Scarinci Hollenbeck, LLC
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201-896-4100 info@sh-law.comFirm Insights
Author: Scarinci Hollenbeck, LLC
Date: December 14, 2020
The Firm
201-896-4100 info@sh-law.comThe New Jersey Economic Development Authority (NJEDA) recently announced the creation of the Brownfields Loan Program. The new program will make low-interest loans of up to $5 million available to brownfield redevelopment projects for all aspects of brownfield revitalization, including assessment, investigation, and demolition.
As highlighted by the NJEDA, funding gaps often make the remediation phase of redevelopment projects financially unviable. The goal of the program is to reactivate long-stalled projects and create new opportunities for commercial, retail, and mixed-use developments.
“Revitalizing contaminated sites and putting them back to productive, locally-appropriate use is an essential component of Governor Murphy’s commitment to building stronger, more vibrant communities across New Jersey,” NJEDA Chief Executive Officer Tim Sullivan said in a press statement. “The Brownfields Loan Program and the NJEDA’s other collaborations with NJDEP Commissioner McCabe and other partners to support brownfields redevelopment will play a crucial role in building a greener, fairer New Jersey by incentivizing investors to consider brownfields remediation and making resources available to get these projects off the ground.”
The Brownfields Loan Program provides financing to potential brownfield site purchasers and current brownfield site owners (including local government redevelopers) that intend to develop commercial, including but not limited to manufacturing, retail, mixed-use developments, expansions or reuses. The maximum loan amount is $5,000,000, while the minimum loan amount is $100,000. Below are several key components of the program:
Eligible Applicants: Applicants must be able to demonstrate site control or a path to site control. Applications must be accompanied by a letter of support from the mayor of the municipality in which the brownfield site is located (or the governing body if the position of mayor does not exist). Municipalities applying for a Brownfields loan require Local Finance Board approval. Applicant must provide owner equity equal to a minimum of 10% of the appraised value of the property in a remediated state. Parties responsible for contamination of brownfield site, related to party responsible for contamination of brownfield site, or parties that have indemnified a responsible party or a party related to a responsible party are not eligible for the Brownfields Loan Program.
Eligible Uses: Eligible uses include any former or current commercial or industrial site that is currently vacant or underutilized and on which:
Eligible Sites: Loan proceeds may be used for costs associated with the investigation, assessment, and remediation of a brownfield, including but not limited to: soil, groundwater and infrastructure investigation; assessment; remediation; abatement; hazardous materials or waste disposal; long-term groundwater or natural attenuation; other forms of institutional controls; attorney fees; planning, engineering and environmental consulting; and building and structural issues (including demolition, asbestos abatement, PCB removal, contaminated wood or paint removal or other infrastructure remedial activities). Use of the loan funds can’t be duplicative of other approved State or Federal grants previously awarded that would pay for the proposed use of funds.
Scoring Criteria: Projects seeking financing will be required to submit an application during competitive application rounds that will be established by NJEDA. Applications that meet the base eligibility requirements will be further reviewed and scored by NJEDA across a publicly available scoring criteria, which are still in development and will be made available when completed. However, the scoring criteria will be based upon the local or economic impact of the brownfields site/proposed project. This will include:
Terms/Rates: Principal and interest payments will be deferred for the first two years; however, interest will accrue and be capitalized onto the principal balance of the loan. Thereafter, interest-only payments will be made for years three and four, followed by full amortization of the principal balance for the remaining term. Full amortization is based on principal and interest payments with no penalty for prepayment. A lien will be placed on the property, subordinated to purchase mortgage, and removed upon repayment.
Interest Rate: Loans will have a base rate of 3% with opportunity for rate reductions to a floor of 2% based on the redevelopment project design.
Rate Reduction: A project may be eligible for interest rate reductions based on the redevelopment project design. Interest rate reductions of 20 basis points per applicable criteria may be available for the following criteria:
According to the NJEDA, applications for the Brownfields Loan Program are still in development. For businesses and municipalities that are interested in the program, we recommend checking the NJEDA website regularly.
If you have any questions or if you would like to discuss the matter further, please contact me, Todd Terhune, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
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