Common problems facing today’s public agencies are constrained budgets, aging assets, costs, and properly balancing competing interests to continue to deliver quality service to the public in a safe and effective manner. Agencies routinely evaluate the condition and utilization of assets and seek to minimize the costs of maintenance of facilities. Too often, asset managers seek to retire or dispose of underutilized buildings, land, and other assets to eliminate costs and realize a short-term one-time payment. While the agencies do receive a short-term benefit by disposing of underutilized assets, agencies should consider a long-term solution to better serve its core mission. The Enhance Use Lease is one alternative available to agencies and military departments
What is an Enhanced Use Lease? An enhanced use lease is a ground or building lease of underutilized real property owned by a federal military department in exchange for fair market consideration. Enhanced use leases are authorized under 10 U.S.C. § 2667 and each military department has implemented enhanced use leasing expertise and offices. The enhanced use lease operates similarly to a commercial lease. The government landlord leases and the third-party tenant occupies the premises for a period of time under certain terms and conditions in exchange for rent. What differentiates the enhanced use lease from ordinary commercial leases is the fact that the Government can negotiate into the lease as rent, consideration to be received in the form of in-kind services (ie “enhanced”), including construction of facilities, maintenance, and other services expressed in the legislation.
Why enhanced use leases? Enhanced use leases have several benefits which agencies should consider:
1. Provides for a beneficial reuse of underutilized assets
2. Generates revenue in the form of consideration (either as Cash or in-kind services)
3. Removes maintenance responsibilities and costs of the asset over time
4. Consideration received from the use of land directly benefits the installation providing the land (as opposed to a disposal in which the payment received goes to the general treasury)
5. The EUL use typical provides indirect services which benefit the mission or installation
6. Revenues received by the installation helps off set budget shortfall
7. In-kind services negotiated into the lease can provide services or facilities to the installation which alleviates the need for installation leadership to find sources of funding for those projects)
MCFA has worked with clients to utilize EUL’s since the programs inception. The DoD has executed several successful and diverse enhanced use project over the years, including the Government and Technology Enterprise at Aberdeen Proving Ground and utility scale solar facility at Joint Base McGuire-Dix-Lakehurst, with the guidance of MCFA.
Despite its long tenure, EUL use in facility management continues to be emphasized by the federal government and DoD. Its use is expressly called out by DoD to be used to create open collaborative campuses between government, industry, and academic researches and the DoD laboratories. This emphasis recognizes the impact to leverage existing assets to obtain private funding to improve facilities, provide revenue, and advance the mission.