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Under the Radar: Military Housing

Military housing development has been keeping some builders and developers busy during the downturn

By Mark Jarasek, Senior Editor, Electronic Media
September 8, 2009
HousingZone


The Military Housing Privatization Initiative brought the public sector into housing development on military bases.
There’s a segment of housing that has been steadily surging forward in spite of industry turbulence. It has been keeping some housing development firms consistently busy while surviving builders throughout the nation have waited on the sidelines for the economy to rebound. Flying somewhat under the radar of the housing crisis are residential builders, developers and management firms that have been involved in the Military Housing Privatization Initiative (MHPI). 

The MHPI is a public/private program where private sector builders and developers are selected to develop or renovate housing for military families. The builders and developers then assume ongoing (up to 50 years) responsibility for that housing. 

Congress launched the program February 1996 to address two major problems the military was facing with its U.S. Department of Defense (DoD) stock of housing for service members: the majority of military homes were in a rapid state of deterioration, and there was a serious shortage of affordable private sector housing that the military considered to be acceptable quality. 

The MHPI gave the Defense Department broad authorities to work with private sector firms to jumpstart the revitalization of military family housing. A variety of financial tools were made available to the DoD and their private sector partners to make it happen, including direct loans, loan guarantees, equity investments, conveyance or leasing of land and/or housing as well as other facilities on military bases. Housing development firms who were alert, savvy and willing to use their talents to serve the needs of the military service members and their families took advantage of this situation. 

As of December 2008, the DoD had 93 privatization projects of more than 183,000 family housing units. Records show 21 firms have been actively involved in the MHPI program since its inception — View List. Several have teamed up on to augment either property development or management expertise. 

Actus Lend Lease, based in Nashville, Tenn., got involved early on in the program. Today it’s among the Top 3 firms that have been awarded the lion’s share of MHPI projects, according to records from the Office of the Deputy Undersecretary of Defense. Balfour Beatty Communities and Hunt Building Co. also took on projects. 


Dale Connor, managing director, Actus Lend Lease
According to Dale Connor, managing director for Actus, the firm has been involved in 10 MHPI projects, or 22 installations for the Army, Marines and Air Force. With more than 40,000 residential units in this portfolio, Actus has created fully master-planned, sustainable, mixed-use communities on military bases throughout the United States. Actus Lend Lease’s first assignment came in 2001 at Fort Hood, Texas: 5,912 housing units were either built or renovated. 

“The military provides steady work for us,” Connor says. “And we’re a very attractive employer for tradesmen.” 

That’s an enviable position to be in right now, considering private sector new-home building activity has been hovering at historic lows. Still, the world of military housing harbors its own risks.
 
Pros and Cons 

Although military personnel receive a housing allowance, they aren’t necessarily forced to live in housing within base compounds. Their option to move off base motivates firms like Actus that build on military installations to produce quality housing and create communities that military families want to live in. 

“If we don’t provide an exceptional level of service, they’ll vote with their feet and go somewhere else for their housing,” Connor says. “But we have a commitment to provide a quality product to service members and their families.” 

And there is competition. Other home builders and developers selectively target military base locations and then target their marketing to the military families — see related article here. Connor readily acknowledges that there are always developers “outside the gate” trying to attract military families to their private communities that surround the compounds. A majority of military personnel do go “outside the gate.” 

Connor says that only about 20 to 30 percent of families stationed at any given base prefer to stay on the base. “They’re in a secured community within the gate of the compound,” he explains, adding that military personnel actively serving in the war generally prefer to leave their families on base. “It gives them peace of mind knowing that their loved ones are in a secured area,” he says. “Families occupy these homes while their spouse is in Iraq. We want them satisfied in their brand new home. After all, these people are over there fighting for our freedom.” 

The Balance Sheet 

Private firms in the MHPI program are able to stay profitable as long as they have 90 percent to 95 percent occupancy at the military neighborhoods, Connor says. He points to the housing units at Fort Hood, which are 98 percent occupied, saying that level of occupancy is critical in making the privatized model work most successfully. “Otherwise we’re losing out on rent and revenue,” he says. 

Additional revenue sources for these firms come from development and management fees. Actus has a contract to manage the communities for 50 years. 


Joe Farrell, executive manager of design and construction, Actus Lend Lease
Actus representatives believe one of the keys to their success at military developments is the company’s quality assurance program. Joe Farrell, executive manager of design and construction for Actus, explains that the planning and execution of every project is driven by the firm’s mission and values that place a strong emphasis on quality, safety, sustainability and community. 

“We have a much higher standard when it comes to details such as safety for our employees and contractors,” Farrell explains. Actus emphasizes doing things right the first time. “We want people in that mindset who can do a good job for us,” he says. 

Healthy Lifestyle 

Creating a sense of community at their military housing projects is another key element contributing to success. Actus includes community centers that incorporate facilities such as social centers, movie theaters, fitness centers, parks, playgrounds and housing offices. Programs and services at the centers include exercise and health classes; day care; social events; and assistance with interior design, housekeeping and laundry. Actus also partners with local schools and community organizations such as the YMCA to enhance youth programs and recreational opportunities. 

Healthy Building 

Incorporating sustainability in the communities is also a high priority. Actus has the distinction of being the first to produce zero-energy homes on a military installation in The Woodlands neighborhood at Fort Campbell, Ky. They’ve also been producing Energy Star; LEED for Homes and Gold and Silver certified homes at the bases where they build and even have a Geothermal Homes Program at the Knox Hills community in Fort Knox, Ky. 

“We don’t view adhering to LEED as a burden,” Farrell says. “It’s not difficult as long at it’s planned and well-thought through. LEED is becoming more of a standard.” 

All of the above efforts seem to have paid off for Actus as it continues to receive new military assignments, including a first-ever foray into lodging development and management — view details. It’s also been collecting awards and accolades — view details — for what it has accomplished along the way in this specialized public/private partnership sector of home building.

Is there still time and/or room for other builders and developers to get in on the act? Difficult to say, but there may be as the Department of Defense has more than a dozen pending projects still slated to be awarded through 2010.

Firms Involved in MHPI Program 

Actus Lend Lease
America First Real Estate Group
Aurora Military Housing
Balfour Beatty Communities
Clark Realty Capital
Dujardin
Equity Residential
Falcon Properties
Forest City Residential Group
Hunt Building Co.
Investment Builders Corp.
Landmark Organization
Lincoln Military Housing
Michaels Military Housing
Miller-Valentine Group
Patrician Asset Management Co.
Pinnacle Development
Picerne Military Housing
The Boyer Co.
United Communities Development
Woolpert Construction Services
Source: Office of the Deputy Undersecretary of Defense

Actus, U.S. Army Partner in Army Lodging Program 

In mid-August, Actus Lend Lease assumed ownership and operations of 62 lodging facilities across 10 U.S. Army installations. Read about it here.

Actus Awards and Accolades 

Army Hawaii Family Housing Receives National Award
Army Hawaii Family Housing’s work with LEED earned the group the 2009 ADC Most Innovative Community Project of the Year Award, the Hawaii Army Weekly reports. Read about it here. 

Actus Named Green Developer of the Year in 2008 in Hawaii  Pacific Basin Communications named Actus Lend Lease Green Developer of the Year in 2008 for its devotion to innovative design and technology. Read about it here.

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© 2009, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved.

 

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