MEMORANDUM

To: Pease Development Authority Board of Directors From: Paul Brean, Executive Director
Date:  January 11, 2022
Re; Option Agreements:
a. Aviation Avenue Group, LLC- 100 New Hampshire Avenue; 7 Lee Streetand 14 Aviation Avenue (Hangar 227)
b. North 40 Group, LLC - North Apron

Since the inception of the Pease Development Authority ("PDA") in 1991, there has been a concerted effort to redevelop the former Pease Airforce Base with a mix of non-aeronautical commercial development and aeronautical development. These are often viewed as "land side" and "air side" development or "Tradeport" and "Airport" development. While Pease is rightly referred to as the most successful example of a BRAC redevelopment in the country, it is fair to say that the non-aeronautical commercial development has generally come easier over the past three decades. While the PDA has been fortunate to have successful partnerships on aeronautical development with entities such as PlaneSense and Port City Air, large scale aeronautical development has been more elusive. However, over recent years interest in airside development has grown.

In 2019, conversations began with the late Mark Stebbins and Paul Roy of PROCON, a New Hampshire based design and construction company, about development of air cargo facilities at Portsmouth International Airport. Separate discussions on air cargo development began with Michael and John Kane of the Kane Company by late 2020. The changing retail landscape, rapid development of global e-commerce, and the increasing need for modem warehouse distribution have all dramatically increased the need for such air cargo facilities. This need has only been enhanced during the pandemic. Both PROCON and Kane were interested in potential development at Hangar 227 location, as well as on the North Apron. By early 2021 these two entities were working together on potential development projects. In July 2021, the PDA issued right of entry agreements for both parcels so these entities could get onto the parcels and advance their due diligence.

Over the summer and fall, through multiple conversations and meetings, the outline of potential pr-0jects began t-0 talce shape. At 14 Aviation Avenue, PROCON/Kane is interested in an air cargo facility of upwards of 400,000 sf. Over the past many years, PROCON has reviewed the possibilities for redevelopment of Hangar 227, the old USAF nose dock hangar located at 14 Aviation Avenue. As a result of that work, PROCON has concluded that redevelopment of the existing Hangar 227 structure would cost over $20 million and that the better path forward is removal of the existing structure and construction of a modern facility in that location. On the North Apron, PROCON/Kane would develop a facility of approximately 324,000 sf.  Development of both facilities would be phased.

At 14 Aviation Avenue the project would include the development of parcels located at l00 New Hampshire Avenue, as well as 7 Lee Street, where the PDA Maintenance Department is currently headquartered. As such, PROCON/Kane would design and construct a new PDA Maintenance and storage facility in an agreed upon location, the cost of which the PDA would pay back as an interest free rent credit over a portion of the lease term. On the North Apron, PROCON/Kane had discussions with the NHANG to ensure any potential concerns were addressed in the planning and design process.

PROCON/Kane appreciates the need to utilize professional engineers and consultants to design these projects. Toward that end, PROCON/Kane has already retained these professionals and made clear its intention to study the potential environmental, traffic, and noise impacts its projects may have, and to incorporate recommendations into its design plans for these state of the art facilities. Furthermore, PROCON/Kane has indicated that there is significant interest in these projects from a large number of potential end users, the names of which are not currently subject to public disclosure, but would likely be familiar to all Board members.

Given the significant upfront cos-ts that would be incurred to plan these projects and engage end users in order to get both projects to the point of seeking conceptual site plan approval from the Board, early last month PROCON/Kane requested option agreements on both parcels, so as to have a period of exclusivity concerning entry into potential lease agreements (see request attached). The granting of an option agreement provides the recipient with a period of time during which they have the exclusive right to enter into lease negotiations/agreements with the PDA for the parcel in question, conditioned upon the payment of an option fee. The PDA has granted option agreements in the past, including most recently to Lonza Biologic on the Iron Parcel.

Given the status of the projects, following receipt of the request draft Option Agreements were prepared for the two LLC's formed by PROCON/Kane for these projects. These drafts are generally consistent with prior PDA option agreements and based on a traditional PDA option fee structure. They provide for a six month option period, which may be extended a maximum of two times for a potential total of 18 months. On January 6, 2022, the proposed developments and draft Option Agreements were presented to the PDA Airport Committee for its review, questions, and feedback. The Committee's review was favorable.

It is exciting to have an established entity with significant development experience in the local area interested in aeronautical developments at Pease. Here, the granting of an option agreement should be viewed as an early step in the necessary planning of these projects and does not guarantee that lease agreements will be entered into, nor limit the necessary planning and review. Both PROCON and the Kane Company have experience with large-scale developments, have the financial backing for projects of this scope as evidenced by their significant development portfolio, work with well-known planning and engineering companies, and have contacts throughout the air cargo industry. PROCON and Kane also understand the need to plan projects that will work for Pease and the surrounding municipalities.

As we look toward the long term growth and viability of the Portsmouth International Airport at Pease, the diversification of our airport development portfolio and increased opportunities for the generation of air traffic, are key to the airport's long-term success. Additionally, the job growth / and economic development these projects will spur is consistent with the underlying mission and objectives of the PDA.

With the foregoing in mind, at the Board's January 20, 2022, meeting I request that the PDA Board of Directors grant me the authority to complete negotiations with the PROCON/Kane group and enter into Option Agreements generally consistent with the attached drafts, for the parcels described herein.

P:\BOARDMTG\2022\Mcmo to Board re-PROCON Option Agreements.docx

LETTER RESPONSE TO MR. BREAN FROM PROCON
 
T 603.623,8811
F 603.623.7250
P.O. Box 4430 Manchester, NH03108
 

December l, 2021

Paul Brean
Pease Development Authority
55 International Drive
Portsmouth, NH 03801

Re: Option Agreements for 14 Aviation Way (aka Hangar 227) and North Apron, Pease international Tradeport, Portsmouth, NH

Dear Mr. Brean:

It was a pleasure meeting with you and the members of the PDA Board last month to discuss our proposed development at Hangar 227 and the North Apron. We're extremely appreciative of the Board's time, consideration, aod thoughtful feedback. As a New Hampshire based company with a deep history in this state, we are excited about the New Hampshire seacoast region and potential development at Pease.

We understand and appreciate the need for thorough studies to fully understand and plan for the effects that our buildings may have on Pease and the surrounding communities. In particular, we recognize the importance of understanding the road traffic and air traffic that our buildings will generate. We have lined up trusted consultants and engineers to embark on these studies, and they are ready to begin their work immediately.

We are also keenly aware of the need to construct a PDA maintenance and storage facility and have met with Ken "KC" Conley to develop a scope to replace the current PDA facilities in and around Hangar 227. We've engaged surveyors, engineers, and planners, and met with Mr. Conley, to identify the best location, and we have an architecture team to ensure the long-term stability and usefulness of the new facility. In addition, we will utilize these same professionals to plan lhc development of state-of-the--art facilities at both locations that will create jobs for the local economy and continue to enhance the development of the Portsmouth International Airport at Pease as a regional transportation hub.

It will take time and effort to thoughtfully work through these matt.cm. Additionally, it will be a significant up front financial commitment to see this planning through. In order to give these projects the thoroughness they deserve and develop a plan that we can all be proud of, our team is respectfully requesting to enter into an Option Agreement with the PDA for each of the two parcels. This will give us the time we need to undertake the necessary detailed planning and get a real answer,, while also allowing us to maintain an exclusive right to develop the properties in order to continue meaningful conversations in real time with potential end users.

We realize this is a first step in the process and are excited to continue working with you. We are grateful for your partnership.
Thank you, 

/S/                                    /S/
John Stebbins                 Michael Kane
Managing Director           Chief Executive Officer
PROCON                          The Kane Company