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Airport seeks retroactive lease extension and acreage reduction in United Airlines Plot 6 modification
Summary
SFO requested committee approval of Modification No.1 to United Airlines' ground lease (Plot 6) to extend the term retroactively, reduce premises by ~3.5 acres and adjust rent; the BAO said the net effect (with subleases/permits) could increase airport revenue by about $1.1 million annually; item was forwarded with recommendation.
Airport staff asked the Budget and Finance Committee to approve a negotiated modification to the ground lease with United Airlines for Plot 6, which includes Buildings 575 and 585 adjacent to the international terminal.
Kathy Weidner told the committee modification No.1 would reduce United's leased area from about 16.04 acres to approximately 12.55 acres to reflect space the airport subleased back for employee offices (SFO Business Center). The airport proposes to retroactively extend the lease term from 07/01/2011 through 06/30/2021 and to reduce United's annual rent from about $2,000,000 to $1,600,000 because of the reduced acreage. Weidner said United has been credited two years of sublease rent toward remediation costs incurred before office occupancy; after applying those payments there remains about $696,000 United still owes for hazardous-material remediation.
Deborah Newman of the Budget Analyst's office said United would pay slightly higher per-acre rent under the proposed lease ($130,900 per acre) but because of the acreage reduction the immediate annual revenue would fall by about $443,000; however, projected term subleases and a permit at Building 575 could yield a net increase of about $1.1 million in annual revenue if those arrangements proceed. The committee advanced the modification to the full Board with a recommendation.
