CARES Act The main provisions of the CARES Act include $454 billion for TALF and other Fed lending facilities (credit: Colin Watts).

SAN FRANCISCO—In these unprecedented times of COVID-19, office owners are feeling the crunch right along with many others. End of the month moves are shot, there are issues with tenants moving in and out, and dates are being pushed out for build-outs, says Manuel Fishman, shareholder at Buchalter in San Francisco.

"It is during these times that human nature comes out," Fishman tells "Now is the time we should be working as partners to show leadership for tenants to get through this. The real estate industry is a chain where one part may collapse the whole chain."

Fishman says every lease has to be dissected individually, but generally, he is advising clients to segregate tenants into three buckets:

  1. Large accounting, law and insurance firms/institutional clients, where the ability to pay is there
  2. Mid-sized companies, which will likely require deferment plans
  3. Retailers, especially of the Mom and Pop variety, are suffering the most and will need to have April and May rents tacked onto the end of extended leases

"All of the tenants use this retailer amenity group, to go down to these restaurants for lunch or use these gyms, so they are very important," Fishman tells "The CARES Act will pump money into buckets two and three, which will be very helpful."

To combat the economic impact felt by the COVID-19 crisis, the federal government passed the Coronavirus Aid, Relief and Economic Security (CARES) Act last week. In it, the government will provide at least $2 trillion in direct aid to states, municipalities, individuals and businesses. The aid comes in the form of direct loans to businesses, paychecks to individuals, tax breaks and grace periods, and employment-related aid. This is the single largest aid package that the federal government has ever passed to stimulate or backstop the economy.

The main provisions of the CARES Act included $454 billion for TALF and other Federal Reserve lending facilities, 90 days of forbearance for multifamily owners with a federally backed mortgage, temporary relief for banks from the CECL implementation and troubled debt restructuring rules, and $350 billion to small businesses.

There are a number of facets of the CARES Act that will be addressed in the coming days, but several key features are associated with the $349 billion small business loan or paycheck protection program, says Buchalter.

Generally, businesses with fewer than 500 employees are eligible to receive a loan. However, certain types of businesses with more than 500 employees may still be eligible based on a previous determination of the Small Business Administration in accordance with applicable regulations. Note that for purposes of this program, an employee includes all those individuals employed on a full-time, part-time or other basis.

Eligible borrowers are able to obtain loans from participating lenders in an amount equal to 2.5 times of a borrower's average total monthly payroll costs. The total amount of any loan in this program shall not exceed $10 million. Interest rates are capped at 4% and the maximum maturity is 10 years.

Loan proceeds may be used for the following expenses: payroll costs, costs related to healthcare benefits (including paid sick, medical or family leave and insurance premiums), employees' salaries, commissions or similar compensation; payment of interest on any mortgage obligation, rent, utilities and interest on any other debt obligation incurred prior to February 15, 2020. Loan proceeds may also be used in any manner consistent with allowable uses pursuant to section 7(a) of the Small Business Act.

Among other limitations, businesses that recently laid off workers would be required to repay a certain portion of the loan and there will be no loan forgiveness for loans covering salaries in excess of $100,000 per year.

Businesses should work with legal counsel to ensure that obtaining these loans will not trigger a default under any existing credit facilities or commercial contracts.

To obtain a loan, borrowers must make a good faith certification upon filing an application. Among other things, the borrower must certify that the uncertainty of the economic condition makes the loan request necessary to support the ongoing operation of the recipient, that the proceeds will be used to support employment and used for other allowable uses, and that the borrower neither has another application pending nor have they received another loan under section 7(a) of the Small Business act between February 15, 2020 and December 31, 2020 for the same purpose.

Loans are able to be forgiven/cancelled for all costs incurred and paid during the covered loan period for payroll costs, interest payments on any covered mortgage obligation, rent payments on covered rent obligation and any covered utility payment. The amount of loan forgiveness is reduced if employees are laid off or salaries are reduced by more than 25%. Importantly, if a borrower rehires a previously terminated employee, the borrower will not be penalized for having reduced payroll at the beginning of the period and can have such amount apply to its forgiven amount.

Employers may also derive benefit from other relief provided by the federal government. This includes employee retention tax credits and Tax Code Section 139 relief. Note that Section 139 relief permits employers to reimburse employees for certain qualified disaster expenses (such as personal, family, medical, living, transportation or funeral expenses incurred due to the pandemic) without such reimbursement being subject to such employee's gross income or the employer's payroll tax.

"After a period of time, the market will stabilize," Fishman tells "We are helping tenants to keep buildings open even though most people are working from home. Force majeure is not our thing. We need happy tenants paying rent."


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Lisa Brown

Lisa Brown is an editor for the south and west regions of She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.