1. Environmental Insurance: Strategic Considerations NAREIM Architectural & Engineering Council Meeting Las Colinas, TX September 26, 2012 Peter A. Nyquist Alston & Bird LLP 333 S. Hope St., 16 th Floor Los Angeles, CA 90071 (213) 576-1000 pete.nyquist@alston.com

2. Topics  Managing Environmental Risk  Pros and Limitations of Environmental Insurance  Key Policy Terms and Endorsements

3. Managing Environmental Risk  Categories of Risk  Identifying & Quantifying Risk  Allocating & Mitigating Risk  PSA  Environmental Matters/Indemnity Agreement  Holdbacks  Environmental Insurance

4. Does Environmental Insurance “Fit Your Deal?”  The Good  Can substantially bracket and/or mitigate residual risk  Favorable insurance market  Cons  No policy is perfect  Time and transaction costs  Uncertainties associated with future claims

5. Key Policy Terms & Endorsements  “Nuts and Bolts”  Premium, Term, Policy Limits and SIR  Known Conditions  Excluded Contaminants/Pollutants  Disclosed Documents and Agreements  Clean-up Triggers  Non-Owned Disposal Sites  Business Interruption  Other interested parties (e.g., lender) as Additional Insured  Renewability  Common Exclusions

6. Questions?

7. Representative Project: Background  Client acquired 50+ acre retail center in prime SoCal location  Several adjacent, undeveloped parcels entitled for additional retail/commercial use  Option on a third contiguous parcel of undeveloped property  Brownfield Success Story  Decades of heavy industrial use, aerospace and chemical manufacturing  PCE/TCE plume extending off-site  Pesticides and metals are present in soils at the undeveloped parcels  Phase I open for business in 2009  Extensive/Ongoing Remediation  Shallow soil closure: vapor barriers, deed restricted, asphalt cap (parking)  Ongoing long-term pump and treatment (by former operator RP)

8. Representative Project: Situation  Environmental Agreement assigned to Buyer  Groundwater: broad indemnities in favor of Buyer  Soils: indemnities “sunsetting” at/near time of acquisition  Existing Environmental Policies for developed parcels and 2 undeveloped parcels  No coverage for option parcels  Proposed change in use for option parcels, with Amended RAP  Required agency approval  Additional groundwater assessment and/or remedial requirements?

9. Representative Project: Key Issues  Existing coverage on certain parcels to expire in 5 years  New policy or cancel/re-write?  Insurer had adopted new PARL form with new definitions  How to preserve legacy coverage and ensure prospective coverage?  Known conditions and disclosures  Seeking to maximize potential coverage for groundwater conditions  Sequencing policy negotiations with ongoing developments at site  Government Mandated Trigger  Existing policy required exercise of rights under Environmental Agreement  Timing and Costs  Hard deadline for submittal of Amended RAP  Transaction costs and refund/commissions

10. Discussion & Questions?