Some lucky landlords have secured bailout funds through the federal government’s Paycheck Protection Program — all thanks to a legal loophole.
The program, created through the CARES Act and administered by the Small Business Administration, specifically excluded businesses that primarily develop or lease real estate from the program. However, dozens of real estate companies have received tens of millions of dollars in PPP funds by applying through related business arms, including property management or construction, the Wall Street Journal reported.
Time Equities is one such real estate company. CEO Francis Greenburger said that its PPP lender, which provided the firm with $3.6 million, didn’t check whether Time Equities was eligible. The company owns stakes in or controls 30 million square feet of property, and offers services including building management, leasing and construction management.
“It was really a self-approved process based on the guidelines they set forth, which were so vague as to be basically impossible to understand,” said Greenburger.
California multifamily owner Trion Properties received roughly $765,000 from the program, which its co-founder Max Sharkansky said was needed to make up for revenue that would have normally come from property sales or refinancings.
Veritas Investments, one of the largest landlords in San Francisco, received $3.6 million in PPP funds, but has promised it would pay back the full amount rather than apply for loan forgiveness.
House Speaker Nancy Pelosi, whose district includes San Francisco, said “Larger companies like Veritas…which has billions in assets and access to liquidity through other sources, were not the intended beneficiaries of PPP loans.”
Some landlords have faced criticism for receiving the funds. Facing pressure, companies tied to Texas hotelier Monty Bennett have said they will return the $68 million received through the program. One of the companies had backed out of a hotel sale once it learned it would be a recipient of the funds.
However, not all landlords will have the same luck securing funds through the program. Smaller companies aren’t as likely to have separate ownership and property management entities. [WSJ] — Danielle Balbi