It is estimated that there are an esimated 600,000 brownfield sites in the US, many of which are in prime urban locations. The brownfield market has been estimated by industry observers to be approximately $2 trillion. In the past corporations, government entities, and private landowners have hesitated to sell these properties due to challenges with the transaction process between buyer and seller and the access to the large-scale capital necessary for site clean-up. Now, thanks to a revolutionary new financial instrument created by Denver’s Brownfields Capital, the gap between the brownfields market and large-scale investment capital is being bridged.
The Brownsfields Capital investment process and patented financial instrument, known as Brownfields Value Contract ("BVC"), allow an innovative method for large-scale, efficient, institutional and private equity investment in the restoration of brownfield properties to productive use. The BVC shields investors from the environmental liability and uses the financial process to redistribute risks to the parties that can best shoulder them. It allows institutional investors to invest in contaminated property, while also enabling owners of polluted sites to address their cleanup liabilities without the financial and legal barriers of the past.
The BVC is similar to a corporate bond and specifies how the cash generated from the re-development of a brownfields property will be allocated to investors and to the ownership entity. The BVC provides all or most of the capital for the project. Cash is managed and allocated by Brownfields Capital, according to the terms and conditions of the financing.
The efficiency of the process generates greater profits for all parties involved, including existing owners of brownfields. It offers a way for investors to capitalize on a disequilibrium on pricing created by environmental law rather than on a temporary undersupply or oversupply in the real estate market.
Visit Brownfields Capital and ULI’s June 2006 Issue for more information.
