Due diligence: A must for commercial property purchase

Written by: Jeff Wickham and Evan Weatherford
Featured in BIC Magazine

Incentives to relocate, demographics of the potential labor force and necessary improvements to the potential property are considerations that immediately come to mind when planning an expansion or plant relocation. However, one major factor often forgotten when purchasing commercial property is its historical use. All too often buyers find themselves in a position where they are ready to close on a piece of property and the lending institution asks for a Phase I Environmental Site Assessment (ESA) documentation. They are then forced to find an environmental professional to quickly perform the assessment in order to close the transaction, overlooking the importance of this step in the purchasing process. This crucial step of researching the historical use of property could save the buyer thousands of dollars in remedial actions.

Necessary steps of due diligence

When purchasing commercial real estate, the buyer should have a Phase I ESA conducted. A Phase I ESA is an investigation conducted by an environmental professional that must adhere to strict standards set forth by the American Society of Testing and Materials (ASTM). It assists potential buyers and their lenders in evaluating and limiting their liability for future cleanups. The investigation entails research of federal, state and local databases and a site visit. The professional determines the type(s) of business that may have occupied the property and if the property or surrounding properties currently or historically contain anything that may have adversely impacted the property in an environmental manner, such as old petroleum tanks, chemical releases from process systems, etc.

If a buyer fails to have a Phase I ESA conducted prior to purchasing a piece of real estate, they are potentially liable for the cost of future remediation, or cleanup, of contamination on the site. However, if a Phase I ESA is conducted and potential areas of concern are identified, then a Phase II site investigation can be done to determine if the site is in fact contaminated and to what extent the property is impacted. Depending on the identified concerns, a variety of methods can be used during Phase II investigations such as soil borings, installation of monitoring wells and surface samples.

Limiting buyer liability

Once the extent of contamination has been determined, future use of the site is taken into consideration when deciding the course of remedial action. For instance, if there are low levels of contamination the site may remain as is and a liability for future cleanup be assigned to either the buyer or seller. Another option is the implementation of engineering controls such as a paved parking lot to ensure the contamination cannot adversely affect human health. However, if extensive contamination is discovered more advanced and costly remedial actions, such as excavating the impacted soil or installation of soil/groundwater remedial systems, will be required.

By performing the necessary due diligence prior to the purchase of commercial property, the buyer can take steps to limit their liability if contamination is discovered. Examples of potential negotiations include contractual purchase agreements including price reduction or escrow accounts, or ensuring the owner has remediated the property prior to assuming ownership.

Selecting an environmental professional

When selecting an environmental professional to conduct a Phase I ESA, ensure the professional has a variety of experience in the type of properties they have assessed and their experience aligns with the type of property being purchased. For example, if a shopping center is being purchased, make sure the environmental professional has experience in assessing shopping centers.

In addition, make sure the company performing the Phase I ESA can also conduct a Phase II site investigation in case a recognized environmental concern is identified. While not required, it is an important benefit because the professional performing the Phase I is likely the most familiar with the potential concerns of the site and will be best at evaluating the true potential liability of the property. Additionally, a lender is typically more comfortable if the same company performs both assessments.

For more information on Summit’s phase I and phase II site investigation and remediation services, call (888) 878-0191 or visit www.summitcontracting.net/BIC.

Proactive Storage Tank Maintenance is Imperative

Storage tanks have been utilized in industry for many years to store process water, acids, caustics, adhesives, petroleum products and a variety of other chemicals. At many facilities these tanks are used for more than just bulk storage; they are actually incorporated into the process or production line. Regardless of their use, these tanks and associated system components (i.e. pumps, pipelines, filters, gauges, etc.) need to be maintained and kept in good working order for the process to operate efficiently.

Without proper maintenance and cleaning, your storage tank system could cost you production time and leave you with an inferior final product. It is critical that storage tank systems be well maintained and cleaned periodically. This can be accomplished by implementing a good preventative maintenance program that includes regular systems checks and cleaning as prescribed by the system manufacturer or as dictated by the production process.

Develop a Preventative Maintenance Program

Implementing preventative maintenance can provide cost savings by eliminating unnecessary downtime. Buildup of sludge, precipitates or other impurities is likely to occur whether your storage tanks are used as a supply source for virgin product, incorporated

A Summit crew chips away at built-up stain & varnish in an aboveground storage tank

into the manufacturing process or utilized for post process waste storage. Over time, the accumulation of undesirable solids and contaminants will decrease flow rates and increase the operating pressure of piping systems as well as diminish transfer pump efficiencies, and clog system filters and strainers.

Cleaning your storage tank system in-house can be time consuming and costly. In addition to managing potentially hazardous materials, confined spaces and fall hazards, all of which require specialized training, you are reallocating personnel from productive tasks to those that are potentially dangerous and inefficient. For many facilities it is more cost effective to outsource this work to specialized contractors.

Selecting a Contractor

When selecting a contractor, there are many factors to consider. Experience, knowledge, capability and safety are among the most important. It is important to partner with a contractor that displays a wide breadth of knowledge and experience specific to storage tank systems, products and regulations. Whether your system is regulated by state and federal environmental agencies or by industry standards, your contractor should possess the capacity to meet your needs.

There are several aspects to servicing storage tank systems. Many plant or facility managers find themselves requiring services such as product transfer, storage tank and pipeline cleaning, water blasting, waste disposal and many other services specifically tailored to their needs. However, many contractors can only handle a few of these services. It can be cost effective to find a specialized contractor that is experienced and equipped to handle a large variety of industrial services that meet the needs of your storage tank system. For instance, it is helpful to have a contractor that can transfer process water in Level D PPE one day and make a Level A entry into a hazardous environment the next. A contractor that specializes in storage tank systems can meet service needs ranging from installation, to inspection, maintenance and removal.

Safety is one of the most important factors to consider when hiring a contractor. You should investigate the contractor’s training program and safety records; both of which can be a strong indicator of job performance. The contractor you select should have training for the hazards associated with your storage tank system. Training such as OSHA 40 Hour HAZWOPER and confined space entry are a necessity. Make sure your contractor is trained to handle the job.

When selecting a contractor to meet the needs of your storage tank system, lowest cost may be an attractive feature; however, the cheapest contractor may not always be the best solution. Choosing by price alone may cost you in the end. Experience, knowledge, capability and safety are important aspects that should be considered when selecting a partner to meet the service needs of your storage tank system.

For information on Summit Contracting’s tank cleaning services, visit www.summitcontracting.net or call (812) 421-1744.