By
Timothy S. Evans, American Geosciences, Inc.
David R. Perry, American Geosciences, Inc.
Reuse of idle or under-utilized commercial properties is typically in the best interest of all stakeholders. The seller generates revenue and eliminates tax burdens from an unused property. A buyer acquires property with an established infrastructure and, if a developer, gains valuable land in potentially, if not established, growing economic areas. The municipality or local government body receives additional tax revenue from the resurgence of jobs. And, environmentally most important, green space is conserved from development.
The presence of environmental contamination on the property may limit the attractiveness of resale of commercial properties. Efficiently and effectively conducting due diligence is critical so that the total cost of site development can be determined. Recognizing decision points during the due diligence process will assist in cleaning up commercial properties to protective standards while balancing the bottom line. Recognizing the true costs of site remediation is critical as even moderate site clean-up costs can make a marginal redevelopment uneconomical. This paper presents case examples for guidance through the critical decision process of assisting a developer evaluate environmental issues when making a decision of whether to purchase a brownfields site. The following topics are addressed:
Focusing Due Diligence Site Assessments
The level of site investigation conducted during due diligence should be aligned with the known history of a property, planned use of the property, and the project schedule. Environmental consultants should focus the investigation while balancing future data quality objectives, to help ensure all appropriate requirements are met. Often, the parties will only fund a “quick look” investigation at the start of the project. However, the limitations of the early data must be considered relative to potential regulatory program requirements. Carefully planned, phased investigation will allow the process to progress efficiently and effectively while minimizing costs. However, a phased approach may sometimes be incompatible with the schedules required by development activities. Examples are presented that highlight the “balancing act” between cost, schedule, and potential requirements.
Making Remediation More Palatable
The cost of active remediation may cause severe “sticker shock” for interested parties. Therefore, it is imperative that appropriate remedial alternatives, that match the planned use of the property while being protective of potential environmental receptors, are selected. Potential liability should be evaluated in order to select remedial solutions. Risk-based approaches coupled with land use controls may effectively address contamination. In situations where active remediation is necessary, the environmental consultant must again consider future planned use and client timeframes. Continual management of systems is necessary, and remedial approaches may be altered or supplemented to efficiently and effectively meet remedial goals.
Exiting a Transfer
The overall economics of site development will decide the viability of property transactions. A well planned acquisition should have a clear “exit strategy.” In cases where site characterization and remediation costs exceed the current value of the property, legal and insurance instruments may still allow a transaction to proceed, especially if the property is highly desirable. In cases where a transaction is not viable, other avenues of managing costs may be available. In other cases, it may become clear that “walking away” is appropriate. Environmental consultants must consider the best interest of a client, whether buyer or seller, in achieving his/her goal in these transactions. Options and considerations for deciding whether to exit a transaction are discussed.