Breaking NewsGlobeSt.com will be offline for scheduled maintenance Friday Feb. 26 9 PM US EST to Saturday Feb. 27 6 AM EST. We apologize for the inconvenience.

 
X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

Contributors Nellie Day, Becky Bergman and editor Daniel D. Williams of Real Estate Southern California contributed to this article.

With real estate becoming an increasingly opportunistic as well as global business, it’s only fitting that some industry players would embrace potential revenue streams found in the friendly skies, whether that be through the use of corporate jets, transport of air cargo or redevelopment of existing airports.

The Jet SetAir travel certainly makes meeting clients and their demands easier, though most commuter airports will advise you to arrive three hours prior to a flight departure. This means that, if you’re traveling round trip in one day, you’ve just spent at least six hours trying to get to your client or the property in question.

Not so, however, if you’re traveling by private or corporate jet. “The ability to travel on your own schedule is the prime advantage [of our service], but we’re also able to utilize thousands of airports the airlines can’t or don’t use,” says Henry Schubach, president of Carlsbad-based Schubach Aviation and a certified corporate jet pilot with more than 29 years of aviation experience. “The result is less net travel time and a far more productive day for the business traveler, with no lost time on security, checking or retrieving luggage, hassles with rental cars, etc. Because of the time savings at the airport, a busy traveler can visit two or three cities in a single day, and still be home for dinner, a mission simply not possible on the airlines today.”

And no one knows that’s more true than James Previti, a real estate developer and CEO of Ontario-based Empire Cos. Though his company’s main focus is developing master-planned communities, residential developments, and commercial and retail properties, Previti added private jet center to that list after a few trips aboard this kind of aircraft allowed him to close a deal that he would have otherwise never been able to make. “There would just be no way to see those properties and walk them and talk to the owners on all that same day,” Previti says. “And that’s the whole reason I got into aviation.”

Though many Southern California developers and real estate personnel conduct deals locally, there’s no telling where a seller or a buyer may be located. And if they need to tour the property, or if they’re only allotting you 45 minutes out of their day while they take a break from snorkeling with their kids in the Bahamas, then using your SouthWest frequent flyer miles just may not cut it.

“Private jets are just so much more accommodating,” says Brandon Greene, director of marketing for Delta AirElite, a subsidiary of Delta Air Lines, which offers private jet travel and membership programs that allow frequent travelers to buy blocks of air time and ensure that a private jet will be available with 12 hours of notice or less. “We structure trips according to our client’s needs. If they’re picking up or traveling with a high-wheeling client and advise us of that then we can structure the trip accordingly. We can provide business amenities or certain catering, anything they want we would take care of it.”

With the privacy and conference facilities that are available on many private jets, many can be used not just to get from point A to B, but to conduct business as well.

“Many clients will take their clients on these jets and get some business talk done in-flight,” Greene notes. “A lot of people like to combine business and pleasure, so they’ll fly their clients to places like Aspen or Vegas. They’ll talk about the deal on the way over, and then maybe seal it once they’ve arrived and when they talk again over a lovely dinner.”

The kind of luxury that can only be found with a private jet is exactly why Previti believed Ontario needed a jet center. Located on the premises of the Ontario International Airport, Guardian Jet Center has accommodated everyone from NASCAR drivers who are flying in for a race in Fontana to local real estate professionals who are conducting business in the Midwest.

“There are a number of very well known Inland Empire real estate developers who, either as companies or as individuals, have jets at the Guardian Center,” says Shawn Beaver, vice president of the center. “It’s a particularly good tool for real estate developers because oftentimes their projects are not in close proximity to where they live or where [their office is], so in order to get to those projects a private jet is the only way you’re going to be able to do that.”

Air Cargo On the RiseWhen Daimler Chrysler Charter delivered more than 20 cars to Southern California Logistics Airport (SCLA) on behalf of Mercedes in July 2006, it took less than three hours to unload the vehicles from a 747 aircraft.

The cars, dropped off for testing in the Mojave Desert approximately 90 miles northeast of Los Angeles, could have been delayed an additional two days if SCLA had been unavailable, according to Dougall Agan, master developer and partner at Stirling Enterprise. Stirling has entitled more than 64 million sf for commercial and industrial development at SCLA, making it the largest fully integrated project in the Inland Empire.

Based on the former George Air Force Base in Victorville, SCLA has leased out more than one million sf so far to tenants such as General Electric, Leading Edge Aviation Services, the Boeing Co. and Pratt & Whitney.

Whether it’s testing new airplane engines, developing a DC-10 Fire Bomber that can drop 25,000 gallons of water or serving as an export/import hub for fresh flowers and state-of-the-art electronics, the airfreight sector is one of the fastest growing segments of the logistics field.

The logistics sector already surpasses the entertainment industry when it comes to hiring, says Agan. “California is known for being the entertainment state,” he says. “But we’re fast becoming known for our logistics industry.” In fact, the International Air Cargo Association found that airfreight volume has grown by double digits every decade since 1970 and will continue to expand by at least 7% annually over the next 20 years.

More than 6.7 million metric tons of cargo moved throughout the world in September 2006, up from 4.6% from the previous month and 3.9% for the same period one year earlier, according to the Airports Council International’s most recently monthly figures.

Largely viewed as the stepchild to the retail and office sector, the air cargo industry is looking more attractive to real estate investors because of the huge growth potential, says Logan Smith, senior vice president of investments for Maryland-based Aeroterm USA Inc.

“There are plenty of opportunities,” Smith says. “LAX is at full capacity. You can’t wipe out a stretch of land and put in a runway. You have to optimize the facilities or develop new ones.”

Locally, Los Angeles International (LAX) handled more than 2.1 million metric tons of cargo in 2005, accounting for 95% of the five-county Southern California region, the most recent annual figures available, according to Airports Council International.

Ontario International (ONT), another heavyweight in the region, handled more than 562,000 metric tons of cargo in 2005 and has nine carriers, including Airborne Express, Ameriflight, DHL, Empire Airways, Express Net, Federal Express, West Air, UPS and Union Flights. In a partnership with Aeroterm, ONT is currently developing one million sf of cargo facilities on 100 acres, in which Aeroterm is putting up $60 million.

Extreme Makeover: Airport EditionHawthorne Airport was in a financial tailspin. City officials knew it; the city coffers could feel it. The airport’s brightest days were in the early 1990s, when it could count on 220,000 take offs annually versus roughly 70,000 in 2006. There was even talk of dumping the 80-acre property–located near the intersection of the 405 and 105 freeways and three miles from LAX–and converting the site to a big power center. However, the city voted 70 to 30 to keep it as an airport.

Roadblocks loomed, though; the site needed major upgrades; the city lacked the funds to pump into the overhaul, as well as the expertise to see it through.

So the city devised a plan to resurrect the airport. The mayor had a prior relationship with Los Angeles-based Kearny Real Estate Co., who had been repositioning the nearby Los Angeles Air Force Base site.

In January 2005, Kearny, Wedgewood and Howard CDM formed Hawthorne Airport LLC and entered into a 45-year ground lease agreement with the City of Hawthorne for the non-runway portions of the Hawthorne Airport, which is also known as Jack Northrop Field.

According to Hoonie S. Kang, a partner with Kearny, the partnership has crafted a new masterplan EIR process, studying the impact and jet traffic over the next 25 years. That plan is set to pass through in April, which “will allow us to build new hangars,” Kang says. “There have been no new hangars built in 20 years.”

Already, the LLC has spent $1 million in upgrading the terminal building and signed a franchise agreement with Millionaire, who will serve as FBO at the airport, taking care of various services such as fueling and concierge duties.

As for the development of new hangars, the masterplan calls for up to 190,000 sf of new hangers at an estimated cost of $10 million, according to Kang. The smallest hangars will be 1,800 sf each, while the largest will run from 15,000 sf to 20,000 sf. The hangers will average in the 4,000-sf to 5,000-sf range with 25 to 30 new hangers in the initial plans.

Kang says that several factors weighed in the decision for Kearny to partner on the project. One was the group’s role in repositioning the LA Air Force Base; another was the city’s positive attitude toward an airport, an attitude not shared by neighboring cities. “Torrance doesn’t want airport activity,” Kang says. In fact, so much so, “they quit selling jet fuel. It’s hard to run an airport without that. And Santa Monica doesn’t want the noise.”

David Wehrly, vice president of locally based Wedgewood, whose main lines of business include managing multifamily apartments and acquiring distressed residential sites, is co-president of Hawthorne Airport LLC. He is also a pilot who owns several airplanes housed at the airport and, from his experiences at the airport and as real estate player, saw the business opportunities in running an airport.

“The general aviation business is a lot like the hotel industry,” says Wehrly. “Guests are foremost looking for good service. So while our group is focused on making the necessary investments to improve the safety, security and appearance of the airport, we feel it is equally important to improve the level of service this airport can provide.”

Besides the city’s backing of the repositioning, the partners were drawn to the economic boom taking place around the airport. In recent years, more than $500 million has been pumped into new developments and retail centers in the area.

Also, Kearny controls an adjacent 86-acre parcel that was formerly owned by Vought Aircraft, the maker of 747 parts. The site was originally Northrop Grumman land, who was also the developer of the airport. Northrop would eventually sell the property to Vought, who, due to downsizing, consolidated to the western 41 acres and signed a long-term lease with Kearny, who is now planning to develop the other 45 acres into a high-end industrial park. On the site, 50% of the existing buildings will be torn down with new buildings going up, while the other 50% will receive an upgrade.

While the airport’s not turning a profit at this point, some of the bleeding has stopped and the partners are looking long term for the bigger returns. The masterplan calls for improvements to the runway, paving the way for more flights. And, already, incoming comes from the fuel operations. Bloated gas prices haven’t hurt this line of business.

As for the existing space, all 120,000 sf is occupied with 100,000 sf leased as hangar space and the remaining 20,000 rented out as office digs. But the need for new hangars is apparent, due to the three-year waiting list. Kang says space can be leased month-to-month, by the year or even by the day, when someone flies in and needs to park their ride.

While the airport project has been a winner for the partners involved, Kang says don’t look for it to become the signature or niche business. “There aren’t enough airports in the country to justify just doing this line of business.”

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.