GeoDiligence- Is it Due?
GeoDiligence – What is it? Purchasers of real estate are frequently looking at a property with a specific plan in mind. All too frequently, due diligence is only considered for environmental liabilities (the evaluation of known or potential contamination from prior industrial uses, underground tanks, spills etc.). The pre-purchase assessment of soil, groundwater and bedrock conditions from a geotechnical perspective may be just as important when evaluating whether a particular development plan is feasible. The best time to explore for latent conditions, be they related to environmental contamination or geotechnical conditions, is prior to final purchase and sale negotiations. This minimizes risk and post-transaction surprises. Pre-transaction due diligence in the evaluation of latent conditions that can significantly complicate a specific plan of development can result in savings to the purchaser, reduction of risk, and minimization of surprises. We call this GeoDiligence.
Example: Site #1
An urban site has a history of former uses and is about to be purchased for development of a high rise building. The seller shows conceptual plans that have been approved with the argument that the property is worth a certain amount because this type of building is permitted for construction. A GeoDiligence review was performed for the buyer. Environmental contingencies were identified and a review of the probable costs to remove and dispose of contaminated soil from the building and utility excavations were made. This step enabled the transaction to proceed with a better understanding of development costs and a realistic sales price which accounted for the underground contingencies.
Example: Site #2
A two story commercial/office building located in a suburban area was constructed on fill. The development plan included an assessment of whether existing foundations would support construction of an additional floor. The potential buyer proceeded with GeoDiligence to explore contingencies related to (1) environmental conditions (due to former buried oil tanks) and (2) the bearing capacities of sub-slab soils and the conditions of existing foundations and slabs. The process concluded that the foundations penetrated the fill at conservative bearing values. However, the ground floor slabs rested on the fill, had settled, and needed repairs. Petroleum contamination was identified at several underground tank locations and a cost estimate for clean-up was developed which was factored into the purchase price.
Example: Site #3
A multi-story Class A office building in an urban setting with a basement flooded during a major rain event. This caused extensive damage and disruption to businesses. The building had multiple sump pumps that controlled water table fluctuations over the decades prior to the flood. The sumps had not been maintained and many were out of service at the time of the storm. The remaining pumps could not control the inflow. Prior to completing new improvements, GeoDiligence was performed to evaluate the flood flow rate and volume, inventory the pump system, identify capacity problems, and recommend repairs to restore the system to capacity.
Questions to ask as part of GeoDiligence include:
- What is the history of the site and the likelihood that there are geo-environmental liabilities which would impact the cost and schedule to develop the site in a manner which is suitable for the proposed reuse and also cost-effective?
- Has the site been filled?
- Have there been any settlement problems of the building or site parking areas?
- What is the type, capacity and condition of the existing foundations? Are there any prior development drawings and reports?
- Have the basements flooded in the past? – are there sump pumps and how often do they operate?
- What information is missing?
Too often such geo-contingencies are not discovered until after the purchase. Many owners and developers have been impacted by increased costs and schedule when “surprises” are identified after the deal is done. An investment in GeoDiligence can pay dividends. Better to begin with the end in mind and perform the “due” diligence to minimize the “dues”.