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Not for Sale

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28 Guidebook for Developing and Leasing Airport Property The airport sponsor should be wary when entering into an agreement that Tampa International Airport had contains a noncompete clause because it may be perceived as offering the two large, empty maintenance existing tenant a monopoly with all of the negative connotations associated hangars they were actively market- with such an arrangement (e.g., the potential for higher prices and lower ser- ing; one vacated by US Airways and vice levels). Without proper context, noncompete language can also be viewed the other vacated by Delta Air Lines. as a violation of Federal Grant Assurances 22 and 23 that address economic The airport was able to attract nondiscrimination and the granting of exclusive rights. When structured prop- interest in the US Airways facility erly, noncompete language can allow the airport sponsor to grant access to from PEMCO World Air Services. another competing commercial enterprise, while respecting an existing tenant's However, PEMCO was concerned interests. In other words, noncompete language can give the airport sponsor the that should a competitor locate in flexibility to pursue a superior tenant should it choose to do so, while respect- the vacant Delta facility, its ability ing the existing tenant's perspective that a new entrant would force them out of to profitably operate in the region the market, and giving that existing tenant an out. Such an arrangement would would be compromised. One of be most prevalent in circumstances where the existing tenant has very little or the concessions the airport made no investment/debt in the facilities they occupy. This type of language is meant when negotiating PEMCO's lease to provide the existing tenant a means to terminate the lease should competi- agreement was the inclusion of a tive conditions on the airport change. The airport sponsor should, however, be noncompete clause that granted cautious not to establish a scenario in which negative consequences will occur PEMCO the right to void the lease should it pursue new tenants/competition. Specifically, if the existing tenant if another third-party MRO was is paying a large amount in rents and fees, and has noncompete language in located on-airport during their its lease, the airport sponsor may have a disincentive to pursue new tenants. lease term. Despite this element in A negative financial impact to the sponsor and presumed disincentive can be the lease, the airport still actively perceived as an exclusive right to operate. markets the Delta hangar. Ultimately, it is the airport sponsor's decision whether or not to enter into such an agreement, and it should be made only after conducting a detailed analysis of the nature of the potential lessee's business in relation to the cur- rent availability of such services, the overall airport need and desire for the lessee's services, and the perceived ability of the lessee to adequately provide said services. 2.3.2 Right of First Refusal A right of first refusal is a contractual right placed in the Albany International Airport, in an effort to attract lease agreement that gives the lessee the option to enter into HondaJet's northeastern sales and service center, a lease agreement with the lessor for a specified airport prop- offered several incentives and guarantees to make erty in advance of an interested third party. This does not the Albany site as financially and operationally specifically limit the airport from marketing the property, but attractive possible. Among the concerns of Honda- it may limit the property's marketability if prospective ten- Jet was the ability to accommodate future expan- ants are aware that the property is subject to a right of first sion. To alleviate this concern, the airport included refusal. An existing commercial tenant may demand such a a "right of first refusal" clause in the lease agree- clause to limit potential competition on-airport, or to ensure ment. This clause allows HondaJet to lease an space and resources for future expansion. additional 45,000 square foot parcel adjacent to The airport sponsor will need to enter into such an agree- the chosen development site prior to the airport ment with caution, particularly if the lessee seeks to place set leasing this land to any other interested party. lease rates into effect for the property in advance (e.g., lease Clauses such as these protect a tenant's investment rate will mirror rates of those for the lessee's current prop- by ensuring that their future development and erty). Such stipulations may hinder the airport's ability to expansion needs are guaranteed, while still achieve market value rent for the property in question. allowing the airport to market the property. Grant Assurance 24, Fee and Rental Structure, states the air- port sponsor shall "maintain a fee and rental structure for