In the early hours of August 15, 2017, the Denver City Council approved a $1.8 billion development agreement between the City and County of Denver’s Department of Aviation and Denver Great Hall, LLC, a consortium led by Madrid-based Ferrovial, for the Great Hall Project. The City Council’s approval follows a 12-month predevelopment and negotiation phase and represents an opportunity for the airport to leverage the expertise of the Ferrovial-led team to relocate and modernize its security screening facilities and revitalize and expand concessions offerings within the Jeppesen Terminal using a P3 delivery model.
Following the vote, Mayor Hancock stated: “This project represents what Denver has long excelled at – preparing our city for the future. The Great Hall project will address vulnerabilities, improve the passenger experience, create hundreds of new jobs and provide the capacity to match the world’s growing desire to travel to and from the Mile High City.”
The final vote of the City Council was 10 votes in favor and two against, with one abstention, signaling strong support from the City Council following a rigorous review by Council members of the proposed terms of the Development Agreement and overcoming concerns expressed by airlines operating at the airport. Airport and Developer representatives fielded numerous questions from City Council members in the weeks leading up to, and during, the City Council hearing, and airport representatives have held several meetings with the airlines to discuss potential ways in which to address their concerns relating primarily to the relocation and design of the security screening area.
The Development Agreement provides for a 34-year term, comprising an anticipated four-year construction period followed by a 30-year operating period, during which the Developer is responsible for developing and managing a revamped concessions program and maintaining associated areas within the Terminal. The $1.8 billion price tag includes a $650 million capital cost, almost three quarters of which will be paid by the airport by way of progress payments, plus a $120 million contingency for potential Owner-initiated changes, and a $24 million maximum annual supplemental payment following substantial completion. The capital cost payable by way of progress payments roughly corresponds to the percentage of the capital work that will be handed back by the Developer to the airport for operation and maintenance following completion of the design and construction work. In addition, revenues from the concessions program will be shared, with 80% to be retained by the airport and 20% to be retained by the Developer. The supplemental payments and Developer’s share of the concessions revenue will be subject to monetary deductions for failures to meet contractually specified performance standards. In recognition of the importance of the timely delivery of the security screening area to the traveling public, the Developer may also earn a bonus of up to $3 million for early delivery of the security screening area.
The Development Agreement also provides for M/WBE goals of 33% for the design work and 18% for the construction work, as well as an ACDBE goal of 26%, which will be updated every ten years.
The Developer team includes equity members Ferrovial Airport International, JLC Infrastructure Fund and Saunders Construction, and a design-build team comprising Ferrovial Agroman West and local contractor, Saunders Construction.
Financial close for the project is anticipated to occur in the fourth quarter of 2017.