• Prepare a Community Improvement Plan (CIP)
• Secure Financing and Investment
• Assess Credit Worthiness
• Public Sector Financing
• Private Sector Financing
• Create Financial Incentives
• Engage Stakeholders
• Develop a Marketing Plan

Section Updated Mar. 2009

Contributor's to this section include:

• Government of Ontario
• Kilmer Brownfield Equity Fund L.P.

Secure Financing and Investment

There are several sources for financing brownfield redevelopment. These include public agencies (federal, provincial, municipal and national) along with private institutes (chartered banks, credit unions and trust companies). Typical redevelopment projects obtain financing from more than one source, in particular if that project qualifies for applicable government grants, funds and loans. 

Assess Credit Worthiness

Exposure to a customer’s environmental risks is a significant concern for lending institutions that may be held liable for substantial cleanup costs and other liabilities that exceed the risk protection and financial depth of most borrowers. Prior to securing financing, a potential stakeholder/developer must be prepared to answer a series of questions that would satisfy a potential lender’s concerns of investing in a redevelopment transaction while reducing their exposure to risks and liabilities.

• Please review the subsections of Financial Barriers in Step 2 - Evaluation, which provides key points on: Lenders' Concerns, The Advantages, What the Lender Needs to Know, and Typical Provisions in Loan Agreements.
  
  
• A study by the federal minister of the environment: Assessing Credit Worthiness: Baseline Survey of Environmental Information Required by Lending Institutions in Atlantic Canada (March 1998), observed several key elements that lending institutions consider. The purpose of the baseline survey of financial institutions in Atlantic Canada was to:
  1. Assess what mechanisms are being implemented by lending institutions in order to minimize their exposure to a potential client’s environmental risk; and
  2. Determine whether the potential exists to promote pollution prevention as an essential element in the assessment of creditworthiness by lenders.
  
  The report described the procedures currently utilized by participating institutions in incorporating environmental information in an assessment of a potential client’s creditworthiness and outlines a generic set of best-practice tools which may be used by lending institutions to minimize their exposure to a customer’s environmental risk. These included:
  • Location and Site History;
  • Environmental Compliance and Litigation;
  • Environmental Risks,
  • Risk Assessments,
  • Contamination and Controls;
  • Environmental Management and Pollution Prevention;
  • Community Perception;
  • Clients History, and
  • Other Information

Public Sector Financing (Government)

Further information on each Incentive Programs related to Brownfields Financing and Public Sector Financing can be accessed on the Brownfields Financing Feature.

Federal Government

Federal Contaminated Sites Action Plan (FCSAP) Funding
In Budget 2004, the Government of Canada established the Federal Contaminated Sites Action Plan (FCSAP) Funding and committed $3.5 billion over 10 years to accelerate the ongoing cleanup of contaminated sites for which federal departments are responsible, including some urban brownfields.

Building Canada Fund (BCF)
The Building Canada Fund (BCF) is the Government of Canada's flagship infrastructure program established in 2008. It advances national priorities that are important to all Canadians: a stronger economy, a cleaner environment, and better communities, while addressing local and regional infrastructure needs.

National Agencies

Federation of Canadian Municipalities - Green Municipal Fund (FCM-GMF) 
FCM-GMF supports municipal initiatives across Canada that benefit the environment, local economies and quality of life.

• FCM's Green Municipal Fund offers grants to develop sustainable community plans.
  
• FCM's Green Municipal Fund offers grants for feasibility studies and field tests.
  
• FCM's Green Municipal Fund (GMF) offers below-market loans.

Sustainable Development Technology Canada (SDTC)
The SD Tech Fund™ supports the late-stage development and pre-commercial demonstration of technology solutions

Ontario Government

The Province of Ontario established several Brownfields Incentive Programs as part of its commitment to protect and maintain safe, clean, livable communities. Further information is available on each Ontario Program below:

• Affordable Housing Program (AHP) - Brownfield Initiative
  
• Brownfields Financial Tax Incentive Program (BFTIP) & Education Property Tax Assistance
• Business Improvement Areas (BIA)
• Community Improvement Plans (CIPs)
• Removal of Provincial Crown Liens
• Ontario Strategic Infrastructure Financing Authority (OSIFA) - Loans and Bonds
• Rural Economic Development (RED)

“The Brownfields Financial Tax Incentive Program supports the Province's implementation of the 'Places to Grow' initiative, which encourages growth through intensification and compact development in those areas that can best accommodate it and promotes more efficient use of existing infrastructure.

The development of brownfields properties also protects green spaces that would have otherwise been consumed by urban sprawl, ensuring that these spaces are preserved to enhance the quality of life for current and future generations.” 

Hon. Greg Sorbara 
Minister of Finance

Municipal and Municipal Regional Incentives  

Municipalities have the ability under Section 28 (7) of the Planning Act to provide grants and loans to property owners to pay for the costs of rehabilitating lands within a community improvement area where there is an existing community improvement plan.  These costs can include the costs of environmental remediation and other costs such as building demolition and on-site infrastructure upgrading. On November 30, 2004 the Strong Communities (Planning Amendment) Act, 2004 (Bill 26) received Royal Assent. This Act amends the Planning Act.

Under the Municipal Act (Part III, Section 107), Regional Governments may offer financial incentives to property owners and developers to assist them with offsetting the financial barriers and potential impediments to redevelopment. These regional grants and loans would be offered to municipalities and could be used in conjunction with their own municipal financial incentives. 

The region may work with the local municipality in this manner for the purpose of promoting brownfields redevelopment. Specifically, subject to Section 106, the council of every municipality may make grants (and loans) to “any person, group, body, including a fund…for any purpose that council considers to be in the interests of the municipality”. Regions are prohibited from providing the grants or loans directly to individuals but may offer grants and loans to the lower tier municipality for purposes that are of interest to the Region. Regional incentive to lower tier municipalities can include grants for: 

• Brownfield Tax Assistance Programs
• Tax Arrears Credits
• Environmental Assessment Grant Programs
• Municipal Brownfields Leadership Programs

Municipalities will be required develop a Community Improvement Plans (CIP) that will incorporate these new programs. A collaborative effort between the region and the local municipality is required for the successful implementation of incentive programs.

Brownfields Financing - Municipal Examples

Private Sector

Traditional Private Financing Institutes

The major banks of Canada have always been recognized as the traditional sources for financing large developments. Concerns regarding lenders’ liability have led to the need and development of other private funding sources. Private lending institutions that are involved in brownfield transactions include: chartered banks, credit unions and trust companies.

Innovative Private Financing Institutes

Kilmer Brownfield Equity Fund LP

Kilmer Brownfield Equity Fund LP is the first private equity fund in Canada dedicated exclusively to the redevelopment of brownfields. The $100 million fund is set up as a limited partnership with both institutional and private investors. By attracting institutional investors to this sector, the Fund has been recognized as an innovator in the area of brownfield financing in Canada. The Fund will make investments in a diversified portfolio of Brownfield Redevelopment Projects in Canada. The Fund works closely with vendors of environmentally-impacted sites to ensure that their particular needs are satisfied.

• The Fund acquires and redevelops qualifying brownfield sites.
• The redevelopment process consists of the remediation of the site and often the rezoning to a higher-and-better end land use.
  
• When the redevelopment is completed, the restored site is sold to an end-user, who will complete the development process through the vertical build-out of the site.
  
• The Fund targets investments in the $5 million to $15 million range.
  
• The Fund will not develop new buildings on its sites, but will sell the sites to real estate developers or end-users for build out.

Kilmer Brownfield Equity Fund LP

Cherokee Investment Funds

Cherokee acquires environmentally impaired assets, or brownfields, and protects sellers from the associated risks and liabilities. Based on the number of brownfields acquired and the amount spent on remediation and committed capital, Cherokee is considered one of the largest and most active brownfield investment firms in North America.

In conjunction with placing capital and generating returns for investors, Cherokee provides solutions for sellers and the communities affected by their contaminated sites. Typically, Cherokee acquires an asset or portfolio of assets for cash and indemnifies the seller from environmental liability through the use of insurance policies and other customized risk transfer methods. Portfolios can contain both clean and environmentally impaired properties. After acquisition, Cherokee remediates and repositions the properties for reuse. Cherokee states that none of their indemnified sellers has ever incurred a future environmental liability.  Cherokee Canada has been created to address the increase in Canadian brownfield projects.

Brownfields Capital

Brownfields Capital plays a unique role as a specialty finance/investment management firm bringing investors and financing institutes together by:

• Financing all stages of remediation and redevelopment of brownfields through one instrument;
• Unlocking great value from brownfields through a patented business process and financial instrument called a Brownfields Value Contract (BVC);
• Aggregating investment capital and providing it to the market more efficiently; and
• Using the investment process to transfer risks to a party best suited to shoulder them.

The Brownfields Capital investment process and patented financial instrument are innovative methods for large-scale, efficient, institutional and private equity investment in the restoration of brownfield properties to productive use. This opportunity is possible because its financial product, the Brownfields Value Contract (BVC), shields investors from environmental liability and uses the financial process to redistribute risks to the parties that can best shoulder them. The efficiency of the process generates greater profits for all parties involved, including the existing owners of brownfields. It offers a way for investors to capitalize on disequilibrium in pricing created by environmental law rather than on a temporary under-supply or oversupply in the real estate market. 

Brownfields Capital's unique business model puts investors in the role of capital provider alone. It relies on developers with solid track records, remediation firms with the best expertise and real estate and insurance firms to provide expert services. These parties form a separate company, or partnership, to own and redevelop each site. Investors invest in the financial security, or instrument (BVC), which finances this entity. This debt instrument has very consistent, measurable performance characteristics. 

The financial product will provide capital to large-scale projects (minimum investment of $25 million in total project costs) while the investment process brings owners of brownfields, developers, remediators, and in some cases, insurers together with lower cost financing. The Brownfields Capital investment product has been used in several projects across the United States.

Additional Resources:

• Brownfields Financing Feature - Private Equity Funds, Brownfields Finacing Incentives/Programs, Municipal Examples, Publicaions and Projects.
  

• A Lender’s Perspective on “Brownfields” Financing in Ontario, by Bill Christmas, CIBC Environmental Risk Management, presented at the 11th Annual Environmental Management, Compliance and Engineering Conference - Toronto Congress Centre (May 15, 2003).

• Coming to Grips: New Incentives and New Regulations, a presentation on financial incentives in Ontario by Allan Veerman, Ontario Ministry of Finance (Oct. 22, 2004). This presentation provides information on the Ontario Brownfields Statute Law Amendment Act and its influence with Community Improvement Planning and Tax Assistance.
  

• Provincial Overview and Community Improvement Plans, a presentation by Thelma Gee, Ontario Ministry of Municipal Affairs and Housing (MAH) (Oct. 29, 2004). This presentation provides further insight into the financial tools that can be implemented using the new brownfields legislation and community improvement plans.