"This is a huge problem that could cripple the real estate industry" in Florida, says Bobby Palta, executive director of market analytics and geographic information systems in the local office of Colliers Arnold Real Estate Services Co.

"The biggest problem now is no insurance can be written in the window of the hurricanes coming [so close together]," explains Linda Carrick-Warfield, director of retail sales and a leasing associate at Colliers Arnold. That means "new tenants who sign leases or have signed leases cannot get insurance for their individual property and can't begin construction, open stores" or participate in other revenue-generating activities, Carrick-Warfield says.

For brokers such as Carrick-Warfield, the no-insurance predicament is "causing a real problem, especially trying to get these tenants to open their businesses." On the investment side, "shopping centers for sale cannot close [deals] until insurance is written," the broker tells GlobeSt.com. "The deals are in limbo," costing brokers thousands in earned commissions as well.

Todd F. Cohen, manager, Income Property Capital Group in the local office of Atlanta-based Primary Capital Advisors, agrees. "It is my understanding that insurers are not writing windstorm coverage until [at least] after Hurricane Ivan passes," Cohen explains.

He says "a loan that is used to facilitate a purchase cannot occur without windstorm coverage." Cohen had three apartment deals, totaling 460 units, affected by the back-to-back storms. In the first deal, Primary Capital issued a loan application for a 150-unit property in Orlando that was under a purchase contract.

"Although the property did not incur significant damage, the seller opted to cancel the contract since he did not have the desire to proceed, given the unknowns regarding the actual damage costs and potential insurance liabilities," Cohen tells GlobeSt.com. "Also, the buyer himself had other properties damaged from the hurricanes and thought it would be best to hang tight for awhile."

Cohen had a similar 150-unit property under contract in Volusia County, next door to Orange County. "The property incurred damages to the extent that it was close whether it would fall under the threshold dictated by the contract, regarding damage and insurance proceeds for items such as roof replacement and water damage to individual units," the Primary Capital executive says. "All parties agreed to cancel the contract after the buyer expressed concerns."

On the west coast of Florida, in Clearwater, Cohen had a 160-unit apartment loan scheduled to close Aug. 13. "On [Aug. 12], the buyer was notified that they will not have binding insurance for the closing, as all markets in Florida were put on hold [by the insurance industry]," he says.

However, "lucky for them, and me, the seller and lender agreed to a short-term extension," Cohen says. "Hurricane Charley passed south of Tampa and they were able to close the purchase and loan the following Tuesday."

Locally based Smith Equities Corp., which does multifamily property deals throughout the state, reports only a few deal holdups from the hurricanes. "I have an institutional deal that has been held up by Hurricane Charley damages, and the buyer and seller are negotiating the $100,000 difference which may come down to a contract addendum that could be settled at closing," Smith Equities president Robert E. Smith explains.

He adds, "I have a deal in Tallahassee that needs to get blown away, but other than that, the demand for apartments and condo conversions is so strong, we seem to pick up more deals than we lose due to the storms." Smith says "many owners have decided that if they don't sell now, they may have to wait years to experience the same market dynamics that is driving the high prices [today]."

The broker says sellers "understand that if interest rates go up, cap rates follow and until rental growth rates rebound, it will cause property values to fall from the current levels."

Christopher Leonard, an office and industrial specialist in the Clearwater office of Colliers Arnold, is hearing of permitting problems caused by the hurricanes. "Residential permits are becoming first priority over commercial permits," Leonard tells GlobeSt.com.

"As a result, some tenants will take space on an as-is basis so that they can secure the space quickly. These same tenants might take out permits for improvements and/or alterations to the space at a later time," the broker says. Hiring available contractors and obtaining construction materials poses another problem for tenants and owners, Leonard says.

"Due to the loss of inventory, I predict that net absorption will increase, thus reducing the vacancy rate," the broker adds. "There seems to be a trend of tenants and buyers looking for buildings that are well-constructed. Some have expressed concerns relevant to metal-skinned buildings."

Another new trend surfacing among property buyers are questions on the building's physical integrity, Leonard says. "It is now not uncommon for tenants and buyers to inquire as to a building's wind load," the broker tells GlobeSt.com. "Due to the inability to get some types of insurance [on buildings] when a tropical storm or hurricane are within a certain geographical area, some deals have been put on hold."

Besides the no-insurance crisis, a lack of electrical power is also causing delays, stoppages and cancellations of planned or ongoing commercial and residential projects throughout the state, brokers tell GlobeSt.com.

"I have a client who is building a residential project who still does not have [full] power," says Susan Morris, senior vice president and a principal in the Orlando office of Colliers Arnold. She says subcontractors under contract who were scheduled to start work two weeks ago have been idled by the lack of power on the construction site.

In the tourist industry, several Central Florida hotels are reporting increased occupancy from hurricane victims renting rooms but some proprietors tell GlobeSt.com, "The real damage test to our industry will come next summer when some tourists may recall the hurricane scene and decide to bypass Orlando attractions for other destinations."

While physical and economic damage assessments are still being made at most tourist attractions, Walt Disney Inc. confirms the temporary closure of its amusement parks in Orlando during the hurricanes will cost the company about $45 million in pretax earnings or about one cent per share.

Wal-Mart Stores Inc., the largest retailer in the US, hasn't completed economic damage assessments at its 209 Florida stores but confirms through its public relations department that 150 locations were shut down completely for at least one day during the storms.

The Tampa-based operator of Outback Steakhouse and Carrabba's Italian Grill estimates it has lost about $3 million in revenue after closing 108 restaurants during Hurricane Frances, according to published reports.

Major hotels and resorts in Central Florida are reporting no high physical damage amounts but continue to compute revenue loss through temporary closures and other period of repairs due to the storms, hotel brokers tell GlobeSt.com.

Charles Bronson, Florida's commissioner of agriculture and consumer services, reports storm damage to Florida's ranches and farms could top $2 billion, the biggest loss in the history of the state.

Instant Insights /

GlobeSt.com SPECIAL REPORT: Lack of Hurricane Insurance Costing Millions in Deals

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