Key Provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) for Commercial Real Estate

Client Alert
April 2, 2020

Nearly all sectors of the economy are confronting unique and challenging circumstances caused by the COVID-19 pandemic. The commercial real estate sector is no exception. One of the principal goals of the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") is to provide direct financial benefits to individuals and businesses to help them survive the current crisis, and this should benefit all commercial real estate owners (at least indirectly) by providing an economic lifeline to their tenants. However, there are certain provisions of the CARES Act which we expect to directly benefit commercial real estate owners, particularly those in the accommodation and food services industries, including hospitality and lodging, as further discussed below. 

I.  Individual Hotels as Small Businesses

In an effort to bolster the hard-hit hospitality industry, Section 1102 of the CARES Act expands the scope of businesses who are eligible to obtain federally-guaranteed loans from the Small Business Administration under the so-called "Payment Protection Program" to include business concerns that employ not more than 500 employees per physical location and are assigned a North American Industry Classification System ("NAICS") code beginning with 72 (which includes, among others, hotels, full service restaurants and limited service restaurants). This provision should allow larger companies owning and operating hotel and restaurant portfolios that would otherwise exceed applicable size limitations for loans under the Payment Protection Program to qualify for such loans on a location-by-location basis. These loans are offered under favorable terms and may even be forgiven provided that certain requirements are satisfied. In addition, the affiliation rules requiring companies to include in their employee count employees of other companies that are controlled by the same entity are waived for companies with a NAICS code beginning with 72.

Although additional guidance is expected, we believe that, based on the intent and purposes of the CARES Act, this expansion should be liberally construed to allow owners, tenants and/or operators of hotels to apply for loans under the Payment Protection Program. 

There are additional qualifications which must be met in order to take advantage of this loan program. For more guidance on such relief and qualifications for small business, please see our advisory here.

II.  Bonus Deductions for Qualified Improvement Property

Section 2307 of the CARES Act amends the Internal Revenue Code (the "Code") to address the so-called "retail glitch" from the 2017 Tax Cuts and Jobs Act (the "TCJA"), which mistakenly excluded certain qualified improvement property from eligibility for bonus depreciation deductions, thereby limiting the amount of deductions that owners and tenants could take in connection with interior improvements and remodeling for commercial properties. Section 2307 includes qualified improvement property among the types of properties that are subject to such bonus deductions, retroactive to January 1, 2018. Allowing bonus deductions for qualified improvement property via amended returns should provide much-needed cash flow to restaurant and retail establishments that have been adversely affected by the COVID-19 pandemic.   

III.  Forbearance and Eviction

The CARES Act provides relief for borrowers with properties secured by federally-backed mortgages while simultaneously protecting tenants residing in those properties. Under Section 4023 of the CARES Act, qualifying multifamily borrowers with federally-backed mortgages can request relief if they are experiencing financial hardship due to COVID-19 and its impacts. The borrower may be granted forbearance for up to 30 days and up to two additional 30-day periods upon qualified request. By receiving forbearance, the borrower is also restricted from initiating evictions of its tenants from said property during the forbearance period if the eviction is due to nonpayment of rent.

*  *  *

Sullivan has developed a rapid response team of attorneys to help our clients and our communities cope with the impact of the COVID-19 pandemic. Please refer to Sullivan’s resource center at for more information and for access to Sullivan’s library of related advisories.

Please know that Sullivan is focusing substantial efforts to provide assistance to businesses and individuals affected by COVID-19. If you have questions about how to move forward and navigate the novel legal issues raised by COVID-19, please contact your primary Sullivan attorney or send a message to

Jump to Page