There are, or have been, thousands of small commercial dry cleaning operations throughout the U.S. – nearly every neighborhood had one. Most of them are, or were, small family owned businesses that started in the 30s, 40s, or 50s. Many of these facilities became ‘anchor’ stores of small shopping centers that are now being redeveloped. The first step in the redevelopment process should be the Phase I Environmental Site Assessment. However, many times this essential first step is requested after the deals are well along their way. As an environmental professional, we find ourselves fielding calls that begin with “We’re closing next week, and need a Phase I done.” What could go wrong?
In this series of articles, we will examine the pitfalls of real estate transactions involving former dry cleaner operations. The first step in the process should be the Phase I Environmental Site Assessment (ESA), conducted by a qualified environmental professional. The Phase I ESA is a desktop evaluation and site inspection that provides the prospective new buyer with information concerning past environmental concerns at a property generally known as “recognized environmental conditions” (RECs).
A standard step in the Phase I ESA is a review of environmental databases conducted through a third party service. These databases searches, which are typically completed within a day, are very informative, and generally reveal if the property was once occupied by a former dry cleaning operation. If a former dry cleaning operation is identified, this is the first clue that a REC is present on the property and that further actions should be taken (e.g., Phase II ESA) to evaluate the REC more closely. If there is an impending deadline approaching, this database search report may be the only tool relied upon to form a decision about the property; however, this is only the first clue that something may be up with this property.
Other elements of the Phase I ESA should be reviewed very carefully as they may identify prior uses of the property that may not have been revealed in the database search alone. The three most informative elements to review next are fire insurance maps, historical city directories and historical aerial photography.
Fire insurance maps, where available, provide a great deal of detail about businesses that occupied the property in the past including the name and/or business activity, the shape of the buildings, as well as information concerning where products were stored and used. Many times, these maps are more informative than aerial photography; however, if the property is not within a historically urban or industrial setting, their coverage may be limited.
City directories are important in that they provide the business name and more importantly the address of the operation. If you have a former dry cleaning operation associated with your strip mall property, don’t be surprised to see the name and address change slightly through time. For example, in 1956 – ABC Cleaners was located at 563 Maple Street; in 1975 – Atomic Cleaners was located at 571 Maple Street, then in 1995 – Super Dry Clean is located at 561 Maple Street. During the site inspection the environmental professional located Super Dry Clean at 561 Maple Street. Did people putting together the city directories make a mistake? Probably not. Aerial photography may help you clear this up.
A review of the aerial photography can help you sort out historical details because they provide photographic evidence of how the property was occupied at any given period of time. In general, try to: 1) obtain enough photography to cover the range of years from pre-development to the present day; and 2) obtain photography with sufficient clarity to identify individual buildings with certainty. In general, clarity is inversely related to the altitude of the flight line. The higher the flight’s altitude, the lower the level of detail captured by the photography. Obtaining the right photography can take some time and should be researched thoroughly. Most third party database search firms provide aerials at an additional cost, but not all firms have access to good quality photography.
In our example, there were no fire insurance maps available; however, it appears that the dry cleaner operation may have moved periodically based on the city directories. Using the information from city directories while reviewing the aerial photography it was revealed that in 1950s, there was a single building resembling a house located at the location that would have had an address of 563 Maple Street (ABC Cleaners). By the 1970s, the location of that building, which been demolished, was now a parking lot for the current strip mall, whose range of addresses included 561 (Super Dry Clean) through 571 (Atomic Cleaners). The Phase I ESA has revealed not one, but three separate RECs associated with former dry cleaning operations. These three RECs involve most of the property and could likely extend off-site. The next step is to perform a Phase II ESA to better understand how these operations may have affected the property and the surrounding area. Luckily for us, the prior owner conducted a Phase II ESA.
Next month we will examine the Phase II ESA, what may have been missed, how it could affect your client, and how to plan for the future …the deal is heating up and the clock is ticking.
Published in Cox-Colvin’s May 2019 Focus on the Environment newsletter.
Craig Cox is a principal and co-founder of Cox-Colvin & Associates, Inc., and holds degrees in geology and mineralogy from the Ohio State University and hydrogeology from the Colorado School of Mines. Mr. Cox has over 30 years of experience managing large environmental project implemented under CERCLA and state voluntary action programs. Mr. Cox is the inventor of the Vapor Pin® and has developed a variety of software products including Data Inspector, an internet-enabled environmental database application. Mr. Cox is a Certified Professional Geologist (CPG) with AIPG and is a Certified Professional (CP) under Ohio EPA's Voluntary Action Program.