impact on the rated securities. In certain situations
where the ownership structure of a military housing
project is weak, Standard & Poor’s may be unable
to rate these securities without the DoD or an effec-
tive outside third-party asset manager playing a role.
Base access
For transactions that are not deemed to be moder-
ately to highly essential, access to base housing will
be another factor in evaluating a privatized military
housing transaction to determine its feasibility as a
civilian housing project. Projects on the perimeters
of bases that can be physically segregated from the
base are stronger transactions than projects located
in the interior of military bases. For projects located
in the interior of bases, Standard & Poor’s will
review the plans for access to the base housing by
civilians in the event that higher defense conditions
restrict access to the base to military personnel and
other DoD personnel. Transactions where base
access is more limited may need the DoD guaran-
tees of debt service, higher reserves, or much higher
vacancy factors. In addition, transactions where the
base commander can restrict access to the project
by the owner or property manager in cases of
national emergency will be carefully evaluated.Military Site Visits And Documentation
In order to evaluate the debt obligations for a rat-
ing, Standard & Poor’s will make a site visit to the
project securing the debt obligations at the begin-
ning of the rating process. Due to the complexity of
these transactions, there are a number of issues that
Standard & Poor’s would like to address during the
site visit, including, but not limited to the essentiali-
ty of the military base that the housing serves.
Before the site visit, Standard & Poor’s will
review the project request for proposals and a sum-
mary of the base vital statistics, as well as the mar-
ket study so that selection of housing comparables
for the visit can be made.
Site visits should include:
■A tour of the military housing project.
Standard & Poor’s will visit each military neigh-
borhood and rank each neighborhood and do
interior site visits of a representative sample of
units and will take photos of each neighborhood
and a tour of off-base civilian housing compara-
ble properties.
■A presentation addressing civilian housing mar-
ket off base (preferably by the author of the mar-
ket study) and how BAH rates and housing on
base compare to civilian housing and rents off
base.
■A command presentation of activities of the base
(preferably by uniformed members of the U.S.
Armed Forces) addressing base essentiality and
contrasting the base in question with other bases
of similar type. A tour of the military facilities is
an important part of the analysis of essentiality.
■A presentation on each military housing neigh-
borhood, location, pay grades housed there, date
of construction and/or rehabilitation and its cur-
rent occupancy rate.
■A presentation regarding environmental condi-
tions of the housing to be privatized and how
environmental issues are being addressed.
■A presentation by developer and general contrac-
tor on their companies and previous experience
with building large residential communities in
general and military housing projects in particular.
■A presentation by developer on development plan
for the project including site plans, housing eleva-
tions, construction plan and phasing plans.
■A presentation by developer/investment banker on
mitigation of construction risk for bondholders.
■A presentation by developer on how property
management is to be handled.Military Housing Privatizationshttp://www.standardandpoors.com 279Documentation that Standard & Poor’s will need to review before assigning
a rating includes, but is not limited to, the following:
■Trust indenture.
■Loan or financing agreements.
■Mortgage or deed of trust.
■Ground lease, loan guaranty from DoD and other government documents.
■Investment agreements.
■DoD request of proposals.
■Base information
■Developer’s plan of finance, construction and management.
■List if participants in project.
■Offering statement.
■Construction agreements.
■Construction completion guarantees.
Project cash flow projections:
■Beginning state cash flow projections assuming beginning state of units.
■Cash flow projections for each year of the development period.
■Ending state (stabilized) cash flow projections assuming completion of
targeted end state number of units.
■BRAC cash flow projections assuming the base is closed and transition to civil-
ian housing at the end of the period designated by DoD to complete the BRAC
process.Documentation Requirements