Overcoming Environmental Challenges of RV and Boat Storage Centers

0
194

RV and boat storage centers are an attractive property ownership type within the self-storage sector. According to the Recreational Vehicle Association, RV shipments have increased every year over the past eight years, with a significant jump of 17.2 percent in 2017, resulting in a high demand for these facilities.

Additionally, the owners of RVs and large boats will typically still have disposable income, even in the case of an economic downturn, protecting the investment in the long term.

That said, from an environmental standpoint, there is more to RV and boat storage centers than meets the eye. While many have found owning and operating these facilities to be a lucrative endeavor, there are important environmental risks that must be considered in the acquisition of these properties, due to the operations and potentially hazardous materials on site.

For self-storage owners/operators looking to purchase an RV and boat storage center, once they acquire the land, they consequently acquire any environmental problems that come with it.

So, what do prospective buyers RV and boat storage center need to consider when acquiring a site? In this section we address common environmental issues facing these properties and provide best practices to overcome challenges that may arise.

Be Aware Of Red Flags
An existing RV and boat storage facility’s operations can present many environmental red flags similar to auto repair operations.

Some common RV and boat storage site potential risks include:

* Longevity of the repair operations

* Lack of agency oversight until the late 1980s

* Hydraulic lifts prior to 1978, use of polychlorinated biphenyls (PCBs)

* Underground hydraulic lifts

* Prior use of hazardous materials

* Subject property is listed for spills or releases in connection with the use or handling of hazardous materials

* Observed conduits to the subsurface or other features of concern

* Improper storage or handling of hazardous materials

* Improper disposal of hazardous material into floor drains

* Painting operations not performed in spray booth

RV and boat storage properties that present any of the above red flags should be properly assessed for existing or potential hazardous contaminations and other issues resulting from these.

Common RV And Boat Storage Site Hazards
There are several common hazardous materials and pieces of equipment associated with RV and boat storage centers of which potential owners should be aware.

Issues related to these materials can often come with clear visible evidence such as staining, but they can also lurk far beneath the surface. Problems can result from below-grade sumps, floor drains, conduits to the subsurface, hydraulic lifts, and lack of secondary containment measures for good housekeeping for drums and larger containers in use at the property.

How exactly are these various hazardous materials and equipment used in RV and boat storage operations and what risks do they present?

* Petroleum: Petroleum can pose a concern with regard to the RVs that are parked on the subject property. If the RVs are parked on gravel driveways or areas exposed directly into the earth’s surface, petroleum can leak into the ground and cause soil and/or groundwater problems.

* Motor Oil: Motor oil also poses a concern during oil changes for boats and RVs, presenting a risk of seeping into the earth’s surface.

* Waste Oil: If note properly disposed of, the waste oil resulting from an on-site oil change can pose a risk.

* Solvents: Solvents are used in degreasing operations to clean equipment and can also get into the earth’s surface and cause contamination problems.

* Anti-freeze: Anti-freeze is the agent used for cooling down an engine or motor, this liquid can also create contamination issues at the subject property.

* Other Hazardous Materials: Materials including paints, sealants, etc., can pose an issue if not stored properly.

* Drums: Waste oil should be stored in waste oil drums. These drums need to be properly disposed of by an appropriate waste hauler.

* Hydraulic Lifts: Underground hydraulic lifts that have been in place prior to 1978 pose a significant risk for a potential release of hydraulic fluid.

* Paint Booths: While unlikely, some facilities may have a designated area for painting the boats or RVs. If this is the case, it is critical that painting is performed solely in a “spray booth” to contain the paint waste. It is also important that all paints and degreasers used are water soluble.

Through keeping the above in mind and understanding the effects of certain materials, equipment, and practices, buyers can strategically and quickly evaluate whether to proceed to next steps in pursuing properties for acquisition.

The Important Questions
When looking to buy an RV and boat facility that likely presents some of the issues discussed above, it is important that the potential owner/operator asks the right questions and is cognizant of the possible risks associated with the property.

Some questions to consider are:

* Has a previous Phase I Environmental investigation been performed?

* Does the site have drip protection in place? (Drip pans or pads that are placed under vehicles to capture any leaking petroleum)

* Are there are hydraulic lifts on site? Are they above ground or underground?

* Were in the hydraulic lifts in place prior to 1978?

* How are hazardous materials stored? Is secondary containment used?

* Are oil changes performed on site? If so, is waste oil disposed in drums picked up by waste hauler?

These questions can help determine whether the benefits of detecting and remediating problems are likely to outweigh the cost and risks as well as which assessments must be completed to get a full picture of a site.

Former Land Use Matters
Beyond a property’s operations as an RV and boat storage center, potential buyers should educate themselves on any previous uses of the site as well. The former land use of a property, even if no longer continuing those operations, can have lasting impacts and come back to haunt new owners. When someone acquires a property, they inherit any environmental issues that come with the site.

RV and boat storage facilities are often located on industrial land that can have a long history worth researching. Potential liabilities associated with industrial sites are directly related to their current and past operations.

This includes the use of hazardous substances and features of environmental concern such as hydraulic lifts, drains, clarifiers, and waste water treatment and disposal systems.

Soil and groundwater contamination may be present, even if the prior business complied with environmental regulations at the time of operation. Industrial solvents pose a particular risk because of their mobility in the subsurface soil, the potentially significant cost to remediate, and third-party liability.

Ultimately, certain previous uses can indicate that sites have issues beyond those commonly resulting from RV and boat storage operations. Environmental due diligence is recommended to make a sound judgment regarding the likelihood of contamination and identify any compliance issues that may exist.

What Action Should Potential Buyers Take?
After evaluating a situation on a surface level and reviewing existing information available on a site and its current and previous uses, the next step is for potential buyers is to complete their due diligence and request a Phase I Environmental Site Assessment (ESA).

For RV and boat storage facility acquisitions, as with most commercial transactions, potential buyers will want to see a Phase I ESA that has been recently completed.

The shelf life for these assessments is one year; oftentimes, potential buyers themselves will need to order an updated assessment to be completed. Additionally, many lenders require a Phase I ESA report that is no older than six months.

A Phase I ESA assesses the underlying land and physical structures on site and is designed to identify potential or existing contamination caused by current and/or historical property features and operations as well as current and/or historical contamination from adjacent and nearby sites.

Such contamination can affect the use of a piece of land, as well as the future liability of the property and owner. The Phase I ESA process is governed by the ASTM Standard E 1527 and the US EPA’s All Appropriate Inquiry (AAI) Rule. The Phase I ESA is always a strong business practice to evaluate a site for potential environmental concerns. A Phase I ESA includes a property inspection, a review of the historical use through resources such as maps, aerial photographs, business listings, and agency research to identify the historical and current uses, operations, and general compliance history.

The assessment will identify whether contamination is present or likely present, and consultants will provide guidance on how to approach any issues identified and remediate when required.The assessment culminates in a report documenting the research and identifies potential of existing environmental contamination for the subject property.

A Phase I ESA can also prove compliance with the Comprehensive environmental Response, Compensation and Liability Act (CERCLA). That said, there are numerous environmental liabilities beyond CERCLA to which an owner can remain exposed, so it is best to look at this as a best business practice rather than a watertight protection from future liability.

The Phase I ESA report can also reduce environmental liability for the report user on the below terms:

* Innocent Land Owner Defense: Protects landowners from cleanup liability for pre-existing contamination, provided that an inquiry into the previous ownership and usage of the property was conducted before purchase and did not reveal contamination.

* Bona Fide Prospective Purchaser Defense: Protects landowners in the event there is known/existing contamination caused by another previous party.

* Contiguous Property Owner Defense: Protects landowners in the event there is known/existing contamination caused from an adjacent site and report user did not know it was there when the land was acquired.

Additional Site Evaluation Resources And Strategies For Success
Beyond the Phase I ESA and further assessments that might be required as a result of its findings, there are several additional resources to help RV and boat storage center buyers remain proactive and stay within budget throughout the entire acquisition process.

In the early stages, one strategy is using Google Earth’s Historical Imagery tool to map a site. This allows users to view older aerial photographs of certain sites to get an idea of their histories.

Further, online building records or title records can be an effective tool to research site use.

For example, for California properties, owners and prospective buyers can utilize the Water Resources Control Board’s GeoTracker at https://geotracker.waterboards.ca.gov/. Users can simply search a property’s street number, review open case files for Leaking Underground Storage Tanks (LUST) sites, and click on the Site Maps/Documents tab to view recent reports and data.

Other strategies for success throughout the process include:

* Starting the environmental review process (including seismic evaluations when applicable) as early as possible

* Being aware of a lender’s Environmental or Seismic Risk Policy and risk tolerance standards and choosing the right lender for the acquisition.

* Giving third-party consultants thorough information, proper contacts, and providing all available environmental documents

* Viewing environmental review not a roadblock, but as a valuable risk management tool

There are many environmental factors to consider not only when looking at RV and boat storage centers but as a commercial property buyer in general. As with any property type, RV and boat storage centers come with their own unique risks associated with the present and past uses of the site. That said, RV and boat storage continues to be a profitable and successful niche within the self-storage arena and should not to be shied away from due to environmental challenges.

Potential owner/operators must do their homework, as with any acquisition, on the piece of collateral they are looking to acquire. The ultimate goal is to own the land but not inherit an environmental problem.

By simply knowing what to look out for, completing due diligence, and ordering a Phase I ESA, potential buyers can protect against many environmental liabilities that come with a purchase.

Own the RV and boat storage center–not the problem!

LEAVE A REPLY

Please enter your comment!
Please enter your name here