The Real Deal Miami

Real estate in the time of climate change: Investors search for opportunity

Buying in higher, drier land that could see strong future demand is among the strategies
October 08, 2018 03:30PM

Volo Foundation’s David Vogel (Credit: Volo Foundation and Wikipedia)

The effects of climate change may literally put real estate underwater, but where many see catastrophe, some investors see opportunity.

Investors are making plays on land investment, flood protection development and other sectors as the long-range outlooks for communities nationwide begin to shift, according to Bloomberg.

Key Point Capital invested in hotel real estate investment trusts around Houston in the runup to Hurricane Harvey in August 2017. Those REITs were dropping because investors figured few people would visit following the hurricane. But Rod Hinze, principal at the Dallas-based firm, bought low, knowing that demand would be high from displaced residents looking for shelter after the storm.

He did the same in South Florida in the leadup to Hurricane Irma, and said he saw 25-30 percent returns.

Cities like New York meanwhile, could struggle to pay for needed storm surge barrier systems, which could cost $2.7 million per meter. To offset that cost, the city could raise money with a bond offering or outsource such a project to a private entity, a JP Morgan Asset Management strategist wrote in an April report.

David Vogel, founder and CEO of Jupiter Florida-based Voloridge Investment Management said he privately purchased land near Asheville, North Carolina, which is 2,000 feet above sea level. Vogel said he thinks people living along the southern coastal areas will move north as sea levels rise, according to Bloomberg. Vogel is also using his quantitative skills to crunch climate change data at his Volo Foundation to help provide more information about the risks.

Changing weather pattersn has already affected the real estate market. Average home prices in some areas of the country less prone to natural disasters have grown more than those more vulnerable locations. Property values for Florida homes below sea level and assessed as having a flood risk dip by about 7 percent on average. [Bloomberg] — Dennis Lynch