Ontario, Calif., Airport’s Management Spars with Landowners Over Access

Thursday, October 14, 2004
Ontario, Calif., Airport’s Management Spars with Landowners Over Access
The Riverside (CA) Press-Enterprise

Inside its tree- and bamboo-lined yards, Hofer Ranch still looks like a rural oasis. But it sounds like industry.

The 137-acre farm, whose origins go back to the 19th century, collects the sounds of passing trucks, planes and trains. From its vineyards, the farm looks out at the runways of Ontario International Airport. Its owners want to transform the land into an industrial project complete with an air cargo facility, but airport administrators say the backyard view is as close as developers will get to their runways.

The issue pits the Hofer family and development partner Hillwood against administrators one of the top 15 cargo airports in the country.

“That fence might as well be 100 feet tall and made of titanium,” said Mark Thorpe, marketing director for Los Angeles World Airports, or LAWA, the Los Angeles city agency that owns and operates Ontario International.

“They’re not getting through-fence access to our runways,” Thorpe said.

Giving the Hofer Ranch project access to the runway would betray Aeroterm, developers of the Pacific Gateway Cargo Center, a 1 million-square-foot air cargo development project on the northwest side of Ontario International.

Aeroterm has pledged to invest $140 million to develop its project. If Texas-based Hillwood and the Hofers gain runway access, it would directly compete with Aeroterm for tenants.

Lyle Haynes, asset manager for LAWA, said the required environmental reports for Aeroterm as well as lease terms should be ready next spring. The Annapolis, M d.-based developer said it plans to deliver the first buildings by 2006.

The airport has a financial interest in Aeroterm’s success, because it earns rent from the developer but has no such stake in the planned Hofer Ranch project.

Michael Webber, a Kansas City, Mo., air cargo consultant, said the airport shouldn’t risk damaging its reputation with cargo companies by handing over valuable airway access, especially when Aeroterm already was working with the airport. Webber recently signed on as an advisor to LAWA on cargo matters.

Steve Forrer, executive vice president of Aeroterm, said LAWA has never wavered from the position that it would not grant airway access to anyone else.

“It was one of our questions early on,” Forrer said. “They’ve been entirely consistent that they’re not going to give anyone else access to the airport.”

Furthermore, in a post-Sept. 11 environment, LAWA officials raise security concerns about opening the runway to a third-party development. LAWA will retain ownership and control of the Aeroterm property. UPS, whose massive West Coast hub is located directly east of Hofer Ranch, also operates a cargo center at Ontario. UPS has had runway access since the early 1990s and owns its own land.

The UPS hub employs more than 3,500 workers, close to 5,000 during the December holiday season. Another air cargo hub could generate at least 500 new jobs. Air cargo hubs also act as magnets for companies that rely on time-sensitive shipments, Webber said.

Thorpe said the delivery company represents the gold standard for security. UPS was granted access before terrorist used airliners in their 2001 attacks, changing the security environment.

Jay Dick, first vice president at the Ontario office of commercial real estate firm CB Richard Ellis, said demand for airport land near the airport is strong enough that the project can thrive with or without an air cargo component. Hillwood hired CB Richard Ellis to lead the marketing and leasing efforts for Hofer Ranch.

“Air commerce is just part of a ton of interest we’ve seen,” Dick said. “In fact, we could do fine if we want to be pure industrial, especially with the land south of Jurupa.”

Financially, the project would suffer from losing the air commerce component. Alan Deszcz, a broker with Sperry Van Ness, said users pay a premium for buildings with airport access because the options are scarce.

For general warehouse and industrial buildings off the airport, the difference is less significant. Without runway access Hofer Ranch loses its key advantage of being adjacent to the Ontario International Airport.

Paul Hofer, whose family has owned the Hofer Ranch land since the 1880s, said the airport is denying an opportunity to put adjacent land to its best use.

“I don’t see how you can give one private company (UPS) access and then deny it to another,” Hofer said.

Without the air cargo component, the project would be comprised of industrial, warehouse and office space in the heart of an airport industrial neighborhood. However, real estate experts say the difference in the value and demand for the buildings is more valuable than what runway access could offer.

“You’re going to pay a little bit more to be a little closer,” said Deszcz, not speaking specifically about the Hofer Ranch development.

The runway access issue is not the only point of contention between the ranch and LAWA. Two months ago the agency revealed two master plan options for the future vision of Ontario International. The second of the two options places a passenger terminal over part of the Hofer Ranch land.

LAWA officials said Federal Aviation Administration rules require seeking at least two distinct development alternatives. At a public hearing, Tim Merwin, a LAWA consultant, said the second plan eases aircraft congestion by not having all future terminals lined up along the north edge.

Hofer said the option has hurt the project by casting the shadow of possibility that LAWA could take his land through eminent domain.

“All of a sudden there’s a passenger terminal sitting on top of our project,” Hofer said. “How can we plan when this type of thing happens?”

LAWA and the FAA plan to finish environmental studies for both options by next summer with a final decision possibly coming by spring 2006.

Two dozen people spoke against the south terminal at the master plan hearings in August. The group included members of the consulting and legal team hired by Hillwood.

So far the conflict has stayed at the negotiating table and not moved toward legal proceedings — although Hillwood was represented by a law firm at a recent public hearing, and lawyers for the city of Los Angeles are keeping an eye on the wrangling.

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