Economic Loss, Commercial Property Damage Loom Following Texas Hill Country Floods
Four days after devastating flash river flooding swept through the Texas Hill Country, hope is fading for survivors to be found, and a region peppered with summer tourist destinations is staring down property damage and economic loss estimates of up to $22B.
The Guadalupe River rose 20-plus feet in under two hours in the early morning hours of July 4, killing more than 100 people while an unknown number of people remained missing as of Tuesday afternoon. Those figures include 27 children and counselors from Camp Mystic, a Christian girls’ summer camp.
AccuWeather pegged an early damage estimate at $18B to $22B, including the cost of search and recovery efforts, the extensive cleanup that will be required, insurance claims and impacts on future tourism in the region. Trepp found at least $276M worth of securitized loans backed by properties in three of the hardest-hit cities.
The Texas Hill Country is known as “Flash Flood Alley” due to its topography, geology and climate that make it particularly susceptible to quickly rising waters. Yet the scenic region is a popular destination for travelers attending summer camps, staying in lakeside cabins, floating the river and visiting wineries.
“Rapidly moving water can result in tremendous destruction and risk to safety, as seen in this tragedy,” AccuWeather Chief Meteorologist Jonathan Porter said. "This is the latest disaster in an area with a long and tragic history of deadly and destructive flash floods."
The area being relatively rural means the flood’s impact on commercial properties may be limited, but CMBS debt has the greatest exposure to multifamily and industrial properties in the region, according to Trepp.
While acknowledging it is too early to speculate about commercial property damage specifics, Trepp found 11,581 properties backing 1,127 securitized loans that could be impacted. Some of those loans might only have small exposure to the region, but the data reflects loans against properties in counties that are under disaster declarations from Texas Gov. Greg Abbott, Trepp said in an emailed newsletter Tuesday.
At least four counties were impacted, with Kerr County hit hardest. Searchers have found 87 bodies in Kerr County, which is northwest of San Antonio and where the Guadalupe River begins flowing about 250 miles to the Gulf Coast.
Kerr County has 17 securitized loans against 18 properties with a balance of about $84M, according to Trepp. All of the loans are backed by apartment complexes in Kerrville, totaling 1,352 units, except for one $767M loan for a Dollar General store.
Two deaths were reported in Kendall County, where in the cities of Boerne and Comfort, another 19 apartment complexes and a nursing and rehabilitation center back six loans totaling $192M, according to Trepp.
On the residential side, water damage is costly to repair and often not covered by homeowners’ insurance, according to AccuWeather. The Federal Emergency Management Agency estimates that only 4% of U.S. homeowners have flood insurance, though 90% of disasters involve flooding.
“This latest weather disaster in the United States could further complicate the insurance availability and affordability challenges that many Texas families and businesses are struggling with,” Porter said.
