The location is great, the price is fair and the market is hot. Sounds like a great deal. And it just might be. But in New Jersey, Smart Growth restrictions to development have pushed the market towards sites with a history of use—and often misuse.
As property owners, developers and municipalities get more involved in the process of brownfields redevelopment, due diligence efforts that recognize the past history and current conditions of a site at the early stages of a project become even more critical. Brownfield sites by their very nature provide challenges that uncontaminated, virgin sites do not.
SAI has for several years provided a type of targeted strategic due diligence for redevelopment projects that allows for the identification of potential liability, remedial options, and costs early in the process to facilitate a go/no-go decision. Not intended to take the place of traditional due diligence efforts to satisfy requirements of a regulatory agency and/or financial institution, the strategic analysis identifies early the remedial options to complete a given project. If plans need to be modified to address site conditions and regulatory constraints, knowing these needs early saves money in the long run by facilitating the site’s design.
An example of just how valuable this strategic due diligence is can be seen with a recent investigation undertaken by SAI personnel. The Client had the opportunity to develop a parcel of land in a prime location. The purchase price was reasonable and the market study clearly indicated the potential for success with the specific redevelopment plan. The only "problem" was that the land was an abandoned landfill. SAI scientists and engineers conducted a series of targeted investigations and proposed a rather unusual but clearly sound management plan for the site. Based on certain cost assumptions, this project was determined to be a reasonable investment and the Client proceeded with the negotiations, equipped with sufficient information to assist in setting a cost.
The information critical to that decision process would not have resulted from "traditional" due diligence - file reviews, preliminary site visits, and other components of the Phase I/Preliminary Assessment effort. While this traditional information is necessary and a requirement of the NJDEP and/or the financial institutions involved in the deal, the information critical to this decision included additional geotechnical investigations and meetings and discussions with regulators. Together, this information, with SAI’s assessment of engineering costs and regulatory time frames, was part of what was needed by the Client to develop the pro forma for the project, and the decision to move forward. While working to develop sound remedial strategies that allow our Clients to reach their redevelopment goals, strategic due diligence can also identify very early in the process when a site is unsuitable and/or the “deal” inappropriate. SAI recently evaluated a site for a Client that contained levels of PCBs that could impact and possibly deter redevelopment. Although SAI was confident that there were ways to make the site buildable, the asking price for the land was unrealistic. Armed with this knowledge our Client was able to attempt to renegotiate the selling price.
Each case, each site is different. SAI is proud of the efforts it has undertaken on behalf of its Clients to incorporate standard procedures for due diligence activities with in-depth knowledge of regulations, remedial options and engineering controls to assist our Clients in critical decisions related to property acquisition and redevelopment.
SAI can advise Clients on the most suitable forms of due diligence for their needs. The following summarizes these efforts.
For more information on SAI’s unique approach to strategic due diligence, please click on the link below to see our Spring 2006 newsletter.