20C — November 23 - December 13, 2018 — Owners, Developers & Managers — M id A tlantic

Real Estate Journal


O wners , D evelopers & M anagers

By Kristi Marinelli, KLM Consulting & Brad Maurer, ARMR Network Environmental risk advisory and insurance placement for brownfield development B

rownfields by their very definition involve properties with envi- ronmental liability risk: A brownfield is a property, the expansion, redevelopment, or reuse of which may be com- plicated by the presence or potential presence of a hazard- ous substance, pollutant, or contaminant. USEPA The definition is broad and includes properties that may have contamination. It is a generally accepted prin- ciple that reusing a brownfield is preferable to developing greenspace for a host of rea- sons, but the top four include:

than develop greenspace. Brownfields, however, pose many challenges and most of them are associated with liability risk. Besides zoning and planning considerations, the following brownfield li- ability risks are directly as- sociated with environmental contamination at brownfields: 1.) Legacy liability for per- sonal injury 2.) Personal injury arising from remediation and develop- ment activities 3.) Cost variances to address site contamination 4.) Personal injury risk for post-development property use These risks drive the actions and investment considerations made by the three classes of stakeholders involved in brownfield development: 1.) Principle Owner/De- velopers This class has a direct eco- nomic interest in the success of the development and needs to balance its total risk cost against its expected return on investment. 2.) Government and Com- munity This class wants to ensure that the development activi- ties adequately address con- tamination and incorporate safeguards to protect commu- nity health and the environ- ment. 3.) Financiers Lenders are partnered with principle owners in financial risk. They require assurances that environmental issues will not significantly impact project cashflow or impair the value of their collateral inter- est in the project. An Environmental Insur- ance Wholesaler should advise each of these classes on all is- sues related to environmental risk: 1.) Deal structure to take advantage of statutory li- ability protections and public financing opportunities; 2.) Liability transfer be- tween parties and financial assurances to support the full performance of the transfer; 3.) Due diligence review to identify and quantify both known and potential contami- nation risks and costs. 4.) Remedial design and estimate review to identify potential for overruns. 5.) Institutional and en- gineering controls , activity continued on page 24C

Brownfield development site

Brownfield redevelopment site

ready exists to support them, lowering develop- ment costs; 3.) It is preferable to re- mediate contamination associated with them to

protect human health and the environment from fur- ther injury; and 4.) For land conservation reasons, it is preferable to reuse a brownfield rather

1.) Brownfields tend to be in urban or developed ar- eas where there is demand for their space; 2.) Utility and access in- frastructure usually al-

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