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Soaring airport rents grounded

By ASJYLYN LODER
Published January 18, 2007

BROOKSVILLE - In the wake of skyrocketing property values, Hernando County's airport will allow nearly 20 percent of its tenants to renegotiate older leases that tied rents to property value, leaving some businesses facing rents that could nearly double.

The move will cost the airport several thousand dollars a month. But record spikes in property value left business owners facing the triple threat of insurance, taxes and staggering rent increases in a single year, said Don Silvernell, airport director. That could spell the end for struggling small businesses.

"These folks are going to get hit extremely hard," Silvernell said.

For example, Omni Circuits on Telecom Drive could see its rent go from $850 a month to $1,250 a month, Silvernell told the Aviation Authority last week. The airport has 104 leases; Omni holds one of 20 leases that have no protection against sudden surges in property value, Silvernell explained.

The airport calculates rent as a percentage of property value; when values go up, rent follows. Under the newer leases, many of which extend for 30 years or more, the rent holds steady for the first five years. After that, the value of the lot is reassessed every two years, and the rent is recalculated.

But the new leases cap rent increases at 5 percent a year. The rent will continue to increase at 5 percent annually until the rent catches up to the value. Over the life of the lease, those incremental increases usually sufficed to keep pace with a slow but steady rise in property values.

But the latest assessment showed a startling spike: airport property values rose 48 percent over the two-year 2005-2006 period, Silvernell said. That means renters just finishing their first five years, during which the rent stayed steady, are faced with the normal property value increase that occurred during those years, topped by the more recent surge.

For some, that means rents will double or more.

Pearson Industries, which holds 17 leases at the airport, has four leases that don't have the cap. Steve Pearson, who runs the investment company with his brother, said it's hard to plan ahead for such an abrupt rise in costs.

"For any business, small or large, 48 percent is a pretty strong number. It's hard to envision that type of increase in one year," he said.

Silvernell proposed reopening those 30-year leases to add the 5 percent cap. Renters will have to agree to a new base value dated from December, before the reassessment. In addition, the 5 percent increases will start immediately. The renegotiated lease will not extend the lease term. Renters will have a choice: take the new terms, or swallow the increase.

The Aviation Authority told Silvernell to go ahead and make the offer.

"It seems reasonable," said Aviation Authority member Don Whiting. "It's a win-win situation."

County Commissioner Chris Kingsley, after hearing Silvernell's presentation, agreed with Whiting. Businesses need to be able to plan for the future. Sudden cost increases would leave them reeling.

Silvernell said it was the right decision.

"On top of the horror stories you hear about property insurance and taxes, for us to go in and hit them a third time, I just think that's a little much."

Asjylyn Loder can be reached at aloder@sptimes.com or 352754-6127.

[Last modified January 17, 2007, 21:49:38]