Resolution approving Amendment No. 6 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, temporarily reducing Percentage Rent to 28% of Gross Revenues up to $100,000,000 and 32% for Gross Revenues above $100,000,000 for Lease Years 7, 8, 9, and 10 (Lease Years 2026 through 2029), and a temporary reduction in the Minimum Annual Guarantee (MAG) for the same period by establishing the MAG at $25,000,000 for 2026 (Lease Year 7), with annual adjustments as provided in the Lease, effective upon approval by the Board of Supervisors.

The City Council is voting on Resolution No. 250976 to approve Amendment No. 6 to Lease No. 17-0303 for the International Terminal Duty Free and Luxury Stores at San Francisco International Airport (SFO). This amendment, approved by the Airport Commission on August 19, 2025, grants DFS Group, L.P., and its joint venture partners temporary rent relief for Lease Years 7 through 10 (calendar years 2026-2029).

The amendment temporarily reduces the Percentage Rent to 28% of Gross Revenues up to $100,000,000 and 32% for Gross Revenues above $100,000,000. The Minimum Annual Guarantee (MAG) will also be temporarily reduced, set at $25,000,000 for 2026 (Lease Year 7), with subsequent annual adjustments. This is a significant reduction from the original tiered Percentage Rent (up to 45.8%) and MAG ($42,000,000).

This is the sixth amendment to the lease, with previous adjustments made due to the COVID-19 pandemic and a sustained decline in international duty-free sales, particularly from Chinese travelers. Despite prior relief of approximately $46.8 million through 2025, DFS Group and its partners have incurred over $115 million in losses since operations began in April 2020. The Airport Commission believes this further relief is necessary to preserve the financial viability of these important concession services.

The original rent structure, including the initial $42,000,000 MAG (adjusted from 2020) and tiered Percentage Rent, is slated to be restored at the commencement of Lease Year 11 (calendar year 2030).

This amendment will result in an estimated $11.2 million reduction in transfers to the City's General Fund from 2026 to 2029, potentially impacting city services. However, it aims to preserve essential duty-free and luxury retail services at SFO, which are significant revenue generators for the Airport and support five local Airport Concessions Disadvantaged Business Enterprise (ACDBE) partners within the DFS Group joint venture.

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