This resolution approves an amendment to the lease for the International Terminal Duty Free and Luxury Store, allowing a temporary rent reduction to 36% of gross revenues starting in 2024, with a minimum annual guarantee of $30 million for that year. The original rent structure will resume in 2027, contingent on the completion of construction in Terminal 1 by the end of 2024.
Resolution approving Amendment No. 4 to the International Terminal Duty Free and Luxury Store Lease No. 17-0303 between DFS Group, L.P. and the City and County of San Francisco, acting by and through its Airport Commission, which continues the temporary reduced Percentage Rent structure, but increases the percentage amount to 36% of gross revenues, commencing with Lease Year 5 (2024) and continuing through Lease Year 7 (2026), and establishing a temporarily reduced Minimum Annual Guarantee of $30,000,000 for Lease Year 5, adjusting annually in accordance with the Lease through Lease Year 7, with the original Base Rent structure recommencing in Lease Year 8 (2027), with each such rent accommodation being conditioned upon Tenant’s timely completion of the construction of its remaining facilities in Harvey Milk Terminal 1 no later than December 31, 2024, with no change to the 14-year term, to be effective upon approval of this Resolution.
How it got here
This resolution approves a change to the lease agreement with DFS Group for duty-free and luxury stores at the airport, allowing for reduced rent until the end of 2023 if they complete construction in designated terminals by specified deadlines. The overall lease term remains unchanged, lasting until March 31, 2034.
This resolution approves a temporary reduction in rent for the International Terminal Duty Free and Luxury Store lease, lowering the percentage rent to 28% for revenues up to $100 million and 32% for revenues above that, along with a minimum annual guarantee of $25 million for 2026. These changes will apply for Lease Years 7 through 10, from 2026 to 2029.
