AN INNOVATIVE APPROACH TO REDEVELOPING CONTAMINATED PROPERTIES

Executive Summary : As the regulatory climate has shifted in the past few years from an adversarial ‘command-and-control’ environment to a more practical and cooperative one, a business opportunity has emerged to turn brownfield liabilities into economic assets.

Preparing brownfield sites for productive reuse requires the integration of many elements – financial issues, liability considerations, environmental assessments and remediation, compliance with regulatory requirements, and diligent coordination among the various stakeholders.

GRA Environmental Group (GRA) will function as a service for owners of contaminated properties by coordinating the various components in brownfield redevelopment, including real estate development, environmental consulting and financial advisory services.

The real estate division will be responsible for providing market analyses, asset evaluation reports, coordination with local development agencies and an aggressive marketing and sales campaign.  GRA will earn a negotiated percentage of the property sales price.  The environmental consulting division will manage all environmental issues on the property and ensure regulatory closure.  The financial advisory division will manage all financial issues including the application of tax deductions for remediation costs.

REAL ESTATE DEVELOPMENT

The most critical and often overlooked component in brownfield transactions is real estate development.  A company may hold title to several highly contaminated properties, take the initiative to comply with the current regulations and commit itself to cleaning up these sites.  However, without an aggressive real estate team working on its behalf from the outset, the company could incur major costs without realizing a return on the investment.  The real estate arm of GRA will provide the following services:

-    Market Analysis.  To accompany any preliminary due diligence, the market analysis will identify possible uses for the site, who would want to buy the land and how much they would be willing to pay.  By knowing the answers to these questions in the initial stage, the real estate team will know what entities to target for the site end-use after remediation.

-    Appraisals.  An asset evaluation study is critical to the brownfield transaction.  This would incorporate cleanup cost into the land value estimate.

-    Coordination with municipal agencies.  Any prospective redevelopment strategy needs to be coordinated with local agencies.  Such issues may include zoning and land use approvals, permitting, community relations and easement reviews. 

-    Marketing and Sales.  An aggressive marketing campaign will occur throughout the remediation phase of the project.  Depending on site location and feasibility, the sales team will concentrate on various end-use options such as industrial, commercial and residential.

-    Legal Support Services.  Legal considerations need to be carefully monitored throughout the transactional phase of the brownfield project.  Legal services will include contracts, title transfers, lien foreclosures and indemnification agreements.

FINANCIAL ADVISORY SERVICES

Due to the complexity of brownfield redevelopment, GRA will secure financial advisory services to address the following issues:

Insurance Protection.  A number of pollution liability indemnification products have emerged over the past few years in response to the growing brownfield redevelopment market.  GRA will negotiate the most cost-effective package tailored to meet the needs of the corporate client.  Some of the available insurance products are:

-    Clean-up Cost Cap (Stop-Loss)
-    Professional Liability (Errors and Omissions)
-    Pollution Legal Liability (Environmental Impairment Liability)
-    Contractors Pollution Liability.

Tax Advisory Services.  Understanding tax treatment of environmental remediation costs is critical to brownfield redevelopment.  Depending on site location and use, our client will be able to take advantage of tax incentives that have recently been made available.  These incentives include application of a federal income-tax deduction, environmental remediation credits and municipal property tax classifications.

Payment Invoicing.  All fees will be generated and processed through the financial advisory group.  Our client will receive one monthly statement that will concisely indicate all work performed and costs incurred to date.  Furthermore, we have developed a unique tracking report of action items that will be sent to the client on a monthly basis.  The report will detail the on-going status of every component and provides the client with a centralized, hassle-free status of each individual brownfield project. 

Legal Support Services.  The financial services group will contract legal support in the specialized areas of tax and insurance law.

ENVIRONMENTAL CONSULTING

GRA will manage all environmental issues related to the contaminated property and ensure regulatory closure expeditiously:  The following issues will be addressed:

-    Competitive Bidding.  GRA will work with third-party environmental consultants who will be responsible for ensuring the most prudent and cost-effective clean-up strategy.

-   Site Investigations.  Where necessary, the consultant shall perform Phase I and Phase II investigations on sites that have not been adequately characterized to date.

-    Risk Assessments.  The consultant might encounter the need to perform risk assessments.  These would be used to develop remediation objectives by applying site-specific data. 

-    Agency Review.  All sites will be enrolled into a Voluntary Cleanup Program.  This will include filing required environmental reports and applications with the state agency.  GRA will secure receipt of a ‘comfort letter’, which releases a potential seller and purchaser from any liability that might be associated with environmental contamination on the property.

-    Legal Support Services.  Legal services in the environmental section may include consultant contracts, regulatory compliance and document reviews.

PLAN AND IMPLEMENTATION

GRA and its partners offer a two-phased approach to manage your brownfield property or portfolio.  Phase I will assess the problems and many components related to each individual property. This phase also presents different creative solutions in a concise low-cost report. The report will include, but not be limited to, the following points:

-   Site Document Reviews
-   Estimated Project Schedule
-   Estimated Project Costs
-   Listing of work required for project completion
-   Preliminary Appraisal
-   Review of sales and redevelopment potential

When the client agrees to move forward, Phase II will execute the following services:

-    Engineering Services
-    Access to Government Assistance
-    Risk Management
-    Comprehensive Site Appraisals
-    Market Analyses
-    Disposition Services
-    GIS Mapping
-    Remediation Financing
-    Construction Financing
-    Permitting and Zoning
-    Cost-Benefit Analyses
-    Public / Community Relations

OTHER INITIATIVES

It is often said that brownfield redevelopments are complex real estate ventures with an added environmental component.  As a result, GRA (representing the client) will employ other initiatives that will hasten the remediation and redevelopment process:  

-    Local Development Corporations.  GRA Environmental Group will work closely with the local development corporation to facilitate a successful redevelopment. 

-    Empowerment Zones and Enterprise Communities. A majority of brownfields are located in these federally-designated areas.  Under the Revenue Reconciliation Act of 1993, special tax incentives were created for businesses operating in these areas.  Such incentives include an employer wage credit, property tax deductions and tax-exempt bond for financing new developments.

-   Government Initiatives.  GRA will access all available government (local, state and federal) initiatives to assist in the brownfield redevelopment process.  Some initiatives to encourage private development may include:

-   Tax-Increment Financing.
-   Interagency Brownfields Task Force.
-   Groundwater Ordinance (applicable in the City of Chicago)
-   Emissions Reduction Trading Bank.
-   nvironmental Loan Program.
-   U.S. EPA grants to fund innovative technologies to characterize and cleanup contaminated sites.