SHOW ME THE MONEY: Jump Start Your Brownfield and Infill Development Projects A Developer s Perspective

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1 SHOW ME THE MONEY: Jump Start Your Brownfield and Infill Development Projects A Developer s Perspective

2 The Krog Group Firm Profile Commercial Developer Design-Build Contractor General Contractor & Construction Manager In-House Architecture & Engineering Work Throughout Western and Central New York Projects Ranging from $100 K to $100 Million Day-to-Day Involvement of Company Principles Extensive Resume of Brownfield Redevelopment

3 SHOW ME THE MONEY: Jump Start Your Brownfield and Infill Development Projects A Developer s Perspective Construction Management General Contracting Pre-Engineered Design-Build

4 Krog Brownfield Project Experience CertainTeed 1 ST COC in NY State, 277,000 sf Architectural Products Riverwalk Medical Office 85,000 sf Medical Facility Cobey 90,000 sf Engineered Products Manufacturer Hydro-Air 150,000 sf HVAC Products Manufacturer Watkins Glen Harbor Hotel 104 Room Four Diamond Boutique Hotel Welded Tube 110,000 sf OCTG Pipe Manufacturer 1000 Islands Harbor Hotel 105 Room Four Diamond Boutique Hotel Olean Gateway Proposed Destination Retail/Hotel Project

5 Krog Brownfield Project Experience

6 Krog Brownfield Project Experience On the Drawing Board Trico Building 480,000 sf Mixed-Use, $85 Million Extended Stay Hotel Public High School Market-Rate Apartments Commercial Indoor Parking Indoor Vertical Farming 3 Projects Indoor green hi-tech growing facility 70,000 sf $35 Million Mushroom substrate and growing facility $20 Million

7 Site Selection Why consider a Brownfield Site Same due diligence as greenfield sites Transportation Labor pool Utility availability and capacity Proximity to low-cost power Geotechnical Land cost Environmental Conditions Impacted soil Impacted groundwater Structural remediation and demolition Long-term operation and maintenance of remedial measures Soil vapor extraction Sub-slab depressurization Groundwater pump & treat Engineering oversight

8 Site Selection Benefits of a Brownfield Site Land availability Most of the largest tracts in urban areas have had prior use, especially those with multimodal transportation access Lower land cost recognizing the cost to rehabilitate NYS Brownfield Cleanup Program Tax Credit offsetting remediation Leveraging other incentives Local, State, Federal and Utility Company

9 Site Selection Overcoming the Challenges Property Sale/Acquisition Complicated by: Environmental condition Stigma Risk Cost Uncertainty Long-term Liability Physical constraint Abandon infrastructure Parcel size Subsurface conditions and obstructions Regulatory Uncertainty

10 Site Selection Getting from This.

11 Site Selection To This.

12 Case Study No. 1 Acquisition from Legacy Seller Olean-Gateway: Destination Retail & Hotel Development 58 Acre Parcel Originally Felmont Oil Refinery Successor ExxonMobil 3 Brownfield Cleanup Program Parcels Extensive environmental impacts

13 Olean Gateway Project Deal Structure Krog was selected as Preferred Purchaser Krog formed a single-purpose LLC (Olean Gateway LLC) Olean Gateway applied to BCP and entered into a Brownfield Cleanup Agreement (BCA) with NYSDEC as a Volunteer Olean Gateway completed Supplemental Remedial Investigation, prepared Alternatives Analysis Report and negotiated Remedial Action Work Plan with NYSDEC Olean Gateway purchased the property at heavily discounted price with environmental liability and financial protections to the seller

14 Olean Gateway Project Seller Liability Protection Environmental Liability Release Upon issue of COC, State releases the COC holder and previous owners from liability arising out of the presence of contamination at the Site This release extends to successors and assigns and is transferable to future owners Performance Assurance Olean Gateway team with more BCP remediation and redevelopment projects than any other entity Never failed to complete a project and obtain a COC 28 BCP Remediation/Redevelopment projects completed or in process Sometimes supported by performance bonding Transfer of property includes environmental liability transfer Preferred Purchaser indemnifies seller of future environmental liability Pollution Legal Liability insurance for third party claims and unknown conditions

15 Olean Gateway Project Remediation Overview Removal of over 150,000 lf subsurface pip and pipe contents Ex-Situ Treatment of Grossly Contaminated Petroleum Soil (GCPS) removed during piping removal Removal of hotspot metals, polychlorinated biphenyls (PCBs) and polycyclic aromatic hydrocarbons (PAHs) above NYSDEC Restricted-Commercial soil cleanup objectives (SCOs) in soil (sitewide) In-situ treatment of hazardous lead soils

16 Olean Gateway Project Remediation Overview In-situ soil vapor extraction to address volatile Grossly Contaminated Petroleum Soil (GCPS) in subsurface soil Removal of light non-aqueous phase liquid (product) in groundwater Crushing and reuse former building concrete foundations and footers Construction of site-wide cover system and drainage Site Management Plan, including Environmental Easement filed with the county

17 Olean Gateway Project Remediation Overview

18 Olean Gateway Project BCP Parcel 1 New Street Constructed Hotel and Conference Center Phased Retail Restaurants Redevelopment Plan BCP Parcel 2 2 Megawatt Commercial Solar System Power Agreement with local hospital BCP Parcel 3 4 Megawatt Commercial Solar System Power Agreement with St. Bonaventure University

19 Olean Gateway Project Redevelopment Plan

20 Olean Gateway Project Negative Land Value Economics Brownfield Site Prep Tax Credit Helps to offset Remediation Cost Site Preparation Insurance Real Property Taxes (not applicable) Brownfield Opportunity Area (BOA) Enhances Tax Credit Brownfield Tangible Tax Credit Incentivizes New Development Cattaraugus County IDA Enhanced Brownfield PILOT Restore NY Grant Offsets some of Demolition and Entry Road National Grid Brownfield Grant

21 Case Study No. 2 Speculative Property Acquisition Watkins Glen Harbor Hotel

22 Case Study No. 2 Speculative Property Acquisition Watkins Glen Harbor Hotel Site Challenges Former Superfund Site Drycleaner Bus Maintenance Garage Asphalt Plant Small town at the base of Seneca Lake Redeveloped into hotel and conference center

23 Case Study No. 2 Speculative Property Acquisition Watkins Glen Harbor Hotel PROJECT COST SUMMARY LAND $ 1,600,000 HARD CONSTRUCTION COST $14,000,000 FURNITURE /FIXTURES/EQUIPMENT $ 2,000,000 SOFT COSTS $ 1,500,000 TOTAL PROJECT COST $ 19,100,000

24 Case Study No. 2 Speculative Property Acquisition Watkins Glen Harbor Hotel BROWNFIELD TAX CREDIT BREAKDOWN BCP Credit $1,600,000 Less Federal Income Tax on NYS Tax Credit ( 560,000) Additional Cost to Remediate ( 250,000) BCP Net of Remediation and Taxes $ 790,000 The BCP Tax Credit is refundable, flows to the individual LLC member through personal income taxes and is Federally taxable.

25 Case Study No. 2 Speculative Property Acquisition Watkins Glen Harbor Hotel Brownfield sites come with an added cost for remediation.

26 Case Study No. 2 Speculative Property Acquisition Watkins Glen Harbor Hotel PROS Refundable tax credit Leverages other incentives Appalachian Region Commission, Empire Zone Monetize the refundable tax credit Banks will lend against credit BCP credit available for future expansion (10 YRS) Cap on Credit based upon value of remediation and site prep CONS Increased audit risk and delayed refund payment Increased costs for remediation and site preparation Increased legal costs due to environmental easements Possible restrictions on property use

27 Other Incentives to Brownfield Redevelopment In addition to the Brownfield Tax Credit, our projects are occasionally aided by: Industrial Development Agency tax abatement (PILOT, Sales and Mortgage) Historic Tax Credits State and Federal Empire State Development - Direct Assistance Grants Community Development Block Grants Federal Programs Northern Borders Regional Commission, Appalachian Regional Commission, etc.

28 Other Incentives to Brownfield Redevelopment NY Power Authority Hydro Power Allocation NYSERDA New Construction Program, Industrial Efficiency, etc. Federal Programs Northern Borders Regional Commission, Appalachian Regional Commission, etc. NY Power Authority Hydro Power Allocation NYSERDA New Construction Program, Industrial Efficiency, etc. National Grid Brownfield, Main Street Revitalization, Capital Investment 485-a and 485-b Real Property Tax relief

29 SHOW ME THE MONEY: Jump Start Your Brownfield and Infill Development Projects A Developer s Perspective