A Toy Box for Big Boys

APRIL 30, 2006

Arriving at the Hayward Executive Airport to check out a new and somewhat unconventional form of real estate investment, a telling moment occurs: Conspicuous as a bent-eared mongrel in a pack of pedigreed poodles, a 16-year-old Buick splattered with bird droppings slinks past the valet parking post and pulls into a lot sprinkled liberally with freshly waxed BMWs, Mercedes, Lexus and Jaguars.

Clearly, the private, invitation-only air show hosted by Ascend Development to showcase its custom-built hangars for business jets on this sunny spring morning, is not for the weak of wallet.

Further proof of that revelation is found on the tarmac behind Ascend's business partner, Trajen FBO Network, where the air show is being held. A dozen or so jets and smaller aircraft, their interiors open for inspection, form a loose semicircle around an open hangar bay.

Several upscale cars -- including a couple of Ferraris whose sticker prices rival those of some of the smaller aircraft -- are displayed within the semicircle. A brunette in a miniskirt and high heels displays her curves next to those of the Ferrari. Booths manned by representatives of aircraft support companies line the walls of the hangar bay. One boasts help in avoiding paying sales tax.

Considering that the sales tax on some larger business jets -- which go for $40 million or more -- would equal the purchase price of a fixer-upper in San Francisco's Sea Cliff neighborhood, it is not a boast to be taken lightly. Neither are the ease, comfort and convenience promised by traveling in your own private jet.

The air show offers a variety of business jets, including Embraer's Legacy, Raytheon's Premier 1, Piaggio's Avanti, the Pilatus, Bombardier and Gulfstream, to accommodate that promise. For the budget-minded, there is a relatively new class of aircraft called very light jets -- sleek, fast and smaller versions of what's known in aviation circles as the "big iron."

The brochure for the Eclipse 500, a very light jet that accommodates six, cruises at more than 400 mph at a maximum altitude of 41,000 feet and sells for about $1.3 million, takes blatant aim at the ego: "Repeat out loud: 'I own a jet.' Got a nice ring to it, doesn't it? For some people, like you, the need to own a jet is just part of your genetic makeup."

"The public has a corporate fat cat image of business aviation -- a bunch of suits puffing cigars," says Bennett Taber, Bay Area manager for Spirit Aviation, an international charter firm headquartered in Van Nuys. "Now, I'm not saying that doesn't happen, but for the most part this is really a practical tool that has the potential to increase productivity. It's just a tool for doing business better."

There are a lot of places, says Bennett, that are difficult to get to in a timely fashion when flying business class on commercial airlines. The increasing number of canceled flights, along with the inconvenience and insecurity of flying in a post-Sept. 11 world make traveling by private jet even more attractive. In addition, private business can be conducted while in flight.

This accounts for the increase in sales of business jets, says Taber, and explains why air charter revenues are up 35 percent from last year.

Whether your business tool happens to be a very light jet or is of the big iron variety, you need a place to park it. And that's where Ascend Development, a California airport real estate company, comes in.

Three years ago, Ascend completed construction on the first phase of its 130,000 square-foot hangar complex at the Hayward airport. The six private hangars, about 10,500 square feet each, were sold before construction was completed on the first phase. The second phase of the project, which calls for the construction of three buildings on 3 1/2 adjacent acres at an estimated cost of $10 million, is scheduled for completion sometime in 2007. Most of the nine additional hangars contained in the second phase have already been sold.

"It's one of those things -- build it and they will come," says Ascend project manager Scott Briggs. "There's a shortage of land and hangar space. And there's been a big growth in corporate aviation."

Ascend Development, says Briggs, was formed to address the growing need for high-quality corporate aircraft storage at the nation's key airports. It offers an alternative to month-to-month hangar rental by selling 50-year leases, condo-style, in which the buyer purchases the hangar but not the land it's built on. The hangars, which can be sold or rented to others, appreciate in value the same way a house or an office building does. Unlike traditional airport construction of hangars, the lease does not revert to the city when it expires.

"From what we've seen, it's a pretty new concept," says Briggs. "One guy bought two of our hangars as a real estate investment. He's made an 11 percent profit on rental returns."

It's an especially good investment, says Spirit Aviation's Taber, in the Bay Area, where medium to large hangar space is at a premium.

"I was recently shopping for some hangar space at Oakland airport," Taber said. "All I could find was a pre-World War II, redwood hangar. It was as dry as a tinderbox and would go up like a Roman candle. The Port of Oakland wanted $25,000 a month for it."

An alternative to renting that hangar, says Taber, would be to buy one of Ascend's hangars, which sell for around $1 million. In four years, the entire investment is recouped.

Since buying hangars as an investment is a little outside the purview of mainstream lending institutions, cash or alternative financing is required.

"It's a little like buying a piece of property in Mexico," says Ascend spokesperson Jason Jepson. "Because you're not buying the land, the bankers say, 'Well, what do you own?' "

Regardless of the method of purchase, says Jepson, after the initial investment is recouped you still have the hangar. And Ascend's hangars, like the high-end hardware they house, are not exactly run of the mill. They have about as much in common with the stereotypical image of a wood-framed, sheet-metal structure as Air Force One does with a Sopwith Camel.

It's a little like ordering a car: You start out with the basic model, whose standard features include 10,500 square feet of space walled off by insulated, interlocking, double-sided steel panels reputed to withstand the blow of a Mack truck traveling at 50 mph; metal halide lighting and high-gloss Tennant floors; all contained within a gated, secure complex.

A 24-hour, Web-accessible security camera is mounted in the center of the 33-foot ceiling.

"Let's say you're in Beijing," says Briggs, "and you're worried about your plane. All you have to do is punch it up on your laptop and check it out."

From there, you add the options: private entries, offices, restrooms, bi-fold doors. If you really want to go first class, Ascend will put in a wine cellar, private crew quarters with showers, or a conference room. It will even personalize the flooring by emblazoning it with the corporate logo or family crest.

"We'll essentially do anything the buyer wants," says Briggs.

Source: San Francisco Chronicle