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Will REITs Face Only a Minimal Financial Impact from Hurricane Harvey?


According to a recent report put out by RBC Capital Markets, the initial look suggests the REIT industry will likely see only a modest financial impact from the effects of Hurricane Harvey as any meaningful losses will likely be covered by insurers. According to the firm, the companies will undoubtedly have some out-of-pocket costs for deductibles and the amount of the deductible will be meaningfully lower if property damage is attributable to the flood vs. hurricane.

“The management teams we spoke to indicated that it is early and they are in the initial assessment stage. Additionally, we do not expect to know the full impact until the end of the week at the earliest as the storm is expected to persist over the next several days,” according to a report from the firm. “Overall, the REITs’ exposure to the Houston market is fairly modest with only a handful of companies generating over 5% of NOI from the market. REITs with a larger concentration include: WRI (~16%), EGP (~15%) and CPT (~11%).”

San Diego-based Reven Housing REIT Inc., for example, an owner and operator of single-family residential properties, is actively assessing the impact of Hurricane Harvey on its rental homes in Houston. According to the REIT’s chairman and CEO, Chad Carpenter, “On behalf of Reven, we extend our heartfelt thoughts to all of Texas, our residents and our team members in Houston as they continue to battle storms in the aftermath of Hurricane Harvey.

He explains in a prepared statement that the REIT’s local team members are assessing the impact of the storm on its homes but the extent of continued flooding of key roadways to the affected areas is making the process challenging. “We will provide a complete assessment as soon as the weather permits and our team completes their diligence.”

Reven owns 264 homes in the greater Houston area.  The company maintains property and casualty insurance policies that cover floods and damage related to named storms subject to deductibles and limits.

Reven Housing REIT Inc. engages in the acquisition and ownership of portfolios of occupied singlefamily rental properties in the US. Reven currently owns and operates single family rental properties in Alabama, Florida, Georgia, Mississippi, Tennessee and Texas.

So who is the loan beneficiary? According to RBC, it is the lodging space. “We expect a modest initial negative financial impact as demand will likely remain subdued over the next few weeks. However, demand should spike in September through December driven by displaced residents and temporary workers such as insurance adjusters and aid workers,” says RBC Capital Markets.