National Academies Press: OpenBook
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

TRANSPORTAT ION RESEARCH BOARD WASHINGTON, D.C. 2011 www.TRB.org A I R P O R T C O O P E R A T I V E R E S E A R C H P R O G R A M ACRP REPORT 47 Research sponsored by the Federal Aviation Administration Subscriber Categories Aviation Guidebook for Developing and Leasing Airport Property Rick Crider Matthew Preisler Erin Autin Sanders Roth RW ARMSTRONG Austin, TX Stephanie Fulton Julie Swartzlander SCOUT MARKETING GROUP Austin, TX Gary Tharp LYNXS GROUP Orlando, FL

AIRPORT COOPERATIVE RESEARCH PROGRAM Airports are vital national resources. They serve a key role in trans- portation of people and goods and in regional, national, and inter- national commerce. They are where the nation’s aviation system connects with other modes of transportation and where federal respon- sibility for managing and regulating air traffic operations intersects with the role of state and local governments that own and operate most airports. Research is necessary to solve common operating problems, to adapt appropriate new technologies from other industries, and to introduce innovations into the airport industry. The Airport Coopera- tive Research Program (ACRP) serves as one of the principal means by which the airport industry can develop innovative near-term solutions to meet demands placed on it. The need for ACRP was identified in TRB Special Report 272: Airport Research Needs: Cooperative Solutions in 2003, based on a study spon- sored by the Federal Aviation Administration (FAA). The ACRP carries out applied research on problems that are shared by airport operating agencies and are not being adequately addressed by existing federal research programs. It is modeled after the successful National Coopera- tive Highway Research Program and Transit Cooperative Research Pro- gram. The ACRP undertakes research and other technical activities in a variety of airport subject areas, including design, construction, mainte- nance, operations, safety, security, policy, planning, human resources, and administration. The ACRP provides a forum where airport opera- tors can cooperatively address common operational problems. The ACRP was authorized in December 2003 as part of the Vision 100-Century of Aviation Reauthorization Act. The primary partici- pants in the ACRP are (1) an independent governing board, the ACRP Oversight Committee (AOC), appointed by the Secretary of the U.S. Department of Transportation with representation from airport oper- ating agencies, other stakeholders, and relevant industry organizations such as the Airports Council International-North America (ACI-NA), the American Association of Airport Executives (AAAE), the National Association of State Aviation Officials (NASAO), and the Air Transport Association (ATA) as vital links to the airport community; (2) the TRB as program manager and secretariat for the governing board; and (3) the FAA as program sponsor. In October 2005, the FAA executed a contract with the National Academies formally initiating the program. The ACRP benefits from the cooperation and participation of airport professionals, air carriers, shippers, state and local government officials, equipment and service suppliers, other airport users, and research orga- nizations. Each of these participants has different interests and respon- sibilities, and each is an integral part of this cooperative research effort. Research problem statements for the ACRP are solicited periodically but may be submitted to the TRB by anyone at any time. It is the responsibility of the AOC to formulate the research program by iden- tifying the highest priority projects and defining funding levels and expected products. Once selected, each ACRP project is assigned to an expert panel, appointed by the TRB. Panels include experienced practitioners and research specialists; heavy emphasis is placed on including airport pro- fessionals, the intended users of the research products. The panels pre- pare project statements (requests for proposals), select contractors, and provide technical guidance and counsel throughout the life of the project. The process for developing research problem statements and selecting research agencies has been used by TRB in managing cooper- ative research programs since 1962. As in other TRB activities, ACRP project panels serve voluntarily without compensation. Primary emphasis is placed on disseminating ACRP results to the intended end-users of the research: airport operating agencies, service providers, and suppliers. The ACRP produces a series of research reports for use by airport operators, local agencies, the FAA, and other interested parties, and industry associations may arrange for work- shops, training aids, field visits, and other activities to ensure that results are implemented by airport-industry practitioners. ACRP REPORT 47 Project 01-08 ISSN 1935-9802 ISBN 978-0-309-15556-4 Library of Congress Control Number 2011926388 © 2011 National Academy of Sciences. All rights reserved. COPYRIGHT INFORMATION Authors herein are responsible for the authenticity of their materials and for obtaining written permissions from publishers or persons who own the copyright to any previously published or copyrighted material used herein. Cooperative Research Programs (CRP) grants permission to reproduce material in this publication for classroom and not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB or FAA endorsement of a particular product, method, or practice. It is expected that those reproducing the material in this document for educational and not-for-profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission from CRP. NOTICE The project that is the subject of this report was a part of the Airport Cooperative Research Program, conducted by the Transportation Research Board with the approval of the Governing Board of the National Research Council. The members of the technical panel selected to monitor this project and to review this report were chosen for their special competencies and with regard for appropriate balance. The report was reviewed by the technical panel and accepted for publication according to procedures established and overseen by the Transportation Research Board and approved by the Governing Board of the National Research Council. The opinions and conclusions expressed or implied in this report are those of the researchers who performed the research and are not necessarily those of the Transportation Research Board, the National Research Council, or the program sponsors. The Transportation Research Board of the National Academies, the National Research Council, and the sponsors of the Airport Cooperative Research Program do not endorse products or manufacturers. Trade or manufacturers’ names appear herein solely because they are considered essential to the object of the report. Published reports of the AIRPORT COOPERATIVE RESEARCH PROGRAM are available from: Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet at http://www.national-academies.org/trb/bookstore Printed in the United States of America

The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. On the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Charles M. Vest is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, on its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Charles M. Vest are chair and vice chair, respectively, of the National Research Council. The Transportation Research Board is one of six major divisions of the National Research Council. The mission of the Transporta- tion Research Board is to provide leadership in transportation innovation and progress through research and information exchange, conducted within a setting that is objective, interdisciplinary, and multimodal. The Board’s varied activities annually engage about 7,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation departments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individu- als interested in the development of transportation. www.TRB.org www.national-academies.org

CRP STAFF FOR ACRP REPORT 47 Christopher W. Jenks, Director, Cooperative Research Programs Crawford F. Jencks, Deputy Director, Cooperative Research Programs Michael R. Salamone, ACRP Manager Joseph D. Navarrete, Senior Program Officer Melanie Adcock, Senior Program Assistant Eileen P. Delaney, Director of Publications Scott E. Hitchcock, Editor ACRP PROJECT 01-08 PANEL Field of Administration Robert P. Olislagers, Arapahoe County (CO) Public Airport Authority, Englewood, CO (Chair) David E. Hamm, Delta Air Lines, Inc., Atlanta, GA Paula Jordan, Dallas/Fort Worth International Airport, DFW Airport, TX Kenneth L. Penney, Jr., City of Fort Worth, Fort Worth, TX Joseph E. Richardson, Jr., JERichardson Aviation Services, LLC, Louisville, KY Rebecca Ross, Fort Wayne-Allen County (IN) Airport Authority, Fort Wayne, IN Charles “Skip” Erhard, FAA Liaison Kevin C. Willis, FAA Liaison Liying Gu, Airports Council International–North America Liaison Laura McKee, Air Transport Association of America, Inc. Liaison Martine A. Micozzi, TRB Liaison AUTHOR ACKNOWLEDGMENTS The research for this Guidebook, performed for the Transportation Research Board and its Airport Cooperative Research Program, Project 01-08, was conducted by RW Armstrong as the prime contrac- tor with the assistance of Scout Marketing Group and Gary Tharp as the subcontractors. Rick Crider, RW Armstrong vice president, served as the principal investigator, and Matthew Preisler, RW Armstrong senior economist, was the co-principal investigator. Research support was provided by Erin Autin and Sanders Roth, also of RW Armstrong. Valuable editing, technical writing, and production support were provided by Stephanie Fulton and Julie Swartzlander, principals of Scout Marketing Group. Gary Tharp, C.C.I.M., assisted with commercial real estate industry consultancy. The study team would also like to acknowledge the guidance provided by the ACRP Project Panel. And, finally, the study team thanks the 10 case study airports for accommodating the research and contributing to what is sure to be an impor- tant industry document. C O O P E R A T I V E R E S E A R C H P R O G R A M S

ACRP Report 47: Guidebook for Developing and Leasing Airport Property discusses the key issues associated with developing and leasing available airport land and summarizes best practices from the perspective of the airport sponsor. The guidebook presents a diverse set of case studies that show several approaches airports have taken to develop and lease prop- erty for both aeronautical uses (e.g., aircraft maintenance facilities, fixed-base operator facilities, hangars, training centers, and cargo facilities) and nonaeronautical uses (e.g., light industrial and commercial facilities). A glossary of terms is also included. This guidebook will therefore be of interest to anyone desiring a better understanding of the process for developing and leasing airport property. Many airport sponsors, and their associated stakeholders within the community, see development of available airport property as an economic opportunity; however, the issues surrounding development on airport land are often complex and constantly evolving. The strategies, approaches, and methodologies employed for the development of airport land often vary by airport sponsor. In addition, airport property development needs to be in compliance with federal obligations and grant assurances. Most importantly, it cannot com- promise an airport’s safety, operational flexibility, or reliability. Airport development is also challenging due to diverse and sometimes conflicting stakeholder goals. Under ACRP Project 01-08, “Guidebook on Best Management Practices for Leasing and Developing Airport Property,” RW Armstrong worked with the objective of developing a guidebook that identifies and evaluates development opportunities, describes various types of leases, and summarizes best practices. The research included a review of existing materials related to the leasing, sale, and development of airport property. Affected stakeholders (airport, tenant, investors, and local interests) and their respective objectives in leasing transactions were identified. Issues affecting public and private leasing and development transactions were then analyzed. The research culminated in an easy-to-follow guidebook designed to help airports and stake- holders develop and lease airport land to support public and private investments for both aeronautical and nonaeronautical uses. A technical report documenting the research process and findings was also prepared. The research effort also included two presentation templates to assist airports in effective stakeholder communication regarding the topic. These are available at http://www.trb.org/ Main/Blurbs/64688.aspx. F O R E W O R D By Joseph D. Navarrete Staff Officer Transportation Research Board

1 Summary 5 Chapter 1 Introduction 5 1.1 Purpose of This Guidebook 6 1.2 How to Use This Guidebook 7 1.3 Research Approach 10 Chapter 2 Anatomy of a Lease 10 2.1 Airport Lease Types 10 2.1.1 Aeronautical Versus Nonaeronautical 11 2.1.2 Land Lease 12 2.1.3 FBO Lease 12 2.1.4 SASO Lease 12 2.1.5 Hangar Rental Agreement 13 2.1.6 Sublease (Subletting) 13 2.1.7 Airline Leases 15 2.2 Essential Lease Elements 16 2.2.1 Lessor 16 2.2.2 Lessee 16 2.2.3 Premises 16 2.2.4 Use of Premises 17 2.2.5 Lease Term 17 2.2.6 Rent 18 2.2.7 Escalation Clause 18 2.2.8 Operation and Maintenance 19 2.2.9 Construction of Improvements 19 2.2.10 Reversion/Reversionary Clause 20 2.2.11 Rights, Reservations, and Obligations of Lessor 20 2.2.12 Rights, Reservations, and Obligations of Lessee 21 2.2.13 Security Requirements 21 2.2.14 Damage to Facilities 21 2.2.15 Insurance Obligations 22 2.2.16 Environmental 23 2.2.17 Taxes and Fees 24 2.2.18 Liens 24 2.2.19 Defaults 25 2.2.20 Assignments and Subletting 25 2.2.21 Regulatory Compliance 26 2.2.22 Hold Harmless Provision 26 2.2.23 Nondiscrimination 26 2.2.24 Living Clauses 26 2.2.25 Force Majeure 27 2.2.26 Holdover C O N T E N T S

27 2.3 Optional Lease Elements 27 2.3.1 Noncompete Clause 28 2.3.2 Right of First Refusal 29 2.3.3 Percent of Revenue 29 2.3.4 Term Extension Options 30 Chapter 3 Airport Owner/Sponsor Role 31 3.1 Airport Vision 31 3.1.1 Airport Master Plan 32 3.1.2 Infrastructure Inventory Analysis 33 3.1.3 Land Use Plan 33 3.1.4 Airport Business Plan 34 3.1.5 Target Industry Analysis 34 3.2 Grant Assurances and Federal Compliance 35 3.2.1 Airport Operation Protection 35 3.2.2 Community Considerations 36 3.2.3 Land Management Compliance 37 3.2.4 Land Releases 37 3.2.5 Business Practice Assurances 38 3.2.6 Exclusive Rights 39 3.2.7 Environmental Compliance 40 3.2.8 Through-the-Fence Agreements 40 3.3 Minimum Standards and Rules and Regulations 42 3.4 Leasing Policy 42 3.5 Stakeholder Coordination 43 3.5.1 Airport Users and Tenants 43 3.5.2 Economic Development Agencies 44 3.5.3 Local Government 44 3.5.4 Community Organizations 44 3.5.5 Colleges and Universities 45 3.5.6 State Government 45 3.5.7 Federal Government 46 3.6 Sociopolitical Considerations 47 3.6.1 The Airport Role in the Community 47 3.6.2 Community Relations 47 3.6.3 The Economic Development Role 48 3.6.4 Incentives and Assurances 49 Chapter 4 Project Development Considerations 49 4.1 Existing Agreements 50 4.2 Marketing 50 4.3 Funding 51 4.4 Land and Facility Development 52 4.5 Valuation 52 4.5.1 Appraisal 53 4.5.2 Comparable Sales Approach 53 4.5.3 Cost Approach 53 4.5.4 Income Approach 53 4.6 Airport Revenue Maximization 54 4.7 External Stakeholder Resources

55 Chapter 5 Finance Overview 55 5.1 Airport Sponsor Perspective 55 5.1.1 Funding 56 5.1.2 Quantifying Benefits—Pro Forma Analysis 57 5.1.3 Capital Recovery Rates 58 5.2 Developer Perspective 58 5.2.1 Return on Investment 60 5.2.2 Financial Effects of Lease Components 61 5.3 Bank/Financier Perspective 61 5.3.1 Debt/Equity Coverage 62 5.4 Debt Vehicles 62 5.4.1 Tax-Exempt Debt 63 5.4.2 Private Financing 64 5.5 Incentives, Abatements, and Deferrals 64 5.6 Funding Sources 65 5.6.1 Airport Improvement Program 66 5.6.2 PFC Program 66 5.6.3 Alternative Grant Sources 67 5.6.4 Private Capital 68 Chapter 6 Summary of Best Practices 68 6.1 Project Development 68 6.1.1 Airport Planning 69 6.1.2 Stakeholder Engagement 69 6.1.3 Financial and Economic Considerations 69 6.1.4 Economic Impact Considerations 70 6.1.5 Regulatory Compliance in Development 70 6.2 Lease Execution 71 6.2.1 Airport Leasing Policy 71 6.2.2 Minimum Standards 71 6.2.3 Lease Rate Determination 72 6.2.4 Lease Term Determination 72 6.2.5 Reversion 73 6.2.6 Regulatory Compliance in Leasing 73 6.3 Airport Sponsor Checklist 73 6.3.1 Project Analysis Checklist 74 6.3.2 Lease Agreement Checklist 77 Appendix A Case Studies 77 Questionnaire To Airport Sponsors 77 Case Study Summaries 78 Collin County Regional Airport (TKI) 80 Monroe County Airport (BMG) 82 Coastal Carolina Regional Airport (EWN) 84 New Bedford Regional Airport (EWB) 85 Albany International Airport (ALB) 88 Baton Rouge Metropolitan Airport (BTR) 90 Pittsburgh International Airport (PIT) 92 Ted Stevens Anchorage International Airport (ANC) 94 George Bush Intercontinental Airport/Houston (IAH) 96 Tampa International Airport (TPA)

100 Project Attributes Matrix 102 Project Stakeholder Matrix 104 Appendix B Acronyms 106 Appendix C Glossary 123 Appendix D References and Bibliography 127 Appendix E Nominated Airport Projects Note: Many of the photographs, figures, and tables in this report have been converted from color to grayscale for printing. The electronic version of the report (posted on the Web at www.trb.org) retains the color versions.

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TRB’s Airport Cooperative Research Program (ACRP) Report 47: Guidebook for Developing and Leasing Airport Property explores issues associated with developing and leasing available airport land and summarizes best practices from the perspective of the airport sponsor.

The guidebook includes a diverse set of case studies that show several approaches airports have taken to develop and lease property for both aeronautical uses and non-aeronautical uses.

The project that developed the guidebook also produced two presentation templates designed to help airports in effective stakeholder communication regarding developing and leasing airport property. The templates, designed for a non-technical audience, provide content, examples, and definitions for a presentation to community stakeholders. The templates, one for aeronautical use development presentations, and the second for non-aeronautical use development presentations are available only online.

An ACRP Impacts on Practice related to ACRP Report 47 is available.

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