Years of promoting an air-cargo development at Denver International Airport are about to bear freight for Denver millionaire L.C. "Cal" Fulenwider III. And the public is helping carry the bags.
The Denver real estate baron and his family already own an estimated 7,500 acres in the area surrounding DIA. Now the city is about to give Fulenwider and two of his business partners control of still more property: up to 72 acres of choice, taxpayer-owned land within the airport's boundaries.
City officials say they've protected taxpayers by cutting a tough deal with Fulenwider that calls on the developer to fund the project and carry the risk. But the city already has cut corners to get the "WorldPort at DIA" off the ground. And for Fulenwider, the project presents remarkable opportunities along with the risk. He and his partners will have the exclusive right to develop and market hundreds of thousands of square feet of commercial property in the heart of the country's sixth-busiest airport--not just cargo warehouses, but office space, showroom facilities and retail outlets offering everything from dry cleaning to children's daycare. And because the public owns the property, the developers won't have to pay property tax.
The city attorney's office is now putting the finishing touches on a lease with Fulenwider. When that document is signed, WorldPort will formally be established as the closest private development to the DIA terminal and its estimated 85,000 daily air travelers--and to the airport's south cargo area, which Fulenwider hopes to tap into with a string of pass-through warehouses.
The complex, which will be located off Pena Boulevard east of the access plaza, is just one of the airport projects on the plate of the Fulenwider family, whose fortunes have been entwined with DIA's since the airport's inception. The family sold Denver much of the land for the airport, making millions in the process. It developed the area's first hotel and is in the process of promoting the 450-acre Denver International Business Center near the airport entrance, as well as a residential "mega-community" dubbed Buffalo Hills Ranch.
Airport officials say WorldPort will pay off for both taxpayers and developers. Because Fulenwider will be responsible for financing construction of the five buildings initially planned for the complex and the city will retain title to those buildings, WorldPort is essentially a no-lose proposition, suggests airport property officer Pete Gingras.
"What they bring to the equation is something we're not offering," Gingras says of Fulenwider and his partners Chris Thompson and Bill Prather. "We're not offering to finance these facilities." Once the buildings are in place, he adds, "We've got an asset in place that we now own, and we get cash flow."
Gingras says the Fulenwider group will pay the city roughly $350,000 in annual ground rent for the first six years, plus 5 percent of the project's gross annual revenues. The developers will get the other 95 percent. The city is further sweetening the pot by asking the federal Department of Commerce for permission to establish a 6.7-acre international free-trade zone on the property.
"The magic here," says Gingras, "is creating a circumstance where all parties end up on a level playing field."
The real magic trick, though, may be how Fulenwider and the city took what started out as a nonprofit effort to promote DIA as a cargo center and turned it into a for-profit "mixed-use business and commerce development."
The original Denver WorldPort Partners Inc., formed in 1989, was a civic supergroup that included Fulenwider and fellow airport landowners Gary Antonoff and Richard Anderson, along with the then-chairman of Colorado National Bank, an Adams County economic-development official and the director of the state's international trade office. Its mission: to promote DIA as an international cargo hub, in part by establishing a free-trade zone at the airport.
The original group never did get around to luring cargo carriers, and it disbanded sometime in 1993, says John Prosser, a planning consultant and CU-Denver architecture professor who served on the original board. But the WorldPort concept didn't die with it. Instead, the idea resurfaced two years later, when the city solicited bids for an "airport cargo facilities development."
The only firm that responded to the September 1995 request for proposals was the Fulenwider partnership. Aviation officials deemed the bid acceptable, but because it was the lone proposal, it wasn't subjected to review by a city evaluation committee. It also apparently wasn't required to meet the standards spelled out in the city's own RFP.
The RFP, for example, listed as an "unequivocal" condition of the deal that bidders "have a commitment with a nationally/internationally recognized" cargo facilities firm. Fulenwider didn't--and, Gingras admits, still doesn't. "I don't recall they mentioned anybody," he says. "Whoever they would partner with would be of significant interest to us, [but] it's not something that we would necessarily expect to see in the proposal."
The RFP also declares that "successful airport experience is considered highly relevant." Other than owning huge tracts of land near DIA, concedes Gingras, Fulenwider had none. But he compares the situation to the city's recruitment of DIA concessionaires. Some of those business owners didn't have airport experience, either, he notes, but the city was willing to "trade off other business experience that would be relevant." And in Fulenwider's case, "they do have some significant commercial experience."
Despite the obvious similarities between the old WorldPort Partners and the new WorldPort at DIA, organizers say there is no connection whatsoever between the two projects. Max Wiley, who heads the Mayor's Office of Economic Development, says it's also a complete coincidence that the city has recycled the notion of a free-trade zone.
"None of us here were party to any of that," says Gingras of the original WorldPort. Adds Prosser, who works as a consultant to Fulenwider but says he has nothing to do with the WorldPort effort, "They've just used [the same] name." Calls to the Fulenwider partnership were not returned.
The new project isn't the first time Fulenwider and the city have pooled their resources. Fulenwider also belongs to the DIA Business Partnership, a controversial program under which the city and private companies donate money to help drum up business in and around the airport. Fulenwider gets a 50 percent state tax credit for its donation, meaning taxpayers are subsidizing the company's efforts to promote its own land.
And another payoff may await Fulenwider should WorldPort take off. The company still owns land along the airport's southern edge that stands to increase in value if WorldPort is successful--and could even serve as a destination point for spin-off development. Fulenwider's interest in such expansion is "self-evident," says Prosser. And, the consultant adds, there's nothing wrong with Fulenwider expecting a "quid pro quo" in return for his willingness to invest.
The Denver City Council has given its approval to WorldPort, although how closely the arrangement was scrutinized is unclear. For instance, Councilman Ted Hackworth, a member of the airport committee, says he didn't realize until recently that the aviation department's "competitive" RFP process had generated only one bid.
DIA's Gingras says the lack of competitive bids may reflect early doubts about the airport, which opened sixteen months late and was hampered by a malfunctioning automated baggage system. And he insists that WorldPort is anything but a sweetheart deal for the Fulenwider group. The partners will have to work hard for their money, he says, adhering to a tight construction timetable and submitting to frequent inspections.
"They'll only earn their piece of the action through good performance," says Gingras. "The eye in the needle for them is going to be very, very tight. If they pull it all through at the end of the day, they'll be rewarded."
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