Tenants, Airport Officials Have Breakthrough Meeting

November 8, 2010
By Mark Madler

In the last week of October a meeting took place between the master leaseholders at Van Nuys Airport and representatives from Los Angeles World Airports, the city agency that owns and operates the airport.

The topic discussed was the rental rate adjustment that takes place every five years but what made this meeting different was that LAWA faced a collective group of tenants, a break from the traditional strategy of handling rental fees with tenants individually.

The relations between airport tenants and LAWA can be described as less than friendly and at times downright adversarial.

Now a variety of factors have come together to get the two sides on a more cooperative footing, starting with the personalities involved and the effects of the recession on activity at the airport.

“It is time the tenants work together on a vision with the city and not be at odds with each other,” said Curt Castagna, president and CEO of Aerolease Associates, which has multiple hangar space at the airfield.

It’s in the role as president of the Van Nuys Airport Association that Castagna is taking a bigger role in the future of the airport and bridging the gap between the tenants and the airport agency.

On LAWA’s side that role has been filled by its Chief Operating Officer Steve Martin.

Any discussion with a leaseholder about the changing relationship with LAWA will include a mention of how Martin brings a different perspective to the table and a better understanding of what the tenants are facing than has been shown before.

A discussion
It was Martin, along with Debbie Bowers, deputy executive director for commercial development, who met with the group of more than 20 tenants on Oct. 26 at the Airtel Plaza Hotel to discuss the rental rate change. The pair had brought with them an appraisal amount to get the discussion going on what leaseholders should be paying.

Attempts to reach Martin and Bowers were not successful.

Airport Manager Jess Romo, who was not present at the meeting, acknowledges what the association is doing and that the staff there at the airport has a role to play as well.

“We know that the airport is a tremendous economic benefit,” Romo said.

Tenants who were at the meeting were nothing if grateful that Bowers and Martin met with them as a group, something that has not happened in the airport in a decade, according to one tenant.

“They showed an openness to try to find a process fair to all parties and to work with the airport tenants,” said Steve Friedman, executive vice president for Castle & Cooke Aviation. “That is a refreshing and positive first step.”

Adjusting the rental rates has been a major bone of contention between the tenants and LAWA. The city charter requires the process be done every five years and be based on fair market value of the property.

The new rental rates were supposed to have gone into effect in February for some tenants and in July for others.

Determining that new amount has proven challenging because of the economy.

Recession a factor
A year ago the major tenants began to dig in their heels over an increase and even suggested rental amounts should decrease. The recession was particularly hard on the general aviation industry and the charter, aircraft management and support businesses at Van Nuys were no exception.

The tenant association thought it important that LAWA understand how the overall industry is down and what that means for the Van Nuys tenants. The association found a sympathetic ear in Martin who was willing to listen and to change the process to determine new rental rates that is not so dependent on appraisals of individual leaseholds.

The adjustment process in the past has always been “unwieldy,” said Castagna, who has been at the airport for more than 20 years.

“With fuel sales down so much there is no way to absorb an adjustment that was not managed properly,” Castagna said. “We should be doing this with the common goal of maximizing the benefits of the airport.”

Apart from the rental rate adjustment, the association looks to mend fences with LAWA by partnering for the overall benefit of the airport with business attraction and retention and to be seen less as the “stepchild” to Los Angeles International Airport.

The association in recent months has made itself more high profile, added members to its board and become more engaged.

The airport’s management is well aware of what the association has done and more than willing to partner with the tenants.

“It has been tough and what we want to do is be part of that recovery,” Romo said.