April 13, 2020

West Coast Real Estate Update: April 13, 2020

Holland & Knight Alert
Susan Jennifer Booth | Stacie Andra Goeddel | Robert M. Haight Jr. | Loren Kessler Higgins | Karl J. Lott | Douglas A. Praw | Andrew J. Starrels | Rebecca M. Freed | Chris Gregores | Leizl Hinajon | Geoff Kelly | Ure Morales

Nearly One-Third of Apartment Dwellers Failed to Make April Rent Payments

Approximately 31 percent of apartment dwellers failed to make their rental payment during the first week of April 2020, an increase of more than 72 percent over April 2019, according to several real estate data firms. Many of these renters may receive temporary protection as a result of various federal, state and local laws enacted in response to the COVID-19 pandemic, but real estate analysts are worried that the non-payment of rent could set off a chain of events starting with commercial mortgage defaults and moving into the investments backed by those mortgages. Although the federal government is allowing apartment owners with government-backed mortgages to defer their mortgage payments, those loan represent only part of the total rental market.

Federal Reserve Establishes New Lending Programs for Midsize Companies

The Federal Reserve's Main Street Lending Program will make as much as $600 billion available to help businesses with fewer than 10,000 employees and less than $2.5 billion in 2019 revenues that have been affected by the COVID-19 crisis. The program is not yet operational, but when it is, businesses will work through banks to obtain the loans. It is designed to help businesses that are not eligible for the U.S. Small Business Association's Paycheck Protection Program (PPP), but  businesses that are eligible for the PPP may also seek loans through the Main Street Lending Program. The new program will have two different lending facilities: one for new loans and one for existing loans. Businesses will be permitted to obtain financing from only one of the facilities.

Will the Coronavirus Create Opportunities for Real Estate Investors?

According to The Real Deal, the coronavirus is sending real estate values tumbling while concurrently creating a perceived buying opportunity in the view of certain investors. The Wall Street Journal reported that hotel and retail properties, along with mortgage-backed securities, have become attractive to distressed-asset investors. Those investors have raised billions of dollars from institutions such as pensions and sovereign wealth funds. As of December 2019, real estate funds focused on opportunistic and distressed-asset investments purportedly had a reported $142 billion ready to invest.

DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact your responsible Holland & Knight lawyer or the author of this alert for timely advice.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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