A private company hired to upgrade military housing at Fort Meade is struggling to rent out older units as it fixes them up and builds new ones, causing a revenue drain that could delay the decade-long, $400 million redevelopment.
More than 200 families have moved or are in the process of moving from outdated and undersized housing on the Army post to new residences constructed by Picerne Real Estate Group, the Warwick, R.I.-based company assigned to build or renovate more than 3,000 homes.
Now Picerne, which also manages the on-post housing, is having difficulty luring new residents to these now-vacant older homes, even after spending $27 million to fix them up.
As the on-post occupancy rate has dropped to 75 percent, the loss in rent, or military housing allowance, is cutting into Picerne's cash flow and might impede plans to replace additional older homes with new ones starting next year.
"The older homes not being occupied - is it a concern? ... It is a concern," said Bill Mulvey, a Picerne spokesman.
In light of military families' reluctance to live in the less spacious, older units, Picerne is seeking to fill the gap by allowing single soldiers and federal government employees to live at Fort Meade.
Among about 2,600 new and old housing units at Fort Meade, there are about 700 vacancies - all in older homes with an average age of 44 years.
Picerne has not found renters for many older units, even though the company is renovating them at a cost of $5,000 to $7,000 apiece. The number of vacancies is up from 551 in August 2002.
The company has begun a marketing campaign to attract residents. In addition to placing ads in area military publications, it has set up banners along routes 32 and 175 to attract Fort Meade civilian employees, many of whom work at the National Security Agency.
Picerne took over 2,612 homes at Fort Meade when it signed a 50-year partnership agreement with the Army in May 2002; of those, about 2,400 remain. All but 400 of these older units have been renovated with new paint, carpet, fixtures and appliances.
New residents will be placed in the renovated homes. Most military families living in unrenovated units will have to stay where they are until newly built homes are ready for them.
Picerne's partnership with the Army is part of a program established by Congress in 1996 to turn over military housing to private industry. The company manages about 12,000 military housing units overall at Fort Meade; Fort Bragg, N.C.; and Fort Polk, La.
Picerne's plan to build 171 single-family homes and townhouses starting this year won't be delayed by the drop in rental revenue. But if occupancy rates don't rise to at least 90 percent by next year, Mulvey said, the schedule for replacing homes might be pushed back.
The lower occupancy rate - 75 percent versus 90 percent - is costing Picerne more than $500,000 in monthly gross income, company officials said.
Picerne had planned to finish construction of five on-post neighborhoods by 2012, but Mulvey said last week that timetable is uncertain until the occupancy issues are resolved. Homes will be opened up to single soldiers and federal employees for at least a few years, although retired military personnel remain excluded.
Picerne's marketing campaign promotes advantages of on-base housing: A gated community, convenient for those who work on post, with nearby shopping and day care options.
Still, many military families who are waiting for the new housing to go up are doing so from outside Fort Meade's gates. They are willing to pay hundreds of dollars more a month to enjoy the amenities they could have to wait years for on post. New developments in Odenton and elsewhere in western Anne Arundel County provide numerous options.
"The families have had a hard time living in these [older on-post] homes because they really can't accommodate today's family needs," said Gayle V. Filo, Picerne's community management director at Fort Meade.
Space is one concern: Older townhouses, duplexes and single-family homes range between 800 and 1,700 square feet. The new homes are 1,560 to 2,200 square feet.
Amenities are another. The vaulted ceilings, new appliances and modern accommodations of the new homes stand in sharp contrast to the narrow bathrooms, cramped kitchens (made smaller by inclusion of a washer and dryer) and almost nonexistent closet space of the older units.
Residents also have complained for years about conditions inside some of the older units. When Picerne signed the $3 billion contract - an amount that was to come entirely from projected rent - the real estate company predicted it would need $7 million to upgrade the older facilities, Mulvey said.
That estimate was based on a small sample of housing the Army allowed Picerne to evaluate, Mulvey said.
But then Picerne received 4,000 work orders in the first week of business in May 2002, and as the company responded to those calls, more came in, Mulvey said.
A few months after Picerne took over, military families complained about its response to asbestos, mold and lead paint contamination, insect infestation and structural issues. Part of the $27 million spent on the older homes has gone into addressing these issues and other work orders.
"Fort Meade hadn't gotten enough funding over the years for maintenance," said Mulvey, referring to the Army's "different military priorities."
The volume of problems helped spark a major turnover of maintenance staff, and thus further delays in service, Mulvey said. He added that Picerne - an 80-year-old company that also owns and manages 30,000 nonmilitary residences throughout the United States and Puerto Rico - has worked through many of the growing pains.
Residents assigned to look into housing complaints, known as "mayors," were disbanded by Fort Meade commander Col. John W. Ives in the past six months, said representatives for Picerne and Fort Meade. This was done because Picerne employees work in each of the neighborhoods and can address residents' issues directly, they said.
Ives could not be reached for comment.
Army Capt. Ryan Bible and his family lived in three older units before recently moving into one of the new homes.
"I feel like I have a home now, as opposed to living in government quarters," said the eight-year veteran, who has lived at Fort Meade for four years.
He said that Picerne responds to most work orders within three or four days. "I've never called back [after putting in a work order], and I'm not a patient person," said Bible, with whom Fort Meade officials arranged a phone interview.
Several other people familiar with on-post housing declined to comment after contacting their superior officers.
In spending money to renovate the older homes, Picerne has to walk a fine line, Mulvey said. The older homes must be desirable enough to attract the rent needed to fund its construction project. At the same time, the company can't afford to overinvest in property that will be torn down and replaced.
Still, Picerne said, it is beginning a multimillion-dollar project to improve the "curb appeal" of the often-criticized older homes.
"The problem will go away," Mulvey said, "once we have all new homes."