Archives for the ‘Storm Preparation’ Category

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No Comments August 8th, 2017 Commercial Property, Latest News, Storm Preparation

Flood Insurance Reforms Loom In Florida

 Florida wades deeper into hurricane season as the debate heightens over what to do with the deeply indebted National Flood Insurance Program and its coverage of properties prone to repeated flooding.

The Sunshine State ranked fourth nationally in damages paid by the national program to rebuild homes and businesses that have suffered repeated and severe flood losses, according to a recently released report by the National Resources Defense Council. The group has urged a house-buyout program for flood-weary residents, rather than bailing them out time and again.

In Florida, more than 1,600 properties have flooded an average of five times since 1978, according to the council’s review of data from FEMA. Flood potential remains a risk as Central Florida’s lakes continue to rise with daily afternoon-storm deluges — even with more than three months left in hurricane season.

The nation’s flood-insurance piggy bank is set to expire in late September — potentially hitting a state with about a third of the country’s 5 million policies. If it ends, no new policies would be written and hme sales requiring flood insurance could suffer. Facing $24 billion of debt, the program faces calls for an end or overhaul.

Lake County resident Dolores Blood owns a Debary-area rental duplex that flooded with several feet of water in 2008 when parts of Volusia County were inundated with unusually high rainfalls.

“The insurance works for property where flooding isn’t expected but it should not cover places known for being under water repeatedly. If you live on the beach, then you pay a premium,” said Blood, who saw her flood insurance rates double last year almost a decade after getting $82,000 for each of two duplex buildings that flooded.

The National Resources Defense Council  just proposed a plan allowing repeated flood victims to sign up for a buyout program prior to the next flood. If high waters then damage their property, FEMA would fund local governments to purchase the flood-prone home or business and demolish them to provide more open space.

“The National Flood Insurance Program was designed to help Americans recover from flood disasters, but it can also unintentionally ‘trap’ homeowners who would prefer to move somewhere safer,” stated a spokesman for the council. ”Instead of moving, many policyholders find themselves rebuilding their homes again and again.”

Other plans call for shifting the insurance program to the private sector. In addition, Sen. Bill Nelson co-sponsored bi-partisan legislation to extend the program six months and cap premium increases at 10 percent — down from 25 percent currently.

 

Source: Emergency Management

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No Comments July 11th, 2017 Commercial Property, Latest News, Storm Preparation

Three Insurance Coverages You Shouldn’t Overlook

With hurricane season upon us, property managers should sit down with their agents and review each policy. So says Jason Wolf, a shareholder at Koch Parafinczuk Wolf Susen in Fort Lauderdale.

Specifically, he says, property managers and insurance professionals should total the dollar amounts on the main policy and other policies that address windstorm, flood, storm surge and wind-driven rain.

GlobeSt.com caught up with Wolf to get his take on these facets of commercial real estate insurance.

GlobeSt.com: When it comes to policies, are flood, storm surge and wind-driven rain the same?

Jason Wolf: No. They are treated differently. The distinctions become important when a property owner or manager files a claim. (Here’s how you can prepare for the next Hurricane Wilma before it hits).

When Hurricane Katrina hit and litigation ensued, a federal appeals court ruled that the flood exclusion in insurance policies applied. That cost owners billions and billions of dollars. By excluding flood damage, owners were hit with astronomical costs in reparation.

Insurers put storm surge, which is water pushed ashore by hurricane winds, into another category. Wind-driven rain isn’t covered unless the property suffers damage that is already covered, which gets to two important points: proper maintenance and impeccable recordkeeping.

GlobeSt.com: Why are these coverages so important?

Wolf: An insurer can push back on a claim if there’s evidence that the property wasn’t kept up. For example, if wind-driven rain comes through a building opening that could have been sealed, an adjuster can argue that the damage resulted from inadequate maintenance and shouldn’t be covered. Property owners that skimp on maintenance to cut costs will find that the next hurricane will cost them a lot more than the bill for sealing windows and doors.

GlobeSt.com: And the recordkeeping?

Wolf: It’s critical to document improvements and renovations. Many developers and managers don’t know when their roof was last replaced or repaired.

When a claim is filed, the insurance company can say that a roof was in bad shape before the storm and therefore it won’t pay for a new one. Without proof, the insured will have a difficult time collecting the full amount.

Before a named storm makes TV news, property owners and managers should inventory everything, create diagrams, and take lots of video and photographs. To file an effective claim, they must be able to re-create the condition of the property before the hurricane hit.

 

Source: GlobeSt.

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No Comments June 27th, 2017 Commercial Property, Latest News, Storm Preparation

Preparing For The Next Hurricane Wilma Before It Hits

Almost a decade has passed since a devastating hurricane has hit the Southeast, memories still haunt many commercial real estate owners. Now, hurricane season is upon us again.

Globest.com caught up with Jason Wolf, a shareholder at Koch Parafinczuk Wolf Susen in Fort Lauderdale how property owners and managers whose careers began in the region in the past 10 years should prepare for the storm season. We also asked him about the repercussions that are totally unfamiliar.

GlobeSt.com: Hurricanes in 2004, 2005 and 2008 wreaked havoc on the Southeast. How bad was it?

Wolf: Katrina, Rita and Wilma were Category 5 hurricanes and Dennis was a Category 3 storm that together caused $153 billion in damage in 2005. Those figures blew past a record set the year before, when four hurricanes tore through Florida and headed north, causing $57 billion in damage. In 2008, damage from Ike totaled $37.5 billion.

GlobeSt.com: What was the effect on insurance companies?

Wolf: The storms created dire consequences on many insurance companies. Insurers stopped writing policies in states such as Florida and Louisiana, premiums skyrocketed, and restrictions proliferated. Although for the most part, the market has recovered, property and casualty policies now have multiple exclusions and higher deductibles.

GlobeSt.com: How has that affected property owners and managers?

Wolf: The impact has made it nearly impossible for property owners and managers to know what’s covered and what’s not without sitting down with their insurance agent. This applies to everyone, by the way. For anyone who has survived, there may be a tendency to get a little smug, thinking “I know what to do” In fact, the insurance industry has changed significantly in the past 12 years, and so has property coverage.

GlobeSt.com: What are the first steps a property manager or develop should take?

Wolf: Property managers should sit down with their agents and review each policy. Find out the basics: What’s covered and what’s not? What’s the deductible? Are hurricanes explicitly covered?

For example, in some coverage for hurricanes, the deductible can be up to 7% of total. On a $10 million property, that’s $700,000. Property managers and insurance professionals should total the dollar amounts on the main policy and other policies that address windstorm, flood, storm surge and wind-driven rain. But policies have different types of exclusions. Read your policy! And if you can’t understand, it, talk to your agent or your insurance company.

 

Source: GlobeSt.

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No Comments June 13th, 2017 Commercial Property, Latest News, Storm Preparation

Four Steps To Prepare Your Small Business For Hurricane Season

While Hurricane Matthew may still be fresh in the minds of many local small business owners, forecasters warn this year’s hurricane season may be worse than normal.

The National Oceanic and Atmospheric Association predicts five to nine hurricanes, two to four of which could be Category 3 or higher. Hurricane season lasts from June 1 through Nov. 30.

Small business are particularly vulnerable to the high costs of weather damages. Almost 40 percent never reopen after a disaster, according to the Federal Emergency Management Agency.

Ed Bides, information security officer and disaster recovery team member at Florida Capital Bank, offers four practical ways to ensure your business is prepared for Mother Nature.

1. Know What You Have

Catalog computers, equipment and other property as well as files and important documents. Keep a digital copy of this list, photograph important equipment and back up your documents using a cloud service.

2. Check Your Insurance Policies

Do you need business interruption coverage? Will your insurance pay what your old equipment is worth now or what it will cost you to buy new equipment? Carefully consider what your policies will do for you, and make sure you have all the coverage you need.

3. Plan Ahead

Develop a plan for how to prepare your business and personnel for severe weather. Remember that your employees will need time to prepare their homes and pick up children from school in the case of an evacuation. “There’s always room to improve,” said Bides, noting that Florida Capital Bank modifies its plan every year. Communicate your plan, so everyone is on the same page when you need them to be.

4. Know Your Disaster Recovery Options

Check the Small Business Administration website after a disaster to see if your business is in a disaster relief zone and eligible for funds.

 

Source: SFBJ

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No Comments June 6th, 2017 Commercial Property, Latest News, Storm Preparation

New Hurricane Advisories To Give Storm Preparation Deadlines

Some coastal residents always put off emergency preparations until storm clouds loom on the horizon.

The National Hurricane Center is going to try giving those people a deadline this year, issuing experimental advisories showing when tropical-storm force winds may hit particular communities to help them understand when it’s too late to put up storm shutters or evacuate.

The forecasters’ advisories will be fueled by more data than ever, thanks to new weather satellites and an expanded network of underwater gliders.

To help people understand when storm preparations should be completed, the hurricane center will experiment with advisories showing the times when sustained tropical-storm force winds are estimated to hit land. If a tropical disturbance nears shore, forecasters also could post advisories or warnings before it develops into a tropical depression or named storm.

 “The new advisories could help validate evacuation orders for people who complain about hype around approaching storms,”’ Florida’s emergency management director,” Bryan Koon, said “We can say, listen, this is when things are going to get bad in your area. We can also use that to say, a few hours ahead of that, stores are going to close, roads are going to get jam-packed with people, we might have to shut down power substations.”

Storm surge watches and warnings will be issued when U.S. coastlines are at risk for life-threatening flooding.

Shrinking Cone

The “uncertainty cone” showing a storm’s projected path shrinks again this year, with continued improvements in track forecasts. It’s still the best-known advisory released by the hurricane center, but forecasters continue to emphasize individual hazards away from the center of a storm.

On his last day as hurricane center director before returning to The Weather Channel, Rick Knabb said better data and better computer models help create a narrower cone. But that can give a false sense of security to areas outside the cone.

“Hurricane watches and warnings can extend well outside the cone. In fact, the hurricane itself can be much larger than the width of the cone,” Knabb said. “So clearly a hurricane is not just a point on the map. Forecasters will add an outline of a storm’s wind field to the graphic to help people see hurricane impacts beyond the cone.”

Intensity Forecasts

Predicting the intensity of a storm remains a challenge. Apart from improving public communications about storm hazards, the hurricane center also has been working to improve its forecasts predicting when and how much a storm will strengthen.

“It’s difficult to measure what’s happening around a hurricane’s eye – where the strongest winds swirl – or how it interacts with the ocean and the atmosphere, and that affects the accuracy of storm intensity forecasts,” said Dan Brown, a senior hurricane specialist at the Hurricane Center in Miami. “It’s a combination of everything, but oftentimes, it’s understanding what the structure of the storm is and getting that right when the computer models are first run.”

Forecasting Technology

More and better data will be streaming into those models this year, which forecasters hope will help improve their predictions for a hurricane’s intensity.

NASA launched eight mini-satellites in December to measure surface winds deep in the hearts of hurricanes. Unlike other weather satellites, the $157 million Cyclone Global Navigation Satellite System can give scientists a clear look into a hurricane’s eye even through walls of clouds and rain.

Forecasters said the $1 billion GOES-16 weather satellite, launched in November, is as significant an upgrade as switching to high-definition television, with more detailed images and more channels looking at storms.

To keep up with higher resolution forecast models, the National Oceanic and Atmospheric Administration has upgraded the Doppler radar on its hurricane hunter aircraft to give scientists a more detailed look at hurricane winds.

NOAA again will launch four underwater gliders from Puerto Rico and the U.S. Virgin Islands to collect ocean data, and this summer the agency will expand its data pool by collaborating with universities and research institutions in the U.S. and Bermuda that have up to 20 their own gliders in the Gulf of Mexico and the Atlantic.

 “Glider data has helped improve the models’ understanding of the ocean,” said Gustavo Goni, director of the physical oceanography division at NOAA’s Atlantic Oceanographic and Meteorological Laboratory. “We want to put all these efforts together to make a better analysis.”

 

Source: Claims Journal

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No Comments May 30th, 2017 Commercial Property, Latest News, Storm Preparation

Here’s What the House Has In Mind For Revamping The National Flood Insurance Program

A much-anticipated House subcommittee proposal on flood insurance promises to reauthorize the National Flood Insurance Program (NFIP) for five years beyond its September 30 expiration date.

The proposal would introduce reforms to put the NFIP on stronger financial footing; provide aid for those unable to afford coverage; improve flood mapping, mitigation efforts and claims handling; and encourage greater private insurer participation in the market.

Rep. Sean Duffy (R-Wis.), chairman of the House Financial Services Subcommittee on Housing and Insurance, said the draft was being released so that all stakeholders could provide “input into protecting the program integrity of the NFIP.”

The schedule for consideration of this or other flood insurance proposals has not yet been announced. The far-reaching draft incorporates ideas from Republicans and Democrats, advocates for consumers and taxpayers, as well as ideas from the insurance, banking and real estate industries.

“The ideas stemming from this open process will ensure that everyone who needs flood insurance will have access to it while ensuring that the NFIP does not fall further into debt,” Duffy said, referring to the $24.6 billion the NFIP owes the Treasury.

In late April, U.S. Senators Bill Cassidy (R-La.) and Kristen Gillibrand (D-N.Y.)  released their draft legislation reauthorizing the NFIP for 10 years. The Cassidy-Gillibrand legislation addresses flood insurance affordability, coverage limits and solvency issues while encouraging increased mitigation and gradual private sector involvement. It also seeks to strengthen flood mapping and claims handling.

The House measure gives the Federal Emergency Management Agency (FEMA), which administers the flood insurance program, more responsibility and authority for the program’s financial stability and operations. The House blueprint incorporates several other House proposals dealing with various aspects of the flood program. Key provisions of the Duffy draft include:

Financial Issues

Independent Actuarial Study. Require FEMA to provide for an annual independent actuarial study of the NFIP to analyze the financial position of the program based on its long-term estimated losses and transmit the results to Congress. Additionally, require FEMA to submit quarterly reports to Congress on the changing policyholder composition and risk profile of the NFIP.

Risk Transfer Requirement. Require FEMA to use risk transfer tools, such as reinsurance, catastrophe bonds, collateralized reinsurance, resilience bonds, and other insurance-linked securities, to reduce direct taxpayer exposure to insurance losses. (FEMA has already begun buying reinsurance.)

Changes To Surcharges. Increase annual surcharges from $25 to $40 for all primary residences; reduce the annual surcharge from $250 to $125 for non-owner occupied residential properties that are currently subject to preferred risk premium rates; and increase the annual surcharge from $250 to $275 for all other non-primary residences.

Reserve Funding. Increase the current National Flood Insurance Reserve Fund assessment rate by 1 percent each year until the NFIP achieves its statutorily mandated reserve ratio phase-in requirement of not less than 7.5 percent.

Multiple Loss Properties. Enhance the managing and tracking of properties with a history of multiple claims by defining a new “multiple-loss property” term to cover all at-risk properties.

Properties With Excessive Lifetime Claims. Prospectively prohibit the availability of NFIP coverage of any multiple-loss property with lifetime losses so excessive that the aggregate amount in claims payments exceeds twice the amount of the replacement value of the structure.

High-Risk Properties. No longer make available NFIP coverage for certain high-risk properties after January 1, 2021, that have other available private flood insurance options. These would include any new structures added to today’s high-risk special flood hazard areas, as well 1-4 unit residential structures where the replacement cost of the building (exclusive of the real estate upon which the structure is located) exceeds $1 million.

Allowance For Write-Your-Own (WYO) Companies. The allowance paid to companies participating in WYO Program shall not be greater than 25 percent of the chargeable premium for such coverage.

Mandatory Purchase Requirements. Increase the civil money penalties on federally regulated lenders for failure to comply with the NFIP’s mandatory purchase requirements from $2,000 to $5,000.

All-Peril Policies. Provide for the satisfaction of the NFIP’s mandatory purchase requirement for those properties located in a state that adopts a state-based requirement for mandatory “all-perils” coverage that includes flood insurance.

Additionally, reiterate that nothing in the law prohibits states, localities and private lenders from requiring the purchase of flood insurance coverage for a structure that is located outside of an area designated by FEMA as a special flood hazard area.

Private Market

In terms of encouraging a private flood insurance market the draft includes provisions to clarify that a private carrier policy outside of the NFIP satisfies mandatory purchase requirements and eliminates the restriction that currently prevents insurers participating in the NFIP’s Write Your Own (WYO) Program from also selling private flood insurance policies. It would also open the government’s flood insurance rate making and loss information to insurers and the public. Private policies would be assessed to help pay for flood mapping as NFIP policies are.

It would allow refunds to policyholders who cancel during a policy term in order to obtain a private market policy — just one of the provisions designed to encourage the private insurance market.

Affordability

Rate Increase Cap. Lowers the cap on annual rate increases from 18 percent to 15 percent and limit the chargeable risk premium of any single family residential property to $10,000 per year.

State Affordability Program. Authorizes states to voluntarily create a state flood insurance affordability program for eligible owner-occupants of single family 1-4 unit residences who are unable to pay their chargeable risk premium due to family income. Assistance can be in the form of either capping the amount of chargeable risk premium paid, or limiting the amount of premium increase on an annualized basis. The program’s cost would be recouped through an equally distributed surcharge on all other policyholders within that state.

Commercial Exemption. Eliminate the NFIP’s mandatory purchase requirement for all commercial properties, while preserving the eligibility of commercial properties voluntarily to purchase NFIP coverage if they so choose.

Replacement Cost. Require the FEMA Administrator to incorporate up-to-date replacement cost, by structure, when calculating annual chargeable premium rates, as opposed to the current practice that relies upon a national average.

Coast vs. Inland. Require the FEMA, when calculating annual chargeable premium rates, to consider the differences in properties located in local coastal and inland areas.

Mitigation Credits. Authorize FEMA to provide policyholders with credits for actions to mitigate the flood risk of their property.

Flood Mapping

Community Mapping. Allow localities to elect to use their own resources to develop their own alternatives to NFIP flood maps subject to minimum standards developed by FEMA.

Beyond Mapping. Require FEMA to use other risk assessment tools, including risk assessment scores, in addition to applicable flood rate maps when determining annual chargeable premium rates.

Map Appeals. Create a new appeals process for states, local governments, or the owners or lessees of real property who want their maps updated.

Mitigation Credits

Community Mitigation Plans. Require covered flood prone areas to develop a community-specific plan for mitigating continuing flood risks if they have 50 or more repetitive loss structures or 5 or more severe or extreme repetitive loss structures.  Communities that fail to develop or make sufficient progress in executing their plan would be subject to certain sanctions.

Community Credits. Provide communities that have joined its Community Rating System program with appropriate credits in calculating their annual chargeable premium rates when those communities implement or benefit from measures that protect natural and beneficial floodplain functions.

Property Acquisition. Authorize a pilot program to provide financial assistance for states and local communities to purchase properties located in participating communities from eligible low-income owners that have incurred substantial damage from a flood event.

Claims Handling

Fraud Penalties. Require FEMA to prohibit false or fraudulent statements connected to the preparation, production, or submission of claims adjustment or engineering reports.

Policyholder Appeals. Codify the due process protections for policyholders established after Superstorm Sandy by FEMA for individuals wishing to appeal a full or partial denial of their NFIP claim by their insurance company, and require FEMA to provide policyholders with a written appeal decision that upholds or overturns the decision of the insurer.

Deadline For Claims. Require FEMA to make final determinations regarding the approval of a claim for payment or disapproval of the claim within 90 days of the claim being made.

Write Your Own (WYO) Company Litigation. Provide FEMA with additional authorities and responsibilities for overseeing litigation conducted by WYO insurance companies acting on behalf of the NFIP. Ensure that WYO litigation expenses are reasonable, appropriate, and cost effective. Give FEMA the authority to direct litigation strategy as necessary.

Underpayment Of Claims. Align penalties for WYO insurance companies that knowingly underpay claims for losses covered to be commensurate with the NFIP’s penalties applicable to overpayment of such claims.

Technical Assistance Reports. Restrict the use of outside technical reports by WYO insurance companies and the NFIP direct servicing agents.

The draft bill follows some of the recommendations in a flood insurance report by the Government Accountability Office (GAO).

Reinsurers’ Report

On the same day that the House proposal was unveiled, the Reinsurance Association of America (RAA) released a report claiming more private sector involvement in the flood insurance market could save billions in taxpayer dollars.

RAA’s findings are based on a comparative analysis between the NFIP and Florida Citizens Property Insurance Corp., a government-subsidized property insurer that has been following a “depopulation” strategy of having private insurers assume blocks of its business, while also increasing rates and investing in reinsurance.

According to the analysis, if the NFIP took actions similar to Citizens, it could reduce taxpayer exposure by 31 percent and would decrease the additional Treasury financing required to pay losses on floods that have a 1 percent chance of occurring by 91 percent over the next four years.

“Increased competition from the private sector would not only reduce the NFIP’s size and debt, but would ensure that the federal program remains sustainable for years to come,” said Frank Nutter, president of RAA.

 

Source: Insurance Journal

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No Comments April 18th, 2017 Commercial Property, Latest News, Storm Preparation

Facing Rising Sea Levels And Greater Insurance Risk, Southern Florida Braces For Relocations, New Flood Design Standards

The moon over South Florida looked like a swollen grapefruit in November, its reflection rippling off pools of ocean water that bubbled up through storm drains, crept over seawalls, and swallowed Miami streets.

It was a “supermoon,” about 17,000 miles closer to Earth than usual, according to NASA, arriving just in time to supercharge the seasonal high waters known as king tides. The water made an island out of the lifeguards’ shack on Matheson Hammock Park, swept “No Wake” signs from marina harbors onto city streets, and marooned a live octopus in a parking garage along Biscayne Bay.

On days like these, it’s obvious that much of the region now home to about 7 million people began as a network of swampy canals meandering from the Everglades to the ocean. Sometimes nature conspires to remind the city of this fact, as it did in November 2016.

Lately those reminders have become more frequent. The rate of sea-level rise has tripled over the last decade, according to a recent study from the University of Miami, bringing with it more frequent coastal flooding. The U.S. Army Corps of Engineers projects that Miami-Dade County will see about 15 inches of sea-level rise by 2045. And because South Florida sits on porous limestone bedrock, saltwater is not just encroaching on coastal communities, but gurgling up from below.

Right now it’s a nuisance, but over the lifetime of a mortgage, flooding in South Florida could threaten tens of billions of dollars of real estate and upend development in the country’s 10th largest metropolitan area. Architects, planners, and developers are just beginning to overhaul the urban landscape, laying the groundwork for a sweeping transformation of building codes, municipal infrastructure, and design norms that could save the city from rising seas.

The crucial question is: Who will change that built environment? Will it be architects and city officials, safeguarding South Florida against the effects of climate change as the world’s living laboratory for so-called climate resiliency? Or is nature coming to reclaim Miami as a swampland?

Higher Ground

South Florida’s development boom is so lucrative it seems inevitable that it will continue. Before the city was founded in 1896, however, it wasn’t clear that the mouth of the Miami River would ever be anything more than a mosquito-infested trading post—until the industrialist Henry Flagler dragged his railroad south from Palm Beach along the highest ground he could find: a coral ridge between 12 and 25 feet above sea level. The tracks reached Biscayne Bay on April 22, 1896. Three months later Miami was incorporated.

Today, Miami is a bustling, sprawling urban landscape that has been remade to suit cars, but some planners say that the same limestone ridge Flagler used could anchor climate-friendly development.

The Urban Land Institute is drafting a plan for the Arch Creek Basin, a mostly low-lying area straddling 2,800 acres and four municipalities, as well as unincorporated Dade County, around one stretch of the railroad. Primarily poor people of color, the residents of Arch Creek face a severe threat from sea-level rise—one that could eventually force them to abandon the area. The development would be flood-resistant and transit-oriented, dense with mixed-use buildings and affordable housing, but also with a health clinic, backup generators, and other resources that could come in handy during disasters.

At a charette in November, designers Gustavo Sanchez-Hugalde, Max Zabala and University of Miami professor Sonia Chao presented their idea for a flood-resistant transportation hub at Northeast 125th Street. It would be transit-oriented development, dense with mixed-use buildings and affordable housing, but also with a health clinic, back-up generators and other resources that could come in handy during a disaster.

“Think of these as not just transit but resilience stations,” said Chao.

In the long run, South Florida’s scarcity of higher ground could also make its elevated areas more valuable as waters rise. That could exacerbate gentrification in minority neighborhoods with relatively high elevations like Liberty City and Little Havana.

“It’s a matter of time until investors will head for the higher land,” said James Murley, chief resilience officer for Miami-Dade County.

But climate change isn’t forcing people out of their homes just yet. Asked if climate change is a driving force for gentrification in Miami, Murley is skeptical, but others are starting to look toward the future.

“Right now we’re experiencing more of the classic gentrification that comes with a growing real estate economy,” Murley said.

While the mainland mulls long-term plans to adapt to rising seas, the coastal barrier island of Miami Beach is busy building.

Planning For High Water

Over the next five years, the municipality of Miami Beach will spend $400 to $500 million on flood defenses, installing 80 new pumps, raising roads, and strengthening seawalls across the city. So far the city has funded about $200 million of that project by more than doubling stormwater fees.

A law passed last year requires the owners of buildings larger than 7,000 square feet to pay a fee if they don’t get certified as at least LEED Gold. The builders of properties that don’t get LEED certified at all get slapped with a fee equal to 5 percent of their construction costs. That could help raise money for future infrastructure investments.

Miami Beach also requires new buildings to be at least one foot above the base flood elevation of six feet above sea level. As an additional incentive for developers, the city won’t count the raised elevation of a flood-proofed site toward the project’s height limit or floor-to-area ratio.

Miami Beach environment and sustainability director Elizabeth Wheaton said the new requirements wouldn’t stunt development.

“Developers want to build here,” Wheaton said. “They’re going to do what’s required.”

The first building completed under the new elevation requirements is Jean Nouvel’s Monad Terrace, a 59-unit luxury residential tower on the waterfront in South Beach. Nouvel built Monad Terrace’s ground floor more than 11 feet above sea level, elevating all of the building’s interior spaces and its entrance high enough to ward off flooding.

Building high is an increasingly popular choice for private residences, too. The local architect Rene Gonzalez, known for his high-end modernist houses, is building four new homes in the area that are modeled on mangroves—propped up with stilts and columns for an additional layer of privacy that also affords the owner some long-term insurance against flooding. Gonzalez designed his own home on Belle Isle the same way.

“It’s a responsibility that every architect should take on,” said Gonzalez. “Building a house up is not a luxury. It’s a necessity in our current environmental climate.”

For now, however, most of that work is clustered in tony Miami Beach. In Miami-Dade County at large, where nearly half of all residents live in poverty, there are fewer options.

Because saltwater rises up through South Florida’s porous limestone bedrock, it’s not just coastal communities that are at risk. Many of the most threatened areas lie miles inland, in suburban and often low-income areas of Miami-Dade and Broward County that can’t afford to elevate all their homes and streets.

“It’s unavoidable that there will be relocations,” said Anthony Abbate, an architect based in Fort Lauderdale in Broward County, just to the north of Miami-Dade. “It’s a difficult conversation but I think we’re on the verge of having it. This has to be a conversation with the people, with the public.”

Miami-Dade is in the middle of a vulnerability analysis for major infrastructure, from its airport to its water system, identifying “adaptation action areas” where city planners might best focus their efforts.

“There’s a lot of work that needs to be done and it needs to be done in short order,” said Abbate.

Some of that work is already underway. The newest addition to the county’s hospital system will pioneer a flood-friendly approach in the recently incorporated town of Doral, just west of Miami International Airport. Designed by Perkins + Will, Jackson West hospital will devote most of its 27 acres to green space and a retention pond to store runoff not just from the built-up part of the site that will house the hospital, but from the developments surrounding the site. Construction is set to begin later this year and the hospital could open in 2020.

Risk And Reward

Perhaps before it faces up to the force of nature, however, South Florida may have to reckon with its runaway real estate market. Wayne Pathman, a land-use attorney and chair of Miami’s Sea Level Rise Committee, said the face of Miami’s climate crisis might not be a natural disaster, but a collapse of the insurance market.

“Flood insurance is going to be the tip of the spear,” Pathman said. “Unlike hurricanes, which are a single event that may not happen for years at a time, sea-level rise is a constant. Once it’s here, it’s here, and it’s never going to get better.”

Pathman said some of his clients with property in Miami Beach and North Beach are already seeing a 500 percent increase in their flood insurance premiums. For now, that’s manageable, he said, because they were probably underpriced in the first place.

“When that jumps as high as $50,000 over the next 10 years, which it will, that’s alarming,” Pathman said.

Areas that today flood two or three times each year could see water in the streets every week, and banks may stop offering mortgages there. That could have ripple effects across the region, Pathman said, jeopardizing tourism dollars and property-tax revenue that Miami-Dade and Broward counties will need to fund new climate-resilient infrastructure.

“Those are our only two industries here in South Florida,” Pathman said. “If we don’t start dealing with the insurance risk, all the ideas we come up with for future infrastructure will be cost-prohibitive because we won’t have any money.”

Reinaldo Borges, an architect who sits on the sea-level rise committee with Pathman, said the luxury houses and museums already built to deal with higher seas show climate-resilient design can provide a return on investment.

“If you design correctly,” Borges said, “you shouldn’t be worried about insurance risk.”

Borges has a checklist for clients who are looking to invest in the future of Miami real estate—not just flip property for a profit. It includes elevating building mechanical systems, installing hurricane-proof windows, and planning for severe floods.

“For a building like that, all you have to do before a storm is bring your pool chairs inside,” Borges said.

Climate-proofing one building may be a straightforward design problem. Saving a metro region of 7 million is something else.

Borges came to Miami when he was six years old, brought from Cuba by parents who sought a better life for their children. Today he has two daughters, ages 23 and 29, and he has the same hope for them.

“When you’ve got political leadership in denial, these are challenges I’m concerned about,” said Borges. “This is a world-class city, but people are starting to ask if this is the place they really want to invest.” 

 

Source: The Architect’s Newspaper

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No Comments March 7th, 2017 Commercial Property, Storm Preparation

Rental Properties Make Good Investments, But Come With Risk

Maybe your financial house is in order.

Your debt is manageable or paid off. You have an emergency fund and now you’re looking for ways to grow your wealth. Or, perhaps you’re planning ahead by learning about different investments options. Have you considered becoming a landlord?

Rent prices tend to rise over time, providing an inflation-protected income into your retirement years. You also might be able to cash in big later if the unit’s value increases. It doesn’t always work out that way, though. Some landlords wind up with a trashed property after evicting a tenant or lose their savings in a natural disaster. In between the extremes of easy, hands-off income and total ruin are the everyday concerns, benefits and risks that most landlords face.

Landlord Risks

Investment property mortgages tend to be a little more difficult and costly to secure than primary residence mortgages. It can also be harder to take cash out of investment properties – either with a cash-out refinance or a home equity line of credit. In other words, you might not have access to the money during an emergency.

Owning a rental property outright can be risky as well. Especially if you’re placing a significant amount of your savings in a single investment, the lack of diversification could put you in a precarious situation.

Those aren’t the only risks you could face when owning a rental.

  • Finding and keeping good tenants. Landlords learn from experience that it’s worth leaving their rental empty for a month or two rather than pay for an eviction or expensive repairs later. You can pay for professional tenant screening reports or credit reports and call applicants’ references before offering a lease.
  • Covering your expenses. Between taxes, insurance, repairs, maintenance and mortgage payments the monthly and one-off costs can quickly stack up. Some landlords lose money because their rental income doesn’t cover their expenses, but they won’t be able to attract tenants if they raise it. If the housing and rental markets drop, you could be stuck losing money each month or selling the property at a loss.
  • The time or cost of managing a rental property. Becoming a landlord is often far from a hands-off job. When the phone rings in the middle of the night because the roof is leaking, you’ll need to figure out how to solve the problem. You may be able to hire a property management company to take on this work for you, but they often charge about 8 to 12 percent of your rental income or a flat monthly fee.

Even with the risk involved, there are countless examples of successful landlords. Many find the experience so rewarding that they purchase additional investment properties.

Financial Success

What separates the successful and sorrow-filled landlords? Luck certainly comes into play, but you can also take steps to get started on the right foot. Try to determine a property’s capitalization rate, the estimated annual return, before making an offer. To calculate the capitalization rate, divide the annual net income by the property’s purchase price.

Your net income will be your rental income, which you can approximate based on rental prices for similar properties, minus your costs, such as maintenance, upgrades, vacancies and emergencies. You may need to consult an accountant to understand how your new tax situation can affect your costs.

Cap rates tend to change depending on the area and type of property. But regardless of what’s considered “good” in your area, you can use this formula to compare different investment opportunities.

Bottom Line

Many people focus on the positives of owning investment property. An extra income and potential to build equity with their tenants’ money seems too good to be true, and it just might be. If you’re going to be successful, you should acknowledge the risks that come with the territory and plan accordingly.

 

Source: The Gilmer Mirror

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No Comments February 14th, 2017 Commercial Property, Latest News, Storm Preparation

5 Business Insurance Gaps To Patch Before Disaster Strikes

From a family-owned winery to a growing startup in Silicon Valley, it can be difficult enough for a company to keep up with the daily demands of running a business, let alone remember to update their insurance.

As a result, businesses tend to overlook certain areas of insurance coverage. The beginning of the year is a great time to review your policy and ensure your business is protected. As those policies are reviewed, here are five things for business owners to consider:

1. Business Income Coverage

Should something happen to your business, you may think you’ll close up shop for only a week or two. Unfortunately, business owners tend to overlook or underinsure for this type of protection. While property insurance covers the physical damage to a structure, business income coverage covers the additional costs caused by a business interruption. The coverage is designed to be applicable for all businesses, in order to put a business back in similar financial position prior to the incident.

For example, consider natural disasters, such as wildfires or severe winter storms. Monterey County witnessed this last summer with the devastating Soberanes fire, cited as the most expensive wildfire in United States history. Powerful winter storms have flooded the region already this winter while heavy snow hit the Sierra Nevada and triggered an avalanche just west of Lake Tahoe. And that’s just the short list.

When damage occurs from these instances, reconstruction or repairs can take much longer than expected due to stretched resources. Your business needs to be covered for that loss of time and lack of income. Consider permit acquisition, municipal building inspections, and supply and contractor availability. This must all be considered, when insuring for loss of income.

2. Building And Ordinance Coverage

Business owners who own and operate older buildings, this one is for you. While it’s easy to underinsure or disregard this coverage, it’s a good idea to reconsider. Depending on the age of your building, municipal building codes can require extensive updates to an entire building even if only a portion is damaged. For the best protection, and to avoid additional out-of-pocket expenses to rebuild, you should add the cost of updating the entire building when you purchase insurance.

3. Umbrella Coverage

Business owners should consider umbrella liability coverage to add an extra layer of protection. The umbrella of liability is essentially a safety net in the event of a large claim and when your existing policies require extra limits to cover the unforeseen costs. Usually for only a fraction of the cost of the package or auto policy, you can extend their liability coverage dramatically by adding this. The coverage provides extra protection, and can be tailored to the needs of different business types.

4. Business Name Change Or Reorganization

When a business undergoes a name change, rebrand or reorganization, it’s important to update the insurance policy to reflect those changes. For example, what if your company transitioned into a limited-liability corporation? Insurance updates will ensure that entity is included for liability coverage and that any checks issued to cover damages are made out to the correct entity. Otherwise, there could be a significant delay in your benefit provisions.

5. Review Your Policy Ahead Of Each Renewal

A best practice for business owners is to review and renew their insurance policy 90 days prior to the start of the next term. Companies should have an established process in place, and maintain a strong relationship with their insurance agent to ensure their policies are updated. The agent should understand the nuances of what makes your business tick and what you need to protect it.

As with any type of insurance, business insurance is there to protect your business for the unexpected. Work with an agent who knows your community and industry, someone who emphasizes personalized, local-decision making and expertise. By doing this, you can have the confidence to take on the challenges of your daily business and hopefully — with more peace of mind.

 

Source: North Bay Business Journals

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No Comments October 12th, 2016 Commercial Property, Latest News, Other Commercial Lines, Storm Preparation

Will Your Insurance Cover Hurricane Matthew’s Damage?

Hurricane Matthew has come and gone but many Southeastern cities are picking up the pieces. The Atlantic Coast is reporting major flooding and the death count is up to 19.

Commercial real estate owners are surveying the damage.

GlobeSt.com caught up with Clark Schweers, Forensic Insurance and Recovery practice leader at BDO USA, to glean some insights in the aftermath of the deadly storm. He shares his perspective on Hurricane Matthew’s business disruption and implications in the real estate industry in this exclusive interview.

“From an insurance perspective, there doesn’t need to be physical damage to trigger a claim,” Schweers tells GlobeSt.com. “Commercial owners might have, or could consider adding, other types of coverage into their policies. It’s important to consider ancillary provisions when determining what the financial impact is to your business, and to protect against potential losses in the event of a natural disaster.”

Specifically, Schweers points to ingress and provisions within a property insurance policy is particularly valuable for businesses located on islands in the path of a storm. If a natural disaster or weather event results in a partial or complete inability for guests or customers to reach a particular asset, he says, this coverage allows a business to make an insurance claim.

“For example, a hotel on a barrier island might sustain no physical damage, but a bridge connecting the island to the mainland may need to be closed for inspection or damage,” he says. “That would restrict guests’ access to the location.”

Then there’s loss of attraction coverage. This allows a commercial business to make a claim if damage or closure to facilities or attractions that drive business to the asset or insured location occurs.

“From a real estate perspective, construction demand has been skewed toward coastal properties in recent years, and there have been relatively few natural disasters of similar magnitude to Hurricane Matthew in the last decade,” Schweers says. “As a result, the real estate industry has responded very well to consumer demand to develop condos, apartments, hotels, shopping malls and other assets around coastal population centers.”

As Schweers sees it, there’s rightful concern in the commercial real estate industry right now. The assessments on damage are not yet in, but it doesn’t look good.

“In the case of Hurricane Matthew, this is an unprecedented and unique storm whose path was uncertain,” Schweers says. “The potential damage area extended along hundreds of miles and several states, which could expose landlords and REITs with assets in these areas to potential financial repercussions.”

 

Source:  GlobeSt.

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