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A decision made (21.08.07) to approve the proposed lease of land at Jersey Airport to Jersey Aviators Limited.

Subject:	Proposed Lease to Jersey Aviators Limited : Land at Jersey Airport
Decision Reference:	MD-PH-2007-0072	Exempt clause(s):		None
Type of Report: (oral or written)	Written	Person Giving Report (if oral):		N/A
Telephone or e-mail Meeting?	N/A	Report File ref:		NS/550
Written Report – Title	Proposed Lease to Jersey Aviators Limited : Land at Jersey Airport	Written report - author		Neil Sproston
Decision(s): 1. The Minister approved, as recommended by Property Holdings, the granting of a development agreement and contract lease to Jersey Aviators Limited upon the terms set out in the attached report. 2. Under Standing Order 168 (1) (a) and 168 (3) the Minister hereby notified the States that he had accepted the recommendation of Property Holdings to agree to the above land transaction. 3. Under Standing Order 168 (5) the Minister hereby authorised the Attorney General and the Greffier to pass any contract which is required to be passed on behalf of the Public. After the expiry of 15 working days following presentation to the States the transaction may be concluded.
Reason(s) for decision: Under Standing Order 168 (1) (a) and 168 (3) the Minister is required to notify the States of his acceptance of recommendations to dispose, acquire, let or rent land on behalf of the Public of Jersey.
Action required: 1. In accordance with Standing Order 168 (3) this decision must be presented to the States at least 15 working days before the contract is passed. After the expiry of 15 working days following presentation to the States the transaction may be concluded. 2. The Director of Property Holdings is to instruct the Attorney General and the Greffier to pass the necessary contract, and to copy this decision to the Minister, Treasurer and Assistant Treasurer.
Signature: (Assistant Minister)[1] Deputy J A N Le Fondré			Date of Decision: MD-PH-2007-0072 21/08/07

Jersey Aviators Limited - proposed lease of land at Jersey Airport

TREASURY AND RESOURCES DEPARTMENT

PROPERTY HOLDINGS

Property Transaction for Ministerial Decision - Minister for Treasury and Resources

Proposed Lease to Jersey Aviators Limited : Land at Jersey Airport

NS 9/550

Purpose

To ask the Minister to approve the grant of a development agreement and lease to Jersey Aviators Limited for the purposes of establishing a private Light Aircraft Hangar at Jersey Airport.

Background

Property Holdings has been requested to provide advice in respect of a proposal by a company, specifically created to establish a hangar facility within which to locate approximately 8 -12 small twin-engine aircraft.

This proposal would involve the initial grant of a development agreement to facilitate the construction of a hangar totalling approximately 18,000 sq ft. by the company, itself at nil cost to the Public. Thereafter a 42 year ground lease would be agreed to coincide with the economic life of the hangar. The Airport would be responsible for provision of an adjacent apron, which has the ability to be shared should further airfield development prove desirable.

The proposal to site the aircraft hangar has been worked up in conjunction with Airport Engineering Services having regard to all relevant compliance issues for development within the operational airfield. Existing and future facilities for such aircraft are limited and it would seem there is no prospect of hangar space being available, certainly in the short term.

Present arrangements to accommodate the aircraft are unsatisfactory from the Airport’s perspective. Partly as a result of compliance with CAA regulations, a large proportion of aircraft parking areas have been restricted, now resulting in the use of ad-hoc hard standing around the airfield. The availability of such areas is dependant upon the commercial, freight and military movements, thus creating operational problems for the Airport, which are thought to be unsustainable, particularly if the space available continues to diminish.

Development Proposal

An unused, grassed area of land to the West of the main apron and adjacent to the de-commissioned radar installation has been identified as being suitable to accommodate a hangar of the required size. This footprint ( approximately 49,730 sq.ft ) would allow for possible expansion by the Airport in this area by reserving access to the adjacent apron. Equally, the hangar itself would comply with all necessary Slope Surface requirements, ILS, radar and Restricted Zone considerations. A summary of the proposal is set out in the attached report, prepared by Airport Engineering Services dated 17 November 2006.

From the 3 sites considered by the above report, this area appears to be the only realistic option and is thus the Airport’s preferred choice. It appears that alternative forms of development would be largely prohibited in this location, though clearly compliance with the above safety and operational criteria would be a necessity. It is also proposed that an area for ancillary car parking (approximately 8no. vehicles) would be provided for the company adjacent to Mont a La Brune, to keep access arrangements landside and for security purposes. Planning permission for the proposed hangar has been given by Planning and Environment on 20 June 2007, (P/2007/0091 refers).

Property Holdings has been informed of a forthcoming Land Availability Audit that the Airport wishes to undertake to identify opportunities to make better use of its property assets. This will accord with the Airport’s main strategic planning, and will set out a clear rationale for proposals in respect of areas of land, which have been declared surplus to operational requirements. In this manner more informed decision- making can be taken in response to requests by third parties relating to property transactions to ensure best value is secured for the Public either financially or as a result of operational benefits, as in this particular case. The Airport has confirmed that this area would not be considered for commercial letting in its own right and not being needed for operational use, has been declared surplus to requirements.

Lease Proposal

Provisional terms have been agreed for the grant of a 42 year lease to Jersey Aviators Limited at a ground rent of £10,000 per annum, subject to a 12 month rent free period. The lease will be triggered upon completion of the hangar by the Lessee company, prior to which a development agreement will be in place to protect the interests of the Public. In order to ensure completion of the hangar, the company will obtain a performance bond, equivalent to the construction cost of the project.

As a mutually beneficial proposal the rental is intended to reflect both the airport’s need to identify a solution to the operational issues created by the ad-hoc parking of these aircraft and also the fact that the facility will not be used for business purposes. The rental shall be reviewed annually in accordance with JRPI and a market review shall be incorporated after 25 years. This will provide certainty for the Lessee, whilst borrowing charges are being met, but will guarantee the rent being reviewed in line with market value of the site in the longer term.

During the first 25 years of the lease, upon assignment, a claw-back provision will be applicable, whereby any “super profit” generated by the company over and above their agreed borrowing rate or to JRPI (whichever is the greater) will effectively be split between the Public and the Lessee. In the event individual shareholders propose to assign their interest in the hangar, fifty per cent of any monies received in excess of a relevant share in total construction costs plus uplift, based upon the above allowances, will be recoverable by the Public.

Otherwise, the lease will include standard contract provisions to protect the interest of the Landlord, together with those necessary in the case of an operational airport.

Conclusion

Based upon the operational needs of the airport, the proposed lease to Jersey Aviators Limited appears to be a pragmatic solution to resolve the circumstances described in the report prepared the Airport Engineering Division.

It would, on future occasions, be preferable to ensure that the disposal of property, which could be regarded as surplus to the Airport’s needs, accords with a strategic plan that clearly identifies the objectives of the Airport in terms of that property under its administration.

Property Holdings is therefore fully supportive of the Land Availability Audit about to be undertaken and indeed may have involvement, with others, in this process.

In taking this approach a clear understanding will then be gained as to the strategic objectives of the airport and its property; those areas of land to create a commercial return, sites and buildings required for operational purposes and those sites where a more flexible approach can be taken, such as in this case.

Recommendation

Based upon the operational benefits derived by the Airport, it is recommended the Public grants a development agreement and subsequent contract lease to Jersey Aviators Limited subject to the terms and conditions outlined above.

Written By: Neil Sproston

Signature …………………………

Authorised By: Paul Tucker (Assistant Director Property Holdings)

Signature ………………………… Date