Shrinking Credit Markets Felt in Brownfields Redevelopment
The contraction in credit markets has significantly impacted the development community. Developers who could obtain 110% financing are often required to invest 40% or 50% in equity. Those dynamics temper developer risk thresholds, particularly in the brownfields arena. At the same time, lenders are scrutinizing potential environmental liabilities in transactions to a much greater extent. Lenders now require more extensive site characterization work, escrows of cash to fund remedial obligations, and often insurance products layered on top. The insurance market has also tightened. The tightening has been less in the nature of increasing premiums, and more in the way of increased scrutiny of site characterization data and unwillingness to insure certain risks. As a result, performing comprehensive site characterizations and quantifying environmental risks will be even more essential to doing brownfields deals in 2008.