On May 12, House Democrats released the text of their proposed stimulus package bill, called the HEROES Act. It is valued at $3.2 trillion which is even more than the $2.2 trillion that the CARES act cost.
Video Index (with direct links) 0:37 – Overview of the new proposed stimulus package, the HEROES Act 1:24 – The wheels on the omnibus go round and round 2:07 – Possible California relief funds for renters and property owners 4:50– AMC Theaters’ potential purchase by Amazon, plus the only theater where you can watch a movie in SoCal 5:37 – Mystery shopping in Dallas and LA to check on retailers’ compliance to Coronavirus protocols 7:28 – Nationwide survey results for rent collection from mom and pops retail establishments
The HEROES Act is still in proposal phase and needs to be approved by the Republicans. Here are some highlights of the bill that may be relevant to you:
Direct stimulus checks of $1200 per person, including adults and children, up to $6,000 per household. This would be a one time payment like the prior stimulus check, so not a recurring monthly payment as had been proposed. The income limit would be $75,000 per person, and $150,000 per married couple, with a gradual lowering of payments if you make more than that.
For small businesses, an additional $10 billion would be allocated for the Economic Injury Disaster Loan, and Paycheck Protection Programs.
$175 billion would be set aside for a Homeowner Assistance Fund. The funds would be distributed to individual states, who could use the money for homeowner or renter assistance.
For renters, there is a section, that states that there will be a moratorium on residential evictions on 1-4 units for 12 months after the bill passes.
For homeowners, there is automatic forbearance on loans, up to 12 months.
Extension of the $600 per week federal unemployment benefit through January 2021, since the benefit from the original CARES act expires in July.
There are many other provisions, including funds for medical professionals and other essential workers who have been putting their lives on the line to work.
Two proposed relief funds for Californians
According to an article in the LA Times, two proposals are expected to be unveiled that will offer relief for both tenants and landlords.
The first is a renter assistance program that asks landlords to forgive rent payments in exchange for equally sized tax credits spread out over a 10-year period starting in 2024. The thinking here is that tenants wouldn’t have to pay rent, but the landlords who can afford to hold on to the property can keep the tenant in there and not have to deal with eviction. Over the course of 10 years, tenants would agree to reimburse the state for rent payments. Some who could prove financial hardship could have the total amount forgiven. In effect, their rent would be covered by the state.
The big issue I see with this is that the landlord doesn’t receive any benefit from this for four years. Are you willing to wait that long and gradually get paid back over 10 years? I wouldn’t be. But one interesting component of this proposed plan is that the tax credits are transferable, so a landlord who is not collecting rent could sell his property, including the value of the future tax credits, and this could create an interesting market for tax credits.
The second plan would give the opportunity for any California taxpayer, from individuals to large corporations, a chance to prepay 10 years’ worth of income taxes for a slight discount. The state would offer $30 billion in long term tax credits for $25 billion up front. I guess this might be worth it if you knew you were staying in California, and if you knew what your income tax would be over 10 years, and if you had the money to pay those taxes up front. But it just seems like not enough of a discount to make it worth it.
AMC Theaters being bought by Amazon?
I want to give a shout out to AMC Theaters, who was in rumors to be declaring bankruptcy soon. On Monday, their stock jumped up 30% on the news that Amazon might be buying AMC. I have mixed feelings about this. I love going to the movies and obviously don’t want to see a theater chain fail, but I’m not sure I like that the company is being saved by Amazon. But hey, I guess I’ll take it if it means that AMC will stick around and continue to show movies.
Speaking of movies, there is one movie theater in the area that’s still open, and that’s the Mission Tiki Drive-In Theater in Montclair. This property was sold last year and the buyer planned to tear it down to build some industrial property. But it’s having its last hurrah right now as it’s the only place you can see a movie. The owner says that weeknights at the theater right now are like summer weekends. So if you want to go see a movie, go check them out.
Mystery Shopping in Dallas and Los Angeles
Let’s talk about what’s happening in the retail world. As you know, many states have opened for business, with California opening up in a very limited capacity. We look to other states and areas that have opened up before us for a model of what may happen here in California. The state of Texas, for example, opened up a week before California, and I want to mention an interesting experiment that took place recently.
Mark Cuban, owner of the professional basketball team the Dallas Mavericks, and one of the sharks on Shark Tank, did an interesting experiment in Dallas where he hired a team of secret shoppers to go around town and see if people were shopping safely and if the stores were operating in safe manner. His team called 1000 restaurant and retail locations and physically audited 300 locations. I guess when you’re a billionaire, you can afford to spend money on these types of things.
Well the conclusion of his findings are that the retailers in Dallas aren’t following the rules.
I’ll highlight a few findings from his report.
On the weekend that stores were allowed to open, only 36% of buinesses chose to open on the opening weekend. It appears there is still a lot of fear among the public to go out shopping or to restaurants.
96% of businesses were non compliant with the governor’s madatory safety protocols, and one-third of the businesses were less than 50% compliant with the mandatory protocols.
ON average, 60% of the mandatory protocols were followed and 54% of suggested protocols were followed. Here is a link to the actual state safety protocols.
Different franchisees within one franchise had wide variability from one to another. One would think that a parent company would want to standardize procedures among their franchisees, like they do with food, but this was not the case in this first round of mystery shopping.
Mark Cuban has said that he plans to do this a few more times to track trends and see if businesses will improve in the coming weeks. So we can either see this as a model for how California and other states will open up retail in the future, or hopefully this will serve as a warning for California businesses to follow safety protocols more closely, so that the public does feel safer to go out and shop.
And just after this weekend, on a smaller scale, the LA County department of Public Health did a similar survey to 410 businesses, and found 162 of them were in violation of safety protocols. Some of the biggest offenders were flower shops that were allowing customers to shop as usual, not requiring face masks.
These business are going to have to improve compliance or they’re going to get shut down again and we’re going to be back to where we started.
May’s retail rent collections from small businesses
Linkedin and Alignable, a small business networking site, report that 40% of small businesses nationwide have skipped paying May’s rent, with hair salons and nail salons among the businesses with the lowest rates of rent payment, with 66% not paying full rent. Restaurants and bars are next with 56% payment, followed by retail stores with 39%. So, based on this nationwide data, and the anecdotal data that we’ve been hearing at Progressive Real Estate Partners about April’s rent collections being about 50%, if you’ve been able to collect at least half of your rent for May, you’re doing better than average.
Progressive Real Estate Partners is a boutique retail brokerage firm with a unique approach to leasing and selling retail properties. Established in 2007, our emphasis on retail AND geographic focus on Southern California’s Inland Empire region has enabled us to become the most efficient and effective brokerage within the marketplace.