29 Jul Last Week, California Gets Shaken – Could Your Real Estate Investment Also?
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Southern California Gets Shaken Last Week – Could Your Real Estate Investment Also?
Last week on the morning of our nation’s birthday, most Southern Californians felt, and all heard, the news that a 6.4 magnitude earthquake occurred. The day after a 7.1 magnitude earthquake occurred along the same fault that was approximately 10 times stronger. Luckily, no fatalities or major injuries were reported as a direct result. However, power and communication systems were knocked out within parts of San Bernardino County, and some homes and buildings sustained significant damage.
We at FR as a first want to stress the importance of having an emergency plan with your families, friends, and neighbors should a disaster hit. With little to no warning of earthquakes, the harsh reality of loss could occur in a matter of seconds if not prepared.
As a follow-up, we also need and want to express the importance of due-diligence as it pertains to structural integrity of a building. Many lenders are now starting to put greater emphasis on Seismic Risk Assessments and Probable Maximum Loss Reports for buildings that fall under certain criteria (as shown below). A Seismic Risk Assessment is a great tool to determine the maximum loss a building could sustain should a disaster occur given its specific construction characteristics. It is a real thing and harsh reminder we endured last week Thursday and Friday that can strike out of nowhere given that it has been nearly two decades since a significant earthquake has hit Southern California.
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Seismic Risk to Buildings
Before &After Photo – Loma Prieta Earthquake 1989, San Francisco.
FRE provides seismic risk assessments (PML’s / SEL’s / SUL’s) for pre-acquisition due diligence services and refinancing services. In evaluating a building’s potential for seismic damage and stability against collapse, we consider six basic characteristics: Configuration, Condition, Compatibility, Continuity, Redundancy, and the Lateral Load Resisting System. In addition, building stability and site stability are evaluated. Below is a list of buildings that are susceptible to significant damage when subjected to large ground motions / earthquakes:
- Concrete Tilt-Up Buildings: Pre-1976
- Tuck Under Parking Buildings; Multifamily; Wood Frame: Pre-1988
- Wood Frame Buildings with Crawl Spaces: Pre-1976
- Buildings with a Soft Story: Pre-1988
- Irregularity in Shape / Stiffness: Pre-1988
- Steel Moment Frame Buildings: Pre-1994
- Concrete Frame Buildings: Pre-1976
- Concrete Shear Wall Buildings: Pre-1980
- Precast Concrete Frame Buildings: Pre-1994
- All Un-reinforced Masonry Buildings
- All Hollow Clay Tile Buildings
- Masonry Buildings: Pre-1980
- Also, All Buildings Located on a Site with a Potential for Liquefaction, Landslides or in an Alquist-Priolo Special Studies Zone.
Note equity owners, insurers and lenders are evaluating buildings with more and more intense scrutiny for the potential of seismic risk / damage. This is largely based on prior losses from significant historical earthquakes. For example, the 1989 Loma Prieta earthquake caused more than $6 billion in damage and the 1994 Northridge earthquake caused over $20 billion in damage. Financial institutions need specific and consistent measures of future damage loss for this decision process.