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Once again, Alaskans lead the nation in building a better mousetrap. In this case, it's the new rental car center at the Ted Stevens Anchorage International Airport, and its inventors are the rental car agencies, Venture Development Group and the Anchorage airport.
The new center, the first of its kind to be built by a limited liability corporation (Venture Development Group, under contract to the rental car companies as individuals), rather than by an airport as a capital improvement project, is a four-level, 618,000-square-foot building. Inside is space for all of the Anchorage rental car agencies--Alamo/National, Avis, Budget, Dollar/Thrifty, Enterprise, Hertz, and Payless--for more than 1,200 cars, and more than 200 employees. There are eight fueling lanes with 16 fueling and cleaning stations, 12 car washes, and nine vacuum stands in the building, and developers say 94 percent of all water used in the car washes is recycled.
"There is also a 24,187-square-foot customer-service building with counters for all the agencies connected to the terminal by a tunnel," said Mark Pfeffer, co-founder of Venture and developer of the center.
The center was designed by kpb architects and built by Neeser Construction.
'TIME IS MONEY'
Expansion of the airport has been on the radar screen at the State of Alaska Department of Transportation for years, and in 2000, the State took a hard look at it and concluded airport growth and short- and long-term parking areas would need the rental car space. At that point, the State hired a Chicago consultant to plan a rental car campus away from the terminals.
According to Pfeffer, one of the solutions the consultant came up with was to build a car-rental campus in Connors Bog, a state-owned piece of land at the airport.
"We were told the plan for relocating us would cost $46 million," said Andrew Halcro, a director of Avis Alaska. "But that didn't take into account busing. It didn't take into account the property they were considering was questionable, and it didn't factor in cost overruns or delays."
Halcro said the agencies began to meet together in late 2000 or early 2001, and "we said we have to look after ourselves. We needed a long-term home, and we needed to come up with some ideas of our own."
The agencies called on Venture, and Halcro said Pfeffer offered to invest his effort to come up with a project scope and to pitch it to the airport.
"The car rental industry said 'no way' would they like the new campus to be built in Connors Bog," Pfeffer said. "There were several challenges to that plan. We all knew it was a popular recreation area, and having the campus more than a mile from the terminals would amplify the turnaround time for the cars.
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"It's a highly seasonal business," Pfeffer said. "These agencies make 65 percent of their income in four or five months, so truly time is money."
Halcro agreed, and added that the off-site campus also added risk.
'BUSINESS FEASIBILITY'
"In addition to the risk of the soft land on which they wanted to site us, it added risk every time we put a bus or car on the highway," he said.
The biggest challenge Pfeffer saw in making the proposal to the airport was the difference between the government procurement method and the private-sector business mentality.
"They don't dovetail," Pfeffer said. "The first thing rental car agencies want to know is the business feasibility. So the airport and the businesses aren't even talking from the same sheet of music."
To make things worse, Pfeffer said, the rental car companies were speaking with eight separate voices (two of the agencies were owned by a single family).
"Generally, they're competitors, and they don't want to have a common voice," Pfeffer said. "This time, though, they came together. That was unique to Alaska," Pfeffer said.
A majority of the agencies are locally owned and operated, Halcro said.
"We have a different way of looking at things here. The risks for the mom-and-pop businesses were greater, so we all had to reach a level of comfort. We had to make sure our industry could support the price we'd have to pay for the project. It was going to go on top of a 10 percent state tax and an 8 percent local tax.
"We had to do a lot of soul searching. We knew we needed this project, but we had to figure out if the economics worked. We finally reached our comfort level, and Mark went to talk to the airport."
That discussion didn't gain much traction at first, Halcro said.
"The airport pushed back. They said they weren't interested in participating. But even when the wheels started to come off, Mark stuck with us. He risked as much as we did, with no promise of payoff."
The agencies and Venture went back to the drawing table.
"Then," Halcro said, "we returned to the airport and told them we'd apply for a land lease, come up with a development plan, get the financing and build the facility. All the State would have to do was lease us the land."
The airport came around.
TURNAROUND
"They committed to this project in 2005," Halcro said, "and began working with us."
At the completion of construction in July 2007, the State took ownership of the facility and began leasing it back to Venture. Venture, in turn, subleases the facility to the rental car agencies," said Airport Director Mort Plumb. Once the bonds are paid, in approximately 35 years, the center will be handed over to the State of Alaska.
"It's particularly beneficial to the traveling public because they're being served completely under cover. That's even more important in Anchorage where we have so much rain and snow," Plumb said.
Developing a project such as this is something Venture does on a relatively routine basis, said Pfeffer.
"We didn't want to do anything with this center that would cause a hike in operating costs. It had to be cost-neutral to the airlines in their landing fees. We knew we'd have to have a customer-facility charge that would pay off the bonds," Pfeffer said.
"There is no other source of repayment," he added, "so we went through a pretty complex statistical modeling to find the charge that wouldn't drive people out of the market. The final cost to the customer is $4.12 per car per day."
Alaska Industrial Development and Export Authority issued $55 million in conduit revenue bonds to help cover the cost of the $62.5 million center. Pfeffer said the bonds were rated by Moody's, given an A rating, and were underwritten and insured.
"We got a terrific rate on the bonds," Pfeffer said.
With the rental car agencies and the airport on board, Venture began construction of the center in March 2006.
"We said we could deliver the project to them on a date certain and for a specific price," Pfeffer said. "It was to cost $63 million, and was to open at 5 a.m. on July 18, 2007. We met both goals."
Pfeffer added that the process was really streamlined from the airport's point of view.
"They were able to deal with the developer, instead of the individual rental car companies," Pfeffer said, "and the industry had a lot more say in how the facility was developed.
"From what we're told by the industry, this is the first one in the country to open on time and without any change orders," Pfeffer added.
HAPPY ENDINGS
The car rental agencies are very happy with the resulting center, Halcro said.
"For years, we were the least customer-friendly airport in the country. Most of our spaces were outside in a state that is under snow and ice for half the year. Operations and customer service were a pain. Now, we're all in the same place and we're covered. For our company, Avis, it allows us to put in place a return agent--somebody carside with a handheld computer--so the customer can totally bypass the rental agency."
Halcro said he was proud of the new state-of-the-art center and of the fact that it's the first in the country.
"There were a lot of people who risked a lot to make it happen," Halcro said, "and there are a lot of hidden benefits to it.
"This center helps us take close to 1,500 or 1,600 cars out of the intersection of Aircraft Drive and International Airport Road. It keeps our rental cars in a relatively controlled environment, and people hardly know it's there."
Plumb agreed.
"We've taken wear and tear off the roads and CO2 out of the air," Plumb said. "It also decreases the turnaround time for rental cars from 70 minutes to 15 minutes. It's a win-win situation for all of us."
When the time came July 18 for the ribbon cutting, Pfeffer said they randomly selected members of the traveling public who were leaving after a two-week visit to Alaska.
"They were Mr. and Mrs. Reed from Allentown, Penn.," Pfeffer said. "They represented the customers who are paying for the facility, and those customers are really the owners. The airport is the fiduciary that makes it operate on their behalf, and the rental car companies are the conduit to deliver the service.
"I think everyone is happy with what we accomplished.
"Now," Pfeffer added, "we just have to figure out if we want to export what we've done."
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