Executive Briefing 5.0

Reclaiming Abandoned Gas Stations

Abandoned gas stations are typically located on prime real estate corners. Most of the properties are abandoned because of an actual or perceived petroleum contamination issue. If the environmental concerns could be resolved within an economically feasible redevelopment plan, these properties represent attractive business opportunities.

Liabilities

There are generally two economic risks associated with such properties if they are determined to be contaminated:

  • Government imposed cleanup
  • Third-party liability

Research can be conducted to evaluate the level of risk associated with each potential source of liability. In many cases, the risks are minimal or manageable, and redevelopment can take place. Once off the regulatory hook, property redevelopment can proceed without environmental problems. The following is the ERMI formula for success:

X-Y=Z

Where:

X = Fair Market Value, as if clean.

Y = Cost of Environmental Risk.

Z = Reasonable Sales Price.

At sites with environmental concerns, a precise Y factor is typically unknown, which prevents buyers and sellers from reaching an agreement. ERMI can provide the comprehensive services necessary to calculate X, Y, and Z.