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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 01/05/2021 - SECOND READING OF ORDINANCE NO. 163, 2020, APPROVI Agenda Item 4 Item # 4 Page 1 AGENDA ITEM SUMMARY January 5, 2021 City Council STAFF Jason Licon, Airport Director Judy Schmidt, Legal SUBJECT Second Reading of Ordinance No. 163, 2020, Approving the First Amendment to Ground Lease Agreement Between the Cities of Loveland and Fort Collins and Discovery Air, LLC, for Property at the Northern Colorado Regional Airport. EXECUTIVE SUMMARY This Ordinance, unanimously adopted on First Reading on December 15, 2020, adopts an amendment to the long-term aviation land lease agreement between the Cities of Fort Collins and Loveland (Cities) and Discovery Air, LLC signed in January of 2019. The lease terms included a (50) year lease for a large-scale aviation development project. The project has progressed since the execution of the original lease, and Discovery Air has obtained the necessary development approvals to continue pursuit of their development. Discovery Air has since determined it necessary to pursue a phased approach to its development and accordingly has requested that the Cities amend the original Lease. Due to the complexity and unique provisions of the original lease and this proposed amendment, the Northern Colorado Regional Airport Commission does not have the authority to approve and sign the Lease Amendment. The two Cities must each approve in accordance with their respective Municipal Codes and Charters. The Northern Colorado Regional Airport Commission reviewed the lease agreement amendment at its November 12, 2020, meeting, and unanimously recommended approval by the Councils. The proposed Airport development includes the construction of corporate aircraft hangar facilities and associated office space, a potential aircraft support center, a restaurant, and all infrastructure to support these facilities. This lease amendment will allow success of the public-private partnership. The Airport has approximately 200 acres of space available for aeronautical development. This proposal will use approximately 10% of the available land for what is considered to be the highest and best use of the property, which is in accordance with the Council adopted Airport Master Plan and Airport Commission Adopted Strategic Plan. The Airport will create revenues through lease payments from the property in addition to other revenues from the operations of the campus. The new buildings will create jobs and enhance the regional economic impact of the Airport. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on Second Reading. ATTACHMENTS 1. First Reading Agenda Item Summary, December 15, 2020 (w/o attachments) (PDF) 2. Ordinance No. 163, 2020 (PDF) Agenda Item 16 Item # 16 Page 1 AGENDA ITEM SUMMARY December 15, 2020 City Council STAFF Jason Licon, Airport Director Judy Schmidt, Legal SUBJECT First Reading of Ordinance No. 163, 2020, Approving the First Amendment to Ground Lease Agreement Between the Cities of Loveland and Fort Collins and Discovery Air, LLC, for Property at the Northern Colorado Regional Airport. EXECUTIVE SUMMARY The purpose of this item is to approve an amendment to the long-term aviation land lease agreement between the Cities of Fort Collins and Loveland (Cities) and Discovery Air, LLC signed in January of 2019. The lease terms included a (50) year lease for a large-scale aviation development project. The project has progressed since the execution of the original lease, and Discovery Air has obtained the necessary development approvals to continue pursuit of their development. Discovery Air has since determined it necessary to pursue a phased approach to its development and accordingly has requested that the Cities amend the original Lease. Due to the complexity and unique provisions of the original lease and this proposed amendment, the Northern Colorado Regional Airport Commission does not have the authority to approve and sign the Lease Amendment. The two Cities must each approve in accordance with their respective Municipal Codes and Charters. The Northern Colorado Regional Airport Commission reviewed the lease agreement amendment at its November 12, 2020, meeting, and unanimously recommended approval by the Councils. The proposed Airport development includes the construction of corporate aircraft hangar facilities and associated office space, a potential aircraft support center, a restaurant, and all infrastructure to support these facilities. This lease amendment will allow success of the public-private partnership. The Airport has approximately 200 acres of space available for aeronautical development. This proposal will use approximately 10% of the available land for what is considered to be the highest and best use of the property, which is in accordance with the Council adopted Airport Master Plan and Airport Commission Adopted Strategic Plan. The Airport will create revenues through lease payments from the property in addition to other revenues from the operations of the campus. The new buildings will create jobs and enhance the regional economic impact of the Airport. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BACKGROUND / DISCUSSION The Northern Colorado Regional Airport is a jointly owned and operated public facility shared by the Cities of Fort Collins and Loveland. In 2015 the Cities entered into an intergovernmental agreement (IGA) forming the Northern Colorado Regional Airport Commission, which is delegated certain powers and authority to operate and maintain the Airport. The IGA provides that the Airport Commission enter into Airport property lease agreements on behalf of the Cities if such agreements are in a form that is generally approved by the Cities. ATTACHMENT 1 Agenda Item 16 Item # 16 Page 2 The Airport, through the Airport Commission and the Cities, grants long-term land leases to private sector investors or builders to construct aviation support facilities. This is a standard procedure for all publicly-owned airports and is in accordance with FAA regulatory standards. The generally approved standard lease term for land for the construction of aeronautical use facilities is forty years, consisting of an initial twenty-five year lease with three five-year extension options. At the end of the standard lease term, the lessee has the ability to renegotiate the lease agreement, or the improvements revert to the ownership of the Cities. The standard lease agreements also typically require investment by the Cities for the infrastructure required for each construction project. Pre-development costs have historically been funded using City bonding resources or through federal and state grant funding combined with local match dollars for the construction of access roads, utility extensions, and aircraft taxiways. The lease agreement negotiated with Discovery Air, LLC does not qualify as a standard lease in a form generally approved by the Cities that the Northern Colorado Regional Airport Commission has the authority to approve. This is due to the key differences with the standard lease format including the extended term of fifty years and the reduced rate to compensate for the developer’s investment in infrastructure. The developer will be assuming all risk and upfront investment for this project, therefore staff recommended and obtained previous Council approval for a lower lease rate and extended lease term than what is standard. The following are details on the original lease terms and rates: Lease area: 564,096 square feet Term: Initial two-year option period that will roll into a fifty (50) year total land lease Annual rate: o Two year option: $0.05 per square foot o Years 3-10 after option period: $0.15 per square foot o Years 11-50 = $0.25 per square foot plus inflation adjustments Value of the lease = $10.2 million at 2.5% estimated inflation The amendment provides for phasing of the project and takes into consideration a new site development plan. The result will be more efficient use and leasing of space and will reduce lease rates in the beginning of the lease term and increase it toward the end, resulting in greater revenues for the Airport over time. Additionally, the new provisions will provide for inflationary protections into the lease rates that are put into effect much earlier in the lease terms. Following are the amended lease terms: Lease area: 675,548 square feet (increase of 111,452 square feet) Term: Initial two-year option period that will roll into a fifty (50) year total land lease (Same) Annual rate: o Two year option: $0.05 per square foot (Same) o Years 3-10 after option period: $0.15 per square foot (Phased and adjusted to CPI) o Years 11-50 = $0.25 per square foot plus inflation adjustments (Phasing impacts) Value of the lease = $13.4 million at 2.5% estimated inflation ($3.1 million increase) Considered a public-private partnership, the proposal is a catalyst for high quality development and end users and provides the financial resources to enhance the Airport’s future financial sustainability. The list of benefits include:  No upfront cost to the Cities.  Fuel flowage from larger aircraft for which this development is designed, could have an additional positive impact to the Airport’s self-generated revenue and future financial sustainability.  The area would take 25 years to fully build out at the current airport development rate.  Potential to be a catalyst to attract additional development and businesses.  The project will enhance the Airport’s regional economic impact. Agenda Item 16 Item # 16 Page 3  Centennial Airport and other successful airports use similar models for large scale aeronautical land leasing.  Rates are comparable to current larger scale leases.  The lease terms conform with FAA regulatory standards and grant assurances.  Performance measures remain included in the Lease agreement. o Have accomplished site development planning and associated approvals completed prior to the end of the 24-month entitlement period. o Requires horizontal infrastructure started within three years. o Requires vertical infrastructure started within five years. BOARD / COMMISSION RECOMMENDATION The Northern Colorado Regional Airport Commission during its regularly scheduled meeting on November 1, 2020 (Attachment 1) recommended the Cities approve the Amendment to the Discovery Air LLC Land Lease Agreement. The City Council of Loveland will also consider this recommendation concurrently at their meeting scheduled December 15, 2020. PUBLIC OUTREACH The proposal is in line with the adopted and approved Airport Master Plan, for which considerable outreach and public input was conducted. It additionally conforms with the Airport’s adopted Strategic Plan, which involved considerable outreach and public involvement. Finally, a public hearing was held by the Airport Commission and will be held by each City Council in connection with consideration of the First Amendment. The City of Loveland has approved the site development plan from the developer and any and all requirements of the facilities planned have been met. The lease agreement includes performance measures that will need to be met by the lessee in addition to the adherence to all City of Loveland building code requirements. ATTACHMENTS 1. Airport Commission Resolution R-10-2020 (PDF) 2. Discovery Air Lease First Amendment (PDF) 3. Original Ground Lease Agreement (PDF) 4. Powerpoint Presentation (PDF) -1- ORDINANCE NO. 163, 2020 OF THE COUNCIL OF THE CITY OF FORT COLLINS APPROVING THE FIRST AMENDMENT TO GROUND LEASE AGREEMENT BETWEEN THE CITIES OF LOVELAND AND FORT COLLINS AND DISCOVERY AIR, LLC, FOR PROPERTY AT THE NORTHERN COLORADO REGIONAL AIRPORT WHEREAS, the Cities of Loveland and Fort Collins (collectively the “Cities,” and “Loveland” or “Fort Collins” respectively) jointly own and operate the public airport known as the Northern Colorado Regional Airport (the “Airport”); and WHEREAS, the Cities entered into an Amended and Restated Intergovernmental Agreement for the Joint Operation of the Airport on January 22, 2015 (the “IGA”), whereby the Cities formed a commission and delegated certain duties and responsibilities to such commission (the “Commission”); and WHEREAS, by adoption of Ordinance No. 148-2018, the Fort Collins City Council approved a fifty year ground lease of Airport property (the “Lease”) to Discovery Air, LLC (“Lessee”) for a planned development for aviation purposes to include airplane hangars, a fixed- base operation, associated office space, and a restaurant, as well as other potential improvements such as a new access road which would create a new entrance to the Airport and expanded tarmac (the “Project”); and WHEREAS, continuation of the Lease is contingent on Lessee obtaining certain approvals and financing for the proposed development and commencing certain development activities within specified time periods; and WHEREAS, the Lessee’s planning for the Project has progressed since execution of the Lease and Lessee desires to develop the Project in four phases, and accordingly has requested that the Cities amend the Lease to also phase the Lease rent; and WHEREAS, Airport staff and Lessee have discussed and negotiated an amended rent structure to correspond with the four phases, with rent for each phase of the Project having two rent escalation points and annual adjustments based on Consumer Price Index increases, as more fully set forth in the First Amendment to Ground Lease (the “First Amendment”) attached hereto as Exhibit “A” and incorporated herein by this reference; and WHEREAS, the Lessee is current on all rent payments and other obligations under the Lease and has obtained preliminary development approvals from Loveland to enable Lessee move forward with the Project, subject to an additional two-year “Inspection and Entitlement Period” as set forth in the First Amendment; and WHEREAS, in addition to amending rent structure, the Lessee proposes to amend the Lease to update the site plan attached thereto as Exhibit B to match the current approved site plan, to add a legal description of the Leased Premises, and to make some other minor amendments; and -2- WHEREAS, the Commission reviewed the First Amendment at its regular meeting on November 12, 2020, and voted unanimously to recommend approval to the City Councils for the Cities; and WHEREAS, the Loveland City Council will consider a resolution approving the First Amendment at its meeting scheduled for December 15, 2020; and WHEREAS, Fort Collins Municipal Code Section 23-113 provides that City Council may approve leases of real property owned in the name of the City for a term in excess of twenty (20) years by ordinance where Council finds that the lease is in the best interests of the City; and WHEREAS, the City Council finds that the Lease, as modified by the First Amendment, is in the best interests of the City because it may be a catalyst to attract additional Airport development and businesses, enhance the Airport's economic impact and job creation, and have an additional positive impact to the Airport's self-generated income and future financial sustainability; and WHEREAS, the City Council desires to approve the First Amendment and to authorize the City Manager to execute the First Amendment on behalf of the City of Fort Collins. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby makes and adopts the determinations and findings contained in the recitals set forth above. Section 2. That the First Amendment is hereby approved. Section 3. That the City Manager is hereby authorized, following consultation with the City Attorney, to modify the First Amendment in form or substance as deemed necessary to effectuate the purposes of this Ordinance or to protect the interests of the City. Section 4. That the City Manager is hereby authorized and directed to execute the First Amendment on behalf of the City. -3- Introduced, considered favorably on first reading, and ordered published this 15th day of December, A.D. 2020, and to be presented for final passage on the 5th day of January, A.D. 2021. __________________________________ Mayor ATTEST: _____________________________ City Clerk Passed and adopted on final reading on this 5th day of January, A.D. 2021. __________________________________ Mayor ATTEST: _____________________________ City Clerk {00600273} 1 FIRST AMENDMENT TO NORTHERN COLORADO REGIONAL AIRPORT GROUND LEASE AGREEMENT This FIRST AMENDMENT TO NORTHERN COLORADO REGIONAL AIRPORT GROUND LEASE AGREEMENT (“Amendment”) is entered into on this _____________ day of ________, 2020 (the “Effective Date”), by and between CITIES OF FORT COLLINS AND LOVELAND, COLORADO (collectively, the “Cities”), and DISCOVERY AIR, LLC, a Colorado limited liability company (“Lessee”). RECITALS A.The Cities and Lessee entered into that certain Northern Colorado Regional Airport Ground Lease Agreement dated January 16, 2019 (the “Lease”), for the lease of certain premises (the “Leased Premises”), located within the Northern Colorado Regional Airport (the “Airport”), Larimer County, Colorado; B.Since execution of the Lease, the Lessee has developed its plans for the Leased Premises at the Airport such that it anticipates constructing its facilities and improvements in phases. As a result, Lessee has requested, and the Cities have agreed to also phase the rent due for the Leased Premises. The parties therefore desire to amend the Lease to phase the rent, to amend the rentable and non-rentable areas of the Leased Premises, and to clarify other items stated in the Lease. C.The parties therefore desire to amend the Lease to phase the rent, to amend the rentable and non-rentable areas of the Leased Premises, and to clarify other items stated in the Lease as more particularly set forth and described herein below. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: 1.Definitions. All capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms as set forth in the Lease. 2.Amended Paragraph 1.4. The Cities and Lessee agree that Paragraph 1.4 of the Lease is deleted in its entirety and is hereby replaced with the following: “1.4 In addition, Lessee shall have twenty four (24) months after the Effective Date (the “Inspection and Entitlement Period”) (i) to obtain, at its sole cost and expense, any and all platting, master planned, subdivision, PUD, land use or other approvals, including approval of a site development plan (“Entitlements”) which are required to enable Lessee to operate and develop the Leased Premises in accordance with the site plan depicted in Exhibit “B;” (ii) omitted; (iii) to inspect, test, examine, survey or conduct any studies of the Leased Premises as Lessee may deem necessary; (iv) to ascertain the availability of utilities and other services and to finalize any development agreements related thereto; and (v) to otherwise investigate the desirability and feasibility of the Leased Premises for Lessee’s use. Lessee further agrees to provide the Commission with Lessee’s final site development plan for review prior to Lessee’s submittal of such final site EXHIBIT A {00600273} 2 development plan to Loveland in order for the Commission to provide input to Loveland regarding the plan. Lessee shall be entitled to terminate this Agreement upon notice in writing to the Cities at any time prior to the end of the Inspection and Entitlement Period if (i) Lessee is unable, in its business judgment, to assure itself that it will be able to obtain the necessary Entitlements, or finalize any development agreements related to utilities and other necessary infrastructure or (ii) Lessee otherwise determines, in its business judgment, that the condition of the Leased Premises is unsatisfactory for Lessee’s intended use, or that any necessary utilities, services, or approvals are unavailable. If Lessee so terminates this Agreement, all further obligations of the parties hereunder shall end and be of no further force or effect except for obligations which expressly survive the termination of this Agreement. If Lessee does not notify the Cities prior to the end of the Inspection and Entitlement Period of Lessee’s election to terminate this Agreement for any of the foregoing reasons, then this termination clause shall be inoperative and void, and this Agreement shall remain in full force and effect. If Lessee has not obtained approval of a site development plan for Lessee’s development of the Leased Premises in substantially similar form to the plan depicted on Exhibit B, the Cities may terminate this Agreement by providing Lessee notice of intent to terminate this Agreement within thirty (30) days. If Lessee fails to obtain approval of such site development plan by the end of the thirty (30) days, this Agreement shall automatically terminate as of the thirty-first (31st) day and all further obligations of the parties hereunder shall end and be of no further force or effect except for obligations which expressly survive the termination of this Agreement.” 3. Amended Paragraph 1.5. The Cities and Lessee agree that Paragraph 1.5 of the Lease is deleted in its entirety and is hereby replaced with the following: “1.5 In the event Lessee has not commenced construction of any horizontal improvements to the Leased Premises for example, grading work or installation of utilities, within three (3) years after the Effective Date of this Agreement, subject to extension mutually agreed upon in writing by the parties, this Lease shall automatically and immediately terminate. In addition, in the event Lessee has not commenced construction of any of the vertical improvements comprising Phase I (as hereinafter defined), subject to extension mutually agreed upon by the parties, this Agreement shall automatically and immediately terminate. Nothing contained herein shall prohibit or operate to prohibit Lessee from applying for or seeking reimbursement for any of the Improvements from any local government, state or federal entity.” 4. Leased Premises. The Cities and Lessee agree that Paragraph 2.1 is deleted in its entirety and is hereby replaced with the following: 2.1 The Leased Premises consist of the parcel of land described in Exhibit “A”, which is attached hereto and by this reference made a part hereof. 5. Amended Rent. The Cities and Lessee agree that Paragraph 4.2 of the Lease is deleted in its entirety and is hereby replaced with the following: {00600273} 3 4.2 (a) Phase I. Commencing on the earlier of (i) January 1, 2021 and (ii) the date that the first certificate of occupancy (or its equivalent) is issued for any of the Improvements located within the Phase I Rental Area (as hereinafter defined) (the “Phase I Rent Commencement Date”), Lessee agrees to pay to the Cities for the first (1st) year following the Phase I Rent Commencement Date an annual rent of $0.15 per square foot for the Phase I Rental Area, for a total of $18,044.10 per year, subject to adjustment pursuant to Section 4.2(f). Commencing on the 8th anniversary of the Phase I Rent Commencement Date (the “Phase I Rent Escalation Date”), Lessee shall pay to the Cities an annual rent of 167% of the previous year’s annual rent for the Phase I Rental Area, subject to adjustment pursuant to Section 4.2(f). “Phase I Rental Area” as used herein shall mean the area comprising a portion but not all of the Leased Premises generally depicted and identified on Exhibit “C” which is attached hereto and by this reference made a part hereof; the parties hereto have agreed that the Phase I Rental Area contains 120,294 square feet. The Phase I Rental Area includes paved areas which Lessee shall construct to comply with the Minimum Standards. The parties acknowledge and agree that the annual rent for the remaining Rental Area (as hereinafter defined) other than the Phase I Rental Area shall remain as set forth in Paragraph 4.1 of the Lease until a subsequent Additional Phase Rent Commencement Date (as hereinafter defined) has occurred. The term “Additional Phase Rent Commencement Date” shall mean any of the following: the Phase II Rent Commencement Date (as hereinafter defined), Phase III Rent Commencement Date (as hereinafter defined), or Phase IV Rent Commencement Date (as hereinafter defined), as the case may be. The parties acknowledge and agree that Lessee intends to develop and construct the remaining Leased Premises in phases comprising currently undetermined portions of the Leased Premises at times reasonably determined by Lessee. (b) Phase II. Commencing on the earlier of (i) January 1, 2026 and (ii) the date that the first certificate of occupancy (or its equivalent) is issued for any of the Improvements located within the Phase II Rental Area (as hereinafter defined) (the “Phase II Rent Commencement Date”), Lessee agrees to pay to the Cities for the first (1st) year following the Phase II Rent Commencement Date an annual rent of 300% of the prior year’s annual rent for the Phase II Rental Area, subject to adjustment pursuant to Section 4.2(f). Commencing on the 8th anniversary of the Phase II Rent Commencement Date (the “Phase II Rent Escalation Date”), Lessee shall pay to the Cities an annual rent of 167% of the prior year’s annual rent for the Phase II Rental Area, subject to adjustment pursuant to Section 4.2(f). “Phase II Rental Area” as used herein shall mean the area comprising a portion but not all of the Leased Premises generally depicted and identified on Exhibit “C” which is attached hereto and by this reference made a part hereof; the parties hereto have agreed that the Phase II Rental Area contains 242,626 square feet. The Phase II Rental Area includes paved areas which Lessee shall construct to comply with the Minimum Standards. {00600273} 4 The parties acknowledge and agree that the annual rent for the remaining Rental Area (as hereinafter defined) other than the Phase I Rental Area and Phase II Rental Area shall remain as set forth in Paragraph 4.1 of the Lease until a subsequent Additional Phase Rent Commencement Date (as hereinafter defined) has occurred. (c) Phase III. Commencing on the earlier of (i) January 1, 2029 and (ii) the date that the first certificate of occupancy (or its equivalent) is issued for any of the Improvements located within the Phase III Rental Area (as hereinafter defined) (the “Phase III Rent Commencement Date”), Lessee agrees to pay to the Cities for the first (1st) year following the Phase III Rent Commencement Date an annual rent of 300% of the prior year’s annual rent for the Phase III Rental Area subject to adjustment pursuant to Section 4.2(f). Commencing on the 8th anniversary of the Phase III Rent Commencement Date (the “Phase III Rent Escalation Date”), Lessee shall pay to the Cities an annual rent of 167% of the prior year’s annual rent for the Phase III Rental Area, subject to adjustment pursuant to Section 4.2(f). “Phase III Rental Area” as used herein shall mean the area comprising a portion but not all of the Leased Premises generally depicted and identified on Exhibit “C” which is attached hereto and by this reference made a part hereof; the parties hereto have agreed that the Phase III Rental Area contains 150,622 square feet. The Phase III Rental Area includes paved areas which Lessee shall construct to comply with the Minimum Standards. The parties acknowledge and agree that the annual rent for the remaining Rental Area (as hereinafter defined) other than the Phase I Rental Area, Phase II Rental Area, and Phase III Rental Area shall remain as set forth in Paragraph 4.1 of the Lease until a subsequent Additional Phase Rent Commencement Date (as hereinafter defined) has occurred. (d) Phase IV. Commencing on the earlier of (i) January 1, 2030 and (ii) the date that the first certificate of occupancy (or its equivalent) is issued for any of the Improvements located within the Phase IV Rental Area (as hereinafter defined) (the “Phase IV Rent Commencement Date”), Lessee agrees to pay to the Cities for the first (1st) year following the Phase IV Rent Commencement Date an annual rent of 300% of the prior year’s annual rent for the Phase IV Rental Area, subject to adjustment pursuant to Section 4.2(f). Commencing on the eighth anniversary of the Phase IV Rent Commencement Date (the “Phase IV Rent Escalation Date”), Lessee shall pay to the Cities an annual rent of 167% of the prior year’s annual rent for the Phase IV Rental Area, subject to adjustment pursuant to Section 4.2(f). “Phase IV Rental Area” as used herein shall mean the area comprising a portion but not all of the Leased Premises generally depicted and identified on Exhibit “C” which is attached hereto and by this reference made a part hereof; the parties hereto have agreed that the Phase IV Rental Area contains 162,006 square feet. The Phase IV Rental Area includes paved areas which Lessee shall construct to comply with the Minimum Standards. “Rental Area” as used herein shall mean area comprising a portion but not {00600273} 5 all of the Leased Premises upon which the parties hereto have agreed to calculate annual rental for the Leased Premises, the total Rental Area contains 675,548 square feet as depicted in Exhibit “C” which is attached hereto and by this reference made a part hereof. The Rental Area includes paved areas which Lessee shall construct to comply with the Minimum Standards. The escalation of Rent described herein above is generally described in Exhibit “D” attached hereto, such Exhibit is for demonstration purposes and is not intended to control the Rent Commencement Date or Rent Escalation Date for any Phase (as defined for each Phase above), such Dates to be established as set forth herein above. (e) Contingent Phase V. The Lessee shall not owe to the Cities any rent for the remaining portion of the Leased Premises not included as a Phase Rental Area (“Remainder Area”) until such time as the Lessee commences any development of the Remainder Area. For purposes of this Lease, “development” shall mean any of the following: (i) use of land; (ii) construction; and/or (iii) clearing, grading, re-grading, or cutting in anticipation of the construction of infrastructure, structures, or buildings, except that “development” shall not include solely landscaping or other activities or use of the Remainder Area that are not intended for the production of revenue for the Lessee. Commencing on the first day of the month following the date that the Lessee begins development of the Remainder Area, Lessee shall pay rent to the Cities as follows: (i) If the Lessee develops the Remainder Area for aeronautical uses, the Lessee shall pay rent at the same rate as Lessee has paid for each Phase listed above starting at the commencement rate ($0.15 per square foot adjusted for CPI for the term the Lease has been in effect since the Phase I Commencement Date) for a period of eight (8) years and increasing to the escalation rate of 167% of the previous year’s annual rent; or (ii) If the Lessee develops the Remainder Area for non-aeronautical uses, Lessee shall pay rent to the Cities at the Airport’s improved property rental rate in effect at the time or fair market value, whichever is required by the FAA. Lessee acknowledges and agrees that if the Remainder Area is developed for non-aeronautical uses, such use may require release of the Remainder Area by the FAA, which release shall be in the sole discretion of the FAA. (f) Commencing on May 1st ,2022, and on May 1st in each year thereafter during the remainder of the Term, the annual rent shall be adjusted by multiplying the annual rent payable in the next preceding year by a fraction, the numerator of which shall be the C.P.I., as hereinafter defined, published for the previous month of December and the denominator of which shall be the C.P.I. published for the month of December which preceded the month used as the numerator. In no event shall the annual rent be reduced from that payable in a previous year. If this Agreement is executed after January 1st, such C.P.I. increase for the calendar year in which this Agreement is executed shall be prorated. The term "C.P.I." as used herein shall mean the Consumer Price Index for all Urban Consumers, all items, Selected Large Cities, for the Denver/Boulder Area as published by the Bureau of Labor Statistics of the United States {00600273} 6 Department of Labor, 1982-84 base = 100. In the event the base year is changed, the C.P.I. shall be converted to the equivalent of the base year 1982-84 = 100. In the event the Bureau of Labor Statistics ceases to use the C.P.I., or this index, an equivalent or comparable economic index will be used. 6. Deletion of Paragraph 4.3. The Cities and Lessee agree that Paragraph 4.3 of the Lease is hereby deleted in its entirety. 7. Amended Exhibit “A” and Exhibit “B”. The Cities and Lessee agree that Exhibit “A” and Exhibit “B” to the Lease are deleted in their entirety and are hereby replaced with the attached Exhibit “A1” and Exhibit “B1” respectively. Furthermore, the Cities and Lessee agree that any all references to Exhibit “A” in the Lease are hereby amended to reference Exhibit “A1” and all references to Exhibit “B” in the Lease are hereby amended to reference Exhibit “B1”. 8. Ratification of Lease. Except as expressly set forth in this Amendment, the Lease otherwise is unmodified, remains in full force and effect and is incorporated and restated herein as if fully set forth at length. Each reference in the Lease to itself shall be deemed also to refer to this Amendment. 9. Counterparts. This Amendment may be executed in two or more counterparts, each of which will be deemed an original, which together will constitute one in the same agreement. A facsimile or other electronic signature shall have the same force and effect as an original signature; provided, however, subsequent to any execution of this Amendment by electronic means, the parties hereto agree to exchange original signatures upon the written request of either party. 10. Modifications. This Amendment may be modified only in writing signed by both the Cities and Lessee. 11. Capitalized Terms. All capitalized terms used herein shall have the meaning as set forth in the Lease, unless otherwise defined herein. 12. Nature of Amendment. The Lease as amended by this Amendment shall remain in full force and effect in accordance with all of its terms and provisions. This Amendment shall be binding upon and inure to the benefit of the parties hereto, and their respective heirs, personal representatives, successors and assigns. No additions or modifications of any term or provision of this Amendment shall be effective unless set forth in writing, signed by the party against whom enforcement of such addition or modification is sought. This Amendment contains the entire agreement of the parties hereto, and supersedes any prior written or oral agreements, negotiations or understandings between them concerning the subject matter contained herein. {00600273} 7 IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment to Shopping Center Lease by their duly authorized officers, effective as of the Effective Date. THE CITIES: CITY OF LOVELAND, COLORADO Stephen C. Adams, City Manager ATTEST: Clerk APPROVED AS TO FORM: _________________________________ Assistant City Attorney CITY OF FORT COLLINS, COLORADO ___________________________________ Darin A. Atteberry, City Manager ATTEST: City Clerk APPROVED AS TO FORM: _________________________________ Assistant City Attorney LESSEE: Discovery Air, LLC, a Colorado limited liability company, ATTEST: By: Name: Title: Discovery Air Lease Area Approx. 1,301,774 SF Boundary and area are approximate and subject to professional survey upon commencement of Phase I construction K 0 500 1,000 Feet Exhibit "A1" Description of Leased Premises Phase II Rental Area 242,626 SF Phase I Rental Area 120,294 SF Phase III Rental Area 150,622 SF Phase IV Rental Area 162,006 SF Contingent Phase V Remainder Area 253,595 SF Public Taxiway 141,552 SF Contingent Ramp 79,788 SF Contingent Ramp 104,564 SF Contingent Ramp 46,665 SF K 0 500 1,000 Feet Exhibit "C" Discovery Air Lease Areas Exhibit “D” Rent Phasing Example This example assumes a constant 2% annual CPI