All Forum Posts by: Martin Potokar

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The post you are about to read is based upon a factual account of a property condition assessment (PCA) recently completed for a commercial real estate property consisting of a multi-tenant industrial office and warehouse building located in a far northwest suburb of Chicago. Please note that specific information such as the property address and names of those directly or indirectly involved in this particular real estate transaction were intentionally omitted to maintain confidentiality given delicate subject matter of/affecting health, life and safety.

Introduction

Having provided carbon monoxide (CO) testing of gas utilization equipment for well over ten years during the 1980's and 1990's in addition to having learned about the production, mitigation, prevention, testing, and harmful effects of elevated levels of carbon monoxide due to incomplete combustion of natural gas utilization equipment from a recognized leader/foremost authority on carbon monoxide testing in the industry by the name of Jim Davis—senior carbon monoxide/combustion trainer and consultant for the National Comfort Institute (NCI), who began traveling the country during the 80's and 90's conducting carbon monoxide training seminars for building and HVAC contractors, building inspectors, utility companies and virtually anyone interested in learning about carbon monoxide testing and proven methods to mitigate and prevent gas utilization equipment from producing elevated levels of carbon monoxide in flue gas known to cause CO poisoning—has without a doubt proven invaluable in heightening my awareness of conditions conducive to/indicative of incomplete combustion known to result in elevated/unsafe levels of CO in flue gas. Suffice it to say that any gas utilization equipment found to produce elevated/unsafe levels of carbon monoxide in flue gas is normally considered sufficient grounds by the gas company to shut-off gas to the property in addition to 'red' tagging gas utilization equipment responsible until such time the condition is addressed and no longer considered a threat to the life and safety of the building occupants.

CO Poisoning Goes Virtually Undetected in a Professional Office Environment

It's a cold, sunny Saturday afternoon in February and I've been given a reprieve in the weather thereby allowing me to use an outdoor scissor lift to safely access/observe a flat roof 24-foot above the finish grade (pertaining to the property for which I have been hired to conduct a PCA) without having to contend with rain/snow and below freezing outdoor air temperatures preventing a visual inspection of the roof much less conduct a higher level due diligent assessment of package rooftop units since gloves cannot be worn as they tend to interfere in attempting to access hidden system components such as air filter elements, blower fan motor assemblies, serpentine tube heat exchangers, etc. typically concealed from view in conducting a baseline PCA. In retrospect, everything appeared to be going well until I had reached the top of the roof whereby I could not help but notice a strong pungent odor emanating from a package rooftop unit operating on heat mode, an odor none other than 'Aldehyde', a byproduct of incomplete combustion of natural gas. Make no mistake in that the smell of Aldehyde is like no other in that once you have had a whiff, not unlike ammonia or skunk (think marijuana cigarette smoke), it's definitely a strong scent you will not soon forget. Moreover, ask anyone well versed in combustion of natural gas utilization equipment such as your local gas company rep or an experienced licensed mechanical contractor and they will tell you unequivocally that not only is Aldehyde a byproduct of incomplete combustion of natural gas but is more often than not accompanied by carbon monoxide, an odorless, poisonous gas. I can also tell you from experience that whether you are outdoors or not, if you breathe in enough carbon monoxide, your cardio vascular system will be compromised whereby you may start to get dizzy, nauseous, vomit and pass out. A worse case scenario is that you may die in the process. Surprisingly, many don't realize that with exception of an elevated body temperature, carbon monoxide poisoning symptoms mimic and as such are often misdiagnosed for the flu. In reality, any legitimate medical website, such as Mayo Clinic or Johns Hopkins, will confirm the similarity of symptoms between carbon monoxide poisoning and the flu. However, many fail to recognize much less understand how a small confined or even large space without adequate ventilation/dilution air can result in death of people subjected to elevated levels of carbon monoxide in the air they breathe. Getting back to the roof, a visual examination of a serpentine tube heat exchanger inside/serving one of the package rooftop units revealed what appeared to be the beginning of a small crack/breech in the heat exchanger. As it turned out, this happened to be the package rooftop unit producing the pungent combustion gas odor cited earlier whereby a breech in the heat exchanger acts to allow flue gas to enter the circulating air stream (conditioned air) inside the building. Needless to say, if carbon monoxide is present under these conditions, it can be easily drawn into the conditioned air space. Moreover, upon disclosing this information to the operations manager of the tenant space below, he was only too quick to respond that a number of company employees had allegedly been home sick with the flue on more than one occasion over the past three months beginning November 2019 that had yet to end as it was fast approaching the end of February, 2020 at which time we were conducting the PCA. As this happened to be the peak of the flu season, no one mentioned or least suspected the possibility of CO poisoning. Interestingly enough, the operations manager stated that a number of employees no sooner returned home from work believing they were sick when they miraculously began to feel better a couple of hours later. This in turn led us to believe that while a number of employees may have well contracted the flu, many may have experienced CO poisoning instead without realizing it.

Conclusion

In short, based upon our conversation with the operations manager, he immediately apprised his boss who in turn contacted the property owner who allegedly contacted a qualified licensed mechanical contractor to put things in perspective. Two days later we were informed by the tenant that the gas was shut-off to their respective space served by the package rooftop units whereby portable electric baseboard heaters were purchased and brought in to provide temporary heat until such time a final decision could be reached as to whether to repair/replace the existing package rooftop units. In brief, we were later informed by our client that the seller had decided to replace all four package rooftop units. However, not knowing the exact reason/s that may have influenced the seller's final decision, our guess is that it was more than likely due to rooftop units well beyond their statistical life cycle, their reliance upon R-22 refrigerant currently being phased out of the industry not to mention two rooftop units with suspect heat exchangers accompanied by elevated levels of CO in flue gas creating a potential liability that could end up in a law suit. Hence, our client and new property owner was able to acquire four (4) brand new package rooftop units at an estimated cost of $36,000 to $42,000 not to mention manufacturer equipment warranties all of which resulted from a PCA paid for in the amount of $1,500. While this surprisingly represents a pay back or ROI equal to 24 to 28 times the cost of the PCA in which event I can assure you this certainly isn't the norm for every PCA we provide, it does illustrate how a PCA designed to best serve a client's needs, conducted according to document ASTM E2018-15 Standard Guide for PCAs can often pay for itself and a whole lot more.

Thanks to everyone for the positive feedback. And yes, I do have more real life examples that I intend to provide in future posts.

Based upon what we have witnessed in conducting commercial property condition assessments (PCAs) and commercial property roof inspections for over 30 years, we can definitely state without reservation that 'An Ounce of Prevention is Worth a Pound of Cure' meaning that a commercial property owner or real estate investor is much better off adopting a pro active as opposed to a reactive approach when it comes to maintaining a commercial property that also acts to help extend the serviceable life of major building systems resulting in a substantial savings over the life thereof.

To lend credence to the above, a recent example comes to mind regarding a modified bitumen flat roof that had already exceeded its statistical life cycle by somewhere around 5 years or more whereby the current owner and occupant of the property had come to realize that it would probably only be a matter of time before they'd begin to experience more problems with the roof resulting in leaks that could jeopardize the operation of the business not to mention that any additional repairs would essentially be a waste of time, money and resources in postponing the inevitable resulting in a recover or complete tear-off and replacement of the existing roof covering. Apart from the fact that doing the later represented a considerable expense, the owner had also been debating about selling the property and moving to a larger facility as the company had since outgrown the space provided whereby a building addition wasn't an option. This being the case, a decision to put a large amount of money into the building at this time was indeed a hard pill to swallow. On the other hand, doing nothing meant taking a big chance on the integrity of an existing roof covering—a roof covering that had already exceeded its statistical life cycle in sustaining numerous repairs along the way—to make it through the Winter ahead and protect inventory inside the building against water damage due to a roof leak. Moreover, apart from there being no assurance that the roof would make it through the Winter ahead, there was absolutely no guarantee that the roof would remain a viable candidate for a recover much less a silicone roof coating application designed to extend the life of the existing roof surface for another 5 to 10 years in which event the only remaining option would be a complete a tear-off and replacement priced considerably more.

All considered, the owner soon realized that simply doing nothing posed too big a risk and was not an option. Moreover, considering that the owner didn't want to rule out selling the property as well as knowing the business would need to continue to occupy the building during the coming Winter and for at least several months thereafter dictated action be undertaken sooner rather than later. Since the least cost effective option appeared to be the silicone roof coating with a 10-year transferable manufacturer's roof warranty, the owner elected to go with this solution. Also, since the property owner had been very diligent in scheduling annual roof inspections and addressing maintenance repair needs over the serviceable life of the roof, this in turn appears to have served the property owner well as the roof was able to perform its intended function for an additional five years over and above its statistical life cycle and had now been approved for a silicone roof coating for adding yet another 10 years of life to an otherwise old modified bitumen roof covering that had reached the end of its serviceable life. And FWIW, not all older, aging roof membrane coverings at or near the end of their serviceable life qualify for a silicone roof coating or a recover using a single-ply roofing system whereby a complete tear-off and replacement often remains the only viable, not to mention most expensive, option available. In contrast, in taking a pro active approach, our property owner in this particular case was able to save $10,000.

In answer to 'If people maintained house, cars, appliances, etc. as often as manufacturers recommend, most people would be broke and their whole time daily would be doing this stuff', I believe we'll have to agree to disagree. It appears that you grossly misinterpreted my recent post in that my intention as a PCA (Property Condition Assessment) specialist is not to recommend a level of maintenance considered beyond that deemed necessary to properly maintain a building system over its serviceable life and, in many cases, help extend its life cycle . Far from it! What I do believe is in being proactive as opposed to being reactive when it comes to taking care of and maintaining anything for that matter whether it be my personal health, automobile, a property I may own, etc. The way I look at it, an ounce of prevention is worth a pound of cure holds true in the majority of cases especially when it comes to maintaining a commercial property. This opinion is based upon what I have personally witnessed in 30 years plus conducting commercial property condition assessments and 50 years accumulative experience in building construction. On the other hand, I do believe that you should continue to do what works best for you. As such, I have no intention whatsoever in trying to convince the party who posted this comment otherwise. While I could take the time to provide countless examples (as opposed to isolated cases) given what I have seen and experienced over the years to show that the cost to properly maintain a major building system such as a roof, mechanical HVAC system, parking lot, etc.. over its serviceable life costs far less than simply calling the roofing, HVAC, and paving contractor only when there appear to be issues or problems, I honestly feel this to be a waste of time and an exercise in futility for those who believe otherwise.

Introduction

While Triple Net Leases continue to gain popularity over the years in more ways than one, especially when it comes to placing responsibility for the cost of maintenance and repairs on the tenant in addition to property taxes and building insurance in exchange for a lower rent compared to a standard lease, the question still remains as to whether or not a triple net lease is really the Panacea it claims to be for commercial property real estate owners and investors alike? In reality, based upon what I have witnessed over the past 30 plus years in conducting property condition assessments (PCAs) for commercial property regardless of age/type, I would have to answer 'No' primarily because experience has shown that not unlike those that rent residential property, the majority of tenants leasing commercial property are nine times out of ten not going to take care of the property as if it were their own in which event they will normally adopt a reactive rather than a proactive approach to save money (or so they think) when it comes to maintenance and repair needs. In reality, given a number of cases I've personally witnessed, a maintenance repair need may often go undetected as well as unaddressed if and when the lessee truly believes doing little to nothing will in no way disrupt the daily operations of the business. What's least understood is that while the building tenant or upper corporate management located elsewhere may sincerely believe they're making the right choice in the best interest of the company to save money, in most cases, the end result leaves much to be desired whereby the tenant may actually be unaware of their having to pay more money in postponing the inevitable making an existing condition much worse than it is as time goes on. Unfortunately, this in turn can also have other adverse ramifications that may end up affecting the pocketbook of the landlord due to the tenant's ignorance and negligence or seemingly lackadaisical attitude in maintaining the property according to the terms of the lease.

Case in Point

To prove a point, my company recently provided inspection services for a couple of commercial properties owned by a real estate investor who presently leases each property to a different franchise business, one of which represents a chain of successful retail store outlets (that doesn't need to advertise) and another that represents a successful 24/7 physical fitness exercise facility that often advertises on television during normal viewing hours. Interestingly, the two things these franchises have in common is that unlike most newly formed young brick and mortar businesses, they are both well established and recognized business entities each with an excellent track record whereby the landlord understandably doesn't have to worry about their paying the rent on time much less their going out of business overnight. The second thing they seem to have in common is that maintenance and repair needs relative to the building do not appear to be high on the priority list as long as they don't interfere with their place of business. For example, in conducting a high level due diligent assessment of package rooftop units at each location, we were altogether surprised by the deficiencies and deferred maintenance encountered during our assessment of the rooftop units given dirty air filters, worn fan belts, rusty and plugged condensate drain pan openings accompanied by condensate backup leaks down into the structure below mistaken for a roof leak by the building occupants inside, etc. In fact, upper corporate personnel, who happen to manage one of the leased properties from a remote location, apparently had a so called brainstorm that required setting two indoor thermostats to 65 degrees and 75 degrees during the hot summer months to save money. Unfortunately, little did they realize that setting the temperature of both thermostats in this manner ended up placing the burden of cooling on one package rooftop unit which was never intended by design to cool much less heat a building of this size by itself. Needless to say, this caused the rooftop unit to run continuously in a futile attempt to maintain much less lower the indoor air temperature to its thermostat setting especially on extremely hot days. What's probably least understood by the average lay person, allowing a package rooftop unit to operate in this fashion merely serves to shorten its life cycle in addition to costing more money to operate since the unit is consuming more gas and electricity in attempting to heat and cool the building on its own. And let's not forget that the cost to replace a package rooftop unit with a 5-ton capacity or more isn't exactly a cheap proposition and one that could easily end up costing a landlord anywhere from $1,200 to $1,500 a ton which equates to $6,000 to $7,500 for a 5-ton package rooftop unit. And believe it or not, we actually found a package rooftop unit with its service access panel totally removed leaving the package unit open to the element. While we could continue to provide more examples, hopefully you get the point.

The Solution

At first we believed that the resolve for maintaining package rooftop units or any mechanical heating and cooling equipment for that matter was to simply require a tenant to secure a service maintenance contract agreement with a bonafied, licensed mechanical heating & cooling contractor in order to mitigate the cost of repairs/replacement. However, we soon realized that asking a tenant to incur additional costs without offering anything in return such as a further reduction in rent was essentially a poor one sided solution as opposed to being a win win situation for both sides. Moreover, we also realized that if the tenant were to accept such an arrangement, there still needed to be a system of checks and balances in place to ensure that the tenant and mechanical contractor were initially diligent and continued to remain so in maintaining the package rooftop units over the term of the lease. The solution we eventually came up with deemed equitable to both parties was to have the landlord or tenant secure a service maintenance contract agreement with a qualified, licensed mechanical contractor. However, and as already mentioned, if a landlord decided to put the onus on the tenant to secure a service maintenance contract agreement, there needed to be a reduction in rent or some other strong incentive in the lease agreement in order to make this a worthwhile arrangement for both sides. Last but not least, regardless of who ended up taking the lead in securing a service maintenance contract agreement, the checks and balances system referred to earlier herein still needed to be implemented in which event the package rooftop units could be made subject to an annual due diligent assessment performed by a qualified, professional outside third party hired by the landlord to further ensure that the package rooftop units were being maintained according to the terms of the lease, a win win situation for both sides on all counts.