For Property-Backed Securities,
Rita May Be Worse Than Katrina
by Christine Haughney
From The Wall Street Journal Online
September 26, 2005
Hurricane Rita threatens to do more damage to publicly traded real-estate markets than Katrina.
Standard & Poor's estimates about three times as much commerical-mortgage-backed securities could be affected by the pending storm than were affected by Katrina. CMBS are created by securitizing loans on offices, malls and other commerical properties.
In Houston alone, some 2,000 properties valued at about $11 billion are packaged in such bonds, according to analytics firm Trepp LLC -- roughly 2.4% of the overall CMBS market. Across Louisiana, Mississippi and Alabama, about 1,100 properties in 345 deals were affected by Katrina.
"There is certainly more CMBS exposure in Dallas and Houston," said Bear Stearns senior managing director Randy Reiff.
But Mr. Reiff and others hope buildings in those more-inland Texas towns won't be harmed nearly as badly as buildings in New Orleans, where flooding accounted for most of the damage.
Real estate investment trusts like Camden Property Trust and Gables Residential Trust also have large portfolios in the Houston market. All together, REITs own more than 900 properties there.
The Houston area has the highest-percentage of REIT-owned shopping centers in the nation, by square footage. Weingarten Realty Investors has the greatest exposure with 75 shopping centers, according to research firm SNL Financial.
"The sooner we can get the population of the Houston market back into the city, the less of an impact it will be," says Keven Lindemann, SNL's director of real estate.
Only 17 REITs with more than five properties along the entire Gulf Coast had properties that were affected by Katrina. Sizeler Property Investors Inc. had half of its portfolio affected, but that company has since reported that two of its three enclosed malls are operational.
Employees of agencies that finance and service commercial buildings are working all-out: In the past several weeks, GMAC Commercial Mortgage already has reallocated 75 staffers to work exclusively on 470 properties, valued at $2.8 billion, harmed by Katrina. Now GMAC executives are also concerned about 800 properties, valued at more than $4 billion, that the company finances or services mortgages on in the path of Rita.
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