Proper environmental due diligence is critically important in transactions involving real estate or the acquisition of ongoing industrial or manufacturing operations. The due diligence process is the foundation for mitigation of environmental risk. Real estate deals are getting more complex as development is trending back to the waterfront, inner-city, and at retired and mothballed power and industrial facilities. These types of transactions all present complex environmental challenges. Understanding the nature and extent of these challenges at a site is a first step for buyers considering an acquisition. It also is important for sellers to have a realistic understanding of the environmental issues at their property to be able to negotiate the best divestiture deal possible. However, many possible transactions involving contaminated sites don’t close due to environmental issues discovered during the due diligence process. A common refrain often heard from real estate professionals is that “environmental issues killed the deal.” Other transactions are significantly delayed as the parties work through environmental issues, risking the loss of financing and business opportunities that made the deal attractive in the first place, as well as increasing transaction costs. So, what’s the problem with these types of transactions? Why don’t they close?
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