Real Estate Development and Reuse Thomas Wackerman, President, ASTI Environmental Member, Bell Tower LLC, Chair, UM/ULI Real Estate Forum

Transcription

1 Corporate Sponsors: Real Estate Development and Reuse Thomas Wackerman, President, ASTI Environmental Member, Bell Tower LLC, Chair, UM/ULI Real Estate Forum Economic Development Basic Course September 14th 17th Kellogg Hotel and Conference Center East Lansing, MI

2 Presentation to Class Objectives To understand the real estate development process To understand the role of economic developers in real estate development To understand the types and uses of incentives Environmental Real Estate Development and Reuse September 16, Environmental Outline Market Factors Macro View The Mind of the Developer Incentives (One Perspective) Incentive Programs Anatomy of a Deal Key Points in Attracting Development Lessons Learned Case Study Q&A Optional : Due Diligence Process Introduction Tom Wackerman, CHMM, CET, EP President, and Founder, ASTI Environmental Member, Bell Tower LLC Chair, UM/ULI Real Estate Forum twacker@asti-env.com The Macro View Environmental ASTI Environmental ASTI September 16 1

3 Presentation to Michigan Grand Rapids Ranked 3 rd for US growth, 2 nd for Hiring, 1 st for Raising a Family Detroit Area Ranks Very Low in ULI Emerging Markets Survey Marquette Traverse City Tri-County Area Grand Rapids Oakland Ann County Kalamazoo Arbor Jackson Detroit Market Factors Market Forces Market Shift Financial Mechanisms Market Maturity For Example: Desire for Dense Social Experience, Vibrant Communities Desire for Accessible Recreational Options Reduction in Auto Dependency Anti-Sprawl Focus Ecological Awareness Sustainability Buy Local Movement Real Estate Is Local Market Factors Market Factors Market Forces Market Shift Financial Mechanisms Market Maturity this recession has given us a chance to think. It s a wonderful opportunity to get things done that you couldn t get done just two or three years ago. - Mr. Andres Duany of Duany Plater-Zyberk & Co. Market Forces Market Shift Financial Mechanisms Market Maturity For Example: Risk Based Closure Standards Liability Protection Understanding Urban and Brownfield Markets Focus on Creating Place Area Wide Planning and Incentive Coordination Creating Authenticity Never Let a Good Crisis Go to Waste Market Factors Market Factors Market Forces Market Shift Market Maturity For Example: Interest Rates Demographics Economic Conditions Government Policies Subsidies Property Location and Condition Social Environment Market Forces Market Shift Market Maturity For Example: Deploying Multiple Incentives Capital Market Acceptance of Risk Incentives focused on Place Making and Economic Return Crowd Funding Financial Mechanisms Financial Mechanisms ASTI Environmental ASTI September 16 2

4 Presentation to Player Objective Threat Opportunity Outcome Developer/ End User Rapid site development IRR Psychological ROI Lack of information Organized opposition Physical, environmental problems with sites Potential liability High development costs Fear of env. uncertainty Increased time Available land parcels, resources, services Liability protection Available capital Remediated sites Clear, achievable requirements Minimum delay Possible Incentives Purchase and develop Invest in the community Create jobs The Mind of the Developer Seller Lender Profit on investment Opportunities for investment Return on investment Low risk Fear of env. uncertainty Affirmative obligations Price Renegotiations Lack of information Potential liability Fear of env. uncertainty Available buyer Willing buyer/seller Sell and Reinvest Approve financing LUG Economic development Provide services Enhance quality of life Clean environment Minimum risk Planned development Burdensome process Lack of information Political challenges Lack of resources (failure) Increased time Lost Tax Revenues Available land parcels Willing buyer/seller Supporting physical infrastructure Tax Revenues Controlled incentives Approve plans, permits, zoning Attract investment Create place Create jobs Environmental Public Jobs Property tax relief Clean environment Minimum risk Safety, security Maintain, improve lifestyle Quality of life Lack of information or understanding Fear of unknown Lack of participation Education and training Active participation Cleaner Environment Public acceptance Modified and adopted from: Brownfields and Michigan Communities, Department of Resource Development, Michigan State University Time 3 to 5 Years for Full Cycle (Dependant on type of development, size of development, municipality, market conditions, etc.) Stages of Development Land Exit Strategy Exit Strategy Exit Strategy One Year Mind Set Residential Feasibility Design AcquisitionConstruction Office Financing Marketing/Leasing. Retail Operations/Maintenance Industrial The Process Must Control at Least One Land Knowledge Capital Tenants Must Balance All Cost Risk Timing Value Real Estate Feasibility Core Objectives Before Tax and After Tax Cash Returns Overall IRR Upvaluing Opportunities for best ROI Psychic Income Create A Sense of Place Create A Legacy Create a Story From The Real Estate Feasibility Chart by Peter Allen End User/Purchaser Seller Development Team Key Players The Overriding Success Factor Location Regulators Other Incentives Providers Developer Lender (Capital Markets) Public Accountant Architect Attorney Broker CM Construction Engineer Environmental Geotechnical Inspectors Investors Landscape Market Researcher Marketing Property Manager Public Relations Transportation State (MEDC, MSF) Local Unit of Government (LUG) ASTI Environmental ASTI September 16 3

5 Presentation to The Overriding Fear Uncertainty Transparency of Process Setting Expectations Extent and Relevancy of Information Risk Management Psychological ROI Participation in Community Lasting Value Creation of Place Circle of Risks Macro and Micro Scale 13 Steps Unpredictability Long Lead Times Short Construction Window The Role of Place In The End - Does It Pencil Out? Creating Place Community Attachment Economy Safety Basic Services Strong Social Offerings Aesthetics Openness Authenticity Sense of Discovery What Makes Metro Detroit Stick (metromode) Knight Foundation Soul of the Community Survey Common Goal, But Different Objectives ASTI Environmental ASTI September 16 4

6 Presentation to Creating Place - Lifelong Communities Neighborhood Centers Walkability Lots of Choices for Entertainment, Work, Education A Showstopper vs. The Economic Garden 1 Incentive Objectives Attracting New Investment (including jobs) Leveling the Playing Field Seeding a Vision Creating a Catalyst Note 1: Attracting New Investment Tax Base and Jobs Stretching Limited Funding Demanding Performance Claw Back Provisions Remaining Competitive Leveling the Playing Field Does creation of place always work? Leveling the Playing Field Incentives (One Perspective) Goal: Soften impediments to (re)development It is a game of inches How do you make it work? Creative purchasing and development Public/private partnerships Use of financial incentives Sequencing Purchase and Redevelopment Environmental ASTI Environmental ASTI September 16 5

7 Presentation to Seeding a Vision First In Making a Vision Tangible Environmental Concerns Inventory Identify Historical Uses Environmental Concerns Extent of Existing Data Define Limits of Existing Data Investigation Priorities Restrictions to Development Priority of Parcels Coordinated Incentives Plan Creating a Catalyst Popcorn Development v. Critical Mass Area Wide Planning Catalytic Project v. Market Demand The Next Twenty Steps Rochester Hills Planning Area 414 Acres 59 Parcels 9 Landfills Area Wide Planning Stops Popcorn Development Increases Chances for Synergy Coordinates All Efforts Coordinating Incentives Within An Area Emphasis of fgrowing Number of Grants Rochester Hills Planning Area District 1 District 3 Area-Wide Incentives Creating districts and/or using Targeted Redevelopment Area (or Land Bank), will permit collateralization of TIF funding Grant funding Surface Water features District 2 ASTI Environmental ASTI September 16 6

8 Presentation to Redevelopment Ready Rochester Hills Planning Area District 1 Preliminary Planning Committed Package Incen ntives Land Control Increased Overall Costs District 2 District 3 Cost Increased Upfront Costs Increased Site Development Costs Time Contact ASTI Environmental at ASTI The Challenges of Incentives Uncertainty Necessity Applicability Timing Cost Preliminary Redevelopment Ready Planning Committed Package Incen ntives Land Control Targeted Funding Grant Funding RLF Tax Incentives Lower Property Costs Land Assembly Land Bank Increased Upfront Costs RLF Grants and Loans Façade Programs Infrastructure Investment Increased Site Development Costs Increased Overall Costs Location RLF Tax Incentives Tax Abatement Grants and Loans MSF Redevelopment Ready Preliminary Basic Assessm ment Planning - Visioning Committed Package Incen ntives Land Control Gap due to economics, demographics, brownfield, historic, encumbrances, title clearance, time, etc. $$ Cost Time Contact ASTI Environmental at ASTI The Key Ingredients Must be an Eligible Property developed by an. Eligible Investor who Creates an Eligible Project that Incurs Eligible Costs after approval (with exceptions) Can complete the project within the defined time, investment or job creation goals Time Contact ASTI Environmental at ASTI ASTI Environmental ASTI September 16 7

9 Presentation to Eligible Properties Include. Perceived Contamination/Impairment Traditional Brownfields (aka contaminated) Blighted and Functionally Obsolete Properties Historic Resources Manufacturing Facilities Mixed-Use Urban Redevelopments Properties in Targeted Areas Incentives Balance Time Required to Obtain vs. Construction Schedule Effort (Brain Damage) vs. Value of Incentives Value of Incentives vs. Uncertainty and Risk of the Project (The Conundrum) Value of Incentives vs. Repayment Timing Extraordinary Costs vs. On-Book Costs ( True Benefits v. Off-Set Benefits) Types of Programs Eligibility Perceived Impacts Incentives Grant Assessment Impact Nature Implementation The Conundrum High High Priority High Developer Sweet Spot Low Known Impacts Blighted Functional Obsolete Targeted Industry/ Area Grant/Loan TIF Other Grant/Loan TIF Other Grant/Loan TIF Other Grant/Loan TIF Other Impact Extent Due Diligence Due Diligence Control/ Remediation Desirability Low Low High cess Probability of Succ Low Priority Incentive Zone Low High AAA Key Steps Assessment Application Does it Meet Criteria? Is There Sufficient Time? Is Incentive Worth the Cost? Site Plan and Financials Tenant or Project Plan Complete Application Value of Incentives vs. Repayment Timing Cost of Money Repayment Period vs. Exit Strategy Gap vs. Total Reimbursement Approval Financial Review Community Participation Background Check Document and Report Performance Cost Grants Grants and Loans CRP, BDP TIF Time Contact ASTI Environmental at ASTI ASTI Environmental ASTI September 16 8

10 Presentation to True Benefits When incentives are applied to nonextraordinary costs When it can be used to secure or enhance a funding source Offset Benefits When incentives are applied to extraordinary costs Incentive Options Grants Loans Loan Guarantees and Enhancement Tax Increment Financing/Tax Abatement Tax Credits In Kind Contributions Insurance Process Benefits Project Funding Offset Benefits True Benefits Summary of Funding Sources Environmental TIF Redevelopment Developer Investment Investments Total Cost Grant Funded Funded TIF Funded MBT Credit Site Acquisition $3,402,500 $0 $0 $0 $0 $3,402,500 Environmental Investigation $121,900 $15,300 $103,500 $0 $0 $3,100 Remediation Site Preparation $55,000 $0 $0 $0 $0 $55,000 Public Infrastructure $500,000 $0 $0 $500,000 $0 $0 Demolition $183,000 $0 $0 $183,000 $0 $0 Construction Costs $4,825,000 $0 $0 $0 $603,125 $4,221,875 Other Construction Costs $1,594,600 $0 $0 $0 $2,500 $1,592,100 Total Above $10,682,000 $15,300 $103,500 $683,000 $605,625 $9,274,575 Contingency 15% 15% 15% 15% 15% 15% $1,602,300 $2,295 $15,525 $102,450 $90,844 $1,391,186 Total With Contingency $12,284,300 $17,595 $119,025 $785,450 $696,469 $10,665,761 The Tool Box Tax Tools Brownfield Tax Increment Financing Tax Abatements Commercial Rehabilitation District Commercial Redevelopment District Obsolete Property yrehabilitation Tax Abatement Corridor Improvement Authority DDAs, LDFAs Federal Historic Rehabilitation Tax Credit Industrial Facilities Tax Abatement New Market Tax Credits No Double Dipping Example Small Project 1 List of Incentives Project Funding Public Infrastructure Costs $500,000 Developer Eligible Expenses $404,475 Developer Tax Credit $696,469 BRA Administrative Costs $21,000 Local RLF Funding $1,304,206 Increased Taxes to Jurisdictions $9,259,461 Example Small Project 1 Developer Benefits LUG Benefits TIF Programs The Increment Existing Property 2012 $5,000,000 Value Incremental Value Base Value $10,000,000 Value $15M Value $5,000,000 Value Redeveloped Property 2014 ASTI Environmental ASTI September 16 9

11 Presentation to TIF Programs The Increment $10,000,000 $5,000,000 $10M Value =$5M TV $232,276 Annual Incremental Tax ,000,000 5,125,000 Captured Taxable Value $ $ - Personal Property - $ 5,000,000 5,125,000 Total Taxable Value $ Captured Millage Category Mills/$1000 Tax Capture COUNTY ,813 $ 23,383 $ $ 18,814 VILLAGE OPERATING ,356 $ $ 10,789 VILLAGE REFUSE ,526 $ 5,733 5,876 LIBRARY $ $ $ 4,823 FIRE ,705 $ $ 15,612 POLICE ,232 $ $ 5,510 TOWNSHIP OPERATING ,376 $ $ 8,102 COMMUNITY COLLEGE ,904 $ $ 9,675 MILFORD DDA ,440 $ $ 17,233 OAKLAND COUNTY ISD ,813 $ $ 89,589 SCHOOL OPERATING ,404 $ $ 28,675 SCHOOL SET ,976 $ $ 238,083 Total Incremental Tax ,276 $ Taxes for (one year delay) The Tool Box Tax Tools (continued) Neighborhood Enterprise Zones Various Renaissance Zones Empowerment Zones Tool and Die Recovery Zones Business Improvement Districts Principal Shopping Districts Business Improvement District Historic Neighborhood Personal Property Tax Relief (328) List of Incentives TIF Programs The Increment $10,000,000 $5,000,000 $10M Value =$5M TV $232,276 Annual Incremental Tax (Year 1) 5% for = $3,300, yrs The Tool Box Grants/Loans Michigan Strategic Fund Grants and Loans Business Development Program (BDP) Michigan Community Revitalization Programs (CRP) Transportation Economic Development Grants EPA Site Assessment Grants EPA Site-Specific S Remediation Grants HUD Sustainable Community Grants Community Development Block Grants Signature Building Acquisition Grant Private Foundation Grants USDA Rural Economic Development Loans and Grants List of Incentives TIF Programs in a DDA $10,000,000 $5,000,000 $10M Value =$5M TV $50,387 Incremental Capture $181,889 Incremental For DDA ,000,000 5,125,000 Captured Taxable Value $ $ - Personal Property - $ 5,000,000 5,125,000 Total Taxable Value $ Captured Millage Category Mills/$1000 Tax Capture COUNTY $ $ - $ - VILLAGE OPERATING $ $ - VILLAGE REFUSE $ $ 5,876 LIBRARY ,733 $ $ 4,823 FIRE ,705 $ $ 15,612 POLICE ,232 $ $ - TOWNSHIP OPERATING $ $ 8,102 COMMUNITY COLLEGE ,904 $ $ - MILFORD DDA $ $ 17,233 OAKLAND COUNTY ISD ,813 $ $ - SCHOOL OPERATING $ $ - SCHOOL SET $ $ 51,646 Total Incremental Tax ,387 $ The Tool Box Grants/Loans (continued) Venture Michigan Fund Angels/Venture Capital Neighborhood Stabilization Program (3?, 4?) Targeted Research and Development Grants Rural Business Enterprise Grants (RBEG) Revolving Loan Funds Local Site Revolving Loan Funds Clean Michigan Initiative Small Grants Government - Grants.gov Foundations - fconline.foundationcenter.org/ List of Incentives ASTI Environmental ASTI September 16 10

12 Presentation to The Tool Box Other Capital Access Program Charter One Job Creation Loan Program Industrial Development Revenue Bonds Land Banks EPA Brownfields Area-Wide Planning gprogram In Kind Contributions Conditional Land Use Transfer WOW Factor List of Incentives Getting Incentives In general Must be Eligible Property or Project Applicant Can Not Be Responsible for Impacts At the Discretion of the Grant or Loan Administrator Requires Public/Private Partnership Some Provided for Specific Purpose, Others Flexible Some Are Incompatible (but no Double Dipping) Takes 3 to 6 (24 for federal grants) months to complete process Trends Limiting Incentives to Financial Need High Density, Mixed Use, Walk-able, Transportation Oriented Development Target Job Creation and Investment Targets Must Be Met Increased Competition for Less Incentives TIF Backlash Creative Use of Grants Collaborative and Area-Wide Focus Modifications to the Application (Be Ready to Do It Many Times) 203 Acres 4,700,000 sq ft -18 heavy industrial buildings Mixed Use Development $162million investment 1,800,000 sq ft renovated industrial 500,000 sq ft new industrial 365,000 sq ft of commercial/80,000 R&D 400 housing units ASTI Environmental ASTI September 16 11

13 Presentation to $32 million in Brownfield costs $13 million in TIF with 15 year payback $9.9 million in SBT Credit -Phased Purchase MDOT Grant Public Participation in Infrastructure PRP Involvement Green Objective 3.3 Acre Site 25,600 sq ft light industrial platting operation RCRA Site Soils and groundwater impacts Corporate Office $5-10 million investment Bread and Butter $208,000 Site Assessment Grant $200,000 EPA RCRA Investigation $300,000 EPA CERCLA Investigation $200, EPA CERCLA Remediation $100,000 Assessment Grant for Demo $200,000 Site Remediation Grant Will Use TIF and MSF Incentive Programs Environmental ASTI Environmental ASTI September 16 12

14 Presentation to Brownfield Definition Michigan For all Brownfields Contamination greater than the applicable Residential Clean-up Criteria under Part 201, or Is in a Land Bank Fast Track Authority In a Qualified Local Unit of Government, can be blighted or functionally obsolete Historic Resource Adjacent and Contiguous Properties TOD Related Development Definitions General Greenfield: Undeveloped, un-impacted land Greyfield: Previously developed land, not requiring special controls or procedures Brownfield: Previously developed land requiring controls or special considerations Orangefield : Where you can make money (green) on a Brownfield Adrian Albion Alma Alpena Ann Arbor Baldwin Bangor Battle Creek Bay City Benton Harbor Benton Twp. (in Berrien Co.) Coldwater Coleman Crystal Falls Dearborn Dearborn Heights Detroit Dowagiac East Lansing Eastpointe Ecorse Escanaba Ferndale Hart Hartford Hazel Park Highland Park Holland Inkster Ionia Iron Mountain Iron River Ironwood Ishpeming Jackson Bessemer Flint Kalamazoo Big Rapids Gaastra Lansing Bronson Genesee Twp. Lincoln Park Buena Vista (in Genesee Co.) Livonia Twp. Gibraltar Ludington (in Saginaw Co.) Gladstone Manistee Burton Grand Haven Manistique Cadillac Grand Rapids Marquette Carson City Grayling Melvindale Caspian Hamtramck Menominee Center Line Harbor Beach Midland Cheboygan Harper Woods Monroe Mount Clemens Saint Louis Mount Morris Sault Sainte Mt. Morris Twp. Marie (in Genesee Co.) Southfield Mount Pleasant Sturgis Muskegon Taylor Muskegon Heights Three Rivers Norton Shores Trenton Norway Traverse City Oak Park Vassar Omer Wakefield Onaway Warren Owosso Wayne Pinconning Pontiac Portage Port Huron Redford Twp. (in Wayne Co.) River Rouge Royal Oak Twp. (in Oakland Co.) Saginaw Wyandotte Wyoming Ypsilanti Core Communities Brownfield Definition Federal (EPA) A brownfield is a property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant. Definitions - Michigan Blighted Means Property That: Has been declared a public nuisance in accordance with a local housing, building, plumbing, fire, or other related code or ordinance; Is an attractive nuisance to children because of physical condition, use or occupancy; Is a fire hazard or is otherwise dangerous; Has had the utilities, plumbing, heating or sewerage disconnected, destroyed or rendered ineffective for its intended purpose; Has substantial subsurface demolition debris buried on site so that the property is unfit for intended use Applicable only in Michigan Core Communities ASTI Environmental ASTI September 16 13

15 Presentation to Definitions - Michigan Blighted Means Property That: Is tax reverted property owned by a qualified local unit of government, by a county, or by the state (the sale, lease or transfer after inclusion in a brownfield plan shall not result in loss of the property status as blighted); or Is property owned or under the control of a land bank fast track authority, whether or not located with in a qualified local governmental unit - property included within a brownfield plan prior to the date it meets this requirement shall be considered eligible as of the date the property becomes qualified (the sale, lease or transfer after inclusion in a brownfield plan shall not result in loss of the property status as blighted). Definitions Urban Redevelopment Projects Downtowns or traditional commerce centers of Qualified Local Units of Government and County Seats Must.. Increase density Promote mixed use and sustainable development Address area wide redevelopment Address underserved markets of commerce Applicable only in Michigan Core Communities and for Land Banks Increased Benefits in Michigan Definitions - Michigan Functionally Obsolete Property: Is property or equipment that is unable to be used to perform as intended due to a substantial loss in value resulting from: Overcapacity; Changes in technology; Deficiencies i i or superadequacies in design; Or other similar features that affect the property: (Or the property s relationship with other surrounding property.) Definitions - Brownfield Owned or Under the Control of a Land Bank Fast Track Authority; An ownership interest in the property, or A tax lien on the property, or A tax deed to the property, or A contract with this state or a political l subdivision of this state to enforce a lien on the property, or A right to collect delinquent taxes, penalties, or interest on the property, or The ability to exercise its authority over the property Applicable only in Michigan Core Communities Definitions - Michigan Historic Resource: Is a publicly or privately owned historic building or structure located within a historic district designated by the national register of historic places, the state register of historic sites, or a local unit acting under the local historic districts act BFTIF Can Be Applied To All Brownfields for Environmental Investigations Preparation of Due Diligence Documents Remedial Activities Including Exposure Barriers Other Environmental Response Activities iti Demolition and lead abatement Brownfield plans Reasonable costs of environmental liability insurance Interest Applicable only in Michigan Core Communities What? Eligible Expenses ASTI Environmental ASTI September 16 14

16 Presentation to BRTIF Can Be Applied To Core Community Brownfields, or Property Currently Owned or Under Control of a Land Bank, for Infrastructure Parking Structures, Urban Storm Water Management Site Preparation Not a Response Activity Planning and Economic Strategies Building Rehabilitation Relocation of public buildings or operations for economic development purposes. What? Eligible Expenses BFTIF Can Be Applied To Property Currently Owned or Under Control of a Land Bank, for Cost of clearing or quieting title to, or selling or otherwise conveying, property owned or under the control of a land bank fast track authority Acquisition of property by the land bank fast track authority if the acquisition of the property is for economic development purposes Community Revitalization Program Grant, Loan, "Other Economic Assistance, or combination For Eligible Investment (including look backs) such as: Alternation, construction, demolition, i rehabilitation i Site improvements Machinery, equipment and fixtures Professional service fees (not soft costs) What? Eligible Expenses What? BFTIF Process Initial meeting with LUG and MEDC and/or MDEQ Prepare Brownfield Plan Public Notice/Notice to Taxing Jurisdications Review and Approval by BRA and LUG Prepare 381 Work Plan Review and Approval by MEDC and/or MDEQ Complete Reimbursement Agreement Community Revitalization Program Grant, Loan or Combination Up to 25% of Eligible Investment, not more than $10,000,000 for any project (grants capped at $1,000,000) Support is Performance Based Grants and Loans may have claw-back provisions and are assignable, may have fees Economic Assistance may include loan enhancement How? What? ASTI Environmental ASTI September 16 15

17 Presentation to Community Revitalization Program On Eligible Property such as: Facility (aka Brownfield) Blighted (aka Brownfield) Functionally Obsolete (aka Brownfield) Historic Resource (publically or privately owned historic building /structure in designated historic district) Adjacent or contiguous if increases taxable value of subject property Municipality must have skin in the game: staff, financial, economic commitment Where? Community Revitalization Program Process: Initial meeting with MSF and LUG Obtain LUG support (conceptual and financial) Submit Pre-Application Review by CATeam Complete Needs Analysis Review and Approval by MSF Complete Application and Agreement How? Community Revitalization Program Must Consider: Revitalization of regional urban areas (promote desired revitalization) Downtown or traditional commercial center only Importance of project to the community and catalyst status Financial need and extent of other contributions Reuse of vacant buildings or historical buildings Extent of environmental impacts Job Creation Financial and economic soundness Density, mixed-use, sustainability, rehabilitation of historic resources Area-wide redevelopment and underserved markets of commerce How? Community Revitalization Program Must Meet: Financial Threshold End Use Threshold Location Threshold Business Development Program Grant, Loan, "Other Economic Assistance, or combination Up to $10,000,000 per project that. Creates 25 Qualified Jobs in rural county 1 or high technology activity, it or Creates 50 Qualified Jobs 1: Rural county with population of 90,000 or less in 2010 Census, See attached for definition of high technology Where? What? ASTI Environmental ASTI September 16 16

18 Presentation to Business Development Program Qualified Investment An investment to a project in Michigan that is acceptable to the MSF Business Development Program Qualified Business Is, or will be, physically located in or physically operate in, Michigan That submits an application and business plan, and Is financially viable What? Who? Business Development Program For Grants Performance Based For Relocation to Michigan or For Expansion in Michigan when another state is competing For Loans Performance Based Need Based For Qualified Businesses expanding in Michigan Business Development Program Qualified Jobs A job performed for the Qualified Business by a resident of Michigan whose state income tax is withheld by employer (or other on behalf of employer) In addition to jobs existing prior to the project Not transferred from other business in Michigan What? Who? Business Development Program For Qualified Business making Qualified Investment(s) or Creating Qualified Jobs Preference to businesses that need assistance for deal-closing and second stage gap financing Business Development Program Process: Initial meeting with MSF Consideration by MSF Complete Needs Analysis Review and Approval lby MSF Complete Application and Agreement Who? How? ASTI Environmental ASTI September 16 17

19 Presentation to Business Development Program Must Consider: No retail projects/no retention projects Out-of-State competition Net positive return to Michigan Investment by business Business diversification Shovel-readiness and re-use of existing facilities Job Creation, wage level, and benefits Links to Michigan suppliers Location in distressed or targeted community Municipality must have skin in the game: staff, financial, economic commitment Eligible Costs Eligible activities on eligible properties Plan must clearly state usage State captured funds Require MDEQ or MEDC approved Work Plan Requires Reimbursement Agreement for TIF Properties located within municipality Maximizing Funding Sources How? What? Revenue Sources Brownfield TIF Must be in Brownfield Plan Must clearly state capture by RLF Segregate Local and State Tax Reimbursement Maximum 5 year capture Limits i State capture to amount reimbursed RLF Repayment Funds from Other Public or Private Sources What? Objective Create Funding for Brownfield Assessments and Remediation in The LUG Provide Immediate Funding of Eligible Activities to be Reimbursed from Brownfield TIF Eligible Criteria (Statutory) Meets the definition of a Brownfield Identified in an approved Brownfield Plan Adjacent and Contiguous properties if they are estimated to increase the taxable value of the Eligible Property Properties affected by a release from the Eligible ibl Property Property under the control of the Land Bank Applicant must own, lease or have entered into agreement to purchase or lease eligible property, or be Land Bank What? Who? ASTI Environmental ASTI September 16 18

20 Presentation to Private Activity Bonds Eligible Expenses for Manufactures Include. $1 million unrestricted for capital expenditures $10 million subject to $20 million restrictions on capital expenditures prior to and after issuance What? Private Activity Bonds Tax exempt finance method secured by project s revenues Interest exempt from federal, state, and local income tax Private Activity Bonds Eligible Applicants Include Manufacturing projects Not-for-Profit Corporation projects Solid or Hazardous Waste Disposal Facility What? Who? Private Activity Bonds Eligible Expenses for Manufactures Include. 95% for land acquisition, building and equipment (not including used) directly related to manufacturing process Warehouse space and non-core uses are ineligible unless directly related to process (limited to 25%) 70% must be for core manufacturing costs 15% must be for renovation if existing facility Not applicable to working capital or inventory Private Activity Bonds Process: Initial meeting with MSF Applicant submits Initial Application (before 1 st of month) Committee Review (once per month) Structure financing and prepare legal documents Public hearing MSF adopts bond resolution What? How? ASTI Environmental ASTI September 16 19

21 Presentation to Site Assessment Grants Federal Program Assessment Grants $200,000 to address sites of hazardous substance contamination; $200,000 for petroleum sites; $350, waiver available for site-specific ifi assessment $1,000,000 combined for coalitions (3 or more applicants) Funds may be used to inventory, characterize, assess and conduct cleanup and redevelopment planning and community involvement Getting Grant and Loan Funding In general Must Be Known or Perceived Brownfield Applicant Can Not Be Responsible for Impacts At the Discretion of the Grant or Loan Administrator Grants Provided for Specific Purpose Revolving Loan Funds (RLF) More Flexible Site Assessment Grants Approval from the community and EPA or DEQ required Eligibility Determination Funding Approval Work rkplan Approval Long lead time to obtain and implement grant, but once in place, project-specific approval can be provided in a few days Site Assessment Grants Administered by the LUG Provides services for environmental due diligence on properties in the community (either community wide or in designated area) Assessments completed by the LUG, reports provided for developer, and funded by community Partial or total funding at LUG discretion Site Specific Remediation Grants Administered by the LUG Provides services for remediation of specific impacts on specific property Must be completed according to the Work Plan Reports available to the developer, but funded and conducted by community, therefore publically available ASTI Environmental ASTI September 16 20

22 Presentation to Site Specific Remediation Grants Federal Program Clean-up Grants $200,000 per site; No more than 5 sites; 20 % cost share; Eligible entity must own site; Funds may be used to address sites contaminated by petroleum and hazardous substances, pollutants or contaminants RLF Federal Program Revolving Loan Funds $1,000,000 per eligible entity; 60% for capitalizing revolving loan; 40% for cleanup sub grants (no repayment); 20% cost share Funds may be used to address (cleanup) sites contaminated by petroleum and hazardous substances, pollutants or contaminants Site Specific Remediation Grants Long lead time to obtain and implement grant Specific threat to public health or the environment preferred Focused on specific impacts Training Grants Federal Program Training Grants $200,000 per grant Funds for eligible entities and non-profit organizations to provide environmental job training projects that t will facilitate t the assessment, remediation, or preparation of Brownfield sites Combining Funding Competing Programs LIHTC DDA Complementary Programs 198, 328 Federal Historic Tax Credits Renaissance Zone Other Grants and Loans ASTI Environmental ASTI September 16 21

23 Presentation to Community Specific Objectives Popcorn Incentives v. Catalytic Projects v. Area Planning 2 Consider Area-Based Impacts Return on Investment for Incentive Threshold Criteria and Performance Criteria Key Points in Attracting Development Also Retaining An eligible project can be considered for Brownfield incentives in the City if it meets all of the following criteria: The project Internal Rate of Return indicates that it requires incentives to be successful and would not occur without the incentives, and The development will ameliorate threats to public health or the environment that were caused by site conditions through remediation, mitigation or control or redevelopment of an historic resource. Projects will be evaluated based on, but not limited to, the following criteria: Amount of property tax generated Amount of investment on a square foot basis Job retention, creation and quality Location Existence of abandoned, blighted or functionally obsolete buildings Amelioration of threats to public health or the environment Whether the project will provide additional beneficial effects on the surrounding area and the community as a whole. Environmental 3 Communicate Performance Expectations Community Specific Objectives The Basic E 4 Equation City of Flint A. Promote Economic Development and Job Creation Through the Reuse of Underutilized Properties B. Position Brownfield Redevelopment Projects to be Competitive with Traditional Development Projects C. Maximize the Impact of Incentives by Encouraging Brownfield Redevelopment that Complements Other Redevelopment Efforts D. Protect Human Health and the Environment Through the Use of Appropriate Remediation and Due Care Activities, and E. Maintain Transparency During the Approval Process City of Rochester Hills 1. Incorporate a preference for source control, active remediation, or mitigation; 2. Create full time jobs; 3. Provide an increase in taxable value to the property and a potential beneficial effect in the area that t would not have occurred without t the incentives; and 4. Use these incentives only after all other sources of funding for eligible activities have been exhausted. Eligible Property + Eligible Activities + Eligible Taxpayer = Eligible Project (Brownfield+ Investment Listed as Eligible+ Innocent Landowner= Eligible Project) 1 Focus Efforts to Leverage Local Assets 4 Eligibility is a Condition Not a Criteria ASTI Environmental ASTI September 16 22

24 Presentation to The Basic E 4 Equation Problem Eligible Project (Brownfield): Contaminated Above Residential Functionally Obsolete Blighted Historic Resource In a Land Bank Adjacent and Contiguous Desirable Project (Incentive Target) Create Jobs Sufficient Investment for Incentive Defined Need (Financing Gap) Contribute to Density and Area Wide Redevelopment Can Will be Successfully Completed Example Financial Evaluations $73M Investment 30 New Jobs $8.2M TIF 12 Years $10M MBT 5 Economic Considerations First 3750 and 3800 Woodward, Detroit Assistance MEDC CAT Regional Organizations Other Communities Private Companies Consultants But For Test What is the Financing Gap? Equity vs. Debt Debt to Equity Ratio Are Extraordinary Costs the Cause? What are the Other Incentives and are They First In? But For Test 8% Equity 73% Debt 19% Incentives Anatomy of a Deal 8.9:1 Debt to Equity Environmental 6 See Who Has Skin in the Game ASTI Environmental ASTI September 16 23

25 Presentation to What If Not Test (the But Not Test) MEDC IRR Worksheet 7 Look at Tax Impact with and without Project Evaluate Need v. Incentive Assess Need Based on long term IRR not just Financing Gap Set Base Incentive on Need Adjust Base Incentive For Other Criteria Be Consistent with Policy and Objectives Eligible Costs Included Threshold IRR v. Extraordinary Costs Using Interest All Eligible Extraordinary Costs Limited by Threshold IRR Interest Included 8 Balance Incentives and Need Custom IRR Table Local Share Coordinating with State Programs Additional Local Capture Proportional Local Share 9 Leverage Local Commitment Amount ASTI Environmental ASTI September 16 24

26 Presentation to State Share Consider Entire Incentive Package Evaluate Total Impact Look at 20-yr Impact Additional State Capture $35.7M Impact $18.2M Incentive $9.3M Local Taxes Proportional State Share 11 Consider Other Relevant Financial Contributions Match Payment Period to Prediction Assumed Completion Schedule Assumed Future Taxable Value Assumed Total Costs to Capture Assumed Annual Appreciation Timing Unless otherwise agreed to in writing by the BRA, this Plan will expire and no longer be valid if the applicant does not execute a Reimbursement Agreement within one hundred and eighty days of the date the Plan is approved by City Council. To remain eligible for the approved incentives, eligible ibl activities iti must start t within eighteen months of Plan approval, construction must start within five years of the executed Reimbursement Agreement, and construction must be completed within three years of the estimated completion date. Results in Final Payment Date 12 Demand Performance $8.4M In Base Taxes Means $23.2M in Additional Tax Revenue (176% Increase) Evaluate Revenues v. Incentive Look at 30-yr Tax Revenues Clawback Provisions How much investment is substantially compliant? Rigorous review of content and date of reimbursement requests $31.6M to Jurisdictions (71%) $8.2M to Applicant (19%) 10 Look at Tax Impact to All Jurisdictions ASTI Environmental ASTI September 16 25

27 Presentation to 12 Step Program Summary 1. Focus Efforts to Leverage Assets 2. Consider Area-Based Impacts 3. Communicate Performance Expectations 4. Eligibility is a Condition Not a Criteria 5. Economic Considerations First See Who Has Skin in the Game Look at Tax Impact with and without Project 8. Balance Incentives and Need 9. Leverage Local Commitment Amount 10. Look at Tax Impact to All Jurisdictions 11. Consider Other Relevant Financial Contributions 12. Demand Performance Keep in Mind the Final Outcome Create Sense of Place and Great Design Drive Appropriate Clean-Up Drive Appropriate Site Design Coordinate and Leverage Incentives Catalytic Projects v. Consistent Development From Subsidies Anonymous Focus on Process Single Point of Contract for Entire Process Transparent, Predictable and Timely Process Early Screening of Incentives Build Incentives Team Communicate Advantages Listen to Advantages Focus on Area-Wide Planning Single Sited-ness Is Out Coordinate Efforts Around Redevelopment Hubs Economic Gardening on Local Clusters Coordinate Efforts Between Communities Be Developer Ready Reduce Uncertainty Publish and Implement Policies and Procedures Manage Timelines Coordinate Meetings Only Real Incentives Count Control the Incentives = Control the Conversation The Real Estate Essentials Have Not Changed Lessons Learned Environmental ASTI Environmental ASTI September 16 26

28 Presentation to Lessons Learned For urban redevelopment, it s a question of how much uncertainty The full financial benefits are rarely available In many states, commercial and residential are the most difficult to obtain benefits, but are a major component of urban redevelopment demand A bad deal is still a bad deal Additional Resources Michigan Laws MEDC MDEQ Land Issues g,7 33, EPA Brownfields - epa.gov/brownfields Environmental Additional Reading ULI Advisory Services Panel Report Baileys Crossroads, Virginia ULI Emerging Trends in Real Estate The Option of Urbanism by Christopher Leinberger The Brookings Institute: Turning Around Downtown: Twelve Steps to Revitalization by Christopher Leinberger Additional Resources Urban Land Institute at International Council of Shopping Centers at National Brownfield Association at Brookings Institute Metropolitan Policy Program at Environmental Environmental Additional Reading Last Harvest by Witold Rybczynski Real Estate Development, Principles and Process, Edited by Mike Miles et al Northeast Midwest Institute: The Environmental and Economic Impacts of Brownfields Redevelopment Energy Benefits of Urban Infill, Brownfields, and Sustainable Urban Redevelopment Class Case Study Questions Environmental Environmental ASTI Environmental ASTI September 16 27

29 Presentation to Q&A Buyers Approach - Traditional Objectives Phases Assessment Risk Management Value Creation Site Selection Screening Tools (GDR, Transaction Screen, ECI) Hazardous Materials Ecological Assessment Assessment Due Diligence Phase Phase ESA* Compliance Investigation Assessment I II Tom Wackerman twacker@asti-env.com Environmental Planning Construction Operation Baseline Environmental Owner Assessment * Exit Strategy Remediation Options Due Care Plan* or Brownfield Analysis DDCC Incentives Hazardous Materials No Further Action Rpt. Remediation, Closure Clearance Report Certificate of Completion and Restoration Operating Permits, Plans Post Closure Plan and Programs * Indicates the three key liability protection documents Operation and Maintenance Pre-Construction Phases - Buyer Due Diligence Risk Management Value Creation Bonus Material: Due Diligence rocess Pr Documentation Identify Issues Identify Limitations (Physical and Financial) i Funding Sources Objective Decrease Uncertainty Control Costs Clean-up Due Care Reduce Time To Market Financial Assistance Environmental Key Issues Appropriate Investigations Site Specific Closure/ Long Term Care Time v. Benefits What You Really Need to Know Due Diligence Site Optimization Site Development Three key steps Process is iterative Process is specific to development plan Provides documentation of due dl diligence process to provide protection for innocent landowner Provides assessment for use in determining compliance with closure standards Due Diligence Liability Protection Evaluating Development Options and Costs Nature and Extent of Contamination Determining Due Care Requirements Appropriate Site Use and Maintenance Identifying Compliance Requirements Underground Storage Tanks, Asbestos, etc. Municipal Environmental Ordinances ASTI Environmental ASTI September 16 28

30 Presentation to Due Diligence Basic Documents Transaction Screen Environmental Concerns Inventory Phase I Environmental Site Assessment Phase II Investigation Baseline Environmental Assessment (BEA) Appropriate Use Single Family Residential vs. Multi-Family Compound (Soils) Direct Contact Residential ug/kg Commercial ug/kg Arsenic 7,600 37,000 Lead 400, ,000 Benzo(a)pyrene 2,000 8,000 Part 201 Closure Requirements Basic Due Diligence Site Selection Site Optimization Yes Functionally Obsolete Or Blighted? No Phase I ESA Basic Documents Construction Readiness Report Remediation Options Analysis Exit Strategy Summary Recognized Environmental Conditions? Yes Phase II Investigation No No End Process Site Development Plan Grant Application or Work Order Brownfield Plan 381 Work Plan MBT Credit Application Is Property a Facility? Go To Yes Environmental Site Optimization Site Optimization Site Optimization Review Business Plan And Financial Projections Obtaining Funding and Grants Tax Credits Investigation and Remediation Grants Special Grants Go To Operation and Documentation No Is Funding Available For This Project? Yes Can Current Plan Capture Funding? No Yes Can Plan Change To Capture Funding? Lead/Asbestos Assessments Hazardous Substance Assessments Mold and Indoor Air Quality Management Pre-Demolition Assessments Consider Core Community Funding Yes Prepare Brownfield Work Plan Submit to BRA and/or MDEQ No Go To Site Development Yes Prepare Applications, Schedule Funding Yes Is Work Plan Approved? No Modify? No Environmental ASTI Environmental ASTI September 16 29

31 Presentation to Site Development Site Optimization Threatened and Endangered Species Management Wetlands Mitigation and Banking Greenway Development/Habitat Restoration Ecological Storm Water Management Bio-Remediation LEEDS Buildings The Process Weeks No. Task Conduct Due Diligence 1 Conduct Phase I ESA 2 Prepare Phase II Sampling Plan 3 Conduct Phase II Sampling 4 Identify Site Development Options 5 Evaluate Site Control/Remediation Options 6 Prepare BEA and Due Care Plan Brownfield Tax Credit Program 7 Identify Brownfield Funding Options 8 Initial Meeting with Agency 9 Prepare Brownfield Plan 10 Brownfield Plan Review 11 Public Hearing 12 Remedaiton Work Plan Work Plan Review 14 Prepare MBT Application Part I 15 MBT Application Review 16 Prepare MBT Application Part II 17 MBT Part II Review Site Operation 18 Install Controls/Conduct Remediation 19 Restroation 20 Operation and Maintenance Site Development Basic Documents Due Care Plan Response Activities Plan Remedial Action Plan Closure Report Engineering, Administrative and Institutional Controls Disposal Documentation Final Assessment Report The Real World Uncertainty of Conclusions Undiscovered Impacts No Liability But Total Responsibility Things That Are Not Protected Public/Buyer Perception USEPA Overwrite Site Development If Facility, Investigate Nature and Extent of Impacts If Obsolete or Blighted, Prepare Corrective Action Plan Prepare Appropriate BEA (Category N, D, or S) Prepare Due Care and/or Remediation Plan Example Project 1- Changing Scope Obtain i Funding Control, Demo, Renovate, Remediate Obtain Core Community Funding Install Infrastructure Construction Utilization of Credits Obtain Certificate of Completion Environmental Environmental ASTI Environmental ASTI September 16 30

32 Presentation to Emagine Royal Oak Project Location Environmental Required Multiple Splits and Combinations Obtained from ALTA/ACSM Survey dated September 25,2009 and provided as part of Parcel No In Brownfield Plan Adjacent and Contiguous to a Facility Parcel No In Brownfield Plan Note: Mislabeled on Brownfield Plan Maps Unclassified in Brownfield Plan Parcel No In Brownfield Plan (Former Bus Service Garage) Unclassified in Brownfield Plan Emagine Theater Project Local Participation was DDA Contribution LEED Features Required Obtained Tax Credit at $1,250,000 Parcel No and In Brownfield Plan Facility per Part 201 (BEA Filed)) Parcel No In Brownfield Plan (Former Goodyear Tire) Facility per Part 201 (BEA Filed)) Parcel No In Brownfield Plan (Former Oakridge Market) Adjacent and Contiguous to a Facility Part of Larger Brownfield Plan Notes: Parcel No In Brownfield Plan Parcel No In Brownfield Plan Note: Mislabeled on Brownfield Plan Maps Parcel No In Brownfield Plan (Former Bus Service Garage) Example Project 2 Going Forward Final Project Location Parcel No and In Brownfield Plan Parcel No In Brownfield Plan (Former Goodyear Tire) Parcel No In Brownfield Plan (Former Oakridge Market) Required Portion of Facility Parcel Environmental Notes: ASTI Environmental ASTI September 16 31

33 Presentation to Site Redevelopment Project Financing Example Project 3 What Would You Do? Demolition of former funeral home Approximately 1.86 acres Construction of senior independent living community Construction starts 2013 All funding is in place $24M investment not including land costs Creates 27 full time and 38 part-time jobs Site is a facility, but impacts are minor Project Financing Example Project 3 Project Financing Example Project 3 ASTI Environmental ASTI September 16 32

34 Player Objective Threat Opportunity Outcome Developer/ End User Rapid site development IRR Psychological ROI Lack of information Organized opposition Physical, environmental problems with sites Potential liability High development costs Fear of env. uncertainty Increased time Available land parcels, resources, services Liability protection Available capital Remediated sites Clear, achievable requirements Minimum delay Possible Incentives Purchase and ddevelop Invest in the community Create jobs Seller Profit on investment Fear of env. uncertainty Affirmative obligations Price Renegotiations Available buyer Sell and Reinvest Lender Opportunities for investment Return on investment Low risk Lack of information Potential liability Fear of env. uncertainty Willing buyer/seller Approve financing LUG Economic development Provide services Enhance quality of life Clean environment Minimum risk Planned development Burdensome process Lack of information Political challenges Lack of resources (failure) Increased time Lost Tax Revenues Available land parcels Willing buyer/seller Supporting physical infrastructure Tax Revenues Controlled incentives Approve plans, permits, zoning Attract investment Create place Create jobs Public Jobs Property tax relief Clean environment Minimum risk Safety, security Maintain, improve lifestyle Quality of life Lack of information or understanding Fear of unknown Lack of participation Education and training Active participation Cleaner Environment Public acceptance Modified and adopted from: Brownfields and Michigan Communities, Department of Resource Development, Michigan State University

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36 SMART NAPKIN - April 26, 2008 LAND COST ASSUMPTIONS Pessimistic Realistic Optimistic FINANCIAL ASSUMPTIONS Pessimistic Realistic Optimistic Land Cost $1,155,000 $1,100,000 $1,045,000 Interest Rate 8.80% 8.00% 7.20% Land Area in sf , Pre const land holding duration - months Land Area in Acres Construction duration - months Months to sell after construction CONSTRUCTION (HARD) COST ASSUMPTIONS Demolition $11,000 $10,000 $9,000 GENERAL SALES DATA Clearing $11,000 $10,000 $9,000 Sales Commissions (%) 3% $591,960 $295,980 $147,990 Utilities $44,000 $40,000 $36,000 Closing Costs $49,500 $55,000 $60,500 Landscaping $11,000 $10,000 $9,000 Title - Recording $13,500 $15,000 $16,500 Paving (% of lot cover) 10% $4,792 $4,356 $3,920 Building cost / sf - units $193 $175 $158 UNIT DATA Total cost - units $5,103,175 $4,639,250 $4,175,325 Description SF/Unit # of Units Total SF Covered parking sf (cars) 24 9,900 9,000 8,100 A - Old West Side Café & Bistro 3, ,270 Building cost / sf - covered parking $55 $50 $45 B - Walkout/Garden live work units 1, ,540 Total cost - covered parking $544,500 $450,000 $364,500 C - Below grade basement parking ,000 Common area (% of total) 18% 7,031 6,392 5,753 D- Smaller 1 bedroom on 2nd & 3rd floor ,300 Building cost / sf - common area $165 $150 $135 E- Larger 1 bedroom on 2nd & 3rd floor ,500 Total cost - common area $1,160,112 $958,770 $776,604 F- 2 bedroom on 4th flr with mezzanine Loft 1, ,000 SOFT COST ASSUMPTIONS G- Small 2 bedroom with loft Survey $5,500 $5,000 $4,500 Soil Investigation $11,000 $10,000 $9,000 TOTALS 51 35,510 Site Engineering $55,000 $50,000 $45,000 Architectural (% of Const) 8.0% $532,226 $483,842 $435,457 A- Sales Price Per sf $315 $350 $385 Environmental $11,000 $10,000 $9,000 B-Sales Price Per sf $315 $350 $385 Legal $27,500 $25,000 $22,500 C-Sales Price Per sf $108 $120 $132 Insurance $11,000 $10,000 $9,000 D-Sales Price Per sf $293 $325 $358 Prop taxes/year (mil rate) 15 $9,075 $8,250 $7,425 E-Sales Price Per sf $293 $325 $358 Permits / fees $110,000 $100,000 $90,000 F-Sales Price Per sf $293 $325 $358 G-Sales Price Per sf $293 $325 $358 PRO FORMA SUMMARY Pessimistic Realistic Optimistic Gross sales income $8,879,400 $9,866,000 $10,852,600 AVE PRICE / SF $273 $303 $333 Land cost $1,155,000 $1,100,000 $1,045,000 Sitework cost $81,792 $74,356 $66,920 A-Sales Price Per Unit $1,030,050 $1,144,500 $1,258,950 Building cost $6,807,787 $6,048,020 $5,316,429 B-Sales Price Per Unit $557,550 $619,500 $681,450 Soft cost $772,301 $702,092 $631,882 C-Sales Price Per Unit $40,500 $45,000 $49,500 Pre const holding costs $244,184 $197,320 $0 D-Sales Price Per Unit $190,125 $211,250 $232,375 Construction Financing costs $537,761 $352,628 $212,854 E-Sales Price Per Unit $219,375 $243,750 $268,125 Sales Financing Costs $422,348 $169,488 $65,458 F-Sales Price Per Unit $292,500 $325,000 $357,500 Sales commission / closing costs $654,960 $365,980 $224,990 G-Sales Price Per Unit $263,250 $292,500 $321,750 GROSS PROFIT / (LOSS) ($1,796,732) $856,116 $3,289,066 (ProfitI %) -17% 10% 43% AVE PRICE / UNIT $370,479 $411,643 $452,807 (Ave Land cost / unit) $22,647 $21,569 $20,490 (Total Construction (Hard) costs) $8,044,578 $7,222,376 $6,428,349 Total sales - Unit A $1,030,050 $1,144,500 $1,258,950 (Total project costs) $10,676,132 $9,009,884 $7,563,534 Total sales - Unit B $1,115,100 $1,239,000 $1,362,900 Total sales - Unit C $972,000 $1,080,000 $1,188,000 Tota; Costs Per Square Foot Total sales - Unit D $380,250 $422,500 $464,750 Land $31 SF Floor Area Ratio 326% Total sales - Unit E $3,071,250 $3,412,500 $3,753,750 Hard $172 SF Total sales - Unit F $2,047,500 $2,275,000 $2,502,500 Soft incl fin & co $50 SF Including financing and commissions Total sales - Unit G $263,250 $292,500 $321,750 Profit $24 sf TOTAL SALES $8,879,400 $9,866,000 $10,852,600

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38 Redevelopment Ready Gap due to economics, Land Control demographics, brownfield, Planning - Visioning historic, $$ encumbrances, title clearance, time, etc. Committed Package Incentives Preliminary Basic Assessment Cost Time Contact ASTI Environmental at ASTI

39 Redevelopment Ready Lan nd Control Com mmitted Pla nning Pre eliminary Package Incentives Increased Overall Costs Cost Increased Upfront Costs Increased Site Development Costs Time Contact ASTI Environmental at ASTI

40 Redevelopment Ready Lan nd Control Com mmitted Pla nning Pre eliminary Cost Package RLF Grants and Loans Façade Programs Targeted Funding Infrastructure Investment Grant Funding RLF Tax Incentives Lower Property Costs Land Assembly Land Bank Incentives Increased Upfront Costs Increased Site Development Costs Increased Overall Costs Location RLF Tax Incentives Tax Abatement Grants and Loans MSF Time Contact ASTI Environmental at ASTI

41 Project Funding Offset Benefits True Benefits Summary of Funding Sources Investments Total Cost Grant Funded Environmental TIF Funded Redevelopment TIF Funded MBT Credit Developer Investment Site Acquisition $3,402,500 $0 $0 $0 $0 $3,402,500 Environmental Investigation $121,900 $15,300 $103,500 $0 $0 $3,100 Remediation Site Preparation $55,000 $0 $0 $0 $0 $55,000 Public Infrastructure $500,000 $0 $0 $500,000 $0 $0 Demolition $183,000 $0 $0 $183,000 $0 $0 Construction Costs $4,825,000 $0 $0 $0 $603,125 $4,221,875 Other Construction Costs $1,594,600 $0 $0 $0 $2,500 $1,592,100 Total Above $10,682,000 $15,300 $103,500 $683,000 $605,625 $9,274,575 Contingency 15% 15% 15% 15% 15% 15% $1,602,300 $2,295 $15,525 $102,450 $90,844 $1,391,186 Total With Contingency $12,284,300 $17,595 $119,025 $785,450 $696,469 $10,665,761 No Double Dipping Example Small Project 1

42 TIF Programs The Increment $10,000,000 $5,000, Captured Taxable Value $ 5,000,000 5,125,000 Personal Property $ - - Total Taxable Value $ 5,000,000 $ 5,125,000 $10M Value Captured =$5M TV g g y /$ 000 $232,276 Annual Incremental Tax Millage Category Mills/$1000 Tax Capture COUNTY $ 22,813 $ 23,383 VILLAGE OPERATING $ 18,356 $ 18,814 VILLAGE REFUSE $ 10,526 $ 10,789 LIBRARY $ 5,733 $ 5,876 FIRE $ 4,705 $ 4,823 POLICE $ 15,232 $ 15,612 TOWNSHIP OPERATING $ 5,376 $ 5,510 COMMUNITY COLLEGE $ 7,904 $ 8,102 MILFORD DDA $ 9,440 $ 9,675 OAKLAND COUNTY ISD $ 16,813 $ 17,233 SCHOOL OPERATING $ 87,404 $ 89,589 SCHOOL SET $ 27,976 $ 28,675 Total Incremental Tax $ 232,2762 $ 238,083 Taxes for (one year delay)

43 TIF Programs in a DDA $10,000,000 $5,000,000 $10M Value =$5M TV $50,387 Incremental Capture $181,889 Incremental For DDA Captured Taxable Value $ 5,000,000 5,125,000 Personal Property $ - - Total Taxable Value $ 5,000,000 $ 5,125,000 Captured Millage Category Mills/$1000 Tax Capture COUNTY $ - $ - VILLAGE OPERATING $ - $ - VILLAGE REFUSE $ - $ - LIBRARY $ 5,733 $ 5,876 FIRE $ 4,705 $ 4,823 POLICE $ 15,232 $ 15,612 TOWNSHIP OPERATING $ - $ - COMMUNITY COLLEGE $ 7,904 $ 8,102 MILFORD DDA $ - $ - OAKLAND COUNTY ISD $ 16,813 $ 17,233 SCHOOL OPERATING $ - $ - SCHOOL SET $ - $ - Total Incremental Tax $ 50, $ 51,646

44 But For Test 8% Equity 73% Debt 19% Incentives 8.9:1 Debt to Equity 6 See Who Has Skin in the Game

45 Eligible Costs Included Threshold IRR v. Extraordinary Costs Using Interest All Eligible Extraordinary Costs Limited by Threshold IRR Interest Included

46 Local Share Coordinating with State Programs Additional Local Capture Proportional Local Share 9 Leverage Local Commitment Amount

47 Match Payment Period to Prediction Assumed Future Taxable Value Assumed Total Costs to Capture Assumed Completion Schedule Assumed Annual Appreciation Results in Final Payment Date

48 $8.4M In Base Taxes Means $23.2M in Additional Tax Revenue (176% Increase) Evaluate Revenues v. Incentive Look at 30-yr Tax Revenues $31.6M to Jurisdictions (71%) $8.2M to Applicant (19%) 10 Look at Tax Impact to All Jurisdictions

49 Basic Due Diligence Site Selection Yes Functionally Obsolete Or Blighted? No Phase I ESA Recognized Environmental Conditions? No End Process Yes Phase II Investigation Is Property a Facility? No Go To Site Optimization Yes Environmental

50 Site Optimization Review Business Plan And Financial i Projections Go To Operation and Documentation No Is Funding Available For This Project? Yes Can Current Plan Capture Funding? No Yes Can Plan Change To Capture Funding? Consider Core Community Funding Yes Prepare Brownfield Work Plan No Go To Site Development Submit to BRA and/or MDEQ Prepare Applications, Schedule Funding Yes Is Work Plan Approved? No Yes Modify? No Environmental

51 Site Development If Facility, Investigate Nature and Extent tof Impacts If Obsolete or Blighted, Prepare Corrective Action Plan Prepare Appropriate BEA (Category N, D, or S) Prepare Due Care and/or Remediation Plan Obtain Funding Control, Demo, Renovate, Remediate Obtain Core Community Funding Install Infrastructure Construction Utilization of Credits Obtain Certificate of Completion Environmental

52 Project Financing Example Project 3

53 Project Financing Example Project 3

54 Project Financing Example Project 3

55 Table 1 Brownfield Funding Options Funding Options for Eligible Properties EPA Grants TIF MSF LSRRF State No. Element Assm't Remd. All Core CRP BDP Local State BRF Eligible Activities (6) 1 Phase I Environmental Site Assessments X X X X X X 2 Soil and Groundwater Investigations X X X X X X X 3 Baseline Environmental Assessments X X X X X X 4 Remediation Options Analysis X X X X X X 5 Assessment of Intended Use X X X X X X 6 Due Care Plans X X X X X X 7 Due Care Activities X X X X X X 8 Response Activities Work Plans X X X X X X 9 Response Activities X X X X X 10 Unanticipated Response Activities X X X X X X 11 Additional Response Activities X X X X X X 12 Other actions necessary to protect the health, safety, welfare, environment, or natural resources X X X X X X 13 Remediation X X X X X X 14 Engineered Controls X X X X X X 15 Eligible Activites on Properties Impacted by Release X X X X X 16 Brownfield Plan Preparation X X X X X X Work Plan Preparation X X X X X 18 Demolition X (7) X (1) X X X X (2) X 19 Lead Abatement X (1) X X X (2) X 20 Asbestos Abatement X (1) X X X (2) X 21 Site Preparation (not a response activity) X X X (2) X 22 Infrastructure Improvements X X X (2) X 23 BRA Administration Expenses X X X X X 24 Environmental Insurance X X X X X 25 Interest Incurred by Developer for Eligible Activities X X X X (3) X 26 Interest on Bonds X X X X (3) X 27 Title Clearing and Land Sale for Land Banks X X X 28 Property Acquisition by Land Banks X (8) X (2) X 29 Title Clearing and Land Sale for Core Commnunity X X X 30 Property Acquisition by Core Community X (8) X 31 Evaluation Necessary to Facilitate Redevelopment X X 32 Relocation of public buildings or operations X (8) X (8) X X (2) X 33 Funding for an RLF X X X X Eligible Investments 34 Site Improvements X 35 Building Restoration or Alteration X 36 Building Renovation and Improvements X 37 Construction Hard Costs X 38 Architect, Engineering,and Survey Costs X 39 Machinery, Equipment and Personal Property X Other 40 Job Creation (>50, or >25 in special circumstances) X 41 Costs of Relocation to Michigan X 42 Costs of Expansion in Michigan vs. Other X 42 Area Wide Planning X 43 Community Outreach X X 44 Community Education X X Notes 1 Eligible in non-core communities under specific circumstances per Sec. 2 (o)(v) 2 Requires an approved Work Plan, Development Agreement and Reimbursement Agreement 3 Only for BEA, Due Care and Additional Response Activities 4 May be captured prior to Brownfield Plan approval for local and state taxes 5 6 May be captured prior to Brownfield Plan approval, for local taxes only See Table 2 for additional detail Provided by ASTI Environmental ASTI Copyright Protected Printed 4/11/2013

56 ACRONYM LIST ACM Asbestos Containing Material ACBM - Asbestos Containing Building Material AHERA Asbestos Hazard Emergency Response Act ASTs Aboveground Storage Tanks ASTM American Society for Testing and Materials BDP Business Development Program under the MSF BRA Brownfield Redevelopment Authority CO Consent Order CFR Code of Federal Regulations CNS Covenant Not to Sue COC Chain of Custody CRD Commercial Revitalization District CRP Community Revitalization Program under the MSF DDCC Documentation of Due Care Compliance DQOs Data Quality Objectives DRO Diesel-Range Organic Compounds ESA Environmental Site Assessment GRO Gasoline-Range Organic Compounds HASP Health and Safety Plan HUD U.S. Department of Housing and Urban Development IRR Internal Rate of Return LCSs Laboratory Control Samples LUG Local Unit of Government MDEQ Michigan Department of Environmental Quality MDLs Method Detection Limits MSF Michigan Strategic Fund MS/MSD Matrix Spike/Matrix Spike Duplicate NELAP National Environmental Laboratory Accreditation Program NVLAP National Voluntary Laboratory Accreditation Program O&M Operation and Maintenance Op Memo Operational Memorandum issued by Agency for Clarification of Regulations OSHA Occupational Safety and Health Administration

57 PARCCS Precision, Accuracy, Representativeness, Completeness, Comparability, and Sensitivity PCBs Polychlorinated Biphenyls PE Performance Evaluation Phase I Phase I Site Assessment completed before purchase according the ASTM standards PID Photoionization Detector PNA Polynuclear Aromatics PPE Personal Protective Equipment QA Quality Assurance QAPP Quality Assurance Project Plan QA/QC Quality Assurance/Quality Control REC Recognized Environmental Condition as defined by ASTM Standards for Phase I Site Assessments RBSLs Risked Based Screening Levels ROI Return on Investment RPD Relative Percent Difference RSD Relative Standard Deviation SAP Sampling and Analysis Plan SOPs Standard Operating Procedures SVOCs Semivolatile Organic Compounds TIF Tax Increment Financing TIR Tax Increment Revenues TOC Total Organic Carbon TOD Transportation Oriented Development TV Taxable Value ULI Urban Land Institute U.S. EPA United States Environmental Protection Agency USTs Underground Storage Tanks VOCs Volatile Organic Compounds

58 Case Studies in Environmental Issues Fact and Fiction September 10, 2014 Overview of Changes Background The new standard for Phase I Environmental Site Assessments (referred to as E ) was issued by the American Society for Testing and Materials (ASTM) the week of November 4, 2013 and replaces the ASTM E standard. The EPA, reversing its earlier decision, accepted the use of this standard on December 30, 2013 for satisfying the "all appropriate inquires" (AAI) requirements (40 CFR Part 312) for landowner liability defenses under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). This is the first update to the ASTM standards in eight years. AAI is a critical element for establishing liability defenses under CERCLA. Without the defense, CERCLA imposes strict liability for purchasers of contaminated property. AAI requires that the landowner make reasonable inquires to determine whether a property has historical contamination. Generally, the ASTM standard establishes the requirements for conducting an AAI inquiry by preparation of a Phase I ESA. Of course, the Phase I ESA is not the exclusive means of establishing the AAI Rule, since other elements, such as continuing obligations for land use restrictions, must be considered, and compliance will depend on the specific circumstances of the subject property. In addition, in Michigan, the requirement of completing a Baseline Environmental Assessment and Due Care Plan for properties with impacts above residential criteria still applies. For More Information Contact Tom Wackerman, ASTI Environmental twacker@asti-env.com ASTI 1

59 Case Studies in Environmental Issues Fact and Fiction September 10, 2014 For a short period, from its announcement in August until it withdrew its direct final rule on October 29, the EPA intended to permit use of either the ASTM E or the E standard for AAI. Based on negative comments to the direct final rule, and specifically the concern that two standards would lead to implementation of the older, less costly, standard, the EPA focused instead on the new standard. Since the final ASTM E standard was not available during that period (the final standard is consistent with the draft standards released in February 2013), most Phase I ESA continued to be completed with the earlier standard. However, if a Phase I was completed according to the new standard, it would also comply with AAI, since the new standard incorporates the requirements of the previous standard. Now, all new and updated Phase I ESA reports must be completed using the E standard. The Phase I ESA has always been the basic tool for liability protection, but it has also functioned as the first step in determining impediments to site redevelopment. By identifying "recognized environmental conditions", it allows the purchaser to focus on historical impacts that may interfere with the intended future use of the property. However, it is only one step in balancing liability protection, site assessment and value creation. Summary The new standard is not significantly different from the previous standard, and most reputable consulting companies have been conducting most of these items as part of a complete Phase I ESA. However, three changes are key for For More Information Contact Tom Wackerman, ASTI Environmental twacker@asti-env.com ASTI 2

60 Case Studies in Environmental Issues Fact and Fiction September 10, 2014 purchasers: 1. Updates and changes to the definitions of recognized environmental conditions; 2. The addition of requirements to assess the potential for vapor intrusion; and 3. The inclusion of additional steps in the regulatory file-review process and mandatory user responsibilities Key Changes The new Phase I ESA continues to provide liability protection and site assessment to property purchases, but now provides more emphasis on prior closures, adjacent land uses and the possibility of impacts from volatilization to indoor air. The most significant changes include: An emphasis on User responsibilities is now specifically included in the standard. The User (aka purchaser) must provide the results of a search of liens and "activity and use limitations" (AULs) through a review of recorded land title records. The requirements for information regarding sales price, specialized knowledge, and commonly known or reasonably ascertainable records did not significantly change, but were not always provide, and are now mandatory. Revisions and clarifications to the "recognized environmental conditions" (REC) designations include the terms "in" and "at" a property (formerly only included "on" a property) and also refine the definition based on defining the terms "release" and "environment" as part of the standard. "Release" now has the same meaning as the definition in CERCLA. An REC is defined as: "The presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment. De minimis conditions are not recognized environmental conditions." The new REC definitions may require that suspected historical impacts receive different, or additional, evaluations. The revised definition of an historic REC (HREC) now requires an evaluation to determine if the HREC For More Information Contact Tom Wackerman, ASTI Environmental twacker@asti-env.com ASTI 3

61 Case Studies in Environmental Issues Fact and Fiction September 10, 2014 should be considered a REC based on changes in regulations. It also limits the HREC definition to situations where impacts have been controlled to unrestricted residential criteria at the time of the investigation and under current residential closure standards. So a release that was previously investigated and closed may need to be reevaluated to determine if the closure satisfies current closure criteria, and if not, it could be considered a REC. A new definition, called a controlled recognized environmental condition (CREC), has been added. This definition applies to closures on properties that do not meet unrestricted residential closure criteria and includes restrictions and/or controls in place (engineered, institution and administrative controls). In some circumstances, such as changes in closure criteria, a CREC may be considered a REC. A CREC is defined as: "The presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment. De minimis conditions are not recognized environmental conditions." Migration is defined in the new ASTM standard to include the term vapor. The new standard requires the inclusion of a vapor migration investigation by conducting a Tier 1 non-invasive screening assessment for potential vapor encroachment conditions (pvecs). This can be completed by implementing the E standard to determine if there is a potential for volatile chemicals of concern to reach the property. Sites identified up to ⅓- mile from the Property that may contain contaminants of concern (COCs) are assessed through review of reasonably ascertainable records pertaining to the extent of contamination, area lithology including soil and groundwater conditions, and other factors that may affect migration of vapors. A positive finding will likely be considered a REC. Vapor migration differs from vapor intrusion in that it refers to migration onto the property itself whereas intrusion refers to migration of vapors into a structure. However, if a vapor migration issue or pvec is identified, this may ultimately lead to a vapor intrusion assessment, dependent on For More Information Contact Tom Wackerman, ASTI Environmental twacker@asti-env.com ASTI 4

62 Case Studies in Environmental Issues Fact and Fiction September 10, 2014 proposed use of the property. Clarifications to regulatory file reviews place an emphasis on review of the subject property and adjoining property database listings. ASTM E does not require the review of these listings, but provides that justification for not reviewing these records be made by the EP and that significance of limitations/data gaps associated with lack of a review be clearly identified. Alternative sources can be used if sufficient information is obtained. Impacts The emphasis on User responsibility places additional requirements on the purchaser. Timely responses to the user questionnaire and additional required information will impact report delivery. More importantly, the User responsibilities are now mandatory. A Phase I ESA may reevaluate a HREC or CREC as a REC based on changes in closure criteria since the closure was completed. This may lead to a requirement for additional investigation. Completion of the vapor migration screening assessment may identify adjacent or local sources that will be listed as a REC and may require additional investigation. In addition, a Phase I ESA updated or created for refinancing may now find additional RECs (previous HRECs, previously de minimis impacts, or uninvestigated sources) based on the vapor migration requirements, specifically in those cases where gas stations or dry cleaners were located on or near the subject property. As a result of the new emphasis on volatiles, additional research has identified other materials that should be evaluated at former dry cleaner locations. These include white gas, naphtha, carbon tetrachloride, kerosene and stoddard solvent. This may result in a need for additional investigation, or for reevaluation of existing site data. With the changes in closure criteria in Michigan (specifically for trichloroethylene and perchloroethylene (PERC)), and the pending additional criteria changes this year, previously closed impacts may now become RECs. For More Information Contact Tom Wackerman, ASTI Environmental twacker@asti-env.com ASTI 5

63 Case Studies in Environmental Issues Fact and Fiction September 10, 2014 Timing and Cost Completion of the Phase I ESA will still require three to four weeks. Unfortunately, "quick" Phase I ESAs must now note significant data gaps if sufficient time is not provided for agency response and file review. This does not change the requirement that the Phase I ESA must be completed prior to purchase. Costs for the Phase I ESA will probably change somewhat from the typical price, due to the additional file review requirements for the pvec. Any price increases for a specific property will depend more on historical uses in the area around the subject property than on the size or historical use of the subject property. It is unlikely that the "bargain" pricing of recent years will be able to produce an AIA compliant Phase I ESA under the new standards. Other cost increases, unrelated to the new standard, should also be expected as the economy continues to improve. These include the recent increase in EDR costs. Unfortunately, additional costs for Phase II investigations will be required for some sites. Site with HRECs or CRECs that have become RECs, sites with potential vapor migration issues, or sites were closure was completed under previous criteria may require more extensive soils and/or groundwater investigations. For More Information Contact Tom Wackerman, ASTI Environmental twacker@asti-env.com ASTI 6

64 ASSESSMENT AND INCENTIVES ASTI E NVIRONMENTAL Client Ashley Capital Contact Susan Harvey Location Grand Rapids, MI Project Dates 2007-Present Project Cost $170,000 Key ASTI Staff Tom Wackerman ASTI Environmental assisted in the redevelopment of 4,700,000 square feet of obsolete heavy industrial buildings on the 206 acre campus of Steelcase Products in Grand Rapids, Michigan. To address financing gaps, this project required ASTI to develop a Brownfield Redevelopment Plan and an Act 381 Brownfield Work Plan, as well as an MBT Credit Application to qualify the project for Brownfield Incentives. ASTI secured over $20 million in various incentive programs for this project. Assessment activities included a Phase I ESA, Phase II Environmental Investigation, asbestos inspections, and a Baseline Environmental Assessment covering the entire campus, followed by individual Baseline Environmental Assessment for subsequent purchasers and tenants. A Due Care Plan was also prepared for both construction and operation. ASTI also assisted with project scheduling, changes to the purchase agreement language, and coordinating an exit strategy for the selling which included contingencies for impacts that could be discovered during site preparation and construction. ASTI Environmental finished the project under budget, and continues to assist with site redevelopment, environmental issues, and tax credit accounting to support the phased redevelopment of this property.

65 PHASE I ENVIRONMENTAL SITE ASSESSMENT ASTI E NVIRONMENTAL Client Conner Creek Greenway Association/ Subconsultant to Hamilton Anderson Associates Contact Sam Lovall Location Detroit, Wayne County, MI Project Dates 2004 to 2006 The Conner Creek Greenway is part of the GreenWays Initiative of the Community Foundation for Southeast Michigan and was initiated by the Detroit Eastside Community Collaborative (DECC). The Conner Creek Greenway will stretch from 8 Mile Road south to the Detroit River, tracing the original Conner Creek. The Greenway will provide pedestrian and bike paths, beautification with plants and flowers, historical signage, and other opportunities linking people, businesses, schools, and shops. The entire Conner Creek Greenway is expected to be completed in 3 to 5 years. Project Cost $15,000 Key ASTI Staff George Kandler Carey Kratz* Dianne Martin *Indicates Project Manager ASTI Environmental was retained by Hamilton Anderson Associates (Project Engineers and Designers) on behalf of the DECC to conduct Phase I Environmental Site Assessments of three areas of the Greenway to date. ASTI s role in this grant-funded project was to identify known and/or potential environmental hazards that could represent a health risk to the pedestrians and workers, and to provide recommendations if such hazards were determined to exist. Areas researched and investigated included nearby existing or historic underground storage tanks and the nearby industrial facilities. ASTI s findings have assisted in continued receipt of funding from the Michigan Department of Transportation and the Greenways Initiative and in the project design process to provide a healthy environment for the workers and pedestrians.

66 ECOLOGICAL EVALUATION ASTI E NVIRONMENTAL Client City of Detroit Contacts Bruce King Location Wayne County, MI Project Date 2002 Project Cost $48,000 Key ASTI Staff Dianne Martin* ASTI Environmental performed an ecological evaluation and identified regulated natural features on acres known as the former Detroit House of Corrections property. ASTI assessed development constraints on the property with regard to wetlands, woodlands, rivers/streams, floodplains, and threatened/endangered species. This entailed both on-site fieldwork to determine the extent of the stream, wetland and woodland features and in-office reviews/analyses of floodplains and endangered species. * Indicates Project Manager As part of the inventory, ASTI also flagged all wetland boundaries, totaling over 200 acres, on the property. ASTI also identified a potential wetland mitigation area on the property. A final report described the natural features identified on site and the local, state, and federal regulations applicable to each feature, thus determining the ecological constraints encountered on the property. This information was used to bolster the prospective sale of the property.

67 ENVIRONMENTAL CONCERNS INVENTORY ASTI E NVIRONMENTAL Client City of Ferndale Oakland County Contacts Mr. Derek Delacourt City of Ferndale Community and Economic Development Director Mr. Brad Hansen Oakland County Environmental Grant Program Coordinator Location Ferndale, MI Project Date 2011 ASTI Environmental conducted an Environmental Concerns Inventory (ECI) of 193 light industrial parcels located along the east side of the rail road in the City of Ferndale. The objective of the ECI was to identify specific environmental impacts that may affect redevelopment and to provide a basis for beginning the discussion on area-wide redevelopment. The inventory included a review of publically available databases, site inspection for all properties (from the right-of-way or on the City owned property), and a review of agency files. Key ASTI Staff Thomas Wackerman* Sarah Pavelko Brian Earl * Indicates Project Manager ASTI utilized this information to prepare a ranking of redevelopment potential based only on environmental impediments (both known and perceived). An interactive map was provided that allows the user to see an overview of the entire project area while identifying the environmental concern(s) on each parcel. The user can select from multiple layers featured on the map for additional analysis of existing site conditions and actual or assumed impediments to redevelopment. The ECI supported the City's commitment to redevelopment in their industrial core by providing information on potential future uses that would require minimum environmental remediation or control. A site specific evaluation to support property purchase or redevelopment is the next step in this long term process. This project was partially funded by the Oakland County EPA Site Assessment Grant.

68 ASSESSMENT AND INCENTIVES ASTI E NVIRONMENTAL Client 965 Wanda, LLC Contact Jeff Denha Location Ferndale, MI Project Dates 2013 Project Cost $87,000 Key ASTI Staff Tom Wackerman ASTI Environmental (ASTI) assisted in the redevelopment of a 20 acre former industrial facility that included a 212,000 square foot blighted building. The site had been used for manufacturing steel piping since 1929, and had been vacant for eight years. Impediments to redevelopment included an historical spill, transformers, asbestos containing building materials, oil soaked wood block floors, and a perception that the site would require extension remediation prior to use. ASTI conducted the environmental due diligence to define the existing historical impacts, and to evaluate redevelopment scenarios. Based on this review, the effectiveness of existing engineered controls was evaluated, remediation costs were estimated and the financing gap identified. ASTI then prepared an incentives package including a loan from the local revolving loan fund and reimbursement of eligible activities from tax increment revenues to permit the purchaser to obtain sufficient funding to redevelop the property for industrial use. The final redevelopment plans included removal of asbestos containing building materials only in those areas where remodeling was being conducted and implementation of an operations and maintenance plan for all other locations, removal of contaminated wood block floor and installation of new floors, removal of impacted soils in a crawl space and along a railroad siding, and closure of all other impacts using engineered controls and deed restrictions. The site was redevelopment for multiple industrial tenants and new construction on the north potion of the property is now proposed.

69 ASTI ENE NVIRONMENTAL N N T ECH BIT S ENVIRONMENTAL INFORMATION FOR YOUR BUSINESS March Central Great Lakes West Great Lakes Services Asbestos, Mold and Lead Assessments Baseline Environmental Assessments Brownfield and Historic Redevelopment Compliance Permitting and Assessments Due Care Plans Ecological Surveys Environmental Concerns Inventories Environmental Due Diligence Habitat Restoration Indoor Air Quality NEPA Reports Phase I ESAs Reclamation Plans Redevelopment Incentives Remediation Restoration SHPO Assessments Soils/Groundwater Investigations Stormwater Management Transaction Screens UST Closures Wetland Mitigation and Banking BROWNFIELD RESTORATION IN MICHIGAN Urban and Brownfield properties remain tremendous redevelopment opportunities because of location, existing infrastructure, and in many cases, an authentic sense of place. But these opportunities require a clear plan to address environmental and infrastructure management, and a method to obtain gap financing for extraordinary redevelopment costs and challanges. For the right type of project, Brownfield incentives can provide the assistance necessary to fill those financing gaps. The Basic Steps With recent changes in the legislation, both the environmental assessment and Brownfield incentives programs in Michigan have new steps and requirements. Assessments are more focused on how impacts affect air quality, and although the Baseline Environmental Assessment still exists, there is more emphasis on Due Care Plans and the associated maintenance and control requirements. Agency review is now limited to Response Activities Plans and No Further Action Reports, two new steps. Contrary to popular belief, incentives for urban and Brownfield redevelopment still exist, and, although there are numerous focused incentives, there are five main programs that every developer and community needs to know about. To be eligible for these programs, a project must be a facility (contaminated above residential criteria), an historic resource, blighted, functionally obsolete, part of a landbank, a transit oriented development, adjacent and contiguous to any of these types of properties (if the adjacent property increases the taxable value of the subject property), or a previously developed property with historical impediments to redevelopment. The first program is the Brownfield Tax increment financing (TIF) program. This is one of the most flexible and direct tools to off-set extraordinary costs. In addition, it still provides opportunities for both the developer and the community to obtain incentives from the incremental value of investment in real estate development, and for communities to create and fund local site remediation revolving loan funds (LSRRF). The list of eligible costs differs depending on the type of community you are in, but there are some notable new eligible costs that will assist in urban redevelopment; specifically, the costs associated with underground ENVIRONMENTAL

70 and multi-level parking structures and urban storm water management systems. The basic eligible costs still include: environmental assessments and investigations, response activities, remediation, engineered controls, demolition, asbestos and lead abatement, site preparation, infrastructure improvements, and various additional incentives for land banks and core communities. The second program is the Community Revitalization Program (CRP), which provides grants, loans and other assistance to help close financing gaps on eligible projects.. The incentives are based largely on the amount of the investment as determined by the construction costs. However, when approving applications, the MEDC will consider whether the project provides revitalization of a regional urban area, is located in a downtown or traditional commercial center, is important to the community and has the community s support (both conceptually and financially), and, most importantly, if it requires incentives to succeed. Additional considerations include, but are not limited to, development density, job creation, and reuse of vacant or historic buildings. The incentives can be no more than 25% of the eligible investments. The incentives can be a combination of a grant and loan, but there is a maximum grant amount of $1,000,000 per project and a total limit of $10,000,000 per project. Allocation and repayment of the incentive is performance based, with grant repayment required under some circumstances. There are communities that have used the last few years to fund their local site remediation revolving fund (LSRRF) and these provide the third incentive source. The types of costs that are eligible include assessment, remediation, site improvement and demolition - in fact, anything that is eligible under the TIF program. Allocation and financial mechanism are determined by the local unit of government, but funding can be provided as a loan or grant, with the option to provide it in a single payment, with repayment provided over time by the Brownfield TIF. The fourth option is the new Brownfield Redevelopment Fund which will permit the state to provide funding for eligible activities. More importantly, as with the LSRRF, this funding can be provided up front with repayment obtained from the Brownfield TIF. The fifth mechanism is the EPA grant program. Grants are available in various communities to cover the full cost of environmental assessment, or, for specific properties, the cost of remediation. These grants are allocated annually, and are administered by the municipality. Next Step? A combination of appropriate assessment, control, and site design can help make an urban or brownfield project a success, but incentives are typically required. Incentives are available for projects in Michigan, but not all projects will qualify, and depending on the community, the definition of eligible costs may vary. The recommended approach is to review project costs early to identify those that are eligible, and then approach both the local community and the MEDC to determine eligibility for the project. Only after you have a sense of the local and state support for the project, and the level of eligible costs relative to your funding gap should you start preparing the reports and applications necessary for the approval process. ASTI can provide free initial assessments for any project in Michigan. For more information about urban restoration contact Tom Wackerman at or twacker@asti-env.com. ENVIRONMENTAL Investigation Remediation Compliance Restoration Since 1985 Tech-Bits is a publication of ASTI ENVIRONMENTAL, P.O. Box 2160, Brighton, Michigan, For a free subscription call ASTI or visit Tech-Bits is intended to provide information concerning current environmental issues, and is not intended to provide technical or legal advice regarding any particular situation. Specific questions should be addressed to your environmental professional by ASTI

71 A S T I E N V I R O N M E N T A L T ECH BIT S ENVIRONMENTAL INFORMATION FOR YOUR BUSINESS ENVIRONMENTAL DUE DILIGENCE FOR REAL ESTATE DEVELOPMENT IN MICHIGAN June Central Great Lakes West Great Lakes Services Asbestos, Mold and Lead Assessments Baseline Environmental Assessments Brownfield and Historic Redevelopment Compliance Permitting and Assessments Due Care Plans Ecological Surveys Environmental Concerns Assessments Environmental Due Diligence Habitat Restoration Indoor Air Quality NEPA Reports Phase I ESAs Reclamation Plans Redevelopment I Incentives Remediation Restoration SHPO Assessments Soils/Groundwater Investigations Stormwater Management Transaction Screens UST Closures Wetland Mitigation and Banking With recent changes in legislation, both the environmental assessment and brownfield incentives programs in Michigan have new options and requirements. Assessments are more focused on soil gas and vapor intrusion from historical impacts, and although the Baseline Environmental Assessment is still the key document for state liability protection, there is more emphasis on Due Care Plans and No Further Action (NFA) Letters, and on the associated maintenance and control requirements. Incentives are still available, but are now focusing on traditional downtowns and commercial corridors and on projects that have clear financing gaps. What all of this means is that you have more options when choosing site closure and you will need to consider these options earlier in the development process. Accordingly, the following are some key points by specific asset classes for Real Estate developers to consider. Downtown Mixed Use $12.5MM in Clean Michigan Initiative funds have been shifted from the DEQ loan program to the DEQ grant program, and the Community Revitalization Program is focusing on specific types of urban Redevelopment. There is now greater flexibility in the management and relocation of contaminated soil on site which minimizes transportation and disposal costs. Commercial The management of the Above/Underground Storage Tank program has been shifted from the DEQ to the Dept. of Licensing and Regulatory Affairs (LARA) and is closely following the provisions of Part 201 with respect to corrective action activities for venting groundwater. Liability exemptions continue for lessees that do not cause impacts, but other changes have occurred. Seven chemicals, including Perchlorethylene (PERC), commonly used by dry cleaners, have revised criteria for soil and/or groundwater. Of these seven, two have less restrictive criteria while the remaining five have slightly to significantly more restrictive criteria. The PERC criteria changes were all for ENVIRONMENTAL