Converging Forces Buffet Small Firms at Wayne Airport
After toiling in his piston aircraft repair business for 14 years at John Wayne Airport, Jamshid (Jay) Ghanbarzadeh faces eviction by a bigger airport tenant who plans to build a facility for corporate jets.
For now, the Iranian immigrant will move into temporary quarters provided by one of his own competitors. But come April, he’ll move again when that hangar will be demolished to make way for construction of the county’s new, $150-million passenger terminal.
After that, nobody is sure what will happen to Ghanbarzadeh or a dozen other small businesses, from Jay’s Aircraft Maintenance on the field to Delaney’s Bar atop the existing, densely packed airline terminal.
Airport Businesses Threatened
County officials said airport-related businesses are threatened by a variety of forces converging at the same time, forces that may signal the transformation of John Wayne Airport into a jet-only facility:
- Efforts are being made by a handful of investors to buy up the few leaseholds--or long-term leases--available from the county, which owns all airport land.
- The county is attempting to raise leasehold prices as much as 500% to 2,000% as the existing, 25-year-old agreements come up for renewal during the next few years.
- When the old leases do come up for renewal, or when new airport building space is leased, county officials may be forced by law to open them to competitive bidding. That might hinder attempts to simply transfer small business such as Delaney’s, or the airport gift shop, from old buildings to new structures, with their current owners.
- There is much more profit in servicing big corporate jets than in repairing light aircraft, but the small mom-and-pop airport operators are not equipped with the expertise or machinery needed to handle jet aircraft, and they may not have the financial resources to acquire them.
“The small guy like me is being pushed out,” Ghanbarzadeh said. “Unless the county does something to save us, only big companies servicing jet aircraft will be here. I can’t afford it. The executive jets are squeezing us out.”
John Wayne is one of the nation’s busiest general aviation airports and the great majority of the 400 aircraft based there are privately owned light planes. The county’s master plan for the airport provides for the continued operation of light planes and parking spaces.
“There may come a time,” said county Airport Commission member Gary Proctor, “when we’ll have to make a policy decision, based on the economics of the situation, that says this is going to be a facility for jets only, and the small guys will have to move to smaller airports elsewhere, such as Chino, Norco and Riverside, and people will get their planes fixed there.”
Various Deals Struck
The rush to acquire the long-term leases for airport property is reflected in various deals struck within the last two years:
- Last year, real estate broker Charles C. Seven and several partners purchased Tallmantz Aviation, an airport fixture for 24 years, for an undisclosed, multimillion-dollar figure. Seven immediately announced a $2-million expansion project that includes the new corporate jet hanger that will replace Ghanbarzadeh’s repair shop. Seven’s partnership reportedly has made offers to buy out other leaseholders.
- Newport Beach developer Don Koll and several partners bought the former Tower Aviation, now known as Million Air--an executive jet center--also for an undisclosed figure. Million Air uses the airport’s old control tower as a pilots’ lounge.
- UCO Air, a John Wayne Airport-based subsidiary of Whittier-based UCO Oil, purchased the leasehold held by Orange County Aviation, a maintenance facility. UCO Air then subleased its facilities to a French firm with an option to buy. Meanwhile, UCO has tried several times to purchase other leaseholds at the airport.
- This year, Martin Aviation, another airport fixture, acquired Mission Beechcraft, an airplane dealer and flight training and repair center, for several million dollars, even though the Beechcraft building, near the airport entrance, will be torn down next April for the new airline terminal. Operations there will be transferred to a new leasehold site on the west end of the field, near Million Air.
But Proctor says the unprecedented purchase prices are causing a problem: To recover investors’ money, the buildings on the leasehold sites must be improved to draw more income. But banks are balking at financing such improvements, because many of the old, 25-year leases are about to expire. Lending institutions want the security of new long-term leases.
At the lessees’ request, the Airport Commission is attempting to speed the process of negotiating new leases, Proctor says.
Process Is Complicated
But that process is complicated, and county real estate officials are trying to sort out the details.
“Unfortunately,” said Janet L. Howard, a real estate agent for the county General Services Administration, “there have been some uses of airport land in the past that were based on nothing more than handshake agreements between airport tenants and the airport staff.”
For example, Howard said, Tallmantz Aviation, which has several airplane parking places with its leasehold, was using an extra aircraft tie-down space without paying rent to the county for it.
“If we don’t maximize county revenues,” Howard said, “we are shortchanging the taxpayers. Failing to charge current market rates for the leaseholds at the airport could be interpreted as an illegal gift of public funds.”
But there is no agreement on what current market values are for the leaseholds.
Huge Purchase Prices
County real estate officials argue that leasehold rates should be increased dramatically, since property values in Orange County have skyrocketed since the 1970s. What’s more, they say the huge purchase prices rumored to have been paid for Tallmantz Aviation and Mission Beechcraft support their argument.
But officials at Martin Aviation and other leaseholders contend that the big purchase prices reflect the value of the businesses themselves and the buildings, not the airport land.
“That’s what they say,” Howard argues, “but then they depreciate the value of the buildings when they file their tax returns with the Internal Revenue Service. They simply can’t have it both ways. Either the buildings are worth that much money, or they’re not. We think the land value is pretty high.”
Rates Laughably Low
Howard said the leasehold rates under the old agreements are so low that “they’re laughable.”
For example, Martin Aviation is paying $2,066 a month for a 4.89-acre leasehold that should go for $26,626.05 at today’s market values, according to county documents--an increase of more than 1,000%. The old rent was kept low by lease provisions limiting increases to only 3% a year.
“With big increases, only the people who can afford it will be left here,” said Martin Aviation President Marvin Tuomala. “And in a way it’s a double-edged sword for the county,” Tuomala said, referring to the fact that a major airport revenue for the county is the fee that it levies on every gallon of fuel pumped into commercial and noncommercial planes at John Wayne. “If the small guys are driven out, there will be a dramatic drop in fuel flow around this place,” Tuomala said.
To help resolve the leasehold price dispute, the leaseholders and the county have agreed to hire an appraiser to study the property and make recommendations.
County Can Refuse to Sign
The county can’t invite competitive bidding for existing leasehold sites because current leaseholders have first right of refusal. But the county can refuse to sign a new leasehold agreement if it believes the price is unfair, according to Howard.
Small business owners at the airport say they understand the county’s position, but they are not sympathetic.
“Our rent went up 50% this year, from $1,000 to $1,500 a month,” said Scott Erickson, who owns Western Avionics, a small firm that subleases from Martin Aviation. “We’ve been at this field for 15 years. Martin Aviation will pass on to me any increases imposed by the county, because that’s what it says in my sublease. I can’t avoid it. But it will simply drive me and other people out to smaller airports.”
Proctor, a lawyer and pilot, owns a small plane based at John Wayne. Last week he pressed county officials to find temporary space for Ghanbarzadeh and, worried about others, such as Erickson, he persuaded fellow airport commissioners to order a study of possible long-term solutions to their problem.
Denis Horn, airport operations chief, told commission members he would report back within 30 to 60 days.
Customers Write Letters
Meanwhile, more than 200 of Ghanbarzadeh’s customers have written letters to county officials urging them to provide other airport space to the U.S.-trained immigrant.
Proctor, Howard and other county officials said they were outraged or upset when they read the Aug. 1 letter notifying him that he must be out of his hanger by Sept. 1.
The letter indicated that Seven and his partners at Tallmantz had secured all the necessary permits to begin tearing down the hanger housing Ghanbarzadeh.
“They never tried to help me find another place,” Ghanbarzadeh said. “They never talked to me about it at all. And then they expect me to move everything in a matter of a few weeks.”
Howard, Proctor and other county officials said Seven has never obtained the necessary permission from the county to tear down Ghanbarzadeh’s hanger and build anything new.
Seven would not comment further on the situation.
“I guess I’m safe for now,” Ghanbarzadeh said. “I don’t make a lot of money at what I do. I don’t drive a fancy Mercedes. I drive a Jeep. But it’s a good living, if you can keep it.”
