Guidebook for Developing and Leasing Airport Property (2011) / Chapter Skim
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Pages 55-67
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From page 55... ...
Funding for and financing of an airport development project can vary widely, depending on the stakeholders that are involved, the incentives that are offered, the grant funding that's available, and the methods that are applied. In short, the variety of funding combinations is limited only by the imagination.
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From page 56... ...
Grant eligibility should be discussed early on in the project with the FAA, the state aeronautical agency and with economic development organizations, because while grant funds are often an important component of the project, they typically have limitations and restrictions on their use. Grant funds, once applied to the development project, are generally viewed as equity and will satisfy only a percentage of the development cost; therefore, additional resources needed typically translate into debt.
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From page 57... ...
• Other Revenue: In addition to rent, the airport may derive other revenue from the execution of a lease agreement; this is particularly true of a lease agreement with a commercial enterprise. The airport sponsor should, to the best of its ability, estimate these revenues and include them in the pro forma analysis.
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From page 58... ...
of money that must be collected each year, CAP rates also speak to the market and level of competitiveness. If the airport sponsor requires a 10% CAP rate, 10% of the value of the land is collected each year in ground rent.
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From page 59... ...
Development projects that do not reflect a reasonable return on investment only erode the market value of all improvements at a given airport. Replacement-based valuation considers the cost of building new facilities in today's dollars, amortizing that investment, and establishing rental rates adequate to recover the investment, with a return on that investment.
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From page 60... ...
may be zero or even less. Conversely, in the case of a private development that includes construction of speculative lease space, without a specific tenant, the project may require a higher return on investment as deemed appropriate for the reward of that speculative risk.
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From page 61... ...
A common trap is to restrict uses of airside facilities to aeronautical activities. While preservation of airside property and facilities for aircraft operations and movement seems appropriate on the surface, prudent closer examination acknowledges that some commercial aeronautical activities require interface with nonaeronautical functions.
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From page 62... ...
For example, facilities that support public air transportation may satisfy the legal test, so a review of whether or not a project meets the objectives for some facet of tax-exempt financing is generally prudent. Public financing often carries with it an attractive interest rate that can have significant impact on debt service over time.
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From page 63... ...
vary from airport to airport, from state to state, and from situation to situation. In addition, alternative funding structures must stand the test of perception within the community, regarding the appropriateness of using tax-exempt funding for private development.
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From page 64... ...
Beyond grants and incentives, the developer is left with cash and debt to satisfy the development costs and operating expenses of the new facility. Incentives, abatements, and deferrals can come from a variety of stakeholders.
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From page 65... ...
An incentive such as ground rent abatements or deferred airport fees may improve the cash position of the developer for a period of time while marketing occurs, or the developer may be able to pass those incentives along to the tenant as an incentive for the tenant to occupy the facilities. Beyond grants and incentives, the developer -- whether the tenant, the airport itself, or a third party -- is left with cash and debt to satisfy the development costs and operating expenses of the new facility.
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From page 66... ...
The Albany Airport Authority, after being selected by HondaJet for their Northeast headquarters, held several meetings with the New York State Senate Majority Leader Joseph Bruno and with HondaJet officials to secure State funding for the planned development. The Airport applied for two grants on behalf of HondaJet East.
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From page 67... ...
region's economic and business competitiveness. If the airport development project can meet the requirements for enhancing the economic competitiveness of the surrounding community, or its need is framed in such a manner, the facility may be eligible for funds more completely described in the Catalog of Federal Domestic Assistance (CFDA)
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