Advice on reviewing Phase 2 report

[Howard Yang]

I'm assessing a commercial property (occupied by a major automotive service tenant) and the seller has completed a Phase1, Phase2, and a Phase2 supplemental report as part of the seller due diligence package. The final results were indentified volatile organic compounds in the soil vapor and indoor air exceeding the commercial environmental screening levels for benzene, ethylbenzene, PCE and chloroform. The groundwater and soil turn out to be ok with some contaminants but all well within limits of the environmental screening levels. So my questions are:

1. How big of a liability/risk am I looking at. Are these Phase2 results typical for these type of auto service properties? Are there specific red flags when assessing these type of properties?

2. The vendor that completed the report recommended to just have better ventilation system indoor. If the vapor is coming from the soil, wouldn't the proper way to remedy the situation involve actual soil removal/clean up?

The reason why it's still worth considering this property is due to the prime location and future potentials of the property.

Any advice much appreciated.

Howard

[Ronald Rohde]

Worse that could happen is the remediation costs outweigh the economic value of the land.

I would say you don't know how much it will cost to fix until you start remediation. That is the biggest deal breaker for 99% of the buyers out there. If you think the delta is several hundred thousand or millions, and you're willing to put that capital in, then go for it.

Is this in CA?