Cleaners as part of your shopping center high risk
I am looking at a multi tenant shopping center and it has a dry cleaners. It has been there since 2000 and my attorney said good chance it will require a phase 2 as it has been there so long. 

Anyone else seen issues with dry cleaners requiring a phase 2. He said he would rather have a gas station than a dry cleaners on the property.
[{"id": "ilf6pls", "text": "Probably. Petro chemicals float on the water table, but might float over to neighbouring properties. Drycleaning chemicals sink deep into the water table, unless there is a clay layer.\n\nYou could be digging deep or alternatively wide.\n\nBoth suck, but then again, both could be clean sites", "replies": [{"id": "ilf9drz", "text": "Will a phase 1 be able to tell if it is clean or not?", "replies": [{"id": "ilfel37", "text": "No. Only way to determine if it\u2019s clean \nis to do sampling (phase 2).", "replies": [], "depth": 3}, {"id": "ilgvawp", "text": "Phase one will tell you what you already know (there was a drycleaners) and maybe something you don't know (there was something else).\n\nPhase two will confirm if the site is polluted or not.\n\nPhase three will clean it up", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ilfnrgp", "text": "Florida? Yes", "replies": [], "depth": 1}, {"id": "ilfpi00", "text": "Are they actually cleaning? A lot of them send out to a centralized facility and only do drop off/ pickup at the retail location.", "replies": [{"id": "ilg5n4o", "text": "This is the biggest factor IMO. Most LifeCo loans I\u2019ve worked have provisions banning you from leasing to dry cleaners who clean on-site for this exact reason. I\u2019d imagine other types of lenders are cognizant as well, we just work with LifeCo the most at my shop. \n\nPhase II may still be required, but if they (truly) aren\u2019t cleaning on-site then your risk of it turning anything up is greatly diminished.", "replies": [], "depth": 2}, {"id": "ilmmarq", "text": "Just called the dry cleaner asking if they clean in house and they said yes, maybe I should pass on this deal? \n\nThere has been a dry cleaner there since 2000 and the last time a phase 1 was done was in 2005. \n\nEven if it isn't contaminated now say in the future it is well I could see this mom and pop cleaner going BK and leaving me with the clean up costs which from what I read can be very expensive. Will insurance cover this?", "replies": [], "depth": 2}], "depth": 1}, {"id": "ilfxoug", "text": "https://mobile.twitter.com/realestatetrent/status/1437802803313922051?lang=en\n\nIn which you learn all about tetrachloroethylene and potentially just walk away from that deal", "replies": [], "depth": 1}, {"id": "ilfzaa0", "text": "I\u2019ve seen the issue, it held up a commercial to MF redevelopment here in ATL for almost 3 years due to the amount of cleanup required", "replies": [], "depth": 1}, {"id": "ilg1uba", "text": "Yes but that was because the tenant was pouring the solvents down the floor drain and not properly disposing of them.  That was just the first of many issues with the tenant.  I've also seen dry cleaners with no issues because they were doing things correctly.  Look at this history of the tenant and start with a Phase I.", "replies": [], "depth": 1}, {"id": "ilg4p9u", "text": "I had a dry cleaners trigger a phase2 on a property I sold years ago. I was really happy when the industrial property wasn\u2019t the problem. I think the source of contamination was 150 yards away from the boundary line.", "replies": [], "depth": 1}, {"id": "ilg5wmu", "text": "If I\u2019ve learned one thing from Strip Mall Guy, it\u2019s this\u2026", "replies": [], "depth": 1}, {"id": "ilg9kn4", "text": "I purchased a commercial property last year. Bank required a phase 1 for loan. Phase 1 is simply a study that identifies potential issues. Pretty exhaustive actually\u2026like 70 pages! Turned out there had been a dry cleaner on site from 1940-1975 with possible buried solvent tanks. We went to phase 2\u2026testing. Drilled in the basement multiple spots down to the water table and sent samples for analysis. Turned up some trace elements (and no tanks) so we got lucky (seller and I split the costs). I got the coveted \u201cno further action\u201d letter. Could have killed the deal for sure. Owners are responsible for clean up\u2026whether they were at fault or not\u2026so due diligence is critical. Phase 3 is mitigation: $$$", "replies": [{"id": "ilh8sya", "text": "Dealt with a very similar transaction, in our case the source of contamination was from a strip center down the street. We were able to negotiate $100k off &amp; split the costs associated with environmental. Took a fair bit of time &amp; energy to close.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ilg9lyz", "text": "It probably will need a Phase 2. The Phase 1 will say \u201chey there\u2019s a dry cleaner here, probably should do some testing.\u201d\n\nWe bought a strip center with a dry cleaner and it required Phase 2 and then some remediation as well. Nothing too crazy but definitely want to do your due diligence. Otherwise any and all clean up and costs could fall on you as the new owner.", "replies": [{"id": "ilgs3ce", "text": "I just went to look at a building that has a dry cleaner as the only tenant and they do everything there in house by all the equipment I saw. I was going to buy it cash. There are sewers at the property so if tenant had poured contaminants down the drain would I be in the clear because it\u2019s not going into a septic tank for example that would be on property?", "replies": [{"id": "ilgtrxx", "text": "No that\u2019s probably worse. There are most likely cracks and holes in those pipes and it it not only contaminated the immediate area, it went \u201cdownstream\u201d and if contamination can be traced back to that shopping center as the source, your liability could theoretically be endless.\n\nI would not only get a Phase 1, and Phase 2, I would probably also seek an environmental indemnity from the current owner (personally not the LLC). I would also approach the tenant, make them sign something saying they are doing everything by the book and to indemnify you as well.", "replies": [{"id": "ilh15aw", "text": "What would a typical phase 3 cost? I\u2019m in NY and had to do a phase 2 at a shopping center I purchased about 7 years ago. Thankfully it came back clean but I think I paid about $10k at the time.", "replies": [{"id": "ilh5vbm", "text": "Phase 2s depend on the amount of testing needed. Hard to say. \n\nPhase 3s are the clean up portion and there\u2019s no way to determine that cost without going further down the road and seeing the extent of the contamination (if any) from the Phase 2 tests.", "replies": [{"id": "ilh777e", "text": "Thanks I appreciate your response. The property is priced right but I\u2019m just trying to see it from all angles. I\u2019d be buying it cash so I wouldn\u2019t have to worry about Enviromental but it would bite me in the ass eventually when I\u2019d decide to sell. My partners are saying to just pick it up with the intention of just planning on never selling assuming there will be issues with environmental.", "replies": [{"id": "ilh8kg5", "text": "Yeah I wouldn\u2019t do that. Even if you never plan to sell it or do any environmental testing, if an adjacent property or something did a Phase 2 and it was found there\u2019s contamination from your site, you are liable for damages and clean up. Governments also take it very seriously and if you do not comply, you could face jail time.", "replies": [{"id": "ilhd9xa", "text": "Yeah I guess you\u2019re right. I didn\u2019t think about that. Thanks for the advice.", "replies": [], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ilggutj", "text": "All the comments warning you off make sense if there was an onsite plant at any time in the property's history. The other consideration is your exit. The potential buyer pool will shrink, which means deep pricing concessions may be needed just to sell.\n\nA colleague of mine cannot unload a well-running, late 90s multifamily property due to trace chemicals found on site from a basket weaving plant in the early 1900s.\n\nThe property has a Phase II with a letter from the State saying that as long as no new construction takes place there won't be any brownfield remediation needed. They thought the letter was their golden ticket, however, lenders won't touch it...They've had three transactions drop out in DD, two during the height of 2021 frothiness where pretty much everything MF sold.. which leaves cash buyers wanting a pretty steep discount killing any profits.\n\nBy the way, they made the same mistake when purchasing. Couldn't get a loan and paid cash because the revenues were so high, kicking the can down the road. Bad on them, unfortunately. Caveat Emptor mate.", "replies": [{"id": "iloqpwj", "text": "So they paid cash, figuring they could \"value add\" by fixing the environmental issues and found out they were wrong... Did they get a good enough purchase price that it cash flows (obviously their cash on cash blows)?", "replies": [{"id": "ilot4h7", "text": "Actually they bought thinking the word from the State would be good enough for the next buyer and had no plans to fix anything on that front, nor do any construction per the State's requirements. Actually, I think it might've been REO from a lender so there was some sort of discount..so another red flag. There was some capex spent on the interiors and it's a great property otherwise. It definitely cash flows and has zero foreclosure risk. Like you say, CoC is probably crap if they are even measuring that.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ilgx9in", "text": "Just did a CRE deal, dry cleaner was there for sometime and the environmental recommended a phase 2", "replies": [], "depth": 1}, {"id": "ilhbypg", "text": "Phase I ESAs review historical usage uses and some uses will virtually always spark a Phase II. I primarily deal with land and all agriculture land basically require a Phase II. I assume anything with chemical usage will require it like a dry cleaners.", "replies": [], "depth": 1}, {"id": "ili0h7m", "text": "Yeah typically a phase 2 is needed, it might help to know whether or not the property is in the US EPA Superfund as that could mitigate costs of cleaning potential contamination. Speaking from south Florida experience here in retail", "replies": [], "depth": 1}, {"id": "iljf1eb", "text": "Get a phase 2. Unlimited liability for cleanup on the owner if contaminants found in soil. Many properties that had/have dry cleaners are worth less than zero due to the liability", "replies": [], "depth": 1}, {"id": "iljqbgx", "text": "I have extensive experience with dry cleaners, laundromats, and gas stations.  First, simply visit the site (or ask) if they perform cleaning on site (now or previously).  If the Premise was never used for cleaning you are fine.  Second, a phase two will be done regardless due to lender liability.  \n\nI have excavated several gas stations and dry cleaners.  Gas stations are 10x worse than dry cleaners, if not 20x worse.", "replies": [{"id": "illdoi6", "text": "The business owner doesn\u2019t own the property and wasn\u2019t very thrilled when I went to look at property. He has a lot of machinery in there so I\u2019m positive he\u2019s doing full service cleaning. I was trying to get an idea of what a ballpark remediation project would cost so I know how to negotiate on price.", "replies": [], "depth": 2}], "depth": 1}]