Financial Health Monitoring of Institutional Control Property Owners

The long term success of Institutional Controls (ICs) and cleanup remedies is often only as strong as the financial health of new property owners.   This is why, along with its classic suite of land monitoring, Terradex LandWatch now monitors the financial health of contaminated property owners.

When new owners take over IC sites or residually contaminated sites, the old owners (a.k.a. divested owners) and regulators depend on the new owner to properly manage the property or, in ASTM parlance, perform continuing obligations.  But if new owners run out money, ICs and engineering controls can fail and other recognized environmental conditions (RECs) can wreak inadvertent health impact.  The foreclosure process can wipe out recorded “deed restrictions,” and thereby generate a regulatory conundrum for the responsible parties and regulators who relied on their durability.   Financial failure of a property owner potentially exposes even the most careful divested property managers to “comeback” liability and could trigger the need for regulators to act.  Even the best laid remedial plans can unravel when an owner enters financial distress.

Responsible parties that divested contaminated properties and the involved regulatory agencies can now rely on Terradex LandWatch to monitor the financial health of  property owners, and alert upon detecting financial distress.  Terradex combines land record monitoring (e.g., sales, foreclosures, etc.) in combination with third-party financial services to evaluate financial metrics such as suites, liens judgements, bankruptcy, deteriorating credit, and pre-foreclosure indicators (such as failure to pay property taxes).  Our third party financial service generates a financial health index, and the indexing can be calibrated by the client to trigger an alert at a specified financial health threshold. This monitoring process automatically resets when a property sale is detected – Terradex resets the service by benchmarking the financial health of the new owner, and then keeps monitoring their financial index across the subsequent owner’s term of ownership.

When LandWatch transmits a financial health alert, Terradex will remind you of the property monitored (as most divestment portfolios are large), the property owner at financial risk, and then describe the basis for the low index.  With this alert, a divestment manager, for example, can appropriately intercede or regulators can take preventative action – keeping the IC and the remedy in tact and the property safe. Terradex has the resources to dig deeper when we discover a property at risk – we can research both the financial and property status to provide the underlying details that led to the financial health alert.

A timeline of the new LandWatch service across three successive properties owners shows how an alert is issued early within the financial distress of Property Owner “B”.  The timeline shows the integrated reliance upon both financial health monitoring  and property ownership monitoring.  In this scenario, the customer is able to intervene upon early notice of financial distress of Property Owner “B” to track the bankruptcy process, and restore lost institutional controls with Property Owner “C”. All the remedy design is protected through this successful use case scenario.

With the early knowledge that a divested property owner is at risk, a responsible party can or regulatory agency can intercede to protect the integrity of engineered controls, and validate the effectiveness of institutional controls. Knowing that foreclosure could wipe out an institutional control, responsible parties or regulatory agencies could work to restore the institutional control, and thereby protect the integrity of the remedy and underlying remedy agreements.

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