Deep Horizon oil spill soaks $9 billion in CMBS deals
The first factoids, attaching dollar signs to the Deep Horizon oil-related damage to commercial real estate, are washing ashore.
Realpoint, a rating agency, recently reported (in Real Estate Finance & Investment and Institutional Investor) that the Gulf of Mexico oil spill is affecting “$9 billion in commercial mortgage-backed-securities (CMBS) deals“.
The article notes:
[Realpoint] found that there are about 306 loans on 319 properties on the coasts of Louisiana, Mississippi, Alabama and Florida that are feeling a direct impact from the spill. The agency believes that the biggest threat to cash flow will be reduced tourism, particularly for properties in Florida. About 247 of the properties affected by the spill are in Florida; reports are that it could cost the state about $2.2 billion.
So will those property owners and the CMBS bondholders go marching arm-in-arm to British Petroleum, to file claims for lost income on those properties and/or debt service on those loans? How will they be compensated for the permanent loss of market value on a “marked” property, not to mention loss of access to refinancing for properties that really are or perceived to be oil-damaged?
Those factoids will roll in soon, I’m sure.
So we now have the unhappy visual of real estate investors, pants rolled up to their knees, trudging through the business, legal and insurance swamp surrounding Gulf-region CMBS, added to a somber image of the rest of the industry on its slow march to building-related sustainability.
One thing’s for sure: the proximity of these events takes the option of doing nothing about environmental and social responsibility off the table (finally).
