Title
Arizona Aviation Partners, LLC Ground Lease at Phoenix Goodyear Airport (Ordinance S-50120)
Description
Request to authorize the City Manager, or his designee, to enter into a ground lease with Arizona Aviation Partners, LLC (AZ Partners) to construct hangars at Phoenix Goodyear Airport (GYR).
Report
Summary
AZ Partners has requested to enter into a ground lease to develop hangars, apron, automobile parking, and an access road on approximately 32 acres at GYR. AZ Partners intends to market the hangars under sublease agreements approved by the City. The hangars and other improvements will be constructed in two phases of approximately 16 acres for each phase. AZ Partners will have 24 months to construct the Phase 1 improvements, and 48 months to construct the Phase 2 improvements. Construction of the hangars will require the relocation of utilities at an estimated cost of $1.4 million that will be reimbursed to AZ Partners through rent credits.
Contract Term
The primary term of the ground lease will be 30 years, which will be preceded by a 24-month development term to complete the Phase 1 improvements. The development term for the Phase 2 improvements will be 48 months. Provisions of the lease will include an option to extend the term up to 10 years, which may be exercised by the City Manager or designee.
Financial Impact
Rent for the primary term of the Phase 1 parcel is anticipated to be approximately $252,474 per year. AZ Partners will pay annual rent of $38,812 on the Phase 2 parcel until construction on the Phase 2 parcel commences, or the 48 month development term expires, whichever occurs first. Upon completion of the Phase 2 development term, AZ Partners will pay rent of $258,746 per year for the first year. Total revenue over the 30-year lease term and 10-year option will be approximately $20.5 million. All rents are subject to annual increases based on the Phoenix-Mesa-Scottsdale Consumer Price Index. As an aircraft storage operator, AZ Partners will also be required to enter into a Specialized Aviation Services Operator permit which will require AZ Partners to report and remit a monthly two percent fee on gross sales derived from hangar subleases with its tenants.
Concurrence/Previous Council Action
The Business and Development Subcommittee recommended approval of this item on May 4, 2023 by a vote of 3-0.
The Phoenix Aviation Advisory Board recommended approval of this item on May 18, 2023 by a vote of 7-0.
Location
Phoenix Goodyear Airport, 1658 South Litchfield Road, Goodyear, Ariz.
District: Out of City
Department
Responsible Department
This item is submitted by Deputy City Manager Mario Paniagua and the Aviation Department.