If you are looking for a lender to finance a building loan or mortgage, you will find it difficult to convince them to accept any amount of risk. Money lenders today realize that they just cannot afford to be left high and dry in the event of strong seismic activity. They realize that is exactly what will happen if an earthquake damages a building they have financed. This means that anyone owning, selling, or buying a building in California, including in the Bay area, should be aware that earthquake safety isn’t just a catch phrase: it can have a significant impact on finding a good loan.
When looking to get a building loan or mortgage, the goal is to present your building in the best possible way. Lenders use a variety of rubrics they have created to calculate the amount of risk a building carries. One of these ratings is known as the PML score and lenders frequently require a PML of less than 20%. Thankfully, there are a number of ways to decrease the PML rating of a building to bring the score within the satisfactory range.
PML stands for Probable Maximum Loss. PML is typically the estimate of the mean amount of loss a building is likely to sustain from strong seismic activity. Losses caused by fire, fault rupture, flooding from broken water lines and dam or tsunami inundation are not included. Loss to the contents of the building or business interruption are also not part of the calculation. The PML estimate and report take into consideration the existing features of the building structure that are both positive and negative. If a building is given a high PML estimate, that is a prime indicator that the building has serious vulnerabilities during and after strong seismic activity
There are two main inputs into a PML calculation. The first is the specific site characteristics, including proximity to fault lines and soil type. The second main input is the building and its particular characteristics. While there is no way to change where the property is located, there are several areas related to the actual building structure that can be handled to ensure a more favorable PML rating. Some building characteristics which influence a PML estimate include the following:
- The year the building was constructed and therefore, the building codes that were in place at that time
- The geometry of the building such as plan and elevation irregularities
- The construction method and materials used originally
- The condition of the building such as dry rot, termite damage and corrosion
- Any earthquake retrofit process completed to reinforce the walls
Taking a building through an earthquake retrofit in California isn’t just about adding a few safety features. Buildings constructed prior to the 1990’s are likely to require some retrofitting steps due to changes in state and local building codes. An earthquake retrofit will strengthen a building structure; the retrofit process can help prevent concrete and masonry walls from failing away, roofs and floors from caving in, and soft stories like tucked under parking from collapsing. Many building owners or property managers initially shy away from the cost of a retrofit. The cost of a retrofit, however, should always be contrasted with the money that can be saved in the event of loss; in the case of getting financing, it may be the factor that makes or breaks the deal.
Saunders Commercial Earthquake Retrofit Bay Area has extensive experience specializing in retrofitting buildings for the impact of an earthquake since 1979. They offer a detailed bid and budgeting quote that helps owners accurately estimate the costs involved. Lenders who require a PML of 20% or less are typically satisfied with an earthquake retrofit provided by Saunders Commercial Earthquake Retrofit Bay Area
To find out more about whether your commercial property in the Bay Area should be strengthened and reinforced to withstand the impact of an earthquake and to get additional information regarding earthquake retrofitting to reduce the PML rating on your building, call Saunders Commercial Earthquake Retrofit Bay Area today!