Airport dilemma: Hangars empty, bonds callable

Published 12:05 am Wednesday, April 22, 2015

Shown is one of the twin hangars, which are empty. | File photo

Shown is one of the twin hangars, which are empty. | File photo

The Airport Authority took steps Tuesday to attract new business to the twin hangars at South Alabama Regional Airport.

SARA Co-director Jed Blackwell and Covington County Economic Development Commission Director Rick Clifton asked the authority for permission to contract with Graham & Co., a Birmingham-based commercial real estate firm, to help market the property for sale or lease.

Clifton said this would be an exclusive lease with the company, which is entitled to commission.

Blackwell said the company would charge between 4 and 7 percent commission.

“They will spend a lot of money marketing the property,” Clifton said.

Clifton said that Ronnie Kerns, formerly of Vector Aerospace, had helped find three potential leads but none had come through yet.

Authority Vice Chairman Dr. Chuck Burgess suggested that they try to negotiate where they didn’t have to pay commission if any of the current potential leads chose to lease or purchase the hangars.

Clifton said the company mentioned marketing the property at the Paris Air show.

Clifton said he expects company officials to inspect the building as soon as next week.

County Commission Chairman Bill Godwin and Opp Mayor John Bartholomew were at the meeting, and each requested a say-so the terms of any lease since they are obligated to pay the debt service on the bond issue.

The bonds are set to be callable in August and the total debt is $12.02 million.

The debt includes:

• 2006 Regions Series A bond, which equates to $4.6 million;

• 2006 Regions Series B bond, which is $796,146 and is old airport debt from the early 1990s;

• 2011 PNC Bank loan for $6.37 million; and

• Covington Electric loan for $201, 207.

Additionally, the county, Andalusia and Opp are in the process of refinancing their portions of the bonds.

The latest discussion on the bond issue has the county commission being responsible for 43 percent of the debt; Andalusia at 34 percent and Opp at 23 percent.

The proposed agreement still must go before the county commission and the two city councils before it is approved.

Clifton said there are two main reasons for doing that.

“First, to get out from under the responsibility of the entire debt,” he said. “Second, each entity will be able to schedule a payment plan which better suits them and tailor it to their needs.”

Clifton said any money from the sale or lease of the properties would be dispersed among the three entities.

“From our standpoint, this would take the airport out of the finance business,” he said. “This is for economic development for the community.”

Bartholomew and Godwin wanted the Authority to decide whether to lease the hangars or sell them to know how to set up the bonds.

“My concern is to lease it for the full payment of the bond,” Bartholomew said.

Each said they were having a hard time setting up the bonds.

“Structure it in the worst case scenario,” Clifton said.

Burgess said in the meeting it was the first time he had heard of the lease option.

“Why wouldn’t we?” Clifton said.

Bartholomew said he wanted the debt out from under the city, so he favors selling the property.

Godwin wanted to know who would be responsible for the fees paid to Graham & Co.

“Where is that funding coming from?” he asked. “Is the airport going to pay or are the three entities?”

Clifton said he wasn’t “following and that they would still be trying to lease the hangars, and sell them.

Authority Treasurer Scotty Short wanted to know what would happen if they leased it and someone came up wanting to buy the property.

Clifton said they may have someone who would want to lease it for $25,000 a month, which would lower the payment made by the entities would have to fork out in payments.

Godwin said there needs to be a short term and long-term solution.

He suggested giving Graham & Co., 12 to 18 months and see what kind of response comes in.

“If the political climate in Washington changes and there is a build up in military, we could get more money,” he said.

“I don’t know how long the listing agreement would be,” Clifton said.

Clifton reminded Godwin and Bartholomew that the hangars and real estate they sit on are airport property and the entities are simply backing them.

“We need an agreement between the airport and the three entities on who has say so,” Godwin said. “I would hate to know that I assumed all the bonds and the airport authority leased the hangars for a small amount.”

“Technically, the airport owns the building,” Clifton said.

Opp City Attorney Rainer Cotter said that guarantors often dictate specifics.

“We may want to sell and the airport authority may not,” Godwin said. “We don’t want to do a 10-year lease for half the bond.”

Ultimately, a new bond issue will leave the airport free and clear of all debt, Clifton said.

“The airport will not be behind the bonds and the airport property will not stand behind it,” he said. “The airport wouldn’t be responsible.”

Airport Authority Chairman Gary Smith was not at the meeting.