In the world of real estate development and land acquisition, the road to success is paved with thorough planning and attention to detail. One often overlooked but crucial step in the due diligence process is the Phase 1 Environmental Site Assessment (ESA). Before a client begins any project, ISG often conducts a Phase 1 ESA to identify any recognized environmental conditions (RECs) that could impact the property’s value or pose potential risks to public health and the environment. The result of the assessment influences the project’s direction and success long-term.
A Phase 1 ESA is a comprehensive study aimed at evaluating potential environmental concerns on a property. This investigation is typically conducted to identify environmental conditions that could pose a risk to the project or have legal and financial implications. A Phase 1 ESA is a key component in the due diligence process for real estate transactions and development projects and is often required by financial lenders before loan approval.
A typical Phase 1 ESA involves several steps performed according to the American Society for Testing and Materials (ASTM) standards:
It is important to understand how the results of the Phase 1 ESA report can impact project success. Key considerations include:
When a project is identified as having potential environmental contamination, clients are given the opportunity to make informed decisions about proceeding with Phase 2 ESA soil and groundwater testing. This phase serves the dual purpose of not only confirming the potential presence and extent of contamination but also determining the responsible party for any subsequent cleanup efforts. ISG provides services by coordinating the Phase 2 testing process with an outside consultant. Additionally, we help in identifying available government funding sources to aid in the cleanup and prepare the site for redevelopment.
The Profinium Place Tower in Mankato, Minnesota, serves as a compelling example showing the importance of proactive due diligence with Phase 1 ESAs. During the initial stages of a downtown development project, the chosen site had a history of potential environmental issues, having previously operated as an automotive garage and maintenance shop that handled hazardous materials such as used oil and gas. Further historical land use research conducted by ISG unveiled the site’s previous functions as a rail yard, and a foundry for metal refining in the early 1900.
This comprehensive investigation stressed the necessity for a Phase 2 ESA, which revealed significant contamination issues that required remediation before the project could progress. By investing the time and resources in conducting a Phase 1 ESA upfront, the developer was able to avoid project delays and mitigate the risk of incurring major cleanup expenses in the future. This case underscores the sensibility of conducting Phase 1 ESAs early in the project’s planning and decision-making process.
A Wise First Step
investing in this assessment at the outset, clients are empowered with the knowledge needed to make informed decisions, manage risks, and ensure the overall success of the project.
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