Hail Damage, a Commercial Property Pitfall?

Posted by on Sep 21, 2012 in Blog | 14 comments Hail Damage is Hard to Find. There are a lot of elements included in due diligence for commercial properties, but the hail storm that hit the valley 2 years ago has added perhaps one of the most costly elements in recent memory.   And before you dismiss this as “old news” let me ask you this question, are you 100% sure you building was not damaged or if it was damaged that it was properly repaired?  Here’s a quick story for you that will shed some light on why I am asking this very leading questions. A large apartment complex in central phoenix filed a claim shortly after the storm, concerned they might have damage.  The insurance adjuster came out and walked the roof and grounds with the building maintenance manager.  The result was a denial of claim because the adjuster and the maintenance personnel found “no damage”.  The Apartment owners contacted one of the leading hail damage teams in the Valley to do an independent assessment.  The team using their standardized assessment reports found $692,000 in damages which the insurance company agreed to and paid.  So the claim went from denied to $692,000 because the experts found and documented the damage.  The insurance company reviewed the expert reports and agreed with them, paying on the claim. I am told is not unique and that similar stories happen all the time with big storms like this.  Again, the reason for this story is to wake you up to the reality that there is hail damage out there and if it is not repaired by the deadline (Oct 4, 2012), then you may be looking at significant property devaluation. Let me explain further.  Take the above example. Let’s say that you represent the OWNER/SELLER of this apartment complex and they filed a claim, the claim was denied, their maintenance personnel said there was no visible damage, so the owner proceeds without any repairs.  The owner goes to sell the building for $3 million let’s say.  The buyer, who is savvy to hail damage, opens a copy of Google maps with the storm overlay, determines there is a high probability that the building was damaged, hires a hail damage expert who finds $692,000 in damage.   That $3 million asset is now instantly devalued by over 20%!    And since the science behind hail damage is pretty straight forward (which is why the insurance...
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Phase I ESA – When Not To Drill

Posted by on Sep 5, 2012 in Blog | 7 comments After the Phase I ESA … then what? We all know that it is essential and imperative that before you can do any property transfer you need to have a Phase I ESA (Environmental Site Assessment) done. Even if you have no reason to believe the property may be contaminated. After all, it is the blind sword of the EPA that decides who is responsible for cleaning up a site, and mere belief that the site was clean will get you nowhere with the EPA. Their AAI (All Appropriate Inquiry) standard has made it doubly clear that if you don’t take certain, specific steps in environmental due diligence you will waive any possibility at an exemption to liability under CERCLA. In our practice we have found the Phase I to be not only an essential element to any real estate transaction, but an incredible tool for ferreting out other issues, like lead paint, asbestos and historic property uses. But the real question that haunts a lot of people is what do I do with the results of a Phase I? A less sophisticated law firm would probably tell you “nothing”. Which would likely dissolve your liability protections under CERCLA and the AAI standard. A really conservative law firm would tell you to “drill the site”. In other words, drill test holes on the site and have them sampled by a laboratory to determine what, if any, chemicals or issues are down there. Out of an abundance of caution the conservative law firm might insist that you need to “see what’s down there” before you can make a reasoned decision to purchase or not. But when you have a law firm that understands the nuances of the law and the realities of business you’d probably get an answer along the lines of “let’s take a closer look at what the Phase I actually tells us.” Here are a couple of examples that should stop the urge to drill … and by the way, saving the company a “few bucks” should never be a legitimate reason that any lawyer gives not to drill. Example #1 – Let’s say that the Phase I ESA (Environmental Site Assessment) shows that historically the site has been used as a service station. But that the station is currently shuttered. In Arizona, this conclusion may mean little to you if you are putting in an office...
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3 Biggest Mistakes You Can Make With Environmental Compliance

Posted by on Aug 4, 2012 in Blog | 7 comments Ever had that sinking feeling like an environmental compliance issue might torpedo your property deal or put you in the cross-hairs for liability? Or worse yet, ever had that feeling like environmental compliance issues were a “non-issue” with your property deal? How confident are you that you can really tell the difference between these two situations? With over 20 years in the environmental and natural resources arena, we’ve seen time and time again how most property owners (and their lawyers) are completely unable to tell the difference between these two situations. Why? Because they don’t truly understand how the environmental laws work, so they just “wing-it”, setting them up for environmental compliance issues. Here are the 3 biggest mistakes People make with environmental compliance. 1) First mistake they make is they ignore real or potential environmental compliance issues … “if I didn’t know, then I can’t be liable.” ANSWER: Wrong. EPA loves it when owners play the “head in the sand” defense. Some of the most stringent laws on the books are environmental laws and many have penalties that can bankrupt most businesses. Regulators like EPA have very big sticks and saying you “didn’t know” is not a defense that works with them. 2) Second mistake they make is they rely upon “Bad” reports. Phase I ESA, environmental site assessments are a very precise document. If it is junk in, the report will be junk out. Without a good Phase I report, you’ll have no idea what your environmental compliance issues may be. What makes them a “Bad” Phase I ESA? Suffice to say, if you don’t have an environmental law expert review them, you will have no idea if it’s good or bad. 3) Third mistake they make is they rely upon lawyers who aren’t environmental law experts. Because environmental law is so specialized and because the penalties are so severe, even the best transactional or real estate attorney will be way over their head offering environmental advice and counsel on environmental compliance issues. And whatever you do don’t turn to your environmental consultant for environmental law advice! They may be great consultants, but they are not lawyers and can’t answer the legal questions around environmental law … again regulators love it when you make these types of mistakes. Environmental laws are not to be taken lightly. Don’t risk it. Bring in an expert who can help you...
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Umbrella Rides The Wind

Posted by on Sep 15, 2010 in Featured, Portfolio | 0 comments Quisque ullamcorper enim vel tellus rhoncus et fermentum diam congue. Phasellus eu turpis lorem, id gravida nunc. In bibendum nulla vel quam pretium a fringilla erat ornare. Etiam hendrerit quam sed orci congue posuere laoreet urna condimentum. Nam vestibulum gravida semper. Maecenas ac nunc purus, et aliquam urna. Curabitur quis tellus vitae dolor tristique egestas. Fusce metus sem, accumsan vel auctor non, laoreet eget nulla. Donec lacinia elit ac nulla hendrerit at tincidunt justo facilisis. Praesent vel risus ut urna vestibulum fermentum. Pellentesque sollicitudin cursus blandit. In hac habitasse platea dictumst. Maecenas sed nulla sed lacus elementum dapibus. Praesent hendrerit semper tempor. Integer sollicitudin ultrices...
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A Monk Walks His Path

Posted by on Sep 15, 2010 in Portfolio | 0 comments Vestibulum non libero in quam vestibulum dignissim a sed sem. Nullam vitae est vitae urna rhoncus sollicitudin. Ut congue lacus molestie augue gravida vitae auctor tortor ornare. Vestibulum sollicitudin vestibulum urna ut tempus. Duis eget dui placerat dui interdum fermentum. Cras lorem nunc, elementum vitae rhoncus quis, aliquet vel erat. Duis elementum justo sed velit mattis semper. Maecenas vel lacus vel nulla suscipit tincidunt in quis nulla. Duis sed metus vitae nunc euismod...
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