Latest / Own More Doors / #47 How Dirty Soil Can Kill Your Deal! Phase 1 Environmental Explained (David McAlister)

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#47 How Dirty Soil Can Kill Your Deal! Phase 1 Environmental Explained (David McAlister) · Own More Doors

0:00
SPEAKER_00: What's up, everyone?
0:01
SPEAKER_00: It's another Ownmore's Dwarf podcast.
0:03
SPEAKER_00: I'm excited to have David McAllister with McAllister Geoscience with us.
0:08
SPEAKER_00: You might be wondering why we are interviewing David?
0:10
SPEAKER_00: Well, David is a phase one environmentalist, and so he does reports for commercial sales.
0:16
SPEAKER_00: Um, David, we're gonna thank you for being here, by the way.
0:18
SPEAKER_01: Yeah, thank you for having me.
0:20
SPEAKER_00: Um David owns a company here in Long Beach.
0:22
SPEAKER_00: Uh, we've known each other for a long time, just kind of, you know, uh meeting each other at different networking events and uh kind of running in the same circle.
0:29
SPEAKER_00: So, David, we're excited to have you here.
0:30
SPEAKER_00: We're gonna start off the show with like uh, you see a lot of crazy things.
0:35
SPEAKER_00: Um real estate brokers and sellers and buyers hire you to make sure that the property that is selling is not contaminated.
0:45
SPEAKER_00: And there's a process for that.
0:46
SPEAKER_00: And we're gonna get them through all the details, but we're gonna hop right into it from the beginning.
0:50
SPEAKER_01: Right.
0:50
SPEAKER_00: Share with us uh kind of a crazy story that you have.
0:53
SPEAKER_01: Yeah, so uh it this story is a little bit older.
0:56
SPEAKER_01: Um, so it's not like it happened yesterday or something, but it um when they were putting it, it's actually so old that when they were putting in the uh 105 freeway, the Caltrans went through and bought a bunch of properties, and a lot of them were like um uh residential, but a lot of them were also industrial.
1:13
SPEAKER_01: And in the like this area of Linwood, there was uh a property called Whitco Chemical.
1:20
SPEAKER_01: Whitco Chemical, there what they were doing is they were rehabbing old transformers.
1:27
SPEAKER_01: And I don't know if you know these transformers that are on the power poles outside the outside of everything.
1:32
SPEAKER_01: And um, you see them on the street, they look like a trash can is mounted up on the thing.
1:36
SPEAKER_01: It's an electrical thing, and it has all these copper windings in it.
1:41
SPEAKER_01: And this thing steps down the power from 600 volts down to 110 that we use in the building.
1:47
SPEAKER_01: And this process generates a lot of heat, so the whole thing's in an oil bath.
1:51
SPEAKER_01: That oil can used to contain PCBs, and that that's good because it keeps it the same viscosity, the same thickness through a wide range of temperatures.
2:05
SPEAKER_01: It's bad because it's carcinogenic.
2:07
unknown: Okay.
2:08
SPEAKER_01: And so this Widco Chemical Company, what they would do is they would rehab these transformers and they would like lift these sometimes they're huge, you know, and some like lift these big coils of copper out of the enclosure and then dip them into this swimming pool full of solvent, like chlorinated solvent.
2:29
SPEAKER_01: And what that happened then is it would all go into solution and then the coils would come out nice and clean, and then they could like put new oil in there and you new transformer.
2:40
SPEAKER_01: Well, what happened to that swimming pool full of chlorinated solvents that now contains PCBs?
2:46
SPEAKER_01: Well, it leaked.
2:47
SPEAKER_01: Uh concrete lined pools always leak because concrete is a porous thing.
2:52
SPEAKER_01: Um, even though our swimming pools are made out of concrete, there's a liner inside there that like keeps it from leaking.
2:58
SPEAKER_01: And uh so it leaked into the soil surrounding there and the groundwater.
3:03
SPEAKER_01: And uh we had a lot of cleanup to do.
3:06
SPEAKER_01: And uh now these PCBs that are oil that normally would not really move very far, now we're like mixed in with chlorine and solvents and we're moving everywhere.
3:17
SPEAKER_01: It was like we were all suited up.
3:19
SPEAKER_01: It was probably one of the dirtier sites I've been on.
3:21
SPEAKER_00: Okay, so that's that's something that needed remediation from uh an environmental standpoint.
3:26
SPEAKER_01: Oh yeah, that's a total cleanup site.
3:29
SPEAKER_01: Uh as far as I know, they're still working on that site.
3:31
SPEAKER_01: Uh the city of Linwood wanted to put a uh low-income housing uh building on there, and that was not gonna happen.
3:38
SPEAKER_00: And they couldn't.
3:39
SPEAKER_01: No, because it's it's way too dirty.
3:42
SPEAKER_01: Um so how do we tie this back into what we were talking about?
3:47
SPEAKER_01: Well, if you if you went to go buy a property that's like next door to this property, and you didn't know about this going on, then you might be on the hook to clean up some of that or participate in that cleanup in the future.
4:01
SPEAKER_01: Well, how do you know?
4:03
SPEAKER_01: Well, you gotta you gotta do a phase one.
4:06
SPEAKER_00: Got it.
4:06
SPEAKER_00: And the so yeah, yeah.
4:07
SPEAKER_00: So let's get into what is a phase one.
4:10
SPEAKER_00: You know, for for a lot of my listeners, I don't talk about phase ones because when we sell multifamily projects, it and if they're not development, which most of the stuff we do is just existing buildings, the phase one is not required by the buyer, it's not required by the lender.
4:26
SPEAKER_00: And so from for the multifamily brokers out there, phase one is not something that we we rely on or or need or or even need to reference.
4:35
SPEAKER_00: And so we just don't get it involved with us.
4:38
SPEAKER_00: But we do sell commercial buildings and retail buildings and office buildings, and then all of a sudden, we need a phase one report because it's required.
4:46
SPEAKER_00: You know, the buyer's gonna require it, but the lender's gonna require it.
4:48
SPEAKER_00: So tell us what is a phase one.
4:52
SPEAKER_01: So that's a great question.
4:54
SPEAKER_01: Um, phase one is the the term phase one comes from the ASTM Standard American Society of Testing and Materials, I think it is.
5:04
SPEAKER_01: And um, they define phase one and they have like all this very in-depth procedure for doing it, and it kind of levels the playing field to a certain extent.
5:16
SPEAKER_01: There's still a lot of like scientific interpretation, and then there's still a lot of um how far down the into the details do we go?
5:25
SPEAKER_01: You're supposed to go very, very far into the details, and that's part of um what they call the all-appropriate inquiries requirement.
5:35
SPEAKER_01: And uh that comes from Circla, which is the comprehensive uh look it up.
5:42
SPEAKER_01: It's circla is the federal law that was enacted in the 70s and it defines superfund.
5:49
SPEAKER_01: And this is like the beginning of the EPA, and so all of that um is kind of like the federal requirements and the state of the industry and the reason why we do all this stuff, or the methods for doing all this stuff.
6:06
SPEAKER_01: Then um we go through and we go through all the details.
6:10
SPEAKER_01: It's really like mostly 90% of it is a like um desktops, desktop work.
6:17
SPEAKER_01: We look at old air photos, we look at all topographic maps, we read old phone books.
6:22
SPEAKER_01: It is super boring and it takes tons of time.
6:26
SPEAKER_01: So, like sometimes people question like, why does it cost so much?
6:29
SPEAKER_01: Why does it take so long?
6:30
SPEAKER_01: It's like we go through a lot of data.
6:31
SPEAKER_01: That's why.
6:33
SPEAKER_00: And what is it that you're looking for, David?
6:35
SPEAKER_00: So, so there's a sale going on of a commercial building.
6:38
SPEAKER_00: Um, a phase one is required.
6:40
SPEAKER_00: They con they they contract with your company.
6:42
SPEAKER_00: We'll get into the cost and everything in a little bit, but what is it that you're looking for?
6:48
SPEAKER_01: Great question.
6:48
SPEAKER_01: So, what we're looking for is historic uh properties like the Witco Chemical talking about, gas stations, dry cleaners, uh various gas uh maybe it's a gasoline refinery, you know, things like that.
7:04
SPEAKER_01: Um they also used to be all kinds of places like um gasted or uh wait coal gasification plants is a very common thing too in a lot of areas and a lot of um developed urban areas.
7:17
SPEAKER_01: They would take coal and they would crush it and they would make this natural gas out of it, and that would go around power all everybody's houses and stoves, heat, sometimes lights on the streets.
7:28
SPEAKER_01: And um, those coal gasification plants are actually really dirty, also, and you don't know that it's there until you do this research.
7:36
SPEAKER_00: Now, some people might be thinking, okay, if there's a new building on that, David, then why wasn't it caught before before they built this new building on this new, you know.
7:46
SPEAKER_01: Yeah.
7:47
SPEAKER_01: Well, let's take, for example, um, just like a generic uh five-unit shopping center on the corner, Main Street USA.
7:59
SPEAKER_00: Right.
8:00
SPEAKER_01: Family trust has owned it a hundred years.
8:05
SPEAKER_01: Nobody's ever bought or sold a thing in a hundred years.
8:08
SPEAKER_01: A hundred years ago, nobody looked into this stuff.
8:12
SPEAKER_01: But now you want to go buy the thing or you want to buy the property next door, and you need to look into what's there.
8:20
SPEAKER_01: You know, maybe it's just a couple of restaurants right now, and maybe it's like a convenience store.
8:26
SPEAKER_01: But back in the day, at some point, there was a dry cleaner in there, but not now.
8:31
SPEAKER_01: How would you know unless you read the old phone books?
8:34
SPEAKER_01: You wouldn't.
8:35
SPEAKER_00: Right.
8:36
SPEAKER_00: Right.
8:37
SPEAKER_00: Talk to us about how long does it take and how much does it cost, and who pays for it?
8:45
SPEAKER_01: Uh who pays for it is kind of up to the lender and the broker.
8:50
SPEAKER_01: They can kind of slice that up.
8:52
SPEAKER_01: Um, but our costs are standard, pretty standard across the industry.
8:58
SPEAKER_01: Um, and it's like$2,500 in two weeks.
9:01
SPEAKER_01: Now that's kind of when I say standard, quote unquote, um, that would be like kind of like a larger apartment building, like 12, 20 units or something, or raw land, or something where you maybe a shopping center that like I was talking about, it's been in the family trash for 100 years, we're gonna do some research on it, those kind of things.
9:25
SPEAKER_01: If it's an old chemical plant, like the Wicco chemical plant I was talking about, that is going to be much, much more involved.
9:33
SPEAKER_01: If it's an old refinery and if it's in the area surrounding a bunch of older other old refineries, like over here in Carson or something, we have a lot more to go through.
9:41
SPEAKER_01: And so that's gonna be like who knows, five, six thousand dollars.
9:46
SPEAKER_01: Who knows?
9:47
SPEAKER_01: It's all based on the number of hours we have to spend looking through stuff, and there's a lot, and um, there's no two ways to slice it.
9:55
SPEAKER_01: Like on a standard one, like on this$2,500 one, we spend about 18 to 20 hours going through data.
10:01
SPEAKER_01: It's not just a sitewalk and then like kind of sketch things together and throw it out there.
10:06
SPEAKER_01: It's a lot of lot of work, a lot of detail, a lot of information to go through.
10:10
SPEAKER_00: David, is there some kind of um record keeping within the industry?
10:15
SPEAKER_00: Like if a building sold, say, five years ago and it's gonna sell again now.
10:21
SPEAKER_00: Do you guys I mean, you would assume that five years ago there was a phase one and the sale went through, so chances are there's not a problem.
10:27
SPEAKER_00: Is there something where you're like, ah, yeah, that one's good to go?
10:30
SPEAKER_00: Or every single time you're going through this process, this boring process that you're talking about.
10:35
SPEAKER_00: Um do you always have to start from the beginning?
10:41
SPEAKER_01: No.
10:42
SPEAKER_01: Um that's kind of a case-by-case question.
10:47
SPEAKER_01: Um, it's not like we submit it and it goes into like the title stack, or I don't know if that's a term or not, but this everything that the title people manage, it doesn't we don't send it into there, we don't send it into any government agencies.
11:00
SPEAKER_01: It this is essentially just goes to the lender, the borrower, the buyer, the seller, those people, broker.
11:08
SPEAKER_01: Um now, savvy property property managers are going to keep all of these documents forever, right?
11:15
SPEAKER_01: And they're going to hang on to them and they'll send it out as part of their due diligence package for the next guy or the next buyer or whatever.
11:24
SPEAKER_01: Um does that happen often?
11:26
SPEAKER_01: No.
11:27
SPEAKER_01: Uh, usually they get lost.
11:28
SPEAKER_01: And that's uh, so yeah, we'd have to start from scratch.
11:32
SPEAKER_00: How you own a business here in Long Beach, and I know you do a lot of Southern California.
11:36
SPEAKER_00: For all I know, you may you might even go out of state, but how often are you finding issues here in Long Beach?
11:43
SPEAKER_00: Um, I would assume, and let's include Signal Hill into that as well.
11:47
SPEAKER_00: Like, how often is that happening?
11:49
SPEAKER_01: Um, well, it's interesting that you asked that question because just a couple of years ago, we were involved in the very beginning of this.
11:59
SPEAKER_01: Uh, the city of Long Beach uh started a new methane um requirements for developments.
12:07
SPEAKER_01: If you're gonna get a like a grading permit or something like that, then you need to do a methane study, especially if you're in a um what they call like the methane zones or these oil fields.
12:20
SPEAKER_01: There's the Wilmington oil field, and then there's uh you know the Signal Hill oil field.
12:24
SPEAKER_01: City of Signal Hill has had uh this on the books for a few years, and the city of LA has had it on the books since the 90s.
12:32
SPEAKER_01: And uh so yeah, methane is a problem in the city of Long Beach.
12:38
SPEAKER_01: And uh yeah, but I mean the city of Long Beach and LA County in general, there's just a lot of different properties and a lot of different owners, and uh it's just a patchwork.
12:52
SPEAKER_00: Talk to us once once you get through okay, so let's just say the options after the phase one comes in.
12:58
SPEAKER_00: Either it comes back, um, you know, I don't know if you use the word clear or clean or satisfactory, but sometimes it's the opposite from that, and it triggers a phase two.
13:09
SPEAKER_00: Yeah.
13:09
SPEAKER_00: So talk to us about the phase two process and kind of like how how that's a domino effect.
13:16
SPEAKER_01: Right.
13:17
SPEAKER_01: So um when we we do the research for phase one, uh, we'll find either there are recognized environmental conditions, wrecks, or maybe there's some historic wrecks that have been addressed and cleaned up already, or uh closed wrecks, um, various things like that, or controlled wrecks, they call them.
13:33
SPEAKER_01: And um, there's business environmental risks, uh, there's de minimis conditions, like there's staining from oil, oil staining in the parking lot from cars parking there.
13:44
SPEAKER_01: That's not really that big a deal.
13:45
SPEAKER_01: We call it a de minimis problem, but we do need to talk about it.
13:48
SPEAKER_01: Um if we find recognized environmental conditions, like uh your property is right next to a dry cleaner, your property is right next to a gas station, or this property used to be a dry cleaner or a gas station, or whatever.
14:00
SPEAKER_01: Then we say, you know, yeah, we found that this is going on and we need to do some sampling.
14:07
SPEAKER_01: Then we go to the phase two.
14:09
SPEAKER_01: So the phase one is all just desktop stuff, and then with a sidewalk.
14:13
SPEAKER_01: But then the phase two is where we actually collect like soil, groundwater, soil vapor samples, and then we send the laboratory, we write a report, we see like is the dirty actu is the dirt actually dirty?
14:25
SPEAKER_01: And that's uh that's the phase two.
14:27
SPEAKER_01: Then we go into remediation.
14:29
SPEAKER_01: Some a lot of times there's like actually two or three uh um rounds of doing phase two, and so we call like additional investigation, further investigation, those types of things.
14:43
SPEAKER_01: And it's because it's like it's a scientific iterative process, like peeling an onion.
14:48
SPEAKER_01: You know, you don't get down to like the real answer until you've been at it a couple times.
14:52
SPEAKER_01: But sometimes you get in the first go.
14:54
SPEAKER_01: Who knows?
14:55
SPEAKER_01: Uh, and then we do the remediation and then that we go from there.
14:58
SPEAKER_00: Is it safe to say that phase two always requires remediation?
15:02
SPEAKER_01: No, no, there's been quite a few sites where there was an old gas station, old auto repair facility, or something like that, and we do we pop in some soil borings, soil vapor, and uh we don't find anything.
15:15
SPEAKER_01: So you're clean, you're good to go.
15:18
SPEAKER_01: Yeah, that's totally reasonable.
15:20
SPEAKER_00: What is, I guess, the standard cost for a phase two?
15:26
SPEAKER_01: Standard cost for a phase two is hard to define because it's really based on the findings of the phase one.
15:34
SPEAKER_01: Uh, was there a dry cleaner there?
15:36
SPEAKER_01: Was there a gas station?
15:37
SPEAKER_01: Was there both?
15:38
SPEAKER_01: Do we need to do soil gas and groundwater and soil?
15:42
SPEAKER_01: Uh, all of that, all those questions, how many borings, how many samples, how much do they get analyzed, how deep do we need to go, all that kind of stuff.
15:51
SPEAKER_01: Those all define the scope and then therefore the budget of the phase two.
15:58
SPEAKER_01: But let's just say if you're gonna go for a uh you got it like an auto-repair facility, you're gonna pop in like five, six, seven borings, just soil and soil vapor.
16:10
SPEAKER_01: Uh, we're not gonna go to groundwater yet.
16:12
SPEAKER_01: You'll you could expect the cost of that to be like you know, 15 grand or so.
16:18
SPEAKER_00: And who typically picks up the 15 grand on the phase two?
16:23
SPEAKER_01: Again, I would ex that would be a question more for the broker, seller, and the buyer to negotiate that.
16:29
SPEAKER_01: I think a lot of times it's the seller who pays that.
16:33
SPEAKER_01: But then again, there's a lot of buyers that'll pay it too because there's a lot of sellers that just say, uh, it is what it is, take it or leave it.
16:40
SPEAKER_01: Yeah, and the buyers want to protect themselves.
16:42
SPEAKER_01: And it's one of those things like I'm not a broker, but a lot of brokers have told me, you know, you make your money when you buy the property, not when you sell it, right?
16:50
SPEAKER_01: And so you want to know everything you need to know about it ahead of time.
16:54
SPEAKER_01: The same way you would look at the roof.
16:55
SPEAKER_01: Is do we need to replace the roof tomorrow?
16:58
SPEAKER_01: Um, you would look at the subsurface and you'd say, are we gonna have to do remediation on this?
17:04
SPEAKER_01: Are we gonna have to do a discount to the next buyer because it's dirty?
17:09
SPEAKER_01: Those kind of things.
17:10
SPEAKER_00: Right.
17:11
SPEAKER_00: What are some misconceptions about there, um out there about the phase one process that you hear frequently from buyers or sellers?
17:17
SPEAKER_01: The largest umbrella I can put over this would be why bother?
17:22
SPEAKER_01: Like, why make the why go through the extra hassle?
17:27
SPEAKER_01: It's not, you know, it's nothing now, it's it's just a Wendy's right now, or you know, some sort of fast food.
17:34
SPEAKER_01: Why would you bother?
17:35
SPEAKER_01: Well, it used to be a gas station.
17:37
SPEAKER_01: And that's why.
17:39
SPEAKER_01: And they never actually pulled out the tanks, and so you gotta you gotta clean it out.
17:43
SPEAKER_00: When does it trigger that it has to be remediated?
17:46
SPEAKER_00: I mean, if someone says, Well, I think I might have a problem.
17:48
SPEAKER_00: I I took over this property from my grandpa and it used to have this use that it most likely there's contamination.
17:55
SPEAKER_00: If they never sell, then it they're not required to do a remediation, David.
18:00
SPEAKER_00: Is that how that works?
18:01
SPEAKER_01: Not necessarily.
18:03
SPEAKER_00: Because if the neighbor gets flagged, that could happen.
18:07
SPEAKER_01: Um, let's just say, let's just take a generic gas station, for example.
18:12
SPEAKER_01: Uh, this gas station like uh shut down, let's say 10 years ago, and they tore everything down and they put a fast food restaurant on it.
18:20
SPEAKER_01: This is a scenario that's very common.
18:23
SPEAKER_01: And then um why would you need to do remediation now?
18:28
SPEAKER_01: Well, um it could be that uh somebody in the went to go buy the property next door and they found um gasoline in their underneath their building or on their property, and it's like it's like a tree growing on your property that leans over your neighbor's property.
18:47
SPEAKER_01: The neighbor's gonna say, Cut your tree down.
18:49
SPEAKER_01: Well, you're gonna say, get this gasoline out of my dirt, right?
18:54
SPEAKER_01: And so then they may actually go to the Cali EPA.
18:57
SPEAKER_01: There's a couple of agencies, there's either the DTSC or the regional board, and say, Hey, listen, there's a problem here.
19:04
SPEAKER_01: And uh, and then that would trigger investigations and then clean up.
19:09
SPEAKER_00: David, like in in my mind, and I'm sure my viewers are thinking, if there was an active oil leak underneath the ground, how the heck can someone go clean that?
19:19
SPEAKER_00: It just seems like I'm thinking, you know, that that could go every which way and far down.
19:24
SPEAKER_00: I mean, just it's crazy to think that that could be somehow cleaned.
19:28
SPEAKER_01: Uh yeah, it's complicated.
19:30
SPEAKER_01: Uh so imagine like you you're taking your kids to the fair and you go and you get a snow cone, and then they put like green goo in there and they like blue goo and the red goo, and then you go to suck all the goo out.
19:44
SPEAKER_01: How do you get it to all of that goo out so it's perfectly clean snow cone again?
19:48
SPEAKER_01: That's very difficult.
19:50
SPEAKER_01: The last like 10% is gonna be 90% of the effort, and that's what we're up against when it comes to cleanup.
19:57
SPEAKER_00: If someone's thinking about selling, do you recommend that they be proactive and and and get the phase one ordered?
20:06
SPEAKER_01: Yeah, I have quite a few clients that do that, and it they I think it's a more of a like a mentality or uh like your business strategy type thing.
20:18
SPEAKER_01: If you're the type of person that's gonna take everything and put it in a neat little box with a bow on it, then the phase one's an important part of that.
20:25
SPEAKER_01: Yeah, yeah, it's the due diligence package, you know, the same way that you'd package a lot of the financials and things like that.
20:31
SPEAKER_01: It's just one more part of the due diligence package.
20:34
SPEAKER_00: Yeah, I would recommend it because you know, yeah, you're do you're you're gonna deliver the the leases, the financials, um, the title report, and this would just be part of all that.
20:45
SPEAKER_00: Yeah.
20:46
SPEAKER_00: And it's better than knowing you're gonna know, anyways.
20:50
SPEAKER_00: And I I think maybe knowing is better than not knowing, and sometimes you're maybe it may I can imagine some sellers are maybe crossing their fingers hoping nothing comes up.
20:58
SPEAKER_01: Yes.
20:59
SPEAKER_01: Um, and I'm glad you said that because I actually we just had a property we worked on.
21:03
SPEAKER_01: Um, it wasn't here in Long Beach, but it was in the LA basin.
21:07
SPEAKER_01: And the uh our client is going to buy the property.
21:11
SPEAKER_01: And we they ordered a phase one from us, and I we found a dry cleaner next door.
21:17
SPEAKER_01: It was across the street in a shopping center, and it's closed down now, and it's a restaurant now, that that particular unit.
21:24
SPEAKER_01: And then to the north was an old trucking company who had underground storage tanks to fuel their trucks.
21:30
SPEAKER_01: Um, this particular property had a couple of underground storage tanks that were pulled out, removed, everything was cleaned, and the agency had signed off on it, so that was good.
21:40
SPEAKER_01: So I found these potential problems, right?
21:44
SPEAKER_01: Now, a dry cleaner next door that doesn't have a documented release, and a gas station or fueling system to the north that doesn't have a documented release, those don't necessarily have to be wrecks.
22:00
SPEAKER_01: They they can be.
22:02
SPEAKER_01: In a lot of cases, they would be.
22:05
SPEAKER_01: Um but it's kind of up to the that kind of thing is kind of up to the risk tolerance of the buyer, the lender, those type of people.
22:14
SPEAKER_01: So we sit down and we talk to this client and we say, like, listen, this is what we found.
22:19
SPEAKER_01: Uh these are the this is the reason why you would want to call it a wreck.
22:23
SPEAKER_01: Most people do.
22:24
SPEAKER_01: This is probably why you want to do it.
22:26
SPEAKER_01: And then this this could be the reason why you're talking wanna consider it as just a business environmental risk.
22:31
SPEAKER_01: Because the tanks north of the property haven't leaked yet that we know, but they could in the future.
22:37
SPEAKER_01: Or there may be an undocumented release, and you have to deal with it at that time.
22:42
SPEAKER_01: So it would behoove you, and we always recommend to call out a rec, do an investigation, and answer all the questions.
22:52
SPEAKER_01: In this case, we are actually doing that.
22:54
SPEAKER_01: We're going out there and we're going to do some work next week.
22:57
SPEAKER_00: When remediation is required, the buyer still wants the building, the seller wants to sell.
23:03
SPEAKER_00: Is this something that has to be remediated before there's a close of escrow, before the the lender does the loan?
23:10
SPEAKER_00: Do you know?
23:11
SPEAKER_01: That's a question for the lender.
23:13
SPEAKER_01: Uh, I will answer in what I've normally seen for most cases, yes.
23:22
SPEAKER_01: Um, but there's also been deals where it's closed and they like leave it.
23:28
SPEAKER_01: Uh we we do remediation as after the property's changed hands.
23:31
SPEAKER_01: Sometimes the buyer and seller will both put money into an escrow account, and then escrow account is used to pay me, and then when we're done, uh they split up whatever's left.
23:41
SPEAKER_01: So um, or but sometimes there's also been we've identified a little bit of dirty dirt in the surface, and it was an SBA deal, and we were actually able to dig and haul that dirty dirt in escrow before they closed, because SBA had a whole different system for uh if it was dirty or if it was clean.
24:01
SPEAKER_01: So we cleaned that up and then they closed.
24:04
SPEAKER_00: David, um how did you get into the business?
24:09
SPEAKER_01: You know, it that's a funny question, and uh it goes way back to when I was in high school, uh, shortly after they invented dirt.
24:19
SPEAKER_01: Um I was uh I was riding bikes with these guys, and these guys were like in their 30s or something.
24:26
SPEAKER_01: And my job at the bike shop I worked at was to lead the Thursday afternoon, three o'clock ride.
24:33
SPEAKER_01: And we would ride in the hills around the area.
24:36
SPEAKER_01: And um these guys had like the best bikes in like David what kind of bikes?
24:43
SPEAKER_00: Mountain bikes, road bikes, mountain bikes, mountain bikes, got it.
24:46
SPEAKER_01: Yeah, and this was like the beginning of mountain bikes.
24:48
SPEAKER_01: This is like the 90s, and so I uh the early 90s, and um so I'm like, okay, so what do you guys do that you can like be here at three o'clock in the afternoon on a Thursday and have all these awesome bikes?
25:02
SPEAKER_01: And they're like, oh well, we uh work for um at the time it was Motorola.
25:07
SPEAKER_01: We work for Motorola, we're putting up these cell towers.
25:09
SPEAKER_01: I'm like, that's silly.
25:11
SPEAKER_01: Nobody's ever gonna want to have a phone in their pocket all the time.
25:14
SPEAKER_01: But these guys are like, no, we're doing it.
25:15
SPEAKER_01: We're putting these cell towers up and we put them on gas stations.
25:19
SPEAKER_01: But you know who's really making the money and who's really doing the interesting work?
25:23
SPEAKER_01: These geologists that are like digging up these gas station tanks and cleaning things up.
25:28
SPEAKER_01: You got backhoes out there and all this kind of stuff.
25:31
SPEAKER_01: And it really rang true with me.
25:32
SPEAKER_01: I was like, that's great.
25:33
SPEAKER_01: I I like my chemistry, it's my favorite class in science.
25:36
SPEAKER_01: Like, I am a total nerd.
25:38
SPEAKER_01: I'm going for it.
25:40
SPEAKER_01: And so I, you know, go to college, uh, here I am.
25:45
SPEAKER_00: And so then you you study what to do this?
25:48
SPEAKER_01: Well, my degree is actually in uh soil science from Cal Poly San Luis Obispo.
25:54
SPEAKER_00: Nice.
25:54
SPEAKER_01: And uh yeah, I mean that that college experience was was great and all, but most of the people that in my industry come from either geology or uh civil engineering, and now there's an environmental engineering degree too, you get so and so were those guys right, David?
26:14
SPEAKER_00: Uh that all the money is in geology or geoscience.
26:20
SPEAKER_01: Unfortunately, no.
26:22
SPEAKER_01: Uh the party was over before I even got there.
26:25
SPEAKER_01: All these properties have been cleaned up, and that's one of the problems with my industry, as opposed to real estate like you guys are actually doing much better than I am, and that's because we're we are working ourselves out of a job.
26:36
SPEAKER_01: We're cleaning up all the major, like majorly dirty sites, and uh there's not much left to do.
26:42
SPEAKER_00: I mean, I I I guess from my perspective, for anyone listening, I I think we want to hear that, right?
26:47
SPEAKER_00: I mean, you know, we want to hear like, oh my gosh, like that's I'm I'm glad that there's more clean clean properties when they're trading than because they're being addressed because the laws were passed for that to have happened.
26:59
SPEAKER_00: Um why is it that they don't require it with multifamilies?
27:03
SPEAKER_00: I mean, I could see I could see a in a in a lot of cities where they did some rezoning and and now they're gonna change it into residential, and maybe they did some phase one back when they were converting it, but it just seems like now that we're selling our buildings, or most of the buildings we sell might be 1930s, 1950s, 1980s buildings, but it's uh it you know it's interesting because you could be next, we could sell an eight-unit building and it's next to a commercial place, and somehow the phase one's not required.
27:31
SPEAKER_01: Yeah, and that's a question for the lender, really.
27:34
SPEAKER_00: Yeah, I guess they they they drew they drew the line at some point, and that's where they drew it.
27:41
SPEAKER_01: I yes.
27:42
SPEAKER_01: I I don't really know because I'm not a lender, and so I don't I'm not the person who says you need to get a phase one or you don't need to get a phase one.
27:51
SPEAKER_01: And um a lot of like the the bigger banks, they have an on-staff risk management person.
28:00
SPEAKER_01: Sometimes it's an underwriter, sometimes it's somebody who used to work at environmental uh consulting and is now working for the bank.
28:07
SPEAKER_01: And those people are the ones that'll kind of like take a thumbnail sketch look at it and they'll say, Yeah, this is probably gonna be okay.
28:15
SPEAKER_01: It's it's multifamily, it's surrounded by multifamily, it's uh always been multifamily.
28:19
SPEAKER_01: We can probably skip it.
28:21
SPEAKER_01: But um, you know, right down the street here from your office, we've got a dry cleaner surrounded by multifamily and single family.
28:34
SPEAKER_01: Well, uh, when those multifamily buildings change hands, I wouldn't be surprised at all if they start looking into that.
28:42
SPEAKER_00: Yeah, it's just something that hasn't come up at all.
28:45
SPEAKER_00: Yeah, and and I could see like in newer cities where you know, I'm thinking like Corona or Irvine.
28:53
SPEAKER_00: You don't have multi, you know, you don't have commercial and single family and multifamily like all on the same block.
28:59
SPEAKER_00: You do here in Long Beach because we're an older city.
29:01
SPEAKER_00: Um, but that's very interesting.
29:03
SPEAKER_01: Um well, you know, I have one more thing on that.
29:06
SPEAKER_01: Um go ahead.
29:07
SPEAKER_01: The uh Fannie Freddie, you know, does loans on they have like this uh small balance program, they call it, or something like it's for like, I think it's for buildings that are it's multifamily buildings that are, you know, more than a certain number of units, but less than a certain number of units, and I think it's really a more like dollar value.
29:25
SPEAKER_01: Again, I'm not the financial person and I'm not really a real estate person.
29:29
SPEAKER_01: I know enough real estate to be dangerous, um, but I am a geologist, and so they um they've been asking us to do radon studies and a lot of these things and do phase ones on all these things, and it's a very it's required as part of the uh as part of the Fanny Freddy process, but they're they're changing that now, and they're doing less, they're kind of less stringent about it.
29:50
SPEAKER_01: For a while there, there was good like radon had to be done on every property, and that's not really the case right now.
29:56
SPEAKER_00: So what what advice do you have for buyers and sellers of say commercial buildings?
30:05
SPEAKER_00: Like, what should they be thinking?
30:07
SPEAKER_00: What should they be doing?
30:08
SPEAKER_00: How can they be proactive if they're thinking about either buying or they're thinking about selling?
30:13
SPEAKER_01: What we do is again part of the due diligence process in the same whichever level of detail you go into on like the electrical systems, the plumbing systems, the roof, like the foundation, you know, all those types of things.
30:27
SPEAKER_01: Uh, you know, asbestos, that's part of what we do too.
30:31
SPEAKER_01: Um, however deep you go into those things, you need to go into the like the environmental concerns.
30:38
SPEAKER_01: Is there a dry cleaner down the street, next door, gas stations, next door down the street, any of those things?
30:44
SPEAKER_01: Um, we need to look at it and look back on the history too.
30:48
SPEAKER_01: And you know what you're know what you're doing, get a whole picture of it.
30:52
SPEAKER_00: If we're looking at a building and the broker or the seller says, hey, um, here's the phase one I did years ago, is that still good enough, David, or is it not?
31:01
SPEAKER_01: Good question.
31:02
SPEAKER_01: And in accordance to the ASTM standard, the these things have a shelf life of 120 days.
31:09
SPEAKER_01: Oh, so it's not the reason well, the reason for that is um new things are discovered all the time.
31:15
SPEAKER_01: Like, like I was talking about this scenario where there was a dry cleaner across the street in a shopping center that is not there anymore.
31:22
SPEAKER_01: It's a it's a restaurant, and there's no documented release.
31:27
SPEAKER_01: Uh, same thing with the property to the north.
31:30
SPEAKER_01: There was a tank, but it was no release.
31:33
SPEAKER_01: Well, you know, maybe there was a release, and so there's there was an investigation and they found something and then they reported to the agency, and so it went on the databases, and so now it is a documented release.
31:44
SPEAKER_01: So you you need to kind of relook at these things in order to see what the most recent information is, and that's that's why there's a shelf life on these things.
31:54
SPEAKER_01: But then again, it goes back to the risk tolerance of the buyer and the lender, and so some lenders will take a phase one that's like a couple years old and they'll just say, sure.
32:06
SPEAKER_01: But that's usually because it's multifamily, it's surrounded by multifamily residential, it's always a multi-family roast residential, or it's before that it was uh agriculture of some sort, like orange groves, very common.
32:18
SPEAKER_00: So got it.
32:20
SPEAKER_00: Um, David, what I'm gonna give you the final word, but if someone is listening to this podcast or they're watching us on YouTube, um how can they get a hold of you?
32:31
SPEAKER_01: Yeah, so the fine uh the best way to get a hold of us is on our website.
32:36
SPEAKER_01: It's a dirtyproperty.com.
32:38
SPEAKER_00: It's a dirty property.com.
32:41
SPEAKER_01: Dirty www.dirtyproperty.com.
32:45
SPEAKER_01: And uh it's easy to remember.
32:47
SPEAKER_01: And uh when you click on You know, David, I gotta be honest, man.
32:51
SPEAKER_00: That's kind of like a negative connotation right off the bat.
32:54
SPEAKER_00: Why not?
32:55
SPEAKER_00: It's a clean property, and you're like, yes, gives me hope.
32:59
SPEAKER_01: Uh I think clean property was taken.
33:01
SPEAKER_00: Okay, okay.
33:02
SPEAKER_00: Someone beat you to the punch, yeah.
33:03
SPEAKER_01: Beat me to it.
33:04
SPEAKER_01: But if if you click on request a quote or contact us or any of that stuff on there, the email goes straight to me.
33:10
SPEAKER_01: We are a small group.
33:12
SPEAKER_01: Um it we are local here to Southern California and Long Beach.
33:17
SPEAKER_01: Our office is in downtown Long Beach.
33:19
SPEAKER_01: If you're in the LA area, buzz me.
33:22
SPEAKER_01: I'd love to sit down and talk to you about your property.
33:24
SPEAKER_01: There's no charge to like take a quick look at things.
33:28
SPEAKER_01: Um, we also have affiliates nationwide in every uh major metro area, and we can get you help you get your deals done.
33:36
SPEAKER_01: And that's what makes the difference between us and some of the other geologists and engineers out there is that if you're a broker and you're trying to get a deal done, you don't want to like have somebody unearth some horror show that's gonna stop the deal, right?
33:51
SPEAKER_01: We're that's not what we're trying to do.
33:54
SPEAKER_01: We're not gonna turn your deal into some sort of endless science project.
33:58
SPEAKER_01: We're gonna help you get your deal done.
34:00
SPEAKER_01: Sometimes we find things, and we'll work through what are the next steps and we'll get it all done.
34:06
SPEAKER_00: All right, David.
34:07
SPEAKER_00: Um, hey, so I'm gonna let you have the final word.
34:10
SPEAKER_00: Great, thanks.
34:11
SPEAKER_01: Um, so uh a little bit more background about us.
34:14
SPEAKER_01: We uh do a lot of phase one and phase two work, but we're really uh in the deep end of it, we're a remediation company.
34:23
SPEAKER_01: And uh my background is in heavy remediation of like these chemical plants, like we talked about, and refineries, things like that.
34:30
SPEAKER_01: So, and because we're such a small company, we are most well tailored to working with your individual property owner, the the family that owns that uh shopping center or dry cleaner or gas station, those types of things.
34:48
SPEAKER_01: If you want, if one of those people went to say, like one of the large remediation firms and the nationwide, worldwide firms, they're gonna have like higher fees, things are gonna go slower.
35:00
SPEAKER_01: We're here to work with those people.
35:02
SPEAKER_01: And that's that's really our killer, you know, our killer app.
35:08
SPEAKER_01: Got it.
35:09
SPEAKER_01: And uh, you know, we also, as I as I was saying before, uh, I don't think we were recording during this, but but the difference between us and some of the other uh engineers and geologists that do phase ones all the time is that we're gonna help get your deal done.
35:25
SPEAKER_01: We're not gonna turn it into like an endless science project.
35:28
SPEAKER_01: Sometimes we do find things, but we're gonna work with you to find the solution and get get your deal done.
35:34
SPEAKER_00: Got it.
35:34
SPEAKER_00: So you do the the phase one reports, you do remediation.
35:40
SPEAKER_01: Yes.
35:40
SPEAKER_00: And I mean, listen, if someone wants to buy a building and and there's there's an issue with the uh with the soils, they can just contact you directly.
35:48
SPEAKER_00: Yeah, you don't have to be afraid of it.
35:49
SPEAKER_01: To us, it's like putting a new roof on a building.
35:52
unknown: Okay.
35:53
SPEAKER_01: It's a little more involved, it's gonna take a little more time, but it's really the complexity is not that much more for us.
35:58
SPEAKER_00: It it's like hiring a contractor.
35:59
SPEAKER_00: Hey, you need a contractor for this specialty, and that's where you come in when it comes to um 100%.
36:05
SPEAKER_00: Okay, awesome.
36:06
SPEAKER_00: Thank you so much for coming in today.
36:08
SPEAKER_00: Thank you, Juan.