Common Ground profiles members of opposing parties who are working together to advance issues important to hoteliers.
by SEAN GROSSNICKLE
THE ISSUE
In the early months of the pandemic, small businesses of all kinds experienced revenue declines, payroll expenses, and looming debt obligations. Congress moved quickly in March to pass the historic CARES Act, which provided assistance in the Paycheck Protection Program (PPP), Economic Injury Disaster Loans (EIDL), and other Main Street Lending Facilities (MSLF). However, the hardships of the pandemic have not relented, and many small businesses have been unable to access these vital initiatives. Some businesses in the commercial real estate (CRE) market, notably those with commercial mortgage-backed securities (CMBS) loans, are engaged in multi-party contracts, which prevent a business owner from taking on additional debt, barring them from the MSLF.
The prevalence and structure of CMBS loans presents serious risk of foreclosures in the CRE market. Many businesses engaged in hospitality, retail, large-scale housing, and industrial production are facing record delinquency rates which accelerated faster than during the 2008 financial crisis. Hotels with CMBS loans have experienced the worst delinquency rates in the CRE market, according to Trepp data. With decision-makers in Washington, D.C. gridlocked in partisan negotiations over the next round of comprehensive COVID-19 relief, revisiting targeted legislation could provide the hardest hit industries with much-needed relief.
COMMON GROUND
In late July, Representatives Van Taylor (R-TX) and Al Lawson (D-FL) introduced H.R. 7809, the Helping Open Properties Endeavor (HOPE) Act. With 69 co-sponsors from both sides of the isle, this bill proposes targeted relief for CRE businesses struggling to meet CMBS loan obligations through no fault of their own. The HOPE Act would require the U.S. Treasury Department to establish a facility to guarantee certain preferred equity investments in CMBS borrowers without violating their existing loan covenants. Furthermore, this bill would not require additional funding as it would tap into unused funds allocated in the CARES Act.
Rep. Van Taylor (R-TX), Author of the HOPE Act
“Millions of jobs and the prosperity of entire communities depend on keeping these properties open. These industries don’t need a bailout, but they do need flexibility and support provided in the HOPE Act to keep their doors open, drive local their local economies, and support families across the country.”
Rep. Al Lawson (D-FL), Democratic lead of the HOPE Act
“COVID-19 is causing many of our industries to experience major financial hits, and commercial real estate is no exception. The Helping Open Properties Endeavor Act establishes a lending facility to help the industry stay afloat – allowing borrowers to seek relief without violating their loan agreements. Without immediate action, we may see unrecoverable losses to these businesses.”
