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STRATEGIES FOR REUSE OF UNDERUTILIZED OR VACANT AIRPORT FACILITIES SUMMARY As the airline industry continues to consolidate and strives to achieve greater efficiencies and lower costs, airports are responding to an environment in which demand (and rent) for facilities is not only less predictable, but often reduced, sometimes at short notice. Bank- ruptcies, mergers, and capacity cuts have resulted in reduced occupancy of terminals and concourses and in terminated leases on a variety of buildings, including maintenance and cargo facilities, hangars, catering kitchens, and other support centers. This report presents an overview of the issues surrounding reuse of aeronautical facilities. Information used for this synthesis was gathered through a series of case studies and inter- views with airport directors, property managers, and community economic development agencies. The report includes a broad examination of reuse situations that address interim and long-term solutions to reuse, the decision process to maintain or demolish a structure, environmental and regulatory issues, success stories, and obstacles to effective reuse. The following is an overview of synthesis findings: The occurrence of airport building vacancies and obsolescence is widespread but is reported primarily at the individual airport level. This synthesis is one of the first compilations of how airports of different sizes and missions have addressed vacant and underutilized properties. Although expiration of leases or changes in ownership of tenant companies are com- mon with any property management, vacancies that arise out of airline bankruptcies often result in sudden and relatively large reductions in airport revenue. Unexpected vacancies also cause urgent efforts by airport sponsors to find replacement tenants. In addition, bankruptcy proceedings can delay resolution of ownership and disposi- tion of financial obligations on a property. Airport sponsors may find themselves assuming the cost and responsibility for maintaining a facility until these issues are resolved. Reuse of specialized aeronautical facilities is complex because of issues of air- field security, FAA grant obligations, airline operating agreements, environmental cleanup, stakeholder support, and market conditions. Expenses associated with upkeep, environmental mitigation, and rehabilitation of old facilities can make demolition the lowest-cost option. Unless there is already a demolition plan and budget in place, many airport sponsors will bear the cost of maintaining a building for what can be several years. Airports have rolled the cost of demolishing a property into a new construction project on the site, but during the recent recession, many capital projects have been postponed and as a consequence, vacant buildings slated for demolition remain on the airport. Vacancies may create opportunities for airport entrepreneurial ventures; however, based on the case studies reviewed for this synthesis, revenue replication is often difficult to achieve. Reuse typically takes years to accomplish. Initial ideas may turn out to be interim solutions.

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2 The experience of vacancies and underutilized facilities has led airport sponsors to consider a number of changes to design standards that will incorporate the flexibility to expand or contract a building footprint or allow for subdivision of properties. Some airports are also integrating review of vacancy risk and response plans into their Enterprise Risk Management (ERM) programs. (ACRP 01-18 is an active project that examines the application of ERM at airports.) Airports are also considering requiring a tenant to offer a security deposit such as a let- ter of credit that designates the airport as a third-party beneficiary. This letter of credit would not be subject to bankruptcy proceedings and could be available to maintain or demolish a building in the event of tenant bankruptcy. As a matter of practice, letters of credit for airport leases are currently rare. The synthesis contains several useful examples of reuse of military bases, a former terminal, a cargo facility, a training facility, and property redevelopment. The unifying features of these case studies are inspired leadership, a vision and comprehensive plan, willingness to cut losses and identify the best reuse prospects, effective use of grants and local resources, active marketing, and patience.