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Case Studies 85 New Bedford Redevelopment Authority (RDA): After Delta left EWB, the facility reverted back to the Airport when the RDA lease expired. Key Lease Elements The lease was negotiated by the Division of Capital Asset Management and Maintenance. In the agreement, the Commonwealth of Massachusetts is the tenant, and Bridgewater State Uni- versity is the "user agency." The lease term is 5 years, the maximum allowed for state entities in Massachusetts, and rent is paid monthly in equal installment. Considerations for the Tenant New Bedford Regional Airport was a perfect fit for Bridgewater State University's aviation pro- gram. The Airport is located near the school, and its air traffic control tower makes it a good loca- tion for a flight training program. Bridgewater State University has a strong education program and wanted a building that would identify with their educational reputation. After the Airport renovated the building at EWB, it was a facility the University could show to prospective stu- dents with pride. Benefits to the Airport Because the Airport acquired the flight training facility from the Plumber's Union through a short-term financing arrangement with the Redevelopment Authority at no cost, all rent received from Bridgewater State University now goes to operational support. The Airport also receives rev- enue through fuel-flowage fees. The flight training center has created at least 18 jobs, including associate dean, flight instructors, dispatchers, and support staff. It has indirectly affected several businesses at the airport through fuel and maintenance contracts, building maintenance contracts, and building incidentals. The upgraded and modernized building will have a positive and significant impact on airport opera- tions, impacting overall FAA support. Albany International Airport (ALB) Airport Type: Small-Hub Tenant: HondaJet East Type of Business: Factory Service and Sales Center Facility Location: Airside SOURCE: www.Honda.com SOURCE: Business Images, New York's Tech Valley, November 5, 2008
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86 Guidebook for Developing and Leasing Airport Property Project Overview Note: The research and interviews for this case study were conducted in early 2009. Since then, the circumstances have changed and the project is being structured differently. However, the initial con- ditions of this case study and its main tenants still illustrate a solid foundation that other airports could apply to their own plan for development of airport property. In February 2007 Albany International Airport (ALB) sent a letter to Honda Aircraft Company informing them of the Airport's desire to be the northeastern location for the new HondaJet loca- tion. In response to this letter, ALB spoke to representatives of HondaJet East and expressed inter- est in receiving the Request for Proposals (RFP) when it was released. During a site visit, the Authority was able to revise its initial RFP submittal to offer HondaJet East a parcel of land directly adjacent to the fixed-base operator. In April 2008 HondaJet announced that they had chosen Albany for the site of their new facility. During negotiations, the Authority attended several meetings with the senate majority leader of the State of New York, and with HondaJet East officials to request an economic development grant. The Albany Airport Authority applied for two grants on behalf of HondaJet East from the New York State Economic Development Assistance Program, and the New York State Transportation Bond Act (AIR '99). Additionally, the Authority provided a match toward the cost of construction, reducing HondaJet East's direct costs. The incentive to attract HondaJet East was a grant package close to 10% of the capital cost to build the new facility. The incentive package, along with a good fit of culture, future vision, and proximity to major northeastern markets, made Albany Interna- tional Airport the perfect fit. The new HondaJet facility will create strong economic activity in the greater Albany commu- nity, as well as the surrounding region. The new facility is estimated to generate at least 29 profes- sional and skilled jobs, in addition to attracting a broader base of customers to the airport. The facility is expected to open in the fourth quarter of 2010. Key Stakeholders The following is a list of key stakeholders responsible for the development and ultimate exe- cution of the lease agreement: Airport Sponsor: The Albany County Airport Authority initiated the conversation between the Authority and HondaJet East, with a letter stating their interest in bringing HondaJet's facility to the Airport. The Authority also applied for grants on HondaJet's behalf and paid a $45,000 match to reduce HondaJet's construction costs, to entice the company to locate at the Airport. New York State Economic Development Assistance Program (EDAP): With support from the New York State senate majority leader, the EDAP provided a $500,000 grant to the Albany County Airport Authority to benefit the HondaJet East project. New York State Department of Transportation (NYSDOT): Processed the application that resulted in the award of an $180,000 Transportation Bond Act (AIR '99) grant, provided on behalf of HondaJet East. Key Lease Elements The lease for this project consists of an agreement between Flight Jets East, Inc., dba HondaJet East and the Albany County Airport Authority. The Authority leases the Airport from Albany
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Case Studies 87 County, and the current lease extends through 2036. The land lease with HondaJet East, at the writing of this report, was scheduled to begin on the earlier of either January 1, 2011, or the date a certificate of occupancy is issued. The initial lease term is for 25 years, to end when the Author- ity's lease with the County ends, but HondaJet East will have the option of two renewals at the end of the initial term, each for 7.5 years. Right of First Refusal: The land lease covers 87,294 square feet of land that will be occupied by HondaJet East. There is an additional parcel of land totaling 45,150 square feet adjacent to the primary parcel and available under option. This adjacent parcel could be used as an expan- sion site for HondaJet East, who will have the right of first refusal during the first 10 years of the lease. Construction Requirements: The lease agreement requires that HondaJet construct, at their own expense, a 12,000-square-foot hangar, a 1,567-square-foot service space, and a 5,406-square- foot non-FBO space. Approval of Plans: HondaJet East must provide detailed construction plans, specifications, and architectural renderings of any improvements, to the Authority, for approval before mov- ing forward with construction of improvements. Lease Extension: If HondaJet East wishes to exercise its option for a lease extension, they must begin negotiations for upgrades to their improvements 23.5 years after the commencement date of the lease agreement. Rent: HondaJet's total rent is the sum of the base rent and a maintenance rent. Rent will be adjusted each year in accordance with the Consumer Price Index. Considerations for the Tenant Location was an important factor in selecting a site for HondaJet's new facility; Albany Inter- national Airport proved to be an ideal location. Albany's geographical proximity to large cities like New York and Boston was attractive to HondaJet, as visitors of larger cities might choose to arrive and depart from Albany since it is less congested than larger airports. Logistically, the loca- tion of the specific parcel of land was appealing because it was directly adjacent to the Fixed-Base Operator. Additional space for expansion was also a favorable attribute. Finally, the perfect fit of culture, vision, and quality of life in Albany appealed to HondaJet East. The HondaJet facility will cost approximately $6 million to construct and will be financed with bonds. As such, the funding from the State of New York and the Airport Authority was very enticing. Benefits to the Airport The HondaJet facility is a high profile development project that is expected to bring numerous benefits to Albany International Airport, and to the greater community. A local construction management company has been selected for the construction of this $6 million project. An annual tax impact of $906,000 is expected, along with the creation of 52 jobs. The facility will house maintenance and sales operations, attracting a variety of customers and increasing aviation activity. Finally, the project is expected to foster economic activity in terms of tourism through hotel stays and restaurant visits while customers' aircraft are being serviced.