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By Chris Olson |
You’ve probably heard the stories. Hang out at the water cooler with
some real estate and property tax professionals and they’ll tell you some
good ones.
Heard the one about the company that entered into a property sale contract with
a buyer only to find out that another group in the same company had sold the
property a couple of years before?
What about the one in which an oil and gas company went out to survey some of its property and found that a family had built a house on the company’s land — and had been living there for 20 years!
How could it be that a company-owned property is purchased at a county tax sale, only to be later repurchased by the company to regain control? One company shared that it continued to pay tax on a property for five years after its sale because they were never notified of the sale.
The Tired, the Weary, the Forgotten
Brownfield properties are by nature the closed, the neglected, and often forgotten
past operating sites that have lost the luster around their original intended
use. Because they produce little or no revenue, closed sites tend to fade from
the limelight and into the woodwork as a low priority.
Not surprisingly, real estate departments are focused on serving the active business needs in the company, particularly in the area of buying, selling and leasing office space. In larger companies it is not uncommon to also find more than one embedded real estate department, each handling their own transactions.
Aside from idled operations, brownfields can also arrive on the doorstep by other means, including mergers, acquisitions, or divestment activity. In some divestments, the buyer specifically carves out or excludes certain closed facilities or surplus/buffer lands from sale. When the transaction dust settles, these stranded assets can linger, sometimes unnoticed, in the shadows of the glitzy sales announcement. Or they can become orphaned when they don’t fit with remaining operating assets.
Despite the fact that some of these idled properties have assets (e.g., an empty warehouse here, a manufacturing or administration building there), buildings require maintenance. And since internal competition for capital is keen, idled sites can’t seem to attract the needed funds to sustain them. The result, of course, is that property maintenance and upkeep begins to slip — buildings start to fall into disrepair, which further erodes any remaining value.
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