Brownfields are ripe for redevelopment

By CANDICE DOUGLAS
Exponent Inc.

Contaminated industrial properties, once thought to be lost forever as productive assets, are becoming prime targets for clean-up and redevelopment as the result of changing market conditions.

Leading the list of factors that have altered the economic landscape for these properties, typically referred to as brownfield sites, is the increasing scarcity of prime commercial and industrial land. In addition, a red-hot economy has pushed demand for commercial and industrial sites to new levels. Lack of supply and increased demand have moved prices to a point where it is now becoming economically viable to rejuvenate environmentally-contaminated properties.

A number of other factors in the brownfield site development equation are also at play. In Washington state, for instance, the Growth Management Act requires that commercial and industrial development be focused within county-designated areas. As a result, contaminated sites that lay within these industrial development zones are becoming attractive investment opportunities.

In fact, this new trend has stimulated the establishment of development firms and consulting companies who now concentrate solely on the purchase and redevelopment of contaminated industrial sites.

"I am sure this turn of events is especially pleasing to the U.S. Environmental Protection Agency and other public agencies," said nationally-recognized economic and environmental redevelopment consultant Shawn Severn. "Federal, state and local agencies responsible for environmental restoration now have development teams willing to accept responsibility and liability for bringing these brownfield sites and other contaminated properties back to life." Severn heads up the Los Angeles office of Exponent, Inc.

Severn noted that because of extremely high clean-up costs and long-term liability associated with these sites, owners and developers in the past were unwilling to tackle projects such as these. "Economics and new laws have changed all that," he said.

The development of these properties, however, is not business as usual. Because physical issues such as environmental clean-up and site restoration are so interrelated with the economics of redevelopment, it takes a specialized team to solve these problems. In addition to the traditional broker-developer-contractor alliances of the past, today's development team consists of several new members, including scientific and environmental restoration experts, cooperative financing specialists, and a number of public agency members.

The market shift has also fueled the establishment of new consulting firms as well as enhancements in the practice areas of existing firms responding to opportunities that were non-existent just a few years ago.

Tom Redd of Exponent's Bellevue office and Severn have been involved in bringing brownfield sites and other abandoned buildings and property back to life.

One example of Exponent's brownfield work is their participation on a public/private development team attempting to revitalize the former Port Quendall property located in the city of Renton, on the southeast shores of Lake Washington.

Port Quendall was the site of a coal tar refinery from 1916 to 1969. The facility accepted coal tar residues from the Seattle Gas Works plant on Lake Union, among other places, and refined them into creosote and other wood preservative products. Historic operations at the facility led to environmental impacts at the site that exist to this day. As a result, the property sustained significant environmental damage. Due to the property's prime Lake Washington shore-side location, many attempts have been made to redevelop the site, all to no avail for a variety of reasons.

In 1997, a concerted redevelopment effort for the Port Quendall site was attempted by Paul Allen's Vulcan Northwest real estate development group. "They undertook an extensive feasibility analysis to determine the maximum development viability of the property," noted Severn, who heads up Port Quendall's current technical redevelopment team on behalf of the city of Renton. "In the end, Vulcan's first attempt failed because of extreme costs related to environmental, geotechnical and transportation requirements that didn't fit the team's economic development and investment strategy."

Though the Vulcan effort was abandoned, the city of Renton continued to pursue efforts that included Port Quendall's environmental restoration and some form of limited industrial or commercial use as well as public access. "I think Paul Allen and the Vulcan team felt the same way," Severn said. "Nobody wanted to give up on the possibility of cleaning up this beautiful site."

What emerged from Renton's vision for Port Quendall was a public/private development team that again included the Vulcan Northwest group and the city of Renton as well as new members, including, William Joyce, an environmental law attorney with Ogden Murphy Wallace; the Washington State Department of Ecology and the Exponent's environmental and economic development staff. "What's more important," said Redd, "is that everyone involved on this new team committed to getting the job done."

"The ultimate success of the project will depend on the ability of the regulatory and private sectors to work together to find creative solutions," according to Joyce who represents the city on the legal aspects of the redevelopment and clean-up.

Exponent's role in the latest effort has included negotiations with the Washington State Department of Ecology, the EPA, Vulcan Northwest and other public and private groups. The Exponent team also continues to facilitate the project planning process and was responsible for the preparation of grant applications and other formal agreements that were necessary to achieve clean-up and redevelopment consensus.

Although a considerable amount of work has been completed on this latest attempt to clean-up and redevelop the Port Quendall site, negotiations are continuing. To date, a final site clean-up agreement has not been reached with all of the regulatory agencies. In addition, real estate negotiations are still pending and efforts to reduce long-term risks by all parties are still being negotiated. All sides remain optimistic at this time, according to Severn.

Currently, Exponent teams are working on brownfield and contaminated property redevelopment projects throughout the U.S. Projects in Bremerton and Everett, as well as Massachusetts and Missouri are currently underway. In those states, Exponent advisors are assisting public and private clients with merger and acquisition work, property valuations, redevelopment and sales as well as basic clean-up and reuse of contaminated properties, and even development of a new city park.

Along these same lines, Exponent is also joining many development teams that are performing economic assessments and redevelopment strategies for earthquake-damaged commercial and industrial buildings. Scenarios range from repair to total demolition and site redevelopment.

New opportunities for brownfield and other damaged property restoration appear to be abundant. "Ten years ago, who would have thought that abandoned and contaminated industrial sites and buildings would prove to be valuable resources?" Severn said. This is just another example of what can happen when a strong economy and entrepreneurial creativity come together.

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