QUESTION
What led to the lease extension negotiations for JFK airport, and why was the lease term extended to 2060?
1:13:35
·
4 min
The renegotiation of the lease for JFK airport to extend until 2060 was driven by the impacts of the COVID-19 pandemic, including international travel restrictions and global supply chain challenges.
- The COVID-19 pandemic and its resultant challenges, such as international travel restrictions and global supply chain issues, necessitated the lease renegotiation.
- The need for terminal operators to maintain access to financial markets during the pandemic influenced the decision for a lease extension.
- The extension to 2060, as opposed to maintaining the original 2050 end date, was considered without detailed rationale provided, but generally involves reducing risks for developers and lenders in real estate transactions.
- While specific benefits to New York City from the renegotiation were not detailed, additional rent payments and a private sector commitment to invest in JFK's redevelopment were acknowledged.
Brooks Powers
1:13:35
The recent extension that took place under I think it was De Blasio's administration.
1:13:41
What was the the reason that that lease was renegotiated because it was still in the midst of an existing lease that wasn't to expire until 2050.
1:13:52
What triggered that negotiation?
Mikelle Adgate
1:13:56
Yeah.
1:13:56
Thank you for the question council member.
1:13:58
It's obviously hard for us to guess about, like, what all of the conversation that were taking place because it was a previous administration.
1:14:11
It was, you know, prior to both Jennifer and I's time as well as EDC's president's office.
1:14:17
We did have some language in our testimony that explains what we understand was the reason why that 2021 lease extension took place.
1:14:28
And from our understanding, it was very much tied to COVID.
1:14:35
And I understand that, you know, discussions had been taking place about a JFK redevelopment effort And because there were so many challenges at the time, this is on on page 3.
Brooks Powers
1:14:51
I had it I had it highlighted.
1:14:53
Got it.
Mikelle Adgate
1:14:54
So the way that we understand it, you know, because there was restrictions in international travel, because there were so many issues related to the global supply chain because it was getting more challenging for the terminal operators to access some of the financial markets.
1:15:11
The discussions at the time or our review of the discussions at the time seems to be that in order to ensure that the redevelopment would be possible, there would need to be some type of change to ensure that the terminal operators would have accessibility to a viable redevelopment.
1:15:34
And so I can't speak directly to how, you know, why it was decided that that was the specific route.
1:15:42
We can only just say what I'm what I'm sure you're alluding to is that there are likely different paths that may have been available, but this was going on that was selected.
Brooks Powers
1:15:55
Do we know why it extended the lease to 2060 instead of just keeping it at 2050 and maybe
Jennifer Sun
1:16:03
We don't know why, but if I already just to think generally about real estate transactions and our negotiations with developers.
1:16:12
There are situations where we might think about a longer lease term because that developer in part through their lender based on the capital financing, the funding that's being put into place to finance a private investment that's going into these projects, a combination of the developers, the lenders might then require a longer lease term.
1:16:36
In order to make that financing work to reduce risk.
1:16:41
So those are potentially some of the variables that are taken into consideration.
Brooks Powers
1:16:47
And I see from, you know, the the extension of the timeline and just opening back up the lease the benefits to the port authority, and I hear you because of the pandemic and everything being taken into consideration.
1:17:02
What is your viewpoint in terms of what New York City got out of those negotiations?
Jennifer Sun
1:17:13
I can't say because frankly, I don't know the details of what the city negotiated and what the city Deka in addition to rent payment and additional rent payment and, you know, a commitment from the private sector to invest in the redevelopment of an airport that I think we would all acknowledge is an important economic generator, right, for the city.