New to Forum 20 Year Due Diligence Consultant Here to Help
Not sure if you guys have someone available to answer commercial property due diligence questions. I am 20 years in business and have experience at over 500 sites across the USA. I am Registered Geologist and NJDEP Licensed Site Remediation Professional. I work for a national firm and I specialize in environmental Phase I and Phase II reports, remediation and property condition reports. I typical work with analyst and commercial real estate folks and I am here to answer questions as needed. Feel free to ask away. Thanks look forward to connecting with you all. Thanks Rich George!
What can be done to be really thorough with a Phase II ESA? Do people cut corners on occasion? I recently did a Phase I and II that didn’t pick up a multi-million dollar environmental problem. I’m wondering what went wrong or if that is just always going to be one of the risks developers face? (I heard the environmental company’s side of the story but they’re obviously playing CYA).
Need some more details to give you the right answer but the scope of Phase II can vary from firm to firm depending on the level of expertise of the person conducting the work. Developers should not have to face this kind of risks. Something clearly went wrong. Not all Phase IIs are equal. I review a ton of them and the quality and detail from the from firm can vary a lot. Most of the national firms get it right because they have attorneys involved and most have been sued at some level in the past. Sometimes the person ordering the Phase II or attorney can ask consultant to reduce the scope and the consultant states these limitations in the proposal but not every time is that picked up by others. Sometimes property owners restrict what can be sampled. Most assume consultant is doing the right thing that is what I hired them for but like anything else this is not always the case. There are good firms and not so good firms out there. Deals move fast and things are missed sometimes but I would say this not normal at all. I am guessing that they missed a groundwater problem with free product or vapor or offsite impact since the cost is multi million dollar cleanup. Mulit million dollar cleanups is not the norm this is major screw up by somebody. Risk is usually very box-able these days and very rarely risk is over 1 million dollars when a Phase II is done....not sure something clearly wrong here. Most consultants have tables of risk cost and there are some general acceptable estimates that we use in the industry to box risk. For example a leaking heating oil UST has a cleanup estimate of $50k To $100K and a hydraulic lift is $25-50K if leaking and needs to be replaced. Let me know if this helped or if you need more information. Even if was missed there are some ways to mitigate the cost through insurance claims.
I can’t really go into specifics of what went wrong and what their response was because that’d give away my identity. But we did use a well known national company and they still missed it. Fortunately, we weren’t on the hook for remediation costs since we knew it was a high risk site for environmental problems and the attorneys structured it in a way where the seller was on the hook for a long list of environmental problems that could occur post closing. It did completely fuck up our construction schedule, though.
this--get an experienced environmental attorney to review your Phase I ESA and guide recommendations for Phase II testing if you see something fishy. They are familiar with federal reporting protocols, they know what lenders want to see in terms of papering an environmental problem, and they can usually recommend specific testing procedures depending on what you are dealing with that the environmental consultant may not bring up.
totally agree great point I work some of the best enviro attorneys in the US and they are by far a clients biggest asset for guiding transactions.
Need some more details to give you the right answer but the scope of Phase II can vary from firm to firm depending on the level of expertise of the person conducting the work. Developers should not have to face this kind of risks. Something clearly went wrong. Not all Phase IIs are equal. I review a ton of them and the quality and detail from the from firm can vary a lot. Most of the national firms get it right because they have attorneys involved and most have been sued at some level in the past. Sometimes the person ordering the Phase II or attorney can ask consultant to reduce the scope and the consultant states these limitations in the proposal but not every time is that picked up by others. Sometimes property owners restrict what can be sampled. Most assume consultant is doing the right thing that is what I hired them for but like anything else this is not always the case. There are good firms and not so good firms out there. Deals move fast and things are missed sometimes but I would say this not normal at all. I am guessing that they missed a groundwater problem with free product or vapor or offsite impact since the cost is multi million dollar cleanup. Mulit million dollar cleanups is not the norm this is major screw up by somebody. Risk is usually very box-able these days and very rarely risk is over 1 million dollars when a Phase II is done....not sure something clearly wrong here. Most consultants have tables of risk cost and there are some general acceptable estimates that we use in the industry to box risk. For example a leaking heating oil UST has a cleanup estimate of $50k To $100K and a hydraulic lift is $25-50K if leaking and needs to be replaced. Let me know if this helped or if you need more information. Even if was missed there are some ways to mitigate the cost through insurance claims.
Since you have years of experience, What would you suggest that all RE developers look into before buying a building/site that we wouldn’t think of when purchasing a property?
Any great takeaway advice and lessons you’ve learned over the years that you can tell us to look out for that’s imperative. Thanks!
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