--- title: "Hurricane Ian: Managing Exposure Through Unprecedented Climate Events" description: This discussion provides a reasonable degree of solace that there will not be a lasting financial impact on our constituent companies from Hurricane Ian. image: https://blog.armadaetfs.com/hubfs/Contrast%20in%20tornado%20recovery%20Foreground%20of%20abandonment%20with%20broken%20debris%20by%20concrete%20steps%20of%20blasted%20foundation%20in%20contrast%20with%20reconstruction%20of%20single-family%20house%20across%20the%20street.jpeg --- [![armada-etf-advisors-1_web](https://blog.armadaetfs.com/hs-fs/hubfs/armada-etf-advisors-1_web.png?width=200&height=43&name=armada-etf-advisors-1_web.png)](https://www.armadaetfs.com/) - [HOME](https://www.armadaetfs.com/) - [HAUS](https://www.armadaetfs.com/haus) - [INSIGHTS](https://blog.armadaetfs.com) - [VIDEOS](https://www.armadaetfs.com/videos/) - [TEAM](https://www.armadaetfs.com/team/) - [CONTACT](https://www.armadaetfs.com/contact) REIT # Hurricane Ian: Managing Exposure Through Unprecedented Climate Events This discussion provides a reasonable degree of solace that there will not be a lasting financial impact on our constituent companies from Hurricane Ian. [Al Otero](https://blog.armadaetfs.com/author/al-otero) Oct 12, 2022 --- ### ![Contrast in tornado recovery Foreground of abandonment with broken debris by concrete steps of blasted foundation in contrast with reconstruction of single-family house across the street](https://blog.armadaetfs.com/hs-fs/hubfs/Contrast%20in%20tornado%20recovery%20Foreground%20of%20abandonment%20with%20broken%20debris%20by%20concrete%20steps%20of%20blasted%20foundation%20in%20contrast%20with%20reconstruction%20of%20single-family%20house%20across%20the%20street.jpeg?width=1000&name=Contrast%20in%20tornado%20recovery%20Foreground%20of%20abandonment%20with%20broken%20debris%20by%20concrete%20steps%20of%20blasted%20foundation%20in%20contrast%20with%20reconstruction%20of%20single-family%20house%20across%20the%20street.jpeg) ### **Hurricane Ian Leaves Florida In Disarray** Karen Clark & Company (KCC, 0.0%), a catastrophe risk management firm based in Boston estimates that the privately insured loss from Hurricane Ian will be close to $63 billion, with a majority of those losses coming from wind, storm surge, and inland flooding from across the affected areas.\[1\] The storm began as a tropical depression in the central Caribbean Sea approximately five days before making landfall in southwest Florida just after 3PM on September 28th with winds of 150 mph. Hurricane Ian made a second landfall on the afternoon of September 30th near Caines, South Carolina as a Category 1 hurricane with winds of 85 mph.\[2\] KCC estimates that Ian will be the largest hurricane loss in Florida history, in nominal dollars, with total economic damage in excess of $100 billion including uninsured properties, damage to infrastructure and other cleanup/recovery costs.\[3\] At the time of this writing, the death toll from the storm stood at just over 104 people in Florida and that number is unfortunately expected to rise as recovery efforts continue across the most impacted areas of the state.\[4\] ### **Florida Represents A Significant Property Market** Florida is a large and important property market for all sub-sectors of the REIT universe with meaningful representation on the part of many constituents within the HAUS portfolio. Of the Top 10 holdings in HAUS (71% of Total), only two names, Equity Residential Properties (EQR, 9.53%) and Essex Property Trust (ESS, 7.33%) have essentially no exposure to the Florida markets and our largest single position, AvalonBay Communities (AVB, 9.72%) has less than 2% of net operating income (NOI) coming from south east Florida. Rounding out exposure for our “coastal” apartment names, UDR Inc. (UDR, 5.76%) generates 10% of total portfolio net operating income (NOI) from two Florida markets, Tampa and Orlando. ### **Sunbelt Apartment Names Weathered the Storm** As expected, the sunbelt apartment names have sizeable Florida exposure, and in most cases that exposure is limited to three high growth metros within the state: Tampa, Orlando and Jacksonville. While we take pains not to downplay the significance of Hurricane Ian, it should be noted that while all three of these markets experienced damage and disruption, they were fortunate to not have been in the direct path of the storm and thus fared relatively well. Mid-America Apartments (MAA, 9.08%) reported Florida exposure at 16.7% of total NOI as of 2Q22 and this exposure was roughly two-thirds Tampa/Orlando, and one-third Jacksonville. The company has yet to put out a statement updating investors on what the longer-term impact will be from the storm, but our expectation is that the damage was relatively limited with only a short-term disruption to operations. Camden Property Trust (CPT, 4.88%) has Florida exposure that is limited to Orlando and Tampa, with each market representing just over 6% of the total operating portfolio, for total Florida exposure of 12.3%. CPT has disclosed that their Florida properties have undergone “minor damage” and we look forward to additional information when the company reports 3Q22 earnings around the end of October. ### **Single-Family Rental Companies** Looking at the two single-family rental (SFR) companies within our Top 10 holdings, we note that American Homes 4Rent (AMH, 8.08%) is substantially less exposed to Florida than Invitation Homes (INVH, 5.20%). Based on 2Q22 supplemental earnings data, AMH generated just over 12% of same-store NOI from their three Florida markets; Jacksonville, Tampa and Orlando and this market exposure translates to 12.8% of total homes owned. AMH disclosed earlier this week that the Florida portfolio experienced “limited damage” from the hurricane. INVH owns approximately 25,300 homes in Florida representing 31.4% of firm revenue per 2Q22 data. On a same-store NOI basis, 30% comes from the Florida market, with the largest segment being south Florida at 12% of NOI, followed by Tampa at 10% and Orlando at 7%. Jacksonville rounds out the exposure at roughly 2% of same-store NOI. INVH has yet to provide an update on their portfolio. ### **Manufactured Housing Sector** We round out the discussion with the manufactured housing sector, which has historically had heavy exposure to Florida due to the attractiveness of its climate and water amenities, two characteristics which work against us during hurricane season. Both Sun Communities (SUI, 6.49%) and Equity Lifestyle Properties (ELS, 5.02%) have substantial Florida exposure. SUI owned 129 Florida properties per their 2Q22 financial disclosure with a total of 41,000 manufactured housing and recreational vehicle (RV) sites in the state. This represents 31% of total U.S. sites (excludes the United Kingdom). Per the marina business, Florida houses 20 properties with 5,100 boat slips, and this represents 11% of total boat slips owned by the company. SUI provided disclosure over the past few days stating that three RV properties in the Fort Myers area (where Ian made landfall) suffered “significant flooding and wind damage” from the hurricane. They also disclosed that one marina suffered damage to a seawall and docks. The disclosure goes on to state that other property damage appears “limited to trees, roofs and fences”. Florida is ELS’s largest market with 63,800 manufactured housing and RV sites across the state. The market represents 38% of total sites and 44% of revenue. While we note that a handful of ELS properties appear to be located in close proximity to where Ian made landfall, the company filed a press release reporting “limited impact from the storm”. We look forward to getting a more detailed update on the company’s 3Q22 earnings call. ### **A Reasonable Degree Of Solace** In aggregating the Florida exposure of our Top 10 holdings, we arrive at a number just shy of 10% of the portfolio. We would preface as referenced above, that Florida is a large state and much of the REIT exposure in our portfolio is centered around three major metros, Tampa, Orlando and Jacksonville, all of which were less severely impacted by the storm than communities centered around Lee County, in the southwest quadrant of the state. This discussion provides a reasonable degree of solace that there will not be a lasting financial impact on our constituent companies from the tragic weather event which played out over the course of several days in late September. From a broader perspective however, we are reminded of the importance of diversification at the portfolio level, and for the need on the part of our constituents to be more diligent than ever \[5\] as it relates to data and analytics on catastrophe preparedness and planning as “unprecedented” weather events become more frequent. Footnotes: \[1\]Karen Clark &Company – Hurricane Ian – KCC Flash Estimate: 09/30/2022 \[2\]KKC \[3\]KKC \[4\]CBS News – Hurricane Ian Death Toll Surpasses 100; 10/04/2022 \[5\]Financial Disclosure: AvalonBay Communities, Equity Residential, Mid-America Apartments, UDR, Inc., Essex Properties, Camden Property Trust, Invitation Homes, American Homes 4Rent, Sun Communities, Equity Lifestyle Properties *Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call (800) 693- 8288 or visit our website at www.armadaetfs.com. Read the prospectus or summary prospectus carefully before investing.* Investments involve risk. Principal loss is possible Distributed by Foreside Fund Services, LLC. [REIT](https://blog.armadaetfs.com/tag/reit) [Hurricane Ian](https://blog.armadaetfs.com/tag/hurricane-ian) ## Similar posts Housing Shortage ### [“America Needs More Housing” - Easier Said Than Done](https://blog.armadaetfs.com/america-needs-more-housing-easier-said-than-done) Housing shortage is gripping the nation, adding to inflationary pressures and extracting real cost to economic output, estimated at $400 billion per... Al Otero May 23, 2022 REIT ### [3Q Earnings Season...A Path to Normalization](https://blog.armadaetfs.com/3q-earnings-season...a-path-to-normalization) We believe that the rental housing segment of the REIT market will live up to its reputation for providing investors with safe and predictable cash... Al Otero Oct 28, 2022 Housing Market ### [Federal Reserve Bank of Dallas Signals Caution and Housing Expert Rebuttal](https://blog.armadaetfs.com/federal-reserve-bank-of-dallas-signals-caution-and-housing-expert-rebuttal) While a Federal Reserve Bank raises caution amidst the seemingly potential real estate bubble, housing expert Edward Pinot argues to embrace the... Al Otero Apr 29, 2022 ### Sign Up For Armada ETF Email Updates, Delivered Straight To Your Inbox. 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The fund is new and has limited operating history to judge. **Risks of Investing in the Funds:** The Funds are classified as non-diversified investment companies. The Funds may invest a greater portion of assets in the securities of a single issuer or a smaller number of issuers than if they were diversified funds. To the extent that either Fund invests in other funds, a shareholder will bear two layers of asset-based expenses, which could reduce returns compared to a direct investment in the underlying funds. Through investments in REITs, the Funds are subject to the risks of investing in the real estate market, including decreases in property revenues, increases in interest rates, increases in property taxes and operating expenses, legal and regulatory changes, a lack of credit or capital, defaults by borrowers or tenants, environmental problems, and natural disasters. The Fund smay invest in derivatives, which are often more volatile than other investments and may magnify the Funds’ gains or losses. The HAUS Fund may invest in debt securities which are subject to the risks of an issuer’s inability to meet its obligations under the security; failure of an issuer or borrower to pay principal and interest when due; and interest rate changes affect the prices of fixed income securities. In addition, an increase in prevailing interest rates typically causes the value of existing fixed income securities to fall and often has a greater impact on longer duration and/or higher quality fixed income securities. The PRVT Fund invests in mortgage-backed securities (MBS), which are subject to the risks generally associated with fixed-income securities and mortgage-backed securities. Delinquencies and defaults by borrowers in payments on the underlying mortgages, and the related losses, are affected by general economic conditions, the borrower's equity in the mortgaged property, and the borrower's financial circumstances. In addition, an increase in prevailing interest rates typically causes the value of existing fixed income securities to fall and often has a greater impact on longer duration and/or higher quality fixed income securities. Unlike typical exchange-traded funds, there are no indexes that the Funds attempt to track or replicate. Thus, the ability of the Funds to achieve their respective objective will depend on the effectiveness of the portfolio manager. In general, ETFs can be tax efficient. ETFs are subject to capital gains tax and taxation of dividend income. However, ETFs are structured in such a manner that taxes are generally minimized for the holder of the ETF. An ETF manager accommodates investment inflows and outflows by creating or redeeming “creation units,” which are baskets of assets. As a result, the investor usually is not exposed to capital gains on any individual security in the underlying portfolio. However, capital gains tax may be incurred by the investor after the ETF is sold. The Fund is recently organized, giving prospective investors a limited track record on which to base their investment decision. Investment Objective: The Home Appreciation U.S. REIT ETF (HAUS) seeks total return. For current holdings and performance click [here](https://www.armadaetfs.com/haus/). Investment Objective: The Private Real Estate Strategy via Liquid REITs ETF (PRVT) seeks total return. For current holdings and performance click [here](http://www.armadaetfs.com/prvt/). Distributed by Foreside Fund Services, LLC. Foreside is not affiliated with Armada ETF Advisors, Tidal ETF Services or Thryve Communications. 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