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Item 1.I.
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| City Council Regular | |
| Date: | 12/09/2024 |
| Title: | Commercial Aviation Ground Leases with Edwards Jet Center Montana, Inc. |
| Presented by: | Jeff Roach |
| Department: | Airport |
| Presentation: | No |
| Legal Review: | Yes |
| Project Number: | N/A |
RECOMMENDATION
Staff recommends City Council approval of the following: (1) the Commercial Aviation Ground Leases with Edwards Jet Center Montana, Inc., for twenty-five year terms beginning December 1, 2024 and ending November 30, 2049, (2) new Lessor's Consents to Assignment of Lessee's Interest in Lease to Secure Bank Loan with Stockman Bank, and (3) new Memorandums of Commercial Aviation Ground Lease for recording purposes. The City must also sign the documents terminating, releasing or assigning previously approved documents for the leased parcel being exchanged and re-leased to Aerotronics in a related and separate item.
BACKGROUND (Consistency with Adopted Plans and Policies, if applicable)
Edwards Jet Center Montana, Inc. (EJC) has been a long-time tenant at the Airport, serving as one of the Airport's Fixed Based Operators (FBOs). EJC constructed, purchased, and owns a number of facilities located on both the east and west ends of the Airport thereby dividing their operations. Aerotronics Inc., another long-time tenant at the Airport now has a new owner after retirement of the former owner and intends to build a new larger facility at the Airport to replace its aging facility located on the east end of the Airport. The company is well known for its avionics services that it provides to the aviation community.
EJC recently demolished the aging building it owned on the west end of the Airport with the intent to construct a new facility at that location. Seeing opportunity for the new locations, the two companies have entered into an exchange agreement, whereby they would exchange leased locations for the purpose of consolidating their respective operations, which are presently split between non-contiguous locations on opposite sides of the Airport. The consolidated locations will create more campus-like business locations for each tenant enabling them to improve operations and also add two new modern facilities to the Airport, both replacing aging facilities in need of expansion and modernization.
To effect the exchange of leased locations, current in-term leases and associated auxiliary documents will be terminated, released or assigned, and replaced with new leases and associated auxiliary documents to reflect the new lease locations of each tenant. Since new construction is involved, the new leases will be twenty-five year term leases to allow both tenants to secure financing and amortize the cost of construction. The subject lease includes a 95,915 square feet parcel located on the east end of the Airport, addressed as 1651 Aviation Place that is the exchanged property. This parcel is in close proximity to the other east end EJC facilities located at 1681, 1691, 1701, 1801 and 1871 Aviation Place. The term of the lease commences on December 1, 2024 and ends on November 30, 2049. The subject lease is part of the exchange, to be accompanied by a new lease for Aerotronics in a separate related action.
EJC's west end lease included a second parcel for EJC's aviation self-fueling facility, which is not part of the exchange. EJC desires to continue operating the self-contained, aviation self-fueling facility, so a second and separate lease has been prepared for this parcel. The second lease for the aviation self-fueling facility is a small 2,000 square foot parcel located on the west end of the Airport that houses only EJC's self-fueling equipment and signage. The term of this lease commences on December 1, 2024 and ends on November 30, 2049.
EJC recently demolished the aging building it owned on the west end of the Airport with the intent to construct a new facility at that location. Seeing opportunity for the new locations, the two companies have entered into an exchange agreement, whereby they would exchange leased locations for the purpose of consolidating their respective operations, which are presently split between non-contiguous locations on opposite sides of the Airport. The consolidated locations will create more campus-like business locations for each tenant enabling them to improve operations and also add two new modern facilities to the Airport, both replacing aging facilities in need of expansion and modernization.
To effect the exchange of leased locations, current in-term leases and associated auxiliary documents will be terminated, released or assigned, and replaced with new leases and associated auxiliary documents to reflect the new lease locations of each tenant. Since new construction is involved, the new leases will be twenty-five year term leases to allow both tenants to secure financing and amortize the cost of construction. The subject lease includes a 95,915 square feet parcel located on the east end of the Airport, addressed as 1651 Aviation Place that is the exchanged property. This parcel is in close proximity to the other east end EJC facilities located at 1681, 1691, 1701, 1801 and 1871 Aviation Place. The term of the lease commences on December 1, 2024 and ends on November 30, 2049. The subject lease is part of the exchange, to be accompanied by a new lease for Aerotronics in a separate related action.
EJC's west end lease included a second parcel for EJC's aviation self-fueling facility, which is not part of the exchange. EJC desires to continue operating the self-contained, aviation self-fueling facility, so a second and separate lease has been prepared for this parcel. The second lease for the aviation self-fueling facility is a small 2,000 square foot parcel located on the west end of the Airport that houses only EJC's self-fueling equipment and signage. The term of this lease commences on December 1, 2024 and ends on November 30, 2049.
ALTERNATIVES
City Council may:
- Approve the new Commercial Aviation Ground Leases and auxiliary documents with Edwards Jet Center Montana, Inc; or,
- Not approve the new Commercial Aviation Ground Leases and auxiliary documents with Edwards Jet Center Montana, Inc;
FISCAL EFFECTS
The City will receive $26,817.84 rental revenue in the first year of the Lease on the exchanged east end parcel. The rental rate will be adjusted on an annual basis on the anniversary date, using the average of the monthly percentage increases for the previous calendar year, as determined by the Department of Labor Consumer Price Index for All Urban Consumers (CPI-U), published by the Bureau of Labor Statistics. On the small parcel for the self-contained aviation self-fueling facility, the City will receive $671.20 for the first year of the Lease. The rental rate will be adjusted on an annual basis on the anniversary date, using the average of the monthly percentage increases for the previous calendar year, as determined by the Department of Labor Consumer Price Index for All Urban Consumers (CPI-U), published by the Bureau of Labor Statistics.