FRONT LINES: Military Base Closings
BY ROBERT FREEDMAN
Land windfall
Practitioners look for opportunity in Pentagon’s local property decisions.
The draft report by the U.S. Base Realignment and Closure Commission, which identifies military installations for expansion, realignment, or closure, may sound the death knell for facilities around the country. But for Trey Carmack, CCIM, the news is good.
Although the BRAC report isn’t final—that’s expected to come later this year after Congress’ sign-off—it’s likely to pass in substantially its current form. The report recommends relocating some 9,000 soldiers and adding jobs for some 600 civilians to Fort Benning, near Carmack’s Columbus, Ga., market.
If that BRAC recommendation is implemented, the Columbus real estate community will have the happy problem of finding where to build some 7,000 new houses, 2,000 new apartments, and thousands of square feet of office and other commercial space to accommodate the changes.
“We’re already starting to see inquiries for commercial leasing,” says Carmack, commercial division manager at Coldwell Banker Kennon, Parker, Duncan & Key.
The news isn’t so good in many other communities. The report recommends expanding installations in some 130 communities, but either closing or paring back more than 300 facilities.
In all, some 119,000 military and 85,000 civilian positions will be reshuffled, and 11,000 military and 18,000 civilian positions will be lost. On the ground, these changes can cause a ripple effect for real estate as retail and local restaurant sales drop, base service businesses like technology support providers close shop, and for-sale and rental housing demand sags.
How bad is bad?
Concerns about the impact of the BRAC report are understandable, but “base closures may not be as traumatic as people think,” says Ted Bradshaw, head of the Human and Community Development department at the University of California, Davis.
In an influential paper he wrote several years ago for the Journal of the American Planning Association, Bradshaw says factors such as the self-contained nature of most military bases (where much of the shopping is done at on-base commissaries, for example) soften the blow of a closure on the community. In addition, local retailers typically offset some losses when military retirees, who could previously shop at the commissary, turn to local stores. When Castle Air Force Base in Mercer, Calif., closed, sales in the community were estimated to decline only about 1 percent a year.
Base success stories
By taking an entrepreneurial approach, practitioners can make base closures work in their favor by finding opportunities to reconfigure base assets into new uses, say practitioners who’ve done just that.
When a 1995 BRAC report called for closure of some unused military warehouses in Memphis a decade ago, local officials created the Memphis Depot Redevelopment Corp. and tapped the space to create a modern business park.
Most of the warehouses were 50 years old but still workable, says Jim Covington, the redevelopment corporation president. Newer structures at the facility, built in the late 1980s for Desert Storm, had high-cube clearances, making them more immediately usable. But even with those buildings, the site required more than $25 million in infrastructure improvements to be viable, says Covington.
Using a combination of $10 million in loans, $6 million in federal and state grants, and cash flow from rents, the redevelopment corporation widened roads, added turnarounds for today’s large trucks, replaced the base’s outmoded electrical system, and planted trees.
“We began to break even on the rents about three years into the process, just about the time our notes came due,” says Covington. Now 89 percent of the total 4 million square feet is leased, about 65 percent of it for warehouse use.
Depot officials encouraged brokers to bring tenants and paid lease commissions promptly, says Daniel Wilkinson, CRE®, SIOR, chairman of the board of Colliers Wilkinson & Snowden, which has done a dozen or so deals with the Depot.
Because of the property’s location north of the airport, in an area where there were few other industrial properties, the Depot has been able to attract tenants without causing any decline in occupancy at sites that aren’t city-supported, Wilkinson says.
From barbed wire to stores
Another turnaround success is Lowry, a former Air Force pilot training base between Denver and Aurora, Colo. The site’s prime location made it a natural for what today is an extensive mixed-use community with approximately 3,000 housing units—20 percent affordable. The homes surround a new urbanism town center with 65,000 square feet of retail and offices.
In 1994 when the military moved out, this area was surrounded by barbed wire and filled with 1,000 vacant, mostly dilapidated buildings, says Hilarie Portell, director of public relations and marketing for the Lowry Redevelopment Authority, which supervised redevelopment. Unlike the Memphis Depot, only a few of the buildings were usable.
The redevelopment authority elicited community input and market tested a plan before breaking ground. The research helped convince the redevelopment authority to focus its office development on smaller build-to-suit office units because of high commercial vacancies in the nearby tech office submarkets.
Overcoming hurdles
In the typical base closing, it’s the local government through creation of a redevelopment authority that acts as the main driver in turning around the property.
To help fund their planning, redevelopment authorities tap assistance from the U.S. Department of Defense’s Office of Economic Adjustment, which offers grants and helps bring assistance from other federal agencies to the table.
Before redevelopment can begin, the federal government is required by law—under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, or CERCLA—to address cleanup of any environmental contamination on the site. To speed property transfer to the redevelopment authority during that period, new regulations under the federal cleanup law offer “early transfer” provisions that permit private entities to take title to property before environmental cleanup is complete.
Under this scenario, the developer or other ownership entity assumes responsibility for environmental cleanup, although costs and liability for known contaminants are still borne by the government. This strategy is being used at Lowry. Other bases, including the Depot, use long-term lease arrangements so that uncontaminated land can be developed and leased before title is actually transferred.
One of the biggest planning challenges for a redevelopment authority is thinking in terms of the base’s potential, not its current use. It’s not uncommon for members of the redevelopment authority, who are typically political appointees, to fail to take into account whether the market wants what they’re offering or whether the community has the resources to make the plan a reality, says Richard Gsottschneider, president of RKG Associates, with offices in Durham, N.H., and Alexandria, Va. His company specializes in land-use consulting for facilities such as military bases.
Commercial practitioners owe it to the community to bring innovative thinking to the deal, says Hilarie Portell. “You have to have an entrepreneurial mind-set and take a private-sector approach. You can’t just sit back and hope.”
—With additional reporting by Mariwyn Evans
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Base Realignment and Closure list
Order information for “Communities not fazed: Why military base closures may not be catastrophic,” American Planning Association. Journal of the American Planning Association
