Airport FBO / Western FAQ
In late 2017, the City of McKinney announced its desire to enter into a public-private partnership with WesternTKILeasing, Inc. (“Western”) for a $16 million construction project at the McKinney National Airport to update and expand its facilities that included a new, state-of-the-art Fixed Base Operator (FBO) terminal, a 40,000-square-foot hangar and related parking facilities.
The public-private partnership agreements included timeframes for completion of both structures. Western completed the 40,000 square-foot hangar on schedule but failed to complete the FBO terminal by March 4, 2020, the deadline set out in the agreements.
Consequently, on March 5, the City of McKinney issued a letter, as the landlord, to Western, notifying Western of its default under the ground lease, including the city’s intent to terminate the lease if the defaults are not timely cured.
Updated March 9, 2020
Q: When was Western selected to partner with the city on this project?
A: The city solicited an RFP for a development partner in the July 2016. Western was selected and entered into lease agreements with the city in November 2017.
Q: Had the city/airport worked with Western before?
A: No. Western was selected for this project based on the strength of its response to the city’s RFP.
Q: What were the financial terms of the agreement?
A: According to the agreement, the city contributed $10 million in prepaid rent. Western financed approximately $6 million through its construction lender and was responsible for the construction and development of the facilities. Once the project is completed, the city has agreed to pay rent payments equivalent to the $6 million construction loan, ultimately retaining ownership of the facilities constructed once the loan is retired.
City funding came from the McKinney Economic Development Corporation and the McKinney Community Development Corporation, with each contributing a $4 million grant toward the project. The remaining $2 million came from the airport construction fund.
Q: How much of the project has been completed?
A: The 40,000-square-foot corporate hanger is complete and has been operational since April 2019. The parking lot facilities are also complete. The FBO terminal building is approximately 50% complete.
Q: What happened to the $10 million the city invested in the project?
A: The $10 million the city invested has primarily funded the construction and completion of the hangar, its associated aircraft apron, the road and utility infrastructure to the access hangar site, and the parking facilities.
Q: Has the city lost money as a result of this delay?
A: No. In fact, the total value of the assets constructed under the project exceed the city’s initial $10 million investment.
Q: What happens to the project moving forward?
A: The city is in negotiations with Western and the construction lender to resolve the issue of the remaining funds needed to complete the project. The city has no contractual obligation to pay rent to fund any additional costs (over $16 million) needed to complete the project. The city’s obligations are fixed at the $6 million in rent payments outlined in the agreements.
Q: What about the hangar that was built by Western?
A: The aircraft hangar has been producing revenue for the airport since April 2019, and no rent payments are due until the FBO terminal is completed.
Q: How has this delay affected operations at the airport?
A: The delay in finishing the new FBO terminal has not had a negative impact on the airport’s operations or the delivery of services to airport users. The new FBO terminal building is intended to replace an existing FBO terminal building that is fully-operational today. The portion of the project that is already completed, the 40,000-square-foot hangar, is a welcome addition to the airport’s aircraft storage inventory and enhances our ability to accommodate both based customers and transient aircraft needing overnight storage. The hangar, which has been in service since April 2019, is averaging over $50,000 of net revenue each month.