Brownfields Update for the Pacific Northwest

In marketing a brownfield, the key to success comes in removing the unknown.

That’s because the biggest stumbling block for a potential buyer is the uncertainty associated with brownfields, says Layne Alfonso, commercial account manager for Land America Commercial Services in Tacoma, Wash. There can be uncertainty in how long the regulatory process will take and the cost of cleanup, he explains.

You can increase the marketability of a brownfield by removing the uncertainty, whether by completing the cleanup process before beginning a marketing campaign, or by having a tool such as a consent decree in place so developers know exactly what they’re responsible for, Alfonso says.

“You have to take a certain amount of the risk out,” agrees Su Dowie, director of planning and operations at the Thea Foss Waterway in Tacoma.

The Thea Foss Waterway has found success in marketing brownfields. Along with having a consent decree with the Washington Department of Ecology, a master plan was in place before any marketing happened, Dowie says. The waterway put all its “regulatory ducks in a row” so the buyer didn’t have to, saving a developer time. And everyone in commercial real estate knows time is money, she adds.

When marketing a brownfield, sellers also need to recognize these properties are still, at their heart, real estate transactions, says Mary Hashem, a partner with Brownfield Partners LLC in Denver, Colo., a private brownfields real estate investment and acquisition company.

Hashem helped coordinate the brownfields transaction forum for the Brownfields 2005 national conference in Denver and has created a marketing training program for sellers. The transaction forum brings together sellers and buyers interested in brownfields. This year’s third annual forum will be held Nov. 13 at the national conference in Boston.

At the first transaction forum in 2004, Hashem saw many cases of municipalities sharing technical environmental data but not giving an overall picture of the property for sale. She created a marketing storyboard that serves as a good starting point for newcomers. Still used by the transaction forum, it can be found at http://www.brownfields2006.org/documentupload/storyboard%20template.pdf.

To begin with, a seller should have a good idea what the property will be used for because its use and design affects the cleanup and its costs. According to Hashem, your marketing material should include information on the property’s location and acreage, zoning regulations, highest and best use, existing structures and infrastructure, access, environmental conditions, land values, absorption rates, market demand versus competing properties, and demographics. Ideally you should also include vicinity and site maps, aerial maps and photos, and photos of the site and the surrounding area.

When explaining environmental conditions, be precise about the contamination and its extent. List any land-use restrictions and where remediation is needed or has been done. Include contact information about lead regulatory agencies. And list any financial incentives available, such as state tax credits, tax increment financing, brownfields-related grants or Community Development Block Grants.

For the buyer, it’s also important to have a timeline in relation to any grants or Prospective Purchaser Agreements that will be utilized, Alfonso says. A buyer needs a realistic picture of how long it could take for a state environmental agency to sign off on the project.

Alfonso also tells clients that they don’t want the environmental issues to become a negotiating point. That means sellers must know everything about the property. A mistake some sellers make is not understanding the property; the seller is at a disadvantage when the buyer has more information than the seller, he says.

Who a seller markets to varies with the due diligence. The farther you can go through that cleanup process with the state environmental agencies, the broader your range of potential buyers will be, Alfonso says. After all, you can market a clean site to anybody. However, if little remediation is done, you’ll be marketing to developers familiar with the cleanup process, Alfonso says.

Officials at the Thea Foss Waterway typically advertise in newspapers and publications targeting developers. They also maintain a list of developers and talk to other communities about their lists, Dowie says. There is a network among the development community. Once you get pipelined into that, you’re going to make connections, she adds.

At the start of its project, the Thea Foss Waterway had 14 building sites. Seven of those sites are constructed, under construction or under agreement and in the process of permitting. There’s about $335 million in private investments in those seven properties, Dowie says. She expects another two sites to be marketed this year and the remaining next year.

Marketing these properties may not always be easy, Dowie says. But in the end, it’s worth it. “Stick to it,” she says. “I think the rewards to a community are huge.”