Present, Discuss, and Consider Action on a Resolution Approving an Airport Ground Lease Agreement Between the Town of Addison and Addison Hangars, LLC for Commercial Aeronautical Use on Approximately 6.054 Acres of Improved Land Located at the Addison Airport, Authorizing the Remediation and Demolition of the Existing Building and Structures on the Foregoing Property, and Authorizing the City Manager to Execute the Ground Lease and Other Necessary Agreements.
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In March 2021, Addison Airport advertised Request for Qualifications (RFQ) #21-75 for the aeronautical redevelopment opportunity of a prime 6-acre site located at 4505 Claire Chennault Drive at Addison Airport. The Airport received four well qualified and attractive written responses. In July 2021, Sky Harbour Group Corporation was selected as the most qualified respondent with a concept and vision best in line with the Airport Master Plan. The City Council was briefed on the Airport’s selection process and recommendation on August 28, 2021.
Sky Harbour Group Corporation (NYSE-SKYH) (“Sky Harbour”) proposes designing, constructing and operating an exclusive executive jet hangar campus on the 6-acre site subject to a forty-year ground lease agreement between the Town of Addison and Addison Hangars LLC, a Delaware limited liability company (“Addison Hangars”), with Addison Hangars being a wholly owned subsidiary of Sky Harbor.
Consistent with Sky Harbour’s scalable business model, the proposed redevelopment will consist of five (5) 14,200 square foot private hangars and one (1) 30,000 square foot semi-private jet hangar. Each of the hangars will have 28-foot-high hangar doors designed to accommodate Aircraft Design Group III aircraft, which include all the larger business jet aircraft capable of operating at Addison Airport. The hangar facilities will be supported with off-street parking and nearly 140,000 square feet of dedicated heavy aircraft apron. Upon completion, Addison Hangars, will sublease and operate the facility dedicated to serving high-end business aviation users including corporate and private flight departments operating large, late-model business aircraft. Estimated construction value of the building improvements as planned are estimated to exceed $15 million.
The proposed development site is the former 6-acre Addison JetPort, located at 4505 Claire Chennault at the southeast corner of the Taxiway Alpha and Taxilane Victor intersection. The site was once subject to a ground lease, which expired in 2013 when the Town took ownership of the existing building improvements, including a two-story 11,000 square foot office/terminal building with 80,000 square feet of concrete aircraft apron. The building has been vacant since 2019 and the apron used on a limited basis as aircraft overflow parking for nearby operators. Under the proposed lease, the Addison Hangars is responsible for the demolition of the existing building improvements at their sole cost, expense and risk. Prior to demolition, the Town is responsible for remediation of some asbestos containing material, which Addison Hangars has agreed to perform on the Town’s behalf pursuant to a separate reimbursement agreement, not to exceed $30,000.
Pursuant to the proposed lease terms, the proposed development represents $189,000 in additional annual real estate revenue and $75,000 in annual fuel flowage fees to the Airport. Collectively, the additional real estate revenue and fuel flowage fees represent $12,500,000 in airport revenue over the 40-year lease term. When discounted at 6% per annum the projected cashflow yields a net present value of $4.470 million. It is estimated the local business property and ad valorem tax base will benefit by as much as $690,000 per annum once business operations stabilize.
| Overview of Estimated Economic Impact |
| Ground Rent |
$189,000 |
$.72 per SFL ; 6.054 acres (263,712 SFL) |
| Fuel Flowage Fees |
$75,000 |
$.73/hangar square feet |
| Business Property Tax (Aircraft) |
$615,000
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$100 million @ $.61466/mil
(DCAD est. rate) |
| Projected Ad valorem Leasehold Tax |
$105,000 |
$15 million @ $.61466/mil |
| Total Annual Economic Benefit |
$984,000 |
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| Net Cashflow over Lease Term |
$12,500,000 |
Ground Rent & Fuel Flowage Fees |
| Net Present Value (NPV) of Cashflow (discount @ 6%) |
$4,470,000 |
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| Tenant’s Capital Investment (est.) |
$10,000,000 to $15,000,000 |
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Sky Harbour intends to finance the design, construction and operation of their new executive hangar campus with loan proceeds originating from the sale of Series 2021 tax-exempt private activity bonds through municipal conduit issuer, Public Finance Authority. These private activity bonds do not require the full faith and credit of the Town, are not Town issued debt, nor a monetary liability or obligation of the Town. The bonds are secured by Sky Harbour’s qualifying project’s, including Addison Hangars, leasehold interests and building improvements and are repaid from Addison Hanger's operating revenues generated by the properties.
The Addison Hangar, LLC redevelopment and lease arrangement supports the Town’s objectives for the Airport by enhancing the overall value of the Airport with new development, increased revenue, and an enhanced tax base. The proposed use is consistent with the 2013 Airport Strategic Plan and 2016 Airport Master Plan Update.
The city attorney has reviewed the Ground Lease and other related documents, finding the same acceptable for the Town’s purposes. |