Due Diligence Presentation (Preview)

Environmental Due Diligence Overview

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Environmental Due Diligence Overview

Why complete Environmental Due Diligence? Types of Due Diligence Phase I, Phase II, and Phase III ESA Process SBA Guidance – Environmental Risk

Management Sources of Error on Phase I ESA Process Vapor Intrusion Questions

Why Complete Environmental Due Diligence?

Formal Environmental Policy Regulatory Pressure Loan Risk Management - New loan origination

- Facility\property acquisition- Foreclosure- Loan extension or refinance- Monitoring over Life of Loan

Why Complete Environmental Due Diligence?

EDR 2010 Annual Survey of Financial Institutions

Reviewed Lender Environmental Policy requiring EDD

Why Complete Environmental Due Diligence?

Types of Environmental Due Diligence

Phase I ESA Process ASTM E 1527-05 Phase II ESA Process ASTM E1903-97 Phase III ESA Process Remediation Action Plan

Definition:“The purpose of this practice is to define good commercial and customary practice in the United States of America for conducting an environmental site assessment of a parcel of commercial real estate with respect to the range of contaminants within the scope of Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) (42 U.S.C. §9601) and petroleum products. As such, this practice is intended to permit a user to satisfy one of the requirements to qualify for the innocent landowner, contiguous property owner, or bona fide prospective purchaser limitations on CERCLA liability (hereinafter, the “landowner liability protections,” or “LLPs”): that is, the practice that constitutes “all appropriate inquiry into the previous ownership and uses of the property consistent with good commercial or customary practice.”

Phase I ESA ProcessASTM 1527-05

Goal of a Phase I ESA: CERCLA Liability Protection Determination of “Recognized Environmental

Concern” Determination of “Business Environmental Risk”

Phase I ESA ProcessASTM 1527-05

Definitions (con’t):Recognized Environmental Conditions “the presence or likely presence of any hazardous substances (HS) or petroleum products on a property under conditions that indicate an existing release, a past release, or a material threat of a release of any hazardous substances or petroleum products into structures on the property or into the ground, ground water, or surface water of the property. The term includes hazardous substances or petroleum products even under conditions in compliance with laws.”

Phase I ESA ProcessASTM 1527-05

Definitions:Business environmental risk “a risk which can have a material environmental or environmentally-driven impact on the business associated with the current or planned use of a parcel of commercial real estate, not necessarily limited to those environmental issues required to be investigated in this practice.Consideration of business environmental risk issues may involveaddressing one or more non-scope considerations.”

Phase I ESA ProcessASTM 1527-05

What is included in a Phase I ESA Report: Records Review

– Regulatory database search– Regulatory agency file review

Historical Use– Aerial Photographs– Sanborn Maps – City Directory Review– Land Title Records– Building\Property Tax Records – Zoning Land Use Records

Phase I ESA ProcessASTM 1527-05

What is included in a Phase I ESA Report: Site Visit

– Visually and physically observe the property – Current\past use of property and adjoining properties– Color Photographs – Site Plan

Interviews – Current Property Owners\Operators\Occupants– Local Government Officials

Phase I ESA ProcessASTM 1527-05

Limitations of a Phase I ESA Report: Out of Scope Items

– Sampling – Asbestos, Lead, Mold, Radon– Cultural or Historical Resources – Wetlands, Ecological Resources, or Endangered Species – Health, Safety, or Regulatory Compliance– Checking Title Records for Environmental Liens or Land Use Restrictions– Property Appraisal or Review of Purchase Price

Phase I ESA ProcessASTM 1527-05

Limitations of a Phase I ESA Report (con’t): Phase I ESA report, per the standard,

− Is only good for 180 days, − At which point an update will need to be

performed

Phase I ESA ProcessASTM 1527-05

Phase II ESA ProcessASTM E1903-97

Follow-up investigation based on the results of the Phase I ESA

Scope is determined by Environmental Professional to properly address “Recognized Environmental Conditions” and “Potential Environmental Concerns”

Typically includes soil and groundwater sampling on the subject property for laboratory analysis

Results of laboratory analysis compared to local, state and federal regulatory guidelines

Phase III ESA Process

Goal – to determine the horizontal and vertical extent of

contaminations impacts in order to estimate the method and

cost of cleanup Typically includes additional soil and groundwater

sampling and laboratory analysis Results of laboratory analysis compared to local,

state and federal regulatory guidelines Development of a Remedial Action Plan

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