Nevada Hotels Urge Congress to Pass HOPE Act, Provide Mortgage Assistance
Posted on: August 19, 2020, 12:53h.
Last updated on: August 19, 2020, 01:57h.
Nevada lodging executives are calling on Congress to pass the Helping Open Properties Endeavor (HOPE) Act, which would provide commercial real estate developments with debt relief.
Introduced in late July by Rep. Van Taylor (R-Texas) with bipartisan support, the HOPE Act would provide financial assistance to businesses that are operating in the struggling commercial real estate market.
According to a recent report from analytics firm Tepp, the hotel industry is facing a wave of foreclosures because of the COVID-19 pandemic. Nearly a quarter (23.4 percent) of all hotel loans in the US are more than 30 days past due.
One of the 4,000 signatures on a letter sent to Congress this week urging Capitol Hill to quickly pass the HOPE Act is Sahara Las Vegas VP of Sales Christopher Bond. The casino resort, located on the Strip’s northern end, has been the subject of recent rumors regarding its ability to weather the coronavirus storm. That prompted Sahara’s legal team to sue one Sin City blogger for spreading gossip that the resort’s closure might be imminent.
Bond told the Las Vegas Review-Journal this week that he signed the letter on behalf of his membership with the American Hotel and Lodging Association, not as a representative of Sahara.
The HOPE Act, if passed, would mandate the US Department of the Treasury to issue financial aid to borrowers of commercial mortgages. Borrowers who have experienced at least a 25 percent year-over-year drop in revenue during a consecutive three-month period between March 1, 2020, and February 28, 2021, would qualify.
The loan comes with a three percent interest rate, and borrowers have one year to pay down the amount.
Rent Due for Casinos
A recent trend in the gaming industry has been the emergence of real estate investment trusts (REITs). MGM Resorts and Caesars Entertainment, which together operate 16 of the Strip’s 27 casino resorts, both have REITs — respectively, MGM Growth Properties and VICI Properties.
Under REIT arrangements in the gaming industry, the real estate entities own the physical land and assets of each resort, while the casino’s lease operations from the trust. During the second quarter, MGM Growth said its casino partner was current on all of its leases.
MGM paid 100 percent of its rent on time and undertook several key actions to preserve its liquidity position, strengthen its balance sheet, and manage its cash outflows to preserve its financial flexibility as the pandemic continues,” explained MGM Growth Properties CEO James Stewart.
VICI Properties said it collected 99 percent of its rent due. That’s something “very few American REITs were able to do in Q2,” explained VICI CEO Edward Pitoniak.
Penn National Gaming, one of the largest regional casino operators in the country, also has a REIT: Gaming and Leisure Properties. Penn National, which in Nevada operates Tropicana on the Strip and M Resort in Henderson, is also currently on its leases.
Little Nevada HOPE
Most casinos on the Strip seemingly have the financial wherewithal to cover their monthly costs despite a steep plunge in revenue, which is perhaps why more Nevada resort execs didn’t sign the HOPE Act congressional letter.
Twenty people representing Nevada hotels did sign. But Bond was the only signee that works directly for a casino. The majority of the Las Vegas signatures came from people representing small hotels and lodges, including the Red Roof Inn, Howard Johnson, and Best Western.
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