Thursday, June 25, 2020

Major Changes Coming To Rental Property In New Hampshire On July 1st

Beginning on July 1 there will be major changes to the prior eviction stays in New Hampshire that were put in place through Executive Orders earlier in the pandemic. However, apartment tenants who have concerns about rent payment should be able to access the new $35M fund that will be set aside for assistance.

On the apartment rental side, throughout the pandemic there has been some concerns about payment of rent from both renters and landlords. While unemployment rates have risen to historical highs, renters without jobs have been concerned about payments. Offsetting these concerns has been an infusion of additional funds from the federal government to increase unemployment benefits. The net result has been that tenant defaults and rent contraction has yet to surface in a major way. However, with the expiration of the expanded unemployment benefits, there is concern of some folks losing their ability to pay.

The CARES Act, passed by Congress, also afforded each state with so called Flex Funds. New Hampshire’s share was $1.2B, and it has been used for various COVID related challenges. One recent announcement, was that Governor Sununu will be taking some of those funds and directing them to housing assistance:

Governor Chris Sununu has authorized the allocation and expenditure of $35 million from the CARES Act Coronavirus Relief Fund (“flex funds”) to support families or individuals in need of housing assistance as a result of COVID-19. Of the allocated $35 million, $20 million will be initially expended, with $15 million being held in reserve, for rent stabilization and housing support.”

The goal of the program is to provide assistance for those folks who may not have the funds to pay, or may otherwise have back payments on their apartments that they may need to clear up. More on the fund can be found here:

The goal is to have the funds and the distribution set up by July 1, which coincides with the reopening of evictions.

On March 17, the Governor announced that he was putting a freeze on evictions throughout the pandemic. While there were a narrow band that could move forward, non-payment evictions were stopped. As a practical matter, with the court system shut down, there was no channel for the process to go through. This stay on evictions was for all asset classes. Office, Industrial, Retail, and Apartments, were all collectively stayed on having evictions. As of July 1 this is being lifted as a result of Executive Order 51. More info on this can be found here:

It is clear that the goal is to soften the concern of non-payment by providing some floor of support to those in need through the $35M flex funds, and dove tailing that with the lift on the eviction freeze. It is worth noting that many landlords and tenants on the commercial side have worked through payment plans, and the hope is that the landing this summer, for all asset classes, will be as soft as it can be.

Landlords and tenants alike should also take interest in the fact that the Executive Orders are not the only governing documents relating to evictions. As part of the CARES Act, the federal government did put a stay on evictions for certain federally backed mortgages on apartments. All parties should research accordingly.

July 1 is right around the corner, and it is very important for all parties to read about the funds, understand if there is appropriate access to them, and see how these new orders affect them, their families, and their businesses.

Thursday, June 04, 2020

Contrasting Boston's Return to Work With New Hampshire's, And How It Could Affect The New Hampshire Office Market

On Memorial Day week, Boston City Mayor, Marty Walsh, announced the Return to Workplace Framework for Commercial Spaces the full details of which can be found here: (

Today we contrast this with the Stay at Home 2.0 initiative by New Hampshire Governor Chris Sununu and speculate what Massachusetts’ policy means for office space, particularly along the corridors to New Hampshire.

It is worth acknowledging by almost any standard, Massachusetts has been harder hit by COVID-19 than the Granite State.  Reopening standards and regulations surrounding masks and social distancing tend to be stronger in the Bay Stay. As it relates to office space in New Hampshire, the standards for the Universal Guidelines have been set by the corner office, and no additional local regulations have superseded it. However, to the South, there is a statewide standard for office space, and in this case the Mayor of Boston has added additional layers to that standard.

When the stay at home orders are lifted in New Hampshire, office employers and their staff who were previously “non-essential” can start going back to their bricks and sticks offices.  Currently, the regulations on these businesses are centered on the employees and employers, not the built environment. For example, the standards discuss temperature checks and Q&A with people entering the building.   Some in New Hampshire are receiving guidance from the Re-Opening Taskforce and then subsequent guidelines endorsed by the Governor that is more specific to that industry.  So, for example, hair stylists have specific standards that really apply to just their niche, and the task force has addressed this.

However, in Massachusetts the guidelines for office users are in place and very clear. When they reopen the State has stated that, “businesses and other organizations shall limit occupancy within their office space to no more than 25 percent of the maximum occupancy level.” Keep in mind, for standard office build out with mix of cubicles and hard offices, the average demand is 4 people per 1,000 square feet (sf).  That is a rule of thumb and you should consult your local code to check what is appropriate for your business. So, the standard would be 1 person for every 1,000 sf under the new reopening order.  

In addition, the statewide orders would ask for cubical barriers to be taller than a standing person, that common areas be reconfigured, and other broad based social distancing goals. Within Beantown, further restrictions are in place, such as requirements for elevator density, lobby and reception areas, as well as cafeterias. These guidelines are very specific.  As most of the office environment is multi tenanted in the city, the reading of these does create a challenge for both tenant and landlord as to the compliance.

While these specific standards for office space have not yet been released in New Hampshire, we do know that in both New Hampshire and Massachusetts there is a phased approach for these reopening’s. As metrics of COVID-19 improve (or god forbid worsen) the standards may change over time.

What will this mean for the office market moving forward in New Hampshire and Boston? Many have speculated, and we have commented, that there could be dramatic impact from COVID on the office leasing market. Some bloggers have stated that larger offices, with only 1 or 2 people per 1,000 sf, will be the new norm, and office demand will rise. While others have said that only a skeleton crew will go to offices, while most work from home, and office space will plummet. But these trends are too early to tell. The only clear piece of data is that for those employers who are looking to get back into their buildings, there is exploration of new office furniture such as the aforementioned taller cubicles.

However, in light of our headline, we should discuss what these guidelines will do to the cross border tenants. Estimates are around 80,000 people travel from New Hampshire to Massachusetts each day.   It is not out of the question to believe that regardless of what standards are created in New Hampshire, that some employers who see benefits of in person office space versus work from home may open satellite locations in New Hampshire, rather than have team members commute. 

In the long run, it will be curious to see if this speculation will play out on a broader scale in the office market, with more New Hampshire based satellites. The corollary would be in the residential real estate market, where there is speculation of a lasting impact on people leaving more densely populated areas to live in more rural environments. If this is true, would it not also follow that the same is true for employers and lessees of office space?

There is much that is speculation, and aside from anecdotal stories about which office users will be opening up when, it is too soon to predict long term trends. Until then we will watch the Stay at Home 2.0 orders as well as the subsequent phasing levels and see how tenants and landlords react.

Thursday, May 28, 2020

Looking At The HEROES Act And Its Potential Additional Funding For Real Estate

The Coronavirus Aid, Relief and Economic Security Act (CARES Act) was passed into law on March 25, 2020.  The Act had a number of large sweeping investments into states, businesses and individuals. The main ones that we have focused on in these blogs are those impacting real estate and small business. Tools within the Act included the Paycheck Protection Program (PPP) and Economic Injury Disaster Relief (EIDL).  Recently the State of New Hampshire has announced that the Flex Funds provided to the State within the CARES Act will in part be used for a Main Street Relief Fund, which was just put in place on May the 15th. 

However, with all of these funds it is clear that the American economy is hurting even as states start to reopen. It should come as no surprise that many people started pushing for additional rounds of stimulus.  And so it came to pass out of the House of Representatives that the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act was passed on the same day Governor Sununu announced the Main Street Relief Funds. The act outlines a number of spending and investment priorities for future relief for Americans. However it is a long way off from becoming law.

The $3 trillion dollar bill passed the Democratic controlled house by a vote of 208 to 199. In order to move forward the bill would have to pass the Republican controlled senate, where Senate Majority Leader Mitch McConnell has said that we should wait until we see how prior rounds of stimulus investment play out prior to passing new investments. Specific to the HEROES Act, he described it as a, “big laundry list of pet priorities”. It is clear that as written this bill is not going anywhere.

It is with that caveat that we jump into this writing to explore the “pet priorities” in the act. If, and when, future rounds of stimulus come, it will have to pass through the House and some of these fingerprints may be left on the commercial real estate industry.

The bill takes aim at expanding the aforementioned PPP and EIDL Loans. The former would be extended through the end of the year, with carve outs to ensure that some loans are given to small businesses. The latter would be given an additional $10 Billion worth of funding after those loans have seen their funding sources shrink.

The SBA 504 and 7A programs would see their loan limit increase to $10 Million each, which are currently at a fraction of those levels.

A proposed moratorium on evictions of non-paying apartment renters for 12 months after the acts passing would be one priority that would impact landlords.  In addition there would be $100 Billion of funds for rental assistance.

These are but a fraction of the priorities outlined in the $3 Trillion bill. Additional changes for personal and corporate tax structures are detailed as well as additional investments for states and schools. All of this discussion on stimulus is clearly theoretical. None of this has a chance of reaching the President’s desk for a signature as written. Keeping an eye on the text is important to understand what items could be coming down if we see yet another round of stimulus.

Friday, May 22, 2020

How The Main Street Relief Fund Will Help New Hampshire's Small Businesses

There is more relief coming for small businesses in New Hampshire through the Governor’s Office for Emergency Relief and Recovery (GOFERR). The relief package was announced on Friday the 15th of May, which is also the day the first applications could be made. Funding in the amount of $400 million of expenditure has been authorized to be given based upon needs. 

With the authorization of the CARES Act, Congress created waves of relief for individuals and businesses. At this point most of us are familiar with the acronyms of PPP (Paycheck Protection Program) and EIDL (Economic Disaster Relief); there were additional benefits to individuals such as the stimulus checks and expanded unemployment benefits. In addition the CARES Act created Coronavirus Relief Funds. These funds were to be given to each state to be used as the state sees fit.

According to the Treasury, the funds are “to provide ready funding to address unforeseen financial needs and risks created by the COVID-19 public health emergency”. In addition the federal government put up some rails on how the dollars could be spent. Some of that is still up for interpretation so we will leave that for another blog.

New Hampshire was given $1.2 Billion in flex funds, and $400 Million of it has been earmarked for small businesses under the Main Street Relief program. Our interpretation is that the small businesses of New Hampshire really made their cases. The PPP and the EIDLs were helpful. However, some of the benefits of those programs either have been slow to pass or could not be realized by the businesses as they have been all or partially closed during the qualifying period. Additionally, as was widely publicized, the PPP was a race to the application booth which created the need for the second round of funding. 

To put the amount of funding in context, in just New Hampshire the initial round of PPP loans covered some 11,000+ businesses and over $2 Billion dollars. This new Main Street Relief Program will be funded with roughly 20% of that amount. I never thought I would say that $400 Million may seem like limited funds, but it is so. As a result it appears that the State is adding qualifying language to their application process.

The PPP loans were first come first serve, and by and large had no liquidity test for approval. The Main Street Relief funds have two main differences. First, there is an open round of application. So long as you apply by May 29, 2020 you will be eligible. But it does not matter when in that two week period you apply. The second difference is that you must tell the State all of the additional funds you have received from the CARES Act. This presumably will allow them to prioritize the funds to small businesses that were left off of the carousel the last go around.  All of the various dates and detailed information can be found here (

From a real estate perspective there are a few items that are not clear, at least not yet. Are independent contractors as small businesses eligible for these funds? Are businesses that are otherwise holding companies for real estate eligible? Are the funds a loan, a grant or a blend? What can the funds be used for within the businesses? It will take time for these things to come to light, but in the meantime our advice is to review the application and make sure you are lined up prior to the May 29 deadline. 

Thursday, May 14, 2020

Liquidity In The Debt Markets During COVID-19

Despite the late snow into April it is spring in New England and we are getting ramped up for summer. Lawn, irrigation and project crews have never been busier. Investors with maintenance contracts are spending on their property despite the challenges being faced with COVID. Some of that spending is coming from prepaid contracts, some from cash from owners, while other capital is coming from the debt side of the house. So how stable is that debt or line of credit?

Lets start pre-COVID. Back over the holidays when we were all carving a turkey, this was not something to consider. The markets were flush with debt capital to deploy. This created not only low interest rates but also flexible terms such as lower down payments and other benefits. 

Some have stated that the 2019 liquidity in the debt side was similar to the pre-financial crisis lending situation. From our perspective this is not the case. There were low interest rates. There was flexibility in lending. But that is where the similarities stop. When you think back to the challenges and the aftermath of 2008 and 2009, it was the underwriting.

Larger banks, many of them from out of state came in and dropped money across all asset classes like it was a snow day in April. When the dust started settling it became clear that the fundamentals were poor. But that only became clear when the banks had to take them back. We first hand reviewed these assets a decade ago when they came to us for valuations on the work outside, we can say that the fundamentals were off. They were off before the financial crisis. Keep in mind that the underwriting the local lenders were using was still more conservative. Aggressive but conservative.

Coming back to the 2018 and 2019 economy, there has not been as much competition from out of state lending institutions. The local lenders were flush with debt capital to deploy. They were flexible however they were not irresponsible. The fundamentals, particularly on the income valuation side were strong but not as crazy as they were 10 to 15 years ago. On the face value one could say that the price of multifamily on a per unit basis in Manchester has risen 30 to 40% over the past three years. You may consider this a hyperinflation, however the low vacancy rate and the underlying cash returns were still in place. In short the fundamentals were there. 

Now we come to Spring of 2020. Are the fundamentals still there? We have still historically low vacancy rates for multifamily, office and industrial. The investment market has not been able to get enough of single tenant net leased assets. There is no inventory so pricing for assets is still high. However some lenders are looking concerned on the fundamentals, just different ones than buyers are interested in.

There is a concern of the softening of the leasing market, particularly on the multifamily and the retail side. Lenders look at B&C multi assets as a more risky proposition and some are pulling out entirely (in the short run) while others are looking at some principal and interest escrow that would have seemed strange to ask for just 90 days ago. There is some evidence to back their claims up. Non-essential retailers are asking for rent abatements in exchange for more term; apartment tenants impacted by the current situation have come to landlords seeking payment plans. 

However despite these challenges there is a huge influx of capital into the market. Despite the challenges with the roll out the CARES Act did what it was intended in the short run. It dumped so much capital into the market that it created a bit of a rise in the stock market, it kept local businesses open and it kept some mortgages and real estate tax bills paid. Some lenders and buyers view this as the short term pain and the liquidity from the Fed will act as the bridge because the fundamentals are still sound.

The take away for buyers and investors is clearly the dynamic has changed. If you have not had a call with your lender in a month, consider doing so. Clearly understand what their view of the world is and how they are reacting to this economy. And continue to do so, weekly if necessary, they are as much your partner as another equity holder. Now when you go to invest back into that Spring time clean up you and your debt partner will be on the same page.