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25 C H A P T E R 3 Introduction Summarizing key transactions as case studies allows decision-makers to extract lessons learned and best practices that may be relevant to their airportâs context. The goal of the case studies produced for this guidebook is to provide a holistic view of the implementation of P3s and privatization transactions at U.S. airports. Data collected for the case studies were derived from interviews with airport practitionersâ both public and privateâand publicly accessible documents, such as development or concession agreements, news reports, and other existing research. Research for the case studies included interviews to elicit the perspectives of the airport owner; project management team; technical/ legal/financial advisory team; investor consortia; and key stakeholders such as airlines, airport employees, airport stakeholder groups, and regulators. Interviews relied on a basic question structure to ensure consistency in each interview but also allowed for project-specific questions to better understand unique characteristics and decision-making steps. Direct quotations in the case studies are derived from public speeches and commentary provided to news outlets. Case studies were chosen based on many characteristics: airport size, contract value, the scope of work, delivery model, transaction size (total capital value of a contract at the time the trans- action closed), current status, and geographic location. Projects selected for review include P3s using private finance with an operation lease and privatizations. This guidebook endeavors to show a variety of contexts for and application of alternative delivery across the United States. Figure 4 shows a matrix of the case studies included in this guidebook as organized by these characteristics. The full narratives for each case study are provided in Appendix C of this guidebook. The case studies describe the airport and project context, the project elements, procurement process, and funding and financing used on the project. Throughout this guidebook, readers will find high- lights of best practices or lessons learned from each of the case studies. This chapter briefly summarizes the eight case studies selected from the 42 U.S. airport trans- actions identified, providing readers with a general context for the discussion of best practices and lessons learned from the case studies in Part II. Summary of Case Studies Austin South Terminal, Texas LoneStar Airport Holdings LLC holds a 40-year lease to operate the South Terminal at Austin- Bergstrom International Airport in Austin, Texas. The South Terminal is an existing, three-gate, Case Studies
26 Evaluating and Implementing Airport Privatization and Public-Private Partnerships single-story terminal located on the south end of the airport that was rehabilitated for commer- cial use starting in 2017. The project reached financial close in July of 2016. â¢ Location: Austin, Texas â¢ Project Scope: Brownfield Terminal â¢ Delivery Method: Privatization â¢ Total Capital Cost: $12 million â¢ Term: 40 years â¢ Status: Financial Close â¢ Airport Owner: City of Austin â¢ Private Partner: Highstar Capital/LoneStar Airport Holdings LLC Denver Great Hall, Colorado The City and County of Denverâs Department of Aviation sought a private partner to pro- vide planning, design, financing, and project delivery services for portions of the Great Hall. The following abbreviations are used: EPAX (enplaned passenger), DBF (design-build-finance), DBFOM (design-build- finance-operate-maintain), AIPP (Airport Investment Partnership Program). 1 Transaction size is the capital value of a project at the time of the projectâs current status. 2 $35 million in lease payments + 5% of gross income on 10th anniversary and $10 million CapEx (capital expenditure). 3 Lease sold to PANYNJ in 2007 for $78.5M. 4 Upfront payment by the private operator (with a commitment to do the $2.3B capex program). Figure 4. Characteristics of case studies in this guidebook.
Case Studies 27 Denver Airport did not require proposers to operate any portions of the terminal. The project was concentrated around a reconfiguration of the terminal to enhance check-in areas, security zones, and retail enhancements. The Denver City Council named Ferrovial Airports as the preferred bidder for the project, and the project reached financial close in December 2017. The project was terminated by the City of Denver for convenience in the fall of 2019 at a cost to the City of between $170 million and $210 millionâa figure that includes the return on investment that Great Hall Partners would have expected over the 34-year life of the contract (Williamson, 2019). â¢ Location: Denver, Colorado â¢ Project Scope: Greenfield, Terminal (reconfiguration, rehabilitation, operations, mainte- nance, and concessions program) â¢ Delivery Method: Design-Build-Finance-Maintain â¢ Total Capital Cost: $650 million â¢ Term: 34 years â¢ Status: Terminated 20 months after financial close â¢ Airport Owner: City of Denver, Denver International Airport â¢ Private Partner: Great Hall Partners (Anderson Mason Dale, Harrison Kornberg Architects, Luis Vidal + Architects, Ferrovial, JLC Infrastructure, Saunders Construction) Snohomish County Airport Terminal (Everett Paine Field), Washington Boeing was the airportâs primary tenant and used the facility for the manufacture of widebody aircraft. In 2017, a deal was agreed to with Propeller Airports to privately develop a passenger terminal and associated facilities to enable commercial passenger service at the airport. Opened in March 2019, the $40 million, 30,000 square foot terminal has two gates. Three airlines have commenced service, with 24 daily flights. â¢ Location: Snohomish County, Washington â¢ Project Scope: Greenfield, Terminal, and Associated Facilities â¢ Delivery Method: Ground Lease â¢ Total Capital Cost: $40 million â¢ Term: 30-year lease with two optional 10-year extensions â¢ Status: Financial Close â¢ Airport Owner: County of Snohomish â¢ Private Partner: Propeller Airports Gary Airport Management and Development, Indiana The project is composed of a 5- to 10-year private management agreement and investment plan for both the facilities and land surrounding the airport. The airport authority retains ownership, with Aviation Facilities Company (AFCO) providing management services and an investment of $25 million over the first 3 years of the term. The project has a 40-year term, and AFCO will receive 20% of net profits on leases of city property. The project reached financial close in November 2019. â¢ Location: Gary, Indiana â¢ Project Scope: Runway Expansion, Master Plan Commercial Development â¢ Delivery Method: Private Operation and Commercial Development, Public Development of Runway
28 Evaluating and Implementing Airport Privatization and Public-Private Partnerships â¢ Total Capital Cost: $174 million (runway expansion capital costs); $100 million private investment over 40 years (in the form of a master development) â¢ Term: 40-year master development agreement and 5-year management agreement with seven 5-year extensions) â¢ Status: Financial Close on January 2014 â¢ Airport Owner: City of Gary, Gary Airport Authority â¢ Private Partner: Aviation Facilities Management (AFCO, AvPorts, Guggenheim Securities, Loop Capital Markets) LaGuardia Terminal B, New York PANYNJ sought a private developer to replace the central terminal building, supporting facilities, and infrastructure as part of its efforts to improve airport and regional mobility. PANYNJ financed part of the project with its own funds and PFCs. The project reached finan- cial close in June 2016. â¢ Location: Queens, NY â¢ Project Scope: Brownfield with CapEx (redevelopment/expansion) â¢ Delivery Method: DBFOM â¢ Total Capital Cost: $3.914 billion â¢ Term: 35 years â¢ Status: Financial Close on June 2016 â¢ Airport Owner: PANYNJ â¢ Private Partner: LaGuardia Gateway Partners, a consortium of Vantage Airport Group, Skanska, and Meridiam Los Angeles International Airport Automated People Mover, California In February of 2018, the Los Angeles World Airports Board of Airport Commissioners approved the preferred proposer for their automated people mover P3 project. The automated people mover will be composed of an elevated, 2.25-mi guideway with six stations, as well as pedestrian bridges to airport terminals, parking garages, and fixed facilities. The project reached financial close in June of 2018. â¢ Location: Los Angeles, California â¢ Project Scope: Greenfield (automated people mover) â¢ Delivery Method: DBFOM â¢ Total Capital Cost: $4.46 billion â¢ Term: 30 years â¢ Status: Financial Close (June 8, 2018) â¢ Airport Owner: Los Angeles World Airports â¢ Airport Owner Advisors: Ernst & Young, Nossaman, Lea & Elliot, WSP â¢ Private Partner: LAX Integrated Express Solutions Luis MuÃ±oz MarÃn International Airport Privatization, Puerto Rico Luis MuÃ±oz MarÃn International Airport is located 3 miles from San Juan. Demand projec- tions estimate that by 2024 traffic will be at 17.9 million passengers and 1,900 pounds of cargo. The private developer is responsible for the capital improvement, operation, maintenance, facilities, and commercial development of the airport, including parking and cargo facilities,
Case Studies 29 over a 40-year lease term. The project reached financial close in February of 2013. In May of 2017, Oaktree divested its 50% stake in the asset to AviAlliance and Grupo Areoportuario del Sureste (ASUR). â¢ Location: San Juan, Puerto Rico â¢ Project Scope: Asset Monetization, Commercial Development â¢ Delivery Method: DBFOM, Lease Concession â¢ Total Capital Cost: $2.6 billion â¢ Term: 40 years â¢ Status: Financial Close on February 2013 â¢ Airport Owner: Puerto Rico Ports Authority â¢ Private Partner: Aerostar Airport Holdings, Inc.; ASUR Stewart International Airport Privatization, New York Stewart/Newburgh Airport was the first participant in the FAAâs APPP in 1999. U.K.-based National Express Group operated the airport until 2007 when the remaining 91-year lease was purchased by PANYNJ. It is now operated under a management lease by AFCO. â¢ Location: New Windsor, New York â¢ Project Scope: Privatization â¢ Delivery Method: Lease Concession â¢ Total Lease Cost: $35 million upfront payment plus revenue participation â¢ Term: 99-year lease â¢ Status: Financial Close, later reversion to public ownership â¢ Airport Owner: PANYNJ (previously, New York State Department of Transportation) â¢ Private Partner: SWF Airport Acquisition, Inc., a subsidiary of the National Express Group