Hartsfield-Jackson International Airport will give a $500,000 annual discount on rent to the developers of a hotel next to the terminal, as a concession for reducing the amount of space for the hotel by a couple of acres.
The airport on Monday got Atlanta City Council approval for an amendment to its 50-year lease with Majestic Carter Atlanta Mixed Use LLC for the massive "Airport City" project to develop a 300-room InterContinental hotel. The hotel will be located steps away from the domestic terminal, a travel plaza, office space and additional hotels near the airport.
Airport officials have for years envisioned building a hotel next to the terminal that travelers could book when flights are canceled or use before flights, and that companies could book for meetings.
Other airports already have terminal hotels, including Chicago O'Hare and Dallas/Fort Worth, but Hartsfield-Jackson has lacked one. The Atlanta airport's previous general manager, Miguel Southwell, first discussed the idea for a terminal hotel in 2014.
Developing land owned by Hartsfield-Jackson is also seen as a key way for the airport to generate more revenue, particularly as parking revenue is expected to decline amid increased use of Uber and Lyft and the advent of self-driving cars.
But Majestic Carter, a team that includes Carter, Majestic Realty Co. and GPM Investments LLC, is entitled to a credit of $500,000 per year for 10 years once the hotel is built and occupied. The lease also allows three years for the hotel to be built, with construction expected to start next year.
The credit would offset rent of 1.5 percent of gross revenue to the city. The hotel is expected to generate $50 million to $60 million in revenue in the first year, which would amount to $750,000 to $900,000 in rent before the credit is given.
Airport officials say they had to reduce the land allotted for the hotel from 10 acres to about 8.36 acres to allow room for changes to the west curb where shuttles and cabs currently pick up passengers. The airport is also working on plans in the same area to extend the Plane Train people-mover track underground to increase efficiency.
City attorney Jeremy Berry told the Atlanta City Council transportation committee that the reduction of space for the hotel increases the developer’s cost by more than $10 million because it no longer has enough room for surface parking and must build more costly underground parking.
“The airport realized they needed some of this property that was originally going to be part of this project,” Berry said. The rent discount is designed “to make the developer whole for the project… for their increased costs.” The committee voted unanimously in favor of the lease amendment before it was approved by the full city council.
Officials had once hoped to build the hotel before Atlanta Mayor Kasim Reed's term ends. They started the contracting process and selected Majestic Carter as the winning firm in 2015, for a project estimated at up to a $600 million investment by the firm. But the original lease wasn't finalized and approved by Atlanta City Council until September 2016. Negotiations continued on the lease amendment to work out the remaining issues, and meanwhile the hotel project never broke ground.
With the lease amendment, Hartsfield-Jackson spokesman Andrew Gobeil said “we look forward to opening the doors of a world-class hotel worthy of the world’s busiest airport.”
Until the hotel is completed, the developers will pay land rent of 30 cents per square foot per year for the hotel tract, starting when the land is available for construction sometime early next year and increasing by 2 percent a year.
The lease allows two years for the travel plaza to be completed. The mixed-use development can be postponed for up to four years, while that tract is used as a staging and storage area for construction and construction equipment and materials.
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