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June 8, 2018

ECONOMIC GROWTH – TRAVEL & TOURISM
“VisitU.S.” Coalition, Roundtable Advance Policy Recommendations to Boost Economic Growth

CAPITAL & CREDIT – VOLCKER RULE
Five Regulatory Agencies Clear Path for Volcker Rule Changes

THE ECONOMY & CRE
Strong Commercial Real Estate Conditions Persist Despite Concerns Over Interest Rates and Trade Tariffs


ECONOMIC GROWTH – TRAVEL & TOURISM

“VisitU.S.” Coalition, Roundtable Advance Policy Recommendations to Boost Economic Growth

Robust international travel helps power economic growth and commercial real estate through tourism dollars directly spent at U.S. hotels, resorts, stores, home purchases, attraction, and investment properties. That is the message to policymakers from the multi-industry VisitU.S. Coalition, which aims to safely and securely welcome more overseas travelers to the U.S. – who stay an average of 18 nights and spend approximately $4,360 at hotels, stores, restaurants and attraction properties on business and leisure trips. (VisitU.S. Policy Agenda

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The multi-industry VisitU.S. Coalition  aims to safely and securely welcome more overseas travelers to the U.S. – who stay an average of 18 nights and spend approximately $4,360 at hotels, stores, restaurants and attraction properties on business and leisure trips. ( VisitU.S. Policy Agenda )

• The coalition advocates for policies from the Trump Administration and Congress to regain the nation’s lost share of the global travel market by 2020, which will result in 88 million international visitors who directly support 1.3 million U.S. jobs and $294 billion in travel exports – crucial to achieving the Administration’s economic goals. (Roundtable Weekly, Jan. 19 and Feb. 9)
 
• To address policies that may encourage or discourage in-bound travel – as well as the impact of  the travel and tourism market on CRE – The Roundtable will host a panel discussion during its June 14 Annual Meeting entitled “Enhancing International Travel and Tourism.”
 
• “We should be encouraging international tourism and promoting policies that not only make the visa system more secure and accessible, but also streamline the process,” said Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable. “Increasing inbound international travel to the U.S. helps power the commercial real estate industry here at home through spending at hospitality, retail, attraction, health, and investment properties – all of which generate revenues to boost overall economic growth and create American jobs,” DeBoer added.
 
• Jonathan Tisch, chairman and CEO of Loews Hotels & Co. spoke about the coalition’s concerns and goals during a Monday interview with CNBC’s “Squawkbox” and at an international hospitality industry investment conference.  (Squawkbox Interview, June 4 and GlobeSt, June 6)
 
• In a June 4 Travel Weekly editorial, Tisch also addressed the Trump Administration’s proposal to eliminate Brand USA, a public-private partnership created by Congress to promote America as the best destination for international visitors.  Tisch writes, “The program returns an estimated $28 in visitor spending for every $1 invested –  without a single dollar from U.S. taxpayers. Although the fees that fund it were extended, after 2020, those monies will be diverted to the U.S. Treasury instead of Brand USA. Unless this is fixed, the program will be in limbo.”

Led by the U.S. Travel Association and the American Hotel and Lodging Association, the VisitU.S. coalition also includes The Real Estate Roundtable, U.S. Chamber of Commerce and the American Resort Development Association. 

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CAPITAL & CREDIT – VOLCKER RULE

Five Regulatory Agencies Clear Path for Volcker Rule Changes

The Securities and Exchange Commission (SEC) this week became the fifth and final regulatory agency to advance possible reforms to the Volcker Rule, which aims to restrict proprietary trading practices at banks. The Federal Reserve became the first agency to move a proposal to simplify and ease the Volcker Rule forward last week, followed by the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Commodity Futures Trading Commission.  If adopted, this proposed revision is expected to enhance liquidity to commercial mortgage-backed securities (CMBS) markets.  (Roundtable Weekly, June 1)

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SEC Chairman Jay Clayton

• SEC Chairman Jay Clayton said, “The proposal seeks to simplify and tailor the 2013 final rule. I strongly encourage all interested parties to comment on the many questions proposed in the release and I look forward to commentator input about implementing the Volcker Rule in a more effective way.”

• In a memorandum to the Fed's Board of Governors, Fed Vice Chairman for Supervision Randall Quarles details the changes in the proposal.

• U.S. Treasury Secretary Steven Mnuchin on June 5 commended the efforts of the Agencies.  Mnuchin stated, “The Treasury Department strongly supports changes aimed at better tailoring the application of the rule, preserving liquidity during periods of stress, decreasing unintended compliance burdens, and encouraging capital formation.  The five agencies responsible for regulation of the Volcker Rule coming together on this notice is an important first step. These efforts are building on the relief for Main Street borrowers and lenders included in the Economic Growth, Regulatory Relief, and Consumer Protection Act recently signed into law by President Trump.”

• In a January 2012 comment letter to the Federal Reserve and other financial regulatory agencies, The Roundtable raised concerns about the unintended consequences of the Volcker Rule that could "negatively impact liquidity and capital formation in commercial real estate."

The Volcker rule reform proposal will be a topic of discussion at next week’s Real Estate Capital Policy Advisory Committee (RECPAC) held in conjunction with The Roundtable’s Annual Meeting in Washington. The Roundtable plans to submit comments to the Agencies before a final rule is expected to be in effect by January 1, 2019.

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THE ECONOMY & CRE

Strong Commercial Real Estate Conditions Persist Despite Concerns Over Interest Rates and Trade Tariffs  

Near-term optimism about commercial real estate market conditions are tempered by concerns over expected increases in interest rates and uncertainty about the effects of international trade tariffs, according to several recent economic and industry reports.  

  Fed-Front

The Federal Reserve is expected next week to raise its target interest rate above the rate of inflation for the first time in a decade.

  • The Federal Reserve is expected next week to raise its target interest rate above the rate of inflation for the first time in a decade. The Federal Open Market Committee in March raised the fed funds rate a quarter point to 1.75 percent, signaled rates will climb to 2 percent in 2018, and projected three additional hikes for 2019. (Reuters, June 7, "Fed Clambers Back to Positive Real Rates, Now Debate is When to Stop" and Politico, March 21) 
  • Interest rates and economic uncertainty are top concerns for the commercial real estate industry, despite near-term optimism from improved economic conditions, changes in the tax code and the promise of a loosening regulatory environment. (2018 Akerman U.S. Real Estate Sector Report, June 5) 
  • Nareit reports that the U.S. real estate market is likely to continue to grow for the next three to five years as current policies such as tax reform benefit the industry, according to a panel at a Capital Markets Update during REITweek: 2018 Investor Conference. (Nareit, June 6) 
  • The Fed's latest "Beige Book" of current economic conditions shows positive growth and widespread concerns about trade tariffs.  The report also notes that steel and aluminum prices rose, "sometimes dramatically" due to recent duties imposed by the Trump Administration. The Beige Book is one of the first official reports showing the economic impact of the new tariffs on domestic business. (Roundtable Weekly, March 9 and The Wall Street Journal, April 18)  
  • Commenting on these concerns, Roundtable President and CEO Jeffrey DeBoer noted the findings of The Real Estate Roundtable's Q2 2018 Economic Sentiment Index: "There are fears about political uncertainty, trade wars, and interest rate increases, which are having some impact and creating a manageable amount of uncertainty for the markets for the remainder of 2018 and looking ahead to 2019."  (Roundtable News Release, May 10) 

Economic policies that support economic growth will be a focus of discussion during next week's 2018 Roundtable Annual Meeting in Washington, DC, which will feature special guests such as House Majority Leader Kevin McCarthy (R-CA), House Ways and Means Chairman Kevin Brady (R-TX) and Senate Minority Leader Chuck Schumer (D-NY). 

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For questions about Roundtable Weekly, please contact The Roundtable's Scott Sherwood at rweekly@rer.org or (202) 639-8400.

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