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 15^th. 

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.

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 15^th 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 (https://www.goferr.nh.gov/covid-expenditures/main-street-relief-fund).

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.