Daimler Bids for German Barracks as Cold War Armies Fade

The washing facility for armored howitzers, set in Germany’s Black Forest, helped convince Daimler AG (DAI)’s Lothar Ulsamer that he’d found the place to build a testing ground for Mercedes-Benz luxury cars.

Ulsamer had been looking for a site near the company’s headquarters in Stuttgart and the army base at Immendingen was the perfect match. As the German soldiers prepare to give up the base, Daimler is in talks to buy the 500-hectare (1,236-acre) complex. It plans to turn the howitzer wash into auto shops, the shooting range into a tunnel for testing car headlights and the training ground into a test track.

“A military plot is ideal,” Ulsamer, Daimler’s head of regional projects, said by phone. Converting agricultural land or empty countryside often meets resistance from farmers and environmentalists, he said. “Military conversions are easy to get through the political process.”

The deal is part of the biggest ever transfer of military properties in Germany as the nation’s armed forces are scaled back, while Britain and the U.S. close bases that were set up across the country after World War II. Soldiers are due to vacate 143 square miles (370 square kilometers) of land, more than six times the size of Manhattan, in the next five years, creating opportunities for companies like Daimler and investors seeking to buy sites for luxury homes, large arrays of energy-generating solar panels and factories.

Bomb Craters

The assets up for grabs range from bomb-riddled airfields to American-style bungalows. In May, the U.S. turned over Benjamin Franklin Village in Mannheim, its largest residential base with 2,000 apartments, four schools, a gas station, cinema, church and a Burger King outlet.

Most of the handovers are taking place next year and in 2015, said Joerg Musial, head of sales at the federal real estate agency, known as BIMA. The agency manages and sells government assets, including army bases.

“We’ve never had such a massive, simultaneous withdrawal,” said Musial. “In some cities, it’s shaking up the entire market.”

BIMA has been helping to reboot disused military facilities, including the one at Immendingen, since 2005. Bidding on most properties in the latest wave of sales hasn’t yet begun because it takes the agency at least two years after the handover to evaluate the property, determine with city officials what kind of use the area should be zoned for, and organize the sale, Musial said.

Research Center

The Daimler deal is moving more quickly than others because the automaker told Immendigen’s mayor it was interested in the property in 2010, before the troops’ departure was announced. Bayerische Motoren Werke AG, another German carmaker, bought part of the Crown Prince Rupprecht Barracks in Munich last year, according to a statement from the local government. BMW plans to build a research and development center on the site.

Large properties such as the Munich base are often broken up into smaller plots that are easier to sell, Musial said. Those in good locations usually fetch 20 million euros ($27 million) to 30 million euros, though some go for more, he said.

The collapse of Communism in 1989 enabled Germany and its Western allies to scale back their military operations in the country. The government plans to shrink the army by about a quarter to 185,000 troops by 2017 to save money, according to the German Defense Ministry website. The U.S. is closing four of its 11 German bases, while the U.K. is scheduled to withdraw all of its 20,000 soldiers by 2019.

Allied Museum

“The Cold War’s over, that’s why they’re leaving,” said Bernd von Kostka, a historian at the Allied Museum in the former American sector of Berlin. “It was thought that Germany would be the main theater if a war broke out.”

More foreign troops were stationed in Germany after World War II than any other European country, von Kostka said. There were a total of 350,000 U.S., British and French soldiers in West Germany as late as 1989 and the Soviet Union had bases across the East.

Many German cities are taking advantage of their right to acquire military sites before they’re put on the market. In Munich, where demand for housing has pushed home prices up 21 percent in the past three years, the local government bought bases that it plans to turn into housing districts with apartments, schools and shops, according to Munich’s municipal website.

Student Housing

In Heidelberg, the authorities plan to convert parts of Mark Twain Village, a former U.S. army complex, into student housing when the property is handed over next year, BIMA’s website shows.

Properties that aren’t acquired by cities are often turned into homes by small developers or used as warehouses or factories by local businesses.

The U.S. army’s former Berlin headquarters are being turned into luxury apartments by Terraplan Immobilien und Treuhand GmbH after the Nuremberg-based company bought the property in 2011. The complex had been empty since 1994 and was rented out to film “Operation Valkyrie” with Tom Cruise and Quentin Tarantino’s “Inglorious Basterds,” according to production company Studio Babelsberg (BG1A) AG.

“Converting barracks into homes isn’t a problem, especially if the buildings are well maintained,” said Charles Smethurst, chief executive officer of Dolphin Capital GmbH, which turns historic properties into homes. Barracks usually have simple layouts that can be easily redrawn for civilian use, he said.

Asian Investors

In 2012, Dolphin acquired a student-housing complex in Mainz that was built by the Nazis before being taken over by U.S. forces. The company, based in Hanover, plans to spend about 40 million euros creating 130 condominiums in a project that will be financed by Asian private investors, Smethurst said.

In April, Belectric Solarkraftwerke GmbH finished building a solar-panel park outside of Berlin on what was once the largest Soviet military airfield in Germany, according to a statement from the company. Doehler Group, a Darmstadt, Germany-based maker of food and beverage ingredients, bought parts of the former U.S. Nathan Hale Depot in July to expand its nearby production facilities.

Military assets aren’t for everyone, though. Musial estimates that about 10 percent of the real estate for sale will probably be snapped up by investors. Many more will be shunned because of their location, or because the redevelopment costs are prohibitive, he said.

Removing Munitions

Sites may be difficult to sell because they come with infrastructure, war damage or chemical contamination that’s expensive to remove, said Felix Embacher, head of housing at Munich-based research firm Bulwien Gesa AG. Foreign armies sometimes built water-supply networks and power plants that may now have to be dismantled, he said.

“What are you going to do with 500 hectares of paved land in the boondocks?” Embacher said.

In 2010, a former military-training field in the southern German town of Guenzburg was transformed into Legoland, a resort for fans of the plastic building blocks made by Lego A/S. Before the Danish company bought the site, the government spent 11 million euros removing 213 tons of munitions from the ground, Sueddeutsche Zeitung reported in May of that year, citing the town’s mayor.

U.S. Closures

Germany is not alone in seeking new uses for its military facilities. Armies around the world are shedding real estate in an effort to cut spending.

The U.S. Department of Defense plans to save about $250 billion over the next five years, in part by closing European bases. The U.S. army’s presence in Europe is due to shrink to about 30,000 soldiers in 2017 from 213,000 in 1989, according to data compiled by the military.

BIMA, the government agency responsible for selling former army bases in Germany, also divests about 100 million euros of other unwanted real estate assets each year. That includes air-raid bunkers and the tracts of land that ran along the Berlin Wall collectively known as the “death strip.”

Daimler plans to invest at least 100 million euros on the testing track at Immendingen, a town of 6,100 residents. The mayor, Markus Hugger, is looking forward to Daimler’s arrival -- and not just because of the 300 new jobs and the extra tax revenue.

“We hope that once Daimler’s here, other companies will come,” he said.

To contact the reporter on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

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Photographer: Jin Lee/Bloomberg

The hood of a Daimler AG Mercedes-Benz 2014 CLA45 AMG during the 2013 New York International Auto Show.

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Photographer: Jin Lee/Bloomberg

The hood of a Daimler AG Mercedes-Benz 2014 CLA45 AMG during the 2013 New York International Auto Show. Close

The hood of a Daimler AG Mercedes-Benz 2014 CLA45 AMG during the 2013 New York International Auto Show.

Photographer: Sean Gallup/Getty Images

The U.K. is scheduled to withdraw all of its 20,000 soldiers by 2019. Close

The U.K. is scheduled to withdraw all of its 20,000 soldiers by 2019.

Photographer: Paul Hilscher/Sheliak

In Heidelberg, the authorities plan to convert parts of Mark Twain Village, a former U.S. army complex, into student housing when the property is handed over next year, BIMA's website shows. Close

In Heidelberg, the authorities plan to convert parts of Mark Twain Village, a former U.S. army complex, into student... Read More

Source: Dolphin Capital via Bloomberg

Dolphin Capital GmbH's Canisius Carree development, a former U.S. forces' barracks, is seen in Mainz, in this illustration. Close

Dolphin Capital GmbH's Canisius Carree development, a former U.S. forces' barracks, is seen in Mainz, in this illustration.

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