20240814-012 DHL RCA — original pdf

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City of Austin Recommendation for Action File #: 24-5165, Agenda Item #: 8. 8/29/2024(cid:4) Posting Language Authorize negotiation and execution of a lease with DHL Express (USA) Inc. for premises consisting of approximately 44,549 square feet of building space and 58,604 square feet of air cargo ramp space, for its air freight and cargo handling operations at Austin-Bergstrom International Airport, for a term of five years, with a renewal option for one additional five-year term. Lead Department Aviation Fiscal Note It is anticipated that the agreement will generate an estimated $4.4 million over a 5-year term, or approximately $8.8 million over a 10-year period if the five-year renewal option is exercised. Prior Council Action: July 20, 1995 - Council authorized negotiation and execution of an agreement with Austin Cargoport Development, LLC for the development and operation of a 200,000 square feet air cargo warehouse and associated infrastructure at Austin-Bergstrom International Airport; Resolution No. 950720-26. April 10, 2014- Council authorized negotiation and execution of an agreement with Lynxs Austin Cargoport, LLC for the refinancing, lease, and operation for cargo facilities at Austin-Bergstrom International Airport. June 14, 2018 - Council authorized negotiation and execution of a purchase and sale agreement with Lynxs Austin Cargoport, LLC for the purchase of its leasehold interest in approximately 731,822 square feet of land and its improvements, including three buildings located at the Austin-Bergstrom International Airport for a total amount not to exceed $25,000,000 for the purchase, estimated closing costs for the acquisition, and additional improvements to the property after acquisition. For More Information: Inquiries should be directed to Tracy Thompson, Airport Chief Officer - Business & External Affairs at tracy.thompson@flyaustin.com <mailto:tracy.thompson@flyaustin.com>. Council Committee, Boards and Commission Action: To be reviewed by the Austin Airport Advisory Commission on August 14, 2024. Additional Backup Information: On September 25, 1996, the City of Austin and Austin Cargoport Development, LLC (Cargoport) entered into an agreement for private development, construction, maintenance and operation of an Air Freight and Cargo Facility at Austin-Bergstrom International Airport (AUS). The agreement established a ground lease from the City of the cargo facilities and related property to Cargoport and/or its successors-in-interest (collectively, Cargoport Entities) for operation and subleasing. The Cargoport Entities entered into a sublease of the facility with DHL Express (USA) Inc. (Sublease). Lynxs Austin Cargoport, LLC (Lynxs) was the last successor-in- interest of Cargoport Entities relevant to the agreement. The City purchased the leasehold interest of Lynxs, and on November 30, 2018, assumed the Sublease between Lynxs and DHL. For purposes of convenience, the City and DHL continued the landlord/tenant relationship established under the Sublease, which is currently City of Austin Page 1 of 2 Printed on 8/8/2024 powered by Legistar™ (cid:5) (cid:6) File #: 24-5165, Agenda Item #: 8. 8/29/2024(cid:4) on a month-to-month term and consists of approximately 45,000 square feet of building area. Prior to the City assuming the Sublease, DHL entered into an Air Cargo Ramp Lease with the City commencing on May 1, 2009, for the preferential use of approximately 30,000 square feet of air cargo ramp. On November 1, 2014, the City and DHL amended the Air Cargo Ramp Lease to revise the air cargo ramp space to consist of approximately 58,604 square feet Air Cargo Ramp Space. The Air Cargo Ramp Lease is currently in effect on a month-to-month basis. If approved, the new lease (New Lease) will replace both the Sublease for the cargo building and the Air Cargo Ramp Lease. If the five-year renewal option is exercised, it is anticipated that the New Lease would generate an estimated $8.8 million over the 10-year lease period based upon the following model. Under the proposed terms for the New Lease, the Base Rent will be calculated using the AUS current cargo building rental rate. [The current aircraft parking area rental rate will then be added to the Base Rent.] Additional terms will include operating and maintenance (O&M) rent, which will be 25% of the Base Rent, and an annual rent escalation based on the higher of the current year’s Consumer Price Index (CPI) or 3% of the current rent. City of Austin Page 2 of 2 Printed on 8/8/2024 powered by Legistar™ (cid:5) (cid:6)