Since the mid-1990s, the Military Housing Privatization Initiative (MHPI) has provided the engine for a number of prominent multifamily firms to keep their pipelines busy during good and bad times. Once the Air Force awards its Northern Region group of six installations later this summer, the major military housing awards will probably be complete. But that’s not the only concern military developers and managers have. “We don’t anticipate any new large projects coming out on the family housing side of things,” says Mike Rouen, Managing Director of Military Housing with Dallas-based Pinnacle. “You won’t see anymore large scale development.”
Pinnacle is actually winding down several projects now with Fort Belvoir, Va., closing out its initial development period in the fall. It has another three to four years on the Fort Irwin and the Presidio of Monterey, Calif., projects, though. “The large part will be done in next two or three years,” Rouen says. “One is hanging on a little longer.”
Marlton, NJ,-based The Michaels Organization has four years left in Fort Leavenworth, Kan., and is finishing up its third year of new construction at Fort Huachuca and Yuma Proving Ground in southwestern Az. “Everyone is done with their construction and has their projects pretty much set,” says Ronald J. Hansen, president of Michaels Military Housing.
Whoever wins the Northern Region will have enough work to sustain them for about five years. That doesn’t mean there won’t be work to do for past base project winners. Developers manage the projects for 50 years with 25-year extension options and the military envisioned renovations in the initial program.
“Sustaining that housing stock for next 45 years is a major undertaking,” Rouen says. “Some bases may determine there are additional needs there. Some of those projects may see expansions of housing.”
For Hansen, the most immediate concern isn’t the end of new housing contracts, it’s Base Closure and Realignment (BRAC). “If they use BRAC as means for cutting the DOD budget, then many of the bases out there could be subject to closure just because of the consolidation of equipment and people at fewer bases,” he says.
For developers who borrowed money to build military housing based on cash flow, this is huge issue. With the military personnel and their families potentially moving elsewhere, developers often must go to the surrounding town to find renters. That’s easier said than done in many of the small towns that usually rely on the military bases to drive their economies.
“The little community outside the base is meeting the housing requirement now,” Hansen says. “I’m not sure what you do with those houses [on base]. Everyone will be a little nervous about it.”
Other times, there’s no one to really rent to. “Some of the bases are in remote sites because you don’t want an Army or Air Force training base near the general population,” Hansen says.
So, far though, no one has really been affected. “None of our bases has been reduced or closed,” Rouen says. “We’ve picked up additional manpower.”