Commercial Property Due Diligence

Posted by on Apr 4, 2013 in Building for sale, Commercial Real Estate Tips | 0 comments

Commercial Property Due Diligence

A commercial real estate environmental inspection is used to determine  cleanup or any contamination of commercial property, while pinpointing liability concerns.  The most popular environmental inspection is called  a Phase I which uses the standard called ASTM E1527-05 EP AA I.

The engineering firm will use the following tools to evaluate the commercial property that is under inspection:

Site reconnaissance  Historical records  Government records Other available information sources

Also surrounding properties that have issues may or can migrate into your commercial property.

Time and Cost for due diligence

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The average turn time for a commercial real estate environmental inspection is 3 weeks and cost is approx $2000, You can order only pieces of Phase I to be done, if that is the case then it can be used for business decisions or renegotiation strategies . If it is not a complete inspection then it will not cover CERCLA I or no Landowner protection.

You can expedite and associated fees do exist for this , some information that is gathered from other sources can take weeks such as fire department , etc.. so this will add to your turn time.

Hiring a Professional to do the inspection:Phase I and Phase II Environmental inspection for commercial property

When a Phase I is required during your commercial property due diligence,  it is important that it  be conducted by an engineer / Phase I professional who has the education and credentials that are required,you always give the consultant-engineer as much information as possible about the property in question such as it’s history, zoning etc..

Getting a hold of  older reports are critical from the seller this helps expedite the reporting , additional add-ins can be lead based paint, asbestos , radon, mold and Chinese drywall

If there is a statement of “No Further action Required” then you are ok, however if that does not exist and there is a REC known as a Recognized Environmental Condition you will need a Phase II inspection done

Big Red Flags – gas stations, dry cleaners , land fills, oil wells and oil fields. Former or existing dry cleaners that use PCE cause a lot environmental issues. Methane gas is an issue with a land fill

Some more : Industrial use with sumps or drains , Auto repair (former)

Historical city directories can be used to see who occupied the space previously all the way back to the 1800’s.

When you see a REC , a Phase II study is typically required, this will cover the following:

Soil, Groundwater, Soil Vapor and Indoor Air for vapor intrusion

Remedial cost estimates are done by characterizing the site during the Phase II , remedial costs can be used to renegotiate the price of the property.

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