Louisiana Flooding Affects $1.1B of CMBS Loans

There are more than 300 Louisiana properties affected by floods included in commercial mortgage-backed securities, according to Morningstar Credit Ratings.

The 302 properties in question have a balance of $1.1 billion and back 214 CMBS loans, Morningstar said. While the loans are spread out across 20 Louisiana parishes that were declared major disaster areas by the Federal Emergency Management Agency, the bulk, mortgages with a balance of $1.01 billion, are located in the Livingston and East Baton Rouge parishes that suffered the most damage.

Most of the CMBS exposure was to multifamily properties. There are loans backing 52 multifamily properties with a $710 million balance. Beyond outright physical damage, other concerns include mold, new regulations and a lack of flood insurance coverage, Morningstar said.

"We see the potential for physical and monetary damage for many of the properties in affected areas," Morningstar wrote. "The undamaged multifamily and hotel properties may see an uptick in demand in the short term, as thousands of homeowners seek out both temporary and permanent residence."

Morningstar called the leasing agents for the 10 largest properties in the area and said it got confirmation of flood damage at a multifamily property backing a $27.6 million loan in one CMBS transaction. The leasing agent told Morningstar that the property will have no available units for the next six to 12 months, but Morningstar said it was not clear whether this was due to flood damage or increased demand due to displaced homeowners in the region.

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