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94 Guidebook for Developing and Leasing Airport Property George Bush Intercontinental Airport/Houston (IAH) Airport Type: Large-Hub Tenant: Consolidated Rental Car Facility Type of Business: Rental Car Facility Location: Landside SOURCE: RW Armstrong, 2009. SOURCE: RW Armstrong, 2009. Project Overview George Bush Intercontinental Airport/Houston (IAH) is one of three airports that comprise the Houston Airport System (HAS). The mid-1990s represented an era of undeveloped land and grow- ing concerns of smog, providing a fertile environment for consideration and development of a con- solidated rental car facility (CRCF). Dallas-Fort Worth International Airport (DFW) opened its CRCF in 2000, and IAH was able to apply lessons learned at DFW to ensure a high quality and suc- cessful facility at IAH. In 2003, the facility located on 250 acres of land opened at IAH. Financing for the CRCF was initiated in April 2001 with the Airport issuing bonds of $130,250,000. When the bonds were issued, a customer facility charge (CFC) of $3.00 was imposed at the airport as well to pay the debt service on the bonds. A Facility Improvement Fund for capi- tal improvements and a Stabilization Account for funding any shortfalls associated with the econ- omy were also created at that time out of excess CFC collections. There are currently eight rental car operators located within the CRCF with Master Leases with the City of Houston. This consortium of operators was required by HAS to form a Limited Liabil- ity Corporation (LLC). The LLC is responsible for governing maintenance and operations, includ- ing bus operations between the facility and the airport, utilities, and insurance. The entire facility covers 250 acres, with 33,960 square feet of exclusive use area, 30,500 square feet of common space, a lobby/shuttle bus area, and a two-level parking garage. Because of issues with rental company bankruptcy in both 2001 and 2009, the Airport learned that there should be separate trust account provisions and/or a financial guarantee provided to pro- tect from bankruptcy. Key Stakeholders The following is a list of key stakeholders responsible for the development and ultimate execu- tion of the consolidated rental car facility lease.

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Case Studies 95 Airport Sponsor: The City of Houston is the Airport owner and is the lessor in the lease agreements. Houston Airport System (HAS): The City of Houston's Department of Aviation considered lessons learned from Dallas-Fort Worth's facility to ensure the facility at IAH was efficient and successful. The HAS issued $130,250,000 in bonds to finance the CRCF project. The bond issuance provided funding for the physical development plus the initial purchase of 26 buses that are used by the rental car operators to transport customers between the airport's terminals and the CRCF. Rental Car Operators: The following rental car operators formed a Limited Liability Corporation: Alamo (rejected lease in 2001 bankruptcy, but dual marketing with National), Avis, Budget, Hertz, Thrifty, Enterprise, Dollar, National (dual marketing with Alamo since 2001 bankruptcy), and Advantage (left due to bankruptcy in 2009). Key Lease Elements Each rental car operator enters into two agreements with the City associated with the CRCF: a Master Lease Agreement and a Concession Agreement and into the LLC with the other operators. Elements of Master Lease: The operator is required to be part of the LLC. Operators pay the LLC for operational expenses. The LLC, in turn, is responsible for main- taining and operating the CRCF, including bus operation. Ground rent is paid by operators pro rata (based on the number of parking spaces and the square footage of the area each operator occupies): Rate of $0.23 per square foot per year initially; currently $0.2645 per square foot per year. Escalation by 15% at every 5-year interval after the 5th year. A Special Facilities Rent is paid by the rental car operators to pay debt service and administra- tive expenses of the bonds and for use of the facility: Customer Service Building, Parking Garage, Shuttle facilities, Shuttle Bus Maintenance, Storage facilities, and the initial buses. Contains provisions for new entrants. Stipulates CFC must be charged for each transaction and remitted to the Airport. Allows for CFC adjustment annually (or more often under certain conditions). Provides for a Rate Stabilization Account to deal with seasonal or economic adjustments throughout the year. Elements of Concession Agreements: Provides a Scope of Services required by operators. Stipulates the greater of a Minimum Annual Guarantee (MAG) versus a percentage fee to be paid to the City: MAG is calculated as 85% of the total amount of concession fees for the preceding 12 months but cannot be less than $100,000. Percentage Rent: 8.5% of first $3 million and 10% above $3 million for the first 5 years. 10% of all gross revenues for years 6 through 10.