Generating Revenue from Commercial Development On or Adjacent to Airports (2017) / Chapter Skim
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Pages 148-211
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148 C h a p t e r 6 Implementation Toolkit 6.1 Introduction The Self-Assessment Toolkit (Chapter 4) and Site Evaluation Toolkit (Chapter 5)
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Implementation toolkit 149 Development program refinement Internal project management structure Community outreach strategy Identifying stakeholders Creating a message Outreach portfolio Revealing project plans to the public Permits and approvals (in two parts) Project team components Incentives Funding and financing Development and partnership strategies Marketing Construction management/property management/operation This guidebook is not intended to replace proper professional expertise.
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150 Generating revenue from Commercial Development On or adjacent to airports 6.2 Financial Analysis At this point in the development analysis, the airport sponsor will need to conduct a basic financial review to confirm whether the investment in the project will be balanced by sufficient revenue and create a profitable center for the airport. Typically these numbers are projected over the construction and rental or sale of the completed project to determine when the revenues will pay for the investments, the potential profit, and the magnitude of the return to the airport.
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Implementation toolkit 151 SOUND BITE Letters of Interest and Requests for Proposals have been used successfully by the airport to jump start the kind of development that is desirable to support airport operations and passenger services. 6.3 Preliminary Development Plan KNOW The financial analyses in this section of the toolkit will be based on the preliminary Development Plan that took shape at the conclusion of the site evaluation.
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152 Generating revenue from Commercial Development On or adjacent to airports Plan elements Notes Land areas for certain development types? General?
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Implementation toolkit 153 Plan elements Notes Division of building lots? Zoning Ordinance minimums?
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154 Generating revenue from Commercial Development On or adjacent to airports Once complete, the preliminary Development Plan can be assessed based on the following questions: Is the plan based on and aligned with the ALP and other planning documents completed by the airport? Does the plan avoid the site constraints identified by the site evaluation to the extent possible and provide space for required design elements including stormwater, parking, and landscaping?
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Implementation toolkit 155 6.4 Project Pro Forma KNOW What is a Pro Forma? As part of a Development Plan, a Pro Forma is a document that presents a set of calculations that use quantified data, such as acres of earth-moving, areas of paving, length of sewer line, and rents per square foot, to project costs and revenues and ultimately a net financial return over a period of time.
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156 Generating revenue from Commercial Development On or adjacent to airports whether the development project produces sufficient benefit for the risk. The return can be compared to other potential actions the airport could make to increase its income.
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Implementation toolkit 157 A simple scenario could be installing roads and utilities for an industrial park and selling off lots. In this case, the revenue from the sales will be analyzed with respect to the investment to see whether it makes sense to implement the project.
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158 Generating revenue from Commercial Development On or adjacent to airports 6.5 Development Program Overview The key information that forms the basis for the Pro Forma is explained in the following sections. As the topics are presented, the checklist sections can be used to enter information about a specific Development Program.
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Implementation toolkit 159 HARD CONSTRUCTION COSTS? At this point, the Development Program depends on estimated construction costs.
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160 Generating revenue from Commercial Development On or adjacent to airports expansions or other facilities are needed, a share of the cost for the expansions also should be estimated. Building construction?
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Implementation toolkit 161 DO With the information gathered for this section in the toolkit, guidebook users can create a total anticipated hard cost of development for the proposed Development Program. If some of the costs are still unknown, it may be advisable to do additional research and develop preliminary cost estimates before proceeding with the development.
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162 Generating revenue from Commercial Development On or adjacent to airports 6.7 Project Soft Costs KNOW HAVE Guidebook users are encouraged to identify the soft costs that are likely to be needed based on the answers to the questions in this section of the toolkit, and to provide an estimated cost for each soft cost item. Most items are fairly self-explanatory and do not include specific explanations.
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Implementation toolkit 163 OPERATING EXPENSES? Soft costs for operating expenses will include costs associated with management and maintenance.
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164 Generating revenue from Commercial Development On or adjacent to airports Funding sources Check to select Preliminary funding estimates Grants? Bond proceeds?
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Implementation toolkit 165 Revenue Sources GROUND RENT REVENUE? This revenue source represents a lower-risk strategy, for which revenue is a contractual, fixed amount with escalation over time.
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166 Generating revenue from Commercial Development On or adjacent to airports 6.9 Miscellaneous Revenue KNOW In addition to the traditional revenue sources identified in the previous section, revenue may also be obtained from a number of other sources, depending on the type of land use, ownership, or control of the project elements. For example, parcel owners or ground lessees in a development can pay fees to the project owner for maintenance of common spaces.
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Implementation toolkit 167 6.10 Detailed Pro Forma This discussion of a detailed Pro Forma is not presented in a "Know, Have, Do" format, and no specific checklist or worksheet is provided in this section. Because the process is especially variable and complicated, the guidebook does not offer a specific guided exercise; rather, the information in this section will help guidebook users understand the content and value of a detailed Pro Forma.
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168 Generating revenue from Commercial Development On or adjacent to airports Based on this information, the airport can evaluate whether the airport sponsor can support those losses, and when a drawdown of loans or grants will be necessary. Whether the airport can "support the losses" is essentially a question of how much the airport sponsor can afford to invest in the project.
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Implementation toolkit 169 6.11 Reality Check For even a preliminary Pro Forma, working through the exercise of identifying costs and revenues is valuable. It compels the sponsor to evaluate what the proposed development can bring to the airport while taking into account the expenses that will be needed to achieve it.
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170 Generating revenue from Commercial Development On or adjacent to airports 6.12 Development and Management Plan This section of the toolkit does not replace the need for professional consultants. Even an airport with substantial in-house expertise will need input from marketing, legal, and engineering experts.
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Implementation toolkit 171 6.13 Using the Toolkit for One Airport This guidebook has been written to be intentionally broad to cover issues applicable to many airports and many potential development scenarios, including: Private or public airports FAA grant-obligated land and land that is not-grant obligated Development projects with or without public bidding and bonding restrictions Each scenario involves a distinct level of regulatory control (see Chapter 2, "Fundamentals," and Chapter 3, "Legal Considerations")
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172 Generating revenue from Commercial Development On or adjacent to airports 6.14 Development Program Refinement KNOW A preliminary Development Plan and the more detailed Development Program provide a basis for the costs and revenues that are put into the Pro Forma. Following the financial analysis, the Development Program is reviewed and adjusted as necessary for the most favorable yet reasonable financial feasibility, perhaps reducing certain costs or increasing higher value uses.
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Implementation toolkit 173 DO Answering the questions in this section of the toolkit offers guidebook users the opportunity to test some alternatives and assess whether there are immediate opportunities to improve the proposed development's potential for revenue generation. These types of refinements will continue throughout the development process in response to new information related to factors such as field conditions, market factors, or unforeseen circumstances.
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174 Generating revenue from Commercial Development On or adjacent to airports SOUND BITE The airport manager is an employee of the department of public works and spends twothirds of his time on airport business and one-third of his time on municipal parking controls. SOUND BITE The airport has recently hired a dedicated marketing and communications director to promote development at the airport.
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Implementation toolkit 175 DO The responsibilities and tasks selected in this section of the Implementation Toolkit can be used in combination with the results of the Self-Assessment Toolkit (see Chapter 4) to prepare the job description for the project manager and make an initial decision about whether the position will be internal or external.
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176 Generating revenue from Commercial Development On or adjacent to airports 6.16 Community Outreach Strategy KNOW With a feasible, well-designed plan and a professional project team, one might expect the approval schedule to be smooth sailing. For better or worse, however, unpredictability is always part of real estate development.
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Implementation toolkit 177 Examples of considerations Check to select Notes History/challenges? Frictions, even minor?
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178 Generating revenue from Commercial Development On or adjacent to airports 6.17 Identifying Stakeholders KNOW Depending on the location and urban development of the airport area, many types of stakeholders may be found in the community. Stakeholders may be public or private.
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Implementation toolkit 179 DO Answering the questions listed in this section of the toolkit will enable guidebook users to better understand who the potential project stakeholders are and identify a specific contact person for each group. Stakeholders can be incorporated into the airport's proactive outreach efforts immediately and should also be specifically brought in to the plan to reveal the project to the public (see the section on creating a message in this chapter)
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180 Generating revenue from Commercial Development On or adjacent to airports 6.18 Creating a Message KNOW The airport has a positive economic impact on the community. To the degree that benefit is recognized and accepted by local elected officials and residents, an airport-sponsored development will be more easily supported.
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Implementation toolkit 181 DO The airport sponsor can use the data collected in this section of the toolkit to craft a message that the development project should increase community economic activity and wealth by attracting investors who will add to the job base and tax base. The emphasis should be on the common goals of community economic growth that will be furthered by the development project.
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182 Generating revenue from Commercial Development On or adjacent to airports 6.19 Outreach Portfolio KNOW The strategic importance of proactive communication has already been stressed. The results of the Self-Assessment Toolkit (Chapter 4)
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Implementation toolkit 183 External OFFER WEBSITE INFORMATION?
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184 Generating revenue from Commercial Development On or adjacent to airports 6.20 Revealing Project Plans to the Public KNOW The decision to release airport development plans to the public is a strategic one. The most suitable strategy will vary with the particular community and, as noted earlier in the toolkit, with any past conflicts.
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Implementation toolkit 185 DO If public outreach and stakeholder involvement strategies are proactive, the airport has the opportunity to both resolve concerns before they take root and garner support for the airport's development efforts. For example, small-scale meetings and public sessions can be used to provide information about the project and take the community's "temperature" before a planning board hearing.
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186 Generating revenue from Commercial Development On or adjacent to airports 6.21 Permits and Approvals KNOW It has been pointed out several times throughout the guidebook how important and potentially expensive the permitting process can be. Approvals can be required at all levels of government: federal, state, county, and local.
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Implementation toolkit 187 FAA Actions -- If Grant Obligated ALP REVISION APPROVAL?
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188 Generating revenue from Commercial Development On or adjacent to airports CONTAMINATION INVESTIGATION AND REMEDIATION?
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Implementation toolkit 189 Transportation -- State, County, or Local Jurisdiction NEW OR MODIFIED HIGHWAY ACCESS?
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190 Generating revenue from Commercial Development On or adjacent to airports Table 1. Permitting matrix example.
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Implementation toolkit 191 Table 2. Example of project team and contributions by role.
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192 Generating revenue from Commercial Development On or adjacent to airports DO The answers to the questions in this section of the toolkit can be used to walk through the process of putting together the project team members. It may be too early in the planning process to identify every team member specifically, but there should be a basic understanding of which resources will be needed, which needs can be filled using the internal staff, and which will be brought in on a contract basis.
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Implementation toolkit 193 6.23 Incentives KNOW HAVE The lists in this section of the toolkit can enable guidebook users to determine which tax and non-tax incentive programs may already be in place for the airport and which ones might be worth pursuing as an incentive for business attraction. The complete Incentives Checklist is provided in Appendix C, "Chapter 6 Checklists," and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage.
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194 Generating revenue from Commercial Development On or adjacent to airports DO The availability and suitability of incentives should be explored early in the process. If suitable incentive programs are available, they can be highlighted in the proposed development's marketing strategy.
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Implementation toolkit 195 the the and the same be will has make would from for be and direct such of or on airport likely likely 6.24 Funding and Financing KNOW The project Pro Forma provided the base reference for the funding needed to implement project. The estimates on the Pro Forma should have allowed the airport sponsor to determine the portion of funding that could be provided through airport operations, the amount that would have to be financed, and when the funding would be needed.
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196 Generating revenue from Commercial Development On or adjacent to airports Bond funds can be used for project engineering and design costs, construction of infrastructure, as well as the development project itself. For a general obligation bond, the issuing municipal entity would have to determine that it has sufficient legal and taxing capacity to support the new debt.
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Implementation toolkit 197 DO The information collected in this section of the toolkit can be used to determine which funding sources are available, what amounts might be provided through each source, and the associated timeline for each funding source. For example, appropriations may be a politically viable funding option, but they may require some lead time to be put into the budget for the next fiscal year.
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198 Generating revenue from Commercial Development On or adjacent to airports 6.25 Development and Partnership Strategies KNOW At this point in the development planning, thinking about scenarios for ownership and project implementation should be fairly far along. The information gathered thus far on risk, professional expertise, and financial resources will all help shape a decision about whether the airport will "go it alone," find a joint venture partner, or enter into an agreement with a master developer.
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Implementation toolkit 199 Evaluating Partners DIRECT EXPERIENCE? Does the potential partner have direct experience in the type of development proposed?
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200 Generating revenue from Commercial Development On or adjacent to airports COMPATIBLE GOALS? Are the airport's goals compatible with the partner's goals with respect to risk-sharing, investment returns, and long-term objectives?
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Implementation toolkit 201 Determining the deal Addressed in deal? Notes Yes No Shares of investment?
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202 Generating revenue from Commercial Development On or adjacent to airports Prospective developers who respond to the RFP are asked to present their proposed development concepts. They also are asked to present financial information demonstrating their ability to undertake the project, as well as references confirming their real estate development experience.
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Implementation toolkit 203 6.26 Marketing KNOW Whether the development effort is led by the airport sponsor, a joint venture partner, or a master developer, a marketing strategy is necessary for its success. Joint venture or master developer partners often are contractually responsible for marketing operations.
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204 Generating revenue from Commercial Development On or adjacent to airports ADVERTISING? Advertising can be expensive, but ads most likely have a role in the marketing campaign.
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Implementation toolkit 205 Engaging a real estate broker does add another layer of complexity to the project, which may or may not be worth the effort. If the airport chooses to work with a broker, it is important that the selected broker or real estate advisor be familiar with the FAA grant assurances that may apply to the project, including limitations on lease terms, building height limitations, and fair market value requirements.
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206 Generating revenue from Commercial Development On or adjacent to airports 6.27 Construction Management/Property Management/Operation KNOW Property management involves various elements and challenges as the project develops; accordingly, the management strategy needs to shift as the project moves from its construction phase, through lease-up, and into operations. For example, the development stage can easily result in disruption to airport circulation if access needs are not anticipated and minimized with effective planning.
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Implementation toolkit 207 a is the property is owned by a partnership, all partners' names should be stated in the management agreement, and all should sign the document.
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208 Generating revenue from Commercial Development On or adjacent to airports With regard to typical property management responsibilities, who will: ACT AS THE TENANT LIAISON? Monitor tenant with respect to lease obligations?
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Implementation toolkit 209 DO Decisions on property management cannot wait until construction is completed. The strategy should be selected in advance in order to hit the ground running when the project is ready for occupancy.
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210 Generating revenue from Commercial Development On or adjacent to airports 6.28 Summary This Implementation Toolkit has been designed to help guidebook users define the Development Program that best fits the airport's needs and guide decisions regarding strategies and actions to implement the project. It is possible to pursue certain avenues concurrently; for example, it is possible to assemble the project team while at the same time carrying out actions that are part of the community outreach strategy and identifying funding sources.
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Implementation toolkit 211 Chapter 6 concludes the toolkits developed for airport use in planning for on-airport development. As described in Chapter 1, "Introduction," the toolkit presented in Chapter 7 focuses on the special considerations involved in generating revenue from off-airport property that is not controlled by the airport.
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