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Don’t Forget the Money- Why Distressed Properties are Increasingly Attractive

October 18, 2016

Real estate developers, investors and lenders historically steered far away from properties that were contaminated by hazardous substance, or that were otherwise distressed.  But today, that is often not the case.  Not only have the laws become more favorable for the reuse of distressed property, but so have the sources of funding.  Starting as early as the site selection period, anybody interested in these properties needs to consider three very important areas of opportunity.

First, there exist a host of governmental financial incentive programs available to those who wish to acquire and re-use distressed property.  These include grants, low-interest loans and tax-reduction incentives, to name a few.  Some are targeted specifically to under-utilized “brownfields,” while others apply to redevelopment more generally, such as in designated redevelopment areas.  Still others apply to redevelopment adjacent to favorable uses, such as train or bus stations.  These areas tend to have a high concentration of brownfields, allowing these incentives to be stacked on top of each other.

Second, several sources of funding exist for government, quasi-government and community groups to assess, remediate and plan for the re-use of property.  For instance, the USEPA just announced that, through December 20, 2016, it is requesting proposals for FY 2017 brownfields grants and low interest loans.  And, similar to opportunities for private assistance, there exist many other programs applicable more generally to favored distressed areas.  Why does this matter to a private developer?  Because they may entice qualifying entities to apply for these incentives, or those entities may want to keep tabs on which areas attractive to them are moving one step closer to being a viable location for acquisition.

Third, and often forgotten, are the opportunities for getting funds from private sources – parties responsible for the contamination and their carriers.  It is often worthwhile to conduct an investigation to determine what viable, responsible entities may still exist, and to assert a claim against them.  And for those that are not viable, there are still ways to tap into their old insurance policies.  On top of that, there are some other unique means of recovering money – for instance, at private industrial sites, the contamination may have arisen out of the government’s war time control over production, enabling claims against the government for recovery of cleanup costs.

Multiple funding sources like those cited above make acquiring distressed property far more palatable than what has been the case.  Developers should explore these opportunities before passing on property simply because it is distressed.

Paul Schmidt chairs the Firm’s Environmental and Energy Practice Group.  Across the country, Paul Schmidt has counseled clients on acquisition, redevelopment, remediation and cost-recovery at sites ranging from corner gas stations to industrial portfolios to former military facilities.  For further information, please contact Paul Schmidt at (215) 569-2800, or at

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