"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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