Embattled hotel owners are looking for a $10 billion cut of the federal bailout package, after the government’s paycheck lifeline program dried up within a matter of days.
Industry groups representing more than 55,000 hotels across the country asked Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell to carve out a special facility from the $600 billion Main Street Lending Program to help cover a year’s worth of securitized mortgage payments.
“Many hotels are unable to pay operating costs and thus debt service,” heads of the American Hotel & Lodging Association and the Asian American Hotel Owners Association wrote in a letter Thursday. “This will cause a snowball effect of foreclosures, and lenders taking ownership of severely distressed assets, leading to full scale layoffs and extended property closures.”
The two hotel trade groups are asking policy makers to set aside the $10 billion — or one year’s worth of principal and interest payments on the $86 billion of outstanding CMBS debt.
The trade organizations claim operating revenues have declined 80 percent nationwide in the past few weeks as restrictions meant to halt the spread of Covid-19 have ground the tourism industry to a virtual standstill.
Hotels, along with restaurants and other retail businesses, have been among the industries hit hardest by the fallout from the pandemic, and many hotel owners are turning to their lenders seeking relief on their mortgage payments.
With its massive massive ”Coronavirus Aid, Relief, and Economic Security Act,”’ Washington reached deep into its toolchest to try and help struggling businesses. Included in that massive piece of legislation was the $350 billion Paycheck Protection Program to help small companies make payroll. It also created a program to buy top-rated commercial mortgage backed securities in an attempt to inject liquidity into a key real estate finance market that’s been essentially frozen for weeks.
But funds for the Small Business Administration’s paycheck program quickly evaporated as companies rushed to apply for loans the government has pledged to forgive if they keep workers on the payroll.
Another element is the Main Street Lending Program. It will make funds available to small businesses by buying qualifying loans from banks. The program was announced April 9 but is not yet accepting applications.
“This lending facility would also forestall the impending debt crisis in the hotel CMBS market and prevent it from rippling out into other areas,” the two hotel groups wrote. “If CMBS servicers are forced to foreclose on these hotels, they have no realistic path to restarting the business or reselling the property into the market in a reasonable amount of time, leading to shuttered hotels.”
Contact Rich Bockmann at firstname.lastname@example.org or 908-415-5229