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OCR for page 52
52 Guidebook for Developing and Leasing Airport Property
the community in terms of job creation and tax revenue. Commercial enterprises are often sought
by competing communities, and, through competitive site selection processes, the commercial
enterprise may consider incentives offered when choosing its ultimate location. These projects
often involve the inclusion of multiple local, state, and federal entities that are needed to provide
funding, tax incentives, and other applicable financial incentives, as well as regulatory oversight.
4.5 Valuation
Valuation of airport property can vary widely from one airport to the next and is often influ-
enced by both the valuations that are placed on property at other airports and by local influence
of the aviation community. In cases where airport development has not been done at the subject
airport for some time, the risk of undervaluation can come into play if the airport sponsor did not
negotiate appropriate escalation language in the existing leases. In those cases, applying a contem-
porary method of valuation may be met with resistance if the new valuation is significantly higher
than the lease rates already in place. Similarly, airport sponsors that take control of improvements
after they revert back to the airport at the end of the lease term may inadvertently undervalue the
improved property if they don't seek the assistance of an appropriate valuation methodology.
Airport sponsors that are systematic in their approach to updating rates and charges, and that
routinely update the value of both unimproved and improved property, are best prepared when
a prospective airport development does present itself. As in most real estate transactions, facil-
ity and property valuation should not be too low or the airport sponsor misses a revenue oppor-
tunity, but not too high or the airport sponsor misses a development opportunity by not being
competitive in the marketplace. The marketplace, in the context of airport development, can
sometimes be a large geographic area, because prospective development may have the luxury of
considering airports of comparable size within a region of the country, as opposed to more site-
specific, nonairport development such as distribution parks, hotels, and restaurants.
The value of airport property is usually dictated by location, size, uses, and income-generating
potential. Regardless of the valuation method, the airport sponsor should always remember that
allowable uses, or restriction of uses, within the boundary of the leasehold being considered have
a profound effect on property value. Restricting the use of airside property to aviation purposes,
for example, is certainly legitimate and appropriate for the airport sponsor. However, from a real
estate valuation perspective, in most circumstances, restricting allowable uses will lower the value
of the airport property because the use restrictions reduce the market demand. Similarly, security
requirements and the ease or lack of access to a property can impact value. Security, or lack of
security, can have a positive or a negative effect on property value, depending on the needs of the
tenant and the market that exists for a given piece of property with given characteristics. Other
restrictions placed on airport property such as height, due to navigable airspace, smoke/emissions,
due to interference with the pilots' ability to maintain visual separation between aircraft, and
organics products, such as composting and landfill activities, affect uses and ultimately land val-
ues as well. This difference is perhaps more pronounced in small- to mid-sized communities than
at large-hub airports, but the airport sponsor should focus on a comparison of comparable prop-
erties at comparable airports rather than focus so much on real estate parcels within the same
community. The following sections provide an overview of differing valuation strategies.
4.5.1 Appraisal
The appraisal process for airport property should consider comparable land and facilities at
airports of similar size throughout the region. Components of comparability include the popu-
lation of the community, proximity to other modes of transportation such as highways, number
