WASHINGTON, DC-Bank of America has finalized a long-term $465 million loan for a real restate project involving the US Army’s Privatization of Army Lodging program, PAL. The bank is using its balance sheet to provide financing to Lend Lease, a property and infrastructure provider, to build and renovate thousands of units of temporary housing at 39 army posts in the US.
InterContinental, Holiday Inn Express and Candlewood Suites are the hotels participating in the program. InterContinental Hotels Group is the hotel operator, and some of the renovated hotels will operate under the IHG Army Hotels brand. All told, the $1 billion PAL program will renovate some 11,000 hotel rooms.
Bank of America is using its balance sheet to underwrite the deal for a number of reasons, says Jamie Fox, an eight-year Army veteran and the Bank of America executive who handed transaction. One is that market appetite for military housing bonds is still limited, he tells GlobeSt.com. Another is that the balance sheet provides, in this case, more flexibility for PAL. The project is somewhat different from other military housing projects, in that these are hotel rooms. However, Fox says, hotel rooms do not have exactly the same application in the military world as they do in the commercial realm. “You could have a family transitioning from one base to another and they need a space to stay. You might have someone on temporary duty at a base and needing a place to stay for a period of time. You might have someone getting extending training and needing a place to stay.”
In short, Fox explains, the needs are far different. “It would be a misnomer to say hotel.”
Privatization addresses the issues of earlier temporary housing, which tended to be dated and filled with old furniture. In general, there is a huge backlog of maintenance at the army facilities. “By handing it over to a private developer and professional manager these facilitates will be kept up to date and increase the quality of these facilitates for soldiers and their families,” Fox says.