Phase 2 environmental report

3 Replies

Hi - I am in due diligence on a 12 unit apartment building.   Possible oil dumping issues are coming up in the Phase 1 environmental.    Based on what was said in the report, it's pretty obvious to me that it's going to lead to testing under the slab in the basement.       So my questions are this:

1) what is the Phase 2 environmental report?  If it's a more intensive version of the the Phase 1 and just ends up saying the same thing in more detail and adds that testing is the next thing that needs to happen,  then why spend thousands for that?   Why not just cut to the chase and do the testing?

2) anyone have experience w oil being found in the basement of a commercial building?   what was the remediation? 

Thanks!

@JEFF D. wish I could be more helpful to you, I have bought and sold 2500+ units and never had to do a Phase 2.

As you finish out your due diligence period, and assuming you will sell this asset at a future date, a Phase 2 could limit the number of buyers in the future so give this 12 unit deal a real close look to ensure it is a solid deal.

Good luck!!

Yeah that wouldn't be good.    My hope is that if a cleanup is done, and it's on record and certified as A-ok by all the appropriate agencies - then it won't be any red-flag for a future buyer.    In theory,  it shouldn't be.  But then again,  a car that has been in a wreck is forever tainted,  regardless of how perfect and documented the body work was to repair it.   It's been hit and isn't "perfect" anymore in the eyes of a buyer.   Which is kind of silly, but a reality.      Hoping that's not how things go with commercial real estate.   Any experiences with this would be greatly appreciated.     

First, you are not going to know how extensive the contamination until you do the Phase II.  You can't jump to the chase as the Phase II is the next step in the testing.  After the Phase II could be hundreds of thousands of dollars.  As @Brian Adams said, make sure this is a deal that is worth the potential expense. 

There may be a way to mediate your risk and recover your testing costs and remediation expenses.  Check with the State the property is in and see if you would be able to enter into a "Brownsfield" program. I am involved in one in Georgia and I know someone doing one in NY.  Once entered in a Brownsfield program, several things happen.  1. You as the owner are protected against any liability for anything resulting from this contamination.  2.  You can get reimbursed, in the form of tax rebates, for your mitigation expenses.

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