COVID-19 Resource Page: Resource for property owners, landlords and tenants during the COVID-19 epidemic.

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COVID-19 Resource Page

Below we hope you will find this combination of links and quotes of what people are doing to be of use to you in dealing with your commercial real estate during these unprecedented times. We will do our best to update these resources as we see and learn of more information.

April 6, 2020

Force Majeure and the Coronavirus

https://www.greenbergglusker.com/coronavirus-resource-center/insights/force-majeure-and-the-coronavirus/?utm_source=AIR+CRE+Contracts+Users&utm_campaign=97389d3639-EMAIL_CAMPAIGN_2020_03_19_12_29_COPY_01&utm_medium=email&utm_term=0_788a1dd8a9-97389d3639-120128885

Force Majeure – Issue du Jour (AIR CRE) by Bryan Mashian, Mashian Law Group, APC

https://www.aircre.com/force-majeure-issue-du-jour/

Sample Rent Reduction Response Letter

https://www.lee-associates.com/elee/sandiego/Marketing/links/Covid19/COVID-19RentReductionResponse.pdf

COVID-19 Amendment

COVID-19 Amendment – Base Rent Reduction or Deferral (AIR CRE Form)


April 1, 2020

Comments from the Field

“We are experiencing rent relief requests from tenants and are thinking through appropriate responses.  Right now, we are telling them it is too early, and we need to assess each request on a case by case basis and we will be in a better position to respond in a few weeks.  Internally we are hashing through granting rent relief now in a holiday type mode say for 2 months, and then add the 2 months to the end of the term.  Other thoughts are grant the two months, and then amortize the two months rent over the remaining term.  So, we are thinking about it.  Then for the big tenants that have strong online sales, we are thinking through scenarios if the tenant’s online sales are up during this period, should landlord even consider rent relief for these guys.  Our thoughts are ongoing, and things change and develop daily…”

“I understand these are scary and challenging times. We all definitely hope they are over soon and everyone is safe and healthy.

I did speak with the property owner and he let me know he is willing to work with you as best as possible however at this time he is waiting on possible guidelines and legislation from the government agencies before he can comment on your request. Things are moving quickly and changing daily so he needs more time to sort things out before he can commit to a final policy.

You may want to look to the State or Federal government for grants, aid packages or SBA loans (that were part of the new Federal stimulus package) that may provide assistance during this time.

Also I was told by another professional in the field, who also has an insurance background, that tenants should contact their insurance carriers and it was suggested tenants should file a claim with their carrier for “business interruption” and other claims related to Coivid-19 (Corona Virus). Many policies have some form of loss of business coverage and you may have this coverage on your policy so you can file a claim for loss of income or “business interruption”. I have been passing this on to tenants who have the same concerns and been affected by the current situation because your business insurance policy may provide you with coverage for loss of business under your “business interruption” coverage.

As this situation is constantly changing every day and state, local and federal governments come out with legislation and guidelines the owner will continue to monitor the situation.”

  1. Get signed NDAs (Confidentiality Agreement 2020 Tenant Concessions) before discussing, and make sure tenant is current on all rent through March.
  1. Propose a 50% deferment/reduction in base rent for April and May, with the tenant still paying 50% of the base rent and 100% of the NNNs for April and May.
  1. The deferment/reduction is conditioned on: (a) the tenant applying for the SBA loan and submitting proof of application, and the tenant agreeing to copy landlord on any responses and communications relating to the application, and (b) a mutually executed lease amendment.
  1. The tenant will repay the deferred rent upon (a) tenant’s receipt of funds from any government agency or SBA loan, or (b) amortized over 12 months in 2021, whichever occurs sooner.  If tenant’s lease expires before 12-31-2021, the lease shall be extended for the remaining months of 2021.
  1. Recommend (but do not require) tenant make an insurance claim for business interruption.

The market is experiencing a significant disruption in supply and demand, volatile transaction volume, and dynamic changes in liquidity on a daily and sometimes hourly basis. Some lenders are facing difficult margin calls from financing counter parties. While capital remains in the market, we expect it to become increasingly constrained, particularly for asset classes that are under pressure, while spreads continue to widen. Lenders are triaging and prioritizing the strongest borrowers while also instituting floors.

Deal closing times are widening by 30 to 45 days in many metros as property inspections are disrupted and county recorder offices remain closed. Many commercial real estate investors and lenders, even those outside of the hard-hit hospitality, retail and senior housing sectors, are wondering what will happen on April 1 when the rent comes due. Property owners may need to get creative and offer tenants some flexibility in exchange for lease modifications.

Deal closing times are widening by 30 to 45 days in many metros as property inspections are disrupted and county recorder offices remain closed. Many commercial real estate investors and lenders, even those outside of the hard-hit hospitality, retail and senior housing sectors, are wondering what will happen on April 1 when the rent comes due. Property owners may need to get creative and offer tenants some flexibility in exchange for lease modifications.

Restaurants Ask for Rent Relief

https://product.costar.com/home/news/shared/207085953?utm_source=newsletter&utm_medium=email&utm_campaign=personalized&utm_content=p4

Chamber Resource Guides

www.sandiegobusiness.org

https://sdchamber.org/coronavirus/

https://sdbusinesschamber.com/covid-19-resources-for-business/

For Companies Considering Stoppages and Layoffs (also has a hotline 619.228.2982)

www.workforce.org

Site is Useful for Run Down on HR 6201 – The Families First Coronavirus Response Act

www.sdeahr.or (San Diego Employers Association)

Will Business Interruption Insurance Cover Losses for Coronavirus Closures?

https://www.aircre.com/leases-require-business-interruption-insurance/?utm_source=AIR+CRE+Contracts+Users&utm_campaign=97389d3639-EMAIL_CAMPAIGN_2020_03_19_12_29_COPY_01&utm_medium=email&utm_term=0_788a1dd8a9-97389d3639-120128885

Coronavirus Impact on Office Market

https://product.costar.com/home/news/shared/1155089062?utm_source=newsletter&utm_medium=email&utm_campaign=personalized&utm_content=p5

Covid-19 Contract Issues

https://www.kts-law.com/covid-19-contract-issues/

Moratorium on Evictions – Residential and Commercial

https://www.sandiegouniontribune.com/news/politics/story/2020-03-24/san-diego-county-approves-moratorium-on-residential-and-commercial-evictions-for-those-impacted-by-covid-19

Five Takeaways from the Senate Approved Coronavirus Stimulus

https://www.loopnet.com/learn/five-real-estate-takeaways-from-senate-approval-of-coronavirus-stimulus-/511170555/

Top CRE Leaders Speak out about Impact of Coronavirus

https://commercialrealestatecoach.com/top-commercial-real-estate-industry-leaders-speak-out-about-the-impact-of-the-coronavirus/

Comprehensive Report from JLL Brokerage of Implications on Business and Commercial Real Estate (includes downloadable report)

https://www.us.jll.com/en/trends-and-insights/research/covid-19-global-real-estate-implications

What CA Developers Need to Know about Permit Deadlines and Extensions During Covid-19

https://www.allenmatkins.com/real-ideas/what-ca-developers-need-to-know-about-permit-deadlines-and-extensions-during-covid-19-disruption.html?utm_campaign=Legal%20Alerts&utm_source=hs_email&utm_medium=email&utm_content=85342791&_hsenc=p2ANqtz-8en1er04pnnM9jk9mrST1oKycaC7SogsFar4L7iDGxRhabb9ZLJY_om6Qi_1ZTAiIUzXwlQekoTVTqBL8mJfWDcd8jSw&_hsmi=85342791

From Senator Diane Feinstein

The CARES Act includes direct payments of $1,200 to most Americans plus $500 per child.  It also assists workers—including self-employed, part-time, and gig workers—who are laid off, furloughed, or have their hours reduced by making them eligible for an additional $600 per week in unemployment benefits in addition to an extra 13 weeks of regular state unemployment benefits.  This law also includes $350 billion in forgivable loans to small businesses and non-profit organizations to help them keep their workers employed, and $500 billion for distressed sectors of the American economy to help them maintain operations and employment through the crisis.

Importantly, the CARES Act includes $150 billion for hospitals and health care providers most affected by the coronavirus, while an additional $150 billion was set aside to help state, local, and tribal governments maintain critical services.  It also gives $400 million in election assistance to help prepare for the 2020 election cycle.  You can read my full comments on this law at the following website: https://sen.gov/8P7P.  To learn more about ways this law could help you, I encourage you to visit the following website: https://sen.gov/N05J.

Congress also passed the Families First Coronavirus Response Act (Public Law 116-127), which was signed into law by the President on March 18, 2020.  Among other benefits, this law provides free coronavirus testing for everyone in the United States, up to three months of paid sick leave during the public health emergency, $1 billion in emergency funding to help states process and pay unemployment benefits, and over $1 billion for various programs that prepare meals for vulnerable Americans.  You can read my full comments on this law at the following website: https://sen.gov/R51P.

Prior to that, Congress passed the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (Public Law 116-123), which the President signed into law on March 6, 2020.  This law includes $8.3 billion in funding to develop and test coronavirus vaccines, support state and local health departments and hospitals, and better equip health care workers on the front lines of this pandemic.  You can read my full comments on this law at the following website: https://sen.gov/9Q92

From CBRE

The CARES Act provides resources for people, businesses, states and hospitals that are dealing with the spread of COVID-19. The stimulus package provides support directly and indirectly to all sectors of the economy. With total potential support equivalent to one-quarter of U.S. GDP or $5.6 trillion, this stimulus is unprecedented in size.

Workers & Families
  • $250 billion was allocated for enhanced unemployment benefits. This will provide an additional $600 per week for up to four months.
  • $300 billion for direct payments of $1,200 sent to all adults who filed tax returns in 2019 and made less than $75,000 per year ($150,000 for couples) and $500 per child. Smaller amounts will be distributed to people making up to $100,000 a year or couples earning less than $200,000.
Large Businesses
  • $500 billion in assistance for large businesses that have been particularly hard hit, such as $32 billion in grants for airlines.
  • Credit facilities backed by approximately $471 billion of the $500 billion allocated for large businesses will allow for up to $4 trillion in liquidity support for large businesses. This means easy access to cheap loans.
Small Businesses
  • Small businesses will receive direct help via $350 billion for SBA loans that use an expedited process—administered by private financial institutions—to cover payments for rent/mortgage, utilities and payroll. These loans will be converted into grants at the end of the year if used for intended purposes.
Public Sector
  • $150 billion for states.
  • $25 billion for public transportation.
Other Aid
  • $117 billion for hospitals.
  • $198 billion for “other.”

Much of the aid for commercial real estate will be in liquidity support for tenants. Occupiers of all sizes across the office, retail, industrial and hotel sectors may qualify for aid.

A key component is SBA loans for small companies—particularly food & beverage operators, which have been severely impacted by mandatory closures. For businesses with less than 500 employees, loans will be forgiven by the government at the end of the year if funds are used as intended. Loan amounts can be up to $10 million and will be calculated as 2.5 times the pre-crisis monthly payroll amount. More government guidance on this will be forthcoming.

Due to the sheer scale of the CARES Act, every commercial real estate sector will be aided. Beyond fiscal policy, additional crisis measures by the Fed will help ensure that property market fundamentals and capital markets for commercial real estate are supported through this turbulent period. Although enacted today, there will be a lag of up to three months before certain parts of the stimulus are fully deployed.

unfathomable rise in jobless claims

CARES Act AllocationsCRE Impacts

Office – Large occupiers will benefit from up to $4 trillion in liquidity via new credit facilities. Smaller occupiers may receive help via expanded SBA loans. All of this should help stabilize employment and demand for office space.

Retail – Liquidity support will encourage retailers to retain employees. This is especially important for food & beverage operators and other small retailers who will have loans forgiven if funds are used for paying rent/mortgage, utilities and payrolls. Furthermore, expanded unemployment insurance and direct payments to taxpayers making less than $100,000 will help sustain consumers through the crisis and aid economic recovery.

Industrial – Support for airlines and cargo companies will ensure supply chains can ramp up with less disruption once activity picks up. Indirectly, support for consumers is also positive for industrial markets. E-commerce demand will be bolstered, as public health concerns dictate closures of retail locations and consumers remain nervous about public spaces.

Multifamily – Measures designed to stabilize the labor force will support household formation. Direct support to citizens via cash payments and enhanced unemployment benefits should also help limit any deterioration in multifamily fundamentals. Fannie Mae and Freddie Mac—along with other financial institutions aided by new regulatory flexibility—are providing multifamily borrowers with forbearance options. This forbearance is contingent on landlords suspending evictions of any residents who are financially impacted during the crisis and on proving that revenue streams were severely impacted.

Hotels – Liquidity support for businesses and households, along with aid to airlines, will facilitate the return of business and leisure travel. Nevertheless, the economic impacts from various measures taken to contain COVID-19 will continue to reverberate across the sector beyond the near term.

The Bottom Line

A sharp drop-in economic activity—produced by necessary public health mandates—has been met by a large fiscal and monetary stimulus of unprecedented scale. By preserving the supply side of the economy, the CARES Act will enable a faster recovery.

Although the U.S. economy will contract during the first half of 2020, the CARES Act will help ensure that economic activity can rebound more quickly. CBRE’s updated house view shows full-year GDP contracting by 2.8% in 2020 (with steep drops in H1 2020), followed by growth of 5.9% in 2021.[/vc_column_text][/vc_column][/vc_row]

Copyright 2013 CDC Commercial, Inc. | Lic. #01857155
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