Pay Dirt

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“The model that CERF is pioneering is going to revolutionize brownfields recovery,” predicts Robert Colangelo, CEO of the National Brownfield Associations, a 1,400-member organization of developers, scientists, bankers, government representatives and service providers.

“In the past, you couldn’t get traditional bank financing at any kind of reasonable leveraged rate, so these projects weren’t often economically viable. CERF’s loan program dramatically lowers the cost of the capital to finance acquisition and remediation to a point that a lot more deals are going to happen.”

Some observers remain cautious, noting there are still substantial challenges ahead for CERF and potential redevelopers of brownfields. “Even if developers get debt loans and diligently do their homework on these properties, they always face the specter that there may be more contamination than they thought,” warns Sandy Karinen, a hazardous substances scientist who works on brownfield recovery for the California Department of Toxic Substances Control. “When you are dealing with chemical pollutants and other contaminants, there can always be hidden problems.”

Ed Hopkins, director of the Sierra Club’s Environmental Quality Program in Washington, D.C., says the organization is concerned that some sites are not adequately cleaned. “In theory, we support these efforts, but some developers haven’t done everything they should.

We’ve never filed a legal suit over a brownfield cleanup, but with redevelopment increasing, we’ll keep an eye on it.”

Economically, there are those who wonder whether land values have risen enough for redevelopers or CERF to turn a profit. They point out that without insurance, brownfield deals are risky, and they can be time-consuming, complex and costly.

Hollingworth counters by saying a “perfect storm” of circumstances has made CERF’s debt-loan program possible. First, insurance companies have recently begun customizing programs for redevelopers, making policies easier to get. Marcel Ricciardelli, senior VP for XL Insurance in New Jersey, says that new state and federal laws capping liability for developers and lenders has helped increase the number of customized insurance plans available.

“Coverage isn’t nearly as difficult to achieve anymore,” Ricciardelli notes. “The brownfield market is vibrant right now and with CERF lending money at debt-loan rates, it will only become better in the future.”

Second, Hollingworth believes CERF has resolved a major time dilemma for redevelopers. “It used to be that the redevelopers had to clean up the property and get a seal of approval from the government before they could get a loan to develop the property,” says Hollingworth. “We provide loans before the project begins, so cleanup and development can occur at the same time. This can cut the time of redevelopment in half.”

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