NEW YORK--(BUSINESS WIRE)--As the COVID-19 crisis continues to threaten the viability of the shopping center industry due to the closure of stores and restaurants, ICSC applauds the bipartisan efforts of members of the House of Representatives requesting the creation of a temporary relief plan for commercial real estate (CRE) borrowers.
More than 100 members of the House signed onto the letter requesting that Treasury Sec. Steven Mnuchin and Federal Reserve Chairman Jerome Powell take steps to protect the $540 billion CMBS market that is at risk of collapsing resulting in significant job loss in an already fragile economy.
“Due to unexpected loss of revenue and rent, many shopping center owners are facing the challenge of paying debt obligations with impaired cash flow. Without federal liquidity assistance we are looking at un-necessary damage to financial markets, increased unemployment and irreparable harm to communities across the country,” said ICSC President and CEO, Tom McGee. “Industries with CMBS debt have a particular challenge in that loan covenants are governed by multiparty state law contracts, which typically prohibit additional indebtedness barring borrowers from turning to banks for help.”
Congress is requesting a relief plan for these borrowers, who through no fault of their own, have experienced a significant drop in revenue due to the COVID-19 pandemic and the resulting government mandates to close businesses. Recognizing that many federal response programs, including the Main Street Lending Program, have benefited businesses, the letter notes that those programs do not help CMBS borrowers as servicers have limited contractual flexibility to modify loans.
“CMBS borrowers are tied to a different set of rules than typical borrowers and they need relief during this time as well,” McGee continued. “These shopping center properties are an integral part of local communities and provide hundreds of millions of dollars in tax revenues, as well as 1 in 4 jobs, that are at stake if help is not provided.”
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