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The What, Why, and How of a Phase 1 Environmental Site Assessment

So, what is a Phase 1 Environmental Site Assessment?

A Phase 1 Environmental Site Assessment, commonly called an ESA, or Phase 1 ESA, is an assessment done to research the historical and current uses of a property as part of a Commercial Real Estate transaction.

Why do Commercial Real Estate transactions require a Phase 1 Environmental Site Assessment?

Phase 1 ESA is needed to assess if historical or current property uses have impacted the soil or groundwater beneath the property. If so, this could pose a threat to human health and a major issue for the environment. If these problems exist, then a potential liability is present for the owner and/or lender. This also affects the value of the property.

If a Phase 1 Environmental Site Assessment is finished pre-closure of a real estate transaction, it can be used to fulfill the requirements of CERCLA’s (Comprehensive Environmental Response, Compensation and Liability Act) innocent land owner defense under All Appropriate Inquiries (AAI).

Finally, how are Phase 1 Environmental Site Assessments completed?

First, it’s important to note that Phase 1 ESA’s can be done on all types of properties; industrial, multi-family residential, commercial, vacant land, and agricultural. But all Phase I ESA’s must comply with ASTM E1527-13. (exception being properties comprised of large primarily undeveloped land, which can be researched under ASTM E2247-16).

Below are the steps commonly followed for Phase I ESA’s.
1. Completing a site visit to observe uses of the property and adjacent properties along with past and current conditions of the property.
2. Reviewing federal, state, tribal, and local regulatory databases including, but not limited to, aboveground storage tanks (ASTs), underground storage tanks (USTs), known or suspected release cases, institutional and engineering controls, and the storage of hazardous substances and disposal of hazardous wastes including petroleum products.
3. Reviewing historical records, i.e. historical aerial photographs, fire insurance maps (Sanborn maps), historical topographic maps, and historical city directories.
4. Reviewing local and state agency records including, but not limited to, state environmental agencies, Fire Departments, Health Departments, and Building Departments.
5. Interviewing past and current property owners, occupants, operators, or others well known with the property.
6. Interviewing the Report User for judicial or title records for environmental liens and activity and use limitations (AULs); specialized experience or knowledge, actual knowledge; commonly known or reasonably ascertainable information; the reason for a significantly lower purchase price; and the reason for the preparation of the Phase I ESA. It’s the User responsibility to provide this information to qualify for the innocent landowner defense.
7. Finally, the Environmental Professional (EP) evaluates all of this information to identify potential environmental risks to the property. EPs highest concerns are with properties including, but not limited to, gas stations, dry cleaners, printing operations, manufacturing, and auto/vehicle repair.
8. Once the Phase I ESA is complete, the EP will summarize what issues were identified on the property and make recommended steps to address these concerns.

In summary, Phase 1 Environmental Site Assessments identify existing or potential environmental contamination liabilities. They are done to satisfy Commercial and Residential Real Estate transactions and ensure environmentally and human safety. They are completed on all varieties of properties but all comply with ASTM E1527-13. UES Consulting Services is ready and happy to help with any and all of your Phase I and Phase II ESA needs.

 

UES Consulting and our team of inspectors would be glad to help you with your Phase 1 Environmental Site Assessment.

Important Details to Note for Phase I Environmental Site Assessments…

While not part of ASTM requirements, Phase I ESA reports typically include a discussion of observed suspect asbestos containing materials (ACM), potential lead-based paint (LBP), and mold growth; as well as the potential for lead in drinking water and radon.  Sampling for these non-ASTM concerns is beyond the scope of a standard Phase I ESA, but can be included upon request.
ASTM E1527-13 provides the guidelines for a Phase I ESA report to meet industry standard, but there are other factors to consider when ordering a report.  Projects associated with Fannie MaeFreddie MacU.S. Department of Housing and Urban Development (HUD), and the Small Business Association (SBA) each have their own report requirements.  This is also true of other lending institutions.
A recognized environmental condition (REC) indicates known contamination or the potential for the subsurface to have been impacted by contamination (either from the subject property or possibly from an offsite source).  A controlled recognized environmental condition (CREC) identifies that the property has been impacted by contamination which has been investigated and remediated; however, contamination remains and would require additional work if redeveloped.  A historical recognized environmental condition (HREC) identifies a release impacted the subject property which has been investigated and remediated meeting unrestricted use criteria.

CRE Investors! Here are 3 ways to quicken decisions in uncertain markets.

Over the last few months, news channels have been filled with stories about movements that are directly affecting the U.S. economy and real estate investments.

-Dan Dokovic Managing Partner, Co-Founder at Bamboo Equity Partners, a leading CRE investment firm.

What are the reasons for these movements?

The first is the news of rising interest rates, trade wars dominating the airways, government shutdown all leading towards business uncertainty. Second is the quick pace of advancing technology which affecting commercial real estate space. Lastly, as seen nationwide popular retailers are quickly closing down and declaring bankruptcy forcing shopping centers to clear out or shut down at rapid rates.

“The real estate industry has become the poster child for uncertainty and anxiety.”

How to overcome this as a CRE investor?

Get ahead of the curve with 3 practical applications below that will help you stay relevant and pivot quickly in response to the shifting industry movements.

1. Fill the space.

Real estate investment companies should reconsider their existing tenant mix. Long gone are the days of 10 to 15 year leases. With any uncertainty in the business market, corporations are often looking for a short-term lease.

Therefore, re-evaluate your long-term leases & business model.

While short-term leases may alter financial forecasting and real estate valuation, immediate increases in net operating income will outweigh the risk of carrying the vacant space.

A major trend is to start diversifying the tenant mixes for overall appeal of your property. An example is mall owners are lending their empty space to startup restaurants, co-working companies, or incubators in hopes it will lure more tenants into the property. These tenants don’t pay rent or nearly as much but will increase foot traffic, visibility, and popularity.

Practical First Step: Initiate partnerships with co-working companies, entice new-age tenants by enhancing your digital strategy, and enlarge your leasing capabilities.

2. Build Relationships

In uncertain times it’s important to focus on growth capital and support from partners and peers. For future stability and success it’s vital to build relationships.

While the industry is in the growth cycle, capital is bountiful. However, as soon as the cycle turns, having capital is the difference between muddling through and controlling destiny.”


Understanding and growing capital relationships comes in two forms: existing capital sources and new prospects with unrelated capital allocations.”

For existing capital relationships, constant communication is crucial. Banking relationships vary with the economic cycles change. Investment executives need to keep in step with bank’s directions and anticipate said direction would have on business.

Here are some examples…

  • Banks that focus on real estate lending might concentrate on commercial and industrial loans after a merger which, in turn, might diminish the negotiating power of borrowers in a downturn.
  • In addition to current capital providers, real estate managers should focus on acquiring alternative sources of equity and debt.
  • A multitenant office owner might want to seek a partnership with a single, long-term tenant equity provider in order to mitigate the risk of short-term leases.
  • Alternatively, office asset managers might want to connect with industrial capital sources in order to diversify high-cost risks, like retenanting office buildings.”

3. Diversify your assets.

According to past data, these changes in real estate are not hitting all markets. An example is the highs and lows of employment rates may affect the office market but the industrial market could flourish due to the increased shift towards e-commerce.

During the last cycle, manufactured housing and self-storage sectors performed better than other property types.

According to Trepp Bank Research’s April 2017 report of historical CRE losses, self-storage had the lowest average loan loss severity of all property sectors at 1.52%, while manufacturing housing loss was at 3.53%. Comparatively, in a different sector, retail had an average loss rate of 6.17% and office at 6.13%. While taking into consideration these examples, property sectors (per research completed by Nareit in December 2018) and manufactured homes provided total returns of 24.93% and 11.43% for the years 2017 and 2018, respectively.

Gaining property sector diversity can lessen risk across your business. But be cautious in your decisions. “While diversification can provide a footing to weather storms, businesses must be prudent as diversification efforts have their own risks.

What crucial questions do you ask before making final decisions in this ages industry?

What oversights can be pulled from current practices?

Who are the allies in this diversification process?

To stay relevant, future real estate leaders need to continue on the path of innovation. While transformation is tough, the only way to continue growing is to advance with the times. As it was in previous cycles, great things come to those who are able to pivot during the hardest times.

Multifamily Housing Market in 2019

Checkout a summary of 2019 trends in Multifamily Housing Markets…

In Freddie Mac’s Multifamily research, they found that “performance in the multifamily market remained healthy during 2018, despite high levels of new supply entering the market. We expect this trend to continue into 2019, but with more modest growth in comparison to recent years.”

2018 ended up with solid rent growth and only modest increases in vacancy rates despite an elevated level of new supply. There are some weakness’s in individual markets and submarkets.

New supply will remain elevated through 2019 and into 2020 but rents and vacancies will continue outperforming historical averages due to robust demand related to the rising cost of homeownership, changing demographics and consumer preferences.”

Cap rates have slightly fallen over the past couple quarters but they expect cap rates to rise in 2019 if Treasury rates increase.

“Multifamily origination volume is projected to grow to $317 billion in 2019 driven by solid market fundamentals and strong investor demand for multifamily properties.” This figure exceeds 2018’s statistic by 3.9 percent.In conclusion, “we expect 2019 to be another strong year for the multifamily industry. Homeownership affordability constraints and consumer trends will continue to drive demand, while strong rent growth will support property price growth.”

For full analysis click here.

Commercial Real Estate Industry Booming

Qualified Opportunity Zones in Kansas City

Did you know that 52 million Americans (1 in 6) live in economically distressed communities? This is a major problem that Congress recently took a step to fix. Thus, Opportunity Zones were created in the Tax Cuts and Jobs Act of 2017.

Opportunity Zones are an innovative, flexible, and bipartisan solution for catalyzing private sector-led economic growth. In addition, they aim to connect low-income communities with much-needed capital.

In exchange, investors get a graduated series of federal tax incentives tied to long-term holdings.

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Lastly, information provided by Ruben Alonso President of AltCap and Korb Maxwell with Polsinelli. 

UES Consulting and our team are experts in Phase I Environmental Site Assessments and Property Condition Assessments and can help your projects run smoothly and close on time. If you are looking for a company to join together with on your commercial real estate transactions of any type, look to our in-house engineers and environmental consultants.

 

End of the Year Swing is Here! We’re Ready…

You’re feeling it, because we are too. It’s the race to the finish line, the final cut of 2018 and, it’s HERE!

While you may not be ready for Christmas yet (*cough* 49 days), or the start of a new year (Hello 2019 in 56 days), the calendar says it’s time to finish those real estate deals. Close on the projects that need completion. And, if you’re like many of your colleagues, you may find yourself in need of an environmental assessment report (Phase I) or a property condition assessment (PCA).

The silver lining in the fast pace to the end of the year? UES is here… and, we’re ready for you. We have your environmental reporting and PCA needs covered. We specialize in quick turn-around times and like Santa’s elves, we work great under a strict deadline!

Don’t hesitate to take some of the pressure off by contacting us to help you close out 2018 strong!

 

SIOR 2018 Recap

SIOR Development Day is the biggest event of the year for UES.

This year the Western Missouri/Kansas Chapter of SIOR 29th Annual Development Day was held at Kansas City’s Union Station in September. SIOR is the Society of Industrial and Office Realtors.

Furthermore, SIOR Development Day provides an unparalleled opportunity to network with industry leaders, highlight new projects, explore opportunities and celebrate successes – all in one setting. It was a great event!Engineering Consulting Kansas City. Environmental Consulting Kansas City. Kansas City Crew. Crew KC. Phase 1 Environmental Consulting. Phase 2 Environmental Consulting. Phase I Environmental Consulting. Phase II Environmental Consulting. Environmental Consultant. Environmental Consultant Kansas City. Property Condition Assessments. Property Condition Assessment Kansas City. Property Condition Assessment Missouri. Environmental & Engineering Consulting. Site Assessment Kansas City. Subsurface Investigations Kansas City. Kansas City Business. Kansas City Engineering. Remediation and removal Kansas City. Kansas Consulting Services. Missouri Consulting Services. SIOR. SIOR 2018. Union Station. SIOR Western Chapter. Consulting Services Kansas City. Commercial Real Estate. Commercial Lenders. Community Support. Events in Kansas City. We had fun talking to booth visitors. We also hosted a football toss activity and exciting giveaway opportunities. Following the event we randomly selected 3 lucky winners for our giveaways.

Paul Fogel with Karbank Real Estate Company won the Callaway golf club. Amanda Kunze with Citizens Bank & Trust won a Travis Kelce signed helmet and last but not least, Brent Parsons was very happy with his football signed by Chiefs star Patrick Mahomes. We had a wonderful time connecting with other likeminded companies & organizations around the area. Hope to see you next year!

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If you are looking for a company to partner with on your commercial real estate transactions of any variety, our in-house engineers and environmental consultants are happy to alleviate the burden of environmental issues and mitigate risks with our Phase I Environmental Site Assessments, Phase II Subsurface Investigations, and other services.

 

 

 

2018 CCIM Kansas City Sponsorship

Kansas City boasts an active, vibrant chapter of Certified Commercial Investment Members, (CCIM). This elite corps of CCIMs includes brokers, leasing professionals, investment counselors, asset managers, appraisers, corporate real estate executives, property managers, developers, institutional investors, commercial lenders, attorneys, bankers, and other allied professionals.

UES has spent nearly 30 years working with CCIMs across the country on a variety of transactions. Therefore, it is our honor to be trusted by these distinguished professionals to get the “job done right.” As well as in a timely manner when their transactions call for environmental report assessments and engineering consulting. We specialize in providing the top professionals with the highest level of service in environmental and engineering consulting.

With our years of partnership with CCIMs, UES is proud to sponsor our local CCIM Kansas City chapter as an annual sponsor for 2018. Our team will be joining the leaders in our community for conversations about important local developments and learning about new trends in the industry. Last but not least, having a little fun, right alongside our many clients and friends.

Insights into Energy Efficiency

Importance of Energy Efficiency

Energy efficiency has never been more important as we look to conserve our valuable, depleting natural resources and continue to fuel a growing society. A survey completed in late 2010 highlighted in the Bloomberg Business week outlines concerns and usage as we all look forward and also work towards more efficiency in our lives, our construction and our growing sustainability.