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.

COVID-19 and Investment Real Estate: Apartments

The COVID-19 Virus has made a giant impact on the health of people around the world. We encourage everyone to be vigilant and follow the guidelines in place to protect oneself. Not to minimize the health effect, these articles will be about COVID-19’s impact on real estate, which is our expertise. The stock and bond market is widely transparent on a minute by minute basis and we hope to provide a transparency into the real estate market. Check back each week for a new look into how COVID-19 is affecting the commercial real estate industry.

In a retrospect, it will be easy to see how the path for COVID-19 was forthcoming, and took some time to hit domestically. But, from the reaction of the stock market, it felt like the impact was overnight. The week that followed was a rollercoaster, but the same cannot be said for the investment real estate market. The reality is that until we see a string of real estate closings we will not be able to pin point the actual market in the investment world. For many apartment owners though, it’s business as usual.

The investment world of commercial real estate has long been a hot market. Nothing speaks that fact truer than apartments. Fueled by historically low vacancy and interest rates, investors have flocked to that asset class, which has driven up the per door price, and driven down the capitalization rates.  In addition, apartments have been seen as an investment class that is protected from some of the concerns in the larger real estate economy. “Everyone needs a place to live,” and, “Amazon cannot take away the need for apartments,” have been phrases of conventional wisdom.

In speaking with investors this past week, these thoughts still prevail. They feel that, in the long run, apartments are one of the safer asset classes out there. Some investors have even made plans in this low interest rate environment, to free up capital for more acquisitions. Others are staying put, waiting to see how the market plays out. 

There are facts that everyone agrees on, though. One is that no one is a seller right now. It is not out of concern that the market is down and investors won’t get their value, but rather that investors do not want to put their money elsewhere. The second is that investors/landlords will need to work through the next few months with their tenants with compassion, with payment plans being one solution, particularly for those tenants with jobs in hard hit industries.

When investors were asked about the impact of the order by the Governor to put off all evictions in the State of New Hampshire, again there was some common ground. Most folks believe that the tenants who will pay are going to pay, and those who will not, won’t. In the end, investors feel the impact of COVID-19 will take a little time to work through the system.

So far folks have not seen changes to their income stream, with some investors noting that they are still getting rental applications. Time will tell, but it appears that the initial reaction from the apartment sector is that the impacts have not been felt.

Are you a landlord? Let us know how the pandemic has been affecting your multifamily/apartment investments in the comments below.