REAL ESTATE PROFESSIONAL SURVEY ON CONTAMINATED PROPERTIES


1. How often do potential purchasers simply refuse to purchase any contaminated property?

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

2. How frequently do potential buyers of a property demand that the seller pay for (or adjust the selling price for) each of the following types of property surveys?

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

3. A preliminary environmental audit to determine the presence or extent of contamination?

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

4. A comprehensive engineering survey to diagnose the specific characteristics of the environmental problem and to estimate the cost to cure or contain

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

5. How often do purchasers that are willing to buy a contaminated property do each of the following when negotiating the purpose?

Demand that the contamination be removed prior to purchase as a condition of the sale.

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Agree to purchase the property as is, but at a price discount approximately equal to the estimated cost to remove all contamination.

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Agree to purchase the property as is, but at a price discount greater than the estimated cost to remove all contamination from the structure.

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never


6. How often do each of the following adverse effects on a property's income stream remain even though all of the contamination has been removed from the structure?

Higher vacancy rates than comparable properties that never had contamination

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Greater difficulty in obtaining the same quality of tenants than comparable properties that never had contamination

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Lower rental rates than comparable properties that never had contamination

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Higher operating expenses than comparable properties that never had contamination.

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Higher financing costs than comparable properties that never had been contaminated

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

7. Indicate how frequently loans made on properties with contamination have each of the following additional costs, limitations, or requirement.

Lending a lesser amount (lower loan-to-value ratio) than similar properties without contamination)

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Charging a higher interest rate

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Charging higher points or loan origination fees

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Requiring indemnification guarantees

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

8. How often do lenders refuse to lend on contaminated properties?

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

9. How often do you and other real estate professionals make each of the following adjustments to reflect the impact of contamination on the value of affected properties?

Decrease the rental rate relative to comparable uncontaminated properties

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Increase the vacancy rate

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Increase the amount of rental concessions to tenants

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Increase workletter/buildout allowances

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Increase repair and maintenance expenses to reflect the need for contamination maintenance and monitoring

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Increase legal expenses

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Increase insurance costs

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Reduce the property value by the direct costs of mitigation (including preparing for removal, physical removal, reconstruction of damaged areas, reinstallation of substitute materials and disposing of contaminants)

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never


Reduce the property value by the indirect costs of contamination removal (including the loss of rental revenue because of the downtime necessary to remove the contamination and the costs to move and temporarily relocate tenants while the contamination is being removed)

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Increase the capitalization rate

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

Increase the discount rate

1. Always 2. Usually 3. Sometimes 4. Seldom 5. Never

 

10. What is the typical range of the percentage reduction (or discount) in the market value of a property with contamination relative to similar uncontaminated properties?
11. When a contaminated property is being sold how much longer does it typically take to sell, compared to comparable property without contamination? Indicate the number of additional months on the market?
12. When leased space in a contaminated property becomes vacant how much longer does it take to replace tenants than in a comparable uncontaminated property. Indicate the additional time in months on the market?
13. On average what is the increase in the discount rate (not the capitalization rate) for a contaminated property? Indicate the additional risk premium added to the discount rate because of the presence of contamination?
14. What is the typical range of the lump sum cost of an environmental audit to ascertain the presence and the extent of an environmental problem in a property?
15. What is the typical range of the lump sum cost of a comprehensive engineering survey to diagnose the specific characteristics of the problem and to estimate the cost to cure or safely contain the problem? 
16. What is the average increase in the effective interest rate (taking into account the effects of points and other origination fees) of first mortgage loans made on properties with contamination?

17. For each of the following property types indicate the average percentage reduction in the stated or quoted rental rate for a property with contamination compared to a property without contamination?

High-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Low-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Free-standing retail store

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Neighborhood shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Regional shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Warehouse

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Light industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Heavy industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Vacant land

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

18. For each of the following property types, indicate the average percentage increase in rental concessions, including workletter or buildout allowances for a property with contamination compared to a property without contamination

High-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Low-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Free-standing retail store

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Neighborhood shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Regional shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Warehouse

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Light industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Heavy industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Vacant land

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

19. For each of the following property types indicate the average increase in operating expenses of a contaminated property compared to a property without contamination? (Expenses include monitoring, increased maintenance, insurance, and legal costs)

High-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Low-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Free-standing retail store

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Neighborhood shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Regional shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Warehouse

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Light industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Heavy industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Vacant land

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

20. For each of the following property types how much higher, on average is the vacancy rate of properties with asbestos relative to comparable properties without asbestos?

High-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Low-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Free-standing retail store

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Neighborhood shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Regional shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Warehouse

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Light industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Heavy industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Vacant land

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

21. For each of the following property types indicate the average decrease in net operating income of contaminated properties relative to properties without contamination, as a result of the effects of the presence of contamination on rental income and operating expenses.?

High-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Low-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Free-standing retail store

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Neighborhood shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Regional shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Warehouse

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Light industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Heavy industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Vacant land

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

22. What is your estimate of the average reduction in the loan-to-value ratio for first mortgage loans originated on properties with contamination?

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Low-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Free-standing retail store

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Neighborhood shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Regional shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Warehouse

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Light industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Heavy industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Vacant land

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

23. For each of the following property types, indicate the average percentage reduction in the value of a property attributable to the expected direct costs of cleanup (which include costs of preparation, physical removal costs, costs for reconstructing building areas damaged by removal costs associated with reinstalling functional substitutes and costs of proper disposal.?

High-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Low-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Free-standing retail store

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Neighborhood shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Regional shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Warehouse

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Light industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Heavy industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Vacant land

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

24. For each of the following property types indicate the average percentage reduction in the value of the property attributable to expected indirect costs of removal (which include the loss of revenue during cleanup downtime and the cost to move and temporarily relocate tenants during removal)?

High-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Low-rise office building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Free-standing retail store

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Neighborhood shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Regional shopping center

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Warehouse

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Light industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Heavy industrial building

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30%

Vacant land

1. No difference 2. Less than 6% difference 3. 6% through 10% 4. 11% through 15%
5. 16% through 20% 6. 21% through 25% 7. 26% through 30% 8. greater than 30

Jeffrey D. Fisher, George H. Lentz, and K. S. Maurice Tse "Effects of Asbestos on Commercial Real Estate: A Survey of MAI Appraisers"

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