Back in June, Congressman Van Taylor (R-TX) promoted a letter in support of a bailout for commercial real estate, in particular the hotel commercial mortgage-backed securities (CMBS) market. Along with 104 Representative co-signers, Taylor argued that significant federal support was necessary to prevent a wave of foreclosures and “permanent job loss in multiple industries and communities across the country.” Taylor told the Wall Street Journal that “This started with employees in my district calling and saying, ‘I lost my job.’”
The argument that bailing out hotel real estate owners would preserve jobs is, as we’ve previously explained, simply not credible. Now that Rep. Taylor’s ideas have been introduced in a bill he’s dubbed the Helping Open Properties Endeavor (HOPE) Act, the 105 letter signers have dwindled to only a handful of co-sponsors.
Why haven’t the letter-signers joined the legislation? It certainly didn’t help that journalists found serious issues with the idea:
- The Wall Street Journal reported that “the biggest beneficiaries of any assistance could be large real-estate owners affiliated with properties that owe troubled hotel debt.” The hotel owner with the most money in troubled CMBS properties was Dallas billionaire Monty Bennett, whose affiliated companies (Ashford Hospitality Trust, Braemar Hotels, and Ashford Hotels Inc.) at the time had loans valued at nearly $2.3 billion with special servicers.
- The Huffington Post narrated how American Hotel and Lodging Association (AHLA) lobbyist Chip Rogers bragged in an interview that his group had created the letter, and had gotten Congress to change the rules of the Paycheck Protection Program to help hotels. (An AHLA spokesperson said Rogers simply misspoke about orchestrating the letter.) An expert interviewed by the outlet assailed the letter: “This is sort of special pleading for one group.”
Consequently, when Rep. Taylor introduced the HOPE Act on July 29, it only attracted two co-sponsors. Even Congressman Denny Heck (D-WA), who had been a leader on the letter, was conspicuously absent. (Nine more co-sponsors have since joined as of 8/11/20.)
Who has come out in favor of the bill? Rep. Taylor issued a press release with statements in support of the bill from several industry associations including AHLA, the Asian-American Hotel Owners Association, the International Council of Shopping Centers, and NAIOP, the Commercial Real Estate Development Association. None of the unemployed workers who Taylor says prompted him to pursue this legislation were quoted.
The Commercial Real Estate Finance Council (CREFC), the industry association for the commercial and multifamily real estate finance industry, issued a press release with the cautious sub-headline, “Efforts appreciated but need further refinement.” “CREFC remains hopeful that a technical correction that does not require any additional appropriation to the CARES Act will address the commercial real estate industry’s needs,” the release concluded.
Financial Times columnist John Dizard best summed up the hard road ahead that a CMBS bailout faces:
“It seems very unlikely that $400bn or $500bn of federal money will go into propping up commercial property values. It is just a piece of theatre that lenders and borrowers can point to — magic government money. Commercial real estate will have to be entirely restructured in the US. More equity and less . . . hope. Starting next year. So burn the furniture and lobby for a government cheque.”