Title
Ground Lease with Sky Harbour, LLC at Deer Valley Airport (Ordinance S-45535)
Description
Request to authorize the City Manager, or his designee, to enter into a 30-year ground lease with Sky Harbour, LLC at Phoenix Deer Valley Airport (DVT) for the construction and subleasing of aircraft storage hangars. The lease may contain other terms and conditions deemed necessary or appropriate by the City Manager or his designee. Sky Harbour, LLC will pay ground rent at the rate of $0.54 per square foot per year, plus applicable taxes. Rent will be adjusted annually by the Consumer Price Index (CPI) using the Phoenix-Mesa-Scottsdale index.
Report
Summary
Sky Harbour, LLC has requested to lease approximately 265,280 square feet (6.09 acres) of undeveloped land near the southeast corner of DVT. Sky Harbour, LLC will invest approximately $12 million to construct executive aircraft storage hangars. Upon completion of the hangars, Sky Harbour, LLC's commercial use of the premises will include subleasing hangar space and providing aircraft management services. Upon completion of the hangars, a metes and bounds survey will be completed, which will reflect the actual square footage of the premises. If the square footage is increased or reduced, the ground rent will be adjusted accordingly. The City will conduct the initial Phase I environmental site assessment on the premises and Sky Harbour, LLC will perform an environmental exit audit at the end of the lease term.
Contract Term
The term of the lease is 30 years. The lease will not contain any option to extend the term.
Financial Impact
Sky Harbour, LLC will pay ground rent at the rate of $0.54 per square foot per year, plus applicable taxes. Rent will be adjusted annually by the Consumer Price Index (CPI) using the Phoenix-Mesa-Scottsdale index. Rent will commence 12 months after the effective date of the lease or upon Sky Harbour, LLC's beneficial occupancy of the hangars, whichever occurs first. Rent for the first year of the lease will be approximately $143,251. Sky Harbour, LLC will own the hangars during the lease term. When the lease expires or is terminated, title to the hangars will be conveyed to the City. The lease will generate approximately $4.3 million in rent over the 30-year term of the lease, excluding CPI adjustments.
Concurrence/Previous Council Action
This item was recommended for approval at the Aviation and Transportation Subcommittee meeting on March 26, 2019, by a vote of 3-0.
Location
Phoenix Deer Valley Airport, 702 W. Deer Valley Road
Council District: 1
Department
Responsible Department
This item is submitted by Assistant City Manager Deanna Jonovich and the Aviation Department.