With two hurricanes following in the footsteps of last month's Charley, the uptick of CMBS delinquencies due to the first storm are expected to take longer to cure than previously anticipated, said Fitch Ratings. Florida currently has the fourth highest percentage of CMBS collateral in the country.

Fitch added that commercial property borrowers are typically required to carry insurance for wind damage (which usually has a 5% loss deductible) and property interruption. Analysts said that these deductibles are usually applied to each occurrence. This is why if a property has been affected by more than one storm, borrowers could face more burdens as a result. Additionally, many policies have reinstatement premiums in cases where limits on insurance are already paid out fully. This factor results in additional expenses for the property owner.

Fitch reports that the servicers it has gotten in touch with are currently in the process of contacting property owners and managers. However, the extent of the damage was still unknown as of press time last week. The rating agency said it would look closely at the loans secured by properties affected by the hurricane, specifically at transactions that have greater than 20% Florida exposure.

Previously, Fitch said that while the initial jump in delinquencies caused by hurricane Charley was likely, the rating agency did not see any long-term effects from the storm within the CMBS deals that it rates.

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