The role of environmental due diligence in understanding the risks, liabilities and opportunities associated with managing your property assets
Are you or your clients a property developer, manager or investor involved in buying, selling or merging property assets? If so, how important is it to you to understand the potential environmental liabilities, costs and opportunities associated with your property assets?
A very simple and effective tool to mitigate your commercial risks is Environmental Due Diligence (EDD) assessment. In the sale and purchase of a property or in a merger or acquisition, undertaking an EDD assessment early in the process adds value by identifying, characterising and quantifying environmental liability (e.g. soil or groundwater contamination) and will strengthen your position in negotiations as either the buyer or the seller.
Undertaking an EDD assessment well before the sale or purchase process allows you to plan accordingly. Being armed with the results of an EDD assessment holds the advantage that when it comes time to sell you have either quantified, managed or removed the environmental liability and optimised the value of the asset. Alternatively, if you are the buyer and have undertaken your own EDD assessment, you can negotiate a discounted purchase price in lieu of the environmental liabilities or even walk away from the deal if the risk is too high.
A typical source of environmental liability is soil and groundwater contamination associated with the historical and/or on-going activities on site. For example, an EDD assessment of your property may determine that you have soil and groundwater contamination from underground fuel storage tanks. Through further assessment, you can characterise the extent of the contamination, determine whether it has remained on site or migrated offsite and cost the remedial works that would be required to either contain or remove the contamination. You may elect to clean up the contamination or, in consultation with the regulators, agree a solution whereby containment and monitoring of the affected area is acceptable.
In order to accommodate your particular situation, you need an assessment tool that is simple, flexible and can be readily designed to fit your property assets, the structure of the deal, the timing requirements and the desired commercial outcomes.
Greencap has developed a very simple approach to EDD assessment that allows you to choose the level of assessment required, depending on your needs. In simple terms it is a decision tree and by asking a series of yes/no questions, you can quickly determine what level of assessment will best suit your needs. Greencap has extensive experience in EDD assessment and we can provide advice on the option that will add the greatest value.
The Greencap EDD process follows a tiered approach, where you can select a Tier 1, 2 or 3 EDD assessment, which provide assessment on the following categories: Desk Studies, Site Work, Risk Assessment, Commercial Liability Assessment and Recommendations. The specific scope items (i.e. tasks) associated with each work stream are either a standard or optional offering in a particular tier. For example, the review of existing environmental reports is one scope item under the category ‘Desk Studies’ and is optional under a Tier 1 assessment but is a standard Greencap offering under a Tier 2 and 3 EDD assessment. Similarly, intrusive soil investigation is a scope item under the category ‘Site Works’ and is not applicable in a Tier 1 EDD but is optional under a Tier 2 and 3 assessment. Each tier provides a higher level of certainty and will obtain the specific level of assurance you require. The advantage of the Greencap EDD tiered approach is that you get to choose what you think you need. The additional benefit is that you also pay for those elements that have a direct benefit and not the nice-to-haves. If you are not sure what you need, the Greencap experts are happy to advise you.
National Practice Lead – Environment | Greencap
Click Here for an overview of Greencap’s comprehensive service offering