Industry groups representing CRE industries and the millions of Americans they employ shared support of H.R. 7809, the HOPE Act.
WASHINGTON - On Wednesday, Congressmen Van Taylor (R-TX-03), Al Lawson (D-FL-05), and Andy Barr (R-KY-06) introduced legislation in the House of Representatives to provide economic support to the commercial real estate (CRE) market, especially for businesses with Commercial Mortgage-Backed Securities (CMBS) debt, and the millions of Americans they employ.
H.R. 7809, the Helping Open Properties Endeavor (HOPE) Act works to prevent Commercial Real Estate (CRE) foreclosures, specifically to borrowers of commercial mortgages and protect millions of jobs across the nation.
Following introduction of the legislation, industry groups representing CRE industries and the millions of Americans they employ released the following statements of support:
“The COVID-19 pandemic caused an unprecedented challenge for the Texas hotel industry, with record-low occupancy numbers and economic damage that will take years from which to recover. In many sectors of Texas, hotel revenues and occupancy levels are a fraction of where they were just six months ago. An unanticipated effect of the pandemic is the economic liquidity crisis in the commercial lending sector, particularly regarding commercial mortgage-backed securities (CMBS) loans. The hotel industry needs federal assistance in the commercial lending space to keep our doors open and retain our employees. The Texas Hotel and Lodging Association is grateful Congressman Van Taylor is working hard to address the commercial lending issue, and we are supportive of his efforts to provide liquidity to affected businesses.” - Justin Bragiel; General Counsel, Texas Hotel and Lodging Association (THLA)
“The COVID-19 economic downturn has created a terrible crisis for thousands of small business owners who depend on hotel and travel industries. Without guests to serve, hoteliers have found it nearly impossible to meet increasing debt obligations and operating costs. Defaults and delinquency rates in our industry are reaching record levels and there is truly a debt crisis for small businesses. America's hotel owners applaud Congressman Taylor for his exceptional leadership during this time of great peril for our industry and our members. The HOPE Act will provide hotel owners with liquidity when they need it most and will serve to help keep businesses open and to save local jobs. We appreciate Congressman Taylor's innovative approach to this problem that will solve challenges for so many commercial real estate borrowers and help bring relief to our industry.” - Cecil P. Staton; President and CEO, Asian American Hotel Owners Association (AAHOA)
“We at NABHOOD applaud Texas Congressman Van Taylor for his thoughtful leadership and innovative approach to addressing this crisis, which threatens the survival of the hotel industry, our members and small business owners. The HOPE Act is essential in helping provide hotel owners with liquidity when we need it most and will serve to help keep businesses open, thus saving local jobs. We stand in solidarity with the Asian American Hotel Owners Association (AAHOA) and Latino Hotel Association (LHA). Together, we represent over 35,000 of the 60,000 hotels across America, and we are responsible for approximately 1 million hotel employees.” - Andy Ingraham; President, Founder, and CEO, National Association of Black Hotel Owners, Operators, and Developers (NABHOOD)
“The Latino Hotel Association supports the HOPE Act. Our hotel industry has been devastated by the effects of COVID-19. The Financial assistance through the HOPE Preferred Equity lending facility would provide relief and could help stimulate the economic situation in communities throughout the United States. Thank you to Texas Congressman Van Taylor for championing the Hotel industry and all commercial real estate businesses.” - Lynette Montoya; President and CEO, Latino Hotel Association (LHA)
“With record low travel demand, thousands of hotels can’t afford to pay their commercial mortgages and are facing foreclosure and the harsh reality of having to close their doors permanently. Tens of thousands of employees are faced with losing their jobs permanently. Other small businesses that depend on these hotels to drive local tourism and economic activity will likely face a similar fate. Before the pandemic, one out of every ten jobs in the U.S. depended on travel and tourism. It’s imperative we get back to those levels once this crisis is behind us. The hotel industry supports the HOPE Act to give struggling small business hotels an opportunity to keep their doors open and avoid foreclosure. We urge Congress to quickly pass this legislation to keep hotels open for business and position America’s tourism industry to survive and recovery when the public health crisis subsides.” - Chip Rogers; President and CEO, American Hotel and Lodging Association (AHLA)
“We applaud Congressmen Van Taylor, Al Lawson, and Andy Barr for outstanding leadership in introducing the Helping Open Properties Endeavor (HOPE) Act, which is the type of solution needed to help prevent widespread foreclosures that could destabilize the US economy. As our nation continues to combat the virus, the bill would provide temporary relief plan for commercial real estate (CRE) borrowers. Due to unexpected loss of revenue and rent, many shopping center owners are facing the challenge of paying debt obligations with impaired cash flow. Without federal liquidity assistance we are looking at un-necessary damage to financial markets, increased unemployment and irreparable harm to communities across the country.” - Tom McGee; President and CEO, International Council of Shopping Centers (ICSC)
“We commend Congressmen Van Taylor, Al Lawson, and Andy Barr for introducing the Helping Open Properties Endeavor (HOPE) Act. The legislation recognizes the unique nature of commercial mortgage-backed securities (CMBS), and the limitations imposed on servicers of CMBS debt when working with borrowers that have been adversely affected by the COVID-19 pandemic. CMBS delinquencies have increased at an alarming rate since the beginning of the pandemic, and without the temporary liquidity afforded by the HOPE Act, our nation could soon be facing widespread foreclosures in the commercial real estate industry at a time when the nation’s businesses are struggling to reopen. We are grateful to the sponsors of the HOPE Act for their foresight and responsible action.” - Thomas J. Bisacquino; President and CEO, NAIOP, the Commercial Real Estate Development Association
“The Building Owners and Managers Association International applauds Congressmen Al Lawson and Van Taylor for their leadership in introducing the HOPE Act. Tenant nonpayment rates have dramatically risen across the country as a result of COVID-related closures, causing default on many CMBS loans. The HOPE Act ensures that these commercial real estate owners have access to additional debt needed to weather the storm without breaking their loan covenants. HOPE will use previously untouched Congressionally appropriated funds to bolster those mortgage-holders who are in the most need.” - Henry H. Chamberlain, APR, FASAE, CAE; President and Chief Operating Officer, Building Owners and Managers Association (BOMA) International
Specifically, H.R. 7809, the HOPE Act, provides borrowers of commercial mortgages, who have been hit the hardest economically by COVID-19, financial assistance through the HOPE Preferred Equity lending facility. Guaranteed by the Department of the Treasury, financial institutions will originate preferred equity instruments to borrowers.
Text of H.R. 7809 can be found here
and a summary of the bill can be found here
The commercial real estate market encompasses hotel, retail, multi-family housing, industrial, and commercial property, industries which support millions of jobs throughout the United States. For example, 8.3 million jobs throughout the United States, and more than 600,000 in Texas are supported by the hotel industry while the retail industry directly supports 29 million American jobs.
As a result of the COVID-19 pandemic, businesses across the country have experienced revenue declines and cash flow shortages, making it difficult to meet monthly debt obligations and ultimately, threatening the livelihood of their business. While Congress and federal agencies have provided critical assistance to many businesses experiencing financial hardship through programs such as the Paycheck Protection Program and Main Street Lending Programs, these initiatives do not fit the needs of the commercial real estate market.
Businesses with CMBS debt have a particular challenge since their loan covenants are governed by multiparty state law contracts which typically prohibit additional indebtedness. Further, CMBS borrowers have less flexibility to modify their loans since bondholders of CMBS trusts expect principal and interest payments to be maintained.
In June, Congressman Taylor led a letter
, signed by 104 Members of Congress from both sides of the aisle, urging the U.S. Secretary of Treasury Steven Mnuchin and Chairman of the Federal Reserve Jerome H. Powell to provide economic support to the commercial real estate (CRE) market.