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In September, the Opus Group unveiled plans to go full-bore into an as-yet-untried market–military housing. As GlobeSt.com reported at the time, the Minnetonka, MN-based developer is planning to take advantage of privatization legislation passed nearly eight years ago. It’s a very different niche than most, especially given the 50-year terms of each commitment made with the Federal government. And it’s a different niche for Opus as well, given the single-family nature of many of the projects. But the newly formed Opus Military Communities LLC is approaching the venture with a specific plan to overcome the obvious hurdles and tap into what it believes will be a billion-dollar-plus business. In an exclusive interview, vice president Julie Kimball, a 10-year Opus veteran, reviewed the marching orders.

GlobeSt.com: Have you ever done military housing before?

Kimble: No. We started looking at government projects about a year and a half ago. We had done some government work at the local, state and federal levels, and we decided it made sense to move into that sector. So we set up a separate company solely to pursue implementing and managing military-privatization contracts. It is a good business with a big, new potential client. And it’s not as cyclical as industrial, office or retail.

GlobeSt.com: Depending on which president is in office.

Kimble: It seems that spending is more consistent than the private sector. Maybe it has ebbs and flows, but it doesn’t seem to have the same drastic changes as some of the private-sector work.

GlobeSt.com: How are military contracts different from your traditional development work?

Kimble: It’s very different. We typically develop, then turn around and sell the assets to the investment market. The privatization projects are 50-year contracts. But we bring a very good skill set to these projects. We are vertically integrated, we have the design/build function as well as the asset- and property-management functions, which are critical to the 50-year period. And we know that the military has been looking for new national players to get into that market.

GlobeSt.com: But isn’t there an established competitive base already, given the time since the legislation?

Kimble: There is a group of maybe 10 development teams, which have done very good work. But these projects are very large–often in the $300-million range–and you can give one company only so many $300-million projects. They were looking for some new players. Of course, that doesn’t mean we’ll automatically get something.

GlobeSt.com: What exactly will you be building?

Kimble: There are two separate programs—single-family homes and what is essentially bachelor quarters or barracks, but these are different than what you might picture; they look and feel more like market-rate apartments. Since we are not a single-family homebuilder and not likely to develop that expertise, we’ll bring on a strong homebuilder. We were down-selected–short-listed–for a Navy project a number of weeks ago and on that project we bought in Pulte Homes. Also, while we have a large property-management staff, we do not have residential-management experience. So we’re partnering with other managers around the country on both the single-family and barracks projects. On the Navy project, we have Draper and Kramer from Chicago. We will be doing the design/build for the barracks components.

GlobeSt.com: The property management aspects must be huge.

Kimble: It is huge because the clients move fairly frequently. Also, you enter into a 50-year ground lease with the defense department or the particular armed services branch, and you own those projects for 50 years.

GlobeSt.com: Where do your proposals stand now?

Kimble: In addition to the Navy project, which is in the Southeast, there are two more—one in the West and another in the Southeast; we are in the qualification stage for both. If we are selected for the Navy project, it should break ground next fall.

GlobeSt.com: Will you take the initiative global?

Kimble: I know they are taking privatization international, but we haven’t been looking at that.

GlobeSt.com: What will the military contracts do for Opus coffers?

Kimble: They bring upfront fees, of course, and a consistent long-term income stream. The total military need is in the billions of dollars, and they are about half or less than half complete. In the next few years, if we win three or four projects, that would be huge–that’s probably in excess of a billion dollars in total project costs.

GlobeSt.com: What else do you find unique about military housing?

Kimble: This may sound corny, but as we did our site visits, everyone saw what a great overall mission this was. These people have dedicated their lives to our country and they live in housing that was built many, many years ago. There is excitement in providing a quality of life for the people who sacrifice so much for our country.

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