Failure…

It seems that many of life’s most valuable lessons are learned from failures. Here’s one…

A loan client was under contract to purchase an industrial building in Central Orange County that had been in the sellers’ family since 1947. It became time for the owners to retire and sell the property.

During those 72 years, there had been many different industrial operations carried out on that property. The Phase 1 turned up a suspicious area, and hence a Phase 2 was ordered to eradicate some contaminated soil under a corner of one of the concrete slabs.

The buyer invested four months and many thousands of dollars having the soil cleaned so that the purchase loan could close, and the seller paid thousands in carrying costs. In the end, the environmental contractor recommended that California EPA be called in to use its super fund to do the cleanup, a process that would take months and result in big fines. In the end, the sale fell through due to environmental problems.

The hard lesson-learned is this: If an industrial property has been in use for many years or decades, it’s a good idea to call in an environmental company now to look for and clear any issues there might be. Postponing such until its time to sell or refinance the property could result in expensive delays and disappointment.

This property would have passed California EPA standards in earlier years. However, Cal EPA has raised standards in an effort to prevent contamination of ground water that everyone depends on for household use, so properties OK before may not be OK now.

Consider recommending to industrial property owners that they have their properties evaluated for environmental contamination by a property licensed environmental contractor, under the current California EPA standards. This way, when they suddenly find that its time to refinance, sell, or do something else that requires a clean Phase 1, their plans are not disrupted or delayed.

Earl McCoubrey
Commercial Real Estate Mortgage Loan Originator
California DRE #01747620
(714) 227-1855

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