Joseph Kesling	Dan Johnson

   This also is an ideal time to divest from these troubled assets. Besides having many companies wanting to acquire contaminated real estate, the new All Appropriate Inquiry (AAI) standards (required by the "Brownfields Amendments") required EPA to define AAI. The standards are now completed, and they take affect in November 2006. AAI is a means to an end for the Brownfields Amendments of 2002, which offers enhanced Innocent Landowner liability protection, and new Bona Fide Prospective Purchaser and Contiguous Property Owner defenses. The Bona Fide Prospective Purchaser allows a buyer to knowingly purchase contaminated real estate and be protected against the environmental liability created prior to the purchase. For developers, these adjustments introduce new brownfield properties into the marketplace.
   Some companies may elect to sell these assets so they will not have to increase the liability they are accruing. There are other factors to consider when selling, as it does not totally release companies of their environmental liabilities; but a sale does provide cash, eliminate on-going carrying charges and maintenance budgets for the properties and reduce future liabilities on the income statement. In the case of environmentally contaminated real estate, the liabilities do not drop away until the site is remediated, but the net effect is that reduced environmental liabilities will help shore up and preserve stock values and help protect against a credit down-rating of the company.
   In short, companies are now routinely cleaning up and selling previously contaminated property more easily than in the past, thanks to new technologies and a new understanding of remediating contaminated properties. Many firms and local governments are now comfortable with acquiring properties with environmental liability and contamination because potential new values of property created after remediation drastically offset clean-up costs. These companies have an appetite for contaminated real estate and are chasing higher rates of return than are normally associated with typical real estate development.
   With the proper mix of risk-mitigation strategies, Brownfields Amendments, All Appropriate Inquiry, and a buyer's market for contaminated real estate assets, a public company can finally start to get control of its contingent environmental liabilities. The Sarbanes-Oxley Act and FIN 47 create these opportunities for companies and developers to profit from previously contaminated property.

   Joseph L. Kesling is a vice president and national partner for due diligence and real estate support for SCS Engineering, a full-service environmental engineering consulting firm. Dan Johnson is the principal of the San Diego, Calif., office of SCS Engineers (www.scsengineers.com).