December 2020

Congress Passes New Stimulus Plan

Congress Passes New Stimulus Plan

  • Congress passed, and President Trump signed into law, a new federal COVID stimulus plan.
  • The bill includes $600 stimulus payments, as well as a new round of PPP loan funding.
  • There is already talk of increasing the amount of the stimulus payments to $2000.

Well I was all set to write this week about some cool new commercial developments happening because it looked like the President was going to veto the new stimulus bill. Then wouldn’t you know it? President Trump changed his mind and signed the bill into law.

So now we have a new stimulus bill. But what is in it? Are there provisions that directly affect the commercial real estate industry? What about other small businesses? Those are the questions we are looking to answer in this article. And don’t forget to check back in next week – when I actually write that article about cool new developments.

Contents of the New Bill

The bill has a lot of different moving parts in it. But because this blog focuses on commercial real estate, I will focus mostly on the ones affecting our industry. Anyway, the bill includes:

  • $600 stimulus checks – This is the most well-known part of the new bill and the reason I thought President Trump was going to veto it (he said he wanted the stimulus checks to be $2,000). According to reports, the Treasury wants to start sending checks to people as soon as this week.

  • Unemployment benefits – The federal unemployment benefits of $300 per week will continue until at least March 14, 2021.

  • Second round of PPP loans – Congress allocated $285 billion for a “Second Draw” of PPP loans. Specifically, these loans are capped at $2 million per company and are available only to companies with less than 300 employees and who saw a 25% decrease in sales in at least one of the first three quarters of 2020 (as compared to the same quarter in 2019). I talk about some more details of the PPP loans below.

  • Eviction Moratorium Extension – As I correctly predicted a few blog posts ago*, the new stimulus plan extends the federal moratorium on evictions until January 31, 2021.

  • Other provisions – There are a lot of other provisions – for example, money for education, foreign investment, infrastructure, child care, vaccines, etc.

Second Draw PPP Loans

Congress tried to be much more specific in this bill about who gets the PPP loans and what they can be used for. For example, as I wrote above, they are much more limited on who can collect them. So I wanted to go into the details a little more.

In addition to the eligibility rules described above, the bill contains the following additional PPP terms:

  • The funding has many different limits that specifically set out funds for truly small companies (i.e. $25 billion for borrowers with 10 or fewer employees);

  • $12 billion for minority owned businesses;

  • $15 billion set aside for the entertainment industry, including independent movie theaters, entertainment venues, music clubs, and cultural institutions; and

  • Expansion of the allowable expenses and forgivable uses for PPP funding.

Is this the End?

As I mentioned above, President Trump wanted the individual payments to be $2,000, not $600. There is talk, therefore, that there may be another stimulus package in the near future. Also – as with the last stimulus – there will undoubtedly be questions that arise that were not covered in this bill. And clarification will be necessary.

And, as I am writing, this came across the twitter machine –

“BREAKING: US House passes bill that would increase COVID stimulus payments from $600 to $2,000 by 275-134 vote, needing two-thirds majority to pass. Measure now moves to US Senate.”

Today (Tuesday), Senator McConnell has blocked the first attempt to debate the $2,000 stimulus in the Senate. Instead, Senator McConnell acknowledged that President Trump called for not only larger stimulus checks but also curbs on large tech companies and an investigation into the November election. Senator McConnell, therefore, said the “Senate will begin a process to bring these three priorities into focus.”

So there are sure to be new developments this week. When there are, we will try to keep everyone updated through our blog. So check back soon to Tales of Legal Madness.

*Just kidding. I incorrectly predicted that the federal government would not extend the nationwide eviction moratorium. Carnac the Magnificent I am not (to continue my use of 40 year old references).

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Bring on the Vaccine

Bring on the Vaccine

  • There is very good news on the horizon – the COVID vaccine is coming soon.
  • Can an employer require its employees to take the vaccine to keep the workplace safe?
  • The answer is probably – depending on the specific facts of your workplace.

If you are anything like me, you are following the vaccine news with anxious anticipation. It’s terrific news that there are now two vaccines approved by the FDA. And I cannot wait for one of them to be available to the everyday joes like me.

But as I sit here waiting like a kid on Christmas Eve – I began to wonder how this is actually going to work. And how will it affect our industry? How will companies treat the vaccine? What can they require of their employees? Well I’m smart enough to know that the answer to these questions are way outside my area of expertise. So I turned to friend and fantastic employment lawyer Alana Ackels. In this article, therefore, I recount my discussion with Alana as she educated me on what companies can and cannot require when the vaccine is available.

Best Practices for a Safe Office

Alana and I started our conversation with the question that everyone wants to know – can employers require employees to get the vaccine? We are lawyers, so of course you already know the answer – maybe. Sometimes? Probably.

I’ll unpack that. Alana said that the short answer is employers can probably require employees to get the vaccine – with some exceptions. Ultimately this question is covered by the Americans with Disabilities Act. Specifically, she said that it’s covered under the medical exams guidelines. And the ADA has a lot of rules governing when and how an employer can require its employees to get a medical exam.

To be clear, Alana said requiring the vaccine itself is not a medical exam. But the screening questions are. So if an employer asks an employee if he or she has been diagnosed with COVID, if he or she has a fever, etc. – those questions do qualify as a medical exam.

According to Alana, an employer can ask these questions (i.e., give a medical exam) if they are job related and consistent with business necessities. That’s the key issue – is requiring the vaccine job related and consistent with business necessities? That is a fact based inquiry that will change for every business. And, it can change within a business if circumstances change.

A more specific question to ask, therefore, is if employees do not get the vaccine, do they pose a direct threat to other employees? According to Alana, the answer to this question will be very specific to how your job site works. For certain industries, it may be more important than others. For example, I would think property management companies that deal with the public may have a stronger argument to require the vaccine than a company where everyone works separately in a private office. Also the circumstances surrounding the outbreak may matter. Right now, when the infection rates are sky high, employers may have a stronger case to require the vaccine. But if the numbers level off, that immediacy may subside also.

Alana made clear, however, that there is an exception to all of this. If an employee cannot take the vaccine because of a disability or a religious belief, the employer cannot require the employee to do so. It will then need to find a reasonable accommodation for the employee, if it can.

So What Will/Should Employers Do?

After hearing her great analysis, the question I asked Alana was – ok, what will or should companies do?

Alana explained that what probably makes the most sense is for companies to do something similar to the flu vaccine – strongly encourage it. If it is strongly recommended but not required, the decision is not subject to the ADA. If the vaccine can be administered by a nurse at the office – a company may want to bring in a nurse to administer the vaccine on site to all who so choose. Whatever you can do to make it easier on your employees will be beneficial.

Returning to the Office

Finally, while I was gleaming this great advice from Alana, I asked her what I knew was likely a popular question – what if you have an employee who does not want to return to the office? Can you require it?

Once again – we are lawyers. The answer is probably.

Alana said that under an OSHA analysis, an employee cannot refuse to report to work for fear unless he can show he has a reasonable belief of death or serious bodily harm. This is, obviously, a very high standard. If an employer can show that it is adhering to CDC guidance for making the workplace safer, then the employee will have a hard time showing there is a legitimate fear. This is one of the many reasons that safety protocols are extremely important.

Anyway, I hope that helps answer some questions. Thanks to Alana Ackels for her expertise. If you have questions about this or any other employment law issue, I highly recommend going to her website and then giving her a call.

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Austin Extends Restrictions on Property Owners

Austin Extends Restrictions on Property Owners

  • While the CDC is likely to end its moratorium on evictions, the City of Austin looks to extend theirs, along with the 60 day notice of proposed eviction.
  • By doing so, Austin is hurting property owners and affordable housing efforts.
  • There are better ways for the Council to help Austin residents who need help.

You probably remember, back in September, the CDC enacted a moratorium on evictions through the end of 2020. At the same time, Austin extended its sixty day notice of proposed eviction and its own moratorium on evictions to the end of the year to match the CDC.

It appears that the CDC is set to let that eviction moratorium expire. Unfortunately, Austin leadership does not seem that smart. Instead, in a continued financial assault on property owners, Austin has already extended the sixty day notice of proposed eviction and seems set on extending its moratorium on evictions.

What does this Moratorium Mean for Austin Property Owners?

Before we talk about the failings of these enactments and a better solution, I just want to give a reminder of what they are. Under Texas law, a property owner is required to give a tenant a three day notice to vacate if it plans to move forward with eviction proceedings. Earlier this year during COVID, Austin added an additional requirement that owners give tenants a 60 day Notice of Proposed Eviction (“NPE”). Thus, before an Austin property owner can issue the three day notice to vacate, it needs to wait 60 days after providing the NPE.

In addition to that, Austin unnecessarily enacted its own moratorium on evictions for non-payment of rent. This was unnecessary because the CDC had already issued a moratorium on them. So currently in Austin, with limited exceptions, a property owner is not allowed to evict a tenant who does not pay his or her rent.

At the December 10 City Council meeting, the Council extended the 60 day NPE requirement until at least April 1, 2021. And, at that same meeting, Mayor Adler hinted that he was going to extend the moratorium on evictions.

Austin Needs to Move Forward

Austin just can’t seem to get out of its own way. It has so much going for it (see Oracle and Elon Musk moving here, for example) but for every one step forward, the City Council takes two steps back. This is a prime example.

Almost everyone is sympathetic to the plight of some of our fellow citizens in these difficult COVID times. I work with property owners every day and they are extremely concerned about the work status and welfare of their tenants. We all want to help. But this is not the way to do it.

Austin has a severe housing shortage. It especially needs more affordable housing. The way to solve this issue is with more density. We need more housing built at a higher density than we previously have built it. Over the objection to some of the Austin leadership, developers have started building this.

But these ordinances are a dagger to those efforts. They are going to make it more difficult and more costly to supply new and current housing to Austin’s citizens. And, as a result, rents will increase. Thus the very issue that Austin needs to solve will only become worse. It’s a terrible idea that meeting this need.

There are Better Alternatives

This is so frustrating because there are better solutions than villainizing the very people who help bring housing to the community. These ordinances unfairly place the burden of supporting people in need on property owners who provide housing. And they discourage owners from providing more housing by making it more expensive.

Finally, the moratorium gives a blanket solution to a targeted problem. There is a segment of the population that has been hit hard by COVID and needs help. Instead of helping the specific people in need, it is a water cannon that sprays everything in its wake.

Instead, the City should be helping those who actually need it. It could provide rental assistance or vouchers to tenants in need. This would be a much more targeted approach and would spread the cost of this help throughout all of the community – instead of just villainizing property owners.

The City Council and Mayor have instead taken the easy, short sighted way out of this. And I worry that these orders are here to stay.

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Did Warner Bros Kill Movie Theaters

Did Warner Bros. Kill Movie Theaters?

  • Warner Bros. announcement this week may accelerate the decline of movie theaters.
  • Its getting more difficult for theaters to survive in a Post-COVID world.
  • As a result, commercial property owners need to get creative with their anchor space.

In case you missed it – Warner Bros. made a pretty big announcement last week. It announced that it was going to release all of its 2021 movies directly on to HBO Max (which it also owns). After a month on HBO Max, the new releases will be removed and put exclusively into theaters.

This, rightly, was reacted to as very big news throughout the movie industry. Its one of the more significant developments in a long time in that industry. But what – if anything – does it mean for commercial real estate? Will it change movie theaters? That’s what I discuss in this week’s blog entry.

Full disclosure up front – I love going to the movies. When MoviePass existed – I was a customer. And one they lost a lot of money on because I would go to the movies at least once per week. And since MoviePass died, I’ve been an Alamo Season Pass Member. Clearly, I love going to the movies. So changes that hurt theaters are personal to me.

Now that that is out of the way – lets look at how the movie theater business will change and what that means for commercial real estate owners.

The Future of Brick and Mortar Movie Theaters

While the announcement from Warner Bros. certainly hurts the future of movie theaters, it was not the beginning of their decline. This trend has been coming for the last few years.

As you probably know based on your own viewing habits, the movie industry has changed a lot in the last few years with the rise of streaming services (Netflix, Hulu, Amazon Prime, etc.). These services have had new movies that go straight to their services and not into movie theaters (or into movie theaters at the same time).

In addition to that, home theater systems have seen great improvement in the last 10 or so years. The availability of large TVs with great sound systems makes it more likely that people are willing to watch movies at home versus going to the theater. And, of course, COVID has accelerated this trend for theaters.

As we have seen, this has made operating movie theaters very difficult. Indeed, in the last six months, Regal, Cinemark, and AMC have all closed large numbers of theaters – at least temporarily.

So what theaters will survive? Most likely it will be theaters that provide a viewing experience above and beyond just watching a movie in a cushioned folded seat. Theaters like Alamo Drafthouse or The Moviehouse and Eatery that provide reclining seats and full menu service are much more likely to survive the destruction.

Where does that Leave Commercial Property Owners?

That, of course, leaves a big hole for commercial property owners in their retail centers. Theaters have often been anchor tenants for malls and other retail properties. With the closing of theaters, commercial property owners have to get more creative in how to fill those spaces. This is another opportunity for creative developers and investors to think outside the box to fill those spaces. A few possibilities include –

One last interesting development in the movie world. The drive-in theater is back. Drive-ins have been popping up all across the country. And they do not necessarily have to be the huge screens in large spaces like they were in the 50s, 60s, and 70s. Smaller spaces have been reconfigured to host smaller drive-ins. For example, Texas developer Presidium Group has used a small space on Pleasant Valley Drive in Austin to set up a small drive-in theater.

As we have been discussing in this blog, the world is changing. That presents many opportunities for commercial property owners. They just have to be creative about it.

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What is the Future of Retail Does Anyone Know

What is the Future of Retail? Does Anyone Know?

  • COVID will likely affect how consumers do their holiday shopping this year – with more people than ever shopping online.
  • This, combined with the overall trend towards online shopping in general, could lead to less demand for retail spaces.
  • Commercial property owners, therefore, will have to adapt to the changing times and look for opportunities to repurpose unneeded retail spaces.

I hope everyone had a great Thanksgiving. It was a little muted this year – but hopefully you had fun and lots of turkey. Or tofurky, if you so desire.

One thing that Thanksgiving always brings – besides a post-turkey nap and a Detroit Lions’ loss – is Black Friday. Obviously this year presented a challenge to stores and shoppers alike. How do you wait in line overnight and practice social distancing? I was not one of the lucky ones who made it out there this year, so I’m not totally sure how that worked. But that is besides the point for this article where my focus is on the future of commercial retail real estate. And the place to start with that is the holiday shopping season that is upon us.

There seemed to be some serious trepidation among retailers about how Black Friday – and the entire holiday season – are going to go. Traditionally Black Friday is the busiest shopping day of the year. But many retailers seemed to think that the holiday shopping season could be different in 2020. The most obvious reason is because of COVID. The pandemic is likely to keep some people away from stores. And even when people come out, there are many local and store regulations about how many people can be in the stores. As a result, the 2020 holiday shopping season could look a lot different.

And, of course, the shift away from brick and mortar shopping did not start with COVID. Its just an another big step in that direction. As traditional retailers have had to compete with online giants like Amazon, they have shifted much of their business away from physical stores to online shops.

Future of Brick and Mortar

So what does all of this mean for commercial property owners that own retail space? Well first, brick and mortar shops are probably never going to go away entirely. If nothing else, they can often serve as loss leaders for the retail online business.

But retail spaces are changing. And commercial property owners have to change with it.

The most stark example may be the indoor shopping malls that we all used to congregate in when we were teenagers. Or was that just me? #LakesideMall

Anyway, around the country those malls are being repurposed into mixed use with office, retail, and residential. Or some (like my aforementioned hometown mall) are being torn down and replaced with a new mixed use product.

I think that is likely to be the future of much retail. It will be repurposed or rebuilt with fewer retail outlets and more hospitality or residential.

But, of course, COVID has thrown the future of many types of commercial real estate into question. We just do not know yet what the demand for office or hospitality will be when things shake themselves out.

The future for retail, however, was already on a path to fewer physical stores. And there is no reason to think that will change with COVID. Indeed, it will likely be accelerated.

That can present great opportunities for current and future owners of commercial real estate. They may have the possibility to purchase a current retail asset to repurpose or do the same with one they own. They will just have to continue to adapt with the changing times. It is, therefore, an exciting time to be in the retail space.

To further discuss this or any other commercial real estate issue, give us a call at 512-614-0335.

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