In the past, most airports have focused on obtaining the market value (or fair value) of all their leases. The reason is usually: “The FAA asks us.” A few years ago, however, the FAA changed its market value position somewhat, or at least clarified. In other words, the FAA notes that airports must receive a market value/market rent for non-aeronautical rentals. Market rent is defined as the most likely rent that should bring a property into a competitive and open market reflecting all the terms and restrictions of the lease agreement, including authorized uses, usage restrictions, fees, durations, concessions, renewal and purchase options, and tenant improvements (TIs). On the other hand, the FAA notes that aircraft leasing must be “fair and reasonable.” What are you doing? Comparing “airports with airports” and “airport properties with airport real estate” is at best a challenge. As the saying: “If you saw an airport, you saw an airport.” In other words, if you found two airports in exactly the same way, you won`t find two identical features in those airports. Similarly, if you find two identical features, the airports are probably very different. Therefore, it is almost always necessary to make some “fair and reasonable” subjective adjustments and/or concessions to generate something comparable. Unfortunately, your definition of “fair and reasonable” will probably be very different from your opponent on the other side of the table in a leasing negotiation. Negotiating a lease remains one of the most difficult challenges facing airport management and tenants today. Both parties are trying to do the best business, while admitting that they will have to live with this business partner in the 20, 30, maybe even 40 years.
Perhaps trying to get the last dollar out of this lease is not that important in the long run. A lease is a partnership and a partnership must be beneficial to both parties in order for it to prosper. Regardless of this, there are several new paradigms that tenants and landlords today face, as well as some of the same challenges that have existed for decades. We also have extensive experience in advising and litigation related to the management of user and leasing contracts, including disputes related to cost and revenue sharing, non-aeronautical revenue allocation and termination damages. In order to avoid litigation, we often work with airport customers to obtain FAA approval or to verify innovative or innovative use and lease agreements. To this end, we are in constant communication with senior FAA officials and we are sticking to legal, political and financial developments that involve airline-airport relationships. It is the same approach that comes into play when comparing fares between airports. Airports are not equal, but neither are leases. Unfortunately, many airports and tenants want to consider rental prices and conditions at face value, without immersing themselves in the details that can tell a completely different story. Some of the things that can and may ultimately affect the leasing rate are: Our mastery of all aspects of airport operations allows us to strategically advise our customers when negotiating new usage and leasing contracts.