MEMORANDUM
PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
TO: Douglas Fairchild, Responsible Partner, Real Estate Practice Group, Calderwood & Harkness LLP
FROM: Grace Nakamura, Working Associate, Real Estate Practice Group, Calderwood & Harkness LLP
CC: Cynthia Ho, Lead Associate, Real Estate Practice Group, Calderwood & Harkness LLP Sylvia Hartwell, Specialist Partner, Tax Practice Group, Calderwood & Harkness LLP Theresa M. Calloway, General Counsel, Fairwater Real Estate Investment Trust
DATE: December 2, 2025
RE: Environmental Review Memorandum — Phase I Environmental Site Assessment for 1500–1580 Wills Street, Baltimore, MD 21231 (Block 7419, Lots 1–6, Baltimore City) — Harbor Point Development JV, LLC
Matter No.: 1036-00005
I. EXECUTIVE SUMMARY
Calderwood & Harkness LLP ("C&H") has reviewed the Phase I Environmental Site Assessment ("Phase I ESA" or the "Assessment") completed November 25, 2025, by Bayline Environmental Consultants, LLC ("Bayline") for the approximately 8.2-acre waterfront development site located at 1500–1580 Wills Street, Baltimore, Maryland 21231 (Block 7419, Lots 1–6, Baltimore City) (the "Property" or the "Site"). The purpose of this memorandum is to summarize the findings of the Phase I ESA, analyze their legal and transactional implications, and provide recommendations for the deal team and our client in connection with the proposed acquisition and development of the Property.
The Phase I ESA was commissioned in connection with the proposed formation of Harbor Point Development JV, LLC ("HP JV" or the "JV"), a Delaware limited liability company, between Fairwater HP Manager, LLC (a wholly owned subsidiary of Fairwater Real Estate Investment Trust, "Fairwater" or "FREIT") and Prescott HP Investor, LLC (a wholly owned subsidiary of Prescott Capital Partners, LP, "Prescott"). The JV is being formed to develop the "Harbor Point Towers" project — a mixed-use development consisting of two 28-story residential towers comprising approximately 610 residential units and approximately 45,000 square feet of ground-floor retail space. The project represents one of the most significant waterfront development undertakings in Baltimore's Harbor Point district in recent years.
The total project cost is estimated at approximately $576,000,000. The JV's equity capitalization is $240,000,000, with Fairwater contributing 30% ($72,000,000) through Fairwater HP Manager, LLC and Prescott contributing 70% ($168,000,000) through Prescott HP Investor, LLC. The project's construction financing will be provided by a $336,000,000 construction loan facility from Meridian National Bank, N.A. ("Meridian"), priced at Term SOFR plus 275 basis points with a 36-month term and two 6-month extension options.
The land acquisition price from the current owner, Harbor East Land Holdings, LLC ("HELH"), whose sole member is Vincent A. DeLuca, is $54,000,000. The target date for land closing is January 30, 2026. The Purchase and Sale Agreement was initially entered into by Fairwater and is being assigned to the JV in connection with the JV's formation.
Bayline's Phase I ESA identified certain Recognized Environmental Conditions ("RECs"), Controlled Recognized Environmental Conditions ("CRECs"), and Historical Recognized Environmental Conditions ("HRECs") that require careful analysis and, in certain instances, may warrant further investigation through a Phase II Environmental Site Assessment. In summary, the principal environmental concerns identified in the Phase I ESA include: (i) potential soil contamination from historical industrial use of portions of the Site during the early-to-mid twentieth century; (ii) the possible former presence of one or more underground storage tanks ("USTs") on Lots 3 and 4, for which no closure records were located with the Maryland Department of the Environment ("MDE"); and (iii) a potential vapor intrusion pathway warranting further evaluation given the planned residential use.
This memorandum: (a) summarizes the Phase I ESA findings in detail; (b) assesses the implications of those findings for the JV and the JV's members; (c) evaluates the impact of the identified environmental conditions on the Environmental Indemnity Agreement required by Meridian in connection with the construction loan; (d) recommends whether a Phase II Environmental Site Assessment should be commissioned and, if so, its scope; and (e) identifies specific action items and responsible parties for the period leading up to closing. The analysis herein is intended to support the deal team's evaluation of environmental risk in the transaction and to inform discussions with Fairwater's management, Prescott's counsel, and the construction lender.
II. SCOPE OF REVIEW
In preparing this memorandum, C&H has reviewed the following documents and materials:
1. Phase I Environmental Site Assessment Report, Bayline Environmental Consultants, LLC, dated November 25, 2025 (the "Report"), prepared in conformance with ASTM Standard Practice E1527-21, Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process. The Report comprises 147 pages, including appendices, and was prepared under the supervision of Rachel M. Thornberry, P.E., Project Manager, and Dr. Aaron S. Whitfield, P.G., Senior Geologist.
2. Historical Trelwick Fire Insurance Maps and Aerial Photographs reviewed and reproduced by Bayline within the Report, covering the period from approximately 1890 through 2020. These maps and photographs document the evolution of land use on and around the Property over more than a century.
3. Federal, State, and Local Environmental Database Search Results, as compiled by Penrose Solutions ("EDR") and included as Appendix C to the Report. The EDR report, dated November 12, 2025, encompasses all standard federal, state, tribal, and local database searches required under ASTM E1527-21 and the EPA's All Appropriate Inquiries Rule.
4. Baltimore City Department of Public Works Records, including sewer and water infrastructure records, stormwater management records, and historical permitting files related to the Property and adjacent parcels.
5. Maryland Department of the Environment ("MDE") Records, including Voluntary Cleanup Program ("VCP") files, underground storage tank registration and closure records, enforcement action files, and remediation records related to the Property and the broader Harbor Point area.
6. Title Commitment issued December 9, 2025, by Tidewater Insurance Group, Inc., File No. TWG-2025-41097 (the "Title Commitment"), reviewed for cross-reference to any environmental-related title exceptions, environmental liens, or recorded instruments affecting the Property.
7. ALTA/NSPS Land Title Survey delivered December 3, 2025, by Calvert Surveying & Engineering, Inc. (the "Survey"), reviewed for identification of physical features relevant to environmental conditions, including evidence of USTs, monitoring wells, staining, distressed vegetation, and other observable indicators.
8. Draft Environmental Indemnity Agreement prepared by C&H for execution in connection with the Meridian construction loan, circulated internally on November 28, 2025.
Bayline's scope of work, as described in the Report, included the following components consistent with ASTM E1527-21: (i) site reconnaissance conducted on November 15, 2025, by Dr. Whitfield and a field team; (ii) interviews with the current Property owner, Vincent A. DeLuca, conducted on November 7, 2025, and with the site caretaker and part-time property manager, Mr. Dennis Kowalski, conducted during the site reconnaissance; (iii) review of federal, state, and local regulatory database search results within the applicable search radii prescribed by ASTM E1527-21; (iv) review of historical use information, including Trelwick maps, aerial photographs, city directories, and available historical records; and (v) evaluation of adjoining properties within ASTM-prescribed search distances for potential off-site sources of contamination.
Importantly, the Phase I ESA was prepared to satisfy the "All Appropriate Inquiries" ("AAI") standard under Section 101(35)(B) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended ("CERCLA"), 42 U.S.C. § 9601(35)(B), and the EPA's AAI Rule, 40 C.F.R. Part 312. Compliance with the AAI standard is a prerequisite to the JV's potential assertion of the innocent landowner defense (CERCLA § 101(35)), the contiguous property owner defense (CERCLA § 107(q)), or the bona fide prospective purchaser defense (CERCLA § 107(r)) in the event that pre-existing contamination is later identified at the Site. As discussed more fully in Section V.A below, the bona fide prospective purchaser ("BFPP") defense is the defense most likely to be available and relevant to the JV.
It should be noted that C&H's review is a legal analysis of the Phase I ESA findings and does not constitute an independent environmental investigation. C&H has not independently verified Bayline's factual observations, data interpretations, or technical conclusions. Our analysis assumes the accuracy and completeness of the information contained in the Report and the other documents described above.
III. PROPERTY DESCRIPTION
A. Location and Legal Description
The Property is located at 1500–1580 Wills Street, Baltimore, Maryland 21231, within the Harbor Point district of Southeast Baltimore. The Property's tax identification is Block 7419, Lots 1 through 6, as identified in the records of Baltimore City. The assembled parcel encompasses approximately 8.2 acres (approximately 357,192 square feet) of waterfront land situated along the northwest branch of the Patapsco River, within Baltimore's Inner Harbor area.
The Property is currently owned by Harbor East Land Holdings, LLC, a Maryland limited liability company whose sole member is Vincent A. DeLuca. HELH's address of record is c/o 700 Aliceanna Street, Suite 100, Baltimore, Maryland 21202. HELH acquired the various lots comprising the assembled Property through a series of transactions between 2014 and 2019, as reflected in the title records reviewed by Tidewater Insurance Group, Inc. in connection with the Title Commitment.
The Property is bounded generally to the north by Wills Street, to the east by Thames Street and adjacent commercial parcels, to the south by the waterfront and harbor waters, and to the west by additional parcels within the Harbor Point development area. The Property is situated within the Harbor Point Planned Unit Development ("PUD") area, which was approved by the Baltimore City Council pursuant to Ordinance No. 24-0417, dated June 14, 2024, and which governs the zoning, density, and land use parameters applicable to the proposed Harbor Point Towers development.
B. Current Use and Improvements
As documented in the Report, the Property is currently a largely cleared, partially improved former industrial and waterfront property. The Site has been substantially graded and is relatively flat, with an elevation of approximately 8 to 12 feet above mean sea level. The following existing conditions and improvements were observed during Bayline's site reconnaissance on November 15, 2025:
• Surface parking: Approximately 2.4 acres of the Site (primarily on Lots 1 and 2) are currently used as an unpaved, compacted-gravel surface parking area. The parking area is operated under a short-term license agreement and generates nominal revenue for HELH. Chain-link fencing with privacy screening surrounds portions of the parking area.
• Remnant building foundations: Bayline observed remnant concrete foundations and partially demolished structural elements on Lots 3, 4, and 5, consistent with the locations of former industrial buildings identified in historical Trelwick maps. These foundations are partially overgrown with vegetation and appear to have been largely abandoned for at least 15 to 20 years.
• Paved areas and access roads: Portions of the Site (primarily along the northern boundary fronting Wills Street) contain deteriorated asphalt paving and access roads that previously served the industrial operations on the Site.
• Utilities and infrastructure: The Site is served by municipal water and sewer connections, as confirmed by Baltimore City Department of Public Works records. Several abandoned utility conduits and disconnected service connections were observed during the reconnaissance.
• Waterfront/shoreline conditions: The southern boundary of the Property consists of approximately 850 linear feet of waterfront along the harbor. Bayline observed a combination of deteriorated timber bulkhead structures and rip-rap shoreline stabilization along this frontage. The bulkhead structures appear to be original to the early-to-mid twentieth century industrial era and are in poor to fair condition. Portions of the bulkhead show evidence of displacement, deterioration, and tidal erosion. A concrete and timber pier structure extends approximately 120 feet into the harbor from the southeastern corner of the Site; this pier is in poor condition and is not currently in use. The Survey notes the presence of the pier and bulkhead structures and identifies their approximate locations.
• Stormwater management: The Site currently drains via sheet flow and a limited network of storm drains toward the harbor. No formal stormwater management facilities are present on the Site.
No occupied structures or active industrial, commercial, or residential operations were observed on the Property at the time of Bayline's reconnaissance.
C. Historical Use Summary
Bayline's review of historical Trelwick fire insurance maps, aerial photographs, city directories, and other available records documented the following chronological history of land use at the Property:
Pre-1900s. The earliest available records indicate that the area comprising the Property was part of Baltimore's general waterfront industrial and maritime district. Trelwick maps from the 1890s depict the shoreline in an approximate configuration and show the general area as containing wharves, piers, and waterfront industrial structures typical of Baltimore's maritime economy during this period. Specific uses of the individual lots that now comprise the Property are not clearly delineated in the pre-1900 records reviewed by Bayline.
Early-to-Mid 1900s (approximately 1900–1960). This period represents the most intensive industrial use of the Property. Trelwick maps from 1911, 1928, and 1953, together with aerial photographs from 1927, 1937, and 1957, indicate the following activities on or in the immediate vicinity of the Property:
• Manufacturing and industrial warehouse operations occupying multi-story brick and frame structures on what are now Lots 3, 4, and 5. The specific nature of the manufacturing operations is not definitively established in the available records, but Bayline noted notations on the 1928 and 1953 Trelwick maps suggesting metalworking, machinery repair, and general industrial warehousing.
• Port-related operations, including cargo handling, materials staging, and loading/unloading activities, on the waterfront portions of the Property (Lots 5 and 6).
• A structure identified on the 1928 Trelwick map as a "fuel storage" building on what is now Lot 4, with an associated tank symbol. This notation is consistent with, and provides corroboration for, the UST-related REC identified by Bayline and discussed in Section IV.B.2 below.
• Smaller commercial and light industrial structures on Lots 1 and 2 during this period, including what appears to have been a marine supply warehouse.
Late 1900s (approximately 1960–2000). During this period, the Property, like much of the Harbor Point and Harbor East area, underwent a transition from heavy industrial to lighter commercial and mixed-use activities. Aerial photographs from 1967, 1978, and 1993 show a progressive decline in industrial activity on the Property, with several structures appearing to be vacant or underutilized. By the 1993 aerial photograph, portions of the Property (particularly Lots 1 and 2) appear to have been cleared of structures. The remaining industrial structures on Lots 3, 4, and 5 appear to have been used intermittently for general warehousing and commercial storage during this period.
Relationship to the Former Allied Chemical/Honeywell Chromium Remediation Site. The broader Harbor Point area in Baltimore has been the subject of significant environmental attention due to the former Allied Chemical Corporation (now Ridgeway Corporation) chromium ore processing facility, which operated in the general Harbor Point vicinity during the early-to-mid twentieth century. The chromium remediation and capping of the former Allied Chemical site has been one of the most prominent brownfield remediation projects in Maryland. Bayline addressed this issue directly in the Report and confirmed that, based on available MDE records and historical mapping, the Property (Block 7419, Lots 1–6) lies outside the boundary of the remediation footprint for the former Allied Chemical chromium site. The Report notes that the nearest boundary of the documented chromium remediation area is approximately 0.3 miles to the northwest of the Property. However, Bayline appropriately noted that the broader industrial history of the Harbor Point area means that residual contamination from various historical sources may exist in the general vicinity, and the potential for off-site migration of contaminants from upgradient or adjacent historical industrial operations cannot be entirely excluded without subsurface investigation. This contextual observation is reflected in Bayline's identification of RECs, as discussed below.
Recent Decades (approximately 2000–present). Beginning in approximately 2003, the prior industrial structures on Lots 3, 4, and 5 were demolished. The demolition appears to have been conducted by or at the direction of prior owners of those lots; HELH acquired the various lots between 2014 and 2019. Since HELH's acquisition, DeLuca has performed additional site clearing, grading, and assembly work. DeLuca confirmed in his interview with Bayline that no environmental assessments or remediation activities were conducted by HELH during its ownership, and that HELH did not commission any Phase I or Phase II assessments prior to the Bayline engagement.
D. Adjoining Properties
Bayline documented the following conditions on properties adjoining and in the general vicinity of the Site:
• North (across Wills Street): Mixed commercial and residential properties, including recently developed condominium buildings and retail establishments associated with the broader Harbor Point and Harbor East development. Bayline did not identify any RECs associated with these properties.
• East (across Thames Street): Commercial office and retail properties. A dry cleaning establishment (Harbor Cleaners) was identified at approximately 1620 Thames Street, within the ASTM-prescribed search radius. Bayline noted that this facility is listed in the MDE UST registry for a small dry cleaning solvent storage tank, but indicated that, based on the cross-gradient to downgradient position of this facility relative to the Property and the relatively small scale of operations, the dry cleaner does not constitute a REC for the Property. This determination is noted as a de minimis condition.
• South (harbor/waterfront): Baltimore Harbor waters. No specific sources of contamination were identified in the harbor waters adjacent to the Property, although Bayline noted that harbor sediments in the general Inner Harbor area are known to contain various contaminants associated with more than a century of industrial activity. Sediment contamination is not within the scope of a standard Phase I ESA.
• West: Additional parcels within the Harbor Point development area, including parcels that have undergone prior redevelopment. Bayline identified one adjacent parcel (approximately 0.15 miles to the west) that is listed in the MDE VCP database as having undergone remediation and received a Certificate of Completion in 2018. This adjacent parcel's enrollment and completion in the VCP was noted by Bayline as informational context, but given the regulatory closure and downgradient/cross-gradient position relative to the Property, it was not identified as a REC.
No upgradient facilities of significant concern (such as active gasoline stations, large-scale industrial operations, or Superfund sites) were identified within the applicable ASTM search radii that would suggest a material risk of off-site contamination migrating onto the Property.
IV. SUMMARY OF PHASE I ESA FINDINGS
A. Regulatory Database Search Results
Bayline's regulatory database review was conducted by Penrose Solutions ("EDR") and is documented in the EDR Radius Map Report dated November 12, 2025, which is included as Appendix C to the Report. The following database categories were searched, and the results are summarized below:
Federal Databases:
The single expired RCRA Large Quantity Generator listing within 0.25 miles corresponds to a former industrial facility that ceased operations in approximately 1998 and whose site has since been redeveloped for commercial use. Bayline determined that this listing does not constitute a REC for the Property. The two RCRA Small Quantity Generator listings correspond to currently operating small businesses (an auto body repair shop and a marine services company) that maintain small quantities of regulated hazardous waste in the ordinary course of their operations. Bayline assessed these as de minimis conditions that do not represent a material threat to the Property.
State Databases:
The Property itself appears in the MDE UST registration database in connection with historical UST registration records associated with the former fuel storage operations on what are now Lots 3 and 4. As discussed in greater detail in Section IV.B.2 below, MDE records indicate that one or more USTs were registered at the Property address, but no corresponding closure records (i.e., records of proper removal, abandonment in place, or closure assessment) were located. This listing forms the basis of one of the RECs identified by Bayline.
The single LUST listing within 0.5 miles pertains to a former gasoline station located approximately 0.4 miles northeast of the Property. MDE records indicate that the LUST case was closed in 2011 following completion of remedial activities. Given the distance, the case closure status, and the downgradient position of this site relative to the Property, Bayline determined that this listing does not constitute a REC.
Local Databases:
Bayline reviewed Baltimore City Department of Public Works records and Baltimore City Fire Department records. No material findings related to environmental conditions at the Property were identified in the local database review, with the exception of a historical fire department record from 1947 referencing a structure fire at an address corresponding to the approximate location of Lot 4. The fire department record does not provide sufficient detail to determine whether hazardous materials were involved, but Bayline noted this record as part of its historical use analysis.
Bayline identified several database listings — including the expired RCRA generator listing, the two off-site small quantity generator listings, and the dry cleaning establishment discussed in Section III.D — that were evaluated and determined not to constitute RECs. Bayline characterized these as de minimis conditions based on their distance from the Property, regulatory status (e.g., closed cases, small-scale operations), hydrological position relative to the Property, and/or the absence of evidence suggesting a release that could have impacted the Site.
B. Recognized Environmental Conditions (RECs)
Bayline identified three Recognized Environmental Conditions in the Phase I ESA. Under ASTM E1527-21, a REC is defined as the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (i) due to a release to the environment; (ii) under conditions indicative of a release to the environment; or (iii) under conditions that pose a material threat of a future release to the environment. Each identified REC is discussed in detail below.
1. Potential Soil Contamination from Historical Industrial Use. Bayline identified potential soil contamination from historical industrial use as a REC. Specifically, the Report notes that historical Trelwick fire insurance maps from 1911, 1928, and 1953 indicate that industrial and manufacturing operations were conducted on portions of the Property — primarily on what are now Lots 3, 4, and 5 — during the early-to-mid twentieth century. The Trelwick maps depict multi-story industrial structures, and notations on these maps suggest metalworking, machinery repair, and general industrial warehousing activities.
Bayline observed that industrial operations of the types indicated by the historical records commonly involved the use, storage, and handling of petroleum products (lubricants, cutting oils, fuel oils), heavy metals (lead, chromium, zinc, cadmium, arsenic), solvents, and volatile organic compounds ("VOCs"). Given the age and nature of the indicated industrial operations, the extended period of industrial use (spanning approximately 50 to 60 years), and the absence of any documented environmental investigation or remediation of the Property during or following the cessation of industrial activities, Bayline concluded that there is a reasonable possibility that residual soil contamination from petroleum products, heavy metals, or VOCs may be present in the subsurface soils at the Property, particularly in the areas of Lots 3, 4, and 5 where industrial structures were formerly located.
Bayline was unable to rule out the presence of subsurface soil contamination without further investigation, as no subsurface soil sampling has been conducted at the Property. The Report characterizes this condition as a REC warranting Phase II investigation, specifically subsurface soil sampling and analysis in the areas of former industrial use.
C&H Assessment: This REC is significant given the planned residential use of the Property. Residential use generally triggers the most stringent cleanup standards under both Maryland and federal environmental programs. If soil contamination is confirmed at concentrations exceeding applicable residential cleanup standards (MDE Cleanup Standards for Soil and Groundwater, COMAR 26.18), remediation would likely be required before or during construction, potentially through MDE's Voluntary Cleanup Program. The scope and cost of any required remediation cannot be assessed without Phase II data.
2. Underground Storage Tanks (USTs). Bayline identified the possible former presence of one or more USTs on Lots 3 and 4 as a REC. This identification is based on multiple lines of evidence:
(a) Historical Trelwick maps from 1928 depict a structure labeled as "fuel storage" on what is now Lot 4, with an associated tank symbol that is consistent with the presence of one or more underground or above-ground storage tanks.
(b) MDE UST registration records indicate that one or more USTs were registered at an address corresponding to the Property (or a former address encompassed within the current Property boundaries). The registration records identify the tanks as being associated with fuel oil storage for industrial heating or operational purposes. The records indicate a registration date of approximately 1985, which may reflect the initial registration of pre-existing tanks following the enactment of UST registration requirements, rather than the date of installation.
(c) No closure records — including records of tank removal, abandonment in place with proper closure, or closure assessment sampling — were identified in MDE's files or in any other records reviewed by Bayline. DeLuca confirmed in his interview that HELH has no records related to USTs on the Property and that HELH did not remove or close any USTs during its period of ownership. DeLuca stated that he was not aware of the presence of any USTs on the Property.
(d) During the site reconnaissance, Bayline observed no visible evidence of USTs (such as vent pipes, fill pipes, or tank saddles) at the surface of Lots 3 and 4. However, Bayline noted that the presence of remnant concrete foundations, debris, and overgrown vegetation in these areas limits the ability to observe surface indicators, and that USTs can be present subsurface without visible surface evidence, particularly if they were buried and subsequently covered during demolition or grading activities.
Bayline concluded that the status of the historical USTs is uncertain — they may have been removed at some point without documentation, they may have been abandoned in place without proper closure, or they may still be present in the subsurface. The absence of closure documentation is particularly concerning because, if the USTs were not properly closed, there is a potential for releases of petroleum products to the subsurface soil and groundwater. Bayline characterized this condition as a REC and recommended a geophysical survey (ground-penetrating radar or similar technique) to determine whether USTs remain in place, followed by appropriate closure and assessment activities if tanks are identified.
C&H Assessment: The UST-related REC presents both environmental and regulatory risks. Under Maryland's UST regulations (COMAR 26.10), the current owner (and, following acquisition, the JV as the new owner) would bear responsibility for any USTs remaining on the Property, including the obligation to properly close any tanks and to investigate and remediate any releases. If USTs are found to be present and to have released petroleum products, the JV could be required to conduct corrective action under MDE oversight. The presence of unresolved UST issues could also delay or complicate the construction loan closing with Meridian, as lenders typically require confirmation that USTs have been identified, properly closed, and that any associated contamination has been addressed or is being managed. The absence of closure records should be addressed as a priority through the recommended Phase II investigation.
3. Potential Vapor Intrusion Pathway. Bayline identified a potential vapor intrusion concern as a REC. Given the historical industrial use of the Property, the potential for soil and/or groundwater contamination from VOCs and petroleum products (as discussed in RECs 1 and 2 above), and the waterfront location (which may involve shallow groundwater conditions that facilitate vapor migration), Bayline concluded that there is a reasonable basis to evaluate the potential for vapor intrusion into the planned residential buildings.
Vapor intrusion occurs when volatile chemicals in contaminated soil or groundwater migrate as vapors through the subsurface and into overlying buildings through cracks in foundations, utility penetrations, and other pathways. This is a particularly significant concern for residential buildings because: (i) residential occupants are assumed to experience longer-duration, more frequent exposure than commercial occupants; (ii) residential indoor air quality standards are correspondingly more stringent; and (iii) the planned 28-story residential towers would involve below-grade foundations and parking structures that could serve as vapor entry points.
Bayline noted that the vapor intrusion concern is not based on confirmed subsurface contamination (which, again, has not been investigated through subsurface sampling), but rather on the reasonable potential for VOC or petroleum contamination in light of the Property's historical industrial use and the planned sensitive (residential) end use. Bayline recommended soil vapor sampling as part of a Phase II investigation to evaluate this potential pathway and to inform building design decisions regarding the need for vapor mitigation systems.
C&H Assessment: The vapor intrusion REC is directly relevant to the planned residential use and could have significant implications for building design and construction costs. If vapor intrusion is confirmed as a concern, the design of the two 28-story residential towers and the ground-floor retail spaces would need to incorporate vapor mitigation measures, which may include sub-slab depressurization systems, vapor barriers, ventilation systems for below-grade spaces, and ongoing monitoring. These measures can add meaningful cost to the project — preliminary estimates for vapor mitigation in residential towers of this scale can range from $500,000 to $2,000,000 or more, depending on the complexity of the system and the nature and extent of the underlying contamination. Early identification of this issue is critical so that any required mitigation systems can be incorporated into the building design before construction documents are finalized.
C. Controlled Recognized Environmental Conditions (CRECs)
Bayline identified one Controlled Recognized Environmental Condition ("CREC") in connection with the Property. Under ASTM E1527-21, a CREC is defined as a recognized environmental condition resulting from a past release of hazardous substances or petroleum products that has been addressed to the satisfaction of the applicable regulatory authority, with hazardous substances or petroleum products allowed to remain in place subject to the implementation of required controls (e.g., property use restrictions, engineering controls, institutional controls, activity and use limitations).
Specifically, Bayline determined that a portion of Lot 6 (the waterfront lot at the southeastern corner of the Property) is subject to an environmental covenant recorded in the land records of Baltimore City. This environmental covenant, recorded as Instrument No. 2017-0089443 on September 12, 2017, was executed in connection with the completion of a limited environmental response action conducted by a prior owner of Lot 6 (prior to HELH's acquisition) under the oversight of MDE. The environmental covenant imposes the following activity and use limitations on the affected portion of Lot 6:
(i) Prohibition on the use of groundwater beneath the subject area for any purpose, including potable water supply, irrigation, or industrial use;
(ii) Requirement to maintain an engineered cap (consisting of a minimum of two feet of clean imported fill material and/or impervious surface cover) over the subject area to prevent direct contact exposure to residual contamination in subsurface soils; and
(iii) Requirement to provide notice to MDE prior to conducting any subsurface disturbance activities (e.g., excavation, grading, utility installation) within the subject area, and to implement appropriate soil management and worker protection measures during any such activities.
The environmental covenant was recorded pursuant to Maryland's Environmental Covenants Act (Maryland Environment Article, Title 1, Subtitle 8) and is binding on subsequent owners of the affected property.
C&H Assessment: The CREC related to the environmental covenant on Lot 6 is significant for several reasons. First, the activity and use limitations imposed by the covenant must be compatible with the planned development. The proposed Harbor Point Towers project contemplates construction of one of the two 28-story residential towers on or partially on Lot 6. Construction activities would necessarily involve significant subsurface disturbance, including excavation for foundations, below-grade parking, and utility installation. Such activities would trigger the notice and soil management requirements of the environmental covenant and would need to be coordinated with MDE. Additionally, the requirement to maintain an engineered cap over the affected area will need to be addressed in the context of the building design — the building foundations and hardscape improvements may satisfy the cap requirement, but this should be confirmed with MDE and documented. The groundwater use restriction is unlikely to affect the development plan, as the project will rely on municipal water supply. However, the existence of the environmental covenant will be disclosed to prospective residential purchasers or tenants and could affect marketability, particularly for ground-floor retail tenants who may have heightened sensitivity to environmental conditions.
Second, the CREC should be cross-referenced with the Title Commitment issued by Tidewater Insurance Group, Inc. The recorded environmental covenant should appear as a title exception, and the title insurance policy should be reviewed to confirm that coverage is not excluded for losses arising from the environmental covenant or the underlying contamination.
Third, the terms of the environmental covenant should be reviewed in detail by C&H to confirm that the planned development is compatible with the covenant's requirements and to identify any modifications or amendments that may need to be requested from MDE in connection with the project.
D. Historical Recognized Environmental Conditions (HRECs)
Bayline identified one Historical Recognized Environmental Condition ("HREC") in connection with the Property. Under ASTM E1527-21, an HREC is defined as a past release of any hazardous substances or petroleum products that has occurred in connection with the property and has been addressed to the satisfaction of the applicable regulatory authority or meeting unrestricted use criteria established by the regulatory authority, without subjecting the property to any required controls.
Specifically, Bayline identified that Lot 2 was the subject of a reported petroleum release in approximately 1996, when a small above-ground storage tank ("AST") containing heating oil was found to have leaked onto the ground surface. The release was reported to MDE by the then-owner of Lot 2 (a party unrelated to HELH or DeLuca), and a limited soil removal action was conducted under MDE oversight. Approximately 35 cubic yards of petroleum-impacted soil were excavated and disposed of at a permitted facility. Confirmatory soil sampling following the removal action demonstrated that residual petroleum concentrations were below applicable MDE Cleanup Standards for unrestricted (residential) use. MDE issued a No Further Action ("NFA") determination for the Lot 2 petroleum release on March 14, 1997.
C&H Assessment: The HREC on Lot 2 is a favorable finding in that the petroleum release has been fully resolved to MDE's satisfaction without ongoing restrictions or controls. The NFA determination means that no further remediation or monitoring is required for this condition. However, as a matter of due diligence, C&H recommends that the NFA letter be obtained from MDE records (if not already in Bayline's files) and included in the JV's due diligence files. The existence of the prior petroleum release and the NFA determination should also be disclosed to Meridian in connection with the construction loan environmental due diligence.
E. De Minimis Conditions and Other Findings
In addition to the RECs, CREC, and HREC discussed above, Bayline reported the following de minimis conditions and other findings:
Asbestos-Containing Materials ("ACM"). Bayline noted that the remnant building foundations and partially demolished structural elements on Lots 3, 4, and 5 may contain asbestos-containing materials. Although the majority of the former industrial structures on these lots were demolished in approximately 2003, remnant foundation materials, piping insulation fragments, and other debris observed during the site reconnaissance could potentially contain ACM. Bayline did not conduct asbestos sampling (which is outside the scope of a Phase I ESA), but recommended that an asbestos survey be conducted prior to any demolition or disturbance of the remnant foundations. This recommendation is consistent with applicable federal (NESHAP) and Maryland (COMAR 26.11.21) requirements for the management and removal of ACM during demolition and renovation activities.
Lead-Based Paint ("LBP"). Bayline noted that lead-based paint may be present on the remnant structural elements on the Property, given the age of the former industrial structures (constructed in the early-to-mid twentieth century, when lead-based paint was widely used). As with ACM, Bayline recommended that an LBP survey be conducted prior to disturbance of any remaining painted surfaces. Compliance with applicable OSHA lead standards (29 C.F.R. § 1926.62) and EPA Renovation, Repair and Painting ("RRP") Rule requirements will be necessary during construction.
Radon. Bayline noted that Baltimore City is located in EPA Radon Zone 3 (low potential), where average indoor radon levels are generally below the EPA action level of 4 pCi/L. However, Bayline recommended that radon testing be considered during the building design phase, particularly given the planned residential use, and that radon-resistant construction techniques be incorporated into the building design as a precautionary measure. This recommendation is consistent with standard practice for new residential construction in Maryland and with the requirements of the International Residential Code as adopted by Baltimore City.
Wetlands and Waters of the United States. Bayline observed potential tidal wetland areas along the southern (waterfront) boundary of the Property. Approximately 0.3 acres of the Site along the shoreline may constitute tidal wetlands subject to the jurisdiction of the U.S. Army Corps of Engineers ("USACE") under Section 404 of the Clean Water Act and MDE under Maryland's Tidal Wetlands Act (Maryland Environment Article, Title 16). Any construction activities affecting these areas — including bulkhead replacement, shoreline stabilization, or construction within the tidal wetland buffer — would require permits from USACE and MDE. Bayline recommended that a formal wetland delineation be conducted and submitted to USACE for jurisdictional determination if the development plan involves work within or adjacent to the waterfront area. While wetlands are not strictly within the scope of a Phase I ESA, this observation is relevant to the overall environmental permitting requirements for the project and should be coordinated with the project's civil engineering and permitting consultants.
Fill Materials. Bayline noted that waterfront properties in the Baltimore Inner Harbor area frequently contain uncontrolled fill materials placed during historical land reclamation, shoreline construction, and industrial operations. During the site reconnaissance, Bayline observed that surface soils on portions of the Property (particularly along the waterfront on Lots 5 and 6) appeared to consist of imported fill material, including cinders, brick fragments, concrete debris, and other anthropogenic materials. The composition and quality of this fill material is unknown, and fill soils at similar waterfront properties in Baltimore have been found to contain elevated concentrations of heavy metals, petroleum products, and other contaminants. Bayline noted that the fill material observation is encompassed within the broader REC related to potential soil contamination from historical industrial use (REC 1), and that the Phase II investigation should include sampling of fill materials to characterize their composition and determine whether contaminant concentrations exceed applicable standards.
F. Data Gaps
Bayline identified the following data gaps in the Phase I ESA, as required by ASTM E1527-21:
1. Limited site access during reconnaissance. During the November 15, 2025 site reconnaissance, Bayline was unable to access certain portions of Lots 3 and 4 due to dense overgrown vegetation, standing water, and unstable remnant foundation structures. Bayline estimated that approximately 15% of the combined area of Lots 3 and 4 was not directly inspected. Bayline noted that this inaccessible area corresponds to portions of the former industrial building footprints identified in the Trelwick maps and recommended that these areas be inspected during the Phase II investigation when vegetation clearing and site preparation may provide improved access.
2. Lack of historical UST closure documentation. As discussed in connection with REC 2, Bayline was unable to locate any records with MDE or from any other source documenting the proper closure (removal or abandonment in place) of the USTs historically registered at the Property. Despite diligent inquiry, including FOIA requests to MDE and interviews with DeLuca and property management, this data gap could not be resolved through the Phase I process. Bayline characterized this as a significant data gap that directly affects the UST-related REC.
3. Limited availability of historical records for certain periods. Bayline noted that historical records for the Property during the period from approximately 1960 to 1985 are sparse. City directories for this period did not consistently list the Property address, and no Trelwick maps were published for this area after the 1953 edition. Aerial photographs from this period provide some information regarding site use, but at relatively low resolution that limits the ability to identify specific activities. Bayline noted that this data gap introduces some uncertainty regarding the uses of the Property during this transitional period, but concluded that the gap does not materially affect the overall assessment given the broader pattern of industrial decline and transition observed during this period.
4. No subsurface sampling performed. Consistent with the standard scope of a Phase I ESA under ASTM E1527-21, Bayline did not perform any subsurface soil, groundwater, or soil vapor sampling. The Phase I ESA is a non-invasive assessment designed to identify RECs and other environmental conditions through records review, interviews, and visual observation. Confirmation of subsurface conditions requires a Phase II Environmental Site Assessment involving invasive sampling and laboratory analysis.
Assessment of Data Gap Materiality. C&H has considered whether any of the identified data gaps are material to the conclusions of the Phase I ESA. In our assessment, data gaps 1 and 2 (limited site access and lack of UST closure documentation) are the most consequential, as they relate directly to the identified RECs and introduce uncertainty regarding the nature and extent of potential contamination. These data gaps reinforce the recommendation for a Phase II investigation. Data gap 3 (limited historical records for the 1960–1985 period) introduces some uncertainty but does not, in our judgment, materially undermine the Phase I ESA's conclusions. Data gap 4 (no subsurface sampling) is inherent in the Phase I process and is expected; it is the primary reason for the Phase II recommendation.
V. IMPLICATIONS FOR THE JOINT VENTURE
A. CERCLA Liability and Bona Fide Prospective Purchaser Defense
The JV (Harbor Point Development JV, LLC), as the prospective purchaser and future owner of the Property, faces potential liability under CERCLA § 107(a) as an "owner" of a facility at which hazardous substances may have been disposed of. CERCLA liability is strict, joint and several, and retroactive — meaning that the JV could be held liable for the full cost of any required remediation of pre-existing contamination at the Property, regardless of fault and regardless of when the contamination occurred.
However, CERCLA provides several statutory defenses that, if properly established and maintained, can limit or eliminate a purchaser's liability for pre-existing contamination. The most relevant defense for the JV is the bona fide prospective purchaser ("BFPP") defense under CERCLA § 107(r) and § 101(40). To qualify for the BFPP defense, the JV must satisfy all of the following requirements:
(a) All Appropriate Inquiries. The JV must have conducted "all appropriate inquiries" into the previous ownership and uses of the Property prior to acquisition, in accordance with the AAI Rule (40 C.F.R. Part 312). The Phase I ESA conducted by Bayline in conformance with ASTM E1527-21 is designed to satisfy this requirement. Provided that the Phase I ESA was conducted within the 180-day period preceding the land acquisition (which it was — the Report is dated November 25, 2025, and the target closing date is January 30, 2026), and that the JV updates any government records searches within 90 days of closing, this element should be satisfied.
(b) All disposal occurred before acquisition. The JV must establish that all disposal of hazardous substances at the Property occurred before the JV's acquisition. Based on the Phase I ESA findings, all identified environmental conditions relate to historical industrial activities and operations that predated HELH's ownership and the JV's prospective acquisition. This element should be satisfied.
(c) Post-acquisition obligations. After acquiring the Property, the JV must: (i) comply with any land use restrictions established or relied upon as part of any response action at the Property; (ii) not impede the effectiveness or integrity of any institutional control; (iii) take reasonable steps to prevent or limit human, environmental, or natural resource exposure to any previously released hazardous substance; (iv) provide full cooperation, assistance, and access to EPA or any authorized persons conducting response actions at the Property; (v) comply with information requests and subpoenas; and (vi) provide legally required notices of the discovery or release of any hazardous substance.
C&H recommends that the JV take the following steps to establish and maintain its BFPP status:
• Ensure that the Phase I ESA and any Phase II investigation are conducted in strict compliance with ASTM E1527-21 and the AAI Rule, and that all documentation is properly maintained.
• Comply with all activity and use limitations imposed by the environmental covenant on Lot 6 (the identified CREC), and ensure that any development activities within the covenant area are coordinated with MDE.
• If subsurface contamination is confirmed through the Phase II investigation, take "reasonable steps" to prevent exposure — which, in this context, would include implementing appropriate engineering controls (e.g., capping, vapor barriers), institutional controls, and soil management practices during construction.
• Provide all legally required notices to EPA, MDE, and any other applicable regulatory authorities regarding the discovery of hazardous substances at the Property.
• Maintain complete and organized environmental due diligence files to document the JV's compliance with BFPP requirements.
If contamination is confirmed through the Phase II investigation at levels exceeding applicable residential use standards, C&H further recommends that the JV consider enrolling the Property (or the affected portions thereof) in Maryland's Voluntary Cleanup Program ("VCP") for additional liability protections, as discussed below.
B. Maryland State Environmental Law Considerations
In addition to federal CERCLA liability, the JV faces potential liability under Maryland state environmental law. The Maryland Environment Article, Title 7 (Hazardous Materials and Hazardous Substances), provides for state-level cost recovery and enforcement authority analogous to CERCLA. The JV's exposure under Maryland law is governed by both statutory provisions and common law principles.
Maryland Voluntary Cleanup Program (VCP). Maryland's VCP, administered by MDE under the Voluntary Cleanup Act (Maryland Environment Article, §§ 7-501 through 7-516), provides a framework for the investigation and remediation of contaminated properties under MDE oversight, with the benefit of certain statutory liability protections upon successful completion. Specifically, upon completion of a VCP-approved response action and issuance of a Certificate of Completion or No Further Action determination, the VCP participant and subsequent purchasers receive protection from further state environmental liability for the conditions addressed by the VCP response action.
If the Phase II investigation confirms the presence of contamination at the Property above applicable MDE cleanup standards for residential use (COMAR 26.18), C&H recommends that the JV consider enrolling in the VCP. Enrollment in the VCP would provide the following benefits: (i) regulatory certainty regarding the scope and standards for any required remediation; (ii) a formal regulatory endpoint (Certificate of Completion) that would satisfy Meridian's requirements and provide comfort to the JV members; (iii) statutory liability protections for the JV and its successors; and (iv) potential coordination with the existing environmental covenant on Lot 6 to establish a comprehensive environmental management framework for the Property.
The VCP application process typically involves submission of an application and fee (currently $6,000 per property), followed by MDE review and approval of a response action plan. The timeline for VCP enrollment and completion varies depending on the complexity of the site, but initial MDE review of a VCP application typically takes 60 to 90 days. This timeline should be factored into the overall project schedule.
Baltimore City Environmental Requirements. In addition to state-level requirements, Baltimore City imposes certain environmental requirements applicable to waterfront redevelopment projects. These include the Baltimore City Critical Area Management Program (implementing the Chesapeake Bay Critical Area Act), stormwater management requirements, and waterfront access requirements. The JV should confirm that the development plan complies with all applicable Baltimore City environmental and sustainability requirements, including any conditions imposed in connection with the PUD approval (Ordinance No. 24-0417).
C. Impact on Development Plans
The identified environmental conditions have the potential to affect the Harbor Point Towers development in several ways, and the project team should carefully evaluate these impacts in the context of the overall development timeline:
Project Timeline. The current project schedule contemplates land closing on January 30, 2026, construction loan closing on February 15, 2026, construction commencement on March 1, 2026, and substantial completion by September 2028. Any environmental investigation or remediation activities could compress or delay this schedule. Specifically:
• The Phase II investigation (recommended in Section VII.A below) should be completed before the land closing or, at a minimum, before the construction loan closing, to provide the JV and Meridian with adequate information regarding subsurface conditions. Depending on Bayline's availability and the scope of the Phase II, the investigation could take 4 to 8 weeks from engagement, including field work, laboratory analysis, and report preparation.
• If the Phase II investigation reveals contamination requiring remediation, the time required for VCP enrollment, response action plan development, regulatory approval, and remediation activities could range from several months to over a year, depending on the nature and extent of contamination. This could potentially delay the construction commencement target of March 1, 2026.
• The PUD approval (Ordinance No. 24-0417, June 14, 2024) should be reviewed to confirm whether any environmental conditions or remediation requirements were imposed as conditions of approval. If environmental clearance or remediation is a precondition to construction, any delay in resolving environmental issues could jeopardize the PUD approval timeline or require a modification to the PUD conditions.
Soil Management During Construction. Regardless of the Phase II results, the JV should develop a comprehensive Soil Management Plan ("SMP") in advance of construction commencement to address the handling, characterization, and disposal of potentially impacted soils that may be encountered during excavation for building foundations, below-grade parking, and utility installation. The SMP should address: (i) protocols for identifying and segregating potentially contaminated soils; (ii) sampling and analytical requirements for soil characterization; (iii) worker health and safety requirements (OSHA 29 C.F.R. § 1910.120 / 1926.65 requirements for work involving hazardous substances); (iv) transportation and disposal requirements for contaminated soils; (v) stormwater and erosion control measures to prevent off-site migration of contaminants during construction; and (vi) MDE notification and coordination procedures. The SMP should be prepared by Bayline or another qualified environmental consultant and should be incorporated into the construction specifications.
Vapor Mitigation Systems. If the Phase II investigation confirms that vapor intrusion is a credible pathway for the planned residential towers, vapor mitigation systems will need to be incorporated into the building design. This may include sub-slab depressurization systems, passive or active ventilation systems for below-grade spaces (including parking garages and mechanical rooms), vapor barrier membranes, and vapor monitoring systems. The design of these systems should be coordinated with the project architect and structural engineer and incorporated into the construction documents before they are finalized. As noted above, the cost of vapor mitigation for residential towers of this scale can be substantial and should be reflected in the project budget.
UST Removal and Closure. If the geophysical survey conducted during the Phase II investigation identifies USTs remaining in place on Lots 3 and 4, the USTs will need to be properly closed in accordance with MDE regulations (COMAR 26.10). Closure of USTs typically involves tank removal (excavation), characterization and disposal of the tank and any contaminated backfill material, and assessment of the surrounding soil and groundwater for evidence of releases. MDE must be notified prior to UST closure activities. If releases are identified, additional investigation and remediation may be required. The UST closure process should be completed before or during the early stages of construction to avoid delays.
PUD Approval Compliance. C&H recommends that the PUD approval ordinance (Ordinance No. 24-0417, June 14, 2024) and any associated conditions of approval be reviewed in detail to confirm whether any environmental conditions, remediation requirements, or environmental clearance prerequisites were imposed. If the PUD approval is conditioned on environmental remediation or regulatory clearance, failure to satisfy these conditions could affect the JV's ability to obtain building permits and commence construction.
D. Allocation of Environmental Risk Between JV Members
The allocation of environmental risk between the JV's two members — Fairwater HP Manager, LLC (30% / Managing Member) and Prescott HP Investor, LLC (70% / Non-Managing Member) — is a critical issue that should be carefully addressed in the JV Operating Agreement and related transaction documents. The following considerations are relevant:
Managing Member Responsibility. Under the draft JV Operating Agreement (signing target: January 12, 2026), Fairwater HP Manager, LLC serves as the Managing Member and operating partner of the JV. As Managing Member, Fairwater is responsible for the day-to-day management and operation of the JV's business, including oversight of environmental risk management, coordination with environmental consultant