Consideration of and action on the termination of the Land Lease Agreement with Vaughn Dallas Properties LP; and authorization of an Aircraft Hangar Purchase Agreement with Vaughn Dallas Properties LP, in the amount of $2,100,000, for the aircraft hangar located at 202 Lee Duggan Drive, Sugar Land, TX 77498.

Vaughn Dallas Properties, LP., entered into a long-term land lease with the City of Sugar Land on November 1, 2016, and constructed a 14,129 SQFT hangar and office space on Taxilane’ C’ in 2017. Vaughn recently sold their aircraft and is currently selling their hangar. With the national shortage of aircraft hangars and the goal to strengthen non-fuel revenue, the Airport is requesting approval to purchase the hangar. Airport staff attended an executive session with the City Council on July 18, 2023, and was authorized to move forward with negotiation. Vaughn was asking $2.3 million for the hangar but accepted an offer of $2.1 million. The hangar is in excellent condition and is fully furnished and move-in ready. 
 
Aircraft hangars can traditionally be leased longer than most facilities. Hangar rental revenue collected over the next 30 years will be approximately $10 million in hangar rent, with an estimated break-even point of around 8 years. This does not include fuel sales from the aircraft and assumes the hangar is always occupied.
 
Owning the hangar also gives the Airport the ability to be more selective when choosing tenants. While the Airport does have a say in private hangar sales, there are limitations if the proposed buyer meets the Airport’s Minimum Standards and is an aeronautical user.
 
Legal has reviewed and approved the associated documents needed, such as the Purchase Agreement, Bill of Sale, and Lease Termination documents, and a closing date has been scheduled for September 29, 2023.

This items was presented to the Finance Audit Committee on October 7th, and they were supportive of the purchase and lease termination. 

Airport staff is recommending that the City Council approve the purchase of the hangar and terminate the existing long-term land lease with Vaughn Dallas Properties, LP.