real estate

America’s Great Climate Exodus Is Starting in the Florida Keys

Posted on September 27, 2019 by abrahamwien18

By Prashant Gopal
View the original article here.

Mass migration begins as coastal homes are bulldozed in the state facing the biggest threat from climate-driven inundation.

Lori Rittel’s home in Marathon Keys, on Sept. 16

Lori Rittel is stuck in her Florida Keys home, living in the wreckage left by Hurricane Irma two years ago, unable to rebuild or repair. Now her best hope for escape is to sell the little white bungalow to the government to knock down.

Her bedroom is still a no-go zone so she sleeps in the living room with her cat and three dogs. She just installed a sink in the bathroom, which is missing a wall, so she can wash her dishes inside the house now. Weather reports make her nervous. “I just want to sell this piece of junk and get the hell out,” she said. “I don’t want to start over. But this will happen again.”

Lori Rittel

The Great Climate Retreat is beginning with tiny steps, like taxpayer buyouts for homeowners in flood-prone areas from Staten Island, New York, to Houston and New Orleans — and now Rittel’s Marathon Key. Florida, the state with the most people and real estate at risk, is just starting to buy homes, wrecked or not, and bulldoze them to clear a path for swelling seas before whole neighborhoods get wiped off the map.

By the end of the century, 13 million Americans will need to move just because of rising sea levels, at a cost of $1 million each, according to Florida State University demographer Mathew Haeur, who studies climate migration. Even in a “managed retreat,” coordinated and funded at the federal level, the economic disruption could resemble the housing crash of 2008.

The U.S. government’s philosophy has been that local officials are in the best position to decide what needs to be done. Consequently, the effort has so far been ad hoc, with local and state governments using federal grants from the last disaster to pay for buyouts designed to reduce the damage from the next one.

“The scale of this is almost unfathomable,” said Billy Fleming, a landscape architecture professor at the University of Pennsylvania. “If we take any of the climate science seriously, we’re down to the last 10 to 12 years to mobilize the full force of the government and move on managed retreat. If we don’t, it won’t matter, because much of America will be underwater or on fire.”

If not for the $174,000 that Rittel, 60, owes on her mortgage, the Montana transplant would have left long ago. Insurance money is insufficient to rebuild, so she applied for one of the buyouts, administered by the state with $75 million of Irma-relief cash from the U.S. Department of Housing and Urban Development, as long as it lasts.

The inside of Lori Rittel’s home.
Photographer: Jayme Gershen/Bloomberg

Florida accounts for 40% of the riskiest coastal land in the U.S., according to the Union of Concerned Scientists, but it’s done little so far to pull people back from the coasts and lags behind states such as New Jersey, North Carolina and Texas. Across the country, the effort is still more theory than practice, even as a consensus among planners grows that “managed retreat” may be the best of bad options.

This year, HUD made available $16 billion for climate resilience, its first dedicated fund to fortify for future storms. Nine states, plus Puerto Rico and the Virgin Islands, will decide how to use it, whether to build sea walls, put houses on stilts or move people out of the way. The money is a fraction of what’s needed, and the process is moving at the speed of government.

A study by the Natural Resources Defense Council this month found that buyouts by the Federal Emergency Management Agency, which responds to disasters, take five years on average to be completed. By that time, many homeowners have rebuilt or moved. Similar data isn’t available on the grants from HUD, which also provides money to demolish homes.

“It’s a slow-motion emergency,” said Rob Moore, director of NRDC’s water and climate team. “But it’s happening right now. These last three hurricane seasons show us what it kind of looks like.”

A FEMA spokesman said the agency supports the voluntary acquisition of flood-prone structures and provides the grant funding, but the prioritization of projects happens at the local level first and then by the state acting as the recipient. The agency believes each county floodplain manager and local official knows the needs of their communities best and are responsible for land usage and permitting.

About 6 million Floridians will need to move inland by century’s end to avoid inundation, according to Hauer, the demographer, in a 2016 paper. By then, about 80% of the nearby Keys, the archipelago that includes the tourist mecca of Key West, will be underwater. About 3.5 million people would be flooded in South Florida’s Miami-Dade and Broward, the two counties with America’s biggest exposed populations.

“Florida’s doing it at a really small scale,” said A.R. Siders, an assistant professor at the University of Delaware who studies climate adaptation. “Compared with the new housing units going up in South Florida, I don’t know if that would even cancel out.”

Here Comes the Flood

Number of people at risk by county from a sea level rise of 1.8 meters

Florida State University demographer Matt Hauer

But Florida runs on tourism and real estate revenue, and managed retreat is a phrase that makes real estate listing agents nervous. But there’s another Florida housing bubble waiting to pop. The Union of Concerned Scientists warns of a coming housing crash — from Miami to San Mateo, California — on a scale worse than last decade’s foreclosure crisis, caused by climate change — from flooding to heat waves and wildfires.

Cities are only starting to grapple with where to resettle residents, and how to transport communities and hometown identities. And homes on higher ground will also demand higher prices, worsening an affordability crisis.

Fifteen years after Hurricane Katrina, Louisiana is trying to relocate the Native American settlement of about 100 people on the Isle de Jean Charles, a narrow island that lost 98% of its land over the past six decades to climate change. It’s working with a $48 million grant from HUD for buyouts and to help them start anew on a 500-acre sugar cane field 40 miles north that the government will populate with homes and businesses. Importantly, it will be 9 feet above sea level. All but three of about 40 households have signed on.

“They’re starting to scale this up,’’ said Jesse Keenan, a social scientist at Harvard University who also specializes in climate adaptation. “This is about building up institutional knowledge on how to do this.’’

New Jersey has a $300 million fund for buyouts and has purchased hundreds of houses since Superstorm Sandy in 2012, though like Florida, even more homes have been built on the coast in the meantime. Harris County, Texas — which includes Houston, ravaged by a series of storms including 2017’s Harvey — has done more than 3,000 FEMA buyouts, more than any other county in the U.S., according to NRDC.

In Monroe County, Florida, where Rittel lives, the planning is just beginning. The county has applied for $5 million of the HUD money — the state maximum. Already, about 60 local homeowners have applied, so it will require triage. Senior citizens, families and residents in the riskiest flood zone would get priority, said Assistant County Administrator Christine Hurley.

Rittel isn’t sure how long she can hang on.

Her insurance payout of about $100,000 would cover repairs to the 640-square-foot house. But the county requires that when more than 50% of a home is damaged, that it be completely rebuilt to meet modern storm-resiliency codes and — in her flood zone — on stilts. That would cost at least $200,000, money she doesn’t have.

She dreams of resettling in Key West or Homestead, a safer spot on the Florida mainland.

“I’d like to take the money and run,” Rittel said. “But I’ll have to buy something on stilts. I’m not buying anything on the ground down here ever ever again.”

This story is part of Covering Climate Now, a global collaboration of more than 220 news outlets to highlight climate change.

You have checked all the boxes on your due diligence checklist; but have you assessed the Climate Risk of Your Real Property Investment?

Posted on June 21, 2019 by abrahamwien18

By Paul L. Jones, CPA, May 13, 2019

In his legal commentary posted on April 1, 2019, my colleague, Rick Jones, a partner with Dechert LLP, a leading law firm serving the Commercial Real Estate Debt Market, opened with “I’m finally writing about climate change… not because 97 out of 100 scientists are shouting at us incessantly about the need to do something, but because I am dead certain that there are real and fairly immediate risks associated with the public reaction to the perception or awareness (take your pick) of the climate change risk which will drive regulatory intrusion on both the state and federal level, will drive legislation and moreover, will inform market reaction to lenders, investors, developers and their properties because of their climate change posture or profile.”

The esteemed Mr. Jones continues: “Where do we start? We are already seeing some commercial real estate owners begin to adapt to regulatory change. Look at the fantastic engineering marvel which is the Hudson Yards, built 40 feet above sea level, with its storm management system and its fortress-like power system designed to survive a mega storm. That’s expensive. It was clearly purpose driven. We should ask what made them, a bunch of smart folks, put up the money. I guarantee it wasn’t frivolous. I would suggest to you that it’s a sign of things to come. More generally, we are also seeing more solar, more green building technology and more innovations in engineering and in general more willingness to pay real money to address environmental concerns.”

New York has a wet climate, and water – from hurricanes, flooding, storm surges and even blizzards – is one of its primary environmental challenges throughout the year. Of course, buildings in NYC also endure seismic activity, high heat loads in the summer, power outages, manmade disasters like those produced by terrorist attacks as well as high humidity and year-round precipitation.

On the Pacific coast, seismic considerations are a primary concern as well as danger from wildfires, flash floods, and drought.

For most of my career serving the real estate industry, I have primarily conducted due diligence and providing underwriting and financial feasibility analyses for buyers, investors, lenders and capital market participants.

We usually start with a checklist of due diligence and underwriting items which typically includes:

reviewing historical operating statements and related reports,
abstracting leases and tenant correspondence records,
getting a title abstract, checking the flood zone,
obtaining and reviewing a property condition assessment (PSA) and a Phase 1 environmental site assessment (ESA), and
evaluating all legal and contractual arrangements that may affect the income and expenses of the property.

But, if you are like most real estate investors, you have missed one item which affects all properties and portfolios: the risk resulting from climate change and sea level rise as well as man-made hazards: You still do not know how sustainable and resilient the income and future value from your investment is.

Beginning about five years ago, my clients started to ask questions regarding the potential effect of climate change and sea level rise on the sustainability and resiliency of the property.

It is important to note that the risk to real property assets – which are immovable by their nature – exists regardless of whether you believe humans have caused climate change, or not.

In fact, my client chose to divest of assets in Miami in order to buy assets in locales without the risk of sea level rise and our screening process involved an informal, yet substantive, assessment of the risk from climate change – no matter the location of the property.

In an article entitled “What does resilience mean for commercial real estate” by Ryan M. Colker published in the September/October issue of BOMA Magazine, he opens with the following observation:

“Around the world, the frequency, intensity and impacts of natural disasters are increasing. These events can significantly affect the social, economic and environmental functionality of communities. The ability of commercial buildings and the businesses they house to adequately prepare for such events and quickly return to full operations—a quality known as resilience—contributes significantly to a community’s ability to bounce back. In addition to the community-wide impacts, the state of individual buildings also can affect the long-term viability of the businesses that occupy those buildings.”

For a multi-family, commercial or industrial building, we at Emerald Skyline define building resilience as “the ability of the systems and structure to protect, maintain or restore the value of, functionality of, and income generated by a property after a damaging event or calamity – whether it is from a weather event or a man-made circumstance – within a pre-determined acceptable timeframe.

A widely-cited 2005 study by the Multi-hazard Mitigation Council (MMC) of the National Institute of Building Sciences “documented how every $1 spent on mitigation saves society an average of $4.

In a 2018 interim update report by the MMC found that costs and benefits of designing all new construction to exceed select provisions in the 2015 IBC and the IRC and the implementation of the 2015 International Wildland-Urban Interface Code (IWUIC) resulted in a national similar benefit of saving $4 in future losses for every $1 spent on additional, up-front construction costs.

In a report published last month (April 2019) by the Urban Land Institute (ULI) and underwritten by Heitman LLC (Heitman) entitled “Climate Risk and Real Estate Decision-making,” the authors note that:

“In 2017, the year Hurricanes Harvey and Maria hit the United States and storms battered northern and central Europe, insurers paid out a record $135 billion globally for damage caused by storms and natural disasters. This figure does not represent actual damages, which in the United States alone equaled $307 billion, according to National Oceanic and Atmospheric Administration estimates.”

In the Foreword, Ed Walter, Global CEO, ULI, and Maury Tognarelli, CEO, Heitman, highlight the need to address sustainability and resiliency:

“Failure to address and mitigate climate risks may result in increased exposure to loss as a result of assets suffering from reduced liquidity and lower income, which will negatively affect investment returns. At the same time, investors who arm themselves with more accurate data on the impact of climate risks could help differentiate themselves and benefit from investing in locations at the forefront of climate mitigation.”

And the industry – especially among institutional investors – is taking note. “Many leading investment managers and institutional investors are undertaking flood, resilience, and climate vulnerability scans of their portfolios. These mapping exercises seek to identify the impacts of physical climate risks on their properties, including sea-level rise, flooding, heavy rainfall, water stress, extreme heat, wildfire, and hurricanes. Potential impacts being considered range from physical access and business disruption for tenants to the effects that longer-term temperature increases or increased wear and tear on buildings could have on operating and capital expenditure requirements. The ultimate objective for the investment community is to understand how climate will affect asset liquidity and, as a result, returns, in terms of both income and capital growth.”

The results of the survey conducted in preparation of this report, the researchers found that industry participants continue to rely on insurance companies to cover potential losses from physical damage due to a natural disaster – but they astutely point out that insurance “does not protect investors from devaluation or a reduction in asset liquidity.” They categorize the climate risks either physical or transitional risks as follows:

“Physical risks are those capable of directly affecting buildings; they include extreme weather events, gradual sea-level rise, and changing weather patterns.

“Transition risks are those that result from a shift to a lower-carbon economy and using new, non-fossil-fuel sources of energy. These include regulatory changes, economic shifts, and the changing availability and price of resources.

“The location-specific physical threats posed by factors such as sea-level rise, hurricanes, wildfires and forest fires, heat stress, and water stress are among the most easily observable risks to real estate investment. They are a particular concern since many key markets for real estate investment are in areas exposed to the physical impacts of climate change.

These risks and their potential impact on real estate is summarized in the following table.

So far, according to the ULI report, “…most investment managers and investors for directly held assets currently use insurance as their primary means of protection against extreme weather and climate events.” However, “leading companies in the industry … are modifying existing decision-making and management processes to add climate and extreme weather-related factors to those being considered alongside other risks and opportunities.

The National Infrastructure Advisory Council (NIAC) in a 2009 repot characterized resilience as having four key features known as the “4-Rs”:

Robustness: the ability to maintain critical operations and functions in the face of crisis.
Resourcefulness: the ability to skillfully prepare for, respond to and manage a crisis or disruption as it unfolds.
Rapid recovery: the ability to return to and/or reconstitute normal operations as quickly and efficiently as possible after a disruption.
Redundancy, back-up resources to support the originals in case of failure that should also be considered when planning for resilience

From the Whole Building Design Guide, a program of the National Institute of Building Sciences (NIBS), understanding the relationship between Asset (Building) resilience and the community’s resilience requires an understanding of the distinctions and relationships between risk, resilience and sustainability as follows:

Risk is expressed as the relationship between a particular hazard or threat that may degrade, or worse, devastate, the building’s security, operations and functionality and the consequences that result from this degradation of performance.
Resilience is the ability of a building or asset to recover from, or adjust, easily to misfortune or change. The ability to prepare and plan for, absorb, recover from, or more successfully adapt to actual or potential adverse effects as reflected in the aforementioned Four Rs.
Sustainability of an asset is determined by its ability to meet the needs of the present while being able to maintain its functionality over time without not being harmful to the environment or depleting natural resources.

The following diagram created by Mohammed Ettouney and Sreenivas Alampalli in their books on Infrastructure Health in Civil Engineering, presented the relationship of threat, vulnerability and consequences to risk as follows:

Recognizing the need for sustainability and resiliency due diligence, Emerald Skyline Corporation has developed a Sustainability and Resiliency Assessment (SaRA Rating^©) Rating system to provide commercial real estate investors with a complete picture of the risk associated with a particular property or investment. The information not only helps investors and owners but also provides lenders, insurers and tenants with information relevant to their decisions.

SaRA Rating^© incorporates an assessment of the physical attributes of the property – including incorporation of information obtained from traditional due diligence procedures with additional procedures to determine the relative risk, resiliency and sustainability of the property over the investment horizon.

The physical review of the property is conducted in conjunction with the Phase I environmental site assessment and the property condition assessment and includes a review of the property’s resiliency features like hardened walls, raised electronic and network connections, secondary systems.

No building operates in a vacuum: Its resiliency, in particular, is directly connected to its location and is directly affected by the surrounding neighborhood, the community, and natural and man-made risks (hazards).

Based on a property-specific assessment including use of mapping services, our team of professionals evaluate a building’s resiliency and sustainability resulting in a rating from 1, not resilient or sustainable (High Risk) to a 5 (Highly Resilient). Our objective is to provide investors with the information they need to make prudent investment decisions that account for the physical, environmental and social risks to the cash flow stream and market value of the building.

At the conclusion of our procedures, we identify land and building improvements that would enhance a property’s resiliency and sustainability. The economics of each improvement or enhancement is assessed in a cost-benefit analysis.

We then evaluate the tradeoffs between performance of a building over its life-cycle and the cost of improving the building systems to ensure its sustainability and resiliency. Accordingly, we evaluate the total cost of ownership (TCO) by determining the capital cost of the property including any improvements plus the present value of the future expenses of operations, maintenance, utilities and the estimated cost to recover from a calamity.

Further, armed with the SaRA Rating^© and report, the stakeholders can incorporate current and prospective tenant/user demand for the space in the building given the cost of occupancy and resiliency as well as investor demand and potential pricing for the asset. A resilient and sustainable asset will combine low-cost operations due to sustainably-reduced energy and maintenance costs and managed insurance expenses while maximizing the net cash flow and long-term value of the property.

The objective of all due diligence – including and especially the assessment of all the risks of ownership – is to optimize the overall returns on the investment while quantifying and minimizing the risks and costs to achieve those goals – that is the purpose of Emerald Skyline’s Sustainability and Resiliency Assessment Rating^© system – your one-stop resource to measure and manage climate risk in the real estate industry.

For more information, contact Paul L. Jones, CPA, Phone: 786-468-9414; email: [email protected]

When assessing risk and reward in acquiring commercial real estate – be sure to cover all your bases including sustainability and resiliency

Posted on September 3, 2015September 3, 2015 by abrahamwien18

by Paul L. Jones, CPA, LEED Green Associate

It is a great day – you have just put a property you like under contract. Now the work begins…conducting your acquisition due diligence. You know the program:

Obtain the deliverables from the seller
Research title for exceptions and obtain insurance binder
Ensure compliance with building and zoning codes
Engage the appraiser
Hire an engineer to conduct a property condition assessment
Hire an environmental engineer to prepare a Phase I environmental site assessment
Abstract leases and agree to the rent roll, check expense pass-through calculations and conclude on in-place and prospective income
Analyze the market and assess the property’s competitive profile including Green certification, utility expenses (electricity, gas, water and waste) and resiliency
Review all existing contractual relationships and obligations, including property maintenance, service and other agreements, warranties (equipment, roof, elevator, etc.)
Obtain property insurance quote and coverage binder
Establish the veracity of the operating statements and establish an operating budget
Update the cash flow forecast and yield assessment to evaluate the purchase price and desirability of the investment

What if I were to tell you that with all this work, you may not have covered all your bases. Let’s go back to the purpose of your acquisition due diligence: to ensure that you are getting what you thought you were getting and to assess, eliminate or quantify the risk and rewards in the investment.

Just like your market analysis which looks at both current conditions as well as the pipeline of future competition and the affordability of new competitive construction; In a rapidly changing environment, it is important for purchasers and investors in real estate to evaluate the property’s operating and energy efficiency, indoor environmental quality and resiliency as well as anticipate future environmental, regulatory and operating conditions.

Regardless of your personal position on climate change and sea level rise, commercial real estate is going to be affected – and because of real estate’s primary characteristic – it is immovable – the effects can be significant.

According to the report, “Risky Business: the Economic Risks of Climate Change in the United States” which was published last summer, “If we continue on our current path, by 2050 between $66 and $106 billion worth of existing coastal property will likely be below sea level.”
FEMA is anticipating a 45% growth in the areas susceptible to flooding due primarily from sea level rise by the end of this Century – just 85 years away.
According to the Institute for Market Transformation, “fourteen cities, two states and one county in the United States have passed laws requiring benchmarking and disclosure of energy use in buildings.” To learn more about where and under what conditions benchmarking is required, go to org. (FYI – these requirements are soon to affect over 5 billion square feet of space AND the EPA estimates that buildings that are benchmarked save an estimated 7% in energy over three years).

I live in Miami. Last week, we were in the cone of TS Erica which looked like it could grow into a hurricane. Businesses and people in South Florida began making preparations by buying staples like gas, batteries, non-perishable food supplies and reviewed their disaster plans. Thanks God the storm did not materialize and all we had was a hard rain which did cause flooding throughout our community. Climate change and sea rise are similar – you prepare for the worst and hope for the best. It does not hurt that in preparing for the worst, we actually are able to delay the time for the rise to occur (through a reduced carbon footprint). Accordingly, prudent investors are well advised to include the following additional due diligence procedures to assess the sustainability and resiliency risk inherent in the property.

Obtain information on the risks the local community experiences due to climate change which could range from increased storm intensity and flooding due to sea level rise, wild fires and water restrictions due to drought conditions, or increased utility usage due to higher average temperatures.
Obtain information on new or prospective municipal environmental requirements and evaluate the property leases and operations to determine the ease and cost of compliance.
- For instance, if benchmarking is going to be required, do the leases in place require the tenant to share utility usage information (if, as is the case with many properties, the tenant pays utilities directly).
In an era of increasing utility costs and more efficient lighting, HVAC and other systems, do the leases provide for a proper sharing of the cost of replacing the equipment if it results in a reduction in utility usage? See my article on Green Leases in the Sustainable Benefits archives.
Obtain current and prospective FEMA flood maps to ascertain the risk and timeline the property will be in a flood zone in the future.
If the property is not a Green-rated building (LEED, EnergyStar, etc.), have the engineer assess the age and efficiency of the building systems.
From your insurance agent, obtain information regarding anticipated future availability and rate increases.
In evaluating the competitive leasing market, evaluate the relative absorption, rents, occupancies and tenant quality of Green buildings vs. traditional buildings to determine the market demand for sustainable buildings.
Evaluate the building’s ability to absorb and recover from to actual or potential adverse effects of stronger storms (wind and rain), higher storm surge and more frequent flooding in coastal areas or tornados, wildfires and dust storms in other areas. Each location has its own set of risks. Some resiliency due diligence questions to ask are:
- Is the building site and entrance flood-proof?
- Is the landscape design hazard-resistant?
- Does the building have back-up power systems including HVAC and water)?
- How secure is the interior environment from damage due to higher storm intensity?

The checklist of due diligence items and questions to be answered with regard to a property’s sustainability, resiliency and ability to comply with ever evolving government, insurance company and tenant requirements needs to be customized based on the location of the property as well as its class and quality.

In a November 2014 article, “Do-or-Die Due Diligence, Auction.com Vice President Andre Cuadrado warns “The due diligence process is one of the most important, yet challenging aspects of investing in real estate. If it’s not conducted thoroughly with a keen eye, an investor could end up with bad deals and lose millions of dollars.”

Cuadrado advises investors to spend the time and resources necessary to conduct due diligence thoroughly. “Some people try to save money on the process,” he notes, “but it’s expensive to be cheap when conducting due diligence, as your investment may end up not being what you thought it was.”

Remember, as Sun Tzu is quoted from The Art of War: “Every battle is won before it is even fought.” This is true for real estate investing as well – complete and thorough due diligence is the key to risk reduction and profit enhancement.

The breadth and depth of our experience and understanding of commercial real estate due diligence, sustainability and resiliency, Emerald Skyline Corporation is uniquely qualified to be your advocate in planning and executing your due diligence needs.

Now, let me tell you about this…

Posted on February 19, 2015 by abrahamwien18

10/22/14

By Paul L. Jones, Founder,
Director, Financial Advisory Services for Emerald Skyline Corporation

I freeze…become paralyzed in the face of danger or uncertainty. It is something that I am getting better at as I age but I still tend to become a deer in the headlights from time to time. In heated discussions, I never come up with the one line “Buzzinga” response until later – sometimes days later – when it is too late to be effective.

Does this happen to you? Or, are you one of the blessed people who know just the right response to any situation without giving it a second thought? Do you see a situation and instantly know and take the correct action to save the person from going into the undertow or stop the bleeding from a kitchen knife cut or have just the right response to win the debate?

We all respond to new circumstances differently. Some freeze, some panic and run, others deny what is happening like a child who pretends people cannot see him when he pulls his “magical” covers over his head. And, then, there are some charge forward full speed ahead.

Again, if you are like me, once you get over the shock of “is this really happening?” you assess the situation, spring into action and work feverishly to correct, or save, the situation….

Based on the muted reaction, or the “I am not a scientist so it does not exist” position of a significant number of our civic, community and business leaders, either they are in shock that the world’s climate can change so rapidly or they are in complete denial which is worse. The fact that many large American cities ranging from Galveston and New Orleans to Tampa, Miami and even as far north as New York City will be faced with significant issues from the rising sea level is still being debated among politicians reflects a similar approach to reality as the child with the magic blanket.

The news of global warming, now more appropriately referred to as Climate Change, is not new. Scientists have been ringing the warning bell for at least two decades. And yet we still do not want to believe.

Well, we are now starting to see the effects. Storms like Hurricanes Katrina and Sandy, increased flooding in cities like Miami Beach, increased tornado activity, the hottest year on record, and shrinking shorelines caused by sea level rise are now featured in the news on a regular basis.

Many government officials responsible for protecting the public from such events are joining in the chorus to raise awareness in order to make their job of obtaining public approval for a budget to install and maintain systems and equipment to reduce the damage from the effects of climate change feasible.

Yet, it is the real estate community that seems to most want to stick their head in the sand….For instance, last July, the Miami-Dade Sea Level Rise Task Force issued its report and recommendations. Shortly afterwards, the Miami Chapter of the American Institute of Architects held a meeting with Harvey Ruvin, Miami-Dade Clerk of Courts and Chairman of the Task Force, presenting the report. The meeting, which was broadly announced, had fewer than 100 attendees and almost no one from the real estate community was in attendance.

As reported in the June 2014 report “Risky Business: A Climate Risk Assessment for the United States”, it is apparent that climate change and sea level rise are going to have significant effects on the American global business community – and real estate, which has a particular distinction of being immovable, is going to be more impacted than most industries.

And yet. And yet the real estate community is acting as if it is business as usual. The level of interest in doing a sustainable retrofit has yet to make a significant impact on the market – especially for properties that are not seeking credit-quality tenants whose corporate sustainability policies encourage occupancy in LEED-certified buildings. (According to an article entitled “What’s Sustainability Wroth to Tenants?” by Paul Bubny of Cushman & Wakefield in the 10/28/2014 GlobeSt.com national eMagazine, ” Among the 37 real estate and sustainability directors at 23 US-based corporations surveyed by C&W, 74% see value in going to a sustainable building compared to a non-sustainable one.”¹

With the obvious costs to upgrade and improve the infrastructure – especially electrical and water and sewer utilities, as well as expected increase in insurance costs, a prudent reaction to the reality of climate change and sea level rise would be to put improvements in place now that reduce the consumption of water and power as well as to make a building less susceptible to damage from major hurricanes, storms and other weather events (like flooding).

We can only hope that real estate owners, investors, managers and tenants will soon realize that the future is now, overcome their “shock” of the impending calamity and start to take action. It is time to take action. The economic, environmental and operational benefits will be immediate and, if done right, sustainable.

And, as in any crisis situation, if you wait too long to take action, the results can be devastating. Let me know if I can be of service.

¹See (http://www.globest.com/news/12_975/national/office/Whats-Sustainability-Worth-to-Tenants-351877.html?ET=globest:e44644:11970a:&st=email&s=&cmp=gst:National_AM_20141027:editorial).

Miami weather forecast …rising tides, flooding and heat

Posted on February 19, 2015February 19, 2015 by abrahamwien18

8/13/14

By Paul L. Jones, Founder,
Director, Financial Advisory Services for Emerald Skyline Corporation

I live in Miami – it is my home. The other night I was watching the weather forecast. The August full moon, a “super” moon, was on Sunday. The forecaster gave us the news that the weather was going to continue to being in the mid-90s with afternoon thunder storms – summer in Miami, no news there (NOTE: All of the record high monthly record temperatures in Miami have been recorded since 1971). However, the forecaster continued to advise viewers who live on Miami Beach and other low-level areas that they may need their rubber boots in order to get to their cars in parking lots and to watch for flooding along the roadways….This is a fairly recent phenomenon – but one that is going to be a part of the forecast for years to come.

It has been a year since Rolling Stone published its article entitled “Goodbye, Miami” written by James Goodell (7/4/2013 Read more: http://www.rollingstone.com/politics/news/why-the-city-of-miami-is-doomed-to-drown-20130620?page=3#ixzz3A6oXVFId).

When the article was first published, most of Miami’s leaders scoffed at the article and the idea that Miami may not exist in 100 years. Perhaps it was the publication in which it was published or wishful thinking, but most of Miami’s (and Florida’s) business and political leaders decided to stick their head in the sand and ignore the increasing number of days in which our streets are flooded.

As reflected in numerous studies and many reports and articles, the world is warming. It does not really matter if it is natural or man-made – the facts are the facts – and this one will not be ignored for long. Along with the warming of the earth’s surface is a rising of the sea level resulting from both the melting of the ice caps and the expansion of the water as it warms….It has already risen almost one foot in the past century – and the pace at which it is rising is hastening.

Predictions are that the sea level will rise by two feet within 35 years and by up to one foot per decade thereafter – until the earth’s temperature stabilizes. At these levels – and with no actions put into place – Mr. Goodell’s prediction will surely come true.

The implications are immense: According to the report, Risky Business: The Economic Risks of Climate change in the United States, produced by the Risky Business Project led by former New York Mayor Michael Bloomberg and published in June:

“In Florida, because of porous limestone on which the major southern cities were build, even modest sea level rise comes at significant economic cost. Under current projections, between $15 billion and $23 billion (in today’s dollars) of existing property will likely be underwater by 2050, a number that grows to between $53 billion and $208 billion by the end of the century…An additional $240 billion in property will likely be at risk during high tide that is not at risk today.”

The impact of rising sea levels goes beyond flooded streets and imminent threat to property – and the impacts will grow exponentially as the sea rises and our leaders and citizenry remain immobilized – whether out of denial, ignorance or apathy.

Miami especially is vulnerable because of our low ground level (one quarter of Miami-Dade County is at less than 3′ above sea level) and our porous limestone plateau which Glenn Landers, senior engineer at the US Army Corps of Engineers likens to a block of Swiss cheese in Mr. Goodels’ article. A good analogy for the ground on which Miami (and all of South Florida) is built; but troublesome in the development of global solutions.

To its credit, Miami Beach has started to build pumping stations to reduce flooding – but this is only a stop-gap measure AND is being contested by home owners who feel it reduces the value of their property. This Stormwater Master Plan began with $206 million budget which is estimated to be half of the actual monies needed. The City is starting to raise fees and rates in order to pay for this program.

According to information in the website Sea Level Rise America, (www.slramerica.org), “Property owners of all types including developers, need to understand sea level rise issues and adaptation strategies. Those seeking to sell their properties will have to disclose to potential purchasers that their real property will be impacted by sea level rise and possibly higher taxes imposed by governments seeking to update public infrastructure projects such as storm sewers. Such adaptation projects will be necessary, but some will be controversial.”

SLR America identifies 26 legal and financial implications of rising sea levels on coastal communities – and many of these implications need to be addressed NOW: For instance, let’s take the disclosures in real property sales. “Simply stated, residential (and commercial) property purchasers in sea level rise threatened zones need informed notice and protection.” Just like sellers and real estate agents must disclose hazards due to asbestos and radon and lead-based paint, in order for sellers to be protected from future claims, property sales in 2013, when sea level rise is a known scientific fact, need to be accompanied by the disclosure of the potential impacts of sea level rise on the property.

We are not under water – yet! Last year, the Miami-Dade County Commissioners created a Sea Level Rise Task Force which issued its report on July 1st (Available here: http://www.miamidade.gov/planning/boards-sea-level-rise.asp) and provided six recommendations to the Commissioners. It is important that the real estate and business leaders support these recommendations and encourage the County government to dedicate the resources necessary to create and implement a plan that results in the survival of our fair City.

Meanwhile, building owners and managers can start now to make their properties more sustainable – which includes the ability to withstand increasingly harsh and violent storms with greater flooding from storm surge.

I have lived in tornado zones and earthquake zones and hurricane zones. The true benefit of living in a hurricane zone is that you have 3 – 7 days of advance notice. In those days, we prepare – we buy supplies and protect our properties against the coming storm. With climate change and the sea level rise, we are given just 40 years to prepare – it is time to start make our preparations – the weather forecast is not changing any time soon.