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Reduce Your Building’s PML Rating With an Earthquake Retrofit

Reduce Your Building’s PML Rating With an Earthquake Retrofit

If you are working with a lender to finance a building loan or mortgage, you have probably found out just how hard it is to convince them to accept any amount of risk.  Lenders today not only do not want to take on risk, they just plain can’t afford to be left high and dry.  Lenders realize that is exactly what is going to happen if a devastating earthquake damages a property they have financed. This means anyone owning, selling, or buying a building located anywhere in California should be aware that earthquake readiness and safety are very important factors that are considered by lenders before processing a commercial loan.

When attempting to finance a commercial mortgage or loan, the goal is to present your building in the best possible light. Lenders use a well-defined set of rubrics they have created to calculate the amount of risk that a building carries. One such rating is known as the PML score and lenders frequently specify that a PML of less than 20% is the only score they will accept.  If your building currently does not meet that required PML score, there are a number of ways to reduce the score to bring it within the required range.

PML stands for Probable Maximum Loss. While there are different confidence levels associated with a PML, it is typically the estimate of the mean amount of loss that a building is likely to suffer from the rocking and rolling of an earthquake. Loss mechanisms such as fire, flooding from broken water lines, fault rupture, and dam or tsunami inundation are not included. The loss to the contents of the building or business interruption are also not considered in this calculation. Typically, the PML estimate and report take into consideration the existing features of the building that are both positive and negative. A high PML estimate is an important indicator that the building has severe seismic vulnerabilities.

When a lender calculates a PML score, there are two main pieces of data that are used for the estimate. The first set of data includes the site characteristics, such as proximity to a fault and the soil type.  Unfortunately, there is no way to change where the property is located. The second set of data centers around the building and its characteristics. This part of the calculation is something that property owners, long term tenants or lenders can influence.

It is important to note that there are some specific building characteristics which influence a PML estimate, including the following:

  • The construction method and materials used

  • The year the building was constructed and the building codes that were in place at that time

  • The geometry of the building, such as plan and elevation irregularities

  • The condition of the building such as roof condensation, corrosion, dry rot, termite damage

  • Any seismic retrofit process completed to reinforce walls

Taking a building through an earthquake retrofitting process in the Los Angeles area is not just a little added safety feature.  Buildings constructed prior to the 1990’s are likely to have a number of retrofitting issues due to changes in the state and local building codes.  An earthquake retrofit can help strengthen a building, preventing concrete and masonry walls from falling away, roofs and floors from caving in, and soft stories, like tucked under parking, from collapsing.

While the cost of earthquake retrofitting any commercial property may seem like an expensive maintenance project, be sure to compare it to the costs associated with rebuilding, along with other potential liabilities issues, in the event of a major loss from a truly devastating earthquake. In the case of getting financing, or even commercial building insurance, earthquake retrofitting may be the factor that determines the deal.

Saunders Commercial Seismic Retrofit in California has extensive experience specializing in retrofitting buildings for the impact of an earthquake. Their seasoned professionals offer a detailed bid and budgeting quote that helps owners accurately estimate the costs associated with the steps needed to complete a retrofitting process. Once Saunders Commercial Seismic Retrofit has completed a thorough earthquake retrofit process, lenders who specify a PML of 20% or less are usually satisfied with the reduced risk.

To get more information regarding an earthquake retrofit tor reducing the PML rating of your California building, call Saunders Commercial Seismic Retrofit today!

Southern California Office

(949) 646-0034



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