Diamonds in the rough

Last updated on May 13th, 2019 at 02:40 pm

Peter Hollingworth, president and chief executive officer of the Continental Environmental Redevelopment Fund (CERF USA), believes that any piece of contaminated property can be restored to a functional commercial, industrial or residential space.

However, such redevelopment requires money, sometimes upwards of a few hundred million dollars, he said.

“There are plenty of brownfields in Wisconsin, and there really isn’t enough public money in the world to clean up those sites,” Hollingworth said.

And private funding for brownfield redevelopment is hard to come by, he said.

“More (private money) will become available over time. Right now, we are just scratching the surface,” Hollingworth said.

Hollingworth was invited to be a featured speaker at the Small Business Times Commercial Real Estate & Development Conference at the Pfister Hotel in Milwaukee on Nov. 9.

CERF USA is a Sacramento, Calif.-based lender that invests private funds in brownfield remediation. Hollingworth also founded its predecessor, the California Environmental Redevelopment Fund.

“It is estimated by the U.S. Environmental Protection Agency (EPA) that there are about 1 million or more contaminated sites (in the United States),” Hollingworth said. “Brownfields represent an enormous market and opportunity, but they are an enormous problem because there are so many sites and not a lot of financing is available.”

CERF USA has more than $40 million in capitalization and is growing with plans to become a national resource for brownfield redevelopment, Hollingworth said.

“The problem is that not many people outside of California know we are here,” Hollingworth said. “We are trying to get the word out.”

CERF USA has the ability to work nationwide from its one office location in Sacramento, but plans to open an office in the Midwest and another one on the East Coast as the company grows, Hollingworth said.

Hollingworth intends to grow CERF USA into a $1 billion company by fulfilling a brownfield redevelopment financial niche.

CERF USA provides bridge loans that enable borrowers to clean up contaminated sites. Once a site is clean, the project is financed by the new value that is created there. CERF USA works with real estate developers, businesses dealing with contaminated sites and public entities.

The monetary investment needed to clean up a site can range from a few hundred thousand dollars to more than $100 million, depending on the space and the extent of contamination, Hollingworth said.

“Each brownfield deal really stands or falls on its own merit,” Hollingworth said. “They are all very different and all have to be looked at uniquely, whether they need to be cleaned up to an industrial standard or residential standard.”

Factors to be weighed for brownfield redevelopment include property rezoning, the level of cleanup required and the economics of the project, Hollingworth said.

Brownfields are equal opportunity offenders, Hollingworth said. There are brownfields in every state in North America, but they tend to be more prevalent in urban areas where oil and chemical companies once operated, he said.

“But that is also why they represent the best opportunity,” Hollingworth said.

The redevelopment of existing urban brownfield sites can be much more beneficial to a city than destroying green space to accommodate new development, he said.

CERF USA hopes to work with public and private organizations in Wisconsin to aid in the financing of brownfield cleanup projects, Hollingworth said. Many brownfields are owned by municipalities because the properties are tax-delinquent. Those properties can sit idle for years.

“The trick is to make (brownfields) clean enough and acceptable enough so that the city can turn around and sell (the properties) at a profit to whoever will do the final development,” Hollingworth said. “The city holds all of the cards. What they aren’t aware of is where to get the financing. We are here to help with that.”

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