Kilmer Brownfield Equity Fund L.P. is the first private equity fund in Canada dedicated exclusively to the redevelopment of brownfields. The $100 million fund is structured as a limited partnership with both institutional and private investors. In 2006, the Fund was awarded a Special Brownie Award by the Canadian Urban Institute in recognition of its innovations in the financing of brownfields. This is relevant because the difficulty in accessing capital through conventional real estate financing channels has been a traditional stumbling block to brownfield redevelopment

The Fund is a specialized developer which acquires brownfield properties and redevelops them for its own account and is financed with equity provided by its investors. For clarification, the Fund is not really a financing source for third-party brownfield developers, though, in certain cases, the Fund will consider partnering with owners of brownfield sites.

The Fund works closely with vendors of environmentally-impacted sites to ensure that their particular needs are satisfied. The investment process for the Fund is as follows:

• The Fund targets brownfield projects where the total redevelopment budget falls in the $5 to $15 million range, with a maximum of $20 million equity invested in any single project.
• The Fund will acquire a brownfield site and will provide indemnification to the vendor for environmental liability.
• Redevelopment consists of remediation to regulatory site closure and often rezoning to a higher-and-better end land use.
• When the redevelopment is completed, the restored site is sold to a developer or end-user, who will complete the development process through the vertical build-out of the site.

The Fund is able to offer vendors of brownfield properties indemnification from environmental liability. Vendors of brownfields should be aware that standard "as is, where is" transaction language will not necessarily protect past owners from potential regulatory environmental liability. The Fund uses approved site closure mechanisms together with environmental legal liability insurance to back its indemnification to vendors. Corporate owners with a sophisticated understanding of brownfields have recognized the merit of the Fund's approach.

In addition to Fund's usual practice of purchasing brownfield sites outright, an opportunity also exists-under the right circumstances-to joint venture with the vendor on projects. The Fund recognizes that, for some vendors, there might be a real benefit to joint venturing on the redevelopment of their environmentally-impacted properties.

The Fund was established in response to several factors which improved the risk-reward relationship of brownfield redevelopment specifically in Canada:

1. Legislative reforms governing site closure and limiting exposure to regulatory environmental liability.
   
2. Land-use planning reforms aimed at curbing urban sprawl and promoting sustainable growth and urban intensification.
   
3. The availability of sophisticated risk management products, like environmental liability insurance.
   
4. Municipal incentives promoting brownfield redevelopment.
   
5. Stricter corporate disclosure requirements for contingent environmental liabilities.
   

For more information on the Kilmer Brownfield Equity Fund and its Management Team, please visit the website at www.kilmergroup.com/brownfield/

Additional Resources:

• Municipal Brownfields Redevelopment Toolbox - The Ontario Municipal Brownfields Redevelopment Toolbox has been developed as a guide and resource for Ontario municipalities to assist them with urban renewal, redevelopment and revitalization.
  

• Redevelopment Framework for Former Service Stations - An online decision-support tool that guides municipalities, property owners, developers, and other stakeholders through the redevelopment of under-utilized and abandoned service station sites.