West Star expansion moving ahead
The Grand Junction Regional Airport Authority voted unanimously Tuesday to push ahead with negotiations to buy an $8 million paint hangar, but withheld final approval until financing for the complicated deal is worked out.
Should negotiations succeed, the paint hangar to be built by West Star Aviation would allow the aircraft maintenance company to expand its operations and eventually create as many as 150 jobs, each paying up to $52,000 a year.
A final agreement between the airport and West Star is far from certain and could fall apart before year’s end unless Wells Fargo Bank or some other lender offers financing that meets the needs of both parties, airport attorney Michael Morgan told the airport authority board.
The board unanimously approved the concept for the deal, which is known as a purchase and lease-back. In general terms, the concept for the deal is as follows:
West Star and Wells Fargo are currently negotiating the terms of a construction loan that would pay for the building of the hangar, West Star CEO Robert Rasberry told the board.
West Star must secure the construction loan on or before Dec. 1. If it does not, either party can back out of the deal, Morgan said.
The airport authority must deem the construction loan satisfactory for the deal to move ahead. If it does not, either party can back out, he said.
Next, the airport authority must obtain a binding commitment on or before Dec. 15 for bond financing of up to $8 million that will be used to buy the paint hangar from West Star once it is built. If it does not, either party can back out, Morgan said.
The interest rate the airport authority is able to negotiate on its revenue bonds will determine the amount of the payment West Star will ultimately have to make on the lease. Should the terms of the revenue bond require West Star to pay more than $113,000 a month for the lease, West Star could back out.
Once all the financing is deemed satisfactory by both sides, West Star would start building the hangar, possibly as soon as March 2014, depending on weather. It will have 15 months to complete construction from the time it breaks ground, Rasberry said.
Once built, the airport authority would purchase the hangar from West Star and then lease it back to the aircraft maintenance company. The authority could close on the purchase of the hangar as soon as June 2015.
The purchase and lease-back arrangement was considered beneficial for both sides because West Star did not have the financial ability to maintain a long-term mortgage and also because the airport authority could obtain bond financing to finance the purchase at a lower interest rate, Morgan said.
The airport would benefit because it can recover the cost of the purchase price and the financing costs by collecting rent on the hangar over time, he said. The Grand Valley would benefit from the creation of new, good-paying jobs.