U.S. property sector takes Sept. 11 hit, study shows

About US$3.7 billion in commercial property deals have fallen through in the U.S. due to lack of available, affordable terrorism insurance, says the Mortgage Bankers Association of America (MBAA). An additional US$4.5 billion in deals have either been delayed or were changed in terms of pricing, adds the Washington-based association representing the real estate finance industry.

The findings come from a June survey of MBAA members, in which 44% said that lack of terrorism coverage had “greatly affected their ability to make loans on commercial properties”. Another 40% said the withdrawal of terrorism coverage had affected their business somewhat. Only 16% reported no effect.

While just 25 of MBAA’s total membership of 2,600 firms were surveyed, they represent some of the largest commercial real estate firms in the U.S., MBAA reports. “We have heard anecdotally about the problems on specific properties, but the magnitude of these numbers astounded me,” says Jim Murphy, chairman of the MBAA. “We are looking at billions of dollars in commercial financing that has been killed in the first half of the year because thus far Congress has been unable to reach agreement on a bill. The delay has been costly, and those costs will continue to go up the longer the delay.” The MBAA is calling for the U.S. Senate and House to come to a compromise bill on a terrorism insurance backstop plan, with initial loss limitations for insurers, and the government acting as an “excess of loss” reinsurer.