500% insurance premium hikes shock New Orleans

New Orleans—Multifamily property owners here have been stunned by increases in property insurance premiums of about 500 percent this spring.

They have been struck with a nasty choice: Pay vastly increased premiums or invoke a state regulation that allows them to defer the increases at the risk of having the insurance company drop coverage for them at the end of the year.

Property owners in Louisiana can invoke a state insurance regulation called Rule 23 that essentially requires carriers, if requested, to renew policies under the existing terms through the end of 2006 if the property has not been placed back in service yet due to storm damage, according to David Abbenante, president of property management at HRI Development, a New Orleans-based multifamily developer and manager. (See APARTMENT FINANCE TODAY, May 2006, page 44.)

HRI Properties, which has 12 properties in the New Orleans metropolitan area, has been busy negotiating with its various insurers, which have presented the company with premium increases of between 500 percent and 1,200 percent.

After calculating that it would cost $2.5 million to meet the new premiums, on top of increases of 4 percentage points in windstorm deductibles, HRI invoked Rule 23 and provided itself with temporary relief. (HRI still has only received $5 million of its $35 million in pending claims to cover damage caused by Hurricane Katrina and its aftermath.)

But Rule 23 comes with drawbacks. Abbenante said his insurance agent has advised him that many insurance companies are warning that if Rule 23 is invoked, they are likely to drop the insured property altogether at the end of 2006. But for property owners faced with a choice between paying up (sometimes with only a few days between notification of the new premium) and the expiration of coverage) or invoking the rule, a six-month delay can buy time to seek better industry remedies.

Abbenante, who is also president-elect of the Greater New Orleans Apartment Association, has organized local apartment professionals to discuss the problem, meet with local and state officials, and try to work cooperatively with the insurers to find a solution.

“We want an open dialogue because apartment owners can’t swallow [these increases],” said Abbenante. “I don’t expect the insurance companies to use the old rates; I know it has to change. We hope something comes out of [the discussion] rather than going to court.”

Louisiana multifamily owners interested in learning more about industry efforts to resolve the insurance crisis can contact Abbenante at

—John Zipperer


Aldinger leads Capmark

Capmark Financial Group, Inc., elected William Aldinger III as president and CEO. He succeeds Robert Feller, who will be leaving the company.

Capmark, formerly known as GMAC Commercial Holding Corp., was acquired in March 2006 by an investor group led by affiliates of Kohlberg Kravis Roberts & Co., Five Mile Capital Partners, LLC; Goldman Sachs Capital Partners; and Dune Capital Management, L.P.

Aldinger served until his retirement in April 2005 as chairman and CEO of HSBC North America Holdings, Inc., a subsidiary of HSBC Holdings, PLC. 

Borland heads Evans Property Management

Evans Property Management, Inc. (EPMI), a subsidiary of apartment developer A.F. Evans Co., Inc., appointed Jennifer Borland president. EPMI manages properties in California, Nevada, Oregon, and Washington.

Borland has nearly 20 years of real estate experience, including tenure as president and chief operating officer of Jupiter Communities, LLC.

CondoLane hires Giannoni

Gigi Giannoni was named president of CondoLane, a subsidiary of Atlanta-based Lane Co. CondoLane sells and markets condominiums for both Lane Co. and third-party clients.

Giannoni was most recently chief operating officer for Gameday Centers Southeastern, which develops and manages luxury sports condos near universities.

Interstate promotes Bennett

Christopher Bennett was promoted to executive vice president and general counsel of Interstate Hotels & Resorts. The company’s subsidiary, Bridgestreet Worldwide, has a portfolio of more than 8,900 corporate apartments internationally. Bennett was previously senior vice president and general counsel of Interstate.


NMHC calls for tech survey participants

The National Multi Housing Council (NMHC) is co-sponsoring a nationwide study to uncover the preferences of multifamily residents for voice, video, and data services.

The survey will ask 10,000 apartment residents about issues such as their preference for phone service delivered via the Internet, cell phones, or traditional land lines; whether the availability at an apartment property of high-definition television, video-on-demand, and other programming technology makes the tenant more likely to rent there; and how interested tenants are in high-speed and wireless Internet services.

NMHC members that want to participate will receive the survey results from their properties’ tenants, and the organization will release the results in a white paper this fall. The study is co-sponsored by five major telecommunications firms: AT&T SmartMoves, Comcast Cable Communications, Cox Communications, Time Warner Cable, and Verizon.

Interested NMHC members should visit the organization’s Web site at


Surety bond in lieu of utility deposit

Depending on the municipality and utility provider, oftentimes a deposit will be required of a new owner. In some cases, multiple deposits (water and sewer, electricity, gas) are levied. These are sometimes left off a start-up budget, either inadvertently or because the amounts are unknown, until the changeover occurs. We have seen cumulative deposits greater than $30,000 on a single property – a significant amount, especially following a large capital outlay at closing. A surety bond, often available from an insurance company or agent, can be acquired for an annual cost of as little as 3 percent, a figure significantly lower (hopefully) than the property’s cash flow. Thus, in lieu of coming up with an additional $30,000 in capital, a bond could be purchased for $900. Generally, after two or three years of service, a deposit will no longer be required.

– Jason Rosa, Continental Realty Advisors, Ltd., Littleton, Colo.

Win $100 and the recognition of your peers

If we publish your clever idea about how apartment owners can cut costs, increase revenue, or attract and retain residents, we’ll send you $100 and an AFT coffee mug. E-mail your Trade Secret to, or fax to (415) 315-1248.

We reserve the right to edit any submissions.