Thursday, September 24, 2020

CDC Outlines New Ban on Apartment Evictions

Earlier in the pandemic tenants and landlords may remember layers of complicated executive orders which outlined when tenants could be evicted for non-payments. At a federal level the evictions were for all apartment tenants whose landlord’s had a federally backed loan that lasted until the end of July of this year. On top of that, in New Hampshire, an eviction ban for all property types ran through June. 

Under both of these programs it was noted that the rent money was still due even though there was an eviction ban in place.  However, there was concern that tenants who were in economic trouble would see their rent accrue and be faced with a lump payment at the expiration of these moratoriums. To combat this, Governor Sununu used some of the CARES Act funding to put direct payments into the hands of tenants who found themselves in these situations. The total funding amount was $35 Million, with just some of those funds making it out as of September.

Now another moratorium from the federal government has been issued. This time from the CDC, which outlines that tenants of apartments cannot be evicted for nonpayment alone. It only applies to tenants who earn less than $99,000 individually or $198,000 jointly. Additionally, they have to illustrate that they have exhausted all other assistance opportunities and that their inability to pay is based directly upon COVID. Much like the other eviction bans outlined above, this new program does state that the rent is still due.

This program is still new and it will take time to work out. Based upon what we are hearing, there are various housing groups lobbying around the order, which may result in further modifications or legal challenges. In the short term the ban is in effect and landlords should read in detail prior to taking any action against any tenant.

Thursday, July 23, 2020

What The Results Of The NH Business Resiliency Survey Mean For Commercial Real Estate

In June, the University of New Hampshire Survey Center worked on behalf of the NH Small Business Development Center to conduct a survey of over 1,500 small businesses in New Hampshire. The survey was distributed through over 50 business organizations throughout the state, and the highlights can be found here https://www.nhsbdc.org/2020surveyresults. The questions asked in the survey were specific to the economy and COVID-19.  

We wanted to share our thoughts on the results, as it impacts commercial real estate.  Let us start with the more empirical data from the survey, as questions relating to a business owners belief or concern can be heavily swayed by many subjective items.

Employment is a key driver of real estate consumption. For office space, a full time employee will need 200 to 300 square feet of space in an office environment, though there is less of a clear correlation in the retail and industrial markets.  In February of this year a similar survey noted that all businesses in the data set averaged 22 employees, while the June survey resulted in 18. However, a positive sign is that the decline in employment was centered on only 40% of the businesses surveyed.

The suggestion from this correlates with the essential/non-essential data. Just over half of all of those surveyed were deemed non-essential. These were a wide range of retail, hospitality, and some service businesses.  It remains to be seen, but it appears that the steep decline in employment was centered on the non-essential businesses within the retail facing world. Largely speaking, office employment appears to remain steady. 

In addition to employment data, the survey also drew inference on businesses ability to meet their other commitments, such as paying rent. Close to half of all businesses surveyed claimed their revenue dropped by 50% or more. What is alarming is a majority of the businesses surveyed were unable to defer or modify any payments to vendors, such as landlords. Clearly this would create a huge imbalance that is not a surprise to anyone.

To reclaim these lost revenues, businesses sought new funds from various services to meet obligations.  Of the relief programs supplied by the Federal Government or the State, the Payroll Protection Program was utilized by 60% of all of the businesses, the Main Street Relief was used by about 40%, and the Economic Injury Disaster Loan was used by about 25%.  To get into the numbers, it appears that food service and hospitality were more likely to take out the EIDL Loans or the Main Street Relief Funds. These are the same businesses who were more likely to have their employees go onto unemployment while their businesses were deemed non-essential.

More subjectively, a majority of business owners feel that the NH Economy will recover within the year. But, business by business, there is concern about the forthcoming changes. A strong majority see work from home being a key focus of their business planning, along with changing a physical location. The data does not go into more specifics, but it is clear that we all are looking at ways to be more flexible with our space. It remains to be seen if this translates into a lower demand for office square footage.

Of note on the retail side would be that close to two thirds of all respondents see the need for curbside pickup and the same amount for delivery. In a practical sense, what will that mean for civil engineering moving forward? Do we need new lanes and parking spots to accommodate the quick in and quick out that these concepts demand?

The data is always to be taken for the snap shot it is. Commercial real estate is slow moving, as leases, purchases, and developments take time. It remains to be seen how these statistics will impact the details of the commercial real estate deal.

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: https://www.goferr.nh.gov/covid-expenditures/new-hampshire-housing-relief-program.

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: https://www.governor.nh.gov/sites/g/files/ehbemt336/files/documents/emergency-order-51.pdf

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: (https://www.boston.gov/news/return-workplace-framework-commercial-spaces-boston).

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.