Commercial real estate due diligence inquiry and opinions
I've recently opened my own environmental consulting firm and I'd like some honest/blunt insight from developers about how they feel about ESA reports and the like. I'm inquiring because I feel this info will help me better taylor my services to my clients. Thanks in advance
[{"id": "hnri4w4", "text": "What is your question?  I feel like this is a bit like appraisal.  \n\n95% all anyone cares about is the summary page saying no additional investigation is needed. (Ie it made value).\n\nThe other 5% is a different ballgame involving lawyers and specific issues where folks pay for good work and your resume.", "replies": [{"id": "hnrimdc", "text": "Looking for insight on whether you feel it's necessary, what you look for in a specialist, how you like to be informed during the process, etc", "replies": [{"id": "hnrjmp9", "text": "Its generally necessary for loan requirements but past that I guess it depends.  For cash deals I find clients frequently will just review a recent phase 1 etc if there is no reason yo suspect an issue.  Cost and turn around time seem to largely be the biggest considerations.  As far as keeping informed if you find an issue that shouldnt come up when you deliver the report.  A headsup is appreciated so we can react as needed.  Like I said the other 5% is different.  If you want that business id load up on certs and build a strong resume.", "replies": [{"id": "hnrjv9i", "text": "What do you look for in a resume?", "replies": [{"id": "hnrnsoj", "text": "For the last 5% ?  Tbh that is past my experience level.  If phase 1 has issues we just bail.  Sometimes weve done soil sampling etc and its been ok which is easy.\n\nIf you want to do the tough ones where litigation is involved, epa is involved, and everyone knows their are issues id think like most other re fields experience in depositions, testifying, connections to lawyers, and having every cert you can in your field is what a good resume is.\n\nYou are expected to be the man or woman at that point and when you speak it needs to be top shelf to investors, courts etc.", "replies": [], "depth": 5}, {"id": "hns9rdh", "text": "Communication and meeting deadlines.  And bringing solutions and not problems.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "hnrvkv9", "text": "It\u2019s absolutely necessary. From a rehab perspective, it informs the engineers on how best to proceed, gives us recommendations on which reports need to be fulfilled (DEC, DEP, RAWP, etc) and provides the GC with evidence of asbestos/lead/radon so they can remediate and file the correct documentation at the municipal level for inspections and sign off. When I am engaged on a deal, it\u2019s one of the first things I want to read through.", "replies": [{"id": "hnrxcrj", "text": "Very insightful thank you. I for a environmental company for many years and I always a big disconnect with our clients, your input much appreciated", "replies": [{"id": "hnt2727", "text": "I work in affordable housing development. Think about this:\n\nI get site control (yr 0). I get an arch to do some basic plans and decide to submit an application for financing. To do that, in any state, you must complete a phase 1.\n\nI get denied.\n\nThis process can go on for 2-3 yrs. We need an update every six months and a new one every yr. (Varies by state) I pay about 3500 for a phase 1 and like 1600 for an update. Idk if it's top dollar but it's almost guaranteed income.\n\nAs far as the report, I only care about the findings page. But that's the same with any report. They're hundreds of fucking pages. Sometimes thousands. I'm not reading that, sorry. So as long as you prepare a report that is accepted and error free, I'm gonna keep hiring you.\n\nMy 2 cents.", "replies": [{"id": "hnt3m4u", "text": "Again very insightful!", "replies": [], "depth": 6}], "depth": 5}, {"id": "hnui93j", "text": "What that guy said. I deal with a lot of medical so radiation is a concern in some properties. On vacant land anything that would show up as a potential environmental hazard is always going to impact the price of the overall project, so knowing earlier is always better. Having a report promptly is just as important is pretty important. If you can\u2019t get it done, don\u2019t take on the work.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "hns9nph", "text": "Nothing is necessary unless it is required.  It's up to whoever is buying the deal.", "replies": [], "depth": 3}, {"id": "hnuoj9e", "text": "I want to see the page that says no RECs. If a Phase II is warranted, or we are dealing with a brownfield property, I want you to call me and explain what we're dealing with, how you would solve it, what the next steps are going to be, and how to estimate the cost. Environmental problems don't scare us, but when problems do arise, we need consultants to be opinionated. It is your expertise we are relying on, so please be blunt and take a position.", "replies": [], "depth": 3}], "depth": 2}, {"id": "hnsg73b", "text": "Also depends on loan type, Fannie, Freddie, etc. and property type, for risk.  Also, hello old friend!  Long time no chat!", "replies": [], "depth": 2}], "depth": 1}, {"id": "hnrini8", "text": "This is coming from someone who is a developer but was previously a civil/environmental PE.\n\nAs a developer, I just want a clean Phase I, at a reasonable price and in a reasonable time. I hate fucking around with Phase II\u2019s or test pits/wells because historical aerials showed a crop duster on the parcel 70 years ago or a few dump trucks of historic fill were placed 40 years ago. Unless it\u2019s a CERLA level liability, I don\u2019t want to even know about it. I think historic fill is vastly overinflated as an issue. \n\nAs an environmental professional, I understand why those are RECs and that I have to identify them to protect my professional liability and reputation. It\u2019s also usually in the best interest of public health to do so. Some Phase I/II\u2019s do occasionally uncover larger off-site concerns.\n\nMy parting advice would be - if you find a REC, figure out how to address is ASAP. No one allocates time or resources for a Phase II or additional study in their due diligence timeline. If you can figure out fast, at least your client will only feel that they lost money, and not also time.", "replies": [{"id": "hnrizdi", "text": "Thank you, very informative", "replies": [], "depth": 2}, {"id": "hns8s62", "text": "What would you consider a reasonable price?", "replies": [{"id": "hnsq2mr", "text": "Depends on the area (cost of living) and property type (new residential lots vs old gas station) but probably $2,100 to $2,500 for a normal site. Maybe $3,500 for a gas station with some document review. I prefer consultants to spend more money on a document review or calling previous consultants upfront before issuing a REC, even if it\u2019s an out of scope add-on. \n\nI think other commenters pointed it out, but no one reads the report body. I\u2019d use an easy to swap template if you can, anything to cut down on your hours.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hnrjuuk", "text": "Try to get on the vendor lists of some lenders. Typically need to get some level of environmental report for every loan.", "replies": [], "depth": 1}, {"id": "hnrtwan", "text": "As a developer in NJ everything is dirty, I know that. What I need to know is worst case scenario and most likely scenario to clean up. I understand it's difficult but ballpark or even big ranges are fine.", "replies": [{"id": "hnrvy5x", "text": "Service wise (communication/formating or presentation etc) anything you prefer or appreciate?", "replies": [{"id": "hnvkr59", "text": "Some sort of chart that says the cost of clean up is between $X and $XXX. In order for me to figure out what that number is you would have to spend $Y more dollars.  I know it's a moving target I just need to know worst case, and then cost to narrow worst case down.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hnrvj30", "text": "I used to do phase I/II work.\n\n&amp;#x200B;\n\nIf you mainly deal with office space, class A retail, or other 'clean' spaces, the lowest cost phase I is probably fine.\n\n&amp;#x200B;\n\nIf your niche is former gas stations, dry cleaners, industrial areas, it is 100% worth it to know what your getting into. Can never put that genie back into the bottle.", "replies": [], "depth": 1}, {"id": "hnrxizj", "text": "Reach out to your local CDC (certified development corporation) and see if you can get on there approved vendor list. Every SBA 504 loan is required to have at least an RSRA if not a phase one. If you can learn what the SBA requires in the report you can get a steady stream of business that way.", "replies": [{"id": "hnrxyry", "text": "Very good suggestion. Thank you", "replies": [], "depth": 2}], "depth": 1}, {"id": "hnsrfqp", "text": "I work for an end user doing large scale industrial development. We perform a phase 1, but really only care about the REC page unless shit hits the fan.\n\nOur risk profile is such that we perform a phase 2 on every property we intend to develop though. Is it always necessary? No, but because we do vehicle reconditioning and sale we want to make extra sure that we're ok to get into the dirt. \n\nFrom our perspective, the more services you can offer, the better. If we can get Phase 1, 2, and geotech's from the same group, so much the better. If you have the expertise or can bring the expertise on to put multiple products together for the client, you'll have a much better chance attracting business.\n\nTime is also a seriously important factor. Right now we are waiting normally 6 to 8 weeks minimum for phase 2 testing. If you can move faster than that, you're going to be a very busy person for sure.", "replies": [{"id": "hnt3fhu", "text": "Thank you, very insightful. Currently I perform Phase 1/2 but never thought of incorporating a Geotechnical...something to think about \ud83e\udd14", "replies": [], "depth": 2}], "depth": 1}, {"id": "hnsvyvl", "text": "Live in Louisiana and a good environmental consultant is very important on former heavy industrial sites. We always do a phase I on every transaction and if initial report calls for more research then phase II. \n\nIf I think there is going to be contamination when starting a project I\u2019ll always engage a company that I know is not going to set off alarm bells right away to kill the deal. A Phase II is not a major deal killer just more time consuming and more expensive. In our market we know who is going to insist on running up a major tab by calling for a bunch of samples and tests. Most folks try to stay away from those groups\u2026.", "replies": [], "depth": 1}, {"id": "hnt4og0", "text": "Outside of cost, are there any attributes or services that would cause you to choose one company over another?", "replies": [{"id": "hnt4zem", "text": "Turn around time and if you are on the bank approved lists", "replies": [], "depth": 2}], "depth": 1}]