... and analysis, rental car facility development and ..

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PRESENTATION
Working With Third Party Developers for Airport
Facility Development
Prepared for Oklahoma Airports Operators
Association and South Central Chapter of the
American Association of Airport Executives 2008
SCC-AAAE OAOA Joint Conference
Tulsa, Oklahoma April 7, 2008
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Contents

• Alternative Sources of Revenue Economic Growth
  for Community and Air Service Development
• Strategic Development Plan
• Airport Program - Infrastructure Financing
• Third Party Development Program Public Private
  Partnership
• Marketing
• Questions and Answers

Jacobs Consultancy has main offices in the San
Francisco area the Washington, D.C. area
Cincinnati Chicago Dallas New Delhi Ottawa
and London. For over 60 years, we have assisted
our clients in achieving their vision and goals.
We have extensive practical experience in all
disciplines necessary for the planning and
management of airports, including airfield and
airspace analyses, airport management and
operation, commercial and concession planning,
economics and forecasting, facilities planning
and design, federal funding and policy
development, financial analysis and planning,
financial feasibility and reporting, ground
transportation planning, noise and other
environmental analyses, privatization, parking
planning and analysis, rental car facility
development and business planning, security
planning and implementation, and simulation and
operational analyses. Burlingame Office 555
Airport Boulevard, Suite 300 Burlingame,
California 94010 Telephone [phone]
Fax [phone] E-mail
inquiry_at_jacobs-consultancy.com
Washington D.C. Office 14900 Conference
Center Drive, Suite 300 Chantilly, Virginia
20151 Telephone [phone] Fax (703)
961-9318 www.jacobs-consultancy.com
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Alternative Sources of RevenueCurrent
Distribution of Airport Revenue

• Airline revenues typically 46 - 56 of total
• Nonairline revenues diversify total revenues
  and/or contribute to retained earnings for
  investment
• Parking
• Rental cars
• Terminal concessions
• Advertising
• Commercial development and Land use
• Other

Source FAA, AAS-400, CATS, Report Form
5100-127, April 2007.
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Alternative Sources of RevenueCommercial
Property Development

• Non-terminal area development
• Closely tied to master planning and land use
  plans
• May entail interim uses until aeronautical or
  aviation use materializes
• Longer-term uses require highest and best use
  assessment
• Requires clear policies regarding airport role
  and control versus tenant or 3rd party development

• Example Dallas/Fort Worth International Airport
• Lease Airport land to Chesapeake Energy
  Corporation
• One-time bonus -- 180 million
• Annual royalties to DFW of 25 of natural gas
  revenues
• Lease to remain in effect as long as lessee is
  drillingand extracting natural gas

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Strategic Development Plan Assess Current
Program

• Creating and implementing a strategic plan for
  the commercial development of airport land can
  facilitate responding to or creating a market for
  such development
• Assess current ProgramExisting facilities and
  current leases
• Review and summarize documents of the existing
  leased parcels
• Create a document management system
• Perform a highest-and-best use review
• Create a property management plan
• Initiate a redevelopment plan for existing
  facilities
• Document changes to existing leasing policies

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Strategic Development Plan - Policies

• New Program - Commercial land leasing policies,
  goals and objectives
• Establish commercial development of airport land
  as a long term program
• Determine the uses/developments that will not be
  allowed
• Integrate commercial development protocols
• Establish rental formulae by classification
• Establish maximum lease terms per parcel
  classification
• Identify lease procurement program/negotiated
  versus competitive bid
• Develop commercial development design criteria
• Create handout for development community
• Conduct outreach program for development
  community

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Strategic Development Plan Market Analysis

• New Program - Commercial real estate market
  characteristics
• Classification of land by type and according to
  the physical characteristics of the land
• Absorption of land by category across development
  phases
• Allocation of land areas by category and by
  development phase

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Strategic Development Plan Regulatory
Considerations

• Federal and State regulations
• FAA and State grant funding assurances require
  fair market value rentals for aeronautical land
  leases
• Rates must be fair, reasonable and non
  discriminatory
• Rates and charges are typically allocated between
  Airfield, Terminal and Landside cost centers
• Rates and charges for commercial developments are
  typically classified by type of Airport user
• Consider Noise Grant Program Guidance Letter
  08-02 dated February 1, 2008 as amended - Reuse
  Plans

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Strategic Development Plan Lease Procurement

• Alternatives for Initiation of Development
• Direct negotiation
• Proposal Review Requirements
• Business Plan
• Site Plan
• Financial Plan
• Marketing Plan
• References and Experience
• M/WBE Plan, Jobs Creation, etc.
• Criteria for selection or rejection
• Requests for Qualifications/Proposals
• Competitive process based on weighted criteria
• Due Diligence required for both methods

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Strategic Development Plan Sample Matrix
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Airport Program - Infrastructure Financing
Airports may have several options to finance
infrastructure improvements within an Airport
managed development area

• Direct Negotiation Airport provided
  infrastructure
• Airport outlines a development area and parcels
  are available on a sequenced basis
• Parcels are leased on a first come basis for
  qualifying lessees with approved development
  programs per the Leasing Policy
• The lessee builds improvements and infrastructure
  on the site - subject to the development
  guidelines of the Airport
• The individual parcels are development ready
  (utilities/roads)
• Ground Rental Rates and Lease Term will be
  defined by the Leasing Policy based on the type
  of development
• Airport initiates next phase of infrastructure
  construction

Will Rogers World Airport SW 54th Street
construction
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Airport Program - Infrastructure Financing

• Direct Negotiation Developer provided
  infrastructure
• Similar criteria and processes as for Airport
  provided infrastructure program
• The individual parcels are not rough graded and
  there is limited or no base infrastructure to the
  premises boundary
• The lessee/developer builds required off site
  infrastructure on behalf of the Airport in
  addition to on site improvements
• All infrastructure is subject to the development
  guidelines of the Airport
• Bond Ordinances, local regulations, and Use
  Agreement provisions may control the construction
  procurement processes and limitations on rent
  credits or repayment provisions

International Air Cargo Centre III DFW
International Airport Trammell Crow Company
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Airport Program - Infrastructure Financing

• Competitive Proposals or Bids can include
  Developer provided infrastructure
• Airport outlines a development area and parcels.
• RFP includes development criteria with respect to
  lessee qualifications, Ground Rent and Lease
  Term.
• RFP includes the requirement that the
  lessee/developer builds required off site
  infrastructure on behalf of the Airport.
• Net cost to Airport for off site infrastructure
  could be a selection criteria component.

• El Paso International Airport Butterfield
  Industrial Park
• Several hundred thousand square feet of both
  manufacturing and distribution warehouse space
  comprise Butterfield is directly adjacent to ELP

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Third Party Development - Public Private
Partnership

• With consensus among the public participants and
  airport stakeholders a PPP may provide the best
  alternative for commercial development
• Alternative 1 - Design/Build
• Single contract awarded to a private partner for
  the design and construction of the facility
• Development Agreement and Ground Lease if build
  to suit
• Financing is provided by the public partner
• Airport Revenue Bonds
• Industrial Revenue Bonds
• Ownership of the improvements remains with the
  public partner (Public partner as sole owner)

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Third Party Development - Public Private
Partnership

• Alternative 2 - Design/Build/Operate
• A single contract awarded to a private partner
  for the design and construction of the facility,
  and operation of the facility after completion
• Operating Agreement in addition to development
  agreement and ground lease
• Financing is provided by the public partner
• Ownership of the improvements remains with the
  public partner (Public Partner is the sole owner)

DFW International Airport Leasehold Development
Criteria for International Commerce Park
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Third Party Development - Public Private
Partnership

• Alternative 3 - Design/Build/Partially Finance
• A single contract awarded to a private partner
  for the partial financing, design and
  construction of the facility
• Development Agreement will contain financing
  provisions
• Ownership of the improvements lies with the
  majority holder of the equity invested
• If majority equity is provided by the private
  partner, and ownership of the completed building
  is transferred to the public sector after debt is
  retired (or upon completion if desired for tax
  reasons)
• Operation of the facility may be with the private
  or public partner

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Third Party Development - Public Private
Partnership

• Alternative 4 - Design/Build/Finance
• A contract awarded to a private partner for the
  financing, design and construction of the
  facility
• Ownership of the improvements lies with the
  equity investors, and ownership of the completed
  building is transferred to the public sector
  after debt is retired (or upon completion if
  desired for tax reasons)
• Operation of the facility may be with the private
  or public partner
• Public partner may provide the land for the
  facility
• Some variation on the form of public/private
  partnership

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Marketing - Development Scenarios and Concepts

• Development Scenarios
• Market-based scenarios based on regional trends
• Determine complementary land uses
• Determine Leasing Program criteria
• Development Concepts
• Determined by Airport or Developer
• Estimated acreage of each land use type
• Potential facility sizes within each acre
• Potential infrastructure requirements
• Projected activity levels
• Aircraft operations
• Vehicle movements
• Employment

Scenario A
Scenario B
Scenario C
Concept A
Concept B
Concept C
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Marketing - Strategic Marketing Outreach Plan

• New Program Marketing
• Introduce commercial leasing program to
  developers
• Educate the surrounding communities and any other
  citizen/political group
• The marketing program will identify and address
  the following
• Adjacent land owner or competitor developer
  issues
• Preferred communication mechanisms
• Brokerage fees
• Chamber of commerce participation
• Required inter-local agreements with respect to
  shared development costs, tap in fees, utility
  and roadway interface, etc.

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Thank You!
Questions Comments Discussion