Military Bases, Reimagined

Base Conversions Offer High Yields

By Erica Rascón on Aug 14, 2015 in News

Upcoming military base closures will provide a wealth of opportunities for developers. Beginning in the early 1990s, more than 8,000 military installations in Western Europe and North America shut their doors, according to NATO Review. In the US, 97 facilities were shuttered, resulting in land sales upwards of 100,000 acres and thousands of buildings. With plans for the US Army to reduce its forces to 500,000 soldiers by the end of 2015, bases are bracing for 70 additional decommissioned sites. Developers can begin to prepare their bids.

The first wave of closures in the early 90s was low-hanging fruit for development firms. Land prices were low, which made achieving a healthy ROI faster and easier. National Real Estate Investor (NREI) reports average returns of 8-10 percent in the first year on bases that are repurposed as office or industrial spaces.

Such successes are now more difficult to replicate, but they are far from impossible. Nearing the new millennium, the Department of Defense (DOD) began seeking higher prices for prime locations. For example, a 4,700 site outside of Orange County has an estimated sale value of $1 billion—which is more than the DOD gained from the sales of 96 previous bases. Developers interested in the new wave of closures will have to bring much more to the table.

In spite of the rising prices, military base conversions are still lucrative. According to Builder Online, the former Glenview Naval Air Station is being transformed into the master planned community, the Glen. This 1,200-acre site rests just outside of Chicago. It includes single-family and multifamily housing, retail, and green space. The complex has experience such success that it is expanded into another project. The most recent addition, Westgate on the Glen, is under development. Upon completion, it will be a 171-unit community that reflects the pedestrian-friendly atmosphere of the nearby city. Residents will have access to shops, restaurants, two golf courses, and a train for commuting to Chicago.

Nonprofits stand to benefit from military base conversions as well. In Fundulea, Romania, a former air force base is being converted into a hospital, a rehabilitation center, and housing for homeless children. The project is sponsored in part by the EU initiative, Stability Pact for Southeastern Europe. The pact provides a framework for collaboration between NATO, international financial institutions, commercial lenders and private donors.

Before tackling a base conversion, development firms must brace themselves for long and complex processes. On average, base conversions take five years or more to complete. A bulk of that time is dedicated to environmental cleanup. Developers must also find harmony between conflicting sets of interest: first, there is the grand vision of the architects and designers. Then come the

mandates of multiple government jurisdictions, which effect permits and zoning codes. They are followed by the needs of government officials whose reputations and investments are linked to the project.

Such tangled webs can prevent projects from reaching their full potential in a timely manner. The Conversion of Fort Ord in Monterrey County, Calif., has become a tedious process. The fort closed its doors in 1991, yet only 45 square miles of the 28,000-acre site has been developed. California State University uses the developed portion of land as a magnet campus. A 20,000 square foot incubator office building and a Hilton hotel join the campus as the sole properties on the vast terrain. The site’s original plan for 12,000 residential units, a 3 million-square-foot office and industrial park, two hospitality centers, and 1.5 million square feet of retail has come to a halt. Developers struggle with compliance on the site that straddles four municipal jurisdictions. The input of redevelopment partners—including 62 local and federal agencies—has contributed to the ongoing battle.

Those are just a few of the hurdles faced by developers in California. Large-scale international projects, such as the Fundulea development, will face even greater feats. Yet to many, the challenges of military base conversions are worthwhile for the gains.