createdb failing

I am trying to create a new database in an alternate location using
'initlocation' and 'createdb'.

The 'initlocation' utility appears to work, but 'createdb' always fails with the
following error:

"ERROR:  The database path 'PGDATA2' is invalid. This may be due to a character
that is not allowed or because the chosen path isn't permitted for databases
createdb: database creation failed"

The path I am using is '/postgres/SERVICES', which does not appear to have
invalid characters.

I put the absolute path of the new location in the PGDATA2 environment variable,
which is visible to the postmaster because the variable is set at system startup
in /etc/profile.local.

I have tried 'initlocation' and 'createdb' using absolute paths (no environment
variable) and I always get the same error. I have even tried "CREATE DATABASE
WITH LOCATION" directly inside of psql.

I noticed that 'initlocation' created the new directory and a 'base'
subdirectory. The 'base' directory is empty. Should the 'base' directory be
empty?

I am running PostgreSQL 7.0.2 on a SuSE 7.0 x86 box.

Any help is greatly appreciated.  Thank you.