Government-sponsored development activity in the Spokane International Airport Business Park is hindering private-sector development of surrounding West Plains land, several developers contend.


Dick Vandervert, one of the Spokane areas most prominent commercial developers, says he believes that progress on his Pacific Northwest Technology Park along U.S. 2 near Airway Heights is being stymied by price under-cutting at the Airport Business Park, located southeast of the airport.


Its unfair competition. I dont know why theyre competing with the private sector. Thats not what their charter is, Vandervert contends.


Meanwhile, the broker for a big California real-estate investor who had signed an earnest money agreement to buy 160 acres of undeveloped land southwest of the airport says his client nixed the deal earlier this year due to concerns he wouldnt be able to compete effectively with the Airport Business Park for tenants.


The difficulty is, you cant build the infrastructure on a private-enterprise basis and compete with prices the Airport Business Park offers prospective tenants on long-term land leases, says the broker, Kyle Denning, of San Marcos, Calif. In the negotiations here, Denning was representing Warner Lusardi, owner of San Marcos-based Lusardi Construction Co., whom has land holdings in about 10 states.


One of the listing agents for the West Plains property, Pete Thompson, of Spokane-based Hawkins Edwards Inc., argues that the Airport Business Park, which isnt driven by the profit motive, shouldnt be competing with the private sector.


Thompson says he expressed his concerns in a March letter to John Wagner, then chairman of the Spokane Airport Board, which operates Spokane International Airport, Airport Business Park, and Felts Field, but got no response. Wagner left that position in May. Thompson sent a follow-up letter to the airport last week.


In a two-page response letter to Thompson dated earlier this week, Wagnerstill on the Airport Boarddefended Airport Business Park pricing for both barren land and building rents as being market rate. However, he wrote, Clearly your correspondence demonstrates that there exists some miscommunications with the development community.


He said he wants to convene a meeting with 20 or so of the areas private developers in the very near future so that we can address these issues in an open manner and discuss ways that we can work more cooperatively together.


The government-versus-private development tension there seems to have bubbled to the surface just this year, as more attention has been focused on the West Plains, and the friction has caught airport officials somewhat by surprise.


We do try to reach out to the private sector. Frankly, wed like to see private development and investment in our facilities, says Todd Woodard, airport spokesman. He disagrees with suggestions that the Airport Business Park isnt charging market rates for the building space and land it leases, and says, Federal law requires us to get a return on our investments. We dont have a profit motive, but we cant give things away.


The discussion comes close on the heels of the speculative construction of two office buildings on the West Plains. One is a 20,000-square-foot building in the Pacific Northwest Technology Park for which Vandervert says he has been struggling to land tenants, and the other is a 30,400-square-foot office building in the Airport Business Park that now is about two-thirds leased.


I have to get $16-a-square-foot rent to make the numbers work. They build a building that is more expensive than I did, and theyll rent it for $12 a foot, Vandervert contends. Airport officials say, though, they are charging more like $13 to $15 a foot for space annually in the new building, depending on length of lease, and that doesnt include an additional leasehold tax charge that the tenant would have to pay.


Vandervert nevertheless asserts, Nobody wants to build out there around the airport because you cant compete with them. He adds, I think the airport should get out of the development business and concentrate on their charter.


Woodard says the Airport park, because of some of its amenities, tends to appeal to a different type of tenant than would be interested in locating in some of the other business parks in the area. He adds, If were approached by individuals who want to build facilities in the business park and lease from us, thats part of our charge to deliver that.


Creating demand


He says the new office building at the Airport Business Park is the first one constructed there since 1985. Most of the 40-plus buildings in the park are World War II surplus structures.


Weve had a 600-acre business park that has been somewhat dormant. The board felt that we should create some demand and create some development of our own, which led to the decision last year to pursue the project, he says.


Denning, Lusardis broker, sides with Vandervert, though, in contending that the airport park is hampering private-sector development initiatives.


The 160-acre parcel that Lusardi came close to buying is located west of the Airport Business Park, between Geiger Boulevard and Electric Avenue, along Interstate 90. Its part of a more than 400-acre undeveloped site on which Inland Power & Light Co. had proposed years ago to develop the West Terrace Business Park.


Denning spent considerable time early this year researching the property and meeting various community and local-government representatives, before informing the listing agents for the parcel that Lusardi considered the Airport Business Park too much of a threat.


Thats the reason we decided not to buy the property, he says.


Lusardi would have been selling the improved land to users, whereas the Airport Business Park offers land for lease, but Denning says, It still eliminates a very substantial part of your market. If you can lease property for less than 10 cents a square foot for 50 years, then you dont really need to buy it.


He asserts, It basically is a giveaway. The private sector cannot compete. On the West Plains, a private developer probably would need to charge around 25 cents a square foot a year on a lease to cover development costs and earn a normal rate of return, he estimates.


The Airport Business Park Web site says land available for lease there ranges in price from 6 cents to 14 cents a square foot per year. Woodard says, though, that the average probably is around 10 cents and that it wouldnt be possible to lease land there for less than 10 cents for 50 years because state law requires review of such lease agreements every five years, and lease prices would rise.


Also, he says, If they were such rock-bottom (prices), I would think we would have people beating down our door, and we just do not. The Airport Board is at a disadvantage, too, in that it cant sell any of the land, yet many developers want to own the land they build on.


Denning says that although Lusardi has crossed the West Plains off its list, its continuing to look at properties in the Inland Northwest.


Weve recently invested in several large tracts in Idaho, and were looking throughout the Intermountain West for real-estate investment opportunities, he says. We continue to be interested in Spokane, and also are looking across the border at the Post Falls, Coeur dAlene, and Sandpoint areas.


Of the West Plains property, he says, Theres no question its a difficult situation. Basically local governments are very much interested in economic development.


Denning suggests the Airport Board explore ways to collaborate more closely with the private sector there to pursue common goals. My feeling is you dont get nearly as much bang for the buck if you compete with the private sector, he says, rather than if you help the private sector do what it does best.