City Council Meeting: April 24,
2007
Agenda Item: 8-E
To: Mayor
and City Council
From: Robert Trimborn,
Subject: The
Recommended
Action
This report recommends that the City Council direct the
City Manager to:
(1) Review the sale of the partnership
interests in Supermarine of Santa Monica LP to new partnership interests owned
and operated by Atlantic Aviation FBO, Inc. under the guidelines set forth in
the lease between the City of Santa Monica and Supermarine of Santa Monica LP
and approve the sale of the partnership interests if the transaction meets the
lease guidelines; and
(2)
Review and approve the Commercial Operations Permits for Supermarine of Santa
Monica LP, Supermarine Investors, Inc. and Aviation Contract Services
contingent upon approval of the sale of the partnership interests by the City,
addressing concerns from the March 26, 2007 Airport Commission meeting and a
finding that the proposed commercial operations permit meets the requirements
for Commercial Operations Permits under the Santa Monica Municipal Code.
Executive
Summary
This report reviews the processing of the request by
Supermarine of Santa Monica LP (Supermarine) that the City approve the sale of
the current partnership interests to new partnership interests that will be
owned and operated by Atlantic Aviation FBO Inc. The request for approval of
the sale of the Supermarine partnership interests started a two step approval
process which has proceeded concurrently, but separately. One step was the application by the new
partnership interests for Commercial Operations Permits as required by Article 10
of the Santa Monica Municipal Code. The
other step was reviewing Supermarine’s request under Article 18 of its lease that
the transaction was consistent with the contractual standards set forth in that
document.
As part of the first step in the process,
applications for Commercial Operations Permits were submitted by Supermarine of
Santa Monica LP, Supermarine Investors, Inc. and Aviation Contract
Services. The three entities jointly
provide the services required under the current lease with Supermarine. Although the entities themselves will not
change if the proposed sale occurs, each entity applied for a new Commercial Operations
Permit due to the proposed change in ownership.
Under the Santa Monica Municipal Code, applications are reviewed by the
Airport Commission for its consideration prior to a decision by the City
Manager on whether to grant, conditionally grant or deny the Commercial
Operations Permit. At the March 26, 2007
Airport Commission meeting, after hearing testimony from the public and the CEO
of Atlantic Aviation, the Commission discussed and deliberated on the various
aspects of the Supermarine operation under the partnership control of Atlantic
Aviation. Although the issue of Atlantic
Aviation FBO, Inc. operating an air charter service at
Under the second part of the review process, the City
has the discretion under the Supermarine Lease to review the current state of the
tenant’s performance under the lease and ability of a prospective tenant to
complete the lease obligations during the balance of the lease term. The review process gives the City the
opportunity to resolve existing issues and to review the transaction to ensure
that the new entity has the experience, ability and financial resources to meet
all of the obligations under the Lease.
The current lease agreement consists of the original
lease executed on May 1, 1986 and four subsequent amendments to the lease, all
of which were approved by the City Council.
Due to the complexity of the transaction, the two review processes are
before the City Council for review as to whether the proposed sale would authorize
activity that would be inconsistent with the scope of the current City Council
approved lease requirements. The City
Council is requested to review and, if applicable, authorize the City Manager
to execute the documents necessary to approve the sale of the partnership
interests in Supermarine of Santa Monica LP.
Discussion
Supermarine is a full service fixed base operator
(FBO) located on the north side of the Airport at 2828 Donald Douglas Loop
North,
On January 17, 2007, the current partners of
Supermarine of Santa Monica LP requested the City’s approval of the sale of their
partnership interests to Atlantic SMO GP LLC and Atlantic SMO Holdings LLC,
both of which are owned and operated by Atlantic Aviation FBO, Inc. The approval process and standards for
assessing the request are specifically set forth in Article 18 of the
Supermarine Lease and are intended to insure that the lessee’s obligations
under the Lease are fulfilled. City
Staff and the City Attorney’s Office have reviewed the information submitted by
Supermarine of Santa Monica LP and Atlantic Aviation FBO, Inc. for
consideration by the City based upon the following contractual issues:
(1) Will the transaction devalue the City’s
interest under the Lease?
No, Atlantic Aviation has not proposed any changes to
the facilities on the leasehold except for internal office improvements for one
tenant that has already been approved by the City. In addition, if this transaction is
completed, there will be no debt assumed by the new partnership interests in
connection with the sale.
(2) Does the proposed transferee have the
financial resources to adequately perform its obligations under the Lease?
Yes. Supermarine
of Santa Monica LP is currently operating profitably on the leasehold and the
new owners do not contemplate changes to the operations on the leasehold. In addition, the new owners have fully funded
the new partnership interests and neither has assumed any financial debt in
connection with the sale.
(3) Is the proposed use of the facility
consistent with the Lease and do the proposed transferees have the
qualifications and experience to fulfill the terms of the Lease?
Yes. The
proposed sale does not change the actual entity that is the City’s tenant nor
does it change the terms of the Lease under which tenant operates on the
parcel. As one of the aviation
facilities envisioned by the 1984 Agreement, the City has a direct interest in
ensuring that tenants provide the aviation services needed by the public for
the safe operation of aircraft. Atlantic
Aviation’s experience in operating other general aviation fixed based
operations at other airports across the nation demonstrates it experience and
qualifications in the area. Atlantic
Aviation will retain the existing personnel to assist in the transition to new
ownership.
Approval of the prospective owner is based solely on
a demonstration that the prospective owners can comply with the requirements
under the Lease for assignment of a partnership interest and that it will
operate the leasehold in compliance with federal, state and local law.
Airport Commission Action
As previously stated, the prospective owner of
Supermarine, Atlantic Aviation FBO, Inc. must demonstrate compliance with
Article 18 of its Lease with the City in order to secure the City Manager’s approval
of the sale of the partnership interests.
In addition to assessing the buyer for compliance with the Lease terms
for transfer of a partnership interest, the buyer must also apply for a new
Commercial Operations Permit (COP) for activities at the Airport. The COP application process requires a
hearing before the Airport Commission and a decision by the City Manager after
consideration of the advice forwarded by the Airport Commission.
On March 26, 2007 the Santa Monica Airport Commission
considered the COP applications for Supermarine of Santa Monica LP; Supermarine
Investors, Inc. and Aviation Contract Services, Inc. Supermarine of Santa
Monica LP is the lessee of the City and is responsible for compliance with the
terms of the Lease with the City.
Aviation Contract Services provides aircraft services, including the
sale of aircraft fuel, to aircraft on the ramp of Supermarine and Gunnell
Properties. Supermarine Investors, Inc.
is the owner of the structure on the leasehold parcel and the landlord to
Supermarine of Santa Monica, LP. New COP’s are required due to the change in
ownership interest of the three companies.
Following the presentation by City staff and the
Chief Executive Officer of Atlantic Aviation, Mr. Louis Pepper, the Commission
took comment from four members of the public. The public expressed concerns regarding:
·
The potential increase
in aircraft activity levels due to Atlantic Aviation’s need to recover their
investment
·
The perceived
truncated time-frame associated with the processing of the Commercial
Operations Permits and approval of the sale of partnership interest
·
Atlantic
Aviation’s need to reduce their impact and adhere to the Airport’s Fly
Neighborly Program and concern regarding their track record at other airports
·
Security issues including
unauthorized access by individuals and commercial operators
·
Environmental issues
related to idling of jets and perceived health impacts on the community, noise
and safety from jet aircraft activity, and late-night aircraft operations
The Commission subsequently deliberated the merits of
the proposed Commercial Operations Permits focusing on current and potential
future operation of the facility. At the conclusion of its discussion, the
Airport Commission voted to recommend that the City Manager conditionally grant
the COPs for Supermarine of Santa Monica LP, Supermarine Investors, Inc. and
Aviation Contract Services subject to the following recommendations:
1) City
Manager’s Office to investigate Atlantic Aviation’s relationship with the
public and neighborhood groups at the
airports where they have operations, particularly
Teterboro Airport in New Jersey.
2) City
Manager’s Office to speak with the public that testified during the hearing and the public in general to receive
input on their views regarding the approval of the
COP.
3) City
Manager’s Office to speak with Marty Ruben to obtain contact information regarding Atlantic Aviation’s
relationship with the neighborhood groups at the airports where they have operations.
4) Atlantic
Aviation to continue to work with Airport Staff on co-operative voluntary programs.
5) Atlantic
Aviation to conform to the Airport’s Sustainability Plan.
6) Public
comment on this transaction will be part of the City Council proceedings if and when it is scheduled before the City
Council.
The Commission’s recommendations have been forwarded
to the City Manager for consideration along with all other relevant information
related to the application for the COP’s.
Part of the review process is the resolution of any
pending obligations under the Lease prior to a transfer of the partnership
interest. One of Supermarine’s
obligations is the reestablishment and continued operation of the
Since the relocation and support of the
The current and prospective owners of Supermarine
have reaffirmed their commitment to relocate and support the
Atlantic Aviation
Founded in 1927, Atlantic Aviation operates forty-one
FBOs throughout the
It should be noted that Atlantic Aviation does not
conduct air charter service and is not affiliated with Atlantic Aviation Flight
Services. Atlantic Aviation Flight Services is a wholly-owned subsidiary of
Sentient Jet who acquired the company on April 14, 2005 from Voyager Group, a
private equity company based in
Atlantic Aviation has indicated that it intends to
continue operations on the parcel in a manner consistent with the terms of the
existing lease agreement and current activities. The lease agreement defines
certain permitted aviation uses on the leasehold, but does not place
limitations on activity levels associated with those uses however; Atlantic
Aviation has indicated that they will continue to operate the FBO in the same
manner as it has been operated to date (see attached March 19th letter from
Atlantic Aviation).
Staff has determined that Atlantic Aviation has demonstrated
the ability to meet its obligations under the Lease and that pending Lease
obligations regarding the operation of the
Budget/Financial
Impact
There will be no financial impact associated with the
transfer of a partnership interest in Supermarine of Santa Monica to entities
that will operate under Atlantic Aviation FBO, Inc. other then those detailed
in the existing Lease Agreement.
Prepared by:
Robert D. Trimborn,
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Approved: |
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Forwarded
to Council: |
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Robert D. Trimborn |
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P. City Manager |
Attachment
