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City, major air center tenants at odds

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“We will still have a presence in Roswell, but it will be significantly scaled down,” said Tom Stewart, right, head of Stewart Industries International. He is seen in this photo talking with Lt. Gov. John Sanchez during a July 2016 Roswell-Chaves County Economic Development Corp. meeting. (Lisa Dunlap Photo)

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Two of the largest tenants of the Roswell International Air Center have voiced frustrations with the city’s decisions about leases, with one saying his company already has decided to move most of its operations elsewhere and another indicating that he wants to stay in Roswell but will consider other options.

Roswell City Manager
Joe Neeb

Roswell City Manager Joe Neeb said such disagreements are, in part, growing pains, reflecting the city’s adoption in December 2017 of a property management plan for the air center.

That plan calls for unquantified “appropriate” rates and fees and states that the city is expected to “endeavor to recover all operating and maintenance expenses, as well as the capital costs of the facilities.”

What that translates to, according to Neeb, is that rental rates need to be raised in many cases.

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“There are frustrations out there because a lot of businesses have become comfortable with these lower-than-market rates,” said Neeb. “So what we are doing is that we are working with everyone, or we are willing to work with everyone, and ramp up through the course of time” to reach market rates.

Leases and tenant relationships are among the issues expected to be considered at some point by the recently created Airport Advisory Commission, due to have its first meeting Thursday. That five-member commission was created to look into issues concerning the air center and provide advice and recommendations to the Roswell City Council.

Stewart Industries chooses Alabama

Tom Stewart, founder and chief executive officer of Stewart Industries International, said a tumultuous 14-year history at the Roswell airport as well as a current disagreement over a large requested rental increase culminated in his decision this fall to move the bulk of his operations to Birmingham, Alabama.

“I’ve moved out most of my operation,” he said, explaining that the company has made its headquarters in Alabama. “It could have been Roswell, but it was not to be.”

Once employing as many as 150 people who worked on aircraft maintenance and repair in Hangar 84 at the Roswell International Center, Stewart Industries will now maintain a Roswell workforce of only about 10 to 15 people, he said.

“You have a great facility here, which I have been a champion of for years,” Stewart said. “We will still have a presence in Roswell, but it will be significantly scaled down.”

Some of his decision-making had to do with industry considerations, including that his business plans to work more with Delta Airlines rather than American Airlines. But he said it also had to do with what he characterized as an often “adversarial” relationship with city officials.

He said the most recent dispute concerns the city’s request that he pay about $7,600 more a month for his lease, for a total of about $14,500 a month.

“Why would I pay $4 a square foot in Roswell when I can pay $1 a square foot in Birmingham, an area of 1.2 million people?” he asked.

He said that city staff told him that the rent increase was determined by market rates at comparable facilities

“There are no comparable facilities,” he said. “Where else is 120 miles from anything?”

He also said a rate of $4 a square foot doesn’t make sense when air center tenants are responsible for most repairs. He said that tenants must dole out the money up front and can receive rent abatements in return. But abatement approvals can take weeks, if not months, while some repairs need to be made immediately.

In addition, he was upset by the city’s decision to place Hangar 84 up for sale “out from underneath him.” He said that, had a sale gone through, it probably would have caused significant financial hardship on his company.

Stewart had offered to buy Hangar 84 for $10, then pay to build a new hangar able to accommodate larger aircraft than current hangars at the air center can hold. After about 20 years, the company would have donated the hangar back to the city.

Given Stewart’s offer, the city released a Request of Proposals offering the hangar to the public. According to Neeb, the RFP garnered two responses, with city officials determining that both responses, including the one from Stewart, fell short of satisfying the city’s criteria for a sale.

Now the city and Stewart are in the midst of negotiating what happens with the current lease, Neeb said, with Stewart Industries hoping to be able to sublet the hangar. Both parties say that they want to keep the door open to working together, but also said whatever deal is forged has to benefit each side.

MISTIC considers options

Another major tenant questioning a 27 percent requested increase in rent is Matrix International Security Training Intelligence Center or MISTIC, part of a consortium of companies serving international clients and having a location in Roswell since 2006.

Director of Planning Mark Fischer said that, in recent days, Neeb contacted him about negotiating better terms, but previously he noted that corporate officers had advised him to explore other options after hearing about a 27 percent proposed increase.

“We aren’t anxious to (move), but I’ve been directed to see what else is out there,” Fischer said.

Right now, the company pays about $6,330 a month for rent on a lease that started Aug. 1, 2016.

MISTIC provides security for events and venues, but it also provides the training for numerous groups, including on-site room and board. Some clients are area law enforcement, the Department of Defense, the Federal Bureau of Investigations and North Atlantic Treaty Organization (NATO) allies.

Fischer said the company has invested a great deal of money in the 300-acre training campus and the leased buildings on it, including significant upgrades to electricity, plumbing and air-conditioning and heating. He thinks the city is being short-sighted if it considers only rent payments, not the entire economic contribution of tenants.

The Roswell location employs about 13 people, pays about $750,000 in local wages each year, and expects to remit about $500,000 in New Mexico gross receipt taxes this year, he said. In addition, the company brings in business visitors from out of town, sometimes as many as a hundred at a time, who spend money at local businesses.

He also said he disagrees with other provisions of the lease contract, including a provision that the city could terminate the agreement with a 90-day written agreement or could immediately terminate if condemnation procedures were undertaken. He said such provisions discourage corporations from wanting to make long-term investments.

He said the company has worked hard to make the Roswell location profitable after some years of difficult financial times and hopes that current negotiations will enable them to stay.

“We want to work with the city,” he said. “We think we’ve been good neighbors.”

City sees increased rents as way to improvements

Neeb said that the city is working now to determine exact minimum and maximum rates for office, industrial and warehouse buildings at the air center, as well as determining how many tenants are at or below market rates.

But the principle of increasing rents, he said, reflected in the Property Management Plan and prompted by the City Council, is to bring all leases up to market rates so that the city will have money to reinvest in facilities.

Neeb said that, while the city hopes businesses will choose to remain in Roswell, it also recognizes that the city has an opportunity when a facility becomes available to a new tenant.

“We believe this is a great place to have a business and to actually make a great living,” he said, “But these businesses are making these decisions all the time. So while it is disappointing, we hope that Stewart Industries is successful where they are relocating and that gives us the opportunity to change and grow, and maybe we learn something new about what we can bring into the community.”

About MISTIC, he said the city would like to them stay, but he also said the city has been accommodating to the company, offering them rent reductions in the past and extending utilities at no cost.

“We enjoy having MISTIC out there. MISTIC is an excellent company for us and a very unique service out there,” he said. “I understand his concern, if it happens that way, but again we fall back on the document that says we need to get our rates to the market level.”

Neeb said the air center has a full occupancy rate for usable buildings and characterized it as already strong, with businesses employing more than 600 people. He added that the city plans to hold discussions and surveys with tenants in the coming months.

“I think what everybody sees with the conversations of the (proposed independent regional) authority, the commission and everything else is, we can do better,” he said. “That is what is optimistic to me, that I think we can do better with this asset.”

A March 2017 feasibility study of the air center by Leland Consulting Group Inc. found that the rental rates of occupied buildings averaged $1.44 a square foot, which compares to $2.50 a square foot charged for a southside Roswell industrial building and an average of $3.79 a square foot at an air center in Salina, Kansas, which is about 170 miles from Kansas City. It is not stated whether building maintenance at Salina is done by the tenant or the governing air authority.

Senior Writer Lisa Dunlap can be reached at 575-622-7710, ext. 310, or at reporter02@rdrnews.com.