Brownfields Tax Credit, Tax Increment Financing, Grants, and Loans
An extension of our environmental consultant firm’s real estate due diligence services is Brownfield redevelopment incentives consulting, including Brownfields tax credits. In the State of Michigan, there are incentives for developers of Brownfield properties. Brownfields have often been defined as abandoned or underused industrial and commercial properties where expansion or redevelopment may be complicated by real or perceived environmental concerns. In Michigan, developers of these properties may be eligible for Brownfields tax credits, tax increment financing packages, grants, and/or loans to assist in overcoming the challenge posed by redevelopment of these types of properties.
In 2009, Triterra assisted clients in acquiring over $10 million in Brownfields Tax Credit and over $30 million in tax increment financing assistance.
At Triterra, we believe that Brownfield remediation development is a viable investment opportunity that can result in above-average financial returns when compared to developing on previously undeveloped site. The key to successful Brownfield development is good planning and understanding the costs and benefits.
Price
Brownfield properties can often appear to be a terrific value. Many are available at prices that appear discounted against seemingly comparable properties. However, there are often environmental issues including contamination that may limit what can be done with the property or require cleanup. Obviously, these issues can be costly. Hidden costs include lead, asbestos, and other hazardous building materials that will increase demolition costs. Many Brownfield remediation developments on urban infill properties will also require parking facilities and new infrastructure to handle storm water issues. As a member of your team, Triterra will provide you with the due diligence and insight that you need to be able to properly consider hidden costs so that you can evaluate the value of the property in the context of your proposed use.
Location, Location, Location
An often overlooked hidden value that exists in many Brownfield properties is simply their location. Think about the existing public infrastructure improvements a Brownfield site may have versus a previously undeveloped site. Roads, storm sewer systems, electrical and gas utilities, and other improvements may already exist. Quite often, simply identifying a better use for a property may unlock hidden value. The best intentioned plans of the early 20th century may have resulted in industrial land use in areas that evolved into viable retail and residential areas.
Risk
Like any investment, real estate or other, investors expect increased rewards with increased risks. The perception is that Brownfield redevelopment opportunities pose more risk than traditional developments. Certainly there are a number of challenges posed by Brownfield redevelopment, however those challenges can be identified and quantified so that the risk can be mitigated. In addition to mitigating risk, real or perceived, Triterra can also help with the “reward”. Brownfield projects are often eligible for Brownfields Tax Credits or other incentives.
Potential risks include costs that make the loan to cost ratio unfavorable and delays to the development process while corrective actions are undertaken. Who doesn’t want to do a project that takes more money and a longer time? Triterra understands these issues and can identify strategies and incentives that reduce costs and eliminate uncertainties. Strategies may include fixed price contracts with pay for performance clauses, negotiation with regulatory agencies, liability transfers, and environmental insurance. However, no strategy is effective without the proper environmental information. Triterra’s expert team has over 70 years of experience that includes regulatory experience with the U.S. EPA.
Many Brownfield sites have had some level of environmental investigation or cleanup in the past. We can help you understand the current site conditions, whether or not additional investigation may be necessary, what potential challenges may be present, and what it will take to make the site usable again. Above all, we believe in a collaborative approach emphasizing communication with our clients, the other members of their team, the community, and the regulators.
Rewards
Obvious benefits include the financial incentives that are often available to support Brownfield redevelopment. Tax increment financing, grants, and/or low-no interest loans are examples of these incentives. However, these tools generally are used to offset the direct increased costs of Brownfield development such as, contaminant cleanup or asbestos abatement. Brownfields tax credits more truly represent a reward in that they are available as a percentage of the qualified investment on a property and aren’t offset by increased Brownfield expenses. Additional “reward” is the hidden value on a Brownfield property. Many times these properties are priced attractively because of the real or perceived contaminant issues. However, just as often, there has never been a comprehensive evaluation of these issues to determine the level of effort necessary to overcome them. The difference between the discounted price of the property and cost to overcome Brownfield issues can be significant. When a property is deeply discounted and the actual costs of remediation are low, a smart investor is rewarded with excellent value.
We would like to hear from you— contact us for more information on our service areas and what we can do for you.
