ASTM Proposes Changes to Phase I ESA Standard (E1527)

Posted on July 12, 2021July 12, 2021

The following article discusses proposed changes to the Phase 1 Environmental Site Assessment [ESA] process. It was provided to us by the original author, whose contact information is after the article.

Although the lawyer-author is based in the USA and references the EPA in the USA, the ASTM standard for Phase 1 ESA is used in Canada as well. The major difference you should be aware of however, is that Canada and the USA, and its various states, have different items considered to be Hazardous Material. Therefore, your ESA consultant should be aware of the differences, between the countries or between the various states; particularly as they apply to a site under investigation, and so-called ‘non-scope considerations’.

Highlights

ASTM International’s E1527-13 Standard Practice on Phase I Environmental Site Assessments (ESAs) is required to be revised, reapproved as is or abandoned this year.
The ASTM E50.02 Task Group has been reviewing the existing standard, and many of group’s proposed changes are intended to correct what are viewed as deficiencies in implementation of the current standard. Other changes are offered to provide greater consistency in the language of the standard.
The current draft is out for ballot with results due on July 10, 2021. All users (and their counsel) are encouraged to actively participate in these discussions.

Every eight years, ASTM International’s standard-setting committees are required to evaluate existing ASTM standards. The ASTM E1527-13 Standard Practice on Phase I Environmental Site Assessments (ESAs) is required to be revised, reapproved as is or abandoned this year. The ASTM E50.02 Task Group has been diligently reviewing the existing standard for more than a year, and has been developing a series of proposed changes to the standard. Many of the proposed changes are intended to correct what are viewed as deficiencies in implementation of the current standard. Other changes are offered to provide greater consistency in the language of the standard. Several of the proposed changes are very nuanced. Not all of the proposed changes are uniformly supported. This Holland & Knight alert highlights what are believed to be some of the key proposed changes. The current draft is out for ballot with results due on July 10, 2021. It behooves everyone who relies on Phase I ESAs to actively engage in this updating process. The voices of the development and legal communities are currently sorely underrepresented in these discussions.

Nuanced Changes to the Definition of REC

Anyone who reads dozens of Phase I ESAs each year knows that, historically, one could give the same fact pattern to three different Environmental Professionals (EPs) and get three completely different opinions about whether there were Recognized Environmental Conditions (RECs) on the property, and why. In order to try to reduce the amount of variability in REC opinions, the E50.02 Committee is proposing a nuanced change to the REC definition in order to obtain more consistent interpretations. The new definition would read as follows:

The term recognized environmental condition means (1) the presence of hazardous substances or petroleum products in, on, or at the subject property due to a release to the environment; (2) the likely presence of hazardous substances or petroleum products in, on, or at the subject property due to a release or likely release to the environment; or (3) the presence of hazardous substances or petroleum products in, on, or at the subject property under conditions that pose a material threat of a future release to the environment. A de minimis conditions is not a recognized environmental condition.

This revised definition is supplemented with examples in Appendix X4 that are intended to clarify what each of these three phrases in the definition means. For example, under the first part of the definition, the presence of hazardous substances or petroleum products in, on, or at the subject property due to a release or likely release to the environment, an EP could not conclude that an off-site property was a REC. Under the second part of the definition, the likely presence of hazardous substances or petroleum products in, on, or at the subject property due to a release or likely release to the environment, an EP could conclude, based upon his or her experience and observations, that the subject property’s use as a gas station or dry cleaner for a significant period of time prior to regulatory controls, or the presence of a bare-steel underground petroleum storage tank installed at the subject property decades ago without any leak detection systems, may be examples of a REC due to the likely presence of a release of hazardous substances or petroleum products to the environment. Finally, Appendix X4 provides examples of what constitutes a material threat of a future release under the third part of the definition, including precariously stacked drums and bulging tanks. Appendix X4 explains that the past closure of a leaking underground storage tank, for example, may not constitute an Historical Recognized Environmental Condition (HREC) unless the EP has evaluated the data associated with that closed tank to be sure that the sampling data meets current regulatory standards for unrestricted use and whether there is an open vapor exposure pathway. Appendix X4 also provides examples of RECs, HRECs and Controlled Recognized Environmental Conditions (CRECs) in order to try to achieve greater consistency in the use of these terms in the future.

These written examples are supplemented further by a REC, HREC and CREC diagram in Appendix X4. All of this supplemental information should facilitate more informed discussions between users and EPs to be sure that they are using the terminology of E1527 as intended and reaching consistent conclusions whether a given fact pattern constitutes a REC, HREC or CREC.

Recognition via a Footnote that Emerging Contaminants Are Currently an Issue in Many States and Perhaps Should Be Addressed in the Phase I ESA (as a Non-Scope Consideration)

If someone is commissioning a Phase I ESA in a state where emerging contaminants, such as per- and polyfluoroalkyl substances (PFAS), are an issue, the EP will not be identifying these contaminants under the changes proposed to E1527. This is because the U.S. Environmental Protection Agency (EPA) has not yet designated any of the PFAS compounds to be a hazardous substance under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). ASTM continues to consider these compounds to be “non-scope.” So users in the growing number of states that are regulating PFAS under one or more of their regulatory programs should be alert to adding PFAS as a non-scope item (13.1.5.15) to their consultant’s scope of work.

ASTM addressed this issue indirectly via a footnote in Section 1.1.4 of the standard, by reminding users and EPs that there may be other state requirements, including those which may define emerging contaminants as hazardous substances:

If a Phase I Environmental Site Assessment is being conducted to satisfy state requirements and to qualify for the state (or other jurisdiction) equivalent of LLPs, users and environmental professionals are cautioned and encouraged to consider any differing jurisdictional requirements and definitions while performing the Phase I Environmental Site Assessment. Substances that are outside the scope of this practice (for example, emerging contaminants that are not hazardous substances under CERCLA), may be regulated under state law and may be federally regulated in the future. Although the presence or any release/threatened release of these substances are “non-scope considerations” under this practice, the user may nonetheless decide to include such substances in the defined scope of work for which the environmental professional conducting the Phase I Environmental Site Assessment is engaged. See Section 13.1.2 [sic].

Controversy Over the CREC Definition

There remains a vigorous debate about the CREC definition in the standard and its inclusion of the phrase “property use limitation” (PUL).

3.2.17 controlled recognized environmental condition—a recognized environmental condition affecting the subject property that has been addressed to the satisfaction of the applicable regulatory authority or authorities with hazardous substances or petroleum products allowed to remain in place subject to implementation of controls (e.g., property use limitations or activity and use limitations). For examples of controlled recognized environmental conditions, see Appendix X4.3.2.17.1. Discussion— …

(2) In determining whether a recognized environmental condition is “subject to implementation of controls (e.g., property use limitations or activity and use limitations),” the environmental professional shall identify the documentation providing the property use limitation or activity and use limitation that addresses the recognized environmental condition in the report’s Findings and Opinions section(s).

(3) When the environmental professional determines that a recognized environmental condition is “subject to implementation of controls (e.g., property use limitations or activity and use limitations),” this determination does not imply that the environmental professional has evaluated or confirmed the adequacy, implementation, or continued effectiveness of the property use limitation or activity and use limitation.

Those who oppose the current CREC definition see no need for the phrase PUL to be included in the standard. Users are reminded that there has been a long-accepted definition of Activity and Use Limitations (AULs) for more than 20 years – ASTM E2091, Standard Guide on Activity and Use Limitations, Including Institutional and Engineering Controls. AULs are described in detail in Section 6 of ASTM E2091; they include proprietary controls, state and local government controls, statutory enforcement tools and informational devices. See, e.g., 6.6.1 of E2091. The AUL terminology is consistent with the 2002 Brownfields Amendments statutory language and EPA’s 2019 Common Elements Guide, both of which require a purchaser to be in compliance with land use restrictions and not to impede the integrity or effectiveness of institutional controls in order to maintain its Landowner Liability Protections (LLPs). Neither the 2002 Brownfields Amendments nor the Common Elements Guide ever uses the term PUL. Developers are looking for bright-line tests, which the well-established term AULs provides. There is no need for the ambiguous term PUL to be used in the E1527 standard. The opponents are asking for this ambiguous phrase to be deleted throughout the standard.

When pressed to provide a definition of PUL, the E1527 Task Group came up with a tautology – simply repeating the words without offering any other meaning. PUL is not an accepted term of art in the industry. Instead, the Task Group now attempts to define the phrase through examples in Appendix X4 (examples 8, 9 and 10). But Examples 9 and 10 appear to be examples of sites that have met a risk-based cleanup standard, without any clear description of what constitutes the “control.” More than 20 years ago, ASTM rejected the concept that achieving a risk-based cleanup standard was, by itself, any type of control. That is why ASTM instructed one of its Task Groups to develop the E2091 standard on AULs, to supplement the E2081 standard on risk-based corrective action.

Concern Over Scope of Historical Resources to Be Reviewed on Adjoining Properties

The E1527 Task Group made significant changes in Section 8.3 regarding the scope of review of historical records. This section has been reorganized to emphasize that the standard historical information sources include aerial photographs, fire insurance maps, local street directories, topographic maps, building department records, interviews, property tax files, zoning/land use records and other historical resources. When evaluating the uses of adjoining properties (Section 8.3.9), the standard now emphasizes reviewing the “top four” sources of historical information (aerial photographs, fire insurance maps, local street directories and topographic maps) for those properties as well, at least if the “top four” sources were obtained for the subject site and included the adjoining properties. Several EPs have expressed concern that the proposed changes will result in a significant expansion of the scope of review for adjoining properties, as the existing E1527 language simply states that this historical information “should” be reviewed for those properties.

8.3.9 Uses of the Adjoining Properties—During research of the subject property, as described in 8.3.8, uses of the adjoining properties that are obvious shall be identified to evaluate the likelihood that past uses of the adjoining properties have led to recognized environmental conditions in connection with the subject property. This task requires reviewing the following standard historical resources if they have been researched for the subject property (see 8.3.8), provide coverage of one or more adjoining properties, and are likely to be useful in satisfying the objective in 8.3.1:

aerial photographs (see 8.3.4.1),
fire insurance maps (see 8.3.4.2),

iii. local street directories (see 8.3.4.3), and

historical topographic maps (see 8.3.4.4).

In cases where any of the preceding four standard historical resources are not reviewed for the adjoining properties but they were reviewed for the subject property, the environmental professional shall indicate in the report why such a review was not conducted. Additional standard historical resources should be reviewed if, in the opinion of the environmental professional, such additional review is warranted to achieve the objective in 8.3.1. Factors to consider in making this determination include, but are not limited to: the extent to which information is reasonably ascertainable; likely to be useful; the time and cost involved in reviewing such resources (for example, reviewing property tax files for adjoining properties may be too time-consuming); and local good commercial and customary practice. Other historical resources may be used to satisfy the objective of 8.3.1, but are not required to comply with this practice. The report shall describe identified uses at the adjoining properties, indicate the earliest dates identified for the first developed use of the adjoining properties (for example, records showed no development of the adjoining properties prior to the specific date), and identify significant data gaps. The term “developed use” includes agricultural uses and placement of fill dirt, and other uses that may not involve structures.

Clarification That the 180-Day or One-Year Shelf Life of the Report Begins to Run from the Date of the First Task Conducted, and That Those Dates Must Be Listed in the Report

Section 4.6.1 of the standard describes how long the Phase I report will be presumed to be viable. It will be presumed to be viable if the report was completed no more than 180 days prior to the date of acquisition, or up to one year if certain components of the report have been updated: the interviews, review of government records, visual inspection of the property and EP Declaration. The E1527 Task Group intends to clarify in the next update of the E1527 standard that this update clock begins to run from the first of these activities, and that the date each component (interview, environmental lien search, review of governmental records, visual inspection and EP Declaration) must be identified in the report. If the EP conducts the environmental lien/AUL search, the date of that report should also be listed in the Phase I ESA.

Clarification That AUL/Environmental Lien Title Reports Must Search Land Records Back to 1980.

The user is responsible under Section 6.2 of the standard for providing land title records that describe any environmental liens or AULs. The revisions to the standard explain that this is typically done in one of two ways: through a Preliminary Title Report/Title Commitment, or through a Condition of Title Report/AUL-Environmental Lien Title Report.

An important issue that came to the attention of the E1527 Task Group was that many companies running so-called AUL/Environmental Lien Title Reports were only searching the land records back to the last change in title, giving purchasers a false sense of security that there were no environmental liens or AULs. The Task Group proposes to address this issue by clarifying the methods for searching title in Section 6 and explaining that companies preparing AUL/Environmental Lien Title Reports must search the land title records back to 1980 for potential restrictions on title. Users who rely on these types of searches are encouraged to talk with the companies performing these searches for them to be sure that they are prepared to comply with this clarification of the current requirement.

6.2.1 Method 1 Transaction-Related Title Insurance Documentation Such as Preliminary Title Reports and Title Commitments – the user may rely on title insurance documentation, commonly fashioned as preliminary title reports or title commitments, which are prepared in the course of offering title insurance for the subject property transaction to identify environmental liens or AULs filed or recorded against the subject property. Title insurance documentation involves a reliable review of land title records or judicial records. See Appendix X1. However, the user (or a title professional engaged by the user) should closely review the title insurance documentation, particularly the areas of the documentation listing subject property encumbrances or “restrictions on record,” for indications of AULs or environmental liens.

6.2.2 Method 2 Title Search Information Reports Such as Condition of Title, Title Abstracts, and AUL/Environmental Lien Reports – Alternatively, users may rely on title search information reports to identify environmental liens or AULs filed or recorded against the subject property. Title search information reports, commonly fashioned as Condition of Title, Title Abstract, AUL/Environmental Lien or similarly titled reports, provide the results of land title record and/or judicial records research (as applicable) for information purposes only, rather than for the purposes of offering title insurance. Users may rely on title search information reports as long as the title search information reports meet the following scope.

6.2.2.1 Scope of Title Search Information Reports – Title search information reports shall identify environmental covenants, environmental easements, land use covenant and agreements, declaration of environmental land use restrictions, environmental land use controls, environmental use controls, environmental liens, or any other recorded instrument that restricts, affects, or encumbers the title to the property due to restrictions or encumbrances associated with the presence of hazardous substances or petroleum products. Title search information reports shall review land title records for documents recorded between 1980 and the present. In the case of jurisdictions that rely on the judicial records for filing of environmental liens, the judicial records shall also be reviewed for environmental liens filed anytime between 1980 and the present. If judicial records are not reviewed, the title search information report shall include a statement providing that the law or custom in the jurisdiction at issue does not require a search for judicial records in order to identify environmental liens.

Findings/Conclusion

For those who have always disliked the awkward phrasing of the conclusion in a typical Phase I report, the Task Group has now changed the phrasing (Section 12.7) so that it reads as an affirmative statement.

12.7.1 “We have performed a Phase I Environmental Site Assessment in conformance with the scope and limitations of ASTM Practice E1527-21 of [insert address or legal description], the subject property. Any exceptions to, or deletions from, this practice are described in Section [ ] of this report. This assessment has revealed no recognized environmental conditions, controlled recognized environmental conditions, or significant data gaps in connection with the subject property,” or

12.7.2 “We have performed a Phase I Environmental Site Assessment in conformance with the scope and limitations of ASTM Practice E1527-21 of [insert address or legal description], the subject property. Any exceptions to, or deletions from, this practice are described in Section [ ] of this report. This assessment has revealed the following recognized environmental conditions, controlled recognized environmental conditions, and/or significant data gaps in connection with the subject property:” (list).

Key Takeaways

Many of these proposed changes are quite nuanced but important and could lead to greater consistency in the findings and conclusions of Phase I ESA reports, if taken to heart by EPs. However, the proposed inclusion of “property use limitations” as a “required control” within the CREC definition remains extremely troublesome, as it appears to encompass mechanisms that are neither “land use restrictions” nor “institutional controls,” and therefore mechanisms that go well beyond the requirements of the 2002 Amendments to CERCLA or the 2019 EPA Common Elements Guide. The direction in which the ASTM E50 committee is headed puts EPs at risk of having to make legal judgments without a license, and their clients at risk of losing their landowner liability protections under CERCLA. It’s not too late to weigh in on this very important issue.

For more information or questions on the ASTM Phase I ESA Standard proposed changes, contact the author, who is chair of the ASTM Activity and Use Limitations Task Group as well as an active member of the ASTM E50.02 Committee and several of its task groups.

If you would like further information about this article and you do business in the USA, contact the article author:

Amy L. Edwards, Partner, Holland & Knight

Amy.Edwards@hklaw.com

Washington, D.C. 202.457.5917

How to Demystify Complicated Lease Clauses

Posted on August 26, 2015August 26, 2015

Commercial real estate leases can be intimidating to anyone who does not read and deal with them on a daily basis.

To start, many are over 50 legal-sized pages long, contain 14 major parts, are full of unfamiliar terms such as waiver of subrogation and legalese; such as “Whereas the Party of the First Part…..”

So I am continually shocked when small business owners either don’t have anyone review the lease before signing it or don’t seek the advice of a commercial lease expert. This occurs in about half of all lease transactions involving small business owners according to my own informal survey from decades of leasing, lease administration and training people about lease negotiation, leasing and lease administration.

Even more shocking is that a failure by small business to rigorously negotiate the entire lease document can result in significant financial issues and increased business risk. I’ve seen businesses destroyed due to a poor lease. That is why we show occupiers how to negotiate their lease correctly.

Many small business owners also don’t realize that the lease is the ongoing, two-way contractual arrangement between the tenant and the landlord AND the landlord and the tenant, so they file away the lease after it is signed, never to look at it again. In part, this is because they may be intimidated by the wording.

So here is a tip to cut through the convoluted wording when reading the lease. But keep in mind that anyone unfamiliar with a commercial lease should ALWAYS have a commercial lease expert and their lawyer explain both the lease clauses – in detail – and the nuances of the wording.

STEP 1

Always get or make a duplicate copy of the fully signed lease. The original should be kept in a safe place. It is the ONLY version that should be referenced if an issue comes up, because it is the ‘legal’ copy. The second copy is the one that become a quick reference guide to the lease. You will make a condensed version of the original lease highlighting the key point in each clause, using the copy.

STEP 2

On the duplicate copy ONLY, highlight the main essence of each clause, so that when reading the clause the main point you need to refer to in the management of your lease on a daily basis is highlighted.

Here is an example from a retail property lease concerning the need to keep store sales information. Here is the original wording as contained in the lease:

That the Tenant shall make and keep on the Premises for a period of at least two (2) years from the end of the Lease Year to which they are applicable or, if an audit is required or a controversy should arise between the parties hereto regarding Rent payable hereunder, then until such audit or controversy is terminated, correct

permanent sales records (indicating daily sales reports) in accordance with good accounting and retail practice, which shall be open to the inspection and audit of the Landlord or its duly appointed representative at all reasonable times.

Believe it or not, that is just one sentence. To fully understand how difficult that is to read I put the text through a readability assessment. This assessment uses various tests to determine what grade level you must have to easily comprehend what is written. Scores over 22 should generally be taken to mean graduate level text and most newspapers and non-technical books write for a grade 4 reading level

How did this fair?

Readability Formula	Grade
Flesch-Kincaid Grade Level	22.2
Gunning-Fog Score	25.9
Coleman-Liau Index	12.7
SMOG Index	16.3
Automated Readability Index	25.3
Average Grade Level	20.5

These tests indicate that this one clause could a person reading at a PhD level. No wonder leases intimidate people.

Now read that clause again. But this time pick out the most basic intent of the clause. You can either underline the important text or highlight it with a highlighting pen. But remember that if you make further copies of highlighted text, the highlighted portions may turn black depending on the colour of highlighter used.

How do you do that without having a PhD to understand the clause in the first place?

Use the Who, What, When method.

Almost all lease clauses provide direction to someone to do something by some time. To simplify the wording – for everyday needs – highlight Who must take action, What that action is and When is must be done.

Here is what you get:

That the Tenant shall make and keep on the Premises for a period of at least two (2) years from the end of the Lease Year to which they are applicable or, if an audit is required or a controversy should arise between the parties hereto regarding Rent payable hereunder, then until such audit or controversy is terminated, correct permanent sales records (indicating daily sales reports) in accordance with good accounting and retail practice, which shall be open to the inspection and audit of the Landlord or its duly appointed representative at all reasonable times.

And now the score is:

Readability Formula	Grade
Flesch-Kincaid Grade Level	8.8
Gunning-Fog Score	11.6
Coleman-Liau Index	8
SMOG Index	6
Automated Readability Index	10.1
Average Grade Level	8.9

There is certainly a lot more in the original clause than in the simplified, pared down version, such as where the documents should be kept, how they should be formatted, etc. But anyone reading the highlighted copy for the daily management of the lease will know that, in most circumstances, the tenant must keep sales records for two years after each lease year and those records may be audited by the landlord.

This isn’t a substitution for the exact lease wording and an understanding both the business and legal aspects of the original wording. It is however, a quick guide to gaining a basic understanding of the lease requirements for your day to day need.

Always remember that the lease is written from two perspectives.

The first is the legal perspective. That is why we have long complicated clauses as lawyers attempt to minimize risk by including as many specifics as possible over as many potential situations as possible. For this reason alone, the lease should be reviewed with a competently trained lawyer specializing in commercial real estate.

The second is the business perspective. The lease is the ongoing contract between the landlord and the tenant, so it must cover how that relationship will work over the time of the lease. This is a completely separate way of looking at the lease as compared to the legal point of view. Therefore, you need a commercial lease expert, such as our firm, to show you the business implications of the lease and how to properly negotiate the lease to protect your interests.

Simple Ways to Improve Operating Returns for Retail Property Owners

Posted on February 3, 2015February 3, 2015

Graph It doesn’t take a business degree to know that to improve operating return at the corporate or property level means revenues must increase, expenses must decrease or a combination of the two. Aside from the obvious question of occupancy, we’ll explore some other aspects to improving returns.

At the company/enterprise level removing waste, eliminating redundancy and cost containment are all common sense ways to add value. As is a serious review of the debt structure and financing options. Another avenue to explore is to examine the company’s sacred cows – policies and processes that have been implemented over time. Some may no longer be needed or the methodology may be outdated. Challenging the status quo may reveal hidden opportunities. For example, I’ve long advocated that the way property management services are delivered to both the owners of property and their tenants is completely outdated and is actually hurting tenant renewal rates and property returns. Moreover, by realigning staff duties in the manner I have suggested, management companies can reduce their overall costs of service delivery by as much as 15%.

The way leases are structured and the mechanics of them can also improve value. In the early 1980’s Cadillac Fairview, a leading mall developer and owner, instituted an across the board HVAC basic charge. It was a sinking fund established to pay for the replacement of roof top units, air handlers, central plant equipment, etc. The concept was drafted into the company’s standard lease form and used for all future new leases. There are many other items in the way a lease is structured that can have a positive impact on returns; such as how renewal options are treated, how the space is used and measured, and how amortization and depreciation costs are handled.

For example, many landlords provide for a recovery of amortization in their leases, but few also specifically note that the landlord should also recover an interest cost on the amortization. When explaining why the landlord should receive an interest component to the amortization, I liken the capitalized (and then amortized expense) to a loan to the common area to the benefit of the tenants. If a tenant pushes back I provide this example.

“Lets assume the landlord will need to replace the roof membrane, the cost of which is, say, $250,000. This is a recoverable expense, but the tenant doesn’t want to be charged with their portion of a $250,000 expense in one year; so the expense is repaid through amortization of, say 10 years. The landlord is out of pocket the initial expense and won’t recover that expense for 10 years. Effectively, the landlord is lending the tenants the $250,000, and just as with any loan the tenants should compensate the landlord for that through interest.”

These are just a few areas of more than a dozen lease refinements I’ve developed for companies I’ve worked with over the years.

One of the biggest lifts in return and value is to change the way lease rates are determined. Many owners and leasing agents for shopping centers still rely on comparable analysis to be the sole determiner of the basic rent. This is a mistake. Rent should be a function of sales – not to be confused with the concept of percentage rent. Using sales as the method for determining base or minimum rent it is possible to create a rent structure that is as much as 35% above comparable rents, based on my personal experience. There is a specific methodology to achieve this. It starts by understanding the market potential in the trade area served and relies on obtaining sales information from each tenant, even if they do not pay percentage rent.

There are a number of opportunities at the property level too. For example, the Greenstead Consulting Group has developed and implemented over 20 different ancillary income streams at the property level. Some produced significant revenues while others did not; but collectively the effect was the same as adding two or three rentable store spaces to the property– without the infrastructure costs.

Another area of additional income from retail properties is through creative densification. The land-mass for retail properties is very large compared to the vertical nature of office buildings. Much of this is dictated by parking ratios mandated in zoning requirements. The typical 5 stalls per thousand square feet of leasable area has been in use for more than 30 years, yet the nature of retail has changed dramatically over the same time. In the 1970’s evening shopping was usually confined to one or two nights a week and virtually no one shopped on Sundays. That parking ratio may have made sense then but does it make sense with the expanded shopping patterns and channels of today?

We convinced a municipal council to adopt a new micro stall designation to accommodate the new ultra small cars, such as the Smart car, and to include designated motorcycle parking as part of the overall parking ratio. Decreasing the average stall size allows for more stalls on the same piece of land. Even with the existing stall ratio, the increase in the number of stalls permits further development on the site. In another densification program increased the site densification that resulted in an $8 Million lift in the property value because the site development could be easily intensified. This improvement came with no additional infrastructure cost, such as a parking structure.

On the expense side of the ledger there are many opportunities to reduce expenses. One that is not widely practiced but that can pay significant dividends is lean maintenance, a concept borrowed from lean manufacturing practices. In lean maintenance there is an understanding that some common maintenance practices have diminished value through the lifecycle of the physical plant. Correcting this is the same as reducing the waste that was inherent in older manufacturing processes.

Repositioning and remodelling can have a positive impact on the revenue and expense of a property. Curb appeal determines customer attraction and what tenants perceive as a desirable location. So we never advocate trimming expenses to the point of harming the impression of the property. This includes capital expenses. However, the timing of the program is critical to obtain the best returns. It is also important to conduct a complete cost benefit analysis and judicious value engineering. Sometimes, just as in theatrical staging, some inexpensive changes can have a dramatic impact on the look and perception of a property.

Improving returns and value is what we do best. Contact us to learn how to transform your investment returns in retail real estate.