WHETHER
your client owns a lavish hotel, an
architecturally unique skyscraper, or a run-of-the mill strip mall, such
valuable investments can be rendered worthless in the wake of unanticipated
catastrophic events. While disaster management planning is likely to be low on
commercial property owners' to-do lists, unexpected events such as Hurricane
Katrina, urban electrical blackouts, and the Sept. 11 terrorist attacks have
demonstrated the importance of having a disaster management strategy.
Unfortunately in today's world all property owners must anticipate the
unthinkable and develop a working disaster management plan that can be adapted
easily to any threat, incident, or catastrophe. Such a plan provides a road map
that, if followed, will help to preserve the property owner's business
objectives, properly safeguard the investment, facilitate a return to normal
operations, and minimize sustained damages. Owners can prepare for disasters by
identifying issues that are essential to a commercial property's survival and
developing a detailed plan in conjunction with a preparedness manual to help
mitigate damages.
Identify Potential Risks
A necessary first step in preparing for disasters is to realistically
identify and assess potential known risks and attempt to anticipate those that
are unknown.
To this end, commercial real estate owners should order a comprehensive
review and analysis of their properties' structural integrity. Each building's
mechanical, electrical, and plumbing systems should be reviewed by licensed
professionals and the results clearly and completely documented. The evaluation
should include all elevator/escalator systems, as well as determine whether
required life safety and fireproofing meet or exceed building code standards.
Additionally, a sufficient land survey should be conducted to highlight any
possible vulnerabilities such as flood-prone areas. These evaluations may be
accomplished by retaining a licensed architect and engineer to provide a
complete analysis and supply recommendations for improving the building's
structural soundness.
As part of the risk analysis, the mutual impact of the surrounding
buildings and community should be explored and discussed with neighboring
owners and local officials. Owners in the development phase should incorporate
security measures into design-build construction or renovation projects. Owners
also should require architects and engineers to consult with security
specialists to develop structures that can withstand an impact and/or
progressive collapse of multiple floors caused by external forces such as
bombs, explosions, air/ground assaults, fires, or a neighboring building's
collapse.
Evaluate Insurance Coverage
Once a building's value and condition is sufficiently documented and
secured, owners must determine if their facility is fully insured. Conducting a
thorough review of possible insurance alternatives with qualified attorneys and
insurance brokers to ensure that coverage and limits are sufficient is a
critical step. Different coverage options are available for pre-construction,
construction, and post-construction phases of development, and insurance
policies may be supplemented with riders specifically tailored to address a
building's unique characteristics, a location in a particular disaster-prone
area, or a greater potential risk of terrorist activity given a building's
size, complexity, value, prominence or celebrity, and location.
A comprehensive economic evaluation can help to determine if an owner
should procure insurance that fully funds the replacement or restoration of the
structure based upon its present value or reimburses the owner for its initial
investment or purchase price of the building and/or land. The best solution is
determined by the owner's business model, the current phase of renovation or
construction, and where within the current real estate market cycle the project
falls.
Placing a monetary value on the potential economic loss including
property damage and business interruption damage and obtaining adequate
coverage for same is recommended to protect the full value of the owner's
investment. Such an analysis should be undertaken in conjunction with the
owner's insurance, appraisal, legal, and accounting advisers. An annual review
and re-adjustment of insurance coverage is required to reflect changes in the
real estate market or an owner's changing business plan. Such a review will
help to reveal potential risks and shortcomings in coverage that have developed
during the previous 12 months. Adequate insurance coverage is critical to
protect a real estate investment as well as its owner from the financial stress
that can be directly or indirectly attributable to a disaster.
Another effective planning tool to identify risk factors is
brainstorming potential disaster scenarios - especially those outside the box -
that may affect an owner's plans, goals, or objectives. A few examples of
categories to consider include extreme weather conditions, terrorism,
blackouts, collapse of adjacent structures, and transportation or communication
disruptions. Since the goal is to plan for the unthinkable, consider scenarios
such as no access to emergency systems, personnel, and local, state, or federal
disaster management agencies or having telephone land lines and cell phone
service disrupted for hours or days. Property owners should involve all levels
of personnel in the brainstorming, planning, and execution of the disaster
preparedness procedures.
Documenting Procedures
Once potential risks have been identified and addressed, they must be
incorporated into a disaster management plan manual that is substantive,
flexible, and easy to follow. The manual's purpose is to create an action plan
for all levels of personnel in an affected facility if a disastrous activity
were to occur. Central to creating and implementing the manual is forming a
disaster management team. Once assembled, the team should implement the owner's
goals by developing and preparing the manual, including emergency telephone
numbers, pertinent contact information, chain of authority, and other details
of the developed plan.
A "first response" strategy, or plan to be implemented
immediately after a disaster occurs, should be included in the manual. During
such time in-house personnel and local, state, and federal officials may be disorganized
or temporarily incapable of reacting to the circumstances at hand. Important
factors to consider in the first moments following a crisis include remembering
the training and guidelines established in the crisis manual; giving deference
to the recognized chain of command; conducting an initial assessment as to the
structural integrity of the building (even by a lay person) to determine if
there has been or continues to be exposure to fire, flooding, earthquakes,
collapsing, or other hazards; conducting an initial assessment of the damage
and effects of the disaster on the property or project; taking steps to limit
the potential for property damage or further property damage; and to the extent
feasible, taking photos of the property to create a visual record.
Just as important is the period following the disaster, which may last
days, weeks, or months. During this phase of recovery, the survival of the
building, commercial investment, or project is at its most vulnerable, and this
is when owners truly become aware of how well they have prepared for such a
crisis.
Beyond the expediency of the response time, owners must secure certain
essential functions to maintain, at a minimum, the status quo. Such functions
include plans to continue or re-establish working communications and
ventilation, protection against fire and flooding, preventative measures
against the development of related conditions such as mold, and the
preservation and functionality of electronic and computer mainframes and
servers. These functions, among others, should be included in the commercial
real estate owner's investment or development project's initial assessment of
critical components. (See sidebar, "5 Safety Assessment Tips.") It
also is important to identify sources for assistance and supplies available
from all three levels of government.
In addition the manual should address the following issues. It should:
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provide for sufficient financial contingencies in the event the
property's lender becomes insolvent as a result of a catastrophic event;
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provide for storage of emergency material and supplies in an
accessible area both on-site and off-site;
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provide for an annual inspection of the structure, land, and/or
project;
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create a log and routinely record damage to the building, repairs
needed and completed, and routine maintenance and inspections of the building,
its systems, and land. This consolidates essential information about the
property and serves as an effective tool when dealing with lenders and
insurers, as well as local, state, and federal agencies; and
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provide for an evacuation plan, which should include, at a minimum,
issues related to fire and life safety, an exit strategy from the building or
project, and an updated list of vacant alternative sites that may be used by
the owner during the recovery period, or on a permanent basis, if necessary.
Implementing the Plan
After the manual is completed and reviewed, it must be maintained and
ready to execute upon a moment's notice. All affected personnel must train sufficiently
for effectiveness, application, and implementation. Owners must run repeated
practice drills to ensure that the disaster response becomes second nature.
Moreover, owners should routinely update the manual as changes to the
property's characteristics and key personnel occur. Also, as new threats
affecting the owner's goals develop, the manual should be reviewed and assessed
to ensure conformance with the owner's most recent business objectives.