Real Estate Industry Alerts Tracker - September 4, 2020 Issue
September 4, 2020

 

CDC To Halt Evictions Through Year-End Using Quarantine Rules

In an effort to prevent COVID-19 from spreading, the Centers for Disease Control and Prevention (CDC) intends to use its quarantine authority to halt the evictions of tenants earning no more than $99,000 a year (or $198,000 for married couples filing joint returns) through the end of the year. Individuals who received a federal stimulus check this year are also eligible for the protections afforded under the proposed CDC order. The policy will take effect immediately upon its publication in the Federal Register. Renters seeking to obtain relief must assert they are either incapable of paying their rent, or are likely to become homeless if evicted. Tenants would also be required to pay as much rent as they can afford. The Trump administration claims that it has the ability to issue the eviction moratorium under a federal law that allows the CDC to order emergency measures when it determines that state and local governments have not taken sufficient steps to prevent the spread of a communicable disease.

Additional information may be found here and a copy of the proposed order may be found here.
 

California Passes Eviction and Foreclosure Moratorium

This week, California Governor Gavin Newsom signed into law AB 3088 (the “Act”), which provides certain protections against residential evictions and foreclosures resulting from the economic impact of COVID-19. The Act bars a residential tenant from being evicted prior to February 1, 2021 for past due rent that accrued between March 4, 2020 and August 31, 2020 due to a COVID-related hardship, if the tenant provides a declaration of hardship. If the tenant suffered a COVID-related hardship between September 1, 2020 and January 31, 2021, then the tenant must pay at least 25% of the rent to avoid eviction. Tenants are still obligated to pay the outstanding rent, but if the tenant is protected under the Act, the unpaid rent cannot be the basis for eviction. Landlords are permitted to begin recovering past due rents starting March 1, 2021. Landlords that do not follow the eviction process are subject to increased penalties under the Act. The Act also:
 
  • Extends anti-foreclosure protections in the Homeowner Bill of Rights to small landlords.

  • Provides new accountability and transparency provisions to protect small landlord borrowers who request CARES-compliant forbearance.

  • Provides a borrower who is harmed by a material violation of the Act with a cause of action.

  • Extends the notice period for nonpayment of rent from three days to 15 days to provide a tenant additional time to respond to a landlord’s notice to pay rent or quit.

  • Requires a landlord that negotiated a rent agreement in a language other than English to provide the tenant with a hardship declaration form in the same language.

  • Provides tenants with a backstop if they have a good reason for failing to return the hardship declaration within 15 days.

  • Requires landlords to provide tenants with a notice detailing their rights under the Act.

  • Limits public disclosure of eviction cases involving nonpayment of rent between March 4, 2020 and January 31, 2021.

  • Protects tenants against being evicted for “just cause” if the landlord’s real intention is to evict the tenant for COVID-related nonpayment of rent.

Additional  information may be found here and a copy may be found here.
 

Oregon has Extended its Eviction and Foreclosure Moratorium Through Year-End; Bankers Challenge Law

Earlier this week, Oregon Governor Kate Brown extended the protections provided under HB 4204 through December 31, 2020. The law was originally due to expire on September 30, 2020. The law protects residential and commercial borrowers in Oregon from foreclosure and other lender remedies resulting from missed mortgage loan payments. In August, 2020, the Oregon Bankers Association and three community banks filed suit challenging HB 4204 claiming:
 
  • Certain provisions of the law are preempted by the mortgage provisions in the CARES Act and the National Bank Act.

  • The law violates the Contract Clause found in Article I of the U.S. Constitution, which limits the ability of states to change provisions of existing private contracts.

  • The law’s retroactive application to actions initiated from March 8, 2020 to June 30, 2020 (when the law was passed) violates the Due Process Clause and Takings Clause of the U.S. Constitution.

Additional information may be found here and here.
 

New York State Casinos and New York City Malls Have the Green Light to Reopen

Governor Cuomo announced that New York State casinos and New York City malls may reopen starting September 9, 2020 subject to certain conditions. Both types of establishments are required to have enhanced air filtration systems. The State’s casinos may only operate at 25% capacity and no table games or beverage service will be permitted on the casino floors. New York City malls will be limited to 50% of normal capacity.

Additional information may be found here.
 

Heard Around the Industry

Commercial Mortgage Investments Held by Life Insurance Companies Surge in Second Quarter: A recent report by Trepp Analytics shows that commercial mortgage investments held by life insurance companies posted a total return of 4.58% in the second quarter. This is in stark contrast to the first quarter, when life insurance companies posted a negative return of 1.00%. This upswing was the second largest in the past 94 quarters, according to Trepp. At first glance, the magnitude of the recovery is somewhat surprising given the exposure life insurance companies have on their lodging and retail mortgage loans – the two sectors hit hardest during the pandemic. As it turns out, however, the exposure to the lodging sector was lower than expected and the exposure to retail, while material, was offset by the fact that life insurance companies generally lend on safer retail projects such as shopping centers anchored by large grocery store tenants.

Additional information may be found here and a copy of the report can be found here.

New York City Residential Rents Drop for the Fifth Consecutive Month: In its September 2020 New York Rent Report, Apartment List reported that New York City residential rental prices declined by 1.1%. This is the fifth consecutive month in which rental prices have dropped in the City. As compared to the same period last year, rental rates are down 3.3%. Seven of the ten other cities in the New York metropolitan area have also experienced a rent decreases. The trend is not limited to the New York metropolitan area, as big cities in other locations have seen rental rates decrease – residential rents are down 5.6% in San Francisco, 3.1% in Boston and 2.2% in Washington, D.C.

Additional information may be found here.

New York City Investment Sales Volume Declines 54% in the First Half of 2020: The Real Estate Board of New York (REBNY) recently issued its 2020 Biannual Investment Sales Report, which tracks investment sales in New York City, for the first half of the year. REBNY reported that investment sales in New York City totaled $10.5 billion, which is 54% of the sales volume from the first half of 2019. The total number of investment sale transactions dropped 32% year-over-year to 1,229 transactions.
Key findings from the report include:
 
  • Office sales volume declined 47% year-over-year to $3.6 billion and the total number of transactions declined 31% year-over-year to 124 in the first half of 2020. The average price of transactions during the same period was $40.4 million, which represents a 28% decline year-over-year.

  • Multifamily rental property sales volume declined 51% year-over-year to $2 billion and the total number of transactions declined 29% year-over-year to 465 in the first half of 2020. The average price of transactions during the same period was $17 million, which represents a 50% decline year-over-year.

  • Hotel sales volume declined 81% year-over-year to $294 million and the total number of transactions declined 70% year-over-year to 6 in the first half of 2020. The average price of transactions during the same period was $49 million, which represents a  37% decline year-over-year.

  • Retail sales volume declined 27% year-over-year to $2 billion and the total number of transactions declined 27% year-over-year to 199 in the first half of 2020. The average price of transactions during the same period was $10 million, which remained flat year-over-year.

New York State was also impacted by the reduced sales volume in New York City, as fewer transactions resulted in lower transfer tax revenues. Transfer tax revenues in New York State decreased by 49% compared with the previous 6 months, and 58% compared with the previous 12 months.

Additional information may be found here and copy of the report may be found here.

State of the Hotel Industry During the Pandemic: The American Hotel & Lodging Association (AHLA) released its analysis on the struggles of the hotel industry six months into the pandemic.

Key findings include:
 
  • 40% of hotel employees are still not working.

  • Nearly two-thirds (65%) of hotels remain at, or below, 50% occupancy. Hotels in urban areas are suffering the most, with occupancy rates of 38%, which is well below the national average.

  • Only 33% of Americans are reporting they have traveled overnight for leisure or vacation since March, which is an all-time low. Only 38% indicated that they are likely to travel by the end of the year.

Additional information may be found here and copy of the report may be found here.

Manhattan Office Leasing Could Reach Lowest Level in 20 Years: According to a report by Colliers International, office leasing in Manhattan may reach the lowest level in 20 years this year. So far in 2020, 13.7 million square feet of office space has been leased in Manhattan, and unless leasing activity picks up in the remaining few months of the year, 2020 will be the worst year for office leasing in the City since the turn of the century. Not all hope is lost, however, because only several more deals covering 100,000 square feet or more would “significantly move the needle,” according to Colliers.

Additional information may be found here and a copy of the Colliers Manhattan Office Market Report 2Q 2020 may be found here.