The Keys to Unlocking Lender Business
Phase I professionals need to work diligently to get their names on the "list"
- By Dianne Crocker
- Aug 26, 2008
It's no secret that Phase I professionals operate in an extremely competitive environment. The Phase I environmental site assessment industry is price sensitive, and many consultants report regularly losing jobs to under-qualified, low-cost bidders. Results from a survey of lenders* show that price is not the only consideration — in fact it's way down on the list!
Over 75 percent of the more than 200 lenders who responded to the lender survey ranked product quality, responsiveness, experience, and turnaround time as very important. Price ranked eighth out of twelve possible considerations. Qualifications are extremely important, given that 90 percent require consultants to demonstrate adherence to AAI's [All Appropriate Inquiries] professional qualifications.
Most banks use a multi-tiered process to select consultants. Ed Amato, the environmental officer for Liberty Bank, is one of many lenders who begin with a pre-screened list.
How does a consultant get on that list? “First, we look for a formal request from the consultant wishing to be added, along with a summary of credentials, background on the firm, liability coverage information, and a sample of their work," Amato explains. "We then review the information and run it by one of several environmental attorneys we use -- preferably one who hasn't worked with the consultant to ensure an objective review.”
Amato says the borrower is usually the one who hires the consultant based on the bank's recommendations. He says the final choice usually comes down to geographic proximity and cost.
Like Liberty Bank, SunTrust Bank has an environmental consultant registry. Decision makers there require similar documents from a candidate as well as a copy of its business license, a copy of professional engineer's or professional geologist's licenses/certifications, references, and other background information, says Derek Pollard, first vice president and commercial real estate credit policy officer with SunTrust. “Based on that and other information procured by bank personnel, our Real Estate Valuation Services group approves or disapproves the consultant. In addition, we rate each ESA [environmental site assessment] and review each consultant based on average scores throughout the year. Any consultant deemed unsatisfactory is removed from the registry, which is updated annually.”
John Rybak, an environmental risk manager with BB&T, says getting on his bank's list comes down to: reliability, qualifications, geographical proximity, and cost. "While it is lower on the list, we do scrutinize cost heavily,” Rybak says.
To build a solid reputation, an environmental professional should train, network, and communicate.
Train. Academic training typically falls short of training recent graduates to conduct Phase Is. For that, they need practical, hands-on experience and guidance from senior staff, especially during fieldwork. Because the Phase I industry is ever-changing, it is important for seasoned professionals—not just newbies—to continue their education. To stay abreast of market trends, new technical issues like AAI and vapor intrusion, and new technology like report-writing platforms, every EP should read trade publications along with the business pages. Talking to peers, especially at industry conferences, is invaluable, as is joining professional associations.
Network. Now that the economy has slowed, and there has been a flight to quality, it is an ideal time to build relationships with lenders. Rybak says environmental professionals who provide an excellent product get his attention. “We see thousands of reports a year. When we see something excellent, we share it within our department.” While face-to-face contact is important, Rybak says he prefers meeting consultants at industry conferences, not at the office.
Communicate. Consultants often express frustration with potential clients, but just as often, those clients say that EPs don't listen to their objectives. Communicating with clients at regular intervals shows you're thinking of their best interests. Rather than push product, add value. Educate potential clients about what constitutes a good report. Once they understand, they won't be so quick to choose the cheapest provider.
The lender survey corroborates what successful consultants have known all along: the EP who conducts due diligence quickly and effectively will have a loyal client for years to come. According to hundreds of lenders, adding value is the way to go. Cheap prices may win a few bids, but lenders are more interested in professionalism and product quality. These are the real keys to lasting success.
* Environmental Data Resource's 2007 Environmental Due Diligence Best Practice Survey of Commercial Real Estate Lenders
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Dianne Crocker is senior economist and managing director of EDR's Market Research Group. With 15 years of experience in the environmental industry, Crocker provides strategic data and analysis on environmental due diligence trends to environmental consultants, lenders, corporations, and other parties involved in commercial real estate transactions.