Enhanced Use Leases provide Air Force alternative funding

  • Published
  • By Eric M. Grill
  • Air Force Civil Engineer Center Public Affairs
JOINT BASE SAN ANTONIO-LACKLAND, Texas --  In today's ever-tightening budget, the Air Force is looking at innovative ways to optimize resources.

At the Air Force Civil Engineer Center's Installations Directorate, one of those innovative ways is Enhanced Use Leases, where the service obtains value from available underdeveloped, "non-excess" real property at installations.

An Enhanced Use Lease is a lease, or outgrant, between the Air Force and a public or private interest willing to pay at least fair market rental value or in-kind consideration for the use of the installation's non-excess real property. An EUL is typically for 25 to 50 years.

The Air Force has a goal of realizing $5 billion in net present value through EULs by 2020.

"To be successful, the EUL program has evolved from a bureaucracy-bound leasing function to a way of extrapolating maximum value from Air Force real property assets to benefit warfighters," said Brian Brown, AFCEC's Strategic Asset Utilization Division chief. "'Business as usual' is not an option. But, a business mindset may offer the best tools to overcome budget headwinds and improve operational efficiency."

Enhanced Use Leases create a profitable, long-term partnership for the Air Force, private industry, local government and communities, Brown said.

Some examples of the 10 existing EULs are energy projects such as renewable and non-renewable power plants or traditional real estate transactions such as office space, hospitality, and technology centers.

The net present value of the existing EULs is an estimated $249.2 million, Brown said. AFCEC also has 25 projects in different EUL development phases worth an estimated $696 million in net present value.

Enhanced Use Leases yield maximum value for stakeholders while maintaining compatibility with Air Force missions, uses and commercial best practices, said Cliff Robertson, an EUL project manager at AFCEC. The center has invested resources in real estate expertise and marketing tools to identify potential EUL opportunities.

"We look for return on value to the Air Force by conducting a strategic, holistic view of asset management at all of our installations," Robertson said. "The partnership with the installation allows AFCEC to pursue EUL project opportunities with the highest potential return and lowest potential risk, while at the same time, maximizing the value through highest and best use of the property."

Installation "buy-in" is a key element in the decision to seek an EUL project, Robertson said.

"The installation is required to commit resources, especially a project 'champion,' to support the project from identification through lease execution," Robertson said. "Without installation buy-in and commitment, the opportunity will not proceed."

Working from the business mindset, Brown said, "Time wasted is money wasted."

"We are constantly refining our EUL process to develop projects and get them to market quickly to take advantage of the opportunities the marketplace offers," Brown said. "As a result, our processes are more efficient, meaning our funding stretches further with each improvement."

The Air Force must have civilian sector participation if the process is to be successful, Brown said.

"We like working with communities and we like embracing their ideas because usually the communities already know what will and won't work," he said. "We are staying as close as we can to understanding the real world, and understanding the pains and tribulations developers go through during the EUL process."

Proceeds from EUL projects supplement unfunded military construction and operations and maintenance requirements, Robertson said.

"Community relations are also improved through local development and economic growth, and market-based innovation helps the installation meet its mission needs," he said.

The biggest challenge faced is buy-in from all stakeholders, Brown said.

"Stakeholders from the installation commander to the private developer and community must be committed to the EUL project to provide the critical resources needed to successfully negotiate lease execution," he said.

"By focusing on value and return on investment, the Air Force can weather the budget storms emerging better suited to manage funds the American taxpayer has entrusted to us," Brown said.

For more information about EULs, go to www.afcec.af.mil/EUL.