Q&A With EBI Consulting's Alex Rodriguez
EBI Consulting senior account executive Alex Rodriguez (pictured below with his family and Food Network star Alton Brown) facilitates the environmental due diligence process for a diverse group of clients, determining the needs of these property managers, buyers, sellers and institutions before connecting them with the appropriate members of his team.
EBI’s generated countless trusted risk assessment reports, so we sat down with Alex to learn a bit more about the process and product.
Bisnow: How do you see buyers, sellers and brokers benefiting from the info contained in your reports? Can they be leveraged before a transaction to negotiate a better price?
Alex: These reports are designed to alert our client to risks at property, both from an environmental and building assessment standpoint, and yes, they are frequently referenced in negotiations. We have M&A advisory and private equity clients who engage our senior team to assess property condition issues. The cost of real estate due diligence is minimal relative to long-term building repair costs or environmental issues. Unbiased third-party verification is always a powerful bargaining chip.
Bisnow: What are the purposes of a lender scope Environmental Site Assessment (ESA) and Property Condition Report (PCR)?
Alex: In general terms, the purpose of both is to protect those involved in acquiring or refinancing commercial property.
The ESA provides for the “innocent land owner” defense. This protects a new owner from acquiring a property and later discovering an environmental issue and being responsible for the cost to remediate it. If someone buys a retail center and learns a dry cleaner was previously on-site, there might be indications that business may have leaked hazardous chemicals through the concrete slab and contaminated the soil or groundwater.
The PCA provides a general understanding of the building and improvement systems and the cost to maintain those over the loan term. A lender may use the figures in our report to determine the amount of cash reserves required to properly maintain the property.
Bisnow: What are the differences between lender scope services and other types of ESAs and PCAs?
Alex: The scope of work is identified in the report (or in the proposal), and our industry follows standards set forth by ASTM International.
Multifamily lenders such as Freddie, Fannie and HUD do a good job of identifying how they want these considerations addressed. It’s also important to understand our clients’ risk tolerance. Private equity groups, for example, may have a higher risk tolerance than others, for various reasons (experience, deep pockets, etc.).
The purpose of a lender scope PCA is to assist in loan underwriting, rather than property management. For prospective owners, EBI offers our equity-level PCA services, which goes into much more detail and has accurate costs for managing a property.
Bisnow: What other entities or parties require an ESA or PCR?
Alex: Most financial institutions, PE groups, CMBS firms, REITs, insurance companies, government organizations, developers and property owners need real estate due diligence.
Bisnow: How are tenants involved? Do they typically receive the findings?
Alex: Tenants are not provided our results during these transactions; however, tenants are interviewed during some site reconnaissance activities, which does provide our experts with key details and in turn can help tailor our recommendations.
Bisnow: What’s one of the hot areas in your industry right now?
Alex: Good question and that’s an easy answer—green loan programs! And it’s great to see it finally taking off.
More than five years ago, Fannie Mae reached out to a select group of the industry’s best consulting firms for help developing the original green loan program. I, myself, and EBI were involved in development of the original green loan program scope of work. EBI is well-versed in Freddie Mac’s Green Advantage Program and Fannie Mae’s High Performance Building module.
Bisnow: As environmental regulations change, what issues have you seen becoming more prevalent in the real estate industry?
Alex: There are three topics that we have seen come to the forefront recently. The first is vapor encroachment and intrusion. Environmental professionals are reviewing past closure reports and contaminants, and assessing current vapor risk to building occupants.
Second, property owners want to reduce energy usage, and accordingly, we’ve increased the size of our energy and mechanical team, which provides commissioning consulting services, energy assessments and solutions, and helps clients looking to become LEED certified.
Lastly, Fannie and Freddie have instituted the aforementioned green loan project that assesses energy consumption and reduction through building component upgrades.
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