Title
AerSale, Inc. Amended and Restated Hangar Lease, New Ground Lease, and New Aircraft Storage Agreement at Phoenix Goodyear Airport (Ordinance S-49837)
Description
Request to authorize the City Manager, or his designee, to amend and restate hangar Lease Agreement 75812, enter into a new ground lease, and enter into a new aircraft storage agreement with AerSale, Inc. (AerSale) at Phoenix Goodyear Airport (GYR).
Report
Summary
AerSale, and its predecessor Aeroturbine, have operated a maintenance, repair, and overhaul business at GYR under hangar Lease Agreement 75812 since 1996 and hangar Lease Agreement 136123 since 2013; both leases are scheduled to expire in 2026. AerSale has requested to amend and restate hangar Lease Agreement 75812 to include both existing hangars with a term of 40 years. AerSale also wants to construct a new hangar with an investment of approximately $40 million under a new ground lease that will include a 40 year term. AerSale also wants to enter into a ten-year lease for the storage of unused commercial aircraft. Staff is seeking permission to apply rent credits for the relocation of utilities that conflict with the new hangar development site in an amount not to exceed $1.5 million, and an additional rent credit for the replacement of an obsolete fire suppression system that serves both existing hangars in an amount not to exceed $2 million.
Contract Term
The term of amended and restated Lease Agreement 75812 and the new ground lease will be 40 years. The term for the aircraft storage agreement will be ten years with one five-year option to extend.
Financial Impact
Rent paid by AerSale under the current leases is approximately $1,115,000 per year. The new leases will increase revenue to the City to approximately $1,468,000 through the inclusion of lease rates that reflect current market conditions. All rents will be subject to the greater of annual consumer price index adjustments per the Phoenix-Mesa-Scottsdale index, or three percent. Total revenue estimated over the combined lease terms will be approximately $54.2 million.
Concurrence/Previous Council Action
City Council previously approved:
- Lease Agreement 75812 (Ordinance S-23774) on July 3, 1996;
- Lease Agreement 136123 (Ordinance S-39438) on Dec. 19, 2012;
- 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 S. Litchfield Road, Goodyear, Ariz.
Council District: Out of City
Department
Responsible Department
This item is submitted by Deputy City Manager Mario Paniagua and the Aviation Department.