Private developers playing bigger role
BY IAN PUTZGER
Cargo facilities are mushrooming at airports all over North America, and private developers are in the thick of it. Lynxs Holdings of Houston completed a 25,000-square-foot facility in Austin in late March, barely two months after it finished a 60,000-square-foot cargo building and a 200,000-square-foot aircraft parking ramp at Fort Lauderdale, Fla. Now Lynxs is poised to construct 160,000 square feet of airside cargo facilities at Houston’s George Bush Intercontinental Airport. Lynxs has facilities at nine airports in North America. International Aviation Terminals, of Vancouver, British Columbia, opened its fourth building there on March 1 and will develop two more cargo facilitie in Las Vegas, adding to four it already operates at the airport. It also will add 100,000 square feet of cargo buildings at Reno by the end of next year. IAT has cargo buildings at seven airports in North America. Aviation Facilities Co., of McLean, Va., will add up to 350,000 square feet of cargo buildings at Baltimore-Washington International Airport. It also wants to expand cargo facilities at Seattle-Tacoma airport, where it owns four cargo buildings. AFCO has a presence at 17 airports in the United States.
“We’re in the middle of a golden age of airport redevelopment. This is part of a larger macro trend to airport privatization and partnerships to handle growth in capacity needs,” said Raymond Brimble, managing partner of Lynxs.
Emerging trend
The wave of private development comes as more and more airports are shying away from building cargo terminals themselves. The Port Authority of New York & New Jersey, which oversees Kennedy, LaGuardia and Newark airports, has given up building facilities and now pursues a strategy of allowing airlines, forwarders and private developers to erect cargo terminals. “There’s not been a decision not to build any more. That’s how it evolved,” said Jim Larsen, head of air cargo development for the port authority. Recent examples include the Korean Air terminal at JFK, scheduled for completion in September, as well as United Airlines and Northwest Airlines terminals completed last year.
In part, this trend is due to diminishing funds at airports’ disposal, as federal funding has been cut back over the years. Simultaneously, demand for cargo facilities has soared due to global sourcing patterns, the Just-In-Time concept and the growth of electronic commerce, said Brimble, adding: “Cargo is not a major revenue earner for airports. Typically it’s 5% or less of revenues.”
Rick Turner, president and chief executive of IAT, said that airlines and airports are increasingly focusing on their core business and are less interested in owning and developing real estate.
Fewer headaches
Airport authorities don’t have to deal with the tenants, don’t have to go
through the bureaucracy and don’t have to worry about the financing, said
Frank Chambers, president of AFCO. Moreover, private developers can get the buildings up and running for less money, saving as much as 30%, he added. In addition, airports don’t have to worry about finding tenants, as private developers have a cache of customers at other airports. “Our proviso is: bring in a base tenant. No commitments can be made before the developers have a tenant,” said Larsen.
For airlines, working with a private developer means greater flexibility, he said. “An airline may build a 50,000-square-foot facility and find after five years that the space is not enough. A private developer builds 150,000 square feet and leases the rest out to others. When the airline needs more room he can manipulate the space.”
Help in marketing
Moreover, developers are an additional marketing arm for the airports. “You have to go out and visit customers. You can’t stick up a for-lease sign and wait for them to come,” said Turner. Chambers added that many airports AFCO deals with are asking the developer for help with marketing. “It doesn’t pay for us to market specific facilities. We market the airport.” “We could build a facility for an authority under contract, but so could everybody else,” Turner said. “Our forte is to attract tenants, to go out and market the airport and its opportunities. We can find synergies and get the right mix of customers.”
He recalled how the airport authority in Las Vegas was wondering how he was going to fill a second cargo building when he submitted the plan. “With phase three they didn’t ask any more.”
Cooperation
In Austin and Houston, Lynxs works hand in hand with the authorities rather than take a leading role in the airports’ marketing efforts. But it is taking on a more prominent role at the Inland Cargo Port in Riverside, Calif., a military base that is vying to become an all-cargo airport. Dutch electronics giant Philips is setting up a West Coast distribution center at the airport, which is scheduled for completion in June. “In Riverside we will in effect be the airport. We’ll do all the marketing,” said Brimble.
Won’t do handling
While developers are only too glad to market airports where they have a presence, they balk at the idea of extending their activities beyond this. Both Turner and Chambers have had requests to do handling at airports but declined to do so. “We don’t want to compete with our customers. We’d bring in a handler, but we wouldn’t handle ourselves,” said Chambers.
So far Lynxs, AFCO and IAT have concentrated fully on the North American market, which has kept them busy, they say. But that’s not to say they’re averse to expanding overseas. AFCO is currently competing for a project in Caracas, Venezuela, and is studying possibilities in Zagreb, Croatia. “We will see more international activities,” said Chambers. Likewise, Brimble has had his hands full with the North American market so far but said he would be delighted to look at opportunities in the international arena.
Ian Putzger can be reached at (416) 510-1661 or alkaputz@aol.com