This process is used to determine the value of the interest held by a lessee (leasehold interest) or lessor (leased fee) in airport-based land and/or improvements.

Leasehold Interest

Leasehold interest is defined as "the interest held by the tenant (lessee) through a lease conveying the rights of use and occupancy for a stated term under certain conditions".

Leased Fee

Leased fee is defined as "the interest in a property that remains with the owner (lessor) after the right to use and occupy the property has been conveyed to another". This right is usually granted by a lease for a specific period of time.

An appraisal is typically performed when a value is desired or required (i.e., to facilitate the sale or acquisition of airport-based land and/or improvements or if a value is required by the lease, use, or operating agreement to calculate a rental rate).

From a theoretical standpoint, there are three fundamental approaches to value: cost, sales comparison, and income. Each of these approaches are discussed, as follows:

Cost Approach

This approach considers the current cost of replacing facilities and site improvements less depreciation plus the market value of the land (assumed vacant). The cost approach is most effective in valuing relatively new developments. Since improvements are typically encumbered by a land lease, leasehold value needs to be analyzed. In addition, when appraising airport-based properties, surrounding (off-airport) land values are considered; however, such values are not heavily weighted since there are significant differences between off-airport and on-airport properties.

Sales Comparison

This approach involves direct comparisons of similar properties that have sold in the same or similar markets. The data from comparable sales is analyzed and adjusted for differences that are considered significant. The adjusted sales are then weighted to provide an indication of value. However, most airport-based businesses occupy leased property and the sale of such businesses typically reflects the transfer of leasehold interest and going-concern. Accordingly, the allocation of real estate and business value is difficult to separate. Therefore this approach is not typically utilized.

Income Approach

This approach is based upon an estimate of the property’s net income potential. The income approach measures the present worth of anticipated future benefits derived from property ownership. There are two methodologies which are typically utilized to determine value using the income approach: direct capitalization technique and discounted cash flow. The direct capitalization approach is most appropriate for airport-based properties. Under this approach, net income (which is estimated using comparable rental rates) is capitalized at an overall rate of return to arrive at an indication of value.

Acquisition

We provide a full range of services relating to the purchase of FBOs or specialized aviation businesses including:

• Assessing (and/or evaluating) potential acquisition opportunities
• Valuing the business (or the assets of the business) to establish a purchase price
• Providing advice regarding the structure of the transaction
• Performing due diligence

Once the acquisition is complete, to ensure a successful transition and in support of the on-going operation of the business, we can provide a full range of development, operation, management, and marketing related services.

Divestiture

We provide a full range of services relating to the sale of FBOs or specialized aviation businesses including:

• Valuing the business (or the assets of the business) to establish a sales price
• Developing an offering document
• Qualifying prospective purchasers
• Providing advice regarding the structure of the transaction
• Compiling a due diligence notebook
• Coordinating and managing the due diligence process

Lease Rate Analysis (Rates and Charges)

A lease rate analysis is used to establish market rental rates (and/or fees) for airport land and/or improvements. Utilizing this streamlined approach, rental rates for similar aeronautical land and/or improvements at similar (or comparable) airports are analyzed to derive an appropriate rental rate.

To achieve this objective, we:

• Develop a profile of the subject airport (and the leasehold – land and/or improvements)
• Identify comparable airports using the subject profile
• Obtain rental rates (and fees) and related information from the comparable airports identified (or from our database)
• Analyze the data obtained from comparable airports

The proper assimilation (and analysis) of comparable data (rental rates and/or fees) is the key to this process. Accordingly, we have developed and maintain an extensive database of airports (and leaseholds) specifically for this purpose.

Based upon our analysis, we recommend appropriate rental rates (and/or fees) for the land and/or improvements under study.

Strategic/Business Planning

In addition to establishing and communicating the mission, vision, and values (management philosophy and approach) of an organization, this process is utilized to develop specific goals, objectives, tactics, and action plans which (collectively) serve as a gameplan for continued and future operations.

Within this context, strategic/business plans typically encompass each of the following areas (and/or elements):

• Business Overview (historical perspective, current situation, ownership, organizational structure, key personnel, products and services, facilities, and vehicles and equipment)

• Management Plan (mission, vision, and values, staffing, employee training and development, compensation, and management information systems)

• Marketing Plan (market overview, situational analysis, target market identification, market positioning, marketshare analysis, competitive analysis, and marketing/sales strategy)

• Financial Plan (budgeting, breakeven analysis, cost/expense controls, assets, and pricing strategy)

Lease and Rates and Charges Policy

In addition to setting forth the parameters for leasing land and/or improvements at an airport, this document outlines the process for establishing and adjusting rates and fees. In many respects, this document sets the stage for the other primary guiding documents (Minimum Standards, Rules and Regulations, and Development Guidelines).