“We expect HQ2 to be a full equal to our Seattle headquar-
ters,” says Amazon’s founder and CEO, Jeff Bezos. “Amazon HQ2
will bring billions of dollars in up-front and ongoing investments,
and tens of thousands of high-paying jobs. We’re excited to find a
second home.”
Unlike a good number of residential second homes, though,
Amazon’s isn’t likely to be in an out-of-the-way location. The RFP
for HQ2 calls for metropolitan areas of one million people or
more with strong pools of technical talent residing in those areas,
along with a stable and business-friendly environment. Amazon
also has a preference for “communities that think big and cre-
atively when considering locations and real estate options.”
HQ2 could be an urban or downtown campus with a layout
similar to the existing Seattle site. Amazon prefers a develop-
ment-prepped site, and will consider greenfield sites, infill sites,
existing buildings or a combination thereof. “We want to encour-
age states and communities to think creatively for viable real
estate options, while not negatively affecting our preferred time-
line,” the company says.
From an economic development standpoint, that creative
thinking could end up paying off. Amazon points out that in its
home base of Seattle, its direct investments between 2010 and
2016 added $38 billion to the city’s economy, while local non-
employees’ increases in personal income during that time
totaled $17 billion.
Amazon has set a deadline of Oct. 19 to submit proposals.
The company expects to make a decision on site selection in
2018.—Paul Bubny ◆
Most buyers of commercial real estate know they face environmental risk, and they also know a Phase I Environmental Site
Assessment (ESA) will help them clarify that risk. Many also are
aware that obtaining a Phase I is necessary to complete “All
Appropriate Inquiries” (AAI), which can give them access to
liability defenses under the federal Superfund law. Less well
known is that a Phase I by itself may
not satisfy AAI or adequately assess a
buyer’s total risk. Effective due diligence, including AAI, requires a team
effort by the
buyer and its
environmental consultant and lawyer confidently to assess
and manage the full range of risk.
As a key requirement for documenting AAI, the Phase I is an essential part
of pre-acquisition due diligence for
commercial and industrial properties. Although the AAI regulations ( 40 CFR Part 312) do not dictate a specific format for documenting AAI, the U.S. EPA has approved a format developed by
the American Society of Testing and Materials (ASTM) as E1527-
13. Among other things, under AAI and the ASTM standard, a
Phase I ESA will include an opinion by the environmental professional (EP) regarding known or suspected adverse conditions, an
evaluation of relevant data gaps, and an opinion of what further
investigation may be necessary to solidify the EP’s opinions.
As a starting point, however, buyers should know that not every
Phase I ESA standing alone will or can fully meet the requirements of AAI and support the AAI Superfund defenses. EPA guidance defines AAI as “a process of evaluating a property’s environmental conditions and assessing potential liability for any
contamination.” By design, AAI is a requirement for the buyer to
complete, with the professional assistance of its consultant and
lawyer. AAI is not equivalent to a Phase I ESA, and it cannot be
siloed with the consultant.
Also, even where the AAI is complete, the Superfund defenses
may not offer sufficient or complete protection. AAI and its
defenses are creatures of the federal Superfund law and apply
only to liabilities under that law. Depending on the history of
the property and how it will be used after purchase, the buyer
could face regulatory compliance issues at the State and federal
level, liability under OSHA and hazardous waste laws, and even
third-party tort claims from tenants and neighbors of the prop-
erty. Many issues related to releases of petroleum and under-
ground storage tanks are not
regulated under some state
Superfund-equivalent laws
allow an independent route
for private parties or State
governmental agencies to
force an owner to cleanup his-
torical contamination or
reimburse their costs.
A buyer must also consider
its own plans for the property
and how those might be
affected by the presence of
adverse environmental condi-
tions. AAI defenses are focused
on boxing legal liability for
contamination that is known
or suspected to remain in
place, but that liability shield
will not be sufficient help if,
e.g., a buyer’s redevelopment
plans require excavation of
impacted soils that multiplies
the buyer’s costs.
All potential risks must be assessed before they can be mitigated, and not all are covered in a standard Phase I report or
adequately addressed by the AAI Superfund defenses. When
consultant and buyer work together to clearly scope and manage these risks, the buyer can proceed to purchase with well-founded confidence.
Andy Bajorat is the Chicago-based chief operating officer and principal at
BBJ Group, an environmental consultancy firm. He may be contacted at
abajorat@bbjgroup.com. The views expressed here are the author’s own.
Environmental Due Diligence Is a Team Effort
RISK MANAGEMENT
By Andy Bajorat
All potential risks
must be assessed
before they can
be mitigated.
When consultant
and buyer work
together to scope
and manage these
risks, the buyer
can proceed to
purchase with
well-founded
confidence.
