The Double Bottom Line: Doing Well While Doing Good

A Sustainable Investment Strategy for the 21st Century

4241Preferred Climate Resilient Properties (PCRP) is the first investment group in the United States to marry the proven cash flows, tax advantages and value propositions inherent in multifamily investing with modern impact investment strategies aimed at making the world a better place.

For many, doing good is good enough. Our core insight takes this a step further: Doing good also improves the chances that your investment will bring the highest possible return. All investing involves a certain degree of risk,  multifamily properties in growing markets represent a proven way to create cash flow and tax advantages. But some of the most crowded, high priced markets in the United States have a hidden downside. They sit in regions prone to the bigger, more frequent storms, earthquakes and other potentially devasting natural events that can wipe out lives, buildings and the value of an investment portfolio in a single afternoon.

Whether you think its driven by man or not, our climate is changing, bringing “100 Year Floods” to some places every five years. The recent growth in “inland” cities – Denver, Atlanta, Boise, Indianapolis and others – is the result of many forces. But PCRP believes the increasing costs involved in purchasing, protecting, maintaining and especially insuring properties in “hot” coastal markets will only get worse, driven by the higher risks associated with owning property in places like Jacksonville, Fla.,  Houston, Charleston, S.C. or the New Jersey shore.

The Purpose of Investing Is Investing with Purpose

apartment_damageRising seas and rivers, more powerful and frequent storms and earthquakes are creating risks that cannot be ignored. Whatever you feel about climate change, smart dollars are flowing to projects that take climate risk seriously. There are two reasons for this:

First, physical damage and rising insurance rates are driving costs ever higher in already overpriced coastal markets and along major waterways prone to flooding.

Second, a consensus is emerging that development policy needs to shift away from areas that will be battered ever harder by natural forces and toward places where a more sustainable lifestyle, free of extreme risks and more in tune with nature, can prevail. This is not a political position.

In fact, “Impact Investing” and “Environmental, Social and Governance” (ESG) strategies now make up $1 of every $4 dollars invested in the United States, according to a study by Morgan Stanley. While personal values play a role in some of these flows, the bottom line still rules on Wall Street and the talk there is of ever greater opportunity in climate mitigation and “greening” infrastructure, including multifamily housing. In his annual letter to clients, Larry Fink, Chairman and CEO of BlackRock, the world’s largest asset management firm, said “Companies that fulfill their purpose and responsibilities to stakeholders reap rewards over the long-term. Companies that ignore them stumble and fail.” At PCRP Group, we think he’s right. And we think his strategy is right for you, too.

Coastal Storm Risk

costal-risk

Coastal markets have had a great run with growth and economic fundamentals in many metropolitan areas. But summer after summer brings more evidence that the increasing size, frequency and ferocity of coastal storms are outpacing efforts to adapt. Insurance companies have pulled out of many regions and rising premiums are cutting into multifamily margins. While PCRP Group analyses potential deals from all over the US, our numbers show that such regions pose a higher risk to returns.


Earthquake Risk

earthquake-risk

A property grazed by a major storm may well survive and prosper once clean up and repair are done. But earthquakes pose a different problem. Buildings not designed from the start to be earthquake resistant are hard to retrofit and seriously prone to structural damage from even relatively mild seismic events. Building on known faultlines is an overt gamble: it’s not a matter of if disaster will strike, but when. PCRP steers clear of such zones and believes our investors’ money is more secure as a result.


Major Flood Risk

spring-flood-risk

Major flooding affects many parts of the United States, especially those along the Mississippi, Missouri, Ohio and other major river systems. As with hurricanes and earthquakes, the last several decades has seen an increased frequency of major flooding, to the point where the National Weather Services has revised the now obsolete concept of the “100-year flood.” Flood damage can devastate a property in a matter of hours, threatening lives, belongings and the viability of entire neighborhoods. We target markets with known resilience to such events. On occasion, we also consider properties within these zones where infrastructure and other precautions mitigate the risk that flooding will diminish returns.


Drought Risk

Scientists believe droughts like the one that lingered in California from 2011 to 2017 will become more frequent as the century goes on due to climate change. This may be a long-term risk that is unlikely to affect someone holding a property for seven to ten years. But the pace of change is accelerating, and the US Southwest in particular could see a major water crisis in the coming years, hurting job and population growth and imposing severe costs and restrictions on water use.


Disclosure and Disclaimer
The information contained on this website is not a public offering or a solicitation to purchase securities or otherwise make an investment. No specific offering is being made at this time. Securities may only be offered or sold by registration or exemption.
This information is not and should not be construed as an offer, or a solicitation of an offer, to buy or sell any securities or other financial instruments. No action has been taken to permit a public offering in any jurisdiction where action would be required for that purpose. This material is offered for informational and educational purposes only.
In considering the prior performance information contained herein, please bear in mind that past performance is not necessarily indicative of future results and there can be no assurance that comparable results will be achieved by PCRP Group LLC, its partners or its affiliates. The use of such terms as higher, above average, better, safe, secure, successful, express the views of PCRP Group and are not a promise or guarantee for any possible offerings that PCRP Group LLC may choose to make by registration or exemption, under relevant securities laws, in the future.