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Last Post 08/05/2009 3:26 PM by  nixonjf
Coastal Apartment Reconstruction Cost Experience
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nixonjf
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08/05/2009 7:50 AM

    I'm finding many apartment owners/managers insuring their complexes uniformly at $55/ Net SF, which is equivalent to ~$40/Gross SF: Standard 2-3 story wood frame apartments, 10-20 units per building, 200-250 units per complex.

    The reconstruction models are +$85/Gross SF.

    One of the issues is that under new construction the owners act as their own GC and build in bulk the entire complex, but in claims scenario they lose economies of scale and may or may not want to act as the GC. Even for new constructon, I'm not sure $40/SF is reasonable or how the figure of $55/Net SF got to be so popular.

    In the soft market, many underwriters didn't bother checking, or at least not arguing about ITV.

    With the market hardening, this is changing and it's a challenge to get the insured and the insurer to agree, and I much prefer a rational estimate to a haggled estimate.

    I'm assuming the $40/SF is low, but are the ITV models too high, about right, or still not high enough? For purposes of discussion, assume single building fire rather than hurricane so the numbers aren't skewed by post-cat inflation.

    If I take it to the step and engage a loss adjuster to write-up a detailed loss estimate as if a sample building burned down, any thoughts on the ballpark cost of the write-up? The biggest sample building would likely be 24 unit, 2-3 story, 26,000 SF.

    Thanks.

    John Nixon

    John Nixon
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    RJortberg
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    08/05/2009 12:26 PM
    John:

    Good questions. I do nto have an aswer for you about teh actual costs of $40-$85 psf. As far as sources for cost estimates: I regularly use the Marshall and Swift online estimator program. Here's the link http://www.swiftestimator.com/

    You can do a one-off cost estimate to check the ITV model and your own estimate of $40 psf. You can go into as much (or little) detail as you want in terms of the estimate for a given zip code and property features, but it is not really good at doing stick built estimates. Seems that you want something that can act as a 3rd party data source to facilitate negotiations before you get a stick built estimate. You can also call a local contractor to validate the range of cost estimates to see where things stand. Labor costs have dropped somewhat given the lack of construction activity in many areas.

    If you do need a stick built estimate from a program like Xactimate, there are many people here who can help you, probably on an hourly basis.

    RJ



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    nixonjf
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    08/05/2009 3:26 PM

    RJ,

    Thanks for the reply.

    I have access to the ITV estimating programs. It looks like I'll need find a way to validate the estimates from claims experience or at least hypothetical claims adjustment.

    John

    John Nixon
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