Ulster helps 42 more businesses, nonprofts

BY PETER KATZ Pkatz@westfairinc.com

Ulster County has announced it is giving f inancial assistance to 42 businesses and nonprof its through its CARES II Small Business Grant award program. This is the second round of funding in the CARES program and is designed to support and expand the operations of local small businesses and organizations with 25 or fewer employees and provide much-needed relief from the economic effects of the Covid pandemic.

A wide variety of expenses including rent, payroll, equipment and f ixed assets are eligible for reimbursement through the program, with a minimum award amount of $5,000 and a maximum award amount of $35,000 provided directly to businesses and organizations.

Ulster County said that more than 270 applications for funding were received. The applications were reviewed by a six-person committee composed of County Legislators John Gavaris, Kevin Roberts, and Chris Hewitt, along with three county employees appointed by the Ulster County Executive’s Of f ice. The Ulster County Economic Development Alliance reviewed the committee’s recommendations and formally approved them.

“I want to congratulate the more than 40 small businesses and nonprof its through- out the county that received these awards,” said County Executive Jen Metzger. “In the aftermath of the pandemic, the funding will provide f inancial relief and assistance where it is most needed, as well as the opportunity to support the growth and vitality of these businesses and organizations, especially when it comes to creating and retaining jobs throughout the county.”

Hewitt said that the review process revealed local businesses are in need of major support as they recover from the pandemic, and that he and his colleagues would continue working to support these businesses. He also said that the number of applications made it clear that more funding is needed.

“The recipients of the CARES II small business grants demonstrated that the pandemic drastically impacted their businesses,” said Hewitt.”They each have strong plans to keep their businesses and organizations successful into the future.”

The f irst round of the CARES program aid totaled nearly $930,000 and covered eligible expenses from Dec. 23, 2021 through Oct. 31, 2022. It provided direct f inancial assistance to 34 small businesses and organizations, more than half of which were women- and minority-owned. The county said that as a direct result of this funding those businesses added 38 new full-time jobs and 27 part-time jobs while retaining 82 full-time and part-time jobs.

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A lack of affordable housing hurts employers' ability to recruit and the housing crisis must be addressed to attract top talent;

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Career exploration should start much earlier.

The phenomenon of hybrid work has resulted in a lot being said in real estate circles regarding of f ice building vacancies, valuations and f inancing. Hybrid work has caused tenants of all sizes to shrink their of f ice space as their leases expire. This will likely continue for years, as there is no regularity to lease terms or lease expiration dates. The adoption of hybrid workforces by businesses will be very detrimental to owners of of f ice buildings.

Tech companies (that are some of the largest users of high-quality of f ice space) have gone through multiple rounds of employee layoffs, following excess expansion during the pandemic. These actions have caused them to put substantial amounts of space on the sublease market, to cancel leases where they have that option, and to pull back on taking new space. The result is obvious: vacancy rates (which pertain only to space that can be leased directly from the building owner) and availability rates (which include space that tenants are paying rent on but are actively marketing for sublease) are both increasing and will continue to increase in the future.

When a commercial mortgage is expiring, ref inancing is required. The conditions noted above are causing banks to underwrite new mortgages under new criteria. These criteria consider the building’s current (frequently lower) value, current higher interest rates for borrowers, as well as the percentage of the value on which the bank will lend, known as the LTV (Loan to Value).

In today’s environment, banks (being extra cautious in lending to an unpopular product type) typically will lower the LTV they will f inance (for example, from the old 80% of value to +/- 50% of the now-reduced value) so that building owners frequently have to put cash into the deal in order to get a new mortgage. In many cases, the owner does not have that cash available, or does not want to increase the equity stake in the property.

If the owner cannot f ind a lender to ref inance, the owner will have to either sell the building to pay off the current mortgage or (literally) give the keys back to the old lender and lose their equity. Prominent developer RXR caused a stir in the f inancial markets a number of months ago when it revealed that it was considering giving the keys back to the lender on some older, underperforming of f ice properties.

Their reasoning was that the only way to improve their return would be to convert these properties to residential uses.

Lenders would not provide the signi f icant capital required to effect those conversions. RXR was not willing to continue to own of f ice buildings whose future income is signi f icantly clouded by the present leasing environment.

Building owners also frequently use the f inancing markets to pay for capital improvements (new lobbies, restrooms, public corridors, and other improvements) as well as for tenant buildouts, which have signi f icantly risen in cost since the supply chain issues during the pandemic.

When interest rates increase, the cost of debt service increases, as many building mortgages are on variable rate schedules. The building income is based on already contracted rents, so the owner’s net income declines as its debt service costs increase, often dramatically. This impacts the owner’s ability to cover the debt service and to upgrade the building and pay for normal operating expenses and real estate taxes.

All of this, in concert with slowing leasing velocity, is putting increasing f inancial pressure on of f ice building owners, particularly those who own older, less desirable buildings. In the current market, these owners are suffering the most with their “ugly duckling” buildings, while the super-expensive “trophy buildings” are getting most of the showings and a disproportionate share of new tenants, at rents of $150 to $250 per square foot. Tenants’ reasoning is that they are willing to pay more per square foot for less square footage (as they downsize to accommodate fewer people in their of f ice each day) with the expectation that they will attract people back to the of f ice with the newest, most sustainable, most highly amenitized building.

These are the issues. Some of the proposed solutions are interesting. They include the obvious, such as renting prebuilt of f ice spaces for flexible or shortterm use, rather than having tenants sign long leases. More expensive solutions include conversion to residential use, which can include all or part of the building. Tishman Speyer is considering converting ten floors of a building in Rockefeller Center to a high-end hotel use. The most interesting one I have seen is using vacant of f ice floors to grow vegetables hydroponically, to be delivered fresh to their urban markets daily. There is no single right answer here, but the problem is clear. We need to f ind ways to repurpose a signi f icant amount of of f ice space into uses that will be economically sustainable.

Howard E. Greenberg is president of Howard Properties, Ltd., located in Valhalla, NY.