Environmental Due Diligence for Property Transactions
SEGRO plc completed the purchase of a 50% stake in the Airport Property Partnership (APP) in 2010, replacing BAA as Aviva Investors partner for the management of 17 industrial estates surrounding Heathrow, Gatwick, Stansted and Edinburgh airports. The resultant portfolio comprised sites from the original APP Portfolio as well as additional sites that SEGRO added to the joint venture. BWB Consulting's role was to act for SEGRO as environmental consultant for both the acquisition and divestment of the properties. The divestment process involved the review of information held by SEGRO and provision of an opinion on whether the audit trail was sufficiently robust to adequately inform on environmental risks and stand scrutiny by the 3rd party consultant acting for Aviva Investors. The project output was at multiple levels with simple summary reports to highlight the key implications for the Client and commercial team, through to detailed reports to satisfy consultants reviewing the work for 3rd party funders. Ultimately the Client recognised a significant reduction in the value of the acquired portfolio due to the commercial risk posed by the lack of a suitable audit trail presented by the vendor, whilst demonstrating sufficient detail for divestment sites leading to no reduction in the value of transferred assets.
The project involved working within tight timescales, whilst at the same time working with numerous third party consultants, either acting for the JV partner or the Client. Works were also challenged by the fact that a number of properties were located airside at major UK airports, requiring security permits and guided inspections.
The project was completed within the required timescales and led to the creation of a specific portfolio management plan to deal with on-going works to address recommendations within the due diligence report, demonstrate to investors that active asset management was taking place and also to actively manage certain sites where risks had been identified to mitigate liabilities over the short to medium term.