Hurricane Harvey has taken its toll on Houston’s commercial real estate market. This overview of the industry impacts reveal how devastating the damage really was.
Hurricane Harvey, the Class 3 hurricane that has devastated Houston, Texas, has also wreaked havoc all along the state’s coast. In addition to displacing tens of thousands of people, Harvey has set a number of records, including the wettest hurricane on record in the United States, according to Reuters. The storm has already become the second most expensive in the nation’s country. Quoting Texas Governor Greg Abbott, ABC News reported that the total funds necessary to recovery from storm exceeded $125 billion.
This destruction has impacted residents of the state at every level. Additionally, the damaged caused by Hurricane Harvey has also had major impacts on businesses in the area, doing irreparable damage to commercial real estate assets throughout Houston and the surrounding areas. Considering that the Texas Commercial Mortgage industry in Houston was already dealing with setbacks, the further consequences of Hurricane Harvey could be devastating.
● Traditional lenders have already begun reporting damages – Banks and other financial institutions in Houston have already begun to tally up their losses. The San Antonio Express-News reported that Houston’s Prosperity Bank, one of the state’s largest regional lenders, is expected to see $34.9 million in pre-tax losses as a result of the storm.
Cullen/Frost Bankers, parent company of San Antonio’s Frost Bank, is expected to take an even bigger hit of $53.4 million in pre-tax losses. Despite being deemed a “manageable” loss by Frost Bank, the devastation caused by Hurricane Harvey is sure to have a lasting impact on the state’s regional mortgage lenders.
● Texas Commercial Mortgage bonds are at risk for billions – The chaos and property damage caused by Hurricane Harvey is likely to cause immense losses for commercial lenders. National Real Estate Investor reported that $8.9 billion of bonds packaged into mortgages are at risk in Houston alone. Across the state, estimated damages exceed $30 billion.
● Multifamily investors must also prepare for delinquency – Another sector of the commercial real estate market that will be affected immediately by Hurricane Harvey is multifamily. With thousands of Texans displaced and their homes in unsafe conditions, there is little guarantee that landlords will be taking in rent over the next few months. National Real Estate Investor estimates that billions of dollars in mortgage bonds are wrapped up into multifamily properties as well. Harvey could leave billions of dollars of delinquent multifamily loans in its wake.
Natural Disasters Emphasize The Need For Versatile Real Estate Portfolios
Those investors who put their entire portfolios into Houston properties are likely protected by hurricane insurance. That being said, covering for all the damages caused by a natural disaster like Harvey is nearly impossible. Investing in new and different types of assets is a better way to prepare for the unknown.
Work with a savvy private lender to diversify your portfolio, increase your financial flexibility and protect your revenue stream with a Texas Commercial Mortgage.
Need help making your company’s income stream more resilient against the unexpected? Smart real estate investments are great first step. An private lender with commercial real estate experience can tell you more about how to move forward.
Level 4 Funding LLC Private Hard Money Lender
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Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.