Army says $8.5 million purchase of Austin real estate for top leaders' housing was 'the right decision'
By ROSE L. THAYER | STARS AND STRIPES Published: October 2, 2020
AUSTIN, Texas — In the fall of 2018, as the Army set up operations for Army Futures Command, it gave one of its private housing partners $8.5 million in profit from Fort Hood base housing to buy Austin real estate for the three top leaders of the unit.
Through the private company Fort Hood Family Housing, the Army selected four properties — all located in Austin’s second most expensive ZIP code — that currently house the four-star general in charge of Army Futures Command, the command sergeant major and the three-star deputy commander. The fourth property supports the commander’s home.
The money spent on the Austin property is nearly the same amount that the Army allocated two years later to repair just under 1,000 homes at Fort Hood known to have a water intrusion problem.
“From the Army perspective, the right decision was to purchase the homes back in 2018, just given the complexity of the Austin market and what we’re trying to do there. Today it’s still the right decision,” said Paul Cramer, the deputy assistant secretary of the Army for Installations, Housing and Partnerships, during a call Monday to discuss the purchase.
Speaking alongside Maj. Gen. Robert D. Harter, chief of staff at Army Materiel Command, which oversees the Army’s housing partnerships, Cramer said the purchase of the homes in Austin did not take away any funds available to maintain the 5,600 homes at Fort Hood that are managed by the same private company.
“I’d like to dispel the notion that there’s a connection between money spent on general officer housing in Austin and what we have available to invest in soldier family housing at Fort Hood,” Harter said. “There’s no impact to what we’re investing in Fort Hood because of the purchase of the homes in Austin.”
Some of the luxury features of the three single-family homes purchased include a built-in coffeemaker and wine fridge, a guesthouse and an outdoor kitchen. The two smaller homes are about 3,300 and 4,200 square feet. They sold for $1.8 million and $2 million, respectively, according to information from the previous owners and sale documents.
The largest of the homes, which is designated for Gen. John M. Murray, the four-star general at the helm of Futures Command, is 5,700 square feet and features a private pool, a three-car garage, a wine grotto and a media room, according to the real estate website Zillow. Its sale price was $3.4 million.
The median sale price of homes in the city of Austin in October 2018 was $377,000, according to the Austin Board of Realtors. In the ZIP code of these homes in west Austin, the median value at the time was $984,000.
The neighborhood is a coveted area because of its proximity to downtown and Lake Austin, its oak tree canopy and its history. Hollywood film director Robert Rodriguez owns a nearby historic property named the Pemberton Castle, which was the set of the 1994 family comedy “Blank Check.”
The size of the homes is on the upper end of average for Army general officer quarters, Cramer said. However, he noted that the square footage skews larger because of the number of historic homes in the Army’s inventory. Newly built general officer homes tend to be about 4,500 square feet, he said.
The fourth property purchased was a multifamily home next door to the commander’s home that sold for $1.29 million, according to the previous owner Steve Kubenka. It was torn down for security reasons and converted into a parking lot, Cramer said.
Kubenka said he had two tenants on month-to-month leases in the duplex and he lived in the garage apartment when a real estate agent approached him about selling to Fort Hood Family Housing. They had to be out of their homes within three weeks of the deal.
Meanwhile, nine Army families filed a lawsuit in June against Fort Hood Family Housing and its parent company Lendlease for the conditions of the homes they were provided at the central Texas Army base, which is about 70 miles north of Austin. Those conditions included mold, lead paint and asbestos exposure, and rat and insect infestations that the families said were exacerbated by delayed or inadequate responses to maintenance requests.
Operating at a loss
A general officer receives just over $3,000 a month in housing allowance, according to a February 2019 Congressional Research Service report on general and flag officers. Zillow estimated the market rent for the smallest of the three homes to be about $9,000 a month and the largest as about $17,000.
Harter conceded that general officer housing often operates at a loss for the private housing partner “because of the complexity of what they do.”
“It’s not just a house, it’s a place to host, to entertain, it’s an office. There’s all sorts of things going on there that drive up utility bills. [Housing allowance] doesn’t cover the cost across the board. The ones in Austin are no different. It might be slightly worse because of the property taxes,” he said.
The combined property tax bill for the four properties is more than $158,800 annually, according to the Travis County Appraisal District.
The funds to purchase the homes were provided to Fort Hood Family Housing from the Army’s capital reinvestment account, which pools money from its 85% share of housing profits at Fort Hood, Cramer said.
No tax dollars were used, and the purchases were not required to be reported to Congress, because the expense and size of the homes did not rise to that level, he said.
That capital reinvestment account had about $20 million at the time, Cramer said. It was still around that balance in May when the Army chose to release $9 million to support an exterior renovation project at Fort Hood. About 970 homes on the base are known to have a water intrusion problem. Some of the homes in the lawsuit against Fort Hood Family Housing are included in the renovation project.
Work on those homes, the majority of which have residents, began in June and as of Sept. 18, crews have corrected the problem on 12 units, according to the Fort Hood Family Housing website. The company said the project is focused on the exterior of the homes and declined to say whether the affected houses were being checked for mold growth caused by the water intrusion.
“Just for context, since 2001 we’ve invested $429 million into housing at the installation of Fort Hood, [with] $80 million of that in the last five years,” Harter said.
The decision to purchase
After spending six months working to obtain just one lease in Austin, officials with the Army and Futures Command decided they needed help with housing top leadership, Cramer said.
The Army approached its private housing partners in 2018 and ultimately chose Lendlease, because they had nearby operations and because the company had an interest in getting into the Austin market and had begun research, Cramer said.
With Army-directed criteria, such as close proximity to the Futures Command headquarters downtown, between 4,000 and 5,000 square feet of living space and move-in ready, Lendlease presented the Army with six homes to choose from, Cramer said.
“Price was a consideration but since we had the funds available, it wasn’t a screening criteria,” Cramer said. “At the end of the day, we wanted proximity to the headquarters. Proximity was more important than the cost.”
Each of the homes is about a 10-minute drive to Futures Command Headquarters, located within the University of Texas System Building in the heart of downtown Austin. Now that they are under Fort Hood Family Housing ownership, Cramer said the homes are part of the project portfolio, just like any other house on the Army base.
The potential resale value of the homes was also considered, Cramer said. Should Futures Command ever decide to leave Austin, the homes could be sold, and the profit returned to Fort Hood Family Housing.
“We wanted an appreciating asset not depreciating,” Cramer said. The neighborhood is expensive, he said, because people want to live there. “When we want to sell the houses there, people will still want to buy the house.”