KBRA releases research on KBRA-rated commercial mortgage-backed securities (CMBS), Freddie Mac, commercial real estate collateralized loan obligation (CRE CLO), and single-family rental (SFR) exposure to Hurricane Idalia. Hurricane Idalia struck Florida’s northwestern shoreline as a Category 3 hurricane on the morning of Wednesday, August 30. The relatively fast-moving storm caused high winds and heavy rains in the Big Bend region of Florida. The storm’s center was already back out to sea off the coast of North Carolina by Thursday morning. Preliminary estimates of insured losses from the storm range from $2 billion to $9 billion for Florida alone. Although the losses are significant, they are substantially lower than the estimated $60 billion caused by Hurricane Ian, which hit Florida in September 2022.

The Federal Emergency Management Agency (FEMA) updated its disaster declaration on September 3 to include 14 Florida counties eligible for individual and public assistance: Citrus, Columbia, Dixie, Gilchrist, Hamilton, Hernando, Jefferson, Lafayette, Levy, Madison, Pasco, Pinellas, Suwanee, and Taylor. The counties cover a low-lying area and include St. Petersburg, the largest city within the declared counties. Eight of the counties have populations of less than 50,000 and only the counties of Hernando (207,000), Pasco (609,000), and Pinellas (962,000) exceed 200,000 residents.

KBRA identified loans within our rated universe of CMBS, Freddie Mac, and CRE CLO transactions that are backed by properties in the impacted areas in Florida. Our analysis indicates that 113 KBRA-rated deals have underlying loan collateral within the 14 Florida counties with a total allocated property exposure of $880.7 million across $7.3 billion of loan balance. Ten deals have property-level exposure that is at least 3% of the total transaction balance.

Among both KBRA-rated multi-borrower and single-borrower SFR transactions, 45 deals have properties in the 14 affected Florida counties. For multi-borrower deals, only CoreVest American Finance 2022-1 has property exposure that is at least 3% of total property value. Among single-borrower transactions, 10 have property-level exposure of at least 3%.

The severity of property damage in the impacted counties is currently unknown. Although potential losses may be fully or partially mitigated by existing insurance policies, the degree of coverage may vary. Securitized loans generally require comprehensive coverage for fire, casualty, special perils, business interruption, rental loss, and commercial general liability insurance. In addition, properties in areas designated as having special flood hazards are generally required to maintain flood insurance, and properties in certain high-risk areas typically need to maintain windstorm and/or “named storm” coverage. KBRA will continue to monitor the situation and review available servicer information to better understand the extent of the damage and determine any potential impacts on ratings.

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KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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