Sky Harbour to Create Hangar Campus at San Jose Airport

Sky Harbour Group is about to lease a city-owned, 283,200-square-foot office building and hangar near Mineta International Airport in San Jose.

The White Plains, N.Y.-based aviation firm has struck a tentative deal with the city to lease the 7-acre property at 1210 Aviation Avenue, the Silicon Valley Business Journal reported.

The San Jose City Council is slated to consider the Sky Harbour lease and a contract for general aviation services on Tuesday, Dec. 12.

Under terms of the agreement, the airport could earn more than $67 million in rent over the 20-year lease, which is also projected to contribute $109 million in tax revenue to San Jose and Santa Clara County, according to the newspaper.

The building and hangar were built and operated by Hewlett Packard Enterprise until early this year, when the city bought out the remaining lease for $2.2 million.

The city put out a request for proposals in June but rejected the only bid after it was considered “non-responsive.”

The city revised its request to make the process more competitive, but only received one new bid from Sky Harbour, which operates hangars and fixed-base operation campuses at general aviation airports in Houston, Nashville, Miami, Phoenix, Denver and Dallas.

While the hangar management firm was the lone bidder, its proposal included several financial benefits to San Jose. The nearly $2.9 million in annual rent works out to 68.5 percent above-market value for the property.

Over the term of the lease, the airport is expected to receive three times the rent paid by Hewlett Packard.

Sky Harbour also proposed more than $8.1 million in improvements to the facility, including building a new 28,000-square-foot hangar, contingent on local and federal approval.

Rent for the property would increase to $3.12 million if the hangar is built and would include adjustments based on inflation.

— Dana Bartholomew