KBRA Releases Research – KBRA-Rated CRE Securitization Exposure to Los Angeles Wildfires

NEW YORK--(BUSINESS WIRE)--KBRA releases research assessing potential exposure of our rated universe of commercial real estate (CRE) securitizations to the unfolding events surrounding the wildfires in Los Angeles, which began on January 7. At least four major wildfires continue to burn in Los Angeles County, threatening lives and thousands of homes and businesses, and forcing residents to evacuate. The fires have already scorched nearly 30,000 acres, destroying several thousand homes and other structures. County officials have issued evacuation orders for nearly 180,000 people in areas in or near Glendale and Pasadena (Eaton Fire), San Fernando (Hurst Fire, north-northwest of Burbank), Tuna Canyon Park (Palisades Fire, between Malibu and Santa Monica), and the area just north of West Hollywood (Sunset Fire).

Across our rated universe of CRE securitizations, KBRA has identified five loans totaling $77.7 million located in areas that, as of the report’s publication, are under mandatory evacuation orders or evacuation warnings. The universe comprises 610 CMBS, CRE collateralized loan obligation (CRE CLO), and Freddie Mac transactions, which together include almost 20,000 loans with collateral properties. The exposure includes four loans in four conduit transactions and one loan in a Freddie Mac transaction. In addition, across our rated single-family rental (SFR) universe of 51 transactions, we have not identified any exposure in the evacuation zones. However, containment efforts have been stymied by the strong Santa Ana winds, dry conditions on the ground, and insufficient water supplies for firefighting. The latest reports indicate that some of the fires are less than 50% contained, which means that, depending on wind and weather conditions, the areas affected could increase.

For securitized loans, fire damage is generally a covered peril, including for wildfire damage. However, coverage for wildfires may be subject to higher deductibles or different sublimits.

KBRA will continue to monitor the status of the wildfires as part of its ongoing surveillance process.

Click here to view the report.

About KBRA

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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