Title
Resolution to Approve a Lease Agreement between the City and the Regents of the University of Michigan for a Corporate Hangar Located at the Ann Arbor Municipal Airport (8 Votes Required)
Memorandum
In 1994 Bijan Air Inc. leased land from the City of Ann Arbor and constructed a corporate hangar located at the Ann Arbor Municipal Airport, specifically 747 Airport Drive. Since the building was constructed, the University of Michigan Survival Flight has operated from this hangar. With the retirement of its owner, Bijan Air Inc. recently assigned, with City consent, the current lease to the Regents of the University of Michigan (University) so they could continue Survival Flight operations from this location. The University's recently assumed lease expired on October 31, 2024, and negotiations progressed on a new lease.
Under the proposed lease between the City and the University, Survival Flight will continue to operate from the corporate hangar. The City owns the land and the University continues to own the building. Besides the operating and maintenance expenses of the building and land, the University has agreed to make certain capital improvements to the building which are included in the proposed lease. At the end of the nine-year term of the lease, the ownership of the building reverts to the City.
Under our FAA grant assurances, land lease rates per square foot should be equal for like properties at the airport, which these are. Land lease rates are increased annually per the Consumer Price Index. Additionally, the lease contains a building depreciation fee over the life of the term to reflect the City's deferral of ownership of the building.
Budget/Fiscal Impact: While the land lease revenue is consistent with other "like" properties at the airport, the building depreciation fee has increased based on the proposed capital improvements, making the overall lease revenue positive for the airport. Unlike other airport owned buildings, the airport has ...
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