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Adaptive reuse of former warehouses or industrial buildings can be scary for developers worried about liability issues surrounding pre-existing site contamination, but the Oregon Department of Environmental Quality has a program in place to encourage such efforts.

The DEQ’s Prospective Purchaser Agreement allows developers to purchase and invest in a property, but with limited liability tied to acquisition of a contaminated site.

Developer Dan Neal entered into a PPA when negotiating the purchase of a 1.17-acre parcel at 5310 S.W. Macadam Ave. for redevelopment into a six-story, 133-unit apartment complex.

鈥淚t was an old furniture manufacturing shop from 1905 until 1980,鈥� said Cheyenne Chapman, the DEQ’s legal policy analyst. 鈥淭he developer wanted to dig down to create ground-level parking, which removed the soil and residual contamination. It was kind of an elegant solution.鈥�

Chapman said the developer approached the DEQ with a proposal to enter into a PPA to protect himself from potential future liability.

鈥淭here weren’t really any viable responsible parties to be found, because the last business on-site closed in 2001,鈥� she said. 鈥淪o we worked to come up with a media management plan to outline what the developer needed to do to make sure any residual contamination issues had been addressed.鈥�

Perry Smick, a project manager with Eugene-based Essex General Construction, general contractor for the Macadam Avenue development, said the site had only 鈥渕ild鈥� contamination compared to sites with heavier industrial use.

鈥淲e’ve taken probably 400-plus cubic yards of soil to a waste management facility in Hillsboro,鈥� Smick said. 鈥淲e’re putting a 15-inch (concrete) slab on 95 percent of the site’s footprint, so we didn’t have to remove as much soil.鈥�

Noel Johnson, vice president of Vancouver, Wash.-based Killian Pacific, said his company used a PPA to move forward with redevelopment of 1510 Technology Center, a Central Eastside property that formerly held a machine and maintenance shop for Portland General Electric.

鈥�(A PPA is) the little-known tool which was key to this building’s rebirth,鈥� Johnson said. 鈥淭his agreement is a novel and productive way for the public to partner with the private to enable the redevelopment of environmentally contaminated sites.鈥�

Tenants in Portland’s growing high-tech market want close-in, creative office spaces in a market where vacancy rates continue to drop and infill development increases with demand. But the expense and uncertainty can 鈥渟care off lenders and buyers,鈥� said Richard Allen, a managing partner at Marten Law’s Portland office.

鈥淎 PPA essentially creates value in a property without the specter of environmental contamination because it addresses the contamination problems and puts a dividing line between the past and future uses,鈥� he said. 鈥淚deal projects are those where there is either a complete redevelopment of the property or an adaptive reuse that helps establish that dividing line and demonstrates a public benefit.鈥�

The 鈥渄ividing line鈥� Allen mentioned is a clear indicator that past contamination issues have been addressed and the site will be repurposed for such use that future contamination could not be misidentified as originating from past site use.

One of the criteria for a site to be considered for a PPA is that an environmental cleanup and repurposing must provide 鈥渟ubstantial public benefit,鈥� Chapman said.

鈥淚t’s a matter of working with the DEQ on due diligence to answer the questions: What are the issues on this site and how clean is clean enough for this property?鈥� she said. 鈥淲hen dealing with environmental cleanup, prospective purchasers have big questions, and this agreement gives the DEQ tools to obtain a liability release.鈥�

A PPA is useful for redevelopment of small, simple sites or large, complicated ones, Chapman said, but it’s only available to potential owners and not existing owners.

鈥淭o qualify, you have to be a prospective purchaser, not a proud new owner, of a property on which some remedial action is necessary to protect the environment or public health,鈥� Chapman said. 鈥淎nd the project must result in substantial public benefit, such as productive reuse of an abandoned industrial site or commercial facility.鈥�

Obtaining a PPA is something a potential owner works on with the DEQ separate from any agreement made with the seller, Chapman said. Then it’s up to the potential buyer to learn about contamination prior to purchase.

鈥淭he time we have to clean up the property is when the transaction is in the works,鈥� she said. 鈥淭he process goes in phases, from a walk-through, to retrieving records on the history of site use, to sampling and testing.鈥�

Allen’s clients have a good idea of properties’ environmental situations early in the process, and he said he thinks redevelopment of several properties in the Portland area would make sense with the protection of a PPA.

鈥淲e still have, here in Portland, an awful lot of old corner gas stations and similar sites dotted around the area,鈥� he said. 鈥淪ome have been developed, but there are a lot more out there that could benefit from this program.鈥�