{"id":1004193455,"date":"2017-10-11T06:59:14","date_gmt":"2017-10-11T14:59:14","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004193455"},"modified":"2022-12-08T10:38:54","modified_gmt":"2022-12-08T18:38:54","slug":"the-benefits-of-investing-in-contaminated-sites","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/the-benefits-of-investing-in-contaminated-sites\/","title":{"rendered":"The Benefits of Investing in Contaminated Sites"},"content":{"rendered":"

By Alexandra Pacurar<\/p>\n

\"Frank<\/a>

Frank Romeo, president of Partner Engineering and Science<\/p><\/div>\n

While some may be skeptical to invest in contaminated sites, a well thought out adaptive-reuse plan and proper due diligence can result in a profitable development. San Francisco\u2019s Ghirardelli Square<\/a>, one of the country\u2019s oldest adaptive reuse projects, is such an example. The former industrial site was transformed into a retail and entertainment destination, with dozens of restaurants and shops. The RCA Victor Building in Camden, N.J., is another example of how a former manufacturing facility was given a new life. In 2003, the property was transformed into the city\u2019s first market-rate community in 40 years, following an investment of more than $60 million that included $7 million of environmental remediation grants.<\/p>\n

Matt Winefield is president & founder of Winefield & Associates, a company specializing in commercial and industrial real estate investing, with an emphasis on contaminated properties. With a brownfields acquisition budget of $70 million for the 2017 to 2018 fiscal year, Winefield spoke with CPE\u00a0<\/em>about\u00a0the challenges and advantages\u00a0of investing in\u00a0environmentally contaminated sites<\/a> for real estate development.<\/p>\n

Frank Romeo is president of Partner Engineering and Science, a company providing full-service engineering, environmental and energy consulting and design services. He revealed how the clean-up of such a site affects design and the situations when a deal involving a contaminated lot may not work out.<\/p>\n

\"Matt<\/a>

Matt Winefield, president & founder of Winefield & Associates<\/p><\/div>\n

What do developers need to consider when choosing a contaminated site for their next development?\u00a0<\/strong><\/p>\n

Winefield:<\/strong> The property, absent contamination, must have significant utility (e.g., an infill location with high demand.) It is also attractive (but not typically critical) to have rental income during the remediation process.<\/p>\n

Romeo:<\/strong> Developers should invest in proper due diligence and fully quantify the extent of the contamination. In a development project, costs are critical and cost overruns can have a significant negative impact on a project. Conducting proper due diligence and going through the steps of quantifying and pricing remedial activity is critically important.\u00a0<\/p>\n

What are the main challenges in developing on a contaminated site and how can these be overcome?\u00a0<\/strong><\/p>\n

Winefield:<\/strong> The first challenge would be inadequate technical\/assessment data prior to closing. Absent good data, it is difficult to develop a remediation cost estimate that you can present to your investors. To overcome this challenge, the brownfields investor<\/a> must be willing to invest in thorough assessment work before closing, and the seller must be willing to provide site access.\u00a0<\/p>\n

The second challenge would be that you can never have complete confidence in your remediation estimate no matter how much data you obtain. Even in the best scenario, your remediation estimate at the onset of a project can be 50 percent off the mark. To overcome this challenge, it is sometimes prudent to buy environmental pollution legal liability insurance.\u00a0<\/p>\n

Another challenge would be the inordinate demands by regulators. Research past projects and the site closure history of the actual regulatory project manager overseeing the site. Don\u2019t be afraid to walk away from the deal if the regulator has a bad reputation or very few sites for which he\/she has issued No Further Action letters.<\/p>\n

Romeo:<\/strong> The main challenge is site clean-up. Depending on the type\/location\/extent of cleanup needed, it could directly affect what you can do with the site. Other issues\u00a0include zoning restrictions, utility layout\/availability, permitting, etc. The best way to be prepared and have an accurate picture of what will be required to ensure your return on investment (ROI) on the property is conducting the most extensive due diligence possible.\u00a0<\/p>\n

Are there advantages to developing a project on a contaminated site? Why do some developers seek impacted lots?\u00a0<\/strong><\/p>\n

Winefield:<\/strong> The internal rate of return (IRR) is significantly greater than for non-contaminated sites. You can obtain higher IRRs than conventional investments if, and only if, you:<\/p>\n