Ownership Entity

• Several combinations of parties can form the ownership structure.


• Each entity will be customized for a specific project.


• The corporate governance and roles of the participants will be negotiated prior to the formation of the ownership entity.


• All ownership entity structures are subject to prior approval from Brownfields Capital.  Each entity must meet criteria set by Brownfields Capital.


• Brownfields Capital underwrites the participants of the ownership entity first, and then it underwrites the specific development project.


• Once approved as a borrowing entity, additional projects only require project approval.

• Parties to the ownership entity must have at least 10 years of general construction/development experience and at least five years of experience in the specific market area and product type under consideration.


• The ownership entity must demonstrate appropriate financial strength and liquidity with a minimum net worth of $5 million and $500,000 in liquid assets.  In addition, they must be capable of posting certain performance bonds.


• The ownership entity must demonstrate appropriate experience with environmental remediation of the size, nature and scope of the project.

• A joint venture between an original owner and a real estate developer;


• A limited liability company (LLC), trust, partnership or other corporation formed and managed by a real estate developer;


• A limited liability company (LLC)formed and owned by an original brownfields owner, a real estate developer and other partners, and is managed by a general partner;


• A limited liability company (LLC), trust, partnership or other corporation formed by a developer and investment partners to purchase brownfield properties over time with fixed installments, contingent installments, or fixed installments in combination with cash flow participation to the original brownfields owner.

• Lien-free completion guarantee;


• The developer, remediation firm, or another party to the ownership entity is usually required to fund cost overruns during the course of the project subject to a development agreement.


• Vendors may guarantee violation of environmental and/or hazardous material laws to the ownership entity or with insurance (most ownership entities will carry cost cap and other forms of environmental insurance).


• Fraud, intentional or negligent waste, misappropriation of funds or improper sales of assets

• An owner transfers brownfield real estate to the transaction and the associated environmental remediation liability to a new ownership entity. A small level of cash may be invested in the ownership entity, in addition to the real estate (other transactions may not require additional cash equity). The owner or another investor may invest this cash.


• A commitment fee equal to 1% of Brownfields Capital’s BVC total commitment (includes all phases/total project cost) will be paid by the ownership entity.


• Interest is a stated rate or yield, and the calculation is an Internal Rate of Return (IRR) based on project cash flows.  The financial instrument resembles a participating mortgage and a zero coupon bond.


• The developer earns market management fees and an incentive fee based on performance (on time, on budget). The developer may also choose to invest in the ownership entity.


• Financing is repaid from sales proceeds, net cash flows from rents, refinancing proceeds or any combination of these and/or additional sources (total cash flows).

• Target areas will include: metropolitan areas that demonstrate strong demand for urban in-fill projects as well as demographic growth patterns that support the sub-market within a significant MSA combined with physical, political or environmental growth constraints.


• Property types include, but are not limited to: industrial buildings, office buildings, housing communities, retail, mixed use and commercial developments.


• Investments will be made in properties with “pre-qualified owners” of the ownership entity.


• Projects will typically have all discretionary governmental approvals prior to funding.  Commitments are usually contingent upon these approvals.


• The maximum development time frame cannot exceed seven years.  Costs to obtain all approvals will be reimbursed as project costs through financing.  Most projects range from three to five years.


• No "special use" properties with restricted use profiles will be considered unless they are pre-leased or pre-sold.


• Additional locations may be considered for build-to-suit or other special circumstances.

• There is a minimum investment of $25 million (total project costs) however, Brownfields Capital’s typical investment is $50 million or more because it finances demolition, remediation, site development, and vertical construction through one financial instrument.


• There is no maximum unit count or square footage but projected absorption of the project must provide for repayment of Brownfields Capital’s investment within the 7-year limit (typically 3-5 years).

Preparation of Investment Summary (2 –3 weeks):
The Brownfields Capital investment and environmental managers review the full development plan submitted by the ownership entity, visit the site, and conduct a preliminary investigation, which is intended to surface major issues and risks associated with the project.  The ownership entity also constructs a preliminary proforma for Brownfields Capital's review that forecasts the costs and revenues of the project.  If the investment and environmental managers like the proposed project, and if the proforma appears to satisfy Brownfields Capital’s underwriting criteria, the investment manager will submit an investment summary sheet to the investment committee, which  summarizing the project, its major strengths and its weaknesses.  If the committee approves the investment summary, the project advances to the next stage.

Due Diligence Letter (1 week):
If the investment summary sheet is approved, Brownfields Capital sends a letter to the ownership entity advising that Brownfields Capital is prepared to move forward with due diligence, including but not limited to: hiring an appraiser and a market consultant to evaluate the project, retaining appropriate engineering and environmental consultants, and reviewing detailed assumptions to the development plan.  The ownership entity may be asked to submit a deposit to Brownfields Capital to cover the cost of these consultants.  If Brownfields Capital funds the project these costs are reimbursed as a project cost.  If Brownfields Capital declines to proceed because the circumstances surrounding the project are different than those represented by the ownership entity, Brownfields Capital will only refund the entity the portion of the deposit that has not been spent.  If Brownfields Capital does not proceed for reasons of its own, it will refund the entire deposit to the ownership entity.

Full Due Diligence & Formal Investment Committee Presentation (4 – 6 weeks):
Unless a project’s timetable requires Brownfields Capital to expedite its due diligence it will ordinarily take four to six weeks for all third party professionals to complete their work.  Once completed, if the manager still wishes to recommend the project he/she will prepare an investment committee memorandum and presentation for formal review by the investment committee.  The committee meets as needed to review and vote on investment committee submissions.  Some approvals may undergo secondary review by the Brownfields Capital Advisory Board.