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Investment firms wade into Florida retrofits

Oct 28, 2022
 Illustration of Ben Franklin wearing a life jacket and goggles

Illustration: Shoshana Gordon/Axios

Weeks after Hurricane Ian ravaged parts of Florida, a private-equity backed group is moving in with multifamily building retrofit projects in Tampa and Orlando.

Why it matters: The deal shows the willingness of deep-pocketed investors to wade into the murky waters of costly and time-consuming infrastructure resilience projects that a changing climate makes necessary.

Driving the news: Taurus Investment Holdings, a PE group focused on real estate, and Aegon Asset Management, an asset management arm of Aegon N.V. with $25 billion AUM, are financing the development projects on two multifamily buildings via recapitalization.

  • Renu Communities, a Taurus-affiliated company, will manage the design and construction for the retrofits, which are the second and third such projects jointly run by the three companies.
  • The project entails replacing traditional HVAC systems with heat pumps, replacing electric water heaters with heat pump water heaters, swapping out inefficient water fixtures, installing solar panels, and adding an energy monitoring system for the buildings and individual units.
  • The projects, which were booked before Hurricane Ian, are expected to be completed in 2023, and Renu Communities CTO Chris Gray confirmed to Axios that the storm did not change the timeline.

State of play: Building retrofit projects are a growing area of interest for startups and investors alike as new construction fails to keep pace with demand.

  • Ivanhoé Cambridge, a Canadian real estate company, recently completed a pilot project with Turntide to retrofit a selection of commercial buildings with more energy efficient heating and ventilation systems. The pilot found the retrofits yielded a 35% energy savings in each location, or roughly 56,000 kWh of energy annually.

Zoom out: A McKinsey report out earlier this year estimated that Florida homes exposed to climate risks such as flooding would see value depressed $5 billion compared to homes that are not exposed to the same risks.

  • Hurricane Ian likely caused $53 billion to $74 billion in insured losses from Florida to the Carolinas, with a "best estimate" of $67 billion, Axios previously reported.

The bottom line: The financial institutions in this deal are taking on a fair amount of short-term risk given the likelihood of increased exposure to climate change events in Florida, but are balancing that with the long-term probability of lower asset management costs associated with retrofitted buildings.

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