Retired U.S. Army Captain Chuck Parker has two ideal qualifications for heading up business development at Actus Lend Lease, one of the world's largest military housing developers: He spent four years working for multifamily titan Trammell Crow Residential, preceded by five years screaming across the Cold War skies of Eastern Europe in the cockpits of Army attack jets and helicopters.
“I've got experience with the Army and experience with multifamily apartment portfolios, and those are two great assets when dealing with the privatization of military housing—understanding the complexity of the federal government and understanding how military communities operate so similarly to multifamily housing,” says the executive vice president of Nashville, Tenn.-based Actus.
Back in Parker's day as an Army ace, military housing was, was, by all accounts, some of the worst residential product available: dull, drab homes and brick barracks that did little to provide servicemen and women a sense of belonging or well-being after putting their lives on the line for their country. “I even hate the words military housing,” Parker says. “It sounds awful.”
Awful, indeed. According to a 1992 Department of Defense survey of barracks-dwelling, unaccompanied soldiers (i.e. those service people without families), almost all of them said they wanted larger rooms, more privacy, more storage, and in short, would rather live somewhere else, regardless of cost. Further analysis of military housing stock by the DoD in the early 1990s found that 43 percent of all on-base family housing was substandard. The latter study also found that 53,000 family units were more than 30 years old, too small for occupants, and dilapidated or in desperate need of repair. Relying on MIL-CON, the military's internal construction arm, the DoD estimated that it would take more than 20 years and $16 billion to complete the required renovations.
Of course, MILCON's inability to land heftier federal budgets was one of the major factors playing into the decrepitude of military housing in the first place. As a result, in 1996, Congress and then-President Bill Clinton passed the Military Housing Privatization Initiative as part of the National Defense Authorization Act. The bill opened up the demolition, repair, and redevelopment of nearly 200,000 units to private developers with a goal of revitalizing the entirety of the U.S. military housing stock by 2007. The mission: to create military housing that rivals the best that the private sector has to offer.
A TALL ORDER Fast forward to the present, and 171,269 of the initial 195,253 units targeted for public/private venture (PPV) rehab are under contract, mostly to a few mega-developers—Actus; Arlington, Va.-based Clark Realty; Cleveland, Ohio-based Forest City Residential; and El Paso, Tex.-based Hunt Realty. Another 10,273 units are pending final contract approval, while the remaining 13,711 units are still in the planning stages, according to the Office of the Deputy Under Secretary for Defense Installations and Environment, which heads up the privatization program.After decades of
That doesn't leave much room for new players to get into the game. Moreover, the costs involved in simply bidding for a project can be astronomical. “We can easily spend upwards of $1 million to $2 million dollars preparing a bid,” Parker says. “That is literally what it takes, and that's not a guarantee that you'll be awarded the project.” Pitching to the various branches of the armed services involves preparing volumes of documents and culminates with a gut-wrenching oral presentation to secure approval from top brass.
“The whole process is stringent and intense and specific,” says Susan Moore, director of community relations for Forest City Military. “Our first oral presentation in Hawaii was six hours long, and we brought 45 people to the interview. We didn't know that the military, by policy, could not provide food or beverage, so there was no water, no snacks. It was hot, and there was no air conditioning. It was crazy. We didn't [get] any water, but we won [the contract].”
Still, once secured, MHPI contracts are lucrative, offering upfront construction and development financing assistance, as well as the exclusive right to own, manage, and collect rents via a 50-year land lease on the project. That means a half-century gig with a built-in renter demographic that is guaranteed rent money in the form of a basic housing allowance. All companies need to do after running the contract gauntlet is to deliver the community-creating, morale-building, Class A-rivaling housing product that the MHPI promises.