Title
Amended and Restated Airport Lease 94042 with Jackson Jet Center Phoenix, LLC at Phoenix Sky Harbor International Airport (Ordinance S-52561) - District 8
Description
Request to authorize the City Manager, or his designee, to amend and restate Airport Lease 94042 (Lease) with Jackson Jet Center Phoenix, LLC (Jackson Jet) for the operation of a full-service fixed base operator (FBO) facility at Phoenix Sky Harbor International Airport (PHX) to extend the term of the Lease for up to 25 years, document minimum capital investment commitments, update the rent structure model, and modernize certain provisions of the Lease.
Report
Summary
Jackson Jet leases approximately 20.5 acres of land under the Lease for the operation of an FBO facility at PHX. The term of the Lease will expire on October 31, 2028.
Jackson Jet intends to invest a minimum $12 million in FBO facility enhancements. In order for Jackson Jet to amortize its investment, the Aviation Department recommends amending and restating the Lease to include an extension of the term of the Lease for up to 25 years and updating other Lease provisions to modernize the Lease to align with current leasing standards. The full 25-year extension of the term is contingent upon Jackson Jet's construction of two proposed hangars. The amended Lease will require both new hangars to be completed within the first 36 months of the extended term. Jackson Jet will provide a $600,000 cash deposit as a capital investment milestone guarantee. Failure to substantially complete construction of both new hangars within the 36-month period will result in the reduction of the term extension to 15 years and forfeiture of the cash deposit guarantee.
Contract Term
The term of the Lease will expire on October 31, 2028. The amended and restated Lease will extend the term up to 25 years from November 1, 2028, to October 31, 2053. If the leased premises are required for PHX operational purposes, the City may terminate the amended and restated Lease by giving Jackson Jet at least months' prior written notice.
Financial Impact
Jackson Jet currently pays approximately $312,533 in rent under a minimum annual guarantee (MAG) for its FBO premises and also pays additional fees to provide other aeronautical services in compliance with Federal Aviation Administration (FAA)-approved Minimum Standards. Total combined revenue from Jackson Jet is approximately $1.01 million per year.
Under the amended and restated Lease, rent for the FBO premises will convert from MAG to a ground rental rate of approximately $0.35 per square foot and will remain at that rate for years one through five of the extended term. In years six through ten of the extended term, the ground rental rate will increase by $0.10 per square foot per year.
An appraisal will be completed to determine the market rental rate for year 11 of the extended term. If the appraisal increases rent by 10 percent or less, then ground rent will be adjusted to the appraised market rate for year 11. If the appraised market rate increase exceeds 10 percent, then the rental rate increase for year 11 will be capped at 10 percent, with subsequent 10 percent annual rent increases in years 12 through 20 until the rental rate reaches the appraised market rate. After the appraised market rate is reached, all subsequent annual rental adjustments through year 20 will be based on the Phoenix-Mesa-Scottsdale Consumer Price Index (CPI) or three percent, whichever is greater. The rental rate for year 21 will be determined by a second appraisal and the rental rate for years 22 through 25 will be determined by following the same rental rate methodology as the years following the appraisal process conducted in year 11.
In addition to annual ground rent, Jackson Jet will continue to pay all applicable fees and services associated with the current FAA-approved Minimum Standards, including fuel flowage fees, remain-over-night aircraft parking fees, and landing fees. The total anticipated revenue over the 25-year extended term is expected to exceed $33 million.
Concurrence/Previous Council Action
The Phoenix Aviation Advisory Board Business and Development Subcommittee recommended approval of this item on December 4, 2025, by a vote of 3-0.
The Phoenix Aviation Advisory Board recommended approval of this item on December 18, 2025, by a vote of 9-0.
Location
Phoenix Sky Harbor International Airport, 2802 E. Old Tower Road.
Council District: 8
Department
Responsible Department
This item is submitted by Deputy City Manager Frank McCune and the Aviation Department.