NJBIZ Online
September 11, 2009
By Bill Lynott
Viridian’s visibility takes hold as it restores more contaminated locations
Having completed work on one of the year’s most high-profile New Jersey real estate projects, the chief executive of a Colorado-based brownfield development company is aiming to make further inroads in the Garden State, with plans to acquire new properties and open a local office in the coming year.
“We like the real estate in New Jersey as well as, or better than, anywhere else in the country,” said Bill Lynott, CEO of Highlands Ranch, Colo.-based Viridian Partners, which he founded in 2003. In its acquisition and repositioning of brownfield sites, Viridian has focused on two of the nation’s largest industrial markets — the ports of Newark and Elizabeth, and the ports of Long Beach and Los Angeles — which have the “best economics” because of their supply constraints, high demand and exit pricing potential, he said.
Currently, all of the company’s projects are located in the Garden State, said Lynott, 59, whose firm is best known locally for its remediation and repositioning of a 130-acre former Hercules Inc. chemical plant site in Burlington Township. That project won the New Jersey chapter of NAIOP’s 2009 Creative Deal of the Year award in May.
During the cleanup, Viridian obtained the entitlements necessary for a 1.69 million-square-foot distribution warehouse park, and got the pad sites ready for three of the four buildings in the park. The property, which the developer acquired in 2005, was sold to Lion Industrial Trust in August 2008, and Viridian received its no-further action letter — indicating remediation on the site is complete — from the state Department of Environmental Protection last month.
The developer is now at work on four other sites in New Jersey, including a defunct munitions plant site of 400 acres in Cranbury; a 29-acre vacant lot, previously owned by Wakefern Food Corp., in Elizabeth; a 13-acre former chemical plant in Woodbridge; and an 8-acre former auto parts assembly facility in North Brunswick.
“We may develop a couple of them ourselves,” Lynott said, “but our standard model is to at least get it to the point where it’s ready for that development.” Whether the company goes on to develop a site often comes down to how the property will be used after it is cleaned, he said: “Some of the specialized product that an end user might want may keep us in the game to go vertical on these sites.”
Meanwhile, Viridian intends to expand its portfolio in the state. “We have our eye on upwards of a dozen additional properties in New Jersey,” all of which are either on the I-95 corridor or in the immediate ports areas, said Lynott, who expects to close on a number of acquisitions next year.
Lynott travels to the Garden State from Colorado once a month to meet with property sellers, end users or regulatory agencies, but in 2010, he plans to open a New Jersey office and “retain someone to be the face of Viridian on a daily basis in the state” in response to the projected growth of operations here, he said.
In acquiring brownfield sites, the company has been able to beat out competitors offering higher prices because of its ability to release the seller from its environmental liability, he said. The pricing Viridian offers for properties is based on several factors, including the amount of return investors require; the projected disposition price after holding the asset for 18 to 36 months; and costs for cleanup, infrastructure and insurance, he said.
Other developers have been hesitant to take on the environmental risk for a brownfield site because of “a lack of comfort,” said Lynott, who worked for more than two decades as an environmental consultant to corporations. “They had a very poor understanding of what their real exposure was, and some of them got burned pretty badly.”
Competition for sites has dropped off considerably in the downturn, Lynott said: A few years ago, as many as a dozen investors pursued a single brownfield property; now, he may be the lone bidder. Developers who once competed for these sites “don’t really want to do that today, because they’ve got their hands full with the inventory they do have,” he said.
At the same time, corporations have been increasingly looking to unload polluted properties. “It used to be comfortable for them to just sit on these legacy properties and not do much year to year,” he said. “Now, the carrying costs are a bit more onerous.”
But in a shaky economy, Viridian — which largely funds its acquisitions through an institutional investor that provides both debt and equity — has exercised greater caution in purchasing sites, sticking to its mantra of considering only properties near the ports and along the I-95 corridor.
“It’s a tough grind to reposition a brownfield property in the state of New Jersey,” he said, though that hasn’t discouraged Viridian from investing here or in California, which also has a tough regulatory environment. “The two most attractive markets for us are in the two most demanding states.”
Lynott, however, said that the Licensed Site Remediation Professional program — part of the Site Remediation Reform Act that was passed in May — will speed the remediation process, though he wasn’t sure how many of his projects would be able to participate. The site in Cranbury, for example, still contains live munitions, and will likely stay under DEP supervision, he said.
But “something like our Elizabeth site, with just the impact of historical fill — that’s something that an LSRP could probably handle very efficiently for you.”
For Viridian Partners, a firm that specializes in acquiring, remediating and repositioning contaminated land into new development sites, New Jersey has always checked all of the boxes.
“The nexus that we needed to make it work was a very land-constrained market with a lot of population and a lot of demand, but just not enough dirt,” said Tate Goss, the firm’s president. “We also had to have brownfields that were sufficiently sized so that you could do something meaningful with them.”
It’s why Viridian’s first project more than a decade ago was in New Jersey, despite being based in Highlands Ranch, Colorado. And the Garden State has continued to be a major piece of its business, especially with the shortage of sizable, well-located development sites that could support the state’s booming market for industrial construction.
With major projects in a half-dozen New Jersey municipalities, Viridian has remediated enough land to make way for 6.5 million square feet of industrial space, Goss said. Its entrance came in 2005 through Burlington Township, where it acquired a 130-acre property that housed an active chemical plant from 1947 to 1992.
Over the next several years after Viridian’s acquisition, the firm carried out a remediation plan that included treating and removing hazardous materials in the ground, while bringing in more than 300,000 cubic yards of fill to the site along the Delaware River.
“That’s a scary proposition to deal with if you don’t know what you’re doing,” Goss said. “We had the best science in the country working on that, and we basically turned a lagoon into a big green rock.”
The result was a site that was approved for nearly 1.7 million square feet of industrial space, which was sold as shovel-ready and is now seeing active construction.
The firm, which was founded by Goss and CEO William Lynott, also has done projects in Woodbridge, Elizabeth, Cranbury and Perth Amboy. What it hasn’t done is vertical development, even with the wealth of experience that both founders brought to the venture.
“That’s more of a strategic move on our part,” said Goss, who spent some 45 years in development before Viridian. “You’ve got some of the best developers — local, national, and regional — in the country in your market, so why compete with guys that we could be working with?”
Tate said its model works better here than a place such as Connecticut, which has brownfields but not ones that are large enough to support major development. That’s not the case in New Jersey, thanks to its manufacturing heritage.
Viridian has since found opportunities in other markets, including California and Florida. But it’s also looking for more opportunities in New Jersey, even amid growing competition for sites.
In its pipeline, the firm has enough projects to produce about 2.5 million square feet of developable space, Goss said.
And while New Jersey’s layers of regulation are usually the source of angst for many businesses, that type of framework is a positive in Viridian’s case.
“We do like doing business there,” Goss said. “At lot of states just don’t have that level of sophistication.”
