World of brownfields touches many
One of the many lessons of brownfields is there's a story behind every one. And because brownfields impacts so many people--the property owner; the developer; the environmental contactor; a plethora of local, state and federal officials; lenders and even neighbors and the local community--there may be several perspectives and lessons to be learned from each.
With this issue, we step outside of the usual redevelopment perspective to consider how others are impacted by a project. We’ve focused on Acme Scenic and Display, a company of set designers and trade-show display makers in northeast Portland that recently completed cleanup at its new location. Acme spent $2 million acquiring and then remediating the former Charles H. Lilly Co. property, where trainloads of chemicals once were mixed into various fertilizers. The property changed hands over time, with Lilly owning it until 1996, but chemical fertilizers were formulated on the 5.5-acre property for more than 40 years. Toxic chemicals, including DDT and arsenic, had been leaching into the ground for decades.
We asked three people connected to the Acme project for their brownfield perspective. Two were deeply involved, including Jan Pederson, president of Acme. Acme's needs were simple: It needed space to accommodate the growing company. The route it took was anything but. Does Pederson think he made the right decision, redeveloping a brownfield? There's also Walt Postlewait, assistant vice president and loan officer for the Bank of Astoria. Why did his bank partner with Acme when so many other lenders would not? We also spoke with Earl Rund, who's been doing business in northeast Portland for 23 years. His property neighbors Acme. What does Rund think of his new neighbor's efforts to clean up the long-contaminated property?
Each of them reminds us that the world of brownfields touches many.
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The developer: Be patient, devoted to the process
When tackling a brownfield, it's to your advantage to take a realistic approach, advises Jan Pederson, president of Acme Scenic and Display.
For anyone who thinks he can simply buy a devalued property at a steal-of-a-price, think again, Pederson warns. You better have money in your bank account and time on your hands to get through this process. You need patience and devotion to persevere. And you have to build vital relationships at the state and local levels in case you need help along the way.
If you do this, your project will be successful, Pederson says. "I was amazed at how well (the process) works," he says.
Acme is a company that needs space. It not only builds props for tradeshows, corporate meetings, TV and movie productions, and restaurants, but it also stores the sets for some clients. Its clients include such big names as Nike and Adidas. In 15 years in business, Acme has moved four times, each time doubling its building space. And with each move has come company growth. "It's amazing the doors that it opens," Pederson says of the space needed to grow the business.
Nearly three years ago, Acme again was on the verge of growth. The 35,000-square-foot building it was operating out of was too small. The move to the former Charles H. Lilly Co. building has given Acme more than triple the space it had previously. Pederson expects future business once again to increase with the move. In fact, he expects business to double within the next three years. "We have 30 employees," he says. "I wouldn't be surprised if we have 60 in three years."
Looking back, Pederson says that when he jumped into the world of brownfields, he would have taken on two to three projects at once because the process can be slow at times. "It isn't something for somebody in a rush," he says.
Pederson spent two years working on site evaluations and developing a cleanup plan with the many partners involved. The amount of paperwork was amazing, he says. There was funding to be secured and legal agreements to be made. Because Acme was the first recipient of the Oregon Economic and Community Development Department's revolving loan fund, many of those documents were created as they moved through the process. A Prospective Purchaser's Agreement was worked out with the Oregon Department of Environmental Quality (DEQ).
After all that, the cleanup phase--completed just last October--took only a little more than two months. "The actual (cleanup) process is not a big deal. It's sad to say, but it's true," Pederson says.
During those two years, Pederson was able to devote his time to the redevelopment of the Lilly property because he has two business partners. Businesses need to dedicate someone to this process if they're going to make it work, he says. And this person better be devoted. Many steps along the way, he wondered why he hadn't bought a piece of property to build upon instead, Pederson says. But he surged ahead because "it becomes a part of your life.”
This person also better know how to align himself with good people, Pederson adds. Because, at the same time, you can't do it all yourself. "I don't know how one person would do everything," he says.
These people include an attorney and environmental contractor experienced and knowledgeable in brownfields redevelopment. Joining Pederson were attorney Chris Reive of Jordan Schrader and contractor Maul Foster & Alongi, both of Portland. And find a lender who isn't afraid to jump into the process with you, Pederson adds. A project's lending portion could be expensive if you approach a bank that doesn't understand the brownfield process, he says. Many want to redo everything that's already been done, doubling your costs, says Pederson, who eventually found a partner in the Bank of Astoria.
Pederson was overwhelmed by the response his project received from local and state agencies. A meeting held in the project's fledgling stages drew 14 governmental representatives. "It's amazing how you pay taxes all your life and nobody calls you from the city or the state," Pederson jokes. Now everyone wanted to be involved.
"I've never had government work for me before," he says. "But they really did in this process. Everyone wanted to see this thing work."
Pederson points to people such as Charlie Landman, a legal policy adviser for DEQ's Land Quality division in Portland. "I think we're lucky to have people like Charlie, who takes the time to put things in lay terms and make sure all the pieces are being put together properly," Pederson says. "It was people like that who got me through the whole process."
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The lender: Community banks can be a key partner
It took Jan Pederson, president of Acme Scenic and Display, more than a year to find a lender who would partner with his company as it worked to convert a former fertilizer plant into a new home for the expanding business.
Words like "brownfield" and "contamination" were scaring away many lending institutions.
It wasn't until Pederson attended the 2005 Oregon brownfields conference when the financial pieces really began to fall into place. While the only lenders attending were from out of state, Pederson was given the name of a community bank in Astoria. It was the Bank of Astoria that finally agreed to loan Acme $1.25 million to finance the purchase of the property.
"Frankly, I don't know why so many banks passed them by," says Walt Postlewait, assistant vice president and loan officer for the Bank of Astoria. "It's one of those transactions I don't have to lose any sleep over."
While this was the first brownfield to come across Postlewait's desk, he didn't have a "negative, knee-jerk reaction," he says. After all, bankers get a variety of projects thrown at them. "We wouldn't rule out a transaction just based on that," he says.
Postlewait likens the loans to construction loans: The loan is based on collateral that doesn't yet exist. "Brownfields…they do have a scary and negative connotation," he says. "But it's nothing more than a construction loan. You just have to look at the components."
Why did the Bank of Astoria say yes when other lenders turned the project down?
The biggest reason the bank was able to work with Acme was because it's a community bank. That's key for any developer looking to do something out of the ordinary, Postlewait says. To larger banks, a project like this one is outside the box; it doesn't fit their criteria. Community banks don't have "programs" that projects must fit into, explains Postlewait, who has worked for national banks in the past.
Another key component was Acme itself. If Acme had been a marginal company with a turbulent or unreliable financial history, the lending process wouldn't have gone far, Postlewait says. As a lender, Postlewait wants to see a solid business with good, strong cash flow. He wants to see collateral, which Acme had in the building it formerly operated from.
Also drawing Postlewait to the project was the partnership Acme had formed with the Oregon Economic and Community Development Department (OECDD). The OECDD already was well-versed on the project, so there was a certain comfort level with the bank, knowing the developer was working with the state, he says. (The OECDD loaned Acme $658,000 in cleanup money--the department's first-ever federally funded revolving loan fund loan. The state's Brownfields Redevelopment Fund added an additional $144,000 loan for cleanup.) The bank also was familiar with Pederson's contractor, Maul Foster & Alongi, a Portland environmental remediation firm.
"The players involved were all strong," Postlewait says.
Postlewait adds that the Acme project was one the Bank of Astoria took on because a relationship was formed between lender and developer. "If you treat your banker well, they'll take care of you," he says.
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The neighbor: Why all the fuss?
When asked if he's ever heard the term brownfield, you get the feeling businessman Earl Rund really could care less. In fact, he nearly says as much.
However, what Rund does know is that things are looking pretty nice over at his neighbor's place, Acme Scenic and Display. While he's also relatively new to the neighborhood, moving there after he had to relocate his company, Rund has been doing business in northeast Portland for more than two decades. His company, Landmark Equipment, moved only 11 blocks when it relocated.
Acme has been a great neighbor, Rund says. Unlike other properties in the neighborhood, Acme's is well trimmed and manicured, he says. It's a nice addition to the neighborhood.
"I think they did a beautiful job over there," says Rund, president of Landmark Equipment.
Rund looked at the Acme property himself when he was searching for a new home for his company. However, that property was too much money and didn't fit Landmark Equipment's needs. Rund wasn't surprised to hear the property was contaminated. He says it was a well-known fact. The property was once a chemical fertilizer plant and an automobile manufacturer, he reasons.
He watched his neighbor this past fall as excavators worked on the property, removing contaminated soil. During the two-month cleanup phase, many trucks were moving through the streets; however, it wasn't anything that disturbed the neighborhood, Rund says. His own company handles construction equipment and a construction company also neighbors Acme. So the activity wasn't unusual for the area. "It was nothing new to me," he says.
Rund questions how much of the contamination, which had been there for decades already, would have affected the surrounding environment. He says Acme's cleanup efforts don't affect his business much. "What would have happened anyway?" he asks.
Still, Rund also says it's about time he heads over to Acme to introduce himself to his new neighbor.
The stories and personal viewpoints of Pederson, Postlewait and Rund remind us once again that brownfields impact many people, whether they want to be or not.
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News and Events
Dec. 14 :: The Disadvantaged Brownfields Communities Network will host a 90-minute web cast, "Dollars and Sense: Smart Brownfields Financing Options for Disadvantaged Communities," at 2 p.m. EST. The web cast will provide an overview of federal and state financing resources, discuss how to prepare brownfield properties for private investment and showcase communities implementing effective financing strategies. Cost is $40 per site; however, the web cast is free to the first 100 registrants. More information at http://www.eventbuilder.com/encounter/DBCN.
Registration is being taken for Oregon's 2007 Brownfields Conference, March 1-2, in Salem, Ore. Nominations also are being taken for the Oregon Brownfields Awards, to be presented March 2 at the conference. Sponsorship opportunities are available, and there remains some exhibitor space in the Exhibit Hall. Scholarships to Oregon participants also are available to offset hotel costs and conference fees. For more information, contact Karen Homolac of the Oregon Economic and Community Development Department at 503-986-0191, or Karen.Homolac@state.or.us.
Twelve communities in 10 states will share more than $2.3 million in job-training grants geared toward cleaning up contaminated properties and turning them into productive community assets. The EPA awarded grants of up to $200,000 each to nonprofit organizations and local governments. The grants will teach environmental assessment and cleanup job skills to people living in low-income areas near brownfields sites. Among the grant recipients is Oregon Tradeswomen Inc. (OTI), of Portland. OTI plans to train 140 students in 12 training cycles, place at least 91 in environmental jobs and track graduates for two years. Information on all grant recipients is at http://www.epa.gov/brownfields/jt1106/jt1106.htm.
Applications for the 2007 Rudy Bruner Award (RBA) are due Dec. 18. The RBA is given to urban places demonstrating the successful integration of effective process, meaningful values and good design. RBA winners often provide innovative solutions to a city's most challenging problems. The RBA awards one Gold Medal of $50,000 and four Silver Medals of $10,000 each. Case studies and applications are available at www.brunerfoundation.org.
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