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Updated over 5 years ago on . Most recent reply

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Andy Grebe
  • Madison, wi
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15% cap commercial property BUT open enviromental....now what

Andy Grebe
  • Madison, wi
Posted

I knew this property and the environmental would be a tricky deal and I have limited experience.  There has been site work on this property but solvents run into neighboring properties.   Here is where we are today -

- working with an environmental attorney (he said to escrow multiple of 3x of quotes on environmental

- looking for quotes for environmental insurance

- traditional lending commercial broker say they can't do the deal with Open DNR case

- what hard money / alternative financing options exist??  My thought is to spend 1-2 years getting a closure letter and then refinancing.   Any thoughts / idea's / strategies??  Thanks!!

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Lawrence P. Schnapf
  • New York, NY
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Lawrence P. Schnapf
  • New York, NY
Replied

I represent a number of lenders on environmental issues. if you have solvents migrating off-site, you may not only possibly become a responsible party but also could become subject to toxic tort suit for property damage. your lawyer should advise you on the wisdom of enrolling in the state brownfield or voluntary cleanup program. to maintain liability protection, you need to exercise "appropriate care". doing work pursuant to a state agreement will generally provide you with such protection. you probably wont be able to get insurance coverage for on-site cleanup but might be able to get coverage for off-site claims. I cannot emphasize enough the importance of enrolling in a state program ASAP. 

Until you have an approved cleanup plan, lenders are going to use a worst case scenario for estimate. You really cannot develop a good estimate until the scope of the contamination is fully understood. solvents are very tricky. i have never seen a solvent cleanup that came close to pre-cleanup plan estimates.  

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