Off-Load Your Brownfield Risk

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One of the biggest impediments to doing a deal for brownfield land revolves around future liabilities and who retains that risk.

August 01, 2003

 

As part of its deal to meet "post-closure" guidelines relating to this 12-acre landfill in Benicia, Calif., TRC implemented a comprehensive insurance and risk-management program protecting Benicia against "known and unknown" environmental issues at the site. As a result, builder/developer Pacific Bay Homes netted an important project.

One of the biggest impediments to doing a deal for brownfield land revolves around future liabilities and who retains that risk. The celebrated Brownfield Reform Act of 2000 addressed many of these issues, and pricey insurance policies typically bear a portion of the risk for sites deemed clean by environmental officials. But for many sites, this unknown risk factor remains a deal breaker.

Now, TRC Companies Inc., a Windsor, Conn.-based environmental cleanup firm with offices nationwide, is offering residential developers a way to contractually eliminate liability from future contamination as part of its cleanup services. Another attribute of TRC's "Exit Strategy" program is a developer's ability to contact the firm during the due-diligence time period and get a single figure for cleanup and liability. This third-party estimate of cleanup costs can give developers the confidence they need in their pro formas to pursue a purchase contract.

"In the absence of somebody like us, the buyer would be relying on the seller's estimates of cleanup cost," says David Zarider, TRC senior vice president. "If we are going to be owners of that liability, our interest is to be realistic."

TRC can make a deal move forward in a number of ways. In a recent deal involving a land dedication for parkland by builder/developer Pacific Bay Homes to the city of Benicia, Calif., TRC helped the two parties sidestep issues relating to the maintenance of the land dedication, which included a former 12-acre landfill that was closed in 1979. For $4.6 million, TRC took title to the site, cleaned it up and subsequently leased the property back to Benicia for $1 per year in perpetuity.

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