Navy may lease out Solomons rec center

Could upgrade facilities and open to public use

Wednesday, Sept. 1, 2010

The future of the Solomons Navy Recreation Center, which officials discussed Thursday at the Holiday Inn in Solomons, hinges on a million-dollar question.

Will developers be willing to pay the Navy $1 million a year to lease the center and develop it into a more modern resort?

The Navy estimates that it brings in $1 million each year operating the center and puts that money back into regional programs for its morale, welfare and recreation division. It would like to let one or more developers invest in the facility, run it under its Enhanced Use Lease program and make that same amount of money as the price of a yearly lease.

"Our intent is to do no harm," said Capt. H. Ramé Hemstreet, commander of naval facilities engineering. "We certainly don't want this venture to have any negative consequences."

Hemstreet warned the developers gathered for the meeting that there was no government funding for the project and "no guaranteed return on investment." He characterized the opportunity as "high risk, potentially high reward."

"What this is, is good, old-fashioned capitalism," Hemstreet said. He later affirmed that the $1 million had to be paid in money, and not in in-kind services. He also said the Navy would not be showing developers its balance sheet.

Capt. Stephen Schmeiser, commander of Patuxent River Naval Air Station and the recreation center, said, "We're attempting to leverage the private sector to enhance what we have."

The project could have implications for the local economy as Navy officials opened the possibility of opening the facility to the general public.

"We talked nominally about enclaving security," Schmeiser said, noting that parts of the facility could remain behind a guarded gate, depending on how the facility develops.

The Navy presented slides showing the military's five Armed Forces Recreation Centers around the world as examples of what could be done with the facility. Most of them are anchored by resort hotels and amenities, features that could raise fees for the Solomons facility's current Navy and civil service customers. But the Navy wants the facility to remain financially accessible.

"The market is junior sailors, and our junior sailors do not make a lot of money," said Debbie Moomey, director of real estate for NAVFAC.

The Navy is also offering leases for opportunities to develop office buildings at Pax River and a power plant at the Indian Head Naval Support Facility. However, the Solomons project is the only one that has included an openly stated minimum lease figure.

The Solomons project also differs from the other two in that the Navy is willing to work with more than one developer to overhaul the facility. The center has been divided into four sections that encompass nearly the entire facility.

"For all intents and purposes, really the whole thing is up for grabs," said Dennis Stout, managing director with Alvarez & Marsal, a real-estate firm hired by the Navy to negotiate lease terms. "You do not have to bid on all of these sites."

Stout said that the project was only a lease. The Navy will not be selling the property.

Christine Calhoon, a realty specialist with NAVFAC, confirmed that the Navy would accept multiple offers for multiple sites, but would only agree to one developer for each site. Hemstreet said that the Navy is working to divide the $1 million lease fee among the four sites.

As with their other EUL offers, Navy officials made it clear that developers would have to conduct their own environmental studies and clear state and local regulatory hurdles, including the state's critical area commission review.

The Navy has not discussed with the State Highway Administration how a new resort would affect traffic on the ailing Gov. Thomas Johnson Memorial Bridge.

"Would that to come up, it would be between the developer and the state," Hemstreet said.

jfriess@somdnews.com