Authorize Execution of a Lease Agreement with Rolls Royce North America, Incorporated or an Affiliate for a Portion of the Alliance Fort Worth Maintenance Base Located at 2112 Eagle Parkway and Authorize Execution of a Brokerage Commission Agreement with Cushman & Wakefield, Incorporated at a Rate of 4.50 Percent of the Base Rent (COUNCIL DISTRICT 7)  

It is recommended that the City Council:

1. Authorize execution of a Lease Agreement with Rolls Royce North America, Incorporated or an affiliate to lease a portion of the Alliance Fort Worth Maintenance Base, to include the Turbine Engine Overhaul Building, the Test Cell and the Heat, Treat, Blast and Spray Shop, located at 2112 Eagle Parkway, Fort Worth, Texas 76177; and

2. Authorize the City Manager or his designee to execute a Brokerage Commission Agreement with Cushman & Wakefield, Incorporated at a rate of 4.50 percent of the base rent.

On November 1, 2016, 444,000 square feet of space (Premises) at the Alliance Fort Worth Maintenance Base (AFWMB), previously under lease with Texas Aero Engine Services, LLC (TAESL), became available for a new tenant. In October 2016, Hillwood Properties, the City's leasing and management agent for the AFWMB, began negotiations with Rolls Royce North America and their representative to lease the majority of the space being vacated by TAESL. A proposed Lease Agreement has been negotiated with Rolls Royce North America, Incorporated for Engine Test Cell facility, Turbine Overhaul Building, and the Heat, Treat, Blast and Spray Building, and accompanying parking.

Below are the highlighted terms from the proposed Lease Agreement:

• Primary Term of 10 years
• Base Rent to be paid as follows:

                Months 1 -12:      No Rent
                Months 13-60:     $1.00 per square foot ($440,000.00 per year)
                Months 61-120:   $1.10 per square foot ($555,000.00 per year)

• Two five-year renewal options at then current market rates
• Rolls Royce assumes operating expenses for the premises during the term of the lease

During the entire term of the lease, the Alliance Maintenance Fund is estimated to increase by approximately $3,200,000.00 and the City saves approximately $250,000.00 per month in current subsidies for the existing operation of the Central Utility Plant at the AFWMB. Additionally, Rolls Royce intends to make approximately $9,000,000.00 in improvements to the Test Cell facility to accommodate their planned operations, which improvements will be the property of the City.

As outlined in the Leasing Agreement between the Alliance Airport Authority and Hillwood Properties, which was assigned to the City via M&C L-15748 on January 15, 2015, Hillwood brokerage commission fees due will be 2.25 percent of the base rent. The Leasing Agreement also stipulates that cooperating brokers in the transaction would be paid a separate commission fee of 4.5 percent of the base rent. Cushman & Wakefield, Inc., was the cooperating real estate broker assisting with the negotiations and upon approval of this M&C and the execution of the lease, the City will enter into a separate Commission Agreement with Cushman & Wakefield, Inc., for their commission fee.

This property is located in COUNCIL DISTRICT 7.