Two Port San Antonio tenants, GDC Technics and Chromalloy, announced plans this week to further expand their operations to Fort Worth and Florida, respectively.
GDC’s growth will come at the expense of its operations in San Antonio, where the company was founded as Gore Design, resulting in the loss of 162 jobs locally. It comes at a time when the former Kelly Air Force Base turned industrial/business park is aiming to grow its aerospace client and job count and address its debt as its leasing income declines.
Fort Worth City Council in February approved GDC as a new tenant at the city-owned Alliance Airport. The company, headquartered at Port San Antonio, designs and installs custom interiors for wide-body jets used by heads of state, corporations, celebrities and other high net worth individuals.
GDC’s owners had considered building a $100 million hangar and support facilities at Port San Antonio, where it employs 650 people and leases 340,000 sq. ft. But GDC officials said they could not make the needed financing work to their advantage. So now the firm is leasing 840,000 sq. ft. in the former American Airlines maintenance hangar at Alliance Airport. GDC, which signed a 25-year lease, will pay less per square foot in Fort Worth than it pays in San Antonio.
“With our success … we have outgrown our San Antonio facility, so in order to accommodate our growing backlog (of work) we had to expand our facilities,” GDC General Partner Mohammed Alzeer stated last week in a press statement. “The new (Fort Worth) facility ensures that we can execute our operations more efficiently and can support our future growth.”
According to a San Antonio Express-News article in February, Alzeer said it would have been difficult to build such a new facility at Port San Antonio without significant incentives.
In a Worker Adjustment and Retraining Notification Act letter that GDC sent to city and state officials, GDC stated it anticipates a “substantial number” of employees accepting a transfer to Fort Worth, resulting in a small number of layoffs that will occur in July.
GDC Technics, formerly Gore Design Completions, has seen steady growth since the company was sold by former CEO Katherine Gore Walters and her former husband Jerry Gore in 2013. Earlier this month, GDC won its third Boeing 787 contract for work that will begin in 2017.
Alzeer and his partners have invested $20 million in GDC since they purchased the company from the Gores for an undisclosed price. GDC is currently completing two 787s and a 777-300ER, and has a contract to refurbish a BBJ1. GDC has expanded into Europe, the Middle East and will soon have a footprint in Africa.
Jim Perschbach, the port’s executive vice president of business development, said he could not get into detail regarding any talks port officials had with GDC prior to the leasing of the Fort Worth facilities. But Perschbach said GDC, like any other business, considers a construction cost challenge. When all factors come into play – adequate space in the right location, leasing versus building a new structure – he said it is understandable to see how GDC chose to move into a cavernous, existing facility such as the American Airlines structure.
Port officials, looking for a positive, see GDC’s expansion as evidence of the quality of its San Antonio workforce.
“It’s rare for a business to move mechanics. It actually tells you something about the quality of the GDC workforce, that one community really wants you to move there from another community,” he said.
Chromalloy provides gas turbine engine service for equipment manufacturers, commercial airlines, militaries, oil and gas companies, and power companies. It has been at Port San Antonio since 1999. It currently occupies 292,000 sq. ft. of space there.
Chromalloy signed a new five-year lease in April 2014, which followed two rounds of downsizing in 2012 and 2013, and the closure of two other U.S. facilities.
Now Chromalloy is establishing a sales and warehouse facility in Fort Lauderdale to house its growing Chromalloy Material Solutions (CMS) subsidiary. CMS buys, sells and exchanges parts and materials to airlines, maintenance repair overhaul enterprises, depots and other customers.
“Chromalloy Material Solutions, our global parts and materials trading business, has moved into a new 70,000 sq. ft. facility to better serve customers,” stated President Carlo Luzzatto in a press release.
“As a material and asset provider to the global gas turbine engine industry, CMS staff and warehouse are now poised for additional growth in the expanding materials arena,” he stated.
Company officials said CMS staff and equipment had been divided among San Antonio and sites in Florida and Georgia. Consolidating “the company’s trading business at a single larger site will drive customer efficiency while offering space for future growth.”
Perschbach said the Fort Lauderdale move does not impact Chromalloy’s presence at Port San Antonio
“The operation they consolidated in Florida handles stocking and material handling rather than their plating, refurbishment, and component repair work that forms the vast bulk of what they do here,” he said.
“Some of the stocking was done here, but very little – at least as far as we know. This site was and remains one of their aviation and oil field services component repair site.”
According to Port San Antonio’s website, 97% of the port’s facilities are leased, including hangars, warehouses, workshops, offices and residential facilities, but only about 40% of the port’s available land is developed.
The port’s 2013 year-in-review lists more than 80 public and private sector customers – including the U.S. Air Force’s multiple agencies and operations – all supported by more than 13,000 employees.
Port leaders have sought to enhance the area’s rail, trucking and aerospace capabilities, and are working with the City to improve surrounding infrastructure.
The 24th Air Force and 25th Air Force at Joint Base San Antonio-Lackland with some programs at the Port are helping the city to maintain its profile as “Military City, USA” and to develop as a key hub for cybersecurity activity.
But debt and retention continue to be challenges for the Port. Last fall, a task force appointed by then-Mayor Julián Castro released a report suggesting that rents, which make up 64% of the Port’s income, must be reduced for Port San Antonio to keep competitive and retain major tenants such as Boeing and Lockheed Martin.
The report also recommended that the Port maintain its aerospace focus while lowering the facility’s operating cost for tenants who can no longer depend on Defense Department contracts.
The Port did not earn a hoped-for improved bond rating from Moody’s Investors Service earlier this month. A rating analyst said the Port would retain its Baa2 credit rating, a medium-grade score that compares unfavorably with the City of San Antonio, Bexar County, and the state of Texas.
Moody’s pointed to the port’s $65.7 million in outstanding debt, a projected revenue drop to $37.5 million for fiscal year 2014 from $42 million for 2013, and rising debt service that could balloon to $19 million this year from $7.5 million for 2013 if it is not refinanced.
In a recent press release, Moody’s stated the Baa2 rating “is based on the strength of the lease agreements with the top tenants Boeing Co. and Lockheed Martin Corp., a strong management team that is focused on future development and healthy financial operations, adequate debt service coverage, strong liquidity and low leverage.”
Last fall, Moody’s did cite renewed leases with Chromalloy and GDC Technics among the port’s current strengths. Inability to refinance the balloon payment could hurt the current rating, Moody’s said.
Perschbach, who served on the mayor’s task force, acknowledged the port must figure out how to better compete in terms of work quality and costs. The port must also further develop a multi-skilled workforce, and use the power of incumbency – presence of bigger established tenants – to its advantage, he said. Perschbach said he and his colleagues are optimistic in taking on this challenge.
“We have a lot of capabilities here. We need to stop marketing ourselves as a low-cost place to do business, and instead promote ourselves as a high quality place,” he said.
“Our hope and goal is that we will continue to expand and bolster the nose to tail maintenance capabilities that our customers here and elsewhere in San Antonio provide, Perschbach said.
“We believe that this will make the region more attractive to operators – drive more business to our local MRO employers and thus make the region more attractive to expansion.”
Perschbach did point to cybersecurity and advanced manufacturing as growing sectors that could help to diversify the port’s customer portfolio.
“We need to take advantage of what great things San Antonio already has to offer. We want to be customer-centric and community-centric,” he said.
*Featured/top image: Boeing’s operations at the Port are among few large facilities worldwide that maintain both commercial and military aircraft. Photo Courtesy Port San Antonio.
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