Have a small park under contract with a few concerns


#1

Have a small park located in the Southwest Region and currently in escrow to close in three weeks.

Was provided with a Phase 1 environmental report by the current owner that was completed 2 years ago. The overall report went through everything and confirmed what I needed but a soil sample was not done and confirmed approved clean of contamination issues. Went through the GIS Mapping of the area for all environmental cases for the area that are active and it shows no sign of dating back any contamination. This Park did have a gas station the under ground tanks were taken out in the mid 80’s per the GIS site. Any perspective on what you would do or not do I’d like to hear input.

Utilities can eventually be billed back for Water / Sewer / Trash which are set up now but the current owner hans’t implemented billing yet. Electric is on 3 master meters and trying to determine the most cost inefficient way to pass these onto the residents. The current set up on master meter is inefficient and most likely will make for more management for collections.

Knowing that smaller parks are more difficult to finance does anybody here have a contact that I may reach out to discuss this park in regards to refinancing?

In advance, thank you for your input!

Mike


#2

Hey Mike,

I’m REALLY surprised a former gas station did not have a Phase 2 performed / required. I have owned one of these - but unlike your report my Phase 1 recommended a Phase 2 for soil sampling and investigation. Underground Storage Tanks (UST’s) leak all the time, and even more so when they are removed from the ground. The Phase 1 should have investigated that process and noted any concerns. Back in the 80’s the DEQ was a good ol’ boys club and environmental concerns didn’t have the attention they have today in many states.

Given the nature of this you may want to consider a couple additional CYA items:

  1. I would ask the Environmental Company that performed the ESA to update the report so that it will cover you instead of only the current owner. These are not transferrable like a survey are with a title company.

  2. Make sure your title policy does not have any exclusions for environmental issues on the property too.

  3. I’d also consider hiring your own environmental company to perform a peer review of the study. Try Renz & Associates as they do nationwide coverage. If subject property is in Texas PM me and I can give you a local company that helped me for my property.

I’m fairly risk averse, so this may seem excessive - but it’s what I would do in this situation. This is internet advice so also seek legal and environmental engineer counsel in the subject property’s state to ensure you have the complete picture.

Good luck and keep us posted.


#3

@jhutson

I didn’t learn there was a past operating gas station on the property until about a week and half into the diligence.

I think what I’m going to do is contact the company who was contracted to do the report and sniff around to see what type of exposure I have. That is such a good idea to try and transfer the created entity for the park onto the sellers report. Doesn’t hurt to ask - my guess is it wouldn’t go over well but I’m use to hearing NO all the time:)

Per the title report there is an open ended statement that displays questions - so that is concerning for sure.

If there was MORE upside which there isn’t I had have know issues spending $$$ on an attorney reviewing sellers phase I, possible redo altogether and get a fresh set of eyes to determine exposure.

If the property was in Texas I would definitely reach out.
Thanks for your willingness to share with me here and providing clarity. Hearing ideas from a 3rd party and getting out of your own head sometimes is the best thing you can do.

Cheers,
mike


#4

I am in no way an expert, so the thoughts below are just my opinion. Ditto to @jhutson ‘s comments.

You should definitely see advice from Qualified professionals on this. You might be able to have the company that did the Phase 1 update it for you at a lower cost than doing a new one. Definitely better to have a current report done in your name than an old one done for someone else.

There is also a licensing and insurance requirement for these environmental audit companies. So make sure they are current with those.

Also, I don’t see any benefit in trying to be subtle with your questions to owner or the environmental auditing company. Be very direct and explicit. Ask them questions about your specific concerns and find out the answers. Liability for environmental problems is not something you want to make assumptions about or accept ambiguity about.

Good luck!


#5

@jhutson
@jaydub

Both of Your suggestions have been very helpful for me to determine what I want to do with this park.

I personally have no issues with attempting to take on BIG problems however the risk attempting to remedy the problem here with this park and weighing the upside potential I just don’t see it. The current seller will eventually have to exit and with doing so any buyer will want to be cleared. Can’t justify spending $ on something with out a significant reward behind it. NEXT.