Developers seeking out shut-down military bases
Wednesday, October 26, 2005
The Wall Street Journal
Note: Concord is located in Contra Costa County adjacent to Solano County.
When the military announces another round of base closings, the news sends chills through cities and towns fearful of losing a source of good jobs and a steady flow of cash generated by the troops.
Not so in Concord, Calif. The city, located about 20 miles from Oakland, actually asked federal officials to shut down the Concord Naval Weapons Station, hoping to develop the land. The Defense Department agreed to close a roughly 5,200-acre portion of the property -- quite enough to stir up Concord.
"Everybody is very, very excited about it," says Jim Forsberg, Concord's director of planning and economic development. "It represents a major opportunity to do good things for our city."
The Concord property is on the current list of U.S. military base closings that has been approved by President Bush. If Congress doesn't reject that list in the next two weeks or so it becomes law. Thanks to the hot real-estate market and some high-profile successes with former bases, the current wave of closings is very different from past efforts. Some cities and towns are eager to start planning what to do with these bases, and big-name real-estate developers are angling for the properties.
Even the military, which in the past has often given the land to local communities, has caught on to the real-estate boom.
In the current round of base closings, developers expect the military will try to sell more former bases at market value, potentially bringing millions into the federal coffers. This shift sparked a niche industry of insurers, lawyers and lobbyists specializing in turning massive tracts of government land into housing, shopping centers and parks. The Navy, which by the nature of its business owns lots of valuable waterfront property, has hired real-estate consulting firm Jones Lang LaSalle to advise it.
"It used to be 'Clean it up, give it to city,' " says Jill Votaw, a spokeswoman for the Navy's program-management office for Base Realignment and Closure. "The current administration says, 'Wait a minute that property is worth some money -- maybe we should get some back for the taxpayers.'"
Some sought-after properties on the 2005 BRAC list, according to developers and the Association of Defense Communities, might include the Concord Naval Weapons Station, Fort McPherson in Atlanta, Fort Monmouth in New Jersey and the main campus of the Walter Reed Army Medical Center in northern Washington, D.C.
Developers, like Lennar Corp. and Actus Lend Lease, are actively analyzing the properties. Others are quietly assessing opportunities and waiting to pounce on some of the 22 major bases that were ordered closed by the commission.
"I can't imagine all the significant developers in the U.S. are not doing what we are," says Jeffrey Simon, a senior vice president of development at Actus Lend Lease, a subsidiary of Australian developer Lend Lease. "They are looking at the list, putting together what they know about the properties and when the time is right they will go after them."
Towns like Concord hope to replicate what happened at the El Toro Marine Air Corps Station in Orange County, Calif., just west of Irvine, which was sold early this year in a closely watched auction.
Lennar, one of the country's biggest home builders, paid the federal government $649 million, one of the highest prices ever paid for a shuttered base. The sale came after years of squabbling between local government officials over the fate of the 3,700-acre tract of land in the red-hot market of Southern California. The parcel that Lennar bought is zoned for 3,400 homes, three million square feet of research and development space, several golf courses, a cemetery and university campus. A large portion of the land will become park space.
"I don't know where you are going to find that much land in a land-constrained market," says Emile Haddad, president of Lennar's Western region.
To be sure, there are some properties that will be a tough sell because of their remote location or serious pollution issues. For example, the Kansas Army Ammunition Plant, which is on the closure list, is located in rural southeastern Kansas about 115 miles north of Tulsa, Okla.
Local disagreements and indecision have kept several bases empty and forlorn for years after they close, despite their prime locations. Near Boston, local officials have come up with three different redevelopment plans for the former South Weymouth (Mass.) Naval Air Station, which was closed in 1997, although local redevelopment officials are confident the latest plan will work. In San Francisco, the Navy has been negotiating for years with the city over the terms of transferring a former naval station on Treasure Island, located in San Francisco Bay.
In January, the Government Accountability Office reported that as of Sept. 30, 2004, the military still owned 28 percent of the land from previous closure rounds, mostly because of environmental cleanup issues.
Pentagon officials say they are learning from their mistakes and figuring out better ways to dispose of the land than in the previous round of closures, which began in the mid-1990s, following the end of the Cold War.
Developers say they have more information about pollution on the bases, which helps them determine whether the properties are worth investing in. Based on this information, developers can assess the risks of developing these properties and local communities can be more realistic about their chances for reuse.
The improved information also allows the military to divide up large installations and transfer the less polluted pieces for redevelopment. Another tool helping developers is environmental insurance, which they say reduces the risk they face if pollutants are found on the site.
Environmental problems, "just don't have the disqualifying affects that they did previously," says Actus Lend Lease's Mr. Simon.
One of the biggest changes in this round of base closures could be the real-estate market itself, which has dramatically raised the value of some of the bases. In 2002, the Navy auctioned off a Naval medical center in the hills of Oakland to a local church for $22.5 million. But when the church couldn't pay the bill, the sale fell through.
A second auction for the medical center started in August and as of Tuesday the top bid was $93.5 million.
In Concord, city officials are eager to begin the planning process for the Naval property, but they want to be sensitive to residents' concerns about traffic, open-space preservation and housing.
Even though the military hasn't closed that portion of the naval station yet, the pressures are mounting. When Mr. Forsberg attended a conference recently about reusing military bases, he was treated like a celebrity. Real-estate consultants and developers were buzzing about the city's Naval installation. "They said, 'Concord. Let's talk,' " says Mr. Forsberg.
Mr. Forsberg says the city is looking for money to hire consultants to help study a reuse plan. Developers have offered to help. But, Mr. Forsberg says they will find the funds elsewhere.
"There is going to be a lot of pressures on the community to go go go -- but we have to get this right," he says.
Barracks to Brownstones
Developers say these and other bases slated for closure could become valuable real estate.
Concord Naval Weapons Station, inland portion (Calif.) 20 miles north of Oakland 5,200 acres
Fort Monmouth (N.J.) 50 miles south of New York City 1,120
Fort McPherson (Ga.) Near downtown Atlanta 487
Walter Reed Army Medical Center Northern Washington, D.C., near the Maryland border 113
Sources: Department of Defense; Assocation of Defense Communities; WSJ research
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