Airplane Hangar

[Lynn Burson]

Does anyone have experience with owning & renting an airplane hangar at a small local airport? Thanks.

[Nicholas Daddis]

Lynn - your decision not to buy, considering the metrics of the hangar lease, were correct. Good decision based on the information. 

I have many years of experience with airport transactions, and here are some of the more important factors to be aware of in case you come into another hangar lease opportunity:

1. Lease term. Almost all hangers and related facilities on publicly owned airports will be on land leases, not fee simple ownership. You will have no, what's called reversion value, at the end of the lease term as the improvements (the hangar) will revert back to the airport or airport authority.

2. Escalations. You can typically expect, especially with ground rent leases from airports that were written in the last 15 years, that there will be annual, semiannual, or every five-year rent escalations typically tied to a full CPI increase. Of course make sure that your lease with your hanger tenant provides for the pass-through of these rent increases. 

And don't forget you're going to be paying ground rent to the airport, in some cases property taxes or any equivalent even though you don't own the fee, and possibly a rent tax to the airport. All of these will of course need to be deducted from your gross income.

3. Use. Be wary of tenants using hangar space for other than the storage of aircraft. The use provisions of your ground lease and more importantly the rules and regulations of the airport (often called Minimum Standards) will overlay and in most instances prohibit non-aviation uses in the hangar. If you see a tenant storing vehicles, running a machine shop, using it as residential quarters use extreme caution as this is likely a non-permitted use despite what you may have been told or read otherwise. (There is a famous development in Southern California, a San Diego area airport in which they in fact did build quasi-hangar/ luxury residential units on the airport.  it was fabulously successful, looked great, but when the FAA years later discovered what had happened, along with the San Diego government which permitted it, the FAA took a stance to not allow such residential uses on an airport.)

4. Hangar door heights and door widths. As everyone knows aircraft come in various different sizes, wing spans and tail heights in particular. You will need to judge the market for your size of Hanger (hangar door width and height) with the number and type (size) of aircraft based at that airport. This affects the market demand for your size of hanger. Generally the smaller the hangar the more recreational aircraft user (single engine, propeller), will be your likely tenant and this tenant is going to be very cost-conscious as he/she is not a commercial, business aircraft user in most cases.

5.  Services. Snow removal, if applicable, towing of aircraft in and out of the hangar, fueling services, hanger maintenance (doors and roofs especially) will need to be considered. The snow removal, towing, and fueling services are likely handled by the airport fuel provider typically known as an FBO.

This is a lot of information to digest - sorry. But it's a good start if you're interested in hanger leasehold ownership. There can be good opportunities and money to be made in this niche. I've had great success. You can too!

Good luck and best regards,

Nicholas, CCIM, CPM