Hong Kong based Duty Free Shopping inks lease deal with San Francisco Board of Supervisors

By Emmett Berg, Bay City News Service

December13, 2006

SAN FRANCISCO INTERNATIONAL AIRPORT (BCN) - The firm behind duty-free shopping and other services at SFO's International Terminal inked a deal with the San Francisco Board of Supervisors yesterday that will increase rent and bring in new stores.

Hong Kong-based DFS, L.P., will pay $26.4 million yearly to San Francisco for the continued right to be the general concessionaire at the international terminal. With finalization of the deal, DFS would gain the right to offer floor space for a new Coach luxury items store, as well as a new bookstore and two kiosks.

Since 9/11, yearly rent paid to the city under the predecessor arrangement was lowered because of reduced passenger traffic after the terrorist attacks on New York and Washington.

In the years following, DFS's rent was gauged to a percentage of the yearly revenue generated on site, with a maximum of $26.1 million per year. With passenger traffic returning to previous levels, city negotiators sought a $300,000 increase and minimum guaranteed rent payments instead of payments partially determined by sales revenue.

DFS, which runs some corporate functions from San Francisco offices, now runs five duty-free stores in the terminal and 24 duty-paid stores. With extensions, the lease could last until 2017. Upon finalization the new terms would take effect no later than June 2007.

The lease extension also refers to construction of a passageway allowing domestic passengers at SFO to enter the international terminal, and vice-versa, without additional security processing.

Copyright © 2006 by Bay City News, Inc. -- Republication, Rebroadcast or any other Reuse without the express written consent of Bay City News, Inc. is prohibited.

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