The Dallas/Fort Worth Airport Board on Thursday unanimously approved a lease extension for American Airlines so the Fort Worth-based carrier can move forward with plans to build a new headquarters.
The lease on the airport-owned property, initiated in 1978 when American moved its headquarters from New York to Fort Worth, was extended to 2114 from its original expiration in 2043. With the extension, American’s ground lease would run for another 99 years.
As part of the deal, the airline will make a $10 million lump sum payment to the airport.
“We at DFW Airport are very pleased to have American Airlines commit to a lease extension that will include the creation of their new headquarters facility on DFW property,” said airport chief executive Sean Donohue. “American is a valued partner for DFW and we look forward to working together with American in jointly serving DFW customers for decades to come.”
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Last week, American announced plans to build a new corporate headquarters campus on the west side of Texas 360, adjacent to its training center and close to its reservations office and new integrated operations center.
The city councils of Fort Worth and Dallas must approve the lease extension.
Currently, American pays the airport $15,000 a year to use DFW-owned land where its flight training center, reservations office and new integrated operations center are located. That lease payment will continue until 2043, and the $10 million payment will cover lease costs for the extension period.
The airport said it valued the amount of rent for the land from 2043 to 2114 at $14 million. But American will only pay $10 million because the carrier will receive a $2 million credit to demolish the existing old Sabre Holdings headquarters building on the land and another $2 million credit for paying Sabre to reassign the property back to American.
Sabre was originally part of American but was spun out as its own company in 2000.
With the extension, American can terminate the lease on six months notice after 2043 for all of the land or individual tracts. The airport voted that if American returns an individual tract, it has to return the whole parcel so the airport is not left with land that can’t be developed.
In 2114, the airport has the option to accept the improvements on the land as is or have American demolish the improvements.
Also, the airport will get back almost 18 acres of land west of American Boulevard that was part of the original 1978 agreement and that American does not plan to use for its new corporate campus. So the ground lease would cover 269 acres.
Long-term ground leases such as the 99-year American lease are not that unusual, particularly when a tenant is spending a good deal of money to develop the land, said Todd Burnette, managing director of commercial real estate brokerage Jones Lang LaSalle in Fort Worth.
Long-term ground leases are common with retail pad sites. For example, Central Market in the Chapel Hills shopping center along Interstate 30 in west Fort Worth is a ground lease with the property owner Lena Pope Home.
Staff writer Sandra Baker contributed to this report