Arsenal alters payment method for rental tenants

Businesses that become tenants under the new “Enhanced Use Leasing” program at the Watervliet Arsena

Businesses that become tenants under the new “Enhanced Use Leasing” program at the Watervliet Arsenal will pay rent to private development companies that will then repay the arsenal with in-kind services, officials said Thursday.

Officials from the U.S. Army Corps of Engineers and the Watervliet Arsenal met with about 30 developers Thursday at the Holiday Inn on Wolf Road to explain the Army’s EUL program, soon to be available for the development of 57 acres at the arsenal.

EUL director Bob Penn said the program will allow the arsenal to benefit from leases to tenants immediately, rather than waiting for rent revenues to be doled back through the federal budget process.

“When we take our rent in in-kind services, we get that rent faster,” Penn said. “If we take it in cash, there’s a process where the money goes to the [federal] Treasury and then some of it makes its way to the Army and then half of that gets to the [arsenal] after about a two-year process.”

Army officials said since 2001 they have identified 31 EUL project sites nationwide and as of May leases have been signed at 10 Army installations.

John Snyder, public affairs officer for the Watervliet Arsenal, said his facility and others like it around the United States have suffered under budget cuts to funding for maintenance and infrastructure needs because of the Army’s need to support wartime missions in Afghanistan and Iraq.

He said the EUL program will help upgrade the arsenal without hindering its core mission of providing artillery for the Army.

“We will work with the developers and say, ‘Here’s our plan for next year: we need a new access road, we need a new roof on our production facility, we need a building rehabilitated.’ And it will be immediate; we won’t have to wait,” Snyder said.

Arsenal Business & Technology Partnership President Tony Gaetano said his organization, a nonprofit corporation that currently manages a section of the arsenal campus devoted to private business development, will be one of the developers submitting proposals for the 57 acres.

He said the EUL program will offer long-term, 25-to-50-year leases, making it fundamentally different from the approximately 30 short-term leases managed by the Arsenal Business & Technology Partnership, which are less secure than traditional commercial real estate arrangements.

The Army retains the right to terminate the partnership’s short-term leases in the event space is needed for military use.

Gaetano said the Army could still reclaim the land leased under the EUL program if it needed to, but the long-term leases will still be seen as more secure by financial institutions, enabling new business tenants to leverage the leases to obtain private capital.

“Under the EUL program, if you build a building, it’s effectively owned, operated and maintained by the developer for up to 50 years.

The arsenal partnership renovates buildings for the arsenal and the Defense Department; they’re the owners,” Gaetano said. “Under the EUL, you can raise private financing. Under the [federal program that established the arsenal partnership], you can’t do that because no one will lend you money for a government facility, which you don’t own.”

Snyder said multiple developers may be chosen for the full 57 acres.

He said the acres have varying characteristics, including historic buildings constructed in the early 19th century, which cannot be torn down, and existing infrastructure like railroad tracks, softball fields and golf holes, which may or may not continue to exist under development plans.

Penn said companies that tend to want to do business inside an Army facility are high-tech firms that can benefit from the arsenal’s on-site fire department, security force and wastewater treatment plant.

He said after the Corps of Engineers selects a developer or developers for the acreage it should take 2 to 21⁄2 years before tenant businesses begin moving into the arsenal campus.

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