$1bn of CMBS at risk from Louisiana floods: Morningstar

Flooding that devastated south Louisiana has put more than $1 billion in CMBS at elevated risk, according to Morningstar.

A report from the ratings agency states that 302 properties backing 214 CMBS loans, with an allocated property balance of $1.1 billion, are in the Livingston and East Baton Rouge counties, which were hardest hit after heavy rains began battering the state more than three weeks ago.

The storms and flooding killed a reported 13 people and caused at least $8.7 billion in damages according to the state’s governor, John Bel Edwards. The residential sector was clearly hardest hit, with the Federal Emergency Management Agency (FEMA) reporting that more than 134,000 households registered for aid. 

“While we see the potential for physical and monetary damage for many of the [commercial] properties in affected areas, the undamaged multifamily and hotel properties may see an uptick in demand in the short term, as thousands of homeowners seek out both temporary and permanent residence,” Morningstar analysts wrote.

Morningstar contacted leasing agents at the 10 largest commercial properties in the flood zone, which account for 25.3 percent of the total balance. The firm confirmed flood damage at just one — the St. Jean Apartments, which back a $27.6 million loan in FREMF 2014-KF05 — which will not have available units for the next six to 12 months.

Due to a likely stall in mall traffic as the recovery plays out, Morningstar noted that the $126.9 million Mall of Acadiana loan in BACM 2007-2 may suffer. And the firm sees heightened risk for loans already operating at low debt service coverage ratios, such as the $37.9 million Bon Carre loan backed by an office property, despite no confirmed flooding at that property.