1. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Economic and Management Aspects of Brownfield Redevelopment Mária Zúbková SPECTRA Centre of Excellence STU in Bratislava Barbara Vojvodíková VŠB – Technical University of Ostrava Faculty of Civil Engineering „This project has been funded with support from the European Commission. This publication [communication] reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.“

2. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Awareness What is the role and importance of economic markets in brownfield regeneration; What is the role of land and real estate market in brownfield redevelopment; What are the different types of brownfield projects (A-B-C model); What are the benefits of public-private partnership in brownfield redevelopment What types of intervention are possible by public policy;

3. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Goals of the teaching unit To strengthen the importance of economic aspects in brownfield redevelopment. To understand main economic forces and markets that drive the process of brownfield redevelopment. To focus on possible combination of the sources and opportunities in public-private partnerships for brownfield redevelopment.

4. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Content PART 1 A-B-C Model PART 2 PPP projects PART 3 Example: Horní Suchá, CZ

5. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Key drivers of brownfield regeneration from economic point of view Economic revitalization of an urban or rural area Attraction of new developers Potential profit to be made Support to economic development Competitiveness across Europe

6. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Redevelopment of brownfields as a stimulus to local economic development Redevelopment of brownfields impacts several markets of economy: land market - economic value of a brownfield site is influenced by its location real estate market - real estate property will be augmented labour market – new jobs available in the area capital market – possible combination of capitals financial market – several financial instruments market of resources – impulse to better use of local resources infrastructure market – utilization and upgrade of existing infrastructure market of innovations – places to offer for new starts in business, technology, research&development, industry

7. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Relation between brownfield redevelopment and markets

8. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Economic status of a brownfield site The economic status of a site can be affected by: indirect as well as direct costs of the regeneration, predicted revenues / return from the site the type of financing and the associated financial risks national and local taxes and their perceived risk of fluctuations, any development agreements between the land owner and/or the municipality and the developer.

9. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Price of a brownfield site Price that developer is willing to pay for a brownfield site depends on: Location of each brownfield site within the country, region and particular municipality Economic cycles - in progress, stagnation or crisis Real estate cycle which is following the economic cycle with some time shift Prognosis of economic development in the country, region and particular municipality Legal and financial environment for redevelopment projects Price of a brownfield site should be reduced by estimated costs of remediation of real or latent damage of the site or object.

10. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Types of brownfields from economic point of view A Sites - Beneficial Location This kind of localities are commercially viable sites. They will be taken by market. The benefits for the community can be increased by public non-monetary policy. B Sites - Less Beneficial Location These are marginally viable sites. There is a need for public intervention and involvement of public money. Usual ratio of public and private money is 1:5. C-D Sites - Non-Commercial Localities These are non-viable sites. Usually the objectives follow more social aspects or protection of the environment or saving the emergency sitautions. Share of public finance is higher, usually 1:1 up to 1:4.

11. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 A-B-C-D Model (after Cabernet, 2005) 0 ‘PROFIT’ ‘BREAKEVEN’ ‘LOSS’ Costs & Values Euro Site Abnormals COMMERCIALLY VIABLE SITES NON-VIABLE SITES MARGINALLY VIABLE SITES Value of Hard End-Use Site Abnormals Category ‘B’ Category ‘C-D’ Category ‘A’

12. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 C-D sites These sites, with their high redevelopment costs and low market values, constitute a specific challenge for many cities and regions, as they: represent a significant problem as they can cause the visual blight, which prejudices local development and thus have a negative impact on the surrounding area and community, generally require substantial pre-investment from the public sector before they can be handed over to private developers, can be put to soft end uses „reserve status – green amenities“, must be made secure because of emergency situation. The majority of these sites may likely never find their reuse.

13. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 What is the risk Risk is such a kind of uncertainty when it is possible to quantify probability of creation of divergent alternatives by usual statistical methods. There is a danger that acquired results will diverge from assumptive results.

14. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Kinds of risks risks connected with property gaining ecological risks risks for banks providing finances risks related directly with realization other risks

15. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Risks of investors connected with property gaining Legal uncertainty resulting from complexness of proprietary relates of existing premises. Technical and financial demands of verification of current situation in ownership change Legal uncertainties arising during acquisitions of whole business or other companies owning brownfields Risks related with property consolidation and brownfields acquiring: Risk connected with purchase of the realized project Risk related with purchase of “cleaned up” land

16. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Other risks More expensive financing handicaps economics of the brownfield project The acquisition costs of the project often include price of ecological clean up and demolitions and often deducted as investments. Project preparation is more expensive Project realization is more expensive Risks connected with a project realized close to other brownfields

17. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Funding of different sites The A site category represents private funding- driven developments. The B site category represents projects on the borderline of profitability. These tend to be funded through public-private co-operation or partnership. The C-D sites category represents mainly public projects driven by public funding or legislative instruments (e.g. tax incentives).

18. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 A-B-C-D model and funding

19. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Benefits of partnerships The benefits of partnerships working in brownfield regeneration include: access to wider sources of funds, greater leverage in the use of limited public funds, and encouraging the private sector to develop on brownfield land.

20. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Partnerships in brownfield development They bring together stakeholders with the following purpose: provide leadership initiate and negotiate the development concept cohere private, public and institutional stakeholders interests mitigate the site problems secure new uses onto brownfields optimize type of public intervention to the site identify potential tenants for the created spaces produce investable and bankable project

21. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Public-Private Partnership (PPP) Long-term cooperation between public administration and private sector with the objective to supply efficient public infrastructure, public spaces and services characterized mainly by: Long-term cooperation (10-30 years). Division of project risks (mainly taken by private partner). Involvement of private partner in several project phases (financing, construction, operation, maintenance). Way of project financing (partly or fully financed by private partner and repaid directly from users or from public partner). Project economic benefiting (it must be beneficial for both sides and set in the preparation phase on the basis of public sector comparator and value for money). Concentration on key competences and making use of public and private sector experience.

22. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Public-Private Partnership at Local Level Municipality can initiate the process of brownfield redevelopment by participation of the local government in the project (direct and indirect participation). It can prepare and offer better conditions to the developer.

23. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Example: Horní Suchá (CZ) This example shows that it is necessary to: be focused on aim be ready for changing an approach be not frustrated if the progress is slow

24. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Example: Horní Suchá (CZ) Example that relates to the categories of brownfield sites. The locality of interest is the area of former mine František that lies on the northern border of the town Horní Suchá in the Ostrava-Karviná agglomeration - 12 km from Ostrava, with area of about 15ha. It is a classical example of a B site which has been transformed to an industrial park with the aim to increase employability.

25. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Example: Horní Suchá (CZ)

26. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Example: Horní Suchá (CZ) 2004

27. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Example: Horní Suchá (CZ) 2007

28. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Example: Horní Suchá (CZ) These days the industrial zone František embraces about 18 entrepreneurial subjects. Some of them operate fully in this area, others build objects for their activities and part of them is in the state of administration of the zoning process or possibly getting the building permit..

29. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Example: Horní Suchá (CZ) 2009

30. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Example: Horní Suchá (CZ) Town management showed extreme persistence already in the phase of negotiations on property transfer to the municipal ownership, and also lots of courage and work during preparation of grant project applications, their administration and financing, which is very difficult for such a relatively small town, mainly concerning projects supported by EU.

31. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Conclusion Recognition of the key drivers for brownfield regeneration. Types of brownfields from economic and management point of view. The benefits of partnerships working in brownfield regeneration. The role of local governments in brownfield regeneration in an example.

32. Brownfields in Baltic States - Lifelong Educational Project CZ/08/LLP-LdV/TOI/134005 Thank you for your attention http://fast10.vsb.cz/bribast maria.zubkova@stuba.sk barbara.vojvodikova@vsb.cz „This project has been funded with support from the European Commission. This publication [communication] reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.“