Title
Amend Ordinance S-49837 for Lease of Property with AerSale, Inc. at Phoenix Goodyear Airport (Ordinance S-52950) - Out of City
Description
Request to authorize the City Manager or his designee to amend City of Phoenix Ordinance S-49837 (Attachment A) and to amend Facility Lease No. 75812 to expand the improvements authorized for reimbursement through rent credits to AerSale, Inc. (AerSale) that will be included in new agreements with AerSale at Phoenix Goodyear Airport (GYR). Further, request to authorize the City Manger or his designee to enter into a new ground lease and aircraft storage agreement with AerSale.
Report
Summary
AerSale operates a maintenance, repair, and overhaul business at GYR under Facility Leases No. 75812 and No. 136123, which both expire on June 27, 2026. On June 14, 2023, the Phoenix City Council approved Ordinance S-49837, which authorized the City Manager or his designee to (1) amend and restate Lease No. 75812, (2) enter into a new ground lease for additional land at GYR, and (3) enter into an aircraft storage agreement on the airfield. Other provisions included adding up to 40 years to the term of the new agreements and authorizing up to $3.5 million in rent credits for rehabilitation of a fire pump house and relocation of a natural gas pipeline that conflicts with AerSale's development plans.
The Aviation Department wants to renegotiate the provisions of the Facility Leases to (1) expand the application of rent credits to include repaving a parking lot and replacing a water main in one of the hangars leased by AerSale, (2) remove the maximum reimbursement amounts for the gas line relocation and the fire pump house rehabilitation, and (3) provide for other projects to be reimbursed under rent credits at the sole discretion of the Aviation Director, provided that the total amount of rent credits does not exceed $3.5 million as originally authorized under Ordinance S-49837.
Contract Term
The term for the amended and restated Lease No. 75812 and the new ground lease will not change at 40 years. The initial term for the aircraft storage agreement will be 10 years with one 10-year option to extend the term at the sole discretion of the Aviation Director. Further, if AerSale completes the construction of a new hangar under the new ground lease, additional years will be added to the term of the aircraft storage agreement so that its term coincides with the terms of the other Facility Leases. All other provisions of the amended and restated Lease No. 75812 and the new ground lease will remain unchanged.
Financial Impact
Revenue anticipated under the new ground lease and aircraft storage agreement is approximately $1,468,000 for the first year and $54,200,000 over the terms of the agreements. All rents will be subject to annual Consumer Price Index adjustments according to the Phoenix-Mesa-Scottsdale index or three percent, whichever is greater. Annual adjustments will not exceed four and one-half percent for any lease year. A fair market rental rate evaluation will be conducted every 10 years for the Facility Leases and the new ground lease.
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 Frank McCune and the Aviation Department.