Transforming a Brownfield Site into a Marketable Development

With less and less developable sites available in many parts of the country, particularly the Northeast, developers are shifting more focus to brownfield sites that are typically in outstanding locations for redevelopment projects. While it entails additional approvals from regulatory agencies and resources to redevelop a brownfield site, which is complicated by the presence, or “perceived presence,” of contaminants, the rewards for developers, users, local communities and consumers are significant.

Many times, brownfield sites are in excellent locales, such as their clustering near inner cities in the Northeast United States – making them ideal for today’s live, work and play mixed-use developments. One such example is Advance Realty Group’s Harrison MetroCentre in Harrison (NJ). Located on the site of a former brownfield, the development will become a mixed-use transit village featuring residential, retail, office, hotels, and a professional soccer and entertainment stadium, all on a NJ Transit rail and PATH line stop 15 minutes from Manhattan.


Potential Challenges
Of course, redeveloping a brownfield site offers many challenges on a regulatory, development and construction level and takes a sustained and collaborative effort to execute. In the early planning stages, there are several key challenges to brownfield remediation and redevelopment, including:

Environmental Liability Concerns: Developers and property owners must manage past and future liabilities associated with the property’s environmental history.
Financial Barriers: Private lenders are often reluctant to give loans for potentially impaired lands. In some cases, cleanup costs for a property may outweigh the property’s value.

Cleanup Considerations: A brownfield redevelopment timeline may take longer than typical real estate development due to environmental assessment and remediation activities.

Despite these challenges, significant opportunities exist for successful brownfield redevelopment, particularly when a redevelopment project that brings new life to an area is enhanced by public and private support. Specifically, brownfield redevelopment relies on strong coordination and a common redevelopment goal shared by local communities; local, state, and federal governments; and private parties.

So, what is the brownfield redevelopment process in summary? It generally follows three phases: pre-development, development, and asset/property management.


Pre-Development
Creating the foundation for a successful project begins with pre-development activities that include conducting due diligence to assess the extent of site contamination; and determining project feasibility, which entails understanding the various financial, regulatory, construction and marketing issues that may need to be resolved.

Conduct Due Diligence: As part of due diligence, a Phase I environmental report would be required. This analysis would list the prior uses of the site and identify potential contaminants resulting from its former use. This is important in order to assess the level of risk involved since prior uses typically identify the extent of contamination. For example, a former manufacturing use would usually indicate that potentially more contaminants would be present versus a former apartment building use. If a Phase I analysis concludes a high risk factor is involved for redevelopment, a Phase II analysis may be required. A Phase II analysis would include actual sample testing at the site for specific hazards identified in the Phase I analysis.

Feasibility Analysis: Also in the pre-development phase, a developer would examine the redevelopment’s environmental impact, via the analysis from the Phase I or II report, and its financial pro forma based on expected costs and anticipated demands to determine its feasibility. This analysis is compiled in a project feasibility report, which also identifies and accesses adaptive site reuses.


Development
Once the aforementioned pre-development phase is complete and it is feasible to proceed, the development phase begins and encompasses receiving regulatory approvals; possible demolition of any existing structures; remediation of the site from contaminants; and, finally, horizontal (streetscapes and below-ground infrastructure) and vertical (buildings and above-ground structures) development.

Approvals: Prior to construction, all land use and regulatory approvals are necessary. In order to receive approvals, building(s) specifications and site plans must be approved and permits secured.

Remediation: Depending on the type, quantity, and toxicity of contamination found onsite, project cleanup activities may include soil, surface water, or ground water remediation. A site would be considered remediated following approvals by local, state, or federal regulatory agencies.

Horizontal & Vertical Construction: Following remediation of the site, a “cap,” which could be a building foundation and slab, may be required over the soil as a barrier between below ground and above ground development. All horizontal development, the construction of streets, utilities and any other below ground infrastructure would occur prior to the capping. Vertical construction, all above ground structures – the actual properties, parking garages, etc. — would commence following the capping and upon completion of the horizontal construction.

Completion & Operation: Upon completion of horizontal and vertical construction, building systems, utilities, and related operating concerns of the project would be commissioned, verified and approved as operational, allowing for tenant occupancy and usage. At this juncture, the redevelopment project enters the traditional operational and maintenance phase of a standard development between landlord and tenant or residential unit owner and renter.


Asset & Property Management
The final phase of a brownfield redevelopment involves asset and property management, which entails a number of steps to ensure long-term, sustainable adaptive reuse. This includes managing the financial aspects, operations and maintenance of the physical structures, ongoing positive community relations, and any long-term environmental issues associated with the property. Some remedial methods, such as groundwater pump and treatment systems, require long-term operation and maintenance. In these instances, the landlord may be responsible for submitting monitoring reports to a regulatory oversight agency on a periodic schedule. In addition, engineering controls such as asphalt caps and fencing should be inspected on a regular basis to ensure they remain protective of human health and the environment.


Why Restore Brownfields
As long as brownfield projects are economically feasible, developers will continue to restore brownfield sites. This is especially true in metropolitan areas where developable land is scarce, and “clean” sites are offered at a significant premium or they are unapproved for development due to local and/or state resistance. For example, in New Jersey, resistance stems from issues related to “suburban sprawl.” Conversely, local, state and federal government agencies many times offer economic incentives to developers to encourage brownfield redevelopment because these projects result in many social and economic benefits for communities by transforming once-abandoned sites into productive reuse. In New Jersey, these incentives are numerous ranging from tax incentives, grants and ease of regulatory approvals for brownfield sites. With these incentives in place, New Jersey has experienced some success in the gentrification of the inner cities and the prevention of further sprawl.

Furthermore, brownfield redevelopment will allow the local municipality to generate additional real estate taxes from the formerly unutilized property. Additionally, these developments typically provide a significant source of new jobs during and after project construction for residents in close proximity to brownfield sites.


Case Study
Advance Realty Group has executed several of the aforementioned phases in the redevelopment process of its Harrision MetroCentre brownfield redevelopment in Harrison. With support on a local and state level in New Jersey, when completed, the facility will be one of the largest transit villages in the Northeast United States.

Designed as a transit village due to its close proximity to multiple modes of mass transit, including NJ Transit, Amtrak and an onsite PATH station, allowing easy access to Newark Penn Station, Newark Liberty International Airport and New York, it is currently one of the largest brownfield, mixed-use redevelopment projects underway in New Jersey.

The public/private partnership between Advance Realty Group and the Town of Harrison is creating new jobs, ratables and infrastructure improvements into this previously obsolete brownfield that was formerly an industrial and manufacturing site. When completed, the projected $1 billion redevelopment will encompass three million square feet of Class A office space, 300,000 square feet of retail space, and approximately 3,500 housing units. Also planned as part of this world-class redevelopment are several hotels and the new 25,000-seat stadium named Red Bull Park, the future home of the New York Red Bulls major league soccer team, and a venue for concerts, outdoor festivals, and other world-class athletic and entertainment activities. Red Bull Park’s managing partner, AEG, one of the world’s leading sports and entertainment companies and promoters, is developing the stadium.

Harrision MetroCentre reiterates the original value proposition of brownfields: their outstanding locations. With most brownfield redevelopment projects, such as Harrison MetroCentre, the old real estate cliché (it’s all about location, location, location) has never been truer. Of course, mixed-use redevelopments are the hottest trend in real estate for another reason – communities and people want them. They want to live, work, shop, dine and be entertained all in one place. They want shorter commutes and more time with their families and friends. They want to be able to move around with less stress and expense. They want a better quality of life, and places like Harrison MetroCentre and many other former brownfield sites in outstanding locations are going to satisfy those demands of today. In the end, it could be said that success is measured by transforming brownfields into marketable developments that serve both the needs of business and the local community. LDT