With the U.S. presidential election taking front and center, coverage of both Hurricane Milton and Helene and their impact seem to be out of the current news cycle. PPR, however, is still paying close attention to see if and how the recent Category 3 and 4 storms had a negative effect on our portfolio.
With regard to the NPL side of the business, it’s important to emphasize the current policies and procedures we currently have in place for our assets:
- All loans and REOs have a hazard insurance policy (which includes wind) either from the borrower’s carrier or a lender placed policy. This is monitored by a 3rd party company.
- All loans and REOs that are in a flood zone (as designated by FEMA) have a flood insurance policy either from the borrower’s carrier or a lender placed policy. This is monitored by a 3rd party company as well.
- All loans and REOs are insured as of the date of acquisition. Even if the loan has yet to service transfer, we have an automatic endorsement that provides coverage during the interim servicing period.
- Once a natural disaster strikes, we will send a 3rd party inspection company to inspect all loans/REOs that are in a FEMA designated disaster area. If the property is vacant, this will also include an interior inspection.
- Inspections will be ordered as soon as practical. Note that depending on the disaster, sometimes access to hard hit areas can be blocked or limited to residents only. The goal is to have the majority of inspections completed within 3 weeks of the disaster.
- As inspections are received, each one is reviewed to determine if there is any insurance related loss. If there is insurance related damage, a claim will be filed immediately.
- Normally insurance claims are completed within 30 days and claim funds are paid within 45 days; however, it’s not uncommon to see extended timelines after a large disaster.
NPL Portfolio Impact
As of November 4th, we have inspected about 82% of our portfolio with 239 properties located in the part of the county that experienced the most severe impact of the storm as determined by FEMA. So far, we have only had 1 property in Florida where we have filed an insurance claim for flood damage, with that claim currently pending.
We also had a property located in South Carolina where a power line came down (along with a neighbor’s tree) that tore the meter off the home. Repair bids have already been made for that as well as for minor additional damage to a screen door and a small portion of a fence near the fallen tree. So far, it looks like we’ve been very fortunate to avoid damage with our properties. It is important to note that this is partially by design, since we take climate and natural disasters into consideration when purchasing assets throughout the U.S.
Multifamily Portfolio Impact
As for our multifamily portfolio, we were already at an advantage with most of our properties located in places largely unaffected by the storm (Texas, Ohio, Kansas, and Tennessee) but in Georgia we did have some risk exposure. While none suffered any damage of note, we have both property and liability insurance in place on all properties that would mitigate us in case of damage. In addition, as a rule, we also have gap insurance policies during any transition period with our multifamily real estate assets.
One can never be too prepared for scenarios like these, but it is important to remember that most of our assets (and all of them currently located in the affected areas) are properties that fit into the so-called “value-add” strategy. That is, they’re expected to already have at least some renovations completed before we exit, so PPR is relatively prepared for additional renovations that might be caused due to the effects of a natural disaster.
Final Assessment
In conclusion, there has been no material effect on either the NPL or the Multifamily portfolios and we’re grateful that our tenants and investments have weathered the storm. Furthermore, PPR is paying close attention by continuing to inspect the remaining 18% of our NPLs. We’ve been fortunate, especially in this past month and a half, to have great partners and vendors that are committed to serving us in times of need to deliver the best for our investors and our community.
