Staying Prepared, Coming Back Strong: Insights on Disaster Readiness
- Apr 30, 2015
Events like the terrorist attacks of Sept. 11, 2001 and Superstorm Sandy have changed the way real estate professionals around the country think about disaster preparedness. In a wide-ranging conference at the New School in New York City, an eclectic group of professionals gathered on Tuesday to offer insights about lessons learned and best practices that apply to disaster preparation, recovery and resilience.
The reminder is vital because “people are like institutions,” explained Kenneth Holden, chief facilities officer for the Mount Sinai Health System and a former commissioner of the New York City Department of Design and Construction, who oversaw the cleanup of the World Trade Center site after the attacks of 9/11. “Once a disaster passes, the responsiveness to that disaster passes, and people move on to other things.”
Several speakers at the conference, which was sponsored by the law firm of Venable L.L.P., stressed the importance of establishing contracts with vendors in advance of an emergency. That exercise helps insure that help will be available promptly after the event and avoids price-gouging. For some panelists, that wisdom was hard-won after Sandy. As vice president of Waterfront NY Realty Corp., Christopher Flagg oversaw the recovery of the Terminal Stores building, a 1 million-square-foot converted historic warehouse near the Hudson River on Manhattan’s West Side.
“You need to have vendor relationships that are locked in place, prices that are locked in place,” Flagg said. “Without putting vendors in place—which we’ve since done—we were scrambling.” Vendor contracts should also be vetted in advance by insurance carriers to avoid subsequent disputes over payment, he added.
Sophisticated building owners and managers typically engage in tabletop exercises covering a variety of scenarios, noted Matt Duthie, who oversees a 15 million-square-foot office portfolio as managing director of JLL’s property management group in New York City. Yet there are all too many gaps in preparation. “It’s amazing how many smaller tenants didn’t have a plan in place when this happened.” Occupants themselves should take the initiative: “If I were a tenant, I would absolutely (tell) your landlord, “I want to see your plan.”
Insurance concerns were also a dominant theme. “All-risk” insurance coverage is something of a misnomer, since it typically excludes disasters like floods and earthquakes, explained Allyson Martin, managing director of the national real estate practice at Beecher Carlson Insurance Services Inc. Deductibles are covered differently for named storms and unnamed storms; hurricane coverage typically has multiple deductibles, she explained.
Superstorm Sandy revealed the limited understanding of flood coverage among real estate stakeholders. “Unfortunately it wasn’t explained to policyholders because some of the agents didn’t take time to understand it,” explained Jana Critchfield, New York and New England regional sales manager for Wright Flood Insurance. The government’s flood insurance program is geared for items like restoring damaged boilers and HVAC equipment, not to compensate policyholders for lost business operations.
Though education remains a challenge, there is some good news on the insurance front. Prior to Sandy, “Many tenants didn’t understand their coverage,” Duthie said. “Today they’re much more educated. They have done a deep dive to understand the gaps and how to fill them.”