A July 17 Sustainable Cities Network article highlights the risks that need to be managed during brownfield redevelopment project in order to make the project a success and how state and local governments can help reduce certain risks. The article summarizes a presentation from the recently held 2013 National Brownfields Conference. From the article:
“Real estate finance is really about risk management,” [Hoboken Brownstone Company President George Vallone] said. The major types of risk associated with a redevelopment project include:
- Environmental risk – liability related to the health hazards associated with the site;
- Entitlement risk – the possibility that governing bodies regulating the site might not provide the necessary permits for redevelopment;
- Market risk – the possibility that no one will want to buy or lease the site at the right price once the site has been cleaned; and
- Construction risk – the uncertainty about how much construction and/or demolition will ultimately cost.
All these risks equate to financial risk, Vallone said, and that’s why mitigating these risks is the first step in a successful brownfield redevelopment project. …[Environmental Liability Transfer (ELT) CEO Randall] Jostes said that, while his company takes the environmental risks away from developers, many brownfield projects depend on municipalities and government agencies to take away or reduce the entitlement risks. As an example, he cited a vacant 116,000-square-foot Viacom/Westinghouse facility in Atlanta that sat on 16.5 acres of contaminated land. If the site could be cleaned up enough to meet the environmental standards for a residential development, it would be worth three times as much as it would be if zoned industrial. But, there was no certainty that it would achieve even the industrial standard, so Viacom/Westinghouse was afraid to move forward, Jostes said.
To help facilitate the deal, the Georgia Environmental Protection Division agreed to work with ELT to bring the property into compliance with residential standards. Should they fail to do so, the site would be assured a restricted industrial permit at a minimum. That, said Jostes, calmed the fears of Viacom/Westinghouse and made the deal possible.
After ELT removed asbestos, demolished the building and remediated soil and groundwater contamination, the site was cleared for residential use and is now ready for a housing development, Jostes said.
“Brownfield opportunities are actually, in our opinion, more viable, more profitable and more productive than a greenfield opportunity, so it’s a misnomer to say it can’t be done,” Jostes said. “It can be done, and we’re doing it coast to coast,” he said.