Environmental Due Diligence Q&A With EBI Consulting’s Morgan Moliver
EBI Consulting account executive Morgan Moliver facilitates the environmental due diligence process for a diverse group of clients, determining the needs of these property managers, buyers, sellers and institutions before connecting them with the appropriate members of the EBI Consulting team. Her company’s generated countless trusted risk assessment reports, so we sat down with her to learn a bit more about the process and product.
Bisnow: What are the purposes of the ESA and PCR?
Morgan: An environmental site assessment (ESA) is a report provided by environmental professionals to a buyer, seller or financial institution. Its purpose is to identify any recognized environmental conditions or business risks on a property. A property condition report (PCR) is a building evaluation, which provides an expert opinion of the building(s), designating issues that require repairs and their associated costs. The purpose of a PCR is to indicate the effective useful life of building components and anticipated replacement or repair costs.
Bisnow: Are they primarily used to alert property managers to unsafe conditions that must be rectified?
Morgan: No, this is not the primary purpose. Occasionally, the report conclusions will identify radon, mold, asbestos, lead, groundwater impact and other concerns that require immediate attention, but this is rare.
Bisnow: How exactly do buyers, sellers and brokers benefit from the info contained in reports? Can they be leveraged before a transaction to negotiate a better price?
Morgan: These reports are designed to alert our client to risks at a property, both from an environmental and building assessment standpoint, and yes, we have many M&A advisory and private equity clients who engage our senior team to assess property condition issues. The cost of real estate due diligence is minimal relative to long-term building repair costs or environmental issues. Also, unbiased third-party verification is always a powerful bargaining chip.
Bisnow: What other entities or parties require an ESA or PCR?
Morgan: Most financial institutions, PE groups, CMBS firms, REITs, insurance companies, government organizations, developers and property owners need real estate due diligence.
Bisnow: How are tenants involved? Do they typically receive the findings?
Morgan: Tenants are not usually provided completed reports during these transactions; however, tenants are interviewed during some site reconnaissance activities, which does provide our experts with key details and in turn can help tailor our recommendations.
Bisnow: Do you present the material in nontechnical terms and help with its digestion and interpretation?
Morgan: We give our clients direct access to our senior review team members, who can explain and add color on any topic or conclusion.
Bisnow: How long does each take and how frequently should they be redone?
Morgan: EBI Consulting can provide an environmental site assessment or PCR in 10 to 15 business days, but we’ve also worked on deals that need to be completed more quickly, and we have the capability to expedite the process. Additionally, we have worked on large portfolios with staggered deadlines based on deal priorities or property sensitivities. In general, our clients update reports every six to 12 months depending on the transaction they are involved in.
Bisnow: Are the ESA and PCR separate processes or is it advantageous to do them simultaneously?
Morgan: It is advantageous to complete at the same time. This provides the property manager and tenants some sanity. Furthermore, our team gets the benefit of asking questions once and hearing answers together. This allows collaboration and cohesiveness between our reports.
Bisnow: Can you provide an estimate of some dollar value savings managers have realized after addressing a condition revealed by a report that otherwise might have gone unnoticed and worsened?
Morgan: Our goal on any report is to identify the risk, add details to explain it, and quantify it for our clients to box it. We are not in the business of killing deals or creating ambiguity. The upfront cost of the report is minimal compared to peace of mind in knowing what the issue is.
From our experiences, clients might identify tens of thousands of dollars in conditions that show up as immediate repairs in the PCR report, such as a less than optimal roof or mechanical system, or an environmental item such as a past underground storage tank or dry cleaner that would not have otherwise been identified, and thus could have led to tens or hundreds of thousands of dollars in remedial costs.
Bisnow: Does EBI's comprehensive approach, with site reconnaissance, record review and interviews differentiate your company from competitors, who might employ more cursory methods?
Morgan: Our site visits, property interviews and property research are vital components of each report. We assure that the reports represent facts and provide accurate solutions.
EBI Consulting differs from other due diligence companies because of the experience level and responsiveness of our team. Our company is constantly evolving to match clients’ emerging needs and requests. Two recent examples—we were just approved by Freddie Mac and Fannie Mae for the Green Loan Program and we’ve expanded our building commissioning services.
Bisnow: As environmental regulations change, what issues have you seen becoming more prevalent in the real estate industry?
Morgan: There are three topics that we have seen come to the forefront recently. The first is vapor encroachment and intrusion. This was placed into the ASTM’s newest version of the ESA standard. Environmental professionals are reviewing past closure reports and contaminants, and assessing current vapor risk to building occupants.
Second, property owners want to reduce energy usage, and accordingly we’ve increased the size of our Energy and Mechanical team, which provides commissioning consulting services, energy assessments and solutions, and helps clients looking to become LEED certified in response to lease demands.
Lastly, Fannie and Freddie have instituted the aforementioned Green Loan project that assesses energy consumption and reduction through building component upgrades. EBI is approved as a third party vendor to do these Green Loan reports.
Bisnow: How does one engage EBI for a report?
Morgan: As a nationwide company with over 400 employees, we have many sales and technical experts regionally. In Texas, I am the appropriate point of contact, and the easiest approach is to contact me via email (firstname.lastname@example.org) or phone (713-829-1002) and I will connect you to the right team quickly.
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