1. 2017 Southeastern Brownfield Workshop
Property Valuation
2017 Southeastern Brownfield Workshop
Atlanta, Georgia
November 8, 2017
Holly Selby
Associate Analyst
Greenfield Advisors, Inc.
Clifford A. Lipscomb, Ph.D., MRICS
Vice Chairman and Co-Managing Director

2. Greenfield Advisors
A 41 year-old real estate and financial firm with offices in Seattle, Washington and Cartersville, Georgia
Known for forensic economic analysis and property valuation
Specialize in complex real estate issues
Also does valuation software work through AVM Analytics LLC
Also does capital raising through Bartow Street Capital LLC
Member of the Inc (two consecutive years)
Cool recent projects: jet fuel spill in British Columbia; landfill-related odor and dust case

3. Brownfield Property Valuation
Brownfield vs. Greenfield valuation – what’s the difference?
What are the different approaches to conduct brownfield and greenfield valuation?
What makes brownfield property valuation difficult?

4. Complexities with Brownfield Properties – Stigma
1. Stigma is persistent and long-lived
It can be theorized that stigma would ameliorate after remediation. However, recent studies indicate that stigma is persistent (Chapter 29 of Brownfields Law and Practice)
2. Pre-remediation stigma
Stigma that results from knowledge of a contamination event that has not yet been remediated.
3. Post-remediation stigma
After clean-up, amelioration may occur over time; however, the time frame is very long.

5. Complexities with Brownfield Properties – Highest and Best Use
Brownfield designation may affect H&BU in many ways:
Legal or physical restrictions may be imposed.
Financial feasibility may be affected.
Net present value may not be optimal.
Subsurface and surface estates may be affected differently.

6. Estimation of Brownfield Value
Three most common approaches to valuation:
Sales Comparison Approach
Cost Approach
Income Approach

7. Estimation of Brownfield Value – Sales Comparison Approach
Sales Grid (traditional appraisal) – compares hedonic components of a subject property to the comparables and makes adjustments one at a time to arrive at a value.
Regression Models – examine all comparables together as a group and use statistics to measure the marginal values of the hedonic components. Makes adjustments simultaneously.

8. Estimation of Brownfield Value – Sales Adjustment Approach
Sales Grid
Example

9. Estimation of Brownfield Value – Sales Comparison Approach
Regression Equation Example
Y = α + β1 X + β2 Z + ε
δY/δZ = β2
*Z is a discrete variable that equals “1” if the site is contaminated (brownfield) or “0” if it is not contaminated (greenfield)

10. Estimation of Brownfield Value – Cost Approach
Determine site value (land) as if ready for development of highest and best use.
Add cost of improvements as if new.
Deduct for any obsolescence (physical depreciation, functional obsolescence, or economic/external obsolescence).
*The cost approach is often inadequate for brownfield valuation due to stigma and the difficult task of quantifying its effects.

11. Estimation of Brownfield Value – Cost Approach
Simple Cost Approach Example

12. Estimation of Brownfield Value – Income Approach
Discounted Cash Flow (DCF) Analysis – flexible valuation methodology that has the capability of dealing with time-varying cash flows
Can directly estimate the internal rate of return (IRR) on a project, which is very helpful for brownfield investors
Provides a platform for performing sensitivity or “what-if” analyses

13. Estimation of Brownfield Value – Income Approach
Discounted Cash Flow Analysis Example

14. Application to Current Brownfields
Instances where brownfield property valuation is appropriate and needed:
A seller is hoping to sell a brownfield property to a potential buyer, such as a local government or industrial authority.
Determining the difference in remediation costs and actual market value
Assistance in appropriately allocating incentives for redevelopment

15. Clifford A. Lipscomb, Ph.D., MRICS
Vice Chairman and Co-Managing Director Greenfield Advisors, Inc.
Holly Selby
Associate Analyst
Greenfield Advisors, Inc.
A East Main Street | Cartersville, GA | USA Office:
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