Partner recently attended the PCIA Wireless Infrastructure Show in Hollywood, Florida.  The energy was high as business is booming for this industry, including the Phase I Environmental Site Assessment world.  With so great a demand for wireless infrastructure, tower companies and developers were eager to network with various services providers, including those with expertise in Phase I ESAs, NEPA assessments, SHPO / THPO consultation and related environmental and construction services.  In our discussions, we noticed an emphasis on service providers with national coverage and local knowledge.  One industry trend observed was that calls are just a small percentage of the network usage; the largest and fastest growing network drain is video and data downloads.  Partner expects this industry will continue to grow as the demand for smart phones and large downloads increases.

Typically, when a lender is considering a real estate secured loan collateralized by a gas station, the environmental risk associated with the real estate can be a major factor in the lending decision.

The three main considerations are outlined below:

(1) What is the age of the current Underground Storage Tank (UST) system?   Regardless of other mitigating factors, internal risk tolerance thresholds may prescribe the completion of a Phase II ESA based solely on the age of the UST system?

(2) What is the age of the gas station/status of former tanks?  It is important to document the usage and removal of all historical fuel storage and dispensary systems.   If the gas station has been in operation since 1965, but the current tank system was installed in 1980, it is reasonable to assume that a fuel storage system preceded the current system.  The location of the system, type of material stored, and closure documentation could have a material impact on the environmental quality of the property.

(3) What is the regulatory status?  Many state funds require the UST system to be in compliance in order to fund re-reimbursement claims in the event of a release.  In addition, the regulatory status of any ongoing remediation is an important factor.  If the state is ‘responsible’ for cleanup, but is not funding cleanup, a secondary source of remediation funding may be necessary to make the real estate marketable in the event of default.

Finally, all of the environmental issues are typically subjugate to the credit package. Since it is possible to spread risk over numerous properties, a portfolio of gas stations, tend to be less risky than a single ‘mom and pop’ gas station loan.  Several major lending institutions currently require or are moving to require a higher percentage of equity when taking gas stations rather than other property types as collateral.

Partner Engineering and Science has qualified staff experienced in the completion of all stages of gas station due diligence.

When a construction project stops or delays, the developer and/or the lender is wise to take proactive steps to prevent erosion.   Once a site is cleared, graded, or any earthwork is completed, the site is more susceptible to erosion. 

A pro active approach to maintaining the site and grading conditions is necessary to prevent added expense in the form of re-grading, corrective action or in some cases fines.  There are instances of partially completed subdivisions being flooded as a result of silted over storm drains, landscaping and finish work being destroyed by runoff and even impacting the public or natural waterways due to excess sedimentation.   Recently, one of the largest homebuilders in the US reached a settlement with EPA for Clean Water Act violations. Those violations involved lack of permits or failure to contain sediment on active construction sites.   Several states have implemented erosion control programs strictly to monitor incomplete or dormant construction projects.

On abandoned sites it’s often not clear who’s responsible. A lender is wise to protect their collateral by monitoring the status of the erosion control for their assets. Employing best management practices such maintaining a silt fence, diverting storm water or maintaining low growth vegetation can potentially save millions of dollars in fines and follow up work.

At Partner Engineering and Science, we assist lenders in monitoring their assets to ensure erosion control measures are in place and then in the event that they are not, we help design and implement relatively inexpensive erosion control measures.

As I mentioned in my first posting, I took a survey of the Environmental Bankers Association Membership as to what is and is not a recognized environmental condition.  The results were presented at the Environmental Bankers Association Conference in Utah on June 9th.   The survey results are posted on the EBA’s Website and my website (www.partneresi.com).