A few local developers are offering to buy hundreds of acres of land from the Lehigh-Northampton Airport Authority before that authority faces deadlines to pay multi-million-dollar fees it owes as the result of a lawsuit.
But the authority has no such agreements of sale with the Rockefeller Group, a New York City-based commercial real estate developer and broker it has been working with for more than a year.
The authority still doesn’t know how much land Rockefeller wants to buy, how much it will pay for it and when it will buy it, said Dean Browning, the authority's secretary-treasurer.
“We have an opportunity to walk away from Rockefeller and open the land up to other buyers,” said Browning.
“Within the past several weeks the airport authority has issued a request for proposals that a number of developers have responded to, saying they would be interested in all of the land.” He added those responses included “firm commitments that they will settle in a sufficient time for us to handle our lawsuit payments.”
The authority intends to sell between 750 and 900 acres of unneeded land to make court-ordered payments in a lawsuit it lost. It must pay $5 million by December 2014 and $6.6 million by December 2015.
The successful lawsuit against the airport involved land it acquired years ago for future runway expansion, which never happened. Ironically, much of that same land now will be sold to pay off the lawsuit.
The authority must pay $3 million on the lawsuit by this December, but most of that money will come from the Federal Aviation Administration.
Browning said the authority does not have the money to make the lawsuit payments in 2014 and 2015. He said his primary responsibility is to make sure it has the money to settle the lawsuit.
Browning said nothing in the authority’s current agreement with Rockefeller requires that Rockefeller buy the land in time to generate money in time for the authority to settle those lawsuit obligations.
“I’m making this a public issue because I think we are confusing our responsibilities on the board,” said Browning. “We have a fiduciary responsibility to come up with the money to settle the lawsuit. I don’t think pursuing the course we’re currently on with Rockefeller will allow us to do that.”
Tony Iannelli, chairman of the airport authority board, questioned why Browning voted to move ahead with Rockefeller just last week if he now opposes continuing that professional relationship. “He must forget that he voted yes at the meeting.”
Iannelli said at other board meetings Browning repeatedly has expressed concern about selling land in time to have the money to pay off the lawsuit obligation.
“He has certainly reminded us on many occasions about the very difficult financial situation we’re in based on the lawsuit,” said the board chairman.
“We get that loud and clear. We know the time line very well. I don’t know how to satisfy his concerns other than waving a magic wand and going to settlement tomorrow.”
“The board is certainly moving forward, we are focused on selling the real estate,” said Charles Everett, executive director of Lehigh Valley International Airport. He said selling that real estate before the lawsuit payments are due “is certainly our goal.”
Browning said the authority recently sent out a request for proposals to a number of developers, “many of whom are local,” and at least one local developer said he will take all of the land and “will commit to us that we will get sufficient money in 2014 and 2015 to handle the lawsuit payments. He would make payments in June 2014 and June 2015, before our December 2014 and December 2015 deadlines.”
Browning declined to identify that local developer.
“We’re delighted to know there is a lot of interest in the real estate,” said Everett.
He confirmed some of those developers may be interested in buying all the land.
Iannelli said many local developers have said they are very interested, but “none have brought us any money yet.”
Browning believes the authority can part company with Rockefeller without being sued for terminating its agreement with that company. He said even if there was a lawsuit, it would not be substantial.
But he said many members of the authority board fear another lawsuit if they sever ties with Rockefeller. They also fear the Lehigh Valley will lose a Federal Express facility to be built on some of the land Rockefeller plans to purchase north of the airport.
Browning said that Fed Ex facility would employ up to 1,000 people.
“My view is Fed Ex – if they like the location, which I’m sure they do – will be here regardless of who the developer is,” said Browning. “We would not lose Fed Ex.”
He said some local developers interested in acquiring the land have been in contact with Fed Ex.
Everett said whether the authority is legally bound to stick with Rockefeller “depends on who you talk to. We have a master agreement with Rockefeller.” He said that agreement was approved in October 2012.
Last week’s meeting
On September 24, the authority voted to authorize its solicitor and executive director to finalize an agreement of sale with Rockefeller for 250 acres of land owned by the airport north of Race Street.
Everett said for that property “Rockefeller has certainly indicated to us how much they’re willing to pay as well as when they would desire to enter into a sale agreement with the authority. As soon as we can successfully negotiate a deal we will be in front of the board with a proposed acquisition agreement.” He hopes that will happen by the end of this year.
Iannelli confirmed that 250 acres is the land where Fed Ex wants to build its facility.
Browning said the authority should insist that land purchase be completed before the lawsuit settlement bills are due.
Iannelli said “there’s a very good chance” the potential Fed Ex property deal could bring the authority money from Rockefeller by next July. He said the sales agreement on that property is being reworked to include deadlines.
Browning said all the remaining unneeded land should be opened up to other developers.
But the resolution passed by the authority last week authorized the airport to negotiate a purchase option with Rockefeller for another 250 acres.
Iannelli questioned why Browning voted in favor of that resolution if he opposed moving ahead with Rockefeller.
Last week, the authority passed a second resolution making “all remaining flight path properties” available for sale to other developers. Those properties, which total 286 acres, are northeast of the airport in Hanover Township, Northampton County.
Browning said Rockefeller wanted to put large box warehouses on some of that land.
Iannelli said his board made a good decision by continuing working with Rockefeller “to compress that timeline as best we can” while simultaneously working with local developers by making other properties available to them.
$37 million shortfall?
Browning projects the airport authority will face a $37-plus-million financial shortfall by the end of 2015 if the land is not sold in time.
He said that figure is a total of what is needed by the authority to pay debts, settle the lawsuit and make significant airport improvements that have been deferred for years.
He said if all the surplus land is sold, the authority will come close to meeting that $37 million shortfall.
Everett, the authority’s executive director, projects a much lower shortfall totaling $5.6 million if no real estate is sold.
Everett said Browning’s higher projection assumes all needed capital improvements will be funded in the next two years, which probably won’t happen.
Browning projects the airport should spend more than $16 million on capital improvements in 2014 and nearly $12 million in 2015 – compared to only $1.06 million this year.
Everett expects the airport will continue receiving funding from the federal government, which was not factored into Browning’s figure.
“We don’t know how much is coming from the FAA or when,” responded Browning.
The airport authority projects an annual income of more than $5.37 million from LVIA in each of the next three years—before interest and depreciation. For 2013, said Browning, “We’re currently running about $300,000 below that.”
He said that estimate of annual income assumes LVIA won’t lose any more airlines.
According to Browning’s figures, each year the authority will need to spend more than $4 million of that $5.37 million to pay its debts. “That doesn’t leave a lot of money left to handle what we still owe on the lawsuit and it certainly doesn’t provide the money we’re going to need to make investments in the airport..”
“Our cash flow will not be sufficient to enable us to do the three things we need to do—service our debt, invest capital in the airport operations and, most importantly, settle the lawsuit for the land.”
Browning said the surplus land up for sale does not include the Braden Airpark in Northampton County, which the authority also has been interested in selling.
“There’s a misconception we’re selling Braden to try to raise cash. “ He said money from the sale of Braden would be used to pay off debt and grants. “The net cash from selling Braden is going to be zero.” He said it would be closed to stop an operating loss from continuing as long as the small airport remains open. “If any operations are losing money, we’ve got to make corrective action. And Braden is losing money.”