Present, Discuss, and Consider Action on a Resolution Approving the Ground Lease Between the Town of Addison and Scarborough I Airport, LP for Commercial Aviation Use on Approximately .55 Acres of Improved Land Located at the Addison Airport and Authorizing the City Manager to Execute the Ground Lease.
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Scarborough I Airport, L.P. (“Scarborough”) is the owner of the fee-simple property at 16445 Addison Road ( “Fee-Simple Property”), which it acquired in 2006. At the same time, Scarborough took assignment of an Airport ground lease that originally commenced in 1981. The Airport ground lease consisted of .55 acres adjacent to the Fee-Simple Property, along Taxiway Uniform. The ground-leased property was improved with concrete pavement (also referred to as aircraft apron) used for the storage and staging of aircraft operating from the Fee-Simple Property; no other improvements were made to the premises. The ground lease expired in February 2022, and the Town took ownership and control of the property and its improvements (the concrete pavement), which were generally regarded to be in fair to poor condition largely due to age (40+ years) and continued use over the years. Since the ground lease expired, Scarborough and its subtenants have continued to use and occupy the leased premises subject to a short-term, commercial aircraft storage lease agreement with the Town.
Scarborough proposes to enter into a new long-term ground lease agreement (“Ground Lease”) with the Town in consideration of Scarborough reconstructing the aircraft apron to the Airport’s current design standards, at Scarborough’s sole cost and expense. Accordingly, the Town is prepared to enter into a new ground lease including the following key terms and conditions:
- Commencement Date: Same as the Effective Date when the Ground Lease is fully executed.
- Term: The Initial Lease Term is two (2) years following the Commencement Date.
- Extended Term Option: Provided Tenant satisfactorily completes the construction of the New Land Improvements, as defined in Lease Addendum #1 of the Ground Lease, and in accordance with Landlord’s current design standards, the Term shall be extended so that the Ground Lease ends forty (40) years following the Commencement Date.
- Rent: Annual Rent is payable in 12 equal monthly installments over the Term starting at $13,165 ($.55/SFL), or $1,097 per month.
- Adjustment of Rent: Beginning on the second anniversary of the Commencement Date and every two years thereafter over the Term, based upon the percentage of change in the local Consumer’s Price Index.
- Permitted Uses – Storage of airworthy aircraft and equipment used in connection with Tenant’s aeronautical operations only.
- Restricted Uses – Standard lease restrictions apply.
- Land Improvements and Construction of New Land Improvements:
- Existing Building Improvements – Tenant is responsible for demolition of existing improvements as required by the approved Design Plan at its sole cost, expense, and risk.
- New Land Improvements – Tenant is to reconstruct the entire premises with concrete pavement in accordance with Landlord’s current design standards.
- Maintenance and Repair of Demised Premises: Tenant obligated to deliver to Landlord third-party pavement assessments performed every five (5) years over the term. Term.
- Title to Improvements: Upon successful completion of constructing the New Improvements, all improvements are to be owned by Landlord.
The proposed redevelopment represents an estimated $13,165 in annual real-estate revenue (ground rent) to the Airport. Assuming the Term is extended to 40 years, the net cash flow is projected to be in excess of $620,000 over the term of the lease.
| Overview of Estimated Economic Impact |
| Ground Rent |
$13,165 |
$.55 per SFL; .55 acres (23,937 SFL) |
| Fuel Flowage Fee (FFF) |
$0 |
Not available |
| Projected Business Property Tax (Aircraft) |
$93,000 |
Assume $15 million @ $.61466/mil
(DCAD est. TOA rate) |
| Projected Ad valorem Leasehold Tax |
$0 |
Improvements will be city owned and held exempt. |
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| Total Annual Economic Benefit |
$106,165 |
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| Net Cashflow over Lease Term |
$620,000 |
Ground Rent & Fuel Flowage Fees Only |
| Net Present Value (NPV) of Cashflow (disc. @ 6%) |
$222,000 |
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| Tenant’s Capital Investment |
$555,000 |
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The proposed ground lease is essential for the Scarborough fee simple property to continue to operate as an aeronautical facility. Without the use and access of the ground leased apron area, Scarborough would not have the room to actively operate aircraft as needed. Similarly, Scarborough’s use of the airport land as an off-airport property, leverages the use and benefit of the airport’s infrastructure.
The proposed ground lease and reconstruction of the aircraft apron supports the Town’s objectives for the Airport by enhancing the overall value of the Airport with new development and increased revenue. The proposed redevelopment and use of the facilities are consistent with the 2013 Airport Strategic Plan and 2016 Airport Master Plan Update.
The city attorney has reviewed the proposed ground lease form and finds acceptable for the Town’s purposes. |