Where Technology and Opportunity Meet in Due Diligence
This week I attended Environmental Data Resources’ (EDR) annual Property Due Diligence Client Summit in Arizona, which gathers many top due diligence professionals and bankers together. The EDR Client Summit was titled "Mobilizing Change: Where Technology and Opportunity Intersect" and it certainly lived up to its billing.
Rob Barber, CEO of EDR, led off with a series of big announcements regarding their investments in better data in terms of city directories and aerial photographs. EDR also provided a great preview of their new product code named “Lightbox”, a product that will allow due diligence professionals to do more with their mobile devices. The grand finale was Dennis Firestone with CBRE's demonstration of camera equipped helicopter that could be controlled by an iPhone. Such devices could potentially be used in property inspections. All in all the show was very interesting for due diligence professionals and some of these things may be valuable for commercial real estate in general.
A few of the most interesting sessions are discussed below:
Mobile Due Diligence Tools:
EDR is developing its next-generation mapping application that will integrate all their environmental database information and historical imagery into a single web based application, provide analytical tools and filters, and offer drawing and annotation options for the user. The application is code named “Lightbox” (name not final yet) and it will add a lot of efficiency to the records process of the Phase 1 Environmental Site Assessment or other desktop environmental reports. As an example, users will be able to overlay Sanborn Maps on top of a current aerial photo, fade between layers and make more precise distance measurements between issues of concern. In testing now, the service is scheduled to launch sometime within the next 6-9 months.
Consolidation in the Environmental Due Diligence Industry:
I was on the panel titled: "Envisioning the Future of the Property Due Diligence Market" and pointed out that the due diligence industry is going through a period of consolidation that started 5 years ago and is continuing today. I supported this statement with three trends:
- In prepping of for the panel I learned that EDR has less environmental consulting customers now than they did 10 years ago. EDR is not losing customers to the competition, there are just less firms engaged in Environmental due diligence.
- More quantitatively, according to EDR Scorekeeper, the EDR Top 25 is growing faster than the industry as a whole. For the past 10 issues, the EDR top 25 has grown faster than the industry, which is more empirical evidence of consolidation.
- Our clients: 15 years ago there were 12,000 banks, now there are 7,000
Why is there consolidation? Lenders, especially large lenders, have become more brand sensitive. Big banks want to work with national environmental consulting firms.
Technology is perhaps another driver. Today, to be competitive, a firm needs more technology and needs to handle data well. You can still open a business with a printer and a computer, but if you don’t harness technology you will have a hard time being competitive.
Drone Property Inspectors:
If you fear that the fictional Cyberdyne systems from the Terminator movies would become real, here is something to feed your paranoia. CBRE’s Dennis Firestone demonstrated how a remote professional could theoretically inspect a property using a drone helicopter. He demonstrated the use of a Parrot AR.Drone 2.0 Quadricopter and I have to admit that his demonstration made me wonder if such an inspection could happen in the future. Could I FedEx the drone to the site instead of flying my Environmental Professional to the site? Hmmm? I am not sure you can really replace the judgment of a person on-site, but it makes you think. Or maybe, I could use the drone in place of a cherry picker for high or difficult to inspect systems. I understand that the drone costs approximately $300.
Environmental Due Diligence for Single Family Residential:
Jack Huntress with EDR briefed the audience on the market for database reports for single family residential properties. He explained the Neighborhood Environmental Report and discussed benefits of this report to the consumer. EDR's sister company, Landmark, in the United Kingdom provides environmental database reports and current/historical records for single family residential properties, among other services. The demand for this product in the United States has been low to date.
Julie Kilgore and other members of ASTM E50 summarized for the audience coming changes to the ASTM E1527 Standard for Phase I Environmental Site Assessments. The new ASTM E1527-13 Phase I Environmental Site Assessment Standard is due to be released in 2013. While it is not finalized, it will likely contain significant revisions in the following areas: Regulatory File Reviews, Vapor Intrusion, Controlled Recognized Environmental Conditions.
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Partner Engineering and Science, Inc. (Partner) is a full-service environmental and engineering consulting firm completing projects nationwide. We specialize in evaluating properties in connection with real estate transactions, development or management.