Hurricane Ida threatens $7B of CMBS

Storm could make things worse for properties already struggling with pandemic

National /
Sep.September 01, 2021 12:30 PM
Photo illustration of the Hyatt Regency hotel in New Orleans (Hyatt, iStock)

Photo illustration of the Hyatt Regency hotel in New Orleans (Hyatt, iStock)

Amid the wreckage that Hurricane Ida wrought when it slammed into the Gulf Coast over the weekend, upwards of $7 billion worth of commercial real estate loans could be affected as the region deals with the aftermath of the storm.

More than 800 properties in Southeastern Louisiana, Southwestern Alabama and Southern Mississippi with securitized mortgages totaling $6.98 billion lay in areas hit by the storm, according to the ratings agency KBRA.

The largest individual property is the nearly 1,200-room Hyatt Regency hotel in New Orleans, which has a $325 million CMBS loan that was 90 days delinquent as of August due to the pandemic’s impact on tourism, according to KBRA.

While the full extent of the damage from Ida is still unknown, experts said hurricanes generally don’t ripple through to the securitized mortgage market.

“Hurricanes have historically resulted in minimal delinquencies in CMBS,” said Matthew Halpern, a senior credit officer at Moody’s.

Halpern said that geographic diversity, property-level insurance coverage and backstops like master servicers advancing debt service payments help to mitigate the challenges faced by individual properties.

Moody’s calculated that approximately $4 billion worth of CMBS loans — or roughly 1 percent of the U.S. balance — lay in counties impacted by Ida. That figure is based on a universe of 302 loans that Moody’s rates, compared with the 526 rated loans that KBRA included in its figure.

As of Wednesday, 2 million Louisanians were without power for a fourth day as authorities warned that a full recovery could take months, USA Today reported. So far two deaths have been recorded in the state, and sweltering hot weather is making things all that more dangerous.





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