Cleaning up the past, building the future
Brownfields and Ginkgo are two private equity funds specialising in the redevelopment of former industrial sites in urban areas. Supported by the EIB with a view to attracting private and institutional investors, they help projects to get off the ground, particularly in France and Belgium.
It is estimated that there are 3.5 million contaminated industrial sites in the European Union, 500 000 of which require remediation measures. Due to its industrial past, France alone has inherited some 250 000 of these sites, including at least 15 000 to 20 000 ha of degraded urban areas that can be redeveloped. Belgium has not been spared either, with around 20 000 sites which need regenerating. Regardless of whether they are the sites of former industrial complexes, medium-sized plants, filling stations or any other activity resulting in ground contamination, their redevelopment presents obvious benefits. The depollution and conversion of these sites into residential and/or commercial areas contribute to reducing public health and environmental risks while providing new prospects for urban planning in some cities which suffer from both a structural shortage of building land and the existence of derelict districts.
A market with huge potential
Owing to the technical complexity, environmental legislation and operational costs involved in cleaning up underground pollution and removing asbestos from industrial sites, local authorities are obliged to seek the services of specialists and funding from private investors.
In the US, the concept of private equity funds combining technical and financial expertise is already well established. The Cherokee Fund, for example, which has been in existence for more than 20 years, has already regenerated around 500 sites and now manages USD 2bn. In continental Europe, however, the redevelopment of brownfield sites via private investors still remains at a low level, with site owners, planners and property developers preferring to operate on a case-by-case basis. There are admittedly some examples in the United Kingdom, such as London's Olympic stadium, but the commercial and urban potential offered by this opportunity for intermediation between owners/public and private industrialists and planners/promoters is still far from being realised.
The Brownfields Fund
Founded in 2006 by engineers and former executives of a major French industrial group's subsidiaries dedicated to depollution and/or environmental protection, Brownfields has initiated, remediated and implemented more than 20 small and medium-sized operations, leveraging investments of up to EUR 100m. This has resulted in the provision of 100 000 m² of residential and commercial property in several French conurbations (Paris Region, Lyon, Marseille, Evreux and Montpellier).
The most spectacular achievement of the Brownfields team is the turnkey Villeneuve-La-Garenne project in the Paris Region, under which a 40 000 m² site, previously owned by General Motors, has been regenerated and sold to the La Poste group. In less than 18 months, the company removed asbestos from the existing buildings and demolished them, cleaned up the site, built roads to be returned to the municipality and constructed a 23 000 m² building to house the mail depot for the Hauts-de-Seine Department, the most modern mail sorting service in France. Two buildings for SME and SMI activities have also been constructed on the site by a partner operator. This redeveloped site now provides jobs for almost 600 people.
In 2013, the team obtained the support of the EIB as a catalyst for raising EUR 120m (now completed) from private institutional investors through a private equity fund. The new fund is dedicated to larger projects that could mobilise up to EUR 250m of new investments in France and Belgium. During its first nine months of existence, it has already made investments of almost EUR 20m.
Ginkgo, another operator in the sector
Since 2010, Brownfields has no longer been the sole player in this promising market. Ginkgo, a fund backed by the EIB, Caisse des Dépôts and Compagnie Benjamin de Rothschild and supported by around ten other public and private institutional investors has a budget of EUR 81m.
Ginkgo specialises in medium-scale and, above all, large-scale projects. It acquires only a few sites from industrial enterprises, relying instead on contributions from property investors seeking significant rental and/or commercial property development schemes in the Paris and Lyon regions and in Belgian conurbations with a high population density.
One year ahead of its investment schedule, Ginkgo has largely committed all the funds at its disposal. Under seven projects, it has achieved building rights for almost 230 000 m² in the heart of major cities in France and Belgium, over 3 000 housing units under construction, 5 000 jobs created by the projects undertaken and 100% self-supporting projects, i.e. not involving any kind of subsidy or financing from public funds. The flagship project, which received the support of the City of Lyon, is the former site of the manufacturer of household appliances Fagor-Brandt, where up to EUR 17m could be committed. Demolition and remediation work has started on this brownfield site and on two other sites in Belgium. Moreover, they are expected to receive planning permission in the near future. Their strategic urban positions and support from Ginkgo through renowned property developers should facilitate the sale of these sites once they have been decontaminated.