In response to a Request for Proposals for the development of the Airport's southeast quadrant that was issued in November 2014, McClurg Century Investments/Business Aviation Group's (BA Group) proposal for fixed-base operations and services was chosen as the preferred development. On January 10, 2017, a resolution was approved by Council for the execution of a Letter of Intent that set in place the terms under which the ground lease would be negotiated. Since that time, Town staff and BA Group representatives have been in negotiations on the ground lease for the property.
The proposed tenant is AJC Holdings Group, LLC, a Colorado limited liability company (AJC), formed by and between McClurg Century Investments, a Colorado trust, and Business Aviation Group, a Texas limited liability company, as its members. They currently have operations at Centennial Airport in Denver, Colorado. Subject to the terms and conditions of the ground lease, AJC will build a $20,000,000 Fixed-Base Operation (FBO) complex in two phases on approximately 16 acres of airport land fronting Addison Road across from Addison Circle Park.
Phase I will comprise nearly 11 acres at the southernmost end of the site and will be improved with a 12,800 square-foot public terminal, a 31,000 square-foot transient-traffic hangar with attached office space, a 25,000 square-foot executive hangar for based aircraft, associated off-street parking, and nearly 170,000 square feet of dedicated aircraft apron designed with a load limit of not less than 100,000 gross pounds of take-off weight. The estimated construction value of the Phase I improvements is $12,000,000.
Phase II will occupy an additional 5+/- acres to be improved with two additional 25,000 square-foot executive hangars with office space, aircraft apron and off-street parking with an estimated construction value of $8,000,000.
This redevelopment project meets the stated goals of the 2013 Addison Airport Strategic Plan which are:
- Enhance the airport's overall value for the benefit of stakeholders;
- Fully integrate the airport with the Town; and
- Promote industry-leading practices in all management, operations and maintenance activities.
Both the Airport strategic plan and master plan support the removal of the Papa T-hangars and the single corporate hangar to be replaced by a large public FBO development that would include large corporate aircraft storage hangars, FBO offices, restaurant, potential office lease space, vehicle parking and park features along Addison Road across from [Addison] Circle Park..."
The ground lease terms are as follows:
- Effective Date: The date of formal consent of the Ground Lease by the City Council.
- Commencement Date: Upon “substantial completion” of Phase I building improvements.
- Expiration Date: Phase I initial term of 30 years. Upon substantial completion of Phase II, the lease term is to be “re-upped” to a full 40 years from the date of the Phase II substantial completion.
- Security Deposit: Tenant will pay a $150,000 Security Deposit until it provides the Town payment and performance bonds or a Letter of Credit in the form approved by City Council.
- Inspection Period: Up to 120 days following the Effective Date. If during this time either party is dissatisfied with its due diligence, the lease may be terminated.
- Demolition: Landlord is responsible for the demolition, remediation and removal of all existing building improvements at Landlord’s sole cost and expense. Phase I estimated demolition cost is $150,000; Phase II’s estimate is $250,000.
- Design Plans: Within first 60 days following Inspection Period Tenant will submit “Phase I Preliminary Design Plans” that will include architectural site plan, floor plans, exterior elevation and perspective renderings. The agreed-to “Design Plan” will be used for permitting and construction purposes and will become, by reference, part of the Ground Lease
- Construction to Commence: Phase I construction to commence within 4 months following acceptance of the Preliminary Design Plan, including all pre-construction permits and approvals. If construction does not commence within 12 months from the Effective Date of the Lease, Landlord may terminate the Lease. Construction to be completed no later than 30 months following the construction commencement date.
- Annual Rental: $.675 times the gross square feet contained within the Phase I leased premises ($323,000 annual) payable in 12 monthly installments. Phase II rent will be same as the Phase I rent, as adjusted. Rent commences upon Substantial Completion of the building improvements.
- Adjustment of Rental: Standard biennial CPI adjustments.
- Expansion Option (Phase II): Tenant has the option right, by way of amendment, to expand the Leased Premises to include the Phase II Land. Option may be exercised any time after the Phase I Commencement Date.
- Tenant shall give Landlord written notice on or before the ninetieth (90th) full calendar month of the lease term but not less than five (5) full calendar months prior to its intent to exercise this Expansion Option (the “Option Period”).
- Landlord may continue to operate the existing Phase II buildings until Tenant exercises the option.
- Option Fee: Provided the Tenant has yet to exercise the Expansion Option on or before the sixty-first (61st) calendar month of the Option Period, Tenant shall commence paying to Landlord an “Option Fee” equal to one-half of the prevailing Phase I Land Ground lease rental per gross square foot of land times the Phase II Land Area.
- Upon achieving Substantial Completion of the Phase II Building Improvements, the Base Rent shall be adjusted to include the Phase II Land at the prevailing Phase I Land adjusted rate.
- Upon Final Completion of the Phase II Building Improvements the Term of the Ground Lease shall automatically be extended to equal 480 full calendar months (40 years) from the date of the Final Completion Date of the Phase II Building Improvements.
- Assignment and Subletting: Generally the airport’s standard terms and conditions.
- Environmental: Generally the airport’s standard terms and conditions.
- Insurance and Bonds: Generally the airport’s standard terms and conditions.
- Title to Improvements: To be vested in name of Tenant during the term. Upon the expiration or termination of the Ground Lease, ownership shall revert to Landlord.
- Property Taxes and Assessments: Tenant shall pay any and all property taxes or assessments, fees and charges or expenses that may be levied upon the leasehold estate of Tenant.
- Maintenance and Repair of Demised Premises: Tenant shall maintain in good repair and in a first-class condition all buildings, improvements, fixtures, equipment and personal property on the Leased Premises subject to Addendum #1 Tenant’s Leasehold Maintenance and Repair Standards and Practices. These maintenance standards require the Tenant to obtain every 10 years of the lease term a third-party Property Condition Assessment (PCA) report evaluating the ongoing condition of the building improvements. Tenant is to immediately repair any deferred maintenance items identified in the report and to develop and implement a maintenance and capital repair plan for the following 10-year period.
- Public Fueling Dispensing Permit: Upon the execution of the Ground Lease the Town will grant Tenant an aviation fuel dispensing license with the right to dispense fuel as a public fueler pursuant to the fueling license.
Economic Impact: Currently, the existing 60 Town-owned T-hangars and Midway Associate ground leasehold that occupy the Phase I Land contribute approximately $150,000 to the airport’s annual operating revenue. The two larger Town-owned maintenance hangars that occupy the Phase II Land contribute an additional $250,000 to the airport’s operating revenue. However, these cash flows are not sustainable due to physical and functional obsolescence of the existing improvements and related infrastructure.
With the proposed AJC redevelopment, annual operating revenues for the same land area are projected to increase by as much as 50% (or $600,000 annually) over the first ten (10) years of ground lease term. Fuel flowage fees from public fueling operations will add an estimated $240,000 annually to airport revenue. The Town is projected to realize $50,000 annually in ad valorem property taxes based upon the construction value of the building improvements. Over the 40-year lease term, the total net cash flow of ground rent, added fuel flowage fees and ad valorem tax to the Town/airport is projected to be $40,000,000. By discounting this cash flow stream to its net present value (NPV), this same cash flow is valued at $10,000,000 in today's dollars. The combination of the $10,000,000 net present value of the cash flow combined with the estimated construction value of the building improvements of $20,000,000, contributed by the developer, is projected to result in an economic benefit to the Town and airport of an estimated $30,000,000. |