The Real Deal New York

Hurricane Florence damage toll could include nearly $1.5B of mortgages

Multifamily properties account for almost one-third of the exposure
By Eddie Small | September 20, 2018 02:00PM

Flooded North Carolina homes (Credit: Getty Images)

Hurricane Florence-related damages could impact $1.49 billion worth of securitized commercial mortgages, according to a report from Morningstar Credit Ratings.

The storm has been devastating North Carolina with flooding and record-breaking rainfall, and Morningstar found 189 properties backing 187 securitized loans in counties designated as disaster areas by the Federal Emergency Management Agency. The state’s Cumberland and New Hanover Counties had the most exposure at $1.05 billion.

Freddie Mac deals on multifamily properties account for 32.8 percent of the total exposure.

Morningstar does not expect a wave of loan defaults to stem from the storm, as business-interruption insurance should be able to cover any gaps in service that may arise for most properties.

However, flood damage could still prevent the refinancing of some existing loans and jeopardize the payoff of about $51.5 million in securitized loans due to mature over the next year.

Morningstar’s securitized commercial mortgage estimate for Hurricane Florence is much smaller than its estimate for securitized commercial mortgages after Hurricane Irma, when it projected that $26.6 billion worth of them were at risk.

Analysts said the storm will likely impact home sales and construction in the coming months, and it could lead to a rise in flood insurance prices as well. An undersupply of apartments in the small cities that Florence has hit could make it especially challenging to relocate residents displaced by the storm.