Airport Leases in debate: A letter of concern from Kennydale resident Mark Hancock

Many citizens are taking a closer look at Renton Airport Leasing policies following the debate about an Airport Jet Center earlier this year. Here is a representative email to city council, asking us to be careful about what we approve. The city’s transportation committee has decided to hold the subject leases in committee for further study.

From: “Mark Hancock”
To: mpalmer@ci.renton.wa.us, DLaw@ci.renton.wa.us, Dpersson@ci.renton.wa.us, racorman@ci.renton.wa.us
Subject: Airport Subleases considered today
Date: Wed, 18 Jul 2007 14:46:35 -0700

I have 35 years experience in the commercial real estate industry, including
dealing with leases. The lease process and language the City is using in
the Kenmore and Bahr proposals have significant flaws, and need your
attention. Here are my primary thoughts:

1) Use Clause – The use clause is totally one-sided, in favor of the
tenant. While it says what their initial use is to be, it then says
“Consent of Permittor [the City] to other types of activities will not be
unreasonably withheld.” So there really are no significant use limitations,
and the City has very little say in the matter with this language. As long
as the tenant proposes something aviation related, the tenant lawyers and
FAA will force it upon the City. No private landlord would sign such a
lease clause, and this language should not be used in these cases where the
City holds the land in the public trust. The clause should say that if the
tenant wants to change or add uses, the City can grant the change, deny the
change, or re-open the lease for re-negotiations, at the City’s sole
discretion. This land is owned by the public, for their interests, not
those of businesses who may use the land under lease. Examples of problems
could be a tenant changing from maintenance to scheduled service (there’s
plenty of room out on the asphalt for planes), a tenant adding a use that
increases their income and therefore should be paying more rent to the City,
etc. etc. If Kenmore or Aerodyne think they will be asking for another use
in the future, they should be asking for it now.

2) Use Clause – It says the tenant must get the City’s “written consent” to
use the premises for other purposes. It should be more specific – and since
this is a land transaction, it should be the consent of the full City
Council. In very minor circumstances, at least the Council Aviation
Committee should sign off in writing on any decisions by staff regarding
minor use changes.

3) Terms – The Kenmore term makes sense, with a term to 8/31/09 and then
one five year extension “in no event…beyond 8/31/14.” The Bahr lease term
is vague – it just says it terminates 30 days “following the date that
either Lessee [Aerodyne] or Permittee [Bahr] gives written notice of its
intention to the other to terminate the sublease.” It should tie the
sublease to the main lease, and say that the Bahr sublease shall in no event
extend beyond the Aerodyne lease expiration date (8/31/16?).

4) Rental – It appears that BHC is paying the City $1,536.52/month for the
space they are subleasing to Kenmore for $4,000/month. Why is the City
letting BHC pocket the difference (about $30,000 per year)? On the other
hand, Bahr is paying Aerodyne $300 for their share of the larger space that
Aerodyne is paying the City $1,869.75 for (which makes a lot more sense).

5) Subleasing – Based on #4 above, and the lack of any substantive staff
reports about these business deals, the whole concept of subleasing comes
into question (maybe not for these deals, but certainly for any deals to
come). City leases simply should not allow it, which is standard practice
in commercial real estate. Again, commercial landlords are protecting their
own property, while the City has a higher standard in protecting public
property. The current language and process is very informal, and again
totally one-sided in favor of the tenant. Both Kenmore and Bahr signed
subleases last fall – so where was the City in all this, as they are not
even signers of those subleases. Did the City know about them at the time,
and did the City approve of them at the time? Where is the documentation?
Again, as land transactions, these should go through the entire City Council
– this is not a minor matter that staff can just give the casual nod of
approval on. The subletting clause (e.g. Kenmore lease #12.1), is terrible.
It says the City cannot unreasonably withhold approval of a sublease –
what about use changes, rent changes, qualifications of new tenants, etc.
etc. ? It should be entirely at the City’s discretion, not a tenant lawyer
argueing about what is “reasonable.” Does the City allow subleasing of the
subleases?

6) Liability Insurance – the $1,000,000 coverage limit is inadequate,
especially for the aviation business. Even a homeowner umbrella policy is
for more than that these days. The City is not properly protected. Talk to
the City’s insurance providers about this.

As pointed out previously, the City Council needs the help of a lawyer with
aviation and FAA experience, both for this inadequate lease form, and the
other issues that are facing us. You should not approve or sign these
leases as they are written.

Lastly, in the absence of a thorough staff report, there are many questions
that should be asked of the operators (and on the record in a public meeting
where records are kept), including:

Are these the only uses anticipated for the duration of the lease?
How many planes do they see involved in these leases, and at what frequency?
How much of the asphalt tie down areas outside of the building are they
planning on using?
Does Kenmore plan to fly the wheeled aircraft in/out of Renton airport at
night or early morning, as they go to/from Boeing Field?
What measures will be taken to minimize noise impacts to neighborhoods on
the west side of the airport?

Thank you for considering my comments,
Mark Hancock