Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) earlier this year, providing a $2 trillion economic relief package. Below are specific resources beneficial to the commercial real estate industry; or view a comprehensive look at all the provisions in the bill.
Small Business Administration Program (SBA)
The CARES Act included funding for SBA loan programs for impacted industries and businesses including commercial brokerages and property management firms. Many commercial brokerages will qualify for the following programs and practitioners can share with their tenants and clients:
- SBA Economic Injury Disaster Loans: Targeted, low-interest loans of up to $2 million for small businesses and non-profits that have been severely impacted by the Coronavirus (COVID-19). Applicants are immediately eligible for advance funds of up to $10,000 for payroll, rent, utilities and similar payments.
- SBA Paycheck Protection Program (PPP): Provides small businesses with fewer than 500 employees loans of up to 250% of the previous year’s average monthly payroll expenses (up to $10 million) to cover payroll, mortgage interest, rent, and utilities for impacted businesses. Employers that maintain at least 75% of their average monthly payroll costs during the covered period (February 15, 2020 – June 30, 2020) will be able to have 100% of those loans forgiven; as employers lower their payroll levels below that, the forgivable portion phases out.
- Application is available online
- Businesses can be matched with lenders through the SBA website.
- If you currently lease to a franchise, you can search to see if the franchise is eligible for the PPP.
- Fannie Mae and Freddie Mac (the Enterprises) will offer multifamily property owners mortgage forbearance with the condition that they suspend all evictions for renters unable to pay rent due to the impact of coronavirus.
- The CARES Act allows multifamily owners who were current on their mortgage payments as of February 1, 2020, and have federally insured, assisted, or supplemented loans (Fannie Mae, Freddie Mac, FHA or any loans backed or assisted by any branch of the federal government, including LIHTC) can request forbearance for 30 days due to financial hardship, with extensions of up to a total of 90 days. Borrowers receiving the forbearance may not evict or charge late fees to tenants for the duration of the forbearance period.
- The HUD/FHFA moratorium on evictions and foreclosures only affects borrowers with mortgages backed by Fannie Mae, Freddie Mac, FHA, VA and RHS. The HUD notice only applies to FHA single family mortgage borrowers and Home Equity Conversion Mortgage (HECM) borrowers. The moratorium for Enterprise and HUD loans is set for 60 days (through May 16th).
Important Tax Provisions
Qualified Improvement Property Technical Fix: Businesses can now immediately write off costs associated with internal improvements to certain real estate (including restaurants and retail stores), instead of having to depreciate them over the 39-year life of the building. Companies should file for refunds with an amended tax return for 2018.
Business Tax Offsets: Businesses can now carry back net operating losses from 2018, 2019 or 2020 against profitable years, up to five years, and get immediate refunds. The current taxable income limitation is also temporarily removed to allow a net operating loss to fully offset income.
1031 Like-Kind Exchange deadline extension: NAR has urged Congress and the Administration to include extension of deadlines for 1031 like-kind exchanges due to the COVID-19 crisis, as these deals may be delayed in response. We will update this new information once Treasury provides guidance.