NOVEMBER 2012 Minnesota Shopping Center Association Vol 26. no. 11 In this Issue Property Claim --------- FEATURE 1 Yogurt Lab ------------ RISIng STAR 3 Champeau/Engels - MEMBER PRoFILES 5 Retail Trends -------- PRogRAM RECAP 6 Online Advertising -------- STATS 7 Connection Feature by Jim Klym and Jon Diessner of Kraus-Anderson Insurance Will Your Business Survive After a Property Claim? roperty owners and managers in every part of the amended by endorsement. It ends on the earlier of (1) the country purchase and maintain insurance policies to date the property should be repaired, rebuilt, or replaced appease lenders and to protect their assets against the with reasonable speed and similar quality or (2) the date Prisk of catastrophic losses like fires and tornados. Since most when the business is resumed at a new permanent location. commercial property insurance carriers gladly offer When the business reopens, your income stream will take coverage for these types of losses, many in real estate shift time to resume to pre-loss levels. Most insurance companies their focus to obtaining the lowest possible premium. What grant 30 days of coverage for the “Extended Period of they often fail to consider is that the potential for financial Indemnity” with the option to purchase a greater timeframe loss to a commercial property such as 60, 90, 180 or 360 owner far exceeds the cost of days. rebuilding a structure. In fact, in situations where businesses Hopefully, owners and suffer a loss that forces them managers that read this to shut down operations for description will be prompted more than 30 days, industry to dust off their own policy or experts state that a quarter of call their agent to see them will never reopen. This whether or not this coverage unfortunate situation occurs is in place for their because many buyers don’t properties. Unfortunately, pay careful enough attention many, upon finding that they to a coverage known as do indeed have Business “Business Interruption Income coverage, will let Insurance” or “Business out a sigh of relief, and go Income/Loss of Rents back to business as usual. Insurance.” While the terminology may seem fairly But be careful. Carriers that include this coverage will rely on innocuous, the consequences of ignoring it can be information provided by the agent, and most make no devastating. This article will examine how the coverage distinction between those in real estate and those in works, why it is so crucial to those in real estate and what manufacturing or construction. But property owners and you need to do to ensure your assets continue to produce managers have very unique exposures that must be the income on which you rely, even after a catastrophic addressed properly in order for the coverage to have any event. value whatsoever. Business Income/ Loss of Rents Insurance is a property The first such exposure that should be considered is the time coverage that is designed to pay lost income (rents) as well required for reconstruction and the inability to move as expenses, including payroll, following a total or partial operations to a temporary location. Unlike a contractor who shutdown of operations. It is only triggered by a loss from a can conduct operations at another location relatively covered peril described in the cause of loss section of the easily, property owners and managers depend on their fixed policy and only applies during the “period of restoration.” location asset to produce income. Most businesses Typically, the “period of restoration” begins 72 hours after underestimate the amount of income necessary to meet the physical damage occurs, although this can be obligations until the property is operating normally again. By msca-online.com 1 MSCA Connection November 2012 Will Your Business Survive? - continued 2012 Sponsors insisting that your agent provide detailed may affect it. This common tool will help and accurate annual income information you identify the gross profit and normal ACI Asphalt Contractors, Inc. to the carrier, you allow for unforeseen operating expenses, including payroll, that Aspen Waste Systems, Inc. delays such as cause and origins will help determine the necessary level of Barna, guzy & Steffen, Ltd. investigation, tear down and debris coverage as well as spark a review of Bremer Bank, n.A. removal, securing permits, upgrading to business strategies and recovery plans. A CBRE comply with current building codes, properly completed business income involvement of federal, state and local worksheet is the foundation for proper CSM Properties government, choosing a contractor, and Business Interruption valuation. As an owner Chuck & Don's Pet Food outlet the delays inherent in construction itself. or manager you might also consider Colliers International | developing a disaster plan to minimize your Minneapolis-St. Paul The basis on which the carrier determines exposure in the event of a loss. Cushman & Wakefield/northMarq the value of their obligation is also very Cutting Edge Property important. Most carriers will require a stated As a property owner or manager, you are Maintenance amount of coverage on larger risks based often required to wear a number of Doran Construction on recent financial statements and a different hats. From repairman to attorney Faegre Baker Daniels LLP business income worksheet. Unfortunately, to accountant, your responsibilities are Fendler Patterson Construction, Inc. this allows for errors and inconsistencies that many and diverse. When you purchase Fredrikson & Byron, P.A. may be problematic when filing a claim. If commercial property insurance, you are available, it is far more beneficial for the entitled to a detailed and accurate analysis gray Plant Mooty valuation to be on what is known as an of your portfolio's unique risks. not all great Clips, Inc. “actual loss sustained” basis. In this situation, policies, agents and carriers are created H.J. Development, Inc. the carrier will rely on historical financial equal, so it is crucial that you have a Inland Real Estate Corporation statements to determine the income that partner that understands commercial Jones Lang LaSalle would have been generated if the loss had property in general, offers helpful and Kraus-Anderson Companies not occurred. insightful risk management suggestions, and Larkin Hoffman Daly & Lindgren Ltd. takes the time to help you evaluate the risks often the most overlooked exposure The Lawn Ranger outdoor Services in your operations and effectively mitigate unique to property owners and managers is Leonard, Street and Deinard them through a well-developed the “Extended Period of Indemnity.” In commercial property program. M & I, a part of BMo Financial today’s real estate market the standard 30- group day extended period of indemnity, which MFRA, Inc. implies a property is either 100% leased at Mcgladrey the time of reconstruction or has thirty days Messerli & Kramer P.A. in which to do so, is simply unrealistic. Mid-America Real Estate – options to purchase a greater time frame, Minnesota, LLC up to 360 days, should be seriously Midwest Maintenance & considered in order to avoid hurried lease Mechanical, Inc. negotiations that undermine the market THIRD THURSDAYS Minneapolis/St. Paul Business value of the property. Journal Minnesota Real Estate Journal It’s also crucial, as a policy holder, that you Next Meeting : Thursday, November 15, oppidan, Inc. understand the possible gaps in coverage. 2012 Business Interruption only pays losses due to Time: 8:30 am – 9:30 am The opus group Paster Enterprises covered perils described in the property Where: Starbucks – 1470 Robert Street Prescription Landscape policy. If you have a loss from a peril that is South, West. St. Paul excluded in your policy such as flood or RLK Incorporated earthquake, Business Interruption will not Member host: Regis Corporation respond. Even if you have a flood policy Anita Johnson , Christianson & Robert Muir Company with the national Flood Insurance Program, Company Commercial Real Estate Ryan Companies US, Inc. Business Interruption will not be included. What: Casual networking hosted by TCF Bank You should also be aware of your duties in MSCA members TCI Architects/Engineers/ the event of a loss and know that it is When: Third Thursday of every month Contractor, Inc. critical that you keep accurate records in a from EITHER 8:30 –9:30 am or 4:00 –5:00 Target Corporation safe place. Insurance companies typically pm. U.S. Bank pay loss of rental income based on your Why: Create synergy in the commercial historical rental income so rent rolls are United Properties real estate industry —share ideas and uniquely important. Foresight and planning, Venture Mortgage Corporation stories and make new effective as in most business situations, will help to Weis Builders, Inc. relationships. avoid pitfalls when it comes to recovery Wells Fargo Bank, n.A. from Business Income coverage. Ask your There is no fee for this event. Food and Westwood Professional Services, Inc. agent to assist you in completing a Business beverage are not included. RSVP to Wipfli LLP-CPAs & Consultants Income Worksheet and make them aware Stacey is preferred, but not required. of any substantial changes in income that MSCA Connection November 2012 msca-online.com 2 Rising Star by Creig Andreasen , Messerli & Kramer Featured (yo)gurt[lab] Sponsors Chuck & Don’s Pet Food cience! nobody knows how to excite your taste buds better than you do, and Yogurt Outlet Lab gives you full reign to concoct your craved creations. With a periodic table filled At Chuck & Don’s Pet Food with yogurt flavors, stations of assorted fresh fruit, and a wall lined with tubes of outlet, we care about pets, Stoppings, the formula you create out of the 60+ favors is just as unique as this scientific people, and doing the right take on a frozen yogurt store. thing. We strive to be the best regional independent Walking into Yogurt Lab feels like entering a pet food and product laboratory.