HIGHLIGHTS Transaction involving another buyer and broker bogs down due to environmental concerns Borelli Investment Company brings in KB Home, then works to find way to eliminate environmental risks Third-party company, backed by AIG insurance policy, guarantees spending cap on cleanup effort via a risk-transfer agreement. Transaction closes, bringing 105 new homes to San Jose, improving the Williams Street neighborhood, and enabling Union Pacific to sell surplus asset

As the railroads have slowed down and been replaced by other forms of transportation, much valuable property has remained unused. For 80 years, Union Pacific Railroad operated a maintenance yard on Williams Street not far from downtown San Jose. With the proposed BART line making that portion of Union Pacific tracks obsolete, the railroad was looking for a way to sell what had become a surplus asset.

When Borelli Investment Company and its valued client, KB Home, learned of the Union Pacific property, the land was under contract through another broker with a different buyer. But complications had arisen.

Testing was done, and it was discovered that the 18-acre parcel needed a substantial environmental cleanup. The price tag was estimated at close to $7 million, but no firm bid had been obtained. Deterred by the uncertainty, the initial broker's client balked, and the deal was about to fall through.

Representing KB Home, Borelli Investment Company entered the negotiations with Union Pacific Railroad. Working diligently yet cautiously, Borelli explored the potential risks and pursued a number of creative solutions. After nearly three years of work, KB Home and Borelli Investment Company found an environmental company that was willing to assume the risk on behalf of KB Home. The company guaranteed that the cleanup would not exceed $7 million, and obtained an insurance policy from industry leader, AIG, to underwrite KB Home against further environmental risks.

With the uncertainty removed, KB Home closed the transaction on the 18-acre parcel that will provide 105 homes. As part of its development, KB Home will also complete a portion of the Coyote Creek Park trail that runs through San Jose. When the cleanup is finished, a blighted area will have been removed from the neighborhood — making it a better place to live for all the residents.

In addition, Union Pacific benefits from the sale of a surplus asset that will bring additional operating capital into its reserves. Throughout the three-year process, Borelli Investment Company's tenacity and experience ensured that this was one transaction that would stay on track.