DEPARTMENT: Aviation
DEPARTMENT HEAD: Russell J. Handy
COUNCIL DISTRICTS IMPACTED: Citywide
SUBJECT:
Amendment to Lease Agreement with Ocotillo Aviation, LLC at Stinson Municipal Airport
SUMMARY:
This Ordinance will authorize an amendment to a lease agreement with Ocotillo Aviation, LLC (Ocotillo) for the leasehold located at 8619 Mission Road at Stinson Municipal Airport (Stinson).
The proposed amendment will extend the expiration of the lease agreement to June 30, 2032, including the title to Building 673 and Hangars 11 and 12, if Ocotillo makes an additional minimum capital investment of at least $300,000.00 within 12 months of the execution of the amendment. The amendment will also add ground space to the leasehold at the annual rate of $0.20 per square foot based on the 2017 Stinson Ground Space Study performed by Valbridge Property Advisors.
BACKGROUND INFORMATION:
Ocotillo provides T-Hangar space for general aviation aircraft at Stinson and has been a tenant at Stinson since 2007 when the City Council authorized an assignment of a lease agreement with Check-Six Aviation, Inc. to Ocotillo. Under the current agreement, the title to Building 673 is set to revert to the City on July 1, 2030 and titles to Hangars 11 and 12 will transfer to the City on March 1, 2024. Currently, Ocotillo pays ground rent to the city for their leasehold; when the buildings revert to the city, the firm will pay rental rates on those facilities.
Amendment
Ocotillo approached the city to extend their lease term in order to make investments in the leasehold so they can grow their business. The amendment allows the firm to extend their lease agreement in exchange for providing capital improvements into the leasehold.
Contingent on Ocotillo providing an additional minimum capital investment of at least $300,000.00 to the lease property, Ocotillo may retain the titles of Building 673, Hangar 11 and Hangar 12 through June 30, 2032. The capital investment will include, but not limited to, the construction of a new 8,500 square foot hangar facility which must begin construction within 12 months of the execution of the amendment. On July 1, 2032, Ocotillo will begin paying rental rates on the structures on the leasehold based on a city-procured appraisal which will begin approximately six months prior to reversion.
The amendment will also add 24,308 square feet of ground space adjacent to Hangars 11 and 12 at the annual rental rate of $0.20, based on the 2017 Stinson Ground Space Study performed by Valbridge Property Advisors.
ISSUE:
This Ordinance will authorize an amendment to a lease agreement with Ocotillo for the leasehold located at 8619 Mission Road at Stinson. Amendments to lease agreements require the authorization of City Council.
ALTERNATIVES:
City Council could elect to not authorize the amendment to the lease agreement which would result in the contract terms remaining as described in the current agreement.
FISCAL IMPACT:
This amendment will include an additional 24,308 square feet of ground space adjacent to Hangars 11 and 12 is set at a rental rate of $0.20, which will generate $4,861.60 in annual revenue for the Aviation Operating and Maintenance Fund.
RECOMMENDATION:
Staff recommends the approval of an amendment to a lease agreement with Ocotillo Aviation, LLC at Stinson Municipal Airport.