           In the United States Court of Federal Claims
                                           No. 08-536L
                                      (Filed: April 19, 2016)

*************************************
LOVE TERMINAL PARTNERS et al.,      *
                                    *                      Fifth Amendment Taking; Lucas
                  Plaintiffs,       *                      Categorical Taking; Regulatory
                                    *                      Taking; Penn Central Factors; Just
v.                            *                            Compensation; Highest and Best
                                    *                      Use of Property; Posttrial Award
THE UNITED STATES,                  *
                                    *
                  Defendant.        *
*************************************

Roger J. Marzulla, Washington, DC, for plaintiffs.

Joshua P. Wilson, United States Department of Justice, Washington, DC, for defendant.

                                    OPINION AND ORDER

SWEENEY, Judge

        Plaintiffs Love Terminal Partners, L.P. (“Love Terminal Partners”) and Virginia
Aerospace, LLC (“Virginia Aerospace”) are leaseholders of property at Dallas Love Field
Airport (“Love Field”), located in Dallas, Texas. In their complaint, filed in the United States
Court of Federal Claims (“Court of Federal Claims”) on July 23, 2008, plaintiffs allege that the
federal government, through the enactment of the Wright Amendment Reform Act of 2006
(“WARA”), prohibited the use of their property, thereby destroying all economic value or benefit
of their leasehold and effecting a taking without just compensation, in contravention of the Fifth
Amendment to the United States Constitution. Plaintiffs seek compensation for the taking as
well as interest from the date of the taking, attorneys’ fees, appraiser and expert witness fees, and
the costs and expenses of litigation.

        In a prior decision issued on February 11, 2011, the court denied defendant’s motion to
dismiss and granted plaintiffs’ motion for partial summary judgment. In its opinion, the court
held the following:

               Based upon its analysis of the WARA, the court holds that the
               statute incorporated the Contract [among local government entities
               and two air carriers] into federal law, thereby mandating that
               Dallas fulfill the obligations to which it agreed on July 11, 2006,
               including acquisition and demolition of the Lemmon Avenue
               Terminal. This federal mandate imposed upon Dallas enabled it to
               satisfy, in part, its obligation to reduce the number of gates at Love
                Field for passenger air service and to manage the airport in
                accordance with the rights and obligations set forth in the Contract.
                Although Dallas was required to act by the authority of the federal
                government, it is the latter party that is responsible for any taking
                that stems from Dallas’s conduct.

Love Terminal Partners, L.P. v. United States, 97 Fed. Cl. 355, 424 (2011). The court further
concluded that through the enactment of the WARA, defendant was responsible for the
demolition of the six-gate Lemmon Avenue terminal, resulting in a physical taking of Love
Terminal Partners’ property:

                Although the WARA designated Dallas as the party responsible for
                acquiring and demolishing the Lemmon Avenue Terminal gates as
                part of a broader commitment to modernize Love Field and to
                facilitate the end of the Wright Amendment, the federal
                government sanctioned such actions. Accordingly, the court
                concludes that the WARA effected a per se, physical taking of
                plaintiffs’ property for which the government is liable to pay just
                compensation, and plaintiffs are entitled to partial summary
                judgment based upon their physical taking theory.

Id. at 424-25. The court left for trial the following two issues: (1) whether the federal government
took the remainder of the leasehold without paying just compensation, and if so, what amount was
due; and (2) the amount of just compensation plaintiffs were due for the per se physical taking of
the six-gate Lemmon Avenue terminal.

        In October 2012, the court conducted a seven-day trial. Plaintiffs offered the following
six fact witnesses: (1) Trusten A. McArtor; (2) Donald J. McNamara; (3) Alan R. Naul;
(4) Thomas G. Plaskett; (5) Kurt C. Read; and (6) William T. Cavanaugh, as well as the
following five expert witnesses: (1) David E. Anderson; (2) Allen E. Cullum; 1 (3) Robert A.
Hazel; (4) Michael W. Massey; and (5) Deborah Meehan. Defendant offered the following
seven fact witnesses: (1) Grant S. Grayson; (2) Neal Sleeper; (3) Diana Moog; (4) Thomas P.
Poole; (5) Kenneth Gwyn; (6) Robert W. Montgomery; and (7) Michael Anastas, as well as the
following four expert witnesses: (1) Daniel Wetzel; (2) Rodney Clark; (3) William T. Reed; and
(4) Winthrop Perkins.

        After the conclusion of trial, and due to highly unusual and unforeseen circumstances
involving Mr. Anderson, the court reopened the record to allow plaintiffs to submit the
supplemental expert testimony of James F. Miller. Since Mr. Miller was brought in to review
Mr. Anderson’s report, neither Mr. Anderson’s report nor his trial testimony was stricken from
the record. After receiving Mr. Miller’s testimony, the court again closed the record, directed the
parties to submit posttrial briefs, and heard closing arguments.


       1
           Mr. Cullum also testified as a fact witness.

                                                  2
        Upon consideration of the testimony and evidence adduced at trial and the parties’
posttrial memoranda, the court concludes that there was a categorical taking of the entire
leasehold, and that plaintiffs are entitled to just compensation in the amount of $133,500,000.
With respect to the separate value of the six-gate Lemmon Avenue terminal physically taken by
the government, the court renders no opinion. Rather, because plaintiffs’ expert testified as to
the value of the terminal as well as the adjacent parking garage, the court concludes that the
separate value of the 9.3-acre property amounts to $21,165,000.

          Due to the length of this opinion, the court provides the following table of contents:

BACKGROUND .............................................................................................................................4
I.   Plaintiffs: Corporate Structure ............................................................................................4
II.  Love Field: An Overview ...................................................................................................5
     A.      Pre-1979 ...................................................................................................................5
     B.      1979: The Wright Amendment ...............................................................................6
     C.      1997: The Shelby Amendment ..............................................................................6
     D.      2006: The WARA ...................................................................................................6
III. The Leasehold: An Overview of the Master Lease and Sublease ......................................9
     A.      The Master Lease .....................................................................................................9
     B.      The Sublease ..........................................................................................................11
IV.  Hampstead..........................................................................................................................12
     A.      Hampstead’s Business Activities Generally ..........................................................12
     B.      Hampstead’s Investment in Legend .......................................................................12
     C.      Hampstead’s Construction of the Lemmon Avenue Terminal and the Master
             Plan ........................................................................................................................16
     D.      Legend’s Bankruptcy and Hampstead’s Subsequent Management of Operations at
             Love Field .............................................................................................................16
     E.      Hampstead’s Acquisition of the Master Lease ......................................................17
     F.      Hampstead’s Attempts to Amend the Leases and Disagreements With Dallas Over
             the Terms of the Leases .........................................................................................18
     G.      Hampstead’s Income From Subtenants, Valuation of the Leases, and Attempts to
             Sell the Leases........................................................................................................20
     H.      Hampstead’s Cessation of Operations at Love Field .............................................21
     I.      Hampstead’s Plans for a Sixteen-Gate Terminal ...................................................22
THE GOVERNMENT’S LIABILITY FOR FIFTH AMENDMENT TAKINGS ........................22
I.   Legal Standards ..................................................................................................................22
     A.      Fifth Amendment Takings Generally ....................................................................22
     B.      Two Types of Takings ...........................................................................................23
             1.        Physical Takings ........................................................................................24
             2.        Regulatory Takings ....................................................................................24
                       a.          Categorical Takings: The Lucas Analysis ....................................25
                       b.          NonCategorical Takings: The Penn Central Factors ....................26
II.  Analysis..............................................................................................................................27
     A.      Plaintiffs Have Established a Lucas Categorical Taking of Their Leasehold .......27
             1.        Plaintiffs Possessed Valid Property Interests at the Time of the Taking ...27


                                                                     3
                     2.
                     The WARA Destroyed All Economically Beneficial and Productive Use
                     of the Subject Property...............................................................................28
     B.     In the Alternative, Plaintiffs Have Established a Taking of Their Property Under
            the NonCategorical Penn Central Factors ..............................................................47
            1.       The Economic Impact of the WARA Was Absolute; No Economic Value
                     Remained After Its Passage .......................................................................47
            2.       The WARA Destroyed Plaintiffs’ Distinct Investment-Backed
                     Expectations ...............................................................................................49
            3.       The WARA Destroyed Plaintiffs’ Property Rights for the Sole Benefit of
                     the Signatories to the Five-Party Agreement .............................................55
RELIEF TO BE AWARDED TO PLAINTIFFS ..........................................................................57
I.   Just Compensation .............................................................................................................57
     A.     Fair Market Value ..................................................................................................58
            1.       Legal Standard ...........................................................................................58
            2.       Analysis......................................................................................................59
                     a.          The Entire Leasehold .....................................................................60
                     b.          The 9.3-Acre Property ...................................................................66
     B.     Interest....................................................................................................................67
II.  Attorneys’ Fees and Costs .................................................................................................70
CONCLUSION ..............................................................................................................................70

       The following section contains the court’s findings of fact as required by Rule 52 of the
Rules of this court. 2 Other findings of fact required by the rule are found in the section
containing the court’s analysis of the government’s takings liability.

                                                        BACKGROUND

I.        Plaintiffs: Corporate Structure

         Love Terminal Partners “is a limited partnership organized under the laws of the state of
Delaware with its principal place of business in Dallas, Texas.” Jt. Stip. ¶ 1. Virginia Aerospace
“is a limited liability corporation organized under the laws of the Commonwealth of Virginia
with its principal place of business in Dallas, Texas.” Id. ¶ 2. Both plaintiffs are controlled by
entities wholly owned by the Hampstead Group (“Hampstead”). Id. ¶ 3. Specifically, both
plaintiffs are wholly owned by Love Equity Group, which, in turn, is owned by Love Equity
Partners II and Love Equity Partners III. Id. Love Equity Partners II is owned by a group of
institutional investors through Hampstead Investment Partners II Funding Corporation. Id. Love
Equity Partners III is owned by Hampstead Investment Partners III, L.P. Id.



          2
          Citations in the “BACKGROUND” section are to information in the parties’ September
25, 2012 Joint Stipulation of Facts (“Jt. Stip.”) and evidence from the trial, to include both
exhibits and testimony. Sources of information previously cited to in the court’s February 11,
2011 opinion have not been identified herein unless to denote the source of a direct quote.

                                                                    4
II.    Love Field: An Overview

       A.      Pre-1979

        In 1917, the City of Dallas (“Dallas”) Chamber of Commerce purchased the land that
now constitutes Love Field and developed it to support the aviation industry. Following World
War I, the Dallas Chamber of Commerce developed Love Field into an aviation-oriented
industrial park and, in 1927, sold Love Field to Dallas. Love Field then began servicing Dallas
as its municipal airport.

        During the 1950s and early 1960s, the cities of Dallas and Fort Worth, which are
separated by approximately thirty miles, operated competing airports. In 1964, the Civil
Aeronautics Board (“CAB”), the predecessor to the United States Department of Transportation
(“DOT”), determined that the competition between the two cities’ airports was harmful and
ordered Dallas and Fort Worth to reach an agreement designating one airport through which
CAB-regulated carriers would serve both communities. The cities were unable to designate one
of the existing airports to serve the region. Instead, they agreed to construct a new airport,
Dallas/Fort Worth International Airport (“DFW”), which would be located halfway between
Dallas and Fort Worth. In 1968, the cities adopted a Regional Airport Concurrent Bond
Ordinance (“1968 Bond Ordinance”), which provided that both cities would take all necessary
steps to provide for the orderly and efficient phase-out of operations at Love Field and the
transfer of services to DFW.

         At the time, eight air carriers that serviced the Dallas and Fort Worth communities agreed
to transfer their operations to DFW. 3 Southwest Airlines Company (“Southwest”), however,
chose to remain at Love Field. Southwest’s refusal to transfer its operations to DFW spawned
litigation between Southwest and the cities; the cities argued that permitting Southwest to
operate at Love Field would financially threaten DFW. In 1973, the United States District Court
for the Northern District of Texas ruled that Dallas and Fort Worth could not lawfully exclude
Southwest from Love Field. As a result, Dallas, Fort Worth, and the DFW Board could not
consolidate passenger service at DFW as envisioned by the 1968 Bond Ordinance. Nevertheless,
in 1974, DFW opened for commercial air service.

         In the meantime, Love Field continued to be fully operational. Commercial airlines
operated out of a main terminal owned by Dallas. Adjacent to the main terminal was automobile
parking. In addition, the airport also allowed general aviation flights for private pilots, charter
flights, and helicopters.


       3
          The eight air carriers were: (1) American Airlines, Inc. (“American”); (2) Braniff
Airways, Inc. (“Braniff”); (3) Continental Airlines, Inc.; (4) Delta Air Lines, Inc. (“Delta”); (5)
Eastern Air Lines, Inc.; (6) Frontier Airlines, Inc.; (7) Ozark Air Lines, Inc.; and (8) Texas
International Airlines, Inc. Each air carrier signed a letter agreement and then executed a use
agreement with the DFW Airport Board (“DFW Board”) in which it agreed to relocate its
services to DFW in conformity with the 1968 Bond Ordinance.

                                                  5
       B.      1979: The Wright Amendment

        In 1978, in an attempt to foster competition, Congress enacted the Airline Deregulation
Act of 1978. However, the controversy over Love Field remained. Therefore, to end the
“continuous disagreement, frequent litigation, and constant uncertainty” associated with Love
Field, Congress proposed an amendment to the International Air Transportation Competition Act
of 1979. The legislation, which had the backing of Dallas and Fort Worth, was intended to
protect the economic vitality of DFW by prohibiting interstate commercial air service from Love
Field. Ultimately, a compromise agreement was reached; the Wright Amendment, enacted as
section 29 of the International Air Transportation Competition Act of 1979, authorized flights
from Love Field to locations within Texas and the four contiguous states (Arkansas, Louisiana,
New Mexico, and Oklahoma); and limited interstate air transportation provided by commuter
airlines to aircraft with a capacity of fifty-six or fewer passengers.

       C.      1997: The Shelby Amendment

         In 1996, Legend Airlines, Inc. (“Legend”) sought to provide long-haul air service to and
from Love Field using airplanes configured to comply with the Wright Amendment’s fifty-six-
seat limitation. The DOT’s Office of General Counsel, however, determined that the Wright
Amendment’s fifty-six-seat exception applied only to airplanes that could hold no more than
fifty-six passengers, and not to larger airplanes, which in their normal configuration might seat
more than fifty-six passengers. In 1997, Congress responded to this determination by enacting
the Shelby Amendment as part of the Department of Transportation and Related Agencies
Appropriations Act of 1998, which clarified that the phrase “passenger capacity of 56 passengers
or less” included any aircraft of any size, except aircraft exceeding gross aircraft weight of
300,000 pounds, reconfigured to accommodate fifty-six or fewer passengers. In other words, the
Shelby Amendment permitted longer-haul flights on larger airplanes so long as the airplanes
were configured to accommodate fifty-six or fewer passengers. The Shelby Amendment also
added Alabama, Kansas, and Mississippi to the list of states that airlines could serve directly
from Love Field.

        After the enactment of the Shelby Amendment, Southwest began offering flights from
Love Field to Mississippi and Alabama, and Legend announced plans to offer long-haul service
to states outside of the Love Field service area using reconfigured aircraft. Shortly thereafter,
however, Fort Worth and American sought to enjoin air service pursuant to the provisions of the
Shelby Amendment. As a result of ensuing litigation, Legend was precluded from offering
service from Love Field until 1999.

       D.      2006: The WARA

        In late 2004, Southwest initiated a campaign to repeal the Wright Amendment: the
“Wright is Wrong” campaign. In response, the Senate Committee on Commerce, Science, and
Transportation conducted a hearing, after which Missouri Senator Kit Bond lobbied for through-
ticketing to states outside of the Love Field service area. Ultimately, Congress added only



                                                6
Missouri to the list of Wright Amendment-exempted states. Shortly thereafter, American opened
additional ticket counters and gates at Love Field.

       Two years later, several bills were introduced in Congress to repeal or modify the Wright
Amendment. While Southwest advocated for a complete repeal of the Wright Amendment,
American lobbied for a continuation of the Wright Amendment restrictions. Resolution of the
issue was reached in 2006 with the enactment of the WARA, which codified the so-called “Five-
Party Agreement,” an agreement among Dallas, Fort Worth, the DFW Airport Authority,
American, and Southwest to restrict flight operations at Love Field. The signatories to the
agreement described its terms in a joint statement issued on June 16, 2006, which this court
summarized in its previous opinion:

               Among other provisions, the Joint Statement indicated that the
               signatories agreed that international commercial passenger service
               would be limited exclusively to DFW, and “[t]hrough ticketing to
               or from a destination beyond the 50 United States and the District
               of Columbia [would] be prohibited from Dallas Love Field.” The
               Joint Statement signatories sought “to eliminate all the remaining
               restrictions on service from [Love Field] after eight years from the
               enactment of legislation,” and to reduce “as soon as practicable”
               the number of gates available for passenger air service at Love
               Field from thirty-two to twenty. Dallas agreed to acquire “the
               portions of the lease on the Lemmon Avenue facility[,] up to and
               including condemnation, necessary to fulfill the obligations under
               this agreement” and to “demoli[sh] . . . the Legend gates
               immediately upon acquisition of the lease to ensure the facility can
               never again be used for passenger service.” The signatories also
               agreed that the Joint Statement was predicated on Congress
               enacting legislation to implement the terms of the agreement.

Love Terminal Partners, L.P., 97 Fed. Cl. at 366-67 (citations omitted); see also Tr. 2044-45
(Montgomery).

        Enacted on October 13, 2006, the WARA expanded service at Love Field by permitting
domestic and foreign air carriers to “offer for sale and provide through service and ticketing to or
from Love Field, Texas, and any United States or foreign destination through any point within
Texas, New Mexico, Oklahoma, Kansas, Arkansas, Louisiana, Mississippi, Missouri, or
Alabama.” Pub. L. No. 109-352, § 2(a), 120 Stat. 2011, 2011 (2006). The WARA also provided
for the complete repeal of the Wright Amendment after a period of eight years.

       In addition, the WARA specifically addressed the future of the gates at Love Field:

               (a) IN GENERAL. – The city of Dallas, Texas, shall reduce as
               soon as practicable, the number of gates available for passenger air
               service at Love Field to no more than 20 gates. Thereafter, the


                                                 7
                number of gates available for such service shall not exceed a
                maximum of 20 gates. The city of Dallas, pursuant to its authority
                to operate and regulate the airport as granted under chapter 22 of
                the Texas Transportation Code and this Act, shall determine the
                allocation of leased gates and manage Love Field in accordance
                with contractual rights and obligations existing as of the effective
                date of this Act for certificated air carriers providing scheduled
                passenger service at Love Field on July 11, 2006. To
                accommodate new entrant air carriers, the city of Dallas shall
                honor the scarce resource provision of the existing Love Field
                leases.

                (b) REMOVAL OF GATES AT LOVE FIELD. – No Federal
                funds or passenger facility charges may be used to remove gates at
                the Lemmon Avenue facility, Love Field, in reducing the number
                of gates as required under this Act, but Federal funds or passenger
                facility charges may be used for other airport facilities under
                chapter 471 of title 49, United States Code. 4

Id. § 5, 120 Stat. at 2012 (footnote added).

        Finally, the WARA addressed general aviation flights from Love Field:

                Nothing in this Act shall affect . . . flights to or from Love Field by
                general aviation aircraft for air taxi service, private or sport flying,
                aerial photography, crop dusting, corporate aviation, medical
                evacuation, flight training, police or fire fighting, and similar
                general aviation purposes, or by aircraft operated by any agency of
                the Federal Government or by any air carrier under contract to any
                agency of the Federal Government.

Id., § 5(c), 120 Stat. at 2012.

       Following the enactment of the WARA, Dallas began a major renovation of the main
midfield terminal at Love Field, to include the addition of four new gates. Tr. 2040
(Montgomery). The budget for this renovation project, which was ongoing at the time of trial,
was $519 million. Id. at 2044. Southwest, which was headquartered at Love Field, id. at 2008,
oversaw the project, id. at 2040-41. To support the cost of expanding the terminal, Southwest
issued $350 million in revenue bonds. Id. By 2007, passenger demand at Love Field had risen
by twenty percent. Id. at 2191 (Reed).



        4
         Chapter 471 of title 49 of the United States Code governs airport development. See 49
U.S.C. §§ 47101-47175 (2006).

                                                   8
III.   The Leasehold: An Overview of the Master Lease and Sublease

       A.     The Master Lease

       On June 10, 1955, Dallas executed a long-term Master Lease with Braniff, granting
Braniff the exclusive use of approximately thirty-six acres at Love Field, together with the
nonexclusive right to use runways, taxiways, and other airport facilities. Jt. Stip. ¶ 4. The
Master Lease was amended and supplemented five times: (1) August 1956, (2) July 1996, (3)
November 1983, (4) March 1992, and (5) September 1993. Id. ¶ 5. The area covered by the
Master Lease was eventually reduced to 26.8 acres. Id. ¶ 6.

       Article VIII of the Master Lease, as amended in November 1983, governs the lessee’s
permissive uses of the property:

                                        ARTICLE VIII

                       LESSEE’S USE OF PREMISES AND AIRPORT

              Lessor hereby grants Lessee the exclusive use of the Premises and
              the non-exclusive use of the Airport for any lawful purpose,
              subject to the following:

                                              ***

              (2) The rights hereinafter granted Lessee for the installation of
              facilities for fuel and communications on any location other than
              the Premises shall be subject to the prior approval of Lessor’s City
              Manager of the plans and specifications therefor, and shall be at a
              reasonable rate of ground rental for any tract or tracts of ground in
              addition to the Premises on which such equipment or facilities may
              be installed. Lessee’s rights shall not include the right to any
              exclusive space within any terminal or passenger station building
              which Lessor may in the future construct to serve the Airport
              unless Lessee by supplemental agreement with Lessor agrees to
              become a tenant and to pay such reasonable rental rates for such
              building tenancy as maybe established by mutual agreement.
              Lessee shall in its use of the Airport observe any reasonable safety
              regulations promulgated by Lessor.

                                              ***

              (3) Lessee’s primary business will be aviation-related and include
              broad relationships and contracts with the Government, other
              airlines and the general public, such as the lease, interchange,
              storage, sale and joint use of equipment, parts, facilities and


                                               9
             functions, the consolidation of activities, and the like. Permitted
             activities shall include, without limitation, the following:

             (a) On the Premises, the overhaul, repair, modification,
             manufacture, assembly, testing, fueling, use, and transit and
             permanent storage of engines, parts, accessories, electronic and
             other equipment and aircraft and such similar or related activities
             for which Lessee’s equipment or facilities might otherwise be
             suitable or appropriate: operation of corporate headquarters and of
             hangar, reservation center, office, shop and employee facilities for
             the Lessee and its affiliates, including the parking of automobiles
             and equipment; the operation of restaurant, cafeteria, club and
             general recreational facilities for Lessee’s employees and guests;
             and the operation of inflight food preparation facilities. However,
             Lessee shall not use the Premises as a passenger terminal area for
             regularly scheduled air carriers employing aircraft with capacity in
             excess of fifty passengers per aircraft.

             (b) On the Airport, the operation of a transportation system by
             aircraft for the carriage of persons, property, cargo and mail,
             including the landing, taking-off, parking, loading and unloading
             of aircraft and other equipment and the routine repairing,
             conditions, servicing, parking and storing thereof.

             (c) On both the Airport and the Premises, training and education
             in all phases of aeronautics; full right to install adequate storage
             facilities for gasoline, fuel, lubricating oil, greases, food and other
             materials and supplies, together with necessary pipes, pumps,
             motors, filters and other appurtenances incidental to the use
             thereof; the installation, maintenance, and operation of radio,
             communications, meteorological and aerial navigation equipment
             and facilities; the sale, disposal or exchange of Lessee’s aircraft,
             engines, accessories, gasoline, oil, greases, lubricants and other
             fuel, materials, supplies and equipment (limited to articles and
             goods used by or bought for use by Lessee); the purchase at the
             Airport or elsewhere, from any person or company of Lessee’s
             choice, of requirements of gasoline, fuel, lubricating oil, greases,
             food, and all other materials and supplies, together with the related
             services by lessee and its suppliers of aircraft and other equipment
             by truck or otherwise.

JX 1 (LTP-000828-29).




                                               10
         After Braniff went bankrupt, Dalfort Corporation (“Dalfort”) acquired the Master Lease.
Jt. Stip. ¶ 7. On March 30, 1992, Dallas and Dalfort executed the “Fourth Supplement to Lease
and Agreement” (“Fourth Supplement”), amending the terms of the Master Lease:

              Lessor leases the Premises, including the Base Facilities, to Lessee
              for a primary term of twenty five years beginning on October 1,
              1998 and ending on September 30, 2023, expressly conditioned
              upon the performance by Lessee of the conditions, terms and
              provisions in the Lease. Lessee has no options to extend the
              Primary Term of the Lease; the Lease and leasehold estate shall
              expire on September 30, 2023 unless sooner terminated in
              accordance with the terms of the Lease. Nothing in this Paragraph
              shall preclude Lessee and Lessor from entering into a new lease
              covering the Premises and Base Facilities at Love Field, following
              expiration of the Lease.

JX 1 (LTP-000785). The Fourth Supplement also included a provision that governed the sharing
of revenue from subleases:

              If at any time following execution of the Fourth Supplement,
              Lessee subleases in whole or in part, the Premises or Base
              Facilities, Lessee shall pay to Lessor a sum equal to fifty percent
              (50%) of the rental collection by Lessee from Sublessee in excess
              of the rental paid by Lessee to Lessor for said subleased Premises
              or Base Facilities, in addition to the monthly rental owed Lessor by
              lessee for the Premises or Base Facilities subleased. Should
              Lessee sublease the Premises or Base Facilities for less than it pays
              in monthly rental to Lessor, Lessee’s rental shall not be reduced or
              abated and lessee shall continue to pay Lessor the full rental set
              forth in the Lease.

Id. (LTP-000793).

        On December 31, 1993, Dalfort assigned the Master Lease to Astrea Aviation Services,
Inc. (“Astrea”). Jt. Stip. ¶ 7. On December 30, 1997, Astrea assigned the Master Lease to
Dalfort Aerospace, L.P. (“Dalfort Aerospace”). Id. On December 12, 2003, Dalfort Aerospace
assigned the Master Lease to Virginia Aerospace. Id. ¶ 9.

       B.     The Sublease

        On December 30, 1997, while Dalfort Aerospace was still a signatory to the Master
Lease, it subleased 9.3 acres to the Asworth Corporation (“Asworth”). Id. ¶ 8. In March 1998,
Asworth subleased the same 9.3 acres to Legend. Id. On August 11, 1999, Legend, in turn,
assigned the Sublease to Love Terminal Partners. Id. In March 2000, Asworth assigned its
interest in the Sublease to Love Terminal Partners. Id.


                                               11
IV.    Hampstead

       As noted above, both plaintiffs are controlled by entities wholly owned by Hampstead.
Thus, this court’s review of plaintiffs’ acquisition of the leases necessarily involves a discussion
of Hampstead’s involvement in the development and management of Love Field, prefaced by a
description of Hampstead’s business activities.

       A.      Hampstead’s Business Activities Generally

        In August 1988, Mr. McNamara founded Hampstead. Tr. 50 (McNamara). As a private
equity firm, Hampstead made investments in real estate with funds raised from different sources,
including the endowments of Yale, Princeton, and Stanford Universities. Id. at 51-54. Notably,
these investments had a business or operating component to them. Id. at 57. In other words,
Hampstead’s investments often included the option of owning part of the operating company. Id.
at 57-58.

         The majority of Hampstead’s investments were in lodging and senior housing. Id. at 184
(Read). Hampstead also invested in real estate financing and commercial office space. Id. at
185. Before making any such investments, Hampstead undertook substantial due diligence
efforts, which could take weeks or months. Id. at 60-61 (McNamara). Mr. Read, a Hampstead
partner, was responsible for leading the teams that performed the due diligence. Id. at 142
(Read). That due diligence included, for example, determining the location of the property and
determining whether the property was zoned for the intended use. Id. at 143.

        By in large, Hampstead’s investments were successful. Id. at 63-64 (McNamara) (noting
that one investment from 1990 took ten years to become profitable and is likely the company’s
most profitable investment). However, Hampstead also made some unsuccessful investments.
Id. at 185-87 (Read) (noting Hampstead’s failed investments in Malibu Entertainment and
Houlihan Restaurants).

       B.      Hampstead’s Investment in Legend

        In 1999, Hampstead became interested in Love Field. Tr. 65 (McNamara). To gain entry
to Love Field, Hampstead developed a plan to fund the construction of a terminal for Legend.
Id. Hampstead anticipated that it would be a leasehold investment as to the land and real estate.
Id. at 65-66. Hampstead’s investment plan for Love Field also called for a direct investment in
Legend. Id. at 72.

       Much of Hampstead’s initial due diligence efforts with regard to Love Field and Legend
were led by Mr. Read. Id. at 148 (Read). First, he and his team examined real estate issues. Id.
Second, he and his team examined legal issues surrounding Love Field, focusing on the Wright
Amendment, the Shelby Amendment, and the DOT’s rulings. Id. Third, Mr. Read analyzed
whether flights could profitably be operated from Love Field. Id. at 149. According to Mr.
Read, the team found a 1992 DOT study, captioned “Analysis of the Impact of Changes to the
Wright Amendment,” (“DOT study”) to be particularly helpful:


                                                 12
               Q       And did you rely on [the DOT study], among all of the
                       other documents that you came across in your due
                       diligence?

               A       I did. You know, one of the things that we needed to be
                       brought up to speed on when we first looked at and
                       understood what the premise of the investment was was
                       what where the demand characteristics at Love Field, and
                       this was a particularly helpful document that talked about
                       the potential for a significant increase of demand at Love
                       Field.

               Q       Yes. Could you expand just a little bit on in what way you
                       found this document helpful?

               A       Well, the Wright Amendment basically restricted airline
                       traffic out of Love Field to Southwest and a couple of very
                       – you know, two small, residual gates, and this report sort
                       of reiterated to us and particularly found it interesting from
                       the government’s perspective that Love Field had a number
                       of unique characteristics that they thought would cause
                       demand should the Wright amendment ever be modified or
                       lifted, would cause demand to jump dramatically because
                       of the location of Love Field in Dallas and also because of
                       the location of Dallas-Fort Worth as a highly desirable,
                       central location for airlines to fly to attractive destinations.
                       And so I found this document to be very interesting and
                       helpful.

Id. at 159-60; see also PX 9.

        Mr. Read and his team also relied upon assessments performed by various external
parties. For example, Hampstead hired the Seabury Group, an outside aviation consulting firm,
to evaluate Legend’s proposed terminal gate rental rates. Tr. 150 (Read). In addition,
Hampstead hired an outside aviation industry analyst, to evaluate the demand for 56-seat aircraft
and to inform Mr. Read’s team about airline business models generally and regional jet models
specifically. Id. at 151.

        Finally, Hampstead reviewed Legend’s due diligence efforts. This included reviewing
documents Legend had prepared, to include a study prepared for Legend by the Campbell-Hill
Aviation Group regarding the fair value of the annual rentals for Legend gates, as well as an
August 1998 investment summary prepared for Legend by Jones Lang Wootton, a real estate
service company, wherein the Legend terminal was valued at $23 million. Id. at 154-55 (Read);



                                                 13
see also JX 7. This also included speaking with experts Legend had previously consulted. Tr.
152-53 (Read).

       Internal due diligence was also performed by Mr. McNamara; he spoke with several
individuals within the commercial airline world, as well as with Legend’s management team. Id.
at 66-74 (McNamara). Furthermore, he reviewed real estate issues, regulatory issues, and airline
operations. Id. at 74.

       In addition to the due diligence performed by Messrs. Read and McNamara, Mr.
Cavanaugh, Hampstead’s outside counsel, reviewed the terms of the Master Lease. Id. at 842-43
(Cavanaugh). Upon concluding his review, Mr. Cavanaugh advised Hampstead that it was not
bound by the rent-sharing provision of the Master Lease because it never planned to sublease the
property and because it never intended to surrender control over any aspect of the property. Id.
at 843-44. In other words, Mr. Cavanaugh believed that Hampstead could enter into licensing
agreements for use of the premises without invoking the Master Lease’s rent-sharing provision:

              Q       Okay. Did you have occasion to review that rent sharing
                      provision either as outside counsel or as general counsel for
                      Hampstead?

              A       Yes.

              Q       Now, to your knowledge, did either Love Terminal Partners
                      or Virginia Aerospace ever pay any sum to the City of
                      Dallas under that rent sharing provision?

              A       No.

              Q       And why not?

              A       When we originally looked at this - - and as you can
                      imagine, this was a provision we focused on - - we thought
                      several things, at least three. One was a fairly common
                      provision in a real estate lease where a landlord will
                      provide - - they don’t want the tenant to make money off of
                      the premises from subleasing the premises to another tenant
                      without sharing in the rental in some way, so this provision
                      had been inserted.

                      It only applied to a sublease that Dalfort as lessee would
                      have subleased to another party, so in this case, Love
                      Terminal Partners was not required to pay Dalfort any more
                      in rent than a proportionate share of what Dalfort owed to
                      the city under the primary lease. This provision did not



                                               14
                      purport to reach down any farther into rentals or
                      compensation that a subtenant would have received from - -

               Q      Okay.

               A      So that was point 1.

               Q      Okay. In addition to Point 1, was there another rationale?

               A      Yes. Point 2 was we felt like at Love Terminal Partners
                      from our business plan we weren’t going to sublease the
                      premises to anybody. We were going to run an operating
                      business. And so, in thinking about what an airline
                      terminal was, we’re not signing leases with airlines that
                      give or anybody else frankly that would give them the
                      exclusive right to operate and control and use a space in the
                      way that a real estate tenant would. We had gate license
                      agreements that provided as I recall nonexclusive rights to
                      use gates to Delta and Legend. We had management
                      agreements and parking agreements and other things, but
                      effectively we felt like we were running an operating
                      business, not subleasing the premises to anybody, so the
                      provision wouldn’t require a sharing of the rent.

Id. at 842-44. Ultimately, no such payments were ever made. Id.; see also id. at 560 (Naul).

        Following the completion of its due diligence efforts, Hampstead presented its findings to
its investors at a one-day meeting. Id. at 169-70 (Read); JX 10, JX 11; see also Tr. 433-34
(McArtor); JX 9. Present at that meeting was David Swensen, head of the Yale Endowment
Fund. Tr. 170 (Read). Known as “the Warren Buffett of institutional investing,” Mr. Swensen
approved of the investment. Id. at 52-53 (McNamara).

        Ultimately, Hampstead invested between $60 and $70 million in Legend and the
proposed terminal. Id. at 187-88 (Read). That investment was memorialized in a May 27, 1999
agreement, to which Love Terminal Partners was a party. See JX 9. Several months later, on
August 11, 1999, Legend assigned its interest in the Sublease to Love Terminal Partners. Jt.
Stip. ¶ 8. That same day, Love Terminal Partners entered into a Gate License Agreement with
Legend for the same 9.3 acres covered by the Sublease. Id.

        As noted above, although Hampstead’s investment in Legend was based on its interest in
Love Field, when it made its investment in 1999, there was still litigation regarding whether
Legend could fly. Tr. 74 (McNamara). In fact, Hampstead did not learn that Legend would be
able to operate out of Love Field until after it had begun construction on the proposed terminal.
Id. Such a fact was irrelevant to Hampstead because Hampstead’s investment plan was broadly
focused on using the real estate to build and then expand an airline terminal, irrespective of


                                               15
Legend’s success or failure as an airline. Id. at 74, 556-59 (Naul); see also DX 51. In December
2000, shortly after Hampstead’s acquisition of Legend, Legend filed for bankruptcy. Tr. 231
(Plaskett).

       C.      Hampstead’s Construction of the Lemmon Avenue Terminal and the Master
               Plan

        Initially, Hampstead hired the McClier Corporation to design and build the proposed
Lemmon Avenue terminal. Tr. 993 (Cullum). However, following concerns that the project was
falling behind schedule and was over budget, Hampstead hired Mr. Cullum, an outside manager,
to oversee the project. Id. When Mr. Cullum assumed control, construction of the terminal was
already in progress and construction of the parking garage was about to begin. Id. at 994. In
2000, the Lemmon Avenue terminal, with its six gates and adjacent parking garage, was
completed. Id. at 1004. The total cost to build the terminal was $17,377,883. Id. at 1000.

        That same year, Dallas and numerous other parties (including, inter alia, Hampstead,
Legend, Southwest, American, other airport tenants, neighborhood organizations, and local
businesses) met to develop a plan for Love Field (“Master Plan”). Id. at 457-58 (Naul); 1435-38
(Sleeper); JX 17 at 811-12. The process was overseen by Mr. Gwyn, Dallas’s director of
aviation. Tr. 1823 (Gwyn). Mr. Sleeper, the president of Love Terminal Partners from late 1999
to early 2006, served as Hampstead’s representative at Master Plan meetings. Id. at 1432-38
(Sleeper).

        The resulting Master Plan envisioned Love Field as a thirty-two gate airport. Id. at 1823-
24 (Gwyn). The preferred allocation of the thirty-two gates was twenty-six gates at the main
terminal and six gates at the Lemmon Avenue terminal. Id. at 1825; see also id. at 2128-29
(Clark). According to Mr. Naul, a principle with Hampstead, the Master Plan was extremely
beneficial to Hampstead’s marketing plan because it specifically referenced the Lemmon Avenue
terminal and allowed for the possibility of ten additional gates. Id. at 459-61 (Naul). However,
following the events of September 11, 2001 (“9/11”), 5 Hampstead suspended all marketing
efforts for the Lemmon Avenue terminal. Id. at 461-62.

       D.      Legend’s Bankruptcy and Hampstead’s Subsequent Management of
               Operations at Love Field

     From April until December 2000, Legend was actively engaged in providing scheduled
commercial air passenger service from the Lemmon Avenue terminal. Jt. Stip. ¶ 14. However,

       5
          Pursuant to Rule 201 of the Federal Rules of Evidence, the court takes judicial notice of
the events that occurred on September 11, 2001: “On September 11, 2001, 19 militants
associated with the Islamic extremist group al-Qaeda hijacked four airliners and carried out
suicide attacks against targets in the United States. Two of the planes were flown into the towers
of the World Trade Center in New York City, a third plane hit the Pentagon just outside
Washington, D.C., and the fourth plane crashed in a field in Pennsylvania.” History,
http://www.history.com/topics/9-11-attacks (last visited Feb. 2, 2016).

                                                16
although Legend was popular with the flying public, it was unable to raise necessary capital and
on December 3, 2000, was forced to file for bankruptcy. Id. ¶ 16; Tr. 417-19 (McArtor). On
April 24, 2001, Legend converted its Chapter 11 bankruptcy filing to a Chapter 7 filing. 6 Id.

        After Legend filed for bankruptcy, Mr. Naul began to oversee Hampstead’s real estate
assets and to act as an asset manager for the terminal. Tr. 450-51 (Naul). In this capacity, he led
Hampstead’s efforts to find additional users for the terminal and to devise a strategy for going
forward. Id. at 451. To that end, Hampstead retained the Seabury Group. Id. at 452. It
recommended, and Hampstead agreed, to maintain a flexible strategy for using the property and
to offer the property to as many potential users as possible. Id. In May 2002, as part of this
marketing strategy, Hampstead commissioned a series of sketches showing possible alternative
layouts and expansions of the Lemmon Avenue terminal, to include the addition of more gates.
Id. at 472-75; PX 107C.

        Up to this point, Atlantic Southeast, a Delta affiliate, had remained a tenant at the
Lemmon Avenue terminal. Tr. 456 (Naul). However, because Legend had also provided
additional routine services such as cleaning, security, and landscaping, Hampstead decided that,
rather than keep the Lemmon Avenue terminal open and charge Atlantic Southeast for these
services, Atlantic Southeast should move to the main terminal. Id. This decision was consistent
with Hampstead’s overall marketing plan because it never intended to use the Lemmon Avenue
terminal solely for the purpose of housing numerous smaller tenants. Id. at 457.

        As a result of Hampstead’s decision, Atlantic Southeast moved its operations from the
Lemmon Avenue terminal to the main terminal at Love Field. Id. at 1813-16 (Gwyn). In 2001,
Atlantic Southeast paid $28,191 per year to lease two gates at the main terminal at Love Field.
Id. at 1815; DX 31; see also Tr. 2085-90 (Anastas). In 2002, Dallas raised the rent for those two
gates to $72,306.30 per year. Tr. 1817-18 (Gwyn); DX 39. In 2003, Atlantic Southeast
informed Dallas that it was terminating its lease at Love Field. Tr. 1860-61 (Gwyn).

       E.      Hampstead’s Acquisition of the Master Lease

        In 2003, given the fact that the aviation industry was slow to recover after 9/11, and given
the fact that Hampstead believed that the Wright Amendment would be repealed, Hampstead
began to look into different investment opportunities at Love Field. Tr. 464-65, 485 (Naul). As
a result, on December 24, 2003, Hampstead (through Virginia Aerospace) acquired the Master
Lease from Dalfort Aerospace. Jt. Stip. ¶ 9. In so doing, Hampstead achieved its original
investment objective, which was to acquire the entire 26.8-acre leasehold. Tr. 79 (McNamara).


       6
          Chapter 11 bankruptcy filings are “rehabilitation cases” whereby “creditors look to
future earnings of the debtor, not to the property of the debtor at the time of the initiation of the
bankruptcy proceeding, to satisfy their claims,” whereas chapter 7 bankruptcy filings are
“liquidation cases” whereby “the trustee collects the non-exempt property of the debtor, converts
that property to cash, and distributes the cash to the creditors.” David G. Epstein et al.,
Bankruptcy § 1-5, at 8-9 (1st ed. 1993).

                                                 17
In order to complete the deal, however, Hampstead had to sell some land located across the street
from the Lemmon Avenue terminal to a car dealership. Id. at 467 (Naul).

         As a result of obtaining the Master Lease, Hampstead was able to move quickly to
demolish Dalfort Aerospace’s hangar facilities and start construction on parking and additional
gates, if a new user for the Lemmon Avenue terminal was found. Id. at 467-69. Hampstead
remained bound, however, by a contractual term in the Master Lease previously negotiated by
Legend and Dalfort Aerospace—that heavy aircraft maintenance could not be performed on the
site. Id. at 468-71; JX 4.

       F.      Hampstead’s Attempts to Amend the Leases and Disagreements With Dallas
               Over the Terms of the Leases

         In 2004, in an effort to attract additional subtenants, such as aircraft manufacturer Adam
Aircraft, Hampstead petitioned Dallas for amendments to the Master Lease. 7 Tr. 1782-84
(Poole); DX 51. First, Hampstead sought to eliminate the fifty percent rent-sharing provision,
which it believed was not imposed on the other tenants at Love Field. DX 51. Second,
Hampstead sought to have the Master Lease amended to include a ten-year renewal option,
which it claimed was typical of the other leases on the property. Id. Although Dallas did not
object to extending the lease—it agreed to a forty-year extension—it did not agree to eliminate
the rent-sharing provision. Tr. 1782, 1785 (Poole); DX 52. In other words, while Dallas
believed that the addition of Adam Aircraft at Love Field would be a source of good jobs for the
city, it was not willing to forgo the revenue derived from the Master Lease’s rent-sharing
provision. 8 Tr. 1782 (Poole).

       In addition to refusing to eliminate the Master Lease’s rent-sharing provision, Dallas
expressed its concern to Hampstead that the rent-sharing provision was in fact being violated.
DX 62. In a November 15, 2005 letter written by Mr. Gwyn to Mr. Grayson, president of
Virginia Aerospace, Mr. Gwyn stated:

               [I]t was our understanding that use of the sublease premises
               parking garage for a non-aviation use was a temporary solution
               while the sublessee’s parking garage was being built. Once the
               sublessee’s parking garage was completed, we expected the
               sublease and their use of Love Field aviation facilities to terminate.
               Please be reminded . . . [that] Lessee’s primary business shall be

       7
          If a tenant wanted to amend or extend its lease with Dallas, the tenant would first
negotiate the amendment with Dallas’s director of aviation. Tr. 1758 (Poole). The director of
aviation would then recommend the amendment to the city manager, who would then
recommend it to the city council for consideration. Id. The city council, of which the mayor of
Dallas was a voting member, then voted on the proposed amendment. Id. at 1846 (Gwyn).
       8
         Ultimately, Adam Aircraft located its manufacturing facilities elsewhere in the United
States. Tr. 556-58 (Naul).

                                                18
               aviation-related. This letter shall serve as notice that all non-
               aviation use of the leased premises must be terminated
               immediately.

Id. In his December 1, 2005 letter of response, Mr. Grayson first indicated that he was surprised
by the city’s concerns since various subtenants had been operating on the property without
objection for several years. Id. He then stated that Love Terminal Partners had been notified
and that it would, in turn, notify subtenant Sewell Motors (“Sewell”) of the city’s concerns. DX
66. Finally, Mr. Grayson stated his belief that Premiere Limousine, one of the other subtenants,
was providing “aviation related services as a transporter of airplane owners, operators, and
passengers,” and that, therefore, its use of the property was permissible under the lease. Id.

       In his December 16, 2015 reply to Mr. Grayson’s letter, Mr. Gwyn stated:

               In regards to the use of the facility, when Sewell Village Cadillac
               (“Sewell”) began using the facility, I was told that this use would
               be on a temporary basis while their parking garage was being
               constructed and that they would vacate the facility upon
               completion of their garage. This did not occur and was one of the
               reasons for our previous letter. . . . I have agreed to Sewell’s
               request to continue their use of the facility, subject to the above
               reference Lease and while the additional parking structure is being
               constructed. . . . As for the limousine service, I do not object to
               their use at this time, however, this is not to be interpreted or
               construed as a consent to any agreement between the limousine
               service and Love Terminal Partners, L.P. nor a waiver of the City’s
               rights and privileges under the Lease.

               As for the Sublease rentals, it is our interpretation of the Lease that
               any rentals receive[d] under a sublease, including any other
               business agreement holding under the Lease, (i.e., sub-sublease,
               license, etc.) will be subject to the 50% rent share provision as
               stated in Article XX of the Lease. In fact, Section 13[,]
               Assignment and Sub-letting of the Sublease between Virginia
               Aerospace and Love Terminal Partners, L.P. ([“]Sublessee”)[,]
               states that

               “…SUBLESSEE SHALL BE RESPONSIBLE TO PAY ANY
               AND ALL AMOUNTS, IF ANY, WHICH SUBLESSOR IS
               OBLIGATION TO PAY TO LANDLORD IN CONNECTION
               WITH SUCH REVENUES AND INCOME UNDER ARTICLE
               XX OF THE MAIN LEASE IN CONNECTION WITH ANY
               SUB-SUBLEASE…”




                                                 19
               As you can see from the above, this 50% rent share was
               contemplated when the sublease was executed by your
               predecessor. The fact that the City has not pursued these excess
               revenues during the temporary sub-sublease/sub-sublicense
               agreements does not mean that the City has waived its right to
               pursue these revenues in the future.

DX 68 (DAL-CFC-002182-83).

       G.      Hampstead’s Income From Subtenants, Valuation of the Leases, and
               Attempts to Sell the Leases

        Following Legend’s bankruptcy, Hampstead was still able to earn income from its
subtenants. Tr. 2097-98 (Naul). From 2002 to 2008, the largest payments were from Sewell,
although Hampstead also received payments from the car dealership from 1999 to 2001. Id. at
2098-99. Other revenue came from an aviation freight company, a limousine company, two
automobile dealerships, an aviation reservation service, and several wireless telecommunications
companies. Id. at 518-20; DX 105. From 2004 to 2008, however, Hampstead’s income from
these properties did not cover their annual rental payment, which was approximately $537,000.
Tr. 2100-02 (Naul); DX 105.

        In the 2005 and 2006 financial reports for Hampstead Investment Partners III, L.P., the
value of the assets owned by Love Equity Partners III was listed as approximately $17.1 and
$17.2 million, respectively. DX 76; DX 91. In the 2006 report, an additional caveat as to the
valuation of the assets was provided:

               In the absence of better information, the general partner has
               continued to value the investment at the appraised values from
               March 2005. Such appraised values considered the flight
               restrictions in [effect] at the time that precluded long-haul flights
               out of Love Field. Thus, the appraised values did not assume a
               best-case (no flight restrictions) scenario and the general partner
               continues to believe those appraised values represent the best
               information currently available.

DX 91. According to Ms. Moog, Hampstead’s accountant, the financial reports provided only
the property’s book value, not its market value:

               Q      Is it possible that book value would not reflect the current
                      market value of assets?

                                                ***

               A      Yes. Book value - - there’s no – you could make no
                      assertion as to whether book value equaled market value.


                                                 20
                                              ***

               Q      They’re not the same thing.

               A      They’re not the same thing.

                                              ***

               Q      Based upon your review of Defense Exhibit 91, is it your
                      understanding that the auditors considered the appraisal
                      reports that they reviewed to be a reliable indication of the
                      value of the assets themselves?

               A      It’s my opinion that they did not consider them to be
                      valuable - - they didn’t consider them to be a true valuation,
                      which was the reason for the significant caveats included in
                      the second paragraph that describes the valuation.

Tr. 1692-64 (Moog).

        In early 2006, Hampstead held discussions with Pinnacle Airlines (“Pinnacle”) regarding
a possible sale of the Master Lease. Id. at 85 (McNamara), 486 (Naul). According to Mr. Naul,
Pinnacle was extremely interested in the property and on April 28, 2006, Hampstead sent
Pinnacle a proposal. Id. at 486-88 (Naul). According to the terms of the proposal, Hampstead
agreed on a price of $100 million for the entire property (the Master Lease) or $85 million for
just the existing gates (the Sublease). Id. at 489-90; JX 32. However, the sale to Pinnacle was
never consummated. Tr. 491 (Naul). Hampstead also engaged in preliminary discussions with
JetBlue, but nothing ever came of them. Id. at 486, 514-15.

       H.      Hampstead’s Cessation of Operations at Love Field

        For fifteen months following the WARA’s enactment, Hampstead continued to pay the
rent on the Master Lease. Id. at 80 (McNamara). However, in March 2008, Hampstead
informed Dallas of its intent to cease rental payments on the Master Lease and Sublease. Jt. Stip.
¶ 12. Subsequently, on November 20, 2008, Dallas informed Hampstead that it was in default
under both leases. Id. Dallas then instituted eviction proceedings and in December 2008, was
granted possession of the leaseholds. Id. Demolition of the Lemmon Avenue terminal, which
had begun on July 20, 2009, was completed by September 29, 2009. 9 Id. ¶ 9.



       9
         The court, accompanied by counsel, party representatives, and city officials, toured the
Lemmon Avenue terminal on March 25, 2009, prior to its demolition. The site visit also
included a tour of other facilities at Love Field.

                                                21
        Between 1999 and 2008, Hampstead invested between $60 and $70 million in Legend
and the Lemmon Avenue terminal. Tr. 77 (McNamara). Over the course of its existence, Love
Terminal Partners lost more than $25.5 million in income plus an additional $8.5 million due to
depreciation and abandonment of assets. Id. at 1712 (Wetzel). Similarly, Virginia Aerospace,
over the course of its existence, lost over $12 million in income plus an additional $5.5 million
due to depreciation and abandonment of assets. Id. at 1713-15. Moreover, at no time did
Hampstead earn enough rental income to cover the monthly payments on the Master Lease. Id.
at 2101-02 (Naul).

       I.      Hampstead’s Plans for a Sixteen-Gate Terminal

       In 2012, 10 Hampstead commissioned a set of architectural plans from the firm of Good
Fulton Farrell (“GFF”) for the expansion of the six-gate Lemmon Avenue to a sixteen-gate
terminal. Tr. 1015 (Cullum); PX 107G. Hampstead never discussed these plans with Dallas, Tr.
531 (Naul), or the Federal Aviation Administration (“FAA”), id. at 1760 (Poole).

      THE GOVERNMENT’S LIABILITY FOR FIFTH AMENDMENT TAKINGS

I.     Legal Standards

       A.      Fifth Amendment Takings Generally

        The Takings Clause of the Fifth Amendment provides that private property shall not “be
taken for public use, without just compensation.” U.S. Const. amend. V. This clause “was
designed to bar Government from forcing some people alone to bear public burdens which, in all
fairness and justice, should be borne by the public as a whole.” Armstrong v. United States, 364
U.S. 40, 49 (1960). “The chief and one of the most valuable characteristics of the bundle of
rights commonly called ‘property’ is ‘the right to sole and exclusive possession—the right to
exclude strangers, or for that matter friends, but especially the Government.’” Mitchell Arms,
Inc. v. United States, 7 F.3d 212, 215 (Fed. Cir. 1993) (quoting Hendler v. United States, 952
F.2d 1364, 1374 (Fed. Cir. 1991)). The Takings Clause does not prohibit the taking of property.
Brown v. Legal Found. of Wash., 538 U.S. 216, 235 (2003). Rather, it proscribes a taking
without just compensation. Id.; see also First English Evangelical Lutheran Church of Glendale
v. Cnty. of L.A., 482 U.S. 304, 315 (1987) (providing that the Takings Clause “is designed not to
limit the governmental interference with property rights per se, but rather to secure compensation
in the event of otherwise proper interference amounting to a taking”).

        Traditionally, “[p]roperty has been well defined to be a person’s right to possess, use,
enjoy, and dispose of a thing not inconsistent with the law of the land.” Peabody v. United
States, 43 Ct. Cl. 5, 16 (1907). “Real property, tangible property, and intangible property all
may be the subject of takings claims.” Conti v. United States, 291 F.3d 1334, 1338-39 (Fed. Cir.

       10
           Previously, in 2002 and in 2005, Hampstead commissioned a series of architectural
sketches from the Dallas firm of HKS, regarding possibilities for expansion on the 26.8 acres
covered by the Master Lease. Tr. 471-75, 532-34 (Naul); PX 107C; DX 64.

                                                22
2002) (citations omitted). Included in the category of intangible property rights are leases. See
Sun Oil Co. v. United States, 572 F.2d 786, 818 (Ct. Cl. 1978) (“As a general proposition, a
leasehold interest is property, the taking of which entitles the leaseholder to just compensation
for the value thereof.” (citing Lemmons v. United States, 496 F.2d 864, 873 (Ct. Cl. 1974); see
also U.S. Trust Co. of N.Y. v. New Jersey, 431 U.S. 1, 19 n.16 (1977) (“Contract rights are a
form of property and as such may be taken for a public purpose provided that just compensation
is paid.”); Lynch v. United States, 292 U.S. 571, 579 (1934) (“The Fifth Amendment commands
that property be not taken without making just compensation. Valid contracts are property,
whether the obligor be a private individual, a municipality, a state, or the United States.”).

         The United States Court of Appeals for the Federal Circuit “has developed a two-step
approach to takings claims.” Boise Cascade Corp. v. United States, 296 F.3d 1339, 1343 (Fed.
Cir. 2002); accord Acceptance Ins. Cos. v. United States, 583 F.3d 849, 854 (Fed. Cir. 2009).
First, a plaintiff must identify the property interest that was allegedly taken. Nw. La. Fish &
Game Pres. Comm’n v. United States, 79 Fed. Cl. 400, 408 (2007); see also Karuk Tribe of Cal.
v. Ammon, 209 F.3d 1366, 1374 (Fed. Cir. 2000) (“[A] court determines whether the plaintiff
possesses a valid interest in the property affected by the governmental action, i.e., whether the
plaintiff possessed a ‘stick in the bundle of property rights.’”). Second, “[o]nce a property right
has been established, the court must then determine whether a part or a whole of that interest has
been appropriated by the government for the benefit of the public.” Members of Peanut Quota
Holders Ass’n, Inc. v. United States, 421 F.3d 1323, 1330 (Fed. Cir. 2005) (citing Conti, 291
F.3d at 1339); see also Karuk Tribe of Cal., 209 F.3d at 1374 (“If a plaintiff possesses a
compensable property right . . . a court determines whether the governmental action at issue
constituted a taking of that ‘stick.’”). Courts “do not reach this second step without first
identifying a cognizable property interest.” Air Pegasus of D.C., Inc. v. United States, 424 F.3d
1206, 1213 (Fed. Cir. 2005).

       Finally, jurisdiction over takings claims against the United States lies in the Court of
Federal Claims. Murray v. United States, 817 F.2d 1580, 1583 (Fed. Cir. 1987) (“[T]he ‘just
compensation’ required by the Fifth Amendment has long been recognized to confer upon
property owners whose property has been taken for public use the right to recover money
damages from the government.”); accord Russell v. United States, 78 Fed. Cl. 281, 289 (2007)
(“The Takings and Just Compensation Clauses of the Fifth Amendment do constitute a money-
mandating source and claims under these clauses are within the jurisdiction of the court.”).

       B.      Two Types of Takings

        According to the United States Supreme Court (“the Supreme Court”), the government
may effect a taking of such “private property by either physical occupation or regulation.”
Tuthill Ranch, Inc. v. United States, 381 F.3d 1132, 1135 (Fed. Cir. 2004) (citing Lucas v. S.C.
Coastal Council, 505 U.S. 1003, 1014-15 (1992)); see also Yee v. City of Escondido, Cal., 503
U.S. 519, 522-23 (1992) (describing “two distinct classes” of takings: (1) physical occupation of
property; and (2) regulation of the use of property).




                                                23
               1.      Physical Takings

          A physical taking constitutes “a permanent and exclusive occupation by the government
that destroys the owner’s right to possession, use, and disposal of the property.” Boise Cascade
Corp., 296 F.3d at 1353; see also Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S.
419, 426 (1982) (“[A] permanent physical occupation authorized by government is a taking
. . .”); Hendler, 952 F.2d at 1375 (“A physical occupation of private property by the government
which is adjudged to be of a permanent nature is a taking . . .”). A physical taking occurs when
“government encroaches upon or occupies private land for its own proposed use.” Palazzolo v.
Rhode Island, 533 U.S. 606, 617 (2001); see also Nollan v. Cal. Coastal Comm’n, 483 U.S. 825,
832 (1987) (explaining that a “permanent physical occupation” occurs “where individuals are
given a permanent and continuous right to pass to and fro, so that the real property may
continuously be traversed, even though no particular individual is permitted to station himself
permanently upon the premises”). “When the government physically takes possession of an
interest in property for some public purpose, it has a categorical duty to compensate the former
owner.” Tahoe–Sierra Pres. Council, Inc. v. Tahoe Reg’l Planning Agency, 535 U.S. 302, 322
(2002) (citing United States v. Pewee Coal Co., 341 U.S. 114, 115 (1951)); see also Yee, 503
U.S. at 522 (“Where the government authorizes a physical occupation of property (or actually
takes title) the Takings Clause generally requires compensation.”). A permanent physical
occupation “is a per se physical taking . . . because it destroys, among other rights, a property
owner’s right to exclude.” John R. Sand & Gravel Co. v. United States, 457 F.3d 1345, 1356
(Fed. Cir. 2006), aff’d on other grounds, 552 U.S. 130 (2008).

        “In a physical takings case, the inquiry is limited to whether the claimant can establish a
physical occupation, not necessarily of infinite duration, of his property by the Government.”
Applegate v. United States, 35 Fed. Cl. 406, 414 (1996) (citing Loretto, 458 U.S. at 441). “The
physical occupation need not occur directly, but can be found in a physical injury to real property
substantially contributed to by a public improvement.” Id. (citing United States v. Kan. City Life
Ins. Co., 339 U.S. 799, 809-10 (1950)); see also Love Terminal Partners, L.P., 97 Fed. Cl. at 424
(describing a physical taking arising from the government’s enactment of legislation targeting
the plaintiff’s six-gate terminal for destruction).

               2.      Regulatory Takings

         A regulation that restricts the use of property or unduly burdens private property interests
results in a regulatory, not a physical, taking. Huntleigh USA Corp. v. United States, 525 F.3d
1370, 1378 (Fed. Cir. 2008); accord Tuthill Ranch, Inc., 381 F.3d at 1137. In other words, a
regulatory taking is one in which “the government prevents the landowner from making a
particular use of the property that otherwise would be permissible.” Forest Props., Inc. v. United
States, 177 F.3d 1360, 1364 (Fed. Cir. 1999) (citing Lucas, 505 U.S. at 1014).

        Originally, the Supreme Court held “that the Takings Clause reached only a ‘direct
appropriation’ of property or the functional equivalent of a ‘practical ouster of [the owner’s]
possession.’” Lucas, 505 U.S. at 1014. However, it later concluded “that government regulation
of private property may, in some instances, be so onerous that its effect is tantamount to a direct


                                                 24
appropriation or ouster–and that such ‘regulatory takings’ may be compensable under the Fifth
Amendment.” Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 537 (2005); see also Members of
Peanut Quota Holders Ass’n, 421 F.3d at 1330 (“While a taking often occurs as a result of a
physical invasion or confiscation, the Supreme Court has long recognized that ‘if a regulation
goes too far it will be recognized as a taking.’” (quoting Pa. Coal v. Mahon, 260 U.S. 393, 415
(1922))). There are two types of regulatory takings: categorical and noncategorical. 11
Huntleigh USA Corp., 525 F.3d at 1378 n.2.

                       a.      Categorical Takings: The Lucas Analysis

         A categorical taking is one in which “all economically viable use, i.e., all economic
value, has been taken by the regulatory imposition.” Palm Beach Isles Assocs. v. United States,
231 F.3d 1354, 1357 (Fed. Cir. 2000) (emphasis in original); see also Lucas, 505 U.S. at 1015
(indicating that categorical treatment is appropriate “where regulation denies all economically
beneficial or productive use of land”). In other words, “when the owner of real property has
been called upon to sacrifice all economically beneficial uses in the name of the common good,
that is, to leave his property economically idle, he has suffered a taking.” Lucas, 505 U.S. at
1019 (emphasis in original). Such a taking, like a permanent physical invasion of property, is
deemed a per se taking under the Fifth Amendment. See Lingle, 544 U.S. at 538; see also Res.
Invs., Inc. v. United States, 85 Fed. Cl. 447, 477 (Fed. Cl. 2009) (stating that “[g]overnment
regulation goes ‘too far,’ and effects a total or ‘categorical’ taking, when it deprives a landowner
of all economically viable use of his ‘parcel as a whole’” (citations omitted)).

        As with all takings, a plaintiff must first demonstrate title to a property right that has
purportedly been taken, see Good v. United States, 39 Fed. Cl. 81, 84 (1997), and then the court
must determine the extent to which the property has been appropriated, see Members of Peanut
Quota Holders Ass’n, 421 F.3d at 1330. Even where the court concludes, however, that the
regulation has taken all economically viable use, no compensation is owed and the state “may
resist compensation . . . if the logically antecedent inquiry into the nature of the owner’s estate
shows that the proscribed use interests were not part of his title to begin with.” Lucas, 505 U.S.
at 1027. In other words, a compensable taking does not occur if the government’s common law
nuisance and property principles prohibit the desired land use:

               Any limitation so severe cannot be newly legislated or decreed
               (without compensation), but must inhere in the title itself, in the
               restrictions that background principles of the State’s law of
               property and nuisance already place upon land ownership. A law
               or decree with such an effect must, in other words, do no more
               than duplicate the result that could have been achieved in the
               courts–by adjacent landowners (or other uniquely affected persons)
               under the State’s law of private nuisance, or by the State under its

       11
          Although regulatory takings may be temporary or permanent, they “‘are not different
in kind.’ Both require compensation.” Kemp v. United States, 65 Fed. Cl. 818, 823 n.2 (2005)
(quoting First English Evangelical Lutheran Church of Glendale, 482 U.S. at 318).

                                                 25
               complementary power to abate nuisances that affect the public
               generally . . . .

Id. at 1029; accord Hendler v. United States, 38 Fed. Cl. 611, 615 (1997) (“Because a property
owner does not have a right to use his property in a manner harmful to public health or safety,
the government’s exercise of its powers to protect public health or safety does not constitute a
compensable taking of any of the owner’s property rights.”), aff’d, 175 F.3d 1374 (Fed. Cir.
1999). At all times, the government bears the burden of identifying those “background
principles of nuisance and property law that prohibit” the plaintiff’s intended use of the property.
Lucas, 505 U.S. at 1031.

                       b.     NonCategorical Takings: The Penn Central Factors

       Unlike a categorical taking, a noncategorical taking “fall[s] short of eliminating all
economically beneficial use of property.” Consumers Energy Co. v. United States, 84 Fed. Cl.
152, 156 (2008) (citing Palazzolo, 533 U.S. at 617). A noncategorical taking is the
“consequence of a regulatory imposition that prohibits or restricts only some of the uses that
would otherwise be available to the property owner, but leaves the owner with substantial viable
economic use . . .” Palm Beach Isles Assocs., 231 F.3d at 1357. In determining whether a
noncategorical taking has occurred, courts look to the factors identified by the Supreme Court in
Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978):

               In engaging in these essentially ad hoc, factual inquiries, the
               Court’s decisions have identified several factors that have
               particular significance. The economic impact of the regulation on
               the claimant and, particularly, the extent to which the regulation
               has interfered with distinct investment-backed expectations are, of
               course, relevant considerations. See Goldblatt v. Hempstead, [369
               U.S. 590, 594 (1962)]. So, too, is the character of the
               governmental action. A “taking” may more readily be found when
               the interference with property can be characterized as a physical
               invasion by government, see, e.g., United States v. Causby, 328
               U.S. 256, (1946), than when interference arises from some public
               program adjusting the benefits and burdens of economic life to
               promote the common good.

Id. at 124.




                                                26
II.    Analysis

       A.      Plaintiffs Have Established a Lucas Categorical Taking of Their Leasehold

               1.      Plaintiffs Possessed Valid Property Interests at the Time of the Taking

        Although the parties dispute the issue, 12 this court previously concluded that plaintiffs
have valid property interests: Virginia Aerospace is the successor in interest to the 26.8 acres at
Love Field covered by the Master Lease initially executed in 1955 between Dallas and Braniff,
and Love Terminal Partners is a sublessee under the Master Lease. See Love Terminal Partners,
L.P., 97 Fed. Cl. at 386-87.

        Furthermore, the scope of plaintiffs’ leasehold interests is clearly defined. As noted
above, Article VIII of the Master Lease provided that Virginia Aerospace’s primary business had
to be aviation-related. 13 See JX 1 (LTP-000828-29). In addition, although not incorporated into
the Master Lease, when Virginia Aerospace acquired the Master Lease in 2003, one of the
conditions of sale was that the property not be used for the performance of heavy aircraft
maintenance. See Tr. 468-71 (Naul); JX 4 (LTP-011376-77).

      Having identified plaintiffs’ valid property interests, the court must now determine
whether the federal government appropriated those interests for public use.




       12
            While defendant concedes that plaintiffs held the right to the 26.8 acres at Love Field
covered by the Master Lease as of October 13, 2006, defendant argues that plaintiffs’ current
claims go beyond the terms of the Master Lease in two respects. Def.’s Posttrial Br. 47. First,
defendant claims that plaintiffs ignore the fact that the Master Lease expires on September 30,
2023, and does not contain an automatic right of renewal. Id. at 47-48. Second, defendant
claims that plaintiffs ignore the fact that the Master Lease contains a rent-sharing provision that
requires the lessee to pay Dallas fifty percent of any rental income collected from a sublessee.
Id. at 48. As a result, defendant reasons, plaintiffs (1) valued the Master Lease as if it ended in
2036 rather than 2023, (2) failed to opine as to whether the sixteen-gate terminal would be built
without a lease extension, and (3) failed to consider the effect of the Master Lease’s rent-sharing
provision in their highest and best use valuations. Id. These arguments, however, go to the
value of plaintiffs’ leaseholds, and not to whether plaintiffs have identified valid property
interests, an issue which is undisputed.
       13
          Although it is clear that Hampstead used its properties for nonaviation related
purposes, the court finds that, based on the language of Article VIII of the Master Lease, it did
not have the right to do so, irrespective of the fact that Dallas chose not to enforce that provision.
See DX 66; DX 68.

                                                 27
                2.     The WARA Destroyed All Economically Beneficial and Productive
                       Use of the Subject Property

       In assessing whether a categorical taking has occurred, i.e., one in which all economic
value has been taken by, in this case, a federal statute—the WARA—the court must review the
testimony of the parties’ expert witnesses regarding the potential uses for plaintiffs’ leaseholds.
In support of their argument that the federal government, through the enactment of the WARA,
deprived their leasehold of all economically viable use, plaintiffs rely upon the testimony of
Messrs. Hazel 14 and Massey. 15

         Mr. Hazel, whom the court qualified as an expert in airport commercial facilities, 16 first
testified that following the WARA’s enactment, there were “no other economical uses” for the



       14
           Mr. Hazel is an aviation consultant specializing in commercial facilities. Tr. 1210-11
(Hazel). He studies the operation of airport facilities such as retail businesses, parking, and
concessions, compares them to other airports—both domestic and international—and then offers
recommendations for improvements. Id. He has worked in the aviation industry since 1983. Id.
at 1211-12. He holds a bachelor’s degree from Princeton University, a juris doctor from the
University of Chicago, and a master of business administration from George Washington
University. Id. at 1212. After practicing law for approximately five years, he took a job with
U.S. Air. Id. at 1212-13. Although he started as a regulatory attorney at U.S. Air, in 1989, he
was promoted to Assistant Vice President of Properties, and became responsible for obtaining
lease rights at airports, negotiating leases, and voting on the budgets for over 100 airports along
the East Coast, and in Canada, the Caribbean, and Europe. Id. at 1216-17. He was then
promoted to Assistant Vice President of Properties and Facilities and subsequently Vice
President of Properties and Facilities, and became responsible for overseeing the design,
planning, and project management of the airline’s facilities. Id. at 1217-20. He left U.S. Air in
2001 to become an aviation consultant, the position he still holds. Id. at 1221-26.
       15
           Mr. Massey is a commercial real estate appraiser. Tr. 1334 (Massey). He has a
bachelor’s degree in business administration from Texas Tech University and an MAI
designation, and is licensed in commercial real estate appraisal in Texas. Id. He has been
performing appraisals since 1970 and has appraised over 20,000 properties, including properties
in almost every state in the United States, the Caribbean, Mexico, and Canada. Id. at 1336. He
previously appraised at least ten properties at Love Field, including multiple commercial
properties, an airplane overhaul facility, car rental lots, and airplane storage hangars. Id. at 1337-
39. He also appraised airport properties elsewhere in Texas, including at Meacham Airport and
Alliance Airport in Fort Worth, as well as at airports in Oklahoma City, Oklahoma; Sacramento,
California; Arkansas; and New Mexico. Id. at 1340-41. In addition, he served on the board of a
regional airport in Collin County, Texas, located just north of Dallas. Id. at 1341-42. He has
been qualified as an expert witness in real estate appraisal over 100 times and has testified
regarding those appraisals between fifty and sixty times. Id. at 1343-44.
       16
            Tr. 1228 (Hazel).

                                                 28
26.8-acre property covered by the Master Lease apart from use as a passenger air terminal. 17 Id.
at 1231-32. Specifically, Mr. Hazel concluded that little to no income was available from a total
of six different categories: (1) passenger terminal rental fees, (2) passenger landing fees, (3) car
rental fees, (4) income from retail as well as food and beverage, (5) cargo rental fees, and (6)
income from a hotel. With respect to passenger terminal rental and passenger landing fees, he
testified that these sources were wholly precluded by the WARA:

               So if you look at the major sources of airport revenue, I’ll go
               through them, the biggest source is terminal rental, passenger
               terminal rental, and that doesn’t apply because WARA restricts
               and prevents this facility from being used as a passenger terminal,
               so that’s off the list. The next biggest slice is passenger landing
               fees. This area can’t be used to generate landing fees because it’s
               not a runway. That’s off the list, clearly.

Id. at 1235-36. With respect to car rentals, he testified this too was not an available source of
revenue for plaintiffs:

               Rental car revenue to airports is generated from people who rent
               cars, and then a percentage of their rental is paid to the airport by
               the rental car company, typically 10 percent. There’s no way for
               this site to capture that revenue. That’s revenue paid by the rental
               car companies to the airport, so it doesn’t apply.

Id. at 1237. He testified that the same was true with respect to income from retail, food, and
beverage:

               The third area is food and beverage and retail, and the food and
               beverage slice is smaller than many people might expect. It’s 2.9
               percent, and the retail slice . . . is 3.5 percent . . . Those numbers
               refer to passenger terminal food and beverage and retail, and we’ve
               already been told that we can’t operate this as a passenger terminal,
               so those don’t apply either.

Id. He also testified that there was little demand for additional cargo rental space:

               [W]hat you see is that Love Field generates very, very little cargo.
               I mean, it’s not in the top 100 of U.S. airports. The cargo is going
               to be at DFW, is at DFW and to a secondary extent, at Alliance.
               There’s limited cargo activity [at Love Field]. There’s very little
               demand for cargo activity there. I don’t see this at all as a potential
               use of this site. There’s no demand for that.

       17
         Mr. Hazel defined economical use as whether revenue would exceed expenses. Tr.
1258 (Hazel).

                                                 29
Id. at 1239. Finally, with respect to building a hotel on the site, he testified that the conditions
were not optimal:

                  I concluded that it makes no sense. I need to give you a little
                  background again. All things being equal, businesses prefer to
                  operate off the airport than on the airport, and the reason for that is
                  that off the airport, you can own your property. You can put a
                  mortgage on it. You can own it fee simple, number one, whereas
                  on the airport, you just get a lease, and that causes problems. Two,
                  it’s more expensive to be on the airport. You’ve got higher cost of
                  security. You’ve got to badge your employees. It’s just generally
                  more expensive to be on the airport, and so if you need to be in the
                  airport, if you’re operating a terminal concession, you have no
                  choice, but if it’s a facility that could be on the airport or off the
                  airport without any significant locational benefit, you’re generally
                  going to want to be off the airport.

                                                   ***

                  Well, there’s already two hotels right on Mockingbird, right near
                  the entrance to the airport, off airport, so why would anyone want
                  to drive 2.7 miles to a hotel located on a leasehold at the airport? It
                  just doesn’t make any sense to me.

Id. at 1245-46.

        In addition, Mr. Hazel dismissed the two uses suggested by defendant’s experts. With
respect to building an additional Fixed Base Operator (“FBO”), he testified that there was simply
no demand:

                  FBOs provide the fuel and the facilities that private aircraft use
                  when they are at an airport. Most of their revenue comes from the
                  sale of fuel, but they also charge for parking. They may provide
                  maintenance services. They typically have a terminal with some
                  lounge facilities, et cetera, and so Love Field has six FBOs. One
                  or two of the documents refer to seven, but I observed six FBOs.

                                                   ***

                  In addition, the corporate operators have learned to improve their
                  fuel procurement, and so what used to be the main source of
                  revenue for FBOs is really getting squeezed. There used to be very
                  healthy markups on fuel. If you look at the rack rates for fuel costs
                  at FBOs, they look like high costs, but actually, the corporate


                                                    30
                  operators are negotiating deals with the chains, which significantly
                  limit markups, so this is a business that is getting tougher and
                  tougher, like many businesses at an airport that has a huge number
                  of FBOs.

Id. at 1240-41.

        He came to the same conclusion with respect to the potential for income from off-airport
parking, noting that Love Field already had adequate facilities. Id. at 1242-44. In support of his
position, he cited the June 2008 Five-Party Agreement for Love Field, which indicated that the
airport’s 7,000 close-in parking spaces were adequate for the average day. Id. at 1243. He also
noted that if plaintiffs were to build a parking facility on their property, it would be 2.7 miles
away from the main terminal. Id. at 1244. He further noted that there already was an off-airport
parking facility, as well as a car rental business with additional parking, both of which were
located at the entrance to the airport. Id. at 1244-45.

        Finally, Mr. Hazel noted that vacant terminals were typically demolished and that it was
extremely difficult to find a tenant looking for a short-term lease that would provide the lessor
with a profit. Id. at 1246.

         Ultimately, it was Mr. Hazel’s opinion, based on his experience constructing terminals in
Boston, New York City, Philadelphia, Phoenix, and San Diego, that Hampstead’s proposed plans
for a sixteen-gate terminal “show a terminal that [c]ould be successfully used as a passenger
airline terminal.” Id. at 1248-49. Specifically, he noted that (1) the plan allowed for a twenty-
seven-foot separation between wingtips, more than the fifteen-foot separation recommended by
the FAA, and therefore the terminal was capable of accommodating the widest of the narrow-
body fleet aircraft, id. at 1250-51; (2) the sixteen-gate terminal averaged approximately 27,500
square feet per gate, roughly comparable to the renovated Ronald Reagan Washington National
Airport, id. at 1252-53; (3) the departure lounges averaged approximately 2,400 square feet,
larger than the 1,500 square feet recommended by the FAA, id. at 1253-54; (4) the terminal’s
spaces were sufficient to accommodate areas for ticketing, lobbies, circulation, baggage claim,
airline operations, and short-term parking, id. at 1254-57; (5) the aircraft utilizing the terminal
would be able to enter and leave the terminal as well as use the taxiways, id. at 1257; and (6) the
terminal was capable of meeting passenger demand, even at peak-hour levels, id. at 1249.

         Mr. Massey, whom the court qualified as an expert in commercial real estate appraisal, 18
testified that his conclusions regarding the highest and best use of the 9.3-acre Sublease were
based on whether the intended use was (1) legally permissible, (2) physically possible, (3)
financially feasible, and (4) designed to allow the maximum potential return. 19 Id. at 1348, 1352

       18
            Id. at 1345 (Massey).
       19
           Mr. Massey defined highest and best use as “[t]he reasonably probable and legal use
of vacant land or an improved property, which is physically possible, appropriately supported,
and financially feasible and that results in the highest value.” PX 90 at 44. This definition of

                                                   31
(Massey). With regard to the highest and best use of the property before the enactment of the
WARA, he concluded that it was “as a scheduled airline terminal as it was built and designed,”
and that the highest and best use of the same property after the enactment of the WARA was as
“some type of aviation use.” Id. at 1352-53. He specifically rejected the postenactment use of
the leasehold as an FBO because he believed there was not room for another FBO at Love Field.
Id. at 1355. In response to Mr. Perkins’s testimony, discussed below, that the highest and best
use for the property was as “a high-end” FBO, Mr. Massey testified that the field of FBOs was
saturated and that the terminal was too far from the active taxiway and therefore lacked the
potential for visibility, good signage, and aircraft storage. Id. at 1358-59. In addition, he
concluded that using the site for parking would not be financially feasible and therefore not the
highest and best use, due to the existence of over 7,000 parking spaces at Love Field. Id. at
1359-60. In support of this conclusion, he cited the deposition testimony of Mr. Poole, who
stated that Dallas had no plans to build additional parking at Love Field. Id.

        With regard to the fair market value of the property prior to the enactment of the
WARA, 20 Mr. Massey concluded that the 9.3-acre leasehold covered by the Sublease was worth
$20.5 million. Id. at 1369-71; PX 90 at 1. Mr. Massey utilized two approaches to determine the
before value of the property. First, he used the income approach, which he defined as “a forecast
of gross income, less expenses, the derived net operating income and then the method of
capitalizing it into an indication of value.” Tr. 1368 (Massey). In addition to conducting his
own appraisal using this method, he also relied upon the analysis in a report prepared by the
Meehan Group, which included Ms. Meehan, 21 an aviation consultant, and Mr. Anderson, an
expert appraiser of aviation-specific assets, whose work was reviewed and corroborated by Mr.
Miller. Id. at 1368-69. Then, Mr. Massey used the replacement cost approach, which he defined
as the cost to recreate the facility less depreciation costs. Id. at 1371-72. In determining the
replacement value, he relied on a computer-driven program widely used in the industry—the
Marshall and Swift Commercial Estimator 7—as well as projections made by Mr. Cullum,
another one of plaintiffs’ expert witnesses. Id. at 1372-74. He then reconciled the values
produced by the two methodologies and came up with a final figure of $20.5 million. Id. at


highest and best use is consistent with this court’s case law and the Appraisal Institute’s
definition of highest and best use, of which the court takes judicial notice. See Loveladies
Harbor, Inc. v. United States, 21 Cl. Ct. 153, 156 (1990) (“Loveladies Harbor I”); Appraisal
Institute, The Appraisal of Real Estate 278 (13th ed. 2008).
       20
            At trial, Mr. Massey explained that his assessment of the value of the property before
the enactment of the WARA assumed that someone assessing the property before the WARA’s
passage would have known that the legislation was going to be enacted, but not that it was going
to restrict Love Field to just twenty gates and not that it would trigger the complete destruction
of the Lemmon Avenue terminal. Tr. 1398-99 (Massey).
       21
           Ms. Meehan specializes in airport demand. Tr. 566 (Meehan). She began her
consulting career upon receiving a master’s degree in city and regional planning, with a
specialization in transportation economics, from Harvard University. Id. at 573-74. She has
over thirty years of experience in the field. Id. at 567.

                                                32
1374-75. While he noted that real estate appraisers also use a methodology called the simplified
market approach, wherein one compares similar properties on the market, he stated that he was
unable to use that approach in this case because of the uniqueness of Love Field. Id. at 1367-68.

        With regard to the fair market value of the property following the enactment of the
WARA, Mr. Massey concluded that the Sublease had a fair market value of negative $665,000, 22
which was calculated by taking the value of the Sublease after the enactment of the WARA ($0)
and subtracting the cost of demolition ($655,000); Mr. Massey recommended demolition so that
plaintiffs would not have to pay ad valorem taxes, as well as security, maintenance, and
insurance fees. Id. at 1375-79, 1417-24. Thus, he calculated that the total amount of damages
owed for the physical taking of the terminal and parking garage was $21,165,000. 23 Id. at 1425.

       To counter the testimony of plaintiffs’ expert witnesses and support its argument that the
WARA did not cause a regulatory taking of plaintiffs’ leaseholds because the legislation did not
take anything of value, defendant relies upon the testimony of Messrs. Perkins 24 and Reed. 25

       22
           In his expert report, Mr. Massey concluded that the value of the Sublease after the
enactment of the WARA was $419,000. PX 90 at 57. At trial, however, Mr. Massey conceded
on cross-examination that he made a mathematical error in his expert report, and that the actual
after value of the Sublease was $4,000,195. From his testimony, the court further understood
that both figures were based on an assumption that plaintiffs could continue to lease 25% of the
parking garage to Sewell for car storage, a use that Mr. Massey acknowledged at trial was not
permissible under the terms of the Sublease, thus rendering the parking garage after the
enactment of the WARA functionally obsolete. See Tr. 1414-17 (Massey).
       23
          Mr. Massey derived this figure by adding the value of the property before the taking
($20.5 million) to the cost of demolishing the property after the taking ($655,000).
       24
           Mr. Perkins is an appraiser of aviation-related real estate and other assets, and also
develops and leases aviation-related real estate. Tr. 2450 (Perkins). Mr. Perkins holds a
bachelor’s degree from Harvard University, and is a certified appraiser in Texas and New Jersey.
Id. at 2450-51. He also has a private pilot’s license. Id. at 2466. Mr. Perkins has more than
twenty-five years of experience appraising aviation-related real estate, and over twenty-eight
years of experience developing property at airports. Id. at 2450. He has been involved in more
than 300 aviation-related appraisal assignments and has served as an expert witness in four other
cases. Id. at 2450, 2466-77.
       25
           Mr. Reed is a principal with Reed & Associates, and serves as a management
consultant to the aviation industry. Tr. 2162-63 (Reed). He holds a bachelor’s degree in
psychology from Washington and Jefferson College and a master’s degree in urban and regional
planning, with emphases in transportation and finance, from the University of Pittsburgh. Id. at
2162. He has over twenty-five years of experience as a management consultant to the aviation
and transportation industries and has worked with a diverse group of airports in the United
States, Europe, and Asia. DX 108 at 44. He has assisted in over fifty airport and airline lease
negotiations at over fifteen airports, involving assessments of airport cost, revenue structures,

                                               33
        Mr. Perkins, whom the court qualified as an expert in the appraisal of aviation-related
real estate, 26 testified that the highest and best use of plaintiffs’ leaseholds—the entire 26.8-acre
property—both before and after the enactment of the WARA, was as “a general aviation phased
development of hangars that served high end aircraft, turbine aircraft,” 27 a use unlike that of a
typical FBO. Id. at 2491-92, 2508 (Perkins). According to Mr. Perkins, a general aviation
hangar operated differently than a typical FBO, which he described as being heavily dependent
upon fuel sales:

                A fixed based operation in this case will be a subtenant of the
                developer or the owner of the property. The owner doesn’t
                necessarily have a stake in his fuel sales insofar as his ability to
                make his rent, but he offers the owner the opportunity to have a
                fuel handling agent on the premises. As I said before, oftentimes
                in this type of development you’re offering the advantageous fuel
                sale as incentive to pay a fairly desirable rental rate. And, of
                course, some of those tenants aren’t going to necessarily have the
                personnel or want to put fuel in the airplane. So a big part of
                something like this, you have to have a mechanism by which the
                airplanes can refuel so the base tenants can avail themselves of a
                good price that you’re offering as incentive.

Id. at 2510-11. In addition, he identified two other advantages of using the property for a hangar
development: its large square footage and comparatively low rental rate under the existing
Master Lease. Id. at 2499-500.

        In assessing the property’s highest and best use, he considered the value of the existing
improvements, noting that the most valuable improvements were the garage and the apron. Id. at
2500-04; see also DX 109 at 115 (“The ramp, supporting utilities and drainage infrastructure
and, to a somewhat lesser extent, the automobile parking lot along Lemmon Avenue cannot
produce revenue by themselves, but are . . . the most valuable improvements present on the


and airport lease agreements. Id. For twenty-one years, he provided financial and management
consulting services to the Detroit Metropolitan Wayne County Airport as its principal consultant.
Tr. 2164 (Reed). During his career, he “has supervised and prepared more than 20 financial
feasibility studies in support of the sale of airport revenue bonds” at several airports, another “20
detailed financial plans for construction of [major airport] facilities, and more than 30 detailed
annual cost allocations and rate setting studies in support of airport fees and charges.” DX 108 at
44.
       26
            Tr. 2472 (Perkins).
       27
            In conducting his highest and best use analysis, Mr. Perkins considered the same four
criteria as Mr. Massey—whether the intended use was legal, physically possible, financially
feasible, and likely to result in the highest value. Tr. 2489 (Perkins).

                                                  34
subject [property] as improved.”). Ultimately, while Mr. Perkins concluded that the terminal
facility and the Dalfort Aerospace maintenance hangar were capable of producing some revenue
to offset costs, he did not believe that the potential revenue would exceed the financial benefit of
demolishing and then redeveloping the site. DX 109 at 115.

        Notwithstanding his assessment of the property’s highest and best use as a hangar
development, Mr. Perkins conceded that there were two major obstacles to plaintiffs’ use of the
property as such. Tr. 2492-93 (Perkins). First, he noted that the seventeen-year lease term
available under the Master Lease made it difficult to recover the cost of financing the property if,
for example, the bank required a ten-year amortization period. Id. Second, he noted that the
rent-sharing provision of the Master Lease would have prevented any new construction. Id. at
2493-94. He therefore explained that any party contemplating an investment in the leasehold in
2006 would have to get a lease extension as well as relief from the rent-sharing provision. Id. at
2493-94.

        With regard to the fair market value of the Sublease, both before and after the enactment
of the WARA, Mr. Perkins concluded that it was worth $10,850,000. Id. at 2513; DX 109 at
145. Finding that the unique character of the property precluded the use of the sales comparison
approach and that the income approach “produced a value that clearly was below the approach
that recognized the highest and best use,” he used the cost approach to value the property. Tr.
2514 (Perkins). He noted, however, that his appraisal did not take into account (1) the cost to
build the proposed hangar development, id. at 2550; (2) the demand for general aviation hangars
and associated services at Love Field, id. at 2559, 2569; or (3) the number of flights serviced by
Love Field’s existing FBOs, finding the number of take-offs and landings to be irrelevant, id. at
2560. Instead, he stated that the more appropriate metric to review when assessing “the health of
FBOs or general aviation” was to look at the amount of fuel that was burned at the airport, noting
further that when, in 2002, Love Field went from two to four FBOs, the total volume of fuel sold
actually increased. Id. at 2663-64. Finally, Mr. Perkins conceded that the enactment of the
WARA made no difference in his valuation of the property. Id. at 2555.

        According to Mr. Reed, whom the court qualified as an expert in airport management and
airport finances, 28 although the Lemmon Avenue terminal was constructed to provide airline
passenger service, the Master Lease had other potential economically beneficial uses, both before
and after the enactment of the WARA. See Tr. 2444 (Reed); DX 108. When overseeing a
financial feasibility study, Mr. Reed first examines the airline’s use and lease agreement. Tr.
2168-69 (Reed). From this document, he learns how the airport’s tenant airlines are expected to
do business, pay for such facilities, abide by restrictions, and in some cases, cover the airport’s
losses. Id. at 2168. He then reviews all of the other operations within the airport complex,
including operations on the airfield side, in the terminal building, and in the automobile parking
area. Id. at 2170. He specifically examines the revenues derived from parking, concessions,
advertising, and news and gift vendors. Id. at 2170-71. He then factors in all of these revenues
and expenses to model the financial operation of the airport. Id. at 2171. Finally, he evaluates


       28
            Tr. at 2177 (Reed).

                                                 35
the number of people that will use the airport, or “in-planed passengers,” and from that figure,
estimates the number of passengers who will use the airport’s parking facilities. Id. at 2172.

        Applying this methodology, Mr. Reed assessed the potential uses of plaintiffs’
leaseholds, beginning with an examination of their use of the property as a terminal. Id. at 2179-
80. First, he considered the Lemmon Avenue terminal’s airside location, focusing on the size of
the hold rooms, the passenger corridors, the gates, the jet bridges or attachments, and the
baggage systems. Id. at 2179-80. Second, he examined the terminal’s roadside location, which
includes the roadways and everything involved in a passenger’s movement from a car, taxi, or
bus into the terminal building and toward an airplane. Id. at 2183. Third, he assessed the yearly
trends in passenger traffic at Love Field, beginning in 2002. Id. at 2199. Finally, he made
projections regarding future demand for parking, revenue from parkers, depreciation of capital
improvements, and costs to operate a parking business. Id. at 2201-15. Upon concluding this
review, Mr. Reed made the following determinations: (1) using the leaseholds as a commercial
aviation terminal would be difficult given the layout of both the airside and roadside of the
Lemmon Avenue terminal, and expansion of the building to meet demand would only exacerbate
the problem, id. at 2181-87; (2) using the leaseholds as a parking facility would be profitable,
producing a net revenue of $31,000,453 from 2007 to 2023, given the increase in passenger
activity at Love Field after the passage of the WARA, id. at 2199-2001, 2219; DX 108 at 4; and
(3) allowing communications antennae to be placed on top of the parking structure would also be
profitable, yielding an additional $653,000 (in current-year dollars) in revenue from 2007 to
2023, DX 108 at 4.

        In this case, the court concludes that plaintiffs have established a Lucas categorical taking
as to the entirety of their leasehold. In so concluding, the court is persuaded by the testimony of
Messrs. Hazel and Massey and unpersuaded by the testimony of Messrs. Perkins and Reed, as
explained below.

        Significantly, both Messrs. Hazel and Massey testified that the highest and best use of
plaintiffs’ leasehold, following the enactment of the WARA, was as a passenger air terminal, the
one use expressly forbidden by the WARA. Mr. Hazel came to this conclusion after reviewing
all available sources of potential revenue, to include (1) passenger terminal rental fees, (2)
passenger landing fees, (3) car rental fees, (4) income from retail as well as food and beverage,
(5) cargo rental fees, (6) income from a hotel, (7) income from FBOs, and (8) income from
additional off-airport parking. Mr. Hazel also reviewed Hampstead’s plans for a 16-gate
terminal. Mr. Massey came to this same conclusion after considering whether the intended use
was (1) legally permissible, (2) physically possible, (3) financially feasible, and (4) allowed the
maximum potential return. In addition, both experts also testified that while plaintiffs could
expect to receive some revenue from the property if it was utilized as a site for parking, it would
not be an economical use of the property. Finally, the court notes that both experts’ testimony
that the WARA destroyed all economically beneficial and productive use of the subject property
echoes Mr. Naul’s testimony that although plaintiffs initially believed the enactment of the
WARA would be beneficial to them, upon its enactment, they realized it “had the effect of taking
[their] gates away” and was in fact “devastating for [them].” Tr. 501 (Naul). In summary,
because the WARA contained explicit language that completely precluded plaintiffs from


                                                 36
utilizing the property as a commercial airline terminal, which is the property’s highest and best
use, the court must conclude that no economic value remained following the legislation’s
enactment, thus constituting a categorical taking.

       Contrary to plaintiffs’ experts, who both agreed that the property’s highest and best use
was as a passenger air terminal, recognized that such use was the only use permitted under the
Master Lease, and noted that such use was directly precluded by the enactment of the WARA,
defendant’s experts offered inconsistent views on the property’s potential uses.

       Mr. Perkins, the only defense expert who offered testimony as to the property’s highest
and best use, concluded that the property could be used as a phased general hangar development.
However, there are numerous reasons why the court is unpersuaded by his conclusion.

        First, and foremost, the court discounts Mr. Perkins’s premise that the WARA would not
be a significant factor in a potential buyer’s decision to purchase the property:

               Q       So in your opinion, a buyer, for example, would not ascribe
                       much priority to the anticipated immediate bump in
                       passenger traffic on Southwest Airlines as soon as those
                       single ticketing restrictions were lifted.

               A       Yes, sir, he might think of that, but I think also the buyer
                       would think that, well, how is that to benefit this property?
                       Southwest is already entrenched in the terminal owned by
                       the city. Is it reasonable to assume that the buyer for this
                       property believed that he could somehow benefit by that?

               Q       So you didn’t see any way a buyer of this property could
                       benefit from repeal of the single ticketing restrictions of the
                       Wright Amendment?

               A       I think the buyer would evaluate it, but there are other
                       factors connected with terminal operation that the buyer
                       would also be aware of. The fact that the Wright
                       Amendment perhaps is subject to outright repeal or some
                       modification is indeed a consideration, but I think also that
                       there’s other evidence to suggest that no matter what
                       happens to the Wright Amendment, the future of alternative
                       terminal development at Love Field is at least somewhat
                       cloudy as of the point in time I think this evaluation would
                       be happening.

Id. at 2553-54 (Perkins). In this respect, the court further notes that none of the other experts
conceded, as did Mr. Perkins, that the WARA played no role whatsoever in their overall
assessment of the property:


                                                 37
               Q       So, in effect, you determined that the Wright Amendment
                       Reform Act made no difference whatever in the value of
                       this property, right?

               A       Once, in my own mind, that I was certain that in terms of
                       size, location and the market at Love Field that general
                       aviation was a more promising long-term development
                       option, I didn’t consider the Wright Amendment as a
                       factor.

               Q       So the Wright Amendment Reform Act made absolutely no
                       difference in the value of this property?

               A       That’s correct.

Id. at 2555. However, as detailed above, significant plans were made by the aviation industry in
anticipation of the passage of the WARA. For example, pursuant to the Five-Party Agreement,
plans were made to tear down the Lemmon Avenue terminal, phase out restrictions on service
from Love Field, and reduce the number of gates available for passenger service at Love Field
from thirty-two to twenty. In sum, it is inconceivable to the court that such dramatic changes to
the air passenger service operations at Love Field would have no impact whatsoever on an
expert’s assessment of the highest and best use of a piece of property directly affected by those
plans.

        Second, the court is unpersuaded by Mr. Perkins’s finding that the highest and best use of
plaintiffs’ property was as a phased general hangar development for the simple reason that he
failed to consider the profitability of using the property as such. Although he stated that he had a
general sense of what it would cost to build the hangars on the leasehold, he admitted that he
never actually prepared an estimate of those costs:

               Q       Okay. Now, did you prepare some sort of design or master
                       plan for the [phased general hangar] development here?

               A       Not from a standpoint of actually physically locating
                       hangars. What I did is an analysis based on the capacity of
                       the site to support a certain amount of hangar space and
                       other elements, some buildings, based on its size and
                       configuration. I think I explained it earlier as a percentage
                       of the size of the site.

               Q       Right. So you, apart from just assuming that a percentage
                       of the site will be consumed in custom built hangars for
                       somebody, you don’t have an actual design that you have
                       drawn out on a map or on a plot plan.


                                                38
                                               ***

               A      Not in a finished form. What I did is sort of look at the
                      plan and put some areas to it, but I didn’t really draw
                      specific buildings. I kind of made some assumptions,
                      recognizing that there might be, in fact, an FBO on the
                      property and that has a little different configuration. I did
                      think about positioning buildings on the property as far as
                      being closer to Lemmon Avenue or closer to the taxiway.

               Q      It’s pretty hard to figure out how much it’s going to cost to
                      construct all of this if you haven’t drawn anything out, isn’t
                      it?

               A      Well, I did an analysis where I assumed there was a certain
                      amount of a type of hangar space, for instance, a couple
                      hundred thousand square feet of corporate hangar space,
                      50,000 square feet, maybe, of a potential fixed base
                      operation, and then essentially made an estimate based on
                      what I think that should cost in Dallas at that time.

                                               ***

               Q      Okay. So you don’t really know what it would cost
                      because you don’t really know what you’re going to build,
                      right? Fair enough?

               A      That’s correct.

Id. at 2548-50. Mr. Perkins also never estimated how much revenue would be generated by his
proposed FBO.

        In addition, while Mr. Perkins conceded that Love Field had more FBOs than any other
airport in the top 100 major airports in the United States, he failed to explain why the owner of
an airplane currently being housed at Love Field would move their plane to this new FBO:

               Q      And how many major airports in this country have six or
                      seven FBOs already?

               A      Only Dallas Love, to my knowledge.

               Q      Right. The other 99 have fewer, correct?

               A      Yes.


                                                39
                                               ***

                Q       And the airplanes that are going to be housed in those
                        hangars, they’re going to have to come from where they’re
                        now being housed at other FBOs, right?

                A       Some of them will.

Id. at 2559-60, 2569.

        Ultimately, Mr. Perkins’s conclusion that the leasehold was worth $10,850,000 was
derived from adding the total depreciated value of the existing improvements (the apron,
approaches, parking lot and structure, engineering, overhead minus the terminal) to the total
capitalized leasehold advantage (the difference between the market rent and the contract rent), id.
at 2528, a calculation that fails to assign any value to use of the property as an FBO.

       By comparison, Mr. Hazel’s conclusion that there was no demand for an additional FBO
at Love Field was supported by his review of the market at Love Field:

                With six FBOs, Love Field has excess FBO capacity in what has
                become a slow or no-growth business. No new FBOs have entered
                Love Field in many years, and it is likely that at least one of the
                current FBOs is interested in exiting the market. In general, FBO
                margins are being reduced as corporate jet operators pressure
                FBOs to cut their fuel margins, which have historically been the
                primary source of FBO profitability. The number of smaller
                general aviation aircraft using Love Field has dropped substantially
                in recent years. As with cargo facilities, to convert the existing
                facilities on the Site to FBO use would involve demolition, sit
                remediation, and rebuilding, and would make no economic sense.

PX 91 at 10; see also PX 95 at 9-10.

        Mr. Anderson, 29 whom the court qualified as an expert in aviation asset valuation, 30 had a
similar view regarding the market for additional FBOs at Love Field:

       29
          Mr. Anderson is an aviation financial analyst and appraiser. Tr. 859 (Anderson). He
has a bachelor’s degree from Rutgers University and a master of business administration from
the Massachusetts Institute of Technology. Id. at 859-60. He has over fourteen years of
experience valuing tangible aviation assets such as “aircraft, aircraft parts, aircraft engines,
ground equipment” as well as intangible aviation assets, such as airport landing and takeoff slots
and airport terminal leases. Id. at 861-63; PX 88 Appendix B.
       30
            Tr. 868-69 (Anderson).

                                                40
               Q      Mr. Anderson, how competitive is the general aviation
                      market at Love Field?

               A      Hypercompetitive.

               Q      Hyper?

               A      Extreme. At the time it had six or seven FBOs serving that
                      market and serving that one airport. There’s no other
                      airport in the United States that has that level of a crowded
                      marketplace. And what that does is reduces the amount of
                      activity and revenue that each individual FBO can generate,
                      . . . given the fairly fixed cost structure of an FBO . . . .

Tr. 2592 (Anderson). Mr. Anderson further noted that in 2006, Love Field averaged twenty-one
daily departures per FBO, a figure which placed Love Field 85 out of the top 100 airports in the
country—the higher the ranking, the greater the number of departures per FBO. Id. at 2593-94.
According to Mr. Anderson, this figure is significant because it demonstrates that the market for
FBOs at Love Field was saturated:

               Just based on my experience working with FBOs, [the number of
               daily departures per FBO] is a key operational metric at which you
               look. It drives how many gallons of fuel you sell. It accounts for
               two-thirds, or 75 percent, of an FBO’s revenue. It can drive how
               much line maintenance you perform and it can drive certain other
               ancillary type services, so the more aircraft you handle, the more
               departures, the greater revenue you will generate.

Id. at 2595.

       Nor is the court persuaded by Mr. Reed’s conclusion that the leasehold could have been
used for an airport parking operation. First and foremost, Mr. Reed admitted that he never
opined on the highest and best use of the property but instead concluded that the property could
support multiple uses:

               Q      So who’s correct about the highest and best use of the
                      property, you or Mr. Perkins?

               A      I believe we’re both correct in our own way. There can be
                      multiples uses on a property. In fact, this property during
                      its history has had multiple uses. The garage has been used
                      by parking passengers of the Lemmon Avenue terminal,
                      it’s been used by a[n] automobile dealership, it’s been used
                      by a limousine company. There [have] been many different


                                               41
                         uses of the garage. There [have] also been many different
                         uses of the aviation side of the property. I believe all of
                         those uses can be permitted. Are permitted.

               Q         So by your analysis are you saying the parking structure
                         and parking lot, for example, can be both used as an
                         amenity for Mr. Perkins’s proposed development of high
                         end airplane hangars and for a parking business for the
                         main terminal?

               A         I’m not aware of the details of what he was conceiving of,
                         but there’s certainly plenty of area on that property to
                         provide parking for hangars in the immediate proximity to
                         those new hangars. The parking structure is on one corner
                         of the property.

               Q         That wasn’t my question. If the parking structure is used as
                         an amenity for the hangars, that is, as a place for people to
                         park their cars when they go to the hangars, it can’t also be
                         used for a parking business, as you propose, can it?

               A         Depending how many cars, you would simply allocate a
                         number of spaces to that use and that would reduce . . . the
                         number of cars you could park in there for people who are
                         going to the main terminal.

                                                 ***

               Q         And did you make a highest and best use determination?

               A         I did not.

Id. at 2442-45 (Reed).

       In addition, Mr. Reed conceded that the success and therefore the profitability of the
parking facility he envisioned was based on an unsupported assumption that individuals currently
parking their cars either in Dallas’s facility or in one of the private facilities would transfer their
business to a parking lot on Lemmon Avenue:

               Q         Surely the City of Dallas doesn’t want to empty its own
                         parking lot in order to fill the Lemmon Avenue parking lot?

               A         I don’t believe they would empty it. I believe what they
                         would do is simply better utilize it. Structure A, which is
                         the closest, could be purely for short term, people who are


                                                  42
                       called meters and greeters, people who come to the airport
                       to meet and pick up somebody. Thereby, you’d get very
                       high turnover and very high daily revenue off of that
                       parking garage.

               Q       But they already get that revenue, presumably, right?

               A       They are getting mostly long-term parking. People are
                       paying the rate because it’s relatively low. At $14 a day it
                       is a fairly low rate.

               Q       Right, but back to my point. If you’re going to capture 22
                       percent of the market, you’re going to have to get, you’re
                       going to have to take those cars out of someone else’s lot
                       because we already have ample parking today, right?

               A       Yes. They will be taken out of both types of parking
                       products, either the structured parking or the surface lots.

               Q       Got it. It’s a fact, though, isn’t it, that you’ve done no
                       market study that would support your assumption that
                       either those who park at the city lots would move to this
                       remote parking or those who park at the existing remote
                       parking lots would move to the Lemmon Avenue parking
                       business?

                                               ***

               A       I have not[.]

Id. at 2425-27; see also id. at 2428-29.

        Finally, Mr. Reed admitted that rather than estimate how much it would cost to shuttle
passengers back and forth from the proposed parking garage to the main terminal, he relied upon
figures devised by Love Terminal Partners to shuttle passengers from a garage it planned to build
across the street from the Lemmon Avenue terminal to the terminal:

               Q       Let’s talk now about how people get from the parking
                       structure to the main terminal. As I understand it, you
                       anticipated running a van service, correct?

               A       That’s correct.




                                                 43
                  Q      And that would be a van that does a circular route from the
                         parking lot, or the parking structure, over to the main
                         terminal and back again, right?

                  A      That’s correct.

                  Q      About how many vans would you need to conduct that
                         service?

                  A      I believe the original estimates by the Love Terminal
                         Partners were five vans.

                  Q      I’m a little confused. The Love Terminal Partners were not
                         sending passengers over to the main terminal, were they?

                  A      There was a plan to shuttle across the street to the garage
                         that was planned to be built, so my understanding was, as I
                         looked at the document, that they had estimated what the
                         cost was to operate that would be.

                                                 ***

                  Q      Okay. And you didn’t make any effort to determine how
                         much it would cost, how many vans you’d need, in order to
                         take people from Lemmon Avenue all the way over to the
                         main terminal and to run that shuttle service, right?

                  A      I didn’t adjust their numbers. No.

Id. at 2435-37.

       By comparison, Mr. Hazel’s conclusion that the site could not be profitably used for
parking was based not on unsupported assumptions, but rather on city-prepared planning
documents for Love Field:

                  So the TARP, which is [a] planning document for Love Field[,]
                  has a detailed analysis of parking in the document and in the
                  appendix, and what the TARP concludes, and you can read the
                  words yourself, is that Love Field, which added 4,000 parking
                  spaces right close to the terminal in 2002 and 2003 and already had
                  parking spaces, so it now has about 7,000 really close-in parking
                  spaces, if you read the TARP, what the TARP says, is that we have
                  adequate parking for the future. We have adequate parking for the
                  average day. We have adequate parking for the typical peak day.



                                                  44
Id. at 1243 (Hazel). In addition, Mr. Hazel focused on the significant competition for parking,
from operations closer to the main terminal that already existed:

               One of those, The Parking Spot, is a national chain, and so it has
               advantages already compared to anyone who’s starting from
               scratch in a remote location because it has some corporate
               customers with big discounts, et cetera.

               The other one, Thrifty Park, is simply a car rental place that’s
               operating parking on the other side, but [its] right at the entrance as
               well.

Id. at 1245.

       Like Mr. Hazel, Mr. Anderson also discounted Mr. Reed’s proposed parking business.
According to Mr. Anderson, at 2.6 miles from the main terminal, the Lemmon Avenue terminal
was simply too far for passengers to go for parking when they could currently find parking
between 0.9 and 1.1 miles from the main terminal. Id. at 2599 (Anderson). In addition, Mr.
Anderson questioned Mr. Reed’s pricing and revenue assumptions:

               A      In essence, for the period of 2007 through 2015 he has
                      projected rates for the city garages that . . . grow at an
                      average annual rate of 4.3 percent per year.

               Q      And how does that compare with his projections for
                      increases at his proposed Lemmon Avenue parking
                      structure?

               A      During the same period he’s assuming that prices would
                      increase at an average annual rate of 10.7 percent . . . for
                      the two facilities, the garage and the surface lot. So, in
                      essence, he’s assuming that prices would increase . . . more
                      than twice as fast at the Lemmon Avenue terminal [than
                      they] would at the primary competitor, which would be the
                      city garage.

               Q      Are you aware of any reasoning that would support that
                      assumption?

               A      I’m not. I think that with a clearly deficient product
                      relative to the city garages, you would need to maintain a
                      very substantial price discount to be able to attract
                      customers.




                                                 45
                                                ***

                Q      Okay. And what percent of market share does Mr. Reed
                       project that the Lemmon Avenue parking business would
                       garner?

                A      . . . . If you look at the year 2013, which is, again, when
                       they . . . would only have one garage and one parking spot
                       on the envisioned site, . . . they would be accounting for 12
                       percent of capacity, but Mr. Reed indicates that he’s
                       assumed this facility would capture 22 percent of the
                       market, so that seems to be quite a variance between the
                       share of capacity and the share of the market. And if you
                       couple that with the strong price increases that are
                       envisioned in his projections, it just seems implausible.

                Q      Okay. Based on those calculations, what is your opinion of
                       the revenue projections that Mr. Reed makes?

                A      I believe the revenue projections are wildly overstated.

Id. at 2600-03. In addition, Mr. Anderson concluded that Mr. Reed failed to either wholly or
adequately consider expenses such as taxes, ground rent, and capital expenditures when
calculating the parking business’s operating costs. Id. at 2603-05. Correcting for these errors,
Mr. Anderson concluded that the nominal value of the property, if used as a parking business,
was $1.1 million, as opposed to Mr. Reed’s estimate of $31 million. Id. at 2605. When Mr.
Anderson further refined his figure by discounting the cash flow value, his $1.1 million figure
was reduced to negative $1.9 million. Id. at 2606. Ultimately, Mr. Anderson concluded that
using the property for a parking business was “not an economically viable use.” Id.

         Finally, the court notes that even though the proposed sixteen-gate terminal was never
built, the evidence demonstrates that there was a market for plaintiffs’ property at the time of the
taking. As explained by Ms. Meehan, whom the court qualified as an expert in forecasting
airport passenger demand, 31 the airline industry suffered a deep recession from 2001 to 2005:

                . . . The significance of this period is that for the network carriers,
                which are most of the industry, . . . during that four and a half 2001
                to mid-2005 period, they actually lost more money than they had
                ever made, so it was a startling period for the network carriers. It
                wasn’t just caused by 9/11. It was a recession that started in the
                spring of 2001, but 9/11 was the nail in the coffin.



       31
            Tr. 585-86 (Meehan).

                                                  46
Id. at 603 (Meehan). By 2006, however, the industry had recovered. PX 89 at 35. As a result,
and in anticipation of the Wright Amendment being repealed, plaintiffs began to engage in
discussions with carriers such as Jet Blue and Pinnacle about acquiring the leasehold. Tr. 84-87
(McNamara); 485-87 (Naul). Had the WARA not been enacted, plaintiffs would have been able
to realize the value of their leasehold. Instead, following the enactment of the WARA, the value
of plaintiffs’ property was reduced to zero. Id. at 1424-25 (Massey).

       In conclusion, the court determines that the expert testimony of Messrs. Hazel and
Massey was, unlike the testimony offered by the defense witnesses, highly reliable and
persuasive. Accordingly, based upon plaintiffs’ experts’ testimony, the court finds that the
highest and best use of plaintiffs’ leasehold before the enactment of the WARA was as a
passenger airline terminal. In addition, the court determines that, following the enactment of
WARA, such use was completely prohibited. As a result, plaintiffs were deprived of all
economically viable use of the property by a regulation—a Lucas categorical taking.

       B.      In the Alternative, Plaintiffs Have Established a Taking of Their Property
               Under the NonCategorical Penn Central Factors

        As noted above, under Penn Central, the court must consider the following three factors:
(1) the economic impact of the regulation on the plaintiff; (2) the extent to which the regulation
has interfered with the plaintiff’s distinct investment-backed expectations; and (3) the character
of the governmental action. 32 Penn Cent. Transp. Co., 438 U.S. at 124. In this case, all three
factors weigh in plaintiffs’ favor.

               1.     The Economic Impact of the WARA Was Absolute; No Economic
                      Value Remained After Its Passage

        The economic impact factor is “intended to ensure that not every restraint imposed by
government to adjust the competing demands of private owners [will] result in a takings claim.”
Loveladies Harbor, Inc. v. United States, 28 F.3d 1171, 1176 (Fed. Cir. 1994) (“Loveladies
Harbor II”). Clearly, “[g]overnment hardly could go on if to some extent values incident to
property could not be diminished without paying for every such change in the general law.” Pa.
Coal Co., 260 U.S. at 413. Although there is no “automatic, numerical barrier preventing
compensation,” Yancey v. United States, 915 F.2d 1534, 1541 (Fed. Cir. 1990), plaintiffs must
show that the regulation caused a “serious financial loss,” Loveladies Harbor II, 28 F.3d at 1177.
Thus, an analysis of the economic impact of the governmental action requires “a comparison of
the market value of the property immediately before the governmental action with the market
value of that same property immediately after the action.” Cane Tenn., Inc. v. United States, 57
Fed. Cl. 115, 123 (2003); see also Keystone Bituminous Coal Ass’n v. DeBenedictis, 480 U.S.
470, 497 (1987); Walcek v. United States, 49 Fed. Cl. 248, 258, 267 (2001). This fair market
value, in the context of a taking, is based on the property’s highest and best use. See Olson v.

       32
           “The Penn Central factors–though each has given rise to vexing subsidiary questions–
have served as the principal guidelines for resolving regulatory takings claims that do not fall
within the physical takings or Lucas rules.” Lingle, 544 U.S. at 539.

                                                47
United States, 292 U.S. 246, 255 (1934). Finally, “[t]he economic analysis is often expressed in
the form of a fraction, the numerator of which is the value of the subject property encumbered.”
Id. at 258; see also Fla. Rock Indus., Inc. v. United States, 18 F.3d 1560, 1567 (Fed. Cir. 1994).

        Plaintiffs argue that the enactment of the WARA destroyed “all profitable use” of their
property. Pls.’ Posttrial Br. 33. According to plaintiffs, even if they had been able to profit from
utilizing the property for automobile parking or as an FBO, those “nominal uses” would not have
provided enough revenue for plaintiffs to cover their approximately $1.8 million annual rent and
carrying expenses. Id. at 33-34. In addition, plaintiffs argue that as a result of the passage of the
WARA, they were unable “to recoup any of [their] investment through operation or sale of the
leasehold.” Id. at 34.

        Defendant counters that the enactment of the WARA had absolutely no economic impact
on the market value of plaintiffs’ leasehold. Def.’s Posttrial Br. 65. Specifically, defendant
claims that (1) plaintiffs lost millions in the years before the passage of the WARA and had no
agreements in place at the time the legislation was enacted that would have reversed that loss; (2)
plaintiffs offered no evidence as to the value of their leasehold immediately before the enactment
of the WARA, thus rendering their valuations meaningless; and (3) plaintiffs’ leasehold was
worth the same amount before and after the WARA passed. Id. at 67-83.

       In resolving this issue, the court is again persuaded by the well-reasoned testimony of
Messrs. Hazel and Massey. Mr. Hazel stated unequivocally that the Master Lease lacked any
pecuniary value following the enactment of the WARA:

               First, no economically beneficial uses remained for the 26.8-acre
               site covered by the Virginia Aerospace lease following the
               determination that it could not be used as a passenger airline
               terminal. The prohibitions against the use of the Site for either a
               passenger terminal or aircraft maintenance meant that the leasehold
               for the Site had no economic value. The cost of facilities
               demolition and site remediation, the lease requirement that the
               lessee invest a minimum of $5 million in capital improvements,
               and the payment of ground rent all combine to render this Site of
               no economically beneficial use.

PX 91 at 20. Mr. Massey, testifying as to the value of the Sublease, went even further,
concluding that it had a negative value following the WARA’s passage. Thus, based on the
testimony of Messrs. Hazel and Massey, the court concludes that plaintiffs suffered a serious
financial loss. 33 As there can be no greater diminution in value than 100% to qualify for
compensation as a noncategorical regulatory taking, this factor weighs entirely in plaintiffs’

       33
           While Mr. Perkins testified that the value of the Sublease remained the same before
and after the enactment of the WARA, thus resulting in a 0% diminution in value, the court is not
persuaded by his testimony because his assessment was not based on the property’s use as a
commercial aviation terminal, its highest and best use.

                                                 48
favor. Furthermore, although Hampstead was able to continue to pay the $3.8 million in carrying
costs for 2.5 years while engaged in litigation over the WARA, because the statute’s economic
impact was so complete in that there was no hope of using the property in any economically
viable way, Hampstead was forced to cease paying rent, resulting in its ultimate eviction from
the site.

               2.      The WARA Destroyed Plaintiffs’ Distinct Investment-Backed
                       Expectations

        Consideration of this factor is intended “to limit recoveries to property owners who can
demonstrate that ‘they bought their property in reliance on a state of affairs that did not include
the challenged regulatory regime.’” Cienega Gardens v. United States, 331 F.3d 1319, 1346
(Fed. Cir. 2003) (quoting Loveladies Harbor II, 28 F.3d at 1177). In order to satisfy this
criterion, plaintiffs must demonstrate that their investment-backed expectations were objectively
reasonable. Id. (citing Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1005 (1984)). In other
words, such an expectation “must be more than a ‘unilateral expectation or an abstract need.’”
Ruckelshaus, 467 U.S. at 1005 (quoting Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449
U.S. 155, 161 (1980)).

        Defendant advances three arguments in support of its position that plaintiffs lacked
distinct investment-backed expectations. First, according to defendant, plaintiffs could not have
had a reasonable investment-backed expectation that they would be able to build a sixteen gate
terminal on their property at the time they acquired their leasehold because the plans for the
sixteen-gate terminal were not created until 2012. Def.’s Posttrial Br. 83. Second, defendant
argues that when Love Terminal Partners acquired the Sublease in 1999, it was for continued use
as a terminal by Legend and other airlines as well as for parking, id. at 84-85, and that when
Virginia Aerospace acquired the Master Lease in 2003, it was “for auto parking and plane
storage,” id. at 86. Third, defendant argues that when plaintiffs acquired their leasehold
interests, they would not have been able to build a 16-gate terminal on the property. Id. at 87.
According to defendant, the proposed 16-gate terminal was designed to offer “regularly
scheduled passenger service to destinations throughout the United States, on aircraft holding 140
or more passengers, from mid-2008 onward,” service that would not have been permitted in 1999
and 2003. Id.

        Plaintiffs counter that at the time they acquired their leasehold, they did have a
reasonable investment-backed expectation that they would use their property for commercial
passenger services. Pls.’s Posttrial Br. 43. In support of their contention, plaintiffs noted that as
part of its due diligence, Hampstead did the following: (1) examined all legal issues surrounding
Love Field, including the Wright Amendment; (2) created financial models reflecting the
profitability of Legend or any other airline flying out of the Lemmon Avenue terminal; (3)
surveyed the real estate surrounding Love Field; (4) evaluated the demand for 56-seat aircraft;
and (5) considered the value of gate rentals at the Lemmon Avenue terminal. Id. at 35-37. As a
result of these efforts, plaintiffs contend, they went ahead with their investment of $60 million in
the Lemmon Avenue terminal, plus an additional $6.5 million to purchase the Master Lease,
believing that the investment would be profitable irrespective of Legend’s success or failure. Id.


                                                 49
at 38-40. Finally, plaintiffs argue that no amount of due diligence could have predicted the
complete destruction of the Lemmon Avenue terminal, as specified by the WARA. Id. at 40.

        The first step in the court’s analysis is to determine whether plaintiffs actually expected
or actually relied upon the repeal of the Wright Amendment. See Cienega Gardens, 331 F.3d at
1346. In other words, did plaintiffs expect that they would be able to use their property for
commercial aviation services? In this case, it is abundantly clear that they did.

       The strongest proof of plaintiffs’ plans for the leasehold is the extent to which Hampstead
engaged in due diligence prior to acquiring the property. As detailed above, such efforts
included extensive internal reviews of real estate, legal, and financial issues by Mr. Read and his
team, as well as the hiring of various external consultants to review Legend’s business plans and
examine data Legend had gathered as part of its own due diligence efforts—even though
Hampstead’s plans for the terminal were not tied to Legend’s success as an airline.

       In addition, according to Mr. Read, Hampstead accorded great weight to the 1992 DOT
study. The DOT study found that there would be tremendous benefit to consumers if the Wright
Amendment was abolished, because of increased competition: 34

               A change to the Wright Amendment will result in more service,
               more competition, lower fares, and more traffic for the Dallas-Fort
               Worth Metroplex and the region. Travellers to or from the
               Metroplex region will save an estimated $183 million per year in
               air fares. The amount of additional service that can be provided at
               Love Field beyond the 214,000 annual operations today will be
               limited by airspace interactions caused by Love Field’s proximity
               to Dallas-Fort Worth Airport and the orientation of its runways in
               relation to those at Dallas-Fort Worth Airport. Safety will be
               maintained by FAA-imposed procedures, and noise impacts on the
               region will continue to decline as older “Stage 2” aircraft are
               phased out. Aircraft delays would become a significant problem
               only if operations reach the unlikely level of 360,000 operations
               annually. Under all possible scenarios, Dallas-Fort Worth Airport
               will continue to grow and remain the region’s dominant airport.

PX 9 (LTP-020284); see also Tr. 633 (Meehan); PX 89 at 11-13.


       34
          Movement to repeal the Wright Amendment began as early as 1987, when Senator
Robert Dole of Kansas introduced an amendment to an appropriations bill proposing a
modification of the Wright Amendment to permit Southwest to fly to Witchita, Kansas from
Love Field. PX 9 (LTP-020310). Two years later, in 1989, Congressman Dan Glickman of
Kansas, along with sixteen original cosponsors, introduced a bill calling for the total repeal of the
Wright Amendment. Id. No action was taken. Congressman Glickman along with seventeen
cosponsors reintroduced the bill in 1991 but again, no action was taken. Id. (LTP-020311).

                                                 50
       Finally, Mr. McNamara, Hampstead’s founder, testified that Hampstead acquired the
Legend Avenue terminal specifically because it believed that the Wright Amendment would be
repealed:

              A      In the Legend terminal we looked at it as if all the signs
                     were that the Wright Amendment was going away. The
                     terminal itself, we knew that the underlying lease had all
                     these rights to fly, and that was a major advantage to have
                     an airport that was so strategic that you could . . . own this
                     leasehold real estate in a place that was such a dominant
                     airport.

                                              ***

              Q      Now, you’ve talked a bit about the Wright amendment. I’d
                     like to go back to that discussion for a moment and ask how
                     did the existence of the Wright Amendment affect
                     Hampstead Group’s decision to acquire the subject
                     property back in 1999?

              A      Well, it was clear that the Wright Amendment was on its
                     way out and that early on Southwest was a - - you had a
                     very unusual circumstance because you had Southwest at
                     Love Field and you had DFW, two major airlines at DFW.
                     And so gradually Southwest was moving toward a decision
                     to fight to open up the Wright Amendment, and Southwest
                     was really the one who could have helped pull it off. And
                     we believed that.

                     There was congressional pressure from primarily Jeb
                     Hensarling and one other congressman there to try to open
                     up the Wright Amendment because Dallas itself had the
                     highest airfares in the nation because DFW was basically a
                     monopoly for American Airlines. They didn’t want to lose
                     their pricing power with a competitor at Love Field.

              Q      Did you ever express to anyone your belief that the Wright
                     Amendment was on its way out, was going to be repealed?

              A      Oh, yes. Anyone who would ask me.

              Q      Okay.




                                               51
               A      I mean, it was the talk of everywhere in Dallas. I mean,
                      people believing this thing was going away.

Tr. 67, 81-82 (McNamara).

         Mr. McNamara also indicated that Hampstead put a great deal of stock in Mr. Swensen’s
belief, following Mr. Swensen’s attendance at the one-day investor’s meeting, 35 that the
investment was sound:

               A      . . . . Coincidently, David Swensen was in town on some of
                      the Yale related activity and I said look, why don’t you
                      come in and sit down with us while we go through the due
                      diligence and just watch us in action. You know, just take
                      a look at it and see what you think.

               Q      See what we’re doing with your money?

               A      Yeah, exactly. Which he did. So he sat in for the whole
                      five hours of our due diligence session.

               Q      And at the conclusion of that due diligence session did Mr.
                      Swensen express any opinion as to his state of mind
                      regarding this potential investment?

                                               ***

               A      . . . . Yes. David said it looks like you’ve covered all the
                      bases, and I see no reason why you shouldn’t do this.
                      Furthermore, just an aside. If he had even winked that he
                      didn’t think we should do this I wouldn’t have done it. I
                      mean, here you have this guy in the room with you at the
                      time, that he’s gone through the whole process you’ve gone
                      through, and if there was any thought that [it] was
                      imprudent of us to do I wouldn’t have done it.

Id. at 76-77. Thus, plaintiffs have proven that they actually expected or actually relied upon the
repeal of the Wright Amendment.

       Turning to the second step in the court’s analysis, determining whether a reasonable
investor in Hampstead’s position would have believed that the Wright Amendment would be

       35
           Although Mr. Read, in a June 23, 1999 memorandum from Hampstead to its investors
regarding Legend Airlines, does not reference the Wright Amendment, the court does not find
that this document stands for the proposition that Hampstead did not consider its repeal a
significant factor in its decision to invest in Legend. See JX 11.

                                                52
repealed, thereby opening up the market at Love Field, see Cienega Gardens, 331 F.3d at 1348,
the court is persuaded by the testimony of Ms. Meehan. Significantly, in this case, it is clear that
Hampstead’s belief that the Wright Amendment would be repealed was reasonable for the simple
fact that Hampstead was not alone in believing that the repeal would happen.

       Ms. Meehan, who specializes in forecasting passenger demand, described what would
occur at Love Field following the repeal of the Wright Amendment:

               . . . Love Field non-stop airline schedules would expand to include
               many locations outside the nine states allowed by the Wright
               Amendment. Repeal would require longer-haul aircraft, and a
               terminal facility able to accommodate them. [Love Terminal
               Partners/Virginia Aerospace (“LTP/VA”)] would therefore
               reconfigure the existing Lemmon Avenue facility from the 6 gates,
               designed for smaller regional aircraft, to a facility that would
               accommodate the aircraft preferred by Love Field’s existing and
               prospective customers: the narrow-body (single aisle) aircraft.
               Examples of those aircraft are the Boeing 737-700 (used by
               Southwest Airlines) or the A320 (used by JetBlue).

PX 89 at 1.

       She then described Southwest’s efforts to repeal the Wright Amendment, local support
for Southwest’s campaign, and the resulting concern on the part of American and DFW:

               In November 2004, Southwest began an aggressive campaign to
               repeal the Wright Amendment. As part of the “Wright is Wrong”
               campaign, Southwest developed a website,
               www.SetLoveFree.com, and released a 4-page press packet
               detailing its opposition to the Wright Amendment. Southwest
               argued that after 26 years “the Wright Amendment is an anti-
               competitive relic.”

                                               ***

               Nor was Southwest the only one pushing for repeal of the Wright
               Amendment. Local citizen groups and individuals also lobbied for
               the repeal of the Wright Amendment. Many brought their support
               directly to Southwest—in October 2005, Southwest sent over
               200,000 signatures it had collected through a petition drive, and
               40,000 messages from the SetLoveFree website to Congress.

                                               ***




                                                53
               In response to Southwest’s lobbying, American Airlines and DFW
               both retained expert consultants to examine the impact of the
               repeal of the Wright Amendment. The conclusions of both studies
               were that Congress should maintain the restrictions of the Wright
               Amendment because doing otherwise would have severe
               implications for DFW and American Airlines.

                                               ***

               With repeal of the Wright Amendment becoming inevitable,
               American Airlines began to plan for change. In February of 2005,
               American Airlines Chairman and CEO Gerard Arpey said, “Were
               the Wright Amendment to be repealed, we would have to build an
               operation at Love Field because that is where the customers are
               going or want to go.” In December of 2005, American announced
               that it was returning to Love Field, signaling the airlines’ belief
               that the Wright Amendment was close to being repealed.

PX 89 at 10-13.

     Ms. Meehan also commented on the reaction by Dallas to the likelihood that the Wright
Amendment would be repealed:

               Knowledge of the imminent repeal of the Wright Amendment is
               evident in the premise for the report prepared for Dallas Love Field
               entitled, “Dallas Love Field Impact Analysis in the Absence of the
               Wright Amendment”, May 31, 2006. . . . The City of Dallas
               prepared the report to develop future air service scenarios at Dallas
               Love Field that could realistically result if the Wright Amendment
               is repealed and compare those results to the environmental results
               that were contained in the 32-gate full build-out scenario included
               in the 2001 Dallas Love Field Master Plan (unanimously approved
               by the Dallas City Council and based on the assumed existence of
               the Wright Amendment). The very comparison conducted in the
               report provides further evidence of the market’s perspective—the
               Wright Amendment would be repealed in favor of more
               competition.

Id. at 13-14. Like the report prepared by Dallas, the DOT study referenced above further
demonstrates that it was reasonable for an investor in Hampstead’s position to believe that major
changes were coming to Love Field.

        Finally, the court notes that no amount of due diligence on Hampstead’s part, or on the
part of any investor in its position at the time, could have predicted the devastating effect the
WARA would ultimately have. According to Mr. McNamara, had he had any idea about the


                                                54
way in which the Wright Amendment would be repealed, Hampstead would not have acquired
the leasehold:

               Q      Mr. McNamara, as you sit here today how do you evaluate
                      Hampstead’s decision to invest in Love Terminal back in
                      1999?

               A      Well, needless to say if when we did our underwriting,
                      when you go back and look at our underwriting of all the
                      threats of the regulatory change – Wright Amendment, no
                      Wright Amendment, all those issues – we did not analyze
                      that the federal government would pass a law at the
                      [behest] of the City of Dallas, the City of Fort Worth,
                      DFW, American Airlines and Southwest, and they would
                      all get together and go pass a law and take that terminal
                      from me. That was not in our analysis. Had I known that,
                      obviously I would not have made the investment, right,
                      knowing that it’s going to be taken from you without
                      payment of any kind. However, I didn’t know that. And
                      knowing what I know about the value of that terminal, but
                      for that fact I would be very happy to make that investment
                      again.

Tr. 90 (McNamara). Therefore, the court concludes that plaintiffs acquired their leasehold
interests in reasonable reliance on the repeal of the Wright Amendment.

               3.     The WARA Destroyed Plaintiffs’ Property Rights for the Sole Benefit
                      of the Signatories to the Five-Party Agreement

        When reviewing the character of the governmental action, the “reviewing court [must]
consider the purpose and importance of the public interest reflected in the regulatory imposition.
In effect, a court [must] balance the liberty interest of the private property owner against the
Government’s need to protect the public interest through imposition of the restraint.” Loveladies
Harbor II, 28 F.3d at 1176. The court does so by considering “the actual burden imposed on
property rights, [and] how that burden is allocated.” Lingle, 544 U.S. at 543.

        Defendant argues that “Congress enacted WARA to effect the orderly removal of the
Wright Amendment’s restrictions on scheduled air passenger service at Dallas Love Field,” and
that the “WARA’s text shows Congress’s intent to strike a balance between introducing forms of
scheduled air passenger services that had not been offered at Love Field since the construction of
DFW Airport, and minimizing the burden of those services on the surrounding environs.” Def.’s
Posttrial Br. 88. Defendant argues further that “Congress’s goal of authorizing service from
Dallas Love Field that had not been offered there since the creation of DFW Airport, while
minimizing the community and environmental impacts of such an increased range of services, is
an important one, and [ ] should be respected.” Id. at 89. Finally, defendant argues that the


                                               55
WARA’s cap on gates at Love Field applied to all parties equally: “[T]he statute equally
restricts the City of Dallas, Plaintiffs, and anyone else from exceeding the 20-gate limit,
regardless of the number of gates they might have had the right to construct before the WARA.”
Id.

        Plaintiffs, on the other hand, characterize the enactment of the WARA as follows:

                Ouster of LTP/VA, akin to a physical taking, is exactly what the
                [WARA] accomplished here. The statute required demolition of
                LTP/VA’s airline gates and prohibited them from ever again using
                this property for air passenger service. The purpose of this
                provision was to clear the way for Southwest and American
                airlines to divide up the Dallas market by limiting Love Field to 20
                airline gates (thus limiting the number of commercial airline flights
                at Love Field), protecting DFW’s interest in keeping flights
                coming in to that airport rather than the much more convenient
                Love Field. LTP/VA’s air passenger business, which stood in the
                way of this plan, had to be eliminated—both physically in the case
                of the terminal gates and economically by the prohibition on air
                passenger service.

Pls.’ Posttrial Br. 42.

        The court agrees with plaintiffs’ assessment of the character of the government’s action.
While, as defendant argues, the stated goal of the WARA may have been to strike a balance
between the need to increase air passenger services from Love Field while minimizing the
burden on the surrounding community, the way in which this stated goal was accomplished did
not treat all parties equally. The WARA, which was the codification of the Five-Party
Agreement, was enacted solely to protect the interests of two cities (Dallas and Fort Worth), two
airlines (Southwest and American), and a competing airport (DFW), all to the detriment and
expense of plaintiffs. Indeed, the statute was clearly anticompetitive, a fact acknowledged by the
United States District Court for the Northern District of Texas:

                By reducing the flight output at Love Field through a 20-gate
                restriction, allocating the gates at Love Field to uphold
                Southwestʼs dominance over the short-haul market, and requiring
                that the LTP Terminal be demolished, the [WARA] almost
                undoubtedly conflicts with the Sherman Act. . . . But in the case of
                airline competition in the North Texas region, Congress is willing
                to tolerate and sanction some anticompetitive behavior as a means
                of effecting the eventual end to the Wright Amendment restrictions
                that hamstring domestic flights to and from Love Field.

Love Terminal Partners, L.P. v. City of Dallas, Tex., 527 F. Supp. 2d 538, 560 (N.D. Tex. 2007).



                                                 56
         In addition, because the WARA not only called for the destruction of the Lemmon
Avenue terminal gates but prohibited plaintiffs from ever again using the property as a
commercial passenger air terminal, the impact of the WARA was akin to a physical taking. As
noted by the court in its previous opinion, “[w]hile the Supreme Court’s regulatory takings
jurisprudence cannot be characterized as unified, courts aim[] to identify regulatory actions that
are functionally equivalent to the classic taking in which the government directly appropriates
private property or ousts the owner from his domain,” Love Terminal Partners, L.P., 97 Fed. Cl.
at 376 (internal quotation marks omitted), and such a regulatory action is exactly what occurred
in this instance.

        In short, as part of its ad-hoc, circumstances-specific analysis, the court concludes that
plaintiffs have also demonstrated a taking of the entire 26.8-acre leasehold under the Penn
Central factors.

                        RELIEF TO BE AWARDED TO PLAINTIFFS

I.     Just Compensation

     The task of determining what amount of money a plaintiff is owed for a Fifth
Amendment taking of its property falls exclusively to the judicial branch:

               [Inverse condemnation] suits [are] based on the right to recover
               just compensation for property taken by the United States for
               public use in the exercise of its power of eminent domain. That
               right was guaranteed by the Constitution. The fact that
               condemnation proceedings were not instituted and that the right
               was asserted in suits by the owners did not change the essential
               nature of the claim. The form of the remedy did not qualify the
               right. It rested upon the Fifth Amendment. Statutory recognition
               was not necessary. A promise to pay was not necessary. Such a
               promise was implied because of the duty to pay imposed by the
               amendment. The suits were thus founded upon the Constitution of
               the United States.

Jacobs v. United States, 290 U.S. 13, 16 (1933).

        Having concluded that plaintiffs are entitled to just compensation for the per se physical
taking of the six passenger gates at the Lemmon Avenue terminal and for the regulatory taking of
the entire 26.8-acre leasehold, the court must therefore now determine the amount for which the
federal government is liable.




                                                 57
       A.      Fair Market Value

               1.      Legal Standard

        When property has been taken, the owner “is entitled to be put in as good a position
pecuniarily as if his property had not been taken. He must be made whole but is not entitled to
more.” Olson, 292 U.S. at 255; accord Ga.-Pac. Corp. v. United States, 226 Ct. Cl. 95, 105
(1980) (“In the context of a fifth amendment taking, just compensation has been interpreted to
mean ‘the full monetary equivalent of the property taken. The owner is to be put in the same
position monetarily as he would have occupied if his property had not been taken.’” (quoting
Almota Farmers Elevator & Whse. Co. v. United States, 409 U.S. 470, 473-74 (1973))). Just
compensation “means in most cases the fair market value of the property on the date it is
appropriated.” Kirby Forest Indus., Inc. v. United States, 467 U.S. 1, 10 (1984) (citation
omitted). “Under this standard, the owner is entitled to receive ‘what a willing buyer would pay
in cash to a willing seller’ at the time of taking.” United States v. 564.54 Acres of Land, 441
U.S. 506, 511 (1979) (quoting United States v. Miller, 317 U.S. 369, 374 (1943)). The Supreme
Court defined the standard as follows:

               Just compensation includes all elements of value that inhere in the
               property, but it does not exceed market value fairly determined.
               The sum required to be paid the owner does not depend upon the
               uses to which he has devoted his land but is to be arrived at upon
               just consideration of all the uses for which it is suitable. The
               highest and most profitable use for which the property is adaptable
               and needed or likely to be needed in the reasonably near future is
               to be considered, not necessarily as the measure of value, but to the
               full extent that the prospect of demand for such use affects the
               market value while the property is privately held.

Olson, 292 U.S. at 255; see also Miss. & Rum River Boom Co. v. Patterson, 98 U.S. 403, 408
(1878) (“The inquiry . . . must be what is the property worth in the market, viewed not merely
with reference to the uses to which it is at the time applied, but with reference to the uses to
which it is plainly adapted; that is to say, what is it worth from its availability for valuable
uses.”). “Highest and best use has been defined as [t]he reasonably probable and legal use of
[property], which is physically possible, appropriately supported, financially feasible, and that
results in the highest value, including those uses to which the property may be readily
converted.” Brace v. United States, 72 Fed. Cl. 337, 350 (2006) (quoting Loveladies Harbor I,
21 Cl. Ct. at 156) (internal quotation marks omitted); accord Appraisal Institute, supra, at 278.

        In addition to the fair market value, an award of just compensation necessarily includes
interest. Miller v. United States, 223 Ct. Cl. 352, 399 (Ct. Cl. 1980) (“Where there has been an
appropriation of private property for public use within the meaning of the fifth amendment, ‘the
right to interest[,] or a fair equivalent, attaches itself automatically to the right to an award of
damages.’” (quoting Shoshone Tribe v. United States, 299 U.S. 476, 497 (1937))). That interest
accrues from the date of the taking until the date the government disburses payment. See Kirby


                                                 58
Forest Indus., Inc., 467 U.S. at 10. Furthermore, where an inverse condemnation has occurred,
resulting in a delay of payment, such interest must be compounded. See Whitney Benefits, Inc.
v. United States, 30 Fed. Cl. 411, 415 (1994) (“[B]ecause of the long delay since the date of
taking in this case, the award of compound interest is not only proper, but its denial would
effectively undercut the protections of the fifth amendment to our Constitution.”); see also
Vaizburd v. United States, 67 Fed. Cl. 499, 504 (2005) (“Compounding we view as a routine
means by which a reasonable person would protect themselves, over an extended period of time,
from erosion of their investment.”); Bowles v. United States, 31 Fed. Cl. 37, 52-53 (1994)
(“[P]rohibiting the landowner from recovering compound interest acts to retroactively reduce the
value of just compensation at the time of the taking by undervaluing its present worth.” (citation
omitted)).

          Ultimately, the determination of just compensation “should be carefully tailored to the
circumstances of each particular case.” Otay Mesa Prop., L.P. v. United States, 670 F.3d 1358,
1368 (Fed. Cir. 2012). In “dealing with a thorny issue of valuation, it is for this court to
‘synthesize in its mind the . . . record before it, determine to what extent opinion evidence rested
on facts, consider and weigh it all, and come up with figures supported by all the evidence
. . . . ʼ” Wash. Metro. Area Transit Auth. v. United States, 54 Fed. Cl. 20, 36 (2002) (quoting
United States v. N. Paiute Nation, 183 Ct. Cl. 321, 346 (1968)). As the Court of Federal Claims
has explained, “in the context of setting just compensation . . . valuation transcends mere
mathematical calculation, and involves the exercise of judgment–first by the experts and
ultimately by the court.” Wash. Metro. Area Transit Auth., 54 Fed. Cl. at 36 (citing Standard Oil
Co. of N.J. v. S. Pac. Co., 268 U.S. 146, 156 (1925) (“It must be remembered in condemnation
cases valuation is not a matter of mere mathematical calculation, but involves the exercise of
judgment.”)).

               2.      Analysis

        As stated in Olson, although a property’s highest and best use is not necessarily the
absolute measure of value, in this case, given the (1) industry-wide expectation that the Wright
Amendment would be repealed; (2) restrictions on use imposed by the Master Lease; and (3) fact
that the court heard contradictory testimony concerning the profitability of utilizing the property
either as a parking garage or as a custom-built hangar development, the court will base its just
compensation determination on a valuation of the property as if it was being used as a
commercial aviation terminal, its highest and best use. Because only plaintiffs offered expert
testimony on the value of the property if used as a commercial aviation terminal, only the expert
valuations provided by Messrs. Miller, 36 and Massey are relevant to the court’s analysis. The

       36
           Mr. Miller is an aviation consultant who specializes in the valuation of aviation assets.
Tr. 2681 (Miller). He is the director of public private partnerships at Royal HaskoningDHV, and
has also served as president of InterVistas Consulting LLC. PX 114 at 38. He has a bachelor’s
and a master’s degree in economics from West Virginia University, and a juris doctor from the
University of Tulsa College of Law. Id. at 2684. Mr. Miller has almost twenty years of
experience valuing assets, including airports, airline assets, and FBOs. Id. at 2682. Mr. Miller
has performed over 100 airport lease valuations throughout the course of his career, including for

                                                59
court must still determine, however, whether their reports are worthy of reliance. See Celsis In
Vitro, Inc. v. CelizDirect, Inc., 664 F.3d 922, 930 (Fed. Cir. 2012) (finding “no error in the
district court’s reliance on [ ] unrebutted expert testimony” because such testimony was
reasonable and supported by the record).

                      a.      The Entire Leasehold

        The court begins its valuation of the entire leasehold by summarizing Mr. Anderson’s
expert report and then Mr. Miller’s expert report, wherein he reviews Mr. Anderson’s work and
ultimately concludes that it meets industry standards.

        Mr. Anderson began his assessment by researching the “general expectations in the
industry with regards to the Wright Amendment and how that would impact the value of the
lease.” Tr. 878 (Anderson). Based on the findings and conclusions of a colleague, Ms. Meehan,
he noted the following:

               The date of the valuations presented in this report is October 13,
               2006, the date on which the Wright Amendment Reform Act was
               signed into law. I express my expert opinion of the value of the
               Subject Asset as of that date assuming no Wright Amendment
               Reform Act, but otherwise fully reflecting the environment of that
               time where there was an expectation of the rescission of the Wright
               Amendment.

PX 88 at 6. He then concluded, again based on Ms. Meehan’s work, that there was demand for
additional gates. Tr. 878 (Anderson). Next, in order to determine whether and how that demand
could be satisfied using plaintiffs’ property, he examined three factors. Id. at 878-79.

        First, he calculated what a terminal operator would require in terms of revenue. Id. at
882. Specifically, he examined the revenue that plaintiffs would expect to earn in four categories
(1) food and beverage concessions, (2) retail concessions, (3) rental car concessions, and (4) car
parking—ultimately arriving at a dollar estimate per passenger for each of the revenue streams.
Id. at 883-93. He then calculated the total amount of revenue that would be generated for each
year, beginning in 2008 and ending in 2036. Id. at 893-94. He explained that he projected
revenues up to 2036 because, although he was aware that plaintiffs’ leases expired earlier, he felt
that anyone investing in this type of facility would need a longer recovery period than what was
allowed under the existing lease and that such lease renewals were typically granted. Id. at 894-
95.




three terminals at the John F. Kennedy International Airport (“JFK”) in New York City; Chicago
Midway International Airport (“Chicago Midway”); Sanford Orlando International Airport in
Florida; and the airports in Recifi, Peru, and San Juan, Puerto Rico. Id. at 2687-88. Many of
these valuations were for large institutional investors. Id. at 2690-700.

                                                60
        Second, Mr. Anderson examined the types of expenses a terminal operator would likely
incur, such as (1) personnel, (2) utilities, (3) supplies, (4) maintenance, and (5) insurance—and
determined how much each would cost. Id. at 895-97. He then calculated total expenses per
passenger, also projecting these figures up to 2036. Id. at 898. In this case, his figures included
a projected increase of between three and four percent annually early in the forecast and two
percent later in the forecast. Id.

        Third, Mr. Anderson looked at related investments, also referred to as capital
expenditures. Id. at 900. Specifically, he looked at three categories of expenditures: (1) initial
development/redevelopment costs, (2) ongoing and future maintenance costs, and (3)
investments in working capital. Id. With regard to determining the cost to construct an
expanded terminal, he relied on estimates provided by Mr. Cullum, 37 finding them to be
reasonable. 38 Id. at 900-01. With regard to maintenance costs, he based his calculation on the
amount of depreciation that would occur over the twenty-five-to-thirty-year period, assuming a
portion of each year’s depreciation was reinvested in the facility. Id. at 901. Finally, with regard
to determining the working capital necessary to operate the terminal, he estimated that plaintiffs
would need enough cash to cover six months’ worth of expenses and then projected that figure
out until 2036. Id. at 901-02.

       After projecting total revenues, total expenditures, and total capital requirements, Mr.
Anderson calculated the cash flows year by year using two cash flow metrics: (1) EBITDA
(earnings before interest, taxes, depreciation, and amortization), and (2) net cash flow. Id. at

       37
           Mr. Cullum has been a construction manager and development manager for
construction projects for over thirty-three years. Tr. 980-82 (Cullum). He has an undergraduate
degree in architecture from Stanford University and a Bachelor of Architecture with honors from
the University of Texas at Austin. Id. at 978. He also has master’s degrees in city planning and
architecture and urban design from the University of Pennsylvania. Id. He has extensive
experience overseeing all aspects of construction, including design, financing, general contractor
selection, permitting, and assessing cost estimates. Id. at 983-87.
       38
            Mr. Cullum, whom the court qualified as an expert in construction management,
testified that “the estimated cost of the expanded sixteen-gate terminal as of the year 2007 would
be $60,675,034.” Tr. 1012 (Cullum); see also PX 87. In reaching this figure, he first considered
the final cost to build the Legend terminal and garage in 1999 and then projected that cost to
2007, Tr. 1013-14 (Cullum), the year after the WARA was passed. Next, he considered the
expansion cost, based on the sixteen-gate plans prepared by the GFF architectural firm. Id. at
1015. Then, he asked Denis Curtin, the director of preconstruction estimating with the Dallas-
based Rogers-O’Brien Construction Company, to review the cost to build the original terminal
and come up with a new cost to build that same terminal in 2007. Id. at 1017-20. Finally, he and
Mr. Curtin worked together to estimate the cost of building the sixteen-gate expansion in 2007.
Id. at 1020. In preparing this final estimate, Mr. Cullum also relied on estimates from two
additional companies: (1) Dallas Demolition, which provided a cost estimate for demolition; and
(2) Oliver Wyman, Inc., which provided a cost estimate for jet bridges and baggage systems. Id.
at 1022-25, 1040.

                                                 61
903-04. Finally, he determined the market value of plaintiffs’ leaseholds utilizing two
methodologies: (1) the discounted cash flow (“DCF”)-based methodology; and (2) the
multiples-based methodology. 39 Id. at 906-08. Under the DCF-based methodology, using a
discount rate of 8.3 percent, Mr. Anderson calculated that the value of plaintiffs’ leasehold
interest was $118.4 million, whereas under the multiples-based methodology, the value was
$148.6 million. Id. at 906-14. Giving equal weight to both methodologies, he ultimately
concluded that the value of plaintiffs’ property was $133.5 million. Id. at 915.

        Mr. Miller, whom the court qualified as an expert in the field of aviation consulting,
specializing in the valuation of aviation assets, 40 and whose testimony was offered for the
purpose of reviewing Mr. Anderson’s expert report, concluded that Mr. Anderson’s report “was
well done, [and critically for the court,] that it met the industry standards.” Id. at 2711 (Miller);
see also PX 114. Mr. Miller identified numerous reasons why he credited Mr. Anderson’s work.
First, Mr. Miller noted that it was common for consultants specializing in aviation asset valuation
to use both the DCF-based and multiples-based methodologies, but that the multiples-based
methodology was usually reserved for long-term leases, such as a ninety-nine-year lease. Tr.
2712-13 (Miller).

      Second, Mr. Miller concluded that Mr. Anderson had properly employed the DCF-based
methodology. Id. at 2713.

        Third, Mr. Miller conducted his own DCF analysis and compared his results to Mr.
Anderson’s. Id. at 2714. In terms of expected revenues, the two had similar figures for the
earlier years, but in the later years, Mr. Miller’s projected parking revenues were lower. Id. at
2716-17. In terms of expected operating revenues, their results were “reasonably close,” with
Mr. Miller arriving at lower amounts in the initial periods and Mr. Anderson arriving at higher
amounts beyond 2030. Id. at 2719-20. Finally, in terms of net cash flows, the two were “very
close,” with Mr. Miller showing lower figures in the latter periods, around 2025. Id. at 2720-22.
Using his own net cash flow figures and a discount rate of 7.7 percent, Mr. Miller determined
that the net present value of plaintiffs’ property was $152.1 million. Id. at 2724.

       Fourth, Mr. Miller concluded that his and Mr. Anderson’s valuations of $152.1 million
and $133.4 million, respectively, 41 were close given the underlying assumptions:



       39
          “Under the discounted cash flow-based methodology . . . the value of an asset equals
the Present Value of the net cash flows that the asset is expected to generate for its owner.” PX
88 at 4. “Under the ‘Multiples-Based Methodology,’ the value of an asset is determined by
multiplying the annual earnings (cash flow) by a factor (multiple).” Id.
       40
            Tr. 2707-08 (Miller).
       41
          Mr. Anderson concluded that the value of plaintiffs’ property was $133.5 million but
Mr. Miller testified that Mr. Anderson valued the property at $133.4 million. Tr. 2726 (Miller).

                                                 62
                  Q   Okay. Is this kind of difference in calculation of net
                      present value something you’ve seen before in other
                      valuations that you’ve done over the years?

                  A   Yes, I have.

                  Q   Okay. And how common is it?

                  A   It’s very common. It’s what makes the market. That’s why
                      we win some and we lose some in the privatization field.
                      We may come up with a different valuation than what a
                      competitive consortium would put together. We lose, they
                      win, and vice versa. Sometime we come up.

Id. at 2727. In this regard, Mr. Miller noted that (1) had he used Mr. Anderson’s 8.3 percent
discount rate, his final figure would have been $140 million, id. at 2427; (2) had he used the
multiples-based methodology, his final figure would have been $204 million, id. at 2728; and (3)
had he averaged the two numbers, his final figures would have been approximately $175 million,
id.

       Fifth, Mr. Miller concluded, based on his review of Ms. Meehan’s report and based on
his own experience, that Mr. Anderson properly assessed the property’s highest and best use. Id.
at 2730-31.

       Sixth, Mr. Miller concluded that Mr. Anderson had properly analyzed the effect of the
WARA on the property’s highest and best use based on the fact that within the aviation industry,
beginning in the early 1990s, it was widely believed that the Wright Amendment would be
repealed:

                  Q   Okay. In your opinion, would it have been more
                      reasonable, more appropriate for Mr. Anderson to have
                      limited the highest and best use of the subject property to
                      only the destinations and the types of airplanes that were
                      allowed by the Wright Amendment in 2006?

                  A   No, it was not.

                  Q   And why not?

                  A   Really for the same reason, because it was - - the
                      expectation was the Wright Amendment would be repealed,
                      and therefore the value, and it would start at that time. That
                      was the take.

Id. at 2732-33.


                                               63
        Seventh, Mr. Miller concluded that it was reasonable for Mr. Anderson to assume that
plaintiffs would be able to extend their lease with Dallas until 2036:

               A       First, I did review testimony from City officials, I believe a
                       Mr. Poole, which indicated that it was common practice for
                       the City of Dallas to extend leases based upon getting
                       something back for capital improvements, what we would
                       normally call.

                       Also, my experience both working at airports as well as in
                       my professional experience since then, it was very common
                       for airports to extend leases for good customers, as long as
                       they’re investing in the airport and creating jobs.

Id. at 2733.

        Finally, Mr. Miller concluded that it was reasonable for Mr. Anderson to rely on Mr.
Cullum’s construction cost projections because (1) Mr. Cullum had experience in the Dallas
construction market and had been involved in the construction of the Lemmon Avenue terminal,
the terminal at issue in this case, id. at 2734; (2) Mr. Cullum’s estimates, while lower than those
actually incurred at other sites (such as JFK in New York City), were appropriate because the
cost to build a terminal at other sites might be much higher due to market differences in
passenger volume, soil composition, and unionization, id. at 2736; and (3) Mr. Cullum
performed his extrapolations with input from Mr. Hazel, whom Mr. Miller had met in the early
1990s, had worked with on many occasions, and whom, in his opinion, produced a
“professionally done” expert report, id. at 2737-38.

        Defendant argues that the court should reject Mr. Miller’s valuation because it was based
on numerous erroneous assumptions. Prior to considering each of defendant’s contentions, the
court notes that defendant cites no authority, and the court cannot find any, for the proposition
that an expert must consider all possible alternatives in order for his opinion to be valid. Rule
702 of the Federal Rules of Evidence, which outlines the permitted scope of expert witness
testimony, states the following:

               A witness who is qualified as an expert by knowledge, skill,
               experience, training, or education may testify in the form of an
               opinion or otherwise if:

               (a) the expert’s scientific, technical, or other specialized
               knowledge will help the trier of fact to understand the evidence or
               to determine a fact in issue;

               (b) the testimony is based on sufficient facts or data;



                                                 64
               (c) the testimony is the product of reliable principles and methods;
               and

               (d) the expert has reliably applied the principles and methods to
               the facts of the case.

Fed. R. Evid. 702. Furthermore, the advisory committee’s note to the rule adds the following:

               When facts are in dispute, experts sometimes reach different
               conclusions based on competing versions of the facts. The
               emphasis in the amendment on ‘sufficient facts or data’ is not
               intended to authorize a trial court to exclude an expert’s testimony
               on the ground that the court believes one version of the facts and
               not the other.

Fed. R. Evid. 702 advisory committee’s note. With these principles in mind, the court now
considers defendant’s arguments.

        First, defendant argues that Mr. Miller erroneously assumed that the Wright Amendment
would be completely repealed, instead of considering the possibility that the repeal might not be
complete or immediate. Def.’s Posttrial Br. 70. However, apart from the joint statement issued
by the signatories to the Five-Party Agreement, which specified what actions were sought and
when they were sought, there is no indication that there was any consensus among those in the
aviation industry regarding the exact timing and breadth of the repeal.

        Second, defendant argues that Mr. Miller erroneously based his valuation on an
assumption that the Master Lease would be extended from 2023 to 2036. Def.’s Posttrial Br. at
74-75. However, although the original lease was due to expire on September 30, 2012, several
witnesses testified that it was customary for Dallas to extend leases at Love Field. See Tr. 2733
(Miller) (testifying “that it was common practice for the City of Dallas to extend leases based on
getting something back for capital improvements”), 1758-59, 1788-89 (Poole) (testifying that
Dallas had an established process for extending leases and that Dallas had extended leases in the
past), 2851-52 (Gwyn) (testifying that Dallas was likely to extend a lease for a good tenant at
Love Field). In addition, in its 2004 response to plaintiffs’ petition to amend the Master Lease,
although Dallas did not agree to forgo the Master Lease’s 50% rent-sharing provision, it
indicated its willingness to extend the lease for 40 years. Id. at 1782, 1785 (Poole); DX 52.

        Third, defendant argues that Mr. Miller erroneously based his valuation on the
assumption that a sixteen-gate terminal could be built on the property between 2007 and 2008 for
a cost of $60.7 million, a figure he obtained from Mr. Cullum. Def.’s Posttrial Br. 79-82.
However, the court credits Mr. Miller’s reliance on Mr. Cullum’s construction cost projections
given Mr. Cullum’s general experience in the Dallas market and specific experience with the
Lemmon Avenue terminal. See Tr. 2734 (Miller). In addition, the court accepts Mr. Miller’s
conclusion that it is inappropriate to compare the cost to build a terminal at Love Field in Dallas



                                                65
with the cost to build a terminal at JFK in New York City, given the vast differences between the
two markets. See id. at 2736.

        Fourth, defendant argues that Mr. Miller’s valuation erroneously failed to take into
account the Master Lease’s rent-sharing provision. Def.’s Posttrial Br. 76-77. According to
defendant, not only does the Master Lease apply a 50% rent-sharing provision to the relationship
between Virginia Aerospace, the lessee, and Love Terminal Partners, the sublessee, but it also
applies a 50% rent-sharing provision to the relationship between Love Terminal Partners, the
sublessee, and any sub-sublessee. Id. at 77 (citing DX 68 at 1). Defendant’s argument lacks
merit for two reasons. First, as noted above, Hampstead’s business model was explicitly
developed to avoid the payment of rent to Dallas as a result of Virginia Aerospace’s leasing of
property to Love Terminal Partners and, in fact, no payments were ever made to Dallas pursuant
to the rent-sharing provision. Second, none of the lease provisions cited by defendant supports
the proposition that the rent-sharing provision applies to rent received by Love Terminal Partners
from a third-party sub-sublessee. Although Mr. Gwyn’s December 16, 2015 letter referenced
Article XX in support of his contention that rents from a “sub-sublease, license, etc.” were
subject to the Master Lease’s rent-sharing provision, DX 68 at 1, Article XX does not so provide.
Rather, Article XX only addresses monies owed by the lessor as a result of payments from a
sublessee, not a sub-sublessee. See JX 1 (LTP-000793).

        Finally, defendant argues that Mr. Miller erroneously assumed that by mid-2008, the
commercial aviation terminal could have been used for flights to any United States destination
by airplanes carrying 140 or more passengers. Def.’s Posttrial Br. 50-51, 70. However, given
Ms. Meehan’s forecast of a vast increase in passenger demand following the repeal of the Wright
Amendment, and given Hampstead’s plans for a sixteen-gate terminal capable of meeting that
demand, Mr. Miller’s assumption that larger planes would be permitted to fly out of the Lemmon
Avenue terminal is not unreasonable.

        Thus, contrary to defendant’s arguments, the court credits Mr. Miller’s testimony and
therefore concludes that the value of the 26.8-acre leasehold is $133.5 million.

               b.      The 9.3-Acre Property

         Defendant argues that the court should reject Mr. Massey’s appraisal on the grounds that
it is neither relevant nor credible. Id. 93. In this section, the court will only address those
arguments that are novel—those arguments that defendant did not advance in reference to Mr.
Miller’s testimony.

        First, defendant argues that Mr. Massey’s cost approach to valuation was flawed because
he relied on Mr. Cullum’s estimate of the cost to construct the original six-gate terminal, a figure
that did not account for depreciation. Id. at 97-98. However, as noted above, Mr. Massey’s
replacement cost approach, which relied both on Mr. Cullum’s cost estimate and the Marshall
and Swift Commercial Estimator, did take depreciation costs into account. Tr. 1371-74
(Massey).



                                                 66
        Second, defendant argues that Mr. Massey’s conclusion that the property in the before
condition was worth $20,500,000 was significantly higher than the $12.3 million Hampstead told
its investors the property was worth in December 2005. Def.’s Posttrial Br. 93. However, as
Ms. Moog testified, the book value of plaintiffs’ assets is not the same as the market value.

       Finally, with respect to defendant’s argument that Mr. Massey violated the Uniform
Standards of Professional Appraisal Practice by (1) failing to acknowledge that his assessment
was based on a hypothetical condition—that the lease would be extended; and (2) committing a
“multi-million-dollar multiplication error,” the court notes simply that its assessment of Mr.
Massey’s testimony is not bound by professional standards and that the court has explained
above why these alleged violations do not impact the validity of Mr. Massey’s overall appraisal.

        Thus, contrary to defendant’s arguments, the court credits Mr. Massey’s testimony.
Significantly, Mr. Massey was the only expert who offered a valuation based on what the court
has deemed to be the property’s highest and best use—as an airline terminal. Furthermore,
although Mr. Massey made a significant mathematical error, in which he erroneously valued the
9.3-acre property after the enactment of the WARA at $419,000 instead of $4,000,195, that
calculation had no impact on the court’s analysis because it was based on the mistaken
assumption that 25% of plaintiffs’ parking garage could still be used for car storage when in fact,
that use was prohibited under the terms of the Master Lease. Ultimately, the court accepts Mr.
Massey’s valuation, and concludes that the property’s value at the time of the taking was
$21,165,000.

       B.      Interest

        In this case, plaintiffs’ property was the target of an inverse condemnation. Thus,
plaintiffs are entitled to interest from the date of the taking, October 13, 2006, until the date of
judgment. Furthermore, because a significant amount of time has passed since the date of the
taking and the present, just shy of 9.5 years, plaintiffs are also entitled to have that interest
compounded. The only remaining issue therefore is to determine the appropriate interest rate.

         Plaintiffs have requested that the court apply the interest rate set forth in the Contract
Disputes Act of 1978, 41 U.S.C. §§ 7101-7109 (2012) (“CDA”). Pls.’ Br. 66. In support of its
request, plaintiffs state only that CDA “interest rates have been used several times by this Court
to set forth a uniform method of establishing interest rates . . .” Id. at 67 (internal quotations
marks omitted).

       Defendant argues that if plaintiffs are entitled to an award of just compensation, to
include interest, the court should use the interest rate set forth in the Declaration of Taking Act,
40 U.S.C. § 3116 (2012) (“DTA”). Def.’s Contentions of Fact & Law 39-40. Defendant
contends that the DTA is “a standardized and uniform method for calculating delay
compensation in the direct condemnation context, [and] provides the best approximation of delay
compensation and preserves uniformity in awards among landowners in both direct and inverse
condemnation cases.” Id. at 40. Furthermore, defendant argues that “[a]bsent special proof that



                                                  67
an award calculated under the [DTA] does not satisfy the just compensation requirement of the
Fifth Amendment, this Court should not depart from the [DTA] rate.” Id.

         In awarding just compensation under the Fifth Amendment, the court emphasizes once
more that it is bound only by the Constitution, and therefore not by any statutorily-based rate
schedule. Furthermore, “[t]he court’s primary goal in determining a correct interest rate is to
employ an interest calculation that does not just ‘yiel[d] a higher or lower interest payment, but
rather . . . is the more accurate measure of the economic harm of the property owners.’” Biery v.
United States, No. 07-693L et al., 2012 WL 5914521, at *3 (Fed. Cl. Nov. 27, 2012)
(unpublished decision) (quoting NRG Co. v. United States, 31 Fed. Cl. 659, 670 n.8 (1994)).
That said, the court will now consider the use of the CDA and DTA interest rates.

        CDA interest rates were developed specifically for use “in government contract cases to
measure interest to be paid to government contractors on valid claims previously presented by
the contractors to government contracting officers.” NRG Co., 31 Fed. Cl. at 665. Under the
CDA, interest “begins to run on the date the contractor presents a proper claim to the contracting
officer and continues to run until the date of payment.” Id. “CDA interest rates are calculated
based on the applicable private commercial interest rates for new loans maturing in
approximately five years.” Id. Use of CDA interest rates thus assumes that “(1) the contractor
had borrowed in the private commercial market the entire amount of money the government
[was] ultimately found to owe the contractor, and (2) the contractor’s loan, with interest adjusted
every six months, remained outstanding until the date the government made its payment.” Id. at
666. Those assumptions may not best approximate the situation faced by a landowner because
real property is not typically “covered by outstanding loans equal to 100 percent of the value of
the property” and because “real estate loans are collateralized loans [and therefore] often can be
obtained on comparatively better terms than an unsecured five-year loan.” Id. at 667.

         The DTA, on the other hand, was specifically enacted to apply to direct condemnation
cases:

                As the Supreme Court noted, the Declaration of Taking Act had a
                twofold purpose: “to give the Government immediate possession
                of the property and to relieve it of the burden of interest accruing
                on the sum deposited from the date of taking to the date of
                judgment[, and] to give the former owner, if his title is clear,
                immediate cash compensation to the extent of the Government's
                estimate of the value of the property.”

Tulare Lake Basin Water Storage Dist. v. United States, 61 Fed. Cl. 624, 629 (2004) (quoting
Miller, 317 U.S. at 381). Pursuant to the DTA, for a period of not more than one year, “interest
shall be calculated from the date of taking at an annual rate equal to the weekly average one-year
constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve
System.” 40 U.S.C. § 3116(a)(1). For a period of more than one year, interest shall be
compounded annually. Id. § 3116(a)(2). Using DTA interest rates thus assumes that the
landowner would be able to borrow at the same rate as the government. Pitcairn v. United


                                                 68
States, 547 F.2d 1106, 1122 (1976) (“The yield on a series of hypothetical Government bonds is
not relevant in ascertaining the injury plaintiff has suffered. It measures compensation only
according to the point of view of the taker without reference to that of the owner since he is
hardly likely to be able to borrow money at the rates the Government can.”). Using DTA interest
rates further assumes “that the landowner, on the day of the taking, would have invested the fair-
market value of his property in exclusively 52-week T-bills, then rolled them over on the
anniversary of the taking each year,” thereby “(a) receiv[ing] little interest, (b) [having] no
access to the principal; and, (c) [engaging in] zero diversification.” Mark F. Hearne, II et al.,
The Fifth Amendment Requires the Government to Pay an Owner Interest Equal to What the
Owner Could Have Earned had the Government Paid the Owner the Fair-Market Value of Their
Property on the Date the Government Took the Owner’s Property, 1 Brigham-Kanner Prop.
Rights Conference J. 3, 24-25 (2012).

         In this takings case, it is the court’s view that the best way to determine the proper rate of
interest is to utilize the prudent investor rule (“PIR”). “Pursuant to this rule, the appropriate
interest rate is calculated based not on an assessment of how a particular plaintiff would have
invested any recovery, but rather on how a ‘reasonably prudent person’ would have invested the
funds to ‘produce a reasonable return while maintaining safety of principal.’” Tulare Basin
Water Storage Dist., 61 Fed. Cl. at 627 (quoting United States v. 429.59 Acres of Land, 612 F.2d
459, 464-65 (9th Cir. 1980)); accord Independence Park Apartments v. United States, 61 Fed. Cl.
692, 717 (2004) (noting that the PIR “does not require that a reference be made only to a rate of
interest on Treasury securities where the United States is the defendant”), rev’d on other
grounds, 449 F.3d 1235 (Fed. Cir. 2006). Thus, the approach is attractive because it does not
rely on the court having to perform a “complex factual assessment” of each plaintiff’s unique
circumstances at the time of the taking, Tulare Lake Basin Water Storage Dist., 61 Fed. Cl. at
628-29 (citing NRG, 31 Fed. Cl. at 668), and because the PIR more accurately reflects a
reasonably prudent investor’s experience in the marketplace. Finally, the PIR is especially well
suited to the facts of this case. Plaintiffs Virginia Aerospace and Love Terminal Partners are
entities of the Hampstead Group, a sophisticated private equity firm whose clients include large
institutional investors such as Yale, Princeton, and Stanford Universities.

        There are, however, many indices upon which the court may choose to rely. In this case,
the court will, in an exercise of its discretion, utilize the Moody’s Composite Index of Yields on
Aaa Long Term Corporate Bonds (“Moody Rate”) as the most appropriate measure of interest.
As stated by the court in Pitcairn:

               [L]ong-term corporate bond yields are an indicator of broad trends
               and relative levels of investment yields or interest rates. They
               cover the broadest segment of the interest rate spectrum. The
               corporate bond market is large, substantially in excess of long-term
               Government bonds[,] and long-term corporate yields measure basic
               trends and relative levels of interest rates from one period to
               another.




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Pitcairn, 547 F.2d at 1124; see also Sears v. United States, 124 Fed. Cl. 730, 734 (2016)
(“[W]here the United States is the defendant, the [PIR does not require] the interest rate to be
based on U.S. Treasury securities, particularly when another instrument such as the Moody’s
Aaa Index can provide a similar ‘safety of principal’ investment over a period spanning a
number of years.” (citations omitted)), 736 (discounting use of the Vanguard Balanced Index
Fund, a diversified mutual fund, as the best measure of interest due to its 7.4% volatility);
Textainer Equip. Mgmt. Ltd. v. United States, 115 Fed. Cl. 708, 718-19 (2014) (exercising
discretion to award a combination of the DTA rate and the Moody Rate); Adkins v. United
States, No. 09-503L et al., 2014 WL 448428, at *1-2 (Fed. Cl. Feb. 4, 2014) (exercising
discretion to award the Moody Rate rather than the DTA rate); Biery, 2012 WL 5914521, at *2-5
(exercising discretion to award the Moody rate rather than the DTA).

II.    Attorneys’ Fees and Costs

         Plaintiffs are also entitled to reasonable attorneys’ fees, expenses, and costs under section
304(c) of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of
1970, 42 U.S.C. § 4654(c) (2012). The court defers determining the amount due under the
statute, however, until the completion of litigation.

                                          CONCLUSION

        For the reasons stated above, the court finds that the federal government effected a per se
physical taking of the six passenger gates at the Lemmon Avenue terminal and a regulatory
taking of the entire 26.8-acre leasehold. The court further finds that plaintiffs are entitled to just
compensation in the amount of $133,500,000 plus interest (based on the Moody Rate)
compounded annually from October 13, 2006, the date of the taking, to the date of payment.
Judgment to this effect shall be issued pursuant to Rule 54 of the Rules of the United States
Court of Federal Claims because there is no just reason for delay. In due course, plaintiffs may
apply for an award of attorneys’ fees and all costs, to include appraiser and expert witness fees.

       IT IS SO ORDERED.



                                                       /s/ Margaret M. Sweeney______________
                                                       MARGARET M. SWEENEY
                                                       Judge




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