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Item # 12.

Council Meeting 2023 Updated

Meeting Date:	05/23/2023
Department:	Airport
Pillars:	Excellence in Transportation Systems
Milestones:	Leverage Airport assets to maximize business growth and expansion Implement the Asset Management Plan in accordance with the Asset Management Policy, utilizing information systems

AGENDA CAPTION:

Present, discuss, and consider action on a Resolution approving the Early Termination of Ground Lease #0200-3504 between the Town of Addison and RR Investments, Inc. (d/b/a Million Air Dallas), located at 4550 Jimmy Doolittle Drive on the condition and subject to Council approving a replacement Ground Lease; and, authorizing the City Manager to execute all necessary documents.

BACKGROUND:

In June 2021, Addison Airport advertised a Request for Qualifications (RFQ) #21-77 for the redevelopment opportunity of the 1.8-acre unimproved parcel of airport land adjacent to the US Customs / Airport Administration offices. There was not enough interest to lead to further negotiations. In 2022, the airport reposted the 1.8-acre site's availability and received three favorable responses, including one from RR Investments, Inc. (RRI). RRI has been a tenant of good standing at Addison Airport since the early 1980s while doing business as Million Air Dallas.

Around the same time, RRI was the successful bidder and acquired the ground leasehold interests at 4550 Jimmy Doolittle Drive. This is a 2.25-acre parcel of airport land and improvements that is adjacent to the 1.8-acre unimproved parcel. The Town consented to this sale and assignment of leasehold interests in September 2022.

In part because of RRI’s acquisition of the 4550 Jimmy Doolittle property, RRI became the preferred prospect to develop the 1.8-acre parcel next door. In October 2022, the Town entered a Letter of Intent with RRI to exclusively negotiate a new ground lease agreement to replace and supersede the underlying ground lease for 4550 Jimmy Doolittle. The new agreement would, among other things, include the above-described 1.8-acre unimproved vacant parcel of airport land and allow RRI to expand their commercial aeronautical facilities with the intent of enhancing their international operations.

RRI is requesting the Council approve this new ground lease agreement to include both properties so RRI can construct heavy aircraft apron to support their FBO operations and potentially to build a private international terminal building next to the US Customs offices.

Salient terms and conditions of the proposed ground lease and early termination agreement are discussed in the presentation.

Assuming RRI exercises their option for term extension, the estimated overall valuation of the proposed ground lease arrangement today is $6,825,000 when considering RRI's minimum capital investment of $5,500,000 plus the net present value (NPV) of the projected annual rentals over the term of $1,325,000 when discounted at 10%.

**RR Investments, Inc. 4550-4553 Jimmy Doolittle Dr.**
Airport Land Area (acres)	4.05
Annual Ground Rental (Stabilized)	$132,875
Projected Cashflow Over Term (rd)	$6,827,000
Net Present Value (Disc. @ 10%) (rd)	$1,325,000
Tenant Minimum Capital Investment	$5,500,000
Overall Projected Valuation (rd)	$6,825,000

The proposed ground lease arrangement with RRI:

Achieves the Town's Strategic Pillars and Milestones
Is consistent with the 2013 Airport Strategic Plan and 2014 Airport Master Plan
Enhances the Airport's annual revenue
Increases the overall value of the Airport and community

RECOMMENDATION:

Administration recommends approval.

Attachments
Presentation
Resolution
Location Map