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NEW YORK CITY-According to a review completed by Standard & Poor’s Rating Services, approximately $574.2 million of outstanding CMBS collateral that could be directly affected if the current Department of Defense’s Base Realignment and Closure recommendations are carried out. Base closures account for $246.6 million of the total, while office lease reductions make up the remaining $327.6 million.

Of the 541 CMBS transactions that S&P currently monitors, just 58 contain some exposure to the BRAC proposal. Of these transactions, only a handful have been identified that could be subject to rating actions. This reflects the small percentage of DoD leases in any individual transaction and the dispersion of affected DoD properties across S&P rated CMBS. In total, the $574.2 million of affected CMBS represents approximately 0.2% of S&P outstanding rated CMBS.

S&P recently completed a review of the impact that BRAC recommendations could have on its rated commercial mortgage-backed securities. The BRAC proposal calls for the closure and realignment of several major military bases across the country, and also includes a list of leased office buildings that the DoD plans to vacate. Historically, 85% of the BRAC’s recommended base closures or realignments have become law.

The proposal also identified 102 office properties that may be subject to lease reductions. Of those, 81 are located in Virginia; Maryland has the next highest number with six, while the remaining 15 properties are located across 12 different states. Local multifamily would typically be hurt most by a base closure, as 70% of the military personnel, on average, are housed off-base. The retail sector could also be adversely affected due to the loss of local nongovernmental jobs in industries that provide goods or services to the bases or to the households of installation employees. Other property types, such as lodging and self-storage, may also be subject to residual consequences but were excluded in this review, as the effect would likely be minimal.

With the closure of the Groton Submarine Base, the Norwich-New London, CT. economic area installation is expected to lose the greatest number of jobs. Groton’s base would experience 8,460 direct job losses and 7,353 indirect changes/job losses. The direct payroll loss that would occur if the base closes is estimated at $285.6 million. If the Cannon Air Force Base closes, 4,779 jobs would be lost, representing 20.5% of the economic area’s employment.

Some bases will see employment gains. The top two economic areas that could realize substantial gains in employment are the submarine base, Kings Bay in St. Mary’s, GA with a 21.9% employment increase, and Ft. Sill in Lawton, OK with a 9.0% gain. The final BRAC proposal is due to the president by Sept. 8.

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