Grubb & Ellis Tapped for Property Management in Innovative Brooks AFB Redevelopment

Week of March 4, 2002
Snapshot from the Field

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By JACK LYNE, Site Selection Executive Editor of Interactive Publishing

The one-of-a-kind arrangement at Brooks AFB keeps 3,300 jobs in place, continuing to generate an estimated annual income of more than $560 million in San Antonio (pictured above).

SAN ANTONIO - Grubb & Ellis
(www.grubb-ellis.com) has been tapped to handle property management services for a ground- breaking military base redevelopment in San Antonio. The Northbrook, Ill.-based firm will be providing services in the conversion of a large swath of the 1,300-acre (520-hectare) Brooks Air Force Base into the Brooks Technology and Business Park.
Selected for the assignment by the Brooks Development Authority, Grubb & Ellis joins a groundbreaking project. Military base redevelopments, of course, have become commonplace. With the Cold War's thaw, the U.S. Defense Dept. has closed 97 major military installations since 1991.
"The goals of the Brooks city-base project are to improve military mission effectiveness and reduce costs while providing new jobs, revenues and amenities to the community," said Grubb & Ellis President and CEO Barry Barovick (pictured above).

The Brooks redevelopment, however, is a different story. While the Air Force has handed over the keys to the city, the base remains very much open. Facilities housing some 3,300 workers are continuing apace, only now as tenants - and ones that pay no rent.
That unprecedented arrangement is part of Brooks AFB's becoming what the Defense Dept. is calling the first "city base," authorized as part of the 2000 Defense Appropriations Bill. The first-of-a-kind scenario positions both the new and former owners to realize substantial benefits. For the Air Force, there's the prospect of multimillions of dollars in savings. For San Antonio, there's the immediate reality of retaining thousands of existing jobs, plus the potential for creating thousands of new high-end private-sector positions.
"The goals of the Brooks city-base project are to improve military mission effectiveness and reduce costs while providing new jobs, revenues and amenities to the community. And we're confident that, working together, all this can be achieved," said Grubb & Ellis President and CEO Barry Barovick.

Air Force Facilities Have 20-Year
Agreement for Rent-Free Occupancy

Grubb & Ellis, which won the Brooks contract in competition among five finalist firms, will provide a range of services. Among those services are management and leasing; property maintenance, marketing, transaction and redevelopment; and strategic advice and execution, according to Grubb & Ellis officials.
"This significant win for Grubb & Ellis reflects our leadership role in a growing number of public-private partnerships from coast to coast," said Barovick. The company's previous military conversion work includes handling the transfer of the Naval Weapons Industrial Reserve Plant in Calverton, N.Y. The military plant in southern New York was developed into Calverton Enterprise Park.
The Brooks AFB project, however, turns some new turf in public-private endeavors.
The Brooks Air Force facilities that are continuing business as usual, for example, operate under 20-year rent-free agreements. And those operations have four additional 20-year option periods. The military installations, however, aren't obligated to stay. The Air Force agreed to lease the portions of the base that it deems necessary to fulfill its military mission. In addition, the arrangement with the city provides Brooks' Air Force operations with some free services, including road maintenance and fire and police protection. But the rent-free Air Force operations pay for some other services, including building maintenance and utilities.

Grubb & Ellis's previous military conversion work included handling the transfer of the Naval Weapons Industrial Reserve Plant in Calverton, N.Y. The military plant in southern New York was developed into Calverton Enterprise Park (pictured above).

In-Place Cluster Could
Draw High-Tech Influx

It remains to be seen which companies will comprise the new tenants that Grubb & Ellis will be serving at the former Brooks AFB.
The tenants already in place, however, are likely to draw a high-end crowd. As the Air Force's center for health and environmental research, Brooks continues to house a host of prestigious operations. The property's 2.2 million sq. ft. (198,000 sq. m.) of facilities, for example, include the Air Force's School of Aerospace Medicine, the Human Effectiveness Directorate of the Air Force Research Laboratory, the Air Force Center of Environment Excellence and the Challenger Learning Center.
That cluster of high-skill operations is a key in the city's strategy. San Antonio officials expect the redeveloped acreage to attract a substantial inflow of high-quality R&D operations, eager to locate near the assembled mass of brainpower and state-of-the-art equipment.
Other uses of the Brooks acreage could further vary Grubb & Ellis's tenant mix. Long-range development plans, for example, have included components for retail use, a hotel and a golf course.

Air Force Will Share Redevelopment Revenues

The city-base strategy originated when San Antonio leaders proposed the idea to federal officials in 1995. At the time, the Defense Base Closure and Realignment Commission (DBCRC) had included Brooks AFB on its initial list of bases scheduled for closure. (The DBCRC later spared Brooks.)
The idea spawned in '95 could yield rich rewards for the city if the envisioned inflow of new businesses materializes. That inflow would also profit the Air Force, which will receive a share of future revenues generated by the property's commercial development.
The arrangement does add some new costs for the city. Providing services for the Air Force operations will cost San Antonio an estimated $1 million a year. However, since those services are already provided to surrounding neighborhoods, the addition won't strain resources, city officials said.
And San Antonio enjoys a larger immediate payoff: Brooks' 3,300 jobs remain in place, continuing to generate an estimated annual income of more than $560 million.
The Air Force, on the other hand, reaps immediate reductions in operational costs. Owing in part to underutilization and excess property, Brooks AFB's costs were significantly higher than at similar Air Force bases. But with the new agreement, the Air Force expects to save up to $10 million annually through 2005. After that, it expects even higher annual payoffs, as revenues from the Brooks property's development begin rolling in.
Grubb & Ellis's assignment, however, may not remain a one-of-a-kind arrangement. More military base closings are on the horizon. Defense Secretary Donald Rumsfeld, for example, told the House Armed Services Committee, "Most people you talk to who are knowledgeable about it believe we are carrying something like 20 to 25 percent more base structure than we need for our force structure."
And the Brooks redevelopment could be a model for phasing out other bases, some prominent Air Force officials have suggested.

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