Building insurance

Executive Summary
Company. Kova Partners Industry. Commercial real estate Key. Insurance is a good way to diversify revenues.

On the local and regional level, commercial real estate and insurance have traditionally been separate businesses.

But Anthony Emma, Jr., the CEO and managing partner of commercial brokerage Kova Partners, doesn't see it that way. In fact, he's counting on the fact that his firm can help landlords lower insurance premiums.

Kova recently launched a new division called Kova Insurance Group to sell commercial property insurance. Emma says he's confident that it can do that as successfully as its other services such as leasing, property management and investments. “It's something I've thought about for quite some time,” he says.

Since Emma relocated permanently to Naples from Rhode Island three years ago, Kova Partners has grown its property management arm to 3 million square feet of space in about 70 buildings in Lee and Collier counties, enough space to fill 52 football fields.

To get into the insurance business, Emma invested as a partner in an existing Naples insurance brokerage called Lely Insurance, renaming it Kova Insurance Group. Leading the insurance division are the owners of Lely Insurance and seasoned insurance executives, David Bolduc and his uncle Daniel Bolduc. The company works with about 30 carriers that sell insurance to businesses and consumers.

“We are a full-service firm,” Emma says. “To me, insurance is a big part of that.”

Risk management
In the commercial real estate world, insurance falls under the category of common-area maintenance, which also includes taxes. Commercial brokers often quote these expenses separately from rents because they have little control over such costs.

“Some people call them non-controllable expenses,” Emma says. “We take a different approach.”

Emma says landlords can control expenses such as insurance, lowering annual premiums on average 10% to 20%. Lower insurance premiums can give landlords a competitive edge in attracting tenants because the gross rents that include common-area maintenance are lower.

In some cases, the insurance savings can be even more significant. For example, Kova recently saved one company 40% on a $100,000 policy.

But it's not necessarily all about savings. Insurance brokers sometimes don't understand the finer points of commercial real estate, Emma says. “They don't realize what risk management means,” he says.

For example, one client had a policy that was missing a key coverage that wouldn't have covered half the building if most of it were destroyed. “Down here that's an especially important coverage,” says David Bolduc.

David Bolduc knows about risk. He began his career with American International Group where he was responsible for underwriting commercial insurance programs for large companies in New England and Canada. He later helped manage a Bermuda-based reinsurance company focused on hurricane and earthquake catastrophe-prone commercial property insurance programs.

Kova Insurance's sales will be to a broad clientele that could include business owners who need personal lines to cover their homes, for example. Many entrepreneurs don't distinguish between their businesses and personal wealth and seek advisers who can help with both. “I look at that as the big picture,” Emma says.

For his own firm, Kova Insurance is a way to diversify its revenues. Commercial real estate brokerage is a boom-and-bust business and insurance can help smooth out those swings.
“There's always a downturn in certain markets,” Emma says. “We're not going to limit ourselves to just our clients.”

Scouting expansion
Originally from Rhode Island, Emma's brother David persuaded him to join him in buying a condo in Naples in 1996. Once his children were through college, Anthony Emma actively started developing buildings in Naples in 2006 with private-equity investors. “I love the area,” he says.

“A lot of the work we do is redevelopment,” says Emma, whose investors look for undervalued properties in good locations, make improvements and lease them up at higher rates.

There are still opportunities for such redevelopment in Southwest Florida despite the recent increase in property values. He says some of the best deals are for properties that aren't listed for sale but for which an owner might sell quietly. “I wouldn't say all the deals are gone,” he says.

Emma says the North Naples area around the intersection of Airport-Pulling Road and Vanderbilt Beach Road currently shows the most promise because of its central location between fast-growing Bonita Springs and tony Naples. “I think that's a big draw right now,” he says, noting that commercial rents there have surged 25% in just two years.

However, Emma is focused on building the brokerage side of his business, which he reasons will weather the next downturn and snag deals for commercial real estate in market dips. “Being full service opens up opportunities,” he says.

Kova was formed in 2014 when Emma's Insignia Real Estate Companies acquired Colonial Square Management Group in Naples. “It gave us the foundation to transition here,” Emma says.

Don't be surprised to see the Kova name appear in Sarasota or Tampa later this year or in 2017, Emma says. He's contemplating expanding commercial real estate and insurance services there, perhaps by acquiring a local firm. “Our tagline is investing in people,” Emma says. “I don't want to lose the boutique style.”

Insurance success
Franklin Street is one commercial brokerage in Tampa that has successfully incorporated insurance sales as part of its services.

“It was part of the original strategy,” says Tom Kersting, president of Franklin Street's insurance services. Kersting joined the firm in 2014 from insurance giant Aon. “We're in the service business and our clients are commercial real estate owners,” he says.

Franklin Street's insurance service now oversees a portfolio of more than $10 billion in property values. But the insurance division of Franklin Street has grown by double-digit percentages in recent years thanks to clients outside the firm.

“We don't rely at all on our other business lines to bring us clients,” Kersting says. “We collaborate and share, but my producers are doing a ton of outward-bound activities.”

Franklin Street's insurance service has targeted a broad swath of the nation and the company now writes policies in 45 states. “One of our largest clients is out of Seattle,” Kersting says. “Three out of the top five are out of state.”

Within commercial real estate, Franklin Street has found niches in certain sectors such as multifamily housing, including “several hundred thousand” apartment units. “Within apartments we have a specialty division on affordable housing,” Kersting says. “That's a bit of a specialized space.”

While commercial real estate is the insurance service's main focus, Kersting says insurance for high-net-worth individuals is also appealing because individual owners of commercial real estate fall into that category. “It is a space that's natural to grow into,” he says.