Magazine article Journal of Property Management

It's Still Real Estate First

Magazine article Journal of Property Management

It's Still Real Estate First

Article excerpt

Brownfield redevelopment is creating a lot of excitement, as environmental consultants and real estate companies scramble for deals. But, cautions William V. Trefethen, senior vice president of Koll Capital Markets, sound real estate decisions should still drive the brownfields redevelopment process.

"At Koll, we see contaminated sites as a value-added play, not much different than repositioning poorly leased building," says Trefethen.

As a rule of thumb, Trefethen says that the company is buying income-producing properties with environmental problems at spreads of between 200 and 400 basis points between going-in and reversion cap rates. However, he cautions that only about 30 percent of contaminated sites are actually suitable for profitable redevelopment.

one or the two types of sites Koll considers for redevelopment is income-producing office, retail, and industrial properties with contamination issues from dry cleaners, underground storage tanks, or similar, mitigatable issues. Often these sites also need other value-added management such as retenanting and repositioning.

The second group of properties, says Trefethen, are former industrial sites that are appropriate for other uses. In this second group, only about 20 percent of the sites have sufficient reuse potential to warrant redevelopment by the private sector.

A former shipyard on the Vancouver waterfront obviously has reuse value, but most contaminated sites are in rural or Inner-city areas where the economics do no add up," says Trefethen. …

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