Anatomy of Brownfields Redevelopment
Brownfields Solutions Series
A brownfield is a property on which expansion, redevelopment, or reuse may be complicated by the presence, or perceived
presence, of contamination. EPA's Brownfields Program provides grants to fund environmental assessment, cleanup, and
job training activities. Additionally, EPA seeks to strengthen the marketplace and encourages stakeholders to leverage the
resources needed to clean up and redevelop brownfields.
This Brownfields Solutions Series fact sheet is intended to provide an overview of the brownfields redevelopment
process. The brownfields real estate redevelopment process, along with key challenges, critical participants, and example
redevelopment scenarios are discussed. Key real estate terms are highlighted in bold text. These terms are explained
on page 7. The information in this fact sheet is based on stakeholders' experiences in the brownfields cleanup and
redevelopment process and does not represent the views of EPA.
Key Challenges
in Brownfields
Redevelopment
Several challenges make brownfields
cleanup and redevelopment unique
compared to other real estate
development projects. These
challenges include:
Environmental Liability
Concerns: Developers and property
owners want to manage past and
future liabilities associated with the
property's environmental history
Financial Barriers: Private lenders
are often reluctant to give loans for
potentially impaired lands. In some
cases, cleanup costs for a property
may ultimately be more than the
property's value.
Cleanup Considerations:
A brownfields redevelopment
timeline may take longer than
typical real estate development due
to environmental assessment and
cleanup activities.
Reuse Planning: A reuse plan
based on community goals or
sound economic and environmental
information (e.g., market potential)
may be lacking.
In spite of these challenges, significant
opportunities exist for successful
brownfields redevelopment. A
redevelopment idea that works to bring
new life to an area, enhanced by public
support for the project, can create the
momentum necessary to overcome the
challenges associated with brownfields
transactions.
Critical Participants
in a Brownfields
Transaction and
Redevelopment
Effort
Property owners, public- and private-
sector stakeholders, and other parties
(e.g., attorneys, regulators) have roles
and interests in brownfields cleanup
and redevelopment efforts. There is
no specific point in the brownfields
project that these participants must
be identified and involved, but the
more participants involved in the
upfront planning, the smoother the
project planning process. Included
on the following page is a table that
summarizes the roles each participant
plays in a brownfields transaction and
their interest in a successful transaction.
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The Real Estate
Development
Process
Brownfields redevelopment often
relies on strong coordination
among stakeholders including local
communities; local, state, and federal
governments; private parties; and
nonprofit organizations. Successful
development of brownfields can be
enabled or accelerated when these
stakeholders work together to assess
and clean up the property and pursue
a common redevelopment goal.
Roles and Interests of Participants
Participants Examples
Property Owner
Public-Sector
Stakeholders
Private-Sector
Stakeholders
Other Parties
Local Governments
Community Groups
EPA Grant Recipients
Nonprofit
Organizations
Investors
Lenders
Developers
Insurers
Attorneys
Environmental
Consultants
State and Federal
Regulators
Role
Sell or develop the
property
Redevelop the
property from
a community
and economic
development
perspective
Provide resources to
develop the property
Provide technical,
regulatory, or other
guidance
Interest
Want to receive a fair value of their property depending on
the extent of environmental contamination
Want to manage any liability concerns upfront
Want to see the project succeed in terms of revitalizing
blighted properties and generating economic or community
growth
May want the successful property assessment, cleanup, and
reuse to enhance the community's image
Want to see the project succeed in terms of revitalizing
blighted properties and generating economic or community
growth
Want to earn an appropriate return on investment
May want to tie the property redevelopment into a larger
redevelopment plan for the neighborhood or community
Want to ensure that the property is cleaned up and safe for
appropriate levels of use and/or reuse
Want to alleviate future environmental concerns on the
property
Typical Steps in the Redevelopment Process
x s
Pre-Development \/ Securing the Deal
Indentify and Refine a
Redevelopment Idea
Conduct Due Diligence
Secure Access
to the Property
Identify Sources of
Financing
Contract Negotiation
Secure Financing
Establish a Remedial
Action Plan
Secure the Property and \
Formal Commitment
Cleanup and
Development
Approvals
Cleanup
Integrate Cleanup and
Construction
Property Sale or Lease
Completion and Formal
Opening
Property
Management
Long-Term Operations
and Maintenance of
Remedial Systems
The redevelopment process generally
follows four steps: 1) Pre-development;
2) Securing the Deal; 3) Cleanup
and Development; and 4) Property
Management. Within each of these
steps, there are multiple activities that
may occur, and the order of these
activities may vary. As brownfields
redevelopment projects vary greatly in
their complexities and scope, a greater
emphasis will be placed on different
parts of the process depending on
which type of redevelopment scenario
occurs. Brownfields redevelopment
typically follows one of three scenarios:
private-led, public-private partnership,
or public-led. These three scenarios are
discussed on page 5-
Pre-Development
Pre-Development
activities lay
the foundation
for a successful
brownfields
redevelopment
project by
identifying and
refining the redevelopment idea;
conducting due diligence to assess the
extent of contamination at the property;
identifying potential funding sources;
and resolving numerous other issues
related to the property's redevelopment.
The pre-development activities are an
iterative rather than a linear process.
Identify and Refine a Redevelopment
Idea, To begin the pre-development
process, a developer may reexamine a
development idea several times before
the project makes sense, from both a
financial and environmental standpoint.
In a private-led redevelopment scenario,
the developer typically generates and
refines the redevelopment idea, while
in the public-led redevelopment
scenario, the community input
drives the redevelopment idea. In
identifying a redevelopment idea, one
of the first steps in the brownfields
redevelopment process is to identify
and assess potential reuses for the
property. Early determination of the
property's reuse will ensure that cleanup
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efforts complement the reuse goal and
that stakeholders are invested in the
redevelopment process. All critical
stakeholders should be assembled to
facilitate communication and elicit
support for the project. Input gathered
through stakeholder meetings can
be used to conduct a reuse planning
effort to evaluate historic use patterns;
examine existing planning and zoning;
and refine potential redevelopment
ideas.
Conduct Due Diligence. Due
diligence involves a variety of activities
in advance of purchasing a property
as well as activities specific to the
environmental components of the
redevelopment. These activities typically
include conducting property and
environmental assessments, researching
land and building titles for the property,
and continuing communications with
key stakeholders about the planned
redevelopment. When reviewing
property reuse assessments, the
assessments typically consider the
highest and best use of a property,
environmental factors, available
financial tools, and local stakeholder
concerns. The highest and best use
from a developer's perspective may vary
from what the community considers
the best use of the property. Potential
contamination on the property may
present obstacles to the developer's
highest and best use for the property.
The project developer or EPA grant
recipient may also prepare a market
analysis or feasibility study to evaluate
local and regional economic and real
estate conditions and characterize the
market demand for various real estate
products. During the due diligence
process, a project developer will also
likely conduct a pro forma analysis to
determine the economic viability of the
development.
Identifying the presence and extent of
contamination is essential to evaluating
risk, limiting liability, and determining
an appropriate reuse. If not already
done, a Phase I environmental
assessment should be performed to
identify the presence, type, and extent
of contamination that may exist onsite.
If required, a Phase II assessment
may be conducted to sample or test
for specific hazards that may have
been identified in Phase I and to help
develop a remedial action plan.
Secure Access to the Property. Access
to the property must be secured from
the property owner before beginning
assessment activities. A plan for
obtaining property control or property
ownership should be identified if
the property owner is not an active
participant in the redevelopment
process.
Identify Sources of Financing. A
combination of private- and public-
sector funding may be used to finance
assessment, remediation, purchase,
and redevelopment activities. These
funding sources may include: local,
state, and federal government
programs that offer tax credits, tax
abatements, TIP districts, grants,
subsidies, bonds, or loans; property
owners; developers; investors; and
nonprofit organizations. Municipal
economic development agencies and/or
state brownfields programs are likely
sources of information for brownfields
redevelopment financing.
Securing the Deal
Securing the
Deal can begin
once the pre-
development
step has yielded
a decision
to purchase
the property and
continue with the project. In order to
secure the deal, contract terms must
be negotiated, financing secured, and
a decision must be made on how to
manage the environmental liability.
Once all of these steps are satisfied, a
formal commitment is made to move
forward.
Contract Negotiation. A brownfields
project may have complications that
must be resolved between the buyer and
seller that stem from environmental
concerns. During the contract
negotiation, a term sheet is often
used to sort out what responsibilities
the buyer and seller will each take in
the property transfer. For example,
if the property has existing buildings
that will be reused, this may include
normal property and building costs
like repairing roofs or HVAC systems.
Negotiations also include determining
where the responsibility for remediation
lies and who will manage the liability
once the redevelopment is completed.
Other issues requiring negotiation
include establishing liability for various
aspects of the cleanup including on-
site vs. off-site concerns and agreeing
on long-term responsibility for the
maintenance of the remediation and
institutional controls, if applicable.
Secure Financing. One of the
developer's roles is to provide financing
to develop the property. To ensure
that cleanup and redevelopment are
not hindered by a lack of funding, all
public and private funding sources
(e.g., grants, loans) identified in the
pre-development step should be
secured. If necessary, a nonprofit, trust,
or other fund may be established to
receive and distribute this funding.
In many instances, debt financing
is utilized, where loans are secured
through a financial institution for the
redevelopment. Private investors may
also back developers through equity
financing. Public financing may be
utilized for many components of the
redevelopment, including building
demolition, infrastructure development,
and cleanup activities.
Establish A Remedial Action Plan.
In brownfields redevelopment, it is
difficult for a property to transfer
owners if the remediation costs are not
quantified. Therefore in most situations
a property is completely characterized
and a remedial action plan is put in
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Bo/of terms are defined on page 7.
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place. This process can either be done
by the buyer or the seller.
Securing the Property and Formal
Commitment. If the property is
not owned by the entity performing
cleanup and redevelopment, it may be
obtained through a purchase or sale
agreement, or involuntary acquisition
methods such as foreclosure. During
the formal commitment, contracts and
documents are signed and exchanged.
Once obtained, any zoning changes or
variances that may be required for the
planned reuse should be pursued (e.g.,
changing the property's zoning from
industrial to commercial).
Cleanup and Development
Cleanup and
Development
occurs once
the planning
processes
have been
completed. This
step encompasses
receiving construction approvals;
conducting cleanup and construction;
integrating cleanup and construction
activities; and completing the
redevelopment signified by the
property's sale or lease, including
securing tenants.
Approvals. Prior to construction, all
land use and construction approvals are
necessary. In order to receive approvals,
specifications of the buildings and site
plans have been approved and permits
have been secured.
Cleanup. Property cleanup is
conducted based on the remedial action
plan. Depending on the type, quantity,
and toxicity of contamination found
onsite, cleanup activities may include
soil, surface water, or ground water
remediation. If an entity that did not
contribute to the contamination is
Cleanup and
Development
performing the remediation, it may do
so through a state voluntary cleanup
program, which may limit liability
associated with any residual or newly-
discovered contamination after cleanup.
A cleanup may be considered complete
when local, state, or federal regulatory
closure (e.g., a No Further Action
Letter) is issued.
Integrate Cleanup and Construction.
Based on assessment activities, planned
cleanup actions, and stakeholder
input, developers are typically able to
integrate cleanup and construction
activities. Engineers for cleanup and
construction activities have developed
detailed plans for streamlining the
process and ensuring all issues are
resolved so that the redevelopment
process runs smoothly. This portion
of the redevelopment process is
extremely time-sensitive as construction
delays may cause overall increases in
redevelopment costs.
Property Sale or Lease. Leasing
begins when the construction schedule
is determined. After construction is
complete, the property may or may
not be sold. A commercial property
may be sold or leased for long-term
management. However, in most cases
the property is leased first.
Completion and Formal Opening.
A brownfields project may be
considered successfully redeveloped after
construction is complete, ownership
and leasing transactions are finalized,
and the property is occupied and
operating as its planned reuse. If the
property is a large-scale redevelopment,
the formal opening may be signified by
an event in which brokers, neighbors,
and elected officials are invited to view
the completed property and celebrate
the completion of the construction
phase of the project.
Property Management
Property
Management
of a brownfield
may continue
after
redevelopment
is considered
complete.
Management involves a number of tasks
to ensure the long-term sustainable
reuse of the property. This includes
managing the financial aspects, physical
plant, community relations, and
any long-term environmental issues
associated with the property.
Long-term Operations and
Maintenance of Remedial Systems.
Some remedial methods, such as ground
water pump and treat systems, require
long-term operation and maintenance.
In these instances, the property owner
may be responsible for submitting
monitoring reports to the agency with
regulatory oversight on a periodic
schedule. In addition, many brownfield
properties incorporate engineering and
institutional controls in their remedial
plans to restrict property access or use.
Engineering controls such as asphalt
caps and fencing should be inspected
on a regular basis to ensure they remain
protective of human health and the
environment. Institutional controls
often take the form of deed restrictions
or easements; property owners must
maintain awareness of these restrictions
and ensure they transfer to the new
owner if the property is sold.
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Bold terms are defined on page 7.
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Redevelopment
Scenarios
Brownfields redevelopment often
involves many participants, including
public- and private-sector partners.
For brownfields projects that utilize
EPA Brownfield grants, the levels and
combinations of public/private funding
vary from project to project. The public
and private stakeholders involved, and
necessary steps, can vary widely among
brownfields projects.
The following redevelopment scenarios
represent three common examples of
brownfield transactions: private, public-
private, and public.
Private Redevelopment
Public-Private Redevelopment
Public Funding
Private Funding
In a typical, privately driven
redevelopment scenario, a developer
takes responsibility for the entire
redevelopment process but may require
some limited public investment to first
define the extent of contamination
onsite. The first step is for the developer
to take title of the land via purchase or
conveyance, and plan for the property's
reuse. Given the developer's financial
resources, private financing will need
to be identified either through debt
or equity. Public funding, such as an
EPA Brownfields Assessment grant
might be used to identify and quantify
the property's contamination and
define the environmental cleanup
required. The developer completes
all environmental cleanup activities,
meeting the state's voluntary cleanup
program requirements and other
applicable federal or state regulations.
Once cleanup is considered complete by
the appropriate regulatory authority, the
property may be redeveloped.
Public Funding
Private Funding
A public-private partnership is an
agreement between at least one public-
sector entity and one private-sector
organization to combine resources and
efforts to accomplish a common goal.
The level of participation can vary from
all public to nearly all private. In typical
public-private partnerships associated
with brownfields restoration, the public
entity usually sponsors the project and
provides some initial funding, often for
assessments that remove contamination
uncertainties and for infrastructure to
support development; a private-sector
developer then funds and manages
the pre-development and construction
process.
The composition of the public-
private partnership is unique for each
brownfields project. Public-private
partnerships are often successful because
initial public investments provide
the necessary incentives for private-
sector development and operation.
These collaborations reduce the
financial burden on the public sector
while accelerating property cleanup,
redevelopment, and community
revitalization.
Private-led Redevelopment: Emeryville, California
Located between Oakland and Berkeley, California, the City of Emeryville saw most of
its supporting industry abandon the area during the 1970s. By the mid-1990s, more than
230 acres within Emeryville were underused or altogether vacant, with more than 90
percent of this idle land known to have soil and ground water contamination. To aid in
the city's assessment, cleanup, and redevelopment efforts for these tainted properties, EPA
awarded Emeryville a $200,000 Brownfields Assessment grant in March 1996. EPA and
the city worked together to target ten area brownfields deemed ripe for redevelopment.
In addition to performing assessments, Emeryville used EPA grant funds to develop
a database on the areas brownfieldsa "One Stop Shop" for potential investors and
developers to learn about assessment results, land use and zoning issues, property ownership status, and other essential facts
about city properties targeted for reuse. On one of Emeryville's brownfields, a private corporation purchased the property and
constructed 200 units of mixed-income housing. Another brownfield was purchased by one of the country's largest biotechnology
firms for its new headquarterswith planned construction of 12 buildings totaling more than two million square feet. Since EPA's
Brownfields grant, the City of Emeryville has leveraged more than $640 million in cleanup and redevelopment funding from the
private sector, for projects ultimately expected to provide more than 10,000 new jobs and produce four million square feet of new
office, commercial, and residential space.
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Public-led Redevelopment
Public Funding
For some brownfields, a public sector-
led development process may return
the property to productive use. In a
typical public redevelopment scenario, a
municipality takes responsibility for the
entire assessment and cleanup process.
The municipality may then "flip" the
property to a developer, or redevelop
the property itself for public use.
In such scenarios, the municipality
typically takes ownership of the
property by foreclosure, eminent
domain, or voluntary purchase.
The municipality then conducts
environmental assessment and cleanup
activities, which may be funded using
EPA Brownfields Assessment or
Cleanup grants, state grant programs,
or local funding. Once remediated,
the property may be transferred to
the local economic development
authority to prepare the property for
construction. The property might
be sold to a developer at this stage,
or the municipality might construct
speculative buildings that could later
be leased or included in the property's
sale. A municipality may also elect
to maintain a property after cleanup
is complete, using the property for a
public need such as a park, school, or
other municipal building.
Public-Private Redevelopment: St. Louis Park, Minnesota
In St. Louis Park, Minnesota, the vacant, 5.8-acre property of a former lithium processing
facility had long meant trouble for the nearby community. Located near a public park and an
elementary school, the property attracted vagrants and drug activity, and had been the subject
of 45 police calls within five years. When a private developer purchased the property, initial
assessments revealed lithium-impacted soils to a depth of 16 feet, as well as petroleum, lead,
and barium contamination. An EPA Brownfields Cleanup Revolving Loan Fund awarded
to Hennepin County, Minnesota, and a partnership between Hennepin County and the
Minnesota Department of Employment and Economic Development (DEED) helped to cover
the critical financing required for this $2.3 million cleanup effort. In return, the developer
financed a $4.6 million redevelopment effort that transformed the property into a 79,000 square foot, multi-tenant modern office
building less than a year after cleanup began. In preparing the property for redevelopment, more than 20 thousand pounds of
pure lithium and other contaminants were removed from the property's soil and ground water. Assessed value of the property went
from $1.7 million to $5-2 million, and the property's tax revenues for the city increased by 350 percent. Before redevelopment
was even complete, nearly 80 percent of the office facility had been leased by a promotional manufacturing and distribution firm
that brought 100 jobs to the community. The private developer received the Twin Cities Business Journal's "Best in Real Estate
Award" in the Redevelopment Category for 2003, and the National Association of Industrial and Office Professionals' "Award of
Excellence" in the Multi-Tenant Industrial Building category in 2005-
Public-led Redevelopment: Prineville City Hall and Community Plaza, Prineville, Oregon
The City of Prineville, Oregon, faced a need for space to accommodate services including
administration, planning and community development, police and emergency dispatch,
and child/family assistance. A .25-acre, former gas station property was identified as a
potential property for these uses. The gas station had operated from 1940 until 1997, and
an environmental assessment revealed severe petroleum contamination. A $200,000 EPA
Brownfields Petroleum Cleanup grant awarded to the city in 2003 was used to address
the property's soil and ground water petroleum contamination and minimize the
migration of vapors. In order to complete this project, the city contributed its own funding, and leveraged funding from sources
including Crook County, an Oregon Housing and Community Services Department Community INVESTMENT grant, an Oregon
Economic Community Development Department Flood Recovery and Restoration grant (for park development), a U.S. Department
of Agriculture Forest Service Community Assistance Planning grant (for design costs), an Oregon Department of Transportation Local
Street Network grant (for road updates), and a U.S. Department of Agriculture Rural Development loan (for construction). Cleanup
was completed in June 2004, and Prineville's new City Hall and Community Plaza opened in July 2005-
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Key Terms and Resources
Included below are definitions of important terms that may be used in brownfields redevelopment projects.
Debt Financing! Project financing that comes from obtaining loans and/or issuing bonds.
Due Diligence: Refers to the research or analysis that takes place in advance of purchasing a property.
Equity Financing; Project financing that comes primarily from private investors investing in a project in exchange for an
ownership stake.
Highest and Best Use: The redevelopment use of the property that will result in the maximum market value for the
property.
Institutional Controls: Actions, such as legal controls, which help minimize the potential for human exposure to
contamination by ensuring appropriate land or resource use.
Market Analysis: Investigating and reviewing local and regional real estate market conditions, economic conditions, and
supply and demand data for a potential redevelopment.
Phase I Assessment: Investigation performed by an environmental professional that typically involves property surveys,
interviews with owners and local government, and reviews of historical records to determine the potential for contamination
on the property.
Pro Forma: A modeling of the projected cash flows of a potential redevelopment.
Real Estate Products: The various types of real estate developments for different market segments (e.g., residential,
commercial, industrial).
Remedial Action Plan: A long-term plan that details the cleanup plans for a property.
State Voluntary Cleanup Programs (VCPs): State VCPs can bring a final authority to the cleanup process via liability
relief and No Further Action letters. A copy of the 2005 State Brownfields and Voluntary Response Programs Guide can be
downloaded at: http://www.epa.gov/brownfields/pubs/st_res_prog_report.htm.
Tax Abatements: Cities or counties may agree to reduce taxes owed or exempt property owners from paying property taxes
for a period of time in order to spur economic development.
Tax Credits: A tax credit lowers the amount of income tax owed by a tax payer.
Tax Increment Financing (TIP) Districts: Cities create TIP Districts to make public improvements within those districts
that will generate private-sector development. In these districts, the current tax rate is frozen while area improvements or
development occur. Tax increases in property assessment values after redevelopment go into a special bond fund or are used
for future growth in the district.
Resources:
The 2005 Brownfields Federal Programs Guide
Developed by EPA's Office of Brownfields Cleanup and Redevelopment (OBCR), this Guide offers information on a range
of federal resources that can provide technical and financial support to brownfields cleanup and redevelopment. The Guide
also includes a quick reference matrix that connects specific types of projects with specific funding sources. The Guide can be
downloaded from the OBCR Web site at: http://www.epa.gov/brownfields/partners/bf_fed_pr_gd.htm.
EPA's Environmental Insurance and Brownfields Redevelopment Web Site
The OBCR Web site provides links to many resources to encourage private-sector involvement, and includes detailed
information on environmental insurance, policy coverage, and key terms. This information can be found at:
http://www.epa.gov/brownfields/insurebf.htnrfabout.
New Markets Tax Credit Program
The OBCR Web site provides a link to the New Markets Tax Credit Brownfields Solutions Series. This fact sheet discusses how
the program can be used as a financing mechanism in brownfields cleanup and redevelopment. The PDF can be found at:
http://www.epa.gov/brownfields/ matters. htm#relate.
Brownfields Solutions Series Solid Waste EPA-560-F-06-245
Anatomy of a Brownfields Deal and Emergency October 2006
Response (5105T) www.epa.gov/brownfields/
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