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RESOLUTION APPROVING AIRLINE VIP CLUB LEASE AGREEMENT BETWEEN AMERICAN AIRLINES, INC. AND MIAMI-DADE COUNTY FOR THE CONSTRUCTION, EXPANSION, AND LEASE OF VIP CLUB SPACE AT MIAMI INTERNATIONAL AIRPORT NORTH TERMINAL GATES D-15 AND D-30 RETROACTIVE TO DECEMBER 1, 2016 FOR A TERM OF 10 YEARS AND AN ANNUAL RENTAL AMOUNT OF $5,545,772.19 IN THE INITIAL YEAR AND ADJUSTED EACH YEAR THEREAFTER IN ACCORDANCE WITH RESOLUTION NO. R-1054-90, COMMENCING UPON THE COMPLETION OF CONSTRUCTION AND EXPANSION; AUTHORIZING THE COUNTY MAYOR OR COUNTY MAYOR�S DESIGNEE TO EXECUTE SAME AND EXERCISE ALL RIGHTS CONFERRED THEREIN, INCLUDING TERMINATION AND TO PERFORM ALL ACTS NECESSARY TO EFFECTUATE SAME; AND DIRECTING THE COUNTY MAYOR OR COUNTY MAYOR�S DESIGNEE TO PROVIDE THE COUNTY PROPERTY APPRAISER A COPY OF SAID LEASE

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WHEREAS, this Board desires to accomplish the purposes outlined in the accompanying memorandum, a copy of which is incorporated herein by reference,

NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF COUNTY COMMISSIONERS OF MIAMI-DADE COUNTY, FLORIDA, that this Board:

Section 1. Approves Airline VIP Club Lease Agreement between American Airlines, Inc. and Miami-Dade County for the lease of VIP Club space at Miami International Airport North Terminal Gates D-15 and D-30 retroactive to December 1, 2016 for a term of 10 years and an annual rental amount of $5,545,772.19 for the initial year and adjusted each year thereafter in accordance with Resolution No. R-1054-90, in substantially the form attached hereto and made a part hereof.

Section 2. Authorizes the County Mayor or County Mayor�s designee to execute the Airline VIP Club Lease Agreement for and on behalf of Miami-Dade County, exercise any and all other rights conferred therein, and perform all acts necessary to effectuate same.

Section 3. Directs the County Mayor or County Mayor�s designee to provide the County Property Appraiser a copy of said lease in accordance with Resolution No. R-791-14.

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Date:

To: Honorable Chairman Jose �Pepe� Diaz
and Members, Board of County Commissioners

From: Daniella Levine Cava
Mayor

Subject: Resolution Approving American Airlines Airline VIP Club Lease Agreement
Retroactive to December 1, 2016

STAFF RECOMMENDATION
Recommendation
It is recommended that the Board of County Commissioners (Board) adopt the attached resolution approving a retroactive lease agreement entitled: �Airline VIP Club Lease Agreement� at Miami International Airport (MIA) between American Airlines, Inc. (AA) and Miami-Dade County with a 10-year term and a five-year renewal option; and authorizing the County Mayor or County Mayor�s designee to execute same and to exercise any and all other rights conferred therein.

On March 13, 2019, the Airline VIP Club Lease Agreement (Club Lease Agreement) was heard at the Tourism and Ports Committee. Essentially, the Club Lease Agreement authorizes AA to continue to lease two VIP Clubs at Gates D-15 and D-30 that AA is currently operating in MIA�s North Terminal, and to construct other improvements in addition to those already completed that expanded the square footage of both VIP Clubs. At the request of the Miami-Dade Aviation Department (MDAD or Department), the Club Lease Agreement agenda item was deferred to �no date certain� at the April 9, 2019, Board meeting. The deferral allowed MDAD to revise certain terms and conditions and to make the effective date of the Club Lease Agreement retroactive to December 1, 2016. By doing so, MDAD is able to align the commencement date of this Club Lease Agreement with the expiration date (November 30, 2016) of the preceding lease agreement for the same VIP Clubs.

The most significant revisions made to the Club Lease Agreement include: (1) a retroactive effective date to December 1, 2016; and (2) the addition of language related to Miami-Dade County�s Code requirements relevant to Art in Public Places, Responsible Wages, and Residents First Training and Employment Program as specified in Sections 2-11.15, 2-11.16, and 2-11.17 of the Code, respectively, and Implementing Order 3-24, which details the County�s requirements pertaining to Responsible Wages and Benefits for County Construction into MDAD�s internal Tenant Airport Construction Program form, a copy of which has been added as an exhibit to the Club Lease Agreement.

Scope
MIA is located primarily in District 6 represented by Commissioner Rebeca Sosa, however, the impact of this agenda item is countywide as MIA is a regional asset.

Delegation of Authority
Under the terms and conditions of this Club Lease Agreement, the County Mayor or County Mayor�s designee has the authority to exercise all termination rights conferred therein.


Fiscal Impact/Funding Source
There is a positive fiscal impact to the County. AA and the County have agreed to honor the terms and conditions of the preceding lease agreement on a month-to-month basis until this Club Lease Agreement is approved by the Board. As such, upon Board approval of this Club Lease Agreement, MDAD will bill AA retroactively from December 1, 2016 to February 28, 2021 in the approximate lump sum amount of $6,749,755.69 (plus applicable taxes), which charges have been broken down in Table A as shown below. This retroactive amount consists of annual rental charges for the additional square footage added to both VIP Clubs in the Club Lease Agreement including the initial annual rental rate of $5,545,772.19, and subsequent annual rental amounts adjusted each year thereafter on October 1 of each year or on any other date set by the Board. More specifically, the retroactive lump sum amount of $6,749,755.69 includes: (i) rental charges for the addition of 1,312 square feet to the VIP Club at Gate D-15 effective December 1, 2016 as renovations were completed on September 30, 2016. The rental charges due from October 1, 2016 through November 30, 2016 were billed under the preceding lease agreement in the total amount of $31,117.28 (plus applicable taxes); and (ii) rental charges for the addition of 16,107 square feet to the VIP Club at Gate D-30 effective August 8, 2018 as renovations were completed on August 7, 2018.

Table A.
AA VIP Club 12/01/16 to 09/30/17 10/01/17 to 09/30/18 10/01/18 to
09/30/19 10/01/19 to
9/30/20 10/1/20 to
02/28/21
Gate D-15 $155,586.38 $189,366.55 $ 193,017.30 $ 204,012.50 $ 933,318.26
Gate D-30 $329,037.03* $2,268,391.44 $2,397,610.00 $ 79,416.24
Total: $155,586.38 $518,403.58 $2,461,408.74 $2,601,622.50 $1,012,734.50
*- this number represents rental charges as of August 8, 2018, the day after construction was completed for the VIP Club at Gate D-30.

By way of this Club Lease Agreement, AA agrees to pay to the County the approximate lump sum amount of $6,749,755.69 (plus applicable taxes) for additional rental charges due from December 1, 2016 through February 28, 2021. AA has also agreed to pay monthly rental charges accrued thereafter for the additional square footage added to both Gates D-15 and D-30 until this Club Lease Agreement is fully executed by the County and AA. MDAD estimates that AA will pay the County a minimum of $75.6 million throughout the 10-year lease term. This estimate is based on accruals of $26.9 million from December 1, 2016 through FY 2019-2020, and projections of $48.7 million from FY 2020-2021 through termination on November 30, 2026, using the current annual rental amount of $7,901,390.79 for both VIP Clubs.

The annual rental amount excludes other payments made to the County, including 18 percent of the monthly gross revenues generated from liquor sales, and 10 percent of the monthly gross revenues generated from the sale of all other amenities such as VIP room rentals. Additionally, AA pays a 35 percent opportunity fee for non-member passengers who purchase a day pass to the VIP Clubs.

Track Record/Monitor
MDAD�s Chief of North Terminal Real Estate, Audwyn Francis, will monitor this Club Lease Agreement.

Background
In 2006 and 2011, as authorized by Resolution No. R-487-93, MDAD and AA entered into two separate sequential five-year lease agreements through which AA leased a total of 42,716 square feet of space for the operation of two VIP Clubs located at Gates D-15 and D-30 in MIA�s North Terminal. Among other things, both lease agreements authorized the construction of improvements to the VIP Clubs if such improvements were endorsed by the Department.

The VIP Club at Gate D-15 is one of the most popular clubs in the One World Network. It drew approximately 4.5 million visitors during its first five years in operation and its 13,237 square-foot premises was consistently at maximum capacity, which prompted AA to lease overflow space outside the Club. The VIP Club at Gate D-30 that had a 29,479 square-foot premise was experiencing the same overcrowding issues. As a result of diminished customer satisfaction at both VIP Clubs, in 2009, AA approached MDAD to discuss expanding and upgrading both VIP Clubs. MDAD approved AA�s renovation plans; however, for operational reasons, AA delayed constructing the planned improvements. In October 2015, construction began for the Gate D-15 Club, and in February 2016 for the Gate D-30 Club.

Although the 2011 five-year lease agreement expired on November 30, 2016, as mentioned previously, AA and the County have agreed to honor the terms and conditions of the five-year lease agreement on a month-to-month basis until this Club Lease Agreement is approved by the Board. As authorized by MDAD, AA renovated both VIP Clubs and completed construction of the Club at Gate D-15 on September 30, 2016. The square footage was increased from a total of 13,237 square feet to 14,549 square feet. On August 7, 2018, the improvements to VIP Club D-30 were completed, increasing the square footage from a total of 29,479 square feet to 45,586 square feet. Both VIP Clubs were upgraded to provide a more elegant and modern customer experience. The VIP Club at D-30 was upgraded to a Miami Flagship Lounge, which is reserved for AA�s high-end customers and its One World premier passengers.





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Jimmy Morales
Chief Operations Officer