By David G. VerSluis Jr.
President
Sierra Consultants
Give Due
Diligence Its Due
Environmental concerns gain new
importance in light of distressed assets
in rEcEnt yEars, somE commErcial
mortgage brokers and lenders may
have been able to avoid environmental
due diligence on many of their deals.
Between uninformed borrowers and
highly variable and poorly enforced
bank policies, this was not unusual.
As the mortgage market continues to
change and as more lenders are taking
back commercial properties, however,
this likely will no longer be possible if
banks — and borrowers — want to protect themselves.
In fact, the federal government is
placing more-stringent requirements
on mortgage lenders in the face of current and upcoming financial troubles.
These requirements likely will require
more, not less, environmental due diligence for commercial properties.
As a result of previously lax stand-
ards, as more commercial and industrial
properties enter the loan-workout or
foreclosure process, potential exists
for discovery of environmental prob-
lems drastically impacting the collater-
al’s value — and not for good. This will
expose loans where the environmental
due diligence received the short shrift
on the front end and will teach many
valuable lessons on the back end.
David G. VerSluis Jr. is president of Sierra
Consultants and a 25-year veteran of the
environmental industry who specializes
in commercial and industrial real estate.
He is a registered environmental property
assessor, has been involved in thousands
of transactions, and is a frequent speaker at
national lending and real estate functions.
Connect to VerSluis on LinkedIn or via e-mail
at dversluis@sierraconsultants.net.
By Terri Smith
Associate
The ELM Group Inc.
An Incentive to
Promote Sustainability
Federal programs may be the push clients
need for redeveloping properties
a visiBlE impact of today’s trouBlEd
economy is the prevalence of properties
that are underused or abandoned after
foreclosure. These distressed properties
offer opportunities for sustainable reuse.
Sustainable reuse includes reusing or
renovating existing buildings using en-ergy-efficient technologies and the U.S.
Green Building Council’s Leadership in
Energy and Environmental Leadership
Design principles to meet the surrounding community’s needs.
Distressed properties often contain
environmental challenges and sometimes dated infrastructure. Because of
their former use, however, these properties also may possess a promising location with major-highway access and
can present an opportunity for reinvestment, new jobs or needed housing.
To help revitalize these properties,
as well as their communities, commercial mortgage brokers can help investors and other property-buyers evaluate
public financial incentives to spur a sus-tainable-reuse effort. These financial
incentives sometimes can provide the
necessary seed money to initiate a
project or can bridge a financing gap to
make a distressed property more attractive for purchase and redevelopment.
By identifying a property’s previous
use and reviewing its new intended
use, mortgage brokers can assess what
types of public financial assistance may
be available to help a potential prop-erty-buyer close the deal. These incentives can play an important part in the
project’s overall financial strategy.
Some environmental consulting
companies can work with the pur-
chaser, the municipality and the lender
to identify the various federal, state and
municipal or county incentives avail-
able to assist with the reuse project.
Brokers also can work with a financial
company that specializes in preparing
grant applications.
Terri Smith is an associate with The ELM Group
Inc., located in Princeton, N.J. Smith has more
than 22 years of environmental program and
funding experience. Additional information on
environmental programs is available at www.
exploreelm.com. Reach Smith at (609) 683-
4848 or tsmith@elminc.com.
