Airports Make Hay from Their Open Land

The Houston hay venture typifies a growing trend in airport management: looking beyond traditional aviation-related sources to bolster finances.


"We were more willing to take a little bit of risk," says DFW's Fegan. "That was a gamble that paid off, and we hope to do more things like that."

A preliminary DFW land-use plan, which has yet to be approved by city officials, calls for a 600-acre mixed-use development that would include retailing and office space. Planned for the airport's property about 2 miles from the nearest terminal, the mall hopes to draw nearby residents as well as 50,000 employees. If approved, the project could open in about three years.

The Denver airport this year made a deal with Canada-based Petro-Canada to drill 20 wells on its land. The airport, which gets a cut of the sales, expects to generate $1.5 million in the first year. Denver International already owns 51 oil and gas wells, which generate about $4 million in annual revenue. The airport gets about $250,000 a year from farmers using its land to grow wheat, sunflowers and other crops.

Denver, which has the largest amount of land among U.S. airports, with 34,000 acres, is also leasing land to developer Landmark for a hotel, retailing and residential complexes and a golf course.

Denver is also planning to lease 15 acres next year to a firm controlled by the family of former tennis pro Michael Chang for a complex of shops, restaurants and offices.

Some other entrepreneurial initiatives:

*Kansas City. Kansas City last month paid $17 million for an office building next to the airport to generate rental income. It hopes to eventually develop 800 acres for office buildings and industrial parks. It will start modestly with one warehouse, to be finished next year.

"The city was sitting on this property and waiting for the golden ring to fall," says Mark VanLoh, the airport director. "We decided we're not going to wait for it."

Local farmers raise cattle, soybeans and corn from about 6,500 acres, and the airport generates rent and royalties from sales. Annual revenue: $300,000.

*Miami. In June, Miami-Dade County Aviation Department shut down its Opa Locka West, a general aviation airport heavily damaged by hurricanes last summer. The property will be mined for limestone rocks. Located northwest of downtown, the area is rich with oolitic rocks, which are heavily in demand from construction companies to stabilize foundations.

Miami officials estimate the rocks could generate $300 million to $600 million for the aviation department. The airport property eventually will revert to a lake.

*Jacksonville. In late 2004, Jacksonville Aviation Authority approved a project to develop 2,500 acres with hotels and an industrial park. It has negotiated six deals so far, including two business hotels and a 328-acre site for distribution centers and warehouses.

*El Paso. El Paso International already runs a 600-acre industrial park, generating $5.7 million in revenue last year. It also receives 5% of the gross revenues from six hotels that it helped develop inside the airport. The hotels brought in $1.6 million for the airport. The airport will open another hotel later this year, a Homewood Suites.

Working with Tom Fazio, a golf course architect, El Paso is also building a resort-style golf course that will open in March, says Patrick Abeln, the airport director. Its preliminary plans call for surrounding the golf course with another full-service hotel and another industrial park.

The airport's "A+" bond rating comes in large measure from the high percentage of revenue it collects from non-aviation sources, Abeln says. El Paso derives 53% from non-aviation sources, vs. 47% for U.S. airports generally.

Peter Stettler of debt agency Fitch Ratings says diversity in revenue sources is a sign of the airport's financial health and is moderately important in boosting the bond rating. A higher bond rating means lower borrowing costs for the airport.

Some airports learned painfully the lesson of not having diversified revenues. Denver had its bond ratings lowered in 2003 by Fitch because of the financial difficulties of United Airlines, which accounted for 60% of its traffic at the time. United exited a three-year run in Chapter 11 earlier this year.

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