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OCR for page 92
92 Guidebook for Developing and Leasing Airport Property Ted Stevens Anchorage International Airport (ANC) Airport Type: Medium-Hub Tenant: Alaska CargoPortTM LLC Type of Business: Cargo Handling Facility Location: Airside SOURCE: RW Armstrong, 2009. SOURCE: RW Armstrong, 2009. Project Overview The Anchorage International Airport, the fifth busiest cargo airport in the world, recog- nized that the level of private-sector interest was high enough to offer property by competi- tive bid. The Airport offered a 20-acre parcel of land for development and required the winning bidder to provide a financial guarantee. Alaska CargoPort LLC, a subsidiary of the LynxsTM Group, LLC was the winning firm, and a long-term lease was executed. Because of regulatory restrictions, the lease is structured as a 35-year lease with four 5-year options, effectively creating a 55-year lease. The Airport was able to use AIP funds for creating a runway and taxiway in preparation of the facility site. Alaska CargoPort secured approximately $30 million in financing, but required more for the development project. The Airport and Alaska CargoPort agreed on a unique situation in which the Airport would act as a conduit for Alaska CargoPort. The Air- port took ownership of the facility, which consisted of approximately 200,000 square feet of warehouse, maintenance buildings, offices, and crew quarters, as well as all-weather aircraft parking for 12,747 freighters and was able to obtain tax exempt financing. The Airport then leased the facility back to Alaska CargoPort. Later, there was an additional 10-acre expansion of the facility. In order to secure prime tenants, the Airport and Alaska CargoPort worked together to utilize creative marketing tactics. In addition to the Airport's ongoing efforts to facilitate the airport-wide marketing of international air cargo activity, it sponsored the Top of the World Air Cargo Sum- mit, where Northwest Airlines CEO Richard Anderson (now Delta Air Lines CEO) was the keynote speaker. Alaska CargoPort and Northwest Airlines held meetings which ultimately resulted in Northwest Airlines relocating its Asia freighter hub to Alaska CargoPort's facility, providing the desired prime tenant.

OCR for page 92
Case Studies 93 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 State of Alaska agreed to assist Alaska CargoPort in securing tax-exempt financing by taking ownership of the facility, and, in turn, leasing it back to Alaska CargoPort. The Airport prepared the facility site with a runway and taxiway using AIP funds. Tenant: Alaska CargoPort won the competitive bid process to build a cargo facility on the valuable 20-acre parcel of land at ANC. Alaska CargoPort requested that the Airport assist with financing in order to lower costs by approximately $1 million. Subtenant: Northwest Air (now part of Delta Air Lines) decided to relocate from Narita Airport in Tokyo to ANC. This gave Alaska CargoPort a prime tenant and greatly increased operations at the facility. Alaska Industrial Development Authority: Issued tax-exempt bonds to the Airport to finance the cost of building the cargo facility. Key Lease Elements Lease Rate and Term: The land lease between the Airport and Alaska CargoPort is a 35-year lease with four 5-year options to renew. The lease requires a bid deposit of 1 year's rent submit- ted with the bidder's registration. Annual rent is $0.06 per square foot. After June 1, 2000, the Airport may increase the rent. The Airport may also increase rent at its discretion every 5 years thereafter. Rent increases will not exceed fair market value, as determined by an appraiser. Improvements: Alaska CargoPort is required to substantially complete development and improvements within 3 years. The minimum value of improvements is $10 million, and the facil- ity must be no less than 100,000 square feet with five wide-body aircraft parking positions. The Airport will provide access, water, and sewer to Alaska CargoPort. Performance Bond: Prior to any demolition or construction, but by no later than July 1, 1998, Alaska CargoPort was required to submit proof of a $10 million performance bond to guaran- tee performance, completion, and payment of the required improvements. Considerations for the Tenant Ted Stevens Anchorage International Airport was an attractive site for Alaska CargoPort because of the high amount of cargo traffic between Asia and North America. There are 33,000 operations between the two continents annually, most of which make stops at ANC to either transfer, sort, clear customs, or refuel. The financial guarantee required by the Airport was an unusual require- ment, but the creative financial partnership between the Airport and Alaska CargoPort made the project feasible. The tax-exempt financing lowered costs by approximately $1 million. Benefits to the Airport The Airport had a valuable but undeveloped 20-acre parcel of land available. By requiring bid- ders to provide a guarantee, the Airport ensured that the land would be developed. Using creative marketing tactics, the ANC facilitated meetings between Alaska CargoPort and airline executives. These meetings resulted in Northwest Airlines relocating their Asia freighter hub to Anchorage, bringing weekly over 90,747 freighters. This was a high profile project and reinforced ANC's strategy of encouraging market-driven activity. Alaska CargoPort brought approximately 500 jobs to the Airport and hundreds of millions of dollars in economic activity to the community from cargo activity, and has been operated suc- cessfully for over 10 years.