Trepp puts CMBS exposure to Hurricane Florence at $3.9B

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Some 550 securitized mortgages on commercial properties in North Carolina and South Carolina totaling $3.9 billion are exposed to Hurricane Florence, according to Trepp.

That tally, published Friday, is lower than the $10.7 billion estimate published last month by Moody’s Investors Service but lower than the $1.49 billion identified by Morningstar Credit Ratings.

The loans Trepp identified as being located in the 28 counties that FEMA has declared eligible for federal disaster relief are securitized across more than 400 deals, including both private-label CMBS and agency notes from Fannie Mae, Freddie Mac and Ginnie Mae deals.

Trepp noted that, because of residual flooding, the ultimate totals may not been known for weeks. The storm dropped nearly three feet of rain in parts of the Carolinas and triggered dangerous flooding, which took more than 40 lives.

“As we've written before with regard to this hurricane and other large hurricanes which hit the US, these painful storms have not led to major losses for CMBS investors,” Trepp stated in its report. “Insurance proceeds have typically been sufficient enough to cover rebuilding costs, and delinquencies and write-offs have been negligible.”

It added, “we can't even recall prepayments over condemned properties being an issue.”

A little more than half of the loan total — with a combined $2.1 billion in outstanding balance — comes from government-sponsored enterprise (GSE) deals. These Fannie Mae/Freddie Mac/Ginnie Mae loans will not pose a credit risk for anyone other than holders of Freddie K-Series credit paper. There could be a potential for heightened prepayment risk if these properties were to be condemned, or if the accompanying loans were paid off with insurance proceeds. However, that would be the only risk.

For the non-GSE portion of this list, there are almost 200 loans in this segment with a total balance of $1.8 billion.

Lodging properties make up the largest chunk of exposure by major property type with $540 million (or 31.2% of the non-GSE total). Retail loans were next with $492 million (28.4%).

There was a “surprisingly high” volume of multifamily loans in this group. The total came to $461 million, or 26.6% of the non-GSE set.

In the office segment, there are 17 loans with a balance of about $195.3 million for which the largest tenant makes up more than 20% of the space and has a lease that expires within the next 24 months.

Only 11 of these private-label loans are slated to mature in the next 12 months, and most of those are legacy notes.

The 18 counties in North Carolina are Beaufort, Bladen, Brunswick, Carteret, Columbus, Craven, Cumberland, Duplin, Harnett, Jones, Lenoir, New Hanover, Onslow, Pamlico, Pender, Robeson, Sampson and Wayne. The 10 counties in South Carolina that FEMA designated for relief are Orangeburg, Dorchester, Berkeley, Charleston, Georgetown, Horry, Marion, Williamsburg, Dillon and Marlboro.

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