Barclays analysts estimate that $620 million of securitized commercial mortgages are exposed to Sunday’s 6.0 magnitude Napa Valley, California earthquake.
But only small CMBS loans are at any risk of cashflow disruption because “these might not have earthquake insurance and could be more susceptible to damage and business interruptions.”
Retail shops in the downtown Napa Valley area may also feel some impact if they are shotdown, according to Barclays.
Otherwise, CMBS loans in a high-risk earthquake environment such as the Napa region are “required to have either earthquake insurance or seismic retro-fitting if an earthquake has the potential to cause a loss of at least 20%.”
The area is a popular tourist destination and there is consequently a high concentration of hotel and retail properties. Bank analysts calculated exposures to the earthquake based on a zip-code analysis of buildings and homes in and around the impacted area.
Based on this analysis, most of the exposure to the earthquake was from 2013-2014 vintage CMBS deals, including some loans just issued. Twelve loans with balances of more than $15 million are exposed to the earthquake. More than $215 million of allocated loan balance for nearby CMBS properties consist of hotels. The second largest property type is mixed use, including a $42 million hotel-retail property and several retail-office combinations in downtown Napa.
The largest loan is the $91mn Meritage Resort and Spa in WFRBS 2013-C15, according to the report. The second largest loan was the $41.5mn Vintage Estate hotel and retail properties loan in COMM 2013-CR11. However, analysts stated, that the properties backing the loans appeared to be operating as of Monday.
The Barclays chart below shows the largest loans located close to the Napa earthquake