THE LAFAYETTE REPORT: March 2009

Fire destroys Pevely Dairy warehouse in Midtown. The fire and building collapse were caught on tape by amateur photographers as well as television journalists. The building was a part of the closed Pevely Dairy complex at Chouteau and Grand and had been set for a mixed use development with retail, offices, and condominiums.

UPDATE: The property was under contract at the time of the fire. No word on the impact that the fire will have on the sale. However, the project is predicated on the availability of tax credits under the Missouri Historic Tax Credit Program. As I have mentioned in prior posts, bills are pending to restrict and/or eliminate this program. This is another example of a worthy project that will get done only with the availability of tax credits.

Embedded Video Removed and Replaced with Link to KSDK News Report.

In January, 2009, we were approached to list a commercial property for sale that had been previously contaminated with dioxin tainted waste oil used to control dust on the unpaved parking area of a truck transport facility.  We met with the owners to obtain a better idea of the status of the clean-up and the nature of potential obstacles that we would face with the listing, marketing and sale of the property, including the release of the EPA Superfund lien associated with the environmental remediation and clean-up of the site.

Here are the steps that we took to prepare a winning listing presentation:

Step 1 - Preliminary Research.  Before we met with the owners, we performed some basic research regarding the property.  We first obtained a copy of the deed, EPA Superfund lien, and a title report for the property.  We then used the EPA's Superfund Information Systems website to run a search on the property to ascertain some basic facts regarding the environmental clean-up associated with the site.  We then reviewed the language of the recorded EPA Superfund lien and the statutory provision authorizing the filing of the EPA Superfund lien as well as the statute of limitations on the enforcement of the EPA Superfund lien.  Based on our preliminary research, we concluded that the EPA Superfuld lien was unenforceable and prepared a detailed memorandum outlining our opinion regarding the enforeability of the lien.  After preparing the memorandum, we prepared a list of questions to be answered prior to us making a decision as to whether or not to submit a listing proposal.

Step 2- Owners' Meeting.  We then met the owners and viewed the property.  We obtained from our discussions a general understanding regarding the nature of the environmental contamination as well as the scope of the environmental remediation and clean-up work performed on the site.  We obtained copies of all notices received by the owners from the EPA.

Step 3 - Public Information Requests.  After we had gained a basic understanding of the issues associated with the environmental remediation and the EPA Superfund lien, we then proceed to verify the information that we had obtained from the owners.  We first contacted the Project Manager from the EPA who gave us an overview of the type of clean-up action (remedial action versus removal action), standards used for the clean-up (residential), and the use restrictions for the property (none).  We then made written requests under the Freedom of Information Act to the EPA and under the Sunshine Law to the Missouri Department of Natural Resources for a copy of the environmental lien, the certification of the clean-up costs, the site closure report, and the final or last sampling test results for the site. 

Step 4 - Legal Research.  After we received the requested documents, we then performed our legal research on the issue of the enforceability of the lien.  It was the key question because the environmental remediation and clean-up costs secured by the EPA Superfund lien exceeded our preliminary opinion of the value of the property.  Internally, we had reached the conclusion that the EPA Superfund lien was not enforceable and would not present an insurmountable obstacle to the sale of the property.  We then retained outside legal counsel to review our file to test our conclusion regarding the enforceability of the EPA Superfund lien.  We then contacted our preferred title agency and requested their requirements to provide an environmental endorsement for the subject property - assuming the worst case scenario that the EPA would not release the lien.

Step 5 - Highest and Best Use Analysis.  Before we started our comparative market analysis, we first addressed the highest and best use for the property (including the issue of physical and functional obsolence of the property).  We didn't simply say "Well, it is a truck transport facility and, therefore, we should list it as a truck transport facility."  We started our analysis by looking at existing truck transport facilities in the St. Louis area - both operating facilities, vacant facilities, and facilities listed for sale and/or lease.  In doing so, we compiled a list of 20 or so facilities in the immediate area with details such as design criteria, size, current use and capacity, etc. 

In the process, we reached the conclusion that our site was too small, had inadequate design and amenities (including the lack of a rail spur, lack of operable crane, and no loading docks), and would need substantial modifications to be used as a modern truck transport facility.  We also reached the conclusion that the market had an abundant over supply of these type of marginal truck transport facilities and that the trucking industry as a whole was experiencing a decline with few operators in need of additional facilities to meet current capacity. 

We then reviewed other potential uses of the site, including light industrial use or business operations that used outside storage like auto body repair.  Finally, we drew up a list of potential businesses that might be interested in acquiring the site.  In the end, we concluded that the marketing the property as a land sale would be the best approach.

Step 6 - Comparative Market Analysis.  We then prepared three independent comparative market analysis - one based on a land sale, one based on use as a truck transport facility, and one based on used as auto body repair, contractor, or other site with open storage.  In connection with the competitve market analysis, we also prepared a detailed proposal outlining how we intended to market the property for sale.

We then submitted our listing proposal to the owners which included a letter from the broker summarizing our proposal, our commercial property owner testimonials, our individual and brokerage resumes, a brief description of the property with photographs, our comparative market analysis reports with the supporting comparable sale information, our marketing plan, and our summary of potential obstacles to the sale.  This 160 page lisitng proposal was delivered and presented to the owners. 

Step 7 - Opening the Bids.  Now, you make think that this was overkill, but this wasn't an ordinary land sale and the ownership group was divided on what approach to take and whether or not to sell or lease the property.  At this point, we discovered that we were in the running with two other competitors - their corporate attorney who had a broker's license and their leasing agent who had previously secured tenant leases for the site.  It was judgment day - so to speak.  Here is what our competitors submitted:

• The corporate attorney submitted a 2 page letter offering to represent them in the sale of the property (including the release of the lien) for a flat fee of $50,000 paid in advance and non-refundable even if the EPA Superfund lien could not be released or if the property didn't sell.  Their corporate attorney didn't even review the EPA Superfund lien or provide any guidance regarding the probability of its release.
• The leasing agent with the national commercial brokerage submitted a 3 page listing agreement offering a 7% commission and no marketing plan - except a copy of a proposed property flyer.  The proposal intended to market the property as a truck transport facility and didn't address the EPA Superfund lien.

In this case, we beat our competition who had pre-existing relationships with the owners based on our research, anticipation of issues, and preparation in the creation of a listing proposal that addressed the owners' number one concern - that is, could the property be sold?

If you want the business, you have to work for the business.  Sometimes it means doing some preliminary work - whether or not you are getting paid to do the work or not.  In this case, we obtained the listing, secured a buyer within 30 days of the listing and it closes next month.  Sounds easy?  It all started with the roadmap that we created for the listing presentation. 

Looking to sell your commercial property in St. Louis, Missouri?  Contact Ryan Shaughnessy at PREA Signature Realty at 314-971-4381 or by e-mail to Ryan@PREASignatureRealty.com.  Let us show how our staff attorneys-real estate brokers can add value to the listing, marketing and sale of your property.