2:10 pm in Environmental Due Diligence by Kelly McMicken
Fannie Mae has come out with an update to Form 4262. Some of the changes that are now included is a seperate worksheet to ”Insert Brochures or Documents.” To view the the worksheet go to Partner Engineering and Science’s Fannie Mae page.
10:24 am in Environmental Due Diligence by Gary Reynolds
Since the latest revision to SBA’s SOP 5010 5 (C), that came out in October 2010, I have been asked some reoccurring questions in regards to the Environmental Requirements on 504 and 7a loans.
One of those reoccurring questions is when there is a NAICS Codes match does it mean that I will have to have a Phase I AAI Compliant ESA? The answer to this is a definitive YES, and NO!
Take a look at SOP 5010 5 (C) pg 357 -358, Appendix 4: NAICS CODES OF ENVIRONMENTALLY SENSITIVE INDUSTRIES. If your property matches up to one of those NAICS codes you would be required to have a Phase I ESA performed if (and that’s a big “if”) you’ve read the little notes accompanying the NAICS code. Let’s say you have a Motor Vehicle and Parts Dealer – NAICS code match 441. You would assume that a Phase I would be required – however if you read what Appendix 4 says you would read (if service bays present).
Many dealerships are just car lots without service bays and therefore wouldn’t require a Phase I. Based on the dollar amount of the loan SBA would require only a Records Search with Risk Assessment, or perhaps if the loan was small enough (under $150,000) SBA would only require an Environmental Questionnaire.
What’s important is to read the accompanying notes in Appendix 4: NAICS CODES OF ENVIRONMENTALLY SENSITIVE INDUSTRIES to determine whether or not you will be required to engage a full Phase 1 Environmental Site Assessment.
The next time you need to turn to the NAICS Code listing just let your eyes search through to the italicized notes in parenthesis within the document to see how many exceptions there really are.
I’ve also had calls requesting a Phase I for a property the borrower was constructing a gas station on. If the property wasn’t a prior gas station (or NAICS code match) then again the requirement would be a Records Search with Risk Assessment, or, an Environmental Questionnaire if the loan was under $150,000.
If you need assistance in determining the level of environmental due diligence that’s required on your property, Partner Engineering and Science, Inc. would be more than happy to assist.
1:37 pm in Commercial Real Estate Finance, Real Estate, SBA Real Estate Finance by Gary Reynolds
In September 2010 the Small Business Jobs Act was passed into law. Yesterday the rules for the refinance mechanism within the 504 loan program were announced. This program will provide a significant tool for small business owners to refinance existing 504 program eligible debt. Some key points from the new 504 Refi rules:
Eligibility
Restrictions
As you can see the new regulations are specific in what types of loans can be refinanced and the requirements for both the lender and borrower. This is a very exciting program from the SBA and should be a significant source of projects through 2012.
6:43 pm in Environmental Due Diligence by Gary Reynolds
In accordance to SBA’s SOP 5010 5 (C), when obtaining a 504 or 7a Loan SBA requires an Environmental Investigation of all commercial Property upon which a security interest such as a mortgage, deed of trust, or leasehold deed of trust is offered as security for a loan or debenture. The type and depth of an Environmental Investigation to be performed varies with the risks of Contamination.
Here is a simple “Steps of Environmental Investigation” flowchart describing what level of report would be required based upon the property site’s NAICS (North American Industry Classification System) Code .
For more information regarding SBA Environmental Due Diligence requirements, or the complete Standard Operating Procedures created by the U.S. Small Business Administration visit http://ftp.sbaonline.sba.gov/idc/groups/public/documents/sba_homepage/serv_sops_50105_c.pdf
8:37 am in Environmental Due Diligence by Gary Reynolds
You’ve been told you need to have a Phase I Environmental Site Assessment (ESA) and now may be looking for answers to the questions:
The purpose of an Environmental Site Assessment (ESA) is to identify any existing environmental contamination on the subject property. You as a buyer do not want to unwillingly become financially responsible for the prior environmental practices on the subject property. An ESA saves you from assuming liability for existing contamination and the costs of remediation (if needed). A Phase I ESA provides a current and historical record search as well as a site visit and inspection by a trained and certified Environmental Professional. The Environmental Professional’s job is to provide you with a report of the property site that informs you that either the site is clean, or there are Recognized Environmental Conditions (REC’s) that exist.
Your banker can suggest some names of Environmental Firms that are on the bank’s approved lists. In cases where no recommendations are given, you can search the Internet for Phase I Environmental Site Assessments.
Typically you can expect to pay between $2,000 and $3,000 depending on the property.
The average turn around time for a Phase I Environmental Site Assessment is three (3) to four (4) weeks. Many firms can provide rush jobs as well.
The Phase I Environmental Site Assessment performed in accordance with ASTM 1527 05 does meet the environmental requirements of the U.S. Small Business Administration.
7:14 am in Commercial Real Estate Finance, Environmental Due Diligence by Kelly McMicken
If you are buying a commercial property, you need to do environmental due diligence. The gold standard for due diligence is the Phase I Environmental Site Assessment. The Phase I ESA is basically a research project into the properties current and past use and how these uses could potentially affect the environment. As a buyer, you want to make sure that you don’t get stuck cleaning up someone else’s environmental mess, so the ASTM 1527-05 Phase I ESA is the most appropriate tool.
For Lenders however, the full Phase I Environmental Report is not always warranted particularly for smaller or less risky transactions. Our lender clients sometimes ask for environmental reports that are less comprehensive and expensive than the Phase I ESA. A few options that are available are:
Environmental Transaction Screen: The Environmental Transaction Screen consists of a Site Visit by an environmental professional, the review of an environmental database report, and very limited historical research. The Environmental Transaction Screen is about half the price of the Phase I ESA and has a scope of work defined by ASTM E1528-06.
Environmental Database Reports: The Environmental Database Report involves the review of an environmental database report by an environmental professional and a short letter report in front of the database. We always recommend that you order these very inexpensive reports from an environmental professional instead of directly from a database company, as what is really valuable is the professional advice.
Records Search and Risk Assessment: The Records Search and Risk Assessment (RSRA) involves the review of an environmental database and historical sources. The report must be done by an environmental professional. This scope of work is recognized by the Small Business Administration (SBA).
I hope this helps commercial property buyers and lenders make good decisions.
by Frank Romeo
1:08 pm in Environmental Due Diligence by Frank Romeo
Due to market conditions, the last few years have seen an increase in HUD/FHA loans. In turn, the need for HUD due diligence reports has increased. Consultants who have specialized in this area in the past have a backlog of work for several weeks, and in some cases, months. As the law of supply and demand would dictate, consultants who had avoided HUD work in the past (very good consultants) are now attracted to both the availability of work and higher fees offered by this market sector. Who can blame them? Unfortunately, when it comes to a HUD PCNA, Phase I ESA, or A&E/Cost review, there is no shortcut, no Cliffs notes, no winging it and absolutely no substitute for experience.
12:16 pm in Environmental Due Diligence by Amy Rudegeair
The selection of a vendor for the completion of Phase I Environmental Site Assessment (ESAs) in North Carolina should be based on the qualifications of the firm. Over the last seven years, I have been personally involved in the completion or review of upwards of 1,000 Phase I ESAs in North Carolina. A lender once jokingly accused me of memorizing the location of every drycleaner in the state.
During my years completing reviews at major lending institutions, I saw the complete spectrum of report quality. A quality report is defined not only by meeting ASTM Standard Practice E1527-05 and the Environmental Protection Agency (EPA) Standards and Practices for All Appropriate Inquiries (AAI) (40 CFR Part 312), but also by providing reasonable findings and conclusions that are supported with documentation provided in the report. A poor quality report often lacks detailed information and includes illogical conclusions. Often, this will delay the transaction that prompted the completion of the report.
Recently, I reviewed a Phase I Environmental Site Assessment completed as pre-foreclosure due diligence. The report identified the presence of a chicken broiler onsite from 1960-1965. While there was no substantiating evidence, the consultant indicated that a UST may have been associated with the chicken broiler operations. Consequently, at the request of a purchaser, the lending institution could end up chasing a non-existent UST.
It has been my experience that quality and price do not always go hand in hand. It can be very troubling to inform a client that they overpaid for a report that does not meet industry standards. On the other hand, if the price is substantially below market rates, the quality is likely to be substantially below industry standard as well. When ordering a Phase I Environmental Site Assessment in North Carolina, careful consideration should be given the credentials of the firm and their experience with similar property types. Partner Engineering and Science has been involved in more than 5,000 environmental site assessments in North Carolina covering a wide range of property types.
by Bruce Beck
8:57 am in Real Estate by Bruce Beck
Communication is a powerful and positive marketing tool in real estate public relations. However, the mere act of communicating does not necessarily mean messages will be understood. Take for example the sage words of famed baseball manager Casey Stengel who addressing his team said, “Now all you fellows line up alphabetically by height.” Ineffective communication is its own form of Stengelese. Whether it’s the way you express your message or how you interpret what others say. Either way, the results are the same: frequent misunderstanding.
In real estate public relations, there are four mutually dependent elements to effective communication: The medium, audience, message and timing. This simple formula, often ignored by others, is at the foundation of everything we do.
Managed Media Relations
Media relations are more than mere publicity. Deriving real value requires knowing how to expertly manage the process, especially as the methods of information delivery continue to evolve. Fundamental to that success is addressing the needs of all those involved in the dialogue. It requires formulating the message and crystallizing it in a way so that it can be best understood; awareness of the needs and requirements of the great variety of platforms that have redefined the “media;” and recognizing that the way people receive their information has changed. Understanding this allows companies to enjoy managed exposure in targeted media and receive expert training and preparation for all types of interview situations.
7:15 am in Commercial Real Estate Finance, Construction, Environmental Due Diligence by Amy Rudegeair
During the housing boom, clearing large parcels of land for development became routine. After the market downturn in late 2008, construction projects throughout the country halted midstream. On many sites, construction equipment was left to rust and utilities and roadways were partially installed. The stormwater management and erosion control systems that were installed as a temporary measure to prevent sediment laden-stormwater from leaving the sites during construction are failing, due to a lack of maintenance or poor construction practices. Nearby waterways are becoming overloaded with sediment from these failed developments.
All too often, large areas of denuded land have become the responsibility of mortgage holders and local governments. Many local governments are experiencing budget shortfalls and are looking to mortgage holders to fund necessary repairs to stabilize sites. Lenders are not exempt from liability under the Clean Water Act, and could be held liable for runoff at abandoned developments. In order to quantify potential liabilities, it is important to make sure that erosion/stormwater inspections are completed as part of the collateral analysis process.
Partner Engineering & Science is experienced with design, construction, evaluation and maintenance of erosion stabilizations projects.
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