Monthly Archives: November 2013

It Is a Challenge to Succeed

by Jim Rohn

It is a challenge to succeed. If it were not, I’m sure more people would be successful, but for every person who is enjoying the fruit from the tree of success, many more are examining the roots. They are trying to figure it all out. They are mystified and perplexed by what seems to be some strange, complex and elusive secret that must be found if ever success is to be enjoyed. While most people spend most of their lives struggling to earn a living, a much smaller number seem to have everything going their way. Instead of just earning a living, the smaller group is busily engaged in designing and enjoying a fortune. Everything just seems to work out for them, while the much larger group sits in awe at how life can be so unfair, complicated and unjust.

“I am a nice person,” the man says to himself. “How come this other guy is happy and prosperous and I’m always struggling?” He asks himself, “I am a good husband, a good father and a good worker. How come nothing seems to work out for me? Life just isn’t fair. I’m even smarter and willing to work harder than some of these other people who just seem to have everything going their way,” he says as he slumps into the sofa to watch another evening of television. But you see, you’ve got to be more than a good person and a good worker. You’ve got to become a good planner, and a good dreamer. You’ve got to see the future finished in advance.

You’ve got to put in the long hours and put up with the setbacks and the disappointments. You’ve got to learn to enjoy the process of disciplines and of putting yourself through the paces of doing the uncomfortable until it becomes comfortable. You’ve got to be prepared and willing to attack the challenges if you want the success because challenges are part of success. Now that may sound like a full menu of activities, but let me assure you that the process of going from average to fortune isn’t really all that difficult. Thinking about it is the difficult part. Anticipating all the effort and the changes and the disciplines is far worse in the mind than in reality. I can promise you that the challenges you’ll meet on the road to success are far less difficult to deal with than the struggles and the disappointments that come from being average. Confronting and overcoming challenges is an exhilarating experience. It does something to feed the soul and the mind. It makes you more than you were before. It strengthens the mental muscles and enables you to become better prepared for the next challenge.

I’ve often said that to have more, we must first become more, and to become more, we must begin the process of working harder on ourselves than we do on anything else. But in addition to gathering new knowledge, new skills and new experiences, it is also important to discover new emotions. It is how we feel about what we know that makes the biggest difference in how our lives turn out. How we feel about the chances we have and the choices we have determines the intensity of our effort. Whether we try or don’t try. Join or don’t join. Believe or don’t believe.

I’d like for you to discover some strong feelings about your life and about what you want to do with that life. You probably have much of the knowledge and a lot of the experience and perhaps most of the skills that it takes to become successful. What you may be lacking in are the strong feelings about what you want and what you want to do. You may be one of those who have become so involved in the process of earning a living that you’ve forgotten about the choices and the chances you have for designing your own life.

Let these strong feelings help you take a second look at your life and where you’re headed. After all, you’ve only got one life, at least on this planet. So why not make it an adventure in achievement? Why not discover what all you can do and what all you can have? Why not discover how many others you can help and in the process how that can help you?

U.S. Housing Price Rise Slows; Consumer, Investor Confidence Down

By Dees Stribling, Contributing Editor –

S&P Dow Jones Indices reported the latest S&P/Case-Shiller Home Price Indices on Tuesday, which cover the three months ending in September. According to the company, the National Home Price Index was 3.2 percent in the third quarter of 2013 and 11.2 percent over the last four quarters.

In September 2013, both the 10- and 20-city composite indexes gained 0.7 percent month over month and 13.3 percent since the same time last year. While 13 of 20 cities posted higher year-over-year growth rates, 19 cities had lower monthly growth in September than August. Prices are still rising, in other words, just not as rapidly as they had been, a trend that might mean that the current run up isn’t a much of a bubble.

“The second and third quarters of 2013 were very good for home prices,” David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said in a statement. “Housing continues to emerge from the financial crisis: the proportion of homes in foreclosure is declining and consumers’ balance sheets are strengthening. The longer-run question is whether household formation continues to recover and if home ownership will return to peak levels since in 2004.”

Consumer Confidence Drops

Consumers were feeling a little more uncertain this month, according to the Conference Board, which said on Tuesday that its Consumer Confidence Index dropped from 72.4 in October to 70.4 in November. The Present Situation Index edged down to 72.0 from 72.6, and the Expectations Index declined to 69.3 from 72.2 last month.

Consumers’ assessment of overall current conditions decreased slightly. Those claiming business conditions are “good” edged up to 19.9 percent from 19.5 percent, while those claiming business conditions are “bad” increased to 25.2 percent from 23 percent. Consumers’ appraisal of the job market didn’t change much, with those saying jobs are “plentiful” ticking up to 11.8 percent from 11.6 percent, while those saying jobs are “hard to get” decreasing to 34 percent from 34.9 percent.

Conference Broad chief economist Lynn Franco noted in a statement that “Sentiment regarding current conditions was mixed, with consumers saying the job market had strengthened, while economic conditions had slowed. When looking ahead six months, consumers expressed greater concern about future job and earning prospects, but remain neutral about economic conditions. All in all, with such uncertainty prevailing, this could be a challenging holiday season for retailers.”

Investor Confidence Down Too

The State Street Investor Confidence Index was released on Tuesday as well, and it came in at 91.3 in November, down 4.2 points from October’s reading. The decline was because a relatively steep drop in European investor confidence, down from 111.3 last month to 101.5 in November. Investor confidence in North America and Asia improved slightly.

Wall Street had a lackluster day on Tuesday, with the Dow Jones Industrial Average gaining a hard-to-see 0.26 points, or less than 0.01 percent. The S&P 500 managed to gain 0.01 percent, while the Nasdaq was up considerably more, 0.58 percent.

Job Growth in Jacksonville Outpaces Florida, U.S. Averages

By Philip Shea, Associate Editor –

After three years of tepid employment growth, the Jacksonville metro is poised to create 12,500 new jobs before year’s end—amounting to a 2.1 percent increase, with even more expected in 2014. As a result, vacancies are expected to recede back to pre-2007 levels, with minimal deliveries expected over the next two years.

Hendricks-Berkadia reports that sectors such as finance, education and health care have been integral to the boost in jobs, with locally based Foundation Financial Group creating 60 new positions within the past year. Additionally, expansions of several hospitals such as St. Vincent’s Medical Center Clay County and Brooks Rehabilitation are expected to create nearly 800 new jobs.

All of this positive development in the local economy has brought the overall vacancy rate down to 8.1 percent, with another 60 basis points expected to be shaved before the end of the year. While this figure ranks far higher than the national average, it is far lower than the near-15 percent rate seen at the height of the recession in 2009.

Additionally, the pace of rent growth is expected to rise, with asking rents expected to rise 3.4 percent to $849 per month in 2013 and 4 percent to $883 per month in 2014. The most expensive submarket continues to be the areas near the beach, with rents there rising 3.4 percent to $1,029 between 2011 and 2012.

As alluded to previously, hiring is expected to accelerate even further over the next 18 months, with another 19,000 positions expected to be added throughout 2014. Other metro employers seeking to expand their operations include the Mayo Clinic, CMG Financial, and Digital Risk—the latter of which has a plan to bring 1,000 jobs to the state over the next few years.

While permitting activity is expected to pick up pace over the next two years, actual deliveries will remain modest, with 560 units and 675 units expected to be completed in 2013 and 2014, respectively. One of the larger developments currently under way, the 294-unit 220 Riverside, is slated for completion by the end of this year.

With a pause in bulk completions and demand on the rise, the metro is likely to see a marked increase in investment activity throughout the current development cycle.


Keeping Your Mind Tuned for Success

by Chris Widener

Absolutely no one can overestimate the power of the mind and its role in our success. It is imperative to keep our minds right and on the right track if we are to achieve balanced success in our career, finances, health, emotions, relationships and spiritual lives.

The analogy I would like to use here is one of a radio station. For example, there may be a “success” station. But the only way you can hear a radio station is to be tuned into it. Even a little off and you can’t get the full effect.

The same is true with our mind and success. If our minds and our thoughts get sidetracked, our success will get sidetracked. As our minds stay tuned to “success” our bodies will then carry out our success and we will begin to experience abundance.

So here are some ways to keep tuned into success.

Use your innate ability to decide and choose. One of the things that separate us from the animals is that we live not by instinct, but by choice. Constantly flexing that muscle of choice builds it up and keeps us on track for success. It is like working out. The more we do, the stronger we get. The more “fit” we get. Want to keep your mind tuned for success? Keep it healthy by making good choices and decisions on a regular basis. For example, do you have a bad habit? Then flex your mind muscle and choose to change—today. If you choose to stay the same way (and those are the only two alternatives) you will have just chosen to tune your mind to a different station than “success.”

Put good stuff into your brain. There are lots of things that want to work their way into our minds (and eventually work themselves out again in our actions). There will be lots that we just get from walking around all day. But what about what we put in on purpose?

We can choose to put good stuff in on a regular basis. Do you take time each day to put good things into your mind, to tune into success? Here are two things to consider when you are choosing what to put into your mind: First, is it positive? Will it build you up or tear you down? Will it make you a better person, or lesser? Will you grow from it or not? Will it tune you to success or not? Secondly, will it move you toward your goals in the areas of your life that you want to see success and abundance in?

Keep the junk out. Like I mentioned above, there will always be junk floating around, like a fellow employee who gripes all the time. But what surprises me is how many people who want success actually willfully choose to put junk into their minds and then expect to be tuned into success. Here are some thoughts on this: First, evaluate everything that you put into your mind. Evaluate what you read, listen to and watch. We live in a fast-paced world and we have little time. Why then would we spend our precious time putting junk into our minds? Does what you read, listen to and watch move you toward your goals or away from them? It is a simple question, really. At least most of the time. And here is my soapbox. Eleven years ago, my wife suggested we give away our television. I was shocked to say the least, but decided to give it a try. Now I am the anti-tv fanatic in our house! I have more time than anyone I know and I don’t have to spend a lot of energy filtering my mind to tune it to success. Just a thought.

Eat right and exercise. That’s right. The way we eat and the amount of exercise we get goes a long way toward our mind’s ability to tune into success. Put the right foods into your body and the brain responds. Exercise on a regular basis and the body releases chemicals that literally ignite your brain for success.

Homebuilders Still Confident

By Dees Stribling, Contributing Editor –

Builder confidence in the market for newly built, single-family homes was unchanged in November from a downwardly revised level of 54 in October, according to the National Association of Home Builders, which released its Housing Market Index on Monday. That means that for the sixth consecutive month, more builders believe market conditions are good than poor.

The index gauging current sales conditions in November held steady at 58, while the component measuring expectations for future sales fell one point to 60—both strong readers. The index gauging traffic of prospective buyers, which is the weakest component, dropped one point to 42.

“Policy and economic uncertainty is undermining consumer confidence,” NAHB chief economist David Crowe warned. “The fact that builder confidence remains above 50 is an encouraging sign, considering the unresolved debt and federal budget issues cause builders and consumers to remain on the sideline.”

Fewer Americans on the move

Americans aren’t moving as much as they once did, according to a report released by the Census Bureau on Monday. About 35.9 million U.S. residents, or 11.7 percent of all Americans, moved between during the 12 months ending in March 2013, down from 12 percent during the same period a year earlier. The decline in the nation’s overall mover rate follows an uptick from the record low of 11.6 percent for the period ending in March 2011. That means the 2013 mover rate isn’t statistically different from the 2011 rate.

Most moves are local. Nearly two-thirds of movers stay in the same county, and even those who leave their county didn’t move all that far away: 40.2 percent of inter-county movers relocated less than 50 miles away. Only 24.7 percent moved 500 or more miles to their new location.

Young Americans in particular aren’t moving at the velocity they once did, mostly because their employment situation (on the whole) isn’t nearly as healthy as their elders, and because fewer of them are buying houses than during previous decades. According to the bureau, only 23.3 percent of adults aged 25-29 moved in the 12 months ending March 2013. That’s smallest percentage in 50 years, and down from the previous year’s 24.6 percent.

Housing starts report postponed

Official numbers on housing starts in October were to have been released on Tuesday, but the Census Bureau said on Monday that the statistics would be out on Nov. 26, citing the rippling impact of the federal government shutdown last month. The September report, which wasn’t released at all last month, will come out at the same time as the November report. Normally timed data collection and data releases, the bureau says, will resume with the release of the November data in December.

Wall Street held steady on Monday until near the end, when sellers started outpacing buyers. Still, the Dow Jones Industrial Average eked out a gain of 14.32 points, or 0.09 percent. The S&P 500 lost 0.37 percent and the Nasdaq declined 0.93 percent.

What Renters Want: The Amenity Arms Race

By Leah Etling, Contributing Editor –

Los Angeles—Gen Y likes rooftop pools, multimedia-equipped fitness suites, concierge package service and the ability to order housekeeping for their apartment. They have dogs, get lots of UPS deliveries but almost no mail, like walking places (but also need to charge their electric vehicles), and want the lobby of their apartment community to look like that of a four-star urban hotel.

Sound high maintenance? It’s a fair assessment.

Last week, a panel of multifamily experts delivered an overview of “What Renters Want: Development + Design Trends that Drive Occupancy,” at an AIA continuing education event held in Los Angeles and sponsored by Multi-Housing News, Interface and Universal Fibers.

Speakers Manny Gonzalez, principal, KTGY Group; Kelly Farrell, vice president, RTKL; and Alan Dibartolomeo, chief development officer, AMF Development Inc. didn’t pull any punches when it came to the wish list of the nation’s largest renter demographic: 20-to-mid-30-somethings.

“Gen Y rents by choice. We’ll see if they continue to rent by choice as they age. But if they keep renting, your rentals will have to be flexible enough in their amenities program to meet their needs in the future and the needs of their kids,” said Farrell, who described the demand for services among today’s typical resident.

They want to be able to order up housekeeping, but not pay for it on a regular schedule, calling for an appointment when they have been too busy to clean or Mom and Dad are coming to visit. Someone should be in the lobby to receive their dry cleaning delivery and accept their packages while they work. Rent should be payable by credit card so they can auto-schedule the payment and forget about it.

The good news is that they’re willing to pay for these conveniences.

“It’s a generation that if they have the money, they want to be served,” said Dibartolomeo, whose firm competed a Glendale project near Americana at Brand and the Glendale Galleria that features a 26,000 square foot rooftop skydeck, replete with a dog park and hot tub.

The only disadvantage of creating such posh living spaces is that residents really do seem to think they’re at a resort.

“They really believe they’re in a hotel. And there’s a downside to that: they think they can barbecue and cook and just walk away and leave it, and somebody will clean it up. Almost everything is ‘somebody else will take care of it,’” Dibartolomeo said.

Describing some of the private student housing communities that have been developed across Southern California, Gonzalez implied that multifamily would likely have to raise the luxury bar to keep up with rising expectations. Does your community’s swimming pool feature a lazy river?  How about a fitness center that rivals the offerings of the neighborhood’s most high-end health club?

“If your community isn’t big enough to do something like this, then don’t even try to do it. Get them a membership to the adjacent club. If you can’t go all the way, don’t just go halfway,” Gonzalez advised. He added, “It’s what I call the amenities arms race. Everything’s getting bigger, how much can we do? All the money seems to be going into the amenities: ‘My pool’s bigger than your pool.’”

A few other trends the panel identified:

  • Black box theaters are out, outdoor theaters—where weather permits–with movable furniture are in.
  • Business centers are out, but universal wireless network coverage and scattered “creative spaces” are in.
  • Printers and a couple of computers on site are still popular for that moment when the household printer is out of ink and you need to print boarding passes for a flight or tomorrow’s homework assignment.
  • Multimedia fitness “suites” where you can do a yoga, pilates or P-90X workout alone or with a few friends are hot.
  • Some new construction doesn’t bother to wire for landline phones. Direct data connections are the alternative.
  • The most important amenity? Five bars. “If you walk in and your phone doesn’t have five bars, you’re walking out,” Gonzalez said.
  • Green isn’t as important as you think, though it may matter to owners, builders and lenders. “The leasing people don’t sell it too hard. They may mention it, but it’s not an amenity that really sells,” Dibartolomeo said.
  • Got an In-and-Out burger nearby? You’re golden. A Whole Foods? High five. Neither? No worries. Settle for a designated food truck parking space and invite local trucks to set up a regular visitation schedule. “It’s a great opportunity for them that costs you absolutely nothing,” Gonzalez noted.
  • Micro units need some kind of separation barrier between living space and sleeping space. It gives the feeling of a one-bedroom unit, even if the entire apartment is less than 500 square feet.
  • Kitchens can be smaller than we’re accustomed to, especially with new reduced-footprint appliances. But entertaining is still important, and expandable spaces to host a larger crowd are requested.
  • Location still matters—a lot. “You’ve got to build it where the rest of the amenities are already provided by the city that’s there,” Dibartolomeo observed.

Reis 3Q Briefing Gives Reason for Optimism

By Scott Baltic, Contributing Editor – Commercial

“All indicators are pointing toward another year of recovery” was the optimistic bottom line of Wednesday’s Q3 2013 Capital Markets Briefing from Reis Inc. Hosted by Reis senior economist Ryan Severino, the conference call promised to tackle angles such as economic growth and the capital markets, interest rates and cap rates, and the GSE pullback.

Though he cautioned that the data are still preliminary, Severino said that GDP growth at an annualized 2.8 percent in the third quarter is better than what had been expected by many and added that job creation figures look good: “We are now ahead of last year’s pace of job creation.”

He does, however, expect a slowdown in growth in the fourth quarter, in part because of lingering effects from the government shutdown.

In the office sector, Severino said, “demand continues to slightly outpace new construction.” He noted, though, that improvement in the office sector has been largely concentrated in a limited number of markets, such as metro areas with strong high-tech industries.

In the multi-family sector, “the market has hit a floor, at least temporarily,” he said, and any future cap rate compression will be “far more gradual.”

As for retail, Severino said, there’s “more evidence that retail cap rates have hit a floor.” This product type, he said, is the one “arguably with the weakest recovery,” not least because “consumer spending remains depressed.”

An examination of 12-month rolling cap rates found that, like last quarter, “we’re getting complicated results,” he said, with a few markets represented in the top 10 for one product type and the bottom 10 for another. (Detroit, for example, is in the top 10 in retail (3.7 percent) and in the bottom 10 (11.1 percent) in multi-family.)

These anomalies, Severino explained, are probably caused by a “shallow transaction environment.”

The briefing highlighted a string of positive signs for the economy and the CRE sector.

* The Mortgage Bankers Association’s Originations Index has approximately tripled since the lows of 2009, from roughly 50 to about 150 (100 = the 2001 quarterly average).

* A year-over-year decline in outstanding balances on GSE loans obviously reflects those entities’ mandate to cut their originations, but Severino also suggested that the GSEs would in any case be getting more competition in the current multi-family lending market.

* The CMBS recovery remains intact, with originations on track to total $80 billion this year, “well ahead of predictions,” according to Severino.

* A Federal Reserve survey of bank senior loan officers found a higher percentage reporting stronger loan demand than at any time in the past 13 years.

* The overall commercial mortgage delinquency rate, now at 2.7 percent, has fallen 300 basis points in three years. Or, as Severino put it, “It’s coming down about as fast as it went up” from 2008 to about 2010.

One intriguing question toward the end of the conference call was whether cheap capital is artificially inflating CRE prices. Severino answered that two quarters ago he might have said yes, but that the improved economy has allayed some of those concerns.

The economy is probably more resilient than many thought, Severino said, and though the credit market will remain “choppy in the short term,” if the capital markets behave well, “We could be on the verge of a real recovery.”

Fed Mulls Tapering in Near Future; Inflation Still Nonexistent; Existing Home Sales See Downtick

By Dees Stribling, Contributing Editor –

The Federal Open Market Committee released the minutes from its Oct. 29-30 meeting on Wednesday, and one of the more closely watched subjects taken up in was tapering. The question now isn’t whether to taper, but how much and exactly when. The central bank hasn’t quite made up its mind about that yet – but the minutes seem to say that it will be a matter of months before tapering kicks in, albeit gradually.

“During this general discussion of policy strategy and tactics, participants reviewed issues specific to the Committee’s asset purchase program,” the FOMC minutes said, referring to the $85 billion worth of bond buying that the Fed has been doing every month. “They generally expected that the data would prove consistent with the Committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months.”

Perhaps more importantly for the long-term health of the economy, the FOMC also discussed at length the federal funds rate, which is currently next to nothing. The committee said it was thinking about a way to tell markets that the rate is going to remain that low for a long time, and whether to lower the unemployment rate threshold for considering any rise in the rate.

The minutes – in their long-winded way – said that “as part of the planning discussion, participants also examined several possibilities for clarifying or strengthening the forward guidance for the federal funds rate, including by providing additional information about the likely path of the rate either after one of the economic thresholds in the current guidance was reached or after the funds rate target was eventually raised from its current, exceptionally low level.” We’ll get to it when we get to it, in other words.

Inflation Still Nugatory 

One of the persistent worries about QE3 – at least among a certain class of economists – is that the stimulus will cause inflation. So far, however, inflation refuses to rear its ugly head: the Bureau of Labor Statistics reported on Wednesday that the all-urban CPI in October dropped 0.1 percent, mostly because of declines in the price of gas. Over the last 12 months, the all-items index has increased 1 percent.

The gasoline index fell 2.9 percent in October. Other energy prices were mixed, with electricity rising, but fuel oil and natural gas declining. The food index rose slightly, with major grocery store and food group indexes evenly split between advances and declines. Take food and energy out of the picture, and prices were up 0.1 percent in October.

Everything else was likewise a mixed bag in terms of price increases and decreases. The price of shelter rose, but at the slowest rate since the end of last year. Air fares, recreation, and used cars and trucks also became more expensive. Medical care – surprisingly — was unchanged, while apparel, household furnishings, and new vehicles all became less expensive.

Existing Home Sales See Downtick

The National Association of Realtors reported on Wednesday that total existing-home sales dropped in October to an annualized rate of 5.12 million units, down 3.2 percent compared with September. Year over year, sales are better: the current rate is 6 percent higher than the 4.83 million-unit level in October 2012. Sales have remained above year-ago levels for the past 28 months.

The national median existing-home price for all housing types was $199,500 in October, up 12.8 percent from October 2012, which is the 11th consecutive month of double-digit annual increases, the Realtors reported. Distressed properties – foreclosures and short sales – accounted for 14 percent of October sales, unchanged from September, but very much changed from October 2012, when they were 25 percent of the total. Part of the gain in median price is from a smaller share of distressed sales.

Total housing inventory at the end of October declined 1.8 percent to 2.13 million existing homes available for sale, which represents a five-month supply at the current sales pace, according to NAR. The supply was 4.9 months in September. Unsold inventory is 0.9 percent above a year ago, when there was a 5.2-month supply.

Wall Street didn’t much like what the FOMC minutes had to say on Wednesday, with an up day turning into a down day as soon as they were released. The Dow Jones Industrial Average dropped 66.21 points, or 0.41 percent, while the S&P 500 and the Nasdaq were down 0.36 percent and 0.26 percent, respectively.

Multifamily Players Dare to Hope GSEs Won’t Be Dismantled

By Erika Morphy –

WASHINGTON, DC-There is a growing sense in the multifamily industry that, despite the strong push to privatize housing finance, Fannie Mae and Freddie Mac may not be unwound. It doesn’t hurt that both GSEs have posted strong profits in recent years. Also, as politicians get closer to the reality of what it would entail to sell off parts or all of the GSEs, the more practical-minded they become about the mission. The intense lobbying campaign by the industry has likely had some sway as well, says one player. “I think Congress didn’t realize how important the GSEs are to housing finance—they liquidity they provide in the capital markets, especially the multifamily side,” this person tells “They certainly didn’t realize how profitable the multifamily side is.”

To be sure, the official party line in Washington is that the GSEs are headed for an exit at some point. Certainly the Federal Housing Finance Agency continues to push the GSEs to conserve, to scale back lending and otherwise shrink. Also the GSEs themselves are positioning their operations for the day when the private markets will be the main source of finance in this space. Earlier this month Fannie Mae priced its inaugural credit risk sharing transaction under its Connecticut Avenue Securities (C-deals) series—transactions is which The GSE transfers some of the retained credit risk to investors in exchange for sharing a portion of the guaranty fee payments.

Then there are the comments Fannie Mae’s CEO Timothy J. Mayopoulos, made at the recent Mortgage Bankers Association meeting.

He spoke of building a sustainable housing finance system and on his list of what would comprise such an ecosystem was private capital that stands “in front of the government to withstand market downturns. The amount of this private capital needs to be substantially higher than the capital the GSEs historically held.”

Reporting the Results of a Due Diligence Investigation

By Azad Khalighi –

Must the results of a Phase II Environmental Site Assessment be reported to regulatory agencies?

Frequently in the area of real estate due diligence, persons who engage consultants for a Phase II Environmental Site Assessment (Phase II ESA) face the question of whether or not they need to report data to regulatory agencies, and if so, who is ultimately responsible to do so.  The answer to this question varies on a case by case basis, depending on three primary aspects: the regulatory jurisdiction of the project; the scope and results of the investigation; and the purpose of the investigation.

Generally, if environmental impacts detected during a Phase II ESA exceed regulatory risk-based standards, action is required.  Who these findings should be reported to, and what kind of cleanup action is required at the property, is determined by the relevant agency that provides oversight for that site.

There are many different regulatory agencies which often have overlapping jurisdiction and each Phase II investigation is different in scope and purpose.  To be certain whether environmental concerns found during the Phase II ESA must be reported, property owners should discuss these aspects with their environmental consultant.  Sometimes, such information is best relayed from the agency regulators themselves, while in particularly complex cases an attorney in the field of environmental law can provide the best advice.

Regulatory Jurisdiction

A property owner may be required to report analytical data from a Phase II ESA if oversight is required in that jurisdiction.  In some instances, a jobsite is under regulatory oversight, and the scope of a subsurface investigation is in accordance with that agency.  Under these circumstances, the agency’s caseworker will most likely require the data to be reported.  Reporting the data to the regulator with pre-existing oversight is generally the duty of the responsible party, and consultants can submit the data on their behalf.

Importantly, risk-based standards are regulated on both a State and a Federal level.  The Federal Environmental Protection Agency (EPA) has jurisdiction across the nation, and publishes standards and foundational requirements per region for local regulatory agencies and departments to use as a template.  In addition to Federal regulators, States have multiple agencies with overlapping jurisdictions such as water quality boards, environmental protection boards, toxic substances control and more, each enforcing various regulatory action levels.  Within these state agency jurisdictions are county and city departments, which also overlap in jurisdiction, such as fire departments, public health departments, water agencies and more.

Each regulatory agency enforces different action/screening levels, which vary across the country.  In Montana, for example, levels are regulated by standards known as Risk-Based Screening Levels (RBSL), New Mexico follows the SSL (soil screening levels) program, Hawaii uses Environmental Action Levels, while standards are set by the Risk Evaluation/Corrective Action Program (RECAP) in Louisiana and the Significant Environmental Hazard Condition Notification Thresholds (SEHCNT) in Connecticut.

Additionally, the majority of city and county environmental departments will require a boring permit for drilling projects encountering groundwater, and a minority of them will require a permit for drilling, even if groundwater is not encountered.  Often times these permits have a closure process that requires all data to be reported.  Property owners should refer to their environmental consultants about whether or not their Phase II ESA project falls within one of these jurisdictions, and if so, prepare to release all analytical data to that department.  A city or county environmental department may report significant data from their permit package to a regional or state agency for regulatory oversight.

Scope and Results

A Phase II ESA scope of work generally includes, but is not limited to, drilling for the analysis of soil, soil gas, and/or groundwater.

Many State EPAs have published various regulatory standards for reporting and clean-up of these elements, such as the Generic Numeric Cleanup Standards for Groundwater and Soil in Maryland, the Soil Cleanup Target Levels in Florida, the Statewide Standards for Soil and Groundwater in Iowa and the Soil Evaluation Values (SEVs) in Colorado.

The Federal EPA has also developed Maximum Contaminant Levels (MCLs) as a health-based protective drinking water standard.  Generally, investigations which include the scope of groundwater sampling use MCLs as a guideline for the risk assessment, however often times other regulatory agencies enforce stricter groundwater and drinking water standards as well.  When a Phase II ESA concludes that groundwater concentrations exceed regulatory standards, the property owner may be required to report that data, if that jurisdiction’s agency requires it, if there are possible sensitive receptors which could potentially be affected, and if any required permitting process requires the data for closure.

The Federal EPA has published Regional Screening Levels (RSLs), and similarly, the California EPA has published Human Health Screening Levels (CHHSLs) for soil and soil gas. Screening levels are generally applied for the science of toxicology and risk assessment, and are not typically used as reporting limits, however some circumstances may still require that data be reported with respect to screening levels.

The advisory and terms of such published screening levels should be reviewed on a case by case basis to confirm any reporting obligations.  Additionally, it is important to consider many state and local agencies have established jurisdictional clean-up numbers which can overrule the requirements for reporting data exceeding these screening levels.

Since each project is different, responsible parties must not rely on generalized information, and should always discuss the conclusions of a Phase II ESA report with their environmental consultant.

Purpose of the Investigation:

Health and safety codes in most jurisdictions across the country indicate that responsible parties and consultants have the absolute duty to immediately report any contamination to soil, soil gas, or groundwater which has been discovered as a risk to public health and safety, or the environment.  Responsible parties should refer to their consultants about whether or not there have been such discoveries that pose a risk to the environment or public health at their site.

A Phase II ESA report may also recommend further investigation, or conclude that remediation is required, and it can be in the property owner’s financial interest to voluntarily report the findings, and remediate the site under regulatory oversight.

Ultimately, it is important for all responsible parties and consultants of a Phase II ESA to understand that each project is different, and similar scopes may still result in different reporting obligations depending on jurisdiction, results, and purpose.  To be certain, the responsible party of a Phase II ESA should never blindly rely on generalized information, but rather discuss their reporting obligations with their environmental engineering consultant, attorney, or local regulatory agency.


California Requirements Study

According to the California Health and Safety Code, any release of a reportable quantity of hazardous substance shall be reported to the department in writing within 30 days of discovery (See California Health and Safety Code, Section 25359.4):

       – A “reportable quantity” means either (1) the quantity of substances as listed in Part 302 (commencing with Section 302.1) of Title 40 of the Code of Federal Regulations, or (2) any quantity of hazardous substance that may pose a significant threat to public health and safety, or to the environment [See 25359.4(c)].

– According to the Department of Toxic Substance Controls, Fact Sheet Update for Reporting Nonemergency Hazardous Substances Releases, the term “discovery” as used in 25359.4 means when a person finds, learns, or otherwise acquires knowledge that a hazardous substance has been released.

– A release must be reported unless (1) it is permitted, (2) it is authorized, (3) it requires reporting to the Emergency Management Agency, (4) it has already been reported to the Emergency Management Agency, and (5) the release occurred prior to January 1st, 1994 [See 25359.4(b)].

According to the California Fire Code, the Fire Chief shall be notified immediately when a  release or an unauthorized discharge escapes containment, is contained but presents a threat to health or property, or becomes reportable under state, federal or local regulations (See California Fire Code, Section 8001.5.2.2).

Any person who causes or permits any hazardous substance or sewage to be discharged in or on any waters of the state, shall, as soon as that person has knowledge of the discharge, immediately notify the California Emergency Management Agency of the discharge in accordance with the spill (See California Water Code, Section 13271).