Officials at Los Angeles International Airport said Monday they have selected a consortium led by Realterm, the largest manager of on-airport air cargo real estate in North America, to redevelop obsolete cargo facilities across the sprawling complex into a consolidated, technically advanced cargo village that increases capacity and efficiency.
The cargo improvement project is the most ambitious of its kind ever attempted in the U.S., considering the potential scope of rehabilitation and the fact that Los Angeles is the nation’s largest traditional international gateway.
In 2022, Los Angeles International ranked as the fifth-largest in the U.S. for air cargo tonnage, processing nearly 2.7 million tons of cargo, down 7.6% from the prior year. Among conventional airports — not including the primary air hubs for parcel giants FedEx and UPS, as well as Anchorage, which mostly serves as a transhipment and refueling center for trans-Pacific traffic — LAX is the second-largest cargo airport in the U.S. after Miami.
Experts say LAX needs a major cargo upgrade to remain competitive and grow. LAX has three cargo areas with 27 buildings, totaling 2.6 million square feet, and about 3.5 million square feet of aircraft ramp area. Many of the buildings, which range from 20 to 80 years old, are at the end of their useful life and not compatible with current industry standards.
The existing layout contributes to truck traffic and complexity because logistics companies must dispatch shuttle trucks to airline warehouses scattered across airport property. Many service providers are not co-located near cargo facilities, adding to the time needed for completing tasks. Buildings are low and have structural obstacles that limit the free flow and storage of shipments.
“In addition to being the busiest passenger origination and destination airport, LAX also is a … critical hub for domestic and international commerce,” said Los Angeles World Airports Chief Executive Justin Erbacci. “This project will … allow LAX to better power the economic vitality for the city of Los Angeles and the greater Southern California region.”
LAWA issued a request for proposals for the first phase of the cargo modernization program last September. The RFP envisioned the developer signing a master lease and engaging in some form of profit sharing in exchange for the right to sublease the facilities for several decades.
Three groups submitted offers but one withdrew, according to a staff report for the airport authority’s May 18 meeting.
The consortium, named LAX Community Partners, will operate and maintain the cargo complex, in addition to designing, building and financing it. JLC Infrastructure, a joint venture between Magic Johnson Enterprises and Loop Capital Partners that invests in public-private infrastructure projects, is an equity partner along with the airport arm of Realterm, a transportation-focused investment manager that also owns and manages transload trucking facilities and warehouses for final-mile delivery.
Magic Johnson Enterprises is a services company founded by former professional basketball star Earvin “Magic” Johnson that focuses on underserved urban communities. Johnson played for the Los Angeles Lakers and is part owner of the Los Angeles Dodgers baseball team.
Realterm recently completed the third, and final, phase of a large cargo expansion project at Chicago O’Hare International Airport
The plan calls for a two-story facility with airside access covering 1.6 million square feet of total floor space, with automated material handling equipment for improved cargo throughput. Also included are a truck staging lot and off-site cargo support facilities where shipments can be trucked under secure conditions for deconsolidation and other processing. A truck management system will regulate the arrival of delivery vehicles to minimize queueing, congestion and emissions. The off-site area will have food services, a gym, training rooms and other conveniences to enhance the cargo community work environment, according to the presentation.
The truck staging system includes automatic license plate readers and artificial intelligence to track processing times and facilitate more efficient operations.
“Our revolutionary development at LAX would be the first of its kind in cargo history and would become the leading example for all future air cargo facilities,” said David Rose, managing director of airport infrastructure at Realterm, in the announcement.
The specific cost of the multibillion-dollar project is unknown. Officials say more information about the overall schedule and budget will be determined once the pre-development phase is completed and a final decision to proceed is made.
The LAWA board on May 18 approved a three-year pre-development agreement with LAX Community Partners to shepherd the project through the environmental approval process and prepare a financial plan for phase one of the cargo redevelopment. It also appropriated $8.2 million to initiate planning and design.
Environmental review for the project, estimated to cost $25 million, is scheduled to start in the third quarter of 2024 and last at least two years. Construction of the first phase is likely to last into the next decade.
LAWA postponed the cargo overhaul three years ago because it had its hands full managing the start of an $18 billion project that includes modernizing passenger terminals, upgrading access roads and building an elevated people-mover train. The COVID crisis pushed back the effort by another year or more.
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