The Challenge
By the late 1990s it became apparent that the family housing on most of the US Military Bases was substandard. Mostly 50-year old stock, the 3,4, and 5-bedroom units needed to be replaced. As the Military budgets are done annually, and the cost to building 10s of thousand units so expensive, the Military decided to outsource the development to third party developers. For the first few projects, the Military guaranteed the lease term; they shortly decided that the developers would do the developments without their guarantee. Our client provided the bond insurance for 22 of these bases, some of which were in obscure locations. If the Military closed the base, and that was the only industry in the area, the risk level for re-leasing 5,500 housing units (in the case of Fort Hood in Killeen Texas) could be high.
The Solution
B&C created a risk analysis scorecard so that different bases could be compared. Real estate is not done in the abstract. We conducted onsite visits and interviewed base leadership, as well as local real estate professionals, municipal and state economic development offices and local employers. Some bases were low risk, such as Fort Ord in Monterey California or Fort Belvoir on the Potomac River in Virginia. Others, like Fort Irwin in the Mojave Desert received a different risk score.
The Results
This process allowed our client to price their insurance quickly and correctly.
