Brownfields Incentives

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Brownfields Incentives From A Developers Point
of View
Jason Robbins Recycland, LLC 7801 Norfolk
Avenue Suite 200 Bethesda, MD 20814 www.recycland.
com 301-656-1956
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Recyclands Mission Statement

• Since its founding, the Company has remained
  singularly focused on its mission. As its name
  implies, the company acquires or invests in
  contaminated underutilized properties, remediates
  them, redevelops the asset into higher and better
  use and places it back into productive service as
  quickly as possible.

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Business Model

• Development
• Long Term Investment Recycland manages its
• acquisitions from beginning to end.
• In-house expertise in financing, remediation
• construction management, leasing, and property
• Management.
• Third party used to perform actual remediation
• and construction.
• Lending
• Provide bridge financing until remediation is
• completed and developer obtains traditional
  financing.

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At the Inception
Minimize remediation costs by consolidating them
into the development process. Coordinate
allocating remediation risk between various
functional groups to manage it more
cost-effectively. The developer acts responsibly
in the 21st century when you know the
consequences of your actions.
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This is poor coordination between Functional
Groups
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Vertical Integration

• Objective Minimize costs of clean-up. Not by
  minimizing
• clean-up, but by managing it into the development
  process. If the developer/buyer has to excavate
  soils and pump groundwater out of his foundation
  anyway, make that his responsibility.
• Recycland views its vertically integrated
  functional groups as a competitive advantage.
• Remediation
• Land Development/Planning Zoning
• Construction
• Financing

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Selection of Properties

• Location, Location, Location.
• Obviously, must be economically viable consider
  
• initial capital requirement, cash flows.
• Initial cash flows are not a prerequisite.
• Focused on east coast in major markets and
  
• surrounding areas.
• Properties are initially selected from
  knowledge
• of local markets.
• Networking with past partners, brokers and end-
  
• users.

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Financial Incentives

• Used by federal, state and local governments
• to demonstrate their contribution to the
  redevelopment
• of Brownfields through encouraging private
  interest .
• Often associated with other economic stimulus
• incentive programs.
• The Goal Communities benefit from the
• redevelopment of these underutilized properties
• through the generation of new taxes, new jobs,
  the
• protection of human health and the environment,
• and more aesthetically appealing properties.

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Federal Financial Incentives

• EPA Brownfield Pilot Program Provides up to
  200,000 for the characterization and assessment
  of Brownfields.
• EPA Revolving Loan Fund program low interest
  rates for remediation and redevelopment
• Job Training Grants Prepares trainees for
  future employment in the environmental field and
  facilitate cleanup of brownfield sites
• Not available to For Profit Organizations

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Federal Financial Incentives

• Brownfields Tax Incentive Part of Taxpayer
  Relief Act on August 5, 1997, and amended on
  December 21, 2000. Certain environmental
  cleanup costs may be fully deducted in the year
  in which they are incurred, rather than having to
  be capitalized over time. Additionally, companies
  operating at a loss in the first years of
  business may use the tax incentive to establish a
  "net operating loss" that may be applied in
  future taxable years.

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Federal Financial Incentives

• Small Business Liability Relief and Brownfields
  Revitalization Act - Eases real estate owners'
  and prospective purchasers' concerns regarding
  liability in brownfield property transactions.
  Greater assurances that voluntary cleanup efforts
  approved by state authorities will not be
  second-guessed by the federal government.
  Provides up to 250 million annually for five
  years to states, local governments and Indian
  tribes for Brownfields cleanup

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Federal Financial Incentives

• Federal Historical Preservation Managed jointly
  by National Park Service and IRS. Provides tax
  incentives to private developers that
  rehabilitate historic buildings. Not limited to
  Brownfields.
• Burdened with legal and administrative fees that
  participating in the program is not financially
  beneficial or worth the investment of time for
  projects under 10M.

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State Financial Incentives

• Redevelopment Agreement Reimbursement of
• remediation expenses through new taxes
  generated
• through the new development.
• Site Assessment Funds Perform Phase I and Phase
  II
• assessments. Must meet stringent criteria.
• UST Site Cleanup Reimbursements Funds provided
• for the removal and associated remediation of
• qualifying USTs.
• Interim Financing, Revolving Loans Low
  interest
• loans for brownfield rehabilitation.

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Empowerment and Enterprise Zones

• Designed to create self-sustaining, long-term
• economic development in areas of deep poverty
• and unemployment.
• Not limited to Brownfields, but environmental
• issues are frequently cited as impediments to
• redevelopment.

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Oakite FacilityMetuchen, NJ

• 19 acre site consisting of 4 lots
• Assumed existing owners
• Remediation Agreement
• Finalizing Redevelopment
• Agreement with NJ Dept of
• Commerce expected total of 1M
• over next ten years
• Expensed significant remediation
• expenses

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Oakite FacilityMetuchen, NJ

• Recyclands long-term business approach allowed
  for
• flexibility during unexpected project delays.
• Revised plan included
• Limited Conveyance for one lot
• ISRA Non-compliance, allowed to convey 2nd lot
• Friendly condemnation of third lot
• Ground Lease on remaining lot construction
  incorporated into remediation plan
• After 5 years, in final stages of
  remediation and still have
• positive NPV.

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State Non-Financial Incentives

• Voluntary Remediation Program Encourages
  hazardous
• substance cleanups that might not otherwise take
  place.
• Agreement between the developer and the state
  environmental
• agency which defines scope of work to remediate
  non-priority
• sites. Useful to close out remediation with No
  Further Action
• Letters.
• Prospective Purchaser Agreement Limited
  liability
• to innocent purchasers that would otherwise be
  fully liable
• for site contamination (doesnt apply to RCRA
  sites).

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Kamp WashingtonFairfax, VA

• Former abandoned gas station, redeveloped into
• retail space with national tenants.
• First property to complete the Virginia Voluntary
  
• Remediation Program.
• Received real estate tax waiver.

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Kamp WashingtonFairfax, VA

• Fantastic location. High visibility, high
  traffic counts. Fairfax County is 10th highest
  income per capita in the U.S.
• Significant historical contamination including
  offsite contamination.
• Former owner assumed expense for cleanup.
• Recycland enrolled in VRP to reduce liability.
• After receiving NFA, additional unknown
  contamination found during construction.
• Notified VDEQ, completed clean-up, lost only 3
  days of construction due to excellent
  communication with VDEQ, City of Fairfax, and
  former owner.

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Municipal Financial Incentives

• Tax Increment Financing uses the incremental
  taxes
• generated by the development to fund the
  project.
• Not limited to Brownfields.
• Gap Financing Cleveland Neighborhood
• Development Investment Fund Provides
  financing
• For large economic development projects
  creating at
• Least 100 new jobs. Not limited to
  Brownfields.
• Redevelopment Funds Loans for assessment and
• remediation of Brownfields.

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Recyclands Approach

• Apply, when applicable, to each incentive
  program.
• Often the completion of the incentive/program
  is
• used as a milestone with Lenders, Tenants,
• or insurance policies.
• Critical to understand probability of obtaining
  funds
• and incentives during due diligence period.
  Often,
• proforma does not include funds/incentives from
• these programs due to delays, budget constraints,
  
• uncertainty of acceptance.

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Issues
Biggest hurdles for new Brownfield developer 1)
Environmental expertise. 2) Initial capital
requirements (reasonably price
equity/debt capital). 3) Long term, carrying
costs and cash flows. Funds
are not always directed to or intended to
benefit private developer. Not a complaint,
just an observation.
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Issues
Classification While our properties
have environmental stigmas, they often do
not meet criteria for some
programs. Often told that the market will
work it out for these properties. Government
Budget constraints Financial incentives are
often unpredictable and subject to political
winds.
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Recommendations

• Make incentives transferable.
• Provide hard and fast economic incentives even to
• the point of placing money in escrow.
• Redevelopment TIF type incentives are useful,
• but the payback is very long-term. The
  Developer
• should have a choice, as with a big lottery
  payout,
• of taking the redevelopment agreement money
  over
• 20 years, or discounting back to the present at
  xx
• and drawing it down up front for remediation or
• construction.

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Conclusion
Incentives have attempted to spur economic
growth and redevelop under-utilized properties,
especially in areas that have environmental
stigma. As a result, the barriers to entry for
many Brownfields developers have been reduced
over the long-term through tax credits and
exemptions.
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Questions?
Jason Robbins Recycland, LLC 7801 Norfolk
Avenue Suite 200 Bethesda, MD 20814 301-656-1956
301-656-8540 (fax) jason.robbins_at_recycland.com ww
w.recycland.com