You are committing to a $45,000 assessment and potentially additional financing for the purchase and preservation of the airpark.
Why $45,000?
Let’s start with some assumptions. The Board, based on available information to it, expects the airport to cost between $2.5 million and $3.5 million. Using the upper number and expecting at least 80 homeowners to join with their neighbors to preserve their right to use the airport, we settled on $45,000 per homeowner as likely to be sufficient. Thus, each of us expects an assessment of up to $45,000 when we exercise our right under the 2010 settlement with Crest Airpark. Establishing $45,000 as a cap is intended to provide some certainty for us all so we can plan to be ready when the time comes.
So, what will the purchase look like?
We don’t know exactly what the purchase will look like even though the terms are prescribed in the settlement. It calls for payment in full at the time of closing. Still, there is some reason to believe that the owner, Crest Airpark, LLC, may have an interest in carrying a contract for a portion of the purchase. Both FAHA and Crest Airpark must agree to this since seller financing is not part of the settlement. Other financing may be needed if the $45,000 is not enough to complete the purchase.
So, what would the purchase look like if it is for $3.5 million or less?
This scenario is straightforward. FAHA would pay all cash using the $45,000 member assessments collected or a combination of cash and seller financing.
Could the airport cost more than $3.5 million? If so, what do we do?
It could, making the situation more complex. We won’t know the price until the appraisal is completed. Because the purchase would likely exceed the amount of cash available, a portion of the purchase must be financed in this circumstance. Three financing options are possible: 1) seller financing; 2) commercial loan; and 3) financing from some homeowners. Each of these has advantages and disadvantages that come into play. Seller financing and commercial loans are the most straightforward although obtaining a reasonable interest rate and avoiding onerous terms may be difficult. Homeowner financing may produce better terms but is more complex and will require noticeably more effort.
Borrowed money isn’t free!
No, it is not. The annual payments for a $1 million loan would be about $72,000 at 6% interest rate. We don’t know how much cash the airport can generate from hangar rentals, but it is likely to be close to this figure! (Hopefully more!) The net effect is that we would probably not be able to do any major projects like paving the runway. Homeowners will need to decide under these circumstances if we want to authorize special assessments for these initial large improvements. Our first priority is the purchase and preservation of the airport.
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