Leader Blues

Monday, August 27, 2007

TOP STORY >>Construction could resume at year's end

By HEATHER HARTSELL AND
JOHN HOFHEIMER

Three years into its 50-year military housing privatization contract at Little Rock Air Force Base, the financially troubled developer is trying to sell properties and contracts here and at four other stalled military housing privatization projects around the country.

“The $100 million (Little Rock) deal was signed in 2003 – before I got here – and it was a great proposal,” Brig. Gen. (Select) Rowayne Schatz told the Cabot Chamber of Commerce Thursday at its membership luncheon. Schatz is Little Rock Air Force Base commander.

“Three years later – it took two years of thrashing to get the project started –we’re supposed to have 120 new homes and we’ve only got 25. We’re supposed to have almost 500 renovated homes and we’ve got three.”

In addition to the 25 homes that have been completed and occupied, about 70 concrete slabs have been poured. The contract calls for 468 new homes and 732 homes remodeled by 2011.

American Eagle Communities, LLC failed to pay some Little Rock-area contractors and suppliers, fell far behind schedule for construction and refurbishing of 1,200 base homes and work stopped May 7, leaving the Air Force scrambling for answers and solutions.

Work has stopped or is behind schedule at five other bases where American Eagle Communities LLC, or Carabetta Enterprises of Meridan, Conn., have the privatization contracts. Schatz said work could resume at the base at year’s end.
American Eagle is a partnership between Carabetta and the Shaw Group of Baton Rouge, La.


BASE HOUSING OLD

“Our goal by the end of the year is to have someone with a proven track record in housing privatization with a new restructured deal able to start construction again,” Schatz said.

“The bottom line is we need to have the best possible housing available for our warriors and their families and we don’t have that now. We need to get there and it’s a very complicated process, but we’re working hard,” he said.

LRAFB has 1,500 homes built around the 1956-58 mark, Schatz said, and the homes look their age.

Schatz said a senior official with the Secretary of Defense’s office visited LRAFB last week, got a tour of the base and saw a house that would be offered to the next family that came in.

“He was shocked that nothing had been done to the house — no renovations,” Schatz said. “Most projects, if the developer isn’t going to tear it down for a couple of years, they at least put new kitchen cabinets in, new bathrooms.

“But nothing. So we have the same house built in the 1950s, renovated here probably back in the early ‘90s, late ‘80s,” Schatz said.

Given the age and quality of the homes, he said the occupancy rate for base housing, 82 percent, was better than he expected it to be. “That’s not bad considering the age of the houses.”

Little Rock is currently working with Air Force headquarters to hold the developer in the default process or have American Eagle sell to another developer because of failed military projects at LRAFB and other bases around the country, all because American Eagle has not lived up to their end of the bargain, Schatz said.

The contracts, part of a Defense Department initiative to turn all responsibility for base housing over to private companies, sold on- and off-base military housing to American Eagle with an exclusive 50-year contract to build new housing, renovate older housing, manage the properties and collect and keep the rents.


COLLECTING RENTS

So far, American Eagle has been better at collecting rents than building and remodeling houses, at least at Little Rock, where it received $9 million in 2006 alone, according to a base spokesman.

Tom Brockway, project manager for American Eagle Communities’ Little Rock Family Housing, is still on the job at Little Rock.
Brockway declined to comment on the telephone but promised Friday to forward a list of emailed questions to his bosses.
American Eagle Communities and Carabetta Enterprises won Air Force privatization projects at Little Rock Air Force Base; Moody Air Force base in Valdosta, Ga.; Patrick Air Force Base in Florida and Hanscom Air Force Base in Massachusetts, plus Fort Leonard Wood Army Base in Missouri and the sprawling Puget Sound Naval installation in Washington State.

The Moody job was locked down in March, where the developer owes contractors and suppliers perhaps millions of dollars, with only two of 400 homes promised completed.


RECEIVERSHIP SOUGHT

American Eagle Community LLC has incorporated separately in each state for its various privatization jobs, but in Georgia, Regions Bank, a trustee on the $30 million construction bond, has filed for receivership in Lowndes County Superior Court, according to an article in the Valdosta Daily Times, which covers Moody Air Force Base.

Among other air bases experiencing difficulties, at Hanscom Air Force Base, only 17 new houses were completed out of 784 proposed, and 163 completed at Patrick of 552 proposed units according to the Record-Journal in Meriden, Conn.

American Eagle managing director at Patrick, Tom Swain, told the Florida Today newspaper that no further homes would be built and that the company is selling five military developments.

“Two are in the process and others, including Pelican Coast (at Patrick AFB) are seeking bids,” he said.

It was reported early this month that American Eagle had sold its nearly 3,000-home contract with the Navy at Puget Sound.


PROPERTY TAX DISPUTE

Meanwhile, American Eagle is wrangling to get out of paying real estate taxes both at Patrick Air Force Base and also at Little Rock Air Force Base.

The developer was told at the time of the sale of the 1,200 Little Rock houses that they would still be subject to property taxes, but they appealed to Pulaski County Judge Buddy Villines, who granted them an exemption.

County Assessor Janet Troutman Ward has challenged Villines’ ruling and the case is currently in Pulaski County Circuit Court, according to County Attorney Karla Burnett.

Despite Carabettas’ 25-year history of bankruptcy, corruption allegations, unpaid contractors, slowly paid contractors, unfinished projects, unhappy partners, and lawsuits, the Air Force awarded the contracts after determining that past performance was satisfactory for all four Carabetta/Shaw projects, according to Mike Hawkins, spokesman for the Air Force Center for Engineering and the Environment.