Justin interviewed Will Narduzzi who runs the insurance accounts for Holt Lundsford. They spoke about the ins and outs of landlord insurance policies. Will Narduzzi joined Holt Lunsford Commercial in 2018 and serves as the Insurance Account Executive. Will is responsible for the growth of the risk management and insurance platform which services office, retail, industrial landlords, and tenants throughout the southwest United States.
Key Takeaways:
- The increase in labor and materials and future inflation affect commercial real estate replacement values and hence policy prices
- Ensure (no pun intended) your property value and policy value stay in line with each other as property values increase or else you will be dramatically underinsured
- Claims management is a huge part of managing cash flow during a catastrophic event
- Your insurance agent should be proactively working to make sure you get an experience claim adjustor and get them to the property within 24 hours.
- Knowing how the money works between actual cash value and replacement value helps you understand how much money you receive to start fixing the property, to finish the project to be completely compensated.
- For owners in the sunbelt and coastal markets, and for those with properties in multiple markets, it’s important to look into the specific definition of the weather events covered to make sure they are relevant to your specific risk profile
Listen to the full episode below and subscribe to the podcast on Apple.
Highlights
- Property purchase prices – 2:30
- The story of Will – 3:40
- The insurance business – 8:23
- Customer service oriented – 8:42
- Things to improve your property – 11:48
- Misconceptions around information for brokers – 14:06
- Why you pay premium – 15:08
- Avoiding a catastrophic event – 16:46
- People need education – 23:44
- New experiences – 44:00
- Surround yourself with good people – 45:00
Episode Resources
- Connect with Will Narduzzi
- https://www.holtlunsford.com/about-us/meet-our-experts/will-narduzzi/
- wnarduzzi@holtlunsford.com
- jmeek@ranchharbor.com
- Connect with Justin Smith
- https://smithcre.com/
- https://www.lee-associates.com/
- jbsmith@leeirvine.com
- https://www.linkedin.com/in/justinbsmith
Justin Smith
Hey, Will.
Will Narduzzi
What’s going on? The man, the myth, the legend, Justin.
Justin Smith
Things are good. It’s amazing how much it’s constantly evolving and changing. What kind of deals people are looking for? Where the different funds are at, all the different tenants and how things are changing. It’s a pretty wild ride, just staying current, much less now when you’re in the grinder and working away.
Will Narduzzi
Absolutely. I heard recently there’s zero to 1% vacancy in New Jersey, or something like that on the eastern seaboard, and people are having to sign NDA is about space coming available. Which is really- That’s what I’ve heard. I haven’t seen anything concrete from a news publication like CoStar anywhere, but that’s just word of mouth at lunch with somebody. Some broker was in town who heard from other groups on the east.
Justin Smith
I’m a broker, you’re a client, I’m going to tell you about something that’s not on the market but you got to swear on a stack of Bibles that you want to tell anyone else.
Will Narduzzi
Yes, allegedly. I don’t know, that’s what somebody told me so it’s kind of crazy but I think just from the competitiveness of the of the market right now which I’m see. I’m sure you guys are seeing out there in California but down here it’s all the rage, everybody wants to be in DFW buy industrial. We’re just working through all of that attention to getting into income producing activity immediately. That’s what we’re all compensated, insurance people and real estate people on the production side, we’re all compensated by the time we put in because we’re commission based. So, you’d love to help everybody I do. I wear my heart on my sleeve. I’ve got two kids at home, I got to feed him. So, you got to kind of get to income.
Justin Smith
One of our commission brethren. Well, we appreciate you carving out some of your precious time. This is good. It is amazing that industrial right it’s not just SoCal it’s not just DFW. Or think like Miami, Tampa, Carolinas are in the mix, Chicago Seattle, like all those markets. Everyone you talk, you get the same story. I feel like values. When you think of lease rates and property purchase prices, cap rates, right? DFW has to have had their cap rates get squeezed down where you used to go there, in search for yield? And now, you say for so many markets, okay, now that it’s compressed, how does that make you feel about your home market? Do you feel different, do you not? I think it plays like a role and that part’s evolving.
Will Narduzzi
I feel like our product is pacing with stuff in Southern California and then the eastern seaboard, for sure. Just some of the evaluations are kind of coming out from capital markets and I track a lot of that just because my clients are operating either soliciting stuff in the capital markets realm or they’re trying to do off market deals. It’s pretty incredible, the cap rates depression just the last 18 months. Stuff was going at five and a half or six and now it’s for sure five and a quarter, five. It’ll be the bigger institutional stuff I might be talking about as hard as maybe sub five but it’s a great thing. It’s been a good time for everybody down here at least and I think nationally as well.
Justin Smith
Can you give us a little bit of the story of Will? I would say as pre–Holt Lunsford was the start of the insurance journey, maybe that’s helpful. What was going on over there and what you learned along the way?
Will Narduzzi
Absolutely. I kind of grew up in the insurance business, my dad was on the employee benefits and life health and disability side. He was at MetLife for a while. So, I’ve always been kind of exposed to the industry as a whole. Out of college, up into the family business. It’s a little brokerage up in New Jersey, where I grew up, but when I took some jobs out of college that had nothing to do with insurance, and then after one of the last gigs, I realized, I want to have a big impact on people on their day to day whether it’s in their personal life or business. I want the ability to have unlimited income potential and I want to work out stuff that’s actually stimulating. Insurance is one of those things that just a lot of people don’t understand that we all have to buy it in for our day to day. You can’t turn the key over in your car to even to get it out of the driveway without it, so it’s one of those things that is very sticky intellectually challenging. There’s the ability to make the trade a lifestyle however you want. I get to have a big impact on people.
Justin Smith
You don’t have to hang around your dad every day.
Will Narduzzi
No, I live down here and he lives up there. We think and look so alike that maybe in the future we do somehow, but I ended up down here in Texas because Liberty Mutual is opening up on massive campus part of their restructuring and consolidation from the region to Frisco, Plano area. So, they had a ton of opportunities there and I just kind of jumped on board. The role I got into right there immediately was the LiMu Emu commercials that you guys see on TV; I was that guy taking that phone call for a while. A 1 in 1000 chances that landed on my desk and I still could probably recite the whole script. The call hits your phone and boom, you’re right into it, three seconds to really get a hold of this person. It’s pure telemarketing, it was my job and just kind of worked up in the ranks there, handling different leads.
Justin Smith
You did training, right?
Will Narduzzi
Oh, yeah unbelievable. You get 60 inbound calls a day and maybe doing a 30 outbound. The volume was there, you’re practicing. The first year, I think I did like 27,000 quotes. Insane. So, it was great. I think what I was given when I was born, what God gave me to do was bigger stuff. I appreciated that experience learned a lot of the fundamentals of insurance, how it works. But I got a phone call from somebody said, Hey, Holt Lunsford Commercial has got this unique insurance opportunity. They really want a guy to kind of grab the bull by the horns and grow a service line for that. Would you want to come on any interview? I said, Oh, hell. A big impact on business, big impact on people. I get to maybe make some more money if I put a great effort into it. I can grow my career. Primarily, we’re a full-service real estate company and we do have a principle and an ownership aspect as well. You manage a lease, let’s say think 79-80 million square feet throughout Texas.
Justin Smith
Grant may not know Holt Lunsford because he’s his experience is industrials in Southern California. Having gone to DFW a bunch of times and owning property there, you can’t go there and be in the game without knowing about you guys. That’s a big presence.
Will Narduzzi
I think this is a preacher statement, but you’ve got the big five here in Texas. We’ve got CB, The Big Green Machine, Cushman, JLL, they swap rankings, and then you’ve got Stream, which I think is our biggest competitor, then there’s us. Stream is based here in Dallas, Texas, but from pure Texas, statistics we are the largest Texas based real estate company, that streams in multimarket company. If you take that aspect out, we’re the largest, just pure Texas based commercial real estate company. We’ve got a little insurance book where we saw a need for owners, because we’re still third parties oriented, that insurance is a complicated thing. We also product here. So, what we started to do about 10 to 15 years ago was bundle everybody on these big master programs to help get better pricing efficiencies, the marketplace, when you go for a renewal, hopefully leverage that into better terms and conditions. Then also just build a service platform around insurance because the insurance business has a poor reputation of not having great customer service. You call Liberty Mutual, State Farm, whomever might wait in a queue for a while no one really picks the phone. The whole situation is very convoluted. Well, we win deals and transactions that pick-up clients by being super customer service oriented and very responsive. That kind of ties together and operating with a high level of integrity and being really transparent. We’ve built a really great insurance platform on those values there. It’s been an awesome gig. So, it was doing well before I got here for sure. They want to take it to the next level and really grow. That’s calling on landlords, cross selling with our property management, third party leasing teams is my day to day and then just kind of interacting as insurance broker would normally would as well. It’s been a really awesome opportunity to be here and to see this platform grow.
Justin Smith
What a great opportunity, when you think of like the ability to have a positive impact and to grow something right. You probably have a lot more autonomy and impact on your own future too, like a direct impact.
Will Narduzzi
Yes, absolutely. It just happens to be this success happens to be a byproduct of the asset class because we are so heavily industrial focused that that 80 million feet, maybe 50 to 60 million of it is this industrial flex. The others remaining is a Class B, Class A office which that side of our business has seen tremendous growth as well, but only we say recently, last three to five years as a really broad. COVID kind of paused some of that, but my success is based off of a lot of my team members on the real estate side, just the asset classes just performing hand over fist day after day. It’s incredible.
Justin Smith
When you think of it in your world, big trends that your typical clientele would maybe be reading about in the paper, but not realizing how it affects the insurance world and their property specific. What are kind of the big things that are going on out there?
Will Narduzzi
The big thing that’s been a really the big topic over the last, let’s call it 24 months has been ensuring the value. But I think that kind of really comes to a head right now where you’ve got lenders are getting very tight on their requirements but the pinnacle of it two ways is construction costs are through the roof right now. 2x4s last year were $2, now there’s $7. You can’t predict that that movement at all, if you do be rich guy. Then the other part is just the evaluations and how they’re keeping pace with construction and all that. Those are the probably the three biggest things that we’re seeing if your owner that’s not needy, that insurance is really going to affect you because when you think-
Justin Smith
If you could pause for a second, for people that don’t speak the lingo all the time.Your replacement value is a huge part of your policy and your replacement value is based upon labor and materials. So materials times two, times three, times four of what they were in a very short period of time.
Will Narduzzi
Correct, that drywall when you’re going to do tenant improvements, or make ready space or white wall, a white box, or whatever the lingo is that you’re going to use. Those things to improve your property just become more expensive. You really see it come to though in a claim, where somebody’s like, I had a water leak or something caught fire and, I thought it’d be like $10,000 to get that fixed but it’s 30. That’s real money in a real scenario that a lot of us insurance people deal with.
Justin Smith
Your rate either goes up or your coverage doesn’t cover as much as you thought.
Will Narduzzi
Correct. In the primary thing in the landlord business, which I don’t really think people it I mean, I’ll play into this a little bit is, insurance is kind of a little bit of a black box, you give us some information, we go away for a couple months and we come back. I sent you information like hey, you want to buy it. But the biggest driver here, if we’re talking about an ownership group that has no claims, the biggest drivers valuations. That dictates rates, carriers that are involved that want to participate in it, it dictates all of it. The more you increase your values, the more insurance you’re buying, you get more expensive. Owners try to get a little skinny sometimes I think and save a couple nickels sometimes, but it’s really not great. I think it’s actually a counselor are insured to value accurately and are talked about by ownership to an underwriter or with their broker or the broker is really up to up to speed on what the owner is doing with capital expenditures and all that good stuff. When you have somebody is able to communicate that clearly to the market and they’re tracking that like hey, last year we insured the building $4 million this year we’re insuring it for 1.1. Here’s why. This is why the risk has changed? We did our new paint and carpet, we did this we did that, landscaping. I mean doing that makes it more attractive and when it looks more attractive the underwriter gets more excited, like who want to share something that’s better. I think there’s been a lot of misconception on providing that type of information to insurance brokers because some people are worried about maybe not being that hands on with their property and getting a little scared like oh, I don’t want to tell the insurance company about this but I think it’s the more information you share the more data you provide, the better the underwriting experience is and hopefully it’ll be a better resolve for you as an owner.
Justin Smith
Not knowing when the roof was redone, or systems upgraded. I don’t want to talk about it. I haven’t done it and I should be doing it.
Will Narduzzi
Exactly. I think it’s okay, in the insurance world nobody wants a whoopsie because you’re in a situation where you as the underwriter you insure one thing, but it really ends up being something a little bit different. We don’t pay premiums and I mean we all of us, your home, your auto, you don’t pay premiums just to feel good. You pay a premium so that if one day you have a catastrophic financial situation, you get compensated. So, I think clearly communicating what you have is very important. Yes, the premium might be expensive. The conditions in terms might not be great but the last thing you want is getting it claim denied. That’s the situation where everyone’s trying to prevent. So valuations is a big thing. It’s probably the biggest elephant in the room for sure.
Justin Smith
Tell me about the big freeze, was that a huge event for you and your world or not so much? Is that what we’re calling it the big freeze?
Will Narduzzi
The big freeze. I think we did a great job on the upside and on the front side of it from a management company but then also from an insurance perspective. We’re gathering resources from our carrier partners, sending it out to property managers, and just kind of having a game plan upfront. Hey, the Weather Channel is saying this is going to get pretty bad, if you can, without posing more risks to the property for fire turn off your waterlines. Really communicating to owners to communicate with tenants or through us and our property management platform like, hey, if you have power in your space, keep the lights on, keep the power on, if you have the ability to safely get space, please go and check on it. Just really be diligent. Be a risk manager, everybody be risk manager right now, so to speak, if you could safely get to the property. It was a big event. It could have been bigger, I think but because of how proactive we were and how practical we were with coaching a lot of people, a lot of owners, I think we kind of avoided a catastrophic event.
Justin Smith
And more prepared for the next one.
Will Narduzzi
Yes, absolutely. I mean, you can’t prevent all of it but what you can do is be proactive and have some great plans to handle that situation afterwards. Just a comment on this is that we’ve done a really good job of trying to get through the claims that have been presented to us to get our owners compensated right now. We’re a month and a half, two months afterwards. Personally, I’m not sure how many groups are at that point yet getting money from their carrier. Look nobody wants to hole burning on to their balance sheet. You buy insurance, like I said earlier to get compensated for these types of things. So, we’ve kind of transitioned to really focus on claims management to make sure that’s all getting taken care of, you’re getting compensated, you’re getting that check within three months of this event.
Justin Smith
I was going to ask later, but because you are on that topic, so what goes into claims and what most people don’t realize because more often than not, you’re not having a claim, or not having one for a long period of time. So, most people’s track record and experience with them is probably close to nil.
Will Narduzzi
No, exactly. That’s the first thing a lot of people say when they call you like I’ve never done this before. Oh, man, like help me out here. For us, we’ve kind of got a set guideline of what to expect. Great, you gave me this phone call Jane Doe, John Doe. Here’s what the process is going to look like. If you want me to be involved with it from point A to point Z, I can. If you don’t want me to that’s fine too. I just want to preference this to before we really go into that, claims adjusters are people to. They go home to a wife and children. We have to remember that even in these tough times that they want to have an off day here and there. I have a bad habit of sending emails on Saturdays and Sundays like Hey, where’s this at? We have to remember that they’ve got to rest. Is it tough during these situations? Yes, absolutely. But it just would like to preference that they’re not robots.
Justin Smith
Yes, well because you imagine the urgency for the person making the claim right and then you imagine the adjuster that’s doing their regular work helping people there can be a mismatch there.
Will Narduzzi
Oh, for sure. What does that look like? You get the phone call, you field it over to the carrier, you let them know hey look, there’s been damaged for the insurance contract when you let you know, I’m doing this on behalf of the insurance your client, the broker just copy them on that email notice written. The next step, at least what we do here, we have dedicated independent insurance adjusters we assign that’s a total third party you’ve got. Like Chubb who’s the insurance carrier, who you actually have the contract with the broker and then the insurance. As the broker we try to hire good, dedicated adjusters, because there’s just sometimes you get people who are inexperienced. You want the best experience for your clients. So we try to match people up ahead of time. We do an introduction, so they know hey, Eddie, or Jane or Paige is going to show up at my door when something bad happens. For us, at least they know, Eddie was coming to visit them. They’re going to go and visit the property. Once we make that initial contact, we try to get in a claims adjuster to the properties in 24 hours. Contract of insurances as the owner when situations have occurred is to prevent further damage from happening. So, getting that person out there ASAP, recognize water damage, they’re talking to the owner, usually while they’re there this way you need to stop any water damage. Usually we try to have the adjuster kind of present next steps like hey, I want to take all this information to put photos, videos, notes, I got to go back and do a report. That report is going to talk about drywall damage, carpet, paint, ceiling tiles, what have you. They start to put together in the report what that should cost. Depending on the urgency of the situation, at least here in Texas right now. The first thing before even a report got back from the adjuster, adjusters are saying, good remediation firms out there right you don’t want fungus and microbial things growing in your walls like this. I don’t think a lot of carriers were rubber stamping expenses per se. It was just kind of understood, look this is catastrophic, hit the drywall, cut the dry wall levels out right here and just stop it immediately. So that was kind of what was going on at first. We’re at the point now where we’re having our claims adjusters are these hired claims adjusters communicate with the owners and taking GC bits comparing them to what be exact to mate, which is the technology these adjusters use to price out what they think replacement costs. They’re trying to line those up so that what we can do next is get the first payment out the door, so the contractor can really start working, finishing up that scope of work, and so you can get the rest of the money out. For your listeners to I think it’s important to have an education how the money side works. Clearly communicating that to people is a huge part of the process for us. You just don’t get $100,000 all on one shot. ACV actual cash value first. If the claim is about 100,000 bucks, maybe you get 10,000 bucks or $20,000 first, right? That’s the kind of incentivize the landlord to get the work going. If they happen to just walk away from the project does not do anything, that’s fine. They can just keep that extra cash value money, but the remainder won’t come to them. Because what is insurance supposed to do? Bring you back to like kind of quality. The next part is once the work starting to go, as an ownership group, I would advise them to let the adjuster know like, Hey, we’re two weeks into it. We’re expecting this to be done in another week. Can we start talking about the replacement cost? Check getting cut, the adjuster sometimes will call it depreciation, so there’s depreciation being released and that usually comes after the final walkthrough for the end of the projects being finished. And it’s just kind of a trust level at that point with the adjuster, the ownership group and the insurance company. Where this is kind of a, it’s very much–
Justin Smith
And the contractor too I imagine.
Will Narduzzi
I’m kind of leaving him out because we’re kind of thinking that the landlord’s right, and the guy to get it done. We’ll bake that in there, but maybe we shouldn’t. I think that’s kind of how that all goes. It’s a long answer to that.
Justin Smith
I think that’s one where people need that education. Especially when it seems like there’s more and more of the claims. Claims are becoming more frequent.
Will Narduzzi
Yes, they absolutely are. It’s a fact. That’s why we buy coverage for.
Justin Smith
Maybe with a typical policy, we get into some of the nuances. We got into actual cash value replacement cost, underwriting and working together with being transparent about the building systems and conditions around with capital expenditures. What are other items in the policies that people may not be privy to, or frequently misstep on or are those the main ones?
Will Narduzzi
I think those are kind of the main ones. The one we aren’t talking about, which is kind of the biggest elephant in the room for North Texas specifically, that’s I operate across the US right now but the majority of my personally is here in North Texas, but is wind and hail. It’s really understanding why your deductible is the way it is. Is it 1%? Is it 2%? How’s it triggered? What’s the definition of a wind event? Is a wind event encapsulated with a hurricane? Are those two separate deductibles? Is it a name storm?
Justin Smith
I love how there is a necessity to really get specific definitions.
Will Narduzzi
No, no definitions. It’s a dictionary, because if you read an insurance policy, it says in section 1A1. It’ll reference all kinds of crazy stuff. So you’re going back and read and then go back. I think like that those two pieces if you own property in a sunbelt state, and or are on the gulf or own properties in both areas, same time covered on the same policy, it’s important to know what’s going to trigger those deductibles. Name storms and windstorms are two separate, especially in the claim scenario is really identifying. What’s Chubb, Westchester, or AIG? How are they labeling this? The damage that was caused to your building, is it because of a windstorm and then rain came in? Really understanding, okay, on paper, it says, the definition of windstorm is for tax land or whatever it ends up being, understanding what that actually is versus a hurricane. You’ll find that there’s big differences. In floods, how does that come up in a hurricane. All that water just came on down.
Justin Smith
Flood zones too. What flood zone you’re in. That’s a Texas game and a Florida game.
Will Narduzzi
Well not even just flood zone. Look, it floods everywhere. I don’t care if you’re in flood zone X or flood zone A. In Houston, it floods everywhere and baseline just knowing if you’re covered for flood, regardless of what zone you’re in, that’s really important. If a flood happens because of a hurricane, or it rains for five days straight. How does that affect your policy? How does your fault policy affect you as the business or the building owner? Just baseline knowledge is paramount. Also flooding insurance is really freaking cheap. In a flood zone X, it’s like 1000 bucks. I think it’s worth it. We try to pitch it as much as possible. You never know when a floods going to happen.
Justin Smith
Do most take you up on it?
Will Narduzzi
No, you’d be surprised. It’s not another premium amount to drive fees. It’s just knowing what your exposure is. In Texas, there’s a lot of levees in this state. There are not many natural lakes, a lot of these reservoirs are manmade. So, they move dirt from one spot to the other to make it fill up. Lord forbid one of those things breaks.
Justin Smith
Can you finish the 1% and 2%? Wind and hail.
Will Narduzzi
Yes, wind and hail. There’s a lot of different caveats we see. With wind and hail, it’s just kind of going alright, so 1% of the total insured value. So total insured value is what your replacement cost is for the four walls and roof. So your building, say it’s a million dollars for four walls and one roof. Then your business interruption if you so choose to purchase it, which is usually just gross rents, or some factor of that. Whatever the owner’s kind of financially expecting to earn or see come through the door. Knows the 1 or 2% based off the total there but both those numbers added in and the personal property that maybe the landlord owns or is it just a replacement cost? That’s just understanding that. Then also, understanding if there’s a minimum attached. Some of these deductibles, they won’t kick in at 2% until the claim exceeds a certain dollar threshold, you might see 2% but a minimum of $50,000. So what if the $50,000 is less than the 2% or is more than a 2%? They’re going to stick with the $50,000 deductible. If 2% is greater, well, my insurance company is getting right about that 2%. It’s kind of understanding how you’re purchasing it right there, how that affects your lender, and all that good stuff there too. It’s a really big important thing, because if you think about what you’re doing with insurance, you’re transferring the financial risk from your balance sheet to the insurance company’s balance sheet. It’s just accounting and some actuarial science behind it. Owners have to realize that their proof is similar as all business owners are trying to not let excess money go out the door. The insurance company doesn’t is trying to keep that money in. They’re trying to generate bees and investment income off the premium they collect. They set boundaries and rules on those policies. So just kind of understanding how those deductibles are triggered and what they’re actually going to pays is a big thing.
