Real Estate Investment Trusts

Protecting your Real Estate Investment portfolio

In the course of acquiring, selling, managing, developing, or redeveloping property, today’s real estate firms and Real Estate Investment Trusts (REITs) face a varied, often complicated, range of risks and challenges including:

• Asset valuations
• Mergers & Acquisitions in a competitive industry
• Environmental, social, and governance issues
• Portfolio management during periods of market volatility
• Environmental liability
• Data breaches

Environmental liability risks can be one of the costliest, making identification and mitigation of these risks critical to protecting the bottom line. For real estate firms and REITs involved in acquisitions, divestitures, or development, getting the due diligence right is critical in each situation.

REITs are attractive investments with a large return on investment potential through a diversified portfolio. Whether you own or operate an equity, mortgage, or hybrid REIT, you want to ensure your investment is adequately protected with a comprehensive insurance package that includes:

• Environmental liability
• Management liability (or directors and officers insurance)
• Cyber liability
• Pollution liability
• Broad general liability 
• Property coverage (including a broad named insured endorsement)
• And much more...

At Risk Strategies, our insurance industry professionals partner with you to craft a tailored insurance and risk management program that provides tools for recovery caused by a series of first- and third-party events, moderates and controls spikes in cash flows, and results in a positive impact to your firm’s financials.

In addition to a comprehensive insurance package, our risk management and loss control team can help identify and mitigate your REIT-specific risks with a variety of proactive services including property engineering, environmental audits, catastrophe modeling, building valuations, and more.

What is environmental Strict, Joint and Several Liability?

Strict, Joint & Several Liability is when two or more parties are jointly and severally liable for an environmental condition that requires remedial action or a toxic tort claim; each party is independently liable for the full extent of the injuries stemming from the release or tortious act. Consequently, if a claimant wins a judgment against the parties collectively, the responsible party may collect the full value of the judgment from any one of them. That party may then seek contributions from the other contributors. Generally, the company that caused the event, companies that are in the chain of title of the operations or property, or in the end, a company with the deepest pockets. Environmental claims are “Cradle to Grave” liabilities.

When completing a regulatory remediation project, are my obligations done?

No, because of Strict, Joint and Several Liability, you are responsible for any future regulatory reopener obligations. If there was a future threat to human health and safety or a change in regulations that required additional work to bring the site back into regulatory compliance, you may be required to address the condition and bring it back into compliance.

Can a company be responsible for waste streams when hiring a third-party contractor to manage their waste streams?

Yes, there have been many claims where a company can be brought in as a responsible party if the landfill owner cannot meet a regulatory obligation at the landfill or if it was disposed of in a place that was not designated for managing waste. The regulatory agencies will access each responsible party who utilized the services of the landfill and assess them based upon the volume of waste brought to the facility. 

Should I be concerned about new emerging contaminants such as PFAS (Per- and Polyfluoralkyl substances)?

Yes, PFAS (Per- and Polyfluoroalkyl substances) is a chemical developed in the 1940s that is made up of more than 4,000 compounds commonly found in household goods such as non-stick coatings. It is also found in firefighting foam. Runoff of hazardous materials from firefighting operations (PFAS) is an emerging issue and results in costly cleanup expenses. Federal and State environmental agencies are working towards adopting standards that are in the range of 70 parts per trillion. This issue could have a significant negative financial impact on a company’s balance sheet.

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Risk Strategies Real Estate team is dedicated to providing you with a specialized approach to managing your risk. Contact our team today.