Multi-Unit Building

Initial action for a property located in a multi-unit building will be determined by the loan size for the property. Should the loan amount be less than or equal to $150,000 then the environmental investigation may begin by using an environmental questionnaire. Environmental questionnaires are basic questionnaires that identify the potential environmental risks of the property and they do not have to be reviewed by an environmental professional unless they are shown to have a possible risk associated with the property. Should the loan exceed $150,000 then an environmental questionnaire and a Records Search with Risk Assessment report must be conducted.

Order an RSRA:www.phasei.com

Indemnitor cannot be the borrower or operating company on a contaminated site

Should the subject property be identified as contaminated or has had remediation occur, then the borrower or the operating company cannot be the indemnitor for the subject property. An analysis from the CDC must still be done on the indemnitor to assure that they have enough assets for them to honor the indemnification agreement. This prevents malpractice between lenders and the environmental companies performing the remediation.

Special use facilities – Lead Risk Assessments for properties built prior to 1980

Residential care facilities that are occupied by children must now undergo a lead risk assessment and lead water testing if the facility was built prior to 1980. This requirement is still required for nursery schools, daycare, and childcare facilities. Residential care facilities built prior to 1980, which do not house children, no longer have to conduct a lead risk assessment or lead water testing. It is important to remember that a lead risk assessment does not involve XRF machine testing. A simple dust wipe sample and visual inspection by a certified lead inspector is what is required along with the lead water sampling.

Equipment Testing
When performing an environmental investigation, an environmental professional must also include whether or not the gas station is determined to be compliant with all state requirements for tank and equipment testing, should any requirements be in place. Until this is complete, then the loan cannot be disbursed. Should any of the equipment be defective or leaking ,then it must be replaced.

Further changes have been done to the SOP standards. For the new SOP standards please click on the following link which will open a PDF file: Click Here

We hope you have a great Thanksgiving weekend and receive some well deserved rest. We look forward  to continue working with you!

Sincerely,

PHASE ONE INC. Staff

                In their July edition Phase One In was chosen to write an article on the environmental due diligence process and a revolutionary program called the “Step Wise” program. This article’s tile is “Follow the Wise Steps of Due Diligence” and was written by Mr. Eric Kieselbach, President of Phase One Inc. He writes about this new program and how those involved in the commercial property transaction can benefit from this new program no matter what the loan type or amount is. 

                The article is now available online and we highly encourage everyone to read it because it will not only answer many questions, but it will also expose you to new information that may have been unknown. We invite you to review the article and to comment or ask questions. As a convenience we have provided the link to the July issue of the Scotsman Guide. Enjoy!

http://www.sg-comdigital.com/comdigital/201107ce#pg27

We are offering the report only today to anyone who would like to try our revolutionizing report. We are the only company to ever offer this type of report.

The following is a description of the report:

ENVIRONMENTAL RISK SUMMARY REPORT

The Environmental Risk Summary Report is a quick environmental risk assessment tool. It is a one-page report providing the environmental risk for your specific property location and the surrounding properties in the area. This report displays a map with your site location and the surrounding site locations within a ¼ mile radius that have been identified on environmental databases. The map has colored triangles representing the level of environmental risk associated with the specific locations.

The key for the Triangles:

Red: This location has a current known environmental contamination.

Yellow: This location has been listed by a governmental agency/historical records; it does not always represent an environmental risk and/or concern.

Green: This location may have an active environmental permit or has had contamination and/or handled hazardous materials on-site in the past.

Your property location

The report provides the results of searching through thousands of records in order to locate and map any listings for your property location site or any nearby properties in the surrounding area. These records are contained in numerous lists and databases of various regulatory agencies nationwide. Upon ordering this report, it will be sent to you electronically via e-mail–a quick and efficient way to receive the information you need!

Upon receiving your one-page Environmental Risk Summary Report, if the results indicate your property or nearby property has a RED or YELLOW TRIANGLE, you may want to consider ordering a LenderCheck Report or a Records Search with Risk Assessment Report.

Uses: Environmental Risk Assessment Screening Tool for collateral property for loan

Pros: Quick, Easy to interpret, Cost Effective

Cons: No Details

This recent  survey was conducted in November and December of 2010.   This survey did provide confidence that there is a turning point for this industry in 2013.  An earlier survey in June of 2010, indicated that there would be a turning point in the California Real Estate Industry in 2012.  The result of the recent November/December 2010 survey is the possibility of a turning point in 2013.

In addition, according to the Allen Matkins/UCLA Anderson Forecast Industrial Space Survey for industrial space, there is similar optimism throughout California.  Based on this survey, the Bay Area will have increased growth in the technology sector.  The Los Angeles and Orange County areas, as well as the Inland Empire will also have increased growth, but not as significant as the Bay Area.

One of the reasons for this optimistic viewpoint is that commercial real estate does not follow the economy directly. The effect of an economic downfall or rise in the commercial real estate industry occurs later than the economy.  As the economy begins to rise again, the commercial real estate industry will try to maintain speed. The Senior economist for the UCLA Anderson Forecast, Jerry Nickelsburg, indicated “After eighteen months of pessimism about office and industrial markets we have now seen six months of optimism.”  Historic economic patterns also provide  further evidence that this turning point may occur by 2013.

This optimistic viewpoint is very beneficial to a market where the delinquency rates for loans have been increasing. As companies continue to grow once again with their new found wisdom, they will make better decisions.

**The Allen Matkins Leck Gamble Mallory & Natsis LLP law firm was founded in 1997. This is a law firm is based in California and serves many of its counties and performs work in many different practices (i.e. environmental, intellectual property, taxation, and many more).  The UCLA Anderson Forecast is often used and cited for the economic outlooks in California.

http://www.bizjournals.com/sanjose/news/2011/02/03/forecast-sees-commercial-real-estate.html

The government is aware that the risk of some of the loans that are presented to banks are too high of a risk for the bank to take on and so it has become apparent to the United States government that they have to aid the banks in mitigating some of the risk by taking on some of the risk themselves. It is important for the borrowers to still keep in mind that even though the government is making a conscious effort to help them meet their financial needs for starting and maintaining their business that they will still need experience and plans on how their business will grow in order to qualify for the government’s help.

A large amount of companies that we have in the United States are small businesses yet they only make up a very small amount of the income that will help the economy.  The main goal of the federal government this year will be to concentrate on smaller businesses given that the larger businesses have already seen their loses from the recession be recovered in a significant way, while smaller companies have yet to fully recover.

As the first week of the new year ends it has been declared on January 5, 2011 by the SBA website that the funds for this program have been exceeded. This is due to the high volume of loans that were being processed. Those who were not able to receive this funding were entered into the Small Business Jobs Act Queue. Those in the queue will have to wait until the funds are once again made available. They must first be preapproved and then once approved they will move into the queue with a 75% to 85% guaranty rate and incurred guarantee fees.

Background

New requirements were set forth in the SBA’s SOP 50 10 (5) that became effective August 1, 2008. This was a major revision of the SBA’s operating procedures for 7 (a) and 504 loans. On March 1, 2009, an updated version of these procedures took effect. Of significance with relation to environmental compliance was the creation of a new report entitled, “Records Search with Risk Assessment” and the creation of a specific step-by-step process for determining the appropriate environmental compliance for SBA loans. Chapter 4, Section 3, of the SOP details the Environmental Policies and Procedures.

Major Change to Environmental Compliance in the Recent Revision

Until March 1, 2009, the compliance process related to gas stations was convoluted. Part of the requirements were based on the age of the gas station and in some cases lenders were directed to order a Phase II as the first step in the process for environmental compliance. The good news is that these requirements have been loosened and streamlined.

Updated Environmental Compliance Steps

The first step is for the lender to determine if the site falls under the SBA’s list of high risk NAICS codes. The list of high risk NAICS codes can be found in Appendix 4 of the SOP and includes sites such as gas stations, automotive repair, manufacturing, printing, etc.

If the site use is a gas station, the SOP requires the completion of a Phase I ESA by an Environmental Professional holding either a Professional Engineer’s (PE) license or a Professional Geologist’s (PG) license.

If the site use is identified on the list of high risk NAICS codes, the SOP requires the completion of a Phase I ESA by an Environmental Professional (EP) [defined in 40 CFR Section 312.10 (a)].

If the site use is not identified on the list of high risk NAICS codes, and the loan is $150,000.00 or less, then an Environmental Questionnaire can be completed. If the Environmental Questionnaire indicates further investigation is required, a Transaction Screen or a Phase I ESA must be completed.

All other sites (those that are not high risk and the loan is greater than $150,000.00) require a Record Search with Risk Assessment completed by an Environmental Professional. If the Record Search with Risk Assessment concludes that the site is at an elevated or high risk, the SOP requires the completion of a Phase I ESA by an Environmental Professional.

Summary:

Start with question 1, and proceed to the next question, until you answer “yes”:

1. Is it a Gas Station->Phase I ESA by a PE or PG
2. Is the use High Risk based on NAICS -> Phase I ESA by EP
3. Is the Loan>$150,000 -> Record Search with Risk Assessment (RSwRA) by EP
4. All others -> Environmental Questionnaire by Lender/Owner

Then if your report (Phase I ESA, RSwRA) or Enviornmental Questionaire results in a finding of “Elevated Risk” or “High Risk”:

1. If you ordered a Phase I ESA, consult with your Environmental Professional to determine any next-step actions.
2. If you ordered a Record Search with Risk Assessment (RSwRA), then upgrade to a Phase I ESA.
3. If you reviewed an Environmental Questionnaire, then upgrade to a Transaction Screen or Phase I ESA.

Definitions

“Environmental Questionnaire” means the questionnaire used by a Lender to determine the likelihood that Contamination may be present at the Property offered to secure an SBA guaranteed loan. Environmental Questionnaires must be completed or reviewed by a Lender that has made at least one site visit to the Property and a good faith effort to conduct an interview with the current owner or operator of the site. An Environmental Questionnaire may be considered if it was completed up to one year prior to submission. The current owner or operator of the site must sign the Environmental Questionnaire.

“Phase I Environmental Site Assessment” (Phase I ESA) means an AAI compliant Phase I ESA conducted by an Environmental Professional in accordance with the most recently adopted standard for a Phase I ESA established by ASTM International, currently ASTM E1527-05. A Phase I ESA must contain an opinion by the Environmental Professional as to whether the inquiry has identified conditions indicative of Releases or threatened Releases at the Property. Additionally, SBA requires that all Phase I ESAs contain a conclusion by the Environmental Professional that performs the assessment that either: (1) the risk of Contamination at the Property is so minimal that no further investigation is warranted; or (2) there is risk sufficient to warrant additional investigation. Alternatively, the Environmental Professional may include a similar statement to this effect. If further investigation is warranted, the Environmental Professional should provide a detailed description of the recommendation.

“Records Search with Risk Assessment” means and includes (1) a search of the government databases identified in 40 CFR § 312.26 for an AAI compliant Phase I as well as a search of historical use records (for example, aerial photography, city directories, reverse directories and/or fire insurance maps) pertaining to the Property and Adjoining Properties; and (2) a risk assessment by an Environmental Professional based on the results of the records search as to whether the Property is either “low risk” or “elevated risk” or “high risk” for Contamination. The choice of historical records to be reviewed on any particular site is at the discretion of the Environmental Professional. The report must identify by name of the Environmental Professional that performed the risk assessment.

How Can ERS Help?

ERS has teamed up with Phase One Inc. to provide low cost environmental reports to comply with the SBA’s SOP. Phase One Inc. has over 18 years of experience in providing environmental consulting and reports that exceed the SBA’s requirements. In addition to providing great prices, if your report needs to be upgraded, 100% of the cost of the first report ordered can be deducted from the cost of the new report.

More information on Phase One Inc. can be found here: http://www.PhaseI.com

To order a Records Search with Risk Assessment for $299, Click Here.

To order a Transaction Screen for $399, Click Here.

To get a proposal for a Phase I ESA, Click Here.

(The following is a link to the SOP document on the SBA’s website: http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sops_50105a.pdf)