Orion Partners Inc., a San Antonio-based real estate company, and RF Weston, an environmental engineering company based in West Chester, PA and the Army have signed three 50-year leases to develop the former Brooke Army Medical Center and the two-building Beach Pavilion Complex.
The leases were formally announced Tuesday at a ceremony at Ft. Sam Houston attended by politicians and military brass. The fort, just northeast of San Antonio's CBD, is home to extensive medical facilities and the Fifth Army.
Tom Chandler, Orion's president and COO, tells GlobeSt.com that the properties will be marketed to military and government offices that want to be close to the Ft. Sam Houston operations. Cross and Co. of San Antonio will handle the subleasing of the properties.
The deal was transacted under a regulation that allows the location of private businesses such as banks and restaurants on military bases. But, extended to development of base property for office use, it brings money to the Army and reduces maintenance costs. "There will be millions of square feet around the country privatized like this," Chandler says.
The developers are seeking historical preservation status for the buildings, which will allow them to take tax credits and increase the viability of the project. The credits could reduce costs through to the tenants by as much as 20%. If the credits are forthcoming, the first tenant could be signed six months with delivery in eight to 10 months, Chandler says. "Once we procure tenants, we go ahead and do the historic restoration of the exteriors and interiors deemed historically significant," he says. The project should be completed in two to three years.
If the project doesn't prove economically viable, the developers can get out of the 50-year leases, according to Chandler. But, he adds, he's confident the project will prove out. "We're breaking new ground in a whole lot of ways," he says. The project should be completed in two to three years.
Construction on the medical center began in 1935 and it opened in 1938 as a state-of-the-art medical facility. The seven-story building, which has 225,000 sf, has been vacant since it closed in 1996, giving way to the new 1.47 million-sf Brooke Army Medical Center. The Beach Pavilion Complex's twin buildings total 240,000 sf. They were built in 1931. The three buildings were designed and built in the Spanish Colonial style.
Under the lease agreements, more than $50 million will go toward the restoration and development of the structures. The Army will receive as much as $253 million over the life of the agreements. The developers take over maintenance of the buildings immediately.
Orion's San Antonio office projects include the 107,000-sf Brookhollow Park with IBM as the lead tenant; Fountainhead Park, two buildings with USAA and Ilex Oncology as tenants; and the 200,000-sf One Technology Center.
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