By Jeff Telego, Owner & President, RTM Communications, Inc.
Managing environmental and financial risk effectively are challenging for all types of corporate and real estate deals from the portfolio and one – off commercial or industrial property transactions. The environmental risk and liability concerns that arise in Mergers & Acquisitions to the legacy liabilities associated with the redevelopment of brownfield sites require the use of bullet proof legal tactics, deal strategies that can bracket and or transfer the environmental risks and the financial tools such as environmental insurance to close the deal. In fact, one of the recent trends in corporate transactions is the increased use of environmental insurance such as Pollution Legal Liability insurance to leverage the transaction whether the deal is a liability buyout or facilitating the closing of a brownfield transaction. The transactions are larger in financial terms and the insurance coverage capacity that is being provided is greater.
Real estate market trends are very favorable to drive contaminated property transactions toward cleanup and sustainable redevelopment. Corporate surplus properties are starting to turn over especially now that we are seeing economic fundamentals work for the transactions as they now appear to be doing. There is a surplus of corporate cash on the sidelines along with institutional and foreign sovereign monies looking for higher yields and investing in U.S. real property some focused on brownfield transactions where there are complex infill properties, affordable housing, waterfront, port terminal activity as well as big box store redevelopment needed. According to a Citizen Commercial Banking report, commercial and industrial property selling activity for 2017 is ramping up. Middle-market decision makers note that valuations may not hold for much longer coupled with unquantifiable economic uncertainty centered on deregulation and tax reform among other externalities and these phenomenon are further driving market dynamics.
The financial markets have seen an increase in construction lending for commercial and industrial loans and where redevelopment supports infrastructure development this trend should continue. There is increased M&A activity in the first quarter of 2017. The private equity coffers are primed thanks to successful fundraising in 2016. The M&A activity of 2016 was anemic compared to 2015 where M&A deals showed an 80% more transactions. Cash is coming into the market, economic indicators are showing strong growth, and many conditions call for improved infrastructure development.
The key to winning Trump administration’s support for brownfield cleanups and redevelopment is couching the funding in terms of infrastructure development. With the past administration, there had been increase cooperation from regulators especially at the state level with the focus on risk-based cleanups and cooperation with the community toward redevelopment. With the Trump administration we are in a wait and see period relative to the impact on brownfield redevelopment and the impact of environmental deregulation and cutbacks in EPA staff.
Environmental risk can impact the success of closing the transaction, valuation of the assets, and the transfer of legacy liabilities. It takes creative funding, the bracketing of environmental risk using rigorous and alternative due diligence and remedial alternatives, and deal structuring techniques grounded in risk management strategies to assure that the redevelopment or reuse or successful disposition of the surplus or stranded asset(s) can be successfully implemented.
This RTM conference zeroes in on the effect environmental risk has on deal flow and the management of commercial, industrial and government property types. We will get into the business tactics and strategies for reducing the uncertainty caused by environmental risk and closing the deals employing creative environmental risk financing and management approaches. The Conference will also delve into the enhanced value environmental insurance and liability management strategies are bringing to leveraging the M&A activity and the purchasing and disposition of corporate assets and contaminated real estate.
Key presentations will cover:
- Environmental liability management strategies for successfully transferring corporate surplus properties and closing M&A transactions,
- Emerging contaminants and new regulatory challenges confronting the financial services industries and property owners/developers,
- Accelerated transfer of redevelopment and legacy sites into beneficial reuse,
- Environmental and M&A Buyer – Side insurance leveraging private equity transactions,
- Creative application of public/private brownfield financings,
- Extreme weather and climate change effects on commercial/industrial properties