November 05, 2004

I'll be the first to admit it...

... I can make some *really* stupid mistakes here at work. The kind of stuff that just comes from being lazy, or blase about your job. However, I'm gonna give myself some credit on this catch. I'm working on a new-construction age-restricted $50MM property in Orange County. Tough developer/borrower - guy's been pressuring the hell out of us from the start, without providing us with any information about the property. Fortunately, this guy has a track record with this product type, fairly deep pockets and we're comfortable with the market so our concern has been getting our investor comfortable with the construction/lease up risk. Part of that is conducting proper due diligence to understand what lease rates/velocity we should expect.

We finally got our leases and addenda in this afternoon - typically something you glance over, see if the proper addendums are there - shouldn't take any more than 30 seconds. Well, guess what I just found:Disclosure regarding Methane Gas:
The XXX community is located in an area overlying geological formations rich in petroleum and natural gas, and is on a site with abandoned gas wells. As a result the site has the potential for elevated concentrations of methane gas in the air and in the soil and excavated surfaces (new construction property, everything is excavated -ed) ... The buildings on the propertry have a methane gas protection system and a gas mitigation system in accordance with plans approved by XXXX (I no longer question why they needed an interim $3.5MM mezz loan -ed). The systems include vents to dissipate the gas and a membrane installed beneath the building's floor slabs to prevent gas intrusion from the soil
(emphasis mine)

IN
goes the call to the environmental consultant who missed all this... Heh.