Unlocking Ontario’s Brownfield Market: Trends and Challenges Kilmer Brownfield Equity Fund L.P. March 3, 2011 (Toronto)
Kilmer Brownfield Equity Fund L.P. Who We Are Kilmer Brownfield Equity Fund L.P. • $100 million Canadian private equity fund • Structured as a Limited Partnership, headquartered in Toronto • Mix of Canadian institutional and private investors • Experienced management team • Well-regarded and experienced sponsor, Kilmer Van Nostrand Co. Limited • First dedicated Canadian brownfield fund The Fund’s Focus • To generate attractive returns to investors through the redevelopment of Canadian brownfields: Acquire, remediate and reposition land; sell “shovel-ready” for build-out Manage risks to an acceptable level • Deal size: $5 million to $15 million; Maximum $20 million equity in any single project • National mandateMarch 3, 2011 ONEIA Forum 2
Kilmer Brownfield Equity Fund L.P. Investment Trends 8 Market Value 7 6 5 VALUE ACCUMULATION 4 3 2 Total Investment 1 0 P rc ha se icati on li t i on ia t i on ul ry ato ure CI ives Pu - I s if o me d eg Clos t e mn Dem Re R e en Inc As I nd Sit Financing Not Available Financing AvailableMarch 3, 2011 ONEIA Forum 3
Kilmer Brownfield Equity Fund L.P. Policy Trends Maintaining Employment Lands • Policy supporting retention of “Employment Lands” presents challenges for Brownfield redevelopment: • Need increased land value (higher/better use) to support remedial costs • Little/no market for industrial/office lands • Municipalities are finishing/have finished studies (Toronto to initiate comprehensive review this year)March 3, 2011 ONEIA Forum 4
Kilmer Brownfield Equity Fund L.P. Development Trends Intensification • Intensification is occurring via: • Higher density residential (more options coming via changes to the Ontario Building Code) • Mixed-use developments; Different types of developers teaming together • Transit investment (ie. Kitchener/Waterloo; Guelph; Mississauga) • Intensification means higher end land values to pay for remedial works • Parking can be a limiting factor: market demands vs. municipal requirements vs. cost to provideMarch 3, 2011 ONEIA Forum 5
Kilmer Brownfield Equity Fund L.P. Development Trends Changing Business Strategies • Toronto developers moving to secondary markets • Developers in secondary markets are becoming more creative Proposed “Breithaupt Block”, Kitchener (Perimeter Development Corp)March 3, 2011 ONEIA Forum 6
Kilmer Brownfield Equity Fund L.P. Development Trends Developers and the Environmental Approval Process • Developers warming up to “Risk Assessments” • Apprehension remains attached to “Certificate of Property Use” Balance between risk and return... some risks remain unacceptable to developers.March 3, 2011 ONEIA Forum 7
Kilmer Brownfield Equity Fund L.P. Property Tax Challenge “Greenfield” vs. “Brownfield” – Property Taxes During Development Brownfield Property Taxes Greenfield Property Taxes 1. Current State 2. Building 3. Rezoning 4. Subdivision 5. Initiate Site of Site Demolition Approved Approved Servicing Property Taxes Owed (Per yr Per Stage) Activities (Brownfield Only) Vacant Industrial Building Remediation Remediation No Difference in Active Farming Demolished, Remediation Continues Finalized On-Site Activities Stage of Begins Farming Farming Development Farming Continues Continues ContinuesMarch 3, 2011 ONEIA Forum 8
Kilmer Brownfield Equity Fund L.P. Property Tax Challenge Difference in Cumulative Taxes Stage of Development/Redevelopment (Totals 3 Years) Current Building Demo Rezoning Subdivision Total State of Site (Brownfield) Approved Approved Property Activities Taxes (6 months) (1 year) (6 months) (1 year) Owed (End year 3)Brownfield(15ac; 200,000sf building to be $100,769 $72,554 $47,032 $94,063 $314,418 demolished) Greenfield(15 ac; actively farmed) $49 $98 $49 $35,038 $35,234 Difference $279,184 March 3, 2011 ONEIA Forum 9
Kilmer Brownfield Equity Fund L.P. Challenges Other Issues • Knowledge Barriers: • Municipal staff in large urban centres don’t fully understand implications of building location, built form, land uses and the additional costs of brownfield remediation/redevelopment • Despite municipal support, time lag to actually implement CIP programs • Failing Municipal Infrastructure: • Costs to Developer (often unforeseen/more significant than anticipated) • Sticker shock to municipalities • Existing impact to the environment • Lack of Ability to Finance BrownfieldsMarch 3, 2011 ONEIA Forum 10
Kilmer Brownfield Equity Fund L.P. Contact Pamela Kraft 416-814-3437 Development Manager firstname.lastname@example.org Kilmer Brownfield Management Limited www.kilmergroup.com/brownfield/March 3, 2011 ONEIA Forum 11
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