At a Glance
In the 1990s, Brent and Mikk Anderson saw many brownfield-rehabilitation projects fall apart. Although the two worked in different firms, they would both help advise clients on the myriad concerns that come with redeveloping former industrial properties, and almost invariably the conflicting opinions of consultants and concerns about unbounded liability would cause deals to fail.
“Brownfields were a huge, unserved market because of the difficulties the transactions present,” Brent says. “Our perception from having worked with each other was that a lot of brownfield deals cratered because deal principals could not integrate all the complexities into a viable solution.”
In 2000, in an effort to remedy this tendency, Brent and Mikk, along with several others, became founding members of the International Risk Group, LLC (IRG), a Denver-based firm focused on redeveloping brownfield sites. Their idea was to bring all the different types of expertise needed to revitalize industrialized land—legal, environmental, regulatory, financial, and civic—under a single umbrella and use them to create a streamlined solution.
“Fundamentally,” Mikk, now the company’s senior vice president, says, “our business model is to have all these various deal-evaluation skills present in our staff and in our partners so that we can quickly evaluate and integrate a solution for a particular site without having to struggle through outside opinions that aren’t integrated from the beginning.”
Top 3 Challenges to Rehabbing Brownfield Sites
1. Environmental regulations. Such projects come with an abundance of red tape from various environmental entities, and aspects of the site cleanup must be done by specialized teams.
2. Capital. Brownfields have a reputation for causing development headaches and investment losses, and it’s difficult to find investors willing to take on the perceived risk.
3. Valuing risk. IRG’s experience with brownfield sites gives the firm particular insight to better evaluate how big a risk a particular project might be, but frequently its estimates are at odds with those of prospective buyers.
When IRG was first formed, the major hurdle was finding capital from investors, who were often wary of taking on projects historically notorious for being risky and vulnerable. Some of the firm’s first projects even wound up being completely owner-funded.
A major turning point came when IRG acquired the former Lowry Air Force Base. The firm’s role was to facilitate the transfer of the abandoned federal government base to a redevelopment authority by structuring a contractual risk assumption, wherein IRG was to take on the liabilities that come with a large old industrial site.
The concerns were numerous: the base’s buildings, which were designed during World War II, had been built with asbestos insulation; solvent-impacted groundwater presented a concern; and neighborhood residents didn’t want too much new construction happening nearby. In the end, IRG’s ability to work with each purchaser and stakeholder from a variety of perspectives allowed the company to create a remedial program fully integrated with the development plan. By fall of 2012, it had completed all its rehabilitation measures at the base—20 years ahead of when the US Air Force projected the firm would finish.
“We literally unlocked in excess of a billion dollars of real estate value,” Brent says. “It was a circumstance where we demonstrated our ability to focus on actually being done with environmental problems as opposed to prolonging them. It emphasized the integration between future use and remedy.”
Today, IRG has not only a proven track record in creating seamless solutions for brownfield sites, but it also has recently acquired a $100 million capital commitment from an investment organization to enter into new projects.
“We’re anxious to find opportunities where we can put this capital to work,” Mikk says. “We can provide sage advice to communities to get projects off the ground with investment capabilities. That’s a pretty powerful mix.” ABQ