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September 28, 2016

A&M helped Naval Air Station Patuxent River, Maryland (Pax River) meet critical space requirements by accessing up to 600,000 square feet of newly developed office space under a public-private partnership (P3) with Hines. 

Client Mandate
Pax River has a projected need for over 600,000 square feet of secured office space to support the installation’s growing mission and to replace dilapidated and obsolete space.  The lack of space and poor condition of existing space is creating significant quality of life and retention issues for professionals working on the installation. A conventional approach of constructing a new building or leasing private office space was not available to the Navy due to budget constraints and lack of suitable space in the local office market. 

A&M Approach
With A&M’s support, the Navy used Enhanced Use Leasing (EUL) authority to out-lease approximately eight acres of underutilized land along the perimeter of Pax River under a long-term ground lease with Hines, who will develop an office complex and make it available to the Navy at market rents. Our team conducted a market and financial feasibility study and determined that it was economically feasible for a private developer to build up to 600,000 square feet of office space at market rents.

After Navy leadership reviewed and approved A&M’s business case, we developed the procurement strategy and documents for soliciting the market’s interest in the development opportunity. Our team reviewed each of the respondent proposals and advised the evaluation panel on the selection of Hines. 

A&M worked with the Navy and Hines to develop  transaction documents including: 1) a business and leasing plan, which establishes the operating agreement between the Navy and Hines; 2) a Master Ground Lease, which contains the terms, conditions, and pre-development ground rent consideration; and 3) a Site Specific Ground Lease, which allows for a phased land take-down and development plan, subject to the appropriate terms and conditions of the Master Ground Lease.

With A&M’s support, this P3 will enable the Pax River to meet its mission requirements and improve the quality of life for its professional staff by gaining access to over 600,000 square feet of new, highly-secured office space. In doing so, the Navy will monetize underutilized land at fair market value and leverage over $150,000 million in private capital with no guarantee by or recourse to the Navy, while transferring all development risk to the private sector.