Airport deal could sell Gloucestershire short, warns business
Could the deal to sell Gloucestershire Airport, hailed as a saviour of its future and the businesses on it, be about to deliver the opposite - and cost the taxpayer hundreds of millions of pounds?
Dear readers,
After an extended August break (enforced, I might add, and not a holiday) this is the first publication for three weeks. My apologies for the hiatus.
What we have below is a shortened edition that goes big on the latest chapter of the sale of Gloucestershire Airport.
You have to feel for the businesses, big and small, that have invested so much in the site and no longer know whether they are coming or going.
And, dare I say it, you might even feel for Horizon Aero Group, which has a number of points levelled against it in the article, but chose instead to send a statement explaining it felt unable to address them due to the ongoing due diligence that could see it become the new owner of the airport.
Is the land really worth a potentially astonishing £300 million to £400 million plus, if redeveloped for houses? We’ve been unable to establish this. But the points made in the story below are difficult to dismiss even with a lack of information - that if Horizon does manage to secure the airport for the relatively paltry £25 million asking price and then goes on to develop the site it will become very rich indeed.
Just how the councils involved, the taxpayers and the businesses would feel about that remains to be seen, as does how it will make Gloucestershire look to anyone watching.
Oh, before I forget. We’re a reader supported publication. As we chase our 1,000th subscriber you’ll find an offer below we hope tempt those of you who aren’t yet officially part of our members’ club to support us!
Good to be back with you again. Have a great week.
Best regards,
Andrew Merrell (editor).
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Airport deal could sell Gloucestershire short, warns business
Could the deal to sell Gloucestershire Airport, hailed as a saviour of its future and the businesses on it, be about to deliver the opposite - and cost the taxpayer hundreds of millions of pounds?
It is a deal championed as a win-win by the two council’s that own Gloucestershire Airport, but it’s the local authorities now being accused of risking short-changing the county out of hundreds of millions of pounds.
A business based at the airport, which says it speaks on behalf of numerous companies at the 375-acre Staverton site, says there are major question marks about the firm in line to take ownership of the airport and its associated operations.
Gloucester City Council and Cheltenham Borough Council put the land and business up for sale through Savills last year and announced in June they had identified a preferred bidder, suggesting they had secured great than the £25 million asking price and the airport’s future.
Horizon Aero Group was revealed as the name in the frame and a period of due diligence began ahead of any final handshake expected this year, but RGV Aviation Limited has written to the councils questioning the credibility of the bidder and its motivates.
RGV Aviation says it has so little confidence in the process it has shelved a £2.5 million investment to expand its own business at the site, which sits between Gloucester and Cheltenham.
Stuart Vincent, managing director of the family-run firm, which has operated from Gloucestershire Airport for more than half a century, said the reply from the councils had done little to reassure him or other businesses.
Mr Vincent said: “Ultimately we want the site to remain as an airport, but we do not feel confident with the current preferred bidder that will be the case. The business underwriting Horizon Aero Group is based abroad in India.
“If the airport is sold for redevelopment some suggestions are it could be worth several hundred million pounds – and any profits would go out of the county, if not abroad.”
He is not the first to suggest the value of the land changes significantly, if looked at as a development opportunity.
In June opposition Gloucester city councillor Alastair Chambers said he too believed the site would be worth £400 million, and also questioned whether this could be the prize Horizon Aero Group was really after.
Vincent added: “We want them to keep the airport open, of course. But it would be better for the taxpayers of Gloucestershire if the local authorities closed the airport, sold the land and used those funds to benefit Gloucestershire rather than let a private company walk away with the money.
“It is money that could wipe away much of the considerable deficits of both of the councils.
“Even if the councils sold off part of the land that would be a better deal for Gloucestershire. As long as they kept runway 09/27 it could still operate as an airport.”
He added: “We know other bidders experienced at running airports and serious about keeping Gloucestershire Airport open were in the mix, but their bids were dismissed. They were significantly less because they were realistic about the amount of investment needed.”
The airport is known to be several million pounds in debt, partly a result of money borrowed from the council to resurface its runway.
In a letter to the councils Mr Vincent said: “We feel compelled to formally raise our serious concerns shared by many other tenants and members of the airport’s senior leadership team regarding the credibility and long-term intentions of the current ‘preferred bidder’ for Gloucestershire Airport.
“To date, there appears to have been minimal due diligence conducted on the financial and operational suitability of the bidder, aside from an assessment of land value.
“It is particularly concerning that the ‘preferred bidder’ has already hosted numerous external investors on site, seemingly with the intention of parcelling and selling off parts of the airport land. The term “land banking” has even been used directly.”
‘Land banking’ referring to the practice of acquiring and holding land with the intention of developing it or selling it for profit at a future date.
Vincent added: “It is our understanding that Savills alone carried out the due diligence process. We were assured that the airport would not simply be sold to the highest bidder. However, the situation suggests otherwise.
“From our own internal investigations, we have identified several red flags regarding the operational experience of the Horizon Aero Group.
“Evidence indicates that key individuals involved, including Soma Pemmireddy, who was managing meet-and-greet parking at Stansted Airport just two years ago, have no direct experience in the operation or ownership of an airport.
“Furthermore, the proposed consortium includes an Indian commercial property developer (Vensa Infrastructure) and a UK-based compliance and assurance consultancy with net assets of only £4,062, both of which appear to have no proven experience in aviation.
“These entities have formed a newly created umbrella company, raising further questions about their long-term commitment and capability.
“Considering the estimated land value of the site is approximately £400 million, this decision to proceed with a sale reportedly valued at £30 million is both alarming and difficult to justify, particularly when the proceeds could have been reinvested into the local community rather than a land banking strategy by the ‘preferred bidder’.”
Darren Lewington, a former operations director for Gloucestershire Airport, said he shared the concerns raised by RGV and the airport community, describing himself as “seriously concerned about the long term future of the airport”.
‘As an airport tenant and private pilot, it’s deeply saddening for me to see how the airport has alienated its tenants and clients.
“Its reputation in the industry has deteriorated significantly and a series of poor decisions have led it to the situation it finds itself in now, unable to repay the loans to its shareholders.
“Nevertheless, the councils’ selling should be a positive step, taking off the bureaucratic shackles that constrained it so heavily in the past.
“The selection of this preferred bidder, however, with no apparent experience of running a UK airport - backed by a property developer is extremely concerning.”
In a letter replying to Vincent the councils said their corporate advisers, Savills UK, and Cheltenham-based BPE Solicitors LLP and Hazlewoods accountants, had “undertaken considerable work to assess the suitability of the bidders for the airport”
“As you have referenced, Horizon Aero Group is a special purpose vehicle set up in January this year by the principals behind the build for the purpose of acquiring Gloucestershire Airport. We are satisfied this is common practice for such acquisitions,” said the statement.
“The size and combined experience of Horizon Aero Group, along with the amount of due diligence that they undertook prior to bidding, was one of the factors behind their selection as the preferred bidder.
“The proposed purchaser is not only seeking to acquire the airport, but also the shareholding in Gloucestershire Airport Limited, which comes with a team of skilled operational staff, who between them have many years of experience of running the airport.
“As part of the next stages, further appropriate due diligence will be undertaken by both parties prior to concluding a sale.
“We remain very much of the view that the proposals set out by Horizon Aero Group represent the best and most realistic opportunity to secure the future of Gloucestershire Airport.”
In a separate statement to The Raikes Journal from the combined local authorities, the councils said: “The terms of the sale will include provisions to ensure ongoing collaboration post-completion and to safeguard the interests of all stakeholders.”
A spokesman for Horizon Aero Group sent The Raikes Journal the following statement: “Horizon Aero Group is honoured to have been selected as the preferred bidder for Gloucestershire Airport.
“Our commitment is to preserve the airport’s aviation heritage, invest in its infrastructure, modernise facilities, and ensure it evolves into a key driver of economic growth for the region.
“As you may be aware, we are currently in an exclusivity period with due diligence in progress. Given the confidential and commercially sensitive nature of this stage, we are unable to provide further comment at present.”