‘Golden Opportunity’: How Brownfield Redevelopment Benefits Investors, Communities And The Environment

There are nearly 450,000 brownfields across the U.S. — properties that have been contaminated by hazardous substances such as lead, hydrocarbons, petroleum and asbestos.

Often the abandoned or blighted sites of industrial/commercial developments, brownfields have historically been viewed as vacant land not worth redeveloping. This is due to an array of risks, including exposure to harmful chemicals, complex legal responsibilities and hefty costs associated with cleanup. 

Today’s investors, however, are increasingly looking at brownfields as diamonds in the rough because of their potential for remediation and reuse in areas where undeveloped greenfields are scarce. RPS, a global engineering and consulting firm, is helping clients navigate brownfield redevelopment through quantifying and managing the risks of these blighted properties.

“Some investors may look at these properties and say, ‘It's got issues and I don't want to mess with it,’ but others view them as a golden opportunity,” said Kristen Rivera, director of legacy site services at RPS.

Brownfields can be located across all types of communities, but they are commonly found in urban areas and include former gas stations, factories and warehouses. 

There are state and federal financial/tax incentives available to those looking to capitalize on otherwise unattractive investment locations. These incentives may include voluntary cleanup tax credits, building material refunds or low-interest loans.

“Each state has its own rules and regulations when it comes to tax incentives, but typically, upon approval of eligible reimbursable expenses, the site’s property tax will be frozen until these expenses are recouped,” Rivera said. “The investor is compensated for taking on the challenge of remediation and is awarded with the property tax break, which can be an economic gain if the property is in a desirable location. It’s ultimately worth looking to see if these incentives can assist with the completion of the deal.”

Alongside these incentives are federal and state-funded grant programs, she said. Last year, the Biden administration allocated $235M in grant money to clean up brownfields across the country, making a total of $1.5B spent via the Investing in America program since 2021. According to Rivera, there are dozens of grants across the board that investors and nonprofits can apply to to help fund the cleanup of federal properties, job training, assessment and research. 

“We think about brownfields almost like a homestead exemption,” she said. “When you purchase a home and don't file your homestead exemption, you're missing out on some ‘free money’ and opportunity.” 

Since many brownfield sites are also undervalued due to their environmental impairment, they are often acquired at a substantial discount or escrow dollars are set aside to address cleanup costs. This can lead to upside potential in property value, Rivera said. 

When going through the brownfield process, it’s important to document progress, said Michael Wilson, leader of legacy site services at RPS. The process typically begins with an environmental site investigation report so all parties can be on the same page as to what the soil and groundwater contamination levels are prior to the purchase. 

Through the Environmental Protection Agency’s review and approval, the prospective purchaser will then submit a corrective action plan as to how they plan on remediating the contaminants.

“Sometimes this process can be tricky because you can have a former industrial  property that investors are trying to rezone,” Wilson said. “This can require deed and property use changes, which can invite complication into the process.”

For example, even if a property is not out of compliance for industrial use, the prospective purchaser will have to put in that extra investment to bring the soil up to residential standards and ensure there is no risk to human health. The prospective purchaser would then be eligible to take advantage of the property tax incentive and recoup that investment, though.

Once the prospective purchaser’s CAP is approved, remediation efforts can begin. 

Beyond financial and tax incentives, brownfield designation provides a groundwater limitation of liability for investors and/or developers who clean up the soil on these contaminated properties, allowing them to purchase with confidence.

“This liability shield protects prospective purchasers from historical groundwater contamination and third-party liability,” said David McCarley, vice president of legacy site services at RPS.  

This allows developers some peace of mind to go ahead and buy the property knowing that once they’ve cleaned up the soil they won’t be facing future liability or responsibility for third-party contamination, McCarley said.

It’s also possible for this limitation of liability to be shared among investors. It is transferable, as long as there’s documentation to prove it, Rivera said. 

“If you do your proper diligence, you’ll get the brownfield limitation of liability that's essentially a line in the sand,” she said. “Brownfield designation is a great way to navigate risk and offer liability protection for purchasers that can turn an otherwise blighted property into beneficial reuse.”

The benefits of redeveloping these properties have a cascading impact that stretches further than the site itself. It also affects the communities in which they’re situated. 

Once a brownfield is redeveloped, other resources can start to flow in including shops and retailers, residential and multifamily developments or perhaps even other industrial firms looking to expand their presence in a community. A 2020 study from the EPA found that its program was responsible for job growth within these communities as well as an increase in surrounding residential property values. 

“Redevelopment lifts the community and makes it a more desired area for people to want to live and work in,” Wilson said. “Many social and economic metrics improve when these properties are transformed for the better.” 

As more properties are expected to become eligible for brownfield designation in the future due to growing concern about contaminants such as PFAS, having experts that can identify, quantify and manage the associated risks is essential, Wilson said. 

“We work throughout the process hand-in-hand with the investor,” McCarley said. “We handle all of the environmental diligence, cost-to-cure and back-end processes from beginning to post-closure. Returning land to use is our ultimate goal so our communities can thrive economically, socially and environmentally.”

This article was produced in collaboration between RPS, A Tetra Tech Company and Studio B. Bisnow news staff was not involved in the production of this content.

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