PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
MEMORANDUM
I. EXECUTIVE SUMMARY
Calderwood & Harkness LLP ("C&H") was engaged by Crestline Packaging Solutions LLC ("Crestline" or "CPS") and its sponsor, Pinnacle River Capital Partners, LP ("Pinnacle River"), to review and analyze the Phase I Environmental Site Assessments (the "Phase I ESAs" or "Reports") prepared by Clearfield Environmental Consultants, Inc. ("Clearfield") for all eleven (11) outpatient clinic locations operated by Lakewood Regional Health Partners, LLC ("LRHP") in connection with the proposed acquisition by Crestline of substantially all assets of LRHP pursuant to the Asset Purchase Agreement (the "APA"), presently in final form and targeted for execution on or about June 16, 2025.
Clearfield prepared individual Phase I ESAs for each of the eleven subject sites in accordance with ASTM International Standard E1527-21, Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process ("ASTM E1527-21"), which is the current standard recognized by the United States Environmental Protection Agency ("EPA") for satisfying the "All Appropriate Inquiries" requirement under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq., and the implementing regulations at 40 C.F.R. Part 312. The Reports were completed between April 14, 2025 and May 22, 2025, with site reconnaissance visits conducted at all eleven locations during that same period.
Based on our review of the Phase I ESAs, together with the supplementary documentation described in Section II.C below, we report the following top-level findings across the portfolio:
• Recognized Environmental Conditions ("RECs"): One (1) site — the Rochester Main facility at 450 East Ridge Road, Rochester, NY 14621 — was identified by Clearfield as presenting a REC, specifically relating to the documented historical presence of a 1,000-gallon underground storage tank ("UST") formerly used for heating oil on the western portion of the parcel, for which no closure documentation or soil confirmation sampling records could be located.
• Controlled Recognized Environmental Conditions ("CRECs"): No CRECs were identified at any of the eleven sites.
• Historical Recognized Environmental Conditions ("HRECs"): One (1) site — the Syracuse facility at 1820 South Salina Street, Syracuse, NY 13205 — was identified as having an HREC relating to a historical petroleum spill on an adjacent parcel (NYS Spill No. 0406721), which was investigated and closed by the New York State Department of Environmental Conservation ("NYS DEC") in 2009 with no further action required.
• De Minimis Conditions: Minor de minimis conditions were noted at six (6) sites, consisting primarily of routine observations such as minor staining on pavement near emergency generator installations, isolated instances of minor container labeling deficiencies in medical waste storage areas, and the presence of presumed asbestos-containing floor tiles in non-friable condition in older portions of three facilities. None of these conditions rises to the level of a REC.
• Sites with No Identified Conditions: Four (4) sites — Henrietta, Utica, Wilkes-Barre, and Towanda — were assessed by Clearfield as having no RECs, CRECs, HRECs, or notable de minimis conditions.
Of the eleven LRHP clinic locations, two (2) properties are owned in fee simple by LRHP — the Rochester Main facility (appraised value: $6,900,000) and the Syracuse facility (appraised value: $4,900,000) — with an aggregate appraised value of $11,800,000. The remaining nine (9) properties are leased from third-party landlords. Particular emphasis has been placed in our analysis on the two owned properties, as Crestline will take title to the fee simple interests in these parcels through the APA, thereby assuming direct liability exposure as a property owner under CERCLA, New York Environmental Conservation Law ("ECL"), and other applicable environmental statutes. The presence of a REC at the Rochester Main facility — the higher-valued of the two owned parcels — warrants further investigation, as discussed in detail in Section IV.A and Section IX.A below.
We recommend that Crestline authorize Clearfield to conduct a Phase II Environmental Site Assessment at the Rochester Main facility, consisting of a limited subsurface investigation targeting the area of the former UST, to evaluate whether a release has occurred and, if so, the nature and extent of any contamination. The estimated cost of this Phase II investigation is $18,000 to $32,000, and Clearfield has indicated it can complete the field work and deliver a final report within approximately three to four weeks of authorization, which would allow completion prior to the Estimated Closing Date of August 15, 2025. We further recommend that the environmental representations and warranties in the APA be classified as Fundamental Representations with a 36-month survival period, and that the parties consider the advisability of a standalone pollution legal liability insurance policy for the Rochester Main property.
The balance of this memorandum sets forth our detailed findings, analysis, and recommendations.
II. SCOPE AND METHODOLOGY
A. Engagement of Clearfield Environmental Consultants, Inc.
Clearfield Environmental Consultants, Inc., a New York environmental consulting firm with offices at 225 West Jefferson Street, Suite 400, Syracuse, NY 13202, was engaged by Crestline at C&H's direction to conduct Phase I ESAs on all eleven LRHP clinic locations. Clearfield is a nationally recognized environmental consulting firm with extensive experience in due diligence assessments for healthcare facility transactions. The engagement letter, dated March 28, 2025, was executed by Patricia Hsu on behalf of Crestline and by Robert M. Clearfield, P.E., President, on behalf of Clearfield.
Each of the eleven Phase I ESA reports is addressed to Crestline Packaging Solutions LLC and Calderwood & Harkness LLP as reliance parties. In addition, and in accordance with the requirements of Ironclad National Bank ("Ironclad") as administrative agent under the $84,000,000 Incremental Term Loan being provided to finance a portion of the acquisition, Ironclad National Bank and its successors and assigns were also named as authorized reliance parties in each Report. The inclusion of Ironclad as a reliance party was confirmed by Clearfield in a supplemental reliance letter dated May 28, 2025, a copy of which has been provided to Ironclad's counsel at Whitfield & Associates LLP. This naming satisfies the lender's requirement under Section 6.01(m) of the Credit Agreement for delivery of environmental assessment reports upon which the lender may rely.
Clearfield assigned qualified environmental professionals ("QEPs") — as that term is defined under ASTM E1527-21 and 40 C.F.R. § 312.10 — to each Phase I ESA. The lead QEP for the engagement was Sarah J. Pennington, P.G., a licensed professional geologist in the States of New York and Pennsylvania, with project management support from Thomas R. Keating, P.E. A full listing of the QEP signatories for each Report is provided in Exhibit C.
B. ASTM E1527-21 Compliance
We have confirmed, through our review of each Phase I ESA report, that Clearfield conducted each assessment in compliance with the requirements of ASTM E1527-21. Each Report contains the required declarations by the QEP signatory that the assessment was conducted in conformance with the scope and limitations of the Standard. Accordingly, the Reports satisfy the "All Appropriate Inquiries" standard established under 40 C.F.R. Part 312, which is required for Crestline to avail itself of the CERCLA innocent landowner defense (42 U.S.C. § 9601(35)(B)), the contiguous property owner defense (42 U.S.C. § 9607(q)), and — most relevant to this transaction — the bona fide prospective purchaser defense (42 U.S.C. § 9607(r)).
The scope of work performed by Clearfield at each site included the following components, consistent with ASTM E1527-21:
• Records Review: Clearfield obtained and reviewed federal, state, tribal, and local environmental database reports from Penrose Solutions ("EDR") for each site. The database searches covered the standard search radii specified in ASTM E1527-21 (summarized in Exhibit B), including the NPL (National Priorities List), CERCLIS/SEMS (Superfund Enterprise Management System), RCRA (Resource Conservation and Recovery Act) treatment, storage, and disposal facilities and generators, ERNS (Emergency Response Notification System), and state-equivalent databases including the NYS Spills Database, NYS Bulk Storage Databases (PBS and Ridgeway Enterprises), PA DEP eFACTS, and PA Storage Tank Database.
• Historical Use Review: Clearfield reviewed Trelwick fire insurance maps (where available), historical aerial photographs (dating from 1938 to present for New York sites and from 1940 to present for Pennsylvania sites), city and cross-reference directories, building department records, and other historical source materials to identify past uses of each subject property and surrounding areas that may have involved the use, storage, treatment, or disposal of hazardous substances or petroleum products.
• Site Reconnaissance: Clearfield environmental professionals conducted physical inspections of each site and visually accessible portions of adjoining properties. Inspections included interior and exterior observations of each facility, parking areas, loading docks, waste storage areas, mechanical rooms, generator installations, and stormwater management features.
• Interviews: Clearfield conducted interviews with LRHP's designated representative, Gretchen Unger, Chief Operating Officer, who served as the principal respondent for the ASTM E1527-21 "User Questionnaire" at all eleven sites. In addition, Clearfield interviewed on-site facility managers at each location, as well as representatives of local fire departments, health departments, and building code enforcement agencies where relevant. For the two owned properties, Clearfield also reviewed title information and interviewed representatives of the respective municipal planning and zoning offices.
• Evaluation of Adjoining Properties: Consistent with ASTM E1527-21, Clearfield assessed the potential for environmental conditions on adjoining and nearby properties to affect the subject properties through subsurface migration or other pathways.
C. Documents Reviewed
In addition to the eleven Phase I ESA reports prepared by Clearfield, C&H reviewed the following supplementary documents in the preparation of this memorandum:
Phase I ESA Reports:
1. Clearfield Report No. CE-2025-0411, Rochester Main, dated May 8, 2025
2. Clearfield Report No. CE-2025-0412, Brighton, dated May 5, 2025
3. Clearfield Report No. CE-2025-0413, Henrietta, dated May 6, 2025
4. Clearfield Report No. CE-2025-0414, Syracuse, dated May 12, 2025
5. Clearfield Report No. CE-2025-0415, Utica, dated May 9, 2025
6. Clearfield Report No. CE-2025-0416, Binghamtonhamton, dated May 14, 2025
7. Clearfield Report No. CE-2025-0417, Ithaca, dated May 13, 2025
8. Clearfield Report No. CE-2025-0418, Albany, dated May 15, 2025
9. Clearfield Report No. CE-2025-0419, Scranton, dated May 19, 2025
10. Clearfield Report No. CE-2025-0420, Wilkes-Barre, dated May 20, 2025
11. Clearfield Report No. CE-2025-0421, Towanda, dated May 22, 2025
Supplementary Documents:
• Lease agreements for the nine leased properties, together with all amendments and estoppel certificates delivered in connection with the transaction
• Property deeds and title commitment reports for the Rochester Main and Syracuse owned properties
• LRHP's internal environmental compliance files, as produced in the electronic data room (Folders 7.1 through 7.14)
• LRHP's OSHA 300 Logs and related safety records for calendar years 2020 through 2024
• Medical waste management contracts between LRHP and Strathmore Health IT (Contract No. SES-NY-2022-4410, effective January 1, 2023, covering all eight New York locations) and Pinnacle Systems (Contract No. CH-PA-2023-0187, effective April 1, 2023, covering all three Pennsylvania locations)
• Hazardous materials inventories maintained by LRHP's facilities management department, current as of March 2025
• LRHP's EPA hazardous waste generator identification numbers (EPA IDs) for each facility
• Emergency generator maintenance records and fuel delivery invoices
• Underground storage tank registration records (Rochester Main — historical records from Monroe County)
• Prior environmental reports and assessments, including a 2017 Phase I ESA conducted by Apex Environmental Group for the Syracuse property in connection with LRHP's original acquisition
• Imaging equipment lease schedules with Marlowe Asset Management Medical Equipment Finance, LLC
• Insurance certificates for general liability and environmental coverage maintained by LRHP
D. Applicable Environmental Laws and Regulations
The environmental regulatory framework applicable to the LRHP portfolio spans federal, New York State, and Pennsylvania statutes and regulations. A comprehensive reference list with full citations is provided in Exhibit D. The principal laws and regulations considered in our analysis include the following:
Federal:
• Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601–9675, and the National Contingency Plan, 40 C.F.R. Part 300
• Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. §§ 6901–6992k, and implementing regulations at 40 C.F.R. Parts 260–282
• Clean Water Act ("CWA"), 33 U.S.C. §§ 1251–1387
• Clean Air Act ("CAA"), 42 U.S.C. §§ 7401–7671q
• Toxic Substances Control Act ("TSCA"), 15 U.S.C. §§ 2601–2697
• Emergency Planning and Community Right-to-Know Act ("EPCRA"), 42 U.S.C. §§ 11001–11050
• Safe Drinking Water Act ("SDWA"), 42 U.S.C. §§ 300f–300j-27
• EPA Hazardous Waste Pharmaceuticals Rule, 40 C.F.R. Part 266, Subpart P
• Asbestos Hazard Emergency Response Act ("AHERA"), 15 U.S.C. §§ 2641–2656
• National Emission Standards for Hazardous Air Pollutants ("NESHAP") for Asbestos, 40 C.F.R. Part 61, Subpart M
• Spill Prevention, Control, and Countermeasure ("SPCC") Rule, 40 C.F.R. Part 112
New York:
• Environmental Conservation Law ("ECL"), Article 27, Title 13 (Inactive Hazardous Waste Disposal Sites)
• 6 NYCRR Part 375 (Environmental Remediation Programs)
• New York Brownfield Cleanup Program, ECL Article 27, Title 14
• NYS DEC Spills Database and reporting requirements under ECL § 17-0807 and Navigation Law § 175
• NYS Petroleum Bulk Storage Regulations, 6 NYCRR Parts 612–614
• NYS Chemical Bulk Storage Regulations, 6 NYCRR Parts 595–599
• NYS Regulated Medical Waste Regulations, 6 NYCRR Part 360
• New York Industrial Code Rule 56 (Asbestos)
Pennsylvania:
• Land Recycling and Environmental Remediation Standards Act ("Act 2"), 35 P.S. §§ 6026.101–6026.908
• Storage Tank and Spill Prevention Act ("Act 32"), 35 P.S. §§ 6021.101–6021.2104
• Hazardous Sites Cleanup Act ("HSCA"), 35 P.S. §§ 6020.101–6020.1305
• PA Solid Waste Management Act, 35 P.S. §§ 6018.101–6018.1003
• PA Infectious and Chemotherapeutic Waste Regulations, 25 Pa. Code Chapters 271–285
• PA Air Pollution Control Act, 35 P.S. §§ 4001–4015
• PA Clean Streams Law, 35 P.S. §§ 691.1–691.1001
Healthcare-Specific:
• Medical waste regulations under NY 6 NYCRR Part 360 and PA 25 Pa. Code Chapters 271–285
• EPA Hazardous Waste Pharmaceuticals Rule, 40 C.F.R. Part 266, Subpart P (effective August 21, 2019)
• DEA regulations governing disposal of controlled substances, 21 C.F.R. Part 1317
E. Limitations and Qualifications
The following limitations and qualifications apply to this memorandum and the underlying Phase I ESAs:
Phase I ESAs conducted in accordance with ASTM E1527-21 are designed to identify RECs through non-invasive means. They do not include sampling, testing, or analysis of soil, groundwater, surface water, sediment, air, or building materials. The presence or absence of actual contamination can only be confirmed through Phase II investigation (subsurface sampling and laboratory analysis). Accordingly, the identification of a REC indicates the potential for contamination, not a confirmed condition.
C&H's review is a legal analysis of Clearfield's findings and their implications for the proposed transaction. C&H has not independently verified the environmental, geological, engineering, or scientific conclusions reached by Clearfield, nor has C&H conducted any independent site inspections or environmental testing. We have relied upon the accuracy and completeness of the information provided in Clearfield's Reports and the supplementary documents identified in Section II.C above.
The Phase I ESAs reflect conditions as of the dates of the respective site visits (ranging from April 14, 2025 to May 16, 2025). No assurance is given that conditions have not changed since those dates. Under ASTM E1527-21, a Phase I ESA is generally considered current for a period of 180 days following the date of the report, provided that certain components (including the site visit and interviews) are updated if more than 180 days old at the time of the property transaction.
Clearfield's database searches were obtained from EDR, which compiles data from federal, state, and local regulatory databases. The accuracy and completeness of those databases is dependent upon the reporting practices of the respective governmental agencies and is not independently verified by Clearfield or C&H.
This memorandum does not constitute an opinion on the compliance of any LRHP facility with any specific environmental law or regulation. Regulatory compliance audits are beyond the scope of a Phase I ESA under ASTM E1527-21. Our observations regarding medical waste management, pharmaceutical waste compliance, and other regulatory matters are based solely on review of documents produced by LRHP and observations noted in the Phase I ESAs, and should not be construed as comprehensive compliance assessments.
III. OVERVIEW OF SUBJECT PROPERTIES
A. Property Classification Table
The following table summarizes the eleven LRHP clinic locations that are the subject of this environmental due diligence review:
Owned Properties: Two properties — Rochester Main and Syracuse — are owned in fee simple by LRHP. Under the APA, Crestline will acquire title to these properties through the conveyance of warranty deeds. The aggregate appraised value of the two owned properties is $11,800,000 (Rochester Main at $6,900,000 and Syracuse at $4,900,000), as determined by independent appraisals conducted by Monroe County Appraisal Associates and Onondaga Property Consultants, respectively. Title insurance commitments for both properties have been issued by First Allegiance Title Insurance Company.
Leased Properties: The remaining nine properties are leased from third-party landlords under commercial lease agreements of varying terms. The aggregate annual base rent for the nine leased properties is approximately $2,740,000. Under the APA, Crestline will assume these leases through assignment and assumption agreements, subject to landlord consent where required.
B. General Characteristics
All eleven sites are outpatient multi-specialty clinic facilities providing primary care, internal medicine, family practice, and certain specialty services. None of the facilities involves heavy industrial use, manufacturing operations, or activities that would typically be associated with significant environmental contamination risks. However, as healthcare facilities, all sites share certain common environmental characteristics that are relevant to this assessment:
Medical Waste Generation: Each facility generates regulated medical waste (also referred to as biohazardous or infectious waste), including sharps, blood-soaked materials, pathological waste, and microbiological waste. Medical waste is segregated, containerized, and stored on-site in designated areas pending pick-up by contracted waste haulers. The New York facilities are serviced by Strathmore Health IT under Contract No. SES-NY-2022-4410, and the Pennsylvania facilities are serviced by Pinnacle Systems under Contract No. CH-PA-2023-0187.
Pharmaceutical Waste: Each facility generates pharmaceutical waste, including expired or unused medications, some of which may constitute hazardous waste under RCRA (e.g., certain chemotherapy agents, nicotine-containing products, and P-listed and U-listed pharmaceuticals). LRHP has represented that it manages pharmaceutical waste under the EPA Hazardous Waste Pharmaceuticals Rule (40 C.F.R. Part 266, Subpart P), which became effective on August 21, 2019, and that all facilities operate as either Very Small Quantity Generators ("VSQG") or Small Quantity Generators ("SQG") of hazardous waste.
Diagnostic Imaging Equipment: Several facilities house diagnostic imaging equipment of varying types. The Rochester Main facility operates a magnetic resonance imaging ("MRI") unit (leased from Marlowe Asset Management Medical Equipment Finance, LLC under Lease Schedule VML-2023-1140), the Syracuse facility operates a computed tomography ("CT") scanner (leased under Lease Schedule VML-2023-1141), and the Albany facility houses an ultrasound unit (leased under Lease Schedule VML-2024-0219). The aggregate outstanding lease balance for this imaging equipment is $2,870,000. Other facilities maintain standard X-ray equipment. Environmental considerations associated with imaging equipment include the use and disposal of chemical developers and fixers for film-based radiography (though most facilities have transitioned to digital imaging), contrast media agents (including barium sulfate and iodinated contrast agents), and the presence of cryogenic cooling systems (helium) for the MRI unit at Rochester Main.
General Building Operations: Common building operational features across the portfolio include HVAC systems (utilizing various refrigerants), emergency generators (diesel-fueled at seven sites; natural gas at four sites), cleaning and maintenance chemicals, and general office operations. Emergency generators range in size from 30 kW (Towanda) to 250 kW (Rochester Main) and are used to maintain essential operations during power outages, as required for healthcare facilities.
IV. FINDINGS — OWNED PROPERTIES
A. Rochester Main Facility — 450 East Ridge Road, Rochester, NY 14621
1. Site History and Current Use
The Rochester Main facility is located at 450 East Ridge Road in the Town of Irondequoit, Monroe County, New York. The property consists of a two-story, approximately 42,500 square-foot masonry and steel-framed commercial building situated on a 2.8-acre parcel. The building was originally constructed in 1968 and has been subject to several renovations, including a significant interior build-out in 2012 when LRHP acquired the property and began outpatient clinic operations.
Clearfield's historical use review, based on Trelwick fire insurance maps (1929, 1949, 1969 editions), aerial photographs (1951, 1966, 1971, 1980, 1991, 2003, 2012, 2020), and city directory research, revealed the following historical sequence of uses:
• Pre-1960: The parcel was undeveloped and appeared to be part of a larger agricultural tract. No structures were identified on the property in pre-1960 aerial imagery.
• 1968–1985: The current building was constructed in approximately 1968 for use as a general commercial office building. The original occupant was East Ridge Medical Associates, P.C., a physician group practice. Building department records indicate that the original construction included a 1,000-gallon underground storage tank ("UST") for No. 2 heating oil, installed on the western side of the building.
• 1985–2004: The property continued in use as a medical office building. Various tenant physicians and medical practices occupied portions of the building. City directory listings indicate occupants including East Ridge Medical Associates (through approximately 1992), Greater Rochester Physical Therapy Associates (1988–2001), and Monroe County Women's Health Center (1993–2004).
• 2004–2012: The building was partially vacant during portions of this period. It appears to have been used intermittently for medical office and general commercial office purposes. The property was acquired by 450 East Ridge Associates, LLC in 2006, which undertook limited renovations before selling to LRHP in 2012.
• 2012–Present: LRHP acquired the property in 2012 and conducted a substantial interior renovation to establish its principal office and largest clinic. The renovation included modernization of mechanical systems (conversion from oil-fired to natural gas heating), installation of medical imaging suites, and build-out of examination rooms and administrative offices.
The current use of the Rochester Main facility encompasses LRHP's headquarters and its largest outpatient clinic operation, with approximately thirty-two examination rooms, an MRI suite, X-ray facilities, a phlebotomy laboratory, physical therapy treatment areas, and administrative offices accommodating approximately 145 employees.
2. Environmental Database Review
Clearfield's review of federal and state environmental databases yielded the following results for the Rochester Main property and surrounding area:
Subject Property Listings:
• The subject property was identified in the NYS DEC Petroleum Bulk Storage ("PBS") database under Facility No. 2-600215, with a notation of one (1) 1,000-gallon underground heating oil tank. The registration status is listed as "closed — tank removed or abandoned." However, Clearfield was unable to obtain closure documentation, tank removal records, or soil confirmation sampling results from either the NYS DEC, Monroe County, or LRHP's records. Gretchen Unger (LRHP COO) reported in the User Questionnaire response that she was aware that the building had been converted from oil heat to natural gas prior to LRHP's acquisition in 2012, but had no knowledge of whether the former UST was physically removed or abandoned in place.
• The property was not identified in the CERCLIS/SEMS, NPL, RCRA TSD, or ERNS databases. The property appears in the RCRA small quantity generator database under EPA ID NYD987654321 (LRHP's generator identification for hazardous waste), with no violations noted.
Adjoining and Nearby Property Listings:
• A former gasoline service station located approximately 0.3 miles east of the subject property at 520 East Ridge Road was identified in the NYS DEC Spills Database (Spill No. 0812449) with a petroleum release reported in 2008. The spill was classified as a "Class 02" (minor) release and was closed in 2011 following remedial activities. Based on the distance and the documented limited extent of contamination, Clearfield concluded that this listing does not represent a REC for the subject property.
• A dry cleaning establishment located approximately 0.25 miles south-southwest of the subject property at 1015 Titus Avenue was identified in the NYS DEC inactive hazardous waste disposal site database (Site No. 828089) as a Class 2 site. Clearfield noted that this site is currently undergoing remedial investigation under the NYS DEC Environmental Remediation Program; however, based on the distance, the intervening topography, and the documented groundwater flow direction (to the north-northeast), Clearfield concluded that this listing does not currently represent a REC for the subject property.
• No other significant database listings were identified for properties within the applicable ASTM search radii.
3. Recognized Environmental Conditions
Clearfield identified one (1) REC at the Rochester Main property:
REC — Former Underground Storage Tank (UST): The documented historical presence of a 1,000-gallon underground heating oil tank on the western portion of the parcel, for which no closure documentation, tank removal records, or soil confirmation sampling results could be located, constitutes a REC under ASTM E1527-21. The UST was registered in the NYS DEC PBS database and is listed with a "closed" status, but the basis for the closure designation is unclear. The absence of documentation confirming proper decommissioning of the UST (whether by physical removal or abandonment in place with appropriate soil sampling) means that the potential for a historical petroleum release from this tank cannot be excluded.
During the site reconnaissance, Clearfield's environmental professional observed no surface evidence of the UST or any associated piping, fill ports, or vent pipes on the western side of the building. However, significant landscaping and paving in that area may obscure subsurface features. No staining, stressed vegetation, or other visual indicators of a petroleum release were observed at the surface.
This REC is the most significant environmental finding across the entire portfolio and is the primary basis for our recommendation that a Phase II ESA be conducted, as further discussed in Section IX.A.
4. Controlled and Historical RECs
Clearfield did not identify any CRECs or HRECs at the Rochester Main property.
5. De Minimis and Other Conditions
Clearfield noted the following de minimis conditions at the Rochester Main facility:
• Minor pavement staining: Light petroleum staining was observed on the asphalt pavement in the vicinity of the emergency generator (a 250 kW diesel-fueled Camberwell Holdings unit located on a concrete pad on the northeast side of the building). The staining appeared consistent with minor drips during generator maintenance and fuel deliveries. The area is limited (approximately 3 feet by 4 feet) and does not indicate a reportable release. Clearfield recommended improved housekeeping practices and the installation of secondary containment or a drip pan at the fuel fill connection.
• Presumed asbestos-containing materials: The 1968-vintage portion of the building (approximately 22,000 square feet) contains 12-inch-by-12-inch vinyl floor tiles and associated mastic in several corridors and mechanical rooms that are presumed to contain asbestos based on their age, color, and style. The tiles observed were in non-friable, intact condition and do not pose an immediate health risk. However, if renovations or demolition affecting these materials are contemplated, an asbestos survey conducted by a New York-certified asbestos inspector would be required prior to disturbance, in accordance with New York Industrial Code Rule 56 and the NESHAP regulations at 40 C.F.R. Part 61, Subpart M.
• Lead-based paint: Given the 1968 construction date of the original building, lead-based paint may be present on interior and exterior painted surfaces. Clearfield's scope did not include lead paint testing. No peeling or deteriorated paint was observed during the site visit. Lead-based paint testing is recommended if renovations involving paint disturbance are anticipated.
None of these de minimis conditions rises to the level of a REC.
6. Medical/Pharmaceutical Waste Compliance
Based on our review of documentation produced by LRHP and observations noted in the Phase I ESA, the Rochester Main facility's medical waste management program appears to be generally well-organized, with the following observations:
• Regulated medical waste is segregated into sharps containers, red biohazard bags, and other appropriate containers throughout the clinic. A centralized medical waste storage area is located in a secured, ventilated room on the building's ground floor, separate from general refuse.
• Medical waste pick-up is conducted by Strathmore Health IT on a twice-weekly basis. Manifests reviewed for calendar year 2024 and the first quarter of 2025 appear to be complete and properly executed.
• LRHP maintains annual bloodborne pathogen and medical waste training records for clinical and support staff. We reviewed training rosters for 2023 and 2024, which appear substantially complete.
• Pharmaceutical waste at this location is managed through a dedicated pharmaceutical waste reverse distribution program operated by Stericycle. LRHP represents that the Rochester Main facility is classified as a Small Quantity Generator ("SQG") of hazardous waste (EPA ID NYD987654321), generating between 220 and 2,200 pounds of hazardous waste per calendar month. We reviewed hazardous waste manifests for 2023 and 2024, which appear complete. The most recent biennial report (for reporting year 2023) was filed with the NYS DEC.
• One area of potential concern: Clearfield's site reconnaissance noted that the pharmaceutical waste accumulation area in the Rochester Main facility's pharmacy did not display a hazardous waste accumulation start date on one of two 55-gallon pharmaceutical waste containers observed during the site visit (April 22, 2025). This is a minor regulatory housekeeping deficiency under 40 C.F.R. § 262.15(a)(5) (the container labeling requirement for satellite accumulation areas) and does not constitute a material compliance violation, but should be addressed through staff retraining.
7. Assessment Conclusion (Rochester Main)
Based on its assessment, Clearfield concluded that one REC was identified at the Rochester Main property — the undocumented former UST on the western portion of the parcel — and recommended a Phase II ESA consisting of geophysical survey (ground-penetrating radar) and targeted subsurface soil and groundwater sampling in the area of the former UST to evaluate whether a release has occurred. No CRECs or HRECs were identified. Several de minimis conditions were noted, none of which rises to the level of a REC. Clearfield assigned an overall risk rating of Medium to this property.
C&H concurs with Clearfield's assessment and recommendations. The Rochester Main property is the higher-valued of the two owned properties ($6,900,000 appraised value) and the centerpiece of LRHP's operations. The UST-related REC warrants Phase II investigation prior to Closing, as further discussed in Section IX.
B. Syracuse Facility — 1820 South Salina Street, Syracuse, NY 13205
1. Site History and Current Use
The Syracuse facility is located at 1820 South Salina Street in the City of Syracuse, Onondaga County, New York. The property consists of a one-and-one-half story, approximately 28,600 square-foot masonry commercial building situated on a 1.6-acre parcel. The building was originally constructed in 1972 and has undergone moderate renovations, most recently in 2017 when LRHP acquired the property and converted it from general commercial use to an outpatient clinic.
Clearfield's historical use review revealed the following:
• Pre-1970: The parcel was developed with a one-story commercial retail building (a furniture store, per city directory research) from approximately 1955 to 1969. The original structure was demolished in approximately 1970 prior to construction of the current building.
• 1972–1998: The current building was constructed in 1972 for use as a general commercial office building with multiple tenants, primarily medical and professional offices. No industrial or manufacturing uses were identified during this period.
• 1998–2017: The property was used as a branch office for a regional insurance company (Finger Lakes Mutual Insurance Group) from approximately 1998 to 2015. It was partially vacant from 2015 to 2017.
• 2017–Present: LRHP acquired the property and conducted interior renovations, including the installation of a CT scanner suite, examination rooms, and administrative offices. The Syracuse facility currently houses approximately twenty-two examination rooms, a CT imaging suite, X-ray equipment, and laboratory services, with approximately 95 employees.
The building is heated by natural gas; no evidence of oil-fired heating systems was identified. No USTs are registered on the property. The building is served by municipal water and sewer.
As noted in the Executive Summary, the Syracuse facility is the subject of a pending inquiry by the U.S. Department of Health and Human Services Office of Inspector General ("OIG") relating to alleged CPT 99214 upcoding at this location, with estimated exposure in the range of $350,000 to $900,000. This matter is a billing and regulatory compliance issue and does not relate to environmental conditions. It is noted here solely for completeness and cross-referencing purposes; the billing matter is being addressed separately in C&H's regulatory due diligence memorandum dated June 6, 2025.
2. Environmental Database Review
Clearfield's review of federal and state environmental databases yielded the following results for the Syracuse property and surrounding area:
Subject Property Listings:
• The subject property was not identified in any federal or state environmental database, including CERCLIS/SEMS, NPL, RCRA, ERNS, NYS DEC Spills, or NYS Bulk Storage databases. The property does appear in the RCRA very small quantity generator database under EPA ID NYD123456789 (LRHP's Syracuse facility generator identification), with no violations noted.
Adjoining and Nearby Property Listings:
• The most significant nearby listing is NYS DEC Spill No. 0406721, a petroleum release reported in 2004 at a former gasoline service station located on the adjacent parcel immediately to the north of the subject property (1842 South Salina Street). The spill involved a release of gasoline from underground storage tanks that were subsequently removed. The NYS DEC conducted an investigation and oversaw remedial activities, which included excavation and off-site disposal of approximately 180 cubic yards of petroleum-impacted soil and installation of a groundwater monitoring well network. The site was closed by the NYS DEC in January 2009 with a determination that the site met applicable cleanup standards and no further action was required. The DEC's closure letter referenced post-remediation groundwater monitoring results confirming that dissolved-phase petroleum hydrocarbon concentrations were below the NYS DEC TOGS 1.1.1 groundwater quality standards.
• A laundromat located approximately 0.2 miles northwest of the subject property at 1905 South Salina Street was identified in the NYS Bulk Storage database with a chemical bulk storage registration for perchloroethylene ("PCE"). No spills or releases have been reported in connection with this listing. Clearfield noted the registration and considered the potential for vapor intrusion but concluded that the distance and absence of any reported releases render this listing a low-risk condition.
• No other significant database listings were identified within the applicable search radii.
3. Recognized Environmental Conditions
Clearfield did not identify any RECs at the Syracuse property. While the adjacent former gasoline service station is noteworthy, the fact that it was investigated and remediated under NYS DEC oversight and received a formal closure determination in 2009 provides a reasonable basis for concluding that it does not represent an ongoing threat to the subject property. Clearfield classified the adjacent site as an HREC (see Section IV.B.4 below).
4. Controlled and Historical RECs
Clearfield identified one (1) HREC at the Syracuse property:
HREC — Adjacent Former Gasoline Station (NYS DEC Spill No. 0406721): The petroleum release at the former gasoline station on the adjacent parcel to the north (1842 South Salina Street) constitutes a past recognized environmental condition that has been addressed to the satisfaction of the applicable regulatory authority. The NYS DEC issued a formal closure letter in January 2009 based on confirmation that remedial activities achieved applicable cleanup standards. Under ASTM E1527-21, a condition that was formerly a REC but has been addressed to the satisfaction of the applicable regulatory authority and does not require ongoing monitoring or restrictions is classified as an HREC. Because the condition has been resolved, it does not require further action with respect to the subject property. However, the existence of this HREC should be noted in the environmental representations and warranties in the APA and in any disclosure schedules.
5. De Minimis and Other Conditions
Clearfield noted the following de minimis conditions at the Syracuse facility:
• Floor tiles: Vinyl floor tiles (12-inch-by-12-inch) presumed to contain asbestos were observed in the original mechanical room and utility corridor (approximately 1,200 square feet). The tiles were in non-friable, intact condition. The same recommendations noted for the Rochester Main facility apply here (asbestos survey prior to any disturbance).
• Drainage observation: Minor ponding of stormwater was observed in the northwest corner of the parking lot during a period of heavy rainfall on the day of the site visit. This is a stormwater management condition and does not represent a REC. Clearfield recommended that the property owner address the grading/drainage condition to prevent recurring ponding.
Neither of these conditions rises to the level of a REC.
6. Medical/Pharmaceutical Waste Compliance
The Syracuse facility's medical waste management program is consistent with the enterprise-wide program described for the Rochester Main facility, with the following site-specific observations:
• Medical waste is managed under the Stericycle contract with pick-up occurring twice weekly. Manifests reviewed for 2024 appear complete.
• Pharmaceutical waste management at this location includes the handling and disposal of CT contrast media (iodinated contrast agents). Clearfield observed that used contrast media containers were being managed through the pharmaceutical waste reverse distribution program. Iodinated contrast agents are not classified as RCRA hazardous waste, but are managed as pharmaceutical waste in accordance with LRHP's standard protocols.
• The Syracuse facility is classified as a Very Small Quantity Generator ("VSQG") of hazardous waste, generating fewer than 220 pounds of hazardous waste per calendar month. VSQG manifesting and record-keeping appeared adequate.
• No compliance deficiencies were identified at this location.
7. Assessment Conclusion (Syracuse)
Based on its assessment, Clearfield concluded that no RECs were identified at the Syracuse property. One HREC was identified relating to the adjacent former gasoline station, which has been remediated and closed by the NYS DEC. Minor de minimis conditions were noted. Clearfield assigned an overall risk rating of Low to this property.
C&H concurs with Clearfield's assessment. The absence of RECs at the Syracuse facility, combined with the formal closure of the adjacent petroleum spill by the NYS DEC, supports a favorable environmental conclusion for this property. We recommend that the HREC be disclosed in the APA schedules and that the existence of the adjacent remediated site be noted in the title insurance commitment and any environmental indemnification provisions.
V. FINDINGS — LEASED PROPERTIES (NEW YORK)
A. Brighton Facility — 2100 South Clinton Avenue, Brighton, NY 14618
The Brighton facility is located at 2100 South Clinton Avenue in the Town of Brighton, Monroe County, New York. The property is leased from Brighton Medical Plaza Associates, LLC under a commercial lease agreement dated March 1, 2014, with a current term extending through February 28, 2029, and one five-year renewal option remaining. The landlord is a local real estate investment entity controlled by the Margolis family. Annual base rent is currently $268,800 ($21.00 per square foot for 12,800 square feet). The building was constructed in 1985 as a medical office building and has been in continuous medical/professional office use since that date.
Phase I ESA Findings (Clearfield Report No. CE-2025-0412, May 5, 2025): Clearfield identified no RECs, CRECs, or HRECs at the Brighton facility. The site reconnaissance and records review did not reveal any historical industrial, manufacturing, or other environmental concern uses on the subject property or immediately adjoining parcels.
Environmental Database Results: The subject property was not identified in any federal or state environmental database. No significant listings were identified for adjoining or nearby properties within the applicable ASTM search radii.
Medical/Pharmaceutical Waste Compliance: The Brighton facility is classified as a VSQG of hazardous waste. Medical waste is managed under the Stericycle contract. Clearfield observed that the medical waste storage area was well-organized and properly secured. No compliance deficiencies were noted.
De Minimis Conditions: Clearfield noted minor staining (approximately 2 feet by 2 feet) on the concrete pad adjacent to the facility's emergency generator (a 75 kW diesel Camberwell Holdings unit). The staining was consistent with minor drips during maintenance. This does not constitute a REC.
Lease Environmental Provisions: Section 12.4 of the Brighton lease includes an environmental indemnification provision under which the tenant (LRHP) indemnifies the landlord for environmental conditions caused by tenant's operations, and the landlord indemnifies the tenant for pre-existing environmental conditions and conditions caused by the landlord or other tenants. This allocation is favorable to Crestline as assignee-tenant.
Conclusion: No RECs, CRECs, or HRECs were identified. Clearfield assigned a risk rating of Low. No further investigation is recommended.
B. Henrietta Facility — 975 Jefferson Road, Suite 200, Henrietta, NY 14623
The Henrietta facility occupies the second floor of a two-story commercial office building at 975 Jefferson Road in the Town of Henrietta, Monroe County, New York. The property is leased from Jefferson Commons Realty Corp. under a commercial lease dated June 1, 2016, with a current term extending through May 31, 2028, and two five-year renewal options remaining. Annual base rent is $179,400 ($19.50 per square foot for 9,200 square feet). The building was constructed in 1992 as a multi-tenant professional office building.
Phase I ESA Findings (Clearfield Report No. CE-2025-0413, May 6, 2025): Clearfield identified no RECs, CRECs, HRECs, or de minimis conditions at the Henrietta facility. The property has been in continuous commercial/professional office use since construction. The Henrietta facility is located in a well-established commercial office park with no history of industrial or environmental concern uses.
Environmental Database Results: Neither the subject property nor any adjoining properties were identified in any federal or state environmental database of significance. One property within the 0.5-mile CERCLIS search radius (a former dry cleaning drop-off location at 1020 Jefferson Road) was identified in the NYS DEC Spills Database with a closed minor petroleum spill. Clearfield concluded this listing does not represent a concern for the subject property based on distance, direction, and closure status.