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Hangars

Monroe County Creates Out-of-the Box Hangar Leases
By Robert Nordstrom

Monroe County Airport

Monroe County Airport (BMG), a Part 139 Class IV airport serving the Bloomington, IN, area, knows how to turn challenges into opportunities. Management and board members at this corporate class general aviation airport focus on their facility's strengths and, in so doing, find creative ways to meet new challenges and grow operations.

The team faced a formidable challenge in the mid-1980s, when the overall aviation downturn squeezed airports across the country. Development fell stagnant. As airport director Bruce Payton describes it: "Things were just drying up."

BMG executives understood that to maintain high-quality services during tough times, they needed to increase the number of aircraft based at the airport. And to build the based-aircraft program, they needed to revisit the airport's hangar leasing program.

Facts and Figures

Project: Freestanding Hangar

Location: Monroe County Airport, Bloomington, IN

Tenant: Geo-Flo Products

Size: 10,000 sq. ft.

Cost: $600,000

Consultant: Hanson Professional Consulting Services

Contractor: Todd & Langley Construction

Of Note: Unique lease terms that provide tenants with financial incentives to improve their hangars encouraged Geo-Flo to install radiant heat flooring

Hoosier Ingenuity

Traditional hangar leasing programs run for 20 years, after which all improvements revert back to the airport or tenants remove their improvem ents and turn the land back to its original state.

"There are some real weaknesses to this approach," explains Payton. "As the building begins to age, especially around the 10- to 15-year mark, the client has little incentive to make improvements since they will have only a few years to amortize their expenditures."

The airport's first change to its leasing program was to offer tenants a 10-year option to extend beyond their 20-year lease, which provided more time to amortize improvements.

While the option offered some incentive for tenants to maintain their properties, the board wanted a better guarantee that the airport would not be left with "a pile of rusted iron" at the end of the 30 years - precisely what many airports end up with.

To this end, the board devised a program in which the airport becomes a vested owner of the improvements at the rate of 2.5% per year. Under this program, tenants own 50% of all improvements at the end of their 20-year contracts; at the end of 30 years, they own 25%.

What makes BMG's leasing program unique is that the airport can purchase hangars at 25% of their market value if tenants do not wish to renew after 30 years. "The tenant wins because he still owns some portion of the improvements," explains Payton, "and the airport wins because it owns 75% of improvements and has the option to purchase a hangar that the tenant has had every incentive to maintain over the life of the lease."

Two state-licensed appraisers determine hangars' market values. If their values vary by a predetermined amount, a third appraisal is sought and value is set at the median level of three figures.

Commercial Side Full of Challenges, Too

At the same time market forces made maintaining corporate and general aviation a challenge at Monroe County Airport (BMG), regulatory changes threw a curve ball at its commercial operations.

In 1997, the FAA's Essential Air Service Program changed its subsidy eligibility guidelines, and airports like BMG that are located fewer than 70 miles from a major or medium hub airport lost their federal subsidies. After decades of service from carriers such as Allegheny Airlines, Britt Airways, American Eagle and United Express, commercial service at BMG waned because airlines could no longer operate profitably at the airport.

"We had to rethink our business plan at that point," says airport director Bruce Payton. "While other airports falling under the same chopping block spent hundreds of thousands of dollars trying to fight these changes to keep their funding program going, we pretty much accepted the fact that the government had spoken and asked ourselves, "What are our strengths?'"

The aviation board agreed that cutting airport services would represent a step backward. The airport boasts an air traffic control tower and automated weather observation system as well as GPS and precision instrument landing systems. By maintaining commercial class facilities and services, the airport would be better able to grow its corporate class client base.

And grow it has. In 2007, BMG hosted 108 commercial flights in and out of the airport. "While that may not sound like a lot," Payton says, "we probably have as many or more than any of the other Class IV airports in the state."

Indiana University has based its charter operation at BMG from the airport's very beginning in 1939, when it was just a small field with a Quonset hut hangar.

Measurable Growth

The revised lease program has served the airport well. In 1994, BMG had 79 based aircraft; today it has 101. Currently, 33 high-quality steel hangars dot the airport landscape. Some of the hangars are built condominium style with shared walls and are owned by a condominium association; others are freestanding.

Typical hangar size is 70 feet by 90 feet, with several others at 10,000 square feet. The two largest measure 18,000 square feet each. Although the first leases will not expire until 2014, Payton reports that tenants have maintained their properties well and several have been bought and sold over the years.

Geo-Flo Products is the airport's most recent tenant. Company founder and CEO Tom Miller recently leased a 10,000-square-foot freestanding hangar to house the company's Piper Meridian and a Waco (open cockpit fabric-covered biplane) of which he is part owner.

An avid flyer for more than 27 years, Miller said he wanted plenty of hangar space so he didn't have to move airplanes around trying to get one out that's buried in the back.

The $600,000 hangar even includes a geothermal radiant floor heating system. "If I didn't have the kind of lease I have with Monroe County," he notes, "I never would have put in this Cadillac of a heating system. It was quite expensive to install, but I feel like I will be able to recoup some of these costs down the road.

"Unlike many airports I've seen, you won't find hangars here that might blow over the next time a strong wind comes through. The hangars are very well maintained. I'm blessed to live so close to this airport because I believe it's one of the nicest airports in the state."

Looking Ahead

One of the keys to BMG's success is its close and positive working relationship with the community. With the support of the Monroe County Council, the airport has established an Airport Building Fund to purchase hangars when leases run out and tenants move on.

The county government also supports the airport by approving land acquisition measures for future and current development, notes Payton.

"Our county commissioners have always been very progressive in that they have put cumulative capital monies aside for airport development," he says. "We've put together some out-of-the-box ideas for future corporate development and we're now applying for federal grant monies, which we hope to see available in 2010."

Airport Improvement Magazine - January-February 2009

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