Edwards Jet Center (EJC) desires to construct a new large aircraft hangar on a currently vacant parcel known as Commercial Lot 9 located at the east end of the Airport.  This twenty-five (25) year ground lease would be for 64,927 square feet.  The Airport averages one or two leases per year using this type of lease, either for a new lease or for a lease renewal.  The Lease identifies that the tenant is responsible for maintaining the leasehold, and includes the appropriate insurance coverage requirements and indemnification language.  Additionally, EJC will be financing the construction of this new hangar through First Interstate Bank.  The Bank is requesting an Assignment of EJC's interest in the Lease to secure the new financing arrangements.
 
The security assignment language has been reviewed by both Airport staff and the City Attorney, and is similar to language used in the past.  The City has approved a number of these financing assignments over the years as a means for the banks to secure the loans they provide to the Airport tenants for either construction, purchase of, or improvements to their onsite facilities.
 
Additionally, the implementation of this new Lot 9 Lease will require adjusting the boundaries of the adjacent Commercial Lot 8 Lease, also with EJC.  The Commercial Aviation Ground Lease on Lot 8 was approved by the City Council on July 23, 2012.  Amendment One to the Commercial Aviation Ground Lease on Lot 8 reduces the leasehold by 709 square feet, and also updates some of the standard lease language. Copies of the new Lease, Lessor's Consent to Assignment, and lot 8 Amendment One are on file in the City Clerk's Office.

 

City Council may:

• Approve the new Lot 9 Lease with EJC and related security Assignment to First Interstate Bank, and Amendment One to the Lot 8 Lease with EJC; or
• Disapprove both the new Lot 9 Lease with EJC and related security Assignment to First Interstate Bank, and Amendment One to the Lot 8 Lease with EJC.

The Lot 9 Lease will generate $16,881 in the first year of the Lease.  The ground lease rate of $0.26 per square foot per annum is in line with the rate being paid by other ground lease tenants located in this area.  Future lease payments will be adjusted annually using the Department of Labor Consumer Price Index for All Urban Consumers (CPI-U), published by the Bureau of Labor Statistics.  The reduction in square footage via Amendment One results in a minor reduction in the annual rental, reducing the Lot 8 rental by $183.48 for the first year.
 

Staff recommends that City Council authorize the Mayor to execute (1) a new twenty-five year Commercial Aviation Ground Lease at Billings Logan International Airport with EJC that commences August 1, 2015 and terminates on July 31, 2040, (2) the Lessor's Consent to Assignment to First Interstate Bank to secure the bank's financing to EJC for EJC's new hangar construction at the Airport, and (3) Amendment One to the Lot 8 Lease.