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Risk Classification: Standard Practices?

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).

I think the results are very interesting!  The point of greatest surprise to me is that 18 consultants that filled out the survey from all over the country were 100% unanimous on 12 of the 24 questions!

The questions where the consultants were unanimous are provided below:

o The Dry Cleaners on site is a REC at 8 years.
o The Dry Cleaners on site is a REC at 15 years.
o The Dry Cleaners on site is a REC at 20 years.
o The Gas Station on site is a REC at 15 years.
o The Gas Station on site is a REC at 20 years.
o The Auto Repair Shop on site is a REC at 15 years.
o The Auto Repair Shop on site is a REC at 20 years.
o Historical Printer on-site for 20 years in the 60’s and 70’s is a REC.
o Historical Service Station on site for 20 years in the 60’s and 70’s is a REC.
o Historical Service Station on site for 20 years in the 60’s and 70’s is a REC even if groundwater was located at 100 feet below ground surface and soil has a lot of clay content.
o Historical Service Station on site for 20 years in the 60’s and 70’s is a REC even if the site has a case closure letter from the 1980s with no actual soil testing.
o A large heating oil tank is a REC.

Consultants and lenders had a high level of agreement on five of the remaining 12 questions.  On seven of the questions there was relatively little agreement.

During my presentation to the EBA, I argued that this high level of concurrence shows that an industry standard practice exists.   A consultant faced with similar facts would need a pretty good reason to classify a set of facts as a Non-REC.   The commercial real estate industry that we serve expects that professionals handle risk somewhat consistently.   I believe that highlighting these industry standard practices help create more consistency from consultant to consultant and from lender to lender.

What do you think?