the “moneyball” of climate change” how to avoid …2019/09/25 · the “moneyball” of...
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The “Moneyball” of Climate Change”How to Avoid Mispricing Assets in a Changing World
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The “Moneyball” of Climate Change• The movie ‘Moneyball’ showed that, for a baseball team,
it’s all about buying runs on the scoreboard. Real estate investing and lending is all about earning an appropriate return. As measures for success, nothing else matters.
• But, many, if not most, industry professionals are under-estimating how more frequent extreme weather events and climate changes negatively impact current and future valuations and ROIs.
• New technologies now enable lenders, investors, appraisers and others to accurately, quickly and affordably obtain property-specific, risk assessments that will help prevent mispricing of real estate assets in loan originations and investment opportunities regardless of hold times.
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“Third Time in Three-Years”• Over the past 40-years, the number of natural
disasters causing financial losses in excess of $1 billion has risen steadily. Natural disaster insurance claims were the highest ever in 2017 at $144 billion, and most of the annual losses (a total of $337 billion) were uninsured.
• Wildfires in 2017 caused a record $21 billion in losses.
• The sequence of hurricanes Harvey, Irma and Maria in 2017 caused losses equivalent to 0.5 percent of the US GDP.
• Of the top ten costliest catastrophes ever recorded in the US, eight were hurricanes and four of the eight occurred in the past 7-years.
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Houston Tropical Storm ImeldaSeptember 2019
“The Times They Are A’Changin’”• “Averaged as a whole, the January 2019
global land and ocean surface temperature was 0.88°C (1.58°F) above the 20th century average and tied with 2007 as the third highest temperature since global records began in 1880.
• Only the years 2016 (+1.06°C / +1.91°F) and 2017 (+0.91°C / +1.64°F) were warmer.
• The ten warmest Januaries have all occurred since 2002, with the last five years (2015–2019) among the six warmest years in the 140-year record.”
• https://www.ncdc.noaa.gov/sotc/global/201901
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Increases in Tidal Flooding 2000-2019
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https://tidesandcurrents.noaa.gov/publications/Techrpt_090_2018_State_of_US_HighTideFlooding_with_a_2019_Outlook_Final.pdf
What’s the Problem, Here?• Very few financial institutions or real
estate owners/investors currently analyze holistic flood, natural hazard, and climate risks to properties, let alone life-of-investment risks from climate change and sea level rise;
• Lenders and owners/investors typically and exclusively rely on FEMA 100-year floodplain maps and Phase I audits to make their decisions;
• FEMA maps and Phase 1 audits are not enough.
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Automated Risk Assessment Tools
• Coastal Risk’s automated tools allow lenders, property owners and investors to identify properties that are particularly vulnerable to risks;
• This enables resources to be focused on vulnerable sites for further risk assessments or management, as the case may be.
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Freddie Mac Researchers Warn…• “Freddie Mac researchers warn that
lenders, servicers, and mortgage insurers could…suffer from significant losses. They stress that housing finance needs to take into account the dangers of climate change in protecting homeowners and the mortgage industry from losses.”
• “If these homes become uninsurable and unmarketable, the values…will plummet, perhaps to zero.----- Realtor Magazine, April 27, 2016
Single-family Home at King Tide, Fort Lauderdalehttp://www.freddiemac.com/finance/pdf/April%20Insight%2004%2026%2016.pdf
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FEMA Flood Maps Aren’t Good Enough• FEMA Flood Maps alone aren’t good
enough for intelligent decision-making in mortgage lending, buying, selling, protecting, and insuring.
• FEMA Flood Maps don’t include:
–Heavy rainfall flood risk
–NOAA Storm Surge models
–Climate change - tidal flood/sea level rise
– Full US fluvial, up-to-date coverages
http://insurancethoughtleadership.com/fema-flood-maps-arent-good-enough/
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Coastal Risk Heavy Rainfall Model
Hurricane Harvey actual flooding, Kingwood, TX
Hurricane Harvey Heavy Rainfall Flooding
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Sawgrass Mills Mall, Florida, Heavy Rainfall Flooding
Actual heavy rainfall floodingCoastal Risk Heavy Rainfall Model
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NOAA Storm Surge Higher Than FEMA BFE Risks
Extreme weather-related flooding
FEMA 100-year Flood PlainBase Flood Elevation
(6.44 ft. Elevation NAVD 88)
All other elevations calculated by Coastal Risk models
Indian Creek (80feet away)
Category 3 High Tide(4.4 ft. Elevation NAVD88)
1 ft. AboveBase Flood Elevation(7.44 ft. Elevation NAVD88)
Category 1 High Tide(3 ft. Elevation NAVD88)
Category 4 High Tide(6.6 ft. Elevation NAVD88)
Category 5 High Tide(8.6 ft. Elevation NAVD88)
King Tide 2045(2.74 ft. Elevation NAVD88)
King Tide 2016(1.66 ft. Elevation NAVD88)
King Tide 2030(2.12 ft. Elevation NAVD 88)
Category 2 High Tide(4 ft. Elevation NAVD88)
King tide / Sea-level rise flooding
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Mexico Beach – Category 5 Hurricane Michael Impact
Hurricane Michael Storm Surge Flooding
Coastal Risk modeling
Actual storm surge impacts
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Super Storm Sandy Water Street, NYC
Coastal Risk Storm Surge Model
Water Street Flooding
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Brickell Ave., Miami Hurricane Irma
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Jacksonville Chamber Building, Hurricane Irma
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Pacific Junction, IA Fluvial Flooding March 2019
Actual Flooding Fathom fluvial model
https://www.planet.com/pulse/how-fathom-leverages-frequent-satellite-imagery-for-dynamic-flood-maps/ 18
Coastal Risk Models “King Tides” – a “Threat Multiplier”
•From Dr. Brian McNoldy, University of Miami; Coastal Risk Science Advisor
The dates of annual extreme tides overlap with the Atlantic Hurricane Season.
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Christ and St. Luke’s Church, Norfolk, VA Tidal Flooding
Actual tidal floodingCoastal Risk’s Tidal Flood Model20
Mola Ave., Fort Lauderdale King Tides
Coastal Risk Tide Flood Model Actual King Tide Flooding
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Portfolio Risk Screening
Property-Level Flood Risk
Assessment
LossCalculations
Risk Mitigation Cost Estimation
RecommendSolutions
B-Resilient™ - A 5-Step Process to Accelerate Resilience
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Portfolio Risk Scoring – Step #1
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Step #2 - Property-Level Hazard Reports
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Step #3 - Damage-Loss Calculations – Property Level• Estimate economic loss for all flood scenarios,
including structure, contents and business interruptions;
• Enable property owners, operators, investors, and
insurers to make better decisions, faster.
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Step #4 : ROI - Resilience Investments and Adaptation
Calculateeconomic lossbefore and afterinstallation of flood barriers
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Step #5 - Coastal Risk Matches Flood Defense Systems with Risks
Personalized resilience-accelerating advice for individuals, businesses and governments
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What Should Lenders and Commercial Real Estate Do?• Utilize new metrics and tools to
better understand flood, natural hazard and climate risks at mortgage origination and purchase opportunity stage;
• Score existing risks in mortgage and real estate portfolios;
• Consider making resilience-enhancing investments in properties with high risks where there is good ROI.
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Coastal Risk Helps Condo HOAs Get Resilient
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Commercial Real Estate Customer Uses CRC Online“Due Diligence” to Close $2M Deal
CRE Customer in CaliforniaPre-Purchase Due Diligence for $2M Investment Property in FloridaReport showed little flood risk and sale completed
“I called Coastal Risk Consulting as part of my due diligence for the purchase of a piece of land on the Eastern coast of Florida because I was very concerned about the possibility of flooding. The Coastal Risk Rapid Assessment™ report I received greatly exceeded my expectations. It was very thorough, helpful, and made it easy to move forward in this $2 million sale. I found this company to be very helpful and responsive. I would recommend Coastal Risk to anyone who is buying, insuring, or funding any piece of property!” -Diana Goulet, Commercial Real Estate Buyer
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Developer Builds Sea Level Rise Ready “Dream Home”Using Coastal Risk Modeling
Grey Door Luxury Homeswww.greydoorluxuryhomes.com
"Coastal Risk’s models and succinct, but comprehensive, report provided everything we need. We see this as a valuable and differentiating part of our business model and one that gives our clients added confidence when buying one of our homes on South Florida waterways.“ -- Stanley Young, President, Grey Door Luxury Homes
Broward Palm Beach New Times, January 2016: “Homeowner Spends 1 Million to Prepare for Sea Level Rise.” http://www.browardpalmbeach.com/news/homeowner-in-las-olas-isles-spends-1-million-to-raise-property-to-prepare-for-sea-level-rise-7533531
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Coastal Risk Helps Homebuyers with Flood Insurance Issues"I purchased a report from Coastal Risk before even making an offer on a lovely riverfront home in North Carolina. Their comprehensive flood risk report helped me decide that the house was a safe investment for me and my family. Additionally, as result of Coastal Risk's visual evidence, my flood insurance premium was reduced from $2500/year to $770. I am very satisfied with Coastal Risk's products and service and highly recommend them to anyone buying property and dealing with flood insurance issues.“David Friedman, MD, Winton, NC
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Coastal Risk Helps Homeowners Get Resilient
“I did research before deciding whether to build a home and how high to elevate it. It was very difficult to get much real information upon which to base my decision. I found that local zoning had no future resiliency built in. Of course, much is unknown and there are no guarantees. But, this report from Coastal Risk helped me make informed decisions, and, I am very grateful for that. Simply taking a guess and adding a few feet of elevation or deciding, without any scientific basis, how many steps to add didn’t seem responsible to me. So thank you for offering this report, it really helped me a great deal!”
Kayle SimonSarasota FL
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Coastal Risk’s Awards and Recognition
Featured in:
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Coastal Risk Customers
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For Further Information Contact:
Albert J. Slap, President and [email protected]
Rajiv Krishnan, [email protected]
Dr. Leonard Berry, Vice President and [email protected]
COASTAL RISK CONSULTING, LLC(O) 844-SEA-RISE (732-7473)
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