AOC blasts hospitality REITs for seeking federal aid to pay dividends

Congresswoman criticized companies for laying off workers while paying out shareholder dividends

National /
Jul.July 15, 2020 03:20 PM
U.S. Rep. Alexandria Ocasio-Cortez (Getty)

U.S. Rep. Alexandria Ocasio-Cortez (Getty)

UPDATED, July 16, 2020, 5:56 p.m.: U.S. Rep. Alexandria Ocasio-Cortez is taking aim at real estate investment trusts that seek to use federal aid to pay out shareholder dividends.

The progressive superstar, who just won a primary challenge in her New York City congressional district, criticized industry trade group Nareit for lobbying congress to allow REITs to use federal aid to pay dividends.

“It is unconscionable that during a moment of national, unprecedented economic hardship federal dollars would be used to subsidize firms that continue to pay out hundreds of millions of dollars to their wealthy shareholders,” Ocasio-Cortez wrote in a letter to Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin.

Using aid from the federal CARES Act for stock buybacks or dividend payments is currently prohibited. The main source of relief for many hotel operators has been the Paycheck Protection Program, which was designed to help companies keep employees on payroll. (More than 8,100 hotel businesses received aid through the program, according to an analysis by The Real Deal.)

The hotel industry has been decimated by the coronavirus pandemic. But to qualify as securities, REITs are required to pay 90 percent of their taxable income in the form of shareholder dividends — regardless of the company’s performance. REITs that own and manage hotels and resorts have had a negative return so far this year, at -48.5, according to data compiled by Nareit at the end of June.

Ocasio-Cortez said that while an estimated 70 percent of hotel workers have been laid off, hotel companies were still paying out millions to shareholders. She pointed to three hospitality REITs in her letter: Park Hotels and Resorts, CorePoint Lodging Trust, and Apple Hospitality, which at the end of March paid shareholders $105 million, $11 million and $67 million, respectively, filings with the U.S. Securities and Exchange Commission.

“We were disappointed to see the letter,” a spokesperson for Nareit said. “REITs have long served to democratize real estate investment, now bringing the benefits of real estate as an investment to more than 40 percent of America’s families.”

Park Hotels and Apple Hospitality did not respond to requests for comment. Mark Chloupek, general counsel for CorePoint, said the company, “did not receive any money from the federal Cares Act.”

Kurt Petersen, the co-founder of Los Angeles-based hotel union UNITE HERE Local 11, said that it was unfair for Park Hotels to pay out its shareholders “while workers at its 60 hotels around the U.S. and Puerto Rico were laid off.”

“If REITs like Park want stimulus funds, they must use taxpayer aid to keep workers employed,” said Petersen, who estimated that 95 percent of his union’s 32,000 members were laid off.

Park Hotels’ portfolio includes the Hilton Orlando in Bonnet Creek, the Hilton Chicago, the Hilton San Francisco Union Square and the 1,878-key Hilton Midtown in New York City, which announced its closure in March.

U.S. Representatives Jesús García, Rashida Tlaib, Ayanna Pressley, Jan Schakowsky and Ilhan Omar co-signed the letter.

UPDATE: This story was updated to include a comment from Nareit and CorePoint. 


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