Redeveloped Brownfields' Real Estate Potential

What is the real estate market and redevelopment potential? Location is key when weighing a Brownfield's economic outcome. In fact, location can be a bartering tool to maximize reuse options. Other factors include: land mass; the property's proximity to nearby significant sites that are viable for development; whether the property borders an appreciable water body; and whether proven cleanup/restoration case studies exist.

Also consider whether the site will be redeveloped for industrial, office, retail, municipal, recreational, residential, marine-related use or a mix.

Who owns the land and is responsible for it? Records of past uses and tenants usually are recoverable, and potentially responsible parties (PRPs) often are identifiable. Whether the PRPs are financially capable of preparing the site for reuse — either through investment or offering the property in kind in exchange for release of liability — can help determine whether redevelopment is feasible.

What are the site's structural similarities and distinguishing characteristics? Is there any architectural appeal to the building(s) on the site? Do structures need to be renovated or demolished? If demolition is the best approach, the amount of debris and building material types have significant recycling value. Sometimes, architecturally significant buildings reflect a community's heritage, and structural restoration will garner public support and funding. In other cases, demolition and recycling can offset the cleanup costs and make the project financially viable. [See “Demolition Material Management Options” on right].

For example, the $5 million cost to decontaminate, demolish and haul a seven-story power plant in Bridgeport, Conn., was offset by approximately $3.5 million that came from recycling 150,000 tons of metal and 40,000 tons of building debris, including brick and stone.

What existing infrastructure and social service facilities are nearby? Is the site near major transportation systems, such as bus or train lines? Are electricity, natural gas pipelines, sewage systems and telecommunications infrastructures already in place? Is the site near facilities that are core to social infrastructure and civic pride? Is the site near other industrial or commercial operations that can lead to mutual benefits? Evaluating the existing attractiveness and/or the costs of infrastructure maintenance and upgrades can be critical in the decision to redevelop.

What are the property tax impacts? Are taxes overdue on the site, or is it generating low tax revenue because of its unuse or underuse? Is the property zoned for tax incentives for investors? Will site redevelopment have little or profound effects on long-term property tax revenue? This can be leveraged to gain economic advantages when considering redevelopment and reuse.

Are there available funding mechanisms and magnets? Can environmental cleanup costs be recovered through PRPs, insurance vehicles or public means? Is the site a target for economic redevelopment funding alliances? Are low-interest, revolving funds available? Can a municipal partnership be formed to leverage other funding? Financial management groups may assist with the purchase and redevelopment of the site.

What is the nature and extent of environmental contamination? This often is the pivotal aspect in weighing the economic candidacy of a Brownfields. Determine what chemical and/or waste issues need to be addressed. What needs to be done to quantify the nature and extent of contamination? And with what certainty can cleanup costs be estimated?

What are the management strategies to reduce liability and accomplish site transaction and reuse objectives? What is the potential for obtaining a covenant-not-to-sue from the state, or a comfort letter from the EPA? You'll want assurance from both that when you redevelop the site, you won't be held liable for contamination that occurred prior to your ownership. Also, is insurance available to protect your investment in the site? Can public/private entities be formed to manage the liability issues?

Are the regulatory philosophies and aligned or remote processes in place? How the regulatory process can dovetail with redevelopment strategies is another juncture point in weighing the candidacy of a project. Does the site meet primary EPA or state department of environmental protection regulations and guidelines? Will the site's future use continue to maintain cleanup standards? And, can environmental and economic redevelopment organizations reach a consensus on the site's viability?

What are the financial and environmental risk assessment, management and communications issues? The trend in Brownfields initiatives is a risk-based approach to site reuse, focusing on the likelihood of contaminant exposure and its consequences. Thus, it's important to identify cleanup end-points. How much remediation must be done to consider the site “clean?” Risk also is weighed among social and ethical factors, so community involvement can help to validate the decisions.

What are the community relations and/or public perception issues? Is the site a community hot button? Are perceived risks greater than actual risks? Or will public sentiment drive reuse options? Then, consider whether social safety risks (i.e. crime) are more of a concern than environmental risk.

How will the chosen reuse option affect other socioeconomic issues? Can the site be an anchor to stimulate further economic redevelopment in the community? If so, what are the job-generating reuse options? Will site reuse enhance the local social infrastructure?

What issues do all stakeholders in the process have and how can consensus be reached? This often makes or breaks a deal, so identify all parties that have a potential, vested interest in the project. What public/private partnerships can be formed to subsidize the site? What are the political drivers? Is community pride demanding action? What are each stakeholder's priorities? Identify the potential conflicts and address all priorities to eliminate conflicts, help generate resolution and build consensus.

What are the costs-of-cleanup estimates with associated reliability margins? The previous questions can help determine the estimated cleanup costs, as well as the preliminary, economic feasibility margin for site redevelopment.

Ultimately, the question you want answered is whether you're looking at good real estate. But remember, all the economic and social factors can improve the chance for a success in a Brownfields project's redevelopment.

The buy or no-buy argument should be based on knowing the risks of committing valuable resources to a Brownfields redevelopment project. And, in most instances, margins of error relate directly to how certain the parties are that the project will be successful.