Search Results for “” – The Real Estate Roundtable

179D bonus depreciation Business SALT Carried Interest Clean Energy Tax Incentives condominium construction tax accounting Duane Desiderio Energy Efficiency ENERGY STAR Inflation Reduction Act Jeffrey DeBoer Low Income Housing Tax Credit LIHTC Opportunity Zones OZs Partnerships amp PassThrough Taxation PassThroughs Ryan McCormick Section 199A

After months of high-stakes negotiations, Congress this week passed the sweeping One Big Beautiful Bill Act, a comprehensive reconciliation package that overhauls tax policy, restructures federal spending, and advances numerous Real Estate Roundtable (RER) priorities as it heads to President Trump’s desk for signature. (Roll Call, July 3) State of Play The House passed the final version of the One Big Beautiful Bill Act this afternoon, following a narrow vote of 218–214, capping off weeks of negotiations and delivering a legislative victory to Republican leaders ahead of the July 4 deadline. In the end, two Republicans—Reps. Thomas Massie (R-KY) and Brian Fitzpatrick (R-PA)—joined all Democrats in opposing the bill. (The Hill, July 3) “With one big, beautiful bill, we are gonna make this country stronger, safer, and more prosperous than ever before, and every American is going to benefit from that,” said House Speaker Mike Johnson (R-LA). “Today we are laying a key cornerstone of America’s new golden age.” (Politico, July 3) The Senate passed the sweeping budget bill in a 51-50 vote on Tuesday, after almost 24 hours of debate, amendments, and a “vote-a-rama” that ended with Vice President JD Vance casting the tiebreaking vote in favor of passage. Three GOP senators—Rand Paul (R-KY), Thom Tillis (R-NC), and Susan Collins (R-ME) voted no. (Axios, July 2) In an interview after the bill’s Senate passage, Senate Majority Leader John Thune (R-SD) acknowledged that the decision to make the measure’s business tax cuts permanent impacted its savings and overall strategy. “We really believed that permanence was the key to economic growth because it creates certainty,” he said. “All the models that we saw showed that you got more growth with permanence.” (PoliticoPro, July 1) Roundtable Advocacy The final legislation advances a broad array of policies that support capital formation, real estate investment, and housing development, while repealing harmful proposals like Section 899 and preserving longstanding tax rules vital to CRE. “This legislation represents a meaningful step toward strengthening communities, expanding housing opportunities, and supporting long-term economic growth,” said Jeffrey DeBoer, President and CEO of RER. “By advancing policies that encourage investment and preserve small business tax parity, Congress is helping to revitalize neighborhoods, create jobs, and ensure all Americans benefit from a stronger built environment. DeBoer added, “We are, of course, disappointed that the overall bill is predicted to increase the deficit and national long-term debt. However, we hope that the pro-growth aspects of the bill will narrow both by significantly growing the economy and providing revenues greater than those now projected. Likewise, we are concerned with predictions by some regarding the impact of spending cuts on research and needed health care for Americans.” RER’s advocacy efforts were particularly successful in eliminating several provisions that would have severely impacted CRE, including Section 899, known as the "revenge tax," and harmful limitations on state and local tax deductions for pass-through businesses. Speaking to Bisnow regarding the impact of the tax provisions on real estate, Ryan McCormick, RER’s SVP and Counsel, said, “From the bill's investment in housing and low-income communities to its fair treatment of entrepreneurial and pass-through businesses, the legislation strikes the right balance … it should spur job-creating capital investments in commercial properties across the nation.” (BisNow, July 1) Tax Policy The final legislation includes several tax provisions that will provide significant benefits to commercial real estate and support long-term economic growth: Permanent Business Tax Cuts: The bill makes permanent several business tax deductions from the 2017 Tax Cuts and Jobs Act (TCJA), including the Section 199A deduction for pass-through businesses and interest deductibility rules under Section 163(j). Section 899: Late last week, lawmakers removed the Section 899 provision known as the “revenge tax” from the bill after the Treasury Department secured an international tax agreement with G7 countries. RER strongly advocated for changes to the measure, warning that the tax would have deterred foreign investment in U.S. commercial real estate and weakened capital formation. (Roundtable Weekly, June 27) (BisNow, July 1) (Commercial Property Executive, July 1) Opportunity Zones: OZs are now a permanent feature of the tax code, though deferral periods for eligible gains are shortened through the end of 2026—a technical issue that RER will continue to address in discussions with Congress and Treasury. Low-Income Housing Tax Credit (LIHTC): The bill preserves and enhances the LIHTC program, supporting the construction of affordable housing nationwide. Bonus depreciation & expensing: Full expensing and 100% bonus depreciation for qualifying property are restored and made permanent, providing significant cash flow benefits for property owners undertaking capital improvements. SALT workarounds preserved: The final bill drops proposed changes to state and local tax deductibility on pass-through business income, preserving current law that allows deductibility through state pass-through entity tax regimes. Condominium construction tax accounting: The legislation includes provisions the RER has advocated for since 2015, allowing condo developers to use the completed contract method of accounting, aligning tax liability with actual receipts. Excess business losses: The revised Senate bill avoids a controversial proposal from earlier drafts that would have permanently siloed active pass-through business losses, instead opting to extend current law under Section 461(l) without restricting taxpayers from using those losses against wages and investment income. This approach preserves flexibility for entrepreneurs, start-ups, and two-earner households and avoids undermining the principle of measuring true net income. Energy Tax Credits For months, clean energy tax incentives enacted under the Inflation Reduction Act (IRA) have been a point of contention in both the House and Senate, with several Republican lawmakers urging leadership to take a more targeted approach to scaling back the IRA’s provisions—while maintaining incentives that support both traditional and renewable energy sectors. (RW, April 25) (CBS News, July 1) Ultimately, the final legislation significantly scales back the IRA’s clean energy tax incentives by accelerating the phase-out of wind and solar credits, while dropping a controversial excise tax on projects using foreign components and preserving eligibility for already planned or approved developments that begin construction before mid-2026. (PoliticoPro, July 1) (Bloomberg, July 1) The Section 48E Investment Tax Credit (ITC) for wind and solar projects remains in the tax code, but projects that begin construction 12 months after the bill’s enactment must be placed in service by the end of 2027. The Section 179D deduction for energy-efficient commercial building construction and retrofits is now limited to projects that begin construction by June 30, 2026. Similarly, the 45L tax credit for energy-efficient new residential construction expires for homes “acquired” after June 30, 2026. Importantly, ENERGY STAR’s current budget for FY2025 was not affected by any of the funding rescissions in the final bill. At this week’s BOMA International Conference, RER’s SVP and Counsel Duane Desiderio joined John Boling (VP, Advocacy & Building Codes, BOMA International) for a panel discussion on ENERGY STAR Portfolio Manager, highlighting the program’s legal foundation, bipartisan economic appeal, and importance to real estate stakeholders. (Commercial Property Executive, July 2) RER will continue engaging with lawmakers through the annual appropriations process to ensure that FY2026 federal funding bills (for spending starting October 1) support ENERGY STAR. (Commercial Property Executive, July 2) What’s Next With the One Big Beautiful Bill Act heading to the president's desk, attention now turns to the appropriations process and additional reconciliation opportunities. Speaker Mike Johnson has expressed interest in pursuing additional budget reconciliation efforts, a process that Congress can undertake at the end of the fiscal year. In an interview on Fox News Tuesday, Johnson said, “This is just a step in a sequence of events. We’re intending to do more reconciliation work. The plan is to do one in the fall for FY26 budget year and we can also squeeze in a third one for FY27 before this Congress is up.” (Politico, July 2) (Punchbowl News, July 2) RER will continue to provide in-depth analysis in the coming days and weeks on the reconciliation bill’s implications for commercial real estate, including technical implementation, market impacts, and policy recommendations.

Tax Policy

July 1, 2025

Press Release

Roundtable Statement on Senate Passage of the One Big Beautiful Bill Act

Statement by Real Estate Roundtable President and CEO Jeffrey D. DeBoer (WASHINGTON, D.C.) —“The Real Estate Roundtable supports the Senate Amendment to H.R. 1, the One Big Beautiful Bill Act. We urge its final passage and speedy enactment. This legislation will spur needed investment in our nation’s housing supply, strengthen urban and rural communities, and grow the broader economy to the benefit of all Americans.” # # #

Tax Policy

June 27, 2025

Roundtable Weekly

Section 899’s Revenge Tax Removed from GOP Tax Bill

Section 899 Retaliatory Tax Measures

Lawmakers have removed the Section 899 provision known as the “revenge tax” from the reconciliation package after the Treasury Department secured an international tax agreement with G7 countries. The Real Estate Roundtable (RER) strongly advocated for changes to the measure, warning that the tax would have deterred foreign investment in U.S. commercial real estate and weakened capital formation. (AP News, June 26) Why It Matters Congressional Republicans agreed Thursday to strike Section 899 from the One Big Beautiful Bill Act at the request of Treasury Secretary Scott Bessent, who announced a “joint understanding” with other G7 nations that he said will protect American companies from foreign tax discrimination. (NYT, June 26) In a post on X, Sec. Bessent said the provision was no longer necessary after the U.S. and its partners in the G7 reached a “joint understanding … that defends American interests.” (The Hill, June 26) Senate Finance Committee Chairman Mike Crapo (R-ID) and House Ways and Means Committee Chairman Jason Smith (R-MO) said they would remove the provision. But, they noted, “Congressional Republicans stand ready to take immediate action if the other parties walk away from this deal or slow walk its implementation.” (AP News, June 26) Section 899 would have raised U.S. taxes on inbound investment from countries with “unfair” tax regimes. RER and other industry groups told lawmakers that the mere proposal of the tax was chilling current foreign capital investment activity and warned that its enactment would substantially deter future investment, increase borrowing costs, and dampen property values. Earlier this week, Chairman Smith and White House economic adviser Kevin Hassett signaled that Section 899 could be removed from the bill if foreign governments—agreed to suspend policies like the Pillar Two global minimum tax and finalize related trade deals. (Reuters, June 25 | Bloomberg, June 25) The Joint Committee on Taxation (JCT) last week released a revised score showing that, under a Senate version of the bill, Section 899 would have raised only $12.5 billion over three years, compared to the $63 billion originally projected in the House version. The JCT estimate used the “current policy baseline” that assumes the extension of expiring tax provisions, lowing the bill’s total cost estimate to $442 billion. (Politico, June 22) RER Advocacy RER has been at the forefront of the policy debate surrounding Section 899, strongly advocating for its elimination or revision. Following weeks of one-on-one meetings with policymakers, a delegation of RER members and their counsel met last week with leading Congressional tax staff. The views expressed are summarized in comment letters submitted on June 12 and June 23 to congressional leaders, warning of its harmful impact on investment, job creation, and market stability. (Bisnow, June 25) “We commend congressional leaders and the Trump administration for removing Section 899 from the reconciliation bill,” said Jeffrey DeBoer, RER President and CEO. “This provision would have increased market volatility, discouraged inbound capital, and imposed higher borrowing costs on American real estate owners—ultimately reducing job creation, slowing economic growth, and diminishing U.S. competitiveness. Its removal helps preserve access to foreign capital and supports continued investment in communities across the country.” RER this week joined a coalition of leading trade groups representing private equity, managed funds, and the securities industries in urging the Senate to include a passive investment exemption in Section 899—a provision in both the House and Senate tax bills that would have raised taxes on inbound investment from countries with “discriminatory” tax regimes. (Letter, June 23) (Bisnow, June 25) “The threat of Section 899 is already having a chilling effect on investment decisions,” said Ryan McCormick, RER’s SVP & Counsel. “These investors are highly mobile, so rather than paying the higher tax rate, they will simply invest elsewhere.” (Bisnow, June 25) The coalition letter states, “Applying Section 899 to all forms of inbound passive investment would result in a significant increase in market volatility and a decline in investment in U.S. companies and our capital markets.” (Pensions&Investments, June 24) RER also sent a letter on June 12 to Senate Majority Leader John Thune (R-SD) and Finance Committee Chair Crapo, calling for changes to the Section 899 tax proposal and cautioningthat without changes, the measure could potentially drive up borrowing costs, depress property values, and significantly deter foreign investment in housing, commercial developments, and infrastructure projects nationwide. (Letter, June 12 | RW, June 23) The removal of Section 899 represents a meaningful policy outcome for commercial real estate, helping to protect investment flows and market stability. RER will continue working with Congress to ensure the final tax package supports capital formation, economic growth, and job creation.

Policy Landscape

June 27, 2025

Roundtable Weekly

Senate Republicans Race to Resolve Policy Disputes in One Big Beautiful Bill

Clean Energy Tax Incentives HSTF Inflation Reduction Act Policy Landscape Real Estate Information Sharing and Analysis Center REISAC RERs Homeland Security Task Force HSTF

Senate Republicans are racing to rewrite significant portions of their sweeping reconciliation bill in an effort to vote before the July 4 recess. Parliamentarian rulings, unresolved tax and Medicaid issues, and opposition from fiscal hawks and House conservatives are testing the goal of delivering the legislation to President Trump’s desk by the holiday. State of Play “We’ll have you out of here by the Fourth of July,” Senate Majority Leader John Thune (R-SD) told reporters Thursday. Parliamentarian Elizabeth MacDonough has ruled that several provisions violate reconciliation rules, including proposed changes to Medicaid financing and certain tax offsets. Republicans must now revise or replace those sections while managing disagreements over state provider taxes, energy tax incentives, and the deductibility of state and local taxes (SALT). The earliest a Senate vote could begin is Saturday, followed by a “vote-a-rama” and potential final passage on Sunday. The House has pledged a 48-hour notice before any floor vote, meaning the earliest action could occur Monday evening. (Roll Call, June 24) “I remain very optimistic that there’s not going to be a wide chasm between the two products, what the Senate produces and what we produce. We all know what the touchpoints are, the areas of greatest concern,” House Speaker Mike Johnson (R-LA) said. Energy Tax Incentives Several Senate Republicans are pushing to soften proposed rollbacks to the Inflation Reduction Act’s (IRA) energy tax credits. (PoliticoPro, June 23) The Senate Finance Committee’s current version seeks to phase out IRA credits faster than Democrats’ 2022 law but retains more favorable provisions than the House bill, including construction-based eligibility rules. (PoliticoPro – Analysis, June 24) Sen. Lisa Murkowski (R-AK) said Thursday that she was focusing on ensuring Senate Finance language allowing projects to receive credits based on when they begin construction remains in the bill. Conservatives are seeking to return to more restrictive language passed by the House that would determine eligibility based on when those projects start producing electricity. (PoliticoPro, June 27) “I want to make sure ‘commence construction’ is in place versus ‘placed in service.’ That’s really important,” said Sen. Murkowski. However, fiscal conservatives remain opposed to extending energy subsidies, and Democrats continue to warn that weakening IRA incentives could threaten grid reliability as demand surges from data centers and AI-related power needs. (NYT, June 26) RER Homeland Security Task Force Engaged Amid Iran Conflict RER’s HSTF is actively coordinating with public and private partners in response to heightened geopolitical risks stemming from the conflict with Iran. Under the oversight of the HSTF, the RE-ISAC, serves as the primary conduit of terrorism, cyber and natural hazard warning and response information between the government and the commercial facilities sector. (RW, June 13) At RER’s 2025 Annual Meeting, geopolitical expert John Sitilides gave a presentation titled “Washington & the World: The New Geopolitics of Great Power Competition,” where he discussed the geopolitical implications of tariffs, NATO relations, and strategic U.S. interests, including maritime security. (RW, May 30) Through the HSTF and RE-ISAC, RER remains engaged in preparedness efforts, emphasizing resilience across the industry and monitoring evolving threats that could affect the nation’s infrastructure and operations. Congress is expected to work through the weekend as Senate leaders try to finalize the reconciliation package and set up potential floor votes before the July 4 recess.

Tax Policy

June 27, 2025

Roundtable Weekly

Real Estate Industry Mobilizes for Pro-Growth Tax Provisions in Megabill

Capital Gains Partnerships amp PassThrough Taxation PassThroughs Section 199A

As Congress works to meet a July 4 deadline for sweeping reconciliation legislation, The Real Estate Roundtable (RER) and partner organizations are calling on Senate leaders to align with House-passed tax measures that strengthen Main Street businesses by expanding the Section 199A deduction, protecting the Opportunity Zones program, and advancing a lower capital gains rate to drive long-term investment. Section 199A RER and nearly 100 other organizations sent a letter to Senate Finance Committee Chair Mike Crapo (R-ID), calling for the Senate to follow the House’s lead in expanding the Section 199A deduction from 20% to 23%. (PoliticoPro, June 26) The Senate version originally would have made the deduction permanent but limited SALT deductibility, resulting in higher effective tax rates for many pass-throughs. But in a positive development announced today by Punchbowl News, Senate Republicans plan to entirely drop those new limits as part of a pending deal with the House GOP. The House approach would maintain tax parity with C corporations and help ensure that small businesses—including real estate partnerships—can continue to invest, grow, and hire. “Expanding Section 199A will help preserve tax parity between pass-through businesses and larger public corporations while helping ensure the Senate bill does not raise taxes on millions of Main Street businesses,” the coalition wrote. (Letter, June 25 ) Opportunity Zones Using the “current policy baseline,” the Opportunity Zone program is now projected to generate $66 billion in savings rather than costing $7.5 billion under traditional estimates, making it appear as a revenue raiser rather than a tax cut. (PoliticoPro, June 27) Senate Budget Committee Chair Lindsey Graham (R-SC) said, “We need a current policy baseline to make tax cuts permanent, and we need Opportunity Zones to help urban and rural poor areas, so we’ll just press on — no matter what.” Capital Gains Bill Introduced Reps. French Hill (R-AR) and Greg Steube (R-FL) introduced the Revitalizing Investment, Savings, and Entrepreneurship (RISE) Act to lower the top federal capital gains rate to 15%, aiming to boost investment and long-term economic growth. (Rep. Hill Press Release, June 24) The RISE Act would restore a bipartisan policy that was in place from 2003 to 2012. “To build a stronger, more prosperous future, we need policies that unlock capital, reward risk-taking, and drive real growth for all Americans. That is exactly what the RISE Act delivers,” said Rep. Hill. As negotiations continue, RER remains focused on advancing tax policies that foster capital formation, protect real estate investment, and support Main Street employers nationwide.

Capital & Credit

June 27, 2025

Roundtable Weekly

Fed Chair Powell Testifies on Monetary Policy Outlook, Proposal to Ease Bank Capital Requirements, and Basel III Endgame

Basel III Capital and Credit Interest Rates The Fed

In a busy week for Fed policy, Federal Reserve Chair Jerome Powell delivered his semiannual monetary policy report to Congress, testifying at a pair of House and Senate hearings on the state of the U.S. economy. Powell also fielded questions from policymakers on a new proposal unveiled this week to ease capital requirements for large banks and the state of Basel III Endgame. Policy Outlook In testimony before the House Financial Services Committee and Senate Banking, Housing, and Urban Affairs Committee, Chair Powell defended the Fed’s decision to hold interest rates steady last week. (Roundtable Weekly, June 20) With consumer confidence weakening and inflation risks from tariffs and Middle East tensions rising, the Fed faces competing pressures that could challenge price stability. On Capitol Hill this week, Chair Powell reiterated the Fed’s wait-and-see approach, saying, “For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.” (Federal Reserve, June 24) Two Trump-appointed Fed officials, Vice Chair for Supervision Michelle Bowman and board member Christopher Waller, signaled support for cutting interest rates as soon as July. Their public stance diverges from the majority of Fed officials, seven of whom do not anticipate any rate cuts this year, highlighting an unusual divergence among Fed leadership. (Axios, June 24) The Fed’s New Proposal On Wednesday, the Fed advanced a proposal to reform the enhanced supplementary leverage ratio (SLR) in a 5-2 vote, which would reduce capital requirements for relatively low-risk assets, like U.S. Treasury markets. (Reuters, June 25) The SLR was originally designed as a backstop to risk-based capital requirements to ensure that large banks hold a sufficient amount of capital, regardless of the riskiness of those assets. (ABA Journal, June 23) Sen. Tim Scott (R-SC), Chair of the Senate Banking, Housing, and Urban Affairs Committee, noted at the Senate hearing with Chair Powell, the backstop has “too often” acted as a binding requirement for U.S. banks, which could harm the effective functioning of U.S. Treasury markets during periods of distress and discourage banks from engaging in low-risk activity. The proposed modifications are intended to make it less expensive for large banks to hold less risky assets, so that more capital is freed up for banks to invest in Treasuries and other low-risk markets. Vice Chair Bowman touted the proposal as an “important first step in balancing the stability of the financial system and Treasury market resilience, while preserving safety and soundness and restoring the SLR as a backstop.” (PoliticoPro, June 25) Chair Powell similarly highlighted the benefits of the reform proposal, noting that “it will not in any way diminish the safety and soundness of the financial system.” (Senate Hearing, June 25) The Fed published a notice of proposed rulemaking on the proposal, opening it for public comment. RER plans to comment on the proposal and its implications for the commercial real estate industry. The organization’s Real Estate Capital Policy Advisory Committee (RECPAC) is working on a response to the notice of proposed rulemaking and welcomes member input. Basel III Endgame Chair Powell was also asked about the Fed’s plans for Basel III Endgame, which stalled after the proposal was met with widespread criticism from policymakers and industry associations last year. Chair Powell told policymakers that the Fed would take a “fresh start” at Basel III in light of the feedback it received. He agreed that the original proposal’s capital requirements were excessive and “very significantly exceeded” the Basel requirements, suggesting that it will be further revised. (American Banker, June 25) RER strongly opposed the original Basel III proposal, pointing out the significant economic costs it would incur without clear benefits to the economy, recommending that it be withdrawn and only reissued after further study. Bowman, the newly appointed Vice Chair for Supervision at the Federal Reserve, is actively involved in reviewing and potentially reforming the Basel III endgame proposal to make it more capital-neutral for U.S. banks. Tighter capital requirements and higher costs would come at a time when the commercial real estate industry is facing a wave of maturing loans, undermining the ability of owners and developers to restructure debt and fill the equity gap. So it is important for the Agencies to recalibrate their proposal accordingly to avert increased borrowing costs and reduced credit capacity for real estate and the overall economy. Chair Powell’s term at the Fed isn’t up until May 2026—but reports indicate that President Trump is considering announcing his pick to succeed Powell far in advance, potentially a candidate who is more amenable to lowering interest rates on an accelerated timeline.

Tax Policy

June 26, 2025

Coalition Urges Senate to Expand and Make Permanent Section 199A Deduction

Partnerships amp PassThrough Taxation, PassThroughs, Section 199A, TCJA,

Tax Policy

June 23, 2025

Policy Comment Letter

Coalition Urges Senate to Exempt Passive Investment from Section 899 to Protect U.S. Capital Markets

Section 899 Retaliatory Tax Measures,

Tax Policy

June 20, 2025

Roundtable Weekly

Senate Finance Chairman Circulates Draft Tax Legislation as Senate Prepares for Reconciliation Debate

Opportunity Zones OZs Policy Landscape Section 899 Retaliatory Tax Measures Tax Policy

The Senate Finance Committee released the draft legislative text and a section-by-section summary of its portion of the budget reconciliation bill, encompassing tax cuts, extensions of the 2017 Tax Cuts and Jobs Act (TCJA), and an overhaul of Medicaid. The draft Senate bill has several differences compared to the House-passed One, Big, Beautiful Bill Act. Why it Matters The 549-page proposal would permanently extend the 20% pass-through business income deduction (Section 199A), 100% bonus depreciation, and the Opportunity Zone tax incentives. (Bisnow, June 16) The Senate bill would also increase the debt ceiling to $5 trillion instead of the $4 trillion that passed the House. (Axios, June 18) The legislation should continue to evolve through upcoming manager’s amendments, as negotiations among Senate Republicans and the White House continue. Senate Finance Committee Chair Mike Crapo (R-ID) confirmed on Tuesday that his panel will not formally take up the sprawling tax package. CRE Provisions in Senate Bill Key provisions under Senate consideration include: Section 899 “Revenge Tax” Provisions: Includes retaliatory tax measures on foreign companies and investors similar to the House bill but delaying the effective date until 2027. The draft clarifies that certain lending would be exempt under the portfolio interest exception, but it does not exempt all passive investment in U.S. real estate—an area of continued concern. (Bloomberg, June 17) Opportunity Zones: Permanently extends OZ incentives, establishes recurring 10-year census tract designations, a rolling reset of deferral windows, new Rural OZs, and a phase-in of the 10% basis step-up for reinvested gains. (The Hill, June 16 | BisNow, June 17) Low-Income Housing Tax Credit (LIHTC): Permanently increases state LIHTC allocations by 12% and lowers the private activity bond threshold from 50% to 25%—in line with the House bill. Bonus Depreciation: Permanently extends 100% bonus depreciation for property acquired and placed in service after Jan. 19, 2025. Business Interest Deductibility: Permanently modifies section 163(j) to allow interest deductions based on earnings before depreciation and amortization (EBITDA), effective for tax years after Dec. 31, 2024. Factory Expensing: Provides four years of 100% expensing for factories that begin construction after Jan. 19, 2025, and are placed in service by Dec. 31, 2030. New Markets Tax Credit: Permanently extends the NMTC, which currently expires on Dec. 31, 2025. SALT Cap: Permanently extends the $10K SALT deduction cap for individuals, with negotiations on a larger increase ongoing. The bill retains full deductibility for business property taxes paid by pass-throughs, but limits the amount of state and local income taxes that pass-through owners can deduct through SALT workaround laws enacted in various states. Energy Tax Incentives: Maintains House-passed foreign entity rules and includes a phasedown of the clean electricity investment tax credit. The clean electricity investment tax credit is phased out over three years (100% if construction begins in 2025, 60% if construction begins in 2026, 20% in 2027, and terminated thereafter). Unlike the House bill, the Senate version terminates section 179D for property constructed 12 months after enactment. Immigration – Gold Card Proposal Last week, President Donald Trump launched TrumpCard.gov for individuals to register for a proposed “gold card" that would grant U.S. permanent residency to eligible applicants for $5 million (Axios, June 11) Announced in February, the plan aims to sell up to 1 million cards, an effort President Trump claims could generate enough revenue to retire the national debt. The website currently only collects basic contact information. (USA Today, June 11) The administration says the program would replace the EB-5 visa, but legal questions remain about whether a new visa program can proceed without congressional approval. (CBS News, June 12) In March, RER sent a letter to Commerce Secretary Howard Lutnick, expressing support for pairing the "Gold card" proposal with the existing EB-5 framework, offering a powerful, dual-track approach that would reform America’s visa system, attract top global talent, and drive foreign investment into strategic, job-creating projects. (Letter, March 11 | RW, March 14) State of Play Republican leaders are pushing for swift negotiations to revise the Senate tax bill as White House officials hold firm on the July 4 deadline despite mounting GOP skepticism. (Bloomberg, June 17) “We first get 51 senators together and then we’ll see what the House can do,” Sen. John Cornyn (R-TX) said Tuesday, referring to the legislation released this week as “an initial draft.” (PoliticoPro, June 17) Senate Majority Leader John Thune (R-SD) said Wednesday that the chamber is aiming to begin consideration of the GOP’s party-line megabill by mid-next week. (Axios, June 18) RER remains closely engaged with policymakers on the Hill and the administration on several high-stake policy issues, such as the retaliatory tax measures and the Opportunity Zone provisions.

Tax Policy

June 20, 2025

Roundtable Weekly

Sen. Wyden Introduces New Tax Bills Targeting Partnerships Tax Rules

Partnerships amp PassThrough Taxation Senator Ron Wyden

Senate Finance Committee Ranking Member Ron Wyden (D-OR) introduced two bills aimed at overhauling the taxation of partnerships this week, reviving a longstanding effort with major implications for commercial real estate. Why It Matters The PARTNERSHIPS Act and the Basis Shifting is a Rip Off Act mark a renewed attempt by Democrats to clamp down on what Sen. Wyden calls “a preferred tax avoidance strategy for wealthy investors and mega-corporations.” (Sen. Wyden Draft Proposal and Summary) Although the legislation faces little chance of advancing this Congress, it signals Democratic priorities for any future tax package, particularly if control of Congress shifts after the 2026 elections. According to Sen. Wyden’s press release, partnerships are “a preferred tax avoidance strategy for wealthy investors and mega-corporations.” He continues, “you can bet we’ll have this on the shelf when it comes time for Democrats to pass an agenda that cleans up the harm Trump is doing to American families.” (Sen. Wyden Press Release, June 17) The PARTNERSHIPS Act is an updated version of Sen. Wyden’s 2021 partnership reform discussion draft. While he has not shared the JCT revenue table, his press release states that the proposals would raise $727 billion over 10 years. The legislation would make fundamental changes to how debt, gains, and deductions are allocated among partners—departing from established practices that reflect real estate economics and contractual obligations. Bill’s Key Provisions Partnership debt: The PARTNERSHIPS Act would rewrite Section 752 rules to require all partnership debt be allocated according to profit shares, disregarding real estate partners’ actual economic risk, contractual guarantees, and repayment obligations. This could significantly alter basis allocation and impact deductions, losses, and gains—though a six-year transition period would apply. Allocation of partnership items: One of the major reforms proposed in the prior discussion draft was eliminating the “substantial economic effect (SEE)” safe harbor for allocating partnership items among the partners. The PARTNERSHIPS Act preserves the SEE rules while creating a specific rule for certain related-party partnerships. Under the Act, these partnerships would be required to allocate items consistent with contributed capital. Allocation of built-in gains with respect to contributed property: The bill would eliminate two of the three options available to partnerships for allocating built-in gain among the partners when property is contributed to a partnership. Net investment income tax: Mirroring the Biden budget, the bill would expand the 3.8% net investment income tax to include active pass-through business income not currently covered. Roundtable Advocacy RER has consistently advocated for fair treatment of partnerships—emphasizing their vital role in driving investment, job creation, and entrepreneurial risk-taking. As nearly half of all U.S. partnerships are in real estate, RER continues to urge Congress to strengthen, not undermine, the long-standing tax rules that support pass-through businesses and economic development. RER, along with 23 national real estate organizations, previously led a comment letter on Sen. Wyden’s proposal in 2021, and will continue to advocate against provisions that mischaracterize partnerships as “tax scams.” (Letter, Sept. 2021 | RW, Sept. 2021) Earlier this year, RER commissioned a comprehensive study by professors at Syracuse University and USC to analyze and address the important role of partnerships in the U.S. economy. RER’s Tax Policy Advisory Committee (TPAC) is reviewing how this research can further counter misleading narratives as tax policy discussions evolve.

The Fed

June 20, 2025

Roundtable Weekly

Interest Rates Remain Unchanged as Chair Powell Keeps Door Open for Future Cuts

Interest Rates The Fed

The Federal Reserve on Wednesday held its benchmark interest rate at 4.25-4.5 percent, signaling a “wait-and-see” posture amid renewed economic uncertainty and lingering inflation. (FOMC Statement, June 18) The Fed's Decision At his Wednesday press conference, Fed Chair Jerome Powell said that policymakers are “well positioned to wait” before moving further on rates. He added, “we’re beginning to see some effects” of tariffs on inflation. (CNBC, June 18) The Federal Open Market Committee (FOMC) still expects to make two rate reductions later this year. (Axios, June 18) When discussing the tariffs, Powell told reporters, "There's the manufacturer, the exporter, the importer, the retailer, and the consumer, and each one of those is going to be trying not to be the one to pay for the tariff. But together they will all pay for the tariff." (Yahoo Finance, June 18) Hours before the decision, President Donald Trump called Powell "stupid" and asked whether he could “appoint myself” to the Fed. "We have a man who just refuses to lower the Fed rate. Just refuses to do it," said Trump. (Financial Times, June 18; Fox Business, June 18) Looking Ahead To resume rate cuts that started last year, Fed officials are likely to need to see either labor markets soften or stronger evidence that price increases due to tariffs will be relatively muted. Projections released Wednesday suggest officials were open-minded about whether they would have that evidence after the summer. (WSJ, June 18) Markets are now pricing in a rate cut as soon as September or October, though officials cautioned that durable inflation or geopolitical risks could delay those cuts. (Seeking Alpha, June 18) The Fed also raised its inflation forecast to around 3 percent this year—well above its 2 percent target—while reducing GDP growth estimates to approximately 1.4 percent, reinforcing its cautious stance. (The Guardian, June 18) Implications for CRE The decision to keep rates flat means access to—and the cost of—capital will remain a hurdle for investors across the commercial real estate landscape. (BisNow, June 18) The Fed’s decision reinforces findings from RER’s Q2 2025 Sentiment Index , which indicated that the CRE executives expressed a decline in market confidence, as policy uncertainty, rising costs, and investor caution continue to cloud the outlook. (RW, May 23) What’s Next The Federal Reserve will hold a June 25 board meeting to consider revising the supplementary leverage ratio (SLR) standards. These revisions aim to address potential issues and ensure the SLR remains an effective backstop to risk-based capital requirements, potentially easing constraints on bank activities, particularly in the Treasury market. These potential revisions could have positive implications for real estate financing and the broader market. RER plans to submit comments on the anticipated notice of proposed rulemaking.

Tax Policy

June 13, 2025

Roundtable Weekly

Coalition Urges Senate to Revise Section 899 to Protect Access to Foreign Capital for U.S. Real Estate Investment

Section 899 Retaliatory Tax Measures

The Real Estate Roundtable (RER) and a coalition of real estate organizations sent a letter to Senate Majority Leader John Thune (R-SD) and Finance Committee Chair Mike Crapo (R-ID) this week, calling for changes to the House-passed Section 899 tax proposal to prevent harm to U.S. real estate investment, property values, and economic growth. (Letter, June 12) Why it Matters The retaliatory tax provision is part of the broader House reconciliation package and would impose steep tax increases on investors from countries that enact "unfair" taxes on U.S. businesses. (Bloomberg, June 12) The coalition letter cautions that, without changes, the retaliatory tax measure could potentially drive up borrowing costs, depress property values, and significantly deter foreign investment in housing, commercial developments, and infrastructure projects nationwide. (PoliticoPro, June 13) As drafted, the policy would apply broadly to both equity and debt investments in U.S. real estate, including capital gains, REIT dividends, and interest income—regardless of whether the investor has any controlling stake in the U.S. property. The coalition urges the Senate to revise Section 899 to exempt non-controlling real estate investments—passive holdings that do not involve day-to-day management. The coalition is also seeking to ensure the exemption applies to both new and existing transactions made under current law and tax treaties, and prevent an unintended retroactive tax increase that could disrupt capital markets and undermine confidence in U.S. investment stability. (Letter, June 12) On Institutional Real Estate, Inc.’s podcast this week, RER President & CEO Jeffrey DeBoer emphasized the importance of maintaining stable, predictable tax policy to attract investment and fuel economic growth—echoing the coalition’s call for Senate revisions to Section 899 that avoid discouraging capital formation in U.S. real estate. (IREI Podcast, June) Speaking at the NYU Federal Real Estate and Partnerships Tax Conference today, RER Senior Vice President and Counsel Ryan McCormick warned that Section 899 “would impose higher tax rates on foreign capital that is critical to U.S. real estate, impacting interest income, REIT dividends, and direct property investments. Without an exemption for passive investors, it would have a chilling impact on investment, raise borrowing costs, and slow economic growth.” By the Numbers Over the past five years, foreign sources have invested more than $213 billion in U.S. commercial real estate, including $57 billion in multifamily housing. This cross-border capital supports construction, jobs, housing affordability, and local tax revenue. (Letter, June 12) The Joint Committee on Taxation has projected that Section 899 would lead to a “decline in foreign demand for U.S. investment” and ultimately reduce Treasury revenues. (AP News, June 10) The Global Business Alliance, which represents foreign multinationals with U.S. operations, released a new study on Tuesday that found Section 899 would result in $100 billion a year in lost gross domestic product. ( PoliticoPro, June 11) View from Capitol Hill Republican senators have said they’re taking a deeper look at that provision and could make changes when the Senate Finance Committee’s version of the tax bill is released. (PoliticoPro, June 13) During a House Ways and Means Committee hearing on Wednesday, Treasury Secretary Scott Bessent defended the so-called revenge tax in the GOP megabill, in the face of concerns that it could deter foreign investment. (Watch Hearing | PoliticoPro, June 11) Secretary Bessent also testified at the Senate Finance Committee hearing on the president’s fiscal 2026 budget request for the Treasury and tax reform on Thursday. Sen. Thom Tillis (R-N.C.), who’s questioned the proposal, told reporters Tuesday that he at least expects a delay in the proposal. (Bloomberg, June 10) House Ways and Means Chair Jason Smith (R-MO) indicated the preferred outcome would be for the revenge tax never to take effect, urging foreign governments to eliminate discriminatory measures, such as digital services taxes. (PoliticoPro, June 11) What’s Next Senate Finance Republicans are expected to release revised legislative text of the One Big Beautiful Bill Act in the coming weeks. “We’re working as aggressively as we can to move as fast as we can,” Senate Finance Chair Mike Crapo (R-ID) said. (Politico, June 9) RER continues to advocate for smart tax policy that avoids unintended consequences while maintaining the U.S. real estate market’s global competitiveness.

Homeland Security

June 13, 2025

Roundtable Weekly

RE-ISAC and Homeland Security Task Force Address Civil Risks

Homeland Security RERs Homeland Security Task Force HSTF

Widespread demonstrations against recent Immigration and Customs Enforcement (ICE) raids, including National Guard deployments across the nation, prompted urgent coordination among commercial real estate leaders this week through The Real Estate Roundtable’s (RER) Homeland Security Task Force (HSTF). (Washington Post, June 13) Why it Matters for CRE In response to protests over recent immigration sweeps across the U.S., RER’s HSTF, Real Estate Information Sharing and Analysis Center (RE-ISAC), and partnership with the Commercial Facilities Sector Coordinating Council convened several calls this week to assess potential impacts on properties and personnel. (Axios, June 9) The escalating risk environment, including looting, anti-government extremism, and threats against infrastructure—has immediate implications for commercial real estate assets. Protests in L.A. County and across the country triggered curfews and disruptions across business sectors, including retail, restaurants, and hotels. Tesla Supercharger stations and other critical infrastructure were identified as high-risk. Fires and vandalism remain top concerns, especially near historic and civic buildings. Last month at RER’s HSTF Meeting, one of the discussions included a review of the risks to commercial facilities from lithium-ion batteries with John Frank (AXA XL Risk Consulting). The meeting also included a series of briefs from the FBI regarding the threats from terrorist and transnational criminal organizations that are directly threatening U.S. citizens and commercial facilities. (Roundtable Weekly, May 30) RER’s Homeland Security Task Force and RE-ISAC Response Rising global tensions are also heightening domestic security concerns. The U.S. has repositioned military resources in the Middle East in response to Israeli strikes across Iran—a development that raises the risk of Iranian retaliation and potential threats to homeland security and critical infrastructure. (AP News | Axios, June 13) Through the HSTF, RER works with government officials and private sector partners to detect, protect, and respond to a multiplicity of key threats. Under the oversight of the HSTF, the RE-ISAC, serves as the primary conduit of terrorism, cyber and natural hazard warning and response information between the government and the commercial facilities sector. “This moment requires vigilance, clarity, and coordination across sectors,” said HSTF Chair Amanda Mason (Executive Director, Global Intelligence, Related Companies), who led several calls throughout the week. RE-ISAC’s information-sharing network coordinates activities supporting the detection, prevention, and mitigation of a full range of physical, data, and cyber threats to the nation’s critical infrastructure. RER, through its HSTF, will remain engaged in efforts to address evolving threats affecting the sector. Through regular briefings and coordination with public- and private-sector partners, the HSTF will continue to support preparedness and resilience across the industry.

Policy Landscape

June 13, 2025

Roundtable Weekly

GOP Leaders Signal Reconciliation May Slip Past July 4 Deadline as Negotiations Continue

Clean Energy Tax Incentives Inflation Reduction Act Policy Landscape

As Senate Republicans navigate internal divisions and mounting pressure from the White House, critical policy decisions in the reconciliation package—including tax reforms, energy, and trade provisions are rapidly taking shape with implications for commercial real estate. State of Play More doubts have emerged among GOP leaders about whether the Senate will be able to meet its self-imposed July 4 deadline for passing its version of the reconciliation package. Though Speaker of the House Mike Johnson (R-LA) believes that the GOP is still on track, he emphasized that meeting the deadline hinges upon how much the Senate’s bill diverges from the House bill passed last month. “We’ll see what they produce,” Johnson told Politico, adding, “I just need them to come to their final decisions on everything. So we’ll see how it shapes up.” (Politico, June 11) Though the White House is keeping the pressure on senators, even President Donald Trump has acknowledged that additional time could be needed to finalize the reconciliation measure. (Politico, June 11) For their part, House Republicans approved several changes to their bill this week that were necessary in order to keep it in compliance with Senate rules. (Politico, June 10) If the Senate makes major revisions, the bill could go to conference in July in order to hammer out the differences, which could run up against the U.S. hitting its debt limit in August. (Axios, June 11) Senate Majority Leader John Thune said his team and key Senate committee chairs are coordinating closely with Speaker Johnson, holding weekly meetings and frequent calls to prevent the House from altering a bill that passes the Senate. “There’s just a lot of coordination to hopefully avoid some of the potential snafus that could happen with something that's this complicated,” Thune said. (Politico, June 11) Key Issues Fiscally conservative Sens. Rand Paul (R-KY) and Ron Johnson (R-WI), among others, continue to scrutinize the long-term effect that the "Big Beautiful Bill" would have on the budget deficit. In an interview with the Financial Times on Tuesday, Sen. Johnson conditioned his vote on assurances that the White House would cut more federal spending with a second major bill before next year’s midterm elections. (Financial Times, June 11) The spotlight remains on the Senate Finance Committee, with Chairman Mike Crapo (R-ID) telling GOP senators Wednesday that he plans to scale back the House’s cap on the deductibility of state and local taxes (SALT) for individuals and rework repeals of clean energy tax credits from the Inflation Reduction Act (IRA). (Punchbowl News, June 12) Senate Republicans are also aiming to make business tax deductions for R&D, equipment purchases, and interest on debt permanent, rather than temporary as proposed in the House bill. (Punchbowl News, June 13) IRA Energy Tax Credits Senate Majority Leader John Thune (R-SD) is juggling different IRA demands, including at least four senators who want a less aggressive approach to the House’s proposed repeals. (Punchbowl News, June 12) Sixteen clean energy tax incentives could be repealed or modified under the House-passed reconciliation bill, now under review by the Senate. Proposed changes to the IRA’s clean energy credits would eliminate incentives for residential energy-efficient upgrades and clean vehicles, while shortening the window for projects to begin construction and still qualify. (PoliticoPro Analysis, June 11) Senate Republicans are moving toward a consensus on preserving the transferability of clean energy tax credits from the IRA, as Finance Chair Mike Crapo (R-ID) signaled openness to easing the House-passed restrictions and extending the phaseout timelines during a GOP conference briefing this week. (PoliticoPro, June 12) The House-passed measure included provisions that would restrict credit transferability, which allows companies to sell their tax credits to a buyer in exchange for cash. (PoliticoPro, June 12) “If you are going to have a credit, if it’s not transferable, it’s not of much use,” said Sen. Kevin Cramer (R-ND). (PoliticoPro, June 12) Trade Talks Tariffs on materials such as lumber, steel, and aluminum have presented several challenges for commercial real estate. Impacts have included increased construction costs, the potential for project delays, and heightened uncertainty among investors. (RW, April 4) The U.S. and Mexico are approaching a deal to reduce or eliminate President Trump's 50 percent steel tariffs on imports, up to a certain volume. (Reuters, June 10) This week, Commerce Sec. Howard Lutnick and senior economic officials from China agreed “in principle” to a framework of a "trade truce" between the world's two largest economies, a sign of further progress. (CNN, June 11) Late Wednesday, Trump said the U.S. was "rocking in terms of deals," as it held trade talks with about 15 countries, including Japan and South Korea—but the president also threatened to unilaterally set tariff levels for many other countries in the coming weeks. (WSJ, June 12) Looking Ahead As the White House urges Senate Republicans to make only modest changes to the reconciliation bill, Senate leaders are moving toward issuing final bill text by June 23, followed by a vote-a-rama. (Politico, June 12)

Tax Policy

June 12, 2025

Policy Comment Letter

Coalition Urges Senate to Revise Section 899 to Protect Access to Foreign Capital for U.S. Real Estate Investment

Section 899 Retaliatory Tax Measures,

Energy

June 6, 2025

Roundtable Weekly

Multi-Industry Coalition Urges ENERGY STAR Support

ENERGY STAR

Today, The Real Estate Roundtable (RER) joined a broad coalition of manufacturing, consumer technology, retail, and real estate allies in a letter to Congress urging continued federal support for the overwhelmingly bipartisan ENERGY STAR program. (Letter, June 6) Cross-Sector Advocacy Push The coalition letter emphasized that ENERGY STAR has delivered hundreds of billions of dollars in energy savings since its inception—approximately $40 billion in annual savings alone for American consumers, families, and businesses. More than 30 leading organizations signed today’s letter including RER, many real estate partners, and manufacturing, consumer products, and retail groups. They include the Air-Conditioning, Heating and Refrigeration Institute (AHRI); American Chemistry Council (ACC); Consumer Technology Association (CTA); National Association of Manufacturers (NAM); National Retail Federation (NRF); National Electrical Manufacturers Association (NEMA); and the Retail Industry Leaders Association (RILA). The multi-industry letter also highlights ENERGY STAR’s brand as a highly successful, non-regulatory, and bipartisan public-private partnership that promotes energy efficiency and consumer trust across industries that drive the U.S. economy. The industry letter stated that ENERGY STAR is fundamental to an "all of the above" energy strategy, crucial for accommodating growing electricity demands from artificial intelligence, crypto assets, and advanced manufacturing. (Letter, June 6) Real Estate Sector Support The real estate industry previously sent letters to Congress, the Department of Energy (DOE), and the Environmental Protection Agency (EPA) explaining the importance of ENERGY STAR focusing on U.S. commercial and residential buildings. (Roundtable Weekly, May 23) (Letters: May 23, May 14, and April 4) In response to indications that the Trump Administration might eliminate ENERGY STAR as federally managed, RER President and CEO Jeffrey DeBoer commented the program “is integral to the U.S. real estate industry. Its software is embedded in the fabric of how profitable, energy efficient buildings are run and managed in all markets across the nation.” “ENERGY STAR provides the key tools for families and business to save money on their utility bills,” DeBoer continued. “Owners and developers rely on ENERGY STAR to attract investment capital so U.S. building infrastructure can compete with the best real estate assets in the world.” (Roundtable Weekly, May 9) Press Coverage A recent op-ed in The Hill made the economic case for ENERGY STAR, arguing that its elimination would raise operational costs, disrupt performance standards, and weaken a public-private partnership that delivers measurable benefits to businesses, consumers, and the environment. (The Hill, May 31) A former Republican EPA Administrator who helped create ENERGY STAR in the 1990s commented that the energy efficiency and waste avoidance goals of the program “should make a DOGE bro swoon.” (Washington Post, May 14). RER will continue to advocate with aligned groups in the real estate sector and across industry lines to preserve ENERGY STAR as a voluntary, federal public-private partnership.

Policy Landscape

June 6, 2025

Roundtable Weekly

Senate Republicans Grapple with Details of Tax and Spending Bill

Section 899 Retaliatory Tax Measures Tax Policy

With Congress back in session this week, Senate Republicans got to work on ironing out the details of their version of the budget reconciliation package. Members of the upper chamber are signaling a number of changes to the House’s bill, which could complicate Speaker Mike Johnson’s (R-LA) fragile coalition. State of Play Majority Leader John Thune (R-SD) met with President Trump at the White House on Monday, initiating a series of calls from Trump to individual GOP senators to discuss their concerns for the House-passed reconciliation package. (Punchbowl News, June 4) The Senate GOP caucus met Wednesday afternoon to speak about the portions of the legislation that had already been or are on the cusp of being released. Among the most contentious issues: Medicaid, the state and local tax (SALT) deduction cap, and Inflation Reduction Act (IRA) energy tax credits. (Politico, June 3) Finance Committee member Sen. Thom Tillis (R-NC) is one of several GOP lawmakers who has voiced interest in adjusting the phaseouts of certain IRA energy tax credits with a more “targeted” approach to protect U.S. businesses—including real estate—that are already invested in existing projects. (NBC News, June 6) Fiscal hawks Rand Paul (R-KY) and Ron Johnson (R-WI) have already expressed opposition to the bill because it doesn’t contain enough spending cuts or do enough to address budget deficits. (WSJ, June 4) Potential SALT & Business Tax Changes On Wednesday, Senate Finance Committee members met with President Trump to discuss possible changes to the tax section of the bill. During the meeting, Senators briefly touched on their intention to try to revise the House’s proposal to raise the cap on SALT deductions for individuals to $40,000. Speaking to reporters outside the White House, Majority Leader Thune said he and his colleagues “start from a position that there really isn’t a single Republican senator who cares much about the SALT issue.” Thune went on to concede that he and other GOP senators "understand that it’s about 51 and 218, so we will work with our House counterparts and with the White House.”(Politico, June 4) “We are sensitive to the fact that, you know, the speaker has pretty narrow margins, and there's only so much that he can do to keep his coalition together. At the same time it wouldn't surprise people that the Senate would like to improve on their handiwork,” Sen. Todd Young (R-IN) told reporters. (Politico, June 4) The bulk of tax writers’ Wednesday meeting with the president, however, focused on a different issue: Trump is not sold on making several proposed business tax breaks permanent, including 100 percent bonus depreciation for equipment, machinery, and nonresidential property improvements. Trump told Sen. Johnson and other members of the Finance Committee that it could be better for economic growth to make the provisions temporary, providing a more immediate incentive for businesses to take advantage of them. (Politico, June 5) Section 899 Another area of debate that has emerged among Senate tax writers concerns Section 899, which would impose steep retaliatory taxes—up to 50 percent—on foreign taxpayers from countries that discriminate against U.S. businesses through their own tax regimes. (Roundtable Weekly, May 30) If enacted in its current form, in addition to taxing foreign companies, Section 899 could raise tax rates on passive foreign investment in the U.S. (CNBC, June 2; Kirkland and Ellis, June 5) Congress’ Joint Committee on Taxation has asserted that the “retaliatory tax” could in effect lead to a decline in foreign demand for U.S. assets and lower U.S. tax revenue (Bloomberg, May 30) In the short term, however, the provision is projected to raise significant revenue—$120 billion over the first five years. (Politico, June 4) Senators are reviewing potential changes and modifications to section 899 to address concerns. “There’s a lot of nervousness about how it could be used,” Sen. James Lankford (R-OK) told reporters, indicating that Republicans “want to make sure there’s not some unintended consequences.” (Semafor, June 4) Implications for CRE Senate tax writers, thus far, have not signaled significant interest in changes to priority issues like the deductibility of property taxes (business SALT) or carried interest. The Senate is considering potential Roundtable-backed improvements to the House-passed Opportunity Zone provisions, as well as reforms to the low-income housing tax credit, the new markets tax credit, and a longer extension for provisions related to bonus depreciation and business interest deductibility. An RER working group is analyzing Section 899’s impact on real estate and working to ensure policymakers understand its potential unintended consequences, which could include deterring foreign investment in large-scale, capital-intensive real estate and infrastructure projects in the U.S. (Roundtable Weekly, May 30) Looking Ahead While a few Senate committees have already released their sections of the bill, the Senate Finance Committee is expected to share their draft of the tax portion next week. RER will continue to update its members on key changes and their impacts on the commercial real estate industry during what will surely be an eventful month in Washington as the Senate works toward passing their reconciliation package by July 4.

CRE and the Economy

June 6, 2025

Roundtable Weekly

Fed’s Beige Book Highlights Uncertainty; CRE Leaders Cautious on Outlook

Jeffrey DeBoer Tariffs The Fed

As the Federal Reserve’s latest Beige Book reveals, the U.S. economy is continuing to adjust to shifting conditions, with commercial real estate leaders focusing on strategies to navigate ongoing uncertainty and emerging opportunities. (The Fed, June 4) Beige Book Findings The Beige Book published this week, reported that “all Districts reported elevated levels of economic and policy uncertainty, which have led to hesitancy and a cautious approach to business and household decisions.” The report, based on surveys and interviews conducted through May 23, noted that the overall outlook remains “slightly pessimistic and uncertain,” unchanged from the prior report. (Bloomberg, June 4) Nine of the 12 Federal Reserve districts reported either a contraction in economic activity or no change in growth; only a few districts, including Richmond, Atlanta, and Chicago, experienced modest growth. (Market Watch, June 4) Commercial construction and real estate activity also declined overall, with the office sector continuing to lag. In San Francisco, construction activity remained subdued due to uncertainty over trade policy and rising material costs. (The Fed, June 4) Tariffs were mentioned 122 times in the report, compared to 107 times in April, reflecting rising concerns about inflationary pressures. (CNBC, June 4) In Boston, the Fed noted deals took longer to close, and “foreign investors grew generally skittish about investing in the United States.” Economic Conditions & CRE This week, during Lument’s webcast, "Turning Point: Multifamily Strategies Amidst Policy and Economic Shifts," RER’s President & CEO Jeffrey DeBoer discussed how federal policies, including tariffs, liquidity, and the ongoing tax debates in Washington, are reshaping investor strategies. DeBoer also emphasized that uncertainty and volatility are hindering investment decisions, mirroring the Beige Book’s findings of delayed business spending. RER’s Q2 Sentiment Survey reflected similar caution, with the index falling to 54 as executives cited policy uncertainty, rising costs, and muted investor confidence—echoing the Beige Book’s insights on slowing activity and elevated economic risk. (Roundtable Weekly, May 23) On Wednesday, the administration doubled tariffs on steel and aluminum imports from 25% to 50%, adding further pressure on construction costs and heightening unpredictability. (BisNow, June 4) In the May edition of ULI’s Economist Snapshot, RER’s Senior Vice President Clifton E. “Chip” Rodgers Jr. weighed in on how rising tariffs and trade tensions are impacting U.S. commercial real estate—from delayed development timelines to increasing construction costs and reduced foreign investment. (ULI, May 13) What’s Next The Fed will consider the Beige Book findings at its June 17–18 meeting as it navigates a delicate balancing act between persistent inflation risks and ongoing trade tensions.

ENERGY STAR

June 6, 2025

Policy Comment Letter

Broad Multi-Industry Support for ENERGY STAR

ENERGY STAR,

June 3, 2025

Fact Sheet: Cyber and Physical Threats to U.S. Real Estate

Homeland Security,

Energy

June 2, 2025

Fact Sheet: Building Performance Standards: Federal, Local, and NGO-Driven

Energy Policy,

Energy

June 2, 2025

Fact Sheet: Energy Tax Incentives for U.S. Real Estate

Energy Policy,

Energy

June 2, 2025

Fact Sheet: Corporate Sustainability Disclosures

Energy Policy,

Energy

June 2, 2025

Fact Sheet: Real Estate’s Role in Unleashing Energy Dominance

Capital and Credit

June 2, 2025

Fact Sheet: Expanding on the EB-5 Visa with the “Gold Card” Concept

Capital and Credit,

Capital and Credit

June 2, 2025

Fact Sheet: Real Estate Capital Formation

Capital and Credit,

Capital and Credit

June 2, 2025

Fact Sheet: Beneficial Ownership & Corporate Transparency Act

Capital and Credit,

Capital and Credit

June 2, 2025

Fact Sheet: Commercial Insurance Coverage in an Evolving Threat Environment

Capital and Credit,

Tax Policy

June 2, 2025

Policy Comment Letter

Coalition Urges Congress to Modernize and Codify the “Green Stamp” Regulation

Tax Policy,

June 2, 2025

Fact Sheet: Addressing the Wave of Maturing CRE Debt and Pro-Cyclical Regulatory Policy

Capital and Credit,

June 1, 2025

Fact Sheet: Business Property Tax Deductions

Tax Policy,

June 1, 2025

Fact Sheet: GSE Reform and the Housing Finance System

Housing,

June 1, 2025

Fact Sheet: Property Conversions and Housing Tax Incentives

Housing,

June 1, 2025

Fact Sheet: Expanding America’s Housing Infrastructure

Housing, Infrastructure,

June 1, 2025

Fact Sheet: Foreign Investment in U.S. Real Estate

Tax Policy,

June 1, 2025

Fact Sheet: Business Interest Deductibility

Tax Policy,

June 1, 2025

Fact Sheet: Real Estate Like-Kind Exchanges

Tax Policy,

June 1, 2025

Fact Sheet: Opportunity Zones

Tax Policy,

June 1, 2025

Fact Sheet: Carried Interest

Tax Policy,

June 1, 2025

Fact Sheet: Pass-Through Business Income

Tax Policy,

Roundtable Annual Meeting

May 30, 2025

Roundtable Weekly

Industry Leaders Discuss Economic Outlook, Policy Priorities, and Geopolitical Challenges at Annual Meeting

Capital and Credit Energy Policy Housing RERs Homeland Security Task Force HSTF RERs RECPACResearch Committee SPAC Sustainability Policy Advisory Committee Tax Policy Tax Policy Advisory Committee TPAC

The Real Estate Roundtable’s (RER) 2025 Annual Meeting this week included discussions with public officials and industry leaders on a range of issues affecting commercial real estate, including market conditions, tax policy, the House’s recent passage of the One Big Beautiful Bill Act, tariffs and trade, affordable housing solutions, energy policy, and evolving security threats. Roundtable Leadership RER Chair Kathleen McCarthy (Global Co-Head of Blackstone Real Estate, Blackstone) opened the meeting by thanking members for their consistent engagement and highlighting the significance of RER’s collaborative efforts in navigating a rapidly evolving policy landscape. (May 2025 Policy Priorities and Executive Summary) During the meeting, RER members approved the nominees for its FY26 board of directors and policy advisory committee officers, which were announced by RER Nominating Committee Chair Geordy Johnson (CEO, The Johnson Group). Addressing the membership, RER President and CEO Jeffrey DeBoer emphasized RER’s ongoing commitment to enhancing member involvement through RER’s policy advisory committees and underscored the value of strategic partnerships with other national real estate organizations for proactive policy advocacy. (Meeting Agenda) Meeting Speakers The Honorable Kevin Hassett (Director, National Economic Council) presented the administration’s economic agenda, focusing on housing initiatives, factory expensing, and the outlook for growth. Geopolitical expert John Sitilides (Principal, Trilogy Advisors LLC; National Security Senior Fellow, Foreign Policy Research Institute) gave a presentation titled “Washington & the World: The New Geopolitics of Great Power Competition.” During the session, he discussed the geopolitical implications of tariffs, NATO relations, and strategic U.S. interests, including maritime security. (L-R): Hessam Nadji (President and CEO, Marcus & Millichap), Martha Gimble (Executive Director, The Budget Lab at Yale University), and Jonathan Pollack (President, Starwood Capital Group) provided macroeconomic insights, reviewed current and future CRE market trends, and spoke about challenges amidst tariff-induced uncertainty. (Hessam Nadji Presentation | Martha Gimble Presentation) Anna Palmer (Founder & CEO of Punchbowl News) offered her perspective on legislative developments and negotiations, and the rise of influential figures within both political parties. Policy Advisory Committee Meetings Each of RER’s policy advisory committees met this week in conjunction with the Annual Meeting for in-depth policy discussions. The committees hosted several congressional staff and regulatory officials. Sustainability Policy Advisory Committee (SPAC) Meeting SPAC Chair Anthony E. Malkin (Chairman and CEO, Empire State Realty Trust, Inc.), Co-Vice Chairs Ben Myers (Vice President, Sustainability, BXP) and Katie Rothenberg (Vice President, ESG, AvalonBay Communities, Inc.) led discussions on EPA’s ENERGY STAR program, grid reliability, clean energy procurement, and nuclear energy deployment. (Agenda & Speakers) Tax Policy Advisory Committee (TPAC) TPAC Chair Josh Parker (Chairman & CEO, Ancora Group Capital), Vice Chair David Friedline (Partner, Deloitte Tax LLP), and the Committee discussed the broad range of tax proposals affecting real estate that are working their way through Congress in the budget reconciliation bill. Panelists included senior staff from the offices of the House Speaker, Ways and Means Committee, Senator Tim Scott (R-SC), and Senator Todd Young (R-IN), as well as the Treasury Department. In addition, tax experts from Baker McKenzie, Sullivan & Cromwell, and Brownstein led or moderated discussions concerning potential new taxes on foreign investors, regulatory initiatives, and Opportunity Zones. (Agenda & Speakers) Sustainability Policy Advisory Committee (SPAC) SPAC Chair Anthony E. Malkin (Chairman and CEO, Empire State Realty Trust, Inc.) and Vice Chairs Ben Myers (Vice President, Sustainability, BXP) and Katie Rothenberg (VP, ESG, AvalonBay Communities, Inc.) led discussions on (Agenda & Speakers) Joint Real Estate Capital Policy Advisory Committee (RECPAC) and Research Committee Meeting D. Michael Van Konynenburg (President, Eastdil Secured) provided an overview of conditions in real estate credit and capital markets. Following a national policy update from RER’S Ryan McCormick (SVP & Counsel, RER) and Chip Rodgers (SVP, RER), Research Committee Chair Spencer Levy (Global Chief Client Officer & Senior Economic Advisor, CBRE) and Darin Mellot (Vice President of Capital Markets Research, CBRE) led a discussion on the evolving post Liberation Day impact of tariffs on commercial real estate markets. Robert Rubano (Executive Vice Chairman, Head of Equity, Debt, & Structured Finance, Cushman & Wakefield) moderated a capital market roundtable with David Bouton (Co-Head of U.S. CMBS, Citigroup), Jack Gay (Senior Managing Director, Global Head of Real Estate Debt, Nuveen Real Estate), Kathryn Ogden, (Head U.S. Corporate Banking and Global Head, Real Estate Capital Partners (RECP), RBC Capital Markets), and Matt Salem (Partner, Head of RE Credit, KKR). (Agenda & Speakers) Homeland Security Task Force (HSTF) Meeting HSTF Chair Amanda S. Mason (Executive Director, Global Intelligence, Related Companies) facilitated a number of discussions on the current threat picture. These discussions included a review of the risks to commercial facilities from lithium-ion batteries with John Frank (AXA XL Risk Consulting). The meeting also included a series of briefs from the FBI regarding the threats from terrorist and transnational criminal organizations that are directly threatening U.S. citizens and commercial facilities. These discussions included updates on the role of the cartels in violent crime, the deaths of American citizens from synthetic opioids, and the facilitation of nearly three million illegal migrant arrivals in 2024, putting U.S. communities at risk. Also addressed were the range of cyber and intelligence threats from China, targeting our critical infrastructure. (Agenda & Speakers) RER’s 2025 Annual Report will be distributed in July. Next on RER’s FY 2025 meeting calendar is the Fall Meeting, which will take place on October 27-28 (restricted to Roundtable-level members only).

Policy Landscape

May 30, 2025

Roundtable Weekly

Senate to Debate Changes to Reconciliation Bill

Tax Policy

With Congress back in session next week, the Senate is gearing up to take on the House’s reconciliation package and potentially make significant changes to the bill. Meanwhile, the Trump administration is expected to release further information on its FY2026 budget. Senate to Take Up One Big Beautiful Bill Act “This bill is far from over, but we are pleased the House bill maintains current law on business property and income tax deductibility, carried interest, and Section 1031 exchanges, while also improving Opportunity Zones, the Low-Income Housing Tax Credit, and taxation of pass-through entities,” said Jeffrey DeBoer, President and CEO of The Real Estate Roundtable (RER). “As the Senate takes up this bill we plan to work to preserve these provisions. We are also highly focused on eliminating the ‘retaliatory tax’ on foreign investment, as well as improving other aspects of the bill.” The Senate is back in session Monday and eager to put its mark on the massive reconciliation package. The next four weeks will involve crucial tax negotiations on a variety of key provisions, including Inflation Reduction Act (IRA) energy tax incentives, state and local tax (SALT) deductions, Medicaid, and more. There are also procedural hurdles that the Senate bill must overcome. Speaker Mike Johnson (R-LA) implored his Senate colleagues to avoid making major changes to the bill, saying, “If it wasn’t obvious for them, I wanted them to know the equilibrium that we reached is so delicate… My hope and my encouragement to them is – fine tune this product as little as possible.” (Punchbowl News, May 26) Difficult compromises based on countless hours of negotiations were made to get the House bill across the finish line. If the Senate makes drastic changes, it could force negotiators back to the drawing board on certain issues and make it more difficult to meet the GOP’s goal of getting the reconciliation bill to President Trump’s desk by July 4. (Punchbowl News, May 29) Expected Changes to the Reconciliation Bill Early reports indicate that Senate leadership will seek only minor modifications to the House’s bill, rather than sweeping changes. But some senators are pushing for much more. (Punchbowl News, May 23) Procedural changes: The Senate’s Byrd Rule requires that only budget-related items are included in the reconciliation process. As a result, some minor provisions could be stripped out. (Axios, May 28) Tax additions: The Senate is also expected to switch the bill from a “current law” to a “current policy” baseline, allowing the Senate to permanently extend key tax cuts expiring this year. This would give Senate tax writers more space to include other tax provisions, including the Tax Cuts and Jobs Act’s (TCJA) 100 percent bonus depreciation. Energy tax incentives: Multiple GOP senators have advocated for protecting the IRA energy tax incentives, including Sens. Lisa Murkowski (R-AK) and Thom Tillis (R-NC), who sits on the Senate Finance Committee and wants to moderate the House’s rollback of the tax credits. (Politico, May 23) These modifications could include extending some tax credits that the House bill proposed eliminating, or expanding the timeline for their phase-out to ensure that the change does not strand energy projects already in progress. Other Potential Changes Medicaid cuts: Sens. Josh Hawley (R-MO), Susan Collins (R-ME), and others have taken issue with the House bill’s Medicaid cost-cutting measures, including expanded work requirements and other changes. (The Hill, May 28) Deficit debate: A group of deficit hawks, including Sen. Ron Johnson (R-WI), are pushing for far deeper spending cuts than the House bill proposes, and have criticized it for not sufficiently reducing the deficit. Sen. Rand Paul (R-KY) also called the spending cuts in the House bill “wimpy and anemic." (Axios, May 25) Pressure from President Trump was crucial to getting deficit hawks in the House to back down from their opposition to the lower chamber’s bill. It remains to be seen whether conservatives concerned about the deficit in the Senate will put up more of a fight. Debt limit: The Senate could increase the debt limit hike in the bill from $4 trillion to $5 trillion, ensuring that the next debt limit fight doesn’t happen until after the 2026 midterms. However, this proposal has also faced opposition from Sen. Rand Paul. (Politico, May 25) Overall, Senate Majority Leader John Thune (R-SD) has his work cut out for him in order to hammer out the differences in opinion within his caucus. He can only afford to lose three GOP senators. It will take immense effort and deft political maneuvering to meet their aggressive July 4 goal. Looking Ahead Trump’s FY2026 budget request is expected to be released next week, kicking off a renewed budget battle after the administration’s skinny budget proposed in early May received pushback from both sides of the aisle. (Reuters, May 2) RER will continue to engage with policymakers to ensure that the commercial real estate industry has a seat at the table in the critical Senate negotiations to come.

Tax Policy

May 30, 2025

Roundtable Weekly

House-Passed Reconciliation Bill includes Potential New Taxes on Foreign Investors

Section 899 Retaliatory Tax Measures

The One Big Beautiful Bill Act approved by the House of Representatives last week would raise tax rates on foreign governments, firms, partnerships and individuals from any foreign country that imposes “unfair foreign taxes.” Proposed Section 899 The so-called section 899 “retaliatory tax measures” legislation was a significant topic at this week’s Real Estate Roundtable Tax Policy Advisory Committee (TPAC) meeting. A discussion of the legislation was led by Baker McKenzie partner Alexandra Minkovich. (Proposed Section 899 Presentation) Unfair foreign taxes are broadly defined in the legislation to include digital services taxes, diverted profits taxes, and certain tax rules adopted by countries pursuant to OECD model rules for taxing multinational businesses (“Pillar 2”), as well as taxes that the Treasury Secretary determines are extraterritorial, discriminatory, or intended to be born disproportionately by US persons. The legislation would raise the applicable treaty or non-treaty tax rate by 5%/year, up to the maximum statutory tax rate plus 20%. (WSJ, May 30) Countries or regions widely considered targets of the legislation because of their adoption of either digital services taxes or Pillar 2 undertaxed profits rules include the U.K., Canada, the E.U., Australia, and Japan. Implications for CRE If enacted, the legislation could have implications for U.S. real estate because of its application to sovereign wealth funds, foreign insurance companies, and passive investors that provide an important source of equity investment for large-scale, capital-intensive U.S. real estate and infrastructure projects. It could have a chilling effect on inbound investment decisions. According to CBRE, foreign investment in U.S. real estate increased by 40 percent between the second half of 2023 and the second half of 2024. (CBRE, March 2025) Chye-Ching Huang with the NYU Tax Law Center recently told the New York Times that the legislation would “create a new front in the U.S. tariff war with its closest economic partners, extending that to taxes and investment.” (New York Times, May 21) The provisions in the House bill draw heavily from legislation introduced by House Ways and Means Chairman Jason Smith (R-MO). They are estimated to raise $116 billion over 10 years. It is unclear whether they have the full support of key Senators. Also, because they implicate foreign relations and treaty commitments, they could face parliamentary challenges under Senate rules. At the TPAC meeting this week, Committee Chair Josh Parker (Chairman & CEO, Ancora Group Capital), announced the formation of a working group to analyze the legislation’s impact on real estate and ensure policymakers fully understand the potential unintended consequences of the bill.

Housing

May 30, 2025

Roundtable Weekly

GSE Reform Discussions Resurface as President Trump Signals Push to Take Fannie Mae and Freddie Mac Public

Fannie Mae Freddie Mac GSE Reform

After nearly 17 years in government conservatorship, Fannie Mae and Freddie Mac may be heading for a significant shift. President Donald Trump recently indicated he is considering taking the government-sponsored enterprises (GSEs) public, renewing efforts to release them that began during his first administration. GSE Reform Trump emphasized that any transition would retain the federal government's implicit guarantees. "I am working on TAKING THESE AMAZING COMPANIES PUBLIC, but I want to be clear, the U.S. Government will keep its implicit GUARANTEES, and I will stay strong in my position on overseeing them as President," Trump said in a post on Truth Social. (Axios, May 27) The GSEs have been in federal conservatorship since 2008, and the administration has not yet detailed how the proposed transition would work. Congressional action would likely be required to change their legal status. “Interestingly, the president has not said anything that he wants to end conservatorship,” Federal Housing Finance Agency (FHFA) Director Bill Pulte said during a CNBC interview. “We’re studying actually potentially keeping it in conservatorship and taking it public.” (Barrons, May 29) Pulte said he would be meeting with Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick about potential options for the two entities. (Bloomberg, May 29) Experts warn that without careful implementation, privatization could increase mortgage rates. Both Bessent and Pulte have said they will not support a GSE release that results in higher costs for borrowers. The limited government guarantee is critical to attract private capital without spiking borrowing costs, and support for affordable and underserved housing must remain a priority, regardless of ownership structure, say the National Multifamily Housing Council (NMHC) and the National Apartment Association (NAA). RER supports sensible GSE reform that preserves and strengthens America’s housing infrastructure, ensuring financial stability and continued liquidity for ownership, rental housing, and underserved markets. (Roundtable Weekly, May 23) View from the Hill While no active GSE reform legislation is under consideration in Congress, lawmakers from both parties are seeking more clarity from the administration. Senate Banking Committee members have signaled interest in a structured release, with Senate Republicans expressing cautious optimism and Senate Democrats raising concerns about potential disruptions to an already stressed housing market. (CBS News, May 27) Sen. Mark Warner (D-VA) expressed support for a “smart release plan that wouldn’t disrupt the market.” (Punchbowl News, May 27) “You do this the wrong way, you’re going to screw up a housing market that’s already teetering because of lack of supply,” said Warner. (PoliticoPro, May 23) Sen. Kevin Cramer (R-ND) stated, “I’d want to see the plan, I’d want to talk about transition.” House Financial Services Committee Chairman French Hill (R-AR) noted that “certain important reforms are only possible through statutory changes,” reinforcing that Congressional involvement will likely be necessary. RER will remain actively engaged on GSE reform through our working group and housing and coalition efforts. We encourage members to provide input as we continue to monitor developments and advocate for policies that support liquidity, stability, and affordability in the housing finance system.

Capital & Credit, Energy, Homeland Security, Housing, Housing, Infrastructure, and Cities, Tax Policy

May 28, 2025

RER Policy Priorities

May 2025 – Policy Priorities

Capital and Credit, Energy Policy, Homeland Security, Infrastructure, Tax Policy,

May 28, 2025

Fact Sheet: Preferential Rate and Realization Requirement

Tax Policy,

ENERGY STAR

May 23, 2025

Policy Comment Letter

US Real Estate Industry Supports ENERGY STAR

ENERGY STAR,

News Release, Q2 Sentiment Index, Quarterly Sentiment Index

May 23, 2025

Press Release

Commercial Real Estate Executives Signal Increased Caution in Q2 Sentiment Survey

Quarterly Sentiment Index

(WASHINGTON, D.C.) — The Real Estate Roundtable (RER) today released its Q2 2025 Sentiment Index, reporting a decrease in confidence in the commercial real estate market environment among industry executives due to policy uncertainty, rising costs, and cautious investor sentiment. The quarterly Sentiment Index, measuring executive perceptions on market conditions, asset values, and capital availability, declined to an overall score of 54, down 14 points from last quarter. The Current Conditions Index dropped to 50, reflecting a 15-point decline, while the Future Conditions Index decreased by 12 points, settling at 58. The Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive. RER President and CEO Jeffrey DeBoer said, “While respondents note early signs of market stabilization and improved transactional discipline, lingering concerns over U.S. trade policies and other economic headwinds are tempering optimism for the remainder of 2025. The office sector remains under pressure, but is experiencing a gradual rebound as return-to-office trends continue to shift closer to pre-pandemic patterns.” He added, “Uncertain tariff policies are driving up construction costs and weighing on long-term investment decisions. At the same time, the Federal Reserve’s decision to hold interest rates steady is slowing capital formation and delaying needed transactions. We need pro-growth economic policies that encourage productive investment, strengthen communities, and promote long-term stability. Extending and making the2017 Tax Cuts and Jobs Act (TCJA) provisions permanent, along with advancing incentives to address our nation’s housing supply shortage, are crucial to help achieve these goals.” The Q2 Sentiment Index topline findings include: The Q2 2025 Real Estate Roundtable Sentiment Index registered an overall score of 54, a decrease of 14 points from the previous quarter. The Current Index registered at 50, a 15-point decrease compared to Q1 2025. The Future Index posted a score of 58 points, a decrease of 12 points from the previous quarter, reflecting uncertainty around policy direction, rising costs, and execution risk. While market sentiment remains cautious, respondents are seeing early signs of stabilization and improved transactional discipline. Nevertheless, expectations for improvement have softened compared to last year, and many investors remain hesitant to re-engage. Market conditions remain mixed, with general uncertainty, along with sector and geographic bifurcation, driving sentiment. 37% of respondents believe that general market conditions are worse than this time last year, and 37% of respondents believe that general market conditions are better than this time last year. Close to half (47%) of Q2 survey participants expect general market conditions to show improvement one year from now, while 20% of Q2 participants expect general market conditions to be somewhat worse in a year. Logistics and high-quality multifamily remain bright spots, while hospitality and office—particularly commodity space—continue to face significant challenges. From a geographic standpoint, the Midwest is showing relative resilience, whereas sentiment around the Sunbelt reflects concern over elevated supply and near-term softened demand. 42% of respondents believe asset values are roughly unchanged compared to a year ago. The remaining respondents are divided, with 22% believing asset prices have increased and 36% believing they have declined. Looking ahead, the outlook is cautious: 38% expect asset prices to remain stable over the next year, while another 38% anticipate a slight decline. Perceptions of equity capital are widely varied, though 34% of respondents believe the availability of equity capital is better than it was a year ago. Sentiment around debt capital has brightened, as 43% said the availability of debt capital has improved from last year. Looking forward, 45% of respondents believe that equity capital availability will be better in one year and 39% believe debt capital availability will be better in one year. Some sample responses from participants in the Sentiment Index’s Q2 survey include: “The one thing that every investor – domestic and foreign – wants is stability. The environment in the United States is incredibly unstable, so some of our investors are sitting on the sidelines.” “Foreign capital flows into the U.S. will shrink in the near term. That said, the U.S. is typically the first market to readjust in terms of pricing, and that will create opportunity.” “We're starting to see slightly more trades, which opens up the door to better visibility into valuations, and as a result, may improve the comfort and volume of future trades.” Data for the Q2 survey was gathered by Chicago-based Ferguson Partners on RER’s behalf in April. See the full Q2 report. The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy. # # #

Policy Landscape

May 23, 2025

Roundtable Weekly

"One Big Beautiful Bill" Moves Through to the Senate as House Republicans Unite on Trump Tax Plan

Business Interest Deduction Business SALT Carried Interest Low Income Housing Tax Credit LIHTC Opportunity Zones OZs Partnerships amp PassThrough Taxation PassThroughs REITs Section 199A Tax Policy TCJA

House Speaker Mike Johnson (R-LA) met his self-imposed Memorial Day deadline as dissenting factions within the caucus reached an agreement on a series of last-minute changes, culminating in a razor-thin vote (215-214) on the One Big Beautiful Bill Act early Thursday morning. The budget reconciliation measure—which has wide implications for CRE—now goes to the Senate, where a similar tug of war could play out. (Ways & Means Press Release, May 22) State of Play The House Budget Committee voted late Sunday night to advance President Donald Trump's One Big Beautiful Bill Act after several GOP hard-liners on the Committee blocked the measure from moving forward last Friday. (ABC News, May 19) President Trump traveled to Capitol Hill Tuesday morning to deliver a message to House Republicans impeding the massive bill, a critical part of his domestic agenda: stop fighting and get it done as soon as possible. (NBC News, May 20) The chamber took action, clearing the sprawling package in an early-morning vote Thursday after days of marathon meetings, intense negotiations that spanned both ends of Pennsylvania Avenue, and a series of swift changes to the bill, which were crucial in coalescing Republicans around the measure. (The Hill, May 22) House Ways and Means Chair Jason Smith (R-MO) said that he’s been working “hand in glove” with Majority Leader John Thune (R-SD) and Senate Finance Committee Chair Mike Crapo (R-ID) on the tax package and had crafted it intentionally so it could survive the Senate’s rules. “I think 90 to 95 percent of the bill is going to be pretty much very similar,” he said previously. (Bloomberg, May 22) Implications for CRE The legislation includes an extension of the 2017 tax cuts, while maintaining the full deductibility of state and local business property tax deductions (also known as “Business SALT”) and preserving the current treatment of carried interest, two key priorities for The Roundtable in the current tax negotiations. Additionally, the pass-through deduction under Section 199A would increase from 20 percent to 23 percent for qualifying income, including REIT dividends and the real estate operating income of partnerships and other pass-through entities. A late addition to the bill will allow REITs greater flexibility in their use of taxable REIT subsidiaries. (The Hill, May 21) The bill extends the Opportunity Zone (OZ) tax incentives through 2033, with several updated eligibility criteria and new benefits for rural areas. This legislation also calls for a new round of OZ designations by state governors. (Mortgage Point, May 22) Other positive developments include an expansion of the low-income housing tax credit and the reinstatement of 100 percent expensing for qualifying leasehold and nonresidential property improvements. Now, the Senate will debate and craft its version of the bill, which it aims to pass by July 4. (The Hill, May 21; CNBC, May 22) The Roundtable's Position RER expressed support for the House’s budget reconciliation measure. The extension of TCJA policies, preservation of property tax deductibility, continued capital gains treatment for carried interest, increased investment in affordable housing, and enhanced pass-through deduction are all positive developments. “Taken as a whole, the tax proposals in the Chairman’s amendment will spur needed investment in our nation’s housing supply, strengthen urban and rural communities, and grow the broader economy to the benefit of all Americans,” said RER President and CEO Jeff DeBoer in a recent statement following the House Ways and Means Committee’s bill markup last week. What’s Next The action on the tax and fiscal legislation now shifts to the U.S Senate where Republicans are operating under similar tight margins. Senate Republican leaders have not yet decided whether they will mark up the reconciliation bill in the various committees of jurisdiction. Finance Chairman Crapo could bring a substitute amendment straight to the Senate floor sometime in June. RER will work to ensure that these hard-fought victories are protected in any final tax package.

Energy

May 23, 2025

Roundtable Weekly

ENERGY STAR and IRA Tax Credits Remain Front and Center

Clean Energy Tax Incentives ENERGY STAR EPA Inflation Reduction Act

Lawmakers put energy policy under a microscope this week, as Environmental Protection Agency (EPA) Administrator Lee Zeldin appeared before Congress regarding the agency’s FY2026 budget request and addressed concerns over the future of the ENERGY STAR program. Additionally, significant changes to the Inflation Reduction Act’s (IRA) energy tax credits were included in the One Big Beautiful Bill that passed in the House on Thursday morning. Roundtable Advocacy This week, The Real Estate Roundtable (RER) joined a coalition of real estate organizations in writing to key members of the House and Senate committees to urge continued funding for the ENERGY STAR program. (Letter) As House appropriators begin drafting FY2026 spending bills, the letter urged committees to maintain funding for ENERGY STAR—highlighting the program’s bipartisan value and pro-business message. (PoliticoPro, May 21) The letter emphasized ENERGY STAR’s value as a voluntary, market-based public-private partnership that helps building owners and managers benchmark building performance, reduce utility costs, and bolster grid reliability. (Roundtable Weekly, May 16) The coalition letter built upon earlier communications RER and partner organizations sent to the EPA and Department of Energy (DOE) opposing a potential phaseout of the program’s foundational benchmarking platform, Portfolio Manager. (Letters: May 14 and April 4) Hearings This Week EPA Administrator Zeldin appeared before the House and Senate panels this week to defend the EPA’s FY2026 budget request. (E&E News, May 21) Lawmakers voiced concerns about EPA plans to wind down or defund ENERGY STAR. (Rep. Paul Tonko (D-NY) Press Release, May 20) Rep. Darren Soto (D-FL) questioned Zeldin directly about the administration’s plans. In response, Zeldin claimed that ENERGY STAR is not a statutory obligation. (E&E News, May 21). However, the real estate coalition’s letter to Congress this week, cites multiple examples of bipartisan legislation that authorizes ENERGY STAR as a federal program. On Thursday, Senators Peter Welch (D-VT) and Jeanne Shaheen (D-NH) led 20 colleagues in a letter to EPA Administrator Lee Zeldin and Energy Secretary Christ Wright, urging the Trump administration to reverse its plan to eliminate the ENERGY STAR program—citing its bipartisan support, billions in consumer energy savings, and nearly 800,000 U.S. jobs it helps sustain. (Sen. Welch Press Release, May 21) IRA Clean Energy Tax Credits The One Big Beautiful Bill Act passed by the House Thursday would end IRA tax incentives for clean energy projects (like solar and storage) earlier than initially proposed. (Bloomberg, May 21) Late-night modifications to the bill, accelerate the repeal of the clean energy production (45Y) and investment (48E) tech-neutral credits, limiting their eligibility to only projects that have started construction within 60 days of the bill’s enactment and which are put into service before January 1, 2029. (Utility Dive, May 22) The initial version of the bill proposed by House Republicans had a longer phase-out time, which would have allowed many of the IRA’s energy tax credits to remain until 2032. (Bloomberg, May 21) The Senate may take a more measured approach. Several Senate Republicans have voiced support for maintaining IRA incentives that bolster U.S. manufacturing, enhance grid reliability, and support domestic clean energy production. (Roundtable Weekly, April 25; Semafor, May 22) RER supports an “all of the above” energy efficiency, generation, and storage agenda and will continue to engage lawmakers and share member perspectives on effective energy policies that strengthen industry and economic growth.

Housing

May 23, 2025

Roundtable Weekly

Momentum Builds for Housing Reform in Washington

Affordable Housing Davis Bacon Fannie Mae Freddie Mac GSE Reform HUD Housing and Urban Development agency Low Income Housing Tax Credit LIHTC

The nation’s housing policy landscape is shifting rapidly as the Trump administration and Congress push forward on multiple fronts—spanning GSE reform, regulatory rollback, and bipartisan legislative efforts to expand affordable housing tools. The Real Estate Roundtable (RER) remains engaged on these developments, reinforcing its priorities through direct advocacy and coalition efforts. GSE Reform This week, President Trump said he’s “giving very serious consideration” to taking government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac public—reigniting debate over the future of the mortgage giants. (WSJ, May 21) “I am giving very serious consideration to bringing Fannie Mae and Freddie Mac public,” Trump posted Wednesday on Truth Social. Trump also said he would consult with Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, as well as the GSEs’ chief regulator, Federal Housing Finance Agency head William Pulte. (Politico, May 21) The GSEs have been in federal conservatorship since 2008, and Congressional action would likely be required to change their legal status. While no active legislative proposals exist, some GOP lawmakers are discussing the sale of the government's stakes in the GSEs as a potential offset for extending tax cuts. (Politico, May 21) RER supports sensible GSE reform that balances taxpayer protection with ensuring financial stability and continued liquidity for ownership, rental housing, and underserved markets. Roundtable Advocacy This week, RER joined a coalition of 15 national real estate organizations urging the Department of Labor to repeal and revise its 2023 Davis-Bacon rule. (Letter, May 20) In the letter sent to Department of Housing and Urban Development (HUD) Secretary Scott Turner and Labor Secretary Lori Chavez-DeRemer, the coalition applauded the administration’s focus on affordability and supply, and called for an end to outdated wage classifications that drive up project costs. The current rule increases housing construction costs by up to 20% and deters developer participation in federally funded projects. The letter recommends suspending enforcement and launching a formal rulemaking to streamline compliance and reduce regulatory risk. In a separate letter, RER voiced strong support for the bipartisan Housing Affordability Act introduced (S.1527) by Senators Ruben Gallego (D-AZ) and Dave McCormick (R-PA) to modernize the FHA multifamily insurance program. (Letter, May 13) Outdated statutory limits, unchanged since 2003, are suppressing the number of insurable housing units and acting as a barrier to middle-income housing development. Updating the limits would unlock private capital, free up federal resources, and bring the program in line with modern construction costs. LIHTC Expansion Clears the House The reconciliation bill that passed in the House this week includes major provisions from the Affordable Housing Credit Improvement Act (AHCIA), marking the most significant increase in Low-Income Housing Tax Credit (LIHTC) resources in 25 years. (Affordable Housing Finance, May 22) Although the entire bill was not incorporated into the package, the elements that were included still amount to a significant expansion of the program. The elements included in the bill—increase the 9% credit volume cap, lower the bond financing threshold to 25% for 4% housing credit projects, and authorize up to a 30% basis boost for rural and tribal developments. Federal Land Sales to Expand Housing Supply HUD Secretary Scott Turner and Interior Secretary Doug Burgum are advancing the administration’s plan to sell underutilized federal land for new housing construction. (Bloomberg, May 22) Their coordinated effort aims to unleash more of the government’s 640 million acres for development—particularly affordable and workforce housing. (PoliticoPro, May 20) RER will continue to advocate for smart, market-based solutions that expand housing supply, reduce regulatory barriers, and support investment across the full spectrum of the nation’s housing needs.

Quarterly Sentiment Index

May 23, 2025

Roundtable Weekly

CRE Executives Signal Increased Caution in Q2 Sentiment Survey

Quarterly Sentiment Index

Commercial real estate executives report a decline in market confidence this quarter, as policy uncertainty, rising costs, and investor caution cloud the outlook, according to The Real Estate Roundtable’s Q2 2025 Sentiment Index released today. Roundtable View The quarterly Sentiment Index, measuring executive perceptions of market conditions, asset values, and capital availability, declined to an overall score of 54, down 14 points from last quarter. The Current Conditions Index dropped to 50, reflecting a 15-point decline, while the Future Conditions Index decreased by 12 points, settling at 58. The Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive. RER President and CEO Jeffrey DeBoer said, “While respondents note early signs of market stabilization and improved transactional discipline, lingering concerns over U.S. trade policies and other economic headwinds are tempering optimism for the remainder of 2025. The office sector remains under pressure, but is experiencing a gradual rebound as return-to-office trends continue to shift closer to pre-pandemic patterns.” He added, “Uncertain tariff policies are driving up construction costs and weighing on long-term investment decisions. At the same time, the Federal Reserve’s decision to hold interest rates steady is slowing capital formation and delaying needed transactions. We need pro-growth economic policies that encourage productive investment, strengthen communities, and promote long-term stability. Extending and making the 2017 Tax Cuts and Jobs Act (TCJA) provisions permanent, along with advancing incentives to address our nation’s housing supply shortage, are crucial to help achieve these goals.” In the May edition of ULI’s Economist Snapshot, RER’s Senior Vice President Clifton E. “Chip” Rodgers Jr. weighed in on how rising tariffs and trade uncertainty are impacting commercial real estate—from delayed development timelines to rising construction costs and reduced foreign investment. (ULI, May 13) Topline Findings The Q2 2025 Real Estate Roundtable Sentiment Index registered an overall score of 54, a decrease of 14 points from the previous quarter. The Current Index registered at 50, a 15-point decrease compared to Q1 2025. The Future Index posted a score of 58 points, a decrease of 12 points from the previous quarter, reflecting uncertainty around policy direction, rising costs, and execution risk. While market sentiment remains cautious, respondents are seeing early signs of stabilization and improved transactional discipline. Nevertheless, expectations for improvement have softened compared to last year, and many investors are still hesitant to re-engage. Market conditions remain mixed, with general uncertainty, along with sector and geographic bifurcation, driving sentiment. 37% of respondents believe that general market conditions are worse now compared to the same period last year, and 37% of respondents believe that general market conditions are better than this time last year. Close to half (47%) of Q2 survey participants expect general market conditions to show improvement one year from now, while 20% of Q2 participants expect general market conditions to be somewhat worse in a year. Logistics and high-quality multifamily remain bright spots, while hospitality and office—particularly commodity space—continue to face significant challenges. From a geographic standpoint, the Midwest is showing relative resilience, whereas sentiment around the Sunbelt reflects concern over elevated supply and near-term softened demand. 42% of respondents believe asset values are roughly unchanged compared to a year ago. The remaining respondents are divided, with 22% believing asset prices have increased and 36% believing they have declined. Looking ahead, the outlook is cautious: 38% expect asset prices to remain stable over the next year, while another 38% anticipate a slight decline. Perceptions of equity capital are widely varied, though 34% of respondents believe the availability of equity capital is better than it was a year ago. Sentiment around debt capital has brightened, as 43% said the availability of debt capital has improved from last year. Looking forward, 45% of respondents believe that equity capital availability will be better in one year and 39% believe debt capital availability will be better in one year. Data for the Q2 survey was gathered by Chicago-based Ferguson Partners on RER’s behalf. Read the full Q2 report here.

Housing

May 20, 2025

Policy Comment Letter

Coalition Urges Repeal and Reform of Davis-Bacon Rule to Boost Housing Supply

Affordable Housing, DavisBacon,

Tax Policy

May 16, 2025

Roundtable Weekly

House Ways and Means Advances GOP Tax Bill

Tax Policy

The House Ways and Means Committee this week passed a comprehensive tax package that preserves critical features of current law while extending and improving real estate provisions supported by The Real Estate Roundtable. However, the legislation encountered a substantial setback Friday morning, when the House Budget Committee rejected the “One Big Beautiful Bill,” which combined the work of the Ways and Means and other House committees. (Axios, May 16) “Taken as a whole, the tax proposals in the Chairman’s amendment will spur needed investment in our nation’s housing supply, strengthen urban and rural communities, and grow the broader economy to the benefit of all Americans,” said Roundtable President and CEO Jeffrey DeBoer. (Read DeBoer’s full statement here) State of Play The House Budget Committee rejected the bill in a 16-21 vote after GOP leadership failed to secure sufficient support from several Republican holdouts. (Axios, May 16) President Trump on Friday urged Republicans to fall in line and support the massive reconciliation package amid sparring among members on the Hill over various provisions. “Republicans MUST UNITE behind, ‘THE ONE, BIG BEAUTIFUL BILL!'” Trump posted on Truth Social. House GOP leaders plan to continue private talks with the reluctant Republicans and the White House over the weekend in hopes of resurrecting the package next week. (Politico, May 16) What's In and Out for CRE As currently drafted, the House legislation maintains the full deductibility of state and local business-related property taxes. Carried interest, capital gains, like-kind exchanges, and general cost recovery periods for commercial real estate would remain unchanged. Section 199A Deduction Boost: The legislation permanently increases the pass-through business income deduction from 20% to 23%, preserving eligibility for REIT dividends and effectively lowering the maximum tax rate on qualifying income to 28.49%. 100% Bonus Depreciation: The Ways and Means Committee is proposing to reinstate 100% bonus depreciation for five years (2025–2030), incentivizing investments and upgrades in nonresidential properties. Opportunity Zones: The legislation extends the Opportunity Zone tax incentives through 2033 and would set aside 33% of new OZ designations for rural areas. Low-Income Housing Tax Credit: The legislation increases the allocation of low-income housing credits by 12.5% for four years and permanently reduces the threshold of private activity bond financing necessary for projects to otherwise qualify for credits. Energy Tax Incentives: The Ways and Means legislation repeals or phases out tax incentives such as the section 48 tax credit for solar panel and other clean energy investments, the 45L tax credit for new home construction, and the section 30C tax credit for EV recharging stations. (See more in Energy story below) Factory Expensing: Other tax changes would temporarily allow newly constructed manufacturing, agricultural and refining properties to qualify for 100% expensing. Roundtable Advocacy RER President and CEO Jeffrey DeBoer provided insights on these developments during a fireside chat at the ULI Spring Meeting in Denver this week. DeBoer discussed the current political climate, policy implications for commercial real estate, and outlined both emerging risks and opportunities shaping the industry's future. With the President advocating for changes to carried interest taxation, RER urges its members to continue contacting lawmakers to express strong support for preserving current law (RER's Tax Talking Points | Hot Button Items | Tax Policy Priorities) (Contact Members of Congress) (GlobeSt., May 16) Housing News The Ways and Means Committee's provisions to expand the Low-Income Housing Tax Credit (LIHTC) align with components of the Affordable Housing Credit Improvement Act (AHCIA). (Affordable Housing Finance, May 16) (RW, May 2) The House Financial Services Subcommittee on Housing and Insurance held a hearing this week titled, “Expanding Choice and Increasing Supply: Housing Innovation in America,” focused on how modern construction technologies could increase moderate-income housing supply while identifying regulatory and financing barriers that limit broader adoption. Lawmakers and witnesses explored alternative housing solutions such as manufactured housing, modular construction, and 3-D printed homes as ways to help close the housing supply gap. (Watch Hearing, May 14) Looking Ahead House Ways and Means Chair Jason Smith (R-MO) expressed interest in passing a separate bipartisan tax package by the end of the year, at an appearance at the Economic Club of Washington, D.C. earlier this week. This package would include expiring tax provisions and healthcare-related items. “I would love to work with Sen. Wyden, Chairman Crapo, ranking member Neal in trying to craft a bipartisan bill before the end of the year, because there’s a lot of tax provisions that I really care about that are expiring, or have expired, that are truly, truly bipartisan,” said Smith. (PoliticoPro, May 15) Senate Finance Committee Chair Mike Crapo (R-ID) and fellow panel member Sen. Steve Daines (R-MT) are pushing to extend business tax cuts beyond the expiration set by Ways and Means, the latest change the Senate wants to make to the bill. (Reuters, May 16) With the Budget Committee setback, the immediate future of the tax package is uncertain. But the provisions are certain to change further as the debate shifts to the Senate.

Energy

May 16, 2025

Roundtable Weekly

Policymakers and Industry Advocates Focus on ENERGY STAR Support, Clean Energy Tax Credits

Clean Energy Tax Incentives ENERGY STAR Inflation Reduction Act

As Republican lawmakers released a sweeping tax package this week and considered federal spending for the next fiscal year, The Real Estate Roundtable (RER) and industry allies continued to advocate for the ENERGY STAR program amid efforts to cut Inflation Reduction Act (IRA) clean energy credits. Roundtable Advocacy This week, RER along with eleven industry partners submitted a letter to U.S. Department of Energy (DOE) Secretary Wright reiterating the message of support for ENERGY STAR, and the benefits of the program driving down utility costs, bolstering grid reliability, and supporting U.S. economic competitiveness by helping building owners and managers benchmark performance and cut waste (Letter, May 14) (RW, May 9) In April, RER and 17 industry organizations sent a letter to EPA Administrator Lee Zeldin expressing strong support for the program. (Roundtable Weekly, April 4) In a Washington Post op-ed this week, former EPA Administrator William K. Reilly (1989-1993) described the program as “government at its best,” noting it was never intended as a climate policy tool but rather a cost-saving initiative embraced by businesses, developers, and consumers alike. (Washington Post, May 14) Hearings This Week EPA Administrator Lee Zeldin testified at Appropriation Committee House and Senate hearings this week regarding the president’s budget, but offered no clarity on ENERGY STAR's future. Lawmakers on both committees voiced concern over the scope of proposed EPA spending cuts. The chair of the House’s Interior-EPA spending subcommittee Mike Simpson (R-ID) told Zeldin during the hearing, the administration's proposed 55% EPA budget cut was unlikely to be accepted. (PoliticoPro, May 15) In the Senate, Appropriations Subcommittee on Interior, Environment, and Related Agencies Chair Lisa Murkowski (R-AK) called the FY2026 EPA budget proposal "unserious" and "problematic." (Sen. Murkowski Remarks, May 15) IRA Clean Energy Tax Credits The House Ways and Means Committee advanced its reconciliation bill that proposes sweeping changes to the IRA. The bill terminates or phases out most of the clean energy tax credits that were expanded or created in the IRA. RER produced a fact sheet summarizing the treatment of clean energy tax incentives relevant to real estate in “The One, Big Beautiful Bill,” The summary is based on the Joint Committee on Taxation’s description. (JCX-18-25, May 9, 2025). (RER Fact Sheet, May 15) Over past few weeks, several Senate and House Republicans have written to leadership expressing their support for maintaining energy incentives that benefit both traditional and renewable energy sectors, and urging a more selective approach to scaling back the IRA’s tax provisions. (RW, April 25) Ways and Means vice chair Rep. Vern Buchanan (R-FL), a defender of IRA clean energy credits, said in an interview Wednesday he hopes Senate Republicans will make changes to the committee’s rollback of incentives. (Politico, May 14) The Roundtable continues to engage lawmakers to ensure balanced, effective energy policies that support industry and economic growth.

Roundtable Leadership

May 16, 2025

Roundtable Weekly

Roundtable Members Featured in Commercial Observer's "Power 100" List of 2025 Most Influential Leaders in CRE

Industry Leadership Roundtable Leadership

This week, Commercial Observer released their “Power 100” list of prominent industry leaders, which includes RER Chair Kathleen McCarthy (Global Co-Head of Blackstone Real Estate, Blackstone), President and CEO Jeffrey DeBoer, 8 other RER board directors, and many other RER members. (Commercial Observer, May 13) CRE Industry Leadership Commercial Observer begins its list by acknowledging what has been a roller coaster of a year so far for CRE, celebrating return to office mandates and steady interest rates while acknowledging April's volatility and the ever-present housing crisis. In balancing these factors, Commercial Observer identified those included on the list as "the names who have run faster, stretched their arms out farther, and are beating their boats against the current—in their case, ceaselessly into the future." (Commercial Observer, May 13) The article describes RER as the “top lobby for commercial real estate in Washington, D.C.,” noting RER’s role in helping policymakers understand and address critical issues facing the industry and the country. RER’s Role As RER President and CEO Jeffrey DeBoer explained to Commercial Observer, “I’m in the information business… I try to inform policymakers about an industry that they may not be fully familiar with.” Federal policy has been top of mind for many CRE executives in the past few months, as uncertainty around tariffs, tax negotiations, federal leasing, and other key issues continues to grow. This has bolstered the need to ensure that the unified voice of the real estate industry is heard and impactful in Washington. (Commercial Observer, May 13) This is especially crucial in a political environment that DeBoer describedas "March Madness, but not the NCAA basketball Tournament," to CO in late March. (Commercial Observer, May 13) Members of RER’s board of directors and former RER chairs on Commercial Observer’s Power 100 list this year include:RER Chair Kathleen McCarthy (Global Co-Head of Blackstone Real Estate, Blackstone), #2 Jeff Blau (CEO, Related Companies), #4 Rob Speyer (President and CEO, Tishman Speyer), #5 Owen Thomas (Chairman & CEO, BXP), #8 RER Chair Emeritus (2015-2018) William Rudin (Co-Executive Chairman, Rudin), #13 Barry Sternlicht (Chairman & CEO, Starwood Capital Group), #14 Scott Rechler (Chairman & CEO, RXR), #21 Mark J. Parrell (President & CEO, Equity Residential), #33 Chair of RER’s Sustainability Policy Advisory Committee (SPAC) Anthony Malkin (Chairman and CEO, Empire State Realty Trust, Inc.), #37 RER President and CEO Jeffrey DeBoer, #90 Diane Hoskins (Global Chair, The Urban Land Institute, Global Co-Chair, Gensler), #95

Housing

May 14, 2025

Policy Comment Letter

RER Supports S.1527 the Housing Affordability Act

Affordable Housing,

ENERGY STAR

May 14, 2025

Policy Comment Letter

Real Estate Industry ENERGY STAR Letter to US-DOE

Energy Policy, ENERGY STAR,

Tax Policy

May 13, 2025

Press Release

Roundtable Statement on the House Ways and Means Committee Reconciliation Mark-Up

Tax Policy

Statement by Real Estate Roundtable President and CEO Jeffrey D. DeBoer (WASHINGTON, D.C.) — “The Real Estate Roundtable supports Chairman Smith's budget reconciliation substitute amendment. Taken as a whole, the tax proposals in the Chairman’s amendment will spur needed investment in our nation’s housing supply, strengthen urban and rural communities, and grow the broader economy to the benefit of all Americans. Importantly, the amendment preserves the deductibility of business-related state and local property tax payments. It ensures that the long-term capital gains rate continues to reward entrepreneurial risk-taking by recognizing the value of sweat equity, business acumen, and other non-cash risks that taxpayers assume in order to build businesses and create jobs, and the amendment expands tax incentives for badly needed new housing construction. The amendment also recognizes the vital role that non-corporate businesses play in the nation's economy. When combined with spending reductions expected in the overall reconciliation bill, the pro-growth tax measures in the amendment can be expected to lessen the immediate impact on our nation’s budget deficit and begin to address our country’s long term structural, fiscal challenges.” # # #

Tax Policy

May 9, 2025

Roundtable Weekly

Tax Talks Intensify as House Republicans Race Toward Memorial Day Deadline

Business SALT Carried Interest Policy Landscape SALT

House Republicans wrapped up a pivotal week in their drive to finalize a sprawling reconciliation package aligned with President Donald Trump’s domestic agenda. But deep internal divides over tax priorities, energy incentives, and offsets—coupled with new demands from the President—have added a new layer of complexity. Busy Week on Capitol Hill House Republicans faced a flurry of high-stakes meetings this week as they worked to finalize a massive reconciliation package before the self-imposed Memorial Day deadline. (Politico, May 5) Speaker Mike Johnson privately told Republicans on Thursday that they would only be able to pay for $4 trillion in tax cuts, versus the $4.5 trillion they had targeted to enact the president’s sprawling tax demands. (PoliticoPro, May 8) The House Ways and Means Committee tentatively plans to begin marking up the tax portion of the reconciliation package next Tuesday. (Tax Notes, May 9) A high-level “Big Six” meeting convened on Wednesday, led by Secretary Scott Bessent, to align House, Senate, and White House tax priorities. Speaking this morning, Senate Majority Leader John Thune noted another new tax proposal now on the table. “The President has proposed expensing for factories, for domestic manufacturing, which would be very stimulative.” (CNBC, May 9) Meanwhile, during a private call with Speaker Johnson on Wednesday, President Trump reportedly urged the Speaker to include a new 39.6% tax rate for high-income earners and reform of carried interest tax rules—further complicating an already difficult path forward. (NBC News, May 8) However, President Trump said Friday that GOP lawmakers should "probably not" raise taxes on the wealthy, though he acknowledged he would accept such a measure, as Republicans continue to negotiate the final details of the bill. (The Hill, May 9) (NYT, May 9) House Ways and Means Chair Jason Smith (R-MO) is scheduled to meet with the President today to discuss the tax package. (Politico, May 8) Carried Interest Among his new requests to Speaker Johnson this week, President Trump revived his long-standing call to eliminate the carried interest tax “loop hole.” (Politico, May 9) Since carried interest and its tax treatment first emerged as a controversial political issue in 2007, RER has consistently opposed legislative proposals to tax all carried interest at ordinary income rates. Current tax rules recognize that risk-taking can take many forms other than just invested cash. The rules allow entrepreneurial risk-takers to earn income on appreciated assets at rates that align with outside investors and limited partners. Senate Leader Thune defended the current treatment of carried interest this morning on CNBC’S Squawk Box, “I’m not a fan of taxing carried interest … these are the people out there investing and creating jobs.” (CNBC, May 9) RER urges its members to contact lawmakers on the House Ways and Means Committee to express strong support for preserving the current law on carried interest and the full deductibility of business-related property taxes. (RER's Tax Talking Points | Hot Button Items | Tax Policy Priorities) (Contact Members of Congress) Business SALT A key priority of The Roundtable (RER) and the real estate industry is preserving the full deductibility of business-related property taxes. The deductibility of business-related state and local income and property taxes emerged as a key issue early in the tax debate as lawmakers looked for ways to pay for new tax provisions. A cap on the deductibility of property taxes paid by U.S. businesses could have devastating consequences for commercial real estate owners, developers, and investors nationwide. State and local property taxes are an ordinary and necessary business expense for commercial real estate owners. On average, property taxes represent 40% of the operating costs of U.S. commercial real estate, a greater expense than utilities, maintenance, and insurance costs combined. (RW, April 11) Potential Challenges Ahead The week saw intense negotiations behind closed doors, with unresolved disagreements over SALT, clean energy tax credits, and offsets threatening to delay progress. SALT: Negotiations around the state and local tax (SALT) deduction cap remained deadlocked despite numerous meetings over the past week. (The Hill, May 8) The Energy and Commerce Committee faces internal GOP friction over Medicaid reductions, balancing fiscal hawks demanding significant cuts against moderates worried about political fallout. (Politico, May 1) In response to the new $4 trillion budget in tax cuts, Rep. Ron Estes (R-KS), said Wednesday that he expects a number of tax provisions to be temporary, with some extended for four, six or eight years. (PoliticoPro, May 8) Bessent and Senate Majority Leader Thune, have said they are targeting July 4 to pass President Trump’s “big beautiful bill.” IRA & Energy Tax Credits Republicans on the House Ways and Means Committee are still struggling to find consensus on repealing clean energy tax credits from the Inflation Reduction Act (IRA). (PoliticoPro, May 7) While some lawmakers push to repeal IRA subsidies to free up revenue, others— including a group of moderate Republicans led by Rep. Mariannette Miller-Meeks (R-IA) urged Chair Smith this week to preserve technology-neutral electricity tax credits. The letter warned that repeal could lead to a 10% rise in electricity costs by 2026. (PoliticoPro, May 8) Fed and Trade Developments Add Pressure Adding to the week’s complexity, the Federal Reserve held interest rates steady at 4.25%–4.5% for a third consecutive meeting, citing heightened risks from tariffs and overall economic uncertainty. Fed Chair Jerome Powell signaled no immediate plans for rate cuts, emphasizing caution amid market volatility. (CNBC, May 7) On the trade front, the Trump administration unveiled a new U.S. and U.K. trade agreement, signaling a temporary pause in tariff escalation. (Axios, May 9) Roundtable on the Road This week, Roundtable on the Road was in Los Angeles, CA where RER Chair Kathleen McCarthy (Global Co-Head of Real Estate, Blackstone) and RER President and CEO Jeffrey DeBoer gathered local RER members and friends for a timely discussion on Washington’s policy outlook. The conversation focused on reconciliation legislation, interest rates, and market conditions. What’s Next With key markups expected next week, Republican leaders face significant hurdles in reaching a consensus on a final package that preserves tax provisions, satisfies fiscal hawks, and delivers wins on energy and trade all before Memorial Day.

Energy

May 9, 2025

Roundtable Weekly

Trump Administration Proposes Possible Elimination of ENERGY STAR Program

Energy Efficiency Energy Policy ENERGY STAR

The Trump administration’s fiscal year 2026 budget released last week proposes to eliminate funding for ENERGY STAR—a voluntary, market-based program currently run by the Environmental Protection Agency (EPA) widely used by commercial real estate to track energy usage and reduce utility costs. (CNN, May 6) Why It Matters Reports also emerged this week of staff reorganization plans announced at EPA that would eliminate the agency’s larger department that currently houses ENERGY STAR. (Washington Post, May 6) (The Hill, May 6) Administration officials say the planned restructuring is part of a broader effort to streamline federal agencies and cut discretionary spending. (LA Times, May 6) Real estate assets that do more with less energy—as quantified, monetized, and recognized through Portfolio Manager and other ENERGY STAR offerings—are critical to achieving EPA’s pillars to “power the great American comeback.” (Roundtable Weekly, April 4) ENERGY STAR is commercial real estate’s most relied-upon public-private partnership with the federal government It provides the industry standard for benchmarking energy use, informing smart capital investments, and supporting lower operational costs with less regulatory burden. Over 330,000 buildings, encompassing nearly 25% of U.S. commercial floor space, have utilized this platform to make informed decisions on energy investments and capital projects. (RER Letter, April 4) (UrbanLand, May 8) CRE Industry Supports ENERGY STAR In response to the proposed cuts, RER President and CEO Jeffrey DeBoer commented on Tuesday: “The highly successful ENERGY STAR program is integral to the U.S. real estate industry. Its software is embedded in the fabric of how profitable, energy efficient buildings are run and managed in all markets across the nation. ENERGY STAR provides the key tools for families and business to save money on their utility bills. Owners and developers rely on ENERGY STAR to attract investment capital so U.S. building infrastructure can compete with the best real estate assets in the world. “ENERGY STAR also provides the best measure to reduce energy use so buildings put less strain on the grid – to free up the electricity we need to lead the world in artificial intelligence, support innovations in the crypto asset industry, and bring back manufacturing to America.” (UrbanLand, May 8) “Only the federal government has all the data, talent, lab research, and other expertise necessary to run all of the facets of ENERGY STAR,” DeBoer continued. (RER Statement, May 7) In April, RER and 17 industry organizations sent a letter to EPA Administrator Lee Zeldin expressing strong support for the program. The coalition urged the administration to maintain ENERGY STAR’s voluntary framework, which enhances electric grid reliability, supports emissions reductions, and has saved consumers and businesses over $500 billion in energy costs since its inception. (Roundtable Weekly, April 4) What’s Next Congressional appropriators will determine the program’s future in the coming months as they review the president’s proposed budget. ENERGY STAR has long received bipartisan support—including from moderate Republicans who cite its role in lowering energy costs and improving the efficiency of household appliances. (Washington Post, May 6) RER looks forward to collaborating with the Trump Administration, Congress, the EPA, the Department of Energy, and our allies in the product manufacturing sector to transition the landmark ENERGY STAR public-private partnership as it evolves to support a new generation of cutting-edge buildings, plants, and consumer products.

ENERGY STAR, News, Roundtable Statement

May 7, 2025

Press Release

Roundtable Statement on the Reorganization of the ENERGY STAR Program

ENERGY STAR EPA Statement Jeffrey DeBoer

Statement by Real Estate Roundtable President and CEO Jeffrey D. DeBoer (WASHINGTON, D.C.) — In response to reports regarding the federal government’s budget and reorganization of the ENERGY STAR program, Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable, stated: “The highly successful ENERGY STAR program is an integral, voluntary participation program critical to residential and commercial, private and public sector U.S. buildings. The program drives efficiency, helps create greater capacity on energy grids to boost economic growth, and enhances profitability for owners and investors in U.S. real estate. “ENERGY STAR software is embedded in the fabric of how profitable, energy efficient buildings are run and managed in all markets across the nation. ENERGY STAR provides the key tools for families, businesses, and owners of schools, hospitals, government, and many other types of buildings to save money on their utility bills with no heavy-handed federal mandates. Owners and developers rely on ENERGY STAR to attract equity and debt capital so U.S. building infrastructure can compete with the best real estate assets in the world. ENERGY STAR also provides the best measure to reduce energy use so buildings put less strain on the grid—to free up the electricity we need to lead the world in artificial intelligence, support innovations in the crypto asset industry, and bring back manufacturing to America. “Only the federal government has the data, talent, lab research, and other expertise necessary to run all facets of ENERGY STAR efficiently and impartially,” DeBoer continued. “Over the course of 35 years, Congress has authorized ENERGY STAR through bipartisan legislation on multiple occasions. The Real Estate Roundtable looks forward to collaborating with the Trump Administration, Congress, the Environmental Protection Agency, the Department of Energy, and our allies in the product manufacturing sector to transition the landmark ENERGY STAR public-private partnership as it evolves to support a new generation of cutting edge buildings, plants, and consumer products.” About The Real Estate Roundtable The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending, and management firms with leaders of major national real estate trade organizations to jointly address key national policy issues relating to real estate and its important role in the global economy. The collective value of assets held by Roundtable members exceeds $4 trillion. The Roundtable’s membership represents more than 3 million people working in real estate; 12 billion square feet of office, retail, and industrial space; over 4 million apartments; and more than 5 million hotel rooms. It also includes the owners, managers, developers, and financiers of senior, student, and manufactured housing—as well as medical offices, life science campuses, data centers, cell towers, and self-storage properties. The Roundtable’s policy news and more are available on The Roundtable website. # # #

Budget & Policy Landscape

May 2, 2025

Roundtable Weekly

GOP Races to Shape Reconciliation Bill

Business SALT Carried Interest Clean Energy Tax Incentives Inflation Reduction Act Tax Policy

The House returned this week from recess to begin critical markups, racing against Speaker Mike Johnson’s Memorial Day goal. With just over three weeks until the Memorial Day target for President Donald Trump’s ambitious reconciliation bill, GOP lawmakers are navigating contentious policy debates on tax, Medicaid, energy incentives, and spending cuts. (Politico, May 1) State of Play On Monday, Treasury Secretary Scott Bessent held another "Big Six" meeting with Speaker Mike Johnson (R-LA), Senate Majority Leader John Thune (R-SD), Senate Finance Chair Mike Crapo (R-ID), House Ways and Means Chair Jason Smith (R-MO), and National Economic Council Director Kevin Hassett to discuss the GOP's tax provisions in the bill. Although Speaker Johnson is adamant about his Memorial Day goal, Secretary Bessent indicated July 4 might be the more practical timeline. After a White House meeting between President Trump, Speaker Johnson, House Majority Leader Steve Scalise (R-LA) and key committee chairs, the GOP leadership decided to delay markups next week in the House Energy and Commerce, Ways and Means and Agriculture committees. (Punchbowl News, May 2) The House Financial Services Committee voted along party lines Wednesday to approve its portion of the reconciliation package, with Chair French Hill (R-AR) expecting savings to surpass the $1 billion in cuts mandated by the congressional budget resolution. Tax Policy Business SALT: The Roundtable (RER) is still focusing heavily on preserving the full deductibility of business-related property taxes, as lawmakers look for ways to pay for new tax provisions. Through meetings, outreach, and aggressive advocacy efforts, RER and the real estate industry continue to urge lawmakers to reject a revenue proposal to limit the deductibility of state and local business-related property taxes as part of the tax bill. The proposal could have a devastating impact on property values, rents, the health of the financial system, local communities, and consumer prices. A cap on the deductibility of property taxes paid by U.S. businesses could have devastating consequences for commercial real estate owners, developers, and investors nationwide, reversing the benefits of the 2017 Tax Cuts and Jobs Act (TCJA) and raising effective tax rates on real estate to 1970s-era levels near 50%. (RW, April 11) SALT: House Republicans left a high-stakes meeting with Speaker Mike Johnson on Wednesday without resolving their long-running internal dispute over the $10,000 SALT deduction cap. Bonus Depreciation: President Trump said on Wednesday that Republicans are going to restore bonus deprecation for only four years. “Our big, beautiful bill, we may name it that actually, will include 100 percent expensing retroactive to January 20,” And we’re gonna make that expensing for a four-year-period at a full 100 percent.” (PoliticoPro, April 30) The TCJA allowed businesses to fully deduct the costs of equipment and machinery, but bonus depreciation began phasing out in 2023, decreasing 20 percent annually and fully expiring at the end of 2025. Carried Interest The House Ways and Means Committee has privately indicated it’s not inclined to close the so-called carried interest loophole in the GOP’s sweeping tax package, though conversations are still ongoing. (PoliticoPro, April 29) When asked about the proposal at a press conference, Speaker Johnson said that he didn’t want to get out front of the Ways and Means Committee but that “we’ve heard from interest groups around the country, and we want to do right by them.” (PoliticoPro, April 29) Rep. Hill told Politico’s Morning Money last week that the policy “is a major source of economic growth, jobs, that impacts every community in the country — it’s not a loophole.” (Politico, May 1) Since carried interest and its tax treatment first emerged as a controversial political issue in 2007, RER has consistently opposed legislative proposals to tax all carried interest at ordinary income rates. RER’s Ryan McCormick told Bloomberg this week that taxing real estate investors’ “sweat equity” at higher income rates would hit projects in low-income and high-risk areas hardest. He added that, small real estate entrepreneurs take on significant risk when developing low-income areas, and these investors face similar risks as long-term equity holders and should be taxed at the 20 percent capital gains rate—a point he said has resonated with lawmakers. (Bloomberg, April 29) IRA Energy Tax Credits As the House Ways and Means Committee, prepares to markup its portion of the reconciliation bill in the coming weeks, House Ways and Means Chair Jason Smith (R-MO) has said the fate of the Inflation Reduction Act (IRA) is one of a few sticking points that the committee still has to figure out. (PoliticoPro, May 1) Internal party divisions persist, highlighted by recent opposing letters from GOP lawmakers. Yesterday, Chair Smith received two letters from opposing House Republicans arguing their cases for full repeal of all energy tax credits under the IRA and preservation of the law. The coalition of 26 House Republicans is urging GOP leaders to preserve electricity tax credits and protect the IRA’s transferability provision, which allows developers to finance clean energy projects by selling their tax credits. (PoliticoPro, May 2) “Nothing is decided on the IRA,” said Rep. Vern Buchanan (R-FL), the number two Republican on Ways and Means. “The chips are on the table and a lot of that is going to happen next week.” (PoliticoPro, May 2) In recent weeks, several Senate and House Republicans have written to leadership expressing their support for maintaining energy incentives that benefit both traditional and renewable energy sectors, and urging a more selective approach to scaling back the IRA’s tax provisions. (RW, April 25) Challenges Ahead The Energy and Commerce Committee faces internal GOP friction over Medicaid reductions, balancing fiscal hawks demanding significant cuts against moderates worried about political fallout. (Politico, May 1) Majority Leader Thune (R-SD) highlighted the looming debt ceiling as a "hard deadline," adding pressure to lawmakers juggling complex fiscal decisions. Upcoming Treasury forecasts on the debt ceiling “X-date” could further adjust legislative schedules, as lawmakers await crucial financial projections. Both House and Senate Republicans want to raise the debt limit in a budget reconciliation measure, something that President Trump has called for as well. (PoliticoPro, April 29) White House Releases Budget The White House on Friday released President Trump’s fiscal year 2026 budget request, outlining $163 billion in proposed reductions to federal spending that would start on October 1. (WSJ, May 2) While presidential budgets outline an administration's policy priorities, the figures rarely reflect the final appropriations determined by Congress. (Axios, May 2) The FY2026 budget is expected to build on cuts already implemented by President Trump and adviser Elon Musk’s Department of Government Efficiency—most notably, reductions in the federal workforce. (AP News, May 2) The Trump proposal is already running into early resistance on Capitol Hill, including from Republicans. (Politico, May 2) As reconciliation efforts progress, balancing the administration's budgetary goals with legislative feasibility will be a challenge. RER will continue to monitor developments closely as Congress advances a package that could have far-reaching implications for commercial real estate, business taxation, and economic growth.

Housing

May 2, 2025

Roundtable Weekly

New Bipartisan Legislation Aims to Unlock Housing Development and Affordability

Affordable Housing Housing Low Income Housing Tax Credit LIHTC Opportunity Zones OZs

Bipartisan lawmakers in both chambers are advancing legislative efforts to address the worsening national shortage of affordable housing, with a focus on updating financing tools and expanding tax incentives. Senate Legislation Senators Ruben Gallego (D-AZ) and Dave McCormick (R-PA) introduced the bipartisan Housing Affordability Act (formerly Homeownership Affordability Act) to increase the supply of affordable housing by increasing the Federal Housing Administration’s (FHA) outdated multifamily loan limits. (PoliticoPro, April 30) “To tackle the affordable housing crisis, we need to make building homes easier and cheaper. But outdated regulations are holding us back,” said Senator Gallego. “By updating a nearly two-decade old loan limit, the Housing Affordability Act will expand access to affordable loans for building multifamily housing and ultimately bring down housing costs.” (Sen. Gallego Press Release, April 30) The bill updates the inflationary index used to set loan limits from the Consumer Price Index to a more accurate construction cost index to better reflect today’s building costs and boost housing production. Without this fix, most areas are misclassified as “high-cost,” limiting HUD's ability to support new multifamily developments and deepening the national housing crisis. “Housing availability and affordability problems are directly tied to the significant shortage of housing units nationwide,” said Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable. “By increasing the Federal Housing Administration’s multifamily loan limits to more accurately reflect individual market costs, the bill introduced today by Senators Gallego and McCormick would increase apartment construction, add supply, and help bring down housing costs. In short, enactment of this bill would make housing more available and affordable for millions of American families.” The Housing Affordability Act is also endorsed by: National Association of Home Builders; National Association of REALTORS®; National Multifamily Housing Council; National Housing Conference; National Apartment Association; Institute of Real Estate Management; National Affordable Housing Management Association; National Leased Housing Association Council for Affordable and Rural Housing; National Association of Housing Cooperatives; and Arizona Multihousing Association. House Legislation In April, Rep. Darin LaHood (R-IL) and Suzan DelBene (D-WA) reintroduced The Affordable Housing Credit Improvement Act (AHCIA) with broad bipartisan support from more than 100 members across 30 states, aimed to expand and strengthen the low-income housing tax credit (LIHTC). (Affordable Housing Finance, April 8) The Affordable Housing Credit Improvement Act will support the financing of nearly two million new affordable homes by: Increasing the number of credits allocated to each state by 50 percent for the next two years and making the temporary 12.5 percent increase permanent. Increasing the number of affordable housing projects that can be built using private activity bonds— a provision that stabilizes financing for workforce housing projects built using private activity bonds by decreasing the amount of private activity needed to secure Housing Credit funding. Improving the Housing Credit program to serve at-risk and underserved communities, including veterans, victims of domestic violence, and rural Americans. “To address this growing crisis across the country, Congress must strengthen tools to drive investment into affordable workforce housing and expand housing options for hardworking families nationwide. I am proud to reintroduce the bipartisan Affordable Housing Credit Improvement Act alongside Representatives DelBene, Tenney, Beyer, Feenstra, and Panetta to strengthen our communities and support economic development,” said Rep. LaHood (R-IL). (Rep. LaHood Press Release, April 8) A Senate companion bill is expected to be introduced in the coming weeks. Opportunity Zones Major provisions from the 2017 Tax Cuts and Jobs Act (TCJA), including Opportunity Zones (OZs), risk expiration without congressional action, threatening economic revitalization projects nationwide. According to a recent CoStar News analysis, apartment openings in OZs surged 151% to 143,219 units last year compared to 2017—far outpacing the national increase of 63% over the same period. (CoStar, April 16) The analysis also found that Opportunity Zones spurred the development of approximately 68,000 more housing units than would have been built without the tax incentive, underscoring the effectiveness of OZ incentives in driving investment into underserved communities. RER urges Congress to advance housing legislation that expands proven tools like Opportunity Zones, LIHTC, and FHA loan programs—catalysts for affordable housing, job creation, and long-term economic growth in underserved communities.

Tax Policy

April 25, 2025

Roundtable Weekly

New Report: Carried Interest Tax Hike Threatens Jobs, Innovation, and Housing

Carried Interest

A new report released this month warns that proposed tax increases on carried interest could significantly harm the U.S. economy, increase the federal deficit, and jeopardize millions of jobs. Report Findings The comprehensive new report by Dr. Charles Swenson, Professor of Accounting at the University of Southern California Marshall School of Business, Economic Impact on the Private Funds and Real Estate Industries Due to Potential Increases in Tax on Carried Interest, estimates what will happen if lawmakers recharacterize all carried interest income as ordinary income. “This report is a testament to the importance of backing up policy recommendations with sound calculations and analysis before making decisions that would affect so many American workers, small businesses, and industries,” said Dr. Swenson. (One-Pager) The report warns that increasing taxes on carried interest would result in: Higher Federal Deficit: Raising taxes on carried interest could cost the U.S. government up to $70 billion in lost revenue over the next decade. Job Losses: Real estate, venture capital and private equity partnerships support an estimated 32 million American jobs. The private sector could lose an estimated 1.23 million jobs as businesses lose access to a critical tool for attracting capital and securing investment. Global Competitive Disadvantage: The proposed tax increase would raise the U.S. tax rate on many businesses and investments to 40.8% – higher than China, Canada, and numerous European countries, discouraging foreign and domestic investment. Worsening Housing Crisis: Higher taxes could exacerbate the current housing shortage, stalling construction at a critical time when the U.S. needs 5.5 million new units to meet demand. Declining Innovation: Removing the tax incentive alignment between entrepreneurs and investors would shift investments away from high-risk opportunities, particularly in high-tech and biotechnology industries. Lost Retirement Earnings: Public pension funds supporting over 34 million workers could lose up to $520 million annually as they're forced into lower-yielding investments. Industry Response Industry leaders reiterated the report’s findings and warned of the harmful economic consequences of increasing taxes on productive, job-supporting investment. (Press Release, April 8) Since carried interest and its tax treatment first emerged as a controversial political issue in 2007, RER has consistently opposed legislative proposals to tax all carried interest at ordinary income rates. (Axios, March 24 | NYT, March 8) President Trump revived calls to close the “carried interest tax deduction loophole” earlier this year during meetings with Republican lawmakers, framing it as a potential revenue offset. While he hasn’t mentioned it publicly in recent weeks, the issue remains part of broader GOP tax discussions. (Politico, April 25) In March, a coalition of 17 national real estate organizations wrote to congressional leadership urging preservation of current law on carried interest, highlighting that taxing all carried interest as ordinary income would raise taxes on 2.2 million real estate partnerships and nearly 9.7 million partners, potentially stalling new housing, infrastructure, and redevelopment projects. (RW, March 28) Jeffrey DeBoer, President and CEO of RER: “The new study by Professor Swenson is further evidence that recharacterizing this long term ‘carried interest’ capital gain as ordinary income would penalize entrepreneurs, slow housing production, and reduce investment in long-neglected neighborhoods. Construction costs and the risks of real estate development continue to rise and financing remains challenging. Now is not the time to raise taxes on U.S. real estate," DeBoer said. (Press Release, April 8) With the House having approved a $5.3 trillion budget resolution, tax legislation is now on the horizon. This timely study provides critical data on the potential consequences of changing carried interest tax treatment.

Policy Landscape

April 25, 2025

Roundtable Weekly

What’s Ahead: Reconciliation Talks on Capitol Hill

Business SALT Carried Interest Inflation Reduction Act Jeffrey DeBoer Policy Landscape

Congress will return to Washington next week with an ambitious agenda—kicking off markups for a sweeping reconciliation package that would enact the President’s legislative agenda and could shape the fiscal and tax landscape for years to come. (CBS, April 24) Markup Schedule The Judiciary, Homeland Security, and Armed Services Committees are expected to lead the process starting the week of April 28. These panels have jurisdiction over spending on border security and defense and are tasked with allocating $110 billion, $90 billion, and $100 billion respectively under the House budget resolution. (Politico, April 17) The Energy and Commerce Committee is targeting May 7 for its markup. The committee is required to find $880 billion in savings, which may involve changes to Medicaid, electric vehicle mandates, and other policy areas. (Punchbowl News, April 23) The Financial Services Committee is set to vote on April 30 on its share of the reconciliation package, which must include a minimum of $1 billion in cuts over 10 years. (PoliticoPro, April 23) Speaker Mike Johnson (R-LA) and Senate Majority Leader John Thune (R-SD) have expressed a shared goal of advancing the reconciliation package by Memorial Day. “We are pushing it very aggressively on schedule, as you said, to get it done by Memorial Day,” Johnson said this week, citing the need to tame stock market instability. Johnson also said he and House Majority Leader Steve Scalise (R-LA) had a conference call with the 11 House GOP committee chairs on Wednesday to discuss the next steps for Trump’s “big beautiful bill.” (PoliticoPro, April 23) Tax Policy Tax legislation will be a cornerstone of the reconciliation package as lawmakers prepare to extend the major tax provisions from the Tax Cuts and Jobs Act (TCJA) that are scheduled to expire at the end of 2025. (PoliticoPro, April 14) The House Ways and Means Committee is eyeing a potential two-day markup session on May 12 and 13. (PoliticoPro, April 24) House GOP leaders, including Ways and Means Committee Chair Jason Smith (R-MO), are scheduled to meet Wednesday with blue-state Republicans to discuss the personal SALT deduction cap. The meeting marks a key moment in resolving one of the most politically sensitive issues in the tax bill. While most Republicans support maintaining the current $10,000 cap, several GOP lawmakers from high-tax states have threatened to oppose the package unless the cap is raised to at least $25,000. (Punchbowl News, April 25) As policymakers prepare the first major tax bill since 2017, The Roundtable (RER) and the real estate industry are focusing heavily on preserving the full deductibility of business-related property taxes. The deductibility of business-related state and local income and property taxes has emerged as a central issue as lawmakers look for ways to pay for new tax provisions. A cap on the deductibility of property taxes paid by U.S. businesses could have devastating consequences for commercial real estate owners, developers, and investors nationwide, reversing the benefits of the 2017 tax bill and raising effective tax rates on real estate to 1970s-era levels near 50%. (RW, April 11) State and local property taxes represent 40% of the operating costs of U.S. commercial real estate, a greater expense than utilities, maintenance, and insurance costs combined. RER urges its members to weigh in with Members of Congress against restrictions on deducting state and local property taxes. Other important issues for real estate in the current tax discussions include: tax parity for pass-through businesses, potential tax increases on carried interest, preservation of the opportunity zone tax incentives, and a possible expansion of the low-income housing tax credit. (Bloomberg, April 21) Potential Challenges Ahead The reconciliation effort faces serious political hurdles, particularly regarding spending cuts and revenue-raising provisions. House Republicans have a narrow majority, and leadership must secure support from nearly every member of their caucus. Proposed cuts to Medicaid and SNAP could generate pushback from moderate Republicans, while debates over “payfors” continue to divide lawmakers. The House and Senate are also operating under different reconciliation instructions, which could further complicate aligning final legislation. IRA & Energy Tax Credits Since budget negotiations began, Republican leadership has suggested repealing some or all of the Inflation Reduction Act's (IRA) clean energy tax credits as a way to reduce federal spending. However, several GOP lawmakers have advocated preserving specific provisions that benefit their constituents. (Reuters, April 21) In a recent letter to Leader Thune, four Senate Republicans urged a more selective approach to scaling back the IRA’s tax provisions. Additionally, 21 House Republicans expressed their support for maintaining energy incentives that benefit both traditional and renewable energy sectors in a March letter to House Ways and Means Chair Jason Smith (R-MO). (Newsweek, April 21) RER at the Forefront This week, RER President and CEO Jeffrey DeBoer appeared on the special webcast “Real Recession Risk or Temporary Distraction?” hosted by Marcus & Millichap President and CEO Hessam Nadji. DeBoer joined Moody’s Analytics Chief Economist Mark Zandi to discuss recession risks, inflation, and the broader impact of trade and tax policy in Washington. (Watch) DeBoer was also a keynote speaker at the University of Wisconsin-Madison’s James A. Graaskamp Center Spring Board Conference earlier this month, where he shared his insights on how the Trump administration’s economic agenda, regulatory changes, tariffs, and tax policy are impacting commercial real estate. RER will continue to monitor developments closely as Congress advances a package that could have far-reaching implications for commercial real estate, business taxation, and economic growth.

Spring Roundtable Meeting

April 11, 2025

Roundtable Weekly

Spring Roundtable Meeting Highlights Tax and Trade, Housing, and Global Challenges Confronting Real Estate

Industry leaders convened with members of Congress and senior administration officials at this week's Spring Roundtable Meeting to address critical national policies impacting commercial real estate and the broader economy. The timely discussions focused on housing supply and affordability, tax policy, regulatory reform, workforce development, grid reliability, infrastructure resilience, tariffs and trade relations, and immigration reform. (L-R): Roundtable Chair Kathleen McCarthy (Global Co-Head, Blackstone Real Estate) and Roundtable President and CEO Jeffrey DeBoer RER members underscored the importance of preserving vital tax provisions that incentivize investment and warned lawmakers that proposals to restrict the deductibility of state and local property taxes would cause self-inflicted injury to the U.S. economy, including unnecessary job losses and new, systemic risks to the banking system, pressure on rents for families and individuals, and other inflationary cost increases for American consumers. (The Roundtable’s Spring 2025 Policy Priorities and Executive Summary) Speakers & Policy Issues Roundtable members engaged in policy issue discussions with the following guests: Jonathan Martin (Politics Bureau Chief and Senior Political Columnist, POLITICO) offered a candid look at the political landscape and forecasted a competitive 2028 election cycle amidst shifting congressional dynamics. The Honorable Scott Turner (Secretary, U.S. Department of Housing and Urban Development (HUD)) emphasized HUD’s mission of service, focusing on reducing regulatory burdens, increasing housing supply through public-private partnerships, and extending Opportunity Zones. The Honorable Howard Lutnick (Secretary, U.S. Department of Commerce) discussed tariffs and how President Trump is seeking to use trade policy to reignite domestic manufacturing, restore U.S. superiority in critical industries, and advance U.S. national security. The Honorable Todd Young (R-IN) (Committees: Commerce, Science, and Transportation; Finance; Small Business and Entrepreneurship; Select Committee on Intelligence) focused on pro-growth tax policies, the need for reduce the deficit, and his initiatives aimed at housing supply and affordability. The Honorable Mark Kelly (D-AZ) (Committees: Joint Economic Committee; Armed Services; Environment & Public Works; and Select Committee on Intelligence)discussed the intersection of national security and technology, emphasizing the need for grid reliability, innovation, and bipartisan immigration reform to support economic and housing needs. The Honorable Bill Huizenga (R-MI) (Committees: Financial Services (Vice Chair); Foreign Affairs) shared his insights as Vice Chair on the House Financial Services Committee priorities, revitalizing community banking, affordable housing access, and insurance programs like the National Flood Insurance Program (NFIP) and Terrorism Risk Insurance Act (TRIA). The Honorable Jason Smith (R-MO) (Chairman, House Ways & Means Committee; Chairman, Joint Committee on Taxation) reinforced his commitment to advancing a comprehensive, pro-growth tax package by summer, highlighting the essential input provided by RER on key issues such as business SALT deductions, carried interest, and real estate's role in driving growth. Next on The Roundtable's meeting calendar is the all-member Annual Meeting, which will include policy advisory committee meetings on May 28-29 in Washington, DC.

Budget & Policy Landscape

April 11, 2025

Roundtable Weekly

Congressional Republicans Pass Budget Resolution, Move One Step Closer to a Final Tax Bill

Budget Inflation Reduction Act Policy Landscape

This week, House Republicans approved a major budget framework that moves President Trump’s tax and spending agenda closer to the finish line and set the stage for Congressional Committees to “mark up” the key details in May—including tax cuts, revenue raising provisions, and spending reductions. State of Play Despite tight margins, on Thursday House Speaker Mike Johnson (R-LA) was able to corral his caucus into passing a new budget resolution that was approved by the Senate over the prior weekend, bringing the president's goal of "one big beautiful bill" closer to fruition. (WSJ, April 10) Senate Republicans adopted a budget resolution on Saturday morning after an all-night voting marathon. Senate Republicans unveiled their 70-page budget blueprint last Wednesday. It lays out a fiscal framework for implementing Trump's border security, defense, energy and tax priorities. (CBS News, April 9) The budget outline punts many of the hard decisions for lawmakers to hammer out later in the tax-cut negotiations. That could lead to a standoff between the House and Senate at the end of the process, where several Senators are resistant to large cuts in safety-net programs while House conservatives are seeking significant deficit reduction. (Bloomberg, April 10) Next Steps and Implications for CRE Lawmakers in the House and Senate now turn their attention to “marking up” their respective Committee instructions, as provided in the budget resolution. The House and Senate instructions do not align, so their differences will have to be resolved later in the process. The budget resolution allows the House Ways and Means Committee to pass a tax cut of up to $4.5 trillion, using a current law budget baseline. The resolution allows the Senate Finance Committee to pass a $1.5 trillion tax cut, but assumes a current policy baseline in the Senate. The practical effect of the current policy baseline is to increase the size of the Senate tax cut to $5.3 trillion. On the spending side, the budget resolution directs the House Committees to identify at least $1.5 trillion in spending cuts. The spending reductions for the Senate Committees are de minimis ($4 billion spread across four committees). Besides tax cuts and spending reductions, the resolution calls for increased spending on the military ($150 billion), along with another $175 billion for border security and immigration enforcement work. (Politico, April 10) The debt limit fight will also shape the legislative timeline. House and Senate Republicans have different reconciliation instructions for increasing the nation’s borrowing authority. (Punchbowl News, April 11) Through meetings, outreach, and aggressive advocacy efforts, The Roundtable and the real estate industry continue to urge lawmakers to reject a revenue proposal to limit the deductibility of state and local business-related property taxes as part of the tax bill. The proposal could have a devastating impact on property values, rents, the health of the financial system, local communities, and consumer prices. In addition, members in both chambers continue to raise concerns about repealing clean energy tax credits from the Inflation Reduction Act (IRA) as part of the upcoming budget reconciliation bill. This week, four senators sent a letter to Senate Republican Leader John Thune warning that a full repeal would undermine investment, hurt businesses, and threaten jobs. (Punchbowl News, April 11) (RW, March 14) At our Spring Roundtable Meeting, House Ways and Means Chairman Jason Smith (R-MO) engaged with RER members, acknowledging their concerns about proposals to change the treatment of business SALT and carried interest. He emphasized the importance of using data to inform policy discussions and commended RER for its impactful work educating policymakers on the issues. As the budget process enters its next phase, RER will continue to advocate for key real estate priorities and inform members on policy updates from Capitol Hill and their impact on the industry.

Energy

April 11, 2025

Roundtable Weekly

Trump Executive Orders Push Energy Dominance Agenda

Carbon Tariff Electric Grid Energy Policy ENERGY STAR Grid Reliability

President Trump issued executive orders this week for a policy agenda to develop domestic energy supplies, ensure grid reliability, and meet increased electricity demands driven by artificial intelligence (AI). (AP News, April 8) Grid Reliability Executive Order (EO) The EO on “Strengthening the Reliability and Security of the U.S. Electric Grid” declares the administration’s policy “to ensure the reliability, resilience, and security of the electric power grid.” It states that America’s leadership in technological innovation “depends on a reliable supply of energy from all electric generation sources, particularly those secure, redundant fuel supplies that are capable of extended operations.” (Politico, April 8) Building efficiency measures that yield energy savings are also key to relieving electricity grid constraints to accommodate more energy users. RER and a broad coalition of real estate organizations urged heightened focus on efficiency programs by voicing strong support for ENERGY STAR in a recent letter to EPA Administrator Lee Zeldin. (RW, April 4) State Overreach EO The EO on “Protecting American Energy from State Overreach” reflects the administration’s view that “American energy dominance is threatened when State and local governments seek to regulate energy beyond their constitutional or statutory authorities.” (Axios, April 9) The EO requires the U.S. Attorney General to scrutinize state climate laws, referencing New York’s law and plan aiming for net-zero emissions statewide by 2050, and the California program for businesses to “cap” emissions and “trade” pollution allowances. (Politico, April 9) Governors committed to reducing the use of fossil fuels and combat climate change within their borders said they were not “intimidate[d]” by the Trump order, signaling likely litigation. (E&E News, April 9; Reuters, April 9) In February, RER submitted a letter to Congress requesting oversight of federal DOE grants that induce states and localities to require all-electric buildings and zero emissions “targets,” through onerous Building Performance Standards (BPS). (RW, Feb. 28) RER’s peer reviewed 20-point policy guide for fair BPS mandates emphasizes that states and localities receiving federal grants should not levy fines on buildings that meet US-EPA and US-DOE high performance industry leadership standards. (RW, Oct. 11) Tariffs and Energy While the administration’s recent executive orders could bolster grid reliability, the potential for broad tariffs may introduce new costs and complexities undermining energy affordability and infrastructure investment. (PoliticoPro, April 8) Tariffs on critical grid components could exacerbate supply chain shortages and drive up electricity prices. (CNet, April 4) On Tuesday, U.S. Senators Bill Cassidy (R-LA) and Lindsey Graham (R-SC) introduced the latest version of the Foreign Pollution Fee Act (FPFA), a carbon tariff aimed at penalizing imported goods manufactured with higher CO2 emissions than domestic alternatives. (E&E News, April 9) (Press Release, April 8) Prospects for imminent passage of the FPFA are remote. Yet, the bill signals some interest by Republican Senators to tie climate policy to tariff policy where overseas manufacturers produce aluminum, cement, iron, steel, and glass with higher carbon emissions compared to like-kind U.S. manufactured products. (American Action Forum, April 8) RER submitted comments on the FPFA in January, raising concerns regarding the impact of a carbon tariff on affordable housing construction, rebuilding after natural disasters, and technical issues on calculating “indirect emissions” associated with product manufacturing. (RW, Feb. 7) RER will continue engaging with policymakers to ensure federal actions promote reliable, affordable energy without unintended economic repercussions.

Tariffs

April 11, 2025

Roundtable Weekly

The White House Pauses Tariffs on Global Partners While Escalating Tensions With China

Tariffs

Global markets, Wall Street and Main Street all watched this week as we entered a "new dawn" of American trade and commerce. The impacts on industry—including real estate—have been mixed and continued volatility is anticipated. Recap Monday marked the first full week of economic activity since President Trump's "Liberation Day" announcement on Tuesday, April 2, which featured a baseline 10% tariff on all imports with higher, targeted reciprocals for specific countries. (CBS News, April 2; Roundtable Weekly, April 4) Markets rebounded on Wednesday after President Trump said he would pause some —but not all—of his sweeping tariffs. Trump offered a 90-day reprieve on the reciprocal tariffs he had imposed on dozens of countries, including global partners such as Japan and the EU. (Axios, April 9) On Thursday, the White House announced the overall tariff imposed on most goods imported from China now stands at 145 percent (after stating the day before that the levy on Chinese goods was 125 percent). Stocks again tumbled at the announcement, (WSJ, April 9; BBC, April 10) Implications for CRE Real estate stocks were not immune to what many are calling the "whipsaw" in prices stemming from to-the-minute changes in tariff policies. (Real Deal, April 9) The pause on the 20 percent reciprocal tariff on EU imports eases the burden for the costs of glass, with many firms relying on Portugal and other EU manufacturers as the primary supplier of this material—especially as glass-and-steel skyscrapers have become the preferred choice for builders. (Commercial Observer, April 4) Wednesday's pause was an encouraging development for the real estate industry. However, higher tariffs on imported Chinese steel and aluminum will raise structural material costs, increasing expenses for developers and complicating efforts to address the housing shortage. (Roundtable Weekly, Jan. 24 | Nov. 27) CRE investors and developers must also still contend with the tariffs that remain in place and potential announcements of new tariffs in the future. The ultimate strategy and intended outcome behind the Trump administration’s trade policies remain unclear. As trade negotiations continue, RER will continue to raise concerns about the negative impact that uncertainty in tariff policy is having on construction costs, particularly in the affordable housing sector.

Energy

April 8, 2025

RER Policy Priorities

Energy – Spring 2025 Policy Priorities

Building Performance Standards BPS, Clean Energy Tax Incentives, Corporate Sustainability Disclosures, Energy and Climate Policy, EPAs ENERGY STAR Tenant Space Recognition, EPAs ENERGY STAR Certification for Buildings, Grid Reliability, Healthy Buildings, Reporting on Climate Risks, ScienceBased Targets, Unleashing Americas Energy Dominance,

Cities & Infrastructure, Housing, Infrastructure

April 8, 2025

RER Policy Priorities

Housing, Infrastructure, and Cities – Spring 2025 Policy Priorities

Affordable Housing, Cities amp Infrastructure, GSE Reform, Housing, Low Income Housing Tax Credit LIHTC, Property Conversions, Yes In My Backyard YIMBY,

Homeland Security

April 8, 2025

RER Policy Priorities

Homeland Security – Spring 2025 Policy Priorities

Cyber Risks, Homeland Security, Physical Risks, Real Estate Information Sharing and Analysis Center REISAC, RERs Homeland Security Task Force HSTF,

Capital & Credit

April 8, 2025

RER Policy Priorities

Capital & Credit – Spring 2025 Policy Priorities

Basel III, Beneficial Ownership amp the Corporate Transparency Act, Capital and Credit, Commercial Insurance Coverage Pandemic Risks amp Natural Catastrophes, EB5, Flood Insurance, Gold Card Concept, Halting ProCyclical Policy Measures and Increases in Regulatory Capital, Insurance, National Flood Insurance Program NFIP, Restoring Liquidity in CRE Markets and Protecting Capital Formation, Restrictions on Foreign Investment in US Real Estate, SAFE Banking Act,

Tax Policy

April 8, 2025

RER Policy Priorities

Tax – Spring 2025 Policy Priorities

Business Interest Deduction, Business SALT, Capital Gains, Carried Interest, FIRPTA, LikeKind Exchanges LKEs, Opportunity Zones OZs, Partnerships amp PassThrough Taxation, Preferential Rate and Realization Requirement, StepUp In Basis, Tax Policy, Unrealized Gains Billionaire Tax,

Capital & Credit, Cities & Infrastructure, Energy & Climate, Homeland Security, Housing, Tax Policy

April 8, 2025

RER Policy Priorities

Spring 2025 – Policy Priorities

Capital and Credit, Cities amp Infrastructure, Energy amp Climate, Homeland Security, Housing, Tax Policy,

Capital & Credit, Cities & Infrastructure, Energy & Climate, Homeland Security, Housing, Tax Policy

April 8, 2025

RER Policy Priorities

Executive Summary – Spring 2025 Policy Priorities

Capital and Credit, Cities amp Infrastructure, Energy amp Climate, Homeland Security, Housing, Tax Policy,

ENERGY STAR

April 4, 2025

Policy Comment Letter

Real Estate Industry Strongly Supports ENERGY STAR

Global Trade Tensions Escalate, Real Estate Industry Sees Mixed Outcomes

Construction ENERGY STAR Tariffs

A major escalation in the White House’s trade agenda this week introduced new tariffs on imports from major global partners—while sparing Canada and Mexico in a move important for construction and development. Recap On Wednesday, President Trump announced a minimum 10 percent tariff on imports from most countries, set to take effect Saturday. In addition, individualized, “reciprocal” tariffs that apply to specific countries will take effect next Wednesday, including raising overall tariffs on China to 54 percent. (White House, April 2) While Canada and Mexico did not receive any new tariffs, other key trading partners were affected. The European Union was hit with a new 20 percent tariff, along with Japan (24 percent) and South Korea (25 percent), spurring a statement from the European Commission President indicating that plans for countermeasures are in motion. (Reuters, April 3) The tariff exceptions for Canada and Mexico are positive for the real estate industry. Canada supplies about 85% of all U.S. softwood lumber imports—nearly a quarter of the total domestic supply in the U.S. Further exempting Mexican products is also a win given major construction cost drivers such as gypsum, concrete and near-shored appliances. (NAHB, April 3) National Association of Home Builders Chairman Buddy Hughes said, “While the complexity of these reciprocal tariffs makes it hard to estimate the overall impact on housing, they will undoubtedly raise some construction costs. However, NAHB is pleased President Trump recognized the importance of critical construction inputs for housing and chose to continue current exemptions for Canadian and Mexican products, with a specific exemption for lumber from any new tariffs at this time.” (NAHB, April 3) In TV interviews after the announcement, Treasury Secretary Scott Bessent called for patience to not immediately retaliate and “asking to let’s see where this goes.” (Politico, April 3) Markets and financial experts remain concerned about the ultimate endgame of the tariffs—whether they are meant to be permanent or represent negotiating leverage for the Trump administration to garner better deals with trading partners. Speaking with reporters on Thursday, Trump seemed to indicate the latter, saying that “the rest of the world wants to see if they can make a deal.” (NBC News, April 3; Forbes, April 3) Implications for CRE Tariffs may present several challenges for commercial real estate, including increased construction costs, potential project delays, and heightened uncertainty among investors. (CBRE, March 19 | Roundtable Weekly, Feb. 14) Higher tariffs on imported Chinese steel and aluminum will raise structural material costs, increasing expenses for developers and complicating efforts to address the housing shortage. (Roundtable Weekly, Jan. 24 | Nov. 27) New tariffs also threaten to escalate energy costs by disrupting supply chains and raising prices for essential clean-tech components, underscoring the need to prioritize energy conservation strategies in commercial buildings. (E&E News, April 3 | NYT, April 3 | Forbes, March 20) Embracing efficiency measures such as EPA’s ENERGY STAR program is now more important than ever—ensuring grid reliability, controlling operational costs, and unleashing American energy dominance amid growing economic pressures. [See ENERGY POLICY story below] For now, deep uncertainties around trade and the administration’s tariff strategy leave long-term planning for investment and development in limbo. This latest round of tariffs is unlikely to be the last. RER will continue to track coverage on tariffs, and the implications for commercial real estate.

Budget & Policy Landscape

April 4, 2025

Roundtable Weekly

Senate Budget Deal Advances with Trump Support, Tax Policy in Focus

Policy Landscape Tax Policy

This week saw a major announcement from President Trump on sweeping new tariffs and movement in Congress as the Senate advances a compromise budget resolution, with big implications for tax and spending cuts. Budget Resolution Moves Forward During his tariff announcement, President Trump announced his “complete and total support” for a compromise budget resolution released on Wednesday. The statement came after Senate Budget Committee Chair Lindsey Graham (R-SC) unveiled the updated resolution, paving the way for a vote later this week. (Punchbowl News, April 3) Trump’s public support for the budget resolution was the result of behind-the-scenes negotiations with Senate leadership to move the reconciliation process forward. Senate Majority Leader John Thune (R-SD) and others in the administration brought the meeting together to alleviate the concerns of skeptical deficit hawks who believed the Senate’s budget resolution didn’t do enough to cut spending. (Punchbowl News, April 3) After receiving assurances from Trump about his support for large-scale deficit reductions, Senators John Kennedy (R-LA) and Ron Johnson (R-WI) seemed to get on board with the compromise budget resolution. With key holdouts resolved, Majority Leader Thune appears to have the votes needed to get the resolution adopted. (CNN, April 2) The budget resolution includes separate spending cut instructions for the House and Senate. While House committees are instructed to find $1.5 trillion in spending cuts, the Senate instructions only call for $4 billion. Senate GOP leaders indicate that they still plan to target $1.5 to $2 trillion in spending cuts, giving them greater flexibility but punting lingering issues down the road. (Politico, April 3) A “vote-a-rama” on the budget resolution is expected to begin Friday evening, with final adoption anticipated early Saturday. (Politico, April 2) Tax Policy Implications The compromise budget resolution incorporates a “current policy baseline” approach that allows the 2017 tax cuts to be permanently extended without needing to offset roughly $4 trillion in costs. The Senate version also authorizes $1.5 trillion in additional tax relief beyond making the tax cuts permanent, allowing tax writers to include other key provisions that business advocates are asking for. The current policy baseline was another sticking point in the Senate resolution that has been punted to later in the process. Senate GOP leadership has opted to assert that the Budget Committee Chair has the authority to choose the baseline used in reconciliation. (Axios, April 1) While this decision allows the compromise budget resolution to move forward, the parliamentarian could still rule on the issue later on. If the parliamentarian rules against the current policy baseline, it would dramatically change the budget resolution landscape and potentially force the GOP to enact a shorter-term extension of the 2017 tax cuts, rather than making them permanent. The current policy baseline also has political implications. Responding to the Senate resolution, House Budget Committee Chair Jodey Arrington (R-TX) and other House tax writers expressed concern that the Senate budget resolution could add as much as $5.3 trillion to the debt. (Politico, April 2) House Speaker Mike Johnson (R-LA) was more optimistic about the compromise budget resolution and the inclusion of the current policy baseline, saying, “We’re in the consensus-building business here… So we’ll have to socialize this with our members and see. Look, I think there’s a large number of House Republicans who expected that would be the final outcome… so it’s not a big surprise.” (Punchbowl News, April 3) In a conversation with Punchbowl News this week, Chairman of the House Financial Services Committee French Hill (R-AR) emphasized that President Trump and House and Senate GOP leaders are united on the urgency to get the reconciliation package done. Rep. Hill also strongly defended the current tax treatment of carried interest. “It’s not a loophole,” he said, calling it an “important component for long-term finance across the country” for many businesses, including commercial real estate, venture capital and energy. (Punchbowl News, April 3) Looking AheadThe coming weeks are a critical time for the administration and congressional leaders on key issues, including trade and tax policy. RER will continue to engage with policymakers to advocate for pro-growth policies that support investment, job creation and healthy real estate markets.

Opportunity Zones

April 4, 2025

Roundtable Weekly

Roundtable Encourages Lawmakers to Extend and Enhance Opportunity Zone Incentives

Opportunity Zones OZs Tax Policy Tax Policy Advisory Committee TPAC

The Real Estate Roundtable (RER) wrote to the sponsors of the Opportunity Zone tax incentives encouraging them to extend and improve the tax benefits, which have successfully mobilized private investment in historically underserved communities. The letter to Senator Tim Scott (R-SC) and Representative Mike Kelly (R-PA) emphasizes the need for a long-term extension and targeted reforms to maximize OZs’ economic impact. (Letter) CRE Impact Since their enactment in 2017, OZs have spurred billions in private investment to revitalize distressed communities, finance affordable housing, and create jobs. 72% of U.S. counties contain at least one OZ. By the end of 2022, the OZ tax incentives had helped mobilize $84.7 billion in investment for low-income areas. More recent estimates suggest OZs have attracted over $120 billion in capital. (Letter) RER members have leveraged OZ funding to develop affordable housing, retail centers, office buildings, and life sciences facilities. Roundtable Policy Recommendations Under current law, the OZ tax benefits are phasing down and will expire altogether for new investments made after December 31, 2026. First and foremost, RER is advocating for a long-term extension of OZ tax benefits to spur continued investment and provide certainty to the private sector. Additional recommendations include: provide certainty to the private sector. Additional recommendations include: Removing limitations on the type of capital eligible for investment in opportunity funds to allow a broader range of capital to flow into OZ investments; Adding a new incentive for commercial-to-residential conversions to address housing shortages; Establishing a rolling deferral period for new OZ investments to sustain long-term interest; Improving the OZ working capital safe harbor to accommodate large-scale real estate developments; Modifying the substantial improvement threshold to encourage redevelopment of vacant properties; and Creating reporting and transparency requirements to track OZ impacts more effectively. What’s Next As Congress considers major tax legislation in 2025, long-term OZ reforms should be a priority to unlock additional private capital and sustain revitalization efforts in low-income communities. Next week, HUD Secretary Scott Turner, an outspoken advocate for the OZ program will be a speaker at our Spring Roundtable Meeting. His recent tour of Philadelphia's OZs showcased the transformative impact of public-private partnerships in revitalizing distressed areas. (Fox News, March 30) RER will continue engaging with lawmakers to advance these recommendations and ensure Opportunity Zones remain a powerful tool for economic development.

Energy

April 4, 2025

Roundtable Weekly

Real Estate Coalition Urges Support for ENERGY STAR Program

ENERGY STAR

The Real Estate Roundtable (RER) and industry partners voiced strong support for Environmental Protection Agency’s (EPA) ENERGY STAR program in a letter to Administrator Lee Zeldin this week—urging continued support for the voluntary, market-driven platform that underpins building efficiency, grid reliability, and energy cost savings. (Letter) Why It Matters Commercial real estate relies more on ENERGY STAR than any other voluntary federal public-private partnership. It provides CRE’s standard tool to track and reduce building energy use—supporting lower utility bills, smart cap ex investments, and reduced regulatory red tape. (Letter) “Real estate assets that do more with less energy – as quantified, monetized, and recognized though Portfolio Manager and other ENERGY STAR offerings – are critical to achieve EPA’s pillars to “power the great American comeback,” the letter stated. Facts and Stats More than 330,000 buildings—representing nearly 25% of U.S. commercial building floor space—utilized EPA’s Portfolio Manager software last year. ENERGY STAR-certified buildings achieve an average of 35% less energy usage compared to similar non-certified buildings. The program has saved businesses and families nearly $200 billion in utility bills since 1992, including $14 billion in 2024 alone. Driving the Energy Comeback The real estate industry letter how ENERGY STAR supports EPA goals to: Restore Energy Dominance and Competitiveness: Helps reduce operating costs, ease grid strain, and boost building global competitiveness. Support Cooperative Federalism: Serves as a unifying national platform across varied state and city energy rules. Lead in AI Innovation: Electricity savings supported by ENERGY STAR, combined with American-made energy of all types, are requisite to meet the massive demands for power we need to lead the world in AI innovation. Energy Hearings on Capitol Hill Congressional committees held a series of energy-related hearings over the past two weeks, zeroing in on grid reliability, domestic supply, and the mounting electricity demands from artificial intelligence and data infrastructure. On April 2, a House oversight subcommittee held a hearing titled, “Unleashing the Golden Age of American Energy Dominance.” The hearing addressed the need to unlock “all of the above” U.S. energy resources to drive economic growth. (Press Release, April 2) Another House subcommittee dealing with energy policy held a hearing, “America’s AI Moonshot: The Economics of AI, Data Centers, and Power Consumption,” AI industry leaders and lawmakers discussed expediting energy permitting and power needed by data centers to support AI innovations. (PoliticoPro, April 2 | PoliticoPro, April 1) Last week, the CEOs of the nation’s grid operators in competitive electricity markets testified at a House Energy Subcommitee hearing, "Keeping the Lights On: Examining the State of Regional Grid Reliability." Witnesses explained that power demands are forecasted to exceed grid capacity and reinforced the need to reduce burdensome regulations to generate new power supplies. (Chairman Latta (R-OH) Statement, March 25) RER remains committed to continued collaboration with EPA to advance the ENERGY STAR program as part of the administration’s 'all of the above' energy strategy, and goals to make the grid more resilient and reliable.

In Memoriam

April 4, 2025

Roundtable Weekly

Honoring Longtime Real Estate Roundtable Member and Friend Donald B. Susswein

Tax Policy Advisory Committee TPAC

The Real Estate Roundtable mourns the loss of Donald B. Susswein, a longtime member, brilliant tax expert, and dedicated mentor who passed away April 2. Don served as a partner in RSM's Washington National Tax office, where he helped build the firm’s Passthrough Tax Consulting Capability and guided many colleagues into leadership roles — a source of immense pride for him. His distinguished career also included roles at two Big 4 firms, a partner at Thacher Proffitt and Wood, a Wall Street law firm, the U.S. Senate Finance Committee, and the Department of Justice. Throughout his years with RER, Don was a driving force behind our Tax Policy Advisory Committee (TPAC), offering his expertise through monthly calls, studies, panels, and helping craft amicus briefs that helped advance our tax policy priorities. Don was a key architect of the partnership audit reform legislation enacted in 2015 and a major contributor to the development of the pass-through business income deduction enacted in 2017. His work revolutionized the way the tax community thinks about like-kind exchanges (as part of a broader continuum of deferrals available for business restructurings). From FIRPTA, to cancellation of indebtedness, to unrealized gains, Don tackled many other difficult issues through The Roundtable. Roundtable President and CEO Jeffrey DeBoer said, “Don was a genius — a brilliant problem solver and a loyal, supportive friend. His clever comments and contagious smile brought levity and clarity to even the most complex policy debates. I’ve known Don since the mid-1980s, when he was already recognized on Capitol Hill as one of the true tax policy sharpies. If you wanted to discuss tax legislation with Don you had to bring your “A” game, even so his game was always “A-plus”. We will deeply miss his voice at The Roundtable, especially in our tax policy deliberations.” Roundtable Senior Vice President and Counsel Ryan McCormick said, “Don was a mentor, coauthor, and friend who brought tremendous wit and wisdom to every complicated tax issue we tackled. Don delighted in the opportunity to solve the unsolvable, and he often succeeded. From partnership audit reform to section 199A to like-kind exchanges, Don brought ideas and insights that challenged traditional thinking, transformed debates, and led Congress to enact better laws. Don made many selfless contributions to The Roundtable and our industry, but it is his kindness and steadfast friendship that will be most missed.” A funeral service is scheduled for Tuesday, April 8 at the Garden of Remembrance Chapel in Clarksburg, MD with a live stream available. In lieu of flowers, a donation in his memory can be made to the Special Olympics, Young Artists of America, and Donate Life DC. (See Obituary for details)

Opportunity Zones

April 1, 2025

Policy Comment Letter

RER Encourages Congress to Extend and Reform Opportunity Zone Incentives in Reconciliation Legislation

Opportunity Zones OZs, Tax Policy,

Tax Policy

March 28, 2025

Roundtable Weekly

Real Estate Industry Urges Congress to Preserve Carried Interest

Carried Interest Tax Policy

As tax negotiations continue this week on Capitol Hill, a coalition of 17 national real estate organizations submitted a unified message to congressional leadership urging preservation of current law on carried interest. (Letter) Why It Matters The coalition letter, led by the National Multifamily Housing Council and joined by The Real Estate Roundtable (RER) and others, highlighted that taxing all carried interest as ordinary income would raise taxes on 2.2 million real estate partnerships and nearly 9.7 million partners, potentially stalling new housing, infrastructure, and redevelopment projects. Since carried interest and its tax treatment first emerged as a controversial political issue in 2007, RER has consistently opposed legislative proposals to tax all carried interest at ordinary income rates. (Axios, March 24 | NYT, March 8) Research cited in the letter demonstrates that carried interest legislation would lower wages, reduce property values, and undermine economic growth. (Letter) What's At Stake “Taxing carried interest at ordinary income rates would discourage the risk taking that drives job creation and economic growth. It would reduce economic mobility by increasing the tax burden on cash-poor entrepreneurs who want to retain an ownership interest in their business. It would have profound unintended consequences for housing affordability and main streets all across our country,” said Jeffrey DeBoer, President and CEO of The Real Estate Roundtable. Roundtable Weekly, Feb. 21) The coalition emphasized that changing the tax treatment would particularly impact small and mid-sized real estate entrepreneurs who contribute sweat equity rather than large capital contributions to their projects. The letter notes that the tax code ”has never, and should never, limit the reward for risk-taking to taxpayers who have cash to invest.” Retroactive application of new tax policies on longstanding partnership agreements could harm small businesses, stifle entrepreneurs and sweat equity, and threaten future improvements and infrastructure in neglected areas. Under the headline “Carried Interest Fight Gets Real,” media outlet Politico wrote that the real estate industry was “laying down a marker as lawmakers begin working to pass a deficit-conscious extension of the 2017 tax cuts.” (Politico, March 27) The signatories of the letter included: National Multifamily Housing Council; American Hotel and Lodging Association; American Resort Development Association; American Seniors Housing Association; CCIM Institute; Council for Affordable and Rural Housing; ICSC Institute of Real Estate Management; Latino Hotel Association; Manufactured Housing Institute; Mortgage Bankers Association; NAIOP, the Commercial Real Estate Development Association; National Apartment Association; National Association of Black Hotel Owners, Operators, and Developers; National Association of Home Builders; NATIONAL ASSOCIATION OF REALTORS® RER urges lawmakers to retain current law and avoid policies that would disincentivize investment, threaten housing affordability, and penalize job-creating entrepreneurs.

Budget & Policy Landscape

March 28, 2025

Roundtable Weekly

Lawmakers Weigh Tax Priorities as Roundtable Emphasizes Need to Protect Deductibility of Property Taxes

Budget Business SALT Section 199A Tax Policy

Congress returned to Capitol Hill this week facing a tight window to deliver on a range of policy priorities ahead of its April recess. As discussions intensify, Roundtable advocacy efforts continue to focus on avoiding harmful limitation on the deductibility of state and local business-related property taxes. (Punchbowl News, March 28) Tax Talks Congressional Republicans are navigating a range of considerations amid pressure from the White House to enact its tax agenda and from conservatives mindful of the deficit. (WSJ, March 26) If Senate Republicans succeed in using the baseline strategy, it would significantly alter the final instructions for the House and Senate tax committees. Under this approach, extending or making permanent many provisions from the 2017 tax cuts would effectively be cost-free. However, GOP deficit hawks may still need offsets for other elements of the tax package. “Business SALT” and potential restrictions on the deductibility of state and local property taxes as a possible revenue offset for the tax bill. (WSJ, March 25) State and local property taxes represent 40 percent of the operating costs of U.S. commercial real estate, a greater expense than utilities, maintenance and insurance costs combined. This tax change could reverse the benefits of the 2017 Tax Cuts and Jobs Act (TCJA) and Section 199A, potentially raising effective tax rates to 1970s-era levels near 50%. (Roundtable Weekly, Feb. 28; March 14) RER continues to lead advocacy efforts surrounding business SALT. RER members and staff are actively engaging with Congressional leaders on Capitol Hill, and educating lawmakers on the potentially devastating impacts of the proposals under consideration. Earlier this month, RER and sixteen other national real estate organizations wrote to members of the House Ways and Means and Senate Finance Committees urging them to oppose any proposal that would cap or eliminate the deductibility of state and local business property taxes. (Roundtable Weekly, March 14) (BisNow, March 13) RER members are proactively contacting congressional offices, reinforcing opposition to any legislation that would restrict or eliminate deductions for state and local business property taxes. All RER members are strongly encouraged to amplify this message to their representatives in Congress. Read more here. State of Play – Budget Congressional Republicans are grappling with how to pay for President Donald Trump's multi-trillion-dollar tax-cut and immigration reform agenda. (Reuters, March 27) With GOP lawmakers eager to finalize a budget framework for the planned megabill, House Speaker Mike Johnson (R-LA) and Senate Majority Leader John Thune (R-SD) are signaling that they will move forward on the fiscal blueprint without first resolving major disputes over the offsets needed to extend Trump' s 2017 Tax Cuts and Jobs Act (TCJA). (Politico, March 26) Meanwhile, the Congressional Budget Office (CBO) has projected that the U.S. government may reach its statutory debt ceiling by August or September unless Congress and the president agree to raise or suspend the borrowing limit. Despite ongoing disagreements, an area of consensus has emerged: Speaker Johnson and Leader Thune are aligning around including a debt limit increase in the budget package—a move Senate Republicans had previously resisted. (Politico, March 26) Failure to act could lead to a default on debt, risking economic stability, market volatility and lower property values. (AP, March 26) Both chambers are targeting the week of April 7 to finalize the budget resolution, which would enable the reconciliation process needed to advance their legislative agenda in the months ahead.

Property Conversions

March 28, 2025

Roundtable Weekly

Ways and Means Members Reintroduce Bipartisan Property Conversions Legislation

Property Conversions

On Thursday, House Ways and Means Committee Members Mike Carey (R-OH) and Jimmy Gomez (D-CA) reintroduced the bipartisan Revitalizing Downtowns and Main Streets Act of 2025 (H.R.2410), which would create a market-based tax incentive for converting older commercial buildings to residential use. Revitalizing Downtowns and Main Streets Act The bipartisan bill, introduced by 15 House Democrats and 12 House Republicans, is strongly supported by The Real Estate Roundtable and a broad coalition of national organizations. The bill would help modernize U.S. real estate, create new and affordable housing, and strengthen cities and neighborhoods that continue to suffer from the aftereffects of the pandemic. (Bill Summary) “Right now, vacant commercial and office space is sitting unused, and converting these properties into housing is often so expensive it isn’t worth doing,” said Rep. Carey (R-OH). “This bipartisan bill will allow communities to expand their supply of affordable housing by upgrading existing buildings, allowing American downtowns and main streets to thrive with new investments.” (Rep. Carey Press Release) Rep. Mike Carey (R-OH) The bill would create a new and temporary 20% tax credit for qualified property conversion expenditures, modeled after the historic rehabilitation credit. (RER’S One-Page Summary) “The housing crisis is squeezing family budgets, while empty commercial and office buildings sit unused in downtowns and in suburban and rural communities,” Rep. Gomez said. “Our bipartisan bill converts these empty commercial buildings into homes families can afford—a smart way to fix both problems.” (Rep. Gomez Press Release) The total credit authority would be limited to $15 billion, allocated by state housing finance agencies based on feasibility and impact. Larger credits would be available for projects in rural areas, low-income census tracts, and economically distressed areas. The credit could be stacked with other federal tax benefits, including LIHTC, the rehabilitation credit, and Opportunity Zone benefits. Roundtable Advocacy The Real Estate Roundtable (RER) has supported similar versions of conversion legislation, such as the Revitalizing Downtowns Act (S. 2511, H.R. 4759, H.R.9002). (Roundtable Weekly, July 2024) The bill addresses and incorporates many of the recommendations a RER-led coalition had collectively made to the Revitalizing Downtowns Act in comment letters submitted in October 2022 and June 2024. Both letters are the product of a property conversions working group created by RER’s Tax Policy Advisory Committee (TPAC). The working group has reviewed and considered the challenges and impediments confronting potential property conversion activities. (Roundtable Weekly, June 2024) RER’s Tax Policy Advisory Committee will continue working with policymakers to advance tax policies that encourage and facilitate property conversion efforts.

Beneficial Ownership

March 28, 2025

Roundtable Weekly

Treasury Removes Beneficial Ownership Reporting Requirements for U.S. Companies

Beneficial Ownership Beneficial Ownership amp the Corporate Transparency Act Corporate Transparency Act CTA

The Financial Crimes Enforcement Network (FinCEN) issued an interim final rule last week that removes the requirement for U.S. companies and persons to report Beneficial Ownership Information (BOI) to FinCEN under the Corporate Transparency Act (CTA). (Bloomberg, March 25) Why It Matters The March 21 rule significantly narrows the scope of the CTA—effectively dismantling key provisions and easing compliance burdens for millions of domestic businesses. (National Law Review, March 25) Treasury previously estimated that 32 million entities would be subject to the requirement. Under the revised rule, only about 11,600 foreign firms operating in the U.S. would have to disclose their ownership on average each year. (FinCen, March 21) Due to the far-reaching scope of the CTA, RER has long raised concerns about the regulatory burden and cost the CTA would impose on many commercial and residential real estate investment businesses. (Roundtable Weekly, March 7) The decision marks a major shift in financial transparency regulation, easing compliance burdens on small businesses and other domestic entities. New Reporting Framework FinCEN prepared a series of questions and answers (Q&As) to address inquiries relating to the Beneficial Ownership Information Interim Final Rule. In the interim final rule, FinCEN revises the definition of “reporting company” in its implementing regulations to mean only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. State or Tribal jurisdiction by the filing of a document with a secretary of state or similar office (formerly known as “foreign reporting companies”). FinCEN also exempts entities previously known as “domestic reporting companies” from BOI reporting requirements. Domestic companies and their beneficial owners are no longer required to file BOI reports, nor update or correct previously filed reports. Foreign reporting companies must still report—but only for non-U.S. owners. U.S. persons with ownership in foreign entities are exempt from BOI disclosure. New deadlines apply for foreign companies to file initial reports—either 30 days after the rule’s Federal Register publication or 30 days post-registration to do business in the U.S., whichever is later. What’s Next FinCEN is accepting comments on the interim rule for 60 days and intends to finalize it later this year. As RER works to develop comments for FinCEN on the March 21 Interim Final Rule, we welcome member input.

Housing

March 28, 2025

Roundtable Weekly

Housing Policy Updates: Comment Letter to FTC on Single-Family Rental Industry , GSE Considerations, and Tenant Protection Policy Developments

Fannie Mae Freddie Mac GSE Reform Housing SingleFamily Rental SFR

Housing policy remains at the forefront this week as The Real Estate Roundtable (RER) responded to the Federal Trade Commission’s (FTC) request for public comment on the impact that the large-scale single-family rental (SFR) owner-operators are having on the housing market; the Trump administration continues to explore privatizing Fannie Mae and Freddie Mac; and Federal Housing Finance Agency (FHFA) Director Bill Pulte rescinded a renter protection directive. Single-Family Rental Housing Study RER and Nareit responded this week to the FTC’s request for public comment regarding the impact that large-scale Single-Family Rental (SFR) operators and institutional investors are having on home prices and rents in the single-family housing. (Letter) The FTC aims to assess whether "mega investors" influence housing prices negatively. The letter underscores that institutional capital is essential to expanding housing supply and addressing the chronic housing shortage affecting affordability nationwide. As stated in the letter, “Single-family rentals, now part of an institutionally supported asset class, add balance to the U.S. housing market. SFRs play an important role in the nation’s housing landscape by boosting supply and offering flexible, high-quality housing options that have broad demographic appeal at lower price points compared to home ownership.” SFR homes constitute only 32 percent of rental units nationally, consistent with historical averages. Institutional investors accounted for a mere 0.3 percent of single-family home purchases in the past year. (BisNow, Feb. 3) The letter emphasized that institutional investors own less than 0.5 percent of U.S. single-family homes, thus not driving the housing affordability crisis. GSE Reform The Trump administration is actively exploring housing finance reform options, including privatizing Fannie Mae and Freddie Mac. (WSJ, March 23) Recent proposals suggest transferring the Treasury's stakes to a newly envisioned U.S. sovereign wealth fund. Treasury Secretary Scott Bessent recently discussed this possibility on a podcast, although he provided limited details. (Bloomberg, March 23) Director Bill Pulte and Sec. Bessent have stated that they would like Freddie and Fannie to go private, but not at the cost of disrupting mortgage rates. (Commercial Observer, March 21) An executive order is also under consideration, which could direct federal departments to examine the privatization of Fannie and Freddie. This proposal has drawn substantial attention from housing industry leaders concerned about potential impacts on mortgage markets and affordable housing. Tenant Protection Policy Rescinded This week, FHFA Director Pulte rescinded a Biden-era directive requiring multifamily housing providers with Fannie Mae or Freddie Mac-backed mortgages to provide renters a 30-day rent increase notice, lease term expirations and a five-day late payment grace period. (GlobeSt, March 26) Pulte contended that this directive increased compliance burdens for lenders and property owners, noting existing state and local regulations already cover lease notices and late fee guidelines. RER along with other national real estate organizations Industry groups such as the National Apartment Association and the National Multifamily Housing Council had opposed the policy, arguing it imposed undue burdens on housing providers. (Bisnow, March 25 | Roundtable Weekly, Jan. 2023) This move aligns with broader industry efforts advocating fewer regulatory constraints to foster housing market stability. Department of Housing & Urban Development (HUD) Secretary Scott Turner will be a featured speaker at The Roundtable’s Spring Roundtable Meeting on April 8, 2025 (Roundtable-level members only).

Tax Policy

March 26, 2025

Policy Comment Letter

Coalition Urges Congress to Preserve Current Tax Law on Carried Interest

Capital Gains, Carried Interest,

Housing

March 24, 2025

Policy Comment Letter

Roundtable Responds to FTC on Single-Family Rental Housing

Affordable Housing, Housing,

Tax Policy

March 21, 2025

Roundtable Weekly

Coalition Urges Treasury to Withdraw FIRPTA Look-Through Rule

LookThrough Rule FIRPTA

On Thursday, The Real Estate Roundtable (RER) wrote to U.S. Treasury Secretary Scott Bessent encouraging the Treasury Department to withdraw regulations issued last year under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). (Letter) Why It Matters FIRPTA imposes capital gains tax on foreign investors that invest in U.S. real estate. The discriminatory tax does not apply to any other asset class. For several years, RER and other stakeholders have worked with policymakers to reform FIRPTA and remove tax barriers that deter capital formation and investment in U.S. real estate and infrastructure. In 2015, those efforts led Congress to enact a new exemption from FIRPTA for foreign pension funds and other helpful FIRPTA reforms. In April 2024, however, Treasury issued final regulations that expanded the reach of FIRPTA to common investment structures by redefining what constitutes a domestically controlled entity. The 2024 regulations invented a new look-through rule to determine whether an entity is a domestically controlled REIT exempt from tax under FIRPTA. The practical effect of the regulations is to subject more foreign investors to U.S. taxation and impede capital formation for job-creating U.S. real estate and infrastructure projects (Roundtable Weekly, July 2024) Roundtable Advocacy In a cover letter accompanying a more detailed legal and economic analysis, RER President and CEO Jeffrey DeBoer wrote this week that in issuing the new look-through rule, “Treasury reached well beyond its regulatory authority and invented a rule that contradicts the statute and is damaging the U.S. real estate market.” (Real Estate Group Seeks Withdrawal of Look-Through Rule, Tax Notes March 20) “[T]he Look-Through Rule reversed decades of well-settled tax law, severely misconstrued the statute, and contradicted Congressional intent,” wrote DeBoer. The letter described the economic benefits of inbound real estate investment. “When invested in U.S. real estate, foreign capital puts contractors, tradesmen, and others to work constructing, upgrading, and improving properties. Pooled with U.S. partners and their expertise, foreign investment helps create productive assets, such as shopping centers and apartment buildings, which revitalize communities and increase the supply of affordable housing.” This week’s letter follows repeated efforts by RER and others to stop the regulations from moving forward during the Biden Administration. House Ways and Means Committee Members Darin LaHood (R-IL) and Carol Miller (R-WV) urged former Treasury Secretary Janet Yellen to drop the regulations when they were in proposed form. (Roundtable Weekly, Aug. 2023) The legal case against the FIRPTA regulations is even stronger today, in the wake of the Supreme Court’s Loper Bright decision in which the Court significantly narrowed the deference to which regulatory agencies are entitled when rulemaking. RER’s submission included a detailed legal and economic analysis prepared by RER’s Tax Policy Advisory Committee FIRPTA Working Group and principally drafted by TPAC Members David Polster and Nickolas Gianou of Skadden, Arps, Slate, Meagher & Flom LLP. (Analysis) In addition to seeking formal withdrawal of the April 2024 regulations, the letter urges the Treasury Secretary to issue sub-regulatory guidance immediately that would allow taxpayers to rely on the forthcoming withdrawal before it is finalized. The Trump Administration has prioritized removing regulations that unnecessarily impede economic activity.

The Fed

March 21, 2025

Roundtable Weekly

Fed Holds Steady on Rates Amid Economic Uncertainty

Federal Reserve Interest Rates The Fed

The Federal Reserve announced Wednesday that it will maintain its benchmark federal funds rate at the current 4.25-4.50 percent range, citing heightened economic uncertainty linked primarily to recent tariff policies. Fed’s Decision The decision reflects cautiousness by Fed policymakers amid rising inflation expectations and slower projected economic growth. (AP, March 19) Fed Chair Jerome Powell highlighted ongoing economic uncertainty, citing the Trump administration's potential "significant policy changes" on trade, immigration, fiscal policy, and regulation. (Opening Statement, March 19) "It's the net effect of these policy changes that will matter for the economy and for the path of monetary policy," Powell said. "Uncertainty around the changes and their effects on the economic outlook is high." Fed Chair Jerome Powell also emphasized that uncertainty is "unusually elevated," largely due to the Trump administration's extensive import tariffs. "Clearly, a good part of [inflation] is coming from tariffs," Powell stated, adding that while tariffs may temporarily delay inflation reduction, he believes the effect will ultimately prove transitory. Looking Ahead Powell stated that the Fed will take a patient, data-driven approach to future rate decisions. "We’re not going to be in any hurry to move," Powell said. "Our current policy stance is well-positioned to deal with the risks and uncertainties we face." According to the Fed's quarterly projections, officials expect GDP to grow 1.7 percent this year, a drop from their 2.1 percent estimate in December. While Fed policymakers still anticipate two quarter-percentage-point rate cuts by year-end, consistent with their December forecast, this expectation primarily reflects concerns over slowing economic growth counterbalancing rising inflation and what Powell described as uncertainty-driven "inertia" given the unclear outlook. (Reuters, March 19) Pressure From The White House President Trump criticized the Fed’s cautious approach via Truth Social, advocating for rate cuts, stating, "The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy. Do the right thing." (ABC News, March 20) Earlier this week, President Trump nominated Federal Reserve governor Michelle Bowman as vice chair for supervision, the central bank's top regulatory position. (Bloomberg, March 17) Senate Banking Committee Chair Tim Scott (R-SC) applauded the nomination and called Bowman an important voice in “pushing back on burdensome rules.” Implications for CRE The decision to maintain current interest rates carries significant implications for commercial real estate. Stable and lower interest rates can provide a more predictable environment for financing and investment decisions. The Fed’s decision reinforces findings from our Q1 2025 Sentiment Index that the CRE industry remains in a transitional period. Released in February, the Index showed signs of market stability—but also lingering uncertainty over tariffs, expiring tax cuts and regulatory reforms that could slow investment and economic growth. (Roundtable Weekly, Feb. 21) Heightened economic uncertainty, particularly from tariff policies, could dampen investment activity and make it challenging to attract foreign capital—both critical elements needed to drive economic growth. Reduced investment activity also risks hindering development projects, including the creation of affordable housing, and could slow ongoing efforts to revitalize communities and cities still recovering from pandemic disruptions. (CBRE, March 19) RER will continue to track coverage on interest rates and tariffs, and the implications for commercial real estate.

Policy Landscape

March 21, 2025

Roundtable Weekly

With Shutdown Averted, GOP Sharpens Focus on Tax Priorities

Tax Policy

Tax and fiscal policy are now at the top of the GOP’s agenda after a stopgap spending bill passed last Friday, preventing a potential government shutdown. House and Senate GOP members have just a few weeks of session before the long Easter and Passover recess to make significant progress on a budget resolution. Government Shutdown Averted Congress avoided a shutdown last Friday after ten Senate Democrats, including Minority Leader Chuck Schumer (D-NY), voted to advance the GOP’s stopgap spending bill. The six-month continuing resolution funds the federal government through September. (NBC News, March 14) Schumer rallied enough Democrats in the Senate to approve the measure in a key procedural vote. Responding to outspoken disagreement within his party about voting for the GOP’s spending bill, Schumer said, “I knew it was a difficult choice, and I knew I'd get a lot of criticism for my choice, but I felt as a leader I had to do it.” (ABC News, March 18) Tax Policy Update With the risk of a shutdown now in the rearview mirror, House and Senate GOP leaders are focusing their attention on a reconciliation package that would advance their tax priorities, including extending key provisions of the 2017 Tax Cuts and Jobs Act (TCJA). (NYT, March 21) The House passed its version of the budget resolution last month, but the bill has seen little movement in the Senate due to divisions within the GOP over budget constraints and offsets. Congressional Republicans want to make the TCJA tax cuts permanent, which will be challenging under the House budget resolution’s current $4.5 trillion tax cut ceiling. President Trump, Senate GOP leadership and House Speaker Mike Johnson (R-LA) support using a “current policy baseline” approach, a budget scoring method that would allow Congress to extend the TCJA tax cuts without adding to the deficit on paper and give them more room to include the administration’s other tax priorities. (Politico, March 13) Senate Budget Committee Republicans are planning to hold meetings with the Senate parliamentarian’s office to determine if this approach complies with reconciliation rules. GOP lawmakers need guidance by early April to move forward with large parts of the budget resolution. (Punchbowl News, March 18) The challenge of balancing tax relief with deficit concerns has fueled high-level discussions between Speaker Mike Johnson (R-LA) and Senate Majority Leader John Thune (R-SD). Thune acknowledged the difficulty of the process, saying, “Both of us understand we’ve got to get this done. And we’re trying to figure out the best way to do that.” (Punchbowl News, March 19) Key Tax Provisions At Stake While GOP leaders seek guidance on the “current policy baseline” approach, House Ways and Means Committee and Senate Finance Republicans are continuing to debate key tax provisions of the bill. Senate Finance Chair Mike Crapo (R-ID) mentioned during an appearance at the U.S. Chamber of Commerce that there are over 200 proposals under consideration—including reducing the estate tax, expanding the Opportunity Zone program and enhancing the Low-Income Housing Tax Credit (LIHTC). (PoliticoPro, March 12) Expanding Opportunity Zones and the LIHTC would help expand the supply of affordable housing and address the U.S. housing crisis. (Roundtable Weekly, March 17) To offset the cost of the large number of tax proposals under consideration, Republicans are considering the repeal of Inflation Reduction Act (IRA) energy tax credits. IRA programs have come under increasing scrutiny by the Trump administration as it looks to roll back Biden-era energy policies. However, a new report warns that eliminating these credits could result in nearly 790,000 job losses and increase consumer energy costs by $6 billion annually by 2030. In light of these concerns, 21 House Republicans have advocated for preserving the energy tax credits—pointing out that they are critical to help the U.S. meet Trump’s goal of becoming “energy dominant.” (PoliticoPro, March 20; Politico, March 10) Other lawmakers have raised potential restrictions on the deductibility of state and local business property taxes, also known as “business SALT,” as a revenue offset for the tax bill. This tax change would have devastating consequences on the commercial real estate industry and the broader economy. (Letter, March 7 | Roundtable Weekly, March 17 | (BisNow, March 14) RER has urged members to contact their representatives to oppose restrictions on business SALT that would discourage new investment and undermine housing affordability nationwide. GSA’s Plans for Federal Leases In other news this week, the General Services Administration (GSA)—under directions from the Elon Musk-led Department of Government Efficiency (DOGE)—will begin to vacate nearly 800 offices across the country this summer. (AP, March 14) The news has generated great uncertainty for federal agencies using these offices and building owners who lease to the government. The Associated Press released a full list of office locations it found would be affected by the planned lease terminations. (AP, March 14) Looking Ahead With Congress racing to cut through key process hurdles before the April 13 recess, GOP leaders are hoping the concurrent budget resolution will start to finally take shape—though tough decisions remain ahead. RER will continue to engage policymakers on important tax priorities for the real estate industry and analyze the implications of the GSA’s federal lease plans on commercial real estate across the country.

Tax Policy

March 21, 2025

Policy Comment Letter

Coalition Urges Treasury to Withdraw FIRPTA Look-Through Rule

FIRPTA, LookThrough Rule FIRPTA,

Tax Policy

March 17, 2025

Roundtable Weekly

Real Estate Industry Fights to Preserve Business Property Tax Deductions Amid GOP Tax Negotiations

Tax Policy

As House and Senate Republicans work to develop the details of their tax legislation, the real estate industry is mounting a unified defense against possible limitations on the deductibility of state and local business property taxes. (BisNow, March 14) Why It Matters Last week, The Real Estate Roundtable (RER) and sixteen other national real estate organizations wrote to members of the House Ways and Means and Senate Finance Committees urging them to oppose any proposal that would cap or eliminate the deductibility of state and local business property taxes. (Roundtable Weekly, March 7) The House Ways and Means Committee is exploring reductions to business-related state and local tax deductions—including property taxes—as part of its effort to offset the costs of a broader GOP tax package. (PoliticoPro, March 11) At a White House meeting on Thursday between President Trump and Senate Finance Committee Republicans, Sen. Ron Johnson (R-WI) said Senators raised corporate SALT as a potential offset. Several Senators reportedly “pitched Trump on repealing the corporate state and local tax deduction.” (CQ, March 13; Politico, March 13) A cap on the deductibility of property taxes paid by U.S. businesses could have devastating consequences for commercial real estate owners, developers, and investors nationwide. State and local property taxes represent 40% of the operating costs of U.S. commercial real estate, a greater expense than utilities, maintenance, and insurance costs combined. The potential tax change could reverse the benefits of the 2017 Tax Cuts and Jobs Act (TCJA) and Section 199A, potentially raising effective tax rates on real estate to 1970s-era levels near 50%. With elevated interest rates, rising insurance premiums, and increased operational expenses pressuring property owners across asset classes, industry advocates argue that eliminating the deduction would only deepen existing challenges, resulting in “job losses, pressure on rents, stress on the banking system, and reduced housing construction.” (BisNow, March 14) RER urges members to amplify this message to their representatives in Congress. Tax Talks Both chambers had a busy week meeting with committee members and Trump administration officials to discuss the overall framework for their respective tax agendas. House Ways and Means Committee Republicans met with Treasury Secretary Scott Bessent on Monday to review tax options, while Senate Finance Committee members separately convened to discuss their approach, revealing significant differences in timeline and strategy. (PoliticoPro, March 10) Ways and Means Committee Chairman Jason Smith (R-MO) has already said that the instructions laid out in the House-approved budget resolution won’t allow for a permanent extension of Trump’s tax cuts, but would allow for an eight- to nine-year extension. (Politico, March 10) GOP lawmakers from high-tax states, including New York, New Jersey, and California, continue to demand that any final tax legislation include lifting or fully repealing the $10,000 SALT cap for individual taxpayers. President Trump has expressed support for repealing the SALT limitation. House and Senate Republicans have yet to reach an agreement on a budget plan that would set the framework for Trump’s legislative agenda. During the White House meeting with Senate Finance Republicans, Trump raised his Gold Visa card concept as a way to pay for the package, along with tariffs and other options. (PoliticoPro, March 13) Looking Ahead House Republicans aim to pass legislation extending Trump-era tax cuts by Memorial Day, while Senate Republicans suggest an August timeframe might be more realistic, with Sen. John Cornyn (R-Texas) noting "there's no consensus" in the Senate. (Politico, March 10) RER will remain actively engaged with lawmakers, reinforcing the message that preserving full deductibility of business property taxes is essential to protecting jobs, promoting investment, housing affordability, and ensuring continued economic stability nationwide.

Policy Landscape

March 17, 2025

Roundtable Weekly

Lawmakers Navigate Action-Packed Week on Capitol Hill

Policy Landscape

Contentious policy discussions surrounding the economy, immigration and government spending continued this week in Washington as lawmakers work towards an agreement on a federal spending bill. State of Play The House narrowly approved a continuing resolution (CR), on March 11 to keep the government funded through September. Speaker of the House Mike Johnson (R-LA) managed to largely keep his GOP conference united, passing the measure days ahead of a possible government shutdown. (CBS News, March 11) To prevent a shutdown, the Senate must approve a measure before the current funding expires on Friday night. Republicans will require support from at least seven Democrats to reach the 60-vote threshold necessary to overcome a filibuster. (Financial Times, March 12) Senate Minority Leader Chuck Schumer (D-NY), told his caucus privately on Thursday, and later in a floor speech, that he would vote to advance a GOP-written stopgap to fund the government through September. While he described the Republican spending bill as "very bad," he emphasized that the "consequences of a shutdown for America would be far worse." (Politico, March 13) National Flood Insurance Program (NFIP) Included in the CR package, is the extension of The National Flood Insurance Program (NFIP). If enacted, this will be Congress’s 32nd short-term extensions of the NFIP. The Roundtable has been a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms. A long-term reform and reauthorization of the NFIP is essential for residential markets, overall natural catastrophe insurance market capacity, and the broader economy. RER, along with its industry partners, will continue advocating for targeted policy solutions that can help alleviate increased insurance costs for housing providers nationwide. (Roundtable Weekly, Feb. 28) Inflation Reduction Act As Congressional Republicans look to offset trillions of dollars in proposed tax cuts in their budget bill, Biden-era provisions from the Inflation Reduction Act (IRA) have sparked debate. (Politico, March 10; Brookings, Jan. 6) This week, a group of 21 House Republicans led by Rep. Andrew Garabino (R-NY), whose districts have benefited from billions in new investments due to IRA incentives, argued that energy tax credits and provisions for manufacturers and builders are essential in achieving President Trump's goal for the U.S. to be "energy dominant". (Politico, March 10) In a letter to President Trump, the group asserted that eliminating certain credits could mean "drastically higher power bills for American families" and emphasized that "many credits were enacted over the course of a 10-year period, which allowed energy developers to plan with these tax incentives in mind." (Reuters, March 11) Immigration – Gold Card Proposal On March 11, RER sent a letter to Commerce Secretary Howard Lutnick, expressing support for the "Gold Card" proposal. This concept aims to bolster U.S. economic growth, address the national deficit, and strengthen America's competitive edge in the global marketplace. The letter reiterated support for the existing EB-5 program, which allows foreign investors to obtain a green card by making substantial investments that result in jobs for American workers and funding for large-scale developments. As RER’s letter emphasized, pairing the "Gold Card" program with the EB-5 framework offers a powerful, dual-track approach that will reform America’s visa system, attract top global talent, and drive foreign investment into strategic, job-creating projects. (Letter, March 11) During a meeting with GOP Senators this week, President Trump discussed his “Gold Card” Program as a revenue source to address the national deficit. Federal Workforce Cuts and GSA Leasing Federal agencies faced a Thursday deadline to submit initial plans for sweeping workforce cuts and reorganizations, following President Trump's directive for "large-scale reductions in force," with a second round of plans due in April. (Politico, March 12) The "Phase 1" agency cut plans due this week mark the first step in the Trump administration's broader downsizing strategy, with "Phase 2" plans—detailing operational overhauls—due by April 14 and set for implementation by Sept. 30. (Politico, March 12) A federal judge ordered the administration to rehire thousands of employees dismissed from six agencies, disputing the Trump administration’s justification for firing the probationary workers. (NYT, March 13) RER will continue to track these developments and their potential implications for government leasing in Washington, D.C. and other major urban centers. (Roundtable Weekly, Feb. 7) Both chambers are in recess next week and set to return to Washington on March 24.

Affordable Housing

March 17, 2025

Roundtable Weekly

Affordable Housing in Focus on Capitol Hill

Affordable Housing

As the nation continues to grapple with housing affordability challenges, recent developments in Washington signal increased attention on this critical issue. From new leadership at federal housing agencies to congressional hearings focused on supply constraints, policymakers are exploring multiple avenues to address the ongoing crisis. Congressional Focus on Housing Supply Constraints This week, the Senate Banking, Housing and Urban Affairs Committee held a hearing titled "Housing Roadblocks: Paving a New Way to Address Affordability," which explored various factors limiting housing supply and driving up costs. (Watch Hearing) In his opening remarks, Chairman Tim Scott (R-SC) highlighted The Roundtable-backed, ROAD to Housing Act (S. 5027 | H.R. 990), his comprehensive legislation aimed at making housing more affordable and widely available. (Sen. Scott Press Release, March 12 | Roundtable Weekly, Dec. 2024) Discussions during the hearing were centered on the challenges of restrictive zoning laws, delayed permitting, land use policies, and escalating material costs. Last week, the House Financial Services Subcommittee on Housing and Insurance held a hearing on “Building Our Future: Increasing Housing Supply in America” which focused on strategies to address the housing shortage. (Committee Memo, March 4) Both Republicans and Democrats on the subcommittee agreed that restrictive zoning laws, high construction costs, and regulatory barriers at the state, local, and federal levels are exacerbating the housing crisis. (CREFC, March 11) Throughout both hearings, solutions for addressing these challenges echoed RER’s housing policy recommendations of simplifying permitting and zoning processes, promoting modular housing construction, strengthening public-private partnerships, and expanding housing incentives such as the low-income housing tax credit (LIHTC). Pulte Confirmed as FHFA Director On Thursday, the Senate confirmed Bill Pulte as the new director of the Federal Housing Finance Agency (FHFA) in a 56-43 vote, marking one of the few Trump cabinet nominations to receive some bipartisan support. (Politico, March 13) RER wrote to Senate leadership this week in support of Pulte as director of FHFA. “His knowledge and experience will prove to be critical in overseeing the Government Sponsored Enterprises—Fannie Mae and Freddie Mac, the key financing sources for America’s housing industry—as well as the 11 federal home loan banks, who play a critical role in investing in local needs including housing, jobs and economic growth,” the letter stated. Speaking with CNN, Pulte said that privatizing the government-sponsored enterprises (GSEs) is not the Trump administration's immediate priority. Instead, he stressed the need for a "significant study" on the potential impact on mortgage rates before any such move. (GlobeSt. March 14) "Fannie and Freddie shouldn’t be in conservatorship forever. But it’s critical to ensure any discussion about exiting conservatorship needs not only to ensure safety and soundness but how it would affect mortgage rates." (CNN, March 13) Opportunity Zones Study A new working paper from Economic Innovation Group provides the first quantitative evidence that Opportunity Zones (OZs) have significantly increased housing supply in designated communities. (Economic Innovation Group, March 11) The study found that the OZ incentive has nearly doubled the number of new housing units in these areas, generating more than 313,000 new residential addresses between 2019 and 2024. The authors also found that this new housing came at a low fiscal cost per unit, suggesting that OZs are proving to be one of the most effective tools in the federal housing policy toolkit. RER has long championed (OZs) as a transformative tool to stimulate economic growth and increase the supply of affordable housing in low-income areas. By creating tax incentives for investments in designated low-income census tracts, OZs have channeled investment into areas most in need. RER has called on Congress to improve and extend the program, which is set to expire along with other key provisions of the TCJA at the end of this year. Sustained recovery and resolution of the affordability crisis will require continued policy reform, increased housing supply, and greater collaboration between the public and private sectors. RER remains committed to working with policymakers to implement solutions that address both immediate needs and long-term challenges in the housing market.

Tax Policy

March 12, 2025

RER Policy Priorities

Call to Action

Business SALT,

The Real Estate Roundtable (RER) and sixteen other national real estate organizations recently wrote to Congress urging them to oppose any proposal that would cap or eliminate the deductibility of state and local business property taxes. (Letter) A cap on property tax deductibility could have devastating consequences for commercial real estate owners, developers, and investors nationwide. Some lawmakers have raised “Business SALT” and potential restrictions on the deductibility of state and local property and income taxes as a possible revenue offset for the tax bill. Call to Action The Real Estate Roundtable urges members to amplify this message to their representatives in Congress. Given that U.S. businesses paid $1.1 trillion in state and local business-related taxes in 2023 (including nearly $400 billion in property taxes), the stakes are extremely high. Effects on CRE and the Broader Economy The ripple effects of this proposal would extend far beyond property owners to impact the broader economy and housing affordability nationwide. U.S. commercial real estate is valued at $18-$22 trillion, supporting 15 million jobs and generating $2.3 trillion in GDP annually. Eliminating the business deduction for property taxes would be the equivalent of raising business owners’ property tax bills by roughly 40 percent, causing employers to owe federal tax on money that they do not have. This tax change could reverse the benefits of the 2017 Tax Cuts and Jobs Act (TCJA) and Section 199A, potentially raising effective tax rates to 1970s-era levels near 50%. Additionally, the increased tax burdens could discourage new investment, deter housing development, and exacerbate the national housing crisis. Given that U.S. businesses paid $1.1 trillion in state and local business-related taxes in 2023 (including nearly $400 billion in property taxes), the stakes are extremely high.

EB-5

March 11, 2025

Policy Comment Letter

RER Supports EB-5 Plus “Gold Card” Concept

EB5, Gold Card Concept,

Tax Policy

March 7, 2025

Roundtable Weekly

Real Estate Industry Urges Congress to Preserve Deductibility of Business Property Taxes

Business SALT SALT TCJA

As discussions continue between the House, Senate, and Administration on how to move forward with a tax and fiscal package, The Real Estate Roundtable (RER) and sixteen other national real estate organizations wrote to members of the House Ways and Means and Senate Finance Committees urging them to oppose any proposal that would cap or eliminate the deductibility of state and local business property taxes. (Letter) A cap on property tax deductibility could have devastating consequences for commercial real estate owners, developers, and investors nationwide. Why It Matters Republican lawmakers intend to enact a major tax and fiscal package this year, and they are under pressure to identify additional revenue offsets to finance a growing list of priorities. Ways and Means Committee Republican Members have scheduled all-day, closed-door meetings next week to discuss the details of their tax plan. Some lawmakers have raised “Business SALT” and potential restrictions on the deductibility of state and local property and income taxes as a possible revenue offset for the tax bill (Roundtable Weekly, Feb. 28) Eliminating the business deduction for property taxes would be the equivalent of raising business owners’ property tax bills by roughly 40 percent, causing employers to owe federal tax on money that they do not have. “Business taxes are fundamentally different from state and local individual income taxes. State and local business taxes are an unavoidable expense, an inescapable cost of doing business,” said Real Estate Roundtable President and CEO Jeffrey DeBoer. (Roundtable Weekly, Feb. 21) DeBoer’s comments were echoed this week in analyses from the Tax Foundation and former Congressional Budget Office Director Douglas Holtz-Eakin. (Tax Foundation, March 3; American Action Forum, March 6). “Firms deduct the costs of generating income—wages, rents, capital costs, etc.—and CSALT is the recognition of those costs. Fully deducting those taxes is … necessary to correctly tax firms. Capping CSALT is professional malpractice,” said Holtz-Eakin. Effects on CRE and the Broader Economy The ripple effects of this proposal would extend far beyond property owners to impact the broader economy and housing affordability nationwide. U.S. commercial real estate is valued at $18-$22 trillion, supporting 15 million jobs and generating $2.3 trillion in GDP annually. This tax change could reverse the benefits of the 2017 Tax Cuts and Jobs Act (TCJA) and Section 199A, potentially raising effective tax rates to 1970s-era levels near 50%. “A cap on the deductibility of property taxes paid by businesses, “would cause self-inflicted injury to the U.S. economy, including unnecessary job losses, higher rents for families and individuals, and other inflationary pressures,” DeBoer said this week. “It would lower commercial property values and create new stresses in the banking system. It is a recipe for a recession.” Additionally, the increased tax burdens could discourage new investment, deter housing development, and exacerbate the national housing crisis. Call to Action RER urges members to amplify this message to their representatives in Congress. Given that U.S. businesses paid $1.1 trillion in state and local business-related taxes in 2023 (including nearly $400 billion in property taxes), the stakes are extremely high. Next Steps House and Senate Republicans remain divided on several key issues as they work to prevent a March 14 government shutdown and agree on the parameters of a larger tax and fiscal reconciliation bill. (USA Today, March 7) The impasse centers on whether to pursue one big bill or a two-bill strategy, the size of spending reductions, how to deal with the debt ceiling, and the budget baseline that will determine the need for offsetting tax increases. The impasse could push resolution of the tax issues into the second half of the year.

Energy

March 7, 2025

Roundtable Weekly

Policymakers Sharpen Focus on Grid Reliability

Electric Grid Energy Policy

Recent legislative hearings and administrative initiatives have highlighted the critical need for a resilient and affordable electricity supply. The Big Picture The U.S. electric grid is under increasing strain from surging energy demand, driven by AI-powered data centers, manufacturing growth, and broader electrification efforts. (North American Electric Reliability Corp., Feb. 28) (Wood Mackenzie, Feb. 11) EPA Administrator Lee Zeldin’s initiative for “Powering the Great American Comeback,” and DOE Secretary Chris Wright’s 9-point plan for US “energy dominance,” outlined agency strategies emphasizing permitting reform, strengthening grid reliability, expanding U.S. energy production to fuel economic growth, and position the U.S. as a global leader in AI and advanced energy technologies. As The Roundtable’s Policy Guide on building performance standards states, the transition to a digital economy raises serious concerns about electricity availability. “AI could soon need as much electricity as an entire country” as “[v]ast swaths of the U.S. are at risk of running short of power.” (Roundtable Weekly, Jan. 25) Why It Matters Policymakers and industry leaders are debating how to balance investment in renewable energy, transmission infrastructure, and traditional baseload generation sources to ensure stable electricity supply. (E&E News, Feb. 26) During this week’s joint address to Congress, President Trump emphasized the administration’s focus on reducing energy costs: “A major focus of our fight to defeat inflation is rapidly reducing the cost of energy … That’s why, on my first day in office, I declared a national energy emergency… It’s called drill, baby, drill.” In a new report from The Center for Strategic & International Studies warns that while AI is digital, its biggest hurdle is physical infrastructure. The report explores using President Trump’s energy “emergency” declaration to fast-track permitting and urges a stronger DOE role in accelerating nuclear projects. (Axios, March 5) Congressional Hearing On Wednesday, the House Energy and Commerce Committee’s Subcommittee on Energy convened a hearing titled "Scaling for Growth: Meeting the Demand for Reliable, Affordable Electricity.” Lawmakers and experts debated permitting delays, transmission bottlenecks, and regulatory uncertainty affecting the nation’s ability to meet growing energy needs. (Hearing Memo, March 5) Industry experts argued that regulatory hurdles are slowing energy infrastructure projects, creating a gap between federal energy goals and grid capacity. (Latitude Media, March 5) Clean Energy & Economic Impact The American Clean Power Association (ACP) reports that while the Inflation Reduction Act (IRA) has boosted clean energy investment, uncertainty over efforts to cut tax credits raises concerns about long-term project financing. In 2024, U.S. developers added 48 gigawatts of new utility-scale solar, storage, and wind capacity—a 33% increase from the previous year. (ACP Report, March 5) The clean energy industry argues that wind and solar projects can be built faster than natural gas and nuclear, making them essential for stabilizing the grid. (E&E News, Feb.26) 79% of operational clean power capacity is now located in Republican-held districts, with GOP districts also home to 77% of new clean energy additions last year. (PoliticoPro, March 5) North America’s data center sector doubled its construction supply in 2024 to a record 6,350.1 megawatts (MW), underscoring the increasing power demands of AI-driven computing, according to CBRE’s latest North American Data Center Trend Report. (ConnectCRE, March 4) The Real Estate Roundtable will continue working with the administration to advance policies that streamline energy project approvals, strengthen grid resilience, ensuring a stable, reliable power supply to fuel economic growth and innovation.

Beneficial Ownership

March 7, 2025

Roundtable Weekly

Treasury Halts Corporate Transparency Act Enforcement for U.S. Businesses

Beneficial Ownership Corporate Transparency Act CTA

This week, The U.S. Department of Treasury announced it will suspend enforcement of the Corporate Transparency Act (CTA) for U.S. citizens and domestic reporting companies. (CNBC, March 2) Why It Matters The agency will not impose penalties or fines tied to the CTA’s beneficial ownership reporting requirements, either under current deadlines or future rule changes. (BisNow, March 4) Treasury plans to narrow the rule’s scope to apply only to foreign reporting companies, with a forthcoming rulemaking proposal. Due to the far-reaching scope of the CTA, RER has long raised concerns about the regulatory burden and cost the CTA would impose on many commercial and residential real estate investment businesses. (Roundtable Weekly, Dec. 2024) The decision marks a major shift in financial transparency regulation, easing compliance burdens on small businesses and other domestic entities. The law, enacted in 2021, was aimed at curbing illicit financial activity by requiring companies to disclose their beneficial owners the Financial Crimes Enforcement Network (FinCEN). The decision aligns with President Trump’s efforts to cut back on regulatory burdens, particularly for small businesses. What’s Next Treasury Secretary Scott Bessent called the move a "victory for common sense," framing it as part of the administration’s broader deregulatory push to bolster economic growth. “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy,” said Secretary Bessent. (Treasury Press Release, March 2) Treasury will soon propose new rules to formally limit CTA enforcement to foreign reporting companies. RER’s Real Estate Capital Advisory Committee (RECPAC) will continue to closely track developments related to the enforcement of the CTA.

Tax Policy

March 7, 2025

Policy Comment Letter

RER & Coalition Urges Congress to Preserve Full Deductibility of Business-Related Property Taxes

Business SALT, SALT, Tax Policy,

Policy Landscape

February 28, 2025

Roundtable Weekly

Major Tax and Fiscal Package Gains Momentum as House Passes Budget Resolution

Business SALT Policy Landscape Tax Policy

House Republicans’ effort to pass a massive tax and fiscal package received a jolt of momentum this week after a cliffhanger vote on the House floor Tuesday night. Passed by a narrow vote of 217-215, the House resolution would authorize $4.5 trillion in tax cuts, provided congressional committees can identify $2 trillion in spending reductions. House Budget Proposal Under the deal negotiated with fiscal conservatives in the House, if congressional committees cannot agree on $2 trillion in savings, the size of the authorized tax cut will automatically adjust downwards. If they can agree on more than $2 trillion in savings, the size of the authorized tax cuts would adjust higher. (House Committee Report, Feb. 18) The House resolution also includes a controversial $4 trillion increase in the national borrowing limit, along with allocations of up to $200 billion for border security and $100 billion for defense funding. (Roll Call, Feb. 25; AP, Feb. 25)) Shortly before the vote, The Roundtable joined a broad business coalition urging Congress to pass the House budget resolution to prevent a looming tax hike on pass-through businesses. (Letter, Feb. 24) Next Steps Both the House and Senate chambers must now align on a budget resolution before moving forward with a reconciliation bill detailing the spending cuts, tax reductions, and other measures. Senate Republicans have expressed reservations about the House's approach, particularly concerning the scale of spending cuts and the structure of tax extensions. Senate leaders have already signaled they will push for changes to ensure the 2017 tax cuts become permanent, as the House plan may lack the fiscal room to do so while also accommodating President Trump’s proposed new tax breaks. Senate Majority Leader John Thune emphasized the complexity of the task, stating, "It's complicated. It's hard. Nothing about this is going to be easy." (The Hill, Feb. 27) View from The White House For weeks, the president has endorsed the House plan as the best way to achieve his top legislative priorities in one move, yet he has also signaled openness to the Senate's alternative or a compromise blending both approaches. “So the House has a bill and the Senate has a bill, and I’m looking at them both, and I’ll make decisions,” President Trump said at the White House on Tuesday. “I know the Senate’s doing very well, and the House is doing very well, but each one of them has things that I like, so we’ll see if we can come together.” Revenue Offsets and Business SALT Some lawmakers have raised “Business SALT” and potential restrictions on the deductibility of state and local property taxes as a possible revenue offset for the tax bill. Eliminating the business deduction for property taxes would be the equivalent of raising property tax bills on commercial real estate by roughly 40 percent. “Business taxes are fundamentally different from state and local individual income taxes. State and local business taxes are an unavoidable expense, an inescapable cost of doing business,” observed Real Estate Roundtable President and CEO Jeffrey DeBoer last week. (Roundtable Weekly, Feb. 21) “Employers would owe federal tax on money that they do not have. It would lead to insolvencies and foreclosures. It would cause self-inflicted injury to the U.S. economy, including unnecessary job losses, higher rents for families and individuals, and other inflationary pressures. It is a recipe for a recession,” said DeBoer. It remains an open question whether the House and Senate will use a “current policy” budget baseline that would not count the extension of the 2017 tax cuts as a revenue loss. A current policy baseline could significantly reduce the pressure to identify spending reductions and revenue offsets. (PoliticoPro, Feb. 28) Averting Government Shutdown In addition to the tax and fiscal package, congressional leaders are under pressure to reach an agreement on current-year federal spending before a government shutdown on March 14. A short-term stopgap bill will likely be necessary. (Axios, Feb. 27, CBS, Feb. 27) Looking Ahead The House budget resolution directs House committees to report their spending reductions and tax changes to the House Budget Committee no later than March 27, 2025.

Energy

February 28, 2025

Roundtable Weekly

RER to Congress: Oversee Federal Grants for Onerous Local Building Performance Laws

Building Performance Standards Energy amp Climate

The Real Estate Roundtable sent a letter on Wednesday asking Congress to oversee nearly a quarter billion dollars in federal grants, used to back city and state efforts setting onerous energy and emissions regulations on buildings. Congressional Hearing The oversight and investigations arm of the U.S. House Energy and Commerce Committee held a hearing Wednesday examining Biden-era energy and environmental program funding. RER submitted its letter for the hearing record, urging Congress to investigate $240 million in federal DOE grants pushing states and localities to adopt regulatory Building Performance Standards (BPS) (Roundtable Weekly, Sept. 6). BPS laws are like “EV mandates” for buildings. These state and local mandates aim to set “net zero” emissions targets for owners and tenants to stop using heaters, boilers, stoves and other appliances that run on natural gas — and “electrify” instead. No U.S. agency has the authority to require private sector building electrification. The U.S. Department of Energy (DOE) should not make an “end run” around this limit on its authority by issuing grants for BPS jurisdictions to accomplish indirectly what federal regulators can’t do directly, RER explained. RER’s letter requested reasonable “strings attached” to the DOE grants. BPS cities and states taking federal taxpayer dollars should be required to study fully the housing affordability, grid capacity, and market impacts of their “net zero” laws. RER has released a comprehensive, peer-reviewed 20-point policy guide for fair BPS mandates. The letter urged Congress to investigate whether jurisdictions receiving federal grants are considering issues raised in RER’s guide to achieve balanced building emissions regulations. CRE Supports EPA ENERGY STAR RER’s letter also strengthened the real estate industry’s longstanding support for market-driven, voluntary, federal partnership programs like US-EPA’s ENERGY STAR program for commercial buildings, and US-DOE’s Better Buildings Initiative. These programs give building owners and developers standardized tools to monetize and forecast “massive energy savings,” help reduce strain on the power grid, and attract global capital to U.S. real estate. “At minimum, any state or locality that received federal grants to develop onerous BPS laws should not levy fines on buildings participating in federal partnership programs,” RER wrote. RER’s position advances the priorities of its Sustainability Policy Advisory Committee (SPAC), chaired by Anthony Malkin (Chairman and CEO, Empire State Realty Trust, Inc.). SPAC leads the organization’s energy advocacy agenda with a message centered on saving money, delivering profits, enhancing grid reliability, and attracting global investments to U.S. real estate. "Building energy, water, and waste performance drives savings, results, and delivers a healthier work environment," said Malkin recently in a discussion with Paul Donofrio, Vice Chairman of Bank of America and Co-Chair of its Responsible Growth Council. (BofA Webinar, Feb. 18) RER will continue to work with the Trump administration to identify opportunities for cost savings while highlighting effective government programs that create American jobs, grow the economy, and optimize America’s energy independence.

Insurance

February 28, 2025

Roundtable Weekly

Lawmakers Push for NFIP Overhaul Amid Short-Term Reauthorization Plan

Commercial Insurance Coverage Pandemic Risks amp Natural Catastrophes Insurance National Flood Insurance Program NFIP

Rising disaster risks—from California wildfires to coastal flooding—are pushing property insurance costs to crisis levels, forcing insurers to retreat from high-risk markets. At the same time, Congress is working to pass another short-term extension of the National Flood Insurance Program (NFIP) before the March 14 deadline, while acknowledging the urgent need for long-term reforms. View from Congress Congress has enacted over 32 short-term extensions of the NFIP. Without comprehensive reforms, property owners and commercial real estate investors face increasing premiums, reduced coverage, and market uncertainty—issues that now threaten housing affordability and broader economic stability. Sen. John Kennedy (R-LA), co-chair of the Senate Banking Committee's NFIP working group, and House Financial Services Republicans warn that Congress must stop “kicking the can down the road” with temporary National Flood Insurance Program (NFIP) extensions. (PoliticoPro, Feb. 25) Lawmakers from both parties have long called for an overhaul. Sen. Kennedy and Sen. Kevin Cramer (R-ND), a member of the Senate Banking Securities, Insurance, and Investment Subcommittee, recently told POLITICO they are open to incorporating other disaster coverage into NFIP renewal. (Politico, Feb. 13) Potential changes to the program could include exploring a national catastrophe insurance program, combining flood, wildfire, and hurricane coverage into a single, federally backed plan. (Politico, Feb. 13) Meanwhile, Sen. Jack Reed (D-RI) noted that the Senate Banking Securities, Insurance, and Investment Subcommittee has been exploring NFIP reforms for years. Roundtable Advocacy The Roundtable has been a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms. (Roundtable Weekly, Oct. 4) Without a robust, long-term NFIP, property owners face escalating risks from future storms, leaving both homeowners and commercial real estate properties vulnerable. A long-term reform and reauthorization of the NFIP is essential for residential markets, overall natural catastrophe insurance market capacity, and the broader economy. BPC Report: The Growing Insurance Crisis A new Bipartisan Policy Center (BPC) white paper, “Rising Property Insurance Costs: Opportunities for Federal Action” highlights the growing affordability and availability challenges facing homeowners, multifamily developers, and insurers as climate risks drive up property insurance costs. (BPC, Feb. 27) Key takeaways from the report: With insurer exits accelerating in high-risk markets, affordable housing developers are struggling—property insurance premiums for multifamily housing jumped 129% between 2018-2023, and disaster risk is intensifying—climate-driven disasters like wildfires, hurricanes, and flooding now account for 90% of property insurance claims. The paper also presented potential opportunities for federal policymakers to help mitigate the impact of rising property insurance costs on housing affordability. Some of BPC’s policy recommendations included: Expanding federal incentives for resilience upgrades, enhancing transparency and data-sharing on disaster risk, allowing insurers, developers, and lenders to make more informed decisions, and considering a federal catastrophe insurance backstop, similar to NFIP, to stabilize private insurance markets. The Roundtable and its industry partners are actively engaging with policymakers and stakeholders to address commercial insurance gaps and rising costs while advocating for targeted policy solutions to ease the financial burden on housing providers nationwide.

Energy & Climate

February 27, 2025

Policy Comment Letter

RER Urges Congress to Investigate Federal Grants for State, Local Climate Laws Regulating Buildings

Building Performance Standards, Building Performance Standards BPS, Energy amp Climate, Inflation Reduction Act,

Quarterly Sentiment Index, RER Quarterly Sentiment Index

February 26, 2025

Quarterly Sentiment Index

2025 Quarterly Sentiment Index

Quarterly Sentiment Index,

Tax Policy

February 24, 2025

Policy Comment Letter

RER & Coalition Urges Congress to Pass House Budget Resolution

Partnerships amp PassThrough Taxation, PassThroughs, Section 199A,

Quarterly Sentiment Index

February 21, 2025

Roundtable Weekly

Sentiment Index Reflects Market Stabilization Amidst Changing Economic Landscape

Quarterly Sentiment Index

The Real Estate Roundtable’s Q1 2025 Sentiment Index, which measures commercial real estate executives’ confidence and expectations about the industry environment, suggests a cautious optimism, fading expectations for additional interest rate cuts, rising insurance costs and larger policy shifts. Roundtable View The Q1 Index reported an overall score of 68, reflecting a 5-point decline from the previous quarter, and the Future Index posted a score of 70 points—a decrease of 7 points from the previous quarter—indicating that optimism for the impact of potential rate cuts has subsided. Roundtable President and CEO Jeffrey DeBoer said, “The commercial real estate industry remains in a transitional period. Although interest rate adjustments have provided some relief, the reality is that capital markets remain constrained, and investors are being more selective. While there are signs of market stability, there is lingering uncertainty over tariffs, expiring tax cuts, and regulatory reforms that could slow investment and economic growth.” He added, “There must be a supportive public policy environment that understands and addresses the multifaceted challenges the industry faces. The Roundtable remains committed to working with policymakers and the administration to advocate and demonstrate the importance of maintaining policies that encourage capital formation, reward entrepreneurial risk-taking, and support jobs and communities.” Topline Findings The Q1 2025 Real Estate Roundtable Sentiment Index registered an overall score of 68, a decrease of 5 points from the previous quarter. The Current Index registered 65, a 4-point decrease compared to Q4 2024. The Future Index posted a score of 70 points, a decrease of 7 points from the previous quarter, indicating optimism for the impact of potential rate cuts has subsided. Nevertheless, survey participants are cautiously optimistic that transaction activity and capital deployment will continue to normalize in 2025. Interest rates, insurance costs and the implications of the Trump administration are top of mind for many investors. Evolving market trends continue to shape the real estate landscape. A majority (70%) of Q1 survey participants expect general market conditions to show improvement one year from now. Additionally, 61% of respondents said conditions are better now compared to this time last year. Only 2% of Q1 participants expect general market conditions to be somewhat worse in a year. A substantial volume of industrial and multifamily assets came online in 2024, though activity is expected to slow in 2025. Return-to-office mandates thus far are not moving the needle on office assets, of which class B and C continue to struggle. A plurality of participants (45%) believe asset values have not meaningfully changed from where they were a year ago. However, respondents are overall optimistic, with most (56%) predicting that asset values will be higher one year from now. The real estate capital markets have seen steady improvement. 47% of respondents believe the availability of equity capital is better than it was a year ago, while 62% said the availability of debt capital has improved from last year. Looking forward, virtually all respondents believe that capital availability will be the same or better in one year (99% and 98% for equity and debt capital, respectively). Data for the Q1 survey was gathered by Chicago-based Ferguson Partners on The Roundtable’s behalf. Read the full Q1 report.

Policy Landscape

February 21, 2025

Roundtable Weekly

Senate Advances Narrow Budget Resolution as President Trump Endorses House “One Bill” Strategy

Budget Policy Landscape

After an all-night session of voting on amendments, the Senate passed a narrow budget resolution focused on border security, defense spending, and expanded energy production. Senate Passes Budget Resolution The Senate vote, 52-48, came two days after President Trump expressed his preference for the House strategy of moving forward with “one big beautiful bill” that would include all of his agenda, including an extension of the 2017 tax cuts. (Reuters, Feb. 21) After its passage, Senate Budget Committee Chairman Lindsey Graham (R-SC) said the Senate resolution would allow the Judiciary and Homeland Security Committees to spend up to $175 billion to implement the President’s border security agenda, increase defense spending by $150 billion, and facilitate energy independence through new on and offshore lease sales and ending the methane emissions fee. (Politico, Feb. 20) Amendments Defeated Although the Senate budget resolution does not include an extension of the 2017 tax cuts, Senate Democrats used the open amendment process to challenge Republicans on tax policy, offering several amendments calling on Senators to reject tax cuts for millionaires and billionaires. These amendments were defeated on party-line votes. (AP, Feb. 21) Senator Mark Warner (D-VA) offered an amendment to create a point of order against any final budget reconciliation bill that does not decrease the cost of housing for American families. It was also defeated on a party-line vote. (WSJ, Feb. 21) Senators Tammy Baldwin (D-WI) and Sheldon Whitehouse (D-RI) filed, but did not offer, an amendment aimed at putting Senators on the record in favor or against recharacterizing carried interest as ordinary income. House and Senate’s Competing Plans The House and Senate appear to be on a collision course. Last week, the Senate Budget Committee passed, on a party-line vote, a much more ambitious budget resolution that includes $4.5 trillion in tax cuts and up to $2 trillion in spending reductions. (Reuters, Feb. 21) The House approach received a major lift on Wednesday when President Trump posted that the House resolution “implements my FULL American First Agenda … not just parts of it,” and that “[w]e need both Chambers to pass the House Budget to ‘kickstart’ the Reconciliation process.” (Barrons, Feb. 19) The House budget could be on the House floor as early as next week. Passage would allow the two chambers to resolve their differences in a conference committee, vote on the compromise budget, and then move to the next stage—committee action on actual legislation. (AP, Feb. 21) Looking Ahead RER will pay close attention to budget discussions coming from both chambers and their implications on crucial real estate policy issues. We will continue to advocate for pro-growth budget considerations in areas such as State and Local Tax (SALT) and carried interest.

Tax Policy

February 21, 2025

Roundtable Weekly

Real Estate Challenges: Business SALT, Carried Interest Emerge as Focal Points of Tax and Budget Discussions

Carried Interest SALT Tax Policy

As congressional Republicans weigh their budget options and consider competing plans from both the House and Senate, their search for revenue offsets has included proposals to restrict the deduction for state and local taxes (SALT) on businesses and raise the tax rate on carried interest. Business SALT Prior to the markup of its budget resolution, the House Budget Committee floated a menu of potential revenue offsets for reconciliation legislation, including a proposal to “eliminate the business SALT deduction.” (New York Times, Jan. 28) Depending on how broadly the business SALT limitation is designed, it could include repealing the deductibility of state and local property taxes paid by commercial real estate owners. Hill discussions on business SALT have intensified in recent weeks. (Bloomberg, Feb. 18) “Eliminating the business deduction for property taxes would be the equivalent of raising business owners’ property tax bills by roughly 40 percent. Employers would owe federal tax on money that they do not have. It would lead to insolvencies and foreclosures. It would cause self-inflicted injury to the U.S. economy, including unnecessary job losses, higher rents for families and individuals, and other inflationary pressures. It is a recipe for a recession,” said Jeffrey DeBoer, President and CEO of The Real Estate Roundtable. The idea of limiting business SALT has support from several outside organizations and, according to Politico, was initially floated by members of the House Freedom Caucus. (Politico, Jan. 15) “Business taxes are fundamentally different from state and local individual income taxes. State and local business taxes are an unavoidable expense, an inescapable cost of doing business,” noted DeBoer. “Property taxes alone are, on average, 40% of operating costs for real estate businesses. In many cases, capping the deductibility of property taxes would require businesses to pay income tax when their actual income and cash flow is negative.” The Roundtable is working, alongside its real estate trade association partners, to raise awareness among policymakers of the risk and harm that a cap on business SALT poses for the industry and the broader economy. Carried Interest President Trump’s recent call on Congress to close the “carried interest tax deduction loophole” has put a national spotlight back on the issue of carried interest and its proper tax treatment. (Financial Times, Feb. 6) Trump’s expression of support for raising taxes on carried interest led Senators Tammy Baldwin (D-WI), Elizabeth Warren (D-MA), Bernie Sanders (I-VT) and others to reintroduce legislation, the Carried Interest Fairness Act. The bill would recharacterize all carried interest as ordinary income. (Politico, Feb. 18) Sen. Baldwin filed a nonbinding amendment on carried interest during the Senate budget resolution debate this week but did not offer it for a formal vote. Carried interest emerged as a political issue in 2007, but remains largely misunderstood to this day. In real estate, carried interest is not compensation for services. General partners receive fees, taxed at ordinary rates, for routine services like leasing and property management. Carried interest is granted for the value the general partner adds, such as business acumen, experience, and relationships. It is also recognition for the risks the general partner takes. In response to the new legislation, the Americans for Tax Reform—alongside a broad coalition of other taxpayer advocacy groups—penned a comment letter urging lawmakers to consider the negative ramifications of this policy. In the letter, the organizations argue that the proposal would discourage investment and reduce growth, urging Congress to oppose the bill. “The current tax treatment of carried interest is an intentional, pro-growth feature of the tax code for more than 100 years that incentivizes risk-taking and entrepreneurship, benefiting investors, public pension funds and retirees.” (Americans for Tax Reform, Feb. 19) The Tax Cuts and Jobs Act of 2017 extended the holding period required for carried interest income to qualify for long-term capital gains treatment from one year to three years. The false narrative surrounding the carried interest issue is that it targets only a handful of hedge fund billionaires and Wall Street executives. The carried interest legislation is far broader and would apply to real estate partnerships of all sizes. “Taxing carried interest at ordinary income rates would discourage the risk taking that drives job creation and economic growth. It would reduce economic mobility by increasing the tax burden on cash-poor entrepreneurs who want to retain an ownership interest in their business. It would have profound unintended consequences for housing affordability and main streets all across our country,” said DeBoer. Looking Ahead As tax negotiations develop, RER will continue to engage with congressional leaders on both sides of the aisle to inform policymakers about the real-world consequences of proposed changes to the deductibility of business SALT and tax treatment of carried interest. While the budget debate will move forward, it will likely be several weeks, if not months, before the tax-writing committees mark-up and vote on the actual details of their tax and revenue legislation.

Q1 Sentiment Index

February 21, 2025

Press Release

NEWS: Market Stabilization Expected Amid Changing Economic Landscape

Quarterly Sentiment Index

(WASHINGTON, D.C.) — The Real Estate Roundtable today released its Q1 2025 Sentiment Index, which registered an overall score of 68, reflecting a 5-point decline from the previous quarter. While industry leaders remain cautiously optimistic, fading expectations for additional interest rate cuts, rising insurance costs, and policy shifts under the new administration are shaping investment decisions. Despite ongoing challenges, survey respondents remain confident that transaction activity will pick up throughout 2025 as investors adjust to the new market realities. Roundtable President and CEO Jeffrey DeBoer said, “The commercial real estate industry remains in a transitional period. Although interest rate adjustments have provided some relief, the reality is that capital markets remain constrained, and investors are being more selective. While there are signs of market stability, there is lingering uncertainty over tariffs, expiring tax cuts, and regulatory reforms that could slow investment and economic growth.” He added, “There must be a supportive public policy environment that understands and addresses the multifaceted challenges the industry faces. The Roundtable remains committed to working with policymakers and the administration to advocate and demonstrate the importance of maintaining a policies that encourage capital formation, reward entrepreneurial risk-taking, and support jobs and communities.” The Q1 Sentiment Index topline findings include: The Q1 2025 Real Estate Roundtable Sentiment Index registered an overall score of 68, a decrease of 5 points from the previous quarter. The Current Index registered 65, a 4-point decrease compared to Q4 2024. The Future Index posted a score of 70 points, a decrease of 7 points from the previous quarter, indicating optimism for the impact of potential rate cuts has subsided. Nevertheless, survey participants are cautiously optimistic that transaction activity and capital deployment will continue to normalize in 2025. Interest rates, insurance costs, and the implications of the Trump administration are top of mind for many investors. Evolving market trends continue to shape the real estate landscape. A majority (70%) of Q1 survey participants expect general market conditions to show improvement one year from now. Additionally, 61% of respondents said conditions are better now compared to this time last year. Only 2% of Q1 participants expect general market conditions to be somewhat worse in a year. A substantial volume of industrial and multifamily assets came online in 2024, though activity is expected to slow in 2025. Return-to-office mandates thus far are not moving the needle on office assets, of which class B and C continue to struggle. A plurality of participants (45%) believe asset values have not meaningfully changed from where they were a year ago. However, respondents are overall optimistic, with most (56%) predicting that asset values will be higher one year from now. The real estate capital markets have seen steady improvement. 47% of respondents believe the availability of equity capital is better than it was a year ago, while 62% said the availability of debt capital has improved from last year. Looking forward, virtually all respondents believe that capital availability will be the same or better in one year (99% and 98% for equity and debt capital, respectively). Data for the Q1 survey was gathered by Chicago-based Ferguson Partners on The Roundtable’s behalf in January. See the full Q1 report. The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy. # # #

Policy Landscape

February 14, 2025

Roundtable Weekly

House GOP Unveils Fiscal Blueprint Calling for Trillions in Cuts to Taxes and Spending

Budget Policy Landscape Tax Policy

After weeks of discussions, the House GOP and Speaker Mike Johnson unveiled their long-term budget blueprint, which would allow congressional committees to move forward with trillions into tax cuts and spending reductions. However, negotiations to fund the government ahead of the March 14 deadline have stalled. Committee Advances Budget Plan The House Budget Committee voted late Thursday night 21-16 to advance their budget resolution, which authorizes up to $4.5 trillion in tax cuts and $2 trillion in spending cuts over the next decade. The fiscal blueprint also calls for $300 billion in new border and defense spending and a two-year extension of the debt ceiling. (Politico, Feb. 12) While Speaker Mike Johnson hopes to bring the resolution to the floor later this month, there are a number of details to hammer out that could hinder its passage. Overcoming the GOP’s extremely narrow majority in the House (218-215) will be a challenge. House Budget Republicans secured passage of their resolution along party lines after striking a deal with the Freedom Caucus to win over fiscal hardliners Reps. Ralph Norman (R-SC) and Chip Roy (R-TX). (Roll Call, Feb. 13) An amendment from Vice Chair Lloyd Smucker (R-PA) cemented the agreement by linking the size of a future tax-cut package to spending reductions. Under the modified resolution, the amount of the tax cuts would be reduced if the legislation does not include the full $2 trillion in spending reductions. Tax Negotiations House Ways and Means Chair Jason Smith (R-MO) also faces a difficult road to extend key provisions in the 2017 Tax Cuts and Jobs Act (TCJA). The $4.5 trillion figure for tax cuts is not enough to permanently extend the TCJA and include President Trump’s other tax priorities. (Politico, Feb. 12) How to come up with the spending cuts to fund a permanent TCJA extension and other priorities remains a fundamental question. The budget package is expected to include significant reductions in Medicaid, which provides health benefits to low-income families and individuals. President Trump has expressed concern with those health care cuts. (Politico, Feb. 13) Some estimates place the cost of the President’s additional tax priorities as high as $2 trillion. These include exempting tips, overtime pay, and Social Security benefits from tax. Tax-writers must also find a way to pay for any adjustments to the SALT limitation, which are widely understood as needed to secure Blue State Republican votes in the House. Tax-writers are expected to look for other tax offsets, raising concerns that they could target issues such as the deductibility of state and local property taxes paid by businesses. Limits on the deductibility of property taxes would upend the federal income tax by denying a deduction for a basic cost of doing business. It would severely hurt property values, real estate markets, and the millions of Americans employed directly and indirectly by the real estate industry. “Capping or eliminating the federal deduction for business property taxes would be a major policy misstep,” said Roundtable President and CEO Jeffrey DeBoer. “Property taxes are not optional—they are a fundamental cost of doing business.” “This change would force businesses to pay federal tax on money they never actually receive, placing a heavy burden on real estate investment and development. The impact would be severe for property owners repositioning assets—such as converting office buildings into housing—where property taxes remain due even when rental income is disrupted. Losing this deduction would drive up operating costs, which would ultimately be passed to consumers through higher rents, and hindering economic growth at a time when we should be encouraging investment and revitalization," said DeBoer. House Republicans are also considering shorter extensions of the expiring tax cuts in a bid to fit them into the budget plan’s constraints. However, in a letter released Thursday, Senate Republican leaders, including Majority Leader John Thune (R-SD), Finance Chair Mike Crapo (R-ID) and seven others, said they would not support a tax package that only provides temporary relief from tax hikes. They said that any extension of the provisions due to lapse at the end of this year “must” be permanent. (Politico, Feb. 13) Meanwhile, congressional Democrats have attacked Republican’s tax and spending cuts as a “betrayal of the middle class,” though they have minimal power to stop the GOP’s budget plan if Republicans are able to align on a strategy. (Politico, Feb. 13) Reconciliation To avoid the Senate filibuster, the tax and spending cuts will require the House and Senate to pass identical budget resolutions as part of the reconciliation process—and the Senate is pursuing its own budget proposal. (Politico, Feb. 12) On Wednesday, the Senate Budget Committee approved its own budget blueprint, which includes up to $345 billion in funding for border security, immigration enforcement and defense. However, the resolution punts on any sweeping tax and spending cuts. (Washington Times, Feb. 12) Preferring a two-step strategy over the House Republican’s plan, Senate Budget Chair Lindsey Graham (R-SC) said, “To my colleagues in the House, I hope you can pass one, big beautiful bill.” “But we’ve got to move on this issue.” (Politico, Feb. 12) The March 14 deadline to fund the government is fast approaching. House Appropriations Chair Tom Cole (R-OK) indicated that negotiations are ongoing, but with much activity and attention focused on budget resolutions, little progress has been made. If congressional leaders are unable to extend government funding before the deadline, key programs like the National Flood Insurance Program (NFIP) could lapse. (Politico, Feb. 12) Looking Ahead While the Senate will be in session next week after President’s Day, the House is out of session until February 24. The Roundtable will continue to follow developments on tax and budget negotiations closely.

Tariffs

February 14, 2025

Roundtable Weekly

Tariffs: CRE Faces Cost Pressures

Tariffs

President Trump signed a memorandum Thursday directing his advisers to calculate new global tariff levels, a move that could disrupt international trade norms and spark intense negotiations, in addition to his recently increased duty on steel and aluminum. State of Play The directive considers not just existing tariffs but also foreign taxes, subsidies, and exchange rate policies that Trump views as “unfair.” His goal is to balance trade relationships and push companies to shift manufacturing back to the U.S. (AP News, Feb. 13) The reciprocal tariffs will not be immediately imposed, but will be customized for each foreign trading partner, based on five different areas: tariffs the nation imposes on U.S. products, unfair taxes imposed, cost to U.S. businesses and consumers from another country’s policies, exchange rates, and any other practices the trade representative’s office determines is unfair. (The Hill, Feb. 13) The proposed 25% duty on steel and aluminum announced Monday, set to take effect March 12, 2025, has raised concerns about higher construction costs, supply chain disruptions, and broader economic impacts on commercial real estate. (Bloomberg, Feb. 10) Trump's trade adviser Peter Navarro said the measures would help U.S. steel and aluminum producers and shore up America's economic and national security. (Reuters, Feb.11) Commercial Real Estate Impact Tariffs may present several challenges for commercial real estate, including increased construction costs, potential project delays, and heightened uncertainty among investors. Higher tariffs on Chinese steel and aluminum will increase structural material costs, while tariffs on Canadian lumber will impact framing and finishing costs. Additionally, any trade disruptions with Mexico could further strain budgets by limiting access to affordable cement, steel, and glass. (Capright, Feb.5) Many commercial real estate projects depend on materials imported from Canada, including softwood lumber for framing and steel for structural components. With tariffs in place, developers are seeing their material costs surge, leading to increased project costs and delayed developments. (InvestinginCRE, Feb.7) The National Association of Home Builders (NAHB) projects that these tariffs could raise the cost of imported construction materials by $3-4 billion, depending on the specific rates. This increase may affect builders' ability to deliver new projects and could have implications for housing affordability. (NAHB | GlobeSt, Feb.11) Tariffs are expected to raise construction costs, potentially by up to 10%. This increase could lead to higher project costs and may affect the feasibility of certain developments. (GlobeSt, Feb.12) In an NAHB housing market index survey published last week, 64% of builders said they expected higher material costs to be an issue for them in 2025. (NationalMortgageNews, Feb.11) Looking Ahead Commerce Secretary nominee Howard Lutnick, and trade representative Jamieson Greer, will evaluate within 180 days whether "remedies" are needed for reciprocal trade relations in a country-by-country report. The Office of Management and Budget nominee Russell Vought will submit a report on the fiscal impact of these measures within the same timeframe. Lutnick said the measures could be ready as soon as April 2. (NYT, Feb. 13) The Real Estate Roundtable will continue to engage with policymakers to reduce regulatory burdens and eliminate other obstacles that are impeding development and expand America’s housing infrastructure. We will continue to provide updates as the global trade situation evolves.

Tax Policy

February 7, 2025

Roundtable Weekly

Tax Policy This Week in Washington: Carried Interest and Budget Talks

Budget Policy Landscape Tax Policy

As budget negotiations continued this week in the House and Senate, President Donald Trump met with Republican lawmakers on Thursday to discuss his tax priorities. Tax Talks White House Press Secretary Karoline Leavitt told reporters that during a Thursday meeting with Republican lawmakers, President Trump outlined his tax priorities, including closing the “carried interest tax deduction loophole,” along with other provisions he wants included in a sweeping tax bill this year. (Bloomberg, Feb. 6 | Axios, Feb.7) President Trump also reiterated ideas he promoted on the campaign trail, including ending taxes on tips, overtime and Social Security payouts, as well as adjusting deductions for state and local taxes. Also this week, Congressional Democrats, led by Sen. Tammy Baldwin (D-WI), Rep. Marie Gluesenkamp Perez (D-WA), and Rep. Don Beyer (D-VA), introduced their own bill, the Carried Interest Fairness Act, to tax all carried interest income at ordinary tax rates. Appearing on Fox Business this week, Treasury Secretary Scott Bessent rejected the idea of a short-term extension of President Trump’s tax cuts, emphasizing they should be made permanent. (Fox Business, Feb. 5) The Roundtable’s Position Since carried interest and its tax treatment first emerged as a controversial political issue in 2007, The Roundtable has consistently opposed legislative proposals to tax all carried interest at ordinary income rates. “The proposals would penalize entrepreneurs, slow housing production, and reduce economic mobility,” said Roundtable President and CEO Jeffrey DeBoer. “The tax code has never, and should never, limit the reward for risk-taking only to deep-pocketed investors who have cash to deploy.” “Real estate partnerships of all sizes across the country, small and large, use carried interest. It is not compensation for services, and it is not comparable to wages. Carried interest is granted for the value a general partner adds beyond routine services, and it is a recognition of the risks a general partner takes, such as funding predevelopment costs, guaranteeing construction budgets and financing, and exposure to potential litigation,” said DeBoer. Reversing well-established tax law and ending carried interest would raise little revenue. It would, however, reduce construction activity, especially higher-risk and much-needed projects like affordable housing, commercial developments in long-neglected neighborhoods, and the cleanup of contaminated land. “Today, construction costs are higher than ever and financing remains challenging. Now is not the time to raise taxes on U.S. real estate,” said DeBoer. Senate Proposal Senate Budget Chair Lindsey Graham (R-SC) announced today that his committee will convene Wednesday and Thursday to debate and vote on his budget resolution, setting the stage for a future vote on a bill focused solely on border security, defense, and energy. (Politico, Feb. 7) Their decision comes ahead of a meeting with President Trump at Mar-a-Lago today, where they also plan to discuss budget reconciliation. (Politico, Feb. 5) "This budget resolution jumpstarts a process that will give President Trump’s team the money they need to secure the border and deport criminals, and make America strong and more energy independent," Graham said in a statement. With a 53-seat majority, Senate Republicans have a bit more flexibility than the House, but still need to unite their party, as some members demand significant spending cuts. Senate GOP leaders plan to revisit the extension of the TCJA 2017 tax cuts later this year through a second reconciliation package. House Proposal Several House Republicans met with President Trump on Thursday to resolve intraparty spending disputes. House Majority Leader Steve Scalise (R-LA) said the meeting was designed so House Republicans could “get in a place” where they could advance their stalled budget blueprint “next week.” (Politico, Feb. 7) Speaker Mike Johnson had aimed to release a framework today but now says Republicans will be working all weekend to finalize it. GOP leaders have warned members that full details won’t be available until Monday, and a topline spending agreement remains elusive.

Tariffs

February 7, 2025

Roundtable Weekly

White House Imposes Tariffs on China, Delays on Canada and Mexico

Carbon Tariff Tariffs

Over the past week, new developments have emerged regarding tariffs affecting China, Canada, and Mexico. As the situation continues to evolve, industry leaders are closely monitoring the status of these executive orders and their impact on affordable housing and the cost of essential construction materials. State of Play Tariffs on these three nations went into effect on February 1. Currently, tariffs on imports from Canada and Mexico are on a 30-day hold, while the additional duties on Chinese goods are in effect. (WSJ, Feb. 4) Shortly after the announcements, President Trump reversed course and paused the tariffs on Mexico for one month following a conversation with Mexican President Claudia Sheinbaum. (ABCNews, Feb. 3) As part of the arrangement reached with the U.S., President Claudia Sheinbaum of Mexico said her country would deploy to the U.S.-Mexico border 10,000 members of the Mexican National Guard to focus on curbing the flow of fentanyl and illegal migrants into the U.S. (New York Times, Feb. 3) After negotiations, Canadian Prime Minister Justin Trudeau and President Trump also agreed to a 30-day pause on the tariffs. Trudeau posted on X that the pause would occur “while we work together,” stating that his government would name a fentanyl czar, list Mexican cartels as terrorist groups and launch a “Canada-U.S. Joint Strike Force to combat organized crime, fentanyl and money laundering.” (APNews, Feb. 3) Chinese and U.S. officials have yet to arrive at a similar agreement as Canada and Mexico. Beijing is readying an opening bid to try to head off greater tariff increases and technology restrictions from the Trump administration. (WSJ, Feb. 3) The Customs Tariff Commission of China’s cabinet, the State Council, imposed 15% tariffs on U.S. coal and liquefied natural gas imports, while raising levies on crude oil, agricultural machinery and certain vehicles. (WSJ, Feb.4) Commercial Real Estate Impact Higher tariffs on Chinese steel and aluminum will increase structural material costs, while tariffs on Canadian lumber will impact framing and finishing costs. Additionally, any trade disruptions with Mexico could further strain budgets by limiting access to affordable cement, steel, and glass. (Capright, Feb.5) The National Association of Home Builders (NAHB) has raised concerns about how tariffs on materials like Canadian softwood and Mexican gypsum could significantly increase construction costs, thereby raising new home prices. (Axios, Jan. 31) Sixty-four percent of a home’s construction cost is building materials—27% of which are supplied by China, 11% by Mexico and 8% by Canada, according to data from the NAHB. (GlobeSt, Feb. 6) (Bloomberg, Feb.3) Imposing additional tariffs on these imports will raise material costs, ultimately driving up housing prices as the U.S. works to rebuild from natural disasters and address a severe housing supply shortage. Tariffs and Clean Materials Congressional Republicans have joined Trump in exploring a possible carbon-specific clause in future rounds of tariffs, with the goal being to leverage data showing that the United States produces certain materials “cleaner” than foreign adversaries—namely China—and impose a fee on certain imports. Recently, Sen. Bill Cassidy (R-LA) proposed a bill, the "Foreign Pollution Fee Act," that would impose a "foreign pollution fee" on imported carbon-intensive products—including construction materials. (RW, Jan.17) The Roundtable submitted comments on the Foreign Pollution Fee Act last month. The letter raises concerns regarding the impact of a carbon tariff on affordable housing construction, rebuilding after natural disasters, and technical issues on calculating “indirect emissions” associated with product manufacturing. The letter suggests forward-thinking refinements to the bill’s language. As attention now shifts towards the new March 1 deadline, The Roundtable will continue to provide updates as the global trade situation evolves.

Office Markets

February 7, 2025

Roundtable Weekly

GSA Considers Massive Lease Reductions, Sales of Federal Properties

Federal Office Leases General Services Administration GSA Office Markets Return to Office

This week, the General Services Administration (GSA) announced its plan to sell half of the federal properties it leases—a decision that compounds President Trump’s return-to-office mandate and Elon Musk’s “buy out” offered to federal workers. (Newsweek, Feb. 5) Why It Matters In 2024, GSA owned or leased more than 360 million square feet of space across more than 8,000 buildings nationwide, according to its most recent annual report. Just as federal workers are returning to offices—prompted by a Trump Executive Order —the “cumulative damage” of canceling federal leases under a Department of Government Efficiency (DOGE) led initiative “would be severe.” (GlobeSt, Jan. 30). A recent Trepp analysis quantifies the impact of GSA-leased space in the Chicago, Dallas, Los Angeles, New York City, Washington, DC, and other metro areas where federal tenancy accounts for significant percentages of total office inventory. (Roundtable Weekly, Jan. 31) If enough termination clauses are exercised, these markets could face economic disruption, with no guarantee of equivalent replacement tenants. (GlobeSt., Jan. 30) Last week, a memo was sent from GSA headquarters in Washington, DC instructing regional managers to begin terminating leases on all of the roughly 7,500 federal offices nationwide. Recently appointed acting GSA administrator Stephen Ehikian also announced two of the agency’s properties, including their headquarters building at 1800 F Street, NW, will be listed for sale in a ‘first step’ to cutting real-estate expenditure. (AP News, Feb. 4). GSA recently appointed Michael Peters as commissioner of the Public Buildings Service (PBS), which will play a role in managing cost-effective workspace solutions for federal agency customers. Peters told staff in an email that non-Defense Department federal building space — both owned and leased — “should be reduced by at least 50%.” (GlobeSt. Feb. 4) What to Watch The extent of the GSA’s leased and owned property inventory will be affected by any reductions in the federal workforce. A federal judge on Thursday extended the deadline for government employees to decide on the Trump administration's "buyout" offer, delaying the original cutoff until Monday amid uncertainty over the evolving terms of the "Fork in the Road" email. (Axios, Feb. 6) As of Thursday, roughly 50,000 federal workers had accepted President Trump's deferred resignation offer ahead of the original deadline. (Washington Post, Feb. 6 ) DOGE, led by Elon Musk, estimates the push for “deferred resignations” could shrink the federal workforce by 5% to 10%. (AP News, Jan. 28) (Axios, Jan. 28) The administration argued the delay was unnecessary and would disrupt workforce expectations, but said it would comply with the order. The Roundtable will continue to keep members informed about further developments as the administration's policies evolve.

Tax Policy

February 7, 2025

Roundtable Weekly

Oral Arguments Heard in Sirius Solutions v. Commissioner Case

limited partnerships

This week, the Fifth Circuit heard oral arguments in Sirius Solutions v. Commissioner, a pivotal case that could redefine the self-employment (SECA) tax obligations of many partners in real estate and other limited partnerships. At issue is the longstanding statutory exception from SECA taxes for limited partners and recent efforts by the IRS to restrict the scope of the limited partner exception to only passive investors. Why It Matters The Fifth Circuit’s ruling in Sirius will set a precedent for future SECA tax cases, There are more than 441,000 limited partnerships in the U.S., with over 10 million partners. Nearly half of these limited partnerships are real estate partnerships. If the IRS position prevails, it could result in widespread tax increases on limited partners who engage in any level of activity, directly or indirectly, with respect to the partnership and effectively raise the tax burden on real estate businesses. Roundtable Advocacy In August 2024, The Roundtable submitted an amicus brief to the Fifth Circuit and argued that the IRS’s interpretation, upheld by the Tax Court, is flawed, pointing to decades of state law that allows limited partners to provide services and still retain their limited partner status. (Roundtable Weekly, September 6) The brief emphasized that pre-1977 state court decisions and the IRS’s own 1994 proposed regulations contradict the government’s position. The passive investor test is found nowhere in the statute and rests on a fundamental misunderstanding of state laws that Roundtable members and others have relied on for decades. Oral Arguments The latest oral arguments on Feb. 6 suggested some judicial skepticism about the IRS’s position. (TaxNotes, Feb. 7). The three-judge panel in the Fifth Circuit Court of Appeals raised the lack of statutory basis for a passive investor test under Section 1402(a)(13) and questioned whether taxpayers had adequate notice of the IRS’s evolving position. The panel also challenged the workability of the IRS’s multi-factor test used to determine whether a partner is active or passive. Judge Andrew Oldham noted that IRS forms and guidance have never mentioned a passive investor requirement and called into question whether taxpayers were ever clearly told how the government interprets the law. (Oral Arguments) The Roundtable brief was cited during the oral argument when Judge Oldham asked whether a taxpayer could be both a general partner and limited partner in 1977. A decision is expected in the next few months. The Roundtable remains committed to protecting entrepreneurs’ ability to flexibly organize in partnerships and other pass-through entities that promote capital formation, risk-taking, and economic growth, and it will remain engaged as the SECA dispute moves forward.

Housing

February 7, 2025

Roundtable Weekly

Scott Turner Confirmed as HUD Secretary, Eyes Major Housing Policy Shifts

Affordable Housing GSE Reform HUD Housing and Urban Development agency Opportunity Zones OZs

Scott Turner was confirmed Wednesday as Secretary of Housing and Urban Development (HUD) and outlined his top priorities, including privatizing Fannie Mae and Freddie Mac, streamlining HUD operations, reducing regulatory barriers to lower housing costs, and expanding opportunity zones to drive investment in underserved communities. A HUD Overhaul Privatizing Fannie and Freddie: Turner has identified the privatization of Fannie Mae and Freddie Mac, the government-sponsored entities that guarantee most U.S. mortgages, as a top priority. (WSJ, Feb. 5) His department will collaborate with the Treasury Department and Congress on the process, though a clear timeline and level of commitment from the White House remain uncertain. While privatization could encourage more market competition, skeptics warn of potential disruptions in the $12 trillion mortgage market, including the risk of higher borrowing costs. Supply-side housing solutions: Turner has signaled a shift towards increasing housing supply to address affordability concerns, stating in his confirmation hearing that the U.S. “needs millions of homes” across all types of housing, including multifamily, single-family, and manufactured homes. The administration is expected to ease regulations that developers say have inflated construction costs, potentially rolling back Biden-era policies and implementing new incentives for affordable housing development. (Bisnow, Feb.6) Opportunity Zones Revival Turner previously led the White House Opportunity and Revitalization Council (WHORC), and played a key role in driving the Opportunity Zones Initiative, and has committed to continuing this work. (AP News, Feb.5) The Roundtable has long championed Opportunity Zones (OZs) as a transformative tool to stimulate economic growth and increase the supply of affordable housing in low-income areas. By creating tax incentives for investments in designated low-income census tracts, OZs have channeled investment into areas most in need. RER has called on Congress to improve and extend the program, which is set to expire along with other key provisions of the TCJA at the end of this year. Sen. John Barrasso, (R-WY) highlighted Turner’s work on opportunity zones, saying he had helped bring $50 billion to 8,700 distressed neighborhoods. “These investments helped to revitalize many forgotten communities,” Barrasso said on the floor before the confirmation vote. (Roll Call, Feb. 5) Turner’s confirmation signals a significant shift in federal housing policy, emphasizing market-driven solutions, regulatory rollbacks, and public-private partnerships. The Roundtable continues to encourage policymakers to enact measures that will expand America’s housing infrastructure. We also remain engaged in potential reforms to the GSEs to ensure that they continue to meet America’s housing finance needs.

Beneficial Ownership

February 4, 2025

Policy Comment Letter

RER and Coalition Urge Treasury to Delay CTA Reporting Requirements

Beneficial Ownership amp the Corporate Transparency Act, Corporate Transparency Act CTA,

Policy Landscape

January 31, 2025

Roundtable Weekly

White House Moves on Plans to Slash Federal Funding, Staff, and Office Leases

Energy amp Climate Office Markets Return to Office

Funding freezes, employee buyouts and scrutiny of the federal office lease portfolio were among the actions taken by the White House and its Department of Government Efficiency (DOGE) this week, as the Trump Administration acted on promises to shrink the federal government. Federal Funding On Monday, the Office of Management and Budget (OMB) issued a memo implementing a "Temporary Pause" on certain federal financial assistance programs. (Politico, Jan. 28) This directive aimed to stop federal loans and grants “implicated” by seven recent executive orders pertaining to areas such as clean energy, DEI initiatives, transgender rights, and foreign aid. By Wednesday, OMB issued a 2-sentence memo rescinding the temporary pause, with the goal to moot the lawsuit filed in the interim that resulted in a federal court restraining order placing the spending freeze on ice. (NYT, Jan. 28) (The Hill, Jan. 29) OMB’s reversal does not lift previous holds on funding of programs disfavored by the administration. Underlying Executive Orders remain in effect regarding the U.S. withdrawal from the Paris climate treaty, “unleashing” American energy resources with a preference for oil and gas development, and abandoning federal DEI programs. The administration may also issue future spending freezes. (Politico, Jan. 29) The administration will continue to reshape federal spending policies through executive action, raising significant constitutional issues that could reach the U.S. Supreme Court. (ABA Journal, Jan. 29). Federal Workforce The Office of Personnel Management (OPM) announced a buyout program offering federal employees severance equal to eight months' salary if they resign by February 6. (The Hill, Jan. 30) Employees who stay do not have a guarantee of their job – but must return to full-time, in-office work as per an executive order signed by Trump on inauguration day. (Washington Post, Jan. 23) DOGE, led by Elon Musk, estimates the push for “deferred resignations” could shrink the federal workforce by 5% to 10%. (AP News, Jan. 28) (Axios, Jan. 28) Meanwhile, Trump has ousted Democratic appointees of the National Labor Relations Board (NLRB) and the Equal Employment Opportunity Commission (EEOC) before the expiration of their terms. Litigation challenging these firings is highly likely. (Federal News Network, Jan. 28). Federal Office Leases DOGE is also reportedly focused on reducing federal government leases in private-sector buildings. Musk has installed “longtime associates” at the General Services Administration (GSA) to reduce the footprint of U.S. owned and leased real estate. (NextGov, Jan. 30) Musk’s visit yesterday to GSA headquarters could “presage more cost-cutting efforts” to “right-size the Federal real estate portfolio of more than 7,500 leases.” (New York Times, Jan. 30) A recent Trepp analysis quantifies the impact of GSA-leased space in the Chicago, Dallas, Los Angeles, New York City, Washington, DC, and other metro areas where federal tenancy accounts for significant percentages of total office inventory. Just as federal workers are returning to offices—prompted by a Trump Executive Order signed after his inauguration—the “cumulative damage” of canceling federal leases under a DOGE-led initiative “would be severe.” (GlobeSt, Jan. 20). Looking Ahead Ongoing budget reconciliation discussions on Capitol Hill suggest that further government funding cuts remain a possibility as part of broader fiscal policy negotiations. The situation remains fluid, with potential implications for various federal programs. On Wednesday, House Republicans outlined their budget blueprint, setting fiscal targets and potential cuts as they prepare to draft a reconciliation package next week. (Politico, Jan. 29) However, Republicans remain divided on strategy for advancing President Trump’s agenda. House Republicans favor a single-bill approach, while Senate Majority Leader John Thune indicates that his conference has developed an initial budget as part of a two-step plan to pass border security measures, tax cuts, and other priorities. (Politico, Jan. 29) The Roundtable will continue to stay informed about further developments as the administration's policies evolve.

The Fed

January 31, 2025

Roundtable Weekly

Federal Reserve Opts Out of Cutting Rates

Interest Rates Tariffs

The Federal Open Market Committee (FOMC) held the federal funds target range steady at 4.25% to 4.50% on Wednesday, as widely anticipated, during its first meeting of 2025. This decision marks a departure from three consecutive rate cuts, which collectively lowered the target range by 100 basis points since September. Fed’s Decision Chair Fed Jerome Powell indicated that inflationary trends are headed in the right direction. The Fed maintained its assessment that the risks to its dual mandate—promoting a strong labor market and controlling inflation—remain “roughly in balance.” (ConnectCRE, Jan. 29) The country's inflation rate remains somewhat elevated above the Fed’s target of 2%. In projections released at last month’s meeting, most officials signaled they expected the Fed to lower rates in the year ahead, but were less certain over how many times the central bank would cut. Most of them penciled in two rate cuts this year, down from four cuts in projections released last September, assuming progress in lowering inflation continued. (CoStar, Jan.29) (WSJ, Jan.29) Looking Ahead Powell highlighted that future decisions will be guided by “real progress” in bringing inflation down toward the Fed’s target or “some weakness” in the labor market. (ConnectCRE, Jan.29) President Donald Trump’s plans to cut taxes, impose hefty tariffs on key imports and deport millions of immigrants who lack permanent legal status have generated unusual uncertainty about the course of the economy, inflation and interest rates. (USAToday, Jan. 27) Thomas LaSalvia, Moody’s head of commercial real estate economics, told CoStar News in an email that “all eyes are now shifting away from Fed action and towards economic consequences of new administration policies." He added that "moving forward, the extremity of those policy actions will be more influential on economic health.” (CoStar, Jan.29) Pressure From The White House Trump says he will “demand” lower interest rates in a virtual address last week to the World Economic Forum in Davos, Switzerland. When asked about the comments, Powell, sought to stay above the fray. “I’m not going to have any response or comment whatsoever on what the president said. It’s not appropriate for me to do so,” he said. “The public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals.” (USNews, Jan.27) In the wake of the Fed’s interest rate announcement, President Trump took to Truth Social: “Because Jay Powell and the Fed failed to stop the problem they created with Inflation, I will do it by unleashing American Energy production, slashing Regulation, rebalancing International Trade, and reigniting American Manufacturing, but I will do much more than stopping Inflation, I will make our Country financially, and otherwise, powerful again!” (TheHill, Jan.29) What to Watch: Tariffs White House Press Secretary Karoline Leavitt told reporters today President Trump plans to move forward with a 25% tariff on imports from Canada and Mexico starting tomorrow, and an additional 10% tariff on Chinese imports. (USA Today, Jan. 31) Howard Lutnick, Trump's Commerce Secretary Nominee, told the Senate during his confirmation hearing this week, that he advised Trump to impose country-by-country tariffs to restore trade "reciprocity" and vowed to tighten restrictions on China’s access to advanced AI technology. (Reuters, Jan. 29) These tariffs could have significant repercussions for the U.S. economy, including housing affordability. Any tariffs on imported materials like steel, aluminum and lumber are likely to drive up costs for developers and impact efforts to address the housing shortage. (Roundtable Weekly, Jan. 24 | Nov. 27) The Roundtable will continue to track coverage on interest rates and tariffs, and the implications for commercial real estate.

State of the Industry Meeting

January 24, 2025

Roundtable Weekly

Industry Leaders Convene for 2025 State of the Industry Meeting

Capital and Credit Energy amp Climate Homeland Security RERs Homeland Security Task Force HSTF RERs RECPACResearch Committee SPAC Sustainability Policy Advisory Committee Tariffs Tax Policy Tax Policy Advisory Committee TPAC

This week, The Real Estate Roundtable's (RER) State of the Industry meeting brought together policymakers, industry leaders, and experts to discuss key policy issues shaping debates in Washington and impacting the economy and commercial real estate industry. 2025 State of the Industry Meeting Roundtable Chair Kathleen McCarthy (Global Co-Head, Blackstone Real Estate) opened the meeting by welcoming attendees, setting the stage for discussions on industry priorities and advocacy opportunities, and highlighting key member priorities for the year ahead. RER President & CEO Jeffrey DeBoer highlighted the organization’s unique strengths in policy advocacy, which is known for its trusted, fact-based, and data-driven approach. He also acknowledged members for participating in the annual policy issues survey, which revealed widespread concern about tariffs and strong support for priorities like tax reform, housing incentives, reducing regulatory barriers, energy infrastructure, insurance, and cybersecurity resiliency. Meeting Speakers Geopolitical expert John Sitilides (Principal, Trilogy Advisors LLC; National Security Senior Fellow, Foreign Policy Research Institute) gave a presentation on “Washington & the World: The New Geopolitics of Great Power Competition” and discussed the current geopolitical dynamics and vulnerabilities affecting global commerce and energy. Rep. Darin LaHood (R-IL) (Member, House Committees on Ways and Means; and Permanent Select Committee on Intelligence) discussed the U.S.-China economic relationship, extending the Tax Cuts and Jobs Act (TCJA) tax cuts, housing incentives such as the Low-Income Housing Tax Credit (LIHTC), opportunity zones, and property conversions. Rep. Tom Suozzi (D-NY) (Member,House Committee on Ways and Means) stressed the need for bipartisanship to address housing shortages, restore state and local tax (SALT) deductions, advance immigration reform, and revitalize cities. Robert Costa (Chief Election & Campaign Correspondent, CBS News) shared his insight on the current political environment and his experiences with the past and current administrations. Rep. French Hill (R-AR) (Chair of the House Financial Services Committee) spoke to RER’s Joint Real Estate Capital Policy Advisory Committee (RECPAC) and Research Committee on his policy priorities for the 119th Congress. Rep. Mike Carey (R-OH) joined RER’s Tax Policy Advisory Committee (TPAC) to discuss expiring provisions in the TCJA, and his bipartisan property conversion legislation Revitalizing Downtowns and Main Streets Act. Committee Meetings Joint Real Estate Capital Policy Advisory Committee (RECPAC) and Research Committee During a joint meeting, Research Co-Chair Spencer Levy (Global Chief Client Officer & Senior Economic Advisor, CBRE) and Darin Mellot (CBRE) discussed the current real estate conditions and the outlook for real estate credit and capital markets. Working Group Chair Michael Lascher (Global Head of Real Estate Debt Capital Markets, Blackstone) led a discussion on office financing with David Bouton (Citibank), Michael Maturo (RXR Realty), and James Million (CBRE). Will Skinner (Blackstone Credit and Insurance) presented on the growing adoption of private credit by insurance companies and the interplay with alternative asset managers. (Agenda & Speakers) Tax Policy Advisory Committee (TPAC) TPAC Chair Joshua M. Parker (Chairman & Chief Executive Officer, Ancora L&G) and TPAC Vice Chair David Friedline (Partner, Deloitte Tax LLP) led panels on the status of tax legislation in Congress and the pending expiration of the TCJA, property conversions, partnerships, pass-throughs, partnership basis-shifting rules, and SECA-limited partners tax dispute. (Agenda & Speakers) Sustainability Policy Advisory Committee (SPAC) SPAC Vice Chairs Ben Myers (Vice President, Sustainability, BXP) and Katie Rothenberg (Vice President, ESG, Avalon Bay Communities, Inc.) led discussions on public-private partnership opportunities with US-DOE, utilities, refrigerant emissions, and building performance standards. (Agenda & Speakers) Homeland Security Task Force (HSTF) Co-Chair Amanda S. Mason (Executive Director, Global Intelligence, Related Companies) highlighted the overall mission of the HSTF, and led a series of discussions on areas of concerns for the commercial facilities sector. Bruce Hoffman (Senior Fellow for Counterterrorism and Homeland Security, Council on Foreign Relations) provided an overview of implications of recent terrorist incidents here and abroad, and the evolving terrorism landscape. Trent Frazier (CISA) and Tobi Rosenzweig, (U.S. Department of State) discussed the current geopolitical tensions in Europe and both short-term and long-term risks. Ken Kurz (COPT Defense Properties)and Marcelle Lee (Equinix) led a panel on the evolving landscape of cyber and physical threats. Cathy Lanier (National Football League), Hon. Lucian Niemeyer (Building Cyber Security), and Thomas Warrick (The Future of DHS Project) hosted a roundtable discussion on recent terrorism incidents, and natural catastrophes.(Agenda & Speakers) Next on RER's FY 2025 meeting calendar is the Spring Meeting on April 7-8. The Spring Meeting is restricted to Roundtable-level members only.

Policy Landscape

January 24, 2025

Roundtable Weekly

Trump’s First 100 Days: Top Commercial Real Estate Policies to Watch

Construction Data Centers GSE Reform Housing Jeffrey DeBoer National Flood Insurance Program NFIP Section 199A Tariffs Tax Policy

President Donald Trump’s second term is rapidly taking shape, with sweeping executive orders, quick nominations and bold policy announcements advancing in the first few days of his second administration. From tax policy to housing, immigration, and energy initiatives, the commercial real estate sector faces a dynamic and fast-changing landscape. Tax Policy TCJA Renewal: Efforts to extend key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) are a key priority for the Trump administration and Republicans in Congress, with significant implications for commercial real estate. A number of RER priorities are at stake, including maintaining the reduced tax rate on capital gains, extending Opportunity Zones and the Section 199A deduction, safeguarding like-kind exchanges and enacting federal tax incentives for property conversions to address the housing shortage. (Roundtable Weekly, Jan. 10) RER, alongside a coalition of over 230 trade groups, wrote to Congress this week in support of the newly introduced Main Street Tax Certainty Act of 2025, which would make the 20-percent deduction for small and family-owned businesses Section 199A permanent to sustain economic growth, protect millions of jobs, and support Main Street competitiveness. (Sen. Daines Press Release, Jan. 23) The content of the reconciliation package continues to be heavily debated, with multiple areas of intra-party disagreement among Republicans to overcome in order to reach a deal. Concerns about pay-fors, the growing debt, budget cuts and proposals to eliminate the state and local tax deduction (SALT) remain. (Politico, Jan. 22) RER President & CEO Jeffrey DeBoer appeared on Marcus & Millichap’s 2025 Economic & CRE Outlook webinar with a panel of industry leaders discussing the macro environment, the potential policies of the new administration and tariffs, affordable housing, tax policy expectations and more. Tariffs Proposed Tariffs: Trump has signaled a desire to implement sweeping tariffs, including a 25% tariff on goods from Mexico and Canada that could go into effect on Feb. 1. Trump has also considered a universal 20% tariff on all imports and a 60% tariff on China. (CNN, Jan. 21) These measures are aimed at boosting domestic manufacturing and addressing trade imbalances but could have ripple effects on construction costs and material availability. Any tariffs on imported materials like steel, aluminum and lumber are likely to drive up costs for developers and impact efforts to address the housing shortage. (BisNow, Jan. 17) The scale and scope of the President’s tariff plans are in flux. Trump’s advisors have reportedly considered a phased-in tariff approach. It’s also possible that Trump makes use of the White House’s exemption authority to protect certain industries or goods deemed vital. (Bloomberg, Jan. 13) Regulatory Work President Trump also signed an executive order freezing all ongoing regulatory work across the federal government, halting the proposal or publication of new rules until reviewed and approved by his administration. The freeze delays the effective date of recently published rules by 60 days, allowing time to decide which Biden-era regulations to keep, rewrite, or discard. (National Law Review, Jan. 23) As with many other parts of the U.S. financial regulatory framework, the pending Basel III Endgame proposal may end up being reproposed with a capital neutral scheme, giving a potential boost to liquidity and credit capacity under the new Trump administration. Disaster Aid and NFIP Extension California Fires: Congress and the new administration will soon need to provide billions of dollars in aid to assist those affected by the Los Angeles wildfires. The catastrophe could reach up to $275 billion, with then of thousands of homes and businesses will need to be rebuilt, making federal assistance essential. (Roundtable Weekly, Jan. 17) NFIP: The increasing severity of natural disasters—including the devastating hurricanes last year—has increased the importance of the National Flood Insurance Program (NFIP), whichis set to expire on March 14 unless reauthorized. The Senate Banking, Housing and Urban Affairs Committee held a hearing on Thursday to discuss the program’s renewal. (Politico, Jan. 22) Housing Fannie Mae and Freddie Mac Privatization: Trump’s team is expected to resume efforts to privatize the government-sponsored enterprises (GSEs), which could significantly reshape multifamily financing markets. Trump has nominated Bill Pulte, to lead the Federal Housing Finance Agency (FHFA), which oversees the GSEs—a move experts say is part of Trump’s push towards privatization. (CRE Daily, Jan. 17) Deregulation to Spur Housing Development: Trump has pledged to roll back environmental and building regulations that hinder housing construction. This includes streamlining permitting processes, relaxing restrictions and accelerating project timelines. Trump’s nominee for the Department of Housing and Urban Development (HUD), Scott Turner, has pledged to cut regulations that he says are stifling development. These efforts aim to increase housing supply, particularly in high-demand markets. (BisNow, Jan. 17) Immigration and Labor Deportations: Trump’s plans for mass deportations could have significant effects on the housing industry. Immigrants make up over 25% of the construction laborer workforce in the U.S., an industry where more workers are sorely needed—especially if affordable housing goals are to be met. (Bisnow, Jan. 17) Depending on the extent of Trump’s deportation plans, CRE projects may face rising costs and delays if the construction workforce is severely affected. (NBC News, Jan. 21) According to the Associated Builders and Contractors, the construction industry needs 439,000 new workers this year to meet rising demand. The need for construction resources is urgent, with Los Angeles requiring rebuilding after devastating fires and a nationwide surge in data center construction on the horizon. (Axios, Jan. 24) Energy and Infrastructure Emergency Powers: On the day Trump took office, he declared an energy emergency—giving the White House new authority to speed up the manufacture of certain products under the Defense Production Act, issue waivers on certain gasoline restrictions and restrict energy trade, among other powers—likely in service of Trump’s stated effort to “drill, baby, drill.” (The Hill, Jan. 20) Data Centers: Trump also announced a $500 billion “Stargate” initiative designed to expand AI-focused data center infrastructure. The executive order prioritizes the use of fossil fuels to power these facilities and streamlines permitting processes for large-scale projects. (AP News, Jan. 22) The investment could help hasten the buildout of high-demand data centers, which are limited by the availability of energy resources and infrastructure. (BisNow, Jan. 22) Looking Ahead With the whirlwind of activity coming out of the Trump administration and Congress, RER will continue to proactively evaluate policy developments as legislative efforts and White House implementation of executive orders progress.

Workplace Return

January 24, 2025

Roundtable Weekly

Momentum Grows for In-Person Work Across Public and Private Sectors

Return to Office

President Donald Trump’s executive order requiring federal employees to return to in-person work, combined with similar legislative efforts in Congress and private-sector return-to-office mandates, could significantly impact Washington, D.C.’s commercial real estate market. Federal Mandate May Upend Greater Washington Market On day one of his second term, President Trump signed a mandate requiring all federal workers to return to full-time in-person work. (Washington Post, Jan. 23) “Heads of all departments and agencies in the executive branch of Government shall, as soon as practicable, take all necessary steps to terminate remote work arrangements and require employees to return to work in-person at their respective duty stations on a full-time basis, provided that the department and agency heads shall make exemptions they deem necessary,” the executive order reads. (BisNow, Jan. 20) The order could significantly affect the office market in the Greater Washington region, which is still grappling with economic challenges in the commercial real estate sector and a sluggish recovery in downtown activity post-pandemic. This past summer, D.C. recorded its highest-ever office vacancy rate. (WJLA, Aug. 12) The executive order coincides with reports that the administration is considering selling two-thirds of the federal government’s office portfolio to the private sector and terminating millions of square feet of leased commercial space. (WSJ, Jan. 21) Mandate Follows a History of Legislative Attempts This executive order aligns with similar efforts from Republicans in Congress to legislate return-to-work mandates for federal employees. On January 16th, Rep. James Comer (R-KY), chairman of the House Oversight and Government Reform Committee, reintroduced the SHOW UP Act, aimed at returning the federal workforce to pre-pandemic telework levels. The bill cleared the House along party lines early in the last Congress, but the Senate didn’t take up the companion bill. (FNN, Jan. 17) Rep. Andy Biggs (R-AZ) has reintroduced the Return to Work Act, a bill that—similarly to the SHOW UP Act—would return federal employees to the telework schedules they had before the COVID-19 pandemic. (FNN, Jan. 17) RER has consistently emphasized that federal policies promoting remote work undermine the health of cities, local tax bases, and small businesses, and urged policymakers to end government policies that encourage remote working arrangements for federal employees. (Roundtable Weekly, Dec. 2023) Private Sector Efforts Leaders in the private sector are also driving the return-to-office momentum. In a January memo, JPMorgan Chase announced that all employees would be required to return to in-person work by March. 'Now is the right time to solidify our full-time in-office approach,' CEO Jamie Dimon and other executives wrote in the company-wide message, emphasizing that they believe this approach is the most effective way to operate the business. (Bloomberg, Jan. 7) Amazon also began 2025 by requiring its nearly 350,000 corporate employees to return to in-person work, including those at its Seattle headquarters and the newly established HQ2 in National Landing. (WMTV, Jan. 2) Looking Ahead Despite hesitations, the return-to-office mandates sweeping across both the public and private sectors signal a notable industry shift for commercial real estate and a potential revitalization of urban office hubs. RER strongly supports return-to-office efforts as critical to thriving cities and communities, and looks forward to working alongside our public and private sector partners to drive vibrant downtowns and economies across the country.

Pass-Through Deduction, Tax Policy

January 23, 2025

Policy Comment Letter

RER Supports Legislation to Make Section 199A Permanent

Partnerships amp PassThrough Taxation, PassThroughs, Section 199A,

Capital & Credit, Cities & Infrastructure, Energy & Climate, Homeland Security, Housing, Tax Policy

January 22, 2025

RER Policy Priorities

January 2025 Executive Summary – Policy Priorities

Capital and Credit, Cities amp Infrastructure, Energy amp Climate, Energy Policy, Homeland Security, Housing, Infrastructure, Tax Policy,

Capital & Credit, Cities & Infrastructure, Energy & Climate, Homeland Security, Housing, Tax Policy

January 22, 2025

RER Policy Priorities

January 2025 Policy Priorities

Capital and Credit, Energy amp Climate, Homeland Security, Housing, Infrastructure, Tax Policy,

Tariffs

January 17, 2025

Policy Comment Letter

Roundtable Comments on Cassidy-Graham Foreign Pollution Fee Act

Carbon Emissions, Carbon Tariff, Construction, EPA, Housing, Tariffs,

Tax Policy

January 17, 2025

Roundtable Weekly

House Freedom Caucus Members Propose Ending Deductibility of State and Local Business Taxes

Jeffrey DeBoer SALT Tax Policy

This week, House Freedom Caucus Members proposed ending the ability of businesses to deduct their state and local business and property taxes on their federal income tax returns. (Politico, Jan. 15) Why It Matters The proposal was raised as a potential offset for relief from the SALT cap on individuals. The proposal was also included in a “menu” of potential policy options prepared by the House Budget Committee for tax and budget reconciliation legislation. (PoliticoPro, Jan. 17) The Budget Committee has a key role in setting the overall size of any reconciliation bill, but the actual details of tax changes fall under the jurisdiction of the House Ways and Means Committee. Industry & Congressional Response “Property taxes and other state-level business taxes are a basic cost of doing business. Denying the deductibility of these business taxes is nonsensical and would be devastating to American businesses, and especially U.S. real estate. The purpose of the income tax is to measure and tax income. Under the proposal, we would no longer have an income tax, we would have a tax on gross revenue. It would penalize existing property owners, artificially distort business decisions, and raise flashing red lights for anyone even considering a long-term capital investment in the United States,” said Jeffrey DeBoer, President and CEO of The Real Estate Roundtable. Senate Democratic Leader Chuck Schumer (D-NY) addressed the proposal on the Senate floor earlier today. (Senate Democrats, Jan. 17) “There is no scenario under God’s green Earth that New York taxpayers will ever accept another unfair SALT cap like the House Freedom Caucus proposes….I will do everything I can, first to remove the entire SALT cap tax, and second to never let a new proposal that for the first time imposes the SALT cap on businesses, small and large, to be put into effect. I’m going to do everything I can to fight this dastardly proposal,” said the Senator. The House Freedom Caucus is one of many factions in the House Republican Conference that will have significant leverage over any tax changes in 2025 due to Republicans’ extraordinary slim majority in the House. House Ways and Means Committee Chairman Jason Smith (R-MO) and House SALT Caucus Co-Chair Rep. Tom Suozzi (D-NY) are scheduled to address Roundtable members at the State of the Industry Meeting next week.

Policy Landscape

January 17, 2025

Roundtable Weekly

This Week on Capitol Hill: Confirmation Hearings and Tax Policy Debates

Fannie Mae Freddie Mac GSE Reform Opportunity Zones OZs Policy Landscape Tax Policy TCJA

This week, the Senate conducted confirmation hearings for several of President-elect Donald Trump's Cabinet nominees, providing critical insights into the nominees' perspectives and potential policy directions on real estate, housing, the economy, and tax policy under the incoming administration. Senate Confirmation Hearings Scott Bessent – Nominee for Secretary of the Treasury: Treasury nominee Scott Bessent faced bipartisan scrutiny during his Senate Finance Committee confirmation hearing over tax policy, tariffs, and China on Thursday. (Axios, Jan 17) He emphasized the importance of extending the 2017 Tax Cuts and Jobs Act, stating, "This is the single most important economic issue of the day." (Roll Call, Jan. 16 | PoliticoPro, Jan. 16) “We must make permanent the 2017 Tax Cuts and Jobs Act and implement new pro-growth policies to reduce the tax burden on American manufacturers service workers and seniors,” Bessent said in his testimony. He also praised the Opportunity Zones program as a "resounding success," highlighting its potential to address housing challenges, promote inner-city redevelopment, and support rural growth. (Politico, Jan, 16) He also called for spending cuts and shifts in existing taxes to offset the costs that extending the tax cuts would add to the federal deficit. (AP News, Jan. 16) Lee Zeldin, nominee for EPA Administrator, Chris Wright, nominee for Energy Secretary, and Doug Burgum, nominee for Housing and Urban Development Secretary, also testified this week and are expected to be confirmed. (see Energy story below) Sean Duffy – Nominee for Secretary of the Department of Transportation: Appearing before the Senate Commerce Committee, Duffy emphasized his commitment to safety and pledged to streamline regulatory processes that delay infrastructure projects. Promising to uphold the 2021 infrastructure law, he stated, “I commit to implementing the law," and vowed to expedite funding distribution, addressing delays to ensure critical projects move forward efficiently. (Politico, Jan. 17) Federal Housing Finance Agency (FHFA) Nominee On Thursday, Trump announced he would nominate Bill Pulte for Director of the Federal Housing Finance Agency (FHFA). (HousingWire | Reuters Jan. 16) If confirmed, Pulte would oversee Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) standing behind roughly half of the U.S. residential mortgage market. The Trump administration is expected to pursue a plan to release Fannie and Freddie from government control. (GlobeSt., Jan. 17) GOP lawmakers have raised the idea of including language to mandate Fannie and Freddie’s release in this year’s reconciliation package as a way to offset the cost of extending expiring tax cuts. (Politico, Jan. 16) House Ways and Means Committee Hearing - TCJA The tax debate kicked off Tuesday with the House Committee on Ways and Means’ first hearing on extending key provisions of the TCJA led by Chairman Jason Smith (R-MO). (Fox News, Jan. 14) At the hearing, lawmakers discussed expiring provisions of the TCJA including the SALT deduction, Section 199-A, opportunity zones, and child tax credits. Congress faces the dual challenge of addressing expiring tax provisions while managing fiscal pressures. While bipartisan cooperation is possible on certain issues like affordable housing, divisions over business tax rates, SALT deductions, and the debt ceiling could stall progress. What’s Next: RER President & CEO Jeffrey DeBoer will be on Marcus & Millichap’s 2025 Economic & CRE Outlook webinar next Thursday, January 23. He will be joined by Mark Zandi and a panel of industry leaders discussing the macro environment and the potential policies of the new administration and key trends on jobs, the FED outlook, tax policy expectations and more. (Register)

Housing

January 17, 2025

Roundtable Weekly

HUD Nominee Scott Turner Outlines Housing Policy Priorities in Senate Hearing

Housing HUD Housing and Urban Development agency Opportunity Zones OZs

Scott Turner, President-elect Donald Trump’s nominee for Secretary of Housing and Urban Development (HUD), emphasized the transformative potential of Opportunity Zones (OZs) and collaboration with the private sector during his Senate nomination hearing on Thursday. (The Hill, Jan. 16) Senate Hearing Recap At the hearing, members of the Senate Committee on Banking, Housing, and Urban Affairs asked HUD nominee Scott Turner how he would address pressing housing challenges, including the affordable housing crisis, the rising rate of homelessness, and HUD reform. (Turner Testimony) There is an estimated shortage of 5.5 million housing units, resulting in high rents and home prices in many parts of the country. Additionally, HUD released its 2024 Annual Homelessness Assessment Report, which found an 18 percent increase in the estimated point-in-time count of homeless individuals from 2023 to 2024. Speaking on the housing challenges facing the country, Turner said, “We have a housing crisis in our country. We have the American people and families that are struggling every day…HUD, if you will, is failing at its most basic mission, and that has to come to an end.” Turner continued, “As a country, we're not building enough housing. We need millions of homes, all kinds of homes, multifamily, single-family, duplex, condo, manufacturing housing, you name it…I believe that we need to bring HUD staff back to the office to do the job and empower them to serve the American people.” HUD Nominee’s Policy Priorities Turner, who previously ran the White House Opportunity and Revitalization Council during Trump’s first term, highlighted Opportunity Zones, public-private partnerships, and tailored local solutions as key elements of his plan to address the housing crisis. As executive director of the Council, Turner was responsible for carrying out the implementation of Opportunity Zones, which were passed as part of the Tax Cuts and Jobs Act of 2017 (TCJA). The Roundtable—along with 22 other real estate organizations—urged the Senate to approve Turner’s nomination, writing in a Jan. 14 letter to the Senate committee that Turner is well-equipped to lead as Secretary of HUD. The Power of Opportunity Zones RER has long championed Opportunity Zones (OZs) as a transformative tool to stimulate economic growth and increase the supply of affordable housing in low-income areas. By creating tax incentives for investments in designated low-income census tracts, OZs have channeled investment into areas most in need. Since its inception, the Opportunity Zones program has raised nearly $100 billion in private capital, catalyzed the creation of more than 500,000 jobs, and spurred multifamily housing developments in underserved areas. 20% of multifamily units under construction were located in OZs as of early 2024. (The New Localism, Jan. 9) Given the program’s success, prominent experts, including Bruce Katz (Founding Director of the Nowak Metro Finance Lab at Drexel University) and Steven G. Glickman (co-founder and former CEO of the Economic Innovation Group, former senior economic adviser in the Obama White House) have advocated for making OZs a permanent part of the tax code to ensure its long-term benefits. (Governing, Jan. 2) RER has called on Congress to improve and extend the program, which is set to expire along with other key provisions of the TCJA at the end of this year. RER will continue to work with policymakers in Congress and officials at HUD to build on the success of programs like Opportunity Zones. Through bipartisan policies that harness the power of the private sector to significantly increase the supply of affordable housing, the U.S. can make meaningful progress toward ending the housing crisis.

Energy

January 17, 2025

Roundtable Weekly

Incoming Trump Administration Prepares Energy Policy Shift

179D Artificial Intelligence AI Carbon Tariff Data Centers Energy Policy EPA

This week’s confirmation hearings shed light on the Trump Administration’s ambitious energy agenda, including plans to expand American energy production, streamline project approvals, and explore a carbon tariff on imports. (PoliticoPro, Jan. 16) “All of the Above” Energy Policy President-elect Trump has prioritized "drill, baby, drill" as a cornerstone of his agenda, emphasizing energy independence and dominance through increased domestic oil and gas production. Chris Wright, the Energy Secretary nominee, told the Senate Energy Committee on Wednesday that he would use the role to “unleash American energy at home and abroad” if confirmed. (Reuters, Jan. 15) Wright said in his opening statement that he would focus on three objectives: removing barriers for energy projects, accelerating innovation by the national laboratories, and advancing U.S. energy domestically and abroad. (Roll Call, Jan. 16) North Dakota Governor Doug Burgum, the Interior Secretary nominee, said at his Thursday confirmation hearing that the U.S. must expand domestic energy production and electricity generation to meet growing demand, particularly from AI technologies. (Politico, Jan. 16 | Roll Call, Jan. 16 ) Burgum supports an “all-of-the-above” approach that would utilize renewables and fossil fuels. Trump has also tapped Burgum to lead a White House-based energy council that would coordinate policy across the federal government. (Politico, Jan. 9) Former Representative Lee Zeldin, the nominee for EPA Administrator, said at his Thursday hearing he would work in a bipartisan manner with career staff to fulfill the agency's mission. (PoliticoPro, Jan. 16 | The Hill, Jan. 16) Zeldin vowed to address climate change without “suffocating the economy,” and committed to private sector collaboration to “promote common sense, smart regulation.” (NBC News, Jan. 16 | Washington Post, Jan. 16) Carbon Tariff Proposal During his Thursday confirmation hearing, Treasury Secretary nominee Scott Bessent (see Policy Landscape story above) expressed interest in a carbon tariff on imports, suggesting it could be part of a broader Trump administration strategy to raise revenue, counter unfair trade practices, and boost negotiating leverage. Bessent indicated the potential for such measures to align with the administration's broader trade and economic goals. (PoliticoPro, Jan. 16) Recently, Sen. Bill Cassidy (R-LA) proposed a bill, the “Foreign Pollution Fee Act” that would impose a “foreign pollution fee” on imported carbon-intensive products – including construction materials. (E&E News, Dec. 12) The bill’s co-sponsor, Sen. Lindsey Graham (R-SC), spoke about the bill at Bessent’s hearing. "If you want to clean up the environment, a carbon fee seems to be a good way to do it, to punish China and India for bad carbon practices," Graham said. (Politico, Jan. 16) The Roundtable submitted comments today on the Foreign Pollution Fee Act. The letter raises concerns regarding the impact of a carbon tariff on affordable housing constriction, rebuilding after natural disasters, and technical issues on calculating “indirect emissions” associated with product manufacturing. Other Energy News This Week President Biden issues executive order to advance U.S. artificial intelligence (AI) infrastructure: President Biden issued an executive order directing agencies to lease federal land for “gigawatt-scale” to support new data center construction. (AP News, WH Press Release, Jan. 14) 179D energy efficiency tax deduction: The Energy Department (DOE) launched the 179D Portal, offering tools for new commercial construction and retrofits to estimate energy savings and qualify for potential federal tax incentives. (DOE Press Release, Jan. 14) California wild fires raise electricity costs: The Los Angeles wildfires, which caused over $250 billion in damages and severely impacted the region's electrical infrastructure, have driven a nearly 50% increase in California's residential electricity rates since 2019, raising concerns about the fairness of passing these wildfire-related costs onto customers. (Politico, Jan. 15) Maryland building emissions standards lawsuit: A coalition of trade organizations filed a federal lawsuit arguing that the Maryland Building Energy Performance Standards (BEPS) is illegal because it is “pre-empted” due to its conflict with federal laws. The Maryland law mandates large buildings to reduce greenhouse gas emissions by 20% within five years and achieve net-zero emissions by 2040. The lawsuit claims the rules exacerbate the housing crisis, strain the power grid, and violate consumer choice. (Baltimore Banner, Jan. 14 | (Baltimore Sun, Jan. 16)

Insurance

January 17, 2025

Roundtable Weekly

Assessing the Impact of the LA Fires and Insurance Markets

Commercial Insurance Coverage Pandemic Risks amp Natural Catastrophes Insurance

The fires in Los Angeles this week have caused tremendous damage to lives and property, demonstrating how risks from natural catastrophes are a growing challenge to both people and industries across the country. National policy solutions are needed to prepare for the future and effectively manage natural catastrophe risk. (Associated Press, Jan. 11 | RAND, Jan.16) Historic Damages The devastating fires tearing through Los Angeles are poised to become the costliest in US history and are fueling an insurance crisis in California, raising questions about how millions of homeowners will secure coverage against future disasters. (Associated Press, Jan. 11) Damages from the LA fires could reach up to $275 billion after the blazes ripped through some of Los Angeles County’s wealthiest neighborhoods. (Orange County Register, Jan. 16) The staggering costs stem from fires hitting densely populated areas filled with some of the nation’s priciest real estate, says Accuweather’s Chief Meteorologist Jonathan Porter. (Associated Press, Jan. 11) Insurance Impact The wildfires that destroyed homes in multiple sections of the Los Angeles area will test California’s efforts to stabilize the state’s insurance marketplace after many insurers stopped issuing residential policies due to the high fire risk. (KNBC, Jan.10) The California FAIR Plan was created in 1968 and provides basic fire insurance coverage for high-risk properties when traditional companies would not. (NYT, Jan.14 | Bloomberg, Jan. 15) Some are worried that the FAIR Plan won’t have enough funds to cover the damages, but FAIR Plan spokesperson Hillary Mclean assured the public that "the FAIR Plan has payment mechanisms in place, including reinsurance, to ensure all covered claims are paid.” (KNBC, Jan.10) The U.S. Treasury's Federal Insurance Office (FIO) released a report Thursday, showing homeowners insurance costs are rising faster than inflation, with premiums 82% higher in high-risk ZIP codes due to climate-related disasters. (Treasury News Release, Jan. 16) The report based on extensive data from 2018-2022, highlights increasing challenges for homeowners and insurers alike, as nonrenewal rates and claims costs surge in areas most affected by severe weather events. (CNBC, Jan. 16) Policymaker and Industry Reaction Policymakers are working to streamline the permitting process to expedite recovery and are actively monitoring the insurance marketplace. Senator Sheldon Whitehouse (D-RI) told CBS News “We will be watching to see whether the collapse of a trembling home insurance market accelerates after this added shock”. (CBS News, Jan.16) California Governor Gavin Newsom has temporarily suspended permitting and review requirements under the California Environmental Quality Act (CEQA) and the California Coastal Act. The move aims to expedite the rebuilding process for fire victims, enabling faster restoration of homes and businesses, Newsom said. (GlobeSt., Jan. 14) The proliferation of natural catastrophe threats has raised concerns about commercial insurance coverage for real estate. Republicans on the Senate Banking Committee, led by Senators John Kennedy (R-LA) and Mike Rounds (R-SD), are drafting legislation to reform the National Flood Insurance Program (NFIP) and provide broader disaster relief for victims of catastrophes like wildfires, floods, and storms. (The Hill, Jan. 14) The proposed initiative aims to expand and improve disaster coverage without relying on taxpayer subsidies, addressing long-term issues with the NFIP and creating a more comprehensive program for natural disasters. Real Estate Industry Response The real estate industry continues to lead in the response and recovery to these fires. A group of 15 leading multifamily firms and commercial real estate industry groups has quickly banded together to support residents and rebuild Los Angeles following the wildfires that struck the city. RER members, including Cityview, Lincoln Property Company, and Marcus & Millichap support the coalition. (ConnectCRE, Jan. 16) Natural catastrophe insurance will be discussed at RER’s upcoming Homeland Security Task Force and Risk Management Committee Meeting next week at our 2025 State of the Industry Meeting in Washington, DC.

Tax Policy

January 10, 2025

Roundtable Weekly

Tax Policy 2025: Competing Strategies and CRE Priorities

Policy Landscape Tax Policy

The Real Estate Roundtable (RER) is focused on advancing a tax code that encourages investment, supports economic growth, and ensures fair treatment for commercial real estate. With significant provisions of the 2017 Tax Cuts and Jobs Act (TCJA) set to expire, tax policy is already dominating early Congressional discussions. Congressional Dynamics The tax debate is set to kick off on Tuesday, Jan. 14, with the House Committee on Ways and Means’ first hearing on extending key provisions of the TCJA led by Chairman Jason Smith (R-MO). Congress faces the dual challenge of addressing expiring tax provisions while managing fiscal pressures. While bipartisan cooperation is possible on certain issues like affordable housing, divisions over business tax rates, SALT deductions, and the debt ceiling could stall progress. House Speaker Mike Johnson and top House leaders doubled down on their plan to bundle border, tax, and energy policies into a single bill. Meanwhile, Senate leaders are continuing with their two-bill approach, aiming for faster legislative wins for the new administration. (The Hill, Jan. 10) The two chambers are effectively competing to see which strategy can deliver results more quickly. Trump indicated he can live with either approach. "I like one, big, beautiful bill," Trump said at a press conference on Tuesday. On Wednesday after meeting with Senate Republicans, he told reporters “Whether it’s one bill or two bills, it’s going to get done one way or the other. The end result is the same.” (Axios, Jan. 8 | The Hill, Jan. 8) Speaker Johnson and Republicans are determined to pass their budget blueprint by the end of February. Johnson told reporters Thursday that he’s still working with the Senate to properly “sequence” the massive effort. (PoliticoPro, Jan. 9) On Thursday, Senate Majority Leader John Thune refused to commit to the House's preferred approach and called it an ongoing conversation. "Obviously we want to give the House as much space as possible," he told reporters. "They believe they can move and execute on getting a bill across the finish line fairly quickly. But we are prepared to move here, as well." (PoliticoPro, Jan. 9) “We’re going to be having conversations with each chairman to make sure that the targets they’re given are achievable within their committee, and then ultimately get pulled back into budget reconciliation to give us the ability to do all the things you want to do,” House Majority Leader Steve Scalise told Punchbowl News. (Punchbowl News, Jan. 10) Senate Bipartisan Outreach Eleven moderate Senate Democrats, led by Sens. Catherine Cortez Masto (D-NV) and Mark Warner (D-VA) wrote to Republican leaders, offering to work with them on extending expiring tax cuts and raising the debt ceiling, proposing bipartisan reforms to balance tax policy and fiscal responsibility. (PoliticoPro, Jan. 10) The letter stated the group was willing to cut spending, protect family-oriented tax policies, maintain competitive business tax rates, — and indicated that they could provide enough votes to allow Republicans to overcome a filibuster in the Senate without having to go through the reconciliation process. While the GOP is unlikely to accept the offer amid internal divisions, the proposal highlights potential avenues for compromise on tax reform and debates ahead. Roundtable Tax Priorities for 2025 RER encourages lawmakers to ensure that any major tax legislation in 2025 retain or include: The reduced tax rate on capital gains. Tax fairness for partnerships and pass-through entities. Safeguard like-kind exchanges. Extend, improve, and enact smart tax policies to address the severe housing shortage. Tax rules that encourage, rather than deter, foreign investment in U.S. real estate. As negotiations and debates continue, RER remains committed to working with lawmakers to ensure the U.S. maintains a competitive tax code that encourages capital formation, rewards entrepreneurial risk-taking, and supports policy objectives, including accessible and affordable housing and safe and healthy communities.

Energy

January 10, 2025

Roundtable Weekly

Electric Grid Strain: CRE's Role in Addressing Energy Challenges

Artificial Intelligence AI Data Centers Electric Grid Energy Policy EPA

Demands for artificial intelligence (AI), advanced manufacturing, electric vehicles, and building electrification are straining the U.S. electric grid—creating challenges and opportunities for commercial real estate (CRE). (Deloitte, Dec. 9) Why it Matters The grid is at a “tipping point.” Heightened demands for power by consumers, businesses, and government are posing significant risks to energy reliability and driving data center construction to meet the needs. (PoliticoPro, Dec. 18) The organization authorized by Congress to assess grid capacity highlighted last month the “critical reliability challenges” needed to satisfy “escalating energy growth,” as retiring power plants age-out of service. The report also noted the need to accelerate construction of transmission projects to bring electricity to the nation’s cities and suburbs. (N. American Electric Reliability Corp., 2024 Assessment.) President Joe Biden is expected to issue an executive order as soon as today to boost the construction of data centers on federal land to support AI, while also aiming to increase geothermal and nuclear energy production to power them. (PoliticoPro, Jan. 9) Data center construction is surging to meet demand with site selection largely driven by power availability. Microsoft and Meta recently announced billions of data center investments. (E&E News, Jan. 10 | CBRE, Aug. 2024) The Department of Energy (DOE) estimates data centers could consume up to 12% of U.S. electricity by 2028, largely attributed to demand from cloud and AI providers. (DOE News Release, Dec. 20) As The Roundtable’s Policy Guide on building performance standards states, the transition to a digital economy raises serious concerns about electricity availability. “AI could soon need as much electricity as an entire country” as “[v]ast swaths of the U.S. are at risk of running short of power.” (Roundtable Weekly, Oct. 11) Bipartisan House Report on AI Policymakers and industry leaders are focusing more than ever on solutions to expand power generation and modernize the grid. The Bipartisan House Task Force on AI released a report last month finding that AI's critical role in U.S. economic and national security interests hinges on a robust power grid. (House AI Report, December 2024). Recommendations from the Bipartisan House AI Task Force report include: Develop metrics and standards to measure energy use and efficiency. Allocate infrastructure costs to customers who benefit most from upgrades. Use AI to improve energy infrastructure, production, and efficiency. EPA’s Energy Data Campaign Looking ahead, utilities, policymakers, and data center operators must collaborate to balance priorities such as grid upgrades, renewable energy procurement, water resource management, and equitable cost allocation. (Deloitte, Dec. 9) This week, EPA continued its building energy data campaign to assist real estate owners in coordinating with utilities to access tenant space energy data. To aid both owners, operators, and utility representatives in understanding this issue and potential solutions, EPA has prepared a number of energy data resources that can be found here. A resilient electric grid is critical to sustaining economic growth. These issues will be featured in discussions at The Roundtable’s State on the Industry meeting on Jan. 22-23.

CRE and the Economy

January 10, 2025

Roundtable Weekly

Navigating Rising Costs and Policy Challenges in CRE for 2025

Office Markets Return to Office Tariffs

While CRE leaders are optimistic about 2025, clear headwinds emerging from escalating construction costs and trade policies threaten to slow development activity and increase strain on industry stakeholders. These challenges demand coordinated efforts between policymakers and the private sector to stabilize costs, address labor shortages, and promote balanced trade measures. Market & Financial Headwinds in CRE Construction The commercial construction sector is facing mounting challenges that could reshape its trajectory. Labor Shortages: Baby boomer retirements are thinning the skilled workforce, with an estimated 5.4% of construction workers aged 65 or older and poised to exit the industry. Simultaneously, a larger share of young adults is pursuing college over the trades, creating a gap in new talent pipelines. Overall, the national number of job vacancies in construction has doubled between 2017 and 2023. (ConnectCRE, Jan. 2 | Construction Dive, Jan. 2) Rising Capital and Material Costs: Construction loans are difficult to get and relatively expensive, with interest rates hovering above 8%, while material costs remain elevated due to inflation and lingering tariffs on construction imports like lumber, steel, copper, and cement. (ConnectCRE, Jan. 2) Tariff Proposals Recent trade and policy developments could exacerbate these challenges. Trump Administration’s Tariff Proposals: President-elect Trump has proposed sweeping tariff increases, including a 60% tariff on Chinese imports and an additional 25% tariff on goods from Mexico and Canada. These measures could raise U.S. tariffs to their highest levels since 1934 and result in an $800 billion annual increase in tariffs across markets, according to PwC estimates. (Barron's Jan. 3, Construction Dive) Steel Supply Chain Disruption: President Biden’s decision to block Nippon Steel’s acquisition of U.S. Steel has raised concerns about the future of one of America’s largest steelmakers. The acquisition would bolster U.S. Steel’s production capacity and supply chain stability with investments such as $2.7 billion in capital for aging U.S. steel plants, a shared $500 million annual research & development budget, and the transfer of cutting-edge blast furnace technology to U.S. Steel. With construction being the primary steel-consuming sector, accounting for over 50% of steel consumption, U.S. Steel's uncertain trajectory could pose challenges for steel-dependent CRE projects. (The Washington Post, Jan. 3 | The Wall Street Journal, Jan. 3) Office Markets & Return to Work The U.S. office market faces a stark divide: while overall vacancy rates remain high due to aging buildings and remote work policies, demand for top-tier office space with modern amenities is surging in major cities. (Axios, Jan. 10 | WSJ, Jan. 7) Tenants occupied 22% more premium office space in late 2023 compared to pre-pandemic levels, according to CBRE. (WSJ, Jan. 7) Many outdated buildings have the potential for conversion to residential use, while landlords of premium properties have regained leverage, scaling back tenant concessions for the first time in four years. (WSJ, Jan. 7) JPMorgan Chase may soon require all employees to return to the office. This move follows a growing trend among major corporations, including Amazon, AT&T, and Walmart, that are ending remote work and returning to pre-pandemic office norms. (Axios, Jan. 1 | Forbes, Jan. 9) RER Board Member Scott Rechler (Chairman & CEO, RXR) highlighted stronger office markets, despite vacancies, and increased transactions and property conversions for New York City in 2025 this week on CNBC’s Squawk Box. (CNBC Squawk, Jan. 8) As rising costs and shifting policies reshape the CRE landscape, RER is committed to working with policymakers to stabilize material costs, innovate solutions to labor shortages, and adjust trade policies to avoid disproportionate impacts on the CRE sector.

Energy & Climate

January 8, 2025

Fact Sheet

Fact Sheet: How Federal Rules on HFC Refrigerants Affect Buildings

American Innovation and Manufacturing Act AIM Act, HFCs, Refrigerants,

Affordable Housing, Housing

December 20, 2024

Policy Comment Letter

Coalition Supports Affordable Housing Legislation – The Renewing Opportunity in the American Dream to Housing Act (ROAD) to Housing Act, (S. 5027 | H.R. 990)

Affordable Housing, Housing,

National Flood Insurance Program (NFIP)

December 20, 2024

Policy Comment Letter

Joint Coalition NFIP Extension Letter

National Flood Insurance Program NFIP,

Policy Landscape

December 20, 2024

Roundtable Weekly

Congress Faces Shutdown Threat Amid Funding Battles

Policy Landscape

House Speaker Mike Johnson (R-LA) announced this afternoon that the House will vote tonight on a revised version of the bill that was defeated on Thursday, excluding the debt ceiling provision advocated by President-elect Trump. (Politico, Live updates) Latest Funding Plan Under the House GOP’s latest plan, the government would be funded until March 14. It includes a one-year farm bill extension and the $110 billion disaster aid package. (The Hill, Dec. 20) (Latest CR-3rd Version, Dec. 20) On Thursday, Democrats and a group of Republicans rejected a second Continuing Resolution (CR) proposal in a decisive 174-235 vote, which fell short of the two-thirds majority needed under expedited rules. (Axios, Dec. 20) Elon Musk and President-elect Trump amplified tensions in Congress, urging Johnson to abandon the bipartisan agreement he reached with top Democrats in favor of a Republican-preferred measure earlier in the week. (AP, Dec. 20) By rejecting the Trump-endorsed proposal, Democrats signaled they would not support legislation unless they were included in negotiations. Roundtable Urges National Flood Insurance Program (NFIP) Extension The Roundtable and 11 other organizations wrote to Congressional leadership urging swift action to extend the National Flood Insurance Program (NFIP) before its December 20 expiration. (NFIP Letter, Dec. 20) The letter emphasized the urgency of passing the “NFIP Extension Act of 2024” in the event of a government funding lapse. This legislation, already introduced in both the House and Senate, would extend the NFIP through September 30, 2025, ensuring continuity and aligning the program with the end of the fiscal year. Debt Ceiling House Republican leaders unveiled a plan this afternoon to raise the debt ceiling by $1.5 trillion in early 2025, paired with $2.5 trillion in cuts to mandatory spending. (Politico, Dec. 20) GOP leaders aim to use the reconciliation process next year to pass these measures with a simple majority vote in the Senate, bypassing the filibuster. The proposal directly challenges President-elect Donald Trump's demands for immediate bipartisan action to raise the debt ceiling. GOP leaders hope to leverage this budget tool to achieve major policy goals, such as increased border security and expiring tax cuts, but face challenges in rallying the slim majorities they will have in both chambers when the new Congress is sworn in. (Politico, Dec. 20) What’s next: The GOP plan sets the stage for a contentious fiscal battle in 2025, as the party grapples with how to balance its policy priorities against the looming threat of economic fallout.

CRE and the Economy

December 20, 2024

Roundtable Weekly

Fed Cuts Rates Again: Slower Path Ahead Amid Inflation Concerns

Federal Reserve Interest Rates The Fed

The Federal Reserve reduced its benchmark interest rate by a quarter percentage point Wednesday, bringing it to a target range of 4.25% to 4.50%. While the cut provides some relief to borrowers, the central bank signaled a more cautious pace for future rate reductions as inflationary pressures persist. (Axios, Dec. 18) Why It Matters The Fed’s decision reflects its effort to balance slowing inflation with a resilient economy. Powell cited recent data, and not just potential policy changes, justified an adjustment to the inflation forecast. Additionally, the labor market has proven more resilient than officials anticipated when they began rate cuts in September. (WSJ, Dec. 18) "We are at or near a point at which it will be appropriate to slow the pace of further adjustments," Fed chair Jerome Powell told reporters at a press conference on Wednesday, referring to the decision to cut rates. (Press Conference, Dec. 18) The Fed’s latest quarterly projections suggest a slower path to lower rates, with officials anticipating only two rate cuts in 2025, down from four or five predicted in September. (AP News, Dec. 18) Beth Hammack, President of the Cleveland Federal Reserve, dissented from the decision, advocating for steady rates. Looking Ahead The incoming Trump administration is expected to pursue policies such as deregulation, tax cuts, and a growth-focused agenda. While policies like deregulation and tax cuts could stimulate growth, tariffs and deportations threaten to exacerbate inflationary pressures. Fed Chair Jerome Powell noted that some officials have started factoring in "highly conditional estimates" of the potential economic impacts of Trump administration policies into their forecasts. The Federal Open Market Committee (FOMC) emphasized that further cuts would depend on incoming data, stating it will assess “the extent and timing” of future adjustments. (Summary of Economic Projections, Dec. 18) The Fed now projects inflation to reach 2.5% in 2025, higher than its September forecast of 2.1%, reflecting expectations of slower progress in curbing price increases. (CBS, Dec. 18) For CRE, adaptability remains key as the macroeconomic environment evolves. The Fed’s next meeting will be January 28-29, 2025, a week after inauguration, and RER’s all-member State of the Industry (SOI) Meeting on January 22-23.

CRE and the Economy

December 20, 2024

Roundtable Weekly

CRE’s Year of Transformation: Lessons from 2024 and Outlook for 2025

Data Centers Economic Growth amp CRE Jeffrey DeBoer Office Markets Property Conversions Return to Office Tax Policy

As 2024 comes to a close, the commercial real estate industry has made significant strides in recovery and adaptation. 2024 Roundtable Highlights Over the past year, industry confidence has rebounded. RER’s Q4 Sentiment Index reached 73—a three-year high—and a 12-point jump from Q1 of this year. Despite ongoing challenges, the industry has demonstrated resilience and emerged stronger. RER President & CEO Jeffrey DeBoer spoke about the industry’s 2025 priorities in a recent episode of the Leading Voices in Real Estate podcast, saying, “Real estate cuts across all aspects of our economy, and it’s what makes cities strong. You can't find a time in history where nations have been strong without healthy cities. Right now, cities are struggling, and we want to help them back.” Looking ahead to 2025, RER remains focused onadvancing policies that support liquidity, innovation, and adaptive reuse to ensure CRE remains a pillar of economic growth and community development. 2025 Policy Priorities Survey: Next week we will be distributing our Policy Issues Survey to all members to gather input on our policy priorities for 2025. Top Takeaways from 2024 Key drivers of the industry’s growing confidence include easing interest rates and improving financial conditions, which have helped to stabilize asset values and encourage investment activity. By year-end, easing monetary policy and growing investor confidence have started to open up capital availability, with more progress expected in 2025. (Roundtable Weekly, Nov. 8) Office-to-residential conversions saw a banner year, with more than 70 projects completed in 2024. Bolstered by the growing number of state and local incentive programs, 71 million sq. ft. (1.7% of U.S. office inventory) was undergoing or planned for conversion as of Q3. Property conversions will continue to see growing momentum in 2025, helping to alleviate elevated vacancy rates. (CBRE, Nov. 11) Loan modifications and extensions, encouraged by regulators and supported by RER, have helped many distressed owners stabilize properties and avoid defaults. While 2024 was a challenging year for the office sector, markets have started to reach an inflection point as capital becomes more available, vacancy rates start to peak, return-to-office momentum grows, and transaction activity picks up. (Roundtable Weekly, Nov. 15) Meanwhile, multifamily and industrial assets—especially data centers—continued to demonstrate strength, benefiting from robust tenant demand and the rapid expansion of AI-driven technologies. (CBRE, Dec. 11) Prospects for 2025 and Trends to Watch Economic growth: The CRE sector is poised to benefit from moderate economic growth and a more favorable interest rate environment. Investors are cautiously optimistic about improving liquidity and stabilizing valuations, which could unlock much-needed capital. (Commercial Observer, Dec. 10, CBRE, Dec. 11) Office recovery: In San Francisco, office vacancy rates have dropped for the first time in four years—a sign that the office sector is beginning to turn the corner on the pandemic-era economy. Conversion activity is also expected to remain robust, supported by state and local incentives. (S.F. Chronicle, Dec. 16, GlobeSt., Dec. 17) As RER Chair Emeritus William C. Rudin (Co-Executive Chairman, Rudin) recently told Squawk Box, “the demise of office and New York City are greatly exaggerated…there is capital, the CMBS market is back, the banks are coming back to the market,” indicating a welcome trend that could help drive an office revival across America’s downtowns. The data center market will likely see explosive growth driven by artificial intelligence and cloud computing, although power constraints may limit development. Demand for data centers is expected to grow 160% by 2030, driving the buildout of the physical infrastructure needed to support the next digital revolution. (Goldman Sachs, May 14) (McKinsey, Oct. 29) Political and regulatory shifts following the 2024 election—including potential changes to trade, immigration, and fiscal policies with a new Congress and presidential administration—could pose new opportunities or risks in 2025. Collaborating with and educating policymakers on the impact these policies have on real estate will be crucial to ensuring that public policies support economic growth, job creation, housing affordability, and industry stability. Heading into 2025, RER will continue advocating for policies that strengthen economic growth and capital availability while addressing industry challenges, including expanded tax credits for affordable housing and property conversions, permitting reform, and other initiatives that support a vibrant and resilient CRE sector.

Roundtable Leadership

December 20, 2024

Roundtable Weekly

Roundtable Employee Elizabeth A. Hoopes Retiring After 42 Years

Roundtable Leadership

Elizabeth “Liz” A. Hoopes retired on December 1, 2024, after a distinguished 42-year career with the National Realty Committee (NRC) and The Real Estate Roundtable. Liz began her career with NRC in December 1982 as Systems Administrator, where she was instrumental in implementing and managing the foundational technology and membership database systems. In 2015, she was promoted to Director, Information Systems, overseeing all technology infrastructure and providing critical support and solutions to ensure seamless operations at The Roundtable. For the past forty years, Liz managed The Roundtable’s Political Action Committee (REALPAC), facilitating all donations, FEC reports, filings, compliance requirements, and more. Recognizing her dedication, professionalism, and unwavering commitment to The Roundtable staff and membership throughout the years, the Board of Directors honored Liz with an engraved glass piece at our Fall Meeting last month. Roundtable President & CEO Jeffrey DeBoer remarked, "Liz’s exceptional work ethic, focus, and dedication are unparalleled, making her truly irreplaceable. Her hard work in so many areas over the years has been invaluable and has helped the Roundtable achieve its mission. We wish her continued success, happiness, and good health in the next chapter of her life.” The Roundtable proudly acknowledges her significant professional achievements and congratulates her on her well-deserved retirement. We are honored to have called her a friend and colleague all these years and wish her a wonderful retirement.

News

December 20, 2024

Roundtable Weekly

Roundtable Weekly Will Resume Publication on January 10, 2025

The Roundtable’s policy news digest will resume publication on Friday, January 10, 2025 Recent issues of Roundtable Weekly can be searched by keyword here.

December 16, 2024

RER Policy Priorities

November 2024 Policy Priorities Full Report

Policy Landscape

December 13, 2024

Roundtable Weekly

GOP Leaders Debate Strategy for Reconciliation in 2025

SALT Tax Policy TCJA

Republicans are divided on how to approach a sweeping legislative package in 2025, as debates intensify between House and Senate GOP leaders considering whether to consolidate tax, border security, energy, and defense priorities into a single reconciliation bill or pursue a two-step approach. (TaxNotes, Dec. 12) The Debate The outcome will shape the GOP’s legislative strategy as they prepare to extend key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and deliver on other campaign promises. House Ways and Means Committee Chair Jason Smith (R-MO) is advocating for a single reconciliation bill that combines tax policy with border and energy reforms, arguing that this approach maximizes the slim Republican majority’s ability to pass ambitious legislation. Rep. Smith’s stance has put him at odds with incoming Senate Majority Leader John Thune (R-SD), who prefers a two-bill strategy—one focused on border security and energy early in the year, followed by a tax package later. (PoliticoPro, Dec. 11) Sen. Thune, backed by Senate Budget Chair Lindsey Graham (R-SC) and incoming White House policy advisor Stephen Miller, see an early legislative win on immigration as critical to setting the stage for more complex tax negotiations. (Axios, Dec. 9) Rep. Smith, contends that splitting the package could jeopardize tax policy priorities, including extensions of TCJA provisions set to expire at the end of 2025. (Roundtable Weekly, Dec. 6) Failure to act on tax reform by the end of 2025 will lead to the expiration of many provisions of the 2017 tax law, resulting in tax increases for most individuals and some businesses. (Bloomberg, Dec. 3) View from the Senate While negotiations continue, Sen. Thune said he’s eyeing a “big early win” for President-elect Trump with a party-line push on border security, military and energy provisions. “Failure is not an option as far as tax is concerned." (Politico, Dec. 11) View from the House House Majority Leader Steve Scalise (R-LA) said Tuesday House leadership is still deciding on a one- or two-bill strategy, and that they have been meeting with House and Senate members, including Sen. Thune and incoming Senate Finance Committee Chair Mike Crapo (R-ID). He warned it would be challenging to pass multiple budget resolutions. (TaxNotes, Dec. 11) “Donald Trump is the whip right now,” Scalise said, describing how Trump would corral votes from House Republicans. “You don’t have to worry about me; I’m actually a nice guy. The guy at 1600 Pennsylvania is going to send out a tweet, a truth, or whatever, and it’s not going to be as nice.” (TaxNotes, Dec. 11) Government Funding Members on both sides of the aisle expect the government will stay open past the Dec. 20 shutdown deadline. (GlobeSt. Dec. 11) Lawmakers anticipate leadership will settle on a stopgap measure extending through next March, though some Republicans in both chambers are advocating for a CR that ends sooner to expedite Congress's funding work. (The Hill, Dec. 11). Challenges Ahead Narrow majorities: House Republicans can only afford to lose a handful of votes, making consensus critical. Senate Republicans face their own challenges under reconciliation rules requiring compliance with strict budget parameters. (NBC News, Dec. 12) SALT deduction disputes: Republicans from high-tax states like New York and New Jersey are expected to push for raising the $10,000 cap on state and local tax (SALT) deductions, which could complicate efforts to unify the caucus. Economist Stephen Moore, a member of President-elect Trump’s economic advisory transition team, told Bloomberg that expanding the tax write-off limit from $10,000 to $20,000 has been discussed. (TaxNotes, Dec. 11 | Bloomberg, Dec. 12) What's Next House Speaker Mike Johnson (R-LA) faces mounting pressure to navigate the narrow majority and align the party’s legislative strategy with President-elect Trump’s priorities. Johnson has indicated flexibility in the approach, noting ongoing discussions with Trump and GOP leaders. House Republicans are preparing to move swiftly in early January, with Budget Committee Chair Jodey Arrington (R-Texas) leading efforts on a budget resolution to lay the groundwork for reconciliation. Arrington has emphasized the need for a streamlined process, warning that delays could jeopardize Republican priorities. (TaxNotes, Dec. 12) Passage of a budget resolution, which is the first key step in the reconciliation process, will be crucial to move forward—a challenge in itself given the slim GOP majority in the House. The text of the funding bill is anticipated to be released over the weekend or early next week, enabling both chambers to pass the measure before lawmakers adjourn until January.

Housing

December 13, 2024

Roundtable Weekly

Real Estate Coalition Supports Affordable Housing Legislation

Affordable Housing Housing Opportunity Zones OZs Renewing Opportunity in the American Dream to Housing Act ROAD to Housing Act

On Tuesday, a coalition of national real estate associations, including The Real Estate Roundtable (RER), wrote to Congress urging support for the Renewing Opportunity in the American Dream to Housing Act (ROAD) to Housing Act, (S. 5027 | H.R. 990). Introduced by Senator Tim Scott (R-SC) and Representative French Hill (R-AR), this comprehensive legislation aims to make housing more affordable and widely available. (Letter, Dec. 10) Addressing Housing Affordability The nation faces a persistent housing affordability crisis rooted in a critical shortage of supply. Addressing this challenge requires bipartisan solutions that foster collaboration across government agencies, industry stakeholders, and policymakers. The coalition praised the bill as “a step forward in addressing the root cause of housing affordability challenges—supply shortages.” (Letter, Dec. 10) The key pillars of the bill are increasing access to affordable housing, promoting opportunity, incentivizing local solutions, and ensuring proper oversight and accountability over federal housing programs. (Sen. Scott Press Release, Sept. 12) Rep. French Hill (R-AR) said, “With the ROAD to Housing Act, we are taking real steps toward creating a housing market that benefits everyone—renters, homeowners, and families striving for stability. I thank my friend Senator Tim Scott for spearheading this legislation in the Senate.” (Rep. Hill Press Release, Oct. 15) The letter emphasized the importance of bipartisan collaboration in crafting sustainable, effective housing policy solutions. ROAD to Housing Act The ROAD to Housing Act introduces targeted reforms and initiatives, including: Enhanced financial literacy and housing counseling: Empowering individuals with tools to navigate homeownership and rental markets. HUD’s Moving to Work (MTW) program: Fully authorizing this initiative to improve housing outcomes for low-income families. The MTW program helps public housing authorities and agencies implement innovative solutions that support affordable housing goals Boosting affordable housing construction: Encouraging development through construction grants and support for small-dollar mortgage lending. Opportunity Zones focus: Promoting affordable housing projects in designated Opportunity Zones to drive investment in underserved areas. Federal coordination: Establishing regular dialogue between federal agencies and Congress to align housing policies with on-the-ground needs. The Roundtable and its coalition partners will continue to educate and collaborate with policymakers to advance the ROAD to Housing Act and ensure that housing supply and affordability remain top priorities.

Policy Landscape

December 13, 2024

Roundtable Weekly

Rep. French Hill to Chair Powerful House Financial Services Committee

Capital and Credit

Rep. French Hill (R-AR) was selected as the next chair of the powerful House Financial Services Committee, after securing the endorsement of the GOP steering committee in a closely watched race. (Axios, Dec. 12) (PoliticoPro, Dec.13) Financial Policy Priorities The House Financial Services Committee holds broad jurisdiction over monetary policy, housing, banking, and international finance. (Axios, Dec. 12) As chair, Rep. Hill will play a vital role in shaping financial policy and working with President-elect Trump’s administration on priorities like banking oversight, GSE reform and cryptocurrency regulation. In an interview with CNBC, Rep. Hill said his top priorities as chair are making community and commercial banking more competitive by rolling back rules, removing limits on investing to make it easier for companies to become publicly traded, and overhauling cryptocurrency regulation. (CNBC, Dec. 13) (PoliticoPro, Dec.13) A former banker, Rep. Hill brings a wealth of experience to the role, having served as Financial Services vice chair and leader of the committee’s digital assets subcommittee. Rep. Hill has advocated for several Roundtable priorities, including affordable housing measures, expanding capital formation, GSE reform, reauthorization of the National Flood Insurance Program, and terrorism risk insurance. Trump Administration Eyes Changes to Financial Regulation President-elect Trump advisers and officials from the newly founded Department of Government Efficiency (DOGE) are exploring ways to consolidate or eliminate major bank regulators, including potentially abolishing the FDIC and transferring deposit insurance to the Treasury Department, according to people familiar with the matter. (WSJ, Dec. 12) Such proposals, which would require congressional approval, mark a dramatic shift in federal oversight, though no major cabinet-level agency or regulatory body like the FDIC has ever been shuttered in Washington’s history. (Reuters, Dec. 13) Looking Ahead Rep. Hill has proposed initiatives to streamline financial regulations, create a “chief economist” role within the committee, and enhance member communication on financial policy issues. (The Hill, Dec. 12) Rep. Maxine Waters (D-CA) will continue to serve as Ranking Democrat of the committee. (Politico, Dec. 12) Whether the Trump administration’s bold proposals to restructure federal regulators gain traction remains uncertain, but Rep. Hill’s experience and focus on pragmatic policy solutions could provide a steady hand in this transformative period for U.S. financial services. The House Republican Conference is anticipated to ratify the steering committee’s selection in the coming days.

Property Conversions

December 13, 2024

Roundtable Weekly

Property Conversions Unlock New Potential in Real Estate

Property Conversions

Property conversions are emerging as a critical tool to revive underutilized assets and address market demands. By transforming outdated office spaces into housing and mixed-use developments, the industry is seizing an opportunity to adapt and thrive. Industry Voices Capture Momentum These strategies offer a blueprint for addressing nationwide housing shortages, while revitalizing communities and modernizing infrastructure. Former RER Chair Dan Neidich (CEO, Dune Real Estate Partners) likens the opportunities in office-to-residential conversions to a "fire hose," emphasizing the urgency and scale of adapting underperforming spaces. (CNBC, Dec. 10) RER Board Member Scott Rechler (Chairman & CEO, RXR) highlights that in New York, "70% of the vacancy is in 30% of the buildings," indicating a concentration of underutilized office space prime for conversion. (CNBC Squawk Box, Nov. 22) According to a recent CBRE report, 73 U.S. conversion projects have been completed this year, a slight increase from last year. Looking forward, another 309 projects are planned or underway, with about 75% categorized as office-to-residential, placing the total count of units in the works at 38,000. (Wall Street Journal, Nov. 26) Community Success Stories New York City recently approved the "City of Yes" plan to create 80,000 new homes through adaptive reuse. NYC real estate leaders have supported this effort to streamline zoning and enable housing development, including RER Board Member Scott Rechler, who spoke in favor of the proposal on an NYU panel. (New York Times, Dec. 5 | Bisnow, Dec. 6) In cities such as Columbus, St. Louis, and Pittsburgh across the Midwest, developers are converting outdated office spaces into vibrant residential communities and mixed-use developments, fostering neighborhood and downtown revitalization. (Business Journal, Dec. 3) 2024 CommercialEdge research outlines New York City, San Francisco, Chicago, and Los Angeles as top cities with conversion feasible office space. The analysis shows that conversion in the top "30 central business districts and surrounding urban segments alone could mean turning roughly 167 million square feet of aging office space into modern residential and mixed-use properties." (CommercialCafe, Dec. 10) Navigating Challenges Financing gaps, structural challenges, and community concerns remain significant hurdles for conversion projects. Regulatory obstacles such as outdated building codes, minimum unit sizes, and natural light requirements continue to increase costs of development. (Governing, Dec. 3) Recognizing the need for change, cities are taking steps to encourage property conversions. Methods include reductions in approval times, exemptions from affordable housing rules, changes in building code requirements, and tax incentives or subsidies to developers. (Governing, Dec. 3) The Roundtable urges federal policymakers to adopt incentives that support and promote these transformative local projects. These measures are vital to expanding access to affordable housing and meeting the nation’s growing demand.

Affordable Housing, Housing

December 10, 2024

Policy Comment Letter

RER Supports the Renewing Opportunity in the American Dream to Housing Act (“ROAD to Housing Act,” S. 5027/H.R. 990)

Affordable Housing, Housing,

Policy Landscape

December 6, 2024

Roundtable Weekly

Outlook for 2025 Budget, Reconciliation, and Tax Legislation

Policy Landscape Tax Policy

Senate Republicans are mapping out an ambitious two-step reconciliation strategy for 2025, planning to first address defense, energy, and border security before tackling a tax package later in the year. The initial focus is to secure an early win that could help build momentum for the more complex task of extending the expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA). (Tax Notes, Dec. 4) Why It Matters This approach marks a notable shift from House Republicans' earlier plan to address tax issues within the first 100 days of President-elect Trump's term. (Washington Post, Dec. 4) Instead, Senate Republicans want to divide the legislative work to make each package more manageable, leveraging early victories to build momentum for harder battles. (PoliticoPro, Dec. 4) Reconciliation Plan GOP senators, including Thom Tillis (R-NC) and Shelley Moore Capito (R-WV), emphasized the importance of consensus and coordination within the party, acknowledging that a slim House majority could complicate passage. (Tax Notes, Dec. 4) Sen. Capito noted that a smaller, earlier reconciliation package—focused on defense, energy, and border security—could help set the stage for tackling the more politically challenging tax bill. The initial bill could include measures that all Republican factions can support, such as limited deficit reduction and targeted energy policy reforms. Failure to act on tax reform by the end of 2025 will lead to the expiration of many provisions from the 2017 tax law, resulting in tax increases for most individuals and some businesses. (Bloomberg, Dec. 3) Rep. Jason Smith (R-MO), chairman of the House’s Ways and Means committee, voiced his opposition to delaying tax reform under Sen. Thune's plan, noting the difficulty of advancing two budget reconciliation packages, which are immune to filibusters in the Senate. (The Hill. Dec. 5 | CNBC, Dec. 4) “The important thing is getting all the policies done as quickly as possible, and what we ultimately all agree on [is] we’re all going to have to be in unison on that, but no final decision has been made,” said House Majority Leader Steve Scalise (R-LA) regarding the reconciliation timeline. (PoliticoPro, Dec. 4) View from Senate Sen. Chuck Grassley (R-IA) pointed to the complexity of the tax package as the reason for its placement as the second bill. “We want to help lower energy costs, we want to help the military. We want to hit the ground running,” said Sen. Lindsey Graham (R-SC). (The Hill, Dec. 4) Sen. Rand Paul (R-KY) cautioned against using reconciliation to increase spending, emphasizing the need to reduce overall expenditures. What's Next Senate Republicans, led by incoming Senate Majority Leader John Thune (R-SD), will work closely with House Speaker Mike Johnson (R-LA) and the White House to finalize the contents and timing of both reconciliation bills. Passage of a budget resolution, which is the first key step in the reconciliation process, will be crucial to move forward—a challenge in itself given the slim GOP majority in the House. The two-bill reconciliation strategy reflects Senate Republicans' cautious approach to the legislative calendar. By securing an earlier, more straightforward win, the GOP hopes to gain the momentum needed to navigate a complex tax debate later in 2025.

Beneficial Ownership

December 6, 2024

Roundtable Weekly

Corporate Transparency Act Enforcement Blocked by Federal Court

Beneficial Ownership amp the Corporate Transparency Act Corporate Transparency Act CTA

On Tuesday, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, blocking enforcement of the Corporate Transparency Act (CTA), questioning its constitutionality and its impact on small businesses. The ruling prevents the federal government from enforcing CTA requirements until further notice. (Forbes, Dec. 4) Impact of Ruling The CTA, effective January 1, 2024, mandates that over 32 million "reporting companies" disclose beneficial ownership information to the Treasury Department's Financial Crimes Enforcement Network (FinCEN). Due to the far-reaching scope of the CTA, The Roundtable has long raised concerns about the regulatory burden and cost the CTA would impose on many commercial and residential real estate investment businesses. The preliminary injunction halts enforcement of the upcoming January 1, 2025, deadline for filing ownership reports. The decision marked the second time a judge has deemed the law unconstitutional. An Alabama federal judge reached a similar conclusion in March (Reuters, Dec. 4 | Roundtable Weekly, March 8) The injunction is temporary; not a final decision. The pause on enforcement could be overturned if the ruling is challenged successfully on appeal. Court's Decision In Texas Top Cop Shop v Garland et al., Judge Amos L. Mazzant III found the CTA's federal oversight of corporate ownership to be overreaching, infringing on constitutional rights typically overseen by states. (Bloomberg, Dec. 3) Judge Mazzant also highlighted the heavy compliance costs — projected at $22 billion in the first year alone — without adequate privacy safeguards. The plaintiffs, including small business owners and a trade association, argued that the CTA compels speech and association, infringing on First Amendment protections. They also raised concerns about privacy violations under the Fourth Amendment, given the extensive personal information required. The Court agreed that a nationwide injunction was necessary due to the sweeping impact of the CTA. Roundtable Opposition The Roundtable has consistently opposed beneficial ownership rules under the CTA, the burdensome reporting requirements, and the negative impact on real estate partnerships and capital formation. In May, The Roundtable and more than 100 business organizations expressed strong support for bicameral legislation that would repeal the Corporate Transparency Act (CTA) and its onerous beneficial ownership burdens. (Roundtable Weekly, May 10) RER continues to work with policymakers to identify a balanced position that would inhibit illicit money laundering activity but would not place unnecessary compliance costs and regulatory burdens on the real estate industry. (Roundtable Weekly, June 7 ) The Roundtable’s Real Estate Capital Advisory Committee (RECPAC) will continue to closely monitor developments related to the enforcement of the CTA and challenges to the law.

Roundtable Advocacy

December 6, 2024

Roundtable Weekly

The Roundtable’s Jeffrey DeBoer Recognized as One of DC’s “Top Lobbyists” for 2024

Jeffrey DeBoer

Real Estate Roundtable President and CEO Jeffrey DeBoer has been recognized as one of the "Top Lobbyists" in Washington, D.C. for 2024, according to the prominent policy news publication, The Hill. This marks the seventh consecutive year that DeBoer has received this honor. (The Hill, Dec. 5) The Hill noted that their list details “some of the best in the business and those that have been “go-to advocates during a year defined by unprecedented political events, legislative logjams, federal spending cut crusades and big rulemaking swings by the outgoing Biden administration.” DeBoer stated, “I am truly honored to be recognized by The Hill for my work, especially in a city with more than 12,000 lobbyists. This recognition, though, really is a testament to the overall Roundtable team, leadership, and membership.” DeBoer added, “This acknowledgment underscores the importance of the fact-based advocacy work we do to advance policies that foster solid real estate asset values, spur job opportunities, economic growth and strengthen communities nationwide."

Tariffs

November 27, 2024

Roundtable Weekly

Trump Tariffs Could Impact Housing Affordability

Affordable Housing Housing Tariffs

On Monday, President-elect Donald Trump pledged to impose a 25 percent tariff on all goods from Mexico and Canada, and an additional 10 percent tariff on imports from China. These measures could have significant repercussions for the U.S. economy, including housing affordability. (WSJ, Nov. 25 | Reuters, Nov. 26) Response to Illegal Drugs, Immigration Trump’s social media posts stated that the threatened tariffs are necessary to stop illegal immigration and fentanyl trafficking. He couched the levies on imports as temporary, staying in effect “until drugs and migrants stopped coming over the border.” (New York Times, Nov. 26) The U.S. imports the most goods from Mexico, China, and Canada, in that order. (U.S. Census Bureau, Sept. 2024). Trump said he plans to impose the new tariffs on his first day in office. (AP, Nov. 26). Mexico, the U.S.’s largest export partner after Canada, vowed to retaliate with its own tariffs and spark a possible trade war. (Washington Post, Nov. 26) Potential Impacts on Housing, Construction “Overly broad and poorly designed tariffs could unintentionally increase housing costs for millions of renters and home buyers,” said Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable. “Building safe and desirable housing cost-effectively is tied closely to the price of imported materials like steel, cement, concrete, lumber, glass, and more. Tariffs that increase construction costs would slow bringing new supplies to the market and increase prices to purchase and rent homes.” “We need to boost the nation’s housing supply — through new construction, converting obsolete buildings, strengthening the low-income housing tax incentive, reforming local zoning laws, and other bipartisan strategies,” DeBoer continued. “We look forward to working with the Trump Administration on policies to spur economic growth, create jobs, and in this case, improve housing affordability and availability.” About 32 percent of building materials are imported, largely from China, Germany, and South Korea. The extent of these imports has increased dramatically in recent years. The proposed tariffs would be additional to Biden-era tariffs, which themselves derive from import taxes dating back to the first Trump Administration. For example, in May, President Biden increased the tariff on steel products from China to 25 percent— while also increasing tariffs to varying degrees on semiconductors, solar panels, batteries and other specific Chinese imports. (White House fact sheet, May 14). It appears that President-elect Trump will seek an additional 10 percent on top of these. Similarly, in August, President Biden raised tariffs on imports of Canadian softwood lumber to 14.54 percent, according to the National Association of Home Builders (NAHB). It appears that President-elect Trump plans to raise this import tax further to 25 percent. Lumber tariffs have a detrimental impact on housing affordability, according to NAHB. “In effect, the lumber tariffs act as a tax on American businesses, home buyers, and consumers.” Potential Impacts on the Broader Economy Investor Uncertainty: Uncertainty surrounding trade policies risks dampening investor confidence, which could weigh on real estate property values and slow transaction activity. (Bisnow, Nov. 24) Energy costs: A 25 percent tariff on all imports from Canada would drive up energy costs. Canada is the top external supplier of crude oil to the U.S., with oil, gas, and other energy products making up its largest exports. (Bloomberg, Nov. 26) Trump did not specify how he plans to impose the tariffs, although many have expected him to rely heavily on the International Emergency Economic Powers Act. That law gives the president broad authority to regulate U.S. commerce after declaring a national emergency. (PoliticoPro, Nov. 24)

Policy Landscape

November 22, 2024

Roundtable Weekly

View from the CEO: Priorities for the CRE Industry in 2025

Capital Gains Energy amp Climate FIRPTA Foreign Investment in Real Property Tax Act Housing Interest Rates Jeffrey DeBoer Property Conversions Section 199A Tariffs

With control over the White House and both chambers of Congress decided, attention has turned to how President-elect Donald Trump’s second term will affect the commercial real estate industry. Looking Ahead As Roundtable President & CEO Jeff DeBoer noted to BisNow last week, the new administration represents a chance to strengthen policymakers’ understanding of the critical role CRE plays in the economy. (BisNow, Nov. 12) “Anytime that there's a turning of the page, there's an opportunity to emphasize new issues, or to bring priority to older issues that maybe have been pushed out by previous leaders,” DeBoer told BisNow. DeBoer also highlighted key policy priorities for commercial real estate to move forward in the coming administration, including housing, tax, capital markets, and energy. Housing Policy Interagency task force: The Roundtable is calling for a federal task force focused on expanding the housing supply, particularly affordable housing. This task force would coordinate efforts across agencies to streamline building processes and reduce regulatory barriers, incentivizing new development across the U.S. Property conversions: The administration should support federal incentives for (such as low interest loans) converting obsolete office buildings into residential housing. Modeled after tax credits for historic preservation, bipartisan legislation like the Revitalizing Downtowns and Main Streets Act could help relieve the national housing shortage. (Roundtable Weekly, July 12) Tariff concerns: Proposed tariffs on materials like lumber, steel, concrete, glass and appliances could impact housing supply: “By putting tariffs on housing materials, you will be indirectly increasing costs for buyers and renters and making it more difficult to solve this housing crisis,” said DeBoer. Tax Policy With key provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) expiring soon, tax legislation will likely be central to President-elect Trump’s first 100 days. Capital gains: Long-standing elements of the tax code, including the reduced rate for capital gains, the ability to reinvest through like-kind exchanges, and step-up in basis of assets at death, are critical for real estate businesses and encourage productive investment and economic growth. RER will continue to advocate that these provisions be maintained. Section 199A: The qualified business income deduction for pass-through businesses, known as Section 199A, ensures that small businesses can compete on a level playing field with public corporations. RER supports extending the deduction, which is currently set to expire. Foreign investment: Restrictions on foreign investment discourage capital formation and could hinder growth in real estate at a time when increasing the supply and availability of capital is critical to the industry’s recovery. Policymakers should avoid imposing additional restrictions or tax burdens on foreign investors, and consider repealing or reforming the Foreign Investment in Real Property Tax Act (FIRPTA). Capital Markets Strengthening capital flows in real estate is a top priority, as lending and credit availability have remained relatively weak since the pandemic and are only recently starting to see improvement. Interest rates: Policymakers should carefully consider the inflationary effects of fiscal policies to maintain a favorable interest rate environment. Avoiding increased capital requirements, such as Basel III Endgame proposal, is also necessary to prevent hindering growth. Energy Policy With the rise of data centers, AI and other energy-intensive sectors, addressing energy capacity and permitting is a critical bipartisan need and “very important” to RER’s agenda, as DeBoer noted. See the story immediately below for more details. RER is committed to working proactively and productively with President-elect Trump and the 119th Congress to support the needs of the economy and commercial real estate industry.

Energy Policy

November 22, 2024

Roundtable Weekly

The Post-Election Energy Landscape for CRE

Building Performance Standards Clean Energy Tax Incentives Corporate Disclosure Energy amp Climate Energy Efficiency ENERGY STAR NextGen EPA Grid Reliability Reporting on Climate Risks

The 2024 election results signal a return to energy policies supported by President-elect Trump and a shift from Biden era climate programs. For the commercial real estate (CRE) industry, these changes present opportunities to emphasize the “business case” for high performance, energy efficient buildings. Anticipated Energy Policy Shifts De-Regulation: Former Congressman Lee Zeldin (R-NY), the pick to lead the EPA, remarked on “the opportunity to roll back regulations” on power plant emissions, abolish fees on oil and gas development, and lift rules that drive automakers to manufacture electric vehicles. (The Washington Post, Nov. 19) Climate Disclosures: The SEC will likely withdraw its controversial rule for public companies to report climate-related financial risks in 10-K forms. (Bloomberg, Nov. 7) Companies may still need to report and disclose emissions under state laws like those in California (if they survive litigation). Clean Energy Tax Incentives: The incoming administration has vowed to dismantle the Inflation Reduction Act (IRA) that provides credits and deductions for solar projects, battery storage, EV charging stations, and energy efficient buildings. However, many clean energy projects benefit Red States and House Speaker Mike Johnson (R-LA) said he intends to use “a scalpel not a sledgehammer” in reviewing the IRA in light of Republican support. (POLITICO, Sept 18). City, State Grants: Federal funding will likely be eliminated to support city and state efforts to enact building performance standards (BPS). (Roundtable Weekly, Sept 6) Localities may continue to adopt these laws imposing energy use and emissions limits on buildings even without federal support, and The Roundtable will continue to urge policymakers to follow our 20-Point Guide for fair and reasonable BPS laws. Grid Reliability: Given the increased demands on the electric grid from AI, bipartisan bills to streamline the federal permitting process to approve interstate transmission lines – carrying electricity produced in rural areas and delivering it to cities long distances away – could finally become a priority. (Roundtable Weekly, Oct. 25) The “Business Case” for Energy Efficiency By emphasizing the economic benefits of energy efficient buildings, the industry can remain resilient and forward-looking amid “policy volatility” arising from the power changes in Washington. Energy efficient buildings improve our economy. They create jobs for American workers, enhance U.S. energy independence, help make the power grid more reliable, and attract overseas investments to our shores. Non-regulatory, voluntary federal guidelines – developed and enhanced with The Roundtable’s support – help real estate companies make the case for energy efficiency. These include public-private partnerships with EPA such as the ENERGY STAR program, the industry standard Portfolio Manager tool for buildings to measure energy use, and the landmark NextGen certification program. They also include our collaboration with the Department of Energy and other agencies through the Better Climate Challenge, the national Zero Emissions Building definition, the Buy Clean initiative, and programs that highlight the environmental benefits of commercial-to-residential property conversions.

Capital & Credit

November 22, 2024

Roundtable Weekly

RECPAC Fall Meeting Spotlights Upcoming Policy Opportunities and Challenges in Real Estate Capital Markets

Basel III Capital and Credit CFIUS Restoring Liquidity in CRE Markets and Protecting Capital Formation

The Real Estate Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) convened this week in New York to address market conditions, pressing policy issues, including Basel III Endgame, shifts in capital markets, and the evolving political and regulatory landscape. Fall RECPAC Meeting RECPAC met Tuesday, under the leadership of RECPAC Co-Chairs Bryan McDonnell (Head of U.S. Debt and Chair of Global Debt, PGIM Real Estate), Rex Rudy (EVP, Head of Commercial Real Estate, US Bank), Miriam Wheeler (Global Head Real Estate Finance, Goldman Sachs Asset Management), and Working Group Chair Michael Lascher (Global Head of Real Estate Debt Capital Markets, Blackstone) to discuss the new political landscape and top policy priorities for 2025. Roundtable Chair Kathleen McCarthy (Global Co-Head, Blackstone Real Estate) kicked off the meeting and welcomed RECPAC members to the meeting, sharing her insights on real estate credit and capital markets. Other discussions included: Overview of Real Estate Capital Markets: Mark Gibson (CEO, JLL Capital Markets, Americas) provided an overview of current economic and real estate market conditions, investment capital flows, interest rate trends, and their impact on financing. Political and Regulatory Landscape: Wayne Berman (Head of Government Affairs, Blackstone) discussed the new political landscape, and its implications for financial services and tax policy, credit, and capital market issues. U.S. Economic Outlook: David Mericle (Chief US Economist, Goldman Sachs) presented his views on the U.S. economic outlook, including growth prospects and recession risks. Global Real Estate Credit Markets Roundtable: Nick Seidenberg (Managing Director, Eastdil) led a discussion on global real estate credit markets, joined by Jeff Krasnoff (CEO, Rialto Capital), Bryan McDonnell (Chair, Global Debt and Agriculture, PGIM), Rex Rudy (EVP, U.S. Bank), Miriam Wheeler (Global Head, Real Estate Financing, Goldman Sachs), and Greg Wolkom (Group Head, Real Estate Syndicated Finance and REIT Finance, Wells Fargo). Committee on Foreign Investment in the U.S (CFIUS) This week, the U.S. Department of the Treasury, as Chair of the Committee on Foreign Investment in the United States (CFIUS), finalized a previously proposed rule expanding both the types of military installations covered by its regulations governing reviews of real estate transactions and the number of military installations subject to those reviews. (Axios, Nov. 18) Under the proposed rule issued in July, foreign land transactions within a mile of 40 additional military installations and within 100 miles of 19 additional military sites would trigger a CFIUS review. (Roundtable Weekly, July 12) The finalized rule, which impacts transactions entered into on or after December 9, 2024, continues the trend toward reviews of more real estate transactions based on their proximity to a growing list of military installations deemed “sensitive,” and also allows for greater growth by changing the definition of “military installations” that can become subject to these regulations in the future. (Morgan Lewis, Nov. 18) Nearly 60 military installations will be added to an existing list of military installations and approximately 10 existing installations will be extended for CFIUS jurisdiction purposes. During their annual conference this week, CFIUS mentioned that the renewable energy industry has been a particular area of focus triggering jurisdiction over real estate transactions, due to the critical infrastructure component. (The National Law Review, Nov. 20) Basel III Endgame Fed Vice Chairman Michael Barr (Vice Chairman for Supervision, Board of Governors of the Federal Reserve System) at a House Financial Services Hearing: Oversight of Prudential Regulators told lawmakers that they will halt rulemaking before Trump takes office. (Barr Testimony) Barr, the Fed’s top regulatory official, said the central bank will not be moving ahead with its plan to hike capital requirements for big banks, also known as Basel III Endgame, or move on any proposals to overhaul rules affecting bank liquidity and long-term debt over the next two months. (Politico Pro, Nov. 20) “I expect to work with my new colleagues at the OCC and the FDIC in the coming year on those measures to get their policy input, their perspectives,” Barr said. Earlier this year, RER raised industry concerns about the negative impact of the Basel III proposal in a Jan. 12 letter to the Fed and other agencies. The comments outlined how the proposal would decrease real estate credit availability, increase borrowing costs for commercial and multifamily real estate properties, and negatively impact the U.S. economy, concluding with a call to federal regulators to withdraw their proposed rulemaking. (Roundtable Weekly, Sept. 19) New regulators are expected to lead the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) when President-elect Trump takes office in January 2025. The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to engage with policymakers on any further changes to the Basel III Endgame proposal and other federal policy issues impacting credit capacity and capital formation.

Roundtable Meeting

November 15, 2024

Roundtable Weekly

CRE Leaders Gather to Discuss Elections, Economy, Housing and More

Affordable Housing Capital and Credit Tax Policy The Fed

Roundtable Chair Kathleen McCarthy (Global Co-Head of Blackstone Real Estate, Blackstone) This week’s Fall Roundtable meeting came at a pivotal time for commercial real estate, as key policy issues take center stage in Washington. Discussions focused on national policies impacting the industry, including the implications of the recent elections, challenges in capital and credit markets, expiration of the 2017 tax bill, and the federal government’s role in supporting housing supply and regulating energy usage. (Bisnow, Nov. 11) The meeting also covered topics such as return-to-office trends, office-to-residential conversions, and liquidity concerns. (The Roundtable’s Fall 2024 Policy Priorities and Executive Summary) Speakers & Policy Issues Roundtable members engaged in policy issue discussions with the following guests: Reince Priebus, former White House Chief of Staff (President Trump) and the longest-serving chairman of the Republican National Committee in modern history, gave his perspective on the recent elections, dynamics on Capitol Hill, and potential focus of the new administration in 2025. (L-R) Roundtable President & CEO Jeffrey DeBoer & Reince Preibus Sen. Tim Scott (R-SC) is the current ranking member and presumed next chair of the influential Senate Banking, Housing, and Urban Affairs Committee and a senior member of the Senate Finance Committee. Sen. Scott advocated for expanding business and homeownership, enhancing financial literacy, and improving affordable housing by reducing regulations and advancing zoning reforms to foster economic growth and equity in communities. Sen. Tim Scott (R-SC) The Honorable Tom Barkin (President & Chief Executive Officer, Federal Reserve Bank of Richmond), provided a candid assessment of economic recovery and the challenges ahead. He also questioned the fundamental demand for office space as companies reassess their needs in a post-pandemic environment. (Reuters, Nov. 14) (L-R) RER Board Secretary Jodie McLean (CEO, EDENS) and Tom Barkin Rep. Richard Neal (D-MA) (Ranking Member, House Committee on Ways and Means), addressed the significance and major takeaways of the recent election and the outlook for tax and trade policy going forward. He discussed affordable housing incentives, such as the Low Income Housing Tax Credit (LIHTC) and the bipartisan Revitalizing Downtowns and Main Streets Act (H.R.9002), and extending tax provisions like Section 199A, capital gains. (RER’s Tax Policy Priorities) Rep. Richard Neal (D-MA) Next on The Roundtable's meeting calendar is the all-member State of the Industry (SOI) Meeting, which will include policy advisory committee meetings, on January 22-23, 2025 in Washington, DC.

CRE and the Economy

November 15, 2024

Roundtable Weekly

Post Election, CRE Shows Signs of Recovery Heading into 2025

Office Markets Property Conversions Return to Office

The commercial real estate sector is at a critical inflection point, with numerous positive indicators signaling substantial progress on recovery and growth since the pandemic's initial disruption to the industry. Key factors driving the change are easing interest rates, continued return-to-office momentum, property conversions and rising office demand from tech and AI sectors, though some challenges remain. Driving Factors in CRE’s Recovery Interest rates have continued to ease, with the Federal Reserve cutting rates by another 0.25 percentage points last week. While inflation has shown some lingering signs of persistence, Fed Chair Jerome Powell indicated that interest rates are likely to continue to come down slowly and deliberately in the coming months. (Roundtable Weekly, Nov. 8, AP, Nov. 14) CRE lending has also improved, with buyers and owners taking advantage of lower interest rates. Total commercial and multifamily originations increased by 59% year-over-year across many property types including healthcare, retail, multifamily and industrial, though office lending remains relatively stagnant. (GlobeSt, Nov. 12) (Bisnow, Nov. 11) Office leasing has seen an uptick, with several major brokers, including JLL and CBRE, reporting significant increases in office leasing revenue. Larger lease sizes and a rising return-to-office trend have been key contributors, with the average number of in-office days required per week by employers up 50% compared to last year. (CoStar, Nov. 11) Regional office visit data indicates that October 2024 was the busiest in-office month since the pandemic for major hubs like Atlanta, Dallas, Houston, Denver, Washington, D.C., Chicago, and San Francisco. (GlobeSt., Nov. 15) Office leasing has been further buoyed by growing demand from tech and AI companies. Tech firms leased 9.9 million square feet of U.S. office space during the third quarter, the highest level in nearly three years—supporting activity in high-value office locations such as San Francisco, Seattle, and New York. (WSJ, Nov. 12) Property Conversions Property conversions have been a bright spot in 2024, with 73 projects already completed this year and another 30 scheduled to be completed by year-end. The vast majority are office-to-residential conversions—71 million sq. ft., or 1.7%, of U.S. office inventory was planned for or already undergoing conversion, helping to increase the supply of housing, boost downtown vibrancy and ease office vacancy rates. (CBRE, Nov. 11) What’s Next: RER’s Real Estate Capital Policy Advisory Committee (RECPAC) will be meeting in person next week on November 19, 2024 in New York to discuss the economic outlook, capital and debt markets and much more.

Elections and Policy Updates

November 8, 2024

Roundtable Weekly

The Roundtable Congratulates President-Elect Trump and Looks Forward to Jointly Addressing Key Policy Priorities

Capital and Credit Energy amp Climate GSE Reform Statement Jeffrey DeBoer Tax Policy

The 2024 election cycle concluded this week, with Donald J. Trump elected as President of the United States. The Roundtable congratulated the President-elect and the newly elected members of Congress. As the nation transitions to new leadership, The Roundtable is looking forward to collaborating with the new administration and Congress on policies critical to the economy, jobs, housing, and the health of real estate markets. Election Results At the time the election was called, President-elect Trump had received 295 electoral votes compared to Vice President Harris’ 226. Trump also took the lead in the popular vote, with 72,773,748 votes compared to Harris’ 68,123,125. (The New York Times, Nov. 7) On the Congressional front, the Republican party took control of the Senate with 53 seats. Neither party has reached the necessary 218 seats to secure a majority in the House, but Republicans are in the lead with 211 seats. (AP News, Nov. 7) Focused Hard Work Ahead Regarding Tax Legislation, Deregulation, and Housing Policy Shifts Donald Trump's victory in the presidential election, Republicans' victory in the Senate, and the likely Republican House majority dramatically reshuffle the dynamics for policy debates on key issues related to real estate. The Roundtable’s initial thoughts on how the election results impact our priorities, strategy and outlook include: Tax Policy Extensions and New Proposals: The incoming administration is expected to extend 2017 tax cuts, restore bonus depreciation, and support Opportunity Zone incentives. New pro-growth tax measures could also gain traction. Deregulation in Energy and Financial Services: Deregulatory shifts may impact climate and financial services regulations, prioritizing oil and gas development, easing bank regulatory and SEC, HUD, and FHFA oversight. Federal rollbacks could increase regulatory challenges across states as they implement varying climate standards. Ensuring grid reliability could become an even more prominent issue in the energy policy arena. Focus on Credit Markets and Housing: Anticipated policy objectives include reducing mortgage rates, revisiting Fannie Mae and Freddie Mac conservatorship, and reducing housing costs by cutting regulatory barriers. Potential Treasury appointments reflect a push toward expanded credit access and reduced regulatory burden. Roundtable Statement Earlier this week, Roundtable President and CEO Jeffrey D. DeBoer issued a statement congratulating President-elect Trump and pledging to work with the new administration and Congress on pressing commercial real estate issues. “We look forward to working with the President-elect and his team to advance policies that will expand the nation’s economy, boost job creation, increase the supply and affordability of housing, and address the many important national policy issues related to constructing, financing and maintaining modern real estate, work, living, and recreational buildings. Strong real estate markets provide millions of American jobs, support strong local budgets, and help millions of people plan for retirement through their pension and retirement savings investments in real estate. The strength of real estate and the benefits the industry provides to all Americans, depends on fair, consistent, and forward-looking policies at all levels of government. Real estate public policies are nonpartisan. The Real Estate Roundtable supports policies based on objective economic principles that are responsive to changing economic cycles and sensitive to societal demands. Tax and financial regulatory reform, housing investment, immigration issues, energy policy, and physical and cyber security each present opportunities to advance the economy and stability of U.S. real estate markets. We are excited to offer our support, expertise and assistance to President-elect Trump and the new Congress. We are honored to contribute meaningfully to the strength and prosperity of our nation,” said DeBoer.

CRE and the Economy

November 8, 2024

Roundtable Weekly

Second Consecutive Fed Rate Cut Offers Continued Relief to CRE

Economic Growth amp CRE Federal Reserve Quarterly Sentiment Index

On Thursday, the Federal Reserve reduced the federal funds rate by 0.25 percentage points, setting the new target range at 4.5% to 4.75%. This marks the second consecutive rate cut, following a 0.5 percentage point reduction in September, as the Fed responds to moderating inflation and evolving economic conditions. (FOMC Statement, Nov. 7) Fed’s Decision Policy Adjustment for Economic Stability: Fed Chair Jerome Powell noted that while inflation has eased to 2.5% as of August 2024, the labor market shows signs of softening: “This further recalibration of our policy stance will help maintain the strength of the economy and the labor market, and will continue to enable further progress on inflation as we move toward a more neutral stance over time.” (Reuters, Nov. 7) Outlook for Future Cuts: The Federal Reserve's Summary of Economic Projections indicates the possibility of additional rate cuts in the coming months, with the federal funds rate projected to decrease to a range of 3.25% to 3.5% by the end of 2025. (Barron’s, Oct. 9) Impacts on CRE The Fed’s rate cut arrives at a time when real estate capital markets are under considerable pressure. Industry leaders expect this move will enhance credit capacity and capital formation, support refinancing efforts, and stabilize property values. Credit Availability & Market Sentiment: The positive impact of a continued downward trend in the federal funds rate on CRE industry sentiment is reflected in the Roundtable’s Q4 Sentiment Index. The Q4 results showed a 9-point jump in the overall score of the Index, marking the highest score in three years, since Q4 2021. (Q4 Sentiment Index Survey) Implications for Property Refinancing: Decreasing financing costs could reignite projects that have been delayed due to high interest rates.The rate cut should facilitate refinancing efforts, particularly in sectors like office and multifamily, where challenges from post-pandemic occupancy shifts continue to impact valuations and cash flow. Looking Ahead Chair Powell emphasized that future rate adjustments will be assessed on a meeting-by-meeting basis, allowing the Federal Reserve to respond flexibly to evolving economic conditions. Powell’s remarks suggest a cautious but adaptable stance, which CRE leaders can look to as they assess financing and investment strategies in a shifting economic landscape. (Wall Street Journal, Nov. 7) The Fed’s final 2024 meeting is scheduled for December 17-18. RER will continue monitoring rate adjustments, advocating for policies that support CRE stability and growth as the rate environment evolves. At FSU’s Real Estate TRENDS conference this week, Roundtable President & CEO Jeffrey DeBoer commented, “The Fed’s recent action to lower interest rates is a promising development for the commercial real estate industry. Reduced borrowing costs may help alleviate current pressures on project financing, foster investment, and ultimately support asset valuations as we enter a more balanced credit environment.” DeBoer was a featured speaker at the FSU Real Estate Center’s 30th Real Estate TRENDS conference this week, where he shared economic and political insights on the recent elections, on the Fed’s rate cuts, ongoing economic trends in CRE, and the industry’s upcoming political and regulatory landscape.

News, Q4 Sentiment Index

November 8, 2024

Roundtable Weekly

Sentiment Index Reaches Three Year High, Signaling Industry Optimism for Gradual Recovery

Quarterly Sentiment Index

The Real Estate Roundtable’s Q4 2024 Sentiment Index reached an overall score of 73, up 9 points from the previous quarter and marking its highest score since Q4 2021. The three year high reflects industry leaders’ cautious optimism that commercial real estate markets are stabilizing, showing signs of recovery and becoming well positioned for activity in 2025. The Index, which measures commercial real estate executives’ confidence and expectations about the industry environment, is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive. Roundtable Perspective Roundtable President and CEO Jeffrey DeBoer said, “The notable increase in sentiment this quarter reflects a combination of factors, primarily the Federal Reserve's rate cuts and expected future monetary easing. This action coupled with positive shifts in office leasing demand and a broader return-to-office trend are leading to greater price discovery and transaction volume. Housing supply constraints, access to energy sources, high operating expenses continue to present major challenges.” Compared to one year ago, sentiment on current conditions is up by 37 points, perception of future conditions is up by 20 points, and overall conditions are up by 29 points. In comparison to last quarter, sentiment on current conditions is up by 10 points, perception of future conditions is up by 7 points, and overall conditions are up by 9 points. Roundtable Chair Kathleen McCarthy (Global Co-Head of Blackstone Real Estate, Blackstone) commented on the Q4 Sentiment Index results: “The improved sentiment reflects the continuing recovery in commercial real estate, which is supported by improving liquidity in the market. This recovery will play out over time, and it is critical that we continue to support policies that help drive economic growth in communities throughout the U.S.” Topline Findings All indices of The Roundtable’s Q4 Index are up, compared to the previous quarter and one year ago. The Q4 2024 Real Estate Roundtable Sentiment Index reached an overall score of 73, up 9 points from the previous quarter and marking the highest score since Q4 2021. The Current Index registered 69, rising 10 points from Q3 2024. Meanwhile, the Future Index hit 77, an increase of 7 points from the previous quarter and the highest level seen since 2011. Leaders in the industry are cautiously optimistic that the commercial real estate industry is showing signs of recovery and is well positioned for activity in 2025. Over three-quarters (77%) of Q4 survey participants said conditions are better now compared to this time last year, and 88% of respondents expect general market conditions to improve one year from now. Although there is some concern that multifamily assets will plateau in certain geographic areas, the market is optimistic about industrial development, Class A offices, shopping centers, and data centers. A significant 98% of Q4 survey participants expressed optimism that asset values will be higher (79%) or the same (19%) one year from now, indicating some semblance of expected stability. 71% of Q4 survey participants believe asset values are higher (38%) or about the same (33%) today compared to a year ago. 61% and 66% of respondents believe the availability of equity and debt capital, respectively, has improved compared to one year ago. There is even more optimism for the future, with 80% and 79% of participants believing the availability of equity and debt capital, respectively, will be better one year from now. While commentary indicates that the capital markets are starting to open, the cost of capital remains elevated from previous levels. Data for the Q4 survey was gathered by Chicago-based Ferguson Partners on The Roundtable’s behalf in October. See the full Q4 report.

News Release, Roundtable Statement

November 6, 2024

Press Release

Roundtable Statement on 2024 Elections

Statement Jeffrey DeBoer

Real Estate Roundtable Congratulates President-Elect Trump and Incoming Congress Looks Forward to Jointly Addressing Key Policy Initiatives Statement by Real Estate Roundtable President and CEO Jeffrey D. DeBoer (WASHINGTON, D.C.) — Real Estate Roundtable President and CEO Jeffrey D. DeBoer today congratulated President-Elect Trump and pledged to work with the new Administration and Congress on compelling issues affecting the nation’s economy, job creation, housing, and the health of real estate markets. “We look forward to working with the President-elect and his team to advance policies that will expand the nation’s economy, boost job creation, increase the supply and affordability of housing, and address the many important national policy issues related to constructing, financing and maintaining modern real estate, work, living, and recreational buildings. Strong real estate markets provide millions of American jobs, support strong local budgets, and help millions of people plan for retirement through their pension and retirement savings investments in real estate. The strength of real estate and the benefits the industry provides to all Americans, depends on fair, consistent, and forward-looking policies at all levels of government. Real estate public policies are nonpartisan. The Real Estate Roundtable supports policies based on objective economic principles that are responsive to changing economic cycles and sensitive to societal demands. Tax and financial regulatory reform, housing investment, immigration issues, energy policy, and physical and cyber security each present opportunities to advance the economy and stability of U.S. real estate markets. We are excited to offer our support, expertise and assistance to President-Elect Trump and the new Congress. We are honored to contribute meaningfully to the strength and prosperity of our nation,” said DeBoer. About The Real Estate Roundtable The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending, and management firms with leaders of major national real estate trade organizations to jointly address key national policy issues relating to real estate and its important role in the global economy. The collective value of assets held by Roundtable members exceeds $4 trillion. The Roundtable’s membership represents more than 3 million people working in real estate; 12 billion square feet of office, retail, and industrial space; over 4 million apartments; and more than 5 million hotel rooms. It also includes the owners, managers, developers, and financiers of senior, student, and manufactured housing—as well as medical offices, life science campuses, data centers, cell towers, and self-storage properties. The Roundtable’s policy news and more are available on The Roundtable website. # # #

Tax Policy

November 1, 2024

Roundtable Weekly

CRE Industry Advocates for Tax Relief to Support Recovery and Stability

Capital Gains Opportunity Zones OZs PassThroughs Section 199A Tax Policy

As the U.S. commercial real estate sector enters a critical recovery period, industry leaders are urging policymakers to retain key tax policies from the Tax Cuts and Jobs Act of 2017 (TCJA), many of which expire at the end of 2025. (Reuters, Oct. 28) Tax Landscape The outcome of the November presidential election will play a critical role in shaping year-end tax bill discussions. If either candidate secures the presidency and achieves unified control of Congress, they may urge their congressional allies to delay any tax negotiations until 2025. The Roundtable is preparing for potential tax legislation in the lame-duck session, though action may be delayed until next year’s debate when major provisions in the TCJA expire. (Roundtable Weekly, Oct. 25) In early October, RER submitted comments to Capitol Hill on the pending expiration of the TCJA and ways in which tax policy can support long-term investment, economic stability, and the creation of affordable housing. (Roundtable Weekly, Oct. 4) Industry Advocacy Speaking to Reuters, Real Estate Roundtable President and CEO Jeffrey DeBoer noted the difficult economic backdrop for real estate as the tax debate has gathered steam, "Over the last 18 months ... operating costs have ... risen dramatically at the same time the availability of capital and credit have diminished…. All of that creates stress and challenges in the CRE marketplace.” (Reuters, Oct. 28) With the tax reform debate heating up in Washington, maintaining sound tax rules that both reflect the economics of real estate transactions and encourage capital formation is a priority for the CRE industry. “Depreciation deductions and interest expense deductions. They’re not tax breaks. They’re the cost of doing business,” said Ryan McCormick (SVP & Counsel, RER) while discussing housing policy in Politico’s Morning Tax. (Politico, Oct. 28) RER Member Hessam Nadji (President & CEO, Marcus & Millichap) appeared on CNBC International Squawk Box this week and spoke on the upcoming elections, international investor re-engagement with U.S. CRE, zoning and private-public partnerships, and the impact of government policies, particularly regarding housing. RER Tax Priorities Roundtable tax priorities heading into 2025 include: Capital formation and capital gains: Preserving key elements of the tax code (e.g., capital gains preference, like-kind exchanges, step-up in basis at death) that encourage productive real estate investment, risk-taking, and growth. Strong partnership, pass-through, and entity choice rules: Extending tax provisions like section 199A that allow pass-through businesses to compete on a level playing field with public corporations. Affordable housing and community development incentives: Advocating for tax incentives tied to affordable housing, energy efficiency, Opportunity Zones, and commercial-to-residential conversions. Removing barriers to job-creating foreign investment: The tax system should avoid discriminatory policies that discourage job-creating foreign investment in US real estate and infrastructure. Tax Bill Negotiators to Watch Sen. Mike Crapo (R-ID): If Republicans take control of the Senate, Crapo is poised to lead the Senate Finance Committee in 2025. Given his influence over Senate Republicans, many of whom followed his opposition to this year's bipartisan tax bill, Crapo's stance on a year-end tax deal will be pivotal. Sen. Ron Wyden (D-OR): Wyden has shown a willingness to strike deals, as evidenced by his work with Rep. Smith on this year's agreement. He might be eager to pass as much of that legislation as possible during the lame-duck session. Rep. Jason Smith (R-MO): As chair of the House Ways and Means Committee, Smith's perspective will be highly influential in the lame-duck session, with Republicans still holding the House majority. The Roundtable is committed to working with lawmakers to ensure the U.S. maintains a competitive tax code that encourages capital formation, rewards entrepreneurial risk-taking, and supports critical policy objectives, including accessible and affordable housing and safe and healthy communities.

Office Markets

November 1, 2024

Roundtable Weekly

Office Markets Stabilize as More Companies Mandate In-Person Work

Office Markets Return to Office

After years of acquiescing to remote and hybrid work arrangements, major companies are reversing course, a positive sign for demand for office space and the continued recovery of America’s downtowns and city centers. Office Leasing Gains Traction Office leasing demand has seen a noticeable uptick, partially thanks to broader factors such as greater economic stability and a stronger push from companies for employees to return to the office. (The Business Journal, Oct. 14) Amazon and HSBC lead the charge: Amazon has ordered corporate staff back five days a week and is searching for more office space in Manhattan. HSBC Bank increased its U.S. headquarters space by 35,000 square feet after attendance rose to 80%. (WSJ, Oct. 29) Dell Technologies and 3M are also tightening in-office requirements, with Dell mandating full-time office work for its global sales teams, and 3M seeking higher attendance from senior employees. (Bloomberg, Oct. 21) More firms requiring in-office presence: The proportion of firms requiring employees in-office five days a week rose to 33% in Q3, up from 31% in Q2, according to Flex Index, which tracks workplace strategies. (WSJ, Oct. 29) Tech sector demand surges: Over the past twelve months, demand for office space has surged in tech-centric cities such as Seattle, Boston, and San Francisco, as tech employers revisit their office needs and reconsider remote work policies. (VTO News Release, Oct. 30) Vacancy Rates Show Signs of Stabilizing Vacancy rates show signs of stabilization: The vacancy rate is stabilizing at a near-record level of 13.8%, up from 9.4% in the fourth quarter of 2019. Since the second quarter of 2020, U.S. office tenants have vacated close to 209 million square feet of space, the highest amount ever for a four-and-half-year period, according to data firm CoStar Group. (WSJ, Oct. 29) Although vacancy rates remain a concern, leasing activity is up in major cities across the US, such as New York City, Washington, D.C., Boston, and San Francisco. (Roundtable Weekly, Oct. 18) The 46th edition of PwC and the Urban Land Institute's Emerging Trends in Real Estate report released this week, depicts the commercial real estate industry as gradually returning to normalcy after the significant disruptions caused by the pandemic. "Investors' focus is shifting back to the typical cyclical changes that occur throughout business cycles," the report noted. (GlobeSt. Nov. 1 | Report, Oct. 29) The Roundtable's Q4 2024 Sentiment Survey which measures senior executives’ confidence and expectations about the commercial real estate market environment will be available next week.

Elections and Policy Updates

October 25, 2024

Roundtable Weekly

Zoom Town Hall Recap: Election Insights and CRE Policy Priorities

Capital and Credit Energy amp Climate Tax Policy

Last week, The Roundtable hosted a Zoom Town Hall to discuss the upcoming election, along with policy priorities for the lame-duck session and the upcoming year. (Watch Town Hall) Town Hall The Roundtable’s Chair Kathleen McCarthy (Global Co-Head of Blackstone Real Estate, Blackstone) kicked off the meeting thanking and recognizing Roundtable Immediate Past Chair John Fish (Chairman and CEO, Suffolk) and board members for their stewardship and support. The Town Hall featured Jonathan Martin, Politics Bureau Chief and Senior Political Columnist for POLITICO. He shared his expert insights on the political landscape, highlighting the most significant races and trends leading up to the election. Election Forecast Senate flip likely: Martin emphasized the high likelihood of a Senate flip. Split government impact: If Vice President Kamala Harris wins the presidential election, the Senate and House could be controlled by opposing parties. Conversely, a Trump victory might ensure Republican control of both chambers. The policy angle: Regardless of the election outcome, key commercial real estate issues will remain central to legislative discussions. "We are preparing for potential action during the lame-duck session, but definitely positioning ourselves for what may come next year," said Roundtable President & CEO Jeffrey DeBoer. "No matter the election outcome, core issues for the real estate industry—tax policy, energy, housing affordability and liquidity—will be front and center." Roundtable Policy Priorities: What’s Next? Tax policy: The Roundtable is preparing for potential tax legislation in the lame-duck session, although it likely will be delayed until next year’s debate regarding the expiration of the 2017 tax cuts. Priorities include: Capital formation and capital gains: Preserving key elements of the tax code (e.g., capital gains preference, like-kind exchanges) that encourage productive real estate investment, risk-taking, and growth. Strong partnership, pass-through, and entity choice rules. Extending tax provisions like section 199A that allow pass-through businesses to compete on a level playing field with public corporations. Foreign investment and competitiveness: Ensuring the U.S. remains competitive by maintaining tax rules and regulations that attract foreign capital to infrastructure and real estate. Affordable housing incentives: RER advocacy will continue for tax incentives tied to affordable housing, energy efficiency, Opportunity Zones, and commercial-to-residential conversions. Energy & climate: Expect policy movement regardless of election outcomes. Key focus areas include: Mandates on buildings: state and local governments are increasingly adopting Building Performance Standard (BPS) laws that impose mandates on buildings to limit emissions and energy use, setting new requirements for energy and climate performance in real estate. RER recently published a BPS policy guidebook reflecting our ongoing commitment to addressing climate change while ensuring the economic sustainability of real estate investments and the communities they support. (Roundtable Weekly, Oct. 11) Disclosure requirements: Future climate risk disclosures for public companies remain on the radar, along with possible passage of the Energy Permitting Reform Act of 2024 (S. 4753), legislation aimed at streamlining and modernizing the permitting process for energy infrastructure projects. Capital & credit: RER continues to monitor the looming wave of maturing commercial real estate loans, Basel III Endgame proposals, and SEC rules affecting capital formation. Insurance rate spike: The real estate industry is dealing with a historic spike in insurance rates, exacerbated by recent hurricanes. RER continues to work constructively with policymakers and stakeholders to address commercial insurance gaps and rising costs. Basel III Endgame: With regulators at an apparent impasse on revisions to the original Basel III Endgame proposal, we do not expect any further action on the revised proposal before the elections. RER’s Real Estate Capital Policy Advisory Committee (RECPAC) will be meeting in person on November 19, 2024 in New York to discuss the outcome of the election on the political landscape, the economic outlook, capital and debt markets and much more.

Energy & Climate

October 25, 2024

Roundtable Weekly

Electricity Supply Issues Teed-Up for Lame-Duck

Energy and Climate Policy

A bipartisan measure to address the growing stress on the nation’s electricity grid could see a window for opportunity in Congress’s lame-duck session after the November 5 elections. The Energy Permitting Reform Act of 2024 (S. 4753), co-sponsored by Senate Energy Committee Chairman Joe Manchin (I-WV) and Ranking Member John Barrasso (R-WY), would streamline approvals for major energy development projects amid increasing demands for power. Why it Matters Permitting reform has been a bipartisan priority reflected by more than two dozen bills introduced by both parties in the 118th Congress. S. 4753 aims to streamline reviews and permitting processing for energy infrastructure. Expediting approvals for pending and new projects are long-standing goals for renewable energy companies, as well as the oil and gas sector. With Senator Manchin retiring at the end of his current term, the bill could be a capstone to his legislative legacy. He has urged Senate Majority Leader Chuck Schumer (D-NY) to bring it to the floor before year-end. (E&E News, Sep. 23) Leader Schumer (D-NY) told reporters in July, “I’d like to get permitting reform done.” (The Hill, July, 26) The bipartisan bill has its controversies. While climate advocates argue that the bill’s fossil fuel provisions could lock in emissions for decades, others point to the need for large-scale clean energy supplies and grid reliability. Third-party analyses indicate that even with these fossil fuel provisions, the bill would ultimately lead to net emissions reductions. The Roundtable believes permitting reform is essential for advancing our economy’s energy transition. The current fragmented system of environmental reviews and approvals hinders progress on launching new projects and delivering cleaner, reliable electricity to our nation’s buildings. The High Stakes for U.S. Grid America’s power grid is under increasing strain as the digital economy accelerates. Data centers, AI, and electric vehicles are all demanding more power. Current infrastructure is not equipped to handle it. As The Roundtable’s recent Policy Guide on building performance standards states, the transition to a digital economy raises serious concerns about electricity availability. “AI could soon need as much electricity as an entire country” as “[v]ast swaths of the US are at risk of running short of power.” (Roundtable Weekly, Oct. 11) A Wood Mackenzie report predicts that parts of the U.S. could see a 15% jump in power demand by 2030—posing major challenges for an already-stressed grid. (Politico, Oct. 18). According to the latest CBRE North America Data Center Trends study, the rapid growth of AI, coupled with soaring demand for cloud services, has driven a 70% surge in data center construction across the US over the past six months—along with an unrelenting need for the electricity to power them. (Cybernews, Aug. 20) Without permitting reform, meeting this growing demand will become more difficult and expensive. (Forbes, Sep. 2) Congress returns to Washington in a matter of weeks and has the opportunity to pass the Energy Permitting Reform Act and address these grid challenges.

Town Hall

October 18, 2024

Roundtable Weekly

Zoom Town Hall: 2024 Election Insights With POLITICO's Jonathan Martin

With the 2024 elections rapidly approaching, the outcome could significantly shape the future of the economy and the commercial real estate (CRE) industry. Later this afternoon at 3:00 PM ET, The Roundtable will host an exclusive Zoom Town Hall session featuring Jonathan Martin, Politics Bureau Chief and Senior Political Columnist for POLITICO. He will share his expert insights on the political landscape, highlighting the most significant races and trends leading up to the election. In addition to Martin’s analysis, The Roundtable will give a brief update on its policy priorities on tax policy, capital and credit issues, energy and sustainability initiatives, housing affordability, and more. This Zoom session, provided to RER members only, will provide a unique opportunity to gain political insight from one of the country’s top analysts, alongside critical updates on the Roundtable advocacy efforts. RER members will receive a link to register for the event. If you are unable to join the session, a recording will be available next week.

Office Markets

October 18, 2024

Roundtable Weekly

Back to the Office: Vacancies Ease, Optimism Grows

CRE Conversions Office Markets Remote Work Return to Office SPAC Sustainability Policy Advisory Committee

Office vacancy rates are beginning to show signs of easing as companies ramp up efforts to bring employees back to the office, fueling optimism across commercial real estate. The office sector also saw key highlights in property conversions and sustainability efforts this week. Driving Factors Office leasing demand has seen a noticeable uptick, partially thanks to broader factors such as greater economic stability and a stronger push from companies for employees to return to the office. (The Business Journal, Oct. 14) A mix of lower office vacancy rates and high-profile return-to-office mandates, like Amazon’s, could help stabilize a sector still grappling with the remote work shift. (Roundtable Weekly, Sept. 20) Market Sentiment Although vacancy rates remain a concern, leasing activity is up in major cities across the US, such as New York City, Washington, D.C., Boston, and San Francisco. (Boston RE Times, Oct. 4; GlobeSt., Oct. 14; SF Examiner, Oct. 15 | Bisnow, Oct. 16) As reported in our Q3 2024 Sentiment Index, which measures commercial real estate executives’ confidence and expectations about the industry environment, there is growing confidence in the future of the commercial real estate market despite ongoing challenges. (Roundtable Weekly, Sept. 6) The Roundtable’s Q4 Sentiment Index survey is currently underway and expected to be released in early November. Additionally, JLL’s latest Global Future of Work survey found that organizations are “planning to increase and rebalance organizational headcount in the coming years and many are ready to invest into their real estate, expecting to increase budget and footprint.” Over 60% of survey respondents anticipate increased workplace utilization in the next five years, prioritizing more efficient and responsible use of real estate assets. (JLL Survey 2024) Property Conversions Office-to-residential conversions are gaining traction as a solution to address high vacancy rates and housing shortages. In 2024, the number of office spaces being converted into apartments increased to 55,000, a staggering 357% jump from 2021, according to data from Yardi Matrix. (New York Post, Oct. 14) Property conversions can be a cost-effective means to re-purpose assets, provide new, affordable housing, revive struggling city centers and small businesses, restore local revenue sources, and reduce energy consumption. (Roundtable Weekly, Oct. 4) Sustainable Innovation Investments in sustainability efforts also reflect growing confidence in the industry rebound and stability heading into 2025. Yesterday, the White House recognized BXP, Clark Pacific, Turner Construction Company, and Weldon Development Group as innovative real estate firms “stepping up to the challenge” of integrating cleaner, low-carbon construction materials in their projects – to help combat climate change and boost U.S. economic competitiveness. (White House fact sheet, Oct. 16) “The Federal Buy Clean Initiative, and BXP’s aligned construction specifications, send a strong demand signal to concrete producers that helps drive market transformation,” said Ben Myers, Co-Vice Chair of the Roundtable’s Sustainability Policy Advisory Committee (Senior Vice President, BXP). “As an active developer, we are interested in cost-effective methods of supply chain engagement to create more sustainable outcomes.” The Roundtable continues to advocate for energy-efficient solutions, supporting property conversions and innovative building methods that align with the evolving needs of modern offices. These efforts are essential to creating sustainable workspaces and revitalizing cities.

Affordable Housing

October 18, 2024

Roundtable Weekly

Solutions to Tackle the Affordable Housing Crisis

Affordable Housing

While recent rate cuts from the Federal Reserve are providing relief for both CRE and housing markets, the affordability crisis remains at the forefront of policy debates in Washington. Roundtable Housing Priorities Sustained recovery and resolution of the affordability crisis will require continued policy reform, increased housing supply, and greater collaboration between public and private sectors. (Roundtable Weekly, Sept. 27) The Roundtable continues to advocate for housing policies that: Streamline Permitting and Zoning: Simplify permitting and zoning processes to reduce delays in housing projects. Promote Modular Construction: Encourage modular construction to accelerate the production of new housing supply. Strengthen Public-Private Partnerships: Foster collaboration between public and private sectors to support innovative construction methods. Expand Housing Incentives: Advocate for expanding the low-income housing tax credit (LIHTC), improving the real estate-related clean energy tax provisions in the Inflation Reduction Act, and introducing new incentives for the conversion of obsolete commercial buildings into affordable housing. (Roundtable Weekly, Oct. 4) Housing policy has become a central issue in the 2024 presidential campaigns as well. (Associated Press, Aug. 27) Vice President Kamala Harris has proposed $25,000 in down payment assistance for first-time buyers and expanding federal funds to streamline local zoning laws and build 3 million homes. Former President Donald Trump countered with plans to reduce housing demand by restricting illegal immigration and opening federal land for housing development while opposing policies that promote urban densification, arguing they harm suburban property values. Alternative Housing Solutions Property Conversions: The conversion of underutilized and often vacant buildings offers a tremendous opportunity to improve the built environment and uplift a surrounding locality. Modular Housing: A recent survey from The Amherst Group shows that Americans are warming up to modular housing as an alternative solution to the ongoing housing supply shortage. Nearly 90% of respondents find modular homes appealing, and four out of five (81%) would consider living in one themselves. With 71% of respondents interested in seeing more alternative housing types in their neighborhoods, modular homes could play a key role in expanding housing supply. (News Release, Oct. 8) Roundtable member and Amherst Chairman, CEO and CIO Sean Dobson emphasized the potential of modular housing: "While the offsite construction process has been around for decades, it has yet to be adopted as a mainstream way to generate high-quality housing supply at scale. As a result, homebuilding remains overdue for disruption and innovation. Amid ongoing supply constraints in the U.S., we think modular construction is an important part of the solution.” (News Release, Oct. 8) The Roundtable encourages policymakers to support federal incentives for affordable housing and zoning reforms to streamline housing development. These measures can help ensure that high-quality, affordable options, such as modular homes, are available to meet rising demand.

Energy & Climate, News

October 11, 2024

Roundtable Weekly

Roundtable Offers Policy Guide to US-DOE to Shape Effective Building Performance Standards

Building Performance Standards BPS

The Real Estate Roundtable urged the U.S. Department of Energy (DOE) on Wednesday to follow a newly released policy guide as the agency awards grants for states and localities to develop Building Performance Standards (BPS). The guidebook developed by the Roundtable’s Sustainability Policy Advisory Committee (SPAC) reflects RER’s ongoing commitment to addressing climate change while ensuring the economic sustainability of real estate investments and the communities they support. (Letter, Oct. 8) Building Performance Standards (BPS) State and local governments are increasingly adopting BPS laws that impose energy and climate performance mandates on real estate. These laws typically set annual limits on how much energy buildings can use and how much greenhouse gases (GHGs) they can emit, with an ultimate goal of reaching net zero emissions around 2050. International groups also apply pressure for energy and emissions performance limits on buildings to drive global investments in real estate. (Roundtable Weekly, July 19) The Department of Energy (DOE) in August announced $240 million in federal grants to help states and localities implement BPS laws. (Roundtable Weekly, Sept 6). The inconsistent nationwide BPS “patchwork” poses significant challenges for property owners and policymakers alike. These laws must be backed by studies and adequate resources to ensure they achieve significant emission reductions—while continuing to further parallel efforts to support the recovery of business districts and increase the supply of affordable housing. “Our members face a variety of local and state legislative initiatives around building performance standards which lack consistent, implementable, fact-based frameworks. The federal government has the research and analysis heft to create and maintain a voluntary system of fair, reasonable, and effective BPS guidelines to help inform these efforts ” said Anthony E. Malkin, Chair of the Roundtable’s SPAC (Chairman and CEO, Empire State Realty Trust). “Our peer-reviewed, 20-point policy guide intends to help start and guide a discussion of the subject,” he continued. Source: US-DOE, IMT (map as of August 2024) BPS Policy Guide: 20 Key Points RER’s policy guide should shape how DOE disburses tens of millions of taxpayer-funded federal grants to states and cities across the country. It outlines 20 key points that should be prioritized when developing and implementing BPS laws. These include: Develop science-based and data-driven standards. Policymakers should base building performance targets on robust cost-benefit analyses, housing affordability studies, grid resilience assessments, and actual data on energy usage. Align standards across jurisdictions. Property owners face confusing and inconsistent mandates. Policymakers should harmonize rules to ease multi-jurisdictional compliance and use landmark federal programs as a uniform means for compliance. Provide clear compliance resources and fair remedies. Policymakers should ensure that BPS laws come with transparent, accessible compliance pathways that building owners can follow. This includes offering practical resources, technical assistance, and incentive programs to help owners plan for “life-cycle” capital investments and retrofits. Enforcement mechanisms should offer building owners reasonable opportunities to correct non-compliance before imposing fines. RER welcomes engagement on the 20-point policy guide to help craft BPS laws that are fair and effective.

Insurance, News

October 11, 2024

Roundtable Weekly

Hurricanes Helene and Milton: The Case for NFIP Reform

Insurance National Flood Insurance Program NFIP

Commercial real estate owners face soaring insurance costs as back-to-back hurricanes place financial strain on insurers and the National Flood Insurance Program (NFIP). The implications for property owners, especially in coastal areas, are severe, with insurance premiums skyrocketing and coverage harder to secure. Storm Impact and Market Challenges Milton is the second major storm to strike Florida in less than two weeks. The hurricane could cause over $50 billion in damages, with worst-case losses approaching $175 billion, according to Wall Street analysts. (CNBC, Oct. 8) Potential insured losses from Milton are expected to be substantial and could amount to $60 billion, according to an S&P Global Inc. report. (Bloomberg, Oct. 9) Without a robust, long-term NFIP, property owners face escalating risks from future storms, leaving both homeowners and commercial real estate properties vulnerable. (Roundtable Weekly, Oct. 4) With more severe storms expected, CRE property owners are struggling to cover rising costs—sometimes opting to forego upgrades or sell assets to manage financial pressures. (NYT, Oct. 8) According to Marsh McLennan, premiums on commercial properties have increased by an average of 11% nationwide, and even more in storm-prone areas. The report also states that owners with "significant exposures and sustained losses" can expect rates to climb by 50% to 100%. “High-magnitude catastrophe losses, the enduring challenges of the pandemic on the supply chain, fluctuations in the employment market, and rising inflation have banded together to create a perfect storm that threatens the sustainability of every property portfolio.” (Marsh McLennan report) Federal Challenges and Response Lawmakers remain divided on addressing FEMA's potential disaster fund shortfall, which could jeopardize rebuilding infrastructure like roads and water facilities. Speaker Mike Johnson has indicated no plans for Congress to reconvene and approve more disaster funding. (PoliticoPro, Oct. 9) The Biden administration is confident that FEMA’s disaster relief fund has sufficient resources to support recovery efforts for both Helene and Milton. However, they have raised concerns about the fund’s solvency through the remainder of the hurricane season ending in November. (PoliticoPro, Oct. 10) Milton could also spark debate again in Washington, D.C., about the need for a national catastrophe insurance program. (PoliticoPro, Oct. 9) NFIP Under Pressure With nearly two million NFIP policies in areas hit by Helene and Milton, the program's $15 billion in coverage may fall short, prompting debates over whether to raise the NFIP's borrowing authority, forgive debt, or appropriate funds to cover policyholders' claims. (Politico, Oct. 9) House Financial Services Chair Patrick McHenry (R-NC) and the committee’s lead Democrat, Rep. Maxine Waters (D-CA), have previously collaborated on long-term NFIP reform. However, they now hold differing opinions on how to free up funds for claims if needed. Rep. McHenry leans toward raising the NFIP’s borrowing cap or appropriating additional funds, while Rep. Waters has consistently supported debt forgiveness. Currently, Congress has set a $30.4 billion limit on the NFIP’s borrowing capacity from the Treasury. The Roundtable has been a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms. These measures are essential for residential markets, overall natural catastrophe insurance market capacity, and the broader economy. The Roundtable, along with its industry partners, continues to work constructively with policymakers and stakeholders to address commercial insurance gaps and rising costs. RER will continue advocating for targeted policy solutions that can help alleviate increased insurance costs for housing providers nationwide.

Building Performance Standards - BPS

October 8, 2024

Policy Comment Letter

Roundtable Letter to US-DOE on Fair and Reasonable Building Performance Standards (BPS)

Building Performance Standards BPS, Energy amp Climate,

Building Performance Standards - BPS, Energy & Climate

October 8, 2024

Fact Sheet

Lessons Learned to Shape Fair and Reasonable Building Performance Standards (BPS) 20-Point Policy Guide Oct. 2024

Building Performance Standards BPS, Energy amp Climate,

Tax Policy

October 4, 2024

Policy Comment Letter

The Roundtable Shares 2025 Tax Legislative Agenda with Lawmakers

Capital Gains, FIRPTA, LikeKind Exchanges LKEs, Low Income Housing Tax Credit LIHTC, Opportunity Zones OZs, Partnerships amp PassThrough Taxation, Tax Policy, TCJA,

Tax Policy

October 4, 2024

Roundtable Weekly

The Roundtable Shares 2025 Tax Legislative Agenda with Lawmakers

Capital Gains FIRPTA LikeKind Exchanges LKEs Low Income Housing Tax Credit LIHTC Opportunity Zones OZs Partnerships amp PassThrough Taxation Property Conversions TCJA

Responding to a request for input from the chairs of the House Ways and Means Committee and Ways and Means Tax Policy Subcommittee, The Real Estate Roundtable submitted comments on the pending expiration of the Tax Cuts and Jobs Act of 2017 and ways in which tax policy can support long-term investment, economic stability, and the creation of affordable housing. (Letter, Oct. 2) Roundtable Recommendations The letter from Roundtable President and CEO Jeffrey DeBoer urges lawmakers to ensure that any major tax legislation in 2025 retain or include: The reduced tax rate on long-term capital gains. The capital gains rate is critical for driving long-term real estate investment and fostering job creation. Raising capital gains rates, taxing unrealized gains, or double-taxing gains at death would deter entrepreneurship, increase costs, and reduce economic mobility. Tax fairness for partnerships and pass-through entities. Half of the nation’s tax partnerships are real estate-related, making these provisions vital to the industry's success. Section 199A, which provides a 20% deduction on pass-through business income (including REIT dividend income), allows privately held businesses to compete on a level playing field with large corporations. Like-kind exchanges. Section 1031 allows for the deferral of capital gains through real estate exchanges and helps gets languishing properties into the hands of new owners who will invest in, and improve, them. Retaining section 1031 is vital to promoting reinvestment in communities, creating opportunities for minority and small business owners, and improving struggling properties. Tax rules that encourage, rather than deter, foreign investment in U.S. real estate. Targeted changes to the outdated and discriminatory Foreign Investment in Real Property Tax Act (FIRPTA) could unlock capital for large-scale real estate and infrastructure projects that create jobs and spur economic development. Incentives for affordable housing, energy efficiency, and community revitalization. The Roundtable supports expanding the low-income housing tax credit (LIHTC), improving the real estate-related clean energy tax provisions in the Inflation Reduction Act, and introducing new incentives for the conversion of obsolete commercial buildings into affordable housing. The letter also calls for a long-term extension of Opportunity Zone (OZ) tax incentives and preserving carried interest tax rules that recognize and reward sweat equity with capital gains treatment. The Roundtable is committed to working with lawmakers to ensure the U.S. maintains a competitive tax code that encourages capital formation, rewards entrepreneurial risk-taking, and supports critical policy objectives, including accessible and affordable housing and safe and healthy communities.

Flood Insurance

October 4, 2024

Roundtable Weekly

Hurricane Helene Highlights Need for National Flood Insurance Program Reform

Flood Insurance National Flood Insurance Program NFIP

Hurricane Helene wreaked havoc along the east coast, causing widespread flooding and over $20 billion in damages to homes, businesses, and infrastructure. The storm underscored the critical need to reform the National Flood Insurance Program (NFIP), which is set to expire in December. Hurricane Helene Damages The frequency of severe weather events continues to rise, yet many communities are underinsured or entirely without flood coverage. Without a robust, long-term NFIP, property owners face escalating risks from future storms, leaving both homeowners and commercial real estate properties vulnerable. The NFIP is the primary source of flood coverage in the U.S., relied upon by 4.7 million properties in high-risk areas. (Reuters, Oct.3) Moody’s Analytics estimates the storm caused $15 billion to $26 billion in property damage, as well as an additional $5 billion to $8 billion in lost economic output. (Washington Post, Sept. 29) Moody's RMS Event Response is preparing a more precise estimate of the insured losses caused by Hurricane Helene that will be released in the coming weeks. (Fox Business, Sept. 30) Roundtable Advocacy The Roundtable, along with nine industry organizations, wrote to Congress last week urging them to extend the National Flood Insurance Program (NFIP) before its Sept. 30 expiration. (Letter) As part of the CR package passed last week, the NFIP was extended until Dec. 20. Congress has enacted over 31 short-term extensions of the NFIP. The Roundtable has been a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms. A long-term reform and reauthorization of the NFIP is essential for residential markets, overall natural catastrophe insurance market capacity, and the broader economy. The Roundtable, along with its industry partners, continues to work constructively with policymakers and stakeholders to address commercial insurance gaps and rising costs. The Roundtable will continue advocating for targeted policy solutions that can help alleviate increased insurance costs for housing providers nationwide.

Property Conversions

October 4, 2024

Roundtable Weekly

The Push for Office-to-Residential Conversions

Affordable Housing Cities amp Infrastructure Property Conversions

Cities across the U.S. are increasingly embracing office-to-residential conversions as part of the solution to address persistent housing shortages and high office vacancy rates driven by remote work policies. Many local governments in key metro areas have accelerated incentive programs and made major progress, bringing thousands of new homes into the development pipeline with more to come. Challenges and Incentives Property conversions can be a cost-effective means to re-purpose certain CRE assets to provide new, affordable housing supply, revive struggling city centers and small businesses, restore local revenue sources, and reduce energy consumption. While costs can vary depending on the building and other project factors, at least one recent property conversion is estimated to cost 40% less than a wholly new apartment building. (Morning Brew, Sept. 24) Office-to-residential conversions present a path to revitalizing downtown areas, but regulatory and financial hurdles must be addressed to unlock their full potential. (ULI, Sept. 27) Various cities are actively pursuing policies to incentivize these conversions through zoning changes and tax incentives: New York City proposed a $400 million initiative to support the conversion of older office buildings into residential units. The "City of Yes for Housing Opportunity" plan aims to create 500,000 new homes over the next decade by legalizing zoning conversions for buildings constructed before 1990 in areas where residential use is allowed, and expands the types of housing commercial buildings can be converted into. Washington, D.C. has implemented the Housing in Downtown program, designed to catalyze new residential development through a 20-year tax abatement for commercial-to-residential conversions, with expectations to deliver 6.7 million square feet of residential use. (BisNow, Sept. 19) Minneapolis took steps last week to simplify its office-to-residential conversion process by passing an ordinance that streamlines the review process, reduces project timelines, and pauses certain affordability requirements for five years. (CBS, Sept. 24) San Francisco has seen limited success despite efforts to incentivize conversions. Only two projects totaling 165 units are underway, prompting Mayor London Breed and Supervisor Matt Dorsey to propose eliminating impact fees and affordable housing requirements for downtown conversions in key areas. (GlobeSt., Oct. 1) California faced a setback this week when Governor Gavin Newsom vetoed a bill aimed at expediting the conversion of vacant office buildings into residential or mixed-use spaces. The legislation would have mandated by-right approval for adaptive reuse projects, streamlining the review process by bypassing environmental reviews and local zoning approvals. (GlobeSt., Oct. 1) This week on the Walker Webcast, Dr. Peter Linneman (Leading Economist, Professor Emeritus, The Wharton School of Business) predicted there will be a push for back-to-office policies after the November elections, regardless who gains control of the White House. (Walker Webcast, Oct. 2) Climate Risks and Opportunities Office-to-residential conversions are recognized universally as having positive climate impacts because they reduce “embodied” emissions in concrete, glass, and other construction materials relative to new projects built from the ground up. (Arup, Dec. 2023; Urban Green, Dec. 2023; NAIOP (April 2023)). Expanding the use of clean energy tax credits, as proposed in the IRA, could further incentivize conversion projects, helping to reduce long-term operating costs and improve building resilience. With tax policy debates at the forefront in Washington, The Roundtable submitted recommendations to Congressional tax leaders this week (see Tax story above), urging enhancements to the Inflation Reduction Act’s clean energy tax provisions in any future legislation. (Letter, Oct. 2) The recommendations included expanding energy-efficient tax credits to cover low-emissions building equipment and allowing developers to transfer the 45L and 179D credits, which would help reduce housing costs and boost energy efficiency. The Roundtable has also encouraged federal agencies to make key improvements to their existing low-interest loan programs to better support property conversions that support high-density, transit-oriented housing. (Roundtable Weekly, April 19) A recent Morningstar report highlighted the growing importance of ESG considerations in real estate investment, with 67% of global asset owners acknowledging that ESG factors have become more material over the past five years. (CREFC, Oct. 1) The Roundtable will continue to advocate for support at the federal level, such as the bipartisan Revitalizing Downtowns and Main Streets Act (H.R.9002) introduced in July, to create market-based tax incentives for office-to-residential conversions. These projects offer a promising but complex solution to both the commercial real estate market’s transformation and the housing shortage. With proper support, they could reshape and rebuild cities across the country.

Policy Landscape

September 27, 2024

Roundtable Weekly

Congress Averts Shutdown – New Deadline Set for Dec. 20

National Flood Insurance Program NFIP

Congress passed a three-month continuing resolution on Wednesday, funding the government through Dec. 20 and avoiding a shutdown ahead of the Sept. 30 deadline. While this provides some temporary stability, lawmakers face additional fiscal challenges on the horizon—including the need for a long-term reauthorization of the National Flood Insurance Program (NFIP). (The Hill, Sept. 26) What’s Next The House passed the CR package 341-82, followed by the Senate approving it 78-18. The bill now heads to President Biden for his signature, ensuring government operations continue through late December. After passing the bill, Speaker Mike Johnson reiterated he won't allow an omnibus spending bill during the lame-duck session. (The Hill, Sept. 24) If Congress fails to pass final spending bills in December, funding negotiations will overlap with efforts to address two other looming fiscal deadlines: the debt limit, which is waived until early January, and the expiration of many 2017 tax cuts at the end of next year. (Politico, Sept. 25) National Flood Insurance Program (NFIP) Extended The Roundtable, along with nine industry organizations wrote to Congress this week urging them to act quickly to extend the National Flood Insurance Program (NFIP) before its Sept. 30 expiration. (Letter) As part of the CR package, the NFIP was extended until Dec. 20. Congress has enacted over 31 short-term extensions of the NFIP. The Roundtable has been a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms. A long-term reform and reauthorization of the NFIP is essential for residential markets, overall natural catastrophe insurance market capacity, and the broader economy. The Roundtable, along with its industry partners, continues to work constructively with policymakers and stakeholders to address commercial insurance gaps and rising costs. The Roundtable will continue advocating for targeted policy solutions that can help alleviate increased insurance costs for housing providers nationwide. Both the House and Senate are in recess and won’t return to Washington until Nov. 12, after the election.

Energy & Climate

September 27, 2024

Roundtable Weekly

EPA Issues New Rules Impacting Building Air Conditioning Systems

American Innovation and Manufacturing Act AIM Act EPA HFCs

The U.S. Environmental Protection Agency (EPA) is accelerating regulatory actions that will affect how real estate owners and developers design, install, and manage air conditioning systems that use refrigerants to cool buildings. Hydrofluorocarbons (HFCs) Impact Climate Change Congress passed the American Innovation and Manufacturing (AIM) Act in 2020. The AIM Act requires a phasedown of certain greenhouse gases known as hydrofluorocarbons (HFCs). The Act also requires a transition to new technologies that use HFCs with lower emissions impacts. (EPA webpage). HFCs regulated by the AIM Act are beneficial to protect the ozone layer but contribute greatly to global warming and are much more potent than carbon emissions. (National Oceanic and Atmospheric Administration, US-EPA) Air conditioning and refrigeration systems in buildings depend on HFCs. An estimated 20% of the total electricity used in buildings’ worldwide electricity consumption comes from space cooling that uses high-emissions refrigerants. (International Energy Agency) EPA Rule on HFC Leak Detection and Repair EPA issued an AIM Act implementation rule on Monday focused on leak detection and repair of equipment that uses HFCs. Starting in 2026, building owners and other operators of heat pumps, chillers, and other air conditioning systems that contain at least 15 pounds of HFC-containing refrigerants are subject to these new requirements. (POLITICO, Sept.. 23) Large appliances that use at least 15,000 pounds of refrigerants must install automatic leak detection for new systems starting in 2026, and existing systems starting in 2027. (EPA fact sheet) The new rule also sets requirements for HFC disposal, and HFC recycling that must be used during installation and repair of new fire suppression systems. (EPA fact sheet) Proposed Rule on HFC Transition Separately, EPA has proposed rules that would phasedown the manufacturing of HFCs controlled by the AIM Act altogether, and set “technology transition” deadlines for when buildings must install new AC systems using refrigerants that are less harmful to the environment. The Roundtable submitted comments yesterday on the proposed “technology transition” rules. The comments expressed concern that EPA’s deadlines do not account for permitting and construction processes in complex buildings designed to accommodate AC and refrigeration systems years before equipment is actually installed. As RER’s letter explains, strict, immutable deadlines that ‘strand’ buildings from HFC regulatory compliance are not what Congress intended and may not be the best interpretation of the statute. RER also stated it seeks a partnership with EPA “to educate our industry leaders on the AIM Act’s requirements” and help regulators better understand how the HFC phasedown may impact new construction, existing building retrofits, and real estate ownership, operations, and financing. Yesterday, RER’s Sustainability Policy Advisory Committee (SPAC) held an educational session with members to start raising awareness about the new regulations (Slide deck). RER will continue to coordinate with the EPA as implementation of the HFC phase-down and transition unfolds.

Housing

September 27, 2024

Roundtable Weekly

Impact of Rate Cuts on CRE and Housing Markets

Affordable Housing Housing Low Income Housing Tax Credit LIHTC The Fed

The Federal Reserve’s recent decision to cut rates renewed optimism in the commercial real estate market, following a prolonged period of high interest rates and economic headwinds. This monetary easing is seen as critical to the CRE sector's path to recovery—reducing financing costs and helping stabilize property valuations. Industry Insights The Summary of Economic Projections (SEP) report released last week forecast an additional half-point rate cut through two more quarter-point reductions over the next three months. (Roundtable Weekly, Sept. 21) These predicted rate cuts, alongside lower bond yields, are expected to boost commercial real estate investment activity and asset values. (CBRE, Sept. 18) Roundtable member Willy Walker (CEO, Walker & Dunlop) appeared on CNBC's Squawk Box, to discuss the importance of removing barriers such as zoning restrictions to increase housing supply. “It’s going to be a very healthy market for commercial real estate as rates start to come down.” (Watch) Roundtable member David O’Reilly (CEO, Howard Hughes Holdings) discussed the resurgence of new construction in the housing market on Fox Business, anticipating that home prices will stabilize in response to interest rates cuts, influencing both demand and affordability. He also highlighted the effects of prolonged high rates on pricing and market trends. “As long as those rates continue to trend lower… demand picks up, more sales occur, prices will remain steady as home builders continue to deliver more supply to meet that demand.” (Watch) Housing Affordability at the Forefront The Senate Budget Committee, chaired by Sen. Sheldon Whitehouse (D-RI), held a hearing this Wednesday, Sept. 25, on housing unaffordability. The hearing focused on the need for significant policy reform to boost housing supply, remove regulatory barriers to new construction, and deregulate land use and zoning. (Watch Hearing) Chair Whitehouse introduced the Affordable Housing Construction Act, which aims to tackle the housing crisis by expanding the Low-Income Housing Tax Credit (LIHTC) program, loosening financing requirements, and ensuring affordability for 50 years— an increase from the previous 30-year mark. (Sen. Whitehouse News Release) The bill also pushes for more sustainable, energy-efficient, and accessible housing. Rate cuts from the Fed are providing relief for both CRE and housing markets, but sustained recovery and resolution of the affordability crisis will require continued policy reform, increased housing supply, and greater collaboration between public and private sectors.

National Flood Insurance Program (NFIP)

September 25, 2024

Policy Comment Letter

Joint Coalition NFIP Extension Letter

National Flood Insurance Program NFIP,

Energy & Climate

September 25, 2024

Policy Comment Letter

Roundtable Files Comments with EPA on the Phasedown of Hydrofluorocarbons

American Innovation and Manufacturing Act AIM Act, EPA, HFCs, Refrigerants,

Energy and Tax Policy

September 20, 2024

Roundtable Weekly

Treasury and IRS Propose Detailed Rules for Expanded EV Charger Tax Credit

Clean Energy Tax Incentives EV Charging Stations

This week, the Treasury Department and IRS released proposed rules for the expanded investment tax credit (Section 30C) for electric vehicle (EV) chargers installed in low-income and rural areas. The credit, enhanced by the Inflation Reduction Act (IRA), is poised to encourage private-sector investment in EV charging infrastructure. (PolitcoPro, Sept. 18) Proposal Details The proposed rules should help accelerate the buildout of a reliable and convenient charging network. In 2021, President Biden set forth an ambitious plan for a nationwide network of public and private EV charging stations. The 30C credit covers as much as 30% of qualifying costs, up to $100,000 per charger for businesses and $1,000 for individuals. (Bloomberg, Sept. 19) In particular, the rules related to qualifying census tracts should encourage the construction of charging stations at industrial properties, commercial parks, warehouses and logistics facilities, and port-adjacent properties that are unpopulated themselves but in the vicinity of denser, population centers. Treasury’s proposed rule broadly defines “low-income” and “rural” areas, making nearly two-thirds of the U.S. population eligible for the credit. (AP, Sept. 18) In addition, one significant change that the IRA made to section 30C, is that the credit applies per charging port, not per location, boosting savings for developers by reducing the cost of building multiple ports at one station. The Roundtable submitted comments in Dec. 2022 to Treasury and IRS on the Section 30C tax credit, urging the IRS to issue guidance to clarify the components of EV charging property that qualify for the credit, the geographic areas that are 30C-eligible, and depreciation matters. (Roundtable Weekly, Dec. 2022) The new proposed rules reflect feedback from The Roundtable on many of the key issues raised, including important clarifications on component eligibility. While White House advisor John Podesta emphasized that the rule will help expand EV access across all communities, Sen. Joe Manchin (I-W.Va.) criticized the broad definition of "non-urban," claiming it overlooks rural areas. (The Hill, Sept. 18) What’s Next With the tax policy debate at the forefront in Washington, House Speaker Mike Johnson made remarks this week regarding the future of the IRA. He pledged to cut "wasteful" spending while preserving some clean energy tax incentives. He emphasized using a "scalpel" rather than eliminating all provisions, acknowledging that certain credits benefit economic growth. In August, 18 Republicans wrote to Speaker Johnson expressing concern that “[p]rematurely repealing energy tax credits, particularly those which were used to justify investments that already broke ground, would undermine private investments and stop development that is already ongoing.” (The Hill, Sept. 18) Treasury will accept public comments on the proposed regulations through Nov. 18. The Roundtable’s Tax Policy Advisory Committee (TPAC) and Sustainability Policy Advisory Committee (SPAC) are reviewing the proposed rulemaking in its entirety and may provide additional written comments to the regulators.

CRE and the Economy

September 20, 2024

Roundtable Weekly

The Federal Reserve Cuts Interests Rates

Federal Reserve Interest Rates

On Wednesday, the Federal Reserve reduced interest rates by half a percentage point, marking thefirst rate cut in four years. The target rate now stands at 4.75-5%, with important implications for the commercial real estate industry and broader economy. (Federal Reserve Press Release | Washington Post, Sept. 18) Fed’s Decision Fed Chair Jerome Powell emphasized that while inflation is easing, falling below 3% from a peak of 9.1% in June 2022, the labor market needs support to prevent further weakening. At a news conference after the meeting, Chair Powell said, “This recalibration of our policy stance will help maintain the strength of the economy and the labor market, and will continue to enable further progress on inflation.” (WSJ, Sept. 18) The Summary of Economic Projections (SEP) report released this week forecasts an additional half-point rate cut by December, signaling two more quarter-point reductions in 2024. (Axios, Sept. 18) Fed officials project the target rate will decrease to 3.4% by the end of 2025, indicating four quarter-point cuts over the next year. Impacts on CRE The rate cut comes at a time when the real estate capital markets landscape remains challenging. However, this move could improve credit capacity and capital availability and help stabilize asset values. Prior to the rate cut, The Roundtable’s Q3 2024 Sentiment Index revealed that a majority of respondents expected improvements in the availability of both equity capital (71%) and debt capital (60%) within the next year. Meanwhile, 88% of respondents expressed optimism that asset values will either increase (57%) or remain stable (31%) over the same period. Stay tuned for The Roundtable’s Q4 Sentiment Index, which will provide further insights into how the rate adjustment is impacting real estate markets. Looking Ahead Chair Powell added that decisions regarding further rate adjustments will be data-driven and made on a meeting-to-meeting basis. Roundtable President & CEO Jeffrey DeBoer commented on the impact for commercial real estate: "The Fed’s rate cuts will bring much-needed relief to the industry. Lower borrowing costs could help address the wave of maturing commercial real estate loans, reignite stalled projects and encourage new investments, helping stabilize property values as we move into a more favorable lending environment." A mix of lower rates and corporate decisions like Amazon’s office return could help stabilize the office sector still grappling with the post-pandemic shift toward remote work. (Business Insider, Sept. 18) This environment also presents multifamily investors with opportunities to refinance properties, reduce payments, improve cash flow, and capitalize on lower borrowing costs, while exploring new asset classes as valuations stabilize. (JPMorgan, Sept. 19) The Fed has two more opportunities to adjust interest rates in 2024, with meetings scheduled for November 6-7 and December 17-18.

Roundtable Leadership

September 13, 2024

Roundtable Weekly

The Roundtable’s Jeffrey DeBoer Honored at the Annual Lamplighter Awards

John Fish

Roundtable President & CEO Jeffrey DeBoer was honored this week with the Lamplighter Award by the American Friends of Lubavitch (Chabad), along with Speaker of the U.S. House of Representatives Mike Johnson, for their leadership and dedication to community and service. Roundtable Leaders’ Comments Coinciding with the 23rd anniversary of the September 11 terrorist attacks and approaching the first anniversary of the October 7 Hamas attacks in Israel, the evening began with a moment of silence, followed by a tribute from the United States Marine Corps Color Guard. Immediate Past Roundtable Chair and event chair, John Fish (Chairman and CEO, Suffolk), introduced House Democratic Leader Hakeem Jeffries (D-NY), who, alongside Rabbi Levi Shemtov, presented the Lamplighter Leadership Award to Speaker Johnson. In his introductory remarks as the event chair and last year’s recipient of the Lamplighter Award, Fish stated, “On this important day, we are all reminded there is far more that unites us as Americans, than divides us.” (L-R): Rabbi Levi Shemtov, John Fish, Jeffrey DeBoer, Norm Brownstein After accepting his award, DeBoer commented, “I am honored to support the American Friends of Lubavitch, particularly because of my deep respect and appreciation for the good deeds the Chabad does. But also because of my utter dismay and disgust by the rise of anti-Semitism in America and in many places around the world.Moreover, I am moved to provide assistance because of my deep distress over the violence that has been planted and allowed to grow on the campuses of our nation’s greatest universities. We must realize that speech is sometimes violent, but violence is never speech. One is allowed, up to a point. The other should never be allowed particularly on university campuses where young people are supposed to be learning.Together, we must continue to stand up against hate and bigotry in all its forms.” (Jeffrey DeBoer's Speech) Lamplighters The American Friends of Lubavitch (Chabad) is part of the largest network of Jewish educational, cultural and humanitarian institutions in the world, with branches in all 50 states and over 100 countries on six continents. The annual Lamplighter Awards honor exceptional communal, political, corporate and academic leaders. Several hundred people attended the event, reception and dinner, including several Senators and House members; Gold Star families and members of the U.S. armed forces; and nearly two dozen ambassadors.

Tax Policy

September 13, 2024

Roundtable Weekly

Senate Finance Committee Tackles 2025 Tax Policy Debate

SALT Section 199A StepUp In Basis Tax Policy

The Senate Finance Committee held a hearing on the 2025 tax policy debate, highlighting sharp divides between Republicans and Democrats over the future of the key provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) that are set to expire in 2025. (Watch Hearing | Bloomberg, Sept. 12) 2025 Tax Policy Debate Chair Sen. Ron Wyden (D-OR) pushed for reforms targeting tax avoidance by the ultra-wealthy. Wyden pointed out tactics like "buy, borrow, die," which he argues allow billionaires to accumulate wealth without paying appropriate taxes, and criticized corporate tax loopholes. (Sen. Wyden Statement) Ranking Member Sen. Mike Crapo (R-ID) defended the TCJA, emphasizing its positive impact on economic growth, job creation, and tax relief for middle-class Americans. Sen. Crapo warned that allowing the TCJA to expire would result in significant tax increases for individuals and businesses, harming the economy. (Sen. Crapo Statement) Jeff Brabant, VP of Federal Government Relations at the National Federation of Independent Business, testified on the importance of making the 20% pass-through business income deduction (Section 199A) permanent and shared new data detailing the critical impact the deduction’s looming expiration will have on the small business economy if Congress fails to act. (Brabant Testimony) Republicans also pushed back on potential changes to estate taxes, including lowering exemptions or eliminating stepped-up basis, which they argue would hurt family-owned businesses. (Bloomberg, Sept. 12) Speaking on the consequences of eliminating stepped-up basis on small businesses, Brabant said, “If you get rid of stepped-up basis and you have an increase in the death tax, you’re looking at a double death tax. Our members who are nearing retirement, this is a critical issue for them. The concern for the small business sector is, often these small businesses are selling these businesses—because they can’t afford to pay these taxes—to larger businesses that don’t have the same footprint in these same small rural communities.” 199A Coalition The Roundtable is a founding member of the newly formed PROTECT Coalition, an alliance of small, medium and large pass-through businesses and industries that oppose the expiration of Section 199A. (Politico, Sept. 5) The coalition’s mission is to defend vital tax incentives that support the growth and sustainability of successful entrepreneurial businesses across the nation. The Real Estate Roundtable’s SVP & Counsel Ryan McCormick said, “Over four million businesses, including two million in real estate, are organized as partnerships. Section 199A was enacted to ensure that these entrepreneurial businesses could compete on a level playing field with large corporations. Permanently extending Section 199A will allow partnerships and other pass-through businesses to continue advancing careers, investing in communities, and expanding economic opportunity for all.” What’s Next The TCJA expiration looms large, with both parties framing the debate around small businesses, working families, and economic growth. Republicans argue that letting it expire would stifle economic activity, while Democrats are focused on shifting more of the tax burden on higher-income earners. Next week, on September 18 at 2:00 PM EDT, the Senate Banking, Housing and Urban Affairs Subcommittee on Economic Policy, chaired by Senator Elizabeth Warren (D-MA) will hold a hearing on the macroeconomic impacts of potential tax reform in 2025. The Roundtable’s Tax Policy Advisory Committee (TPAC) will continue to closely track ongoing tax debates in Congress.

Capital & Credit

September 13, 2024

Roundtable Weekly

Fed Revises Basel III Endgame Proposal

Basel III

Federal Reserve Vice Chair for Supervision Michael S. Barr previewed the latest revisions to the Basel III Endgame capital requirements this week. Amid industry opposition, Barr scaled back his initial proposal to raise capital requirements for large banks, offering a more measured approach to the rule. (Bloomberg, Sept. 10) Basel III & CRE The revised proposal would increase aggregate Common Equity Tier 1 (CET1) capital requirements for global systemically important banks by roughly 9%—half of what would have been required in the original proposal. Banks with assets between $100 billion and $250 billion are now exempt from most of the proposed changes, except for recognizing unrealized gains and losses in regulatory capital. (Politico, Sept. 10) "There are benefits and costs to increasing capital requirements," Barr said during his September 9 remarks at the Brookings Institution. "The changes we intend to make will bring these two important objectives into better balance, in light of the feedback we have received." (Barr’s Speech | Bloomberg, Sept. 10) The proposal reduces risk weights for certain residential mortgages, and retail exposures, extending this reduction to low-risk corporate debt. However, commercial real estate risk weights remain unclear. Non-GSIB banks would see a long-term increase of 3 to 4% in capital requirements, mainly from the inclusion of unrealized gains and losses. Other changes are expected to add just 0.5% to their capital obligations. The Roundtable raised industry concerns about the negative impact of the Basel III proposal in a Jan. 12 letter to the Fed and other agencies. The comments outlined how the proposal would decrease real estate credit availability, increase borrowing costs for commercial and multifamily real estate properties, and negatively impact the U.S. economy, concluding with a call to federal regulators to withdraw their proposed rulemaking. (Roundtable Weekly, Mar. 29) What’s Next An open Board meeting is expected to be scheduled to review the revised plan, with an announcement expected as early as Sept. 19. The plan will be open to public comment for 60 days once released. While this new proposal is an improvement of the original plan, we remain concerned that any increase in capital requirements will have a pro-cyclical impact on credit capacity and still carry a cost for commercial real estate and the overall economy. The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to monitor and respond to any further changes to the Basel III Endgame proposal and other federal policy issues impacting credit capacity and capital formation.

News, RER Quarterly Sentiment Index

September 10, 2024

Press Release

NEWS: Sentiment Index Reflects Growing Optimism Amid Persistent Market Challenges

Quarterly Sentiment Index

(WASHINGTON, D.C.) — The Real Estate Roundtable’s Q3 2024 Sentiment Index, which measures commercial real estate executives’ confidence and expectations about the industry environment, suggests a growing confidence in the future of the commercial real estate market despite ongoing challenges. The Q3 Sentiment Index reported an overall score of 64, reflecting an increase of three points from the previous quarter, and the Future Index at 70, up four points from the previous quarter. This rise in sentiment marks an 18-point increase in the overall score since last year. Roundtable President and CEO Jeffrey DeBoer said, “The increase in our Q3 Sentiment Index indicates that while uncertainty remains, the industry is gradually regaining confidence. Leaders are seeing signs of stabilization in asset values and a potential improvement in the availability of capital, which are encouraging signals as we navigate this complex environment.” He added, “The results of the report reflect the resilience of the commercial real estate industry. The fact that a majority of executives expect better conditions in the coming year is a strong signal that although serious challenges remain, the worst may be behind us.” The Q3 Sentiment Index topline findings include: All indices of The Roundtable’s Q3 Index are up, compared to the previous quarter and one year ago. The Q3 2024 Real Estate Roundtable Sentiment Index registered an overall score of 64, an increase of three points over the previous quarter. The Current Index registered 59, a four-point increase over Q2 2024. The Future Index posted a score of 70 points, an increase of four points from the previous quarter, indicating that uncertainty surrounding the future of asset values and availability of capital persists, but has lessened. In Q3 2023, the Overall Index registered at 46, while the Current Index registered at 33, reflecting a notable 26-point gain in the Q3 2024 Current Index compared to the previous year. The Index is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive. Evolving market trends continue to shape the real estate landscape. A majority (70%) of Q3 survey participants expect general market conditions to show improvement one year from now. Additionally, 48% of respondents said conditions are better now compared to this time last year. Only 6% of Q3 participants expect general market conditions to be somewhat worse in a year, a decrease from 11% in Q2. Some subsector asset classes, such as data centers and student housing, are well-positioned from both a fundamentals and capital availability perspective. However, Class B office properties continue to face ongoing challenges, and the fast pace of multifamily and industrial rent growth has subsided. A significant 88% of Q3 survey participants expressed optimism that asset values will be higher (57%) or the same (31%) one year from now, indicating some semblance of expected stability. 76% of Q3 survey participants believe asset values are slightly lower (50%) or about the same (26%) today compared to a year ago. The real estate capital markets landscape remains challenging. However, 71% of respondents believe the availability of equity capital will improve in one year, while 60% said the availability of debt capital will improve in one year. 40% of participants said the availability of debt capital would be the same or worse in one year, an increase from 36% who voiced the same expectation in Q2 of this year. Some sample responses from participants in the Sentiment Index’s Q3 survey include: “Investors still want to allocate dollars to real estate, but there is still sentiment for defensive positioning and risk mitigation.” “Pricing is all over the board and has reset since the post-Covid boom. The magnitude of the reset depends on where the asset is in its life cycle and its financing structure.” “Banks have pulled back, but insurance companies have a reasonable level of capital and pricing has been stable. For higher quality assets, there’s demand.” “Spreads are tightening on construction loans, but acquisition financing is more available. There is a lot of debt capital on the sidelines for high quality asset acquisitions.” Data for the Q3 survey was gathered by Chicago-based Ferguson Partners on The Roundtable’s behalf in July. See the full Q3 report. The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy. # # #

Tax Policy

September 6, 2024

Roundtable Weekly

The Roundtable Files Amicus Brief in Sirius Solutions v. Commissioner

limited partnerships Tax Policy

On August 19, The Roundtable submitted an amicus brief to the Fifth Circuit Court of Appeals in Sirius Solutions v. Commissioner, a pivotal case that could redefine the tax obligations of limited partners under the self-employment tax in the Self-Employed Contributions Act (SECA). (Amicus Brief) Why It Matters There are more than 441,000 limited partnerships in the U.S., with over 10 million partners. Nearly half of these limited partnerships are real estate partnerships. If the IRS position prevails, it could result in widespread tax increases on real estate limited partners who provide some services to the business and effectively raise the tax burden on real estate investments. The IRS’s position would requires limited partners to be “passive investors” to qualify for the exemption from the 3.8% SECA tax under Section 1402(a)(13). Roundtable Amicus Brief The Roundtable’s amicus brief argues that the IRS’s interpretation is flawed, pointing to decades of state law that allows limited partners to provide services and still retain their status. The brief emphasizes that pre-1977 state court decisions and the IRS’s own 1994 proposed regulations contradict the government’s position that limited partners must be passive to avoid SECA taxes. The Tax Court’s imposition of the passive investor test is found nowhere in the statute and rests on a fundamental misunderstanding of state laws that Roundtable members and others have relied on for decades. Ignoring an established body of partnership law, the IRS is relying on a recent Tax Court decision, Soroban, that imposes a judge-made test requiring a limited partner to be a “passive investor.” The Roundtable believes this fundamental error should be reversed. What’s Next The Fifth Circuit’s ruling in Sirius will set a precedent for future SECA tax cases, with significant consequences for real estate and other industries that use limited partnerships for business purposes. A successful outcome in the Sirius case could reduce the likelihood that the government moves forward with formal tax guidance that expands the reach of SECA taxes. The Roundtable remains committed to protecting entrepreneurs’ ability to flexibly organize in partnerships and other pass-through entities that promote capital formation, risk-taking, and economic growth, and it will remain engaged as the SECA dispute moves forward.

Quarterly Sentiment Index

September 6, 2024

Roundtable Weekly

Sentiment Index Reflects Growing Optimism Amid Persistent Market Challenges

Quarterly Sentiment Index

The Real Estate Roundtable’s Q3 2024 Sentiment Index, which measures commercial real estate executives’ confidence and expectations about the industry environment, suggests a growing confidence in the future of the commercial real estate market despite ongoing challenges. Roundtable View The Q3 Sentiment Index reported an overall score of 64, reflecting an increase of three points from the previous quarter, and the Future Index at 70, up four points from the previous quarter. Roundtable President and CEO Jeffrey DeBoer said, “The increase in our Q3 Sentiment Index indicates that while uncertainty remains, the industry is gradually regaining confidence. Leaders are seeing signs of stabilization in asset values and a potential improvement in the availability of capital, which are encouraging signals as we navigate this complex environment.” This rise in sentiment marks an 18-point increase in the overall score since last year. He added, “The results of the report reflect the resilience of the commercial real estate industry. The fact that a majority of executives expect better conditions in the coming year is a strong signal that although serious challenges remain, the worst may be behind us.” Topline Findings All indices of The Roundtable’s Q3 Index are up, compared to the previous quarter and one year ago. The Index is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive. The Q3 2024 index registered an overall score of 64, an increase of three points over the previous quarter. The Current Index registered 59, a four-point increase over Q2 2024. The Future Index posted a score of 70 points, an increase of four points from the previous quarter, indicating that uncertainty surrounding the future of asset values and availability of capital persists, but has lessened. In Q3 2023, the Overall Index registered at 46, while the Current Index registered at 33, reflecting a notable 26-point gain in the Q3 2024 Current Index compared to the previous year. Evolving market trends continue to shape the real estate landscape. A majority (70%) of Q3 survey participants expect general market conditions to show improvement one year from now. Additionally, 48% of respondents said conditions are better now compared to this time last year. Only 6% of Q3 participants expect general market conditions to be somewhat worse in a year, a decrease from 11% in Q2. Some subsector asset classes, such as data centers and student housing, are well-positioned from both a fundamentals and capital availability perspective. However, Class B office properties continue to face ongoing challenges, and the fast pace of multifamily and industrial rent growth has subsided. A significant 88% of Q3 survey participants expressed optimism that asset values will be higher (57%) or the same (31%) one year from now, indicating some semblance of expected stability. 76% of Q3 survey participants believe asset values are slightly lower (50%) or about the same (26%) today compared to a year ago. The real estate capital markets landscape remains challenging. However, 71% of respondents believe the availability of equity capital will improve in one year, while 60% said the availability of debt capital will improve in one year. 40% of participants said the availability of debt capital would be the same or worse in one year, an increase from 36% who voiced the same expectation in Q2 of this year. Data for the Q3 survey was gathered by Chicago-based Ferguson Partners on The Roundtable’s behalf in July. Read the full Q3 report.

Energy & Climate, News

September 6, 2024

Roundtable Weekly

Biden Administration Announces $240 Million of IRA Grants for Building Efficiency Upgrades

Building Performance Standards BPS Energy amp Climate Inflation Reduction Act

On August 27, the U.S. Department of Energy announced plans to allocate $240 million from the Inflation Reduction Act (IRA) to 19 state and local governments to help communities adopt energy-efficient building codes and retrofit structures to meet updated standards. (Politico, Aug. 27) Key Details The initiative is expected to reduce utility costs for multifamily residents and commercial building operators, enhance grid resilience, and lower emissions. “DOE is helping jurisdictions move further and faster in implementing stronger codes that will provide Americans safer, healthier, and more comfortable places to live, work, and play,” said U.S. Secretary of Energy Jennifer Granholm. (US-DOE Press Release, Aug. 27) The 19 selected projects will receive direct technical assistance to support the adoption and implementation of traditional energy codes, zero energy codes, and building performance standards. The grants also align with the Justice40 Initiative, designed to direct 40% of federal investments to disadvantaged communities overburdened by pollution. This latest announcement follows an initial $90 million awarded to 27 projects last year from the 2021 Infrastructure Investment and Jobs Act, commonly known as the bipartisan infrastructure law, to implement updated building codes. (Politico, Aug. 27) Chosen jurisdictions must go through a “negotiation process” with US-DOE before the agency ultimately awards Round 1 grants. Applications for the second round of IRA funding will close on Sept. 13. (US-DOE Press Release, Aug. 27) What’s Next Building Performance Standards (BPS) laws have the potential to drive significant environmental benefits, but only if they are thoughtfully designed and implemented. The Roundtable is developing a “primer” for real estate stakeholders, highlighting key issues in the state and local BPS trend, with a release planned for this fall.

Beneficial Ownership, Beneficial Ownership & the Corporate Transparency Act

September 3, 2024

Policy Comment Letter

The Roundtable and Coalition Urge Congress to Delay CTA Compliance Deadline, Support H.R.9278

Beneficial Ownership amp the Corporate Transparency Act,

Bipartisan Tax Bill Stalls in Senate

bonus depreciation Business Interest Deduction Low Income Housing Tax Credit LIHTC Tax Policy

Yesterday, the Senate failed to pass a bipartisan $79 billion tax package, the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024). The House-passed legislation seeks to extend various expiring tax provisions from the 2017 and pandemic-related tax bills. (WSJ, Aug. 1 | The Hill, Aug. 1) Key Points Bipartisan Effort: Senate Finance Committee Chair Ron Wyden (D-OR) and House Ways and Means Committee Chair Jason Smith (R-MO) crafted the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024). The bill passed the House on Jan. 31 by an overwhelming 357-70 vote. Senate Opposition: Despite bipartisan support, the bill faced significant opposition in the Senate, where critics argued it failed to adequately address long-term fiscal concerns and prioritized short-term fixes. Roundtable Support: The bill included Roundtable-supported measures on business interest deductibility, bonus depreciation, and the low-income housing tax credit (LIHTC). Other provisions in the agreement: Reforms to the child tax credit, the expensing of R&D costs, disaster tax relief, a double-taxation tax agreement with Taiwan, and a large pay-for that creates significant new penalties for abuse of the employee retention tax credit (ERTC) rules and accelerates the expiration of the ERTC. (RW, Jan. 19) Roundtable Advocacy In February, The Roundtable and a large coalition of housing and other real estate groups sent letters to Congress in support of the tax bill. (RW, Feb. 16) The Roundtable and the Housing Affordability Coalition’s letter emphasized the importance of advancing provisions in the bill that strengthen the low-income housing tax credit (LIHTC)—along with various real estate investment measures that would benefit families, workers, and the national economy. The coalition noted how the bill would increase the housing supply as a positive response to the nation’s housing affordability crisis. It would also suspend certain tax increases on business investment that took effect in 2022 and 2023. Congress will return to Washington on September 9, with several critical legislative priorities on the agenda, including decisions on key housing policies and potential new regulations impacting the commercial real estate industry.

CRE and the Economy

August 2, 2024

Roundtable Weekly

Fed Holds Rates Steady: Implications for Commercial Real Estate

Federal Reserve Office Markets The Fed

The Federal Reserve chose to maintain current interest rates at the same level since last July, despite calls from economists and policymakers to implement a cut. (AP News, July 31 | Axios, July 31) Fed's Decision Fed chair Jerome Powell emphasized the need for data-driven decisions, indicating that future rate adjustments will hinge on economic indicators. (Washington Post, July 31) During the June meeting, Fed officials released their Summary of Economic Projections report, which showed that policymakers penciled in just one rate cut this year, down from the three initially estimated at the start of the year. (RW, June 14) After the decision, Powell said, "a reduction in our policy rate could be on the table as soon as the next meeting in September." (Barrons, Aug.1) In June, Senators Elizabeth Warren (D-MA), Jacky Rosen (D-NV), and John Hickenlooper (D-CO) wrote to Powell, urging the Fed to cut the federal funds interest rates from a two-decade-high of 5.5 percent, citing that high interest rates are increasing the costs of housing and insurance, and exacerbating the housing supply crisis. (Letter) In their letter on housing prices, they emphasized that “The country is already facing a severe housing shortage, and the Fed’s refusal to bring down interest rates is exacerbating this shortage and driving higher inflation rates…Lower mortgage rates would encourage more people to sell their homes, which would in turn increase housing supply, decrease prices, ease the costs of renting, and ultimately increase homeownership.” CRE Markets RER board member Owen Thomas (BXP) With interest rates unchanged at a 23-year high, the commercial real estate sector faces significant challenges, particularly in financing and investment, as higher rates increase borrowing costs and reduce demand for development. Higher interest rates and the pandemic-induced shift to remote work have left a lasting impact on office demand, prompting landlords to rethink space utilization. In a recent interview with Bloomberg Television, RER board member Owen Thomas (BXP) discussed the transformation of the office market and the need for innovation and adaptability in the face of changing tenant needs and market conditions. (Watch interview) The Fed’s next meeting is scheduled for September 17-18, 2024.

Housing, News

August 2, 2024

Roundtable Weekly

New Study on Rent Control Shows Proposals Impede Housing Production

Rent Control

In July, the White House announced a nationwide rent control plan that aims to cap rent increases at 5%. Owners of rental housing would only be able to take advantage of depreciation write-offs if they limit annual rent increases to no more than 5%, effectively trading depreciation deductions for price controls. Economists on Rent Control Proposals The White House’s recent rent control plan, while intended to make renting more affordable, would impede the production of much-needed housing, particularly for affordable units. (RW, July 19) Last week, The Roundtable and a coalition of national real estate associations, wrote to President Biden expressing strong opposition to the proposed rent control measures. (RW, July 26) Economists across the political spectrum widely agree that rent control is a discredited policy. Jason Furman, the former Obama administration's top White House economist, asserts that rent control would worsen housing supply issues instead of solving them. A recent study by the University of Chicago surveyed 45 economists from elite institutions, revealing near-universal agreement that national rent control measures would do little to aid Americans and would ultimately worsen the housing shortage. (NMHC, July 30) Survey Findings: No economist agreed rent control would substantially reduce income inequality. 2% of economists surveyed agreed that a national rent cap would substantially improve the lives of middle-income Americans over the next 10 years. 62% of the economists agreed or strongly agreed that the Administration’s rent cap proposal would substantially reduce the amount of available apartments over the next 10 years, compared to 7% who disagreed. The Roundtable will continue to encourage policymakers to enact measures that will expand the nation’s housing infrastructure, develop more affordable units and reduce the costs of housing.

Housing

July 26, 2024

Roundtable Weekly

Real Estate Coalition Opposes Federal Rent Control Proposal

Affordable Housing Rent Control

On Monday, a coalition of national real estate associations, including The Real Estate Roundtable, wrote to President Biden expressing strong opposition to recently proposed nationwide rent control measures. (Letter) Key Points Last week, the White House announced a nationwide rent control plan that aims to cap rent increases at 5%. Owners of rental housing would only be able to take advantage of depreciation write-offs if they limit annual rent increases to no more than 5%, effectively trading depreciation deductions for price controls. (Roundtable Weekly, July 19) Negative impacts of rent control: Rent control consistently leads to instability in the housing market and reduced supply, undermining efforts to foster a healthy and equitable housing environment. Economic consensus: Economists across the political spectrum widely agree that rent control is a discredited policy. Jason Furman, the former Obama administration's top White House economist, asserts that rent control would worsen housing supply issues instead of solving them. Disincentive for investment: Rent control discourages necessary housing investments, particularly in areas with limited affordable options. It disproportionately benefits higher-income renters, impeding access for lower-income households. Coalition Recommendations Increase housing subsidies: Instead of imposing rent control, the coalition urges the administration to increase subsidies for those in need and to work with housing providers on solutions that expand the affordable housing supply. Support proven solutions: The coalition advocates for enhancing federal programs such as the Low-Income Housing Tax Credit (LIHTC) and Section 8, which have been effective in creating and preserving affordable housing units. Industry Testimony On Wednesday, the House Financial Services Committee Subcommittee on Housing and Insurance held a hearing, “Housing Solutions: Cutting Through Government Red Tape” to discuss the nation’s housing affordability crisis and burdensome federal government reviews and permitting processes. The committee heard testimony from Carl Harris (Chairman, National Association of Home Builders (NAHB) and James H. Schloemer (Chair, National Multifamily Housing Council (NMHC) who testified on the rent cap proposal and the federal push to mandate costly and restrictive national energy codes. NMHC Chair Schloemer stated in his testimony, “Decades of research shows that rent regulation devastates rental housing quality and harms affordability. The Biden administration proposal to cap rents will not add a single new unit of housing, and, in fact worsens housing availability and quality.” Hastening the permit approval process must be a critical part of any policy legislation aimed at increasing the supply of affordable housing. (NYT, July 8) The Roundtable and the coalition will continue to educate policymakers about and push back against flawed rent control policies while advocating for bipartisan solutions to boost supply and affordability.

News, Tax Policy

July 26, 2024

Roundtable Weekly

Roundtable Requests Additional Guidance for FIRPTA REIT Regulations

LookThrough Rule FIRPTA Tax Policy Tax Policy Advisory Committee TPAC

Today, The Roundtable wrote to U.S. Treasury Secretary Janet Yellen requesting that the Treasury Department provide additional clarifying guidance regarding transition relief in the Foreign Investment in Real Property Tax Act’s (FIRPTA) regulations for domestically controlled REITs. (Letter) Key Concerns In April, Treasury issued final regulations that redefined what constitutes a domestically controlled REIT exempt from tax under FIRPTA. The regulations created a new look-through rule that extended the reach of the discriminatory FIRPTA regime to common investment structures. (Roundtable Weekly, April 26) Clarifying guidance is necessary and urgent to enable a qualified investment entity (QIE) to make a timely determination concerning its direct or indirect ownership of “U.S. real property interests” (“USRPI(s)”) under the conditions of the Transition Rule. Impact on foreign investment: Foreign investment can attract significant capital, helping to support market stability and create jobs. The final regulations, designed to define a domestically controlled QIE, are feared to be deterring foreign investment in U.S. real estate. Outstanding questions: Specifically, the letter seeks additional guidance on: what constitutes “direct or indirect” ownership of real estate when it is held by a REIT through multiple subsidiaries, how to treat acquisition costs and capitalization expenditures, and situations where ongoing construction or substantial renovations are occurring. Roundtable Advocacy The Roundtable has consistently advocated for the withdrawal of regulations and policies that hinder foreign investment in U.S. real estate. (Roundtable Weekly, April 26) David Friedline, a tax partner at Deloitte and Vice Chair of RER’s Tax Policy Advisory Committee (TPAC) said, “The official guidance would provide needed clarification for our members, who have been adversely affected by the final regulations’ new look-through rule, on how to comply with the conditions of the transition relief.” Friedline was a principal drafter of the Roundtable letter. Building new affordable housing and office-to-residential conversion projects requires encouraging more investment, not less. Erecting new barriers to passive foreign investment in U.S. real estate runs counter to important bipartisan policy priorities. The Roundtable remains committed to collaborating with the Treasury to ensure that the final regulations can provide much-needed clarity and stability, supporting the industry's efforts to attract foreign capital and drive economic growth.

Energy & Climate, ENERGY STAR “NextGen”, Zero Emissions Buildings (ZEB)

July 24, 2024

Fact Sheet

Fact Sheet: NextGen-ZEB Path to Sustainable Real Estate

Energy amp Climate, ENERGY STAR NextGen, EPAs NextGen Building Label, Zero Emissions Buildings ZEB,

Affordable Housing, Housing

July 23, 2024

Policy Comment Letter

Real Estate Coalition Opposes Federal Rent Control Proposal

White House Calls on Congress to Enact Federal Rent Price Control Measure, Eliminate Depreciation Write-Offs to Help Reduce Housing Costs

Affordable Housing GSE Reform Housing Rent Control

This week, the White House unveiled a nationwide rent price control plan that calls on Congress to "pass legislation giving . . . landlords a choice to either cap rent increases on existing units at 5% or risk losing current valuable federal tax breaks." (White House Fact Sheet) While the package is focused on imposing flawed rent price control policies and eliminating long-standing depreciation write-offs, it also includes policies to help build more housing. (WSJ, July 16) Housing Proposals Under President Biden’s plan, beginning this year and for the next two years, owners of rental housing would only be able to take advantage of faster depreciation write-offs if they limit annual rent increases to no more than 5%, effectively trading depreciation deductions for rent price controls. This would apply to landlords with over 50 units in their portfolio, covering more than 20 million units nationwide—nearly half the U.S. rental market. It would include an exception for new construction and substantial renovation or rehabilitation. (White House Fact Sheet) While intended to make renting more affordable, these proposals would impede the production of much-needed housing, particularly for affordable units. (Bloomberg, July 17) The Biden-Harris Housing Plan also includes initiatives to: Call on all federal agencies to assess surplus federal land that can be repurposed to build more affordable housing; Rehabilitate distressed housing, build more affordable housing, and revitalize neighborhoods; and Authorize $325 million in Choice Neighborhoods grants under the U.S. Department of Housing and Urban Development (HUD) to build new deeply-affordable homes and spur economic development in communities across the country. The proposal would require congressional action to become law. FHFA Proposed Tenant Protections Last week, the Federal Housing Finance Agency (FHFA) announced a set of required tenant protections for multifamily properties financed by Fannie Mae and Freddie Mac (the Enterprises). (FHFA News Release) This is the first time tenant protections will be a standard component of Enterprise multifamily financing. These protections apply to future loans acquired by the Enterprises and would include: Requiring 30-day notice before rent increases; Requiring 30-day notice on lease expiration; and Providing a 5-day grace period before imposing late fees on rental payments. Industry & Roundtable Response This week at the Republican National Convention, our National Real Estate Organizations (NREO) partnered with POLITICO to host a series of discussions on the elections, affordable housing, revitalizing cities, the commercial real estate industry, and proactive policy solutions. (Watch here) The Roundtable’s President & CEO Jeffrey DeBoer was a featured speaker alongside Shannon McGahn (National Association of Realtors), joining Heidi Sommer (POLITICO) for a discussion on affordable housing, upcoming tax priorities, interest rates, and the economy. DeBoer stated in response to the administration’s recent rent cap proposal, “Rent control is fundamentally flawed and historically ineffective. Wage and price controls, even during wartime, have consistently failed to deliver the intended results. Implementing such measures now will only exacerbate the root cause of America’s housing problem by discouraging new housing development and reducing investment in existing housing.” Many of our NREO colleagues, including NAR also spoke out against the proposal. (NAR statement) (NMHC statement) (Housing Solutions Coalition statement) The Roundtable is developing comments on the proposed plans and will continue work to enact measures that will help spur the expansion of America’s affordable housing infrastructure.

Energy & Climate, News

July 19, 2024

Roundtable Weekly

Roundtable Requests Voluntary U.S. Guidelines for Climate-Resilient Buildings to Fend Off EU-Based Rules

Energy amp Climate ENERGY STAR EPAs ENERGY STAR Certification for Buildings

This week, The Roundtable urged the Departments of Treasury, Energy, and the Environmental Protection Agency to develop voluntary, science-based guidelines to help U.S. real estate companies align their climate-related programs with global targets. (July 16 letter) U.S.-Specific Climate Investment Principles The Roundtable’s letter to Treasury Secretary Yellen, Energy Secretary Granholm, and EPA Administrator Regan, builds on Treasury’s Principles for Net Zero Financing and Investment. (Roundtable Weekly, Sept. 23) Treasury’s principles can guide net-zero corporate commitments in the United States. However, foreign organizations aim to exert significant influence over capital decisions in America’s real estate – which can leave buildings “stranded” in the eyes of some overseas investors because they do not meet “energy requirements being rolled out in Europe.” Bloomberg (June 18) These market risks prompted the Roundtable’s letter requesting voluntary building “decarbonization curves” designed by the U.S. government reflecting climatic, market, and data conditions in our country. Investment principles for America’s real estate “should not be the creation of the European Union,” The Roundtable states. “This is a matter of global economic competitiveness for capital access,” said the Chair of The Roundtable’s Sustainability Policy Advisory Committee, Anthony Malkin (Chairman and CEO, Empire State Realty Trust, Inc.). “America’s buildings should not be expected to meet standards that speak to assets, laws, power grids, and regulatory environments in Europe or elsewhere.” U.S. Energy Programs and Recommendations Anthony Malkin (Chairman and CEO, Empire State Realty Trust, Inc.) Malkin continued, “The United States leads the world in government developed, voluntary guidelines for all types of buildings' energy use and emissions. Agencies like US-EPA and US-DOE know the conditions of our markets, climate zones, and power grids and can help make it easier for capital to come into real estate and grow jobs and tax revenue in the United States.” America’s global leadership in developing climate-related real estate guidelines is shown through tools and resources such as: EPA: ENERGY STAR Standards for efficient and low-carbon buildings, including NextGen certification. (Roundtable Weekly, March 22) DOE: The first voluntary National Definition for a Zero Emissions Building (“ZEB”) (Roundtable Weekly, June 7), and the wealth of scientific research from the agency’s 17 national labs. Federal Data Collection: Systems like the national Commercial Building Energy Consumptions Survey (CBECS) and ENERGY STAR’s Portfolio Manager. Electric Grid Information: Unmatched resources profiling carbon intensities of grid regions across the U.S. The Roundtable urged the U.S. government to develop building “pathways” through a robust public input process that considers the experiences of companies that own, develop, manage and finance America’s real estate. The Sustainability Policy Advisory Committee (SPAC) will continue to work with the agencies and Congress to shape policies that promote cost-effective investments to optimize building energy efficiency and help the real estate sector mitigate the effects of climate change.

Energy & Climate

July 18, 2024

Policy Comment Letter

U.S. Guidelines for Climate-Resilient Real Estate

Energy amp Climate, Energy Efficiency, ENERGY STAR, EPAs ENERGY STAR Certification for Buildings, Treasury Department,

News, Property Conversions

July 12, 2024

Roundtable Weekly

Property Conversions Legislation Introduced

Affordable Housing Property Conversions Tax Policy

On Thursday, House Ways and Means Committee Members Mike Carey (R-OH) and Jimmy Gomez (D-CA) introduced the bipartisan Revitalizing Downtowns and Main Streets Act (H.R.9002), which would create a market-based tax incentive for converting older commercial buildings to residential use. Revitalizing Downtowns and Main Streets Act The bill is a positive step forward in the effort to modernize U.S. real estate, create new and affordable housing, and strengthen cities and neighborhoods that continue to suffer from the aftereffects of the pandemic and changing business needs. “Between high housing costs and the rise of remote work, formerly prosperous neighborhoods across the country are struggling,” said Rep. Carey (R-OH). “The solution is right in front of us. But even though vacant commercial and office space is sitting unused, converting these properties into housing is so expensive it is often uneconomical. This bill will allow communities to meet their residents’ need for affordable, abundant housing and allow American downtowns and main streets to thrive.” (Rep. Carey Press Release) The bill would create a new and temporary 20% tax credit for qualified property conversion expenditures, modeled after the historic rehabilitation credit. (RER’S One-Page Summary) The total credit authority would be limited to $15 billion, allocated by state housing finance agencies based on feasibility and impact. Larger credits would be available for projects in rural areas, low-income census tracts, and economically distressed areas. The credit could be stacked with other federal tax benefits, including LIHTC, the rehabilitation credit, and Opportunity Zone benefits. Roundtable Advocacy The Real Estate Roundtable has supported similar versions of conversion legislation, such as the Revitalizing Downtowns Act (S. 2511, H.R. 4759), introduced by Sen. Debbie Stabenow (D-MI) and Rep. Jimmy Gomez (D-CA). The Roundtable has also worked closely with the White House on administrative actions designed to provide low-cost financing for conversion projects. (Roundtable Weekly, April 19) “The Revitalizing Downtowns and Main Streets Act is a proactive, market-based policy measure that aims to breathe new life into underutilized commercial properties, create jobs, generate local property tax revenue, and help reinvigorate our nation’s cities and suburbs,” said Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable. “We commend the leadership of the bill sponsors for their vision and urge support for this critical bipartisan legislation.” The bill addresses and incorporates most of the recommendations a Roundtable-led coalition had collectively made to the Revitalizing Downtowns Act in comment letters submitted in October 2022 and June 2024. Since then, many states and localities have taken bold action to support property conversion efforts. Both letters are the product of a property conversions working group created by The Roundtable’s Tax Policy Advisory Committee (TPAC). The working group has reviewed and considered the challenges and impediments confronting potential property conversion activities. (Roundtable Weekly, June 28) The Roundtable’s Tax Policy Advisory Committee will continue working with policymakers to advance tax policies that encourage and facilitate property conversion efforts.

Capital & Credit

July 12, 2024

Roundtable Weekly

Treasury Issues Proposed Rule to Expand CFIUS Coverage of Real Estate Transactions Near Military Installations

Capital and Credit CFIUS

This week, the U.S. Department of the Treasury, as Chair of the Committee on Foreign Investment in the United States (CFIUS), issued a Notice of Proposed Rulemaking (NPRM) that would expand CFIUS’s jurisdiction over certain transactions by foreign persons involving real estate in the United States. (Treasury Press Release, July 8) Proposed Rule As chair of the Committee on Foreign Investment in the United States (CFIUS), the Treasury has the authority to review certain real estate transactions near specified military installations and to act in appropriate circumstances. Under the new proposal, foreign land transactions within a mile of 40 additional military installations and within 100 miles of 19 additional military sites would trigger a CFIUS review. The proposed rule would add over 50 military installations across 30 states to the existing list of installations for which CFIUS has jurisdiction. The national security review panel has the power to block transactions entirely or impose restrictions on foreign transactions. The U.S. Department of Defense (DOD), a member of CFIUS, continuously assesses its military installations and the geographic scope established under the CFIUS regulations to ensure appropriate application in light of national security considerations. This proposed rule is the result of a recent comprehensive assessment conducted by the DOD regarding its military installations. Other Key Changes This latest update would vastly expand the reach of CFIUS’s real estate jurisdiction while maintaining its sharp focus on national security. The proposed rule would also make other key changes: Expand CFIUS’s jurisdiction over real estate transactions between 1 mile and 100 miles around eight military installations already listed in the regulations; and Update the names or locations of 21 military installations already listed in the regulations to better assist the public in identifying the relevant sites. Implications and Next Steps The rulemaking comes amid growing bipartisan concern in Congress over the purchase of U.S. agricultural land and other property by China and other foreign adversaries. Several GOP-led states have considered or enacted new restrictions on foreign ownership of land, targeting investors with ties to China and other countries. (PoliticoPro, July 8) In response to the proposed rule, written comments will be accepted for 30 days following the NPRM’s publication in the Federal Register. The Real Estate Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to monitor the proposed rulemaking and plans to submit comments.

Homeland Security, News

July 12, 2024

Roundtable Weekly

Real Estate Coalition Raises Concerns Over Cyber Reporting Requirements

CIRCIA CISA Cyber Reporting Requirements Cyber Risks Cybersecurity Homeland Security RERs Homeland Security Task Force HSTF

A coalition of national real estate associations submitted comments to the Cybersecurity and Infrastructure Security Agency (CISA) expressing concerns over a new proposed rule: Cyber Incident Reporting for Critical Infrastructure Act (CIRCIA) Reporting Requirements. As currently drafted, the rule imposes overly burdensome requirements and requires companies to assume unnecessary but significant legal and cybersecurity risks. (Letter) Cyber Incident Reporting Rule Under the current proposal, companies would be required to report significant cyber incidents to the Department of Homeland Security or CISA within 72 hours as well as any ransomware payments within 24 hours. Given the ever-expanding cyber-threat landscape, the rental housing and real estate industry has prioritized defense against vulnerabilities. The industry has undertaken efforts to mitigate cybersecurity risks, implement policies to prevent and mitigate such risks and encourage investments in bolstering cyber defenses to protect data. The letter noted, “We support a unified but flexible regulatory framework for data security and incident notification, and believe it is important to have a balanced approach to providing consumers with meaningful information about material cybersecurity risks and incidents, while also not imposing overly burdensome regulations on the real estate/rental housing industry or unintentionally exposing our members to substantially greater cybersecurity risks.” Industry Concerns and Recommendations Overly burdensome requirements: CISA should revise the definition of "covered cyber incident" to a higher threshold for reporting to prevent unnecessary administrative load. Disproportionate compliance costs: the estimated compliance cost of over $1.4 billion is seen as disproportionate to the benefits. These funds could be better spent on actual cybersecurity measures rather than on reporting. Reporting deadlines are unclear and increase the risk of attack: the proposed rule’s 72-hour reporting requirement and 24-hour ransom payment reporting deadline could hinder effective incident response and increase vulnerability to additional attacks. The proposed rule adds another reporting requirement to an already cluttered landscape. CISA should harmonize its reporting requirements to reduce compliance burdens. The Real Estate Roundtable’s Homeland Security Task Force and RE-ISAC will continue to be resources and assist CISA in the development of clear, effective, and secure cyber incident reporting rules.

Cyber Risks, Cybersecurity, Homeland Security

July 3, 2024

Policy Comment Letter

Cyber Incident Reporting for Critical Infrastructure Act (CIRCIA) Reporting Requirements – Comment Letter

Cyber Risks, Cybersecurity,

Roundtable Leadership

June 28, 2024

Roundtable Weekly

Roundtable Announces FY 2025 Leadership; Kathleen McCarthy Takes Over As New Chair

Board of Directors Jeffrey DeBoer John Fish Kathleen McCarthy Roundtable Leadership

Roundtable Leadership The Roundtable’s membership also approved a 26-member Board of Directors. Kathleen McCarthy, Chair of the Real Estate Roundtable (above), said, “I am incredibly honored to step into the role of Chair of the Real Estate Roundtable. The real estate industry touches every aspect of our economy—from affordable housing and shopping centers to warehouses and data centers. Strong collaboration between the public and private sectors will enable the country to meet the challenges we face and capitalize on the opportunities ahead. John, Jeff, and the entire Roundtable team have advocated for policies to help drive growth and innovation across communities in the U.S., and I look forward to building on their important work.” (Press Release) John Fish, Immediate Past Chair, stated, “It has been a privilege to serve as Chair during such a pivotal period for our industry. I am pleased to hand over the reins to Kathleen. Her expertise and leadership, along with Jeff DeBoer’s vision and guidance, will undoubtedly guide The Roundtable to new heights. The focus on recovery, resilience, and innovation remains crucial as this important organization works with our partners in government to advance our shared interests and strengthen the American economy.” “The Real Estate Roundtable and its members have always risen to meet the challenges of the times, and I am confident that under Kathleen’s leadership, we will continue to make impactful strides,” said Jeffrey DeBoer, Roundtable President and CEO. “The real estate industry is a cornerstone of economic vitality, job creation, and community development. Kathleen’s extensive experience and strategic vision will be invaluable as we address critical policy issues and advocate for a shared, prosperous future.” Roundtable Board of Directors The 26-member FY2025 Roundtable Board of Directors is elected from the membership and includes three elected leaders of national real estate trade organizations from The Roundtable’s 18 partner associations. Joining The Roundtable’s Board of Directors as of July 1 are: Conor Flynn, CEO, Kimco Realty Corporation; First Vice Chair, Nareit Michelle Herrick, Head of Real Estate Banking, J.P. Morgan Diane Hoskins, Global Co-Chair, Gensler; Chairman, The Urban Land Institute Michael H. Lowe, Co-CEO, Lowe Andrew P. Power, President & CEO, Digital Realty See the complete list of the FY2025 Roundtable’s Board of Directors here. Stepping down from The Roundtable Board as of July 1 are: Michael D. Brown, Travel & Leisure Co. President & CEO, Immediate Past Chair, American Resort Development Association Debra A. Cafaro, Chairman and Chief Executive Officer, Ventas, Inc., Immediate Past Chair, The Real Estate Roundtable W. Matthew Kelly, CEO, JBG Smith, Chair, Nareit The Roundtable will release its 2024 Annual Report: Dynamic Policy for Evolving Needs in the coming weeks, which highlights the organization’s advocacy efforts over the past year and future policy solutions.

Property Conversions

June 28, 2024

Roundtable Weekly

Real Estate Coalition Urges House Members to Support Bipartisan CRE Conversions Bill

Affordable Housing CRE Conversions Property Conversions Tax Policy

A Roundtable-led coalition of 17 national real estate organizations wrote to members of the House of Representatives voicing their support for the introduction of the Revitalizing Downtowns and Main Streets Act, which would create a market-based tax incentive for converting older commercial buildings to residential use. (Coalition letter) Revitalizing Downtowns and Main Streets Act The House Ways and Means Committee Members Mike Carey (R-OH) and Jimmy Gomez (D-CA) will introduce the Revitalizing Downtowns and Main Streets Act in the coming weeks. If enacted, the bill would be a step forward in the effort to modernize U.S. real estate, create new and affordable housing, and strengthen cities and neighborhoods that continue to suffer from the aftereffects of the pandemic and changing business needs. Currently, only 2% of vacant offices are undergoing the conversion process (CBRE). However, 15% of office buildings are suitable for residential conversion. (White House, Oct. 2023) The bill would create a new and temporary 20% tax credit for qualified property conversion expenditures, modeled after the historic rehabilitation credit. The total credit authority would be limited to $15 billion, allocated by state housing finance agencies based on feasibility and impact. Larger credits would be available for projects in rural areas, low-income census tracts, and economically distressed areas. Roundtable Advocacy The Real Estate Roundtable has supported similar versions of conversion legislation, such as the Revitalizing Downtowns Act (S. 2511, H.R. 4759), introduced by Sen. Debbie Stabenow (D-MI) and Rep. Jimmy Gomez (D-CA) to encourage the conversion of older buildings into new uses. The new bill addresses and incorporates most of the recommendations the coalition made collectively to the Revitalizing Downtowns Act in the October 2022 letter. (June 2024 letter | October 2022 letter) Since then, many states and localities have taken bold action to support property conversion efforts. Both letters are the product of a property conversions working group created by The Roundtable’s Tax Policy Advisory Committee (TPAC). The working group has reviewed and considered the challenges and impediments confronting potential property conversion activities. The Roundtable’s Tax Policy Advisory Committee will continue to respond to legislative proposals affecting potential property conversion activities.

Roundtable Leadership

June 28, 2024

Roundtable Weekly

Roundtable Employee Nancy G. Pitcher Retiring After 47 Years

Nancy G. Pitcher will retire on June 28, 2024, after a distinguished 47-year career with the National Realty Committee and The Real Estate Roundtable. Nancy began her career with NRC in 1977, as Office Manager. In 2001, she was promoted to Office Manager and Assistant Secretary, and in 2002, she was promoted to Director of Administration. In recognition of her dedication, exceptional skills, professionalism, and unwavering commitment to The Roundtable staff, the Board of Directors honored Nancy with a gift and presented her with a Board Resolution, among other acknowledgments, at last week’s Annual Meeting. (Watch Presentation) Roundtable President & CEO Jeffrey DeBoer remarked, “We have worked together for 32 years and through it all, Nancy has always been someone the industry, our team and I could rely on. She has been an inspiration and a role model to all our employees. She is hard-working, caring, focused, team-oriented, and can’t be replaced.” Nancy has earned the admiration and respect of The Roundtable members, her colleagues, and everyone she has worked with over the years. The Roundtable is proud to acknowledge her significant professional achievements and extends heartfelt congratulations on her well-deserved retirement. We wish her continued success, happiness, and good health in the years to come. We are honored to have called her a friend and colleague all these years and wish her a wonderful retirement.

Cities & Infrastructure, Property Conversions

June 28, 2024

Policy Comment Letter

Roundtable Coalition Urges House Members to Support Property Conversions Legislation

Affordable Housing, Cities amp Infrastructure, Property Conversions,

Board of Directors, Roundtable Leadership

June 27, 2024

Press Release

NEWS: The Real Estate Roundtable Announces FY 2025 Leadership

Board of Directors John Fish Kathleen McCarthy Roundtable Leadership

Roundtable Annual Meeting

June 21, 2024

Roundtable Weekly

Public Officials and Industry Leaders Discuss National Policy Challenges Affecting CRE

Jeffrey DeBoer John Fish

The Real Estate Roundtable’s 2024 Annual Meeting this week included discussions with key public officials and industry leaders on issues affecting commercial real estate, including market conditions, the upcoming elections, affordable housing solutions, tax policy, sustainability issues, rebuilding cities, and evolving security threats. Roundtable Leadership During the meeting, Roundtable Chair Emeritus Robert Taubman (Chairman, President & CEO, Taubman Centers, Inc.) presented outgoing Chair John Fish (Chairman & CEO, SUFFOLK) with a gift from The Roundtable Board of Directors and membership, for his outstanding leadership and successful time as Chair. In his outgoing speech as now-Immediate Past Chair, Fish thanked Jeffrey DeBoer, The Roundtable Board of Directors, membership, and staff for their hard work, and reiterated a key lesson from his time as Chair: “What’s good for America is good for our business.” Kathleen McCarthy (Global Co-Head of Blackstone Real Estate) will begin her three-year term as Roundtable Chair on July 1, 2024. Meeting Speakers (L-R): Kenneth T. Rosen (Chairman of the Fisher Center for Real Estate and Urban Economics at the Haas School of Business at the University of California, Berkeley; Chairman, Rosen Consulting Group) presented and led a panel discussion on the economy and market conditions with Scott Rechler (Chairman & CEO, RXR), Bryan McDonnell (Managing Director, Chair of Global Debt & Agriculture, PGIM Real Estate), and Andrew P. Power (President & CEO, Digital Realty). The Honorable Elliot Doomes (Commissioner, Public Buildings Service, U.S. General Services Administration) discussed public-private partnership opportunities and sustainable building practices. “We urge the Public Buildings Service to accelerate their process to catalogue and sell to the private sector underutilized federal buildings. The private sector can convert those buildings to much needed housing, reduce unnecessary emissions, and help revitalize communities still struggling to recover from the pandemic,” said Roundtable President & CEO Jeffrey DeBoer. Dr. Frank Luntz (Founder and President, FIL Inc.) Bruce J. Katz (Director, Nowak Metro Finance Lab, Drexel University, former Inaugural Centennial Scholar and Vice President of the Brookings Institution) Policy Advisory Committee Meetings Joint Real Estate Capital Policy Advisory Committee (RECPAC) and Research Committee During a joint meeting, Research Co-Chair Spencer Levy (Global Chief Client Officer & Senior Economic Advisor, CBRE) and Darin Mellot (CBRE) briefed members on current real estate market conditions. RECPAC Co-Chair Michael Lowe (Co-CEO, Lowe) led a discussion about real estate credit and capital markets with: Kathleen S. Briscoe (Dermody Properties); Christina Chiu (Empire State Realty Trust); John Kessler (Mitsui Fudosan America); and Rex Rudy (U.S. Bank). Roundtable Senior Vice President Chip Rodgers moderated a discussion with Terry Haines (Pangea Policy) and Alex Sternhell (Sternhell Group) on key policy issues affecting the industry. (Agenda & Speakers) Tax Policy Advisory Committee (TPAC) TPAC Vice Chair David Friedline (Partner, Deloitte Tax LLP) led panels on tax legislation at the forefront of policy debates in Washington, including the Revitalizing Downtowns Act 2.0, the Foreign Investment in Real Property Tax Act (FIRPTA), partnerships, and pass-throughs. (Agenda & Speakers) Sustainability Policy Advisory Committee (SPAC) SPAC Chair Anthony E. Malkin (Chairman and CEO, Empire State Realty Trust, Inc.) and Vice Chair Ben Myers (Vice President, Sustainability, BXP) led discussions on the recently announced national definition of a Zero Emissions Building (ZEB), the SEC’s climate risk reporting rule, US-EPA ENERGY STAR, and NextGen. (Agenda & Speakers) Homeland Security Task Force (HSTF) Co-Chairs Amanda S. Mason (Executive Director, Global Intelligence, Related Companies) and Keith Wallace (VP, Global Safety & Security, Marriott International) led a series of discussions on a number of key areas of concerns for the commercial facilities sector. Dr. Todd C. Helmus (Senior Behavioral Scientist, RAND) discussed issues related to the 2024 U.S. election; Dr. Michael Doran (Senior Fellow and Director, Center for Peace and Security in the Middle East at the Hudson Institute) discussed risks posed by Iran; and FBI special agent Matthew Drummond briefed the Task Force on the current threat picture. (Agenda & Speakers) Next on The Roundtable's FY 2025 meeting calendar is the Fall Meeting on October 8-9. The Fall Meeting is restricted to Roundtable-level members only.

News, Tax Policy

June 21, 2024

Roundtable Weekly

Supreme Court Rules in Case of Federal Taxation of Unrealized Income

Moore v United States Unrealized Gains Billionaire Tax

On Thursday, the Supreme Court ruled 7-2 to uphold the constitutionality of mandatory repatriation tax (MRT) enacted in 2017, but chose to sidestep and not rule on the issue of whether the Constitution imposes a realization requirement on the taxation of income. (Moore v. United States) Background & The Decision The petitioners in Moore argued that the MRT exceeds Congress’s authority under the 16th Amendment to lay and collect taxes on income. The Moore’s were shareholders of a foreign corporation. The corporation never distributed its earnings, but the MRT taxed the Moore’s on their deemed share of the corporation’s income. The Moore’s argued that the federal government could not tax them on income they never realized. (Roundtable Weekly, Oct. 13) A decision in favor of the Moore’s could have important consequences for both legislative proposals to tax unrealized gains, but also existing aspects of the tax code and pass-through taxation. The Ninth Circuit ruled against the Moore’s on the grounds that there is no realization requirement in the Constitution. The Roundtable has consistently opposed proposals to tax unrealized gains on several grounds, including their constitutionality and the damage they would cause to the economy, entrepreneurship, and productive investment. The Supreme Court, in a decision authored by Justice Brett Kavanaugh, stepped back from the sweeping holding by Ninth Circuit and concluded that it did not need to rule on the realization question because the foreign company’s operating income was clearly “realized” by the foreign company. In passing the MRT, Congress was simply attributing (or passing through) that income to its U.S. shareholders. The 7-2 opinion by Justice Kavanagh was accompanied by two concurring opinions, one from Justice Jackson and one from Justice Barrett (joined by Justice Alito). Justices Thomas and Gorsuch dissented. While the Real Estate Roundtable’s Tax Policy Advisory Committee (TPAC) and its members are still parsing the language of the various opinions to understand the broader implications, at the end of the day, there appear to be at least four justices willing to uphold a realization requirement (Barrett, Alito, Thomas, and Gorsuch), one justice prepared to hold that realization is not required (Jackson), and four justices who have not yet tipped their hand (Kavanaugh, Roberts, Sotomayor, and Kagan). See analysis of Moore decision by TPAC member Don Susswein (Principal, RSM US LLP) The Moore ruling is unlikely the last word in the heated debate over the constitutionality of taxing unrealized gains.

News, Tax Policy

June 21, 2024

Roundtable Weekly

IRS and Treasury Unveil New Rules Aimed at Partnership “Basis-Shifting” Transactions

Partnerships amp PassThrough Taxation

This week, the IRS and Treasury Department announced a multistage regulatory initiative aimed at regulating certain partnership transactions that shift the tax basis of assets and generate additional depreciation deductions, reduce taxable gains, or increase deductible losses. (IRS-Treasury Press Release, June 17) Guidance Package In Notice 2024-54, Treasury and the IRS indicated they intend to issue proposed regulations governing certain transactions that affect the basis of property held by a partnership or distributed by a partnership. The guidance will focus on partnerships that involve related parties or tax-indifferent parties. Related parties could include family members, corporations and their shareholders, and other entities and businesses with common or overlapping ownership. It is unclear from the guidance where the administration believes the targeted abuses generating inappropriate tax benefits are most likely to arise (e.g., corporate mergers, family offices, real estate, etc.). The rules will apply to cost recovery deductions and gain/loss calculations for tax years ending after June 17, 2024, thus covering deductions, gains, or losses attributable to transactions completed in prior years. Roundtable Concerns A principal concern voiced at this week’s RER Tax Policy Advisory Committee meeting is related to the broad scope of the new rules. Rather than focusing specifically on identifiable, abusive transactions, Notice 2024-54 states that the forthcoming regulations will provide “mechanical rules applicable to all covered transactions without regard to the taxpayer's intent and without regard to whether the transactions could be abusive or lacking in economic substance.” Moreover, the Notice states that the regulations will only apply if the transaction results in a basis increase for the relevant property. “If, and to the extent, property has been allocated a basis decrease, the proposed rules would not apply.” The new rules thus apply to a transaction regardless of whether the transaction is abusive or lacking in economic substance, but only if they result in a negative outcome for the taxpayer. If the same mechanical rules would generate a positive result for another taxpayer, they are disregarded. In sum: Heads, IRS wins; tails, taxpayer loses. Additional Developments: Other elements of the regulatory initiative include: Proposed regulations (REG-124593-23) identifying some partnership-related-party basis adjustment transactions as transactions of interest and requiring disclosures by participants and material advisers. Revenue Ruling 2024-14 notifying taxpayers that it will apply the codified economic substance doctrine to challenge certain basis-shifting transactions. The IRS Office of Chief Counsel also announced the formation of a new associate office focused exclusively on partnerships, S corporations, trusts, and estates. (TaxNotes, June 17) The Roundtable’s Tax Policy Advisory Committee will continue its discussion of the partnership basis-shifting issue and how best to respond on its next TPAC Zoom meeting.

Homeland Security

June 14, 2024

RER Policy Priorities

Homeland Security – June 2024 Policy Priorities

Cyber Risks, Homeland Security, Physical Risks, Real Estate Information Sharing and Analysis Center REISAC, RERs Homeland Security Task Force HSTF,

Affordable Housing, Capital & Credit, Cities & Infrastructure, Energy & Climate, Homeland Security, Housing, Tax Policy

June 14, 2024

RER Policy Priorities

June 2024 – Policy Priorities

Capital and Credit, Cities amp Infrastructure, Energy amp Climate, Homeland Security, Housing, Tax Policy,

Cities & Infrastructure, Housing

June 14, 2024

RER Policy Priorities

Housing, Infrastructure, and Cities – June 2024 Policy Priorities

Affordable Housing, Cities amp Infrastructure, GSE Reform, Housing, Low Income Housing Tax Credit LIHTC, Yes In My Backyard YIMBY,

Tax Policy

June 14, 2024

RER Policy Priorities

Tax – June 2024 Policy Priorities

Capital Gains, Carried Interest, LikeKind Exchanges LKEs, Opportunity Zones OZs, Partnerships amp PassThrough Taxation, StepUp In Basis, Tax Policy, Unrealized Gains Billionaire Tax,

Affordable Housing, Capital & Credit, Cities & Infrastructure, Energy & Climate, Homeland Security, Housing, Tax Policy

June 14, 2024

RER Policy Priorities

Executive Summary – June 2024 Policy Priorities

Capital and Credit, Cities amp Infrastructure, Energy amp Climate, Homeland Security, Housing, Tax Policy,

Energy & Climate

June 14, 2024

RER Policy Priorities

Energy & Climate – June 2024 Policy Priorities

Building Performance Standards BPS, Clean Energy Tax Incentives, Energy amp Climate, Energy and Climate Policy, EPAs ENERGY STAR Tenant Space Recognition, EPAs NextGen Building Label, EPAs ENERGY STAR Certification for Buildings, Healthy Buildings, Reporting on Climate Risks, ScienceBased Targets,

Capital & Credit

June 14, 2024

RER Policy Priorities

Capital & Credit – June 2024 Policy Priorities

Basel III, Beneficial Ownership amp the Corporate Transparency Act, Capital and Credit, Commercial Insurance Coverage Pandemic Risks amp Natural Catastrophes, Halting ProCyclical Policy Measures and Increases in Regulatory Capital, Restoring Liquidity in CRE Markets and Protecting Capital Formation, Restrictions on Foreign Investment in US Real Estate, SAFE Banking Act,

Insurance, News

June 14, 2024

Roundtable Weekly

Housing Coalition Calls on Lawmakers to Address Rising Insurance Costs

Affordable Housing Commercial Insurance Coverage Pandemic Risks amp Natural Catastrophes Insurance National Flood Insurance Program NFIP

On Monday, The Roundtable as part of a broad housing coalition wrote to policymakers offering solutions to address rising insurance premiums across the nation’s housing market and its significant impact on all stakeholders throughout the commercial real estate industry. (Letter) Coalition Policy Solutions The lack of affordability and availability of insurance options has both short- and long-term implications for the real estate industry’s ability to address the housing crisis. The letter suggests several measures to mitigate these issues, including regulatory reforms, public-private partnerships, and innovative insurance products tailored toward affordable housing projects. Federal Backstop for Catastrophic Coverage: A federal backstop, similar to terrorism risk and national flood insurance, could help stabilize the market. Adjust Operating Cost Adjustment Factor (OCAF) Methodology at HUD: Use industry data for property and casualty insurers to reflect actual insurance costs for rental housing. Modernize Insurance Requirements: Revise stringent insurance requirements for federally-backed loans to provide more flexibility. Expand Federal Grants and Programs: Leverage existing federal programs to subsidize insurance costs and support resiliency investments. Unprecedented Insurance Rates The volatility in the insurance market, driven by more frequent natural catastrophes and inflation, has led insurers to raise premiums, increase deductibles, and limit coverage. Rising insurance premiums significantly impact housing providers, developers, and renters across the U.S., exacerbating housing affordability challenges and disincentivizing providers from participating in the affordable housing market. Insurance rates have surged dramatically, with property insurance rates increasing for 25 consecutive quarters and casualty insurance rates for 17. Over the past three years, affordable rental housing communities have seen premium increases ranging from 30% to 100%. An October 2023 survey and report, commissioned by the National Leased Housing Association (NLHA), found that affordable housing providers are facing much higher premiums, with nearly one in every three policies experiencing rate increases of 25% or more in the most recent renewal period. National Flood Insurance Program (NFIP) A recent report by the Joint Economic Committee Democrats found that the total annual economic burden of flooding in the United States is between $179.8 and $496 billion—equivalent to 1-2% of U.S. GDP in 2023. (JEC Report on Flooding) Congress has enacted 30 short-term extensions of the NFIP. The most recent stopgap spending bill extended the NFIP's funding through September 2024. (PoliticoPro, June 10) The Roundtable has been a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms. A long-term reauthorization of the NFIP is essential for residential markets, overall natural catastrophe insurance market capacity, and the broader economy. The Roundtable, along with its industry partners, continues to work constructively with policymakers and stakeholders to address commercial insurance gaps and rising costs through targeted policy solutions that can help alleviate the burden on housing providers and ensure the availability of affordable housing nationwide.

Financial Stability

June 14, 2024

Roundtable Weekly

Federal Reserve Leaves Rates Unchanged

Housing Insurance Interest Rates The Fed

The Federal Reserve’s Federal Open Market Committee voted unanimously this week to maintain the federal funds rate at the 5.25%-5.5% range where it has been since July of last year. (Federal Reserve Press Release) Federal Open Market Committee (FOMC) Meeting After the meeting Wednesday, Fed chair Jerome Powell said at a news conference that he saw either one or two rate cuts this year as "plausible" scenarios. (Axios, June 12) "What everyone agrees on is it's going to be data dependent," Powell added. The FOMC issued a statement indicating that lowering inflation to 2 percent is their primary objective before reductions can occur. The Summary of Economic Projections (SEP) report released this week forecasted one rate cut in 2024, compared with three estimated in December 2023. The FOMC currently anticipates making four quarter-point cuts next year, bringing the federal funds rate down by 1.25 percentage points from its current level. Congressional Pushback Senators Elizabeth Warren (D-MA), Jacky Rosen (D-NV), and John Hickenlooper (D-CO) wrote to Fed chair Jerome Powell, urging the Fed to cut the federal funds interest rates from its current, two-decade-high of 5.5 percent, citing that other major central banks around the globe have made cuts or are leaning toward lowering interest rates. (Press Release | Letter) Their letter also raises concerns that high interest rates are increasing the costs of housing and insurance, continuing to hurt Americans as rates remain unchanged. On housing prices, the senators wrote: “The country is already facing a severe housing shortage, and the Fed’s refusal to bring down interest rates is exacerbating this shortage and driving higher inflation rates…Lower mortgage rates would encourage more people to sell their homes, which would in turn increase housing supply, decrease prices, ease the costs of renting, and ultimately increase homeownership.” Sen. Sheldon Whitehouse (D-RI), chairman of the Senate’s Budget Committee, and Rep. Brendan Boyle (D-PA), ranking member of the House Budget Committee, also wrote to Chairman Powell echoing their concerns that high interest rates are exacerbating the housing supply crisis. (Letter) Next week, at The Roundtable’s all-member Annual Meeting, we will hear economic and market forecasts from a panel of Roundtable members and Kenneth T. Rosen, Chairman, Fisher Center for Real Estate and Urban Economics at the Haas School of Business at the University of California, Berkeley; Chairman, Rosen Consulting Group.

Capital & Credit

June 10, 2024

Policy Comment Letter

Roundtable and Housing Coalition Call on Lawmakers to Address Rising Insurance Costs

Capital and Credit, Commercial Insurance Coverage Pandemic Risks amp Natural Catastrophes, Flood Insurance, National Flood Insurance Program NFIP, Pandemic Risk Insurance Program, Terrorism Risk Insurance Program,

Climate and Energy Policy

June 7, 2024

Roundtable Weekly

White House Announces Guideline for a “Zero Emissions Building”

Zero Emissions Buildings ZEB

The Biden administration on Thursday unveiled the “National Definition for a Zero Emissions Building,” or “ZEB.” This voluntary, long-term goal for commercial and residential buildings to slash carbon emissions has been anticipated for months. It is the first definition of its kind from the U.S. government and was developed with heavy input from The Real Estate Roundtable’s Sustainability Policy Advisory Committee (SPAC). (ZEB Definition | Press Release) ZEB Criteria Three criteria define a ZEB asset under the new definition from the U.S. Department of Energy (DOE). To meet the guideline, a building must be: Highly energy efficient, such as having an ENERGY STAR score of “75” or higher; Free of on-site emissions from energy use, with an exception for emergency backup power generation; and Powered solely from clean energy, which can be achieved through on-site renewable energy measures or the purchase of verified renewable energy certificates that increase off-site supplies of clean power. U.S. Energy Secretary Jennifer Granholm said, “With today’s announcement, DOE is helping bring clarity to our public and private sector partners to support decarbonization efforts and drive investment—paving the way for the cutting-edge clean energy technologies we need to make America’s buildings more comfortable and affordable.” (Press Release) The Roundtable and Nareit collaborated closely on comments in February when the ZEB definition was proposed to shape the final version. (Roundtable Weekly, February 2) A U.S. Definition for U.S. Real Estate A voluntary definition with standard minimum criteria for what it takes for a building to be “zero emissions” will drive innovation, attract investment capital, and support workforce development, according to DOE. It is important for U.S. real estate to have energy and climate guidelines—like the ZEB definition—backed by the federal government that reflect building data, climate conditions, and the carbon intensity of the electric grid here at home. Climate-related building standards “have to be granular enough to accurately reflect the power and buildings infrastructure located in the United States,” said Duane Desiderio, Senior Vice President and Counsel with The Roundtable. “We’re not getting that from the EU and global climate advocates.” (Bloomberg, June 6). EPA Offers the “Path to ZEB” ZEB status is best considered a long-term aspiration. Few buildings will reach zero emissions levels today. Buildings have ways to show more immediate progress, such as through the ENERGY STAR “NextGen” program, recently announced by the U.S. Environmental Protection Agency. “NextGen” building certifications will be available starting this fall. (Roundtable Weekly, March 22) Investors need a market signal for buildings to indicate they are taking steps now to slash emissions and energy use. NextGen, a low-carbon building label, is the intermediate step before reaching ZEB’s zero emissions guideline. “A building has to be ‘NextGen’ before it can be ‘ZEB.’ They work together,” Desiderio told Bloomberg. Speakers from the White House, DOE, EPA, and other leaders will discuss the ZEB definition and NextGen program at the upcoming SPAC meeting in Washington, DC on June 21.

Capital & Credit

June 7, 2024

Roundtable Weekly

US Appeals Court Vacates SEC’s Private Fund Rule

Capital and Credit Private Fund Advisors Private Rule Fund SEC Proposed Rules

The Fifth Circuit Court of Appeals in New Orleans ruled in favor of six private equity and hedge fund groups, finding that the Securities and Exchange Commission (SEC) exceeded its authority by adopting the Private Fund Adviser rule in August 2023. (WSJ, June 5) Court Ruling The appellate panel stated in a 25-page opinion that the SEC had exceeded its authority by implementing the rule changes in a 3-0 decision. The rules adopted by the SEC required fund managers to submit quarterly reports detailing performance, compensation, and other fees. They also restricted the ability of fund managers to provide more favorable terms or information access to investors. (WSJ, June 5) The rule applied to private equity funds, hedge funds, venture capital funds, and fund managers for institutional investors. The industry groups challenging the SEC rule argued it was burdensome and would harm investors by suppressing capital formation and make it harder for smaller advisers to compete. (CNBC, June 6) The panel noted that the Dodd-Frank Act section used by the SEC to justify it “has nothing to do with private funds.” (Politico, June 6) A spokeswoman said that the SEC is reviewing the decision and will determine its next steps. (Reuters, June 5) Roundtable Advocacy Since March 2022, The Roundtable has consistently advocated that the addition of reporting requirements presents significant compliance and operational challenges for private real estate fund sponsors with no added benefit to investors. While we support efforts to protect investors and monitor risk, we believe these proposals are unnecessary and would curb the entrepreneurialism, flexibility, and investment returns that make real estate private equity an increasingly attractive option for investors. (April 2022 Comment Letter) The Roundtable’s April 2022 letter stated, “As the real estate investment fund industry is required to bear more regulatory burdens and demands, the risk is that capital formation will be unduly hindered. We are therefore concerned that the Proposal, if finalized, could hinder real estate capital formation, the development and improvement of real properties, essential economic activity and jobs.” The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to monitor and respond to the SEC’s various proposed regulatory initiatives with its industry and coalition partners.

Beneficial Ownership

June 7, 2024

Roundtable Weekly

Real Estate Organizations Urge Congress to Delay Filing Deadlines of the Corporate Transparency Act (CTA)

Beneficial Ownership amp the Corporate Transparency Act Capital and Credit

The Real Estate Roundtable, along with eleven other national real estate organizations, wrote to the Senate Banking, Housing, and Urban Affairs Committee urging them to advance the Protect Small Business and Prevent Illicit Financial Activity Act (S.3625), which would extend the deadline for companies to report ownership information to the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). Corporate Transparency Act (CTA) Delay Bills Beneficial ownership regulations that took effect on Jan. 1 under the Corporate Transparency Act (CTA) pose burdensome compliance and material cost challenges for real estate and the small business community. The Protect Small Business and Prevent Illicit Financial Activity Act (S.3625), introduced by Banking Committee Ranking Member Tim Scott (R-SC), would extend the deadline for companies to report beneficial ownership information to FinCEN to two years (current regulations require the report within 1 year). Additionally, it would prohibit FinCEN from allowing companies to withhold information that would obscure their true owners. (Press Release, Jan. 18) “Chinese shell companies cannot be allowed to operate discreetly in the United States – threatening our national security, harming our economy, and stealing sensitive information. At the same time, we must ensure U.S. small businesses have the time necessary to comply with new reporting requirements. This bill makes important changes to do both,” said Ranking Member Scott. The bipartisan companion to this legislation (H.R. 5119), introduced by Representatives Zach Nunn (R-IA) and Joyce Beatty (D-OH), passed the House of Representatives by a decisive vote of 420-1 on December 12, 2023. The coalition’s letter noted a one-year delay of the CTA’s filing deadline would: Be consistent with congressional intent to give covered entities two years to comply with the CTA’s reporting requirements; and Provide the business community and FinCEN additional time to educate millions of small business owners regarding the new reporting requirements and the onerous penalties resulting from non-compliance. Roundtable Opposition The Roundtable has consistently opposed the beneficial ownership rules, the burdensome reporting requirements, and the negative impact on real estate transactions. (Coalition letter, April 29) “Because there are more real estate partnerships in the U.S. than any other line of business, the beneficial ownership reporting requirements in the CTA have a considerable impact on the industry. A one-year delay, as called for in S. 3625, would permit businesses much-needed time to fully understand these new reporting requirements,” said Clifton E. (Chip) Rodgers, Jr., Roundtable Senior Vice President. The Roundtable also joined more than 120 other national business organizations in a March 19 letter that urged Senate Banking Committee leaders to support a one-year filing delay for the new CTA beneficial ownership regulation requirements. The Roundtable’s Real Estate Capital Advisory Committee (RECPAC) will continue to monitor developments related to beneficial ownership requirements and legal outcomes.

Affordable Housing

June 7, 2024

Roundtable Weekly

Reports Show Single-Family Rentals Increase Housing Availability, Drive Educational Advancement

Affordable Housing Housing

Recent studies show major investments that grow the single-family rental (SFR) market increase housing supplies for low-income and middle-class households, and create more educational opportunities for families with improved access to quality school districts. Positive SFR Research Roundtable members discussed these results in a “listening session” on Wednesday with housing policy leads from the White House Domestic Policy Council and the National Economic Council. A report released last month by the U.S. Government Accountability Office (GAO) highlights the positive impact of major SFR investors in the aftermath of the 2007—2009 financial crisis. Large investors leveraged capital and technology to convert foreclosed homes into rentals, stabilizing neighborhoods and increasing housing availability. (GAO Report Highlights | Full GAO Report) Another study out of UNC Charlotte, also released in May, finds that children from low- and moderate-income households see improved achievements in school when they rent single-family homes in neighborhoods where they cannot afford to buy. (UNC Study Highlights | Full UNC Report) Key Findings Market Stabilization: The GAO explained that institutional investors bought foreclosed homes in bulk, converting them into rental properties, during the Great Financial Crisis. This helped stabilize neighborhoods and increased home values. Technological Efficiency: Advanced digital platforms and online management tools enabled investors to efficiently manage large property portfolios, improving tenant experiences and reducing costs, according to the GAO. Improved Housing Stock: Larger equity investors were able to underwrite substantial repairs and renovations to the units they purchase, “the cost of which is out of reach for many homebuyers,” according to a study cited by GAO. Educational Achievement: According to the UNC-Charlotte study, “low-income parents [are] taking advantage of these newly available rental units” and “their children are experiencing substantial achievement gains from attending high-performing schools.” Clear SFR Benefits Expanding the supply of housing across the geographic and economic spectrum is essential for the nation’s economic vitality. Large-scale SFR investments have helped revitalize distressed properties and communities, contributing to economic growth and stability. "Changing lifestyles are driving people to seek more flexible housing options that also provide better education opportunities without the long-term financial commitment of homeownership. Large-scale single-family rental businesses are responding to meet this demand," said Jeffrey DeBoer, Roundtable President and CEO. As American households increasingly turn to the rental market for housing, a strong housing finance system should support homeowners and aid the expansion of affordable rental housing. The Roundtable’s Annual Meeting on June 20-21 in Washington, DC, will feature discussions regarding the policies needed to help expand the supply of affordable and workforce housing.

Beneficial Ownership & the Corporate Transparency Act, Capital & Credit

June 4, 2024

Policy Comment Letter

RE Coalition Letter Supporting the Protect Small Business and Prevent Illicit Financial Activity Act (S.3625)

Capital and Credit, Corporate Transparency Act CTA,

Energy & Climate

May 31, 2024

Roundtable Weekly

Administration Unveils Principles for Carbon Offset Markets

Carbon Emissions Energy amp Climate GHG Emissions Scope 1 Emissions Scope 2 Emissions

The Biden administration on Tuesday released principles to enhance the integrity and effectiveness of voluntary carbon markets (VCMs) and incentivize companies to prioritize reducing their emissions. These principles can guide real estate businesses that seek to offset greenhouse gas (GHG) emissions. (White House fact sheet, May 28) All-of-Government Approach The principles and joint policy statement were signed by the Treasury, Energy and Agriculture Secretaries, and White House officials directing national economic and climate policy. VCMs can “channel a significant amount of private capital to support the energy transition and combat climate change, with the right incentives and guard rails in place,” they wrote Markets that provide credits for greenhouse gas (GHG) mitigation are crucial for meeting the administration’s climate goals to cut emissions in half by 2030 and reach net zero by 2050. Focus on Market Integrity The principles support carbon markets based on independently verified emissions savings. “[S]takeholders must be certain that one credit truly represents one tonne of carbon dioxide (or its equivalent) reduced or removed from the atmosphere.” Specific actions cited in the White House fact sheet to support the new principles include proposed guidance from the U.S. Commodity Futures Trading Commission (CFTC) for high-quality carbon offsets. (Roundtable Weekly, Feb. 16) The principles reflect the U.S.’s intentions to play a leadership role in standardizing international carbon markets. Today, VCMs are around $2 billion annually. With the potential of more private capital into climate projects through VCMs, Morgan Stanley projected that the voluntary market could grow to $100 billion by 2030. (Axios, May 28) Relevance for CRE Companies may finance GHG mitigation projects such as reforestation, carbon capture, and increasing renewable energy supplies. (WSJ, May 28) These tools can help real estate and other companies offset their Scope 1 “direct” emissions, as well as controversial Scope 3 emissions from supply chain sources. “Concerns about the credible use of credits (for example, to address a portion of Scope 3 emissions) must also be adequately addressed for VCMs to truly drive decarbonization.” (Joint Policy Statement, May 28) Specific instruments known as Renewable Energy Certificates (RECs) are commonly used in U.S. markets to address Scope 2 emissions, which are generated by power plants for the electricity used by tenants and other building occupants. (US-EPA, “Offsets and RECs – What’s the Difference?”) The Roundtable’s Sustainability Policy Advisory Committee (SPAC) continues to work closely with the White House on climate initiatives impacting commercial real estate.

Property Conversions

May 31, 2024

Roundtable Weekly

Revitalizing Post-Pandemic Cities Through Building Conversions

Cities amp Infrastructure Housing Property Conversions

Recent reports show property conversions are on the rise as commercial real estate and cities continue to undergo significant transformations to adapt to new post-pandemic realities. (Multihousing News, May 20 | (CBRE Report, May 29) Report Data Adaptive reuse projects are on the rise, with 17.6% more apartments converted from outdated buildings in 2023 than the prior year, according to a recent RentCafe report. There are currently 151,000 units underway in various stages of conversion projects across the U.S., of which 58,000 are to be redeveloped from office properties. (CRE Daily, May 30) Adaptive reuse projects from former hotels are at an all-time high in the U.S., with a 38.8% increase since the previous year and almost double the volume of 2021. (RentCafe report). CBRE’s “Shaping Tomorrow’s Cities” report identified six key factors that can help cities rebuild and thrive: economic dynamism, demographic potential, lifestyle vibrancy, distinctive identity, responsive governance, and resilient infrastructure. Rebuilding Strategies Converting underutilized buildings to residential use can be a cost-effective means of developing new housing, creating jobs, and generating critical sources of local property tax revenue while saving energy and reinvigorating communities. However, conversions can be costly, and local governments and developers must work together to bridge the gap and aid in rebuilding cities and communities. For example, Chicago is providing $150 million in public subsidies to property developers to convert four buildings in the business district to more than 1,000 apartments, with the assurance that one-third are set aside as affordable units. (WSJ, May 28) In New York City, Mayor Adams created the Office Conversion Accelerator Program, which brings city agencies together to work collaboratively with developers and aims to streamline converting offices into housing. (CRE Daily, May 30) “Public and private stakeholders have an integral role to play in shaping American cities. By having an all-hands-on-deck approach, the collective impact of experiences and rich data will drive insights and strategies to transform our cities,” the report said. (CBRE Report, May 29) Roundtable Recommendations The Roundtable has urged policymakers to create a robust tax incentive to help overcome the significant financial, architectural, and engineering hurdles associated with repurposing older commercial buildings as housing. The incentive should complement actions taken by state and local governments to encourage property conversions. The Roundtable is working with the House and Senate sponsors of the Revitalizing Downtowns Act (H.R.419) to update and improve the bill, which would create a 20-30 percent tax credit for qualifying conversion costs. The credit is based on the highly successful historic rehabilitation tax credit and would apply to buildings that set aside 20 percent of their housing units for low- and moderate-income tenants. In April, The Roundtable recommended a series of actions to the Biden administration to support commercial-to-residential property conversions, including leveraging various federal loan programs and tax incentives to provide financial support for CRE conversions. (Roundtable Weekly, April 19) Property conversions and the Revitalizing Downtowns Act (H.R.419) will be discussed at The Roundtable’s Annual Meeting on June 20-21 in Washington, DC.

Capital and Credit

May 24, 2024

Roundtable Weekly

Federal Regulators Signal Significant Changes for Proposed Bank Capital Hikes

Basel III Capital and Credit Restoring Liquidity in CRE Markets and Protecting Capital Formation The Fed

Proposed regulations that would dramatically hike capital requirements for the nation's largest banks may undergo significant changes, which could include a 50 percent reduction in the current mandated increase, according to sources cited by The Wall Street Journal on May 19. Proposed Capital Requirements Top officials from the Fed are working with regulators from the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC) on “negotiating substantive and technical revisions” to the current proposal, known as the “Basel III Endgame.” (WSJ, May 19) The Real Estate Roundtable strongly opposes the current proposal, which would hike capital requirements by approximately 19 percent for banks with at least $100 billion in assets. (Roundtable Weekly, March 29) Barclay estimates the proposal, if approved without changes, would require eight U.S. global systemically important banks to hold approximately $150 billion more in capital. (WSJ, May 23) Roundtable Response Roundtable President and CEO Jeffrey DeBoer testified this month before a House subcommittee on the health of CRE markets and offered Roundtable policy recommendations, which included rejection of the Basel III Endgame—along with other pro-cyclical regulatory measures that would restrict credit and capital formation. (Roundtable Weekly, May 3 | DeBoer’s oral statement and written testimony) Additionally, a Jan. 12 Roundtable letter and Jan. 16 industry coalition letter urged federal banking regulators to withdraw the proposed rule, emphasizing its potential negative impact on available credit capacity for commercial real estate transactions, market liquidity, and economic growth. (Roundtable Weekly, Jan. 19) Policymakers Signal Adjustments The proposal has been met by internal disagreement and concerns among the seven-member Fed Board. (Roundtable Weekly, March 29) Michael Barr, the Fed’s Vice Chair for Supervision, said in a May 20 speech that the central bank is exploring “targeted adjustments” to bank liquidity rules, including Basel III. In March, Fed Chairman Jerome Powell testified before congressional committees that he expects regulators to “make broad and material changes” to the Basel III proposal. (PoliticoPro, May 20 and Roundtable Weekly, March 8) Barr also testified last week before a House Financial Services Committee hearing on May 15 about risks to the banking system. Committee Vice Chairman French Hill (R-AK) questioned Barr and regulators from the FDIC and OCC on the Basel III proposal, stating that the agencies should withdraw and re-propose Basel III. (Video of the exchange on X | Barr testimony) The Roundtable’s all-member Annual Meeting on June 20-21 in Washington, DC will address Basel III Endgame and other capital and credit issues impacting CRE. # # #

Roundtable Leadership

May 24, 2024

Roundtable Weekly

Commerce Department Announces Voluntary Industry Pledge to Increase Women in Construction Workforce

Jeffrey DeBoer John Fish Labor Policy Roundtable Leadership

RER Chairman and Suffolk CEO John Fish, above, convened a meeting this week of leading construction company CEOS to sign on to the “Million Women in Construction Community Pledge,” led by U.S. Commerce Department Secretary Gina Raimondo. (UPI, May 21 and ConstructionDive, May 22) Committed to Workforce Expansion Fish said, “The construction industry continues to face significant labor challenges due to the aging workforce and dwindling number of young people entering the construction field. There is a critical need to attract more talent and diversify our workforce to ensure we have the resources to build our cities and grow our economy.” (Commerce Department news release) He added, “Suffolk is honored and privileged to be one of the first companies to commit to Secretary Raimondo’s inspiring Million Women in Construction Pledge. As an organization that has long been committed to rebuilding the ratio of women in the construction industry, we are proud to play a leadership role in inspiring other organizations to commit to this effort and help position our American workforce for future growth and success.” The Million Women in Construction Community Pledge is a nationwide call to action for the construction industry to commit to bold steps aimed at increasing the number of women in the construction workforce. Secretary Raimondo launched the initiative after participating in The Real Estate Roundtable’s Spring 2023 Meeting. (Roundtable Weekly, April 28, 2023) In addition to Suffolk, other leading construction companies committed to the Pledge include Baker Construction, Gilbane Building Company, McKissack & McKissack, Mortenson, Power Design, and Shawmut Design and Construction. Call for Greater Industry Participation Left to Right: RER Chairman John Fish, Commerce Sec. Raimondo, RER President & CEO Jeffrey DeBoer Secretary Raimondo is seeking more industry companies, unions, and training organizations to sign the Pledge. She emphasized the need for the industry to recruit, train, hire, and retain thousands of new and non-traditional workers as the next generation of skilled laborers and leaders—and prepare them to rebuild U.S. infrastructure and supply chains to complement the Federal government’s investment. Secretary Raimondo said, “President Biden’s Investing in America agenda is creating a construction boom all over the country, and with that boom comes a huge increase in jobs and opportunities for workers in construction and the trades. But right now, women make up less than 11% of jobs in construction and only 4% in skilled trades.” She added, “Many of these are good-paying, quality jobs you can get without a college degree, and women deserve equal opportunity for these jobs. I’m calling on everyone—contractors, labor unions, training organizations—to join our Community Pledge to commit to solutions and support proven strategies that help overcome barriers faced by women and underserved communities in construction and the trades.” For questions about the program or to pledge, email WomenInConstruction@doc.gov # # #

Q2 Sentiment Index

May 24, 2024

Roundtable Weekly

CRE Executives Express Tempered Optimism Despite High Interest Rates and Tight Liquidity

CRE Trends Quarterly Sentiment Index

Commercial real estate executives expressed tempered optimism about property markets in The Real Estate Roundtable’s Q2 2024 Sentiment Index as high interest rates and liquidity challenges linger. The Q2 Sentiment Index registered the same overall score of 61 from the previous quarter as uncertainty persists about future asset values and availability of capital. The Roundtable’s Current Sentiment Index registered 55, a 2-point increase over Q1 2024. The Future Index posted a score of 66 points, a decrease of 4 points from the previous quarter. Any score over 50 is viewed as positive. The Overall Index this quarter of 61—a measure of senior executives’ confidence and expectations about the commercial real estate market environment—is scored on a scale of 1 to 100 by averaging the scores of the Current and Future Indices. The Q2 Sentiment Index topline findings also include: Evolving market trends continue to shape the real estate landscape. A majority (66%) of Q2 survey participants expect general market conditions to show improvement one year from now. Additionally, 45% of respondents said conditions are better now compared to this time last year. Only 11% of Q2 participants expect general market conditions to be somewhat worse in a year, a slight increase from 6% in Q1. Class B office properties are facing ongoing challenges attributed to an ongoing “flight to quality.” Industrial and multifamily sectors show tempered growth, yet their underlying fundamentals remain robust. Retail sectors are healthy, propelled by consumer spending, while interest in data centers continues to ascend. [The healthy momentum of the retail sector was affirmed by ICSC CEO and President Tom McGee, above left, this week during an interview with DLC Management. He stated that the demand for physical retail is incredibly strong, but the supply of net new construction is constrained because of the cost of capital and construction. “Retailers are just not using stores for conventional shopping purposes but also increasingly using them as fulfillment centers, so the demand for space is quite high.” (DLC Management on X, May 23)] A significant 75% of Q2 survey participants expressed optimism that asset values will be higher (44%) or the same (31%) one year from now, indicating some semblance of expected stability. The real estate capital markets landscape remains challenging. For the current quarter, 65% believe the availability of equity capital will improve in one year, while 64% said the availability of debt capital will improve in one year. The 36% of participants who said the availability of debt capital would be worse in one year is an increase from 24% in Q1 who voiced the same expectation. Regarding sentiment on the availability of equity capital, 65% of survey respondents expect conditions to improve, compared to 26% who stated that the availability of equity capital was better a year ago. Data for the Q2 survey was gathered by Chicago-based Ferguson Partners on The Roundtable’s behalf in April. See the full Q2 report. # # #

Housing and Energy Policy

May 24, 2024

Roundtable Weekly

Roundtable to House Committee: Balance Housing and Energy Efficiency Priorities

Affordable Housing building codes Building Performance Standards Building Performance Standards BPS Energy and Climate Policy

The Real Estate Roundtable asked House lawmakers on Wednesday to direct the U.S. Department of Housing and Urban Development (HUD) to reconsider a recent federal energy codes rule because it does not adequately consider impacts on affordable housing. (Roundtable Statement, May 22 for House Hearing) HUD’s Energy Codes Rule Last month, HUD and the U.S. Department of Agriculture (USDA) issued a joint rule that applies the most recent, stringent—and costly—model energy code standards to new residential construction receiving the agencies’ financial support. (Roundtable Weekly, May 3) The rule would apply to both single- and multifamily homes covered by HUD and USDA programs, including homes backed with federal mortgage insurance. HUD itself estimated the rule would add at least $7,229 to the cost of building a new single-family home. (HUD’s rule | House subcommittee memo) The May 22 House hearing considered how HUD’s rule and other green building policies impact homeownership, price buyers out of the market, and burden renters. The National Association of Home Builders testified at the hearing, and the National Multifamily Housing Council and National Apartment Association submitted a joint statement. (Subcommittee hearing YouTube video) Roundtable Recommendations The Roundtable’s statement explained that policymakers must prioritize both the climate crisis and our nation’s housing crisis, but that HUD’s federal codes rule is not balanced and should be re-considered. The new nationwide rule imposing the highest energy efficiency standards, currently adopted by only a handful of states, must be assessed in light of the Biden-Harris administration’s goals to address the serious U.S. housing shortage and create two million affordable units. (Biden Administration Affordable Housing Policy Fact Sheet, March 7) RER’s letter also explained how the new federal codes rule adds yet another layer to a stacked mix of stringent government rules and other headwinds that have made single- and multifamily housing construction a “hyper-regulated business.” Reducing buildings’ energy use and climate emissions are critical policies, but the Administration should not pass new regulations that “make the housing crisis worse,” The Roundtable explained. A more balanced re-assessment of HUD’s and USDA’s action is warranted. This week’s hearing follows House testimony recently delivered by Roundtable President and CEO Jeff DeBoer, who reinforced the messages that the health of commercial and residential real estate markets are intertwined—and excessive regulations that make housing prices and rents unaffordable for working-class families must be avoided. (DeBoer’s April 30 oral statement and written testimony | Roundtable Weekly, April 30) # # #

News

May 24, 2024

Roundtable Weekly

Roundtable Founding Member and TPAC Chairman Frank G. Creamer, Jr. Passes

Frank G. Creamer, Jr., a founding member of The Real Estate Roundtable and long-serving chairman of its Tax Policy Advisory Committee (TPAC), passed away on May 17. (Obituary) Industry Mentor “Frank Creamer offered his deep expertise and knowledge to so many in the industry during his 25 years of involvement with RER,” said Jeffrey DeBoer, Roundtable President and CEO. “In his long-time role as TPAC Chairman, Frank was a tremendous mentor and reliable guide who cared deeply about The Roundtable, its role in the industry, and its members. His dedication was exemplary, and he will be remembered as the consummate gentleman he most certainly was, who always had time for others. We will sorely miss Frank and extend our heartfelt condolences to his family and friends.” Mr. Creamer held various executive positions during his career in the global commercial real estate lending business, rising to oversee all real estate banking at Citibank. After his tenure at Citibank, he became a principal and owner of his company, FGC Advisors, LLC, a real estate advisory firm. A memorial service is scheduled for June 5 in Center Moriches, NY followed by a June 6 funeral Mass at St. John the Evangelist Roman Catholic Church. In lieu of flowers, a donation in his memory can be made to the Tunnels to Towers Foundation. (See obituary for details)

Q2 Sentiment Index

May 23, 2024

Quarterly Sentiment Index

Q2 2024 Real Estate Roundtable Sentiment Index – full report

Quarterly Sentiment Index,

News, News Release, RER Quarterly Sentiment Index

May 23, 2024

Press Release

CRE Executives Express Tempered Optimism Despite High Interest Rates and Tight Liquidity

Quarterly Sentiment Index

(WASHINGTON, D.C.) — Commercial real estate executives expressed tempered optimism about property markets in The Real Estate Roundtable’s Q2 2024 Sentiment Index as high interest rates and liquidity challenges linger. The Q2 Sentiment Index registered the same overall score of 61 from the previous quarter as uncertainty persists about future asset values and availability of capital. The Roundtable’s Current Sentiment Index registered 55, a 2-point increase over Q1 2024. The Future Index posted a score of 66 points, a decrease of 4 points from the previous quarter. Any score over 50 is viewed as positive. The Overall Index this quarter of 61—a measure of senior executives’ confidence and expectations about the commercial real estate market environment—is scored on a scale of 1 to 100 by averaging the scores of the Current and Future Indices. The Q2 Sentiment Index topline findings also include: Evolving market trends continue to shape the real estate landscape. A majority (66%) of Q2 survey participants expect general market conditions to show improvement one year from now. Additionally, 45% of respondents said conditions are better now compared to this time last year. Only 11% of Q2 participants expect general market conditions to be somewhat worse in a year, a slight increase from 6% in Q1. Class B office properties are facing ongoing challenges, attributed to an ongoing “flight to quality.” Industrial and multifamily sectors show tempered growth, yet their underlying fundamentals remain robust. Retail sectors are healthy, propelled by consumer spending, while interest in data centers continues to ascend. A significant 75% of Q2 survey participants expressed optimism that asset values will be higher (44%) or the same (31%) one year from now, indicating some semblance of expected stability. The real estate capital markets landscape remains challenging. For the current quarter, 65% believe the availability of equity capital will improve in one year, while 64% said the availability of debt capital will improve in one year. The 36% of participants who said the availability of debt capital would be worse in one year is an increase from 24% in Q1 who voiced the same expectation. Regarding sentiment on the availability of equity capital, 65% of survey respondents expect conditions to improve, compared to 26% who stated that availability of equity capital was better a year ago. Some sample responses from participants in the Sentiment Index’s Q2 survey include: “Real estate fundamentals are shaping up to be very strong in one to two years. Companies that have a long-term perspective and can be patient will benefit from strong employment growth, demographic shifts, and stable occupancies.” “The mom-and-pop investors who own class B office are hurting the most. The institutional investors are diversified, so they are faring better.” “Stability in asset values isn’t just about reaching pre-2022 levels; it’s about establishing a new norm based on sustainable growth.” Data for the Q2 survey was gathered by Chicago-based Ferguson Partners on The Roundtable’s behalf in April. See the full Q2 report. The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy.

Energy And Climate Policy

May 22, 2024

Policy Comment Letter

Roundtable Statement for House Hearing on Green Building Policies and Home Ownership

building codes, Building Performance Standards, Building Performance Standards BPS, Energy and Climate Policy, EPA,

Affordable Housing

May 17, 2024

Roundtable Weekly

House Committee Passes Roundtable-Supported Yes in My Backyard (YIMBY) Act

Affordable Housing Yes In My Backyard YIMBY YIMBY

Yesterday, the House Financial Services Committee passed the bipartisan Yes in My Backyard (YIMBY) Act, which would help eliminate discriminatory land use policies and remove barriers to production of affordable housing. The Roundtable and 17 other national organizations submitted a letter of strong support for the bill the day before the committee mark-up. (Coalition letter, May 15 | Committee news release and video of committee mark-up, May 16) Affordable Housing The YIMBY Act (H.R. 3507) requires recipients of certain federal grants to submit public reports about their implementation of certain land-use policies, such as policies for expanding high-density single-family and multifamily zoning. The reports must detail how federal grant recipients are removing discriminatory land use policies and other barriers to constructing affordable housing, while promoting inclusive and affordable housing. The YIMBY bill, introduced by Rep. Derek Kilmer (D-WA), advanced to the full House for consideration by a vote of 48-0. The House Financial Services Committee passed it yesterday as an amendment in the nature of a substitute offered by Rep. Mike Flood (R-NE). [Watch Rep. Flood’s remarks in support of the bipartisan bill] Committee Chairman Patrick McHenry (R-NC) expressed his support for the legislation during the May 16 mark-up. Previously, the YIMBY Act passed the House without opposition in 2020 but stalled in the Senate (S. 1688). Roundtable Support The Real Estate Roundtable and 21 other national organizations also expressed their strong support for the bipartisan bill in February to the House Financial Services Committee (Coalition letter, Feb. 20, 2024) The Roundtable joined another coalition of 285 housing, business, and municipal organizations last year in a letter of support when the YIMBY Act was reintroduced. (Roundtable Weekly, May 26, 2023 and coalition letter) Separately, the Wall Street Journal (Feb. 20, 2024) reported that community opposition to new projects is not just restricted to housing developments. E-Commerce hubs are also “increasingly contending with a headache” of NIMBY sentiments, as developers of warehouse and logistics properties face the conundrum of siting projects that are necessary to deliver goods to residents and consumers. (“Don’t Build That E-Commerce Warehouse in My Backyard, More Communities Say”) Next week, a House Energy Subcommittee will hold a hearing on “Green Building Policies: Jeopardizing the American Dream of Homeownership.” The May 22 hearing will focus on excessive regulations that constrict housing supply, including a recent Biden administration “final determination” that all new single- and multifamily homes financed with federal mortgages must be built to stringent “model energy codes.” (Roundtable Weekly, May 3) # # #

Energy And Climate Policy

May 17, 2024

Roundtable Weekly

EPA Seeks Building Owners’ Input on Whole-Building Energy Data

Building Performance Standards Building Performance Standards BPS Climate and Energy Policy Climate Policy Energy amp Climate Energy and Climate Policy Energy Policy EPA

A new Environmental Protection Agency (EPA) campaign seeks to assist building owners in obtaining data from utilities on energy used by tenants in leased spaces. Stakeholders are encouraged to complete EPA’s brief Whole-Building Energy Data survey by Friday, June 7. Access to Whole-Building Data is Critical A challenge shared by owners and managers across the CRE industry is obtaining leased space energy data particularly where tenants operate under “triple-net” (NNN) leases and pay their electricity, gas, and other power bills directly to utilities. Difficulties accessing whole-building energy data are acute in multifamily, offices, retail, logistics, life sciences, and any building type that leases spaces to numerous tenants. Nonetheless, owners are expected to capture data on tenants’ energy use as a simple matter of proper building management, and for myriad policy and regulatory reasons such as: Reports to investors and lenders, including disclosures to the US-SEC and state agencies; Compliance with mandatory state or local Building Performance Standards (BPS); Attaining voluntary certifications such as EPA’s ENERGY STAR and NextGen building “labels”; and Qualifying for the 179D tax deduction for building retrofits enacted by the Inflation Reduction Act (IRA) of 2022. [Roundtable Weekly, Jan. 20, 2023 and IRA fact sheet, July 31, 2023] Roundtable Advocacy The Roundtable supported a Jan. 18 open letter from leaders of the EPA, Department of Housing and Urban Development (HUD), and Department of Energy (DOE) to utilities and their regulatory commissions about the national importance of obtaining tenant-level consumption data. The Roundtable also submitted comments to EPA on Jan. 20 that emphasized how utilities should be eligible for EPA grants to develop technologies that provide owners of multi-tenant assets with whole-building energy data. EPA’s Campaign EPA has posted online tools including a “Multitenant Buildings and Federal Incentives” fact sheet. This resource explains the importance of whole-building data to building owners (with a focus on federal funding opportunities requiring this data), as well as solutions available to utilities to provide the data. More than 90% of utilities currently do not provide whole-building energy use data. (See EPA’s data access map.) The EPA campaign aims to: Gather input from building owners and others on where they need this data most and why, via the survey. Create resources that support building owners in engaging utilities nationwide, including a summary of the survey’s input. Organize meetings between utilities and building owners in priority locations to facilitate discussion. EPA will support utilities that are interested in providing the data in line with industry best practices. EPA’s campaign will be among the topics discussed during The Roundtable’s Sustainability Policy Advisory Committee (SPAC) Meeting on June 21 in Washington, D.C., held in conjunction with the RER’s all-member Annual Meeting on June 20. # # #

Roundtable Leadership

May 17, 2024

Roundtable Weekly

Roundtable Members Featured in Commercial Observer’s “Power 100” List of 2024 Most Influential Leaders in CRE

Jeffrey DeBoer Kathleen McCarthy Roundtable Leadership

This week, the publication Commercial Observer released their “Power 100” list of prominent industry influencers, which includes Real Estate Roundtable Chair-Elect Kathleen McCarthy (Global Co-Head of Blackstone Real Estate, Blackstone), Chairman Emeritus (2015-2018) William C. Rudin (Co-Executive Chairman, Rudin), Roundtable President and CEO Jeffrey DeBoer, and nearly 30 other Roundtable members. (Power 100 2024 – Commercial Observer) CRE Industry Leadership Commercial Observer notes that the industry has been through a great deal of turbulence this year. "For better or worse, the biggest cliché that seeped into the commercial real estate conversation over the last year was: ‘Survive until ’25.’ This year’s honorees have shown the pluck, the determination, and the fortitude to make their ways onto this list.” (Power 100 2024 – Commercial Observer) The article also notes how The Roundtable effectively represents the industry while partnering with 18 national trade associations to educate Washington, D.C. policymakers on national issues impacting the industry. The Roundtable’s Role DeBoer comments within his profile, “Helping federal regulators understand the whiplash of very quickly moving from the historically long period of artificially low interest rates to a much higher interest rate environment was critical to the flexibility they ultimately provided to banks to modify or extend a great deal of the roughly $1 trillion in maturing commercial real estate loans.” He also notes that significant stress on CRE remains, especially the pressures of remote work. Yet, “a systemic crisis for the banking industry and real estate markets seems to have been averted,” DeBoer states. (See DeBoer’s listing) # # #

Yes In My Backyard (YIMBY)

May 15, 2024

Policy Comment Letter

Roundtable and 17 National Organizations Support Passage of the Bipartisan “Yes In My Backyard” (YIMBY) Act

Yes In My Backyard YIMBY, YIMBY,

Policy Landscape

May 10, 2024

Roundtable Weekly

Roundtable’s William C. Rudin Discusses Public Policies to Strengthen CRE and the Economy

CRE Federal Reserve Jeffrey DeBoer Liquidity Property Conversions Remote Work testimony Workplace Return

Real Estate Roundtable Chairman Emeritus (2015-2018) William C. Rudin (Co-Executive Chairman, Rudin) discussed commercial real estate conditions on CNBC’s Squawk Box this morning, emphasizing how public policies could help the industry meet significant challenges as it faces a wave of looming maturities in a high-interest rate environment. Federal Action Needed Rudin noted that unless a property owner has a top-tier asset with a stable long-term lease, liquidity is a major issue. “The federal government and the Federal Reserve have to keep giving the banks flexibility to be able to restructure some of the loans.” (Watch Rudin’s comments) Rudin added, “The federal government should support legislation to help incentivize owners to convert obsolete office buildings to residential—and the federal government should be getting their employees back into the office space.” (Entire Rudin interview) Rudin referenced recent testimony by Roundtable President and CEO Jeffrey DeBoer that addressed these issues during a House subcommitteeon the “Health of the Commercial Real Estate Markets and Removing Regulatory Hurdles to Ensure Continued Strength.” (Roundtable Weekly, May 3 and video of DeBoer’s testimony) Roundtable Recommendations The Roundtable’s testimony last week addressed a wide swath of concerns for owners, lenders, and local communities. DeBoer discussed specific issues with House policymakers, including market liquidity, the state of the office sector, remote work, affordable housing, and property conversions. (DeBoer’s oral statement and written testimony) DeBoer also commended efforts by House Oversight Committee Chairman James Comer (R-KY) to bring federal workers back as the lead sponsor of the Stopping Home Office Work’s Unproductive Problems (SHOW UP) Act (H.R. 139). (See GlobeSt, May 2 and the WorkPlace Return story below) A key Roundtable recommendation was the need to encourage banks and loan servicers to extend maturing loans and restructure maturing loans with new equity—effectively making “cash-in refinances”—by converting non-performing and criticized loans to new performing loans. (Watch select video clips of DeBoer’s comments) DeBoer also emphasized the need for lawmakers to stimulate the production of affordable housing by converting obsolete buildings into housing, increasing the Low Income Housing Tax Credit volume caps, incentivizing local zoning and permitting reforms, increasing efficiency in the Section 8 housing voucher program, and more. (Roundtable Weekly, May 3) Separately, The Roundtable and a broad real estate coalition submitted a set of specific policy recommendations last week to Congress detailing a host of pending legislative and regulatory actions that would help provide housing to more Americans. (Roundtable Weekly, May 3) The Roundtable’s all-member Annual Meeting on June 20-21 in Washington, DC will include speakers and policy advisor committee meetings focused on many of these topics. # # #

Workplace Return

May 10, 2024

Roundtable Weekly

Bipartisan Senate Bill Would Set Limit on Federal Employees Telework

Remote Work Workplace Return

This week, Sens. Mitt Romney (R-UT) and Joe Manchin (D-WV) introduced the Back to Work Act of 2024 (S. 4266), which would require federal employees to spend 60% of their work hours in the office, a slight increase from the 50% in-office policies at many agencies. The Roundtable supports various efforts by policymakers to enact workplace return policies for federal workers. (Romney-Manchin news release and The Register-Herald) Senate Bills The bipartisan Senate bill, in addition to the40% cap on remote work within a federal employee’s pay period, would also require agencies to report on the productivity and potential negative effects of their employees’ telework arrangements. (Government Executive, April 30) A separate bipartisan Senate bill introduced on April 3 would increase oversight of federal telework policies after a recent report showed government agency headquarters in Washington, DC are using an average of 12% of their office space. (Senate Committee news release and Public Buildings Reform Board report). The Telework Transparency Act (S. 4043) from Sens. Joni Ernst (R-IA) and Gary Peters (D-MI), chairman of the Homeland Security and Governmental Affairs Committee, would require agencies to gather information on how telework impacts agency performance and federal property decisions. (Government Executive, April 8 and Federal News Network, April 3) House Efforts House Oversight and Accountablity Committee Chairman James Comer (R-KY) A Biden administration official testified last week before the House Oversight and Accountability Committee that federal agency workers should spend at least half of their working hours at their office sites. (Committee hearing, April 30) “[For] office workers, the place where there is consistency across agencies, we’ve been clear that our expectation is for agencies to be achieving at least 50% [in-person work], while giving them flexibility for how best to deliver based on their diverse mission space. That’s consistent with where the private sector is, and we’ll continue to adjust as needed,” said Office of Management and Budget Deputy Director for Management Jason Miller. ( Government Executive, April 30 and Miller’s written testimony) Committee Chairman James Comer (R-KY) responded, “At the onset of the COVID pandemic, massive federal employee telework was a justifiable necessity, but that necessity ended a long time ago.” (Committee hearing, April 30) Rep. Comer is the lead sponsor in the House of the Stopping Home Office Work’s Unproductive Problems (SHOW UP) Act (H.R. 139), a bill that requires each executive agency to reinstate the pre-pandemic telework policies. The Roundtable View Roundtable President and CEO Jeffrey DeBoer, above, commended the efforts of Chairman Comer before a House subcommittee hearing last week, noting that the SHOW UP Act passed over a year ago and should be enacted into law. (Roundtable Weekly, Oct. 20 and Feb. 3, 2023) DeBoer emphasized during the April 30 hearing that a return to in-person work is critical for the health of our cities, local economies, tax bases, and small businesses. “While private sector office occupancy is slowly picking up, the federal office workforce is behaving as if the pandemic still exists. This is despite President Biden’s call for agencies to return to pre-pandemic workplace practices,” DeBoer testified. (Roundtable Weekly, May 3) The Real Estate Roundtable has also urged members of the Senate and President Biden to end the “active encouragement of remote working for federal employees” and for federal agencies to return to their pre-pandemic workplace practices. (RER letter to the Senate, April 12, 2023 and RER letter to President Biden, Dec. 12, 2022) The Roundtable will discuss the evolving remote work issue during its all-member June 20-21 Annual Meeting in Washington, DC. # # #

Beneficial Ownership

May 10, 2024

Roundtable Weekly

Roundtable and More Than 100 Business Organizations Support Legislation to Repeal the Corporate Transparency Act

Beneficial Ownership Beneficial Ownership amp the Corporate Transparency Act Capital and Credit Corporate Transparency Act CTA

The Real Estate Roundtable and more than 100 business organizations recently expressed strong support for bicameral legislation that would repeal the Corporate Transparency Act (CTA) and its onerous beneficial ownership burdens, which took effect on Jan. 1. The Roundtable has consistently opposed the CTA’s beneficial ownership rules. (Coalition letter, April 29) CTA Overreach The Repealing Big Brother Overreach Act, introduced on April 30 by Sen. Tommy Tuberville (R-AL) and Rep. Warren Davidson (R-OH), would provide relief for small business owners from the CTA’s burdensome reporting requirements and excessive penalties. (Rep. Davidson news release, April 30) Sen. Tuberville also authored an April 29 op-ed in Newsweek about the need to repeal the CTA. The coalition’s letter noted how the CTA was designed to help law enforcement prevent money laundering by requiring shell companies to report “beneficial owners information” (BOI) to the Department of the Treasury. The law defines a shell company as any legal entity with 20 or fewer employees or $5 million or less in revenues—nearly every small business in the United States. The broad concept of beneficial owner includes owners, senior management, members of the board, and any employee or outside consultant exerting significant control over the businesses’ operations. Penalties Under the CTA, covered entities must report and regularly update BOI to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) or face significant fines and jail time. Last month, the District Court for the Northern District of Alabama ruled the CTA as unconstitutional. However, the resulting injunction applies only to the plaintiffs in the case—members of the National Small Business Association. (Roundtable Weekly, March 8) A subsequent notice from FinCEN made clear that all other covered entities are still required to file their BOI reports by the end of the year. (FinCEN’s current requirements) Initial filings under the CTA began more than two months ago in accordance with the new law, yet fewer than two percent of covered entities have submitted their required information to FinCEN. One reason for this low compliance rate is that most business owners are ignorant of the new law The Roundtable also joined more than 120 other national business organizations in a March 22 letter that urged Senate Banking Committee leaders to support a one-year filing delay for the new CTA beneficial ownership regulation requirements. (Coalition letter, March 19) The Roundtable’s Real Estate Capital Advisory Committee (RECPAC) will continue to monitor developments related to beneficial ownership requirements and legal outcomes. # # #

Policy Landscape

May 3, 2024

Roundtable Weekly

Roundtable Testifies on Health of CRE Markets and Recommended Policies

Affordable Housing Capital and Credit Halting ProCyclical Policy Measures and Increases in Regulatory Capital Jeffrey DeBoer Liquidity Restoring Liquidity in CRE Markets and Protecting Capital Formation Statement Jeffrey DeBoer testimony

Click to watch a compilation of select testimony by Roundtable President and CEO Jeffrey DeBoer Roundtable President and CEO Jeffrey DeBoer testified this week before a House subcommittee on the “Health of the Commercial Real Estate Markets and Removing Regulatory Hurdles to Ensure Continued Strength.” (Videos of DeBoer’s testimony | Entire hearing | Select clips from the subcommittee’s wrap-up) CRE Issues The April 30 hearing before the House Oversight and Accountability Subcommittee on Health Care and Financial Services included The Roundtable’s views on market liquidity, the state of the office sector, remote work, affordable housing, and property conversions. (DeBoer’s oral statement and written testimony) DeBoer emphasized that all stakeholders in the regulatory and private sectors should work together to ensure real estate continues to be a leading driver of the economy—and a primary way cities grow, business needs are met, and housing challenges are solved. (Transcript of entire hearing) DeBoer also clarified, “The commercial real estate industry is not seeking a bailout of any sort.” (MarketWatch, April 30) Subcommittee members heard testimony on how liquidity in CRE markets, particularly office, is an overriding industry concern. As nearly half the value of the $4.7 trillion property debt market is scheduled to mature by 2027, base interest rates have risen nearly 500 basis points in 24 months while lenders are considering reductions in their CRE portfolios. (RER’s written testimony and Mortgage Bankers Association testimony) DeBoer urged policymakers and regulators to acknowledge that not all CRE is the same. “In the office market, there are notable differences. Some individual owners are facing considerable pressure, potentially leading to increases in mortgage defaults, foreclosures and large losses of equity. Many top-tier modern office buildings with strong ownership and workspace amenities are currently weathering the storm. There needs to be a better distinction and not a monolithic treatment of commercial real estate.” DeBoer added that pressures within certain segments of the office sector are creating a “slow-moving train wreck.” (Watch select video clips of DeBoer’s comments) Policy Solutions The Roundtable’s policy recommendations submitted to the subcommittee address a wide swath of concerns for owners, lenders, and local communities, including: Ensure federal employees return to the workplace. DeBoer testified, “The federal government should lead by example by highlighting the value of in-office work” as it is critical for the health of cities, local economies, tax bases, and small businesses. (GlobeSt, May 2)He also commended efforts by House Oversight Committee Chairman James Comer (R-KY) to bring federal workers back as the lead sponsor of the Stopping Home Office Work’s Unproductive Problems (SHOW UP) Act (H.R. 139). “This bill passed the House over a year ago and should be enacted into law,” Deboer said. (Roundtable Weekly, Oct. 20 and Feb. 3, 2023) Encourage banks and loan servicers to extend maturing loans and restructure maturing loans with new equity—effectively making “cash-in refinances”—by converting non-performing and criticized loans to new performing loans. Encourage foreign capital investment in U.S. real estate by amending or repealing the outdated Foreign Investment in Real Property Tax Act (FIRPTA). Reject pro-cyclical measures such as the Basel III Endgame and other regulatory measures that will restrict credit and capital formation. Stimulate the production of affordable housing. The Roundtable and a broad real estate coalition submitted a set of specific policy recommendations this week to Congress detailing a host of pending legislative and regulatory actions that would help provide housing to more Americans. DeBoer informed the subcommittee that these solutions include converting obsolete buildings into housing, increasing the Low Income Housing Tax Credit volume caps, incentivizing local zoning and permitting reforms, increasing efficiency in the Section 8 housing voucher program, and more. (see Affordable Housing story below) House Oversight Subcommittee Chairwoman Lisa McClain (R-MI), right, and Ranking Member Katie Porter (D-CA), center, with Jeffrey DeBoer He added, “Rent control and eviction moratoriums are on first blush appealing concepts, but they've proven time and again, that they're counterproductive to addressing the housing shortfall.” Congress should also enact a time-limited tax incentive to convert older, underutilized commercial buildings to housing that would help revitalize America’s cities, accelerate the economic recovery of office buildings, and create new supplies of housing in close proximity to jobs. Property Conversions Separately, The Roundtable provided a list of specific agency actions to accelerate property conversion projects in a recent letter to Jared Bernstein, Chair of the White House Council of Economic Advisers. (Roundtable Weekly, April 19) During this week's hearing, subcommittee witness Doug Turner, above, senior fellow for Housing at the Center for American Progress, endorsed The Roundtable’s April 15 recommendations on conversions. Turner stated in his written testimony and oral comments, “I want to compliment The Real Estate Roundtable for a second. They sent a letter to the Council of Economic Advisers in April and offered some very specific suggestions on how to improve the conversion process. Many of these are sensible. And they could help direct what is an evolving policy. We haven't seen an attempt to convert this much real estate in a short period of time.” (Video clip of Turner’s full comment, or click on photo above) The Roundtable’s all-member Annual Meeting on June 20-21 in Washington, DC will include speakers and policy advisor committee meetings focused on many of the topics discussed during this week’s House hearing. # # #

Affordable Housing

May 3, 2024

Roundtable Weekly

Roundtable and Industry Coalition Urge Congress to Enact Affordable Housing Policies and Incentives

Affordable Housing Housing Low Income Housing Tax Credit LIHTC Opportunity Zones OZs Yes In My Backyard YIMBY

This week, The Real Estate Roundtable and a broad real estate industry coalition encouraged lawmakers to pursue bipartisan solutions that would increase the supply of affordable and market-rate housing through specific policies and programs to help communities meet their housing challenges. (Coalition letter, April 29) Legislation and Programs The coalition letter to Congress and the Biden administration detailed policy solutions to help develop and preserve housing at all price points by enacting industry-supported bills in the House and Senate, encouraging incentive-based programs, streamlining regulatory burdens, and supporting public-private partnerships. The specific proposals detailed in the letter will work best when paired with state and local government policies to meet the demand for rental homes. Specific policies outlined in the letter would streamline and fast-track the entitlement and approval process; provide density bonuses and other incentives for developers to include workforce units in their properties; and enable “by-right” zoning and create more fully entitled parcels. Other programs and bills defer taxes and other fees for a set period of time; lower construction costs by contributing underutilized buildings and raw land; create incentives to encourage higher density development near job and transportation hubs; and expand and strengthen the Low-Income Housing Tax Credit (LIHTC) program. Legislation would also encourage Yes In My Backyard (YIMBY) policies to remove discriminatory land use policies and other barriers that depress housing production. Among the key bills strongly supported by the coalition are the Affordable Housing Credit Improvement Act (S.1557 & H.R.3238), Workforce Housing Tax Credit Act (S.3425 & H.R.6686), and Revitalizing Downtowns Act (S. 2511 & H.R.419). The coalition expects the Opportunity Zones program to spur the production of new multifamily housing, but to maximize its effectiveness, the industry groups recommend Congress revitalize and enhance Opportunity Zones to incentivize rehabilitation of housing units. Biden Administration Proposals The coalition described the Biden Administration’s Housing Supply Action Plan as a thoughtful proposal that rightly acknowledges that there is no single solution to the housing shortage. The letter also expressed support for several proposals included in the President’s FY25 federal budget proposal, including proposals to expand and enhance the LIHTC, the Neighborhood Homes Credit, and increased funding for the HOME Investment Partnerships Program. However, the coalition also urged Congress to reject certain tax proposals included in the administration’s FY25 budget, such as increases in the capital gains rate. These policies would directly impact the operations of housing providers, as most are structured as “flow-through” entities where earnings are passed through to owners who pay taxes at the individual level. The tax increases under consideration would reduce real estate investment and inhibit the capital flows that are so critical to the development and preservation of critically needed housing. It is unlikely that new housing or tax-related legislation will be enacted before the November presidential election. Proposals now under consideration may have better opportunities for advancement in a post-election lame-duck session or during a new Congress in 2025. # # #

Energy And Climate Policy

May 3, 2024

Roundtable Weekly

Biden Administration Determines Federally-Financed Housing Construction Must Comply with Costly "Model Energy Codes"

ASHRAE code building codes Energy and Climate Policy Energy Policy HUD Housing and Urban Development agency Zero Emissions Buildings ZEB

The Biden administration recently issued a “final determination” that all new single- and multifamily homes financed with federal mortgages must be built to stringent “model energy codes.” The Department of Housing and Urban Development (HUD) estimates this federal mandate on residential construction will add at least $7,229 to the cost of building a new single-family home, effectively establishing a disincentive to increase the supply of affordable housing—a federal policy strongly opposed by The Roundtable. (Bloomberg, April 25 and National Association of Home Builders (NAHB), April 26) Federal Compliance The Roundtable believes this new federal regulation will reduce the supply of housing, increase home prices and rents, and make it more difficult for buyers to assemble a down payment. The “final determination” from HUD and the Department of Agriculture (USDA) is, in effect, a new federal-level building energy code that could impact approximately 150,000 units per year. Although the energy code update technically takes effect May 28, the dates for “compliance” are May 2025 for multifamily, Nov. 2025 for single-family homes, and May 2026 for homes in “persistent poverty rural areas.” (NAHB, April 26) This action stands in stark contrast to a set of policy recommendations submitted this week by The Roundtable and a broad real estate coalition aimed at broadening housing supply and lowering costs. (Coalition letter to House policymakers, April 29 and Affordable Housing story, above) Additionally, Roundtable President and CEO Jeffrey DeBoer testified on April 30 before a House Oversight Subcommittee on the need to “create more effective incentives and programs to stimulate the production of affordable housing.” (see Policy Landscape story, above) Varying Energy Standards The HUD-USDA notice may also conflict directly with local energy codes in jurisdictions throughout the country. The federal action will require all HUD- and USDA-financed new single-family construction housing to be built to the 2021 International Energy Conservation Code (IECC). All HUD-financed multifamily housing must be built to 2021 IECC or ASHRAE 90.1-2019. NAHB cites studies that show building to the 2021 IECC can add up to $31,000 to the price of a new home and take up to 90 years for a home buyer to realize a payback on the added cost of the home. Zero Emissions Buildings (ZEB) As Bloomberg reported, the Biden administration also issued this latest update as part of a larger effort to modernize building codes to reach its climate goals. Earlier this year, the Biden administration issued a draft of a federal definition for a Zero Emissions Buildings (ZEB). (Roundtable Weekly, Jan. 5) RER and Nareit submitted comments on Feb. 2 to the U.S. Department of Energy (DOE) on the draft ZEB definition, which would impose no federal mandates. (Joint comments' cover letter and addendum | Roundtable ZEB Fact Sheet, Jan. 18 | Roundtable Weekly, Jan. 5) The Roundtable’s Sustainability Policy Advisory Committee (SPAC) will discuss the repercussions of the HUD-USDA rule during its next meeting on June 21 in Washington, DC. # # #

Roundtable Testimony

April 30, 2024

Testimony

Roundtable Testimony Before House Oversight Subcommittee on Policies to Strengthen CRE Markets

CRE, Jeffrey DeBoer, Roundtable Statement, testimony,

Beneficial Ownership & the Corporate Transparency Act

April 29, 2024

Policy Comment Letter

Roundtable Supports Legislation to Repeal the Corporate Transparency Act (CTA)

Beneficial Ownership, Corporate Transparency Act CTA,

Affordable Housing

April 29, 2024

Policy Comment Letter

Roundtable and Broad Housing Coalition Call on Lawmakers to Enact Policies Aimed at Broadening Housing Supply and Lowering Costs

Affordable Housing, Yes In My Backyard YIMBY,

Policy Landscape

April 26, 2024

Roundtable Weekly

Roundtable Congressional Testimony on April 30 Will Focus on Policy Actions to Strengthen CRE Markets

Jeffrey DeBoer testimony

Real Estate Roundtable President and CEO Jeffrey DeBoer will testify next week before the House Oversight Subcommittee on Health Care and Financial Services about the “Health of the Commercial Real Estate Markets and Removing Regulatory Hurdles to Ensure Continued Strength.” (Watch hearing here at 2pm EST on Tuesday, April 30 | Update: Written testimony here) CRE Market Conditions & Solutions Subcommittee Chairwoman Lisa McClain (R-MI), commented on April 23 that the hearing will explore solutions to strengthen businesses that continue to struggle from the impact of pandemic-related government policies. She stated, “These businesses – including medical centers, warehouses, and offices – are crucial to our local economies and communities.” (McClain news release) House Oversight Committee Chairman James Comer (R-KY)—the lead sponsor of the House-passed Stopping Home Office Work’s Unproductive Problems (SHOW UP) Act (H.R. 139)—said it is urgent that federal employees return to their offices. (Roundtable Weekly, Feb. 3, 2023 and Comer news release) DeBoer’s testimony will recommend a range of policy actions that lawmakers and regulators should enact to strengthen CRE markets and encourage overall economic growth. The testimony will be available via the RER website and posted on the subcommittee website. The other hearing witness will be Jeffrey Weidell (CEO, NorthMarq), chairman of the Mortgage Bankers Association's (MBA) Commercial Real Estate/Multifamily Finance Board of Governors. (MBA news release, Oct. 15, 2023) MBA released a report on April 23 that details recent levels of commercial real estate mortgage borrowing and lending. The 2023 Commercial Real Estate/Multifamily Finance Annual Origination Volume Summation estimates that $429 billion of CRE mortgage borrowing and lending transpired last year. That total represents a 47% decrease from $816 billion in 2022, and a 52% decrease from the record $891 billion in 2021. (Report order information, MBA) The Roundtable’s all-member June 20-21 Annual Meeting will include a Joint Research Committee and Real Estate Capital Policy Advisory Committee Meeting to drill down on specific CRE capital and credit market trends and issues. # # #

Tax Policy

April 26, 2024

Roundtable Weekly

Final Treasury Rules Expand Reach of FIRPTA Tax Regime

FIRPTA Jeffrey DeBoer LookThrough Rule FIRPTA Tax Policy Tax Policy Advisory Committee TPAC Treasury Department

The Treasury Department issued final regulations this week that redefine what constitutes a domestically controlled REIT exempt from tax under the Foreign Investment in Real Property Tax Act (FIRPTA). The regulations create a new look-through rule that extends the reach of the discriminatory FIRPTA regime to common investment structures. (Final Regulations | Tax Notes, April 25 and Bloomberg Law, April 24) New Look-Through Rule By looking through a domestic C corporation to its shareholders, the new FIRPTA rules run counter to general tax principles, past IRS guidance, and historic precedent. Moreover, the final regulations do not provide relief to widely held U.S. real estate funds with dispersed foreign ownership, even if the foreign investors are far removed and separate from the management and control of the U.S. funds’ activities. While the final rules increased the total percentage of foreign ownership of a C corp. necessary to trigger look-through treatment, the change offers little practical relief since participating U.S. investors typically will only invest in U.S. real estate through other channels (e.g., directly, through a partnership, or through a REIT). Transition relief in the final regulations may offer some respite to certain foreign investors, depending on their facts and circumstances. The new look-through rule does not apply to preexisting business arrangements—but only if the entity does not acquire a significant amount of new real estate interests or undergo a significant change in its ownership during the 10-year transition period. Roundtable Response Roundtable President and CEO Jeffrey DeBoer responded to the Treasury rules. “Foreign capital is badly needed to supplement domestically sourced capital in cities and downtowns that continue struggling to recover from the pandemic. The wide spread adoption of remote work, coupled with today’s high interest rates and decreased lending by banks is fueling a reinforcing cycle of declining investment, property values, and tax revenues that can only be countered through additional investment capital.” “Unfortunately, the final Treasury rules on FIRPTA and domestically controlled REITs raise new barriers to passive foreign investment in U.S. real estate, including affordable housing and the conversion of underutilized office buildings,” DeBoer said. The Real Estate Roundtable and some members of Congress had advocated for the withdrawal of the proposed regulations or significant changes. House Ways and Means Committee Members Darin LaHood (R-IL) and Carol Miller (R-WV) urged Treasury Secretary Janet Yellen to drop the FIRPTA proposal. (Letter to Yellen, July 28, 2023 and real estate industry coalition letter, March 1, 2023 | Roundtable Weekly: Jan. 6, March 4 and Aug. 4, 2023) A Roundtable Tax Policy Advisory Committee (TPAC) working group is reviewing the most recent changes and considering potential policy and tax planning strategies going forward. The next TPAC meeting will be held on June 21 in conjunction with the all-member Roundtable Annual Meeting in Washington, DC. # # #

Energy and Tax Policy

April 26, 2024

Roundtable Weekly

IRS Regulations Clarify Rules for Transferring Energy Tax Credits

Energy Policy Inflation Reduction Act Tax Policy

On Thursday, the IRS issued a package of final regulations on the transferability of tax credits for rooftop solar and other clean energy investments under the Inflation Reduction Act (IRA). (Final regulations and IRS news release, April 25) Transferability The final rules relate to the transferability of qualifying credits to third-party credit purchasers in the context of partnerships and pass-throughs, as well as potential credit recapture events and penalties for excessive credit transfers. (PoliticoPro, April 25 and Tax Notes, April 26) Treasury has also provided guidance on the implementation and application of the IRA’s prevailing wage and apprenticeship requirements. (Roundtable Fact Sheet | Roundtable comments to Treasury and Roundtable Weekly, July 28, 2023) The ability to transfer clean energy credits allows REITs to participate in the new IRA tax incentive regime. The final regulations address several concerns raised by The Roundtable in its July 2023 comment letter, particularly in the context of REIT investments. For example, the regulations clarify that as-yet-untransferred credits are disregarded for purposes of the REIT 75% asset test. Unfortunately, the final regulations did not reverse the Biden administration’s prior guidance that generally limits the ability of mixed real estate partnerships (taxable and tax-exempt partners) to maximize their credit benefits through a combination of credit transfers and direct payments. Mixed partnerships can still claim the new tax credits, but may lose some of the financial value due to the specific tax attributes of the individual partners. Treasury indicated additional guidance is likely to help taxpayers meet the cumbersome credit registration requirements and ensure taxpayers can qualify for the underlying incentives. The IRS also updated its FAQs on tax credit transfers on April 25. The Roundtable's Energy Credit Transferability/Direct Pay Working Group is analyzing the regulations and assessing their impact on CRE. # # #

Financial Stability

April 26, 2024

Roundtable Weekly

Fed Report Cites Office Loans as Potential Economic Vulnerability

Capital and Credit Office Markets Remote Work Return to Office The Fed Wave of Maturing CRE Debt Workplace Return

Potential losses from certain office real estate loans are an economic vulnerability within the U.S. financial system—yet considered less of a threat than last year, according to the Federal Reserve Board’s semiannual Financial Stability Report. The Fed report noted that if inflation persists and higher interest rates linger during the ongoing, post-pandemic adjustment to remote work, a wave of maturing loans could pose CRE refinancing risks for regional U.S. banks. (Fed report | Bloomberg and Reuters, April 19) Office Sector Risk The financial stability report focused on four areas of risk, including asset valuations. CRE stress was the third most cited risk, moving down from second in last October’s survey. (KPMG, April 22, 2024 and Roundtable Weekly, Oct. 27, 2023) This month’s Fed report also acknowledged unique strains on CRE, especially in the office sector, “where vulnerabilities have mounted in the post-pandemic period.” The report added that continued economic pressures could reduce investor risk appetite and lead to a “more pronounced correction in commercial property prices.” This, in turn, could “reduce the willingness of financial intermediaries to supply credit to the economy” and further weigh on overall economic activity. Despite ongoing concerns about CRE, the Fed survey also found that the issuance of non-agency securities started to recover in the first three months of 2024. A separate report from DoubleLine shows signs of improvement for the commercial mortgage-backed securities market and other capital markets and notes that borrowers in some sectors, including office, are finding access to credit. (Bloomberg, April 24) The Roundtable’s all-member June 20-21 Annual Meeting will include a Joint Research Committee and Real Estate Capital Policy Advisory Committee Meeting to drill down into specific CRE capital and credit market trends and issues. # # #

Roundtable Meeting

April 19, 2024

Roundtable Weekly

House Democratic Leader and Other Policymakers Discuss Economic and CRE Market Issues

Roundtable Meeting

This week’s Real Estate Roundtable meeting focused on national policies impacting commercial real estate, with an emphasis on the economy, the need for increased federal support for property conversions, and capital and credit issues. Guests such as House Democratic Leader Hakeem Jeffries (D-NY) and other prominent policymakers also discussed the housing crisis, return-to-office issues, and the upcoming elections. (The Roundtable’ Spring 2024 Policy Priorities and Executive Summary) Speakers & Policy Issues Democratic Leader Hakeem Jeffries (D-NY), center, with Roundtable Chair John Fish (Chairman & CEO, SUFFOLK), left, and Roundtable President and CEO Jeffrey DeBoer, right, discussed policymaking in the House, the need to balance geopolitical urgencies with pressing domestic priorities, and finding bipartisan paths to solve the nation’s problems. House Financial Services Committee Member French Hill (R-AR), right, engaged in a discussion moderated by Michelle Herrick (Head of Real Estate Banking, J.P. Morgan), left, that addressed the wave of maturing CRE loans and the future of a regulatory proposal to hike bank capital requirements known as “Basel III.” (Roundtable Weekly, March 8) White House Council of Economic Advisers Chair Jared Bernstein, above, emphasized that affordable housing is a high-priority focus of the Biden administration—and welcomed a series of recommendations by The Roundtable on how the Biden administration could further support commercial-to-residential property conversions. He also discussed inflation’s role in credit and capital markets. (See story below) Enice Thomas (Deputy Comptroller for Credit Risk Policy, Office of the Comptroller of the Currency), above, focused on economic risk for regional banks that service specific property types and locations within office and multifamily sectors. Thomas clarified that the OCC encourages bankers to work with borrowers early if any stress indicator arises in their portfolio. He added federal banking regulators are monitoring office markets closely as a wave of loan maturities looms. Kevin Palmer (Head of Multifamily, Freddie Mac)—above right, with Roundtable Board Member Matt Rocco (President, Colliers Mortgage), left—spoke with Roundtable members about Freddie's role in the industry. He noted that the CMBS market is “humming” and added that planning for a significant refinance opportunity is important, although exceeding Freddie's caps is an FHFA issue. Next on The Roundtable's meeting calendar is the all-member Annual Meeting on June 20-21 in Washington, DC, which will also feature meetings of RER’s Policy Advisory Committees. # # #

Property Conversions

April 19, 2024

Roundtable Weekly

Roundtable Recommends Agency Actions to Accelerate Property Conversions

CRE Conversions President Biden Property Conversions

Jared Bernstein, chair of the White House Council of Economic Advisors, right, and Roundtable President and CEO Jeffrey DeBoer The Real Estate Roundtable urged the Biden administration to take a series of actions to support commercial-to-residential property conversions in an April 15 letter to Jared Bernstein, chair of the White House Council of Economic Advisors. (see Meeting story above) Improving Agency Resources The Roundtable’s letter aims to harness various federal loan programs and tax incentives to provide financial support for CRE conversions. A “Commercial to Residential Conversions” guidebook released by The White House last year catalogued various federal resources that could support adaptive re-use projects. (White House fact sheet and Roundtable Weekly, Oct. 27, 2023) These programs, enhanced by President Biden’s Bipartisan Infrastructure Law and Inflation Reduction Act, can ideally be tailored to accelerate projects that transform underutilized assets into housing. RER’s letter states, “The Federal Guidebook’s featured programs have not lived up to their promise—yet.” The Roundtable’s suggestions to improve these U.S. agency resources support goals to increase housing supply, revitalize urban downtowns, and cut carbon emissions. Roundtable Recommendations The April 15 letter urges agency actions to streamline environmental reviews, hasten the federal loan underwriting process, and layer various agency loan platforms to help finance housing conversions. The letter recommends specific improvements to the Department of Transportation’s loan programs for transit-oriented development, which can also resonate for resources offered by HUD, DOE and EPA. The Roundtable letter also details changes to the tax code and exisiting incentives that can increase energy efficiency and renewable energy investments in commercial-to-residential building conversions. The Roundtable will continue to coordinate with White House staff and encourage modifications to federal regulations and laws that can improve CRE conversion projects. # # #

Tax Policy

April 19, 2024

Roundtable Weekly

Senate Democrats Reintroduce Legislation to Tax Carried Interest at Ordinary Income Rates

Carried Interest Tax Policy

A group of Senate Democrats introduced legislation this week that would tax carried interest capital gains income at ordinary income tax rates of up to 40.8%. (Bloomberg Tax April 16) Carried Interest Proposals The Carried Interest Fairness Act was introduced on April 15 by Senate Banking Committee Chairman Sherrod Brown (D-OH) along with Sens. Tammy Baldwin (D-WI), Joe Manchin (WV), and several other Democratic co-sponsors. According to Sen. Brown, the change would raise $6.5 billion in revenue over 10 years. The Senators introduced a similar bill in 2021. (Sen. Brown news release; Crain Currency, April 16) This week’s carried interest bill is part of a broader effort by congressional Democrats to position legislative changes in anticipation of the expiration of 2017 Tax Cuts and Jobs Act provisions at the end of 2025. The approaching expiration of those individual provisionsis likely to drive tax negotiations next year into what some policymakers have referred to as the “Super Bowl of Tax.” (Bloomberg Tax, Jan. 4 and Axios, Feb. 16) Democratic Proposals President Biden’s 2025 budget also proposes taxing all carried interest as ordinary income. Most of the Biden tax agenda is carried over from his prior budgets. (Roundtable Weekly, March 15 and March 8 | White House Fact Sheet, March 11) Senate Finance Chair Ron Wyden (D-OR) introduced legislation last year to treat the grant of carried interest as deemed compensation in the form of an interest-free loan from the limited partners to the general partner (GP). (Bloomberg Tax, Nov. 15, 2023) The Roundtable has consistently opposed these and similar proposals since 2007 for failing to recognize that carried interest is actually granted for the value a General Partner adds beyond routine services, such as business acumen, experience, and relationships. Carried interest also reflects a recognition of the risks the GP takes with respect to the partnership’s liabilities—e.g., funding predevelopment costs, guaranteeing construction budgets, and potential litigation. Carried interest changes would also harm small businesses, stifle entrepreneurs and sweat equity, and threaten future improvements and infrastructure in neglected areas. They would increase the cost of building or improving infrastructure, workforce housing, and other socially desirable projects. The Tax Cuts and Jobs Act of 2017 created a three-year holding period requirement for carried interest to qualify for the reduced 20% long-term capital gains rate. # # #

Energy And Climate Policy

April 19, 2024

Roundtable Weekly

GOP Resolutions Aim to Overturn SEC’s Climate Rule

Climate Risk Reporting Energy and Climate Policy Reporting on Climate Risks SEC Securities and Exchange Commission

Dual Republican House and Senate resolutions introduced this week take aim at the recent climate risk disclosure rule from the U.S. Securities and Exchange Commission (SEC). As the 2024 election season gets underway, the resolutions delineate the parties’ different views on climate policy and their clashing perspectives on the scope of agencies’ regulatory authority. (Senate and House resolutions | PoliticoPro, April 17) Political Differences The partisan effort to overturn the SEC’s rule will not garner significant support from Democrats and the resolution is unlikely to pass the Senate. However, the resolutions have rallied Republicans to advance their message that the Biden administration’s SEC frequently steps outside the bounds of its regulatory authority. (The Hill and Bloomberg Law, April 17) Banking Committee Ranking Member Tim Scott (R-SC) leads the effort in the Senate. “The SEC’s mission is to regulate our capital markets and ensure all Americans can safely share in their economic success — not to force a partisan climate agenda on American businesses,” he said in a statement. Scott’s resolution has the support of 33 Republicans. Sen. Joe Manchin (D-WV) is the lone Democrat co-sponsor. (PoliticoPro, April 17). Democratic support for the SEC’s rule includes Senate Banking Committee Chairman Sherrod Brown (D-OH). “I applaud the SEC for acting to address climate risks to protect workers, investors, and our economy,” Brown said after the SEC rule was released last March. (Senate Banking news release) On the House side, Financial Services Committee Republicans advanced a similar resolution along a party-line vote on April 17. Committee Member Bill Huizenga (R-MI) introduced the House resolution. (Climate Wire, April 18) Legal Pause in Effect Numerous lawsuits challenging the SEC’s rule are now consolidated in federal court. The SEC agreed to stay its climate rule while litigation is pending. (Climate Wire, April 5) House Financial Services Committee Chairman Patrick McHenry (R-SC) said “[t]he SEC’s stay of the rule is not enough” and that congressional action is warranted, crystallizing the political nature of the issue. If the SEC’s rule eventually takes effect, registered companies would have to include certain climate-related disclosures in annual Form 10-Ks. Notably, the final SEC rule did not include Scope 3 disclosures, which affirmed a position strongly advocated by The Roundtable. (Roundtable Fact Sheet, March 12 and Roundtable Weekly, March 8) # # #

CRE Conversions

April 15, 2024

Policy Comment Letter

Roundtable Recommends White House Actions to Support Commercial-to-Residential Property Conversions

179D, Clean Energy Tax Incentives, CRE Conversions, Property Conversions, Tax Policy,

Tax Policy

April 12, 2024

Roundtable Weekly

Broad Coalition Urges Congressional Tax Writers to Support Like-Kind Exchange Rules

LikeKind Exchanges LKEs Tax Policy

This week, The Real Estate Roundtable and 35 other national business organizations urged leaders of the Senate and House tax-writing committees to preserve long-standing tax rules governing like-kind exchanges (LKEs). The April 10 letter encouraged policymakers to reject proposals, such as those in President Biden's budget, to restrict the use of LKEs. (Coalition letter, April 10) Value of LKEs The letter, sent to the chairs and ranking members of the House Ways and Means and Senate Finance Committees, details the importance of LKEs to the health, recovery, and realignment of U.S. commercial real estate in the post-pandemic economy. Exchanges have helped offset reduced transaction activity associated with high interest rates and other sources of economic uncertainty. Without LKEs, many properties would languish—underutilized and underinvested—because of the tax burden that would apply to an outright sale. The letter notes how LKEs increase economic mobility for cash-poor small business owners, farmers, and entrepreneurs—including minorities, women, and veterans—while contributing to environmental conservation efforts, housing affordability, and redevelopment in economically struggling cities and towns. Widespread Use Academic and other economic research has repeatedly demonstrated the positive economic contribution of LKE. Research by Professors David Ling (University of Florida) and Milena Petrova (Syracuse University) estimates that 10 to 20 percent of commercial real estate transactions involve a like-kind exchange. A recent Marcus & Millichap analysis demonstrates the value of LKEs to the health and financing of the commercial real estate industry, particularly during market corrections and liquidity shortages. (Roundtable Weekly, Dec. 1, 2023) House Tax Hearings Separately, congressional hearings in the House this week considered tax provisions scheduled to expire at the end of 2025 that were enacted in the 2017 Tax Cuts and Jobs Act (TCJA). On April 10, a House Small Business Committee hearing focused on a Roundtable-supported provision within the TCJA that may be subject to reform in 2025—the 20 percent section 199A pass-through deduction. (Tax Notes, April 11 and Roundtable Weekly, May 19, 2023) During an April 11 House Ways and Means Committee hearing, Chairman Jason Smith (R-MO) stated, “With the expiration of the 199A small business deduction, we will see even more ‘closed for business’ signs up and down Main street when their federal tax rate jumps to over 40 percent.” Chairman Smith added that strong bipartisan support for key TCJA provisions exists in the House after passage earlier this year of the Tax Relief for American Families and Workers Act (H.R. 7024) by a vote of 357-70. (Roundtable Weekly, Feb. 2) The $79 billion tax package passed by the House includes Roundtable-supported measures on business interest deductibility, bonus depreciation, and the low-income housing tax credit (LIHTC), but continues to face hurdles in the Senate. The Roundtable and 21 other industry organizations that comprise the Housing Affordability Coalition urged the Senate on Feb. 15 to pass the tax package.

Workplace Return

April 12, 2024

Roundtable Weekly

Senate Bill Calls for More Federal Telework Data as Study Shows DC Agencies Using 12 Percent of Office Space

Remote Work Telework Workplace Return

A bipartisan Senate bill introduced on April 3 would increase oversight of federal telework policies after a recent report showed government agency headquarters in Washington, DC are using an average of 12% of their office space. (Committee news release and Public Buildings Reform Board report) Congressional Push The Telework Transparency Act (S. 4043) from Sens. Joni Ernst (R-IA) and Gary Peters (D-MI), chairman of the Homeland Security and Governmental Affairs Committee, would require agencies to gather information on how telework impacts agency performance and federal property decisions. (Government Executive, April 8 and Federal News Network, April 3) Last month’s report from the Public Buildings Reform Board (PBRB) concludes that the “massive scale” of underutilized federal property creates an “outsized opportunity to save money and improve outcomes through property disposals and smarter real estate decisions.” (GlobeSt, April 9 and Bisnow, April 3) A Government Accountability Office (GAO) report last summer said a majority of government agencies were using 25% or less of the HQ capacity of 17 government agencies in 39 buildings encompassing more than 21M SF. (GlobeSt, April 9) Roundtable Efforts The Real Estate Roundtable wrote to members of the Senate about the need for the federal government to end its “active encouragement of remote working for federal employees” and for federal agencies to return to their pre-pandemic workplace practices. (RER letter to the Senate, April 12, 2023 and Commercial Observer, April 14, 2023) Roundtable President and CEO Jeffrey DeBoer, above, sent a similar request to President Biden, noting that federal telework policies were ignoring “the negative impacts of remote work on cities and communities, labor productivity, and U.S. economic competitiveness, as well as the quality of government services.” (RER letter to President Biden, Dec. 12, 2022) The economic impact of remote work in the public and private sectors will be discussed next week during The Roundtable’s Spring Meeting in Washington, DC. (Roundtable-level members only). Policymaker guests will include House Minority Leader Hakeem Jeffries (D-NY), House Financial Services Committee Member Rep. French Hill (R-AR), and Jared Bernstein, chairman of the White House Council of Economic Advisers. # # #

Energy And Climate Policy

April 12, 2024

Roundtable Weekly

States May Tap Into Federal Funds to Help CRE Owners Comply With City Climate Laws

Building Performance Standards BPS Energy and Climate Policy Zero Emissions Buildings ZEB

The U.S. Department of Energy (DOE) announced a new financing program this week for states to access federal funds that could help real estate owners meet state, city, and county building performance standards (BPS). State Energy Financing Institutions An April 9 webinar hosted by the White House and DOE’s Loan Programs Office provided information on plans to make federal money available to state energy financing institutions (SEFIs). Federal funds deployed under the SEFI program will be channeled through state agencies, which in turn will provide loans and grants to qualified building owners. SEFIs that receive federal DOE “certification” will assist compliance with building emissions and energy efficiency limits set by a growing number of states and localities. The LPO has released a SEFI Toolkit that describes the contours of the program. The Roundtable supports non-binding federal guidelines that bring national consistency to the conflicting patchwork of local BPS mandates.(DOE “blueprint” to decarbonize buildings; Roundtable Weekly, Sept. 15) Funding Criteria States will establish eligibility financing criteria under federal guidelines. They will likely prioritize disbursements to buildings in low-income areas and low-income housing. SEFI funds could be deployed to support commercial-to-residential property conversions in jurisdictions with BPS laws. To scale the program, DOE stated on the webinar that federal funds channeled through the states will be geared to support energy work on a portfolio of buildings rather than single projects. The agency also stated that DOE-sourced funds will aim to support assets that strive to meet the forthcoming national definition for a Zero Emissions Building (“ZEB”). (Roundtable Fact Sheet on ZEB, Jan. 18) The Roundtable’s Sustainability Policy Advisory Committee (SPAC) continues to work closely with the White House and DOE on climate initiatives impacting commercial real estate. # # #

In Memoriam

April 12, 2024

Roundtable Weekly

Ray Torto, Pioneer of Real Estate Research and Former Roundtable Research Committee Chairman

In Memoriam

Real estate industry research pioneer Ray Torto passed on April 7 after an accomplished professional career spanning roles in academia, government, and the private sector that included service as chairman of The Real Estate Roundtable’s Research Committee. (Torto obituary) Roundtable President and CEO Jeffrey DeBoer said, “Ray was well-known throughout the industry for decades as an astute leader who offered original insights about the important role of data in real estate markets and its application to national policy. The Roundtable will always remember his valuable guidance leading our Research Committee, and we will miss him.” In 1982, Ray partnered with Bill Wheaton of MIT to start Torto-Wheaton Research (TWR, now CBRE Econometric Advisors). TWR was among the first to bring data analysis and econometrics to the real estate industry, paving the way for increased institutional capital investment. See an appreciation by current Roundtable Research Committee Chair Spencer Levy, CBRE Global Client Strategist and Senior Economic Advisor. After Ray retired from CBRE, he returned to the classroom to become a lecturer at the Harvard Graduate School of Design. Reflecting on his career in an interview in 2014, Ray said that his favorite part of the real estate industry was the many people he worked with over the years. An additional interview from 2017 is available from The Counselors of Real Estate (CRE). # # #

Tax Policy

April 10, 2024

Policy Comment Letter

Roundtable and 35 National Organizations Urge Congressional Taxwriters to Preserve Like-kind Exchange Rules (Section 1031)

LikeKind Exchanges LKEs, Section 1031, Tax Policy,

Capital and Credit

April 5, 2024

Roundtable Weekly

Fed Cautions About Office Sector as Vacancies Climb and Loan Modifications Surge

Capital and Credit CRE Conversions Kathleen McCarthy Loan Modifications Office Markets Remote Work Return to Office The Fed

Recent reports show U.S. office vacancies climbed to nearly 20% during Q1 2024 after loan modifications more than doubled last year compared to 2023. Meanwhile, Federal Reserve Board Vice Chair for Supervision Michael Barr cautioned this week that federal regulators are “looking carefully at banks with heavy concentrations in office commercial real estate where there are significant, expected price declines.” (Moody’s Analytics, April 2 | CRED iQ, March 28 | (C-SPAN video, April 3) Office Sector Preliminary data from Moody’s Analytics reinforces the long-term, negative ramifications of hybrid work models. The Q1 2024 office vacancy rate set a new record at 19.8%, up from 19.6% in the prior quarter, and beating two historic peaks of 19.3% in 1986 and 1991. (Bloomberg, April 2 | Quartz, April 3 | CRE Daily, April 4) “The office stress isn’t quite done yet,” said Thomas LaSalvia, Moody’s head of commercial real estate economics and an author of the report. He added, “This is part of a longer-term evolution where we are seeing obsolete buildings in obsolete neighborhoods.” (Bloomberg, April 2) Brookfield’s Feb. 14 report, “The Misunderstood U.S. Office Market,” emphasizes that high vacancy rates are due to an excess of dated, functionally obsolete office buildings and an undersupply of offices that satisfy tenants’ changing needs. To counter economic pressure on some sectors of CRE, borrowers worked with lenders in 2023 to achieve a surge of loan extensions and other alterations to their loan covenants, according to CRED iQ’s “The Wall of Maturities Morphs into the Wave of Modifications.” A Roundtable-led coalition of 16 national real estate organizations urged the expansion of a 20 percent tax credit for qualified property conversion expenditures in an Oct. 12, 2022 letter to policymakers. The recommended enhancements included expanding the category of properties eligible for the credit to various types of commercial buildings such as shopping centers and hotels. (Roundtable Weekly, Nov. 11, 2022) Fed Oversight & CRE Sectors The Fed’s top market supervisor told the National Community Reinvestment Coalition on April 3 that CRE refinancing deals will “take some time to work through” as the Fed closely monitors office sector conditions. (C-Span | BGov, April 3 | Roundtable Weekly, March 8) Barr said, “This is the kind of thing where it is likely a slow-moving train as the financial sector and commercial real estate market move forward. Over the next two to three years, we are going to see how properties deal with refinancing in a higher interest rate environment. Occupancy rates have lowered because of work-from-home, so for some categories of office CRE they are more exposed to risk.” Kathleen McCarthy, global co-head of Blackstone Real Estate and chair-elect of The Real Estate Roundtable, commented to CNBC’s “Closing Bell Overtime” on April 3 that the office sector is different from other CRE investment areas that have performed well. “We do feel like there's a bottoming happening. There’s no V-shaped recovery … but we do see the cost of capital coming down, we’re seeing more liquidity in markets, and perhaps more importantly for the long term, we’re seeing a sharp decline in new supply," she said. Barron’s recognized McCarthy this week as one of the 100 Most Influential Woman in Finance. She commented on her upcoming role as Roundtable Chair: “To bring together my interest in policy and have a position to help our whole industry in Washington is really exciting.” (Barron’s, April 4) Commercial and multifamily market conditions will be discussed during RER’s April 15-16 Spring Meeting in Washington DC (Roundtable-level members only) with guests including White House Council of Economic Advisers Chairman Jared Bernstein, House Democratic Leader Hakeem Jeffries (D-NY), and House Financial Services Member French Hill (R-AK). # # #

Energy And Climate Policy

April 5, 2024

Roundtable Weekly

Biden Administration Outlines Options to Cut Building Emissions

Building Emissions Energy and Climate Policy EPAs ENERGY STAR Certification for Buildings

Reducing greenhouse gas (GHG) emissions from buildings is the focus of a “national strategy document” released this week by the Biden administration. The Department of Energy (DOE) “blueprint” has no regulatory impact on private sector assets, but it articulates aspirational goals to reduce building-related emissions 65% by 2035 and 90% by 2050. (Department of Energy (DOE) news release, April 2 and Politico EnergyWire, April 3) Four Pathways “Decarbonizing the U.S. Economy by 2050: A National Blueprint for the Buildings Sector” outlines four action categories: Increase Building Energy EfficiencyDOE acknowledges the value of federal tools that help building owners and jurisdictions benchmark, track, and improve efficiency (e.g., ENERGY STAR Portfolio Manager, Portfolio Manager Data Explorer)—all supported by The Real Estate Roundtable. (Roundtable Weekly, March 22) Reduce On-site EmissionsDOE notes that building electrification with heat pumps is a primary strategy for reducing on-site, fossil-fuel fired building emissions. DOE’s goal also includes reducing on-site emissions from fluorinated gas (including equipment refrigerant leakage), foam-blowing agents, and fire suppressants. (DOE document pages 26-28) Transform the “Grid Edge”Federal efforts could help buildings better connect with the power grid through storage methods, on-site renewable generation, and EV charging. (DOE document pages 28-30) Minimize Embodied Life Cycle EmissionsThe document lists strategies to reduce embodied emissions, including repurposing existing buildings, new construction methods, and reducing emissions intensity of construction materials. (DOE document pages 31-32) Noteworthy Recommendations The Biden administration framework acknowledges the need for CRE owners to access whole-building utility data. Metrics on building energy usage can be used to complete requirements for benchmarking and building performance disclosures. State regulators and local governments could support emission reduction goals by requiring utility companies to provide customers with access to tenant-meter data. (DOE document page 52) The blueprint recognizes the need for government-sponsored low-interest loans and tax credits to support clean power projects at buildings. (DOE document page 40 and Table 5, page 43) The blueprint also encourages federal-level resources to help city and state governments implement building performance standards (BPS). The Roundtable supports non-binding federal guidelines that bring order and national consistency to the conflicting patchwork of local BPS mandates. (DOE document pages 24-25 and 50-51 | Roundtable Weekly, Sept. 15) DOE plans to vet these recommendations for federal actions to reduce building emissions in the future with a wide range of stakeholders, track progress on their implementation, and amend the document as needed. # # #

Capital and Credit

March 29, 2024

Roundtable Weekly

Fed Signals Significant Changes Ahead for Basel III Endgame Proposal

Basel III Capital and Credit Halting ProCyclical Policy Measures and Increases in Regulatory Capital The Fed

Federal Reserve Board Vice Chair for Supervision Michael Barr said in a recent speech that he is working with other regulators on “broad and material changes” to a sweeping banking proposal known as the “Basel III Endgame.” The proposal, opposed by The Roundtable, would hike capital requirements for banks with at least $100 billion in assets by approximately 19 percent. (Bloomberg, March 22, 2024 and Congressional Research Service, Nov. 30, 2023) Fed Statements Barr said during his March 22 University of Michigan remarks, “I am working very closely with (Fed) Chair (Jerome) Powell and other members of our Federal Reserve board to try to reach a broad consensus” on revisions to the proposal. After an enormous private sector response to the proposal, Powell testified during a March 7 Senate Banking Committee hearing, “We do hear the concerns and I do expect that there will be broad and material changes.” He also told a March 6 House Financial Services Committee hearing that a rewrite of the proposal is a “very plausible option.” (Roundtable Weekly, March 8 and JD Supra, March 18) The Fed, Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) approved the 1,100-page proposed rulemaking last July by an unusually close 4-2 vote. See Interagency Overview of the Notice of Proposed Rulemaking for Amendments to the Regulatory Capital Rule, July 27. (Roundtable Weekly, July 28, 2023) Powell voted for the original rulemaking proposal but noted a significant tone of caution. Statements by Fed Governors Michelle W. Bowman and Christopher J. Waller bolstered their opposition to the proposal. Basel III and CRE The Federal Reserve Building in Washington DC The Real Estate Roundtable urged federal regulators to withdraw the proposed rulemaking in a Jan. 12 letter that raised industry concerns about its negative impact. The comments outlined how the proposal would decrease real estate credit availability, increase commercial and multifamily properties' borrowing costs, and negatively impact the U.S. economy. Real Estate Roundtable President and CEO Jeffrey DeBoer also stated in a March 2023 comment letter to Barr and other key regulators, "At this critical time, it is important that the agencies do not engage in pro-cyclical policies such as requiring financial institutions to increase capital and liquidity levels to reflect current mark to market models. These policies would have the unintended consequence of further diminishing liquidity and creating additional downward pressure on asset values.” The Mortgage Bankers Association (MBA) reported last month that 20 percent ($929 billion) of the $4.7 trillion of outstanding commercial mortgages held by lenders and investors will mature in 2024. That represents a 28 percent increase from the $729 billion that matured in 2023, according to MBA’s Commercial Real Estate Survey of Loan Maturity Volumes. The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will respond to any further changes to the Basel III proposal or other federal policies impacting capital and credit issues. # # #

Remote Work

March 29, 2024

Roundtable Weekly

Office Vacancy Rates Rise as Remote Work Arrangements Linger

CRE Conversions CRE Trends Remote Work Workplace ReEntry

Recent media reports show the U.S. commercial real estate office market continues to adapt to pressures from remote work, increased vacancy rates, and difficulties with price discovery. Building Value and Rent On March 26, the Wall Street Journal cited CoStar data showing that average U.S. asking office rents rose despite lower office demand and more empty space. David Bitner, the head of global research for Newmark told the Journal that if rents were cut to fill empty space, it “would significantly reduce the appraised values of their buildings. This in turn could lead to a covenant default on their loans or at minimum would make it harder for them to refinance.” The Journal noted that the value of office buildings will reset after owners and lenders manage to restructure mortgages or sell distressed properties. Another major influence on office rental rates is the adoption of new hybrid workplace arrangements by businesses that require less space. (Article: “The Office Market Is in Turmoil. So Why Are Rents More Expensive?”) According to an MSCI index, the average value of office buildings in central business districts fell nearly 41% from July 2022 to the beginning of this year. (Wall Street Journal, March 26) The New York Times reported on March 14 about the options facing municipal officials as nearly $3 trillion of outstanding commercial real estate debt is coming due by 2028 while tax revenues from commercial properties drop. The consequences of remote work and a post-pandemic shift in the use of the built environment are leading city officials to assess lower tax revenue assessments and consider policy changes to incentivize commercial-to-residential conversions, cutbacks to local services, or raise taxes. Vacancy Rates Increase Commercial Edge’s National Office Report reported on March 22 that there was a noticeable adjustment in demand for office spaces in the first two months of this year, partly due to the ongoing shift towards remote and hybrid work models. These challenges were exacerbated by higher interest rates and ongoing economic uncertainties that put pressure on upcoming maturing loans. The report also shows that the national office vacancy rate is 17.9 percent, up 140 basis points year-over-year. It also stated that San Francisco’s vacancy rate climbed 480 basis points year-over-year to 23.4 percent. Government Remote Work Real Estate Roundtable President and CEO Jeffrey DeBoer spoke at the PREA conference last week. For public buildings, the influence of return-to-office trends on federal employees was reflected in the $1.2 trillion government funding package recently signed by President Biden. (Reuters, March 23 | Roundtable Weekly, March 22) The fiscal 2024 measure included six new requirements for agencies to report data about federal telework, return-to-office trends, and use of federal office space. (Federal News Network, March 21) Roundtable President and CEO Jeffrey DeBoer has consistently emphasized that federal policies promoting remote work undermine the health of cities, local tax bases, and small businesses. The Real Estate Roundtable has urged President Biden and national policymakers to end government policies that encourage remote working arrangements for federal employees. (RER letter to President Biden, Dec. 2022; RER letter to Senate, April 2023) Mr DeBoer, speaking last week in Nashville at the Pension Real Estate Association (PREA) conference, noted that office vacancy rates are a bit misleading given the significant number of aging and obsolete building that do not functionally meet modern tenant demands. The Roundtable continues to urge incentives to encourage the conversion of these buildings to much-needed housing. # # #

Policy Landscape

March 22, 2024

Roundtable Weekly

Policymakers Aim to Pass $1.2 Trillion Budget, Avoid Shutdown

Budget Congress

Lawmakers pushed a sprawling $1.2 trillion legislative package through Congress today that would avoid a government shutdown at midnight by funding more than half the government through Sept. 30. After the House passed the funding measure today, the Senate will likely approve the package and send it to President Biden for his signature. (Bloomberg and Forbes, March 22) Minibus Faces Fiscal Cliff If the Senate debate goes past the midnight “fiscal cliff,” the White House budget office can delay a shutdown order before Monday. Congress is aiming to pass the budget before departing Washington for their two-week Easter break. (Washington Post, March 20 and AP, March 22) The 1,012-page, six-bill “minibus” (H.R. 2882) includes funding for the IRS, Pentagon, Department of Homeland Security, and foreign aid. Five and a half months after FY2024 began on Oct. 1, 2023, the government has operated on temporary funding extensions. (PBS, March 22) The Congressional Budget Office listed a detailed breakdown of this week’s funding bundle on March 21. The other half of the government’s budget was enacted earlier this month under a two-tiered congressional agreement. (NBC News, March 9 and Roundtable Weekly, March 1) House Republicans Rep. Marjorie Taylor Greene (R-GA) filed a motion (H. Res. 2203) to remove House Speaker Mike Johnson (R-LA), above, from his leadership post in protest over the legislation. Since the motion was filed but not brought up for a vote, no immediate action will be taken. “This is more of a warning than a pink slip,” she said. (Wall Street Journal, March 22) Speaker Johnson’s House Republican caucus is about to drop to a one-vote majority, as retiring Rep. Mike Gallagher (R-WI) will exit the House as soon as next month. (Politico, March 22) # # #

Housing Policy

March 22, 2024

Roundtable Weekly

White House Recommends Policies to Increase Affordable Housing

Affordable Housing Housing Low Income Housing Tax Credit LIHTC President Biden Property Conversions

The White House Council of Economic Advisers released a report yesterday on policies to boost the supply of affordable rental and ownership units—proposals that could form the foundation of a housing push during a second Biden term. (2024 Economic Report of the President and New York Times, March 21) Zoning Reform, LIHTC The Annual Report of the Council of Economic Advisers provides that public funds could be used to encourage zoning reforms at the local level, reduce financing constraints, and support workforce training to support housing construction. (See Chapter 4, “Increasing the Supply of Affordable Housing: Economic Insights and Federal Policy Solutions”) The report explains that the federal government could reduce exclusionary zoning via grants and other spending, and directly subsidize affordable unit construction through programs like the low-income housing tax credit (LIHTC). The report adds, “Ultimately, meaningful change will require State and local governments to reevaluate the land-use regulations that reduce the housing supply.” Addressing Equity The Council’s report addresses how increasing the housing supply could increase access and equity for groups with few financial resources, increase overall wealth, and reduce disparities across groups. (Page 163 of the Annual Report of the Council of Economic Advisers) The report notes that exclusionary zoning policies, such as prohibitions on multifamily homes, are a “subset of local land-use regulations that can constrain the housing supply and thus decrease affordability.” This week, President Biden also spoke in Las Vegas about his plans to “establish an innovative program to help communities build and renovate housing or convert housing from empty office spaces into housing, empty hotels into housing.” (White House remarks, March 19 and Roundtable Weekly, March 15) # # #

Energy And Climate Policy

March 22, 2024

Roundtable Weekly

EPA Releases “NextGen” Criteria for Low-Carbon Buildings

Anthony Malkin Energy and Climate Policy EPA EPAs NextGen Building Label SPAC Sustainability Policy Advisory Committee

The Environmental Protection Agency (EPA) released long-awaited final criteria on Tuesday for ENERGY STAR’s voluntary “NextGen” certification to recognize buildings with reduced carbon footprints. Three Criteria NextGen builds upon ENERGY STAR’s popular “label” for highly efficient buildings. The new label has three criteria that must be independently verified to: Demonstrate Superior Energy PerformanceThe building must achieve an ENERGY STAR score of 75 or higher and meet all criteria associated with ENERGY STAR certification. Use Renewable EnergyAt least 30 percent of a building’s total energy used onsite must derive from renewable sources. Market-based measures like power purchase agreements (PPAs) and renewable energy certificates (RECs) can qualify as long as they meet certain quality control criteria (e.g., Green-e certified). Meet a Direct Emissions TargetThe building must meet a GHG intensity target for its property type, which adjusts to account for days of extra heating required in colder climates. CRE Recognition “NextGen highlights RER’s constructive engagement with decision makers who translate policy to action,” said Tony Malkin, above, (Chairman, President and Chief Executive Officer, Empire State Realty Trust, Inc.), chair of The Roundtable’s Sustainability Policy Advisory (SPAC) Committee. He added, “The NextGen voluntary standard provides specific metrics-based criteria to recognize the very best performers who increase efficiency, reduce emissions, and help expand the nation’s supply of renewable energy. This new framework allows our members to urge cities and states to look to these researched and logical federal standards rather than create their own unduly complicated and punitive mandates.” “Our work with EPA is not done,” Malkin continued. “Our next project with our EPA partners is to recognize inefficient buildings which will never reach ENERGY STAR levels and still take steps to reduce materially energy use in common areas and tenant spaces.” Planning Considerations Companies can apply online to EPA for the NextGen label starting in Sept. 2024. EPA’s response to public comments noted the agency will explore “separate recognition” for inefficient buildings that significantly improve energy performance. In February, RER and Nareit urged that EPA’s NextGen label should be considered a critical intermediate step for an asset to show it is “on a path” to meet the Energy Department’s yet-to-be-released, voluntary Zero Emissions Building (ZEB) definition. Building owners may report to investors about assets certified with the NextGen label. Information on green-labeled buildings could be within the scope of disclosure requirements released earlier this month by the U.S. Securities and Exchange Commission (SEC) and passed last year in California. (See RER’s facts sheets on the SEC and California requirements). Court challenges are currently underway against both the SEC and California corporate climate reporting rules. The SEC’s rule has been stayed at least temporarily by a federal appeals court. (POLITICOPro, March 20 and Roundtable Weekly, March 15). EPA staff overseeing the NextGen program will participate on SPAC’s next Zoom meeting on April 11 to field questions on the new building label. # # #

Beneficial Ownership

March 22, 2024

Roundtable Weekly

Business Coalition Urges Congress to Delay Implementation of Beneficial Ownership Rules

Beneficial Ownership Beneficial Ownership amp the Corporate Transparency Act Capital and Credit

The Real Estate Roundtable joined more than 120 other national business organizations in a letter this week that urged Senate Banking Committee leaders to support a one-year filing delay for new beneficial ownership regulation requirements, which took effect Jan. 1 under the Corporate Transparency Act (CTA). (Coalition letter, March 19) CTA Delay Bills The CTA impacts more than 32 million existing entities and an additional 5 million newly created entities every year. These companies and other legal entities face increased paperwork, privacy risks, and potentially devastating fines and prison terms. (New York Times, March 4) The coalition’s March 19 letter expressed strong support for passage of the Protect Small Business and Prevent Illicit Financial Activity Act (S. 3625), introduced by Banking Committee Ranking Member Tim Scott (R-SC), which would extend the deadline for companies to report beneficial ownership information to the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). [FinCEN’s current requirements] Companion legislation in the House (H.R. 5119), introduced by Reps. Zach Nunn (R-IA) and Joyce Beatty (D-OH), passed by a vote of 420-1 on December 12, 2023. Initial filings under the CTA began more than two months ago in accordance with the new law, yet fewer than 2 percent of covered entities have submitted their required information to FinCEN. One reason for this low compliance rate is that most business owners are ignorant of the new law. A one-year delay would provide the business community and FinCEN additional time to educate millions of small business owners about the new reporting requirements and its onerous penalties. Legal Challenge The U.S. District Court for the Northern District of Alabama This week’s coalition letter also explains that a one-year delay would accommodate the time it will take for a March 1 District court decision, which ruled the CTA regulations as unconstitutional, to work its way through Appellate and Supreme Courts. (Roundtable Weekly, March 8) The ruling earlier this month from the District Court for the Northern District of Alabama was narrow, applying only to National Small Business Association (NSBA) member plaintiffs named in the case. As a result, non-NSBA firms should continue to comply with the CTA pending further developments. (FinCEN’s current requirements) The March 19 letter to the Senate Banking Committee states, “It is obvious more time is needed. Congress did not enact the CTA in order to turn millions of law-abiding small business owners into felons.” The Roundtable has consistently opposed the beneficial ownership rules. We continue to work with policymakers to identify a balanced position that would inhibit illicit money laundering activity but does not place unnecessary costs and legal burdens on the real estate industry. (Coalition letter, Nov. 2023) The Roundtable’s Real Estate Capital Advisory Committee (RECPAC) will continue to monitor legislative and legal developments as they impact beneficial ownership requirements. # # #

Beneficial Ownership

March 20, 2024

Policy Comment Letter

Roundtable and Business Coalition Urge Congress to Delay Implementation of Beneficial Ownership Rules

Beneficial Ownership, Beneficial Ownership amp the Corporate Transparency Act,

Policy Landscape

March 15, 2024

Roundtable Weekly

President Biden’s FY2025 Budget Calls for $4.9 Trillion in Tax Increases

Budget Capital Gains Congress President Biden Tax Policy

The Biden administration this week released its $7.3 trillion FY2025 budget request, which includes $4.9 trillion in tax increases and several tax proposals impacting capital gains. The Treasury Department also released its "Green Book," which provides detailed descriptions of the budget’s tax proposals and associated revenue estimates. (White House budget and Treasury news release, March 11) Capital Gains Focus The White House’s annual budget represents the economic policy agenda of the Biden administration. While it is a wish list with no immediate impact, it sets a marker for upcoming debates on spending and fiscal priorities in Congress and throughout the upcoming election. This week’s budget document includes many of the same tax proposals in President Biden’s previous budgets and policies outlined during his State of the Union address last week. (Roundtable Weekly, March 8 and White House Fact Sheet on the Budget, March 11) The FY2025 Green Book repeats the administration’s proposal to tax capital gains at ordinary income rates—nearly doubling the capital gains rate from 20% to 39.6%. The budget would also increase the net investment income tax from 3.8% to 5% and extend the tax to all pass-through business income, effectively ending the exception for real estate professionals active in the business. As a result, the top combined tax rate on real estate capital gains and rental income would rise to 44.6%. Other tax proposals in the budget would create a 25% minimum tax on the unrealized gains and income of individuals with more than $100 million in wealth, recapture depreciation deductions at ordinary income rates when real estate is sold, and raise the top personal income tax rate from 37% to 39.6% for those making more than $400,000. The president also proposes to raise the corporate tax rate from 21% to 28%. (The Hill, March 13) Biden’s 2025 budget would largely eliminate the deferral of capital gain through like-kind exchanges (section 1031) and tax all carried interest as ordinary income. (White House Fact Sheet, March 11) Tax Debates Begin Treasury Secretary Janet Yellen will testify on the administration’s budget and tax proposals before the Senate Finance Committee March 21 and during an upcoming House Ways and Means Committee hearing. The Green Book will serve as a reference for congressional Democrats who develop large-scale tax legislation for the next Congress in anticipation of the expiration of 2017 Tax Cuts and Jobs Act provisions at the end of 2025. As the FY2025 budget proposals spark a wide-ranging tax debate, a current $79 billion tax package—passed by the House and supported by The Roundtable—is pending in the Senate. (CQ News | Politico Pro | Tax Notes, March 15). Additional proposals in the budget impact housing policy—see story below. Joint Employer Rule Struck Separately, a federal court on March 8 blocked the National Labor Relations Board’s (NLRB) final joint-employment standard rule. The decision from the U.S. District Court for the Eastern District of Texas addressed whether the expansive definition has the potential to expose broad swaths of employers to liability for labor law violations committed by contractors or franchisees. The court vacated the NLRB rule, stating the joint-employment standard interpretation is too broad. (Politico Weekly Shift, March 11, 2024 and Roundtable Weekly, Jan. 17, 2020) As an appeal from NLRB is expected, employers should continue to comply with the current joint-employer rule adopted in 2020. (JD Supra, March 14) # # #

Housing Policy

March 15, 2024

Roundtable Weekly

White House Focuses on Affordable Housing Policy Proposals

Affordable Housing Housing Low Income Housing Tax Credit LIHTC President Biden

This week President Biden and his top economic advisor previewed a new Housing Innovation Fund and forthcoming proposals to encourage additional housing development. The White House’s focus on affordable housing confirmed it will be a top administration priority as the presidential election season picks up momentum. (Politico, March 14) Administration’s Housing Remarks Following his March 6 State of the Union address, which addressed new tax incentives for homebuyers and an expansion of the Low-Income Housing Tax Credit (LIHTC), President Biden spoke this week about other aspects of his housing plan. (Roundtable Weekly, March 8 | White House Fact Sheets: Budget, March 11 and Housing, March 7) Biden stated during comments at the National League of Cities, “The federal budget that I’m releasing today has a plan for 2 million more affordable homes, including housing — a housing innovation fund to help communities like yours build housing, renovate housing, and convert empty office space and hotels into housing. The bottom line is we have to build, build, build. That’s how we bring housing costs down for good.” (White House transcript and C-Span video, March 11) New Initiatives White House National Economic Advisor Lael Brainard, above, also addressed the president’s housing proposals this week. “While tax credits are a proven way to boost supply, it is also vital to support the efforts of governors, county executives, and mayors who are pioneering new approaches that can be scaled. That’s why the president is proposing a new $20 billion Innovation Fund for Housing Expansion to help communities expand their housing supply,” Brainard remarked. (White House transcript, March 12) Brainard also previewed forthcoming administration housing policies. “In the months ahead, we will take further action– from supporting communities in identifying and removing barriers to housing production to promoting the use of federal resources for conversions from office to residential,” Brainard said. (Urban Institute video of speech and interview, March 12) She confirmed that “the centerpiece of the president’s Plan is an expansion of the Low Income Housing Tax Credit (LIHTC) that would produce or preserve 1.2 million affordable units over the next decade.” (HousingWire, March 12) During a Senate Banking hearing on March 12 on Housing Affordability, Availability, and Other Community Needs, bipartisan support was also expressed for expanding the LIHTC—a policy strongly supported by The Roundtable. (Roundtable Weekly, March 1 and Feb. 16) # # #

Office Markets

March 15, 2024

Roundtable Weekly

Industry Leaders Discuss Office Market Pressures, Challenges, Opportunities

CRE Conversions Office Markets Property Conversions

The ramifications of declining values for certain office properties were the focus of several national media interviews this week with industry leaders. The pressures, challenges, and opportunities of the current office market are the consequence of remote work and a post-pandemic shift in the use of the built environment—realities that are leading city officials to assess lower tax revenue assessments and consider policy changes to incentivize commercial-to-residential conversions, cutbacks to local services, or raising taxes. (New York Times, March 14) Office Conversions The New York Times reported this week on the options facing municipal officials as nearly $3 trillion of outstanding commercial real estate debt is coming due by 2028 while tax revenue from commercial properties drops. Refinancing certain office assets at reduced values remains difficult during a period of high interest rates and heightened regulatory concern about regional banks' office loan concentrations. (Trepp, Dec. 21, 2023 and Roundtable Weekly, March 8) Roundtable Chairman Emeritus Bill Rudin, above, (Co-Chairman and CEO, Rudin Management Co.) discussed positive options for office property conversions today on CNBC’s Money Movers. Rudin offered examples in New York City of successful office reuse. He also emphasized how other cities need to convert obsolete office buildings to residential use by changing multiple dwelling laws, zoning statutes, and a providing a robust tax abatement to incentivize capital into the marketplace for conversions. “It’s a public-private partnership. The capital will come to those projects with the right structure that start creating housing on all levels: affordable, workforce, market rate,” Rudin said. Evolving Opportunities Roundtable Member Hessam Nadji (President and CEO, Marcus & Millichap) spoke with CNBC’s Worldwide Exchange today about the bifurcated office market. He added that investors are exploring opportunities in shopping centers and high-quality offices in suburban markets. “(We are) hearing from various institutional investors that it’s the time to buy. Prices have adjusted. There’s record capital on the sidelines. And when you combine those two with confidence that the economy is going to hold up pretty well, you’re going to see capital come back,” Nadji said. Blackstone President and Chief Operating Officer Jon Gray discussed investor opportunities in commercial real estate yesterday with Bloomberg Television. “As investors, sometimes, one of the risks is that you miss it by being overly cautious and I think now is probably a good time before rates come down. There are definitely assets that were financed in a different era, particularly in commercial real estate because there has been a more profound impact in the office sector—and that will create opportunities,” Gray said. On the public buildings front, the Biden administration’s 2025 budget plan proposes $425 million for the General Services Administration to reduce the federal footprint and long-term costs through a new “optimization program.” (Federal News Network, March 11) # # #

Energy And Climate Policy

March 15, 2024

Roundtable Weekly

Lawsuits Mount Against SEC Climate Rules

Climate Policy Climate Risk Reporting Energy and Climate Policy Reporting on Climate Risks Scope 3 reporting Securities and Exchange Commission

The U.S. Securities and Exchange Commission (SEC) headquarters in Washington, DC. Almost two dozen Republican-led states have sued the U.S. Securities and Exchange Commission (SEC) over its climate corporate disclosure rules released last week. (Bloomberg Law, March 12 – paywall | Roundtable Weekly, March 8) Litigation Gauntlet GOP attorneys general in 22 states allege the SEC acted beyond its authority by requiring companies to report certain GHG emissions and costs related to extreme weather. The U.S. Chamber of Commerce joined the “legal salvo” against the SEC. (POLITICO, March 15). An SEC spokesperson stated the agency will “vigorously defend” petitions filed in the federal appeals courts for the Fifth, Eighth, and Eleventh Circuits. (Bloomberg Law, March 12) These suits will likely rely on the “major questions” doctrine, raised in a 2022 U.S. Supreme Court decision that curtailed EPA’s authority to fight climate change. The doctrine provides that a federal agency must have “clear” authority from Congress to regulate issues of “vast economic and political significance.” (E&E News ClimateWire, March 11) Meanwhile, environmental groups filed their own counter-suit in the D.C. Circuit. They claim that the SEC’s rules are too “water[ed] down” and fail to provide investors with “material” information on a company’s financial exposure to climate risks. (Newsweek, March 14). It will take months for the SEC to run this court gauntlet. The November elections could shape the legal outcome before the suits are resolved, depending on which party controls Congress or the White House. RER “Fact Sheet” Assuming the SEC’s rules are not delayed, the largest public companies must comply with climate-related disclosures in Form 10-Ks filed during fiscal year 2025. (SEC fact sheet, March 6) The Real Estate Roundtable has issued its own fact sheet summarizing “What CRE Should Know” about the SEC’s final climate disclosure rules. (RER Fact Sheet, updated March 12). The Roundtable’s Sustainability Policy Advisory Committee (SPAC) continues to study the new SEC regulations and plans to hold educational sessions at its June 21 meeting in Washington as part of RER’s annual meeting. # # #

Climate Risk Reporting

March 12, 2024

Fact Sheet

The SEC’s Climate Disclosure Rules: What CRE Should Know – Roundtable Fact Sheet, March 12

Climate and Energy Policy, Climate Policy, Climate Risk Reporting, Energy and Climate Policy, Reporting on Climate Risks, Scope 3 reporting, SEC, Securities and Exchange Commission,

Policy Landscape

March 8, 2024

Roundtable Weekly

President Biden Proposes New Housing Incentives, Increased Taxes on Wealthy Individuals and Public Corporations

Affordable Housing Low Income Housing Tax Credit LIHTC President Biden Tax Policy TCJA

President Joe Biden’s State of the Union address last night included proposals to levy a 25 percent minimum tax on wealthy individuals, increase the corporate tax rate from 21 to 28 percent, and raise the alternative minimum tax on large corporations from 15 to 21 percent. He also called on Congress to pass legislation to support the construction or rehabilitation of more than 2 million homes and rolled out new tax incentives for homebuyers. (Biden’s Remarks | White House Fact Sheets on Taxes and Housing, March 7) Proposed Tax Increases Biden proposed to levy a 25 percent minimum tax on those with wealth of more than $100 million. He committed to not raising taxes on those making $400,000 or less while heavily criticizing the 2017 Tax Cuts and Jobs Act (TCJA) as a $2 trillion giveaway to high-income households and corporations. (Tax Policy Center | Forbes, March 8) Most of the Biden tax agenda is carried over from his prior budgets and includes provisions that he was unable to pass when Democrats controlled both chambers of Congress. While not detailed in his speech, the White House’s upcoming 2025 budget could include past proposals to raise taxes on real estate like-kind exchanges and carried interest income. (Roundtable Weekly, March 10, 2023) Many provisions from the 2017 tax bill will expire at the end of 2025, including the 20 percent deduction for pass-through business income, the cap on the deductibility of state and local taxes, and the reduction in the top individual tax rate from 39.6 to 37 percent. The approaching expiration of the individual provisions creates a tax “cliff” that is likely to drive tax negotiations next year. Housing Plan Real estate coalition response to President Biden's SOTU housing proposals. The White House’s Fact Sheet on housing describes the administration’s plans to establish new tax credits for first-time homebuyers and individuals who sell their starter homes. The tax credit for home sellers seeks to address the “lock-in” effect associated with current high interest rates.The president would also increase spending on affordable housing by Federal Home Loan Banks. (PoliticoPro and White House Fact Sheet on Housing, March 7) The White House Fact Sheet also includes an expansion of the low-income housing tax credit (LIHTC) to support an additional 1.2 million affordable rental units and a new Neighborhood Homes Tax Credit to encourage the construction or preservation of over 400,000 affordable, owner-occupied homes. Bipartisan legislation to expand LIHTC passed the House in January and is pending in the Senate. The National Multifamily Housing Council (NMHC) and nine industry groups responded to the negative aspects of Biden’s housing plan. A coalition letter explained how proposals to limit fee for service arrangements would hurt renters by undermining the administration’s objectives of lowering housing costs, driving new housing development, and creating more affordable rental housing. President Biden has also supported Department of Justice and Federal Trade Commission investigations into rental rate fixing—investigations that many in the industry believe are highly questionable. (NMHC statement and real estate coalition letter, March 7) Funding Watch After the House passed a spending package this week to fund several federal agencies through September, the Senate has until midnight tonight to pass the bill and avoid a partial government shutdown. Approval from all 100 senators is necessary to fast track the process. The consideration of multiple amendments could delay a final vote until Saturday, necessitating a temporary funding extension to avoid disruption and get the final bill to President Biden for his signature. (The Hill, March 8) The next government funding deadline is March 22, which requires a new spending package to fund the Pentagon, Health and Human Services, Labor, and other agencies. Policymakers agreed on this two-tiered stopgap funding plan (March 8 and 22) to buy time to negotiate a full-year appropriations bill. (Roundtable Weekly, March 1) # # #

Capital and Credit

March 8, 2024

Roundtable Weekly

Fed Chairman Testifies on Regional Bank Loan Concentrations in CRE, Basel III Proposal Changes

Basel III Capital and Credit CRE Debra Cafaro Ventas Federal Reserve Restoring Liquidity in CRE Markets and Protecting Capital Formation The Fed

Fed Chair Jerome Powell addressed CRE concerns in an exchange with Sen. Catherine Cortez Masto (D-NV) Federal Reserve Chair Jerome Powell testified before congressional committees this week about the risks posed by commercial real estate loans to regional banks—and that he expects “broad and material changes” to a regulatory proposal to hike bank capital requirements known as “Basel III.” (The Hill, March 7 and Reuters, March 6) CRE Concerns & Banking The Senate and House hearings focused on the Fed’s March 1 Monetary Policy Report to Congress. The publication stated, “Credit quality at banks remained strong, although the quality of CRE loans backed by office, retail, and multifamily buildings continued its decline, a result of the lower demand for downtown real estate prompted by the shift toward telework.” The report also noted, “Low levels of transactions in the office sector likely indicated that prices had not yet fully reflected the sector’s weaker fundamentals.” During a March 7 Senate Banking Committee hearing, Fed Chair Powell responded to questions from Sen. Catherine Cortez Masto (D-NV) that he expects some smaller banks with high commercial real estate office concentrations will fail, but that risks posed by these loans are “manageable.” (Watch a video clip of the exchange, above) Similar concerns were raised by policymakers with Powell during a March 6 House Financial Services Committee hearing. The Fed chair addressed why he expects manageable bank losses and added, “We've had a secular change in the economy, which has left office demand significantly lower, at least temporarily, and perhaps for a long time. The same is true in some downtown retail (properties) associated with office workers. So it's a shock to the system.” Basel III Changes The committees also heard Powell state that the “Basel III” regulatory proposal, which would significantly increase capital requirements for banks with at least $100 billion in assets, is likely to be overhauled after an enormous private sector response. He commented to the Senate panel, “We do hear the concerns and I do expect that there will be broad and material changes to the proposal.” He told House lawmakers that a rewrite of the proposal is a “very plausible option.” (Fortune and GlobeSt, March 7 | Bloomberg and PolitcoPro, March 6) The Real Estate Roundtable raised industry concerns about the negative impact of the Basel III proposal in a Jan. 12 letter to the Fed and other agencies. The comments outlined how the proposal would decrease real estate credit availability, increase borrowing costs for commercial and multifamily real estate properties, and negatively impact the U.S. economy—and urged federal regulators to withdraw their proposed rulemaking. The New York Times DealBook reported this week that Basel III could crimp lending as some banks struggle with office portfolios and a looming “maturity wall” of $1.5 trillion in CRE loans come due over the next two years. (New York Times, Feb. 7) Industry Views On March 6, Roundtable Board Member Scott Rechler (Chairman and Chief Executive Officer, RXR) told CNBC’s Squawkbox that high interest rates, price discovery, and the amount of maturing CRE loans have resulted in a “slow-moving train wreck” for regional banks. Rechler, a member of the New York Fed’s Board of Directors, said, “There’s a balance. The longer rates stay higher, there’s more distress. For the industry, there’s enough imbalance right now that some level of rates moderating will help ease this transition. Capital structures are upside down. They’re going to need to be re-equitized, there’s going to be write-offs. So if you can bring down (interest rates), it can create some transaction activity.” (Squawkbox, March 6) Squawkbox also featured Roundtable Member Marty Burger (Infinity Global Real Estate Partners CEO and former Silverstein Properties CEO) on Feb. 28 to discuss office-to-residential conversion opportunities in the current CRE environment. (CNBC, Feb. 28) Today, RER’s Immediate Past Chair Debra Cafaro (Chairman and Chief Executive Officer, Ventas, Inc.) discussed the CRE market with a focus on the senior housing sector on Bloomberg Markets. “For the commercial real estate sector writ large, those tightening financial conditions are having an impact, particularly in sectors like office, where you have the demand fall off. There will be an impact on the smaller lenders. It is something the system will have to absorb over time with $1 trillion of real estate loans coming due in 2024. It is having an effect. The best elixir for that might be lower rates,” Cafaro said. # # #

Energy And Climate Policy

March 8, 2024

Roundtable Weekly

SEC Releases Climate Disclosure Rules

climate Climate Risk Reporting Energy and Climate Policy Reporting on Climate Risks Scope 3 reporting SEC Securities and Exchange Commission

On March 6, the U.S. Securities and Exchange Commission (SEC) released long-awaited final “Climate Disclosure Rules” that establish federal regulations for registered companies to disclose climate-related financial risks and opportunities. The Real Estate Roundtable has prepared a fact sheet summarizing “What CRE Should Know” about the new SEC rules. Overview of the SEC Rules The rules require certain registrants to report “material” financial impacts to address storms, wildfires, sea level rise, and other events attributable to climate change (SEC news release, March 6) Certain climate-related expenses and costs must be quantified and disclosed in audited financial statements filed annually as part of Form 10-K. The rules also expand disclosures in narrative “items” included in a 10-K, such as descriptions of “physical” and “transition” risks from extreme weather and related events. Required disclosures include third-party assured calculations of Scope 1 “direct” emissions and Scope 2 emissions attributable to the purchase of electricity, steam, and gas to power buildings. The SEC’s final rules impose no requirements to report Scope 3 emissions from sources in a company’s “value chain” – following the position advocated by the Roundtable in 2022 comments. (Roundtable Weekly, June 10, 2022) “The SEC’s decision to drop proposed Scope 3 reporting was the right move,” said Roundtable President and CEO, Jeff DeBoer. “It would have imposed onerous financial and paperwork burdens for commercial real estate owners and failed to produce reliable and useful emission information for investors.” The Climate Disclosure Rules phase-in and ramp-up over time. The largest companies (in terms of the amount of shares held by public investors) must start complying in 2025. (RER Fact Sheet) Impacts on CRE The Roundtable's Fact Sheet on the SEC's Climate Disclosure Rules CRE registrants should become familiar with the new rules if they voluntarily set corporate “targets” to reduce emissions in their buildings or portfolios, or own assets located in cities or states with building performance mandates. Companies that purchase renewable energy certificates (RECs) or carbon offsets may also be subject to SEC disclosures. CRE owners and financial firms with “lifecycle” cap ex investment plans for building electrification may also be subject to new reporting. The SEC’s rules do not preempt similar state requirements. For example, companies regulated by California’s climate disclosure laws passed in 2022 must satisfy those rules in addition to SEC rules. (Roundtable summary of the California legislation and Roundtable Weekly, Sept. 22) The courts may ultimately decide the legality of the SEC’s actions. Institutional investors might move the market toward the SEC’s rules even if they are stalled or struck in court. The Roundtable’s Sustainability Policy Advisory Committee (SPAC) will continue to assess the implications of the SEC’s rules and convene our members to develop industry standards and practices for compliance. # # #

Beneficial Ownership

March 8, 2024

Roundtable Weekly

Treasury Collection of Beneficial Ownership Information is Ruled Unconstitutional by Federal District Court Judge

Beneficial Ownership Beneficial Ownership amp the Corporate Transparency Act Capital and Credit Corporate Transparency Act CTA FinCEN

The U.S. District Court for the Northern District of Alabama Beneficial ownership regulations that took effect Jan. 1 under the Corporate Transparency Act (CTA) were ruled unconstitutional on March 1 by a federal District Court judge, who sided with claims by the National Small Business Association against the U.S. Treasury Department. The Roundtable has strongly supported NSBA’s legal challenge. (NSBA v. Janet Yellen ruling and NSBA’s website on the CTA | Industry coalition support of NSBA law suit, Dec. 7, 2022) Impact of Ruling Alabama Judge Liles Burke’s ruling applies only to the NSBA and its members, although the court’s decision likely paves the way for further challenges to the CTA. FinCEN issued a statement on March 4 that it will “comply with the court’s order for as long as it remains in effect” and will not enforce the CTA against the named plaintiffs in the case. What goes unsaid is that FinCEN intends to continue enforcement of the CTA against non-parties while the case works its way through the federal court system. As a result, firms should continue to comply with the CTA absent further developments. (See FinCEN’s current requirements) NSBA President and CEO Todd McCracken on March 5 stated, “FinCEN should immediately reverse course and suspend enforcement of the CTA for all until these issues are finally resolved.” Appeals of the NASB ruling could take months or years. (BGov, March 5) CTA’s Onerous Requirements The CTA amended the Bank Secrecy Act to require corporations, limited liability companies, and similar entities to report certain information about “beneficial owners” who own at least 25% of an entity or indirectly exercise “substantial control” over it. (Roundtable Weekly, Sept. 15, 2023) The CTA authorized the Treasury's Financial Crimes Enforcement Network (FinCEN) to collect and disclose beneficial ownership information to authorized government authorities and financial institutions. The statute also mandated the submission of regular reports by the end of 2024 that includea litany of sensitive personal identifiers of the owners, senior employees, and/or advisors of covered entities. (FinCEN’s current requirements) The law directly impacts more than 32 million existing entities and an additional 5 million newly created entities every year. These companies and other legal entities face increased paperwork, privacy risks, and potentially devastating fines and prison terms. (New York Times, March 4) The CTA rules subject many real estate businesses to a heavier compliance burden at a time when the industry faces economic challenges from decreasing office usage and diminishing credit capacity. Roundtable Opposition The Roundtable has consistently opposed the beneficial ownership rules. In Nov. 2023, The Roundtable and a broad coalition of approximately 70 business groups urged Congress to pass a one-year delay in implementing the burdensome reporting requirements. (Coalition letter and PoliticoPro, Nov. 16) In Feb. 2022, The Roundtable joined nine other national real estate industry organizations in detailed comments to FinCEN about the negative impact of the proposed beneficial ownership regulations on real estate transactions. The Roundtable’s Real Estate Capital Advisory Committee (RECPAC) will continue to monitor developments related to beneficial ownership requirements and legal outcomes. # # #

Policy Landscape

March 1, 2024

Roundtable Weekly

Congress Punts Funding Deadlines … SEC to Vote March 6 on Climate Disclosures … Roundtable Urges EB-5 Guidance Correction

Climate Risk Reporting Congress EB5 Foreign Investment Scope 3 reporting SEC Securities and Exchange Commission

A bill passed by both chambers of Congress yesterday and signed by President Biden today punts a set of government funding deadlines to March 8 and 22, thereby preventing a partial government shutdown that was scheduled to start at midnight. (ABC News, March 1 | House bill text) New Stopgap Goals The new two-tiered stopgap bill gives policymakers some time to negotiate a full-year appropriations bill as a House-passed tax package is under consideration in the Senate. (See tax story below). On Wednesday, congressional leaders announced the deal, which extends funding for the departments of Housing and Urban Development, Commerce, Energy, Transportation, and others from March 1 through March 8. The bill also extends funding for the Pentagon, Health and Human Services, Labor, and other agencies from March 8 through March 22. SEC to Vote March 6 on Climate Rule The U.S. Securities and Exchange Commission (SEC) announced a vote next week on whether it will adopt final rules requiring companies to provide certain climate-related information in their registration statements and annual reports. The SEC’s “open meeting” to consider the climate rule will take place on Wednesday, March 6 at 9:45 am and will be webcast at www.sec.gov. PoliticoPro cited confidential sources claiming that SEC’s anticipated final rule may scale back on corporate reporting requirements that were more aggressive in its 2022 proposal regarding Scopes 1, 2, and 3 “value chain” emissions. RER’s 2022 comments to the SEC urged the Commission to drop its “back door mandate” for Scope 3 disclosures. (Roundtable Weekly, Feb. 16, 2024 and June 10, 2022) Roundtable Urges Congress to Correct EB-5 Guidance The Real Estate Roundtable urged the leaders of the Senate and House Judiciary Committees this week to correct defective “guidance” enacted by the U.S. Citizenship and Immigration Services (USCIS) that is undermining the EB-5 Reform and Integrity Act of 2022 (RIA). [Roundtable EB-5 letter, Feb. 28, 2024] The USCIS’s arbitrary guidance states that EB-5 investments made after RIA’s enactment must “remain invested for at least two years.” This position contradicts regulations kept by USCIS on its rulebooks for decades. RER’s letter also explains that USCIS’s defective guidance exacerbates CRE’s current liquidity issues. For example, the agency’s position effectively eliminates the availability of EB-5 investment capital to help finance projects to convert underutilized commercial buildings to multifamily housing. The Roundtable is calling on Congress to correct the error with a short statutory change that codifies the long-standing regulatory approach, which couples the periods for EB-5 capital sustainment and conditional residency. # # #

Tax Policy

March 1, 2024

Roundtable Weekly

Senate Republicans Seek Changes to House-Passed Tax Package

Low Income Housing Tax Credit LIHTC Tax Policy

Senate Finance Committee Chairman Ron Wyden (D-OR), left, and Ranking Member Mike Crapo (R-ID), right. The Senate Finance Committee’s top Republican made it clear this week that he wants changes to a House-passed $78 billion tax package, which includes Roundtable-supported measures on business interest deductibility, bonus depreciation, and the low-income housing tax credit (LIHTC). [Roundtable Weekly, Feb. 2 | PoliticoPro and Tax Notes, Feb. 29] Senate Republicans Concerns The Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) passed the House on Jan. 31 by an overwhelming 357-70 vote. House Ways and Means Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR) are pressing Senators to support its passage. (Axios, Feb. 16) Senate Republicans considering the House tax package have called for an amendment process that could be time consuming. (The Hill, Feb. 2) Finance Committee Ranking Member Mike Crapo (R-ID) laid out the changes he would like to see in the bill in a Feb. 28 news release. A major issue for Sen. Crapo is a reform to the Child Tax Credit (CTC) that allows taxpayers to rely on income from prior years when determining their eligibility for the refundable credit. (Fiscal Times, Feb. 29) Sen. Crapo added in comments to Tax Notes this week that “There's just a lot of separate issues that need to get sorted out. Everything from traditional extenders to LIHTC to SECURE 2.0.” Congressional Timing Sen. Crapo also stated in his news release that “… with each week that has passed, (Republican) members have strongly voiced additional calls for numerous modifications, and there are also increasing concerns about making 2023 changes this far into the IRS tax filing season.” The Senator said he is “committed to seeking a bipartisan resolution that a majority of Senate Republicans can support.” (Tax Notes, Feb. 29) Sen. Wyden and senior congressional staff discussed the tax package with Roundtable members during The Roundtable’s all-member 2024 State of the Industry Meeting in Washington. (Roundtable Weekly, Jan. 26) Additionally, The Roundtable and 21 other industry organizations that comprise the Housing Affordability Coalition urged the Senate on Feb. 15 to pass the tax package. The coalition’s letter emphasized the importance of advancing provisions in (H.R. 7024) that strengthen the low-income housing tax credit (LIHTC)—along with various real estate investment measures that would benefit communities and the broader economy. (Coalition letter, Feb. 15) The best chances for enacting the tax package may be in combination with a government funding bill later in March. (See story above). # # #

Roundtable Leadership

March 1, 2024

Roundtable Weekly

Real Estate Roundtable Leaders Discuss Market Conditions, Policy Issues Facing CRE

Jeffrey DeBoer John Fish Roundtable Leadership

Real Estate Roundtable Chair John Fish (Chairman & CEO, Suffolk) on Bloomberg’s Wall Street Week. This week, Real Estate Roundtable Chair John Fish (Chairman & CEO, Suffolk) and Roundtable President and CEO Jeffrey DeBoer discussed market conditions and policy issues impacting commercial real estate with Bloomberg’s Wall Street Week and the American College of Real Estate Lawyers (ACREL). Markets and Federal Actions Roundtable Chair John Fish addressed how current economic challenges facing commercial real estate, cities, communities, businesses and individuals have led to a somewhat “somber” mood in his Feb. 26 Wall Street Week interview. Fish emphasized the importance of CRE to the overall economy and the need for policymakers to work with the industry to ensure a soft landing. He also discussed the wave of maturing CRE debt coming due at higher interest rates as remote-work continues to press the industry—and the ramifications of a large number of environmental regulations moving forward in a compressed time period. The Roundtable’s chair noted, “Back in June of 2023, the Federal Reserve, the FDIC in the OCC issued forward guidance on working with borrowers, and that was credit worthy borrowers. I would encourage them to continue with their policy and reinforce that policy. It's extremely important to the industry as a whole because creditworthy borrowers should not get hurt through this process.” (Roundtable Weekly, June 30, 2023) He added, “We need the Federal government to work with us on interest rates. We also need the federal government to ask workers to come back to work. That's one of the reasons why some of our buildings in downtown urban areas are 25, 30 percent vacant today. As an industry, we need to work together, collaborating with the government to try to solve these problems.” (Bloomberg’s Wall Street Week) The Roundtable’s Policy Role Roundtable President and CEO Jeffrey DeBoer, right, with Jay Epstein, former president of the American College of Real Estate Lawyers, left. Roundtable President and CEO Jeffrey DeBoer spoke with Jay Epstein, former president of the American College of Real Estate Lawyers on the Feb. 26 edition of the ACREL Files podcast about The Roundtable’s policy advocacy role in Washington and compelling issues now facing the industry. DeBoer explained that The Roundtable is a unifier between industry and lawmakers on policies that benefit the economy and communities by using a non-partisan, data-centric, asset-based approach. DeBoer also said the industry is at an inflection point as issues—including post-pandemic remote work and CRE needs, office-to-residential property conversions, affordable housing, building energy usage, insurance costs, and xenophobic attitudes to foreign real estate ownership—are “all rushing forward on top of the market challenges.” (ACREL Files podcast) “By and large, the industry has stepped up to challenges, met them, and helped the economy and the country move forward.” He added, “Today there are other problems with financing and remote work, but I have no doubt the industry will overcome those challenges and emerge stronger.” # # #

Restrictions on Foreign Investment in U.S. Real Estate

March 1, 2024

Policy Comment Letter

Roundtable letter to Florida State Legislative Leaders in Support of Amendment on Real Property Ownership

Florida SB264, Foreign Investment, Restrictions on Foreign Investment in US Real Estate,

Quarterly Sentiment Index

February 29, 2024

Quarterly Sentiment Index

2024 Quarterly Sentiment Index

Quarterly Sentiment Index,

EB-5

February 28, 2024

Policy Comment Letter

Roundtable Letter to Judiciary Committees on Need to Correct EB-5 Guidance

Government Shutdown Looms … Coalition Supports YIMBY Bill … SEC Scope 3 Emissions Rule

Congress Scope 3 reporting Tax Policy Yes In My Backyard YIMBY

Congress returns next week to address an imminent government shutdown. Unless the House and Senate pass a long-term budget or short-term stopgap by March 1, 20 percent of funding for the current fiscal year will expire – with remaining federal operations potentially ceasing on March 8. (Forbes | (Politico, Feb. 21) Funding Negotiations Policy riders on issues such as abortion, gender-affirming care, and medical research remain contentious issues. Axios reported this week that House Republicans expect some version of a shutdown before passing a new funding bill. Congress has approved three continuing resolutions since Sept. 30 to keep the government open with current funding in place, as a full budget for the fiscal year ending Sept. 30 remains elusive. (Committee for a Responsible Budget, Feb. 13) Congress must also take into account a key date of April 30, when a 1 percent cut in all federal funding (including Pentagon programs) will take effect without passage of fiscal legislation. (Federal News Network, Dec. 26, 2023) Pending Tax Package House Ways and Means Committee Chair Jason Smith [R-MO] A bipartisan $79 billion tax package that was overwhelmingly approved by the House on Jan. 31faces potential hurdles in the Senate. The bill contains Roundtable-supported measures on business interest deductibility, bonus depreciation, and the low-income housing tax credit (LIHTC). (Roundtable Weekly, Feb. 2 and Jan. 19) Leading congressional tax writers are considering adding the House-passed tax package to a potential spending bill. House Ways and Means Committee Chair Jason Smith [R-MO] recently told Axios that he is meeting with Republican senators to pass the limited tax extenders package as a prelude to next year’s effort on whether to extend tax cuts passed in 2017 as part of the Tax Cuts and Jobs Act. (TaxNotes Talk podcast, Feb. 21) Smith commented, "For one it breaks the dam. There has not been any kind of even a small extenders package passed in three years and let alone in divided government. And so 2025 is the Super Bowl of tax." (Axios, Feb. 16) “Yes in My Backyard” Coalition This week, The Real Estate Roundtable and 21 other national organizations expressed their strong support for the bipartisan Yes in My Backyard Act (YIMBY) in their latest letter to the House Financial Services Committee (Coalition letter, Feb. 20) H.R. 3057, introduced by Congressmen Mike Flood (R-NE) and Derek Kilmer (D-WA), would help promote development of affordable housing by requiring local governments that receive certain federal grants to report on their practices to support high-density development. Separately, the Wall Street Journal (Feb. 20) highlighted that community opposition to new projects is not just restricted to housing developments. E-Commerce hubs are also “increasingly contending with a headache” of NIMBY sentiments, as developers of warehouse and logistics properties face the conundrum of siting projects that are necessary to deliver goods to residents and consumers. SEC & Scope 3 Disclosure Reuters (Feb 23) reports that the U.S. Securities and Exchange Commission (SEC) plans to eliminate requirements for companies to report on Scope 3 “value chain” emissions in its imminent climate risk disclosure rule. (Roundtable Weekly, Feb. 16). RER’s 2022 comments in fact urged the Commission to drop its “back door mandate” for Scope 3 disclosures. (Roundtable Weekly, June 10, 2022) The SEC must still vote on the final regulation before its release. Progressive Democrats in Congress will likely object to any rule that relieves registered companies from Scope 3 reporting. # # #

Quarterly Sentiment Index

February 23, 2024

Roundtable Weekly

Despite Ongoing Market Challenges, Industry Leaders Expect Improvements in 2024

Quarterly Sentiment Index Wave of Maturing CRE Debt

Real Estate Roundtable President and CEO Jeffrey DeBoer The Real Estate Roundtable’s Q1 2024 Sentiment Index confirms that commercial real estate property markets continue to experience significant challenges. At the same time, in the coming year industry executives expect monetary policy action reflecting lower inflation to bring greater stability in asset pricing and expanded availability of debt and equity capital. Cautious Optimism Roundtable President and CEO Jeffrey DeBoer said, “Our current Sentiment Index shows improved optimism by industry leaders, compared with previous surveys that highlighted significant market concerns. The Q1 sentiment continues to note challenges presented by ongoing tight capital markets, increased operating expenses, and the continuing uncertainty of post-pandemic, in-office work. However, as the interest rate environment appears to have settled somewhat, executives are now expressing increased optimism that values and capital availability will improve in 2024.” He added, “As we look at the current and future landscape of commercial real estate, it's clear that we are at a pivotal moment. With nearly $3 trillion of commercial real estate loans maturing in the next four years, it remains very crucial that lenders continue to work constructively with borrowers to reflect both current and expected economic growth. Markets and asset values continue to adjust and stabilize as office use, interest rates, and inflation begin to normalize.” All indices of The Roundtable’s Q1 Index are up, compared to the previous quarter and one year ago. The Index—a measure of senior executives’ confidence and expectations about the commercial real estate market environment—is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive. Topline Findings The Q1 2024 Real Estate Roundtable Sentiment Index registered an overall score of 61, an increase of 17 points from the previous quarter. The Current Index registered 53, a 21-point increase over Q4 2023, and the Future Index posted a score of 70 points, an increase of 13 points from the previous quarter. These increases point to cautious optimism in the real estate market. There continue to be variations among asset classes and within specific property types as the real estate market rapidly changes. Industrial and multifamily are starting to soften, but retail and hospitality asset classes were identified as being surprisingly resilient. While many office properties have experienced a significant erosion in value, Class A offices continue to outperform. An overwhelming 79% of survey participants indicate that asset values have decreased compared to the previous year. However, the potential end to interest rate hikes has instilled some industry optimism, with nearly 80% of survey participants expecting asset values to be the same or higher a year from now. Survey participants continue to emphasize the challenging capital markets landscape, with 86% and 85% of survey participants suggesting that the availability of equity and debt capital, respectively, is the same or worse than a year ago. That said, 67% and 76% believe the availability of equity and debt capital, respectively, will improve a year from now. Data for the Q1 survey was gathered in January. See the full Q1 report. # # #

Affordable Housing

February 20, 2024

Policy Comment Letter

Roundtable and Broad Coalition Strongly Support the Yes in My Backyard Act (YIMBY) — H.R. 3507

Affordable Housing, Yes In My Backyard YIMBY,

Capital and Credit

February 16, 2024

Roundtable Weekly

Federal Reserve Supervisors Focused on Banks’ CRE Lending Risk

Capital and Credit The Fed Wave of Maturing CRE Debt

Federal banking regulators are closely monitoring risk factors in commercial real estate bank lending throughout the United States, according to comments today from Federal Reserve Board Vice Chair for Supervision Michael Barr. This week, the Fed also released scenarios for its annual stress test for large banks that includes a 40 percent decline in commercial real estate prices—one of several hypothetical risks designed to assess the resilience of the banking system in the event of a severe recession. (Barr speech, Feb. 16 and Fed stress test, Feb. 15) Managing CRE Risks Barr stated today, “Let me turn to supervision of a specific risk: commercial real estate. The reduced demand for office space and higher interest rates have put pressure on some CRE valuations, particularly in the office sector.” Barr noted that Fed supervisors are “closely focused on banks’ CRE lending in several ways.” He explained that regulators analyze how banks measure and report their risk, what steps they have taken to mitigate the risk of losses on CRE loans, and whether they have sufficient capital to buffer against potential CRE loan losses. (Barr speech, Feb. 16) He also stated that today’s heightened financial risk environment has led the Fed to downgrade firms' supervisory ratings at a higher rate in the past year and increase its issuance of enforcement actions. Barr said, “We continue to evaluate whether we should temporarily require additional capital or liquidity beyond regulatory requirements where the firm has trouble in managing its risks.” (PoliticoPro, Feb. 16) Bloomberg reported that regulators determined that 22 regional banks late last year had CRE loan portfolios that merit greater scrutiny. (Connect CRE, Feb. 15) Wave of CRE Refinance Meets Price Discovery Bloomberg also reported this week that commercial property deals in the U.S. are starting to pick up at deep discounts, forcing lenders to brace for increased pressure on maturing loans. (Bloomberg, Feb. 14) Roundtable Board Member Scott Rechler (Chairman and Chief Executive Officer, RXR) told Bloomberg that as more transactions add price discovery to the market, investors will have to recapitalize loans to reflect lower values. Rechler said, “In 2024, we’re at that fifth stage of grief. People are now in acceptance.” He also commented on falling property values: “You can’t ignore that anymore. Depending on the severity of it, we’ll see who has actually marked appropriately and who hasn’t.” RXR’s CEO told CNBC last week that “if you're a borrower who's willing to invest money, banks are willing to reduce their loan balances to reflect the current environment.” (CNBC, Feb. 6 and Roundtable Weekly, Feb. 9) The Wall Street Journal reported this week that investors are starting to show interest in properties where building owners are unable to extend their loans. The article cites Trepp data that shows more than $2.2 trillion in commercial mortgages are scheduled to mature between now and the end of 2027. (WSJ, Feb. 12) The Mortgage Bankers Association (MBA) reported this week that 20 percent ($929 billion) of the $4.7 trillion of outstanding commercial mortgages held by lenders and investors will mature in 2024. That represents a 28 percent increase from the $729 billion that matured in 2023, according to MBA’s Commercial Real Estate Survey of Loan Maturity Volumes. # # #

Tax Policy

February 16, 2024

Roundtable Weekly

Roundtable and Housing Affordability Coalition Urge Senate to Pass Tax Package

Affordable Housing bonus depreciation Business Interest Deduction Low Income Housing Tax Credit LIHTC Tax Policy

This week, The Real Estate Roundtable and 21 other industry organizations urged the Senate to pass a tax package that was approved by the House in an overwhelming bipartisan vote (357-70) on Jan. 31. (Coalition letter, Feb. 15) Tax Provisions in the Senate The Housing Affordability Coalition’s letter to all Senators emphasized the importance of advancing provisions in The Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) that strengthen the low-income housing tax credit (LIHTC)—along with various real estate investment measures that would benefit families, workers, and the national economy. The coalition noted how the bill would increase the supply of housing as a positive response to the nation’s housing affordability crisis. It would also suspend certain tax increases on business investment that took effect in 2022 and 2023. The Feb. 15 letter focused on details of the bill’s provisions that positively impact the LIHTC, deductibility of business interest, bonus depreciation, and small business expensing. The Roundtable also joined the National Multifamily Housing Council (NMHC) and a large coalition of housing and other real estate groups in a Jan. 26 letter to Congress in support of the tax package. That letter also focused on the bill’s important improvements to the LIHTC, which will significantly increase the construction and rehabilitation of affordable housing over the next three years. Congressional Timing Senate Republicans considering the House tax package have called for an amendment process that would be time consuming. (The Hill, Feb. 2) With Congress in recess until the last week of February, there will be limited legislative vehicles available the bill could ride on, just days before a set of government funding deadlines hit on March 1 and 8. The best chances the package could have for inclusion in other legislation include a potential funding bill to prevent an early March government shutdown or a bill to reauthorize the Federal Aviation Administration on March 8. If the tax package is pushed beyond March, it may not be considered until a lame duck session after what is expected to be a contentious election season. SALT Reform Pinched On Feb. 14, a procedural rule to advance the SALT Marriage Penalty Elimination Act (H.R. 7160) to a floor vote in the House fell short of a majority vote needed to pass. The effort by House lawmakers to double the $10,000 cap on state-and-local tax deductions (SALT) for married couples earning up to $500,000 failed by a vote of 195-225. (RollCall and CQ, Feb. 14) The tax package (H.R. 7024) passed by the House last month did not address the SALT cap, which led to this week’s consideration of a separate reform measure. The current SALT cap is scheduled to expire at the end of 2025, along with many other measures passed as part of the Tax Cuts and Jobs Act (TCJA) of 2017. # # #

Energy And Climate Policy

February 16, 2024

Roundtable Weekly

Federal Initiatives on Buildings, Climate Gaining Momentum Ahead of 2024 Elections

Anthony Malkin Clean Energy Tax Incentives Climate Policy Energy and Climate Policy Energy Policy ENERGY STAR EPAs NextGen Building Label Scope 3 reporting SEC Securities and Exchange Commission

The Biden-Harris administration is accelerating actions at the intersection of climate and real estate policy in the lead-up to November’s elections to implement its signature clean energy legislation passed during its first years in office. RER’s Sustainability Policy Advisory Committee (SPAC) remains engaged with policymakers on a variety of initiatives coalescing in 2024 that include the following: Climate-Related Financial Risk The U.S. Securities and Exchange Commission (SEC) is expected to issue a final rule this spring for registered companies to disclose financial risks from climate change.(RER fact sheet and Roundtable Weekly, March 10, 2023). Scope 3 “indirect” emissions from sources in a company’s supply chain are controversial elements of the anticipated SEC rule. RER’s 2022 comments urged the Commission to drop its “back door mandate” for Scope 3 disclosures. (Roundtable Weekly, June 10, 2022) Litigation against the SEC’s imminent rule is widely expected. A recent lawsuit filed by industry groups against a California disclosure package passed last summer (modeled after the SEC’s proposal) signals similar claims that the federal government might face in court. (Wall Street Journal, Jan. 30 and RER fact sheet) Additionally, the U.S. Commodity Futures Trading Commission (CFTC) plans to finalize a proposal establishing standards for verified carbon offsets that companies may pursue to mitigate GHG emissions they cannot avoid. Voluntary Frameworks The Environmental Protection Agency (EPA) will accept applications for its NextGen building label starting in September. (EPA slides to SPAC, Jan 24) ENERGY STAR assets will be NextGen-eligible if they also meet an emissions “target” and source 30 percent of energy use to renewable power. (RER fact sheet) NextGen certification may serve as an “intermediate step” for buildings that strive for a voluntary Zero Emissions Building (“ZEB”) definition coming from the U.S. Energy Department. Recent comments from RER and Nareit maintain that the federal ZEB definition can lend consistency to the confusing state-local regulatory patchwork of building performance standards. (Roundtable Weekly, Feb 2.) EPA is acting on requests to update Portfolio Manager, CRE’s standard tool to measure metrics for building efficiency and emissions. Portfolio Manager upgrades announced at last month’s SPAC meeting will help real estate companies strive for NextGen or ZEB status. (Coalition letter, Sept. 14, 2023) This spring, the influential GHG Protocol—an international framework heavily relied upon by the SEC, EPA, DOE, and institutional investors—will undertake its first revisions since 2015 to its guidance for companies to account for emissions from electricity use. RER will participate in the upcoming Scope 2 guidance public comment process. Tax Incentives Roundtable Sustainability Policy Advisory Committee Chair Tony Malkin, right, andVice Chair Ben Myers The Internal Revenue Service (IRS) has issued dozens of proposed rules and notices to implement clean energy tax incentives available to real estate and other sectors since Congress passed the Inflation Reduction Act (IRA) in 2022. (RER fact sheet) The IRS is expected to release final rules before November on topics such as the ability of REITs to transfer certain tax credits, proposed rules on non-urban census tracts eligible for EV charging station credits, and the 179D deduction for building retrofits. RER has submitted comments on these and other topics in response to initial IRS notices and will continue to provide feedback as opportunities arise. (RER letters Oct. 30 and July 28, 2023; Nov. 4 and Dec. 2, 2022) The Roundtable’s SPAC—led by Chair Tony Malkin (Chairman, President, and CEO, Empire State Realty Trust) and Vice Chair Ben Myers (Senior Vice President of Sustainability, BXP)—will press forward with RER’s climate and energy priorities for the remainder of the current administration and into the next. # # #

Capital and Credit

February 16, 2024

Roundtable Weekly

Treasury Testifies on New Rules for Investment Advisors to Combat Illicit Finance

Beneficial Ownership Capital and Credit FinCEN Treasury Department

The director of the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) appeared before the House Financial Services Committee this week to address recent regulatory proposals for investment advisors to combat illicit finance activity and money laundering in U.S. residential real estate. Director Andrea Gacki testified, “We are also considering next steps with regard to addressing the illicit finance risks associated with the U.S. commercial real estate sector.” (Committee hearing and Gacki’s statement, Feb. 14) FinCEN’s Business Regulatory Proposals The hearing on Wednesday followed a new FinCEN proposal that would require investment advisors to report suspected money laundering to the U.S. government. (Wall Street Journal, Feb. 13) A fact sheet on the proposal explains that although FinCEN is not proposing an obligation for investment advisers to collect beneficial ownership information at this time, it anticipates it will do so in the future. (FinCEN Proposal and Fact Sheet, Feb. 13 | Treasury’s 2024 Investment Adviser Risk Assessment) Last week, FinCEN proposed a rule that would require certain real estate professionals involved in the closing or settlement of residential transfers to report information to FinCEN about the beneficial owners of legal entities and trusts involving all-cash transactions. The rule would not require the reporting of sales to individuals. (Roundtable Weekly, Feb. 9 | Reuters and AP, Feb. 7) Another set of regulations that took effect on Jan. 1, 2024 is expected to collect personal information from owners of at least 32 million U.S. businesses into a beneficial ownership registry managed by the government. A beneficial owner is described as individual who owns at least 25 percent of a company or enough to exert significant control over it. (Final Rule | Fact Sheet | RER background on beneficial ownership) FinCEN Director Gacki told the House Committee that more than 430,000 businesses have submitted reports to the registry so far. (PoliticoPro, Feb. 14) Concerns About Beneficial Ownership Registry In his opening statement, Committee Chairman Patrick McHenry (R-NC), above, was critical of Treasury’s ongoing proposals and its beneficial ownership regulations affecting small businesses. McHenry added, “Until FinCEN can show Congress it can do its current job and appropriately use its existing authorities, I’m skeptical of providing greater authorities and resources.” (FinCEN’s background information and FAQs on beneficial ownership reporting) McHenry added, “The administration has transformed what was a simple and direct program into Frankenstein’s monster of complexity. We now have a new, overly complex and less secure access regime." On Oct. 13, 2023, The Roundtable and a coalition of eight national real estate groups urged Treasury Secretary Yellen to delay the implementation of the burdensome reporting requirements. (Coalition letter | Roundtable Weekly, Oct. 20 and Sept. 30) # # #

Tax Policy

February 15, 2024

Policy Comment Letter

Roundtable and Housing Affordability Coalition Urge Senate to Pass Tax Package

Business Interest Deduction, Low Income Housing Tax Credit LIHTC, Tax Policy,

Office Loan Concentrations

February 9, 2024

Roundtable Weekly

Key Regulators View Banks’ Office Loan Concentrations as Manageable Risk

Capital and Credit The Fed Treasury Department

Fed Chair Jerome Powell and Treasury Secretary Janet Yellen this week said that federal regulators are closely monitoring bank loan concentrations in office properties for heightened economic risk but view the CRE sector’s financial challenges as manageable. (60 Minutes’ Powell transcript, Feb. 3 and Bloomberg video of Yellen testimony, Feb. 6) Regulators Focus on CRE Chair Powell told CBS’ 60 Minutes, “We looked at the larger banks' balance sheets, and it appears to be a manageable problem. It's a secular change in the use of downtown real estate. And the result will be losses for the owners and for the lenders, but it should be manageable.” Secretary Yellen also said economic pressures on office properties are “manageable” before the House Financial Services Committee on Feb. 6 and the Senate Banking, Housing and Urban Affairs Committee on Feb. 8. Her testimony included a summary of findings from the Financial Stability Oversight Council’s annual report, which noted, “Elevated interest rates, high costs, and potential structural changes in demand for CRE have heightened concerns about CRE.” CNBC’s Squawkbox interviewed Minneapolis Fed Pres. Neel Kashkari on Feb. 7 about the regulators’ CRE concerns. “It really is focused on the office sector. Many other segments within commercial real estate seem to be doing very well, so I think that delineation is important. And we think it’s going to be on a bank-by-bank basis where we see pressures flare up. Our bank supervisors are in very close contact with others around the country,” Kashkari said. CRE Markets Roundtable Board Member Scott Rechler (Chairman and Chief Executive Officer, RXR) told CNBC’s Squawkbox on Feb. 6 that commercial real estate markets in 2023 were "a little bit paralyzed" but that “if you're a borrower who's willing to invest money, banks are willing to reduce their loan balances to reflect the current environment." (CNBC, Feb. 6) A recent CRED iQ report found that more borrowers are modifying CRE loans. The report covers 441 loans with a total value of $13.6 billion (GlobeSt. Jan. 25) CNBC’s Last Call interviewed House Financial Services Committee Member French Hill (R-AR) about capital and credit pressures on CRE on Feb. 1. Rep. Hill addressed the negative impacts of interest rates, fiscal policy, and inflation on the economy and the office sector—and the problems posed by the regulatory agencies’ Basel III “Endgame” proposal. Separately, The Federal Reserve Board recently announced that its Bank Term Funding Program will cease making new loans on March 11. The program remains available as an additional source of liquidity for eligible institutions until that date. (Fed news release, Jan. 24) # # #

Foreign Investment & CRE

February 9, 2024

Roundtable Weekly

U.S. Appeals Court Blocks Law Restricting Foreign Investment in Florida Real Estate

Florida SB264 Foreign Investment Restrictions on Foreign Investment in US Real Estate

A federal appeals court recently blocked enforcement of a Florida law that could have negative consequences for foreign investment in U.S. property and agriculture land. The Real Estate Roundtable has urged Florida officials for months to consider changes to the interpretation of the law’s broad language. As currently written, the measure could prevent U.S.-managed funds from pursuing investment opportunities in the state if there is any level of investor participation in the fund from “countries of concern.” (Roundtable Weekly, Feb. 2 and Dec. 15 | Reuters and WFTV, Feb. 2) Foreign Investment in U.S. Property The outcome of the case (Shen v Simpson) involving the Florida law (SB 264) could have national ramifications. At least 15 other states enacted similar legislation restricting foreign investment in U.S. real estate during the first six months of 2023. An additional 20 states are considering the issue. (Congressional Research Service, July 2023 and Gibson Dunn, Sept. 2023) On Feb. 5, BisNow quoted a Sept. letter from Real Estate Roundtable President and CEO Jeffrey DeBoer to the Florida Real Estate Commission. The letter emphasized that non-U.S. investors may include small investors from China, who routinely subscribe to funds controlled or advised by regulated U.S. asset managers. Third-party, passive investors ordinarily invest as limited partners in the partnership, and do not have the right to participate in the partnership's management, or exercise control over its underlying investments. “Our concern with the new law is that these U.S.-managed investment funds, which are controlled and managed by U.S. nationals, may now be precluded from pursuing investment opportunities in Florida if there is any level of investor participation in the fund from countries of concern like China,” DeBoer wrote. (Roundtable letter, Sept. 5, 2023) The Roundtable also submitted a comment letter on Jan. 30 to the Florida Department of Agriculture and Consumer Services, which is considering implementing SB 264 measures addressing foreign investment in Florida’s agricultural land. The Roundtable’s letter raised concerns about the unintended and negative consequences for investment in Florida and future economic growth. (Roundtable letter and Roundtable Weekly, Feb. 2) SB 264 & FIRRMA The 11th U.S. Circuit Court of Appeals, above, considered a ban authorized by SB 264 restricting certain Chinese citizens from owning homes or land in the state. The U.S. Department of Justice filed a “statement of interest” in the case, noting that SB 264 violates federal law and the U.S. Constitution. (Politico and NBC News, Feb. 2) The appeals court's Feb. 1 order stated the Florida law is “preempted” by the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which is implemented by the U.S. Committee on Foreign Investment in the United States (CFIUS). (Appeals Court order) CFIUS is an interagency federal committee authorized to review certain transactions involving foreign investment in the United States and certain real estate transactions by foreign persons. Roundtable Chairman John Fish (Chairman & CEO, Suffolk) was quoted in Bloomberg about Florida’s SB 264, stating, “The law is far-reaching, very, very confusing, and the unintended consequences would be very, very detrimental.” (Bloomberg, Dec. 11 | Bisnow and Inman, Dec. 12) Oral arguments in Shen v Simpson are scheduled for this April. (Appeals Court order) # # #

Beneficial Ownership

February 9, 2024

Roundtable Weekly

Treasury Regulators Propose Beneficial Ownership Rule for All-Cash Residential Transactions

Beneficial Ownership Corporate Transparency Act CTA Treasury Department

This week, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) proposed a rule that would require certain real estate professionals involved in the closing or settlement of residential transfers to report information to FinCEN about the beneficial owners of legal entities and trusts involving all-cash transactions. The rule would not require the reporting of sales to individuals. (Reuters and AP, Feb. 7) FinCEN’s Initiatives FinCEN’s 132-page notice of proposed rulemaking describes the circumstances that would require a report, who must file, what information must be provided, and when a report about the transaction would be due. (FinCEN news release, Feb. 7) The proposed rule would require reporting on various types of residential real property transfers. Exceptions would apply for highly regulated types of entities and trusts that are less likely to be used by illicit actors to launder money through residential real property. (FinCEN Fact Sheet on NPRM, Feb. 6) FinCEN expects that the obligation to file Real Estate Reports would generally apply to settlement agents, title insurance agents, escrow agents, and attorneys. Comments about the Notice of Proposed Rulemaking will be accepted for 60 days following publication in the Federal Register. Small Business Registry Treasury has also pursued the development of a new small business ownership database called the beneficial ownership registry, which is expected to include personal information on the owners of at least 32 million U.S. businesses. (AP, Feb. 7 | FinCEN’s background information and FAQs on reporting) The registry requires millions of companies to report information about persons who own at least 25% of a company or exert significant authority over it to the Financial Crimes Enforcement Network (FinCEN).These beneficial ownership regulations took effect on Jan. 1, 2024 under the Corporate Transparency Act (CTA). (Final Rule | Fact Sheet | Wall Street Journal and Bloomberg Law, Sept. 29) On Jan. 8, Treasury Secretary Janet Yellen announced that 100,000 businesses have registered for the new database. (AP, Jan. 8) Industry Response Ten national real estate industry organizations and The Roundtable submitted detailed comments to FinCEN on Feb. 21, 2022 about the proposed anti-money laundering regulations affecting real estate transactions. (Roundtable Weekly, Feb. 25, 2022) On Oct. 13, 2023, The Roundtable and a coalition of eight national real estate groups urged Treasury Secretary Yellen to delay the implementation of these burdensome reporting requirements. (Coalition letter | Roundtable Weekly, Oct. 20 and Sept. 30) The Roundtable also signed onto a letter with approximately 70 business groups on Nov. 16, 2023 that urged Congress to pass a one-year delay in implementing the rules. # # #

Capital and Credit

February 7, 2024

Policy Comment Letter

Real Estate Coalition Comments on Proposed FTC Rule on Unfair or Deceptive Fees

Bipartisan Tax Package with LIHTC and Business Provisions Passes House; Senate Challenges Ahead

Business Interest Deduction Low Income Housing Tax Credit LIHTC Tax Policy

A bipartisan $79 billion tax package overwhelmingly approved this week by the House still faces potential hurdles in the Senate. The bill contains Roundtable-supported measures on business interest deductibility, bonus depreciation, and the low-income housing tax credit (LIHTC). (Associated Press, and Wall Street Journal, Jan. 31 | The Hill, Feb. 2) Industry Support for House Bill On Wednesday, the House voted 357-70 to pass the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024). House GOP leaders gained additional support for the bill by allowing a floor vote next week on the SALT Marriage Penalty Elimination Act (H.R. 7160), which would increase the cap on state and local tax deductions to $20,000 from $10,000 for married couples. (PoliticoPro and TaxNotes, Feb. 2) House Ways and Means Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR) negotiated the larger tax package. Sen. Wyden and senior congressional staff discussed the legislation last week with Roundtable members during The Roundtable’s all-member 2024 State of the Industry Meeting in Washington. (Roundtable Weekly, Jan. 26) Last Friday, The Roundtable joined the National Multifamily Housing Council (NMHC) and a large coalition of housing and other real estate groups in a letter to Congress in support of the tax bill. The letter focused on the bill’s important improvements to the low-income housing tax credit, which will significantly increase the construction and rehabilitation of affordable housing over the next 3 years. (Coalition letter, Jan. 26) Tax Measures Face Senate Scrutiny In the Senate, the House-passed tax bill faces an uncertain path forward. Senate Finance Committee Ranking Member Sen. Mike Crapo (R-ID) and other Republican Senators have raised concerns regarding the lack of a work requirement for the child credit, the cost, the proposed pay-for, and other aspects of the bill. Senate Minority Whip John Thune (R-SD) added the bill would not be able to clear a possible Senate filibuster without amendment votes. (The Hill, Feb. 2) Provisions in the House tax bill affecting real estate include: Low-Income Housing Tax CreditA Roundtable-supported three-year extension (2023–2025) of the 12.5 percent increase in LIHTC allocations to states. The bill also reforms LIHTC's tax-exempt bond financing requirement, which will allow more affordable housing projects to receive LIHTC allocations outside of the state cap. Business Interest DeductibilityA retroactive, four-year extension (2022–2025) of the taxpayer-favorable EBITDA standard for measuring the amount of business interest deductible under section 163(j). The changes do not alter the exception to the interest limitation that applies to interest attributable to a real estate business. Bonus Depreciation Extension of 100 percent bonus depreciation through the end of 2025. As under current law, leasehold and other qualifying interior improvements are eligible for bonus depreciation. In 2026, bonus depreciation would fall to 20 percent and expire altogether after 2026. Other provisions in the agreement include reforms to the child tax credit, the expensing of R&D costs, disaster tax relief, a double-taxation tax agreement with Taiwan, and a large pay-for that creates significant new penalties for abuse of the employee retention tax credit (ERTC) rules and accelerates the expiration of the ERTC. # # #

Climate Policy

February 2, 2024

Roundtable Weekly

Roundtable and Nareit Comment on National Definition for a “Zero Emissions Building”

Climate Policy Zero Emissions Buildings ZEB

The Real Estate Roundtable (RER) and Nareit submitted comments today to the U.S. Department of Energy (DOE) on its draft definition for Zero Emissions Buildings (ZEB). DOE’s initiative would impose no federal mandates while showing U.S. leadership on climate policy. (Joint comments cover letter and addendum | Roundtable Weekly, Jan. 5) A “Path to ZEB” The ZEB national definition aims to set voluntary criteria that could help building owners provide auditable, consistent statements to investors, tenants, and policy makers about long-term aspirations for a building's decarbonization. (DOE announcement | National Definition Draft) The RER/Nareit comments emphasize that few buildings today could meet zero emissions status. Rather, the ZEB definition can be a guideline to support lifecycle investments when boilers, water heaters, and other systems reliant on fossil fuels reach the end of their lives after years of use. (Joint comments cover letter and addendum) Concrete actions that owners can take now to show an asset is “on the path” to zero emissions status are key to ZEB’s success as a long-term goal. The joint comments urge DOE to recognize “NextGen”—the imminent label for low-carbon buildings from the Environmental Protection Agency (EPA)—as the intermediate step for a building that aspires to reach ZEB status. EPA plans to make NextGen building certifications available later this year. EPA unveiled final NextGen criteria, also voluntary, at a meeting of RER’s Sustainability Policy Advisory Committee (SPAC) last week in Washington, D.C. (Roundtable Weekly, Jan. 26 and EPA’s Presentation on NextGen to SPAC) Comments on the National ZEB Definition Topline points from the RER/Nareit comments (cover letter and addendum) include: ZEB should provide ambitious but attainable policy for individual buildings and portfolios, residential and commercial, across product types. DOE’s national definition should be leveraged to bring consistency and uniformity to the patchwork of building related climate programs, which are imposed by state and local performance standards and pushed by international frameworks. (Roundtable Weekly, Sept. 15 and RER’s Climate and Energy Priorities, Jan. 2024) DOE should not re-invent the wheel. It should align the ZEB definition with the ecosystem of federal data, methods, and guides that already pertain to buildings. ZEB’s general nationwide definition must consider regional variables such as the climate and electric grid conditions pertinent to where a building is located. The definition’s success depends on consistent methods for building owners to measure energy use and emissions. ZEB must reflect metrics tracked in Portfolio Manager, EPA’s free online software. (Roundtable Weekly, Sept. 15 and EPA’s Portfolio Manager Upgrade Project) A “zero” emissions standard requires a reasonable exclusion of emissions from emergency power generators. This exclusion to protect health and safety is necessary for building operations to continue when the electric grid fails. Many buildings have physical and regulatory restrictions that preclude onsite solar panels, wind turbines, and battery storage. DOE’s draft correctly permits valid and credible “market-based” measures, such as the purchase of renewable energy certificates (“RECs”), to meet the definition’s renewable energy criteria. A final ZEB definition is expected later this year. The real estate sector also awaits final climate risk corporate disclosure rules this spring from the U.S. Securities and Exchange Commission. (Roundtable Weekly, Jan. 12) # # #

Foreign Investment & CRE

February 2, 2024

Roundtable Weekly

Roundtable Recommends Changes to Implementation of Florida Law Limiting Certain Foreign Investments in Real Estate

Florida SB264 Foreign Investment

On Jan. 30, The Real Estate Roundtable urged the Florida Department of Agriculture and Consumer Services to consider several recommendations on implementing a new law that could have negative consequences for foreign real estate investment in the state. Twenty states have enacted restrictions on foreign investors in real estate or agricultural land, eight states are considering similar measures, and others are exploring the issue. (Roundtable letter) Restrictions on Foreign Investment in U.S. Real Estate The Florida agency is considering various aspects of the proposed rule, published on Sept. 21, which implements State Senate Bill 264 (SB 264). The law aims to limit and regulate the sale and purchase of certain Florida real property by “Foreign Principals” from “Foreign Countries of Concern.” The Roundtable’s Jan. 30 letter commended the national security intentions of the Florida measure yet emphasized that the technical language of SB 264 is much broader in scope than the publicly stated intent of the law. The Roundtable also offered several recommendations to help achieve the law’s stated goals without discouraging U.S.-managed investment funds from pursuing investment opportunities in Florida. Real estate and agricultural land are a critical element of Florida’s economy, with state property taxes contributing over 18% of its overall tax revenue. If legal language in SB 264 is not corrected, implementation of the law could have unintended and negative consequences for investment in Florida and the state’s economy. Roundtable Recommendations Real Estate Roundtable President and CEOJeffrey DeBoer The Real Estate Roundtable’s concerns with Section 204 (692.202) of SB 264 include: The new law may prevent U.S. investment funds, controlled and managed by U.S. nationals, from pursuing investment opportunities in Florida if there is any level of investor participation in the fund from countries of concern like China. Non-U.S. investors routinely subscribe for small, generally passive minority interests in these funds. These third-party investors do not have the right to participate in the management of the funds in any way or exercise control over the partnership or its underlying investments. A certain interpretation of a de minimis exception available for investment funds controlled by U.S. registered investment advisers could nullify the exception’s application to many different types of private funds controlled by U.S. asset managers that invest in Florida real estate. Clarification is needed about the definition of a “controlling interest” that impacts exceptions to the law based on an investor’s meaningful ownership or influence. (SB 264 text). In September 2023, the Florida Department of Commerce proposed a positive clarification to a different section of the foreign investment law in response to a previous Roundtable request. RER is hopeful that its current request for further clarification of Section 204 will also be considered during the rulemaking process. (See highlighted areas in the Notice of Proposed Rule) This week’s letter from Roundtable President and CEO Jeffrey DeBoer urged the Florida agency to consider the impact of their interpretation and implementation effort carefully, so that they do not inadvertently prohibit major U.S. investments that are safe from control by foreign countries of concern. Clear legal clarifications to SB 264 can continue to promote safe real estate investment that encourages economic growth without sacrificing the security or economic interests of Florida. # # #

Capital and Credit

February 2, 2024

Roundtable Weekly

Key House Democrats Urge SEC to Exempt Real Estate from Proposed Safeguarding Advisory Client Rule

Capital and Credit Safeguarding Advisory Client Proposed Rule Securities and Exchange Commission

A group of seven key Democrats from the House Appropriations Committee on Jan. 22 urged Securities and Exchange Commission (SEC) Chair Gary Gensler to exempt real estate assets from a proposed “Custody” rule. The proposal would fundamentally change the ownership and transfer rights of real estate, and impose severe investment limitations on advisory clients. The congressional letter supports The Roundtable’s strong opposition to the rule. (Congressional letter) Proposed “Qualified Custodian” Layer The SEC’s Safeguarding Advisory Client proposal would inject significant confusion into well-established transaction protections, rules, and procedures governing real estate transactions by imposing a new layer of unclear and unnecessary oversight. (SEC Rule proposal) Current law (the “Custody Rule”) under the Investment Advisers Act of 1940 requires an investment adviser to maintain clients’ funds and securities with a qualified custodian. The new proposed SEC rule would expand this requirement to maintain all advisory client assets with a qualified custodian. It is not possible to maintain other physical investments such as real estate with a qualified custodian. The letter, led by Rep. Joseph Morelle (D-NY), noted the SEC has acknowledged that real estate assets may not be easily subject to theft or loss and therefore may not need safeguarding protections. Additionally, the letter states, “The ownership of a real estate asset is tracked by mortgages and deeds recorded by municipalities, further decreasing the likelihood of theft.” The House Democrats also emphasized that the SEC’s proposal would materially inhibit investors’ access to real estate investment strategies through an advisor. The additional layer of unnecessary oversight would also compound pressures on residential and commercial real estate markets, which are currently constrained by a lack of affordable housing, high interest rates, and increased office vacancies. Real Estate Exemption The Appropriations Committee members’ letter requested “the Commission exclude real estate from the scope of any final rule.” They also stated that the Commission should not place additional pressure on residential and commercial real estate markets. An Oct. 30, 2023 letter from Real Estate Roundtable President and CEO Jeffrey DeBoer to the SEC reiterated the current legal protections that promote the safe-keeping of real estate assets held in advisory accounts or funds. DeBoer urged the SEC “… in the strongest possible terms to exclude real estate from the scope of any final [Safeguarding] rule,” citing the ample set of existing protections that prevent real estate assets from fraudulent transfer. (Roundtable Weekly, Nov. 3, 2023) The Roundtable and a diverse group of 25 trade associations previously wrote to SEC Chair Gary Gensler on Sept. 12, 2023 to oppose the Custody Rule proposal and explain the negative impacts it would have on investors, market participants, and the financial markets. Fed and OCC Voice Concerns Federal Reserve Chair Jerome Powell and acting Comptroller of the Currency Michael Hsu recently expressed concerns over the SEC's proposed expansion of existing custody regulations. (PoliticoPro, Feb. 2) Powell and Hsu responded to a Nov. 1 inquiry from Rep. Andy Barr (R-KY), who chairs the House Financial Services Committee Subcommittee on Financial Institutions and Monetary Policy. The Fed and OCC leaders stated that extending the SEC custody proposal to assets beyond "funds and securities" would require a significant change in custody practices at depository institutions. Both regulators said their agencies are engaged with the SEC about the proposal. (Letters from Powell and Hsu via PoliticoPro) The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) Custody Rule Working Group met with the SEC’s Division of Investment Management last November about the proposal and developed The Roundtable’s comments. Details about RECPAC’s next meeting this spring in New York City are forthcoming. # # #

Zero Emissions Buildings (ZEB)

February 2, 2024

Policy Comment Letter

Roundtable-Nareit Cover Letter to DOE on Zero Emissions Building (“ZEB”)

Climate Policy, Zero Emissions Buildings ZEB,

Zero Emissions Buildings (ZEB)

February 2, 2024

Policy Comment Letter

Roundtable-Nareit Addendum Comments to DOE on Zero Emissions Building (“ZEB”)

Climate Policy, Zero Emissions Buildings ZEB,

Affordable Housing, Housing, Tax Policy

January 31, 2024

Policy Comment Letter

RER Supports H.R. 7024, The Tax Relief for American Families and Workers Act of 2024

Affordable Housing, Business Interest Deduction, Low Income Housing Tax Credit LIHTC,

Equity, Diversity, and Inclusion

January 31, 2024

Mission Statement for The Roundtable’s Equity, Diversity, and Inclusion Committee

Equity Diversity and Inclusion EDI,

Restrictions on Foreign Investment in U.S. Real Estate

January 30, 2024

Policy Comment Letter

Roundtable Recommends Changes to Implementation of Florida Law Limiting Certain Foreign Investments in Real Estate

Capital and Credit, Florida SB264, Restrictions on Foreign Investment in US Real Estate,

Capital and Credit

January 26, 2024

Presentation

Capital and Credit Issues Presentation – January 2024 Roundtable State of the Industry Meeting

Capital and Credit, Chip Rodgers,

2024 State of the Industry Meeting

January 26, 2024

Roundtable Weekly

Senator Joe Manchin and Financier Michael Milken Among Roundtable’s SOI Meeting Guests

Jeffrey DeBoer John Fish

Roundtable Chair John Fish, right, (Chairman and CEO, Suffolk) and Roundtable President and CEO Jeffrey DeBoer, left, launched this week’s Real Estate Roundtable 2024 State of the Industry (SOI) meeting, which focused on many of RER’s 2024 Policy Priorities. (See Executive Summary and the SOI meeting agenda) The meeting featured a discussion with Sen. Joe Manchin (D-WV) and Financier Michael Milken on America’s leadership role in the world. Additional presentations by prominent policymakers and industry leaders focused on issues of importance to commercial real estate, including updates on select market conditions by Roundtable members. (See below) Economic Leadership & Future Challenges Sen. Manchin, left, and Mr. Milken, right, discussed the need to preserve American economic leadership; the crucial, long-term importance of an educated workforce; and global demographic trends that pose new challenges to U.S. strength. Sen. Manchin noted that he is retiring from the Senate at the end of this Congress but not retiring from his efforts to encourage bipartisan policy solutions to America’s big challenges such as immigration, the national debt and deficit, and electoral system issues. An international financier and philanthropist, Mr. Milken discussed a variety of his successful initiatives in access to capital, medical research, education, and public health. He leads a new DC-based initiative called the Milken Center for Advancing the American Dream while spearheading the Milken Institute, a nonpartisan think tank focused on financial, physical, mental, and environmental health issues affecting critical global issues. Three additional U.S. Senators and other guests at the Jan. 23-24 SOI meeting addressed a variety of other policy issues, including affordable housing, tax policy, banking and climate regulations, evolving security threats, and the current election cycle. (RER’s 2024 SOI meeting agenda and stories below). Next on The Roundtable's 2024 meeting calendar is the Spring Meeting on April 15-16. The upcoming meeting is restricted to Roundtable-level members only. # # #

Capital and Credit

January 26, 2024

Roundtable Weekly

Roundtable SOI Meeting Spotlights Monetary Policy, Liquidity, and Capital

Capital and Credit Chip Rodgers Debra Cafaro Ventas The Fed

The Roundtable’s State of the Industry (SOI) meeting this week explored monetary policy, international capital flows, commercial real estate market sector updates, and other national capital and credit issues included in RER’s 2024 Capital and Credit Policy Priorities. Policy and CRE Markets Debra Cafaro (Chairman & CEO, Ventas, Inc. | Immediate Past Chair, The Real Estate Roundtable) led a policy discussion with former Fed Vice Chairman Randal Quarles (Chairman, The Cynosure Group) on the “Basel III Endgame“ regulatory proposal to increase banks’ capital requirements; CRE loan exposure to the financial system; and the importance of retaining Fed independence from the political landscape. CRE industry leaders offered market sector reports, including Roundtable Board Member Jodie McLean (Chief Executive Officer, EDENS) on retail; Thomas Toomey (Chairman and CEO, UDR) on multifamily; Dan Letter (President, Prologis) on industrial; Roundtable Board Member Owen Thomas (Chairman & CEO, BXP) on office; and Michael Lowe (Co-CEO, Lowe) on hospitality. Roundtable members also discussed market liquidity and international investment in U.S. real estate, including the negative impact of the Foreign Investment in Real Property Tax Act (FIRPTA) of 1980. A panel of experts included (left to right) David Friedline (Partner, Deloitte Tax LLP); Steve Hason (Managing Director, Head of Americas Real Assets, APG Asset Management US Inc.); Adam Gallistel (Managing Director, GIC Real Estate); and Max O’Neill (Managing Director, Blackstone). A presentation by Roundtable Senior Vice President Clifton E. (Chip) Rodgers, Jr. about the major capital and credit issues facing the industry can be downloaded here. The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) plans to meet next in New York this spring. Details on date, time and venue will be provided soon. # # #

Housing Policy

January 26, 2024

Roundtable Weekly

Policymakers Emphasize Affordable Housing Incentives, Increasing Supply

Affordable Housing Housing Kathleen McCarthy Low Income Housing Tax Credit LIHTC Senator Ron Wyden

Three U.S. Senators discussed national housing policy with industry leaders and Roundtable members during this week’s State of the Industry (SOI) meeting. (See Meeting agenda) Need for Housing Incentives Senate Finance Committee Chairman Ron Wyden (D-OR) discussed the importance of expanding and extending the Low-Income Housing Tax Credit (LIHTC), which was included in a tax package advanced by the House Ways and Means Committee last week by a vote of 40-3. Sen. Wyden negotiated the $77 billion bill with Ways and Means Chairman Jason Smith (R-MO) and commended the overwhelming margin of bipartisan support in the committee vote. (Roundtable Weekly, Jan. 19) Sen. Maggie Hassan (D-NH), center, discussed what can be done to address U.S. housing challenges with Kathleen McCarthy, left, (Chair-Elect, The Real Estate Roundtable | Global Co-Head of Real Estate, Blackstone), and Shaun Donovan, right, (CEO and President, Enterprise Community Partners |former HUD Secretary and OMB Director). Sen. Hassan spoke about the urgent need for national policy to encourage development of more workforce housing, while Mr. Donovan noted the congressional tax bill under consideration would create 200,000 new affordable housing units. Sen. Debbie Stabenow (D-MI)– introduced by Roundtable Chair Emeritus (2012-2015) Robert Taubman (Chairman, President & CEO, Taubman Centers, Inc.) – spoke about legislative efforts to revitalize downtowns. Sen. Stabenow referred to the recent tax package as an encouraging development for affordable housing, yet noted how more is needed to incentivize conversions of commercial properties to multifamily use. Stabenow is an original co-sponsor of the Revitalizing Downtowns Act (H.R. 4759) to encourage adaptive use of older buildings. Housing policy and incentives advocated by The Roundtable to encourage more affordable housing supply are topics weaved throughout RER’s 2024 Policy Priorities. (See Executive Summary) # # #

Tax Policy

January 26, 2024

Roundtable Weekly

Congressional Tax Package and Supreme Court Case Focal Points at Roundtable Meeting

Don Susswein Jeffrey DeBoer Moore v United States Ryan McCormick Senator Ron Wyden Tax Policy Tax Policy Advisory Committee TPAC

Tax policy issues impacting commercial real estate were front and center during This Roundtable’s Jan. 23 State of the Industry (SOI) meeting as policy discussions with congressional tax writers, issue experts, and Roundtable members ranged from specific measures in a recently approved tax package by the House Ways and Means Committee to a landmark Supreme Court case. Tax: What Lies Ahead Senate Finance Committee Chairman Ron Wyden (D-OR), right with The Roundtable's Jeffrey DeBoer, discussed the recent tax package passed by the House Ways and Means Committee and its uncertain path in the Senate. In addition to an expansion of the low-income housing tax credit, the $77 billion bill includes a retroactive, four-year extension (2022–2025) of the taxpayer-favorable EBITDA standard for measuring the amount of business interest deductible under section 163(j). It also contains an extension of 100% bonus depreciation through the end of 2025. (Roundtable Weekly, Jan. 19) “What’s in Front of Congressional Tax Writers: 2024 and Beyond” was explored by (left to right) Roundtable Senior Vice President and Counsel Ryan McCormick; Mark Roman, (Staff Director, Republican Majority House Ways and Means Committee); and Joshua Sheinkman (Staff Director, Democrat Majority Senate Finance Committee). The congressional tax experts discussed measures in the recent tax package and noted the scheduled expiration of Tax Cuts and Jobs Act (TCJA) incentives at the end of 2025—and what proposals may emerge to extend them. McCormick also offered a Tax Policy Issues presentation based on and The Roundtable’s 2024 Tax Policy Priorities. Supreme Court Challenge Roundtable Tax Policy Advisory Committee (TPAC) member Don Susswein (Principal, RSM US LLP) presented an overview of an important Supreme Court case (Moore v. United States) that challenges the federal government’s constitutional authority to tax unrealized income. (Roundtable Weekly, Dec. 8) TPAC holds monthly Zoom calls on timely, compelling tax policy issues affecting CRE. If you are interested in joining, contact The Roundtable’s Ryan McCormick. # # #

Sustainability and Homeland Security Issues

January 26, 2024

Roundtable Weekly

Roundtable Policy Advisory Committees Drill Into Sustainability and Security Issues at 2024 SOI Meeting

Better Buildings Initiative Dept of Energy Climate Policy ENERGY STAR EPA Homeland Security RERs Homeland Security Task Force HSTF SPAC Sustainability Policy Advisory Committee Zero Emissions Buildings ZEB

National policies and agency actions related to climate, environmental, and energy issues were among the many topics on The Roundtable’s Sustainability Policy Advisory Committee (SPAC) agenda at the SOI meeting. Additionally, The Roundtable’s Homeland Security Task Force (HSTF) and Risk Management Working Group (RMWG) met to discuss evolving security threats impacting CRE. SPAC’s agenda included an update by White House officials on an expected national definition of voluntary “Zero Emissions Building,” along with implementation of the Inflation Reduction Act’s (IRA) measures affecting embodied carbon strategy initiatives. In addition, Environmental Protection Agency (EPA) staff discussed their NextGen ENERGY STAR Certification for buildings and a Department of Energy director gave an update on their Better Climate Challenge/Better Buildings Initiative. (Roundtable 2024 Energy and Climate Priorities) SPAC members also attended a special session with EPA staff where Roundtable members provided detailed industry feedback about the first major enhancements in a decade that are under consideration for EPA’s ENERGY STAR Portfolio Manager benchmarking tool. The Roundtable’s HSTF and RMWG joint meeting on Jan. 24 addressed China’s espionage efforts impacting American corporations; the emerging use of Artificial Intelligence as a new risk vector; and the current dynamic in pricing and coverage in commercial insurance markets. (HSTF & RMWG joint agenda | Roundtable 2024 Homeland Security Priorities) Next on The Roundtable's 2024 meeting calendar is the Spring Meeting on April 15-16. This upcoming meeting is restricted to Roundtable-level members only. # # #

Roundtable Meeting

January 26, 2024

Meeting Agenda

2024 RER State of the Industry (SOI) Meeting Agenda — January 23-24

Sustainability Policy Advisory Committee - SPAC

January 24, 2024

Presentation

EPA Update on ENERGY STAR and “NextGen” to Roundtable’s Sustainability Advisory Policy Committee

EPA, EPAs NextGen Building Label, SPAC Sustainability Policy Advisory Committee,

Policy Landscape

January 19, 2024

Roundtable Weekly

Congress Extends Government Funding Until March, House Ways & Means Approves Tax Package with LIHTC and Business Provisions

Budget Congress Low Income Housing Tax Credit LIHTC Policy Landscape Tax Policy

President Biden signed legislation today that averts a partial federal government shutdown by extending federal funding to March 1 and 8. The stopgap, passed by Congress yesterday, gives policymakers limited time to negotiate 12 additional bills at an agreed-upon $1.59 trillion limit to fund the government through the end of its fiscal year on Sept. 30. (Associated Press, Jan. 19 | (Politico and The Hill, Jan. 18) Stopgap Funding Today’s stopgap is the third “continuing resolution” Congress has cleared since the start of the current fiscal year on Oct. 1. Intense opposition from members of the conservative House Freedom Caucus led Speaker Mike Johnson (R-LA) to reach an agreement with Democrats to support the measure. (Wall Street Journal, Jan. 18) A similar short-term spending bill last October led to the ouster of former Speaker Kevin McCarthy (R-CA) by House conservatives. (Wall Street Journal, Jan. 8) Bipartisan Tax Package Advances Meanwhile, the House Ways and Means Committee today marked up the $77 billion Tax Relief for American Families and Workers Act of 2024 negotiated by Senate Finance Committee Chairman Ron Wyden (D-OR) and Ways and Means Chairman Jason Smith (R-MO). (National Public Radio, Jan. 16) No amendments were adopted, and the bill passed overwhelmingly by a vote of 40-3. See Chairman Jason Smith’s (R-MO) opening statement and video of the markup. Provisions in the tax bill affecting real estate include: Low-Income Housing Tax CreditA Roundtable-supported three-year extension (2023–2025) of the 12.5 percent increase in LIHTC allocations to states. Even more importantly, the agreement reforms LIHTC's tax-exempt bond financing requirement, which will allow more affordable housing projects to receive LIHTC allocations outside of the state cap, and without requiring projects be financed with 50% tax-exempt bonds. Business Interest DeductibilityA retroactive, four-year extension (2022–2025) of the taxpayer-favorable EBITDA standard for measuring the amount of business interest deductible under section 163(j). The changes do not alter the exception to the interest limitation that applies to interest attributable to a real estate business. Bonus Depreciation Extension of 100 percent bonus depreciation through the end of 2025. As under current law, leasehold and other qualifying interior improvements are eligible for bonus depreciation. In 2026, bonus depreciation would fall to 20 percent and expire altogether after 2026. Other provisions in the agreement include reforms to the child tax credit, the expensing of R&D costs, disaster tax relief, a double-taxation tax agreement with Taiwan, and a large pay-for that creates significant new penalties for abuse of the employee retention tax credit (ERTC) rules and accelerates the expiration of the ERTC. Sen. Wyden and senior congressional staff will discuss tax legislation with Roundtable members during The Roundtable’s all-member 2024 State of the Industry Meeting in Washington next week. # # #

Capital and Credit

January 19, 2024

Roundtable Weekly

Roundtable and Industry Coalition Raise Concerns About Negative Impact of Basel III Endgame Proposal

Basel III Capital and Credit Halting ProCyclical Policy Measures and Increases in Regulatory Capital Regulators The Fed

The Real Estate Roundtable has raised concerns about the negative impact that the “Basel III Endgame” regulatory proposal would have on real estate credit and capital markets, urging federal banking regulators to withdraw their proposed rulemaking to increase capital requirements for banks with at least $100 billion in assets. The Roundtable’s letter Jan. 12 outlines how the proposal would decrease real estate credit availability, increase costs to commercial and multifamily real estate borrowers, and negatively impact the U.S. economy. (Roundtable comment letter) Industry Opposition The Roundtable letter states, “The largest U.S. banks’ capital and liquidity levels have grown dramatically since the original Basel III standards were implemented in 2013 in response to the 2008 Global Financial Crisis. So it is not clear what problem regulators are trying to solve with this proposed capital hike.” The letter also noted that raising capital levels at the largest U.S. banks will only limit credit and feed a downward spiral that will put additional pressure on the financial system. Additionally, The Roundtable filed a Jan. 16 letter, along with a coalition of nine national industry trade groups in opposition to the proposal, citing its potential negative impact on available credit capacity for commercial real estate transactions, market liquidity, and economic growth. (Industry coalition letter) Fed Weighing Possible Changes Federal Reserve officials are considering possible adjustments to key parts of the proposal, “including operational risk calculations and potential offsets for mortgage servicing,” according to the Federal Reserve’s Vice Chair for Supervision Michael Barr. “The public comment(s) that we're getting on this is really critical for us getting it right. We take it very, very seriously," Barr said. (Reuters and PoliticoPro, Jan. 9) In Oct. 2023, the Federal Reserve, FDIC, and OCC extended the comment period on the 1,100-page proposed Basel III rulemaking to Jan. 16, 2024. (Roundtable Weekly, Oct. 27) The Roundtable joined a coalition of 17 national trade associations in a letter to the Federal Reserve to oppose the proposal on Nov. 14. (U.S. Chamber of Commerce-led coalition letter, Nov. 14 and Axios, Nov. 16) Real Estate Roundtable President and CEO Jeffrey DeBoer also stated in a March 2023 comment letter to Barr and other key regulators, "At this critical time, it is important that the agencies do not engage in pro-cyclical policies such as requiring financial institutions to increase capital and liquidity levels to reflect current mark to market models. These policies would have the unintended consequence of further diminishing liquidity and creating additional downward pressure on asset values.” Wave of Impending CRE Maturities This month’s Roundtable and industry coalition letters emphasize the banking proposal’s negative impact on real estate. The regulators estimate their own proposal would raise capital on the target institutions by 16% on average, which could have a profoundly negative impact on the availability of credit for commercial and multifamily real estate development—especially as interest rates remain high and the need for more affordable housing continues to grow. The coalition letter also notes that the commercial and multifamily real estate industry is a $20 trillion dollar market supported by $5.82 trillion of commercial real estate debt, of which 50% is held by commercial banks. Of that total debt, more than $2 trillion of CRE loans are maturing over the next four years. The letters address how the risks of raising capital levels at the largest U.S. banks would limit credit and exert downward pressure on the financial system. National Media Reports Focus on CRE Pressures This week, The Wall Street Journal reported on the impending wave of commercial real estate debt, which increases “the prospect of a surge in defaults as property owners are forced to refinance at higher rates.” The article also cited Trepp data showing that $602 billion in total debt backed by office buildings and other commercial real estate comes due in 2027. (WSJ, Jan. 16) Additionally, CBS’ 60 Minutes on Jan. 14 televised a report on the pressures facing CRE that featured Roundtable Board Member Scott Rechler (Chairman and CEO, RXR), above left. "This post-COVID world of higher interest rates, the changing nature of how people work and live, we're not going back to where we were," Rechler said. "And it's going to be turbulent.” The CRE industry’s concerns about the wave of maturing debt was addressed in a Dec. 18 op-ed in the Urban Land Institute’s UrbanLand by Roundtable Senior Vice President Clifton E. Rodgers, Jr. (“Finding Liquidity: Regulatory Agencies Should Exercise Caution to Prevent a Perfect Storm”) Capital and credit issues facing CRE will be a focus of discussion at next week’s all-member Roundtable State of the Industry meeting on Jan. 23-24 in Washington, DC. # # #

Roundtable Leadership

January 19, 2024

Roundtable Weekly

RER President and CEO Jeffrey DeBoer Recognized with Commercial Property Executive’s Lifetime Achievement Award

Jeffrey DeBoer Roundtable Leadership Statement Jeffrey DeBoer

A “Lifetime Achievement Award” from the national publication Commercial Property Executive recognized the accomplishments of Roundtable President and CEO Jeffrey DeBoer, who spoke about current policy challenges facing the industry, The Roundtable’s evolution, and the industry’s historical effectiveness in Washington. (Watch the Jan. 18 webcast | Read DeBoer’s written comments | CPE article, Jan. 19) DeBoer noted that real estate is entering a period of increased national public policy risks, which include issues such as liquidity, energy and resiliency, tax policy, and more. DeBoer stated, “[The Roundtable’s] job is to focus on these policy risks, gather the facts, prepare the analysis, develop sound messages, and fine-tune our messages and our message delivery system.” DeBoer added, “It’s very important that everyone in the industry recognize that to ignore Washington in the coming years is to increase business risk.” Current and upcoming challenges facing the industry will be the focus of The Roundtable’s Jan. 23-24 all-member State of the Industry Meeting in Washington, DC. # # #

Roundtable Leadership

January 18, 2024

Statement - Jeffrey DeBoer

Roundtable President and CEO Jeffrey DeBoer Lifetime Achievement Award — Keynote Address

Jeffrey DeBoer, Roundtable Leadership, Statement Jeffrey DeBoer,

Basel III

January 16, 2024

Policy Comment Letter

Roundtable and Real Estate Coalition Oppose “Basel III Endgame” Proposal to Raise Bank Capital Requirements

Basel III, Capital and Credit, Halting ProCyclical Policy Measures and Increases in Regulatory Capital, The Fed,

Basel III

January 12, 2024

Policy Comment Letter

Roundtable Opposes Proposed “Basel III Endgame” Increase in Capital Requirements

Basel III, Capital Credit, Federal Reserve, Halting ProCyclical Policy Measures and Increases in Regulatory Capital, The Fed,

Policy Landscape

January 12, 2024

Roundtable Weekly

Congress Struggles to Assemble Stopgap Funding Measure as Policymakers Negotiate Elements of Potential Tax Package

Congress Policy Landscape Tax Policy

House and Senate lawmakers are discussing a short-term stopgap measure aimed at avoiding government shutdown deadlines on Jan. 19 and Feb. 2, which would also buy time to negotiate additional funding through the end of the fiscal year on Sept. 30. Meanwhile, with tax filing season slated to begin Jan. 29, congressional tax writers reported making progress this week on a potential tax package that includes measures on business interest deductibility, bonus depreciation, and the child tax credit. (CQ | PoliticoPro | TaxNotes, Jan. 11) Funding Challenge Sen. John Thune (R-SD), the second-ranking Republican in the Senate, said on Tuesday that a stopgap bill with funding until March might be necessary. “What that looks like next week, and where it originates, House or Senate, remains to be seen.” Thune said. (Roll Call, Jan. 9 and PunchBowl News, Jan. 10) Sen. Majority Leader Chuck Schumer (D-NY) announced yesterday that the Senate will consider a “continuing resolution” to keep the government open. “A shutdown is looming over us, starting on Jan. 19, about a week away. Unfortunately, it has become crystal clear that it will take more than a week to finish the appropriations process.” (CBS News and CQ, Jan. 11) In the House, Speaker Mike Johnson (R-LA) is struggling to obtain the approval of conservative Republicans on a spending agreement announced on Sunday for a $1.66 trillion spending plan for the federal government. (The Hill, Jan. 11 and AP, Jan. 8)) Republicans currently hold a 220-seat majority in the House while Democrats control 213, which means Johnson can afford to lose only three votes in his caucus for the GOP to pass legislation in the lower chamber by party-line vote. (AP, Jan 11 | CNN, Jan. 9 | AlterNet, Jan. 2) Tax Package Negotiations On Wednesday, Senate Finance Committee Chairman Ron Wyden (D-OR) and House Ways and Means Committee Chairman Jason Smith (R-MO), above, presented their members with an outline of a potential, three-year $70 billion tax package. Disagreements continue over the scope of a potential child tax credit and low-income housing tax credit in exchange for partial restorations of business tax credits such as business interest deductibility and bonus depreciation. (MarketWatch and PunchBowl, Jan. 11 | PoliticoPro and Wall Street Journal, Jan. 10) Issues that remain under consideration include a Roundtable-supported expansion of the low-income housing tax credit and the deductibility of state and local taxes (SALT). Sen. Wyden and senior congressional staff will discuss tax legislation with Roundtable members during The Roundtable’s all-member 2024 State of the Industry Meeting on Jan. 23-24. Preview of Coming Tax Battles Current discussions among congressional tax negotiators are a precursor for a much larger challenge next year, when 23 different provisions in the 2017 Tax Cuts and Jobs Act (TCJA) will change or expire at the end of 2025, including the deduction for pass-through business income and the cap on the SALT deduction. (Roundtable Weekly, May 26) PWC emphasized the stakes in next year’s tax negotiations in its “2024 Tax Policy Outlook” released yesterday. PwC’s National Tax Services Co-Leader Rohit Kumar told PoliticoPro that the current tax package under consideration would amount to only a “rounding error” when compared to the value of all the TCJA provisions. Today’s Wall Street Journal estimated there are $6 trillion in taxes at stake in this year’s elections. Policymakers’ efforts to pass government funding and negotiate a tax package come as office vacancies hit a record high in the fourth quarter of last year, according to a Moody’s Analytics released Jan. 8. The Moody’s report shows the national office vacancy rate rose 40 bps to a record-breaking 19.6 percent. The new record shatters the previous rate of 19.3% set twice previously—and reflects changing trends in business needs and the recent shift towards in remote work arrangements. (Wall Street Journal and ConnectCRE, Jan. 8) # # #

Climate Policy

January 12, 2024

Roundtable Weekly

Building Emissions Policies Picking Up Steam in 2024

179D Building Performance Standards BPS climate Climate Policy Scope 3 reporting SEC Securities and Exchange Commission Supreme Court Zero Emissions Buildings ZEB

A confluence of mandatory rules and voluntary guidelines pertaining to real estate’s climate impacts—including a first-ever U.S. definition for the term Zero Emissions Building (“ZEB”) and an imminent Securities and Exchange Commission (SEC) greenhouse gas disclosure rule—will be a key focus of policy makers in 2024. ZEB Definition On Jan. 9, GlobeSt reported that The Roundtable supports the direction of the Biden administration’s recently released voluntary ZEB draft definition pertinent to private sector existing buildings and new construction. (Roundtable Weekly, Jan. 5) The ZEB definition proposes voluntary criteria for buildings to be highly energy efficient and powered solely by clean energy sources to attain zero emissions status. The Roundtable’s Sustainability Policy Advisory Committee (SPAC) is working on comments (due Feb. 5) in response to the Energy Department’s draft. SEC & Scope 3 The SEC is expected to release its long-anticipated climate risk disclosure rule this spring. (Roundtable Weekly, March 10, 2023) On Jan. 11, Bisnow quoted Roundtable Senior Vice President and Counsel Duane Desiderio about the SEC’s impending rule and its impact on CRE and other industries. Desiderio explained to Bisnow, “Let’s hope the SEC delivers some workable rules and brings rationality to this space, especially regarding Scope 3 indirect emissions” that cover sources in a company’s supply chain beyond its immediate control. Desiderio added, “The market is certainly moving in the direction of the SEC rule.” (RER Fact Sheets: SEC’s Proposed Rule and California’s Climate Disclosure bills) 179D & BPS Another federal rule expected in the coming weeks concerns the section 179D tax deduction for energy efficient buildings, substantially revamped by the Inflation Reduction Act (IRA). (Roundtable Weekly, Dec. 1).The Internal Revenue Service will propose a regulation for comment that addresses how existing building retrofits may qualify for this incentive. Axios (Jan. 9) reported this week about trends at the local level to enact building performance standards (BPS) such as LL 97 in New York City. While Congress has not granted authority for a national emissions mandate on buildings, more cities and states are expected to run with these efforts in 2024. (Roundtable Weekly, Sept. 15). A report from the Rhodium Group this week shows U.S. GHG emissions decreased nearly 2 percent year-on-year in 2023. The report also notes that emissions from commercial and residential buildings dropped by 4 percent, which the researchers attributed primarily to a mild winter. (PoliticoPro and The Hill, Jan. 10) SCOTUS to Consider Federal Agency “Deference” A wild card in the effectiveness and durability of federal regulations—not just in the climate arena, but from any U.S. agency—will be at the fore this spring when SCOTUS renders a decision in Loper Bright Enterprises v. Raimondo. Loper will consider whether an administrative law doctrine from 1984 known as “Chevron deference,” which grants wide latitude to federal agencies when crafting rules to implement laws passed by Congress, should be overruled. (SCOTUS Blog, May 1, 2023) The Department of Commerce stated in their brief that overruling Chevron “would be a convulsive shock to the legal system.” Oral argument will take place next Wednesday, with a decision expected by early summer. (SCOTUS Blog, Jan. 8, 2024) Officials from the White House, the Environmental Protection Agency, the Energy Department and leading non-governmental organizations will address issues at the nexus of buildings and climate policy on January 24 at the Roundtable’s all-member 2024 State of the Industry Meeting. # # #

Roundtable Leadership

January 12, 2024

Roundtable Weekly

RER President and CEO Jeffrey DeBoer to Receive Commercial Property Executive’s Lifetime Achievement Award

DeBoer Jeffrey DeBoer Roundtable Leadership

Real Estate Roundtable President and CEO Jeffrey DeBoer, above, will receive Commercial Property Executive’s Lifetime Achievement Award during CPE’s virtual 2023 Influence Awards on Thursday, Jan. 18 at 1 pm ET, when he will deliver the keynote address. (Register here for the event) As the founding President and CEO of The Real Estate Roundtable and in previous Washington-based positions, DeBoer has been at the forefront of national policy affecting the real estate industry for the past 40 years. The prominent Capitol Hill publication, The Hill recently recognized DeBoer as one of the "Top Lobbyists" in Washington, DC for 2023. This was the sixth consecutive year DeBoer has been included in the list. (Roundtable Weekly, Dec. 8) # # #

Policy Landscape

January 5, 2024

Roundtable Weekly

Congress Faces Shutdown Deadlines as Domestic Funding and Foreign Aid Priorities Dominate Early 2024 Agenda

Congress Regulators Tax Policy

Congress faces a looming set of government shutdown deadlines early in the New Year as pressure builds on lawmakers to balance government funding with increased emergency aid requests for the southern border, Ukraine, and Israel. A stopgap bill passed late last year established the first funding deadline on Jan. 19, which could shutter parts of the government—while the second deadline on Feb. 2 could bring a total shutdown, including military operations. (Punchbowl News, Jan. 5 | The Hill, Jan. 1 | Politico, Jan. 2 and Dec. 28) Tax Legislation Congressional focus on immediate funding priorities adds a degree of uncertainty to an additional tax package that may seek to hitch a ride on any new spending bill early in the year. (Tax Notes and Politico, Jan. 2) Recent discussions between Senate and House tax writers have focused on a package in the $90-100 billion range that would include measures on business interest deductibility, bonus depreciation, and an increase in the child tax credit for low-income families. (Roundtable Weekly, Nov. 17) The Roundtable continues to encourage policymakers to include real estate-related tax measures in any tax package. Specific proposals include cancellation of indebtedness tax relief for commercial real estate loan restructurings; a tax credit for converting older office and other commercial buildings to housing; an increase in the equity interest that REITs can take in struggling retail tenants; an expansion of the low-income housing tax credit; and an extension of deadlines for Opportunity Zone investments. Senate Finance Committee Chair Ron Wyden (D-OR) is scheduled to discuss funding priorities and tax issues during The Roundtable’s all-member 2024 State of the Industry Meeting on Jan. 23. Additionally, senior congressional staff from both Senate Finance and the House Ways and Means Committees will discuss the outlook for tax, trade, and other economic legislation in 2024 and beyond with Roundtable members. Congressional Review Act On the regulatory front, the Congressional Review Act (CRA) is a tool a new Congress can use to overturn certain federal agency rules completed during the last 60 session days of the previous Congress. This “lookback” threat of CRA reversal may come to fruition if Republicans win control of Congress and the White House in the November elections. (PoliticoPro, Jan. 2 and Congressional Research Service.) Pending regulations impacting commercial real estate include the Securities and Exchange Commission’s imminent climate disclosure rules; expected guidance from the IRS on the section 179D deduction for energy-efficient buildings; and federal banking agencies’ proposed “Basel III” increased capital requirements. A CRA initiative could impact Biden administration regulations completed this summer, but an exact date for when new rules would be clear of the CRA “lookback” is unknown at this time. (PoliticoPro, Jan. 2) # # #

Climate and Energy Policy

January 5, 2024

Roundtable Weekly

Biden Administration Requests Comments on Draft Definition for “Zero Emissions Buildings”

Climate and Energy Policy Climate Policy Energy Policy SPAC Sustainability Policy Advisory Committee Zero Emissions Buildings ZEB

The Biden administration on Wednesday issued a draft definition for the term “Zero Emissions Buildings.” The voluntary guideline would apply to non-federal, existing buildings and new construction. The U.S. Department of Energy (DOE) requested comments by Feb. 5 from industry and other stakeholders about Part 1 of the draft “ZEB” language, which is focused on “zero operating emissions.” (DOE announcement | National Definition Draft Criteria | Comments Form) Draft Criteria An eventual, final ZEB definition would be the first federal government guideline providing voluntary criteria for buildings that aspire to zero emissions status. DOE’s proposed draft defines a zero emissions building through three (3) criteria: Highly energy efficient Free of on-site emissions from energy use, and Powered solely from clean energy DOE will hold two public listening sessions on the draft definition. Registration is capped at the first 100 attendees: Thursday, January 11, 2024 @ 10 a.m. ET – Register Tuesday, January 30, 2024 @ 10:30 a.m. ET – Register DOE’s request for information will consider stakeholder responses by Feb. 5 before version 1.00 of Part 1 of a ZEB definition is finalized. (DOE’s Building Technologies Office bulletin, Jan. 3). Future parts of a national ZEB definition will likely address embodied carbon, refrigerant, and other key elements. National ZEB Definition RER plans to submit comments about the draft proposal. A federal definition for ZEB could bring much-needed consistency to help CRE owners and investors establish long-term emissions goals for buildings. (Roundtable Weekly, Sept. 29, 2023) The Roundtable and a coalition of real estate organizations sent a Sept. 14 letter to US-EPA supporting development of standard methods and metrics for buildings and tenants to quantify their emissions. Federal standards, definitions, and tools “are the North Star though which local governments can inform their law-making, and this helps bring some sense and order to the otherwise conflicting patchwork of climate laws and frameworks developed by states, cities, and NGOs,” said The Roundtable’s Sustainability Policy Advisory Committee (SPAC) Chair Tony Malkin (Chairman, President, and CEO, Empire State Realty Trust). (Roundtable Weekly, Sept. 15) Roundtable Senior VP and Counsel Duane Desiderio was quoted on Sept. 28 in the Washington Post about how CRE companies may welcome the idea of a single federal standard. “A workable, usable federal definition of zero-emission buildings can bring some desperately needed uniformity and consistency to a chaotic regulatory landscape,” Desiderio said. (Roundtable Weekly, Sept. 15) Executive branch officials from the White House, federal agencies, and leading non-governmental organizations will discuss the national ZEB definition on Jan. 24 during sessions on sustainability issues at The Roundtable’s all-member 2024 State of the Industry Meeting. # # #

Capital & Credit

December 22, 2023

Roundtable Weekly

FSOC Sees CRE Among Risks to U.S. Economy in 2024

Capital Credit

Last week, the Financial Stability Oversight Council (FSOC) released its 2023 Annual Report, identifying commercial real estate among the major financial risks to the U.S. economy in 2024. (FSOC 2023 Annual Report). Report Findings Developed by the FSOC, the report reviews financial market developments, describes emerging threats to U.S. financial stability, identifies vulnerabilities in the financial system, and makes recommendations to mitigate threats and vulnerabilities. Citing the almost $6 trillion of commercial real estate loans outstanding in the second quarter of 2023, roughly half of which are held by U.S. banks, the report raises concerns about “a substantial volume” of these loans that are set to mature in the next few years. (Marketwatch, Dec. 14) The report states, “Elevated interest rates, high costs, and potential structural changes in demand for CRE have heightened concerns about CRE. Maturing loans and expiring leases amid weak demand for office space have the potential to strain office sector conditions further, which could cause stress to spread beyond this segment of the CRE market.” The report also cites the July 2023 policy statement by the banking agencies on Prudent Commercial Real Estate Loan Accommodations and Workouts, as requested in the Roundtable’s March comment letter, and notes that accommodations and workouts are often in the best interest of borrowers and lenders. The FSOC recommends that supervisors, financial institutions, and investors continue to monitor CRE exposures and concentrations closely and track market conditions. (U.S. Department of Treasury Press Release, Dec. 14) Looking Ahead This week, The Roundtable’s Clifton E. Rodgers, Jr. discussed the CRE industry’s concerns about the wave of maturing commercial real estate debt, restoring liquidity, and the challenging economic environment ahead in 2024 in an op-ed for Urban Land Institute,Finding Liquidity: Regulatory Agencies Should Exercise Caution to Prevent a Perfect Storm. In the op-ed, Rodgers stated, “To help rebalance these maturing loans, it is important to advance measures that will encourage additional capital formation. To that end, it is essential to bring more foreign capital into U.S. real estate by lifting legal barriers to investment, as well as to repeal or reform the archaic Foreign Investment in Real Property Tax Act (FIRPTA). Importantly, policymakers must not hike the tax rate on capital gains, end carried interest, or alter the 1031 like-kind exchange provisions.” (ULI Op-ed Dec. 18) A recent paper published by four economists at the National Bureau of Economic Research found that 14 percent of the $2.7 trillion commercial real estate loan market and 44 percent of office loans currently carry outstanding loan balances higher than property values and are at risk of default. (Commercial Observer, Dec. 18) The paper also cited that around one-third of all loans, and the majority of office loans, may encounter substantial cash flow problems and refinancing challenges. RER board member Scott Rechler (RXR) was quoted in the Wall Street Journal this week discussing the outlook for 2024. “In 2024, it’s game time. Owners and lenders are going to have to come to terms as to where values are, where debt needs to be, and right-sizing capital structures for these buildings to be successful.” The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will discuss many of these issues at our State of the Industry Meeting on January 23, 2024. # # #

Tax Policy

December 22, 2023

Roundtable Weekly

Roundup: Lawmakers Seek Action on Affordable Housing Incentives, Senators Push Treasury for EV Recharging Station Guidance, and Joint Tax Committee Releases Long-Awaited “Bluebook”

Affordable Housing Inflation Reduction Act

House Ways and Means Committee members sent a bipartisan letter to House Leadership last Friday urging consideration of the Affordable Housing Credit Improvement Act (H.R. 3238) in any potential tax legislation brought to the floor in 2024. (Letter, Dec. 15) AHCIA Provisions Since the introduction of H.R. 3238 in May, the bill has garnered strong bipartisan support with 200 cosponsors—100 Republicans and 100 Democrats. (summary of AHCIA) Representatives Darin LaHood (R-IL), Suzan DelBene (D-WA) and others wrote to House leadership urging inclusion of two key changes to the low-income housing tax credit (LIHTC) in any tax legislation that emerges (Tax Notes, Dec. 15): Restoring the 12.5% increase in state allocation of housing credits that expired at the end of 2021, and Lowering the threshold of private activity bond financing (currently 50%) that a project must meet in order to qualify for the maximum amount of 4% housing credits. The competitive and over-subscribed LIHTC program is a critical federal tool for addressing the widespread lack of affordable rental housing. The arbitrary 50% bond financing requirement creates a barrier to affordable housing production, especially for the growing number of states that fully utilize their private activity bond cap. (Roundtable Weekly, May 19) Senators Push Treasury to Finalize Rules for EV Recharging Infrastructure Incentives Fourteen Senators wrote to Treasury Secretary Yellen on December 15 asking for final rules implementing the alternative fuel vehicle refueling property tax credit. The Roundtable previously submitted detailed comments seeking guidance requesting greater clarity for real estate owners and others contemplating new investments in EV recharging stations. The Inflation Reduction Act generally limits the credit to facilities installed in rural or low-income census tracts. The letter encourages Treasury to adopt an inclusive definition that effectively covers any tract if 10 percent or more of the “census blocks” inside the tract are rural. The Senators’ letter includes other requests that align with the Roundtable’s comments and aims to help the administration realize its goal of deploying 500,000 chargers by 2030. For example, the Senators urge that the rules treat each port at a refueling property as a “single item” that effectively qualifies for its own credit. Joint Tax Committee Releases “Bluebook” Describing Recent Tax Laws On Friday, Congress’s nonpartisan Joint Committee on Taxation released its long-awaited explanation of recently enacted tax laws. The General Explanation of Tax Legislation Enacted in the 117th Congress covers eight tax laws and nearly 200 tax provisions enacted or modified in 2021 and 2022, including the employee retention tax credit, the corporate alternative minimum tax, and the revamped energy tax incentives. The so-called “JCT Bluebook” is often relied upon by Treasury officials and federal courts when implementing and interpreting tax statutes. Congress reconvenes in Washington the week of January 8, where they will face a fast-approaching deadline for fiscal year 2024 spending bills and additional priorities, including a tax package. # # #

News

December 22, 2023

Roundtable Weekly

Roundtable Weekly Will Resume Publication on July 12, 2024

The Roundtable’s policy news digest will resume publication on Friday, July 12, 2024. Recent issues of Roundtable Weekly can be searched by keyword here.

Affordable Housing

December 15, 2023

Roundtable Weekly

Senate Finance Committee Chair Aims to Include Workforce Housing Tax Incentive in 2024 Tax Package

Affordable Housing Low Income Housing Tax Credit LIHTC Tax Policy

The Roundtable and 12 other national real estate organizations wrote to congressional tax writers on Dec. 8 in strong support of the Workforce Housing Tax Credit (WHTC) Act (S. 3436), which would create a new tax incentive aimed at increasing the supply of moderate-income rental housing. The Senate’s top tax writer, Finance Committee Chair Ron Wyden (D-OR), above, said this week that there is a “real window of opportunity” to pass bipartisan housing legislation in the coming months that could be folded into a possible 2024 tax package. (WHTC bill summary, Dec. 7 | Coalition letter, Dec. 8 | Wyden’s Senate floor remarks, Dec. 12 | Tax Notes, Dec. 13) Affordable Housing Tax Credits Sen. Wyden told Tax Notes that housing tax credits “will be part of the discussions we’ll have to have” with House Ways and Means Chairman Jason Smith (R-MO) as they discuss elements for a possible tax package in the new year. The Senate Finance Committee Chairman also commented on the Senate floor about his introduction last week of the WHTC Act (S. 3436) with Sen. Dan Sullivan (R-AL), Rep. Jimmy Panetta (D-CA) and Rep. Mike Carey (R-OH). “Our bipartisan proposal, based largely on the success of the Low Income Housing Tax Credit (LIHTC) would help spur a juggernaut of new housing construction,” Wyden said. (Video of floor remarks | Roundtable Weekly, Dec. 8) Led by the National Multifamily Housing Council, the Dec. 8 industry coalition letter stated, “We believe that the Workforce Housing Tax Credit Act will only serve to complement the LIHTC.” The organizations emphasized that the WHTC would spur the development of housing targeted to renter households who face affordability challenges yet are ineligible for federal subsidies. WHTC & LIHTC The WHTC would build on the successful LIHTC by enabling state housing agencies to issue similar tax credits to developers for the construction or rehabilitation of income-capped rental housing. (One-page Senate Finance Committee summary and WHTC bill text) WHTC credits could be used to build affordable housing for tenants between 60% and 100% of the area median income, or transferred to the State’s LIHTC allocation for housing aimed at lower-income tenants (generally below 60% of area median income). (Congressional Research Service summary of the LIHTC, April 26) Roundtable President and CEO Jeffrey DeBoer stated, “Tax policy should support and encourage private sector investment that boosts the supply of affordable and workforce housing. The Workforce Housing Tax Credit Act would build on time-tested tax incentives like the low-income housing tax credit and further facilitate the conversion of underutilized, existing buildings to housing. We welcome this positive step forward for our nation’s housing supply.” (Roundtable Weekly, Dec. 8) In the House this week, Rep. Jimmy Gomez, D-CA), reintroduced the Rent Relief Act of 2023, which would create a new tax credit for renters of a personal residence to cover part of the gap between 30 percent of their income and actual rent. Tax Notes, Dec. 13) Rep. Gomez told Tax Notes this week that House tax writers hope to include the rent relief bill, along with Gomez’ Revitalizing Downtowns Act (H.R. 419) in bipartisan discussions about a potential tax package. H.R. 419 would provide an investment tax credit for 20 percent of the cost of converting office buildings to other uses. (Rep. Gomez news releases, July 28 and Dec. 12 | news release, Dec. 12 | Roundtable Weekly, Aug. 11) # # #

Foreign Investment & CRE

December 15, 2023

Roundtable Weekly

Roundtable Chairman Raises Concerns About Florida Law Impacting Foreign Investments in Real Estate

Florida SB264 Jeffrey DeBoer John Fish Restrictions on Foreign Investment in US Real Estate

Roundtable Chairman John Fish (Chairman & CEO, Suffolk), above, was quoted in media articles this week raising concerns about certain aspects of a new Florida law that would limit and regulate the sale and purchase of certain Florida real property by “foreign principals” from “foreign countries of concern.” Foreign Investment in Florida Property Fish commented to Bloomberg about Florida’s SB 264, stating, “The law is far-reaching, very, very confusing, and the unintended consequences would be very, very detrimental.” (Bloomberg, Dec. 11 | Bisnow and Inman, Dec. 12) The Real Estate Roundtable urged the Florida Real Estate Commission on Sept. 5 to consider specific concerns about implementing the state law, which could impair capital formation and hinder the important role legitimate foreign investment plays in U.S. real estate, the broader economy, and job growth. (Roundtable Weekly, Sept. 8) Need for Clarifications In response, the Florida Department of Commerce on Sept. 21 proposed a positive clarification to one section of the law, which could have implications for similar laws in other states. Montana and Alabama have also passed legislation with similar restrictions to Florida’s that ban the sale or lease of agricultural land, critical infrastructure, and properties near military bases to “foreign adversaries,” including China. (Inman, Dec. 12) Broader prohibitions in another area of Florida’s SB 264—Section 204—generally preclude Chinese investors from acquiring “any interest”in any Florida real property anywhere in the state. The Roundtable is hopeful that Section 204 will be subject to clarification during the rulemaking process. (See highlighted areas in the Notice of Proposed Rule) Roundtable President and CEO Jeffrey DeBoer noted in his Sept. 5 letter, “Our concern with the new law is that U.S.-managed investment funds, which are controlled and managed by U.S. nationals, may now be precluded from pursuing investment opportunities in Florida if there is any level of investor participation in the fund from countries of concern like China.” The Roundtable is seeking a technical clarification that would permit U.S.-managed investment funds, which may include passive investor participation from investors across the globe to continue to pursue investment opportunities in Florida. Non-U.S. investors routinely subscribe for small, generally passive minority interests in these funds. These investors exercise no control over the investments or the operation of the assets. Importantly, the investment decisions are made by the U.S.-managed funds, not by passive investors who simply commit capital for a return, not to control the underlying investments. Florida Gov. Ron DeSantis has launched the SecureFlorida Portal, where foreign principals from foreign countries of concern like China must register property. # # #

Tax Policy

December 15, 2023

Roundtable Weekly

Bipartisan Legislation to Improve REITs’ Flexibility and Competitiveness Gains Traction in the House

Nareit REITs Ron Wyden Tax Policy

A bill to increase the limit on the amount of assets a REIT can own through a fully taxable subsidiary is gaining momentum in the House. The bipartisan measure has picked up 18 additional cosponsors from the tax-writing Ways and Means Committee since its introduction in late August by Representatives Mike Kelly (R-PA) and Brian Higgins (D-NY). (Legislative text of H.R. 5275) Taxable REIT Subsidiaries In 1999, Congress authorized REITs to create taxable subsidiaries (C corporations) that can engage in activities not otherwise allowed at the REIT level. Common activities undertaken by taxable REIT subsidiaries (TRSs) include services such as landscaping, cleaning, concierge, childcare, and catering, among others. As professional real estate management evolved, the change was necessary to ensure REITs could compete with other full-service real estate businesses. H.R. 5275 would raise the limit on a REIT’s assets attributable to its taxable subsidiary from 20 to 25 percent. The legislation would not change the longstanding REIT income rules requiring that at least 75 percent of the REIT’s total income come from sources like real property rents and interest from real estate mortgages. Similarly, the legislation would not change the REIT asset test, which requires that at least 75 percent of the value of the REIT’s assets consist of real estate, cash, cash items, and government securities. The Roundtable supports the legislation to raise the TRS limitation. The issue is also a tax priority for Nareit, which is leading the outreach effort on Capitol Hill. The current 20 percent limit has created particular challenges for REITs seeking to expand and acquire assets outside the United States, such as digital infrastructure. Raising the threshold to 25 percent would restore the limit to its prior level and allow U.S.-based businesses to continue growing in competitive foreign markets. The Roundtable and its Tax Policy Advisory Committee (TPAC) will continue working closely with Nareit and other industry partners in support of H.R. 5275 as deliberations continue on tax legislation. # # #

Affordable Housing, Housing, Tax Policy

December 11, 2023

Policy Comment Letter

RER Supports the Workforce Housing Tax Credit Act

Affordable Housing, Housing, Tax Policy,

Affordable Housing

December 8, 2023

Roundtable Weekly

Senate, House Bills Introduced to Spur Workforce Housing Development

Affordable Housing Housing Low Income Housing Tax Credit LIHTC Ron Wyden

Bills introduced yesterday in the Senate and House would create a new tax incentive aimed at increasing the supply of moderate-income rental housing. The legislation seeks to expand the construction and rehabilitation of housing for middle-class families and young people starting their careers, while enabling workers to live in communities where they are employed. (Senate Finance Committee news release and bill summary, Dec. 7) Workforce Housing Tax Credit Senate Finance Committee Chair Ron Wyden, (D-OR) and Sen. Dan Sullivan (R-AL), along with Reps. Jimmy Panetta (D-CA) and Mike Carey (R-OH), introduced the bipartisan Workforce Housing Tax Credit (WHTC) Act to build on the successful Low-Income Housing Tax Credit (LIHTC) by enabling state housing agencies to issue tax credits to developers, which would subsequently be sold to investors. (1-page Senate Finance committee summary and WHTC bill text) WHTC credits could be used to build affordable housing for tenants between 60% and 100% of area median income, or transferred to LIHTC for tenants generally below 60% of area median income. (Congressional Research Service summary of the LIHTC, April 26) State housing finance agencies could allocate WHTC credits to developers through a competitive process. The tax credits could also be provided to developers with a 15-year compliance period and 30-year extended commitment. (Committee summary) Sen. Wyden’s committee previously held a March hearing on “Tax Policy’s Role in Increasing Affordable Housing Supply for Working Families” focused on the need to expand affordable housing for working families. Roundtable Support The Roundtable strongly supports the WHTC. Roundtable President and CEO Jeffrey DeBoer stated, “Tax policy should support and encourage private sector investment that boosts the supply of affordable and workforce housing. The Workforce Housing Tax Credit Act would build on time-tested tax incentives like the low-income housing tax credit and further facilitate the conversion of underutilized, existing buildings to housing. We welcome this positive step forward for our nation’s housing supply.” The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) has formed an Affordable Housing Working Group, which is working with the Research Committee to develop proposals on expanding the nation’s housing infrastructure. # # #

Tax Policy

December 8, 2023

Roundtable Weekly

Taxation of Unrealized Gains is Focus of Senate Democratic Bill and Supreme Court Case

Supreme Court Tax Policy Unrealized Gains Billionaire Tax

Senate Finance Committee Chairman Ron Wyden (D-OR), above, and 15 of his Senate colleagues recently introduced the Billionaires Income Tax Act (S.3367), which would tax the appreciation of wealthy individuals’ assets. On Tuesday, the Supreme Court heard oral arguments in Moore v. United States, a case challenging the federal government’s authority to tax unrealized gains under the 16th Amendment. Billionaires Income Tax Act (BITA) Under BITA, tradable, liquid assets would be marked-to-market and taxed annually on their appreciation, while illiquid assets would be subject to a “deferral recapture” tax when sold—or if certain other currently nontaxable events occur, such as death, a transfer to a trust, or a like-kind exchange. (One-page summary; section-by-section summary). (CQ, Nov. 30) As drafted, the bill would apply to taxpayers with more than $100 million in annual income or more than $1 billion in assets for at least three consecutive years. (Tax Notes, Nov. 30). The legislation is not limited to future appreciation of assets. It would reach back in time and apply the tax to accumulated, unrealized gains at the time of enactment. The tax on built-in gains could be paid over a five-year period. Mark-to-market losses could be carried back for three years and applied against taxable market-to-market gains. The appreciation of partnership assets (including built-in gains) and gains or losses from partnership transactions would flow through and taken into account at the partner level. Related legislation was introduced in the House by Reps. Steve Cohen (D-TN) and Don Beyer (D-VA). Roundtable Position and Outlook Real Estate Roundtable President and CEO Jeffrey DeBoer said, “Taxes rarely remain targeted, and like the income tax, this targeted proposal could be revised and expanded over time to apply to everyone. Moreover, taxing unrealized gains would upend over 100 years of federal taxation, require an unprecedented IRS intrusion into household finances, and create unknown and potentially unintended consequences at a time of economic uncertainty. Deferring the taxation of gains until an asset is sold supports entrepreneurs while encouraging the type of patient, long-term investing and productive risk-taking that drives our economy forward.” He added, “These proposals lack robust policy support, are ill-timed, and carry considerable risk. They should be rejected.” (See also RER Policy Priorities – Taxing Unrealized Gains – Billionaire Tax) In the last Congress, efforts to enact a mark-to-market regime were unsuccessful when they ran into resistance from moderate Democrats. Sen. Wyden (D-OR) acknowledged that his bill, which lacks bipartisan support, would not be part of any year-end tax legislation. (CQ, Nov. 30) Moore v. United States On Tuesday, the Supreme Court heard oral arguments in Moore v. United States, which challenges the federal government’s constitutional authority to tax unrealized income. The petitioners in Moore argue that the mandatory repatriation tax in the Tax Cuts and Jobs Act exceeds Congress’s authority under the 16th Amendment to lay and collect taxes on incomes. They argue that because the tax is based on the accumulated, undistributed earnings of a foreign corporation, there is no income realization event for the Moores, who are a non-controlling minority shareholder of the corporation. (Roundtable Weekly, Oct.13) Depending on the outcome and the scope of the decision, the Moore case could have implications for other forms of taxing unrealized gains, such as the appreciated value of real estate and other assets directly owned by a taxpayer. A majority of the justices signaled they are hesitant to weigh into the broader debate of how to define income for tax purposes. A decision in Moore is not expected until June 2024. (USA Today and PoliticoPro, Dec. 5 | Tax Foundation, Aug. 30) # # #

Remote Work

December 8, 2023

Roundtable Weekly

GAO Reports All Federal Agencies at Less Than 50 Percent Occupancy

Remote Work Workplace Return

More than half of the federal workforce is not working in their agency offices, according to the Government Accountability Office (GAO). Sen. Joni Ernst (R-IA) released a list this week based on the GAO data that shows federal space utilization percentages range from a low of 7% to 49% with most agencies using less than 30%. (Agency list | Sen. Ernst news release | DailyMail, Dec. 6) Federal Employees’ Return to Office The GAO statistics released by Sen. Ernst, the Ranking Member of the Senate Small Business & Entrepreneurship Committee, covers 24 agencies for one week between January and March 2023. Sen. Ernst told Federal News Network this week that she is pushing the federal government to get workers back to their offices or sell their unused space. In August, Ernst demanded investigations into federal departments and agencies to determine the impact of telework on the delivery and response times of government services. That same month, White House Chief of Staff Jeff Zients directed cabinet officials to increase the return of federal employees to their offices. (Federal News Network, Nov. 30 | (Government Executive, Aug. 7 | Roundtable Weekly, Aug. 11) Since the pandemic, Congress has held multiple hearings and introduced legislation in both the House and Senate about the government’s remote work policies. (Roundtable Weekly, Dec. 1) The General Services Administration’s (GSA) Robin Carnahan recently told the House Committee on Oversight and Accountability that her agency sees an opportunity to reduce the government’s real-estate footprint by up to 30% in the coming years. (Federal News Network, Nov. 14) Roundtable Response RER Chair John Fish (Chairman & CEO, Suffolk), above, expressed the industry’s concern about government employees’ reluctant return to their offices in last week’s Wall Street Journal. “Other parts of the country with large federal workforces are also struggling to bring back workers. Whether you’re talking about downtown Boston, or Denver or Northern Virginia, occupancy is down substantially,” said Fish. (WSJ, Nov. 28) Roundtable President and CEO Jeffrey DeBoer has consistently emphasized that federal policies promoting remote work undermine the health of cities, local tax bases, and small businesses. The Real Estate Roundtable has urged President Biden and national policymakers to end government policies that encourage remote working arrangements for federal employees. (RER letter to President Biden, Dec. 2022; RER letter to Senate, April 2023) # # #

Climate Policy

December 8, 2023

Roundtable Weekly

U.S. Joins Global Push to Slash Building Emissions

Climate Policy

The United States joined China, the UK, and the larger European Union this week in an international initiative to accelerate the buildings sector’s ability to reach “near zero” emissions by 2030. (United Nations press release, Dec. 6) The “Buildings Breakthrough,” launched at the United Nations COP 28 climate meeting in Dubai, is a voluntary partnership that covers new construction and major renovation projects. (Recorded launch and USGBC blog post, Dec. 6) The initiative is a pledge by countries to cut emissions from building operations and construction materials down or close to zero. A Buildings and Climate Global Forum scheduled for March in Paris will flesh-out details. The Biden-Harris administration’s imminent release of a proposed zero emissions building (“ZEB”) definition aligns with this international effort. The ZEB definition will be the first federal government guideline providing voluntary criteria for buildings that aspire to zero emissions status. (Roundtable Weekly, Sept. 29) SBTi The Science Based Targets Initiative (SBTi), an organization with significant global influence, recently updated its “pilot” guidance for the building sector. (Ramboll, Dec. 4) SBTi’s latest guidance includes important revisions urged by The Roundtable and Nareit in joint comments submitted last summer. (Roundtable Weekly, July 14). Notably, SBTi changed course from its original proposal and will allow companies to set science-based emissions targets based on “market-based” solutions such as purchases of renewable energy certificates (RECs). Real estate companies can apply to participate in SBTi’s pilot program through December 10. (SBTi Call for Applicants) CFTC Guidelines and EPA’s Portfolio Manager On Monday, the Commodity Futures Trading Commission (CFTC) proposed first-ever federal guidelines to improve the transparency, quality, and pricing of “carbon offset” projects (such as tree planting and GHG sequestration). Comments are due by February 16, 2024. (CFTC news release | Reuters | Financial Times, Dec. 4) The Environmental Protection Agency (EPA) is holding a workshop session for Real Estate Roundtable members on improvements to its ENERGY STAR Portfolio Manager benchmarking tool. The workshop will take place on January 24, 2024 as part of The Roundtable’s State of the Industry meeting in Washington, DC. (Contact RER Meetings about registration) EPA’s improvements to its free online Portfolio Manager tool, used by nearly 25% of U.S. building space to measure energy use and GHG emissions, is widely supported by the CRE industry. (Coalition letter to EPA, Sept. 14 and Roundtable Weekly, Sept. 15) # # #

Roundtable Advocacy

December 8, 2023

Roundtable Weekly

The Roundtable’s Jeffrey DeBoer Recognized as a "Top Lobbyist" for 2023

Jeffrey DeBoer

Real Estate Roundtable President and CEO Jeffrey DeBoer, above, is one of the "Top Lobbyists" in Washington, DC for 2023, according to the widely-read Capitol Hill publication, The Hill. This is the sixth consecutive year that DeBoer has earned the recognition. (The Hill, Dec. 6) The Top Lobbyists 2023 list includes “impactful advocates (who) stand out for the results they’ve delivered for their clients, companies, trade associations and advocacy groups in the nation’s capital.” The Hill also noted that after pandemic restrictions were lifted, “these top lobbyists had to navigate a divided Congress—and not just the traditional Republican and Democratic divisions” as a flood of regulatory activity flowed from the Biden administration. DeBoer commented, “I am honored to lead The Real Estate Roundtable’s policy advocacy efforts and very humbled to be included on The Hill’s top lobbyist list. This personal recognition by The Hill reflects the collective efforts of the Roundtable membership, leadership, and staff. Together we work very hard to deliver non-partisan, data-based policy positions, guided by what is good for communities, job creation, and the economy. This has always been the foundation of our organization’s effectiveness, and it has proven to be even more critical given today’s increasingly challenging policy environment.” # # #

Capital & Credit

December 8, 2023

Proposed Revisions to NASAA’s Model Rule on Dishonest or Unethical Business Practices of Broker-Dealers and Agents

Property Conversions

December 1, 2023

Roundtable Weekly

White House Holds Property Conversions Briefing for Roundtable Members

179D Clean Energy Tax Incentives Inflation Reduction Act Property Conversions

Last week, the White House hosted a virtual briefing for Roundtable members to discuss federal loan and guarantee programs at the federal departments of Energy, Housing, Transportation and the General Services Administration that may assist with financing commercial-to-residential conversion projects. Property Conversions Briefing In October, the administration announced a suite of federal resources—including low-interest loans—across various agencies to assist conversion projects aimed at increasing the housing supply, revitalizing urban downtowns, and cutting climate pollution. (Roundtable Weekly, Oct. 27; White House Commercial to Residential Conversions Guidebook) The briefing last week provided members with a high-level overview of the administration’s conversion work and focused on the Transportation Department’s Transportation Infrastructure Finance and Innovation (TIFIA) and Railroad Rehabilitation and Improvement (RRIF) financing programs. (See FAQs) White House staff also announced upcoming workshops with the Department of Transportation’s Build America Bureau to learn more about how TIFIA and RRIF financing can be used for transit-oriented development (“TOD”) that takes the form of adaptive reuse. Upcoming Workshops - Federal Resources to Support Commercial-to-Residential Conversions General Services Administration Dec 5, 2023 02:00 PM Register: https://pitc.zoomgov.com/meeting/register/vJIsfuGhrDMoEtl2b6hWEl0SV4B4K1g3xXo Department of Transportation Dec 6, 2023 12:30 PM Register: https://pitc.zoomgov.com/meeting/register/vJIsdOmprDwtGEouaConZYQHY_1sOdNkRjQ Department of Energy Dec 14, 2023 02:00 PM Register: https://pitc.zoomgov.com/meeting/register/vJIsduGhqjkpH-F53_dFQvvXcu6On0_rzC4 IRA Tax Incentives – 179D White House staff on the property conversions briefing mentioned that green tax incentives enacted by the Inflation Reduction Act (IRA) may be layered with other federal loan, guarantee, and grant programs to support a project. (See RER fact sheet, “Clean Energy Tax Incentives Relevant to U.S Real Estate) Roundtable Senior Vice President & Counsel Duane Desiderio was quoted this week in Tax Notes on the deduction in section 179D for energy-efficient commercial buildings. “The IRA’s changes to section 179D are good policy, but more changes need to be made for the deduction to reach its full potential,” said Desiderio.” (Tax Notes, Nov. 28). He explained that Congress should make 179D “transferable” by REITs and other private sector owners. The Roundtable’s Property Conversions Working Group will continue to serve as a conduit between our members and the administration to help design impactful policies that can assist with office-to-residential conversions. Please contact Roundtable SVPs Duane Desiderio (ddesiderio@rer.org) or Ryan McCormick (rmccormick@rer.org) for more information. # # #

Workplace Return

December 1, 2023

Roundtable Weekly

The Administration and Congress Continue to Urge Federal Agencies to Return to the Office

Workplace Return

Although the Biden administration and Congress continue to urge federal agencies to end pandemic-era telework policies, officials acknowledge they have yet to reach their return-to-office objectives, with only about half of cabinet agencies having achieved the goal of workplace return by January. (Axios, Nov. 30) Congressional and Administration Efforts On Wednesday, a subcommittee of the House Committee on Oversight and Accountability held a hearing titled, “Oversight of Federal Agencies’ Post-Pandemic Telework Policies,” to discuss the current status of telework policies within various federal agencies. Subcommittee Chairman Pete Sessions (R-TX) reiterated the goal to ensure federal agencies are measuring the impact of telework, as it remains at elevated levels even with President Biden’s call for federal employees to return to the office. (Government Operations and the Federal Workforce Subcommittee Chairman Sessions’ Remarks, Nov. 29) White House Chief of Staff Jeff Zients has been privately urging cabinet secretaries to address the significant number of federal workers who continue to work remotely, encouraging a shift away from persistent work-from-home practices. (Axios, Nov. 30) RER Chair John Fish (SUFFOLK) (above) was quoted in the Wall Street Journal, voicing the industry’s concern for stalled return to the workplace. “Other parts of the country with large federal workforces are also struggling to bring back workers. “Whether you’re talking about downtown Boston, or Denver or Northern Virginia, occupancy is down substantially,” said Fish. (WSJ, Nov. 28) Unions representing federal workers strongly support work from home and have pushed back against the Biden administration’s workplace return goals. (BGov, Sept. 14; Federal Times, Aug. 7) Since the pandemic, Congress has held multiple hearings and introduced legislation in both the House and Senate aimed at solidifying official government definitions of remote work and enhancing the accountability and transparency of federal telework policies. (Roundtable Weekly, Oct. 20) Roundtable Advocacy The Real Estate Roundtable has urged President Biden and national policymakers for months to end government policies that encourage remote working arrangements for federal employees. (RER letter to President Biden, Dec. 2022; RER letter to Senate, April 2023) In August, the White House ordered cabinet officials to increase the return of federal employees to their offices. (Roundtable Weekly,Aug. 11) Roundtable President and CEO Jeffrey DeBoer has repeatedly emphasized that remote working by federal employees is undermining the health of cities, local tax bases, and small businesses. # # #

Like-Kind Exchanges

December 1, 2023

Roundtable Weekly

New Analysis Highlights Importance of Like-Kind Exchanges in Current Market Environment

LikeKind Exchanges LKEs

A new analysis by Marcus & Millichap demonstrates how like-kind exchanges are fundamental to the health and financing of the commercial real estate industry, particularly during market corrections and liquidity shortages. (Marcus & Millichap - The Importance of Like-Kind Exchanges During Periods of Reduced Commercial Real Estate Market Liquidity, 2023). Key Findings Commercial real estate transaction volume is down, but like-kind exchanges are up. Despite a general decline in commercial real estate transactions, the number of 1031 exchanges initiated has increased nearly 15% from 17,467 in the first half of 2019 to 20,070 in the first half of 2023. The analysis attributes the general decline in commercial real estate transactions in the first half of 2023 to the rise in interest rates, stricter lender underwriting, a diminished economic outlook, and a broad spectrum of geopolitical challenges. “The 15% rise in the number of exchanges initiated, when commercial real estate transaction count fell by 22.1%, underscores the importance of like-kind exchanges in periods of reduced commercial real estate market activity.” (Marcus & Millichap) The liquidity generated through LKEs serves as a deterrent against commercial property defaults, consequently reducing risks in the banking and financial systems that could otherwise pose a threat to the broader economy. While the Biden administration has proposed limiting like-kind exchanges in its last two budget submissions, academic and other economic research has repeatedly demonstrated the positive economic contribution of LKEs and their importance to the economy. (EY report—“Economic Contribution of the Like-Kind Exchange Rules to the US Economy in 2021: An Update”) The Marcus & Millichap analysis draws on data collected by the largest like-kind exchange qualified intermediaries in the country and aggregated by the Federation of Exchange Accommodators, a member of The Real Estate Roundtable’s President’s Council. The Roundtable’s Tax Policy Advisory Committee (TPAC) will continue working to raise awareness of the role that like-kind exchanges play in supporting the health of the US economy and the stability of real estate markets. # # #

Like-kind Exchanges, Like-Kind Exchanges And Economic Growth

November 30, 2023

Academic Study

Importance of 1031 Exchange – Marcus & Millichap

LikeKind Exchanges LKEs,

Policy Landscape

November 17, 2023

Roundtable Weekly

Lawmakers Extend Government Funding Into Early 2024; Outlook Uncertain for Tax Policy and Other Priorities

Clean Energy Tax Incentives Congress Inflation Reduction Act Tax Policy

The latest threat of a government shutdown eased this week after President Biden signed two continuing resolutions, funding some agencies until Jan. 19 and others until Feb. 2, giving Congress a chance to pass full-year appropriations bills in early 2024, and leaving the Biden administration’s $106 billion supplemental foreign aid request unresolved. (AP, Nov. 17 |Wall Street Journal | Washington Post | NBC News, Nov. 15) Window Narrowing for Other Policy Priorities Congress’ focus on the funding measures leave policymakers looking for a potential legislative vehicle that could support a separate, expensive tax package. Conversations among tax policy writers are ongoing, according to Ways and Means Ranking Member Richard Neal (D-MA). (BGov, Nov. 16) Senate Finance Committee Chair Ron Wyden (D-OR) and House Ways and Means Committee Chairman Jason Smith (R-MO) are discussing a package in the $90-100 billion range that would include measures on business interest deductibility and bonus depreciation, as well as an increase in the child tax credit for low-income families. (Roundtable Weekly, June 16) The Roundtable is encouraging policymakers to include real estate-related tax measures in any tax package. Specific proposals include cancellation of indebtedness tax relief for commercial real estate loan restructurings; a tax credit for converting older office and other commercial buildings to housing; an increase in the equity interest that REITs can take in struggling retail tenants; an expansion of the low-income housing tax credit; and an extension of deadlines for Opportunity Zone investments. IRA Tax Incentives On the regulatory front, Roundtable Senior Vice President Ryan McCormick was quoted this week in Tax Notes on the Inflation Reduction Act’s (IRA) rules affecting clean energy credits—and the need to ensure incentives extend equitably to “mixed partnerships” that include both taxable and tax-exempt investors. “Tax-exempt investors in mixed real estate partnerships include pension funds, educational endowments, private foundations, and public charities,” said McCormick, noting that these entities have invested over $900 billion in commercial real estate. The issue of proposed and temporary tax rules affecting the transferability and direct payment of the IRA credits was the subject of a July Roundtable policy comment letter to the Treasury Department and IRS. (Roundtable Weekly, July 28) The Tax Notes article also addressed problems posed by IRA prevailing wage and apprenticeship rules that were the focus of an Oct. 30 Roundtable comment letter. The letter quantified the large compliance costs and recommended allowing contractors to self-certify their compliance with the wage and apprenticeship requirements. (Roundtable Weekly, Nov. 3) The Roundtable’s Tax and Sustainability Policy Advisory Committees will remain engaged with policymakers as the IRA rules affecting CRE are finalized and implemented. These issues will be discussed during The Roundtable’s State of the Industry Meeting on January 23-24, 2024 in Washington. # # #

Capital and Credit

November 17, 2023

Roundtable Weekly

The Roundtable and Coalition Request Reproposal of Basel III Capital Rulemaking as Banking Regulators Face Bipartisan Congressional Opposition

Basel III Capital and Credit Halting ProCyclical Policy Measures and Increases in Regulatory Capital Liquidity Regulators The Fed

The Real Estate Roundtable joined a coalition of 17 national trade associations in a Nov. 14 letter to the Federal Reserve, urging regulators to repropose a sweeping set of proposed rules—known as the “Basel III Endgame”—that would increase capital requirements for the nation's largest banks. Meanwhile, the nation’s top federal banking regulators testified this week before congressional committees, where they faced stiff bipartisan opposition to the proposal. (U.S. Chamber of Commerce-led coalition letter, Nov. 14 and Axios, Nov. 16) Bipartisan Opposition In July, the regulators jointly approved the 1,100-page proposed Basel III rulemaking, which aims to guard against potential risk by increasing capital requirements for banks with at least $100 billion in assets. The proposal could have a significant impact on available credit capacity for commercial real estate transactions, as well as undermine liquidity and economic growth. (Roundtable Weekly, Nov. 10 and CQ, Nov. 15) Democrats and Republicans challenged the regulators during a Nov. 14 Senate Banking Committee hearing and a Nov. 15 House Financial Services Committee hearing, warning the proposed capital requirements lacked quantitative economic analysis and would harm the economy. Sen. Chris Van Hollen (D-MD) stated that higher capital standards could impede investment in clean energy while Sen. Bob Menendez (D-NJ) emphasized that higher capital requirements pose a risk for mortgage loans to low-income and minority buyers. (Axios, Nov. 14) Before the hearings, Senate Banking Committee Ranking Member Tim Scott (R-SC) led 38 of his colleagues in a Nov. 13 letter to the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) to withdraw the Basel III Endgame proposal. House Financial Services Committee Chairman Patrick McHenry (R-NC) and Subcommittee on Financial Institutions and Monetary Policy Chairman Andy Barr (R-KY) also sent letters to the regulators on Nov. 14, claiming the Basel III regulations would put the nation’s financial system at a competitive disadvantage. More Feedback for Basel III During the hearings, the Fed’s Vice Chair for Supervision Michael Barr defended the proposals, yet responded that regulators are “quite open to comment, and we want to improve the rule before we get to a final rule.” On Oct. 20, the Federal Reserve, FDIC, and OCC announced an extension of the comment period on the Basel capital proposal from Nov. 30, 2023 to Jan. 16, 2024. The agencies also launched a quantitative impact study to clarify the estimated effects of the proposal, with the data collection deadline also due Jan. 16. Since the deadline for stakeholder comments is the same day as the impact study’s final data collection deadline, there is broad concern that the regulators’ failed to provide industry participants with an opportunity to assess and comment on any of the Agencies’ collected data. (Roundtable Weekly, Oct. 27) The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) discussed the capital requirements proposal during its Nov. 8 meeting in New York. RECPAC welcomes Roundtable membership input as it works on a Basel III comment letter due in January. (Contact Roundtable Senior Vice President Chip Rodgers) # # #

Joint Employer

November 17, 2023

Roundtable Weekly

Business Coalition Urges Congress to Nullify Expansive Joint Employer Rule

Joint Employer Labor Policy

The Real Estate Roundtable and a coalition of major business groups sent a letter to all members of Congress last week in support of a joint resolution that would nullify a final rule of the National Labor Relations Board (NLRB). The NLRB “joint employer” rule—scheduled to go into effect on Dec. 26—would render employers vulnerable to claims by “indirect” workers who are not immediate hires. The policy has significant implications that could subject parent-level hotel and restaurant companies, other franchise-model businesses, and companies that hire contractors and subs to expansive joint employer liability. (Coalition letter, Nov. 9 and AP, Nov. 13) Potential Impact The NLRB rule overturns Trump-era policy and returns to an Obama-era position that makes employers liable to workers they do not directly hire or manage. It also holds joint employers liable for workplace issues they do not control, which range from collective bargaining to workplace safety conditions. The Obama-era version—in place from 2015 to 2017—cost small business franchise operators $33 billion per year, according to the International Franchise Association (IFA). It resulted in 376,000 lost job opportunities and led to 93% more lawsuits against these businesses. The Roundtable joined the coalition letter led by IFA and the U.S. Chamber of Commerce. Other real estate group signatories include the American Hotel and Lodging Association (AH&LA), the National Association of Home Builders, the National Multifamily Housing Council, and national general contracting organizations. Party Lines in Congress On Nov. 9, a group of 10 Senate and House Republican leaders introduced a joint Congressional Review Act resolution (H.J.Res.98/S.J.Res.49) to overturn the final rule. (Senate news release, Oct. 9 and PoliticoPro, Nov. 9) The measure could pass the House but is not expected to advance in the Democratically-controlled Senate. The U.S. Chamber and other business organizations who are signatories on the coalition letter sent last week also filed a lawsuit challenging the joint employer rule on Nov. 9. Unions groups will likely seek to intervene to defend the NRLB rule. (U.S. Chamber case updates) # # #

Beneficial Ownership

November 17, 2023

Roundtable Weekly

The Roundtable and Broad Business Coalition Urge Congress to Pass One-Year Delay to Beneficial Ownership Rules

Beneficial Ownership Corporate Transparency Act CTA

The Roundtable signed onto a letter yesterday with approximately 70 business groups that urges Congress to pass a one-year delay in implementing burdensome “beneficial ownership” reporting requirements. (Coalition letter and PoliticoPro, Nov. 16) FinCEN Enforcement The new regulations—scheduled to take effect on Jan. 1, 2024 under the Corporate Transparency Act (CTA)—would be implemented by Treasury’s Financial Crimes Enforcement Network (FinCEN). The CTA requires the submission of regular reports to the federal government identifying the beneficial owners of businesses and other legal entities. The new law defines the targeted entities as those having 20 or fewer employees and under $5 million in revenue, which would impact nearly every small business in the nation. The CTA includes civil and criminal penalties of up to $10,000 and two years of jail time for failing to comply. The scope of the data collection is expansive. Covered entities will be required to provide the personal information of owners, board members, senior employees, attorneys, and more, then monitor the information and report all changes. FinCEN expects to receive more than 32 million separate reports in 2024, with an additional five to six million filings each year thereafter. The coalition letter states, “A year’s delay will provide FinCEN and the business community with more time to educate owners of their new obligations. It will also give Congress and FinCEN time to review the new rules to ensure they are successful.” AICPA & Updated FAQs This week’s letter also notes that the American Institute of Certified Public Accountants (AICPA) recently requested a one-year delay from FinCEN. (AICPA coalition letter, Oct. 30) AICPA noted in its letter that FinCEN significantly underestimated the cost burdens associated with the new reporting regime, relied on vague and arbitrary standards in laying out the criminal and civil penalties under the statute, and implemented filing deadlines for newly-formed entities that in some cases are impossible to meet. On Oct. 13, The Real Estate Roundtable and a coalition of eight other national real estate groups urged Treasury Secretary Janet Yellen to delay implementation of the new beneficial ownership rule. (Roundtable Weekly, Oct. 20 and Industry coalition letter) Yesterday, FinCEN issued updates to its beneficial ownership “frequently asked questions.” The FAQs include new information about the reporting process, reporting companies, beneficial owners, company applicants, reporting requirements, initial reports, and reporting company exemptions. It also includes new resources related to beneficial owners, initial reports, FinCEN identifiers, and third-party service providers. (.pdf version of the FAQs) # # #

Beneficial Ownership

November 17, 2023

Policy Comment Letter

The Roundtable and Broad Business Coalition Urge Congress to Pass One-Year Delay to Beneficial Ownership Rules

Beneficial Ownership, Corporate Transparency Act CTA,

Basel III

November 14, 2023

The Roundtable and Coalition Request Reproposal of Basel III Capital Rulemaking

Basel III, Capital and Credit, Halting ProCyclical Policy Measures and Increases in Regulatory Capital, The Fed,

Policy Landscape

November 9, 2023

Roundtable Weekly

Congress Aims for Continuing Resolution by Nov. 18 Funding Deadline

Congress Jeffrey DeBoer Quarterly Sentiment Index

Congress needs to pass a continuing resolution (CR) by next Saturday, Nov. 18 to avoid a partial government shutdown if appropriations bills are not enacted for the fiscal year that began Oct. 1. (CQ and The Hill, Nov. 9) CR vs Shutdown New House Speaker Mike Johnson (R-LA) may introduce a funding bill early next week, giving only days for Congress to agree on a CR or risk a partial government shutdown. House Republican leaders have signaled they still may pursue a “laddered” approach—with several spending bills to last until December and the remainder in January. By contrast, The Senate is considering a short-term CR to fund the government until mid-December. (Punchbowl News, Nov. 9) Another major consideration is a White House $106 billion supplemental request that includes aid for Ukraine and Israel. Republicans have voiced opposition to the package unless President Biden includes policy changes on border security. Today, Biden commented today that he was "open to discussions about the border" on the tarmac before boarding Air Force One. The administration has also requested another $56 billion for domestic policies that include childcare, broadband subsidies, and disaster relief. (Roll Call, Nov. 7) CRE Conditions Real Estate Roundtable Chairman Emeritus Bill Rudin, above, (Co-Chairman and CEO, Rudin Management Co.) this week discussed challenges facing CRE on CNBC’s Squawk on the Street, including a massive wave of loans that need to be refinanced over the next few years and the need for property conversions. Rudin emphasized that each CRE sector, and region, is different, noting that multifamily properties and high-quality commercial buildings may be doing well while certain office assets face significant challenges. The Roundtable’s Q4 Sentiment Index released last week reflects these conditions, which include higher financing costs, increased illiquidity, and uncertain post-pandemic user demand. (Roundtable Weekly, Nov. 3 and GlobeSt, Nov. 7) Roundtable President and CEO Jeffrey DeBoer said, “Various CRE markets and asset classes need more time to adapt to the new preferences of clients; more flexibility to restructure their asset financing; and patience while adjusting to the evolving valuation landscape. In addition to conversion activities, The Roundtable continues to urge the federal government to return to the workplace and support measures to assist loan modifications and increase liquidity available to all asset classes and their owners. We also remain opposed to regulatory proposals that impede capital formation.” (Roundtable news release, Nov. 3) # # #

Climate Risk Reporting

November 9, 2023

Roundtable Weekly

SEC Commissioner and Key Senators Support Further Analysis of Climate Disclosure Proposal

Climate Policy Climate Risk Reporting Energy and Climate Policy Scope 3 reporting SEC Securities and Exchange Commission The Fed

One of the commissioners from the Securities and Exchange Commission (SEC) and two U.S. Senators suggested this week that further analysis may be needed for a highly anticipated SEC rule on climate reporting, which includes a proposal for sweeping disclosures on Scope 3 GHG emissions. (Bloomberg Law, Nov. 7 | SEC headquarters in Washington, DC, above) Stakeholder Comments Given that the SEC has received more than 16,000 stakeholder comments on the proposal, Republican SEC Commissioner Mark Uyeda said, “Before the Commission adopts any final rule that significantly deviates from the proposal, it should seriously consider re-proposing the rule with revised rule text and an updated economic analysis.” (Ayuda’s comments, Nov. 7 and The Hill, April 6) SEC Chair Chair Gary Gensler indicated in March that the agency’s climate-related reporting rule may be scaled back. (CNBC, March 7 and Roundtable Weekly, March 10) Senators Support Additional Feedback Sen. Bill Hagerty (R-TN), left, and Roundtable Board Member Geordy Johnson (CEO, The Johnson Group) at The Roundtable’s 2023 Annual Meeting in June. Sens. Bill Hagerty (R-TN) and Joe Manchin (D-WV) also expressed support this week for obtaining additional feedback about the SEC’s proposed rule. Sen. Manchin chairs the Senate Energy and Natural Resources Committee and Sen. Hagerty serves on the Senate Banking Committee. (Hagerty-Manchin letter and PoliticoPro, Nov. 9) The lawmakers wrote to SEC Chairman Gary Gensler about recent California state laws that require companies to disclose their emissions, which beat the SEC to the punch on releasing final climate reporting rules. (Roundtable Weekly, Sept. 22 and The Real Estate Roundtable’s summary of the California legislation.) The Senators’ letter states, “The interconnectedness of the California requirements and the SEC’s proposal is undeniable: thousands of businesses would end up being subject to both the California requirements and the SEC’s rule, if finalized. However, key differences between the two raise significant compliance questions that the SEC should thoroughly review.” Roundtable Comments on Scope 3 Scope 3 refers to indirect emissions that are part of an organization’s value chain but not owned or controlled by the reporting company. The 2022 SEC proposal would require corporate issuers of securities to estimate and report Scope 3 emissions “if material” in 10-Ks and other filings. (SEC News Release, March 22, 2022) Roundtable comments submitted in June 2022 emphasized that the SEC’s proposed directive, which would mandate that companies report on Scope 3 emissions “only if material,” is a “back-door mandate” that should be dropped. The comment letter added, “No registrant should be effectively required to report on indirect emissions beyond its organizational or operational boundaries.” (Roundtable Weekly, June 10, 2022), The Roundtable’s Sustainability Policy Advisory Committee (SPAC) plans to respond to any further developments on the SEC’s proposed climate disclosure rule or other climate-related regulatory proposals affecting CRE. # # #

Capital and Credit

November 9, 2023

Roundtable Weekly

Policymakers Address Basel III Endgame’s Capital Requirements Proposal

Basel III Capital and Credit Liquidity Restoring Liquidity in CRE Markets and Protecting Capital Formation The Fed

This week, policymakers addressed proposed regulations to increase capital requirements for the nation's largest banks, known as the “Basel III Endgame,” which could have a significant impact on available credit capacity for commercial real estate transactions, as well as undermine liquidity and economic growth. Congressional Hearings The House Financial Services Subcommittee on Financial Institutions and Monetary Policy, chaired by Rep. Andy Barr (R-KY), held a Nov. 7 hearing focused on an array of federal financial regulations, including the Basel III proposal. Chairman Barr stated that U.S. financial regulators have increasingly ceded portions of their authority to international and domestic intergovernmental organizations, which has decreased transparency in development of U.S. regulatory frameworks and reduced regulators’ accountability. (Barr’s opening remarks, Nov. 7 and Committee memo, Nov. 2) House Financial Services Committee Chairman Patrick McHenry (R-NC) and Subcommittee Chairman Barr recently requested the Government Accountability Office (GAO) to examine the role U.S. federal banking agencies played in developing the recent international Basel proposal. (McHenry-Barr Letter, Oct 20) The Senate Banking Committee announced that top U.S. financial regulators will testify on Nov. 14 about their sweeping plan to increase bank capital requirements. Views from the Regulators Federal banking regulators announced last month an extension of the comment period on the Basel capital proposal from Nov. 30, 2023 to Jan. 16, 2024. Additionally, the agencies announced a quantitative impact study to clarify the estimated effects of the proposal, with data collection due the same date as the comments—Jan. 16. (Fed news releases, Oct 20) While the quantitative impact study is a positive development, the timing of the study fails to provide industry participants with the opportunity to assess its results or comment on the collected data before the Jan. 16 deadline. Regulators often grant the public ample time (120 days) to analyze and comment on such an impact study after it is released. (Roundtable Weekly, Oct. 27) This week, Fed Governor Michelle Bowman criticized the scope of the Basel proposal in two speeches. On Nov. 7 and today, Governor Bowman stated, “While the capital proposal reflects elements of the agreed upon Basel standards, it is not a mere implementation of the Basel standards. In this proposal, the calibration—with a large increase in capital requirements for U.S. firms—far exceeds the Basel standards mandate. There has been growing support for improving the proposal's quantitative, analytical foundations, including the need for and impact of capital increases of this scale.” The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) met in New York City yesterday to discuss the Basel proposal, other federal policies impacting capital and credit issues, and market conditions. RECPAC has established a working group on Basel III to develop comments, due by Nov. 30, on the Basel III Endgame proposal. # # #

November 9, 2023

Sens. Hagerty and Manchin Support Further Analysis of SEC Climate Disclosure Proposal

Q4 Sentiment Index

November 3, 2023

Roundtable Weekly

CRE Executives Report Ongoing Financing and Liquidity Issues Causing Price Discovery Difficulties

Q4 Sentiment Index Quarterly Sentiment Index

Industry executives report commercial real estate asset classes continue to face a variety of challenges centered around higher financing costs, increased illiquidity, and uncertain post-pandemic user demand. Reduced transaction volume has also contributed to difficult price discovery, according to The Real Estate Roundtable’s Q4 2023 Sentiment Index. (RER news release, Nov. 3) Pressures on CRE Assets Roundtable President and CEO Jeffrey DeBoer said, “Commercial real estate is at the front line of change in how people use the built environment in a post-pandemic society. Steep interest rate increases and diminished liquidity caused by regulatory pressures have led to much lower transaction volume and continued uncertainty in price discovery. The challenges facing different asset classes in the broad, complex CRE landscape is reflected in our Q4 Sentiment Index.” The Roundtable’s Sentiment Index—a measure of senior executives’ confidence and expectations about the commercial real estate market environment—is scored on a scale of 1 to 100 by averaging the scores of Current and Future Sentiment Indices. Any score over 50 is viewed as positive. The Q4 Index comes days after the Federal Reserve left its benchmark interest rate unchanged at a 22-year high of 5.4% and stated it remains open to future increases. "The good news is we're making progress," Chair Jerome Powell said." (Associated Press, Fed press release and Fed news conference video, Nov. 1) Q4 Sentiment Index Topline Findings: The Q4 2023 Real Estate Roundtable Sentiment Index registered an overall score of 44, a decrease of two points from the previous quarter. The Current Index registered 32, a one-point decrease from Q3 2023, and the Future Index posted a score of 57 points, a decrease of two points from the previous quarter. These stable indices highlight the persistent challenges faced by participants in the real estate market. Although there are variations among asset classes and even within specific property types, ongoing uncertainty within the broader commercial real estate industry persists due to concerns about liquidity, capital availability, interest rates, and remote work. Bright spots exist in smaller classes, such as data centers, outlet malls, and hotels, while multifamily and industrial continue to attract interest. Within the office sector, class “A” properties with top-of-the-line amenities are the lone high performers. An overwhelming 92% of survey participants indicate that asset values have decreased compared to the previous year. The valuation process has been challenging due to limited transactions, and the combination of current cap rates and fluctuating interest rates has further complicated pricing, ultimately leading to a view that asset values have decreased relative to one year ago. Survey participants express ongoing concerns about the capital markets landscape, with 70% indicating that the availability of equity capital has worsened compared to a year ago, and 86% believing the availability of debt capital is also worse. DeBoer, above, added, “We welcome efforts at all levels of government to incentivize conversions of commercial use to residential use. Yet various CRE markets and asset classes need more time to adapt to the new preferences of clients; more flexibility to restructure their asset financing; and patience while adjusting to the evolving valuation landscape. In addition to conversion activities, The Roundtable continues to urge the federal government to return to the workplace and support measures to assist loan modifications and increase liquidity available to all asset classes and their owners. We also remain opposed to regulatory proposals that impede capital formation.” Some sample responses from participants in the Sentiment Index’s Q4 Survey include: “Your perspective depends on what assets you hold and the strength of your balance sheet.” “The distribution of capital is highly dependent on specific sectors and asset quality.” “There will be a ‘great revaluation’ cycle with more real estate assets priced lower. There haven’t been enough transactions to collect good data, and the transactions that are happening are in the most dire of circumstances, which is driving erratic and less reliable market information.” Data for the Q4 survey was gathered in October by Chicago-based Ferguson Partners on behalf of The Roundtable. See the full Q4 report. # # #

Energy and Tax Policy

November 3, 2023

Roundtable Weekly

Roundtable Recommends Solutions to Ease Compliance with Labor Rules for IRA Tax Incentives

Clean Energy Tax Incentives Energy Policy Inflation Reduction Act Prevailing Wage Tax Policy

The Real Estate Roundtable submitted comments this week encouraging the Treasury Department to provide a compliance “safe harbor” to streamline labor-related requirements necessary to seek “bonus” tax incentives for clean energy building projects under the Inflation Reduction Act (IRA). (Roundtable comment letter, Oct. 30) Prevailing Wage and Apprenticeship Compliance Burdens The IRA allows enhanced tax incentive “bonus rates” for clean energy building projects that pay “prevailing wages” to workers and meet apprenticeship targets. (See RER’s IRA Fact Sheet on Clean Energy Incentives) The Roundtable letter notes that the IRA’s objective to support retrofits and slash carbon emissions in the built environment will be undermined if the costs of labor compliance far exceed the incentives offered by Congress. The comments explain that wage and apprenticeship compliance burdens would dis-incentivize businesses and taxpayers’ to pursue the IRA’s clean energy bonuses, thereby rendering the bonus credits program illusory in many cases. The letter also emphasizes that a regulatory solution to ease the IRA’s paperwork burdens would spur more clean energy projects in buildings—and encourages Treasury/IRS to conduct its own thorough cost-benefit accounting of Prevailing Wage/Registered Apprenticeship (PW/RA) Requirements before issuing a final rule. Contractor Compliance Certifications Sought The “safe harbor” recommendation by The Roundtable would allow building owners/developers to rely on written certifications provided by their General Contractors (GCs), or any other subcontractors (subs), would confirm and fulfill all PW/RA labor requirements. This streamlined approach would reduce the compliance burden and retain the fervor that IRA tax incentives could generate under the IRA. Real estate owners and developers are not the direct employers of electricians, plumbers, HVAC technicians, solar technicians, EV charging installers, or any others that construct or retrofit buildings. GCs and subs directly employ manual laborers. The Roundtable also recommends regulators develop “Recordkeeping Requirements” for PW/RA compliance that reflect the reality of how laborers, mechanics, and apprentices are employed on real estate projects, who is hired by whom, and how hours worked are tracked. Other targeted tax reforms that will help scale real estate’s transformation toward zero emissions are recommended in The Roundtable letter. These include expanding Section 48 of the Code to building electrification technologies; allowing private owner transfers to unrelated third parties under Sections 45L and 179D; and repealing a Section 179D rule that reduces a property’s basis by the amount of the claimed deduction. (Roundtable comment letter, Oct. 30) # # #

Capital and Credit

November 3, 2023

Roundtable Weekly

Roundtable Urges SEC to Exempt Real Estate from Proposed Safeguarding Advisory Client Rule

Capital and Credit Safeguarding Advisory Client Proposed Rule SEC Securities and Exchange Commission

The Real Estate Roundtable urged the Securities and Exchange Commission (SEC) this week to exempt real estate from a proposed Safeguarding Advisory Client Rule that could severely limit advisory clients’ ability to invest by fundamentally changing the ownership and transfer rights of real estate. The proposed rule currently includes a conditional exception for real estate assets, which would impose a new layer of unclear and unnecessary oversight—and inject significant confusion into well-established transaction protections, rules, and procedures governing real estate transactions. (Roundtable letter, Oct. 30 and SEC Proposed Rule) The “Proposing Release” The Oct. 30 letter from Real Estate Roundtable President and CEO Jeffrey DeBoer reiterated current legal protections that promote the safe-keeping of real estate assets held in advisory accounts or funds. DeBoer urged the SEC “… in the strongest possible terms to exclude real estate from the scope of any final [Safeguarding] rule,” citing the ample set of existing protections that prevent real estate assets from fraudulent transfer. The letter also emphasized that the SEC has not coherently explained how the Proposed Safeguarding Rule would apply to real estate. Current law (the “Custody Rule”) under the Investment Advisers Act of 1940 requires an investment adviser to maintain clients’ funds and securities with a qualified custodian. The new proposed SEC rule would expand this requirement to maintain all advisory client assets with a qualified custodian. Since it is not possible to maintain real estate and certain other physical investments with a qualified custodian, the proposal includes a conditional exception that includes the following language: “In the real estate context, a deed or similar indicia of ownership that could be used to transfer beneficial ownership of a property would not qualify for the exception, but the physical buildings or land would qualify.” The Roundtable’s letter challenges this “Proposing Release” as confusing, impractical, and unworkable for holding and transferring real estate deeds. It also conflicts with current state and country chain of custody legal requirements that govern real estate transactions. The letter also notes the SEC could chose to make the conditional exemption available to real property, because a physical asset cannot be maintained with a qualified custodian. Additionally, the requirement to maintain custody of deeds with a qualified custodian—compared to recording the interest with a governmental authority—serves no regulatory purpose. Existing Layers of Safeguards Other existing safeguards come into play. State laws currently require signature verifications, notarizations, and accompanying IDs that provide significant hurdles to an attempted fraudulent transfer. Modern real estate transactions in the United States also require buyers and lenders to obtain title insurance, which involves a title insurance company to engage in substantial due diligence of the chain of ownership. Real estate lawyers representing the buyer and/or seller represent yet another intermediary, since they are often involved in these asset transactions to provide yet another source of gatekeeper protections. The Roundtable letter states the SEC must explain how it would be possible to maintain title or deed with a qualified custodian since the “Proposed Rule would fundamentally change the ownership and transfer rights of real estate.” The letter states the SEC should avoid any final rule that would limit clients’ access to, or unduly burden, investment in the real estate asset class. The Proposing Release also contains no evaluation of any risk of loss for real estate assets—it only asserts such risk as a theoretical matter. The Roundtable and a diverse group of 25 trade associations previously wrote to SEC Chair Gary Gensler to oppose the Safeguarding Advisory Client Rule proposal and explain the negative impacts it would have on investors, market participants, and the financial markets. This week’s letter from The Roundtable focused exclusively on the proposal’s impact on real estate assets. (Roundtable Weekly, Sept. 15) The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) Custody Rule Working Group developed this week’s comments and met today with the SEC’s Division of Investment Management about the proposal. RECPAC is scheduled to meet Nov. 8 in New York City. # # #

Q4 Sentiment Index

November 3, 2023

Press Release

NEWS: CRE Executives Report Ongoing Financing and Liquidity Issues Causing Price Discovery Difficulties

Q4 Sentiment Index

(WASHINGTON, D.C.) — Industry executives report commercial real estate asset classes continue to face a variety of challenges centered around higher financing costs, increased illiquidity, and uncertain post-pandemic user demand. Reduced transaction volume has also contributed to difficult price discovery, according to The Real Estate Roundtable’s Q4 2023 Sentiment Index. Roundtable President and CEO Jeffrey DeBoer said, “Commercial real estate is at the front line of change in how people use the built environment in a post-pandemic society. Steep interest rate increases and diminished liquidity caused by regulatory pressures have led to much lower transaction volume and continued uncertainty in price discovery. The challenges facing different asset classes in the broad, complex CRE landscape is reflected in our Q4 Sentiment Index.” The Roundtable’s Sentiment Index—a measure of senior executives’ confidence and expectations about the commercial real estate market environment—is scored on a scale of 1 to 100 by averaging the scores of Current and Future Sentiment Indices. Any score over 50 is viewed as positive. The Q4 Sentiment Index topline findings include: • The Q4 2023 Real Estate Roundtable Sentiment Index registered an overall score of 44, a decrease of two points from the previous quarter. The Current Index registered 32, a one-point decrease from Q3 2023, and the Future Index posted a score of 57 points, a decrease of two points from the previous quarter. These stable indices highlight the persistent challenges faced by participants in the real estate market. • Although there are variations among asset classes and even within specific property types, ongoing uncertainty within the broader commercial real estate industry persists due to concerns about liquidity, capital availability, interest rates, and remote work. Bright spots exist in smaller classes, such as data centers, outlet malls, and hotels, while multifamily and industrial continue to attract interest. Within the office sector, class “A” properties with top of-the-line amenities are the lone high performers. • An overwhelming 92% of survey participants indicate that asset values have decreased compared to the previous year. The valuation process has been challenging due to limited transactions, and the combination of current cap rates and fluctuating interest rates has further complicated pricing, ultimately leading to a view that asset values have decreased relative to one year ago. • Survey participants express ongoing concerns about the capital markets landscape, with 70% indicating that the availability of equity capital has worsened compared to a year ago, and 86% believing the availability of debt capital is also worse. DeBoer added, “We welcome efforts at all levels of government to incentivize conversions of commercial use to residential use. Yet various CRE markets and asset classes need more time to adapt to the new preferences of clients; more flexibility to restructure their asset financing; and patience while adjusting to the evolving valuation landscape. In addition to conversion activities, The Roundtable continues to urge the federal government to return to the workplace and support measures to assist loan modifications and increase liquidity available to all asset classes and their owners. We also remain opposed to regulatory proposals that impede capital formation.” Some sample responses from participants in the Sentiment Index’s Q4 Survey include: “Your perspective depends on what assets you hold and the strength of your balance sheet.” “The distribution of capital is highly dependent on specific sectors and asset quality.” “There will be a ‘great revaluation’ cycle with more real estate assets priced lower. There haven’t been enough transactions to collect good data, and the transactions that are happening are in the most dire of circumstances, which is driving erratic and less reliable market information.” Responses by survey participants reflect recent, persistent challenges facing certain sectors and assets. In comparison to last quarter, sentiments on current conditions are down by 1 point, perceptions of future conditions are down by 2 points, and overall conditions are down by 2 points. Regarding sentiment on the state of current asset values, 92% of respondents believe they are lower than one year ago, 3% feel they are higher, and 5% believe asset values have remained the same compared to a year ago. This contrasts with the Sentiment Survey one year ago, when only 59% of participants expected asset values would be lower in this Q4 2023, indicating a steep decline in current perceptions of asset values. Survey participants also commented on the availability of equity capital, with 70% noting it is worse compared to one year ago, 3% stating it has improved, and 27% that the availability of equity remains the same. For the availability of debt capital, 86% of participants believe it is worse compared to one year ago, 2% feel it has improved, and 12% believe the availability of debt remains the same. Data for the Q4 survey was gathered in October by Chicago-based Ferguson Partners on behalf of The Roundtable. See the full Q4 report. The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy. # # #

Q4 Sentiment Index

November 3, 2023

Press Release

Q4 2023 Sentiment Survey – Press Release

Q4 Sentiment Index, Quarterly Sentiment Index,

RER Quarterly Sentiment Index

November 3, 2023

Quarterly Sentiment Index

Q4 2023 Roundtable Sentiment Index — full report

Q4 Sentiment Index, Quarterly Sentiment Index,

Capital & Credit

October 31, 2023

Policy Comment Letter

Ohio Division of Securities Division to amend Rule 1301:6-3-09 (the “Proposal”)

Capital Credit,

Capital & Credit, Capital and Credit, SEC Proposed Rulemaking

October 30, 2023

Policy Comment Letter

RER Comment Letter – Proposed Rule on Safeguarding Advisory Client Assets -10-30-23

Safeguarding Advisory Client Proposed Rule,

Clean Energy Tax Incentives, Inflation Reduction Act

October 30, 2023

Policy Comment Letter

Prevailing Wage/Registered Apprenticeship Requirements Under The IRA – 10-30-23

Clean Energy Tax Incentives, Inflation Reduction Act, Prevailing Wage,

Roundtable Leadership

October 27, 2023

Roundtable Weekly

Roundtable Chair John Fish Honored at Annual Lamplighter Awards

Jeffrey DeBoer John Fish lamplighter award Roundtable Leadership Roundtable Statement Statement Jeffrey DeBoer

Roundtable Chair John Fish (Chairman and CEO, Suffolk), right, was honored this week with the Lamplighter Award from the American Friends of Lubavitch (Chabad), along with Senate Majority Leader Chuck Schumer (D-NY) and Kurt Newman, President and CEO of Children’s National Medical Center. (Photo: Mr. Fish with Rabbi Levi Shemtov, left. | Watch Mr. Fish’s powerful comments) Lamplighters The American Friends of Lubavitch (Chabad) is a part of the largest network of Jewish educational, cultural and humanitarian institutions in the world, with branches in all 50 states and over 100 countries on six continents. The annual Lamplighter Awards honor exceptional communal, political, corporate and academic leaders. Several hundred people attended the Oct. 24 event reception and dinner, including 8-12 U.S. Senators; House Democratic Leader Hakeem Jeffries (D-NY) and several House members; 20 Ambassadors from foreign nations; and seven family members of hostages now held in Gaza. Roundtable Leaders’ Comments Mr. Fish commented, “It pains me to discuss the reality that many of us have discussed here this evening. There is, unfortunately, a rise in anti-Semitism and hate in the world today. A reality that played out tragically several weeks ago.” The Roundtable issued an Oct. 13 statement condemning the violence and urging humanitarian aid. Roundtable President and CEO Jeffrey DeBoer, above, gave introductory remarks as the co-chair of the event, stating that each one of the three honorees exemplified a unique combination of leadership and optimism. DeBoer added that Mr. Fish is a selfless person who provides The Roundtable with steady guidance, positive advice, and consistent support in his role as Chairman of the organization. DeBoer asked the Lamplighter audience “… for a moment of silence to internally pledge that each of us will do our part, every minute, hour and day to reject evil, to help those in need, and to embrace the goodness of ethnic and religious diversity worldwide.” (Read DeBoer’s remarks and watch Mr. Fish’s comments) # # #

Property Conversions

October 27, 2023

Roundtable Weekly

Biden Administration Announces Support for Financing Commercial to Residential Property Conversions

Affordable Housing Cities amp Infrastructure Jeffrey DeBoer Property Conversions

The Biden administration today revealed a suite of federal resources—including low-interest loans—to assist commercial to residential conversions that increase housing supply, revitalize urban downtowns, and cut climate pollution. (White House fact sheet; Bloomberg, Oct. 27). Holistic Federal Strategy Roundtable President and CEO, Jeffrey D. DeBoer said, “The pandemic’s indelible impact on where Americans live and work continues to reverberate through the real estate industry, which is at the center of this societal transition. The Roundtable supports innovative policy that reimagines the adaptive reuse of CRE, rejuvenates affordable housing and urban downtowns, and addresses the climate crisis. The guidance released by the White House today checks all these boxes—and bolsters our agenda to improve the health of our cities, local tax bases, and small businesses.” Among the actions announced today, conversion projects located near mass transit hubs would be eligible for low-interest financing under U.S. Department of Transportation programs. “TIFIA” and “RRIF” loans are pegged to US Treasuries at 5.03 percent interest (today’s rates). Transit-oriented projects supported by TIFIA and RRIF financing do not require affordable housing units—although they can be “stacked” with projects supported by low-income housing tax credits and local laws may have independent inclusionary zoning mandates. (FAQs on project eligibility) The White House announcement also directs the General Services Administration (GSA) to identify “surplus” federal properties that private developers may help to convert to housing. A fact sheet summarizing the administration’s actions indicates that training workshops will be held this fall for real estate owners, developers, and lenders on how to use federal programs included in the White House’s new “Commercial to Residential Conversions” guidebook, which describes how 20 programs across six federal agencies can be used to support adaptive re-use projects. The Administration’s guidebook also explains how mortgage insurance and grants from the Department of Housing and Urban Development (HUD) can leverage state, local, and private sector capital as layers in the capital stack to support adaptive reuse. Adaptive Reuse a “Win-Win” Real estate market conditions with high office vacancies “present[ ] an area of opportunity to increase housing supply while revitalizing Main Streets,” said National Economic Council Director Lael Brainerd. “It’s a win-win.” (POLITICOPro, Oct. 27) (WH Council of Economic Advisors blog post) White House efforts to assist property conversions lands as national office vacancy stands at nearly 18 percent—with some major metro areas experiencing vacancies higher than one-fifth of their entire inventory—according to a report from analytics firm Yardi Matrix released on Thursday. (Commercial Observer, Oct. 26) Architectural firm Gensler released a report on Monday that estimates 25% of under-performing U.S. office properties are suitable candidates for conversion projects. The initiative builds on the Biden Administration’s announcement last July to boost the nation’s housing supply. (Roundtable Weekly, July 28). The Roundtable will continue to serve as a conduit between our members and the Biden Administration to help design impactful policies that can assist with office to residential conversions. # # #

Energy And Climate Policy

October 27, 2023

Roundtable Weekly

US-DOE Lauds CRE’s Efficiency Gains and Carbon Reductions

Better Buildings Initiative Dept of Energy Building Emissions Energy and Climate Policy Energy Efficiency

Roundtable members are among the commercial real estate partners recognized in the U.S. Department of Energy’s (DOE) Better Buildings Initiative 2023 progress report released on Monday. This voluntary public-private partnership with more than 900 participating organizations has collectively saved $18.5 billion through energy efficiency improvements, and cut carbon dioxide emissions by nearly 190 million metric tons, since its launch in 2011. (DOE’s Better Buildings Initiative Report and PoliticoPro, Oct. 23) DOE’s CRE Partners This week’s Progress Report from DOE shows that more than 165 partners from various industry sectors who participate in its separate Better Climate Challenge have committed to reducing greenhouse gas (GHG) emissions (scope 1 and 2) by at least 50% over 10 years without the use of offsets. The report’s outstanding GHG Emissions Reduction Goal Achievers include companies led by RER members. The Real Estate Roundtable and several of its partner real estate organizations—including the National Multifamily Housing Council (NMHC), American Hotel & Lodging Association (AHLA), Building Owners & Managers Association International (BOMA), Pension Real Estate Association (PREA), and Urban Land Institute (ULI)—are noted in the report as Industry Organization Partners. U.S. Secretary of Energy Jennifer M. Granholm said, “To meet President Biden’s ambitious climate goals, the public and private sector need practical pathways to reduce emissions while cutting costs—and that’s exactly what they get from DOE’s Better Building Initiative.” (DOE news release and the report’s Commercial Real Estate Sector Spotlight) Tools and Best Practices DOE’s partners represent almost every sector of the American economy: nearly 30 of the country’s Fortune 100 companies, nearly 20 of the top 50 U.S. employers, 14% of the U.S. manufacturing energy footprint, and 13% of total commercial building space, as well as more than 90 state and local governments. The DOE report also provides case studies for collaborations across sectors to access insights, strategies, and through the agency’s “Decarbonization Resource Hub.” DOE’s Better Buildings Initiative website provides extensive resources on the agency’s wide-ranging effort to partner with leaders in the public and private sectors to make the nation’s commercial buildings, industrial plants, and homes more energy-efficient by accelerating investment and sharing successful best practices. # # #

Capital and Credit

October 27, 2023

Roundtable Weekly

Federal Regulators Announce Extension of Comment Period and Quantitative Impact Study on Basel III Proposal

Basel III Capital and Credit Halting ProCyclical Policy Measures and Increases in Regulatory Capital The Fed

U.S. banking regulators issued two announcements on Oct. 20 related to their sweeping set of proposed rules to increase capital requirements for the nation's largest banks, which could significantly affect liquidity available for commercial real estate transactions, impact asset values, and influence economic growth. The proposal, known as the “Basel III Endgame,” is the last major regulatory response designed to address failures from the global financial crisis of 2007-2008. (Bloomberg and Reuters, Oct. 20 | Roundtable Weekly, July 28) Stakeholder Comments The Federal Reserve, Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) announced an extension of the comment period on the Basel capital proposal from Nov. 30, 2023 to Jan. 16, 2024. Additionally, the agencies announced a quantitative impact study to clarify the estimated effects of the proposal, with data collection due the same date as the comments – Jan. 16. (Fed news releases, Oct 20) While the quantitative impact study is a positive development, the timing of the study fails to provide industry participants with the opportunity to assess its results or comment on the collected data before the Jan. 16 deadline. Regulators often grant the public ample time (120 days) to analyze and comment on such an impact study after it is released. The Basel proposal will be among the topics discussed at The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) Nov. 8 meeting in New York. RECPAC welcomes membership input as it works on a comment letter on the announcements and proposal. (Contact Roundtable Senior Vice President Chip Rodgers) In July, the regulators jointly approved the 1,100-page proposed rulemaking, which would substantially revise the regulatory capital framework for banking organizations with total assets of $100 billion or more Real Estate Roundtable President and CEO Jeffrey DeBoer stated in a March 2023 comment letter to Fed Vice Chair Michael Barr and other key regulators, "At this critical time, it is important that the agencies do not engage in pro-cyclical policies such as requiring financial institutions to increase capital and liquidity levels to reflect current mark to market models. These policies would have the unintended consequence of further diminishing liquidity and creating additional downward pressure on asset values. Congressional Opposition Last week, House Financial Services Committee Chairman Patrick McHenry (R-NC), above, and Financial Institutions and Monetary Policy Subcommittee Chairman Andy Barr (R-KY) requested the Government Accountability Office (GAO) to examine the role U.S. federal banking agencies played in developing the recent Basel proposal. (McHenry-Barr Letter, Oct 20) Previously, McHenry and more than two dozen Republicans on the committee urged banking regulators to withdraw their proposal in a Sept. 13 letter sent in conjunction with the committee hearing, “Implementing Basel III: What’s the Fed’s Endgame?” The House Republicans’ letter claimed the scope and process of the banking regulators’ plan is flawed, and noted how the proposal was opposed by some members on the Federal Reserve and FDIC Boards. Their letter concluded, “Given those fatal problems with your Basel III Endgame proposal, we urge that it be withdrawn.” Goldman Sachs’ 10,000 Small Businesses Voices recently announced the launch of a multifaceted national media campaign that will urge the Federal Reserve to abandon the proposed Basel III Endgame regulation. The campaign will feature new survey data showing 87% of small business owners say it is important for their elected officials to weigh in with The Fed about the impact of new bank capital requirements. # # #

Financial Stability

October 27, 2023

Roundtable Weekly

Potential CRE Losses Cited as Major Economic Concern in Fed’s Financial Stability Report

Capital and Credit CRE Economic Growth amp CRE Return to Office The Fed Workplace Return

Elevated commercial real estate valuations are increasingly viewed as a near-term risk that could stress the U.S. financial system, according to the Federal Reserve’s October 2023 Financial Stability Report. The central bank’s semiannual report also cited inflationary pressures, interest rate increases, and global economic volatility as vulnerabilities—even though survey data was collected before the recent escalation of geopolitical tensions in the Middle East. (Fed’s Financial Stability Report, Oct. 2023) CRE Risk Emphasized Seventy-two percent of all participants in the Fed’s survey cited the potential for large losses on commercial real estate and residential real estate—along with persistent inflation and monetary tightening—as major risks. The CRE asset valuation problem noted in the Fed Report is influenced by an ongoing lack of price discovery, which creates significant refinancing challenges. GlobeSt reported Oct 24 on the report, noting that “With transactions down and many sellers holding off, waiting for improved pricing while a lot of buyers look for bargains in distress, it’s hard to tell how much properties should be worth.” WorkPlace Return Pressure The Fed report warns, “If the economy were to slow unexpectedly … investor risk appetite and asset prices might decline, and valuations in the office building sector appear particularly vulnerable given the ongoing uncertainty surrounding post-pandemic norms regarding return to work. A correction in office property valuations accompanied by even a mild recession could result in significant losses for a range of financial institutions with sizable exposures, including some regional and community banks and insurance companies.” As workplace return concerns linger, The Wall Street Journal reported on Oct. 21 about how cities are developing proposals to recast office districts into neighborhoods where people live, work and raise families. (WSJ, “America’s Downtowns Are Empty. Fixing Them Will Be Expensive”) Additional risks that continued to feature prominently in the Fed survey were associated with the reemergence of banking-sector stress, market liquidity strains, and volatility. # # #

Roundtable Leadership

October 27, 2023

Statement - Jeffrey DeBoer

Jeffrey DeBoer Comments – 2023 Lamplighter Awards Dinner

lamplighter award, Statement Jeffrey DeBoer,

Fall Roundtable Meeting

October 20, 2023

Roundtable Weekly

Policymakers and Roundtable Members Discuss Domestic and Global Issues Impacting CRE

Roundtable Meeting

This week’s Real Estate Roundtable Fall Meeting focused on financing and liquidity issues; housing shortages and the damaging impact that widespread remote work has on cities, small businesses and real estate markets. Additionally, mitigating policy initiatives were discussed, including: additional regulatory action on maturing loans; legislation to facilitate greater building conversions to housing; and technical tax proposal to address cancelled debt, extend opportunity zones and other matters. Regulations implementing last year’s “climate” related laws were also a topic. Photo: Roundtable Chair John Fish (Chairman & CEO, Suffolk) Overcoming the ongoing impasse regarding the election of a new Speaker of the House of Representatives was frequently cited as crucial to advancing any legislation, including funding the government and providing assistance to Israel and Ukraine. (The Roundtable’s Oct. 13 Statement on the recent violence in Israel and its Fall 2023 Policy Priorities and Executive Summary, Oct. 16) Speakers & Policy Issues Roundtable members engaged in policy issue discussions with the following guests: Tom Barkin, President and CEO, Federal Reserve Bank of RichmondRichmond Fed President Barkin (above, with Roundtable Board Secretary Jodi McLean, Chief Executive Officer, EDENS) acknowledged how rising interest rates have hit CRE hard as the Fed aggressively moves to fight inflation. He also suggested recent data shows consumer demand is weakening, which may help to fight inflation. (Reuters | MarketWatch | Wall Street Journal, Oct. 17) Sen. Mike Rounds (R-SD) As a member of the Senate Banking, Housing, and Urban Affairs Committee, Sen. Rounds (right, with Roundtable Board Member Ross Perot, Jr., Chairman, The Perot Companies and Hillwood) offered his insights into how capital and credit market volatility affects housing policy. He also discussed property insurance costs, supply side issues, and the rising national debt. Sen. Kevin Cramer (ND) Sen. Kramer also discussed capital liquidity issues and his serious concerns about foreign aid for Ukraine, Israel, and Taiwan amid turmoil in House leadership. Rep. Ritchie Torres (D-NY) Rep. Torres (D-NY), gesturing above, discussed the violent, murderous attack on Israel and its citizens. He also engaged in a panel discussion on affordable housing, transit-oriented development, and real estate markets with Roundtable Board Members Owen Thomas, left, (Chairman and CEO, BXP); Mark Parrell, 2nd from left, (President and Chief Executive Officer, Equity Residential); and Roundtable President and CEO Jeffrey DeBoer, right. (See The Roundtable’s Oct. 13 Statement on the recent attack) John Podesta, White House Senior Advisor for Clean Energy Innovation and Implementation [Photo: John Podesta, left, with Roundtable Board Member Tony Malkin (Chairman, President, and CEO, Empire State Realty Trust and Chair of The Roundtable’s Sustainability Advisory Committee)]. Mr. Podesta spoke with Roundtable members about the implementation of the Inflation Reduction Act’s expansive clean energy and climate provisions. Gov. Kathy Hochul (D-NY) Gov. Hochul addressed real estate as a crucial economic force in New York State, noting the negative impact of remote work in New York City. She also discussed efforts to combat NIMBYism and the role of tax incentives and office conversions to jump-start affordable housing development. Next on The Roundtable's meeting calendar is the all-member Annual Meeting, whick will include policy advisory committee meetings, on January 23-24, 2024 in Washington, DC. # # #

Roundtable Leadership

October 20, 2023

Roundtable Weekly

The Roundtable’s Board of Directors Announces Blackstone’s Kathleen McCarthy as Chair-Elect

Board of Directors Kathleen McCarthy Roundtable Leadership

The Real Estate Roundtable’s Board of Directors has elected Kathleen McCarthy (Global Co-Head of Blackstone Real Estate) as Chair-Elect to begin her three-year term as Roundtable Chair on July 1, 2024. Roundtable Chair-Elect Chair-Elect McCarthy will succeed Roundtable Chair John Fish (Chairman & Chief Executive Officer, Suffolk) on July 1. “The Real Estate Roundtable and its Board of Directors are thrilled to announce Kathleen McCarthy as our Chair-Elect,” said Mr. Fish. “Kathleen is an extraordinary leader in the real estate industry and has been a key contributor to The Roundtable’s mission as a member of our Board. Her extensive experience and expertise as co-head of the world’s largest real estate platform brings a unique and invaluable perspective to our policy discussions.” Mr. Fish added, “Kathleen’s fact-based approach and understanding of policies impacting commercial real estate will help advance policies that benefit communities, create jobs and accelerate economic growth. I am delighted that Kathleen will be the next Chair of The Real Estate Roundtable.” Ms. McCarthy stated, “I am deeply honored to have the opportunity to serve as Chair of the Real Estate Roundtable and build upon the important work being done by John, Jeff and the entire Roundtable team. The opportunities and challenges facing our industry require innovative approaches and strong engagement between the public and private sectors. Advocacy for policies in an industry that touches so many aspects of everyday life is crucial and I'm committed to advancing our sector for the benefit of communities across the nation." Blackstone Real Estate is the largest owner of commercial real estate globally with a $585 billion real estate portfolio and $333 billion in investor capital under management (as of June 30, 2023). Roundtable President and CEO Jeffrey D. DeBoer commented, “I am excited about our Board’s decision to select Kathleen McCarthy as our Chair-Elect, and look forward to working more extensively with her as we continue The Real Estate Roundtable’s solid track record of driving change in our industry for the benefit of all stakeholders.”# # #

Workplace Return

October 20, 2023

Roundtable Weekly

Senate Bill Introduced to Define Federal Remote Work Roles; GSA Inspector General to Investigate Agency Telework Policies

Remote Work Return to Office Telework Workplace Return

Sens. James Lankford (R-OK) and Kyrsten Sinema (I-AZ) recently introduced the Telework Reform Act to codify government definitions of remote work and improve the accountability and transparency of federal telework programs. Meanwhile, the Inspector General of the General Services Administration (GSA) confirmed an audit is underway that is focused on how the agency manages telework and remote positions for over one million federal workers. (Lankford news release, Oct. 12 | Senate bill S. 3015) | Washington Times, Oct. 18) Congressional Efforts The Senate legislation would require teleworking federal employees to return to their offices at least twice per two-week pay period. The bill also includes measures that would enforce annual reviews of telework agreements, mandate training for managers, and improve performance management, data accuracy, and cyber-security. (Government Executive, Oct. 13 and Federal News Network, Oct. 17) Separately, Sen. Joni Ernst (R-IA) is seeking to add an amendment to federal spending bills that would force agencies to provide details on the cost of telework. “There’s no better way to start paying off our nation’s over $33 trillion debt than a clearance sale on unused office space.” (Washington Times, Oct. 18 | BGov, Sept. 14) A recent letter from the GSA’s Inspector General to Sen. Ernst confirmed the IG's oversight investigation into the agency’s telework policies. (Washington Times, Oct. 18) As the largest landlord in the United States, GSA’s Public Buildings Service (PBS) owns and leases more than 8,800 assets and maintains an inventory of more than 370 million square feet of rentable workspace. (GSA Strategic Plan Fiscal Years 2022-2026) The Senate actions come as a House subcommittee announced it will hold a second hearing on federal agencies’ post-pandemic telework policies. (See Roundtable Weekly, Sept. 15 for coverage of the first hearing). Remote work legislation passed by the House in Feb. 2023—The Stopping Home Office Work’s Unproductive Problems Act (SHOW UP Act)—was introduced in the Senate (H.R. 139 and S. 1565) in May by Sen. Marsha Blackburn (R-TN). The companion bill would require agencies to “reinstate and apply the telework policies, practices and levels ... in effect on December 31, 2019” within 30 days of the bill’s enactment. (Blackburn news release, May 11 and Government Executive, May 16). Language similar to the SHOW UP Act is included in House-passed appropriations legislation. (Roundtable Weekly, Sept. 15) Roundtable Advocacy The Real Estate Roundtable has urged President Biden and national policymakers for months to end government policies that encourage remote working arrangements for federal employees. (RER letter to President Biden, Dec. 2022; RER letter to Senate, April 2023) In April, the White House Office of Personnel Management announced it was ending its “maximum telework” directive to federal agencies (Roundtable Weekly, April 21) In August, the White House ordered Cabinet officials to increase the return of federal employees to their offices. (Roundtable Weekly, Aug. 11) Real Estate Roundtable President and CEO Jeffrey DeBoer, repeatedly has emphasized that remote working by federal employees is undermining the health of cities, local tax bases, and small businesses. (Commercial Observer and The Hill, April 14) # # #

Beneficial Ownership

October 20, 2023

Roundtable Weekly

Roundtable and Industry Coalition Urge Treasury to Delay January Implementation of Beneficial Ownership Rules

Beneficial Ownership Beneficial Ownership amp the Corporate Transparency Act Capital and Credit

The Real Estate Roundtable and a coalition of eight other national real estate groups on Oct. 13 urged Treasury Secretary Janet Yellen to delay implementation of new “beneficial ownership” rules, which will significantly impact real estate. The new regulations—scheduled to take effect on Jan. 1, 2024 under the Corporate Transparency Act (CTA)—would be implemented by Treasury’s Financial Crimes Enforcement Network (FinCEN). (Coalition letter, Oct. 13) BOIR Proposal Many real estate businesses will face a heavier compliance burden at a time when the industry faces economic challenges from decreasing office usage, and diminishing credit capacity. The businesses impacted could include numerous legal entities that own and operate real property across all asset classes as domestic corporations, LLCs and similar entities, along with foreign entities registered to do business in the United States. FinCEN will be tasked with collecting and housing a centralized federal government database containing extensive, sensitive personal identifiers of the owners, senior employees, and/or advisors of certain businesses. Those entities will be required to report information about their “beneficial owners” who own at least 25% of the business or indirectly exercise “substantial control” over it. (Roundtable Weekly, Sept. 15) On Sept. 27, FinCEN proposed a minor change to the current 30-day deadline for filing an initial Beneficial Ownership Information Return (BOIR). The proposal would extend the deadline to 90 days for reporting companies that were created or registered on or after Jan. 1, 2024 and before Jan. 1, 2025. No other changes were made to the final beneficial ownership reporting rule (Holland & Knight Alert, Sept. 28) Opposition to CTA The real estate coalition’s Oct 13 letter echoes congressional opposition to the implementation of the CTA and its beneficial ownership rules. House Financial Services Committee Chairman Patrick McHenry (R-NC), above, has introduced legislation—the Protecting Small Business Information Act of 2023 (H.R. 4035)—that would delay when the CTA’s beneficial ownership reporting requirements would go into effect. (McHenry news release, June 12) The Roundtable and a broad coalition representing millions of businesses throughout the country wrote to Chairman McHenry last month in strong support of his legislation. (Coalition letter, Sept 12) The Roundtable is part of a broad coalition of business trade groups that supports a National Small Business Association legal challenge (NSBA v. Janet Yellen) on the constitutionality of the Corporate Transparency Act (CTA), which became law in Jan. 2021. (Coalition statement of support, Dec. 7, 2022 and NSBA’s website on the CTA) # # #

Beneficial Ownership

October 19, 2023

Policy Comment Letter

Real Estate Industry Coalition Letter Requesting Implementation Delay of Beneficial Ownership Rules

Beneficial Ownership, Beneficial Ownership amp the Corporate Transparency Act, Corporate Transparency Act CTA,

Roundtable Leadership

October 19, 2023

Press Release

The Real Estate Roundtable’s Board of Directors Announces Blackstone’s Kathleen McCarthy as Chair-Elect

Board of Directors Kathleen McCarthy Roundtable Leadership

Roundtable Statement

October 13, 2023

Roundtable Weekly

Roundtable Condemns Violence; Urges Humanitarian Aid

DeBoer Jeffrey DeBoer Roundtable Statement Statement Jeffrey DeBoer

The Real Estate Roundtable today issued the following statement: "The Real Estate Roundtable strongly condemns last weekend’s violent, murderous attack on Israel and its citizens. Long standing regional conflicts cannot justify this abhorrent behavior. We urge all civilized people and organizations to stand in opposition to it, and to provide assistance to mitigate the rapidly growing humanitarian crisis."

Policy Landscape

October 13, 2023

Roundtable Weekly

House GOP Turmoil Continues; Roundtable Leaders Address Issues Facing CRE

Congress Policy Landscape

House Republicans continued their divided struggle this week to identify a new Speaker after removing Kevin McCarthy (R-CA) last week. Meanwhile, Congress faces increasing pressure to pass foreign aid for Israel and Ukraine, followed by a spending bill to avoid a partial government shutdown on Nov. 17. When House GOP leadership is eventually elected, pending real estate-related tax proposals in the lower chamber may depend on whether policymakers are able and willing to expand the scope of negotiations over a bill to fund the government. (Roundtable Weekly, Oct. 5) Speaker Search The House has been unable to pass legislation without a Speaker since Oct. 5. Today, House Republicans nominated Rep. Jim Jordan (R-Ohio) for Speaker, although he will need to be elected with 217 votes from all Representatives, included the divided GOP caucus. (The Hill, Oct. 13) Also today, four centrist Democrats offered to give Acting Speaker Patrick McHenry (R-NC) “temporary, expanded authorities” to bring urgent funding bills to the House floor for votes. The letter, led by Rep. Josh Gottheimer (D-N.J.), is an offer to Republicans who may also support empowering McHenry to act on spending bills. (Politico and Democrats’ letter to McHenry, Oct. 13) The letter proposes authorities for the Speaker Pro Tempore to introduce legislation on the following: Foreign aid emergency supplemental funding for Ukraine and Israel; Extending current continuing resolution through January 11, 2024, to prevent a looming government shutdown; and, Committee and floor consideration of remaining FY24 appropriations bills. CRE Issues Recent media interviews featured Roundtable leadership discussing industry challenges that will also be addressed by RER members, lawmakers and regulators during The Roundtable Fall Meeting in Washington next week. On Oct. 6, Roundtable Chair John Fish (Chairman & CEO, SUFFOLK) talked about developments in remote work, housing costs, interest rates, and construction supply on Bloomberg’s The Tape podcast. (Scroll to 30:00 to begin Fish interview) Roundtable Board Member Kathleen McCarthy (Blackstone Global Co-Head of Real Estate) appeared on CNBC’s Halftime Report 28 to discuss sector variation in commercial real estate, creating value in a dislocated environment, and more. "Different sectors are traveling at different speeds," said McCarthy, who addressed activity in data centers, logistics, and student housing. Roundtable President and CEO Jeffrey DeBoer discussed a range of policy issues facing the industry on Sept. 26 as part of a Marcus & Millichap webcast, “A Conversation with Lloyd Blankfein, Former Chairman and CEO of Goldman Sachs, on the Economy and Commercial Real Estate with Insights from Industry Leaders.” Marcus & Millichap President and CEO Hessam Nadji and former Chairman and CEO of Goldman Sachs Lloyd Blankfein led the webcast discussion on economic issues, including Federal Reserve policy impacting the commercial real estate market. CRE industry leaders Tom McGee, President and CEO of ICSC and Sharon Wilson Géno, President of NMHC also joined the conversation.

Tax Policy

October 13, 2023

Roundtable Weekly

Supreme Court Case Challenges Federal Taxation of Unrealized Income

Supreme Court Tax Policy Unrealized Gains Billionaire Tax

This week, the Supreme Court announced it will hear oral arguments on Dec. 5 in a case—Moore v. United States—challenging the federal government’s right to tax unrealized gains. (PoliticoPro, Oct. 12) Moore Consequences The question raised by the petitioners in Moore, and granted certiorari by the Supreme Court in June, is whether the 16th Amendment authorizes Congress to tax unrealized sums without apportionment among the states. Specifically, the case involves a Washington state couple with an interest in an India-based corporation who are challenging a 2017 mandatory repatriation tax on foreign earnings as an unconstitutional levy on unrealized gains. Outside legal and tax commentary and analysis have suggested the case could have far-reaching consequences for both the existing tax code and pending legislative proposals, depending on how the decision is drafted. A recent report from the Urban-Brookings Tax Policy Center report estimates that a ruling in favor of the petitioners could result in tax revenue losses exceeding $100 billion annually. Estimates of revenue losses from the Tax Foundation range as low as $3.5 billion and as high as $5.7 trillion in the unlikely event the Supreme Court were to strike down taxes on all undistributed business earnings, whether earned domestically or from foreign sources. Policy Ramifications A Supreme Court decision in favor of the petitioners could also undercut President Biden’s proposal to tax the unrealized real estate and other gains of wealthy taxpayers. The President and influential lawmakers such as Senate Finance Chairman Ron Wyden (D-OR) have proposed new mark-to-market taxes on assets based on annual changes in asset values rather than specific realization events. (Roundtable Weekly, Sept. 19, 2019) The Real Estate Roundtable has consistently opposed the proposals to tax unrealized gains since they first emerged in 2019 (Sen. Wyden, Treat Wealth Like Wages, 2019). JCT Memo On Oct. 3, in a letter to House Ways and Means Ranking Democrat Richie Neal (D-MA), the Joint Committee on Taxation (JCT) provided an analysis of how a ruling for the petitioners in Moore could impact the tax code. JCT informed Rep. Neal that partnership taxes, taxation of shareholders of S corporations, and taxes on mark-to-market valuations also could be implicated in the outcome. The income of real estate mortgage investment conduits, or REMICs, also may be affected, according to JCT’s memo. Alternatively, notes JCT, the Court could rule that the mandatory repatriation tax is a tax on realized income, in which case it could “leave unanswered the question of whether the Constitution imposes a realization requirement.” (JCT memo, p. 2)

CRE By The Numbers

October 13, 2023

Industry Report

CRE By The Numbers 9-28-2023

CRE, CRE By The Numbers,

October 13, 2023

RER Policy Priorities

Fall 2023 Executive Summary

Building Performance Standards BPS, Cities amp Infrastructure, Clean Energy Tax Incentives, Corporate Disclosure, Cyber Risks, Foreign Investment, Healthy Buildings, Infrastructure, LikeKind Exchanges LKEs, National Flood Insurance Program NFIP, Pandemic Risk Insurance Program, PassThroughs, Property Conversions, Remote Work, Reporting on Climate Risks, Tax Policy, Unrealized Gains Billionaire Tax, Wave of Maturing CRE Debt, Workplace Return,

October 10, 2023

2024 Meeting Calendar

Tax Policy

October 6, 2023

Roundtable Weekly

Path Uncertain for Pending Tax Legislation as Implementation of Energy Tax Incentives Continues

Clean Energy Tax Incentives Tax Policy

The possibility of an end-of-year tax package faces an uncertain path and timeline as House GOP policymakers consider new leadership in the wake of this week’s historic vote to remove Kevin McCarthy (R-CA) as Speaker. Another layer of unpredictability is government funding, which is scheduled to expire Nov. 17 following last week’s passage of a continuing resolution to avert a partial government shutdown. House Measures In June, the House Ways and Means Committee approved a proposed tax legislative package along party lines that includes measures on business interest deductibility and bonus depreciation. The bill stalled due to differences in the GOP caucus over a boost in the $10,000 deduction cap on state and local taxes (SALT). (Roundtable Weekly, June 16) Prospects for the Ways and Means tax package, other expired provisions such as the expanded child tax credit, and pending real estate-related tax proposals may depend on whether Congressional leaders are able and willing to expand the scope of negotiations over a bill to fund the government. (Roundtable Weekly, Sept. 29) Real estate-related tax proposals under consideration and supported by The Roundtable include cancellation of indebtedness tax relief for commercial real estate loan restructurings; a tax credit for converting older office and other commercial buildings to housing; and an extension of deadlines for Opportunity Zone investments. Regulatory Implementation On Oct. 17, The Roundtable’s Fall Roundtable Meeting will feature a discussion on Inflation Reduction Act (IRA) incentives impacting CRE. (See Roundtable Clean Energy Tax Incentives Fact Sheet, July 31) Last week, Treasury issued new guidance that provides clarity for single and multifamily home builders seeking to qualify for the expanded energy efficient home credit (45L). (Treasury news release, Sept. 27 and Tax Notes, Sept. 28) Also last week, Treasury provided new information on the process for taxpayers to apply for bonus tax credits for solar and other renewable investments made in low-income communities or in low-income housing developments. (See The Roundtable’s chart, “Base” and “Bonus Rate” Amounts Relevant to Commercial and Multifamily Buildings, May 25). For more information on energy tax incentives available to real estate under the Inflation Reduction Act, see The Roundtable’s Clean Energy Tax Incentives Fact Sheet, July 31) # # #

Property Conversions

October 6, 2023

Roundtable Weekly

Educational Institutions Increase Office Acquisitions; CRE Adaptive Reuse Rises

CRE Trends Property Conversions

Recent CRE research shows an increasing number of colleges and universities are acquiring office buildings for adaptive reuse. Meanwhile, an overall surge in U.S. office-conversion projects scheduled for completion this year represents more than double the average annual pace. Federal, state and local conversion-incentive programs could play an important role going forward. (New York Times, Oct. 3 and CBRE, Rise in Office Conversions May Help to Reinvigorate Cities, Sept. 27) Conversion Trends Data from JLL cited in this week’s New York Times article shows dozens of U.S. institutions of higher education have bought office buildings since 2018—including 49 four-year private schools and 16 four-year public institutions—often for conversion to academic use. Separately, CBRE research published Sept. 27 shows that a surge in office-conversion projects in major U.S. cities this year (nearly half of them in the multifamily sector) may help urban economies recover after the pandemic-induced shift to hybrid working. (Commercial Property Executive, Oct. 2 and GlobeSt, Sept. 29) The CBRE report shows that 60 million square feet of office conversions are planned or in progress in 40 U.S. markets, which represents 1.4 percent of the nation’s office inventory. The report also notes that, despite a variety of government incentive programs, adaptive reuse is not a panacea for problems facing the U.S. office market, especially in a high interest rate environment. Role of Policy An Oct. 16 discussion during The Roundtable’s Fall Meeting in Washington, DC will address policy initiatives impacting building conversions, and other challenges facing CRE, during The Roundtable’s Fall Meeting in Washington, DC. The Roundtable strongly supports policies that provide incentives for office-to-residential conversions. Last Dec, The Roundtable urged the Biden administration to support "legislation to facilitate the increased conversion of underutilized office and other commercial real estate to much-needed housing." (RER letter to President Biden, Dec. 12, 2022 and Roundtable Weekly, Aug. 11, 2023) This week, Roundtable Senior Vice President Chip Rodgers joined a group of business groups’ representatives to brief the staff of the House Financial Services Subcommittee on Financial Institutions and Monetary Policy, and the Subcommittee on Capital Markets. The Oct. 2 briefing emphasized the need for policymakers to address dislocations in the office market by 1) incentivizing the conversion of outmoded office properties to residential use to help meet the nation’s housing needs; and 2) requiring federal government workers return to their offices. Federal government programs will incentivize local jurisdictions to pursue office-to-residential conversions, according to CBRE. Federal incentives also aim to encourage financing mechanisms to build and preserve more housing, while reducing land-use and zoning restrictions for affordable and zero-emissions housing. (CBRE, Sept. 27) A Real Estate Roundtable property conversions working group has worked with lawmakers for several months on draft legislation to create a tax credit for converting older commercial buildings to housing. # # #

Capital and Credit

September 29, 2023

Roundtable Weekly

2023 Loan Extensions Increase as Lenders and Borrowers Seek Workouts

Capital and Credit Loan Modifications Restoring Liquidity in CRE Markets and Protecting Capital Formation The Fed

Approximately $5.65 billion in commercial real estate loans have been modified with extensions in 2023, with nearly 73% of the total from the office sector, according to a recent Trepp report. The rise in loan extensions—sparked by higher interest rates, lower valuations, and remote work—also come at a time when commercial mortgage-backed securities (CMBS) have been subdued. (Trepp CRE Research Report) Modification Trend Trepp reported that term increases of 1-12 months comprised the largest share (37%) of extensions. The largest quarter upon maturity came in Q2 2023, when $957 million in loans were extended. Office properties comprised 72.9% of the total $3.2 billion in loan extensions, or roughly $2.4 billion. Trepp stated, “Of all property types, the office sector faces the steepest refinancing challenges as office properties are struggling with occupancy and financial performance in the post-pandemic era.” (Trepp CRE Research Report) The increase in modifications follows a joint policy statement from federal regulators in June that encouraged financial institutions to work with borrowers on pending loan maturities. (Agencies’ joint statement, June 29 and National Law Review, July 9) Roundtable Advocacy In March, The Roundtable had originally requested that federal regulators accommodate commercial real estate borrowers and lenders as the industry continued to endure a difficult time of historic, post-pandemic transition—and enthusiastically welcomed the Agencies’ subsequent, joint action. (Roundtable Weekly, June 30 and Roundtable letter to regulators, March 17) During a Sept. 26 Marcus & Millichap webcast, Roundtable President and CEO Jeffrey (above) said, “We’re seeing some impact. Trepp put out a report about loan modifications and extensions. Time is the most important aspect for the most challenged part of our industry, office. We have to let time settle in and let businesses and employers determine how they want to use office space going forward.” Additionally, bipartisan legislation (H.R. 5580) introduced in the House last week would reduce the tax burden on a borrower that can arise when a troubled commercial real estate loan is modified as part of a debt workout. The Tenney-Higgins bill would build on existing tax provisions by effectively deferring cancellation of debt (COD) income. (Roundtable Weekly, Sept. 22) The legislation, introduced by Reps Claudia Tenney (R-NY) and Brian Higgins (D-NY), could help smooth the transition to a healthy and stable post-pandemic real estate market. The Roundtable’s DeBoer was quoted in support of the House legislation by GlobeSt, Connect CRE, and Commercial Observer. Capital and credit policy issues facing CRE, especially office assets, will be among the topics discussed during The Roundtable’s Oct. 16-17 Fall Meeting (Roundtable-level members only) in Washington. # # #

Policy Landscape

September 29, 2023

Roundtable Weekly

Partial Government Shutdown Would Impact Policies Important to CRE

National Flood Insurance Program NFIP Policy Landscape

A partial government shutdown looks likely to begin after midnight on Sept. 30 as House and Senate policymakers pursue different short-term funding bills amid hardened resistance from conservative Representatives to pass any continuing resolution (CR) without certain concessions. (The Hill’s live updates and ABC News Sept. 29) Lapse in Program Funding A lapse in funding could impact the industry by suspending the National Flood Insurance Program (NFIP), the Securities and Exchange Commission’s (SEC) rulemaking on climate disclosure, and the Treasury Department’s expected guidance on the energy efficient commercial buildings deduction under section 179D. (New York Times, Sept. 28 – “Government Shutdown May Hurt Home Sales in Flood-Prone Areas”) Additionally, Senior White House Adviser John Podesta on Sept. 26 said a shutdown would delay billions to implement the Inflation Reduction Act, including Treasury guidance on how to distribute the measure’s tax credits. (Bloomberg, Sept. 26 | Roundtable Clean Energy Tax Incentives Fact Sheet, July 31 | Roundtable Weekly, July 28) Shutdown Uncertainty Government agencies are preparing to furlough employees for an uncertain amount of time. The most recent shutdown lasted 34 days from December 2018 to January 2019, and cost the economy approximately $3 billion (equal to 0.02% of GDP) according to the Congressional Budget Office. (Government Executive, Sept. 29 and Reuters, Sept. 25) The shutdown would also come amidst a flurry of regulatory rulemakings impacting commercial real estate capital markets. During a House Financial Services Committee hearing on Sept. 27, Rep. Andy Barr (R-KT) questioned SEC Chairman Gary Gensler (above) on the “perfect storm of regulations” that could further impair liquidity for commercial real estate capital markets. (Watch 1:27 video clip of the exchange | Committee Hearing Memorandum, Sept. 22) The Roundtable’s Fall Meeting on Oct. 16-17 (Roundtable-level members only) will address numerous regulatory proposals impacting CRE, and assess the state of the economy and capital markets in the wake of a potential shutdown. # # #

Climate and Energy Policy

September 29, 2023

Roundtable Weekly

Biden Administration to Prepare Unifying, Voluntary Definition for “Zero Emissions Buildings”

climate Climate and Energy Policy ENERGY STAR EPA Zero Emissions Buildings ZEB

This week, the White House’s climate policy chief announced the imminent release of voluntary, uniform federal-level criteria for “Zero Emissions Buildings.” The “ZEB” definition could bring much-needed consistency to help CRE owners and investors establish long-term goals for buildings that align with varying climate programs adopted across numerous jurisdictions and international frameworks. (Washington Post, Sept. 28) Proposed ZEB Definition in October National Climate Advisor, Ali Zaidi, stated in yesterday’s keynote address at the Greenbuild 2023 conference in Washington, D.C. that the proposed federal ZEB definition will be released next month. Zaidi noted The Real Estate Roundtable in his comments as an important group for addressing the need to transform buildings at scale. The White House invited members of The Roundtable’s Sustainability Policy Advisory Committee (SPAC) to a listening session following Zaidi’s remarks. When the U.S. Department of Energy (DOE) announces the proposed ZEB definition it will kick-off an anticipated 30-day public comment period. The Environmental Protection Agency (EPA) ENERGY STAR program is coordinating closely with DOE. A final ZEB definition could be published by the end of this year. Federal Consistency is Essential DOE’s ZEB definition would not be mandatory on the private sector. It will be a voluntary, aspirational guideline at the federal level. However, a definition from the U.S. government can finally build a uniform understanding of what it takes for a building to achieve “zero emissions” over time, along a realistic and achievable pathway. Not all real estate assets will be able to reach a level of “zero emissions.” But an overarching and workable term—developed with feedback from industry and other stakeholders—can bring greater uniformity and consistency to: Related federal programs like EPA’s anticipated “NextGen” building label – to serve as a transition point toward ultimate zero emissions (Roundtable Weekly, March 3); Climate risk reporting and disclosure rules on companies like the one anticipated from the U.S. Securities and Exchange Commission, and recently enacted California measures (Roundtable Weekly, Sept. 22 and March 10); Myriad state and local building performance laws (Roundtable Weekly, Jan. 20 and Dec. 9, 2022); International NGO standards like the one offered by the Science-Based Targets Initiative (SBTi) (RER and Nareit August 25 and July 14 comments to SBTi) (Roundtable Weekly, July 14); and Net-zero emissions investment principles developed for and by asset managers, banks, sovereign wealth funds, and venture capital firms (Roundtable Weekly, Sept. 22). A CRE coalition of real estate organizations including The Roundtable sent a Sept. 14 letter to US-EPA supporting development of standard methods and metrics for buildings and tenants to quantify their emissions. Federal standards, definitions, and tools “are the North Star though which local governments can inform their law-making, and this helps bring some sense and order to the otherwise conflicting patchwork of climate laws and frameworks developed by states, cities, and NGOs,” said Roundtable Sustainability Policy Advisory Committee (SPAC) Chair Tony Malkin (Chairman, President, and CEO, Empire State Realty Trust). (Roundtable Weekly, Sept. 15) A Climate Priority for CRE Roundtable Senior VP and Counsel Duane Desiderio was quoted yesterday in the Washington Post and Popular Science about how CRE executives welcome the idea of a single federal standard. “A workable, usable federal definition of zero-emission buildings can bring some desperately needed uniformity and consistency to a chaotic regulatory landscape,” Desiderio said. (Roundtable Weekly, Sept. 15) Yesterday, The White House also released a National Climate Resilience Framework in anticipation of an eventual White House Climate Resilience Summit. The Framework identifies climate resilience principles and specific actions to expand and accelerate progress towards six objectives that includes, “Expand adoption of the latest consensus-based building and energy codes and high-performance standards.” (White House Fact Sheet, Sept. 28) The Roundtable will continue to work with our partner organizations and develop comments on the ZEB definition upon its anticipated release next month. # # #

Opportunity Zones

September 29, 2023

Roundtable Weekly

House Lawmakers Reintroduce Legislation to Extend and Reform Opportunity Zone Incentives

Opportunity Zones OZs Tax Policy

Bipartisan legislation introduced this week by a group of House policymakers would update and amend the Opportunity Zones (OZs) program. The Roundtable-supported bill (H.R. 5761), if enacted, would extend the tax deferral date for OZ investments from the end of 2026 to the end of 2028, expand transparency and reporting requirements, and authorize investment structures that permit an Opportunity Fund to own and operate multiple real estate assets. (House OZ bill text) Roundtable Support Reps. Mike Kelly (R-PA), above, —chairman of the Ways and Means Subcommittee on Tax—along with Dan Kildee (D-MI), Carol Miller (R-WV), and Terri Sewell (D-AL) introduced the bill on Sept. 27. The bill is similar to legislation (H.R. 7467 and S. 4065) introduced in the last Congress. (Rep. Kelly news release, Sept. 29) Roundtable President and CEO Jeffrey DeBoer welcomed the Opportunity Zones Improvement, Transparency, and Extension Act. “Opportunity Zones have delivered on their promise to create new economic opportunities in low-income communities. Real estate developments spurred by the Opportunity Zone tax incentives are expanding the supply of affordable housing and creating vibrant commercial centers where small businesses can reside, jobs can grow, and the local tax base can expand.” “Unfortunately, certain OZ incentives have already expired. The new legislation would strengthen the program's integrity and ensure Opportunity Zone investment continues into the future. Congress should act quickly to enact these measures,” said DeBoer. 2023 OZ Reforms The OZ program, created in the Tax Cuts and Jobs Act of 2017, designated low-income census tracts where qualifying investments are eligible for reduced capital gains taxes, channeling investment into areas prioritized by states and local communities. This week’s legislation includes a 2-year extension of the initial capital gains deferral period for prior gain that is rolled into an opportunity fund by an investor. (Legislative text for H.R. 5761 | Roundtable comment letters: Dec. 21, 2021 and May 14, 2020) The 2-year extension from the end of 2026 until the end of 2028 will allow OZ investors to benefit from a partial step-up in basis that reduces their tax liability on their prior gain if their opportunity fund investment is maintained for at least five years. Additionally, the bill would facilitate fund-of-fund investment structures that allow opportunity funds to own and operate efficiently more than one asset. Similar to traditional real estate funds, the structure would allow an opportunity fund to sell a property and reinvest the proceeds in another qualifying Opportunity Zone investment without triggering a taxable event for the fund’s underlying investors, provided the investors themselves have not disposed of their interest. Other provisions would establish robust OZ reporting requirements, mandate Treasury to produce certain studies and reports on the OZ program, sunset high-income OZs, and create a new $1 billion fund for states to support business activities in OZs Prospects for the 2023 bill are uncertain, but the legislation is a likely candidate for consideration if, and when, House and Senate Leaders sit down to negotiate an end-of-year tax package that focuses on expired provisions—such as the expanded child tax credit, the expensing of R&D costs, and bonus depreciation. # # #

Opportunity Zones

September 29, 2023

Legal Statue or Legislative language

House Legislation (H.R. 5761)- The Opportunity Zones Improvement, Transparency, and Extension Act

Opportunity Zones OZs, Tax Policy,

Tax Policy

September 22, 2023

Roundtable Weekly

Bipartisan House Legislation Would Encourage Debt Workouts

Cancellation of Indebtedness COD Income

Bipartisan legislation (H.R. 5580) introduced in the House this week would reduce the tax burden on a borrower that can arise when a troubled commercial real estate loan is modified as part of a debt workout. The legislation, introduced by Reps Claudia Tenney (R-NY) and Brian Higgins (D-NY), could help smooth the transition to a healthy and stable post-pandemic real estate market. Restructuring CRE Loans “From the tax law to banking regulation, housing policy, and other areas, public policy has always encouraged the restructuring of unsustainable loans to help businesses turnaround and help taxpayers get back on their feet,” said Real Estate Roundtable President and CEO Jeffrey DeBoer. During the height of the pandemic, the federal government extended lifelines to businesses (PPP loans), suspended the repayment of federal debts, and imposed foreclosure moratoria on federally backed loans. Emergency legislation expressly excluded the forgiveness of federal loans from cancellation of debt (COD) income. “In the case of commercial real estate, the full economic consequences of the pandemic are still unfolding. Remote work and other challenges facing cities have put stress on certain real estate assets, such as office buildings. Debt workouts between lenders and borrowers are a critical part of the solution. Workouts can ensure that these properties continue supporting jobs and economic activity,” said DeBoer. “Congress, COVID, and COD” addressed the discharge of indebtedness issue in Tax Notes on July 27, 2020. The article was written by Roundtable Tax Policy Advisory Committee (TPAC) member Donald Susswein (Principal, RSM US LLP) and Roundtable Senior Vice President & Counsel Ryan McCormick. Cancellation of Debt (COD) Income The Tenney-Higgins bill would build on existing tax provisions by effectively deferring COD income. For over 30 years, a provision of the law (section 108(c)) has allowed noncorporate taxpayers to defer tax when a loan used to buy, construct, or improve real estate used in a trade or business is modified. To qualify for the provision, the taxpayer must have depreciable basis in the property. The taxpayer's basis is reduced by the amount of COD income, resulting in smaller depreciation deduction and larger capital gain when the property is eventually sold. The Tenney-Higgins bill would expand on the current law COD income rules in the case of loans secured by nonresidential real property that were incurred before March 1, 2022 and are discharged in 2023-2026. The Roundtable commends the leadership of Reps. Tenney and Higgins, both members of the tax-writing House Ways and Means Committee, above. The bipartisan bill was cosponsored by Reps. Mike Lawler (R-NY) and Pat Ryan (D-NY). The Roundtable and its industry partners will continue working with House and Senate tax-writing committees to address gaps in the COD income rules and encourage loan restructurings that revitalize properties, save jobs and local tax bases, and strengthen the health and vitality of surrounding communities. Roundtable President and CEO Jeffrey DeBoer will discuss a range of policy issues facing the industry on Sept. 26 as part of a Marcus & Millichap webcast, “A Conversation with Lloyd Blankfein, Former Chairman and CEO of Goldman Sachs, on the Economy and Commercial Real Estate with Insights from Industry Leaders.” Marcus & Millichap President and CEO Hessam Nadji and former Chairman and CEO of Goldman Sachs Lloyd Blankfein will lead the live webcast discussion on economic factors, including Federal Reserve policy, impacting the commercial real estate market. DeBoer, Tom McGee, President and CEO of ICSC and Sharon Wilson Géno, President of NMHC will join the conversation as CRE industry leaders. (Register here)# # #

Climate Policy

September 22, 2023

Roundtable Weekly

California Passes Corporate Climate Disclosure Package; Biden Administration Releases Net-Zero Emissions Principles for Financial Institutions

Building Emissions climate Climate Policy Corporate Disclosure Reporting on Climate Risks SEC Securities and Exchange Commission

Recent government actions amplify the increasing focus by policymakers on climate laws and guidelines—and their heightened impact on CRE. The California legislature recently passed first-of-its-kind state laws that require companies to disclose their emissions, beating to the punch anticipated federal climate reporting rules from the U.S. Securities and Exchange Commission (SEC). (Politico, Sept. 17) Meanwhile, the Biden administration issued voluntary principles this week for asset managers, banks, insurers, and venture capital companies with goals for “net zero” emissions investments, including real estate. (Treasury news release, Sept. 19) California’s Climate Risk Disclosure Package California’s legislature passed two bills (SB 253 and SB 261) last week requiring climate-related disclosures from certain companies doing business in the state. Most notably, the Climate Corporate Data Accountability Act (SB 253) would require entities with total annual global revenues greater than $1 billion to quantify and publicly report Scopes 1, 2, and 3 emissions. See The Real Estate Roundtable’s summary of the California legislation. SB 253 is estimated to regulate around 5,400 companies. Gov. Gavin Newsom (D) pledged to sign both bills, although he may request changes when the legislature reconvenes in January. The laws could be challenged in court before they take effect over the next several years. (Wall Street Journal, Sept. 20 and New York Times, Sept 17) The California legislature “leapfrog[ged]” the U.S. SEC (Bloomberg, Sept. 12), which has yet to release highly anticipated federal rules that are expected to require registered companies to report to investors on material climate-related financial risks in 10-Ks and other filings. (See RER’s 2022 comments on SEC proposal | Roundtable Weekly, March 10 and June 10, 2022) SEC Chair Gary Gensler testified last week before the Senate Banking Committee that final rules regarding disclosure of Scope 3 “indirect” emissions could be changed from what was proposed. “Really important issues have been raised around Scope 3,” he said. (Wall Street Journal, Sept. 12 and Roundtable Weekly, March 17). U.S. Treasury’s Net-Zero Emissions Investment PrinciplesThe Treasury Department’s Principles for Net-Zero Financing & Investment is focused on “financial institutions’ scope 3 financed and facilitated greenhouse gas (GHG) emissions.” It urges private sector financial institutions to align their GHG reduction efforts and net-zero goals with their “portfolio companies,” “portfolio of assets,” and “client base.” The document notes that clients and portfolio companies should provide to their financial institutions their own net-zero plans, including “metrics and targets” for Scopes 1, 2 and 3 emissions. Buildings and real estate assets have long been considered part of a financial institution’s Scope 3 emissions “value chain.” The set of nine principles encourage greater adoption of emerging best practices for private sector financial institutions that have made net-zero commitments, while promoting consistent and credible implementation approaches. Treasury’s net-zero investing and financing guidelines elicited GOP criticism from Patrick McHenry (R-NC), chairman of the House Financial Services Committee. A Sept. 12 podcast featuring Roundtable Senior Vice President & Counsel Duane Desiderio, and Nareit’s Senior Vice President of Environmental Stewardship and Sustainability Jessica Long, discusses the imminent SEC rule and other real estate policy priorities in the energy and climate arena. (Listen to Nareit’s “Real Estate Roundtable says CRE Playing Key Role in Success of Federal Climate Programs”) # # #

Foreign Investment & CRE

September 22, 2023

Roundtable Weekly

Florida Proposes Positive Clarification to Law Impacting Foreign Investments in Real Estate

Capital and Credit Florida SB264 Foreign Investment Restrictions on Foreign Investment in US Real Estate

Yesterday, the Florida Department of Commerce proposed a positive clarification to a recently enacted law impacting foreign real estate investment, with implications for similar laws in several other states. The clarification responds to a Roundtable request on Sept. 5 urging the Florida Real Estate Commission to consider specific concerns before implementing the new state law, which could impair capital formation and hinder the important role that legitimate foreign investment plays in U.S. real estate, the broader economy and job growth. (Roundtable letter, Sept. 5 and Roundtable Weekly, Sept. 8) Section 203 The proposed rule published on Sept. 21 addresses the implementation of Florida Senate Bill 264 (SB 264), Section 203, signed into law on May 8. The new law aims to limit and regulate the sale and purchase of certain Florida real property by “foreign principals” from “foreign countries of concern.” The Florida Real Estate Commission will implement the new law. (SB 264 text). Section 203 of the bill prohibits investment in real property near military installations and critical infrastructure. Importantly, the de minimis exemption has been re-drafted, which (1) fixes earlier drafting errors to the Registered Investment Advisor exemption, and (2) introduces a new category of de minimis interests that categorically exempts passive indirect investment. (See highlighted areas in the Notice of Proposed Rule) The proposed rule clarification remains subject to change during a 21-day public comment period and may include a formal hearing. Section 204 Broader prohibitions in another area of SB 264—Section 204—generally preclude Chinese investors from acquiring “any interest” in any Florida real property anywhere in the state. Since the de minimis language and relevant statutory text are almost identical across Sections 203 and 204, The Roundtable is hopeful that similar language will be adopted during the rulemaking process for Section 204. The Sept. 5 letter from Roundtable President and CEO Jeffrey DeBoer notes that approximately $1.5 trillion of U.S. commercial real estate debt will come due in the next three years. Foreign equity investments in U.S. assets are often an important source of capital as commercial real estate owners seek to restructure, refinance or sell their properties. DeBoer urged the Commission to “carefully consider the impact of your agency’s interpretation and implementation efforts of this new law so that it does not prohibit major investments in the state, which are safe from control by foreign countries of concern and promote growth without sacrificing the security or economic interests of Florida.” (Roundtable letter, Sept. 5) # # #

Capital and Credit

September 22, 2023

Roundtable Weekly

House Republicans Urge Federal Regulators to Withdraw Capital Rules Proposal for Large Banks

Basel III Capital and Credit Halting ProCyclical Policy Measures and Increases in Regulatory Capital The Fed

More than two dozen Republicans on the House Financial Services Committee, led by Chairman Patrick McHenry (NC), recently urged banking regulators to withdraw a sweeping set of proposed changes that would significantly increase capital requirements for large banks. The federal Agencies’ proposal—known as the “Basel III Endgame”—represents the final stages of the global regulatory response to the 2008-09 financial crisis. (Bloomberg Government, Sept. 14) Proposed Agencies’ Rulemaking In July, the Federal Reserve, Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) jointly approved the 1,100-page proposed rulemaking, which would substantially revise the regulatory capital framework for banking organizations with total assets of $100 billion or more. The Agencies’ proposal would have a long phase-in period and have not impact community banks. (CNBC, Fed news release, and Interagency Overview of the Notice of Proposed Rulemaking for Amendments to the Regulatory Capital Rule, July 27) Fed Chairman Jerome Powell voted for the proposal, but noted a significant tone of caution. Powell stated, “Raising capital requirements also increases the cost of, and reduces access to, credit … threatening a decline in liquidity in critical markets and a movement of some of these activities into the shadow banking sector. I look forward to hearing from all stakeholders on how best to strike that balance,” (Federal Reserve Board Chair Powell statement, July 27) The House Committee Republicans’ letter claims the scope and process of the banking regulators’ plan is flawed, while noting how the proposal was opposed by some members on the Federal Reserve and FDIC Boards. The letter concludes, “Given those fatal problems with your Basel III Endgame proposal, we urge that it be withdrawn. The proposal should be replaced with one based on sound, objective analysis supported by data.” The Sept. 13 letter was sent in conjunction with last week’s House Financial Services Committee hearing, “Implementing Basel III: What’s the Fed’s Endgame?” A subsequent hearing on Sept. 19 held by the House Financial Services Subcommittee on Financial Institutions and Monetary Policy—“A Holistic Review of Regulators: Regulatory Overreach and Economic Consequences”—explored the interaction and economic impact of recent federal regulatory proposals, including the Basel III Endgame, new and expanded long-term debt requirements, and changes to resolution plans. Subcommittee Member William Timmons (R-SC), expressed concern during the hearing about how the Basel III capital requirements may exacerbate the strain on bank capital availability. He emphasized “… the fact that billions of dollars of commercial real estate projects must be refinanced the next 36 months, and not all those projects will be profitable when their mortgage payments more than double and banks are prevented from extending additional credit due to increases in capital requirements and an unfavorable interest rate environment.” Rep. Timmons added, “That is the looming crisis that we need to be preparing for, not further restricting capital availability.” (CQ, hearing transcript) Impact on CRE The proposed changes would increase capital requirements for the nation's largest banks by as much as 20%, with far broader indirect impacts on bank counterparties and customers and the broader financial markets. The Agencies’ rulemaking could significantly affect available liquidity for commercial real estate transactions, impact asset values, and hinder economic growth. (Roundtable Weekly, July 28) Mortgage Bankers Association (MBA) President and CEO Robert Broeksmit testified during the Sept. 14 House Financial Services Committee hearing. “MBA strongly opposes certain provisions of the proposal that undermine the mortgage market and takes exception to the extremely scant economic analysis regarding how the changes will affect the economy, single-family housing market, and commercial real estate finance markets,” Broeksmit testified. (MBA Newslink, Sept. 19) Real Estate Roundtable President and CEO Jeffrey DeBoer stated in a March 2023 comment letter to Fed Vice Chair Michael Barr and other key regulators, "At this critical time, it is important that the Agencies do not engage in pro-cyclical policies such as requiring financial institutions to increase capital and liquidity levels to reflect current mark to market models. These policies would have the unintended consequence of further diminishing liquidity and creating additional downward pressure on asset values. A deflationary spiral must be avoided at all costs. As recent events are only amplifying the contraction of credit, it is important for the Agencies to take measures to maintain sufficient liquidity levels and support positive economic activity." The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) has established a working group on Basel III that is developing comments, due by Nov. 30, on the Basel III Endgame proposal. # # #

Foreign Investment & CRE

September 22, 2023

Legal Statue or Legislative language

Florida SB 24 – Section 203 Notice of Proposed Rule Clarification – Sept. 22, 2023

Florida SB264, Foreign Investment,

Climate Risk Reporting

September 21, 2023

Fact Sheet

California’s Climate Disclosure Package – Summary of SB 253 and SB 261

climate, Climate Policy, Corporate Disclosure, Reporting on Climate Risks,

September 15, 2023

John C. Cushman, III, Industry Legend, Roundtable Leader, and Iconic Pillar of Cushman & Wakefield

September 15, 2023

Roundtable and Business Coalition Weigh In on Legislation Requiring Ransomware Attack Reports

Bipartisan legislation that would require private sector companies to report ransomware attacks to federal authorities was advanced this week by the Senate Homeland Security and Governmental Affairs Committee. A broad, 37-member coalition that includes The Real Estate Roundtable on Oct. 4 provided detailed suggestions to Senate and House congressional committees about provisions that should be included in any bill that would impose a compulsory cyber incident notification program on the business community. (Cybersecurity coalition letter and Committee mark-up)Why It MattersThe Cyber Incident Reporting Act (S. 2875) – sponsored by Committee Chairman Gary Peters (D-MI) and Ranking Member Rob Portman (R-OH) – would require certain owners and operators of critical infrastructure operators to report hacks within 72 hours and ransom payments within 24 hours to the Cybersecurity and Infrastructure Security Agency (CISA). Organizations failing to do so would potentially banned from doing business with the federal government. (The Hill, Set. 28 and PoliticoPro, Oct. 5)The committee also approved the Federal Information Security Modernization Act of 2021 (S. 2902), which would require agencies and contractors to report on cyberattacks.The congressional bills aim to update the Federal Information Security Modernization Act, signed into law in 2014. Sen. Portman noted two reports on issued by the Homeland Security Committee since 2019 that found massive cybersecurity shortcomings at several federal agencies. The Senate Homeland Security Committee’s leadership may seek to merge their legislation may with a bill (S. 2010) from the Senate Intelligence Committee. Sen. Peters said he may also seek to include S. 2875 in House-passed defense policy legislation (H.R. 4350), which also includes language requiring cyber incidents. (BGov and PoliticoPro, Oct. 5)Private Sector ConcernsThe business coalition’s Oct. 4 letter to the Senate Committees on Intelligence, Homeland Security and Government Affairs and the House Committee on Home recommended several provisions that should be central to a mandatory reporting regime, including:Establish a prompt reporting timeline of not less than 72 hours. Legislation should reflect an appropriate, flexible standard for notifying government about significant cyber incidents.Attach reporting to confirmed cyber incidents. Businesses need clarity in reporting requirements, which should be targeted to well-defined and confirmed cyber incidents.Confine reports to significant and relevant incidents .A list should be limited in reach—particularly excluding small businesses using existing federal rules—and risk based.The business industry comments recommended that federal cybersecurity reporting legislation should also include robust liability protections; consistent federal reporting requirements; restrictive government use of reported data; and guarantee substantial input from industry to protect the rulemaking process. Identifying Critical InfrastructureIn the House, a separate bill that would identify systemically important infrastructure was introduced Oct. 5 by Homeland Security Committee Ranking Member John Katko (R-NY), Rep. Abigail Spanberger (D-VA) and Rep. Andrew Garbarino (R-NY). (Katko one-pager on the bill)The bill would authorize CISA to prioritize infrastructure operators considered so crucial to the U.S. economy, public health and national security that a disruption to their operations due to a cyberattack would be considered debilitating. (Katko news release, Oct. 5) The Roundtable’s Homeland Security Task Force continues to work with key law enforcement and intelligence agencies and the Real Estate Information Sharing and Analysis Center (RE-ISAC) on protective measures that businesses can take to create infrastructure resistant to physical damage and cyber breaches. # # #

September 15, 2023

Roundtable Urges Treasury to Clarify Tax Consequences of Transition Away from LIBOR as Reference Rate

The Real Estate Roundtable yesterday asked the U.S. Treasury Department and IRS to reduce the risk of market disruption by clarifying the tax treatment of financial contracts that replace the expiring London Inter-bank Offered Rate (LIBOR) with a substitute reference rate. Over $200 trillion of LIBOR contracts are outstanding, including roughly $1.3 trillion of commercial real estate debt. (Roundtable LIBOR letter, June 6)The Real Estate Roundtable yesterday asked the U.S. Treasury Department and IRS to reduce the risk of market disruption by clarifying the tax treatment of financial contracts that replace the expiring London Inter-bank Offered Rate (LIBOR) with a substitute reference rate. (Roundtable LIBOR letter, June 6). The United Kingdom's Financial Conduct Authority (FCA), which regulates LIBOR, announced in 2017 that it is phasing out the global borrowing index by the end of 2021. LIBOR will need to be replaced in both new agreements and innumerable existing legacy contracts.Several factors may necessitate or accelerate parties' adoption of alternative reference rates on existing contracts well before the end of 2021. To facilitate the transition, the Federal Reserve Bank of New York in 2018 began publishing an alternative U.S. benchmark to work alongside LIBOR – the Secured Overnight Financing Rate (SOFR). (See: A User's Guide to SOFR and SOFR: A Year in Review)However, several issues may be contributing to the reluctance of market participants to use SOFR, including the absence of necessary internal infrastructure to support its accounting and trading, and the lack of tax guidance. Roundtable President and CEO Jeffrey DeBoer noted in the comment letter, "If the terms of a debt instrument are significantly modified, for Federal income tax purposes there is a deemed exchange of the old debt for a new (modified) debt instrument." Without relief, this deemed exchange could trigger the recognition of taxable gain or loss for the lender, or debt discharge income for the borrower."Moreover, the tax consequences of the deemed exchange can arise without generating actual cash to pay any ensuing tax liability," wrote DeBoer. Randal Quarles – the Fed's vice chairman in charge of financial regulation – reiterated the urgency of moving forward on the transition to SOFR. The Roundtable's June 6 comments recommend that a safe-harbor rule confirm that a replacement index or formula identified by regulators, broad industry groups, or similar objective sources-or by the parties themselves in good faith-is not considered an alteration or modification of the original instrument. The Roundtable letter states, "Instead, the replacement should be treated for Federal tax purposes as a continuation of the instrument's original terms."This week, Randal Quarles – the Fed's vice chairman in charge of financial regulation – reiterated the urgency of moving forward on the transition to SOFR: "I believe that the ARRC has chosen the most viable path forward and that most will benefit from following it, but regardless of how you choose to transition, beginning that transition now would be consistent with prudent risk management and the duty that you owe to your shareholders and clients .... With only two and a half years of further guaranteed stability for LIBOR, the transition should begin happening in earnest." (Bloomberg, June 3)The Wall Street Journal reported last July that companies were adopting SOFR sparingly – despite regulators urging banks and traders to stop launching new Libor-based contracts ahead of the 2021 deadline. (WSJ, July 12 and Roundtable Weekly, July 13, 2018) The Roundtable letter was developed by a task force that included Tax Policy Advisory Committee (TPAC) Chairman Frank Creamer Jr., TPAC member Don Susswein, and chair of the Real Estate Capital Policy Advisory Committee (RECPAC) Working Group on LIBOR, Joseph Philip Forte. On June 11, at The Roundtable's Annual Meeting in Washington DC, Joseph Forte will lead a RECPAC discussion on real estate's concerns with the LIBOR transition.

September 15, 2023

Roundtable Proposes Framework for Implementing the Real Estate Exception to the New Business Interest Deduction Limit

The Real Estate Roundtable on Wednesday wrote to Treasury Secretary Steven Mnuchin regarding the new limitation on business interest deductibility created in the Tax Cuts and Jobs Act, including rules that allow taxpayers to continue fully deducting interest related to commercial real estate debt. (Roundtable letter, Feb. 21) The Feb. 21 Roundtable letter urges that Treasury clarify that interest (other than investment interest) on debt that is allocable to an owner of an entity engaged in a real property trade or business is exempt from the new business interest limitation rule – if that trade or business has elected out of the rule. The exception for interest allocable to a real property trade or business reflects policymakers' understanding that limits on the deduction for interest expense could have enormous negative consequences for property values, real estate markets, and economic growth. (Reference: Real Estate Forum, Jan/Feb 2018, Decoding The New Tax Bill)The Feb. 21 comment letter requests clarification to ensure the real estate exception operates as intended for common real estate ownership arrangements – focusing on the scope and application of the exception for an electing real property trade or business. The letter urges that Treasury clarify that interest (other than investment interest) on debt that is allocable to an owner of an entity engaged in a real property trade or business is exempt from the new business interest limitation rule – if that trade or business has elected out of the rule. As relevant examples, the letter describes four common scenarios where the financing of a real property trade or business occurs through a tiered structure. The letter demonstrates why treating the interest expense of an upper-tier entity as properly allocable to the real property trade or business of a lower-tier entity is consistent with the legislative intent and conforms with existing tax rules and principles. The letter also addresses the allocation of indebtedness within entities, requesting that Treasury guidance apply the tracing rules found in existing authorities, which are already used for purposes of the passive loss rules. During a Feb. 20 tax conference, both Treasury's Deputy Tax Legislative Counsel Krishna Vallabhaneni and Deputy Assistant Secretary for Tax Policy Dana Trier said a notice on language limiting interest expenses under the new tax law will be issued soon. (Bloomberg Law, Feb. 20). This week's letter is a follow-up to a Jan. 18 Roundtable letter, which identified several areas where Treasury rulemaking would reduce uncertainty and facilitate continued investment. [Roundtable Weekly, Jan. 19] As Treasury and Congress continue to focus on implementation and technical corrections to the new tax law, The Roundtable and TPAC will play an active role in seeking appropriate clarifications affecting the most significant changes to the tax code in more than three decades.

September 15, 2023

Roundtable Calls for Congress to Pass Cyber Security Bill, Increase Digital Competitiveness

The bipartisan Cyber Diplomacy Act (H.R. 3776) will advance America’s public and private efforts to safeguard cyberspace and enhance the nation’s economic competitiveness in a global digital economy. That is the message sent by The Roundtable, U.S. Chamber of Commerce and five other national trade organizations in a joint letter last week to Senate Majority Leader Mitch McConnell (R-KY), Minority Leader Chuck Schumer (D-NY) and all other U.S. Senators. (Joint Letter, Sept. 26)The Roundtable and six other national trade organizations sent a Sept. 26 joint letter on cybersecurity policy to all members of the U.S. Senate. (Joint Letter) The bill – introduced by House Foreign Affairs Committee Chairman Ed Royce (R-CA) – passed the House in January, was reported out of the Senate Committee on Foreign Relations in June and is currently under consideration by the Senate.H.R. 3776 would task the State Department with establishing a unified Office for Cyberspace and Digital Economy, which would consolidate efforts relating to international cybersecurity, internet access, internet freedom, digital economy, cybercrime, deterrence, and international responses to cyber threats. (The Washington Times, Sept. 27)The Sept. 26 joint letter states, “We believe that a focused, centralized, and appropriately placed office led by an ambassador-rank official would aid U.S. cybersecurity and digital economy efforts. We believe that enactment of this bill would send a powerful message that the U.S. intends to preserve and protect a secure, reliable, and open internet.” The cybersecurity issue is a key focus of The Roundtable’s Homeland Security Task Force (HSTF), which encourages measures to address the global cyber threat and effective information sharing..The Roundtable’s Homeland Security Task Force will discuss cyber security and other issues affecting real estate during its upcoming meetings at FBI offices in New York (Oct. 18) and Washington, DC (Nov. 13).

September 15, 2023

Roundtable Comments Support Proposed Implementation Rule for High Volatility Commercial Real Estate Loans

The Real Estate Roundtable's support for a federal proposal that would implement modified capital rules for High Volatility Commercial Real Estate (HVCRE) loan exposures is detailed in a Nov. 26 comment letter to three banking agencies. The Agencies — tasked with developing a rule consistent with Section 214 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) to clarify the capital treatment of HVCRE Acquisition, Development, or Construction (ADC) loans — invited comments on their Notice of Proposed Rulemaking. (Roundtable Weekly, May 25)The Real Estate Roundtable's support for a federal proposal that would implement modified capital rules for High Volatility Commercial Real Estate (HVCRE) loan exposures is detailed in a Nov. 26 comment letter to three banking agencies.. The Roundtable's comment letter to the Office of the Comptroller of the Currency; the Board of Governors of the Federal Reserve System; and the Federal Deposit Insurance Corporation states the current implementation proposal "more realistically aligns the requirements for HVCRE loans on commercial real estate projects with the actual periods of development or construction risk." The letter also notes that when the final proposal is implemented, it "will aid economic growth and job creation, while maintaining adequate capital levels to manage the risks associated with ADC lending." (Roundtable Comment Letter, Nov. 26)The changes to the capital rules address key deficiencies in the agencies' prior regulations governing the criteria for HVCRE or HVADC loans by providing the following modifications and clarifications:The 15% equity requirement would be revised to expressly include contributed land/property at the appreciated land value as determined by a FIRREA appraisal and bank review (versus the cost basis under the current rule).Clarifies that loans made to acquire existing property with rental income and/or do cosmetic upgrades and other improvements don't trigger the capital penalty.A new exemption would be added to the HVCRE rule covering acquisition/refinancing loans for performing income producing properties.Allows borrowers to use internally generated capital in the project and, once the development/construction risk period has passed, outside the project, rather than forcing them to refinance the loan (possibly away from the original lender).All ADC loans made prior to January 2015 would be grandfathered and do not have to satisfy current HVCRE exemption criteria.Banks would able to withdraw HVCRE status prior to the end of an ADC loan's term.Roundtable President and CEO Jeffrey DeBoer also suggests in the letter that periodic industry forums be held on the implementation of the capital rules. "This feedback would allow the Agencies to appropriately address any possible unintended economic consequences resulting from the regulation by supervisory personnel or by the institutions they supervise that might threaten the soundness of the banking system or the stability of the real estate lending market," DeBoer added.The Roundtable's letter is supported by The American College of Real Estate Lawyers (ACREL) and The American College of Mortgage Attorneys (ACMA). (Joint Letter of Support, Nov. 27)The Agencies' HVCRE proposal was one of the issues discussed at this week's meeting of The Roundtable's Real Estate Capital Advisory Committee (RECPAC). Since 2015, The Roundtable's HVCRE Working Group and industry coalition partners have played a key role in advancing specific reforms to the HVCRE Rule. (Roundtable HVCRE Comment Letter, March 2).

September 15, 2023

Roundtable Asks Treasury to Clarify Real Estate Exception to New Limit on Business Interest Deductibility

The Real Estate Roundtable on Tuesday wrote to the Treasury Department and IRS about the new limitation on business interest deductibility enacted in the Tax Cuts and Jobs Act of 2017 (TCJA). The provision allows qualifying businesses to continue fully deducting interest related to commercial real estate debt. (Roundtable comment letter, Feb. 26)The Roundtable's Feb. 26 letter on business interest deductibility. Roundtable President & CEO Jeffrey DeBoer sent the detailed comments as Treasury officials work to finalize proposed regulations implementing TCJA's new section 163(j), which limits the deductibility of business interest to no more than 30% of modified, adjusted taxable income. Section 163(j) includes a critical exception for real estate.On December 28, 2018 Treasury published proposed regulations clarifying that partner-level debt may qualify for the real estate exception-if the debt is allocable to a partnership engaged in a real property trade or business (RPTOB). DeBoer notes in The Roundtable's Feb. 26 letter, "In light of the clear legislative intent to enact a broad real estate exception and its importance to the health and stability of real estate markets, the final Treasury regulations should build on the proposed rules and not limit unnecessarily the ability of a real property trade or business (RPTOB) to elect out of the provisions of section 163(j)."DeBoer adds, "No issue in tax reform is more important to the health and stability of U.S. commercial real estate than the new rules related to the taxation of business-related borrowing. U.S. commercial real estate is leveraged conservatively with roughly $14 trillion of total property value and $4 trillion of debt."The letter includes detailed comments on several 163(j) implementation issues and makes the following recommendations:The need to preserve the deduction for income-producing real estate was at the center of Jeffrey DeBoer's testimony and exchanges with Senate Finance Committee members before final passage of the 2017 tax overhaul law. (Roundtable Statement for the Record, Sept. 19, 2017 and video clips). The real estate exception should extend through all "tiered" investment structures. The real estate exception should apply fully to non-rental activities. Treasury regulations should not "whipsaw" corporations/REITs through conflicting definitions of a "trade or business" that can effectively block their ability to use the real estate exception. Treasury regulations should modify the anti-abuse rule for related-party leases. The small business exception should not prevent otherwise eligible partners from qualifying for the real estate exception. Debt allocation rules should not undercount real estate assets for purposes of the real estate exception.Treasury regulations should confirm that senior housing constitutes a real property trade or business.The economic consequences of changes to the deductibility of business interest expense, and particularly the potential impact on real estate, was a central focus of lawmakers during consideration of the historic tax overhaul in 2017. The need to preserve the deduction for income-producing real estate was at the center of DeBoer's testimony and exchanges with Senate Finance Committee Chairman Orrin Hatch – and other members of the committee – during the last congressional hearing on business tax reform prior to votes on the TCJA. (Roundtable Statement for the Record, Sept. 19, 2017 and video clips).

September 15, 2023

The Roundtable and 16 Real Estate, Insurance and Contracting Organizations Urge Passage of Infrastructure Expansion Act to Counter Inequities in “Scaffold Law”

The Real Estate Roundtable, Associated General Contractors, and 16 U.S. organizations representing the contracting, insurance and real estate sectors today urged the House Judiciary Committee and key congressional offices to swiftly pass the Infrastructure Expansion Act of 2017 (H.R. 3808), sponsored by Rep. John Faso (R-NY). (Coalition Letter, Jan. 19) According to the coalition letter , the Infrastructure Expansion Act seeks to provide is a 21st century solution to ameliorate the harsh impact of an outdated 19th century law, which is restraining modern interstate commerce and economically burdening transportation projects that cross state lines. H.R. 3808 is a common sense tort reform effort aimed at correcting inequities from New York State's outdated "Scaffold Law." Passed during the Industrial Revolution – long before the advent of Federal and state Occupational Safety and Health Administration and workers' compensation laws – the Law holds property owners, employers, and contractors fully liable for all fall-related injuries at building and infrastructure construction sites. As a result, courts have interpreted the New York law to subject property owners and contractors to "absolute liability." Under this standard, the costs of injuries from commonplace painting, cleaning, remodeling, and construction activities are completely borne by property owners and contractors, even if they do not directly employ the injured worker. The Scaffold Law also deems property owners and contractors as absolutely liable for height-related incidents, without regard to whether the worker caused the accident and intensified his or her own injuries. Under this standard, even an inebriated worker who stumbles and falls at a project site is not held accountable to the extent his intoxicated state caused his own injuries. (Roundtable Weekly, Oct. 27, 2017) The House bill counters the absolute liability standard by specifying that lawsuits against property owners and contractors for injuries associated with slips, falls, and "gravity-related risks" at Federally-assisted projects should instead be held to a "comparative negligence" standard. When workers proximately cause their own injuries, comparative negligence factors such self-inflicted harm to proportionately limit damages awarded by judges and juries. H.R. 3808 fosters the comparative negligence legal standard adopted by the overwhelming majority of courts, legislatures, and legal scholars across the United States. According to the coalition letter, the Infrastructure Expansion Act seeks to provide is a 21st century solution to ameliorate the harsh impact of an outdated 19th century law, which is restraining modern interstate commerce and economically burdening transportation projects that cross state lines. Rep. John Faso (R-NY) introduced the Infrastructure Expansion Act of 2017 (H.R. 3808) , intended to counter New York State’s “Scaffold Law.” Among specific examples offered in the letter showing the economic impacts of the Scaffolding Law is the Gateway Program, a Department of Transportation-assisted rail tunnel project of overwhelming national significance. The New York law is estimated to drive-up costs by as much as 300 million dollars for this project, which will modernize the power grid, update a century-old tunnel inundated by Superstorm Sandy, and help eliminate a train "bottleneck" in the Northeast Corridor that contributes $50 billion to US GDP annually. H.R. 3808 can help reduce the substantial added costs from insurance coverage, excessive litigation pay-outs, and project delays for interstate infrastructure construction like Gateway. "On the heels of a major federal infrastructure initiative, Rep. Faso's bill is welcome news – enacting it would drive down costs of proposed infrastructure projects like the vital Gateway tunnel project between New York and New Jersey, said John Banks, President of the Real Estate Board of New York. (See REBNY Newsroom, Oct. 25, 2017). Additionally, the Infrastructure Expansion Act of 2017 does not diminish or alter Federal or state OSHA obligations, nor does it foreclose "no-fault" workers' compensation. The coalition letter addressed to House Judiciary Committee Chairman Bob Goodlatte (R-VA) and Ranking Member Jerrold Nadler (D-NY) concludes that H.R. 3808 "… simply makes property owners, contractors, and workers accountable for their own choices and conduct at construction sites benefitting from Federal taxpayer dollars. We encourage swift passage of the 'Infrastructure Expansion Act.'"

September 15, 2023

Business Coalition Urges Treasury Secretary Mnuchin to Issue Guidance on Cost Recovery Period for Real Estate Improvements

A broad-based business coalition that includes The Real Estate Roundtable urged Treasury Secretary Steven Mnuchin on Wednesday to issue guidance clarifying certain provisions included in tax overhaul legislation enacted last year — including the cost recovery period for qualified improvement property (QIP). ( Coalition letter , Aug. 22)A broad-based business coalition that includes The Real Estate Roundtable urged Treasury Secretary Steven Mnuchin on Wednesday to issue guidance clarifying certain provisions included in tax overhaul legislation enacted last year — including the cost recovery period for qualified improvement property (QIP). (Coalition letter , Aug. 22) An unintentional drafting mistake in the tax law has resulted in a significantly longer 39-year cost recovery period for new, qualified nonresidential interior improvements. Congress intended to allow the immediate expensing of qualified improvements, or provide a 20-year recovery period in the case of taxpayers electing out of new limitations on the deductibility of business interest. The drafting error affects leasehold improvements, expenditures made to improve common spaces in shopping centers and office buildings, and other interior improvements to nonresidential structures. The longer cost recovery period effectively increases the after-tax cost of upgrading and improving commercial real estate. ("Correcting the Drafting Error Involving the Expensing of Qualified Improvement Property " – The Tax Foundation , May 30) The August 22 letter includes 283 signatories, who state the delay in correcting the QIP provision is delaying some store and restaurant remodeling projects, and causing some retailers to decline opportunities to purchase or lease new store locations that would require substantial improvements. The coalition letter further explains, "These decisions not only deny communities the jobs associated with substantial construction projects, but also deny our communities the opportunity to bring new, permanent jobs to an otherwise abandoned store or to revitalize a declining mall. The delayed investment in remodeling projects is also causing a decline in sales by manufacturers that supply products used in remodels, like energy-efficient lighting and plumbing supplies." The coalition urges Secretary Mnuchin "to issue guidance that will facilitate the intent of the law and eliminate the imposition of large additional tax compliance and accounting burdens on taxpayers, as well as associated tax enforcement burdens on the Internal Revenue Service." Last week, all Republican members of the Finance Committee and Chairman Orrin Hatch (R-UT) wrote to Treasury and the IRS, requesting "guidance that is consistent with the congressional intent" of the new tax law regarding QIP expensing and two other tax policy areas. (Roundtable Weekly, Aug. 17) Roundtable President and CEO Jeffrey DeBoer stated, "In 2015, Congress voted overwhelmingly to permanently extend the 15-year recovery period for certain property improvements. By passing tax reform, Congress intended to consolidate those changes. Treasury should now use its authority to provide taxpayers with relief until a technical corrections bill is enacted. Treasury guidance will remove taxpayer uncertainty, unlock investment, and spur job-creating property upgrades and renovations."

September 15, 2023

Roundtable Comment Letter Urges Treasury to Simplify, Streamline New Pass-Through Deduction Regulations

The Real Estate Roundtable on Monday submitted detailed recommendations to the Treasury Department on simplifying and streamlining the new 20 percent tax deduction for pass-through businesses. (Roundtable letter, Oct. 1)The Real Estate Roundtable on Monday submitted detailed recommendations to the Treasury Department on simplifying and streamlining the new 20 percent tax deduction for pass-through businesses. (Roundtable letter, Oct. 1) Passed as part of last year's tax overhaul, the deduction can reduce the top tax rate on qualifying pass-through income, including rental income, to 29.6 percent. Once it is fully implemented, section 199A will be a powerful incentive for capital investment and job growth.The comment letter from Roundtable President and CEO Jeffrey DeBoer suggests four major simplifications that would provide greater certainty, lessen the need for wasteful restructuring, and reduce taxpayer-government controversies. Trade or business definition The final regulations should clarify that rental income from real property held for the production of rents will be considered a trade or business for purposes of section 199A;Aggregation The final regulations should allow taxpayers to treat all qualifying real estate rental activities, whether held directly or through a pass-through entity, as if held in a single “trade or business” for purposes of section 199A;Non-recognition transactions When assets with associated unadjusted basis immediately after acquisition (UBIA) are transferred in a non-recognition transaction (such as a like-kind exchange or the contribution or distribution of assets involving a partnership or S corporation), the general rule should be that the UBIA of an asset (and its duration) carries over; andSeparating trades and businesses The final regulations should provide rules to help taxpayers ascertain when multiple activities (including multiple activities conducted in a single entity) constitute discrete trades or businesses.With a few exceptions, last year's Tax Cuts and Jobs Act limited the pass-through deduction to businesses with employees or capital-intensive businesses that invest in long-lived (i.e., depreciable) assets, including real estate. This so-called wage/capital limitation applies to partnerships, S corporations, and sole proprietorships, but does not apply to ordinary REIT dividends and income from publicly traded partnerships.During the tax reform debate, The Roundtable's Tax Policy Advisory Committee (TPAC) formed a task force to review the regulations, analyze their impact on real estate investment and jobs, and craft specific recommendations for policymakers. The pass-through deduction (section 199A) was a key element of Roundtable President and CEO Jeffrey DeBoer's testimony before the Senate Finance Committee shortly before lawmakers released the first version of the proposal in the fall of 2017. (Roundtable Weekly, Sept. 22, 2017)TPAC will continue to offer insight to Treasury officials and congressional tax-writing committees before final regulations are expected by the end of the year.

September 15, 2023

Roundtable and Business Coalition Seek Administrative Relief, Shorter Cost Recovery Period for Nonresidential Real Estate Improvements

This week The Real Estate Roundtable, along with 239 businesses and trade groups, wrote to Secretary Mnuchinurging the Treasury Department to provide taxpayers with administrative relief from a drafting mistake in last year’s tax overhaul that increased the cost recovery period for qualified improvement property (QIP).This week, The Real Estate Roundtable, along with 239 businesses and trade groups, wrote to Secretary Mnuchin urging the Treasury Department to provide taxpayers with administrative relief from a drafting mistake in last year’s tax overhaul that increased the cost recovery period for qualified improvement property (QIP). The drafting error in the tax law has resulted in a significantly longer 39-year cost recovery period for new, qualified nonresidential interior improvements. The intent of Congress was to allow the immediate expensing of QIP – or provide a 20-year recovery period in the case of taxpayers electing out of new limitations on the deductibility of business interest. In the Oct. 9 letter to Secretary Mnuchin, the coalition addressed the need for a QIP correction, along with the unintended consequences if action is not taken. The letter raised concerns that the drafting error is resulting in “[d]elays in store and restaurant remodeling projects,” “[b]usinesses refraining from purchasing or leasing vacant stores or other leasehold spaces that require improvements,” and “[l]oss of construction jobs associated with commercial renovation projects.” The coalition letter was sent in response to the Administration’s request for comments on newly proposed regulationsimplementing the additional first year depreciation deduction (immediate expensing) benefit. The coalition submission also included two recent letters—one from 16 Democratic Senators to Treasury Secretary Steven Mnuchin and the other from 58 House Republicans to GOP leadership—reiterating the importance for policymakers to correct this unintentional drafting mistake in last year’s legislation, while recommending that Treasury should issue interim guidance and refrain from enforcing the drafting error. (House Letter, Oct 2 and Senate Letter, Sept 24)The Real Estate Roundtable and a broad-based business coalition urged Secretary Mnuchin in August to issue guidance clarifying certain provisions included in tax overhaul legislation enacted last year – including the cost recovery period for qualified improvement property. (Coalition letter, Aug. 22)Congress could address the issue during the lame duck congressional session between the mid-term election and January. Senate Republican Conference Chairman John Thune (R-SD) said GOP lawmakers are motivated to address a number of tax issues that are outstanding, including tax reform technical corrections and expired tax provisions. (The Hill, Oct. 11)

September 15, 2023

Congressional Lame Duck Session Could Consider Condominium Tax Accounting and Other Real Estate Tax Policy Issues

Following the Nov. 6 mid-term elections, a “Lame Duck” session of Congress is expected to consider various tax policies of importance to commercial real estate. Several tax issues of importance to real estate may be in play during the November "Lame Duck" congressional session, including condo tax accounting rules; technical corrections; the cost recovery period for qualified improvement property (QIP);and tax extenders. As part of a potential year-end omnibus spending bill to fund the government, tax policies that may be addressed include condo tax accounting rules; technical corrections; the cost recovery period for qualified improvement property (QIP); and tax extenders. (Roundtable Weekly, Oct. 12) Current condo tax accounting rules require multifamily developers of buildings with five or more residential units to recognize income and pay tax on their expected profit as construction is ongoing — well before pre-sale transactions are closed and full payment is due from the buyer. This mismatch of cash flow and tax liability prevents income tax deferment until a condo building is finished. Home builders of single-family homes, townhouses and row houses are not subject to this accounting rule restriction. A House bill introduced last summer by Reps. Carlos Curbelo (R-FL) and Joe Crowley (D-NY) aimed to correct this disparity. Although the Fair Accounting for Condominium Construction Act (H.R. 3659) stalled in 2017, it could serve as a template for inclusion in year-end tax legislation. The Real Estate Roundtable supports lawmakers' efforts to pass H.R. 3659. Other congressional efforts to ensure that development accounting rules treat condos like other residential construction included a 2016 letter from 10 members of the Senate Finance Committee urging regulatory corrections to former Treasury Secretary Jack Lew. Roundtable President and CEO Jeffrey DeBoer on April 7, 2017 sent a letter to Treasury Secretary Steven Mnuchin outlining eight regulatory actions the Treasury Department could take to stimulate new real estate investment, job creation, and economic growth. Among the recommendations addressed in the letter are tax accounting for new condominium construction; the Foreign Investment in Real Property Tax Act, tax treatment of private real estate funds and partnership tax rules. Last week, an article on the condo tax accounting issue in The Real Deal included a quote from Roundtable Senior Vice President & Counsel Ryan McCormick, who commented on the outlook for correcting the current rules. "Legislation may be the most likely route, in light of all the work ongoing at Treasury with tax reform," McCormick said.

September 15, 2023

Business Coalition Urges Implementation Delay for FASB’s ‘Current Expected Credit Loss Accounting Standard’ (CECL), Pending Impact Analysis

A business coalition that includes The Real Estate Roundtable on March 5 wrote to the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) to urge a delay in the implementation of the proposed Current Expected Credit Loss (CECL) accounting standard, which may begin to reduce aggregate bank lending as early as next year. (Coalition Letter, March 5)The March 5 coalition letter cites a 2018 KPMB survey showing companies are struggling to make certain accounting, modeling and data decisions to be in compliance with CECL. (KPMG, Financial institutions feeling the crunch in countdown to CECL implementation) The new CECL model will change the way banks calculate reserves on assets, requiring certain financial institutions to estimate the expected loss over the life of a loan beginning in January 2020. For real estate, there is concern is that banks may reduce lending volumes as they build up additional capital reserves to be in compliance with CECL. The accounting rule change was issued by the Financial Accounting Standards Board (FASB) in June 2016 as a result of the 2008 financial crisis.The regulatory change in how banks estimate losses in their allowance for loan and lease losses (ALLL) will require substantial changes in data analytics and financial methodologies. The March 5 coalition letter cites a 2018 KPMB survey showing companies are struggling to make certain accounting, modeling and data decisions to be in compliance with CECL. (KPMG, Financial institutions feeling the crunch in countdown to CECL implementation)According to Trepp’s Looking at Historical CRE Losses for CECL, “To benchmark and fine-tune loss methodologies for CECL, the key for banks will be a four-letter word: data. Unfortunately, many banks have very little in the way of granular historical data, and a number of those that do have good data have taken few to no losses in their history. This has made it difficult for those banks to effectively model future losses.” (Trepp article by Joe McBride, April 21, 2017)To avoid unintended economic consequences, the coalition states in its letter, “We believe it is important to delay implementation of CECL in order to allow for time to conduct a quantitative impact analysis and to consider potential alternatives, while allowing for post-issuance field testing. Time for further assessment will also allow regulators to better understand and address the key consequences of any proposal for capital and other regulatory purposes.”The 8 signatories to the coalition letter are the U.S. Chamber of Commerce, American Bankers Association, Bank Policy Institute, The Real Estate Roundtable, Commercial Real Estate Finance Council, Mortgage Bankers Association, National Association of Realtors, Credit Union National Association and National Association of Federal Credit Unions.

September 15, 2023

Roundtable Recommends Policies to Spur Infrastructure Investment and Economic Growth

Repealing FIRPTA, streamlining permit procedures and passing infrastructure financing measures will help spur infrastructure improvements and contribute to economic growth, according to recommendations submitted this week by The Real Estate Roundtable to the House Ways and Means Committee. (Roundtable Statement for the Record)Repealing FIRPTA, streamlining permit procedures and passing infrastructure financing measures will help spur infrastructure improvements and contribute to economic growth, according to recommendations submitted this week by The Real Estate Roundtable to the House Ways and Means Committee. (Roundtable Statement for the Record) In the March 20 Statement for the Record for a recent hearing regarding “Our Nation’s Crumbling Infrastructure,” Roundtable President and CEO Jeffrey DeBoer states, “A holistic approach to expanding and modernizing our aging infrastructure will create American jobs, boost economic growth, and improve the quality of life in all regions of the country.” The Roundtable recommendations include the following: Unlocking private capital by repealing the Foreign Investment in Real Property Tax Act (FIRPTA). FIRPTA imposes a discriminatory layer of capital gains tax on foreign investment—a tax burden that does not apply to any other asset class. Repealing FIRPTA would serve as a market-driven catalyst to finance improvements in our nation’s infrastructure.Streamlining the permitting process. A report by the nonprofit organization Common Good estimates that a six-year delay in starting construction on public projects costs the nation more than $3.7 trillion. Permit delays dampen private sector investment and add to the overall costs of infrastructure projects. Increasing the federal gas “user fee” in a responsible and sustainable manner. The gas user fee (18.4-cents a gallon) that capitalizes the Highway Trust Fund has not been raised since 1993. The Roundtable supports proposals to sustain the HTF by increasing the user fee by five cents a year for the next five years, and indexing it to inflation thereafter.Revising IRS “volume caps” and other limitations on private-activity bonds (PABs). Congress should broaden availability of these tax-exempt municipal bonding tools. Bipartisan measures that advance PAB financing, including the Move America Act (H.R. 1508), the Public Buildings Renewal Act ( H.R. 1251), and the BUILD Act (S. 352), warrant close analysis. Improving the Transportation Infrastructure Finance Innovation Act (TIFIA) loan program through measures such as the RAPID Act (S. 353). Congress should consider establishing a similar credit enhancement program to encourage public-private partnerships to help repair an aging pipeline grid and remediate gas leaks that impact climate change. DeBoer discussed the role of public-private partnerships to develop infrastructure projects on CNBC’s Squawk Box in June 2017. “There’s a lot of capital that wants to invest in infrastructure,” DeBoer said. (Roundtable Weekly, June 9, 2017). Ways and Means Chairman Richard Neal (D-MA) has indicated he intends for his committee to consider an infrastructure bill this spring.

September 15, 2023

Roundtable and Business Coalition Seek Administrative Relief, Shorter Cost Recovery Period for Nonresidential Real Estate Improvements

This week The Real Estate Roundtable, along with 239 businesses and trade groups, wrote to Secretary Mnuchinurging the Treasury Department to provide taxpayers with administrative relief from a drafting mistake in last year’s tax overhaul that increased the cost recovery period for qualified improvement property (QIP).This week, The Real Estate Roundtable, along with 239 businesses and trade groups, wrote to Secretary Mnuchin urging the Treasury Department to provide taxpayers with administrative relief from a drafting mistake in last year’s tax overhaul that increased the cost recovery period for qualified improvement property (QIP). The drafting error in the tax law has resulted in a significantly longer 39-year cost recovery period for new, qualified nonresidential interior improvements. The intent of Congress was to allow the immediate expensing of QIP – or provide a 20-year recovery period in the case of taxpayers electing out of new limitations on the deductibility of business interest. In the Oct. 9 letter to Secretary Mnuchin, the coalition addressed the need for a QIP correction, along with the unintended consequences if action is not taken. The letter raised concerns that the drafting error is resulting in “[d]elays in store and restaurant remodeling projects,” “[b]usinesses refraining from purchasing or leasing vacant stores or other leasehold spaces that require improvements,” and “[l]oss of construction jobs associated with commercial renovation projects.” The coalition letter was sent in response to the Administration’s request for comments on newly proposed regulationsimplementing the additional first year depreciation deduction (immediate expensing) benefit. The coalition submission also included two recent letters—one from 16 Democratic Senators to Treasury Secretary Steven Mnuchin and the other from 58 House Republicans to GOP leadership—reiterating the importance for policymakers to correct this unintentional drafting mistake in last year’s legislation, while recommending that Treasury should issue interim guidance and refrain from enforcing the drafting error. (House Letter, Oct 2 and Senate Letter, Sept 24)The Real Estate Roundtable and a broad-based business coalition urged Secretary Mnuchin in August to issue guidance clarifying certain provisions included in tax overhaul legislation enacted last year – including the cost recovery period for qualified improvement property. (Coalition letter, Aug. 22)Congress could address the issue during the lame duck congressional session between the mid-term election and January. Senate Republican Conference Chairman John Thune (R-SD) said GOP lawmakers are motivated to address a number of tax issues that are outstanding, including tax reform technical corrections and expired tax provisions. (The Hill, Oct. 11)

September 15, 2023

Senate Committee Advances Legislation to Reauthorize “Brand USA” Tourism Marketing Program

The Senate Committee on Commerce, Science and Transportation on July 24 overwhelmingly passed S. 2203 , the Brand USA Extension Act to reauthorize the organization that promotes the U.S. globally as a travel destination. Brand USA is a public-private partnership that attracts international travelers to the U.S. to encourage tourism spending at America's hospitality, retail, attraction and other properties. The Brand USA marketing organization operates at no expense to taxpayers. Private sector contributions fund the program, matched by U.S. government fees collected from foreign visitors who enjoy visa-free entry to the U.S.Brand USA is a public-private partnership that attracts international travelers to the U.S. to encourage tourism spending at America's hospitality, retail, attraction and other properties. The Brand USA marketing organization operates at no expense to taxpayers. Private sector contributions fund the program, matched by U.S. government fees collected from foreign visitors who enjoy visa-free entry to the U.S. The federal portion of Brand USA funding runs out next year. S. 2203 would extend the federal cost-share until 2027, and increase the foreign traveler fees that pay for the federal portion. The bill's bipartisan co-sponsors are Sens. Roy Blunt (R-MO), Amy Klobuchar (D-MN), Cory Gardner (R-CO), Catherine Cortez Masto (D-NV), Dan Sullivan (R-AK), Lindsey Grahan (R-SC), and Jacky Rosen (D-NV). Nearly 50 senators signed-onto a bipartisan May 2019 "Dear Colleague" letter to support reauthorizing and extending Brand USA. The Real Estate Roundtable is part of the Visit U.S. Coalition which advocates for Brand USA reauthorization. The coalition, led by the U.S. Travel Association (USTA) and the American Hotel and Lodging Association, also includes the American Resort Development Association and the U.S. Chamber of Commerce. The importance of international travel to the domestic economy, job growth, and CRE was the focus of a panel discussion during The Roundtable's 2018 Annual Meeting. (Roundtable Weekly, June 15, 2018). A study released last year shows that Brand USA's marketing efforts brought in 6.6 million incremental international visitors to the U.S. between 2013 and 2018, at a return-on-investment of $28 in visitor spending for every $1 the agency spent on marketing. S. 2203 is introduced at a crucial time, as recent travel trend figures forecast steady declines in the U.S.'s share of the international travel market through at least 2022. The decline in market share represents estimated losses to the domestic economy of 14 million international visitors, $59 billion in international traveler spending and 120,000 U.S. jobs. (USTA news release, Aug. 1) Other travel policy legislation is pending in the House. Reps. Mike Quigley (D-IL) and Tom Rice (R-SC) on April 9 reintroduced the bipartisan Jobs Originating through Launching Travel (JOLT) Act of 2019 (H.R. 2187) to improve national security, increase international tourism, and reform visa laws. (Roundtable Weekly, April 26, 2019) When Congress returns from its summer recess on Sept. 9, policymakers will face the task of setting FY'20 federal appropriations for individual agencies and departments - before current funding runs out on September 30. It is uncertain which individual programs such as Brand USA could be addressed within these funding bills, or whether Congress will need to pass an extension of current funding levels via a "Continuing Resolution." (Roundtable Weekly, Aug. 2)# # #

September 15, 2023

President Trump Signs Debt Limit, Budget Caps Deal After Senate Passage; Congress In Recess Until Sept. 9

President Trump signed major bipartisan legislation today that allocates more than $2.7 trillion in discretionary federal spending over two years; suspends the debt ceiling until July 2021; and permanently eliminates the prospect of strict "sequestration" spending caps imposed under the Budget Control Act of 2011. ( The Hill , Aug. 2) After passing the budget deal yesterday, the Senate left for summer recess, following the House's exit last week. Congress will reconvene on September 9.The legislation – a result of weeks of negotiations between Democratic congressional leaders and the White House – passed the Senate yesterday by a vote of 67-28 after the House last week approved it 284-149. (Roundtable Weekly, July 26). President Trump tweeted yesterday in support of the bill. Senate Majority Leader Mitch McConnell (R-KY) yesterday commented on the bill: "In recent weeks, key officials on President Trump's team engaged in extensive negotiations with Speaker Pelosi and the Democratic House. Given the exigencies of divided government, we knew that any bipartisan agreement on funding levels would not appear perfect to either side. But the administration negotiated a strong deal." (CNN, August 1) Notably, the budget deal puts an end to the threat of sequestration, which would have imposed a mandatory 10 percent cut on all programs if budget targets were not met. Senate Minority Leader Chuck Schumer (D-NY), said yesterday, "For too long, the arbitrary, draconian limits of sequester have hampered our ability to invest in working Americans and in our military readiness. This deal ends the threat of sequester permanently. That is huge." (Schumer Floor Remarks, August 1) President Trump has indicated he wanted to eliminate budget brinkmanship in Washington that last year resulted in the longest partial government shutdown in U.S. history – while obtaining a two-year budget allocation until after the 2020 presidential election. (Wall Street Journal, August 1) After passing the budget deal yesterday, the Senate left for summer recess, following the House's exit last week. Congress will reconvene on September 9. Policymakers will face a tight deadline upon their return as they will need to set federal appropriations for individual agencies and departments for FY'20. Current FY'19 funding runs out on September 30, as does legislative authority for the National Flood Insurance and EB-5 investment programs. If Congress and President Trump cannot agree on how to allocate the $1.37 trillion in discretionary money allotted for the new fiscal year beginning October 1, a stopgap funding measure (or "Continuing Resolution") may be required.

September 15, 2023

Senate Committee Advances Five-Year Transportation Bill

The Senate Environment and Public Works Committee (EPW) unanimously approved a bill on Tuesday to authorize $287 billion over five years to repair and maintain the nation's surface transportation. The bipartisan measure also aims to expedite the infrastructure permitting process, help address climate change, and grow the economy. ( EPW Committee news release , July 30) The Roundtable on April 29 submitted infrastructure policy recommendations to House Committee on Transportation and Infrastructure Chairman Peter DeFazio (D-OR) and Ranking Member Sam Graves (R-MO ). America's Transportation Infrastructure Act of 2019 (ATIA, S. 2302) is not the comprehensive infrastructure overhaul that Republicans and Democrats have long sought. (Roundtable Weekly,May 3, 2019.) However, it makes progress toward shoring-up the Highway Trust Fund (HTF) – the nation's largest financing source for roads, bridges, tunnels, and mass transit. Congress must reauthorize and capitalize the HTF before it runs out of money by the end of September 2020, at the height of the presidential election season. (ATIA summary and section-by-section analysis) The ATIA would also codify Trump Administration measures to cut lengthy project permitting times. EPW Chairman John Barrasso (R-WY) and Ranking Member Tom Carper (D-DE) stated their bill "will speed up project delivery by codifying key elements of the President's 'One Federal Decision' policy, without forgoing important environmental protections. Cutting red tape will allow important highway infrastructure projects to be built quicker and smarter." (July 29 CNN joint op-ed)President Trump tweeted his support of S. 2302 on July 30, praising the EPW Committee's 21-0 vote as a bipartisan achievement. The bill now moves to the Finance Committee, chaired by Sen. Chuck Grassley (R-IA), to figure out how to pay for it through tax revenues and other means. Additionally, the Senate Banking Committee, chaired by Mike Crapo (R-ID), must also mark-up sections dealing with mass transit programs. The Senate's No. 2 Republican, John Thune (R-SD), said funding the bill will be a "heavy lift" and that any broader infrastructure package is "really unlikely." (POLITICO Morning Transportation, Aug. 2)One financing source reportedly off-the-table is an increase to the "pay-at-the-pump" gas user fee that capitalizes the HTF. Congress has not raised the so-called "gas tax" since 1993, and its buying power has been significantly diminished since then by inflation and gains in fuel efficiency. Grassley said the Finance Committee will not consider how to pay for the ATIA until Senate Majority Leader Mitch McConnell (R-KY) "says he's willing to let a gas tax increase on the floor." (BGov Tax, July 31)The Real Estate Roundtable's infrastructure policy agenda recommends a responsible increase to the gas user fee to sustain the Highway Trust Fund for the long term; streamlined permitting goals; and support for infrastructure innovations (such as driverless and electric vehicles) that respond to the nation's changing demographics and accommodate increased demands for transit-oriented development.Roundtable President and CEO Jeffrey D. DeBoer discussed the role of public-private partnerships to develop infrastructure projects on CNBC's Squawk Box in June 2017 . ( Roundtable Weekly , June 9, 2017) Congressional committees have also received statements from The Roundtable outlining our infrastructure priorities. ( Roundtable Weekly, May 3, 2019 and March 22, 2019 ).

Workplace Return

September 15, 2023

Roundtable Weekly

Congress Seeks to Include Legislative Language in Spending Bills Addressing Federal Workers' Return to Offices

DeBoer Jeffrey DeBoer Workplace Return

House and Senate lawmakers are looking to change current federal workforce telework policies by including language in annual spending bills under consideration by Congress. Yesterday, a House Oversight and Accountability Subcommittee held a hearing on “Oversight of Federal Agencies’ Post-Pandemic Telework Policies” and efforts to mandate federal workers return to their offices. (BGov, Sept. 14) Federal Telework The Real Estate Roundtable has urged President Biden and national policymakers for months to end government policies that encourage remote working arrangements for federal employees. (RER letter to President Biden, Dec. 12, 2022) The White House directed Cabinet officials on Aug. 4 to increase the return of federal employees to their offices this fall as a “critical” part of fulfilling the mission of government agencies. (Government Executive, Aug. 7 | Axios, Aug. 4 In the House, Republicans inserted language into the Financial Services-General Government spending bill (H.R. 4664) that would defund any agency that does not return to 2019 telework practices. The House bill states, “Within 30 days of enactment of this Act, the Committee requires Federal agencies to reinstate and apply their pre-pandemic telework policies, practices, and levels in effect as of December 31, 2019, or they cannot obligate or expend funding for fiscal year 2024.” The Senate’s Appropriations bill for FY 2024 (S. 2309) is far more flexible, requiring agencies to only “examine how policies for in-person work, telework, and remote work impact agency productivity and performance as well as how effectively and efficiently agencies are able to carry out their missions and serve the public.” (Government Executive, Sept. 5 and FedWeek, July 18) Sen. Joni Ernst (R-IA) is seeking to add an amendment to federal spending bills that would force agencies to provide details on the cost of telework. “You have bureaucrats that are doing bubble baths during their conference calls for work. So you federal employees that are out there, we’re coming after you,” Ernst said recently. (BGov, Sept. 14) Roundtable Calls for Workplace Return The Roundtable followed its letter to President Joe Biden in December about the negative economic impact of federal telework policies with a letter to the Senate in April about the need to get more federal workers back to the workplace. (Commercial Observer and The Hill, April 14) Today Real Estate Roundtable Chairman Emeritus Bill Rudin (Co-Chairman and CEO, Rudin Management Co.) discussed the return-to-office trend in New York City, the challenge of property conversions, the need to increase the housing supply, and other issues facing CRE on CNBC’s Squawk on the Street. Roundtable President and CEO Jeffrey DeBoer will discuss the impact of remote work and other policy issues facing the industry on Sept. 26 as part of a Marcus & Millichap webcast, “A Conversation with Lloyd Blankfein, Former Chairman and CEO of Goldman Sachs, on the Economy and Commercial Real Estate with Insights from Industry Leaders.” Marcus & Millichap President and CEO, Hessam Nadji and former Chairman and CEO of Goldman Sachs, Lloyd Blankfein, will lead the live webcast discussion on the economic factors, including Federal Reserve policy, impacting the commercial real estate market. DeBoer, Tom McGee, President and CEO of ICSC and Sharon Wilson Géno, President of NMHC will join the conversation as CRE industry leaders. (Register here)

Energy And Climate Policy

September 15, 2023

Roundtable Weekly

CRE Coalition Asks EPA to Help Standardize Conflicting State, Local Building Emissions Laws

Anthony Malkin Building Performance Standards BPS ENERGY STAR EPA EPAs ENERGY STAR Certification for Buildings Reporting on Climate Risks Securities and Exchange Commission

The Real Estate Roundtable and industry partners encouraged the U.S. Environmental Protection Agency (EPA) on Sept. 14 to enhance its set of effective, standardized, and voluntary federal tools that can assist real estate companies meet climate targets imposed by city and state laws. (Real estate coalition letter, Sept. 14) EPA Standards to Quantify Emissions The coalition endorsed EPA’s planned improvements to its free, online Portfolio Manager benchmarking tool, announced in an ENERGY STAR July 2023 policy brief. Nearly 25% of U.S. CRE space measures energy and water use, waste disposal, and GHG emissions using Portfolio Manager. The coalition’s letter cites the ENERGY STAR Commercial Buildings program as an exemplary “public-private partnership to address the climate crisis and enhance our nation’s energy independence.” Portfolio Manager and other EPA resources can help real estate owners, developers, and lenders with common tools to comply with numerous building performance standards (“BPS”) enacted at the state and local level, and similar non-governmental frameworks like the one proposed by the Science Based Targets Initiative (“SBTi”). (Roundtable Weekly, July 14 and Jan. 20). Without EPA’s voluntary resources to support uniform emissions measurement, compliance with local mandates is “exceedingly difficult, impracticable, and in some cases, impossible,” the letter states. “We value greatly our longstanding collaboration with the US-EPA’s ENERGY STAR program. It is the gold standard of resources which help our industry report on energy efficiency and the financial impacts from the increase of renewable energy supplies,” said Roundtable Sustainability Policy Advisory Committee Chair, Tony Malkin (Chairman, President, and CEO, Empire State Realty Trust), below. Malkin added, “Non-binding federal guidelines from the EPA’s strong and best-in-class analytical frameworks are the North Star through which local governments can inform their law-making, and this helps to bring some sense and order to the otherwise conflicting patchwork of climate laws and frameworks developed by states, cities, and NGOs. The future is hard facts and data, and our industry is fortunate to have a constructive and productive relationship with the EPA that focuses on points on the board, the how to address the what.” The American Hotel & Lodging Association; Building Owners and Managers Association (BOMA) International; CRE Finance Council; ICSC; Mortgage Bankers Association; NAIOP, Commercial Real Estate Development Association; and Nareit® joined The Roundtable on the coalition letter. Anticipated SEC Climate Rules The Roundtable’s call for uniform methods to calculate and report emissions anticipates overdue rules this fall from the U.S. Securities and Exchange Commission (SEC). The SEC’s rules are expected to compel registered companies to disclose in investor filings material financial impacts related to climate change. (See Roundtable Weekly, June 10, 2022 and RER comments). SEC Chair Gary Gensler testified this week before the Senate Banking Committee that rules regarding disclosure of Scope 3 “indirect” emissions could be changed. “Really important issues have been raised around Scope 3,” he said. (Wall Street Journal, Sept. 12) (See also Roundtable Weekly, March 17). Gensler is also scheduled to testify before the House Financial Services Committee on Sept. 19. A Sept. 12 podcast featuring Roundtable Senior Vice President & Counsel Duane Desiderio, and Nareit’s Senior Vice President of Environmental Stewardship and Sustainability Jessica Long, discusses the imminent SEC rule and other real estate policy priorities in the energy and climate arena. (Listen to Nareit’s “Real Estate Roundtable says CRE Playing Key Role in Success of Federal Climate Programs”) The Biden administration’s emphasis on climate policy will continue this fall, when it is expected to propose a uniform federal definition on the long-term concept of “zero emissions buildings.” The Roundtable’s SPAC will convene a working group to analyze the definition upon its release for public comments. # # #

Capital and Credit

September 15, 2023

Roundtable Weekly

Roundtable and Business Coalition Urge SEC to Withdraw Proposed Safeguarding Advisory Client Rule

Safeguarding Advisory Client Proposed Rule Securities and Exchange Commission

The Roundtable and a diverse group of 25 trade associations this week wrote to Securities and Exchange Commission (SEC) Chair Gary Gensler to oppose a proposed Safeguarding Advisory Client Rule—in its current form—and explain the negative impacts it would have on investors, including their access to various services, assets, and markets with well-established rules and procedures. (Coalition letter, Sept. 12) Inconsistent and Duplicative The coalition letter notes how the proposal creates requirements that are inconsistent with certain recent or preexisting Commission requirements—and duplicative of, existing safeguards enforced by the Commodity Futures Trading Commission (CFTC), federal banking agencies, and state insurance regulators. The letter emphasizes that substantial, material flaws in core elements of the proposal require changes that would make the proposal no longer meaningful in its current form. The letter states, “Should the Commission decide to make such changes and move forward with rulemaking, we strongly recommend withdrawing and re-proposing the [Safeguarding Advisory Client Rule].” The Commission acknowledged this fact on August 23, 2023, when it re-opened the comment period on the proposal to give the public 60 days to provide additional feedback in light of separate final rules adopted by the SEC regarding the regulation of private fund advisers. (SEC news release, proposed rule, fact sheet, and comments received) The proposal’s range of new custodial requirements would create significant operational and practical challenges to the custody of real estate, even though these assets cannot be misappropriated and are easily tracked by deeds and mortgages recorded by municipalities. These challenges would materially inhibit adviser clients’ access to investment strategies relating to real estate, compounding the pressures that high interest rates and vacancies are placing on commercial and residential markets. Policymaker Pushback During a Senate Banking Committee hearing this week, Ranking Member Tim Scott (R-SC), above, questioned Gensler about the proposal. Sen. Scott noted in his opening statement that the SEC has put forward 47 proposals and adopted 22 of them in the first several months of Gensler’s leadership, not allowing a reasonable amount of time for the public to provide input on proposed rules and for the widespread impact and confuse on created by agency’s proposed rules. During Q&A with Gensler, Sen. Scott stated “…your proposed revisions to the current rules for safeguarding are so overreaching, you've placed your fellow regulators at the CFTC, the Fed and Treasury between a rock and a hard place. These proposals and rule makings will have a tremendous effect on our capital market system. Yet under your leadership, the SEC has failed to conduct thorough cost benefit analysis, much less look at the overall impacts of these proposal and has limited the time the public can have—the time to analyze and then comment on these rules and the proposals.” (CQ transcripts) In the House, Rep. Patrick McHenry (R-NC), chairman of the House Financial Services Committee, announced this week that its Capital Markets Subcommittee will hold a hearing on “Oversight of the SEC’s Division of Investment Management” on Sept. 19. The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) established a Custody Rule Working Group, which is working on comments about the SEC proposal that are due October 30. The working group also plans to meet with the SEC’s Division of Investment Management.

Beneficial Ownership

September 15, 2023

Roundtable Weekly

Roundtable and Broad Coalition Support Legislation to Delay CTA Reporting Requirements

Beneficial Ownership Beneficial Ownership amp the Corporate Transparency Act Corporate Transparency Act CTA FinCEN

The Roundtable and a broad coalition representing millions of businesses throughout the country wrote to House Financial Services Committee Chairman Patrick McHenry (R-NC), above, this week in strong support of his legislation—the Protecting Small Business Information Act of 2023 (H.R. 4035). McHenry’s bill would delay the date when the Corporate Transparency Act’s (CTA) beneficial ownership reporting requirements go into effect, currently scheduled for Jan. 1, 2024. (Coalition letter, Sept 12 and McHenry news release, June 12) CRE Impact There is significant concern about the CTA's far-reaching scope and its impact on many commercial residential real estate businesses that use the LLC structure for conducting business. The coalition’s letter states that Chairman McHenry’s bill “legislation offers a commonsense solution to this pending regulatory trainwreck.” The CTA amended the Bank Secrecy Act to require corporations, limited liability companies, and similar entities to report certain information about “beneficial owners” who own at least 25% of an entity or indirectly exercise “substantial control” over it. The CTA authorizes the Treasury's Financial Crimes Enforcement Network (FinCEN) to collect and disclose beneficial ownership information to authorized government authorities and financial institutions, subject to effective safeguards and controls. The statute requires the submission of regular reports to the federal government that include a litany of sensitive personal identifiers of the owners, senior employees, and/or advisors of covered entities. CTA Rule Burdens The coalition notes that the rule will cover over 32 million existing entities and an additional 5 million newly-created entities every year. These companies and other legal entities could be subjected to increased paperwork, privacy risks, and potentially devastating fines and prison terms. The CTA also applies only to businesses with under $5 million in annual revenues and fewer than 20 employees, thus ensuring that the very companies who can least afford the costs associated with compliance are the ones targeted. Additionally, the coalition emphasizes that despite a looming effective date of January 1, 2023, FinCEN regulators have not finalized the “Access Rule,” which specifies who can access the database and for what purposes, nor an updated “Customer Due Diligence Rule” that applies to financial institutions. Regulators have not laid out a clear plan for engaging millions of affected businesses to convey upcoming responsibilities. In April, bipartisan groups of House and Senate policymakers urged FinCEN to amend the proposed beneficial ownership reporting and access rules, contending certain provisions do not follow congressional intent. (Reuters, April 5) Rep. McHenry, Sen. Sheldon Whitehouse (D-RI), and a bipartisan, bicameral group of congressional lawmakers requested that FinCEN amend the proposed beneficial ownership rule to adhere to congressional intent and ensure reporting companies cannot avoid transparency. (Congressional letter, April 3) The Roundtable is also part of a broad coalition of business trade groups that supports a National Small Business Association legal challenge (NSBA v. Janet Yellen) on the constitutionality of the Corporate Transparency Act (CTA), which became law in Jan. 2021. (Coalition statement of support, Dec. 7, 2022 and NSBA’s website on the CTA)

Building Performance Standards

September 14, 2023

Policy Comment Letter

CRE Coalition Letter to EPA in Support of ENERGY STAR “Portfolio Manager” Enhancements

Building Performance Standards BPS, EPA, EPAs ENERGY STAR Certification for Buildings,

SEC Proposed Rulemaking

September 12, 2023

Policy Comment Letter

Joint Trades Letter Opposing SEC’s Safeguarding Advisory Client Proposed Rule

Safeguarding Advisory Client Proposed Rule, Securities and Exchange Commission,

Beneficial Ownership & the Corporate Transparency Act

September 12, 2023

Policy Comment Letter

Joint Trades Letter Requesting Delay in Corporate Transparency Act’s Reporting Requirements

Beneficial Ownership, Beneficial Ownership amp the Corporate Transparency Act, Corporate Transparency Act CTA, FinCEN,

Policy Landscape

September 8, 2023

Roundtable Weekly

Congress Faces Short-Term Funding Measure to Prevent Government Shutdown by Sept. 30

Climate Risk Reporting Congress National Flood Insurance Program NFIP Policy Landscape Tax Policy

Funding for the government will expire Sept. 30 if Congress cannot muster a short-term stopgap patch to keep federal agencies open and avoid a partial government shutdown. House Speaker Kevin McCarthy (R-CA) faces strong opposition from members of the conservative House Freedom Caucus to strike a deal with the Biden administration, which has submitted an additional $44 billion request for disaster relief, border security, and Ukraine. (CQ, Sept. 5 and AP, Aug. 21) Flood Response Funding An uncertain funding landscape dominates the prospects for legislative developments for the remainder of the year. If policymakers manage to pass a short-term “continuing resolution,” it could require a follow-on “omnibus” budget package for 2024 that may serve as the only must-pass vehicle to move other policy changes through Congress. As the hurricane season picks up momentum, one government program affecting commercial real estate that is subject to the Sept. 30 funding deadline is The National Flood Insurance Program (NFIP). Congress has enacted 25 short-term NFIP reauthorizations since 2017. A new flood rating methodology (Risk Rating 2.0) in 2021 established by the Federal Emergency Management Agency (FEMA) has attracted additional disagreement among policymakers after it was reported that resulting rate hikes could cause the loss of coverage for hundreds of thousands of policyholders. (Associated Press, July 22) The Roundtable is a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms that create long-term stability for policyholders, improved accuracy of flood maps, mitigation reforms, enhanced affordability, and the acceptance of non-NFIP policies for commercial properties. (Roundtable Weekly, June 30) Tax and Other Policy House Republican leaders hope to break an impasse in the GOP caucus over a tax relief package passed by the Ways and Means Committee that includes measures affecting commercial real estate. Committee Chairman Jason Smith (R-MO), above, spoke about his efforts to advance the tax measure during The Roundtable’s recent Annual Meeting. (Roundtable Weekly, June 16 and June 9) The committee bill has not reached the House floor for a vote due to opposition by members from high-tax states who want the package to include relief from the $10,000 cap on state and local tax deductions (SALT), enacted in the GOP’s 2017 tax law. (Washington Post, July 24 and Roll Call). The tax package would extend expired business interest deductibility rules and 100% immediate expensing (bonus depreciation) for qualifying capital investments. Bonus depreciation is 80% in 2023 and gradually phasing down. Two other tax issues with bipartisan support that may be folded into a negotiated end-of-year tax package are the expansion of The Roundtable-supported low-income housing tax credit and technical corrections to SECURE 2.0, a package of retirement provisions. (Tax Notes, Sept. 5) Hearings & Climate Disclosure Rule Securities and Exchange Commission (SEC) Chair Gary Gensler will testify before the Senate Banking Committee on Sept. 12, followed by an expected appearance before the House Financial Services Committee on Sept. 27. (PoliticoPro, Aug. 28) Committee members are likely to question Gensler about a highly anticipated climate disclosure rule and SEC proposals impacting advisory client assets and cybersecurity risk management. (Thomson Reuters, Aug. 22, “SEC Plans to Finalize 30 Proposed Rules in Near Term”) See The Roundtable’s resources on “Reporting on Climate Risks,” including a Fact Sheet, recent issues of Roundtable Weekly, and policy comment letters. In other news this week, the Wall Street Journal featured a story on how owners of buildings in cities across the U.S. are facing significant new taxes on their carbon emissions. Ben Myers, Senior Vice President of Sustainability at BXP and Vice Chair of The Roundtable’s Sustainability Policy Advisory Committee (SPAC), is quoted in the article, stating, “We have made energy efficiency a priority” The policy issues above and many more will be the focus of discussions during The Roundtable’s Fall Meeting (Roundtable-level members only) on Oct. 16-17 in Washington.

Foreign Investment & CRE

September 8, 2023

Roundtable Weekly

Roundtable Urges Clarifications to Florida Law Restricting Certain Foreign Investments in Real Estate

Capital and Credit Florida SB264 Foreign Investment Restrictions on Foreign Investment in US Real Estate

On Sept. 5, The Real Estate Roundtable urged the Florida Real Estate Commission to clarify their implementation of a recently enacted law that could have negative consequences for foreign real estate investment in the state. Twenty states have enacted restrictions on foreign investors in real estate or agricultural land, eight states are considering similar measures, and other states are exploring the issue. (Roundtable letter) Restrictions on Foreign Investment Governor Ron DeSantis signed into law Florida Senate Bill 264 (SB 264) on May 8. The new law aims to limit and regulate the sale and purchase of certain Florida real property by “foreign principals” from “foreign countries of concern.” The Florida Real Estate Commission will implement the new law. (SB 264 text). Foreign investment is a major source of capital funding for U.S. commercial real estate projects, leading to job creation and economic growth for communities nationwide. Real estate is a critical element of Florida's economy, and the state is one of the most popular states for foreign investment. Property taxes contribute over 18% of Florida’s overall tax revenue. The letter from Roundtable President and CEO Jeffrey DeBoer notes that approximately $1.5 trillion of U.S. commercial real estate debt will come due in the next three years. Foreign equity investments in U.S. assets are often an important source of capital as commercial real estate owners seek to restructure, refinance or sell their properties. Roundtable Concerns The Roundtable’s letter supports efforts to protect the nation’s economic, military, and civil security, as well as the integrity of commercial real estate investments. The letter also reflects Roundtable members' concerns that the new law may have a chilling effect on foreign investment in Florida real property, hinder foreign investment in U.S. real estate by legitimate enterprises, and act as a barrier to capital formation by law-abiding entities. The comments detail how SB 264 expands the scope of the law beyond its publicly stated intent, which could have negative repercussions for Florida real estate markets and capital formation. (Roundtable letter) The Roundtable letter includes a request for clarification about the definition of a “controlling interest” that impact exceptions to the law based on an investor’s meaningful ownership or influence. (SB 264 text). News Service Florida cited the letter in their Sept. 7 article “Real Estate Group Concerned About Land Law.” DeBoer requests the Florida Commission to “carefully consider the impact of your agency’s interpretation and implementation efforts of this new law so that it does not prohibit major investments in the state, which are safe from control by foreign countries of concern and promote growth without sacrificing the security or economic interests of Florida.”

Restrictions on Foreign Investment in U.S. Real Estate

September 5, 2023

Policy Comment Letter

Roundtable Requests Clarifications to Florida Law Restricting Certain Investments in Real Estate

Capital and Credit, Florida SB264, Foreign Investment, Restrictions on Foreign Investment in US Real Estate,

Science-Based Targets

August 25, 2023

Policy Comment Letter

Roundtable and Nareit Submit Supplemental Comments on Draft “Building Sector Science Based Target Setting Guidance”

Building Emissions, Building Performance Standards BPS, Climate and Energy Policy, Nareit, SBTi, ScienceBased Targets,

Q3 Sentiment Index

August 16, 2023

Press Release

Commercial Real Estate Executives Optimistic Despite Challenging Market Conditions

Economic Growth amp CRE Quarterly Sentiment Index

August 16, 2023 (WASHINGTON, D.C.) — Industry leaders remain optimistic about future market conditions while acknowledging uncertainty due to interest rate increases, maturing office loans, financing costs, prolonged remote work policies, and labor productivity, according to The Real Estate Roundtable’s Q3 2023 Sentiment Index. Roundtable President and CEO Jeffrey DeBoer said, “Many maturing loans were financed when base rates were near zero and now need to be refinanced in a challenging environment where rates are much higher, values are lower, and markets are less liquid. Higher rates are also contributing to cyclical pressure on valuations. On top of that, remote work has devastated America’s downtowns and stalled office demand.” DeBoer added, “The economy has undergone significant transformations due to the pandemic. The realities and challenges we face today requires us to rethink how businesses and people use offices, retail, housing, medical care, and more. Future buildings must accommodate the changes to be successful. The Roundtable will continue to advocate and support measures that boost the availability of credit and enhance the formation of capital in the commercial real estate industry, particularly during these times of market uncertainty.” The Roundtable’s Economic Sentiment Index—a measure of senior executives’ confidence and expectations about the commercial real estate market environment—is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive. The Q3 Sentiment Index topline findings include: All indices reported increases: The Q3 2023 Real Estate Roundtable Sentiment Index registered an overall score of 46, an increase of five points from the previous quarter. The Current Index registered 33, a six-point increase from Q2 2023, and the Future Index posted a score of 59 points, an increase of four points from the previous quarter. Disparities between asset classes persist in these challenging market conditions. Hotel and retail markets are largely performing well. Niche asset classes continue to generate interest. On the other hand, office is performing poorly, and rental growth in multifamily and industrial are starting to abate. Perceptions of declining asset values continue to dominate, with 95% of survey participants reporting that asset values are lower as compared to last year. While Class A properties across all asset classes are trading at competitive prices, managers are still in a “wait and see” mindset for other assets, resulting in lower transaction volumes and an inability to complete accurate valuations. The availability of capital —both debt and equity—continues to be a pressing topic; 85% and 69% of survey participants, respectively, believe that today’s conditions are more difficult than a year ago. Although managers face a difficult capital raising environment, only 24% and 9% of participants believe debt and equity availability respectively will be worse a year from now as the industry works to creatively solve financing issues. Data for the Q3 survey was gathered by Chicago-based Ferguson Partners on The Roundtable’s behalf in July. See the full Q3 report. The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy.

Workplace Return

August 11, 2023

Roundtable Weekly

White House Directs Agencies to Increase Return of Employees to Federal Offices

Remote Work Return to Office Telework Workplace Return

White House Chief of Staff Jeff Zients, above, directed Cabinet officials on Aug. 4 to increase the return of federal employees to their offices this fall as a “critical” part of fulfilling the mission of government agencies. The Real Estate Roundtable has urged President Biden and national policymakers for months to end government policies that encourage remote working arrangements for federal employees. (Government Executive, Aug. 7 | Axios, Aug. 4 | RER letter to President Biden, Dec. 12, 2022) Back-to-Office Fed Policies Zients informed administration officials, “As we look towards the fall, your agencies will be implementing increases in the amount of in-person work for your team. This is a priority of the president — and I am looking to each of you to aggressively execute this shift in September and October." (Reuters, Aug 5 and The Washington Post, Aug. 4) Empty federal offices have depressed local economies, according to a July 18 Federal News Network (FNN) broadcast. (Listen or read transcript from Federal Drive with Tom Temin) An updated list of agencies’ return-to-office policies is available online through the Federal News Network. Meanwhile, Republican leaders on the House Oversight and Accountability Committee have also urged agency officials to encourage a return-to-office, threatening this week to “resort to compulsory measures” in their probe of federal agencies’ telework polices. Roundtable Weighs In In an April letter to all U.S. Senators, Real Estate Roundtable President and CEO Jeffrey DeBoer, above, emphasized, “The executive branch’s current policies are undermining the health of cities, local tax bases, and small businesses. Federal agencies should return to their pre-pandemic workplace practices.” (RER letter to the Senate, April 12). In a similar letter to President Biden in December, DeBoer noted that federal telework policies were ignoring “the negative impacts of remote work on cities and communities, labor productivity, and U.S. economic competitiveness, as well as the quality of government services.” (Commercial Observer, April 14 and RER letter to President Biden, Dec. 12) # # #

CRE Conversions

August 11, 2023

Roundtable Weekly

House Democrats Urge Federal Regulators to Incentivize CRE Conversions

Property Conversions

Rep. Jimmy Gomez (D-CA), above, and nine other House Democrats last week urged federal banking regulators to incentivize conversions of commercial real estate to other uses. Rep. Gomez previously introduced the Roundtable-supported Revitalizing Downtowns Act (H.R. 4759) in 2021 to encourage adaptive use of older buildings. Sen. Debbie Stabenow (D-MI) also introduced companion legislation in the Senate (S. 2511). (Rep. Gomez news release, July 31) Federal Regulators & CRE Conversions The recent letter to Fed Chairman Jerome Powell and other regulators stated that the congressional policymakers are concerned how the COVID-19 pandemic continues to exert a negative influence on markets and regional banks. "We are especially interested in the impact of this instability on the $6 trillion dollar market for retail and office space CRE, which has been unduly impacted by pandemic related disruptions," the letter states. The letter also noted, "It is essential that all arms of the federal government take prudent steps to limit the impact of a CRE market contraction, and innovate to encourage reuse of vacant commercial space as a potential source of housing." (Rep. Gomez news release, July 31) Legislation & Tax Credits On Oct. 12, 2022, a Roundtable-led coalition of 16 national real estate organizations urged Rep. Gomez and Sen. Stabenow to consider certain enhancements and expansions to the Revitalizing Downtowns Act’s 20% tax credit for qualified property conversion expenditures. (Real Estate Coalition letter) The bill's property conversion measure was modeled on the historic rehabilitation tax credit and could be used for office buildings that are at least 25 years old at the time of conversion. The industry's recommendations included expanding the category of properties eligible for the credit to various types of commercial buildings such as shopping centers and hotels. (GlobeSt and Roundtable Weekly, Oct. 2022) The Senate addressed the Revitalizing Downtowns Act as part of a March hearing on Tax Policy’s Role in Increasing Affordable Housing Supply for Working Families. Sen. Stabenow engaged hearing witness and National Multifamily Housing Council President Sharon Wilson Géno about a joint NMHC and Urban Land Institute study on adapting CRE to residential use. White House Initiative The Roundtable on Dec. 12, 2022 urged the Biden administration to support "legislation to facilitate the increased conversion of underutilized office and other commercial real estate to much-needed housing." (RER letter to President Biden, Dec. 12 andGlobeSt, Aug. 8) Last month, the administration announced a new initiative that will establish a multi-agency working group to "develop and advance federal funding opportunities" for commercial-to-residential conversions that would help increase the supply of energy-efficient affordable housing. (Reuters and HousingWire, July 27 | Roundtable Weekly, July 28) New CRE Conversion Study A new analysis from researchers at New York University and Columbia University explores the potential for renewable energy investment tax credits in the Inflation Reduction Act to help subsidize CRE adaptive use and green conversions. (National Bureau of Economic Research) The August study, Converting Brown Offices to Green Apartments, also notes the significant role that local zoning laws, permitting policies, and building codes could play in encouraging CRE conversions. The authors conclude that about 11% of commercial office buildings in the 105 largest cities are candidates for conversion, and that an estimated 400,000 new apartment units could be created. (Axios, Aug. 8) A property conversions working group created by The Real Estate Roundtable’s Tax Policy Advisory Committee will continue to respond to legislative proposals affecting potential property conversion activities. # # #

News

August 11, 2023

Roundtable Weekly

New Federal Rules Issued Regarding Real Estate Construction, Clean Energy Projects

Clean Energy Tax Incentives Energy Policy Labor Policy Tax Policy

The Biden administration issued two new rules this week impacting real estate construction and investments in clean energy projects. Davis-Bacon: The U.S. Labor Department on Tuesday issued a final rule to overhaul Davis-Bacon standards that determine prevailing wages for workers on construction projects covered by a federal contract or financially assisted by federal grants, loans, guarantees or insurance. Construction association AGC issued a statement expressing “preliminary” concerns that “this rulemaking critically missed an opportunity” to inject “more accurate data” in processes to establish prevailing wage rates in local markets across the nation. Laborers and mechanics constructing transportation, energy, water, toxic site clean-ups, and other infrastructure financially supported by the bipartisan Infrastructure Investment and Jobs Act (IIJA) must meet the new Davis-Bacon requirements. (IIJA project map) Inflation Reduction Act (IRA) projects receiving clean energy tax incentives are not required to meet Davis-Bacon rules, but they can qualify for increased credits and deductions if workers are paid prevailing wages. (RER’s IRA fact sheets) “Bonus” Tax Credits: The Treasury Department and IRS on Thursday released final rules explaining how IRA “bonus credits” can be awarded to solar, wind, and associated storage projects in low-income communities. (The Hill, August 10) Qualifying projects in census tracts eligible for new market tax credits (NMTCs) can receive a 10% solar credit boost, while those supported by low-income housing tax credits or Section 8 rental assistance can receive a 20% solar credit increase. (RER’s IRA “bonus rate” chart) The “bonus” incentives – over “base” rate tax credit amounts – are competitive. Bonuses will be awarded through an application process run by the U.S. Department of Energy scheduled to open this fall. The Roundtable submitted comments in June when the IRS proposed the “bonus credit” program. (Roundtable Weekly, June 30). It will update its summary of IRA-related agency guidance following analysis of the newly issued rule. # # #

Annual Reports

August 11, 2023

Roundtable Weekly

Roundtable Releases FY2023 Annual Report, “Sustained Strength, Sustained Solutions”

The Real Estate Roundtable has released its FY2023 Annual Report, which coincides with the June 30 conclusion of the organization's fiscal year. The report details how the industry experienced significant transformation due to the global pandemic—yet emerged resilient and adaptive, achieving successes over the past 12 months on several national issues in the tax, energy, and capital formation policy areas. Roundtable Policy Issues In the introduction to “Sustained Strength, Sustained Solutions,” Roundtable Chair John F. Fish (Chairman & CEO, Suffolk) and Roundtable President and CEO Jeffrey DeBoer state, "Adapting to this new reality requires us to rethink how businesses and people use offices, retail and entertainment spaces, housing, medical care, and more. Future buildings must accommodate the changes brought on by the pandemic, as well as those that accompany the rapidly evolving artificial intelligence and technological world. The real estate industry is at the center of this transition, where the future of work, the future of housing, the future of our communities, and much more are being reimagined before our eyes." The Roundtable leaders add, "However, we are also mindful that embracing these changes is not without its costs and time constraints, and as has proven in the past to be true, the industry’s ability to respond to these changes will be inhibited or encouraged by public policy actions." The Roundtable’s FY2023 Annual Report details the organization's mission, recent activities, and offers potential policy solutions to today's pressing and far-reaching industry challenges, including: Tax Policy Capital & Credit Energy & Climate Homeland Security Infrastructure, Affordable Housing & GSE Reform Roundtable Initiatives The publication also includes: Introduction Summary of FY2023 Policy Outreach Activities Commercial Real Estate by the Numbers — useful industry statistics Membership of The Roundtable # # #

Annual Reports

August 11, 2023

Press Release

Roundtable Releases FY2023 Annual Report, “Sustained Strength, Sustained Solutions”

The Real Estate Roundtable has released its FY2023 Annual Report, which coincides with the June 30 conclusion of the organization's fiscal year. The report details how the industry experienced significant transformation due to the global pandemic—yet emerged resilient and adaptive, achieving successes over the past 12 months on several national issues in the tax, energy, and capital formation policy areas. Roundtable Policy Issues In the introduction to “Sustained Strength, Sustained Solutions,” Roundtable Chair John F. Fish (Chairman & CEO, Suffolk) and Roundtable President and CEO Jeffrey DeBoer state, "Adapting to this new reality requires us to rethink how businesses and people use offices, retail and entertainment spaces, housing, medical care, and more. Future buildings must accommodate the changes brought on by the pandemic, as well as those that accompany the rapidly evolving artificial intelligence and technological world. The real estate industry is at the center of this transition, where the future of work, the future of housing, the future of our communities, and much more are being reimagined before our eyes." The Roundtable leaders add, "However, we are also mindful that embracing these changes is not without its costs and time constraints, and as has proven in the past to be true, the industry’s ability to respond to these changes will be inhibited or encouraged by public policy actions." The Roundtable’s FY2023 Annual Report details the organization's mission, recent activities, and offers potential policy solutions to today's pressing and far-reaching industry challenges, including: Tax Policy Capital & Credit Energy & Climate Homeland Security Infrastructure, Affordable Housing & GSE Reform Roundtable Initiatives The publication also includes: Introduction Summary of FY2023 Policy Outreach Activities Commercial Real Estate by the Numbers — useful industry statistics Membership of The Roundtable # # #

Building Performance Standards - BPS

August 9, 2023

Fact Sheet

Science-Based Targets initiative (SBTi) for Building Emissions – RER Fact Sheet

Building Emissions, Building Performance Standards BPS, Climate and Energy Policy, EPA, ScienceBased Targets,

Tax Policy

August 4, 2023

Roundtable Weekly

House Ways and Means Members Call on Treasury to Withdraw FIRPTA Regulatory Proposal

Capital Gains FIRPTA LookThrough Rule FIRPTA Tax Policy

House Ways and Means Committee Members Darin LaHood (R-IL) and Carol Miller (R-WV) recently called on Treasury Secretary Janet Yellen to withdraw a proposed IRS rule that would expand the reach of the Foreign Investment in Real Property Tax Act (FIRPTA) of 1980. The policymakers’ request followed a letter by The Real Estate Roundtable and 14 other real estate trade organizations that urged congressional tax-writing committees to oppose the FIRPTA proposal. (Letter to Yellen, July 28 and Industry coalition letter, March 1) Retroactive Rewrite for REITs Under current law, shareholders of domestically controlled REITs are not subject to FIRPTA, a statutory regime that subjects foreign investors to capital gains tax on their U.S. property investments. The proposed IRS Look-Through Rule would no longer treat a taxpaying U.S. C corporation that has ownership shares in a REIT as a U.S. person—if more than 25% of the owners of the C corporation are foreign. If enacted, the new rule would trigger FIRPTA capital gains, retroactively, on REITS and investment structures used for decades when planning real estate and infrastructure investments. Congressional CRE Concerns Reps. LaHood and Miller asked Treasury and the IRS to reverse course and withdraw the proposed regulation, stating in their letter, “The proposed regulation’s retroactivity is severely burdensome and is already having a chilling effect on foreign investment, which has been a vital contributor to the economic health of the U.S. commercial real estate market. If Treasury decides to move forward with this proposal, it is imperative that the retroactivity provisions are removed.” The letter also noted the proposed change would limit access to capital at a time when the CRE market is showing signs of destabilization. The House taxwriters added, “We fear this proposal could worsen the commercial real estate outlook and harm the many Americans who rely on these crucial investments in their communities.” Industry Response In March, The Roundtable and other industry trade organizations wrote to congressional tax policymakers, urging them to contact regulators about withdrawing the rule. (Roundtable Weekly, March 3) Additionally, The Roundtable, Nareit, American Investment Council, Managed Funds Association, and ICSC submitted comments to Treasury in February in opposition to the proposed look-through rule. The organizations wrote that the regulation would “reverse decades of well-settled tax law, severely misconstrue the statute, and contradict Congressional intent.” (Letter to Treasury, Feb. 27) # # #

Affordable Housing

August 4, 2023

Roundtable Weekly

Real Estate Industry Urges FHFA to Avoid Linking New Regulations to GSE Financing

Affordable Housing Fannie Mae FHFA Freddie Mac

The Roundtable and an industry coalition recently submitted separate comments in response to a Request for Input from the Federal Housing Finance Agency (FHFA) on multifamily properties with mortgages backed by Fannie Mae and Freddie Mac (the Enterprises). The letters encourage the FHFA to remain focused on the Enterprises’ stated mission "to serve as a reliable source of liquidity and funding for housing finance and community investment.” The industry comments also raise concerns about the FHFA imposing counterproductive property restrictions, such as rent control, on multifamily properties backed by loans from the Enterprises. (Roundtable comments, July 28 and Industry coalition comments, July 31) Industry Solutions The Roundtable’s comments encouraged the FHFA—the regulator and conservator of the Enterprises—to focus on its pivotal role in America’s housing finance market by maintaining Enterprise support of the multifamily affordable housing market, particularly for low-income households. The letter noted that the imposition of counterproductive restrictions on Enterprise-backed financing and private rental housing providers would lead to less investment and development in the affordable housing market, especially during this time of market uncertainty. The Roundtable letter expressed support for measures to: Enhance the Low-Income Housing Tax Credit (LIHTC); Support initiatives that explicitly tie federal funding of infrastructure and other federal funding for “green” initiatives to local assurances to improve exclusionary zoning; Reduce regulatory costs, including a broad range of fees, standards and other requirements imposed at different stages of the development and construction process; and, Stabilize the GSEs to ensure appropriate liquidity in mortgage markets. The Roundtable’s July 28 letter also noted the important role of institutional investors as a source of capital for affordable housing. The comments emphasized how FHFA should not disincentivize this important source of capital for expanding the housing infrastructure. Coalition Comments The real estate coalition’s July 31 letter reiterated that the best way to help the nation’s renters find affordable housing is to keep the Enterprises focused on financing housing creation. The real estate organizations note that rental housing is already a heavily regulated industry that should not be subject to a one-size-fits-all set of new “protections” that conflict with the unique housing needs of individual markets. National Multifamily Housing Council President Sharon Wilson Géno said, “When we have market dynamics like we do now, where we have really high interest rates and difficulty accessing capital, the GSEs are even more important. If they start putting mandatory restrictions and rent caps on their products, people are going to go back into that private market at higher cost, and that’s going to increase rent and decrease affordability.” (PoliticoPro, Aug. 1) This week, Senate Banking Chair Sherrod Brown (D-OH) and 17 Senate Democrats also responded to the FHFA by supporting rent increase limits and other tenant measures on properties with federally backed loans from the GSEs. (Senate Banking Committee letter, Aug. 1) # # #

Cybersecurity

August 4, 2023

Roundtable Weekly

SEC Issues Final Cybersecurity Disclosure Rules for Public Companies

Cyber Risks Cybersecurity SEC

The Securities and Exchange Commission (SEC) finalized new rules last week by a vote of 3-2 that will require public companies to disclose more information about cybersecurity-related incidents, risk management, strategy, and governance. A joint comment letter by The Real Estate Roundtable and Nareit about the SEC proposal was cited nearly a dozen times in the final rule. (SEC fact sheet | Roundtable-Nareit comment letter, May 9, 2022) Industry Objections The Roundtable and Nareit expressed a number of concerns in their May 2022 letter about the proposed rule’s rigid incident reporting deadlines and granular requirements, which the industry organizations stated may unintentionally exacerbate cybersecurity risks for issuers while imposing unjustified burdens. (Roundtable Weekly, May 13, 2022) Under the new rules, registered companies must report cyber-attacks by filing an 8-K form with the SEC within four business days, which The Roundtable and Nareit objected to in their joint letter. Responding to these concerns, the SEC stated in its final rule that it is “… providing for a delay for disclosures that would pose a substantial risk to national security or public safety, contingent on a written notification by the Attorney General, who may take into consideration other Federal or other law enforcement agencies’ finding.” (Pensions and Investments, July 26) The SEC also responded to industry concerns by stating it had “streamlined” its requirements on cyber-attack disclosures to focus more on the potential effects, rather than the details of the incident itself. (Wall Street Journal, July 26 | PillsburyLaw and GreenbergTaurig) The agency states in its final rule, "To that end, to balance investors’ needs with the concerns raised by commenters …The final rules will require the registrant to describe the material aspects of the nature, scope, and timing of the incident, and the material impact or reasonably likely material impact on the registrant, including its financial condition and results of operations." SEC Chairman Gary Gensler emphasized that the final rule does not require disclosure of non-material information related to incidents—unlike the original proposal issued in March 2022. (SEC news release, July 26, 2023 and Roundtable Weekly, March 18, 2022) New Disclosures Required Public real estate companies will also be required to disclose the board of directors’ oversight of cybersecurity threats, identify any board committee (or subcommittee) responsible for cybersecurity oversight, and the processes by which the board or (sub) committee is informed about these risks. The final SEC rule will become effective on September 5, according to a notice today in the Federal Register. All registered public companies, other than smaller reporting companies, must begin complying by Dec. 18, 2023. The Roundtable’s Homeland Security Task Force will remain engaged with government officials and private sector partners on industry best practices to detect, protect, and respond to a variety of key threats, including cyber-attacks. # # #

Clean Energy Tax Incentives

July 31, 2023

Fact Sheet

IRA Clean Energy Tax Incentives Relevant to U.S. Real Estate – RER Fact Sheet

Clean Energy Tax Incentives, Energy Policy, Inflation Reduction Act, Tax Policy,

Tax Policy

July 28, 2023

Roundtable Weekly

Senate Finance Chairman Seeks Expanded Taxation of Sovereign Wealth Funds’ Real Estate, Other Investments

Tax Policy

Legislation introduced this week by Senate Finance Chairman Ron Wyden, above, would repeal tax rules applicable to foreign governments and their investment arms (“sovereign wealth funds”) if that government has more than $100 billion invested globally and does not qualify for an exception. (Wyden’s news release and one-page summary, July 26) Section 892 Citing specific concerns related to the recent merger between the Professional Golf Association (PGA) Tour and the Saudi Public Investment Fund, Chairman Wyden’s expansive bill—the Ending Tax Breaks for Massive Sovereign Wealth Funds Act—would deny application of the tax code’s long-standing section 892, which exempts certain passive income earned by foreign governments from U.S. income taxation. Countries that have a free trade agreement or tax treaty with the United States could continue to qualify for section 892, provided they are not listed as a "foreign country of concern"by the U.S. State Department. According to Chairman Wyden, the legislation would apply to China, Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, and Russia. (PoliticoPro, July 26) Foreign Investment & CRE Some of the listed countries are large investors in U.S. commercial real estate and represent a key source of capital for job-creating U.S. real estate investment. “Section 892 is nearly as old as the tax code itself, and the tax principle it represents—sovereign immunity for foreign governments—is older than the tax code. Disrupting and rewriting these rules on a whim because of a single transaction is risky and unwarranted. The consequences for U.S. real estate, jobs, and the economy could be severe,” said Real Estate Roundtable President and CEO Jeffrey DeBoer, above. “The United States is able to attract foreign capital for jobs and productive real estate investment because foreign investors have confidence in our rule of law. They believe the USA is a safe place to invest,” continued DeBoer. “When leading lawmakers threaten to overturn 100-year-old tax policies because of a single, unpopular transaction, it raises legitimate concerns. Congress should tread carefully in this area and fully understand the potential implications of its action.” CBRE’s Global Head of Capital Markets Christopher Ludeman stated, “Sovereign wealth funds are among the largest and most important investors in global real estate, especially in the U.S. where, by conservative estimates, they have invested over $25 billion since 2021. At a time when capital flows into real estate are scarce, transaction volume is down by 53% in the first half of 2023 compared to the first half of 2022. In this environment, SWFs are an important source of capital, investing close to $9.7 billion this year alone. This is the wrong time to put any new restrictions on capital flows into real estate, which this bill would do.” Established Law The section 892 tax exemption for foreign governments does not extend to commercial activities or active ownership of U.S. real estate. Income from an interest in a U.S. real property-holding corporation that a foreign sovereign does not control is generally exempt from U.S. tax as income from an investment in a U.S. security—consistent with the general rule that section 892 is limited to passive investments. Over the years, Treasury guidance and IRS rulings have further defined the scope of the provision and its interaction with other tax provisions, such as section 897 and the Foreign Investment in Real Property Tax Act (FIRPTA). The original version of section 892 was enacted in 1917 and is based on Supreme Court case law that dates to 1812. Similar foreign government tax exemption regimes apply in other countries, such as the United Kingdom, Canada, Australia, and Japan. See JCT, Economic and U.S. Income Tax Issues Raised by Sovereign Wealth Fund Investment in the United States (2008). The Wyden bill includes grandfathering rules that would apply to certain investments through 2025. The rules would cover capital deployed or committed prior to enactment and investments in publicly traded companies, provided the investment is less than 10 percent. Any grandfathering benefits would expire beginning in 2026. (Wyden’s one-page summary of the bill, July 26) # # #

Energy and Tax Policy

July 28, 2023

Roundtable Weekly

Monetizing Energy Credits: Roundtable Submits Recommendations to Treasury

Clean Energy Tax Incentives Energy Policy Tax Policy

The Real Estate Roundtable submitted comments today on proposed and temporary tax regulations regarding the transferability and direct payment of clean energy credits under the Inflation Reduction Act (IRA) of 2022. (Roundtable comments, July 28) IRA Incentives Congress passed the IRA last August. The law significantly increases the size of existing tax incentives for energy-saving improvements to commercial real estate. Perhaps even more importantly, the legislation contained key reforms related to the transferability and direct payment of energy tax credits. The reforms have made the incentives relevant to a large and previously untapped segment of real estate owners, including REITs, pension funds, and private foundations. The incentives include: Tax-exempt real estate owners that invest in solar panels and other improvements can elect to receive direct payments from the Treasury in lieu of the expanded investment tax credit. Taxable real estate owners, including REITs, can sell the credits to third parties for cash. The credit amount can range from 6% to 60% of the qualifying investment, depending on factors such as the size, location, domestic content, and wages paid to equipment contractors. Roundtable comments submitted last year included recommendations on the IRA’s transferability provisions. On June 14, the Treasury Department and IRS issued proposed regulations to implement the provisions, as well as temporary regulations establishing a pre-filing registration process. The IRS rules adopted certain Roundtable recommendations, such as the ability to divide and sell the credits from a single project to multiple transferees. Other recommendations, which would have maximized the value of the credits in mixed real estate partnerships involving taxable and tax-exempt partners, were rejected as contrary to the statute and difficult to administer. Energy Credits Monetization Today’s letter from Real Estate Roundtable President and CEO Jeffrey DeBoer commends Treasury for providing greater clarity on its credit monetization mechanism and for laying out a rational process and timeline for property owners to claim and transfer credits or receive payments. The Roundtable’s July 28 letter—developed by a joint working group of the Roundtable’s Tax and Sustainability Policy Advisory Committees (TPAC and SPAC)—also encourages Treasury to revisit the issue of mixed partnerships and asks for clarification that the credits are not “bad assets” for purposes of the 75% REIT asset test. The credit monetization tools enacted in the IRA offer valuable new opportunities to access and raise capital for energy-saving improvements to commercial real estate. The deadline for comments to Treasury and the IRS is August 14, and final Treasury regulations are expected this year. The Roundtable’s Energy Credit Transferability Working Group will remain engaged with policymakers as the rules are finalized and implementation continues. # # #

Capital and Credit

July 28, 2023

Roundtable Weekly

Federal Regulators Approve Proposal to Increase Bank Capital Requirements, Internal Dissent Signals Cautious Approach to Final Rules

Capital and Credit Restoring Liquidity in CRE Markets and Protecting Capital Formation The Fed

Federal bank regulators this week approved a sweeping set of proposed changes that would increase capital requirements for the nation's largest banks by as much as 20%, which could significantly affect liquidity available for commercial real estate transactions, impact asset values, and influence economic growth. Dissenting votes on the proposed rulemaking revealed rare disagreement among regulators, and Fed Chairman Jerome Powell signaled a cautious approach to consideration of any final rule as a 120-day public comment period begins. (Axios and PoliticoPro, July 27) New Capital Framework The Fed, Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) jointly approved the proposal, which would substantially revise the regulatory capital framework for banking organizations with total assets of $100 billion or more. Stakeholder comments on the 1,100-page proposed rulemaking are due by Nov. 30. (See Interagency Overview of the Notice of Proposed Rulemaking for Amendments to the Regulatory Capital Rule, July 27) Fed Chairman Powell voted for the proposal, but noted a significant tone of caution, stating, “Raising capital requirements also increases the cost of, and reduces access to, credit … threatening a decline in liquidity in critical markets and a movement of some of these activities into the shadow banking sector.” He added, “While there could be benefits of still higher capital, as always we must also consider the potential costs. As the financial system evolves, it is important that regulation evolve with it. I look forward to hearing from all stakeholders on how best to strike that balance.” (Federal Reserve Board - Statement by Chair Jerome H. Powell) Statements were also issued by Fed Governors Michelle W. Bowman and Christopher J. Waller, who voted against the proposal. Extensive background information on the proposal is available on the Fed’s website, including a video of the Fed’s July 27 Open Board Meeting, Board memo, Fact Sheet, Statements and Federal Register Notices. The proposed changes to large bank capital requirements would implement the final components of international banking regulations known as the Basel III “endgame” following the U.S. banking turmoil in March 2023. The agencies’ proposal would have a long phase-in period and not impact community banks. (CNBC, July 27) Real Estate Roundtable President and CEO Jeffrey DeBoer stated in a March 2023 comment letter to Fed Vice Chair Michael Barr and other key regulators, "At this critical time, it is important that the Agencies do not engage in pro-cyclical policies such as requiring financial institutions to increase capital and liquidity levels to reflect current mark to market models. These policies would have the unintended consequence of further diminishing liquidity and creating additional downward pressure on asset values. A deflationary spiral must be avoided at all costs. As recent events are only amplifying the contraction of credit, it is important for the Agencies to take measures to maintain sufficient liquidity levels and support positive economic activity." CRE Challenges The Wall Street Journal this week quoted Roundtable Chair John Fish, above, (SUFFOLK Chairman and CEO) and Roundtable Board Member Scott Rechler, (RXR Chairman and CEO) on the influence of the agencies and their positive joint policy statement issued last month that granted flexibility for CRE workouts. Agencies’ joint statement, June 29 and Roundtable Weekly, June 30) Fish noted that the agencies’ recent policy statement “is a bridge to the other side. It’s what the real-estate industry was asking for.” Rechler also praised the new policy and added, “Since the failure of the regional banks, regulators have come on very hard.” Major refinancing pressures facing CRE are shown in new Trepp data released this week, which estimates $528.7 billion of commercial mortgages will mature this year—and increase to $532.8 billion next year. (TreppTalk, July 25) Trepp notes the data indicates “the market is facing a wall, if not a mountain, of maturities that would make the 2015-2017 wall of maturities look almost inconsequential. During that period, roughly $1.1 trillion of loans were scheduled to come due.” The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) plans to work on industry comments in response to the agencies’ proposed rulemaking. # # #

Affordable Housing

July 28, 2023

Roundtable Weekly

Office-to-Residential Conversions Part of New Biden Plan to Increase Energy-Efficient, Affordable Housing Supply

Property Conversions

The Biden administration announced a new initiative yesterday to increase the energy-efficient affordable housing supply, including a multi-agency working group to “develop and advance federal funding opportunities” for commercial-to-residential reuse. (Reuters and HousingWire, July 27) Support for Office Conversions White House Chief Domestic Policy Adviser Neera Tanden said, “With high rates of commercial vacancies across the country, we see a tremendous opportunity for conversions to residential housing.” (PoliticoPro, July 27) An administration statement listed a variety of new initiatives aimed at lowering housing costs and boosting supply that include: Promoting commercial-to-residential conversion opportunities, particularly for affordable and zero emissions housing; Expanding financing for affordable, energy efficient and resilient housing; and, Reducing barriers to build housing such as restrictive and costly land use and zoning rules. Agency Actions HUD: Yesterday’s announcement included opportunities for localities that develop high-density zoning rules to apply for grants from the Department of Housing and Urban Development (HUD) under a new “Pro-Housing” Program. This follows HUD’s release on Tuesday of new funds for research and policy guidance on economically viable office-to-residential conversions, with applications due by October 12. (HUD Press Release) DOT: A similar grant program run by the Department of Transportation (DOT), “Reconnecting Communities and Neighborhoods,” will provide funds for planning and construction projects (primarily in disadvantaged communities) for transit-oriented affordable housing. EPA: The White House also announced that the $27 billion Greenhouse Gas Reduction Fund, created by the Inflation Reduction Act (IRA) and administered by the U.S. Environmental Protection Agency (EPA), will be available for energy efficiency building retrofits and commercial-to-residential conversions. GSA: The White House statement advised that the General Services Administration (GSA) will launch an effort to identify under-utilized and surplus assets in the federal real estate portfolio that present the “best opportunities” for public-private partnership, commercial-to-residential projects. DOE: Yesterday, the Department of Energy (DOE) released program and legal documents for $8.8 billion in rebates authorized by the IRA. State-level energy agencies will dole out federal rebates that can be used for high-efficiency appliances and electrification equipment installed in single-family homes and multifamily units, including measures in adaptive reuse projects. This week’s announcements follow commitments made by the Biden-Harris administration in its Housing Supply Action Plan, released in May 2022. That month, The Real Estate Roundtable and 18 other real estate organizations urged Congress to work with the Biden administration, housing providers, lenders, and other stakeholders to pursue bipartisan solutions to increase the nation’s supply of housing. (Coalition letter, May 23 and Roundtable Weekly, May 22) # # #

Foreign Investment in Real Property Tax Act (FIRPTA)

July 28, 2023

Policy Comment Letter

Reps. LaHood and Miller Letter to Treasury on FIRPTA-REIT “Look-Through” Proposal

FIRPTA, Foreign Investment in Real Property Tax Act, REITs,

Affordable Housing

July 28, 2023

Policy Comment Letter

Housing Affordability Coalition Letter to FHFA on Tenant Protections

Affordable Housing, Fannie Mae, FHFA, Freddie Mac, Housing,

Affordable Housing

July 28, 2023

Policy Comment Letter

Roundtable Comments to FHFA Encouraging the GSE Enterprises to Avoid Property Restrictions such as Rent Control

Affordable Housing, FHFA, Housing,

Energy and Tax Policy

July 28, 2023

Policy Comment Letter

Monetizing Energy Credits: Roundtable Submits Recommendations to Treasury

Clean Energy Tax Incentives, Climate and Energy Policy, Inflation Reduction Act, Tax Policy,

Capital and Credit

July 21, 2023

Roundtable Weekly

Banks Increase CRE Workouts to Prevent Defaults

Capital and Credit Restoring Liquidity in CRE Markets and Protecting Capital Formation The Fed

Banks are increasing their efforts to modify troubled commercial real estate loans to prevent defaults, according to recent media reports. (GlobeSt and Bisnow, July 14) Momentum on Modifications “Lenders are offering borrowers loan extensions and modifications, selling derivatives to fix interest costs, and offering subsidized loans to investors to purchase defaulted loans” according to CRE analysts and industry data quoted by Reuters on July 12 The reported increase in modifications follows a joint policy statement from federal regulators last month that encouraged financial institutions to work with borrowers on pending loan maturities. (Agencies’ joint statement, June 29 and National Law Review, July 9) Real Estate Roundtable President and CEO Jeffrey DeBoer commented on the positive action by regulators. “This major step forward by federal regulators provides the flexibility that The Roundtable has consistently encouraged, and the relief many in the industry need, as the economy and communities struggle to move beyond the repercussions of the global pandemic,” DeBoer said. (Roundtable Weekly, June 30 and Roundtable letter to regulators, March 17) Need for Liquidity On July 20, Roundtable Chair John Fish (SUFFOLK Chairman and CEO) discussed the pressures facing CRE and the recent policy accommodation from regulators on Bloomberg’s What Goes Up podcast. “The biggest problem right now is the capital markets nationally have frozen,” Fish said. On July 14, Roundtable Board Member Scott Rechler, above, (RXR Chairman and CEO) joined CNBC’s Closing Bell Overtime to discuss the impact of the credit crunch and the need for more liquidity in the market. (Watch interview) A July 6 article by Carl White, senior vice president of the St. Louis Fed’s Supervision, Credit and Learning Division, shows that the proportion of nonperforming CRE loans remains low on an average basis and has continued to decline since 2020. Low occupancy rates for downtown offices in various cities are leading municipal governments to incentivize adaptive reuse by encouraging the conversion of often-older office buildings into residential properties. A report this week from RentCafe forecasts that conversions may increase by 63% in coming years, after adaptive reuse peaked from 2019 to 2020. (GlobeSt, July 19) # # #

Workplace Return

July 21, 2023

Roundtable Weekly

Work-From-Home Arrangements Linger, Most Federal Agencies Using Less Than 25% of Office Space

Workplace Return

Overall workplace occupancy registered 49.1% last week, according to Kastle’s 10-city Back to Work Barometer, which showed return to office rates vary significantly over the course of the week. Additionally, a recent Department of Labor American Time Use Survey showed that nearly 35% of Americans worked from home on an average day in 2022, down from nearly 40% in 2021. (Axios, June 23)Public SectorIn the public sector, federal government offices remain largely unoccupied, according to a new report issued by the Government Accountability Office (GAO) that revealed most agencies are using their headquarters less than a quarter of the time.The GAO report shows that 17 of 24 agencies' buildings were at 25% capacity or less after an analysis of 21.5 million square feet (SF) of usable federal office space during three weeks of Q1.The empty federal offices have depressed local economies, according to a July 18 Federal News Network (FNN) broadcast. (Listen or read transcript of Federal Drive with Tom Temin)The House Subcommittee on Economic Development, Public Buildings, and Emergency Management addressed the GSA report in a July 13 hearing called “When the Lights Are On but No One’s Home: An Examination of Federal Office Space Utilization”)Roundtable ResponseIn April, The Real Estate Roundtable wrote to members of the Senate about the need the federal government to end its “active encouragement of remote working for federal employees” and for federal agencies to return to their pre-pandemic workplace practices. (RER letter to the Senate, April 12)Roundtable President and CEO Jeffrey DeBoer, above, sent a similar request to President Biden last December, noting that federal telework polices were ignoring “the negative impacts of remote work on cities and communities, labor productivity, and U.S. economic competitiveness, as well as the quality of government services.” (Commercial Observer, April 14 and RER letter to President Biden, Dec. 12, 2022).A study released in May by New York University and Columbia University researchers shows how the disruption from remote work could impact municipalities. “The fiscal hole left by declining office and retail property tax revenues would need to be plugged by raising tax rates or cutting government spending. Both would affect the attractiveness of the city as a place of residence and work.” (Work From Home and the Office Real Estate Apocalypse, May 15 and Roundtable Weekly, May 26)# # #

Industry Leadership

July 21, 2023

Roundtable Weekly

The Real Estate Roundtable Approves Five New Board Members

Board of Directors Industry Leadership Roundtable Leadership

The Real Estate Roundtable’s membership has approved five new members to serve on its 25-member Board of Directors during the 2024 fiscal year (July 1, 2023 – June 30, 2024). The Roundtable’s Board is effective July 1, elected from the membership, and includes industry representatives from four of The Roundtable’s 18 national real estate trade partners.Board TransitionRoundtable Board Chair John Fish (SUFFOLK Chairman and CEO) also enters the final year of his three-year term that began on July 1, 2021. Fish said, “We look forward to the contributions of five new commercial real estate leaders who have joined The Roundtable’s Board of Directors. Their individual expertise, insight, and broad skill sets will add to our organization’s highly regarded effectiveness on national policy issues affecting CRE. Our Board, supported by our policy advisory committees and general membership, will continue to engage policymakers in Washington with fact-based, non-partisan analysis. I look forward to working with them on issues such as the negative impact of remote work on municipalities and communities; capital and credit concerns in a high-interest rate environment; and a practical approach to the role buildings can play in helping to achieve climate goals.”“I also offer my sincere gratitude to our Board members whose terms have expired. Their significant service to the industry during a global pandemic was essential, and we look forward to their continued participation as Roundtable members,” Fish said. Roundtable President and CEO Jeffrey DeBoer stated, “Roundtable members consistently bring innovative solutions to compelling policy challenges facing CRE. The Roundtable’s Board of Directors represents all major industry activities and asset types, and includes diverse voices from throughout the country. This inclusion ensures that our Board’s decisions are sustainable, flexible, and based in real-world economics. I am eager to continue working with the Board as we advance new recommendations on organizational and strategic policy direction.”The five new members joining The Roundtable’s FY 2024 Board of Directors as of July 1 are:Michael Brown, President & CEO, Travel & Leisure Co.Chairman of the Board, American Resort Development AssociationMichael A. Covarrubias, Chairman and Chief Executive Officer, TMG PartnersW. Matthew Kelly, CEO, JBG SMITHFirst Vice Chair, NareitMatthew G. Rocco, Sr., President, Colliers MortgageChair, Mortgage Bankers AssociationKenneth J. Valach, CEO, Trammell Crow ResidentialChair, National Multifamily Housing CouncilStepping down from The Roundtable Board as of July 1 are:Alyssa Dangler, Partner, Williams MullenPresident, CREW NetworkKen McIntyre, Chief Executive Officer, Real Estate Executive CouncilLeah Nivison, Managing Director, BMO Capital MarketsImmediate Past Chair, CRE Finance CouncilBrandon Shorenstein, Chairman and Chief Executive Officer, Shorenstein Properties A. William “Bill” Stein, Crystal Crown VenturesThe Roundtable’s 2023 Annual Report—“Sustained Strength, Sustained Solutions”—will be sent to all members next week.# # #

Tax Policy

July 14, 2023

Roundtable Weekly

Senate Democrats Propose Tax Penalties on Institutional Owners of Single-Family Rental Homes

Ron Wyden Tax Policy

A group of eight Democratic Senators introduced legislation on July 11 that would prohibit for-profit owners of 50 or more single-family rental homes from taking depreciation or business interest expense deductions on their properties. “Short-Sighted Proposal” Senate Banking Committee Chairman Senator Sherrod Brown (D-OH), one of the bill’s sponsors, said, “big investors funded by Wall Street buy up homes that could have gone to first-time homebuyers, then jack up rent, neglect repairs, and threaten families with eviction.” Similar concerns were expressed by several cosponsors: Senator Ron Wyden (D-OR), chair of the Senate Finance Committee, along with Sens. Elizabeth Warren (D-MA), Tina Smith (D-MN), Jeff Merkley (D-OR), Jack Reed (D-RI), John Fetterman (D-PA), and Tammy Baldwin (D-WI). (Senate Banking press release, July 11) Real Estate Roundtable President and CEO Jeffrey DeBoer, below, said, “Improving and expanding housing affordability is a goal we all share, and any illegal or unjust actions by landlords should not be tolerated. However, this legislation is a short-sighted proposal that will drive up housing costs for working Americans, reduce property values for existing homeowners, and further discourage new home construction.” “The bill deflects attention from the real, underlying causes contributing to high housing costs: inflation, labor shortages, and supply chain challenges; rising interest rates and tight credit conditions; NIMBY’ism, discriminatory zoning rules, and restrictive land-use policies; and insufficient investment in the low-income housing credit, to name just a few. Many of these factors are deep, structural challenges. Institutional investors are a convenient scapegoat and a distraction from the real work that must be done to address housing affordability,” DeBoer added. By denying basic business expense deductions, the Stop Predatory Investing Act would distort housing markets and create additional, restrictive policies that exacerbate the current supply/demand imbalance. Depreciation ensures that the cost of a capital investment is reflected in the measurement of income and recovered, for tax purposes, over the economic life of the investment. Depreciation deductions compensate property owners for the normal wear and tear that reduces the value of a structure over time. Interest expense deductions ensure that taxable income properly takes into account the cost of borrowing to invest in a trade or business. Depreciation and interest expense deductions are not “tax breaks” as suggested by the bill’s sponsors. (Senate Banking one-page summary) House Tax Legislation Tax legislation advanced by the House Ways and Means Committee in June is unlikely to receive a vote before Congress starts its August recess. House Majority Leader Steve Scalise (R-LA), above, noted this week that the appropriations bills and reauthorization of the National Defense Authorization Act (NDAA), passed today in the House, are the chamber’s current priorities. “Getting the NDAA done and getting the appropriations bills are what are front and center right now. Then, we’ll really look forward to getting that economic agenda moving forward,” Scalise said. (Bloomberg Law, July 12) Republican Ways and Means Committee members last month approved their proposed tax legislative package along party lines, including measures on business interest deductibility, bonus depreciation, and opportunity zones. (Tax Notes, June 14 | Ways and Means Committee, June 13 and Roundtable Weekly, June 9) Scalise added that Ways and Means Committee Chairman Jason Smith (R-MO) is still “working with other members on remaining issues with that bill.” (Bloomberg Law, July 12) # # #

Capital and Credit

July 14, 2023

Roundtable Weekly

Fed Outlines Tighter Bank Capital Requirements Amid Congressional Concerns About Market Liquidity

Capital and Credit The Fed

Federal Reserve Vice Chair for Supervision Michael Barr this week said higher capital requirements for banks with $100 billion or more in assets are likely to be one of several regulatory proposals expected soon from federal banking regulators. The Roundtable has warned that such a policy “would have the unintended consequence of further diminishing liquidity and creating additional downward pressure on (commercial real estate) asset values.” (Barr’s speech, July 10 and Roundtable letter to federal regulators, March 17)Fed ProposalsBarr added that the rules would be the equivalent of requiring the largest banks to hold an additional $2 of capital for every $100 of their risk-weighted assets. He also commented that the changes—including long-term bank debt requirements and adjustments to how banks measure their financial market risks—“would not be fully effective for some years” because of the formal rulemaking comment process and a lengthy transition period for implementation. (Barr’s speech, The Wall Street Journal and Axios, July 10)Roundtable President and CEO Jeffrey DeBoer noted during an April 6 Walker Webcast that “The concept of additional regulations and expanding liquidity are kind of counter to each other. [The financial turmoil] has to be allowed to settle through and transition. We ought to be working together and the federal government ought to be helping people transition to that new world.” (Roundtable Weekly, April 7)The Roundtable’s June 13 Annual Meeting featured a joint RECPAC and Research Committee meeting discussion with Senate Banking Committee Member Bill Hagerty (R-TN) on liquidity concerns and possible new regulations, along with a presentation by CBRE industry experts on CRE conditions. Bipartisan Congressional ConcernsDuring a June 21 Senate Banking Committee hearing on President Biden’s three nominations for the Federal Reserve Board, Sen. Mark Warner (D-VA), above, shared concerns raised by his Republican colleagues Bill Hagerty (TN), Tim Scott (SC), and Thom Tillis (NC) on Barr’s agenda to increase capital requirements for banks.Sen. Warner stated, “I do worry, when we've got as aggressive a monetary policy as we have … that if there's not a phase-in on some of these new capital standards, we could have the perfect storm of these two entities intersecting, and dramatically decreasing access to credit, at a moment when we've got large segments of our economy, commercial real estate in particular, could really be hit hard.”House Financial Services Committee Chairman Patrick McHenry (R-NC) said during a June 21 hearing featuring Fed Chairman Jerome Powell that "... a massive increase in capital standards for medium and large institutions... would limit banks’ ability to lend money, exacerbating the looming credit crunch, and starving families and small businesses of the capital they need.” (Roundtable Weekly, June 23)The top members of the House subcommittee focused on bank regulation—Reps. Andy Barr (R-KY) and Bill Foster (D-IL)—wrote to Barr on July 7, urging him to “minimize negative impacts as we enter a phase of potential credit tightening. We must strike the right balance between safeguarding our financial system and ensuring banks of all sizes can support communities’ access to credit.” The bipartisan letter also requested a “cost-benefit analysis, including supporting data, for any rulemaking you intend to propose.” (Letter to Barr and Politico Pro, July 7)What’s NextBarr added in his speech this week, “I will be pursuing further changes to regulation and supervision in response to the recent banking stress, including how we regulate and supervise liquidity. I expect to have more to say on these topics in the coming months.”Former Fed Vice Chair for Supervision Randal Quarles, above, on July 12 criticized the Fed’s bank capital requirements proposal. Quarles said, “It’s a mistake. It will restrict the ability of the financial system to provide support for the real economy.” (Bloomberg, July 12). Prior to Barr, Quarles contributed to the Fed’s report on the failure of Silicon Valley Bank that concluded the central bank’s supervisory approach was partially to blame for the banking crisis. (Associated Press, April 28)Fed Governor Michelle Bowman spoke out against tougher baking regulations on June 25, stating, “Increasing capital requirements simply does not get at this underlying concern about the effectiveness of supervision.” She added, “It is abundantly clear that regulatory and supervisory reform is on the way.” (Bowman speech and Bloomberg, June 25) RECPAC will continue to work on Roundtable responses to potential federal regulatory proposals affecting bank liquidity and CRE. # # #

Climate and Energy Policy

July 14, 2023

Roundtable Weekly

Roundtable, Nareit Critique Proposed International Standard for Building Emissions

Building Performance Standards BPS Climate Policy Energy Policy ScienceBased Targets

As the buildings sector makes progress on reducing greenhouse gas emissions to meet global climate goals, The Roundtable and Nareit submitted comments today about proposed guidance that would create “unworkable and unattainable” standards. (RER-Nareit joint comments) Science-Based Targets The real estate groups submitted their joint letter to the Science-Based Targets initiative (“SBTi”), a body with global influence. In May, SBTi released extensive draft guidance for companies in the buildings sector to set emissions reduction levels based on climate science. SBTi’s targets aim to achieve a goal of “net zero emissions” by 2050 in accord with the 2016 Paris Agreement administered by the United Nations. The controversial draft guidance was developed by an advisory group comprised largely of academia and environmental organizations—with minimal representation from real estate developers, owners, and financial institutions. SBTi asked stakeholders to comment on its proposal, prompting the letter from The Roundtable and Nareit. A number of real estate companies use science-based protocols to establish portfolio-wide emissions reductions targets. The Roundtable convened a working group of its Sustainability Policy Committee (SPAC) to review and assess SBTi’s draft guidance. Nareit conducted a similar process with its members. These efforts resulted in the organizations’ unified position. RER-Nareit Position The Roundtable and Nareit seek a constructive dialogue with SBTi, as their letter explains. However, the real estate groups expressed concern that SBTi’s proposal would require building stakeholders to set emissions targets for sources and operations they do not control, based too heavily on estimates and speculation as opposed to actual and verifiable data. Key points raised in the joint comments include: Building owners must have options to purchase off-site renewable energy when they set science-based targets. Real estate in dense urban areas faces major barriers to deploy solar panels and similar measures on-site, so owners should be encouraged to increase overall clean energy supplies for broader market availability. There should be no categorical, across-the-board mandate to set emissions targets based on tenants’ energy use because building owners do not control operations in leased spaces. Nor do owners have general access to meter data showing how much energy a tenant uses. Emissions goals should not require, in all circumstances, reporting on “embodied carbon” in materials. Manufacturers do not uniformly provide such embodied emissions data for the concrete, steel, and other products they produce—so building stakeholders should not be required to guess this information in their climate reports. Full-blown building electrification is not practicable, feasible, or even desirable for occupants’ safety and comfort in all cases. SBTi should abandon its proposed ban on all new fossil fuel building installations starting in 2025. Why It Matters There is no mandate in the U.S. at the federal level for real estate companies to set science-based emissions targets. However, anticipated rules from the U.S. Securities and Exchange Commission are expected to require registered companies to report to investors on material climate-related financial risks. Those disclosures could include corporate efforts to reduce emissions following SBTi’s and similar standards. (Roundtable Weekly, March 17, March 6 and June 10, 2022). In addition, key aspects of SBTi’s proposal counter voluntary efforts underway at the U.S. Environmental Protection Agency and the U.S. Department of Energy that recognize advances in low-carbon buildings and portfolios. (Roundtable Weekly, March 3 and March 4, 2022) Moreover, varying and often conflicting climate mandates on buildings are proliferating at the local level. (Roundtable Weekly, Dec. 9, 2022). SBTi’s proposed approach should not gain traction in regulatory building performance standards imposed by cities and states. A final version of SBTi’s buildings sector guidance is expected this fall. The Roundtable will continue to track the issue, coordinate with Nareit and other allied groups, and educate policy makers as this matter develops. # # #

Science-Based Targets

July 14, 2023

Policy Comment Letter

Roundtable & Nareit Submit Joint Comments on Proposed International Standard for Building Emissions (Science-Based Targets)

Building Emissions, Building Performance Standards BPS, Climate and Energy Policy, Nareit, SBTi, ScienceBased Targets,

Tax Policy Section 199A

July 6, 2023

Policy Comment Letter

Roundtable and Broad Business Coalition Support Legislation Making Permanent the 20-Percent Deduction for Qualified Pass-Through Business Income

Partnerships amp PassThrough Taxation, Section 199A, Tax Policy,

Main Street TaxCertainty Act of 2023

Capital and Credit

June 30, 2023

Roundtable Weekly

Federal Agencies Encourage Commercial Real Estate Loan Accommodations and Workouts in Major Step Forward for CRE

Capital and Credit Restoring Liquidity in CRE Markets and Protecting Capital Formation The Fed

In a positive development for the commercial real estate industry, federal regulatory agencies issued a joint policy statement yesterday on CRE loan accommodations and workouts that calls for “financial institutions to work prudently and constructively with creditworthy borrowers during times of financial stress.” (Agencies’ joint statement, June 29) Real Estate Roundtable President and CEO Jeffrey DeBoer, above, said, “We enthusiastically welcome and applaud the action of federal regulators to accommodate commercial real estate borrowers and lenders as the industry endures a time of historic, post-pandemic transition. Maturing office loans in particular face a new environment of higher operating and financing costs, much tighter bank lending requirements, and uncertainty in business space needs. This major step forward by federal regulators provides the flexibility that The Roundtable has consistently encouraged, and the relief many in the industry need, as the economy and communities struggle to move beyond the repercussions of the global pandemic.” CRE Relief This significant action fulfills recent Real Estate Roundtable requests for regulators to provide more supervisory flexibility that would allow for the responsible restructuring of maturing CRE loans. The guidance is expected to encourage debt restructuring for certain office assets under pressure from remote work, high interest rates, and post-pandemic demand. (Roundtable Weekly, May 11 | Roundtable letter to regulators, March 17) The June 29 joint agency statement was issued by the Office of the Board of Governors of the Federal Reserve System (the Fed), the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and National Credit Union Administration (NCUA). The agencies noted that their policy statement builds on existing supervisory guidance issued in 2009, updates existing interagency supervisory guidance on commercial real estate loan workouts, and adds a section on short-term loan accommodations. The new section on accommodations includes an agreement to defer one or more payments, make a partial payment, or provide other assistance or relief to a borrower who is experiencing a financial challenge. The statement also addresses recent accounting changes for estimating loan losses and provides examples of how to classify and account for loans affected by workout activity. (See 90-page policy statement on “Prudent Commercial Real Estate Loan Accommodations and Workouts”) Approximately $1.5 trillion in CRE mortgages will mature in the next three years were originally financed when base rates were near zero. Refinancing this wave of maturing loans is complicated by the current debt environment, characterized by much higher interest rates, uncertain asset values, and illiquid capital markets. CRE Part of Fed Stress Test This week, the Federal Reserve also released the results of its annual bank stress tests, which included a severe hypothetical scenario of global recession, a 40% decline in commercial real estate prices, a substantial increase in office vacancies, and a 38% decline in house prices. The Fed noted the stress test focus on CRE illustrates that 23 large banks would be able to continue lending in the hypothetical scenario, despite heavy losses. (2023 Fed stress test results and CNBC, June 28) "Today's results confirm that the banking system remains strong and resilient," Vice Chair for Supervision Michael S. Barr said. "At the same time, this stress test is only one way to measure that strength. We should remain humble about how risks can arise and continue our work to ensure that banks are resilient to a range of economic scenarios, market shocks, and other stresses." (Fed news release, June 28) The 2023 adverse test scenario model stated that declines in CRE prices should be assumed to be concentrated in properties most at risk of a sustained drop in income and asset values—offices that may be affected by remote work or hospitality sectors that continue to be affected by reduced business travel. The Fed’s stress test report added, “The May 2023 Financial Stability Report highlighted elevated prices on CRE and the possibility of a large correction in property values that could lead to substantial losses for banks. The demand for offices, downtown retail, and hotels has seen dramatic and countervailing changes over the past several years due largely to the pandemic and resulting changes. While many bank CRE loans are held by smaller banks not subject to the supervisory stress test, the banks subject to the stress test hold approximately 20% of office and downtown retail CRE loans.” Regulators have also recently signaled they are likely to adopt increased capital requirements for the nation's biggest banks, while Fed governor Michelle Bowman this week spoke out against tougher regulations. (Axios, June 21 and June 26) “We need to consider whether examiners have the appropriate tools and support to identify important issues and demand prompt remediation,” Bowman stated. “Increasing capital requirements simply does not get at this underlying concern about the effectiveness of supervision.” She added, “It is abundantly clear that regulatory and supervisory reform is on the way.” (Bowman speech and Bloomberg, June 25) # # #

Energy and Tax Policy

June 30, 2023

Roundtable Weekly

Roundtable Comments on Clean Energy Tax Credits for Low-Income Communities, Housing

Affordable Housing Clean Energy Tax Incentives Energy Policy Housing Low Income Housing Tax Credit LIHTC Tax Policy

The Real Estate Roundtable submitted comments today on a proposed rule from the IRS and Treasury Department regarding “bonus” tax credits for renewable energy investments in low-income communities, passed by Congress as part of the Inflation Reduction Act (IRA). (Roundtable Comment Letter, June 30) Solar, Wind Bonus Credits IRA Section 48(e) establishes a Low-Income Communities Bonus Credit Program to address climate, affordable housing, and environmental justice challenges. (Treasury news release, Feb. 13, 2023) Taxpayers must apply to the IRS through a competitive process to receive any bonus credits under the Program. The bonus can provide extra tax credits to help cover the costs of solar, wind, and storage facilities. See The Roundtable’s chart, “Base” and “Bonus Rate” Amounts Relevant to Commercial and Multifamily Buildings (May 25, 2023). Taxpayers who qualify can layer an extra 10% bonus—above “base rate” credit amounts—for renewable projects in low-income communities defined in the IRA as census tracts that qualify for new markets tax credits. The bonus can increase to an extra 20% for clean energy investments that are part of low-income rental housing—such as housing supported by LIHTCs or Section 8 “housing choice” vouchers. Roundtable Comments Treasury and IRS proposed a rule on June 1 to implement the low-income bonus program. Today’s comments from The Roundtable seek greater clarity and certainty for building owners that may access the bonus credits, raising the following points: The bonuses are available only for solar or wind projects that generate under 5 megawatts of electrical output. The Roundtable requested a more straightforward rule for what constitutes a “single project” for purposes of this output threshold. The IRA’s text requires that multifamily building owners must share “financial benefits” of renewable energy produced on-site with tenants. The Roundtable’s comments stressed that any such benefits should not depend on utility bill savings that accrue directly to tenants—because owners cannot measure, track or control energy consumption in sub-metered leased units. Low-income housing supported by non-federal programs through state- and local-level housing finance agencies or public housing authorities should also be eligible for the IRA’s low-income bonuses. The proposed rule would offer a preference, not based in the statute, for non-profit owners to receive bonus credit allocations. The Roundtable’s comments urge there should be no bias against business taxpayers to receive the bonus to further the Biden administration’s climate policy goals for rapid deployment of renewable energy investments in low-income communities. Future Roundtable comments on IRA topics are in the works. Feedback on a proposed rule to buy-and-sell certain clean energy credits is due August 14. In addition, proposed rules to implement the 179D tax deduction for energy efficient retrofits of commercial buildings are expected this summer. Prior comments, information and summaries on The Roundtable’s advocacy efforts regarding clean energy tax incentives are available on our Inflation Reduction Act resources page and in Roundtable Weekly (Dec. 2, 2022 and Nov. 4, 2022). # # #

Flood Insurance

June 30, 2023

Roundtable Weekly

Bipartisan Bill to Extend and Reform National Flood Insurance Program Introduced in Senate, House

Flood Insurance National Flood Insurance Program NFIP

Bipartisan legislation recently introduced in the Senate and House would reauthorize and extend the National Flood Insurance Program (NFIP) for five years, providing greater stability for real estate markets, homeowners, and small business owners as the nation continues to struggle with inflationary pressures and increased threats of extreme weather. The National Flood Insurance Program Reauthorization (NFIP-RE) Act of 2023 would also implement a series of sweeping reforms to reduce program costs, make generational investments in communities to reduce flood risk, and establish a fairer claims process for policyholders. (Legislative text and PoliticoPro, June 22)Risk MitigationA new flood rating methodology (Risk Rating 2.0) established by the Federal Emergency Management Agency (FEMA) attracted the attention of policymakers from coastal and flood-prone areas after it was reported that resulting rate hikes may result in the loss of coverage for hundreds of thousands of policyholders. (Associated Press, July 22)Sens. Bob Menendez (D-NJ) and Bill Cassidy (R-LA), alongside Reps. Frank Pallone (D-NJ) and Clay Higgins (R-LA), introduced the NFIP-RE Act (S. 2142 and H.R. 4349) to put the program on solid fiscal ground. The Senate Banking Committee is leading this bicameral and bipartisan reform effort. (One-page summary of the bill)The Roundtable is a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms that create long-term stability for policyholders, improved accuracy of flood maps, mitigation reforms, enhanced affordability, and the acceptance of non-NFIP policies for commercial properties. (Roundtable Weekly, May 27, 2022)Proposed ChangesCongress has enacted 25 short-term NFIP reauthorizations since 2017. The NFIP-RE Act of 2023 would:Extend the program for five years and cap annual rate increases at 9%.Provide a comprehensive means-tested voucher for millions of low- and middle-income homeowners and renters if their flood insurance premium becomes prohibitively expensive.Increase the maximum limit for Increased Cost of Compliance (ICC) coverage to reflect more accurately the costs of rebuilding and implementing mitigation projects.Boost funding for mitigation grants and modernize mapping to identify and reduce flood risks.Create new oversight measures for insurance companies and vendors.Reform the claims process based on lessons learned from Superstorm Sandy and other disasters, to level the playing field for policyholders during appeal or litigation, hold FEMA accountable to strict deadlines so that homeowners get quick and fair payments, and ban aggressive legal tactics preventing homeowners from filing legitimate claims.Sen. Menendez said, “With disastrous flooding events becoming all the more common, we must work to create a more sustainable, resilient, and affordable flood insurance program that invests in prevention and mitigation efforts, and all while ensure hard-working Americans can have peace of mind in the event of a disaster.” (Menendez news release, June 22)# # #

Clean Energy Tax Incentives

June 30, 2023

Policy Comment Letter

Roundtable Comments on Clean Energy Tax Credits for Low-Income Communities, Housing

Affordable Housing, Clean Energy Tax Incentives, Energy Policy, Housing, Tax Policy,

REITs

June 30, 2023

Policy Comment Letter

Joint Trades Letter in Support of Ohio REIT Legislation

REITs,

CRE By The Numbers 2023

June 27, 2023

Industry Report

“CRE By The Numbers” — entire report (pdf)

CRE By The Numbers, Economic Growth amp CRE,

Capital and Credit

June 23, 2023

Roundtable Weekly

Fed Chairman Addresses CRE as Leading Economic Concern During Congressional Hearings

Capital and Credit CRE The Fed

Federal Reserve Chairman Jerome Powell testified this week before congressional committees on the state of the economy, identifying commercial real estate as an area the central bank is “very focused on” as the office sector faces significant pressures from declining demand and remote work issues. Banks & CRE During Powell’s appearances before the House Financial Services Committee on Wednesday and the Senate Banking, Housing, and Urban Affairs Committee on Thursday, policymakers noted in their Q&A that an estimated $1.5 trillion of CRE loans will mature in the next three years. Powell responded that the Fed is applying a “supervisory toolkit” to banks it has identified with high concentrations of commercial real estate loans.During the Senate hearing, committee member Bob Menendez (D-NJ) said he was concerned CRE mortgages could be “a ticking time bomb” for many banks as office property values decline and interest rates increase. Powell noted, “We're being pretty proactive about reaching out to these institutions and trying to help them get through these significant issues.” Click on video clip above to watch the Menendez-Powell exchange or scroll to :31:33 in the full Senate hearing.In his opening remarks, House Financial Services Committee Chairman Patrick McHenry (R-NC) stated, “Now we are told these (bank) runs represent a systemic threat to the stability of our financial system. Add in the commercial real estate exposure facing financial institutions and it becomes very easy to understand the mounting anxiety of consumers and job creators. I share in that anxiety.” (Scroll to 1:44 in the House hearing)McHenry, above, also warned, "... a massive increase in capital standards for medium and large institutions... would limit banks’ ability to lend money, exacerbating the looming credit crunch, and starving families and small businesses of the capital they need.” (The Roundtable wrote to federal regulators on March 17 about the importance of not engaging in pro-cyclical policies such as requiring financial institutions to increase capital.)Rep. Young Kim (R-CA) asked Powell during the House hearing if the Fed is thinking about policies that could provide time for refinancing commercial real estate loans—a position strongly advocated by The Real Estate Roundtable. Powell answered, “There's a playbook for working your way out of these loans. And it's particularly in the office sector where work from home is still a material factor in some areas.” (Scroll to 1:26:04 in the House hearing for Kim-Powell exchange)On June 16, a statement from the Financial Stability Oversight Council—which includes the heads of the Federal Reserve, the Treasury Department, and the Securities and Exchange Commission—addressed the results of their recent meeting where potential risks in the CRE market were on the agenda. The group commented, “Regulators are taking steps to emphasize risk management and examine exposures to CRE loans at their regulated institutions.” Roundtable Response On June 21, CNBC’s Last Call interviewed Roundtable Board Member Scott Rechler, above right, (Chief Executive Officer and Chairman, RXR) on how a rise in office vacancies could have sweeping implications for the economy. Roundtable Board Member Barry Sternlicht (Chairman and CEO, Starwood Capital Group) joined CNBC’s Squawk Box on June 22 for a discussion about the Fed’s inflation fight and commercial real estate. The dropping value of various investments, including offices that provide crucial property taxes to fund municipalities, were the focus of a June 20 Wall Street Journal report “Wall Street Sours on America’s Downtowns.” Real Estate Roundtable President and CEO Jeffrey DeBoer recently remarked on The Roundtable’s Q2 Sentiment Index findings and the role federal regulators can play as CRE faces these significant market developments. “Federal financial institution regulators must act quickly to provide greater supervisory flexibility—as they did in 2009, 2020, and 2022—to allow lenders and borrowers to responsibly restructure the large amount of maturing commercial real estate loans,” DeBoer said. (Roundtable Weekly, June 9)“Businesses and individuals need more time to transition their space needs to the post-pandemic economy. Greater certainty in demand will allow commercial real estate markets, particularly the office sector, to stabilize and revert to its dominant position as the source for local budget revenue. In addition to regulatory flexibility, positive public and private action to encourage in-person, return-to-work policies is needed, where appropriate. As some buildings will need to be reimagined entirely, policy reforms are needed to encourage those buildings to convert to other uses such as housing,” DeBoer added. # # #

Tax Policy

June 23, 2023

Roundtable Weekly

Bipartisan Bill Would Correct Condo Construction Tax Accounting Rules and Facilitate Construction Financing

Condonimiums Tax Policy

House Ways and Means Committee members Bill Pascrell Jr. (D-NJ) and Vern Buchanan (R-FL) this week reintroduced the Fair Accounting for Condominium Construction Act (H.R. 4280) to correct current condominium tax accounting rules that hamper construction financing. Discriminatory Tax Current condo tax accounting rules require multifamily developers of condominium buildings to recognize income and pay tax on their expected profit as construction is ongoing. This “percentage-of-completion method” requires payment on pre-sale transactions well before a buyer closes and pays for a transaction.Homebuilders of single-family homes, townhouses and row houses are not subject to this tax accounting rule restriction, which unfairly accelerates federal income tax liability for new condominium construction. The Buchanan-Pascrell legislation would correct the discriminatory tax by providing condominium developers an exclusion from the percentage-of-completion tax method. Roundtable Support for Change Real Estate Roundtable President and CEO Jeffrey DeBoer said, “Developers seeking construction loans face severe headwinds in today’s economy. Our tax accounting rules should not create additional barriers to the financing of new housing construction. Unfortunately, a quirk in the way that federal tax law works accelerates income from the pre-sale of condominium units and prevents developers from using their own revenue to finance condo construction.”“This tax aberration is unique to vertical condo development and does not apply to the construction of townhouses, row houses, or buildings with four or fewer units,” DeBoer continued. "The Buchanan-Pascrell bill would fix this issue and allow taxpayers to put their own capital to work expanding the supply and availability of housing.”The Roundtable is a long-standing advocate to correct this discriminatory rule as developers have struggled to access their own income (condo pre-sales) to self-finance new construction.On August 21, 2019 The Roundtable wrote to former Treasury Secretary Steven Mnuchin requesting regulatory relief from existing tax accounting rules that unfairly accelerate federal income tax liability for new condominium construction. (Roundtable letter) The Roundtable’s letter detailed how the completed contract method of accounting— rather than the percentage- of-completion method—would more accurately fit the economics of condominium construction. (Tax Notes, August 23, 2019)In 2008, the IRS and Treasury released proposed regulations (REG-120844-07) under section 460 that would treat individual condo units as townhouses or row houses. The Roundtable’s Tax Policy Advisory Committee (TPAC) continues to advocate for the passage of corrective legislation that would level the playing field for accounting rules impacting condominium construction. # # #

The Economy & CRE

June 23, 2023

Roundtable Weekly

Public Data in Roundtable’s “Commercial Real Estate By The Numbers: 2023” Shows CRE as Driving Economic Force

CRE Economic Growth amp CRE

A new Real Estate Roundtable report—Commercial Real Estate By The Numbers: 2023— illustrates CRE’s significant contributions to the economy, statistics on climate and the industry, and the important role of tax policy in CRE investment. (18-page report) Statistical CRE Reference Roundtable President and CEO Jeffrey DeBoer said, “Our compilation of publicly available data shows the vital role commercial real estate plays as a driving force in the American economy. Whether it is real estate’s positive contributions to GDP, the workforce, local tax bases, or Americans' retirement savings, this report serves as a valuable resource in understanding the important role of CRE in our society.”DeBoer added, “Our report also presents data on CRE’s climate footprint, information on the economic impact of real estate tax proposals, facts on the affordable housing shortage, and statistics on the physical footprint of U.S. commercial real estate. We intend for this reference to be a ‘living document’ that can be updated when new government and private sector statistics become available.” Public Data The report’s findings, footnoted throughout the publication, include:The total value of America’s commercial real estate is estimated between $18- $22 trillion. The value of America’s commercial real estate is nearly 39%-47% of the market capitalization of all U.S. publicly traded companies. The U.S. multifamily housing sector alone is worth $3.8 trillion—worth more than the value of Microsoft, Google, and Amazon combined.The combined economic contributions of new commercial building development and the operations of existing commercial buildings contributed an estimated $2.3T to GDP in 2022.If U.S. commercial real estate was a country it would have the eighth-largest economy in the world as measured by GDP.The commercial real estate industry supports 15.1 million jobs in the U.S.CRE pays $559B in property taxes to local governments annually—comprising 72% of all local tax revenue. Commercial real estate owners pay property taxes that are 1.7X more, on average, than the tax rates paid by homeowners.Pension funds, educational endowments, and charitable foundations have invested $900B in real estate. 87% and 73% of public and private sector pension funds, respectively, contain real estate investments.The commercial and residential sectors represent 13% of total U.S. greenhouse gas emissions. This figure does not include “Scope 3” supply chain emissions beyond the direct control of CRE owners and developers—such as from tenant operations in leased spaces, and carbon embodied in the manufacturing process of cement, steel and other construction materials. (See March 17 Roundtable Weekly, “Reports Confirm Challenges in Scope 3 Reporting”) Download the 18-page pdf of The Roundtable’s Commercial Real Estate By The Numbers: 2023. # # #

Roundtable Annual Meeting

June 16, 2023

Roundtable Weekly

CRE Market Conditions, Tax Proposals, and Energy Policy Focus of Roundtable Annual Meeting

The Real Estate Roundtable’s 2023 Annual Meeting this week included policy discussions with national lawmakers on issues affecting commercial real estate, including market conditions and pressures on the office sector, tax policy, sustainability issues, and evolving security threats. Additionally, a special industry tax panel focused on incentives for property repurposing, community revitalization, and housing.Speakers & Policy Issues Roundtable Chair John Fish (Chairman and CEO, SUFFOLK), left, and Roundtable President and CEO Jeffrey DeBoer, right, launched the meeting, which included the following speakers:Sen. Kyrsten Sinema (I-AZ)Member, Senate Committee on Banking, Housing and Urban AffairsSen. Bill Hagerty (R-TN), left Member, Senate Committee on Banking, Housing and Urban Affairsand Roundtable Board Member Geordy Johnson (CEO, The Johnson Group)Jason Smith (R-MO), ChairmanHouse Ways and Means Committee Brad Schneider (D-IL), MemberHouse Ways and Means CommitteeRep. Andrew Garbarino (R-NY), ChairmanHouse Homeland Security Subcommittee on Cybersecurity and Infrastructure Protection David Crane, left, Department of Energy Under Secretary for Infrastructure, and Roundtable Board Member Tony Malkin (Chairman, President and Chief Executive Officer, Empire State Realty Trust, Inc.)Alejandra NunezEnvironmental Protection Agency (EPA)Deputy Assistant Administrator, Office of Air and RadiationThomas Barthold Chief of Staff, Joint Committee on TaxMark Zandi, Chief Economist, Moody's Analytics Roundtable Policy Advisory Committees The Roundtable's policy advisory committees also met on June 13-14 to analyze policy issueswith industry experts, policymakers, and their staff, including:Joint RECPAC-Research Committee Meeting The Roundtable’s joint RECPAC and Research Committee meeting included a real estate capital market panel with CRE leaders. [Left to right in photo: panel moderator Mike Lowe (Co-CEO, Lowe); Sarah Hawkins (CEO, East Region, Hines); Christoph Donner (Chief Executive Officer, America, PIMCO Prime Real Estate LLC); David Mei (Vice President, InterContinental Hotels & Resorts); Gregg Gerken (Head of Commercial Real Estate, TD Bank); and Kathy Farrell (Head of Commercial Real Estate, Truist). A separate presentation on the economy and CRE conditions was given by CBRE's Christopher R. Ludeman, Global President, Capital Markets and Spencer Levy, Global Client Strategist & Senior Economic Advisor.Tax Policy Advisory Committee (TPAC) Speakers at the TPAC meeting included key House tax policy leaders (see photos in previous story section) and a panel on "Debt Workouts / Tax Incentives for Property Repurposing, Community Revitalization, and Housing." [Left to right in photo above: Adam Feuerstein (Real Estate Tax Technical Leader, PwC); David Downey (President & CEO, International Downtown Association); Victoria Honard (Legislative Director, Rep. Suzan DelBene (D-WA); and Phuc Tran (Vice President, Asset Management, Jair Lynch Real Estate Partners)]An additional panel on the "Tax Legislative Outlook and Agenda with Senior Republican Tax Staff" featured a discussion with Payson Peabody (Tax Counsel, House Ways and Means Committee Majority Staff) and Michael Gould (IRS Detailee, Senate Finance Committee) that was moderated by Russ Sullivan (Brownstein Hyatt Farber Schreck).Sustainability Policy Advisory Committee (SPAC) SPAC members heard from featured speakers David Crane and Alejandra Nunez (see photos in previous section above), along with updates from EPA senior staff on agency projects affecting CRE assets, and a presentation of an online marketplace for Inflation Reduction Act energy tax credits. (SPAC meeting agenda)Homeland Security Task Force (HSTF) A joint session of The Roundtable’s HSTF and Risk Management Working Group met with Rep. Andrew Garbarino (R-NY) and were briefed by officials from the Department of Homeland Security on efforts to enhance information sharing with the CRE industry. Next on The Roundtable's FY2023 meeting calendar is the Fall Meeting on October 16-17 in Washington, DC. This meeting is restricted to Roundtable-level members only. # # #

Tax and Energy Policy

June 16, 2023

Roundtable Weekly

House Republicans Advance Tax Package, Biden Administration Proposes Rules for Energy Tax Credits

Clean Energy Tax Incentives Energy Policy Tax Policy

Republican members of the House Ways and Means Committee approved their proposed tax legislative package along party lines this week, including measures on business interest deductibility, bonus depreciation, and opportunity zones. (Tax Notes, June 14 | Ways and Means Committee, June 13 and Roundtable Weekly, June 9) Tax Measures and CRE On Wednesday, Ways and Means Committee Chairman Jason Smith (R-MO), Committee Member Brad Schneider (D-IL), and Ways and Means staff spoke with Roundtable Members about the tax measures and other issues at The Roundtable’s all-member Annual Meeting in Washington, DC during the Tax Policy Advisory Committee (TPAC) session. [Photo left to right: Roundtable Chair John Fish (Chairman and CEO, SUFFOLK), Roundtable President and CEO Jeffrey DeBoer, and Committee Chairman Jason Smith] The three tax bills sent to the House floor for a potential vote next week contain $237 billion in business and individual tax cuts, financed by the repeal or modification of several energy tax incentives enacted in last year’s Inflation Reduction Act (IRA). However, differences in the GOP caucus and requests from some Republicans to include a boost in the $10,000 deduction cap on state and local taxes (SALT) could push a vote until after the congressional July 4 recess. Any Republican tax package passing the House would face significant opposition in the Democrat-controlled Senate and the White House. (Tax Notes, June 16) The committee’s proposals relevant to real estate include: Business interest deduction. The Build It in America Act would provide a 4-year extension (through 2025) of certain, taxpayer-favorable business interest deductibility rules that applied from 2018-2021. The proposal would allow more real estate businesses to operate under the general rules of section 163(j) and its preferable cost recovery schedules. (H.R. 3938 and summary) Bonus depreciation. H.R. 3938 also includes a 3-year extension (through 2025) of 100% bonus depreciation for qualifying capital investments, including equipment, machinery, and interior improvements to nonresidential property (“qualified improvement property”). Bonus depreciation is 80% in 2023 and gradually phasing down. Opportunity Zones. The Small Business Jobs Act would establish special, favorable rules for investments in rural opportunity zones. It would also create a new and detailed information-reporting regime for all opportunity funds. (H.R. 3937 and summary) Energy Tax Credits Transferability The Biden administration this week proposed rules on transferring clean-energy tax credits under the IRA. Treasury’s proposed guidance released on June 14 seeks to clarify numerous issues, including which entities would be eligible for each credit monetization mechanism, laying out the process and timeline to claim and receive an elective payment, and transferring a credit. (Tax Notes, June 15 |The Wall Street Journal, June 14 | IRS news release) Secretary of the Treasury Janet Yellen stated, “The Inflation Reduction Act’s new tools to access clean energy tax credits are a catalyst for meeting President Biden’s historic economic and climate goals. They will act as a force multiplier, bringing governments and nonprofits to the table.” (CNBC and Treasury news release, June 14) The Roundtable’s Tax Policy Advisory Committee (TPAC) and Sustainability Tax Policy Committee (SPAC) will analyze the impact of the transferability rules on commercial real estate for potential comments on the proposed rulemaking. SPAC’s meeting on Wednesday during The Roundtable’s Annual Meeting included a presentation about an online marketplace for exchanging such tax credits. Climate Disclosure Regs Separately, the Securities and Exchange Commission (SEC) expects to issue new climate disclosure rules by October, a year later than the original target date. The new date was included in a SEC rule-making agenda and schedule released on Tuesday. Legislation to constrain future SEC disclosure requirements was reintroduced this week by Sen. Mike Rounds (R-SD) and nine of his Senate colleagues. The bill includes language stating that an “issuer is only required to disclose information in response to disclosure obligation adopted by the Commission to the extent the issuer has determined that such information is important with respect to a voting or investment decision regarding such issuer.” Rep. Bill Huizenga (R-MI) is sponsoring a version of the bill in the House. (Sen. Rounds news release and Politico Pro, June 15) The Roundtable’s SPAC will continue to track any developments related to the SEC’s forthcoming rule on climate reporting, including its proposal for sweeping disclosures on Scope 3 GHG emissions affecting CRE. (Roundtable Weekly, March 10) # # #

Capital and Credit

June 16, 2023

Roundtable Weekly

Economic Pressures on CRE a Top Concern of Federal Regulators

Capital and Credit Restoring Liquidity in CRE Markets and Protecting Capital Formation The Fed

Federal Reserve Chairman Jerome Powell, above, commented on Wednesday about the economic pressures on banks that hold a significant concentration of commercial real estate loans. Powell said, “We of course, we're watching that situation very carefully. There's a substantial amount of commercial real estate in the banking system. A large part of it is in smaller banks.” He added, “those banks will experience larger losses” but since the loans are “well distributed,” the issue is not likely to “suddenly hit and work its way into systemic risk” to the overall economy. (Fed news conference transcript, page 24 and Fortune, June 14) Market Conditions The Fed Chairman spoke after the Federal Open Market Committee declined to raise interest rates this week for the first time in 15 months, after the Fed funds rate jumped from zero to more than 5% in less than a year and a half—the sharpest spike in rate increases in nearly 40 years. (Axios, June 15) Real Estate Roundtable President and CEO Jeffrey DeBoer stated during an April 7 Walker Webcast, “I don’t think anybody assumed a 12-year period of basically zero interest rates, followed by a steep 500bps increase in financing costs, immediately following a once-every-hundred-years pandemic that shut everything down and changed a lot of the ways the built environment would be used. I think all of this has to be allowed to settle through.” (Walker Webcast video and Connect CRE, April 5) The Real Estate Roundtable continues to emphasize the need for federal regulators to allow more flexibility for lenders and borrowers to restructure commercial real estate loans facing potential default—as the Federal Reserve reported recently that CRE poses a potential risk to financial stability. (Fed’s Financial Stability Report, May 2023) Today, Treasury Secretary Janet Yellen presided over a meeting of the multi-agency Financial Stability Oversight Council, which will address financial stability vulnerabilities, developments in the commercial real estate market, and receive an update on the banking sector. Maturing CRE Loans Roundtable Member Willy Walker (CEO, Walker & Dunlop), above left, was interviewed June 15 on CNBC’s Squawk on the Street about defaults and other pressures facing commercial real estate, the industrial sector, and multi-family supply coming to market. Nearly $1.5 trillion in CRE loans will mature by 2027, with some $270 billion coming due this year, according to real estate data provider Trepp. (Reuters, June 14) Trepp this week released its Mid-Year Report entitled “Cracks in the Foundation: Office Problems Could Extend Far Beyond CRE.” The Roundtable’s joint RECPAC and Research Committee meeting this week included a real estate capital market panel with CRE leaders and a presentation by CBRE industry experts on the economy and CRE conditions. The session also included a discussion with Sen. Bill Hagerty (R-TN), a member of the Senate Banking Committee. # # #

Tax Policy

June 9, 2023

Roundtable Weekly

House Republicans Unveil Tax Package; Ways and Means Chairman to Address Real Estate Roundtable Next Week

Tax Policy

The House Ways and Means Committee unveiled a tax package today that includes measures impacting commercial real estate, and announced a legislative mark-up on June 13. (Politico and Tax Notes, June 9) Committee Chairman Jason Smith (R-MO), above, Ways and Means Member Brad Schneider (D-IL), and committee staff will speak on June 14 during The Roundtable’s all-member Annual Meeting in Washington, DC at the Tax Policy Advisory Committee (TPAC) meeting. GOP Proposal & CREChairman Smith released a statement today about the package, which includes the following bills scheduled for markup next week:H.R. 3936, Tax Cuts for Working Families Act summary H.R. 3937, Small Business Jobs Act summaryH.R. 3938, Build It in America Act summaryThe proposals relevant to real estate include:Business interest deduction. The Build It in America Act (H.R. 3938) would provide a 4-year extension (through 2025) of certain, taxpayer-favorable business interest deductibility rules that applied from 2018-2021. The proposal would allow more real estate businesses to operate under the general rules of section 163(j) and its preferable cost recovery schedules.Bonus depreciation. H.R. 3938 also includes a 3-year extension (through 2025) of 100% bonus depreciation for qualifying capital investments, including equipment, machinery, and interior improvements to nonresidential property (“qualified improvement property”). Bonus depreciation is 80% in 2023 and gradually phasing down. Opportunity Zones. The Small Business Jobs Act (H.R. 3937) would establish special, favorable rules for investments in rural opportunity zones. It would also create a new and detailed information-reporting regime for all opportunity funds.The GOP package (H.R. 3938) also contains proposals that would repeal some clean energy provisions from the Inflation Reduction Act (H.R. 5376), including electric vehicle tax credits, clean energy production, and investment tax credits.Prospects for PassageThe Ways and Means proposal may pass through committee—and possibly pass the Republican-majority House—but such a package faces steep obstacles in the Democrat-controlled Senate and with the White House. The proposals are a good indication of the priorities that House Republicans will bring to any bipartisan economic policy negotiations as the year unfolds. # # #

Roundtable Annual Meeting

June 9, 2023

Roundtable Weekly

Policymakers and Industry Leaders to Discuss Economic Pressures on CRE

Real Estate Roundtable members will meet next week to discuss policy issues, market conditions, and the significant economic pressures facing the office sector. In an interview with CNBC’s Squawk Box, Treasury Secretary Janet Yellen acknowledged the increasing stress on the office market this week, including the potential for further problems with banks with exposure to weakening CRE valuations.Stress on Office SectorOn June 7, Treasury Secretary Yellen said, “Well, I do think that there will be issues with respect to commercial real estate. Certainly, the demand for office space since we’ve seen such a big change in attitudes and behavior toward remote work has changed and especially in an environment of higher interest rates.” She added that banking supervisors continue to closely monitor “a range of banks to make sure that they are adequately prepared to deal with it.” (CNBC’s Squawk Box and MarketWatch, June 7)Roundtable Member David O’Reilly (CEO, Howard Hughes Corporation) was interviewed by CNBC’s Power Lunch on June 7 about the distress facing sectors of CRE, noting how capital markets are constraining borrowers from financing real estate projects.The Roundtable continues to emphasize the need for federal regulators to allow more flexibility for lenders and borrowers to restructure a wave of $1.5 trillion in CRE loans maturing in the next three years. Real Estate Roundtable Chair John Fish (Chairman and CEO, SUFFOLK) summarized the industry’s views in a May 9 MarketWatch article.Policymakers at Next Week’s Roundtable MeetingThese compelling industry issues, among others, will be the focus of The Roundtable’s Annual Meeting on June 13-14 in Washington, DC.Roundtable members are encouraged to attend all sessions, which will feature policy discussions with:Sen. Kryrsten Sineman (I-AZ)Sen. Bill Hagerty (R-TN)Thomas Barthold, Chief of Staff, Joint Committee on Tax Mark Zandi, Chief Economist, Moody’s AnalyticsSen. Hagerty is a featured guest at the June 13 joint Real Estate Capital Policy Advisory Committee (RECPAC) and Research Committee meeting, which will also include a real estate capital market panel with CRE leaders and a presentation by CBRE.The June 14 TPAC meeting will feature key House tax policy leaders (see Tax story above), tax counsels from the House Ways and Means and Senate Finance Committees; and a panel on “Debt Workouts / Tax Incentives for Property Repurposing, Community Revitalization, and Housing.”The Sustainability Policy Advisory Committee (SPAC) on June 14 will include David Crane—confirmed by the Senate on June 7 as Under Secretary for Infrastructure at the U.S. Department of Energy—and Alejandra Nunez, Deputy Assistant Administrator, Office of Air and Radiation.Also on June 14, a joint session of The Roundtable’s Homeland Security Task Force and Risk Management Working Group will include a discussion with Rep. Andrew Garbarino (R-NY), chairman of the House Homeland Security Committee’s Subcommittee on Cybersecurity and Infrastructure Protection. Additionally, officials from the Department of Homeland Security will speak on efforts to enhance information sharing with the CRE industry.The Roundtable will conclude its 2023 fiscal year this month and will release its annual report to the membership in early July.# # #

News Release

June 9, 2023

Roundtable Weekly

NEWS: Real Estate Leaders Report Tighter Liquidity and Difficult Price Discovery

Quarterly Sentiment Index

Stress in Office Sector Threatens Cities, Jobs(WASHINGTON, D.C.) — The Real Estate Roundtable’s Q2 2023 Sentiment Index dropped to an overall score of 41, three points lower than the previous quarter. Commercial real estate executives noted how remote work, high interest rates, operating cost escalations, and difficult price discovery has led to significant uncertainty in the post-pandemic office sector and reduced liquidity for nearly all commercial real estate asset classes. (See entire Q2 report)Industry leaders also reported relatively healthy Q2 demand for industrial, multifamily, and strip center retail assets. Solid rental growth in multifamily, senior, student, and assisted living sectors was another positive trend reported by sentiment survey participants. Roundtable President and CEO Jeffrey DeBoer said, “The commercial real estate market is at the center of a major transition. Maturing office loans in particular face a new environment of higher operating and financing costs, much tighter bank lending requirements, and uncertainty in business space needs.”“However, while there is relatively good current news from non-office CRE sectors, the combination of reduced liquidity, increased costs, and post-pandemic business uncertainty threatens to spread to these other sectors as well—and potentially cause great damage to communities, jobs, and the economy. Federal financial institution regulators must act quickly to provide greater supervisory flexibility—as they did in 2009, 2020, and 2022—to allow lenders and borrowers to responsibly restructure the large amount of maturing commercial real estate loans.”“Businesses and individuals need more time to transition their space needs to the post-pandemic economy. Greater certainty in demand will allow commercial real estate markets, particularly the office sector, to stabilize and revert to its dominant position as the source for local budget revenue. In addition to regulatory flexibility, positive public and private action to encourage in-person, return-to-work policies is needed, where appropriate. As some buildings will need to be reimagined entirely, policy reforms are needed to encourage those buildings to convert to other uses such as housing,” DeBoer added.The Roundtable’s Sentiment Index—a measure of senior executives’ confidence and expectations about the commercial real estate market environment—is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive. The Q2 Sentiment Index topline findings include:The Q2 2023 Real Estate Roundtable Sentiment Index registered an overall score of 41, a decrease of three points from the previous quarter. The Current Index registered 27, a four-point decrease from Q1 2023, and the Future Index posted a score of 55 points, a decrease of three points from the previous quarter.Participants noted the continued disparity between asset classes as well as within them. On one hand, rental demand continues to hold up in the multifamily and industrial sectors. Hotel and retail markets are also largely performing well and niche asset classes continue to generate interest and attract capital. On the other hand, while Class A offices remain desirable, the rest of the office industry is struggling to reposition itself.Similar to last quarter, 93% of survey participants believe that asset values have repriced to the downside vs. last year. However, limited trades in 2023 are making it difficult to gauge the market. Survey respondents continue to observe wide disparities in bid-ask spreads.The availability of capital, both debt and equity, continues to be a pressing topic. Regarding the availability of debt and equity, 93% and 75% of survey participants, respectively, believe that today’s conditions are more difficult than a year ago. While the cost of capital has universally increased, platform scale and relationships largely determine access and ability to secure debt financing.Looking to the future, 48% of survey participants stated general market conditions will be more favorable a year from now—although only 20 percent of respondents believe asset values will be more favorable in one year. Data for the Q2 survey was gathered in April by Chicago-based Ferguson Partners on The Roundtable’s behalf. See the full Q2 report.The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy. # # #

Policy Landscape

June 2, 2023

Roundtable Weekly

Debt Ceiling Compromise Passed Days Before National Default Deadline

Congress Debt Ceiling Tax Policy

Congress passed compromise legislation this week to suspend the debt ceiling for two years and restrain government spending, sending it to President Biden for his signature and calming world financial markets days before a US government default. (CQ and Wall Street Journal, June 2)After the Debt CeilingThe House on Wednesday night passed the Fiscal Responsibility Act (H.R. 3746)—forged by President Joe Biden, House Speaker Kevin McCarthy (R-CA), and their negotiation teams—to suspend the nation’s $31.4 trillion debt limit until Jan. 1, 2025 and cut spending by at least $1.5 trillion. The Senate approved the bill last night by a bipartisan vote of 63-36. (Congressional Budget Office, May 30 and Associated Press, May 26)"No one gets everything they want in a negotiation, but make no mistake: this bipartisan agreement is a big win for our economy and the American people," President Biden stated last night. "I look forward to signing this bill into law as soon as possible..." (White House statement, June 1)House policymakers have signaled they may follow the debt ceiling crisis with a legislative tax proposal that could include significant measures affecting commercial real estate. (Roundtable Weekly, May 26)Congressional action on such measures would come at a time when the office sector faces difficult conditions, including asset price discovery and tighter liquidity. (Wall Street Journal, May 30 Financial Times, May 29 | GlobeSt, May 26) Economic Conditions & CREReal Estate Roundtable Chair John Fish (Chairman and CEO, SUFFOLK) explained the economic conditions facing CRE and the office market, along with other pressures such as remote work and a shortage of labor, in a May 26 Boston Globe interview. “We’re in a very precarious situation,” Fish said.Roundtable Board Member Ross Perot, Jr., above, (Chairman, The Perot Companies and Hillwood) discussed the financing challenges faced by some CRE sectors in an interview with Bloomberg TV on Wednesday. “If the industry can’t get a construction loan, real estate will have a recession,” Perot said. “The key to commercial real estate today will be banking.”The Federal Reserve’s “Beige Book” issued this week also reported on the nation’s current overall economic activity, noting, “Commercial construction and real estate activity decreased overall, with the office segment continuing to be a weak spot.” (GlobeSt, May 31)Additionally, Trepp’s CMBS Delinquency Report issued this week showed the nation’s overall CMBS delinquency rate hit a 14-month high, topping 4% for the first time since 2018. Although May’s delinquency rate jumped to 3.62%, up 53 basis points for the month, the all-time high registered 10.34% in July 2012 and the COVID-19 high reached 10.32% in June 2020.Federal Reserve monetary policies, congressional fiscal policy, potential tax measures, and other issues impacting CRE will be discussed during The Real Estate Roundtable’s Annual Meeting on June 13-14 in Washington, DC.The Roundtable meeting includes policy advisory committee meetings—open to all members—that will feature prominent policymakers, including Senate Banking Committee Member Bill Hagerty (R-TN); House Ways and Means Committee Chairman Jason Smith (R-MO); David Crane, the US-DOE’s Director of the Office of Clean Energy Demonstrations; and Alejandra Nunez, US-EPA Assistant Administrator overseeing climate policy.# # #

Tax Policy

June 2, 2023

Roundtable Weekly

Bipartisan Legislation Reintroduced to Allow Greater REIT Equity Investments in Distressed Retail Tenants

Congress Tax Policy

Bipartisan legislation reintroduced this week by House Ways and Means Committee Members Darin LaHood (R- IL) and Brad Schneider (D-IL) would allow real estate investment trusts (REITs) to make greater equity investments in retail tenants that have yet to recover from the pandemic’s economic impact. Support for Retail Tenant AssistanceThe Retail Revitalization Act (H.R. 3749) is aimed at unlocking capital for productive investment and helping prevent further large-scale job losses and bankruptcies in the retail sector and its supply chain. (Congressional Record, May 30)As of May 5, ten major retailers had filed for bankruptcy protection in 2023. The number of retail failures, which includes Bed Bath & Beyond, David’s Bridal, and Party City, is already twice the level of 2022. More bankruptcies are anticipated. (Forbes, May 5 and Forbes, May 15)Real Estate Roundtable President Jeffrey DeBoer stated, “The Retail Revitalization Act would reform an outdated section of our tax code that currently prevents the commercial real estate industry from stepping forward and deploying its own capital to solve significant economic challenges. Retail bankruptcies have negative consequences for employees, surrounding businesses, and local communities. This bipartisan legislation to allow REITs to invest more heavily in their tenants is exactly the type of cost-effective, commonsense measure that everyone can and should support. The bill will save jobs, increase local tax revenue, and create a stronger foundation for future economic growth.”Amending REIT RulesThe LaHood-Schneider legislation—strongly supported by The Real Estate Roundtable—would modify tax provisions limiting REITs’ ability to invest equity capital in their retail tenants. The bill would amend existing “related-party rent” rules by:increasing the capacity of a REIT to own the equity of a distressed tenant from 10% to 50% and from 10% to 30% for all other tenants;changing the ownership attribution rules used to determine what is considered related party rent under current REIT rules to the general ownership attribution rules used elsewhere in the tax code, and;changing the limitation on space that a REIT can lease to its taxable REIT subsidiary.Tax PolicymakersTax proposals such as H.R. 3749 and others will be discussed during TPAC, held in conjunction with The Roundtable’s all-member Annual Meeting on June 13-14 in Washington, DC. TPAC speakers will include:House Ways and Means Committee Chairman Jason Smith (R-MO), aboveHouse Ways and Means Committee Member Brad Schneider (D-IL)Joint Committee on Taxation Chief of Staff Thomas BartholdSenior staff from Senate Finance Committee and House Ways and Means CommitteeTPAC will also feature a panel session on “Post-Pandemic Real Estate Challenges and Tax Policy: Debt Workouts / Tax Incentives for Property Repurposing, Community Revitalization, and Housing.” All Roundtable members are encouraged to attend.# # #

Policy Landscape

May 26, 2023

Roundtable Weekly

House Tax Package Expected to Follow Debt Ceiling Resolution

Congress Tax Policy

The House Ways and Means Committee may release a tax-focused economic growth package in June after a final resolution is reached between President Joe Biden, House Speaker Kevin McCarthy (R-CA), and their negotiation teams on the debt ceiling. The intense talks on federal spending limits have less than a week before the Treasury Department estimates the nation may default on its debt obligations. (Wall Street Journal, May 25 | PoliticoPro, May 23 | Roundtable Weekly, May 19) Tax Measures & CRE The House Republican tax package is about 90% complete and “buttoned up pretty tight,” according to Ways and Means Member Kevin Hern (R-OK). “We’re making sure that we don’t disrupt any of the debt limit conversations and distract from that, but it would be ready to go very quickly,” Hern said. (Tax Notes, May 24) Ways and Means Committee Member Randy Feenstra (R-IA) commented that the package will likely include measures that expired last year, including full bonus depreciation and certain taxpayer-favorable rules related to the deductibility of business interest under Section 163(j)—both supported by The Real Estate Roundtable. (PoliticoPro, May 23 and BGov, May 25) Under the Tax Cuts and Jobs Act (TCJA) of 2017, 100% bonus depreciation applies to capital investments made between 2018 and 2022 (as well as capital improvements made to the interior of nonresidential buildings). However, the bonus depreciation benefit began phasing down this year. In addition, real estate businesses that elect out of TCJA’s limits on business interest deductibility do not qualify for the bonus depreciation benefit. The House tax package is expected to extend 100% bonus depreciation through at least 2025, allowing many taxpayers to continue immediately expensing qualified interior improvements. Moreover, by reinstating certain expired provisions from section 163(j), the tax bill would allow more real estate businesses to avail themselves of the bonus depreciation benefit without inhibiting their ability to deduct their business interest expense. Additional Provisions and TCJA Permanency The economic growth package could also include provisions extending the enhanced child tax credit and the deductibility of R&D expenditures. Housing-related measures, such as an expansion of the low-income housing tax credit, are also under consideration. Separately, the Ways and Means Committee may also consider the TCJA Permanency Act (H.R. 976), reintroduced by Committee Vice Chairman Vern Buchanan (R-FL) in February. The bill would permanently extend TCJA provisions scheduled to sunset at the end of 2025, including the 20 percent deduction for qualified pass-through business income (Section 199A). (Tax Notes and Roundtable Weekly, Feb. 24)While a TCJA permanency bill is likely dead on arrival in the current Senate, the House economic growth tax package could be the starting point for bipartisan negotiations with congressional Democrats on a limited number of tax and economic priorities as the year further unfolds. House Ways and Means Committee Chairman Jason Smith (R-MO) will be a guest at The Roundtable’s June 13-14 all-member Annual Meeting and policy adivisory committee meetings will include discussions on a debt ceiling agreement and potential tax legislation. # # #

Workplace Return

May 26, 2023

Roundtable Weekly

New Research Shows Severe Impact of Remote Work on Office Sector

Workplace Return

An updated study released this month by New York University and Columbia University researchers concludes “remote work is shaping up to massively disrupt the value of commercial office real estate in the short and medium term.” (Work From Home and the Office Real Estate Apocalypse, May 15) Municipal Finances and Financial Stability The researchers—Arpit Gupta, Vrinda Mittal, and Stijn Van Nieuwerburgh—find a $506.3 billion value destruction for the U.S. office market between 2019 and 2022. Post-pandemic hybrid work arrangements have led to large drops in lease revenue, occupancy, lease renewal rates, and market rents in the commercial office sector, according to the updated research, affecting CRE cash flow at a time when the Federal Reserve has aggressively raised interest rates. (Fortune, May 25)The report notes, “Higher quality buildings were buffered against these trends due to a flight to quality, while lower quality office is at risk of becoming a stranded asset. These valuation changes have repercussions for local public finances and financial stability.”The report also concludes that the fiscal hole left by declining office and retail property tax revenues may lead municipalities to increase taxes or cuts in spending—negatively affecting the attractiveness of cities as places to live and work, which may risk the activation of an “urban doom loop.” The authors note, “Future research should explore these implications and study the role for local and federal policy.” Moody’s Outlook Moody’s Analytics Chief Economist Mark Zandi, above, noted in a series of tweets this week that CRE prices fell in the first quarter of 2023 for the first time in more than a decade, led by drops in multifamily residences and office buildings, according to Moody’s Repeat Sales Index. (Zandi will be a guest speaker at The Roundtable’s all-member Annual Meeting on June 13 in Washington, DC.)“Lots more price declines are coming with prices expected to be off 10% peak-to-trough by mid-decade. Demand for space is weak due to remote work and online retailing. Lots of multifamily units are being built. And credit to refinance and purchase properties is tough to get,” Zandi tweeted.Bloomberg reported on May 17 that Zandi noted if the US economy slips into a recession, the price declines could get worse. "We're on a razor's edge here," Zandi said. Roundtable Request for Flexibility The Real Estate Roundtable continues to emphasize the need for federal regulators to allow more flexibility for lenders and borrowers to restructure commercial real estate loans facing potential default—as the Federal Reserve reported recently that CRE poses a potential risk to financial stability. (Fed’s Financial Stability Report, May 2023) Real Estate Roundtable Chair John Fish, above, (Chairman and CEO, SUFFOLK) summarized the industry’s views in a May 9 MarketWatch article, noting that the Fed and regulatory agencies should grant more flexibility for borrowers, including corporate real estate developers, to restructure CRE loans. In addition to Mark Zandi and House Ways and Means Committee Chairman Jason Smith (R-MO), The Roundtable’s Annual Meeting next month will also include Sen. Kyrsten Sinema (I-AZ), Sen. Bill Hagerty (R-TN), and other policymakers. # # #

Affordable Housing

May 26, 2023

Roundtable Weekly

Roundtable and Industry Coalitions Urge Congress to Act on Affordable Housing Measures

Affordable Housing Housing Low Income Housing Tax Credit LIHTC Yes In My Backyard YIMBY YIMBY

The Real Estate Roundtable and 18 other real estate organizations urged Congress on May 23 to work with the Biden administration, housing providers, lenders, and other stakeholders to pursue bipartisan solutions to increase the nation’s supply of housing. (Coalition letter, May 23) “Yes in My Backyard” This week’s joint letter from the Housing Affordability Coalition detailed a wide range of legislative proposals and policy measures that lawmakers should immediately enact to address the nation's housing affordability crisis. The industry coalition supports legislation that would eliminate harmful land use policies, promote affordable housing near public transit, and support local government efforts to expand housing supply. Separately, The Roundtable joined another coalition of 285 housing, business, and municipal organizations with a show of focused support for the bipartisan, bicameral Yes In My Back Yard (YIMBY) Act, reintroduced on May 18. (YIMBY Coalition letter) The bill requires localities that receive certain federal HUD grants to submit a public report on whether they have local policies in place that remove exclusionary zoning tactics. Encouraging high-density development is “an essential first step in decreasing barriers to new housing of all price levels,” the YIMBY Act coalition letter states. The YIMBY Act passed the House without opposition in 2020. It is championed in the Senate (S. 1688) by Todd Young (R-IN) and Brian Schatz (D-HI), and in the House (H.R. 3507) by Reps. Derek Kilmer (D-WA) and Mike Flood (R-NE). (YIMBY Act summary by Up for Growth) Tax Measures This week’s Housing Affordability Coalition letter encourages Congress to expand the low-income housing tax credit, create a new middle-income housing tax credit, and establish a dedicated tax incentive to promote the conversion of underutilized office and commercial buildings to rental housing. The letter also supports tax measures that have not been reintroduced yet in the 118th Congress, including incentives to encourage neighborhood revitalization, accelerated depreciation of high-performance building equipment, and reduction of the basis increase necessary to qualify a multifamily rehabilitation project for Opportunity Zone purposes. The industry coalition expressed support for the Biden administration’s proposed solutions such as its Housing Supply Action Plan and investments that are part of its FY2024 federal budget proposal. (Roundtable Weekly, May 22, 2022 and White House fact sheet, March 9, 2023) On March 7, the National Multifamily Housing Council (NMHC) and National Apartment Association (NAA) offered joint testimony before a Senate Finance Committee hearing on “Tax Policy’s Role in Increasing Affordable Housing Supply for Working Families.” (Roundtable Weekly, March 10) # # #

Clean Energy Tax Incentives, Inflation Reduction Act

May 25, 2023

Fact Sheet

IRS Guidance on IRA Clean Energy Tax Incentives – RER Fact Sheet

Clean Energy Tax Incentives, Energy Policy, Inflation Reduction Act, Tax Policy,

Clean Energy Tax Incentives, Inflation Reduction Act

May 25, 2023

Fact Sheet

Chart – IRA Section 48 Investment Tax Credit – “Base” and “Bonus” Rate Amounts

Clean Energy Tax Incentives, Inflation Reduction Act,

Affordable Housing

May 23, 2023

Policy Comment Letter

Real Estate Coalition Urges Congress to Act on Affordable Housing Measures

Affordable Housing, EQUIP, Housing, Low Income Housing Tax Credit LIHTC, Opportunity Zones OZs, Property Conversions, YIMBY,

Policy Landscape

May 19, 2023

Roundtable Weekly

Administration Unsuccessfully Seeks to Add Like-Kind Exchange Restrictions to Debt Ceiling Talks

Congress Debt Ceiling LikeKind Exchanges LKEs

President Joe Biden and House Speaker Kevin McCarthy (R-CA) signaled progress this week on debt limit and federal spending talks after they assigned teams of negotiators to bang out an agreement before a looming national default “x-date” is reached in June. (BGov and CQ, May 18) LKE Restrictions Rejected One cost-cutting measure proposed by the administration’s team, and rejected by Republicans, would have imposed limitations on the use of Section 1031 like-kind exchanges. (Washington Post, May 15) President Biden has consistently proposed limiting the use of LKEs, most recently as part of his FY2024 budget proposal submitted earlier this year. (Roundtable Weekly, March 10) “The administration’s proposal to severely limit the use of section 1031 would destroy jobs, lock properties into unproductive uses at a time when a realignment of real estate assets is needed, harm housing supply, and end a mechanism used by environmental groups to conserve land and natural spaces,’ said Real Estate Roundtable President and CEO Jeffrey DeBoer. “It is an idea that has been debated by Congress numerous times and always rejected, most recently in a unanimous vote on the Senate floor,” DeBoer continued. “Perhaps most importantly, the proposal would eliminate one of the only real estate market liquidity tools available at a time when credit markets and banks are tightening, as they are today.” Academic and other economic research has repeatedly demonstrated the positive economic contribution of LKEs and their importance to the US economy. (Roundtable Weekly, July 1, 2022 and EY report—“Economic Contribution of the Like-Kind Exchange Rules to the US economy in 2021: An Update”) Looming Deadline President Biden and Speaker McCarthy assigned five Washington insiders on May 16 to the immense negotiation task, in hopes that an “agreement in principle” can be reached this weekend, which would allow the House and Senate to vote before June 1. (The Hill and BGov, May 17 | Associated Press, May 18) “I’m confident that we’ll get the agreement on the budget and America will not default,” Biden said before departing this week for a meeting of world leaders at the G-7 annual summit in Japan. (CBS News, May 17) McCarthy said yesterday, “I see the path that we can come to an agreement. And I think we have a structure now and everybody’s working hard.” (Politico, May 18) House Democrats this week began preparing an emergency “discharge petition” to raise the debt ceiling if negotiators are unable to reach an agreement, though its odds of passing are uncertain. (Wall Street Journal, May 17) # # #

Affordable Housing

May 19, 2023

Roundtable Weekly

Lawmakers Reintroduce Bill to Reform, Expand the Low-Income Housing Tax Credit

Affordable Housing Housing Low Income Housing Tax Credit LIHTC Tax Policy

Bipartisan, bicameral legislation introduced last Thursday would significantly expand and improve the low-income housing tax credit (LIHTC). The tax credit, strongly supported by The Real Estate Roundtable, subsidizes the construction, rehabilitation, and preservation of affordable rental housing for low- and moderate-income tenants. Increasing Supply The Affordable Housing Credit Improvement Act (AHCIA) would finance nearly two million affordable homes over the next 10 years. (Affordable Housing Tax Credit Coalition, 2023) Led by Sens. Maria Cantwell (D-WA) and Todd Young (R-IN), along with Reps. Darin LaHood (R-IL) and Suzan DelBene (D-WA), the AHCIA (H.R. 3238 and S. 1557) has already garnered nearly 90 cosponsors. Roundtable President and CEO Jeffrey DeBoer said, “The low-income housing tax credit is a critical and well-designed tool that addresses a pressing issue throughout the country–the lack of affordable rental housing. LIHTC harnesses market forces and the power of the private sector to incentivize the construction and rehabilitation of affordable homes. Countless studies have demonstrated LIHTC’s cost-effectiveness. Inflation has taken a toll on working Americans, but Congress can help reduce the burden of high housing costs by passing the AHCIA reforms.” A March 7 Senate Finance Committee hearing showed bipartisan policymaker consensus on the need to increase the supply of affordable housing by expanding the LIHTC and other tax incentives. The National Multifamily Housing Council (NMHC) and National Apartment Association (NAA), two key supporters of the AHCIA, offered joint testimony during the hearing. (Roundtable Weekly, March 10) AHCIA Provisions A summary of the AHCIA is available here. Among its many provisions, the legislation would: Boost the allocation of low-income housing credits to states by restoring the temporary 12.5% increase enacted in 2018 (expired at the end of 2021) and phasing in a 50% increase in the LIHTC allocation cap over two years. Lower the threshold of private activity bond financing—from 50 to 25%—required to trigger the maximum amount of 4% housing credits available to individual properties. The bill would also ensure that low-income housing credit projects that seek to maximize their energy efficiency through use of the section 179D commercial building deduction are not penalized by existing provisions of the law that reduce the basis of the development by the 179D deduction amount. This change would conform the LIHTC/179D rules to be consistent with those that apply to LIHTC and other energy tax incentives, such as the section 48 investment tax credit. (See the bill’s section 309, page 31 and The Roundtable’s Fact Sheet: “IRA Clean Energy Tax Incentives Relevant to U.S. Real Estate”, April 6) While movement on LIHTC legislation is unlikely before the debt ceiling debate is resolved, the broad-based, bipartisan support for AHCIA could lead to Congressional action on the bill later in the year. (News – The Affordable Housing Tax Credit Coalition) Domestic Content In related news, the Internal Revenue Service (IRS) released a notice this week on “made in the USA” guidance that can increase clean energy tax credits. The Inflation Reduction Act (IRA) offers a “bonus” tax credit of up to 10% for solar, wind, battery storage, and other projects that use iron, steel, and components manufactured in the U.S. (JD Supra, May 16) The “domestic content” notice provides initial guidance until the Treasury Department proposes rules on the subject. A fact sheet prepared by The Roundtable keeps track of various federal agency actions that implement IRA tax incentives of significance to the real estate sector. # # #

Tax Policy

May 19, 2023

Roundtable Weekly

Senate Republican Taxwriter Introduces Legislation to Permanently Extend 20% Pass-Through Income Deduction

Section 199A Tax Policy

Yesterday, Senate Finance Committee member Steve Daines (R-MT) reintroduced legislation to make permanent the 20 percent deduction for pass-through business income (Section 199A), one of the cornerstone provisions of the Tax Cuts and Jobs Act of 2017 that expires at the end of 2025. Deduction SunsetThe Main Street Tax Certainty Act of 2023 supports small businesses, helps create jobs, and strengthens the economy. (Sen. Daines’ news release, May 18) House Ways and Means Committee Chairman Jason Smith (R-MO), who has long championed making Section 199A permanent, is anticipated to re-introduce the legislation in the House soon.In 2017, Congress created the 20% deduction for pass-through business income to avoid putting businesses organized as partnerships, S corporations (S corps), and real estate investment trusts (REITs) at a competitive disadvantage relative to large C corporations (C corps).Section 199A is scheduled to sunset on Dec. 31, 2025 as businesses continue to recover from post-pandemic price hikes, labor shortages, and supply chain disruptions.Section 199A Permanency The Real Estate Roundtable and a coalition of more than 145 business organizations sent a letter yesterday to Sen. Daines in support of the bill. (Coalition letter, May 18)The letter notes that the bill “would provide certainty to the millions of S corporations, partnerships and sole proprietorships that rely on the Section 199A deduction to remain competitive both here and overseas.”Previously, The Roundtable and other stakeholders supported congressional efforts in 2021 to make the pass-through deduction permanent. (Coalition letter, Feb. 26, 2021 and Tax Notes, March 1, 2021)While House Republicans are expected to introduce an economic growth package in the coming weeks that includes tax cuts, it is unclear whether the bill will address provisions such as Section 199A that are not scheduled to expire until the end of 2025. # # #

In Memoriam

May 19, 2023

Roundtable Weekly

Real Estate Industry Trailblazer Sam Zell Passes

In Memoriam

Sam Zell, the founder and chairman of Equity Group Investments died yesterday due to complications from a recent illness. Mr. Zell was a leader in modernizing the REIT structure and was well known for his ability to revive distressed real estate assets, as well as turnaround troubled manufacturing, retail, travel, healthcare, and energy businesses. (Fortune and Wall Street Journal, May 18) Equity Residential, the multifamily REIT Zell founded, released a statement mourning the death of its founder and chairman, noting he led the transformation of the public real estate market, and that under his leadership, grew the company into a $31B apartment owner, developer, and operator listed on the S&P 500 (NYSE: EQR). Mark Parrell, Equity Residential President and CEO, and member of The Real Estate Roundtable Board of Directors said, “The world has lost one of its greatest investors and entrepreneurs. Sam’s insatiable intellectual curiosity and passion for deal making created some of the most dynamic companies in the public real estate industry.” Real Estate Roundtable President and CEO Jeffrey DeBoer said, “Sam was very quick to see the potential economic consequences of policy actions. He was a master of making complex issues simple and he was unambiguous in offering what could always be called a very unique and valuable perspective on national policy issues. His straight talk, clear vision and philanthropic generosity will be deeply missed. “ See www.samzelllegacy.com for a video retrospective of his many accomplishments and contributions to the investing and philanthropic communities. # # #

Tax Policy Section 199A

May 18, 2023

Policy Comment Letter

Roundtable and Coalition Support Legislation Introduced by Sen. Steve Daines (R-MT) to Permanently Extend 20% Pass-Through Income Deduction

Partnerships amp PassThrough Taxation, Section 199A, Tax Policy,

Yes In My Backyard (YIMBY)

May 18, 2023

Policy Comment Letter

Roundtable and Broad Housing Coalition Support Bipartisan Reintroduction of the “Yes in My Backyard (YIMBY) Act”

Affordable Housing, Housing, Yes In My Backyard YIMBY,

Capital and Credit

May 11, 2023

Roundtable Weekly

Roundtable Leaders Emphasize Need for Regulators to Allow More Flexibility for Restructuring CRE Loans

Capital and Credit CRE Trends Restoring Liquidity in CRE Markets and Protecting Capital Formation

This week, Real Estate Roundtable leaders emphasized the need for federal regulators to allow more flexibility for lenders and borrowers to restructure commercial real estate loans facing potential default—as the Federal Reserve reported that CRE poses a potential risk to financial stability. (Fed’s Financial Stability Report, May 2023) Request for Time Real Estate Roundtable Chair John Fish, above, (Chairman and CEO, SUFFOLK) summarized the industry’s views in a May 9 MarketWatch article, noting that the Fed and regulatory agencies should grant more flexibility for borrowers, including corporate real estate developers, to restructure CRE loans.Fish explained how an impending wave of $1.5 trillion in CRE loans—combined with tight lending conditions and higher, unsustainable interest rates—could stifle construction and development in major cities struggling to bounce back from the pandemic. (MarketWatch article pdf)Post-pandemic CRE values have dropped $453 billion, according to the U.S. National Bureau of Economic Research, especially in cities with high vacancy rates due to ongoing work-from-home policies. Prior to the pandemic, 95% of U.S. offices were occupied. Today, that number is closer to 47%. Collapsing property values are threatening the fiscal health of cities across the nation. (GlobeSt, March 3)Defaults on CRE loans hit a 14-year high in February. Fish emphasized that further economic damage can be avoided if federal regulators grant additional time for markets to stabilize, as they have done in the past. (See regulatory notices from 2009, 2020, and 2022)Real Estate Roundtable Chairman Emeritus Bill Rudin, above left, (Co-Chairman and CEO, Rudin Management Co.) discussed similar topics today on CNBC’s Squawk on the Street.“We are going to have to figure out a plan with the federal government to allow banks to have some time to work through some of these loans. It has been done before, so you can restructure, and get more equity into the deal, so that we don’t see this cascade of defaults that we’ve already started seeing happening. There has to be some thought to give banks, owners, and developers time to restructure loans,” Rudin said. Fed Reports A pair of recent Federal Reserve surveys show the state of CRE conditions and the potential risks the sector poses to the financial system. (Enlarged graphic, above | Axios, May 9 and New York Times, May 8)On Monday, the Fed released its bi-annual Financial Stability Report—a survey of market experts, economists, and academics that assesses concerns about the nation's financial and economic health. The report, which includes a special section on commercial real estate-related risks, identifies CRE as the fourth-largest financial stability concern. (Commercial Observer, May 10 and ConnectCRE, May11)Many survey respondents noted CRE as a "possible trigger for systemic risk," listing concerns about higher interest rates, valuations, and shifts in end-user demand. "With CRE valuations remaining elevated … the magnitude of a correction in property values could be sizable and therefore could lead to credit losses by holders of CRE debt," according to the May report. (GlobeSt, May 10)Additionally, the Fed’s April 2023 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) addressed changes in the demand, standards and terms for bank loans over the past three months. The survey notes, "Banks reported having tightened all the terms surveyed on all categories of CRE loans."Over the first quarter of this year, the SLOOS shows a majority of banks reported concerns about an uncertain economic outlook, reduced tolerance for risk, worsening of industry-specific problems, and deterioration in their current or expected liquidity position. Mid-sized banks generally reported tightening both price and non-price terms more frequently than the largest banks and other banks, according to the loan officer survey. The Roundtable continues to urge federal regulators to issue guidance that would give financial institutions increased flexibility to refinance loans with borrowers and lenders. The various market pressures facing CRE will be discussed during The Roundtable’s all-member Annual Meeting on June 13-14 in Washington. # # #

Policy Landscape

May 11, 2023

Roundtable Weekly

Debt Ceiling Talks Inch Forward as Republicans, Democrats Prioritize Permitting Reform for Energy Projects

Congress Debt Ceiling

A May 9 meeting between President Joe Biden and the "Big Four" congressional leaders about the debt ceiling and federal spending ended with little progress—yet the policymakers agreed to meet early next week as their respective staffs begin separate budget discussions. (The Hill, May 11 and Axios May 9 | Roundtable Weekly, May 5) Talks Begin As the “X date” for defaulting on the national debt looms in June, House Speaker Kevin McCarthy (R-CA), Senate Minority Leader Mitch McConnell (R-KY), Senate Majority Leader Chuck Schumer (D-NY), and House Minority Leader Hakeem Jeffries (D-NY) met to discuss raising the $31.4 trillion U.S. debt limit with President Biden, who described the gathering as "productive." (Associated Press and Reuters, May 10)McCarthy commented he "didn't see any new movement," but added he was willing to discuss spending cutbacks such as clawing back funding for pandemic programs. He added that Biden may also be open to discussing permitting reform for energy infrastructure projects, though the two parties are far apart on the specifics of their legislative proposals. (Washington Post and CNN, May 10 and BGov, May 9)Energy Infrastructure Priorities POLITICO reports that streamlining the process to permit energy infrastructure projects is “one of the GOP’s biggest debt limit priorities”—while the Biden administration insists that the two must be de-coupled as part of negotiations to raise the nation’s borrowing authority. (POLITICO, May 10 and May 11)Nonetheless, the White House highlighted the need for permitting reform in its energy infrastructure priorities announced yesterday. (Roll Call, May 10)The White House’s priorities also include the accelerated deployment of upgraded transmission lines needed to deliver renewably sourced energy over long distances and bring it to the nation’s urban and suburban population centers—a policy supported by The Real Estate Roundtable. (White House fact sheet, May 10) White House Senior Advisor John Podesta, above, unveiled the administration’s policy priorities yesterday, citing the ongoing progress of clean energy incentives enacted as part of the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act (IRA). Podesta said, "And thanks to all three bills working together … we’ve sent a powerful signal to the private sector. They’ve already responded with over $220 billion in new clean energy announcements since President Biden took office." ( Podesta remarks, May 10)See The Roundtable’s resources on the IRA: “Clean Energy Tax Incentives Relevant to U.S. Real Estate” Fact Sheet on relevant Clean Energy IRS/Treasury guidance to dateInflation Reduction Act -- Section 48 Investment Tax Credit “Base” and “Bonus” Rate Amounts Relevant to Commercial and Multifamily Buildings Related Energy News The Environmental Protection Agency released a proposed rule today to cut carbon emissions by 90% from the nation’s power plants, drawing a “counterattack from Republicans and coal-state Democrat Sen. Joe Manchin” (D-WV), chairman of the Senate Energy Committee. (New York Times, May 11 and POLITICO, May 11)De-carbonizing the electric grid, and moving utilities away from combusting coal and natural gas, would help building owners and commercial tenants reduce their “indirect” Scope 2 GHG emissions attributable to the electricity they purchase.Meanwhile, the General Services Administration (GSA) announced yesterday it will leverage $3.4 billion it received under the IRA to pursue new public-private partnerships that will improve energy efficiency, reduce onsite emissions, and encourage electrification in federal buildings. (GSA news release, May 10)The GSA will advance the White House’s Climate Smart Buildings Initiative. It aims to modernize 41 federal facilities in DC and the Midwest through long-term “performance contracts” with private sector companies that guarantee projects will pay for themselves over time through energy savings that accrue from retrofit installations. (BGov, May 10). See GSA's National Deep Energy Retrofit program. The Roundtable will focus on the impact of the debit ceiling and federal energy policy priorities during its all-member Annual Meeting on June 13-14 in Washington. # # #

Policy Landscape

May 5, 2023

Roundtable Weekly

Policymakers Face Debt Ceiling Crunch After Treasury Forecasts June “X Date”

Debt Ceiling

Pressure on Congress and the White House ratcheted up this week after Treasury Secretary Janet Yellen warned that the U.S. could default on its $31.4 trillion debt as early as June 1. President Joe Biden will meet on May 9 with House Speaker Kevin McCarthy (R-CA), Senate Minority Leader Mitch McConnell (R-KY), Senate Majority Leader Chuck Schumer (D-NY), and House Minority Leader Hakeem Jeffries (D-NY) to discuss raising the US debt limit and Republican concerns about federal spending levels. (Treasury letter, May 1 | Bloomberg and New York Times, May 2)Looming DeadlineThe estimated date that Treasury will run out of money to pay its bills is called the “X date.” Moody’s Analytics Chief Economist Mark Zandi told the Senate Budget Committee yesterday that the best case scenario for hitting the X date is August 8 and the worst is June 1. (BGOV, May 5)Zandi testified, “The Treasury debt limit drama is heating up and is sure to get much hotter in coming weeks as we have a better understanding of the 2023 tax filing season and the actual X-date.”Zandi also noted how a debt ceiling extension could be combined with annual budget talks. “If the X-date is as soon as early June, it seems a stretch for lawmakers to come to terms fast enough, and they instead will decide to pass legislation suspending the limit long enough to line the X-date up with the end of fiscal 2023 at the end of September. This will buy time and combine the debt limit decision with the federal government’s fiscal 2024 budget, which is also must-do legislation for lawmakers to ensure the government is funded and avoids a shutdown,” Zandi stated. (Senate Budget Committee hearing, May 4)Office of Management and Budget Director Shalanda Young suggested this week that the White House may be open to a short-term debt ceiling extension. “I’m sure one of the things on the table we will have to work through is how long. I’m not going to take anything off the table,” Young said. (Reuters and The Hill, May 4)Policy issues related to raising the debt ceiling and CRE market conditions will be discussed be during The Roundtable’s all-member meeting on June 13-14 in Washington, DC.# # #

Capital and Credit

May 5, 2023

Roundtable Weekly

Real Estate Coalition Backs Bill to Support Multifamily Housing Construction

Capital and Credit Housing

The Real Estate Roundtable and 11 other national industry organizations on May 2 expressed their support for legislation that would bolster the Federal Housing Administration’s (FHA) ability to finance multifamily housing construction throughout the country. The joint letter backed a discussion draft released on April 26 by Sen. Bob Menendez (D-NJ) before a Senate Banking, Housing, and Urban Affairs Committee hearing, “Building Consensus to Address Housing Challenges.” (Coalition letter)Housing Supply ConstraintsThe industry coalition letter noted how FHA’s base statutory limits define the number and size of multifamily mortgages that the Department of Housing and Urban Development (HUD) can insure nationwide. The letter also emphasized how FHA’s multifamily insurance programs need to capture the true cost of current apartment construction using a more accurate price index.Menendez, a senior member of the Banking Committee, stated during the hearing that his measure would increase FHA’s multifamily lending authority throughout the country for the first time in 20 years, enable the agency to better support apartment construction, and ultimately bring down rental costs. (Hearing video clip and Menendez news release, April 26)FHA’s statutory limits are now significantly below current multifamily construction costs, which poses an unintentional regulatory barrier to middle-income housing.The joint letter also recommended that FHA track residential construction costs more accurately by changing the index used for future annual inflationary adjustments—from the Consumer Price Index (CPI) to the Census Bureau’s Price Deflator Index of Multifamily Residential Units Under Construction.FHA’s base limits for 2022 would be 26% higher than their current estimates by using the Price Deflator index instead of CPI.FHA’s current limits and inaccurate price index now consider communities throughout the nation—from Columbia, South Carolina to Cleveland, Ohio—as “high-cost areas,” thereby constraining urgently needed workforce housing projects across the country.Other LegislationOther housing issues discussed during the hearing included zoning and land use regulation, limiting regulation, and the Low-Income Housing Tax Credit (LIHTC).Senate Banking Committee Ranking Member Tim Scott (R-SC), above, discussed his newly proposed discussion draft of the Renewing Opportunity in the American Dream (ROAD) to Housing Act, which seeks to reform housing programs and prioritize HUD grants to recipients located in communities designated as Opportunity Zones.The National Multifamily Housing Council (NMHC) and National Apartment Association (NAA) submitted testimony for the April 26 committee hearing. (NMHC news release summary, May 1)As Congress aims to advance bipartisan housing bills in the coming months, The Roundtable will continue to support innovative policy solutions and development incentives to develop increase the supply of affordable housing.# # #

May 5, 2023

Roundtable Weekly

John C. Cushman, III, Industry Legend, Roundtable Leader, and Iconic Pillar of Cushman & Wakefield

Housing Policy

May 2, 2023

Policy Comment Letter

Industry Coalition Letter to Sen. Menendez in Support of FHA Multifamily Statutory Caps Reform

FHFA, Housing,

2023 Spring Roundtable Meeting

April 28, 2023

Roundtable Weekly

Roundtable Members, Policymakers Discuss Key National Issues

Roundtable Meeting

Real Estate Roundtable members and policymakers met this week to discuss pressing issues affecting CRE, including return-to-work trends, the looming refinance wave, the debt ceiling, and affordable housing challenges. The Roundtable 2023 Spring Meeting also focused on tax, climate, and regulatory proposals. (The Roundtable’ Policy Priorities and Executive Summary, April 24)Speakers & Policy IssuesRoundtable Chair John Fish (Chairman & CEO, SUFFOLK), below left, and Roundtable President and CEO Jeffrey DeBoer, right, led policy issue discussions featuring the following guests:Gina Raimondo, U.S. Secretary of CommerceSecretary Raimondo, center, discussed how the Commerce Department is investing billions in federal funds in infrastructure, manufacturing, and other industries to generate jobs and economic growth. The former governor of Rhode Island also focused on her recent “Million Women in Construction Initiative” during a National Public Radio Marketplace interview later the same day.Sen. Tim Kaine (D-VA)As a member of the Senate Budget and Foreign Relations Committees, Sen. Kaine offered his insights on negotiations surrounding the debt ceiling, global trade, and efforts to revise federal remote work policies aimed at getting government employees back to their offices. (The Roundtable’s workplace return efforts, Commercial Observer, April 14)Rep. French Hill (R-AR)Serving as Vice-Chair of the influential House Financial Services Committee and Chairman of its new Subcommittee on Digital Assets, Financial Technology and Inclusion, Rep. Hill addressed economic issues and CRE, debt ceiling negotiations, the banking system, and monetary policy. Yesterday, the Financial Services Committee approved two bills sponsored by Rep. Hill to expand capital formation.Phillip Swagel, Director, Congressional Budget OfficeThe government’s fiscal trajectory; the impact of high interest rates on federal revenue and spending; and long-term trends in social security, immigration, and the national debt were among the topics discussed by CBO Director Swagel. (The Fiscal Times, April 25)Sharon Wilson Géno, President, National Multifamily Housing CouncilA Roundtable member exchange on policy issues included an update on affordable housing challenges facing the industry by NMHC’s President Géno. Capital concerns affecting multifamily and commercial markets were also a topic in a recent Walker Webcast featuring Géno and The Roundtable’s DeBoer, hosted by Roundtable Member Willy Walker (Chairman & CEO, Walker & Dunlop).Kevin Warsh, Former Member of the Federal Reserve’s Board of GovernorsMr. Warsh, right, a member of the Fed from 2006-2011, discussed the central bank’s potential actions affecting commercial real estate markets, the wave of CRE debt maturities, and the future of the office sector, with Roundtable Treasurer Thomas Flexner, left, Vice Chairman and Global Head of Real Estate, Citigroup.Next on The Roundtable's meeting calendar is the all-member Annual Meeting on June 13-14 in Washington, DC. # # #

Policy Landscape

April 28, 2023

Roundtable Weekly

House Republicans Pass Debt Ceiling Bill

Debt Ceiling

House Republicans this week narrowly passed legislation—the Limit, Save, Grow Act (H.R. 2811)—that would slash government spending and rescind much of the Biden administration’s climate-related incentives in an effort to spur bipartisan talks on raising the nation’s $31.4 trillion debt ceiling. (Roll Call, April 26 and Reuters, April 27)Avoiding DefaultThe White House issued an April 25 Statement of Administration Policy that the GOP bill would be vetoed if it ever made it to President Biden’s desk. Biden added he is willing to meet with House Speaker Kevin McCarthy (R-CA), but that extending the debt limit is “not negotiable.” Senate Majority Leader Chuck Schumer (D-NY) responded to passage of the House bill by stating it “has no hope of ever becoming law.” (Schumer Floor Remarks, April 27)The Congressional Budget Office released an analysis this week showing that H.R. 2811 would reduce $4.8 trillion from the deficit by setting caps on federal spending over the next 10 years—with an additional $570 billion in savings coming from rescinding energy tax provisions passed in the Inflation Reduction Act. (Tax Notes, April 27 and Roundtable Weekly, Aug. 12, 2022)Mark Zandi, the chief economist at Moody's Analytics testified before Congress last month that if no resolution to the debt limit is reached before mid-August, “a default would be a catastrophic blow to the already-fragile economy.” (Zandi’s written testimony, March 7) A previous standoff over the debt limit in 2011 led to a downgrade of the government's credit rating, which pushed borrowing costs higher. (ABC News, Jan. 24)Roundtable ResponseThe Roundtable and 13 other national real estate organizations sent a joint letter last month urging congressional leaders to raise the debt limit to avoid agitating the stability of U.S. financial markets and roiling significant sectors of the American economy unnecessarily. (Coalition letter, March 29) Real Estate Roundtable Chair John Fish, right above, (Chairman and CEO, SUFFOLK) and President and CEO Jeffrey DeBoer, left, have also called on Roundtable members to contact both policymakers in Congress and the White House to raise the debt ceiling. (Roundtable Weekly, Jan. 20)DeBoer said, “Some threats to the U.S. economy are unavoidable, others are ones of our own making and entirely unnecessary. The potential for a default on the federal debt is a needless and inexcusable risk with potentially dire consequences for U.S. real estate, workers and retirees, and the entire economy. The full faith and credit of the United States government should not be open to negotiation.”The impact of negotiations over federal spending and raising the debt ceiling on the national economy and CRE markets was a focus of discussion during The Roundtable’s Spring Meeting this week (see story above). It is possible that intense discussions among DC policymakers on these issues will be underway during The Roundtable’s all-member meeting on June 13-14 in Washington, DC.# # #

Policy Landscape

April 21, 2023

Roundtable Weekly

Looming Debt Limit Expiration Dominates Congressional Agenda

Debt Ceiling

House Republicans this week proposed the Limit, Save, Grow Act to cut federal spending and spur negotiations to raise the nation’s $31.4 trillion debt ceiling for approximately one year. President Joe Biden and Senate Democrats oppose the bill and propose lifting the debt ceiling without conditions. (The Hill, April 19 and Committee for a Responsible Federal Budget, April 20) X Date Approaches House Speaker Kevin McCarthy (R-CA) stated he aims to schedule a vote next week on the bill and begin negotiations with Democrats over raising the debt limit. McCarthy needs approval from 218 House members to pass the legislation, meaning he can only afford to lose four votes from his conference to pass it without Democratic support. (NBC News, April 19 and CBS News, April 18) On Wednesday, the Problem Solvers Caucus—comprised of 32 moderate Democrats and 31 Republicans in the House—proposed their own plan to raise the debt ceiling. (Caucus news release and Axios, April 19) The nonpartisan Congressional Budget Office estimated that Treasury will run out of money sometime between July and September, a point referred to as the “X date” (CBO analysis, Feb. | ABC News, April 15) Mark Zandi, the chief economist at Moody's Analytics testified last month before Congress that if no resolution is reached before mid-August, “a default would be a catastrophic blow to the already-fragile economy.” (Zandi’s written testimony, March 7) Congressional Hearings A House Ways and Means Committee hearing on Wednesday focused on the Limit, Save, Grow Act’s proposal to strike the package of clean energy tax incentives that Democrats passed last year in their signature climate law, the Inflation Reduction Act (IRA). (Roundtable Weekly, Aug. 12, 2022) The Republicans’ proposed repeal is unlikely to pass the Senate’s Democratic majority and President Biden has stated he would veto if it ever reached his desk. A Joint Committee on Taxation (JCT) report summarized the IRA’s incentives—and The Roundtable has prepared fact sheets on the credits and deductions relevant to CRE. The day before the hearing, Rep. Bill Pascrell (D-NJ), Ranking Member of the Ways and Means Subcommittee on Oversight, introduced the Ending Wall Street Tax Giveaway Act, which would eliminate the current tax treatment of carried interest. (Pascrell news release, April 18) On Tuesday, a House Financial Services Committee hearing on “Oversight of the Securities and Exchange Commission” featured testimony from SEC Chairman Gary Gensler, above. A final SEC rule on climate reporting, which derives from a proposal for sweeping disclosures on Scope 3 GHG emissions, is anticipated this spring. (Roundtable Weekly, March 25, 2022 and Roundtable Comments on the SEC Proposal, June 10, 2022) Gensler testified that the agency is not interested in capturing emissions from all sources and small businesses in a reporting company’s Scope 3 “value chain.” He stated, “We only oversee seven or eight thousand public companies … It is not a rule about the rest.” The importance of the nation’s supply chains to the economy was also addressed when Commerce Secretary Gina Raimondo testified before a House appropriations panel this week on the department's 2024 budget. Secretary Raimondo will discuss national economic conditions during The Roundtable’s Spring Meeting next week in Washington. (Roundtable-level members only) # # #

Workplace Return

April 21, 2023

Roundtable Weekly

OPM Ends “Maximum Telework” Status for Federal Government

Remote Work Return to Office Telework Workplace Return

On Tuesday, the White House Office of Personnel Management (OPM) announced that it is ending its “maximum telework” directive to federal agencies. Federal Workforce and TeleworkAt the outset of the pandemic, OPM issued a government-wide announcement that federal agencies should "operate as 'open with maximum telework flexibilities to all current telework eligible employees…'" The April 18 memo from OPM Director Kiran Ahuja states that OPM will withdraw its maximum telework directive effective May 15, 2023. (Gov’t. Executive, Apr 19)“COVID-19 is not driving decisions regarding how Federal agencies work and serve the public as it was at the outset of the pandemic,” wrote Director Ahuja in his memo to the chief human capital officers of federal agencies.The announcement by OPM comes on the heels of guidance released last week from the White House Office of Management and Budget (OMB) informing federal agencies that they have 30 days to develop plans to "substantially increase" their employees in-person work at headquarters.Roundtable Letters Both the OMB and OPM actions followed appeals from The Real Estate Roundtable for the federal government to end its “active encouragement of remote working for federal employees.” (RER letter to the Senate).“The executive branch’s current policies are undermining the health of cities, local tax bases, and small businesses. Federal agencies should return to their pre-pandemic workplace practices,” wrote Real Estate Roundtable President and CEO Jeffrey DeBoer, above, in an April 12 letter to all U.S. Senators. In a similar letter to President Biden in December, DeBoer wrote that federal telework polices were ignoring “the negative impacts of remote work on cities and communities, labor productivity, and U.S. economic competitiveness, as well as the quality of government services.” (Commercial Observer, April 14 and RER letter to President Biden).“This week’s OPM announcement is another important step forward for our communities, small businesses, and local tax bases that depend on vibrant city centers,” said DeBoer. (Roundtable Weekly, April 14)Low Office Occupancy Persists Kastle reported on Monday that office occupancy rates for 10 U.S. cities fell to an average of 46%, a weekly dip of 2.2 points that reflects consistent rates of under 50% since last month. (Kastle’s Back to Work Barometer, April 17)Real estate investor Sam Zell commented this week on the state of the office market and remote work, predicting a reversal in telework trends. (GlobeSt, April 20)“We’re all reading about layoffs in the newspapers. It will be interesting to see what percentage of those who lost their jobs worked from home and what percentage of them are people who came into the office,” said Zell. “The office situation will change. People need to be together to develop their skills.”The impact of return-to-the office on the industry, communities, and the economy will be a focus of discussion during The Roundtable’s April 24-25 Spring Meeting in Washington, DC. (Roundtable-level members only). # # #

Climate and Energy Policy

April 21, 2023

Roundtable Weekly

Energy Department Releases Latest Nationwide Data on Building Energy Use

Climate Policy ENERGY STAR EPA

The Department of Energy (DOE) this week presented its latest data on energy use in U.S. commercial buildings. The nationwide information released by DOE’s Energy Information Administration (EIA) is the basis for ENERGY STAR building scores from the Environmental Protection Agency (EPA). (EIA final results and reports) CBECS Results The latest Commercial Buildings Energy Consumption Survey (CBECS) reflects information collected in 2018. Although this is EIA’s newest building data, it is a “snapshot” in time—and does not account for occupancy rates or energy usage during or after the COVID-19 pandemic.According to the 2018 CBECS, there are an estimated 5.9 million public and private commercial buildings in the U.S. across non-residential asset classes—75% of which were constructed before the year 2000. (CBECS “building characteristics” highlights)Key CBECS findings on building energy consumption and expenditures include: Building energy efficiency improved compared to the 2012 survey.Total floor space in commercial buildings increased yet energy consumption did not. Commercial buildings overall consumed 12% less energy per square foot of floor space in 2018 than in 2012. Electricity and natural gas accounted for about 94% of energy consumed.Electricity accounted for 60% of energy consumed (mostly for cooling) and natural gas for 34% (mostly for heating).Large buildings were fewer but consumed over one-third of energy.Buildings over 100,000 square feet accounted for 2% of all commercial buildings—yet covered 34% of total commercial floor space. The newest buildings were the most energy intensive.Commercial buildings spent $141 billion on energy in 2018, averaging $1.46 per square foot.Commercial buildings spent $119 billion on electricity, or 84% of their total energy expenditures. Natural gas accounted for 12% of total commercial building energy expenditures ($16 billion).Space heating accounted for close to one-third of end-use consumption.Space heating was the most energy-intensive end use, especially in colder climates. Office equipment and computing were the least intensive end uses.EIA held a webinar this week explaining the 2018 CBECS results, which will posted on their website soon.ENERGY STAR & NextGen Label EPA’s successful ENERGY STAR score—an efficiency rating for buildings—is generally based on CBECS data.EPA is expected to update its models for calculating ENERGY STAR ratings in 2025, under the newly-released 2018 CBECS data. The anticipated update could greatly alter a building’s current ENERGY STAR score (presently based on 2012 CBECS data). EPA recently proposed a new voluntary label for low-carbon buildings. The NextGen label would expand upon ENERGY STAR and recognize buildings that use significant percentages of solar and other forms of renewable energy. The Real Estate Roundtable submitted comments to EPA last month on the NextGen building label proposal. (Roundtable letter and Roundtable Weekly, March 3) # # #

Climate and Energy Policy

April 21, 2023

Roundtable Weekly

Federal Appeals Court Strikes Local Natural Gas Ban on New Construction

Climate Policy Energy Policy

A federal appeals court on Monday struck a local law that banned natural gas hook-ups to new buildings. (Wall Street Journal, April 17 and AP News, April 18)State and Local Gas BansIn California Restaurant Ass’n v. City of Berkeley, the Ninth Circuit Court of Appeals ruled that a Berkeley, California ordinance was illegal because federal law “preempts” local building codes that try to prohibit stoves, furnaces and other appliances that use natural gas. (Politico E&E News, April 18).Dozens of cities including New York, Washington, D.C, Los Angeles, and Chicago—and the states of California, Colorado, Maryland, and Washington—have passed building electrification mandates requiring new construction to install expensive heat pumps and other electric equipment for heating, cooling, and cooking.New York Governor Kathy Hochul (D) has proposed a similar statewide ban on natural gas furnaces as a way to fight climate change. (Bloomberg, Jan. 23)Impact of Court RulingThe Ninth Circuit’s reasoning will likely prompt federal preemption challenges and may pose a “chilling effect” to similar state and local building decarbonization laws. (E&E News, April 18). Yet, environmental advocates maintain that the ruling is limited in scope and will not call into question other gas bans. (POLITICO, April 18)Meanwhile, about 20 states have gone the other way with “bans on bans.” These laws would prohibit their cities and municipalities from stopping natural gas distribution and requiring all-electric new buildings.“States and localities can’t skirt the text of broad preemption provisions” in a law passed by Congress to address the 1970s energy crisis, Judge Patrick Bumatay wrote for the Ninth Circuit’s unanimous opinion.As its next litigation option, the City of Berkeley might ask for a fuller panel of Ninth Circuit judges to uphold its ordinance. The Roundtable will continue to monitor how local natural gas bans and related building performance standards impact federal-level policies that address real estate’s role to help tackle climate change. (Roundtable Weekly, March 3 and Jan. 20)# # #

Workplace Return

April 12, 2023

Policy Comment Letter

Roundtable Letter to the Senate: Federal Agencies Should Return to Pre-Pandemic Telework Rules

Remote Work, Workplace ReEntry, Workplace Return,

April 3, 2023

Quarterly Sentiment Index

2019 Quarterly Sentiment Index

April 3, 2023

Quarterly Sentiment Index

2020 Quarterly Sentiment Index

April 3, 2023

Quarterly Sentiment Index

2021 Quarterly Sentiment Index

Quarterly Sentiment Index

April 3, 2023

Quarterly Sentiment Index

2022 Quarterly Sentiment Index

Quarterly Sentiment Index,

March 31, 2023

Commercial Real Estate by the Numbers

Debt Ceiling

March 29, 2023

Policy Comment Letter

Real Estate Coalition Urges Congress to Raise Debt Limit ASAP

Bank Failures Increase Pressure on CRE Capital Markets

Capital and Credit

The failures of Silicon Valley Bank and Signature Bank this month have raised concerns about the financial health of small and regional banks that hold a large amount of commercial real estate debt—particularly loans backed by office buildings already under pressure from decreased valuations, rising interest rates, and looming debt maturities. (New York Times, March 22 and Wall Street Journal, March 21) Call for Regulatory Flexibility Roundtable Board Member Scott Rechler, above, (chairman and CEO of RXR) appeared on CNBC’s Squawk Box Wednesday morning to discuss liquidity pressures on CRE. During the interview, he endorsed a recent Roundtable request that banking regulators grant increased flexibility immediately to financial institutions for refinancing loans with borrowers and lenders, allowing time for capital markets to stabilize and the private sector to develop solutions. (Commercial Observer, March 22)Rechler added that if no relief is provided, increased pressures on CRE may threaten the tax base of municipalities, the viability of small businesses that rely on regional banks, and the supply of housing. (Squawk Box, March 20)Last week’s Roundtable letter from President and CEO Jeffrey DeBoer informed federal bank regulators about the immediate need for reestablishing a troubled debt restructuring (TDR) program for CRE, similar to initiatives established in 2009 during the global financial crisis and in 2020 during the height of the COVID-19 pandemic. (BisNow and GlobeSt, March 21)DeBoer’s letter also cited the lingering effects of the global pandemic, including remote work’s negative influence on office space demand, as pressure points on liquidity and refinancing options for CRE assets. (Roundtable Weekly, March 17) CRE Loan Concentrations A March 16 report from Goldman Sachs Research showed that small- and medium-size banks with less than $250 billion in assets account for approximately 80% of commercial real estate lending and 60% of residential real estate lending.The Wall Street Journal reported this week that smaller banks hold around $2.3 trillion in commercial real estate debt and that about $270 billion in commercial mortgages held by banks are set to expire this year, according to data firm Trepp Inc.Additionally, sales of commercial mortgage-backed securities (CMBS) were down 85% last month compared with the same time in 2022 due to rising interest rates and defaults. (Bloomberg, Feb. 17, 2023)Treasury Secretary Janet Yellen testified yesterday before a House Appropriations Committee panel that the federal government is prepared to protect depositors in banks “of any size” who may face the possibility of collapse. “These are tools we could use again for an institution of any size if we judge that its failure would pose a contagion risk,” Yellen said. (Reuters, March 23)The Fed is reviewing tougher capital and liquidity requirements for midsize banks, along with more stringent annual stress tests to assess their ability to weather recessionary pressures. New rules may target mid-sized banks with assets totaling between $100 billion to $250 billion. (Wall Street Journal | Financial Times | Reuters, March 14) The Roundtable’s March 17 letter to federal regulators states, “to avoid increasing unnecessary risk, we respectfully request that the Agencies reaffirm that financial institutions have flexibility to use reasonable and prudent judgment to give borrowers and lenders more time to see properties and loans through this current evolving environment.” # # #

Tax Policy

March 24, 2023

Roundtable Weekly

President’s Budget Reignites Congressional Debate on Taxing Assets at Death

Capital Gains Tax Policy

Congressional policymakers this week focused on two tax policy proposals included in President Biden’s FY2024 budget that could adversely affect family-owned real estate businesses—eliminating the step-up in the basis of assets at death and imposing new restrictions on the use of grantor retained annuity trusts (GRATs) and grantor trusts. (Roundtable Weekly, March 10 and Treasury’s “Green Book” description of the President’s revenue proposals, March 9) Step-up in Basis The White House budget plan once again includes a proposal to eliminate the step-up in basis of real estate and other assets at death. The budget would replace step-up with a new policy that subjects the decedent’s appreciated assets to capital gains tax at death, in addition to potential estate tax liability. The tax on unrealized, built-in gains would apply even when the decedent and the heir have no intention or desire to sell the property. On Tuesday, a bipartisan group of Representatives led by Rep. Tracey Mann (R-KS) and Jim Costa (D-CA) introduced House Resolution 237 expressing support for retaining stepped-up basis. Cosponsored by 63 members of Congress (4 Dem., 58 Rep.), the resolution notes that stepped-up basis is “a crucial component of many family farms and small business succession plans.” (BGov and Rep. Mann news release, March 21) In 2021, a study by EY commissioned by the Family Business Estate Tax Coalition with support from The Real Estate Roundtable found that repealing stepped-up basis and taxing unrealized gains at death would result in reduced job growth, lower wages, and a reduction in GDP of roughly $10 billion per-year. Grantor Trusts The President’s budget again proposes major tax increases on grantor retained annuity trusts (GRATs) and grantor trusts that the administration estimates would raise $65 billion over 10 years. GRATs and grantor trusts are frequently used to facilitate the continuation of family-owned businesses from one generation to the next, particularly in capital-intensive industries like real estate that can involve significantly appreciated assets. On Monday, four Democratic Senators—Elizabeth Warren (MA), Bernie Sanders (VT), Chris Van Hollen (MD), and Sheldon Whitehouse (RI)—wrote to Treasury Secretary Yellen urging her to use her regulatory authority to “limit the ultra-wealthy’s abuse of trusts to avoid paying taxes.” The letter includes eight specific recommendations, including the reissuance of family limited partnership regulations that address the use of valuation discounts. (Tax Notes, March 22) In 2017, The Real Estate Roundtable and others commissioned a study by Dr. Robert Shapiro, former Undersecretary of Commerce for Economic Affairs, analyzing the economic impact of a proposed regulation to limit valuation discounts for family businesses. The study concluded the limits could cost 106,000 jobs and $150 billion in GDP over 10 years. The study followed formal Roundtable written comments submitted in 2016—and oral testimony highly critical of the proposal by Roundtable Tax Policy Advisory Committee Member Stef Tucker. The White House FY2024 budget revenue proposals will be discussed during the Roundtable’s Spring Meeting on April 24-25 in Washington, DC (Roundtable-level members only.) # # #

Capital and Credit

March 17, 2023

Roundtable Weekly

Roundtable Urges Federal Bank Regulators to Reestablish CRE Troubled Debt Restructuring Program

Capital and Credit The Fed

The Real Estate Roundtable today requested federal bank regulators to reestablish immediately a troubled debt restructuring (TDR) program for commercial real estate that would give financial institutions increased flexibility to refinance loans with borrowers and lenders. (Roundtable letter to regulators, March 17) Roundtable Liquidity Concerns The letter from Real Estate Roundtable President and CEO Jeffrey DeBoer, above, cites rising interest rates, a steady increase in looming debt maturities, remote work’s negative influence on office space demand, and heightened uncertainty from this week’s bank turmoil as contributing factors that have exerted pressure on liquidity and decreased refinancing options for CRE assets.DeBoer added, “Regulators have taken significant action four times since 2009 to assist commercial real estate loan modifications during periods of economic instability—and now is the time to take action again. Our request is for immediate action, given increasing credit and liquidity constraints. Time will allow markets still struggling with post pandemic uncertainties to stabilize.”Minutes from last month’s Fed Open Market Committee meeting confirmed economic pressures on CRE assets. The FOMC minutes state, “In particular, the staff noted that measures of valuations in both residential and commercial property markets remained high, and that the potential for large declines in property prices remained greater than usual.” Fed Intervention The Fed is reviewing tougher capital and liquidity requirements for midsize banks, along with more stringent annual stress tests to assess their ability to weather recessionary pressures. New rules may target mid-sized banks with assets totaling between $100 billion to $250 billion. (Wall Street Journal | Financial Times | Reuters, March 14)The Fed this week acted to quell turmoil caused by the collapse of three mid-sized banks, including expanding its balance sheet to nearly $300 billion after months of shrinking it through a quantitative easing program. (Axios, March 17)The Fed announced on Sunday night, March 12, the creation of a new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions that pledge U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. The BTFP is backstopped up to $25 billion from the Exchange Stabilization Fund. (Fed announcement, March 12)Additionally, a Fed report released yesterday showed a huge outflow of $153 billion in loans at the Fed’s "discount window," a funding resource that helps depository institutions manage their liquidity risks. The previous record for discount window borrowing was $111 billion during the 2008 financial crisis. Remote Work DeBoer’s letter to the Agencies also emphasized the lingering effect of the global pandemic on hospitality, senior housing, retail (including the enclosed shopping center market), office and other property sectors.The ongoing pressure of remote work arrangements has altered the current demand for office space nationwide, created significant concerns about the future of office use, and the cast doubt on the future of American cities that heavily depend on property tax revenue to fund needed community services. (Roundtable letter, March 17)The wide adoption of remote work may have been a factor in Silicon Valley Bank's collapse, according to the bank’s 2023 annual report filed in February. SVB acknowledged in a filing with the Securities and Exchange Commission that it faced "risks from a prolonged work-from-home arrangement as well as our implementation of a broader plan to return to the office." (Fortune, March 16 and Axios, March 17) The Roundtable’s letter concludes by urging the federal regulators to “take action immediately to provide increased latitude for financing institutions to work constructively with borrowers. Such action will avert what we believe would be an unnecessary crisis.” # # #

Tax Policy

March 17, 2023

Roundtable Weekly

Coalition Urges Treasury to Exempt Unrealized Gains from New Corporate Alternative Minimum Tax

Corporate Alternative Minimum Tax CAMT Tax Policy

A coalition of trade organizations that includes The Real Estate Roundtable asked the IRS yesterday to issue regulatory guidance clarifying that unrealized gains and losses are not subject to tax under the new corporate alternative minimum tax (CAMT). Enacted under the Inflation Reduction Act of 2022, CAMT levies a 15% minimum tax on the adjusted financial statement income (book income) of certain large corporate taxpayers. (Coalition letter, March 15) CAMT Implementation Starting this year, the CAMT applies to firms with an average of $1 billion or more in profits in any three-year period and to foreign-parented U.S. firms with profits of over $100 million if the aggregated foreign group has over $1 billion in profits. Congress expressly exempted REITs from the tax. (Congressional Research Service, Jan. 19, 2023) The coalition’s comments respond to a Dec. 27, 2022 IRS Notice (2023-7) that states Treasury may issue future guidance intended “to help avoid substantial unintended adverse consequences” from the interaction of mark-to-market accounting and the CAMT. Congress granted the Treasury Secretary substantial regulatory authority to implement the new tax. (Debevoise & Plimpton, Jan. 3 and Gibson Dunn, Jan. 6) Coalition Weighs In The coalition, which includes the American Investment Council, the U.S. Chamber of Commerce, and others, emphasized in its comments that providing a comprehensive exclusion for unrealized gains and losses that are marked-to-market for book purposes would be consistent with the legislative intent of the CAMT—and Congress’s rejection of prior proposals to tax unrealized gains. The coalition’s comments note that Treasury’s clarification would help avoid a patchwork of unprincipled and ad hoc rules that leave certain categories of unrealized gains and losses subject to tax. The result could distort investment decisions, create a disincentive for taxpayers to elect fair value accounting, and force taxpayers to sell real estate and other assets or borrow money to pay their taxes. The Roundtable’s Tax Policy Advisory Committee (TPAC) and its partner organizations will continue to work with federal regulators on the CAMT guidance to prevent the unintended taxation of unrealized real estate gains and losses. # # #

Climate Risk Reporting

March 17, 2023

Roundtable Weekly

Reports Confirm Challenges in Scope 3 Reporting

Climate Risk Reporting Reporting on Climate Risks Scope 3 reporting SEC

Reports released this month show the challenges companies face to quantify indirect “Scope 3” GHG emissions that emanate from an organization’s value chain. These studies support recent remarks from U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler that Scope 3 reporting is not “well-developed,” and “adjustments” could be made to the agency’s highly anticipated climate risk reporting rule. (CNBC, March 6 and Roundtable Weekly, March 10) Reporting Categories A report from environmental disclosure platform CDP examined survey responses from more than 18,700 companies. CDP found that a company’s limited influence over emissions in its supply chain, lack of data, and/or low-quality data are the biggest challenges for Scope 3 disclosures. CDP’s report noted that only 41% of responding companies reported on at least one of the 15 Scope 3 “indirect” emissions categories. In contrast, 72% of CDP-responding companies reported Scope 1 (“direct”) and/or Scope 2 (“electricity”) emissions. (ESG Today, March 15) The most commonly reported Scope 3 emission category (42%) reported by all sectors in was emissions from “business travel,” perhaps the easiest category to calculate. (CDP, Scope 3 Categories by all Sectors) Real Estate & Scope 3 A technical note to CDP’s report, above, provides statistics specifically on Scope 3 disclosures from building developers, owners, and REITs. According to CDP: Scope 3 emissions on average contribute over 85% of a commercial real estate company’s entire footprint. Embodied emissions from construction materials (steel, concrete) was the most significant Scope 3 category reported by 156 real estate companies. “Downstream” emissions from tenants was the second most significant category, comprising 27% of total Scope 3 emissions and 25% of total Scope 1+2+3 emissions. Executives on Scope 3 A separate Workiva/PwC survey, above, on expected SEC disclosure requirements and ESG reporting compiles the responses of 300 executives at U.S.-based public companies. Key findings from the “Change in the Climate” report include: 95% of corporate executives say they are prioritizing ESG reporting more now than before the SEC’s proposed rule. 36% don’t feel their company is staffed appropriately to meet the SEC’s proposed disclosure rule. 60% of respondents said they would need an extra 1-3 years to estimate and report on Scope 3 emissions—after any Scopes 1 and 2 requirements take effect. 61% of respondents believe the SEC rule will cost their companies at least $750K in the first year of compliance. Separately, Senate Majority Leader Chuck Schumer (D-NY) this week commented on a proposed House of Representatives energy package (H.R. 1), which focused on measures impacting fossil fuels, as a "non-starter" for congressional negotiations. (Politico, March 15) # # #

The Fed

March 17, 2023

Policy Comment Letter

Roundtable Urges Federal Bank Regulators to Grant Financial Institutions Increased Flexibility to Refinance Loans with Borrowers and Lenders

DeBoer, Halting ProCyclical Policy Measures and Increases in Regulatory Capital, Jeffrey DeBoer, Liquidity, Regulators, Restoring Liquidity in CRE Markets and Protecting Capital Formation, The Fed,

Tax Policy

March 14, 2023

Policy Comment Letter

Coalition Urges Treasury to Exempt Unrealized Gains from New Corporate Alternative Minimum Tax (CAMT)

Corporate Alternative Minimum Tax CAMT, Tax Policy,

Workplace Return

March 10, 2023

Roundtable Weekly

Impact of Remote Work Increases Pressure on Office Sector, Cities

Workplace Return

The number of office assets facing loan defaults or entering special servicing is growing in major markets as remote work and rising interest rates continue to exert pressures on metropolitan areas and city budgets, according to reports this week in Commercial Observer and Bloomberg.Workplace OccupancyWorkplace occupancy rates are measured in a weekly “Back to Work Barometer” series, above, by building security provider Kastle Systems, whose March 6 report showed a 10-city average occupancy rate of 50.1%. (Bloomberg, March 9)Kastle also reported that the Washington, DC metro area’s workplace occupancy rate registered 46.6%. Remote work’s influence on the DC tax base, reduced office transactions, and dropping asset values are projected to decrease the city’s tax revenue by nearly a half-billion dollars from 2024-2026. (Roundtable Weekly, March 4)Congressional HearingsDuring a March 7 Senate Banking Committee hearing, Fed Chairman Jay Powell addressed a question from Sen. Mark Warner (D-VA) about low office occupancy rates in many major cities. Powell said the issue is “an area that requires a lot of monitoring,” noting that some smaller banks may have more significant exposure to CRE than large banks. “I’d say we’re on the case,” he added. (CQ News, March 7 and CQ hearing transcript)The issue of converting commercial buildings into affordable housing and mixed-use properties was also addressed during a Senate Finance Committee hearing this week by Sen. Debbie Stabenow (D-MI), who co-sponsored the Revitalizing Downtowns Act to encourage conversions. Hearing witness Sharon Wilson Géno—president of the National Multifamily Housing Council (NMHC)—noted a recent joint NMHC and Urban Land Institute study on adapting CRE to residential use.The Real Estate Roundtable wrote to President Joe Biden last December about the need for federal employees to return to their workplaces—and encouraged the administration to support legislation that could incentivize conversion of underutilized buildings to more productive use such as housing. These two requests are included in the House-approved Stopping Home Office Work’s Unproductive Problems (SHOW UP) Act (H.R. 139). (Roundtable Weekly, Feb. 3 | GlobeSt and CoStar, Dec. 15, 2022)# # #

Tax Policy

March 10, 2023

Roundtable Weekly

President Biden’s FY2024 Budget Aims to Raise Taxes on Real Estate, Capital Formation, and Investment

Budget Capital Gains LikeKind Exchanges LKEs Tax Policy

The Biden administration yesterday proposed a $6.9 trillion FY2024 budget that includes $3 trillion in deficit reduction and $2.2 trillion in tax increases over the next decade on corporations, high-earning households, and certain business activities, including real estate investment. (White House budget materials and Treasury Department news release) Blueprint for Negotiations It is unlikely the tax proposals—detailed in the “General Explanations of the Administration’s Revenue Proposals” or Treasury “Green Book”—will be enacted as proposed. However, the budget reflects priorities that the White House is certain to emphasize when negotiations intensify this spring over the debt-limit and fiscal policies. Real Estate Roundtable President and CEO Jeffrey DeBoer said, “Congress has rejected several of these same tax proposals in the past. In particular, Congress has said no to proposals to double the capital gains rate, tax gains reinvested in property of a like-kind, or taxing unrealized gains. We will strongly urge that these counter-productive proposals again be rejected. They have weak policy support, are poorly timed and quite risky given the current uncertain economy.” Of note for real estate: Capital Gains Rate The top, combined tax rate on long-term capital gains would nearly double from 23.8% (20% + 3.8% net investment income tax) to 44.6%. This results from increasing the maximum capital gains rate from 20% to 39.6% and a new proposal to increase the net investment income tax from 3.8% to 5%. Mark-to-Market Tax on Unrealized Capital Gains The FY 2024 budget carries over President Biden's proposal from last year, imposing a retroactive, annual minimum tax of 25% on the income and unrealized gains of taxpayers with wealth (assets minus liabilities) exceeding $100M. Real Estate Professionals The budget also carries over a proposal to extend the 3.8% net investment income tax to real estate professionals and other pass-through business owners who are currently exempt from the tax because they are active in their business. Tax Proposals Other real estate-related tax proposals include: Taxing carried interest as ordinary income Limiting the deferral of gain from like-kind exchanges Increasing the top tax rate on ordinary income to $39.6% Ending step-up in basis and taxing unrealized capital gains at death Expanding the limitation on excess business losses for non-corporate taxpayers by converting the limitation from a 1-year deferral to a permanent compartmentalization of active pass-through losses Modifying tax rules for grantor retained annuity trusts (GRATs) and grantor trusts Recapturing and taxing real estate depreciation deductions at ordinary income tax rates The budget also devotes $59 billion to provisions aimed at increasing the supply and availability of affordable housing, as well as $10 billion “to incentivize State, local, and regional jurisdictions to make progress in removing barriers to affordable housing developments, such as restrictive zoning.” Tax incentives in the budget include an expansion of the low-income housing tax credit (LIHTC) and a new tax credit for the development of affordable, owner-occupied housing. These tax issues and other policies affecting CRE will be discussed during The Roundtable’s Spring Meeting on April 24-25 in Washington. # # #

Climate Risk Reporting

March 10, 2023

Roundtable Weekly

SEC Chair Indicates Possible Scale-Back of “Scope 3” Emissions Reporting

Climate Policy Reporting on Climate Risks Scope 3 reporting SEC

U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler commented on March 6 that the agency’s forthcoming rule on climate reporting may be scaled-back, including its proposal for sweeping disclosures on Scope 3 GHG emissions, according to CNBC. Scope 3 Proposal Scope 3 refers to indirect emissions that are part of an organization’s value chain but not owned or controlled by the reporting company. The 2022 SEC proposal would require corporate issuers of securities to estimate and report Scope 3 emissions “if material” in 10-Ks and other filings. (SEC News Release, March 22, 2022) Roundtable comments submitted last June called the SEC’s proposed treatment of Scope 3 disclosures a “back-door mandate” and urged the agency to drop it. (Roundtable Weekly, June 10, 2022) The SEC’s final rulemaking process is ongoing. Gensler acknowledged that the agency received a record 15,000 public comments and “adjustments” to the proposed rule were likely. (Bloomberg Law, March 6; CNBC, Feb 10) Some stakeholders have signaled potential litigation by questioning whether the SEC has “clear” legal authority to regulate climate matters in light of recent Supreme Court precedent. (SCOTUSblog, June 30, 2022 | Pensions & Investments, March 7, 2023) Gensler told POLITICO this week that any final climate rule must be “durable” and “sustainable.” “It doesn’t protect investors … if we have a rule overturned in court,” he said. Congress Weighs In The SEC’s climate rule is the focus of dueling letters by members of Congress. Democrats wrote in a March 5 letter that the agency should not “soften” or “scale back” proposed climate discloures. Reports that the SEC might “curtail” Scope 3 reporting, among other matters, are “deeply concerning,” the Democrats wrote. Republicans wrote to Gensler on Feb 22, stating the proposed rule exceeds the Commission’s authority. The GOP letter states, “Congress created the SEC to carry out the mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation—not to advance progressive climate policies.” A final rule is anticipated from the SEC this spring. The Roundtable’s Sustainability Policy Advisory Committee (SPAC) will continue to track any developments on the agency’s proposed rule and other climate-related regulatory proposals affecting CRE. # # #

Affordable Housing

March 10, 2023

Roundtable Weekly

Congressional Tax Writers Focus on Policies to Increase Supply of Affordable Housing

Affordable Housing Capital Gains Housing Low Income Housing Tax Credit LIHTC

Legislation aimed at increasing the nation’s supply of affordable housing was introduced by Senate and House tax writers this week while the National Multifamily Housing Council (NMHC) and National Apartment Association (NAA) offered joint testimony before a March 7 Senate Finance Committee hearing on “Tax Policy’s Role in Increasing Affordable Housing Supply for Working Families.” (NMHC President Sharon Wilson Géno, above and MarketWatch, March 9) Solutions to Meet the Need A new report from real estate brokerage Redfin shows that the number of affordable home listings fell 53% from last year—the largest annual drop in Redfin’s records, which date back to 2013. (The Hill and Redfin news release, March 3) The National Low Income Housing Coalition estimates there is a shortage of 7 million affordable and available rental homes in the United States, while a Rosen Consulting Group study reports the underbuilding gap is 5.5 million units. This week’s Senate hearing displayed bipartisan policymaker consensus on the need to increase the supply of affordable housing by expanding the Low-Income Housing Tax Credit (LIHTC) and other tax incentives. (TaxNotes, March 8 and Congressional Research Service, “An Introduction to the Low-Income Housing Tax Credit”) During the hearing, NMHC President Sharon Wilson Géno offered joint testimony that included recommendations to address the affordable housing crisis, including tax policy, regulatory reform, rental assistance, and development incentives. (NHMC News | Video of Géno’s remarks and Written testimony, March 7) Senate Bills Senate Finance Committee Chairman Ron Wyden (D-OR), above, noted his support for the Affordable Housing Credit Improvement Act (AHCI), the Neighborhood Homes Investment Act, and the reintroduction of the Decent, Affordable, Safe Housing for All (DASH) Act in his opening comments. Wyden’s DASH Act would strengthen the LIHTC and offer a new Middle-Income Housing Tax Credit (MIHTC) that would provide a tax credit to developers who house tenants between 60 and 100% of the area's median income. (DASH Act Text | Bill Summary | Section-by-section) The AHCI would expand the pool of tax credits allocated to states for new affordable housing, make it easier to combine LIHTC with other sources of capital like private activity bonds, and facilitate LIHTC rehab projects. Wyden added in his opening comments, “Members of Congress also need to keep pushing state and local authorities to cut back on the thicket of zoning rules that get in the way of building the housing Americans need.” The Roundtable has supported these Senate bills since they were introduced last year. Real Estate Roundtable President and CEO Jeffrey DeBoer previously stated, “Overly restrictive land-use and zoning policies, construction cost increases, and labor shortages are deepening our housing challenges, which now extend across the entire country. Government at all levels needs to be part of the solution, not part of the problem." (Roundtable Weekly, July 22, 2022) House Action Reintroduction of similar LIHTC legislation in the House is expected by Reps. Suzan DelBene (D-WA) and Brian Higgins (D-NY). (BGov, March 2) Additionally, House Ways and Means Tax Subcommittee Chair Mike Kelly (R-PA) and committee member Jimmy Panetta (D-CA) on March 1 reintroduced the More Homes on the Market Act, which would double the capital gains exclusion for home sellers to $500,000 for single individuals and $1 million for married couples. (TaxNotes, March 8) Despite widespread congressional support for certain affordable housing legislation, prospects for the bills are uncertain until the national debt ceiling issue is addressed—and a tax legislative package is identified that could include such measures. # # #

Workplace Return

March 3, 2023

Roundtable Weekly

Remote Work’s Negative Impact on Office Market Cited for Plunge in DC Tax Revenue Forecast

Workplace Return

The expansion of remote work in Washington, DC has dramatically reduced tax revenue from office buildings, which poses “a serious long-term risk to the District’s economy and its tax base,” according to a Feb. 28 revenue estimate from the city’s CFO Glen Lee. (Washington Post, March 1) $464M Revenue Drop DC’s tax revenue is projected to plunge nearly a half-billion dollars from 2024-2026 due to remote work’s influence, reduced office transactions, and dropping asset values. (BisNow and DCist, March 1) The quarterly report notes that tax revenue from District commercial properties —particularly large office buildings valued over $50 million—significantly declined in the past fiscal year and was the main reason for a reduction in overall real property tax revenue in FY 2022. The city’s forecast, according to Lee’s letter to District Mayor Muriel Bowser and Council Chairman Phil Mendelson, has also been “revised downward by $81 million in FY 2024, $183 million in FY 2025, and by approximately $200 million in FY 2026.” The report states that although real property revenue from hotels, restaurants and retail properties is expected to continue on a path of recovery, “this growth is expected to be more than offset by a deeper loss in tax revenue from office properties.” The Roundtable View Mayor Bowser this week stated, “With the ongoing impacts of telework and national political uncertainties, we face another significant test to our local economy.” (Bowser Statement, Feb. 28) In January, Bowser reiterated views expressed by The Real Estate Roundtable to President Biden the previous month about the need to get more federal workers back to the workplace and convert underutilized commercial real estate spaces into affordable housing. (Roundtable Weekly, Jan. 6) Roundtable Chair John F. Fish (Chairman and Chief Executive Officer, SUFFOLK), left, and Jeffrey DeBoer, Roundtable President and CEO The letter from Real Estate Roundtable Chair John Fish, above right, (SUFFOLK Chairman & CEO) and President & CEO Jeff DeBoer, left, also urged Biden “to direct federal agencies to enhance their consideration of the impact of agency employee remote working on communities, surrounding small employers, transit systems, local tax bases and other important considerations.” (Roundtable letter, Dec. 12, 2022) City officials in New York, Washington, Chicago, Houston, San Francisco, and Boston have also recently encouraged city workers to return to their downtown offices. (Wall Street Journal, Jan. 24) Economic Consequences The DC revenue forecast also warned, “The population decline observed during the pandemic, coupled with the increasing prevalence of remote work, may lead to demographic shifts and economic repercussions. With fewer commuters, there may be less demand for public transportation and office space, leading to a potential reduction in real estate prices. Policymakers will need to carefully monitor and respond to these changes.” Separately, The Wall Street Journal reported on Feb. 28 that return-to-office rates in Paris and Tokyo have climbed to over 75%, while U.S. office occupancy stands at about half of prepandemic levels, depending on the city. (WSJ, “As Americans Work From Home, Europeans and Asians Head Back to the Office”) The consequences of remote work on CRE—and potential policy solutions—will continue to be a focus of The Roundtable. # # #

Energy Policy

March 3, 2023

Roundtable Weekly

Roundtable Comments on EPA’s Proposed Voluntary Label for Low-Carbon Buildings

Anthony Malkin Energy Policy ENERGY STAR EPA EPAs NextGen Building Label lowcarbon buildings SPAC Sustainability Policy Advisory Committee

The Real Estate Roundtable submitted comments to the U.S. Environmental Protection Agency (EPA) yesterday on the agency’s proposed voluntary label for low-carbon buildings. (Roundtable letter, March 2) Voluntary Building Label EPA’s NextGen building label would expand upon the agency’s successful ENERGY STAR program for assets that attain high levels of energy efficiency. The NextGen label would allow companies to highlight buildings that go beyond top efficiency performance—and further rely on renewable energy use and reduce their greenhouse gas (GHG) emissions. (EPA’s proposal and Roundtable Weekly, Jan. 27) NextGen recognition has great potential for widespread market acceptance, The Roundtable stated in its comments. EPA’s proposed program could create a uniform, voluntary federal guideline to simplify the confusing patchwork of city and state climate-related building mandates that exists across the country. (EPA Policy Brief, Jan. 19; Roundtable Weekly, Jan. 20) EPA staff discussed its NextGen proposal with The Roundtable’s Sustainability Policy Advisory Committee (SPAC) at the “State of the Industry” meeting in January. (SPAC slide presentation) Roundtable Recommendations The Roundtable’s SPAC, chaired by Tony Malkin, above left, (Empire State Realty Trust Chairman President and CEO) and vice-chaired by Ben Myers, right, (BXP Senior Vice President, Sustainability), convened a working group to develop the comments submitted to EPA. The Roundtable stated that NextGen recognition criteria “must be grounded in financial performance that offer building owners reasonable returns on their investments.” The Roundtable’s comments suggested refinements to improve EPA’s proposed components, including: Efficiency: Significant and demonstrated reductions in a building’s energy use should be eligible for the NextGen label (as an alternate, additional criterion to EPA’s proposal that only ENERGY STAR certified buildings could qualify). Renewable Energy: The NextGen proposal would require that 30% of a building’s energy use must derive from renewables. The Roundtable recommends that the level should start at 20% and adjust over time to reflect the changing status of the electric grid as it decarbonizes through increased reliance on solar, wind, and other clean power sources. GHG Reductions: The Roundtable supports EPA’s proposal for a GHG “intensity target” that reflects a building’s unique weather conditions by a factor known as heating degree days (HDD). The Roundtable worked closely with EPA in the pre-pandemic era to consider HDD as a key variable in the underlying ENERGY STAR building score process. (Roundtable Weekly, July 19, 2019) Renewable Energy Certificates (RECs): The Roundtable explained that voluntary NextGen recognition can provide much-needed guidance on corporate accounting for REC purchases and enhance credible claims on the environmental benefits from offsite clean power procurement. The Roundtable further advised EPA that it should conduct a pilot of the low-carbon label with private and public building owners before broad release to U.S. real estate markets. EPA intends to make the NextGen label available in 2024. # # #

Restrictions on Foreign Investment in U.S. Real Estate

March 2, 2023

Policy Comment Letter

Roundtable and Coalition of 14 Real Estate Industry Groups Urge Congressional Tax Committees to Withdraw FIRPTA “Look-Through” Proposal

FIRPTA, Foreign Investment, Foreign Investment in Real Property Tax Act, LookThrough Rule FIRPTA, REITs,

EPA’s ENERGY STAR Certification for Buildings

March 2, 2023

Policy Comment Letter

Roundtable Comments on EPA’s Proposed Voluntary Label for Low-Carbon Buildings

ENERGY STAR, EPA, EPAs NextGen Building Label, lowcarbon buildings,

Restrictions on Foreign Investment in U.S. Real Estate

February 27, 2023

Policy Comment Letter

Roundtable and 5 Business Groups Urge Treasury Department to Withdraw Proposed FIRPTA “Look-Through” Rule

FIRPTA, Foreign Investment in Real Property Tax Act, LookThrough Rule FIRPTA,

Workplace Return

February 24, 2023

Roundtable Weekly

New Study Forecasts Remote Work Will Restructure Office Sector

Workplace Return

The profound impact of remote work on the office sector—and the resulting negative consequences for municipal tax revenues—were the focus of reports this week on current marketplace pressures and long-term office forecasts. Office VacancyA weak return-to-office rate for employees working under hybrid arrangements, combined with rising interest rates and asset value pressures, have led to increased office vacancy rates and loan defaults in many cities, according to a Feb. 21 Wall Street Journal report.Roundtable Board Member Scott Rechler (Chairman & CEO, RXR) is quoted by the Journal on how the office sector may eventually emerge from the current cycle. “There’s a transition period that takes time. You have to cross the chasm into the new regime,” Rechler said. (WSJ, “Office Landlord Defaults Are Escalating as Lenders Brace for More Distress”)A Feb. 22 Cushman & Wakefield report forecasts that the overall level of office vacancy by 2030 will be 55% higher than prior to the pandemic (Q4 2019)—a trend that could be countered by repositioning and repurposing current space usage in coordination with public-private efforts at the local, state, and federal levels. (C&W’s “Obsolesence Equals Opportunity” and Fortune, Feb. 22)The report also states that as much as 25% of all U.S. office space is “growing increasingly undesirable and will need to be reimagined and made relevant for the future,”—and that approximately 60% of all current office stock is “facing competitive obsolescence.” (BisNow, Feb. 23)The Cushman & Wakefield report concludes, “Eventually, the remote working dynamic will flow completely through the marketplace as pre-pandemic leases expire and as firms shed the space to meet new-era, hybrid work requirements.”The Roundtable ViewThe Real Estate Roundtable’s Q1 Economic Sentiment Index released last week shows that Class B office properties are struggling, asset values have fallen year-over-year, and availability of debt and equity capital have declined.Roundtable President and CEO Jeffrey DeBoer, above, said, “Fundamentally, our Q1 index illustrates that the trends accelerated by the pandemic have led to mixed performances across asset classes. In the office sector, remote work policies, concerns over crime and transportation are driving record-high vacancy rates throughout the country, hurting city budgets and small businesses.” (Roundtable news release, Feb. 17)DeBoer added, “Policymakers should emphasize the need to return to the workplace while considering other innovative solutions such as legislation to convert underutilized offices to housing.” (Roundtable Weekly, Feb. 17)DeBoer and Roundtable Chairman John Fish (Chairman & CEO, SUFFOLK) submitted comments last Dec. to President Biden encouraging support for legislation that could help facilitate “the increased conversion of underutilized office and other commercial real estate to much-needed housing.” (Roundtable Weekly, Dec. 16, 2022)The Roundtable’s letter to Biden emphasized that work-from-home policies are damaging the economy, cities, and communities. “We are concerned that certain Administration policy guidance is encouraging federal agencies to adopt permanent work-from-home policies for federal employees and thereby actually magnifying negative economic and social consequences for cities,” the letter stated. Tax Incentives & Remote Work Private companies may be motivated to enforce stronger employee return-to-office policies if they wish to qualify for city and state tax incentive agreements.Provisions built into some existing municipality agreements were designed to ensure that private sector jobs would boost local revenue from income, sales and property taxes, and bolster downtown economies. (Bloomberg, Feb. 21) The Bloomberg report offers several examples of how state and city officials are reevaluating current incentive agreements and designing new ones that detail the scope of employee location requirements for companies to qualify for tax breaks. # # #

Tax Policy

February 24, 2023

Roundtable Weekly

House Republicans Reintroduce Bill to Make TCJA Deductions and SALT Cap Permanent

SALT Tax Policy TCJA

Tax provisions affecting individuals and small businesses originally enacted as part of the Tax Cuts and Jobs Act (TCJA) of 2017—along with the state and local tax (SALT) deduction cap—would be made permanent under legislation reintroduced this month by House Ways and Means Committee Vice Chairman Vern Buchanan (R-FL), above. (The Bond Buyer, Feb. 13 and Legislative Text)The TCJA Permanency Act Buchanan’s bill (H.R.976) includes a Roundtable-supported provision to make permanent the 20 percent deduction for qualified pass-through business income (Section 199A). The legislation would also permanently lower tax rates for individuals and families and maintain the higher standard deduction.There are currently 83 co-sponsors of The TCJA Permanency Act. Buchanan has led five of the six Ways and Means Subcommittees and currently sits on the Joint Committee on Taxation, a small group of the most senior tax policy writers in Congress. (Buchanan news release, Feb. 13)Without Congressional action, 23 different provisions of the 2017 Republican tax law are set to expire after 2025, including the SALT deduction cap. Buchanan originally filed legislation to make the TCJA cuts permanent last September during the Democratic-controlled 117th Congress.Buchanan stated that funding for the Federal Aviation Administration could be a legislative vehicle to attach the TCJA bill, since no major standalone tax bills are expected this year. (BGov, Feb. 23)SALT Caucus RelaunchedMore than 20 members of the House relaunched the SALT Caucus this month as part of their push to repeal the $10,000 cap limit on the federal deduction for state and local taxes. (News conference video, Feb. 8 and Tax Notes, Feb. 9)The cap is scheduled to sunset after 2025, but SALT caucus members want relief sooner while pledging to fight attempts to extend the cap. (Rep. Gottheimer news release, Feb. 9)“I like the odds of having a bunch of new Republicans from states that need to restore SALT," said SALT Caucus Co-Chair Josh Gottheimer (D-NJ). “So if you want to talk, this is the caucus to talk to to get this done, to restore SALT and make life more affordable.” (Roll Call, Feb. 8)More than 30 states and local jurisdictions have enacted a SALT workaround for pass-through businesses, S-corporations, and some LLCs. (CNBC video Feb. 13)# # #

Cybersecurity

February 24, 2023

Roundtable Weekly

Senate Bill Introduced to Require Federal Guidance on Cybersecurity Insurance

Cyber Risks Cybersecurity Homeland Security

Federal guidance on cyber insurance policies is the focus of a new bipartisan Senate bill introduced on Feb. 21 that aims to protect businesses and consumers against cyberattacks. (PoliticoPro, Feb. 21) Cyber Issues The Insure Cybersecurity Act will direct the National Telecommunications and Information Administration (NTIA) to mitigate digital risk by developing recommendations for issuers, agents, brokers, and customers to improve communication over cybersecurity insurance coverage levels. Co-sponsored by Sens. John Hickenlooper (D-CO) and Shelley Moore Capito (R-WV), the bill also directs a NTIA task force to develop policy recommendations relating to ransomware or ransom payments, and the “terminology used in policies to include or exclude losses” due to cyber terrorism or acts of war. Hickenlooper is the new chair of the Commerce Committee’s Subcommittee on Consumer Protection, Product Safety, and Data Security. A 2021 Government Accountability Office report found that ambiguity in policy language can result in misunderstandings and litigation between issuers and policyholders—and underestimations of coverage needed to protect against cyber risks. The Roundtable’s Homeland Security Task Force continues working with the Real Estate Information Sharing and Analysis Center (RE-ISAC), federal officials, and real estate companies about threats to the business cyber environment with the aim of mitigating cyber intrusions. # # #

Restrictions on Foreign Investment in U.S. Real Estate

February 23, 2023

Policy Comment Letter

Roundtable and Industry Coalition Request Leadership of Tax Committees to Oppose FIRPTA “Look-Through” Proposal

FIRPTA, LookThrough Rule FIRPTA, Tax Policy,

RER Quarterly Sentiment Index

February 17, 2023

Press Release

News Release: While Uncertainty Remains, Commercial Real Estate Executives Are Optimistic About Future Market Conditions

Interest Rates Quarterly Sentiment Index

(WASHINGTON, D.C.) — The Real Estate Roundtable’s Q1 Economic Sentiment Index reports that industry executives, while optimistic about the future, remain uncertain about current market conditions, citing inflation, rising interest rates, and supply chain disruptions as concerns. However, executives also express that perceptions and outlooks differ across asset classes, as some remain strong and others show concerns. Roundtable President and CEO Jeffrey DeBoer said, “Fundamentally, our Q1 index illustrates that the trends accelerated by the pandemic have led to mixed performances across asset classes. Multifamily and industrial assets have maintained steady growth due to increased housing demand and supply chain needs, while hospitality and student housing are regaining momentum. But in the office sector, remote work policies, concerns over crime and transportation are driving record-high vacancy rates throughout the country, hurting city budgets and small businesses.” “Looking forward, industry leaders are anticipating the landscape to improve throughout the year, despite recent declines in asset values and the decreased availability of debt and equity capital compared to a year ago. Policymakers should emphasize the need to return to the workplace while considering other innovative solutions such as legislation to convert underutilized offices to housing to entrench this optimism, create jobs, spur economic activity, and increase housing supply and tax revenue,” DeBoer added. The Roundtable’s Economic Sentiment Index—a measure of senior executives’ confidence and expectations about the commercial real estate market environment—is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive. The Q1 Sentiment Index topline findings include: The Q1 2023 Real Estate Roundtable Sentiment Index registered an overall score of 44, an increase of five points from the previous quarter. The Current Index registered at 31, a two-point increase from Q4 2022, and the Future Index posted a score of 58 points, an increase of ten points from the previous quarter. Several survey respondents acknowledged the dangers of generalizing trends across the commercial real estate industry as the disparities between asset classes grow; multifamily and industrial continue to attract interest, hospitality and student housing are beginning to bounce back, meanwhile Class B office is struggling. Nearly all survey participants (93%) expressed that asset values have fallen year-over-year. That said, conversations with industry leaders suggest that the market is still in a period of price discovery. With low transaction volume and a limited supply of debt capital, there is lingering uncertainty as to where asset prices will ultimately land. Survey participants overwhelmingly indicated that the availability of debt and equity capital is worse today compared to one year ago (93% and 82% respectfully). However, over half of participants expect the capital markets to improve over the next 12 months. Data for the Q1 survey was gathered in January by Chicago-based Ferguson Partners on The Roundtable’s behalf. See the full Q1 report. The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy # # #

Equity, Diversity, and Inclusion

February 17, 2023

Roundtable Weekly

Roundtable and Coalition Partners Launch Industry-Wide Initiative to Advance “Supplier Diversity” in Real Estate

Equity Diversity and Inclusion EDI Jeff Blau MWBEs Statement Jeffrey DeBoer Supplier Diversity The Commercial Real Estate Diverse Supplier Consortium CREDS

The Real Estate Roundtable and six national real estate trade associations this week announced a first-of-its-kind alliance that aims to foster supplier diversity throughout the industry. (News release, Feb. 14) The Commercial Real Estate Diverse Supplier (CREDS) Consortium The Roundtable is joined by CREW Network, ICSC, Mortgage Bankers Association, NAIOP, Nareit, and the National Multifamily Housing Council in the CREDS Consortium. The CREDS Consortium aims to improve and accelerate opportunities for “MWBEs”—shorthand for firms owned by minorities, women, veterans, LGBTQ+ persons, and persons with disabilities – in the chain of vendors, service providers, and other suppliers that support the real estate industry. (CREDS Frequently Asked Questions) The CREDS Consortium has initiated a pilot program with SupplierGATEWAY—a leading supplier management software platform and minority-owned firm that automates and simplifies supplier and vendor management. (Roundtable Weekly, Feb. 10) SupplierGATEWAY provides software tools and a robust vendor database that allows real estate companies to track, report, and procure services and materials from MWBEs. Members of the CREDS associations can subscribe to SupplierGATEWAY’s platform at discounted rates through the end of 2024. Upon this week’s CREDS Consortium launch, Real Estate Roundtable board member and chair of its Equity, Diversity, and Inclusion Committee, Jeff T. Blau (CEO, Related Companies), said, “Diversifying the supply chain in real estate must be a collective effort – and I am proud to be a part of this deeply impactful program. This vital work will help us lift up MWBEs and provide the industry with real tools to connect with these businesses and track spending. With partners like my fellow Roundtable board member, Ken McIntyre (CEO, Real Estate Executive Council) and the RER staff, together, we are on the road to expanding opportunity across the industry.” Real Estate Roundtable President and CEO Jeffrey DeBoer said, “Owners, developers, and financiers of commercial and multifamily real estate are committed to help minority, women, and other historically under-represented entrepreneurs prosper in our great industry.” “The CREDS Consortium can help our members realize their intentions to advance economic opportunities across the vast and varied supply chain that serves real estate, makes our buildings productive, and strengthens the fabric of our communities,” DeBoer added. DEI and ESG Goals SupplierGATEWAY tools that measure and track MWBE procurement spending can support companies’ efforts to advance environmental social and governance (ESG) and diversity, equity, and inclusion (DEI) goals. Hiring companies can also post their purchase orders and other contracting opportunities through the CREDS portal to be matched with potentially qualified MWBE firms. CREDS associations’ members can subscribe—at a discounted price—to SupplierGATEWAY’s vendor management software and a comprehensive database of more than 1 million MWBE suppliers through the Consortium’s portal page. SupplierGATEWAY Founder and CEO Ade Solaru said, “Our partnership with the CREDS Consortium is an important component of our mission to generate meaningful economic impact at scale for our customers. Each member of the CREDS associations can now create meaningful social impact at the local level without sacrificing efficiency, cost or risk.” Next Steps The CREDS Consortium also hopes to gain insights from the pilot program about supplier diversity trends across the commercial real estate industry to strengthen the program in the future. Learn more about the CREDS Consortium pilot program. Interested companies can contact Julian So ( julian@suppliergateway.com) to schedule a demo of the system. More information on the initiative can also be provided by Roundtable Senior Vice President and Counsel, Duane Desiderio, and other points of contact listed at the end of the CREDS Consortium’s “ Frequently Asked Questions” document. # # #

Debt Ceiling

February 17, 2023

Roundtable Weekly

Congressional Budget Office Issues Warning on Debt Limit

This week, the nonpartisan Congressional Budget Office (CBO) reported that the government would exhaust its ability to borrow using extraordinary measures between July and September if Congress fails to raise the $31.4 trillion debt limit. (CBO, Federal Debt and the Statutory Limit, Feb. 15). (Washington Post, Jan. 15)Looming StandoffWhen the U.S. reached the current debt limit in January, Treasury Secretary Janet Yellen notified congressional leaders of the implementation of so-called “extraordinary measures” to avoid a default, such as suspending the reinvestment of federal employees’ retirement plans. (Roundtable Weekly, Jan.13) (Yellen letter, Jan. 13)While the CBO noted these measures are expected to last until at least July, it also highlighted the difficulty in determining an exact date of default. The projected exhaustion date is uncertain, CBO notes, because the timing and amount of revenue collections and outlays over the intervening months could differ from current projections. (The Hill, Feb. 15)Thus far, discussions between the Republican-led House, Democratic Senate, and Administration have generated little, if any, progress towards a resolution. The new warning from the nonpartisan CBO reinforces the urgency for congressional leaders to reach an agreement to avoid a default. (Politico, Jan.15)Roundtable Call-to-ActionIn January, Real Estate Roundtable Chair John Fish (Chairman and CEO, SUFFOLK) and President and CEO Jeffrey DeBoer called on Roundtable members to proactively reach out to federal lawmakers to urge that they act expeditiously to raise the debt ceiling. “We now believe the risk of a default on the federal debt in 2023 is a real and meaningful concern that must not be taken lightly.” (Roundtable Weekly, Jan. 20)“Some threats to the U.S. economy are unavoidable, others are ones of our own making and entirely unnecessary. The potential for a default on the federal debt is a needless and inexcusable risk with potentially dire consequences for U.S. real estate, workers and retirees, and the entire economy,” said DeBoer. “The full faith and credit of the United States government should not be open to negotiation.” Roundtable leaders continue to strongly encourage members to contact policymakers in Congress and the White House and appeal to them to raise the debt ceiling soon.# # #

Q1 Sentiment Index

February 17, 2023

Roundtable Weekly

While Uncertainty Remains, Commercial Real Estate Executives Are Optimistic About Future Market Conditions

Interest Rates Quarterly Sentiment Index

The Real Estate Roundtable’s Q1 Economic Sentiment Index reports that industry executives, while optimistic about the future, remain uncertain about current market conditions, citing inflation, rising interest rates, and supply chain disruptions as concerns. However, executives also express that perceptions and outlooks differ across asset classes, as some remain strong and others show concerns.Roundtable President and CEO Jeffrey DeBoer said, “Fundamentally, our Q1 index illustrates that the trends accelerated by the pandemic have led to mixed performances across asset classes. Multifamily and industrial assets have maintained steady growth due to increased housing demand and supply chain needs, while hospitality and student housing are regaining momentum. But in the office sector, remote work policies, concerns over crime and transportation are driving record-high vacancy rates throughout the country, hurting city budgets and small businesses.” “Looking forward, industry leaders are anticipating the landscape to improve throughout the year, despite recent declines in asset values and the decreased availability of debt and equity capital compared to a year ago. Policymakers should emphasize the need to return to the workplace while considering other innovative solutions such as legislation to convert underutilized offices to housing to entrench this optimism, create jobs, spur economic activity, and increase housing supply and tax revenue,” DeBoer added.The Roundtable’s Economic Sentiment Index—a measure of senior executives’ confidence and expectations about the commercial real estate market environment—is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive. Top Line FindingsThe Q1 2023 Real Estate Roundtable Sentiment Index registered an overall score of 44, an increase of five points from the previous quarter. The Current Index registered at 31, a two-point increase from Q4 2022, and the Future Index posted a score of 58 points, an increase of ten points from the previous quarter. Several survey respondents acknowledged the dangers of generalizing trends across the commercial real estate industry as the disparities between asset classes grow; multifamily and industrial continue to attract interest, hospitality and student housing are beginning to bounce back, meanwhile Class B office is struggling. Nearly all survey participants (93%) expressed that asset values have fallen year-over-year. That said, conversations with industry leaders suggest that the market is still in a period of price discovery. With low transaction volume and a limited supply of debt capital, there is lingering uncertainty as to where asset prices will ultimately land. Survey participants overwhelmingly indicated that the availability of debt and equity capital is worse today compared to one year ago (93% and 82% respectfully). However, over half of participants expect the capital markets landscape to improve over the next 12 months. Data for the Q1 survey was gathered in January by Chicago-based Ferguson Partners on The Roundtable’s behalf. See the full Q1 report. # # #

Equity, Diversity, and Inclusion

February 14, 2023

Press Release

The Real Estate Roundtable and Partner Real Estate Associations Join Together for the First Time to Expand Supplier Diversity Opportunities

Equity Diversity and Inclusion EDI Supplier Diversity The Commercial Real Estate Diverse Supplier Consortium CREDS

The Commercial Real Estate Diverse Supplier (CREDS) Consortium is a first-of-its-kind coalition to provide more opportunities for minority- and women-owned businesses in the industry’s supply chain. Washington, D.C. — Today, an industry-wide group of seven real estate trade associations announced a first-of-its-kind alliance to foster supplier diversity in real estate. The Commercial Real Estate Diverse Supplier (CREDS) Consortium aims to expand economic opportunities for businesses owned by minority- and women-owned businesses (MWBEs) in the chain of providers that supply the real estate industry. In addition to The Real Estate Roundtable, CREDS Consortium associations include CREW Network, ICSC, Mortgage Bankers Association, NAIOP, Nareit and the National Multifamily Housing Council. CREDS Consortium associations will highlight tools that their members can use to identify, track, report, and procure products and services from MWBEs and companies owned by veterans, LGBTQ+ persons, and persons with a disability. The Real Estate Roundtable’s President and CEO, Jeffrey DeBoer, said, “Owners, developers, and financiers of commercial and multifamily real estate are committed to help minority, women, and other historically under-represented entrepreneurs prosper in our great industry. The CREDS Consortium can help our members realize their intentions to advance economic opportunities across the vast and varied supply chain that serves real estate, makes our buildings productive, and strengthens the fabric of our communities.” The CREDS Consortium has launched a two-year pilot program that will run through the end of 2024 with SupplierGATEWAY, a leading supplier management software platform and minority-owned firm that automates and simplifies supplier and vendor management. SupplierGATEWAY's products include supplier sourcing, registration, risk management, compliance, and management—and provide support for corporate social responsibility, diversity, and inclusion goals. Members of the CREDS associations can subscribe—at a discounted price—to SupplierGATEWAY's software platform to search for, connect with, and potentially hire MWBEs as contractors, service providers, vendors, and joint venture partners. CREDS associations’ subscribing members can access the vendor management software and a comprehensive database of MWBE suppliers through the Consortium’s portal page, hosted by SupplierGATEWAY. Hiring companies can also post their purchase orders and other contracting opportunities through the CREDS portal. Tools available on the platform that measure and track MWBE procurement spending will support companies that intend to advance environmental social, and governance (ESG) and diversity, equity, and inclusion (DEI) goals. During the pilot program, the Consortium also hopes to gain broad insights into supplier diversity trends across the commercial real estate industry. Visit Supplier Gateway to learn more about the CREDS Consortium pilot program. An FAQ document can be found here. What CREDS Consortium partners are saying: Wendy Mann, CEO, CREW Network “As a global organization focused on accelerating success for all women in commercial real estate, CREW Network supports this partnership and initiative as an important business strategy to elevate ESG and DEI and create a more equitable industry for all. Women- and minority-owned businesses are a driving force behind economic growth and bringing this diverse talent to the industry is a business imperative. Companies that increase their diverse spend also see an increase in innovation and market share. It’s a win-win.” Tom McGee, ICSC President & CEO “ICSC is committed to advancing diversity, equity and inclusion in the Marketplaces Industry and giving our members ways to identify and source MWBEs is one way we can do this. The CREDS Consortium helps meet the growing demand for diversity in service providers and offers our members direct access to the tools and resources they need to support their own DEI goals. We are proud to be a founding member of the Consortium and look forward to working closely with the partner organizations to further this important initiative.” Bob Broeksmit, CMB, President and CEO of the Mortgage Bankers Association “The Commercial Real Estate Diverse Supplier Consortium is a great resource for expanding DEI and ESG opportunities in the real estate finance industry. Our members will benefit from the consortium’s work to identify minority- and women-owned suppliers that provide essential products and services. MBA and its members are dedicated to supporting and promoting supplier diversity.” Marc Selvitelli, CAE, NAIOP, the Commercial Real Estate Development Association “NAIOP is proud to be a founding member of this important initiative. By working together, we believe this powerful alliance of real estate associations can propel our member companies’ success in achieving their important ESG goals. Facilitating access to a minority- and women-owned supplier database is an important first step in creating future opportunities between diverse vendors and developers and owners of commercial real estate.” Steven A. Wechsler, President and CEO, Nareit “Increasing the use of diverse service providers is an industry-wide priority that requires an industry-wide approach, which is why we are proud to be a founding member of the CREDS Consortium. The CREDS-SupplierGATEWAY partnership will enable Nareit’s members to leverage existing software and tools to more quickly increase diversity and inclusivity in their respective supply chains.” Sharon Wilson Géno, President, National Multifamily Housing Council “As a founding member of the Consortium, NMHC proudly continues our longstanding commitment to DEI as a business imperative that drives innovation and success. NMHC knows that connecting more buyers with more sellers, and measuring those connections, are essential steps toward a more robust market that benefits both multifamily firms and MBWE partners that help power the industry. As an alliance, the Commercial Real Estate Diverse Supplier (CREDS) Consortium can amplify our efforts to strengthen industry access for diverse suppliers, and support the ESG and DEI goals of our members.” Ade Solaru, Founder and CEO, SupplierGATEWAY “Our partnership with the CREDS Consortium is an important component of our mission to generate meaningful economic impact at scale for our customers. Each member of the CREDS associations can now create meaningful social impact at the local level without sacrificing efficiency, cost or risk.” About The Real Estate Roundtable The Real Estate Roundtable brings together leaders of the nation’s top publicly held and privately-owned real estate ownership, development, lending, and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy. # # #

Equity, Diversity, and Inclusion

February 10, 2023

Roundtable Weekly

“Supplier Diversity” Platform Available to Roundtable Members

Equity Diversity and Inclusion EDI MWBEs Supplier Diversity The Commercial Real Estate Diverse Supplier Consortium CREDS

Real Estate companies interested in providing more economic opportunities to businesses owned by minorities, women, veterans and other under-represented groups can participate in a national “supplier diversity” program initiated by The Roundtable in coalition with allied trade associations. (Supplier Diversity's FAQ) SupplierGATEWAY Pilot Program A leading vendor management company, SupplierGATEWAY, has joined The Roundtable and six other national organizations in a pilot program that runs through the end of 2024. The pilot effort provides the software, database, and tracking tools to real estate companies with an interest in hiring small businesses and other entrepreneurs that have historically lacked fair and equal access to opportunities in the industry’s supply chain. “MWBEs”—shorthand for firms owned by minorities, women, veterans, LGBTQ+ persons, and persons with disabilities—can register with SupplierGATEWAY’s comprehensive online database. The database currently includes approximately one million MWBE “suppliers”— including consultants, contractors, building trades, service providers, joint venture partners, vendors and other enterprises. MWBE developers, lenders, and capital providers can also register to be included in the database. (Supplier Diversity's FAQ) Hiring companies can track their discretionary procurement spending on MWBEs by subscribing to the database, vendor-matching software, and budget analysis tools at the discounted rate of $10,000 for 12 months. SupplierGATEWAY has offered this reduced rate to members of The Roundtable and our coalition partners through the pilot’s duration. Participation in the program may assist real estate companies seeking to advance Environmental, Social, and Governance (ESG) and Diversity, Equity, and Inclusion (DEI) goals. Industry Coalition Launch Imminent The SupplierGATEWAY pilot program is a unique industry-wide initiative of the Commercial Real Estate Diverse Supplier (CREDS) Consortium, which includes The Roundtable and six inaugural association partners. An announcement of the CREDS Consortium’s formal launch is imminent. Points of Contact Roundtable members interested in subscribing to the SupplierGATEWAY platform should first receive a demo of the system by contacting Julian So at julian@suppliergateway.com. Roundtable Senior Vice President and Counsel, Duane J. Desiderio (ddesiderio@rer.org), can also provide more information. (Supplier Diversity FAQ document) Advancing supplier diversity goals across the CRE industry has been a priority of The Roundtable’s Diversity, Equity, and Inclusion Committee, chaired by Roundtable Board Member Jeff T. Blau, (CEO, Related Companies). Roundtable members and their key staff interested in joining the DEI Committee should contact Michelle Reid, Director of Membership Services (mreid@rer.org). # # #

CRE and the Economy

February 10, 2023

Roundtable Weekly

Commercial Real Estate a Focus of Fed Loan Officer Survey and Bank Stress Test Plans

CRE Trends The Fed

This week, commercial real estate was a prominent focus of the Federal Reserve’s quarterly senior loan officer opinion survey and announcement about the hypothetical scenarios that 23 banks will be stress-tested against in 2023. (Fed Survey, Feb. 6 and Stress Test, Feb. 9)2022 Survey & 2023 Stress TestOn Monday, the Fed released its January 2023 Senior Loan Officer Opinion Survey on Bank Lending Practices, which reported tighter standards and weaker demand for all commercial real estate loan categories for the fourth quarter of 2022. The survey also reported that for 2023, banks expect lending standards will tighten, demand will weaken, and loan quality will deteriorate across all loan types. (Reuters, Feb. 6 | American Banker, Feb. 7 | GlobeSt, Feb. 9)On Thursday, the Fed released the hypothetical scenarios for its 2023 annual stress test, which measures and evaluates the ability of large banks to continue lending to businesses and households during a recession or weakened financial conditions.The scenarios will include a severe global recession, heightened stress in both commercial and residential real estate markets, and a new, unspecified "exploratory market shock." The new component will not count against capital requirements affected by the tests, the Fed said. (BGov, Feb. 10)The Fed detailed additional key features of the “severely adverse scenario” by instructing banks, “Declines in commercial real estate prices should be assumed to be concentrated in properties most at risk of a sustained drop in income and asset values: offices that may be affected by remote work or hospitality sectors that continue to be affected by reduced business travel. Declines in U.S. house prices and U.S. commercial real estate prices should also be assumed to be representative of … those that experienced rapid price gains before the pandemic and were significantly affected by the event.” (pdf of instructions for 2023 Federal Reserve Stress Test Scenarios)Delinquency Rate & CRE OutlookTrepp’s CMBS Research reported this week that that the overall US CMBS special servicing rate dropped in January 2023 six basis points to 5.11%—down for the second month in a row after four consecutive increases from August to November. By comparison, the rate one year ago was 6.33% and six months registered at 4.79%. (Trepp, Feb. 8)The office sector saw a 16-basis point increase in the special servicing rate in January, and it led all new special servicing transfers. An industry panel discussion on Feb. 6 focused on Cutting Through Uncertainty: 2023 Economic & CRE Outlook. The on-demand webinar is moderated by Roundtable Member Hessam Nadji (President & CEO, Marcus & Millichap), who leads a discussion with Moody’s Analytics Chief Economist Mark Zandy, along with Roundtable Members Wendy Mann (CEO, CREW Network), Tom McGee (President and CEO, ICSC) and Marc Selvitelli (President & CEO, NAIOP).This month, The Real Estate Roundtable will release its Q1 Economic Sentiment Survey, which will report on how leading CRE executives view current market conditions and their expectations for the year. # # #

Capital and Credit

February 10, 2023

Roundtable Weekly

SEC Plans Increased Scrutiny of Private Funds With CRE Investments

Capital and Credit SEC

The Securities and Exchange Commission’s (SEC) this week announced its 2023 Examination Priorities, which includes a focus on registered investment advisers (RIAs) who manage “private funds that hold certain hard-to-value investments…with an emphasis on commercial real estate.” (PoliticoPro, Feb. 7) Private Fund Adviser DisclosuresThe SEC reports that more than 5,500 RIAs manage approximately 50,000 private funds with gross assets exceeding $21 trillion. In the past five years, the gross assets of private funds have increased, with retirement funds playing a significant role. The funds are invested through a variety of strategies used by hedge funds, private equity funds, and real estate-related funds, among others. (SEC 2023 Examination Priorities, Feb. 7)The agency recently proposed an expanded set of disclosures by SEC-registered, private fund advisers, which could affect those that manage real estate investments. (SEC Feb. 9, 2022 News Release | Proposed Rule | Fact Sheet)The Real Estate Roundtable submitted comments last April on how the proposed SEC rules would increase compliance costs, decrease returns for all private fund investors and drive smaller fund sponsors away from the market. (Roundtable comments to the SEC, April 25, 2022)The Roundtable letter raises concerns that the SEC proposal, if finalized, could hinder real estate capital formation; harm development and improvement of real properties; and curtail essential economic activity that encourages job creation. (Roundtable Weekly, April 29, 2022) Credit Rating RiskLast week, the SEC issued a separate report that identified commercial real estate credit ratings as a potential risk for consideration in assessments by nationally recognized statistical rating organizations (NRSROs). (SEC Staff Report, Feb. 2023)According to the agency’s NSRO report, “After being adversely affected by COVID-19, the single borrower CMBS sector experienced an uneven recovery during the first half of 2021 as compared to the first half of 2020, with properties such as lodging and retail lagging. The (SEC) Staff identified potential risks relating to commercial real estate ratings with significant exposure to sectors negatively impacted by COVID-19, and potential non-adherence to methodologies and rating processes.”The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to respond to the SEC’s various proposed regulatory initiatives and proposals affecting CRE with its industry and coalition partners. # # #

In Memoriam

February 10, 2023

Roundtable Weekly

Former Roundtable Chairman Nelson Rising, Industry Leader and Political Activist

In Memoriam

Nelson C. Rising, a trailblazing real estate industry leader who served as chairman of The Real Estate Roundtable (2000 to 2003), and cofounder and chairman of Rising Realty Partners, passed away yesterday. (Los Angeles Times and BusinessWire, Feb. 10)Private and Public Sector Leader“Always a gentleman, Nelson Rising chaired The Real Estate Roundtable for three years,” said Jeffrey DeBoer, Roundtable President and CEO. “Nelson emphasized an issue advocacy system built around solid research, positive approaches to issues and an overall focus on the substantial economic and social benefits that strong real estate markets provide to job creation, healthy communities, and a growing national economy.”DeBoer added, “His strategic policy acumen was especially valuable following 9-11 when Nelson was a key leader in the establishment of a national terrorism insurance program. This hugely important work allowed a stalled real estate capital market to reopen. The Roundtable was honored to have his compassionate friendship and his inspirational leadership. We already miss him deeply and will remember him always.“Mr. Rising was an accomplished developer who built iconic projects in Los Angeles, Chicago, and Mission Bay, the largest mixed-used development in San Francisco history. (CREConnect, Feb. 10)“Some of the biggest buildings in America are standing today because Nelson had a hand in it,” said John Cushman, Chairman, Global Transactions at Cushman & Wakefield, Inc., and a friend of Mr. Rising for over 40 years. “We worked together to bring Downtown LA the Library Tower, Gas Company Tower, Wells Fargo Center, and numerous other projects in California and across the country. He could take confusion and chaos and translate it into common sense and bring people back to the table who were yelling. He was a genius in terms of dealing with people,” added Cushman, who is also a member of The Real Estate Roundtable. (Los Angeles Times and BusinessWire, Feb. 10)Mr. Rising served as Chairman Emeritus of Rising Realty Partners, an environmentally conscious real estate investment and operating company headquartered in Los Angeles. The company owns or manages more than 5 million square feet in buildings in California, Colorado, Nevada, Missouri, and Texas.Previously, he served as President & CEO of MPG Office Trust, Inc., the owner of over half of the institution-quality office space in downtown Los Angeles. From 1994-2005, Mr. Rising served as Chief Executive Officer of Catellus Development Corporation. During his tenure, he oversaw the company’s successful evolution from a railroad land company to a diversified development company and a real estate investment trust. (Rising Realty Partners)Mr. Rising was also widely known for his influential role in advising elected officials at all levels of government. He is credited with managing the successful mayoral campaigns of the late Tom Bradley, who served for twenty years as Mayor of Los Angeles. Mr. Rising also chaired campaigns for California Governor and U.S. Senate. He also served as a former chair of the Federal Reserve Bank of San Francisco.Mr. Rising received a B.A. with honors in Economics from UCLA on a football scholarship and earned a Juris Doctor from UCLA School of Law, where he served as Managing Editor of the UCLA Law Review. He practiced law at O’Melveny & Myers prior to entering the real estate industry.# # #

EB-5 Investment Program

February 9, 2023

Policy Comment Letter

EB-5 Stakeholder Letter on Sustainment Period

EB5,

Quarterly Sentiment Index

February 8, 2023

Quarterly Sentiment Index

2023 Quarterly Sentiment Index

Quarterly Sentiment Index,

Workplace Return

February 3, 2023

Roundtable Weekly

House Passes Return-to-Office Bill for Federal Workers

Workplace Return

The House of Representatives passed legislation this week requiring all federal agencies to revert to pre-pandemic telework office arrangements and allow employees 30 days to return to their offices. (GovExec, Feb. 1 and The Hill, Feb. 2)SHOW UP ActHouse Oversight Committee Chairman James Comer (R-KY)—the lead sponsor of the Stopping Home Office Work’s Unproductive Problems (SHOW UP) Act—said it is urgent that federal employees get back to their offices. (Video of Comer’s House floor statement and news release, Feb. 1). Rep. Comer also noted that the cost of federal leases in Washington, D.C. is also motivating return-to-office calls for government employees. “If we’re not going to use those buildings for federal workers, then the federal government may look at doing something different with those buildings.” (Federal News Network, Jan. 30 and Roundtable Weekly, Jan. 6)CoStar’s reporting on the bill’s passage noted The Real Estate Roundtable’s December letter to President Biden, which cited the negative impact of underutilized office space on local communities. (CoStar, Feb. 2 and Roundtable letter, Dec. 12)The Roundtable comments also encouraged President Biden to support legislation that could help facilitate “the increased conversion of underutilized office and other commercial real estate to much-needed housing.” (Roundtable Weekly, Dec. 16)Office-to-Apartment ConversionsMeanwhile, New York City Mayor Eric Adams plans to encourage the conversion of aging office buildings to apartments by changing zoning restrictions that limit adaptive uses of CRE in a specific swath of Manhattan. (GlobeSt, Jan. 30)Mayor Adams’ efforts to convert outdated office space to other potential uses, especially housing, are based on a recent task force report, the New York City Office Adaptive Reuse Study. What’s NextThe Democrat-controlled Senate is unlikely to take action on the House-approved SHOW UP Act. (PoliticoPro, Feb. 1)Meanwhile, the White House announced this week that COVID-19 emergency declarations will end on May 11. It is unclear how the federal government’s pandemic response shift will impact remote work arrangements for government and private sector employees. (Forbes, Jan. 31 and White House Statement of Administrative Policy, Jan. 30)The Roundtable will continue to focus on return-to-office policies as part of its 2023 policy agenda as remote work continues to take an economic toll on cities and tax bases throughout the nation. # # #

Energy Policy

February 3, 2023

Roundtable Weekly

EPA Invites Comments on Proposed Label for Low-Carbon Buildings

Energy Policy ENERGY STAR EPA

The Environmental Protection Agency (EPA) opened a comment period this week on its proposed ENERGY STAR NextGen certification, a voluntary public-private partnership program that would recognize low-carbon buildings. (EPA’s NextGen webpage)NextGen CriteriaThe proposed NextGen label builds on EPA’s successful ENERGY STAR Commercial Buildings program that recognizes high-performing real estate assets. More than 39,000 buildings have earned EPA’s ENERGY STAR certification to date. EPA discussed its proposal at The Roundtable’s Sustainability Policy Advisory Committee (SPAC) meeting last week in Washington and again on a webinar this past Tuesday. (SPAC slide presentation, Jan. 25 and Roundtable Weekly, Jan. 27) EPA proposes that a building would need to meet three (3) criteria to earn NextGen certification: 1.) Demonstrate High Energy Efficiency Building is ENERGY STAR certified and has a score of “75” or higher on EPA’s rating scale. 2.) Renewable Energy Use Building must obtain at least 30% of the total energy it consumes from renewable sources through any combination of (a) onsite renewable generation, (b) renewable energy certificates (not “offsets”), (c) biofuels or other renewable fuels, or (d) renewable thermal certificates. 3.) Onsite Emissions Target Building must meet a greenhouse gas emissions target unique for its asset class that is also “normalized” by regional weather conditions through a metric known as “heating degree days.” Next StepsComments are due to EPA by March 2. (Comments Submission Form).SPAC has formed a working group to develop The Roundtable’s comment letter. EPA aims to make ENERGY STAR NextGen certification available in early 2024.# # #

Capital and Credit

February 3, 2023

Roundtable Weekly

Office Sector Shows Economic Stress, NAIOP Releases Report on CRE’s Economic Contributions

Capital and Credit CRE Trends

Trends in real estate capital and credit markets were the focus of a joint session of The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) and Research Committee on Jan. 24 during RER’s State of the Industry Meeting in Washington. Market ReportsResearch Committee Co-Chairs Paula Campbell Roberts (KKR), above left, and Spencer Levy (CBRE), right, led a discussion on market conditions and the economic outlook. Their findings suggest that the industry is facing challenges from shifting property fundamentals, rising rates, upward pressure on cap rates, and contracting credit capacity. (Download the slide presentation)Other recent reports support the RECPAC-Research presentation, including one from CoStar that shows tightening credit conditions in the sector. “The office market is showing signs of weakness due to weak demand, driving higher vacancy rates and deteriorating operating performance, as well as challenging economic and capital market conditions,” said Mike Santomassimo, chief financial officer of Wells Fargo. He added that the bank is “… making sure we’re being proactive with our borrowers to make sure we’re thinking way ahead of any maturities or extensions, options that need to get put in place to help manage through it.” (CoStar, Jan. 18)A report from Moody's Analytics suggests that approximately $17 billion worth of mortgage bonds backed by office assets will come due in 2023, compared to $7 billion in 2022 and $4 billion in 2021. Victor Calanog, Moody’s head of commercial real estate economics told The Business Journals that the key issue for today’s office inventory is demand, due to the long-term effect of remote work and initiatives to increase adaptive use. (Washington Business Journal, Jan. 18)The office paradigm shift is analyzed in a market risk assessment study of 11 metropolitan statistical areas released yesterday by Trepp and Compstak. Their findings show that a total of $40.7 billion in loans are scheduled to mature by the end of 2024. In addition to loan statistics, the report reviews leasing trends and headwinds. (Trepp/Compstak, Feb. 2)CRE’s Economic ContributionNAIOP, the Commercial Real Estate Development Association, released a research study on Jan. 26 on the Economic Impacts of Commercial Real Estate for 2022.The report analyzes the combined economic contributions of new commercial building development and the operations of existing commercial buildings in 2022. The NAIOP Research Foundation publication positive impacts on the U.S. economy, including:$2.3 trillion to U.S. gross domestic product (GDP)$831.8 billion in personal earnings15.1 million jobsEconomic Impacts of Commercial Real Estate is authored by Brian Lewandowski, Adam Illig, Michael P. Kercheval, Ph.D., and Richard Wobbekind, Ph.D., at the University of Colorado Boulder Leeds School of Business.# # #

Equity, Diversity, and Inclusion

February 2, 2023

Fact Sheet

Commercial Real Estate Diverse Supplier (CREDS) Consortium — FAQs & Fact Sheet

Equity Diversity and Inclusion EDI, The Commercial Real Estate Diverse Supplier Consortium CREDS,

2023 Roundtable State of the Industry Meeting

January 27, 2023

Roundtable Weekly

Roundtable Members and Leading Policymakers Focus on National Issues Affecting CRE in 118th Congress

The Real Estate Roundtable’s 2023 State of the Industry (SOI) Meeting this week included policy discussions with national lawmakers on issues affecting commercial real estate—including the debt ceiling, affordable housing, tax policy, climate regulations, market conditions, and evolving security threats. A special Roundtable joint committee meeting also analyzed the opportunities presented by the Inflation Reduction Act (IRA) and the ways CRE companies are navigating the law’s clean energy tax incentives. Speakers & Policy Issues Roundtable Chair John Fish (Chairman and CEO, SUFFOLK), right,and Roundtable President and CEO Jeffrey DeBoer, left, launched the meeting, which included the following speakers: House Democratic Leader Hakeem Jeffries (D-NY) Miami Mayor Francis Suarez (R) Sen. Robert Menendez (D-NJ) Sen. Katie Britt (R-AL) Rep. French Hill (R-AR) Former Rep. and Ways and Means Committee Chairman Kevin Brady (R-TX) and former Rep. Stephanie Murphy (D-FL) Roundtable Policy Advisory Committees The Roundtable's policy advisory committees also met on Jan. 24-25 to analyze policy issues with industry experts, policymakers, and their staff, including: Special Joint SPAC-TPAC Session The Roundtable’s Tax and Sustainability Policy Advisory Committees (TPAC and SPAC) jointly met to discuss the practical aspects of employing the IRA’s new clean energy tax credits and deductions, and how the incentives can help finance improvements needed to meet evolving regulatory requirements and investor expectations. [Photo: panel moderators TPAC Vice Chair Catherine Perrenoud (Tax Director, Johnson Management LLC), left, next to Roundtable Board Member and SPAC Chair Anthony Malkin (Chairman and CEO, Empire State Realty Trust)] Research and Real Estate Capital Policy Advisory Committees (RECPAC) Rep. Andy Barr (R-KY), above, shared his insights on capital and credit issues as chairman of the House Financial Services Subcommittee on Financial Institutions and Monetary Policy. Panels on real estate capital markets and debt markets also engaged Roundtable members in wide-ranging discussions on current economic conditions.Tax Policy Advisory Committee (TPAC) Speakers at the TPAC meeting included senior House Ways and Means Committee member Darin LaHood (R-IL), above, a bipartisan panel of senior staff from the congressional tax-writing committees, and the Treasury Department’s attorney advisor for partnership and pass-through tax issues. The policymakers focused on tax and economic policy priorities for the year ahead.Sustainability Policy Advisory Committee (SPAC) SPAC members heard from Environmental Protection Agency (EPA) senior staff on the proposed ENERGY STAR NextGen certification for commercial buildings designed to recognize low-carbon assets, as well as EPA’s Indoor Air Programs. Department of Energy senior staff also provided updates on the Biden administration’s Better Climate Challenge.Homeland Security Task Force (HSTF) HSTF members were briefed on the current threat environment to CRE by Linda Reid (VP, Security Operations, Walt Disney), right, and National Football League Security Chief Cathy Lanier, left, who also serves as vice-chair of CISA’s Commercial Facilities Sector Coordinating Council. Other discussions focused on cyber crime threats, fraudulent lease applications, organized criminal retail theft, and other security challenges facing commercial sector facilities. Next on The Roundtable's FY2023 meeting calendar is the Spring Meeting on April 24-25. This meeting is restricted to Roundtable-level members only. # # #

Workplace Return

January 27, 2023

Roundtable Weekly

Return-To-Office Policies Present National Economic Challenges

Workplace Return

The ongoing negative economic impact of remote work was featured in the Wall Street Journal this week—supported by a private sector study showing more uncertainty lay ahead as office markets adjust to post-pandemic hybrid arrangements for employees. (WSJ, Jan. 24 and CommercialEdge, Jan. 19) Threats to Local Tax Bases Real Estate Roundtable Chair John Fish and President & CEO Jeff DeBoer wrote to President Biden last month about the consequences of federal agencies’ promotion of permanent remote work—and how these actions are harming cities, local tax bases, and small businesses. (Roundtable letter, Dec. 12, 2022) The Roundtable letter also expressed support for legislation that could help facilitate “the increased conversion of underutilized office and other commercial real estate to much-needed housing.” The WSJ article this week cited The Roundtable’s letter as well as District of Columbia Mayor Muriel Bowser's recent calls for President Biden to get more federal workers back to the workplace—and convert underutilized commercial real estate spaces into affordable housing. (Roundtable Weekly, Jan. 6 and ABC News, Jan. 2) City officials in New York, Washington, Chicago, Houston, San Francisco, and Boston have also encouraged city workers to return to their downtown offices. (WSJ, Jan. 24) Uncertainty Ahead Yardi’s CommercialEdge issued its National Office Report this month showing that the U.S. office market closed 2022 with a consistent rise in vacancies & declining sales. The national analysis shows that some firms have become more forceful in bringing workers back into the office, while many have fully committed to hybrid and remote work policies. The report also notes that tenants will likely embrace smaller office footprints in premium locations. CommercialEdge stated, “With offices vacant and housing in short supply across the county, converting offices seems like a logical solution.” Yet without tax incentives and other financial resources from state and local governments, many office conversion projects may not be a priority in a high-interest-rate environment, according to the report. A VTS Office Demand Index (VODI) report shows that, while there is momentum in return-to-office trends, it “seems unlikely” that most employers will revert to pre-pandemic physical workplace arrangements. (GlobeSt, Jan. 26) The real estate industry’s perspective on the major repercussions of remote work, including its threat to municipal tax bases throughout the country, were also the focus of recent articles in GlobeSt on Jan. 26 and Jan. 23. Return-to-office policies by the federal government and cities throughout the nation—and solutions to ease hybrid work’s damaging consequences—will continue to be a focus of The Roundtable’s policy agenda in 2023. # # #

Homeland Security

January 27, 2023

Roundtable Weekly

Treasury Issues Alert on Potential Russian Attempts to Evade Sanctions Through U.S. CRE Investments

Beneficial Ownership Corporate Transparency Act CTA FinCEN Homeland Security

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) warned financial institutions this week about how Russian elites and their proxies may attempt to evade sanctions by exploiting vulnerabilities in the U.S. commercial real estate market. (FinCEN Alert | Bloomberg and Wall Street Journal, Jan. 25) Russian Exploitation Treasury has imposed wide-ranging sanctions on certain Russian elites, their proxies, and others who have provided support for Russia’s brutal war against Ukraine. (Treasury’s Sanctions List Updates) FinCEN Acting Director Himamauli Das said, “Today we are identifying red flags and typologies in commercial real estate transactions that financial institutions can use to remain vigilant in monitoring, detecting, and reporting suspicious activity that may be indicative of sanctions evasion by sanctioned Russia elites, oligarchs and their proxies.” (Treasury news release, Jan. 25) FinCEN’s 11-page alert warns that sanctioned Russian elites and their proxies may pose as CRE investors seeking to evade sanctions by using shell companies, trusts, and pooled investment vehicles, including offshore funds, in order to avoid customer due diligence obligations and beneficial ownership protocols established by financial institutions. The alert also reminds financial institutions involved in loan syndication—including banks, life insurers, and other types of companies regulated by the Bank Secrecy Act—that Section 314(b) of the USA PATRIOT Act provides a safe harbor that offers protections from liability for financial institutions who share information with one another on suspected money laundering or terrorist activities. Questions or comments regarding the alert should be sent to the FinCEN Regulatory Support Section at frc@fincen.gov. The Treasury Department issued a final rule last Sept. that will require millions of companies to report information about their “beneficial owners”—persons who own at least 25% of a company or exert significant authority over it—to FinCEN. (Roundtable Weekly, Sept. 30, 2022 | Final Treasury Rule | Fact Sheet | Wall Street Journal and Bloomberg Law, Sept. 29) # # #

Housing Policy

January 27, 2023

Roundtable Weekly

Real Estate Coalition Raises Concerns About White House Directive for Federal Agencies to Strengthen Tenant Protections

Affordable Housing Housing Low Income Housing Tax Credit LIHTC

A coalition of 12 national real estate organizations raised concerns this week about the Biden administration’s “Blueprint for a Renters Bill of Rights,” which directs federal agencies to strengthen tenant protections. (White House Fact Sheet and Coalition statement, Jan. 25 and GlobeSt, Jan. 26) Industry Response The White House on Wednesday issued the “Blueprint” that includes a set of principles to encourage voluntary private sector actions that increase affordable rental units—and drive action by the federal government, state and local partners on tenant rights enforcement. The administration will also launch an effort in the spring to get local governments and housing providers involved in a "Resident-Centered Housing Challenge." (White House Blueprint for a Renters Bill of Rights and The Washington Post, Jan. 25) The real estate coalition, which includes the National Multifamily Housing Council (NMHC), expressed disappointment that the White House announcement was “solely focused on renter protections, creating potentially duplicative and onerous federal regulations that interfere with state and local laws meant to govern the housing provider and resident relationship.” (Coalition statement, Jan. 25) NMCH also issued a statement that acknowledged the White House action did not include the threat of a national rent control policy—and urged the administration to prioritize implementation of its Housing Supply Action Plan issued last May. “The best renter protection is an abundant supply of housing,” NMHC stated. Affordable Housing Solutions Brick townhouse on Sam Cooper Blvd near Overtone Park in Midtown district of Memphis, Tennessee The administration’s Housing Supply Action Plan includes zoning incentives and government financing to address an estimated shortfall of 7 million units for low-income renters nationwide. It aims to create hundreds of thousands of affordable housing units in the next three years, with the goal of closing the nation’s housing supply shortfall in five years. (Roundtable Weekly, May 20, 2022 | PoliticoPro, May 16, 2022 | National Low Income Housing Coalition, April 2022) On the legislative front, congressional committees showed support last year for the Affordable Housing Credit Improvement Act (S. 1136). The bill (detailed summary here) has not been reintroduced yet in the 118th Congress. The measure would expand the pool of tax credits allocated to states for new affordable housing, make it easier to combine the Low Income Housing Tax Credit (LIHTC) with other sources of capital like private activity bonds, and facilitate LIHTC rehab projects. (National Multi-Housing News, Jan. 16) Real Estate Roundtable President and CEO Jeffrey DeBoer said, “Overly restrictive land-use and zoning policies, construction cost increases, and labor shortages are deepening our housing challenges, which now extend across the entire country. Government at all levels needs to be part of the solution, not part of the problem. The Affordable Housing Credit Improvement Act would be an important step forward.” (Roundtable Weekly, July 22, 2022) The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) has formed an Affordable Housing Working Group, which is working with the Research Committee to develop proposals on expanding the nation’s housing infrastructure. # # #

Debt Ceiling

January 20, 2023

Roundtable Weekly

Roundtable Issues Call-to-Action to Members Concerning the Debt Ceiling

Debt Ceiling

The Real Estate Roundtable yesterday urged its membership—leaders of the nation’s top publicly held and privately owned real estate ownership, development, lending and management firms—to contact federal lawmakers to raise the nation’s debt ceiling. Treasury Secretary Janet Yellen said the U.S. reached the maximum amount it can legally borrow yesterday, and that “extraordinary measures” would allow the country to continue paying its bills, but only until early June. (NPR and Yellen letter to House Speaker Kevin McCarthy, Jan. 19)Call-to-ActionIn the all-member Call-to-Action, Roundtable Chair John Fish (Chairman and CEO, SUFFOLK) and Roundtable President and CEO Jeffrey DeBoer wrote, “We now believe the risk of a default on the federal debt in 2023 is a real and meaningful concern that must not be taken lightly.” Congress has faced this statutory limit on debt 78 times in the past, yet has always acted to increase the debt limit. The note expressed their concern that Congress will face more difficulty in reaching an agreement on the debt ceiling now amid a substantial increase in political acrimony.Today, DeBoer said, “Some threats to the US economy are unavoidable, others are ones of our own making and entirely unnecessary. The potential for a default on the federal debt is a needless and inexcusable risk with potentially dire consequences for U.S. real estate, workers and retirees, and the entire economy. The full faith and credit of the United States government should not be open to negotiation.”Federal Reserve economists believe a prolonged stand-off could cause private interest rates to rise sharply, create liquidity pressures, and severely impair financial markets. “As default risk rises, the impacts will be felt throughout the economy, but especially in borrowing-intensive industries such as real estate,” the Call-to-Action added.The Roundtable note encourages its members to contact both policymakers in Congress and the White House to raise the debt ceiling soon. Policymaking in the 118th Congress and significant challenges such as the debt ceiling will be discussed during The Roundtable’s State of the Industry Meeting next week in Washington, DC.# # #

Workplace Return

January 20, 2023

Roundtable Weekly

Remote Work Continues to Exert Economic Pressure on CRE and Cities as Mayors Explore Options

Workplace Return

As the pandemic-induced rise of remote work has lowered office demand and occupancy rates, building repurposing projects are on the rise—and the nation’s mayors are exploring ways to revitalize their downtowns and damaged tax bases. (Commercial Property Executive, Jan. 16 | CBRE Research, Dec. 2 | New York magazine, Dec. 29)Growing Threat to Municipal Tax BasesThe president of the U.S. Conference of Mayors, Miami Mayor Francis Xavier Suarez, above, will discuss the issue of how cities are responding to the economic impact of hybrid work arrangements during The Real Estate Roundtable’s Jan. 24 business meeting in Washington.This week’s National Conference of Mayors Winter Meeting included a session on “Bringing Life Back to Downtown: Opportunities for Office Conversions” with the Mayors of Hartford, Pittsburgh and Birmingham. Additionally, members of the Ohio Mayors Alliance, a bipartisan group of mayors representing the state’s 30 largest cities, recently issued a report that identified remote work’s economic threat to municipal revenue as among their top concerns for 2023. (Dayton Daily News, Dec. 19)A Jan. 19 editorial in the Washington Post focuses on the national problem of hybrid work for downtown areas and suggests paths to recovery, including the need to speed up permitting, rezoning and easing of restrictions. “Cities must adapt to this new reality or risk a downward spiral of falling commercial property values, lower taxes on those buildings and ghost downtowns that could lead to increased crime and homelessness,” the editorial states.Employees working full-paid days from home increased to about 30 percent from 5 percent before the pandemic, according to a July 21 panel on “Vulnerable Cities Facing Work from Home Realities” from the Volcker Alliance and the Penn Institute for Urban Research.Federal Agencies & Remote WorkFederal government employees were recently urged to return to their agency offices by Washington, D.C. Mayor Muriel Bowser, who called on President Biden to urge more federal workers back to the workplace and convert underutilized commercial real estate spaces into affordable housing. (Roundtable Weekly, Jan. 6)Mayor Bowser’s views reiterated a letter sent on Dec. 12 by The Roundtable to President Joe Biden about the ongoing, harmful economic impacts of widespread remote work on cities, local tax bases, and small businesses—and how work-from-home policies by federal agencies threaten to magnify these negative economic and social consequences. (Roundtable letter | GlobeSt and CoStar, Dec. 15) Legislation introduced in the House of Representatives last week would require all federal agencies to revert to pre-pandemic office arrangements that were in effect on December 31, 2019 and give employees 30 days to return to their offices. [Roundtable Weekly, Jan. 13 and Bill text of the SHOW UP Act (H.R. 139)]Any federal order to mandate government workers back to their offices could be complicated by federal worker labor unions, which support flexible hybrid arrangements. (GlobeSt, Jan. 17 and (TechTarget, Jan. 12)Meanwhile, the Federal Reserve released its “Beige Book” this week, which reports on national economic conditions. The report stated, “Commercial real estate activity slowed slightly, on average, with more notable weakening in the office market.” Additionally, some bankers reported to the Fed that higher borrowing costs had begun to dampen commercial lending. (Beige Book national summary, Jan. 18 and GlobeSt, Jan. 20)# # #

Building Performance Standards - BPS, Climate Policy

January 20, 2023

Roundtable Weekly

Roundtable Comments to EPA on Building Performance Standards, Electrification

Building Electrification Building Emissions Building Performance Standards BPS climate EPA

The Real Estate Roundtable submitted comments this week encouraging the Environmental Protection Agency (EPA) to use its grant authority to foster consistent, practicable, and cost-efficient local building mandates and electrification programs. (Roundtable letter, Jan. 18) Consistency Urged in Building Performance Standards In addition to clean energy tax incentives for the private sector, the Inflation Reduction Act (IRA) devotes billions in grant money for EPA to dole-out to states and cities for greenhouse gas (GHG) reduction programs. [White House Guidebook, Dec. 15] IRA grants could support localities as they develop and enforce building performance standards (BPS) that mandate owners to reduce energy use and emissions. Dozens of BPS laws have emerged in jurisdictions across the United States. (EPA Policy Brief, Jan. 19) (Roundtable Weekly, July 1, 2022) The Roundtable’s Jan. 18 letter urges EPA to use its grant authority to encourage consistency in BPS mandates. A “hodge-podge” of state and local laws complicates compliance by building owners with nationwide real estate portfolios and hinders responsible investment strategies, according to The Roundtable’s letter. The Roundtable’s position is that EPA should not award IRA grants unless state or local recipients ensure their BPS laws offer uniform federal tools, data, and protocols for enforcement and compliance. These federal standards include EPA’s ENERGY STAR Portfolio Manager, its GHG Emissions Calculator, eGRID factors that convert electricity use to GHGs, and metrics already recommended by EPA to support BPS efforts. Tenant Energy Data and “Practicable Electrification” The Roundtable letter also advocates that utilities should be eligible for EPA grants to develop technologies that provide owners of multi-tenant buildings with “whole building” energy data. Owners need data on tenants’ energy use to meet BPS mandates and to attain the IRA’s new tax deduction for building retrofits. (Fact Sheet, updated Jan. 5.) EPA can also devote grant dollars for building electrification “partnerships.” The Roundtable directed EPA to the federal government’s own BPS and NYSERDA’s Empire Building Challenge as paradigms that may accelerate voluntary and cost-effective building electrification scenarios in the private sector. (Roundtable Weekly, Dec. 9, 2022) In addition, The Roundtable letter advocates that grants to help standardize corporate climate reporting should prioritize consistency in accounting for emission benefits from the purchase of Renewable Energy Certificates (RECs), and for embedded carbon in construction materials and building products purchased by real estate owners and developers. IRA tax incentives and grant programs affecting CRE will be among the topics discussed during The Roundtable’s Sustainability Policy Advisory Committee (SPAC) Meeting on Jan. 25 in Washington, D.C., held in conjunction with Jan. 24 State of the Industry meeting. # # #

Climate Risk

January 20, 2023

Roundtable Weekly

Fed’s Climate Risk Assessment Exercise Will Include Impact on Banks’ CRE Portfolios

climate Federal Reserve

The Fed released new details this week about its “pilot climate scenario analysis”—an exploratory exercise that will require six major banks to report by July 31 on how extreme weather event scenarios would impact their operations, investments and real estate portfolios. (Reuters, Jan. 17 and Politico PowerSwitch, Jan. 19)Risk Scenarios & CREThe pilot exercise aims to learn about climate risk-management practices and challenges of the six largest U.S. banks—and enhance their ability to identify, measure, monitor, and manage climate-related financial risks.The banks will analyze the impact of two risk scenarios on corporate and CRE lending exposures in their portfolios, according to the Fed’s 52-page set of instructions for Bank of America, Citigroup, Goldman Sachs Group, JPMorgan Chase, Morgan Stanley and Wells Fargo. (Fed news release, Jan. 17)One scenario will include how storms, floods and other “physical risks” could affect residential and commercial real estate portfolios in northeast over a one-year horizon.The second scenario will focus on “transition risks,” which refers to financial stresses caused by regulations and market forces that compel shifts to a lower carbon economy. The banks will analyze impacts over a 10-year horizon, using a scenario based on current policies—and one based on reaching net zero greenhouse gas emissions by 2050. (Yahoo News and Fed Participant Instructions, Jan. 17)What’s NextThe Fed plans to publish a summary of its climate scenario analyses by the end of 2023.Banks will calculate and report to the Fed on credit risk parameters such as probability of default, internal risk rating grade, and loss given default.The Fed’s climate exercises are different from bank stress tests, since these climate risk scenarios are exploratory in nature and have no capital consequences. (Fed Participant Instructions, Jan. 17)The central bank’s exercises come as various federal agencies are taking action on risks that climate change may pose to the economy.The Securities and Exchange Commission (SEC) is expected to issue climate disclosure regulations from by April. The proposed rules would require all registered companies to disclose material financial risks related to climate change, and may include new disclosure requirements for “Scope 3” GHG emissions. The Roundtable submitted extensive comments last year on the SEC’s about the proposal. (Roundtable Weekly, June 10)The Federal Insurance Office within the Treasury Department has also requested information on climate-related financial risks from the insurance sector to identify geographic areas that might lack coverage. (ClimateWire, Jan. 18 and Federal Register, August 31, 2021)Climate-related regulatory proposals affecting CRE will be among the topics discussed during The Roundtable’s Jan. 24-25 State of the Industry Meeting in Washington, DC.# # #

Building Performance Standards

January 18, 2023

Policy Comment Letter

Roundtable Comments to EPA on Building Performance Standards, Electrification

Building Electrification, Building Performance Standards BPS, Clean Energy Tax Incentives, Inflation Reduction Act,

Workplace Return

January 13, 2023

Roundtable Weekly

House Legislation Would Require Federal Employees' Return-to-Office, Agencies’ Plans on Property Leases

Workplace Return

Legislation introduced in the House this week would require all federal agencies to revert to pre-pandemic office arrangements that were in effect on December 31, 2019 and give employees 30 days to return to their offices. The bill, if enacted, would also require the Biden administration to provide Congress with a plan to mitigate the negative impacts of remote work and report on agencies’ plans for federal property leases. [Bill text of (H.R. 139)]SHOW UP ActThe Stopping Home Office Work’s Unproductive Problems (SHOW UP) Act—introduced this week by House Committee on Oversight and Accountability Chairman James Comer (R-KY)—reflects the views recently expressed by The Real Estate Roundtable to President Joe Biden about the importance of getting more federal workers back to the workplace. (GlobeSt, Jan. 13 and Roundtable letter, Dec. 12, 2022)The Dec. 12, 2022 letter from Roundtable Chair John Fish and President & CEO Jeff DeBoer urged the administration to consider the consequences of federal agencies’ promotion of permanent remote work—and how it magnifies ongoing, harmful economic impacts on cities, local tax bases, and small businesses. The Roundtable letter also noted how agencies should consider how hybrid work arrangements directly affect governmental service delivery and labor productivity. (Roundtable Weekly, Dec. 2 and Dec. 16, 2022)The SHOW UP Act would also require the administration to report to Congress on how pandemic-era telework levels affected agencies’ missions, along with federal property lease plans. (Federal News Network, Jan. 11)Similar legislation was introduced in the last Congress by former Rep. Yvette Herrell (R-NM) to address how expanded, pandemic-era telework arrangements negatively impacted agencies’ missions. (One-page backgrounder and Federal News Network, May 20, 2022)Federal Agencies’ LeasesWashington, D.C. Mayor Muriel Bowser also recently called on President Biden to get more federal workers back to the workplace and convert underutilized commercial real estate spaces into affordable housing. (Roundtable Weekly, Jan. 6)President Biden commented on federal return-to-the-workplace efforts in his March 2022 State of the Union address, above. “It’s time for America to get back to work and fill our great downtowns again with people. People working from home can feel safe and begin to return to their offices. We’re doing that here in the federal government. The vast majority of federal workers will once again work in person,” Biden said. (White House transcript, March 1, 2022)A General Accounting Office (GAO) survey last year reported that 24 federal agencies planned to reduce their leased space. Sixteen agencies surveyed said they would reduce the number of leases and 19 planned to reduce square footage over the next three years. (GlobeSt, Sept. 15, 2022 and GAO Report, Sep. 7, 2022)The GAO survey noted that “… in a post-COVID-19 environment agencies are likely to significantly reduce their demand for federal real estate due to changes to telework and remote policies.” A footnote in the report added, “GSA leases typically have a date after which GSA can terminate the lease with as little as 90 days’ notice.” (Full GAO report)In addition to the Washington, DC region, cities throughout the nation are responding to the impact of hybrid work arrangements on local communities and tax bases. Roundtable members will hear about this significant issue during our Jan. 24 State of the Industry Meeting in Washington from Miami Mayor Francis Xavier Suarez, who also serves as president of the U.S. Conference of Mayors.# # #

Policy Landscape

January 13, 2023

Roundtable Weekly

118th Congress Faces Looming Debt Ceiling and Funding Deadlines

Congress Debt Ceiling

Today, Treasury Secretary Janet Yellen notified Congress that the federal government is expected to reach its $31.4 trillion debt limit by Jan. 19, officially triggering the start of a potential standoff between House Republicans, the Democratic-controlled Senate, and the White House about how to increase the debt ceiling. (New York Times and Politico Playbook PM, Jan. 13)Looming StandoffYellen wrote, “Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.” (Yellen letter, Jan. 13)Yellen noted that while the Treasury will take steps to preserve cash, the government may only be able to pay its financial obligations until early June. Treasury’s “extraordinary measures” could include halting pension fund contributions and prematurely redeeming federal bonds. (New York Times, Jan. 13 | Committee for a Responsible Federal Budget, Oct. 28, 2022)The 118th Congress will eventually need to raise the debt limit to avoid a first-ever national default and global recession. (Politico, Jan. 12)Some Republicans have discussed achieving spending cuts by setting caps on discretionary government funding at FY 2022 levels. This approach would result in a cut of approximately $130 billion from current levels appropriated in the omnibus spending law enacted last month—a non-starter for Democrats. (The Hill, Jan. 10 | Roll Call, Jan. 9 | Roundtable Weekly, Dec. 22)Rep. Kevin McCarthy (R-CA) secured his new position as House Speaker on Jan. 7 by appeasing a small group of hardline Republican conservatives with concessions, which included unspecified spending cuts in exchange for raising the national debt ceiling. (Reuters, Jan. 7 and AP, Jan. 11)White House officials are mounting an outreach campaign to freshman lawmakers and moderate Republicans in an attempt to attract enough votes to avoid a fiscal cliff vote over the debt ceiling. (Politico, Jan. 12)Government Funding DeadlineAnother deadline on the financial horizon is Sept. 30, when funding for the federal fiscal year expires. A legislative standoff on spending priorities could lead policymakers to vote on a “Continuing Resolution (CR)” to fund the government programs at current levels or allow a partial government shutdown. (CQ, Dec. 29, 2022)Rep. French Hill (R-AR), above, one of Speaker McCarthy's allies who helped negotiate with the hardline GOP faction, said Republicans were seeking to design an automatic trigger for a CR in the event that the Senate does not act on House spending proposals.Hill said, "It would be a way for all members of Congress to say, look, we want to fund our government, we want to rein in spending. But if the Senate doesn't act in the right way, we've agreed on this CR that would be triggered by the lack of certain bills not being passed on Oct. 1." (CQ, Jan. 9)Rep. Hill will address policymaking in the 118th Congress and capital markets during The Roundtable’s State of the Industry Business Meeting on Jan. 24 in Washington. # # #

Tax Policy

January 13, 2023

Roundtable Weekly

New House Republican Ways and Means Chairman Promises Focus on Working Families, Wages, and Investment

Tax Policy

Rep. Jason Smith (R-MO), above, won a three-candidate race this week in the 118th Congress to become the youngest-ever chairman of the powerful House Ways and Means Committee, which has jurisdiction over tax policies affecting commercial real estate. Former Ways and Means Chair Richard Neal (D-MA) now becomes the panel’s ranking member. (Roll Call and Wall Street Journal, Jan. 9)Chairman SmithRep. Smith is a 42-year-old lawyer who was first elected to the House in 2012. He served as the top Republican on the House Budget Committee in the previous Congress, and is a close ally of new House Speaker Kevin McCarthy (R-CA). (PoliticoPro, Jan. 9)Rep. Smith was a leading supporter of Roundtable-supported legislation introduced in 2021 to make permanent the 20 percent deduction for qualified pass-through business income (Section 199A). The pass-through deduction was enacted on a temporary basis as part of the Tax Cuts and Jobs Act (TCJA) in 2017. Rep. Smith also spoke at The Roundtable’s Tax Policy Advisory Committee (TPAC) in June 2016 at the height of the tax reform debate. (Smith news release, Feb. 26, 2021 and stakeholder letter of support). There are only five remaining Republican members on Ways and Means who served on the panel when the TCJA was enacted. Several TCJA provisions are scheduled to expire at the end of 2025, including Section 199A and the limitation on the deductibility of state and local taxes. (Wall Street Journal, Jan. 9)A New AgendaOn Monday, Ways and Means Chairman Smith stated, “We will build on the success of the Tax Cuts and Jobs Act and examine how our policies can reward working families with a tax code that delivers better jobs, higher wages, and more investment in America.” He added that he would aim to use the tax code to strengthen American supply chains, encourage domestic energy production, and achieve energy independence. (Smith statement, Jan. 9)On Dec. 7, 2022, Rep. Smith also discussed key priorities that should be addressed by the Ways and Means Committee with Punchbowl News. (Watch video)House Republicans added 10 new members to the Ways and Means Committee on Jan. 11, and six Republican women will be part of the 25-seat majority on the panel. Subcommittee chairs will not be decided for several weeks, according to Chairman Smith. (BGov, Jan. 12)TPAC will discuss industry tax priorities in the 118th Congress during their next meeting on Jan. 25 in conjunction with The Roundtable’s State of the Industry Meeting in Washington, DC.# # #

Workplace Return

January 6, 2023

Roundtable Weekly

Washington, DC Mayor Reiterates Roundtable’s Call for Federal Personnel Return-to-Work

Workplace Return

Washington, DC Mayor Muriel Browser this week reiterated views expressed by The Real Estate Roundtable to President Biden about getting more federal workers back to the workplace and converting underutilized commercial real estate spaces into affordable housing. (ABC News, Jan. 2 and Roundtable letter, Dec. 12, 2022)Federal Employees & Remote Work“The federal government represents one-quarter of D.C.’s prepandemic jobs and owns or leases one-third of D.C.’s office space,” Bowser, above, said in her third inaugural address on Jan. 2. “We need decisive action by the White House to either get most federal workers back to the office most of the time, or to realign their vast property holdings for use by the local government, by nonprofits, by businesses and by any user willing to revitalize it.” She added that converting office space into housing is the key to unlocking the potential of a reimagined, more vibrant downtown. (MarketWatch, Jan. 4)Prominent DC office landlords sent a letter on Nov. 28 to the District’s chief financial officer about eroding local market conditions, including increased vacancy rates, lackluster leasing activity, equity flight, and a financing drought—especially for assets with high levels of vacancy. The landlords warned that DC may face a significant loss of tax revenue that could threaten the city’s fiscal health, and that other cities are experiencing similar conditions. (Commercial Observer, Nov. 29 and Bisnow, Nov. 28) A recent federal employee survey from the U.S. Office of Personnel Management reports that about 42% of federal employees “telework” at least a few days per week.The federal government maintains facilities in 2,200 communities, influencing local leasing activities, property values, and surrounding small businesses. (Roundtable Weekly, Dec. 16, 2022)Federal proposals aimed at encouraging more Americans back to the workplace, including enhanced child- care and eldercare benefits, are under consideration as the administration formulates its 2023 economic agenda. (Wall Street Journal and The Hill, Dec. 20)Roundtable ViewReal Estate Roundtable Chair John Fish, above right, and President & CEO Jeff DeBoer, left, wrote to President Biden last month about the consequences of federal agencies’ promotion of permanent remote work—and how remote work magnifies the ongoing, harmful economic impacts on cities, local tax bases, and small businesses. (Roundtable Weekly, Dec. 2 and Dec. 16, 2022)Roundtable Chair John Fish also recently responded to plans by the state of Massachusetts to vacate at least 355,000 square feet of its office footprint. Fish told The Boston Globe on Dec. 27 that government agencies at all levels should consider the effects on small businesses and property taxes when evaluating their back-to-office policies.The Roundtable comments also expressed supported legislation that could help facilitate “the increased conversion of underutilized office and other commercial real estate to much-needed housing.” The letter stated that incentives for conversion projects could be modeled on the rehabilitation tax credit as a cost-effective means to increase the housing supply, create jobs, and boost the local tax base.How cities are responding to the impact to hybrid work arrangements will be one of several topics that Miami Mayor Francis Xavier Suarez, who also serves as president of the U.S. Conference of Mayors will discuss with Roundtable members at our Jan. 24 State of the Industry Meeting in Washington.# # #

Policy Landscape

January 6, 2023

Roundtable Weekly

GOP Speaker Votes Stymie Start of House Session in Divided 118th Congress

Congress

The protracted vote process for Republican House Speaker this week stalled the start of the new GOP House majority in a narrowly divided 118th Congress, portending difficulties ahead for policymakers to reach agreement on raising the debt limit this summer and passing FY24 funding for the government by Sept. 30. This speaker election is the longest since 1859. (Semafor, Jan. 6 | The Hill, Jan. 5 | Bloomberg Law, Jan. 3)House Challenges Ahead Until a House speaker is elected, new representatives cannot be sworn in, lawmakers cannot introduce bills, and committee chairs (including leadership of the important tax-writing House Ways and Means Committee) cannot be confirmed. (BGov, Jan. 6 and ABC News, Jan. 5)Sen. John Cornyn (R-TX), an adviser to the Senate GOP leadership team, said raising the debt limit with a slim, five-seat Republican majority in the House that can be leveraged by a small group of staunch conservatives, “will probably be the single biggest challenge the House will have.” (The Hill, Jan. 5)Failure to raise the U.S. debt limit would lead to a first-ever default, causing financial chaos in the global economy. In 2011, an impasse between Republicans and President Obama over increasing the debt limit led to a temporary downgrade of the credit of the United States. The crisis ended after an agreement was reached to cut more than $2 trillion in spending over a decade. (New York Times, Dec. 9, 2022 and Washington Post, Dec. 5, 2022 | Congressional Research Service, Nov. 22, 2022)Additionally, funding for the government expires on Sept. 30, the end of the federal fiscal year. A legislative standoff on spending priorities for FY24 after Sept. 30 could lead to either a “Continuing Resolution” to fund the government programs at current levels or a partial shutdown. (CQ, Dec. 29, 2022)The Regulatory Front The new Republican majority in the House is expected to bring intense oversight of government programs funded by the Inflation Reduction Act (IRA) passed by Congress in August—and increased scrutiny of proposed regulations that could impact commercial real estate. (Roundtable Weekly, Aug. 12, 2022)The IRA included nearly $370 billion in climate spending—the largest federal clean energy investment in U.S. history—with measures important to CRE. [See Roundtable Fact Sheets on the IRA & CRE: Clean Energy Tax Incentives (Sept. 20) and Revenue Provisions (Aug. 17)]The Real Estate Roundtable submitted extensive comments to Treasury and the IRS on Nov. 4 that address various clean energy tax incentives in the IRA. (Nov. 4 letter and Roundtable Weekly, Aug. 12)The Roundtable also plans to submit comments by Jan. 18 to the Environmental Protection Agency on EPA federal grant programs that could impact CRE.Securities and Exchange Commission (SEC) climate disclosure regulations are now expected by April. The proposed rules would require all registered companies to disclose material financial risks related to climate change, and may include new disclosure requirements for “Scope 3” GHG emissions. The Roundtable submitted extensive comments to the SEC about the proposal on June 10. (Roundtable Weekly, June 10, 2022)Policymaking in the 118th Congress and regulatory proposals affecting CRE will be among the topics discussed during The Roundtable’s Jan. 24-25 State of the Industry Meeting in Washington, DC.# # #

Tax Policy

January 6, 2023

Roundtable Weekly

Treasury Dept. Issues New Rules on Taxation of Foreign Investment in U.S. Real Estate

Capital Gains FIRPTA Tax Policy

On December 28, Treasury and the IRS released new tax regulations affecting foreign investment in U.S. real estate. FIRPTA Among the changes, a proposed rule would repeal a long-standing private letter ruling that foreign investors have relied on when structuring inbound investments. Under current law, shareholders of domestically controlled REITs are not subject to the Foreign Investment in Real Property Tax Act (FIRPTA)—a statutory regime that subjects foreign investors to capital gains tax on their U.S. property investments. The proposal, if finalized, would expand the reach of FIRPTA by denying a REIT’s status as domestically controlled if a U.S. corporate shareholder of the REIT is foreign-owned. In other words, the rule would look through a domestic C corporation that owns the REIT, even if the C corporation is a U.S. taxpayer that pays U.S. income tax. The proposed regulation surprised foreign investors and real estate fund managers who have relied on a 2009 IRS private lettering rule, which held that a domestic C corporation that owns shares in a REIT is a U.S. owner for purposes of determining whether the REIT is domestically controlled. The proposed rule appears to conflict with policies underlying FIRPTA-related ownership attribution changes enacted in the 2015 PATH Act. As a practical matter, the tax consequences of the proposal are retroactive because they would apply to existing investments made years ago. (Weil Tax Alert and Skadden Insights) Additional Provisions & Regulations Other provisions in the proposed regulations are more favorable. For example, they include rules that allow a sovereign wealth fund to preserve the tax exemption applicable to foreign governments if the fund has only a minority, non-controlling interest in a U.S. real estate business. Simultaneously, Treasury also released final regulations last month related to the FIRPTA exemption for foreign pension funds, which the Roundtable worked to enact in 2015. The final regulations are largely positive and should facilitate even greater investment in U.S. real estate by qualified foreign pension funds. The Real Estate Roundtable’s Tax Policy Advisory Committee (TPAC) has created a working group to develop formal comments and respond to the recent Treasury releases. # # #

Policy Comment Letter

FINAL_RER_063023_Low_Income_Bonus_Comments

January 1, 2023

Policy Comment Letter

Letter_to_fed_vice_chair_for_supervision_michael_barr_from_reps_andy_barr_bill_foster_-_POLITICO_PRO

December 30, 2022

Annual Report

2022 Policy Agenda – Captial and Credit

Policy Landscape

December 22, 2022

Roundtable Weekly

House to Vote on Senate-Approved “Omnibus” Funding Package

Congress

The House of Representatives is expected to pass a Senate-approved $1.65 trillion fiscal 2023 bill by tomorrow to avert a government shutdown. President Biden needs to sign the 4,155-page “omnibus” package before midnight on Dec. 23 to fund the government through Sept. 30, 2023. (CNBC and Politico, Dec. 22 | The Hill, Dec. 20)Omnibus & TaxesThe omnibus passed by the Senate today includes $858 billion in military spending and approximately $772.5 billion in nondefense discretionary spending. The $1.65 trillion legislative package is a slight increase over the previous fiscal year’s $1.5 trillion omnibus. (Wall Street Journal, Dec. 22)The massive funding bill also includes a bipartisan package of retirement savings provisions, but not other proposals on lawmakers’ shortlist of end-of-year tax priorities, such as an expansion of the low-income housing tax credit (LIHTC). The Roundtable’s support for the LIHTC and other provisions such as modernizing the rules for REITs and facilitating condominium construction will continue into the 118th Congress. (Tax Notes, Dec. 21 and Roundtable Weekly, Oct. 21)The outlook for policy in the new Congress will be a topic for discussion during The Roundtable’s Jan. 24-25 all-member State of The Industry Meeting in Washington.# # #

Workplace Return

December 22, 2022

Roundtable Weekly

Hybrid Work Arrangements Impacting Office Vacancy Rates

Workplace Return

This week, rising U.S. office vacancy rates were the focus of several media reports as a result of the ongoing, negative impact of hybrid work arrangements. On Dec. 20, CNBC’s Squawkbox reported that 100 million square feet of office space is now available in Manhattan.On Dec. 18, The Real Deal reported on The Roundtable’s recent letter to President Joe Biden about the harmful economic and social consequences of widespread remote work on cities, local tax bases, and small businesses.The article included a quote from Real Estate Roundtable Chairman and SUFFOLK CEO John Fish and The Roundtable’s President and CEO Jeffrey DeBoer, who stated in their letter, “We are concerned that certain administration policy guidance is encouraging federal agencies to adopt permanent work-from-home policies for federal employees and thereby actually magnifying negative economic and social consequences for cities.” (Roundtable Weekly, Dec. 16)On Dec. 17, the New York Times reported on office vacancy rates in San Francisco. “Office buildings are at about 40 percent of their prepandemic occupancy, while the vacancy rate has jumped to 24 percent from 5 percent since 2019,” according to the article, “What Comes Next for San Francisco’s Emptied Downtown.”Commercial real estate trends and potential policy responses will be discussed during The Roundtable’s Jan. 24-25 State of the Industry Meeting in Washington, DC.# # #

Beneficial Ownership

December 22, 2022

Roundtable Weekly

Treasury Issues Proposed Beneficial Ownership Regulations on Info Retention and Disclosure

Beneficial Ownership Beneficial Ownership amp the Corporate Transparency Act Corporate Transparency Act CTA FinCEN

The Treasury Department issued a set of proposed rules this month that address how government officials could access information about the “beneficial owners” of most corporations, limited liability companies, and other entities created in or registered to do business in the United States. (Fact Sheet, Dec. 15 and Federal Register, Dec. 16) Proposed FinCEN Rules The Dec. 15 Notice of Proposed Rulemaking (NPRM) issued by Treasury’s Financial Crimes Enforcement Network (FinCEN) follows a final beneficial ownership rule issued on Sept. 30. The previous rule requires millions of companies to report information about their beneficial owners—persons who own at least 25% of a company or exert significant authority over it—to FinCEN. (Final Rule | Fact Sheet | Roundtable Weekly, Sept. 30) The Roundtable and three other national real estate organizations submitted detailed comments to FinCEN on May 5, 2021 addressing several implementation concerns related to the beneficial ownership registry. (Roundtable Weekly, May 7) FinCEN Acting Director Himamauli Das said, “The beneficial ownership information reporting rule finalized earlier this year is a major step forward in unmasking shell companies and protecting the U.S. financial system from abuse by money launderers, drug traffickers, sanctioned oligarchs, and other criminals.” “In this next step, the proposed rule would provide the highest standards of security and confidentiality while ensuring that the new beneficial ownership database is highly useful to law enforcement agencies in its efforts to combat financial crime.” Das added, “As we drive toward full implementation of the Corporate Transparency Act, we move closer to exposing criminals, corrupt actors, and anyone trying to hide ill-gotten gains in the United States.” (Treasury news release and FinCEN Fact Sheet, Dec. 15) House Republican Opposition The Chairman-elect of the House Financial Services Committee, Patrick McHenry (R-NC), above, raised concerns about the proposed regulations, stating that protecting Americans’ financial privacy will be a top priority of Committee Republicans’ oversight and legislative initiatives next Congress. (McHenry news release, Dec. 15) “Today’s Notice of Proposed Rulemaking issued by FinCEN does not prioritize Americans’ financial privacy in the way Congress intended,” McHenry said. “FinCEN must include the appropriate protections to prevent unauthorized access and use of the sensitive information collected under this new regime. Until we see a real effort to protect this confidential information, Republicans remain concerned about FinCEN’s commitment to privacy and civil liberties.” Corporate Transparency Act This month’s proposed set of rules addresses provisions of the Corporate Transparency Act (CTA), which became law in Jan. 2021, and target tax fraud, terrorism financing, and money laundering. (Tax Notes, Dec. 16) The Roundtable is part of a broad coalition of business trade groups that supports a legal challenge by the National Small Business Association (NSBA v. Janet Yellen), which challenges the constitutionality of the CTA. (Coalition statement of support, Dec. 7 and NSBA’s website on the CTA) The coalition stated, “It is clear whatever marginal benefit the CTA affords law enforcement will be far outweighed by the costs borne by small businesses and their owners.” The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to work with industry partners to address the implications of FinCEN’s proposed rules and the impact it could have on capital formation and the commercial real estate industry. Written comments on the NPRM are due by Feb. 14, 2023. RECPAC will meet on Jan. 24, 2023 in conjunction with The Roundtable’s State of the Industry Meeting in Washington. # # #

LIBOR

December 22, 2022

Roundtable Weekly

Fed Adopts SOFR as Fallback Benchmark Rate to Replace LIBOR on Certain Legacy Contracts

LIBOR The Fed

The Federal Reserve Board on Dec. 16 adopted SOFR (Secured Overnight Financing Rate) as the fallback benchmark rate to replace LIBOR (London Interbank Offered Rate) in certain financial contracts after the use of LIBOR expires on June 30, 2023. (Federal Register notice and Bloomberg Law, Dec. 16)LIBOR to SOFRLIBOR was the dominant reference rate used in recent decades for financial contracts—including commercial real estate debt, mortgages, student loans and derivatives—worth an estimated $223 trillion. (Roundtable Weekly, Dec. 10, 2021.)The Fed’s action this month implements a final rule from the Adjustable Interest Rate (LIBOR) Act (H.R. 4616)—passed by Congress in March to provide a uniform, nationwide solution for so-called tough legacy contracts that do not have clear and practicable provisions for replacing LIBOR. (Roundtable Weekly, March 11, 2022)The Real Estate Roundtable and 17 national trade groups submitted letters in 2021 on April 14 and July 27 to policymakers in support of measures to address “tough legacy” LIBOR-based contract issues. (Roundtable Weekly, Dec. 10, 2021) Final LIBOR RuleThe final rule identifies replacement benchmark rates based on SOFR to replace overnight, one-month, three-month, six-month, and 12-month LIBOR in contracts subject to the LIBOR Act. These contracts include U.S. contracts that do not mature before LIBOR ends and that lack adequate "fallback" provisions that would replace LIBOR with a practicable replacement benchmark rate. (Fed Reserve Board’s memo, Dec. 2 and Fed news release, Dec. 16)The final rule also restates safe harbor protections contained in the LIBOR Act for market participants who need to switch existing LIBOR-referencing financial contracts to a replacement benchmark for debt instruments before the replacement date on June 30, 2023. (Federal Register notice on LIBOR)The LIBOR transition will be among the issues discussed during The Roundtable’s Real Estate Capital Policy Advisory Committee’s (RECPAC) next meeting on Jan. 24 in Washington, DC during The Roundtable’s State of the Industry Meeting.# # #

Congress Extends Funding Deadline to Dec. 23; Democrats Pushing Full-Year Omnibus Spending Bill

Congress

This week, Congress passed a government funding extension package until Dec. 23 while appropriators continue working on a $1.7 trillion FY2023 “omnibus” spending deal that they may unveil on Monday. (CQ News and BGov, Dec. 16) Omnibus Negotiations President Biden is expected to sign the extension today, as bipartisan efforts to reach a funding agreement continue among congressional policymakers. Some Republicans, including House Minority Leader Kevin McCarthy (R-CA), are urging their colleagues to postpone negotiations until January when the GOP assumes majority control of the House. (Wall Street Journal, Dec. 14) The logjam in reaching a final deal focuses on $26 billion in non-defense, domestic spending. Both sides have agreed on $858 billion for defense spending. (Forbes, Dec. 14) If an agreement on an omnibus cannot be reached next week, Democrats may forego new legislation in favor of a one-year continuing resolution that would freeze government funding at current levels and allow certain tax policies to expire. (Roundtable Weekly, Dec. 2 and Dec. 9) Tax Policy Prospects Chances that a spending agreement will include tax policy—including “extenders” of tax incentives that have expired or are set to lapse after 2022—are uncertain. (Roundtable Weekly, Dec. 9)House Ways and Means Committee Chair Richard Neal (D-MA), above, said on Thursday, “We continue the negotiations. The conversations are ongoing. I still can see the contours of a big deal.” (BGov, Dec. 16)Senate Minority Whip John Thune (R-SD) said earlier this week that he is doubtful that a year-end tax deal will be added to an omnibus. (Politico, Dec. 13)Implementing IRA Tax ProvisionsThe Internal Revenue Service (IRS) will open a new office to monitor the agency’s implementation of the 2022 Inflation Reduction Act’s clean energy provisions, according to a new IRS report released Thursday.The Inflation Reduction Act (IRA) Transformation & Implementation Office will include units focused on “implementation of new tax law provisions, taxpayer services transformation, tax compliance transformation and human capital transformation.” (BGov, Dec. 15)Additionally, The White House released a guidebook this week on the IRA’s clean energy provisions as a compendium reference to the large amount of federal energy and climate programs financed by the IRA. (White House Fact Sheet, Dec. 15) The Roundtable will discuss energy and tax policy developments during our 2023 State of the Industry and Policy Advisory Committee meetings on Jan. 24-25 in Washington, DC.# # #

Workplace Return

December 16, 2022

Roundtable Weekly

Roundtable Urges President Biden to Weigh Negative Impacts of Remote Work on Cities, Broader Economy

Workplace Return

The Roundtable wrote to President Joe Biden on Dec. 12 about the ongoing, harmful economic impacts of widespread remote work on cities, local tax bases, and small businesses—and how work-from-home policies by federal agencies threaten to magnify these negative economic and social consequences. (Roundtable letter | GlobeSt and CoStar, Dec. 15) Roundtable Requests The letter from Real Estate Roundtable Chair John Fish and President & CEO Jeff DeBoer urges President Biden “to direct federal agencies to enhance their consideration of the impact of agency employee remote working on communities, surrounding small employers, transit systems, local tax bases and other important considerations.”The federal government maintains facilities in 2,200 communities, influencing local leasing activities, property values, and surrounding small businesses. Cities may continue to struggle if federal agencies encourage their employees to work-from-home on a permanent basis. Unfortunately, some federal officials view agency remote work simply as a recruiting tool or cost-saving measure. [Office of Personnel Management testimony, Future of Federal Work Part II, before House Committee on Oversight and Reform (July 21, 2022), and OPM’s Future of Work FAQ]The Roundtable letter notes that federal agencies’ actions to emphasize the benefits of permanent remote work differ from the current direction of private sector employers, who are increasingly recognizing the need to bring employees back to the workplace.The Roundtable comments also encourage President Biden to support legislation that could help facilitate “the increased conversion of underutilized office and other commercial real estate to much-needed housing.” The letter states that incentives for conversion projects could be modeled on the rehabilitation tax credit as a cost-effective means to increase the housing supply, create jobs, and boost the local tax base. Economic Impact of Remote Work The work-from-home trend poses a threat to local tax bases and community services, according to research by organizations such as the Pew Charitable Trust. (Pew State Fiscal Health Initiative, Feb. 22)The economic threat posed by remote work to municipalities was also a focus of a Dec. 13 Wall Street Journal report—“Shrinking Office Building Values Are Becoming a Dilemma for City Budgets.” Roundtable Members in the News Roundtable Chair John Fish (Chairman and CEO, SUFFOLK) spoke with Bloomberg Intelligence on Dec. 9 about the consequences of rising interest rates, the impact of remote work, labor force participation, and the general economic outlook. (Chair Fish interview begins at 26:05)Former Roundtable Chair Bill Rudin (Co-Chairman & CEO, Rudin Management Company, Inc.) discussed real estate challenges and the potential for office-to-residential conversions in New York City on Dec. 14 during an interview with CNBC’s Squawk on the Street. Roundtable Board Member Kathleen McCarthy (Global Co-Head of Blackstone Real Estate) was interviewed on Dec. 9 by Bloomberg Radio on a wide range of real estate investment issues, asset types, and her experience in the industry. Commercial real estate trends and potential policy responses will be discussed during The Roundtable’s Jan. 24-25 State of the Industry Meeting in Washington, DC.# # #

CRE and the Economy

December 16, 2022

Roundtable Weekly

Federal Regulators Identify CRE as a Risk to U.S. Financial Stability

CRE Trends

A council of federal financial regulators chaired by Treasury Secretary Janet Yellen stated in their 2022 Annual Report released today: “the commercial real estate (CRE) and residential real estate sectors have the potential to increase risks to U.S. financial stability significantly.” (Treasury Department news release and PoliticoPro, Dec. 16) A Top Concern The Financial Stability Oversight Council (FSOC) identified CRE among its top market and credit concerns heading into 2023, given rising interest rates and borrowing costs. (FSOC Annual Report, pages 18-20)Among the FSOC’s report conclusions:“Rising interest rates, uncertain economic conditions, continuing weakness in urban commercial real estate, and the possibility that some post-pandemic changes in demand for CRE will become permanent have heightened concerns about CRE.”"The Council recommends supervisors and financial institutions continue to monitor CRE exposures and concentrations, ensure the adequacy of credit loss allowances, assess CRE underwriting standards, and review contingency planning for a possible increase in delinquencies.” “In extreme cases, CRE credit losses can lead to outright bank failures, particularly for banks with high exposure to CRE loans,” according to the regulators’ report. Office Markets & Remote Work The Council emphasized that the office property market may face the most uncertainty, with the prospect of weak future demand as return-to-office plans evolve and users decide how much space they need.The 2022 Annual Report notes that office property demand may take time to stabilize as tenants navigate remote work decisions and adjust leasing decisions. The FSOC also reports that a slow return to densely populated urban office centers could reduce the desirability of office properties and nearby retail space.“This may be especially true for older, less desirable office spaces with fewer modern amenities,” the report acknowledges.The report also notes, “structural changes in the demand for office space can lead to weaker credit quality for loans secured by office properties over the long term.”The Fed’s InfluenceFSOC regulators also caution that more aggressive action by the Fed—either in its interest rate decisions or changes in its holdings of mortgage-backed securities—could lead to further increases in mortgage rates that could negatively affect financial stability. (FSOC 2022 Annual Report and PoliticoPro, Dec. 16 ) The Council's mission is to identify risks to the financial stability of the United States, promote market discipline, and respond to emerging risks to the stability of its financial system. (FSOC website) # # #

Workplace Return

December 12, 2022

Policy Comment Letter

Roundtable Comments to President Biden on Negative Economic Impacts of Widespread Remote Work

Cities amp Infrastructure, President Biden, Remote Work, Return to Office, Telework, Workplace ReEntry, Workplace Return,

Policy Landscape

December 9, 2022

Roundtable Weekly

Spending Bill Negotiations at Impasse as Deadline Looms; Senate Democrats Re-Elect Leadership Team

Congress

Congress reached an impasse on a government spending package this week, leaving lawmakers with limited options before Dec. 16 when the expiration of current funding would cause a partial shutdown. Policymakers may opt to pass a short-term Continuing Resolution (CR) to fund the government at current levels while they attempt to reach an agreement by year-end on a massive “omnibus” package—which could include tax, affordable housing, and other measures important to commercial real estate. (Roll Call, Dec. 8 and Roundtable Weekly, Dec. 2)Funding LogjamPolicymakers are reportedly gridlocked over $26 billion in non-defense, domestic spending that would be part of an estimated $1.7 trillion overall funding bill. Both sides have agreed on $858 billion for defense spending. (PoliticoPro, Dec. 7 and CQ, Dec. 8)With the clock ticking, Democrats may introduce their own omnibus proposal next week with measures designed to attract the 60 votes needed to pass the Senate, along with a full-year CR. (Punchbowl, Dec. 8)If an agreement cannot be reached, Democrats may forego new legislation in favor of a one-year CR that would freeze government funding at current levels and allow certain tax policies to expire. Some House Republicans are urging their colleagues to take another course—wait until early next year when they assume majority control and can exert greater influence over funding negotiations with the Senate’s Democratic majority. (Washington Post, Dec. 8)Other Policy NewsSenate Democrats on Tuesday voted unanimously to re-elect their entire leadership team to another term for the 118th Congress, with Majority Leader Chuck Schumer (D-NY), above right, at the helm.Today, Schumer stated that Sen. Kyrsten Sinema (D-AZ), above, will keep her committee assignments after she registered as an independent and published an op-ed in the Arizona Republic about why she is leaving the Democratic Party. (The Hill, Dec. 8 and Dec. 9 | Wall Street Journal, Dec. 9)Sinema suggested her decision would not affect the power balance in the Senate because she will not caucus with Republicans and her voting behavior will not change. (Politico, Dec. 9)Separately, the Treasury Department’s recently released, initial guidance on labor standards for companies to qualify for increased incentives in the Inflation Reduction Act (IRA) will be the focus of two Department of Labor webinars next week. Register for the Wednesday, December 14 or Thursday, December 15 webinars, both scheduled for 1pm EST. (Roundtable Weekly, Dec. 2)# # #

Climate and Energy Policy

December 9, 2022

Roundtable Weekly

White House Announces Federal Building Performance Standards

Building Performance Standards BPS Climate Policy Energy and Climate Policy Energy Policy

The White House on Wednesday released a new standard to reduce scope 1 “direct” emissions from fossil fuels combusted to heat and cool federal buildings. (CNBC |UPI | PoliticoPro, Dec. 7) Federal Building Performance Standard (BPS) The Federal BPS from the White House Council on Environmental Quality (CEQ) applies to the 300,000 existing buildings owned by the U.S. government. It sets a 2030 goal for each federal agency to eliminate scope 1 emissions in 30% of its facilities. (White House Fact Sheet) The Federal BPS “prioritiz[es] energy efficiency and the elimination of on-site fossil fuel use.” It is a stepping-stone toward the Biden administration’s ultimate goal of “net zero” emissions by 2045 across all federal facilities. (Exec. Order 14057, Dec. 8, 2021) The Federal BPS’s “performance pathway” would achieve the goal for zero scope 1 emissions “through efficient electrification of all equipment and appliances.” The Federal BPS also offers a “prescriptive pathway” for specific replacement of gas-fired furnaces and boilers. This alternate compliance route recognizes that “full decarbonization may not be practicable today” considering a building’s size and climate zone—and is designed to account for the market availability and cost-effectiveness of electrification equipment. Relevance to Other GHG Standards While the Federal BPS intends to reduce on-site scope 1 emissions, it will likely increase scope 2 emissions from electricity purchased by the federal government to power electric heat pumps, hot water heaters, and similar equipment. Furthermore, the Federal BPS—and its focus to reduce fossil fuels on-site—might set an easier standard compared to a number of emerging BPS mandates at the state and municipal level. Some local BPS laws may effectively require buildings to reduce overall GHG emissions at their source, which depends on whether local power grids provide “clean” electricity from solar, wind, or other renewable energy. EPA data that profiles “fuel mixes” used to generate electricity, however, indicate that coal, gas and other non-renewables account for 80 percent of the fuels that power electric grids nationally. Also, local BPS laws may not offer a “prescriptive” compliance path similar to the Federal BPS that contemplates cost effectiveness in building electrification retrofits. Notably, the Federal BPS sets no requirements for U.S.-owned buildings to reduce their upstream and downstream “scope 3” emissions outside of an owners’ control. (EPA website) Possible measurement and reporting of scope 3 emissions has been a controversial element of a private sector, corporate GHG disclosure rule proposed by the U.S. Securities and Exchange Commission that has not yet been finalized. (Roundtable Weekly, June 10) Other Building Policies The U.S. Department of Energy (DOE) also on Wednesday proposed a rule that would establish the first-ever emissions standards for new federal construction and major renovations. Like the Federal BPS for existing federal assets, DOE’s proposed rule “aims to accelerate” electrification by phasing out on-site fossil fuel usage for heating and hot water. (DOE news release) The White House also announced this week that California has joined the National Building Performance Standards Coalition, a group of over 30 states and localities committed to adopt BPS policies by Earth Day 2024. (White House Fact Sheet) The White House’s announcements touted DOE’s Better Climate Challenge—a voluntary “pledge” that includes Roundtable members as “partners” who have committed to reduce portfolio-wide scopes 1 and 2 emissions by at least 50% within 10 years. The Roundtable is an “ally” supporting DOE’s Challenge. (Roundtable Weekly, March 4) # # #

Healthy Workplaces

December 9, 2022

Roundtable Weekly

Roundtable Responds to EPA’s Inquiry Regarding Indoor Air Quality

Environmental Policy EPA Indoor Air Quality Workplace Return

The Real Estate Roundtable on Dec. 5 responded to a recent Environmental Protection Agency (EPA) Request for Information on Indoor Air Quality (IAQ) management, which posed questions about a possible new building “label” program. (Roundtable comments and EPA’s Federal Register Notice) Roundtable Comments A public-private partnership federal recognition program that commends leadership in IAQ design and management could be a key component of a return to healthy workplaces, The Roundtable stated in its comments. The Roundtable urges policymakers and business leaders to push for the safe return of employees to their physical workspaces to benefit productivity and help reinvigorate small businesses in downtown neighborhoods—an essential contributor to urban communities and their tax bases. (Roundtable Weekly, Dec. 2) Should EPA move forward to propose any criteria for a potential IAQ label, The Roundtable commented that the agency must: Identify clear statutory authority and adequate federal resources to ensure its long-term viability; Conduct an initial pilot program for testing in actual buildings to reflect real-world experiences of commercial real estate practitioners (including private sector and federal building owners); and Demonstrate support for best practices and procedures that sequentially (I) control emissions and off-gassing from indoor sources, (II) improve ventilation rates, and (III) enhance air filtration and cleaning. (EPA’s IAQ best practices webpage) The Roundtable's Sustainability Policy Advisory Committee (SPAC) has a long, successful track record of collaboration with EPA and the Department of Energy in the development of numerous voluntary recognition programs, which are listed in the comments. Healthy Return to Office The Roundtable participates in the Healthy Workplaces Coalition, which supports federal policies that support the health and well-being of employees, customers, and the public in workplaces and across the built environment. Other coalition members also submitted comments in response to the EPA’s Request for Information. The coalition is led by the International WELL Building Institute (IWBI). (Roundtable Weekly, May 27 and IWBI news release, May 25) The positive impact of IWBI’s WELL Certification on employees—including physical and mental health, well-being, and productivity—is analyzed in a recent issue of the Journal of Building and Environment. (IWBI news release and research study). Return-to-the-office is a significant industry priority that will be discussed during The Roundtable’s all-member State of the Industry Meeting on January 24-25 in Washington, DC. # # #

Roundtable In The News

December 9, 2022

Roundtable Weekly

The Roundtable’s Jeffrey DeBoer Recognized as One of DC’s "Top Lobbyists" for 2022

Real Estate Roundtable President and CEO Jeffrey DeBoer, above, is one of the "Top Lobbyists" in Washington, DC for 2022, according to the prominent policy news publication, The Hill. This is the fifth consecutive year that DeBoer has earned the recognition. (The Hill, Dec. 7)The publication noted their list of individual lobbyists is comprised of those who “played a key role in shaping an avalanche of legislation in 2022, including Democrats’ Inflation Reduction Act and several bipartisan bills that brought sharply divided lawmakers together.”The Hill also notes the list recognizes “advocates won hard-fought battles to secure some of this year’s most significant bipartisan measures” and “demonstrated a track record of success in the halls of Congress and the administration during a critical year for policy.” (pdf of The Hill’s 2022 Top Lobbyists)The Roundtable’s DeBoer commented, “I am honored to be recognized for my advocacy successes on behalf of the commercial real estate industry. However, I’m smart enough to know that they are not individual successes but are actually successes resulting from the hard work of the entire Roundtable team ... our membership and staff. It is particularly rewarding to be honored by The Hill knowing that, in leading the team, my approach is grounded by a positive, bipartisan foundation built around overall community betterment and advancement.”DeBoer added, “We will continue to advocate long-term, sustainable public policy relating to taxation, access to housing and capital, job creation and energy efficient buildings that are safe and secure—and I hope that our efforts will continue to be positively recognized.”# # #

Beneficial Ownership & the Corporate Transparency Act

December 7, 2022

Policy Comment Letter

Coalition Statement of Support for Legal Challenge to Constitutionality of the Corporate Transparency Act (CTA)

Beneficial Ownership, Beneficial Ownership amp the Corporate Transparency Act, Capital and Credit, Corporate Transparency Act CTA,

"Healthy Buildings"

December 5, 2022

Policy Comment Letter

RER Responds to EPA’s Inquiry Regarding Indoor Air Quality

EPA, Healthy Buildings,

Clean Energy Tax Incentives, Inflation Reduction Act, Infrastructure and Clean Energy

December 2, 2022

Policy Comment Letter

Roundtable Comments on EV Charging Station Credit

Clean Energy Tax Incentives, EV Charging Stations, Inflation Reduction Act, Tax Policy,

Policy Landscape

December 2, 2022

Roundtable Weekly

Washington Leaders Aim for December Funding Deal; Lawmakers Seek to Include Tax Measures

Congress Tax Policy

President Biden met with congressional leaders on Tuesday to discuss the legislative agenda for the remaining weeks of the lame duck session before the new Congress begins on Jan. 3 with a House Republican majority. Omnibus vs CRThe meeting between President Biden and Senate Majority Leader Charles Schumer (D-NY), Senate Minority Leader Mitch McConnell (R-KY), House Speaker Nancy Pelosi (D-CA) and House Minority Leader Kevin McCarthy (R-CA) also focused on lawmakers efforts to reach a potential deal on a massive “omnibus” spending bill before current government funding expires on Dec. 16. (Politico, Nov. 29)There is a possibility that Congress could pass a one-week continuing resolution (CR) to extend current funding until Dec. 23 to buy more time to reach an agreement.Sen. McConnell commented on the White House meeting that there is “… widespread agreement that we’d be better off with an omnibus than a CR, but there are some significant hurdles to get over to do that.” (The Hill, Nov. 29)Attempts to attach a wide variety of other policy riders to an omnibus package—including tax extenders affecting commercial real estate—could become more difficult as the holiday break draws closer. (Wall Street Journal, Nov. 29 and Roundtable Weekly, Nov. 18)House Ways and Means Chairman Richard Neal (D-MA) this week expressed optimism about negotiations on tax measures that may be included in an omnibus, including "extenders” of tax incentives that have expired or are set to lapse after 2022. (CQ, Nov. 30) House Speaker Pelosi said yesterday that if Congress fails to reach a year-end spending bill in the coming weeks, then a “last resort” would be a year-long CR. (Politico video and Politico Pro, Dec. 1) Real Estate-Related Tax Measures A bipartisan group of 54 House lawmakers sent a letter this week to House leadership that requested the inclusion of two affordable housing provisions from a bipartisan bill (H.R. 2573) “in any year-end legislative vehicle.” (BGov, Nov. 28 and PoliticoPro, Nov. 29)The Nov. 28 letter led by Reps. Suzan DelBene (D-WA) and Brad Wenstrup (D-OH) urged House Speaker Pelosi and Minority Leader McCarthy to expand and strengthen the Low Income Housing Tax Credit (LIHTC). The letter recommended extending a temporary increase in credit allocations enacted in 2018—and decreasing the amount of private activity bonds that are needed to access low-income housing credits (in the absence of specific credit allocation from a state housing authority). Studies suggest the latter proposal could increase affordable rental housing production by more than one million units over 10 years. (Novogradac 2020) Other important tax proposals vying for consideration include bipartisan, real estate-related bills. The first would modify REIT-related party rules to allow REITs to provide additional equity investment in struggling tenants. The second would modernize outdated tax rules that unfairly accelerate the income of condominium developers that pre-sell condo units during the construction process.The Roundtable strongly supports these efforts and will discuss affordable housing and tax policy developments during our 2023 State of the Industry and Policy Advisory Committee meetings on Jan. 24-25 in Washington, DC.# # #

Inflation Reduction Act

December 2, 2022

Roundtable Weekly

Treasury Issues Labor Guidance on Clean Energy Incentives; Roundtable Comments on EV Charging Station Credit

Clean Energy Tax Incentives Energy Policy Tax Policy

The Treasury Department on Wednesday released initial guidance on labor standards for companies to qualify for increased incentives in the Inflation Reduction Act (IRA), passed by Congress in August. (Federal Register, Nov. 30 | CNBC, Nov. 29 | Roundtable Weekly, Aug. 12) Wage, Apprenticeship Guidance The IRA allows certain clean energy projects to qualify for “bonus” tax incentives (five-times “base” rates) if they meet prevailing wage and apprenticeship requirements. This “bonus” rate structure applies to commercial installations of solar panels and other clean energy technologies (Section 48 credit), EV charging stations (Section 30C credit), and energy efficient building equipment (Section 179D deduction). Treasury’s guidance directs taxpayers and their contractors to the federal government’s sam.gov website to search for geographically-appropriate wage determinations for construction jobs relevant to the IRA’s clean energy projects. If no labor classification for the planned work is available, a prevailing wage determination can be requested from IRAprevailingwage@dol.gov. The guidance also explains that certain percentages of “labor hours” on a qualifying clean energy project must generally be performed by apprentices from registered programs. (Treasury FAQs on prevailing wage and apprenticeships, Nov. 29) The guidance takes effect for qualifying projects that start construction on or after January 29, 2023. See Treasury Notice and news release. The Real Estate Roundtable addressed labor and other IRA issues in comments submitted Nov. 4 to Treasury and the Internal Revenue Service (IRS). [Roundtable Weekly, Nov. 4 and Oct. 7 | Roundtable IRA Fact Sheet, Sept. 20]. EV Charging Stations The Real Estate Roundtable submitted separate comments today to Treasury and IRS on the Section 30C tax credit for EV charging stations—or “Alternative Fuel Vehicle Refueling Property” as amended by the Inflation Reduction Act (IRA). The Roundtable comments urge the IRS to issue guidance to clarify the components of EV charging property that qualify for the credit, the geographic areas that are 30C-eligible, and depreciation matters. According to the Wall Street Journal, “Budget estimators expect around $1.7 billion in tax credits for chargers or other alternative-fuel equipment to be claimed over a 10-year period.” (WSJ, Nov. 29) Treasury’s guidance on the IRA’s clean energy tax incentives and will be among the issues discussed during The Roundtable’s Jan. 24-25, 2023 State of the Industry and Policy Advisory Committee meetings in Washington, DC. # # #

Workplace Return

December 2, 2022

Roundtable Weekly

Increase in Office Vacancy Rates Threaten Municipalities’ Tax Base; Remote Work Seen as Contributing Factor

Workplace Return

The Roundtable’s Q4 Economic Sentiment Index released this month noted the influence of hybrid work arrangements on the office market. (News Release and Entire Q4 Report, Nov. 18) Roundtable View Roundtable President and CEO Jeffrey DeBoer commented, “We continue to urge policymakers and business leaders to push for the safe return of workers to their shared, physical workspace,” DeBoer said. (Connect CRE, Nov. 22 and CoStar, Nov. 21)He added, “A back-to-the-workplace movement would increase overall economic productivity and competitiveness, help preserve urban small businesses, and lower the threat to the property tax base of municipalities throughout the nation.” (News Release and Entire Q4 Report, Nov. 18) National Vacancy Rates Recent industry reports show hybrid work arrangements are contributing to increased office vacancy rates nationwide and threatening the health and well-being of American cities. A national report issued this month by CommercialEdge shows that large swaths of companies that have embraced remote and hybrid work since the onset of the pandemic have influenced the current decrease in demand for office space in most markets. (Commercial Observer, Nov. 21)CommercialEdge reports U.S. vacancy rates rose over the previous 12 months in 86 of 120 markets, including 22 of the 25 leading office markets. (National Office Report webpage and pdf, Nov. 2022)CommercialEdge Senior Manager Peter Kolaczynski stated in the report, “Work-from-home solidifying itself, plus broader economic uncertainty, are set to continue the stress on the office industry as we enter the new year.” Risks to Local Tax Revenue In Washington, DC, office owners alerted city officials this week that a dramatic and persistent decline in commuter activity—exacerbated by remote work—has contributed to deteriorating market conditions. The landlords warned that DC may face a significant loss of tax revenue that could threaten the city’s fiscal health, and that other cities are experiencing similar conditions. (Commercial Observer, Nov. 29 and Bisnow, Nov. 28) Prominent DC office landlords sent a letter on Monday to the city’s chief financial officer about eroding local market conditions, including increased vacancy rates, lackluster leasing activity, equity flight, and a financing drought—especially for assets with high levels of vacancy. “The pandemic and work from home have further eroded fundamentals and all indicators of the health of the District’s office market point increased systemic risk and distress,” the letter states. “For every decline of $100 million in commercial property tax assessments, annual property tax revenue falls by $2 million. It is vitally important for city officials to fully comprehend the difficult environment commercial office buildings are operating under and the risks to the future tax revenue,” the letter noted. Signatories to the Nov. 28 letter—including Carr Properties, JBG Smith, Boston Properties, Brookfield, Trammel Crow and Hines—offered to work with DC officials to discuss potential means of addressing “this enormous challenge.” # # #

December 2, 2022

Policy Comment Letter

2022-12-02_RER_30C_Comments_FINAL

Congress

November 18, 2022

Roundtable Weekly

House Republicans Win Majority as Democrats Face Leadership Transition; Lame Duck Session May Include Tax Extenders

Congress Tax Policy

Significant transition came to Washington this week as Republicans officially secured a slim majority in the House of Representatives for the 118th Congress that convenes on Jan. 3. The GOP will control House committees for the final two years of President Biden’s current term, ensuring a clash of policy approaches. (Associated Press, Nov. 17 and Wall Street Journal, Nov. 16)New House LeadershipConfirmation of the new majority ushered in leadership votes in both chambers. House Speaker Nancy Pelosi (D-CA), above, and Majority Leader Steny Hoyer (D-MD) announced they will step aside while continuing to serve in Congress. (Pelosi’s House floor comments | C-Span video, Nov. 17 | The Hill, Nov. 17)The announcements pave the way for a new generation of House Democratic leadership likely to be filled by Reps. Hakeem Jeffries (NY) as minority leader; Katherine Clark (MA) as House whip; and Pete Aguilar (CA) as caucus chair. (Politico, Reuters and Wall Street Journal, Nov. 18 | Business Insider, Nov. 17)House Republicans voted this week to nominate House Minority Leader Kevin McCarthy (CA) for speaker. (Axios and NBC News, Nov. 15)Other members of the House Republican leadership team include Representatives Steve Scalise (LA), Elyse Stefanik (NY), and Tom Emmer (MN). (The Hill and Times Union, Nov. 15)Several House races remain too close to call. (NY Times, Nov. 18)In the Senate, Minority Leader Sen. Mitch McConnell (R-KY) defeated a challenge by Sen. Rick Scott (R-FL) for Republican Minority Leader. (Louisville Courier Journal and USA Today, Nov. 16)Democrats retained their control of the upper chamber and Sen. Chuck Schumer (D-NY) will continue in his position as Senate Majority Leader. (BuzzFeed, Nov 16)Lame Duck SessionDuring the lame duck session, lawmakers will consider which policy riders to attach to must-pass spending legislation. Current government funding expires on Dec. 16.Tax issues of importance to CRE that may be considered include rules related to business interest deductibility and an expired, temporary increase in allocations of low-income housing tax credits (LIHTCs) to states. Additionally, the 100% bonus depreciation benefit starts phasing down at the end of this year. (BGov, Nov. 16 and Roundtable Weekly, Nov. 11)Senate Finance Chair Ron Wyden (D-OR), above, said this week that tax extenders are “obviously” a priority for the panel. “All of the negotiators are committed to getting this done before we wrap up,” Wyden commented. (PoliticoPro, Nov. 15)Wyden added that he is also focused on energy and housing issues, including a new tax break to subsidize housing for average Americans. “There’s room to work on these issues in a bipartisan way as well,” Wyden noted. “Housing tax credits, for example, have long had bipartisan support.” (BGov, Nov. 14)Rep. Kevin Brady of Texas, the top Republican on the tax-writing House Ways and Means Committee, last week said he is talking with Democrats about a potential lame duck deal on taxes. (PoliticoPro, Nov. 10)# # #

News

November 18, 2022

Roundtable Weekly

Rising Interest Rates, Tighter Liquidity, Hybrid Work, and Cost Cutting Reflected in Roundtable’s Q4 Sentiment Index

Quarterly Sentiment Index

The Real Estate Roundtable’s Q4 Economic Sentiment Index dropped to an overall score of 39, five points lower than the previous quarter. Commercial real estate executives cited a reduction in available equity and debt capital, changes in post-pandemic office use, general business cost cutting, and employee layoffs among the contributing factors causing market uncertainty and a decrease in transactions. (News Release and Entire Q4 Report, Nov. 18)Roundtable ViewRoundtable President and CEO Jeffrey DeBoer, above, said, “Industry executives report that asset valuation difficulties, coupled with the tightened availability and cost of capital, have caused a slowdown in commercial real estate investment and overall transactions. This situation, magnified by steep inflation and interest rate hikes, is leading to investor hesitancy. Additionally, while some businesses are instituting greater return-to-the-workplace policies, many are not, partially due to employee reluctance. Ultimately, greater clarity on businesses’ future post-pandemic workspace demands is needed to provide a more reliable window into asset valuations, particularly in the office sector.”“As an industry, we’re working with tenants to provide attractive building safety and use amenities—and where possible, converting underutilized property types to other uses, including housing. We continue to urge policymakers and business leaders to push for the safe return of workers to their shared, physical workspace. A back-to-the-workplace movement would increase overall economic productivity and competitiveness, help preserve urban small businesses, and lower the threat to the property tax base of municipalities throughout the nation,” DeBoer added.The Roundtable’s Economic Sentiment Index—a measure of senior executives’ confidence and expectations about the commercial real estate market environment—is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive.Although the Q4 Overall Index registered an Overall score of 39, the Current Index registered 29—a nine-point drop from Q3 2022—and the Future Index posted a score of 48 points, a dip of three points from the previous quarter. (Download Q4 report, Nov. 18)Market PerspectivesThe return of office workers to buildings in New York, Boston, Atlanta, San Francisco and other cities is languishing well below pre-pandemic levels as hybrid work, layoffs and higher interest rates act as drags on the office market, according to a Nov. 17 New York Times article. Despite the headwinds, office owners believe demand will eventually return.Roundtable Chairman Emeritus (2015-2018) William Rudin (Co-Chairman & CEO, Rudin Management Company, Inc.) noted in the article that occupancy was much higher at buildings occupied by financial companies, many of which have required employees to return to the workplace.The impact of layoffs, macroeconomic trends, and office demand were discussed this week by Roundtable Board Member Scott Rechler (Chairman CEO, RXR), above, in a CNBC Squawk on the Street interview. Rechler, a member of the New York Fed, said he expects the next 12 to 18 months will be "choppy" as the Federal Reserve continues to fight inflation, but that a strong economy will emerge with significant growth potential.Economic conditions and commercial real estate markets will be discussed during The Roundtable’s Jan. 24-25 State of the Industry in Washington.# # #

Climate Policy

November 18, 2022

Roundtable Weekly

White House Releases Net-Zero “Road Map” as EPA Credits Strides in Building Efficiency

Climate Policy ENERGY STAR

The Biden administration this month released a “road map” to reach net zero emissions by 2050 by focusing on five key areas for research and development, including efficient buildings and grid decarbonization. (White House Fact Sheet)Buildings Sector EmissionsOne of the priorities in the administration’s net zero initiative is to accelerate innovation in “efficient building heating and cooling.” It notes that HVAC is responsible for nearly a fifth of commercial building energy use.“Innovation is required to reduce upfront costs to enable widespread adoption” of retrofits that replace traditional HVAC systems with heat pumps, automated controls that interact with the grid, and the switch to refrigerants with low global warming potential, according to the R&D report.ENERGY STAR Commercial Buildings The Environmental Protection Agency (EPA) released a separate report this week marking two decades of ENERGY STAR Commercial Buildings. EPA concluded that the overall stock of U.S. office buildings has become 30 percent more energy efficient since the turn of the century. Top-of-class “certified” office buildings decreased energy use by 30 percent in the last decade alone.EPA’s “Two Decades of ENERGY STAR” study also found that owners and managers cite “operations and maintenance” as the most important factor to optimize building energy performance—more than investments in original design and construction, or to retrofit older buildings with new equipment.Net-Zero TrackerNew data show corporate emissions cuts still lag far behind their pledges. A "Net-Zero Tracker" by the investment research firm MSCI finds public companies' emissions are out of step with global targets. (Axios, Oct. 18 and Nov. 3)Additionally, an Accenture report shows that more than 90 percent of large companies that have made net zero emissions pledges will miss their goals at their current pace. (The Hill, Nov. 3)Clean Energy IncentivesVarious clean energy tax incentives in the Inflation Reduction Act (IRA) passed by Congress in August were the focus of extensive comments submitted by The Real Estate Roundtable to the Treasury Department and the Internal Revenue Service (IRS) earlier this month. [Nov. 4 letter and Roundtable Weekly, Aug. 12]Stacking multiple incentives on the same buildings “must be encouraged for the real estate industry to strive towards net zero emissions,” The Roundtable stated in its comments.The Roundtable’s Sustainability Policy Advisory Committee (SPAC) will discuss the IRA’s clean energy incentives during its Jan. 25, 2023 meeting, which will be held in conjunction with The Roundtable’s State of The Industry meeting.# # #

Post-Election Lame Duck Session Faces Crowded Agenda

Congress

Congress returns next week for a lame duck session after the midterm elections, which have left party control in the Senate and House uncertain as final votes are tallied in races throughout the country. A new policy landscape for 2023 will take shape as current policymakers work on a funding deal by Dec. 16 to avert a partial government shutdown. (CBS News, “The unresolved 2022 House and Senate races that will determine control of Congress,” Nov. 10) Omnibus Riders Lawmakers return Nov. 14 but the official lame-duck session will not begin until Nov. 28, when the top priority will be an “omnibus” spending bill. (BGov, Nov. 7)A diverse array of policy priorities will be considered as possible add-ons to the must-pass fiscal 2023 appropriations package, including several issues of importance to commercial real estate. (Roundtable Weekly, Oct. 21)Among the many tax issues under consideration are recently expired provisions passed as part of the Tax Cuts and Jobs Act of 2017 (TCJA), including rules related to business interest deductibility. Also in play are an expired, temporary increase in allocations of low-income housing tax credits (LIHTCs) to states. Additionally, the 100% bonus depreciation benefit starts phasing down at the end of this year.A key element of House Republicans’ Commitment to America policy agenda released in September is to make permanent provisions from the TCJA that have recently expired or are scheduled to sunset. (Tax Notes, Nov. 10 and Bloomberg, Sept. 23) What’s NextRep. Kevin Brady of Texas, the top Republican on the tax-writing House Ways and Means Committee who is retiring at the end of the year, said he is talking with Democrats about a potential lame duck deal on taxes, but is ambiguous about its prospects. According to PolticoPro, Brady said, “It’s so difficult to predict,” noting that lame ducks “can be lightning quick or they can go through mid-December.” [Photo: Brady, right, with Ways and Means Chairman Richard Neal (D-MA)]A massive end-of-year spending package may also include another extension of The National Flood Insurance Program, which is now more than $20 billion in debt and extended on a short-term basis more than 20 times. (BGov, Nov. 7) Congress will also need to raise the federal borrowing limit within the next six months to avoid a government default. The 118th Congress convenes on January 3, 2023.# # #

Property Conversions

November 11, 2022

Roundtable Weekly

CRE “Adaptive Reuse” Report Shows Increase; Industry Coalition Urges Expansion of Conversion Incentive

Property Conversions

The conversion of former offices to apartments reached an all-time high in the last two years—40% of all existing building repurposing projects—reflecting a rapid increase in “adaptive reuse” throughout the nation, according to a Nov. 7 RentCafe analysis of Yardi Matrix data. (Download pdf or see website)Conversion TrendLarge cities such as Philadelphia, Cleveland, and Pittsburgh have embraced conversion projects to repurpose old buildings and unused office spaces, according to the report. (BusinessInsider, Nov. 8)Offices are the largest share of all building types undergoing conversion, representing 28% of future apartments, followed by hotels (22%) and factories (16 %).Los Angeles ranks first in the nation with the most converted apartments in the first half of 2022. (RentCafe analysis of Yardi Matrix data.)Conversion Development ObstaclesAs building occupancy levels remain depressed due to lingering remote working arrangements, cities such as New York, Los Angeles and Chicago are proposing plans to relax building rules and create tax incentives for property owners undertake conversions. (Axios, Sept. 28)A Roundtable-led coalition of 16 national real estate organizations on Oct. 12 recommended certain enhancements and expansions to a 20 percent tax credit for qualified property conversion expenditures, which is part of the Revitalizing Downtowns Act (S. 2511, H.R. 4759). The recommendations include expanding the category of properties eligible for the credit to various types of commercial buildings such as shopping centers and hotels.The coalition letter also emphasized the significant obstacles that the industry continues to face with conversion projects. Obstacles that frequently arise include property acquisition, permitting, development review, toxic contamination, property age and code conformance, and a “not in my backyard” (NIMBY) sentiment. Additionally, the structural elements of an existing structure—columns, beams, floor layouts and size, ceiling height, etc.—often pose hurdles that add cost and extra delays to an otherwise desirable repurposing of a building. (GlobeSt, Oct. 12 and Roundtable Weekly, Oct. 14)The letter to the bill’s sponsors, Sen. Debbie Stabenow (D-MI) and Rep. Jimmy Gomez (D-CA), offers several recommendations to help ensure the legislation drives additional economic investment and brings down housing costs.# # #

Financial Stability

November 11, 2022

Roundtable Weekly

Fed Reports U.S. Financial Stability Risks Include Inflation, Asset Valuation Pressures, and Cyber Attacks

Cyber Risks Cybersecurity Federal Reserve The Fed

Near-term risks to the U.S. economy and financial system include inflation, asset valuation pressures and cyber attacks, according to the Federal Reserve’s semiannual Financial Stability Report released this month. (Wall Street Journal, Nov. 4) Stability Threats “Higher-than-expected interest rates could lead to increased volatility in financial markets, stresses to market liquidity, and declines in asset prices, including prices of both commercial and residential real estate properties,” the central bank states in its report. The report warns that such effects could cause losses at a range of financial intermediaries, reducing their access to capital and raising their funding costs—and pose adverse consequences for asset prices, credit availability, and the economy. Federal Reserve Vice Chair Lael Brainard stated the American financial system has held up through the turbulent developments of the past year. She said, "Household and business indebtedness has remained generally stable, and on aggregate households and businesses have maintained the ability to cover debt servicing, despite rising interest rates." Cybersecurity Concerns Respondents to the central bank’s survey on stability threats also noted continuing concerns about the Russian invasion of Ukraine, high oil prices and a potential conflict between China and Taiwan. Cyber attacks pose an additional risk that “could come as retaliation for sanctions imposed on Russia,” according to the Fed’s report. The Roundtable’s Homeland Security Task Force will hold a conference call on Monday, November 28 that will focus on a new Cyber Risk Summary briefing on Commercial Facilities—includes Commercial Real Estate—from the Cybersecurity and Infrastructure Security Agency (CISA). [To register, contact Andy Jabbour of the Real Estate Information and Sharing Network (RE-ISAC)] U.S. financial institutions processed approximately $1.2 billion in ransomware-related payments last year, a nearly 200 percent increase compared to 2020, according to the Treasury Department’s Financial Crimes Enforcement Network. (FinCEN report, Nov. 1) Cybersecurity issues and CRE will be discussed during the next HSTF meeting on Jan. 25, 2023—held in conjunction with The Roundtable’s State of the Industry meeting. (Roundtable Weekly, Oct. 7) # # #

Energy and Tax Policy

November 4, 2022

Roundtable Weekly

Roundtable Submits Comments to IRS on New Clean Energy Tax Incentives

Clean Energy Tax Incentives Energy Policy Tax Policy

The Real Estate Roundtable submitted extensive comments to Treasury and the Internal Revenue Service (IRS) today that address various clean energy tax incentives in the Inflation Reduction Act (IRA) passed by Congress in August. [Nov. 4 letter and Roundtable Weekly, Aug. 12] Need for Clarifications The Roundtable’s comments are in response to recent IRS notices on a host of issues affecting CRE. [Roundtable Weekly, Oct. 7 and Roundtable Fact Sheet, Sept. 20]. The letter requests further guidance and clarifications that would: Allow businesses to “layer” multiple credits and deductions on the same buildings; Support building retrofits that contemplate an asset’s “conversion,” such as from multifamily to office, within the revised building efficiency incentive under Section 179D; Maximize installations of solar, wind, and other technologies to feed renewable power to buildings onsite—while also allowing property owners to “sell” excess generation back to the grid; Optimize clean power deployment in low-income housing and economically distressed areas; Offer a “safe harbor” for employers seeking the IRA’s credit boosts when they pay prevailing wages to laborers and mechanics involved in energy project construction and installation; and Capitalize on changes to the tax code that would allow REITs, partnerships, and other businesses to “transfer” certain clean energy credits to third parties. Roundtable Advocacy Roundtable President and CEO Jeffrey DeBoer stated, “The Roundtable’s comments to policymakers will help ensure that the Inflation Reduction Act spurs new investments in clean energy and climate-saving measures that benefit our industry and our country.” The Roundtable letter was developed with input from its Sustainability and Tax Policy Advisory Committees. Treasury and the IRS are expected to start issuing implementing guidance before the end of the year. Roundtable Board Member and Sustainability Policy Advisory Committee Chair Tony Malkin, center in photo above, (Chairman, President, and CEO, Empire State Realty Trust, Inc.) led a panel discussion in September with Roundtable staff on how the IRA’s “clean energy” tax incentives impact CRE. [Watch the discussion]. IRA incentives were discussed this week during a Blackstone ESG Summit panel featuring former Vice Chair of The Roundtable’s Sustainability Committee, Dan Egan (BX’s Americas Head of Real Estate ESG) and Duane Desiderio, Roundtable Senior Vice President and Counsel. # # #

CRE News And Views

November 4, 2022

Roundtable Weekly

“Emerging Trends in Real Estate” Reveals Bifurcated Market as Industry Adapts to Pandemic and Economic Influences

CRE Trends

The Roundtable's Real Estate Capital Policy Advisory Committee (RECPAC) met this week to discuss the current state of credit and capital markets. The Urban Land Institute (ULI) and PwC US also provided data points about market fundamentals in their recently issued publication, Emerging Trends in Real Estate 2023.Shift to “New Normal”RECPAC’s meeting in New York City focused on interest rate trends, global capital flows, and the implications for financing and property development. (For more information on RECPAC, contact Roundtable Senior Vice President Chip Rodgers or call 202-639-8400.)ULI-PwC reports that industry participants are cautiously optimistic amid diminishing pandemic tailwinds and the potential for a “short yet shallow” recession. (ULI, Oct. 28 | download 125-page report) The annual report—a compilation of data and insights from 2,000 real estate experts—shows the industry is:Reassessing the use of office space,Addressing climate change impacts and ESG demands,Experiencing a shift in investor sentiment and capital, andFacing new opportunities from government infrastructure spending.The report’s survey revealed bifurcated market trends, with some aspects of the industry reverting to pre-pandemic patterns as others shift to a “new normal” that includes remote work arrangements. (PWC website | download full report)Asset Classes in FluxULI Senior Vice President Anita Kramer commented that as people continue to adapt to pandemic-influenced changes in their lives, property asset classes are in flux as owners and investors assess how to move forward. (Bisnow, Oct. 27 and (ULI news release, Oct. 27)Byron Carlock, US real estate leader for PwC and a member of The Real Estate Roundtable, told REjournals this week that challenges facing CRE include rising interest rates, return-to-the-office issues, and the possibility of converting office space to alternative uses. (Interview with Midwest Real Estate News, Nov. 2)Carlock said, “The downtown buildings with large floor plates built from the ‘60s to the ‘80s might need a change. That’s significant because about 80% of our office stock was built in the ‘80s or before. We will see a great change in which office space is relevant and which is not.” (Roundtable Weekly, Oct 12—“Real Estate Industry Urges Lawmakers to Consider Tax Incentive for Property Conversions”)Roundtable ReportsRoundtable President and CEO Jeffrey DeBoer this week discussed the industry’s public policy agenda on the verge of the midterm elections during the American and Development Association’s Fall 2022 Conference in Washington. [Photo, left to right: ARDA President and CEO Jason Gamel, Former Congressman (R-PA) and Chair of the House Transportation Committee Bill Shuster, Jeffrey DeBoer, and U.S. Travel Association President and CEO Geoff Freeman.]The Roundtable plans to release its Q4 Economic Sentiment Index report next week. The quarterly index provides a gauge of CRE leaders' views about the overall health of property markets, debt and capital availability, pricing, and asset values.# # #

Clean Energy Tax Incentives

November 4, 2022

Policy Comment Letter

Roundtable Comments on Clean Energy Tax Incentives in the Inflation Reduction Act (IRA)

Clean Energy Tax Incentives, Inflation Reduction Act,

Clean Energy Tax Incentives

November 4, 2022

Policy Comment Letter

Comments to IRS on New Clean Energy Tax Incentives

Clean Energy Tax Incentives, Energy Policy, Inflation Reduction Act, Tax Policy,

Homeland Security

October 28, 2022

Roundtable Weekly

Federal Officials, Roundtable Focus on Potential Election-Related Threats

Homeland Security HSTF

This week, U.S. security officials released information on their efforts to secure the nation’s election infrastructure and protect American voters from intimidation, discrimination or threats of violence related to the Nov. 8 midterm elections. The potential for political violence, cyberattacks and mitigation strategies were also among the topics of discussion during yesterday’s Real Estate Roundtable Homeland Security Task Force (HSTF) virtual meeting. (Presentation to HSTF | Justice Department bulletin and Politico, Oct. 24)Election SecurityAs election sites and offices are hardening formerly soft targets, hiring security guards, and installing bulletproof and bomb-resistant glass, the HSTF meeting featured a discussion with Mohamed Telab—Deputy Regional Director (DRD) for the Cybersecurity and Infrastructure Security Agency’s (CISA) Region II—on federal resources available for securing elections. (Axios, Oct. 9 and CISA website)Earlier this month, CISA Director Jen Easterly said, “At this time, we are not aware of any specific or credible threats to compromise or disrupt election infrastructure” although the current threat environment is “more complex than it has ever been.” (Politico, Oct. 24 and Reuters, Oct. 17)The FBI previously issued a public service announcement on Oct. 12 warning about election crimes and the Department of Homeland Security announced in June that “calls for violence by domestic violent extremists” against election workers, candidates and democratic institutions will likely rise closer to the midterms. (CNBC, Oct. 27)Local TacticsDomestic disinformation campaigns and homegrown threats to poll workers are emerging as the more significant concerns ahead of midterm elections than foreign interference. Extremists are reportedly focusing their efforts locally, monitoring neighborhood ballot boxes and signing up as poll workers. (Axios, Oct. 26)The Roundtable’s HSTF and the Real Estate Information Sharing and Analysis Center (RE-ISAC) work closely with federal officials on potential cyber and physical threats to CRE. Roundtable members interested in participating in the HSTF or RE-ISAC can contact Roundtable Senior Vice President Chip Rodgers or call 202-639-8400.# # #

Tax Policy

October 28, 2022

Roundtable Weekly

Ways and Means Chair Supports LIHTC in Year-End Tax Extenders Package

Ways and Means Chairman Richard Neal (D-MA) this week expressed support for including the low-income housing credit (LIHTC) in a year-end tax extenders legislative package. (Roll Call, Oct. 25). Affordable Housing & LIHTC This week, Neal referred to the LIHTC in an interview with Roll Call, stating, “But for that credit, there's a lot of housing that doesn't get built at a time when the housing crunch is substantial across the country. I think it's a pretty important tax vehicle. It's demonstrated its value time and again.”A 12.5% temporary increase in the annual LIHTC allocation to states enacted in 2018 expired at the end of 2021. The credit increase may be extended or further expanded when Congress returns from the midterm elections. (GlobeSt, Oct. 25 and Roundtable Weekly, Oct. 21)In 2020, nearly a quarter of American renters spent 50% or more of their income on housing, according to the most recent data available from the U.S. Census Bureau. (Pew Research Center, March 23) Congressional ActionThe Roundtable-supported Affordable Housing Credit Improvement Act (S.1136 and H.R. 2573)—introduced in 2021 by Washington Democrats Sen. Maria Cantwell and Rep. Suzan DelBene—would expand the pool of tax credits, make it easier to combine LIHTC with other sources of capital like private activity bonds, and facilitate LIHTC rehab projects. (Detailed bill summary and (Tax Notes, July 21)Neal previously discussed his support for creating nearly 1 million additional affordable homes through tax incentives during a July 12 House Ways and Means Committee hearing. (See also Joint Committee on Taxation, Present Law and Background Relating to Tax Incentives for Residential Real Estate, July 13)Ways and Means Ranking Member Kevin Brady (R-TX) said the committee will consider the LIHTC for a year-end package, but said, “There’s challenges with the program, I’ve always thought. For me, it doesn’t fall in the highest priority of buckets.” (CQ, Oct. 24) Beyond LegislationSeveral new federal agency actions aimed at closing the housing supply shortfall were announced by the Biden administration on Oct. 7 as part of its Housing Supply Action Plan, launched in May. (GlobeSt, Oct. 27 | Multi-Housing News, Oct. 10 | White House statement, Oct. 7 | Roundtable Weekly, May 20)Roundtable President and CEO Jeffrey DeBoer, above, recently stated, “Expanding the supply and availability of affordable housing deserves a coordinated local, state, and national policy action plan. Local zoning restrictions, permitting issues, and the oversized influence of NIMBYs—coupled with high and now significantly rising labor and material costs—are the true factors limiting housing supply, and in turn, increasing housing costs. Government at all levels needs to be part of the solution, not part of the problem.” (Roundtable Weekly, July 1 and July 22) The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) has formed an Affordable Housing Working Group, which is working with the Research Committee to develop proposals on expanding the nation’s housing infrastructure. # # #

Tax Policy

October 21, 2022

Roundtable Weekly

Congressional Lame Duck Session May Include Tax Policies Impacting Real Estate

Lawmakers returning after the midterm elections for a lame duck session will work on a possible FY2023 “omnibus” budget package that may include tax policies of importance to commercial real estate. Omni First The first congressional priority will be a massive “omnibus” budget package that needs to pass by December 16—the deadline set by a Continuing Budget Resolution passed in September—to avoid a partial government shutdown. (Roundtable Weekly, Sept. 30)Whether business tax relief—e.g. a delay in the pending phase-out of 100 percent bonus depreciation, tax extenders, or a fix to the business interest deductibility rules—will be attached to an omni package may depend on whether a bipartisan deal can be struck on child tax credit relief. (Politico, Oct. 6 and Tax Policy Center, Oct. 6)Tax ExtendersCertain provisions from the Tax Cuts and Jobs Act of 2017 (TCJA) recently expired, including rules related to business interest deductibility. TCJA’s 100% bonus depreciation benefit starts phasing down at the end of this year. Other expired tax provisions include a temporary increase in allocations of low-income housing tax credits (LIHTCs) to states. The Real Estate Roundtable has long supported well-designed, targeted tax incentives like the LIHTC that are aimed at boosting the construction and rehabilitation of badly needed affordable and workforce housing. (Roundtable 2022 Policy Agenda Tax Section) House Republicans have made the permanent extension of the TCJA tax cuts a key element of their Commitment to America policy agenda. (Bloomberg, Sept. 23 and ABC News, Sept. 22) Packed Lame Duck A cascade of other national policy issues will vie for attention in the tightly packed lame duck agenda, including reauthorization of defense programs, hurricane relief, immigration, election reform, marriage equality and more. (Axios, Sept. 29)House Republican Minority Leader Kevin McCarthy (R-CA) said that if the GOP controls the House in 2023, they will use raising the debt limit as leverage to force spending cuts—which could include cuts to Medicare and Social Security—and possibly limit funding to Ukraine. (PunchBowl, Oct. 18 and Bloomberg Law, Oct. 11) The House returns Nov. 9 and the Senate on Nov. 14. # # #

Environmental Policy

October 21, 2022

Roundtable Weekly

White House “Clean Air in Building Challenge” Invites Owner Participation; SEC Delays Climate Rule

Climate Policy Environmental Policy Healthy Buildings Indoor Air Quality

Real estate and other industry leaders recently participated in the first White House Summit on Indoor Air Quality (IAQ) as part of the Biden administration’s continued focus on the benefits of healthy buildings in the pandemic era. (Summit video, Oct. 12 and International WELL Building Institute, Oct. 13) Building Owner “Pledge” The summit included a website launch inviting businesses to participate in the Clean Air in Buildings Challenge, an initiative announced by the administration earlier this year. (Roundtable Weekly, March 18, 2022) The Challenge encourages building owners and managers to sign a pledge to: Create a clean indoor air “action plan” (e.g., regular HVAC inspections and maintenance) Optimize fresh air ventilation (e.g., use economizers, open operable windows) Enhance air filtration (e.g., install MERV-13 filters) Communicate IAQ practices with building occupants Speakers at the summit included Silverstein Properties’ Chief Innovation Officer Guy Vardi and Dr. Joseph Allen, Healthy Buildings Program Director at Harvard University. Roundtable President Jeffrey DeBoer interviewed Dr. Allen at the height of the COVID-19 lockdown. (Roundtable Weekly, May 8, 2020 | Watch the video interview) Agency Developments The Environmental Protection Agency (EPA) recently released a Request for Information to solicit feedback from industry, researchers, and the public on key characteristics and measures of improved ventilation, filtration, and air cleaning in buildings. Comments are due by Dec. 5, 2022. In other news, the Securities and Exchange Commission will reportedly delay by “months” its release of a long-anticipated final rule on corporate climate disclosures. (Bloomberg Law, Oct. 19) The agency continues to assess the legality of its proposal under recent U.S. Supreme Court case law and sift through more than 14,000 comments received from the public—including input provided by The Roundtable and other CRE groups in June. (Roundtable Weekly, Sept. 16 and June 10) # # #

Infrastructure

October 21, 2022

Roundtable Weekly

White House Seeks to Speed Up Infrastructure Implementation

Infrastructure

A White House “Accelerating Infrastructure Summit” on Oct. 13 showcased actions by the administration to hasten infrastructure project construction by improving coordination with mayors and governors. (Summit video and White House Action Plan)Accelerating IIJA InvestmentMitch Landrieu, the White House’s infrastructure coordinator (photo above) stated, “With over 90% of Bipartisan Infrastructure Law funding being delivered by non-federal agencies, our state, tribal, regional, territorial, local and industry partners must also find ways to accelerate the delivery of infrastructure.” (ABC News, Oct. 13)The plan—funded under the $1.2 trillion bipartisan Infrastructure Investment and Jobs Act (IIJA) enacted last November and supplemented by the Inflation Reduction Act in August—is the most significant investment in infrastructure since the interstate highway initiative during the Eisenhower administration. The Roundtable strongly backed the IIJA as it moved through the legislative process. (Roundtable Weekly, Nov. 12, 2021)The IIJA broadens access to federal funding programs by targeting resources toward communities. The administration launched a webpage on Grants.gov and a Technical Assistance Guide to help communities with infrastructure project resources, from grant writing to funding eligibility requirements. A web-based interactive map also shows where IIJA funds have been disbursed in communities across the nation.On Time, On Task, and On BudgetThe White House acceleration plan details numerous federal policy initiatives and complements the administration’s Permitting Action Plan, released in May. (Transportation Today, Oct. 17)The Roundtable continues to support federal transportation infrastructure investments to spur economic growth, support local communities, and enhance America’s competitiveness. (Roundtable Weekly, May 20 and Roundtable’s 2022 Policy Agenda)# # #

CRE Conversions, Tax Policy

October 14, 2022

Roundtable Weekly

Real Estate Industry Urges Lawmakers to Consider Tax Incentive for Property Conversions

Property Conversions Tax Policy

A Roundtable-led coalition of 16 national real estate organizations on Oct. 12 recommended certain enhancements and expansions to the Revitalizing Downtowns Act (S. 2511, H.R. 4759). The bill was introduced by Sen. Debbie Stabenow (D-MI) and Rep. Jimmy Gomez (D-CA) to encourage the conversion of older buildings into new uses. (Coalition letter) Qualified Property Conversions Credit The coalition noted that many buildings are being reimagined and repurposed to address a severe shortage of housing and meet other post-pandemic business needs. Where appropriate, property conversions can be a cost-effective means to develop new housing supply, create jobs, and generate critical sources of local property tax revenue while saving energy and reinvigorating communities. The Revitalizing Downtowns Act would provide a 20 percent tax credit for qualified property conversion expenditures. The credit is modeled on the historic rehabilitation tax credit and could be used for office buildings that are at least 25 years old at the time of the conversion. An office-to-residential conversion project may qualify for the credit if the project provides at least 20 percent affordable housing—or is subject to an alternative affordable housing arrangement under state or local policy, ordinance, or agreement. Real Estate Industry Recommendations The letter to Sen. Stabenow and Rep. Gomez offers several recommendations to help ensure the legislation drives additional economic investment and brings down housing costs. The recommendations include: (a) expanding the category of properties eligible for the credit to include other types of commercial buildings, such as shopping centers and hotels; (b) extending the incentive to real estate investment trusts (REITs); and (c) reducing the conversion expenditure requirement from 100 percent of the building’s basis to 50 percent—along with half-a-dozen other suggestions. The coalition letter is the work product of a property conversions working group created by The Real Estate Roundtable’s Tax Policy Advisory Committee. The working group has reviewed and considered the challenges and impediments confronting potential property conversion activities. Recent media articles on property conversions include "Cities push to convert deserted office buildings into housing” (Axios, Sept. 28) and “Multifamily Developers Turn Some Dead Office Space into Apartments” (WealthManagement.com, Oct. 4). # # #

Affordable Housing

October 14, 2022

Roundtable Weekly

Biden Administration Expands Low-Income Housing Financing and Provides More Flexibility to Affordable Housing Developers

The Biden administration on Oct. 7 announced several new federal agency actions aimed at closing the housing supply shortfall as part of its Housing Supply Action Plan, launched in May. (White House statement, Oct. 7 | Multi-Housing News, Oct. 10 | Roundtable Weekly, May 20)LIHTC ReformThe White House’s announcement focused on efforts to reduce barriers to affordable housing construction and preservation by:Finalizing Treasury rules that reform the Low-Income Housing Tax Credit (LIHTC) income guidelines. The new rules provide greater flexibility to develop mixed-income housing, housing for very low-income tenants, and housing in sparsely populated rural areas. Specifically, the final regulations create an alternative means of complying with the rent restriction requirements of the LIHTC. The new rules allow owners to measure and average their tenants’ income based on a broader range of qualifying incomes (20 to 80 percent of the area median). Extending LIHTC deadlines to ensure that affordable housing projects delayed by public health, economic, and supply-chain issues can be built as expeditiously as possible and still qualify for the credit. (IRS Notice 2022-52)The Real Estate Roundtable has long supported well-designed, targeted tax incentives like the LIHTC that are aimed at boosting the construction and rehabilitation of badly needed affordable and workforce housing. (Roundtable 2022 Policy Agenda Tax Section)Other Federal Actions Announced by the White HouseReforming and streamlining Fannie Mae’s and Freddie Mac’s Forward Commitment programs, which allow developers to secure financing to pay off a construction loan when construction has been completed and the housing project has been approved for occupancy. Each GSE will be able to provide $3 billion in Forward Commitments per year—above and beyond the multifamily purchase cap.Enabling more affordable housing development and preservation with State and Local Fiscal Recovery Funds (SLFRF) under the American Rescue Plan. Treasury and the Department of Housing and Urban Development jointly published a “How-To” Guide to further encourage state and local governments to make use of these funds with other sources of federal funding.Promoting more housing options near transit and other modes of transportation, coordination of transportation and housing planning, and rewarding jurisdictions that have removed barriers to housing development. Increasing transportation investments that can connect and expand affordable housing supply. The Department of Transportation (DOT) has begun awarding grants for recipients where local governments are improving their transportation infrastructure and promoting a range of transportation, environmental, urban planning, and housing policy goals.DOT also announced “TIFIA 49,” which authorizes borrowing from the Transportation Infrastructure Finance and Innovation Act (TIFIA) program up to 49 percent of eligible costs for projects that meet eligibility requirements, an increase from 33 percent of eligible project costs.Real Estate ViewsThe National Multifamily Housing Council and National Apartment Association applauded the Biden administration’s plan. Their joint statement noted the U.S. needs to produce 4.3 million more apartments by 2035 to keep up with demand.Roundtable Member Willy Walker, above left, chairman and CEO of Walker and Dunlop, joined CNBC’s Squawk on the Street on Oct. 12 to discuss supply and demand challenges in the housing market, rent increases associated with inflation, and the consequence of banks pulling back loans from commercial real estate. (Watch video) The Real Estate Roundtable’s Research Committee and Real Estate Capital Policy Advisory Committee (RECPAC) has formed an Affordable Housing Working Group, which is working on a report to address expansion of the nation’s housing infrastructure. # # #

Capital and Credit

October 14, 2022

Roundtable Weekly

FASB Approves Two-Year Extension for Transitioning LIBOR Contracts to Alternative Benchmark

LIBOR

The Financial Accounting Standards Board (FASB) recently voted to extend accounting relief to companies working to transition financial contracts from the London Interbank Offered Rate (LIBOR) benchmark to an alternative benchmark such as the Secured Overnight Financing Rate (SOFR). (Wall Street Journal, Oct. 5) Transition Timing LIBOR was the dominant reference rate used in recent decades for financial contracts—including commercial real estate debt, mortgages, student loans and derivatives—worth an estimated $223 trillion. (Roundtable Weekly, Dec. 10, 2021.The FASB relief allows companies until the end of 2024 to update or renegotiate Libor-backed loans. Companies that change the reference rate—as opposed to a more substantive alteration such as extending the loan’s maturity—will not be required to record a new loan. (UHY, Oct. 6)The two-year, optional extension from Dec. 31, 2022 to Dec. 31, 2024 aims to help banks and borrowers transition LIBOR-based loans—including legacy “tough legacy” contracts.Banks can continue using LIBOR in U.S. dollars and other currencies on existing loan contracts through June 2023. U.S. banks stopped issuing new financial contracts using LIBOR at the end of last year. (Wall Street Journal, June 7)LIBOR to SOFRThe Federal Reserve and other regulators prefer banks and borrowers use the alternative benchmark SOFR. Companies are considering using two versions: overnight SOFR, administered by the Federal Reserve Bank of New York—and term SOFR, which benefits companies that borrow or lend in one-, three- or six-month periods. (NYS Society of CPAs, Oct. 6)The Wall Street Journal reported that federal regulators prefer a version of SOFR because of its stability, as opposed to credit-sensitive alternatives such as the Bloomberg Short Term Bank Yield Index.Legislative SupportSeparately, Congress passed the Adjustable Interest Rate (LIBOR) Act (H.R. 4616) in March to provide for an orderly transition of debt contracts away from LIBOR, as part of an “omnibus” bill to fund the government. (Roundtable Weekly, March 11)The Real Estate Roundtable and 17 national trade groups submitted letters in 2021 on April 14 and July 27 to policymakers in support of measures to address “tough legacy” LIBOR-based contract issues. (Roundtable Weekly, Dec. 10, 2021) The LIBOR transition will be among the issues for discussion during The Roundtable’s Real Estate Capital Policy Advisory Committee’s (RECPAC) next meeting on Nov. 2 in New York City. # # #

October 12, 2022

2022-10-12-property conversions-16orgs-ltr FINAL

CRE Conversions

October 12, 2022

Policy Comment Letter

Roundtable-led Coalition Comment on Revitalizing Downtowns Act’s 20% Tax Credit for Qualified Property Conversion Expenditures

Property Conversions, Tax Policy,

Energy and Tax Policy

October 7, 2022

Roundtable Weekly

Treasury Requests Public Input on Inflation Reduction Act Energy Tax Incentives

Energy Policy Tax Policy

The Treasury Department and Internal Revenue Service (IRS) issued six separate notices this week to gather public input regarding the clean energy tax credits and deductions in the Inflation Reduction Act (IRA). (Treasury Fact Sheet, Oct. 4 and Roundtable Weekly, Sept. 30)CRE ImpactThe Treasury and IRS notices most relevant to the real estate industry concern the new law’s provisions regarding:Incentives to improve energy efficiency such as the tax deduction for commercial buildings (Section 179D) and the credit for single- and multi-family residential construction (Section 45L);Credits for specific clean energy technologies like solar panels, energy storage, combined heat and power systems, dynamic glass, and grid interconnection property (Section 48);Credit monetization which can allow businesses to transfer the amount of certain credits to third parties; andEnhancements to boost the value of certain credits where projects are located in economically distressed areas, or that meet labor requirements for prevailing wages and apprenticeship hiring.Comments are due to the Treasury and IRS by November 4.Roundtable fact sheets detail the IRA’s Clean Energy Tax Incentives (Sept. 20) and Revenue Provisions (Aug. 17).Rapid ImplementationCongress authorized $270 billion to the IRA’s clean energy tax incentives – putting Treasury and the IRS, in coordination with the Energy Department and the Environmental Protection Agency, at the forefront of implementation. (E&E Greenwire, Oct. 5 and Roundtable Weekly, Aug. 12)One of Treasury’s guiding principles for the public comment process is to “provide clarity and certainty” for businesses and other taxpayers to access the incentives, “so the climate and economic benefits can take effect as quickly as possible.” (Treasury Fact Sheet)White House Senior Adviser John Podesta said, "We have to get implementation right. That means we have to listen, engage, and move quickly to translate policy into action." (Reuters and Bloomberg Law, Oct. 5)The Roundtable, working through its Sustainability and Tax Policy Advisory Committees (SPAC and TPAC), will coordinate with industry partners to develop comments to the Treasury and IRS notices that highlight CRE clean energy priorities.# # #

Cybersecurity

October 7, 2022

Roundtable Weekly

Treasury and CISA Seek Comments on Potential National Cyber Insurance Program

Cyber Risks Cybersecurity

As cyberattacks pose an increasing threat to the real estate industry and the U.S. economy, the government is seeking input from policyholders, critical infrastructure owners, and operators on a potential federal response for catastrophic cyber incidents, including whether a national cyber reinsurance program is warranted. (Treasury Department Notice, Sept. 29 and NextGov, Sept. 28) Response to Catastrophic Cyber Attacks The Treasury Department’s Federal Insurance Office (FIO) and the Cybersecurity and Infrastructure Security Agency (CISA) are seeking comments by Nov. 14 on the structure and scope of a federal response. (FIO request for comments and Inside Cybersecurity, Sept. 12) The FIO-CISA request for comments follows a June Government Accountability Office (GAO) recommendation that the federal government assess the need for a potential insurance backstop for cyberattacks. (GAO, Cyber Insurance: Action Needed to Assess Potential Federal Response to Catastrophic Attacks, June 21) Cyber insurance is a growing market, with approximately $4 billion in direct premiums written in 2020. (FIO’s Effectiveness of the Terrorism Risk Insurance Program, June 2022) Lloyd’s of London announced in August that it is set to introduce cyber insurance exclusions for coverage on “catastrophic” state-backed attacks from 2023. (Lloyd’s Market Bulletin, Aug. 16 and Industrial Cyber, Aug. 18) Terrorism & Cybersecurity The Roundtable and its partners in the Coalition to Insure Against Terrorism (CIAT) have raised concerns about the need for effective insurance products to help manage the risks of catastrophic cyberattacks. (CIAT comment letter on the 2022 Report on the Effectiveness of the Terrorism Risk Insurance, May 16) Insurers and the federal government's Terrorism Risk Insurance Program (TRIP) may not cover the expanding range of such losses. For example, TRIP may only cover cyberattacks if they can be considered "terrorism" under its defined program criteria. (Roundtable Weekly, June 24) Separately, CISA is requesting input on the implementation of cyber incident reporting requirements (due Nov. 14). CISA is also hosting a series of public listening sessions in cities throughout the nation as an additional means of gathering stakeholder responses on definitions for the proposed rules, the form and content of reports, enforcement procedures, and information protection policies. (Federal Register and Notice of Public Listening Sessions, Sept. 12) Cybersecurity has long been a focus of The Roundtable’s Homeland Security Task Force (HSTF) and the Real Estate Information Sharing and Analysis Center. Cybersecurity issues and CRE will be discussed during the next HSTF meeting on Jan. 25, 2023—held in conjunction with The Roundtable’s State of the Industry meeting. (Roundtable Meeting Calendar) # # #

Flood Insurance

October 7, 2022

Roundtable Weekly

Hurricane Ian Raises Issues on Natural Catastrophe Risk and Reform of National Flood Insurance Program

Flood Insurance National Flood Insurance Program NFIP

The catastrophic damage revealed this week in the wake of Hurricane Ian shows the need for Congress to address natural catastrophe risk and pass a long-term reauthorization of the National Flood Insurance Program (NFIP). The Real Estate Roundtable has long advocated for a long-term program extension to avoid lapses that create uncertainty in both the insurance and housing markets.NFIP & CREOriginally enacted in 1968, the NFIP has been extended under 22 short-term congressional reauthorizations, including last week’s stopgap funding bill that extended government operations until Dec. 16. (Congressional Research Service report, Oct. 3 and Roundtable Weekly, Sept. 30)The total potential debt exposure to properties in the path of Ian could be as high as $52 billion. (Trepp, Sept. 29 “Hurricane Ian Makes Landfall: Mapping the Commercial Real Estate Exposure”)Recovery from storms could take longer and cost more to rebuild amid continued supply chain constraints and inflationary pressures. Media coverage included:“Property Damage from Hurricane Ian Now Estimated Between $41 Billion to $70 Billion” (WorldPropertyJournal, Oct. 7)“The Impact Hurricane Ian Could Have on CRE” (GlobeSt, Oct. 3) “'Never Seen Anything Like This': CRE Assesses Impact Of Hurricane Ian” (BisNow, Oct. 2)“Ian will 'financially ruin' homeowners and insurers” (PolitcoPro, Oct. 1)The Roundtable continues to work with lawmakers and coalition partners to address catastrophic risk issues and enact a long-term extension to the NFIP that includes effective reforms.# # #

Policy Landscape

September 30, 2022

Roundtable Weekly

Congress Passes Funding Extension Through Dec. 16, Lame Duck Session Awaits

Budget

A stopgap funding bill that will keep the government open through mid-December passed the Senate yesterday, the House today, and is expected to receive President Biden’s signature tonight. (Bill text and summary) CR Buys Time The “continuing resolution” (CR) passed Congress after an energy permitting measure sponsored by Sen. Joe Manchin (D-WV) was removed earlier in the week. (Business Insider, Sept. 27)The funding bill will keep federal agencies operating through Dec. 16, buying time for lawmakers during the upcoming lame duck session to craft a possible FY2023 “omnibus” budget package by year-end.The CR includes reauthorization of the National Flood Insurance Program (NFIP), which has been extended more than 20 times. Bloomberg reported that House Financial Services Chair Maxine Waters (D-CA) wants a longer-term NFIP extension and other program changes. “It has to be bipartisan. We are working on keeping the premiums down, and some of the other issues that have been brought to our attention,” she said. Lame Duck AwaitsAfter the November election and before the new Congress is seated in January, current members of Congress will return for a “lame duck” legislative session. In addition to addressing outstanding legislative issues, lawmakers will meet with newly elected members, organize their respective party conferences, vote on leadership and committee positions, and discuss their post-election policy agendas.On Thursday, Senate Leader Chuck Schumer announced the Senate would not return until Nov. 14. (The Hill, Sept. 29)The House is scheduled to return from recess on Nov. 9, after the midterm elections.Legislative issues that will vie for attention in the lame duck session include federal appropriations, reauthorization of defense programs, and expiring tax provisions affecting real estate such as certain temporary expansions of the low-income housing tax credit.The elections, tax policy, inflation and other policy issues were among the topics discussed by industry leaders and national lawmakers last week during the Fall Roundtable meeting in Washington. (Roundtable Weekly, Sept. 23).Next on The Roundtable’s calendar is the Real Estate Capital Policy Advisory Committee (RECPAC) meeting on Nov. 2 in New York City. # # #

Beneficial Ownership

September 30, 2022

Roundtable Weekly

Treasury Issues Final Rule Requiring Disclosure of “Beneficial Owners”

Beneficial Ownership Beneficial Ownership amp the Corporate Transparency Act Corporate Transparency Act CTA FinCEN

The Treasury Department issued a final rule yesterday that will require millions of companies to report information about their “beneficial owners”—persons who own at least 25% of a company or exert significant authority over it—to the Financial Crimes Enforcement Network (FinCEN). (Final Rule | Fact Sheet | Wall Street Journal and Bloomberg Law, Sept. 29) Who Reports? Treasury Secretary Janet Yellen said, “This rule … will help strengthen our national security by making it more difficult for oligarchs, terrorists, and other global threats to use complex legal structures to launder money, traffic humans and drugs, and commit other crimes that threaten harm to the American people.” (Treasury statement, Sept. 29) The rule will require most corporations, limited liability companies, and other entities created in or registered to do business in the United States to disclose beneficial ownership information. FinCEN notes that the definition of reporting company applies only to legal entities that have 20 or fewer employees and less than $5 million in gross receipts or sales as reflected in the previous year’s federal tax returns. These entities also must not otherwise benefit from the exemptions described in the regulations. Reporting companies created or registered before Jan. 1, 2024, will have one year (until Jan. 1, 2025) to file their initial reports. Those entities created or registered after Jan. 1, 2024, will have 30 days to file their initial reports. Data Required The required data about individuals who own, control or create firms will include the name, birthdate, address, and a unique identification number from driver’s licenses or passports—as well as images of the documents. (AP, Sept. 29) Treasury states the database will be available only to law enforcement and government agencies under the CTA’s beneficial ownership information reporting provisions. (Treasury Department, “Beneficial Ownership Information Reporting”) Roundtable Concerns The Real Estate Roundtable submitted comments with other industry organizations earlier this year about CTA’s anti-money laundering regulations affecting real estate transactions. (Industry comment letter and Roundtable Weekly, Feb. 25 | (Coalition letter to FINCEN, Feb. 4) The Roundtable and three other national real estate organizations submitted detailed comments to FinCEN on May 5, 2021 addressing several implementation concerns related to the beneficial ownership registry. (Roundtable Weekly, May 7) Separately, a broad business coalition that includes The Real Estate Roundtable submitted comments yesterday to congressional leaders in opposition to the Establishing New Authorities for Business Laundering and Enabling Risks to Security (ENABLERS) Act. The ENABLERS Act would dramatically expand CTA reporting requirements and subject the owners, board members, and senior executives of most businesses and charities to audits. (Coalition letter, Sept. 29) The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to work with industry partners to address the implications of FinCEN’s 330-page rule and the impact it could have on capital formation and the commercial real estate industry. RECPAC meets on Nov. 2 in New York City. # # #

Clean Energy Tax Incentives

September 30, 2022

Roundtable Weekly

Yellen, House Committee Promote Inflation Reduction Act Climate Investments; CRE Webinars Focus on New Tax Incentives

Clean Energy Tax Incentives Climate and Energy Policy Energy Policy Tax Policy

Incentives in the Inflation Reduction Act (IRA) will accelerate private sector investment in clean energy technologies, according to remarks this week from Treasury Secretary Janet Yellen, above. (Yellen’s remarks, Sept. 27) Yellen announced that Treasury will host “a series of roundtable discussions to help inform our efficient and effective implementation of the tax credits.” (Barron’s and AFP News, Sept. 27) A House Committee yesterday considered how the IRA’s climate investments will lower families’ utility bills, create jobs, and expand U.S. manufacturing of green tech and electric vehicles. (Video of Congressional hearing) Several of the IRA’s revisions to the federal tax code can help the U.S. real estate sector reduce GHG emissions. Roundtable fact sheets detail the IRA’s Clean Energy Tax Incentives (Sept. 20) and Revenue Provisions (Aug. 17) Industry Education on the IRA Roundtable Senior Vice Presidents Ryan McCormick (tax counsel), right, and Duane Desiderio, left, (energy counsel) recently participated in a number of panel discussions on how the IRA’s tax credits and deductions can spur energy efficiency and renewable energy projects in buildings. (Roundtable’s IRA fact sheet) McCormick participated in a Sept. 27 Engineered Tax Services webinar. (Powerpoint slides) Desiderio participated in a Sept. 27 CBRE podcast moderated by Co-Chair of The Roundtable’s Research Committee, Spencer Levy (Senior Economic Advisor, CBRE) (Podcast transcript). Desiderio also participated in a Sept. 28 briefing hosted by the Urban Land Institute (ULI) featuring members of The Roundtable’s Sustainability Policy Advisory Committee (SPAC) – Immediate Past Vice Chair Dan Egan (Managing Director, Real Estate ESG - Americas, Blackstone), Suzanne Fallender (VP Global ESG, Prologis), and ULI EVP Billy Grayson. SPAC Chair Tony Malkin [Chairman, President, and CEO, Empire State Realty Trust, Inc.], center above, led a discussion with Desiderio and McCormick last week regarding the IRA at The Roundtable’s fall 2022 meeting. (Watch the discussion) (Roundtable Weekly, Sept. 23) The Treasury Department is expected to issue multiple regulations and guidance documents in the coming months to implement the new law. The Roundtable plans to submit comments as the new rules are proposed to help accelerate industry investments in tackling the climate crisis. # # #

September 29, 2022

Policy Comment Letter

Joint Trades Letter – ENABLERS Act 9 29 22

Fall Roundtable Meeting

September 23, 2022

Roundtable Weekly

Congressional and CRE Leaders Discuss Economic, Political Currents Leading to November’s Midterms

Industry leaders and national policymakers met this week for The Roundtable’s fall meeting to discuss the U.S. political and economic environment, including issues such as inflation, housing, labor shortages, climate change, and November’s midterm elections. (Roundtable Executive Policy Summary and Policy Issue Profiles)National Policy Issues & CRESpeakers at The Roundtable’s Sept. 20-21 meeting included:Roundtable Chair John Fish (Chairman & CEO, SUFFOLK), above, and President and CEO Jeffrey DeBoer opened the meeting with an overview of The Roundtable’s efforts to shape the Inflation Reduction Act (IRA) that passed last month, and how the new law’s tax and sustainability provisions impact CRE. (Watch John Fish’s opening remarks | Roundtable Weekly, Aug. 12)Senate Majority Leader Chuck Schumer (D-NY) also discussed the IRA and a string of other recent legislation—including bipartisan success on infrastructure spending, investments in U.S. manufacturing, and overhaul of the EB-5 investment program. He also raised the importance of immigration reform and Congress’s current focus to pass a funding resolution by Sept. 30 to avoid a government shutdown.Rep. Patrick McHenry (R-NC), left, Ranking Member of the House Financial Services Committee, and Roundtable Board Member Ross Perot, Jr., right, (Chairman, Hillwood), discussed affordable housing supply problems, steps to counter local NIMBY opposition, and the need to develop a prudent economic policy response to prepare for future pandemic risks.Sens. Michael Bennet (D-CO), right, and Mark Warner (D-VA), left, joined Willy Walker, center, (Chairman & CEO, Walker & Dunlop), to discuss supply chain issues, the war in Ukraine, and the importance of GSE reform.Clean EnergyRoundtable Board Member and Sustainability Committee Chair Tony Malkin, center, [Chairman, President, and CEO, Empire State Realty Trust, Inc.] led a discussion on how the IRA’s “clean energy” tax incentives impact CRE investments with Roundtable Senior Vice Presidents Duane Desiderio, left, and Ryan McCormick, right. (Watch the discussion)Roundtable fact sheets detail the IRA’s Clean Energy Tax Incentives (Sept. 20) and Revenue Provisions (Aug. 17). Economic Conditions & Political LandscapeDr. Austan Goolsbee, right, (former Chairman, White House Council of Economic Advisors) and The Roundtable’s Immediate Past Chair Debra Cafaro (Chairman & CEO, Ventas, Inc.) focused on inflationary pressures, labor shortages, return-to-office issues, and a new era of deglobalization.A “fireside chat” with Jim Messina, right, (former President Obama’s Deputy Chief of Staff) and Barry Jackson, left, (former House Speaker John Boehner’s Chief of Staff) offered an overview of the current state of U.S. politics and a preview of the upcoming midterm elections.Next on The Roundtable’s meeting calendar is the all-member State of the Industry Meeting on Jan. 24-25, 2023 in Washington, where The Roundtable will unveil its 2023 Policy Agenda.# # #

Climate Risk Reporting

September 23, 2022

Roundtable Weekly

Advisory Panel Endorses SEC Proposed Disclosure Rule

Climate Policy Corporate Disclosure Energy and Climate Policy Reporting on Climate Risks Scope 3 reporting SEC

A Securities and Exchange Commission (SEC) advisory panel on investor issues this week endorsed the agency’s proposed climate disclosure rule, including a requirement for registered companies to support Scope 3 indirect emissions “if material” to investors. (Bloomberg Law and advisory panel recommendation, Sept. 21) Scope 3 & CRE The Investor Advisory Committee’s recommendations are not binding, although the SEC could adopt final rules on corporate climate reporting requirements this fall. (BGov, Sept. 21) The Real Estate Roundtable submitted comments on June 10 objecting to the Commission’s Scope 3 approach. The comments noted that real estate companies neither control nor have access to data regarding emissions from third parties in their “value chains.” (Roundtable Weekly, June 10 and June 24) A joint industry letter filed on June 13 from 11 national real estate trade groups also opposed the SEC’s proposed approach, emphasizing that corporate disclosures on indirect Scope 3 emissions should be voluntary. SEC Authority & EPA Funding Litigation is expected to challenge any final Commission regulation—especially in light of a recent Supreme Court decision in West Virginia v. EPA that questioned whether the SEC has “clear” authority from Congress to regulate climate matters. House Financial Services Committee Ranking Member Patrick McHenry (R-NC) and other Republican committee members wrote to SEC Chair Gary Gensler this week to request the SEC provide a list of all pending and upcoming rulemakings with the specific Congressional authority supporting each action. (Policymakers’ letter, Sept. 20) Apart from the SEC, the Environmental Protection Agency (EPA) received a modest sum from Congress ($5 million) under the recently enacted Inflation Reduction Act (IRA) to help standardize voluntary corporate commitments to reduce greenhouse gas (GHG) emissions. The new EPA funds are not “meant to create a parallel program … in case the SEC rule is scrubbed,” but will rather be used for climate models and software to hold companies “accountable” for the climate commitments they are already making. (BGov, Sept 21) EPA backed the SEC’s climate disclosure proposal in a recent letter— stating the Commission has “broad authority to promulgate disclosure requirements that are ‘necessary or appropriate … for the protection of investors.’” The Roundtable’s Sustainability Policy Advisory Committee (SPAC) will remain engaged with policy makers on climate risk disclosure rules that affect commercial real estate. # # #

Tax Policy

September 23, 2022

Roundtable Weekly

House Republicans Unveil Tax Agenda for 2023

PassThroughs Tax Policy

In advance of the November midterm elections, House Republican Leader Kevin McCarthy, above, and the House GOP Conference released their Commitment to America today in Pittsburgh. The platform includes forward-looking tax and economic policy proposals that, if enacted, would impact commercial real estate in important ways. (Document and video, Sept. 23)GOP Tax ProposalsThe Commitment to America is the product of months of work by task forces created by the House Leader to develop a policy agenda to unify House Republicans. The tax proposals are outlined in a document entitled “Growth Through Innovation” developed by Republicans’ Jobs and the Economy Task Force. (Bloomberg Sept. 23; ABC News Sept. 22)The proposals are aimed at providing more tax relief to individuals and small businesses. Proposals affecting real estate include:Permanently extending 20% deduction for pass-through business income enacted in 2017,Enacting additional estate tax relief for family-owned businesses, andExtending rules that facilitate the full deductibility of business interest expense.Other areas of focus include middle class tax relief, increasing tax incentives for R&D, bringing jobs back to the United States, and tax simplification.TCJA Tax CutsSenior Ways and Means Republican Rep. Vern Buchanan (R-FL), above, introduced legislation this week to make permanent tax cuts for individuals and small businesses enacted as part of the Tax Cuts and Jobs Act (TCJA) of 2017. The Buchanan legislation was endorsed in House Republicans’ Commitment to America released today. (Buchanan news release, Sept. 21)The TCJA Permanency Act (H.R.8913) also includes several technical fixes. Without Congressional action, 23 different provisions of the 2017 Republican tax law are set to expire after 2025.The current deduction for qualified business income (Section 199A) was part of the TCJA. Designed to ensure pass-through businesses received tax relief alongside the large tax cut for public corporations, the provision allows real estate and other pass-through businesses to deduct up to 20% of their net business income.''Buchanan, the most senior member on the House Ways and Means Committee, is running to become the next top Republican on the powerful tax policy panel. (The Hill, April 15, 2021)CRE Policy Webinars“Implications of the Inflation Reduction Act for CRE” will be the focus of a CRE Finance Council webinar on Sept. 28 featuring Real Estate Roundtable SVP & Counsel Duane Desiderio. (CREFC registration)Desiderio will also participate in another Sept. 28 virtual briefing on the Inflation Reduction Act’s clean energy tax incentives, hosted by the Urban Land Institute (ULI registration). The webinar features members of The Roundtable’s Sustainability Policy Advisory Committee (SPAC)—Immediate Past SPAC Vice Chair Dan Egan (Managing Director, Real Estate ESG - Americas, Blackstone), Suzanne Fallender (VP Global ESG, Prologis), and ULI EVP Billy Grayson.# # #

Capital and Credit

September 23, 2022

Roundtable Weekly

Fed Seeks Comment on CRE Loan Accommodations and Workouts Policy Statement

The Fed

Federal regulators are inviting comment on an updated policy statement that addresses: (1) short-term commercial real estate loan accommodations; (2) revisions and additions to examples of CRE loan workouts; and (3) accounting developments for estimating loan losses. (Federal Register, Sept. 15 and GlobeSt, Sept. 19)Why It MattersThe Fed’s proposal would build on existing guidance around the need for financial institutions to work prudently and constructively with creditworthy borrowers during times of financial stress.The “Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts” was developed jointly by the Federal Reserve’s Board of Governors, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA) in consultation with state bank and credit union regulators. The Fed Board aims to update and expand the 2009 federal regulators’ statement on prudent commercial real estate loan workouts for CRE borrowers experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties. (FFIEC news release, Oct. 30)Update & ExpandThis month’s proposed Fed policy reaffirms two key principles from the 2009 statement:Financial institutions that implement prudent CRE loan accommodation and workout arrangements—after performing a comprehensive review of a borrower's financial condition—will not be subject to criticism for engaging in these efforts, even if these arrangements result in modified loans that have weaknesses that result in adverse credit classification.Modified loans to borrowers—who have the ability to repay their debts according to reasonable terms—will not be subject to adverse classification solely because the value of the underlying collateral has declined to an amount that is less than the loan balance.If finalized, the proposed statement would supersede the 2009 statement for all supervised financial institutions. The proposal would also revise language to incorporate current industry terminology and include updated references to other federal supervisory guidance.The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) plans to work on comments, which are due by November 14, 2022.# # #

Policy Landscape

September 16, 2022

Roundtable Weekly

Senate to Consider Stopgap Funding Bill as Parties Signal Contrasting Tax Agendas After Mid-Term Elections

Capital Gains Congress Tax Policy

The end of the government’s fiscal year is only two weeks away as congressional leaders continue to work on the scope of a Continuing Resolution (CR) that would extend federal funding into mid-December. CR Scope The Senate will move first to determine if other bills will be attached to the stopgap—the final legislative package before November’s mid-term elections. (House Majority Leader Steny Hoyer (D-MD) website, Sept. 12) The process of moving the funding package has been complicated by a deal reached last month between Senate Majority Leader Charles Schumer (D-NY) and Sen. Joe Manchin (D-WV) to consider permitting rules for energy pipelines and exports. The agreement was reached to secure Manchin’s support for the Inflation Reduction Act. (Roundtable Weekly, Aug. 12 and Manchin’s Outline of Energy Permitting Provisions) Sens. Schumer and Manchin are working to gather support for permitting legislation, which would require 60 votes to pass the Senate. In the House, a coalition of 77 Democrats recently expressed their disapproval of linking a permitting reform bill to the “must-pass” CR. (Reuters and The Hill, Sept. 13) House Speaker Nancy Pelosi (D-CA) addressed the possibility of a permit bill yesterday. "We have agreed to bring up a vote, yes. We never agreed on how it would be brought up, whether it be on the CR, or independently or part of something else. We'll just wait & see what the Senate does," Pelosi said. (E&E News, Sept. 15) A CR that expires in December could be followed by consideration of a FY2023 “omni” spending package —with possible extensions of certain tax provisions—during a lame-duck session. Post-Election Tax Agendas House Republicans plan to unveil an outline of their “Commitment to America” platform on September 23 in anticipation of the November 8 midterm elections. (Tax Notes, Sept. 15) Rep. French Hill (R-AR), a member of the GOP Jobs and the Economy task force, told Tax Notes there will be a “skinny version” of the House GOP Platform and a less widely circulated “deep blueprint for legislative work to lay out that first year of Congress.” Extending portions of the Tax Cuts and Jobs Act past their December 31, 2025 expiration will be at the core of the the House Republican tax plan— including 2017’s tax reductions for individuals, the 20 percent rate cut on pass-through income, and bonus depreciation. (Tax Notes, Sept. 15) The White House released its own economic blueprint last week, reciting recent accomplishments and signaling tax measures it plans to pursue, including tax increases on capital gains, carried interest, and the step-up in basis of assets at death, as well as a new minimum tax on billionaires’ wealth. (White House news release and blueprint, Sept. 9) Meanwhile, the Biden administration announced plans on Wednesday to distribute $900 million throughout the country to build electric vehicle infrastructure across 53,000 miles of the national highway system—funding that is part of last year’s bipartisan infrastructure law. (PoliticoPro, Sept. 14) Transportation Secretary Pete Buttigieg said, “With the first set of approvals we are announcing today, 35 states across the country—with Democratic and Republican governors—will be moving forward to use these funds to install EV chargers at regular, reliable intervals along their highways.” (Approvals and each state’s deployment plan for 2022) The CR, midterm elections, and the legislative outlook for the lame-duck session will be among the topics of discussion during The Roundtable’s Fall Meeting on Sept. 20-21 in Washington. # # #

The Fed

September 16, 2022

Roundtable Weekly

Increased Pace of Fed’s Quantitative Tightening Raises Concerns About Liquidity Stress in Banking System

The Fed

As the Federal Reserve accelerates the unwinding of its nearly $9 trillion balance sheet this month, there is growing concern about the impact that quantitative tightening (QT) may have on credit market liquidity and the overall economy. (Financial Times, Sept 14 and Reuters, Sept. 15)QT & LiquidityThe Fed launched its QT initiative on June 1 with initial caps set for $30 billion in U.S. Treasuries and $17.5 billion in agency mortgage-backed securities—but scheduled the caps to increase this week to $60 billion and $35 billion, respectively. (Federal Reserve, Plans for Reducing the Size of the Federal Reserve's Balance Sheet, May 4)The increased QT pace of up to $95 billion per month has sparked concerns about how contracting liquidity conditions could impact the overall economy and whether the Fed may seek an early exit from QT. (Financial Review, Sept. 14 and BGov, Sept. 12)The QT increase prompted a Bank of America warning to clients this month that strain on bond market liquidity is "one of the greatest threats to global financial stability today, potentially worse than the housing bubble of 2004-2007." (MarketWatch, Sept 15 and New York Times, Sept. 11)The Fed’s expected policy interest rate increase by 75 to 100 basis points next week would keep borrowing costs elevated as the central bank’s scheduled QT effort increases.Soft Landing ChallengeThe challenge for the Fed is whether it can achieve a “soft landing”—reducing the inflation rate while avoiding a recession—while the U.S. economy faces volatile inflationary factors from the war in Ukraine, high energy costs, and supply chain disruptions.Rising interest rates and various market conditions around the world could lead to a global recession next year, resulting in “lasting harm” to emerging and developing economies, according to an analysis released today by the World Bank. (Financial Times and UPI, Sept. 16)“Recent tightening of monetary and fiscal policies will likely prove helpful in reducing inflation,” said Ayhan Kose, the World Bank’s Acting Vice President for Equitable Growth, Finance, and Institutions. “But because they are highly synchronous across countries, they could be mutually compounding in tightening financial conditions and steepening the global growth slowdown.” (World Bank news release and analysis, Sept. 16)Roundtable Board Member Barry Sternlicht (Chairman and CEO, Starwood Capital Group), above, appeared on CNBC’s Squawk Box yesterday to discuss the Fed, inflation, and the U.S. economy. Sternlicht stated the economy is “braking hard” and that prices will begin to decrease after recent Fed measures.The Roundtable’s Fall Meeting next week in Washington will include a discussion on the Fed’s actions and economic conditions with Dr. Austan Goolsbee, former White House Chairman of the Council of Economic Advisers from 2010-2011 and a member of President Barack Obama's cabinet.# # #

Climate Risk Reporting

September 16, 2022

Roundtable Weekly

Senators Challenge SEC Chair on Proposed Climate Rule

climate Climate Policy Energy and Climate Policy Reporting on Climate Risks Scope 3 reporting SEC

Senate Banking Committee members challenged Securities and Exchange Commission (SEC) Chair Gary Gensler, above, during an oversight hearing yesterday about the agency’s proposed climate disclosure rule. (CQ, Sept. 15 and Yahoo Finance, Sept. 16) SEC Authority Questioned Committee Ranking Member Pat Toomey (R-PA) opened the hearing by stating, “The SEC is wading into controversial public policy debates that are far outside its mission and its expertise.” Toomey pressed Gensler about a June Supreme Court ruling that executive branch agencies “cannot use novel interpretations of existing law to pretend they have legal authority to support sweeping policy changes, including on climate change, that Congress never intended.” (Toomey Opening Statement) Toomey asked, “In light of the EPA v. West Virginia case, have you given any consideration to rescinding that rulemaking?” Gensler replied that the Commission is “seriously” considering the high Court ruling and 14,000-plus public comments to assess its legal authorities to ensure that registered companies provide material, decision-useful information about climate risks to investors. (SEC docket with list of organizations and individual comments) Senator Jon Tester (D-MT) explained that the SEC’s proposal would require farms and other small businesses to estimate and disclose carbon emissions because they sell products and services to public companies. Senators Mike Rounds (R-SD) and Steve Daines (R-MT) shared Tester’s concerns (CQ, Sept. 15) A CRE Priority The SEC’s climate proposal, if finalized, would require all SEC registrants to quantify direct GHG emissions (“Scope 1”) and emissions attributable to electricity purchases (“Scope 2”) through annual 10-Ks and additional filings. (SEC News Release | Proposed Rule | Fact Sheet, March 22) The SEC also proposed that a company would need to report on “Scope 3” indirect emissions if they are “material” to investors. In June 10 comments, The Roundtable objected to the Commission’s proposed Scope 3 approach because real estate companies neither control nor have access to data regarding emissions from third parties in their “value chains.” (Roundtable Weekly, June 10 and June 24) A joint letter filed on June 13 from 11 national real estate industry trade groups echoed the issues raised by The Roundtable in its earlier comments. The SEC is expected to issue a final climate reporting disclosure rule sometime this fall. If the Commission votes to regulate Scope 3 emissions, the recent SCOTUS decision in West Virginia v. EPA is likely to spark litigation, raising questions as to whether the SEC has authority from Congress to regulate climate disclosures and emissions. # # #

September 12, 2022

Policy Comment Letter

2022-9-12 NASAA REIT Proposal – Real Estate Joint Trades Letter FINAL

Policy Landscape

September 9, 2022

Roundtable Weekly

Congress Focuses on Stopgap Federal Funding to Avoid Government Shutdown

Congress

Congress this month will consider a $47 billion emergency funding request from the White House as part of a “continuing resolution” (CR) spending bill that would avoid a partial government shutdown starting Oct. 1. (Roll Call, Sept. 6, White House request, Sept. 2) Legislative Timing Senate Majority Leader Chuck Schumer (D-NY) said this week, "We're hoping the CR would go to about mid-December and then we might do an omnibus"—a bill that would fund the government through the remainder of the federal fiscal year (Sept. 30, 2023). However, the November mid-term elections could push consideration of an omnibus budget to the congressional lame-duck session. (Reuters, Sept. 7)The CR may also include legislation to fast-track federal permits for energy projects, which Schumer and Sen. Joe Manchin (D-WV) agreed to last month in principle as part of the Democrats’ effort to pass the Inflation Reduction Act of 2022 (IRA).Schumer said on Wednesday, “Permitting reform is part of the IRA, and we will get it done.” (PoliticoPro, Sept. 7 and E&E Daily, Sept. 8) The IRA & CRE The IRA, passed on strict party-line votes in both chambers last month, is a $790 billion tax-and-spending package that includes the largest federal clean energy investment in U.S. history. (Roundtable Weekly, Aug. 12)Roundtable fact sheets detail the IRA’s impact on Clean Energy Tax Incentives and Revenue Provisions affecting commercial real estate.The Real Estate Roundtable has encouraged Congress for several years to develop clean energy tax incentives that are more usable for building owners, managers, and financiers—and more impactful to help meet national carbon reduction goals.The Roundtable will stay engaged with lawmakers as the Treasury Department proposes rules and guidance on a range of issues to implement the IRA’s provisions. Clean Energy Spending The Biden administration confirmed last week that its top climate advisor Gina McCarthy is leaving her post. The White House also announced that John Podesta, above, will become a senior advisor for clean energy innovation, oversee the implementation of the IRA’s climate and energy spending, and serve as chair of President Biden’s National Climate Task Force. Podesta led former President Barack Obama’s climate strategy. (Wall Street Journal and CNBC, Sept. 2)Private sector investments in battery factories, solar panel manufacturing and other projects in the weeks since President Biden signed the IRA are part of the New York Time’s Sept. 7 article, “Clean Energy Projects Surge After Climate Bill Passage.” Roundtable members will meet in Washington, DC on Sept. 20-21 to discuss the IRA’s impact on CRE, the outlook for the midterm elections, and other topics, such as the Federal Reserve’s concurrent meeting on monetary policy. # # #

Capital and Credit

September 9, 2022

Roundtable Weekly

The Roundtable Opposes NASAA Proposal Affecting REITS, Multifamily Industry, Capital Formation

Capital and Credit REITs

The Real Estate Roundtable submitted comments today to the North American Securities Administrators Association (NASAA) in opposition to proposed rules that would place new restrictions on the market for public non-listed REITs. (Roundtable comment letter and Roundtable Weekly, July 29)CRE Impact ConcernsNASAA’s proposal could have a profound impact on the $20.7 trillion U.S. commercial and multifamily real estate market.These proposed revisions to the NASAA Statement of Policy Regarding Real Estate Investment Trusts could have the unintended and unnecessary consequence of impeding real estate capital formation, undercutting economic growth, and weakening the strength and stability of U.S. real estate capital markets. (NASAA Request for Public Comment, July 12)The proposed revisions also have the potential to influence other sets of NASAA Guidelines under development, including those for Asset-Backed Securities, Commodity Pools, Equipment Leasing, Mortgage Programs, and Real Estate Programs other than REITs. (NASAA Request for Public Comment, July 12)NASAA’s Proposed ChangesSince nontraded real-estate investment trusts are not listed on stock exchanges, investors purchase shares through financial brokers. Federally regulated, public non-listed REITs (PNLRs) raised a record $35.4 billion last year. (Wall Street Journal, Aug. 30)The NASAA proposal would negatively affect publicly registered, non-traded REITs by linking conduct standards for brokers selling non-traded REITs to the SEC’s Best Interest conduct standard.The proposal has four revisions that would affect individual net income and net worth requirements; add a uniform concentration limitation; and include a new prohibition against using gross offering proceeds to fund distributions. (Roundtable Weekly, July 29 and the Institute for Portfolio Alternatives)Roundtable ResponseRoundtable President and CEO Jeffrey DeBoer, above, emphasized in his letter to NASAA that PNLRs are a growing source of capital for the acquisition and development of affordable housing, commercial properties for small businesses, and other types of real estate that supports economic growth and employment.“The Roundtable encourages NASAA to conduct or at a minimum to address the economic impact of the proposal in its justification before considering adoption,” DeBoer stated. (Roundtable comment letter, Sept. 9)The Roundtable’s letter also notes the proposal would impose arbitrary restrictions that would limit investor choice during a time of stock market volatility and high inflation.The NASAA rules would also negatively impact highly regulated investment vehicles—including mutual funds, exchange-traded funds, interval funds, tender offer funds and business development companies.The Roundtable’s letter concludes by urging NASAA to withdraw their proposal and engage industry participants to craft regulations that will help ensure NASAA’s goals without stifling investment in commercial real estate—nor limit investors’ ability to diversify their portfolios.# # #

Tax Policy

September 9, 2022

Roundtable Weekly

Senators Propose New Restrictions on Conservation Easement Donations

Tax Policy

Senate Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) released legislative text yesterday with new restrictions on conservation easements as a revenue offset for their new retirement savings bill.Easement RestrictionsSection 1104 of the Senate Finance committee’s summary of the Enhancing American Retirement Now (EARN) Act states that since 2016, the IRS “has identified certain syndicated conservation easement transactions involving pass-through entities as ‘listed transactions’ carrying a high potential for abusive tax avoidance.” (Legislative text)The EARN provision would disallow a charitable deduction for a qualified conservation contribution if the charitable deduction claimed exceeds two and one half times the sum of each partner’s relevant basis in such partnership— unless the contribution meets a three-year holding period test. (Section-by-section summary of the EARN Act)What’s NextThe Senate Finance Committee adopted the conservation easement proposal in June during consideration of the EARN Act, which passed on a 28-0 vote. The House passed its retirement legislation by a wide margin in March. The two packages will have to be reconciled. (PoliticoPro and TaxNotes, Sept. 9)Conservation easement changes, retirement-related legislation, expiring tax provisions, and potentially other tax proposals could gain momentum during the “lame duck” legislative session following the November mid-term elections.# # #

Homeland Security

September 9, 2022

Roundtable Weekly

National Counterterrorism Center Offers Private Sector a Preview of New Platform to Protect Against Threats

Homeland Security REISAC

The National Counterterrorism Center (NCTC) on Sept 28 will preview its new aCTknowledge platform, designed to deliver timely situational awareness notifications covering terrorist events that may impact local communities. How to ParticipateCRE participants can join the preview here:Wednesday, September 28 from 1:00–2:00 pm (ET)Zoom linkMeeting ID: 833 6363 8044 Passcode: 591990The aCTknowledge platform will provide significant tactics, techniques, and procedures to support homeland security, law enforcement, and community first responder efforts aimed at protecting against terrorist threats. Additionally, NCTC’s aCTknowledge will offer reference guides to aid in rapid response and deployment, helping with private sector efforts. (See fact sheet about the new platform)Roundtable EffortsThe Roundtable—through our Homeland Security Task Force (HSTF) and partnership with the Real Estate Information Sharing and Analysis Center (RE-ISAC)—remains focused on increased cross-agency information sharing and cooperation with key law enforcement and intelligence agencies that benefit the industry.The RE-ISAC sends a daily report to members to share actionable information on a variety of potential cyber and physical threats. Additionally, The Roundtable’s HSTF works closely with federal, state, and local law enforcement, intelligence agency partners, and the RE-ISAC on risk mitigation measures that CRE businesses may consider to help protect critical infrastructure. See The Roundtable’s 2022 Annual Report’s Homeland Security section.# # #

September 8, 2022

Policy Comment Letter

RER Comment Letter – NASAA REIT Guidelines – 9-8-22

Inflation Reduction Act, Tax Policy

August 17, 2022

Fact Sheet

Inflation Reduction Act (IRA) Revenue Provisions – RER Fact Sheet

Clean Energy Tax Incentives, Inflation Reduction Act, Tax Policy,

Reconciliation Bill

August 12, 2022

Roundtable Weekly

Senate and House Pass The Inflation Reduction Act of 2022

climate Energy and Climate Policy Energy Policy Tax Policy

The Inflation Reduction Act of 2022 (IRA) heads to President Joe Biden’s desk for his signature, following passage by the House today and the Senate on Sunday. After weeks of negotiations, the comprehensive economic package primarily brokered by Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin (D-WV) reflects Democratic priorities to combat climate change, reduce prescription drug costs, and lower the deficit by roughly $300 billion over the next decade. (Washington Post, Aug. 7; Roundtable Weekly, July 29) Why It Matters After Congress passed the IRA today, President Biden stated, “With the passage of the Inflation Reduction Act in the House, families will see lower prescription drug prices, lower health care costs, and lower energy costs. I look forward to signing it into law next week” (Twitter, Aug. 12 | Wall Street Journal, Aug. 12) The $790 billion reconciliation proposal includes nearly $370 billion in climate spending that affects “clean energy” measures important to commercial real estate, the largest federal clean energy investment in U.S. history. (NPR, Aug. 7) (see story below) CRE Impact Real Estate Roundtable President and CEO Jeffrey DeBoer commented today, "The revised Inflation Reduction Act is a welcome step toward boosting economic growth by spurring extensive investments in clean energy and climate measures that benefit both our industry and our country. We applaud Congress for recognizing and protecting the critical role of carried interest provisions in incentivizing the risk-taking necessary for robust economic development. We look forward to working with our partners in industry and government to implement this legislation." Proposed changes to the taxation of carried interest were cut from the IRA last week at the request of Sen. Kyrsten Sinema (D-AZ). The Roundtable and 14 other national real estate organizations wrote to all members of Congress on Aug. 3 in strong opposition to the measure. (Coalition letter, Aug. 3 | Roundtable Weekly, Aug. 5 ) The IRA’s largest tax increase is a 15% corporate minimum tax on businesses with profits over $1 billion whose reported book income exceeds reported taxable income. The measure is estimated to raise $313 billion. The final bill includes a 1 percent tax on what public companies spend on stock buybacks. However, it did not include any changes to the state and local tax (SALT) deduction. (CQ, Aug. 7) The package also includes protections that would preserve the value of the low-income housing tax credit for investors (typically large banks) that use the credit to reduce their effective tax rate. In the coming weeks, The Roundtable will continue updating summaries of the tax and energy provisions in the IRA while also analyzing the direct and indirect impact on commercial real estate. (See below for Clean Energy Tax Incentives Fact Sheet) # # #

Energy And Climate Policy

August 12, 2022

Roundtable Weekly

Roundtable “Fact Sheet” Summarizes Inflation Reduction Act’s “Clean Energy” Tax Incentives Important to Real Estate

climate Energy and Climate Policy Energy Efficiency

The Inflation Reduction Act (IRA) that passed Congress today (see story above) – “includes the largest expenditures ever made by the federal government to slow global warming.” (New York Times, Aug. 7) The bill “would spend nearly $370 billion on a raft of tax credits to help stimulate adoption of clean energy technologies.” (POLITICO, July 28)Key CRE Credits and Deductions (RER Fact Sheet) A number of the IRA’s revisions to the federal tax code can help the U.S. real estate sector reduce GHG emissions. The Real Estate Roundtable has prepared a fact sheet summarizing key IRA incentives, including:A revised tax deduction at Section 179D, to encourage existing commercial building “retrofit” projects that cut energy consumption by at least 25%;A revised tax credit at Section 45L, to encourage new energy efficient multifamily construction;An expanded tax credit at Section 48, to support investments in solar, combined heat and power, microturbines, energy storage, dynamic glass, grid interconnection, fuel cells, geothermal heat pumps, and other clean energy technologies;A reformed tax credit at Section 30C, for electric vehicle charging stations located in low-income or high poverty census tracts; andA new code section to allow businesses that cannot typically benefit from tax incentives because of income limitations (such as REITs) to transfer certain credits to unrelated third parties.The Senate Finance Committee has provided a summary of all incentives in the IRA’s “Energy Security” Subtitle D. Roundtable Advocacy The Roundtable has long advocated for code changes that can make clean energy incentives more usable for building owners, managers, designers, and financiers. (See Roundtable Weekly, Nov. 19 and May 28, 2021). The IRA includes a number of The Roundtable’s recommended changes. As our analysis of Subtitle D continues, RER’s fact sheet will be updated and revised. The Internal Revenue Service (IRS) is expected to issue multiple regulations and guidance documents in the coming months that implement the new law. The Roundtable will provide comments as new rules are proposed to help accelerate the CRE industry’s investments in tackling the climate crisis.# # #

Q1 Sentiment Index

August 12, 2022

Roundtable Weekly

Commercial Real Estate Executives’ Perceptions Of Industry Fundamentals Hold Steady Despite Current Market Conditions

Quarterly Sentiment Index

Commercial real estate executives continue to view current conditions as significantly less favorable than previous quarters due to rising interest rates, increased inflation, supply chain disruptions, and labor shortages. However, leaders’ views of where the markets will be one year from today have improved, indicating a cautiously optimistic outlook for the future, according to The Real Estate Roundtable’s Q3 2022 Economic Sentiment Index. Roundtable President and CEO Jeffrey DeBoer said, “Our Q3 Sentiment Index reflects many of the challenges our economy and industry have faced since early 2022. While these challenges will continue to be bottlenecks in the near term, CRE leaders are optimistic about the future, as underlying real estate fundamentals, such as housing, remain in high demand.DeBoer added, “Industrial and multifamily continue to be a source of strength, but office and retail still struggle to regain momentum following the pandemic. These are uncertain times, but quality assets and owners will persevere as they continue to meet fundamental demand.”The Roundtable’s Overall Q3 2022 Sentiment Index—a reflection of the views of real estate industry leaders—registered an overall score of 44. The Economic Sentiment Overall Index is scored on a scale of 1 to 100 by averaging the scores of Current and Future Indices. Any score over 50 is viewed as positive. The Current Index registered at 38, a 19-point decrease compared to Q2 2022; however, the Future Index registered a score of 51, a 5-point increase from the previous quarter, reflecting leaders’ optimism in future conditions. Topline findings:The Q3 2022 Real Estate Roundtable Sentiment Index registered an overall score of 44, a decrease of 7 points from the previous quarter’s overall score and 34 points lower than a year earlier. Survey respondents are cautious of rising interest rates, increased inflation, supply chain disruptions, and other issues but remain optimistic regarding the underlying fundamentals for real estate.While fundamentals, such as industrial and multifamily, remain strong in terms of supply and demand, there is concern over current market conditions for other asset classes, particularly office and retail.Although in the short-term the pandemic has led to a lack of enthusiasm for office and retail assets, industry leaders expect strong, long-term demand for assets that allow increased flexibility by providing tenants with more amenities and higher quality accommodations. Rising interest rates and general market uncertainty represent clear challenges facing asset pricing; where trades are taking place, they have been occurring at a discount relative to recent high-water marks. In terms of capital markets, participants noted that capital is available, though market uncertainty has induced hesitancy for risk-taking and tightening across both debt and equity. Data for the Q3 survey was gathered in July 2022 by Chicago-based Ferguson Partners on The Roundtable’s behalf. Read the full Q3 report.# # #

Reconciliation Bill

August 5, 2022

Roundtable Weekly

Proposed Carried Interest Provisions, Opposed by Real Estate Industry, Cut From Reconciliation Bill

Carried Interest Climate Policy Energy and Climate Policy Energy Efficiency Energy Policy

Proposed changes to the taxation of carried interest were cut from Senate Democrats’ broad Inflation Reduction Act (IRA) yesterday at the request of centrist Sen. Kyrsten Sinema (D-AZ). The Roundtable and 14 other national real estate organizations wrote to all members of Congress on Aug. 3 in strong opposition to the measure. (Coalition letter, Aug. 3 | Wall Street Journal, Aug. 4 |Tax Notes, Aug. 5). Photo above: Sen. Sinema at The Roundtable's 2022 Spring Meeting.Vote on Revised Reconciliation Bill Sinema announced her decision in a statement released Thursday night, commenting she would “move forward” with the $790 billion reconciliation bill after removal of the carried interest provision—subject to the Senate Parliamentarian’s review of the revised bill.Yesterday, Senate Majority Leader Chuck Schumer (D-NY) announced that the chamber will begin consideration of the bill on Aug. 6, setting up a weekend process of around-the-clock votes on hundreds of amendments to the bill.Real Estate Roundtable President and CEO Jeffrey DeBoer commented today, “The wide-ranging climate measures in the revised bill include the most extensive clean energy investments ever considered by Congress—a positive step welcomed by the real estate industry. We are also pleased to see that carried interest provisions in the original version of the Inflation Reduction Act are out, since they would have clearly harmed the residential and commercial real estate industries, job creation and the economy.” Real Estate’s Carried Interest Opposition The real estate coalition urged policymakers to preserve current carried interest law and detailed major concerns with the proposed changes to carried interest that were in the original IRA, brokered last week between Sens. Schumer and Joe Manchin (D-WV). (Coalition letter, Aug. 3 and Roundtable Weekly, July 29)The Aug. 3 coalition letter noted, “The carried interest proposal would slow housing production, discourage the capital needed to reimagine buildings to meet post-pandemic business needs, hamper job creation and create an additional unknown in an already confusing economic environment.”The real estate coalition letter concluded, “Now is not the time to impose a tax increase on the countless Americans who use partnerships to develop, own, and operate housing and other commercial real estate. We urge you to preserve current tax law as it relates to carried interest.” Senate Considers Changes Senate Democrats are making additional changes to the package, including adjusting the minimum tax on corporations and adding a 1% excise tax on stock buybacks. (New York Times, Aug. 4 and Punchbowl News, Aug. 5)Before a final Senate vote can be held, the Senate Parliamentarian must ensure the bill complies with special budget reconciliation rules, which require provisions directly relate to spending and revenue—not policy.One hurdle before the Parliamentarian is a clean energy tax credit that proposes a bonus incentive to developers who pay prevailing wages on certain projects. If it is determined to be a policy change, it will be dropped from the bill. (POLITICO Power Switch, Aug. 3)A number of the IRA’s proposed revisions to the federal tax code could leverage greater private sector investments in clean energy building technologies, including:A deduction to help make commercial and multifamily buildings more energy efficient (Section 179D),A credit to encourage investments in renewable energy generation and other low carbon equipment such as solar panels, energy storage, and combined heat and power systems (Section 48), andA credit to incentivize installations of EV charging stations (Section 30C). The Roundtable continues to work with its policy advisory committees and national real estate organization partners to assess how details in the bill language could impact CRE. These policies will be a focus of discussion during The Roundtable’s Sept. 20-21 Fall Meeting in Washington, DC. # # #

Energy and Climate

August 5, 2022

Roundtable Weekly

Senate Democrats Strike Deal to Speed-Up Federal Permits for Major Energy Projects

Climate Change Climate Policy Energy Policy Infrastructure

Sen. Joe Manchin (D-WV) and Democratic Senate leadership reached a side deal on federal energy permitting this week, separate from the larger reconciliation bill agreement addressing climate, taxes, and drug pricing reform. (PoliticoPro, One-page summary of agreement and Washington Post, Aug. 1) Energy Permitting Provisions An outline of the energy permitting agreement shows that an eventual bill would direct the President to designate and periodically update a list of at least 25 high-priority energy infrastructure projects and prioritize their approvals by federal agencies. The agreement could lead to policies that accelerate federal approvals for long-distance transmission lines needed to help “clean the grid” and deliver renewable energy generated in rural areas to cities. The agreement would also limit National Environmental Policy Act (NEPA) reviews for major federal projects to two years, and one year for lower-impact projects. NEPA requires federal agencies to assess alternatives to their proposed actions that have lesser environmental impacts. (EPA fact sheet) The Democratic senators agreed with House Speaker Nancy Pelosi (D-CA) that the permitting agreement could be added to a stopgap spending measure to fund the government after Sept. 30. (BGov, Aug. 3) In May, the Biden administration released a Permitting Action Plan to strengthen and accelerate Federal permitting and environmental reviews. Another package of White House changes to permitting rules is expected later this year. (Roundtable Weekly, April 22 | White House news release, May 11 | BGov, Aug. 4). Climate Financial Risk Tool The Treasury Department launched its Climate Data and Analytics Hub pilot, which aims to provide regulators with data, software and tools to gauge climate change risk to the financial system. (Treasury Department Fact Sheet) Initial access to the pilot will be limited to the Federal Reserve Board of Governors (FRB) and the Federal Reserve Bank of New York (FRBNY), with the goal of expanding access to all of the Financial Stability Oversight Council (FSOC) member agencies. # # #

Capital and Credit

August 5, 2022

Roundtable Weekly

Business Coalition Succeeds in Extending the Comment Period for NASAA Proposal Affecting REITS

Capital and Credit REITs

A coalition of 17 business organizations, including The Real Estate Roundtable, wrote this week to the North American Securities Administrators Association, Inc. (NASAA) requesting an extension of the comment period on proposed revisions to the NASAA Statement of Policy Regarding Real Estate Investment Trusts. In response to our coalition letter, NASAA has extended the comment period from August 11 to September 12, 2022. (NASAA extension request, Aug. 2)The coalition is also preparing to submit a comment letter raising concerns about these proposed revisions to the NASAA Statement of Policy Regarding Real Estate Investment Trusts. (NASAA Request for Public Comment, July 12)Proposed ChangesThe NASAA proposal would negatively impact publicly registered, non-traded REITs by linking conduct standards for brokers selling non-traded REITs to the SEC’s Best Interest conduct standard, according to the coalition letter.Specifically, the proposal has four revisions that would affect individual net income and net worth requirements; add a uniform concentration limitation; and include a new prohibition against using gross offering proceeds to fund distributions. (Roundtable Weekly, July 29 and the Institute for Portfolio Alternatives)Wide ImpactThe NASAA rules would also negatively impact highly regulated investment vehicles—including mutual funds, exchange-traded funds, interval funds, tender offer funds and business development companies.These investment funds direct long-term capital to geographically diverse opportunities across a range of property types—office, industrial, multifamily, retail, self-storage, medical, and real estate debt—throughout the United States and its territories.The funds would face arbitrary restrictions within the proposal that, if implemented, would limit investor choice during a time of stock market volatility and high inflation.Additionally, the NASAA proposal would affect federally regulated, non-traded REITs— particularly NAV REITs. These investment vehicles are a growing source of capital to the acquisition and development of affordable housing, commercial properties for small businesses, and other types of real estate that support economic growth and employment.Other Investment ConcernsThe proposed revisions also have the potential to influence other sets of NASAA Guidelines under development, including those for Asset-Backed Securities, Commodity Pools, Equipment Leasing, Mortgage Programs and Real Estate Programs other than REITs. (NASAA Request for Public Comment, July 12)With the deadline extended to Sept. 12, the coalition is continuing to refine its comment letter and welcomes input from our members.The Real Estate Roundtable is working with several other organizations on the coalition’s responses to NASAA. Roundtable members can direct their comments and questions to Roundtable Senior Vice President Chip Rodgers or call 202-639-8400.# # #

Carried Interest

August 3, 2022

Policy Comment Letter

Coalition Strongly Opposes Proposed Changes to Carried Interest Law

Carried Interest,

August 2, 2022

Policy Comment Letter

Joint Letter to NASAA – Extension Request – 8.2.2022

Reconciliation Bill

July 29, 2022

Roundtable Weekly

Sens. Schumer and Manchin Agree on Reconciliation Bill With Carried Interest and Energy Efficiency Provisions

Capital Gains Carried Interest Energy and Climate Policy Energy Efficiency Energy Policy Tax Policy

An unexpected agreement announced Wednesday night between Senate Majority Leader Chuck Schumer (D-NY), above right, and Sen. Joe Manchin (D-WV), left, on a $790 billion reconciliation proposal includes $14 billion in increased taxes on carried interest and a 15% corporate minimum tax—in addition to $369 billion in climate spending that affects “clean energy” measures important to commercial real estate. Senate Democrats are hoping to pass some version of the Schumer-Manchin language on a party-line vote before the upper chamber begins its summer recess on Aug. 8. (Senate Democrats’ joint statement and one-page bill summary, July 27 | Committee for a Responsible Federal Budget, July 28) Legislative Details Today, The Real Estate Roundtable held an all-member virtual town hall to discuss major provisions within the 725-page Inflation Reduction Act (IRA) of 2022. The Roundtable is working with its policy advisory committees and national real estate organization partners to assess how details in the bill language could impact CRE. Real Estate Roundtable President Jeffrey DeBoer stated, “The Roundtable is engaged with policymakers and Capitol Hill staff on the potential impact of the proposed bill on real estate capital formation, economic growth, clean energy investments, and affordable housing development. The industry is working together to mitigate any negative consequences for CRE before policymakers hold an eventual vote on a final bill." Taxes & Clean Energy The IRA’s largest tax increase is a new 15% corporate minimum tax on businesses with profits over $1B whose reported book income exceeds reported taxable income. The measure is estimated to raise $313B. The package also includes protections that would preserve the value of the low-income housing tax credit for investors (typically large banks) that use the credit to reduce their effective tax rate. The smallest tax increase would raise $14B in revenue by extending the capital gains holding period requirement for carried interest from 3 years to 5 years, although there is an exemption for real estate. Additionally, there are technical reforms to the holding period rules for measuring the 3- or 5-year holding period. (Deloitte Tax News & Views, July 29) The carried interest holding period change includes a real estate exception for gain associated with assets used in a real property trade or business. The language in the IRA on carried interest is identical to text in the House Ways and Means Committee’s previous reconciliation bill last year—language that was dropped from the version that passed the full House. (Roundtable Weekly, Sept. 17, 2021) The Schumer-Manchin agreement also proposes significant reforms to Section 179D—the tax code’s main provision to incentivize energy efficient commercial buildings. The 179D reforms are geared to encourage more existing building “retrofits” although maximum incentives amounts depend on compliance with heightened wage and labor standards. Tax incentives are also included to encourage investments in solar panels, energy storage, and EV charging stations. (See Summary of the bill’s Energy Security and Climate Change Investments) Timeline There are several challenges to the Senate Democrats’ timeline for passage of the bill in early August. Senate Democrats need all 50 members of their caucus present for an eventual budget reconciliation vote, along with Vice President Kamala Harris to break an anticipated tie with 50 Republicans. Yet Covid-19 infections have caused recent absences. (The Hill, July 28) The bill was sent to Senate Parliamentarian Elizabeth MacDonough to see if it conforms with reconciliation budget rules, a process that will spill over into next week. (BGov, July 29) Arizona Democratic Senator Kyrsten Sinema is a key centrist vote, considering she has long opposed changes to the taxation of carried interest. Sinema’s spokesperson Hannah Hurley said yesterday that the Senator is “reviewing the text and will need to review what comes out of the parliamentarian process.” (BGov, July 29) # # #

Economic Conditions

July 29, 2022

Roundtable Weekly

Economic Uncertainty Follows Inflation and Interest Rate Increases

This week’s flurry of key economic data offered mixed signals about the state of the economy and whether the Federal Reserve’s interest rate increases can slow inflation without causing a significant increase in unemployment—a “soft landing” that could prevent a full-blown recession before the mid-term elections. (The Hill, July 28)Economic Slowdown & InflationPOLITICO described the week as a “Category 5 storm of economic news.” Developments included a drop in the consumer confidence index for the third straight month; an increase in the Fed funds rate by another 75 basis points; and a drop in the gross domestic product (GDP) at an annual rate of 0.9 percent.Additionally, the Commerce Department reported today that the personal consumption expenditures price index (PCE)—a key inflation gauge closely tracked by the Fed—rose 1.0% increase last month and increased 6.8% since last June, the largest spike since January 1982. (Reuters and CNBC, July 29)President Biden responded, “It’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation.” (White House statement, July 28)Fed Chair Jerome Powell commented after the increase in interest rates. “I do not think the U.S. is currently in a recession. And the reason is there are just too many areas of the economy that are performing too well. The labor market has remained extremely tight, with the unemployment rate near a 50-year low, job vacancies near historical highs, and wage growth elevated. We think there's a path for us to be able to bring inflation down while sustaining a strong labor market.” (Federal Reserve press conference transcript, July 27)The recent rise in interest rates are starting to hamper commercial real estate transactions and values. The Wall Street Journal reported on July 26 that “banks are lending less and charging higher interest rates for the loans they make to owners and buyers of office buildings, shopping centers and other commercial real estate.”GDP & JobsTreasury Secretary Janet Yellen yesterday addressed this week’s drop in GDP. “Most economists and most Americans have a similar definition of recession: a broad-based weakening of our economy. That is not what we're seeing right now.” She added, “Job creation is continuing, household finances remain strong, consumers are spending, and businesses are growing.” (Treasury Department press conference transcript, July 28)Two straight quarters of economic contraction is usually considered a “technical” recession. Yet The National Bureau of Economic Research (NBR), as the official designator of recessions, has not released a decision yet based on the recent economic data. NBR bases its analysis of a wide variety of economic indicators such as employment, personal income, durable goods, housing permits, and other factors. (The Washington Post, July 27 and CNBC, July 26)White House economist Brian Deese commented on NBR and this week’s economic data on CNBC yesterday. “We’re certainly in a transition and we are seeing slowing as we all would have expected,” Deese said, “but if you look at the full data and the type of data that NBR looks at, nothing signals that this period in the second quarter is recessionary in the labor market.” (CNBC, July 28)Roundtable Chair John F. Fish (Chairman & CEO, Suffolk), above, was interviewed July 27 on Bloomberg Markets: Americas about current economic conditions and real estate. He commented on the industry’s challenges, including fractious land use policy, supply shortages, and cost drivers. National economic conditions affecting CRE and the Fed’s monetary policies will be a focus during The Roundtable’s Fall Meeting on Sept. 21-22 in Washington, DC.# # #

Affordable Housing

July 29, 2022

Roundtable Weekly

New Treasury Guidance Allows Greater Flexibility in Using COVID-19 Rescue Funds for Affordable Housing

The Biden administration issued new guidance this week that gives local and state governments greater flexibility when using their share of $350 billion in COVID-19 federal relief funds for affordable housing. The changes are in line with the administration’s recent Housing Supply Action Plan, which aims to boost the supply of affordable housing in communities throughout the nation. (Treasury Dept. news release, July 27 and Roundtable Weekly, May 20)Expanded Use of Pandemic FundsThe Treasury guidance allows a portion of the Coronavirus funds dedicated to state and local recovery to finance long-term affordable housing loans, including low-income housing tax credit (LIHTC) projects. (Affordable Housing Finance, July 27, 2022 and Roundtable Weekly, March 12, 2021)Treasury has also updated its guidance to clarify two “presumptively eligible” ways to use the pandemic rescue funds for affordable housing. (Treasury Dept., How to Use State and Local Fiscal Recovery Funds for Affordable Housing Production and Preservation)The National Council of State Housing Agencies reported, “The new guidance, which is effective immediately, allows states and localities to make long-term loans to affordable housing developments, as long as units are targeted to tenants earning 65% of the area median income or lower for a minimum of 20 years.” How-To GuideTreasury and the Department of Housing and Urban Development have also jointly published a “How-To” Guide to show governments ways of combining pandemic aid with other sources of federal funding.According to the guide, recipients of Coronavirus State and Local Fiscal Recovery Funds (SLFRF) can “acquire properties that will be transitioned into affordable housing for households that experienced the negative economic impacts of the pandemic. This could include acquisition of market rate rental properties, motels, or commercial properties that will be converted to affordable housing, or acquisition and preservation of publicly supported affordable housing.”SLFRF may also be used to “finance retrofits and weatherization of properties to improve energy efficiency, potentially by leveraging new federal funding such as the Department of Energy’s Weatherization Assistance Program, or infrastructure resources.”Over the coming months, Treasury plans to conduct a series of webinars and briefings with states, local governments, nonprofits, and private sector entities involved in the development and preservation of affordable housing. Multifamily ResponseThe National Multifamily Housing Council (NMHC) and National Apartment Association (NAA) applauded the flexibility provided by the new guidance.NMHC also unveiled new research this week showing the need for the U.S. to produce 4.3 million more apartments by 2035 to address the underbuilding of housing after the 2008 financial crisis.In conjunction with the study’s release, the website www.WeAreApartments.org breaks down the data by each state and 50 key metro areas.# # #

Capital and Credit

July 29, 2022

Roundtable Weekly

Proposed NASAA Rules Target REIT Guidelines, May Impact Real Estate Capital Formation

Capital and Credit REITs

The North American Securities Administrators Association (NASAA) is seeking public comment on proposed revisions to its Statement of Policy Regarding Real Estate Investment Trusts. The July 12 proposal would update the conduct standards for brokers selling non-traded REITs with references to the SEC’s Best Interest conduct standard. (NASAA news release, July 12 and Investment News, July 25)Proposed ChangesThe Institute for Portfolio Alternatives (IPA) reports that the four proposed revisions under consideration by NASAA would:Update the conduct standards for brokers selling non-traded REITs by supplementing the suitability section with references to the SEC’s best interest conduct standard.Update to the individual net income and net worth requirements—up to (a) $95,000 minimum annual gross income and $95,000 minimum net worth, or (b) a minimum net worth of $340,000—in the suitability section, by adjusting upward to account for inflation since 2007.Add a uniform concentration limitation prohibiting an aggregate investment in the issuer, its affiliates, and other non-traded direct participation programs that exceeds 10% of the purchaser’s liquid net worth. Liquid net worth would be defined as that component of an investor’s net worth that consists of cash, cash equivalents, and marketable securities. [NOTE: There is no carve out for accredited or other sophisticated investors.]Include, in multiple sections, a new prohibition against using gross offering proceeds to fund distributions, “a controversial product feature used by some non-traded REIT sponsors . . . having the potential to confuse and mislead retail investors.”Potential ImpactThe proposed revisions have the potential to influence other sets of NASAA Guidelines under development, including those for Asset-Backed Securities, Commodity Pools, Equipment Leasing, Mortgage Programs and Real Estate Programs other than REITs. (NASAA Request for Public Comment, July 12)NASAA works to coordinate state regulation of broker-dealers, investment advisers and securities offerings—including non-traded REITs, which are publicly offered REITs not listed on any exchange.NASAA’s Corporation Finance Section Committee Chair and Ohio Securities Commissioner Andrea Seidt said, “The REIT guidelines have not been updated for more than 15 years and these revisions are long overdue. If adopted, the proposed revisions will make key inflationary adjustments to existing suitability standards and promote uniformity in state concentration limits, both of which are key to limiting retail investor risk.” (NASAA news release, July 12)Final comments on NASAA’s 44-page request are due by Aug. 11, 2022. The Real Estate Roundtable is working with several other organizations on a coalition response. Roundtable members can direct their comments and questions to Roundtable Senior Vice President Chip Rodgers or call 202-639-8400.# # #

Policy Landscape

July 22, 2022

Roundtable Weekly

Democrats Focus on Pared-Down Reconciliation Bill, Biden Takes Action on Climate

Climate Policy Congress

Democrats scaled down their ambitions for a budget reconciliation bill in the wake of Sen. Joe Manchin’s (D-WV) recent rejection of any climate and tax legislative package. Instead, congressional Democrats this week focused on a limited prescription drug pricing and health care subsidy bill as President Biden announced executive actions to make progress on climate initiatives. (Roundtable Weekly, July 15 and New York Times, July 20)Senate Democrats PivotSenate Majority Leader Chuck Schumer (D-NY) said this week that Democrats are moving forward on a smaller party-line package before the Senate summer recess begins on August 5. Policymakers are also mindful that budget reconciliation rules expire on Sept. 30 as the November mid-term elections approach. (AP, July 19 and July 15)Roundtable Tax Policy Advisory Committee Member Russ Sullivan (Brownstein Hyatt Farber Schreck, LLP) profiles the steps and timeline involved to produce a reconciliation bill in his article, “How Likely is it that we see a Reconciliation Law Passed in this Congress?" (JD Supra, July 12)White House Climate ActionBiden's executive actions “to turn the climate crisis into an opportunity” fell short of declaring a federal emergency, which would have unlocked broad federal powers to develop clean energy. (Wall Street Journal and White House fact sheet, July 20)With climate legislation stalled in Congress, and constrained by a recent SCOTUS ruling that restricts the EPA’s ability to regulate greenhouse gases, Biden’s actions to increase offshore wind capacity and help communities cope with extreme heat have been described as “incremental” and “minuscule compared to his ambitious plan” for a net-zero emissions economy by 2050. (Wall Street Journal and POLITICO, July 20)Given the limited federal response, Biden stressed that governors, mayors, state agency heads, and public utility commissioners—as well as developers—need “to stand up and be part of the solution.” (President Biden remarks and video, July 20)Trends in CRE, the congressional agenda, and the upcoming lame-duck session of Congress after the mid-term elections will be among the topics discussed during The Roundtable’s Fall Meeting on Sept. 20-21 in Washington, DC.# # #

Affordable Housing

July 22, 2022

Roundtable Weekly

Senate Finance Committee Focuses on Low-Income Housing Tax Credit and Other Affordable Housing Incentives

Numerous congressional committees have recently addressed the nation’s scarcity of affordable housing—including this week’s Senate Finance Committee hearing, “The Role of Tax Incentives in Affordable Housing,” which focused on the Low Income Housing Tax Credit (LIHTC) and other legislative incentives. Tax Focus Senate Finance Chairman Ron Wyden (D-OR), Ranking Member Mike Crapo (R-ID) and several witnesses expressed support during the hearing for the Affordable Housing Credit Improvement Act (S.1136), introduced by committee member Maria Cantwell (D-WA). The bill would expand and strengthen the LIHTC.The bill (detailed summary here) would expand the pool of tax credits that are allocated to states for new affordable housing, make it easier to combine LIHTC with other sources of capital like private activity bonds, and facilitate LIHTC rehab projects. (Tax Notes, July 21)Hearing witness Dana Wade—an executive at Walker & Dunlop and a former commissioner of the Federal Housing Administration (above)—noted that 25 percent of all renters spend more than half of their monthly income on rent. Wade also testified extensively about the causes of the housing affordability crisis. “An estimated 40 percent of development costs can be attributed to regulation at the federal, state, and local levels,” testified Wade. “Zoning policies like density limits, requirements for parking, height restrictions, lengthy permitting and approval processes, and other land-use restrictions create a perfect storm that can often stymie new development.” One of the largest multifamily lenders and LIHTC syndicators in the country, Walker & Dunlop is chaired and managed by Roundtable Member Willy Walker.“Overly restrictive land-use and zoning policies, construction cost increases, and labor shortages are deepening our housing challenges, which now extend across the entire country,” said Real Estate Roundtable President and CEO Jeffrey DeBoer (above). “Government at all levels needs to be part of the solution, not part of the problem. The Affordable Housing Credit Improvement Act would be an important step forward.”The future of S. 1136 is uncertain after key centrist Sen. Joe Manchin recently said he would not support any legislative package that included tax increases until more economic data affecting the 40-year high inflation rate becomes available. Chairman Wyden did not promise a timetable for committee action. (Roundtable Weekly, July 15) Congressional Hearings Other congressional efforts to address affordable housing included yesterday’s Senate Banking, Housing and Urban Affairs Committee hearing on the state of housing in America. Policymakers heard testimony from Dr. Lawrence Yun, chief economist with the National Association of Realtors and Dr. Douglas Holtz-Eakin, president of the American Action Forum.In the House, a July 20 House Financial Services Committee hearing focused on ways to provide more affordable housing in the face of rising inflation. Additionally, a July 12 House Ways and Means Committee hearing and a June 28 House Financial Services Subcommittee hearing focused on institutional ownership in the single—family home market other affordable housing issues. (Roundtable Weekly, July 15 and July 1) The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) has formed an Affordable Housing Working Group, which is working with the Research Committee to develop proposals on expanding the nation’s housing infrastructure. # # #

LIBOR

July 22, 2022

Roundtable Weekly

The Fed Requests Comments on Proposal to Implement LIBOR Transition

LIBOR

The Federal Reserve Board on July 19 invited comment on a proposal that implements the Adjustable Interest Rate (LIBOR) Act, which Congress enacted last year. The LIBOR Act provides a safe harbor for market participants who need to switch existing LIBOR-referencing financial contracts to a replacement benchmark for debt instruments before LIBOR reaches its final replacement date on June 30, 2023. (The Fed’s Notice of Proposed Rulemaking, July 19 and Roundtable Weekly, March 11)LIBOR and CRELIBOR, formerly known as the London Interbank Offered Rate, is the interest rate benchmark that was the dominant reference rate used in recent decades and remains in extensive use today in outstanding financial contracts — including commercial real estate debt, mortgages, student loans and derivatives — worth an estimated $223 trillion. (Roundtable Weekly, Dec. 10, 2021)The LIBOR Act also provides that all contracts with no adequate fallback provisions for an alternative benchmark substitute will be replaced by the Secured Overnight Financing Rate (SOFR).The Real Estate Roundtable and 17 national trade groups submitted letters last year on April 14 and July 27 to policymakers in support of measures to address “tough legacy” contracts during the transition away from LIBOR. (Roundtable Weekly, Dec. 10, 2021)What’s NextThe Federal Reserve is working to mitigate potential risks and promote a smooth global transition away from LIBOR with both domestic and foreign supervisors. The Fed has emphasized the importance of preparation and transitioning to the market to ensure that supervised institutions can transition away from LIBOR. (The Fed Libor Transition webpage)Comments on the Fed’s Notice of Proposed Rulemaking will be accepted for 30 days after publication in the Federal Register.The Roundtable welcomes comments from its members on the proposed rulemaking and plans to work with its Real Estate Capital Policy Advisory Committee (RECPAC) on a response. For any questions, please contact The Roundtable’s Senior Vice President Chip Rodgers or call 202-639-8400.# # #

Industry News & Views

July 22, 2022

Roundtable Weekly

Small-Business Owners Descend on Capitol Hill to Urge SBA Reauthorization, CRE Leaders Address Market Conditions

Economic Growth amp CRE

Over 2,500 small-business owners gathered on Capitol Hill this week to meet with more than 400 lawmakers and federal officials to urge reauthorization of the Small Business Administration (SB) for the first time in over 20 years. Small businesses throughout the nation are facing inflationary pressures, supply chain shortages, labor challenges, limited access to capital and a looming possibility of recession. (The Hill, July 20) 10,000 Small Businesses The business owners urged lawmakers to modernize the SBA, enact tax credits and provide incentives to help small businesses retain workers and access capital.Sens. Kyrsten Sinema (D-AZ) and Tim Scott (R-SC) commented on Tuesday during the summit that the SBA should be simplified and supported reauthorization. (The Hill, July 20)The July 18-20 summit was hosted by Goldman Sachs’s 10,000 Small Businesses program, which provides education and business training to entrepreneurs. The program has reached more than 12,800 small business owners across all 50 states, Puerto Rico, and Washington, DC. (Goldman Sachs, June 29)Joe Wall, director of Goldman Sachs’s small-business program, said, “Our goal this week is to generate a lot of momentum so that heading into next year it’s a real priority.” (The Hill, July 20)Owner ChallengesA recent survey of the program’s participants shows 93 percent of small-business owners are worried about the US economy experiencing a recession in the next 12 months. Nearly all respondents (97 percent) also say inflationary pressures have increased or remained the same compared with three months ago. Additionally, 88 percent of respondents say it is important for Congress to prioritize the Small Business Administration (SBA), which has not happened in 20 years. (Survey news release, July 13) Alumni of the 10,000 Small Businesses program collectively represent over $17.3 billion in revenues and employ 245,000 people. Industry ViewsCNBC’s Squawk on the Street this week featured two interviews with commercial real estate leaders. CBRE CEO Robert Sulentic and Roundtable member Marty Burger (Chief Executive Officer, Silverstein Properties) commented on commercial real estate market conditions, including office conversions to rental housing and the return-to-office trend. (Burger interview | Sulentic interview)In this week’s Walker Webcast, Dr. Peter Linneman (Principal, Linneman Associates, KL Realty and CEO, American Land Fund) was interviewed by Roundtable Member Willy Walker (Chairman and Chief Executive Officer, Walker & Dunlop). (Bisnow, July 21)Dr. Linneman commented that inflation is transitory with supply lagging demand due to 23% of the workforce collecting unemployment insurance. He also offers his views on national debt concerns, the Fed and interest rates, and return-to-the-office concerns. (Watch “The Best Hour in CRE” with Economist Peter Linneman, July 21)# # #

Annual Reports

June 25, 2022

Press Release

2022 Annual Report – Building a More Resilient and Dynamic Future

Climate Policy Energy Policy Homeland Security Housing Infrastructure Tax Policy

View Full Report - 2022 Annual Report - Building a More Resilient and Dynamic Future Intro Policy Outreach Commercial Real Estate by the Numbers Tax Policy Capital & Credit Housing Infrastructure Energy & Climate Homeland Security Membership

Climate Risk Reporting

June 13, 2022

Policy Comment Letter

Industry Groups Submit Comments to SEC on Climate Risk Disclosure Proposal

Climate Policy, Climate Risk Reporting, Reporting on Climate Risks,

Climate Risk Reporting

June 10, 2022

Roundtable Weekly

Roundtable Submits Comments to SEC on Climate Risk Disclosure Proposal

Building Performance Standards BPS climate Climate Policy Climate Risk Reporting Energy and Climate Policy Reporting on Climate Risks Scope 3 reporting

The Real Estate Roundtable submitted comments today to the U.S. Securities and Exchange Commission (SEC) on a proposed rule that would require all registered companies to disclose material financial risks related to climate change. The comments were developed with The Roundtable’s Sustainability Policy Advisory Committee (SPAC), chaired by Tony Malkin (Chairman, President and CEO of Empire State Realty Trust). (GlobeSt, March 22) Extensive Climate Risk Disclosures The SEC’s proposal, “Enhancement and Standardization of Climate-Related Disclosures for Investors,” is a key component of the Biden Administration’s efforts to cut U.S. greenhouse gas emissions. (CBS-AP | Bloomberg | Axios, March 21) If the rule is finalized, compliance would phase-in over the next several years. All SEC registrants would be required to quantify their greenhouse gas (GHG) emissions, assess the economic impact of rising sea levels related to their assets, and report in SEC filings (for the benefit of investors) on these and other climate-related risks through annual 10-Ks and additional filings. (SEC News Release | Proposed Rule | Fact Sheet, March 22) The SEC’s extensive draft rule has raised significant concerns throughout the U.S. business community. (ClimateWire, June 2). The proposal includes new disclosure requirements for “Scope 3” GHG emissions, which are generated outside a business' direct control by partners, suppliers, and consumers that make up the “value chain” of that business. (EPA Scope 3 Inventory Guidance and Fourkites). Roundtable Response The Roundtable’s comment letter is summarized as follows: Registered Companies Should Not be Required to Report on Emissions From Sources They Do Not Own or Control.When applied to the CRE context, this means that a building owner should not be under a mandate to report on emissions attributable to the operations of tenants in leased spaces. For example, emissions from metered electricity in a tenant-leased space should not be the CRE owner’s responsibility to report to the SEC. Create a "Safe Harbor” for Emissions Calculated with U.S. Government Data and Tools.Reporting companies should be protected by a “safe harbor” that insulates emissions disclosures from liability—in both SEC enforcement as well as private litigation—when calculations are based on the best, available, and most recent data and tools released by the federal government. There Should be No Scope 3 Reporting “Mandate.”Scope 3 disclosures typically depend on GHG data possessed by suppliers and other businesses in a reporting company’s value chain. Registrants should not be under any Scope 3 disclosure mandate because they frequently cannot get the basic data to quantify those “indirect” estimates. Wait Until a Registrant has a Full Year of “Actual” Data Before Requiring Emissions Disclosures.The proposal as written effectively requires two separate emissions disclosures each fiscal year. The SEC should only require emissions filings once a year—after a company has all of the “actual” data it needs to support and verify its calculations. Financial Risks from Severe Weather Events Should be Subject to “Principles-Based” Reporting—As Opposed to One-Size-Fits-All “Prescriptive” Rules.Risks from floods, droughts, and similar events should be subject to narrative, “principles-based” reporting. The SEC should drop its proposed “prescriptive” rule that registrants should precisely quantify impacts from climate-related events if they have a one-percent or greater impact on any line item in a financial statement. Policymaker Concerns The Biden administration is expected to push forward with a final rule that could be issued later this year. Senator Joe Manchin (D-WV), chairman of the Senate Committee on Energy and Natural Resources, sent a letter to the SEC on April 4 outlining his concerns with the proposal. Senate Republicans also expressed their opposition to the SEC proposal in an April 5 letter. House Republicans have called for a hearing on the SEC’s proposal—signaling heightened oversight should they win the majority in this November’s mid-term elections. (E&E News, May 10) The Roundtable’s comments to the SEC will be a focus of the SPAC meeting on June 17, held in conjunction with The Roundtable’s Annual Meeting. # # #

Homeland Security

June 10, 2022

Roundtable Weekly

DHS Warns of Increased Extremist Threats Through November Midterm Elections

Homeland Security

The Department of Homeland Security (DHS) issued a National Terrorism Advisory System Bulletin this week, warning of a “heightened threat environment” affecting targets that encompass U.S. critical infrastructure, public gatherings, faith-based institutions, schools, racial, ethnic, and religious minorities, government facilities and personnel, the media, and perceived ideological opponents. (DHS Bulletin, June 7) CRE & Security Threats The bulletin, which expires Nov. 30, said calls for violence by domestic extremists directed at democratic institutions, candidates and election workers will likely increase through the fall. (Associated Press, June 7)DHS’s Cybersecurity and Infrastructure Security Agency (CISA) continues to work with government and private sector partners—including owners and operators of critical infrastructure, soft target facilities, and public gathering places—to provide information resources on Active Shooters, Bombing Prevention, and Soft Targets-Crowded Places. DHS partners include The Roundtable’s Homeland Security Task Force (HSTF) and The Real Estate Information Sharing and Analysis Center. RE-ISAC is a public-private information sharing partnership between the U.S. commercial facilities sector and federal homeland security officials organized and managed by The Real Estate Roundtable.HSTF and The Roundtable’s Risk Management Working Group (RMWG) will hold a joint meeting on June 17 in conjunction with The Roundtable’s Annual Meeting in Washington, DC. Guests will include:National Football League security Chief Cathy Lanier, above, the new chair of the Commercial Facilities Sector Coordinating Council. (Video: “Cathy Lanier explains her role as the NFL's Chief Security Officer”)Former NYPD commissioner Dermot F. Shea, president of Related Commercial Property ManagementA representative from the FBI's Counterterrorism DivisionNitin Natarajan, Deputy Director for the Cybersecurity and Infrastructure Security Agency (CISA)Gun ViolenceThree real estate CEOs who have served on The Roundtable’s Board of Directors joined 225 other national business leaders in a joint letter to the Senate yesterday, urging “bold urgent action” to address gun violence. (CBS News, June 10)Roundtable members Owen Thomas (CEO & Director, Boston Properties/BXP), Scott Rechler, (Chairman and CEO, RXR) and William Rudin (Co-Chairman & CEO, Rudin Management Company) are signatories on the joint letter.The letter states, “Taken together, the gun violence epidemic represents a public health crisis that continues to devastate communities—especially Black and Brown communities—and harm our national economy.” (CNBC, June 10) Roundtable President and CEO Jeffrey DeBoer issued a May 27 statement on gun violence in America, calling on Democrats and Republicans “… to pass common sense legislation to remove weapons of war from America’s cities and communities.” The Roundtable’s 2022 Roundtable Policy Agenda states, “As a critical part of the nation's infrastructure, real estate continues to face an array of threats from natural catastrophes, international and domestic terrorism, criminal activity, cyber-attacks, and border security. To address such threats, The Roundtable continues to help build a more secure and resilient industry against both physical and cyber threats.” # # #

Climate Risk Reporting

June 10, 2022

Policy Comment Letter

Real Estate Roundtable Comments to SEC on Climate Risk Disclosure Proposal

Building Performance Standards BPS, Climate Policy, Climate Risk Reporting, Reporting on Climate Risks,

Policy Landscape

June 3, 2022

Roundtable Weekly

Discussions Gain Momentum on Reconciliation Package

Congress

Congress returns to Washington next week as talks on a scaled-back reconciliation package between Senate Majority Leader Chuck Schumer (D-NY) and Sen. Joe Manchin (D-WV) have reportedly gained momentum, with a focus on climate and energy provisions, deficit reduction, and lowering prescription drug costs. (Wall Street Journal, May 28 and Axios, May 27) The Reconciliation Route Axios reported last night that Manchin’s separate talks with several Republican Senators on the contours of a pared-down, bipartisan legislative package have reached an end. (Axios, June 2 and Roundtable Weekly, May 6) Manchin, who stymied the Build Back Better (BBB) Act from moving forward last year, is the key to a possible alternative Democratic reconciliation bill that could pass the 50-50 Senate on a party-line vote. Sen. Manchin and Sen. John Thune (R-SD), who holds the number two position in Senate Republican leadership, will be among the guests during The Roundtable’s Annual Meeting on June 16. Sen. Kyrsten Sinema (D-AZ) is also a crucial centrist vote. She discussed policy issues at The Roundtable’s April 25 Spring Meeting. (Roundtable Weekly, April 29) Scaling Back The Schumer-Manchin discussions are now reportedly addressing a pared-down package involving $800 million to $1 trillion in revenue from a new minimum tax on large company profits and increased IRS enforcement. Half of these revenues would go to deficit reduction. (Wall Street Journal, May 28 and Axios, May 27) Some of the remaining revenues would reportedly focus on possible tax incentives for reducing carbon emissions and support for existing energy sources. An extension is also under consideration for Affordable Care Act health insurance subsidies, which are scheduled to expire later this year as the November mid-terms approach. The most significant portion of the moribund BBB Act’s proposed spending was focused on climate policies. The Roundtable on Nov. 16, 2021 sent a letter to congressional tax writers detailing five recommendations on green energy tax provisions affecting real estate that were part of the BBB Act. (Roundtable Weekly, Nov. 19, 2021) Time is short to move any new legislative package via reconciliation with midterms looming. Manchin has stated the only deadline is Sept. 30 to pass a spending bill, although other policymakers have signaled it would have to be done before the August recess. (Wall Street Journal, May 28 and Reuters, May 27) # # #

Inflation

June 3, 2022

Roundtable Weekly

President Biden Announces Plan to Fight Inflation With Federal Reserve in Lead Role

President Joe Biden affirmed this week that the Federal Reserve will take the lead role in his administration’s efforts to tame inflation. The Fed’s “Beige Book” of regional economic surveys also confirmed the economy is facing headwinds of high inflation, supply chain issues and labor market difficulties. (Barron’s, May 31 and MarketWatch, June 1) Top Economic PriorityBiden announced a three-pronged plan to fight inflation as his “top economic priority” in a May 30 Wall Street Journal op-ed, where he noted the Fed will have the primary responsibility to control rising prices.Biden stated his second goal is to push Congress to act on cost-reduction measures such as clean energy tax credits and a Housing Supply Action Plan recently proposed by the administration. Lastly, he listed that Congress must act to reduce the federal deficit, citing a May 25 report by the Congressional Budget Office. (CBO Budget and Economic Outlook: 2022 to 2032).Federal Reserve Chair Jay Powell and Treasury Secretary Janet Yellen also met with President Biden this week (see photo with video link, above) to reiterate their “laser focus on addressing inflation.” Biden remarked, “With a larger complement of [Federal Reserve] board members now confirmed, I know we’ll use those tools of monetary policy to address the rising prices for the American people.” (White House remarks and video, May 31)The next meeting of the Federal Open Market Committee is June 14-15, when it is expected that the Fed’s benchmark interest rate will be increased by half a percentage point. (AP, May 25)The White House previously announced plans to combat inflation on May 10 that included proposals to increase taxes on large corporations and the wealthiest Americans – and possibly eliminate Trump-era tariffs on foreign imports. (White House Inflation Plan | News conference video | The Hill, May 10) Beige Book & Sentiment IndexIn the Fed’s June 1 “Beige Book,” the majority of the twelve Federal Reserve Districts reported slight or modest growth. Survey respondents cited labor market difficulties as their greatest challenge, followed by supply chain disruptions. Rising interest rates, general inflation, the Russian invasion of Ukraine, and disruptions from COVID-19 cases (especially in the Northeast) round out key concerns impacting household and business plans, according to the Fed’s surveys.Roundtable President and CEO Jeffrey DeBoer commented on similar findings in The Real Estate Roundtable’s Q2 2022 Economic Sentiment Index. “Our Q2 Sentiment Index reveals bright spots for lease demand in a wide swath of the economy, particularly regarding life sciences, industrial, multifamily, and data center assets. At the same time however, high inflation, rising interest rates, labor and supply chain shortages are increasing costs associated with all real estate development and operations. The impact of ongoing war in eastern Europe is another cloud tempering optimism.”He added, “We urge national policymakers to focus on creating jobs and supporting strong real estate asset values. Both actions would buttress the overall economy and help local community budgets provide needed safety, education and transportation services.” (Roundtable news release, May 13)CBO ProjectionsThe CBO’s May 25 Budget and Economic Outlook noted that although the deficit is projected to fall to about $1 trillion — or 4.2 percent of GDP — in the current fiscal year from almost $2.8 trillion last year, demographic pressures and other factors will push deficits steadily higher in later years.These pressures on the federal deficit could have an impact on the prospect for legislation addressing “tax extenders” later this year during a post-election, congressional “lame duck” session. Inflation, interest rates and other economic conditions will be a focus of discussion during The Roundtable’s Annual Meeting on June 16-17 in Washington, DC (all member meeting). # # #

Gun Violence

May 27, 2022

Roundtable Weekly

Roundtable Calls for Common Sense Gun Policy

Congress

Roundtable President and CEO Jeffrey DeBoer, above, issued a statement today on gun violence in America. “Enough is enough. Congress must set politics aside. We call on Congress to use its moral authority to help make our schools, places of worship, work, shopping and recreation more safe from gun violence.” “Democrats and Republicans must come together, in a national act of healing, and pass common sense legislation to remove weapons of war from America’s cities and communities. Enough is enough,” DeBoer said. # # #

Workplace Return

May 27, 2022

Roundtable Weekly

Healthy Workplaces Policy Coalition Launches With Roundtable’s Backing

Healthy Buildings Workplace ReEntry

The “Healthy Workplaces Coalition” launched this week with the backing of The Real Estate Roundtable to support federal policies that promote health and safety in offices and other work environments. (Coalition news release and 1-pager, May 25) Roundtable Support More than 40 national organizations, industry leaders and trade associations will collaborate on federal policies to support the health and well-being of employees, customers and the public in workplaces and across the built environment. The International WELL Building Institute (IWBI) and ISSA–The Worldwide Cleaning Industry Association lead the Coalition. The Roundtable and Building Owners and Managers Association (BOMA) International join them on the Steering Committee, and the American Hotel & Lodging Association (AHLA) is among the Coalition’s founding members. “Revitalizing downtown communities hit hard by the pandemic depends on getting America’s workers back to the office place – and supporting the mom-and-pop restaurants and stores that serve our central business districts,” said Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable. “Policies that support investments to improve indoor air quality and other healthy building strategies will not only accelerate the return to the workplace, but improve the long-term resiliency of our nation’s built environment.” The Healthy Workplaces Coalition launch announcement cited a recent Honeywell survey, which showed 72% of office workers worldwide worry about air quality in their workplaces’ buildings. Back-to-the-workplace issues were the focus of a Roundtable virtual town hall in March with U.S. Department of Labor Secretary Martin Walsh and Roundtable Chair John Fish (Chairman and CEO, Suffolk). Town hall participants Fred Seigel (President and CEO, Beacon Capital Partners) and Owen Thomas (CEO, Boston Properties), emphasized the importance of healthy building strategies as key measures necessary to prompt workers’ return to office environments. (Watch video discussion | Roundtable Weekly, March 18) Policy Focus The coalition will support federal incentives and other policies that help businesses defray some of the extra costs they incur for heightened sanitization and safety practices prompted by the spread of COVID-19. For example, the coalition aims to build support for legislation such as the bipartisan Healthy Workplaces Tax Credit Act (S. 537), introduced by Sens. Rob Portman (R-OH) and Kyrsten Sinema (D-AZ), backed by The Roundtable since the height of the pandemic. Companion legislation pending in the House (H.R. 1944) is sponsored by Reps. Stephanie Murphy (D-FL) and Darin LaHood (R-IL). The Portman-Sinema bill would provide a refundable tax credit against payroll taxes for 50 percent of the costs incurred by a business for adhering to health guidelines, as well as support for training and education on the prevention of virus transmission. Similarly, the recently introduced Airborne Act sponsored by Rep. Don Beyer (D-VA) would provide a tax credit for businesses to conduct indoor air quality assessments, and create a voluntary certification program for CRE owners that meet heightened ventilation standards. (Beyer news release, May 9) Reopening businesses and the country is an important priority in The Roundtable's 2022 Policy Agenda: “Connection, Commitment, and Collaboration - Supporting Federal Policy Through Experience and Innovation in 2022” – and will be a focus of discussion during The Roundtable’s all-member Annual Meeting on June 16-17 in Washington. # # #

Flood Insurance

May 27, 2022

Roundtable Weekly

New Legislation to Reauthorize the National Flood Insurance Program Released Before House Committee Hearing

Flood Insurance

The House Subcommittee on Housing, Community Development, and Insurance held a hearing on May 25 to address the reauthorization and reform of the National Flood Insurance Program (NFIP). Funding for the program is set to expire on Sept. 30 if reauthorization is not passed by Congress. (Hearing Webcast and Committee Memorandum)Since the last major reauthorization expired at the end of fiscal 2017, there have been 19 short-term NFIP extensions and several brief lapses, according to the committee’s memo.Five draft bills were released in conjunction with the hearing, including two from House Financial Services Committee Chair Maxine Waters (D-CA). Her first bill would reauthorize the program for five years, renew flood risk mapping and mitigation funds, and offer discounted rates to lower-income households. Water’s second bill would cancel the indebtedness of the NFIP. The Roundtable View The Roundtable supports a long-term reauthorization of the NFIP with appropriate reforms that create long-term stability for policyholders, improved accuracy of flood maps, improved mitigation, enhanced affordability, and the acceptance of non-NFIP policies for commercial properties. (Roundtable website)Under the current NFIP, commercial property flood insurance limits are very low – $500,000 per building and $500,000 for its contents. Lenders typically require this base NFIP coverage, and commercial owners must purchase Supplemental Excess Flood Insurance for coverage above the NFIP limits.The Roundtable and its coalition partners support NFIP reauthorization with the inclusion of provisions that permit a voluntary "commercial exemption" for mandatory NFIP coverage if commercial property owners currently maintain adequate flood coverage.Given the low coverage amounts provided to commercial properties, it is important to permit larger commercial loans to be exempt from the mandatory NFIP purchase requirements.Congress will face the possibility of yet another NFIP funding extension before September 30 if policymakers cannot agree on reforming the program through legislation.# # #

News

May 27, 2022

Roundtable Weekly

Roundtable-Supported Fed Liquidity Facility Bolstered CRE Finance During Pandemic

Federal Reserve The Fed

A report published this week by the Dallas Fed concludes that the Federal Reserve’s Term Asset-Backed Loan Facility (TALF) played a key role in bolstering commercial real estate finance during the pandemic. The Federal Reserve added outstanding CMBS as eligible collateral for lending through the TALF in 2020 after urgent requests from business coalitions that included The Real Estate Roundtable. (Roundtable Weekly, April 17, 2020 and Joint Trades letter, March 24, 2020) TALF & CREThe report by three authors with the Federal Reserve Bank of Dallas’ Research Department states the value of CRE assets at the onset of the pandemic in Feb. 2020 – particularly office towers, retail centers and hotels – suddenly became uncertain. The TALF’s subsequent support of asset-backed securities successfully anchored CMBS prices and helped to steady CRE finance during a tumultuous economic environment.The TALF, previously used during the 2008 financial crisis, was relaunched by the Fed on March 23, 2020 in response to the Covid-19 crisis.A business coalition that included The Roundtable on March 24, 2020 urged the Federal Reserve, Treasury, and Federal Housing Finance Agency to immediately expand the TALF to include non-agency CMBS – including legacy private-label conduit and single-asset single borrower (SASB) assets. The coalition stated the inclusion of private-label assets would stabilize asset prices and shore up the balance sheets of market participants. (Joint Industry letter)On April 9, the Federal Reserve announced the range of TALF-eligible collateral would expand to include triple-A rated tranches of both outstanding (legacy) CMBS, commercial mortgage loans and newly issued collateralized loan obligations. However, the updated term sheet excluded single-asset single borrower (SASB) CMBS and commercial real estate collateralized loan obligations (CRE CLOs). (Federal Reserve news release and Term Sheet)Six real estate industry organizations, including The Roundtable, wrote again to federal regulators on April 14, 2020 about the urgent need to include a wider range of investment grade commercial real estate debt instruments in the Fed’s TALF.The 2020 letter stated, “Commercial and multifamily real estate assets that were perfectly healthy just weeks ago now face massive stress and a wave of payment and covenant defaults.”The Fed on May 12, 2020 broadened the range of leveraged loans that could be used as collateral for the TALF to include new Triple-A rated collateralized loan obligations (CLOs) with leveraged loans. (Fed news release and Term Sheet)TALF Lessons A recent Federal Reserve paper entitled “Crisis Liquidity Facilities with Nonbank Counterparties: Lessons from the Term Asset-Backed Securities Loan Facility” explores the constructive role of the TALF in depth. The TALF and other emergency lending facilities were closed in late 2020 as part of a multi-trillion “omnibus” bill providing pandemic relief and government operations funding – but the Fed can re-start TALF if emergency economic conditions arise again in the future. (Roundtable Weekly, Dec. 22, 2020) The report published this week concludes the TALF proved especially important in supporting commercial real estate finance. “The TALF program structure provided needed liquidity to investors at the height of the pandemic, but it incentivized borrowers to exit as normal market conditions returned, allowing the program to quickly unwind,” the article states. # # #

SEC Rulemakings & CRE

May 25, 2022

Policy Comment Letter

2022_04_25_RER Private Funds Proposal Comment Letter

Capital and Credit, Restoring Liquidity in CRE Markets and Protecting Capital Formation, SEC, Securities and Exchange Commission,

May 25, 2022

Policy Comment Letter

2022_04_25 Joint Trades Comment Letter on Proposed PFIC Regulations

Housing Policy

May 20, 2022

Roundtable Weekly

White House Announces Comprehensive Plan to Increase Affordable Housing Supply

The White House this week announced a plan to create hundreds of thousands of affordable housing units in the next three years, with the goal of closing the nation’s housing supply shortfall in five years. The Housing Supply Action Plan includes zoning incentives and new government financing to address an estimated shortfall of 1.5 million homes nationwide. (PoliticoPro, May 16 and Moody’s Analytics, March 2021) Comprehensive Approach The White House proposes a range of administrative and legislative actions that aim to build and preserve rental housing for low- and moderate-income families. The Biden administration’s proposed actions include:Expanding and improving federal financing for affordable multifamily development and preservation using funds from prior COVID relief legislation.Disposing of federal properties to create affordable housing for the homeless. Proposed regulations aim to make the disposition process easier to navigate for affordable housing developers and strengthen the process to identify suitable properties for potential developers.Financing more than 800,000 affordable rental units by expanding and strengthening the Low-Income Housing Tax Credit (LIHTC). The proposal would infuse $55 billion to expand LIHTC and include a 10 percent annual increase in 9 percent allocations from 2022 to 2024—and a reduction in the 50 percent bond test to 25 percent from 2022 to 2026. (Multi-Housing News, May 18)Working with Fannie Mae to invest in construction to permanent loans; and reforming the HOME Investment Partnerships Program (HOME).Ensuring that more government-owned foreclosed homes go to owner-occupants or non-profits for rehabilitation, rather than to large institutional investors.Rewarding jurisdictions that have reformed zoning and land-use policies with higher scores in certain federal grant processes, for the first time at scale.Expanding federal financing of manufactured housing, accessory dwelling units (ADUs), 2-4 unit properties, and smaller multifamily buildings.Transit-Oriented Development The Housing Supply Plan also seeks to provide incentives to increase housing density around transit hubs, goals long-supported by The Roundtable. These actions include:Leveraging transportation funding from the Infrastructure Investment and Jobs Act (IIJA) last November for transit-oriented programs to encourage state and local governments to boost housing supply. (Roundtable Weekly, Nov. 12, 2021)Directing the Department of Transportation (DOT) to use IIJA and other transit-oriented discretionary grant programs to encourage locally driven land use reform, density, rural main street revitalization, and transit-oriented development that integrate affordable housing. DOT earlier this year released three funding applications for competitive grant programs totaling nearly $6B in funding to achieve these goals. (GlobeSt., May 18)Updating DOT program guidelines to increase financial support for Transportation Infrastructure Finance and Innovation Act (TIFIA) program projects that include residential development. (President Biden Announces New Actions to Ease the Burden of Housing Costs | The White House, May 16)The National Multifamily Housing Council and National Apartment Association applauded the Biden administration plan. Their joint statement noted the housing supply crisis requires the private sector to work with local, state and federal governments to reduce regulatory burdens and encourage the development and rehabilitation of housing of all types and price points.The Real Estate Roundtable’s Research Committee’s co-chairs have drafted a report on affordable housing that will be discussed at the Roundtable’s Annual Meeting in June. Additionally, The Real Estate Capital Policy Advisory Committee (RECPAC) has formed an Affordable Housing Working Group, which is working with the Research Committee to develop proposals on expanding the nation’s housing infrastructure. # # #

Infrastructure

May 20, 2022

Roundtable Weekly

Biden Administration Marks Six-Month Anniversary of Bipartisan Infrastructure Law

Infrastructure

White House Infrastructure Coordinator Mitch Landrieu led a group of Biden administration cabinet officials this week in recognizing the six-month anniversary of the $1 trillion infrastructure package, noting the 4,300 projects underway with more than $110 billion in allocated funding. (White House Fact Sheet and YouTube news conference, May 16) Implementation Efforts The Biden Administration has published an interactive map showing where the $110 billion will be spent. Of that total amount, $52.5 billion is for federal highway funding this fiscal year, $20.5 billion for public transit, and $27 billion over five years for bridges, airports, ports, the electric grid, and other infrastructure programs.Ninety percent of funding authorized by the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) enacted last November will be implemented by governors and mayors. In January, the White House requested state and local leaders appoint infrastructure coordinators to manage the flow of funds. (White House Fact Sheet, May 16)A White House guidebook to IIJA-funded programs released on Jan. 31 provides a key tool for states and local governments to apply for federal grants, loans, and public-private partnership resources under more than 375 infrastructure investment programs. (The Hill, Jan. 31 and Roundtable Weekly, Feb. 4) Department of Transportation (DOT) Secretary Pete Buttigieg stated on March 28 that the administration’s budget includes $100 million in recommended funding for the Hudson Tunnel commuter rail project, which is part of the Gateway Program, a series of strategic rail infrastructure investments along the Northeast Corridor. (Railway Age, March 29 and The Center Square, March 30) Roundtable SupportThe Roundtable has long supported federal transportation infrastructure investments to spur economic growth, support local communities and enhance America’s competitiveness. (Roundtable Weekly, Nov. 12, 2021) The Roundtable’s 2022 Policy Agenda states, “The IIJA allows $550 billion in new infrastructure investments, estimated to create around 2 million jobs per year over the next decade. This long-term investment in physical infrastructure can re-imagine how we can productively move people, goods, power and information from home to work, business to business, community to community – and building to building.” Landrieu noted that many large infrastructure projects funded by the law will take years to build out. “This is going to be Infrastructure Decade," he said. (Reuters, May 16) # # #

Q2 Sentiment Index

May 16, 2022

Press Release

News Release: Economic Headwinds and Geopolitical Uncertainty Top CRE Executives’ Views About Q2 Market Conditions

Quarterly Sentiment Index

(WASHINGTON, D.C.) — Commercial real estate executives remain optimistic about overall Q2 market conditions despite growing economic headwinds and geopolitical uncertainty, according to The Real Estate Roundtable’s Q2 2022 Economic Sentiment Index released today. Roundtable President and CEO Jeffrey DeBoer said, “The decline in this quarter’s Real Estate Roundtable Sentiment Index reflects concerns regarding inflationary pressures, interest rate increases, labor shortages and supply chain disruptions. Even so, the overall sentiment of commercial real estate industry senior executives remains positive. Businesses and individuals continue to rethink how real estate meets their evolving working, living, and traveling preferences. Building owners, managers and financiers across the nation are partnering with their business and residential tenants to respond, while also pressing forward in developing and redeveloping buildings to be greener, smarter, and more efficient.” He added, “Our Q2 Sentiment Index reveals especially bright spots for lease demand in a wide swath of the economy, particularly regarding life sciences, industrial, multifamily, and data center assets. At the same time however, high inflation, rising interest rates, labor and supply chain shortages are increasing costs associated with all real estate development and operations. The impact of ongoing war in eastern Europe is another cloud tempering optimism. We urge national policymakers to focus on creating jobs and supporting strong real estate asset values. Both actions would buttress the overall economy and help local community budgets provide needed safety, education and transportation services.” The Roundtable’s Overall Sentiment Index—a measure of senior executives’ confidence and expectations about the commercial real estate market environments—is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive. Topline findings include: The Q2 2022 Real Estate Roundtable Sentiment Index registered an overall score of 51, a decrease of 15 points from the previous quarter’s overall score and 26 points lower than a year earlier. Survey respondents remain optimistic but have tempered their expectations due to geopolitical and economic uncertainties, which include rising interest rates, increased inflation, and labor and supply chain shortfalls. Perceptions vary by property type and geography, with industrial, multifamily, life sciences, and data centers continuing to be most favored. As employers continue to roll out return-to-office policies, the demand for office space remains uncertain. Asset values have trended upward across asset classes compared to last year, while forward-looking expectations are starting to taper off. Participants cited a continued availability of debt and equity capital despite those heightened concerns over rising interest rates, geopolitical concerns, and inflationary risk. Data for the Q2 survey was gathered in April by Chicago-based Ferguson Partners on The Roundtable’s behalf. See the full Q2 report. The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy. # # #

Policy Landscape

May 13, 2022

Roundtable Weekly

White House Releases Plans to Battle Inflation and Streamline Infrastructure Permitting; Congressional Leaders Urge Swift Implementation of New EB-5 Law

EB5 Infrastructure Labor Policy

President Joe Biden this week committed that his administration’s top economic priority is battling inflation. Biden’s efforts to combat rising prices include proposals that would increase taxes on large corporations and the wealthiest Americans – and possibly eliminate Trump-era tariffs on foreign imports. (White House Inflation Plan | News conference video | The Hill, May 10)The Labor Department reported that consumer prices increased 8.3% in April compared to one year ago, as inflation remains near a four-decade high. (Labor Department news release and AP, May 11)Federal Reserve Chair Jerome Powell discussed the Fed’s inflationary goals during an interview this week with Marketwatch, stating, “Whether we can execute a soft landing or not, it may actually depend on factors that we don’t control.” The Fed recently approved the biggest interest hike in 22 years and announced plans for reducing its nearly $9 trillion balance sheet. (CNBC, May 12)Powell also recently stated, "There is a broad sense on the committee that additional 50 basis point increases should be on the table at the next couple of meetings." He added, "the American economy is very strong, and well-positioned to handle tighter monetary policy.” (Wall Street Journal, May 4)A semi-annual report released this week by the Fed detailed risks to financial stability, pointing to the potential impact of inflation, sharply rising interest rates and the war in Ukraine. The report also flagged a decline in liquidity. "While the recent deterioration in liquidity has not been as extreme as in some past episodes, the risk of a sudden significant deterioration appears higher than normal," according to the report. (Wall Street Journal, May 9)Powell was approved this week to serve a second term as Fed Chair by a bipartisan Senate vote of 80-19. (Politico, May 12)Infrastructure PermittingThe White House this week also unveiled a plan to strengthen and accelerate federal permitting and environmental reviews funded by the Infrastructure Investment and Jobs Act (IIJA) passed last November. (White House Fact Sheet, May 11 and Roundtable Weekly, Nov. 12, 2021)The Biden administration said its Permitting Action Plan will improve environmental reviews to avoid duplicity and will create sector-specific teams aimed at speeding permitting and resolve supply chain issues that hinder construction.EB-5 Regional CentersFour congressional leaders wrote a bipartisan letter to Homeland Security Secretary Alejandro Mayorkas this week to counter a statement by the U.S. Citizenship and Immigration Services that existing EB-5 regional centers must apply for recertification. The USCIS statement, if put into effect, would delay regional center enterprises from seeking new foreign investment pending reapproval. (Congressional letter, May 9)The letter was signed by Senate Majority Leader Chuck Schumer (D-NY), House Judiciary Committee Chair Jerrold Nadler (D-NY), and Senate Judiciary Committee members John Cornyn (R-TX) and Lindsey Graham (R-SC). Their letter clarified that previously existing regional centers are not required to be recertified under the EB-5 Reform and Integrity Act of 2022 passed last March – but the centers must swiftly meet all of the new law’s anti-fraud and homeland security protections. (EB-5 investors blog, May 10)USCIS’s position is also the subject of a pending legal challenge in California federal trial court. (Behring Regional Center LLC v. Mayorkas) The Roundtable-supported EB-5 Reform and Integrity Act was the first significant update to the regional center program since its creation by Congress in the early 1990s. (Roundtable Weekly, March 11, Roundtable news release and EB-5 Fact Sheet)# # #

Q1 Sentiment Index

May 13, 2022

Roundtable Weekly

Economic Headwinds and Geopolitical Uncertainty Top CRE Executives’ Views About Q2 Market Conditions

Quarterly Sentiment Index

Commercial real estate executives remain optimistic about overall Q2 market conditions despite growing economic headwinds and geopolitical uncertainty, according to The Real Estate Roundtable’s Q2 2022 Economic Sentiment Index released on May 13, 2022.Roundtable President and CEO Jeffrey DeBoer, above, said, “The decline in this quarter’s Real Estate Roundtable Sentiment Index reflects concerns regarding inflationary pressures, interest rate increases, labor shortages and supply chain disruptions. Even so, the overall sentiment of commercial real estate industry senior executives remains positive. Businesses and individuals continue to rethink how real estate meets their evolving working, living, and traveling preferences. Building owners, managers and financiers across the nation are partnering with their business and residential tenants to respond, while also pressing forward in developing and redeveloping buildings to be greener, smarter, and more efficient.”He added, “Our Q2 Sentiment Index reveals especially bright spots for lease demand in a wide swath of the economy, particularly regarding life sciences, industrial, multifamily, and data center assets. At the same time however, high inflation, rising interest rates, labor and supply chain shortages are increasing costs associated with all real estate development and operations. The impact of ongoing war in eastern Europe is another cloud tempering optimism. We urge national policymakers to focus on creating jobs and supporting strong real estate asset values. Both actions would buttress the overall economy and help local community budgets provide needed safety, education and transportation services.”The Roundtable’s Overall Sentiment Index—a measure of senior executives’ confidence and expectations about the commercial real estate market environments—is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive. Topline findings include:The Roundtable’s Q2 2022 Economic Sentiment Index registered an overall score of 51, a decrease of 15 points from the previous quarter’s overall score and 26 points lower than a year earlier. Survey respondents remain optimistic but have tempered their expectations due to geopolitical and economic uncertainties, which include rising interest rates, increased inflation, and labor and supply chain shortfalls.Perceptions vary by property type and geography, with industrial, multifamily, life sciences, and data centers continuing to be most favored. As employers continue to roll out return-to-office policies, the demand for office space remains uncertain.Asset values have trended upward across asset classes compared to last year, while forward-looking expectations are starting to taper off.Participants cited a continued availability of debt and equity capital despite heightened concerns over rising interest rates, geopolitical concerns, and inflationary risk.Data for the Q2 survey was gathered in April by Chicago-based Ferguson Partners on The Roundtable’s behalf. See the full Q2 report.# # #

SEC Proposed Rulemaking

May 13, 2022

Roundtable Weekly

Roundtable and Nareit Raise Concerns to SEC About Proposed Cybersecurity Rules; SEC Climate Proposal Stokes GOP Criticism

Climate Policy Cyber Risks Cybersecurity SEC Securities and Exchange Commission

The Real Estate Roundtable and Nareit raised concerns to the Securities and Exchange Commission (SEC) about their proposed rules related to cybersecurity risk management, strategy, governance, and incident disclosure. (Comment Letter, May 9) Industry Concerns The letter states that The Roundtable and Nareit generally support the SEC’s efforts to ensure that investors receive accurate and comparable material information regarding company cyber risk management and incidents. (SEC News Release | Proposed Rule | Fact Sheet) However, the two industry groups expressed a number of concerns arising from the detailed, granular reporting that would be required by the SEC proposal and its rigid incident reporting deadlines, which may unintentionally exacerbate cybersecurity risks for issuers and impose unjustified burdens. Those concerns include: It is vital to harmonize SEC reporting requirements with other federal and state cyber incident reporting requirements. The Commission’s proposed 72-hour reporting window should incorporate flexibility for a reporting delay to accommodate other law enforcement and other contingencies. Registrants should not be required to report detailed descriptions of their internal cybersecurity gameplans, which could compromise them in any number of ways. The prescriptive requirements for disclosing risk management, strategy, and governance regarding cybersecurity risk are burdensome and unjustified. The letter also raises concerns about the highly prescriptive nature of the requirements set forth in the Proposal and the “one size fits all” presumption that the prescriptive requirements will be appropriate for all industry sectors. SEC Climate Disclosure Proposal A separate SEC proposal on climate disclosure rules has drawn the ire of House Republicans, who have criticized the proposal and called for a hearing with the full commission. (E&E News, May 10) In a May 4 letter to SEC Chair Gary Gensler, a group of House Republicans led by Oversight and Reform ranking member James Comer (R-KY) stated, “The Climate Disclosure Rule would represent the largest expansion of SEC authority without a clear legislative mandate from Congress.” The SEC on May 9 issued an extension of the public comment period on the proposed rule until June 17. A regulatory push on multiple fronts by the Securities and Exchange Commission (SEC) prompted The Real Estate Roundtable and 24 other national business organizations to submit comments to Gensler about the need for more time to assemble meaningful stakeholder analysis as part of the rulemaking process. (Coalition letter, April 5 and Roundtable Weekly, April 8) The proposed SEC climate disclosure rule has no immediate effect. If it is finalized, the action could have a significant impact on the real estate industry, requiring all SEC registered companies to report on climate-related risks through annual 10-Ks and additional filings. (SEC News Release | Proposed Rule | Fact Sheet, March 22) # # #

May 9, 2022

Policy Comment Letter

2022-05-09 Joint EB-5 RC Letter

Cyber Risks

May 9, 2022

Policy Comment Letter

Roundtable and Nareit Comment on SEC’s Proposed Rules on Cybersecurity

Senators Joe Manchin and Lisa Murkowski Aim for Bipartisan Compromise on Energy Policy as Alternative to Stalled Build Back Better Act

Energy Policy

Senators Joe Manchin (D-WV), left, and Lisa Murkowski (R-AK), right, have led bipartisan meetings with lawmakers over the last two weeks to explore potential areas of agreement for a scaled-back energy and climate legislative package before the midterm elections. (Politico Morning Energy and E&E News, May 5 | The Hill, April 25) BBB Energy Measures $300 billion in clean energy tax credits were part of last year’s failed, multi-trillion Build Back Better (BBB) Act, which Democrats advanced through the House under fast-track, filibuster-proof budget reconciliation rules. The Roundtable sent a letter in November to congressional tax writers with specific recommendations to improve the BBB bill’s energy tax provisions affecting real estate. (Roundtable Weekly, Nov. 19)The BBB legislation stalled in the Senate after failing to attract key Democratic votes from Sens. Manchin and Kyrsten Sinema (AZ). Manchin’s concern about rising inflation led to his opposition of the bill. (Wall Street Journal, April 28)Last week, Sen. Sinema discussed the post-BBB policy landscape during The Roundtable’s Spring Meeting in Washington. Other featured speakers included Sens. Bill Cassidy (R-LA) and John Hickenlooper (D-CO), who are among the members of the bipartisan group. (Roundtable Weekly, April 29 and E&E News, May 5) Search for Agreement This week, the BBB Act’s energy-related tax credits were a focus of the small bipartisan group, which also included Senate Environment and Public Works Chair Tom Carper (D-DE), above.Carper on May 5 said, “I think some progress was made in better understanding what the Finance Committee voted on in the energy tax package that was debated and voted on months ago.” He added, “Republicans will not be anxious to support any kind of reconciliation bill. But let's see how much we can get done in a bipartisan approach.” (Politico Morning Energy, May 5)Another meeting participant, Sen. Kevin Cramer (R-ND), said general discussions need to eventually produce an agreement on specific measures “long before” the July 4th recess. Cramer also told E&E News that any Republican support for a bipartisan package “depends on how long Santa’s list is.” Support for a bipartisan clean energy package would need to clear a 60-vote threshold in the Senate to pass the evenly-divided chamber before November’s midterm elections. Sen. Chris Van Hollen (D-MD) recently stated, “I think it’s a make-or-break moment for the elements of Build Back Better that are still on the table. The clock is ticking. This is a perishable moment.” (Wall Street Journal, April 28) # # #

Cannabis

May 6, 2022

Roundtable Weekly

Bipartisan Push in Senate Seeks to Include Cannabis Reform Banking Legislation in Economic Competitiveness Bill

Cannabis

A bipartisan push in the Senate is underway to pass a bill that would allow federally regulated banks to provide mortgage and financial services to state-licensed, cannabis-related businesses (CRBs)—without the threat of federal penalties. (The Hill, May 4) SAFE & COMPETES The Secure and Fair Enforcement (SAFE) Banking Act (H.R. 1996) would provide commercial property owners a safe harbor if they lease space to a state-approved CRB. Additionally, owners who lease space to CRBs under SAFE could finance their properties without repercussions from federal anti-money laundering statutes. The Roundtable is a long-standing supporter of the legislation. (Roundtable Weekly, May 3, 2019).The cannabis reform bill was first introduced in Congress in 2013 by Rep. Ed Perlmutter (D-CO) and has passed the House six times—either as an amendment to a larger legislative package or as a standalone bill. Each time, the legislation has stalled in the Senate. (Rep. Perlmutter news release, Feb. 9)This year, the SAFE Banking Act passed the House on Feb. 4, after it was added as an amendment to the America COMPETES Act, which aims to ease the nation’s supply chain problems and boost domestic manufacturing. Next: Senate-House Conference A House-Senate conference on the America COMPETES Act will aim to negotiate a final bill and pass it with the support of 60 senators before the August recess. (Reuters, May 4)Sen. Steve Daines (R-MT) addressed the SAFE Act recently with The Hill , stating, “We’ve got nine Republican co-sponsors officially on it, close to 50 Democrats. There are some other Republicans that I’m confident, if we had a vote, would vote for it.” (Sen. Daines news release, March 23, 2021)An Unbanked Industry Sen. Patty Murray (D-WA) said she is “fighting every which way” to include the SAFE ACT in the final version of the COMPETES Act. “This [cannabis] is a cash-only business right now. It’s dangerous for the employees,” added Murray, who is the third-ranking Democrat in the Senate and a member of the bicameral conference committee. (PoliticoPro, May 5 and The Hill, May 4)Public safety is an urgent reason to include the SAFE Act as part of the conference’s final bill, according to a recent letter sent to Senate leaders by the American Bankers Association and all 50 state banking associations. (April 28 letter)State-licensed cannabis businesses currently operate in 37 states, with additional states weighing legalization. (ABA April 28 letter) A Senate bill seeking wider cannabis reforms is supported by Senate Majority Leader Chuck Schumer (D-NY), Senate Finance Committee Chair Ron Wyden (D-OR) and Sen. Cory Booker (D-NJ). The Democratic leaders originally planned to introduce their bill this month, but recently announced it will be delayed until August. (PoliticoPro, April 14)# # #

Foreign Investment & CRE

May 6, 2022

Roundtable Weekly

Global Investors in US CRE Report Positive Outlook, Growing Influence of ESG

Foreign Investment

Global investors plan to increase net investment this year in US commercial real estate, with a focus on multifamily, life science and industrial assets, according to the Association for International Real Estate Investors’ (AFIRE) 2022 Annual International Investor Survey Report. Positive Outlook AFIRE CEO Gunnar Branson said, “With the 2022 AFIRE International Investor Survey Report, we now have a clearer picture on the longer-term impact of the pandemic on real estate investment, with altered cultural attitudes and sustained strength in investment in secondary and tertiary US cities—led by Austin, Atlanta, Boston and Dallas.” The survey’s topline findings include: Seventy-five percent of respondents expect their volume of investment activity and revenue growth to increase over the coming year.Eighty-one percent of surveyed investors agree that the pandemic has now permanently altered cultural attitudes towards US consumption and live-work preferences.Environmental change, housing, and market affordability are top social concerns for investors.Austin, Atlanta, Boston, and Dallas rank top US cities for planned investment this year.London is the only non-US city among the top five for global investment in 2022, followed by New York and Seattle. Market Sectors & ESG Influence The AFIRE report shows 90% of survey respondents plan to increase investment in multifamily over the next three to five years, followed by life sciences (77%) and industrial (7 %).The growing influence of Environmental, Social and Governance (ESG) criteria is also clear, with survey respondents reporting:Carbon footprint reduction measures (90%) and actionable climate change strategies (89%) are rated as the most important ESG priorities for US real estate investments in the near future.Diversity (74%) and talent attraction/ development (75%) follow environmental factors among ESG trends.Almost nine in ten respondents recognize the future financial benefit of taking action now on ESG. Notably, more than half of respondents (55%) agree that they would accept a lower than-expected rate of return if it meant realizing other social or environmental benefits. The annual survey responses were collected in February from the AFIRE membership—which represents nearly 175 organizations from 23 countries, with approximately US$3 trillion assets under management—and the global institutional investor community.# # #

Spring Roundtable Meeting

April 29, 2022

Roundtable Weekly

CRE Leaders and Lawmakers Discuss Domestic Policy Agenda, Ukraine, Climate and Economic Issues

National lawmakers and Real Estate Roundtable members met this week to discuss domestic and geopolitical issues affecting the economy and industry—including inflation and the Fed; the congressional legislative agenda; and the war in Ukraine. The Roundtable’s 2022 Spring Meeting also featured a discussion on climate-related financial and regulatory proposals. (Roundtable April 2022 Policy Issue Profiles and Executive Summary) Senator Sinema & Market Conditions A discussion with Sen. Kyrsten Sinema (D-AZ), above, on policymaking in the Senate launched The Roundtable meeting on April 25. Roundtable Chair John Fish (Chairman & CEO, Suffolk) and Roundtable President and CEO Jeffrey DeBoer led a dialogue among industry executives and House and Senate members on CRE market conditions. Roundtable members offered their views on inflationary pressures, supply chain disruptions, and back-to-office challenges. Ukraine, Climate and the Fed On April 26, Roundtable members convened for policy discussions with the following guests: Lieutenant Colonel (Ret.) Alexander Vindman A 20-year military veteran, former Director with the White House’s National Security Council, and now a senior advisor with VetVoice Foundation, Mr. Vindman addressed the war in Ukraine. “It is a geopolitical earthquake that will shape how power is used in the 21st century,” Vindman said, adding that an eventual reconstruction effort will require a massive international effort involving public-private partnerships and private equity. (Photo: left to right, Jeffrey DeBoer, Mr. Vindman, and John Fish)Senator Bill Cassidy (R-LA) As a member of the Senate’s Committee on Energy and Natural Resources, Finance, and Joint Economic Committee, Sen. Cassidy provided his insight on the congressional agenda, including economic and energy policy issues. “The real estate sector acts as both a leading indicator and a reflection of what is happening in our communities across the country,” said Cassidy, above left. At right is Roundtable Chair John Fish.Climate PanelA Roundtable panel addressed climate-related issues and their impact on investor demand, property values and interest rates. (Video of the discussion). The panel also discussed regulatory issues such as the SEC’s proposed climate risk disclosure rule. (Roundtable Weekly, March 25). Speakers included:Senator John Hickenlooper (D-CO) above right, part of a bipartisan group of Senators working on comprehensive energy reform legislation. Panel moderator Tony Malkin, left, (Chairman, President, and CEO, Empire State Realty Trust and Chairman of The Roundtable’s Sustainability Policy Advisory Committee).Roy Hilton March (CEO, Eastdil Secured), above left,Kathleen McCarthy (Global Co-Head, Blackstone Real Estate), center, andBill Stein (CEO, Digital Realty Trust), right. Former Fed Board Member Kevin Warsh Warsh, above left, a former member of the Fed Board of Governors (2006-2011), discussed the Fed’s potential actions to temper inflation and guide the economy to a “soft landing” with Roundtable Member Scott Rechler, right, (Chairman & CEO, RXR Realty), who serves on the Federal Reserve Bank of New York’s Board of Directors. Next on The Roundtable's meeting calendar is the all-member June 16-17 Annual Meeting in Washington, DC. # # #

Capital and Credit

April 29, 2022

Roundtable Weekly

Roundtable Warns SEC Proposed Rules Affecting Private Fund Advisers Pose Unnecessary Burden on Capital Formation and Investment

SEC Securities and Exchange Commission

The Roundtable submitted comments this week to address the potential negative consequences of recently proposed Securities and Exchange Commission (SEC) regulations affecting real estate private equity investment fund advisers. (SEC comment letter, April 25) Negative Consequences The Roundtable’s April 25 comments detail how the proposal could have a negative impact on real estate private fund disclosures, reporting, fees and expenses, and operations—with significant results for the $18-trillion private fund adviser marketplace.The letter also explains how the Commission’s extensive reporting requirements proposed under the new rules would increase compliance costs, decrease returns for all private fund investors and drive smaller fund sponsors away from the market. (SEC Feb. 9 News Release | Proposed Rule | Fact Sheet)The Roundtable letter raises concerns that the SEC proposal, if finalized, could hinder real estate capital formation; harm development and improvement of real properties; and curtail essential economic activity that encourages job creation. Interrelated, Multiple Rulemakings The SEC, above, has proposed a number of other complex rules with potentially wide-ranging, significant consequences—all at the same time—and given the public abnormally short, 30-day comment windows to participate in these interrelated rulemakings. (Roundtable Weekly, April 8)The Commission’s private fund adviser proposal is one of many of these rulemakings. This rulemaking alone seeks open-ended and extensive information from stakeholders and the public, including more than 800 individual questions and more than 60 specific questions on the cost-benefit analysis portion.The Real Estate Roundtable and 24 other national business organizations recently submitted comments to SEC Chairman Gary Gensler regarding the need for more time to assemble meaningful stakeholder analysis as part of the rulemaking process. (Coalition letter, April 5) The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to engage the SEC on its various rulemakings and address individual proposals in more detail at its next meeting on June 16 during The Roundtable’s all-member June 16-17 Annual Meeting. # # #

Tax Policy

April 29, 2022

Roundtable Weekly

Coalition Requests Changes to Treasury Tax Regulations Affecting Outbound Foreign Real Estate Investment

Capital Gains Tax Policy

The Real Estate Roundtable and four other national trade groups submitted recommendations to modify proposed Treasury regulations regarding partnerships and other pass-through entities that own direct or indirect interests in a passive foreign investment company (PFIC). (Read PFIC comment letter, April 25) Passive Foreign Investment Companies and Proposed Regulations A PFIC is a foreign corporation that derives a significant share of its income from passive sources or primarily owns assets that are held for the production of passive income, including capital gains, interest, dividends and rent. PFICs commonly arise when structuring investment funds and pooling capital to invest in foreign real estate. Special U.S. tax rules apply to PFIC income. The rules generally accelerate the recognition of PFIC income by PFIC shareholders, or impose an interest charge if the income is deferred. PFIC shareholders can elect which tax regime to apply. Recently proposed Treasury regulations would require any U.S. partner of a partnership that directly or indirectly owns a PFIC to make PFIC-related tax elections at the individual partner level, in addition to other changes. Recommended Changes The April 25 coalition letter suggests the proposed rules would result in an exponential increase in the number of separate PFIC filings, greater administrative burdens and a higher cost of compliance. The rules would also lead to inadvertent failures to file elections since small investors are less well-versed in the PFIC rules than the investment partnerships and their advisors. The letter also urges the IRS to allow partnerships to make PFIC elections at the entity level for all partners, including on behalf of indirect partners who own their interest through an upper-tier partnership. A partnership could make the election for a partner through a partner’s grant of a power of attorney to the general partner of the partnership. An implicit delegation of this authority (e.g., the authority in the partnership agreement to file tax returns) would be sufficient. “If Treasury incorporates these changes,” said Real Estate Roundtable President and CEO Jeffrey DeBoer, “the end result will be less friction and expense for real estate funds as they raise and deploy capital for productive real estate investment.” Other signatories of the letter include the Alternative Investment Management Association, the American Investment Council, the Managed Funds Association, and the S Corporation Association. # # #

Policy Landscape

April 22, 2022

Roundtable Weekly

Inflation Threatens Biden Agenda as Fed Chair Powell Addresses Raising Interest Rates

Congress US Economic Outlook

President Joe Biden traveled throughout the country this week to promote the benefits of infrastructure projects as rising inflation threatens his administration’s revamped “Building a Better America” domestic agenda. Meanwhile, Federal Reserve Chair Jerome Powell affirmed expectations that interest rates will begin increasing next month with consumer inflation running at an annual pace of 8.5 percent. (NBC News, April 19 and Associated Press, April 20) Revising “Build Back Better”Democrats are expected to resuscitate parts of the moribund Build Back Better (BBB) Act when Congress returns on April 25 by focusing on a scaled-back package to attract enough party line support in the 50-50 Senate for passage. (Roundtable Weekly, April 15)A key consideration for Senate Democrats and the White House will be agreement on policy priorities with Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), who rejected the administration’s BBB social and climate policy package late last year. (Roundtable Weekly, Jan. 21)Sen. Manchin cited inflation as one of his top concerns about passing more spending bills. “Getting inflation under control will require more aggressive action by a Federal Reserve that waited too long to act,” Manchin recently said. (The Hill, April 12)Sen. Sinema will discuss the current policy landscape in Congress with Real Estate Roundtable members next week in Washington DC during The Roundtable’s April 25 Spring Meeting.Rising consumer prices and inflation have been a focus of Republicans as the mid-term elections are only about six months away. (BGov and Fortune, April 20)House Ways and Means Committee Ranking Member Kevin Brady (R-TX) on April 12 discussed inflation’s threat to small businesses and the administration’s agenda on CNBC’s Squawkbox. Fed & Interest RatesThe Consumer Price Index’s rise to 8.5 percent last month – the fastest annual increase in 40 years – sparked expectations that the Fed will move aggressively to raise interest rates. (Bureau of Labor Statistics, April 12 and CBS News, April 21) The Federal Reserve’s Open Market Committee will meet next on May 3-4 to consider monetary policy, the discount rate and consider a reduction in the nearly $9 trillion in bonds on its balance sheet.Powell, above, commented yesterday on the Fed’s target for annual price increases. “We really are committed to using our tools to get 2 percent inflation back,” he said, adding, “It’s absolutely essential to restore price stability.” Powell also noted a half point interest rate increase next month may be the start of future interest rate increases. “I would say 50 basis points will be on the table for the May meeting,” he stated. (CNBC, April 21)He also said the Fed will act to get demand and supply back in balance, “so that inflation moves down and does so without a slowdown that amounts to a recession.” (CNBC, April 21)The Fed also released this week its latest “Beige Book” containing anecdotal information on current economic conditions. The report stated “supply chain backlogs, labor market tightness, and elevated input costs continued to pose challenges” and that “outlooks for future growth were clouded by the uncertainty created by recent geopolitical developments and rising prices.” (Fed’s Beige book, April 20) The Roundtable’s Spring Meeting next week will include a discussion with former Fed Board Member Kevin Warsh on inflation, interest rate expectations, potential asset bubbles and other economic challenges.# # #

Infrastructure

April 22, 2022

Roundtable Weekly

Biden Administration Issues Rules Affecting Environmental Approval and Sourcing of Major Infrastructure Projects

Infrastructure

The Biden administration announced this week the restoration of strict environmental reviews for major infrastructure projects. Additionally, the U.S. Office of Management and Budget (OMB) issued new guidance to help federal agencies implement the “Build America, Buy America” sourcing provisions passed as part of the Infrastructure Investment and Jobs Act (IIJA) last November. (PoliticoPro and Council on Environmental Quality, April 19)Project Permitting & Climate ChangeThe environmental guidelines will revive how federal agencies authorize and issue permits for infrastructure construction projects. The regulations reaffirm that Federal agencies must evaluate all environmental impacts – including those associated with climate change – during reviews of proposed projects like bridges, mass transit and energy generation. (Wall Street Journal, April 19)A second, broader proposal with additional changes is expected later this year. It is uncertain how the regulatory review guidance will affect projects authorized in the Roundtable-supported $1 trillion IIJA. (White House Council on Environmental Quality, April 19, 2022 and Roundtable Weekly, Nov. 12, 2021)The restored regulations, which take effect on May 20, will also allow federal agencies to adopt environmental review standards that are more stringent than what is outlined in the National Environmental Policy Act (NEPA). The NEPA environmental review rules were in effect since 1970 before the Trump administration scaled them back in 2020. (Reuters, July 15, 2020)Under Trump’s revisions, full environmental-impact statements were required to be completed within two years, while less comprehensive reviews had a one-year deadline. (Wall Street Journal, July 15, 2020)Infrastructure Materials Sourced in AmericaThe OMB’s preliminary guidance issued this week instructs federal agencies how to implement new “Buy America” requirements applicable to federally funded infrastructure projects. (Associated Press, April 18)The IIJA requirement provision mandates that all federal agencies must ensure that a “Buy America” requirement applies to all infrastructure projects that receive federal financial assistance, whether or not funded through IIJA. (National Law Review Q&A, April 20)The new requirements, which take effect on May 14, require material purchased for infrastructure projects be produced in the U.S, with waivers included in case there are either not enough U.S. producers or domestic material costs prove excessive. (White House blog, April 20)The Biden administration’s effort to increase domestic manufacturing and ease supply chain pressures from overseas sourcing comes as inflation has reached a 40-year high ahead of the 2022 midterm elections. (U.S. Bureau of Labor Statistics, April 12)# # #

Policy Landscape

April 15, 2022

Roundtable Weekly

Democrats Considering Spring Revisions to Build Back Better Act

Democrats are planning to work with Senators Joe Manchin (D-WV), left, and Kyrsten Sinema (D-AZ), right, this spring to resuscitate parts of the moribund Build Back Better (BBB) Act, in hopes that a scaled-back domestic policy package can pass the 50-50 Senate under the budget reconciliation process. (Business Insider, April 13) The Manchin View Manchin and Sinema remain key votes in the Senate after their reluctance to approve the Biden Administration’s BBB social and climate policy package last year. (Roundtable Weekly, Jan. 21)Manchin, chair of the Senate Energy and Natural Resources Committee, has signaled his support for a much smaller package that would include climate programs, prescription drug reform, and reversal of Trump-era tax cuts that would generate savings for deficit reduction. (Politico, April 4)Manchin also issued a statement on April 12 about consumer inflation rising to 8.5%, the largest 12 month increase in four decades. “Getting inflation under control will require more aggressive action by a Federal Reserve that waited too long to act. It demands the Administration and Congress, Democrats and Republicans alike, support an all-the-above energy policy because that is the only way to bring down the high price of gas and energy while attacking climate change,” Manchin said.Additionally, he commented this week about the possibility of revised BBB negotiations, "We'll just see if there's a pathway forward. We don't know if there's a pathway forward yet.” (Business Insider, April 13) Sinema & Taxes Sinema offered her views this week, commenting, "What I can't tell you is if negotiations will start again or what they'll look like. But what I can promise you is that I'll be the same person in negotiations if they start again that I was in negotiations last year." (Arizona Republic, April 13)She added, “I am unwilling to support any tax policies that would put a break on economic growth or stall personal or economic growth for America’s industries.” (Arizona Republic, April 13)Sinema noted last week that she wants to ensure any spending package is "responsibly offset and that new revenue provisions protect qualified small business income where possible." (NFIB Tax Summit, April 7)Senate Minority Leader Mitch McConnell (R-KY) this week stated, “Sinema is unenthusiastic about tax hikes. Hopefully that will be enough to keep [BBB-related legislation] underwater permanently." (Business Insider, April 12)Sen. Tim Kaine (D-VA) noted Congress is on a tight deadline to pass a reconciliation package after they return from recess on April 25. "You either do it before Memorial Day or you're not going to do it,” Kaine said. (Politico, April 4)Sen. Sinema will be a guest at The Roundtable’s April 25-26 Spring Meeting in Washington, DC. (Roundtable-level members only)# # #

Tax Policy -- Depreciation

April 15, 2022

Roundtable Weekly

Republican Members Propose Shortening Depreciation Period of Buildings

Tax Policy

Legislation introduced by a handful of influential Republicans in the House and Senate would shorten the depreciation period for structures to 20 years and adjust depreciation deductions upwards every year to account for inflation and a real rate of return on capital. (Tax Notes, April 13) Legislation vs. Biden Budget Proposal The Renewing Investment in American Workers and Supply Chains Act was introduced in the House by senior Ways and Means Committee Member Jackie Walorski (R-IN) and Republican Study Committee Chairman John Banks (R-IN). Senator Mike Braun (R-IN) introduced companion legislation in the upper chamber. (Joint news release, April 11)The bill would reduce the cost recovery period for nonresidential property from 39 years to 20 years, and for residential rental property from 27.5 to 20 years.In addition to shortening depreciation periods, the bill would enhance depreciation deductions by providing an adjustment for inflation and a return on capital (3%). The deduction adjustment would not be counted against the property’s basis or for purposes of depreciation recapture.The changes would not be limited to new construction, but would apply to existing properties (adjusted for remaining basis), as well as properties that change ownership.The nonpartisan Tax Foundation, a highly regarded research institution in Washington, estimated the bill would boost long-run GDP by 1.2 % and expand employment by 230,000 full-time equivalent jobs. Over the current 10-year budget window, when factoring in the positive macroeconomic feedback, the policy would increase federal revenue by $126.6 billion. (Tax Foundation, March 24)The legislation stands in stark contrast to President Biden’s proposed budget, which would raise the tax burden on structures by eliminating the reduced 25% tax rate that applies to recaptured depreciation deductions when a property is sold. The Biden budget would tax depreciation recapture at a rate of 39.6%. (Roundtable Weekly, April 1)The release of President Biden’s second budget launched the annual congressional appropriations process, which aims to fund the FY23 government budget starting Oct. 1. The prospects for tax increase proposals before the Nov. 8 mid-term elections are highly uncertain. (Politico, March 28 – “Here’s what’s in Biden’s $5.8 trillion budget proposal – and what’s next”) # # #

Tax Policy -- Carried Interest

April 15, 2022

Roundtable Weekly

Roundtable CEO Questions Wisdom of Administration’s Proposed Carried Interest Tax Increase

Capital Gains Carried Interest Tax Policy

This week, Real Estate Roundtable President and CEO Jeffrey DeBoer, above, challenged the Administration’s recently proposed budget, which would recharacterize nearly all real estate carried interest as ordinary income, in Bisnow, a prominent commercial real estate media outlet. (Bisnow, April 13) Taxing Carried Interest as Ordinary Income President Biden’s budget includes tax proposals recycled from last year that failed to pass congressional negotiations, including taxing long-term capital gains at ordinary income rates – and taxing carried interest in real estate partnerships as ordinary income. (Roundtable Weekly, April 1) In Bisnow’s “Taxing Carried Interest as Ordinary Income: The Idea that Never Dies, but Never Becomes Law Either,” DeBoer noted, “The president’s carried interest budget proposal would, for the first time, limit capital gain tax treatment to the return on cash and cash-equivalent investment. This would ignore the reality that real estate owners and developers bear significant financial risks beyond their capital contribution." DeBoer added, "The capital gains tax incentive has always recognized and rewarded other factors beyond just invested cash, including the assumption of construction, litigation and market risk, as well as the sweat equity associated with owning investment real estate." Targeting tax evaders and illegal transactions is appropriate, DeBoer noted, but he emphasized that penalizing entrepreneurship and discouraging noncash risk-taking by recharacterizing all carried interest as ordinary income would be a mistake. Proposals to recharacterize carried interest as ordinary income have been introduced in Congress perennially since 2007. The Tax Cuts and Jobs Act of 2017 included a provision extending the holding period requirement from one to three years for carried interest to qualify for the reduced long-term capital gains tax rate. Carried interest and other tax issues outlined in The Roundtable’s recently released 2022 Policy Agenda will be discussed during the April 25-26 Spring Meeting (Roundtable-level members only) in Washington DC. # # #

Beneficial Ownership

April 15, 2022

Roundtable Weekly

House and Senate to Consider Legislation Targeting Beneficial Ownership of Real Estate Assets

Beneficial Ownership Corporate Transparency Act CTA FinCEN

Legislation to strengthen anti-money laundering laws affecting real estate will be introduced soon by House Financial Services Chair Maxine Waters (D-CA), above, following a bipartisan bill targeting U.S. assets of Russian oligarchs that was introduced last week in the Senate. (Politico, April 11 and Senate news release, April 8) Beneficial Ownership In the Senate, the bipartisan “Kleptocrat Liability for Excessive Property Transactions and Ownership (KLEPTO) Act” was introduced by Sens. Sheldon Whitehouse (D-RI), Bill Cassidy (R-LA), Elizabeth Warren (D-MA), and Roger Wicker (R-MS). The bill (S.4075) includes:Requirements for the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to mandate disclosure of beneficial ownership information (the identity of the real person behind an entity) for all real estate transactions through legal entities;Requirements for FinCEN to extend anti-money laundering safeguards to the real estate sector;Clarification that any foreign entity that buys or holds real estate in the U.S. should be considered a “reporting company” under the Corporate Transparency Act (CTA). FinCEN Efforts The congressional push to address anti-money-laundering measures in real estate follows FinCEN’s work on anti-money laundering regulations that were proposed long before Russia invaded Ukraine.FinCEN solicited comments on a wide range of questions related to its implementation of the CTA – enacted on January 1, 2021 – that effectively bans the registration of anonymously owned shell companies in the United States. (JD Supra, April 26 and Lexology, April 28) Ten national real estate industry organizations, including The Roundtable, on Feb. 21 submitted detailed comments to FinCEN on proposed anti-money laundering regulations affecting real estate transactions. (Roundtable Weekly, Feb. 25) Industry Concerns The Feb. 21 industry letter supports the broad goal of preventing the use of LLCs or any form of real estate to finance illicit acts, money laundering, or terrorism – yet emphasizes that FinCEN should proceed cautiously to not harm legitimate real estate capital flows in the process.The coalition also stated that anti-money laundering rules and requirements should focus on mitigating criminal activity while not burdening legitimate actors with unnecessary or duplicative compliance, which will only increase costs without meaningfully combating money laundering.The coalition letter emphasizes three main recommendations for FinCEN:Study the commercial and multifamily real estate markets to tailor future regulation to how those markets function;Leverage the CTA and the beneficial ownership database to reduce the necessary scope of further action; andDistinguish nonbank commercial real estate lenders from true all-cash transactions.The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to work with industry partners to respond to FinCEN’s proposals. The industry will also continue to support a balanced approach that inhibits illicit money laundering activity while not restricting capital formation or increasing the regulatory burden on real estate. # # #

EB-5 Investment Program

April 11, 2022

Fact Sheet

EB-5 Reform and Integrity Act of 2022 – RER Fact Sheet

EB5,

Climate Risk Reporting

April 11, 2022

Fact Sheet

The SEC’s Proposed Rule on Climate-Related Disclosures for Investors – RER Fact Sheet

Climate Risk Reporting, Energy and Climate Policy, Reporting on Climate Risks, SEC, Securities and Exchange Commission,

Climate Risk Reporting

April 8, 2022

Roundtable Weekly

Real Estate Roundtable Requests Member Feedback on SEC Climate Risk Disclosure Proposal

climate Climate Policy Energy and Climate Policy Reporting on Climate Risks Scope 3 reporting

Monday, April 11 is the deadline for responses to a voluntary Real Estate Roundtable membership survey on a proposed rule issued by the U.S. Securities and Exchange Commission (SEC), above, that would require corporate disclosures of climate-related financial risks. (Roundtable Fact Sheet, March 25) The responses will influence The Roundtable’s comments to the SEC about the March 21 proposed rule. (Roundtable Weekly, March 25) Roundtable members are encouraged to review The Roundtable’s fact sheet summarizing the SEC’s proposed rule before submitting responses. The survey, originally sent on April 1, aims to obtain a high-level understanding of the existing practices and standards used by Roundtable members in assessing and quantifying: greenhouse gas (GHG) emissions across portfolios, buildings’ electricity use, the impact of floods and rising sea levels to real estate assets, tenant interactions about these issues, and other questions that may require registered companies to report on their climate-related financial risks. The proposed SEC rule has no immediate effect. If it is finalized, the action could have a significant impact on the real estate industry, requiring all SEC registered companies to report on climate-related risks through annual 10-Ks and additional filings. (SEC News Release | Proposed Rule | Fact Sheet, March 22) If any Roundtable member has questions about the survey, please contact Roundtable Senior Vice President and Counsel, Duane Desiderio. Policymakers & SEC Regulation Several Senate Democrats support a more stringent SEC climate disclosure rule, including Elizabeth Warren and Edward Markey of Massachusetts. (Politico, April 5 and Markey news release, March 21) Senator Joe Manchin (D-WV), chairman of the Senate Committee on Energy and Natural Resources, sent a letter to Commission Chairman Gary Gensler on April 4 outlining his concerns with the 506-page proposed SEC rule. A group of 19 Senate Republicans from the Senate Environment and Public Works (EPW) and Banking committees expressed their opposition to the SEC proposal in an April 5 letter to Gensler. While some opposition to the SEC’s proposed rule is mounting in Congress, particularly from the GOP, the Biden Administration is nonetheless expected to push forward with a final rule that could be issued later this year. The Roundtable’s Sustainability Policy Advisory Committee (SPAC) will convene a working group that will review the SEC’s proposed climate rule and our comment letter response to the Commission. # # #

SEC Rulemakings & CRE

April 8, 2022

Roundtable Weekly

Roundtable and Broad Business Coalition Request SEC to Provide Appropriate Comment Time Periods for Multiple Rulemakings

SEC Securities and Exchange Commission

A regulatory push on multiple fronts by the Securities and Exchange Commission (SEC) prompted The Real Estate Roundtable and 24 other national business organizations this week to submit comments to SEC Chairman Gary Gensler, above, about the need for more time to assemble meaningful stakeholder analysis as part of the rulemaking process. (Coalition letter, April 5)SEC Proposals & CRE A long list of recent, overlapping SEC proposals affecting business are cited in the coalition letter, including four rulemakings that could significantly impact the real estate industry: 1.) Jan. 26 – the SEC issued a proposal that would impose new reporting requirements on real estate investment and private equity advisers, including a mandate to file reports (Form PF) within one business day of certain events. (SEC News Release | Fact Sheet | Proposed Rule)The Roundtable’s March 21 response stated the SEC proposal “presents significant compliance and operational challenges for private real estate fund sponsors, with no added benefit to investors and no relation to the intent of Form PF in monitoring systemic risk.” (Roundtable Weekly, March 25)2.) Feb. 9 – the SEC also proposed new rules and amendments affecting private fund advisers. (SEC News Release | Proposed Rule | Fact Sheet)The Roundtable plans to submit comments by April 25 to the SEC, which stated it is aiming to increase transparency and efficiency in the $18-trillion private fund adviser marketplace. (Roundtable Weekly, Feb. 11)3.) March 9 – the SEC issued another proposal that would require publicly traded companies to disclose a cybersecurity incident within four days of determining a breach is “material,” or important to the average investor. (SEC News Release | Proposed Rule | Fact Sheet)The Roundtable is working on comments due by May 9 regarding the reporting requirement proposal addressing material cybersecurity incidents. (Roundtable Weekly, March 18)4.) March 21 – the SEC issued a proposed rule regarding the reporting and disclosure of material corporate financial risks related to climate change. (SEC News Release | Proposed Rule | Fact Sheet, March 22 and Roundtable Weekly with Roundtable Climate Proposal Fact Sheet, March 25) Stakeholder input on the proposed climate disclosure rule is due to the SEC around May 20. The Roundtable is working on a comprehensive response that will include information from a Roundtable member survey due this Monday, April 11. (see related Roundtable Weekly story on the survey, above) Coalition Request This week’s coalition letter to the SEC noted, “The hundreds-upon-hundreds of questions, and numerous catch-all requests for comment, posed in these rulemakings reflect the Commission’s recognition that it needs input from the public to properly craft the proposed rules, yet the Commission is refusing to allow the public the time it needs to answer the Commission’s questions satisfactorily.”The business coalition requested that the SEC should not reflexively assign a 30-day or 60-day comment period to multiple rule proposals. The coalition commented, “Exceedingly short comment periods associated with numerous concurrent potentially inter-connected rule proposals … could result in rules that hurt investors, damage the financial system, and implicate the Commission’s obligations.” (Coalition letter, April 5)The SEC’s various rulemaking proposals affecting CRE will be discussed during The Roundtable’s April 25-26 Spring Meeting (Roundtable-level members only) in Washington, DC. # # #

Opportunity Zones

April 8, 2022

Roundtable Weekly

Legislators Introduce Bipartisan Bill to Reform Opportunity Zone Incentives

Affordable Housing Capital Gains Opportunity Zones OZs Tax Policy

Members of Congress introduced bipartisan, bicameral legislation yesterday to update and amend the Opportunity Zones (OZs) program. If enacted, the bill would extend expired OZ benefits, sunset certain high-income OZ census tracts, and apply additional information reporting requirements for opportunity funds and their investors. (Congressional news release, April 7) OZ Reforms The Opportunity Zones Transparency, Extension, and Improvement Act was introduced in the Senate by Tim Scott (R-SC), above, and Cory Booker (D-NJ) – and in the House by Ron Kind (D-WI) and Mike Kelly (R-PA). (Full text of the legislation | One-page summary | Section by Section). The bill includes a Roundtable-requested, 2-year extension of the initial capital gains deferral period for prior gain that is rolled into an opportunity fund by an investor. (Roundtable Comment letters: Dec. 21, 2021 and May 14, 2020) The 2-year extension, from the end of 2026 until the end of 2028, will allow OZ investors to benefit from a partial step-up in basis that reduces their tax liability on their prior gain if their opportunity fund investment is maintained for at least 5 years. The extension would help OZs continue attracting capital and investment that is boosting job growth and supporting the local tax base in these communities. Other provisions include a detailed process for sunsetting certain high-income census tracts from the OZ program; new information reporting rules for Opportunity Funds and investors; and creation of a $1 billion State and Community Dynamism Fund to support OZ projects and businesses in underserved communities. Census tracts subject to the sunset provision include those with a median family income that exceeds 130 percent of the national median. The sunset includes transition rules that grandfather in existing and planned investments. The information reporting proposals were previously introduced by Senator Scott in 2019. They aim to improve program transparency and facilitate improved tracking of the OZ investment outcomes in the designated communities. The Roundtable and other real estate organizations previously encouraged Congress to adopt enhanced OZ information reporting, data collection, and transparency measures. (Roundtable Comment letter: Dec. 21, 2021) In the short time since their enactment, Opportunity Zones have created jobs and spurred billions of dollars in new investment in economically struggling communities. The Roundtable worked closely with Members of Congress and the Treasury Department to ensure OZ implementing regulations would facilitate the program’s success, and has long-supported OZ legislation that could spur greater investment, promote capital formation and bolster job growth in economically disadvantaged communities. (Roundtable Weekly: May 15, 2020 and (Roundtable Comment letter: Dec. 21, 2021) In the current legislative environment, prospects for the new bill are uncertain, but it will likely be the basis for any serious consideration of OZ changes going forward. # # #

April 5, 2022

Policy Comment Letter

SEC_Joint Trades_Comment Period Letter_April-5-2022

Policy Landscape

April 1, 2022

Roundtable Weekly

Biden Administration Submits FY2023 Budget to Congress, Proposes Tax and Other Measures Impacting Real Estate

Budget Capital Gains LikeKind Exchanges LKEs Tax Policy

The Biden administration on Monday released its $5.8 trillion FY2023 Budget, a package of spending, tax, and policy proposals that will face extensive congressional scrutiny and revisions over the coming months. The March 28 budget was accompanied by the Treasury Department’s “Greenbook,” which details the Administration’s $2.5 trillion in tax increases on corporations, high-earning households, and certain business activities, including real estate investment. (New York Times and BGov, March 29) Billionaire Minimum Income Tax The new budget proposes to tax the wealthiest households on their unrealized capital gains, including real estate. The so-called “Billionaire minimum income tax” would impose a minimum levy of 20 percent on a comprehensive tax base that includes both realized income and the unrealized annual appreciation of a taxpayer’s assets. The new tax would apply to future appreciation of assets and all unrealized, built-in gains at the time of enactment. The tax on pre-enactment, built-in gains would be collected over a 9-year transition period. Although marketed as a tax on “billionaires,” the proposal would apply to any taxpayer with $100 million or more in wealth. This initial high threshold arguably represents a first step towards a wealth tax regime with much broader application. The original income tax applied to the top 1/3 of one percent of the U.S. population and now applies to over 150 million American households. In certain cases, holders of illiquid assets like real estate could elect to defer the minimum tax until the property is sold, provided they pay an additional charge. The budget leaves many of the most difficult questions unanswered, including: How would the tax survive a constitutional challenge on the grounds that direct taxes must be apportioned among the states by population? Why would taxpayers continue to make patient, long-term investments, knowing that they could be taxed before the investment generates cash income? Will much of the tax burden fall on noneconomic inflationary increases in asset values? How will the IRS administer the tax without building a highly intrusive compliance system that is based on subjective valuation measures? Another new revenue proposal in the budget relates is to tax depreciation recapture at ordinary income rates. The provision generally would treat gain on real estate held for more than one year as ordinary income to the extent of cumulative depreciation deductions taken in tax years beginning after 2022. Depreciation recapture is currently taxed at a rate of 25 percent. The White House budget also includes tax proposals recycled from last year that failed to pass congressional budget negotiations, including: repealing the deferral of gain from real estate like-kind exchanges; taxing long-term capital gains at ordinary income rates; taxing carried interest in real estate partnerships as ordinary income; and treating transfers of property at death as realization events subject to capital gains tax. Immediate Congressional Pushback The spending and revenue proposals faced immediate pushback on Capitol Hill by Republicans and Democrats, including Sen. Joe Manchin (D-WV), a key centrist who stated he opposes President Biden’s 20% minimum tax on unrealized capital gains for households worth at least $100 million. (CQ News, March 29) Manchin told The Hill, “You can’t tax something that’s not earned. Earned income is what we’re based on. Everybody has to pay their fair share, that’s for sure. But unrealized gains is not the way to do it, as far as I’m concerned.” Manchin also recently stated he is open to negotiating some limited remnants of the defunct Build Back Better (BBB) Act, with a focus on energy-related incentives, prescription drug costs ,and deficit reduction. (Business Insider, March 24) Other Measures Directly Affecting Real Estate Biden budget proposals impacting other aspects of The Roundtable’s 2022 Policy Agenda include: Energy and Climate – the president’s budget request outlines $44.9 billion for increased spending on several climate-related initiatives, yet does not address specific clean energy provisions that were part of last year’s BBB bill. Instead, a "deficit neutral reserve fund" is noted in the FY23 budget to accommodate a potential future deal on clean energy legislation with Democratic Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-AZ). (E&E News, March 28 and Axios Generate, March 29) Affordable Housing – the FY23 budget seeks to ease the nation's affordable housing shortage with $50 billion in federal funding for housing construction and supply, including $35 billion for state and local housing finance agencies. (PoliticoPro, March 28) SEC Reporting Requirements – The Securities and Exchange Commission would receive $2.15 billion in the FY2023 budget proposal, an 11.4% increase from FY2021 (BGOV, March 28). The SEC has ramped up its activity recently with proposed rules on reporting requirements for investment advisers, climate risks and cybersecurity incidents that may have significant impacts for the real estate industry. The release of President Biden’s second budget launches the annual congressional appropriations process, which aims to fully fund the FY23 government budget starting Oct. 1. The prospects for certain tax increase proposals before the Nov. 8 mid-term elections are highly uncertain. (Politico, March 28 – “Here’s what’s in Biden’s $5.8 trillion budget proposal – and what’s next”) Issues outlined in The Roundtable’s recently released 2022 Policy Agenda in the areas of tax, climate, capital and credit and cybersecurity will be discussed during the April 25-26 Spring Meeting (Roundtable-level members only) in Washington DC. # # #

Climate Risk Reporting

April 1, 2022

Roundtable Weekly

Roundtable Survey Seeks Members’ Input on SEC Climate Risk Disclosure Proposal

climate Climate Risk Reporting Energy and Climate Policy SEC Securities and Exchange Commission

Real Estate Roundtable members received a survey earlier today that will help formulate comments in response to a proposed rule issued on March 21 by the U.S. Securities and Exchange Commission (SEC) regarding corporate disclosures of climate-related financial risks. (Roundtable Weekly, March 25) Roundtable Member Participation The Roundtable requests that members respond to the SEC climate issues survey by COB April 11.Before submitting responses to the survey, members are encouraged to review The Roundtable’s fact sheet summarizing the SEC’s proposed rule.The survey sent today aims to obtain a high-level understanding of the existing practices and standards used by Roundtable members in assessing and quantifying the following:greenhouse gas (GHG) emissions across their portfolios, their buildings’ electricity use, impacts to their real estate assets from floods and rising sea levels,how they interact with their tenants on these matters, andsimilar questions that will likely require registered companies to report on their climate-related financial risks.If any Roundtable member has questions about the survey, please contact Roundtable Senior Vice President and Counsel, Duane Desiderio. SEC Climate Risk ProposalThe proposed rule has no immediate effect. If the proposal is finalized, all companies registered with the SEC would be required to report, measure, and quantify “material” risks related to climate change in their annual Form 10-Ks and certain other filings. (SEC News Release | Proposed Rule | Fact Sheet, March 22)Compliance would phase-in over the next several years. For example, registrants with a global market value of $700 million or more would need to comply first for filings in FY 2024 (covering FY 2023 emissions).“Limited assurance” from independent third party verifiers, regarding so-called Scope 1 and Scope 2 emissions, would be required for the first two compliance years. Thereafter, “limited assurance” would ramp-up to “reasonable assurance” at a level provided in a financial statement audit filed with a 10-K.Indirect “supply chain” emissions – known as “Scope 3” – are considered the most difficult emissions to measure and quantify. Under the SEC’s proposal, reasonable efforts to report on Scope 3 emissions would receive a “safe harbor” from certain liability under federal securities laws. Also, third-party verification of Scope 3 reporting would be optional. Stakeholder input on the proposed rule is due to the SEC around May 20. Themes raised by The Roundtable in pre-rulemaking comments submitted last year will likely be addressed again in this latest round of public input. (Roundtable Weekly, June 11, 2021 and (Roundtable fact sheet, March 28) The SEC proposal, formally titled “Enhancement and Standardization of Climate-Related Disclosures for Investors,” is considered a key component of the Biden Administration’s efforts to cut U.S. greenhouse gas emissions by as much as 52% (below 2005 levels) by 2030. (CBS-AP | Bloomberg | Axios, March 21) # # #

Infrastructure

April 1, 2022

Roundtable Weekly

Federal Aid Flowing to Transportation Infrastructure Projects, Including NY-NJ Gateway Program

Infrastructure Transportation

Department of Transportation (DOT) Secretary Pete Buttigieg and White House Infrastructure Coordinator Mitch Landrieu on March 24 announced $2.9 billion in combined funding under a new infrastructure grant program. The new “Multimodal Projects Discretionary Grant” will allow all communities pursuing major transportation infrastructure projects to submit one application for three major DOT funding sources. (DOT Twitter, March 23) Surface Transportation Funding Expansion DOT funds under the new program will be awarded on a competitive basis for surface transportation infrastructure projects that have significant national or regional impact, according to DOT’s March 22 Notice of Funding Opportunity. (Transport Topics, March 24)Secretary Buttigieg said he expects to announce winners by the fall after receiving final applications by May 23. (Washington Post, March 23 and DOT Notice of Funding Opportunity)Last November, the enactment of the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) includes more than $350 billion over five fiscal years for surface transportation programs. (DOT news release, Jan. 14)White House Infrastructure Chief Landrieu said about half of the IIJA’s $1.2 trillion will flow through the DOT during a presentation earlier this month at a Bipartisan Policy Center virtual forum. (Engineering News-Record, March 9)This week, an additional $105 billion for the DOT was included in President Biden’s FY2023 budget request (see story above). The combined funding sources are expected to expand DOT’s discretionary grant programs for large, complex infrastructure projects that may involve more than one state. (DOT FY23 Budget Highlights document) Gateway Project & IIJA A March 28 announcement by DOT Secretary Buttigieg stated that the Administration’s budget recommends $4.45 billion to advance 15 major transit projects in FY2023. “This includes, for the first time, $100 million in recommended funding for the Hudson Tunnel commuter rail project, which is part of the Gateway Program, a series of strategic rail infrastructure investments along the Northeast Corridor.” (Railway Age, March 29 and The Center Square, March 30)The Roundtable has long supported federal transportation infrastructure investments to spur economic growth, support local communities and enhance America’s competitiveness. (Roundtable Weekly, Nov. 12, 2021)The Roundtable’s 2022 Policy Agenda states, “The IIJA allows $550 billion in new infrastructure investments, estimated to create around 2 million jobs per year over the next decade. This long-term investment in physical infrastructure can re-imagine how we can productively move people, goods, power and information from home to work, business to business, community to community – and building to building.” A guidebook to IIJA funding programs released on Jan. 31 provides a key tool for states and local governments to apply for federal grants, loans, and public-private partnership resources under more than 375 infrastructure investment programs. (The Hill, Jan. 31 and Roundtable Weekly, Feb. 4) # # #

Homeland Security

March 25, 2022

Roundtable Weekly

Roundtable Convenes Town Hall on Ukraine With Alexander Vindman; Biden Administration Warns About Russian Cyberattacks

Cybersecurity Homeland Security

Lieutenant Colonel (Ret.) Alexander Vindman, Senior Advisor of VetVoice Foundation, today discussed the conflict in Ukraine during a Real Estate Roundtable virtual town hall. In recent years, Vindman served on the White House’s National Security Council as the Director for Eastern Europe, the Caucasus, and Russia. (Watch video discussion) Focus on Ukraine Vindman and Roundtable President and CEO Jeffrey DeBoer addressed Ukraine in the context of Democracy vs. Authoritarianism, the spillover effects of the war, and the need for a future international reconstruction effort. “It’s a geopolitical earthquake that has unfolded over the past year, culminating in a war between the largest country in the world and the largest country in Europe,” Vindman stated. In addition to the devastating human and physical destruction, the war’s spillover effects include interruptions to the supply of crucial commodities such as neon and titanium, and food supplies for the Middle East and Africa. “The longer this war continues, the greater the chance of spillover,” Vindman said, citing the Russian attack on a Ukrainian nuclear power plant, and the potential use of cyberwarfare and chemical weapons. He added the war’s eventual outcome will be a significant setback to Authoritarianism – and that the West should keep a door open for a reconciliation with Russia after Putin is gone. Vindman and DeBoer also discussed the need for an enormous reconstruction effort, which Vindman said could amount to $100 billion international fund that could take the form of a public-private partnership. (Watch video discussion) Roundtable members can support Ukraine against the Russian invasion via the VetVoice Foundation. U.S. Support Since the invasion of Ukraine began, over 450 U.S. companies have announced their withdrawal from Russia, shutting down 25% of Russia’s gross domestic product (GDP), according to Professor Jeffrey Sonnenfeld at the Yale Chief Executive Leadership Institute. Sonnenfeld’s research team maintains a list of companies that have either withdrawn from Russia completely, suspended or scaled back operations, or delayed investments. (Fortune, March 16) Many American Hotel & Lodging Association members, including Hilton and Marriott International, recently announced donations for humanitarian aid; the closure of their corporate offices in Moscow; and a suspension all future hotel development and investment in Russia. (TravelPulse, March 21 and Roundtable Weekly, March 18) White House CyberSecurity Warning President Joe Biden alerted U.S. business leaders on March 21 that “based on evolving intelligence, Russia may be planning a cyberattack against us." Biden added, "[I]t's a patriotic obligation for you to invest as much as you can in making sure ... you have built up your technological capacity to deal ... with cyberattacks." (Remarks by President Biden | White House Statement | Fact Sheet: Act Now to Protect Against Potential Cyberattacks, March 21) The growing concern about a possible Russian cyberattack response over U.S. sanctions also led White House Deputy National Security Adviser for Cyber and Emerging Technology Anne Neuberger, above, to clarify that although “there is no certainty” of an attack, Biden’s warning was intended to focus attention on “critical infrastructure.” (White House Press Briefing video | BGov and Axios, March 21) The Real Estate Roundtable’s Homeland Security Task Force and the Real Estate Information Sharing and Analysis Center (RE-ISAC) continue to work with its members, key law enforcement and intelligence agencies to help manage and mitigate cyber and physical threats to the commercial facilities sector. (Information on joining the RE-ISAC and Roundtable Weekly, March 4) # # #

Building Performance Standards - BPS

March 25, 2022

Roundtable Weekly

SEC Issues Proposal for Registered Companies to Disclose Climate Risks; EPA Releases Emissions Calculator Tool

Building Emissions Building Performance Standards BPS Climate Policy Corporate Disclosure EPA Reporting on Climate Risks Scope 3 reporting SEC

The U.S. Securities and Exchange Commission (SEC) issued an anticipated proposed rule on March 21 regarding the reporting and disclosure of material corporate financial risks related to climate change. (GlobeSt, March 22 and Roundtable Fact Sheet, March 25) Expanded Climate Disclosures The proposed rule has no immediate effect. If it is finalized, the action would require all SEC registered companies to quantify their greenhouse gas (GHG) emissions, assess the economic impact of rising sea levels relating to their assets, and report to investors on these and other climate-related risks through annual 10-Ks and additional filings. (SEC News Release | Proposed Rule | Fact Sheet, March 22) Release of the proposal triggers a public comment period, with stakeholder input due to the SEC around May 20, 2022. Themes raised by The Real Estate Roundtable in pre-rulemaking comments submitted last year will likely be raised again in this latest round of public input. (Roundtable Weekly, June 11, 2022) The SEC’s proposal, titled “Enhancement and Standardization of Climate-Related Disclosures for Investors,” is considered a key component of the Biden Administration’s efforts to cut U.S. greenhouse gas emissions by as much as 52% (below 2005 levels) by 2030. (CBS-AP | Bloomberg | Axios, March 21) Scope 3 “Safe Harbor” A Real Estate Roundtable Fact Sheet provides a summary of the 510-page SEC proposal, including the following elements: All companies registered with the SEC would be required to report and quantify Scope 1 and Scope 2 GHG emissions each year. Scope 1 and 2 reporting would require registrants to define and disclose how they determine their “organizational” and “operational” boundaries. SEC registrants would report on Scope 3 “indirect” emissions in their supply chain if the company has announced a Scope 3 reduction goal – or if investors would deem the registrant’s Scope 3 emissions to be “material.” The SEC proposes a “safe harbor” for Scope 3 disclosures related to certain liabilities covered by federal securities law. Independent 3rd party assurances would be required for Scope 1 and 2 disclosures, but not for Scope 3. Registrants should report on climate targets or goals they set for themselves, their energy efficiency investments, and whether they purchase Renewable Energy Certificates (RECs) or carbon offsets to meet their GHG goals. Registrants would also need to report on material “physical risks” to buildings and other assets from climate change – such as those caused by extreme weather, droughts, and coastal flooding. Compliance would start with SEC filings in 2024 for the biggest registrants and phase-in for other companies. (Roundtable Fact Sheet) EPA’s GHG Emissions Calculator for Buildings In related news, the Environmental Protection Agency (EPA) formally released this week its new ENERGY STAR Building Emissions Calculator. Key EPA staff recently demonstrated the new calculator for The Roundtable’s Sustainability Policy Advisory Committee (SPAC). [EPA’s step-by-step User's Guide and other reference materials] The Building Emissions Calculator expands upon the industry-standard Portfolio Manager tool widely used to benchmark energy usage in buildings. The new offering goes to the next level by allowing owners and managers to estimate historical, current, and future annual GHG emissions resulting from buildings’ energy use. The Building Emissions Calculator has important potential to assist owners as they strive to comply with state and local building performance standards. EPA’s new calculator can also help real estate companies registered with the SEC to quantify and report on their GHG emissions should the commission’s investor disclosure proposed rule take final shape. # # #

Capital and Credit

March 25, 2022

Roundtable Weekly

Roundtable Opposes SEC Proposals Impacting Real Estate and Private Fund Advisors

SEC Securities and Exchange Commission

The Real Estate Roundtable on March 21 submitted comments to the Securities and Exchange Commission (SEC) opposing a proposal that would impose new reporting requirements on real estate investment and private equity advisers, including a mandate to file reports within one business day of certain events. The proposal “presents significant compliance and operational challenges for private real estate fund sponsors, with no added benefit to investors and no relation to the intent of Form PF in monitoring systemic risk,” according to The Roundtable’s letter.Cost and Timing Burdens The SEC’s proposal would impose new requirements on Form PF, the confidential reporting form for certain SEC-registered private fund advisers. The proposal reflects the SEC’s experiences with recent market turmoil, including the COVID-19 crisis and the January 2021 market volatility impacting certain stocks. (SEC, Jan. 26 News Release | Fact Sheet | Proposed Rule) New disclosure obligations in the Commission’s proposal include: Additional reporting requirements for large hedge fund advisers and advisers to private equity funds, obligating such advisers to report a number of specified events to the SEC within one business day of their occurrence;A lowered threshold for large private equity adviser reporting;Certain revised reporting questions for private equity funds; andEnhanced reporting requirements for large liquidity fund adviser. The Roundtable’s Response The Roundtable’s March 21 comment letter details why the proposed reporting requirements for Form PF should not be adopted. While the letter acknowledges the SEC’s intention to enhance the monitoring of systemic risk, it also outlines how the proposed reporting requirements present significant compliance and operational challenges for private real estate fund sponsors. Some of the key points made against the proposed new requirements include:A one-day reporting requirement imposed on private equity advisers for any reason is unprecedented, and a requirement to report the specific transactions and events deemed by the SEC to be systemically important is wholly unsupported.The proposed amendments to Section 4 of Form PF impose onerous new reporting requirements that force “large private fund advisers” to report sensitive information unrelated to monitoring for systemic risk.The significant added cost and timing burdens of the proposed amendments are unreasonable and do not provide investors with commensurate benefits or protections or enhance systemic risk monitoring.The reduced threshold for reporting private equity advisers is arbitrary. The SEC’s rationale for choosing 75% of committed capital as a meaningful threshold for purposes of FSOC’s systemic risk-monitoring function is unclear. A March 16 analysis of the proposed SEC amendments on Form PF is available from Dechert LLP. The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to respond to the SEC’s various proposed regulatory initiatives with its industry and coalition partners. # # #

SEC Proposed Rulemaking, SEC Rulemakings & CRE

March 21, 2022

Policy Comment Letter

Roundtable Comment Letter to SEC – Form PF Private Funds Proposal

Capital and Credit, Private Fund Advisors, Restoring Liquidity in CRE Markets and Protecting Capital Formation, SEC, SEC Proposed Rules, Securities and Exchange Commission,

Workplace Return

March 18, 2022

Roundtable Weekly

U.S. Labor Secretary Discusses “Back-to-the-Workplace” Issues With Roundtable Members

U.S. Department of Labor Secretary Martin Walsh discussed back-to-the-workplace and labor market issues with Real Estate Roundtable members today during a virtual town hall. Participants also included Roundtable Chair John Fish (Chairman and CEO, Suffolk); Fred Seigel (President and CEO, Beacon Capital Partners); Owen Thomas (CEO, Boston Properties); and Roundtable President and CEO Jeffrey DeBoer. (Watch video discussion) Pandemic Labor Market Fish, below left, opened the discussion by noting how the pandemic has changed the relationship of employees to their physical workplaces, which poses new challenges for real estate. He cited a recent Pew Research report showing that the majority of teleworkers feel more productive at the office, yet appreciate how a hybrid work model improves their work-life balance.Secretary Walsh, below right, commented on how the overall labor market has bounced back from the COVID-19 downturn more swiftly than in prior recessions – and that the nation is continuing a “worker-centered” economic recovery.“Worker-centric means making sure workers have what they need to be successful,” Secretary Walsh stated, emphasizing how the Biden administration is working to create pathways for workforce development, job training, and apprenticeships. “But we can’t do it if we don’t have businesses at the table with us,” he continued. (Watch the video discussion) The Labor Department’s February employment data analysis showed widespread job growth across the private sector – especially for hard-hit leisure and hospitality businesses.The jobs report also showed the overall number of telecommuting workers dropped to 13% in February, compared to a pandemic-era high of 24.3% in August 2020. (Bureau of Labor Statistics and Business Insider, March 4)Walsh also commented the employment report indicates that, “With the Administration’s Bipartisan Infrastructure Law beginning to invest in communities across the country, we have the opportunity to create many more good jobs and make sure that they are accessible to all workers.” (DOL Feb. Jobs Report) Workplace Return & CRE During the town hall discussion, Seigel, above right, shared an overview of research underway by the University of California, Berkeley, with The Roundtable's DeBoer, above left. Preliminary findings show that further delays of employees’ return to the workplace pose major risks to local government budgets and the health of cities – particularly for lost municipal revenues from transit services and from property, sales, and hotel-stay taxes.Seigel stated that the repercussions of the pandemic could reduce near-term revenue for certain municipalities between 10 to 18 percent per year.He added that property owners “… need to create environments that address employees’ health and wellness concerns.” Seigel noted how state-of-the-art building systems can share health-related data in real time with tenants. “The transparency and trust between tenants and landlords has never been more important than it is today,” he said.Thomas, above right, said, “You have to think about the office not as an obligation, but as a destination.” He added that property owners, tenants and local policy makers should consider various efforts to attract employees back to the workplace, including “… amenities, indoor air quality, sustainability features, the environment around the building and proximity to transit.”“The future is some form of hybrid work, which is the reality of the market right now,” Thomas commented. He also stated that “Our leasing activity is at pre-pandemic levels, so clearly businesses are planning on using offices in the future but perhaps in a different way.”Return-to-office issues were also recently addressed on CNBC’s Squawkbox on March 10 by Roundtable Chair Emeritus (2015-2018) Bill Rudin (Co-Chairman and Chief Executive Officer, Rudin Management Company. Squawkbox hosted Roundtable Member Scott Rechler (CEO, RXR Realty) to discuss the CRE market on March 17. Biden Administration Announces “Clean Air In Buildings” Challenge In related news, the White House and the U.S. Environmental Protection Agency (EPA) yesterday released a “best practices” guide to improve indoor air quality and reduce the spread of COVID-19 inside buildings. (White House Fact Sheet; EPA Guidance)The “Clean Air in Buildings Challenge” is styled as a “call to action” that encourages building owners and managers to take steps such as: Create a clean indoor air “action plan” (e.g., regular HVAC inspections and maintenance)Optimize fresh air ventilation (e.g., use economizers, open operable windows)Enhance air filtration (e.g., install MERV-13 filters)Communicate IAQ practices with building occupants Reopening businesses and the country is an important priority in The Roundtable's 2022 Policy Agenda: “Connection, Commitment, and Collaboration - Supporting Federal Policy Through Experience and Innovation in 2022,” sent this week to Roundtable members. # # #

Policy Landscape

March 18, 2022

Roundtable Weekly

Roundtable Schedules Town Hall Next Week on Ukraine Conflict; Zelensky Addresses Joint Session of Congress

The Real Estate Roundtable will hold a virtual “town hall” on Friday, March 25 with Lieutenant Colonel (USA, Ret.) Alexander Vindman, former National Security Council Director for Eastern Europe during the Trump Administration, to discuss Russia’s war against Ukraine. Ukraine Support The Roundtable’s town hall with Vindman will address Ukrainian President Volodymyr Zelensky’s speech to Congress on Wednesday and the U.S. response thus far to the brutal Russian invasion. Zelensky’s appeal galvanized the Biden administration to release additional aid to Ukraine. (President Biden video, transcript and Axios, March 16)Roundtable President and CEO Jeffrey DeBoer stated, “The Roundtable fully supports the billions in federal aid to Ukraine as its citizens continue to bravely stand up against Russian aggression. As we bear witness to the tragic violence of the invasion, The Roundtable encourages its members and all industry stakeholders to contribute to charities involved in Ukrainian humanitarian relief,” DeBoer added. (VetVoice Foundation)The Ukrainian war has compelled hundreds of American companies with business in Russia to either withdraw completely, suspend or scale back operations, or delay investments, according to the Yale’s Chief Executive Leadership Institute.Hilton President and Chief Executive Officer Christopher Nassetta (Roundtable Chairman 2006-2009) announced on March 9 the company’s actions in response to the crisis in Ukraine, including:Closure of Hilton’s corporate office in Moscow; Suspension all new development activity in Russia; Donation of any Hilton profits from business operations in Russia to the humanitarian relief efforts for Ukraine, and; Donation of up to 1 million room nights to support Ukrainian refugees and humanitarian relief efforts across Europe, in partnership with American Express, #HospitalityHelps.Marriott International also recently announced the closure of their corporate office in Moscow, along with a suspension in opening upcoming hotels and all future hotel development and investment in Russia. (Marriott statement, March 10) Reviving Climate Negotiations Separately, House Democrats this week urged the White House to revive negotiations on climate measures that were part of the moribund Build Back Better (BBB) Act. (Business Insider, March 8)A group of 89 House Democrats on March 14 wrote to President Biden stating, “The more than $555 billion in climate investments in the House-passed Build Back Better Act can serve as the building block to restart negotiations." (House Democrats’ letter)The Roundtable sent a letter to Congressional tax writers last fall detailing recommendations to improve the BBB Act’s green energy tax provisions. (Roundtable letter, Nov. 16) The BBB bill passed the House in November, but stalled in the Senate amid disagreements with key Democratic Senators Joe Manchin (WV) and Kyrsten Sinema (AZ). (Roundtable Weekly, Nov. 19, 2021 and Jan. 21, 2022). It remains uncertain if any revised deal will garner their support. (CNBC, March15) # # #

Cybersecurity

March 18, 2022

Roundtable Weekly

SEC Proposes 4-day Cybersecurity Reporting Requirements for Public Companies; Roundtable’s HSTF Plans Security Threat Briefings

Cyber Risks Cybersecurity Homeland Security HSTF SEC Securities and Exchange Commission

The Securities and Exchange Commission (SEC) on March 9 issued a proposed rule that would require publicly traded companies to disclose a cybersecurity incident within four days of determining a breach is “material,” or important to the average investor. (BGov, March 11 and SEC News Release | Proposed Rule | Fact Sheet) Proposed SEC Requirements SEC Chair Gary Gensler, above, said, "Today, cybersecurity is an emerging risk with which public issuers increasingly must contend. I am pleased to support this proposal because, if adopted, it would strengthen investors’ ability to evaluate public companies' cybersecurity practices and incident reporting." (Bloomberg, March 9) An SEC spokesperson noted that the crisis in Ukraine gave these proposals “special relevance.” (CNBC, March 9 and see story below on The Roundtable’s upcoming March 25 discussion on the Ukraine conflict) The proposed SEC amendments would include requirements around reporting material cybersecurity incidents – and providing periodic updates for previously reported cybersecurity incidents. (Wall Street Journal, March 9) The proposal also would require periodic reporting related to: a registrant’s policies and procedures to identify and manage cybersecurity risks; the registrant’s board of directors' oversight of cybersecurity risk; and management’s role and expertise in assessing and managing cybersecurity risk and implementing cybersecurity policies and procedures. The Real Estate Roundtable is planning to provide comments on the SEC proposal in advance of the May 9, 2022 submission deadline and looks forward to Roundtable members’ input. The proposed four-day reporting timeframe for companies to provide cyber disclosures may not provide enough time for companies to discover the full extent of an incident. (BGov, March 11) Cybersecurity Threats An Audit Analytics report released last year showed the number of cybersecurity intrusions reported by public companies increased from 28 breaches in 2011 to 117 in 2020. The average cost of a corporate data breach was $4.24 million in 2021, according to an annual IBM Security report. Separately, the $1.5 trillion omnibus bill spending bill enacted on March 11 included the Cyber Incident Reporting for Critical Infrastructure Act. The legislation establishes a narrower 72-hour window for critical infrastructure owners and operators to disclose a cyberattack to the Cybersecurity and Infrastructure Security Agency (CISA). Certain businesses are also required to report any ransom payments to the federal government within 24 hours, among other changes. (Brownstein Hyatt Farber Schreck, March 14) The Real Estate Roundtable’s Homeland Security Task Force (HSTF) is coordinating briefings on the following security threats through the Real Estate Information Sharing and Analysis Center (RE-ISAC): April: DHS Sector Outreach and Programs (Active Shooter, and other soft target resources for the Commercial Facilities Sector) May: DHS Fusion Center overview June: US Secret Service cybercrime August: The Protective Security Advisor Program September: FBI cybersecurity/cybercrimeNovember: The InfraGard program Roundtable members interested in participating can contact Andy Jabbour of the RE-ISAC. # # #

Fiscal Policy

March 11, 2022

Roundtable Weekly

Congress Passes $1.5 Trillion Omnibus Funding Package With EB-5 and LIBOR Legislation

Congress

Congress this week passed a $1.5 trillion “omnibus” spending package that would fund government programs through September and provide $13.6 billion for emergency Ukraine assistance. The omni also includes Roundtable-supported language to address the transition away from the London Interbank Offered Rate (LIBOR) and reform the EB-5 Regional Center Program. (See separate Roundtable Weekly story below on EB-5)Omni Funding & UkraineThe omni passed the House on a bipartisan basis on Wednesday and the Senate last night after months of negotiations. President Biden is expected to sign the 2,741-page omnibus spending package (H.R. 2471) today to avoid a government shutdown, since previously allocated funding expires at midnight. (Wall Street Journal, March 9 and March 10) Roundtable President and CEO Jeffrey DeBoer said, “The Roundtable applauds these bipartisan actions by lawmakers to shore up funding for government operations, and pass positive changes impacting EB-5 and LIBOR. We look forward to Congress turning its focus to other essential issues facing American businesses, workers, local communities and CRE, as outlined in our recently released 2022 Policy Agenda.“The Roundtable also fully supports the billions in federal aid to Ukraine as its citizens continue to bravely stand up against Russian aggression. As we bear witness to the tragic violence of the invasion, The Roundtable encourages its members and all industry stakeholders to contribute to charities involved in Ukrainian humanitarian relief,” DeBoer added. (VetVoice Foundation)The Roundtable on March 25 will hold an open Zoom discussion on the situation in Ukraine with Lieutenant Colonel (USA, Ret.) Alexander Vindman, a Senior Advisor at VoteVets and the VetVoice Foundation. More details will be forthcoming on how to register.Omni & CREEB-5The omni legislation also includes the Roundtable-supported EB-5 Reform and Integrity Act of 2022, which would overhaul and reinstate the regional center program for five years. (See The Roundtable’s EB-5 Fact Sheet) LIBORAnother important bill included in the omni is the Adjustable Interest Rate (LIBOR) Act (H.R. 4616), which would provide for an orderly transition of debt contracts away from LIBOR. (Roundtable Weekly, Dec. 10, 2021) InfrastructureThe omnibus package would also release an additional $197 billion to be spent over 10 years for energy, transportation, and other programs that were part of last year’s bipartisan infrastructure bill. (Roundtable Weekly, Feb. 11)Reference: Appropriations bills | Ukraine Supplemental | One-page fact sheet # # #

EB-5 Investment Program

March 11, 2022

Roundtable Weekly

Long Overdue EB-5 Regional Center Reforms Included in Omnibus

EB5

A reinstatement and major overhaul of the EB-5 investment visa program passed Congress this week as part of the omnibus package that will fund the federal government through Sept 30. President Biden is expected to sign the omni today. (Roundtable news release and EB-5 Fact Sheet) EB-5 ReinstatementThe EB-5 Reform and Integrity Act is the first significant update to the “regional center” program since its creation by Congress in the early 1990s. The EB-5 language can be found in the Division BB section of the 2022 omnibus appropriations bill.The Act reauthorizes regional centers for five years, which expired on June 30, 2021. The EB-5 program reforms are the culmination of years of hard work by a bipartisan group of Senators and Representatives who negotiated a pragmatic solution to modernize the investment visa program.After President Biden signs the omni, the U.S. Citizenship and Immigration Services (USCIS) can re-start its procedures to review the petitions of tens of thousands of overseas investors who have been in limbo on their green card applications since last July.The Act also sets new program requirements to safeguard national security, deter fraud, and promote urban and rural development with EB-5 financing provided by overseas investors. [Roundtable EB-5 Fact Sheet]Roundtable Commends Reforms “The EB-5 Reform and Integrity Act gives our country a competitive edge in the global marketplace for foreign capital and it will attract investments from abroad to create jobs here at home,” said Real Estate Roundtable Chair, John Fish [Chairman and CEO, Suffolk], above, “American workers in low-income neighborhoods, downtown business districts and rural markets will benefit from EB-5 modernization because it will bring critical financing to support infrastructure and other economic development projects throughout the country.” (Roundtable news release, March 11)“The Roundtable has advocated for years to clean up the regional center program and we applaud congressional passage of the EB-5 Reform and Integrity Act,” said Roundtable President and CEO, Jeffrey D. DeBoer. “The Act strikes a bipartisan compromise to get the program back on track – and reduces the litigation risk from existing investors who have been waiting in limbo on their visa applications since the program expired last July.”“We thank House Speaker Nancy Pelosi (D-CA), Senate Majority Leader Charles Schumer (D-NY), Senate Minority Leader Mitch McConnell (R-KY), and House Minority Leader Kevin McCarthy (R-CA) for their bipartisan, bicameral agreement to include comprehensive EB-5 reform in the omnibus appropriations package,” DeBoer continued. “We commend the authors of the EB-5 Reform and Integrity Act, Senators Patrick Leahy (D-VT) and Chuck Grassley (R-IA), for their work in crafting a product that has the support from a diverse stakeholder coalition.” # # #

Reopening Businesses

March 11, 2022

Roundtable Weekly

Roundtable Convenes “Workplace Return” Town Hall Next Week with U.S. Labor Secretary; Industry Coalition Urges Full Capitol Hill Reopening

U.S. Department of Labor Secretary Martin Walsh will address back-to-the-workplace issues in a March 18 virtual town hall with Roundtable members. Participants will also include Roundtable Chair John Fish (Chairman and CEO, Suffolk); Beacon Capital Partners President and CEO Fred Seigel; Boston Properties CEO Owen Thomas; and Roundtable President and CEO Jeffrey DeBoer. Roundtable members were sent an exclusive registration invitation this week via email. (Roundtable Meetings contact) Reopening Momentum “Americans have learned to deal and cope and live with the coronavirus,” Secretary Walsh recently told Insider (March 4). More employees coming back to the office can “add to job creation and job growth” he explained, as restaurants, retail shops, and other small businesses cater to returning workers. The reopening theme was also the focus of a March 9 letter to Senate and House leaders signed by over 200 organizations and companies, including The Real Estate Roundtable. The coalition urged lawmakers to fully reopen Capitol Hill buildings by July 11 “in a way that is safe for all with security measures already being used in many state legislatures.” (Coalition letter, March 9) In addition to The Roundtable, other real estate organizations signing the letter to re-open Capitol Hill included the American Hotel & Lodging Association; American Resort Development Association; Building Owners and Managers Association; CRE Finance Council; ICSC; NAIOP, Commercial Real Estate Development Association; and the National Apartment Association. 2022 Roundtable Policy Agenda Reopening businesses and the country is an important priority noted in The Roundtable's 2022 Policy Agenda: “Connection, Commitment, and Collaboration - Supporting Federal Policy Through Experience and Innovation in 2022” sent this week to Roundtable members.In the policy agenda’s introduction, John Fish, above right, and Jeffrey DeBoer, above left, emphasize the national need for a safe and successful return to the physical workplace.“Our state and local economies—as well as our long-term global competitiveness—depend heavily on the innovation, collaboration, and productivity fostered by an in-person work environment,” Fish and DeBoer stated.The Roundtable’s policy agenda states that the nation’s long-term health, economic growth, and strength of small businesses and local governmental budgets all require safe back-to-workplace encouragement. Policy Agenda Issues The Roundtable’s policy agenda publication outlines our issue priorities for the year ahead that aim to restore economic stability and expand growth opportunities for local communities and the industry. Specific policy sections include: Intro Tax Policy Capital & CreditEnergy & ClimateHomeland Security Infrastructure & HousingEntire Publication The Roundtable encourages our members and partner organizations to share the content from our policy agenda on your social media channels or websites by using our communications toolkit. You may also follow us on social media for RER updates and the latest developments in DC via LinkedIn or Twitter: # # #

Capital and Credit

March 11, 2022

Roundtable Weekly

Roundtable and Coalition Weigh In on Sweeping SEC Proposals Impacting Private Fund Investors

Capital and Credit

The Real Estate Roundtable and 12 trade organizations recently responded to a set of sweeping, proposed Securities and Exchange Commission (SEC) rules that would significantly increase the compliance obligations of advisers to “private funds.” (Coalition letter, March 1)Time Extension RequestThe coalition letter detailed why time extensions are needed for comprehensive responses to two recently introduced SEC NPRMs (“Notice of Proposed Rulemaking”), which include more than 800 questions and an extensive expansion of cost-benefit analysis requests. The SEC provided a tight deadline for stakeholders to respond to the proposed rules.The SEC issued two NPRMs on Jan. 26 and Feb. 9 that would significantly change how private funds are regulated. If approved, the proposed rules would require private-equity and hedge-fund managers to provide new statements on fund performance, compensation, fees and expenses. The NPRMs passed the Commission on a 3-1 party-line vote, with one dissenting Republican. (Wall Street Journal and PoliticoPro, Feb. 9)Currently, under most conditions, private companies are exempt from registration requirements put forth by the SEC, above – instead, they are regulated at the state level, where registration and disclosure requirements vary by state. The proposed rules would increase the compliance burden for private fund advisers, potentially impeding capital formation. (SEC resources: Jan. 26 News Release | Fact Sheet | Proposed Rule and Feb. 9 News Release | Fact Sheet | Proposed Rule)The coalition response provided context to the NPRM requests, noting the deluge of recent SEC regulatory initiatives. The coalition letter stated, “We and our members will need simultaneously to analyze and prepare comments for these proposals as well as other significant proposals on short-selling (with the related re-opened proposal on securities lending), shortening the securities transaction settlement cycle, beneficial ownership reporting, security-based swap position reporting, and cybersecurity risk management (collectively representing more than 1,000 additional pages of text and thousands of additional individual questions from the Commission).”A “LawFlash” report on the proposed SEC rules is available from Morgan Lewis. The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to respond to the SEC’s various proposed regulatory initiatives with its industry and coalition partners.# # #

Policy Landscape

March 4, 2022

Roundtable Weekly

White House Requests Billions for Ukraine and Pandemic Response as Congress Rushes to Pass Omnibus Funding

Budget

Congressional appropriators received an emergency request yesterday from the White House for an additional $10 billion for Ukraine assistance and $22.5 billion for pandemic response funding. The request may complicate lawmakers’ efforts to pass an “omnibus” spending package by March 11, when current government funding expires. (Punchbowl News, March 3) Omni Funding Congressional appropriators may release the text of an omni bill within days, as House Democrats hope to pass a potential $1.5 trillion spending package early next week for the Senate to consider before the March 11 funding deadline. (Politico, March 3)A deal on an omni package would fund the government though Sept. 30, consolidate 12 separate spending bills and release additional funds for infrastructure. (Tax Notes, Feb. 18 and Roundtable Weekly, Feb. 11)Reauthorization and reform of the EB-5 visa investment program is one of the many issues being negotiated for possible inclusion in the omni funding bill.If efforts to pass an omnibus deal fail, Congress could pass yet another Continuing Resolution to fund the government at current levels – while considering separate bills to fund aid for Ukraine or the U.S. response to COVID-19. SOTU & Climate Measures Yesterday’s White House emergency request comes after President Joe Biden’s March 1 State of the Union address, where he sought to rebrand the multitrillion Build Back Better (BBB) spending package into a pared-down proposal called “Building a Better America.” (BGov, March 2)The moribund BBB legislation stalled at $1.7 trillion, which included $555 billion in climate-related incentives. (Roundtable Weekly, Jan. 21)President Biden’s address on Tuesday also touched on climate measures such as tax credits for electric vehicles, energy efficiency improvements, and clean energy production. (White House Fact Sheets on Clean Energy and Infrastructure, Feb. 28)“Let’s provide investment tax credits to weatherize your home and your business to be energy efficient and get a tax credit for it; double America’s clean energy production in solar, wind, and so much more,” Biden stated.The Real Estate Roundtable on Nov. 16, 2021 supported the BBB Act’s climate measures in a letter to congressional tax writers. The letter also detailed five Roundtable recommendations aimed at improving certain green energy tax provisions affecting real estate. (Roundtable letter, Nov. 16) Key Senate Votes Key Sen. Joe Manchin (D-WV), right, chair of the Senate Energy and Natural Resources Committee, has signaled his support for climate measures in a revised BBB package. (Roundtable Weekly, Feb. 18)Manchin on Wednesday responded to the State of the Union, saying he could support a smaller spending package that would split revenue between deficit reduction and new spending. Manchin said, “If you do that, the revenue producing [measures] would be taxes and [prescription] drugs. The spending is going to be climate.” (Politico, March 2 and E&E News, March 3)However, another key vote in the 50-50 upper chamber – Sen. Kyrsten Sinema (D-AZ), left – has voiced opposition to raising taxes. (BGov, March 2)As Congress continues to work on the current fiscal year budget, President Biden will release a non-binding budget for the 2023 fiscal year that will outline his administration’s major economic, tax and climate policy priorities. The Treasury Department will also release its “Greenbook,” which will detail proposed tax cuts and revenue raisers that could fund the White House’s budget initiatives. # # #

Energy Policy

March 4, 2022

Roundtable Weekly

Roundtable Recognized as Energy Department “Ally” in Better Climate Challenge

The U.S. Department of Energy (DOE) recognized The Real Estate Roundtable this week as an inaugural “ally” of the Better Climate Challenge (BCC), a voluntary program to encourage private and government owners of buildings and industrial plants to cut their GHG emissions in half. (Climate Challenge Factsheet | FAQs | BCC Launch video, Feb. 28) Better Climate Challenge & CRE “The Real Estate Roundtable is proud to partner with the Department of Energy as an ‘ally’ in the Better Climate Challenge,“ said Roundtable Chair John Fish, above, (Chairman and CEO, Suffolk). “As leaders in the CRE industry, our members welcome opportunities to innovate with DOE and other federal agencies to reimagine how our nation’s buildings can optimize efficiency, slash GHG emissions, and draw electricity from a cleaner grid.“Partnerships with DOE offer significant opportunities to focus on retrofitting older buildings,” Fish continued. “Seventy-five percent of U.S. buildings were constructed in the last century. The greatest and most positive impact our industry can have on the climate crisis is to make smart investments that modernize the apartments, office buildings, and other structures where our communities live, work, learn, and socialize.”The BCC to date has received commitments from more than 90 organizations from various industries, including six companies represented by Roundtable members – Empire State Realty Trust, Hilton, Jamestown LP, LaSalle Investment Management, Lendlease, and MetLife Investment Management.Other real estate industry trade groups who are designated “allies” of the BCC include the Building Owners and Managers Association International (BOMA) and the American Hotel & Lodging Association (AHLA). Program Requirements DOE Secretary Granholm, top left, officially launched the BCC on Feb. 28 during an executive discussion with White House National Climate Advisor Gina McCarthy, middle left, Housing and Urban Development Secretary Marcia Fudge and committed partner organizations.The key element of DOE’s voluntary challenge is for companies to commit to reduce direct emissions (“scope 1”), and emissions from electricity purchases (“scope 2”), by 50% over 10 years. There is no requirement to quantify or reduce indirect “scope 3” emissions.The 10-year window is measured from a baseline of up to five years before a company joins the program.Commitments to reduce emissions must be across a building portfolio. DOE explained that to reach the 50% emissions reduction target, companies can tally their long-term clean power purchase agreements (PPA) and associated renewable energy certificates (RECs). PPAs and RECs are increasingly common strategies used by CRE and other sectors to help deliver more renewable energy to the electricity grid. (Roundtable Weekly, November 5, 2021)Participating companies must also pursue an efficiency target, to prioritize energy savings that will contribute toward the 50% reduction in portfolio-wide emissions over a decade.Companies joining the program must pledge to share energy and emissions data for 10 years through EPA’s Portfolio Manager, publicly report on progress, participate in peer-to-peer exchanges, and help develop industry best practices.Businesses who want to pursue “partnership agreement” – or trade organizations who want to participate as an “ally” – with DOE’s national leadership initiative on climate can consult with BCC online.# # #

Cybersecurity

March 4, 2022

Roundtable Weekly

Russian Aggression Raises Cybersecurity Concerns for CRE

Cybersecurity

Russian aggression against Ukraine has included cyberattacks that could potentially spillover to U.S. networks that serve commercial real estate. (GlobeSt, March 2) Spillover or Direct Threats Since the imposition of American sanctions, direct Russian retaliation to U.S. networks could include malware, supply chain disruption and cyberattacks on critical infrastructure. (The Hill, March 3)Senate Intelligence Committee Chairman Mark Warner (D-VA) recently told Axios that Russian cyber weapons inside Ukraine could spread to NATO member states. In 2017, Russia's NotPetya malware was unleashed in Ukraine, causing billions of dollars in damage to companies worldwide. (Axios, Feb. 23)"If you're suddenly having 190,000 troops attack Ukraine, chances are that the cyberattack will not be a single piece of malware," Warner told Axios. "The chances of that staying within the Ukrainian geographic border is quite small. It could spread to America, could spread to the U.K., but the more likely effect will be spreading to adjacent geographic territory [such as] Poland.” (Axios, Feb. 23)GlobeSt on March 2 addressed potential cyber threats to CRE. “The largest vulnerabilities for real estate companies are systems such as HVAC, elevators, lighting, metering, parking, and physical access control,” according to Tom Shircliff of Intelligent Buildings.Homeland Security Today also reported in January about a cyberattack on a German engineering firm’s building automation system that locked the owners out of the system and rendered three-quarters of several hundred devices in the building nonoperational. CRE’s Response The CRE industry has responded to emerging cyber threats through the Real Estate Information Sharing and Analysis Center (RE-ISAC) – a public-private information sharing partnership organized and managed by The Real Estate Roundtable since 2003.The RE-ISAC sends a Daily Report to members to raise awareness on cyber threats and other concerns affecting the U.S. commercial facilities sector, while sharing guidance from the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) and other agencies. See CISA’s online resources on Russian cyber threats.The RE-ISAC has also worked with InfraGard National Capital Region (InfraGardNCR) to establish the Commercial Facilities Cyber Working Group (CCWG), a virtual effort to share cyber threat intelligence. The group shares threat reports, ransomware victim examples, and other information on a regular basis. RE-ISAC Managing Director Andy Jabbour interviewed James Whalen, Boston Properties’ SVP, Chief Information & Technology Officer on the steps commercial real estate companies are takings to meet cybersecurity threats. (Gate 15, March 23, 2021 and Blended Threats: Holding Buildings Hostage)FBI Recommendations This week, the FBI recommended organizations take the following steps:Review recent cybersecurity advisories, such as the Department of Homeland Security’s recent “Shields Up” warning that urged “all organizations – regardless of size – adopt a heightened posture when it comes to cybersecurity and protecting their most critical assets.” (TechCrunch, March 2)Know your networks; especially if you have even a tangential relationship with Russia and surrounding countries.Know your Cyber Incident Response plan. If you don’t have one, you should. Make sure the FBI and info sharing are embedded in that plan. Lower your thresholds for reporting.Report mis, dis, mal information, a tried-and-true tactic of the Russian government, including on your social media.In the event of a compromise, call the FBI.The Real Estate Roundtable’s Homeland Security Task Force continues to work with key law enforcement, intelligence agencies and the RE-ISAC on protective measures that businesses can take to create infrastructure resistant to physical damage and cyber breaches. (Information on joining the RE-ISAC) # # #

Beneficial Ownership

February 25, 2022

Roundtable Weekly

Roundtable, Real Estate Coalition Comment on Proposed Anti-Money Laundering Regulations

Beneficial Ownership Corporate Transparency Act CTA FinCEN

Ten national real estate industry organizations, including The Roundtable, on Feb. 21 submitted detailed comments to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) on proposed anti-money laundering regulations affecting real estate transactions. Industry Concerns The industry letter supports the broad goal of preventing the use of LLCs or any form of real estate to finance illicit acts, money laundering, or terrorism – yet emphasizes that FinCEN should proceed cautiously to not harm legitimate real estate capital flows in the process. The coalition also states that anti-money laundering rules and requirements should focus on risk while not burdening legitimate actors with unnecessary or duplicative compliance, which will only increase costs without meaningfully combating money laundering. The coalition letter emphasizes three main recommendations for FinCEN: I.) Study the commercial and multifamily real estate markets to tailor future regulation to how those markets function; II.) Leverage the Corporate Transparency Act (CTA) and the beneficial ownership database to reduce the necessary scope of further action; and III.) Distinguish nonbank commercial real estate lenders from true all-cash transactions. The Feb. 21 letter notes that the real estate industry supports efforts to provide the law enforcement community with the tools necessary to stop money laundering, terrorism financing, or other crimes. However, the coalition urges that any compliance regime should be structured in a manner that does not discourage CRE capital formation and investment. FinCEN Comments Earlier this month, a coalition of five real estate organizations, including The Roundtable, submitted concerns to FinCEN on a proposed federal registry with beneficial ownership information that would include rules on who must file, when, and what specific information must be provided. (Coalition letter to FINCEN, Feb. 4) The letter stated the industry supports efforts to eliminate terrorism financing and money laundering and appreciate efforts to protect the U.S. financial system from illicit actors and business entities. However, the coalition also raised concerns about the cost and compliance burden of imposing excessive, unnecessary and/or confusing beneficial ownership reporting requirements on real estate businesses. The Roundtable and three other national real estate organizations also submitted detailed comments to FinCEN on May 5, 2021 addressing several implementation concerns related to the proposed registry. (Roundtable Weekly, May 7) FinCEN has solicited comments on a wide range of questions related to its implementation of the CTA – enacted on January 1, 2021 – that effectively bans the registration of anonymously owned shell companies in the United States. (JD Supra, April 26 and Lexology, April 28) The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to work with industry partners to respond to FinCEN’s proposals. The industry will also continue to support a balanced approach that inhibits illicit money laundering activity while not restricting capital formation or increasing the regulatory burden on real estate. # # #

Pandemic Risk Insurance

February 25, 2022

Roundtable Weekly

The Roundtable and Business Continuity Coalition Call for Public-Private Pandemic Risk Insurance Backstop

Pandemic Risk Insurance Program

Rep. French Hill (R-AR), above, – Ranking Member of the House Financial Services Subcommittee on Housing, Community Development and Insurance – led a Feb. 23 discussion on the widening gaps in pandemic-related coverage in commercial insurance markets with policyholders and insurance industry officials. Pandemic Risk Insurance Solution Additionally, members of the multi-industry Business Continuity Coalition (BCC), which includes The Real Estate Roundtable, on Feb. 23 urged policymakers to enact a public-private pandemic risk insurance backstop program. The BCC’s Feb. 23 statement emphasizes that such a program would protect the economy from future government-ordered shutdowns while enabling employers to keep payrolls and supply chains intact. The BCC is comprised of over 50 business organizations and companies representing approximately 70 million workers in the hospitality, retail, real estate, communications, broadcasting, nonprofit association, entertainment, restaurant, gaming and professional sports industries. (BCC statement, Feb. 23) Real Estate Roundtable President and CEO Jeffrey DeBoer, above, said, “Pandemic risk is one of the largest unhedged risk exposure in the U.S. economy today. It is important to have an economic mechanism in place to protect jobs and the economy from future government mandated shutdowns.”DeBoer added, “The Real Estate Roundtable and its Business Continuity Coalition partners encourage policymakers to prepare the economy for future risks by enacting a program that provides the coverages that American businesses need.”The BCC offered a detailed proposal last March to establish a federal pandemic insurance program, and endorsed the Pandemic Risk Insurance Act (H.R. 5823) last November, while policymakers continue to deliberate on how to design such a program. (Roundtable Weekly, Nov. 5, 2021) The coalition noted that the design of any pandemic risk insurance program should adhere to certain principles, which are outlined in the Feb. 23 statement. # # #

February 23, 2022

Policy Comment Letter

BCC_Statement_Roundtable_02-23-2022

Beneficial Ownership

February 21, 2022

Policy Comment Letter

Joint CRE Organizations Submit Comments to FinCEN on Proposed Beneficial Ownership Regulations

Beneficial Ownership, Beneficial Ownership amp the Corporate Transparency Act,

Fiscal Policy

February 18, 2022

Roundtable Weekly

Senate Passes Stopgap Funding, Giving Congress Three Weeks to Pass FY2022 Omnibus Spending Bill

Budget

The Senate yesterday approved funding to keep the government open through March 11, allowing congressional negotiators an additional three weeks to reach a spending deal for fiscal year 2022. (CQ, Feb. 18) From CR to Omni The legislation (H.R. 6617) extends FY2021 funding levels, averting a government shutdown at midnight tonight. President Biden is expected to sign the Continuing Resolution (CR), which was passed by the House last week. (Roundtable Weekly, Feb. 11)Congressional appropriators are now focused on crafting an “omnibus” bill to fund the government though the end of FY2021, which began Oct. 1 and ends Sept. 30. A deal on an omni package would consolidate 12 separate spending bills and release additional funds for infrastructure. (Tax Notes, Feb. 18)The must-pass omnibus could become a vehicle for additional tax measures, including expired tax incentives and energy credits known as extenders. Senate Finance Committee Chair Ron Wyden, (D-OR), told Tax Notes on February 10 that certain credits may be included in an omnibus bill or in a scaled-down Build Back Better Act (H.R. 5376).The Biden administration’s request for Congress to appropriate billions more in COVID-19 response funds is meeting bipartisan resistance. Senate Appropriations Chair Patrick Leahy (D-VT) this week commented on negotiations about the omnibus and the White House supplemental, stating, “That should probably be a separate bill.” (Politico, Feb. 17 and PoliticPro, Feb. 18) Roundtable & Energy Measures Omnibus negotiations and pandemic funding may be followed by congressional consideration of a pared-down BBB bill as the mid-term elections grow closer. Key Sen. Joe Manchin (D-WV), chair of the Senate Energy and Natural Resources Committee, has signaled his support for climate measures in a revised BBB package. (CNN, Jan. 5 and New York Times, Jan. 20)The Roundtable has supported the BBB Act’s climate measures, which include a suite of clean energy tax credits and incentives amounting to $300 billion. (Roundtable Weekly, Jan. 7)The Roundtable sent a letter to Congressional tax writers on Nov. 16, 2021 detailing five recommendations aimed at improving the green energy tax provisions affecting real estate. (Roundtable letter, Nov. 16) The Senate returns on Feb. 28 for President Biden’s first State of the Union address on March 1, which will be followed by the administration’s FY2023 budget request. # # #

Q1 Sentiment Index

February 18, 2022

Roundtable Weekly

CRE Executives’ Optimism About Q1 Market Conditions Tempered by Inflation and Interest Rate Concerns

Quarterly Sentiment Index

As the economy continues to recover from the global pandemic, commercial real estate executives see strong market fundamentals and steady economic growth, according to The Real Estate Roundtable’s Q1 2022 Economic Sentiment Index. While optimistic about the economic outlook going forward, inflation concerns and a rising interest rate environment are frequently cited as potential headwinds for the industry.Market ConditionsAdditionally, Roundtable Chair John Fish (Chairman and CEO, Suffolk), above, on Feb. 14 discussed the real estate market and return-to-office efforts on Bloomberg’s “The Tape” podcast. (Listen to podcast from 10:45 to 16:55)The Roundtable’s Overall Q1 2022 Sentiment Index—a reflection of the views of real estate industry leaders—registered a score of 66, a seven-point increase relative to the Q1 2021 score, demonstrating continued optimism for market conditions despite a decrease of seven points from Q4 2021. The Current Index registered at 71, a 27- point increase compared to Q1 2021. The Economic Sentiment Overall Index is scored on a scale of 1 to 100 by averaging the scores of Current and Future Indices. Any score over 50 is viewed as positive.The Roundtable’s quarterly economic survey also shows that 69 percent of respondents believe that general market conditions today are “much better or somewhat better” versus one year ago—and that 53 percent anticipate conditions will continue to improve one year from now.Roundtable President and CEO Jeffrey DeBoer said, “We are encouraged by the decreasing number of cases of COVID-19, pandemic-related restrictions being lifted throughout the country, cities continuing to reopen safely and efficiently, and increased travel and consumer spending. Our nation’s post-pandemic recovery is reliant on the revitalization of cities, safe transportation systems, significant return of employees to the workplace, and healthy real estate values.”He added, “Throughout the pandemic the real estate industry has assisted suddenly jobless residents and troubled business tenants restructure leases to remain in their properties. Industry leaders now look forward to reimagining people’s living, shopping, work, and other spaces in the built environment to accommodate the evolving needs of the post-COVID economy.”Topline Findings The Q1 2022 Real Estate Roundtable Sentiment Index registered a score of 66, a decrease of seven points from the fourth quarter of 2021 but a seven-point increase over Q1 2021. While optimistic about the economic outlook going forward, inflation concerns and a rising interest rate environment were frequently cited as potential headwinds for the industry. Survey respondents’ outlook varied between asset classes and location; most participants felt that real estate assets, particularly single and multifamily housing and industrial, remain largely “priced to perfection” with limited supply being chased by seemingly “boundless” capital. This supply-demand imbalance has generally led to compressed cap rates across favorable asset classes and results in perceptions that valuations will remain elevated.Participants cited a continued abundance of debt and equity capital and strong investor demand for real estate. Data for the Q1 survey was gathered in January by Chicago-based Ferguson Partners on The Roundtable’s behalf. See the full Q1 report. # # #

Economic Growth - Travel & Tourism, Roundtable Weekly

February 18, 2022

Roundtable Weekly

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

Economic Growth Travel amp Tourism

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) 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 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.

Broadband Infrastructure

February 18, 2022

Roundtable Weekly

FCC Issues New Rule That May Hinder Broadband Deployment in Multi-Tenant Buildings

Infrastructure

A Federal Communications Commission (FCC) order released Tuesday aims to nullify arrangements between broadband providers and building owners to deliver efficient and cost effective internet service for residential and business tenants. (Bloomberg, Feb. 15)The FCC maintains that its latest rules will “unblock broadband competition” for apartment dwellers and businesses. The agency aims to block agreements that would allow building owners to share revenue with a broadband company when providing internet access in a residential or commercial building. (FCC news release)The FCC’s action this week derives from a Biden Administration executive order issued last summer that contains a far-reaching objective to “promote competition in the American economy.” The order included a lone reference to rules that improve tenants’ choices in selecting broadband providers, which led to this week’s action by the FCC.Multifamily industry advocates counter that the FCC’s latest order could “discourage investment and harm deployment and maintenance of broadband networks.” [Feb. 17 statement of the National Multifamily Housing Council (NMHC) and the National Apartment Association (NAA)]The NMHC and NAA statement explains that the FCC’s ruling attempts to provide a solution where there is no problem. “Industry data shows competition and superior broadband service already exists, with 80 percent of apartments surveyed having two or more providers on site.”NMHC and NAA also point out that the FCC’s order could actually hinder broadband access for Americans living in low-income communities, smaller rentals, public housing, and other underserved properties most in need of broadband modernization. “Building owners often struggle to find even one provider to serve a property and provide up-to-date broadband service in these locations,” the organizations stated.NMHC and NAA led a coalition of real estate groups – including The Real Estate Roundtable and Nareit – in filing comments to the FCC last fall. The coalition comments demonstrated there is “ample competition in the broadband market in apartment buildings and office and retail properties” and that new FCC rules were unnecessary.The real estate coalition comments also explained that “revenue sharing agreements” between building owners and broadband providers are not the problem that limits internet access in low-income and other underserved communities. Rather, the chief “limiting factor” in addressing that challenge is the cost of “extending infrastructure to and within those communities” in the first place. (FCC comment letter, Oct. 20, 2021)The bipartisan Infrastructure Investment and Jobs Act (IIJA) invests roughly $65 billion “to help ensure that every American has access to reliable high speed internet.” (Bipartisan Infrastructure Law Guidebook, “Broadband” section)The Roundtable will continue to work with coalition partners to promote speedy and proper disbursement of IIJA funds for broadband and other infrastructure projects, while preserving the rights of owners to manage their buildings and meet their tenants’ demands.# # #

Policy Landscape

February 11, 2022

Roundtable Weekly

House Passes Government Funding Extension Until March 11 as Appropriators Signal Progress on FY2022 Omnibus

Budget Congress

The House of Representatives on Tuesday passed a continuing resolution (CR) that would prevent a government shutdown on Feb. 18 by extending current government funding levels for three weeks, through March 11. The CR, which also applies to the National Flood Insurance Program, moves to the Senate for consideration next week. (CR legislative text and summary) CR & Omnibus If passed by the Senate, the CR would give lawmakers additional time to finalize a separate “omnibus” spending bill for fiscal year 2022, which runs from Oct. 1, 2021 through Sept. 30, 2022. (BGov, Feb. 9)House and Senate Appropriations Committee leaders announced on Wednesday a “framework” deal for top-line spending levels for defense and domestic funding. Such an agreement would clear the way for congressional committees to complete a sweeping 12-bill spending bundle, which could amount to a $1.5 trillion omnibus package funding government operations into the fall. (PoliticoPro, Feb. 10)A full-year omnibus package would also release an additional $197 billion over 10 years for energy, transportation, and other programs that were part of last year’s bipartisan infrastructure bill. (BGov, Feb. 9 and CQ, Feb. 10) Omni & BBB The “omni” funding bill is now a focus of Congress since President Biden’s multi-trillion Build Back Better (BBB) Act has been sidelined on Capitol Hill. (Politico, Feb. 10)Sen. Joe Manchin (D-WV), above, – a key vote in the 50-50 Senate – said on Sunday that he sees a government funding package as a higher priority than the stalled BBB bill. ‘We have to get a budget bill first,’ Manchin said. (CNN, Feb 6)Manchin this week also expressed his reluctance to endorse additional federal spending, after news that consumer inflation rose to 7.5%, the largest 12-month increase in four decades. (BGov, Feb. 10)Manchin’s statement included, “It’s beyond time for the Federal Reserve to tackle [inflation] head on, and Congress and the Administration must proceed with caution before adding more fuel to an economy already on fire. As inflation and our $30 trillion in national debt continue a historic climb, only in Washington, DC do people seem to think that spending trillions more of taxpayers’ money will cure our problems, let alone inflation,” Manchin said. (Newsweek, Feb. 10) The start of the 2023 fiscal year cycle is approaching as Congress aims to pass an omnibus for the current year by March. President Biden is expected to release his FY2023 budget request shortly after his State of the Union address on March 1. # # #

Corporate Disclosure Rules

February 11, 2022

Roundtable Weekly

SEC Proposes Increased Oversight for Private Investment Funds; Delay Reported for Proposed Climate Risk Rule

Corporate Disclosure SEC Securities and Exchange Commission

The U.S. Securities and Exchange Commission (SEC) on Feb. 9 proposed expansive, new disclosure requirements for private investment funds, while an anticipated proposed rule that could require issuers to report on GHG emissions has been delayed. (Wall Street Journal Feb. 9 and Bloomberg, Feb. 8) Proposed Rules & Private FundsThis week’s proposed rule, if approved, would require private-equity and hedge-fund managers to provide statements on fund performance, compensation, fees and expenses. The proposal passed the Commission on a 3-1 party-line vote, with one dissenting Republican. (PoliticoPro, Feb. 9) Managed Funds Association President and CEO Bryan Corbett responded, “The SEC’s proposed additional regulations on private funds will harm the most sophisticated investors, including pensions, endowments and foundations, who rely on these funds to serve their beneficiaries. The agency's treatment of private funds as if they were serving retail investors is misguided.” (Pensions and Investments, Feb. 8)Climate Risk Disclosures & CRE Reps. Andy Barr (R-KY), French Hill (R-AR) and Bill Huizenga (R-MI) on Oct 6, 2021 wrote to SEC Chair Gary Gensler, above, claiming the SEC lacks jurisdiction to create and implement policies affecting private, non-market companies. “Lest there be any doubt, we wish to emphasize that the SEC has no authority to impose public disclosure obligations—regarding climate or otherwise— on private businesses that have not accessed the public capital markets,” the Members wrote. Bloomberg reported this week that the SEC has delayed the release of a separate proposed rule that could require REITs and other issuers to disclose GHG emissions and climate-related financial risks in their Commission filings. (Bloomberg, Feb. 8) The climate risk proposal may extend into March or later, according to Bloomberg. Gensler previously announced it would be released last year. (Roundtable Weekly, June 11, 2021 and Reuters, May 6, 2021). The SEC’s climate proposal is widely expected to evolve into the first-ever federal rule that will require companies to measure and report on GHG emissions they directly cause (“Scope 1”), and emissions attributable to their electricity purchases (“Scope 2”). A brewing controversy is whether the SEC might also direct issuers to estimate and report on indirect “Scope 3” emissions up and down corporate supply chains. (Reuters, Jan. 19) If the Commission potentially mandates “Scope 3” disclosures, the requirement could possibly impose new obligations on some commercial property owners to report on the emissions of their tenants – and some banks to report on the emissions of their borrowers. Pre-rulemaking comments filed by The Roundtable last year, developed in close coordination with Nareit, point out that building owners should not be required to disclose tenant emissions simply because property owners do not even have access to leased-space energy data in many instances. Any proposed rule from the SEC will trigger a public feedback process, followed by internal agency review, before it would take effect. The SEC’s climate rule is considered a major environmental initiative of the Biden Administration, particularly as GHG reduction provisions in the Build Back Better Act face a steep climb to pass the Senate. (Bloomberg, Feb. 8) # # #

Cannabis

February 11, 2022

Roundtable Weekly

House Passes Cannabis Reform Banking Legislation to Provide Safe Harbor for Financial Service Providers and CRE Owners

Cannabis

A Roundtable-supported bill that would allow federally regulated banks to provide mortgage and financial services to state-licensed, cannabis-related businesses (“CRBs”) – without the threat of penalties under federal law – passed the House on Feb. 4. A SAFE Harbor The Secure and Fair Enforcement (SAFE) Banking Act (H.R. 1996) would provide commercial property owners a safe harbor if they lease space to a state-approved CRB, whose mortgages would not be subjected to corrective action by a bank under federal law.The SAFE Banking Act was approved by the House last week after it was added as an amendment to the America COMPETES Act, a bill that aims to make the U.S. more competitive with China. (The Hill, Feb. 4)The cannabis reform bill has been introduced in every Congress since 2013 by Rep. Ed Perlmutter (D-CO) – and has now passed the House six times as a standalone bill or an amendment to a larger legislative package.Perlmutter, who plans to retire from the House at the end of this year, said, “Cannabis-related businesses — big and small — and their employees are in desperate need of access to the banking system and access to capital in order to operate in an efficient, safe manner and compete in the growing global cannabis marketplace.” (NJ.com, Feb. 7)The Real Estate Roundtable is a long-standing supporter of the SAFE Banking Act. Roundtable President and CEO Jeffrey DeBoer noted in a March 2019 letter to policymakers that the bill “… clarifies that banks could not take adverse action on a loan to a real estate owner solely because that owner leases property to a legitimate CRB. The measure also protects sellers and lessors of real estate and other CRB ‘service providers’ by clarifying that proceeds from legitimate marijuana-related transactions do not derive from unlawful activity, and thus do not provide a predicate for federal criminal money laundering.” (Roundtable letter, March 25, 2019)Cannabis has been legalized in 18 states since 2010, and 37 have legalized marijuana for medical purposes. (HuffPost, Feb. 10)The estimated value of the U.S. cannabis industry is $17.7 billion, a substantial amount of which remains unbanked. As of January 2021, the legal cannabis industry supports 321,000 jobs across the country. (Perlmutter news release, April 19, 2021) Senate Consideration The America COMPETES Act now heads to the Senate for consideration and a likely legislative conference with House policymakers. Perlmutter, above, commented that if the SAFE Banking Act is rejected once again by the Senate, he would attach the cannabis reform measure to “some other bills coming up over the course of the next month or two.”House Speaker Nancy Pelosi (D-CA) assured Rep. Perlmutter that she will push for passage of the SAFE Banking Act bill. Perlmutter said, “[Pelosi] understands, too, that I'm committed to put this on anything that I can. She sees it – and I hope the Senate ultimately sees it – as inevitable.” (PoliticoPro, Feb. 4)Senate Minority Leader Mitch McConnell (R-KT) on Feb. 8 described the SAFE Banking measure as a “poison pill” amendment. “China has been steadily building up its military and economic might, and the Democrats’ answer is to help Americans get high?” McConnell said. (MarketWatch, Feb. 8) In a separate cannabis reform effort, Senate Majority Leader Chuck Schumer (D-NY), along with Sens. Cory Booker (D-NJ) and Ron Wyden (D-OR), yesterday sent a “dear colleague” letter to solicit input about a Senate bill seeking to legalize marijuana at the federal level with the addition of social justice measures. Schumer’s bill is likely to attract more Republican opposition than the SAFE Banking Act. # # #

Fiscal Policy

February 4, 2022

Roundtable Weekly

Congress Considers Short-Term Continuing Resolution as Feb. 18 Budget Deadline Looms

Budget Congress

House Democratic leaders, facing a heavy agenda and a Feb. 18 government funding deadline, are considering a three-week stopgap funding bill to allow appropriators more time to complete 2022 spending bills. (RollCall, Feb. 4) Negotiating Omnibus The House may vote early next week on a possible “Continuing Resolution” (CR) to extend current funding levels through March 11 and avoid a possible government shutdown. A CR would also require Senate approval. (CQ, Feb. 4)Negotiations among congressional appropriations leaders to reach a deal on a bipartisan omnibus bill for FY202 – which runs from Oct. 1, 2021 through Sept. 30, 2022 – have stalled on reaching top-line spending levels for defense and domestic funding. (The Hill, Feb. 1)This would be the third government funding stopgap for the fiscal year that began Oct. 1.Yesterday, Senate Appropriations Committee Ranking Member Richard Shelby (R-AL) stated that the length of time agreed upon for another CR extension would reflect whether Democrats and Republicans can agree to a funding deal. “If it’s a short-term [CR], that would mean probably that we’re making some progress, real progress,” Shelby said. “If it’s longer, we might go … for the rest of the year.” (The Hill, Feb. 3) A Demanding Agenda A crowded congressional agenda – including what may be next for the stalled Build Back Better (BBB) Act, international geopolitics, and action on President Biden’s upcoming Supreme Court nominee – adds pressure for policymakers to reach agreement on a spending bill.House Speaker Nancy Pelosi (D-CA), above, yesterday noted the urgency to reach an omnibus funding agreement. She stated, “We're hoping to get that done as soon as possible in terms of … the omnibus bill.” Pelosi added, “One connection between infrastructure and omnibus is that some of the money in the infrastructure bill cannot be freed up until we pass the omnibus bill," she said. (Pelosi Weekly Press Conference, Feb. 3)Separately, the impact of the FY2022 funding negotiations are unlikely to affect the timing for congressional consideration of how to pare down the BBB Act (H.R. 5376), according to House Ways and Means Chair Richard Neal (D-MA) and Senate Finance Chair Ron Wyden (D-OR). Both policymakers said they did not want to set an “artificial” deadline for potential revisions to the stalled proposal. (Tax Notes, Feb. 3 and Roundtable Weekly, Jan. 21)As FY2022 spending negotiations continue, The Washington Post reported today that the White House may request additional federal funding from Congress to aid pandemic recovery as current funding for preparedness is starting to dwindle. President Biden is also expected to start the next fiscal year cycle with the release of his fiscal budget request for 2023 – shortly after his State of the Union address on March 1. # # #

Infrastructure

February 4, 2022

Roundtable Weekly

Biden Administration Issues Funding Guide for the Bipartisan Infrastructure Law

Infrastructure

The White House on Jan. 31 released its guidebook to funding for the Infrastructure Investment and Jobs Act, the $1.2 trillion bipartisan measure signed into law last year. (The Hill, Jan. 31 and (Roundtable Weekly, Jan. 21) Roadmap to Infrastructure Funding The Bipartisan Infrastructure Law Guidebook is a key tool for states and local governments to apply for federal grants, loans, and public-private partnership resources under more than 375 infrastructure investment programs. Mitch Landrieu, White House Senior Advisor and Infrastructure Implementation Coordinator, stated, “Our primary goal is to empower people across the country with information, so they know what to apply for, who to contact, and how to get ready to rebuild.” (White House news release, Jan. 31)The White House last week also outlined steps for cities and mayors to prepare for funding applications. Landrieu on Jan. 4 sent a request to all of the nation's governors, urging them to appoint their own infrastructure implementation coordinators to work on the smooth disbursement of funds over the next several years. Support for Infrastructure Important to CRE The Guidebook consolidates information on the funding available from myriad federal agencies to build and repair infrastructure assets that are positive for local communities and commercial real estate, including: BridgesA total of $40 billion is dedicated for bridges, including $12.5 billion for a new DOT grant program to replace or rehabilitate some of the nation’s most economically significant bridges. (Roads, Bridges and Major Projects section.)Transit-Oriented DevelopmentThe infrastructure law invests $91.2 billion to repair and modernize mass transit. (Public Transportation section). The public-private TIFIA loan program receives $1.25 billion in funding with expanded authorities to assist airport and transit-oriented development projects. (Major Projects section).Passenger Rail$36 billion is available for federal-state partnership grants to repair existing rail routes or establish new intercity service. Amtrak’s Northeast Corridor benefits from a $6 billion grant program. (Passenger Rail section)EV Charging$7.5 billion in grants is available to help build out a national network of 500,000 electric vehicle chargers – particularly along highway corridors to facilitate long-distance travel and within disadvantaged communities. (Electric Vehicles section)Clean EnergyThe infrastructure law will deploy more than $20 billion in federal financing tools to deliver clean power. The U.S. Department of Energy in January launched the “Building a Better Grid” Initiative to catalyze construction of electric transmission lines that can deliver solar, wind, and other renewable energy over long distances. (Clean Energy and Power section and DOE website)Superfund Clean-up ProgramThe law provides $3.5 billion for the Environmental Protection Agency’s Superfund program to clean up some of the nation’s most contaminated sites. (EPA news release, Dec. 20, 2021)Underserved CommunitiesA set of funding sources aim to make transformative investments in disadvantaged and low-income communities. (Supporting Underserved Communities section) For example, $1 billion is devoted to a “Reconnecting Communities” competitive grant program that can remove or retrofit highways built decades ago that isolated low-income neighborhoods. Future versions of the guidebook will update key timelines for program implementation, best practices, case studies, and links to resources developed by the White House. # # #

Public Safety

February 4, 2022

Roundtable Weekly

Roundtable Members Support NYC Coalition to Reduce Crime and Increase Public Safety

A coalition of more than 230 business, civic, and labor leaders – including 16 Real Estate Roundtable members – on Jan. 31 expressed broad support for New York City Mayor Eric Adams’s efforts to increase public safety in the wake of a series of violent crimes across the city. New York is one of several cities across the nation facing a spike in crime since the start of the pandemic. (Partnership for New York City letter, Jan. 31 | Reuters and CQ, Feb. 3) Private Sector SupportRoundtable Board Member Rob Speyer (President and CEO, Tishman Speyer), above, and Steven Swartz (President and CEO, Hearst) – Co-Chairs of the Partnership for New York City – stated, “We support Mayor Adams’ comprehensive approach to reducing crime and gun violence. The return of the pre-pandemic vibrancy of our city depends on his success.” (New York City’s website)The coalition letter also noted, “New York cannot recover from the devastating impacts of the pandemic without first restoring the sense of personal security that every resident, worker, visitor, and community in our city has the right to expect.”“[I]t is equally necessary to invest in mental health care and alleviate conditions that contribute to violent behavior” such as homelessness, the letter explains.Roundtable President and CEO Jeffrey DeBoer, above, stated, “The Real Estate Roundtable is highly supportive of governmental efforts nationally and locally to address violent behavior, substance abuse, homelessness, and joblessness. We join with our New York-based leaders in supporting efforts to address these troubling realities in New York City and we applaud President Biden for his announcement this week on community safety.”The coalition letter comes a week after Adams proposed a comprehensive Blueprint to End Gun Violence. President Biden and Attorney General Merrick Garland yesterday traveled to New York to offer federal support to the plan of Adams and New York Gov. Kathy Hochul to crack down on illegal guns coming into the state. (New York Daily News and Reuters, Feb. 3) The White House yesterday announced President Biden’s plan to urge Congress to allocate $500 million more to combat gun violence into a fiscal 2022 spending package. (White House Announcement, Feb. 3) # # #

Beneficial Ownership

February 4, 2022

Policy Comment Letter

Roundtable and 4 Industry Associations Comment to FinCEN on Beneficial Ownership Information Reporting Requirements

Beneficial Ownership, Beneficial Ownership amp the Corporate Transparency Act,

2022 State of the Industry Meeting

January 28, 2022

Roundtable Weekly

Roundtable Members Engage Policymakers on Economic, Energy, ESG and Other National Issues

Energy and Climate Policy Homeland Security Tax Policy

The Real Estate Roundtable’s Virtual 2022 State of the Industry (SOI) Meeting this week included discussions with national policymakers and industry leaders on the future of the Build Back Better (BBB) Act, the Fed and monetary policy, energy policy, regulatory oversight of ESG reporting, along with equity, diversity and inclusion issues in CRE. The Roundtable’s policy advisory committees also met, drilling down on timely issues with policy and industry experts in the areas of tax, sustainability, capital and credit, and homeland security.Speakers & Policy IssuesRoundtable Chair John Fish (Chairman and CEO, Suffolk), right, and Roundtable President and CEO Jeffrey DeBoer, left, launched the meeting and led discussions with three U.S. Senators and other prominent policymakers, including:Sen. John Thune (R-SD)Senate Republican WhipCommittees: Senate Commerce, Finance, Agriculture… joined Roundtable Board Member Ross Perot. Jr. (Chairman, Hillwood) to discuss upcoming Senate legislation and the political outlook. Sen. Amy Klobuchar (D-MN)Committees: Joint Economic, Senate Commerce, Judiciary, and Rules … expressed her support for the recently-enacted bipartisan infrastructure bill and additional pandemic aid for the hard-hit tourism industry and hospitality sectors.Sen. Catherine Cortez Mastro (D-NV) Committees: Senate Finance, Banking, and Energy… noted her support for expanding the low-income housing tax credit to build affordable homes for working families, along with business incentives to invest in energy efficiency projects. John Kerry President Biden’s Special Envoy for Climate and former Secretary of State… discussed the significant role of the real estate industry in efforts to combat the impact of climate change and emphasized the need for nations to adopt new green energy technologies.Larry SummersFormer Treasury Secretary under President Clinton and Former White House National Economic Council Director under President Obama … discussed a wide range of policy topics, including his views on the Fed’s reaction to market volatility, inflation, and the tight labor market. (Watch Summers video)Equity, Diversity & InclusionThe SOI meeting also included a discussion about exploring a potential industry initiative that would aim to accelerate opportunities for minority and women business enterprises (MWBEs) in the commercial real estate industry.The goals of the initiative were discussed by The Roundtable’s Equity, Diversity and Inclusion (E,D&I) Committee Chairman, and Roundtable Board Member, Jeff Blau (CEO, Related Companies); Ken McIntyre, CEO of The Real Estate Executive Council; and Thomas Baltimore, Jr., Chairman, President and CEO of Park Hotels & Resorts. Roundtable Policy Advisory Committees(Above: Sustainability Policy Advisory Committee (SPAC) Chair Tony Malkin (Chairman, President and CEO, Empire Realty Trust), right, and Roundtable SPAC Liaison, Senior Vice President and Counsel Duane Desiderio, left.)The Roundtable's policy advisory committee meetings on Jan. 25-26 analyzed national issues impacting CRE, including:Research and Real Estate Capital Policy Advisory Committees (RECPAC) Rep. French Hill (R-AR) provided his insights on the congressional legislative agenda from his perspective as a member of the House Financial Services Committee and Ranking Member of its Subcommittee on Housing, Community Development and Insurance. Research Committee co-chairs Spencer Levy (CBRE’s Global Chief Client Officer) and Paula Campbell Roberts (KKR Managing Director) provided their perspectives on real estate capital markets. RECPAC co-chair Kathleen Farrell, Head of Commercial Real Estate for Truist, moderated a joint committee meeting capital market discussion, along with co-chairs Gregg Gerken, Head of Commercial Real Estate with TD Bank, and Mike Lowe, Co-CEO with Lowe.Tax Policy Advisory Committee (TPAC)Potential tax revenue policies that may be considered by Congress were a focus of a discussion moderated by Russ Sullivan (Brownstein Hyatt Farber Schreck) with Bethany Bell, staff director for the House Ways and Means Subcommittee on Select Revenue Measures. Additionally, Derek Theurer, chief tax counsel for Ways and Means’ Republicans, discussed tax legislative priorities prior to the upcoming mid-term elections. Homeland Security Task Force (HSTF) HSTF members were briefed on the escalation of organized “smash and grab” looting incidents affecting the retail sector by Dan Kennedy, Senior Vice President of US Security Operations for Unibail-Rodamco-Westfield, Chris Woiwode, Vice President and Chief Security Officer for Macerich and Terry Monahan, former New York City Senior Advisor for Recovery Safety Planning and NYPD Department Chief. Additionally, HSTF co-chairs Amanda Mason (Executive Director of Global Intelligence for the Related Companies) and Keith Wallace (Vice President for Global Safety & Security with Marriott International) led HSTF in a discussion on current threats to CRE and mitigation strategies. (HSTF on Jan. 20 held a virtual exercise simulating hostile events and adverse weather impacting CRE).Sustainability Policy Advisory Committee (SPAC)Environmental Protection Agency (EPA) staff demonstrated a new, powerful Building Emissions Calculator to estimate historical, current and future annual greenhouse gas emissions resulting from a building’s energy use. SPAC also discussed the SEC’s expected rule on Environmental, Social, and Corporate Governance (ESG) reporting requirements. (Reuters, Jan. 19). Additional speakers from the U.S. Energy Information Administration provided an update on the Commercial Building Energy Consumption Survey (CBECS), which tracks federal data on U.S. CRE energy use.Next on The Roundtable's FY2022 meeting calendar is the Spring Meeting on April 26. This meeting is restricted to Roundtable-level members only.# # #

Tax Policy

January 28, 2022

Roundtable Weekly

State and Local Tax (SALT) Deduction Relief in Doubt as Democrats Seek to Narrow Build Back Better Act

SALT Tax Policy

Several Democratic Senators favor retaining current law as it relates to the deductibility of state and local taxes and eliminating SALT relief from any pared down version of the Build Back Better (BBB) Act, The Hill reported on Jan. 26. SALT FixSpeaking both on the record and anonymously to The Hill, policymakers said that they expect proposed changes to SALT will be cut from the next generation of the BBB Act, despite the issue being a top priority of Senate Majority Leader Chuck Schumer (D-NY).The 2017 Tax Cuts and Jobs Act limited the itemized, individual deduction for state and local taxes (including property taxes) to $10,000. The provision does not restrict the deductibility of business taxes paid or incurred at the entity level. The limitation expires after 2025. (The SALT Cap: Overview and Analysis, Congressional Research Service, March 6, 2020)Sen. Joe Manchin (D-WV), a key centrist vote in the Senate, has not publicly stated his position on SALT relief, but reportedly has sent signals he is not a supporter. (Politico, Jan. 27 and Roll Call, Jan. 28)SALT & BBBIf negotiations resume, congressional Democrats are expected to reduce the size and scope of the BBB Act. Manchin recently said he prefers “starting from scratch” after Democratic negotiations on the House-passed $2.2 trillion package collapsed in December. (Roundtable Weekly, Jan. 21)There are also challenges in the House, where Democrats have only a four-vote majority. “No SALT, no deal,” wrote New York Rep. Tom Suozzi and New Jersey Reps. Josh Gottheimer and Mikie Sherrill in a joint statement last week. “If there are any efforts that include a change in the tax code [in a revised BBB proposal], then a SALT fix must be part of it.” (CNBC, Jan. 21)# # #

Policy Landscape

January 21, 2022

Roundtable Weekly

White House Looks to Reset and Downsize Build Back Better Act; Roundtable Meeting to Address National Issues With Leading Policymakers

Congress

President Joe Biden acknowledged in a Jan. 19 news conference that his nearly $2 trillion social and climate package, the Build Back Better (BBB) Act, needs to be pared down in the face of stalled negotiations in the 50-50 Senate. "I think we can break the package up, get as much as we can now, come back and fight for the rest later," Biden said, noting there are some areas of agreement with key Democratic Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona. (CQ and BGov, Jan. 20) Revamping BBB Biden and congressional Democratic leaders may pursue one revamped legislative package – instead of several separate bills – as the November mid-term elections grow closer. Democrats have pushed the BBB Act under restrictive budget reconciliation rules, which allows consideration of one bill that could pass with a simple majority in the evenly divided Senate. (Wall Street Journal and CNBC, Jan. 19)Climate measures are emerging as a top priority for inclusion in a smaller bill. Manchin, chair of the Senate Energy and Natural Resources Committee, has signaled his support for that aspect of the BBB package. (CNN, Jan. 5 and New York Times, Jan. 20)White House National Economic Council Director Brian Deese yesterday said that certain BBB proposals, including clean energy measures are “doable” and could pass Congress. “The clean energy provisions in this bill will not only make it easier and cheaper to deploy clean energy and address the climate crisis, it will reduce energy costs,” Deese said. (BGov and Bloomberg, Jan. 20)If the Senate ultimately passes some revised version of the BBB Act that changes the House-approved version (H.R. 5376), the bill would need to go back to the House for another vote before it reaches President Biden’s desk. (Roundtable Weekly, Nov. 19, 2021) Roundtable Support for Clean Energy Measures The Roundtable has supported the BBB Act’s climate measures, which include a suite of clean energy tax credits and incentives amounting to $300 billion. (Roundtable Weekly, Jan. 7)The Roundtable sent a letter to Congressional tax writers on Nov. 16, 2021 detailing five recommendations aimed at improving the green energy tax provisions affecting real estate. (Roundtable letter, Nov. 16) BBB, ESG and More Next week, key policymakers will discuss what’s next for the BBB plan with Roundtable members during the organization’s Jan. 25-26 Virtual State of the Industry Meeting (SOI). The featured speakers will include: Sen. John Thune (R-SD), who holds the second highest position in Senate Republican leadership; Sen. Amy Klobuchar (D-MN), member, Joint Economic Committee and Senate Commerce Committee;Sen. Catherine Cortez Mastro (D-NV), member, Senate committees – Finance, Banking, and Energy;John Kerry, President Biden’s Special Envoy for Climate and former Secretary of State; andLarry Summers, former Secretary of the Treasury and former Director of the White House National Economic Council.Mr. Summers’ discussion will include the growing importance of environmental, social and corporate governance (ESG) issues for private sector businesses.One policy example of the growing influence of ESG factors is a proposed rule expected soon from the Securities and Exchange Commission (SEC) on new reporting disclosures quantifying financial risks related to climate. (Roundtable Weekly, Oct. 1, 2021 and Wall Street Journal, Jan. 19, 2022)BlackRock CEO Larry Fink, above, this week explained the need for businesses to make ESG an essential part of their decision-making process in his annual letter to CEOs. His letter states, “As stewards of our clients’ capital, we ask businesses to demonstrate how they’re going to deliver on their responsibility to shareholders, including through sound environmental, social, and governance practices and policies.” (New York Times and Washington Post, Jan. 18) The Roundtable’s SOI Meeting will also address market conditions and feature detailed policy advisory committee presentations in the areas of sustainability, tax, homeland security and capital and credit. # # #

Infrastructure

January 21, 2022

Roundtable Weekly

White House Details Initial Implementation of $1.2 Trillion Federal Infrastructure Spending Package

Infrastructure

The disbursement of $1.2 trillion in federal infrastructure investment approved by Washington policymakers two months ago is moving forward – in careful coordination with federal agencies, state and local partners – according to recent announcements by President Biden and White House Infrastructure Implementation Coordinator Mitch Landrieu, above. (News conference transcript and video, Jan. 18) Improving Infrastructure Assets The bipartisan infrastructure law enacted in November includes measures to improve infrastructure assets via public-private partnership efforts, streamline the federal permitting process, and improve key federal energy data that supports Environmental Protection Agency building labels. (Roundtable Weekly, Nov. 12, 2021 and White House Executive Order on Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability, Dec. 8, 2021) Real Estate Roundtable Chair John Fish (Chairman and CEO, Suffolk) commended the bipartisan effort and called the legislative package “an historic opportunity to position our nation for sustainable growth and greater economic prosperity.” (Roundtable Statement, Nov. 8, 2021) Former New Orleans Mayor Mitch Landrieu now leads a task force of federal agency officials charged with implementing the infrastructure law through a combination of direct federal grants and competitive bidding. (White House Infrastructure Implementation Fact Sheet, Jan. 14) A White House fact released today lists 25 available or soon-to-be-available sources of funding that local governments – particularly cities – can compete or apply for directly. The White House also plans to release a comprehensive guidebook of all available funding from the bipartisan infrastructure law in the coming weeks. Landrieu on Jan. 4 sent a request to all the nation's governors, urging them to appoint their own infrastructure implementation coordinators to work on the smooth disbursement of funds over the next several years, in coordination with both federal agencies and state and local leaders. Landrieu noted during his Jan. 18 White House news conference that the $1.2 trillion disbursement involves 14 federal agencies. He also said federal talks are also underway with Amtrak and that “the Northeastern Corridor … needs immediate attention.” (News conference transcript and video) Specific Programs Impacting CRE President Biden on Jan. 14 discussed a variety of recently announced infrastructure projects and funding commitments with Infrastructure “Czar” Landrieu. (White House Remarks and Infrastructure Implementation Fact Sheet, Jan. 14 and Competitive Infrastructure Funding Opportunities for Local Governments Fact Sheet, Jan. 21). The following five programs are among the many agency-specific infrastructure projects enabled by the bipartisan infrastructure law that are positive for local communities and commercial real estate: The U.S. Department of Energy (DOE) launched the “Building a Better Grid” Initiative, which will catalyze the nationwide development of new and upgraded high-capacity electric transmission lines by deploying more than $20 billion in federal financing tools. (DOE news release, Jan. 12) The U.S. Department of Transportation (DOT) and Federal Highway Administration announced $27 billion in funding to replace, repair, and rehabilitate thousands of bridges across the country. (Wall Street Journal and ABC News, Jan. 14) DOT Secretary Pete Buttigieg and DOE Secretary Jennifer Granholm formed a Joint Office of Energy & Transportation focused on building a national network of 500,000 electric vehicle chargers. (Department of Energy news release, Dec. 14, 2021 and White House EV Charging Action Plan, Dec. 13, 2021) The Federal Aviation Administration (FAA) announced $3 billion for 3,075 airports across the country to upgrade critical infrastructure. The Environmental Protection Agency (EPA) announced a $1 billion investment to initiate cleanup and clear the backlog of 49 previously unfunded Superfund sites and accelerate cleanup at dozens of other sites across the country. (EPA news release, Dec. 20, 2021) Additionally, Labor Secretary Marty Walsh discussed in an interview today with The Hill how he is focused on implementing the infrastructure law and launching a new program called the Good Jobs Initiative. Walsh emphasized the need for "workers at all different levels of construction” and stated, “I think we’re going to need additional housing in our country in the next five to 10 years, we’re going to have lots more development going on in our country.” (The Hill, Jan. 21) The various infrastructure improvement programs and their impact on the economy, commercial real estate and local communities will be a focus of discussion during The Roundtable’s Jan. 25-26 Virtual State of the Industry Meeting and its policy advisory committee meetings. # # #

Affordable Housing

January 21, 2022

Roundtable Weekly

Blackstone Commits $1 Billion to Private Sector Affordable Housing Program

Affordable Housing

Blackstone on Jan. 14 announced a $1 billion commitment to help address affordable housing challenges often faced by low-to-moderate-income families in historically under-represented communities. Blackstone’s single-family rental company Home Partners of America will expand their private sector program called Choice Lease, which offers qualified applicants below market rents and paths to homeownership without government subsidies. (Bloomberg, Jan. 14) An Affordable Housing Solution Kathleen McCarthy, above, Global Co-Head of Blackstone Real Estate and Real Estate Roundtable Board Member, said, “The lack of housing supply is a national crisis. We are proud to support Home Partners’ mission of addressing housing access and affordability while also providing underserved populations with a new path to homeownership. Blackstone’s scale and long-term capital make a program like this possible.” (GlobeSt, Jan. 18)Home Partners intends to use the Blackstone funds for purchasing approximately 4,000 homes over the next two years that will benefit eligible individuals and families facing challenges to homeownership, including lower credit scores and lack of savings. (News release, Jan. 14)Bill Young, co-founder and CEO of Home Partners of America, said, "Our Choice Lease program is providing a critical service to many who would not otherwise be able to access the housing market. We are grateful that our partners at Blackstone have provided the support needed to implement this initiative. We have a unique opportunity to drive change that will help these groups access quality homes while providing a clear and transparent path to homeownership." Program Details Bloomberg reports that Home Partners buys a home on behalf of its Choice Lease client, and rents it back on a series of one-year leases. Blackstone confirmed that throughout the lease, the tenant has the option to purchase the house at any time.Choice Lease’s rental and purchase options, as well as free financial education and counseling programs, come as a housing shortage pushes rents and purchase prices higher throughout the United States. (National Mortgage Professional, Jan. 17) Choice Lease is intended for households who earn 80% or less of the area median income. The program also offers residents rental rates 10% lower than market rates – and caps a home’s eventual purchase price at a 3.5% annual increase. (Information on the Choice Lease Program and Chicago Agent Magazine, Jan. 17) Home Partners has implemented Choice Lease in four metropolitan areas, including Atlanta and Phoenix, and is expanding the program to thirteen other markets. (Bloomberg, Jan. 14) The affordable housing shortage is one of the most important and complex political problems in America, and The Roundtable continues to work with our national real estate organization partners to jointly advocate for policies that will help to enhance the supply of safe, affordable housing. # # #

Tax Policy and CRE Outlook

January 14, 2022

Roundtable Weekly

Roundtable Offers 2022 Tax Policy Overview in CBRE’s Market Outlook Podcast

Capital Gains Tax Policy

How national tax policies may affect commercial real estate and the outlook for market sectors were the focus this week of a CBRE podcast, “High Hopes: Why Commercial Real Estate Is Poised for Continued Growth in 2022” that included Roundtable Senior Vice President & Counsel Ryan McCormick. Tax Policy Issues McCormick emphasized that tax increase proposals affecting CRE could receive renewed attention in 2022 if the President, congressional leaders, and key centrist Democrats sit down to renegotiate major elements of the Build Back Better Act. (CBRE Podcast, Jan. 11) “We started last year with a tremendous amount of potential change on the table, potential risks for real estate,” including “changes to the taxation of capital investment, capital formation, capital gains . . . pass-through rates and just rates generally,” McCormick noted. In his initial budget, the President proposed “limiting like-kind exchanges, eliminating the step-up in basis of assets at death, and other changes,” he added. As the process unfolded, according to McCormick, the real estate industry was able to demonstrate the negative impact these proposals “would have on not just real estate in particular, but local communities, local governments, property tax revenue at the state and local level and the jobs that flow from those industries and those services that are provided.” (CBRE Podcast, Jan. 11) Congressional lawmakers, driven by the need to get the key approval vote of Sen. Joe Manchin (D-WV) in an evenly divided Senate, are likely to pare back the cost of the $1.75 billion BBB bill to restart negotiations. (Roundtable Weekly, Jan. 7) McCormick added, “The Build Back Better Act is hanging by a thread at this point, and it's really going back to the drawing board. . . . There’s a lot of different ways and directions things could take. They could go small. They could try to do something on a bipartisan basis. I think the most likely scenario is they whittle back the Build Back Better Act further from where it is today. . . . [I]n many respects, we’re back where we started in 2021.” The SEC, OZs and SALT The discussion also touched on the growing influence of ESG factors on the industry, including the expectation that the Securities and Exchange Commission (SEC) may release a proposed rule for reporting financial risks related to climate during the first quarter of this year. (Roundtable Weekly, Oct. 1, 2021) McCormick expressed optimism that political support for Opportunity Zones, which have raised over $75 billion in capital since their enactment in 2017, would grow over time. The Roundtable and other stakeholders recently urged Congress to extend deadlines for investors to qualify for OZ tax benefits. On Thursday, Senate Finance Committee Chairman Ron Wyden announced an investigation into the impact of OZs on jobs and investment in low-income communities (Roundtable Weekly, Jan. 7; Wyden press release, Jan. 13) The fate of the deductibility of state and local taxes (SALT) was also a topic in the CBRE podcast. Roundtable Speakers: Thune, Kerry and Summers Tax policy in the new year will be a focus of The Roundtable’s Jan. 25 State of the Industry Meeting (remote) and its Tax Policy Advisory Committee (TPAC) meeting on Jan. 26. Featured speakers at The Roundtable’s business meeting will include: Sen. John Thune (R-SD), the number two position in Senate Republican leadership; John Kerry, President Biden’s Special Envoy for Climate and former Secretary of State; and Larry Summers, former Secretary of the Treasury and former Director of the White House National Economic Council. Looking Ahead The Jan. 11 CBRE podcast – moderated by Spencer Levy, CBRE’s Global Chief Client Officer & Senior Economic Advisor and co-chair of The Roundtable’s Research Committee – also featured Richard Barkham, CBRE’s Global Chief Economist, Head of Global Research & Head of Americas Research. Barkham focused on the economic outlook and forecasts for capital markets and individual CRE sectors. (GlobeSt, Jan. 12) CBRE’s recently released publication, U.S. Real Estate Market Outlook for 2022, projects a growing U.S. economy will fuel demand for space and increase real estate investment across all property types – despite uncertainty from the omicron variant and other risks. The Real Estate Roundtable’s Policy Agenda for 2022, scheduled for release at the end of this month, will address the tax issues above and several more of importance to CRE in the areas of infrastructure, sustainability, capital and credit, and homeland security. # # #

Homeland Security

January 14, 2022

Roundtable Weekly

Real Estate Preparedness Exercise on January 20 to Address Adverse Weather and Hostile Events

Homeland Security

The Real Estate Roundtable’s Homeland Security Task Force and the Real Estate Information Sharing and Analysis Center (RE-ISAC) invite member organizations to participate in a Virtual Preparedness Exercise on January 20. One exercise will address winter weather preparedness to examine critical dependencies related to water, power and communications/IT. Another exercise will focus on hostile events in local areas that do not directly target a member’s facility. One recent example of such an event involved an armed suspect incident in Boston that shut down activity in a four-block radius during a seven-hour standoff. Government officials and other industry ISACs will also participate in the Jan. 20 event, scheduled for 2:00-3:30 pm ET. Please RSVP no later than January 18 to Liz Hoopes and indicate if you prefer to participate in a weather preparedness or hostile events group. Additionally, HSTF has recently worked with government officials to produce a one-page reference on “flash mob” retail theft to assist businesses in recognizing potential preparatory actions for future criminal activity. For more information, please contact Roundtable Senior Vice President Chip Rodgers. # # #

Policy Landscape

January 7, 2022

Roundtable Weekly

Build Back Better Act Negotiations in “Cooling Off” Period as Congress Prioritizes Pressing Issues

Democrats this week signaled that negotiations over the Build Back Better (BBB) Act are in a “cooling off” period as Congress turns its immediate focus to pressing policy issues such as voting rights legislation and filibuster rules reform. (The Hill, Jan. 5) BBB’s Climate Provisions Congress will face several other deadlines in the New Year, including a possible push later this month by Senate Democrats for a vote on the Build Back Better (BBB) Act, the need to extend funding for federal government operations beyond February 18, and the looming November mid-term elections. (Bloomberg and Roll Call, Jan. 3)Discussion on how to revive the multitrillion BBB Act followed Sen. Joe Manchin’s (D-WV) Dec. 19 statement on Fox News that he opposed the package. Manchin is a key vote in the 50-50 Senate to pass the BBB Act under reconciliation rules, which require a majority vote for passage.Manchin, who chairs the Senate Energy Committee, last month offered the White House a $1.75 trillion proposal that included funding for climate initiatives supported by The Roundtable. (Wall Street Journal, Jan. 4)Sen. Manchin affirmed on Tuesday that he shares the views of the Democratic caucus on the climate portions of the BBB package. “The climate thing is one that we probably could come to an agreement much easier than anything else,” Manchin said. (E&E News, Jan. 4)Sen. Manchin wants to restructure other aspects of the BBB bill, possibly paring down the cost of its healthcare, childcare and housing initiatives. (Wall Street Journal, Jan. 5)If the Senate ultimately passes the BBB Act in a manner that changes the House-approved version (H.R. 5376), the bill would need to go back to the House for another vote before it reaches President Biden’s desk. (Roundtable Weekly, Nov. 19) Roundtable Support for Clean Energy Tax Provisions The BBB Act includes $550 billion for measures to fight climate change, which include a suite of Roundtable-supported clean energy tax credits and incentives amounting to $300 billion. The Roundtable sent a letter to Congressional tax writers on Nov. 16, 2021 detailing five recommendations that aim to improve green energy tax provisions affecting real estate. The Roundtable letter urged further changes to the BBB Act that would advance objectives aimed at slashing GHG emissions and making rapid progress toward a “net zero” economy by mid-century. (Roundtable letter, Nov. 16)The letter’s recommendations would increase and scale deployment of low- and zero-carbon technology in the nation’s commercial and multifamily building infrastructure.The need to address funding to keep the government is also pressing upon Congress. Current funding is authorized under a “Continuing Resolution” through Feb. 18, 2022. Congress has not yet reached agreement on full-year funding for fiscal 2022, which began Oct. 1, 2021. The Roundtable will discuss its policy agenda for the new year during its Jan. 25-26 State of the Industry meeting (virtual), along with potential changes to the BBB Act, and how the mid-term elections in November may impact the congressional agenda. # # #

Capital and Credit

January 7, 2022

Roundtable Weekly

Final IRS Regulations Reduce Tax Risks When Replacing LIBOR With Alternative Benchmarks

LIBOR

The IRS on Dec. 30 issued final regulations clarifying how parties can replace the London Interbank Offered Rate (LIBOR) as a reference rate in mortgages and other financial contracts without triggering negative tax consequences. The Real Estate Roundtable offered extensive input and comments during the Treasury Department’s LIBOR regulatory review. LIBOR Transition, Roundtable Comments & Tax Guidance LIBOR is currently used in outstanding financial contracts worth an estimated $223 trillion, including commercial real estate debt, mortgages, student loans and derivatives. (Roundtable Weekly, July 30)Financial regulators are phasing out LIBOR in its current form following serious cases of manipulation.The anticipated replacement of LIBOR in existing financial contracts poses a potential tax problem – avoiding a deemed taxable “exchange” of the contract if the replacement index is viewed as “significantly modifying” the interest rate or yield of the existing contract.In June 2019, Roundtable President and CEO Jeffrey DeBoer wrote to Treasury officials and emphasized, “… addressing the tax issues associated with the transition away from LIBOR is critical to the stability of financial markets, the real estate industry, and the overall economy.” (Roundtable LIBOR letter, June 6, 2019) The Roundtable letter offered a suggested framework for tax guidance that would clarify when a replacement rate is not considered a significant modification. The IRS issued favorable proposed rules shortly thereafter, in October 2019. The final IRS regulations provide bright-line rules for determining when replacement of LIBOR with an alternative rate in a contract qualifies as a “covered modification,” which is not treated as a taxable exchange of property under the tax code. (Federal Register, Guidance on the Transition From Interbank Offered Rates to Other Reference Rates; ABA Banking Journal, Jan. 3)The final tax rules generally are effective for contract modifications made on or after March 7, 2022.The Roundtable’s initial recommendations were developed with the assistance of an industry task force that included Tax Policy Advisory Committee (TPAC) Chairman Frank Creamer Jr., TPAC member Don Susswein, and chair of the Real Estate Capital Policy Advisory Committee (RECPAC) Working Group on LIBOR, Joseph Philip Forte. Tough Legacy Contracts Another significant LIBOR issue is a safe harbor for market participants seeking to transition to a replacement benchmark for debt instruments, such as the Secured Overnight Financing Rate (SOFR). Some difficult LIBOR-based contracts – referred to as “tough legacy” – have insufficient fallback language or include provisions that cannot be amended. (Roundtable Weekly, Dec. 10, 2021)Legislation passed by the House of Representatives on Dec. 8, 2021 would protect trillions in “tough legacy” contracts that use LIBOR as a reference rate for financial transactions. The bill (H.R. 4616) provides a safe harbor for market participants and includes a federal preemption.The House bill also provides that when LIBOR reaches its final replacement date on June 30, 2023, all contracts with no adequate fallback provisions for an alternative benchmark substitute will be replaced with SOFR.The Roundtable and 17 national trade groups previously submitted letters this year on April 14 and July 27 to House Financial Services Committee policymakers in support of legislation to address “tough legacy” contracts during the transition away from LIBOR. The Roundtable and a broad coalition of industry groups have long-supported measures to ensure that the transition away from the LIBOR reference rate does not cause market disruptions or diminish credit capacity. (Industry Coalition letter, Dec. 7, 2021 and Bloomberg, Dec. 8, 2021) LIBOR transition issues will be discussed during The Roundtable’s Jan. 25-26 virtual State of the Industry Business Meeting and at scheduled TPAC and RECPAC meetings. # # #

Tax Policy

January 7, 2022

Roundtable Weekly

Real Estate Roundtable and Other Stakeholders Urge Congress to Extend Expiring Opportunity Zone Tax Incentive Deadlines

Opportunity Zones OZs

Congress should extend expiring tax incentives that promote investment and jobs in Opportunity Zones (OZs) as soon as possible, according to a letter to Congressional leaders from a diverse coalition of 22 organizations that includes The Real Estate Roundtable. (Dec. 21, 2021 coalition letter) OZ Tax Incentives Expiration Established in the Tax Cuts and Jobs Act of 2017, OZs mobilize capital for new businesses and economic activities in targeted, low-income areas. A significant share of OZ investment has gone towards productive real estate projects that create new, sustainable sources of local tax revenue and increase the supply of affordable and senior housing. Taxpayers that invest existing capital gains in a qualified opportunity fund are potentially eligible for tax benefits on both the prior gain and any gains that relate to the opportunity fund’s investments. However, the deadline for OZ investments to qualify for a partial capital gains exclusion with respect to gains that are deferred and rolled into an opportunity fund expired on December 31, 2021. Specifically, in order for an investor to qualify for a 10 percent step-up in the basis of a prior investment, the gain must be held in an opportunity fund for five years before it is recognized and tax. Under the OZ law, gains rolled into an opportunity fund are recognized at the end of 2026. Therefore, unless the gain was invested in an opportunity fund by then end of 2021, it will be taxed prior to meeting the five-year requirement. The coalition letter urges Congressional leaders to extend the 10 percent step-up deadline through the end of 2023 and the deferred gain recognition date until the end of 2028. OZ Impact The coalition letter noted that the White House Council of Economic Advisors in 2020 estimated Opportunity Funds had raised $75 billion in private capital in the first two years following the incentives’ enactment. The Council also estimated this capital could lift one million people out of poverty and decrease poverty in OZs by 11 percent. (The Impact of Opportunity Zones: An Initial Assessment, Aug. 2020) More recently, the U.S. Government Accountability Office estimated that 6,000 opportunity funds with more than 18,000 partners or shareholders invested $29 billion in OZs in 2019. (GAO: Opportunity Zones: Data on Investment Activity) OZ Program Improvements The coalition also supports congressional improvements to OZ tax incentives, such as enhanced information reporting, data collection, transparency, and lowering the substantial improvement threshold to cover a broader range of real estate rehabilitation and redevelopment projects. Congressional tax-writing committees have not taken up bipartisan legislative proposals to improve the OZ program. The Roundtable’s Tax Policy Advisory Committee (TPAC) will discuss the OZ tax incentives and other real estate-related tax policies during their next meeting on Jan. 26 in conjunction with The Roundtable’s State of the Industry business meeting. # # #

January 6, 2022

Policy Comment Letter

CRE industry comment on proposed 1071 rule – 01-06-2022

January 1, 2022

Policy Comment Letter

IRA Notice 2022-50 Comments FINAL

January 1, 2022

Policy Comment Letter

NILE Letter to Leadership – final

January 1, 2022

Policy Agenda

Policy Agenda 2022

Infrastructure and Tax Policy

December 29, 2021

Roundtable Weekly

Democrats’ Revised Tax Plan Includes Changes and Improvements Important to Real Estate and Other Pass-through Businesses

Infrastructure Tax Policy

This week’s frenzy of infrastructure negotiations in Washington was capped off by the White House’s release yesterday of a pared down, $1.75 trillion framework agreement on “human” infrastructure legislation, which trimmed back potential tax increases on commercial real estate and other pass-through businesses. (CQ, Oct. 30 and Tax Notes, Oct. 29) Dynamic Negotiations By introducing revised legislation – the Build Back Better Act (H.R. 5376) – Democratic leaders hoped to create momentum for a vote on the separate, bipartisan “physical” infrastructure bill. Their effort was unable to secure the necessary support for an immediate vote from House progressives. (Section-by-section bill summary and Washington Post, Oct. 29)Policymakers did pass a short-term extension of surface transportation programs until Dec. 3 – the same day that funding for the government will run out and within the time frame for addressing the current debt ceiling. (Punchbowl News, and BGov, Oct. 30)Roundtable President and CEO Jeffrey DeBoer commented on the evolving infrastructure legislative developments in an interview this week with American City Business Journals. DeBoer noted that as the bill’s cost has come down, policymakers have eliminated many proposed tax increases. “We very much want to see the physical bipartisan infrastructure bill pass. It has been tied in the House to the larger human infrastructure bill, and that legislation is slowly winding its way to the finish line. As the larger bill was put forward, we were concerned about some provisions that we felt might target real estate activities and real estate investment. We tracked all of these various proposals such as mark-to-market and wealth taxes. We're continuing to monitor developments and ensure that nothing comes up without proper vetting or full understanding of how it would impact CRE,” DeBoer said. What It Means for CRE The revised reconciliation bill reflects continued progress on a number of tax issues important to real estate and prioritized by The Real Estate Roundtable. Critically, the current bill includes: No limitations on like-kind exchanges (sec. 1031),No increase in the capital gains tax rate,No restrictions on the 20% pass-through business income deduction (sec. 199A),No taxation of unrealized gains at death or repeal of the step-up in basis of assets,No changes in the tax treatment of carried interest, andNo restrictions on estate tax valuation discounts. Additionally, the revised legislation excludes a complex mark-to-market regime to tax the unrealized gains of billionaires, new tax burdens on grantor trusts, and a provision that would have prohibited IRA investment in many non-listed REITS. For more information on the tax provisions in the original House bill, see The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation. Also watch the recent Marcus & Millichap webcast on tax policy that featured The Roundtable's Jeffrey DeBoer, above. (Registration required to view the Marcus & Millichap webcast)Key Tax Revenue Provisions In addition to provisions aimed at corporate and international business activities, tax provisions in the framework agreement include: Expansion of the 3.8% net investment income tax to cover a much broader range of income – such as capital gains and rents – earned by both active business owners (such as real estate professionals), S corp. shareholders, and limited partners. A new proposal to impose a 5% surtax on a taxpayer’s modified adjusted gross income (AGI) over $10M and an additional 3% surtax tax on modified AGI over $25 million.Restrictions on taxpayers’ ability to deduct more than $250K (individual) or $500K (married couple) of losses incurred in an active trade or business from their portfolio income or wages.Modifications to the portfolio interest exception that exempts interest earned on certain U.S. debt obligations from a withholding tax on outbound interest payments. The exception is sometimes used by foreign institutions when investing in US real estate.Clarification that limitation on interest deductibility (sec. 163(j)) applies at the partner or shareholder level, not the entity level.Clean Energy tax provisions affecting real estate are covered in the Roundtable Weekly story below. Dropped Tax Incentives As the cost of the bill came down, certain tax incentives were eliminated from the package: expansion of the low-income housing tax credit and the credit for rehabilitating historic structures, creation of a new tax credit for home construction in low-income communities for low-income buyers, and new infrastructure tax credit bonds and related infrastructure financing provisions. Legislative changes to the bill could occur next week on crucial issues such as the SALT deduction, but the timing of action on a final agreement remains uncertain. (Bloomberg, Oct. 29) # # #

Infrastructure and Clean Energy

December 29, 2021

Roundtable Weekly

Biden Administration Proposal Includes $555 Billion Mix of Senate and House Clean Energy Proposals

Energy Policy Infrastructure

The White House’s scaled back $1.75 trillion “framework” infrastructure reconciliation bill includes a $555 billion mix of Senate and House clean energy provisions. (Axios, Oct. 29) Why It Matters Revamped clean energy tax incentives “form the biggest measures to fight climate change in the budget reconciliation bill.” (PoliticoPro and B-Gov, Oct. 28)House Ways and Means Chair Richard Neal (D-MA) and Senate Finance Chairman Ron Wyden (R-OR) said yesterday they had reached agreement on the climate provisions. (PoliticoPro, Oct. 28) The incentives largely reflect the suite of credits and deductions passed Ways and Means last month with Democratic-only support (Roundtable Weekly, Sept. 17). Senate Finance provisions favorable to CRE advanced in May (Roundtable Weekly, May 28) have also been included in the latest House package. Clean Energy Tax Provisions Based on the text and a section-by-section summary of the Build Back Better reconciliation bill, clean energy tax provisions of interest to the U.S. real estate sector include:Extension of the Section 48 Investment Tax Credit to offset some of the expenses of solar properties, combined heat and power systems, and fuel cells – with expansions to cover energy storage, dynamic glass, and “linear” generators; A revised tax credit for installations of EV charging stations;An elective “direct pay” option allowing entities with little or no tax liability to obtain a payment equal to the value of the credits they would have received if they paid taxes; andReform of the 179D tax deduction geared toward incentivizing energy efficiency “retrofits” of existing commercial and multifamily buildings.The green energy incentives, however, are subject to new labor rules that will affect taxpayers’ decisions to utilize the benefits. The Build Back Better Act does not require businesses seeking these credits or deductions to pay Davis-Bacon wages or hire registered apprentices on clean energy projects. However, the amount of the incentives can be five times greater for qualifying projects meeting these labor costs compared to those that do not.The Roundtable’s latest Policy Issues Toolkit (“Clean Energy Tax Incentives” fact sheet, p. 25) provides more details on particular incentives and the wage/apprenticeship issues at play in reconciliation talks.A separate climate priority of Progressive Democrats known as the Clean Electricity Performance Program (CEPP) – that would have offered incentives to power companies switching to renewable energy and fining those that “moved slowly from fossil fuels” – was dropped from the reconciliation bill at the urging of Senator Joe Manchin (D-WV). (Roll Call, Oct. 28.) CRE’s Role Roundtable Chair John Fish (Chairman and CEO, Suffolk), above, commented on the importance of clean energy measures affecting commercial real estate in an interview published this week with American City Business Journals. Fish emphasized the impact that the built environment has on clean energy. He noted buildings produce 40 percent of all carbon emissions and 36 percent of all energy use. He also commented on the role of older building stock, since 75 percent of all buildings in America average 35 years old or older. “The building world – the asset class of the buildings themselves – contributes a great deal of influence to the health of our environment. We all support energy efficiency, we all support lowering the carbon footprint. We really feel that the real estate industry, of all industries, has probably one of the biggest impacts on that conversation than anybody else. We welcome the opportunity to be at the table and to have those constructive dialogues,” Fish said. (Business Journals, Oct. 27)# # #

Opportunity Zones

December 21, 2021

Policy Comment Letter

Real Estate Roundtable and Other Stakeholders Urge Congress to Extend Expiring Opportunity Zone Tax Incentive Deadlines

Opportunity Zones OZs, Tax Policy,

Policy Landscape

December 17, 2021

Roundtable Weekly

Build Back Better Act Stalls as Congress Raises Debt Ceiling; Fed Signals Interest Rate Hikes Next Year

Congress

Senate action on the House-passed multitrillion dollar Build Back Better (BBB) Act (H.R. 5376) stalled this week as Democrats continued negotiations on the scope and scale of the legislation. (The Guardian, Dec. 16 and BGov, Dec. 15). BBB IssuesA significant hurdle to progress on the BBB bill are ongoing negotiations between President Biden and congressional leadership with Senate Energy Committee Chairman Joe Manchin (D-WV) – one of the key Democratic centrist swing votes needed to pass the bill under budget reconciliation rules. (CNBC, Dec. 15)“The talks between [Biden] and Manchin have been going very poorly. They are far apart,” according to a Dec. 15 Politico report. The article also quotes Sen. Tim Kaine (D-VA), who stated, “[Biden and Manchin] may have very different views about timing. It’s less about whether, than about when and how much.”Democrats also remain split over how BBB legislation would resolve policy issues such immigration and SALT – the limit on the federal deduction for state and local taxes. (Bloomberg, Dec. 13)Senate Majority Leader Chuck Schumer (D-NY) and House Speaker Nancy Pelosi (D-CA) predicted this month that Congress would pass the BBB Act before Christmas. (Wall Street Journal, Dec. 15 and AP, Dec. 16)President Biden acknowledged in a statement yesterday that his BBB agenda is unlikely to pass this year and that Democrats will work to finish it “over the days and weeks ahead.” (The White House, Dec. 16)BBB and CRESenate Finance Chairman Ron Wyden (D-OR) on Dec. 11 released statutory language for BBB Act measures that fall under the Finance Committee’s jurisdiction, including tax provisions. The committee’s language does not include a complex tax proposal that would impose mark-to-market taxation on annual, unrealized gains. Chairman Wyden’s specific legislative proposals to impose an income limit on the sec. 199A pass-through deduction (July 2021), tax carried interest as ordinary income (Aug. 2021) and reform partnership taxation (Sept. 2021) are also excluded. These proposals, as introduced, could have a negative impact on real estate investment, entrepreneurial risk-taking, jobs, and local communities. Additionally, the current BBB Act would not limit like-kind exchanges, increase the 20% capital gains tax, or repeal the step-up in basis of assets at death. The key tax issues in the bill are addressed in a Roundtable comparison of the tax-related provisions in the BBB package. (Roundtable Weekly, Oct. 29)Clean energy tax credits make up the most significant portion of the BBB Act’s climate policies. The Roundtable supports several improvements to the green tax provisions aimed at extending them to certain technologies (e.g., thermal energy storage), ensuring that EV charging incentives cover stations employed in widely available but non-public locations (e.g., apartment building parking lots), and incentivizing building electrification through the use of heat pumps.The Roundtable on Nov. 16 sent a letter to congressional tax writers detailing five recommendations that would improve green energy tax provisions in the BBB Act affecting real estate. (Roundtable Weekly, Nov. 19) Debt Ceiling and Fed ActionPresident Biden yesterday signed legislation to raise the debt ceiling by $2.5 trillion, averting default on the nation’s debt and pushing the issue beyond the November 2022 mid-term elections. (Investopedia, Dec. 16)The debt ceiling bill cleared the Senate Dec. 15 on a party-line vote of 50-49, and the House passed it the following morning on a mostly partisan 221-209 tally. (The Hill and CNBC, Dec. 16)Federal Reserve Chairman Jerome Powell on Wednesday announced the Fed will wind down its bond-buying program by March instead of June – paving the way for potential interest rate hikes starting in the spring. Powell said the Fed could raise interest rates three times next year as it responds to elevated inflation. (Commercial Property Executive, Dec. 17 | GlobeSt, Dec. 16 | Wall Street Journal, Dec. 15)Monetary and fiscal policy will be a focus of discussion at The Real Estate Roundtable’s all-member State of the Industry Meeting on Jan. 25-26 in Washington, DC. # # #

Senate Raises Debt Ceiling; Democrats Face Tight Deadline to Pass Build Back Better Act by Christmas

Congress

The Senate approved a procedural bill last night to raise the national debt ceiling without the risk of a Republican filibuster. The House and Senate plan to consider a subsequent bill within days that will increase the debt limit by more than $30 trillion, thereby avoiding a national default and delaying the next fiscal cliff until after the November midterm elections. (Wall Street Journal | Punchbowl News | Reuters, Dec. 9)Hurdles Await BBB Act The expected increase to the debt limit will also allow Senate Democrats to focus on the House-passed $1.7 trillion Build Back Better (BBB) Act.Senate Majority Leader Chuck Schumer (D-NY) and House Speaker Nancy Pelosi (D-CA) this week predicted that Congress will pass the social and climate package before Christmas. However, numerous hurdles could push congressional action on the BBB Act into 2022. (The Hill, Dec. 8)Today, the Congressional Budget Office reported that the BBB Act would add $3 trillion to the federal deficit over the next 10 years if its major provisions are made permanent.Senate Energy Committee Chairman Joe Manchin (D-WV), below, is one of the key Democratic centrist swing votes needed to pass the BBB Act under budget reconciliation rules, which allow Congress to pass legislation with only 51 votes in the Senate. Manchin reiterated his reluctance to vote for the package this week, stating "the unknown" of inflation "is much greater than the need" for Democrats to move on their climate and social spending bill now. (Marketwatch, Dec. 8 and Wall Street Journal, Dec. 7)Additionally, the Senate parliamentarian is reviewing the BBB Act to determine if it conforms to reconciliation rules, which require that all the bill’s provisions directly impact the federal budget. (Indivisible, The Senate’s Byrd Rule)Another significant hurdle is whether potential changes to the BBB bill can resolve existing policy differences among Democrats on the state and local tax deduction (SALT), Medicare expansion and immigration. (CQ and BGov, Dec. 9)If the Senate passes a bill with changes, it likely will need to go back to the House for another vote before it reaches President Biden’s desk. (Roundtable Weekly, Nov. 19) BBB and CRE The current BBB bill – when compared to the President’s budget and the bill passed by the House Ways and Means Committee in September – reflects major progress on a number of tax issues important to real estate and prioritized by The Real Estate Roundtable. (Roundtable Weekly, Oct. 29)The current bill would not limit like-kind exchanges, increase the 20% capital gains tax, or cap eligibility for the 20% pass-through business income deduction. It also does not include changes in the tax treatment of carried interest or repeal the step-up in basis of assets at death. The key tax issues in the bill are addressed in a Roundtable comparison of the tax-related provisions in the BBB package.Clean energy tax credits make up the most significant portion of the BBB Act’s climate policies. The Roundtable on Nov. 16 sent a letter to congressional tax writers detailing five recommendations that would improve green energy tax provisions in the BBB Act affecting real estate. (Roundtable Weekly, Nov. 19) The BBB Act’s potential impacts on tax and climate policy issues of importance to CRE will be topics for discussion at The Roundtable’s Jan. 25-26 State of the Industry Meeting in Washington, DC. # # #

Capital and Credit

December 10, 2021

Roundtable Weekly

House Passes Legislation to Transition Away From LIBOR With Solution for “Tough Legacy” Contracts

LIBOR

Legislation passed by the House of Representatives on Dec. 8 would protect trillions in “tough legacy” contracts that use the London Interbank Offered Rate (LIBOR) as a reference rate for financial transactions. The Real Estate Roundtable and a broad coalition of industry groups have long-supported this protective measure. (Industry Coalition letter, Dec. 7 and Bloomberg, Dec. 8)LIBOR and CRE House lawmakers approved the Adjustable Interest Rate (LIBOR) Act (H.R. 4616) by a vote of 415-9, sending the bill to the Senate as the use of LIBOR faces retirement in 2023. Banks will not be able to issue new loans or other financial contracts using LIBOR as of Jan. 1, 2022. (Wall Street Journal, Dec. 3)LIBOR is currently used in outstanding financial contracts – including commercial real estate debt, mortgages, student loans and derivatives – worth an estimated $223 trillion. (Roundtable Weekly, July 30) Tough Legacy Issues AddressedThe House bill includes provisions that address the transition of the most troublesome LIBOR-based contracts – referred to as “tough legacy” – to a replacement benchmark when LIBOR sunsets. These contracts have insufficient fallback language or include provisions that cannot be amended.The bill also provides a safe harbor for market participants switching existing LIBOR-referencing financial contracts to a replacement benchmark for debt instruments, such as the Secured Overnight Financing Rate (SOFR). The bill also includes a federal preemption.The Real Estate Roundtable and 17 national trade groups also previously submitted letters April 14 and July 27 to House Financial Services Committee policymakers in support of legislation to address “tough legacy” contracts during the transition away from LIBOR. The House bill provides that when LIBOR reaches its final replacement date (June 30, 2023), all contracts with no adequate fallback provisions for an alternative benchmark substitute will be replaced with SOFR. # # #

Beneficial Ownership

December 10, 2021

Roundtable Weekly

Biden Administration’s Proposal to Combat Money Laundering May Require New Real Estate Reporting Requirements

Beneficial Ownership Corporate Transparency Act CTA FinCEN

The Biden Administration on Dec. 6 announced it is seeking public comment about a proposed anti-money laundering rule that may result in increased reporting requirements about certain commercial real estate transactions. (Bloomberg, Dec. 6 and GlobeSt, Dec. 7)Impact on Real Estate The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued its Advance Notice of Proposed Rulemaking (ANPRM) this week to seek input on how to craft the new rule. “Broadly speaking, FinCEN has serious concerns with the money laundering risks associated with the commercial real estate sector,” according to the ANPRM. (FINCEN Fact Sheet: Beneficial Ownership Information Reporting, Dec. 7)Two senior administration officials discussed the proposed rulemaking and its potential impact on the real estate industry during a media call on Dec. 6. One official stated, “We’re very focused on asking a number of questions around ways that any approach that we take towards this additional regulation can be used to minimize the regulatory burdens on the real estate sector.” (White House Background Press Call, Dec. 6)The FINCEN initiative is part of a government-wide effort announced by the White House on Monday called the United States Strategy on Countering Corruption. (Washington Post, Dec. 7) FINCEN Concerns Real estate transactions involving bank loans or other financing are less susceptible to money laundering because regulated financial institutions are required to report suspicious activity to FinCEN. When real estate is purchased with all cash, it can be nearly impossible to trace the beneficial owners behind shell companies often used in the transaction.Currently, title insurance companies are required to report to FINCEN the identities of persons behind shell companies used in all-cash purchases of residential real estate costing over $300,000 that are located in one of a dozen metropolitan areas. (Bloomberg, Dec. 6)Biden administration officials this week said the new rule could expand that reporting requirement beyond existing geographic areas to cover the entire U.S. – and potentially apply a new regulation to commercial real estate. (White House Background Press Call, Dec. 6). CRE Industry Response The Real Estate Roundtable and three other national real estate organizations on May 5, 2021 submitted detailed comments to FINCEN on several implementation concerns related to a proposed federal registry with beneficial ownership information. (Roundtable Weekly, Dec. 9)The new ANPRM is open for comment until February 7, 2022. A response to FINCEN will be one of the topics discussed on Jan. 25 during The Roundtable's Real Estate Capital Policy Advisory Committee (RECPAC) meeting in Washington, DC. # # #

News

December 10, 2021

Roundtable Weekly

"Building Success" Reports on The Roundtable’s FY2018 Policy Activities in Tax, Capital and Credit, Homeland Security, Energy and Infrastructure Issue Areas

The Real Estate Roundtable has released its FY2018 Annual Report “Building Success,” which reports on the organization’s policy activities from July 1, 2017 to June 30, 2018 and outlines its policy priorities for the coming year. "We are extremely proud of our success this past year and equally eager to build on its foundation as we move into our new fiscal year. As always, we will continue to inform lawmakers with consistent and credible policy analysis that encourages economic growth, job creation, and a healthy national real estate market,” said Roundtable President and CEO Jeffrey D. DeBoer. Immediate Past Roundtable Chair (2015-2018) William C. Rudin (Co-Chairman and CEO, Rudin Management Company, Inc.) noted the continued efforts of promoting greater diversity throughout the organization and his efforts during his tenure as Chair. “We have made measurable progress at identifying and recruiting more highly qualified women and people of color to join, and participate at The Roundtable. With greater membership diversity, we ensure that our decisions are better informed and more sustainable.” The Report includes summaries showing continued progress on the policy front, including: In late 2017, the most comprehensive tax reform in over 30 years, the Tax Cuts and Jobs Act, was signed into law. Due in large part to the Roundtable’s advocacy efforts, TCJA preserved interest deductibility; retained like-kind exchanges for real estate; and maintained depreciation and cost recovery rules. The Roundtable and its Tax Policy Advisory Committee is continuing its efforts with Treasury and the Administration to ensure appropriate implementation of the comprehensive law. Congress passed financial deregulation legislation – Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155) – that included important reforms to the Basel III High Volatility Commercial Real Estate (HVCRE), which promote sustainable development and lending, and lowers financial barriers for job-creating projects. The Federal Reserve and four other federal agencies approved a proposal to simplify and ease the Volcker Rule. The proposal, known as Volcker 2.0, seeks to simplify regulatory requirements by giving banks new quantitative “bright-line rules” to provide more clarity on what activities are prohibited and permitted. As a long-time supporter of the ENERGY STAR Program, The Roundtable was a key player in the creation and ongoing development of the EPA’s new charter tenant program “ENERGY STAR for Tenants” labeling platform of high-performance leased office spaces. Anticipating infrastructure as a policy issue for possible compromise after the upcoming midterm elections, The Roundtable offered comments to the Administration and Congressional committees on real estate’s role in creating public-private partnerships to help repair the roads, transit, broadband, power grid and other systems needed to make our communities safe, productive and competitive. Newly elected Roundtable Chair Debra A. Cafaro (Chairman and Chief Executive Officer, Ventas, Inc.) emphasized that The Roundtable’s policy agenda remains full of key issues that require our engagement as a non-partisan industry voice. “Above all, we must uphold our independent and respected position on Capitol Hill, emphasizing our optimism about the economy and the positive contributions the real estate industry provides as a job creator and as a cornerstone for retirement savings. We are committed to proactively advancing policies that promote a healthy balance of capital and people flows to create sustainable economic growth that is good for our members, our industry and our national economy,” said Cafaro. The publication includes a listing of all Roundtable members, as well as the FY2019 Board of Directors and Committee Leadership, and has been mailed to all Roundtable members, congressional offices on Capitol Hill, and is available online.

Roundtable In The News

December 10, 2021

Roundtable Weekly

Roundtable President and CEO Jeffrey DeBoer Recognized as One of the “Top Lobbyists” in Washington, DC

Jeffrey DeBoer

Real Estate Roundtable President and CEO Jeffrey DeBoer, above, was recognized this month as one of the Top Lobbyists in Washington, DC by the influential policy news publication The Hill.A variety of industry representatives were acknowledged in the annual list as “the people who wielded their clout and knowledge most effectively on behalf of their clients.”The publication also noted, “The ranks of policy experts and influencers run deep in Washington, but these are the players who stand out for delivering results for their clients in the halls of Congress and the administration.”The Roundtable’s DeBoer commented, “My inclusion on The Hill’s annual list reflects the effectiveness of our entire organization. I am proud to work with the industry’s best – its leaders represented on our board of directors, our national real estate organization partners and The Roundtable’s highly-effective advocacy staff,” DeBoer added.The Roundtable’s next meeting on January 25-26 in Washington, DC will address its 2021 policy agenda during business and policy advisory committee meetings. # # #

December 7, 2021

Policy Comment Letter

2021-12-07 LIBOR Joint Trades Letter for House

Policy Landscape

December 3, 2021

Roundtable Weekly

Congress Extends Government Funding Until February 18, Faces Debt Ceiling Deadline; Senators Begin Consideration of Build Back Better Act

Climate Policy Debt Ceiling Tax Policy

A Continuing Resolution (CR) that would fund the government until Feb. 18 passed the House yesterday and the Senate last night, sending the bill to President Biden for his signature to avoid a partial government shutdown at midnight. (CNBC, Dec. 2). Senate leaders this week also continued negotiations to extend the national debt ceiling to avoid default and began discussions about potential changes to the House-passed $1.7 trillion Build Back Better (BBB) Act. [Further Extending Government Funding Act (H.R. 6119) and section-by-section summary] Debt Ceiling Looms Treasury Secretary Janet Yellen and the Congressional Budget Office this week urged Congress to increase the debt ceiling as soon as possible to avoid a national default in December. (Bloomberg, Nov. 30) Yellen testified Monday before the Senate Banking Committee about the need to increase the debt limit. She stated, “If we do not, we will eviscerate our current recovery. In a matter of days, the majority of Americans would suffer financial pain as critical payments, like Social Security checks and military paychecks, would not reach their bank accounts, and that would likely be followed by a deep recession.” (The Hill, Nov. 30 and Yellen testimony) Senate Majority Leader Chuck Schumer (D-NY) and Senate Minority Leader Mitch McConnell (R-KY) expressed optimism this week about their discussions to raise the federal government's $28.9 trillion debt limit soon. (Reuters, Nov. 30) BBB Act & Tax Issues House Ways and Means Chair Richard Neal (D-MA), above, on Wednesday stated that a vote on the BBB package may be pushed into next year, given the urgent agenda Congress faces this month. (BGov, Dec 1) The House-passed BBB Act and its potential impact on the taxation of real estate was also the focus of a Nov. 30 report in Commercial Property Executive – “Tax Policy Largely Stays the Course for CRE Execs.” Roundtable President and CEO Jeffrey DeBoer was quoted in the article – “I think that there has been a clash between expectations and reality. Expectations were high because Biden won, he had a Democratic House, and the Senate was 50/50. But the reality is that none of these issues are easy.” The current BBB bill – when compared to the President’s budget and the bill passed by the House Ways and Means Committee in September – reflects major progress on a number of tax issues important to real estate and prioritized by The Real Estate Roundtable. (Roundtable Weekly, Oct. 29) The current bill would not limit like-kind exchanges, increase the 20% capital gains tax, or cap eligibility for the 20% pass-through business income deduction. It also does not include changes in the tax treatment of carried interest or repeal the step-up in basis of assets at death. The key tax issues in the bill are addressed in a Roundtable comparison of the tax-related provisions in the BBB package. Green Energy Provisions The Senate this week also began consideration of the BBB Act following the House’s passage of the multitrillion-dollar legislation on Nov. 19. Clean energy tax credits make up the most significant portion of the BBB Act’s climate policies. Schumer and Senate Energy and Natural Resources Chair Joe Manchin (R-WV) met this week to discuss climate policies in the House package. E&E News reported, “Manchin said he is negotiating ‘adjustments’ to the energy and climate provisions of his party’s $1.7 trillion social spending bill, in what could be part of a larger suite of changes to the legislation as it moves through the Senate.” The Roundtable on Nov. 16 sent a letter to congressional tax writers detailing five recommendations that would improve green energy tax provisions in the BBB Act affecting real estate. (Roundtable Weekly, Nov. 19) The letter’s recommendations, listed below, would increase and scale deployment of low- and zero-carbon technology in the nation’s commercial and multifamily building infrastructure. Clarify that “thermal energy storage systems” are eligible for incentives under the Section 48 Investment Tax Credit. Further revise the 30C tax credit to support EV chargers in the non-public, but widely used, parking lots and garages that serve America’s residential and business tenants who seek to conveniently “charge-up” while at home or at work. Better align the BBB Act with the Biden Administration’s long-term climate strategy – by providing accelerated depreciation and other incentives for heat pumps and other components that “electrify” commercial and multifamily buildings. Induce more “retrofits” of aging buildings by allowing taxpayers to claim the 179D deduction in the year high-efficiency equipment is placed in service. The inclusion of Davis-Bacon and apprenticeship hiring will seriously undermine climate goals – because the high costs to comply with these labor standards will more than offset the BBB Act’s “bonus rates” for clean energy projects. Congress should not hinge the “bonus rates” on unrelated labor issues that fail to accelerate achievement of GHG reduction strategies. Fiscal policy, the BBB Act and how it may affect tax and climate issues of importance to CRE will be topics for discussion at The Roundtable’s Jan. 25-26 State of the Industry Meeting in Washington, DC. # # #

News

December 3, 2021

Roundtable Weekly

Biden Administration to Redirect Federal Rental Assistance Funds to States, Localities Experiencing Greater Demand

The Treasury Department plans to redirect millions in federal emergency rental assistance from states and localities with a large amount of unused funds to other geographic areas with a backlog of aid requests. (Wall Street Journal and Treasury Department new release, Nov. 29)Administration officials said the initial reallocation, set to be unveiled early this month, could exceed $800 million. Jurisdictions with large amounts of unused funds (such as Montana and North Dakota) may see redistributions to more populous states (such as New York and Texas) over the coming week and months. Funds may also be redirected within a state depending on the needs of individual cities or other geographic areas. (The Hill, Nov. 29)Treasury data released this week shows that approximately $2.8 billion in emergency rental assistance was distributed in October by state and local governments to keep tenants housed – the same amount distributed the previous month.Forty-one states had spent less than 65 percent of their federal rental assistance funds as of Oct. 31. Twenty-five of those states spent less than 30 percent of their allocations – and face additional Treasury requirements to avoid clawbacks.Gene Sperling, who leads the implementation of President Joe Biden’s $1.9 trillion coronavirus rescue package, said, “Treasury is using the reallocation process to spur weak performers to up their game and to get more funds into the hands of those who can help the most vulnerable the fastest.” (PBS NewsHour, Nov. 29)Roundtable President and CEO Jeffrey DeBoer discussed the need to distribute federal rental assistance to property owners and tenants during a September ConnectCRE webinar, which included National Multifamily Housing Council Chair David Schwartz (Chairman and CEO, Waterton) and NMHC President Doug Bibby. (Connect, Sept. 23) # # #The Roundtable’s Homeland Security Task Force Virtual ExerciseRescheduled from Dec. 9, 2021 to Jan. 20, 2022The Real Estate Roundtable’s Homeland Security Task Force (HSTF) and Real Estate Information Sharing and Analysis Center (RE-ISAC) has rescheduled its Virtual Exercise from Dec. 9, 2021 to Jan. 20, 2022. The exercise will involve discussion groups addressing winter weather preparedness and hostile events (e.g. communication plans and continuity.) For more information, please contact Roundtable Senior Vice President Chip Rodgers.# # #

Infrastructure and Energy Policy

November 19, 2021

Roundtable Weekly

House Passes Build Back Better Act, Roundtable Urges Improvements to Green Energy Tax Provisions

Energy Policy Infrastructure Tax Policy

House Democrats passed their “sweeping” reconciliation package of tax, health care, education, and climate initiatives Friday morning, a step that advances a “centerpiece” of President Biden’s domestic agenda and represents “the most significant restructuring of the [social] safety net in decades.” (Politico, Nov. 19)President Biden lauded the House’s action in a statement released by the White House this morning.Partisan Bill Advances to the SenateAll Democrats (except one) supported the $1.7 trillion Build Back Better Act (H.R. 5376), after months of negotiations between Progressives and Moderates debating the breadth of the measure and scaling back its original price tag north of $3.5 trillion. (Roundtable Weekly, Nov. 5) No House Republican voted for the bill.Today’s party-line vote took place after the Congressional Budget Office submitted a cost analysis that satisfied the requirements of a crucial group of Democratic Moderates needed to approve the legislative package. (CBO, Nov. 18 and text of the budget reconciliation bill.)The legislation now moves to the Senate where it will face additional scrutiny and could be reduced further in scope. If the Senate ultimately passes the BBB Act in a manner that changes the House-approved version, the bill would need to go back to the House for another vote before it reaches President Biden’s desk.Passage of the BBB Act follows on the heels of the enactment of the bipartisan bill to upgrade the nation’s transportation, water, grid, broadband, and other “physical” infrastructure. President Biden signed the $1.2 trillion Infrastructure Investment and Jobs Act into law on Monday. (Washington Post, Nov. 15). The Roundtable has strongly supported bipartisan investments to modernize the nation’s physical infrastructure. (Roundtable Weekly, Nov. 12). Progress on CRE Tax IssuesRelative to President Biden’s budget and the initial bill passed by the Ways and Means Committee, the House-passed BBB Act reflects continued progress on a number of tax issues important to real estate and prioritized by The Real Estate Roundtable. (Roundtable Weekly, Oct. 29) Critically, the current bill does not: Limit like-kind exchanges (sec. 1031),Increase the capital gains tax rate,Restrict the 20% pass-through business income deduction (sec. 199A),Tax unrealized gains at death or repeal of the step-up in basis of assets,Change the tax treatment of carried interest, andRestrict estate tax valuation discounts.Roundtable Recommends Changes to Clean Energy Tax ProvisionsThe BBB Act’s suite of clean energy tax credits and incentives comprise the legislation’s biggest measures to fight climate change. (Roundtable Weekly, Oct. 29)The Roundtable sent a letter to Congressional tax writers on Tuesday detailing five recommendations that aim to improve green energy tax provisions affecting real estate. The Roundtable’s letter urged changes to the BBB Act that would further the objectives to slash GHG emissions and make rapid progress toward a “net zero” economy by mid-century. (Roundtable letter, Nov. 16)The letter’s recommendations, listed below, would increase and scale deployment of low- and zero-carbon technology in the nation’s commercial and multifamily building infrastructure. Clarify that “thermal energy storage systems” are eligible for incentives under the Section 48 Investment Tax Credit.Further revise the 30C tax credit to support EV chargers in the non-public, but widely used, parking lots and garages that serve America’s residential and business tenants who seek to conveniently “charge-up” while at home or at work.Better align the BBB Act with the Biden Administration’s long-term climate strategy – by providing accelerated depreciation and other incentives for heat pumps and other components that “electrify” commercial and multifamily buildings.Induce more “retrofits” of aging buildings by allowing taxpayers to claim the 179D deduction in the year high-efficiency equipment is placed in service. The inclusion of Davis-Bacon and apprenticeship hiring will seriously undermine climate goals – because the high costs to comply with these labor standards will more than offset the BBB Act’s “bonus rates” for clean energy projects. Congress should not hinge the “bonus rates” on unrelated labor issues that fail to accelerate achievement of GHG reduction strategies.Next: The Senate in DecemberThe Senate will take up the House BBB bill in December. Democrats will need the support of moderate Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) to pass BBB legislation in the evenly divided upper chamber using budget reconciliation rules. However, Manchin recently stated he may withhold his support of the bill until next year due to rising inflation rates. (Newsweek, Nov. 16 and Axios, Nov. 10)Additionally, House lawmakers included six pages of technical changes in their BBB bill that could help it pass the scrutiny of the Senate Parliamentarian, who can remove certain House provisions if she determines they are incompatible with Senate rules. Congress is scheduled to return from the Thanksgiving break on Dec. 3. Treasury Secretary Janet Yellen this week warned that if lawmakers do not take action to lift the legal debt ceiling by Dec. 15, they will risk a government default on its debt obligations. (Wall Street Journal, Nov. 16) # # #

News

November 19, 2021

Roundtable Weekly

Commercial Real Estate Executives Report Steady Q4 Market Fundamentals

Quarterly Sentiment Index

Commercial real estate leaders report positive market fundamentals across asset classes, according to The Real Estate Roundtable’s Q4 2021 Economic Sentiment Index. Industry leaders describe steady supply, demand and financial conditions for multifamily, industrial, life science and other assets while expressing some caution about the strength of office and hotel assets. Leaders also noted conditions vary by geography and local governmental policies.Topline FindingsThe Roundtable’s Overall Q4 2021 Sentiment Index registered a score of 73, which reflects continued optimism about general market conditions despite a slight dip of five points from the previous quarter. The Economic Sentiment Overall Index is scored on a scale of 1 to 100 by averaging the scores of Current and Future Indices. Any score over 50 is viewed as positive. Roundtable President and CEO Jeffrey DeBoer (above) said, “Our Q4 Sentiment Index score is a 29-point increase over the same time period last year. This is a solid indication of significant progress in the overall economy as more businesses continue to reopen under cautious, local COVID-19 protocols.” He added, “CRE leaders are encouraged by the safe (albeit slow) return of employees to their work places, robust retail consumer appetites, and the gradual return of domestic and international travelers to hotels, resorts and other hospitality assets. The commercial real estate industry continues to play an active role in accommodating new business and individual preferences that will help the economy adjust post-COVID.” “Industry leaders are concerned with accelerating inflation, supply chain obstacles and still unclear questions regarding future office space desires,” DeBoer noted. The Roundtable’s quarterly economic survey also shows that 85 percent of respondents believe that general market conditions today are “much better or somewhat better” versus one year ago – and that 61 percent anticipate conditions will continue to improve one year from now. The report’s Topline Findings include: The Q4 2021 Real Estate Roundtable Sentiment Index registered a score of 73, a decrease of five points from the third quarter of 2021 and a 29-point increase over Q4 2020. Despite the slight downtick from Q3, participants largely expressed optimism regarding the current fundamentals of the commercial real estate market.That said, perceptions vary by property type and geography, with industrial, multifamily, life sciences and data centers most in favor. Delayed return-to-office policies and questions about office space demands have resulted in a degree of uncertainty. Asset values have trended upward across asset classes compared to the previous quarter.Participants cited a continued availability of debt and equity capital. International investors remain highly interested in opportunities within the United States.Infrastructure & CREDeBoer also noted, “The recent passage of the $1.2 trillion bipartisan infrastructure bill by Congress will help the commercial real estate industry to ramp up its existing suite of climate-friendly practices by reimagining, building and retrofitting America’s built environment.” He added, “The Roundtable is also encouraged that the bill emphasized the expanded use of public-private partnerships to reach infrastructure goals – as well as measures that will streamline the federal permitting process and improve key federal energy data that support EPA building labels.” Data for the Q4 survey was gathered in October by Chicago-based Ferguson Partners on The Roundtable’s behalf. See the full Q4 report. # # #

Roundtable Weekly

November 19, 2021

Roundtable Weekly

Roundtable Weekly Will Resume Publication on December 3, 2021

Roundtable Weekly will resume publication on December 3, after Congress returns from the Thanksgiving break. Recent issues of RW can be searched by keyword here. # # #

Infrastructure

November 12, 2021

Roundtable Weekly

Roundtable Applauds Passage of Bipartisan Infrastructure Bill; House Democrats Aim to Vote on Social and Climate Package Next Week

Infrastructure

The Real Estate Roundtable on Nov. 8 congratulated congressional policymakers and the Biden administration for their bipartisan efforts in passing the trillion-dollar infrastructure bill late last week. President Joe Biden plans to sign the legislation on Monday, Nov. 15 as Congress returns from recess to consider a separate $1.85 trillion social and climate package. (JD Supra and White House Statement, Nov. 10) Roundtable Reaction Real Estate Roundtable Chair John Fish (Chairman and CEO, Suffolk) said, “The real estate industry has long been committed to an ambitious vision for infrastructure. The passage of the bipartisan infrastructure bill by Congress is an historic opportunity to position our nation for sustainable growth and greater economic prosperity. Thank you to Members of Congress for coming together and supporting this critical legislation. I urge President Biden to sign the legislation as soon as possible so we can get shovels in the ground and start building a brighter future.” (Roundtable Statement, Nov. 8)The infrastructure legislation is a positive catalyst that should dramatically improve the nation’s infrastructure, spur economic growth and advance national efforts to combat the climate crisis. The bill includes measures to expand the use of public-private partnerships to reach infrastructure goals, streamline the federal permitting process and improve key federal energy data that support EPA building labels.The bipartisan bill also includes $30 billion for improvements along Amtrak’s Northeast Corridor, including the long-delayed “Gateway” tunnel project between New York and New Jersey, according to a Nov. 10 Bloomberg interview with Amtrak CEO Bill Flynn. (Bloomberg article)Roundtable President and CEO Jeffrey DeBoer said, “This infrastructure bill will repair and upgrade the nation’s roads, bridges, mass transit, high-speed rail, broadband, power grid, water pipes, electric vehicle charging stations, and other critical infrastructure. We applaud this investment in our nation’s future and look forward to the jobs, communities and progress it will support.” (MultiHousing News, Nov. 10) Build Back Better Act & CRE House Speaker Nancy Pelosi (D-CA) this week said during the U.N. climate change conference that next on her agenda is passage of the Build Back Better Act (H.R. 5376). “That is our plan, to pass the [Build Back Better] bill the week of Nov. 15, as is indicated in our statements that were made at the time of passing the infrastructure bill.” (Pelosi Remarks)President Biden in late Oct. scaled back his sprawling social and climate package from $3.5 trillion to $1.85 trillion to resolve intraparty differences in the Democratic congressional caucus. Further changes made last week to the tax and spending measure would increase the cap on the deductibility of state and local taxes (SALT) from $10,000 to $80,000. Another set of changes would expand and modify the low income housing tax credit (LIHTC) to promote greater construction and rehabilitation of affordable housing. (Roundtable Weekly, Nov. 5 and House Rules Committee section-by-section summary of the bill.)The revised legislation reflects continued progress on a number of tax and climate issues of importance to The Real Estate Roundtable. (Summaries in Roundtable Weekly, Oct. 29)The Roundtable has produced a comparison of the real estate-related tax provisions (image above) in the most recent version of the legislation – compared to the bill passed by the House Ways and Means Committee in September, and the Biden Budget .Additionally, an Oct. 21 Marcus & Millichap webcast on tax policy featured The Roundtable's Jeffrey DeBoer. (Registration required before streaming the webcast)The revised bill will be considered under budget reconciliation rules, which require a majority vote for approval in the narrowly divided House and the 50-50 Senate. Challenges Ahead Five moderate House Democrats have raised concerns regarding the deficit impact of the Build Back Better Act (BBB), threatening its passage even before it goes to the Senate. They have also urged that the bill be “pre-conferenced” with the Senate. (Letter to Speaker Pelosi Nov. 2; Politico, Nov. 8) The House moderates committed to vote for the BBB no later than the week of Nov. 15 – if Congressional Budget Office (CBO) cost estimates are in line with the Administration’s estimates (CNBC, Nov. 5)CBO stated on Nov. 9 that it plans to unveil estimates for parts of the BBB as the agency completes its reviews. A CBO score is not a technical requirement for a House vote – but Senate rules do require the agency’s cost estimate. (CBO statement and Politico, Nov. 11)If the BBB package passes the House, substantive changes are possible in the Senate. (Wall Street Journal, Nov. 9)Axios reported on Nov. 10 that Sen. Joe Manchin (D-WV) may withhold his support of the costly BBB legislation until next year due to worries about rising inflation rates.Roundtable President and CEO Jeffrey DeBoer commented on the evolving infrastructure legislative developments in an interview with American City Business Journals. “We're continuing to monitor developments and ensure that nothing comes up without proper vetting or full understanding of how it would impact CRE,” DeBoer said. Policymakers return to Washington on Monday for one week before the Thanksgiving break. On Dec. 3, funding for the government will run out unless an appropriations bill or “Continuing Resolution” is passed to avoid a partial shutdown. Additionally, the Bipartisan Policy Center estimates the current debt ceiling will be breached sometime between mid-December and mid-February. # # #

Infrastructure

November 5, 2021

Roundtable Weekly

House Democrats Stall Efforts to Pass “Physical” and “Human” Infrastructure Bills

Infrastructure

An intense push by Democratic leaders this week to approve a $1 trillion “physical” infrastructure bill and a $1.85 trillion “human” infrastructure plan (H.R. 5376) met resistance today from House progressives and moderates, who rejected ongoing efforts to vote on the bills until their concerns are addressed. Intraparty Disagreement The bipartisan physical infrastructure bill passed the Senate in August. House progressives have tied consideration of that bill to a separate social infrastructure package – which has been mired in weeks of ongoing negotiations and revisions over its scope and cost. Additionally, House moderates insist on a full cost estimate from the Congressional Budget Office before a final vote on the larger package. (BGov and CQ, Nov. 5)President Biden announced a scaled-down version for the larger bill on Oct. 28, reducing its total outlay to $1.85 trillion versus the earlier estimated cost of $3.5 trillion. (Roundtable Weekly, Aug. 13 and Oct. 29)The new Build Back Better plan framework includes $1.75 trillion of social and climate provisions, along with $100 billion targeting immigration needs contingent on approval by the Senate parliamentarian. (Investopedia, Nov. 5)President Biden today said, “I’m asking every House member … to vote ‘yes’ on both these bills right now. Send the [physical] infrastructure bill to my desk, send the Build Back Better bill to the Senate.” (Bloomberg, Nov. 5)House Speaker Nancy Pelosi worked to bridge the divides in her caucus, considering a possible vote on the physical infrastructure bill alone, while postponing a vote on the social spending package. (The Hill, Nov. 5)Rep. Pramila Jayapal (D-WA), leader of the Congressional Progressive Caucus, responded, “As we’ve consistently said, there are dozens of our members who want to vote both bills — the Build Back Better Act and the Infrastructure Investment and Jobs Act — out of the House together." (The Hill, Nov. 5) SALT and LIHTC Changes were made this week to the sweeping tax and spending measure, including a new provision affecting the deductibility of state and local taxes (SALT) and an expansion of the low income housing tax credit (LIHTC).The new SALT provision would raise the deduction cap from $10,000 to $80,000 through 2030, then return to the $10,000 cap in 2031. A previous version of the bill would have set the cap at $72,500 through 2031.The revised LIHTC measure would increase state allocations, temporarily allowing the credit to cover a project without affecting state caps if at least 25% of the building and land are financed by tax-exempt bonds – instead of 50%. Additionally, projects intended to serve extremely low-income communities could receive a 50% increase in the applicable credit amount. (BGov, Nov. 5)The new reconciliation bill reflects continued progress on a number of tax and climate issues of importance to real estate and prioritized by The Real Estate Roundtable. Summaries of the revised bill are in the Oct. 29 edition of Roundtable Weekly. Congress faces a crucial agenda and a tight timeframe. Policymakers return from recess Nov. 15 for one week before the Thanksgiving break. On Dec. 3, funding for the government will expire – within the same time frame when the current debt ceiling must also be addressed. Lawmakers may pass either an appropriations bill covering FY23, or opt for another "continuing resolution" to fund the government at existing levels for a specified period of time. # # #

Pandemic Risk Insurance

November 5, 2021

Roundtable Weekly

Roundtable and Business Coalition Strongly Support House Reintroduction of Pandemic Risk Insurance Act

Pandemic Risk Insurance Program Terrorism Risk Insurance Program

Legislation introduced this week in the House by Rep. Carolyn Maloney (D-NY), above, would create a federal backstop to ensure coverage in all critical commercial lines of insurance for business interruption losses, whether from future pandemics or other public health emergencies. The Real Estate Roundtable and the Business Continuity Coalition strongly support the bill. (ConnectCRE, Nov. 2)PRIA & Risk ExposureThe Pandemic Risk Insurance Act (PRIA) of 2021 (H.R. 5823) is modeled after the Terrorism Risk Insurance Act (TRIA) – the enduring, successful public-private backstop adopted following the 9/11 terrorist attacks. (Maloney | Roundtable | Coalition news releases, Nov. 2)Real Estate Roundtable President and CEO Jeffrey D. DeBoer, above, said, “PRIA is an important step forward that helps to address possibly the largest unhedged risk exposure in the U.S. economy today. It is important for business policyholders to be able to secure the pandemic risk coverage necessary to maintain jobs and grow the economy. The Real Estate Roundtable and its 19 national real estate trade association partners have seen firsthand how a broad range of economic risks, including terrorism (TRIA) and floods (NFIP), underscore the need for public support when private markets fail. In those circumstances, a public-private partnership is essential to support the economy. PRIA is positive, forward-thinking legislation that Congress needs to pass.”A RIMS survey recently found that pandemic risk is excluded or restricted on most lines of commercial property-casualty insurance, and where coverage is available, it is often cost-prohibitive without government support.PRIA SpecificsPRIA would require insurers to offer coverage in return for a government indemnification of 95% of insured losses arising from any future pandemic that results in a public health emergency. Unlike TRIA, there is no “insurer deductible” nor would there be any post-event recoupment, although the program would begin to pay for itself after an initial “economic recovery period.”The bill would ensure availability of pandemic coverage while fostering the development of private reinsurance and capital market alternatives to reduce taxpayer exposure going forward.The Maloney bill also addresses the unavailability of coverage in other crucial lines of insurance such as event cancellation, TV and film production insurance and liability coverage for essential services.The bill is similar to current proposals advanced by the insurance industry that would establish a parametric program for non-damage business interruption (NDBI) losses, which recognize rapid claims payment and minimal transaction costs are critical when the aggregation of losses are so high as in a pandemic. The bill also would provide a pooling alternative for insurers that do not wish to underwrite primary NDBI coverage.Industry ViewsThe Roundtable’s DeBoer noted, “When private insurance markets cannot provide the coverage needed to protect jobs and help businesses meet their obligations in the event of a government mandated shutdown, those exposed gaps in business continuity insurance coverage can only be filled by a federally-backstopped mechanism. A TRIA-style program for pandemic risk can protect the American economy with the coverage it needs to minimize the economic impact of pandemic-related shutdowns and aid economic recovery.”The Real Estate Roundtable is a member of the broad-based Business Continuity Coalition (BCC), which testified about the importance of establishing a federal pandemic risk / business continuity insurance program in July before the Senate Banking Subcommittee on Securities, Insurance, and Investment.Closures and shutdowns caused by COVID-19 have significantly impacted the employees and operations of businesses across the country. The Business Continuity Coalition – representing the restaurant, entertainment, professional sports, hospitality, gaming, retail, communications, broadcasting and real estate industries, employing millions of people – encourages policymakers to develop a public-private partnership that will protect American jobs and limit future economic damage from pandemics and other national emergencies that cause business interruptions.The Business Continuity Coalition has also posted a collection of statements of support for the PRIA legislation.“The Roundtable stands with its partners in the BCC in support of PRIA’s eventual enactment. We commend the efforts of Rep. Maloney and look forward to working with policymakers as the legislation moves forward,” DeBoer added. The legislative outlook for PRIA will be among the many issues discussed at the next meeting of The Roundtable's Real Estate Capital Policy Advisory Committee (RECPAC) on Nov. 9 in New York City.# # #

Climate and Energy Policy

November 5, 2021

Roundtable Weekly

CRE Industry Encouraged to Participate in Energy Department’s “Better Climate Challenge” to Reduce GHG Emissions

climate Climate Policy Energy Policy

U.S. Energy Secretary Jennifer Granholm, above, announced on Nov. 3 a “soft launch” of the multi-sector Better Climate Challenge at the COP26 international conference in Glasgow. This new Department of Energy (DOE) effort aims to recognize U.S. real estate, industrial, and other companies that voluntarily agree to slash their GHG emissions – and share their “best practices” toward achieving emissions reduction goals. (Climate Challenge Factsheet | FAQs | Informational webinar) Program Requirements The key element of DOE’s voluntary challenge is for companies to commit to reduce direct emissions (“scope 1”), and emissions from electricity purchases (“scope 2”), by 50% over 10 years. There is no requirement to quantify or reduce indirect “scope 3” emissions.The 10-year window is measured from a baseline of up to five years before a company joins the program.Commitments to reduce emissions must be across a building portfolio.Participating companies must also pursue an efficiency target, to prioritize energy savings that will contribute toward the 50% reduction in portfolio-wide emissions over a decade.Companies joining the program must pledge to share energy and emissions data for 10 years through EPA’s Portfolio Manager, publicly report on progress, participate in peer-to-peer exchanges, and help develop industry best practices.Corporate Purchases of Clean PowerDOE staff discussed the new program yesterday with The Roundtable’s Sustainability Policy Advisory Committee (SPAC).DOE explained that to reach the 50% emissions reduction target, companies can tally their long-term clean power purchase agreements (PPA) and associated renewable energy certificates (RECs). PPAs and RECs are increasingly common strategies used by CRE and other sectors to help deliver more renewable energy to the electricity grid.Staff further explained that it does not intend for certain carbon “offsets” (such as planting trees offsite) to count towards meeting the 50% emissions reduction target.Partnership Agreements and Public RecognitionCompanies that pledge to participate in the Better Climate Challenge must sign a partnership agreement with DOE.DOE will work with organizations as they develop organization-wide GHG emissions reduction plans and provide technical assistance with meeting corporate goals.DOE aims for the Challenge to develop and provide “alternative pathways” that present options for companies to set and achieve climate targets.Organizations that have already made similar commitments are encouraged to reach out to DOE to discuss how they can participate. For example, DOE will accept pre-established corporate goals with an approved 1.5° Celsius aligned science-based target, on a case-by-case basis.Aside from Wednesday’s “soft launch,” DOE plans further public recognition for participating companies during a formal launch slated for early 2022. DOE also intends to feature companies that participate in the Challenge at its next annual Better Buildings Summit in Washington, D.C. on May 17-19, 2022.So far, 32 organizations have publicly pledged their commitment to the Better Climate Challenge as DOE elevates outreach out to private sector companies, states, municipalities and other organizations.Contact the Department of Energy to Participate Those interested in participating and considering a “partnership agreement” should contact DOE:Maria.Vargas@ee.doe.govHannah.Debelius@ee.doe.govBetterBuildings@ee.doe.gov References:Climate Challenge Factsheet | FAQs | Informational webinarBetter Climate Challenge Partnership AgreementBetter Climate Challenge Partnership Agreement for Energy Intensive IndustriesBetter Climate Challenge Partnership Agreement for Multifamily (coming soon) # # #

October 28, 2021

Policy Comment Letter

2021-10-28 Letter to Committee on Ways and Means Grantor Trusts and Minority Discounts

Infrastructure and Tax Policy

October 22, 2021

Roundtable Weekly

Democrats Struggle to Reach Agreement on “Social Infrastructure” Package as Roundtable’s DeBoer Addresses Real Estate Tax Issues in Play

Infrastructure Tax Policy

Democrats this week struggled to reach agreement on cutting the cost of President Biden’s multitrillion “social infrastructure” proposal as Senator Kyrsten Sinema (D-AZ) opposed any increase in marginal rates for businesses, high-income individuals or capital gains to pay for the package. Democrats aim to pass both the “human” and “physical’ infrastructure packages under a budget reconciliation process that requires approval of all 50 Democrats in the evenly divided Senate. (Wall Street Journal, Oct. 20) CRE Impact Real Estate Roundtable President and CEO Jeffrey DeBoer (above) yesterday addressed the fluid nature of the reconciliation bill negotiations during a Marcus and Millichap tax policy webinar. The webcast is available here, but you must be registered to access the discussion.DeBoer noted that the narrow voting margins in both the Senate and House have created an environment where it is difficult for various factions in Congress to reach consensus. “What we have here is a clash between expectations and reality,” DeBoer said.He added that the current policy disputes among lawmakers adds uncertainty to the potential outcome. “Could negative tax provisions affecting real estate be put back on the table? Absolutely. What also worries me is that other proposals that we don’t know about yet may suddenly be considered.” (Registration required to view the Marcus & Millichap webcast)The House Ways and Means Committee voted in September to advance legislation that would finance Biden’s social infrastructure initiatives with a $2.1 trillion tax increase focused on high-income individuals and corporations. The House legislation excluded several tax proposals put forward by the Biden administration and Senate lawmakers that would increase the tax burden on real estate. (Roundtable Weekly, Sept. 17)The Washington Post today reported that a new “Billionaire Income Tax” proposal from Senate Finance Chair Ron Wyden (D-OR) would “aim to raise hundreds of billions of dollars from the fortunes of America’s roughly 700 billionaires” by applying a tax to those individuals earning over $100 million in income three years in a row. Taxes would be imposed on the increased value of assets such as stocks on an annual basis, regardless of whether those assets are sold. Billionaires would also be able to take deductions for the annual loss in value of those assets. (Washington Post, Oct 22)Additional tax issues affecting CRE are profiled in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation. Tax Uncertainty The Senate has not acted on any revenue-raising proposals to support President Biden’s original $3.5 trillion infrastructure package. Policymakers are now aiming to pare down the overall reconciliation bill cost to approximately $2 trillion before finalizing measures to pay for the package.Sen. Sinema (above) yesterday spoke with House Ways and Means Committee Chairman Richard Neal (D-MA) in an effort to break the impasse on how to fund certain infrastructure spending priorities in a scaled-down package. Neal said he is optimistic a deal will be reached. "I did point out that it's the ninth inning. I mean, when are you going to vet these issues?" Neal said. (The Hill, Oct. 21)The current reconciliation bill in the House would raise the top marginal income tax rate on many pass-through business owners from 29.6% today to 46.4% (a 57% increase). The Roundtable believes this level of increase on pass-through businesses was unintended by Members of Congress and could undercut the bill’s own objectives. As negotiations continue among policymakers on a reduced topline number for the social infrastructure package – and the specific programs it would support within a multi-trillion reconciliation bill – The Roundtable continues to urge lawmakers to ensure that any tax changes within a final agreement treats pass-through businesses fairly and equitably. (Roundtable Weekly, Oct. 1 and Oct. 15) # # #

Infrastructure and Clean Energy

October 22, 2021

Roundtable Weekly

Policymakers Exploring Alternative Climate Policies for Reconciliation Package

The White House and congressional Democrats scrambled this week to find alternatives to address climate change within the multitrillion reconciliation framework after Sen. Joe Manchin (D-WV) rejected the proposed Clean Electricity Performance Program (CEPP). The CEPP has been a centerpiece proposal pushed by the Biden Administration to increase U.S. renewable power supplies by de-carbonizing the electricity grid. (Politico and E&E News, Oct. 20)Clean Energy and CEPPThe CEPP would offer federal Energy Department incentive payments to utilities that meet an annual target of increasing “clean electricity” by four percent per year through 2030. It is intended to reach the Biden Administration’s goal of powering 80% of the electric grid from renewable sources by 2030. (The Hill, Oct. 18)Sen. Manchin (above), chair of the Senate Energy and Natural Resources Committee, stated he opposes the CEPP because the electricity sectors’ transition to clean power sources is already underway. Manchin’s opposition has prompted some Democrats to consider a last-ditch effort to expand the program to include coal and gas power plants that capture carbon emissions, in an effort to attract the key West Virginia Senator’s support. (E&E News, Oct .19 and Politico, Oct. 14)Policymakers are also exploring whether the CEPP could be restructured as a grant program to reward states that increase clean energy output. (Bloomberg, Oct. 20)U.S. Department of Energy Deputy Secretary David Turk addressed alternative approaches to the CEPP during an Oct. 19 Bloomberg Live event. He said, “There are a variety of discussions right now about how to have different authorities, different funding streams” that support partnerships among states, localities, utilities and the private sector toward the goal of grid de-carbonization. (BGov, Oct 20)Climate Provisions and CREProposals like the CEPP – which aim to boost electricity from solar, wind, and other non-carbon sources – have become a key energy policy priority for CRE. This is particularly the case in local jurisdictions considering “performance standards” that set regulatory limits on “direct” and “indirect” GHG emissions from buildings. (Roundtable Weekly, April 9)An evolving, cleaner grid can also help enable real estate assets to reduce and disclose their so-called “Scope 2” emissions that derive from purchased electricity. The Securities and Exchange Commission (SEC) has indicated it will propose regulations that require public companies (and other entities in its jurisdiction) to report on “material” information regarding GHG emissions to the investor community. (Roundtable Weekly, Oct. 1 and June 11) If a CEPP-type policy is included in a final reconciliation package, it will be critical for federal data to stay up-to-date and forecast how such a program is driving the grid to become cleaner and less reliant on fossil fuels.The Roundtable’s Sustainability Policy Advisory Committee (SPAC) has thus convened a task force to examine the primary federal data set – known as the Emissions Generation Resource Integrated Database (eGRID) – that reports on the carbon impact of virtually all electric power generated in the U.S.Roundtable members rely on eGRID to inventory their portfolio-wide carbon emissions. eGRID also provides the data that EPA’s Portfolio Manager benchmarking tool uses to determine a specific building’s indirect Scope 2 emissions that derive from electricity consumption.While the fate of climate policies – and indeed, the entire reconciliation framework – remains unclear, re-vamped provisions of the federal tax code to incentivize clean energy projects appear to have garnered uniform Democratic support. Particulars vary in Senate and House tax proposals, but credits and deductions to incentivize solar installations, energy storage, EV charging stations, and building retrofit projects are on the table in reconciliation discussions. (See The Roundtable’s latest Policy Issues Toolkit, “Clean Energy Tax Incentives,” p. 25)# # #

Policy Landscape

October 15, 2021

Roundtable Weekly

Debt Ceiling Increase Enacted as House Democrats Consider Cuts to $3.5 Trillion Reconciliation Bill

Debt Ceiling Infrastructure

President Joe Biden yesterday signed a $480 billion increase in the federal government’s debt limit to $28.9 trillion, narrowly avoiding an Oct. 18 national default deadline. The debt increase – passed by the Senate last week and the House on Tuesday – sets the stage for another fiscal cliff negotiation in less than two months, when both the debt limit and funding for the government run out on Dec. 3. (Associated Press, Oct. 14 and Reuters, Oct. 13) Infrastructure Funding Democrats this week continued to struggle on how to cut the scope and cost of the $3.5 trillion “human” infrastructure bill, after an intraparty split between moderates and progressives postponed a vote on a scaled-down bill in the House. (Wall Street Journal, Oct. 1)House Speaker Nancy Pelosi (D-CA) set an Oct. 31 target date to pass revised legislation under the budget reconciliation process, which requires a simple majority in the 50-50 Senate to bypass Republican opposition. (Bloomberg, Oct. 2) Cuts and Scale Pelosi sent an Oct. 11 letter to her caucus members as they work to cut Biden's reconciliation proposal from $3.5 trillion to approximately $2 trillion. “Overwhelmingly, the guidance I am receiving from Members is to do fewer things well,” Pelosi wrote. (PoliticoPro, Oct 13)On Oct. 12, Pelosi also commented on possible cuts to the length of certain spending programs, stating, “What would be the first to go? ... the timing would be reduced in many cases to make the cost lower.” (News conference transcript)In the Senate, Majority Leader Chuck Schumer (D-NY) yesterday sent a letter to his fellow Democrats urging unity as they consider a scaled-back infrastructure bill. “To pass meaningful legislation, we must put aside our differences and find the common ground within our party. As with any bill of such historic proportions, not every member will get everything he or she wants,” Schumer wrote. (Associated Press, Oct. 14) Roundtable Concerns Real Estate Roundtable President and CEO Jeffrey DeBoer will participate in an Oct. 21 Marcus & Millichap webinar on the state of play in infrastructure proposals, the industry’s tax policy concerns and the possible impact on commercial real estate. (Register here) The tax bill passed by the House Ways and Means Committee does not include restrictions on like-kind exchanges, taxation of gains at death, ordinary income treatment for carried interest, and tax parity between capital gains and ordinary income. The Roundtable argued that these Biden administration tax proposals could harm job growth, local tax revenue, and the economic recovery. As negotiations continue on a multi-trillion reconciliation proposal, The Roundtable is urging lawmakers to ensure that any final agreement on tax changes to fund a bill would treat pass-through businesses fairly and equitably. The current reconciliation bill in the House would raise the top marginal income tax rate on many pass-through business owners from 29.6% today to 46.4% (a 57% increase). The Roundtable believes this level of increase on pass-through businesses was unintended by Members of Congress and could undercut the bill’s own objectives of stimulating job growth, improving housing availability, and promoting investment in economically struggling communities, among other priorities.Roundtable members and others are encouraged to reach out to their Representatives and contact their Senators to urge them to preserve the 20% deduction for pass-through business income (section 199A), which is directly tied to hiring workers and investing in capital equipment and property. Modest adjustments in the legislation would ensure that pass-through businesses will continue contributing to economic growth, innovation, and job creation. Background information and talking points can be found here. Additional tax issues affecting CRE are summarized in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation. # # #

Economic Growth - Travel & Tourism

October 15, 2021

Roundtable Weekly

Biden Administration to Ease Pandemic Travel Restrictions; Senate Hearing Considers Legislation to Support Travel and Tourism Economy

Economic Growth Travel amp Tourism

The Biden administration today announced that fully vaccinated travelers from Mexico and Canada will be allowed to enter the United States starting Nov. 8 for “non-essential purposes, including to visit friends and family or for tourism.” The easing of travel restrictions provides a renewed opportunity for international travel to boost domestic economic growth. Additionally, next month will see the end of a pandemic-driven, 18-month ban on travel from 33 countries, including members of the European Union. (Reuters, Oct. 15 and New York Times, Oct. 12 | Oct. 8) Why It Matters The easing of travel restrictions could help rejuvenate the U.S. tourism industry and commercial real estate’s hospitality and retail sectors, which have been hit hard by the pandemic. Inbound international travel may help CRE through increased spending at hospitality, retail, attractions, health, and investment properties, generating revenues and creating American jobs. According to Marketwatch, relaxed travel restrictions may alsolead to an increase in foreign investment in U.S. real estate. Secretary of Homeland Security Alejandro Mayorkas stated, “Cross-border travel creates significant economic activity in our border communities and benefits our broader economy.” He added, “This new travel system will create consistent, stringent protocols for all foreign nationals traveling to the United States – whether by air, land, or ferry – and accounts for the wide availability of COVID-19 vaccinations.” (DHS news release, Oct. 12)Senate Majority Leader Chuck Schumer (D-NY) this week commented, “Since the beginning of the pandemic, members of our shared cross-border community have felt the pain and economic hardship of the land border closures. That pain is about to end.” (Schumer news release, Oct 12)The American Hotel & Lodging Association (AH&LA) also issued a Sept. 15 report on how hotels are projected to end 2021 with a loss of 500,000 jobs and more than $59 billion in business travel revenue compared to 2019. (AH&LA news release | state-by-state breakdown | market-by-market breakdown) Bipartisan Senate Efforts The Senate is preparing legislation to boost inbound travel and tourism to the United States, according to a Sept. 21 Senate Commerce subcommittee hearing chaired by Sen. Jacky Rosen (D-NV), above.Executives from AH&LA and the U.S Travel Association testified at the hearing, entitled Legislative Solutions to Revive Travel and Tourism and Create Jobs.Rosen, who leads the Subcommittee on Tourism, Trade, and Export Promotion, announced that bipartisan legislation is in the works to “support the recovery of the travel and tourism economy in the wake of the COVID-19 pandemic and help us build a brighter future for businesses and workers in this key sector for every state in our nation.” (Rosen news release, Sept. 22)The imminent Omnibus Travel and Tourism Act would establish permanent federal leadership on travel policies, invest in public-private partnerships to increase visits to the U.S., and create a task force to address the pandemic’s impact on air travel. (BGov, Sept. 21) Full committee ranking member Roger Wicker (R-MS) added his support for the emerging bill, saying that the nation’s travel and tourism challenges are a “bipartisan issue.” # # #

Fall Roundtable Meeting

October 8, 2021

Roundtable Weekly

Industry Leaders Engage Lawmakers on National Policy Issues Impacting CRE

Roundtable Meeting

Real Estate Roundtable members on Oct. 5 engaged national lawmakers on compelling policy issues impacting commercial real estate, economic growth and job creation – including tax revenue proposals in the infrastructure reconciliation bill, the debt ceiling, housing, climate change and cybersecurity legislation – during The Roundtable’s 2021 Fall Meeting.Urgent Policy IssuesRoundtable Chair John Fish (Chairman and CEO, Suffolk), right, and Roundtable President and CEO Jeffrey DeBoer, left, launched the meeting and led discussions with members of Congress, including:Sen. Mitt Romney (R-UT)This discussion focused on colliding policy issues that have been front-and-center this week in Washington, including the debt ceiling and infrastructure. Sen. Romney was part of a small group of leading policymakers who negotiated the bipartisan “physical” infrastructure bill that passed the Senate in August. (Roundtable Weekly, Aug. 13)Sen. Mark Warner (D-VA)Sen. Warner noted his priorities in the areas of child care and workforce development. He also addressed the need for more affordable housing investment and cybersecurity reporting, described climate change as an “existential threat,” and discussed tax measures such as raising the top marginal rate on many pass-through owners. Rep. Josh Gottheimer (D-NJ)A discussion with Roundtable Chair Emeritus Randy Rowe (Chairman Green Courte Partners LLC) focused on Rep. Gottheimer’s crucial leadership role with congressional moderates as the Co-Chair of the Problem Solvers Caucus, who are key to passage of the bipartisan “physical” infrastructure framework and the evolving “human” infrastructure bill. Rep. Kevin Brady (R-TX)Ways & Means Committee Ranking Member Brady discussed the menu of revenue options that Democrats are considering to pay for the “social infrastructure” reconciliation package. (Accounting Today and MSNBC, Oct. 6)Rep. Darin LaHood (R-IL)Rep. LaHood, a member of the Ways & Means Committee, provided his views on the numerous converging policy deadlines affecting the decision-making process on Capitol Hill through a video interview with DeBoer released ahead of Tuesday’s meeting. Interactive Town HallRoundtable members also participated in an open-mic Town Hall session featuring four members of Congress who play leading roles on national tax, energy and housing issues. The dialogue covered a wide range of topics, including transit investment, EB-5, carried interest and capital gains, climate-related measures and energy-efficiency provisions related to greenhouse emissions.Sen. Bob Menendez (D-NJ) and Reps. Earl Blumenauer (D-OR), Brad Schneider (D-IL) and Peter Welch (D-VT) participated in the Town Hall.Videos of the discussions with policymakers are available to Roundtable members upon request. Policy Advisory Committees Chairs of The Roundtable’s Sustainability Policy Advisory Committee (SPAC), Tax Policy Advisory Committee (TPAC) and Real Estate Capital Advisory Committee (RECPAC) provided updates of the organization’s policy priorities. (See The Roundtable’s Policy Issues Toolkit and Executive Summary) Members of the Equity, Diversity and Inclusion (ED&I) Committee reported on Roundtable-supported research currently underway, exploring the creation of a potential online marketplace that would connect real estate companies with minority-and women business enterprises that might serve as contractors, suppliers, and venture partners in CRE’s “supply chain.” (ED&I Mission Statement) The policy committees will gather next during the all-member Roundtable State of the Industry meeting, scheduled for January 25-26, 2022 in Washington, DC. (Roundtable Meeting Calendar) # # #

Policy Landscape

October 8, 2021

Roundtable Weekly

Senate Passes Short-Term Debt Limit Increase as Democrats Aim to Reduce Cost of Human Infrastructure Package

Debt Ceiling Infrastructure

The Senate last night passed legislation (S.1301) on a 50-48 vote that would increase the debt limit by $480 billion and avoid an Oct. 18 national default. (Axios and Wall Street Journal, Oct. 7)New Fiscal Cliff The bill would also effectively set Dec. 3 as the new fiscal cliff – when the new debt limit and the current short-term government-spending authorization both expire. (Roundtable Weekly, Oct. 1 and CQ, Oct. 7)The agreement struck by Senate Majority Leader Charles Schumer (D-NY) and Minority Leader Mitch McConnell (R-KY) this week raises the current national debt to approximately $28.8 trillion to cover spending previously authorized by the federal government. (NPR and CNBC, Oct. 7) House Speaker Nancy Pelosi (D-CA) wrote to members of her caucus last night that she would call the House back from recess early to vote if necessary. President Biden said this week said he also would support an increase in the debt ceiling. (Wall Street Journal, Oct. 7 and White House remarks, Oct. 6)Infrastructure Reset Meanwhile, disagreements among moderate and progressive Democrats on the scope and cost of a $3.5 trillion “human” infrastructure package delayed a vote last week in the House, prompting Speaker Nancy Pelosi (D-CA) to reset the deadline for lawmakers to reach agreement to Oct. 31. (Forbes, Oct 2) Congressional leaders and President Biden continued negotiations this week with centrist Senate Democrats Joe Manchin (WV) and Kyrsten Sinema (AZ) aimed at reaching a deal that would allow a human infrastructure bill to pass the Senate with 50 votes. Manchin this week added that he is open to a reduction in the reconciliation bill’s cost to between $1.9 trillion and $2.2 trillion. (CNN, Oct 5) Democrats are now engaged in an intense debate about how to cut the total cost of their human infrastructure bill. Legislation that would raise an estimated $2.1 trillion in taxes from corporations and the wealthy was approved by the House Ways and Means Committee on Sept. 15 to help finance the original $3.5 trillion reconciliation package. (Roundtable Weekly, Sept. 17) Real Estate Roundtable President Jeffrey DeBoer commented Sept. 17 on the bill’s advancement. “We encourage Congress to review the suggested tax hikes, particularly those on pass-through businesses, and work to ensure that unnecessary and unintended damage is not done to the economy. Substantial commercial real estate activities are conducted by pass-through entities and these activities create jobs, support retirement savings, and boost tax revenue for critical public services provided by local governments.” DeBoer added, “The Roundtable is encouraged, yet cautious, at this still relatively early stage of the legislative process.” (Roundtable Weekly, Sept. 17 | Sept. 24 | Oct. 1)Roundtable members and others are encouraged to reach out to their Representatives and contact their Senators to urge them to preserve the 20% deduction for pass-through business income (section 199A), which is directly tied to hiring workers and investing in capital equipment and property. Modest adjustments in the legislation would ensure that pass-through businesses could continue contributing to economic growth, innovation, and job creation. Background information and talking points on the pass-through issue can be found here. Tax issues affecting CRE are summarized in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation. DeBoer will participate in an Oct. 21 Marcus & Millichap webinar on the latest tax policy developments in Washington and what they mean for CRE. (Register here) Legislation on human and physical infrastructure, the debt ceiling, government funding and many other policy issues affecting CRE were the focus of discussions between Roundtable members and national policymakers during The Roundtable’s Oct. 5 Fall Business Meeting. (See story above). # # #

October 8, 2021

Roundtable Weekly

Roundtable and Business Coalition Weigh In on Legislation Requiring Ransomware Attack Reports

Bipartisan legislation that would require private sector companies to report ransomware attacks to federal authorities was advanced this week by the Senate Homeland Security and Governmental Affairs Committee. A broad, 37-member coalition that includes The Real Estate Roundtable on Oct. 4 provided detailed suggestions to Senate and House congressional committees about provisions that should be included in any bill that would impose a compulsory cyber incident notification program on the business community. (Cybersecurity coalition letter and Committee mark-up)Why It MattersThe Cyber Incident Reporting Act (S. 2875) – sponsored by Committee Chairman Gary Peters (D-MI) and Ranking Member Rob Portman (R-OH) – would require certain owners and operators of critical infrastructure operators to report hacks within 72 hours and ransom payments within 24 hours to the Cybersecurity and Infrastructure Security Agency (CISA). Organizations failing to do so would potentially banned from doing business with the federal government. (The Hill, Set. 28 and PoliticoPro, Oct. 5)The committee also approved the Federal Information Security Modernization Act of 2021 (S. 2902), which would require agencies and contractors to report on cyberattacks.The congressional bills aim to update the Federal Information Security Modernization Act, signed into law in 2014. Sen. Portman noted two reports on issued by the Homeland Security Committee since 2019 that found massive cybersecurity shortcomings at several federal agencies. The Senate Homeland Security Committee’s leadership may seek to merge their legislation may with a bill (S. 2010) from the Senate Intelligence Committee. Sen. Peters said he may also seek to include S. 2875 in House-passed defense policy legislation (H.R. 4350), which also includes language requiring cyber incidents. (BGov and PoliticoPro, Oct. 5)Private Sector ConcernsThe business coalition’s Oct. 4 letter to the Senate Committees on Intelligence, Homeland Security and Government Affairs and the House Committee on Home recommended several provisions that should be central to a mandatory reporting regime, including:Establish a prompt reporting timeline of not less than 72 hours. Legislation should reflect an appropriate, flexible standard for notifying government about significant cyber incidents.Attach reporting to confirmed cyber incidents. Businesses need clarity in reporting requirements, which should be targeted to well-defined and confirmed cyber incidents.Confine reports to significant and relevant incidents .A list should be limited in reach—particularly excluding small businesses using existing federal rules—and risk based.The business industry comments recommended that federal cybersecurity reporting legislation should also include robust liability protections; consistent federal reporting requirements; restrictive government use of reported data; and guarantee substantial input from industry to protect the rulemaking process. Identifying Critical InfrastructureIn the House, a separate bill that would identify systemically important infrastructure was introduced Oct. 5 by Homeland Security Committee Ranking Member John Katko (R-NY), Rep. Abigail Spanberger (D-VA) and Rep. Andrew Garbarino (R-NY). (Katko one-pager on the bill)The bill would authorize CISA to prioritize infrastructure operators considered so crucial to the U.S. economy, public health and national security that a disruption to their operations due to a cyberattack would be considered debilitating. (Katko news release, Oct. 5) The Roundtable’s Homeland Security Task Force continues to work with key law enforcement and intelligence agencies and the Real Estate Information Sharing and Analysis Center (RE-ISAC) on protective measures that businesses can take to create infrastructure resistant to physical damage and cyber breaches. # # #

Cyber Risks

October 4, 2021

Policy Comment Letter

Coalition Cyber Incident Reporting Comment Letter

Infrastructure Negotiations Continue as Congress Extends Government Funding to Dec. 3; Debt Ceiling Deadline Looms

Infrastructure

Intense negotiations among moderate and progressive Democrats on the scope and cost of the $3.5 trillion “human” infrastructure package continued this week, delaying a vote yesterday on the $1 trillion bipartisan “physical” infrastructure bill. House progressives have insisted they will not vote for the bipartisan bill until Senate centrists commit to support a multitrillion-dollar social benefits package. Moderates in the Balance President Joe Biden, House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Chuck Schumer (D-NY) this week engaged moderate Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) in hopes of sealing the support of all 50 Senate Democrats on the “human” infrastructure package. That bill’s passage depends on the budget reconciliation process to bypass Republican opposition. (Reuters, Sept. 28)Sen. Manchin this week released a document indicating the terms for his potential support of the reconciliation package. Manchin’s conditions, provided to Schumer on July 28, cite a topline cost of $1.5 billion for spending on social programs and climate change – $2 trillion less than the package that Democratic progressives have agreed to support. (Politico, Sept. 30)The Manchin document included proposals to raise the corporate tax rate to 25% and increase the top tax rate on ordinary income to 39.6%. It also lists as an offset condition to “end carried interest,” raise the capital gains tax rate to 28 percent, and notes that “any revenue exceeding $1.5 trillion” should be used to reduce the national deficit. Tax issues affecting CRE in the “human” infrastructure package are summarized in The Roundtable's "Pass-Through Businesses and the Reconciliation Bill" document. White House Press Secretary Jen Psaki yesterday said, "A great deal of progress has been made this week, and we are closer to an agreement than ever. But we are not there yet, and so, we will need some additional time to finish the work.” (White House Statement, Sept. 30) CR and Debt Ceiling Meanwhile, Congress passed a Continuing Resolution (CR) yesterday to fund the government through Dec. 3. President Biden signed the bill hours before a partial federal shutdown was scheduled to take effect. (BGov and CQ, Oct 1)The flurry of activity in Washington this week also included action on the debt ceiling. Legislation that would suspend the nation's debt limit until December 2022 passed the House on Sept. 29 but is expected to fail in the Senate, where 60 votes are needed to advance the bill in the 50-50 upper chamber. Republicans oppose the measure, insisting that Democrats should suspend the debt ceiling through the budget reconciliation process, which requires 50 votes. (CNBC, Sept. 29)The debt ceiling must be suspended by Oct. 18 to avoid the government from defaulting on its financial obligations, according to Treasury Secretary Janet Yellen’s Sept. 28 testimony before the Senate Banking Committee.Unless Congress increases the government’s authority to borrow more, "It would be disastrous for the American economy, for global financial markets, and for millions of families and workers," Yellen said. Federal Reserve Chairman Jerome Powell also testified, supporting Yellen’s view about the catastrophic economic consequences if the government were to default. (AP, Sept. 28)The potential impact of infrastructure policy proposals on commercial real estate markets, employment and investment in communities Washington will be the focus of discussion during The Roundtable’s Fall Meeting on Oct 5.# # #

Tax Policy

October 1, 2021

Roundtable Weekly

Roundtable Encouraging Congress to Ensure Fair Treatment of Pass-Through Businesses in Final Reconciliation Bill

PassThroughs Tax Policy

ESG Reporting

October 1, 2021

Roundtable Weekly

SEC Issues Guidance on Climate Risk Disclosures

Climate Change Corporate Disclosure SEC Securities and Exchange Commission

The Securities and Exchange Commission (SEC) issued non-binding guidance on Sept. 22 on how companies within its jurisdiction should disclose risks related to climate change under current standards. The guidance comes as the SEC is preparing proposed regulations – expected by early next year – on anticipated climate reporting mandates that will likely impact all issuers of securities, including real estate companies. Why It Matters The Sept. 22 guidance amplifies the Commission’s 2010 Climate Change Guidance. It explains that companies should include in their formal SEC filings the same kinds of climate and ESG-related disclosures that they provide in their annual corporate social responsibility reports. The latest guidance advises companies to disclose information (deemed to be “material”) on topics such as:Whether climate-related local, state, or federal laws or regulations – or international accords – impact the company’s finances or operations;Past or future capital expenditures for “climate-related projects”;Increased demands for renewable energy generation and transmission;Reputational risks from corporate operations that produce greenhouse gas emissions;Whether floods, fires, hurricanes, and other “extreme weather events” affect thye company; andPurchases or sales of carbon offsets or credits. Guidance Portends New RuleThe Sept. 22 guidance portends a proposed rule from the Commission that will likely lead to mandated climate change disclosures.SEC Chair Gary Gensler, above, remarked on Sept. 22 that its proposed rule on climate disclosures will be released by early 2022. A proposed rule would then kick-off a process for public comments from industry stakeholders. Earlier this year, the Commission inquired about what kinds of updated climate and ESG-related information may be “material” to investors – and whether such information should be included in annual reports, proxy statements, and other SEC filings. (SEC’s March 15, 2021 “Public Statement” welcoming input on climate change disclosures.) The Real Estate Roundtable responded in June to the SEC’s “pre-rulemaking” statement. The Roundtable developed its comments in close coordination with Nareit, and recommends a “principles-based” approach to corporate climate risk disclosures as opposed to a prescriptive “one size fits all” reporting mandate. (Roundtable Weekly, June 11, 2021) A final rule from the SEC on climate risk reporting could be issued by the end of 2022, after conclusion of the public comment process on any forthcoming proposal. # # #

News

September 24, 2021

Roundtable Weekly

Real Estate Industry Weighs in Against Potential Partnership Tax Changes as House Lawmakers Prepare Next Steps for Infrastructure, Tax Bills

Infrastructure

The Real Estate Roundtable and 22 other national real estate organizations wrote today to Senate Finance Committee Chairman Ron Wyden expressing significant concerns regarding his draft legislation to overhaul partnership tax rules. The letter was sent after congressional leaders and Treasury Secretary Janet Yellen yesterday announced they had agreed on a framework for moving forward with human infrastructure legislation, which includes a list of tax issues for discussion and potential inclusion in a final reconciliation bill. Additionally, the House Budget Committee announced it would “mark up” the combined $3.5 trillion reconciliation bill tomorrow. (Coalition letter, Sept. 24 and BGov, Sept. 23) Why It Matters On September 10, Chairman Wyden proposed a far-reaching restructuring of partnership taxation that would raise at least $172 billion over 10 years. Chairman Wyden or others could put forward the partnership proposals as revenue provisions for the reconciliation bill. Real Estate Roundtable President and CEO Jeffrey DeBoer stated, “Partnerships are used to bring parties together to create and grow businesses that propel job creation, new investment, and productive economic activity. Partnerships contribute immensely to the culture of dynamic entrepreneurship and risk-taking that is missing in many parts of the world where business activity is dominated by large, public corporations. In this current environment, Congress should be working on ways to encourage and strengthen partnerships, not cut their knees out from under them.” (Roundtable Weekly, Sept. 10) Nearly half of the four million partnerships in the United States are real estate partnerships. These pass-through businesses are a key driver of jobs, investment, and local tax revenue. Provisions in the draft bill would alter the tax rules that apply when a partnership is formed and property is contributed, creating new barriers to business formation. Other provisions would changes the rules when a partnership borrows to finance its growth and expansion, as well as when a partnership distributes profits and gains to the owners. Many of the provisions in Wyden’s draft would apply retroactively to economic arrangements entered into years, and sometimes decades, earlier. A proposal requiring that partners share all debt in accordance with partnership profits could overturn decades of tax law with respect to nonrecourse borrowing by a partnership. The coalition of 24 real estate organizations stated, “With millions of Americans still unemployed and others who have yet to return to the labor force, we encourage you to focus instead on reforms that will strengthen and expand partnerships’ ability to create jobs and economic opportunities.” (Coalition letter, Sept. 24) Infrastructure / Reconciliation Developments A vote on the bipartisan infrastructure legislation is expected on Monday, Sept. 27 or Tuesday, Sept. 28, but that could change depending on Democratic leaders’ ability to ensure sufficient votes for passage. The House Budget Committee’s scheduled mark-up the $3.5 trillion reconciliation bill on Saturday afternoon, Sept. 25 will proceed as Democrats race to reach consensus with moderates who object to the bill’s overall price. (PoliticoPro, Sept. 23) The framework deal between House and Senate Leaders reportedly includes an understanding between Senate Finance Committee Chairman Ron Wyden (D-OR) and House Ways and Means Committee Chairman Richard Neal (D-MA) about revenue-raising proposals that could be used to pay for the massive proposal. (The Hill, Sept. 23) Senate Majority Leader Chuck Schumer (D-NY) described the agreement as a “menu of options that will pay for any final negotiated agreement” as Pelosi called it “an agreement on how we can consider, go forward in a way to pay for this.” Roundtable Resources Tax issues affecting CRE are summarized in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation. The Real Estate Roundtable on Sept. 17 held an all-member Town Hall discussion on specific measures in the House’s human infrastructure bill, including its tax policy aspects. The event featured Roundtable Chair John Fish (Chairman and CEO, Suffolk), Roundtable President and CEO Jeffrey DeBoer and Senior Vice President & Counsel Ryan McCormick. (Roundtable YouTube channel) DeBoer also discussed tax law policy proposals under consideration in Washington and the need to distribute federal rental assistance to property owners and tenants during a recent Connect webinar, which also included National Multifamily Housing Council Chair David Schwartz (Chairman and CEO, Waterton) and NMHC President Doug Bibby. (Connect, Sept. 23) Infrastructure bills and tax policy issues in play that may impact commercial real estate will be the focus of discussions during The Roundtable’s Fall Meeting on Oct. 5 in Washington, DC (Roundtable-level members only). # # #

News

September 24, 2021

Roundtable Weekly

House Democrats Pass Bill to Extend FY22 Government Funding and Suspend Debt Ceiling; Senate Republicans Plan to Oppose

Budget Debt Ceiling

House Democrats on Sept. 21 passed a short-term funding bill that would keep federal agencies open until Dec. 3 while suspending the debt limit through December 2022. The bill, passed on a party-line vote (220-211) faces bleak chances of Senate approval, where 60 votes are needed to avoid a filibuster in the evenly divided upper chamber. Republicans object to linking the debt ceiling to FY22 government funding. Shutdown, Default Loom The short-term bill to extend funding for government operations at current levels, known as a Continuing Resolution (CR), would avoid a partial government shutdown on Oct. 1. Funding for programs affecting national flood insurance and surface transportation are also scheduled to expire Sept. 30.Senate Minority Leader Mitch McConnell (R-KY) stated Democrats need to separate the CR from legislation that would suspend or increase the debt limit, which the GOP will not support. (Louisville Courier-Journal, Sept. 23)Meanwhile, Treasury Secretary Janet Yellen issued a stark warning to policymakers that they must raise or suspend the debt ceiling as soon as possible – or the federal government will default on its financial obligations sometime in October. (Wall Street Journal, Sept. 19 and Reuters, Sept. 22) Yellen stated, “Doing so would likely precipitate a historic financial crisis that would compound the damage of the continuing public health emergency. Default could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil. Our current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost.” Treasury has been spending down its reserves since Aug. 1, when the current two-year debt ceiling suspension ended. Yellen warned that hitting the debt ceiling would result in a halt of social security payments to nearly 50 million seniors for a time. Additionally, troops could go unpaid and millions of families who rely on the monthly child tax credit could see delays. (Axios, Sept. 23) A coalition of 13 real estate trade organizations, including The Roundtable, last week urged congressional leaders to raise the statutory debt limit as soon as possible. The letter stated, “Given the more than $8.6 trillion in mortgage debt backed by the federal government through Fannie Mae, Freddie Mac, Ginnie Mae and other federal agencies, the housing and real estate markets are particularly susceptible to any instability stemming from concern about the U.S. meeting its financial obligations.” (Coalition letter, Sept. 16) Policymakers face the debt ceiling and FY22 government funding deadlines next week as Democrats struggle to advance sprawling legislative bills on infrastructure (see Infrastructure story above). # # #

Tax Policy

September 24, 2021

Policy Comment Letter

Real Estate Industry Weighs in Against Potential Partnership Tax Changes

Partnerships amp PassThrough Taxation, Section 199A, Senator Ron Wyden,

Tax Policy

September 24, 2021

Policy Comment Letter

Sen. Wyden Partnership Reform – Real Estate Letter – 9-24-21

Partnerships amp PassThrough Taxation, PassThroughs, Tax Policy,

Policy Landscape

September 17, 2021

Roundtable Weekly

Democrats Advance Human Infrastructure Package While Facing Tight Deadlines on Physical Infrastructure Bill, Budget Funding and Debt Ceiling

Infrastructure

House Democrats this week advanced 13 committee bills – including positive measures affecting commercial real estate – that will be assembled into a massive $3.5 trillion “human” infrastructure package for policymakers to consider as soon as this month. (See Roundtable Weekly stories below for details on tax, energy and transportation legislation). Human and Physical Infrastructure Democrats aim to pass President Joe Biden’s massive social spending and tax package in the House and Senate without Republican support using the budget reconciliation process – despite signals of resistance from some caucus members in a narrowly divided Congress. (BGov, Sept. 15) Additionally, House Speaker Nancy Pelosi (D-CA) has set a Sept. 27 deadline for the House to vote on a separate, bipartisan “physical” infrastructure bill passed by the Senate on Aug. 10. (Roundtable Weekly, Sept. 10 and Aug. 20) Congress also needs to act on FY22 government funding by October 1 to avoid a partial shutdown – and reach agreement on raising the federal debt ceiling in October to avoid a national credit downgrade or default. (Politico, Sept. 12) Roundtable Response[Photo, right to left: Roundtable Chair John Fish (Chairman and CEO, Suffolk); Roundtable President and CEO Jeffrey DeBoer and Senior Vice President & Counsel Ryan McCormick during today's Town Hall discussion on the House reconciliation package.]The physical infrastructure bill’s impact on CRE was the focus of a discussion published Sept. 15 in The Real Deal, featuring Roundtable Chair John Fish (Chairman and CEO, Suffolk) and Roundtable President and CEO Jeffrey DeBoer. Fish stated in the article, “At the end of the day, these are investments that the government is going to be sponsoring, that creates economic activity, job creation, and a sense of equality across our communities of America.” DeBoer commented, “We think it’s very important and very much needed, long overdue. I think everyone agrees that what is needed immediately is to work on our infrastructure, repairing roads, bridges, inter-city rail, broadband, water systems, and all of these things are definitely needed.” (The Real Deal, Sept. 15)The Real Estate Roundtable also held an all-member Town Hall discussion this afternoon to address specific measures in the House’s human infrastructure bill, including its tax policy aspects. The event featured The Roundtable’s John Fish, Jeffrey DeBoer and Senior Vice President & Counsel Ryan McCormick. A coalition of 13 real estate trade organizations, including The Roundtable, yesterday urged congressional leaders to raise the statutory debt limit as soon as possible. The letter stated, “Given the more than $8.6 trillion in mortgage debt backed by the federal government through Fannie Mae, Freddie Mac, Ginnie Mae and other federal agencies, the housing and real estate markets are particularly susceptible to any instability stemming from concern about the U.S. meeting its financial obligations.” (Coalition letter, Sept. 16) The many policy issues now in play for CRE will be the focus of discussions during The Roundtable’s Fall Meeting on Oct. 5 in Washington, DC (Roundtable-level members only). # # #

Tax Policy

September 17, 2021

Roundtable Weekly

House Ways and Means Committee Advances Historic Legislation with Safety Net Expansion and $2.1 Trillion in Tax Increases

Infrastructure Tax Policy

The House Ways and Means Committee voted to advance legislation that would expand benefits for low-income families, invest in affordable housing and other Democratic priorities, and finance the initiatives with a $2.1 trillion tax increase that primarily falls on high-income individuals, pass-through businesses, and corporations. The legislation excludes several tax proposals put forward by the Biden administration and Senate lawmakers that would increase the tax burden on real estate. (Ways and Means news release and markup resources) Real Estate Roundtable President Jeffrey DeBoer stated, “The House Ways and Means Committee’s proposals include significant tax increases on corporations and income received by upper income taxpayers, and not on business activities like real estate. Even so, the combined tax hikes on income received from pass-through entities could threaten job creation and business expansion. As the bill moves forward, we encourage Congress to review the suggested tax hikes, particularly those on pass-through businesses, and work to ensure that unnecessary and unintended damage is not done to the economy. Substantial commercial real estate activities are conducted by pass-through entities and these activities create jobs, support retirement savings, and boost tax revenue for critical public services provided by local governments. The Roundtable is encouraged, yet cautious, at this still relatively early stage of the legislative process. Further changes may be on the horizon, both positive and negative.” Tax issues affecting CRE are summarized in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation. The real estate tax issues addressed by the W&M Committee include: Real Property Like-Kind Exchanges (Section 1031) The bill wisely preserves taxpayers’ ability to defer capital gain when exchanging real property for another property of like kind. Step-Up in Basis and Taxation of Gains at Death The bill preserves the step-up in basis that applies to appreciated gain when real estate is transferred from a decedent to an heir. The bill does not impose capital gains tax on appreciated real estate when transferred by a decedent or donor.Capital Gains The bill increases the maximum capital gains rate from 20% to 25%. The 3.8% investment tax is maintained and extended to all taxpayers, thus making the effective capital gain tax rate 28.8%. The President’s budget proposed increasing the capital gains rate to 39.6% to create parity between the tax rate on ordinary income and capital gains.Real Estate Carried Interest The bill generally extends from 3 years to 5 years the holding period for partnership gains attributable to a profits interest to qualify for the long-term capital gains rate. However, the bill preserves the shorter 3-year holding period for capital gain related to a real property trade or business. The President’s budget proposed converting all carried interest income derived from a profits interest in a real estate partnership to ordinary income.Pass-Through Business Income Deduction (Section 199A) The bill limits the maximum deduction available for pass-through business income under section 199A to no more than $400,000 for an individual and $500,000 in the case of a joint return ($2.5 million).Net Investment Income Tax The bill would apply the 3.8% net investment income tax to income derived from a trade or business, capital gain, dividends, interest, and rental income regardless of whether the taxpayer is active or passive in the activity. Other Tax Issues Other tax issues addressed by the committee included affordable housing, infrastructure financing, grantor trusts, deductibility of active losses and REIT constructive ownership rules. These issues are also summarized in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation.House Speaker Nancy Pelosi (D-CA) is expected to address a provision affecting the $10,000 limit on state and local deductions (SALT) before a final bill is assembled for a floor vote. (CNBC, Sept. 15)The committee’s proposals on clean energy incentives are detailed in the Roundtable Weekly story below on energy policy. The House is expected to try to resolve major differences between their final bill and the Senate's version before voting on the package. Senate Majority Leader Chuck. Schumer (D-NY) has not set a formal deadline for the Senate to complete its work but he said Tuesday "there's going to be a lot of intense discussions and negotiations over the next few weeks." (RollCall, Sept. 14) # # #

Energy Policy

September 17, 2021

Roundtable Weekly

House Committees Advance Clean Energy Measures Favorable to CRE

Energy Policy

House committees this week advanced “clean energy” portions of the $3.5 trillion reconciliation plan along party lines, including several measures supported by The Real Estate Roundtable. Clean Energy Tax Incentives The Ways & Means Committee this week approved “green energy” portions of the reconciliation package. (Bill text [Subtitle G); section by section) The Committee approved significant changes to existing tax credits that incentivize investments in solar, wind, combined heat and power (CHP) and fuel cell systems – and expanded them to also include energy storage and dynamic glass properties.These renewable energy investments would be subject to an “elective pay” option that can allow entities with little appetite for tax credits to request a payment equal to the value of the credit.Investments in EV charging stations and high-voltage transmission lines (needed to support delivery of renewable power over long distances) would also benefit from the elective pay option.The Committee also made changes intended to improve the 179D tax deduction for energy efficient buildings. The proposed changes are geared to support existing building retrofits. The amounts of these incentives would start at a “base rate” – and could increase to a “bonus rate” if the property owner meets certain labor provisions for Davis-Bacon wages and hiring registered apprentices. Climate and EnergyThe House Energy and Commerce (E&C) Committee passed a $456 billion section of the reconciliation bill. (Bill text / Committee memorandum, Sept. 9 and Markup summary, Sept. 13) The centerpiece of the E&C package is a Clean Electricity Performance Program (CEPP). It would offer federal Energy Department “incentive payments” to electric utilities that meet clean energy targets and shift to zero-emissions sources (i.e., nuclear, hydropower, wind, solar, geothermal). A nationwide CEPP could accelerate “greening” the grid and help real estate and other sectors accommodate increasing demands from investors and regulators to source the electricity they purchase from renewable power. However, Sen. Joe Manchin (D-WV), chair of the Senate Energy and Natural Resources Committee and a key centrist vote needed for ultimate passage of a reconciliation package, has questioned the need for the CEPP program. He has stated that utilities should not receive taxpayer funds because the electricity sector’s’ transition to clean power sources is already happening. (Politico and E&E News, Sept 14) Other elements of the E&C Committee’s bill include:Grants for state/localities to adopt most recent and zero-energy building codes; andA rebate program for electric vehicle charging infrastructure with set asides for individuals, small businesses, and low-income communities.# # #

Transportation Policy

September 17, 2021

Roundtable Weekly

Positive Transit Measures Included in Reconciliation Package

Infrastructure Transportation

The House Transportation and Infrastructure (T&I) Committee this week marked-up its $57.3 billion piece of the reconciliation package with a focus on mass transit and high-speed rail. The House bill aims to supplement surface transportation measures that are included in the Senate-passed bipartisan “physical” infrastructure bill. (T& I Bill text; section-by-section and Roundtable Weekly, Aug. 13)Many of the T&I measures are now in line with the Biden administration’s original transit priorities, which were pared down in the Senate’s final physical infrastructure bill. (Washington Post, Sept. 10)Roundtable-supported measures in the T&I Committee’s bill include:A competitive federal grant program to support transit access for affordable housing projects and improve mobility for low-income riders; Grants administered by the Federal Highway Administration to support transportation equity and reconnect communities divided by “existing infrastructure barriers;”Funds to improve high-speed rail corridors;Credit risk assistance to develop rail infrastructure under the Railroad Rehabilitation and Improvement financing (RRIF) program; andFunds to convert federal buildings owned or managed by the General Services Administration to “high-performance green buildings.” Separately, the Ways and Means Committee’s package also proposed favorable tax-exempt bond financing improvements to attract greater public-private partnership investments in transportation projects.Timing for a House vote on the sprawling reconciliation bill is uncertain. Modifications to the tax, energy or transportation sections of the bill could be introduced when it is sent to the House Rules Committee, which determines floor action – or through an amendment on the floor. House Speaker Nancy Pelosi (D-CA) can afford to lose only three votes when the final legislation comes to a vote. (Bloomberg, Sept. 15)# # #

Capital and Credit

September 17, 2021

Roundtable Weekly

House Committee Advances Bill to Expedite Emergency Rental Assistance; Treasury and FHFA Loosen Fannie, Freddie Mortgage Purchase Restrictions

Eviction Moratorium Fannie Mae

The House Financial Services Committee (HFSC) on Sept. 14 advanced the “Expediting Assistance to Renters and Landlords Act of 2021” by a vote of 28-22 after a hearing last week that focused on urgent reforms needed to the Treasury Department’s Emergency Rental Assistance Program (ERAP). (Bill text and section-by-section) H.R. 5196 would allow property owners to directly apply for rental arrears after meeting certain requirements. Landlords could apply for pandemic-related rental aid without getting the tenant’s signature, but could not evict those tenants for 120 days. (HFSC memorandum, Sept. 7 and PoliticoPro, Sept. 14) Assistance for Property Owners Treasury reported that as of July 2021, only 11% ($5.1 billion) of the $46.6 billion in authorized federal rental assistance funds had been spent by state and local governments to assist approximately one million renters. (Committee Memorandum, Sept. 7) The issue of eliminating significant bottlenecks to deliver billions in rental assistance to landlords and tenants has grown more urgent in recent weeks after the Supreme Court’s Aug. 26 decision to halt the federal eviction ban. (Roundtable Weekly, Aug. 27) Treasury this week announced it will speed up delivery of the remaining $13 billion in federal rental aid by targeting the high-performing state and local government grantees. (Treasury news release, Sept. 14) National Multifamily Housing Council (NMHC) Chair David Schwartz (Chairman and CEO, Waterton) testified Sept. 10 on behalf of the rental housing industry at the HFSC hearing “Protecting Renters During the Pandemic: Reviewing Reforms to Expedite Emergency Rental Assistance.” Schwartz supported the ramp up of rental assistance benefits and streamlining onerous application and documentation requirements, yet cautioned against the imposition of new requirements that create new barriers for property owners to participate in ERAP programs. (YouTube, full hearing and NMHC news release, Sept. 10) Schwartz will join Roundtable President and CEO Jeffrey DeBoer and NMHC President Doug Bibby in a Sept. 23 multifamily webinar hosted by RealEstateConnect that will cover the economic outlook and tax law policy changes under consideration in Washington. (Register here) Fannie, Freddie Restrictions Suspended Treasury and the Federal Housing Finance Agency (FHFA) this week suspended Trump-era restrictions on Fannie Mae and Freddie Mac as the Biden administration reviews revisions affecting mortgage purchases. (American Banker, Sept. 14) The suspended provisions include limits on Fannie and Freddie cash windows (loans acquired for cash consideration), multifamily lending, loans with higher risk characteristics, and second homes and investment properties. (FHFA news release, Sept. 14) Treasury stated, “FHFA will continue to measure, manage, and monitor the financial and operational risks of the Enterprises to ensure that they operate in a safe and sound manner and consistent with the public interest. During the suspension, FHFA will review the suspended requirements and consult with Treasury on any recommended revisions.” (Treasury news release, Sept. 14) # # #

September 16, 2021

Policy Comment Letter

2021-09-16 Coalition Debt Limit Letter

September 16, 2021

Policy Comment Letter

9-16-21-Coalition Debt Limit Letter Final

Homeland Security

September 10, 2021

Roundtable Weekly

The Roundtable Commemorates 20th Anniversary of 9-11 and TRIA’s Positive Impact

Homeland Security TRIA

The Real Estate Roundtable this week commemorated the 20th anniversary of the 9-11 attacks by recognizing the enduring, positive impact of the Terrorism Risk Insurance Act (TRIA) and holding a joint meeting of the organization’s Homeland Security Task Force (HSTF) and Risk Management Working Group (RMWG). Reflection and Action Roundtable President and CEO Jeffrey DeBoer stated, “The nation and the industry reflects during this solemn anniversary week on the profound human losses, and lessons learned, from the tragic events of September 11, 2001.”DeBoer added, “We also recognize the enduring, positive impact of the Terrorism Risk Insurance Act (TRIA) to help protect the economy in the event of future attacks. The Roundtable remains proud of its efforts in the wake of 9-11 and secure TRIA renewals that extend the program until the end of 2027. Our nation remains vigilant against terrorism threats as our industry remains steadfast in working with government agencies to combat physical and cyber-terrorist attacks.” 9-11 Legacy: TRIA A Sept. 7 article in Commercial Observer reported how The Real Estate Roundtable organized a coalition of business insurance policyholders – the Coalition to Insure Against Terrorism – to win passage of TRIA. The article states, “TRIA has provided the commercial real estate industry with a crucial backstop against losses suffered from external threats in the nearly two decades since its enactment.”The article quotes Roundtable Board Member Anthony Malkin, (chairman, president and CEO, Empire State Realty Trust) on the far-reaching, positive impact of TRIA on CRE, colleges, sports stadiums and hospitals.Roundtable Senior Vice President Chip Rodgers is also quoted about TRIA’s vital importance for commercial real estate, since lenders require ‘all risk’ insurance coverage — including terrorism coverage — to cover the risk of loss to the collateral. (Commercial Observer, Sept 7) Ongoing Industry Efforts The Roundtable’s HSTF and the Real Estate Information Sharing Analysis Center (RE-ISAC) were launched soon after 9-11 to coordinate CRE’s response to potential future attacks and share threat information.The HSTF and RMWG virtual joint meeting this week featured a discussion with Peter Bergen, whose extensive background as an expert on terrorism includes years as a journalist, documentary producer, vice president for global studies & fellows at New America, and CNN national security analyst. He is currently co-director at the Center on the Future of War at Arizona State University. Mr. Bergen discussed the current threat picture facing the United States, including the ramifications of the Taliban’s return to power in Afghanistan.Roundtable participants were also joined by Shane Lamond (Lieutenant, D.C. Metropolitan Police Department) who led a discussion on civil unrest threats, the proliferation of ransomware attacks and various COVID-related challenges of re-entering buildings. The Roundtable is also working with the Business Continuity Coalition to develop an insurance program that protects jobs by ensuring business continuity from future economic losses from pandemics and other health emergencies that necessitate widespread government mandated closures of the economy. (Roundtable Weekly, July 23) # # #

Policy Landscape

September 10, 2021

Roundtable Weekly

Congress Faces Daunting Fall Agenda of Infrastructure Bills, Budget Funding and Debt Limit Deadlines

Congress Debt Ceiling Infrastructure

Several significant issues affecting commercial real estate converge this month as Congress faces deadlines on a $550 billion “physical” infrastructure bill, a separate $3.5 trillion “social” infrastructure package, government funding for FY2022, and the national debt ceiling. The full Senate will return on Sept. 13 and the House on Sept. 20. Deadlines to watch as policymakers face a daunting agenda: Sept. 15 — Reconciliation Bills Expected House committees this week began work on completing various portions of the massive social infrastructure package – including tax revenue raisers impacting CRE – by a Sept. 15 deadline set by House Speaker Nancy Pelosi (D-CA). The $3.5 trillion package will be considered under “reconciliation” budget rules that would only require Democratic votes to pass. (The Hill, Sept. 9 and Roundtable Weekly tax story below) Senate Majority Leader Chuck Schumer (D-NY) has instructed his committees to finalize their parts of the upper chamber’s reconciliation bill by Sept. 15 – although this deadline is non-binding and expected to slip. (CNBC, Aug. 11) Sen. Joe Manchin (D-WV) wrote in a Sept. 2 Wall Street Journal op-ed that Congress should take a “strategic pause” on the reconciliation package. In a 50-50 Senate, the votes of moderate Democrats such as Manchin and Krysten Sinema (D-AZ) are crucial for passage. Sept. 27 — House infrastructure Vote The Senate on Aug. 10 passed a bipartisan bill addressing physical infrastructure with $550 billion in new spending. (Roundtable Weekly, Aug. 13) Pelosi has set a Sept. 27 deadline for the House to vote on the Senate-passed bill. Pelosi’s move accommodated a group of 10 moderates in her caucus who insisted on de-coupling House votes on physical and human infrastructure legislation. (Roundtable Weekly, Aug. 20) Pelosi can afford to lose only three Democratic votes in the narrowly divided House if all Republicans oppose a bill. (New York Times, Sept 5) The Real Estate Roundtable held an all-member Infrastructure Town Hall on Aug. 12 to discuss the Senate infrastructure bill, what lay ahead in the House, and the potential impact on commercial real estate. (Roundtable Weekly, Aug. 13) The Roundtable’s summaries of issues affecting CRE that are in play as part of the infrastructure packages include: Tax and Fiscal Reconciliation Fact SheetBudget Reconciliation: Tax PrioritiesBipartisan Infrastructure Deal Fact SheetPandemic Risk Fact Sheet October – Federal Government Funding and Debt Ceiling Funding for the federal government expires Oct. 1 unless an FY22 appropriations bill is enacted. Congress is expected to pass a stopgap spending bill – known as a Continuing Resolution (CR) – that would fund agencies at current levels to avoid a partial government shutdown. The CR could also include a measure to suspend or raise the national debt ceiling, which would require at least 10 Senate Republican votes to pass under regular order. Democratic leaders plan to pursue a bipartisan vote to waive the debt limit. (Reuters and PoliticoPro, Sept. 8) However, 46 Senate Republicans pledged in an August 10 letter that they “will not vote to increase the debt ceiling, whether that increase comes through a stand-alone bill, a continuing resolution, or any other vehicle." (Bloomberg and The Wall Street Journal, Aug. 10) Congress must address the national debt ceiling by October, according to a Sept. 8 letter from Treasury Secretary Janet Yellen to congressional leaders. The Roundtable will discuss how all these issues impact CRE and the national economy during its Fall Meeting on Oct. 5 in Washington, DC (Roundtable-level members only). # # #

Real Estate Partnerships

September 10, 2021

Roundtable Weekly

Roundtable Raises Concerns about New and Complex Senate Proposal to Raise Taxes on Real Estate Partnerships

Tax Policy

Real Estate Roundtable President and CEO Jeffrey DeBoer expressed strong concerns following the Sept. 10 release of Senate Finance Committee Chairman Ron Wyden’s (D-OR) draft legislation to restructure pass-through tax rules and raise $172 billion in additional tax revenue from the country’s 4 million partnerships and LLCs. (Wyden Draft, Proposal Overview and Summary) Possible Economic Disruption DeBoer stated, “Partnerships are used to bring parties together to create and grow businesses that propel job creation, new investment, and productive economic activity. Partnerships contribute immensely to the culture of dynamic entrepreneurship and risk-taking that is missing in many parts of the world where business activity is dominated by large, public corporations. In this current environment, Congress should be working on ways to encourage and strengthen partnerships, not cut their knees out from under them.” Over the last several decades, partnerships have grown to become a dominant form of business organization in the United States, accounting for $8.7 trillion in annual business receipts and $34.3 trillion in total assets, according to the IRS. Senator Wyden’s proposal, if enacted, could have enormous and unanticipated consequences for U.S. real estate, capital investment, and economic activity. Real estate, rental, and leasing businesses represent more than half (50.4 percent) of all partnerships. “The Chairman’s proposal is big, comprehensive, and not yet vetted in any meaningful way. Partnership taxation is a complicated area of the law that has evolved over decades. The proposals would apply retroactively to economic arrangements negotiated years ago. Past experience with retroactive changes to partnership tax law, in 1986, generated huge and damaging economic disruption, including massive bankruptcies, stress on all lenders, and the end of the saving and loan industry. We don’t need that kind of rash policy action again,” DeBoer added. Details Proposals in Chairman Wyden’s discussion draft that would have a significant impact on real estate partnerships include: Modifying the rules for determining whether a partner has recourse debt with respect to partnership property. The provision would require all partnership debt to be allocated in accordance with partnership profits except where a partner is the lender (sec. 752). Restricting the methods available for allocating the tax attributes of contributed property among the partners in a partnership by mandating the remedial method under section 704(c). In the case of property contributed to a partnership with built-in gain, requiring gain recognition by the contributing partner if the property is subsequently distributed to another partner, even if the distribution occurs after 7 years (e.g., the “mixing bowl” rule that currently applies for 7 years would apply forever). Mandating partnership basis adjustments that relate to disparities between inside and outside partnership basis that arise due to partnership distributions or transfers of partnership interests. These basis adjustments are currently elective under section 754 and mandated in only certain substantial cases in sections 734 and 743. Other provisions in the draft legislation would: eliminate substantial economic effect as a basis for partnership allocations and instead require partnerships to make allocations in all instances based on the “partners’ interests in the partnership” standard (except in certain “abusive” situations involving related partners). Among the other proposed changes, the bill would also subject publicly traded partnerships that earn qualifying passive income to corporate-level taxation. The Wyden proposal comes as Congressional Democrats are seeking new revenue sources to finance their ambitious $3.5 trillion human capital initiative. # # #

Tax Policy

September 10, 2021

Roundtable Weekly

House Ways & Means Scheduled to Mark-up Revenue Measures Next Week

Tax Policy

The Real Estate Roundtable continued to weigh in with lawmakers with concerns on a number of Biden administration tax proposals as the House Ways and Means Committee prepared to mark-up tax measures early next week that may potentially affect commercial real estate. Ways & Means Timeline Congressional committees are aiming to complete work by Sept. 15 on various portions of the massive infrastructure package, which Democrats will consider under “reconciliation” budget rules that require a simple majority to pass in the narrowly divided Congress. (Wall Street Journal, August 24)Ways and Means Chairman Richard Neal (D-MA) expects to release details on his revenue proposals over the weekend. The top ordinary tax rate and the corporate tax rate are expected to be a key focus of the committee's deliberations. (The Hill, Sept. 9)Ways and Means member Stephanie Murphy (D-FL) stated this week she will vote against the committee’s measures unless more time is available to review the proposals. (CNN, Sept. 9)Rep. Murphy, a moderate, said she supports the use of reconciliation to enact Democrats’ economic priorities, but at this stage, she said, “I have no choice but to vote ‘no’ on each subtitle and on final passage,” she said. (Roll Call, Sept. 9)“I don’t know how much we’re spending, how much we’re raising, how we’re spending some of the money and how we’re raising any of the money,” she said. (Murphy statement, YouTube, Sept. 9) Revenue Raisers President Biden’s tax proposals that may be considered by Ways & Means include: Like-kind Exchanges (Section 1031) A coalition of 27 business organizations, including The Real Estate Roundtable, wrote to congressional tax-writing committee leadership on Sept. 7 about how Biden’s proposed legislative restrictions on like-kind exchanges, if enacted, would undermine the economic recovery while causing unintended and unnecessary risks to the strength and stability of U.S. real estate.The coalition’s letter details how like-kind exchanges under section 1031 support jobs and investment; the health of U.S. commercial real estate and real estate markets; and the preservation of family-owned farms, ranches, and forestland.Tax Notes on August 9 published an article entitled “The Tax Policy Case for Section 1031” by Roundtable Tax Policy Advisory Committee Member Don Susswein (Principal, RSM US LLP), Roundtable Senior Vice President and Counsel Ryan McCormick and Kyle Brown (Senior Manager, RSM).The article addresses how like-kind exchanges increase net investment, boost state and local tax revenue, stimulate capital expenditures which leads to job growth, reduce leverage and financial risk, lower rents for households, and support healthy property values. The article also shows how use of section 1031 also creates a ladder of economic opportunity for minority-, veteran-, and women-owned businesses and cash-poor entrepreneurs who may lack access to traditional sources of financing. Advertising messages on the need to preserve section 1031 will begin running on Sept. 13 in Politico’s Morning Money. Pass-Through Business Income Deduction (Section 199A) More than 120 business trade associations, including The Roundtable, are part of the broad-based Main St. Employers coalition, which wrote to Ways and Means Chairman Neal on Sept. 8 about new Biden tax proposals affecting individually- and family-owned businesses. (Coalition letter)The letter states, “Proposals to raise rates on pass-throughs and C corporations, cap the Section 199A deduction, increase the capital gains tax, and impose capital gains at death would raise taxes on Main Street businesses when they operate, when they are sold, and when they are passed on to the next generation.” Step-up in Basis and Taxation of Gains at Death A Sept. 9 letter to congressional tax-writing committee leadership from a large multi-industry trade association coalition that includes The Roundtable strongly opposed Biden administration proposals to death a taxable event for inherited assets and eliminating stepped-up basis.The Family Business Estate Tax Coalition letter also cited a recent EY report that showed if stepped-up basis were repealed via carryover basis, 40,000 jobs would be lost every year in the first 10 years after enactment and GDP would decrease by $50 billion over 10 years. The National Association of Realtors also weighed in on the administration’s tax proposals above in a Sept. 7 letter to leaders of the House Ways and Means and Senate Finance Committees. The letter emphasized how these the proposals could negatively impact the health of the commercial real estate market and limit the production of much-needed affordable rental housing and result in higher rent costs.Policymakers are also expected to address tax issues such as raising the capital gains rate, the 3.8% net investment income tax, and carried interest, as well as tax incentives for important priorities like affordable housing and energy efficiency. Roundtable members are encouraged to contact the Ways and Means Committee directly about the Biden tax proposals. The Roundtable and its coalition partners expect this fall will be a critical time for decisions on national tax policy affecting CRE. # # #

September 9, 2021

Policy Comment Letter

FBETC Letter to WM_9.9.21

Tax Policy

September 8, 2021

Policy Comment Letter

Joint Trades Letter Pass-Through 199A-9-8-21

Partnerships amp PassThrough Taxation,

September 7, 2021

Policy Comment Letter

Congressional 1031 ltr – FINAL 09.07.2021

September 7, 2021

Policy Comment Letter

NAR 9-7-21 letter to House Ways and Means

Infrastructure

August 27, 2021

Roundtable Weekly

House Democrats Reach Deal for $3.5 Trillion Budget Framework, Schedule September Vote on Bipartisan Infrastructure Bill

Budget Infrastructure

The House of Representatives passed a $3.5 trillion budget resolution Tuesday, after Speaker Nancy Pelosi (D-CA) promised moderate Democrats a September vote on the Senate-passed bipartisan infrastructure bill to garner their support for a framework that sets-up the “reconciliation” process. (Washington Post, Aug. 25) Why It Matters “I am committing to pass the bipartisan infrastructure bill by September 27,” Pelosi said. “We must keep the 51-vote privilege by passing the budget and work with House and Senate Democrats to reach agreement in order for the House to vote on a Build Back Better Act that will pass the Senate." (Speaker Pelosi Statement, Aug. 24; Politico, Aug. 24) A group of 10 Democratic moderates led by Rep. Josh Gottheimer (D-NJ) agreed to allow the House to consider the $3.5 trillion budget resolution – encompassing “human” infrastructure initiatives – contingent on a vote for the “physical” infrastructure bill. For the past several weeks, the moderates insisted they would not move on to the budget package unless the Senate-passed bill also received a House vote. (Roundtable Weekly, Aug. 20) The Roundtable’s summaries of issues affecting CRE that are in play as part of the “physical” and “human” infrastructure packages are available: Tax and Fiscal Reconciliation Fact Sheet Budget Reconciliation: Tax Priorities Bipartisan Infrastructure Deal Fact Sheet Pandemic Risk Fact Sheet CRE Impact The human infrastructure proposal that may be advanced in the House under budget reconciliation rules would be partially financed by raising taxes on businesses and wealthy individuals – and potentially include a variety of tax increases affecting commercial real estate (see Tax Policy story below) The Real Estate Roundtable held an all-member Infrastructure Town Hall on Aug. 12 to discuss the Senate-passed infrastructure bill, what lay ahead in the House, and the potential impact on commercial real estate. Rep. Tom Suozzi (D-NY), a member of the tax-writing House Ways and Means Committee, joined Roundtable Chair John Fish (Chairman and CEO, Suffolk), and Roundtable President and CEO Jeffrey DeBoer, for the Town Hall discussion. (Roundtable Weekly, Aug. 13) DeBoer, stated, “This [reconciliation] package may be financed with a variety of tax increases affecting step-up in basis, like-kind exchanges, carried interest and capital gains that would act as a cumulative drag on investment at the exact time when sectors of the economy need incentives to recover from the pandemic. The Roundtable urges Senate and House policymakers to be very cautious as they proceed on the reconciliation bill – so that one-step forward with the physical infrastructure bill is not met with two-steps backward from tax increases.” (Roundtable statement, Aug. 11) What’s Next Congressional committees are in the process of drafting different sections of the reconciliation package. They have a non-binding deadline of submitting their text by Sept. 15. (Axios, Aug. 24) Reconciliation would likely move in the House first. The House Budget Committee will compile each committee’s individual text into a single package for a floor vote that, if approved, would then be sent to the Senate. Getting both packages to President Biden’s desk for his signature will be a major challenge. Congressional leadership must consider demands of centrists who balk at the $3.5 trillion price tag for “social” infrastructure, and progressives who believe the $550 billion in new spending for “physical” infrastructure is not big enough to address issues such as climate change. (CNBC, Aug. 25) When Congress returns after Labor Day, policymakers will face other critical deadlines in addition to their anticipated actions on the infrastructure and reconciliation packages. Legislation is needed after the Treasury Department exhausts its “extraordinary measures” in mid-September to avoid defaulting on the national debt. Congress is also expected to consider a “continuing resolution” to put stop-gap spending measures in place before federal government funds run dry on Sept. 30. (Politico, Aug. 25)

Eviction Moratorium

August 27, 2021

Roundtable Weekly

Supreme Court Blocks CDC’s Latest Eviction Ban

Eviction Moratorium Housing

The U.S. Supreme Court struck the Biden Administration’s nationwide ban on residential tenant evictions yesterday, ruling that only Congress has the authority to enact such a moratorium through legislation. (New York Times, Aug. 27; Wall St. Journal, Aug. 27) The Legal Challenge The high court’s conservatives issued a majority, 6-3 opinion striking the latest iteration of the eviction ban issued by the Centers for Disease Control (CDC) on Aug. 3. (Roundtable Weekly, Aug. 20). “If a federally imposed eviction moratorium is to continue, Congress must specifically authorize it,” the Justices decided. The gist of the ruling is that the CDC’s public health role could not be stretched so far to encompass the federal ban. “[T]he CDC has imposed a nationwide moratorium on evictions in reliance on a decades-old statute that authorizes it to implement measures like fumigation and pest extermination,” the majority wrote. “It strains credulity to believe that this statute grants the CDC the sweeping authority that it asserts.” The majority recognized the financial burden on landlords deprived of rent payments with no guarantee of recovery. “Despite the CDC’s determination that landlords should bear a significant financial cost of the pandemic, many landlords have modest means” the majority wrote. “And preventing them from evicting tenants who breach their leases intrudes on one of the most fundamental elements of property ownership—the right to exclude.” Three justices in the Court’s liberal minority would have kept the moratorium in place due to the surge of the Delta variant. Focus on Disbursing Rental Assistance A coalition of national real estate organizations – led by the National Apartment Association and the National Multifamily Housing Council, and including The Real Estate Roundtable – has consistently opposed the CDC’s eviction ban. The groups have called upon Congress to focus on disbursing billions in unspent sums of federal rental assistance appropriated in prior COVID-19 relief bills – instead of destabilizing rental markets with a nationwide eviction ban. (Roundtable Weekly, July 30). The latest figures released by the Treasury Department this week on the status of rent relief disbursements remain disheartening. While more funds are reaching tenants and landlords, only $5.1 billion out of a total $46.5 billion in Emergency Rental Assistance has been distributed by states and localities through the end of July. (AP, Aug. 25) Roundtable President and CEO Jeffrey DeBoer commented, “Federal, state, and local policymakers must act with urgency to ensure that tenants and housing providers in distress due to the pandemic receive the aid the Congress appropriated for them – and help bring stability to our housing markets.” States have had varying levels of success in getting federal rent assistance out the door. “Texas and Virginia have distributed the largest percentages of their allocated funding at around 34% and 41% respectively, while New York State hasn't even doled out 1% of its federal rental assistance.” (U.S. News, Aug. 25). The Treasury Department has a website to help tenants and landlords find rental assistance programs in their local areas. The National Multifamily Housing Council (NMHC) also has an online hub that provides resources for renters and housing providers to access COVID-19 emergency relief. While the Supreme Court’s ruling is the end point for litigation challenging the Biden Administration’s actions, progressives in Congress could attempt to re-impose the eviction ban via legislative enactment in the coming weeks.

Tax Policy

August 27, 2021

Roundtable Weekly

Tax Proposals Under Scrutiny as Timetable Moves Up for Mammoth Reconciliation Bill

Affordable Housing Capital Gains Likekind Exchanges LikeKind Exchanges LKEs PassThroughs Tax Policy

The unanticipated commitment by Speaker Pelosi to allow a stand-alone vote on the bipartisan Senate infrastructure bill no later than September 27 has scrambled the Congressional calendar and put increased attention and focus on the potential for major tax changes. Why It Matters House Leaders are urging committees, including the powerful Ways and Means Committee, to complete their work on the $3.5 trillion budget reconciliation bill by September 15. Ways and Means Chairman Richie Neal has indicated a formal mark-up could start the week of Sept. 6 and continue 4-5 days. (E&E Daily, Aug. 25) Accelerating the consideration of the $3.5 trillion reconciliation bill may allow its supporters and advocates to retain political momentum for the massive package of social safety net, environmental, tax, and other policies—momentum that could be lost once the infrastructure bill is sent to the President. The shortened timetable, however, puts pressure on lawmakers who are considering complex changes to the tax code that would normally require hearings, extended debate, and substantial vetting. Industry Concerns The Real Estate Roundtable has raised concerns regarding a number of proposals in the President's plan that would raise the tax burden on capital formation, undermine property values and the functioning of real estate markets, and harm the industry’s ability to create jobs and support local communities through property tax revenue. These proposals include restrictions on like-kind exchanges, an elimination of the reduced tax rate on capital gains, and the taxation of unrealized gains at death. On Tuesday, the accounting industry expressed strong concerns with the President’s proposed changes to capital income. The letter noted that, “[t]he taxation of the capital gains on gift or death in many cases would be the third time that the gain is taxed.” Imposing immediate tax on transfers by gift or death is an unreasonable requirement when the transfers are non-liquid assets such as real estate, business interests, etc., because it may require the forced liquidation of some or all of the assets transferred,” they continued. Last Friday, the Tax Foundation challenged the Administration’s claim that their tax proposals would spare 97 percent of small businesses. The organization analyzed the most recent IRS data and concluded the President’s proposals would reach more than half of pass-through business income (because 54% of pass-through income is earned by taxpayers making more than $500,000). At the same time, lawmakers are mobilizing to ensure that the $3.5 trillion bill includes priorities such as increased investment in affordable housing. On Thursday, 111 House Democrats led by Reps. Suzan DelBene (D-WA) and Don Beyer (D-VA) wrote to Speaker Pelosi urging that the legislation include a significant expansion of the low-income housing tax credit. Contact Congress Real Estate Roundtable members and others are encouraged to weigh in with their lawmakers regarding the proposed tax changes and their potential impact on real estate and the broader economy.  Here are some resources: Real Estate Roundtable sample letter to Congress Real Estate Roundtable budget reconciliation tax talking points and priorities Real Estate Roundtable Tax Policy Agenda

Infrastructure

August 20, 2021

Roundtable Weekly

House Scheduled to Vote Next Week on Rule to Advance both “Physical” and “Human” Infrastructure Packages

Infrastructure

The House of Representatives will briefly return to Washington the week of Aug. 23 to vote on measures affecting the future of President Biden’s sweeping infrastructure agenda. (New York Times, Aug. 17) Two-Track ApproachA group of nine moderate Democrats led by Rep. Josh Gottheimer (D-NJ) informed House leadership on Aug. 12 that they will not support a $3.5 trillion budget resolution encompassing “human” infrastructure initiatives unless the bipartisan “physical” infrastructure bill passed by the Senate last week is approved by the House and enacted. (Bloomberg, Aug. 17 and Roundtable Weekly, Aug. 13)The moderates’ letter to House Speaker Nancy Pelosi (D-CA) stated, “Some have suggested that we hold off on considering the Senate infrastructure bill for months – until the (budget) reconciliation process is completed. We disagree. We will not consider voting for a budget resolution until the bipartisan Infrastructure Investment and Jobs Act passes the House and is signed into law.” (Politico, Aug. 13)Progressive House Democrats countered with the opposite approach, stating that they will not support the bipartisan infrastructure plan unless it is tied to the massive budget reconciliation measure, which addresses child care, health care and climate change. (Axios, Aug. 18)Pelosi this week reiterated her two-track plan to advance both measures in the House despite having just a three-vote margin majority. Republicans are expected to oppose the sprawling “human” infrastructure budget resolution. (BGov, Aug. 18) CRE Impact The human infrastructure proposal that may be advanced in the House under budget reconciliation rules would be partially financed by raising taxes on businesses and wealthy individuals – and potentially include a variety of tax increases affecting commercial real estate. The Real Estate Roundtable held an all-member Infrastructure Town Hall on Aug. 12 to discuss the Senate-passed infrastructure bill, what lay ahead in the House and the potential impact on commercial real estate. Rep. Tom Suozzi (D-NY), a member of the tax-writing House Ways and Means Committee, joined Roundtable Chair John Fish (Chairman and CEO, Suffolk), Roundtable President and CEO Jeffrey DeBoer, and other Roundtable staff for the Town Hall discussion. (Roundtable Weekly, Aug. 13 and The Roundtable's Bipartisan Infrastructure Deal Fact Sheet and Tax and Fiscal Reconciliation Fact Sheet) DeBoer, above, stated, “This [reconciliation] package may be financed with a variety of tax increases affecting step-up in basis, like-kind exchanges, carried interest and capital gains that would act as a cumulative drag on investment at the exact time when sectors of the economy need incentives to recover from the pandemic. The Roundtable urges Senate and House policymakers to be very cautious as they proceed on the reconciliation bill – so that one-step forward with the physical infrastructure bill is not met with two-steps backward from tax increases.” (Roundtable statement, Aug. 11)The Roundtable’s summaries of budget reconciliation tax issues that could directly impact commercial real estate include: Tax and Fiscal Reconciliation Fact SheetBudget Reconciliation: Tax PrioritiesBipartisan Infrastructure Deal Fact SheetPandemic Risk Fact Sheet What’s NextPelosi and House Majority Leader Steny Hoyer (D-MD) laid out a schedule for votes next Monday and Tuesday.The House is scheduled to vote Aug. 23 on a rule that governs floor debate on the $3.5 trillion budget resolution (S Con Res 14), the $550 bipartisan infrastructure bill (HR 3684) and a voting rights bill (HR 4). The chamber is then expected to vote Tuesday on the “human” infrastructure framework and the popular voting rights bill. (CQ, Aug. 16)Approval of the budget resolution would allow the development of legislation to move forward that could pass later this year under “reconciliation” rules without any Republican support. The Senate voted last week to advance the same measure. (Roundtable Weekly, Aug. 13)White House spokesman Andrew Bates this week told Bloomberg, “All three are critical elements of the President’s agenda, and we hope that every Democratic member supports this effort to advance these important legislative actions.” (Bloomberg, Aug. 17) Pelosi sent a note to her caucus this week, warning that any delay next week "jeopardizes the once-in-a-generation opportunity" to enact Biden's broader legislative priorities. (Politico, Aug. 17) # # #

Eviction Moratorium

August 20, 2021

Roundtable Weekly

Eviction Moratorium Appeal Denied; Supreme Court Challenge Expected

Eviction Moratorium

The D.C. Circuit Court today allowed the Biden administration’s latest federal eviction moratorium to remain in effect, denying an Aug. 14 emergency appeal by the Alabama and Georgia Associations of Realtors to overturn the ban. (Politico and Wall Street Journal, Aug. 20) The Legal Challenge The Realtor groups’ challenge was filed immediately after a federal judge’s ruling allowed the latest eviction moratorium – effective through Oct. 3 – to remain in place until higher courts decide its legality. (Wall Street Journal and Law.com, Aug 13) The White House stated its latest moratorium from the Centers for Disease Control and Prevention (CDC) is targeted toward areas that have experienced substantial or high levels of Covid-19 transmission. (CDC news release and Wall Street Journal, Aug. 4). The extension would also allow more time for billions in rent relief appropriated by Congress to reach tenants and landlords. (Time, Aug. 3)Previously, the U.S. Supreme Court ruled that an earlier CDC eviction ban could remain in effect through its expiration on July 31, yet indicated the federal agency had overstepped its authority. Justice Kavanaugh wrote in the high court’s 5-4 decision that another extension would require “clear and specific” legislation from Congress. (New York Times, June 29) When Congress could not muster last-minute support in late July to pass an extension, the CDC issued its latest moratorium on Aug. 3. (NBC News and Roundtable Weekly, July 30) Impact on Housing Providers A coalition of 15 national real estate organizations – including The Real Estate Roundtable – sent a letter on July 29 to all members of Congress strongly opposing another moratorium extension. The joint letter called for policymakers to focus on disbursing billions in unspent sums of federal rental assistance appropriated in prior COVID-19 bills – instead of destabilizing rental markets with a legislative eviction moratorium. (Roundtable Weekly, July 30)A massive logjam in states’ disbursement of federal rental aid to tenants and housing providers has compounded the negative economic impact of the eviction moratorium. A National Rental Home Council survey issued in March showed that approximately 23 percent of small landlords leasing single-family rentals were forced to sell at least one, if not all of their properties.Politico also reported on Aug. 14 that nearly 59 percent of tenant households who are behind on rent live in properties with between one and four units – and that 72 percent of those properties are operated by mom-and-pop landlords. The Realtors’ current attempt to end the moratorium, considered this week by the D.C. Circuit Court of Appeals, is likely to be appealed to the Supreme Court next week. # # #

Infrastructure

August 13, 2021

Roundtable Weekly

Senate Passes Historic Bipartisan Infrastructure Legislation

Infrastructure

The Senate on Aug. 10 passed a historic, bipartisan $1 trillion+ infrastructure bill that would allocate $550 billion in new spending to improve the nation’s transit, utilities and broadband. The Infrastructure Investment and Jobs Act (H.R. 3684) was approved 69-30, with support from all Democrats and 19 Republican Senators, including Minority Leader Mitch McConnell (R-KY). (Wall Street Journal and New York Times, Aug. 10) Why it Matters Real Estate Roundtable Chair John Fish (Chairman and CEO, Suffolk) on Aug. 11 commented, “With the Senate’s passage of this bill, we are one step closer to realizing a once-in-a-generation opportunity to rebuild and reimagine the buildings of tomorrow. We applaud both this historic investment in our nation's infrastructure, and the members of Congress who have reached across the aisle to find common ground.” Real Estate Roundtable President Jeff DeBoer added, “By devoting more than a trillion dollars toward American infrastructure projects, this long-term investment in the nation’s roads, bridges, mass transit, high-speed rail, broadband, power grid, water pipes, and electric vehicle charging will prompt positive, transformational change for our communities and citizens.” (Roundtable statement, Aug 11)The Roundtable held an all-member Infrastructure Town Hall on Aug. 12 to discuss the Senate bill, its prospects in the House and what it means for commercial real estate. Rep. Tom Suozzi (D-NY), a member of the tax-writing House Ways and Means Committee, joined Roundtable Chair John Fish, Jeffrey DeBoer and other Roundtable staff for the Town Hall discussion. (See Tax Policy story below and The Roundtable’s Bipartisan Infrastructure Deal Fact Sheet)Roundtable policy specialists also briefed members of the CREW (Commercial Real Estate Women) Network on Aug. 11 about how the infrastructure legislation could potentially impact CRE. BID Details The 2,700-page Senate bill evolved from bullet points to legislation after a painstaking journey of more than a month by a group of bipartisan senators who negotiated with the Biden Administration. (Politico and Senate Group Joint Statement, Aug. 10)President Biden remarked about the Senate bill, “Forecasters on Wall Street project that over the next 10 years our economy will expand by trillions of dollars, and [the legislation] will create an additional 2 million jobs.” (White House Remarks, Aug. 10)The amounts that would be invested by the “Bipartisan Infrastructure Deal” (BID) to various infrastructure categories are listed in White House summaries and The Roundtable’s BID Fact Sheet. The BID seeks no tax increases on families or businesses as “pay-fors.”The Senate bill includes Roundtable-supported measures that will utilize public-private partnerships to reach ‘physical’ infrastructure goals, streamline the federal permitting process, and improve key federal energy data used in EPA building labels.What’s Next The Senate’s “physical” infrastructure package now goes to the House.House Speaker Nancy Pelosi (D-CA) has insisted that she will not bring up the Senate’s “physical” infrastructure bill until the Senate also passes a sprawling $3.5 trillion “human” infrastructure bill with funding for climate programs, health care, education and child care. (New York Times, Aug. 10). Majority Leader Steny Hoyer (D-MD) announced the House will interrupt its summer recess and return to session on Aug. 23 to consider the Senate-passed budget resolution that Democrats have insisted is a precursor to votes on the bipartisan infrastructure deal. (NBC News, Aug. 10) (See “reconciliation” story below) # # #

Tax Policy

August 13, 2021

Roundtable Weekly

Senate Democrats Pass Budget Resolution that Would Authorize $3.5 trillion “Human Infrastructure” Bill with Large Tax Increases

Infrastructure Tax Policy

Senate Democrats voted August 11 to advance a $3.5 trillion “human infrastructure” budget resolution, which allows development of legislation that could pass later this year without any Republican support. The budget blueprint passed on a party-line vote of 50-49 the day after the Senate passed a $1.2 trillion “physical infrastructure” bill on a bipartisan basis. (BGov, Aug 11 and Roundtable Weekly, story above) Why It Matters The Senate budget resolution supports President Biden’s wide-ranging domestic priorities that aim to expand the federal social safety net and combat climate change. (New York Times and The Hill, Aug. 11)The sprawling human infrastructure proposal would be partially financed by raising taxes on corporations and wealthy individuals – and potentially include a variety of tax increases affecting commercial real estate.The Senate measure also provided instructions for various committees to craft bills under “reconciliation” budget rules. If approved by the Senate Parliamentarian, the committees’ work would be combined into final legislation that could pass on a majority vote, thereby bypassing a Republican filibuster. (Senate Democratic Memorandum, Aug. 9)The House announced this week that it will return early from summer recess on Aug. 23 to consider the budget resolution. (Associated Press and CQ, Aug. 11)House Speaker Nancy Pelosi (D-CA) reiterated on Aug. 11 that until the Senate finishes and passes the massive reconciliation bill, the House will not vote on the physical infrastructure legislation. Other Members of the Democratic Caucus, including Rep. Josh Gottheimer (D-NJ), co-chair of the bipartisan Problem Solvers Caucus, have called on Congressional Leaders to decouple the measures and send the bipartisan infrastructure bill to the President without delay. (Politico, Aug. 11 and The Hill, Aug. 11) Taxes & CRE Roundtable President and CEO Jeffrey DeBoer commented on the Senate’s $3.5 trillion reconciliation bill and the tax proposals under consideration. DeBoer on Aug 11 stated, “This [reconciliation] package may be financed with a variety of tax increases affecting step-up in basis, like-kind exchanges, carried interest and capital gains that would act as a cumulative drag on investment at the exact time when sectors of the economy need incentives to recover from the pandemic. The Roundtable urges Senate and House policymakers to be very cautious as they proceed on the reconciliation bill – so that one-step forward with the physical infrastructure bill is not met with two-steps backward from tax increases.” (Roundtable statement, Aug. 11)The Roundtable this week produced a summary of budget reconciliation tax issues that could directly impact commercial real estate, including: Like-Kind ExchangesCapital GainsPass-through Business IncomeStep-up in Basis and Taxation of Gains at DeathCarried InterestEnergy Efficiency IncentivesAffordable Housing Incentives During the Senate’s extensive Aug. 11 debate on the budget resolution, a nonbinding amendment to preserve the current law tax treatment of like-kind exchanges passed on a unanimous, voice vote. Watch the debate and vote on the like-kind exchange amendment here. Roundtable Infrastructure Town Hall The Roundtable held an all-member Infrastructure Town Hall on Aug. 12 to discuss the Senate reconciliation measure and what it means for commercial real estate. Rep. Tom Suozzi (D-NY), a member of the tax-writing House Ways and Means Committee, center in photo, joined Roundtable Chair John Fish, top right, Jeffrey DeBoer, top left, and other Roundtable staff for the Town Hall discussion. The Roundtable Town Hall addressed many intertwined policy issues in both infrastructure packages that are summarized in the following Roundtable documents: : Tax and Fiscal Reconciliation Fact SheetBudget Reconciliation: Tax PrioritiesBipartisan Infrastructure Deal Fact SheetPandemic Risk Fact Sheet A link to the Town Hall will be sent to all Roundtable members next week. The Roundtable’s website also features links to find your members of Congress to send your views on the infrastructure proposal’s potential impact on CRE tax priorities, along with talking points. The congressional debate on infrastructure is expected to extend into the fall, when policymakers face multiple other deadlines that converge on Sept. 30 – government funding for FY2022, reauthorization of funding for surface transportation programs, and reauthorization of the National Flood Insurance Program. The Roundtable is scheduled to discuss all these issues at its Fall Meeting on Oct. 5 in Washington, DC (Roundtable-level members only). # # #

News

August 13, 2021

Roundtable Weekly

Commercial Real Estate Leaders Report Improving Market Conditions Amid Uncertain Return-to-Office Trends

Quarterly Sentiment Index

Commercial real estate executives report improving market conditions, through consistent growth of various asset classes, despite uncertainty surrounding employees returning to the office, according to The Real Estate Roundtable’s Q3 2021 Economic Sentiment Survey released today. The report shows the continued positive momentum for industrial, multifamily and single-family assets, with hospitality continuing to improve with increased travel. Market Conditions“As the commercial real estate industry continues to adapt in the face of the global pandemic, we recognize the changing demands and expectations for hospitality, shopping centers, office buildings, travel and convening spaces,” said Real Estate Roundtable President and CEO Jeffrey DeBoer. “Strong, stable and growing real estate markets can be a driving force for the nation’s economic recovery, and contribute productively to a world struggling to overcome COVID and its variants. Investment in these reimagined spaces presents the opportunity to move the economy forward for the benefit of all Americans.” The Roundtable’s Q3 Current Conditions Index of 85 increased 7 points from the previous quarter, the highest index recorded in its thirteen year history. The Economic Sentiment Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive. The Roundtable’s Overall Q3 2021 Sentiment Index registered at 78 – a one-point increase from the previous quarter. The Roundtable’s quarterly survey shows that 89 percent of respondents believe that general market conditions today are “much better or somewhat better” versus one year ago – with an abundance of available capital compared to one year ago.However, this quarter’s Future Conditions Index of 71 decreased 4 points compared to last quarter, indicating uncertainty still remains while the country continues to recover from the COVID-19 crisis.Topline Findings:The Q3 2021 Real Estate Roundtable Sentiment Index registered a score of 78, an increase of 1 point from the second quarter of 2021 and a 36-point increase over Q3 2020. The speed of the economic recovery compared to only 6 months ago has provided more clarity and certainty for specific asset classes, with the biggest looming question marks being the impact of employees returning to the office and rising inflation risk. Industrial performed exceptionally well throughout the pandemic and has maintained positive momentum through the first half of 2021. Additionally, multifamily and single-family suburban assets continue to attract strong demand. Previously challenged assets such as hospitality have rebounded and remain hopeful to reach pre-pandemic levels with increased travel and employees returning to the office. Assets classes with durability or the perception of durability such as high-quality multifamily, long-term net lease office, and industrial have all hit record levels, all while certain sectors and regional markets (in particular, those relying heavily on mass transit) have yet to fully recover. Respondents cited a continued abundance of available debt and equity capital, which has led to significant amounts of capital sitting on the sidelines waiting for attractive deployment opportunities.DeBoer also noted, "Historically, the real estate industry has played a pivotal role in catalyzing economic recovery following national and worldwide events, and we have the opportunity to play that role again. With the recent infrastructure policy developments in Washington, it is a once-in-a-generation opportunity to rebuild cleaner, safer, and more climate-friendly buildings. With private capital readily available for investment, we are hopeful federal and public private partnerships will continue to fuel job creation and equitable economic development needed to continue the progress made in the economic recovery.”Data for the Q3 survey was gathered in July by Chicago-based Ferguson Partners on The Roundtable’s behalf. For the full Q3 report, visit here.# # #

Affordable Housing

August 11, 2021

Policy Comment Letter

Housing Affordability Coalition Urges Representatives to Support Efforts to Increase Housing Supply

Affordable Housing, Housing,

Infrastructure

August 6, 2021

Roundtable Weekly

Senate Vote on Bipartisan “Physical” Infrastructure Deal Expected Soon, Laying Groundwork to Consider “Human” Infrastructure on Separate Track

Infrastructure

The Senate processed amendments this week on bipartisan legislation for hundreds of billions in new investments in the nation’s “physical” infrastructure. Majority Leader Chuck Schumer (D-NY) pushed to continue votes this weekend on the bipartisan measure – with further plans next week to separately consider an anticipated $3.5 trillion budget resolution for “human infrastructure” designed to pass with only Democratic support. (BGov, Aug. 6) Bipartisan “Physical” Infrastructure Deal The Senate’s Bipartisan Infrastructure Investment and Jobs Act ( text as of Aug. 3 | section-by-section – also known as the “Bipartisan Infrastructure Deal” (BID) – proposes $550 billion in new infrastructure investment. Summaries and fact sheets from the Biden Administration break down the amounts invested in the BID’s various infrastructure categories. The bipartisan deal is estimated to create around 2 million jobs per year over the next decade. The bill needs 60 votes to pass in the Senate, requiring support from at least 10 Republicans. The BID includes no new tax increases. Most of its proposed “pay-fors” involve repurposing previously enacted COVID relief funds. Senate policymakers struggled to complete work on the bipartisan deal this week amid concerns over taxation on cryptocurrency and yesterday’s release of a score by the Congressional Budget Office score, estimating the bill would add $256 billion to the deficit over 10 years. (Politico, Aug. 5; Wall Street Journal, Aug 6; The Washington Post, Aug. 6) The BID, Real Estate, and Community Development The Real Estate Roundtable has summarized elements of the BID of particular interest to real estate owners and community developers, that align with The Roundtable’s longstanding infrastructure policies. ["Spending and Other Provisions Pertinent to Real Estate and Community Development"] The Roundtable’s summary addresses the BID’s provisions for: Billions of proposed investments in various infrastructure asset classes dedicated to roads, bridges, mass transit, high-speed rail, broadband, the power grid, water pipes, and electric vehicle charging; Supporting public-private partnerships; Streamlining the federal permitting process; and Improving the key federal energy data that supports EPA building labels (Roundtable Weekly, July 16) “Human” Infrastructure Package If the BID legislation is approved, it would prompt the Senate to move to a $3.5 trillion budget plan that includes President Biden’s wide-ranging domestic priorities supporting “human infrastructure.” No Republicans are expected to support the $3.5 trillion measure. Democrats must first pass a joint budget resolution to avoid a Senate filibuster, that authorizes the use of special “reconciliation” rules and sets a course for passage on a party-line vote Senate Budget Committee Chairman Bernie Sanders (D-VT), above, signaled that the reconciliation package would include spending for health care, child care, education, paid family and medical leave, and affordable housing. Reconciliation is also expected to address immigration and climate change matters. ( Wall Street Journal, Aug. 3) After Labor Day, Democratic members are expected to meet to decide on which provisions to include in the human infrastructure package, including tax increases on businesses and individuals. # # #

Eviction Moratorium

August 6, 2021

Roundtable Weekly

CDC Issues New Eviction Moratorium Until Oct. 3; Realtor Groups File Legal Challenge

Eviction Moratorium

The Biden administration reversed course this week and issued a new federal eviction moratorium on Aug. 3, responding to pressure from progressive Democrats to allow more time for billions in rent relief appropriated by Congress to reach tenants and landlords. (CDC news release and Wall Street Journal, Aug. 4) New 60-Day Eviction Ban The new ban from the Centers for Disease Control and Prevention (CDC) is in effect until Oct 3. It applies to about 80% of U.S. counties with “substantial” or “high” COVID-19 transmission rates, and covers about 90% of the U.S. population. ( Reuters, Aug 4 and CDC order, Aug. 3) The previous eviction moratorium expired on July 31. A U.S. Supreme Court majority in June indicated the federal-level ban exceeded CDC’s authority. President Biden initially stated that the Supreme Court’s action prevented another CDC extension, and called on Congress to pass 11th-hour legislation establishing a new moratorium. House Democrats last Friday failed to muster enough last-minute votes to pass an extension. ( The Hill, July 30; Roundtable Weekly, July 30) Legal Challenge Redux Upon the Administration’s about-face in issuing the new moratorium, President Biden said it is “likely to face obstacles” in court. (White House remarks, Aug. 3 and Associated Press, Aug. 4) The latest eviction ban prompted the Alabama and Georgia Associations of Realtors to file an emergency motion in D.C. federal trial court before the same judge who previously ruled that the CDC had overstepped its authority in imposing the first eviction moratorium. (Politico and Washington Post and National Association of Realtors’ statement, Aug. 4) Need to Accelerate Federal Rent Assistance The Realtor groups’ motion adds more pressure on state and localities to distribute billions allocated by federal policymakers to assist renters and housing providers – an effort that has faced severe bottlenecks and delays. Only 6.5 percent of $46.5 billion allocated by Congress for rental aid has found its way to state and localities in the first half of 2021, according to a recent Treasury Department report. (Washington Post, July 21 and Bloomberg and July 22) Treasury’s Emergency Rental Assistance program, overseen by Senior Advisor to the President Gene Sperling, now faces a 60-day race for states and localities to distribute funds to tenants and landlords while the newest CDC order is in effect. Sperling stated during an Aug. 2 White House press conference that the Emergency Rental Assistance is “so important [because] it helps struggling landlords and struggling tenants. It can pay up to 18 month, forward or backwards, of back rent or back utilities. So, it is a way to make a landlord, who is struggling, whole, while also keeping that tenant and their family safe and secure.” # # #

Roundtable Leadership

August 6, 2021

Roundtable Weekly

Roundtable Elects FY 2022 Leadership; 2021 Annual Report Released

Roundtable Leadership

The Real Estate Roundtable this week announced its new FY2022 leadership, with John F. Fish (Chairman & CEO, Suffolk), above, elected as Chair for a three-year term starting July 1, 2021 – following an effective, productive term by Immediate Past Chair Debra A. Cafaro (Chairman & CEO, Ventas, Inc.). The Roundtable’s membership also approved a 22-member Board of Directors and committee officers. ( Roundtable news release, Aug. 5) Policy Leaders “I am honored and humbled to assume this new role at such a pivotal moment for the real estate industry. Our communities are facing a host of challenges – from unprecedented political polarization, to the growing threat of climate change, to the comeback from the global pandemic – but where we see obstacles ahead, we also see opportunity to expand jobs, provide housing, and assist businesses evolve in the post-Covid economy,” said John Fish, Real Estate Roundtable Chair. Fish also recently discussed infrastructure issues, the impact of the pandemic on commercial real estate and the industry’s leadership role in national policy issues with Roundtable member Willy Walker (Chairman and CEO of Walker & Dunlop) on the Walker Webcast. (Bisnow and Connect, July 21 and Roundtable Weekly, July 23) The Roundtable’s Immediate Past Chair, Debra Cafaro noted, “It has been an honor and privilege to serve as chair for the last three years, and I am delighted to pass the baton to my friend and colleague John Fish. John is uniquely well-positioned to lead this organization as we move forward with the issues of economic recovery from the pandemic, job creation, sustainability, infrastructure and tax policy, which are at the forefront of policy debates in Washington.” Photo - center: Debra Cafaro, top right: John Fish, top left: Jeffrey DeBoer Cafaro was recently recognized as a “Diversity Champion” for her efforts with The Roundtable and her company Ventas on equity, diversity and inclusion by Real Estate Forum magazine in their “Women of Influence” July-August issue. The Forum’s sister publication, GlobeSt.com, also featured the award winners. Roundtable President and CEO Jeffrey DeBoer commented, “We are committed to sustainable national policies that reinforce and expand long-term economic growth and opportunities for all, spur job creation and encourage capital formation.” DeBoer added, “The real estate industry provides jobs for tens of millions of people, is a significant source of revenue for local governments to help fund schools, hospitals and much needed community services, and is a key investment allocation for pensions and other retirement savings funds. I thank Debra for her leadership, and look forward to working closely with our new chair John Fish on these policy issues and to continuing The Roundtable’s fact-based, data driven advocacy work.” The Roundtable recently released its 2021 Annual Report, which shows its effective policy activities in the areas of tax … capital and credit … housing and infrastructure … energy and climate … and homeland security. The publication’s introduction also addresses The Roundtable’s path ahead as the industry seeks to emerge out of the pandemic stronger than ever. Roundtable Board and Committee Leadership The 22-member FY2022 Roundtable Board of Directors is elected from the membership and includes three elected leaders of national real estate trade organizations from The Roundtable’s 19 partner associations. See The Roundtable leadership news release for a complete list of outgoing and incoming Board members as well as committee leaders. The Roundtable’s FY 2022 Committee Leadership was also announced for the following policy advisory committees: Equity, Diversity and Inclusion (E,D&I) Committee Homeland Security Task Force (HSTF) Real Estate Capital Policy Advisory Committee (RECPAC) Research Committee Sustainability Policy Advisory Committee (SPAC) Tax Policy Advisory Committee (TPAC) The Roundtable’s membership represents over 3 million people working in real estate; some 12 billion square feet of office, retail, and industrial space; over 2 million apartments; and more than 3 million hotel rooms. It also includes senior, student and manufactured housing as well as medical office, life science campuses, data centers, cell towers, and self-storage properties. The collective value of assets held by Roundtable members exceeds $3 trillion. # # #

Tax Policy

August 6, 2021

Roundtable Weekly

House Republicans Urge Biden Administration to Preserve Like-Kind Exchanges

LikeKind Exchanges LKEs Tax Policy

A group of 88 House Republicans, led by Rep. Randy Feenstra (R-IA), above, sent a letter to President Joe Biden on Aug. 3 urging him “not to damage the livelihood of farmers everywhere by repealing or changing like-kind exchanges.” ( Coalition letter and Feenstra news release) Agriculture Sector Impact Like-kind exchanges (LKEs) allow real estate, farming, and other businesses to defer capital gain when exchanging real property used in a trade or business for property of a like kind. Like-kind exchanges also help businesses to grow organically, with less debt, by reinvesting gains on a tax-deferred basis in new and productive assets. President Biden has proposed restricting the use of LKEs by limiting deferred gain in any one year to no more than $500,000 for single taxpayers and $1 million for married taxpayers. (Treasury Department’s Summary of Revenue Proposals, “Green Book” budget documents, and Roundtable Weekly, April 30) The coalition of House policymakers emphasized in their Aug. 3 letter how LKEs allow farmers and other small business owners to improve their operations and invest in better income-producing properties. The letter noted that four out of five individuals who utilize these tax deferments are qualified as small investors by the IRS. The letter stated, “For the agricultural community, a cap on like-kind exchanges would limit farmers' ability to improve their operations through combining acreage, purchasing more productive land, and mitigating environmental impacts. Further, capping likekind exchanges could make it more difficult to restructure businesses so that young or beginning farmers can join operations. Retiring farmers could be prevented from using like-kind exchanges to exchange their farm or ranch for other real estate, allowing for the next generation to take over, without depleting their life savings.” The 88 policymakers also commented how the negative impact of the administration’s LKE proposal would radiate outward from individual farm owners and agricultural investors into the larger agricultural sector and the national economy at large. Roundtable’s Strong Support for LKEs On May 27, a broad business coalition that included The Real Estate Roundtable held a virtual briefing for members of Congress and their staff on the longstanding economic importance of LKEs – and detailed the potential negative unintended consequences of limiting section 1031. (Roundtable Weekly, May 28) The briefing, moderated by Roundtable President and CEO Jeffrey DeBoer, included expert speakers and featured recent research into the macro-economic impact of LKEs. (See “The Tax and Economic Impacts of Section 1031 Like-Kind Exchanges in Real Estate” by Professor Milena Petrova and Dr. David Ling) On May 18, The Roundtable and others submitted detailed comments to the Senate Finance and House Ways and Means Committees on like-kind exchanges and other pending tax issues. (Roundtable Weekly, May 21). Additionally, in March, The Roundtable and 30 national real estate, housing, environmental, farming, ranching, and forestry organizations wrote to key policymakers to underscore the vital importance of real estate like-kind exchanges. (Roundtable Weekly, March 19) The coalition “1031 Builds America” provides an online method for stakeholders to share their experiences with LKEs with members of Congress, and urge them to preserve Section 1031. # # #

Roundtable Leadership

August 5, 2021

Press Release

The Real Estate Roundtable Elects FY 2022 Leadership

Board of Directors Roundtable Leadership

John Fish is New Chair of Roundtable Board of Directors; Debra Cafaro Commended for her Effective Three Years as Roundtable Chair (WASHINGTON, D.C.) — The Real Estate Roundtable today announced its new FY2022 leadership, with John F. Fish (Chairman & CEO, Suffolk) elected as Chair for a three-year term starting July 1, 2021 – following an effective, productive term by Immediate Past Chair Debra A. Cafaro (Chairman & CEO, Ventas, Inc.). The Roundtable’s membership also approved a 22-member Board of Directors and committee officers. “I am honored and humbled to assume this new role at such a pivotal moment for the real estate industry. Our communities are facing a host of challenges – from unprecedented political polarization, to the growing threat of climate change, to the comeback from the global pandemic – but where we see obstacles ahead, we also see opportunity to expand jobs, provide housing, and assist businesses evolve in the post-Covid economy,” said John Fish, Chair of the Real Estate Roundtable. “The Real Estate Roundtable and its members have a tremendous legacy of stepping up during difficult times, and I look forward to working alongside my colleagues and leaders from business and government to build on the great work that is already underway. Together, we can continue to leverage our knowledge and resources to have a positive impact on our industry and the world.” “We are committed to sustainable national policies that reinforce and expand long-term economic growth and opportunities for all, spur job creation and encourage capital formation,” said Jeffrey D. DeBoer, Roundtable President and CEO. “The real estate industry provides jobs for tens of millions of people, is a significant source of revenue for local governments to help fund schools, hospitals and much needed community services, and is a key investment allocation for pensions and other retirement savings funds. I thank Debra for her leadership, and look forward to working closely with our new chair John Fish on these policy issues and to continuing The Roundtable’s fact-based, data driven advocacy work.” The Roundtable’s Immediate Past Chair, Debra Cafaro noted, “It has been an honor and privilege to serve as chair for the last three years, and I am delighted to pass the baton to my friend and colleague John Fish. John is uniquely well-positioned to lead this organization as we move forward with the issues of economic recovery from the pandemic, job creation, sustainability, infrastructure and tax policy, which are at the forefront of policy debates in Washington.” Key Background: The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy. The 22-member FY2022 Board is elected from the membership and includes three elected leaders of national real estate trade organizations from The Roundtable’s 19 partner associations. Under Mr. Fish’s leadership, Suffolk has grown into one of the leading privately held general building contractors in the country. With approximately $4 billion in annual revenue, Suffolk is currently ranked #23 on the Engineering News-Record national list of “Top 400 Contractors.” Mr. Fish is also fixture on numerous boards focused on improving the economy, strengthening business and creating jobs, and has served on The Roundtable’s Board of Directors since 2017. The Roundtable’s business and trade association leaders seek to ensure a cohesive industry voice is heard by government officials and the public about real estate and its important role in the global economy. Joining The Roundtable’s Board of Directors as of July 1 are: Geordy Johnson, CEO, Johnson Development Associates, Inc. Brian Kingston, Managing Partner and Chief Executive Officer, Brookfield Property Partners Kara McShane, Head of Commercial Real Estate, Wells Fargo Mark J. Parrell, President & Chief Executive Officer, Equity Residential, Member, National Multifamily Housing Council See the complete list of the FY2022 Roundtable’s Board of Directors here. Stepping down from The Roundtable Board as of July 1 are: Shelby Christensen, Chair and Chief Elected Officer, Building Owners & Managers Association, International Richard B. Clark, Managing Partner, WatermanCLARK Charlie Dawson, Vice President, National Association of REALTORS® Robert R. Merck, Senior Managing Director and Global Head of Real Estate, MetLife Investment Management William C. Rudin, Co-Chairman and CEO, Rudin Management Company, Inc. Chairman Emeritus, The Real Estate Roundtable For FY 2022, The Roundtable’s Committee Leadership will be: Equity, Diversity and Inclusion Committee Jeff T. Blau (Related Companies) continues as chair The Homeland Security Task Force (HSTF) will be co-chaired by Amanda S. Mason (Related Companies) and Keith Wallace (Marriot International) The Real Estate Capital Policy Advisory Committee (RECPAC) will be co-chaired by: Kathleen Sullivan Farrell (Truist), Gregg Gerken (TD Bank), and Michael H. Lowe (Lowe) The Research Committee will be co-chaired by: Spencer Levy (CBRE) and Paula Campbell Roberts (KKR) The Sustainability Policy Advisory Committee (SPAC): Anthony E. Malkin (Empire State Realty Trust) continues as chair, Daniel Egan (Vornado Realty Trust) continues as co-vice chair Ben Myers (Boston Properties) is a new co-vice chair The Tax Policy Advisory Committee (TPAC): Frank G. Creamer, Jr. (FGC Advisors, L.L.C.) continues as chair Catherine Perrenoud (Johnson Management, LLC) is the new vice chair The Roundtable’s membership represents over 3 million people working in real estate; some 12 billion square feet of office, retail, and industrial space; over 2 million apartments; and more than 3 million hotel rooms. It also includes senior, student and manufactured housing as well as medical office, life science campuses, data centers, cell towers, and self-storage properties. The collective value of assets held by Roundtable members exceeds $3 trillion. # # #

Infrastructure

July 30, 2021

Roundtable Weekly

Senate Advances Trillion Dollar Bipartisan “Physical” Infrastructure Deal as Democrats Push Separate $3.5 Trillion “Human” Infrastructure Package

Infrastructure

The Senate on July 28 voted to advance a $1 trillion infrastructure package that would allocate $550 billion in new spending toward transit, utilities and broadband. The plan, which has not been translated into final legislation yet, was the result of a breakthrough in month-long negotiations between a bipartisan group of senators and President Biden. (White House Fact Sheet, July 28 | E&E Daily, July 29 | Roundtable Weekly, June 25) Historic Step Forward The Senate vote of 67-32 included the support of 17 Republicans and all 50 Democrats – and kick-started the process of debating and amending the measure, which could draw enough support to pass the Senate next week. (BGov, July 29)Real Estate Roundtable President and CEO Jeffrey DeBoer yesterday stated, “The Real Estate Roundtable strongly supports the bipartisan agreement on infrastructure reached by the White House and senators this week – and we applaud the continued hard work of policymakers to work across the aisle to create legislation that will revitalize our economy and keep us globally competitive. The trillion-dollar+ infrastructure package is a positive, historic step forward. We look forward to its enactment and the well-paying jobs it will create, the economic growth it will spur on, and how it will benefit our long-term national competitiveness and productivity.” (Read DeBoer’s full statement, July 29)Roundtable Chair John Fish (Chairman & CEO, Suffolk) and 11 other Roundtable members joined more than 100 business leaders in a July 26 letter to Congress that urged policymakers to pass the bipartisan infrastructure package. (The Hill, July 28)The letter noted, “New jobs generated by investment in the nation’s mass transit, roads, bridges, airports, broadband and other essential assets will create training and re-employment opportunities for millions of Americans who lost jobs during the pandemic. The public-private initiatives that are created will accelerate recovery from losses suffered due to COVID-19.” (Business leaders’ joint letter, July 26) Infrastructure Package & CRE The sweeping bipartisan plan would focus federal funds on physical infrastructure over five years for roads, bridges, rail, public transit, the power grid, water and broadband. (New York Times, July 28, “The Infrastructure Plan: What’s In and What’s Out” and Committee for a Responsible Federal Budget, July 29, “What's in the Bipartisan Infrastructure Investment and Jobs Act?)The bipartisan package would also incorporate a bill passed by the Senate Energy Committee on July 15 that proposes spending more than $100 billion on energy initiatives, includes measures affecting commercial real estate. (Roundtable Weekly, July 16 and Reuters, July 14) The Energy Infrastructure Act, introduced by Committee Chairman Joe Manchin (D-WV) includes provisions that would create an avenue for Congressional oversight to improve the Commercial Building Energy Consumption Survey (CBECS) – the key data set collected by the federal government on the basic characteristics of US commercial buildings, and how much energy they consume. (Roundtable Weekly, July 16)Pay-Fors & Timing Miller & Chevalier reported on July 28 that the bipartisan plan’s wide-ranging infrastructure investments would be paid from a variety of sources, including: certain unused COVID relief dollars; certain states returning unused federal unemployment insurance aid; sales of future spectrum auctions; extending fees on GSEs; economic growth resulting from a 33 percent return on investment in long-term infrastructure projects; and information reporting requirements related to cryptocurrency.Senate Majority Leader Chuck Schumer (D-NY), above, would need 60 votes in the upper chamber to avoid a Republican filibuster and pass the Bipartisan Infrastructure Investment and Jobs Act. Those votes would likely come from all 50 members of his caucus and at least 10 Republicans. (PoliticoPro, July 29)“My goal remains to pass both the bipartisan infrastructure bill and a budget resolution during this work period. Both,” he said. “It might take some long nights. It might eat into our weekends. But we are going to get the job done, and we are on track.” Although the Senate’s recess is scheduled to start Aug. 9, Schumer has said he could keep the chamber in session longer to pass the measures. (New York Times, July 29) “Human” Infrastructure Package The Biden administration’s separate $3.5 trillion “human infrastructure” plan to invest in child care, paid leave, education and measures to curb climate change is traveling along a parallel budget “reconciliation” path – a process that would require the vote of every Senate Democrat to pass the bill without any Republican votes. (CNBC, July 29)Senate Budget Committee Chairman Bernie Sanders (I-VT) on July 28 said he has the 50 votes to pass a broad budget resolution next week that would lead to consideration of the package, according to Bloomberg. Sanders added, “It is my absolute conviction that you’re not going to have a bipartisan bill unless you have a reconciliation bill of $3.5 trillion.”However, Sen. Kyrsten Sinema (D-AZ) – the lead Democratic negotiator on the bipartisan infrastructure bill – this week told the Arizona Republic, “I have also made clear that while I will support beginning this process, I do not support a (reconciliation) bill that costs $3.5 trillion – and in the coming months, I will work in good faith to develop this legislation with my colleagues and the administration to strengthen Arizona's economy and help Arizona's everyday families get ahead.” (CNN, July 28) In the House of Representatives, Speaker Nancy Pelosi (D-CA) has insisted she will not consider either the infrastructure bill or budget measure until the Senate passes both. (CNBC, July 29) # # #

Eviction Moratorium

July 30, 2021

Roundtable Weekly

Imminent Expiration of CDC Eviction Moratorium Prompts White House, FHFA Actions to Protect Tenants; Real Estate Groups Counter 11th Hour Attempts at Extension

Eviction Moratorium

The Biden Administration took steps this week to protect tenants at risk of eviction for non-payment of rent. (PoliticoPro, July 28). Announcements from the White House and the Federal Housing Finance Agency (FHFA) were prompted by the anticipated July 31 expiration of the national moratorium on residential tenant evictions – first enacted by Congress in March 2020, then extended by the Centers for Disease Control (CDC), and scheduled to sunset tomorrow. (Roundtable Weekly, June 25)Congressional Action In response to the CDC moratorium’s expected lapse, Congressional Democrats today pursued an 11th hour attempt to resuscitate the eviction ban through legislation. The Hill reported late today that efforts to extend the federal moratorium "fell far short amid resistance from moderates and housing industry groups." House Speaker Nancy Pelosi (D-CA) subsequently urged the CDC to unilaterally extend the current moratorium again. Politico reported earlier today that House Democrats were considering extending the moratorium to mid-October – and that there was not a plan yet to get the vote through Senate Republicans. A coalition of 15 national real estate organizations – including The Real Estate Roundtable – sent a letter today to all members of Congress strongly opposing another moratorium extension. The joint letter called for policymakers to focus on disbursing the vast unspent sums of federal rental assistance appropriated in prior COVID-19 bills – instead of destabilizing rental markets with a new legislative eviction moratorium.Roundtable President and CEO Jeffrey DeBoer commented, “In the first half of this year, Congress rightly appropriated more than $45 billion for rental assistance, but so far states have distributed less than 10 percent of that assistance. If the moratorium is extended, it needs to be more tightly targeted to people in distress due to the pandemic, including housing providers.”Federal Actions Supporting Tenants The FHFA announced on Wednesday that owners of all multifamily properties with a federally-backed mortgage must provide a 30-day written notice to a tenant before requiring removal for not paying rent. [Most states already have laws requiring some “wait period” or notice to tenants before eviction proceedings can commence, though typically not as long as 30 days according to this summary.]The FHFA’s notice requirement had been limited to situations where a landlord received mortgage forbearance protections. Now, the FHFA requires the tenants’ notice regardless of whether the landlord benefits from delayed loan payments – where the debt is backed by Fannie Mae, Freddie Mac, or a federal agency. (See FHFA fact sheet).The White House on June 24 released its fact sheet, “Initiatives to Promote Housing Stability by Supporting Vulnerable Tenants and Preventing Foreclosures.” The fact sheet also references “strict adherence” to tenant notice requirements and offers further measures such as:Accelerating disbursement of Emergency Rental Assistance (ERA) to get the funds appropriated by Congress into the hands of landlords and tenants;Providing a streamlined payment option so large landlords can receive “bundled” payments from multiple eligible tenants; and Urging state and local courts to participate in "eviction diversion efforts" that encourage landlords and tenants to access ERA funds before litigation is pursued. The White House released another fact sheet on Wednesday summarizing how private sector companies, non-profits, and government agencies are notifying Americans about available emergency rental assistance – including a national “rental assistance finder” produced by the Consumer Financial Protection Bureau (CFPB) that helps tenants apply for ERA funds in their localities.Rental Assistance Delays Severe delays in getting federal rental aid to those in need have added another layer of pressure on tenants at risk of eviction – as well as on housing providers who are unable to collect rent, yet remain responsible for taxes, maintenance and other property costs. (Wall Street Journal, July 22)Only 6.5 percent of $46.5 billion allocated by Congress for rental aid has found its way to state and localities in the first half of 2021, according to a recent Treasury Department report. (Washington Post, July 21 and Bloomberg and July 22) Treasury’s report also notes some progress – more than $1.5 billion in rental assistance reached households in June, which is more than all of the money disbursed between January and May combined. The Roundtable is part of a broad real estate coalition that has consistently urged state, county and municipal officials to distribute the billions in allocated federal funds as soon as possible. (Coalition letter, April 15)The National Multifamily Housing Council (NMHC) on July 26 urged the leadership of the Senate Banking and House Financial Services Committees to push for the swift distribution of rental assistance funds. Additionally, a recent NMHC survey of apartment owners and managers shows that 100 percent of multifamily firms surveyed worked with residents facing financial hardships since the onset of the COVID-19 crisis. Biden’s “Hands-Tied” by SCOTUSA U.S. Supreme Court majority indicated last month that the CDC overstepped its authority in issuing the federal-level eviction ban, with Justice Kavanaugh writing that “clear and specific” legislation from Congress would be necessary to extend the moratorium past July 31. (New York Times, June 30) The Biden Administration reportedly “found its hands to be tied” by the high Court’s decision. (PoliticoPro, July 29) The White House issued a July 29 statement, noting, “President Biden would have strongly supported a decision by the CDC to further extend this eviction moratorium to protect renters at this moment of heightened vulnerability. Unfortunately, the Supreme Court has made clear that this option is no longer available.” The statement also requested the U.S. Departments of Housing and Urban Development, Agriculture, and Veterans Affairs to extend their respective eviction moratoria through the end of September “to provide continued protection for households living in federally-insured, single-family properties.” Yesterday’s statement from the administration sparked today’s last-minute scramble in Congress. White House Press Secretary Jen Pskai said, “In light of the Supreme Court’s ruling, the President calls on Congress to extend the eviction moratorium to protect such vulnerable renters and their families without delay.” # # #

Capital and Credit

July 30, 2021

Roundtable Weekly

House Financial Services Committee Approves Bill to Transition Away from LIBOR

LIBOR

Legislation advanced this week by the House Financial Services Committee would help smooth the transition away from the London Interbank Offered Rate (LIBOR) as a reference rate for financial contracts. (House Financial Services Committee markup documents and videos, July 28 | Rep. Brad Sherman (D-CA), above)Why It Matters Libor is currently used in many outstanding financial contracts – including commercial real estate debt, mortgages, student loans and derivatives – worth an estimated $223 trillion. (Committee memo, page 6)The use of LIBOR for new contracts is scheduled to terminate at the end of 2021. Additionally, all LIBOR maturities will stop in June 2023, although some will cease at the beginning of next year.The Adjustable Interest Rate (LIBOR) Act of 2021 was sponsored by Rep. Brad Sherman (D-CA) – chair of the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets. The bill would authorize the Federal Reserve to issue rules to "establish a clear and uniform process on a nationwide basis for replacing LIBOR in existing contracts,” with replacement benchmark rates. An amendment to the legislation was also approved during the Financial Services Committee July 29 markup.The bill would also provide a safe harbor for market participants switching existing LIBOR-referencing financial contracts over to a replacement benchmark for debt instruments. This would apply to instruments such as floating-rate bonds, which require all parties to agree to terms that cannot easily be changed. The bill also includes a federal preemption.Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell recently told the Financial Stability Oversight Council that Congress urgently needed to pass legislation to allow for a smooth transition away from LIBOR. (Bloomberg, June 11)Additionally, the Fed’s Alternative Reference Rates Committee (ARRC) yesterday endorsed use of Secured Overnight Financing Rate (SOFR) Term Rates, a forward-looking version of the LIBOR alternative for financial instruments. (Bloomberg, July 29)As Federal Reserve Vice Chair for Supervision Randal Quarles continues to encourage the termination of the use of LIBOR by year-end, the House bill and the ARRC endorsement of SOFR Term Rates are intended to provide market participants with the tools they need to transition away from LIBOR. Roundtable Support The Real Estate Roundtable and 17 national trade groups on July 27 submitted a letter to House Financial Services Committee policymakers in support of legislation to address “tough legacy” LIBOR contracts during the transition away from the benchmark. (Joint Trades’ Letter on Libor)The joint letter noted that currently, there is no realistic ability to modify legacy contracts that cannot be converted to a non-LIBOR rate or be amended with adequate fallback language before all LIBOR maturities are scheduled to stop in June 2023.The coalition letter stated, “A state-by-state piecemeal approach does not provide the necessary comprehensive protections that is achievable at the federal level given importance of the issue and the very limited time remaining until LIBOR’s end in less than two years.” The letter also commended Rep. Sherman and the Committee for providing a meaningful legislative solution in support of the LIBOR transition by providing fair, equitable and consistent treatment for all tough legacy contracts. # # #

July 29, 2021

Policy Comment Letter

07-29-21 Coalition Letter Opposing Eviction Moratorium Extension Final

July 28, 2021

Policy Comment Letter

7-28-21-Joint Trades Letter in Support of the Adjustable Interest Rate (LIBOR) Act

Infrastructure

July 23, 2021

Roundtable Weekly

Policymakers Claim Deal is Close on Bipartisan “Physical” Infrastructure Proposal; Roundtable Chair John Fisk Addresses Infrastructure Investment

Infrastructure

Members of a bipartisan group of senators working on a $579 billion “physical” infrastructure proposal said Thursday that final details may be announced as early as July 26, after a procedural vote in the Senate earlier this week failed to allow debate on the evolving measure. (Bloomberg, July 22) Bipartisan Deal The bipartisan group initially announced their tentative, broad infrastructure agreement with President Biden on June 24. Remaining issues to resolve are finalizing how to pay for the package including measures affecting funding for transit systems. (Roundtable Weekly, June 25 and BGov, July 22) One of the 22 Senate negotiators, Sen. Joe Manchin (R-WV), said, “We had an agreement on 99% when we walked out yesterday afternoon. The pay-fors are pretty much lined up.” (Bloomberg, July 22) Another negotiator, Sen. Mitt Romney (R-UT) added, "I think we’ll get it done over the weekend, and then I hope that we get another cloture vote next week, and that will succeed." (PolitcoPro, July 22) The bipartisan proposal, if eventually translated into legislation, would need at least 10 Republican votes in the 50-50 Senate to avoid a filibuster and start debate on the measure. Reconciliation If the deal fails, Democrats may consider paring the “hard” infrastructure proposal with a separate, $3.5 trillion “human” infrastructure plan that addresses climate change, child care and health care. A combined package could be pushed through Congress as part of a budget “reconciliation” process that would bypass the need for Republican votes. (CNBC, July 22) Senate Majority Leader Chuck Schumer (D-NY) on July 21 said he may delay the chamber’s August recess to pass both infrastructure packages. (Roll Call, July 21) House Speaker Nancy Pelosi (D-CA) yesterday reiterated that the House will not act on the Senate's bipartisan infrastructure plan until the upper chamber also passes a reconciliation bill. (Transcript of July 22 press conference) Infrastructure Investment Analysis A July 21 Analytics report by Moody’s Chief Economist Mark Zandi states that the emerging $4.1 trillion package of spending on physical and social infrastructure would benefit the economy and create jobs, despite being offset with tax increases. (Washington Post and CNN, July 21) The report – “Macroeconomic Consequences of the Infrastructure and Budget Reconciliation Plans” – shows that infrastructure investments would increase inflation-adjusted economic growth by 0.6 percent by 2023 and create 650,000 new jobs by mid-decade. (The Hill and CQ, July 21) CRE & Infrastructure Roundtable Chair John Fish (Chairman and CEO, Suffolk), above right, on July 21 discussed infrastructure issues, the impact of the pandemic on commercial real estate and the industry’s leadership role in national policy issues with Roundtable member Willy Walker (Chairman and CEO of Walker & Dunlop), left, on the Walker Webcast. (Bisnow and Connect, July 21) Fish noted that economic opportunities resulting from investments in physical infrastructure are equally as important as investment in social infrastructure. Fish noted Boston’s “Big Dig” transportation infrastructure project as an example of a large-scale public investment that returns enormous benefits for the larger community. “Boston made an almost $19 billion investment with the federal government in the Big Dig, and we have received probably $100 billion in returns today so far,” Fish said. “If we didn't make those investments in the Big Dig back in the 1990s, early 2000s, the city of Boston would not be growing the way that it is right now.” (Walker Webcast and Bisnow) Fish also commented on The Roundtable’s role in Washington and the importance of CRE industry leadership in the climate change debate. He emphasized that the vast majority of US buildings were constructed in the last century — and that with 40% of US energy use attributable to owners, tenants, and other occupants of residential and commercial structures, now is the opportune time for the industry to reimagine its positive role for future generations. (See 34:45 in the Walker Webcast) # # #

Pandemic Risk Insurance

July 23, 2021

Roundtable Weekly

Senate Hearing Focuses on Need for Federal Pandemic Risk Insurance Program

Pandemic Risk Insurance Program

Senate lawmakers heard testimony yesterday about the importance of establishing a federal pandemic risk / business continuity insurance program during a hearing entitled “Examining Frameworks to Address Future Pandemic Risk.” (See webcast and witness statements). Public-Private Backstop Senator Bob Menendez (D-NJ), above, chairman of the Senate Banking Subcommittee on Securities, Insurance, and Investment, stated in his opening remarks, “We must determine the extent to which businesses, private insurance providers, and the federal government are able to share the risk of losses due to a pandemic. Each presents different ideas on how much risk is borne by the private sector versus the federal government, and the approach to paying claims.” Menendez also noted that of the eight million businesses with commercial insurance policies with business interruption coverage, 83 percent also carried a clause excluding claims from viral contamination, disease, or pandemic – and that 82 percent of claims have been closed without payment. (Menendez remarks) Roundtable & Coalition Efforts The Roundtable is part of the Business Continuity Coalition (BCC), which offered testimony during the hearing on how a public-private backstop program for pandemic risk insurance – similar to the Terrorism Risk Insurance Act (TRIA) program – is urgently needed. Charles Landgraf of Arnold & Porter, above, testified on behalf of the BCC. (See written testimony and video at 1:00:20) The coalition includes 44 trade associations and major companies representing more than 70 million workers from healthcare and dining/hospitality to real estate, construction, finance, manufacturing, media and film, live entertainment, professional sports and professional services. The BCC’s testimony emphasized how pandemic risk is possibly the largest unhedged risk exposure in the U.S. economy. The coalition’s statement also shows how a precedent for government involvement in insurance markets exists for a broad range of risks – including terrorism (TRIA), flood (NFIP), and crop risk (FCIC) – where private markets fail to provide the economy with the coverage it needs. A detailed, section-by-section description of the BCC Recommended Proposal urges the design of any pandemic risk insurance program to address core principles, including: scope, availability and affordability; private insurer utilization; a pooling alternative for offerinf non-damage business interruption insurance (NDBI) coverage; stop-loss and quota-share protection; and utilization of reinsurance and capital markets. A New Jersey small business owner, Adenah Bayoh, testified on behalf of the National Restaurant Association (NRA) in support of the BCC proposal, stated, "This country needs a Pandemic Risk Insurance Program to ensure that Main Street businesses and employees have certainty and continuity in the ability to navigate the impact of a future pandemic." Subcommittee Chairman Menendez and the Ranking Member Tim Scott (R-SC) added during the hearing that there are likely to be several more Senate hearings on pandemic risk insurance. In the House, the BCC submitted a hearing statement for the record for a Nov. 29, 2020 House Financial Services Subcommittee hearing on “Insuring against a Pandemic: Challenges and Solutions for Policyholders and Insurers.” Both Senate and House subcommittees played important role in the seven-year extension of the Terrorism Risk Insurance Program (TRIP) enacted in 2020. (Roundtable Weekly, Dec. 13 and Dec. 20, 2019) # # #

Tax Policy

July 23, 2021

Roundtable Weekly

Senate Finance Committee Chair Introduces Bill to Restrict 20% Pass-through Business Income Deduction

PassThroughs Tax Policy

Senate Finance Committee Chairman Ron Wyden (D-OR), above, unveiled new legislation this week that would phase out the 20-percent pass-through business income deduction for taxpayers earning more than $400 thousand a year. (CNBC, July 21 and Wyden news release, July 20) The current deduction for qualified business income (Section 199A) allows certain taxpayers, such as sole proprietors, partners in partnerships and shareholders of S-corporations, to deduct up to 20% of their net business income. The deduction was enacted as part of the 2017 Tax Cuts and Jobs Act (TCJA), which reduced the corporate tax rate by 40%. Since the vast majority of American businesses are taxed as pass-throughs, the deduction ensured that the benefits of TCJA were more evenly distributed. Why It Matters Section 199A is currently scheduled to expire at the end of 2025. Wyden’s proposed overhaul, if enacted, would start with the 2022 tax year. (CQ and BGov, July 20 | one-page summary | text of the bill) Wyden estimated that his Small Business Tax Fairness Act could raise $147 billion in revenue, based on a Joint Committee on Taxation analysis from 2018. The Senate Finance Committee Chairman also noted that he may add the bill to the Biden administration’s $3.5 billion “human” infrastructure proposal later this fall. (Tax Notes, July 21) Roundtable Response The Roundtable, as part of a broad business coalition, last month expressed strong opposition to any reductions or repeal of the Section 199A deduction – including phasing it out above a certain income threshold – to the leadership of the tax-writing Senate Finance and House Ways and Means Committees. (Coalition letter, June 22 and Roundtable Weekly, June 25) The coalition’s letter emphasized how nearly 40 percent of individually- and family-owned businesses closed their doors during the COVID pandemic – and that Section 199A provided critical tax relief during that time. “There are nearly two million real estate partnerships with more than 8.6 million partners in the United States,” said Real Estate Roundtable President and CEO Jeffrey DeBoer, above, in response to the new legislation. “Among other benefits, the pass-through deduction allows these real estate businesses to focus on creating jobs, investing in underserved neighborhoods, and creating productive, sustainable properties that support the local tax base. Congress should permanently extend the pass-through deduction. The proposed restrictions are a step in the wrong direction.” President Biden proposed phasing out the Section 199A deduction for qualified business income above $400,000 during his presidential campaign. However, that proposal was not included in his Build Back Better agenda released earlier this year or his formal budget proposal. (Tax Notes, July 21) # # #

Infrastructure

July 16, 2021

Roundtable Weekly

Senate Democrats Push Forward on Two Tracks to Advance President Biden’s Infrastructure Agenda

Infrastructure

Senate Democrats this week moved forward on their two-pronged approach to enact President Joe Biden’s policy agenda – a $579 billion bipartisan “physical” infrastructure package – and a separate $3.5 trillion package addressing “social” infrastructure. Both measures face steep hurdles in the narrowly divided Senate and House. (Wall Street Journal and BGov, July 15)Two TracksSenate Budget Committee Democrats agreed in principle on Tuesday to a $3.5 trillion spending increase for Biden’s wide-ranging social agenda that includes education, childcare and climate. (Reuters, July 13 and Roundtable Weekly story below)Separately, President Biden and a bipartisan group of senators on June 24 agreed on a framework to invest in “hard” infrastructure, including transit, roads, bridges and the electrical grid. (White House Fact Sheet and bipartisan Senate group framework, June 24)Senate Majority Leader Chuck Schumer (D-NY) stated last week that he plans to hold votes on both measures before the Senate leaves for its August recess. (AP and CNBC, July 9)Bipartisan Proposal DeadlineSchumer pushed his schedule forward by announcing the Senate will take a procedural vote next week to begin debate on the unfinished bipartisan proposal. The move forces a tight deadline on Senate negotiators to produce a detailed version of their bipartisan proposal, which has many unresolved issues, including funding sources. (Politico, July 15)Sen. Shelley Moore Capito (R-WV) said Schumer’s decision is an attempt “to put pressure on the group to either put up or shut up,” according to Politico.Sen. Lisa Murkowski (R-AK) said, “The good news-bad news is we’ve got a pretty tight time frame. There are details we have to resolve, and those details involve things like [paying for it].” (Washington Post, July 15)The bipartisan proposal, if translated into legislation, would need any combination of 60 votes in the 50-50 Senate to avoid a filibuster and start debate on the measure.Budget Blueprint DirectiveSchumer also said he wants the Senate Budget Committee to agree by July 21 on the details of their separate 10-year budget blueprint, after they agreed this week to its overall $3.5 trillion spending level. (New York Times, July 15)The committee must now build support for a budget resolution, which would give fiscal targets to other Senate committees responsible for producing an eventual, final bill – including how taxes would be raised to pay for it.Senate Budget Committee Chairman Bernie Sanders (I-VT) commented this week, “What happens next is this is an enormously large and complicated piece of legislation and it’s going to take an enormous amount of work amongst 50 people to reach agreement.” (BGov, July 15)Passage of a budget blueprint would also mark the beginning of the reconciliation process, which would allow Democrats to pass an expansive economic package without Republican votes. (Bloomberg, July 15)SALT InclusionThe Democratic budget outline may include a partial expansion of the state and local income tax deduction (SALT), according to Sen. Bob Menendez of (D-NJ), a member of the Senate Finance Committee. “My understanding is there is a SALT provision in there that would provide relief,” Menendez told NJ Advance Media. (NJ.com, July 15)Since the SALT deduction was capped at $10,000 in the Republican Tax Cuts and Jobs Act of 2017, Democratic lawmakers from high-tax states have urged the inclusion of a SALT expansion in longer-term fiscal packages.Roundtable PerspectiveRoundtable Senior Vice President & Counsel Ryan McCormick, bottom left in photo, participated in the Avison Young July 14 webinar "Proposed Federal Tax Policy Changes." Additional participants included Lisa Knee and Kenneth Weissenberg of Eisner Amper.Roundtable Senior Vice President Chip Rodgers participated in the Association of Foreign Investors in Real Estate July 13 webinar “Mid-Year Policy Update.” Additional participants included Elizabeth Espín Stern, Partner at Mayer Brown and Hope Goldman, Senior Associate at The Cohen Group. (Watch video after entering the password “AFIRE!!”)What’s NextPresident Biden yesterday commented on the dual track approach in the Senate. “There may be some last-minute discussion as to what mechanism is used to pay for each of these items, both the infrastructure package and the human infrastructure package. But I believe we will get it done.” (White House transcript, July 15)In the House, Speaker Nancy Pelosi has pledged that the chamber will not move forward until the Senate passes a budget setting up the $3.5 trillion social spending package. (The Mercury News, June 25 and Transcript of Pelosi Press Conference, June 24)# # #

Energy And Climate Policy

July 16, 2021

Roundtable Weekly

Senate Committee Advances $100 Billion+ Energy Bill With Provisions Affecting Commercial Real Estate

Climate Policy Energy and Climate Policy Energy Policy

The Senate Energy Committee this week passed a bill to authorize more than $100 billion in spending on U.S. energy infrastructure with provisions affecting commercial real estate. The bill may be folded into a larger bipartisan infrastructure package emerging on Capitol Hill. (CQ and Reuters, July 14) A Bipartisan Influence The Energy Infrastructure Act, introduced by Committee Chairman Joe Manchin (D-WV), below, drew the support of all 10 Democrats and three Republicans on the panel. Manchin noted that the committee’s vote “is another critical step toward finalizing our bipartisan infrastructure package, and an important reminder that we can find sensible solutions to difficult problems when we put partisanship aside and work together.” (Manchin news release and committee meeting video, July 14) CRE Impact The bill includes provisions that would create an avenue for Congressional oversight to improve the Commercial Building Energy Consumption Survey (CBECS) – the key data set collected by the federal government on the basic characteristics of U.S. commercial buildings and how much energy they consume. Improving the quality and integrity of CBECS data has long been a priority of The Roundtable’s Sustainability Policy Advisory Committee (SPAC) chaired by Tony Malkin (Chairman, President, and CEO, Empire State Realty Trust) , and Vice-Chaired by Dan Egan (Vornado Realty Trust) and Ben Myers (Boston Properties). “Reliable data from the federal government is crucial to help building owners do their part to address climate change,” said Roundtable President and CEO, Jeffrey DeBoer. “We applaud Chairman Manchin’s efforts through the Energy Infrastructure Act to modernize CBECS data so it reflects the substantial resources our members commit to optimize energy efficiency and reduce greenhouse gas emissions from the built environment.” CBECS is managed by the U.S. Energy Information Administration (EIA). It provides the foundational data set used by the Environmental Protection Agency (EPA) to certify 1-100 ENERGY STAR scores that “label” top performing buildings for lower energy use and greenhouse gas emissions compared to typical buildings. According to EPA, 5.6 billion square feet of floor space are ENERGY STAR rated, and these certified assets command a premium up to 16% for sales prices and rental rates. Despite the critical importance of EIA’s CBECS data to EPA’s ENERGY STAR program, there is currently no requirement for the agencies to coordinate on how they use or verify data. Manchin’s bill would change this. It would require the agencies to submit to Congress an “information sharing agreement” that explains how EPA’s own vaster and more current set of building data (collected through its Portfolio Manager “energy benchmarking” tool) can be used to supplement CBECS data. Manchin’s bill would also require EIA to report to Congress on how it might publish CBECS data every three years – on a faster track than EIA’s current six-to-seven year survey cycle, which results in government and private sector reliance on outdated building information in rapidly evolving energy markets. The bill would also require the agencies to “cross-check” buildings’ energy consumption in different data sets to improve statistical reliability, and take steps to ensure that larger buildings (greater than 250,000 square feet) are fully represented in the federal CBECS set. Investments in the Electric Grid, Code Implementation Other provisions in the Energy Infrastructure Act would:Provide federal grants to States and other entities to harden the electric grid and improve its resiliency to natural and cyber threats;Provide States with money to establish revolving loan funds for building audits and retrofit projects;Direct the Energy Department and the Federal Energy Regulatory Commission (FERC) to develop model guidance for combined heat and power (CHP) systems to provide “backup” or “standby” power to the electric grid; Create an Energy Department grant program for code agencies, building associations, and other entities to improve implementation and compliance with building energy codes; andTrigger Davis-Bacon “prevailing wage” requirements for any projects or programs receiving federal dollars. Language from the Senate Energy Committee’s bill might ultimately be incorporated into a larger infrastructure package expected to encompass transportation, electric vehicles, broadband, water, and sewer systems. [See Infrastructure story above] # # #

Infrastructure

July 2, 2021

Roundtable Weekly

House Passes Surface Transportation Infrastructure Bill; Negotiations with Senate Ahead

Infrastructure

The House yesterday approved a five-year, $760 billon surface transportation and water bill (H.R. 3684) with climate provisions, which Democrats plan to use in infrastructure negotiations with the Senate. The INVEST in America Act passed by a vote of 221 to 201, with only two Republicans joining Democrats in support. (Washington Post, July 1 and Invest in America Act Fact Sheet)Must-Pass Transportation FundingThe House bill does not detail pay-fors yet, but is considered must-pass legislation, as funding for the nation’s surface transportation programs expires on Sept. 30. (Roundtable Weekly, June 11)Roundtable President and CEO Jeffrey DeBoer last week said, “Americans depend on safe and efficient roads, bridges, and mass transit to commute all across the country. Our nation’s buildings and the people in them depend on reliable supplies of water, power, and broadband to function, and meet the evolving demands of business and individual tenants. In turn, infrastructure and real estate are synergistic, and have a two-way relationship.” (Roundtable news release, June 25)Different PathsIn the Senate, a bipartisan agreement was reached last week with the White House on the outlines of a package addressing “physical” infrastructure. The agreement nearly fell apart after President Biden said the bill was directly linked to the passage of a separate, multi-trillion dollar “human” infrastructure proposal. (RRoundtable Weekly, June 25)The Senate proposal includes $579 billion in new spending and was initially supported by 11 Republicans, although some have since objected. Ten Republican Senators would be needed to overcome a filibuster in the 50-50 chamber. (Bloomberg, June 25 and Punchbowl News, June 30)The costs for all the infrastructure “asset classes” in the bipartisan framework are detailed in a recent White House memo from Brian Deese, Director of the National Economic Council, and Anita Dunn, Senior Adviser. (Deese-Dunn memo)The Senate infrastructure agreement has not yet been translated into legislation. Republican and Democratic Senators disagree if they should move forward with a stand-alone bill, or insist on pairing it with a massive “social” infrastructure package. As Senate talks continue, the House bill passed this week could present another path toward a final infrastructure bill, since it comes with a Sept. 30 deadline. (Politico, June 30)House Speaker Nancy Pelosi (D-CA) plans to reference the House bill as a base for negotiating changes to the Senate’s $973 billion bipartisan infrastructure framework in the coming weeks. (BGov, June 30)House Transportation and Infrastructure Chair Peter DeFazio (D-OR), the lead sponsor of H.R. 3684, said, "I'm suggesting that substantial amounts of the policy in our bill should be negotiated by the White House, the Senate and the House to be part of that bipartisan proposal." (New York Times, July 1)What’s NextSenate Minority Leader Mitch McConnell (R-KY) this week said President Biden should encourage Pelosi and Senate Majority Leader Chuck Schumer to support the bipartisan proposal without a dependent, separate bill that would move through a restrictive budget “reconciliation” process. According to McConnell’s June 28 statement, “The President cannot let congressional Democrats hold a bipartisan bill hostage over a separate and partisan process.."White House Press Secretary Jen Psaki commented June 30 on the evolving infrastructure proposals, stating, “It’s up to leaders in Congress to move this forward. The President looks forward to signing both pieces of legislation into law.” (White House Press Briefing transcript)Senate Democrats are aiming to pass bipartisan infrastructure legislation and send it to the House before the August recess, in hopes that a package could arrive on President Biden’s desk by the end of September. (Reuters, June 29)# # #

Infrastructure

June 25, 2021

Roundtable Weekly

Bipartisan “Physical” Infrastructure Agreement Announced; Separate Package on “Social Infrastructure” Tied to Reconciliation Path

FHFA Infrastructure

President Joe Biden and a bipartisan group of senators yesterday announced a tentative agreement to address the nation’s “physical” infrastructure – as Democrats indicated that its passage into law would depend on enactment of a separate, much larger “social” infrastructure bill structured to bypass Republican votes through a budget “reconciliation” process. Goals and Pay-Fors The total cost of the physical infrastructure deal, according to the White House, is $1.2 trillion over eight years, with $579 billion in new spending for investments in transit, roads, bridges, the electrical grid, and other systems. (White House Fact Sheet, June 24)The 21-member bipartisan Senate group also released a document outlining how the agreement would be funded while avoiding new taxes. Among the pay-fors listed: Leverage private sector investment through incentivizing use of public private partnerships, expanding use of Private Activity Bonds, and encouraging asset recycling.Create direct-pay municipal bonds to attract more investment in public infrastructure.Repurpose unused COVID relief funds. Roundtable President and CEO Jeffrey DeBoer, above, said, “Americans depend on safe and efficient roads, bridges, and mass transit to commute all across the country. Our nation’s buildings and the people in them depend on reliable supplies of water, power, and broadband to function, and meet the evolving demands of business and individual tenants. In turn, infrastructure and real estate are synergistic, and have a two-way relationship.”DeBoer added, “The package has potential to impact GDP, promote job growth, keep the U.S. competitive with other countries that are massively investing in their own infrastructure, and expand the overall economy.”Next: ReconciliationPresident Biden said that signing the bipartisan physical infrastructure deal into law would be contingent on a separate bill addressing his administration’s “social infrastructure” agenda on matters such as education and child care. “If the [physical infrastructure bill] is the only one that comes to me, I’m not signing it.” Biden said (Wall Street Journal, June 24)Democratic leaders are aiming to move the “social” infrastructure bill through the budget reconciliation process which would only require a simple, 51-vote majority in the Senate. (NPR, June 24)House Speaker Nancy Pelosi (D-CA) said yesterday, “We will not take up a bill in the House until the Senate passes the bipartisan bill and a reconciliation bill. If there is no bipartisan bill, then we'll just go when the Senate passes a reconciliation bill.” (The Hill, June 24)Senate Majority Leader Schumer stated his timeline is to have both the bipartisan infrastructure bill and the budget reconciliation bill passed in July. (Politico, June 24) Housing -- New FHFA Director President Biden on June 23 removed Fannie Mae and Freddie Mac’s chief regulator, hours after the U.S. Supreme Court ruled that the Federal Housing Finance Agency’s (FHFA) loan director is insufficiently accountable to the president. (CNBC and BloombergLaw, June 23)Mark Calabria, a Trump administration appointee, focused much of his efforts at FHFA trying to end Fannie and Freddie’s 12 years under government conservatorship. A Biden White House official said, “It is critical that the agency (FHFA) implement the Administration’s housing policies.” (CNBC, June 23)Calabria was replaced on an acting basis with FHFA Deputy Director Sandra Thompson. Since 2013, Thompson has led FHFA’s housing and regulatory policy, capital policy, financial analysis, fair lending and all mission activities for Fannie Mae, Freddie Mac and the Federal Home Loan Banks. (FHFA statement, June 24) The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) works on issues related to Fannie Mae and Freddie Mac and their impact on commercial real estate.# # #

Eviction Moratorium

June 25, 2021

Roundtable Weekly

CDC Issues Final Extension of National Eviction Moratorium until July 31; California Plans to Reimburse Housing Providers for Past-Due Rent

Eviction Moratorium

The Centers for Disease Control and Prevention (CDC) yesterday issued a final extension of the national moratorium on evictions through July 31 as the Biden administration announced a series of actions involving several federal agencies on housing affordability and evictions. (White House Fact Sheet, Associated Press, Washington Post and New York Times, June 24)Sluggish Aid DistributionThe CDC indicated its action would be the final extension of the federal-level tenant eviction moratorium, first enacted by Congress in March 2020 through the CARES Act pandemic relief law. “Keeping people in their homes and out of crowded or congregate settings — like homeless shelters — by preventing evictions is a key step in helping to stop the spread of COVID-19,” according to the June 24 CDC announcement. (Congressional Research Service, Federal Eviction Moratoriums)The extension also allows more time for federal officials to improve the sluggish distribution of billons in pandemic housing aid authorized by Congress. The urgent financial needs of millions of tenants nationwide have overwhelmed local officials struggling to provide financial assistance under current rules. (Wall Street Journal, June 7)The White House’s announcement yesterday of actions to help state and local governments prevent evictions included a planned summit on housing affordability and evictions, along with new guidance from the Treasury Department aimed at streamlining distribution of emergency aid for renters behind on payment to their housing providers.The Federal Housing Finance Agency (FHFA) yesterday also extended the foreclosure moratorium for mortgages backed by Fannie Mae and Freddie Mac until July 31. (FHFA news release)Tenants and Housing ProvidersThe National Multifamily Housing Council (NMHC) on June 24 stated, “The continuation of a nationwide, one-size-fits-all, federal eviction moratorium is out of step with the significant progress made in controlling COVID-19 and restoring the economy. Instead of this blanket federal policy, this pandemic has already shown that targeted, efficient relief works. The statement also noted that earlier this month NMHC released Principles to Work with Residents, which offer practical steps housing providers can take to work hand-in-hand with residents and demonstrate the good faith with which property owners and managers have supported their residents. State and Local ActionCalifornia Gov. Gavin Newsom, above, and state legislators today agreed to a plan to reimburse housing providers for past-due rent incurred by lower-income tenants during the state’s pandemic eviction moratorium – along with an extension of the moratorium until Sept. 30. (Los Angeles Times, June 25)A senior housing advisor to Newsom told the Associated Press that California likely has enough money from the $5.2 billion in multiple aid packages approved by Congress to cover all of the unpaid rent in the state.Other states and cities have a variety of deadlines related to their own eviction moratoria. CNBC reports that at least 28 state rental aid programs bar landlords from evicting tenants for at least the time period covered by the aid – and in some cases for between 30 and 90 days afterward. The Roundtable is part of a broad real estate coalition that has consistently urged state, county and municipal officials to distribute the billions in allocated federal funds as soon as possible. (Coalition letter, April 15)# # #

Tax Policy

June 25, 2021

Roundtable Weekly

Roundtable-backed Bipartisan Bill Would Correct Condo Construction Tax Accounting Issue; Roundtable Joins Coalition Letter in Defense of Pass-Through Deduction

Section 199A Tax Policy

Two senior members of the House Ways and Means Committee introduced bipartisan legislation this week that would correct current condominium tax accounting rules.Condo Accounting ReliefHouse Ways and Means Committee members Bill Pascrell Jr., (D-NJ) and Vern Buchanan, (R-FL) on June 22 announced the Fair Accounting for Condominium Construction Act to encourage greater housing development in high-population and high density-areas. (Pascrell news release)Current condo tax accounting rules require multifamily developers of condominium buildings with five or more residential units to recognize income and pay tax on their expected profit as construction is ongoing — well before pre-sale transactions are closed and full payment is due from the buyer.Homebuilders of single-family homes, townhouses and row houses are not subject to this percentage-of-completion tax accounting rule restriction. As a result, current tax accounting rules discriminate against vertical condominium by unfairly accelerating federal income tax liability for new condominium construction.Rep. Pascrell’s legislation would provide for an exclusion from the percentage-of-completion method for condo construction.Roundtable EndorsementRoundtable President and CEO Jeffrey DeBoer said, “The Pascrell-Buchanan legislation will modernize the outdated percentage-of-completion tax accounting rules that discriminate against condominium construction. The bill will reduce the cost of building new housing, especially in high-cost areas where greater density is needed. The Real Estate Roundtable commends the sponsors for introducing a common sense measure that, when enacted, will help expand the nation’s housing supply.” (Pascrell news release)Section 199A SupportSeparately, The Roundtable, as part of a broad business coalition, this week also weighed in on the 20-percent tax deduction for qualified business income (Section 199A), which was enacted as part of the 2017 Tax Cuts and Jobs Act. (Roundtable Weekly, April 2)Senate Finance Committee Chairman Ron Wyden (D-OR), above, reportedly plans to propose changes to Section 199A affecting partnerships, LLCs, and other entities taxed only at the individual owner level. According to BloombergTax, Wyden’s legislation, which is still being drafted, will likely aim to start phasing out the deduction for individuals making above $400,000 in annual business income. Wyden also plans to keep the deduction in place until it is scheduled to expire at the end of 2025. The business coalition’s June 22 letter to the leadership of the tax-writing Senate Finance and House Ways and Means Committees expressed strong opposition to any reductions or repeal of the Section 199A deduction, including phasing out the deduction above certain income thresholds.The coalition’s letter emphasizes how nearly 40 percent of individually- and family-owned businesses closed their doors during the COVID pandemic – and that Section 199A provided critical tax relief.The June 22 letter adds, “Proposals to limit or repeal the deduction would hurt Main Street businesses and result in fewer jobs, lower wages, and less economic growth in thousands of communities across the country. Such changes would amount to a direct tax hike on America’s Main Street employers, a key reason why the tax plan released by the White House in March left the deduction fully intact.”# # #

June 22, 2021

Policy Comment Letter

2021-06-22-199A-Support-Letter

News

June 18, 2021

Roundtable Weekly

National Policy Issues Dominate Roundtable Annual Meeting; John F. Fish Succeeds Debra A. Cafaro as Roundtable Chair

Roundtable Meeting

National lawmakers and industry leaders this week discussed a wide range of policy issues – including cybersecurity, infrastructure, climate, taxes, and post-pandemic reopening of businesses – during The Real Estate Roundtable’s 2021 Annual Meeting, where John F. Fish (Chairman and CEO, Suffolk) was elected as Roundtable Chair, effective July 1. (Watch Incoming Chair Fish’s remarks) Leadership: The successful leadership of Roundtable Chair Debra A. Cafaro (Chairman and CEO, Ventas, Inc.) was acknowledged in video segments from industry leaders and policymakers, including Senate Majority Leader Chuck Schumer (D-NY) and Sen. Bob Casey (D-PA). The Roundtable approved the nominees for its FY22 board of directors and policy advisory committee officers, which were announced by Roundtable Chairman Emeritus Christopher J. Nassetta (President & Chief Executive Officer, Hilton Worldwide). Policy Issues & Featured Speakers Sen. Chris Coons (D-DE) discussed the administration’s infrastructure proposal, aid for low-income renters, and more. Sen. Ben Sasse (R-NE) focused on bipartisan congressional efforts on infrastructure, return-to-work issues, and national security threats. White House National Climate Advisor Gina McCarthy, above, and Roundtable Sustainability Policy Advisory Committee Chair Tony Malkin (Chairman, President and Chief Executive Officer, Empire State Realty Trust) focused on the commercial real estate industry’s role in climate policy. (watch the discusssion) Rep. Stephanie Murphy (D-FL) discussed tax policies that could encourage economic recovery and avoid unintended consequences. “Current Market Challenges and Coming Opportunities” – above – featured the following industry leaders in a discussion on challenges facing markets during a recovering economy, reopening strategies, and cybersecurity concerns for CRE: (watch the discussion) Thomas M. Flexner (Vice Chairman and Global Head of Real Estate, Citigroup) Kathleen McCarthy (Global Co-Head of Blackstone Real Estate) Mark J. Parrell (President & Chief Executive Officer, Equity Residential) and Owen D. Thomas (Chief Executive Officer, Boston Properties) Policy Advisory Committees Sustainability Policy Advisory Committee (SPAC) – aboveThe outlook for energy efficiency legislation was a focus of discussion with key Hill staff representing Senator Jeanne Shaheen (D-NH). Additionally, officials from the Department of Energy’s Better Buildings initiative and the Environmental Protection Agency’s ENERGY STAR program updated SPAC. Research and Real Estate Capital Policy Advisory Committees (RECPAC)Sen. Steve Daines (R-MT) discussed the importance of enacting measures to encourage job creation and pro-growth tax policy, and the importance of developing a clear strategy to address global and national security threats, including cyber and ransomware attacks. Tax Policy Advisory Committee (TPAC)Tax legislative priorities affecting CRE were the focus of discussion with congressional staffers – including proposals to eliminate or limit the use of carried interest and Like-Kind Exchanges, along with increasing the capital gain rate. Homeland Security Task Force (HSTF) and Risk Management Working Group (RMWG)This joint meeting was briefed on “Civil Unrest: Challenges for Communities” by Terry Monahan, Senior Advisor for Recovery and Safety Planning for New York City – and an FBI official discussed the current threats of ransomware and cyber challenges. The Roundtable’s 2021 Annual Report will be distributed in July. Next on The Roundtable’s Meeting Calendar is the Oct. 5 Fall Meeting in Washington, DC. (Roundtable-level members only) # # #

Infrastructure

June 18, 2021

Roundtable Weekly

Senate Efforts Pursue Two-Track Approach to Infrastructure Package

Infrastructure

Senate members announced this week that they are pursuing a two-track approach in assembling an infrastructure package in response to President Biden’s original multitrillion dollar proposal – a pared-down bipartisan plan, and a much larger Democratic plan that could advance on a narrow, party-line vote path. Bipartisan Framework In the wake of failed negotiations last week between the White House and Senate GOP leaders, a group of five Democrats and five Republicans began work on an alternative plan focused on “core, physical infrastructure.” The bipartisan Senate group expanded this week to 21 members, including 11 Republicans. At least 10 Republicans in the 50-50 Senate must approve a bill to reach the 60-vote threshold for passage. (Bloomberg and Washington Post, June 16) A draft outline of the bipartisan group’s infrastructure proposal published on June 16 by Politico revealed a framework that would cost $974 billion over five years, including $579 billion in new spending. President Biden originally proposed $2 trillion in new infrastructure spending, then signaled a compromise closer to $1 trillion. (Roundtable Weekly, June 11) The Senate group’s framework also includes numerous funding sources, such as unspent coronavirus relief aid and public-private partnerships. Since the document’s release, Republicans have provided assurances that a final framework would not include indexing the national gasoline tax to inflation, a proposal opposed by President Biden and House Speaker Nancy Pelosi (D-CA). (Politico and The Hill, June 17) The Reconciliation Path US Capitol building at sunset, Washington DC, USA. Meanwhile, Senate Majority Leader Chuck Schumer (D-NY) this week met with Democratic senators on the Budget Committee to trigger the budget reconciliation process, which would allow a party–line majority vote of an infrastructure package, eliminating the need for Republican votes. (Associated Press, June 17) According to the AP, “Sen. Tim Kaine (D-VA) said the Budget Committee was unified in putting together a package that ‘gives us a latitude to do what we need to do — we can shrink it if there’s a bipartisan deal, we could do the broader deal if there isn’t.’” Schumer said he would like to pass next month both a bipartisan infrastructure package and a larger budget blueprint, which would address a follow-up Democratic legislative. (BGov, June 17) Additionally, Senate Budget Chairman Bernie Sanders (I-VT) said he is seeking a $6 trillion measure that would fund both Biden’s infrastructure proposals, including reforms targeting climate change and an expansion of Medicare. (Wall Street Journal and Washington Post, June 17 Sen. Mark Warner (D-VA), a member of the bipartisan group leading infrastructure negotiations, said, "I know there needs to be reconciliation. But that also doesn't mean that I accept all of what the president proposed and all of what Sen. Sanders has proposed." (BGov, June 17) The Real Estate Roundtable, along with 16 other national real estate trade organizations submitted detailed comments in May to the Senate Finance Committee and House Ways and Means Committee as part of hearings on how to fund the administration’s infrastructure proposals. (Roundtable Weekly, May 21) The Roundtable’s Annual Meeting this week also featured discussions with policymakers on the evolving infrastructure debate – and the organization plans to remain fully engaged with lawmakers on any eventual legislative proposal that could affect commercial real estate. # # #

Energy Policy

June 18, 2021

Roundtable Weekly

Congress Continues to Focus on Climate-Related Legislation

Energy Efficiency Energy Policy

Legislators in both the Senate and House this week continued to work on stand-alone bills designed to lower U.S. energy consumption and reduce the risks posed by GHG emissions, in tandem with the administration’s emphasis on climate change and building “retrofits” through the comprehensive American Jobs Plan proposal. (Roundtable Weekly, May 28 and June 11) Senate: The INSULATE Buildings Act A bipartisan bill introduced by Sens. Joe Manchin (D-WV) and Lisa Murkowski (R-AK) on June 15 would seek to improve the energy efficiency of buildings and homes by providing financial resources to state-level energy agencies. The INSULATE Buildings Act (summary) would establish a new U.S. Department of Energy “revolving loan program.” State agencies would then use these federal proceeds to distribute loans and grants to eligible businesses and homeowners to upgrade and retrofit to commercial and residential buildings. The program would also seek to provide states that have the poorest efficiency in their commercial and residential building stock with additional aid. States could also use up to 25% of their capitalization grant to provide direct grants to small businesses and low-income homeowners. Manchin, who chairs the Senate Energy and Natural Resources Committee, remarked that his INSULATE Buildings Act “provides a significant opportunity to improve energy efficiency and reduce energy consumption in buildings.” (News release, June 15) Davis-Bacon Wage Requirements Both the Manchin-Murkowski bill and a recent Senate Finance Committee energy tax incentives bill would require construction projects receiving federal financial support through these measures to comply with “Davis-Bacon” prevailing wage standards. (Roundtable Weekly, May 28) The Finance Committee, chaired by Ron Wyden (D-OR), in May advanced an improved energy efficiency tax deduction for commercial buildings (Section 179D) that would make the incentive more usable for “retrofits” of older buildings, multifamily structures, and REITs. (Clean Energy for America Act (S. 1298), mark-up video and supporting documents) A May 26 Roundtable letter opposed new prevailing wage mandates proposed by the Senate committee bill. The letter warned that the excessive costs from Davis-Bacon compliance will greatly exceed the amount of any tax deduction that Section 179D might provide to incentivize an energy efficient construction project. House: Climate Risk Disclosures The House on June 16 passed the Corporate Governance Improvement and Investor Protection Act (H.R. 1187) on a partisan vote, which incorporated the texts of several bills with support from the White House. Among its provisions, the Act would require companies to disclose greenhouse gas emissions and describe their climate risk mitigation strategies. It would also direct the Securities and Exchange Commission (SEC) to issue specific rules within two years that address the disclosures. (House Financial Services Committee summary and section-by-section overview) At the regulatory level, The Real Estate Roundtable on June 9 commented to the SEC on the unique challenges facing commercial real estate businesses if the Commission eventually requires corporate issuers to report on climate-related financial risks. (Roundtable Weekly, June 11). The bill would also require disclosures to the SEC on matters relating to companies’ political action contributions, lobbying efforts, executive compensation and pay raises, and offshore tax havens. The measure barely passed the House with only Democrats showing support on a 215-214 vote, indicating that the prospects for passage in the Senate are slim. # # #

Tax Policy

June 18, 2021

Roundtable Weekly

Real Estate Coalition Urges Lawmakers to Preserve Longstanding Carried Interest Tax Rules

Carried Interest Tax Policy

The need for policymakers to preserve longstanding tax law governing partnerships and profits interests – carried interest – was the focus of a June 16 letter sent by The Real Estate Roundtable and 14 other national real estate organizations to congressional tax writers. Pending Proposals The Biden administration’s budget includes a proposal to tax carried interest as ordinary income. The Biden proposal, as well as pending House legislation (the Carried Interest Fairness Act, H.R. 1068), would result in an enormous tax increase on Americans who use partnerships to develop, own, and operate real estate. (Roundtable Weekly, Feb. 27 and April 30) The real estate coalition’s letter emphasized that the proposed changes to taxation of carried interest would: Increase the cost to construct or improve real estate and infrastructure, including workforce housing, senior living communities, industrial properties or investments that support economic inclusion or bring environmental benefits; Create unintended consequences for local communities. Property taxes on real estate contribute 75 percent of local tax revenue and provide a stable and reliable source of funding for critical public services like education and law enforcement; Create new tax barriers during the post-COVID era as buildings throughout the country need to be repurposed and converted. Reality vs. Perception The industry letter to policymakers also countered the false narrative that the carried interest issue targets only a handful of hedge fund billionaires and Wall Street executives. The letter notes the following realities: The IRS reports that real estate partnerships represent half of the four million partnerships in the United States. These two million partnerships and their 8.6 million partners who own and operate multifamily rental housing, office buildings, shopping centers, hotels, distribution centers, senior living communities, and other commercial real estate in every town, city, and region of the country would face damaging impacts. Carried interest involves recognition of the risks a general partner takes, including the funding of predevelopment costs; guaranteeing construction budgets and financing; and exposure to potential litigation. Retroactive Change The letter also notes that current proposals would limit capital gain treatment only to taxpayers who have cash to invest. Those who invest entrepreneurial innovation, risk taking, and sweat equity would no longer receive capital gain treatment. The proposals would also apply retroactively to partnership agreements executed years, often decades, earlier. Changing the tax treatment of proposals agreed to years earlier would undermine the predictability of the tax system and discourage long-term investment that encourages economic growth, according to the letter. The Roundtable’s Tax Policy Advisory Committee (TPAC) met June 16 during The Roundtable’s Annual Meeting to discuss the carried interest proposals and the current tax legislative landscape in Washington. # # #

Carried Interest

June 16, 2021

Policy Comment Letter

Real Estate Carried Interest – Partnerships

Infrastructure Negotiations Shift to Bipartisan Congressional Groups; House, Senate Committees Advance Surface Transportation Bills

Infrastructure Transportation

Months of negotiations on bipartisan infrastructure legislation between President Biden and Republicans led by Sen. Shelley Moore Capito (R-WV) collapsed this week – and talks have shifted to alternative approaches from bipartisan groups of congressional policymakers. Meanwhile, House and Senate committees are moving forward on spending bills to meet the nation’s surface transportation needs before current funding expires on Sept. 30. (White House statement, June 8 and CQ, June 10) Alternative Paths President Biden recently reduced his original infrastructure package proposal from $2.3 trillion to $1.7 trillion – and requested at least $1 trillion in new spending from Republicans. The Senate GOP group counteroffered with nearly $1 trillion, which included only $330 billion in new spending and the rest from repurposed COVID-19 relief funding signed into law earlier this year. Biden cancelled the talks after the gap over the package’s scope and funding could not be bridged. (The Hill and AP, June 8)Yesterday, a bipartisan group of 10 senators said they would propose a plan focused on “core, physical infrastructure” infrastructure that would cost $974 billion over five years, or $1.2 trillion over eight years, including about $579 billion in new spending. (CQ and New York Times and Washington Post, June 10)According to Axios, “The group proposes paying for it through unspent coronavirus relief aid, public-private partnerships, indexing the gas tax to account for inflation and allowing states to borrow necessary money through a revolving loan fund.”A joint statement released by the senators said, “[We] reached a bipartisan agreement on a realistic, compromise framework to modernize our nation’s infrastructure and energy technologies. This investment would be fully paid for and not include tax increases.” (Joint statement, June 10)In the House, the Problem Solvers Caucus, which has 29 Democrats and 29 Republicans, on June 9 released a $1.25 trillion infrastructure spending framework, including $761.8 billion in new spending over eight years – yet did not include any details about how to pay for the proposal. (News release, Building Bridges Infrastructure Framework and section-by-section summary)The co-chairs of the House caucus – Reps. Josh Gottheimer (D-NJ) and Brian Fitzpatrick (R-PA) – are also in contact with a key group of bipartisan group of senators, including Bill Cassidy (R-LA), Kyrsten Sinema (D-AZ), Rob Portman (R-OH) and Joe Manchin, (D-WV) about developing a bipartisan, bicameral infrastructure package. (CQ, June 9)White House Press Secretary Jen Psaki this week said, “[President Biden] feels it’s encouraging to see multiple proposals put out there, both from Republicans in the House and the Problem Solvers Caucus, as well as a bipartisan group that’s working on a proposal. Both will have increased numbers over what we’ve seen and been negotiating to date. Those are all positive steps.” (White House Press Gaggle, June 9)Surface Transportation Legislation Yesterday, the House Transportation and Infrastructure (T&I) Committee advanced a five-year, $547 billion surface transportation bill by a vote of 38-26 that included two supporting Republican votes. (Section-by-section summary of the INVEST in America Act)Although the House Ways and Means Committee needs to address how to fund the bill’s costs, many of the provisions align with Biden administration transportation priorities – and could serve as a possible cornerstone for a larger infrastructure package. (CQ and BGov, June 10)House Majority Leader Steny Hoyer (D-MD) said the chamber will take up the T&I committee bill the week of June 28. A reauthorization bill for surface transportation is considered must-pass legislation as current funding expires Sept 30. (Washington Post, June 10)In the Senate, several committees have jurisdiction over portions of that chamber’s surface transportation bill. The Environment and Public Works Committee unanimously voted on May 26 to advance a $303.5 billion bill over the next five years to fund the nation’s roads, bridges, tunnels, and mass transit projects. (Roundtable Weekly, June 4)The Senate Commerce, Science and Transportation Committee is scheduled to consider rail and safety issues on June 16. Separately, a spokeswoman for Senate Banking, Housing and Urban Committee said Chairman Sherrod Brown (D-OH) said he continues to work with Ranking Member Patrick Toomey (R-PA) “in hopes of reaching a bipartisan agreement on a robust transit title for a surface transportation bill.” (CQ, June 10)ReconciliationDemocrats are also considering the use of the budget “reconciliation” process, which would allow them to bypass the Senate’s 60-vote requirement to pass legislation and push through an infrastructure package on a party line vote. (Roundtable Weekly, June 4)Senate Majority Leader Charles Schumer (D-NY), above, said yesterday, “We continue to proceed on two tracks. A bipartisan track and a reconciliation track — and both are moving forward.” (Washington Post, June 10)Schumer said last week that he wants to move forward on an infrastructure bill in July, whether it is bipartisan or not. (The Hill, May 25)A National League of Cities’ 2021 State of Cities report released this week supported the need for infrastructure investment nationwide. Of the 600 mayors who provided information for the report, 91 percent said they did not have the funds to make needed infrastructure investments. (NLC news release, June 10)The Roundtable will focus on the evolving infrastructure negotiations and their possible impact on CRE during its June 15-16 Annual Meeting and Policy Advisory Committee Meetings in Washington, DC.# # #

Cybersecurity

June 11, 2021

Roundtable Weekly

White House Urges Companies to Build Cyber Defenses as Ransomware Attacks Increase; Commercial Facilities Cyber Working Group Sharing Information on Threats

Cybersecurity Homeland Security

The increasing frequency and size of ransomware cyberattacks on U.S. companies prompted the White House on June 2 to issue a stark warning urging businesses to take "immediate steps" to increase their ransomware defense based on the federal government’s best practices. (White House Deputy National Security Advisor for Cyber and Emerging Technology Anne Neuberger, above)A National ThreatRansomware is a type of malicious computer network attack where criminals encrypt an organization’s data and demand payment to restore access. In some instances, attackers may also steal an organization’s information and demand additional payment in return for not disclosing the information to the public.The document from the White House's Neuberger notes, “All organizations must recognize that no company is safe from being targeted by ransomware, regardless of size or location. Much as our homes have locks and alarm systems and our office buildings have guards and security to meet the threat of theft, we urge you to take ransomware crime seriously and ensure your corporate cyber defenses match the threat.” (White House, What We Urge You To Do To Protect Against The Threat of Ransomware and Readout of Neuberger Meeting)In the past month, $15 million in cyber-ransom was paid to hackers in bitcoin by Colonial Pipeline and JBS USA, the world’s largest meat-processing company. The U.S. Justice Department reported on June 7 that it had retrieved $2.3 million paid by Colonial. (Axios, June 9 and CNBC, June 8)In an interview with the Wall Street Journal this week, FBI Director Christopher Wray compared the challenge of countering the threat of ransomware to the 9/11 terrorist attacks and that the agency was currently investigating about 100 different types of ransomware.Wray also testified on June 10 before the House Judiciary Committee that companies should not make ransomware payments to hackers but instead contact the FBI for help to restore stolen data. Wray said, “There are a whole bunch of things we can do to prevent this activity from occurring, whether they pay the ransom or not, if they communicate and coordinate with law enforcement right out of the gate. That's the most important part,” he added. (AP, June 10)Additional hearings this week on ransomware and other cyber threats to infrastructure where held by the Senate Homeland Security and Governmental Affairs Committee on June 8 and the House Homeland Security Committee on June 9. CRE and CybersecurityCommercial real estate companies are taking steps to meet cybersecurity threats. See interview with James Whalen, SVP, Chief Information & Technology Officer, Boston Properties. (Gate 15, March 23, 2021) The CRE industry has also responded to emerging cyber threats through the Real Estate Information Sharing and Analysis Center (RE-ISAC) – a public-private information sharing partnership organized and managed by The Real Estate Roundtable since 2003. (Information on joining the RE-ISAC) The RE-ISAC has worked with InfraGard National Capital Region (InfraGardNCR) to establish the Commercial Facilities Cyber Working Group (CCWG), a virtual effort to share cyber threat intelligence. The group shares threat reports, ransomware victim examples, and other information on a regular basis. The RE-ISAC sends a Daily Report to members to raise awareness on cyber threats and other domestic concern affecting the U.S. commercial facilities sector, while sharing guidance from the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) and other agencies.Resources and ReferenceISA this week published “Rising Ransomware Threat to Operational Technology Assets,” a fact sheet for critical infrastructure owners and operators detailing the rising threat of ransomware, along with recommended actions and resources. Ransomware insurance is another important aspect of the threat. Ransom and extortion claims increased 150 percent between 2018 and 2020, according to AIG, one of the world's largest insurers. Additionally, AIG reports that one in five cyber insurance claims relate to ransom demands. (CNN Business, June 7: “Hit by a ransomware attack? Here's what to do”)Ransomware Threats in Commercial Real Estate – A Common Cyber Threat (ReShield, Feb. 21, 2020) Real Estate Ransomware Attacks: Hackers Have a New Target (James Moore) Atlanta Real Estate Firm Gets Ransomware (BoostIT)The Roundtable’s Homeland Security Task Force (HSTF) works closely with federal agency partners and the RE-ISAC on protective options that CRE businesses may consider as they implement infrastructure resistant to cyber breaches. HSTF – co-chaired by Roundtable members Dan Kennedy (URW) and Charlie McGonigal (Brookfield) – will discuss ransomware and CRE during their next (remote) committee meeting on June 16, which will be held in conjunction with the Roundtable’s June 15 Annual Meeting. For more information, contact Gate 15 Managing Director and RE-ISAC staff Andy Jabbour or The Roundtable’s RE-ISAC Executive Director and HSTF Liaison Chip Rodgers. # # #

Climate Change

June 11, 2021

Roundtable Weekly

Roundtable Comments to SEC on Corporate Climate Risk Disclosures

Climate Policy Corporate Disclosure SEC Securities and Exchange Commission

The Real Estate Roundtable on June 9 commented on the unique challenges facing commercial real estate businesses if the Securities and Exchange Commission (SEC) eventually requires corporate issuers to report on climate-related financial risks. (See SEC’s 15 Questions for Consideration and The Roundtable’s responses) The SEC’s March 15 request for public comments is not unique to real estate, but seeks information from all corporate stakeholders on climate change reporting and metrics. “It’s time to move from the question of ‘if’ to the more difficult question of ‘how’ we obtain disclosure on climate,” said former Acting Chair Allison Herren Lee. (SEC speech, March 15) On May 6, the new SEC chair, Gary Gensler, testified before the House Financial Services Committee that he intends to propose new rules on corporate climate risk disclosures in the second half of 2021. (Reuters, May 6) Roundtable CommentsThe Roundtable’s comments recommend a “principles-based” approach to corporate climate risk disclosures as opposed to a prescriptive “one size fits all” reporting standard. It coordinated closely with Nareit in developing its submission to the SEC.More specifically, The Roundtable’s comments provide:Energy consumption and associated emissions from any particular building or portfolio depend on a range of variables – such as a building’s age, location, asset-type, and tenant mix. The SEC should be flexible in developing reporting standards for companies that develop, own and operate income-producing real estate.The GHG metrics that building owners can most accurately measure and quantify arise from their direct and immediate operations of assets they manage and control on a day-to-day basis. Building owners should not be compelled to measure, quantify or report on indirect emissions that derive from off-site facilities, or the actions of tenants or other third-parties beyond the owner’s immediate control.The SEC should allow a marketplace of reporting frameworks to thrive, flourish, and evolve. No single reporting framework should be mandated.House LegislationThe House Financial Services Committee on May 12 advanced the Climate Risk Disclosure Act of 2021. The bill would direct the SEC to issue rules within two years that require public companies to disclose: Direct and indirect greenhouse gas emissions;Total amount of fossil-fuel related assets that it owns or manages;How its valuation would be affected if climate change continues at its current pace, and;Risk management strategies related to the physical risks and transition risks posed by the climate crisis.The House bill would also direct the SEC to tailor disclosure requirements to different industries. (JD Supra, May 17). The bill likely faces a more difficult path forward in the Senate.Investment Industry CommentsThe Investment Company Institute (“ICI”), which represents firms including BlackRock, Vanguard and JPMorgan Chase, submitted comments to the SEC on June 4. ICI believes “using a combination of principles-based and prescriptive elements is particularly apt in the context of climate-related information.” (Reuters, June 8).While ICI recommends that companies within the SEC’s jurisdiction should report on “direct” emissions (“Scope 1”) and emissions due to electricity purchases (“Scope 2”), it does not believe that companies should be mandated to report on so-called indirect “Scope 3 emissions” at this time.PoliticoPro (June 7) reported that “ICI made the recommendations as investors increasingly demand that companies follow certain environmental, social and governance reporting standards so they can channel capital to green projects and workplaces that promote equity and inclusion.”The Real Estate Roundtable’s Sustainability Policy Advisory Committee (SPAC) – which meets remotely on June 16 in conjunction with The Roundtable’s June 15 Annual Meeting – will continue to work with policymakers in Congress and the Administration on energy and climate issues of importance to commercial real estate. # # #

June 9, 2021

Policy Comment Letter

2021_06_09_SEC_Letter_FINAL

Eviction Moratorium

June 4, 2021

Roundtable Weekly

Realtor Coalition Submits Emergency Appeal to Supreme Court to Reject CDC Eviction Moratorium Ban

Eviction Moratorium

A coalition of Realtor associations on June 3 submitted an emergency appeal to the Supreme Court to reject the U.S. Centers for Disease Control and Prevention (CDC) national eviction moratorium, which is scheduled to expire June 30. (SCOTUSblog, June 3)Why It MattersThe federal eviction moratorium – originally enacted by Congress more than a year ago in the CARES Act – was extended by both the Trump and Biden Administrations by executive orders to prevent mass evictions in the face of a public health emergency. A further extension by President Biden is likely. The Supreme Court appeal in Alabama Association of Realtors v. Department of Health and Human Services comes after a DC Circuit court this week upheld a federal judge’s May 5 ruling, which allowed the moratorium to remain in effect. (Roundtable Weekly, May 7)The Realtor coalition argued in its 35-page pleading to the high court that “Congress never gave the CDC the staggering amount of power it now claims.” (NBCNews and CNN, June 3)The filing also emphasized that the CDC’s moratorium “shifted the pandemic’s financial burdens from the nation’s 30 to 40 million renters to its 10 to 11 million landlords—most of whom, like applicants, are individuals and small businesses—resulting in over $13 billion in unpaid rent per month.” (Case number 21-5093 in the U.S. Court of Appeals for the D.C. Circuit.)National Multifamily Housing Council CEO Doug Bibby on June 2 told Connect CRE that rental housing is dominated by non-institutional, ‘mom and pop” property owners. Bibby stated, “When eviction moratoria policies are treated as ‘rental holidays,’ these individual property owners tend to suffer disproportionately – as do renters, who end up with fewer options.”Bibby added, “While federal policymakers ultimately provided $46.5 billion for emergency rental assistance, the continuation of eviction moratoriums has renewed focus on broader questions of eviction practices, as well as raised concerns about the disruption in the market once the moratoriums expire.” (ConnectCRE, June 2)The Federal Housing Finance Agency announced yesterday that it is extending for a third time the ongoing moratorium on evictions on multifamily properties backed by Fannie Mae and Freddie Mac, which the agency oversees. The housing regulator’s extension is now in effect until the end of September, preventing affected housing providers from evicting tenants for not paying rent, or charging late fees for unpaid rent. (Reuters, June 3)Distribution Problems Congress approved $25 billion of emergency rental assistance in December 2020 under the Consolidated Appropriations Act. An additional $21.6 billion was allocated in March 2021 under the American Rescue Plan Act. The Treasury Department announced on May 7 that it was releasing the second allocation, along with new guidance for local municipalities administering emergency rental assistance programs. (Roundtable Weekly, May 14)State and local authorities have been overwhelmed with how to allocate the influx of funds, leaving many tenants and housing providers waiting weeks or months for the assistance. (Washington Post, June 4 and Wall Street Journal, April 13)The Roundtable is part of a broad real estate coalition that has urged state, county and municipal officials to distribute the allocated federal funds as soon as possible. (Coalition letter, April 15) The coalition letter emphasized the need “to quickly and fully allocate available American Rescue Plan federal funds to provide assistance to renters, consumer-facing small businesses, and impacted industries such as retail, tourism, travel, and hospitality that are having trouble paying rents, mortgages or remaining viable enterprises due to the COVID-19 pandemic.” The letter adds, “Such assistance would make a big difference in the lives of thousands upon thousands of COVID-19 affected renters and businesses in their cities, counties, and states – and would also provide stability to the buildings and communities in which they live.”As this week’s emergency appeal is considered by to the Supreme Court, there are several states that will continue to ban evictions beyond June 30. Additionally, the state of Washington last month guaranteed tenants facing eviction the right to counsel. Maryland and Connecticut are considering similar measures. (CNBC, June 3)# # #

Policy Landscape

June 4, 2021

Roundtable Weekly

Policymakers Remain Far Apart on Bipartisan Infrastructure Package; Senate Ruling Limits Reconciliation as Fast-Track Option

Infrastructure

Policymakers this week remained far apart on the scope and cost of a possible bipartisan infrastructure package, as President Biden floated a 15% minimum corporate tax to partially fund his pared-down proposal. Meanwhile, a recent Senate Parliamentarian ruling would limit the use of a fast-track budget process called “reconciliation” that could allow Democrats to bypass Republicans and pass legislation on a party-line vote. (Washington Post, June 3, The Hill and New York magazine, June 2) [Photo above: President Biden discusses infrastructure with Sen. Shelley Moore Capito (R-WV)]Seeking New SpendingPresident Biden recently reduced his original infrastructure package cost from $2.3 trillion to $1.7 trillion – and is now looking for at least $1 trillion in new spending from Republicans on infrastructure. Biden this week proposed raising these funds partially through a new 15% minimum corporate tax, which would replace his initial proposal to raise the corporate income rate to 28% from 21%. (BGov and New York Times, June 3)Sen. Shelley Moore Capito (R-WV), who is leading GOP lawmakers in negotiations with the White House, last week counteroffered with $928 billion – although it limits new spending to $257 billion for traditional “hard” infrastructure such as roads, bridges and other public works. Republicans proposed the remaining $671 billion come from repurposed funding previously passed as part of the American Rescue Plan Act’s Covid-19 relief effort. Democrats have rejected repurposing of funds. (Roundtable Weekly, May 28 and AP, May 27)The U.S. Conference of Mayors, National League of Cities and National Association of Counties recently expressed their “adamant opposition to any proposal that would detrimentally recoup and repurpose funds allocated to local governments” from coronavirus relief funds. (NLC news release, June 1 and joint letter, May 27)The coalition’s joint letter to congressional leadership, stated, “Local governments are using these critical recovery funds to invest in public safety, vaccine distribution, housing and rental assistance, local economic support, economic and workforce development, broadband expansion, social safety-net services, hospitality and tourism development, and hazard pay for public employees.”Time is ShortWhite House Press Secretary Jen Psaki this week said, “Patience is not unending, and [President Biden’s] wants to make progress. His only line in the sand is inaction. He wants to sign a bill into law this summer.” (White House Press Briefing, June 2)The No. 3-ranked House Democrat, Rep. Jim Clyburn of South Carolina, yesterday said time is short to complete negotiations on a bipartisan package. “I don’t think we should run the risk of not getting something done because the other side is not cooperating.” (Bloomberg’s Balance of Tower, June 3)Sen. Ben Cardin (D-Md.) on Thursday added that Democrats would soon take actions to use the budget reconciliation process to bypass the Senate’s 60-vote requirement to pass legislation and push through a bill on a party line vote. Cardin said that Democrats are “going as far as we can with Republicans and not delay[ing] it beyond this work period without seeing some action.” (Politico, June 3)Senate Majority Leader Charles Schumer (D-NY) said last week that he wants to move forward on an infrastructure bill in July, whether it is bipartisan or not. (The Hill, May 25)Limits on ReconciliationThe Democrats’ alternative plan to use reconciliation to bypass Republican opposition on infrastructure legislation may be slowed by a recent Senate Parlimentarian ruling. Congressional Democrats used reconciliation in March to pass the administration’s $1.9 trillion pandemic relief package. (Roundtable Weekly, March 12)Senate Parliamentarian Elizabeth MacDonough’s four-page opinion, issued to Senate staff on May 28, stated, "overuse and over-reliance on a hyper-fast track procedure in the ordinarily deliberative Senate … will change the culture of the institution to the detriment of the committee and amendment processes and the rights of all Senators." (CQ, June 2)The new guidance adds that lawmakers intended the reconciliation provision to be used only “in extraordinary circumstances and not for things that should have been or could have been foreseen and handled” in a regular budget resolution. The ruling suggests that Democrats will be restricted to one additional opportunity this year to use reconciliation to pass a filibuster-proof legislative package. (Roll Call, June 2 and The Hill, June 4)# # #

Infrastructure and Transportation

June 4, 2021

Roundtable Weekly

Senate Committee Unanimously Reauthorizes Highway Trust Fund; “Gateway” Hudson Tunnel Project Reaches Major Milestone

Infrastructure Transportation

The Senate Environment and Public Works (EPW) Committee’s unanimous vote last week to advance $303.5 billion over the next five years to fund the nation’s largest source for roads, bridges, tunnels, and mass transit may help advance negotiations over President Biden’s infrastructure proposal. (BGov, May 26)A Bipartisan SignalSenate EPW Ranking Member Shelly Moore Capito (R-WV) is the lead GOP negotiator on the White House’s infrastructure proposal, which includes $115 billion for repairing Main Street roads, highways and bridges. (White House Fact Sheet: The American Jobs Plan, March 31) Sen. Capito said the 20-vote committee vote to advance the Surface Transportation Reauthorization Act “… is further proof that a bipartisan infrastructure deal is possible. I’m hopeful this bipartisan product can be the anchor of a larger infrastructure package moving forward.” (Senate EPW Markup and news release, May 26) The Senate committee’s measure would set a new baseline funding level for the Department of Transportation’s Highway Trust Fund – an increase of more than 34 percent from the last reauthorization to pass Congress in 2015. (Full text of the EPW bill and one-page summary)Time ConsiderationsThe Senate EPW Committee only has jurisdiction over the surface transportation bill’s highway section. The Senate Commerce Committee is next, with a markup expected the week of June 14. The Senate Finance Committee will eventually address how to pay for the measure and the Senate Banking Committee will consider sections dealing with mass transit programs. In the House, Democrats on the Transportation and Infrastructure Committee introduced the INVEST in American Act today and plan to mark up their surface reauthorization bill on June 9. (Bill Text | Fact Sheet | Section-by-Section and Washington Post, June 4)The Biden administration was encouraged by the Senate EPW vote. White House Press Secretary Jen Psaki said during a May 25 briefing that the$303 billion dollar bill “is a great down payment” for a broader infrastructure package. (BGov, May 26) However, the administration has expressed it is on a tighter deadline to advance a comprehensive infrastructure proposal. Transportation Secretary Pete Buttigieg recently said, “I think we are getting pretty close to a fish-or-cut-bait moment.” (CNN, May 30) Gateway ProgressThe Biden Administration on May 28 approved a key step allowing the multi-billion dollar “Gateway” rail tunnel project between New York City and New Jersey to move forward, ending years of delay and clearing the way for state officials to apply for federal funding. (New York Times, May 28) The administration’s approval of a long-awaited environmental impact statement clears the way for pre-construction activities to begin on the crucial infrastructure project, which aims to repair tunnels damaged by Superstorm Sandy. (Politico, May 28) Transportation Secretary Buttigieg commented on the approval – clearing the way for the project to advance to the next steps such as engineering, final design development, and property acquisition, as well as construction. “This is a big step for the Northeast, and for the entire country, as these tunnels connect so many people, jobs, and businesses,” he said. (DOT statement, May 28)Senate Majority Leader Chuck Schumer (D-NY) said, “It’s probably the most important public works project in America. If those tunnels fail and can’t be used, 25 percent of our economy would be at risk from Boston to Washington.” (Politico, May 28) # # #

Budget and Infrastructure

May 28, 2021

Roundtable Weekly

Biden Administration Issues FY22 Budget with Tax Policy Details; Policymakers Face Deadline on Bipartisan Infrastructure Negotiations

Infrastructure

The Biden Administration today issued its FY22 budget proposal, which serves as a benchmark of its tax policy priorities, accompanied by the Treasury Department’s “General Explanations of the Administration’s Revenue Proposals.” Meanwhile, negotiations continued this week between Senate Republicans and the White House on the scope and cost of President Biden’s multitrillion infrastructure investment proposal. Budget Pay-fors The administration’s $6 trillion 2022 budget beginning Oct. 1 represents some of the highest levels of federal spending of the postwar era. The revenue portion of the proposal would sharply raise taxes on corporations and high-income households to fund President Biden’s infrastructure, climate change and social safety net goals. (BGov, White House Fact Sheet and budget appendix, May 28) Although Congress will eventually determine final legislation that controls the federal government’s annual spending, today’s White House budget influences the debate on how to pay for its proposed programs with a variety of taxes, including: An increase in the corporate tax rate to 28% from 21%; Nearly doubling the tax rate on long-term capital gains to 40.8% from 23.8%; Limiting capital gains treatment to invested cash and disregarding other forms of risk taken by partners; Limiting taxpayers’ ability to defer gain that is reinvested in property of a like-kind; and Making death a taxable event at far lower levels of income and potentially taxing the unrealized gain on appreciated assets not once but twice when an individual dies. The administration’s proposed capital gains tax rate increase assumes it would be retroactive to April, preventing investors from quickly selling assets before the end of the year to avoid such a change. (Wall Street Journal, May 27) The Real Estate Roundtable, along with 16 other national real estate trade organizations, last week submitted detailed comments to the Senate Finance Committee and House Ways and Means Committee, which held hearings on how to fund recent Biden Administration infrastructure investment proposals. (Roundtable Weekly, May 21) The Roundtable plans to analyze the details of the White House budget proposal for its potential impact on CRE with its policy advisory committees and national real estate organization partners to remain engaged at all levels of the tax policy debate. GOP Infrastructure Counteroffer Senate Republicans yesterday outlined a $928 billion infrastructure proposal over eight years as a counteroffer to Biden’s $1.7 trillion infrastructure initiative. The GOP proposal would repurpose funds from the $1.9 trillion pandemic relief law enacted in March, an approach rejected by Democrats. The Republican proposal also includes $257 billion in new spending for traditional “hard” infrastructure such as roads, bridges and other public works. (NPR / New York Times / AP, May 27) Democrats are weighing whether to advance the Biden infrastructure plan under the same “reconciliation” budget process that was used to pass the March pandemic relief package by a simple majority vote – thereby bypassing the 60-vote requirement typically needed to advance most legislation in the 50-50 Senate. President Biden yesterday referred to the infrastructure talks, stating, “We’re going to have to close this down soon.” He added that he plans to meet next week with Sen. Shelley Moore Capito (R-WV), above at podium, who has led Republican policymakers in infrastructure negotiations. (Bloomberg, May 27) Senate Majority Leader Chuck Schumer (D-NY) on May 25 said, “The bottom line is very simple, that it has always been our plan regardless of the vehicle to work on an infrastructure bill in July. And that’s our plan, to move forward in July.” (The Hill, May 28) Senate Minority Leader Mitch McConnell (R-KT) stated during a May 27 CNBC interview, “We’re open to spending some more … we’re going to keep talking.” White House Press Secretary Jen Psaki issued a May 27 statement on the Republican infrastructure proposal. “We are concerned that the proposal on how to pay for the plan remains unclear: we are worried that major cuts in COVID relief funds could imperil pending aid to small businesses, restaurants and rural hospitals using this money to get back on their feet after the crush of the pandemic.” The statement added, “As for the path forward … we will work actively with members of the House and Senate next week, so that there is a clear direction on how to advance much needed jobs legislation when Congress resumes legislative business during the week of June 7.” According to Axios, Senate Democrats intend to continue working on bipartisan infrastructure negotiations through the week after Memorial Day congressional recess “… then forge ahead on their own if there's no deal.” (Axios, May 24) # # #

Like-Kind Exchanges And Economic Growth

May 28, 2021

Roundtable Weekly

Congressional Briefing on Section 1031 Exchanges; ‘Stand with Cities’ Event Focuses on Economic Growth

Likekind Exchanges LikeKind Exchanges LKEs

A broad business coalition that includes The Real Estate Roundtable held a virtual briefing this week on the economic importance of like-kind exchanges (LKEs) for members of Congress and their staff. Additionally, several Roundtable members focused on the future of urban areas and economic growth during a “Stand With Cities” webcast. President Biden’s April proposal to restrict gain deferred through like-kind exchanges to no more than $500,000 per-year was included in the administration’s formal FY22 budget and revenue proposals released today. (Treasury Department’s Summary of Revenue Proposals, “Green Book” budget documents, and Roundtable Weekly, April 30) Yesterday’s congressional LKE briefing was moderated by Roundtable President and CEO Jeffrey DeBoer and featured the following speakers: Hessam Nadji, CEO, Marcus & Millichap Steve Chirico, Mayor, Naperville, IL Professor Milena Petrova, Syracuse University Dr. Robert Carroll, Ernst & Young The May 27 briefing focused on the longstanding, positive role of like-kind exchanges in the economy and the potential negative unintended consequences of limiting section 1031. (View video of the briefing) DeBoer said that as Washington policymakers consider whether and how to pay for infrastructure, clean energy, education, child care, housing and other policy goals, various tax provisions are under consideration, including the Section 1031 exchanges. He also noted how LKEs have been used to finance economic development and support local communities for 100 years – the provision is nearly as old as the income tax itself. (Exeter, history of Section 1031) LKE Examples & Data Nadji described the practical uses of LKEs, which help small business, partnerships and family farms to reinvest profits—in this case, the capital gain earned in a real estate business or investment—on a tax-deferred basis so that a business can continue to grow. He noted that if the exchanges are restricted, it would stifle transactions and hamper the marketplace. Mayor Chirico gave real-world examples of how like-kind exchanges have provided an essential tool for attracting economic investment to his community. He stated that because of 1031, Naperville was able to secure a Costco store, which has produced jobs and as much sales tax revenue as their entire downtown business district. “The halo effect of all the Mom and Pop businesses that have now occupied vacant spaces in that very worn-out and distressed area that we once had – it has now been transformed, and it happened during the pandemic,” Chirico said. Professor Petrova addressed her extensive research into the macro-economic impact of LKEs with Dr. David Ling. In their recent study, “The Tax and Economic Impacts of Section 1031 Like-Kind Exchanges in Real Estate,” data shows how LKEs have helped preserve capital, allowed investors to upgrade their portfolios and make capital improvements. Petrova’s research also demonstrates how elimination of LKEs would likely lead to a decrease in CRE prices, less investment in real estate, greater use of leverage and a decrease in liquidity. Dr. Carroll discussed his recent study on the “ Economic contribution of the like-kind exchange rules to the US economy in 2021.” His key results focused on the positive economic activity supported by LKEs; employment supported by the exchanges, listed by industry; and taxes paid by and related to businesses that make use of Section 1031. Stand With Cities Several Roundtable members participated this week in Commercial Observer’s “Stand With Cities” webcast, which focused on how civic, city, state, and business leaders are joining forces to strengthen the economies of U.S. urban centers. A list of all participants is on the event website. (Roundtable Weekly, May 21) Commercial Observer’s May 26 article about the webcast quoted The Roundtable’s DeBoer on the future of the state and local tax (SALT) federal deduction. “If there is a tax bill, there will be something on it that temporarily lifts the SALT cap or repeals it completely,” DeBoer stated. To view the entire webcast or individual panels: Full Video – Stand With Cities Today’s Urban Issues & Supporting Economic Growth A Closer Look at Urban Lifestyle Trends: Reimagining the Live/Work/Play Concept Talent Wars: How Cities Are Staying Competitive For the Top Workers in the U.S. Reviving Tourism, Entertainment, Retail & Hospitality Always Be Prepared: Resiliency Protecting Our Cities From the Next Disaster The Big Rethink: High-Level Takeaways & The Future of City Adaptation Like-Kind exchanges and economic growth proposals under consideration by Washington policymakers will be a focus of discussion during The Roundtable’s June 15-16 Annual Business Meeting and Policy Advisory Committees Meetings (all remote). # # #

Tax and Energy Policy

May 28, 2021

Roundtable Weekly

Senate Finance Committee Advances Energy Tax Bill with Enhanced Incentive for Energy Efficient Building “Retrofits”

Energy Policy Tax Policy

The Senate Finance Committee on Wednesday advanced an improved energy efficiency tax deduction for commercial buildings (Section 179D) that would make the incentive more usable for “retrofits” of older buildings, multifamily structures, and REITs. (Clean Energy for America Act (S. 1298), mark-up video and supporting documents) Section 179D & CRE The modified bill introduced by Chairman Ron Wyden (D-OR), above, included amendments originally proposed by Sen. Ben Cardin (D-MD) to improve Section 179D. Overall, the bill would replace a patchwork of more than 40 energy tax policies with incentives for commercial and residential energy efficiency, clean electricity, and clean transportation fuels, and eliminate fossil fuel subsidies. The Section 179D enhancements would allow: A retrofit project tax deduction for efficiency investments that lower an existing building’s energy consumption from a “pre-retrofit” baseline measured through EPA’s Portfolio Manager benchmarking tool; All multifamily buildings to qualify for the Section 179D incentive; REITs to benefit from the incentive by allowing the amount of the 179D tax deduction to reduce earnings and profits (“E&P”) in the year that energy efficient equipment is placed in service. The legislation also includes new rules requiring that taxpayers claiming Section 179D or other tax benefits in the bill comply with the Department of Labor’s prevailing wage standards and use qualified apprentices for at least 15 percent of the labor hours associated with any construction, alteration, or repair work on the project. Roundtable Recommendations The Real Estate Roundtable submitted comments on May 26 prior to the mark-up. The letter included a strong endorsement of the retrofit incentive and the E&P fix for REITs that the Chairman’s “modified mark” ultimately adopted. The Roundtable letter also stated that the bipartisan E-QUIP Act (H.R. 2346) should be added to the bill. The E-QUIP Act would offer component-based, 10-year “accelerated depreciation” for new HVAC, lights, windows, roofs and other building equipment installed in older buildings. The Roundtable and a broad coalition of environmental, manufacturing, real estate, and other business groups are strong supporters of the E-QUIP Act. (Roundtable Weekly, April 2) Davis-Bacon Prevailing Wage Concerns The Roundtable's letter opposed new prevailing wage mandates proposed by the bill. The Roundtable warned that the excessive costs from Davis-Bacon compliance will greatly exceed the amount of any tax deduction that Section 179D might provide to incentivize an energy efficient construction project. “Davis-Bacon has never been applied simply because the Internal Revenue Code provides a deduction to lower a private entity’s taxable income,” the letter stated. “The Roundtable recommends that the Clean Energy for America Act avoid unchartered territory that would transform the Internal Revenue Code into a ‘Davis-Bacon Related Act.’” Committee Ranking Member Mike Crapo (R-ID), above, said, “I cannot support attaching labor requirements to energy tax policy. Linking labor policy to energy-related tax credits is unprecedented, and I have concerns not only about the policy, but also about the dangerous precedent it sets for amending the tax code.” After the committee voted 14-14 along party lines to advance the $260 billion energy tax bill, Chairman Wyden said he would place the bill on the Senate calendar. (CQ, May 26). The bill’s prospects in the full Senate are uncertain, yet specific elements within the bill could be incorporated into a larger economic package proposed by President Biden. Wyden has not said whether he will work to roll the measure into the president’s infrastructure plans. (BGov, May 26) Energy and tax policies affecting commercial real estate will be a focus of discussions during The Roundtable’s June 15 all-member Annual Meeting – and during its June 16 Tax Policy Advisory Committee (TPAC) and Sustainability Policy Advisory Committee (SPAC) Meetings. # # #

News

May 28, 2021

Roundtable Weekly

"Building Success" Reports on The Roundtable’s FY2018 Policy Activities in Tax, Capital and Credit, Homeland Security, Energy and Infrastructure Issue Areas

The Real Estate Roundtable has released its FY2018 Annual Report “Building Success,” which reports on the organization’s policy activities from July 1, 2017 to June 30, 2018 and outlines its policy priorities for the coming year. "We are extremely proud of our success this past year and equally eager to build on its foundation as we move into our new fiscal year. As always, we will continue to inform lawmakers with consistent and credible policy analysis that encourages economic growth, job creation, and a healthy national real estate market,” said Roundtable President and CEO Jeffrey D. DeBoer. Immediate Past Roundtable Chair (2015-2018) William C. Rudin (Co-Chairman and CEO, Rudin Management Company, Inc.) noted the continued efforts of promoting greater diversity throughout the organization and his efforts during his tenure as Chair. “We have made measurable progress at identifying and recruiting more highly qualified women and people of color to join, and participate at The Roundtable. With greater membership diversity, we ensure that our decisions are better informed and more sustainable.” The Report includes summaries showing continued progress on the policy front, including: In late 2017, the most comprehensive tax reform in over 30 years, the Tax Cuts and Jobs Act, was signed into law. Due in large part to the Roundtable’s advocacy efforts, TCJA preserved interest deductibility; retained like-kind exchanges for real estate; and maintained depreciation and cost recovery rules. The Roundtable and its Tax Policy Advisory Committee is continuing its efforts with Treasury and the Administration to ensure appropriate implementation of the comprehensive law. Congress passed financial deregulation legislation – Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155) – that included important reforms to the Basel III High Volatility Commercial Real Estate (HVCRE), which promote sustainable development and lending, and lowers financial barriers for job-creating projects. The Federal Reserve and four other federal agencies approved a proposal to simplify and ease the Volcker Rule. The proposal, known as Volcker 2.0, seeks to simplify regulatory requirements by giving banks new quantitative “bright-line rules” to provide more clarity on what activities are prohibited and permitted. As a long-time supporter of the ENERGY STAR Program, The Roundtable was a key player in the creation and ongoing development of the EPA’s new charter tenant program “ENERGY STAR for Tenants” labeling platform of high-performance leased office spaces. Anticipating infrastructure as a policy issue for possible compromise after the upcoming midterm elections, The Roundtable offered comments to the Administration and Congressional committees on real estate’s role in creating public-private partnerships to help repair the roads, transit, broadband, power grid and other systems needed to make our communities safe, productive and competitive. Newly elected Roundtable Chair Debra A. Cafaro (Chairman and Chief Executive Officer, Ventas, Inc.) emphasized that The Roundtable’s policy agenda remains full of key issues that require our engagement as a non-partisan industry voice. “Above all, we must uphold our independent and respected position on Capitol Hill, emphasizing our optimism about the economy and the positive contributions the real estate industry provides as a job creator and as a cornerstone for retirement savings. We are committed to proactively advancing policies that promote a healthy balance of capital and people flows to create sustainable economic growth that is good for our members, our industry and our national economy,” said Cafaro. The publication includes a listing of all Roundtable members, as well as the FY2019 Board of Directors and Committee Leadership, and has been mailed to all Roundtable members, congressional offices on Capitol Hill, and is available online.

May 26, 2021

Policy Comment Letter

05-26-21_FINAL_SFC_Markup_Letter_

Tax Policy

May 21, 2021

Roundtable Weekly

Real Estate Coalition Weighs In on Infrastructure Funding Options; Roundtable Addresses Tax Proposals and Like-Kind Exchanges

Infrastructure Likekind Exchanges LikeKind Exchanges LKEs Tax Policy

The Real Estate Roundtable, along with 16 other national real estate trade organizations, submitted detailed comments to the Senate Finance Committee and House Ways and Means Committee, which held hearings this week on how to fund recent Biden Administration infrastructure investment proposals. Congressional Consideration The coalition letter states, “As Congress considers options to pay for these investments, we urge policymakers not to erode longstanding tax rules that support job creation, capital formation and productive risk taking. Several of the tax proposals in the Administration’s infrastructure and human capital initiatives, unfortunately, would reduce real estate investment and diminish opportunities for startup businesses and those less advantaged.” The comments focus on recent Biden Administration tax proposals, including: Limiting taxpayers’ ability to defer gain that is reinvested in property of a like-kind; Nearly doubling the tax rate on long-term capital gains; Limiting capital gains treatment to invested cash and disregarding other forms of risk taken by partners; and Making death a taxable event at far lower levels of income and potentially taxing the unrealized gain on appreciated assets not once but twice when an individual dies. Economic Impact Dramatic sunset over the US capitol in Washington DC The letter states, “(President Biden’s) American Jobs Plan and American Families Plan offer credible initiatives to address many of our Nation’s most pressing needs, such as a modernized infrastructure, a more comprehensive approach to climate-related matters, and increased investments in housing, education, and childcare. We support aggressive steps to finance infrastructure needs, increase the supply of affordable housing, expand the economy, and promote job growth. Regrettably, some of the tax proposals accompanying the plans would reduce economic activity and opportunities and be completely counterproductive to the goals of the President’s initiatives.” The coalition comments detail how the Biden tax proposals would undercut the tax base in localities throughout the country that rely on real estate taxes to finance schools, police, and other first responders. It also notes how the proposed taxes would diminish the incentive for private investment of capital in riskier real estate projects, such as affordable housing and redevelopment in struggling communities. The letter also cites an April 2021 EY study commissioned by the Family Business Estate Tax Coalition, which includes The Real Estate Roundtable, that shows the impact of a specific proposal that would impose tax on transferred assets at death. The study found that repealing stepped-up basis and taxing unrealized gains at death would result in reduced job growth, lower wages, and a reduction in GDP of roughly $10 billion per-year. Tax Issues & LKEs A May 18 webcast moderated by Marcus & Millichap President and CEO Hassam Nadji entitled “Tax Reform: A CRE Game Changer?” featured Roundtable President and CEO Jeffrey DeBoer and EisnerAmper Tax Partner Lisa Knee. DeBoer and Knee discussed many of the tax issues put forward by President Biden. (Access the Marcus & Millichap webcast by completing a registration form) DeBoer will also participate in Commercial Observer’s May 25 “Stand With Cities” webcast, which will focus on how civic, city, state, and business leaders are joining forces to strengthen the economies of U.S. urban centers. (Registration for webcast) Among the other industry leaders scheduled to participate in the May 25 event are the following Real Estate Roundtable Members: Kathleen McCarthy (Global Co-head of Blackstone Real Estate) Owen Thomas (CEO, Boston Properties) Matthew Kelly (CEO, JBG Smith) Marty Burger (CEO, Silverstein Properties) Tony Malkin (Chairman & CEO Empire Realty Trust) Scott Rechler (Chairman and CEO, RXR Realty) A list of all participants is on the event website. DeBoer was also quoted in Commercial Observer on May 18 on President Biden’s proposal to limit the use of Section 1031 like-kind exchanges. “Exchanges reduce the need for outside financing, leading to less leverage and debt on U.S. real estate. As a result, exchanges allow cash-strapped minority-, women- and veteran-owned businesses to grow their business by temporarily deferring tax on the reinvested proceeds,” DeBoer stated. Like-kind exchanges were the focus of a May 19 webcast that featured Roundtable Senior Vice President and Counsel Ryan McCormick. The webcast – “Powerful Economic Activity Supported by 1031 LKEs: A Dive into the EY Economic Impact Study” – was sponsored by the Institute for Portfolio Alternatives. The Roundtable will also host a virtual congressional staff briefing next week on real estate like-kind exchanges and the Administration’s proposed changes to Section 1031 of the tax code. President Biden’s proposals, congressional action and the industry response will be a focus of discussion at The Roundtable’s June 15 Annual Meeting and its Tax Policy Advisory Committee (TPAC) Meeting on June 16. # # #

Energy And Climate Policy

May 21, 2021

Roundtable Weekly

Biden Administration Officials Hold Summit with CRE Leaders to “Decarbonize” Buildings

Climate Policy Energy and Climate Policy Energy Policy

The White House convened a roundtable discussion on Monday with CRE industry leaders and other stakeholders to discuss opportunities and obstacles to “decarbonize” U.S. buildings and create jobs on energy efficient construction and retrofit projects. (“Accelerating Building Decarbonization,” Department of Energy / YouTube video) Government and Industry Dialogue The event aimed to catalyze cooperation across government, real estate, manufacturing, and union participants as part of President Biden’s American Jobs Plan, which has a goal to build and retrofit two million homes and commercial buildings.According to a White House Fact Sheet, its recommended federal investments in building energy efficiency and electrification “will create new domestic manufacturing opportunities for electric heating and cooling technology, invest in research and development to spur smart building advances, and forge collaborations that will enable buildings to be powered by clean electricity.” White House National Climate Policy Advisor Gina McCarthy led the “Better Buildings Summit,” which also included Department of Energy (DOE) Secretary Jennifer Granholm; Environmental Protection Agency (EPA) Administrator Michael Regan; General Services Administration (GSA) Acting Administrator Katy Kale; and White House Council on Environmental Quality Chair Brenda Mallory. (YouTube video) Henry Chamberlain, president and COO of the Building Owners and Managers Association (BOMA) International, participated in the event. The White House also invited five members of The Roundtable’s Sustainability Policy Advisory Committee (SPAC) to participate: Darien Crimmin, WinnDevelopmentDan Egan, Vornado Realty Trust (SPAC vice-chair)Ben Myers, Boston Properties, Inc.Sara Neff, Kilroy Realty Corp.Dana Schneider, Empire State Realty Trust, Inc.New Programs The webinar revealed that GSA will act as a proving ground to adopt carbon neutral strategies in the federal building stock – and develop “performance standards” for federal buildings with metrics and targets to reach their goals for reducing emissions.The White House’s Brenda Mallory announced during the event that a series of "stakeholder roundtables” will be held by the Administration to gain perspectives from industry experts on how to modernize buildings. EPA Administrator Regan also announced new programs affecting CRE, along with several other initiatives impacting the residential sector, including:Zero-Carbon Building RecognitionEPA is developing criteria for a new zero-carbon commercial building recognition award. This new program aims to encourage early adoption of efficiency, electrification, green power and renewable thermal certificates in buildings, and to complement building performance standards and ENERGY STAR certification for top performing energy efficient buildings. Greenhouse Gas Emissions Calculator Tool for Commercial BuildingsEPA will launch a new tool linked to the ENERGY STAR Portfolio Manager benchmarking tool used by over 25% of the commercial building space in the country. The new calculator will support scenario-building and estimating the impacts of electrification and renewable energy at the building and portfolio level by enabling the use of customized emissions factors to estimate future emissions associated with building energy use. Separately, DOE Secretary Granholm testified yesterday before the House Energy and Commerce Subcommittee on Energy on her department’s $46.2 billion 2022 FY budget request. Granholm addressed the Administration’s infrastructure plan and urged Congress to advance clean energy technologies. (Granholm testimony, May 19)President Biden yesterday issued an Executive Order directing his Administration to create a strategy on quantifying climate change risks for both public and private financial assets. Treasury Secretary Janet Yellen, who leads the multi-agency Financial Stability Oversight Council, will oversee development of the federal report on information sharing requirements of the climate-related financial risk data. (White House Fact Sheet, May 20) The Roundtable’s SPAC will focus on the impact of the Biden Administration’s and congressional efforts to reduce carbon emissions in buildings during its June 16 meeting, held in conjunction with the organization’s Annual Meeting (remote). # # #

May 18, 2021

Policy Comment Letter

Real estate industry tax stmt – SFC hrg 05.18.2021

Infrastructure

May 14, 2021

Roundtable Weekly

President Biden and Congressional Leaders Discuss Path Forward for Infrastructure Legislation

Infrastructure

President Biden met with congressional leaders this week to find a path forward on his $2.3 trillion infrastructure-focused American Jobs Plan. Republicans agreed to continue negotiations and develop a pared down counter-proposal that will limit the definition of infrastructure and include specific funding measures. (CNBC and Wall Street Journal, May 12 and The Hill, May 13) Negotiations on Scope Biden’s multitrillion-dollar proposal calls for funding infrastructure investments by raising the corporate tax rate to 28% from 21% and making other changes to tax laws passed during the 2017 overhaul. "The proper price tag for what most of us think of as infrastructure is about $600 to $800 billion," McConnell said on May 9. (CBS News, May 10 and Kentucky Educational Television, May 10) Biden and Vice President Kamala Harris on May 12 met with the “Big 4” Congressional Leaders – Republican Senate Minority Leader Mitch McConnell of Kentucky, House Minority Leader Kevin McCarthy of California, Democratic Senate Majority Leader Chuck Schumer of New York and House Speaker Nancy Pelosi of California – to discuss infrastructure proposals. Although both sides remained deeply divided over the scope of an infrastructure package and exactly how to pay for it, some optimistic signs emerged from the meeting. (New York Times, May 12) McConnell commented after the meeting, “We’re not interested in reopening the 2017 tax bill. We both made that clear with the president. That’s our red line.” (Business Insider, May 12) However, McCarthy added, “there is a place where we can find bipartisanship” – and Pelosi noted, “I feel very optimistic . . . about our ability to pass such a bill, more optimistic now about being able to do so in a bipartisan way. But we’ll see.” (Tax Notes, May 13) Republican Counter-Offer Biden and Harris also met on May 13 to discuss infrastructure with a group of top Republican committee leaders, including Sen. Shelley Moore Capito of West Virginia, ranking member on the Senate Environment and Public Works Committee. (White House Readout of Oval Office Meeting, May 13) During the meeting, Republicans suggested using public-private partnerships to partially cover the costs of funding an infrastructure bill, instead of reversing elements of the 2017 tax bill. (The Hill, May 13) Capito commented after the meeting, "I think what he wants to see is 'OK, I get it you don't want me to touch the 2017 taxes ... well then how are we going to pay for this.' The [Paycheck Protection Program] was part of the discussion but there were other things discussed." Capito added, “He asked that we would come back with another offer, with more granularity to it and more details, and so we agreed to do that. Maybe some different numbers too." (The Hill, May 13) The president also met with key Democratic senators, including Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, this week to discuss infrastructure measures proposals. Congressional Republicans are expected to propose their counter-offer for a pared-down infrastructure program next week. Roundtable Statement Real Estate Roundtable President and CEO Jeffrey DeBoer on April 30 issued a statement on funding options for President Biden’s American Jobs Plan and American Families Plan. DeBoer noted, “As policymakers consider the options to raise this needed revenue, we strongly urge that the focus be on broad-based tax increases that do minimal damage to job creation, risk taking and entrepreneurial activity. Unfortunately, particularly when considered in total, many of the tax proposals accompanying the American Jobs Plan or American Families Plan would reduce economic activity, impede job growth, and diminish opportunities for startup businesses and those less advantaged. The current law in these areas may be in need of review and reform, but repealing these incentives is simply not wise.” (Full Roundtable statement) The initial release of President Biden’s American Jobs Plan on March 31 listed several corporate tax revenue measures to offset infrastructure spending. Further details on the Administration’s proposed tax and revenue provisions are scheduled to be released on May 27 as part of the president’s FY 2022 budget proposal. (Reuters, May 13) # # #

Tax Policy

May 14, 2021

Roundtable Weekly

Capitol Hill Lawmakers Consider Tax Measures to Finance Infrastructure and other National Priorities

Tax Policy

Democratic and Republican policymakers this week debated options for financing new investments in infrastructure and human capital, including tax proposals that could affect commercial real estate and incentives for capital formation. Stepped-up Basis A May 12 House Ways and Means subcommittee hearing focused on "Funding Our Nation's Priorities: Reforming the Tax Code's Advantageous Treatment of the Wealthy." (Tax Notes, May 13) Several hearing witnesses testified in favor of recent tax proposals to repeal stepped-up basis upon death, including a recent bill introduced by Sen. Chris Van Hollen (D-MD). (Roundtable Weekly, April 2. Van Hollen news release, March 29 and section-by-section bill explanation). Concerns exist among Democrats about Biden’s tax plans, which range from eliminating stepped-up basis to raising the corporate tax rate and increasing tax rates on wealthy investors. (Washington Post, May 11 and RollCall, May 6) More than a dozen House Democrats sent a May 6 letter to their leadership emphasizing how the elimination of stepped-up basis could threaten farms and family businesses. “Farms, ranches, and some family businesses require strong protections from this tax change to ensure they are not forced to be liquidated or sold off for parts, and that need is even stronger for those farms that have been held for generations,” according to the letter. [Rep. Jim Costa (D-CA) news release and Roll Call, May 6] President Biden backed elimination of stepped-up basis during his campaign. (CNBC, “This is how Joe Biden will tax generational wealth transfer,” March 13, 2020 / CNBC, June 30, 2020 / ABC News, Oct. 8, 2019) The Real Estate Roundtable, along with other members of the Family Business Estate Tax Coalition, recently released a report by EY’s Dr. Robert Carroll, Treasury’s former top tax economist, which found repealing stepped-up basis would result in reduced job growth, lower wages, and a reduction in GDP of roughly $10 billion per-year. The EY report, Repealing Step-Up of Basis on Inherited Assets: Macroeconomic Impacts and Effects on Illustrative Family Businesses, concluded that, “Many family-owned businesses have value tied up in illiquid land, structures, and equipment that may need to be liquidated, or leveraged to finance loans, to pay for the new tax burden at death.” The one-time capital gains tax could “limit[] the business’ viability as an ongoing concern.” Energy Tax Legislation Senate Finance Committee Chair Ron Wyden (D-OR) in a May 12 statement said the committee will begin consideration this month of infrastructure and jobs legislation, starting with a markup on energy tax measures. “Following the clean-energy markup, the committee plans to consider additional key pieces of our jobs and infrastructure agenda,” according to the statement. (The Hill, May 12) The Finance Committee on May 18 will hold a hearing entitled "Funding and Financing Options to Bolster American Infrastructure." Sen. Wyden last month introduced the Clean Energy for America Act, which would revamp tax incentives directed at buildings, electricity and transportation. (Roundtable Weekly, April 30) Wyden’s bill includes reforms to the 179D deduction for energy efficient commercial and multifamily buildings – with the value of the incentive increasing as more energy is conserved. (Text of the legislation, one-page summary of the bill and a section-by-section summary.) A broad coalition of real estate, environmental, and manufacturing groups led by The Roundtable supports the E-QUIP Act (H.R. 2346), which proposes “accelerated depreciation” for high-performance equipment installed in commercial and multifamily buildings. The coalition is urging Senate and House policymakers to include this measure as part of any “green tax” package that may be folded into larger infrastructure spending legislation. (Roundtable Weekly, April 2) Roundtable President and CEO Jeffrey DeBoer emphasized an important distinction between energy incentives affecting CRE. “The 179D incentive relies on the energy performance of an entire building, without accounting for its age or tenant usage. By contrast, E-QUIP focuses on an individual building’s components – each one capable of contributing to a reduction in overall energy consumption. The E-QUIP incentive would therefore therefore apply to all buildings more efficiently, despite their age or tenant base, and increase energy performance across all asset classes.” Like-Kind Exchanges Among the many tax issues on The Roundtable’s 2021 policy agenda is the Biden administration's proposal to cap real estate profits that can be deferred in a 1031 like-kind exchange to $500,000. On May 11, The Wall Street Journal reported on the significant impact the proposal would have on the multifamily market, which utilizes 1031 exchanges as a primary source of capital. Additionally, the May 7 issue of Realtor Magazine focused on how the 1031 proposal could present adverse consequences for communities and their economic development. The Real Estate Roundtable, along with 30 other national real estate, housing, environmental, farming, ranching, forestry, and financial services-related organizations, wrote to key policymakers on March 16 to raise awareness of how 1031 exchanges support jobs, economic development, local communities, property taxes, and the supply of rental housing, among other benefits. (Roundtable Weekly, March 19) Between 10-20 percent of all commercial real estate transactions involve a like-kind exchange. The coalition’s letter describes how like-kind exchanges under section 1031 of the tax code helped stabilize property markets at the height of the COVID-19 lockdown, and will continue to facilitate repurposing of real estate assets in the post-COVID economy. Roundtable Senior Vice President & Counsel Ryan McCormick on May 18 will discuss the economic contributions of like-kind exchanges to the U.S. economy during an Institute for Portfolio Alternatives (IPA) Summit session. REITs Reps. Tom Suozzi (D-NY) and Darin LaHood (R-IL) on May 11 introduced the bipartisan Parity for Non-Traded REITs Act (H.R. 3123) to boost investment in commercial real estate and infrastructure. In 2015, Congress increased the amount of equity that a foreign shareholder can invest in a U.S. exchange-traded REIT to 10 percent without generating tax liability under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). The Suozzi-LaHood bill would extend the same 10 percent FIRPTA exemption to publicly offered but non-exchange-traded REITs. “Given the current economic environment and the need for additional investment in U.S. real estate, updating existing FIPRTA rules applicable to public non-traded REITs will expand available capital, create parity with exchange traded REITS, and level the playing field for investors – thereby encouraging more foreign investment in U.S. real estate and generating economic and job growth at home,” said Rep. LaHood. (Institute for Portfolio Alternatives, May 7) Roundtable President and CEO Jeffrey DeBoer will discuss the wide-range of tax proposals noted above, and others addressed in the organization’s 2021 policy agenda, during a May 18 Marcus & Millichap webcast, “Tax Reform: a CRE Game Changer?” # # #

Rental Assistance and Affordable Housing

May 14, 2021

Roundtable Weekly

Treasury Releases New Guidance for Emergency Rental Assistance; YIMBY Act Reintroduced

Affordable Housing Eviction Moratorium Housing Yes In My Backyard YIMBY YIMBY

US Treasury Department in Washington The Treasury Department on May 7 issued new guidance for local municipalities administering emergency rental assistance programs, with rules aimed at directly assisting more renters in less time. The rules simplify applications for aid, expand covered costs such as moving expenses and hotel stays, and require programs to help tenants directly even if their housing providers choose not to participate. (New York Times, May 7) Distribution Challenges Congress approved $25 billion of emergency rental assistance in December 2020 under the Consolidated Appropriations Act. An additional $21.6 billion was allocated in March 2021 under the American Rescue Plan Act. The Treasury Department ‘s May 7 announcement releasing the second allocation was accompanied by its new guidance. (National Multifamily Housing Council, May 10) State and local authorities have been overwhelmed with how to allocate the influx of funds, leaving many tenants and housing providers waiting weeks or months for the assistance. (Washington Post, April 8 and Wall Street Journal, April 13) The nine “enhanced policies” from Treasury aim to ensure that states and localities can move quickly to address the housing affordability crisis wrought by the pandemic. (Treasury’s May 7 Fact Sheet and FAQs on Emergency Rental Assistance) The new guidance comes days after a federal judge overturned the U.S. Centers for Disease Control and Prevention (CDC) eviction moratorium, which is scheduled to expire June 30. Judge Dabney L. Friedrich of the U.S. District Court for the District of Columbia also issued an order on May 5 that temporarily allows the moratorium to continue while she considers an emergency appeal by the Biden Administration. (Roundtable Weekly, May 7) Rental Assistance Support The Roundtable is part of a broad real estate coalition that recently urged state, county and municipal officials to distribute the allocated federal funds as soon as possible. (Coalition letter, April 15) The coalition letter emphasized the need “to quickly and fully allocate available American Rescue Plan federal funds to provide assistance to renters, consumer-facing small businesses, and impacted industries such as retail, tourism, travel, and hospitality that are having trouble paying rents, mortgages or remaining viable enterprises due to the COVID-19 pandemic.” YIMBY Reintroduced Window in house. Architectural elements. Construction materials. Building house. The bipartisan “Yes In My Backyard (YIMBY) Act” was reintroduced on May 13 in the House by Reps. Trey Hollingsworth (R-IN) and Derek Kilmer (D-WA). The bill would require local governments applying for federal housing development funds through the Community Development Block Grant (CDBG) program to report whether they have enacted policies to reduce counterproductive regulations that may affect affordability. (Hollingsworth news release and text of the bill) The Real Estate Roundtable is one of many organizations that have endorsed YIMBY, which passed the House last year but stalled in the Senate. The Roundtable also urged support for the YIMBY Act in comments filed with HUD in January 2020. (Roundtable Weekly, March 6, 2020) A Senate YIMBY companion bill was also introduced May 13 by Sens Todd Young (R-IN) and Brian Schatz (D-HI). “Discriminatory local zoning and land use policies drive up housing costs in communities across America,” said Sen. Young. “These policies exacerbate the housing affordability crisis and stifle the ability of Americans to move to areas of opportunity. My legislation will require cities, towns, and rural areas across America to face this reality under a new level of transparency and encourage them to cut these harmful regulations.” (Sen. Young news release, May 13) “The YIMBY Act complements the many pro-housing proposals currently before Congress,” said Mike Kingsella, Executive Director of Up for Growth Action. “The YIMBY Act will empower communities across the country to clear the path for housing that is more affordable, equitable, and sustainable.” (Up for Growth’s YIMBY Fact Sheet) The Roundtable and its coalition partners will continue to urge lawmakers to pass the YIMBY Act and similar legislation that eases burdensome rules that inhibit affordable housing development. # # #

News

May 7, 2021

Roundtable Weekly

Congress Reviews Biden’s Multitrillion Infrastructure Proposals

Energy Policy Infrastructure

Capitol Hill continued to assess President Biden’s “physical” and “social” infrastructure plans this week as Democrats considered how to advance the Administration’s proposals in a narrowly divided Congress. (BGov, May 4) Photo: President Biden on April 30th discussed his infrastructure proposals during Amtrak's 50th anniversary.Infrastructure Negotiations Biden’s infrastructure proposals include last week’s $1.8 trillion American Families Plan, composed mainly of social spending and tax hikes on wealthy individuals – and his $2.3 trillion American Jobs Plan unveiled in March. (Roundtable Weekly, April 30 and Wall Street Journal, April 29). Senate Minority Leader Mitch McConnell (R-KY) on Monday said Republicans are open to funding projects that fit into a much narrower definition of infrastructure, for a much smaller cost, and funded by unspecified fees rather than tax increases. (AP, May 3) “We’re open to doing a roughly $600 billion package, which deals with what all of us agree is infrastructure and to talk about how to pay for that in any way other than reopening the 2017 tax reform bill,” McConnell said. White House Press Secretary Jen Psaki on May 5 said Biden plans to meet with key policymakers on his proposals next week, including Sen. Shelley Moore Capito (R-WV), ranking member on the Environment and Public Works Committee. “The president believes Congress can and should move forward with multiple policies at the same time. And, certainly, that is what is happening on Capitol Hill.” Psaki said. (White House press briefing, May 5 and Transport Topics, May 6)CNBC reported on May 6 how residential and commercial real estate could be affected by Biden's tax proposals, which would raise capital gains taxes, tax unrealized gains at death with an exception for family-owned businesses, and restrict the use of Section 1031 like-kind exchanges.The Wall Street Journal on May 6 also reported how Biden’s proposal to restrict 1031 exchanges would add another burden on farmers, who have used the provision to relocate operations, diversify crops, and consolidate land holdings. Congressional LegislationThis week, Congress considered legislation that would impact issues of interest to commercial real estate, including:The House Energy Committee addressed the CLEAN Future Act (H.R.1512) during a hearing focused on decarbonizing the transportation sector. H.R. 1512 is a sprawling bill aimed at achieving net-zero greenhouse gas emissions by 2050 that contains provisions affecting building construction, operations, and ESG reporting. (Politico, March 3 and CQ News, Reuters, March 2) A May 4 House Financial Services Subcommittee hearing addressed the National Flood Insurance Program (NFIP). A discussion draft released before the hearing would reauthorize the NFIP for five years, enact reforms to place the program on sound financial footing, institute a cap on premium increases of 9% per year, and forgive over $20 billion in NFIP debt. (Committee background memorandum)In the Senate, legislation is expected to be reintroduced in the next few weeks that would encourage the construction of more energy-efficient new homes and commercial buildings through voluntary “model” building codes. Sens. Jeanne Shaheen (D-NH) and Rob Portman (R-OH) issued a May 3 news release on their plans to reintroduce their energy efficiency legislation. House Appropriations Chair Rosa DeLauro (D-CT) on May 6 said she plans to mark up fiscal 2022 spending bills in June, before expected floor votes in July. Lawmakers would have to finish their spending bills by Sept. 30, when the government’s fiscal year ends, or pass a stopgap measure to avert a shutdown of government agencies. (BGov, May 6) # # #

Eviction Moratorium

May 7, 2021

Roundtable Weekly

Federal Judge Overturns CDC’s National Eviction Moratorium; Justice Department Appeals

Eviction Moratorium

A federal judge on May 5 ruled that the U.S. Centers for Disease Control and Prevention (CDC) exceeded its authority by issuing its national eviction moratorium, which is scheduled to expire June 30. (New York Times, May 6) National Impact The federal eviction moratorium – originally enacted by Congress more than a year ago in the CARES Act – was extended by both the Trump and Biden Administrations by executive orders to prevent mass evictions in the face of a public health emergency. (BGov, May 5)The 20-page ruling by Judge Dabney Friedrich of the U.S. District Court for the District of Columbia vacates the moratorium on a nationwide basis, yet does not affect similar eviction moratoriums enacted at the state or local levels. (Wall Street Journal, May 5) The order states, “It is the role of the political branches, and not the courts, to assess the merits of policy measures designed to combat the spread of disease, even during a global pandemic. The question for the Court is a narrow one: Does the Public Health Service Act grant the CDC the legal authority to impose a nationwide eviction moratorium? It does not.” (Washington Post, May 5)The Georgia and Alabama state Realtor associations, along with two housing providers and their property management companies, filed the lawsuit against the U.S. Department of Health and Human Services. (Realtor Magazine, April 29) Justice Department Appeal Brian M. Boynton, Acting Assistant Attorney General for the Justice Department's Civil Division, stated on May 5 that the department would file an appeal of the decision and an emergency stay of the order. Boynton stated, “The Department of Justice respectfully disagrees with today’s decision of the district court in Alabama Association of Realtors v. HHS concluding that the moratorium exceeds CDC’s statutory authority to protect public health. In the department’s view, that decision conflicts with the text of the statute, Congress’s ratification of the moratorium, and the rulings of other courts.” Judge Friedrich also issued an order late on May 5 that would temporarily allow the moratorium to continue while she considers the Biden administration’s emergency request. The temporary stay is in place “to give the court time to consider the merits” of arguments from both sides. (BGov, May 6)Rental Assistance DistributionThe National Multifamily Housing Council (NMHC) responded to the ruling: “What has become clear over the course of the pandemic and resulting financial distress is that the best way to keep people in their homes is to provide them the resources necessary to meet their housing obligations and other costs. To that end, lawmakers in Congress fulfilled their responsibilities and passed almost $50 billion in rental assistance, as well as other supports like stimulus checks and extended unemployment benefits.” Congress has enacted billions in aid to help renters, but state and local authorities are overwhelmed with how to allocate the influx of funds, leaving many tenants and housing providers waiting weeks or months for the assistance. (Washington Post, April 8 and Wall Street Journal, April 13)The Roundtable is part of a broad real estate coalition that recently urged state, county and municipal officials to distribute the allocated federal funds as soon as possible. (Coalition letter, April 15) The coalition letter emphasized the need “to quickly and fully allocate available American Rescue Plan federal funds to provide assistance to renters, consumer-facing small businesses, and impacted industries such as retail, tourism, travel, and hospitality that are having trouble paying rents, mortgages or remaining viable enterprises due to the COVID-19 pandemic.” The letter adds, “Such assistance would make a big difference in the lives of thousands upon thousands of COVID-19 affected renters and businesses in their cities, counties, and states – and would also provide stability to the buildings and communities in which they live.” Additional guidance from the Treasury Department on disbursement of federal rental assistance funds is expected this month. # # #

Beneficial Ownership

May 7, 2021

Roundtable Weekly

Real Estate Coalition Weighs In About Proposed Beneficial Ownership Reporting Requirements

Beneficial Ownership Corporate Transparency Act CTA FinCEN

The Real Estate Roundtable and three other national real estate organizations on May 5 submitted detailed comments to the Treasury Department's Financial Crimes Enforcement Network (FinCEN) on the development of a new federal registry that will contain beneficial ownership information. Corporate Transparency Act The Roundtable, the National MultiFamily Housing Council (NMHC), National Apartment Association (NAA) and National Association of Home Builders (NAHB) submitted the comments in response to FinCEN’s effort to gather public input on the reporting, maintenance and disclosure of beneficial ownership information. FinCEN solicited comments on a wide range of questions related to its implementation of the Corporate Transparency Act (CTA) – enacted on January 1, 2021 – that effectively bans the registration of anonymously owned shell companies in the United States. (JD Supra, April 26 and Lexology, April 28) The CTA amended the Bank Secrecy Act to require corporations, limited liability companies, and similar entities to report certain information about their beneficial owners (the individual natural persons who ultimately own or control the companies). FinCEN is required to develop a confidential, secure, and non-public database to maintain the reported beneficial ownership information. This new reporting requirement aims to enhance the national security of the United States by making it more difficult for malign actors to exploit opaque legal structures to launder money, finance terrorism, proliferate weapons of mass destruction, traffic humans and drugs, and commit serious tax fraud and other crimes that harm the American people. Real Estate Industry Concerns The real estate coalition’s extensive comments emphasize, “The scope of the CTA is far reaching and will impact many commercial and residential real estate businesses who are frequent users of the LLC structure for conducting business. If not implemented with a clear set of rules and regulations, the CTA could result in an outcome of confusion, missteps, and ultimately fines on law-abiding businesses.”The coalition’s comments detail “concerns and recommendations for establishing regulations to implement reporting requirements – as well as provisions regarding FinCEN’s maintenance and disclosure of reported information effectively and fairly.”The coalition document addresses several specific implementation issues, including how small companies targeted by the CTA will face compliance burdens. The time-consuming and challenging process of gathering required information on all beneficial owners of a reporting company that may have been created years ago is also addressed. Congressional Intent Reps. Patrick McHenry (R-NC), ranking member of the House Financial Services Committee, and Blaine Luetkemeyer (R-MO), ranking member of the Consumer Protection and Financial Institutions Subcommittee, sent a letter on April 7 to Treasury Secretary Janet Yellen on the development of the new beneficial ownership reporting regime.The McHenry-Luetkemeyer letter urged Secretary Yellen to adhere to the CTA’s congressional intent by ensuring “the new reporting paradigm is focused on fighting bad actors such as human traffickers, money launderers, and State actors such as China.” The letter also emphasized that FinCEN implement the statute as intended, with a particular focus on minimizing burdens on small businesses while retaining confidentiality, unless disclosure is authorized. FinCEN is mandated to issue regulations on the new registry for beneficial ownership information by January 1, 2022 – and specify a subsequent effective date. # # #

May 5, 2021

Policy Comment Letter

2021-5-5 Joint letter ANPR for Beneficial Ownership Reporting.FINAL

Beneficial Ownership, Corporate Transparency Act CTA, FinCEN,

Policy Landscape

April 30, 2021

Roundtable Weekly

Biden Proposes $1.8 Trillion “American Families Plan” Funded by Tax Increases

Biden Administration Requests Voluntary “Commitments” from CRE Companies to Help Tackle the Climate Crisis

Climate Change Climate Policy

As part of the roll-out for its American Jobs Plan to invest in the nation’s “physical” infrastructure assets, the Biden Administration is asking real estate companies to make voluntary “commitments” to help reduce the built environment’s carbon footprint. (Climate Commitment Fact Sheet)The White House seeks three categories of voluntary “commitments” from real estate companies. A fact sheet prepared by The Roundtable provides more details:(1) EV Charging Stations: Commitments to install a significant number of EV charging infrastructure in parking lots, garages, gas stations, and other areas.(2) Clean Power Purchases: Commitments to purchase clean power in amounts that “offset” or “credit” the electricity consumed by an entire or majority of a real estate portfolio.(3) Data Sharing: Commitments for a real estate company to share data on building energy consumption with federal agencies and US-DOE’s national laboratories.Mark Chambers, Senior Director for Building Emissions with the White House Council on Environmental Quality (CEQ), outlined these commitments with The Real Estate Roundtable’s Board of Directors on April 20 timed with the Spring 2021 Roundtable meeting. (Roundtable Weekly, April 23).White House RecognitionParticipating companies stepping up to the challenge will be recognized by the Biden Administration. A small number of commitments, deemed “significant” by the White House and reached within the next 7-10 days, may be showcased on May 17 with Cabinet-level participation at the virtual Better Buildings Summit sponsored by the U.S. Department of Energy.The Administration’s outreach to CRE is part of a multi-industry push to also enlist the manufacturing, technology, transportation, power generation, and utility sectors as “partners” in tackling the climate crisis. (Forbes, April 29; Reuters, Feb. 3)Over 400+ businesses and investors recently signed an open letter urging the Biden Administration to cut U.S. GHG emissions in half by 2030 (relative to a 2005 baseline).Any real estate company interested in exploring a commitment and earning recognition from the White House should contact Mark Chambers directly at Mark.C.Chambers@ceq.eop.gov. The Roundtable can also facilitate connections to the Administration through Duane Desiderio, Senior VP for energy and infrastructure policy (ddesiderio@rer.org).# # #

Climate and Tax Policy, Energy

April 30, 2021

Roundtable Weekly

Senate Hearings Focus on Clean Energy and Tax Policy, Climate Bank

Climate Policy Energy Policy Tax Policy

Senate hearings this week indicate that clean energy financing and tax policies considered in the current Congress might significantly affect commercial real estate. (Tax Notes, April 29)Senate Finance FocusSenate Finance Committee Chairman Ron Wyden (D-OR), photo above, opened an April 27 hearing by noting how President Biden’s goal of cutting carbon emissions in half by 2030 is driving clean energy policy. Wyden stated, "The reality is, a debate on energy and transportation is largely a debate on tax policy. That puts this committee in the driver’s seat when it comes to job-creating legislation that addresses head-on the existential challenge of the climate crisis."Sen Wyden also remarked about legislation he introduced last week – the Clean Energy for America Act, which would revamp tax incentives directed at buildings, electricity and transportation. Among other things, the bill would reform the 179D deduction for energy efficient commercial and multifamily buildings – with the value of the incentive increasing as more energy is conserved. (Text of the legislation, one-page summary of the bill and a section-by-section summary.)Committee Ranking Member Sen. Mike Crapo during his opening remarks noted draft legislation that he unveiled the day before with committee member Sheldon Whitehouse (D-RI) – the Energy Sector Innovation Credit (ESIC) Act. ESIC is an incentive that would “target tax credits for innovative clean energy technologies,” Crapo said. (SFC news release).E-QUIP Accelerated DepreciationSeparately, a broad coalition of environmental, manufacturing, and real estate groups led by The Roundtable supports the E-QUIP Act (H.R. 2346), which proposes “accelerated depreciation” for high-performance equipment installed in commercial and multifamily buildings. The coalition is urging policymakers to include this measure as part of any “green tax” package that may be folded into larger infrastructure spending legislation. (Roundtable Weekly, April 2)Roundtable President and CEO Jeffrey DeBoer emphasized an important distinction between the energy incentives affecting CRE. “All building owners are intensely focused on operations and technologies to reduce energy consumption. Yet the policy discussions in Washington frequently don’t reflect the reality of these efforts to make commercial real estate properties more sustainable. It is retrofitting the existing building stock, not new construction, where energy savings and policy incentives are most challenging.” DeBoer said.He added, “The 179D incentive fails to reflect the diverse vintage and tenant base in buildings. The E-QUIP incentive accommodates existing buildings by targeting the addition of high-performance, energy saving components. Combining the two incentives would make most sense.” National Climate BankThe Senate Environment and Public Works Climate Subcommittee on April 27 held a “Legislative Hearing on S.283, National Climate Bank Act” focused on how a national climate bank, also known as an “energy accelerator,” would invest in renewable energy technology. Sen. Chris Van Hollen (D-MD), photo above, co-author of S. 283 with Subcommittee Chairman Sen. Ed Markey (D-MA), testified at the hearing, “… we need a National Clean Energy Accelerator … so we can turbocharge private investment, fortify our energy grid, and create millions of clean energy jobs – including in those communities where fossil fuel plants have closed.” Van Hollen’s legislation is supported conceptually by President Biden’s American Jobs Plan, which recommends a $27 billion “accelerator” financing platform to mobilize private investment into building retrofits and other clean energy projects.White House National Economic Council Director Brian Deese recently discussed the creation of a climate bank in an interview with Roundtable President and CEO, Jeffrey DeBoer for The Roundtable's April 20 Spring Meeting. (Roundtable Weekly, April 23).Additionally, the White House on April 27 announced policy actions to advance the expansion and modernization of the energy grid. National Climate Advisor Gina McCarthy noted, "After the Texas transmission debacle this winter, no one can doubt the need to invest in our electric grid. The steps that the Departments of Energy and Transportation are taking today, when combined with the grid investments outlined in the American Jobs Plan, will turbocharge the building of major new electricity transmission lines that will generate new jobs and power our economy for years to come."# # #

Spring Roundtable Meeting

April 23, 2021

Roundtable Weekly

Roundtable Leaders and National Policymakers Highlight Key Industry Issues

Roundtable Leadership Roundtable Meeting

A wide range of policy issues were addressed by Roundtable leaders, Members of Congress and Administration officials during this week’s Roundtable Spring Meeting, including: infrastructure; housing availability and financing; tax proposals; building energy and climate related matters; and pandemic risk insurance. (For issue detail please see The Roundtable’s 2021 National Policy Agenda)Roundtable LeadershipRoundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.) launched the meeting on April 20 with Roundtable Chair-Elect John F. Fish (Chairman & CEO, SUFFOLK) and Roundtable President and CEO Jeffrey DeBoer. Chair Cafaro noted, “We convene at a time imbued with optimism and renewal, as we are fortunate to have an accelerated vaccine rollout, an improving economy and stabilizing markets.” She also acknowledged the vital, positive role that The Roundtable membership has played in addressing many of today’s national challenges, including rebuilding and expanding infrastructure; expanding housing opportunities; creating jobs and training workers for a changing economy. “Roundtable members have been at the forefront of advocating for these important policies since the onset of the COVID-19 pandemic,” Cafaro said.Roundtable Chair-Elect Fish stated, “Unintended consequences can occur when big national policy changes are proposed, so it is more important than ever that the real estate industry offer its expertise to help policymakers as they look to enact reform and propose new, important initiatives. The Roundtable is indeed engaged, and will remain so, in major policy issues impacting the industry.”Roundtable President and CEO DeBoer emphasized the need for ongoing interaction with policymakers in Washington as the policy agenda and congressional rosters change. He stated, “Our Roundtable policy advisory committees continue to remain active in keeping policymakers and regulators up to date on the evolving marketplace and our policy agenda. We always take a fact-based approach from the point of view of the asset, showing how it is sustainable, supports jobs for the community and contributes to overall economic growth,” DeBoer stated.Featured PolicymakersThe Roundtable’s Fall Business Meeting included virtual visits from the following guests: Senate Majority Leader Chuck Schumer (D-NY) Secretary of Transportation Pete Buttigieg, aboveSecretary of Commerce Gina Raimondo White House National Economic Council Director Brian Deese Senator Jacky Rosen (D-NV)Following the business meeting, members from the House and Senate attended several smaller breakout sessions with Roundtable attendees to discuss national policy issues in a more informal exchange of views.Next on The Roundtable's meeting calendar is the all-member June 15-16 State of the Industry Meeting, which will be held virtually via Zoom. # # #

Infrastructure and Climate

April 23, 2021

Roundtable Weekly

GOP Senators Outline Infrastructure Plan; Biden Announces U.S. Emissions Goal at Global Summit

Climate Policy Infrastructure

Senate Republicans on April 22 unveiled a five-year, $568 billion infrastructure proposal as a counteroffer to President Joe Biden’s eight-year, $2.2 trillion plan. (Republican infrastructure framework and press conference)Contrasting Infrastructure PlansThe GOP plan, crafted by a group led by Senate Environment and Public Works Committee Ranking Member Shelley Moore Capito (R-WV), at podium in photo, adheres to a more narrow definition of infrastructure than the Democrats' proposal. (CQ and CNBC, April 22)The Republican proposal is focused on transportation, but also targets broadband and water projects. Details about how to fund the plan are vague, referencing unspecified user fees and spending unused money from prior COVID-19 relief bills. (Republican infrastructure framework and Politico Pro, April 22)Funding for Biden's multitrillion dollar “hard infrastructure” plan, by contrast, would rely on an increase in corporate taxes and further address electrical vehicles and “clean energy” assets. The Administration is expected to unveil its “American Families Plan” next week – an extensive framework supporting “human infrastructure” investments that would be paid for, at least partially, through tax increases on wealthy individuals. (Roundtable Weekly, April 2)Meanwhile, a group of 58 bipartisan lawmakers called the Problem Solvers Caucus on April 23 released a report that proposes several possible fee increases to pay for infrastructure spending. The caucus report includes options to impose a vehicle-miles traveled tax from electric vehicles – and proposes indexing gas and diesel taxes to inflation, highway construction costs, fuel-economy standards, or some combination. (Caucus report and Wall Street Journal, April 23)Climate GoalsPresident Biden held a historic “virtual” climate summit yesterday and today with 40 world leaders to build global commitments to slash greenhouse gas emissions and ramp-up renewable energy development. (New York Times, April 22 and White House Fact Sheet, April 23)Biden committed the U.S. to cut its emissions in half by 2030 (relative to a 2005 baseline) – a pledge that would “dramatically reshap[e] key sectors of the economy.” (Wall Street Journal, April 23). The Biden Administration considers its climate commitments a “core part of [its] $2.2 trillion infrastructure plan,” essential to embrace new technologies, and necessary for the U.S. to out-compete China. (POLITICO, April 22) An open letter signed by 400+ businesses and investors support Biden’s 2030 target, calling it “ambitious and attainable.” The CEOs for Bank of America and Citibank appeared at the summit, as the financial sector faces increasing pressure to “play its biggest role yet in greening the global economy.” (Axios, April 22)Energy Tax BillSenate Finance Committee Chairman Ron Wyden (D-OR) on April 21 reintroduced legislation that would consolidate and refocus a range of existing energy tax incentives directed at buildings, clean electricity, transportation and conservation.The Clean Energy for America Act would provide performance-based tax incentives for energy efficient homes and commercial buildings – with the value of the tax incentives increasing as more energy is conserved. (Text of the legislation, one-page summary of the bill and a section-by-section summary.)Similar to the previous version of the legislation, the bill would also address Section 179D – the enhanced deduction for energy-efficient commercial buildings – by creating a sliding scale based on the percent of energy efficiency achieved above the most recent ASHRAE 90.1 standard.A business coalition led by The Roundtable supports the E-QUIP Act (H.R. 2346), which proposes “accelerated depreciation” for high-performance equipment installed in commercial and multifamily building. The coalition is urging policymakers to include this measure as part of any “green tax” package that may be folded into larger infrastructure spending legislation. (Roundtable Weekly, April 2)The Senate Finance Committee will discuss energy tax policy and climate change at an April 27 hearing entitled "Climate Challenges: The Tax Code’s Role in Creating American Jobs, Achieving Energy Independence, and Providing Consumers with Affordable, Clean Energy."# # #

Diversity

April 23, 2021

Roundtable Weekly

Roundtable-Backed Corporate Diversity Bill Passes House Committee

A bill supported by The Real Estate Roundtable that would require public companies to report on the diversity of their corporate boards and executive officers was approved Tuesday by voice vote in the House Financial Services Committee. (Committee mark-up, April 20) The Improving Corporate Governance Through Diversity Act (H.R. 1277) is sponsored in the House by Rep. Gregory Meeks (D-NY), left in photo, and in the Senate by Sen. Bob Menendez (D-NJ), right in photo. (Roundtable Weekly, Feb. 27)The bill would amend the 1934 Securities Exchange Act to require issuers of securities that must file annual reports to disclose in proxy statements:Data on the racial, ethnic, and gender composition of their executive officers, board of directors, and board nominees;Whether any director, board nominee, or executive officer is a veteran; andPlans or strategies to promote diversity at the board and executive levels. The Roundtable supports the Meeks-Menendez bill along with other groups including Nareit, NAIOP, International Council of Shopping Centers, Real Estate Executives Council (REEC), and the U.S. Chamber of Commerce. (Meeks news release, Feb. 23, 2021)The Roundtable joined other national organizations in a letter urging Financial Services Committee leaders to advance the legislation. The April 20 letter stated, “gender, racial, and ethnic diversity on corporate boards of directors … is important to institutional investors and other stakeholders, as well as to good corporate governance.”The full House is expected to vote in the coming weeks on the measure, which passed in the last session of Congress but stalled in the Senate (Roundtable Weekly, July 31, 2020). Now that the Senate is under Democratic control, the Meeks-Menendez bill has a higher likelihood of passing in both chambers.In related news, The Roundtable’s Equity, Diversity and Inclusion (ED&I) Committee is coordinating with the Real Estate Executive Council (REEC) on efforts to promote the hiring of more minority- and women-business enterprises (MWBEs) in real estate’s “supply chain” of vendors and contractors.The Roundtable is a “Founding Diversity Partner” in a REEC national program to improve diversity, racial equality, and inclusivity across the commercial real estate industry. (Roundtable Weekly, Feb. 5)# # #

Cannabis

April 23, 2021

Roundtable Weekly

House Again Passes Cannabis Reform Legislation Providing a Safe Harbor to CRE Owners

Cannabis Capital and Credit

A Roundtable-supported bill that would allow federally regulated banks to provide mortgage and financial services to state-licensed, cannabis-related businesses (“CRBs”) without the threat of federal penalties passed the House April 19 on a strong bipartisan vote. The SAFE Banking ActThe Secure and Fair Enforcement (SAFE) Banking Act [H.R. 1996 (117)] would provide commercial property owners a safe harbor if they lease space to a CRB, whose mortgages would not be subjected to corrective action by a bank.The SAFE Banking Act, which has been introduced in every Congress since 2013 by Rep. Ed Perlmutter (D-CO), passed the House multiple times in the last Congress – both as a stand-alone measure and as an addition to coronavirus relief legislation.Rep. Perlmutter commented on the passage this week, “After years of bringing up this issue, I feel optimistic about the path forward for the SAFE Banking Act and, more broadly, reforms to our federal cannabis laws.” (Perlmutter news release, April 19)Roundtable SupportThe Real Estate Roundtable is a long-standing supporter of the SAFE Act. Roundtable President and CEO Jeffrey DeBoer noted in March 2019 letter to policymakers that the legislation, “… clarifies that banks could not take adverse action on a loan to a real estate owner solely because that owner leases property to a legitimate CRB. The measure also protects sellers and lessors of real estate and other CRB ‘service providers’ by clarifying that proceeds from legitimate marijuana-related transactions do not derive from unlawful activity, and thus do not provide a predicate for federal criminal money laundering.” (Perlmutter news release, March 18, 2021 and Roundtable letter, March 25, 2019)The legislation is supported by a wide variety of other organizations, including the National Association of State Treasurers and Governors from 21 states and territories. (Perlmutter news release, April 19)The Roundtable also advocates that Congress should provide fuller protections to real estate business through legislation that clarifies state-compliant cannabis transactions are not illegal federal “trafficking” – and do not produce unlawful proceeds under money laundering statutes.Cannabis and CREForty-seven states and DC currently legalize marijuana to varying degrees. Yet use, possession, and sale remains illegal under federal law. (National Council of State Legislatures, April 5, 2021)The growing trend in cannabis decriminalization is having an increasing impact on the commercial real estate industry, according to recent member survey released this month by the National Association of Realtors (NAR publication Marijuana & Real Estate: A Budding Issue)The estimated value of the U.S. cannabis industry is $17.7 billion, a substantial amount of which remains unbanked. As of January 2021, the legal cannabis industry supports 321,000 jobs across the country. (Perlmutter news release, April 19)# # #

April 20, 2021

Policy Comment Letter

2021_04_20_Coalition_ImprovingCorporateGovernanceThroughDiversityAct_HFSC

Policy Landscape

April 16, 2021

Roundtable Weekly

President Biden Signals Flexibility on Infrastructure Plan as GOP Senators Craft Alternative Approach; SALT Repeal May Influence Negotiations

Infrastructure SALT

President Joe Biden this week met with a bipartisan group of policymakers about the details of his multitrillion infrastructure proposal as a bloc of moderate GOP senators stated they are developing a far less expensive counterproposal that would pare back the definition of what comprises “infrastructure” and fund it with unspecified user fees. (Washington Post, April 14)Sen. Mitt Romney (R-UT), who is involved in talks about an alternative infrastructure plan, said, "The pay-for ought to come from the people who are using it," suggesting that a transportation mileage charge could be applied to electric vehicle drivers. "Clearly by bringing in additional revenue from actual miles driven is going to create some additional revenue," Romney said. (Politico Pro, April 14)Rep. Donald Payne, Jr., chairman of the House Transportation Subcommittee on Railroads, attended the White House meeting where President Biden said he was “prepared to negotiate” on his new infrastructure-focused economic plan – and expressed support for the Gateway project, a major rail tunnel project between New York and New Jersey. (BGov, April 12)SALT CaucusAn effort by members of Congress to repeal the cap on state and local tax deductions (SALT) is adding to the complexity of negotiations over the White House infrastructure proposal. Yesterday, a bipartisan congressional “SALT caucus” was launched to push for the full repeal of the $10,000 limit on state and local deductions, which was enacted as part of the 2017 Republican tax overhaul. (Bloomberg, April 15)It is unclear how many members of the bipartisan caucus would link their support for Biden’s infrastructure proposal, and its increased corporate taxes, to action on the SALT cap. Reps. Josh Gottheimer (D-NJ) and Tom Suozzi (D-NY), who co-chair the SALT caucus, said they “will not accept any changes to the tax code that do not restore the SALT deduction.” (CNBC, April 15)Additionally, several New York Democrats sent a letter to House leadership on April 13 urging for a full repeal. “We will not hesitate to oppose any tax legislation that does not fully restore the SALT deduction,” according to the letter. (BGov and Wall Street Journal, April 13)Energy-Efficient BuildingsThe White House’s infrastructure plan and the importance of energy efficient buildings was noted in a recent New York Times interview with White House National Economic Council Director Brian Deese.Deese stated during the April 9 Ezra Klein Show (podcast), “… it’s been true for multiple years that energy efficiency upgrades in commercial buildings should just happen, and they’re not. The built environment and industry get less attention but are extraordinary opportunities. And this [infrastructure] plan has a very significant investment in upgrading buildings and making them more energy efficient.”He added, “The jobs doing that happen all around the country. They’re construction jobs, building trades. A lot of it is actually high-value investment, where providing an incentive could actually unlock a bunch of private capital to invest, particularly in the commercial building space.”Deese is scheduled to participate in next week’s Roundtable Spring Meeting, along with U.S. Department of Transportation Secretary Pete Buttigieg. The remote discussions will be available on The Roundtable’s YouTube channel by April 21.The Roundtable is part of the Build by the 4th coalition, led by the U.S. Chamber of Commerce, which encourages the Biden Administration and Congress to pass a comprehensive infrastructure deal by Independence Day 2021.# # #

Monetary and Fiscal Policy

April 16, 2021

Roundtable Weekly

Federal Reserve’s Robert Kaplan Discusses Economic Outlook with Roundtable; Real Estate Coalition Urges State and Local Officials to Distribute Federal Pandemic Relief Funds

Economic Growth Federal Reserve The Fed

Federal Reserve Bank of Dallas President and CEO Robert S. Kaplan, top left in photo, on April 12 discussed a wide range of monetary and fiscal policy issues with Roundtable Chairman Emeritus Robert S. Taubman (Chairman & CEO, Taubman Centers, Inc.), top right, and Roundtable President and CEO Jeffrey DeBoer, center. (Watch the Kaplan video interview on The Roundtable’s YouTube Channel)The Fed ViewThe remote discussion focused on the overall economy, inflation trends, affordable housing, commercial real estate, the banking industry and cryptocurrency. Among Mr. Kaplan’s key points:The Dallas Fed forecast for the 2021 U.S. economy’s growth rate is 6.5 percent. The distribution of COVID-19 vaccines is outpacing the spread of the virus, positively affecting economic growth. A recovering economy follows improved health conditions, with expected increases in consumer mobility and spending.A significant element driving the economic recovery is “Substantial fiscal policy, much more substantial as a percentage of GDP than we had during the Great Recession." Kaplan acknowledged the challenge of balancing central bank monetary policies with fiscal policies enacted by lawmakers. “Anytime there’s fiscal actions or other changes, you have to keep recalibrating that balance. There’s no textbook for this because we haven’t been through a period where we were shut down and we’re now reopening … and there’s no precedent in recent years of fiscal policy that’s this size of GDP,” Kaplan said. (Video of the discussion)He commented about the yield on U.S. Treasuries, which rose to 1.77% last month. “As we recover, it wouldn’t surprise me for it to drift higher, the 10 year,” Kaplan said, adding, “There’s no shortage of capital” to buy Treasuries. (BGov, April 9)Kaplan also addressed the economic trends monitored by the Dallas Fed, reopening progress and CRE debt exposure to banks. Pandemic Relief Funds & Distribution Significant fiscal policy enacted by Washington lawmakers last month authorized hundreds of billions in pandemic relief under the American Rescue Plan Act of 2021 to households, small businesses, and the hospitality industry suffering from the economic impact of COVID-19. (Roundtable Weekly, March 12, 2021) The Wall Street Journal reported on April 13 that state and local authorities are overwhelmed with “how to allocate $25 billion in federal rental relief, leaving many tenants and landlords waiting weeks or months for their share.” The Roundtable is part of a broad real estate coalition that wrote on April 15 to state, county and municipal officials, urging them to distribute the allocated federal funds as soon as possible. (Coalition letter) The coalition letter emphasized the need for elected state and local leaders “to quickly and fully allocate available American Rescue Plan federal funds to provide assistance to renters, consumer-facing small businesses, and impacted industries such as retail, tourism, travel, and hospitality that are having trouble paying rents, mortgages or remaining viable enterprises due to the COVID-19 pandemic.” The letter adds, “Such assistance would make a big difference in the lives of thousands upon thousands of COVID-19 affected renters and businesses in their cities, counties, and states – and would also provide stability to the buildings and communities in which they live.” The Treasury Department continues to implement pandemic recovery programs, including the State and Local Fiscal Recovery Fund, State Small Business Credit Initiative, and renter and homeowner assistance. Treasury Secretary Yellen and White House Rescue Plan Coordinator Gene Sperling met yesterday with members of the National Governor’s Association Executive Committee to determine the most efficient and effective way to get federal resources to states. (Treasury Dept readout, April 15) # # #

Infrastructure and Housing

April 16, 2021

Roundtable Weekly

Bipartisan Legislation to Build More Housing Near Transit Reintroduced

Housing Infrastructure Transportation

The bipartisan Build More Housing Near Transit Act of 2021 (H.R. 2483) – reintroduced on April 14 by Reps. Scott Peters (D-CA) and McMorris Rodgers (R-WA) – would encourage the construction of low and middle-income housing in transit-served, walkable locations. The United States is in the middle of a severe affordable housing shortage exacerbated by the economic toll of the COVID-19 pandemic. The National Low Income Housing Coalition estimates there is a shortage of 7 million affordable homes, and 10.4 million Americans spend more than half of their income on housing. Benefits of the Bill The Build More Housing Near Transit Act of 2021 would provide incentives for building housing developments that use less land, allow people to live closer to job opportunities and effectively reduce green house gas emissions by eliminating the need for cars.The Roundtable-supported bill was initially introduced in the previous Congress, which passed the House as part of last year’s Moving Forward Act. (One-page summary, Up for Growth Action)This year’s bill (H.R. 2483) would ensure the Federal Transit Administration (FTA) takes a holistic and quantitative approach to evaluating applicants seeking to build affordable housing projects near transit station areas. Specifically, the bill would make some minor, but essential, enhancements to the evaluation criteria for the FTA’s Fixed Guideway Capital Investment Grants Program, or Section 5309 grants, which fund projects like commuter rail, light rail, and bus rapid transit. Broad Support The Real Estate Roundtable joined a broad coalition of housing, transportation and other organizations in an April 14 letter to the bill’s sponsors to express strong support for the legislation. The coalition letter states, “ From encouraging more thoughtful planning, to supporting more inclusive housing policies, to enabling more efficient use of federal dollars, the Build More Housing Near Transit Act is a sound policy and the product of a collaborative process.”One of the organizations includes Up for Growth Action, whose Executive Director Mike Kingsella said, “The Build More Housing Near Transit Act encourages localities to align land-use policies and affordable housing resources with federal transit investment, ensuring that transit-rich communities are accessible to more Americans.” (Rep. Peters news release, April 24) Original cosponsors of the legislation include Reps. Marilyn Strickland (D-WA), Derek Kilmer (D-WA), Lisa Blunt Rochester (D-DE), David Scott (D-GA), Ami Bera (D-CA), Alan Lowenthal (D-CA), and Tom Suozzi (D-NY). # # #

Capital and Credit

April 16, 2021

Roundtable Weekly

Financial Regulators Call for Federal Legislation to Ease LIBOR Transition

Capital and Credit LIBOR

Officials from the Fed and other top federal financial regulatory agencies testified on April 15 before a House Financial Services subcommittee that they support federal legislation to transition away from using the London Interbank Offered Rate (Libor) as an interest rate benchmark for US dollar contracts. (Subcommittee hearing video and background memorandum)Libor DeadlinesLibor is currently used in many outstanding financial contracts – including mortgages, student loans and derivatives – worth trillions of dollars.Using LIBOR for new contracts is scheduled to end at the end of 2021. Additionally, all Libor maturities will stop in June 2023, although some will cease at the beginning of next year.Rep. Brad Sherman (D-CA), photo above – who chairs the House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets that held the hearing – has circulated draft legislation of a proposal entitled the Adjustable Interest Rate (LIBOR) Act of 2021 to smooth the transition away from Libor to the Secured Overnight Financing Rate (SOFR). (Pensions & Investments, April 16)Lawmakers from both parties also voiced their support for federal Libor legislation during the hearing. Sherman stated that the need for federal action on Libor would test Congress to see if it can pass “necessary legislation that isn't Democrat, isn't Republican.” (CQ, April 15)Roundtable SupportThe Real Estate Roundtable and 17 national trade organizations on April 14 sent a letter of support for federal Libor legislation to leadership of the House Financial Services Committee. The letter notes that the trillions of dollars of outstanding contracts, securities, and loans that use LIBOR for their interest rates do not have appropriate contractual language to address a permanent cessation of LIBOR. The coalition states in their letter that “Ineffective or ambiguous fallback provisions will result in uncertainty, litigation, and harm to consumers, businesses, and investors. Only federal legislation can uniformly address all 50 states, and only federal legislation can address issues such as the need for narrow relief from certain federal laws.”On April 6, 2021, New York Governor Andrew Cuomo signed the first state-passed legislation (Senate Bill 297B/Assembly Bill 164B) intended to reduce risks associated with the transition away from LIBOR. Since New York law governs many of the financial products and agreements referencing LIBOR, the legislation will provide legal clarity for these contracts and will lessen the burden on New York courts. (Pensions & Investments, March 25) The American College of Real Estate Lawyers recently published a detailed overview of the Libor transition – “LIBOR'S Endgame: a Brief Pause, Not a Reprieve; a Safe Harbor, but a New Penalty” – by Joe Forte (Senior Legal Councel, AmTrust Title), who is a member of The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC). # # #

April 15, 2021

Policy Comment Letter

2021-04-15-Coaltion Letter STATE POLICY MAKERS ON RENTAL AND BUSINESS ASSISTANCE

April 14, 2021

Policy Comment Letter

2021-04-14-Coalition_Build-More-Housing-Transit-Act

April 14, 2021

Policy Comment Letter

2021-04-14 Joint Trades LIBOR HFSC Letter – FINAL

Economic Growth and Infrastructure

April 9, 2021

Roundtable Weekly

Biden Administration Details Tax Proposals to Fund Infrastructure Package

Economic Growth Infrastructure

The Biden administration this week released additional details on its proposals to raise corporate taxes to pay for its massive $2.3 trillion economic growth and infrastructure proposal. Infrastructure & Taxes President Biden, anticipating Congress’ return next week to begin deliberations on his proposal, stated, “Debate is welcome. Compromise is inevitable. Changes are certain. Inaction simply is not an option.” (White House remarks, April 7) The administration aims to raise $2.5 trillion to pay for its sprawling “American Jobs Plan” by increasing the corporate tax rate to 28 percent from 21 percent, imposing a strict new minimum tax on global profits, and eliminating incentives to shift profits overseas. (New York Times, April 7) The proposed taxes to fund the infrastructure investments were detailed this week in a Wall Street Journal op-ed by Treasury Secretary Janet Yellen – “A Better Corporate Tax for America” – and in Treasury’s report, “The Made in American Tax Plan.” According to an April 8 Wall Street Journal report, the infrastructure proposal includes at least $5 billion for an affordable-housing grant program that would encourage local jurisdictions to relax zoning rules and restrictions on new construction. The new competitive grants for cities and localities would seek to eliminate exclusionary zoning policies such as minimum lot sizes, mandatory parking requirements and density restrictions. The Journal article quotes a recent Urban Institute brief: “There are so many decisions made at the local level that can impede the development of affordable housing that federal policy makers should push communities to reorganize their approach to development from the ground up.” The Roundtable has long encouraged federal agencies to leverage economic development and infrastructure funds to discourage exclusionary zoning tactics. Bills such as the Yes in My Backyard Act and the Build More Housing Near Mass Transit Act would require state and local governments to plan for and encourage high-density and multifamily development when they seek grants from US-HUD and US-DOT. (Roundtable Weekly, March 6, 2020 and February 28, 2020) What’s Next: Democrats are weighing whether to advance the Biden infrastructure plan under the same “reconciliation” budget process that was used to pass the March $1.9 trillion pandemic relief package by a simple majority vote – thereby bypassing the 60-vote requirement typically needed to advance most legislation in the 50-50 Senate. Senate Parliamentarian Elizabeth MacDonough this week issued an opinion that may allow Democrats to pass additional, large-scale bills with no Republican support before the midterm elections. The sparse April 5 ruling, according to a Democratic spokesperson, has “some parameters [that] still need to be worked out.” The ruling does not specify the types of reconciliation bills that could be considered or how many times the maneuver would be allowed. (Politico, April 7 and CQ News, April 8) House Speaker Nancy Pelosi (D-CA) yesterday said, “If [Democrats] have to go to reconciliation, that’s a lever, but I hope it’s not something that we need to do.” (Roll Call, April 8) Pelosi added that the House could pass the infrastructure package by the July 4 recess, followed by the Senate before the August recess. (Bloomberg, April 8) Pelosi also said she expects the White House in the coming months to introduce a separate, multi-trillion “American Families Plan” focused on expanded family support benefits, including child care and health measures. That plan could be pared with significant changes to individual taxes, including capital gains. # # #

Climate and Energy Policy

April 9, 2021

Roundtable Weekly

Roundtable Comments on “Model” Local Ordinance Proposing Efficiency and Emissions Requirements on Buildings

Climate Policy Energy Policy

The Real Estate Roundtable submitted comments on April 6 regarding a “model” law developed for cities, counties, and states considering building “performance standards” for energy consumption and GHG emissions. Building Performance Standards (BPS): The model ordinance has been developed by the Institute for Market Transformation (IMT) – a D.C.-based policy organization that coordinates with state and local bodies on energy- and climate-related regulations. (IMT’s model ordinance, BPS resources, and blog post, Creating Real-Estate Friendly Building Performance Standards, Jan 21, 2021)A task force of The Roundtable’s Sustainability Policy Advisory Committee (SPAC) convened to respond to IMT’s proposed law. According to the letter, a “whole-of-economy approach must drive businesses to take bolder actions within their control to minimize their carbon footprints while operating profitably, meeting investors’ demands, and equitably creating jobs in their communities.”“Real estate developers, owners, managers, and financiers – along with building tenants, occupants, public buildings, and … the power supply, transportation, and manufacturing sectors – all have shared obligations to address climate change,” The Roundtable writes.Roundtable Comments -- Talking Points:BPS laws must rely on consistent standards, methods, and data that reflect the best available government and industry practices. Uniformity is critical to avoid a divergent “patchwork” of state and local laws that would unduly complicate building owners’ compliance and regulators’ enforcement.No BPS law should mandate building owners to reduce emissions from sources beyond their control. Owners should not be saddled with responsibilities to “clean-up” the electric grid, district thermal systems, and other community-wide power infrastructure that they do not manage or control.Any BPS law should include financial assistance to help all regulated owners defray the significant capital expenses needed to bring buildings into compliance.BPS laws should encourage investments in existing buildings and allocate compliance burdens based on tenants’ and occupants’ energy usage.The least efficient buildings and communities are frequently the most distressed buildings and communities. Added regulatory costs from BPS mandates could disproportionately affect housing affordability and economically distressed neighborhoods on the “frontlines” of climate change.Why It Matters: “RER members must engage vigorously on climate and energy issues,” said SPAC Chair Anthony E. Malkin, above left, (Chairman, President and CEO, Empire State Realty Trust). “We have the facts, the practice, and the experience to inform the thinking of cities, states, federal officials, and NGOs as they develop goals to reduce greenhouse gas emissions and stride toward a clean energy economy. The field on which the game is played, and the rules themselves, are in constant flux. RER member engagement has never been more important to offer policy recommendations that create green jobs while modernizing U.S. buildings and power infrastructure.” “It is critical for Roundtable members to have a seat at the table as cities and states consider laws that set efficiency and emissions standards on buildings,” said SPAC Vice Chair, Daniel Egan, above right, (Senior Vice President, Vornado Realty Trust). “Policy makers must design climate programs that encourage owners to invest in their buildings to improve performance, while incentivizing our industry with market-based solutions that can help increase the nation’s supply of clean, renewable energy.” State and local jurisdictions have been marching forward with regulatory mandates on buildings to address energy and GHG emissions, which prompted The Roundtable to comment on IMT’s model ordinance. While Democrats in the House of Representatives have offered omnibus climate legislation with provisions that would affect U.S. real estate (see the CLEAN Future Act, H.R. 1512), it faces an uphill battle in the Senate. (Roundtable Weekly, March 5) # # #

Budget and Climate

April 9, 2021

Roundtable Weekly

Administration Outlines FY 2022 Budget, Plans Executive Order on Climate-Related Risks for Public and Private Financial Assets

Climate Policy

The Biden administration today released its $1.52 trillion discretionary spending request for the coming fiscal year, which starts Oct. 1, 2022. This initial budget request outlines President Biden’s priorities and agenda for the coming year, but does not include any plans for raising revenue or tax policy changes. (Full budget text and news release summary)Tax Details in SpringToday’s “skinny” budget will be followed in late spring by a formal budget with more detailed requests for mandatory spending and tax policy proposals. (CQ, April 7)The budget proposal would boost current funding levels for nondefense spending by 16 percent and limit increases in defense spending to 1.7 percent. (CQ, April 9)Among the specific agencies affected, the Environmental Protection Agency budget would increase $2 billion, and the Housing and Urban Development Department would receive a $9 billion boost. (New York Times and USA Today, April 9 )Budget & ClimateThe administration’s is also expected to address risks to financial stability posed by climate change in its long-term budget planning. Bloomberg reported this week that Biden will soon issue an Executive Order to develop a plan on climate-related risks for public and private financial assets.The Executive Order would come as policymakers and the private sector debate how the financial industry should prepare for environmental threats – and the information companies should provide to investors about those risks.The strategy would be developed within 120 days of the Order by National Economic Council Director Brian Deese and National Climate Advisor Gina McCarthy, in coordination with Treasury Secretary Janet Yellen. (Bloomberg, April 8)Secretary Yellen is currently working on a separate report on government-wide efforts to address climate-related financial risks with the Financial Stability Oversight Council, which includes the Federal Reserve and the Securities and Exchange Commission. (Politico, March 31)# # #

April 6, 2021

Policy Comment Letter

2021_04_06_IMT_Model_BPS_Comments_FINAL

Infrastructure

April 2, 2021

Roundtable Weekly

President Biden Announces $2.3 Trillion Infrastructure Plan Funded by Corporate Taxes

Infrastructure

President Joe Biden on March 31 announced the first part of his sweeping economic growth proposal focused on infrastructure and clean energy – a $2.3 trillion, eight-year plan that White House officials said would be funded, over 15 years, by corporate and international tax increases. (Wall Street Journal and White House Fact Sheet: The American Jobs Plan, March 31)Why It MattersThe enormous scale of the proposal seeks to use federal spending to address a wide-range of economic and social issues widely defined as infrastructure while strengthening America’s long-term competitiveness against challengers like China. Biden stated, “It’s a once-in-a generation investment in America, unlike anything we’ve seen or done since we built the Interstate Highway System and the Space Race decades ago.” (Remarks by President Biden on the American Jobs Plan, March 31)The White House proposal would direct federal spending to transportation, manufacturing, buildings, schools, water systems, broadband, health care, and energy infrastructure assets. (USA Today, April 1, “These 4 charts show where the money would go”)A “Made in America Tax Plan” would pay for the proposal. It would increase the corporate tax rate from 21% to 28%; set the minimum tax for multinational corporations with U.S. operations at 21 percent; and eliminate certain incentives affecting the offshoring of jobs. (The Hill, March 31)Impact on CREThe Biden proposal would spend $213 billion to produce, preserve, and retrofit two million homes and commercial buildings. In particular, it recommends: Tax credits and grants with a goal of one million new and renovated, affordable and efficient, rental housing units;Extend and expand energy efficiency tax incentives for homes and commercial buildings;A new competitive grant program for cities and localities that eliminate exclusionary zoning policies – like minimum lot sizes, mandatory parking requirements, and density restrictions;Mobilize private sector investment in distributed energy resources, and to de-carbonize the electric grid;Drive clean energy deployment by requiring federal buildings to purchase 24/7 clean power; andSupport private development of idle Brownfields into hubs of economic growth.The proposal does not affect the federal eviction moratorium, which was recently extended by the Centers for Disease Control and Prevention (CDC) until June 30. (CDC order and CNBC video, March 30)Transportation Infrastructure$115 billion in the White House proposal would focus on repairing Main Street roads, highways and bridges.$80 billion would be devoted to inter-city high-speed rail to address Amtrak’s repair backlog and modernize the Northeast Corridor. This is of significance to national and regional projects like “Gateway,” the rail tunnel project between New York City and New Jersey.What’s NextSenate Minority Leader Mitch McConnell (R-KY) said, “This proposal appears to use 'infrastructure' as a Trojan horse for the largest set of tax hikes in a generation,” and that Biden’s proposal “is not going to get support on our side.” (The Hill, March 31 and Bloomberg, April 1)House Speaker Nancy Pelosi (D-CA) signaled she would like to see an infrastructure bill pass the House by July 4. She added that “hopefully” a final infrastructure package will include a repeal of the $10,000 cap on state and local tax deductions. (Associated Press, March 31 and BGov, April 1)The Roundtable is part of the Build by the 4th coalition, led by the U.S. Chamber of Commerce, which encourages the Biden Administration and Congress to pass a comprehensive infrastructure deal by Independence Day 2021. The Biden administration is planning a second legislative package for April that could seek an additional $1 trillion to expand family support such as the child tax credit and paid leave. (B-Gov, March 31)President Biden's infrastructure plan will be a focus of discussion during The Roundtable’s April 20 Spring Meeting (remote).# # #

Tax and Energy Policy

April 2, 2021

Roundtable Weekly

Bipartisan House Bill Encourages Equipment Upgrades in Commercial and Multifamily Buildings

EQUIP Energy Policy Tax Policy

Roundtable-supported legislation that would accelerate depreciation for high performance upgrades in commercial and multifamily buildings – creating jobs and reducing the built environment’s carbon footprint – was reintroduced this week by House Ways and Means Committee members Brad Schneider (D-IL) and Tom Rice (R-SC).The E-QUIP ApproachThe bipartisan Energy Efficient Qualified Improvement Property (E-QUIP) Act (H.R. 2346), originally introduced last December by Reps. Schneider and Rice, encourages energy efficiency building retrofits to replace aging and obsolete HVAC, lighting, windows, roofs, and windows with state-of-the-art systems.The Real Estate Roundtable has rallied a unique coalition of environmental, manufacturing, and business groups to support the bill. The coalition sent an April 1 letter to members of the House Ways and Means Committee, and the Energy and Commerce Committee, to enact the E-QUIP Act and include it in any infrastructure package.Roundtable President and CEO Jeffrey DeBoer stated, “The E-QUIP Act checks all of the boxes for smart energy, climate, and economic policy. Installation of high performance HVAC, lights, windows, and other building components will modernize aging buildings, save businesses billions of dollars on their energy bills, create tens of thousands of jobs, and avoid carbon emissions equal to taking 22 million cars off the road for a year.”DeBoer added, “The E-QUIP Act can also encourage state-of-the-art retrofits that enhance outdoor air ventilation rates — a key practice to improve a building’s health and indoor air quality, according to the best available science.”Support for an Energy Efficient EconomyThe American Council for an Energy-Efficient Economy (ACEEE) has prepared a fact sheet and analysis that estimates the climate, energy, and jobs benefits of E-QUIP Act retrofit projects: 130,000 net additional job-years.$15 billion energy bill savings.100 million tons of carbon dioxide emissions avoided – or the equivalent emissions from 560,000 rail cars full of coal or taking 22 million cars off the road for one year.Key elements of the E-QUIP Act are: Elective 10-year, straight-line cost recovery period for a new category of depreciable property that meets the E-QUIP Act’s high-performance standards.Available to replace or retrofit systems and components in buildings that are at least 10 years old.Certification requirement that E-QUIP is designed, installed, operated, and maintained by credentialed professionals.Five-year duration of incentive.A uniform 10-year depreciation period for components that meet E-QUIP standards would simplify the current cost recovery “patchwork” in the federal tax code for building investments.The E-QUIP Act and advocacy efforts to include it as part of infrastructure legislation will be a focus of discussion during The Roundtable’s April 20 (Remote) Spring Meeting.# # #

Estate Tax

April 2, 2021

Roundtable Weekly

Congressional Progressives Propose Legislation to Tax Unrealized Gains at Death as Republican Bill Seeks Permanent Repeal of Federal Estate Tax

Tax Policy

Several progressive members of Congress, led by Senator Chris Van Hollen (D-MD), above, on March 29 proposed legislation that would tax appreciated and unrealized capital gains when property is transferred at death or by gift. Meanwhile, Senate Republicans on March 9 reintroduced legislation to repeal permanently the federal estate and gift tax, commonly known as the “death tax.” (Wall Street Journal, March 29 and Fox Business, March 11).Stepped-Up BasisTaxing gains at death would mark a major departure from longstanding current law in which the basis of property is “stepped up” to its fair market value when a taxpayer dies or transfers property by gift. Under the Sensible Taxation and Equity Promotion (STEP) Act, capital gains taxes would be applied at the time of inheritance transfer, with a $1 million per-person exemption. (Van Hollen news release, March 29 / one-page bill summary / section-by-section explanation)A House companion bill (H.R. 2286) was introduced by Rep. Bill Pascrell (D-NJ), a member of the House Ways and Means Committee. (Pascrell news release, March 29)President Biden backed elimination of stepped-up basis during his campaign. (CNBC, “This is how Joe Biden will tax generational wealth transfer,” March 13 / CNBC, June 30, 2020 / ABC News, Oct. 8, 2019)Why It MattersRepealing stepped-up basis and treating death as a taxable event would be particularly burdensome for real estate owners because of the illiquid and indivisible nature of real assets relative to a holdings like a portfolio of publicly traded stock. The legislation could force owners to sell properties if no cash income is available to pay the tax. The bill would also pull capital out of real estate markets at a time when it will be needed to help repurpose existing properties in the post-pandemic era. Estate Tax Repeal Senate Republicans on March 9 unveiled the Death Tax Repeal Act of 2021 (S. 617) to permanently repeal the federal estate tax. The legislation, introduced by Sens. John Thune (R-SD.) and John Kennedy (R-LA) would eliminate the federal tax levied on estates worth more than $11.7 million after the death of the owner. (Sen. Kennedy news release)Reps Jason Smith (R-MO) and Sanford Bishop (D-GA) on March 10 introduced companion legislation in the House. (Rep. Smith news release)The Real Estate Roundtable, as part of the Family Business Estate Tax Coalition (FBETC), this week wrote to Sen. Thune and the House co-sponsors in support of S. 617 and the permanent repeal of the estate tax. (Coalition letter, April 2) The letter states that the FBETC “... supported the temporary estate tax relief in the Tax Cuts and Jobs Act (TCJA), which doubled the exemption to approximately $11.7 million for tax year 2021 and indexed future increases for inflation through 2025. However, without further congressional action, the temporary increase in the exemption amount will expire… repeal is the best solution to protect all family-owned businesses from the estate tax.” Proposals to raise the tax burden on appreciated property at death could be considered in the next wave of domestic economic legislation. President Biden is expected to roll out more tax proposals aimed at upper-income taxpayers over the next few weeks. # # #

April 2, 2021

Policy Comment Letter

FBETC Support Letter_S. 617_Thune_4-2-2021

April 1, 2021

Policy Comment Letter

2021-04-01 E-QUIP Stakeholder Letter FINAL

Economic Growth and Infrastructure

March 26, 2021

Roundtable Weekly

Biden Administration Preparing Multitrillion Economic Growth Proposal; Transportation Secretary Buttigieg Testifies Gateway Project Has “Sense of Urgency”

Economic Growth Infrastructure Tax Policy

President Biden will unveil an ambitious economic growth plan on March 31 that may cost up to $4 trillion to fund his administration’s wide-ranging goals on infrastructure, climate and domestic policies. (Reuters, March 24 and Bloomberg News, March 25) The administration’s legislative effort may be split into two parts – an initial package that funds transportation projects with a focus on climate change, and a second that addresses domestic priorities such as universal prekindergarten, national childcare and free community college tuition. (Wall Street Journal and Washington Post, March 22, New York Times March 25)Congressional Democrats are working on a filibuster-proof fiscal 2022 reconciliation bill to advance President Biden's economic recovery plan, along with a five-year surface transportation reauthorization. Funding for the current surface transportation bill expires Sept. 30. (Law360, March 22)Axios reported on March 23, the White House is considering using the budget reconciliation process two more times this year, after using it to pass the recent $1.9 trillion pandemic relief package without any Republican support. Enacting three separate reconciliation packages would be unprecedented, and require a ruling from the Senate parliamentarian that proposed legislation is eligible for reconciliation under the Congressional Budget Act of 1974. Focus on Gateway Project: The “Gateway” rail tunnel project between New York City and New Jersey is a high priority for the Biden administration that is being treated with a “sense of urgency,” according to Transportation Secretary Pete Buttigieg, who testified March 25 before the House Transportation and Infrastructure Committee. (BGov, March 25)“This is a regional issue, but one of national significance because if there were a failure in one of those tunnels, the entire U.S. economy would feel it,” Buttigieg said. He added that federal and state officials are working “to develop the next administrative draft of the environmental impact statement, which is a big part of what needs to be completed in order to get there.”Buttigieg also acknowledged that funding the administration’s infrastructure transportation goals must look to other revenue sources than borrowing. “There is a simple set of places we can look: user fees, general fund or other tax sources as Congress has done to fill gaps in Highway Trust Fund in recent years or borrowing,” Buttigieg testified. How to Pay: Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell testified jointly this week before House and Senate committees on economic conditions and pandemic relief. (Wall Street Journal, March 23)Yellen testified before the House Financial Services Committee on March 23 that future taxes are needed to fund infrastructure programs. “A package that consists of investments in people, investments in infrastructure, will help to create good jobs in the American economy, and changes to the tax structure will help to pay for those programs.” She added, “We do need to raise revenues in a fair way to support the spending that this economy needs to be competitive and productive.” (Financial Times, March 23)Chairman Powell responded to a concern from House Committee Member Blaine Luetkemeyer (R-MO) that Fed data indicates 51 percent of current commercial real estate debt is held by banks and that community banks have a higher concentration of these loans. Powell stated, “We're monitoring CRE very carefully. Its concentrations arise principally in smaller banks, and we'll have to monitor it carefully as we allow moratoriums to elapse. We're well aware of the issue and we'll be sure to move very, very carefully when we do address that.”The two regulators also testified before the Senate Banking Committee on March 24. Treasury Secretary Yellen stated that the federal government can afford to invest trillions, despite the national debt. “My views on the amount of fiscal space that the United States, I would say, have changed somewhat since 2017. Interest payments on that debt relative to GDP have not gone up at all, and so I think that's a more meaningful metric of the burden of the debt on society and on the federal finances,” Yellen said. (The Hill, March 24) Taxes & CRE: A March 25 BisNow webinar on Tax Policy and the Impact on CRE featured Roundtable Senior Vice President and Tax Counsel Ryan McCormick, bottom left in photo. The webinar focused on the outlook for real estate tax policy in 2021, with an emphasis on like-kind exchanges and opportunity zones. Other participants included Ja’Ron Smith, former Deputy Assistant to President Trump; Capital Square Founder and CEO Louis Rogers; and David Franasiak, Principal at Williams & Jensen. (Watch Video)Congress leaves Washington today for a two-week recess. “When the Senate returns to session, our agenda will be no less ambitious than it was over the past few months,” Senate Majority Leader Chuck Schumer (D-NY) said yesterday. (The Hill, March 25 and New York Times, March 26) # # #

Climate Policy

March 26, 2021

Roundtable Weekly

Biden Administration Plans to Cut U.S. Carbon Emissions in Half by 2030; Fed Announces Climate Threat Monitoring Effort

Climate Change Climate Policy

The Biden Administration continued to work this week on an aggressive goal to slash U.S. carbon emissions in half by 2030, as the Fed announced plans to monitor climate change threats to the financial system. (Bloomberg, March 23 and E&E News, March 24)A National EffortWhite House Climate Advisor Gina McCarthy is leading a National Climate Task Force that will finalize U.S. goals and commitments before participating in an April 22 virtual global climate summit on Earth Day. (White House Readout of the Second National Climate Task Force Meeting, March 18) The government-wide effort includes input from 21 federal agencies and industrial sectors, ranging from car manufacturers to aviation to the oil industry. (The Hill, March 22 and E&E News, March 23)The prospects for both chambers of Congress to pass legislation that puts a price on carbon are still remote, even though key business groups such as the U.S. Chamber of Commerce and the American Petroleum Institute have now come out in favor of “market-based” climate policy. (Axios Generate, March 26)Climate Change and Real Estate Federal Reserve Governor Lael Brainard this week emphasized the impact climate change could have on real estate markets. She stated during a March 23 speech, “… the usability of real estate in many areas will be directly affected by the increased risks of floods, wildfires, severe storms, and sea-level rise associated with climate change.” She added, “Sudden realizations of climate-related risks could cause rapid shifts in investor sentiment and shocks to asset prices.” (Financial Stability Implications of Climate Change speech by Gov. Brainard, March 23)Brainard announced the Fed has established new oversight committees “to identify, assess, and address climate-related risks to financial stability.”Fed Chairman Jerome Powell and Treasury Secretary Yellen also commented on their increased attention to the risks posed by climate change during a March 23 hearing before the House Financial Services Committee and a March 24 Senate Banking, Housing and Urban Affairs Committee hearing. Secretary Yellen will lead the first meeting of the Financial Stability Oversight Council under the Biden administration on March 30 to discuss climate-related financial risks. (The Hill, March 24) The administration’s climate policy plans and their impact on CRE will be a focus of discussion during The Roundtable’s Spring Meeting on April 20 (held remotely). # # #

News

March 26, 2021

Roundtable Weekly

Only 17% of Global CEOs Plan to Reduce Office Footprint Post-COVID; Office Demand Activity Posts Significant Gains

CRE Trends

A KPMG survey of global CEOs shows that only 17% are considering downsizing their office space in the post-pandemic period – a drop from 69% recorded last August. Approximately one-third of the 500 CEOs in 11 key markets interviewed also anticipate a return to normal business operations this year, while 45 percent expect normality to resume in 2022. (KPMG 2021 CEO Outlook Pulse Survey) Key Findings“The COVID-19 vaccine rollout is providing leaders with a dose of optimism as they prepare for a new reality,” KPMG Global Chairman and CEO Bill Thomas said. The report shows that global CEOS are:» Less likely to downsize their physical footprint compared to 6 months ago» Encouraged to reopening workplaces by government action and vaccination rates» Apprehensive about a fully remote workforce» Concerned increasingly about cyber security as remote working has increased» Overwhelmingly looking to increase focus on ESG issues Office Demand Improving:Additionally, the survey shows only 21% of businesses are looking to hire employees who work predominantly remotely – a significant reduction from 73% in 2020. The KPMG interviews with CEOs were conducted in February and March of this year. (Workplace Insight, March 24 and GlobeSt, March 25)The outlook for office demand is on the upswing, supported by recent data by the national VTS Office Demand Index (VODI) that shows both in-person and virtual tenant tours posted large gains in January and February.The VTS report shows that recent office demand activity is 38% lower compared to pre-pandemic levels – after having plummeted over 85% from February to May 2020. Additionally, all seven core office markets covered by VODI saw an increase in demand for office space in February 2021 compared to October 2020.“While we saw some growth in demand in the back half of 2020, the exponential increase in the first two months of 2021, (combined) with the announcement from the Biden Administration that all Americans will be eligible for the vaccine by May 1, 2021, is providing confidence that a meaningful recovery is on the horizon,” VTS CEO Nick Romito said. (GlobeSt, March 25)Noteworthy:Microsoft will allow 57,000 employees back to its headquarters in suburban Seattle on March 28, although workers can choose whether to continue working remotely or a hybrid approach combining home and office. (AP, March 22)Amazon Global Real Estate Chief: Company To Return To Office ‘Pretty Much As We Were Pre-Covid’ (Bisnow, March 23)# # #

March 24, 2021

Policy Comment Letter

3-24-21-Industry Letter to NY Leaders in Opposition to Mezz Debt – Preferred Equity Tax

Infrastructure

March 19, 2021

Roundtable Weekly

Biden Administration Floats Tax Increases to Pay for Infrastructure as Policy Focus Shifts to Economic Growth

Infrastructure Tax Policy

Biden Administration and The White House The Biden administration is considering increasing the corporate tax rate and the individual rate for high earners as it deliberates how to structure its next major legislative initiative – a sprawling “Build Back Better” economic growth package that may cost far more than the $1.9 trillion coronavirus-relief bill enacted last week. (BGov, March 15 and Roundtable Weekly, March 12) Why It Matters: The first major tax increase since 1993 could be proposed as one method of funding Biden’s ambitious infrastructure plan. Heather Boushey, a member of the White House Council of Economic Advisers stated, “There is a long list of things that we need to invest in,” including “broadly defined” infrastructure, the power grid, and a plan to bolster child and elder care. (BGov and Bloomberg Television interview, March 15) Biden’s tax plan would aim to provide relief for middle-class households, including those in the $110,000-a-year income range, according to Bharat Ramamurti, deputy director of the White House National Economic Council. “The key here is that the president believes strongly that the biggest corporations and those folks who have done extremely well over the last several decades should pay a bit more,” Ramamurti said. (Bloomberg Television interview, March 16) Senate Minority Leader Mitch McConnell (R-KY) this week rejected any potential tax increases to fund President’s Biden infrastructure plan. (The Hill, March 16) Democrats are considering using the budget reconciliation process to pass an infrastructure bill, the same process used to pass the pandemic relief bill in the Senate by a simple majority in the 50-50 Senate. Under normal budget rules, the support of at least 10 GOP senators would be needed to defeat a 60-vote filibuster. Democrats will only be able to use reconciliation for one more bill this year. (The Hill, March 15) The enormous scope of the administration’s legislative goals may lead to the possible separation of their economic growth package into as many as three bills. (Politico Playbook, March 18) Congressional Legislation: Expanding allowable investment opportunities for REITs could increase private sector infrastructure and help revitalize distressed retail businesses. The Roundtable-supported, bipartisan Retail Revitalization Actof 2021 (H.R. 840) – introduced Feb. 4 by House Ways and Means Members Brad Schneider (D-IL) and Darin Lahood (R- IL) – would modernize real estate investment trust tax provisions to permit REITs to invest equity in struggling commercial tenants that have been harmed by the COVID-19 pandemic. (News release, Feb. 4) H.R. 840 is the focus of a March 16 Tax Notes article entitled, “Modifying REIT Rules Could Aid Recovery and Infrastructure Plans.” House Energy and Commerce (E&C) Committee Chairman Frank Pallone, Jr. (D-NJ) has scheduled a March 22 hearing on the committee’s recently released Leading Infrastructure For Tomorrow’s (LIFT) America Act, which would provide more than $312 billion in funding for broad range of projects. (E&C news release, March 11 and Chairman’s Memorandum, March 18) House E&C Committee Republicans released a clean energy and climate package this week in response to the E&C Democrats’ LIFT legislation. (E&C Republicans news release, March 15) Sen. Elizabeth Warren (D-MA) and Rep. Alexandria Ocasio-Cortez (D-NY) on March 18 introduced the BUILD GREEN Infrastructure and Jobs Act, a $500 billion proposal to shift U.S. transportation away from fossil fuels by 2050. What's Next: More legislation is expected to be introduced that will focus on highways, mass transit and other surface transportation, as well as tax-related energy and infrastructure measures. House bills are expected from Transportation and Infrastructure Committee Chairman Peter DeFazio (D-OR) and Ways and Means Committee Chairman Richard Neal (D-MA). A “by-the-mile” vehicle usage tax is also under consideration to fund transportation infrastructure projects. Transportation Secretary Pete Buttigieg is considering funding highway projects with a fee based on how many miles someone travels instead of how much gasoline they pump. Buttigieg has stated the administration will move swiftly to reauthorize the surface transportation highway bill, which is set to expire at the end of September. (BGov, March 15) The Roundtable is part of the Build by the 4th coalition, led by the U.S. Chamber of Commerce, which encourages the Biden Administration and the new Congress to pass a comprehensive infrastructure deal by Independence Day 2021. Infrastructure investment will be a focus of discussion between commercial real estate leaders and policymakers during The Spring Roundtable Meeting on April 20 in Washington, DC. # # #

Energy Policy

March 19, 2021

Roundtable Weekly

Policymakers Considering Energy and Climate Provisions as Part of Infrastructure Package

Climate Policy Energy and Climate Policy Energy Policy

Congressional Committee leaders are gearing up energy and climate proposals as the Biden Administration assembles its plan for an infrastructure initiative to bolster the recovery of the pandemic-damaged economy. What’s at Stake: The White House is considering including clean energy tax credits in a coronavirus recovery proposal, White House national climate adviser Gina McCarthy said. “You can bet tax credits are a large part of that discussion.” (BGov, March 11.) The scale and scope of energy and climate measures may make it difficult to attract Republican votes in the wake of the nearly $2 trillion pandemic aid package last week that received no GOP support. Top Democratic tax writers may differ on their approach to clean energy tax incentives that aim to achieve low-and zero-carbon energy targets. (CQ, March 15) Senate Finance Committee Chairman Ron Wyden’s (D-OR) is seeking to consolidate existing tax incentives. In 2019, he proposed replacing 44 energy-related tax provisions with three credits: one for clean electricity, one for clean fuels, and one to promote greater energy efficiency. House Ways and Means Committee Chairman Richard Neal (D-MA) is a leading cosponsor of House Democrats’ GREEN Act, which would expand and enhance existing tax benefits for clean energy and energy efficiency. The Roundtable is currently working with Democratic and Republican Members of the Ways and Means Committee to update and reintroduce a bipartisan proposal, the E-QUIP Act, to encourage energy efficient retrofits of existing commercial and residential rental buildings. (Roundtable Weekly, Dec. 11, 2020). A House Energy and Commerce (E&C) hearing on March 18 focused on the Climate Leadership and Environmental Action for our Nation’s (CLEAN) Future Act (H.R. 1512). The CLEAN Act includes provisions affecting building energy codes, energy benchmarking, and Securities and Exchange Commission (SEC) public company reporting on climate risk. The bill is not expected to advance far in the Senate. (Roundtable Weekly, March 5). Regulation and Federal Funding: A Climate Change Disclosures Request for Information issued by the Securities and Exchange Commission (SEC) on March 15 addresses a broad range of issues and legal considerations relevant to possible mandatory SEC requirements. The RFI has a 90-day comment window. Acting SEC Chair Allison Lee addressed the RFI this week, stating the agency will commence a number of new initiatives to address “… the risks and opportunities that climate and ESG [Environmental, Social, and Corporate Governance] pose for investors, our financial system, and our economy.” A March 17 letter led by Sen. Jeanne Shaheen (D-NH) urges President Biden to include robust federal funding for programs that promote energy efficiency as part of the administration’s upcoming budget proposal for fiscal year 2022. Sen. Lisa Murkowski (R-AK), a member of the Senate Energy and Natural Resources Committee, is also a signatory on the letter. The letter states, “Increasing investment in energy efficiency programs within the Office of Energy Efficiency and Renewable Energy (EERE) at the U.S. Department of Energy (DOE) can deliver significant emissions reductions, grow jobs in the clean energy sector and provide savings to American consumers.” The letter also notes that the pandemic and associated economic impacts have hit the energy efficiency sector especially hard, slowing progress and costing jobs, particularly for workers of color. Energy efficiency employment in the United States grew by 20% – nearly three times the rate of growth in the overall economy – in the five years leading up to 2020, and energy efficiency jobs are available in nearly every county in every state, according to the National Association of State Energy Officials. The Real Estate Roundtable’s Sustainability Policy Advisory Committee (SPAC) continues to work with congressional policymakers, EPA and DOE on energy and climate issues of importance to commercial real estate. # # #

Tax Policy

March 19, 2021

Roundtable Weekly

Broad Coalition Highlights Economic, Social, and Environmental Benefits of Like-Kind Exchanges

Likekind Exchanges LikeKind Exchanges LKEs Tax Policy

March 16, 2021

Policy Comment Letter

3-15-21- Stakeholder support – PPP Extension Act of 2021

Tax Policy

March 16, 2021

Policy Comment Letter

Coalition Highlights the Economic, Social, and Environmental Benefits of Like-Kind Exchanges – Congressional Letter

LikeKind Exchanges LKEs,

Tax Policy

March 16, 2021

Policy Comment Letter

Coalition Highlight the Economic, Social, and Environmental Benefits of Like-Kind Exchanges – Treasury Letter

LikeKind Exchanges LKEs,

Pandemic Relief

March 12, 2021

Roundtable Weekly

President Biden Signs Landmark COVID-19 Aid Legislation Passed by Congress in Near Party-Line Votes

Coronavirus

President Joe Biden signed his landmark $1.9 trillion pandemic relief package (H.R. 1319) into law yesterday – the largest injection of federal cash in history into a growing U.S. economy – before unemployment benefits begin expiring on March 14. (Politico March 9, Wall Street Journal March 10 and AP, March 11) Why It Matters The total economic stimulus passed by the U.S. government over the past year now totals $5.3 trillion. The American Rescue Plan Act of 2021 is the third and largest coronavirus relief package. (U.S. News and World Report, March 10 and Axios Capital, Mach 11)President Biden commented during the signing ceremony of the relief package, “…this historic legislation is about rebuilding the backbone of this country and giving people in this nation — working people and middle-class folks, the people who built the country — a fighting chance. That’s what the essence of it is.” (White House, March 11, Remarks by President Biden at Signing of the American Rescue Plan)Key provisions of the new law are detailed in The Roundtable’s "Summary and Analysis of Key Economic Provisions in The American Rescue Plan." Recovery rebates of $1,400 for the vast majority of Americans and large one-year expansions of the child and child care tax credits are provided, along with increases in subsidies for health insurance and the earned income tax credit. Additional provisions include: $350 billion in direct fiscal aid to state and local governments$242 billion to extend enhanced unemployment benefits through Sept. 6$170 billion for educational institutions$28.6 billion for a Restaurant Revitalization Fund$26.1 billion for urban mass transit grants$21.55 billion for residential rental assistance$5 billion for tenant-based residential rental vouchers The bill does not include an extension of the current eviction moratorium for residential tenants or an increase in the federal minimum wage. While there is little business tax relief in the bill, provisions excluding restaurant and small business grants from income tax should further strengthen The Roundtable’s push to exclude COD income from tax during the pandemic, particularly since The Roundtable has explicitly proposed that the exclusion be accompanied by offsetting adjustments to tax attributes.The Roundtable is also continuing to urge Congress to enact the Retail Revitalization Act (H.R. 840) as part of its relief efforts. This bill would save thousands of retail jobs by allowing REITs to make equity investments in struggling tenants without violating current related-party rent rules. The bipartisan bill is cosponsored by a growing list of Ways and Means Committee Members. (Roundtable Weekly, Feb. 5, 2021) Reference:The Roundtable’s "Summary and Analysis of Key Economic Provisions in The American Rescue Plan" Fact sheet issued by House Speaker Nancy Pelosi (D-CA)Joint Committee on Taxation revenue estimate of the tax provisions in the billCongressional Research Service report on the bill's tax provisions What’s Next Economists expect the legislation to spark 5.95% GDP growth, the fastest in nearly 40 years, according to a recent survey by the Wall Street Journal. The poll also reports that economists expect consumer prices will rise 2.48% by December, compared to last year, and projects employers will add an average 514,000 jobs per month over the next four quarters. (Wall Street Journal, March 10)Congressional Democrats passed the massive relief package using a budget process called reconciliation that requires a simple majority vote, bypassing the 60-vote requirement typically needed to advance most legislation in the 50-50 Senate. It is uncertain whether Democrats will opt to take a similar approach to other major policy initiatives as President Biden prepares his next major legislative push on infrastructure. # # #

Energy and Infrastructure Policy

March 12, 2021

Roundtable Weekly

Infrastructure Legislation Next on Biden Agenda; Michael Regan Confirmed as EPA Administrator

Energy Policy EPA Infrastructure

The Biden Administration plans to move forward on its “Build Back Better” infrastructure initiative as the next legislative push to spur the economy after he signed the COVID-19 relief package yesterday. (CNBC, March 10 and New York Times, March 3)Why It MattersA $312 billion bill was introduced yesterday by House Democrats on the Energy & Commerce (E&C) Committee that would invest in clean energy, drinking water, broadband, and health care infrastructure. LIFT America Act (text, section-by-section analysis, press release).House E&C Democrats last week introduced a sprawling climate change bill, the CLEAN Future Act, which includes provisions on building energy codes, energy benchmarking, and SEC public company reporting on climate risks. (Roundtable Weekly, March 5)More bills are forthcoming on matters addressing highways, mass transit and other surface transportation, as well as energy and infrastructure tax-related matters. In the House, these bills are expected from Peter DeFazio (D-OR) and Richard Neal (D-MA), chairs of the Transportation and Infrastructure Committee and the Ways and Means Committee, respectively.How to pay for the price tag of these measures remains an overriding issue. Possible revenue sources for infrastructure investments were discussed by the White House with a bipartisan group of Senate leaders on Feb. 11, and House leaders on March 4. (Roundtable Weekly, Feb. 12 and Feb. 19, and Reuters, March 4)Congressional Committees’ InfluenceCapitol Hill hearings this week focused on various aspects of low-carbon energy, climate-resilient infrastructure and transportation issues. (Axios, March 8, “Energy and climate move closer to center stage on Capitol Hill”) The House Energy Committee will start hearings next week on its CLEAN Future Act (E&C press release, March 11)Senate Energy Committee Chairman Joe Manchin (R-WV), above, told "Axios on HBO" that he will seek tax increases to pay for Biden's upcoming proposal, and will use his leadership position to pursue bipartisan solutions to climate realities.Manchin said the budget process called reconciliation should not be pursued to pass the climate and infrastructure package. Reconciliation was used to advance the pandemic relief bill without Republican support in the 50-50 Senate. (Axios, “Manchin’s Next Power Play,” March 8).Senate Environment and Public Works Chairman Tom Carper (D-DE) told Bloomberg this week that a transportation infrastructure package could move through his committee by the end of May and signed into law as part of a broader economic recovery plan by the end of September. (Bloomberg, March 10)Michael Regan Confirmed as EPA AdministratorMichael Regan was confirmed this week as Administrator of the Environmental Protection Agency (EPA). He will apply his experience as North Carolina’s environmental chief to broad federal policies addressing climate change and energy efficiency. (E&E News and Reuters, March 10)What’s NextThe Real Estate Roundtable, as part of the Build by the 4th coalition, is encouraging Congress to pass a comprehensive infrastructure package by Independence Day 2021. The Roundtable's Sustainability Policy Advisory Committee (SPAC) is also focused on climate and energy regulations on buildings emerging at the state and local level. # # #

Policy Landscape

March 5, 2021

Roundtable Weekly

Senate Advances Pandemic Relief Package as President Biden Pushes Infrastructure Plan

Coronavirus Infrastructure

Senate Democrats this week advanced an amended, $1.9 trillion pandemic relief package that is expected to pass on a party-line vote – then sent back to the House for final passage before current unemployment benefits expire March 14. (Politico, March 4 and Congress.gov, actions on H.R. 1319) President Biden, who has championed the COVID-19 legislation, agreed to changes in the package such as restrictions on the use of $350 billion in state and local funding to solidify Democratic support in the 50-50 Senate. (BGov, March 4 and text of the amended Senate bill)CQ reported that financial allocations changes for states and local governments require federal assistance be used for specific purposes, including: Aid to households, small businesses or nonprofits, or aid to "impacted" industries like tourism, hospitality and travel;Funding government services that reduced due to the pandemic-related hit to tax revenue;"Necessary investments" in water, sewer, or broadband infrastructure. Senate Majority Leader Chuck Schumer (D-NY) said yesterday, "No matter how long it takes, the Senate is going to stay in session to finish the bill, this week.” (Politico, March 4).Meanwhile, the White House push for a massive infrastructure bill was discussed on March 4 in a meeting with President Biden, Transportation Secretary Pete Buttigieg and a bipartisan group of House members led by Rep. Peter A. DeFazio (D-OR), chairman of the House Transportation Committee. (Bloomberg, March 4)Biden remarked at the start of the meeting, “We’re going to talk about infrastructure and American competitiveness and what we’re going to do to make sure that we once again lead the world across the board on infrastructure. It not only creates jobs but it makes us a helluva lot more competitive around the world.” (White House, March 4)The White House infrastructure plan is expected to emphasize climate change, but legislation has not been unveiled nor has its cost or methods to pay for the initiative. (Wall Street Journal, March 4)The critical need for investing in modern and sustainable infrastructure was also the focus of a Feb. 11 White House meeting between Biden, Vice President Kamala Harris, Buttigieg and a bipartisan group of senators from the Environment and Public Works Committee. (Roundtable Weekly, Feb. 12)In a December 16, 2020 letter, The Roundtable and 12 national real estate organizations provided detailed recommendationsto then President-elect Biden and Vice President-elect Harris that included infrastructure funding and modernization as engines to drive recovery and job growth from the economic fallout of the COVID-19 pandemic.The Roundtable is part of Build by the 4th coalition led by U.S. Chamber of Commerce, which encourages the Biden Administration and the new Congress to pass a comprehensive infrastructure deal by Independence Day 2021. # # #

Q1 Sentiment Index

March 5, 2021

Roundtable Weekly

Roundtable’s Q1 Sentiment Index Shows CRE Execs Optimistic About Market Conditions

Quarterly Sentiment Index

Commercial real estate industry leaders continue to acknowledge the effects of the COVID-19 pandemic on various asset classes, while expressing increased optimism about market conditions for the remainder of 2021, according to The Real Estate Roundtable’s Q1 2021 Economic Sentiment Index. The March 3 Index also reports on growth potential for the industrial and multifamily sectors, while hospitality and retail continue to face challenges due to government restrictions and health guidelines.Real Estate Roundtable President and CEO Jeffrey DeBoer stated, "Our Q1 index indicates that despite the extremely challenging past 12 months, industry leaders are optimistic that market conditions are trending in positive way. General supply and demand market balance, functioning capital markets, and low leverage – combined with increased vaccination efforts – have sparked the strong uptick in optimism. Of course all of this is threatened if vaccinations stall overall, or if national policymakers impose new tax or regulatory burdens on the industry.” DeBoer also noted the positive role that real estate has played in combatting the pandemic. “Throughout the pandemic, real estate owners, managers, investors and lenders each have focused on mitigating the impact of the crisis on their residential and business tenants. The industry has restructured leases with tenants under stress, advocated for federal rental and other assistance, helped educate tenants on how to access relief, provided significant reforms to health-related building operational protocols, and issued detailed guidance to ensure safe and effective ways to re-enter buildings,” he said.The Roundtable’s Q1 2021 Sentiment Index registered at 59 – a fifteen-point increase from the previous quarter. [The Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive.]. This quarter’s Current Conditions Index of 44 increased 17 points from the previous quarter, while this quarter’s Future Conditions Index of 74, is an increase of 13 points compared to last quarter. The last time the Future Conditions Index registered at 74 was Q3 2010.The report’s Topline Findings include: The Q1 2021 Real Estate Roundtable Sentiment Index registered a score of 59, an increase of 15 points from the fourth quarter of 2020. Respondents continued to express optimism about future conditions; however, the outlook is highly dependent upon asset class and portfolio mix.The industrial and multifamily sectors were cited as having been the most resilient to the global pandemic, and best positioned to emerge successful in a post-pandemic environment. Retail and hospitality sectors continue to face challenges stemming from public health measures and government restrictions.Low transaction volume has resulted in limited visibility into asset valuations over the past year. Among the trades that have occurred, industrial assets have seen their values increase, mirroring the market overall, while multifamily properties are trading at a slight discount to their pre-COVID values.Capital flows within the real estate market are following the sector-specific impacts of the pandemic. Most respondents cited accessible capital markets for high quality assets, particularly in the industrial and multifamily spaces. However, out-of-favor property types and strategies with leasing and/or development exposure are finding it more difficult to secure institutional equity and financing. Data for the Q1 survey was gathered by Chicago-based FPL Associates on The Roundtable’s behalf. For the full Q1 report, visit here and full news release.# # #

Energy And Climate Policy

March 5, 2021

Roundtable Weekly

House Democrats Introduce Sweeping Climate Legislation Including Building Codes, Benchmarking and SEC Reporting Provisions

Climate Policy Energy Policy

House Democrats on March 2 introduced a sprawling bill aimed at achieving net-zero greenhouse gas emissions by 2050 with provisions regarding building construction, operations, and ESG reporting. (Politico, March 3 and CQ News, Reuters, March 2)The 981-page Climate Leadership and Environmental Action for our Nation’s (CLEAN) Future Act– 981-page measure is sponsored by House Energy & Commerce Committee Chairman Frank Pallone (D-NJ); Climate Change Subcommittee Chairman Paul Tonko (D-NY) and Energy Subcommittee Chairman Bobby Rush (D-IL), (BGov, March 3)The House Committee noted provisions that would impact commercial and residential real estate. “The CLEAN Future Act improves the efficiency of new and existing buildings, as well as the equipment and appliances that operate within them. It establishes national energy savings targets for continued improvement of model building energy codes, leading to a requirement of zero-energy-ready buildings by 2030.” (Energy & Commerce Committee news release, March 2)The CLEAN Future Act also proposes mandatory federal-level energy and water “benchmarking” requirements for buildings over 50,000 square feet. These provisions mimic dozens of existing state and local requirements that currently require building owners to track their assets’ energy and water usage and disclose this information to the public.CLEAN Future Act reference:Fact sheet 1-PagerSection-by-Section analysis full bill text The bill also directs the Securities and Exchange Commission (SEC) to require public companies to disclose in annual reports information about their “direct” and “indirect” GHG emissions, and corporate governance procedures to identify and manage climate-related risks. (Akin Gump Strauss Hauer & Feld LLP, March 3)Acting SEC Chair Allison Herren Lee recently issued a Climate Change Statement explaining, “[n]ow more than ever, investors are considering climate-related issues when making their investment decisions” and that it is the SEC’s “responsibility to ensure that they have access to material information when planning for their financial future.” (SEC statement, Feb. 24 and Gibson Dunn, March 1) While the measure will likely face substantial challenges to attract 60 votes in the evenly divided Senate, The Roundtable’s Sustainability Policy Advisory Committee (SPAC) is conducting a detailed analysis of the CLEAN Future Act’s impacts on the real estate sector. # # #

Tax Policy

March 5, 2021

Roundtable Weekly

New Bills Would Help Offset COVID-Prevention Workplace Expenses and Permanently Extend 20% Pass-Through Deduction; Industry Seeks Cost Recovery Transition Relief for Rental Housing

Tax Policy

Two recently introduced legislative proposals supported by The Real Estate Roundtable would address issues important to commercial real estate. The Healthy Workplaces Tax Credit Act would provide a new tax credit for business owners’ expenses associated with reducing the risk of COVID-19 in the workplace. The Main Street Tax Certainty Act would permanently extend the 20% pass-through business income deduction enacted in 2017. Separately, a coalition of real estate organizations, including The Roundtable, urged Treasury this week to provide guidance allowing property owners to fully benefit from legislation enacted in December that clarified the cost recovery period for rental housing.Healthy Workplaces Tax CreditOn March 2, Sens. Rob Portman (R-OH) and Kyrsten Sinema (D-AZ) introduced the bipartisan Healthy Workplaces Tax Credit Act. (See one-page summary) The bill includes several measures that would help businesses reopen safely, while ensuring employee and customer confidence, by providing:a refundable tax credit against payroll taxes for 50 percent of the costs incurred by the business for COVID-19 testing, PPE, disinfecting, extra cleaning, reconfiguring workspaces, and employee education and training until the end of the year; andan income tax credit for expenditures made to reconfigure work spaces last year (March 13, 2020- December 31, 2020)Chip Rogers, president and CEO of the American Hotel & Lodging Association, stated, "The Healthy Workplace Tax Credit is critical legislation for industries like ours, to help offset these significant, but necessary operating costs at a time when hotel revenues remain down 40% or more across the country." (Sen. Portman news release, March 2, 2021)A broad business coalition, including The Real Estate Roundtable, urged Congress last July to pass a “healthy workplaces” tax credit as part of coronavirus relief. (Coalition letter, July 16, 2020 and Roundtable Weekly July 17, 2020). Sen. Portman originally introduced a Healthy Workplaces Tax Credit bill on July 20, 2020.20% Deduction for Pass-Through Business Income (Section 199A)Last week, Members of Congress in both the House and Senate introduced legislation to extend permanently the 20 percent deduction for qualified pass-through business income permanent. The bills are strongly supported by more than 80 stakeholder groups, including The Real Estate Roundtable. (Rep Jason Smith news release, Feb. 26)Sen. Steve Daines (R-MT), Rep. Jason Smith (R-MO), and Rep. Henry Cuellar (D-TX) introduced the Main Street Tax Certainty Act to support small businesses, help create jobs and strengthen the economy. Without congressional action, the deduction will expire at the end of 2025. In a February 26 letter to the leadership of the Senate Finance and House Ways and Means committees, The Roundtable and other stakeholders stated that making the section 199A deduction permanent would provide certainty to small businesses affected by the COVID-19 pandemic. (Tax Notes, March 1)Real Estate Industry Requests Rental Housing Cost Recovery GuidanceOn March 2 a coalition of real estate industry organizations requested the Treasury Department and IRS issue guidance that would allow taxpayers to automatically change their method of accounting in order to benefit from the technical correction to the rental housing recovery period that was in the end-of-year omnibus spending bill enacted in December (Roundtable Policy Alert, Dec 22, 2020) The 2020 law clarified that properties placed in service before 2018 are eligible for the new 30-year cost recovery period under the Alternative Dispute System (ADS).The industry letter was led by the National Multifamily Housing Council and joined by The Real Estate Roundtable, International Council of Shopping Centers, Nareit, and others. The letter also requests transition relief that would allow real estate partnerships to file amended returns to opt out of the limitation of business interest deductibility now that the penalty for opting out is a 30-year cost recovery period, rather than the prior 40-year ADS recovery period.The Roundtable and its Tax Policy Advisory Committee (TPAC) will continue to work with policymakers in Congress and regulatory agencies on the fair and equitable tax treatment of real estate.# # #

Housing Policy

March 5, 2021

Roundtable Weekly

Federal Judge Rules CDC’s Tenant Eviction Ban is Unconstitutional; Justice Department Vows Appeal

A national eviction moratorium issued by the U.S. Centers for Disease Control and Prevention (CDC) is unconstitutional, according to a Feb. 25 ruling by a federal judge in Texas. The ruling does not address similar state-level bans, but raises key questions on the extent of the federal government’s power to prevent residential tenant evictions during the pandemic. (National Multifamily Housing Council and GlobeSt, Feb. 26)The federal eviction moratorium – first enacted by Congress almost a year ago in the CARES Act, and since extended by both the Trump and Biden Administrations by executive orders, currently expires on March 31.Biden might further prolong the CDC’s eviction ban though another executive order. (Washington Post and NBC News, Feb. 26) The $1.9 trillion COVID relief bill passed by the House last week and pending before the Senate does not include a federal eviction ban due to procedures moving the package through “reconciliation” rules. (CNBC, March 2.) In striking the CDC’s action, Judge J. Campbell Barker of the U.S. District Court for the Eastern District of Texas ruled in favor of an individual landlord and six property management companies that claimed the moratorium exceeds the federal government’s power to regulate “commerce” under Article I of the U.S. Constitution. (BGov, Feb. 25)He wrote: "Here, the regulated activity is not the production or use of a commodity that is traded in an interstate market. Rather, the challenged order regulates property rights in buildings—specifically, whether an owner may regain possession of property from an inhabitant." (Terkel v CDC, Feb. 25)The Department of Justice (DOJ) on Feb. 27 announced it would appeal the decision. DOJ maintains the decision “does not extend beyond the particular plaintiffs in that case, and it does not prohibit the application of the CDC’s eviction moratorium to other parties. For other landlords who rent to covered persons, the CDC’s eviction moratorium remains in effect.” (DOJ statement, Feb. 27)The Roundtable & Rental AssistanceRoundtable President and CEO Jeffrey DeBoer testified during a Senate Banking Committee hearing last year that the CDC moratorium underscores the need for a dedicated fund to help impacted tenants meet their rent payments.He also testified that shoring-up a reliable stream of rent payments also provides apartment owners with the revenue they need to pay their property taxes, utility bills, employ their own workers, and invest in their building assets to keep them running safely and efficiently. (DeBoer Written Testimony, Sept. 9, 2020)In Dec. 2020, Congress passed omnibus legislation that provided $25 billion in rental assistance. Last week, the House passed a $1.9 trillion pandemic relief package that included an additional $19 billion for residential rental assistance through Sept. 30, 2027. (See The Roundtable’s Summary and Analysis of Key Economic Provisions in The American Rescue Plan.)The Wall Street Journal recently reported that small landlords who rely on rental income for their retirement are vulnerable to eviction bans – as millions of tenants are behind on rent, awaiting federal Covid-19 assistance. (WSJ, Feb. 26 and March 1)Alston and Bird notes in an analysis of the Texas decision that “Absent a broad injunction, the decision has very limited effect. Nonetheless, the ultimate outcome of Terkel v. CDC could have important implications for other courts considering the scope of government action in response to the COVID-19 pandemic – particularly if it is upheld on appeal or ultimately heard by the U.S. Supreme Court.” (Alston & Bird, March 1)# # #

March 2, 2021

Policy Comment Letter

03-02-2021 Letter to Treasury re 30-year ADS

Pandemic Relief

February 27, 2021

Roundtable Weekly

House Passes $1.9 Trillion Virus Relief Package; Fed Reports Concerns About CRE

Coronavirus

Congressional Democrats racing to enact President Biden’s landmark $1.9 trillion COVID-19 relief package before unemployment benefits expire March 14 passed The American Rescue Plan Act of 2021 (H.R. 1319) early Saturday morning on a near party-line vote. The massive aid bill now goes to the 50-50 Senate where Democrats cannot afford to lose a single vote. (Associated Press, Feb. 27 and Politico, Feb. 26 and text of the bill) More than 170 corporate CEOs from the New York City area – including 34 members of The Real Estate Roundtable – issued a public letter to leaders of Congress days before the vote, urging rapid, bipartisan adoption of a stimulus package on the model of the American Rescue Plan. (CNBC, and Partnership for New York City, Feb. 24) The House bill provides $638 billion in tax cuts, offset by $45 billion in tax increases, representing over 2% of GDP in 2021 and a significant individual income boost for low- and middle-income Americans. While there is no business tax relief in the bill, it includes: $245 billion to extend enhanced unemployment benefits through August; $350 billion in fiscal assistance for States and localities; $170 billion for schools and colleges – and $85B for vaccine distribution. $30.5 billion in grants to mass transit Key elements of the bill affecting real estate include: $19 billion for residential rental assistance through Sept. 30, 2027, which adds to the existing $25 billion in rental assistance provided in December’s omnibus legislation; $10B homeowner assistance fund to help prevent foreclosure or eviction due to the pandemic; a new $25B Restaurant Revitalization Fund to provide cash grants to food and beverage establishments. See The Roundtable’s Summary and Analysis of Key Economic Provisions in The American Rescue Plan. The House at this time is not expected to include an increase in the minimum wage in the legislative package, after the Senate’s parliamentarian ruled yesterday that the measure does not comply with reconciliation rules, and could not be included in a Senate bill. (Axios, Feb. 25 and Feb. 26 / Wall Street Journal and Politico, Feb. 25) Fed Concerns on Pandemic & CRE As the $1.9 trillion relief package made its way through the House this week, Federal Reserve Chairman Jerome Powell testified before congressional committees on the Fed’s semiannual monetary policy report to Congress before the Senate Banking, Housing and Urban Affairs Committee on Feb. 23 and the House Financial Services Committee on Feb. 24. The Fed’s Feb. 19 Monetary Policy Report warned of significant risks to the economy as a result of the ongoing national impact of the pandemic. The report noted, “Commercial real estate prices remain at historically high levels despite high vacancy rates and appear susceptible to sharp declines, particularly if the pace of distressed transactions picks up or, in the longer term, the pandemic leads to permanent changes in demand.” (Bloomberg, Feb. 19, “Fed Sounds Alarm on Commercial Real Estate, Business Bankruptcy”) “We don't have a plan specifically for commercial real estate,” Powell testified. “I will say that we do see a number of sectors of commercial real estate that are under pressure, particularly office [and] hotels … which are directly affected by a pandemic. The best thing that can happen for the commercial real estate sector is [to] … get the pandemic behind us.” (Powell House Testimony) # # #

COVID-19 & CRE

February 27, 2021

Roundtable Weekly

White House Requests Information from Businesses on Their COVID-19 Efforts

Coronavirus

The Biden Administration is calling on the private sector to share their unique contributions in combatting the pandemic. In the coming weeks, The White House plans to elevate these examples to show how businesses across the country are doing their part to fight the coronavirus. (New York Times and White House Press Briefing, Feb. 26) For more information, email publicprivatepartnerships@who.eop.gov and provide the name of your organization, location, and 3-5 bullets about your efforts toward defeating the virus. (Download White House document Join Us to Help Defeat COVID-19 for more details). Examples of how commercial real estate owners are offering to open their buildings for COVID-19 testing are provided in a Feb. 24 Bloomberg report (subscription only). The Bloomberg article focuses on the efforts of several companies exploring how to open coronavirus testing centers for the public good. “SL Green Realty Corp. and Rudin Management Co. have expressed interest in offering tests at their buildings. And Vornado Realty Trust and Boston Properties Inc. are among companies that agreed to let the state set up testing centers in select buildings,” according to the article. Companies such as Related Cos. and RXR Realty are noted for having added on-site testing at their properties for returning clients. Roundtable Member and RXR Chairman and Chief Executive Officer Scott Rechler told Blooomberg, “You think to yourself, as a real estate owner and operator, we need to provide testing to help our tenants.” Roundtable President and CEO Jeffrey DeBoer noted the continuing efforts of Roundtable members in fighting the pandemic. “Commercial real estate owners of buildings small and large have been active in combatting COVID-19 on behalf of their employees, tenants and investors since the early days of the outbreak,” DeBoer said. “These focused efforts will continue to help Americans in towns and cities throughout the nation until the pandemic is defeated and a sense of normalcy returns to the workplace.” # # #

Energy and Infrastructure Policy

February 27, 2021

Roundtable Weekly

Biden Plans Infrastructure Push as Congress, Agencies Prepare to Investigate the Texas Electric Grid Crisis

Energy Efficiency Energy Policy Infrastructure

The Biden Administration plans to push for a large-scale infrastructure initiative that takes into account the effects of climate change after Congress finishes consideration of the pandemic relief package. Meanwhile, federal regulators and Congress are preparing to examine the threat that climate change poses to the nation’s electric infrastructure in the wake of last week’s deadly freeze in Texas that stranded millions without power. (Wall Street Journal and Reuters, Feb. 22) The Biden Administration is expected to reveal details of its infrastructure package soon, as part of its “Build Back Better” agenda to spur economic recovery. (Roundtable Weekly, Feb. 19) The rolling power outages across Texas and the Midwest due to severe winter storms prompted the Federal Energy Regulatory Commission (FERC) this week to open a proceeding to examine how electric grid operators prepare for and respond to extreme weather events. (FERC news release and FERC Insight, Feb. 2021) FERC Chairman Richard Glick said, “The effects of climate change are already apparent and we must do everything we can within our statutory authority to ensure that the electric grid is capable of keeping the lights on in the face of extreme weather.” The Texas power outages have increased scrutiny in Congress on the need for investments in the nation’s electric grid. House Speaker Nancy Pelosi (D-CA) referred to the blackouts when she announced that the House Energy Committee will be investigating the matter. (Axios, Feb. 19) In the Senate, Energy Committee Chairman Joe Manchin (R-WV) told Politico Pro that he is planning his own review of the power grid issue. (Politico, Feb. 19) The question of how to fund a national infrastructure effort remains the major challenge for Washington policymakers. ( Roundtable Weekly, Feb. 12) Senate Environment and Public Works Committee Chairman Tom Carper (D-DE) suggested at a hearing yesterday that a national pilot program should explore a “vehicle miles travelled” tax, while Manchin separately stated that the gas tax paid by consumers at the pump “is not going to do what we need” to build and modernize roads, bridges, and mass transit. (NATSO, Feb. 25) The Roundtable and the Build by the 4th coalition is encouraging Congress to pass a comprehensive infrastructure package by Independence Day 2021. Last December it also provided recommendations to the new Administration that included infrastructure funding and modernization as engines to drive recovery and job growth from the economic fallout of the COVID-19 pandemic. Construction Industry’s Role The leadership role that the construction industry could take in sustainable development was the focus of a Feb. 7 op-ed in Crain’s New York Business by Suffolk’s Executive President of Business Development, Ann Klee. (Suffolk’s Chairman and Executive Officer John Fish is the Chair-Elect of The Real Estate Roundtable) “The construction industry can be part of the solution by working with developers and owners to reimagine the entire building lifecycle and ensure sustainability is incorporated at every stage of the process, from planning, design and material selection to building operation and energy efficiency after construction completion,” the op-ed states. Other recommendations include more efficient management of the consumer supply chain; just-in-time delivery of materials to project sites; and minimizing construction waste. Ms. Klee concludes that sustainable development will require “smart planning, flawless execution and education across the spectrum of stakeholders to ensure these best practices pay significant dividends, both socially and financially, in the long term.” # # #

Diversity

February 27, 2021

Roundtable Weekly

Roundtable-Backed Corporate Diversity Bill Reintroduced in House and Senate

Legislation requiring public companies to report on the diversity of their corporate boards and executive officers was reintroduced Feb. 23 in the Senate and House by Sen. Bob Menendez (D-NJ), above right, and Rep. Gregory Meeks (D-NY), left, (Bloomberg Law, Feb. 23) The Improving Corporate Governance Through Diversity Act would amend the 1934 Securities Exchange Act to require issuers of securities that must file annual reports to disclose in proxy statements: Data on the racial, ethnic, and gender composition of their executive officers, board of directors, and board nominees; Whether any director, board nominee, or executive officer is a veteran; and Plans or strategies to promote diversity at the board and executive levels. “Without greater diversity in top corporate positions, the U.S. will fail to compete with other leading economies and stall our nation’s progress towards full inclusivity,” said Sen. Menendez. “It’s time corporate boardrooms mirror the rich diversity of our country.” (Menendez news release, Feb. 23 “Revealing the gender, racial, ethnic and veteran makeup of these corporate C-suites and boardrooms will not only shed light on the value of diversity, but hopefully encourage corporate shareholders to increase diversity in the highest ranks of their corporations,” said Rep. Meeks. (Meeks news release, Feb. 23) The Improving Corporate Governance Through Diversity Act passed the House in the last Congress but did not advance in the Senate. (Roundtable Weekly, July 31, 2020). Now that the Senate is controlled by the Democrats, the measure has a higher likelihood of passage this session. The Roundtable supports the Menendez-Meeks bill along with other groups including Nareit, NAIOP, International Council of Shopping Centers, Real Estate Executives Council (REEC) and the U.S. Chamber of Commerce. (Meeks news release, Feb. 23) “Diversifying corporate leadership is a critical step to provide equal business opportunities for all Americans, and we urge Congress to pass the Improving Corporate Governance Through Diversity Act,” said Roundtable President and CEO, Jeffrey DeBoer. ”It’s been estimated that $5 trillion can be added to US GDP over the next five years if we close the systemic gaps that have prevented Blacks, Hispanics, and other under-represented groups from fully and fairly participating in our economy.” Reports from PwC and McKinsey & Co. find that diversity in corporate management and leadership drives profitability. The McKinsey report concludes that “companies with more diverse executives were 33% more likely to see above average profits.” (CNBC, June 12, 2020) The Roundtable’s Equity, Diversity and Inclusion (ED&I) Committee recently issued its mission statement to create equal opportunities for Black Americans and other minorities to prosper in the commercial real estate industry. (Roundtable Weekly, Feb. 12) The Roundtable is also a “Founding Diversity Partner” in a national program recently launched by the Real Estate Executives Council (REEC) — the leading trade association formed to promote the interests of minority executives in the CRE industry. (Roundtable Weekly, Feb. 5) # # #

Tax Policy

February 27, 2021

Roundtable Weekly

Legislation Reintroduced in the House to Change Taxation of Carried Interest

Carried Interest

A group of House Democrats led by Bill Pascrell Jr. (D-NJ), chairman of the House Ways and Means Oversight Subcommittee, introduced the Carried Interest Fairness Act of 2021 (H.R. 1068) on Feb. 16. For taxpayers with a profits interest in a partnership that invests in capital assets, such as stock and real estate, the bill would convert long-term capital gain to ordinary income. (Pensions & Investments and Bisnow, Feb. 16) As currently drafted, the House legislation would apply to dispositions of partnership interests, distributions of partnership property, and sales of partnership assets that occur in tax years ending after the date of enactment. Thus, if the bill became law this summer or fall, and a partnership’s tax year corresponded with the calendar year, the tax increase would apply to gains realized after December 31, 2020. There is no provision that would exempt or grandfather prior partnership agreements, even though the agreements were negotiated based on well-settled tax law as it existed at the time. The top individual income tax rate today is 37%. The current maximum tax rate on long-term capital gain is 20%. In some cases, an additional 3.8% tax on net investment income also applies. The six co-sponsors of H.R. 1068 are Reps. Reps. Don Beyer (D-VA), Earl Blumenauer (D-OR), Judy Chu (D-CA), Andy Levin (D-MI), Katie Porter (D-CA) and Tom Suozzi (D-NY). (Rep. Pascrell news release, Feb. 16). Similar legislation has been introduced in every Congress since 2010. In the Senate, incoming Finance Committee Chairman Ron Wyden (D-OR) outlined his tax agenda during a Jan. 13 call with reporters, including plans to move forward with an increase in the corporate tax rate and major changes in the taxation of individual capital gains. Wyden added he would also pursue raising the current 21% corporate tax rate and change the tax treatment of carried interest (Roundtable Weekly, Jan. 15). During the Presidential campaign, then-candidate Joe Biden did not put forward a carried interest proposal, but rather proposed raising the maximum tax rate on long-term capital gains to create rate parity with wages, rental income, and other sources of ordinary income. The Roundtable & Carried Interest The Roundtable has consistently opposed proposals to tax all carried interest at ordinary income rates. Congress likewise has consistently rejected proposals to recharacterize all profits interests as ordinary income. Carried interest is not compensation for services. General partners receive fees for routine services like leasing and property management. Those fees are taxed at ordinary tax rates. The carried interest is granted for the value the general partner adds to the venture beyond routine services, such as business acumen, experience, and relationships. It is also recognition of the risks the general partner takes with respect to the general partnership’s liabilities, such as predevelopment costs and potential litigation. “Taxing carried interest at ordinary income rates would discourage the risk taking and sweat equity that drives job creation and economic growth,” said Roundtable President and CEO Jeffrey DeBoer. “It would encourage real estate owners to borrow more money to avoid taking on equity partners, and it would make it more expensive to build or improve real estate and infrastructure, including workforce housing, assisted living communities, and industrial properties, to name just a few. Some development simply won’t happen, especially in long-neglected neighborhoods or on land with potential environmental contamination,” DeBoer added. The Tax Cut and Jobs Act of 2017 created a 3-year holding period requirement for carried interest to qualify for the long-term capital gains rate. As Congress considers additional economic recovery legislation, The Roundtable and its Tax Policy Advisory Committee (TPAC) will continue working with policymakers, including the Congressional tax-writing committees, to preserve and improve tax rules that promote capital formation and the appropriate treatment of entrepreneurial activity and productive risk-taking. # # #

February 26, 2021

Policy Comment Letter

02-26-2021_199A-Trades-Letter_Main-Street-Tax-Certainty-Act

Pandemic Relief

February 19, 2021

Roundtable Weekly

House Democrats’ $1.9 Trillion Virus Relief Bill Faces Possible Changes in Senate; President Biden Extends Residential Foreclosure Moratorium and Forbearance Program

House Democrats are quickly advancing a $1.9 trillion coronavirus relief proposal through committees to create a final bill that may face delays in the Senate, but is expected to give President Biden his first major legislative accomplishment by March. (BGov, Feb. 18)The Real Estate Roundtable has consistently urged Washington policymakers to take aggressive actions to combat the pandemic and its economic repercussions. (Roundtable Weekly, Feb. 12)Speaker Nancy Pelosi (D-CA) last week said she expects the House will approve a bill “by the end of February so we can send it to the president’s desk before unemployment benefits expire” on March 14. (CNBC, Feb. 11)The House legislation is being considered under a budget reconciliation process that allows passage in the Senate with only a simple majority – yet certain measures such as a minimum wage increase face opposition from Democratic Senators that could pose delays in the 50-50 upper chamber. (The Hill, Feb. 17)House Majority Leader Steny H. Hoyer (D-MD) told his Democratic colleagues in a Feb 16 letter that “Members should be aware that the House may need to remain in session through the weekend next week to complete consideration.”Anticipating potential changes to the House bill from the Senate, Hoyer added, “During the week of March 8, the House will continue in legislative session. We will be ready to take further action on the American Rescue Plan in the event the Senate amends it and sends it back to us.” (Rep. Hoyer’s Feb. 16 Dear Colleague letter)The Democratic House bill include $25 billion in assistance to renters and their landlords, as well as $10 billion for assistance to homeowners. It would also provide $350 billion for state and local governments, territories and tribal governments to respond to the economic downturn caused by the pandemic. (“Where things stand on the COVID-19 relief measure,” The Hill, Feb. 17)The two chambers must reconcile differences before a final bill is sent to Biden’s desk. Comparisons of the Democratic and Republican proposals are available from CNN, The Wall Street Journal, and USA Today.Foreclosure Moratorium ExtendedPresident Biden on Feb. 16 further extended a ban on home foreclosures for Americans with federally backed mortgages through June 30, as well as a residential mortgage payment forbearance program that allows people to pause or reduce payments. On his first day as president, Biden issued an executive order extending eviction protections for the country's 44 million rental households until March 31. (USA Today, Feb. 16 and Forbes, Feb. 3 )According to a White House Fact Sheet, the extension benefits 2.7 million homeowners currently in COVID forbearance and extends the availability of forbearance options for nearly 11 million government-backed mortgages nationwide.The White House statement on the extensions also referred to the pandemic relief package under consideration in Congress. “To bolster these efforts, it is critical that Congress pass the American Rescue Plan to deliver more aid to struggling homeowners. The rescue plan creates a Homeowners Assistance Fund which will provide states with $10 billion to help struggling homeowners catch up on their mortgage payments and utility costs,” according to the Feb. 16 statement.# # #

Infrastructure

February 19, 2021

Roundtable Weekly

Biden Policy Eases Funding Constraints on Mass Transit Projects

Infrastructure

The Biden Administration released a policy letter on Feb. 16 enabling states to more readily access federal grant dollars to help finance mass transit and other large-scale transportation projects. (FTA “Dear Colleague” letter and CQ, Feb. 16).The letter from Acting Federal Transit Administrator Nuria Fernandez reverses Trump-era policy from 2018. The earlier policy restricted the amount of transportation money states could receive from the U.S. Department of Transportation (DOT) through the Capital Investment Grants (CIG) program if the project also received a low-interest DOT loan.The Feb. 16 letter clarifies that DOT loans extended under the Transportation Infrastructure Finance and Innovation Act (TIFIA) or the Railroad Rehabilitation & Improvement Financing (RRIF) program – when repaid with non-federal funds – can count toward the state’s cost-share requirement to also qualify for a “new starts” CIG grant.The Roundtable has long supported the FTA’s recent step. "Loans repaid [by states] with interest are fundamentally different instruments than grants awarded with no repayment obligation," The Roundtable noted in a 2019 letter to the House’s Transportation and Infrastructure Committee. The letter added, "Credit-worthy state and local project sponsors who successfully navigate the TIFIA loan process should not be penalized for seeking a CIG grant as a separate, necessary layer in the capital stack to finance a massive transit project." (Roundtable Weekly, May 3, 2019) The FTA’s policy change should help large-scale transportation projects of national and regional significance that may qualify for both CIG grants and TIFIA loans. [See nationwide lists of CIG projects and TIFIA projects.] One prominent example is the New York-New Jersey Gateway Program, a $30 billion modernization of Amtrak’s Northeast Corridor. Senator Bob Menendez (D-NJ) applauded the Biden Administration’s action, noting that the effect of the 2018 policy was to “stall the Gateway project” which includes replacing a 110-year-old bridge and construction of a “new Trans-Hudson rail tunnel.” (Menendez press release, Feb. 16)The Real Estate Board of New York (REBNY) applauded the Biden FTA’s move. “Restoring access to federal funding for Gateway is an initial but pivotal step toward advancing the project, which will improve mass transit service for millions of commuters, create thousands of good jobs and play a significant role in getting our regional and national economics back on track,” said REBNY President Jim Whelan. (REBNY news release, Feb. 18) Movement on InfrastructureBiden Transportation Department Secretary Pete Buttigieg hinted at the FTA’s policy change during his January confirmation hearing, emphasizing that he was committed to working with lawmakers on projects such as Gateway. (Bloomberg, Jan. 21, 2021) Also this week, President Biden discussed plans to improve the nation’s infrastructure with labor leaders, including Sean McGarvey, president of North America’s Building Trades Unions. (Wall Street Journal and White House Remarks, Feb 17) Roundtable President and CEO Jeffrey D. DeBoer and McGarvey discussed infrastructure policy in a video interview released during RER’s annual meeting last June. (Roundtable Weekly, June 19, 2020) The Biden Administration is expected to reveal its infrastructure package soon as part of its “Build Back Better” agenda to spur economic recovery from the repercussions of the pandemic. Additionally, The Senate Environment and Public Works Committee has scheduled a hearing on transportation infrastructure on Feb. 24, entitled “Building Back Better: Investing in Transportation while Addressing Climate Change, Improving Equity, and Fostering Economic Growth and Innovation.” The Roundtable’s recommendations regarding infrastructure financing and permitting will again be featured in our forthcoming 2021 Policy Agenda. The Roundtable is also a member of the “Build by the 4th”coalition, led by U.S. Chamber of Commerce, which urges Congress to pass a comprehensive infrastructure bill by Independence Day 2021. # # #

Pandemic Relief

February 12, 2021

Roundtable Weekly

House Committees Advance Provisions Supporting President Biden’s $1.9 Trillion Virus Relief Proposal; Democrats Aim to Pass Final Bill by Month’s End

Coronavirus

House committees this week advanced legislative language that will transform President Joe Biden’s $1.9 trillion pandemic relief package proposal into a consolidated bill and provide details on aid for states and local communities; assistance for renters and homeowners; and support for small businesses.The progress in the House is a positive development that brings much-needed economic relief and funding to defeat COVID-19 one step closer to enactment. The Real Estate Roundtable consistently has urged policymakers to take aggressive actions to combat the pandemic. Roundtable President and CEO Jeffrey DeBoer said,” The Real Estate Roundtable is encouraged by both Democratic and Republican efforts to work toward additional economic relief from the pandemic. Given the continuing great need for additional assistance to cities, people and businesses, we continue to urge policy makers to find a path forward.” (Roundtable Weekly, Feb. 5)Democrats plan to pass the final legislation through “reconciliation” procedural protections, which will prevent a filibuster by Republicans when the measure reaches the 50-50 Senate. House Speaker Nancy Pelosi (D-CA) yesterday said she expects the House will approve a bill “by the end of February so we can send it to the president’s desk before unemployment benefits expire” on March 14. (CNBC, Feb. 11 and Roundtable Weekly, Feb. 5)The House Ways and Means Committee on Feb. 11 approved over $630 billion in new tax relief, including $460 billion in 2021 alone. Their provisions include $1,400 payments to individuals; credits for children, childcare and dependent care; and expansion of the Earned Income Tax Credit. The temporary federal unemployment and benefit would also be extended through August 29, 2021, increasing the weekly benefit from $300 to $400. (Wall Street Journal, Feb. 11and Ways and Means Committee mark-up videos)The committee proposal – “Subtitle G. Budget Reconciliation Legislative Recommendations Relating to Promoting Economic Security – passed on a partisan 24-18 vote with no amendments. (Section-by-section summary and Joint Committee on Taxation (JCT) description)House Ways and Means Committee Chairman Richard E. Neal (D-MA), above, stated, “Over the last two days, the Ways and Means Committee has considered aggressive, science-based solutions that will deliver the urgent relief our country so desperately needs. From unemployment benefits to health care affordability, the work we’ve done is substantial, and it is exactly what the American people have been calling on us to do to meet this moment.” (Ways and Means news release, Feb. 11)The House Financial Services Committee was also one of the House committees this week that held legislative markup sessions to formulate legislative details for Biden’s pandemic relief proposal. (Financial Services Committee Instructions, Feb. 4 and Markup videos, Feb. 10)In her markup opening statement Financial Services Committee Chairwoman Maxine Waters (D-CA) noted, “The package also includes $25 billion to provide rental assistance, including $5 billion towards 70,000 emergency vouchers and funding directed to rural and tribal communities. The package also includes language … to provide $10 billion to support struggling homeowners, who face a looming foreclosure crisis. And, it … provides $10 billion to support small businesses, including minority-owned businesses that are closing their doors at historic rates.”More than half of 2.7 million active home mortgage forbearance plans are set to end in March, April, May or June, according to mortgage-data firm Black Knight Inc. (Wall Street Journal, Feb. 9)During the Small Business Committee’s Feb. 10 markup, $50 billion in emergency pandemic aid for small businesses was approved. Committee Chairwoman Nydia M. Velazquez said, “Surveys show that one in three small business owners will not survive the next few months without additional financial support.” (Rep. Velaquez opening statement, Feb. 10)The committee’s language would also provide $25 billion for restaurants and bars under a new Small Business Administration program, and $15 billion for “economic injury disaster” loans. (Washington Post and BGov, Feb. 11)In the Senate, the pandemic relief package is expected to go straight to the Senate floor, circumventing the committee “mark-up” process, due to the ongoing impeachment trial of former President Donald Trump, which may conclude this weekend. (Bloomberg, Feb. 11)# # #

Diversity, Equity, Diversity, and Inclusion

February 12, 2021

Roundtable Weekly

Roundtable’s ED&I Committee Releases Mission Statement Aiming to Advance Racial Equity in CRE

Equity Diversity and Inclusion EDI Jeff Blau

The Real Estate Roundtable’s Equity, Diversity and Inclusion (ED&I) Committee finalized its mission statement on Wednesday, with a key objective to create more economic opportunities for Black, Latino and other historically under-represented groups to prosper in the commercial real estate industry. The ED&I Committee’s mission statement draws from the Biden-Harris Administration’s executive order “On Advancing Racial Equity and Support for Underserved Communities” (Jan 20), as well as data recently reported by Citi GPS on the economic cost of racial inequality in the U.S. The statement provides a four-part mission to: Encourage RER’s members to create equal opportunities in real estate’s management, workforce, supply chain, and capital markets for Black, Latino, and other professionals historically under-represented in the CRE industry; Develop an anti-discrimination, pro-inclusion federal policy agenda within The Roundtable’s traditional spheres of influence as an advocate on tax, capital markets, ESG, housing, infrastructure, and immigration matters; Forge alliances by The Roundtable with civil rights and minority business organizations; and Increase diversity among Roundtable membership, directors, contractors, and staff. Roundtable Board Member and ED&I Committee Chairman Jeff Blau (CEO, Related Companies) stated, “The creation of a mission statement is a foundational step that will guide The Roundtable in its crucial work to create equity and affect real change in the real estate industry. Diversifying our industry is not a task that can be left to a few, rather it is a responsibility for all of our members and I look forward to continuing to work with RER to advocate for and drive meaningful progress.” The ED&I Committee’s initial focus will be on initiatives to boost opportunities for minority-owned firms in CRE’s supply chain of service providers, and support appropriate federal policy proposals to improve diversity in corporate governance. The Roundtable is also a “Founding Diversity Partner” in a national program recently launched by the Real Estate Executives Council (REEC) — the leading trade association formed to promote the interests of minority executives in the CRE industry. The Roundtable’s ED&I mission statement reflects the goals of REEC's framework, including objectives to increase corporate spend on minority-owned vendors, develop a pipeline of racially diverse CRE talent, and improve access to capital and credit for minority owned investment managers. (Roundtable Weekly, Feb. 5) NAIOP and the National Multifamily Housing Council (NMHC) are also among the founding partners in REEC’s initiative. “The events of the last year have laid bare the injustices faced by Black Americans and other minorities in our economic, public health, and social institutions,” said Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable. “The Roundtable must do our part to help create an equal playing field of opportunities for all Americans to prosper in our industry.” (ED&I Mission Statement, Feb. 10) # # #

Infrastructure

February 12, 2021

Roundtable Weekly

President Biden Focuses on Infrastructure Policy Plan With Key Senate Committee Leaders

Infrastructure

The critical need for investing in modern and sustainable infrastructure was the focus of a Feb. 11 White House meeting between President Joe Biden, Vice President Kamala Harris, Transportation Secretary Pete Buttigieg, and a bipartisan group of senators from the Environment and Public Works (EPW) Committee.The Senate EPW committee was represented by Chairman Thomas Carper (D-DE), Transportation Subcommittee Chairman Ben Cardin (D-MD), Ranking Member Shelley Moore Capito (R-WV), and former Chairman James Inhofe (R-OK). Biden stated at the meeting that the EPW Committee “is central to everything that’s going to happen” on infrastructure. (White House Remarks and meeting video, Feb. 11). White House Press Secretary Jen Psaki remarked that the meeting “was a reflection of how important it is [for Biden] to meet with bipartisan leaders and have a discussion about what’s required in states and communities.” (White House press conference video, Feb. 11) The president noted the importance of investing in infrastructure to maintain Americas’s international competitiveness, referring to China’s advancements in high-speed rail and automobiles by stating, “if we don’t get moving, they’re going to eat our lunch.” (Washington Post, Feb. 11)Sen. Cardin said after the meeting that “it's going to be a challenge to… have adequate revenues to fund transportation moving forward.” Congressional focus on an infrastructure package is widely expected to take place after the legislature acts on the next round of COVID-19 relief. (Politico, Feb. 11). Sens. Cardin and Carper led a Feb. 9 letter from nearly 50 Democrats from both the House and Senate to Secretary Buttigieg, regarding the need for federal transportation policies to create jobs while also reducing carbon pollution, with an emphasis on reducing vehicle tailpipe emissions. In a December 16, 2020 letter, The Roundtable and 12 national real estate organizations provided detailed recommendationsto then President-elect Biden and Vice President-elect Harris that included infrastructure funding and modernization as engines to drive recovery and job growth from the economic fallout of the COVID-19 pandemic. The December industry letter stated, “A strong national infrastructure is vital to the health of the nation’s real estate, and vice versa. Roads, bridges and mass transit enhance the values of nearby properties, which in turn generate greater tax revenues to fund even more infrastructure assets.”The Roundtable is also part of Build by the 4th coalition led by U.S. Chamber of Commerce, which encourages the Biden Administration and the new Congress to pass a comprehensive infrastructure deal by Independence Day 2021. The Biden Administration is expected to reveal its infrastructure package soon as part of its “Build Back Better” agenda to spur economic recovery from the repercussions of the pandemic.# # #

Pandemic Relief

February 5, 2021

Roundtable Weekly

Democrats Approve Budget Resolution Setting Up Path for Biden COVID-19 Package

Vice President Kamala Harris broke a 50-50 tie in the Senate on Feb. 5 to pass a budget resolution that will allow President Biden’s proposed $1.9 trillion pandemic relief package to advance without GOP support. (New York Times, Feb. 5)The budget resolution triggers special “reconciliation” procedural protections that prevent a possible filibuster by Senate Republicans – and will give tax-writing and other committees in both chambers until Feb. 16 to report legislative language for consolidation into a final pandemic relief bill. (“Budget Reconciliation: The Basics,” House Committee on the Budget)Senate Majority Leader Chuck Schumer (D-NY) said, “This was a giant first step. So we will keep working as hard as we can to pass this legislation through the House, through the Senate as we go through the reconciliation process and hopefully put it on the President's desk.” (Schumer statement, Feb. 5)‘House Speaker Nancy Pelosi and Senate Majority Leader Schumer issued a joint statement on Feb. 1 to unveil the budget resolution. “Congress has a responsibility to quickly deliver immediate comprehensive relief to the American people hurting from COVID-19. The cost of inaction is high and growing, and the time for decisive action is now,” according to the statement.Additional unemployment assistance and other pandemic aid measures are scheduled to expire in March as calls increase for more funding to support vaccine distributions, direct payments to households, school reopenings, and relief for businesses. (AP, Feb. 2) Earlier in the week, President Biden’s $1.9 trillion pandemic relief package proposal was countered by a $618 billion Republican proposal. The GOP counter-proposal did not include aid for state and local governments, rental assistance, or further extension of the CDC’s eviction moratorium beyond its current expiration date on March 31. (Comparisons of the Democratic and Republican proposals have been prepared by CNN, The Wall Street Journal, and USA Today).Roundtable President and CEO Jeffrey DeBoer said,” The Real Estate Roundtable is encouraged by both Democratic and Republican efforts to work toward additional economic relief from the pandemic. Given the continuing great need for additional assistance to cities, people and businesses, we continue to urge policy makers to find a path forward.”Changes Possible Before Final PackageWhite House Press Secretary Jen Psaki commented there may be some changes to Biden’s “American Rescue Plan” to achieve compromise on the next pandemic package, including lowering the qualifying income threshold for the proposed $1,400 in direct payments. (AP’s YouTube channel, Feb. 2)The reconciliation process allows for congressional tax-writing committees to consider measures that could potentially be added to the package. A group of 120 House and Senate Democrats – led by Ways and Means Member Lloyd Doggett (D-TX) and Senate Finance Committee member Sheldon Whitehouse, (D-RI) – this week urged congressional leaders to reinstate the full limitation on net operating losses and active business losses that were part of the Tax Cuts and Jobs Act of 2017. The CARES Act included tax relief that allowed businesses to carry back 2018-2020 net operating losses to prior years, thus allowing them to claim refunds for taxes paid in earlier years.The letter states that proceeds from reversing the NOL measure “should be repurposed to help Americans who have lost income due to the pandemic and its economic fallout.” (Feb. 2 letter)Separately, a power-sharing agreement for the 50-50 Senate was unanimously adopted on Feb. 3 by the chamber after Majority Leader Schumer and Minority Leader Mitch McConnell (R-KY) finalized terms. The agreement allows Democrats to take control of Senate committees and formalize their leadership. (Wall Street Journal and Politico, Feb. 3)# # #

Equity, Diversity, and Inclusion

February 5, 2021

Roundtable Weekly

The Real Estate Roundtable Partners With REEC to Address Equity, Diversity and Inclusivity Disparities in Commercial Real Estate

Equity Diversity and Inclusion EDI Jeff Blau

The Real Estate Roundtable is a Founding Partner of a national program unveiled Feb. 3 by the Real Estate Executive Council (REEC) – the trade association for CRE professionals of color – that will seek to address equity, diversity, and inclusivity issues across the commercial real estate industry with a wide spectrum of partner companies and organizations. (REEC news release, Feb. 3) "The lack of diversity in the CRE industry, and the disparities that exist in access to capital and credit for African Americans and other people of color, are systemic problems that need a multifaceted approach. None of us can do this alone. Coming together to tackle the challenge through industry partnerships such as REEC's Diversity Partner Program will give us a fighting chance," said REEC Board Chair Tammy K. Jones, CEO and founder of Basis Investment Group. Ken McIntyre, CEO of the REEC and a Real Estate Roundtable Board Member, said, “We are excited to launch the Diversity Partners Program and to work with this committed group of initial partners to improve diversity and inclusion in the CRE industry. We invite other firms to join REEC as Diversity Partners to further our mission. As an industry we have a great deal of work to do to change the paradigm.” REEC's initial diversity partners have committed to meaningful goals for diversity and inclusion in support of REEC's mission. The founding diversity partners include: Ventas, Inc. –Healthcare REIT led by Debra A. Cafaro, Real Estate Roundtable Chair The Real Estate Roundtable NAIOP Commercial Real Estate Development Association National Multifamily Housing Council L+M Development Partners Nuveen -- Investment Ferguson Partners – Human Capital Bisnow– Media and events The Roundtable’s Board of Directors has established an Equity, Diversity and Inclusion (ED&I) Committee, chaired by Roundtable Board Members Jeff T. Blau, CEO, Related Companies, which is organizing members and finalizing a mission statement. (Roundtable news release, Sept. 30, 2020) The framework of the partnership REEC has with The Roundtable and other founding partners includes the following goals: Diversity Ecosystem – hiring and developing a pipeline of racially diverse talent. Diversity Business Plan -- focus on goals, measurements and transparency. Supplier or Vendor Diversity/Diversity Spend – increasing percentages of annual spend allocated to firms owned by people of color. Investment Allocations and Access to Capital & Credit - increase the amount of, and improve access to, capital and credit for minority-owned investment managers, developers, projects and communities. # # #

Tax Policy

February 5, 2021

Roundtable Weekly

Bipartisan Legislation Allowing REITs to Increase Investment in Commercial Tenants Introduced

Tax Policy

Bipartisan legislation introduced Feb. 4 by House Ways and Means Members Brad Schneider (D-IL) and Darin Lahood (R- IL) would modernize real estate investment trust (REIT) tax provisions to permit REITs to invest equity in struggling commercial tenants that have been harmed by the COVID-19 pandemic. (News release, Feb. 4)The Retail Revitalization Act of 2021 (H.R. 840) – strongly supported by The Roundtable and a coalition of real estate, retail, and labor interests – would help address the challenges in the retail sector that have been exacerbated by the coronavirus. Failure to make these changes could result in further retail bankruptcies, liquidations of retail businesses, large-scale job losses and a collateral impact on related supply chains that service the sector. “The COVID-19 pandemic has decimated the retail sector, resulting in lost jobs and shuttered doors. Retailers across the county are already facing bankruptcy, liquidation or large-scale job losses. Allowing REIT landlords to infuse more capital into their retail tenants will help offset the retail sector’s devastating losses caused by the pandemic and save jobs,” said Rep. Schneider.Rep. Lahood added, “Retailers need more funding as they work to recover from the pandemic and this legislation will help infuse critical private capital into small businesses struggling.”Roundtable member Brian Kingston, CEO of Brookfield Property Group commented, “As one of the largest shopping mall owners in the U.S., we have seen first-hand the devastating effects the pandemic has had on many of our tenants. A modernization of the REIT rules—like those contained in the Retail Revitalization Act—will allow us to respond to our tenants request for further assistance, in turn allowing them to keep their doors open, save thousands of jobs, and continue to generate millions in tax revenue for federal, state, and local governments.”The bill would modify existing related-party rent rules that treat rental income received by a REIT from a tenant in which the REIT owns more than a 10 percent interest as bad income for REIT purposes. Specifically, among the changes, the bill would:increase the capacity of a REIT to own the equity of a tenant from 10% to 50%, andconform the ownership attribution rules used for determining what is considered related-party rent under the REIT rules to the general ownership attribution rules that apply to corporations.Speaking at a virtual event with the sponsors and stakeholders on the day of introduction, Roundtable President and CEO Jeffrey DeBoer said, “[A]s important and helpful as Congress’s actions have been for smaller businesses, a lifeline is now needed, particularly to larger retail businesses and the people who work in the retail industry.”“The legislation is not a tax cut or a tax break,” DeBoer continued, “It is very much a private sector solution. It would provide a legal framework for property owners ... to put their own capital at risk by making equity investments in struggling retail businesses that employ tens of thousands of workers nationwide.” # # #

In Memoriam

February 5, 2021

Roundtable Weekly

Benjamin V. Lambert, Eastdil Secured Chairman, Transformed Industry Advocacy

Benjamin V. Lambert – an industry icon who served as Chairman of Eastdil Secured and as former Chair of The National Realty Committee (predecessor of The Real Estate Roundtable) – passed away the weekend of Jan. 30. (Commercial Observer, Feb. 2 and TheRealDeal, Feb. 1)“Ben Lambert’s leading role in modernizing commercial real estate finance is well known“ said Jeffrey DeBoer, Roundtable President and CEO. “Less well known is the profound influence Ben had on industry advocacy efforts in Washington. He was a Founding Member and later Chairman of The National Realty Committee (NRC) – the organization that evolved to become The Real Estate Roundtable – and many of his early advocacy principles, such as industry unification across product type, remain traits of the Roundtable to this day. We will miss him but we will not forget him.” A Jan. 31 email by Eastdil Secured’s CEO Roy Hilton March and President D. Michael Van Konynenburg sent to friends and clients stated, “Ben was a true father-like figure to many of us, and we will miss his wisdom, warmth, leadership and love. In a tough, high stakes environment, Ben never had a bad word to say about anyone.” They added that a future ceremony may be held in honor of Mr. Lambert when large gatherings are deemed safe again.(Mr. March serves on The Roundtable’s Board of Directors and Mr. Van Konyenburg is also a Roundtable Member.) Lambert founded Eastdil in 1967, bringing a Wall Street investment banking approach to real commercial real estate for more than 50 years. He was the chief financial negotiator in the 1977 sale of Irvine ranch in California and structured the financing of San Francisco’s Embarcadero Center and the MacArthur Foundation apartment portfolio. He also led some of the largest transactions in the country, including the sale of Chicago’s Willis Tower and New York City’s General Motors.Among his many affiliations beyond Eastdil, he served on the board of trustees for Brown University and the Silver Shield Foundation and was a Founder and Chairman of the Harlem Day Charter School.# # #

2021 State of the Industry Meeting

January 29, 2021

Roundtable Weekly

Pandemic Aid, Biden Administration Agenda and Other National Policy Issues Addressed in Roundtable Discussions

The Real Estate Roundtable’s 2021 State of the Industry (SOI) meeting this week featured discussions with three incoming Senate Committee chairs who oversee banking, energy, housing, and tax legislation – along with other national leaders on a wide range of policy matters. The Roundtable’s policy advisory committees also met virtually to discuss these matters as well as the Biden Administration’s COVID response initiatives, the prospects for legislating in a 50-50 Senate, and homeland security concerns in the aftermath of the January 6 attack on the Capitol. (Watch all SOI videos on The Roundtable's YouTube Channel.)Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.) launched the SOI meeting on Jan. 26, acknowledging the health, economic and equality crises that have engulfed the nation over the past year. (video)Cafaro also emphasized how The Roundtable was one of the first industry groups to denounce the attack and suspend political support for any members of Congress not interested in seeking bipartisan solutions to the nation’s significant challenges. (Roundtable Weekly, January 15)Cafaro was joined by Roundtable Chair-Elect John F. Fish (Chairman & CEO, SUFFOLK) and Roundtable President and CEO Jeffrey DeBoer (photo above) in announcing that the organization’s 2021 National Policy Agenda will soon address issues in the areas of tax, capital and credit, energy and climate, homeland security, infrastructure and housing.Policy Issues & Featured SpeakersThe SOI meeting attracted nearly 300 participants and included the following speakers: Sen. Sherrod Brown (D-OH) – Incoming Chairman of the Senate Banking, Housing and Urban Affairs Committee – spoke about the national eviction moratorium and ensuring citizens have access to affordable housing (video). [Roundtable President and CEO testified before the Senate Banking Committee in Sept. 2020 about policy recommendations that could encourage a national recovery from the economic effects of the pandemic.]Sen. Joe Manchin (D-WV), photo above – Incoming Chairman of the Senate Energy and Natural Resources Committee – is one of the key centrist Senators who is expected to play a significant role in forging bipartisan legislation in the 117th Congress, as the Biden Administration moves swiftly on its pandemic aid plan and clean energy initiatives to boost job creation. (video)Sen. Ron Wyden (D-OR) – Incoming Chairman of the Senate Finance Committee – will have a principal role on Capitol Hill on tax, trade, and spending. He welcomed fact-based reports showing the link between real estate, the pandemic and tax policy. (video)Dr. Scott Gottlieb – 23rd Commissioner of the U.S. Food and Drug Administration – spoke with Roundtable Chair Debra Cafaro on the emergence of vaccines, concerns about coronavirus variants, and the prospects for fuller re-opening of the economy.Penny Pritzker – 38th Secretary of Commerce (2013-2017), Founder and Chairman of PSP Partners and former Roundtable Board Member – provided her insight on leadership, international trade agreement, the climate crisis and racial inequity. (video)Steven Pearlstein – Business and Economics Columnist, The Washington Post – discussed the challenges ahead for bipartisan policymaking in a split Senate with The Roundtable’s Board of Directors, reflecting his recent column, “Five (somewhat) upbeat predictions for 2021.” (video)Roundtable Policy Advisory CommitteesThe Roundtable's policy advisory committee meetings analyzed national issues impacting CRE in detail with the following high-level congressional and agency staff:Research and Real Estate Capital Policy Advisory Committees (RECPAC)Rep. French Hill (R-AR) provided his insights on the 117th Congress from his perspective as a member of the House Financial Services Committee. Additionally, D. Michael Van Konynenburg (Eastdil Secured), Brian Kingston (Brookfield) and Michael Bilerman (Citi) provided their perspectives on the market cycle. (video)Tax Policy Advisory Committee (TPAC)Tax legislative priorities affecting CRE were a focus of a discussion moderated by Russ Sullivan (Brownstein Hyatt Farber Schreck) with Tiffany Smith, chief tax counsel for Senate Finance Committee Democrats and Andrew Grossman, chief tax counsel for House Ways and Means Committee Democrats. (video)Homeland Security Task Force (HSTF) and Risk Management Working Group (RMWG)This joint meeting was briefed on potential post-inauguration threats from a representative of the FBI’s Counterterrorism Division. Additionally, Brian Michael Jenkins, a senior adviser to the president of the RAND Corporation, addressed the attack on the U.S. Capitol and the implications for real estate.Sustainability Policy Advisory Committee (SPAC), photo aboveU.S. Energy Information Administration speakers updated SPAC on the Commercial Building Energy Consumption Survey (CBECS), the only federal data that takes stock of U.S. commercial real estate. Environmental, Social, and Corporate Governance (ESG) trends were also discussed, as well as the need for voluntary federal standards to help unify a patchwork of state and local laws addressing buildings and their carbon footprint. (video)Next on The Roundtable's FY2021 meeting calendar is the Spring Meeting on April 20. This virtual meeting is restricted to Roundtable-level members only.# # #

Policy Landscape

January 29, 2021

Roundtable Weekly

Senate Weighs Timelines for COVID-19 Relief Bill and Impeachment Trial; President Biden Signs Climate Executive Order

Senate policymakers this week began to consider President Joe Biden’s $1.9 trillion COVID relief package proposal after Congressional leaders agreed to delay opening arguments in the impeachment trial of Donald Trump until Feb. 9. (Reuters, Jan. 25 and PBS, Jan. 26)As an alternative to a trial, Sen. Tim Kaine (D-VA) yesterday said he will introduce a resolution to censure the former president, citing the 14th amendment to bar Trump from holding future office. At least 10 Senate Republicans would have to vote for censure to move the resolution forward, even though the GOP has shown little support for conviction in the impeachment proceeding. (The Hill and The Washington Post, Jan. 28)With the impeachment trial date set, Senate Majority Leader Chuck Schumer (D-NY) said he is aiming to pass a pandemic aid package by mid-March, when unemployment benefits will expire. (Forbes, Jan. 25, 2021 and Roundtable Weekly, Dec. 22, 2020)Schumer and House Speaker Nancy Pelosi (D-CA) also said this week that if Republicans continue to reject President Biden’s $1.9 trillion pandemic relief proposal, a Democrat-only pandemic stimulus plan will move forward next week using budget reconciliation – a process that requires a simple majority vote in the Senate, thereby avoiding a filibuster. Vice President Kamala Harris could break a tie vote in the 50-50 Senate. (The Hill, Jan. 29)President Biden said Monday that he is open to negotiating a bipartisan approach to the next pandemic aid package with Congress, but stated “time is of the essence” and that “[t]he decision to use reconciliation will depend on how these negotiations go.” (Bloomberg and CNBC, Jan. 25) Sen. Rob Portman (R-OH) – a centrist Republican who recently announced he will not seek reelection in 2022 due to partisan gridlock – said the use of reconciliation “would exacerbate the partisanship around here; it would make it more difficult to find common ground.” (Wall Street Journal, Jan. 26)Presidential Executive Order on ClimateIn related policy news, President Biden issued an executive order on Wednesday to “tackl[e] the climate crisis at home and abroad.” (Axios, Jan. 28, New York Times, Jan. 27). The order aims for the U.S. to achieve a “net-zero emissions” economy by 2050.The climate order directs federal agencies to determine the U.S.’s carbon reduction target under the terms of the Paris climate agreement, and maximize opportunities to “create well-paying union jobs to build a modern and sustainable infrastructure.”# # #

News

January 29, 2021

Roundtable Weekly

Senate Advances Biden Cabinet Confirmations; Janet Yellen Confirmed as Treasury Secretary

Cabinet nominations for the Biden Administration are advancing in a closely divided Senate. On Jan. 25, former Fed Chair Janet Yellen, above, was confirmed (84-15) by the full chamber as the first female U.S. Treasury Secretary after the Senate Finance Committee unanimously approved her nomination last week. (Roundtable Weekly, Jan. 22) Members of the Finance Committee asked Dr. Yellen about the potential for tax increases under the new Administration. She responded in writing, “President Biden has proposed an array of reforms that would ensure the wealthiest taxpayers and corporations pay their fair share. These and other proposals will be further developed as part of the budget process.” In addition to the former Fed Chair’s testimony, her responses to written questions for the record are available here. Secretary Yellen is expected to play an important role in negotiations with Congress over COVID-19 relief, support President Biden’s efforts to encourage clean energy jobs, and work closely with current Fed Chair Jerome Powell on bolstering an economic recovery. (The Hill, Jan. 29 and NBC News, Jan. 25) Yellen also said she will establish a new “hub” at Treasury that will examine financial system risks arising from climate change and on related tax policy incentives. (Politico, Jan. 25) Other Biden cabinet nominations of interest to commercial real estate include: Secretary of Transportation -- Pete Buttigieg The former mayor of South Bend, IN was approved by the Senate Commerce Committee on Jan. 27 and the full Senate has scheduled a vote on his nomination on Feb. 2. Buttigieg made urban development and economic revitalization cornerstones of his mayoral service. (Reuters, Jan. 27) Administrator of the Environmental Protection Agency (EPA)-- Michael Regan The Senate Committee on Environment and Public Works will hold a confirmation hearing on Biden’s nomination of Regan to be EPA administrator on Feb. 3. (Bloomberg Law, July 27) He currently leads North Carolina’s Department of Environmental Quality, and if confirmed will have a major role on shaping the Biden Administration’s reponse to the climate crisis. Secretary of Energy – Jennifer Granholm Former Michigan Gov. Jennifer Granholm had her confirmation hearing on Jan. 27 before the Senate Energy Committee. As governor, she supported policies for electric cars, energy efficiency, and renewable energy deployment. Secretary of Commerce – Gina Raimondo The Senate Commerce Committee held a Jan. 26 confirmation hearing to consider Rhode Island Governor Gina Raimondo for Commerce Secretary. Gov. Raimondo spoke at The Roundtable’s 2020 State of the Industry Meeting about her efforts to build more affordable housing, along with her support for Opportunity Zone tax incentives. (Roundtable Weekly, Jan. 31, 2020) Secretary of Homeland Security – Alejandro Mayorkas The Senate will vote on the nomination of Alejandro Mayorkas to lead DHS on Feb. 1, after he was approved by the chamber’s Homeland Security and Governmental Affairs Committee on Jan. 26. A former Obama Administration official, if confirmed he will help shape the Biden Administration’s policies on matters such as immigration and cybersecurity. (The Hill, Jan. 28) Secretary of Housing and Urban Development – Marcia Fudge The Senate Banking Committee on Jan. 28 held a hearing on the nomination of Marcia Fudge to lead HUD. Rep. Fudge (D-OH) is former chairwoman of the Congressional Black Caucus. During her nomination hearing, she told the committee that $25 billion in rental assistance approved by Congress at year-end was “not enough.” (NPR, Jan. 28) A full listing of other cabinet nominees and senior roles in the Biden Administration is provided by The Wall Street Journal. # # #

Policy Landscape

January 22, 2021

Roundtable Weekly

Joe Biden Takes Oath as 46th President, Signs Executive Orders on Pandemic Response, Evictions, Climate, Immigration and Racial Equity

Coronavirus

On January 20, the peaceful inauguration of Joe Biden as the 46th president of the United States and Kamala Harris as vice president took place on the steps of the Capitol, where two weeks prior a violent mob attempted to overturn the electoral process.President Biden in his inaugural address emphasized themes of national struggle and unity. He stated, “We must end this uncivil war that pits red against blue, rural versus urban, conservative versus liberal. To overcome these challenges – to restore the soul and to secure the future of America – requires more than words. It requires that most elusive of things in a democracy: Unity.”Vice President Harris – who is the highest-ranking woman of color in U.S. history – stated during a post-inaugural event, “This, too, is American Aspiration. This is what President Joe Biden has called upon us to summon now. The courage to see beyond crisis. To do what is hard. To do what is good. To unite.” (New York Times, Jan. 21) Coronavirus ResponseThe new administration’s top priority is to develop and manage a coordinated, national public health and economic response to the COVID-19 pandemic. On its first two days in office it issued:A “National Strategy for the COVID-19 Response and Pandemic Preparedness,” which contains overarching goals to mount a “safe, effective comprehensive vaccination campaign” and to “safely reopen schools, businesses, and travel;” andA flurry of Executive Orders and communications to establish a White House COVID-response coordinator, a mask-wearing mandate for federal workers and on federal properties, and a commitment to re-join the World Health Organization. (Fact Sheet summarizing initial COVID response steps) Additional “Day One” OrdersIn addition to addressing COVID-19, the Biden Administration moved swiftly on “Day One” with 17 Executive Orders (EOs) covering a range of issues. (New York Times and CQ, Jan. 20) These actions include: Extending the federal residential eviction moratorium (scheduled to expire on January 31) through the end of March – with a request to HUD and other agencies to allow forbearance on payments of federally-guaranteed mortgages; “Restoring science” and “tackling the climate crisis,” such as by rejoining the Paris Climate Agreement, and directing the EPA and the Energy Department to reassess Trump-era rules on building energy codes as well as standards for appliance and motor vehicle fuel efficiency;Advancing racial equity and support for underserved communities; andRestoring protection for “Dreamers” under the Deferred Action for Childhood Arrivals (DACA) program, ending the ban on travel to the U.S. from primarily Muslim countries, and other immigration-related matters. The Roundtable joined an amicus brief to the U.S. Supreme Court last year urging that DACA protections should be re-instated for immigrants brought to the United States as children. (Roundtable Weekly, June 19, 2020 )(Biden has also proposed a legislative immigration overhaul that would provide a path to citizenship for the undocumented, which has already been met with some GOP opposition and “underscore[s] that the measure faces an uphill fight in a Congress that Democrats control just narrowly.” (AP, Jan. 19).References:Fact Sheets from Biden Admin on Executive Orders – Jan. 21 and Jan. 22Exec Orders and Agency Review List on Climate Change White House, Presidential ActionsPolitico, Jan. 22, “Biden executive orders: The 17 things Joe Biden did on Day One”The Biden Administration's initial actions and policy agenda will be a focus of The Roundtable's Jan. 26-27 State of the Industry Meeting (held virtually). Speakers will include:Sen. Sherrod Brown (D-OH) – Chairman, Senate Banking, Housing and Urban Affairs CommitteeSen. Joe Manchin (D-WV) – Chairman. Senate Energy and Natural Resources CommitteeSen. Ron Wyden (D-OR) – Chairman, Senate Finance CommitteeDr. Scott Gottlieb – 23rd Commissioner of the U.S. Food and Drug AdministrationPenny Pritzker – 38th Secretary of Commerce (2013-2017); Founder and Chairman of PSP PartnersThe Roundtable will also unveil its 2021 National Policy Agenda publication soon, which will address policy issues in in the areas of tax, capital and credit, energy and climate, homeland security, and infrastructure and housing.# # #

COVID-19 Victims Tribute

January 22, 2021

Roundtable Weekly

Roundtable Members Participate in Nationwide Illumination of Buildings to Honor COVID-19 Victims

Real Estate Roundtable members on Jan. 19 joined other building owners and operators around the nation to illuminate private and public buildings in a “national moment of unity and remembrance” to honor those Americans who have fallen to COVID-19. (Photo: Denver's City and County Building, credit: Patricia Duncan )Dozens of Roundtable member organizations responded to a request for participation from the Presidential Inaugural Committee. Their building illumination efforts coincided with a lighting ceremony around the Lincoln Memorial Reflecting pool in Washington, D.C., and the ringing of bells in churches and towns nationwide to commemorate the moment of remembrance.The Roundtable on Jan. 19 issued the following statement about the memorial event, which was held as part of the inauguration of President Joseph R. Biden and Vice President Kamala D. Harris:“The Real Estate Roundtable encourages all Americans to support the peaceful transfer of power to the new Biden-Harris Administration, and urges that the 117th Congress unify across party lines to address the critical health, economic and social challenges now facing the American people. “This evening, in association with the inauguration of the Biden-Harris administration, our nation will recognize the nearly 400,000 fellow citizens who have died over the past year due to COVID-19." “Building owners are proud to join national policy makers, religious leaders, business figures and others commemorating tonight’s event by lighting many of our buildings nationwide as part of the #COVIDMemorial."“The Roundtable is committed to work positively with our elected officials to help our nation stabilize and rebuild from the severe hardships caused by the pandemic — and to do so in a manner that affirms and more fully realizes the ideals of equality and opportunity upon which our great nation is founded.”Photo compilations of illuminated buildings in towns and cities nationwide who participated in the tribute were posted on media outlets such as Axios, the San Jose, CA publication The Mercury News and ABC News. # # #

Economic Stimulus

January 22, 2021

Roundtable Weekly

Senate Finance Committee Approves Janet Yellen as Treasury Secretary; BisNow Webinar Features Roundtable’s DeBoer on Industry Policy Agenda and Biden Administration

Treasury Department

The Senate Finance Committee on Jan. 22 voted unanimously to advance President Biden’s nomination of Janet Yellen for Treasury secretary to the full Senate for a vote. Yellen, who formerly served as chair of the Federal Reserve, would become the first woman to hold the position. (The Hill, Jan. 22) Yellen testified before the committee earlier this week that “the world has changed,” encouraged policymakers to “act big,” and addressed fiscal relief, potential tax increases and the growing budget deficit. (Bloomberg and Wall Street Journal, Jan. 19)“Neither the President-elect, nor I, propose this relief package without an appreciation for the country’s debt burden,” she said. “But right now, with interest rates at historic lows, the smartest thing we can do is act big. In the long run, I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time.” (Yellen testimony, Jan. 19)In follow-up written Q&A with the committee, Yellen addressed a wide variety of policy issues including tax policy and climate change. Among her answers in the document:“Both the President and I believe we can turn the threat of climate change into an opportunity to boost our economy and reinvigorate old and new industries to create high paying middle class jobs across America. President Biden has a comprehensive plan to invest in the United States, create a clean energy economy, and address the crisis of climate change. I am focused on the President's agenda, including investments in the clean energy economy, to address climate change and create good paying jobs and energy efficiency technologies, as well as clean electricity standards that will achieve carbon-pollution-free electricity by 2035.”Yellen also said she planned to start a new Treasury "hub" that would examine financial system risks arising from climate change and on related tax policy incentives, POLITICO's Zachary Warmbrodt reports.Sen. Ron Wyden (D-OR), who is poised to chair the tax-writing Senate Finance Committee, said in a statement after the hearing, “As we continue to deal with the worst economic crisis in a century, it’s critically important that she be leading the Treasury Department as soon as possible.” Roundtable’s DeBoer & Policy Priorities Real Estate Roundtable President and CEO Jeffrey DeBoer commented in the media this week on the Biden Administration and policy priorities ahead. In Commercial Property Executive’s Jan. 22 article, Industry Responds as Biden Kicks Off Tenure (cpexecutive.com), DeBoer states, “There are many serious issues facing the nation, but job number one is winning the ongoing battle against the health and economic consequences of the pandemic.” He added, “In addition, we expect robust debate and activity around housing availability, infrastructure and immigration reform and expanding opportunities for all Americans.”The Roundtable and 12 national real estate organizations on Dec. 16, 2020 congratulated Joe Biden and Kamala Harris on their historic election and submitted detailed policy recommendations to the incoming administration on COVID-19 relief, sustainability, housing, immigration, tax policy infrastructure, and other policy issue areas. (Roundtable Weekly, Dec. 18, 2020)The industry letter acknowledges the many economic and social challenges confronting the country and the Biden Administration, including the national response to COVID-19. The letter and supporting policy memo were also sent to every congressional office on Capitol Hill.DeBoer also participated in Jan. 19 BisNow webinar with Roundtable Member Steven Witkoff, Chairman & Chief Executive Officer of Witkoff, and W. Edward (Ed) Walter – Global Chief Executive Officer of the Urban Land Institute and current co-chair of The Roundtable’s Research Committee – that focused on future economic stimulus proposals from the Biden Administration and industry priorities.DeBoer said, “What Biden has suggested already is very positive. We need to go bold and big. So when we look at this next wave of legislation, we’re going to be looking for how does it distribute the vaccine because until that occurs it is going to be difficult for cities and states and businesses to regain their footing. We have also worked hard on the concept of rent assistance and we have urged that impacted businesses also be able to get some rental assistance.”He added, “We are also very hopeful that in the next bill we can get some additional clarity on liability concerns for businesses. And going forward, we’re concerned that for leasing and refinancing, there may be a need to have a program along the lines of what was established after 9-11 for terrorism insurance. There may be a need for a pandemic risk insurance federal program that would allow people to help mitigate the risk of a future pandemic and that insurance would be available to any kind of business.” The Roundtable’s policy agenda and the Biden Administration’s proposals will be discussed during both The Roundtable’s business meeting and policy advisory committee meetings during the organization’s State of the Industry Meeting on Jan. 26-27 (all virtual). # # #

Political Support

January 15, 2021

Roundtable Weekly

The Real Estate Roundtable Suspends Political Support to Members of Congress Who Objected to Electoral College Certification

The Real Estate Roundtable announced on Tuesday that it “will suspend all political contributions to Members of Congress whose votes attempted to subvert the validly expressed will of the American people in selecting Joe Biden and Kamala Harris as the nation’s next president and vice president.” (Roundtable statement, Jan. 12) The Jan. 12 statement continued, “In the time since this armed insurrection, we have become even more appalled and our anger is amplified by the dismissive reaction of many of our national leaders, beginning with the votes cast by a band of Senators and Representatives who continue to fuel baseless claims of election fraud by refusing to certify the clear results of last November’s election.” The Roundtable’s statement suspending political support follows its denunciation last week of the January 6 attack on the Capitol and its commitment to “support[ ] efforts to bring about more measured tone and civility in policy debates at all levels of government, and policy actions that are balanced and sustainable.” In the Jan. 8 statement, Real Estate Roundtable President and CEO Jeffrey DeBoer also noted, “We will continue to work with policymakers representing the full spectrum of political views. However, we do not intend to help advance initiatives proposed by policy makers uninterested in seeking bipartisan consensus." (Roundtable Weekly, Jan. 8) GlobeSt reported on The Roundtable’s suspension of certain political contributions, noting that “the industry—as well as the larger business community—has not only voiced disgust with what happened but backed those sentiments with hard actions.” CoStar reported, “While Trump's business is now a focus of the fallout, the politically focused repercussions are still coming. The Washington., D.C.-based Real Estate Roundtable, commercial real estate’s most prominent national lobbying group, suspended all political contributions to members of Congress” who objected to certifying the vote of the Electoral College. Industry and Private Sector Response According to The Real Deal, (TRD) Nareit stated, “As a result of these recent events… Nareit’s political action committee, REITPAC, will immediately suspend political contributions to all members of Congress who voted to deny certification of electoral votes cast by the Electoral College.” TRD also reported that the National Multifamily Housing Council (NMHC) stated it has paused all PAC disbursements, not only those connected with legislators who objected to the electoral votes and that NMHC added, “We will undertake a thorough review of our strategy for the 117th Congress.” The Mortgage Bankers Association told the publication, “MBA has decided to pause disbursements from its political action committee, MORPAC, and will undertake a careful review with our member leadership of our giving strategies for the 117th Congress.” (The Real Deal, Jan. 15) International Council of Shopping Centers (ICSC) CEO Tom McGee announced on Jan. 11 that the organization will be “suspending all ICSC PAC donations for the next three months.” McGee stated that “during this historically challenging period…the focus of politicians should be on governing and uniting our nation, not campaigning and raising money.” The National Association of REALTORS (NAR) on Jan. 6 stated, “We urge for calm and fully support the U.S. Capitol Police and the National Guard to restore safety to the city of Washington, D.C.” On Jan, 12, The Hill reported that NAR “paused its federal political disbursements and will monitor events in Washington in the days and weeks ahead.” Cushman & Wakefield told The Washington Post this week, “Cushman & Wakefield has made the decision to no longer do business with The Trump Organization.” Axios (Jan. 14) summarized the corporations that have “cut off political donations after the Capitol siege – including Marriott International, which will “pause donations ‘to those who voted against certification of the election.’” The repercussions of the political transition and the industry’s 2021 policy agenda will be a focus of discussion during The Roundtable’s Jan. 26-27 State of the Industry Meeting (virtual attendance). # # #

News

January 15, 2021

Roundtable Weekly

Inauguration Activities to Include Nationwide Illumination of Buildings to Honor COVID-19 Victims; Roundtable Members Asked to Participate

The Presidential Inaugural Committee has announced it is hosting a memorial to illuminate buildings in cities and towns across the country next Tuesday evening, as part of a series of online and virtual events for the Biden-Harris inauguration. The building illumination is intended as a “national moment of unity and remembrance” in honor of the American people who have fallen to COVID-19. (Inaugural Committee fact sheet and Building Owner Participation Form) The nationwide memorial to illuminate buildings will start at 5:30 p.m. EST on Tuesday, January 19, 2021. The lighting ceremony will then roll westward from time zone to time zone, taking place at 5:30 pm local time in each zone. The Inaugural Committee has requested support from Roundtable members to participate in the memorial to honor those who died from the coronavirus. Participation in the event is voluntary. Building owners and managers willing to illuminate their assets are asked to complete this short Google docs form to be submitted to the Inaugural Committee. The Committee also requests that owners and managers who participate in the event record or photograph their building illuminations to share on social media platforms. Further questions can be emailed directly to the Presidential Inaugural Committee at publicengagement@bideninaugural.org. The ceremony will be timed with a lighting around the Lincoln Memorial Reflecting pool in Washington, D.C., and the ringing of bells in churches and towns nationwide to commemorate the moment of remembrance. Roundtable members who opt to participate on January 19 are kindly requested to inform our staff by email (Duane Desiderio, Senior Vice President and Counsel, ddesiderio@rer.org) and (Abigail Grenadier, Communications Director, agrenadier@rer.org). We would like to keep track of the building square footage participating in this voluntary event and our organization’s collective involvement. # # #

Policy Landscape

January 15, 2021

Roundtable Weekly

President Trump Faces Second Impeachment Trial as President-elect Biden Proposes $1.9 Trillion Pandemic Aid Package

House Democrats, joined by 10 Republicans, on Jan. 13 voted 232-197 to impeach President Trump for a historic second time on charges that he incited last week’s insurrection at the Capitol that left five people dead, including a Capitol Hill police officer. (NBC News and Fortune, Jan. 13) No date has been set yet for Trump’s second impeachment trial in the Senate, although it could begin on the day of the inauguration of President-elect Biden and Vice President-elect Harris. The timing is uncertain as two new Democratic Senators from Georgia, Jon Ossoff and Raphael Warnock, await state electoral certification early next week. Vice President-elect Harris’s replacement—California Secretary of State Alex Padilla—is expected to be sworn in shortly after the inauguration. Some Democrats want a later trial date to give the incoming Administration time to establish their policy agenda and work on immediate COVID-19 priorities. (Wall Street Journal, Jan. 14) “We are working with Republicans to try to find a path forward,” said a spokesperson for Sen. Chuck Schumer, who will become majority leader. (AP, Jan. 14) As the Jan. 20 Biden-Harris inauguration approaches, 21,000 National Guard troops have been authorized for deployment to Washington, which is approximately three times the total number of American troops deployed in Iraq, Afghanistan, Somalia and Syria. Troops have not been stationed in the Capitol since the US Civil War in the 1860s. (Washington Post, Military Times, Jan. 14 and New York Times, Jan. 13) The Roundtable’s Homeland Security Task Force and Real Estate Information Sharing and Analysis Center (RE-ISAC) has been working with groups who are preparing and planning for potential related protests which may occur in the District of Columbia and in State capitals across the United States. (Homeland Security Today, After the Capitol Riot, What Is Your State of Preparedness?, Jan. 14) As the combined force strength of National Guard military personnel and federal and state law enforcement agencies continues to expand in Washington, DC, the attention is shifting to making sure that State capital complexes, government facilities (owned and leased) and adjacent properties are on alert, well-defended and are supporting this effort, as intelligence continues to be collected. Biden’s “American Rescue Plan” President-elect Biden last night proposed a $1.9 trillion pandemic aid package that may attract Senate Republican opposition over Democratic priorities, such as aid to state and local governments. (Bloomberg Law, Jan. 14) The latest COVID-19 stimulus proposal—called the “American Rescue Plan”—would build on earlier relief packages and provide emergency measures to meet immediate health care and economic needs. The incoming Administration is expected to unveil a broader plan in February before Biden’s first appearance before a joint session of Congress that will focus on long-term goals such as infrastructure and climate change. (B-Gov and The Washington Post, Jan. 14) A summary prepared by Brownstein Hyatt Farber Shreck (Jan. 14) describes Biden’s proposed American Rescue Plan as including: $350 billion for state and local governments $160 billion in funding for a national program of vaccination, testing and other coronavirus containment efforts $30 billion in rental and utility assistance for low- and moderate-income households, with an extension of the federal residential eviction moratorium (currently set to expire on Jan. 31) until Sept. 30, 2021 $1,400 per person stimulus checks for qualifying individuals (in addition to the $600 approved in December) $400 per week in supplementary unemployment benefits through September $130 billion to help schools reopen $25 billion for childcare providers $20 billion for hard-hit public transit agencies $15 billion in directs grants to small businesses, and a $35 billion investment in state and local small business financing programs to leverage additional lending The proposal would also raise the minimum wage to $15 an hour and expand food assistance, child tax credits, and medical and family leave. (Washington Post, Jan. 14) House Speaker Nancy Pelosi (D-CA) and Senate Democratic leader Chuck Schumer (D-NY) on Jan. 14 supported Biden’s stimulus package proposal. “The emergency relief framework announced by the incoming Biden-Harris administration tonight is the right approach,” Pelosi and Schumer said in a joint statement. “We will get right to work to turn President-elect Biden’s vision into legislation that will pass both chambers and be signed into law.” (Reuters, Jan. 14) Biden’s proposal follows the most recent COVID relief package that Congress passed before the holidays, part of omnibus legislation that funds federal operations through September 30, 2021. (Roundtable Weekly, Dec. 22, 2020) SBA Reopens Paycheck Protection Program (PPP) The U.S. Small Business Administration, in consultation with the U.S. Treasury Department, will re-open the Paycheck Protection Program (PPP) loan portal today, Jan. 15, to PPP-eligible lenders with $1 billion or less in assets for First and Second Draw applications. (SBA news release, Jan. 13) The portal will fully open on Tuesday, January 19, 2021 to all participating PPP lenders to submit First and Second Draw loan applications to SBA. SBA granted initial PPP access earlier in the week for lending in low-income and underserved communities, and to allow “second draw” loans for qualifying small businesses that received credit under earlier phases of the lending program. (Journal of Accountancy, Jan. 13) The deadline for Second Draw PPP loan applications has been extended to March 31, 2021. (NexTech, Jan. 12 and SBA Interim final rule). Updated PPP Lender forms, guidance, and resources are available at www.sba.gov/ppp and www.treasury.gov/cares. # # #

Tax Policy

January 15, 2021

Roundtable Weekly

House Ways and Means Democrats Release Legislative Framework, Senate Finance Chairman Ron Wyden Will Pursue Capital Gains Changes

Capital Gains Tax Policy

Congressional tax-writing committees this week began unveiling their agendas for the 117th Congress, with Democrats poised to control the majority in the both House and Senate. [Photo: Senate Finance Chairman Ron Wyden (D-OR), left, and House Ways and Means Chairman Richard Neal (D-MA), right] In the House, Ways and Means Committee Chairman Richard Neal (D-MA) on Jan. 11 released a 14-page legislative framework describes an agenda to address health and economic inequities in the United States, particularly those rooted in racial disparities. (Ways & Means news release, Jan 11) The framework, entitled “A Bold Vision for a Legislative Path Toward Health and Economic Equity,” lays out the pillars and policy priorities that will steer the committee’s work in the new Congress. The economic proposals focus on economic justice for workers, economic justice for children and families, retirement security, investment in communities, and environmental justice. The committee’s staff report, “Something Must Change: Inequities in U.S. Policy and Society,” provides key context about committee members’ legislative priorities. Specific proposals in the legislative framework include increasing the supply of affordable housing through the low-income housing tax credit; providing enhanced bond incentives to state and local governments to address environmental stressors; and expanding tax credits for families with children, child care expenses, higher education costs, and more. Chairman Neal writes in his foreword, “The framework we present here is Ways and Means Committee Democrats’ plan to make our nation a more just and equitable place. Some actions we can pursue almost immediately. Other advancements may take longer to become law. But inaction is not an option. Complacency cannot be tolerated.” Senate Finance Committee In the Senate, incoming Finance Committee Chairman Ron Wyden (D-OR) outlined his tax agenda during a Jan. 13 call with reporters, including plans to move forward with an increase in the corporate tax rate and major changes in the taxation of individual capital gains. Wyden presented and released a detailed white paper outlining his plan to reform the taxation of capital gains in September, 2019. (News Conference Video, Center for American Progress Action Fund, Sept. 12, 2019) His proposal, entitled “Treat Wealth Like Wages,” would raise the top tax rate on capital gains (currently 20%) and create parity with the tax rate on wages and other ordinary income. In addition, his plan would impose annual mark-to-market taxation of capital assets for taxpayers above certain income thresholds. Both proposals represent dramatic departures from existing tax law. During this week’s press call, Wyden said, “If you are a nurse in America taking care of COVID patients, you don't get to defer paying your taxes. If you're a billionaire, you can defer, defer and defer some more and then pretty much never pay any taxes at all.” A mark-to-mark system would require taxpayers to pay tax on the annual appreciation of capital assets – regardless of whether the property has been sold and cash is available to pay the levy – or impose a “look-back charge” on illiquid assets when a sale occurs or certain revaluation events take place. It could greatly diminish the incentive to start a busines or invest in any asset with a long, productive life. Such a dramatic change in the basic rules for how capital is taxed could have severe unintended consequences for future economic growth and job creation. ( Roundtable Weekly, Sept. 13, 2019) Wyden added he would also pursue raising the current 21% corporate tax rate and change the tax treatment of carried interest. Any tax changes in the Senate will have to advance through a 50-50 chamber. How committees will work through their arrangements and procedures has yet to be determined by Senate Majority Leader Chuck Schumer (D-NY) and Minority Leader Mitch McConnell (R-KY) More details related to Senate and House leadership positions and their respective committees can be found on JDSupra’s “Welcome to the 117th Congress” (Jan. 8). Sen. Ron Wyden is scheduled to speak with Roundtable members at the organiation’s upcoming State of the Industry business meeting on Jan. 26. Additionally, The Roundtable’s Tax Policy Advisory Committee meeting will address the 117th Congress’ tax agenda on Jan. 27 (all virtual). # # #

Political Transition

January 8, 2021

Roundtable Weekly

Mob Storms Capitol as Congress Certifies Electoral College Vote; Roundtable Denounces Violence, Urges Unity

The violent mob attack on the U.S. Capitol Jan. 6 by pro-Trump supporters as Congress debated the Electoral College’s final votes shook the nation to its core this week, resulting in Democratic leadership calling for a second impeachment proceeding or invocation of the 25th amendment to immediately remove the president, whose term expires on Jan. 20. Real Estate Roundtable President and CEO Jeffrey DeBoer issued the following statement:"The Real Estate Roundtable strongly denounces the armed violent protestors, and their baseless election claims, who stormed the U.S. Capitol this week. The mob chaos was contrived to inflict great damage on our democracy. A member of the Capitol Hill police died bravely defending others against the attack. Thankfully, democracy again defeated anarchy."Those involved in plotting, acquiescing or participating in this despicable act are not patriots. They are violent lawbreakers and must be treated as such. This chaotic, seditious mob also could have inflicted serious damage to America’s fight against the deadly pandemic – a crisis that has already taken over 400,000 lives and caused enormous economic hardships."As we all continue to work to overcome the challenges of the pandemic we must also unify to make sure that this week’s violence is not repeated. The Real Estate Roundtable pledges to do its part. We commit to supporting efforts to bring about more measured tone and civility in policy debates at all levels of government, and policy actions that are balanced and sustainable. We intend to continue to analyze policy based on its benefit to jobs, community and opportunity. We will continue to work with policymakers representing the full spectrum of political views. However, we do not intend to help advance initiatives proposed by policy makers uninterested in seeking bipartisan consensus," DeBoer said. Congress certified the Electoral College vote results hours after the storming of the Capitol, and planning for the Jan. 20 inauguration of President-elect Joe Biden and Vice President-elect Kamala Harris is underway. The Capitol has not been attacked since 1814 when British troops burned federal buildings in Washington, D.C. during the War of 1812.The Roundtable’s State of the Industry Business Meeting and Policy Advisory Committee Meetings will address the ramifications of the political transition on Jan. 26-27 (all meetings will be held virtually). # # #

Policy Landscape

January 8, 2021

Roundtable Weekly

Democratic Control of White House, Senate and House Ushers in New Policymaking Dynamic

The riot at the Capitol this week occurred during a momentous political power shift in Washington, as Congress certified the Electoral College’s votes confirming the incoming Biden-Harris Administration – and as the Jan. 5 Georgia runoff election determined the ruling party in the Senate.The Georgia election, won by Democratic candidates Raphael Warnock and Jon Ossoff, gives Democrats a razor-thin edge as Vice President-elect Kamala Harris will be able to cast tie-breaking votes in the Senate after she is sworn in Jan. 20The Democrats will control the White House, House and a Senate that will have no voting margin for defections. The 50-50 chamber will require close collaboration between Senate Democrats and the Biden Administration to advance legislative initiatives.With Sen. Chuck Schumer (D-NY) as Majority Leader, moderate Democrats in the Senate will have a significant influence on advancing bills through committee and on final votes that Schumer allows to the Senate floor.Such a narrow policymaking path was addressed before in a “power sharing agreement” in the 2001 Senate, which also faced a 50-50 split. A 2006 Congressional Research Service report – “The Senate PowerSharing Agreement of the 107th Congress (2001-2003: Key Features” – reports the details of how committee processes and other procedures were finalized. Yet Democrats who effectively now control the Senate will also assume chairmanships of committees that consider issues of importance to real estate. Among them are the tax-writing Senate Finance Committee, whose gavel will go to Sen. Ron Wyden (D-OR), the panel's senior Democrat who served as chair six years ago. Other new Senate committee chairs include: Banking, Housing and Urban Affairs Committee Chair Sherrod Brown (D-OH)Energy and Natural Resources Committee Chair Joe Manchin (D-WV)Environment and Public Works Chair Tom Carper (D-DE)Homeland Security and Governmental Affairs Gary Peters (D-MI)More details related to Senate and House leadership positions and their respective committees can be found on JDSupra’s “Welcome to the 117th Congress” (Jan. 8).Democrats are likely to advance additional COVID relief packages in close cooperation with the Biden Administration, including fiscal assistance for State and Local governments. Other policy issues expected to be addressed soon by Democrats include transportation and infrastructure funding. President-elect Joe Biden also said today, “I will introduce an immigration bill immediately” after he assumes office. (B-Gov, Jan. 8)The Roundtable and 12 national real estate organizations on Dec. 16 congratulated President-elect Joe Biden and Vice President-elect Kamala Harris on their historic election and submitted detailed policy recommendations to the incoming administration on COVID-19 relief, sustainability, housing, immigration, tax policy infrastructure, and other policy issue areas. (Roundtable Weekly, Dec. 18)The industry letter acknowledges the many economic and social challenges confronting the country as the Biden Administration prepares to take office, including the national response to COVID-19. The letter and supporting policy memo were also sent to every congressional office on Capitol Hill.The Roundtable plans to debut its 2021 Policy Agenda during its upcoming State of the Industry Meeting that begins Jan. 26.# # #

Coronavirus Response

January 8, 2021

Roundtable Weekly

Treasury Launches $25 Billion Emergency Residential Rental Assistance Program Supported by The Roundtable

Coronavirus

A $25 multi-billion residential rental assistance program launched on Jan. 5 by the Treasury Department will use funds from the year-end $900 billon coronavirus relief package signed into law by President Trump on Dec. 27. (Roundtable Weekly, Dec. 22)Treasury Secretary Steven Mnuchin said, “The Emergency Rental Assistance Program will help to keep American families in their homes during this challenging time. Treasury is implementing this program with unparalleled speed so our state, local, and tribal partners across the country can provide assistance to families in need.” (Treasury news release, Jan. 7, 2021)States, U.S. Territories, tribal and local governments covering more than 200,000 people are now able to enroll in the ERAP through a web portal by providing payment information and accepting award terms. Households or landlords that qualify can apply through the enrolled programs that receive funding from Treasury. Qualifying households include at least one person who is eligible for unemployment insurance or suffered a coronavirus-related financial hardship; is at risk of homelessness or housing instablity; and has a household income at or below 80 percent of “the area median.”A federal rental assistance program—advocated by The Real Estate Roundtable since April 2020—comes as the National Multi-Housing Council reports that 76.6 % of apartment households paid rent as of January 6. (NMHC Rent Tracker)The Roundtable last year called for the establishment of a rental assistance fund for impacted residential and business tenants. Calling it the “rental obligation chain,” The Roundtable emphasized that rent payments support owner payrolls, utility, taxes and debt service and further benefit capital providers and local governments. (Bisnow, April 30, 2020 interview with Roundtable President and CEO Jeff DeBoer and Roundtable Weekly, Sept. 11, 2020 on MSLP testimony)The enacted year-end omnibus bill took a partial step by establishing a $25 billion fund only for impacted residential tenants, although The Roundtable continues to support a similar, if not greater, fund for small business tenants. The bill also extended the Centers for Disease Control and Prevention (CDC) current federal eviction moratorium one month (through Jan 31, 2021). The Hill reported that “housing experts, advocates and economists have called on the federal government to provide sufficient rental assistance to protect tens of millions of Americans from eviction when the CDC ban expires.” (Jan. 7, 2021 and Oct. 11, 2020)# # #

Tax Policy

January 8, 2021

Roundtable Weekly

Treasury Department Finalizes Regulatory Projects on Carried Interest, Deductibility of Business Interest

Coronavirus Tax Policy

Treasury Department officials are working overtime to complete several multi-year tax regulatory projects before handing authority over to the new Biden Administration. These rules largely relate to the implementation of the Trump Administration’s signature legislative accomplishment, the Tax Cuts and Jobs Act of 2017. The recently finalized regulations address carried interest and the deductibility of business interest.The IRS on Dec. 29 issued a final revenue procedure (Rev. Proc. 2021-9) creating a safe harbor for senior housing to qualify for an exception to the new limitation on the deductibility of business interest. The statutory exception is available to a “real property trade or business.” Uncertainty regarding whether an assisted living facility would qualify as a real property trade or business has hung over the senior housing industry since the legislation’s enactment. The new revenue procedure puts those lingering concerns to rest and clarifies that senior housing qualifies for the exception, as long as certain requirements are met.In addition, Treasury released supplemental, final regulations on the deductibility of business interest this week. The rules address changes made in the CARES Act, as well certain transition relief for partnerships (T.D. 9943)The long-awaited carried interest final regulations implement the new three-year holding period requirement for carried interest to qualify for the long-term capital gains preference (T.D. 9945). The final carried interest regulations address several comments submitted by The Real Estate Roundtable. Roundtable comments aimed to ensure the rules are consistent with legislative intent of the provision (Oct. 5, 2020 comment letter). Specific improvements in the final carried interest rules provide greater flexibility for a general partner to finance an equity interest in a partnership with a loan from other partners in the partnership. The final rules also clarify that the three-year holding period does not override other provisions of the tax code that treat certain transactions as nontaxable events. Proposed regulations still outstanding include tax rules related to the transition away from LIBOR as a reference rate in mortgages and other financial contracts (Roundtable Weekly, Oct. 11, 2019).The Roundtable’s Tax Policy Advisory Committee (TPAC) will discuss these regulatory efforts in detail on January 27 in conjunction with The Roundtable’s State of the Industry Meeting (all virtual). # # #

January 1, 2021

Policy Comment Letter

Letter in Support of the Pandemic Risk Insurance Act of 2021

January 1, 2021

Policy Comment Letter

Trade Association Coalition in Favor of HR 5

January 1, 2021

Policy Comment Letter

PRIA Talking Points_(US_170552924_2)

Policy Alert

December 22, 2020

Roundtable Weekly

Congress Passes Pandemic Relief Aid and FY’2021 Funding in Overwhelmingly Bipartisan Fashion; “Omnibus” Includes Important Measures for CRE

Coronavirus

Congress passed a multi-trillion “omnibus” bill Dec. 21 that provides approximately $900 billion in coronavirus relief, as well as $1.4 trillion to fund government operations through Sept. 30. (Text of the 5,550-plus page bill )The legislation is the culmination of months of bipartisan negotiations to further stimulate the COVID-era economy. It will also keep the federal government operational for the rest of the current fiscal year. The Senate approved the legislation on a 92-6 vote, and the House on a 359-53 vote. “The size of the deal approximates the 2009 stimulus act that Congress passed at the beginning of the Obama administration – and sits on top of the much larger stimulus bill” known as the CARES Act, the $2.2 trillion legislation that President Trump signed last spring. (New York Times editorial (Dec. 20). See also Roundtable Weekly, March 27) “The COVID-19 relief package is welcome news to help America’s families, businesses, and communities cope with the pandemic in the midst of the holiday season,” said Roundtable President and CEO Jeffrey D. DeBoer. “With vaccinations underway, this bipartisan package provides hope for a robust economic recovery in 2021 – and is a bridge for the real estate industry to work with President-elect Biden and Vice President-elect Harris on additional measures to push health and economic solutions forward.” A broad coalition of national real estate organizations endorsed many of the components included in the emergency COVID measure, through a Dec. 16 letter and supporting policy memo sent to the Biden-Harris transition team. (Roundtable Weekly, Dec. 18) These include direct assistance to families and workers in the form of “stimulus checks” and expanded unemployment benefits; funding for states to distribute coronavirus vaccines; a new round of Paycheck Protection Program (PPP) loans for qualifying small businesses; and an emergency assistance fund to help households that have suffered economic hardship during the pandemic meet their monthly rent and utility bill obligations. “While there remains much work to do in the coming weeks and months, this effort is clearly a step in the right direction and will come as welcome news for so many households facing financial distress,” said National Multifamily Housing Council President Doug Bibby, and National Apartment Association President and CEO Bob Pinnegar, in a joint statement. “We are heartened that the legislation includes such critical resources that will allow those impacted by COVID and resulting economic stress to meet their financial obligations, including rent.” Summaries provided by various Congressional offices regarding the $900 billion COVID-19 relief package include: Topline summaryDetailed summaryPaycheck Protection Program (PPP) and Small Business Summary (part 1 and part 2)Residential Rental Assistance and Federal Eviction Moratorium summaryTax Provisions in the 2020 Year-End LegislationMatters of particular interest to the real estate sector are summarized below. Additionally, a Roundtable summary PDF can be downloaded.Direct relief to families, individuals, and the unemployed: $286 billion“Stimulus checks”: $166 billion$600 per individual earning up to $75K per year ($1200 under CARES Act)$1200 per couple earning up to $150K per year $600 for each dependent childFor example, family of four receives $2400 assistanceAdditional Unemployment Benefits: $120 billion$300 boost in weekly unemployment insurance to supplement existing state and federal unemployment benefits (CARES Act provided $600/week boost)From December 26, 2020 until March 14, 2021 Available to “gig” workers and the self-employedPaycheck Protection Program (PPP) “Round 2”: $284.5 billionExtends PPP through March 31, 2020Borrower eligibility more limited than CARES Act “Round 1.” Small business must have:300 or fewer employees, and25% revenue loss for any quarter in 2020 (compared to same quarter in 2019)501(c)(6) organizations now eligible – but not lobbying organizations (501(c)(3)s)Loan amount is generally 2.5-times payroll (same as CARES Act) – with max loan amount of $2 million (CARES Act was $5 million)Loan amount formula is increased to 3.5-times payroll for qualifying small businesses in the restaurant and hospitality industries (NAICS Code 72)Round 2 borrower must have exhausted initial Round 1 PPP loanExpedited forgiveness for loans up to $150K “60/40 Rule” remains in effect. That is, no more than 40% of loan proceeds can be used for rent and other non-payroll items.Expanded “allowable uses” for Round 2 PPP loans.COVID-related expenses like PPE purchases, indoor air quality improvements, workplace protection measuresRepair property damage from recent social unrestCosts associated with outdoor diningRound 1 allowable uses still apply: payroll, benefits, rent, mortgage, utilities“Passive real estate” remains ineligible for PPP loans. New law codifies SBA’s “ineligibility rule” at 13 CFR 120.110 for purposes of “passive real estate.”Codifies that “publicly traded companies” are prohibited from accessing PPP loans PPP and Tax Issues:Forgiven PPP loans are not treated as taxable incomeBusiness expenses paid with forgiven PPP loans are tax deductible (a reversal of Treasury guidance and retroactive to enactment of the CARES Act in March)COVID Vaccine Distribution, Testing, Tracing: $69 Billion. Includes – $9 billion for CDC and states to distribute vaccines$22 billion directly to states for testing, tracing, and “COVID mitigation” Transportation Assistance: $45 billion. Includes – $15 billion: Airline workers$14 billion: Mass transit agencies$10 billion: State highway agencies$2 billion: Airports and airport concessionaires$1 billion: Amtrak Residential Rent Assistance, Eviction Moratorium: $25 billionCDC’s current federal eviction moratorium extended one month (through Jan 31, 2021)Funds available through December 31, 2021Covers household rent past due, coming due, and utility billsAssistance not to exceed 12 months of payments, with a limit up to three months for prospective rent. Household can apply for additional assistance depending on availability of funds.States/localities receive “grants” from U.S. Treasury, apportioned based on Social Security formula.Households apply to state/local for assistance. Landlords can help household apply. Assistance paid directly to landlord.Households at 50% AMI are “prioritized” for assistance; no household over 80% AMI can receive assistance.Renter must have experienced “financial hardship” due to COVID, or is “at risk” of homelessness. State/local grantee only considers the household’s monthly income at the time the household applies for assistance, or total income for calendar year 2020. State/local grantee “shall ensure” “to the extent feasible” that any emergency rental assistance here does not duplicate other Federal rent assistance (e.g., Section 8)Emergency rental assistance is not income for tax purposes.No provisions regarding allowable forbearance on mortgage payments by property owner (as in CARES Act). Shuttered Theaters and Live Venues: $15 billion Small Business Administration grants available to eligible live venues, independent movie theaters, museumsMaximum grant amount is $10 million Unwinding the Federal Reserve’s Emergency Lending FacilitiesWinds down the 13(3) emergency lending facilities created under the CARES Act (the Main Street Lending Program for mid-size businesses, and three other facilities aimed to boost purchases of municipal and corporate bonds)These 13(3) program cannot be re-opened or duplicated in the future by the Fed without Congressional authorization$429 billion in unspent CARES Act funds intended for Fed facilities repurposed to offset the overall $900B packageFed retains more flexibility over the Term Asset-Backed Securities Loan Facility (TALF), initially launched during the 08-09 financial crisis to jumpstart the economy and increase banks’ liquidity. TALF supports the issuance of CMBS and other asset-backed debt securities. This bill closes TALF, but the Fed can re-start this facility in the future as emergency economic conditions may arise.More details on the cessation of the CARES Act 13(3) programs as reported in The Hill (Dec. 20). Real Estate-Related Tax Relief and Tax ExtendersReduces the cost recovery period for residential rental property placed in service before 2018 to 30 years under the alternative depreciation system (relevant to owners of multifamily housing who elect out of the new TCJA limits on the deductibility of business interest)Minimum 4% credit amount for low-income housing tax credit projects that involve the rehabilitation and renovation of affordable housing (in recent years, the 10-year credit for qualifying projects has fluctuated between 3.15% and 3.97%) Temporary reinstatement of the full 100% deduction for business meals expenses (food and beverages) in 2021 and 20226-month extension and expansion of the employee retention tax credit for businesses that retain their employees despite government-ordered shutdowns or steep declines in business revenue (>20%) Permanent extension of the enhanced deduction for energy-efficient commercial buildings (section 179D)5 year extension of the new markets tax credit, tax incentives for Empowerment Zones, and the tax exclusion for mortgage debt forgiveness on a principal residence2-year extension of the tax credit for residential solar property and other residential renewable energy improvements tax (section 25D)1-year extension of the $2,000 tax credit new energy efficient homes (section 45L), the deductibility of mortgage insurance premiums, and the tax credit for energy efficient improvements (e.g., windows, insulation, roofing, doors) to owner-occupied homes (section 25C) Troubled Debt Restructurings (TDRs)CARES Act’s TDR provisions extended until January 1, 2022. (ABA Banking Journal, Dec. 21)Extension provides an additional year of relief from accounting and disclosure requirements on loan modifications made in response to the COVID-19 pandemic. The Roundtable and other real estate groups recently requested an extension to the TDR relief period “to offer prudent relief to commercial real estate owners who have been acutely affected by the pandemic.” (Roundtable Weekly, Nov. 13) What’s Not Included in the $900 billion package Liability protections for businesses, non-profits, schools, hospitalsFederal aid to state and local governments for general revenue shortfalls (but aid for vaccine distribution provided as noted above) Omnibus Appropriations Bill for FY 2021$1.4 trillion in federal spending through end of FY’2021 (Sept. 30, 2021)EB-5 Regional Center investment visa program extended until June 30, 2021 – with no legislative reforms at this timeThe omnibus and its impact on The Roundtable’s 2021 policy agenda will be a focus of discussion during The Roundtable’s State of the Industry Meeting and Policy Advisory Committee Meetings Jan. 26-27 (all virtual).# # #

Coronavirus Response

December 18, 2020

Roundtable Weekly

Congress Struggles to Complete COVID-19 Aid Package for Inclusion in Multi-Trillion Omnibus Funding Bill

Coronavirus

Congressional leaders will work through the weekend in an effort to reach agreement on an omnibus bill that would attach approximately $900 billion in coronavirus relief to a $1.4 trillion bill to fund the government until Oct. 1, 2021 – the final piece of legislation in the lame-duck session. Another short-term stopgap measure needs to be passed before midnight tonight to extend current funding, prevent a partial government shutdown and allow more time for Congress to complete the omnibus negotiations. (BGov, Dec. 18 and Deloitte Tax News and Views, Dec. 18)Republicans and Democrats have inched toward a deal on a coronavirus relief package this week that currently includes $600 in direct payments for individuals, $300 for enhanced weekly unemployment benefits, aid to small businesses, distribution of the Covid-19 vaccine and other measures. (Wall Street Journal, Dec. 18 and Roundtable Weekly, Dec. 11)A bipartisan group of US Senators on Dec. 14 released text of the Bipartisan Emergency COVID Relief Act of 2020, which is under negotiation by House, Senate and White House policymakers – see section-by-section summary and draft text of the bill.The Act includes $25 billion for residential rental assistance, augmented unemployment insurance benefits, a scaled-down Paycheck Protection Program (PPP) – as well as money for vaccine development, supply, and testing and tracing programs.The bill also provides for emergency rental assistance, which may soften the impact of the Centers for Disease Control (CDC) moratorium that expires Dec. 31.The Act would also extend the moratorium through Jan. 31, 2021. Landlords/owners could assist or apply for rental assistance on behalf of renters.Politico reported this week that state and local funding and a business liability shield would be excluded from the final bill, although talks remain in flux. (Politico, Dec. 16) Extended troubled debt restructuring (TDR) relief is also currently not included in the package. (Roundtable Weekly, Nov. 13) Senate Majority Leader Mitch McConnell (R-KT) said today, "I am even more optimistic now than I was last night that a bipartisan, bicameral framework for a major rescue package is close at hand. Like I’ve said, the Senate will be right here until an agreement is passed, whenever that may be." (NBC News, Dec. 18) Disagreements continue among policymakers about the Fed's emergency lending programs, stimulus check eligibility and the use of disaster relief funds. (Politico, Dec. 17 and CQ, Dec. 18) The Roundtable and 12 national real estate organizations this week sent President-elect Joe Biden and Vice President-elect Kamala Harris several policy options for COVID-19 relief, as well as recommendations aimed at long-term challenges – see story below for details. # # #

News

December 18, 2020

Roundtable Weekly

Real Estate Industry Congratulates Incoming Biden Administration, Offers Policy Recommendations

The Roundtable and 12 national real estate organizations this week congratulated President-elect Joe Biden and Vice President-elect Kamala Harris on their historic election and submitted detailed policy recommendations to the incoming administration in the areas of COVID-19 relief, sustainability, housing, immigration, tax policy, and infrastructure, as well as others.The industry's Dec. 16 letter acknowledges the many economic and social challenges confronting the country as President-elect Biden and Vice President-elect Harris prepare to take office, including the national response to COVID-19. The letter and supporting policy memo were also sent to every congressional office on Capitol Hill.The economic impact of commercial real estate is far-reaching, wrote the organizations. America’s commercial real estate is worth between $14.4 and $17 trillion, and directly supports 13.6 million jobs. The ownership and transfer of real estate generates over 70% of local tax revenue. Pension funds, schools, and charities have invested nearly $800 billion in real estate. The submission describes how struggles caused by COVID-19 are affecting real estate-related workers and putting pressure on small businesses, financial institutions, property values, retirement savings, and local governments. At the same, time, the organizations noted how the real estate industry is contributing to the reopening process and is prepared to help lead the economic recovery. “We pledge the support, collaboration, and collective ‘on the ground’ experience of our members so that, together, we can get past the immediate crisis and continue building healthy communities for generations of Americans,” wrote the 13 organizations. The organizations’ letter offers several recommendations for COVID-19 relief (direct relief, state and local fiscal assistance, rental assistance, liability safeguards, debt restructurings, and others) as well as recommendations aimed at long-term challenges (pandemic risk insurance, infrastructure investment, retrofitting aging buildings to optimize energy efficiency, housing affordability, immigration reform, etc.). The recommendations are then described in greater detail in the supporting policy memo accompanying the letter. “We also recognize that the pandemic has magnified systemic inequalities, and are committed to ‘build back better’ in a manner that addresses the disproportionate hardships endured by minority and low-income households and communities from the fallout of COVID-19,” the organizations stated. The letter emphasized that the industry is committed to a “nonpartisan approach to public policy” that is “focused on contributing data and fact-based analysis that improves policymakers’ understanding of how their decisions will affect real estate, jobs and communities, and the overall economy.” The industry’s policy agenda, and its anticipated initiatives with the new Administration and Congress, will be a focus on Jan. 26-27 at The Roundtable’s State of the Industry Meeting and Policy Advisory Committee Meetings (all virtual). # # #

December 16, 2020

Policy Comment Letter

12-16-20-Real estate – Biden-Harris transition ltr attmt FINAL

December 16, 2020

Policy Comment Letter

12-16-20- Biden-Harris Transition Letter – FINAL

December 16, 2020

Policy Comment Letter

200730_Coalition_S._4317_SAFETOWORKAct_Congress

December 15, 2020

Policy Comment Letter

Sen_Commerce_Hearing_Live_Entertainment_Industry_12-15-2020

Policy Landscape

December 11, 2020

Roundtable Weekly

Government Funding Deadline Extended to Dec. 18 as Pandemic Relief Package Proposals Face “COVID Cliff”

Coronavirus

Congress this week extended government funding until Dec. 18 to avert a government shutdown and give bipartisan negotiators more time to finalize a pandemic relief bill, which remains at an impasse over business liability and state and local government aid provisions. President Trump is expected to approve the one-week spending bill before current funding expires tomorrow. (CNBC, Dec. 11)Policymakers engaged in intense pandemic aid negotiations also face the expiration of unemployment and housing benefits scheduled at the end of this month. This “Covid cliff” includes the Dec. 31 expiration of a national eviction moratorium by the Centers for Disease Control. (CNBC, Dec. 4 and The Hill, Dec. 9)House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Mitch McConnell (R-KY) recently signaled their goal was to combine a 2021 fiscal year spending bill with pandemic relief as part of a massive “omnibus” bill this month before recessing. (Politico, Dec. 4)McConnell this week backed a $916 billion GOP pandemic aid proposal released Dec. 8 by Treasury Secretary Steven Mnuchin, while Democratic leaders support a $908 billion proposal issued by a bipartisan group of lawmakers last week. (BGov, Dec. 10)The bipartisan coalition on Dec. 9 released details on its $908 billion stimulus proposal that includes $25 billion for residential rental assistance, state and local aid, augmented unemployment insurance benefits, a scaled-down Paycheck Protection Program (PPP) – as well as money for vaccine development, supply, and testing and tracing programs. (Framework summary for details on the bipartisan Emergency COVID Relief Act of 2020, Dec. 9)Although the dueling relief plans are close in total costs, significant policy differences over business liability and state and local government aid threaten the completion of negotiations. (Wall Street Journal, Dec. 9)The bipartisan group reportedly agreed this week on a needs-based formula to distribute $160 billion in state and local aid, but will not release details until compromise language addressing liability is finalized. (CQ, Dec. 9 and BGov, Dec. 10)Sen. Chris Coons (D-DE) on Dec. 9 said that emerging liability language may include a six-month moratorium on coronavirus-related lawsuits that would give states time to develop their own protections. An "affirmative defense" provision may also be included to counter excessive claims against institutions subject to lawsuits. (Roll Call, Dec. 9)Pelosi yesterday suggested that discussions over the emergency legislation could now stretch beyond the holiday season. “If we need more time, then we take more time. But we have to have a bill and we cannot go home without it,” Pelosi said. “I would hope that it would honor the December 18th deadline ... We’ve been here after Christmas, you know.” (Business Insider, Dec. 10)# # #

Tax and Energy Policy

December 11, 2020

Roundtable Weekly

Bipartisan House Bill Would Spur Energy Efficiency Upgrades in Commercial and Multifamily Residential Buildings

EQUIP Tax Policy

New legislation introduced this week by House Ways and Means Committee members Brad Schneider (D-IL) and Tom Rice (R-SC) would accelerate depreciation for high performance upgrades in commercial and multifamily buildings – creating new jobs in the construction, design, and energy sectors; boosting equipment manufacturing; and reducing the built environment’s carbon footprint. (Rep. Schneider news release, Dec. 9)The Energy Efficient Qualified Improvement Property (E-QUIP) Act proposes the establishment of an elective 10-year, straight-line cost recovery period for a new category of E-QUIP expenditures that meet strict energy efficiency criteria. The E-QUIP benefit would apply to “above code” heating and cooling equipment; lighting; building shell components (e.g., roofs, insulation, and windows); and “smart controls” (e.g., web-enabled thermostats, occupancy and daylight sensors) – as long as they are installed through 2025.Real Estate Roundtable President and CEO Jeffrey D. DeBoer helped to launch support for the E-QUIP Act during a Dec. 8 virtual meeting led by Reps. Schneider and Rice that reached a spectrum of stakeholders representing environmental, manufacturing, and real estate organizations.“The E-QUIP Act checks all of the boxes for smart energy, climate, and economic policy,” DeBoer said. “Installation of high performance HVAC, lights, windows, and other building components will modernize aging buildings, save businesses billions of dollars on their energy bills, create tens of thousands of jobs, and avoid carbon emissions equal to taking 22 million cars off the road for a year. The E-QUIP Act can also encourage state-of-the-art retrofits that enhance outdoor air ventilation rates — a key practice to improve a building’s health and indoor air quality, according to the best available science.”The Roundtable and numerous other stakeholders wrote to congressional tax writers last year about the need to establish an accelerated depreciation schedule for E-QUIP. (Coalition E-QUIP letter, May 8, 2019) E-QUIP AnalysisThe American Council for an Energy-Efficient Economy (ACEEE) released research this week estimating the E-QUIP Act’s economic and environmental impacts would include:130,000 net additional job-years$15 billion energy bill savings100 million tons of carbon dioxide emissions avoided – or the equivalent emissions from 560,000 rail cars full of coal, or taking 22,000 cars off the road for one year. (ACEEE’s E-QUIP policy brief and fact sheet)“Many building owners want to make energy efficiency investments, but existing law disincentivizes them. This fix will help them upgrade from old equipment to state-of-the-art options that will reduce their energy bills while cutting carbon emissions,” said ACEEE Executive Director Steven Nadel in a press release. Most investments in existing commercial and multifamily buildings are currently ineligible for the immediate tax deductions available to other business investments under the 2017 Tax Cut and Jobs Act. Instead, they are subject to depreciation periods as long as 40 years, depending on the kind of building, whether the investments affect the interior or exterior, and the tax status of the owner.The current patchwork of depreciation periods is largely unrelated to the useful lifetime of the investments. The new E-QUIP proposal would apply uniform criteria to an elective 10-year depreciation period. The Roundtable and other supporters aim to undertake a coordinated advocacy effort to identify additional House sponsors for the bill, and support introduction of companion legislation in the Senate. The E-QUIP Act will be discussed in greater detail at the “virtual” meetings of The Roundtable’s Tax Policy Advisory Committee (TPAC) and Sustainability Policy Advisory Committee (SPAC) on Jan. 27.# # #

Roundtable In The News

December 11, 2020

Roundtable Weekly

Roundtable President and CEO Jeffrey DeBoer Recognized for Third Consecutive Year as One of the “Top Lobbyists” in Washington, DC

The prominent policy news publication The Hill this week recognized Real Estate Roundtable President and CEO Jeffrey DeBoer as one of the Top Lobbyists in Washington, DC. This is the third consecutive year that DeBoer has been recognized in the annual list. (The Hill, Dec. 10)The Hill’s 2020 recognition acknowledges a variety of industry representatives for their advocacy efforts as “the people who wielded their clout and knowledge most effectively on behalf of their clients.”The publication also notes, “The ranks of policy experts and influencers run deep in Washington, but these are the players who stand out for delivering results for their clients in the halls of Congress and the administration.”The Roundtable’s DeBoer commented, “It is an honor to be recognized individually, but my inclusion on the list is more reflective of the overall Roundtable organization, its membership and our staff team effort. I am proud to work with highly effective leaders from the commercial real estate industry and with a staff of advocacy professionals who communicate our balanced policy agenda positions to lawmakers and regulators with a fact-based, non-partisan approach.”DeBoer added, “I appreciate the consistent recognition by The Hill but I share it side-by-side with our talented membership, staff and others who work on behalf of The Real Estate Roundtable.”# # #

Policy Landscape

December 4, 2020

Roundtable Weekly

Policymakers Face Government Funding Deadline as Talks Renew on Pandemic Relief

House Speaker Nancy Pelosi (D-CA) today said that Senate Majority Leader Mitch McConnell (R-KY) agreed to aim for combining a pandemic relief package with government funding legislation in an “omnibus” bill that would prevent a partial shutdown later this month. (Politico, Dec. 4)Pelosi referred to the goal for attaching a coronavirus relief measure to the must-pass spending bill, stating, “That would be a hope, because that is the vehicle leaving the station. We would want a big, strong vote.”McConnell commented on his discussion with Pelosi, stating, "… we had a good conversation. I think we're both interested in getting an outcome, both on the omnibus and on a coronavirus package." (NPR, Dec. 4)Negotiations over a COVID-19 stimulus package have been at an impasse for months – House Democrats passed a $2.2 trillion relief bill, Senate Republicans favored a $500 billion measure and the Trump administration offered a ceiling of $1.8 trillion. (Roundtable Weekly, Nov. 6)Congressional leaders renewed discussion this week about pandemic relief after a bipartisan group of Senate and House members proposed a compromise $908 billion package that attracted the support of Pelosi and Senate Minority Leader Chuck Schumer (D-NY). (BGov, Dec. 3) The bipartisan stimulus proposal includes $25 billion for “rental assistance,” state and local aid, augmented unemployment insurance benefits, a revival of the Paycheck Protection Program (PPP) and other small business relief, as well as money for vaccine development, supply, and testing and tracing programs. (“What's in the $908 Billion Bipartisan Stimulus Proposal?” by The Committee for a Responsible Federal Budget, Dec. 2) Pelosi also said, “There is momentum — there is momentum with the action that the senators and House members in a bipartisan way have taken.” (Politico, Dec. 4)President-elect Biden issued a statement today supporting pandemic-related funding. "Any package passed in the lame duck session is not enough," Biden said. "It’s just the start." (The Hill, Dec. 4)Government funding is currently scheduled to expire on Dec. 11. That deadline for combining fiscal 2021 appropriations and a coronavirus relief deal could lead to a one-week stopgap bill, giving lawmakers until Dec. 18 to pass a massive “omnibus” bill before Congress breaks for recess. (CQ, Dec. 4) Pelosi today said, "Don't worry about a date. It will be in sufficient time for us to get it done. The sooner the better but not at the expense of the initiatives that we need to address in the bills.” She added, “We'll take the time we need and we must get it done. We cannot leave without it." (CQ and The Hill , Dec. 4)# # #

News

December 4, 2020

Roundtable Weekly

Roundtable’s Q4 Sentiment Index Shows CRE Execs Optimistic Despite Serious Market Challenges; Walker Webcast Focuses on the Future of Urban Real Estate

Quarterly Sentiment Index

Commercial real estate executives expressed a modest increase in optimism about market conditions despite serious COVID-related challenges, according to The Real Estate Roundtable’s Q4 Economic Sentiment Index released this week. (Roundtable news release, Dec. 2)A majority of respondents to the survey also noted that general conditions one year from now will be either “somewhat better” or “much better” than today. “Nearly every sector of the commercial real estate industry is facing serious economic challenges due to the overall impact of the pandemic. High unemployment, closed businesses, travel reductions and more have ripped into otherwise healthy real estate portfolios, creating challenges for all building owners in meeting their payroll, utility, tax and debt service obligations. Overall industry low leverage, general market balance, and functioning capital markets are positive influences that – when coupled with growing good news regarding vaccines – results in an increased optimism on part of industry leaders," said Real Estate Roundtable President and CEO Jeffrey DeBoer. DeBoer also said, “That optimism is dependent however on urgently-needed additional COVID relief from Washington and on the rapid testing and availability of effective vaccines. Federal lawmakers and regulators must support further assistance to bridge people and businesses into a post-COVID economy. Help is needed quickly for local governmental budgets, as well as for people and businesses negatively economically impacted by the pandemic. And some protection from unnecessary lawsuits must be provided to businesses to spur a more robust transition back to workplaces. ” The Roundtable’s Q4 Sentiment Index topline findings include:The Sentiment Index registered a score of 44, an increase of two points from the third quarter of 2020. Respondents continued to express optimism about future conditions, and many noted increasingly positive trends in their own portfolios. Participants from the hospitality and retail sectors were understandably less optimistic, but felt market dynamics were strong enough that successful recoveries were possible.Respondents referenced stronger markets for industrial and multifamily properties, while retail and hospitality properties were perceived as challenging in this environment. Dynamics in the office sector remain uncertain for most participants as work from home policies have created an uncertain future operating environment.Lower leverage and continued forbearance have combined to allow owners to retain their positions, despite distress within their portfolios. As a result, owners are resistant to realizing discounted asset prices while buyers are seeking discounts as steep as 30% within the hospitality industry.Most respondents cited accessible capital markets for high quality assets, and an increase in debt as well as equity availability. Many also noted the real estate market in general has lower levels of leverage than seen in the last downturn. Future of Urban Real EstateOn this week's Walker Webcast, Roundtable Member Willy Walker (Chairman & CEO, Walker & Dunlop) discussed the pandemic's impact on urban centers with Roundtable Board Member Owen Thomas (CEO, Boston Properties) and Roundtable Member Mark J. Parrell (President & CEO, Equity Residential Investments). Thomas commented, “It's all about the virus. CEOs increasingly are understanding the problems with all remote work. Cultures are getting stretched and it is difficult to do more creative and strategic work, to procure new customers when everyone is working remotely. Companies want to get their employees back to work but companies are also very concerned about liability. What's going to change all that around is health security.”He added, “We have to get people back to the offices, back to the big cities for the overall economy to recover.”Parrell noted, “When we think about our urban centers, there are places like New York that have been around 400 years and they've been resilient over time. (During) the last two decades in New York, up to the pandemic, the quality of life improved so much. These cities are capable of recovery, but good leadership is required. It will be very important that these cities be led by both public and private minded individuals who, like the Partnership for New York for example, are trying to put the city back together and on its feet. Once the cities re-energize, renters will return.”Parrell added, “I do think there’s going to be a migration back into city centers, based initially on price and on activation as the vaccine gets broadly distributed.”The pandemic’s ongoing impact on CRE and the policy response will be a focus of discussion during The Roundtable’s virtual State of the Industry Business Meeting and policy committee advisory committee meetings on January 27-28, 2021. # # #

Capital and Credit

December 4, 2020

Roundtable Weekly

Regulators Urge Banks to Cease Use of LIBOR for New Contracts by End of 2021 as Benchmark Rate is Scheduled to Sunset on Legacy Contracts in June 2023

Capital and Credit LIBOR

US and UK regulators are urging banks using the London Interbank Offered Rate (LIBOR) as a benchmark interest rate to stop writing new LIBOR contracts by the end of 2021, while most legacy contracts will be able to mature before use of the rate sunsets in June 2023. (Federal Reserve and Wall Street Journal, Nov. 30)The UK-based ICE Benchmark Administration (IBA) announced it will consult in early December on its intention to cease US$ LIBOR. IBA intends to eliminate, subject to confirmation, one week and two month US$ LIBOR settings at the end of 2021. (Financial Conduct Authority, Dec. 4)LIBOR is used as a reference rate in an estimated $200 trillion of financial contracts, including $1.3 trillion of commercial real estate loans. UK financial authorities are phasing out LIBOR in response to manipulation concerns.The Federal Reserve Board, Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation on Nov. 30 released a joint statement supporting the proposal and explaining that the June 30, 2023 proposed LIBOR cessation date would allow time for "legacy contracts"—USD LIBOR transactions executed before January 1, 2022—to mature. The joint statement also notes, “Failure to prepare for disruptions to USD LIBOR, including operating with insufficiently robust fallback language, could undermine financial stability and banks’ safety and soundness.”Federal Reserve Vice Chair for Supervision Randal K. Quarles on Nov. 30 said, "Today's plan ensures that the transition away from LIBOR will be orderly and fair for everyone—market participants, businesses, and consumers.”"These announcements represent critical steps in the effort to facilitate an orderly wind-down of USD LIBOR," said John Williams, President of the Federal Reserve Bank of New York and Co-Chair of the Financial Stability Board's Official Sector Steering Group. "They propose a clear picture of the future, to help support transition planning over the next year and beyond."The Fed has urged banks to prepare for a transition away from LIBOR to the Secured Overnight Financing Rate, which will use rates that investors offer for bank securities such as loans and assets backed by bonds, instead of relying on bank quotes.The US Treasury Department on October 9, 2019 released proposed regulations to clarify the tax consequences of replacing LIBOR in existing financial contracts, including real estate loans. The proposed rules largely align with Roundtable recommendations submitted in June 2019. (Roundtable Weekly, June 7, 2019)# # #

Policy Landscape

November 20, 2020

Roundtable Weekly

Treasury Requests Cessation of Several Fed Emergency Lending Programs and Return of Unused Funds; Senate Republicans Want Funds Repurposed for Pandemic Relief

The Fed Treasury Department

Treasury Secretary Steven Mnuchin sent a letter to Federal Reserve Chairman Jay Powell yesterday requesting that five emergency lending facilities, including the Main Street Lending Program (MSLP), should not be extended past their scheduled expiration on December 31, 2020. Mnuchin also requested the Fed to return unused Treasury loan funds from the programs for Congress to re-appropriate. (Treasury letter and The Wall Street Journal, Nov. 19) The MSLP has the capacity to issue up to $600 billion in loans, yet has only completed approximately 400 loans totaling $3.7 billion. (Washington Post, Oct, 30) The programs were created as part of the CARES Act coronavirus aid package passed in March, which included funding for all the Fed’s emergency lending facilities. (The Hill, Nov. 19) Mnuchin’s Nov. 19 letter stated, “I am requesting that the Federal Reserve return the unused funds to the Treasury. This will allow Congress to re-appropriate $455 billion, consisting of $429 billion in excess Treasury funds for the Federal Reserve facilities and $26 billion in unused Treasury direct loan funds.” The decision to end the lending facilities operations cannot be done unilaterally by Treasury; it would require cooperation by the Fed. Chairman Powell issued a statement after markets closed yesterday that signaled disagreement. “The Federal Reserve would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy.” (Wall Street Journal, and CNBC interview with Mnuchin, Nov. 20) Powell also said on Nov. 17 that “I don’t think it is time yet, or very soon” to close down the programs and that the Fed was “using all of our tools to support the recovery for as long as it takes until the job is well and truly done.” (Reuters, Nov. 17) If the Trump administration decides not to extend the Fed programs, the new administration’s Treasury Department could reestablish them after Biden is inaugurated on Jan. 20. (Wall Street Journal, Nov. 10) Pandemic Relief Package The request for the Fed to return unused funds from the lending programs comes as Congress remains at an impasse over costs for a pandemic relief package – the Trump administration offered a ceiling of $1.8 trillion, House Democrats passed a $2.2 trillion bill, and Senate Republicans favored a $500 billion measure. (Roundtable Weekly, Nov. 6) Mnuchin and Senate Majority Leader Mitch McConnell (R-KY) today discussed a strategy for reviving talks between Republicans and Democrats over the stalled pandemic stimulus package. McConnell commented after the meeting about utilizing the unused Fed funds for a relief package, stating, “Congress should repurpose this money toward the kinds of urgent, important, and targeted relief measures that Republicans have been trying to pass for months, but which Democrats have repeatedly blocked with all-or-nothing demands.” (AP, Nov. 20) President-elect Joe Biden on Monday urged Congress to advance the $2.2 trillion HEROES Act (H.R. 925) passed by the House. "Right now, Congress should come together and pass a COVID relief package like the HEROES Act that the House passed six months ago. Once we shut down the virus and deliver economic relief to workers and businesses, then we can start to build back better than before,” Biden said. (BGov, Nov. 16) A report issued Wednesday by The Century Foundation shows that approximately 12 million Americans will lose unemployment insurance by the end of the year due to deadlines set by Congress early in the pandemic. (Washington Post and GlobeSt, "12M Workers Set to Lose Unemployment Benefits," Nov. 19) Lawmakers also face the added pressure of passing a government funding bill to avoid a Dec. 11 partial shutdown. Congress may choose to merge some COVID-19 aid measures into a sweeping multi-trillion-dollar omnibus funding bill during the lame-duck session to address both issues – or attempt to pass separate bills. # # #

Pandemic Risk Insurance

November 20, 2020

Roundtable Weekly

Federal Pandemic Risk / Business Continuity Insurance Program Focus of House Hearing

Capital and Credit Pandemic Risk Insurance Program

House lawmakers heard testimony about a possible federal pandemic risk / business continuity insurance program during a hearing yesterday entitled, Insuring against a Pandemic: Challenges and Solutions for Policyholders and Insurers. (Webcast of hearing and witness statements) The Business Continuity Coalition (BCC), which includes The Real Estate Roundtable, submitted a hearing statement for the record to The House Financial Services Subcommittee on Housing, Community Development and Insurance. The subcommittee played a key role in last year’s seven-year extension of the Terrorism Risk Insurance Act (TRIA). (List of BCC members) The BCC announced on Oct. 28 that it aims to develop a public/private business continuity insurance program with policymakers and other stakeholders. Such a program would enable employers, in the event of a government-ordered shutdown, to keep payrolls and supply chains intact; help limit job losses and furloughs; reduce stress on the financial system; and speed economic recovery when government-imposed limitations on operations are lifted. (BCC launch news release) The BCC has emphasized that the COVID-19 crisis has shown the current lack of insurance availability for business continuity coverage for catastrophic pandemic events. This coverage gap raises concerns for policyholders and shows the need to enact an effective federal program. The BCC hearing statement submitted this week notes, “… if not remedied, these insurance gaps will hinder any recovery, especially impacting business lending, new leasing activity, retail and hospitality, housing construction and development, as well as media production. Private insurance alone cannot and will not remedy the gaps – at least not in the short-term – but private insurers need to be part of the solution. What is urgently needed is a federally-backstopped availability mechanism similar to the highly successful one which Congress put in place for terrorism following 9/11– in short, a TRIA-style program for pandemic risk." A number of legislative proposals have been introduced to address the need for business continuity coverage – including the Pandemic Risk Insurance Act of 2020 (H.R. 6983). Roundtable President and CEO Jeffrey DeBoer on Sept. 25 discussed prospects for developing and enacting a federal pandemic risk-business continuity insurance program with Rep. Steve Stivers (R-OH), the Ranking Member on the House Subcommittee. (Video of the discussion) “We’ve seen business interruption insurance not being willing to cover any pandemics. I think you’re going to start to see lenders … requiring some type of pandemic coverage in their loan covenants in the coming years,” Stivers said. He added, "I think we need to make sure that if this ever happens again and the government shuts down the economy, [Congress] holds people harmless and businesses harmless in the future.” (Video of the discussion) DeBoer commented, “The pandemic crisis has exposed gaps in business continuity insurance coverage that can only be filled by a national program that will provide the American economy with the coverage it needs to minimize the economic impact of pandemic-related shutdowns and aid economic recovery.” # # #

Tax Policy

November 20, 2020

Roundtable Weekly

Treasury Department Clarifies that Partnership-level State and Local Income Taxes are Deductible

SALT Tax Policy

The Treasury Department and IRS in a recent notice indicated their intent to issue proposed regulations clarifying that state and local income taxes imposed on, and paid by, a partnership or an S corporation are deductible in computing the partnership or S corporation’s taxable income. (IRS Notice 2020-75) The announcement has important implications for real estate and other businesses operating in States with high state and local income tax burdens. The Tax Cuts and Jobs Act of 2017 limits taxpayers’ ability to deduct state and local taxes (SALT) paid at the level of the individual taxpayer to no more than $10,000. The SALT limitation in TCJA applies to state and local taxes owed on individual wages, as well as state and local taxes paid on business income distributed to partners or S corporation shareholders. In contrast, state taxes on corporate income remained deductible under the 2017 legislation. However, prior to Notice 2020-75, it was unclear whether the SALT limitation applied to entity-level income taxes imposed on, and paid directly by, a partnership or S corporation. The Treasury announcement is an important step towards creating a more level playing field between publicly held C corporations and privately held pass-through businesses. Over the last three years, several States have modified their tax laws to allow partnerships, S corporations, and LLC’s to pay tax on their business income at the entity level. States adopting an entity-level tax on pass-throughs include Connecticut, Louisiana, Maryland, New Jersey, Oklahoma, Rhode Island, and Wisconsin. In most cases, the regimes are elective. (CNBC, Nov. 18) Uncertainty about the federal tax treatment of these regimes has limited their effectiveness. That could change quickly with the new Treasury guidance. Similar legislative proposals are pending in Alabama, Arkansas, Michigan, and Minnesota and more may follow in light of Treasury’s clarification. Entity-level regimes that comply with the Treasury regulations could help restore SALT deductions for a significant share of pass-through business income. Other tax and economic policy issues affecting real estate were addressed this week in a CBRE panel discussion that featured Roundtable Senior Vice President and Counsel Ryan McCormick and other industry experts. (video) # # #

November 19, 2020

Policy Comment Letter

HFSCHearing – Insuring Against a Pandemic 11.19.20 – BCC Statement

Policy Landscape

November 13, 2020

Roundtable Weekly

Roundtable Holds Policy Town Hall; Post-election Congressional Session Faces Pandemic Relief Pressure, Government Funding Deadline

Coronavirus Policy Landscape

The Real Estate Roundtable this week held a virtual “town hall” to discuss the election and its impact on national policy issues. Participating in the discussion were Sen. Michael Bennet (D-CO), Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.), Chair-Elect John Fish (Chairman and CEO, Suffolk), Roundtable President and CEO Jeffrey DeBoer and policy staff. The Nov. 9 discussion addressed a wide range of policy issues with nearly 200 Roundtable members in attendance. (Watch the discussion on The Roundtable’s YouTube Channel)Cafaro said, “Our priorities are the COVID relief package that will come out of Congress, whether in the lame-duck session or later – a renters’ fund … (support) for state and local government relief … for the Paycheck Protection Program … funding for continued vaccine and testing and distribution … and liability protection of some type.”Fish stated, “What is important for this COVID bill … if we don’t support the cities and towns and states, getting them back on their feet, the issues of lay-offs, restoring services and the impact on education … it is going to continue to spiral. If that happens, that is really detrimental.” He added those measures should be “coupled with PPP support because we need to put people back to work. They need payroll protection, the need jobs and that sense of security.” (Nov. 9 Roundtable Town Hall video)Roundtable policy staff reviewed the lame-duck legislative outlook; tax and energy policy; and initiatives to create a Federal “business continuity” insurance program to mitigate future pandemic risk.DeBoer also participated in a Nov. 12 NYU Shack Institute of Real Estate remote discussion on “Real Estate’s Priorities: Engaging with the New Administration” with Dr. Sam Chandan, PhD, Silverstein Chair of the Institute. (See Shack’s entire agenda)“The narrow majorities in the House and Senate next Congress will place a premium on bipartisanship, and create hurdles for extreme legislation. We expect a very active Congress. Large legislative agreements will be possible, but odds favor more targeted, constructive legislative initiatives. We look forward to offering our positive perspective on stabilizing the economy and moving forward,” DeBoer said. (Video with Sam Chandan)Lame-Duck AgendaPresident-elect Joe Biden and Democratic leaders met this week about prospects for a bipartisan pandemic relief package during the post-election Congress, despite deadlocked negotiations over the cost and policy details of COVID-19 aid – and unlikely chances for compromise ahead of Georgia’s Senate elections on Jan. 5.Both chambers of Congress return for their “lame-duck” session with a limited amount of working days before the new 117th Congress begins in January. The current Congress will need to pass a funding bill to keep the government open past Dec. 11 or face a shutdown – and negotiate a coronavirus stimulus package before several safety net programs expire in late December. It is possible the two measures could be combined in an “omnibus” bill. (BGov and Calculated Risk, Nov. 12)Senate Majority Leader Mitch McConnell (R-KY) said this week that Congress should pass a limited stimulus bill before the end of the year, reiterating Senate Republicans’ opposition to a larger-scale package Democrats favor, signaling the current stalemate could extend into next year. (The Hill, Nov. 12 and Roundtable Weekly, Nov. 6)Biden’s meeting with House Speaker Nancy Pelosi (D-CA) and Senate Minority Leader Charles Schumer (D-NY) yesterday addressed several outstanding issues facing Congress and the new administration.According to a joint readout from Biden's transition team and the congressional Democrats, "They discussed the urgent need for the Congress to come together in the lame duck session on a bipartisan basis to pass a bill that provides resources to fight the COVID-19 pandemic, relief for working families and small businesses, support for state and local governments trying to keep frontline workers on the payroll, expanded unemployment insurance, and affordable health care for millions of families." (The Hill, Nov. 12)Policymakers are reconvening amidst troubling signs affecting the economy, including a significant rise in COVID-19 cases, hospitalizations and deaths throughout the country as state and local governments consider reinstating lockdowns and school shutdowns. (Axios, Nov. 13)Additionally, The Washington Post reported this week that regulators are increasingly concerned about US banks’ loan exposure to commercial real estate. The Nov. 11 article reports that if banks are forced to absorb losses on their $2 trillion in commercial real estate loans, the entire economy will suffer, according to Federal Reserve officials, economists and credit analysts.“The Federal Deposit Insurance Corp. (FDIC) regards 356 banks as ‘concentrated’ in commercial real estate, based upon criteria such as the ratio of their CRE loans to their capital base and the pace of loan growth over the past three years,” according to the article.Eric Rosengren, the president of the Federal Reserve Bank of Boston, said in a September speech, “I am especially worried about a second shoe dropping that will particularly affect small and medium-sized banks, which provide a large share of commercial real estate loans and small-business loans. A curtailment of credit resulting from such problems has caused serious head winds to recoveries in the past and may be a serious problem going forward.” (Washington Post, Nov. 11)# # #

Capital and Credit

November 13, 2020

Roundtable Weekly

Real Estate Coalition Urges Federal Banking Regulators to Extend Relief Period for COVID-19 Related Loan Modifications

Capital and Credit Coronavirus

A coalition of national real estate organizations, including The Real Estate Roundtable, this week urged federal banking agencies to provide additional guidance that would reaffirm financial institutions may use reasonable judgment when assessing credit risk during the unique circumstances of the pandemic – such as allowing borrowers and lenders additional time to see properties and loans through the pandemic.The guidance would preserve financial institutions’ ability to continue work with borrowers and grant additional incremental accommodations that would total more than six months after December 31, without being classified as a troubled debt restructuring (TDR). (Coalition letter and MBA Newslink, Nov. 10)Early in the crisis, the Federal Reserve joined the Office of the Comptroller of the Currency (OCC) and other banking regulators in a March 22 Interagency Statement that encouraged banks to avoid automatically categorizing COVID-19 related loan modifications up to 6 months as a TDR. (Roundtable Weekly, March 27)The March joint statement also encouraged borrowers experiencing cash flow problems due to the pandemic to reach out to any FDIC-insured lenders about modifying their loans, without adverse consequences to the bank or the borrower that traditionally come with the TDR label. The statement included, “Short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. This includes short-term — for example, six months — modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.”On March 24, The Roundtable called on all owners and operators of business and residential rental real estate to voluntarily, proactively work in a positive and constructive manner with their COVID-19 impacted tenants respecting current rent obligations. (Roundtable news release, March 24)Confluence of EventsA revised interagency statement released April 7 clarified the interaction between the March 22, 2020, interagency statement and section 4013 of the CARES Act, Temporary Relief from Troubled Debt Restructurings (section 4013). Many of the modifications granted under the revised Interagency Statement and section 4013 of the CARES Act are reaching the end of their six-month terms – at that same time that CARES Act protections are set to expire on December 31, 2020.This confluence of these events creates significant, urgent challenges for any financial institution seeking to extend existing modifications of Covid-19 related loans past their six-month term.The Nov. 10 coalition letter states, “…we urge the Agencies to provide guidance that a loan modification with a term greater than six months (e.g., up to 18 months combined) will not automatically result in a TDR under the Interagency Statements.”“Because this issue is urgent, we request that the Agencies issue such a clarification and reaffirmation as soon as possible,” the letter concludes.OCC Acting Comptroller Brian Brooks on Nov. 10 testified before a Senate Banking, Housing and Urban Affairs Committee Hearing on Financial Regulator Oversight. Brooks stated, “While banks remain sound, we see potential for troubled assets ahead in commercial and residential real estate, in small business and consumer lending, and in the travel and hospitality sectors in particular. Banks, particularly those with concentrations in those assets, must take a sober view of their risks and work with customers to the maximum extent possible consistent with safety and soundness.”The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) continues its work with Washington policymakers to constructively support The Roundtable’s efforts to address the economic consequences of the COVID-19 crisis. # # #

Energy Policy

November 13, 2020

Roundtable Weekly

Roundtable Advises that Uniform Federal Data and Voluntary Standards are Needed to Avoid State, City “Patchwork” of Carbon Pricing Protocols

Energy Policy

The growing number of state and local mandates to reduce GHG emissions and increase renewable energy supplies are driving the need for uniform and voluntary federal-level practices to measure and price carbon, The Roundtable advised in comments submitted on Tuesday.Commercial real estate stakeholders are paying increased attention to their “energy supply chain” and need to know “where the electricity they purchase derives from,” The Roundtable wrote in a Nov. 10 letter to the Federal Energy Regulatory Commission (FERC).This is because dozens of state and city laws are setting energy measurement, reduction, and emissions targets on buildings, and imposing renewable energy “portfolio standards” that require greater power supplies from solar, wind, and other carbon-free sources. These state and local mandates have “effectively forced the issue – throughout the United States – that carbon emissions are an economic liability, and carbon reductions are an economic asset,” the letter explains. Environmental demands from investors, tenants, employee talent, and other audiences also impel real estate owners to voluntarily purchase “clean” power and “offset” carbon emissions.While FERC itself lacks authority from Congress to set a price on carbon, within the Commission’s sphere of regulating bulk electricity sales in “wholesale markets” it can play a “vital role to help facilitate a harmonious nationwide system of standards relating to carbon measurement and pricing,” the comment letter provides.SPAC InvolvementThe Roundtable’s Sustainability Policy Advisory Committee (SPAC) – chaired by Tony Malkin (Chairman, President and CEO, Empire State Realty Trust), above left, and vice-chaired by Dan Egan (Senior Vice President, Vornado Realty Trust), right, – directed the course of the comments, which also provides:FERC should encourage jurisdictions to rely on federal data provided by power plants and managed by the Environmental Protection Agency (EPA) – known as “eGRID” – as the unifying information source to measure how combustion of various fuels used across the country contribute to GHG emissions;Federal measurement standards can support “the types of long-term price signals that our energy future demands,” and minimize a confusing a “hodgepodge” in emerging state and regional markets that already treat carbon as a commodity (such as through the purchase of renewable energy certificates (RECs)); Any government revenue raised by state-level carbon pricing regimes should be returned to commercial, residential, and other consumers to help defray their energy costs. Sums from any such “carbon dividend” should also be channeled to create jobs by modernizing energy infrastructure and electrifying the grid.“The SPAC has been hard at work for years on real estate related topics around energy production, distribution, consumption, and pricing that now are front and center,” Malkin said. “Our members can be comfortable that they have excellent representation and access to information, that RER is on its front foot here, and that representation on SPAC by our members is critical to their ability to get the best information and have the opportunity to help inform The Roundtable’s actions."# # #

November 10, 2020

Policy Comment Letter

11-10-2020 FERC FINAL Comment Letter

November 10, 2020

Policy Comment Letter

Industry Letter to Agencies on Interagency Statements on TDRs – 11-10-2020

Policy Landscape

November 6, 2020

Roundtable Weekly

Election Results Usher In Uncertain Prospects for Pandemic Relief and Funding Omnibus

Congress

Ballot counting in the presidential election continued for the fourth day this week as former Vice President Joe Biden made gains against President Trump in key battleground states. Control of the Senate balances on the results of undecided races in Alaska and North Carolina – and on both Senate seats in Georgia that will face run-off elections on Jan. 5. The Real Estate Roundtable will hold a membership-only town hall discussion on Monday, Nov. 9 from 5-6pm EST to discuss the policy implications of the elections with Roundtable staff, elected leaders and special guests. Electoral uncertainty will influence Congress on its return to Washington next week for a “lame-duck session,” which will include consideration of a pandemic relief package and must-pass legislation to keep the government open past Dec. 11. (BGov, Nov. 6 and Roundtable Weekly, Oct. 30) House Speaker Nancy Pelosi (D-CA) this morning called for Republicans to re-enter negotiations for COVID-19 relief as Senate Majority Leader Mitch McConnell on Wednesday said Congress should pass a new economic-relief package this year. (Politico and Wall Street Journal, Nov. 6) McConnell said, “We need another rescue package. Hopefully the partisan passions that prevented us from doing another rescue package will subside with the election. We need to do it, and I think we need to do it before the end of the year.” Senate Whip John Thune (R-SD), who is number 2 in the chamber’s leadership, said on Oct. 25 that if Democrats prevail in the presidential election, a smaller stimulus bill could be pursued in the lame-duck session, followed by another package in the new year. (BGov, Oct 27) A major impediment in the negotiations over pandemic aid is cost, as the Trump administration has offered a ceiling of $1.8 trillion, House Democrats passed a $2.2 trillion bill, and Senate Republicans favored a $500 billion measure. (Wall Street Journal, Oct.9 / AP, Oct. 1 / USA Today, Oct 21) The tension surrounding the presidential election results adds to the uncertainty about whether President Trump will negotiate and seek to influence a Senate GOP bill addressing COVID-19 relief during the lame-duck session. White House economic adviser Larry Kudlow today said the administration remains open to negotiations. “Sen. McConnell and for that matter President Trump, and [Treasury Secretary Steven Mnuchin] and I and the others ... we would like to negotiate a package. It would still be a targeted package to specific areas. We’re not interested in two or three trillion dollars,” Kudlow said. (CQ, Nov. 6) Lawmakers during the lame-duck may choose to merge some COVID-19 aid measures into a sweeping multi-trillion-dollar omnibus bill to avoid a partial government shutdown on Dec. 11, when funding is set to expire. Additionally, many temporary financial safety net programs are set to expire on Dec. 31. (Marketwatch, Oct. 21 and RollCall , Oct. 28) # # #

Capital and Credit

November 6, 2020

Roundtable Weekly

Fed Announces Limited Adjustments to Main Street Lending Program Terms

The Fed

The Federal Reserve on Oct. 30 announced limited adjustments to the terms of its Main Street Lending Program (MSLP) facility in an attempt to support small and medium-sized businesses affected by the COVID-19 outbreak. (Fed news release) The MSLP has the capacity to issue up to $600 billion in loans, yet has only completed approximately 400 loans totaling $3.7 billion. (Washington Post, Oct, 30) With congressional negotiations over a pandemic relief package at an impasse, The Fed reduced the minimum loan size for three Main Street facilities from $250,000 to $100,000 and reduced fees to lenders who facilitate the loans. (Wall Street Journal and Roundtable Weekly, Oct. 30)The Fed also issued a set of frequently asked questions to clarify that Paycheck Protection Program loans of up to $2 million may be excluded when determining the maximum MSLP loan size. (MSLP FAQs, Oct. 30)Real Estate Roundtable and President Jeffrey DeBoer yesterday commented to CoStar, “The Main Street Lending Program won’t be energized by modest revisions. Banks need greater incentives to focus on the program, the borrower eligibility rules must be rethought, and the loan underwriting rules should better reflect the needs of troubled businesses. Without far deeper reforms to the program, its full potential assistance will continue to be untapped,” DeBoer stated. (CoStar, Nov. 5, “Modest Changes May Not Be Enough to Make Relief Effective, Head of Real Estate Industry Group Says”)DeBoer testified about the MSLP on Sept. 9 before the Senate Banking, Housing and Urban Affairs Committee on how to improve access to Federal Reserve credit facilities for businesses such as manufacturing, retail, restaurants, real estate owners, and other asset-based borrowers. (Roundtable Weekly, Sept. 11)DeBoer told the Committee, “The recommendations that I have made on the Main Street Lending Program … really require no additional funds from the federal government. They are administrative. They could be done tomorrow by the Treasury and the Fed if they wanted to.” (Roundtable Oral Comments and written statement / video of DeBoer's Testimony and Q&A with Senators)Fed Chairman Jay Powell testified before Congress on Sept. 23 that the central bank has “done basically all of the things that we can think of.” Powell added, “There is nothing major that we see now that would be consistent with opening it (MSLP) up further.” (American Banker, Sept. 23) Last month, The Fed released its Summary of Commentary on Current Economic Conditions, showing that “commercial real estate conditions continued to deteriorate in many Districts.” (The Fed’s Beige Book, Oct. 22)The Fed lending programs backed by pandemic relief legislation are set to expire at the end of December. Fed Chairman Powell and Treasury Secretary Steven Mnuchin must decide which programs to extend into 2021. (New York Times, Nov. 5) The Roundtable continues to urge regulators and lawmakers to develop specific MSLP changes to bolster small business tenants and other industries struggling with the pandemic’s ongoing economic impact. # # #

Homeland Security

October 30, 2020

Roundtable Weekly

Potential Election-Related Civil Unrest Monitored and Shared by Real Estate Information Sharing and Analysis Center (RE-ISAC)

Homeland Security REISAC

The escalating threat of civil unrest related to the election – looting, homegrown violent extremists and organized attacks on properties – continues to be addressed by law enforcement and the commercial real estate industry. Through the Real Estate Information Sharing and Analysis Center (RE-ISAC), The Real Estate Roundtable works with government officials and private sector partners to detect, protect and respond to a multiplicity of such key threats. The RE-ISAC serves as the primary conduit of terrorism, cyber and natural hazard warning and response information between the government and the commercial facilities sector. Through its information-sharing network, the RE-ISAC engages in operational efforts to coordinate activities supporting the detection, prevention, and mitigation of a full range of physical, data, and cyber threats to the nation’s critical infrastructure.The RE-ISAC is now maintaining a central section online of election-related threats and updates, both physical and cyber, called U.S. & Election 2020. While not a direct threat to the Commercial Facilities Sector, cyberattacks, misinformation, physical threats and intimidation, as well as the complexities of an election during the pandemic are concerns that must be monitored and shared with CRE stakeholders.Reference: The Gate 15 Interview: Elections Security 2020, with the FBI and the Elections Infrastructure ISAC (Gate 15, Oct. 26)Election officials say they're getting suspicious emails that may be part of malicious attack on voting: report (The Hill, Oct. 26) Report warns that 5 states are at high risk for activity by armed groups around election (USA Today, Oct. 27)New tension at the polls as supporters get aggressive and officials call in police (Miami Herald, Oct. 28) To subscribe to the RE-ISAC Daily Report and alerts, industry participants should contact RE-ISAC Executive Director Chip Rodgers.The Roundtable’s Homeland Security Task ForceAdditionally, The Roundtable’s Homeland Security Task Force (HSTF) held a remote meeting on Oct. 21 that included presentations on election-related security issues with Michael Burgwald, Assistant Section Chief, Domestic Terrorism Operations Section, Counterterrorism Division, Federal Bureau of Investigation and Branden Fuller, Unit Chief, Strategic Engagement Unit, Counterterrorism Division, Federal Bureau of Investigation. HSTF is co-chaired by Charlie McGonigal, Brookfield’s Senior Vice President, Global Security & Life Safety, U.S. Office Division, and Dan Kennedy, Unibail-Rodamco-Westfield (URW) Senior Vice President, US Security Operations.McGonigal said, “Our well-established industry relationship with federal, state and local law enforcement partners and homeland security officials facilitates a robust information-sharing exchange that benefits both the commercial facilities sector and government officials. We rely on timely updates from them and they look to us for insight on threats to commercial real estate.”Kennedy added, “Last week’s remote meeting of our Homeland Security Task Force had a high participation rate from Roundtable members across the country eager for the view of security officials on potential security threats surrounding the elections. To raise awareness of how these kind of tensions, or other threats, could manifest in actions affecting CRE requires these ongoing briefings and useful meetings.”The HSTF will hold another WebEx meeting on Friday, November 6, 2020 at 11:30 AM ET. The focus of the meeting will be to discuss any post-election unrest and discuss strategies used to address those situations. For more information, please contact Roundtable Senior Vice President Chip Rodgers. A summary of election-related security threats will also be one topic of discussion on January 27, 2021 during HSTF’s meeting that will be held in conjunction with The Roundtable’s all-member State of The Industry Meeting. # # #

Coronavirus Response

October 30, 2020

Roundtable Weekly

Post-Election Pandemic Relief Could Be Part of Government Funding Bill in December

Coronavirus

Current negotiations on a pandemic relief bill remain at a standstill until the results of next week’s elections, which will impact the contours of a potential deal in a “lame-duck” Congress that must also pass funding legislation by Dec. 11 to avoid a partial government shutdown.The key players in the relief negotiations– House Speaker Nancy Pelosi (D-CA) and Treasury Secretary Steven Mnuchin – both expressed frustration this week about the deadlock over policy differences for a COVID-19 stimulus deal.Pelosi detailed seven policy issues where significant disagreements remain in an Oct. 29 letter to Mnuchin – including funding for state and local governments; OSHA and worker liability protections; and unemployment insurance and tax credits for working families. Mnuchin responded with his own letter yesterday, saying the state of negotiations described by Pelosi were inaccurate. (BGov, Oct. 30)Pelosi also told the Wall Street Journal this week, “What [Mr. Mnuchin] and I have agreed upon—on how we would go forward—is not necessarily what the Republican Senate will vote on. That is up to the president to convince them that the agreement we have with him is one that will be honored by them.” (WSJ, Oct 28)Post-Election Lame-Duck SessionPresident Trump yesterday said, “Once we get past the election, we’re going to get it (pandemic stimulus). It may be bipartisan, it may not have to be... Right after the election, we’ll get it one way or the other.” (Jon Taffer podcast, Oct. 29)Trump also said his administration expects negotiations to continue, saying, “After the election we’ll get the best stimulus package you’ve ever seen …” (The Hill, Oct. 27 and CQ, Oct. 29) The cost of a potential package is another major impediment in the negotiations, with the Trump administration considering a ceiling of $1.9 trillion and the Democrats holding at $2.4 trillion. ( Roundtable Weekly, Oct. 23) Senate Whip John Thune (R-SD), who is number 2 in the chamber’s leadership, said on Oct. 25 that if Democrats win on Nov. 3, a smaller stimulus bill could be pursued in the lame-duck session, followed by another package in the new year. (BGov, Oct 27)House Ways and Means Ranking Member Kevin Brady (R-TX) added this week he was open to finalizing a “smart Covid package” during the upcoming lame-duck session, commenting he aims to provide certainty for more than 30 tax extenders scheduled to expire at the end of 2020. “We’ve already reached out and are having discussions with (House Ways and Means) Chairman Neal and Democratic leaders on how we might resolve some of those temporary health and tax provisions,” Brady said. (BGov, Oct. 30)With government funding set to expire on Dec. 11 and many temporary financial safety net programs expiring on Dec. 31, lawmakers could merge some COVID-19 aid measures into a sweeping multi-trillion-dollar omnibus bill to avoid a partial shutdown. (Marketwatch, Oct 21, Washington Post, Oct. 23 and RollCall, Oct. 28)# # #

Business Continuity

October 30, 2020

Roundtable Weekly

Broad Business Coalition to Seek National Program Aimed at Limiting Future Impact of Major Economic Interruptions, Including Pandemics

Business Continuity Pandemic Risk Insurance Program

The economic damage from future business interruption events – such as pandemics and other national emergencies – needs to be limited and managed with a new national business continuity insurance program, according to a broad business coalition launched this week that represents more than two dozen industries and over 50 million workers. The Business Continuity Coalition (BCC), which includes The Real Estate Roundtable, announced on Oct. 28 that it aims to develop a public/private business continuity insurance program with policymakers and other stakeholders. Such a program would enable employers, in the event of a government-ordered shutdown, to keep payrolls and supply chains intact; help limit job losses and furloughs; reduce stress on the financial system; and speed economic recovery when government-imposed limitations on operations are lifted. (BCC launch news release)The BCC membership is comprised of organizations from the hospitality, restaurant, entertainment, gaming, communications, and broadcasting industries, as well as the apartment, healthcare, industrial, office, and retail real estate sectors. (See full list of BCC members)Roundtable President and CEO Jeffrey DeBoer commented, “The need for a future national program that supports readily available business continuity insurance is clearly needed as the American business community, including commercial real estate, continues to adapt to the economic damage brought on by the pandemic.” He added, “Businesses are making the health of workers and customers their top priority as they face interruptions, closures and attempts at reopening. The Business Continuity Coalition will work with lawmakers in applying lessons learned from present challenges toward future solutions so that the nation can collectively bridge any future economic interruption gap with the support of a congressionally-approved national program.”Nov. 19 Hearing on Pandemic InsuranceDeBoer on Sept. 25 discussed prospects for developing and enacting a federal pandemic risk-business continuity insurance program with Rep. Steve Stivers (R-OH), above, in a remote interview. (Video of the discussion)Rep. Stivers, is the Ranking Member on the House Committee on Financial Services’ Subcommittee on Housing, Community Development and Insurance, which has scheduled a Nov. 19 hearing on “Insuring against a Pandemic: Challenges and Solutions for Policyholders and Insurers.”“We’ve seen business interruption insurance not being willing to cover any pandemics. I think you’re going to start to see lenders … requiring some type of pandemic coverage in their loan covenants in the coming years” Stivers said. He added, "I think we need to make sure that if this ever happens again and the government shuts down the economy, [Congress] holds people harmless and businesses harmless in the future.” (Video of the discussion)Carolyn B. Maloney (D-NY), who also serves on the subcommittee, said, “Congress needs to be proactive in helping businesses protect themselves from economic losses as a result of pandemics, which, as we’ve seen, can be devastating to businesses of all sizes.” (BCC)The subcommittee played a key role in last year’s seven-year extension of the Terrorism Risk Insurance Act (TRIA).According to the BCC, there are a number of successful models that can provide guidance in structuring a business continuity insurance program. Among them are TRIA, originally enacted following the 9/11 attacks and the War Damage Corporation developed during World War II. (BCC news release, Oct. 28)BCC Steering committee members include the American Resort Development Association, Building Owners and Managers Association, Fox Corporation, Independent Film & Television Alliance, International Council of Shopping Centers, Motion Picture Association, NAIOP – Commercial Real Estate Development Association, Nareit, National Association of Realtors, National Restaurant Association, Sony Pictures Entertainment, The Real Estate Roundtable, and ViacomCBS.# # #

Coronavirus Response

October 23, 2020

Roundtable Weekly

Pandemic Relief Deal at Impasse as Election Nears

Coronavirus

Policymakers signaled this week that pandemic relief negotiations remain at an impasse over federal aid to state and local governments and liability protection for employers – adding uncertainty to prospects for a deal before the election and diminishing chances for a legislative package before Nov. 3. House Speaker Nancy Pelosi (D-CA) yesterday said, “If we can resolve some of these things in the next few days, it will take a while to write the bill. We wouldn’t take less of a bill to get it sooner.” (CQ, Oct. 23)President Trump today said Pelosi is delaying progress on a deal until after the election. “She wants to bail out poorly run Democrat states and that’s a problem … we don’t want to reward areas of our country who have not done a good job,” Trump said at the White House. (BGov, Oct. 23)Treasury Secretary Mnuchin added today, “We’ve offered compromises. The speaker, on a number of issues, is still dug in. If she wants to compromise, there will be a deal.”Pelosi said this morning on MSNBC that President Trump needs to convince reluctant Senate Republicans to support a possible deal with the White House. “The fact is that the president has been back and forth. But he has to talk to the Senate Republicans.” (Washington Post, Oct. 23)The stalemate reflects a lack of legislative agreement in Congress on the cost of a COVID-19 stimulus package.” (CQ and BGov, Oct.23)Senate Democrats this week voted 51-44 against a “skinny” relief bill of $500 million proposed by GOP lawmakers to fund the Paycheck Protection Program and additional unemployment relief. That measures stands in contrast to a $2.2 trillion pandemic stimulus bill passed by the House of Representatives on Oct. 1 that is a scaled-down version of the $3.4 trillion HEROES Act passed by the House in May. (Roundtable Weekly, Oct. 16)Senate Appropriations Committee Chairman Richard Shelby (R-AL) said yesterday he has doubts a stimulus package could be agreed to soon. “I think it’s about two minutes to midnight, and we’re not going to pass anything until we see the particulars. There could always be a miracle, but there’s not many around here.”It is possible that some COVID-19 aid measures could be added to must-pass legislation after the election during the “lame-duck” congressional session, when lawmakers will face a Dec. 11 government funding deadline or risk a shutdown. (Washington Post, Oct. 23)Action on a comprehensive pandemic relief package may wait until early January after the elections – even though many temporary financial safety net programs are set to expire Dec. 31. (Marketwatch, Oct 21)# # #

Capital and Credit

October 23, 2020

Roundtable Weekly

Main Street Lending Program’s Restrictive Terms Prevent Full Access by Impacted CRE Sectors

Capital and Credit Coronavirus

The Federal Reserve yesterday released its Summary of Commentary on Current Economic Conditions, showing that “commercial real estate conditions continued to deteriorate in many Districts.” There are twelve federal reserve geographic districts that gather information for the report, which is released eight times per year. The Fed report, also known as The Beige Book, adds that CRE market exceptions are the warehouse and industrial sectors, “where construction and leasing activity remained steady.”The economic turbulence inflicted by the pandemic continues to damage CRE sectors such as retail and hotels, according to an Oct. 18 article in Politico. Mike Flood, senior vice president of commercial and multifamily policy at the Mortgage Bankers Association, stated, “What’s at risk here is both the ability for people to stay in their apartments and the ability for people to go to their jobs. So unless there’s a stimulus, there’s a lot less to go back to once we get back to normal times.” (Politico, “The next economic crisis: Empty retail space”)The efforts of Congress, the Treasury Department and the Federal Reserve to counter the economic repercussions of COVID-19 are summarized in a Congressional Research Service (CRS) report released Oct 19 entitled, “COVID-19 and the Future of Commercial Real Estate Finance.” The CRS report states, “Members of Congress have called on the U.S. Treasury and the Federal Reserve to open liquidity facilities to CRE and CMBS markets.” The MSLP & CREThe New York Times and Washington Post published articles this week on the disappointing results shown to date by the Federal Reserve’s federal lending facilities, including its Main Street Lending Program (MSLP).The Oct. 21 Times article reports that of the $454 billion Congress authorized in March for the Treasury Department to support various Fed emergency lending programs, $195 billion has been allocated so far – and only $20 billion in loans have been distributed. The Oct. 19 Post article reports that of the $75 billion dedicated to support the Fed’s MSLP, only $3 billion has been loaned to date. According to the Post, an ongoing obstacle to making the MSLP more effective is whether the Fed and Treasury can agree on a new set of rules to significantly expand the reach of the program. A broad coalition of national hotel executives on Oct 15 urged President Trump to take action by making immediate modifications to the MSLP that would increase participation in the program and help thousands of businesses crippled by the pandemic.“We strongly urge you to use your executive authority to direct the Treasury to encourage the Federal Reserve to amend and expand the Main Street Lending Program … to support struggling businesses, stem the impending wave of foreclosures, and save millions of jobs to ensure the health of the entire American economy,” the letter states.The hotel coalition emphasized that overly restrictive terms imposed by the MSLP continues to prevent the hardest hit businesses it was intended to support from accessing the program. “To date, only a small fraction of $600 billion in available loans have been utilized while the remaining funds - which are so desperately needed by industries like ours - sit idle and go unused,” according to the letter. Real Estate Roundtable President and CEO Jeffrey DeBoer testified about the MSLP – and how to improve access to Federal Reserve credit facilities for businesses such as manufacturing, retail, restaurants, real estate owners, and other asset-based borrowers – on Sept. 9 before the Senate Banking, Housing and Urban Affairs Committee. (Roundtable Weekly, Sept. 11)The Main Street program is not working, DeBoer testified, because there is little incentive for participating banks to make the loans – and the program’s eligibility, affiliation and underwriting rules are not designed to meet the needs of the businesses in need. (Video of DeBoer's Testimony and Q&A with Senators)“The result: countless mid-sized retail businesses, restaurants, hotels, commercial and multifamily building owners are moving closer to shutting their doors forever,” DeBoer stated. (Roundtable Oral Comments and written statement)DeBoer added, “The recommendations that I have made on the Main Street Lending Program … really require no additional funds from the federal government. They are administrative. They could be done tomorrow by the Treasury and the Fed if they wanted to.” (Roundtable Weekly, Sept. 11)Fed Chairman Jay Powell on Sept. 23 testified on the MSLP before the House Oversight and Reform Select Subcommittee on the Coronavirus Crisis, stating the central bank has “done basically all of the things that we can think of.” Powell added, “There is nothing major that we see now that would be consistent with opening it (MSLP) up further.” (American Banker, Sept. 23)The Roundtable continues to work with its national real estate trade partners, membership and other stakeholders to develop effective recommendations for policymakers to improve the MSLP, as well as identify alternative strategies to bolster CRE sectors and other industries struggling with the pandemic’s ongoing economic impact.# # #

Coronavirus Response

October 16, 2020

Roundtable Weekly

Pandemic Relief Package Compromise Uncertain as Senate Republicans Oppose Cost of Democrats’ Plan; Trump Willing to Press for Deal if Agreement Reached

President Trump will urge Senate Republicans to approve a pandemic relief deal if an agreement can be reached soon with Democrats, according to Treasury Secretary Steven Mnuchin. That message was relayed by Mnunchin to House Speaker Nancy Pelosi (D-CA) this week during stimulus negotiations as Senate Majority Leader Mitch McConnell (R-KY) repeated Republican opposition to the latest proposals. (The Hill, Oct. 15 and BGov, Oct. 16)Last month, Senate Republicans attempted to advance a “skinny” COVID-19 aid bill for approximately $500 billion that was blocked by Democrats. (Axios, Sept. 10)The House of Representatives subsequently passed a $2.2 trillion relief bill that was a scaled-down version of their $3.4 trillion HEROES Act passed in May. (NBC News , Oct. 1)Recent discussions between Pelosi and Mnuchin have circled around a possible deal that would cost between $1.8 trillion and $2.2 trillion. Senate GOP OppositionSenate Majority Leader McConnell, above, commented on whether a compromise within that range is possible, stating, “I don’t think so … That’s where the administration’s willing to go. My members think what we laid out, a half a trillion dollars, highly targeted, is the best way to go.” (@ericawarner, Oct. 15 and photo credit: Gage Skidmore)McConnell issued a statement this week, pledging to offer another bill in the $500 billion range. “When the full Senate returns on October 19th, our first order of business will be voting again on targeted relief,” McConnell said.McConnell also commented this week, “You’re correct we’re in discussions with the secretary of the Treasury and the speaker about a higher amount. That’s not what I'm going to put on the floor.” (@ericawarner, Oct. 15)Pelosi has met primarily with Mnuchin during recent weeks to negotiate cost and policy differences affecting a possible COVID-19 package. Today marks the one-year anniversary since Pelosi and Trump have spoken to one another. (The Hill, Oct. 16)Pelosi said in a letter to Democratic colleagues on Thursday night that although agreement with the White House had been reached for a national virus testing and tracing plan, key policy priorities remain unresolved, including aid for state and local governments and liability protections for businesses. (Washington Post, Oct. 15)Even if a framework for a comprehensive agreement is reached among policymakers, developing and passing language for a multi-trillion dollar bill less than three weeks before a presidential election is highly uncertain. Pelosi also suggested on Oct. 7 that if a deal cannot be reached soon, virus relief funding could be addressed during a post-election, lame-duck session of Congress. She noted that pandemic relief could be added to a must-pass spending bill needed to keep the government open after Dec. 11, when current funding is scheduled to expire. (BGov, Oct. 7 and Roundtable Weekly, Oct. 2)# # #

Energy Policy

October 16, 2020

Roundtable Weekly

EPA Launches Voluntary “ENERGY STAR Tenant Space” Program to Certify High Performance Leased Office Suites

Energy Efficiency Energy Policy ENERGY STAR EPAs ENERGY STAR Tenant Space Recognition

The Environmental Protection Agency (EPA) on Oct. 13 launched its voluntary “ENERGY STAR Tenant Space” labeling program to recognize tenants who collaborate with their landlords on design and construction of high performance leased office spaces. (Download EPA's Oct. 15 webinar slides – How to Apply for ENERGY STAR Tenant Space Recognition.) EPA’s new certification for office tenants is now a permanent ENERGY STAR program offering, to complement the agency’s popular “whole building” label. The ENERGY STAR label is a key marketplace influence to signal energy efficient assets, impacting nearly 35,000 buildings and plants nationwide that represent more than 5 billion square feet of commercial space. (ENERGY STAR Facts and Stats) “ENERGY STAR Tenant Space” recognition requires office tenants to estimate their suites’ energy use, separately meter their spaces, use efficient office equipment, and share energy usage data with their landlords. (See EPA’s guide, “How to Prepare for Tenant Space Recognition.”) EPA will also offer access to a new online tool for estimating lighting energy usage within its commonly used Portfolio Manager benchmarking platform. Use of this new lighting assessment function, and requiring an office suite to meet a lighting efficiency “target,” will be a prerequisite for the voluntary Tenant Space label. EPA provided an online demonstration of the lighting estimation tool to The Roundtable’s Sustainability Policy Advisory Committee (SPAC) earlier this month. The agency plans broader stakeholder outreach in the coming weeks to publicize the tenant-level award opportunity. EPA’s next webinar: Verifying the Application for ENERGY STAR Tenant Space Recognition (October 20, 3:00 p.m. ET) The Tenant Space label is currently available to office tenants. EPA explained to SPAC members that it intends to expand the program to provide recognition opportunities to retail and warehouse tenants in the coming months. ENERGY STAR building ratings and the corollary Tenant Space program were part of a discussion held October 1 at The Real Estate Roundtable’s offices in Washington, D.C., between EPA Administrator Andrew Wheeler and Roundtable President and CEO Jeffrey DeBoer. In a video of the discussion, Wheeler stated he is a “strong” ENERGY STAR proponent and that the agency’s expansion of the label to cover tenant spaces was “the right thing to do.” Wheeler also emphasized these platforms must remain voluntary to encourage additional private-sector technological innovations in buildings and manufacturing. (See video at 12:40 and Roundtable Weekly, Oct. 2) EPA’s tenant recognition efforts are authorized by the so-called “Tenant Star” law, passed by Congress in 2015 with The Roundtable’s strong backing. (Commercial Property Executive, May 4, 2015) # # #

Coronavirus Response

October 9, 2020

Roundtable Weekly

Shifting Negotiations Aim for Uncertain Pandemic Relief Deal, Legislation Unlikely Before Election; Fed Chairman Warns Lack of Fiscal Support Risks ‘Tragic’ Consequences

Coronavirus

Negotiations about a pandemic relief package shifted dramatically this week in Washington, ranging from complete cancellation to industry-specific assistance to discussions reported today about a new $1.8 trillion White House proposal. (Wall Street Journal and PoliticoPlaybook Oct. 9) President Trump tweeted today, “Covid Relief Negotiations are moving along. Go Big!” A framework for an agreement before the election is possible, yet the timeline for developing specific legislation and passing a broader package remains doubtful. Senate Majority Leader Mitch McConnell (R-KY) today called coronavirus negotiations “murky” and added, "I think the murkiness is a result of the proximity to the election, and everybody kind of trying to elbow for political advantage. I'd like to see us rise above that ... but I think that's unlikely in the next three weeks.” (The Hill, Oct. 9) The Senate this week is focusing most of its attention on confirmation hearings for Supreme Court nominee Amy Coney Barrett, despite three GOP Senators having tested positive for COVID-19 and an additional three in quarantine. (The Hill, Oct. 8) Another challenge among GOP senators is attracting support for any pandemic relief package over $1 trillion. (Roundtable Weekly, Oct. 2) White House support for a $1.8 trillion package reported today remains below the $ 2.2 trillion coronavirus relief bill passed last week by House Democrats. Policy differences also remain on key areas such as liability protections for business, aid for state and local governments and the specific structure for additional federal unemployment benefits. (Associated Press, Oct. 9) House Speaker Nancy Pelosi (D-CA) on MSNBC today said, “You know, the devil and the angels are in the details. And so it—part of it is about money, and part of it is about policy,” she said. (Wall Street Journal, Oct. 9) Pelosi earlier in the week suggested that if no stimulus deal can be reached before the election, virus relief funding could be added to a must-pass spending bill needed to keep the government open after Dec. 11 during a post-election, lame-duck session of Congress. (Roundtable Weekly, Oct. 2 and BGov, Oct. 7) Federal Reserve Chair Jerome Powell, above, on Tuesday encouraged Congress and the White House to pass greater fiscal support for the economy, households and businesses. Powell stated, “… a prolonged slowing in the pace of improvement over time could trigger typical recessionary dynamics, as weakness feeds on weakness. A long period of unnecessarily slow progress could continue to exacerbate existing disparities in our economy. That would be tragic, especially in light of our country's progress on these issues in the years leading up to the pandemic.” (Fed speech, Oct. 6) Powell also warned that the economic expansion and recovery from the coronavirus is far from complete. “Even if policy actions ultimately prove to be greater than needed, they will not go to waste. The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods,” he said. # # #

Tax Policy

October 9, 2020

Roundtable Weekly

Roundtable Commends Aspects of Proposed Carried Interest Regulations While Recommending Further Clarifications and Improvements

Carried Interest Tax Policy

The Real Estate Roundtable on Oct. 5 submitted detailed comments to the Treasury Department and IRS on proposed regulations implementing the 3-year holding period requirement for carried interests to qualify for long-term capital gain treatment. (Roundtable comment letter) Treasury on July 31 released the proposed rules under IRS Section 1061 to address the specific conditions that apply to the 3-year holding period requirement passed by Congress in the Tax Cuts and Jobs Act (TCJA) of 2017. (Roundtable Weekly, Aug. 7) The Roundtable commended the agencies for a balanced approach on certain key issues addressed in regulations – yet recommended further clarifications and improvements to the proposed rules to retain the original intent of Congress. The Roundtable’s comments note that the IRS rules include a number of well-designed provisions that should help avoid unintended consequences when the 3-year holding period is implemented, including: -- The 3-year requirement is limited to the gain from a sale or exchange of a capital asset – and excludes gain from property used in a trade business (Section 1231 gain). -- A useful “look-through” rule to help ensure REIT dividends paid to shareholders receive the same long-term gain treatment that would apply to assets owned individually or in partnership form. -- A sensible exclusion to ensure a partner’s own capital contributions to the partnership are not subject to re-characterization under section 1061. Recommendations for Additional Clarifications and Improvements The Roundtable comment letter also recommends certain changes to the proposed regulations to bring the rules more in line with the legislative intent when Congress enacted section 1061. The Roundtable recommendations include the following: Provide a safe harbor to allow funds borrowed by a general partner to qualify as a capital interest in the partnership. Investors frequently require a general partner to co-invest in the partnership to align the parties’ interests. These co-investments often are financed with loans from the investors. The proposed regulations would undermine the economics of these arrangements. The 3-year holding period would apply when an investment is made with funds borrowed from the other investors in the partnership. The Roundtable recommends that the Treasury narrow the broad restriction on borrowed funds by creating a safe harbor for non-abusive situations. Prevent improper acceleration of tax liability when a partnership interest is transferred in a nonrecognition transaction. Section 1061(d) creates certain tax consequences for transfers of partnership interests to related parties. The proposed regulations broadly interpret section 1061(d) to override other nonrecognition provisions in the tax code by requiring the inclusion of gross income as a result of such transfers. The Roundtable recommends that Treasury narrow its current interpretation of the provision to avoid accelerating tax liability in the case of transfers of partnership interests to related parties in nonrecognition transactions. Avoid casting too broad a net on partnerships covered by the 3-year holding period. Congress limited section 1061 to partnership interests in businesses that raise or return capital on a regular, continuous, and substantial basis. The proposed rules, however, largely disregard this prong of the test and could capture many real estate arrangements unintended by lawmakers, including joint ventures, operating partnerships, and others. The Roundtable recommends that Treasury limit application of the provision to businesses that meet the statutory requirements. Roundtable President and CEO Jeffrey DeBoer concludes the letter by noting, “Congress . . . narrowly drafted section 1061 to apply to specific situations. Our comments our aimed at preserving the drafters’ intent while avoiding unnecessary disruption to common, everyday real estate partnerships—small and large—throughout the country.” The recommendations were developed by The Roundtable’s Tax Policy Advisory Committee (TPAC). # # #

October 5, 2020

Policy Comment Letter

10-5-2020 RER comment ltr re Sec 1061

Roundtable Leadership

October 2, 2020

Press Release

Roundtable Board of Directors Approves RER Leadership; Establishes Equity, Diversity and Inclusion Committee

Board of Directors Roundtable Leadership

RER Board Approves Suffolk Chairman and CEO John F. Fish as Chair-Elect for FY 2021, Edens CEO Jodie W. McLean as Secretary, and Related Companies CEO Jeff T. Blau as Chair of Newly Established Equity, Diversity and Inclusion Committee (WASHINGTON, D.C.) — The Real Estate Roundtable’s 24-member Board of Directors has approved John F. Fish (CEO & Chairman, Suffolk) as the organization’s Chair-Elect, to begin his term as Chairman of the Roundtable in mid-2021. The Board also approved, effective immediately, Jodie W. McLean (CEO, Edens) as its Secretary and Jeff T. Blau (CEO, Related Companies) as the Chair of the organization’s newly established Equity, Diversity and Inclusion (ED&I) Committee. Chair-Elect Fish will succeed current Roundtable Chair Debra A. Cafaro (Chairman and Chief Executive Officer, Ventas, Inc.) whose term expires July 1, 2021. “The Board of Directors of The Real Estate Roundtable is excited to announce John Fish as our Chair-Elect and Jodie McLean as our Secretary,” said Cafaro. “John has been an active Board member and has played a key role in developing our policy agenda. He is active on a bipartisan basis with policymakers, and his experiences and accomplishments across business, government and philanthropy give John a broad perspective that will benefit the Roundtable and our members. John’s emphasis on labor force issues, infrastructure, and the need to level the educational and economic opportunities for all Americans are particularly relevant as The Roundtable develops and advocates fact-based policies that create jobs and inclusive economic growth,” Cafaro added. Mr. Fish stated, “I am honored to have the opportunity to serve as Roundtable Chair-Elect, work with the talented team and follow Debra Cafaro’s impressive record of policy accomplishments in Washington. I have seen the effectiveness of the organization in advocating shared industry concerns to lawmakers and regulators, and strongly believe it is essential for The Real Estate Roundtable to continue its engagement at all levels of policy-making as the nation comes together to address new economic, societal and health challenges.” About Fish and McLean Mr. Fish is the Chairman and CEO of Suffolk, which is a national real estate and construction enterprise that invests, innovates and builds, providing value throughout the entire building lifecycle. Suffolk is one of the largest builders and privately held companies in the country, with main offices in the Northeast, New York, Florida, Texas and California. The company services clients in the aviation/transportation, science and technology, mission critical, commercial, education, healthcare, gaming and government sectors. Mr. Fish is a former Chair of the Federal Reserve Board of Boston, current Chair of Brigham and Women’s Hospital and member of the Mass General Brigham’s Executive Committee, and is serving his second term as Chairman of the Board of Trustees at Boston College. Jodie W. McLean is Chief Executive Officer of EDENS, one of the nation’s leading private owners, operators and developers of retail real estate. She is responsible for EDENS’ strategy to move the portfolio to major urban centers, creating a portfolio of assets that are the center of community life. Ms. McLean currently serves on the Board of Directors of the Federal Reserve Bank of Richmond. She also serves on the boards of Cushman & Wakefield and Extended Stay America, as well as boards of several other institutions and charities. Equity, Diversity and Inclusion Commitment of RER On his appointment as the Chair of the Real Estate Roundtable’s newly created Equity, Diversity and Inclusion Committee, Mr. Blau said, “As leaders, it is our obligation to enact fundamental change. I am honored to chair the ED&I committee and am eager to listen and be guided by diverse voices and perspectives as we work together to promote an industry that is reflective of the society we live in.” Roundtable Present and CEO, Jeffrey D. DeBoer commented, “I am delighted with these Board leadership decisions and, in particular, I look forward to implementing recommendations from our ED&I Committee that will help advance equal economic opportunities for all.” The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and and its important role in the global economy. The Roundtable’s policy agenda, annual report and policy digest are available on The Roundtable website. The Roundtable’s membership represents nearly 3 million people working in real estate; approximately 12 billion square feet of office, retail and industrial space; more than 2 million apartments and nearly 3 million hotel rooms. The collective value of assets held by Roundtable members is estimated at $3 trillion. # # #

Policy Landscape

October 2, 2020

Roundtable Weekly

Stopgap Funding To Keep Government Open Until Dec. 11; House Democrats Pass Revised COVID-19 Stimulus Bill as Pandemic Relief Negotiations Continue

A stopgap measure to fund the government until Dec. 11 at current spending levels passed the Senate Wednesday and was signed by President Trump early Thursday morning, narrowly avoiding an Oct. 1 government shutdown before the election. (Reuters, Sept. 30 and Bloomberg, Oct. 1)The “Continuing Resolution,” which passed the House last week, includes short-term funding extensions (with no policy changes) for surface transportation funding, the National Flood Insurance Program, and the EB-5 Regional Center Program. (Rountable Weekly, Sept. 25, Text of H.R. 8337 and Section-by-section summary of the legislation)As the government operations funding bill advanced this week, House Speaker Nancy Pelosi (D-CA) met face-to-face with Treasury Secretary Steven Mnuchin about an additional COVID-19 relief package for the first time since August.Disagreements between Democrats and Republicans continued over the cost of a relief package, leading House Democrats Thursday night to pass a largely symbolic $2.2 trillion COVID-19 relief bill by a narrow 214-207 vote. Eighteen Democrats voted against the measure, which is a scaled-down version of the $3 trillion HEROES Act passed by the House in May. The Senate is unlikely to consider the package. (Forbes and NBC News, Oct. 1)President Trump’s positive test for the coronavirus today adds great uncertainty to the political landscape and “changes the dynamic” of the pandemic relief talks, according to Pelosi. “We always have to find a path, that is our responsibility to do so, and I believe that we will,” she said. (Washington Post, Oct 2)The White House has seemed willing to engage House Democrats in hopes of a deal, yet attracting enough support from Senate Republicans to pass another relief package over $1 trillion is a significant challenge. Senate Finance Committee Chairman Chuck Grassley (R-IA) yesterday said, "There's a real revulsion among Republicans to going above $1 trillion and even $1trillion is real difficult." (CNN, Sept. 30)Another issue in the negotiations remains Senate Majority Leader Mitch McConnell’s (R-KY) insistence on a liability shield for businesses that are concerned about unlimited COVID-related lawsuits after reopening. McConnell said yesterday, “I'd like to see another rescue package. We've been trying for months to get there. I wish them well." (AP, Oct. 1)House lawmakers will depart Washington today until after the election – unless they are summoned back to vote on a COVID-19 legislative package deal. The Senate is scheduled to remain in session next week as confirmation hearings begin Oct. 12 for Judge Amy Coney Barrett, the President's nominee for the US Supreme Court.# # #

Energy and Environmental Policy

October 2, 2020

Roundtable Weekly

Roundtable Interview with US-EPA Administrator Covers ENERGY STAR, Coronavirus Guidance, and Brownfields Redevelopment in Opportunity Zones

Energy Policy ENERGY STAR EPAs ENERGY STAR Certification for Buildings

U.S. Environmental Protection Agency (EPA) Administrator, Andrew Wheeler, above right, met yesterday with Real Estate Roundtable President and CEO, Jeffrey D. DeBoer, above left, to discuss a wide range of energy and environmental policy matters that impact the U.S. real estate sector. (Video on Roundtable’s YouTube page) DeBoer interviewed Wheeler at The Roundtable’s offices in Washington, D.C., as part of a series of “listening sessions” between EPA and stakeholders. Their discussion covered: EPA’s development of a standardized process to systematically calculate the economic costs and environmental benefits of its regulatory programs (video at 3:29); A “science transparency” regulation that makes the scientific studies relied upon by EPA available to the public (video at 4:56); Wheeler’s implementation of a “lean management” system to streamline the agency’s procedures for project permitting and environmental reviews (video at 8:15); ENERGY STAR building ratings, and EPA’s corollary Tenant Space program that will launch on October 13. Wheeler stated he is a “strong” ENERGY STAR proponent, expanding the program to cover tenant spaces was “the right thing to do” – and that these platforms must remain voluntary to spur technological innovations deployed in buildings and manufacturing. ( video at 12:40); EPA’s development of COVID-related guidance to help the economy re-open, such as updated Portfolio Manager benchmarking instructions to account for recent changes in building occupancy and hours of operations, EPA’s approvals of cleaning and disinfecting products to combat COVID-19, and information on flushing pipes and plumbing systems to maintain indoor water quality (see, e.g., Roundtable Weekly, July 31, 2020 and May 22, 2020) (video at 15:45) Public-private partnerships to re-develop Brownfield sites in economically-distressed “opportunity zones” created under the 2017 Tax Cuts and Jobs Act. Wheeler remarked that every dollar EPA invests in a Brownfields clean-up leverages up to an estimated $20 dollars in private sector investment capital for surrounding low-income neighborhoods. ( video at 18:40) Also yesterday, EPA career staff spoke to The Roundtable’s Sustainability Policy Advisory Committee (SPAC) regarding the imminent launch of the ENERGY STAR Tenant Space program on October 13. Opportunities to certify high performance design and construction of leased office spaces will become a permanent EPA offering, and stem from the so-called “Tenant Star” law Congress passed in 2015 with the Roundtable’s strong backing. (Commercial Property Executive, May 4, 2015) The Roundtable participates in EPA’s Smart Sectors Program, the agency’s platform to collaborate with industry sectors to protect the environment and public health though sensible, cost-effective regulatory and incentive programs. (EPA news release, Oct. 3, 2017) # # #

Roundtable Leadership

October 2, 2020

Roundtable Weekly

Roundtable Board of Directors Approves RER Leadership; Establishes Equity, Diversity and Inclusion Committee

Board of Directors Roundtable Leadership

The Real Estate Roundtable’s 24-member Board of Directors has approved John F. Fish (CEO & Chairman, Suffolk), above right, as the organization’s Chair-Elect, to begin his term as Chairman of the Roundtable in mid-2021. The Board also approved, effective immediately, Jodie W. McLean (CEO, Edens) as its Secretary and Jeff T. Blau (CEO, Related Companies) as the Chair of the organization’s newly established Equity, Diversity and Inclusion (ED&I) Committee. Chair-Elect Fish will succeed current Roundtable Chair Debra A. Cafaro (Chairman and Chief Executive Officer, Ventas, Inc.), above left, whose term expires July 1, 2021. “The Board of Directors of The Real Estate Roundtable is excited to announce John Fish as our Chair-Elect and Jodie McLean as our Secretary,” said Cafaro. “John has been an active Board member and has played a key role in developing our policy agenda. He is active on a bipartisan basis with policymakers, and his experiences and accomplishments across business, government and philanthropy give John a broad perspective that will benefit the Roundtable and our members. John’s emphasis on labor force issues, infrastructure, and the need to level the educational and economic opportunities for all Americans are particularly relevant as The Roundtable develops and advocates fact-based policies that create jobs and inclusive economic growth,” Cafaro added. Mr. Fish stated, “I am honored to have the opportunity to serve as Roundtable Chair-Elect, work with the talented team and follow Debra Cafaro’s impressive record of policy accomplishments in Washington. I have seen the effectiveness of the organization in advocating shared industry concerns to lawmakers and regulators, and strongly believe it is essential for The Real Estate Roundtable to continue its engagement at all levels of policy-making as the nation comes together to address new economic, societal and health challenges.” (Roundtable news release, Sept. 30 and Roundtable video)About Fish and McLean Mr. Fish is the Chairman and CEO of Suffolk, which is a national real estate and construction enterprise that invests, innovates and builds, providing value throughout the entire building lifecycle. Suffolk is one of the largest builders and privately held companies in the country, with main offices in the Northeast, New York, Florida, Texas and California. The company services clients in the aviation/transportation, science and technology, mission critical, commercial, education, healthcare, gaming and government sectors. Mr. Fish is a former Chair of the Federal Reserve Board of Boston, current Chair of Brigham and Women’s Hospital and member of the Mass General Brigham’s Executive Committee, and is serving his second term as Chairman of the Board of Trustees at Boston College. Jodie W. McLean, above, is Chief Executive Officer of EDENS, one of the nation’s leading private owners, operators and developers of retail real estate. She is responsible for EDENS’ strategy to move the portfolio to major urban centers, creating a portfolio of assets that are the center of community life. Ms. McLean currently serves on the Board of Directors of the Federal Reserve Bank of Richmond. She also serves on the boards of Cushman & Wakefield and Extended Stay America, as well as boards of several other institutions and charities. Equity, Diversity and Inclusion Commitment of RER On his appointment as the Chair of the Real Estate Roundtable’s newly created Equity, Diversity and Inclusion Committee, Mr. Blau, above right, said, “As leaders, it is our obligation to enact fundamental change. I am honored to chair the ED&I committee and am eager to listen and be guided by diverse voices and perspectives as we work together to promote an industry that is reflective of the society we live in.” Roundtable Present and CEO, Jeffrey D. DeBoer commented, “I am delighted with these Board leadership decisions and, in particular, I look forward to implementing recommendations from our ED&I Committee that will help advance equal economic opportunities for all.” (Roundtable news release, Sept. 30) # # #

Fall Roundtable Meeting

September 25, 2020

Roundtable Weekly

Roundtable Board Selects Suffolk’s John Fish as Chair-Elect, Establishes Equity, Diversity & Inclusion Committee; Industry Leaders Discuss Investment Trends, Engage Lawmakers on National Policy Issues

Coronavirus Pandemic Risk Insurance Program

The Real Estate Roundtable’s Fall Meeting on Sept. 22 featured top-of-mind issues, including the latest economic and political forecasts; real estate's diversity and inclusion efforts; prospects for pandemic risk insurance; and future economic stimulus initiatives, particularly those related to housing, rent and infrastructure.Advocacy: Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.) welcomed Roundtable members to the virtual meeting by summarizing The Roundtable's effective, yet remote, advocacy work with industry stakeholders and Washington policymakers on the multi-faceted policy responses to the coronavirus – as well as on issues in the tax, capital and credit, sustainability and homeland security areas. (See for example, The Roundtable’s written statement for the committee and testimony before the Senate Banking Committee regarding the Federal Reserve’ Main Street Loan Facility. (Video of Sept. 9 testimony and Q&A )Leadership: Cafaro, above left, also announced that The Roundtable’s 24-member Board of Directors has selected John F. Fish, above right, (CEO & Chairman, Suffolk) as the organization’s Chair-Elect; appointed Jodie W. McLean (CEO, Edens) as its Secretary; and named Jeff T. Blau (CEO, Related Companies) as the inaugural Chair of the organization’s newly-established Equity, Diversity and Inclusion (ED&I) committee. Reference: Video on FY 2021 nominations for The Roundtable Board and comments by John Fish Video on The Roundtable’s ED&I committee and comments by Jeff Blau Investment Trends: Roundtable Chair Debra Cafaro led a discussion regarding “Emerging Global Real Estate Investment Trends” with Christoph Donner (Chief Executive Officer, Allianz Real Estate of America); Adam Gallistel (Managing Director, GIC Real Estate); Steven Hason (Managing Director, Head of Americas Real Assets, APG Asset Management US Inc.) and Roundtable Board Member Kathleen McCarthy (Global Co-Head of Blackstone Real Estate, Blackstone) – video of panel discussion.Special Guests: The Roundtable’s Fall Business Meeting included virtual visits from the following guests: Senate Majority Leader Mitch McConnell (R-KY) – videoSenator Tim Kaine (D-VA) – videoRep. Steve Stivers (R-OH) – videoSee below for more details about this discussion regarding pandemic risk insurance. Next on The Roundtable's meeting calendar is the all-member January 26-27 State of the Industry Meeting.# # #

Business Continuity Insurance

September 25, 2020

Roundtable Weekly

Representative Steve Stivers Anticipates a Pandemic Risk Insurance Bill by Early 2021

Capital and Credit Pandemic Risk Insurance Program

Rep. Steve Stivers (R-OH) discussed prospects for developing and enacting a federal pandemic risk-business continuity insurance program in an interview with Roundtable President and CEO Jeffrey DeBoer during the organization’s Fall Meeting this week. (Video of the interview)Rep. Stivers is the Ranking Member on the House Committee on Financial Services’ Subcommittee on Housing, Community Development and Insurance and played a key role in last year’s seven-year extension of the Terrorism Risk Insurance Act (TRIA).DeBoer noted that the COVID-19 crisis has highlighted the lack of insurance availability for business continuity coverage for catastrophic pandemic events. Most business interruption insurance policies are denying pandemic risk-related claims, raising urgent concerns among policyholders – including owners of real estate, the event industry and professional sporting leagues.Rep. Stivers emphasized the problem is growing worse and stated, “We’ve seen business interruption insurance not being willing to cover any pandemics. I think you’re going to start to see lenders … requiring some type of pandemic coverage in their loan covenants in the coming years.” While a number of legislative proposals have been introduced – including the Pandemic Risk Insurance Act of 2020 (H.R. 6983) – many are based on TRIA, which presents stark differences compared to pandemic risk. Rep. Stivers notes in the interview how the scale and size of a terrorism attack and a pandemic are fundamentally different. He also notes how a mandatory make-available clause that is part of the TRIA legislation is not currently part of a pandemic risk insurance bill.Rep. Stivers (above) also said he expects a modified legislative approach to H.R. 6983 may be successful: “I believe in the first six months of next year we should have something (legislation) out of the House and pending in the Senate with the Senate starting to take action.”Both DeBoer and Stivers agreed that a federal business continuity insurance program should be put into place before there is a recurrence of pandemic or government-ordered shutdown in response to a different natural catastrophe. The Roundtable is working with industry partners such as Nareit and other stakeholders through the newly formed Business Continuity Coalition (BCC) to develop with policymakers an effective federal insurance program that provides the economy with the coverage it needs to provide business continuity coverage in the face of pandemic risk. . (Video of DeBoer’s discussion with Rep. Stivers)DeBoer also asked the Congressman, as a member of the House Financial Services Committee, about the prospects for a pandemic relief bill. Rep. Stivers responded, “I believe there will be a pandemic relief bill in the lame-duck session. The most important things to me are number one, liability protection for businesses that open. Number 2 – some help for our state and local governments that have seen a hit in their revenues. I’d like to see us add money for infrastructure … and for people who continue to struggle.”He continued, “Instead of (increasing) unemployment insurance … I would rather see us do a temporary rental assistance program and I think it should apply to commercial as well as residential. There’s already an eviction moratorium, but if you can’t evict somebody but you don’t get help for your rent, then you’re picking tenants over landlords and I’d like to see us fix that problem and do a temporary rental assistance program.”Pressure for policymakers to act on another round of pandemic aid is growing since negotiations between Democrats and Republicans stalled in August. (See story below on Coronavirus Response)# # #

Policy Landscape

September 25, 2020

Roundtable Weekly

House Approves Government Funding Until Dec. 11 and Passes Comprehensive Energy Package

Energy Policy ENERGY STAR

The House of Representatives on Tuesday night passed a bipartisan Continuing Resolution (CR) by a vote of 359-57 to extend federal government funding through December 11 and avoid a government shutdown at the end of the month. (Text of H.R. 8337 and Section-by-section summary of the legislation)The CR includes short-term funding extensions (with no policy changes) for surface transportation funding, the National Flood Insurance Program, and the EB-5 Regional Center Program.The Senate is expected to pass the CR next week and send it to President Trump for his signature before FY’2021 starts on October 1, 2020. Energy Package PassesThe House yesterday also passed a comprehensive energy package (H.R.4447) that includes sections on building energy codes, federal energy data regarding commercial buildings, and grant programs for underserved communities and green infrastructure. The measure passed with mostly Democratic support by a 220-185 vote. (CQ, Sept. 24)One of the major goals of the legislative package is to reduce carbon dioxide emissions by 80% by 2050. (BGov, Sept. 16)The Clean Economy and Jobs Innovation Act includes a section – strongly supported by The Roundtable – that would require the U.S. Environmental Protection Agency (EPA) and the U.S. Energy Information Administration (EIA) to report to Congress through a “coordination agreement” regarding each agency’s separate collection of data regarding commercial building energy consumption. Coordination between the agencies is critical because the EIA’s Commercial Buildings Energy Consumption Survey (CBECS) provides data that underpins EPA’s ENERGY STAR building scores, which impact nearly 35,000 buildings nationwide, representing more than 5 billion square feet of commercial space. (ENERGY STAR Facts and Stats) The House bill also includes Roundtable-backed provisions that would bring greater transparency to how the U.S. Department of Energy provides federal recommendations to develop building energy codes, which state and local governments may ultimately adopt through a long-established process. (Roundtable Weekly, June 19, 2019)The White House on Sept. 21 stated its opposition to H.R. 4447. Among the reasons for its veto threat, the Administration believes that the bill sets “rigid targets” on Federal buildings to reduce water and energy consumption, and is concerned that State and local governments might establish building codes “not grounded in available technologies.”In the Senate, Energy Committee Chair Lisa Murkowski (R-AL) hopes to reintroduce bipartisan energy legislation (S. 2657) next week. Sen. Joe Manchin (D-WV), the Senate Energy Committee’s ranking member and co-sponsor of S. 2657, said they are working through issues to overcome an impasse on the building energy codes section. (BGov, Sept. 24)If the Senate passes its bill, a “conference” would be convened – perhaps during the Lame Duck Congressional session after Election Day – for House and Senate committee leaders to reconcile any differences between their respective packages.# # #

Coronavirus Response

September 25, 2020

Roundtable Weekly

Powell and Mnuchin Urge More Congressional Pandemic Fiscal Relief; Fed Releases FAQs on Main Street Lending Program; Democrats Considering New COVID-19 Package

Capital and Credit Coronavirus The Fed

Federal Reserve Chairman Jay Powell (right) and Treasury Secretary Steven Mnuchin (left) testified before House and Senate committees this week to discuss the government’s pandemic response. Powell offered no option for administrative changes to the Main Street Lending Program (MSLP) credit lending facility while Mnuchin strongly urged Congress to repurpose unused COVID-19 relief funds in another legislative pandemic aid package. (BGov, Sept. 23 and Reuters, Sept. 24)Recommendations to improve access to the MSLP were a focus of recent testimony by Roundtable President and CEO’s Jeffrey DeBoer on behalf of the industry before the Senate Banking Committee. (Roundtable Weekly, Sept. 11)On Sept. 23, policymakers on the House Oversight and Reform Select Subcommittee on the Coronavirus Crisis questioned Powell about the efficacy of the MSLP, which has only utilized about 0.3% of its $600 billion capacity. (BGov, Sept. 23)Powell responded about the MSLP that the Fed has done “… basically all of the things we can think of that are clear gains (but) we are looking to do more.” He added, “… but I would say the things that we have done have been really to widen the appeal of that program and its effectiveness … there is nothing major that we see now that would be consistent with opening it up…” (BGov and CQ Committee transcript, Sept. 23)Fed Updates MSLP FAQsThe Fed on Sept. 18 issued new guidance to banks for the MSLP in an attempt to encourage increased lending. The central bank’s revised “Frequently Asked Questions” for the MSLP emphasize that lender underwriting should look back to the borrower's pre-pandemic condition and forward to their post-pandemic prospects. The FAQs also seek to clarify the Board and Department of Treasury's expectations regarding lender underwriting. (Fed news release)In a news conference announcing the FAQs, Powell said, “I would say it may be that further support for commercial real estate will require further action for Congress – from Congress.” During his three committee appearances this week, Powell consistently emphasized that more fiscal relief is needed from Congress to sustain an economic recovery from the pandemic. Mnuchin struck a similar theme in his two committee appearances while urging Congress to pass a new package that would reuse unused funds from previous COVID-19 relief authorizations for urgent needs. Mnuchin told the Senate Banking Committee this week that up to $380 billion could be repurposed. "It would not cost an extra penny," Mnuchin said. (Reuters, Sept 24) During the Sept. 24 hearing, Senate Banking Committee Chairman Mike Crapo (R-ID) in his opening statement referred to the committee’s earlier hearing on Sept. 9 on “The Status of the Federal Reserve Emergency Lending Facilities.”Chairman Crapo said, “Jeff DeBoer (above) President and CEO of the Real Estate Roundtable painted a bleak picture of the condition of the commercial real estate market. He said, ‘It is impacting their ability to meet their debt service obligations which increases pressure on financial institutions, pension fund investors and others.’ And he said, ‘It is pushing property values down to the detriment of local governments. It is causing much stress to pools for commercial mortgage backed securities and it is threatening to result in countless commercial property foreclosures. The situation must be addressed.’" (Crapo’s Opening Statement, Sept. 24 and DeBoer's testimony and Q&A, Sept. 9)Crapo added, “Negotiating toward a realistic package that can actually get passed and signed into law would best serve the American people during this difficult time.” Mnuchin told the Senate Committee that he and House Speaker Nancy Pelosi (D-CA) have "agreed to continue to have discussions." (Wall Street Journal, Sept. 24)Democrats Considering New Aid ProposalPelosi has directed her committee chairs this week to assemble a scaled back coronavirus relief package of approximately $2.4 trillion that could be used for as a basis for potential discussions with the White House and Senate Republicans. (Politico, BGov, and The Hill, Sept 24) Negotiations over a COVID-19 relief bill between Democrats and Republicans broke down in August over a nearly $1 trillion gulf between their proposals. The House passed a $3.4 trillion package in May (H.R. 6800), which is more than the $1.5 trillion President Trump indicated he would support and much larger than a $650 billion package supported by Senate Republicans.House Democrats could vote on a new plan next week, which would appease lawmakers from battleground election states anxious to pass a pandemic aid package before adjourning to campaign – despite chances that a Democrat-only plan is unlikely to attract Republican support. Speaker Pelosi said last week that the House would remain in session until an agreement is reached, and House Majority Leader Steny Hoyer (D-MD) clarified that Representatives would be on call to return to the Capitol on short notice in the event a deal is reached. (BGov, Sept. 15)# # #

Policy Landscape

September 18, 2020

Roundtable Weekly

House Vote on Stopgap Funding Bill Expected Next Week; White House Signals Possible Compromise on Pandemic Relief Package

Coronavirus

Congressional policymakers struggled today to finalize a bipartisan spending bill to fund the government past September 30 and avoid a shutdown. House and Senate lawmakers disagree on when the temporary funding would expire – Republicans want the stopgap to end on Dec. 18 while Democrats are pushing for Feb. 26. (RollCall, Sept. 14 and Politico, Sept. 18)House Majority Leader Steny Hoyer (D-MD) stated on September 15 that a vote on the continuing resolution (CR) would be held sometime next week. He added the CR will include language to extend the authorization for surface transportation and the National Flood Insurance Program. “I am going to bring it to the floor early next week and hope that the Senate passes it either later next week or the first part of the following week,” Hoyer said. (BGov, Sept. 18)COVID-19 Package NegotiationsCongressional leaders remained at an impasse this week on another coronavirus stimulus package, although the Trump Administration signaled compromise is possible. Negotiations between Democrats and White House officials stalled in August. (Roundtable Weekly, Aug. 4)GOP lawmakers initially proposed a $1 trillion coronavirus stimulus proposal in July. Last week, Senate Republicans attempted to advance a “skinny” COVID-19 aid bill for approximately $500 billion less that was blocked by Democrats. (Roundtable Weekly, Sept. 11).Democrats are currently advocating a package of at least $2.2 trillion following passage of the $3.4 trillion HEROES Act by the House of Representatives in May. (Axios, Sept. 10)Speaker Nancy Pelosi (D-CA) said on Tuesday that the House would remain in session until an agreement is reached and Hoyer clarified that lawmakers would be on call to return to the Capitol on short notice in the event a deal is reached. (BGov, Sept. 15)After a compromise $1.5 trillion pandemic aid proposal from the bipartisan House Problem Solvers Caucus was rejected on Tuesday by congressional Democrats and Republicans, the White House signaled the following day it was open to further negotiations. (New York Times, Sept 15 and Vox, Sept. 16)President Trump tweeted on Sept 16, “Go for the much higher numbers, Republicans, it all comes back to the USA anyway (one way or another!).” White House Chief of Staff Mark Meadows added there was support for more aid to state and local governments and that the Administration would be willing to consider a $1.5 trillion package. (CNBC, Sept 16.Speaker Pelosi and Senate Minority Leader Chuck Schumer (D-NY) said in a joint statement after Trump’s tweet, “We look forward to hearing from the President’s negotiators that they will finally meet us halfway with a bill that is equal to the massive health and economic crises gripping our nation.”Treasury Secretary Steven Mnuchin said earlier this month that the next stimulus bill could be closer to $1.5 trillion. Larry Kudlow, director of the White House National Economic Council, said yesterday in response to a question about a $1.5 trillion package: “I would say that’s in the range of plausibility.” (Wall Street Journal, Sept. 18)Senate Finance Committee Chairman Chuck Grassley (R-IA) yesterday told Bloomberg TV, “The White House has been making some statements here recently that would never get hardly any Republicans in the United States Senate. So this used to be the White House versus Pelosi up until about now. Now the president’s coming in and saying ‘we can maybe go to $1.5 trillion.’ He better be careful of that because I don’t think that bill could get through the United States Senate.” Today, Pelosi told Bloomberg Television that Democrats remain committed to a $2.2 trillion relief package but indicated they may include aid for “airlines, transportation in other forms, restaurants, retail, issues like that” in a relief package. (Transcript of Pelosi Interview on Bloomberg's Balance of Power with David Westin, Sept. 18)The need for policymakers to produce a pandemic aid package before the November elections will be a focus of discussions during The Roundtable’s Fall Meeting on Sept. 22. Confirmed speakers include Senate Majority Leader Mitch McConnell (R-KY) and House Financial Services Committee Member Steve Stivers (R-OH).# # #

Energy Policy

September 18, 2020

Roundtable Weekly

EPA Launching “ENERGY STAR Tenant Space” Process on October 13; CBECS Requests Stakeholder Feedback; House May Vote on Building Codes Bill Next Week

Energy Policy ENERGY STAR

Recognition for office tenants who collaborate with their landlords on design and construction of high performance leased spaces will be the focus of the voluntary ENERGY STAR Tenant Space program, scheduled to launch on October 13. The launch marks the second occasion that the U.S. Environmental Protection Agency (EPA) will certify energy efficient office suites, following inaugural awards granted to “charter tenants” in 2018 and legislative authorization for the program from the so-called “Tenant Star” law passed by Congress in 2015. (Commercial Property Executive, May 4, 2015). EPA’s application process, opening October 13, will require office tenants seeking certification to estimate their suites’ energy use, separately meter their spaces, use efficient office equipment, and share energy usage data with their landlords. See EPA’s “How to Prepare for Tenant Space Recognition” guide.EPA will also offer access to a new tool for estimating lighting energy usage intensity within the ENERGY STAR “Portfolio Manager” platform. Use of this new lighting assessment function will be a prerequisite for Tenant Space awards. EPA has plans for on-line demonstrations in the coming weeks.The ENERGY STAR label impacts nearly 35,000 buildings and plants nationwide, representing more than 5 billion square feet of commercial space. (ENERGY STAR Facts and Stats) Real Estate Stakeholders Requested to Provide Input on CBECS ProcessThe Roundtable requests that our members respond to a short questionnaire (6 questions) currently on the Commercial Building Energy Consumption Survey (CBECS) website. An ENERGY STAR “whole building” score (registered on a scale of 1 to 100) is generally based on data from the Commercial Buildings Energy Consumption Survey (CBECS), conducted periodically by the U.S. Energy Information Administration (EIA). EIA speakers have provided The Roundtable with information on CBECS data and its impact on ENERGY STAR scores for years. The Roundtable estimates that EPA will next update its ENERGY STAR building scoring methods sometime around 2023, based on CBECS data collected in 2018-2019. However, that data is pre-COVID. It does not reflect the likely changes that have taken place in building occupancy and energy use since the pandemic struck in 2020. Answers to the current CBECS questionnaire may have a significant impact in EIA’s data collection efforts regarding the U.S. buildings. It is crucial that EIA capture data from all types and sizes of buildings – such as larger buildings over 500K square feet that have historically been under-represented in past surveys.RER members responding to the CBECS questionnaire should also explain that EIA’s data collection should account for possible changes in building occupancy, energy consumption, ventilation protocols, and HVAC equipment since the COVID-19 pandemic started. House May Vote on Energy Bill Next WeekIssues regarding CBECS data are also part of legislation reintroduced by House Democrats on September 15, The Clean Economy and Jobs Innovation Act (H.R. 4447). The omnibus bill includes sections on building energy codes, grant programs for underserved communities and green infrastructure. The bill may come to a vote in the House next week.The bill includes a section, strongly supported by The Roundtable, which would direct EPA and EIA to enter into an “information sharing agreement.” Such an agreement would direct the agencies to publicly and systematically address the relationship between CBECS data and ENERGY STAR buildings scores, as discussed above.The bill also includes provisions, long-supported by The Roundtable, that would bring greater transparency to the process by which the U.S. Department of Energy provides federal recommendations to develop building energy codes that state and local governments may ultimately adopt. (Roundtable Weekly, June 19, 2019)One of the major goals of the comprehensive, nearly 900-page legislative package is to reduce carbon dioxide emissions by 80% by 2050. (BGov, Sept. 16)In the Senate, Energy and Natural Resources Chair Lisa Murkowski (R-AL) is working to reintroduce energy reform legislation, but has once again run into delays due to long-standing objections over housing affordability issues. (E&E News, Sept 17)# # #

Coronavirus Response

September 11, 2020

Roundtable Weekly

Roundtable Testifies on State of Commercial Real Estate, Presents Industry’s Shared Agenda and Recommendations for Action to Senate Banking Committee

Coronavirus

Recommendations on how to encourage a national recovery from the economic effects of the pandemic – and improve access to Federal Reserve credit facilities for businesses such as manufacturing, retail, restaurants, real estate owners, and other asset-based borrowers – was the focus of testimony by Roundtable President & CEO Jeffrey DeBoer (above) on Sept. 9 before the Senate Banking, Housing and Urban Affairs Committee. (International Council of Shopping Centers news release)The Roundtable’s written statement and oral presentation also provided the commercial real estate industry’s shared recommendations on how to provide critical federal assistance to the U.S. workforce, renter households, and business tenants to help them weather the COVID-19 crisis. (Hearing video and witness statements) The Senate hearing focused on the effectiveness of the Federal Reserve’s Main Street Lending Program (MSLP) – a $600 billion loan facility established in March as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act to assist small and mid-sized businesses weather the economic fallout from the pandemic. (CQ News, Sept. 9)Chairman Mike Crapo (R-ID), Ranking Member Sherrod Brown (D-OH) and other Banking Committee Members heard testimony from DeBoer; Hal Scott, President of the Committee on Capital Markets Regulation; and William Spriggs, Professor of Economics, Howard University and Chief Economist, AFL-CIO. (Witnesses written testimony)Chairman Crapo (photo below) noted in his opening statement that the hearing would provide an update on “why the (commercial real estate) CRE market lacks access to needed support, including through the Main Street Program; and recommendations for options to get support to commercial real estate.” (Sen. Crapo’s Opening Statement, Sept. 9)DeBoer emphasized the goal of the MSLP is to provide capital to mid-sized businesses that are disproportionally owned by minorities, women and veterans, who are unable to obtain capital due to COVID-related economic problems. (Law360, Sept. 9)The Main Street program is not working, DeBoer testified, because there is little incentive for banks to make the loans – and the program’s eligibility, affiliation and underwriting rules are not designed to meet the needs of the businesses in need.“The result: countless mid-sized retail businesses, restaurants, hotels, commercial and multifamily building owners are moving closer to shutting their doors forever,” DeBoer stated. (Roundtable Oral Comments)DeBoer recommended that to incentivize banks to participate on a larger scale, the Fed should purchase 100 percent of a Main Street loan, instead of the current 95% limit.He also encouraged administrative actions to expand the MSLP’s eligibility rules “… to stabilize the weakening condition of many businesses, particularly real estate owners whose businesses support millions of jobs nationwide and whose health is directly related to the health of local communities.” (Washington Post, Sept. 9)“The recommendations that I have made on the Main Street Lending Program … really require no additional funds from the federal government,” DeBoer said. “They are administrative. They could be done tomorrow by the Treasury and the Fed if they wanted to.” Sen. Chris Van Hollen (D-MD) commented, “I wish there was a broader recognition that getting funds into the hands tenants to pay their landlord on the residential side and also on the commercial side is something that would be very important at this time.” (American Banker, Sept. 9)During Q&A with several committee members, DeBoer also addressed the importance of preserving the “rent obligation chain” – the stream of tenant rent revenues that travel through the financial system to support business workers, local government services and mortgage markets, safeguarding billions in Americans’ pension and retirement savings invested in real estate assets. (Video of DeBoer's Testimony and Q&A with Senators)Committee Chairman Crapo on July 31 sent a letter to Secretary Mnuchin and Chairman Powell urging them to quickly expand the Main Street Program by setting up an asset-based lending facility, and to address commercial real estate either through access to the Main Street Program or in a separate facility.” (Roundtable Weekly, August 14)DeBoer’s testimony, the Fed’s efforts and prospects for congressional action regarding the economic repercussions of the coronavirus will be a focus of discussion during The Roundtable’s September 22 Virtual Fall Meeting. (Video of DeBoer's Testimony and Q&A with Senators)# # #

Policy Landscape

September 11, 2020

Roundtable Weekly

Senate Democrats Block Republicans’ COVID-19 Relief Package as Sept 30 Deadline Looms to Fund the Federal Government

Senate Democrats yesterday blocked Republicans’ attempt to advance a scaled-back COVID-19 relief package. The 52-47 procedural vote, mostly along party lines, did not meet the 60-vote threshold to pass, diminishing the possibility that Congress will enact another pandemic recovery measure before the November elections. (AP, Sept. 10 and Summary of GOP bill) The Republican “skinny” bill (S. 178) proposed this week is approximately $500 billion less than the GOP’s $1 trillion July coronavirus stimulus proposal. Democrats are currently advocating a package of at least $2.2 trillion following passage of the $3.4 trillion HEROES Act by the House of Representatives in May. (Axios, Sept. 10)Previously, Congress passed coronavirus relief in March with the $2 trillion CARES Act, which increased unemployment benefits until July 31. Prospects that unemployed Americans may receive an additional $1,200 stimulus check remain uncertain. (Roundtable Weekly, August 14 and C/Net, Sept. 10)Treasury Secretary Steven Mnuchin on Sunday stated the Trump Administration favored another COVID-19 aid package. “We want to help businesses that are particularly impacted by this, and we’ll continue to work on proposed new legislation," Mnuchin told Fox News. (Real Clear Politics, Sept. 6)Senate Minority Leader Charles E. Schumer (D-NY) yesterday said Republicans “may yet be forced to come back to the table because COVID is the major issue that’s facing the American people.” (AP, Sept. 10)Congressional negotiations on another round of pandemic stimulus between Democrats and White House officials stalled in August. President Trump then signed four executive orders aimed at providing unemployment aid, eviction protections, student loan relief and payroll tax deferments. (Roundtable Weekly, August 14) One executive order authorized an additional $300 per week to unemployed beneficiaries from disaster relief funds. The Federal Emergency Management Agency recently announced those funds are near depletion and the program is closed to new applications. (BGov, Sept. 10)White House officials are considering additional unilateral actions to provide targeted relief, according to The Washington Post. Stephen Moore, an economic adviser to the White House, said, “They’re trying to figure out what they can do legally, what authorities they have, and there are differences of opinion on that. Trump would like to do another flurry of executive orders that would jump-start the economy.”Government Funding Expires Sept. 30Lawmakers returned to Washington this week with a five-week legislative schedule in the Senate and four-weeks for the House. In addition to COVID-19 related legislation, Congress has until Sept. 30 to pass a funding bill to keep the federal government open beyond the end of FY2020 or face a shutdown before the November elections. House Speaker Nancy Pelosi (D-CA) and Secretary Mnuchin have reportedly agreed to work on a temporary funding bill without unrelated policy riders. A spending bill would likely include continued funding for the National Flood Insurance Program and the EB-5 Regional Center Program, which provides visas to foreign nationals who pool their investments to finance U.S. economic development projects. (CQ, Sept. 3)A Continuing Resolution (CR) would fund the government at current levels, yet how long such a measure would last is uncertain. Senate Majority Leader Mitch McConnell (R-KY) on Wednesday said he supports a stopgap spending bill through December, although Senate Minority Leader Schumer indicated no decisions have been made about the length of a CR. (The Hill, Sept. 9)Sen. Roy Blunt (R-MO), chairman of the Senate Republican Policy Committee, said yesterday, “My guess would be that if we leave in September with a CR we will not come back to do anything before the election.” (Washington Post, Sept. 9)# # #

Economic Recovery & CRE

September 11, 2020

Roundtable Weekly

Roundtable Members and Business Leaders Urge NYC Mayor to Address Deteriorating Quality-of-Life Conditions as Part of Economic Recovery and Reopening

Economic Growth amp CRE

More than 160 business leaders – including 16 Real Estate Roundtable members – yesterday sent a letter to New York City Mayor Bill de Blasio urging him to address crime and deteriorating quality-of-life issues as part of the city’s efforts to ease pandemic restrictions, encourage economic recovery and reopen businesses. (New York Times and Forbes, Sept. 10)The letter states, “We need to send a strong, consistent message that our employees, customers, clients and visitors will be coming back to a safe and healthy work environment.” It adds that what must be confronted by city management is a “widespread anxiety over public safety, cleanliness and other quality of life issues that are contributing to deteriorating conditions in commercial districts and neighborhoods.” (Partnership for New York City letter, Sept. 10)The letter explains that if steps are not taken quickly to address security and other livability conditions, then people will be slow to return to the city and a establish a degree of normalcy.Mayor de Blasio responded on twitter yesterday, stating, “To restore city services and save jobs, we need long term borrowing and a federal stimulus — we need these leaders to join the fight to move the City forward.”One of the signatories of the letter, Roundtable Member Scott Rechler (Chairman & CEO, RXR Realty LLC and Trustee of the 9/11 Memorial Museum) appeared on CNBC’s Squawkbox this morning to discuss the business leaders’ concerns about the city’s economic recovery and reopening. (Rechler in photo above)“We don’t have a plan to build a brighter, better future for our city like we did post 9-11 and its eerily scary. While I know we have a crisis and its going to need support from the federal government, that’s not the only solution. We need to manage our city better,” Rechler stated during the Squawkbox interview.An op-ed in the New York Daily News today by Rechler also encourages individuals “to safely fill our city streets, our parks, our stores, our restaurants, and our business districts.” Rechler calls for a safe return, especially by those “… who stayed home or left the city to protect themselves and their loved ones by slowing the spread of the coronavirus.”New York City’s coronavirus infection rate has been reduced to a low level in recent months after a phased reopening of its economy started in June. The infection rate in the city has been below 1% for more than one month, due to strict emergency regulations. (Wall Street Journal, Sept. 11 and New York Gov. Cuomo’s website, Sept. 9)Rechler’s op-ed adds, “Every lawyer, software engineer and banker working in New York’s office buildings supports five additional service jobs in retail, restaurants and small businesses, but this partnership, hundreds of thousands of jobs and livelihoods, falls apart if we all stay home.”# # #

Coronavirus Response

August 14, 2020

Roundtable Weekly

President Trump Signs Executive Orders to Provide COVID-19 Relief As Congressional Negotiations Stall

Coronavirus

President Donald Trump signed four executive orders (EOs) on August 8 that seek to counter the negative economic repercussions of the pandemic by preventing residential evictions and foreclosures; providing additional unemployment payments; and deferring the collection of payroll taxes and student-loan payments.The EOs were signed after White House officials and Democratic leadership could not agree on a fourth comprehensive coronavirus aid package. (Roundtable Weekly, Aug. 7) Republicans and Democrats urged each other this week to continue negotiations. (Wall Street Journal, Aug 10.)Whether the president has the authority to issue some of these Executive Orders is questionable, since taxing and spending power is generally under the purview of Congress. (NPR, Aug. 8) President Trump’s four executive orders include: Assistance to Renters and HomeownersThis order calls upon several federal agency heads to take steps within their existing authorities and programs to minimize evictions and foreclosures. These efforts would apply only to federally originated, backed, or securitized mortgages.The order does not purport to reauthorize the CARES Act federal eviction moratorium that expired at the end of July. (Wall Street Journal, July 16)The EO instructs the Secretary of the Treasury, the Secretary of Housing and Urban Development (HUD) and the Director of the Federal Housing Finance Agency (FHFA) to take all lawful measures to prevent evictions and foreclosures of residential tenants and owners who have been financially impacted by the pandemic. The HUD Secretary is also instructed to encourage and provide assistance to landlords, public housing authorities, federal grant recipients and affordable housing owners to minimize evictions and foreclosures. Roundtable President and CEO Jeffrey DeBoer commented on federal rental assistance efforts: “Seeking to optimize existing programs and resources to minimize evictions and foreclosures makes sense. For example, the existing Section 8 housing choice voucher program successfully provides housing assistance to lower income tenants.” DeBoer continued, “However, millions of additional families have pre-qualified for rental assistance yet are on stand-by wait lists for Section 8 housing vouchers and therefore do not receive the assistance for which they qualify. HUD should work quickly to reduce what are, in many cases, multi-year Section 8 housing assistance wait times.” The residential relief EO complements a series of FHFA guidance for lenders and servicers since the start of the pandemic, collected on the agency’s “COVID-19 Information and Resources” website. For example, FHFA announced on August 6 that multifamily owners with mortgages backed by Fannie Mae or Freddie Mac who enter into forbearance agreements must inform tenants in writing about eviction protections.FHFA Director Mark Calabria, below right, addressed his agency’s oversight of Fannie and Freddie, which own or guarantee $5.6 trillion in single and multifamily mortgages, during The Roundtable’s January 2020 State of the Industry Meeting in a discussion with Roundtable Member Willy Walker, chairman & CEO, Walker & Dunlop, left. Unemployment Payments Weekly federal unemployment payments of $600 that were authorized in the CARES Act expired on July 31.This order directs a $400 weekly payment to those unemployed due to the pandemic through December 6, 2020 – or whenever $44 billion from the Department of Homeland Security’s Disaster Relief Fund is depleted to $25 billion. The benefit would be funded 75% by the federal government and 25% by states, who are encouraged – but not required – to provide their share of $100 per week. Several governors this week insisted their states do not have the funds budgeted for the proposed allocation. (Roll Call, Aug. 10)A senior Labor Department official said the additional $300 weekly federal share would likely take weeks to reach the unemployed and could run out six weeks after initial disbursement. (Wall Street Journal, Aug. 12)Deferring Payroll Tax Obligations This order directs the Treasury Department to defer the withholding, deposit, and payment of the employee-share of payroll taxes for Sept. 1, 2020 through Dec. 31, 2020 – essentially suspending the 6.2% Social Security tax on wages for employees making less than about $104,000 annually on a pre-tax basis. (Brownstein Hyatt Farber Shreck EO Summary, August 12)The president said that if he is reelected, he will work to turn the temporary deferral into a permanent tax cut while also seeking to reduce the payroll tax going forward. (Washington Post, Aug. 8) Treasury Secretary Mnuchin later clarified that the payroll tax deferral would be optional for employers and not mandatory. (Forbes, Aug. 12). The CARES Act previously authorized businesses to defer the employer-share of payroll taxes until the end of the 2020. (Click to enlarge image above )The executive action on payroll taxes, along with recent comments by President Trump in support of a capital gains tax cut, has renewed speculation that the President could act to reduce capital gains taxes administratively by directing Treasury to allow taxpayers to adjust the basis of assets for inflation when measuring gain. (MarketWatch, Aug. 12)Deferring Student Loan PaymentsStudent loan payment relief granted under the CARES Act expires on Sept. 30, 2020. This EO instructs the Secretary of Education to pause monthly payments and interest for student loan borrowers until Dec. 31.September 30th Funding DeadlineMost policymakers have left Washington for the August recess, but senators and House members will receive a 24-hour notice to return if a coronavirus deal is reached or if a vote is scheduled. Both chambers are scheduled to return on September, and no votes are scheduled until the week of September 14 – just weeks before government funding is scheduled to expire on September 30.In today’s Bisnow, several commercial real estate industry leaders are quoted in the article, “'They're Playing A Dangerous Game': CRE Leaders On Congress Leaving Without Passing Relief Bill."Referring to the executive orders signed by President Trump, DeBoer states in the article, “The presidential executive orders are positive measures, but they are not a full substitute for legislation. Legislation that builds on the short-term relief enacted this spring is sorely needed."DeBoer also notes, "Congress will face even greater relief needs when they return in September, but at the same time politics will make negotiations even more difficult." (Bisnow, August 14) # # #

News

August 14, 2020

Roundtable Weekly

Oversight Commissioners Emphasize Increasing CRE Access to Fed Credit Lending Facility; Congressional Committee Leaders Urge MSLP Expansion

The need for commercial real estate companies to have greater access to Federal Reserve lending facilities during the ongoing pandemic was addressed during an August 7 hearing before the bipartisan Congressional Oversight Commission – a five-person panel tasked with monitoring the use of coronavirus aid funds. (New York Times, August 8)The panel focused on the shortcomings of the Fed’s Main Street Lending Program (MSLP), a $600 billion loan facility established in March as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act to assist mid-market businesses respond to the negative impact of COVID-19.The MSLP is administered by the Federal Reserve Bank of Boston, whose president, Eric Rosengren, testified before the Commission on the MSLP and other credit facilities.Rosengren explained the MSLP is structured to assist businesses that are too small to raise money by issuing bonds and stocks, yet too large to qualify for the Small Business Administration’s (SBA) Paycheck Protection Program loans. (AP, August 7)Banks who participate in the program must make loans for at least $250,000, with strict requirements, and loans cannot be approved for highly indebted companies. (Roundtable Weekly, August 7)Hotels that pursue loans using the Fed’s MSLP must adhere to restrictive criteria based on Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). (Reuters / Yahoo News, Aug 12)“This program is designed as a cash flow program, so it’s designed for a business that expects to be able to pay off the debt,” Rosengren said. (Roll Call, August 7)MSLP and CRERep. French Hill (R-AR), below, a member of the Commission, asked Rosengran if there are discussions at the Fed “to expand a different Main Street facility that would be more of an asset-based loan rather than a cash flow loan?”Rosengran responded, “I know there are discussions about asset-based financing and some of the difficulties experienced, for example, in commercial real estate. So, there have been ongoing discussions about this, but there is no term sheet that is imminent.” (Watch hearing video and read testimony)Another Commission member, Sen. Pat Toomey (R-PA), said, “I want to underscore a point that Congressman Hill raised … about considering asset based facilities. I think you're very well aware there are some real challenges in the commercial mortgage backed security market right now, in particular, the hotel subset of the commercial mortgage backed sector is experiencing some real difficulties. Do you have any thoughts on whether we ought to stand up a facility specifically designed, it would be designed generally for the broad category of real estate I think and other categories that would be more suitable for an asset based lending than they are for an EBITDA constraint?”Rosengran answered, “Yes, so an asset program would differ from what we have for Main Street. Most of that type of lending has a much longer maturity than five years. So as though these are five-year loans with a balloon payment at the end of the five years, that's probably not appropriate for example, for retail or for commercial real estate such as hotels. So the nature of that program would be quite different. I know there is work being done thinking about how asset based can be addressed, including through the SBA.”He added, “So I think there are a number of proposals that are being considered. I'm certainly aware that there are many concerns in the commercial real estate industry and those concerns will get even worse if the pandemic gets worse.” (Watch hearing video and read testimony)MSLP RevisionsSenate Banking Committee Chairman Mike Crapo (R-ID), below, and House Committee on Financial Services Ranking Member Patrick McHenry (R-NC) on August 10 wrote to Fed Chairman Jay Powell and Treasury Secretary Steven Mnuchin about utilizing the MSLP to support businesses and their employees struggling with the pandemic’s impact. The congressional committee leaders proposed utilizing the remaining funds appropriated by Congress for the Exchange Stabilization Fund “to expand MSLP and support more businesses.”Sen. Crapo also submitted a letter to Treasury Secretary Mnuchin and Fed Chair Jay Powell encouraging the expansion the Main Street Lending Program (MSLP) by setting up an asset-based lending program and commercial real estate program. (Sen. Crapo’s letter, July 31)Four other U.S. senators recently wrote to Mnuchin and Powell with several recommendations on reforming the Fed’s MSLP credit facilities. (Senators’ letter, Aug. 4)"Many banks seem disinterested in the program because they either wish to retain more than 5 percent of a profitable loan or they have no interest in retaining any stake at all in an unprofitable loan," according to Sens. Mike Braun (R-IN), John Cornyn (R-TX), Kelly Loeffler (R-GA) and Thom Tillis (R-NC).A coalition of nine real estate industry groups, including The Real Estate Roundtable, on July 21 submitted a set of recommendations to the Senate Banking Committee aimed at improving the Fed’s MSLP for commercial real estate owners and tenants. (Real estate coalition letter, July 21 and Roundtable Weekly, July 24)The Fed’s efforts to support commercial real estate businesses and their employees struggling with the pandemic – especially in the hospitality and retail sectors – will be a focus of discussion during The Roundtable’s September 22 Virtual Fall Meeting.# # #

August 10, 2020

Policy Comment Letter

2020-08-10_pmc_and_crapo_letter_to_mnuchin_and_powell_re_esf

Coronavirus Response

August 7, 2020

Roundtable Weekly

Pandemic Relief Negotiations Continue as President Trump Considers Use of Executive Orders

Coronavirus

Negotiations this week between congressional lawmakers and the White House on a fourth comprehensive coronavirus relief package continued through this afternoon, as significant policy and funding differences remain between Democrats and Republicans. (POLITICO Playbook PM, August 7) The GOP’s $1 trillion package released July 27 contrasts with the $3.4 trillion proposal House Democrats passed in May. (Brownstein Hyatt Farber Schreck, July 31 – “HEALS Act Comparison to HEROES Act and Current Law,” and CNet, August 5 – “HEALS vs. CARES vs. Heroes stimulus packages: Key differences between Democratic and Republican proposals”) President Donald Trump tweeted yesterday that if a deal cannot be made soon, he would sign executive orders extending the CARES Act’s residential tenant eviction moratorium and some enhanced unemployment benefits, while also establishing a payroll tax cut. Unilateral executive action on these matters, however, would likely result in legal challenges. (Bloomberg, August 6) Senate Minority Leader Chuck Schumer (D-NY) commented on the negotiations with Treasury Secretary Steven Mnuchin, White House Chief of Staff Mark Meadows and House Speaker Nancy Pelosi (D-CA). “We’re still slogging through step by step by step. They made some concessions, which we appreciated. We made some concessions, which they appreciated. We’re still far away on a lot of the important issues, but we’re continuing to go at it,” Schumer said. (Wall Street Journal, August 4) The House of Representatives is out of session next week but members have been notified they will be called back if a deal is reached. In the Senate, Majority Leader Mitch McConnell (R-KY) announced yesterday that he will allow senators to leave Washington until an agreement is reached. (The Hill, August 6) “Exactly when that deal comes together I couldn’t tell you, but I think it will at some point in the near future,” McConnell said yesterday on “Squawk on the Street,” which also featured an interview with Pelosi. (CNBC interviews, August 6) Paycheck Protection Program (PPP) Loans The PPP is set to expire on August 9. It has provided over five million loans and more than $521 billion since April to help small businesses meet expenses for payroll, benefits, rent, and other obligations. (Small Business Administration statistics through July 31). Senate Small Business Chair Marco Rubio (R-FL) has unveiled two amendments for the next coronavirus relief package to extend the PPP. (Politico Pro, August 5) Sens. Rubio and Susan Collins (R-ME) on July 27 introduced the “Continuing Small Business Recovery and Paycheck Protection Program (CSBRPPP) Act” that would fund PPP “second draw” loans, establish a new loan program for “Recovery Sector Businesses,” and make other PPP reforms. (Section-by-section summary and one-pager.) Businesses with 300 or fewer workers, that can also show a 50 percent quarterly revenue loss compared to last year, could qualify for a second round of PPP loans under the Rubio-Collins proposal. The Real Estate Roundtable joined 120 business groups (including the International Franchise Association (IFA), U.S. Chamber of Commerce, and U.S. Travel Association) in an August 5 letter urging Congress to expand “second draw” PPP loan eligibility beyond the scope of the Rubio-Collins bill. (IFA press release, Aug. 5) The coalition’s August 5 letter stresses that “the 50 percent decline as proposed in the CSBRPPP Act is simply too high.” A revenue decline of 20 percent or greater for small businesses could mean the difference between staying open or closing, according to the letter. Meanwhile, CEOs of major retail, hospitality, and technology companies separately urged Congress in an August 3 letter to enable more businesses to qualify for government-backed loans beyond the current PPP. (Politico, August 3) The CEOs expressed support for the “Reviving the Economy Sustainably Towards a Recovery in Twenty-twenty (RESTART) Act” (S. 3814), introduced by Senators Michael Bennet (D-CO) and Todd Young (R-IN). The measure currently has 52 bipartisan Senate cosponsors. It would allow businesses with up to 5,000 employees to qualify for federally-backed, forgivable loans if they sustained a 25 percent revenue loss in 2020 (with reference to a comparable 2019 quarter). (Press release, May 21). The Roundtable supports S. 3814 to help small and mid-sized businesses meet up to six months of payroll, rent, and other obligations during the pandemic. RESTART loans would be repaid up to seven years, with loan forgiveness amounts calculated based on the business’s employee size and extent of revenue loss. (RESTART Act summary) Sen. Bennet commented on Sen. Rubio’s PPP proposal, “We’ve got to expand the ambition of the program. $100 billion of loans is a great start, but it’s not going to meet the large portion of the need. The amount is substantially greater than that.” (Politico, August 3) The ongoing efforts of policymakers to provide COVID-19 economic relief was a focus of a discussion last week featuring Real Estate Roundtable President and CEO Jeffrey DeBoer and other real estate industry trade group leaders in a Walker & Dunlop webinar “All Eyes On Washington: What will the next stimulus bill do for CRE?”— moderated by Roundtable member and W&D Chairman and Chief Executive Officer Willy Walker. (Roundtable Weekly, July 31) # # #

Capital and Credit

August 7, 2020

Roundtable Weekly

Senate Banking Committee Chair Urges Expansion of Fed’s Main Street Lending Program to Accommodate Commercial Real Estate

Federal Reserve The Fed

Senate Banking Committee Chairman Mike Crapo (R-ID) on July 31 submitted a letter to Treasury Secretary Mnuchin and Fed Chair Jay Powell encouraging the expansion of the Main Street Lending Program (MSLP) by setting up an asset-based lending program and commercial real estate program. (Sen. Crapo’s letter, July 31) Specifically, the letter encourages the Treasury and Fed to: Establish a facility to accommodate asset-based lending could open access to critical resources for several industries that could not otherwise access the MSLP based on earnings or cash flow metrics. Such asset-based lending would be predicated on pledged collateral. Address the unique circumstances faced by commercial real estate, including securitized commercial mortgages, whether through access in the MSLP or a separate facility. Several options have been circulated and should be carefully considered in crafting the appropriate terms. The letter also directs the Treasury and Fed to sidestep the need for an additional Congressional appropriation of funds by utilizing the remaining funds available under section 4003(b)(4) of the CARES Act intended for Federal Reserve 13(3) facilities. A coalition of nine real estate industry groups, including The Real Estate Roundtable, on July 21 submitted a set of recommendations to the Senate Banking Committee aimed at improving the Fed’s MSLP for commercial real estate owners and tenants. The committee is currently reviewing the effectiveness of the MSLP and other Fed credit lending facilities launched to counter the economic repercussions of the COVID-19 crisis. (Real estate coalition letter, July 21 and Roundtable Weekly, July 24) The MSLP became fully operational about a month ago with $600 billion in lending capacity. Banks who participate in the program must make loans for at least $250,000, with strict requirements, and loans cannot be approved for highly-indebted companies. The program to date has attracted only eight borrowers as of July 27 – according to a report released yesterday by the central bank – and been used to support only about $100 million in loans, with more in process. (BGov, Aug 7) Separately, four U.S. Senators wrote to Treasury Secretary Mnuchin and Federal Reserve Chairman Jay Powell this week with recommendations on reforming the Fed’s MSLP credit facilities. (Senators’ letter, Aug. 4) Sens. Mike Braun (R-IN), John Cornyn (R-TX), Kelly Loeffler (R-GA) and Thom Tillis (R-NC) offer specific ways the MSLP program could be amended to better serve borrowers across the nation to save millions of American jobs, including: Increase the maximum debt-to-EBITDA leverage ratio that qualifies borrowers for loans. Eliminate the 200% collateralization requirement in the MSPLF and increase the maximum loan amount. Permit borrowers of MSLP loans to refinance debt within at least 12 months of the maturity period, revising the present prohibition on refinancing debt until it comes within 90 days of the maturity date. The Congressional Oversight Commission held a hearing today on the MSLP. The bipartisan commission is a five-person panel established by the CARES Act to monitor use of coronavirus aid funds. Witnesses at today’s hearing included Federal Reserve Bank of Boston President and CEO Eric Rosengren. The Commission has released three reports, all of which are available for review at the Congressional Oversight Commission's website. # # #

Q1 Sentiment Index

August 7, 2020

Roundtable Weekly

Commercial Real Estate Executives See a Coronavirus Vaccine as Cure for Current Market Challenges

Quarterly Sentiment Index

Commercial real estate executives recognize the various challenges in the current market as a result of the COVID-19 pandemic, while remaining optimistic about future market conditions, according to The Real Estate Roundtable’s Q3 2020 Economic Sentiment Index released today. The report emphasizes the importance for developing, testing, and distributing a vaccine in the coming months in order for market conditions to show further improvements. “As our Q3 index shows, commercial real estate markets continue to suffer from the effects that the COVID-19 pandemic has had on businesses and residential tenants” said Real Estate Roundtable President and CEO Jeffrey DeBoer. “Hospitality, senior housing, and retail commercial real estate tenants in particular are struggling currently, as are CMBS loan pools consisting of these asset types. Other commercial real estate sectors, notably office and multifamily, also are facing challenges related to the overall economic hit from the health care crisis and are very cautious in their activities. However, generally balanced CRE market conditions and responsible leverage prior to the crisis positions the industry to stabilize and move forward positively once a vaccine is available,” DeBoer added. The Roundtable’s Q3 2020 Sentiment Index registered at 42 – a four point increase from the previous quarter. [The Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive.]. This quarter’s Current Conditions Index of 21 increased eight points from the previous quarter, while this quarter’s Future Conditions Index of 63, is an increase of one point compared to last quarter, and a 13-point increase compared to Q1 2020. The report’s Topline Findings include: Many respondents expressed optimism about future market conditions as they feel current market conditions are the result of the COVID-19 pandemic, as opposed to poor underlying market fundamentals. However, until a vaccine or treatment is released and the general populace regains its confidence, responders felt the market would stay in its current challenged state. Survey responders expect a challenging market for at least the next six to nine months while a vaccine is created, tested, and distributed. Assuming a vaccine is released, most responders assume the market will be in recovery by this time next year. Transaction volume has been down since the beginning of the COVID-19 pandemic in most markets. Anticipated asset price discounts for most property types have yet to materialize as property owners are not willing to capitulate to market pressures if they can keep hold of their assets until a post-vaccine market. Many responders described the capital markets as open, but challenging to access. Construction and permanent financing options have increased since the beginning of the pandemic, but are still selective, relative to the projects they will finance. Institutional equity has continued to enter the market where it has an existing relationship with a manager; otherwise, investors are reluctant to enter the market at this time. DeBoer noted, “While a vaccine continues to be explored, it is imperative that Congress and the Administration soon come to an agreement on the next round of COVID-19 relief. Extending added unemployment benefits, additional funding for the Paycheck Protection Program (PPP), and a rental assistance program to help impacted people as well as struggling small businesses is needed. Moreover, property owners, hospitals, schools and others need liability protection against frivolous lawsuits and businesses need assistance as they seek to cover new and unusual expenses related to safety and cleaning protocols.” Data for the Q3 survey was gathered by Chicago-based FPL Associates on The Roundtable’s behalf. The Roundtable table’s Q4 Sentiment Index will be released in November. # # #

Business Interest Deductibility

August 7, 2020

Roundtable Weekly

Final Treasury Rules on Deducting Business Interest Preserve and Strengthen the Real Estate Exception

Business Interest Deduction

US Treasury Department in Washington Final Treasury regulations released on July 28 create a detailed legal framework to implement the new limitation on the deductibility of business interest enacted in the Tax Cuts and Jobs Act of 2017. The underlying provision—section 163(j) —caps the deduction for business interest expense at no more than 30 percent of modified gross income but allows real estate businesses to elect out of the regime altogether. The deductibility of business interest expense was front and center in the 2017 tax reform debate. Elimination of the deduction was viewed by some as a necessary “pay-for” to help offset the cost of immediately expensing capital investment and reducing the corporate rate from 35 to 21 percent. The Roundtable worked to preserve the full deduction, noting that it was necessary to accurately measure income and critical to the normal financing of real estate investment and activities. (Roundtable President & CEO Jeffrey DeBoer Statement for the Record before Senate Finance Committee, video clips and full hearing on September 19, 2017) During the rulemaking process, The Roundtable focused on ensuring that the regulations would not restrict unnecessarily the ability of a real property trade or business (RPTOB) to elect out of the provisions of the new limit (section 163(j)). Previously proposed regulations clarified, as requested, that interest on debt incurred by a partner to fund an investment in a partnership engaged in a real estate business would be allocable to that business and therefore qualify for the RPTOB election. The proposed regulations also clarified that an RPTOB election by a partnership did not bind a partner with respect to any activity conducted by the partner outside the partnership. The 575 pages of final rules unveiled last week favorably address and resolve several outstanding issues raised in Roundtable comment letters submitted at various times during the two and a half year regulatory process. (The Roundtable’s Interest Deductibility webpage) For example, the regulations clarify that a business entity can be in a real property trade or business even if it is not in a trade or business under the general tax rules of section 162 (the provision that authorizes taxpayers to deduct ordinary and necessary expenses paid or incurred in carrying on a trade or business). Unlike the proposed rules, the final regulations provide that a small business that is exempt from the business interest limit can still make a RPTOB election. This clarification is important because individual partners in a small business may not qualify for the exemption once their interests in multiple properties are aggregated. The final regulations favorably revise troubling language in the proposed rules that suggested the RPTOB exception was only available for trades or businesses involved in rental real estate activities. Consistent with Roundtable recommendations, the Treasury guidance also includes a notice (IRS Notice 2020-59) with a proposed revenue procedure that creates a safe harbor for assisted living facilities so they can qualify for the RPTOB exception – notwithstanding their provision of other services, such as nursing and routine medical services. Other elements of the Treasury guidance include new proposed regulations on specific issues, such as application of the rules to foreign taxpayers. Collectively, the final regulations should provide greater certainty to real estate owners and investors that debt used to acquire, improve, and operate commercial real estate remains fully deductible for federal income tax purposes, provided the taxpayer complies with specific tax and filing requirements. # # #

Carried Interest

August 7, 2020

Roundtable Weekly

Proposed Carried Interest Regulations Would Create Complex Regime for Taxing Partnership Profits’ Interests

Carried Interest Tax Policy

Proposed carried interest regulations released by the Treasury Department on July 31 would implement the three-year holding period requirement enacted in the Tax Cuts and Jobs Act (TCJA) of 2017. TCJA restricted eligibility for the reduced long-term capital gains rate in the case of certain capital gain allocated to a profits interest in a partnership if the investment is held for less than three years. The proposed rules under section 1061 represent the first formal Treasury regulations on the issue of carried interest since it emerged as a controversial political issue in 2007. The 3-year holding period requirement reflects a compromise approach developed by key tax-writers during the 2017 tax reform debate. Members of The Roundtable’s Tax Policy Advisory Committee (TPAC) reviewed and discussed the proposed carried interest regulations on August 3. Critically, the 3-year holding period would not apply to property used in a trade or business (section 1231 gain). In addition, the rules would permit REITs to report capital gains dividends in a manner that facilitates look-through treatment. Thus, REIT shareholders could take into account whether the underlying REIT gain relates to property that meets the 3-year requirement or relates to property excluded from the rule because it gives rise to section 1231 gain. Certain other aspects of the proposed rules appear less favorable. For example, the regulations take an expansive view of what constitutes an “applicable partnership interest” subject to the regime. The exemption for capital gain that relates to a partner’s capital interest involves complex rules and restrictions that may complicate its use. The regulations appear to import a rule from pending legislation that would prevent partners from crediting partnership capital contributions that are attributable to a loan from other partners or the partnership. Other important aspects of the new regime including detailed rules for: determining the “recharacterization amount” and the applicable holding period, anti-abuse measures, and reporting requirements. A TPAC working group will be convening in the days ahead to develop comments and recommendations for Treasury and IRS officials related to the proposed regulations. # # #

August 4, 2020

Policy Comment Letter

MSLP 8-4-20 Loeffler, Cornyn, Braun, Tillis to Treasuy and Fed

Coronavirus Response

July 31, 2020

Roundtable Weekly

COVID-19 Congressional Negotiations Stall; Republican Package Includes Liability Protections, PPP Round 2, and Healthy Workplaces Tax Credit

Coronavirus

Negotiations between Democrats and Republicans over the next round of COVID-19 relief stalled this week after policymakers could not bridge significant differences between the GOP’s $1 trillion package released Monday and the $3.4 trillion proposal House Democrats passed in May. (BGov, July 30 and Roundtable Weekly, May 22) "We're still very far apart on a lot of issues," Treasury Secretary Steven Mnuchin said on July 29 after three days of meetings with House Speaker Nancy Pelosi (D-CA), Senate Minority Leader Charles Schumer (D-NY) and White House Chief of Staff Mark Meadows. "I do think there is a subset of issues that we do agree on, but overall we’re far from an agreement." (RollCall, July 29) Mnuchin added that negotiating a compromise on unemployment insurance, state and local government assistance, and liability protections for businesses are especially challenging. "It makes it the pending business for next week,” said Majority Leader Mitch McConnell (R-KY) [CQ, July 29]. CARES Act benefits regarding $600 weekly unemployment insurance and the federal residential tenant eviction moratorium expire today – placing additional pressure on lawmakers to reach agreement before the congressional recess, scheduled to start on August 8. HEALS Act Provisions Senate Republicans on July 27 unveiled the “Health, Economic Assistance, Liability Protection, and Schools (HEALS) Act.” The GOP package would reduce the expanded unemployment benefit to $200 per week, authorize another round of $1,200 stimulus checks to most Americans, provide more than $100 billion for reopening schools, among other provisions. (Appropriations Committee news release, July 27 and Republican Policy Committee summary, July 28) The GOP’s HEALS Act is comprised of eight bills that form a base for negotiations with Democrats, who passed the $3.4 trillion “Health and Economic Recovery Omnibus Emergency Solutions Act [HEROES] Act” (H.R. 6800) in the House in May. (How the HEALS Act compares to the HEROES Act, CNBC, July 30 and HEALS Act Comparison to HEROES Act and Current Law, Brownstein Hyatt Farber Schreck, July 31) The HEALS Act includes: Liability protections in the “Safeguarding America’s Frontline Employees To Offer Work Opportunities Required to Kickstart the Economy (SAFE TO WORK) Act,” introduced by Sens. John Cornyn (R-TX) and Mitch McConnell (R-KY). A billsummary notes it would “create a federal cause of action for coronavirus exposure claims” that preempts state laws outside of workers’ compensation regimes. A business defendant would lose the liability shield if it engaged in “gross negligence” or “willful misconduct” in causing the plaintiff’s COVID-related injuries. (Summary of the Act)The Real Estate Roundtable joined approximately 480 business groups in a July 30 letter urging Congress to support the liability relief provisions. (The Hill, July 30) The Safe and Healthy Workplaces Tax Credit in the “American Workers, Families and Employers Assistance Act” introduced by Senate Finance Committee Chairman Charles Grassley (R-IA). [Section-by-section summary] The proposal would provide a refundable payroll tax credit for 50% of the costs associated with protecting employees (testing, PPE, cleaning, etc.), reconfiguring workplaces, and upgrading workplace technology to prevent the spread of COVID-19. Expenses between March 13 and the end of this year would qualify, and the maximum credit would be based on the number of employees. The measure reflects stand-alone legislation recently introduced by Senator Rob Portman (R-OH) and Rep. Tom Rice (R-SC). [Roundtable Weekly, July 24] A Wall Street Journal video released yesterday profiles the extensive efforts of commercial real estate companies to accommodate the safe return of workers to offices, featuring Roundtable member Scott Rechler (Chairman and Chief Executive Officer, RXR). The video features the use of new technological tools, revised layout plans and enhanced ventilation systems to enhance the well-being of building occupants. A second round of funding for the Paycheck Protection Program (PPP) would be provided in the “Continuing Small Business Recovery and Paycheck Protection Program Act,” introduced by Sens. Marco Rubio (R-FL) and Susan Collins (R-ME). The $190 billion bill would fund PPP “second draw” loans; a new Section 7(a) loan program for Recovery Sector Businesses; and numerous program criteria reforms. (Section-by-section summary and one-pager.) In other pandemic relief news, a bill introduced on July 29 by members of the House Committee on Financial Services, Van Taylor (R-TX), Al Lawson (D-FL), and Andy Barr (R-KY), would provide economic support to the commercial real estate market, especially for businesses with Commercial Mortgage-Backed Securities (CMBS) debt. The “Helping Open Properties Endeavor (HOPE) Act” (H.R. 7809) would establish a Treasury facility to encourage bank loans in the form of preferred equity to help struggling CMBS borrowers. (Wall Street Journal and Rep. Taylor news release, July 29) Federal Reserve Chairman Jay Powell on July 29 held a news conference after a two-day meeting of the Federal Open Market Committee (FOMC) to address interest rates and the repercussions of the pandemic. Powell stated, “To support the flow of credit to households and businesses, over the coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning.” (FOMC statement and new conference video, July 29) As pandemic negotiations continue in Congress, The Roundtable and its real estate industry partners remain engaged in issues of vital importance to CRE. See the story below for more details presented this week in a webinar held by Walker & Dunlop. # # #

News

July 31, 2020

Roundtable Weekly

Industry Trade Group Leaders Focus on Prospects for Stimulus Legislation and CRE Impact

Capital and Credit Coronavirus Tax Policy

Real Estate Roundtable President and CEO Jeffrey DeBoer joined other real estate industry trade group leaders in a July 29 Walker & Dunlop webinar “All Eyes On Washington: What will the next stimulus bill do for CRE?” moderated by Roundtable member and W&D Chairman and Chief Executive Officer Willy Walker. Mortgage Bankers Association CEO and President Bob Broeksmit and National Multifamily Housing Council President Doug Bibby also participated in this “Walker Webcast” to discuss the next $1 trillion+ stimulus bill under consderation on Capitol Hill and its impact on the multifamily, mortgage, and commercial real estate industries. (Watch video on The Roundtable’s YouTube channel) The three trade group leaders agreed that consensus on a new stimulus bill will stretch into August and predicted a new bill would be passed by Aug. 8 or Aug. 15. Bibby and Broeksmit predicted the legislative package cost would total $1.75 trillion, while DeBoer estimated $2 trillion. (BisNow, July 29 and ConnectCRE, July 30) DeBoer noted that the real question in determining whether additional funding for state governments, small businesses, and others will be approved is how previous funds allocated by Congress during the pandemic are being allocated. DeBoer asked, “Are they going to solve COVID-related problems, or solve issues that were pre-existing?” Broeksmit added, “An imperfect compromise is going to emerge, and that’s all right because we need to get the funding out quickly. We don’t have time to get it perfect.” Walker also focused on the federal eviction moratorium, observing that it negatively affects the relationship between landlords and their tenants as they attempt to work through financial challenges of paying rent. “When you have an eviction moratorium, there is a propensity for people to go dark on you,” Walker said. “The owner and tenants stop working with each other. You lose the ability to maintain your community.” Bibby stated that an eviction moratorium may seem appealing but it creates a cycle of economic disinvestment and puts the livelihoods of tens of thousands of owners across the country at risk. DeBoer emphasized that a robust federal rental assistance program to help the unemployed as well as struggling small business is necessary to preserve the “rental obligation chain” that underpins the economy. He also said The Roundtable supports additional funding for the Paycheck Protection Program (PPP), which has distributed approximately $520 billion to an estimated 5 million businesses. DeBoer added that businesses should receive assistance from the government on “new and unusual” expenses related to safety and cleaning protocols. “We have to think of this period as building a bridge to a time when the economy works again, when businesses are open and when people are employed and can stand on their own two feet again,” said DeBoer. “But we need the bridge to get there, and it needs to be strong enough and long enough.” (REBusiness Online, July 31 and Walker Webcast video) # # #

News

July 31, 2020

Roundtable Weekly

Business Coalition Urges Senate to Pass Corporate Diversity Legislation

Affordable Housing Capital and Credit Housing Likekind Exchanges LikeKind Exchanges LKEs Tax Policy

The Real Estate Roundtable and 16 other national organizations sent a letter on July 27 urging leaders of the Senate Banking Committee to advance legislation that would require public companies to report the racial, ethnic and gender composition of their boards and executive officers. (The Hill and coalition letter, July 27) The Improving Corporate Governance Through Diversity Act of 2019 (H.R. 5084), championed by Rep. Gregory Meeks (D-NY), passed the House by bipartisan vote last November. (Rep. Meeks news release) The coalition’s letter encourages the Senate Banking Committee to consider a companion bill (S. 360) sponsored by Sen. Robert Menendez (D-NJ). The act would require issuers that must register under the Securities Exchange Act of 1934 to provide data regarding diversity on corporate boards and in executive management. Such diversity reporting would occur in annual reports and proxy statements regarding election of directors filed with the Securities and Exchange Commission (SEC). The bill would also require securities issuers to disclose whether it has adopted a plan or strategy to promote board- and executive-level racial, ethnic, gender, and veteran-status diversity. The coalition letter addressed to the Senate Committee’s Chairman Mike Crapo (R-ID) and Ranking Member Sherrod Brown (D-OH), cites a 2019 PwC Annual Corporate Directors Survey to show the benefits of diversity. The survey results show that 94% of participating board directors indicated that a diverse board brings unique perspectives; 87% responded that diversity enhances board performance; and 84% responded that it improves relationships with investors. Other signatories on the coalition letter include Nareit, International Council of Shopping Centers (ICSC), American Bankers Association, and the U.S. Black Chambers, Inc. There is a growing interest among policymakers regarding environmental, social, and governance (ESG) reporting by public companies. In July 2019, the House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets held a hearing on “Building a Sustainable and Competitive Economy: An Examination of Proposals to Improve Environmental, Social and Governance (ESG) Disclosures.” (Roundtable Weekly, August 9, 2019). Presumptive Democratic Presidential Nominee Joe Biden this week presented a series of proposals intended to address racial economic inequality. Biden said that as president, his future appointments to the Federal Reserve would be “diverse nominees for the Board of Governors and the regional Federal Reserve Banks.” (The Wall Street Journal, and The New York Times, July 29) Last week the Biden campaign indicated its desire to eliminate several current law tax provisions, including like-kind exchanges under Section 1031, to pay for a 10-year, $775 billion “caregivers” proposal. Roundtable President and CEO Jeffrey DeBoer responded, "The long-standing like-kind exchange tax law has encouraged investment in affordable housing and other properties, generated state and local tax revenue, and spurred new jobs through labor-intensive property improvement. As a result, exchanges allow cash-strapped minority, women, and veteran-owned businesses to grow their business by temporarily deferring tax on the reinvested proceeds.” (Entire Roundtable Statement on like-kind exchanges, July 21 and Roundtable Weekly, July 24). # # #

News

July 31, 2020

Roundtable Weekly

EPA Releases ENERGY STAR Guidance on Building Operations Impacted by COVID-19

Coronavirus Energy Efficiency Energy Policy ENERGY STAR EPAs ENERGY STAR Certification for Buildings

The U.S. Environmental Protection Agency (EPA) announced ENERGY STAR program guidance this week to reflect changes in building operations due to the COVID-19 pandemic. The guidance was developed after EPA sought input from The Roundtable’s Sustainability Policy Committee Advisory Committee (SPAC). The EPA guidance – “Has COVID-19 affected ENERGY STAR certification?” – impacts real estate industry practices regarding the web-based “Portfolio Manager” tool used by more than 450,000 properties (or nearly 45% of U.S. commercial building space) to measure, benchmark, and track energy, water, and waste management in buildings. “Portfolio Manager” is a voluntary platform at the federal level for private sector buildings although a number of state and local laws mandate its use in major markets. EPA explained that building owners and managers should update Portfolio Manager “use details” to reflect changes in occupancy and operations that may have occurred since the start of the pandemic – for both the numbers of workers in a building and the asset’s weekly operating hours. (Point #1 in EPA’s guidance) The agency also provided practical instructions on how to update such “worker numbers” and “hours of operation” details in the Portfolio Manager tool. When merged with data on a building’s actual energy consumption, these “use details” are key variables to determine a 1-100 ENERGY STAR rating that allow investors, tenants, regulators, and other audiences to assess an asset’s energy performance compared to like-kind buildings. EPA staff sought input on these matters at SPAC’s “virtual meeting” on June 12, which was held in conjunction with The Roundtable’s remote Annual Meeting (Roundtable Weekly, June 12). SPAC members were surveyed for their recommendations about how ENERGY STAR should address changes in building operations during the pandemic. The committee’s preferred option is now reflected in EPA’s latest guidance. EPA plans to issue additional guidance (expected in September) to advise owners and managers on how to apply for ENERGY STAR certifications that may be awarded to buildings in 2020. (Point #3 in EPA’s guidance) The key clarification in this week’s announcement is that updating “use detail” data to reflect COVID-era operations is prerequisite for the ultimate ENERGY STAR “label,” which may be granted for a building that ranks “75” or higher on EPA’s scale. This week’s guidance is the latest example of longstanding cooperation between the ENERGY STAR program and SPAC. It follows collaborations to update the technical models that EPA currently uses to “score” buildings (Roundtable Weekly, July 19, 2019). SPAC also assisted the agency with developing the “ENERGY STAR Tenant Space” program to recognize high performance design and construction of leased office. (Roundtable Weekly, June 15, 2018) In related news, EPA opened its process for 2021 ENERGY STAR awards this week. Applications must be submitted by December 9, 2020 and can be downloaded here. SPAC is led by Chairman Anthony E. Malkin (Chairman, President, and CEO, Empire State Realty Trust) and Vice Chairman Daniel Egan (Senior Vice President, Energy & Sustainability, Vornado Realty Trust). # # #

Cancellation of Indebtedness (COD) Income

July 27, 2020

Media Article

Congress, COVID, and COD – Tax Notes, July 2022

Cancellation of Indebtedness COD Income, Tax Policy,

Coronavirus Response

July 24, 2020

Roundtable Weekly

Republicans Seek Intra-Party Consensus on Coronavirus Aid as Unemployment Benefits Expire and Democrats Wait to Begin Negotiations

Capital and Credit Coronavirus Tax Policy

The White House and Senate Republicans have reached an “agreement in principle” on GOP priorities for another COVID-19 relief package but legislative text is still in the drafting phase, as negotiations in earnest with Democrats have yet to commence. (The Hill, NPR, and Law 360, July 23) Sen. Rob Portman (R-OH) outlined GOP priorities during a July 22 floor speech on the next COVID-19 bill. (News release and transcript of Portman’s comments and YouTube video.) Republicans are reportedly in broad agreement on issues such as a liability shield for businesses from frivolous COVID-related lawsuits, a new targeted round of forgivable Paycheck Protection Program (PPP) loans for small business, and funds to help schools re-open, but “[w]e’re still developing the bill,” said Senate Finance Committee Chairman Chuck Grassley (R-IA). (B-Gov, July 23) The GOP proposal is also expected to include additional unemployment benefits that expire this month, but less than the $600 per week boost Congress approved in March as part of the CARES Act. (Roundtable Weekly, March 27 and July 17). Republicans’ next plan is expected to fall within the $1 to $1.5 trillion dollar range. The Democratic starting point for negotiations is the $3.4 trillion HEROES Act (H.R. 6800) passed by the House of Representatives in May (See one-pager; section-by-section; state and local relief summary and Roundtable Weekly, May 22). Speaker Nancy Pelosi (D-CA) expressed her conference’s perspective that the GOP’s relief proposal “falls very short of the challenge that we face in order to defeat the virus and to open our schools and to open our economy." (July 23 news conference video, The Hill) Healthy Workplaces Tax Credit Bipartisan support is growing for a “re-opening tax credit” in the next COVID-19 response package, which could offer businesses assistance in helping defray extra costs associated with workplace cleaning, disinfecting, personal protective equipment, and virus testing. (The Hill, July 16 and Roundtable Weekly, July 17) Legislation includes the Clean Start: Back to Work Tax Credit Act (H.R. 7079) – introduced by Reps. Darin LaHood (R-IL) and Stephanie Murphy (D-FL). The bill proposes a credit maximum of $250,000 per business entity, up to $25,000 per location. (LaHood news release, May 29) LaHood discussed his tax credit proposal and other pandemic relief measures yesterday in a video discussion with Roundtable President and CEO, Jeffrey D. DeBoer. Watch the July 23 LaHood discussion on The Roundtable’s Youtube channel. Additionally, Sen. Rob Portman (R-OH) this week introduced the Healthy Workplaces Tax Credit Act, which proposes a refundable payroll tax credit with a phased amount based on the number of a business’s employees that would cover 50% of costs associated with PPE, cleaning, disinfecting, testing, and reconfiguring workspaces (Portman news release , July 20). Rep. Tom Rice introduced companion legislation in the House. A broad business coalition, including The Real Estate Roundtable, urged Congress on July 16 to include a “healthy workplaces” tax credit in the next coronavirus relief bill. (Coalition letter, July 16 and Roundtable Weekly, July 17) Liability Protections and Minority Credit Legislation Governors from 21 states urged Congress this week to provide “common sense” civil liability protections to health care workers, businesses, and schools in the next COVID-19 response package. (Governors’ Letter, July 21) Republican Senators have indicated liability protections remain a leading priority for inclusion in the next relief package. A draft outline of the Senate’s new COVID-19-related liability protections for businesses proposes a five-year shield from coronavirus lawsuits. (The Hill, Fox Business, CBS News, and Roundtable Weekly, July 17) The Senate summary reflects principals supported by The Roundtable that were part of a multi-sector coalition letter sent to Hill leadership on May 27. (Roundtable Weekly, May 29) Separately, Senate Minority Leader Charles Schumer (D-NY) and Senators Mark Warner (D-VA), Cory Booker (D-NJ), and Kamala Harris (D-CA) introduced legislation on July 21 to invest $17.9 billion in low-income and minority communities especially hard-hit by the COVID-19 crisis. Representative Gregory Meeks (D-NY) introduced companion legislation in the House. The Jobs and Neighborhood Investment Act would provide eligible community development financial institutions (CDFIs) and Minority Depository Institutions (MDIs) with capital, liquidity, and operational capacity to expand the flow of credit into underserved, minority, and historically disadvantaged communities. The sponsors aim to include the measure in upcoming COVID-19 relief legislation to help small businesses remain solvent and expand operations, while providing affordable access to credit for lower income borrowers. Congress faces a tight deadline to address a multitude of economic and health policy issues related to COVID-19 in an omnibus bill before breaking for its August recess. (The Hill, July 20)

Capital and Credit

July 24, 2020

Roundtable Weekly

Real Estate Coalition Seeks Expansion of Main Street Lending Program for CRE Borrowers; Hotel Industry Seeks COVID-19 Relief

CMBS The Fed

Federal reserve building at Washington D.C. on a sunny day. A coalition of nine real estate industry groups, including The Real Estate Roundtable, on July 21 submitted a set of recommendations to the Senate Banking Committee aimed at improving the Fed’s Main Street Lending Program (MSLP) for commercial real estate owners and tenants. The committee is currently reviewing the effectiveness of the MSLP and other Fed credit lending facilities launched to counter the economic repercussions of the COVID-19 crisis. (Real estate coalition letter, July 21) The coalition letter states, “The impact of COVID-19 has been especially devastating to commercial real estate tenants, borrowers and lenders. As our members attempt to navigate the fall-out from this crisis, there is a deficiency of reasonably priced capital sources to address temporary liquidity deficits. Should impacted assets go into foreclosure, a downward spiral follows, affecting jobs, property values, investors at all levels (including pension funds), and state and local tax revenues. The repercussions on communities will be profound and take years from which to recover.” The coalition letter makes a number of recommendations for adapting the MSLP to support real estate. AHLA Comment Letter Requests Additional Liquidity Assistance The American Hotel & Lodging Association (AHLA) sent a letter to the congressional leadership this week requesting additional relief as the leisure and hospitality sector faces the loss of 4.8 million jobs since February. AHLA is urging Congress to: Provide additional liquidity for severely impacted businesses through a targeted extension of the Paycheck Protection Program (PPP). Establish a Commercial Mortgage Backed Securities (CMBS) market relief fund, with a specific focus on the hotel industry, as part of the Federal Reserve’s lending options. Make structural changes to the Main Street Lending Facility (MSLP) established under the CARES Act to ensure hotel companies can access the program. Include limited liability language to provide a limited safe harbor from exposure liability for hotels that reopen and follow proper public health guidance. Include targeted tax provisions that will benefit severely injured businesses and their employees, including tax credits for capital expenditures or expenses to meet the industry’s Safe Stay initiative. Moody’s Report Raises Concerns About CMBS Delinquencies for Hotel and Retail Moody’s reported yesterday that special servicing and late payment volumes have both continued to spike as ongoing COVID-19-related cash flow disruptions severely hinder retail and hotel properties backing commercial mortgage-backed securities (CMBS) loans. The report shows that significant drops in revenue per available room (RevPAR) and low rent collections among nonessential business have resulted in hotel and retail loans making up more than 91% of special servicing transfers since 1 March. The remaining 9% was primarily office and mixed-use. Mixed-use property types typically included a retail or hotel component. (Moody’s report, July 23) Federal Reserve officials are scheduled to meet on July 28 and 29 to discuss how and whether to provide more economic stimulus. They are expected to address interest rates and the status of several credit lending programs, but will likely not release any proposal until the fall. (Wall Street Journal, July 22) # # #

Like-kind Exchanges

July 24, 2020

Roundtable Weekly

Biden Proposes Taxes on Real Estate Investments and 1031 Like-Kind Exchanges to Pay for Caregiving Plan

Likekind Exchanges LikeKind Exchanges LKEs Tax Policy

Presumptive Democratic nominee Joe Biden on July 21 released a policy proposal to fund universal childcare and in-home elder care by taxing real estate investors and targeting the taxation of like-kind exchanges. (The Real Deal July 21) The proposal states that $775 billion would be raised over 10 years to pay for the plan “… by rolling back unproductive and unequal tax breaks for real estate investors with incomes over $400,000 and taking steps to increase tax compliance for high-income earners.” A senior Biden campaign official added the plan would prevent investors from using real estate losses to lower their income tax bills and would take aim at the taxation of like-kind exchanges, according to a Bloomberg report. Real Estate Roundtable President and CEO Jeffrey DeBoer responded by noting the many ways in which like-kind exchanges contribute to economic growth and create greater opportunity for entrepreneurs from under-represented demographic groups. "The long-standing like-kind exchange tax law has encouraged investment in affordable housing and other properties, generated state and local tax revenue, and spurred new jobs through labor-intensive property improvement. Exchanges reduce the need for outside financing, leading to less leverage and debt on U.S. real estate. As a result, exchanges allow cash-strapped minority, women, and veteran-owned businesses to grow their business by temporarily deferring tax on the reinvested proceeds,” DeBoer said. He added, “Like-kind exchanges are particularly important during economic downturns when access to capital is less certain. In short, like-kind exchanges create a more dynamic real estate marketplace, ensuring properties do not languish, permanently underutilized and under-invested. Congressional review of like-kind exchanges is reasonable and appropriate, and we will support sensible reforms, as The Roundtable has in the past, that preserve and maintain the provision’s broad-based economic benefits." (National Real Estate Investor, July 21) “The Biden Plan for Mobilizing American Talent and Heart to Create a 21st Century Caregiving and Education Workforce” does not contain details on the specific changes to like-kind exchange (LKE) taxation. (CNBC, July 21) A 2015 economic study commissioned by The Real Estate Roundtable and other national real estate organizations on the US commercial real estate market highlights the critical role that 1031 exchanges play in stabilizing rents, safeguarding property values and strengthening the economy. (“The Economic Impact of Repealing or Limiting Section 1031 Like-Kind Exchanges in Real Estate” by Professors David C. Ling and Milena Petrova) # # #

July 21, 2020

Policy Comment Letter

7-21-20-FINAL_JT_CRE_letter_on_MSLP

July 21, 2020

Policy Comment Letter

AHLA_AAHOA_LHA_NABHOOD_MSLFLetter 062620 FINAL

July 21, 2020

Policy Comment Letter

ASAE Kudlow-Letter-on-COVID-19-Stimulus

July 21, 2020

Policy Comment Letter

BOMA Congressional Letter on Commercial Real Estate Liability Concerns

July 21, 2020

Policy Comment Letter

Chairman Crapo Letter to Treasury_Fed _7.31.20

Coronavirus Response

July 17, 2020

Roundtable Weekly

Policymakers Signal Positions on Next COVID-19 Relief Package; Negotiations Expected to Address Business Liability and Aid to Business Sectors

Business Liability Coronavirus

Lawmakers return to Washington on July 20 to begin urgent negotiations on a massive COVID-19 relief package that is expected to address business liability, unemployment benefits and tax incentives before Congress breaks for its August recess. (BGov, July 17 and CQ, July 15) Treasury Secretary Steven Mnuchin today testified before the House Committee on Small Business, urging Congress to swiftly pass a fourth significant relief package since the pandemic outbreak. Mnuchin said additional relief should target certain industries, smaller businesses, and lower- to middle-income families that have been especially hard-hit by the pandemic. “Certain industries, such as construction, are recovering quickly, while others, such as retail and travel, are facing longer-term impacts and will require additional relief,” Mnuchin said in his prepared remarks. Mnuchin added that the Paycheck Protection Program (PPP), which provides forgivable small business loans, should be extended, but on a more targeted basis for smaller companies and hospitality businesses. (NYTimes, July 17) Senate Proposal on Business Liability Senate Republicans are expected to unveil their economic aid proposal early next week that is expected to include some level of unemployment subsidy and address business liability. (The Hill, July 17) Senate Majority Leader Mitch McConnell (R-KY) has emphasized that federal courts should have jurisdiction over liability claims arising from coronavirus infections to limit the legal exposure of businesses, schools and other organizations as they reopen. (Washington Post, July 6) McConnell and Texas Republican Senator John Cornyn are working on a measure that would temporarily give businesses, schools, colleges, charities and other organizations a shield from lawsuits as long as they make “reasonable” efforts to follow public health guidelines and didn’t commit an act of “gross negligence” or “intentional misconduct.” (BGov, July 16 and Wall Street Journal, July 16) A draft outline of the Senate’s new COVID-19-related liability protections for businesses proposes a five-year shield from coronavirus lawsuits. The proposal would be retroactive from December 2019 through 2024, or until the expiration of an emergency declaration issued by the Department of Health and Human Services. (The Hill, Fox Business and CBS News, July 17) The newly released Senate summary reflects principals supported by The Roundtable that were part of a multi-sector coalition letter sent to Hill leadership on May 27. (Roundtable Weekly, May 29) Roundtable President and CEO Jeffrey DeBoer talked about the business liability issue and how it affects CRE in a July 10 CBRE podcast – “Public Policy in the Age of COVID: Shaping the CRE Recovery.” DeBoer noted during the podcast, “… if businesses don't have a roadmap on what they're supposed to be doing to keep people healthy when they come in contact with their business – and I'm talking about schools and hospitals and bowling alleys and shopping centers. We need to understand what it is that we're supposed to be doing as a reasonable person in order to not subject ourselves to potential liability claims down the road.” He added, “We don't want a blanket shield. We're not talking about protecting people from negligent activities and certainly not people that are grossly negligent. But we want to understand what we should be doing so that we can … protect the people that work in our buildings and come into our buildings every day. And without that protection, it's going to be very hard for businesses and people in hospitals and schools and everyone to move forward. So this is critically important.” Upcoming Negotiations Senate Finance Committee spokesperson Michael Zona commented yesterday about upcoming negotiations on Phase Four of COVID-19 relief, “A number of tax relief proposals will be part of the discussion.” (Bloomberg Tax and Politico, July 16) Several bipartisan bills currently in the Senate and House would create a healthy workplace tax credit for businesses and nonprofits that incur unexpected costs as they reopen, including extensive cleansing, COVID-19 testing and personal protective equipment for employees. (See more details in the “Healthy Buildings” story, below) The House of Representatives in May passed the $3.4 trillion HEROES Act, the largest financial stimulus bill in U.S. history, to combat the ongoing economic fallout related to the coronavirus pandemic. (H.R. 6800, Health and Economic Recovery Omnibus Emergency Solutions Act: one-pager; section-by-section; state and local relief summary and Roundtable Weekly, May 22) Republican policymakers have signaled they are open to another COVID-19 bill, but on a measured basis, and the Trump administration has called for limiting the next relief package to $1 trillion. President Trump this week also said he will not sign a new coronavirus stimulus package without the inclusion of a payroll tax cut, which has not attracted much support on Capitol Hill. (Washington Post, July 16) The time frame for legislative action on legislation that will likely exceed a trillion dollars is tight. The House is aiming to recess for the summer on July 30, while the Senate plans to recess on August 7. The Democratic Party Convention is scheduled for August 17-20 in Milwaukee, WI. Republicans are planning to hold their convention August 24-27 in Jacksonville, FL. Both chambers plan to return from summer recess on September 8. # # #

Healthy Buildings

July 17, 2020

Roundtable Weekly

Coalition Urges Congress to Help Businesses with COVID-Related Cleaning, Safety, and Prevention Expenses

A broad business coalition urged Congress on July 16 to include assistance in the next pandemic response package to help businesses offset extra expenses related to heightened cleanliness and safety of work environments in the COVID-19 era. (Coalition letter, July 16) The Worldwide Cleaning Industry Association (ISSA) is leading the coalition, which includes The Real Estate Roundtable, Building Owners and Managers Association (BOMA) International, the American Hotel & Lodging Association, International Council of Shopping Centers, and over two dozen additional national trade groups. ISSA estimates that cleaning costs are 50% or higher compared to pre-pandemic practices due to increased use of disinfecting products, equipment upgrades, and greater frequency of cleaning activities. ISSA estimates a 3,000 square retail space will cost an additional $56,160 in cleaning-related costs – on top of personal protective equipment (PPE), testing, employee training, and other COVID-19-related expenses. Several bipartisan bills pending in the House and Senate would establish a tax credit to help businesses and nonprofits cover more expensive safety and cleaning practices. Hill legislators are considering whether such incentives should be included in the next phase of pandemic relief legislation that may pass Congress before the August recess. Various “re-opening tax credit” bills introduced to date differ in terms of the size of the incentive they would offer, and the kinds of safety-related expenses they would cover. (The Hill, July 16) These bills include: The Clean Start: Back to Work Tax Credit Act (H.R. 7079) introduced by Reps. Darin LaHood (R-IL) and Stephanie Murphy (D-FL), which would provide a 50% tax credit for the costs of qualified cleaning expenses including third-party janitorial services, cleaning products, PPE, and related tools and machinery. The bill proposes a credit maximum of $250,000 per business entity, up to $25,000 per location. The Healthy Workplaces Tax Credit Act introduced by Rep. Tom Rice (R-SC), would offer a refundable tax credit for 50% of business’s costs incurred for COVID-19 testing, PPE, cleaning and disinfecting, and reconfiguring work spaces to adhere to social distancing guidelines. The credit would be limited to $1,000 per employee for a business’s first 500 employees; $750 per employee for the next 500 employees; and $500 per employee for each subsequent employee. Similar measures include a small business “workplace safety” tax credit (S. 4178) introduced by Sens. Kyrsten Sinema (D-AZ) and Kevin Cramer (R-ND); the “Safe Re-Opening Tax Credit” (H.R. 7222) introduced by Rep. Jimmy Panetta (D-CA); and the “Small Business PPE Tax Credit Act” (H.R. 7216) introduced by Rep. Brenda Lawrence (D-MI). The ISSA-spearheaded coalition explained in its letter that any “re-opening tax credit” should be targeted, temporary, capped, and available to business entities and non-profits regardless of size. The letter noted that such a tax credit would help protect against further COVID-19 infections and other respiratory conditions such as asthma, MRSA and influenza. A COVID-induced healthy workplace tax credit would be “critical to the safety of Americans as businesses re-open and workers return to their jobs. The proposal will also prepare workplaces to better deal with future emerging pathogens that we could be confronted with in the future,” the coalition letter concludes. # # #

Roundtable Leadership

July 10, 2020

Roundtable Weekly

Real Estate Roundtable Re-Elects Cafaro as Chair, Approves Five New Board Members; 2020 Annual Report Focuses on National Recovery

Roundtable Leadership Roundtable Meeting

The Real Estate Roundtable’s membership has re-elected Debra A. Cafaro (Chairman and Chief Executive Officer, Ventas, Inc.) as Chair, while approving five new members for its Board of Directors who will serve during the organization’s 2021 fiscal year (July 1, 2020 – June 30, 2021).Roundtable President and CEO Jeffrey DeBoer presented the election results and the organization’s FY2020 Annual Report, Leading Though Crisis, during The Roundtable’s June 11 Annual Meeting. The 24-member FY2021 Board is elected from the membership and includes five elected leaders of national real estate trade organizations from The Roundtable’s 19 partner associations. Cafaro, whose three-year term as chair began July 1, 2018, said, "We are delighted to welcome five industry leaders to The Real Estate Roundtable Board. Their outstanding backgrounds, broad industry representation and diverse experiences will enhance our ability to act as the cohesive industry voice addressing key national policy issues relating to real estate and the overall economy. With our existing Board members, we also intend to drive constructive solutions to economic challenges created by the COVID-19 and racial injustice, both of which are crucial to our society, the national economy, local communities and our industry.I also sincerely thank our Board members whose terms have expired. They have made significant contributions to the industry and we look forward to their continued engagement with The Roundtable,” Cafaro said. DeBoer stated, “Roundtable members are among the most talented and innovative industry leaders. Our Board of Directors represents all major industry activities and is diverse geographically, racially and by gender. The Board’s strategic and organizational decisions are thus sustainable, practical and inclusive. I look forward to continuing to follow the Board’s recommendations as we continue our fact-based analysis of overall economic and industry specific policy issues.” Joining The Roundtable’s Board of Directors as of July 1 are:Thomas J. Baltimore, Jr., Chairman, President & CEO, Park Hotels and Resorts Shelby Christensen, Chair and Chief Elected Officer, Building Owners & Managers Association International (BOMA)Ken McIntyre, Chief Executive Officer, Real Estate Executive CouncilBrandon Shorenstein, Chairman and Chief Executive Officer, Shorenstein Properties William Stein, Chief Executive Officer, Digital Realty Trust and Chair, NareitSee the complete list of the FY2021 Roundtable’s Board of Directors here.The following Roundtable Board members whose terms expired as of July 1 are:Dr. Thomas R. Arnold, Global Head of Real Estate, Abu Dhabi Investment AuthorityTim Byrne, President and Chief Executive Officer, Lincoln Property CompanyScott O. Jones, PE, Principal, Jones Inc. and Immediate Former Chair and CEO, BOMARobert A. Spottswood, President, Spottswood Companies, Inc. andChairman, American Resort Development AssociationNational Recovery & Leading Through CrisisJeffrey DeBoer addresses how policymakers and the industry can move forward in the wake of the COVID-19 Pandemic in a July 10 CBRE podcast with Brian Stoffers, Chairman of the Mortgage Bankers Association and Global President of Debt & Structured Finance, CBRE.DeBoer states in Public Policy in the Age of COVID: Shaping the CRE Recovery, “…look at what Washington has tried to do … building a bridge, in a sense, a bridge to get people and businesses to a point where they return to some semblance of normalcy. And the problem … is the bridge going to get us there as it's currently constructed? Is it long enough? Is it strong enough?”He adds, “…there's a great deal of concern about that because the PPP – the Paycheck Protection Program – that helped people pay their rent and the unemployment and the supplemental … will it burn off at the same time that the economy regenerates itself? Or will there be this lapse? And if there is a lapse, that's really the focus, I think, of a great deal of concern right now.”The Roundtable has also released its FY2020 Annual Report – Leading Though Crisis. Chair Cafaro states in the report that as The Real Estate Roundtable beings its 21st year of industry policy work, the nation’s economy is in deep distress due to the COVID-19 health crisis and Americans’ civil protest is a justified expression of anger and frustration around racial injustice. “We pledge to take action and be part of the solution,” Cafaro states. She adds that there is much to be done on the policy front ahead: “Although the challenges in these times are unprecedented, our response is based on the same longstanding commitment to sound, evidence-based, nonpartisan policy that undergirds all of our work and success. We know from experience that there is a path to recovery.”The 2020 Annual Report covers the following policy issues:COVID-19 RER Response TimelineTaxCapital and CreditInfrastructure and HousingEnergy and ClimateHomeland SecurityThe Roundtable’s Meeting Calendar for FY2021 is now available. The next Fall Roundtable Meeting on September 22 is for Roundtable-level members only. Registration forms for the remote meeting will be sent directly to members. # # #

Infrastructure

July 10, 2020

Roundtable Weekly

House Democrats Pass $1.5 Trillion Climate-Focused Infrastructure Package While GOP Prioritizes Surface Transportation Funding

Infrastructure

House Democrats on July 1 passed a sprawling $1.5 trillion infrastructure package (the Moving Forward Act, H.R. 2) largely along party lines (233-188). The bill would reauthorize spending for the nation’s roads, bridges and mass transit transportation – and also addresses housing, water, broadband, renewable energy, electric grid, and education infrastructure. (Wall Street Journal and Washington Post, July 1) The broad Democratic package reflects the party’s blueprint for infrastructure priorities in the lead-up to the November elections. (Politico, July 1) H.R. 2 includes climate-related provisions that would require states to measure and reduce emissions from transportation systems, which account for the nation’s single largest source of greenhouse gases. (U.S. Energy Information Administration) H.R. 2 would also support mass transit and other low-emissions transportation modes with more money, and spur greater electrification of vehicle fleets.H.R.. 2 faces steep GOP opposition. (E&E News, June 29) Senate Majority Leader Mitch McConnell (R-KY) said the measure is “not going anywhere in the Senate” due to its price tag and focus away from highways and more traditional surface transportation funding. (The Hill, July 1)The White House threatened to veto H.R. 2 because it includes “‘Green New Deal’ initiatives” and “fails to tackle the issue of unnecessary permitting delays, which are one of the most significant impediments to improving our infrastructure.” (Statement of Administrative Policy, June 29) The Trump administration is reportedly preparing its own $1 trillion infrastructure proposal. (Reuters, June 15)A core component of the House-passed legislation is a $494 billion surface transportation bill – the INVEST in America Act – that would reauthorize funding for the Highway Trust Fund, which is scheduled to expire on September 30. Action on the Highway Trust Fund has been considered a “must-do” policy item before the November elections (Roundtable Weekly, June 19 and June 26)A National League of Cities survey shows that coronavirus-related expenses have forced more than 700 U.S. cities to suspend or terminate plans to upgrade critical infrastructure. (Washington Post, June 23)Job-creating infrastructure legislation could become a major focus for lawmakers in the second half of 2020 as high unemployment levels linger amid increasing uncertainty about business reopenings during the pandemic.# # #

News

July 10, 2020

Roundtable Weekly

New Data Shows Greater Flood Risk Across America, National Flood Insurance Program Funding Scheduled to Expire September 30

Flood Insurance National Flood Insurance Program NFIP

Properties across much of the United States face a far greater risk of flood damage then current estimates maintained by the Federal Emergency Management Agency (FEMA), according to new data from the First Street Foundation, a non-profit research and technology consortium. (New York Times, June 29)FEMA administers the National Flood Insurance Program (NFIP), which aims to reduce the impact of flooding on private and public structures by providing affordable federal insurance to property owners, renters and businesses and by encouraging communities to adopt and enforce floodplain management regulations.Funding for NFIP is currently scheduled to expire on September 30, after numerous temporary extensions. The federal government’s current flood maps guide homebuilders, owners and mortgage lenders about flood risk.The First Street Foundation’s report, “The First National Flood Risk Assessment: Defining America’s Growing Risk” classifies 14.6 million properties as being at substantial risk from flooding, whereas FEMA classifies 8.7 million properties as facing the same risk. (Axios, June 29)In current climate conditions, 21.8 million properties are classified as at risk, according to the new report. “When adjusting for future environmental changes, by 2050, this will raise the number of properties with any risk across the country by 7.7% percent to 23.5 million,” the report states.Any home can be searched on First Street’s FloodFactor.com website, which will soon integrate its data with Realtor.com.Matthew Eby, founder and executive director of First Street Foundation said, “There are millions of Americans who have substantial flood risk and have no idea and now they’ll be able to access that ... Having that data available will change the perspective of flood risk in this country.”The National Flood Insurance Program (NFIP)On May 14, 2019, the House Financial Services Committee unanimously approved a five-year flood insurance reform and reauthorization bill – the National Flood Insurance Program Extension Act of 2019 (H.R. 2578).The bill would renew the NFIP until Sept. 30, 2024; forgive the NFIP’s remaining $20 billion debt and boost funding for mapping, floodplain management, and mitigation for homes, businesses and infrastructure. It has not yet made it to the floor for a vote due to pressure from coastal state interests.Meanwhile, the Trump Administration plans to overhaul government-subsidized flood insurance, in a sweeping proposal that could raise rates on more expensive properties and those in higher-risk areas. The proposal would take effect on Oct. 1, 2020. (Wall Street Journal, March 23, 2019)Under the current NFIP, commercial property flood insurance limits are very low – $500,000 per building and $500,000 for its contents. Lenders typically require this base NFIP coverage, and commercial owners must purchase Supplemental Excess Flood Insurance for coverage above the NFIP limits. Only a niche market of carriers typically provides this type of excess coverage and The NFIP's low commercial limits make it problematic for most commercial owners.The Roundtable and its coalition partners support NFIP reauthorization with the inclusion of provisions that permit a voluntary "commercial exemption" for mandatory NFIP coverage if commercial property owners currently maintain adequate flood coverage.Congress will face the possibility of yet another NFIP funding extension before September 30 if policymakers cannot agree on reforming the program through legislation.# # #

Coronavirus Response

July 3, 2020

Roundtable Weekly

Key Policymakers Testify on COVID-19 Relief and CRE; Congress Extends PPP until August 8; House Passes Bill Extending Eviction Moratorium 12 Months

Coronavirus

Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin offered their views on potential COVID-19 relief for commercial real estate during a June 30 House Financial Services Committee that focused on the federal government’s response to the pandemic. (HFS Committee hearing, June 30)Rep. Andy Barr (R-KY) referred Powell and Mnuchin to a letter sent June 22 by more than 100 members of Congress to urging support for real estate borrowers unable to keep up with payments on debt tied to CMBS. (Roundtable Weekly, June 26)Barr added that without federal intervention, the commercial real estate sector could experience a wave of foreclosures and defaults. He asked if the Federal Reserve has the authority to establish a credit lending facility to service commercial real estate. Powell responded, “I've been very focused on this. You've got people who can't currently service debt, you've got these inflexible arrangements. So there's a serious problem here that needs to get fixed and we're racking our brains to see how – how it could be something we could do by lending, but that's really all what we can do … is create more debt.”Mnuchin acknowledged the June 22 letter and responded that CRE sectors such as hotels may be considered for direct aid in the next round of coronavirus relief. Mnuchin stated, “This is a large challenge. So, we have been working with the Fed, we have not yet figured out a way to set up a facility. So, it's not out of a lack of interest or a lack of it desire. There are structural problems. And let me just add, in many of these cases, these companies don't need more debt. They need support. So, one of the things we will want to look at in the next CARES Act, as I said, is additional support for these hardest hit industries. As the (Fed) Chair has said, there's a difference between lending and spending.”Rep. Bill Posey (R-FL) warned that hoteliers’ inability to make payments threatens the servicing of CMBS. Munchin responded that the CMBS industry has restrictive covenants limiting their ability to utilize relief programs. “And that's why one of the things I do think we need to look at in the next CARES Act is additional funding for these industries that are the hardest hit so they can continue to rehire people so that, as occupancy increases, that they have employees that they can maintain. We need to look at additional support for these hard hit industries,” Munchin said. Mnuchin also discussed the Administration’s work with Congress to address the economic fallout from the outbreak with The Roundtable’s President and CEO Jeffrey DeBoer during the organization's Virtual Annual Meeting last month. Secretary Mnuchin emphasized how recent improvements to the Paycheck Protection Program (PPP) has helped small business borrowers deal with the economic impact of the global pandemic. He added that the Administration is also considering business liability protections and pandemic risk insurance. (Watch the discussion on The Roundtable's Youtube channel here.)Extending and Repurposing PPPThe House and Senate this week passed an extension to the Paycheck Protection Program (PPP), allowing small businesses to apply for these loans until August 8. President Trump is expected to sign the extension into law. (CQ, July 1) Mnuchin’s testimony on June 30 came on the same the day that the (PPP) was set to expire, with approximately $130 billion of the original $670 billion allocated unused. The PPP was created by Congress in March to enable small businesses to apply for forgivable loans during the pandemic. Mnuchin stated that as of June 27, the PPP had approved 4.8 million small businesses loans totaling $520 billion, supporting an estimated 50 million jobs. (ThinkAdvisor, June 30)Mnuchin also told the House Financial Services Committee (HFSC) that he supports congressional legislation to repurpose the remaining PPP funds. “There appears to be bipartisan support in the Senate to repurpose the (funds) for PPP, extending it to businesses that are most hard hit, that had a requirement that their revenues have dropped significantly, things like restaurants and hotels and others where it is critical they get people back to work.”House Passes Eviction Moratorium ExtensionHFSC Chairwoman Maxine Waters (D-CA) led the effort for House passage this week of the Emergency Housing Protections and Relief Act of 2020 (H.R. 7301), which supplements housing assistance provisions passed in May as part of the HEROES Act. (Rep. Waters House floor statement, June 30 and Roundtable Weekly, May 15.)The National Multifamily Housing Council (NMHC) and National Apartment Association (NAA) sent a June 29 letter to Congressional leadership expressing concerns about the bill’s expansion of the federal eviction moratorium that would undermine the benefits of other provisions within the legislation. The bill also would also provide multifamily building owners who are economically impacted by the pandemic the ability to obtain forbearance on making mortgage payments for a maximum of 360 days, whether those loans are federally-regulated or from a non-federal lender. The NMHC letter offers strong support for several measures within H.R. 7301, including liquidity for multifamily mortgages and servicers, additional funding for Section 8 Housing Choice Vouchers and support for rural housing.However, the letter also notes that the bill substantially expands the federal eviction moratorium established in the CARES Act to virtually all single family and multifamily homes for 12 months. The moratorium extension is also untethered to any actual COVID-19 impact on a renter and disconnected from a renters’ qualification or acceptance of emergency rental assistance.The letter states, “A protracted eviction moratorium does not provide a sustainable, long-term solution for American families facing financial hardship and we oppose the inclusion of this provision for the severe consequences it will have that ultimately blunt the impact of the positive components of the legislation.” (NMHC, June 29)Next COVID-19 Relief Package This week’s action on COVID-19 related policy comes as Democrats and Republicans consider an additional coronavirus relief package after they return from the congressional July 4 recess. The House in May passed its own $3 trillion pandemic recovery package, which includes billions in aid for state and local governments. Republicans have signaled they may be open to another COVID-19 bill, but on a measured basis. (Forbes, May 21 and Roundtable Weekly, May 22) Senate Majority Leader Mitch McConnell (R-KY) this week said the goal for finishing the next coronavirus package would be before Congress breaks for its lengthy August break. McConnell assessed that when policymakers return on July 20, it “dovetails nicely with the perfect time to take an assessment of the economy and the progress we’re making on the health care front and see if there is additional assistance needed for our health care providers,” McConnell said. (Politico, June 30) Congress will have an 11-day window in late July to act on another stimulus package. President Trump yesterday said he supports another round of direct stimulus payments as part of a potential phase four coronavirus relief package. "We're working on a 'phase four.' We're working with Congress," Trump said. "Work has started." (Axios, July 1 and Fox Business, July 2)# # #

Energy And Climate Policy

July 3, 2020

Roundtable Weekly

House Democrats Propose Climate Framework With Measures to Reduce Buildings’ Carbon Footprint

Energy and Climate Policy

The House Select Committee on the Climate Crisis on June 30 released its blueprint for “Solving the Climate Crisis.” The plan proposes a menu of mandates and incentives for multiple industry sectors – including commercial and residential real estate – with a goal to achieve a 100% “net zero” emissions U.S. economy by 2050. (Summary of the 547-page report)The plan is widely viewed as a roadmap the Democrats may follow for developing climate policy legislation after the November elections. The plan is currently not expected to see any action in the GOP-controlled Senate. (Axios, July 1)A series of 1-page summaries describes specific recommendations to reduce GHG emissions for “Buildings” – and for the “Electricity,” “Financial Risk,” Transportation,” and “Manufacturing” sectors.The “Buildings” summary covers both new construction and existing buildings. It includes proposals to:Set federal energy benchmarking requirements for commercial buildings (which a number of states and localities have already adopted); Eliminate emissions from new buildings by 2030 by incentivizing states and cities to adopt net-zero codes;Use tax incentives to drive commercial building retrofits;Boost onsite clean energy generation by increasing tax incentives and rebates;Reduce emissions from building construction by incentivizing building reuse and requiring federal buildings to use lower-emission building materials;Increase availability of energy efficient affordable housing; andFor federal buildings, enact heightened standards for deep energy retrofits and emissions intensity targets.Select Committee Chair Kathy Castor (D-FL) stated, “Our plan will put people back to work and rebuild in a way that benefits all of us. That means environmental justice and our vulnerable communities are at the center of the solutions we propose.” (June 30 news release)The Roundtable submitted a comment letter to the Select Committee during its public participation period (see Roundtable Weekly, November 22, 2019).The Roundtable’s recently released 2020 Annual Report affirms a proactive “Energy and Climate” policy agenda developed by its Sustainability Policy Advisory Committee, chaired by Anthony E. Malkin (Chairman, President and CEO, Empire State Realty Trust) and vice-chaired by Dan Egan (Senior Vice President, Vornado Realty Trust). The Empire State Building's successful sustainability efforts are the focus of a recent Washington Post profile, which details the “deep retrofit” led by Malkin and completed in 2010. "A decade later, the Empire State Building saves more than $4 million a year on its electric bill; the project is expected to pay for itself twice over," the Post reports. (Empire State of Green, May 27, 2020)# # #

News

June 26, 2020

Roundtable Weekly

Roundtable to Establish Standing Policy Committee on Diversity and Inclusion; Industry Executives Discuss Needed Actions

The Real Estate Roundtable’s Board of Directors recently approved establishment of a new standing committee to address inclusivity and diversity in the industry and as part of the organization’s policy agenda. (Roundtable Weekly, June 12)The new committee’s working name is the “Real Estate Diversity and Inclusion Policy Advisory Committee” (REDIPAC). Its intended objectives are to: Encourage Roundtable members to adopt and report on quantifiable standards for attracting workers across all skill- and corporate-levels from minority and other pools of talent historically under-represented in our industry;Leverage The Roundtable’s existing advocacy agenda on tax, capital, climate/energy, housing, and infrastructure policies with a view toward also including policy elements aimed to dismantle racial and other barriers to equality; andBuild coalitions with civil rights and real estate industry organizations to scale the effectiveness of joint initiatives.The new committee’s mission statement, leadership and requests for participants are expected to be announced in July.This week, African American real estate executives discussed actions needed to expand diversity at all levels of the industry during a webinar on “The Black Experience in Real Estate,” hosted by NYU’s Schack Institute of Real Estate. Schack Associate Dean Sam Chandan lead the remote discussion with four panelists: Margaret Anadu, Head of the Urban Investment Group, Goldman SachsTammy Jones, Co-Founder & CEO, Basis Investment Group, LLC and Chair, The Real Estate Executive Council Onay Payne, Managing Director, Clarion PartnersJames Simmons, CEO & Founding Partner, Asland Capital PartnersThe panelists expressed their hope that recent executive-level responses to the deaths of George Floyd and other African Americans at the hands of police officers represent not simply a “moment but a movement.” The webinar participants also agreed what is needed now are tangible actions that could bring measurable, positive changes to increase opportunities for minorities in real estate. (The Real Deal, June 26) and Bloomberg, June 23, “Black Real Estate Executives Seek Lasting Change in Diversity”)The four leaders discussed their personal experiences with systemic racism and recommended inclusivity steps that CRE leaders should take in their companies. (Registration required to watch the June 9 webinar) Separately, a June 24 Walker & Dunlop webinar focused on the first African American woman REIT CEO – Leslie Hale of RLJ Lodging Trust. Roundtable Member Willy Walker, W&D’s Chairman & CEO, hosted the discussion, which addressed the opportunities for increasing diversity in commercial real estate, Ms. Hale’s approach to diversity and inclusion, the current outlook for the hospitality and retail industries, the U.S. economy and more. # # #

Q1 Sentiment Index, Roundtable Weekly

June 26, 2020

Roundtable Weekly

Q2 Economic Sentiment: Commercial Real Estate Execs Confirm COVID-19 Market Downturn

Quarterly Sentiment Index

Commercial real estate executives confirmed a downturn in Q2 market conditions due to job losses and business shutdowns related to COVID-19, according to The Real Estate Roundtable’s 2020 Q2 Economic Sentiment Index released today. The report also shows there is an expectation for an improvement in market conditions by next year, dependent upon the return of jobs and the ability to safely reopen businesses. “The commercial real estate industry, like all industries, experienced in the second quarter a sudden onset of economic disruption due to business lockdowns and stay-at-home shutdown orders put in place to combat the pandemic,” said Real Estate Roundtable President and CEO Jeffrey DeBoer. “The economic damage to commercial real estate has been particularly harmful for the retail and lodging sectors of the industry. Although our Q2 survey results show there is hope for improved conditions within the next year, there are significant concerns that other sectors of the industry could be dragged down if jobs don’t rebound and government assistance tapers off. The fear is that business and residential tenants may be suddenly unable to pay rent beyond the sectors already impacted and struggling to come back,” DeBoer added.The report’s Topline Findings include:The Real Estate Roundtable Q2 2020 Sentiment Index registered a score of 38, a decrease of 14 points from the first quarter of 2020. Many respondents confirm tenants are having increased difficulties paying their rent obligations as a result of massive job losses. Most survey participants expect the eventual reopening of businesses and resolution of rental obligations will lead to improved real estate market conditions.Many survey respondents have seen the industry quickly adapt to new social distancing environments by implementing technologies and online processes that provide some continuity for current operations. Market volatility is leading to uncertainty about how future retail real estate and multifamily demand will be affected.Job losses have led to widespread economic uncertainty. Lockdowns and stay-at-home orders have also impaired the ability of survey respondents to accurately value commercial real estate assets. As a result, transactions have slowed until a medical solution to the outbreak may allow reopening of properties, renewed business activity and underwriting of investments. The majority of survey participants indicated the availability of debt and equity are worse today than one year ago. Many respondents indicated they believe there is plenty of equity capital on the sidelines, but it is unwilling to invest in a market without price discovery. As for debt markets, debt funds have been largely absent from the market and only the most pristine assets are qualifying for new debt capital. The Roundtable’s Q2 Overall Sentiment Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive. The Q2 Current Conditions Index dropped to 13 from Q1’s score of 55 – yet the Q2 Future Conditions Index increased 12 points to register 62 when compared to Q1’s score of 50.The 49-point disparity between the Q2 Current Index (13) and Future Index (62) is the most significant difference registered by The Roundtable’s Quarterly Economic Sentiment Survey in its 12-year history. The next highest disparity previously occurred in Q1 2009, when the difference between current and future indices registered 40 points during the financial crisis.DeBoer noted, “The unprecedented wave of job losses is disproportionally impacting women, minorities and veterans. Unemployment and business closures have added tremendous stress on people worried about taking care of their families and maintaining their housing. And it also has added to the worries of business owners, particularly in terms of meeting their payroll and rent obligations. The Roundtable continues to support the Federal government’s efforts to date including the CARES Act, the FED lending facilities and the expanded unemployment benefits. In addition to finding ways to improve and extend these programs, we now call on Congress to create a temporary assistance program specifically designed to help COVID impacted residential and commercial tenants meet their rent obligations."He added, “Such a program would help people and businesses cope with the current economic downturn. It would help building owners maintain their workforce that is necessary to ensure that visitors to buildings are safe and healthy. It would ease pressure on financial institutions and local governments. The next COVID relief bill must include a rent assistance program for people and businesses.”Data for the Q2 survey was gathered by Chicago-based FPL Associates on The Roundtable’s behalf. The Roundtable’s Q3 Sentiment Index will be released in early August.# # #

Capital and Credit

June 26, 2020

Roundtable Weekly

More Than 100 Members of Congress Urge Trump Administration to Aid CMBS Borrowers

Capital and Credit CMBS Coronavirus

Commercial mortgage-backed security borrowers could face a historic wave of foreclosures starting this fall, impacting local communities and jobs across the country, without a long-term federal relief plan to combat liquidity deficiencies facing commercial real estate borrowers caused by the COVID-19 pandemic. That is the bipartisan message sent on June 22 to the Federal Reserve and Trump Administration by more than 100 members of Congress, who are seeking support for real estate borrowers unable to keep up with payments on debt tied to CMBS. (Wall Street Journal, June 23)The bipartisan letter acknowledges the existence of the Fed’s lending facilities, yet warns about “the looming crisis in commercial real estate adversely impacted by the COVID-19 pandemic, including the $540 billion Commercial Mortgage-Backed Security (CMBS) market that, if left unchecked, may lead to a wave of foreclosures, exacerbating the current downturn in the U.S. economy and ultimately result in permanent job loss in multiple industries and communities across the country.” (Congressional letter, June 22)The congressional letter also requests the Fed to “devise a relief plan for these borrowers, who through no fault of their own, have experienced a significant drop in revenue on account of the COVID-19 pandemic and related governmental orders.”Rep. Van Taylor (R-TX) is leading the effort to show policymakers the troubles faced by many hotels, shopping malls and office buildings that borrow money in the CMBS market – with some owners expressing concerns their properties could go to foreclosure. (Wall Street Journal, June 4)A June 26 letter from four national hotel trade associations to Treasury and the Fed emphasizes the unique pressures they face when pursuing loans using the Fed’s Main Street Lending Program (MSLP), which utilizes strict criteria based on Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). The hoteliers detail multiple unnecessary obstacles in accessing desperately needed liquidity and how the industry’s asset-heavy business model shut them out from utilizing the MSLP because of the rigid EBITDA leverage test. “Most hotels are financed via mortgage debt, which means that their total outstanding debt is generally already above the maximum six-times EBITDA threshold established in the Main Street Lending Facility,” the letter notes. The hotel coalition letter also details specific “actions that would allow this critical industry access to liquidity to keep workers employed and help survive the crisis.”The Real Estate Roundtable and Nareit on April 22 wrote to Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell urging that additional measures be adopted to expand the scope of the MSLP to forestall further disruption and economic dislocations in the commercial real estate sector during the pandemic. (MSLP comment letter, April 22)Previous industry letters to the Fed on March 24 and April 14 addressed the need to broaden the range of a separate credit facility – the Term Asset Backed Securities Facility (TALF). Those letters requested that TALF eligible collateral include both outstanding (legacy) CMBS, commercial mortgage loans and newly issued collateralized loan obligations. On April 9, the Fed confirmed that the TALF would be expanded to include triple-A rated legacy non-agency CMBS and loans. The Federal Reserve Bank of New York reported this week that the TALF had done $145,213,948 of "commercial mortgage" collateralized financing – legacy CMBS – out of a total of $252,155,890 of total volume, or 57.59%.Overall, the CMBS market over the next two years could see 13,000 loans totaling $148 billion go into default, according to a recent analysis by CoStar Risk Analytics. (CoStar News, April 30)Additionally Fitch reports that $21 billion of CMBS loans are now in Special Servicing due to the coronavirus pandemic’s impact on tenants and borrowers. This total is more than double the amount of CMBS loans that went into special servicing all of last year. (GlobeSt, June 23 and The Real Deal, June 22 and Fitch, June 17)Real Capital Analytics reports that the volume of deals for U.S. commercial properties including, offices and hotels, plummeted 79% in May compared with a year earlier. Deals to purchase hotels plunged 95% in May, the largest drop of any property type. Retail property transactions were down 83%. (BGov, June 25)The June 22 congressional letter led by Rep.Taylor requests that Treasury and the Fed urgently consider targeted economic support to bridge the temporary liquidity deficiencies facing all commercial real estate borrowers. The letter concludes, “We believe an opportunity exists for responsible federal government investment in the commercial real estate market to provide a pathway to stabilize affected properties, the local jobs and businesses they enable, and the neighborhoods they serve.”# # #

Infrastructure

June 26, 2020

Roundtable Weekly

House Democrats Release Infrastructure Package Details; Vote Expected Next Week

Infrastructure

House Democrats on June 22 released details of a $1.5 trillion infrastructure package – the Moving Forward Act (H.R. 2) – that they plan to bring to a vote before July 4, although the measure’s prospects in the GOP-controlled Senate are uncertain. (Bill Text | Section-by-Section | Fact Sheet)The comprehensive Democratic infrastructure package, totaling about $1 trillion, has been combined with a $494 billion surface transportation bill – the INVEST in America Act – that would fund roads, bridges, and mass transit before current finding for the Highway Trust Fund expires on September 30. (House Transportation and Infrastructure Committee news release, June 22)The broad Moving Forward Act also addresses the nation’s housing, water, broadband, clean energy, and education systems. More than 300 amendments to the package are expected to be considered on Monday by the House Rules Committee before it is advanced to the House floor. (Miller & Chevalier, June 25)About two-thirds of the infrastructure package does not appear to have specifics for funding, although some financing measures are listed for elements of the bill. (CQ, June 22). The House Transportation and Infrastructure (T&I) Committee issued an excerpt of the 2,309-page bill containing the revenue provisions. Rep. Richard Neal, (D-MA), chair of the House Ways and Means Committee, floated the idea of reinstating “Build America” government bonds that could help spur private investment, as well as “a massive expansion of the Low Income Housing Tax Credit”. (Ways & Means news release, June 18) Rep. Sam Graves (R-Mo.), T&I’s Ranking Member, last week announced an alternative bill for surface transportation programs and on June 23 stated, “Now the bill has been completely swallowed up … and turned into a colossal $1.5 trillion wish list for the Majority.”The Trump administration is reportedly preparing a nearly $1 trillion infrastructure package proposal focused on transportation projects. (Reuters, June 15)The critical need for infrastructure improvements was supported this week by a National League of Cities survey, which showed that coronavirus-related expenses have forced more than 700 U.S. cities to suspend or terminate plans to upgrade critical infrastructure. (Washington Post, June 23)“The survey found that 65% of cities are being forced to delay or completely cancel capital expenditures and infrastructure projects, which will not only stifle job growth and slow local economic activity, but further jeopardize economic recovery efforts in communities across the nation," said Clarence Anthony, CEO and Executive Director, National League of Cities. "Without congressional action now, the forced delay or cancellation of infrastructure projects will create an economic ripple effect throughout the nation not felt in decades.” (National League of Cities, June 23)# # #

June 22, 2020

Policy Comment Letter

2020.06.22 – Letter to Mnuchin Powell on CRE CMBS Relief

Capital and Credit

June 19, 2020

Roundtable Weekly

Fed Chairman Testifies Congressional Stimulus Measures Should Continue as Main Street Lending Program Launches; Regulators Support Financing to Non-Bank Lenders

Capital and Credit CARES ACT Coronavirus The Fed

Federal Reserve Chairman Jerome Powell told House and Senate policymakers this week that economic support for workers and businesses adversely affected by COVID-19 should continue, adding that until COVID-19 is fully contained, “a full recovery is unlikely.” Powell testified remotely on June 16 before the Senate Banking Committee and on June 17 before the House Financial Services Committee to deliver his Semiannual Monetary Policy Report to Congress. “It would be wise to look at ways to continue to support people who are out of work and also smaller businesses that may not have vast resources for a period of time…so that we can get through this critical phase,” Powell said. “That support would be well placed at this time.” (Wall Street Journal, June 17 and 18) The Fed Chairman acknowledged some economic indicators have suggested "a modest rebound." He also cautioned, "That said, the levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery." (BGov, June 17 and Marketwatch, June 18) During his two days of congressional testimony, Powell defended the Fed’s aggressive purchases of assets and corporate bonds. “I don’t see us as wanting to run through the bond market like an elephant, doing things and snuffing out price signals,” he said. “We just want to be there if things turn bad in the economy.” (Bloomberg, June 16) Powell delivered his remarks to Congress after stating last week that the central bank will continue buying large quantities of bonds and leave interest rates near zero through at least 2022.” (USA Today, June 10) The Fed Chairman also warned that the economic downturn could widen inequalities between rich and poor. “Low-income households have experienced, by far, the sharpest drop in employment, while job losses of African-Americans, Hispanics and women have been greater than that of other groups,” Mr. Powell said. “If not contained and reversed, the downturn could further widen gaps in economic well-being that the long expansion had made some progress in closing.” (New York Times, June 16) Former Federal Reserve Chairs Ben Bernanke and Janet Yellen signed a June 16 letter to congressional leaders, endorsed by more than 150 economic scholars, stating, “Congress must pass another economic recovery package before most of the support in the CARES Act expires this summer. Congress should address this risk, and the already occurring economic damage, by passing, as soon as possible, a multifaceted relief bill of a magnitude commensurate with the challenges our economy faces.” (Washington Center for Equitable Growth, June 16 statement) Main Street Lending Program Launches The Real Estate Roundtable and Nareit on April 22 wrote to Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell urging that additional measures be adopted to expand the scope of the Main Street Lending Programs (MSLP) to forestall further disruption and economic dislocations in the commercial real estate sector during the pandemic. (MSLP letter, April 22) On June 8, The Federal Reserve Board expanded its MSLP to allow more small and medium-sized businesses to be able to receive support. (Roundtable Weekly, June 12) This week, the Federal Reserve’s MSLP opened for lender registration. The Federal Reserve Bank of Boston announced on June 15 that lenders can find the necessary registration documents and are encouraged to begin making Main Street program loans immediately. (News Release) The program offers five-year loans with floating rates, with principal payments deferred for two years and interest payments deferred for one year. The loans range in size from $250,000 to $300 million to support a broad set of businesses. The MSLP intends to purchase 95% of each eligible loan that is submitted to the program after meeting all requirements. The Program will also accept loans that were originated under the previously announced terms, if funded before June 10, 2020. Regulators Support Financing to Non-Bank Lenders Federal banking regulators responded favorably this month to a request from a business coalition, including The Real Estate Roundtable, that requested clarifications about financial institutions working with borrowers impacted by COVID-19. (Regulators April 7 guidance—Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus.) The coalition on May 15 wrote to the regulators requesting clarification that – in addition to traditional loan products – lending and financing arrangements, such as warehouse lines and repurchase agreements secured by multifamily and commercial real estate loans and commercial mortgage-related securities, are within the scope of the guidance. (Coalition May 15 letter) The coalition’s focus was the debt financing extended by commercial banking institutions to non-bank lenders (NBLs) who, in turn, provide mortgage loan funding to commercial and multifamily property owners of all types. The coalition received two affirmative replies, from Acting Comptroller of the Currency (OCC) Brian P. Brooks on June 4 – and on June 18 from Federal Deposit Insurance Corporation (FDIC) Chairman Jelena McWilliams. The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) continues to work to address the current crisis, pursuing measures that will enhance liquidity and capital formation, and to help develop an effective insurance program that provides the economy with the coverage it needs to address future pandemics. # # #

Tax Policy

June 19, 2020

Roundtable Weekly

IRS Proposes Favorable New Rules for Like-Kind Exchanges

Likekind Exchanges LikeKind Exchanges LKEs Section 1031 Tax Policy

The IRS on June 11 released proposed regulations for like-kind exchanges under section 1031 that implement changes enacted in the Tax Cuts and Jobs Act (TCJA) of 2017. TCJA restricted section 1031 to exchanges of “real property.” The proposed rules would provide a favorable definition of “real property” and establish a safe harbor for certain personal property received in an exchange. Like-kind exchange rules allow taxpayers to defer capital gains tax when they exchange property held for investment or business use for another property of a “like kind.” Ryan McCormick, senior vice president and counsel at The Real Estate Roundtable, described in Bloomberg Tax (June 11) why real estate like-kind exchanges are critical in the current environment: “Like-kind exchanges are even more important during periods of economic stress, like today, when traditional financing is less reliable.” TPAC Member Richard Lipton (Baker McKenzie LLP) noted favorable aspects of the proposed rules, “It’s a very broad definition and many practitioners will be happy with the inclusion of inherently permanent structures being broadly defined, and also the inclusion of certain intangible property,” Lipton said. (Bloomberg Tax, June 11). Under TCJA, items like machinery, equipment, vehicles, artwork, collectibles, and patents no longer qualify for deferral under section 1031, but exchange treatment remains available for real property, including “land and generally anything built on or attached to it.” (IRS New Release 2018-227, Nov. 19, 2018). The proposed rules appropriately treat licenses, permits, and other rights that derive their value from real property as eligible assets. The regulations also provide a helpful safe harbor for incidental personal property (up to 15% of the aggregate value of the replacement property) that is typically transferred, in standard commercial transactions, with the real property. (Federal Register, June 12, Statutory Limitations on Like-Kind Exchanges) Like-Kind Exchange Deadlines Like-kind exchanges must meet strict deadlines to qualify for deferral. The pandemic has greatly complicated the ability to complete an exchange. The reasons include: stay-at-home orders, flight restrictions, an inability to visit sites or perform appraisals, the closure of local governmental offices, and a general inability to conduct the necessary due diligence. In March, The Roundtable and other real estate organizations requested an extension of 1031 deadlines. (Coalition LKE letter, March 23) The Treasury Department in early April extended the 45-day deadline for identifying like-kind exchange replacement property and the 180-day deadline to close on a like-kind exchange transaction until July 15, 2020. (IRS Notice 2020-23) “It seemed like a good-government, reasonable thing to do,” The Roundtable’s Ryan McCormick recently told The New York Times. Real estate investors could not travel because of pandemic lockdowns and completing due diligence steps such as an appraisal became difficult, if not impossible. “Taxpayers were seeking some additional time to work through that,” McCormick told the Times. (The New York Times, June 5) An industry coalition, including The Real Estate Roundtable, on April 20 wrote to the Treasury Secretary seeking further clarification and relief on 1031 deadlines. (Coalition letter, April 20, 2020) The Roundtable’s TPAC will review the June 11 proposed regulations and comment on any further like-kind exchange issues that may need clarification. TPAC Video Discussions TPAC held its first remote meeting in conjunction with The Roundtable’s Annual Meeting on June 12. Wide-ranging TPAC discussions touch on recent social unrest; the COVID-19 pandemic and the CARES Act; partnership audit reform; section 199A; like-kind exchanges, COD income; energy-efficiency incentives; REIT related party rules; section 163(j); and much more. TPAC recordings on The Roundtable's YouTube channel include: A View from the Chairman TPAC Chairman Frank Creamer, Jr. A Discussion on the Recent Social Unrest, COVID-19, Tax Policy, and Legislative Priorities with a Member of the House Ways and Means Committee U.S. Representative Brad Schneider (D-IL) An Interview on Tax Law and Administration in the Pandemic The Honorable Michael J. Desmond, Chief Counsel, Internal Revenue Service Tax Policy in the U.S. Senate Sarah Schaefer, Tax Counsel, Senate Finance Committee # # #

Labor and Public Policy

June 19, 2020

Roundtable Weekly

Roundtable Discussion with North America’s Building Trades Unions President Sean McGarvey on COVID-19, Racial Inequality, Workforce Training and Infrastructure

Coronavirus Labor Policy

Sean McGarvey, above, President of North America’s Building Trades Unions (NABTU) and Roundtable President Jeffrey DeBoer this week discussed compelling issues of importance to CRE and the Trades, including COVID-19 responses, infrastructure investment, racial inequality, workforce development, infrastructure and capital investment. (Watch the remote discussion on The Roundtable’s Youtube channel.) NABTU is an alliance of 14 national and international unions in the building and construction industry that collectively represent over 3 million skilled craft professionals in the United States and Canada. DeBoer and McGarvey’s discussed possible ways the two sectors could work constructively together on issues, including: COVID-19. McGarvey commented on how at the onset of the pandemic outbreak, a large amount of NABTU’s workforce was laid idle. The unions urgently worked with DHS and state leaders on how the construction industry could remain in business by pursuing guidance with federal agencies such as the Centers for Disease Control and Prevention Centers (CDC). NABTU’s extensive efforts in funding COVID-19 vaccine research and trials are also recounted. Nondiscriminatory work environments. The discussion touched on NABTU’s June 1 statement issued in response to the nationwide protests over racial inequality. In the remote discussion with DeBoer, McGarvey said, “At this point where people want to compare it to 1968 … its so much different now that I really thing we’re going to get somewhere this time. And the Building Trades when it comes to diversifying our membership … we even have a couple dozen formerly incarcerated programs where we are teaching curriculum inside the state prison system (until Covid came) to prepare people for when they get out to come into our training programs and go to work.” Apprenticeships and training. “There’s only one institution in the world that trains more people in hard skills than NABTU. That’s the United States military,” McGarvey noted. The unions and their signatory contractor partners invest over $1.6 billion in private-sector money to fund and operate over 1,900 apprenticeship training and education facilities across North America that produce highly trained, craft workers. Several Roundtable member companies participate in NABTU workforce programs. Infrastructure. The effectiveness of public-private partnerships in large infrastructure investments was addressed by DeBoer and McGuire. The two also discussed the difficulty of financing construction projects during the pandemic and how it affects the economic security of the entire industry. The Roundtable is currently working with policymakers and stakeholders to develop and enact an effective pandemic risk/business continuity program that would add more confidence to the marketplace while a health solution is vigorously pursued on the medical front. Capital investment strategies. NABTU has interests in nearly $700 billion of capital investments and assets that include funds focused on pensions, commercial real estate development, infrastructure and other investment. “We are about partnerships,” McGarvey noted. “We are partnered with public pension funds who see it like us … who want a minimum amount of standards of who they are going to lend to and who they are going to invest with. So you take our nearly $700 billion … we are thinking that in about 3 years we’ll be up to about $3 trillion worth of pension fund money that’s going to have minimum requirements.” The remote discussion concluded on a positive note about exploring possible ways The Roundtable and NABTU could work together on mutually beneficial issues. # # #

Infrastructure

June 19, 2020

Roundtable Weekly

House Democrats, Republicans Propose Infrastructure Plans as Highway Trust Fund Faces Sept. 30 Expiration

Infrastructure

House Speaker Nancy Pelosi (D-CA) and several Democratic chairs are using a surface transportation bill as a base for a broader $1.5 trillion infrastructure plan they announced yesterday, to also invest in the nation’s housing, water, broadband, clean energy, and education systems. (POLITICO, June 18 – see also Pelosi remarks and Youtube video, June 18). Action on transportation infrastructure is considered a “must-do” item in Congress before the November elections because the nation’s main source to fund roads, bridges, and mass transit – the Highway Trust Fund – expires on September 30. (New York Times, June 17) The Democratic surface transportation piece – the INVEST in America Act – would authorize $494 billion in spending over five years. Key elements of this bill align with Roundtable policies, such as state/local cost share allocations that would help finance significant projects like the Northeast Corridor Gateway Program. (Roundtable Weekly, June 5 and Bill text | Factsheet | Bill Summary | Section-by-Section) Meanwhile, the Ranking Member on the House Transportation and Infrastructure Committee, Sam Graves (R-MO), announced an alternative bill for surface transportation programs. The Republicans’ STARTER Act (section-by-section summary) would bolster permit streamlining and the “One Federal Decision” framework, measures long-supported by The Roundtable. (Roundtable Weekly, August 2, 2019) Pelosi said yesterday that the comprehensive Democratic infrastructure package – the Moving Forward Act – would “make real the promise of building infrastructure in a green and resilient way,” and that “[i]t’s job-creating in its essence, but also commerce-promoting.” (The Hill, June 18). A framework for the omnibus measure was released in January. (Roundtable Weekly, January 31) The critical issue with any infrastructure proposal is how to pay for it. House Ways and Means (W&M) Committee Chairman Richard Neal (D-MA) yesterday outlined several tax provisions to be included in the Democratic leadership's measure. Neal stated, "We leaned on our tax code and will reinstate Build America Bonds, to not only provide financing to state and local governments but also spur investment in the private sector,” according to a W&M Committee press release. “There is a desperate need for modernizing low-income housing, and the Committee proposed a massive expansion of the Low Income Housing Tax Credit to get us there." A W&M fact sheet outlines other provisions. The Senate is expected to focus on infrastructure in the coming weeks after the House acts. Last summer, the Senate Environment and Public Works Committee (EPW) unanimously approved a five-year, $287 billion surface transportation plan. (Roundtable Weekly, August 2, 2019). The Trump Administration has long stated that infrastructure is one of its top priorities. It is reportedly preparing another $1 trillion plan that it may present to Congress next month. (Bloomberg, June 16) Pelosi said yesterday she anticipates the Democratic Moving Forward Act will come to a House vote before Congress breaks for the July 4th recess and urged the Administration to begin negotiations about funding it. # # #

Immigration & The Workforce

June 19, 2020

Roundtable Weekly

SCOTUS Decision Protects “Dreamers” from Deportation For Now, and Sets the Stage for Election Year Controversy

Immigration

Facade of US Supreme court in Washington DC on sunny day The Supreme Court of the United States (SCOTUS) handed down a highly-anticipated decision yesterday, ruling that Obama-era forbearance against deporting unauthorized immigrants brought by their parents to this country as children – the “Dreamers” – stands in place for the time being. (SCOTUSblog analysis, June 18) Chief Justice John Roberts wrote the 5-4 decision in Dep’t of Homeland Security vs. Regents of the Univ. of California. The Court’s majority decided that the Trump Administration’s 2017 efforts to thwart the Deferred Action for Childhood Arrivals (DACA) program, established in 2012, was a wrongful “arbitrary and capricious” action. Approximately 700,000 immigrants have sought DACA protections. The program allows unauthorized foreign-born individuals who “only know this country as home” to apply for two-year forbearance on deportation, as well as work permits and eligibility for Social Security and Medicare. A 2014 program extended similar protections to the Dreamers’ parents.” The Trump Administration rescinded both programs in 2017. The high Court majority decided the rescission was illegal because, among other reasons, DHS purported to strike the entire policy – and did not consider whether the “deferred removal” elements of DACA could be retained while eliminating the “federal benefits” components. Chief Justice Roberts also wrote that DHS’s rescission was arbitrary because the agency failed to consider the extent of the Dreamers’ reliance on the program, noting that DACA recipients have served in the military, enrolled in college, started businesses and careers, purchased homes, got married and had children, and paid taxes. (Opinion at 24-25). The Real Estate Roundtable last October joined an amicus brief in the case, led by the National Association of Home Builders, requesting that DACA remain in place. The brief explained the importance of the immigrant workforce to construction, hospitality, and building maintenance functions, stating that “DACA-eligible immigrants are a crucial component” of real estate jobs as 41% of them work in industries represented by the amici (Roundtable Weekly, October 18, 2019) SCOTUS likewise noted the economic contributions of DACA beneficiaries: “[E]xcluding DACA recipients from the lawful labor force … [would] result in the loss of $215 billion in economic activity and an associated $60 billion in federal tax revenue over the next ten years.” (Opinion at 25) Immigration groups heralded yesterday's decision, but called for Congress to enact a permanent solution to protect DACA recipients. (The Hill, June 19) In what will surely become a contentious issue leading up to the November elections, President Trump tweeted today that his Administration will “be submitting enhanced paperwork shortly” to again try and rescind the program and eliminate protections afforded to the Dreamers. (USA Today, June 19) # # #

News

June 12, 2020

Roundtable Weekly

Treasury Secretary Mnuchin and Industry Leaders Address Coronavirus Policy Response, Racial Injustice, and Reopening Challenges

Board of Directors Roundtable Leadership Roundtable Meeting

The Real Estate Roundtable’s first Virtual Annual Meeting this week attracted nearly 300 Roundtable members who remotely accessed discussions with Treasury Secretary Steven Mnuchin and industry leaders on COVID-19 policy responses, racial injustice and business reopening challenges. The Roundtable’s policy advisory committee meetings also held their first remote meetings to analyze policy issues in the tax, capital and credit, sustainability and homeland security areas with subject matter experts from Capitol Hill, federal agencies and the private sector. Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.) launched the business meeting yesterday, noting the June 9 statement on racial injustice she issued with Roundtable President and CEO Jeffrey DeBoer. (See related story below for more details)Cafaro noted The Roundtable’s intense focus on the economic repercussions of the coronavirus. She explained how the organization has successfully pivoted its focus to advocating policies that support economic recovery, including a pandemic risk insurance program modeled after TRIA; ongoing efforts to reform the Paycheck Protection Program; Federal Reserve credit lending facilities that accommodate CMBS; and federal efforts that could preserve the “rental obligation chain.”Cafaro also announced that four individuals will join The Roundtable’s Board of Directors and three current Directors will depart, effective July 1. The new Board Members are:Thomas J. Baltimore, Jr. – Chairman, President & CEO, Park Hotels & ResortsKen McIntyre – Chief Executive Officer, Real Estate Executive CouncilBrandon Shorenstein – Chairman and Chief Executive Officer, Shorenstein PropertiesWilliam Stein – Chief Executive Officer, Digital Realty Trust & Chair, NareitThe exiting Board Members, who Cafaro thanked for their accomplished service, are:Tom Arnold – Global Head of Real Estate, Abu Dhabi Investment AuthorityTim Byrne – President and Chief Executive Officer, Lincoln Property CompanyRobert A. Spottswood – President, Spottswood Companies, Inc. Policy Issues & Featured Speakers The Roundtable’s June 11 Annual Business Meeting included the following speakers: Treasury Secretary Steven Mnuchin discussed the Administration’s work with Congress to address the economic fallout from the outbreak with The Roundtable’s Jeffrey DeBoer. Secretary Mnuchin emphasized how recent improvements to the Paycheck Protection Program (PPP) has helped small business borrowers deal with the economic impact of the global pandemic. He added that the Administration is also considering business liability protections and pandemic risk insurance.Citi’s Vice Chairman Raymond McGuire discussed “Real Estate’s Role in Addressing Racial Injustice” with Roundtable Immediate Past Chair William Rudin (Co-Chairman and CEO, Rudin Management Inc.). McGuire noted that fortunate opportunities for an excellent education is what made the difference in his life experience and that providing similar opportunities to African American youths is of vital importance. “Reopening the Economy, Returning to the Workplace, Reinforcing Health Protections” panel featured leading industry executives discussing reopening strategies, operational protocols, potential liability concerns and more. The discussion is available to stream at your convenience. Separately, Roundtable Board Member and Sustainability Policy Advisory Committee Chair Tony Malkin (Chairman and CEO, Empire State Realty Trust, Inc.) was interviewed on CNBC this week on safety protocols and other measures that can be utilized for reopening businesses. (CNBC interview, July 9)Governor Jared Polis (D-CO) focused on Colorado’s approach to managing the outbreak, as it has recently reopened most businesses while practicing social distancing. In his video interview, “States Set the Pace,” Gov. Polis discusses how state government can work with the real estate industry on practical safety measures to help businesses looking to reopen.Dr. Scott Gottlieb, former Food and Drug Administration Commissioner (2017-2019) and Roundtable Chair Debra Cafaro discussed medical aspects of the novel coronavirus and his health policy perspectives on the crisis. Dr. Gottlieb noted, “We still have a slowly expanding epidemic in the United States” that has a high case fatality rate. He added that the world could see multiple vaccines with some targeting specific populations based on age or other factors.Charlie Cook, Editor and Publisher of the Cook Political Group, outlined the dynamics of the upcoming election cycle during a health pandemic and economic downturn. Cook emphasized the importance of approximately 5 percent of independent voters who will make a choice in an election without third-party candidates. Roundtable Policy Committees The Roundtable’s Policy Advisory Committees and associated task forces also met remotely in conjunction with the Annual Meeting, offering a combination of live and recorded presentations for participants. A video featuring all Roundtable Committee Chairs providing updates on each committee’s policy efforts is available on The Roundtable’s youtube channel. This week’s committee meetings analyzed policy issues in detail with high-level congressional and agency staff:Research and Real Estate Capital Policy Advisory Committee (RECPAC):Rep. French Hill (R-AR), who serves on the House Financial Services Committee and the Congressional Oversight Commission on the CARES Act, provided insights on recent and future COVID-19 economic relief and stimulus during this joint committee meeting. Additionally, industry experts discussed the state of real estate capital and credit markets, including the Fed’s Term Asset-Backed Securities Loan Facility (TALF). Tax Policy Advisory Committee (TPAC):House Ways & Means Chief Tax Counsel Andrew Grossman joined TPAC to share his perspective on committee priorities and the tax legislative outlook. A panel of leading real estate tax authorities also discussed legislative proposals focused on the current distress in U.S. real estate – particularly debt restructurings, impaired rent and cancellation of indebtedness (COD) income. Additional wide-ranging tax policy TPAC discussions are available on demand: A View from the Chairman-- TPAC Chairman Frank Creamer, Jr.A Discussion on the Recent Social Unrest, COVID-19, Tax Policy, and Legislative Priorities with a Member of the House Ways and Means Committee – Rep. Brad Schneider (D-IL)An Interview on Tax Law and Administration in the Pandemic – Michael J. Desmond, Chief Counsel, Internal Revenue ServiceTax Policy in the U.S. Senate – Sarah Schaefer, Tax Counsel, Senate Finance CommitteeSustainability Policy Advisory Committee (SPAC):U.S. Environmental Protection Agency speakers provided an update on the ENERGY STAR certification program and its Portfolio Manager Benchmarking tool in the Covid-19 Era. EPA and the Centers for Disease Control and Prevention (CDC) speakers discussed “Reopening Guidance for Cleaning and Disinfecting Workplaces.” SPAC members also focused on “Healthy Building Strategies in a Global Pandemic” with the senior executives from the Center for Active Design and the International WELL Building Institute. Homeland Security Task Force meeting (HSTF) and Risk Management Working Group (RMWG):The joint meeting attendees heard briefings by government officials on the threat of civil unrest, looting, homegrown violent extremists and organized attacks on commercial properties – and the security, management and health challenges related to building re-entry. The Task Force was also briefed on the need to enact a federal business continuity/pandemic risk program aimed at providing capacity for policyholders in need of insurance protection from the enormous costs associated with pandemics.Next on The Roundtable's meeting calendar is the September 22 Fall Meeting, which is restricted to Roundtable-level members only. The Roundtable has also posted its 2021 meeting calendar dates.# # #

News

June 12, 2020

Roundtable Weekly

Real Estate Roundtable Issues Industry Imperative to Act Against Racism and Injustice

It is a moral and economic imperative for The Real Estate Roundtable and CRE companies to take immediate and concrete actions that stand against racism and for inclusion, stated Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.) and Roundtable President and CEO Jeffrey DeBoer, in a statement issued on June 9. (DeBoer, above center, with Roundtable meeting attendees in 2019)The entire statement – “The Real Estate Roundtable Stands in Solidarity Against Racism and Injustice” – also notes, “Systemic racism and injustice is a pandemic that has plagued our nation for far too long. The real estate industry must help to eliminate at its core this scourge in our society and economy.”The statement preceded a discussion yesterday on “Real Estate’s Role in Addressing Racial Injustice” between Roundtable Immediate Past Chair William Rudin (Co-Chairman and CEO, Rudin Management Inc.), and Raymond McGuire (Vice Chairman, Citi and Chairman, Banking, Capital Markets and Advisory), during The Roundtable’s first Virtual Annual Meeting.McGuire said that fortunate opportunities for an excellent education is what made the difference in his life experience and that providing similar opportunities to African American youths is of vital importance. “I do see this as a defining moment. It’s a challenge we have to answer for history,” McGuire said. McGuire also discussed steps to combat systemic racism this week on CNBC’s Squawk Box. “We welcome the millions of dollars. We welcome the relatable messages, but we need to do more. Otherwise, it will have been another sad day in the neighborhood,” McGuire said.The Roundtable’s Board yesterday approved the establishment of a standing committee to further equal opportunities and address racial disparities in the industry, with the goal of taking specific actions to bring more career opportunities to African American and other historically marginalized youth.Ken McIntyre, Chief Executive Officer of the Real Estate Executive Council (REEC), will join The Roundtable’s Board of Directors, along with three other new members, effective July 1. REEC is a professional trade association composed of minority leaders in the commercial real estate industry – and is now officially one of 19 national real estate trade association partners that The Roundtable coordinates with on industry policy issues. Cafaro and DeBoer’s statement concludes, “The moment for leadership is now. The Real Estate Roundtable commits to motivate meaningful and lasting change within our spheres of influence.”# # #

News

June 12, 2020

Roundtable Weekly

Roundtable Recommends Congressional Focus on Emergency Rental Assistance for Residential, Business Tenants Impacted by Covid-19

Housing

The Real Estate Roundtable on June 8 urged Congress to develop a policy solution that assists residential and business tenants, economically harmed by the pandemic, with meeting their due and owing rent obligations. The letter sent was submitted for the record of a June 10 virtual hearing on “The Rent is Still Due: America’s Renters, COVID-19, and an Unprecedented Eviction Crisis” by the House Financial Services Subcommittee on Housing, Community Development. The Roundtable emphasizes in the letter that a specific rent assistance program for both residential and business tenants is needed to:Keep workers housed and employed;Maintain property taxes for state and local budgets that pay for essential community services;Safeguard Americans’ retirement savings; andAvoid a cascade of mortgage foreclosures.The letter explains that tenants’ rental revenues are the foundational link in an “obligation chain” that supports local government property taxes to pay for essential community services, provides the revenue to pay the salaries and benefits of real estate industry workers, maintains the stability of the mortgage system, and supports Americans’ pension and retirement savings. Articles and studies cited in an attachment to the letter describe drastic declines in rent collections since April, especially from businesses in the retail and hospitality sectors. A cited article published in the Washington Post on June 3 – “The next big problem for the economy: Businesses can’t pay their rent” – reports:“The problem for the broader U.S. economy is that when businesses … stop paying rent, it sets off an alarming chain reaction. Landlords are now at risk of bankruptcy, too. Commercial real estate prices are falling. Jobs at property management companies and landscapers face cuts. Banks and private investors are unwilling to lend to most commercial real estate projects anymore, and cash-strapped city and local governments are realizing the property taxes they usually rely on from business properties are unlikely to be paid this summer and fall”Additionally, the letter cites CoStar Risk Analytics, which reports the commercial real estate market can expect to see borrowers default on more than 13,000 loans totaling $148 billion in value.The New York Times on June 5 also reported in “Tenants’ Troubles Put Stress on Commercial Real Estate” that landlords have begun to fall behind on the loans used to acquire or build properties, citing hotel and retail property data from Trepp.The Wall Street Journal this week reports that disputes between landlords and retail tenants over missed rent payments are now increasingly headed to court. (WSJ, June 9, “Landlords’ New Credo for Late-Paying Retail Tenants: I’ll See You in Court”)The depressed state of business rent collections is a foreboding sign of diminishing commercial real estate asset values, which translates to lower property tax revenues for state and local governments to pay for infrastructure and essential health care and first-responder services. The letter’s proposes that “Congress should strengthen the ‘obligation chain’ with a robust rental assistance program specifically designed to help business and residential tenants through the current crisis.” General assistance criteria for business and residential tenants to qualify for emergency rent support are suggested in The Roundtable’s June 8 letter.The House subcommittee also heard from a coalition of national housing associations that submitted a letter focusing on the need for a residential rent assistance program. “It is a top priority for the rental housing industry that Congress establish an emergency rental assistance program,” the groups wrote in their June 9 letter. “We expect a significant number of residents will continue to be negatively affected by the pandemic, inhibiting their ability to pay their rent, even with the assistance provided in the CARES Act.” The need for policies to preserve the “rental obligation chain” and sustain economic recovery from the fallout of Covid-19 was a central topic during The Roundtable’s June 11-12 Virtual Annual Meeting.# # #

Coronavirus Response

June 12, 2020

Roundtable Weekly

Talks Continue on Next Phase of Coronavirus Stimulus as Federal Reserve Expands Main Street Lending Program

Capital and Credit Coronavirus TALF The Fed

Trump Administration officials are signaling support for another Coronavirus stimulus package that Congress is expected to consider next month. (Wall Street Journal, June 11)After the House of Representatives on May 22 passed a $3 trillion coronavirus relief bill, congressional Republicans have signaled they may be open to another COVID-19 legislative package, but on a measured basis. (Forbes, May 21 and Roundtable Weekly, May 22) Treasury Secretary Steven Mnuchin on June 10 testified before the Senate Small Business and Entrepreneurship Committee: “I definitely think we are going to need another bipartisan legislation to put more money into the economy. I think whatever we do going forward needs to be much more targeted, particularly to the industries and small businesses that are having the most difficulty in reopening as a result of COVID-19.” (RollCall, June 10)Mnuchin on June 11 responded to a question by Jim Cramer of CNBC’s “Squawk on the Street” about future coronavirus stimulus plans and rental payment pressures faced by commercial real estate. Mnuchin said, “On the commercial side … it is more complicated. You have companies, particularly in retail, that are having a lot of issues. They are going to have to deal with the rent. The landlords then have to deal with mortgage payments.”The Treasury Secretary continued, “…how do we help the industries that are especially impacted –- and I would say hotels, travel, entertainment, restaurants are right up there. So we are going to need to be much more targeted in making sure that we get people back to work and help these industries.”White House economic adviser Kevin Hassett on June 9 said the odds of passing additional coronavirus economic stimulus before Congress breaks for its August recess “are very, very high.” Hasset added that the issue of business liability protections for employers is one of the “biggest problems” facing passage of another coronavirus package. (Wall Street Journal, June 9 and Forbes, June 6).Sen. John Cornyn (R-TX) emphasized the GOP’s position on May 18, stating on the Senate floor that “Senate Majority Leader McConnell (R-KY) and I … are working on a proposal that would put common sense reforms in place and protect those acting in good faith from being sued into oblivion.” (Cornyn statement). Potential employer immunity and anticipated litigation related to Covid-19 were the focus of a May 12 Senate Judiciary Committee hearing. (Roundtable Weekly, May 15).Sen. Cornyn this week stated the Republican liability proposal will be released next month. He added the plan would allow employers to choose which government coronavirus safety guidelines to follow while shielding them from lawsuits if their customers or workers contract the virus. (BGov, June 10)A multi-sector coalition including real estate, tourism, technology, manufacturing, health care, and energy sector groups – led by the U.S. Chamber of Commerce – called upon Congress in a May 27 letter to enact temporary liability protections for businesses struggling to reopen and operate safely during the COVID-19 pandemic. Federal Reserve ActionsFederal Reserve Chairman Jerome Powell on June 10 stated the central bank will continue buying large quantities of bonds and leave interest rates near zero through at least 2022 as it anticipates the outbreak “will weigh heavily on economic activity” and “poses considerable risks to the economic outlook.” (USA Today, June 10)Powell added after the Fed’s two-day meeting this week, “This is the biggest economic shock, in the U.S. and the world, really, in living memory. We went from the lowest level of unemployment in 50 years to the highest level in close to 90 years, and we did it in two months.” (New York Times, June 10)Powell stated, “To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions.” (FOMC statement and Economic Projections, June 10)The Fed has purchased agency mortgage bonds during the pandemic at a record pace totaling $719 billion, more than $12 billion per day on average, according to the New York Fed. (BGov, June 11)On June 8, The Federal Reserve Board on expanded its Main Street Lending Program to allow more small and medium-sized businesses to be able to receive support. The Board expects the Main Street program to be open for lender registration “soon” and to be actively buying loans shortly afterwards. (Fed news release)The Main Street Lending Program was established with the approval of the Treasury Secretary and with $75 billion in equity provided by the Treasury Department from the coronavirus economic relief package, The CARES Act.The changes include:Lowering the minimum loan size for certain loans to $250,000 from $500,000;Increasing the maximum loan size for all facilities;Increasing the term of each loan option to five years, from four years;Extending the repayment period for all loans by delaying principal payments for two years, rather than one; andRaising the Reserve Bank's participation to 95% for all loans.This chart has additional details on the changes.Once lenders have successfully registered for the program, they will be encouraged to make Main Street loans immediately. The Main Street Lending Program intends to purchase 95% of each eligible loan that is submitted to the program after meeting all requirements. The Main Street Lending Program will also accept loans that were originated under the previously announced terms, if funded before June 10, 2020.Additionally, The New York Fed has released updated Frequently Asked Questions for the Term Asset-Backed Securities Loan Facility (TALF). See changes from the May 26 TALF FAQs here. Updated forms and guidance were also issued for the TALF program. The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) and Research Committee discussed the Fed’s actions as part of the economic outlook and the state of real estate capital and credit markets during its remote meeting yesterday held in conjunction with The Roundtable’s Virtual Annual Meeting.# # #

June 9, 2020

Policy Comment Letter

2020-06-09 Real Estate Coalition Letter_

June 8, 2020

Policy Comment Letter

2020-06-08-House Subcomm Letter_Rent Assistance Program

COVID-19 and Reopening, Racial Injustice

June 5, 2020

Roundtable Weekly

Industry Leaders Respond to Racial Injustice; Rental Concerns Amid COVID-19 Lockdowns Add to Uncertainty

Coronavirus

Real estate industry leaders this week responded to protests against racial injustice throughout the nation sparked by the May 25 death of George Floyd in Minneapolis. Real Estate Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.) on June 2 stated, “The buildup and expression of anger and frustration around racial injustice is real and it is justified. There are sadly far too many examples of systemic racism, bias and inequality in our society, and there are no fast or easy answers to dismantling hundreds of years of racism.” She added, “We do not condone violence against people or property, which seems to be emanating principally from criminal and other elements, rather than from peaceful protesters who are demanding change. But We CAN stand together as allies, stand against racism when we see it, and take deliberate actions to encourage and promote diversity, equity and inclusion within and beyond our own homes, networks, and communities to ensure that everyone feels like they belong.” (Full Statement, Ventas, June 2) Real Estate Roundtable President and CEO Jeffrey DeBoer on June 1 told BisNow, “Political, business and community leaders must come together and take concrete actions to significantly and measurably combat the long-standing abuse and unequal opportunities that continue to fall, particularly across race and gender.” (Bisnow article, June 1) Roundtable Board Member and Related Companies CEO Jeff Blau also told Bisnow on Monday, “… this has been going on for a very, very long time, and I think [inequality] is probably one of the greatest risks to our country's future that I can imagine. And I think it's a topic that we all, as business leaders, need to focus on to try to make things better.” Scott Rechler, chairman and CEO of RXR Realty and a Roundtable Member, tweeted a statement on May 31: “The rage currently being felt across our country reflects the widening inequality and systemic racism that has plagued our nation for far too long.” He urged demonstrators to channel their anger into change at the ballot box. (TRD, June 1, “Developers, brokerage heads express solidarity but urge non-violence”) James Whelan, president of the Real Estate Board of New York, said Floyd’s killing underscores “systemic issues of race and class” that the city and country have failed to address. Whelan told The Real Deal that he condemned violence and pledged the industry would provide solutions, “not just lip service.” (TRD, June 2) Economic Restart and Re-Entry Concerns Working with its industry partners, The Roundtable is focused on identifying and addressing issues associated with building re-entry as people return to work in many regions. The Real Estate Roundtable’s Building Re-Entry Working Group continues to meet weekly to address issues associated with the restarting of the economy. This week, the Working Group shared a report from fitwel on how to adapt building design projects to respond COVID 19. Additionally, a June 4 article in Facility Executive, “NYC Real Estate Leaders Issue Guidelines For Reentering Office Buildings,” notes, “A coalition of business and real estate industry leaders have joined together to issue New York City’s most comprehensive guidelines to facilitate the safe and healthy reentry into commercial office buildings. These guidelines follow New York State’s issuance of commercial building safety practices and will help owners, managers, and building workers comply with state guidance.” (Best Practices for Reentering Commercial Buildings in Phase Two of New York Forward) A recent Littler survey of more than 1,000 employers show concerns centered on when to bring employees back and how to do so safely; how to accommodate increasing remote-work requests; and liability concerns stemming from the rise in COVID-19-related employment claims and lawsuits. (View the survey infographic and the May publication). The Centers for Disease Control and Prevention (CDC) has issued recommendations for American employers preparing to reopen their offices as states begin to lift their lock-down orders. [CDC, Interim Guidance for Businesses and Employers Responding to Coronavirus Disease 2019, (May 2020] CDC recommends various steps such as checking ventilation systems, increasing outdoor air circulation, ensuring employees maintain six feet of separation through physical barriers, staggered worker shifts, enhanced clean and disinfecting practices, and conducting employee health checks and screenings. A multi-sector business coalition including real estate, tourism, technology, manufacturing, health care, and energy sector groups – led by the U.S. Chamber of Commerce – called upon Congress in a May 27 letter to enact temporary liability protections for businesses struggling to reopen and operate safely during the COVID-19 pandemic. Among the more than 200 signatories to the letter are The Real Estate Roundtable, American Hotel & Lodging Association, International Council of Shopping Centers, National Apartment Association, National Association of REALTORS®, and the National Multifamily Housing Council. In recent weeks, Roundtable members have shared their perspectives and experiences with a number of media platforms regarding workplace re-entry strategies and technologies. (Roundtable Weekly, May 15) Such questions are also complicated by an evolving patchwork of state-level laws and guidance. (New York Times Interactive Map, “See How All 50 States are Re-Opening” ) Commercial Rent Shortfalls; Bank Regulator Warns About Lock-Down Impact on CRE The Washington Post on June 3 reported in “The next big problem for the economy: Businesses can’t pay their rent” that more than 40 percent of commercial retail rents were not paid in April and May, citing Datex Property Solutions. (Request Datex’ report on National Tenant Payment Trends.) The Post story notes when businesses stop paying rent, it sets off an alarming chain reaction that could threaten the broader economy and put landlords at risk of bankruptcy. The article also mentions how an aggressive proposal in California would force landlords to renegotiate leases with tenants affected by the pandemic, posing a risk to the basis of contract law. John Worth, executive vice president for research at Nareit, is quoted, “It’s not appropriate policy to have blanket rent forgiveness. It could really create some chaos.” The New York Times on June 5 reports in “Tenants’ Troubles Put Stress on Commercial Real Estate” that landlords have begun to fall behind on the loans used to acquire or build properties, citing hotel and retail property data from Trepp. The Times article notes, “As landlords face rent shortfalls and renegotiation because of the pandemic, lenders are also exposed.” It continues, “Beyond the immediate impact of business closings on tenants’ revenue are larger questions, including the already-dire trends for malls and shopping centers, how office and consumer behavior might change after the pandemic, and the effects of recent looting and vandalism on retail corridors.” The Roundtable has emphasized the vital need to restore the “rent obligation chain” during this economic crisis, which would benefit all stakeholders – business and residential tenants, owners, lenders, municipal and state budgets and retirement investments. (Bisnow video interview with Jeffrey DeBoer, April 30) Separately, Acting Comptroller of the Currency Brian P. Brooks on June 1 urged the nation’s mayors and governors to consider the adverse impacts of long-term regional economic shutdowns on the nation's financial system and the commercial real estate sector. (Office of the Comptroller of the Currency news release, June 1) In letters to the National League of Cities, the U.S. Conference of Mayors, and the National Association of Governors, Brooks warned that the lengthy duration and scope of continued lockdown orders “potentially threaten the stability and orderly functioning of the financial system the OCC is charged by law to protect.” Brooks also warned about the negative potential consequences for CRE, stating, “Banks are a major source of commercial real estate finance in the United States. Cutting off utilities to commercial buildings can impair their condition, structural integrity, and value, thus impairing the collateral that secures real estate loans. Commercial real estate loan collateral is also put at risk by lengthy property vacancies that result from extended stay-at-home orders.” “Apart from damage to the physical collateral, extended lockdown orders obviously impair the ability of businesses, particularly small businesses, to generate the revenue needed to pay their loan obligations,” Brooks stated. (OCC letter to U.S. Conference of Mayors) The challenges of restarting the economy and re-entering commercial properties will be a central topic of The Roundtable’s June 11-12 Virtual Annual Meeting and concurrent policy advisory committees. # # #

Coronavirus Response

June 5, 2020

Roundtable Weekly

Paycheck Protection Program Changes Signed Into Law; Next COVID-19 Stimulus Legislation Expected by July

CARES ACT Coronavirus Tax Policy

Legislative changes to the Paycheck Protection Program (PPP) signed into law today will ease restrictions on forgivable loans to small businesses seeking to retain and pay workers affected by COVID-19. (BGov, June 4)Under the CARES Act, a portion of PPP loans could be forgiven for an eight-week period after origination. (See “CARES Act and Implications for Real Estate”)The most significant rule change provided by the Paycheck Protection Program Flexibility Act (H.R. 7010) this week extends that time period that borrowers must spend their funds to 24 weeks, while preserving the ability to have the debt forgiven. H.R. 7010 passed the House (417-1) on May 28, cleared the Senate by unanimous consent on June 3 and was signed into law by President Trump today. (Roundtable Weekly, May 22 and AP, June 5) The bill also: Replaces the “75-25 Rule” on the use of PPP loan proceeds for loan forgiveness purposes with requirements to spend at least 60% for payroll costs and up to 40% for covered mortgage interest, rent, and utility payments;Extends the PPP re-payment period to five years for small businesses that do not receive loan forgiveness;Allows PPP loan recipients to take full advantage of deferral of employment taxes through the end of 2020; and Provides borrowers a “safe harbor” from the loan forgiveness rehiring requirement if the borrower is unable to rehire an individual who was an employee of the recipient on or before February 15, 2020, or if the borrower can demonstrate an inability to hire similarly qualified employees on or before December 31, 2020; (Congressional Research Service summary, May 28)Senate Majority Leader Mitch McConnell (R-KY) said additional technical fixes to the PPP will follow at the requests of Sen. Ron Johnson (R-WI), Senate Small Business and Entrepreneurship Chairman Marco Rubio (R-FL) and Sen. Susan Collins (R-ME) (RollCall, June 3)Next COVID-19 Stimulus; Fed Expands Muni Loan Program The Trump Administration is considering policy options for the next legislative response to the coronavirus pandemic. The Wall Street Journal reports a senior administration official stated this week, “We’ve been through the rescue phase and we’re now in the transitional reopening phase and I think generally speaking we’d like to move into a growth-incentive phase for the future economy.” (WSJ, June 2)White House aides, according the Journal, stated the nation’s mass unrest over police brutality and racial inequality, along with the progress of business reopening efforts, will influence the pace of discussions – but they do not expect the completion of a package until July. House Ways and Means Committee Chair Richard E. Neal (D-MA) on Wednesday said he is continuing negotiations with Treasury Secretary Steven Mnuchin on another round of coronavirus relief legislation that could include major infrastructure spending and tax credit proposals. (Law360, June 4)Neal said on June 3 that in addition to infrastructure investment, he intends to propose an expansion of new markets tax credits for private investment in low-income communities, low-income housing tax credits to build affordable housing, and historic rehabilitation tax credits for preservation purposes. (TNT, June 4)This week also saw the Federal Reserve expand the scope of its $500 billion a lending program for state and local governments to include smaller borrowers. (Fed news release, June 3)The Fed’s expansion of its Municipal Liquidity Facility (MLF) will now enable all U.S. states “… to have at least two cities or counties eligible to directly issue notes to the MLF regardless of population.” Governors from each state will also be able to select two bond issuers “…whose revenues are generally derived from operating government activities (such as public transit, airports, toll facilities, and utilities) to be eligible to directly use the facility.’ (MLF term sheet, June 3)The MLF expansion may now allow sparsely populates states to designate two areas hard hit by the economic repercussions of the pandemic, or bond issuers like New York’s subway system, to sell debt to the Fed as a way to maintain critical services. (New York Times, June 3)The various policy response to economic impacts of COVID-19 will be a focus next week during The Roundtable’s Virtual Annual Meeting, which will include a discussion with Treasury Secretary Steven Mnuchin.# # #

Opportunity Zones

June 5, 2020

Roundtable Weekly

IRS Issues Pandemic-Related Relief for Opportunity Zone Investors and Funds

Opportunity Zones OZs

The Internal Revenue Service (IRS) yesterday issued broad relief for Qualified Opportunity Zone Funds and their investors in response to the ongoing COVID-19 pandemic. (IRS news release, June 4) IRS Notice 2020-39 includes five helpful changes and clarifications to the current rules governing the capitalization and operation of opportunity funds. The Roundtable’s Opportunity Zone Working Group has strongly supported greater flexibility in the Opportunity Zone rules to ensure that capital investment continues to flow to hard-hit, low-income communities during the economic crisis brought about by COVID-19. Under the new guidance: if the 180-day investment period to roll gain into an opportunity fund would have expired between 4/1/20 and 12/31/20, the deadline is now extended to 12/31/20; if an opportunity has a compliance date for the 90% investment asset test that falls between 4/1/20 and 12/31/20, failure to comply is automatically excused under the reasonable cause exception; the 30-month substantial improvement period for real property owned by an opportunity fund or opportunity zone business from 4/1/20 through 12/31/20 is disregarded; the IRS has clarified that the working capital safe harbor for opportunity fund working capital assets is extended under the President’s emergency declaration by 24 months (for a total period of 55 months) if the working capital is held by the fund before 12/31/20 and the other requirements for the safe harbor are met; and the 12-month period for an opportunity fund to reinvest proceeds from the return of capital or disposition of property is extended by an additional 12 months if the original period included 1/20/20, the date of FEMA’s major disaster declaration and other requirements are met. Additionally, the IRS has updated their Qualified Opportunity Zones Frequently Asked Questions. The Roundtable and a broad coalition of real estate organizations continue to support more significant enhancements to Opportunity Zones that would require congressional action. The 11-member industry coalition urged members of Congress on May 14 to consider Opportunity Zones (OZ) rule changes that could spur investment, promote capital formation and bolster job growth in economically disadvantaged communities impacted by the coronavirus pandemic. (Coalition letter) The IRS changes this week come not long after the coalition’s letter, and several regulatory recommendations made by Sen. Tim Scott (R-SC) and eight other Senate Republicans on May 4 in a letter to Treasury Secretary Mnuchin and IRS Commissioner Charles Rettig. (Roundtable Weekly, May 8) The Roundtable’s Tax Policy Advisory Committee will discuss Opportunity Zone guidance and other tax relief resulting from the COVID-19 pandemic during the first Virtual Roundtable Annual Meeting on June 12. # # #

Infrastructure

June 5, 2020

Roundtable Weekly

House Democrats Unveil Infrastructure Bill to Reauthorize Highway Trust Fund Before Sept. 30 Expiration

Infrastructure

A five-year, $494 billion surface transportation bill unveiled June 3 by House Transportation and Infrastructure Committee Democrats would authorize highway, railroad, and transit programs to replace the current $226 billion Highway Trust Fund that expires on Sept. 30. (The Investing in a New Vision for the Environment and Surface Transportation in America – INVEST in America Act – Bill text | Factsheet | Bill Summary | Section-by-Section) Rep. Peter DeFazio (D-OR), chairman of the Transportation and Infrastructure (T&I) Committee, said, “We are in multiple crises at the moment … But we have to move forward with our very important reauthorization of surface transportation. (BGov, June 3) The INVEST in America Act is part of a $760 billion “Moving Forward Framework” rolled out in January by House Speaker Nancy Pelosi (D-CA) with the chairs of three House committees to address national infrastructure investment. (Roundtable Weekly, Jan. 31, 2020) A plan on how to pay for the new bill has not yet been determined by the House Ways and Means Committee. The Roundtable submitted extensive comments on infrastructure policy to both committees last year. (March 20, 2019 W&M comments; April 29, 2019 T&I comments.) This week’s T&I bill contains elements that align with Roundtable policies including: Improve the Transportation Infrastructure Finance Innovation Act (TIFIA) loan program to encourage more public-private partnerships for infrastructure projects; Encourage high-density, transit-oriented development by incorporating the Build More Housing Near Transit Act (H.R. 4307), which would require localities applying for Federal Transit Administration grants to assess feasibility of affordable housing construction along mass transit routes (Up for Growth Action’s 1-page summary); Authorize a Vehicles Miles Travelled (VMT) pilot program as a potential, more sustainable funding source for the Highway Trust Fund as opposed to the controversial federal “pay-at-the-pump” gas tax; Revise current Capital Investment Grant (CIG) and TIFIA program state/local “cost share” commitments to allow funding for major projects (like the New York-New Jersey Gateway Program along the Amtrak Northeast Corridor); and Prioritize use of Highway Trust Funds with a “fix it first” strategy to focuses on repair and rehabilitation of decaying infrastructure. The House bill also includes measures on climate resiliency and Amtrak that are expected to face opposition by the Republican majority in the Senate. For example, the measure would require the U.S. Department of Transportation (DOT) to establish new greenhouse gas performance measures, and authorize a new DOT program to support carbon pollution reduction. The Democratic T&I committee bill is considered the first salvo in the transportation funding debate to reauthorize the Highway Trust Fund before it expires on September 30, 2020. Additional committees from both the House and Senate need to produce other portions of the final legislation. The T&I committee is scheduled to consider the INVEST in America Act on June 17 – and a vote on the House floor is could occur at the beginning of July. (BGov, June 3) The need for infrastructure investment to help restart the economy and encourage long-term growth was also the focus of a June 3 meeting between President Trump and New York Gov. Andrew Cuomo at the White House. (Wall Street Journal and New York Times, June 3) Gov. Cuomo said, “It was about: How do we supercharge the reopening? It was a good conversation.” The two policymakers discussed obstacles to federal funding and expedited approvals for significant New York transportation initiatives such as the Gateway Project, which would require new rail tunnels under the Hudson river. (WSJ, April 18, 2019) President Trump on June 4 signed an executive order that cites an economic emergency to waive laws for expediting federal approval for highways, pipelines and other projects. The Washington Post cites a senior administration official stating that the action will help the economy recover from novel coronavirus losses. (Washington Post, June 4) The Real Estate Roundtable will host an infrastructure discussion with Gov. Cuomo on June 11 during the organization’s first Virtual Annual Meeting. # # #

Pandemic Risk Insurance

May 29, 2020

Roundtable Weekly

Pandemic Risk Insurance Proposals Include House Legislation Modeled on TRIA

Coronavirus

House Democrats and the insurance industry recently released separate proposals aimed at expanding the availability of pandemic-related business interruption insurance. (Bloomberg Law, May 28) Legislation introduced on May 26 by Congresswoman Carolyn B. Maloney (D-NY), above, senior member of the House Financial Services Committee, would create the Pandemic Risk Reinsurance Program – a federal backstop that would provide capacity for pandemic risk insurance and maintain marketplace stability with the private sector, modeled after the Terrorism Risk Insurance Act (TRIA). Rep. Maloney’s bill – the Pandemic Risk Insurance Act of 2020 (PRIA), H.R. 7011 – has 20 Democratic cosponsors, including four who serve on the House Financial Services Committee. (PRIA Section-by-Section Summary, Bill text and Rep. Maloney news release). Rep. Maloney commented on the introduction of PRIA this week with stakeholders during a remote news conference. “We want to solve a market failure by allowing companies to purchase business interruption insurance that covers pandemics so that they can stay in business and keep their workers employed. To solve this marketplace failure, we need to create a federal backstop just like we did with TRIA,” said Rep. Maloney. “That’s why I’ve introduced the Pandemic Risk Insurance Act. This will help relieve some of the economic losses that business are suffering and will protect businesses and the economy from future pandemics.” (PRIA introduction video, May 26) Under PRIA, Maloney stated. “… policyholders and insurers and the federal government will share the risks. With this backstop, the insurance industry will have more certainty and will be able to safely underwrite this unique risk.” (PRIA Section-by-Section Summary) Rep. Maloney also noted the insurance industry’s May 21 proposal for a federal program to help businesses meet the financial challenges from future pandemics. “It was encouraging to see last week the insurance industry’s agreement with so many members of Congress and policyholders from across the country that pandemic insurance is a viable, actuarially sound product – and that there is an immediate need to create a mechanism to provide relief for millions of struggling business owners.” The insurance industry-backed Business Continuity Protection Program, proposed in advance of Rep. Maloney’s PRIA bill, would provide revenue replacement assistance for payroll, employee benefits and operating expenses following a presidential viral emergency declaration. (National Association of Mutual Insurance Companies news release, May 21) The proposals from Rep. Maloney and the insurance industry are prospective, and do not address losses associated with the current coronavirus pandemic. The Trump administration, lawmakers and state insurance regulators have warned against measures that would have insurers retroactively pay for current pandemic claims. (Politico, May 21 and Insurance Journal, May 27) The Real Estate Roundtable, along with its industry partners, continues to work constructively with policymakers and stakeholders to develop and enact an effective pandemic risk/business continuity program. Pandemic risk insurance will be a policy focus during The Roundtable’s Remote Annual Meeting and policy advisory committee meetings on June 11-12. # # #

Business Liability & COVID-19

May 29, 2020

Roundtable Weekly

Protection from Frivolous Lawsuits Key to Economic Recovery, Business Groups Urge Congress

Coronavirus

A multi-sector coalition including real estate, tourism, technology, manufacturing, health care, and energy sector groups – led by the U.S. Chamber of Commerce – called upon Congress in a May 27 letter to enact temporary liability protections for businesses struggling to reopen and operate safely during the COVID-19 pandemic. The letter explains that American businesses face risks of frivolous litigation that will impede the nation’s path to economic recovery. “Absent a targeted safe harbor for [businesses] that work to follow applicable guidelines, the fear and uncertainty from boundless liability threatens to impede our country’s social and economic recovery,” the groups explain. The Chamber-led coalition emphasized that “recourse for those harmed by truly bad actors who engage in egregious misconduct” must be preserved. Reasonable and temporary liability protections should also be offered for: (1) businesses, nonprofit organizations, and educational institutions that work to follow applicable public health guidelines against COVID-19 exposure claims; (2) healthcare workers and facilities providing critical COVID-19-related care and services; (3) manufacturers, donors, distributors, and users of vaccines, therapeutics, medical devices, as well as PPE and other supplies (such as hand sanitizer and cleaning supplies) that are critical to the COVID-19 response; and (4) public companies targeted by unfair and opportunistic COVID-19-related securities lawsuit Among the more than 200 signatories to the letter are The Real Estate Roundtable, American Hotel & Lodging Association, International Council of Shopping Centers, National Apartment Association, National Association of REALTORS®, and the National Multifamily Housing Council. Additionally, Building Owners and Managers Association (BOMA) International wrote to congressional leaders on May 27, urging them to consider business protections developed in response to prior emergencies like 9/11 as a guide for responding to Covid-19-related liability issues. (BOMA letter on business liability) “A tailored, specific legal safe harbor program for those in the commercial real estate sector, who are following public health rules, directives, and guidelines, making plans, and implementing protective measures, will support ongoing recovery efforts,” BOMA’s letter explains. Senate Majority Leader Mitch McConnell (R-KY) and House Minority Leader Kevin McCarthy (R-CA) said in a joint statement early this month that any future Covid-19 relief legislation must include liability protections for employers and businesses. (See Roundtable Weekly, May 1) Senator John Cornyn (R-TX) emphasized the GOP’s position on May 18, stating on the Senate floor that “Leader McConnell and I … are working on a proposal that would put common sense reforms in place and protect those acting in good faith from being sued into oblivion.” (Cornyn statement). Potential employer immunity and anticipated litigation related to Covid-19 were the focus of a May 12 Senate Judiciary Committee hearing. (Roundtable Weekly, May 15). Several states have implemented or are considering pandemic-related liability protections that could provide a direction for federal legislation. Utah, for example, provides law suit immunity to businesses except in cases of reckless or intentional misconduct. (Salt Lake Tribune, May 4) Roundtable Members Continue to Drive the “Re-Entry Discussion” Roundtable Immediate Past Chair Bill Rudin (Co-Chairman & CEO, Rudin Management Company, Inc.) today joined CNBC for a conversation about the path forward for re-populating office spaces in New York and cities nationwide. Citing recent industry surveys, Rudin said, “Over 75% of the employees want to come back to work. They want to be with their co-workers and interact and have that cohesiveness that is missing right now.” He added, “We're optimistic that when we get through this the office building will still be a central hub for creativity and entrepreneurship.” (CNBC Squawkbox, Twitter, May 29) In recent weeks, Roundtable members have shared their perspectives and experiences with a number of media platforms regarding workplace re-entry strategies and technologies. (Roundtable Weekly, May 15) Such questions are complicated by an evolving patchwork of state-level laws and guidance. (New York Times Interactive Map, “See How All 50 States are Re-Opening” ) The Centers for Disease Control and Prevention (CDC) has issued recommendations for American employers preparing to reopen their offices as states begin to lift their lock-down orders. [CDC, Interim Guidance for Businesses and Employers Responding to Coronavirus Disease 2019, (May 2020] CDC recommends various steps such as checking ventilation systems, increasing outdoor air circulation, ensuring employees maintain six feet of separation through physical barriers, staggered worker shifts, enhanced clean and disinfecting practices, and conducting employee health checks and screenings. Business liability and building re-entry are crucial issues affecting commercial real estate operations in the Covid-19 era. They will be discussed during The Roundtable’s virtual Annual Meeting on June 11-12, which will include remote events for both business and policy advisory committee meetings. # # #

Paycheck Protection Program (PPP)

May 29, 2020

Roundtable Weekly

House Passes Bill to Relax Restrictions on Small Business PPP Loans

Coronavirus Paycheck Protection Program PPP

The House of Representatives yesterday overwhelmingly passed legislation (417-1) intended to ease restrictions on Paycheck Protection Program (PPP) loans to help small businesses keep workers on payroll with benefits during the coronavirus outbreak. (The Hill, May 28) The House’s Paycheck Protection Program Flexibility Act (H.R. 7010) would allow small businesses to apply for loans and rehire laid-off or furloughed workers through December 31, 2020 – a six month extension to the original June 30 “covered period” deadline enacted as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act in March. (Roundtable Weekly, March 27). H.R. 7010 would make other changes that offer greater flexibility for PPP-eligible businesses, including: Extending the loan forgiveness period from eight weeks to 24 weeks after origination; Extending the PPP re-payment period to five years, for small businesses that do not receive loan forgiveness; Allowing PPP loan recipients to take full advantage of deferral of employment taxes through the end of 2020; and Allowing small businesses to receive forgiveness for up to 40% of PPP loan amounts used for rent and other non-payroll expenses. The Roundtable joined a broad coalition of organizations supporting the flexibility bill – as originally introduced – that would have given small businesses greater discretion to decide how to best apportion PPP proceeds to help pay rent obligations and other ordinary operating expenses. (Roundtable Weekly, May 22) The original bill would have completely eliminated the so-called “75-25 Rule.” The rule’s name derives from a Small Business Administration (SBA) regulation that currently requires a qualifying business to use at least 75% of PPP proceeds for payroll and benefits, and no more than 25% for rent, mortgage interest, and utility payments. (See RER’s “8-Point Plan to Reform the PPP”) H.R. 7010 as passed by the House yesterday defaulted instead to a “60-40 Rule.” According to Politico, “Democrats scaled back [the] initial version of the bill to address complaints from labor leaders that it would have given businesses less incentive to hire back workers.” (POLITICO, May 28) With the Senate scheduled to come back in session on Monday, it could vote next week on its own bipartisan legislation to modify the PPP, the Paycheck Protection Program Extension Act (S. 3833). Like H.R. 7010, the Senate version would increase the PPP forgiveness period – but only by 16 weeks. The Senate bill would not address changes to the “75-25 Rule” at all. (Journal of Accountancy, May 25) A bipartisan group of Senators led by John Cornyn (R-TX), meanwhile, is on record to move the “75-25 Rule” to a “50-50 Rule” where up to half of PPP loan proceeds could be used by a business to pay rent and other non-payroll fixed expenses. (Cornyn press release, May 6) Treasury Secretary Steven Mnuchin has expressed the Administration’s opposition to changing the “75-25 Rule.” “Let me just remind people it’s called the Paycheck Protection Program, it's not called the overhead protection program,” Mnuchin said in a May 21 interview for The Hill. “It was designed that you got eight weeks of payroll plus 25 percent for overhead, which we thought was a reasonable amount.” House Majority Leader Steny Hoyer (D-MD) claimed earlier this week that House and Senate negotiators are nearing agreement on PPP reforms. (Bloomberg, May 26). A recent “tracker tool” released by the American Action Forum charts the allocation of PPP loans since the program’s inception in March. # # #

May 27, 2020

Policy Comment Letter

5-27-20-Coalition_CoronavirusLiabilityProtections_Congress

Coronavirus Response

May 22, 2020

Roundtable Weekly

Policymakers Debate Timing of Next COVID-19 Response; Fed Report Warns Pandemic May Force Significant CRE Asset Repricing

Coronavirus

After the House of Representatives last Friday passed a $3 trillion coronavirus relief bill, Republican policymakers have signaled they may be open to another COVID-19 bill, but on a measured basis. (Forbes, May 21) Senate Republican Leader Mitch McConnell yesterday said, “I think there is a high likelihood we will do another rescue package. But we need to be able to measure the impact of what we’ve already done, what we did right, what we did wrong ... We’re not quite ready to intelligently lay down the next step, but it’s not too far off.” (Fox News, May 21) Treasury Secretary Mnuchin said yesterday during a forum hosted by The Hill that "We're going to carefully review the next few weeks. I think there is a strong likelihood we will need another bill, but we just have $3 trillion we're pumping into the economy." (Advancing America's Economy forum, May 21) Sen. Lindsey Graham (R-SC), chairman of the Senate Judiciary Committee and close ally of President Trump, told CNN, "I want to do infrastructure. I told Trump, this is the time. We got it teed up. This is the time to go big. ... It really is a once-in-a-lifetime opportunity to give a facelift to the country.” (CNN, May 20)The debate in Washington on what will constitute the next large legislative response to the coronavirus pandemic continued as the Federal Reserve released its bi-annual Financial Stability Report, which analyzes vulnerabilities in the economy and identifies significant risks to the U.S. banking system. (Bloomberg, May 15)CRE a Focus of Fed’s Financial Stability ReportThe Fed report offered a stark warning that asset prices remain vulnerable to significant price declines if the COVID-19 pandemic persists – especially in the commercial real estate sector. (GlobeSt, May 18) The report states, “The vulnerability stemming from elevated CRE valuation pressures, coupled with a dim outlook for the sector as indicated by recent declines in equity REIT prices, suggests that CRE may undergo a substantial repricing in response to disruptions generated by the COVID-19 pandemic.” (The Fed’s 2020 Financial Stability Report)The Fed report also notes that non-agency commercial mortgage-backed securities (CMBS) market, which had previously been funding about one-fifth of CRE mortgage debt, stopped new securitizations toward the end of March. “CRE loans that would normally be securitized have been accumulating on bank balance sheets. In addition, data from the April 2020 Senior Loan Officer Opinion Survey on Bank Lending Practices indicated that a major fraction of banks reported weaker demand for CRE loans and tighter lending standards, on net, in the first quarter of 2020,” the report adds.Fed Chairman Jay Powell told a virtual Senate Banking Committee hearing on Tuesday that the Main Street Lending credit facility – a loan program designed to lend to small and medium businesses – should be ready to launch by the end of May.In an April 22 letter sent to Treasury Secretary Steven Mnuchin and Fed Chairman Jay Powell, The Real Estate Roundtable and Nareit urged that the scope of the Federal Reserve’s “Main Street” Lending Programs should be expanded to forestall further disruption and economic dislocations in commercial real estate.Chairman Powell also testified that the Term Asset-Backed Securities Loan Facility (TALF) is one of four Federal Reserve credit facilities that will become operational soon. Powell testified, "We expect all of them to be stood up and ready to go by the end of this month," Powell said of the remaining programs. "People are working literally around the clock and have been for weeks." (Markets Insider, May 18) Previous industry letters to the Fed on March 24 and April 14 addressed the need to broaden the range of TALF, requested that eligible collateral include both outstanding (legacy) CMBS, commercial mortgage loans and newly issued collateralized loan obligations. On April 9, the Fed confirmed that the TALF would be expanded to include triple-A rated legacy non-agency CMBS and loans.Roundtable Video Interview Economic and other policy issues facing the CRE industry in today’s pandemic environment were discussed recently in a video discussion with Roundtable Chairman Emeritus (2009-2012) Dan Neidich (Chief Executive Officer, Dune Real Estate Partners LP) and Real Estate Roundtable President Jeffrey DeBoer. The video, done as part of several remote Roundtable interviews about pandemic-related policy issues, was hosted by the alumni club of Stanford University – Stanford Professionals in Real Estate (SPIRE). Neidich and DeBoer address the importance of restoring the “Rent Obligation Chain” and the need for policy makers to help maintain business and residential rental income streams so local governments receive property tax revenues they need to provide essential community services.Steady rent revenues drive building values that support American pensions and retirement savings. Rents to property owners also pay the compensation, health, and other benefits for the millions of workers – at all skills levels – that make U.S. building infrastructure safe, healthy, and functioning.The SPIRE interview also covers a range of other policy matters at the forefront of discussions in our nation’s capital – such as business liability and proposals to help manage risks associated with reopening places of work, education and recreation.Policymakers’ response to the contagion crisis, whether legislative or regulatory – and how the industry is participating in the process – will be a focus of The Roundtable’s June 11-12 Remote Annual Business and Committee Meetings.# # #

Paycheck Protection Program (PPP)

May 22, 2020

Roundtable Weekly

Senate, House Signal Openness to PPP Reforms as Business Coalitions Urge Policymakers to Strike “75/25 Rule,” Extend Loan Forgiveness Period

Coronavirus Paycheck Protection Program

Congressional lawmakers are taking steps to improve key terms of the Paycheck Protection Program (PPP) to help small business borrowers deal with the economic impact of the global pandemic. (Washington Post, May 20 and Wall Street Journal, May 21) Under the CARES Act, a portion of PPP loans can be forgiven for the eight week period after origination. (See “CARES Act and Implications for Real Estate”)Implementing rules and guidance from the U.S. Treasury and Small Business Administration further establish a “75/25 Rule,” whereby 75% of PPP loan proceeds and forgiven amounts must be for payroll. No more than 25% can be devoted to non-payroll business expenses like rent, mortgage interest, and utility bills.Business coalitions (including the The Real Estate Roundtable) sent letters yesterday urging policymakers to take immediate action to modify these requirements by extending the PPP loan forgiveness period and striking the “75/25 Rule.”A broad business coalition initiated by the U.S. Chamber of Commerce also recommends extension of the PPP’s June 30 safe harbor date for rehiring and restoration of pay. A separate letter focuses support for specific legislation, the Paycheck Protection Flexibility Act (H.R. 6886). This bipartisan bill is a stand-alone “spin-off” of PPP reform provisions passed by House Democrats last week in the HEROES Act. (Roundtable Weekly, May 15, 2020) H.R. 6886 would likewise strike the “75/25 Rule” and extend the PPP forgiveness period to 24 weeks after loan origination.A sponsor of the PP Flexibility Act, Rep. Dean Phillips (D-MN), informed in a press release that House leadership has committed to bring up H.R. 6886 for its own vote possibly as early as next week. House Speaker Nancy Pelosi (D-CA) reportedly called the 75/25 limitation on small businesses “debilitating.” (Roll Call, May 20)Over in the Senate, Marco Rubio (R-FL), Chairman of the Senate Small Business Committee and author of the PPP provisions in the CARES Act, predicted in a tweet yesterday that the Senate would pass reforms (S. 3833) to extend the time period beyond the current June 30 deadline by which qualifying small businesses can apply for and use PPP loans.Senator John Cornyn (R-TX), meanwhile, has spearheaded a bipartisan effort to amend the “75/25 Rule” to a “50/50 Rule” – where up to 50% of PPP loan and forgiveness amounts could be used for rent and other ordinary business expenses. (Cornyn letter, May 5) (Roundtable Weekly, May 8, 2020)Since passage of the CARES Act on March 27, The Roundtable has recommended elimination of the “75/25 Rule” as an inappropriate “one-size-fits-all” restriction that unduly limits businesses in meeting their rent obligations and paying for other ordinary operating expenses. (RER’s “8-Point Plan to Reform the PPP”) Treasury Secretary Steven Mnuchin yesterday endorsed congressional efforts regarding extension of the PPP loan forgiveness period. “One of the things we’re working with Congress on, and there is bipartisan support, is lengthening the eight-week period. [T]hat’s something we definitely want to fix,” he said. (Advancing America's Economy forum, May 21)At The Hill’s Advancing America's Economy forum, Mnuchin also stated he did not support reforming the “75/25 Rule.” “We want most of this money to go to workers and that we believe the 75 percent was exactly consistent with the way the program was designed,” he said.A recent “tracker tool” released by the American Action Forum charts the allocation of PPP loans since the program’s inception in the CARES Act. The Paycheck Protection Program will be discussed at The Roundtable’s Remote Annual Business and Committee Meetings from June 11-12. # # #

Workplace Reentry

May 22, 2020

Roundtable Weekly

CDC Summarizes “Re-Opening America” Initiatives; EPA Provides Building Water Quality Checklist; Roundtable Board Member Interviewed on Office Return

Workplace ReEntry

The Centers for Disease Control and Prevention (CDC) this week released a comprehensive summary of its initiatives and tools to enable fuller reopening of communities and businesses, as all 50 states are taking steps to return to a “new normal” after months of COVID-19 shutdowns and stay-at-home orders. (CDC’s “Activities and Initiatives Supporting the Covid-19 Response” and NYTimes national map, May 21)CDC’s “Activities and Initiatives” summary describes its measures to date to control the spread of the pandemic and enable contact tracing to slow transmission. CDC’s initiatives support the White House’s guidelines for “Opening Up America Again” through a phased approach that governors, mayors, and state/local public health officials may implement statewide or community-by-community.Six “gating criteria” that consider a community’s “downward trajectory” of patients treated for the virus over a 2-week period, availability of Covid-19 testing, and public health capacity, provide the basis to guide officials’ decisions to “move between phases” toward gradual re-opening. (CDC’s “Activities and Initiatives,” p. 7)CDC’s “Activities and Initiatives” also sets forth a “menu of safety measures” as “interim guidance” (Appendix F) to supplement its recent “decision tools” to advise businesses, restaurants and bars, mass transit systems, and schools on how to safely reopen during the pandemic. (Roundtable Weekly, May 15, 2020)Meanwhile, the U.S. Environmental Protection Agency (EPA) recently issued an information resource and checklist to address water quality in buildings as they ramp-up operations. EPA recommends that owners and managers take proactive steps to minimize water stagnation in plumbing systems during temporary shutdowns or reduced operations, prior to building re-population. See: Maintaining or Restoring Water Quality in Buildings with Low or No Use (PDF)Checklist: Restoring Water Quality in Buildings for Reopening (PDF)Additionally, Roundtable Board Member Owen Thomas (CEO, Boston Properties) was interviewed yesterday on CNBC’s Squawkbox (photo above) about the pandemic’s impact as employees return to office environments and how cities may compare to suburbs as major work hubs of the future. (CNBC interview, May 21) “We have a pandemic underway; there will be a gradual return to the office. But I do think companies will be actively using their offices in the long-term,” Thomas said.“I also hear from customers that remote work is not an acceptable replacement for the in-person interactions that happen in the office space. The ability to mentor younger employees. The spontaneous collaboration and creativity that occurs and also the culture that companies develop – it’s very difficult to do it when we’re all on Zoom and Webex.” (Thomas CNBC interview, May 21) Roundtable members who have recently been interviewed about workplace return strategies and technologies include Immediate Past Chair Bill Rudin, Roundtable Member Scott Rechler and others. (Roundtable Weekly, May 15)Two industry reports issued this month also address return-to-work guidelines and COVID-19 operational contingency plans:A CBRE analysis of 203 companies’ operations across the globe – “ReEntering the World’s Workplaces” – shows many companies have implemented return-to-work guidelines stricter than local government requirements (CBRE news release, May 15) / (GlobeSt, May 18)A Deloitte survey of 100 senior financial service institutions’ (FSI) executives with responsibility for crisis management and business continuity planning reveals that at least half of the respondents are developing COVID-19 operational contingency plans spanning at least the next three months. Part of the complexity around re-opening has to do with the scale and scope of FSI real estate. (Deloitte, May 15)The Roundtable’s Building Re-Entry Working Group continues to meet weekly to address issues associated with the restarting of the economy. # # #

May 21, 2020

Policy Comment Letter

5-21-20-Coalition_PPPFixes_CongLeadership_Treasury_SBA

May 21, 2020

Policy Comment Letter

5-21-20-PP Flexibility Act Letter

May 19, 2020

Policy Comment Letter

5-19-20-final_multitrade_Industry_request_RBCmod_period_extensn

Coronavirus Response

May 15, 2020

Roundtable Weekly

House Democrats Expected to Pass $3 Trillion Covid-19 Stimulus Package; Fed Chair Says Additional Fiscal Support Needed to Avoid Long-Term Economic Damage

Coronavirus

The House of Representatives’ Democratic majority is expected to pass tonight the largest financial stimulus bill in U.S. history to combat the ongoing economic fallout related to the coronavirus pandemic. (H.R. 6800, Health and Economic Recovery Omnibus Emergency Solutions Act [“HEROES”] Act: one-pager; section-by-section; state and local relief summary.) The $3 trillion HEROES Act is considered a marker for Democratic priorities in negotiations with the Republican-controlled Senate and the White House. The bill has been declared “dead on arrival” by Senate Majority Leader Mitch McConnell (R-KY). (The Hill, May 12)Since March, Congress has passed four Covid-19 response packages totaling $2.9 trillion. (Roundtable Weekly March 6, March 20, March 27, and April 24)President Trump said he is in “no rush” to negotiate another financial rescue bill, while McConnell doesn't plan to move forward on another economic relief bill until June at the earliest, according to a Senate Republican aide. (Time-AP, May 9 and Bloomberg, May 13)The HEROES Act would combine $950 billion in aid to state and local governments with direct cash payments, expanded unemployment insurance, support for health care testing and food stamps – along with funding for a list of non-virus related measures such as the U.S. Postal Service and vote-by-mail initiatives. (Forbes, May 12).The HEROES Act would also temporarily eliminate the limitation on the deduction for State and local taxes, which was originally passed in 2017’s Tax Cuts and Job Act. (Associated Press, May 12 and CBS News, May 13) Proposed Legislative Changes to the Paycheck Protection ProgramThe House bill also includes revisions to the Paycheck Protection Program (PPP) although it does not seek additional funding for more small business loan capacity. The HEROES Act would remove the cap that no more than 25% of PPP loan amounts could be forgiven for non-payroll business expenses, such as rent or mortgage interest. On May 11, Treasury Secretary Steven Mnuchin told CNBC the Trump administration is sympathetic to changing the so-called “75/25 rule” that 75% of PPP proceeds must be used for payroll and benefits. “We will look at a technical fix,” Mnuchin said. (CNBC transcript, May 11)The Roundtable’s 8-Point Plan to Reform the PPP recommends that Treasury and the Small Business Administration (SBA) should not apply a 75/25 rule as a categorical “one size fits all” standard that limits PPP assistance to help business meet their rent obligations and pay other ordinary operating expenses.The HEROES ACT would also change the PPP requirement that the “forgiveness” period for loans would extend to 24 weeks after origination (from the March 27 CARES Act’s current 8-week limitation). (House Small Business Committee summary of the proposed changes to the PPP program and EY Tax News, May 13)In other PPP news, a federal court in Michigan declared SBA’s “Ineligibility Rule” invalid in a broad ruling that respects the CARES Act’s text that Congress intended for “any business” with 500 employees or less to be eligible for PPP loans. (May 11 decision in DV Diamond Club of Flint LLC v. SBA, E.D. Mich., No. 20-cv-10899)Treasury and SBA release updated rules and guidance implementing the PPP on an ongoing basis. (U.S. Treasury’s PPP resources page) Federal Reserve Chair Powell Supports More Fiscal ReliefFederal Reserve Chair Jerome Powell on May 13 gave remarks on current economic issues, warning that a prolonged recession could take hold unless additional fiscal aid was devoted to bolster the economy as it reels from the impact of the coronavirus pandemic. (Video of Powell’s remarks) Powell noted Congress has already provided $2.9 trillion to battle a downturn “without modern precedent, significantly worse than any recession since World War II.” He added, “While the coronavirus economic shock appears to be the largest on record, the fiscal response has also been the fastest and largest response for any postwar downturn.”The Fed has also taken action with “unprecedented speed and force” by slashing interest rates and purchasing Treasuries and agency mortgage-backed securities to restore functionality in critical markets. He warned these actions may not be enough, stating that there is “a growing sense … that the recovery will come more slowly than we would like. We ought to do what we can to avoid these outcomes, and that may require additional policy measures.” Powell drew attention to policy makers’ next steps in Washington since “the recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems.”As Congress begins its debate over the next coronavirus package, the Fed Chairman concluded his remarks by stating, “Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery. This tradeoff is one for our elected representatives, who wield powers of taxation and spending.” # # #

COVID-19 Congressional Hearings

May 15, 2020

Roundtable Weekly

Senate Committees Consider Workplace Reentry, Business Liability and Financial Regulations

Coronavirus

Senate committee hearings on May 12 addressed Covid-19 issues including reopening businesses and schools, legal liability for businesses, and the role of financial regulations in combatting the economic repercussions of the pandemic.A “new normal” for congressional hearings was on display as social distancing and remote testimony were put into effect, with lawmakers and witnesses meeting through video conferences to maintain social distancing protocols.Workplace Re-EntryThe health risks associated with reopening places of work, education and recreation were explored during the Senate Health, Education, Labor and Pensions Committee hearing, "COVID-19: Safely Getting Back to Work and Back to School."Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases, testified that returning too quickly could “turn the clock back, rather than going forward” on the road to economic recovery. (Stat, May 12)According to Politico, a dozen states will see their stay-at-home orders or business restrictions expire between today and Monday (May 15 to May 18) at the same time other states surpass the two-week point since reopening. Updated reports on reopening status are available from CNN and the New York Times.The U.S. Chamber of Commerce has developed an interactive state-by-state map of re-opening guidance policies.The Centers for Disease Control and Prevention posted new one-page “decision tool” guidance documents on Thursday that advise businesses, restaurants and bars, mass transit systems, and other concerns on how to safely reopen during the pandemic.Business LiabilityPotential employer immunity and anticipated litigation related to Covid-19 were the focus of a Senate Judiciary Committee hearing on Tuesday, "Examining Liability During the COVID-19 Pandemic."Republicans and Democrats expressed that enforceable federal guidelines from the Occupational Safety and Health Administration (OSHA) or Centers for Disease Control and Prevention (CDC), outlining proper health, safety, cleaning and other procedures, would likely be necessary to set standards for business conduct. Senators also acknowledged that potential plaintiffs asserting liability claims would likely confront challenges in establishing that a business’s actions directly caused a Covid-related injury. (Brownstein Hyatt Farber Schreck, May 14)“One primary goal out of this hearing is to get the standards in place for business, for universities, for schools, whether they come from the CDC [or] OSHA,” Chairman Lindsey Graham (R-SC) said at the hearing. Standards are needed so businesses “can understand what’s expected of them. And if they do what’s expected, they don’t need to worry about getting sued. The big hole in the puzzle right now is the standard,” (The Hill, May 12)The Judiciary hearing followed prior statements on employer liability from Republican congressional leaders that “these protections will be absolutely essential to future discussions surrounding recovery legislation” and that any coronavirus stimulus package will not pass the Senate without addressing business liability. (Roundtable Weekly, May 1)Financial RegulationsThe Senate Banking Committee hearing on “Oversight of Financial Regulators” focused on the effectiveness of recent financial regulatory actions implemented to combat the economic impact of the pandemic.Lawmakers shared the sentiment that more could be done by U.S. financial regulatory agencies to broaden the availability of various lending facilities put into effect to get more capital to businesses and communities in need.During the hearing, Fed Vice Chairman for Supervision, Randy Quarles, responded to questions on the need for expanding the Fed’s Term Asset-Backed Securities Loan Facility (TALF) by saying there were no “specific changes to suggest” at this time, but that the Fed was “very sensitive to that.”The Roundtable joined industry letters to the Fed on March 24 and April 14 on the need to broaden the range of the TALF to include both outstanding (legacy) CMBS, commercial mortgage loans and newly issued collateralized loan obligations. On April 9, the Fed confirmed that the TALF would be expanded to include triple-A rated legacy non-agency CMBS and loans.The Fed on May 12 also broadened the range of leveraged loans that can be used as collateral for the TALF. The Fed will now accept new Triple-A rated collateralized loan obligations (CLOs) with leveraged loans, including refinanced loans and priced as far back as January 2019, as part of the TALF. (Fed news release and Wall Street Journal, May 12)Today, a business coalition including The Real Estate Roundtable wrote to financial regulators requesting they clarify their April 7 guidance encouraging financial institutions to work constructively with borrowers impacted by COVID-19. Specifically, the coalition requests clarification that – in addition to traditional loan products – lending and financing arrangements, such as warehouse lines and repurchase agreements secured by multifamily and commercial real estate loans and commercial mortgage-related securities, are within the scope of the guidance in the Statement. (Coalition letter, May 15)# # #

News

May 15, 2020

Roundtable Weekly

Roundtable Members Address Workplace Return Strategies and Technology

Coronavirus

Roundtable members addressed the challenges and techniques in reopening the workplace in a variety of media outlets this week.On May 13, Roundtable Chair Debra Cafaro (Chairman & CEO, Ventas) discussed the steps being taken by the City of Chicago towards reopening with Mayor Lori Lightfoot as part of The Economic Club of Chicago’s virtual program series. The discussion also covers the city’s response to the COVID-19 pandemic and other aspects of Mayor Lightfoot’s first year in office. (Video: Mayor Lightfoot’s Prepared Remarks: 00:45 – 29:30, followed by Q&A with Debra Cafaro: 29:30 – 54:00)Roundtable Immediate Past Chair Bill Rudin (Co-Chairman & CEO, Rudin Management Company, Inc.) today joined CNBC for a conversation about the path forward for reopening office space in New York City as employees work from home amid the coronavirus pandemic. Rudin, above, discussed his building operating system called Nantum, which tracks real time data on metrics like indoor air quality, energy usage, temperature and carbon dioxide. Rudin also commented on the need for state and local stimulus funding from Congress to support the basic functions of municipalities that will help economic recovery. (CNBC video, May 15)Roundtable member Scott Rechler (Chairman and CEO, RXR Realty) yesterday participated in a webinar hosted by Axios’ Mike Allen on reopening the economy and the future of workplace safety. (Axios webinar, May 14). Rechler discusses a “Leap to Labor Day” project for his company that will rotate employees back to offices on a staggered time basis to avoid congestion. (Watch Axios webinar)Roundtable Board Member and Sustainability Policy Advisory Committee Chair, Tony Malkin (Chairman and Chief Executive Officer, Empire State Realty Trust, Inc.), was quoted this week in a New York Times article on the challenges Manhattan owners and developers may face if the change in work environments evolves from buildings to homes. He added that New York City’s diverse and educated work force will drive an economic rebound and desire for office space that caters to large industries, including a fast-growing technology sector. (New York Times, “Manhattan Faces a Reckoning if Working From Home Becomes the Norm,” May 12)Real Estate Roundtable President and CEO, Jeffrey DeBoer, discussed what building owners and managers should consider to safely manage the reentry of tenants, workers and visitors in an interview last week with Dr. Joseph Allen, Assistant Professor at Harvard’s T.H. Chan School of Public Health and Director of its Healthy Buildings Program. (Video, May 6)The Roundtable's Building Re-Entry Working Group continues to meet weekly to address issues associated with the restarting of the economy.Operations and performance standards for healthy buildings will be a topic discussed during The Roundtable’s virtual Annual Meeting on June 11-12, which will include remote events for both business and policy advisory committee meetings.# # #

News, Opportunity Zones

May 15, 2020

Roundtable Weekly

Industry Coalition Urges Congress to Consider Opportunity Zone Rule Changes to Spur Investment in Hard-Hit Communities

Opportunity Zones OZs

An 11-member industry coalition, including The Real Estate Roundtable, urged Members of Congress on May 14 to consider Opportunity Zones (OZ) rule changes that could spur investment, promote capital formation and bolster job growth in economically disadvantaged communities impacted by the coronavirus pandemic. (Coalition letter, May 14) Opportunity Zones seek to stimulate jobs and growth where they are most needed by encouraging taxpayers to make long-term, patient investments in targeted, low-income communities. On Thursday, Federal Reserve Chairman Powell reported that “among people who were working in February, almost 40 percent of those in households making less than $40,000 a year had lost a job in March.” (Chairman’s Prepared Remarks, May 13) The coalition letter asks Congress to make three critical improvements to the Opportunity Zone incentives. The changes would: Allow opportunity funds to raise capital from all sources, not just gain rolled over from a recently disposed investment. Spur productive real estate investment in low-income communities by providing that a 50 percent increase in the basis of a building constitutes a substantial improvement of the property. Strengthen the economic incentives by codifying the tax rate on deferred gain and extending for two years the recognition date for deferred gain, and consequently, the deadlines that must be met in order to qualify for the increase in basis for gain rolled into an opportunity fund. The coalition’s legislative suggestions come not long after Sen. Tim Scott (R-SC) and eight other Senate Republicans made several regulatory Opportunity Zone recommendations on May 4 in a letter to Treasury Secretary Mnuchin and IRS Commissioner Rettig. (Roundtable Weekly, May 8) The Senators encouraged 10 specific changes in their letter, which states, “Significant challenges arise from the inability to raise capital; decreased demand for space, products and services; a decline in the local economy; governmental delays; supply chain interruptions; and uncertainty regarding valuations and ability to secure loans and necessary funding apart from Opportunity Zone capital gain investments.” The role of investment in Opportunity Zones may be addressed in eventual Covid-19 stimulus legislation in Congress. The Roundtable’s Tax Policy Advisory Committee (TPAC) will continue to collect and share information regarding with policymakers regarding the real estate industry’s experience with the Opportunity Zone tax incentives and the impact on low-income communities of real estate-focused opportunity funds. # # #

In Memoriam

May 15, 2020

Roundtable Weekly

Jim Didion, Real Estate Pioneer, Ex-CBRE CEO, National Realty Committee Chair Emeritus

In Memoriam

James Jerrett Didion (Jim) – a pioneer in commercial real estate who served as CEO of CB Richard Ellis and as former Chair of The National Realty Committee (predecessor of The Real Estate Roundtable) – passed away on April 2.“Jim Didion was a driving force not only in the commercial real estate industry – his decades of invaluable public service included work on the National Realty Committee (NRC), the predecessor organization that became The Real Estate Roundtable in 1999,” said Jeffrey DeBoer, Roundtable President and CEO. He added, “Jim joined NRC in 1972, served in a variety of policy advisory roles for years, including as Chairman from 1993 to 1996 and beyond as NRC Chair Emeritus. He will always be remembered as a selfless contributor to the common good of the industry, the country and his community.”His real estate career began at Coldwell Banker Commercial, where he rose to become CEO and Chairman of CB Richard Ellis, leading the firm's growth from $400 million in annual revenues in 1986 to more than $1 billion in 1999. Mr. Didion has been widely recognized as a pioneer in building a global, fully integrated, professional services business and credited with leading CB to its position as the largest commercial real estate company in the world.Mr. Didion consulted on real estate issues to the Chancellor of the University of California at Berkeley and served on the advisory board of the Fisher Center at the Haas Business School, as trustee of Community Hospital of the Monterey Peninsula and as National Real Estate Consultant to the U.S. Olympic Committee. A video of his real estate advisory efforts, with his wife Gloria, on behalf of Montage Health illustrates their community participation and involvement. (Full obituary, Monterey County Herald)# # #

May 15, 2020

Policy Comment Letter

20-05-15_CoalitionComments_GuidanceClarification_Fed_OCC_FDIC – Final (003)

May 15, 2020

Policy Comment Letter

5-15-20-CoalitionComments_GuidanceClarification_Fed_OCC_FDIC – Final

Opportunity Zones

May 14, 2020

Policy Comment Letter

Industry Coalition Urges Congress to Consider Opportunity Zone Rule Changes to Spur Investment in Hard-Hit Communities

Opportunity Zones OZs, Tax Policy,

Coronavirus Response

May 8, 2020

Roundtable Weekly

Policymakers Float Measures for Next COVID-19 Relief Package; Senators Propose Changes to Paycheck Protection Program’s “75/25 Rule”; Democrats Introduce $100 Billion Emergency Rental Assistance Bill

Coronavirus

House Democrats are developing another massive coronavirus aid package as they consider when to return to Washington for a vote – while Republicans have signaled they prefer to pause any negotiations on future pandemic aid until the effectiveness of current programs can be evaluated. (Wall Street Journal, May 7) House Speaker Nancy Pelosi (D-CA) has stated her goals for the next round of pandemic relief, which include $800 billion in funding for state and local governments, in addition to unemployment support, direct payouts, Covid-19 testing and more. (Bloomberg, April 30 – AP, May 5 – Bloomberg TV, May 7)Senate Minority Leader Charles Schumer (D-N.Y.) told MSNBC yesterday, “We need Franklin Rooseveltian-type action and we hope to take that in the House and Senate in a very big and bold way.” White House National Economic Council Director Larry Kudlow today said, "We've kind of paused as far as formal negotiations go. Let's have a look at what the latest round produces. You need a month or so to evaluate that.” (Roll Call, May 8)Kudlow’s remarks follow Senate Majority Leader Mitch McConnell’s (R-KY) statement earlier this week that Congress should "take a pause” before passing more pandemic relief legislation. (The Hill, May 5)Kudlow added, "The president, as you know, has put out a number of his own policy ideas, payroll tax cuts being one of them, and … COVID-19 liability restrictions for businesses." Kudlow also highlighted proposals to promote restaurant and travel spending, as well as allowing businesses to quickly write off their expenses as they reopen. (CQ, May 8) Roundtable Pandemic Policy Communications Outreach Jeffrey DeBoer, President and CEO of The Real Estate Roundtable, on May 6 participated in the Urban Lab Podcast to discuss the pandemic’s ongoing impact on CRE, The Roundtable's recommendations for reforming the PPP, the merits of a Pandemic Risk Insurance Act similar to TRIA, the “rent obligation chain,” and the organization’s broader engagement with policymakers. Dr. Sam Chandan, Silverstein Chair of the NYU SPS Schack Institute and Fellow at the NYU Urban Lab, hosted the podcast. (Interview with DeBoer, May 6)DeBoer also participated in a Bisnow webinar last week to discuss the government’s legislative and regulatory responses to the economic impact of the coronavirus pandemic. (Bisnow recap, May 4 and Roundtable Weekly, May 1)The Roundtable’s Senior Vice Presidents on May 5 participated in “The Policy Response to COVID-19: Implications for Real Estate” – hosted by the Pension Real Estate Association (PREA). The supporting slides for the PREA webinar offer extensive details to various issues related to the PPP, tax changes and actions by the Federal Reserve. (Download slides) Small Business Aid and Rent Assistance Loan demand for the Paycheck Protection Program (PPP) was expected to quickly diminish the program’s supplemental funding that became available April 27. Yet, more than 40 percent of the aid remains unused according to data released by the Small Business Administration yesterday. (Wall Street Journal, Demand for Small-Business Loans Cools, May 8) Lenders and participants say that reasons for the slowdown in demand include the reluctance of small businesses to sign up for a program whose loan forgiveness terms remain unclear. To obtain forgiveness of a loan, agency rules implementing the PPP require small businesses to spend 75% of funds on payroll (and no more than 25% of PPP proceeds or forgiveness can be devoted to rent, mortgage interest, utility bills, and other debt obligations).The Roundtable’s 8-Point Plan to Reform the PPP recommends that SBA and Treasury should not apply the 75/25 rule as a categorical “one size fits all” standard that limits PPP assistance, in all cases, to no more than 25% for business rent and other ordinary expenses.This week, a broad bipartisan group of Senators led by John Cornyn (R-TX) proposed changing the 75-25 rule to a 50-50 rule – where up to 50% of PPP loan proceeds can be used by qualifying small businesses to pay rent, mortgage and utilities. (Cornyn letter, May 5)Sen. Cornyn and 20 other Senators urged Secretary of the Treasury Steven Mnuchin and Small Business Administration Administrator Jovita Carranza to “exercise the power of your respective offices to ensure all business sectors are able to spend at least 50 percent of the loan proceeds on the statutorily allowed non-payroll expenses.”Senate Finance Committee member Cornyn on May 5 also introduced The Small Business Expense Protection Act of 2020, which would modify the CARES Act to allow business owners to claim tax deductions for ordinary business expenses, regardless of whether they were paid with a forgiven PPP loan.Additionally, legislation introduced today would create a $100 billion emergency residential rental assistance fund. The Emergency Rental Assistance and Rental Market Stabilization Act of 2020 was introduced by Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, and Senator Sherrod Brown (D-OH), Ranking Member of the Senate Committee on Banking, Housing and Urban Affairs. (House Financial Services Committee news release and bill summary.)Earlier this week, The Roundtable’s Jeffrey DeBoer was quoted in GlobeSt.com about the need for a program to help both residential and business tenants with temporary, emergency rental assistance. DeBoer said, “While the focus on employment has been necessary and effective, there is presently no COVID-19 response program with the primary goal of assisting American families and businesses in meeting their obligations to pay rent, mortgages, and other ordinary debts and expenses.” (GlobeSt, May 5)DeBoer added, “No landlord wants to evict a tenant, and most are working proactively with their tenants to make payment plans and reduce tensions. Without rental income, such actions disproportionately impact smaller landlords and pummel a city’s property tax collections by sending buildings into foreclosure. Ultimately, it would affect municipal workers who will lose their jobs—including teachers, police and firefighters.”The "rent obligation chain" and its crucial role to support the economy and the CRE sector was also illustrated in a March 24 Wall Street Journal article, “Businesses Can’t Pay Rent. That’s a Threat to the $3 Trillion Commercial Mortgage Market.” The pandemic’s ongoing impact on CRE and Washington’s policy responses will be a major focus of The Roundtable’s first virtual Annual Meeting, which will be held remotely on June 11-12. # # #

COVID-19 & Building Re-Entry

May 8, 2020

Roundtable Weekly

Roundtable Interview Addresses Healthy Building Operations as Governments Develop Economic Re-Opening Plans

Coronavirus

With states and cities beginning to re-open economic sectors, what should building owners and managers consider to safely manage the reentry of tenants, workers and visitors? This was the topic of an interview conducted this week by Real Estate Roundtable President and CEO, Jeffrey DeBoer, with Dr. Joseph Allen, Assistant Professor at Harvard’s T.H. Chan School of Public Health and Director of its Healthy Buildings Program. (Video, May 6)Dr. Allen discussed how a science-based strategy to mitigate infectious risks can be adopted as part of a healthy building effort. He is the co-author of the book, “Healthy Buildings: How Indoor Spaces Drive Performance and Productivity,” published last month. The interview is one of a series of videos by The Roundtable on the impact of Covid-19 (The Roundtable’s YouTube channel videos) Dr. Allen said: He was inspired at a Roundtable Sustainability Policy Advisory Committee (SPAC) meeting to assemble a report that eventually became “The 9 Foundations of a Healthy Building.” The publication “takes 40 years of scientific evidence, distills it down to those key factors or features that we know relate to better employee health, improved productivity and help reduce infectious disease transmission.” Building stakeholders could implement a health safety plan using “a five-step hierarchy of controls” detailed in his April 29 Harvard Business Review article, “What Makes an Office Building ‘Healthy’”Healthy building metrics can contribute to building valuation. “Start measuring … health performance indicators. Capture all those gains.” He gives a specific marketplace example featured in an April 28 Harvard Business Review podcast case study, “A Tower for the People: 425 Park Avenue.” There is increased market interest in healthy buildings, especially in light of the fallout from the global pandemic. “This healthy building movement, just like working from home and teleworking, have been slowly rising – and with COVID, it has forced a massive quickening of these movements.” (Watch interview, May 6)Resources:National Real Estate Investor: “Some States Are Reopening. Here’s What Office Landlords Can Do to Make Tenants Feel Safer.” NREI.com, May 7 – From tracing apps to strictly enforced rules on the use of masks, office landlords prepare for eventual reopening.Building Owners and Managers Association (BOMA) International: “Getting Back to Work: Preparing Buildings for Re-Entry Amid COVID-19” provides guidance for preparing commercial properties for the safe return of office tenants, building personnel, visitors, vendors and contractors. The guidance document provides a framework for developing individual property or portfolio plans.International Council of Shopping Centers (ICSC) Covid-18 Resources Center includes “Re-Opening Best Practices” and state-by-state business updates and mandates.CDC's "Reopening Guidance for Cleaning and Disinfecting Public Spaces, Workplaces, Businesses, Schools, and Homes.” CDC’s guidance relies heavily on lists developed by EPA’s Office of Chemical Safety and Pollution Prevention, regarding disinfectant products that can be used against COVID-19 (e.g., sprays, concentrates, and wipes).Department of Homeland Security (DHS) State/Local COVID Requirements:“State and Local Executive Actions” chart provided by DHS is a compendium (to date) of state and local laws and ordinances related to COVID-19 (e.g., stay-at-home orders, social distancing, facial covering/PPE requirements).The Roundtable's Building Re-Entry Working Group continues to meet weekly to address issues associated with the restarting of the economy.Operations and performance standards for healthy buildings will be a topic discussed during The Roundtable’s virtual Annual Meeting on June 11-12, which will include remote events for both business and policy advisory committee meetings.# # #

Tax Policy

May 8, 2020

Roundtable Weekly

IRS Grants REITs Pandemic Relief; Lawmakers Challenge Tax Rules for PPP Loans and Request Greater Flexibility for Opportunity Zones

Opportunity Zones OZs

Several tax policy issues affected by the coronavirus pandemic were the focus of policymakers’ attention this week in Washington, including:Regulatory Relief for REITsThe IRS on March 4 granted relief with respect to distributions that publicly traded REITs must make to their shareholders in order to retain their single-level, preferred tax treatment. The new guidance temporarily lowers the minimum percentage of shareholder dividends from these investment vehicles that must be made in cash from 20% to 10%. The agency granted similar relief during the 2008 financial crisis. IRS Revenue Procedure 2020-19 is effective for distributions made by REITs on or after April 1, 2020 and on or before December 31, 2020. According to the IRS, the guidance was issued to enable REITs to conserve capital and thereby enhance their liquidity.Nareit wrote to the Treasury Department on March 8 seeking the change. “The current COVID-19 has significantly impacted all REITs, but most severely in the lodging, retail, and health care sectors. Many REITs have reduced their dividends because the rents they expect to receive are declining dramatically because of the restrictions put in place or suggested by federal and state authorities,” according to Nareit’s letter. Congress Challenges Treasury on Tax Aspects of PPP LoansCongressional leaders are questioning a recent notice from the IRS prohibiting taxpayers from deducting business expenses paid with loans from the $670 billion Paycheck Protection Program if the loans are subsequently forgiven (see IRS Notice 2020-32, April 30).The chairmen of the House and Senate tax-writing committees sent two letters this week to Treasury Secretary Steve Mnuchin urging him to reconsider the Department's interpretation, which significantly reduces the economic benefit of the loan forgiveness for the borrower. House Ways and Means Chairman Richard Neal (D-MA), Senate Finance Chairman Chuck Grassley (R-IA) and Sen. Ron Wyden (D-OR), the Finance panel’s top Democrat, wrote that Treasury and the IRS’ position defies lawmakers’ intentions when they passed the CARES Act. "We believe the position taken in the Notice ignores the overarching intent of the PPP, as well as the specific intent of Congress to allow deductions in the case of PPP loan recipients," the lawmakers stated in their letter to Sec. Mnuchin. Yesterday, Treasury responded to the lawmakers’ May 5 letter, acknowledging the agency guidance (Notice 2020-32), and that it would “follow up” with Grassley’s office on the matter. Additionally, Sen. John Cornyn (R-Texas) on May 6 led a group of Senators in introducing the Small Business Expense Protection Act, which would clarify the PPP so small businesses can deduct expenses paid with a forgiven PPP loan from their taxes. Covid-19 Relief for Opportunity ZonesSen. Tim Scott (R-SC) and eight other Senate Republicans wrote to Treasury Secretary Mnuchin and IRS Commissioner Rettig on May 4 asking Treasury Department and the IRS to consider several regulatory recommendations aimed at providing flexibility to Opportunity Zone businesses and investors in response to the coronavirus pandemic. National estimates show approximately $67 billion has been pledged towards investments in Opportunity Zones, with $10 billion in equity already raised. (Sen. Scott news release. May 4) The Senators are encouraging 10 specific changes in their letter, which states, “Significant challenges arise from the inability to raise capital; decreased demand for space, products and services; a decline in the local economy; governmental delays; supply chain interruptions; and uncertainty regarding valuations and ability to secure loans and necessary funding apart from Opportunity Zone capital gain investments.”The May 4 letter continues, “Relief focused on giving stakeholders, projects, and businesses additional time and flexibility to meet Opportunity Zone requirements, timelines, and thresholds will enable Opportunity Zone businesses to weather the storm and be part of the robust post-COVID economic recovery.” The Roundtable continues to be a strong supporter of the Opportunity Zones program as a powerful catalyst for transformational real estate investment in designated low-income areas.# # #

Coronavirus Response

May 1, 2020

Roundtable Weekly

Real Estate Roundtable’s DeBoer Discusses Coronavirus Policy Responses and Need for Future Actions

Coronavirus DeBoer

Roundtable President and CEO Jeffrey DeBoer, above, discussed the government’s legislative and regulatory responses to the economic impact of the coronavirus pandemic – and what those policies mean for commercial real estate – in a BisNow webinar yesterday and Real Estate Executive Council Town Hall today. (Watch April 30 Bisnow interview)The discussions addressed the Paycheck Protection Program (PPP), new Federal Reserve credit lending facilities and the need for a national renter assistance program.DeBoer noted that the federal response to the pandemic’s economic shockwave have provided bridge relief, and that the Small Business Administration’s (SBA) PPP and the Fed’s TALF credit facility could be improved to increase their effectiveness. The Roundtable’s Covid-19 Resource Center includes an “8-Point Plan” to improve the PPP. Additionally, the SBA on April 29 released an updated PPP FAQs document.Restoring The Rent Obligation Chain & Future IssuesDeBoer emphasized in his discussions that there is a vital need to “restore the rent obligation chain” to benefit business and residential tenants, owners, lenders, local budgets and retirement investments. (Bisnow video)Before the pandemic crisis, there was clarity on the likely income real estate assets could generate by rental obligations and contracts. However, now those income streams are impaired. The future of certain businesses are unknown; tenants in shared buildings may default; and how employers can retain or regenerate jobs is uncertain. DeBoer noted that these challenges can be addressed by fixing the rental obligation chain.DeBoer also said future issues that should be addressed include business liability, as building owners anticipate the return of occupants, workers and visitors – along with government support for a Pandemic Risk Insurance Program, which could be modeled on the highly successful Terrorism Risk Insurance Program established in the wake of 9/11. The Real Estate Roundtable recently established a Building Re-Entry Working Group to address issues associated with building re-entry, as state and local authorities seek to re-start economic sectors and allow people to return to work.DeBoer also discussed what future legislative packages may include to jumpstart the economy, including infrastructure investment.Other Roundtable videos address how the crisis has affected real estate tax issues, along with other topics, on its Youtube channel.# # #

News

May 1, 2020

Roundtable Weekly

Congressional Republicans and Democrats Clash on Including Covid-19 Business Liability Protections in Future Pandemic Relief Legislation

Coronavirus

Liability concerns in a post-coronavirus world are influencing congressional negotiations about the next pandemic relief package as states move forward on easing business restrictions and employers across the country consider plans to reopen. (AP, April 28 and The Hill, May 1)With the Senate scheduled to return to Washington on May 4, policymakers are staking their priorities about stimulus and other measures that may be included in the next round of Covid-19 related legislation. The House announced this week they will delay their return until May 11 due to concerns about coronavirus in Washington, DC.Senate Majority Leader Mitch McConnell (R-KY) and House Minority Leader Kevin McCarthy (R-CA.) said in a joint statement today that any future stimulus bill must include liability protections for employers. “Senate and House Republicans agree these protections will be absolutely essential to future discussions surrounding recovery legislation,” according to the statement.McConnell on Tuesday referred to the protections as his "red line" during an interview with Fox News. "Let me make it perfectly clear, the Senate is not interested in passing a bill that does not have liability protection. ... What I'm saying is we have a red line on liability. It won't pass the Senate without it," he added. (Fox interview, April 24)House Speaker Nancy Pelosi (D-CA) on Wednesday said employees returning to work should have increased safety protections. “Especially now, we have every reason to protect our workers and our patients in all of this. So we would not be inclined to be supporting any immunity from liability,” Pelosi stated during a press briefing. (National Review, April 29)Senate Minority Leader Chuck Schumer (D-NY) on Tuesday said employers pushing workers to return to unsafe conditions during the pandemic should not receive protections. He stated, “If an employer makes an employee do something that is untenable, shouldn’t an employee have some rights here?” (Bloomberg, April 28).The Roundtable’s Building Re-Entry Working Group is working to address this issue and continues to meet weekly. The Working Group will hold its third virtual meeting on May 7 when it will discuss issues affecting building re-entry, including legal liability and developing best practices to support building health standards. (Reference: The Centers for Disease Control and Prevention publication, “Reopening Guidance for Cleaning and Disinfecting Public Spaces, Workplaces, Businesses, Schools, and Homes.”)Negotiations on the next pandemic bill in Congress will intensify this month, as Democrats are expected to push for massive assistance to help state and local governments meet tax revenue shortfalls that pay for essential services.# # #

Capital and Credit

May 1, 2020

Roundtable Weekly

The Fed Expands Main Street Loan Program to Reach More Businesses; Fed Chair Powell Urges Lawmakers to Take Further Fiscal Measures

The Fed

The Federal Reserve yesterday announced an expansion of its $600 billion Main Street Lending Program (MSLP) to help credit flow to small and medium-sized businesses that were in sound financial condition before the pandemic. (Fed news release and Wall Street Journal, April 30)As part of its broad effort to support the economy, the Fed’s action will assist businesses that were either unable to access the Small Business Administration's (SBA) Paycheck Protection Program (PPP) or that require additional financial support after receiving a PPP loan. It is important to note that MSLP loans (as opposed to PPP loans) are not forgivable. Three separate facilities make up the MSLP: (1) the Main Street New Loan Facility (MSNLF); (2) the Main Street Priority Loan Facility (MSPLF); and (3) the Main Street Expanded Loan Facility (MSELF). (Steptoe, comparison chart, May 1)The changes include:• Creating a third loan option, with increased risk sharing by lenders for borrowers with greater leverage;• Lowering the minimum loan size for certain loans to $500,000 from $1 million; and• Expanding the pool of businesses eligible to borrow for businesses that may already have significant debt. Businesses with up to 15,000 employees or up to $5 billion in annual revenue are now eligible, compared to the initial terms, which were for companies with up to 10,000 employees and $2.5 billion in revenue.According to Steptoe, each MSLP facility uses the same borrower eligibility criteria and have similar commercial components – including the same term (four years), interest rate (LIBOR plus 3%), deferral of principal and interest for one year, and permit prepayment without penalty. For lenders, the risk retention requirement varies: 5% for the MSNLF and MSELF, and 15% for the MSPLF.The Roundtable and Nariet on April 22 wrote to Treasury Secretary Steven Mnuchin and Fed Chairman Jay Powell to request specific changes that would enable CRE borrowers to more efficiently access the Main Street New Loan Facility (MSNLF) and Main Street Expanded Loan Facility (MSELF). (Joint letter, April 22)The joint industry letter addresses (1) Underwriting/ Leverage Limitations/ Loan Size, (2) Distributions/ REITs (3) Loan Terms (4) Applicable Interest Rate Index and (5) Program Timing.The Fed states that a start date will be announced soon for the MSLP. (Main Street Lending Program FAQs, April 30)Fed Chairman Powell Recommends More Fiscal ResponseFederal Reserve Chair Jay Powell on Wednesday said concerns about the rising national debt should not limit the federal government’s efforts to counter the coronavirus pandemic’s economic impact.After announcing the Fed would leave interest rates near zero, Powell included a rare commentary on fiscal policy, urging lawmakers to pursue do more to support the economy. (Bloomberg, April 29)"This is the time to use the great fiscal power of the United States to do what we can to support the economy,” Powell said. "The time will come again and reasonably soon I think where we can think about a long-term way to get the fiscal house in order, and we absolutely need to do that ... But in my personal view, this is not the time to let that concern ... get in the way of us winning this battle," he stated. (Video and statements of The Fed’s news conference)Powell added, “I would say that it may well be the case that the economy will need more support from all of us if the recovery is to be a robust one.” He also noted that "our credit facilities are wide open. We can do more on that front." (MarketWatch, April 29)The Fed Chairman issued a somber warning of the long-term consequences of the coronavirus economic crisis. “These thousands of great medium- and small-size businesses are worth so much more to the economy than the sum of their net assets,” Powell said. (Wall Street Journal, April 29)He added, “It is heartbreaking, frankly, to see that all threatened now. Everyone is suffering here, but those who are least able to bear it are the ones who are losing their jobs and losing their incomes and have little cushion to protect them.”Powell added, that the Fed will use its powers “forcefully, proactively, and aggressively until we’re confident that we’re solidly on the road to recovery.” (Video and statements of The Fed’s news conference)# # #

CORONAVIRUS – Paycheck Protection Program (PPP)

April 24, 2020

Roundtable Weekly

Policymakers Replenish Paycheck Protection Program, Consider Framework for Larger Economic Response Package; Treasury Questions Public Companies’ PPP Loan Eligibility

Coronavirus

A supplemental coronavirus emergency aid measure enacted today replenishes the Paycheck Protection Program (PPP), which ran out of money after its launch on April 3 due to high demand. A recent Small Business Administration (SBA) report shows real estate, rental and leasing businesses were approved for 79,784 PPP loans totaling more than $10.7 billion (figures through April 16). [Roundtable Weekly, April 17] SBA’s PPP Loan Approvals report also indicates that, through April 16, the construction sector received the most PPP loans ($44.9 billion) with health care ($39.8 billion), hotels and restaurants ($30.5 billion), and retail ($29.4 billion) also receiving significant percentages of assistance. The Roundtable on April 8 submitted an 8-Point Plan to policymakers that seeks to clarify and improve the PPP. Policymakers this week have also expressed ideas for expanding the next coronavirus response package beyond individual and business relief measures. Additional funding programs may include hazard pay for essential workers, vote-by-mail programs and funding for the U.S. Postal Service, with a total cost that could exceed the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act passed by Congress last month. (Roundtable Weekly, March 27) This week’s funding bill is referred to as an interim step to combat the economic impact of the pandemic as lawmakers consider a major follow-up package, generally referred to as “CARES 2.” (The Hill, April 23) Senate Democratic Leader Chuck Schumer (D-NY) said, “We will need a big, strong and active [fourth bill]. It’ll have to come very soon. The needs are large and great.” Schumer added that funding for state and local governments is a top priority as municipalities’ tax revenues drop and city officials work to set budgets for the next fiscal year. (The Hill and Axios Cities, April 22) Schumer also stated Federal Reserve Board Chairman Jerome Powell is working to open up the Main Street Lending program to nonprofits and municipal governments. (AP, April 21) Additionally, Sens. Bill Cassidy, (R-LA) and Bob Menendez, (D-N.J.) on April 19 unveiled legislation that would provide a $500 billion fund to help states and local governments respond to the public health and economic crisis, while maintaining essential services. (Sen. Cassidy news release) Treasury Secretary Steven Mnuchin is reported as stating the next bill may include some infrastructure funding to boost 5G cellular and broadband access, and incentives for manufacturers to bring PPE, pharmaceutical, and other critical infrastructure production back from China. (POLITICO Playbook, April 24) Senate Majority Leader Mitch McConnell (R-KY) this week hedged on any endorsement of assistance to state and local governments, instead focusing on how future coronavirus-related legislation could add to the growing national debt. “Let's weigh this very carefully, because the future of our country in terms of the amount of debt that we're adding up is a matter of genuine concern.” (The Hill, April 22) Treasury Questions Large Companies’ PPP Loan Eligibility Treasury and SBA updated their Frequently Asked Questions guidance on the PPP yesterday, which questions whether businesses owned by large companies, with adequate sources of liquidity to support the business’s ongoing operations, qualify for a PPP loan. (Question # 31 from FAQs) The answer addresses public companies seeking PPP loans, stating “it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification [of economic need] in good faith.” Before the PPP ran out of money, approximately 150 public companies received nearly $600 million in loans from the $350 billion program, with some of those companies announcing this week that they will return the funding obtained. (Wall Street Journal, April 23) Updates to the PPP rules and guidance are available via the Treasury Department’s website (April 23 FAQ update here) and the Small Business Administration’s Covid-19 resource webpage. The Real Estate Roundtable’s response and resources, including policy comment letters related to the pandemic, are listed on its website. # # #

Tax Policy

April 24, 2020

Roundtable Weekly

Roundtable Video Alert Focuses on Tax Policy Pandemic Responses and Priorities; Industry Asks Treasury to Clarify Like-Kind Exchange Deadlines

Likekind Exchanges LikeKind Exchanges LKEs Tax Policy

The Real Estate Roundtable on Tuesday released a video alert focused on tax policy efforts aimed at mitigating the COVID-19 pandemic’s economic impact on commercial real estate. Roundtable President and CEO Jeffrey DeBoer, above, introduces the video with a report on the organization’s various policy efforts related to emergency financing, including the Payroll Protection Program (PPP) and the Federal Reserve’s credit lending facilities, such as the Term Asset-Backed Securities Loan Facility (TALF) – before delving into tax policy with Roundtable Senior Vice President and Counsel Ryan McCormick. McCormick describes recent actions the Treasury Department and the Internal Revenue Service have taken to provide relief and ease cash flow challenges for taxpayers, including real estate businesses and their tenants, and shares insight on remaining COVID-19-related tax priorities. The discussion highlights new Treasury guidance permitting partnerships to file amended tax returns, thus allowing partnerships to benefit from retroactive provisions in the CARES Act, including the shorter depreciation period for improvements to nonresidential property. Other issues include new guidance allowing real estate businesses to revoke prior elections under the business interest limitation. The Roundtable had urged both actions to ensure that the tax relief in the CARES fully extends to commercial real estate and its tenants. (Roundtable Weekly, April 10) The video alert also addresses the administrative relief related to tax deadlines for like-kind exchange transactions and opportunity zone investments – along with added flexibility for mortgage servicers’ to modify loans in mortgage-backed securities (REMICs) without triggering tax liability. Remaining tax policy priorities for The Roundtable include relief that would allow private parties to restructure existing loans through debt workouts and restructurings without generating cancellation of indebtedness (COD) income – (see Roundtable COD letter, March 20) – as well as greater flexibility under the tax law for REITs to take an economic interest in a struggling commercial tenant to help avoid business closures and layoffs." This week’s video discussion is the third of several Roundtable video reports addressing the COVID-19 economic crisis. Other resources, including related policy comment letters, are available on the organization’s website. (The Roundtable’s COVID-19 Resource Center). Like-Kind Exchange Deadline Clarification An industry coalition, including The Real Estate Roundtable, on April 20 wrote to Treasury Secretary Steven Mnuchin seeking further clarification and relief on deadlines affecting real estate like-kind exchanges. (LKE policy comment letter, April 20) The letter requests that Treasury or the IRS clarify that recently issued IRS Notice 2020-23 did indeed initiate the 120-day extension of like-kind exchange deadlines that is part of the 2018 revenue procedure that applies to declared disasters. At a minimum, Notice 2020-23 extended the 45-day deadline for identifying like-kind exchange replacement property and the 180-day deadline to close on a like-kind exchange transaction until July 15, 2020 (if the deadline otherwise would have occurred between April 1 and July 14). However, relief associated with prior disasters provided 120-day deadline extensions that were retroactive to the date of the disaster declaration. The IRS may have intended to grant the full 120-day extension, and some experts interpret the guidance as providing the longer benefit, retroactive to March 13, the date of the President’s COVID-19 disaster declaration. As the letter notes, governmental restrictions and Stay at Home orders in place across the country, along with the fear of catching or spreading the life-threatening disease, threaten the ability of taxpayers to complete like-kind exchanges. Identifying properties for trade purposes requires travel and a confidence in both the expected cash-flow stream and the value of potentially acquired property. Closing on an identified property requires these same conditions plus extensive due diligence by the buyer, lender and other third-party contractors, such as appraisers. All of these necessary steps are thwarted by travel restrictions, the inability to access properties, and the closures of title/escrow companies and governmental recording offices. The letter concludes, “This relief would give taxpayers who may have commenced, or who wish to commence an exchange, the necessary time to identify and / or close on a replacement property. Taxpayers, many of whom are small to mid-sized businesses and middle class investors, should not have to be concerned about the possibility of having to pay significant capital gains taxes because like-kind exchange transactions cannot be completed due to the disruption caused by the coronavirus pandemic.” Additional guidance from Treasury or the IRS on like-kind exchange transactions is expected in the coming days. # # #

Capital and Credit

April 24, 2020

Roundtable Weekly

The Roundtable and Nareit Request Expansion of The Fed’s “Main Street” Lending Programs to Prevent Further Disruption to CRE Markets

Coronavirus The Fed

Facade on the Federal Reserve Building in Washington DC The scope of the Federal Reserve’s “Main Street” Lending Programs should be expanded to forestall further disruption and economic dislocations in commercial real estate, according to an April 22 letter sent to Treasury Secretary Steven Mnuchin and Fed Chairman Jay Powell from The Real Estate Roundtable and Nareit. This week’s letter requests specific changes to the Fed’s Main Street New Loan Facility (MSNLF) and Main Street Expanded Loan Facility (MSELF), both established on April 9. The April 22 letter emphasizes that real estate borrowers, owners and managers now face existential challenges. The letter states, “At a time when Main Street needs credit, it cannot get it because the secondary markets that provide liquidity to Main Street lenders are clogged.” The Roundtable and Nareit urge specific changes to enable CRE borrowers to access the Main Street New Loan Facility (MSNLF) and Main Street Expanded Loan Facility (MSELF). The joint letter addresses (1) Underwriting/ Leverage Limitations/ Loan Size, (2) Distributions/ REITs (3) Loan Terms (4) Applicable Interest Rate Index and (5) Program Timing. Previous industry letters to the Fed on March 24 and April 14 addressed the need to broaden the range of a separate credit facility – the Term Asset Backed Securities Facility (TALF). Those letters requested that TALF eligible collateral include both outstanding (legacy) CMBS, commercial mortgage loans and newly issued collateralized loan obligations. On April 9, the Fed confirmed that the TALF would be expanded to include triple-A rated legacy non-agency CMBS and loans. Since then, as rental income has diminished, conditions in the commercial real estate sector have deteriorated further, causing real estate credit and capital markets to stall. Therefore, it is important for the Main Street credit facilities to help bring renewed liquidity to commercial and multifamily real estate. The CARES Act permits financially stressed tenants in properties financed by federally backed loans to postpone rent payments, while several states and municipalities are currently considering additional measures to afford tenants rent forbearance. As the Treasury and Fed continue to take positive actions benefiting liquidity for the nation’s economy, the Main Street Lending Programs can be enhanced to support commercial real estate. # # #

News

April 24, 2020

Roundtable Weekly

Moody’s Releases Interactive Tool Showing Covid-19 Impact on Various Commercial Real Estate Property Types

Coronavirus

Moody's Analytics on April 22 unveiled a new tool to help commercial real estate market participants assess how the coronavirus crisis is affecting CRE fundamentals across US markets. The COVID-19 CRE Impact Dashboard is a publicly available resource that provides access to economic, property, and construction data, analytics and insights for CRE property types. Presented as a visual mapping tool, the dashboard brings together Moody’s Analytics CRE capabilities and supplements them with up-to-date information on COVID-19 from public sources. The dashboard also includes forecasts for market vacancies and rents under different economic scenarios for office, retail, industrial, and multi-family properties. “The coronavirus pandemic is changing the landscape of commercial real estate, as businesses of all types adapt to new economic realities,” said Cristina Pieretti, Managing Director of Moody’s Analytics REIS. “We are offering our new tool to help the CRE community make the critical business decisions necessary to navigate this unprecedented event.” To access the dashboard, and for more information, visit reis.com or Moody’s Coronavirus blog. # # #

April 22, 2020

Policy Comment Letter

4-22-20-Main Street Lending Program Comment Letter

Tax Policy

April 20, 2020

Policy Comment Letter

Coalition Seeks Further Clarification and Relief on Deadlines Affecting Real Estate Like-Kind Exchanges

LikeKind Exchanges LKEs,

CORONAVIRUS – Paycheck Protection Program (PPP)

April 17, 2020

Roundtable Weekly

High Demand Depletes Small Business Loan Program as Congress Negotiates More Funding; President Trump Announces “Guidelines to Open Up America Again”

Coronavirus Paycheck Protection Program PPP

The Small Business Administration (SBA) yesterday announced that the Covid-19 Paycheck Protection Program (PPP) hit its $349 billion limit after successfully processing more than 1.6 million loans since the program launch on April 3. The PPP – funded by the Coronavirus Aid, Relief, and Economic Security (CARES) Act for small businesses struggling with the economic shocks of the pandemic – was quickly depleted as Congress continued negotiations over how to replenish funding. (Wall Street Journal, April 16)“The SBA has processed more than 14 years’ worth of loans in less than 14 days. By law, the SBA will not be able to issue new loan approvals once the programs experience a lapse in appropriations,” according to a joint statement by the Treasury and SBA.”The urgent need for Congress to move quickly to authorize additional funding for the PPP is detailed in an April 15 letter to policymakers from more than 250 industry and business groups, including The Real Estate Roundtable. The SBA this week also released its first report on loan approval details since launching the program. Through April 13, the SBA report shows 49,000 real estate businesses and 115,000 construction businesses were approved for PPP loans. (SBA PPP Report) See The Wall Street Journal, April 15, “Where the Stimulus Loans for Small Businesses Are Going”)The Roundtable on April 8 also submitted an 8-Point Plan to clarify and improve the Payroll Protection Program (PPP) to policymakers. A coalition letter from national real estate organizations also seeks clarifications and confirmation on real estate businesses’ eligibility for the PPP. See April 16 letter to the Treasury and SBA. Updates to the PPP rules and guidance are available via the Treasury Department’s website (April 15 FAQ update here) and the Small Business Administration’s Covid-19 resource webpage.Congressional Republicans this week have emphasized that additional PPP funding should be limited to $250 billion solely for small businesses – while Democrats want to add an additional $100 billion for hospitals, $150 billion for state and local governments and more food assistance funds. (The Hill, April 16)Due to coronavirus health concerns the House and Senate are currently scheduled to return to Washington on May 4. Until then, both chambers need unanimous support to pass an additional funding package.Re-Opening the U.S. EconomyPresident Trump yesterday announced “Guidelines to Open Up America Again” that delegates final decisions for states to lift stay at home orders or business restrictions to governors once certain criteria are met. States would first need to demonstrate their COVID-19 cases are on downward trajectory over a 14-day period, while also establishing a system for testing health care workers before they can proceed to a phased opening. (Guidelines document and Wall Street Journal, April 16)President Trump on April 14 also announced the formation of various “Great American Economic Revival Groups” to gain insight on combating the economic impact of the coronavirus from leading business executives representing various economic sectors. Among the 200 leaders from industry sector groups are 10 members of The Real Estate Roundtable. (Full list, White House news release and Bisnow, April 15)# # #

Capital and Credit

April 17, 2020

Roundtable Weekly

Industry Requests TALF Expansion to Include a Broader Range of Commercial Real Estate Assets, CMBS; Congressional Efforts Seek to Address Pandemic Business Interruption Insurance Policies

Capital and Credit CMBS TALF The Fed

Six real estate industry organizations, including The Real Estate Roundtable, wrote to federal regulators on April 14 to communicate the urgent and growing need to include a wider range of investment grade commercial real estate debt instruments in the Fed’s Term Asset-Backed Securities Loan Facility (TALF) credit facility. Currently, TALF eligible collateral is limited to triple-A rated tranches of outstanding (legacy) commercial mortgage backed securities (CMBS), commercial mortgage loans and newly issued collateralized loan obligations. (TALF letter, April 14)The TALF, previously used during the 2008 financial crisis, was relaunched on March 23 in response to the Covid-19 crisis to “enable the issuance of asset-backed securities (ABS) backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.” (Fed news release, March 23)Immediately after the TALF was relaunched, an industry coalition on March 24 urged the Federal Reserve, Treasury, and Federal Housing Finance Agency to expand the TALF to include non-agency CMBS – including legacy private-label conduit and single-asset single borrower (SASB) assets. The coalition, which includes The Roundtable, stated the inclusion of private-label assets would stabilize asset prices and shore up the balance sheets of market participants. (Joint Industry letter, March 24)On April 9, the Federal Reserve announced that it would broaden the range of TALF eligible collateral to include triple-A rated tranches of both outstanding (legacy) CMBS, commercial mortgage loans and newly issued collateralized loan obligations. However, the updated term sheet excludes single-asset single borrower (SASB) CMBS and commercial real estate collateralized loan obligations (CRE CLOs).According to the April 14 letter, “Commercial and multifamily real estate assets that were perfectly healthy just weeks ago now face massive stress and a wave of payment and covenant defaults. As the economy shuts down and American workers face massive layoffs, it is now clear that many tenants will not be able to meet their debt obligations. This will soon cascade through the over $4 trillion commercial real estate debt market and exponentially increase the pressure on the financial system.”To bolster the health of the CMBS market, the industry coalition recommends the following investment grade instruments be added as eligible TALF assets:Legacy and new issuance, investment grade, non-agency CMBS;Investment grade Agency Credit Risk Transfer (CRT) securities;Legacy and new issuance Single-Asset, Single-Borrower (SASB) CMBS;Commercial real estate (CRE) collateralized loan obligations (CLOs); andU.S. commercial real estate (CRE) first mortgage loans (which have capital charges equivalent to investment grade/NAIC CM 1 and 2 and loans in good standing, or can obtain a rating agency letter confirming that the pledged loan is rated at least single-A).The coalition letter explains that a broader, deeper, and more effective TALF would complement and minimize the direct lending that will be required of the Federal Reserve’s other credit facilities, which are supported by the $454 billion provided under the CARES Act.The coalition also notes that expansion of the TALF’s scope and the Fed’s further support of the highly illiquid non-bank financial sector would forestall further disruption and economic dislocations in the commercial real estate sector.Pandemic Risk Insurance CoverageTwo preliminary legislative proposals in Congress seek to address increasing requests for the property and casualty industry to extend business interruption (BI) insurance policies to cover pandemic risk related claims – and the general lack of pandemic risk commercial insurance availability.A recent effort in the House led by Rep. Carolyn Maloney (D-NY) seeks to develop the Pandemic Risk Insurance Act of 2020 (PRIA), which would create the Pandemic Risk Reinsurance Program. PRIA would seek to create “a system of shared public and private compensation for business interruption losses resulting from future pandemics or public health emergencies.” (Rep. Maloney Dear Colleague letter, April 10 Roundtable Weekly)Rep. Maloney's pandemic program would be prospective – not retrospective. “Like the Terrorism Risk Insurance Act (TRIA), the federal government would serve as a backstop to maintain marketplace stability and to share the burden alongside private industry,” according to Maloney.In the Senate, Sen. Steve Daines (R-MT) is working on a broader concept that is both retrospective and prospective. Known as the Workplace Recovery Act, the measure would provide direct retrospective reimbursement through a Federal Automated Security Trust program to every business for operating losses, limited to 90% of past revenues. The Senate proposal would also establish a new government-funded business interruption insurance add-on for every privately administered commercial insurance plan to protect against future national pandemics. The National Association of Insurance Commissioners issued a statement recently warning that such efforts “would create substantial solvency risks for the sector, significantly undermine the ability of insurers to pay other types of claims, and potentially exacerbate the negative financial and economic impacts the country is currently experiencing.” (NAIC statement, March 25)As with terrorism risk insurance, The Roundtable is working with policymakers and stakeholders to help develop an effective risk insurance program that addresses the economic impact of the current pandemic crisis and provides the economy with the coverage it needs to deal with future pandemic risks. # # #

Tax Policy

April 17, 2020

Roundtable Weekly

IRS Grants Safe Harbors for Loan Modifications by Servicers of Mortgage-Backed Securities

Tax Policy

The IRS on April 13 issued rules that will help facilitate mortgage modifications and debt work-outs between borrowers and lenders when a loan is held in a mortgage-backed security. The IRS guidance is consistent with the Roundtable’s request on March 20 that Treasury and the IRS take steps to protect private parties from the tax consequences of restructuring debt during the extraordinary and unanticipated COVID-19 pandemic. The new safe harbors extend to real estate mortgage investment conduits (REMICs) and investment trusts affected by loan forbearances and workouts due to the Covid-19 pandemic. (IRS Rev Proc 2020-26)REMICs are widely used vehicles for pooling mortgage loans and issuing residential and commercial mortgage-backed securities. A REMIC is generally required to hold a substantially fixed pool of real estate mortgages and related assets and must not have the power to vary the composition of its mortgage assets. Even if an entity initially qualifies as a REMIC, one or more significant modifications of mortgages held by the entity may terminate its REMIC status. Certain loan modifications are permitted if the change is “occasioned by default or a reasonably foreseeable default.” A prohibited transaction by a REMIC, however, can result in a tax equal to 100 percent of the income from the transaction. The new IRS rules provide that REMICs and investment trusts can grant forbearance relief to COVID-19-affected borrowers – and REMICs can acquire mortgage loans for which such forbearance is already in place – without adverse tax consequences or threatening their tax status. (Sidley Austin, April 15)These safe harbors apply to mortgage loan forbearance that is provided voluntarily by the mortgage holder or servicer, forbearance that is State-mandated, and forbearance that is mandated in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act generally provides temporary forbearance relief for borrowers with certain federally backed mortgage loans who are experiencing a financial hardship due directly or indirectly to the COVID-19 emergency. (JD Supra, April 16)The rules extend to both residential and commercial mortgage loans, including federally backed mortgage, multifamily and any “non-federally backed mortgage loans,” with no explicit limits on the type of property financed. The specific safe harbors are profiled in Alston & Bird’s April 15 Advisory.# # #

In Memoriam

April 17, 2020

Roundtable Weekly

Real Estate Roundtable Members Stanley Chera and Mayer Greenberg Pass

In Memoriam

Real Estate Roundtable members Stanley Chera and Mayer Greenberg, both from New York, passed away this month. Stanley Chera founded Crown Acquisitions with Isaac Chera Sr. and built it over a span of three generations to include ownership interest in dozens of retail and office properties throughout North America, including trophy buildings in Manhattan. He was a member of The Roundtable since 2015.President Trump called out Mr. Chera at a 2019 rally in Grand Rapids, Michigan, as “one of the biggest builders and real estate people in the world.”Mayer Greenberg, a real estate tax attorney with Kramer Levin was also a member of The Roundtable and an active member of its Tax Policy Advisory Committee (TPAC). He advised domestic and foreign investors on the tax implications of complex commercial transactions, including joint ventures, mergers, acquisitions and other business restructurings.Before joining Kramer Levin Naftalis & Frankel LLP in 2019, Mr. Greenberg was a partner with Stroock & Stroock & Lavan LLP. Roundtable President and CEO Jeffrey DeBoer said, “We are saddened by the loss of two well-established professionals in commercial real estate who participated in The Real Estate Roundtable for several years. Both Stanley Chera and Mayer Greenberg were generous with their time and expertise in helping their colleagues, the industry and our organization grow and adapt to rapid changes in the policy and business landscape. We will miss them and we extend our sincere condolences to their families.” # # #

April 16, 2020

Policy Comment Letter

4-16-20-FINALPPP_NREO_Letter

April 15, 2020

Policy Comment Letter

4-15-20-Paycheck Protection Program Association Letter

April 14, 2020

Policy Comment Letter

4-14-20- Joint_Trade_TALF_finalLetter

Capital and Credit

April 10, 2020

Roundtable Weekly

Federal Reserve Launches $2.3 Trillion in New Credit Facilities, Expands TALF to Existing AAA CMBS and Commercial Mortgage Loans

Capital and Credit CARES ACT CMBS Coronavirus TALF

The Federal Reserve yesterday announced the establishment of $2.3 trillion in new credit lending facilities in an effort to restore liquidity and steady economic shocks from the Covid-19 pandemic. These actions include the expansion of its Term Asset Lending Facility (TALF) to include AAA-rated commercial mortgage-backed securities (CMBS) and commercial mortgages as eligible collateral. (Fed news release and TALF term sheet, April 9)The Fed’s Term Asset Lending Facility – previously used during the 2008 financial crisis and relaunched on March 23 – will now accommodate non-agency CMBS issued before March 23, 2020; any issuance after that date is ineligible. All collateral must also be AAA-rated and located in the U.S or its territories. The TALF will support up to $100 billion in credit, which is backed by $10 billion in credit protection from the Treasury Department. (TALF term sheet)Under the TALF, static collateralized loan obligations (CLOs) are also eligible collateral, yet CMBS securities related to single-asset single-borrower (SASB) and commercial real estate collateralized loan obligations (CRE CLOs) are not eligible at this time.The terms and conditions for commercial mortgages to be included as eligible collateral in the TALF have yet to be announced. (TALF term sheet, April 9)While the Fed’s recent actions are welcome, an industry coalition, including The Roundtable, continues to advocate for the inclusion of CRE collateralized loan obligations (CLOs) and Single Asset, Single Borrower (SASB) CMBS in the TALF. (Joint Industry letter, March 24)The Federal Reserve also announced $600 billion for purchasing loans in two new “Main Street” facilities. The Main Street New Loan Facility (MSNLF) and the Main Street Expanded Loan Facility (MSELF), which will purchase 95% participations in new 4-year loans to businesses that have up to 10,000 employees or up $2.5 billion in 2019 annual revenue. Borrowers with more than 10,000 employees but less than $2.5 billion in 2019 revenue may potentially qualify.The Fed’s new credit facilities also include $500 billion for short-term municipal bonds and additional funding for the central bank’s purchases of larger investment grade businesses and capital markets securities. Fed Chair Jay Powell commented on yesterday’s actions during a webinar. “Many of the programs we are undertaking to support the flow of credit rely on emergency lending powers that are available only in very unusual circumstances—such as those we find ourselves in today—and only with the consent of the Secretary of the Treasury.” He added, “I would stress that these are lending powers, not spending powers. We will continue to use these powers forcefully, proactively, and aggressively until we are confident that we are solidly on the road to recovery.”During Q&A after his remarks, Chairman Powell acknowledged severe liquidity concerns faced by mortgage servicers as the pandemic has resulted in widespread forbearance on mortgage payments. Powell referred to the mortgage market as "at the very center of our economy" and stated, "We're watching carefully the situation with the mortgage servicers and I will just tell you that we certainly have our eyes on that as a key market." (S&P Global, April 9)On April 4, a broad coalition financial industry and affordable housing advocates, including The Roundtable, urged government regulators to provide a source of liquidity to mortgage servicers in need of additional capacity to support homeowners and renters impacted by COVID-19. (Coalition mortgage servicers letter)While this week’s actions could provide up to $2.3 trillion in loans to support the economy, the Treasury and the Fed have not yet committed the full $454 billion allocated for credit support to lending facilities under the recently-enacted Coronavirus Aid, Relief, and Economic Security Act (CARES). Therefore, more loan programs or an expansion of these now existing loan programs could be forthcoming. (Roundtable Weekly, March 27). This week’s massive Fed intervention also includes the creation a Paycheck Protection Program Lending Facility (PPPLF) to support the Small Business Administration's Paycheck Protection Program (PPP) – established under the CARES Act. This facility will extend credit to eligible financial institutions that originate PPP loans to small businesses, taking the loans as collateral at face value. (See story below on The Roundtable’s 8-point reform plan for the PPP).Yesterday’s actions by the Fed recognize that businesses vary widely in their financing needs – and input from lenders, borrowers, and other stakeholders until April 16 is welcome through a Federal Reserve feedback form.The Fed’s response to the pandemic is the focus of an April 8 Chicago Economic Club discussion moderated by Roundtable Chair Debra Cafaro (Chairman and Chief Executive Officer, Ventas, Inc.) with Charles Evans, President and CEO of the Federal Reserve Bank of Chicago. (Watch interview on Youtube)As part of the rapidly evolving developments related to the COVID-19 pandemic, The Real Estate Roundtable continues to be proactive on all policy fronts in Washington to provide insight and recommendations to lawmakers and regulators. The Roundtable depends on the input and expertise of its dedicated members, including those serving – now remotely – on the organization’s Real Estate Capital Policy Advisory Committee (RECPAC).# # #

CORONAVIRUS – Paycheck Protection Program (PPP)

April 10, 2020

Roundtable Weekly

Roundtable Unveils 8-Point Plan to Improve the PPP; Roundtable Member Discusses Successful PPP Funding

CARES ACT Coronavirus Paycheck Protection Program PPP

The Real Estate Roundtable on April 8 submitted an 8-Point Plan to clarify and improve the Payroll Protection Program (PPP) to congressional leadership, Treasury Secretary Steven Mnuchin and Small Business Administrator (SBA) Jovita Carranza. (Roundtable Letter and 8-Point Plan)The Roundtable supports the intent of the PPP in the CARES Act, and the efforts to get SBA loans to struggling individuals, families and businesses as soon as possible.The CARES Act passed by Congress and signed by President Trump on March 27 established the PPP to provide financial assistance to “any” business concern that has 500 employees or less, or meets small business size standards used by SBA for its existing loan program. Larger companies sized-out of the PPP might obtain credit support through the Federal Reserve’s new Main Street Lending Program, and its expanded Term Asset-Backed Loan Facility (TALF). (See story above for more details)The Roundtable’s recommendations detailed in the “8-Point Plan to Reform the PPP” would significantly help avoid potential calamitous economic consequences for small businesses. The letters to Congress, Treasury, and SBA transmitting the 8-Point Plan warn of foreclosures by lenders upon building owners who go into mortgage default because rents are not being paid to cover debt service. The Roundtable’s plan thus supports use of PPP loans to help businesses pay rents and other operating expenses.The Roundtable letter urges Congress and the Administration’s agencies to enact 8 improvements as swiftly as possible to clarify, streamline and improve the process. Additionally, a coalition including The Roundtable today wrote to Fed Chair Jay Powell, Treasury Secretary Mnuchin and SBA Administrator Carranza to request additional guidance on current business affiliation rules as part of the PPP. (Coalition affiliation rules letter, April 10)Among its requests, the coalition urges the policymakers to allow small businesses supported by venture capital, angel capital and private equity firm investors to access critical funding that would help retain workers and jobs during the economic fallout of this health crisis.Since the SBA launched the program last Friday by making borrower applications available on-line, demand for PPP loans has been intense. Challenges have included a massive influx of traffic that has brought website application sites down, confusion over specific application packages, and the technology used to process loans and approve lenders. (The Hill, April 9 and Wall Street Journal, April 10)Roundtable Member’s Successful PPP ExperienceA successful example this week of PPP funding is profiled in an interview recorded today by Roundtable President and CEO Jeffrey DeBoer with Roundtable member Albert Dwoskin, President and CEO of A.J. Dwoskin & Associates, Inc. (Watch the interview here)Mr. Dwoskin’s company, facing a sudden halt in rental payments due to the pandemic, immediately sought PPP funding to stabilize its capital needs and retain more than 100 employees. “The application went in on Tuesday and was funded on Friday. We didn’t expect that,” Dwoskin says in the interview.Dwoskin’s Vice President of Accounting & Finance Natalia Ostroveanu, also details the PPP loan process. “J.P. Morgan had a question as part of their review … because the number of employees on the application was different than what the report from ADP showed. And once I explained to them the reason for that number, they were okay with it and that was yesterday morning. Today, this morning, we already received the funds,” Ostroveanu states.Since the SBA launched the program last Friday by making borrower applications available on-line, demand for PPP loans has been intense. Challenges have included a massive influx of traffic that has brought website application sites down, confusion over specific application packages, and the technology used to process loans and approve lenders. (The Hill, April 9 and Wall Street Journal, April 10) # # #

News

April 10, 2020

Roundtable Weekly

House Democrats Propose Pandemic Risk Insurance Program Modeled on TRIA; Senate Attempts to Break Stalemate on “Phase 4” Coronavirus Relief Package

Coronavirus Pandemic Risk Insurance Program TRIA

House Financial Services Committee Democrats this week proposed a federal reinsurance program for pandemic risks as part of the next round of congressional coronavirus relief. (HFS Committee memo)An April 6 memo from the committee’s majority Democratic staff states the recently enacted CARES Act was only a down payment on the relief needed to fully address the historic negative health and economic effects of COVID-19. For the next congressional package, the memo recommends policy proscriptions focused on both the crisis and the recovery that includes “Pandemic Risk Insurance.” The draft package's reinsurance program proposal would be “similar to the Terrorism Risk Insurance Program for pandemic risks in order to promote the availability and affordability of insurance coverage that includes pandemic risks.” Whether existing business interruption insurance policies have virus and bacteria-related exclusions is a growing issue between closed businesses and their insurers. (BGov and Insurance Insider, April 9)Rep. Carolyn Maloney, (D-NY), chairwoman of the House Oversight and Reform Committee and a senior member of Financial Services Committee, circulated a letter this week informing colleagues in the House that she is “… developing the Pandemic Risk Insurance Act of 2020, to create the Pandemic Risk Reinsurance Program, a system of shared public and private compensation for business interruption losses resulting from future pandemics or public health emergencies.”Rep. Maloney's note explains, “An ounce of prevention is worth a pound of cure. The Pandemic Risk Insurance Act (PRIA) would be an important step in our prevention efforts against future pandemics by both requiring insurance companies to offer business interruption insurance policies that cover pandemics, and creating a Pandemic Risk Reinsurance Program to ensure that there is sufficient capacity to cover these losses and protect our economy in the event of a future pandemic. Like the Terrorism Risk Insurance Act (TRIA), the federal government would serve as a backstop to maintain marketplace stability and to share the burden alongside private industry”Rep. Maloney's pandemic program would be prospective – not retrospective. The current TRIA program would be triggered if losses from certified acts of terrorism attack exceed $200 million across all affected insurers. The establishment of the federal terrorism backstop – and its multiple reauthorizations over the years – has been a top policy priority for The Real Estate Roundtable since the 9/11 attacks. (Roundtable TRIA webpage) John Doyle, president and CEO of the insurance unit of Marsh & McLennan Companies Inc., offered in a March 30 letter to Congress and the White House to help create a federal pandemic backstop. Doyle wrote, “The basic framework of a pandemic risk insurance program would be to structure a risk sharing model between policyholders, insurers and the federal government.” The Roundtable is working with policymakers and stakeholders to help develop an effective pandemic risk insurance program that addresses the current crisis and provides the economy with the coverage it needs to address future pandemic risks. Senate Attempts to Develop a Phase 4 Coronavirus Relief PackageSenate Republicans and Democrats this week failed to reach agreement on “Phase 4” coronavirus legislation that would quickly follow and expand the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed on March 27. Republicans sought more funding for the Paycheck Protection Program (PPP) for small businesses impacted by COVID-19, while Democrats emphasized any follow up measure to the “Phase 3” CARES Act should include increased funding for hospitals and local governments. (Akin Gump, April 9 and Deloitte, April 10)Negotiations between congressional leaders and the White House over a Phase 4 package are ongoing. With the Senate in pro forma session on Monday, there is a chance for a deal to be reached over the weekend. The Senate and House are currently scheduled to return for regular business the week of April 20. Health concerns for Members of Congress and their staff cast doubt on when they can return to Washington to consider legislation. The only way for Congress to currently vote on and send legislation to President Trump is by using the unanimous consent process, which can be blocked by any single member. Rep. Thomas Massie (R-KY) last month forced hundreds of his colleagues to return to the Capitol to pass the CARES Act. He warned on April 8 that he may again block unanimous consent for a Phase 4 coronavirus bill if it is not held with a roll call vote. (The Hill, April 8)President Trump wrote on Twitter March 31 that a larger infrastructure should be included in the next coronavirus relief bill. “With interest rates for the United States being at ZERO, this is the time to do our decades long awaited Infrastructure Bill,” President Trump wrote. “It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our Country! Phase 4.”# # #

Tax Policy

April 10, 2020

Roundtable Weekly

IRS Guidance Ensures Real Estate Businesses Benefit from Phase Three Tax Relief

CARES ACT Coronavirus Tax Policy

This week, the IRS issued two revenue procedures that will help real estate businesses maximize the amount of tax relief they receive under the “Phase 3” CARES Act. The IRS actions are consistent with recent Real Estate Roundtable recommendations.Partnership Amended ReturnsThe CARES Act included several provisions designed to generate deductions in prior years that can be “monetized” today, through the filing of amended tax returns, to help businesses stay afloat during the current economic turmoil. As the Senate Finance Committee summary noted, “[t]hese changes will allow companies to utilize losses and amend prior year returns, which will provide critical cash flow and liquidity during the COVID-19 emergency.” In the understandable rush to enact the CARES Act, Congress did not have an opportunity to consider fully how provisions in the legislation would interact with various aspects of existing tax law and regulations. In particular, under the partnership audit regime enacted in 2015, partnerships are no longer permitted to file amended tax returns.In a letter on April 4, Roundtable President and CEO Jeffrey DeBoer urged the Treasury Department and IRS to use its regulatory authority to allow partnership to file superseding tax returns that could replace returns filed in 2018 and 2019. IRS Rev. Proc. 2020-23, released on Wednesday, allows partnerships to file amended returns for those years, effectively providing the relief The Roundtable requested. Business Interest LimitationThe Tax Cuts and Jobs Act created a new limitation on the deductibility of business interest, but allows real estate businesses to elect out, which most did in 2018. The election is irrevocable, and the price of the election is longer cost recovery periods for real property and improvements. The CARES Act liberalized the limitation on the deductibility of business interest for tax years 2019 and 2020. However, the law did not allow real estate businesses to go back and change their election out of the regime.In its April 4 letter, The Roundtable asked the IRS to allow real estate businesses to revoke elections made in 2018 and 2019. This afternoon, the IRS issued the requested relief in Rev. Proc. 2020-22.Like-Kind ExchangesIn addition to the actions related to the CARES Act, the IRS has provided relief to taxpayers having difficulty completing like-kind exchanges due to the COVID-19 pandemic. In late March, The Roundtable and 21 other national real estate organizations requested relief from the strict statutory deadlines that apply for identifying replacement property and closing on like-kind exchange transactions. Under IRS Notice 2020-23, like-kind exchange deadlines that would otherwise fall between April 1 and July 14 are extended to July 15.Opportunity ZonesRelief from the various deadlines and compliance testing dates for Opportunity Zones during the pandemic is a Roundtable priority. IRS Notice 2020-23 provides that if a taxpayer’s 180-day period to invest gain in an opportunity fund would have expired between April 1 and July 14, 2020, the taxpayer now has until July 15, 2020 to make the investment. # # #

April 10, 2020

Policy Comment Letter

4-10-20- Coalition_PPPAffiliationRules_Fed_Treasury_SBA

April 10, 2020

Policy Comment Letter

4-10-20- jointtrades_letter_to_ECommittee_re_RBC_guidance

April 7, 2020

Policy Comment Letter

4-7-20 Letter to the Federal Reserve on MBS TALF Eligibility

Tax Policy

April 4, 2020

Policy Comment Letter

Roundtable Comments on CARES Act and Prior Tax Returns

CARES ACT, Tax Policy,

April 4, 2020

Policy Comment Letter

4-4-20 – Joint Statement on Servicer Liquidty Facility

Coronavirus

April 3, 2020

Roundtable Weekly

Roundtable Launches Covid-19 Call to Action, Intensifies Legislative and Regulatory Outreach; Debuts Video Blog on Pandemic Policy Efforts

Coronavirus

The Real Estate Roundtable today debuted a Covid-19 Video Alert, detailing how the industry has switched into high gear, focused on legislative and regulatory policies aimed at repairing frozen liquidity conditions that threaten the entire American economic system. (Watch Covid-19 Call To Action)The Roundtable’s Chair, Debra Cafaro (Chairman of the Board and Chief Executive Officer of Ventas, Inc.) and President and CEO Jeffrey DeBoer present the organization’s wide-ranging, intensive efforts with policymakers and regulators in Washington, all aimed at stabilizing the far-reaching economic shockwave unleashed by the pandemic. The Roundtable’s Board of Directors has quickly responded to the crisis by charting a policy advocacy course in Washington – matched by immediate action by Roundtable policy advocacy committees, which have recently analyzed and worked on multiple policy recommendations in the tax and capital & credit areas.Today’s video blog features Cafaro and DeBoer launching the industry call to action. DeBoer states, “It is the view of The Real Estate Roundtable that our industry, each one of us, must become much more active and aggressive in pointing out the dangers that lurk ahead. We must communicate the connectivity of our industry to jobs, pension and 401K returns, communities and more.” He adds, “When economic hardships strike, our industry has historically worked tirelessly to help find a positive path forward. We must do that again.”DeBoer explains how the nationwide cessation of income brought on by the outbreak, which now presents new, significant obstacles to economic recovery once the coronavirus is brought under control. He also notes how the severe interruption of residential and commercial rental and mortgage payments – along with eviction moratoriums and a growing rent holiday advocacy movement – is contributing to dysfunction in the credit markets and freezing liquidity. DeBoer explains how this market freeze will eventually disturb the expected income of millions of people living on pensions and other retirement funds.“The financial system must facilitate positive action to allow issues to be worked out without penalty and without temporarily following strict enforcement guidelines that were written for normal times but that now threaten, in a pro-cyclical way, to make credit markets worse,” DeBoer states.The vlog continues with reports from three Roundtable policy specialists on:The Coronavirus Aid, Relief and Economic Security (CARES) Act expansion of the Small Business Loan Program, which attempted to begin today, and the urgent need to change and clarify its qualification rules;Regulatory forbearance efforts and new credit facilities recently established by the Federal Reserve, including the Term Asset-Backed Securities Loan Facility (TALF);Tax measures passed in the CARES Act, including a new a five-year carryback period and temporay repeal of the 80% limitation for net operating losses (NOLs) from 2018, 2019 and 2020. Other tax priorities discussed included administrative relief for like-kind exchanges and a tax exemption for debt forgiveness.In addition to today’s alert, The Roundtable recently held a “town hall” conference call for Roundtable members, along with policy advisory committee calls with experts from the Centers for Disease Control and Prevention (CDC). An analysis of the CARES Act, based on how many workers are employed by a given business concern was also produced by The Roundtable last week. (Roundtable PDF document - "Corona Aid, Relief, and Economic Secuirty (CARES Act) and Implications for U.S. Real Estate" ) Future video blog reports will feature Roundtable senior policy staff, Roundtable member guests and Members of Congress. We will continue to inform and engage policymakers and CRE stakeholders about how Washington is responding to the industry – and how The Roundtable and its industry trade association partners plan to meet the challenge ahead, together. # # #

Pandemic Economic Relief

April 3, 2020

Roundtable Weekly

Phase 4 Congressional Package May Provide Additional Direct Relief; Roundtable Urges New Pandemic Recovery Fund and Clarifications to Small Business Loan Issues

Coronavirus

Leading policymakers floated ideas on a “Phase 4” coronavirus relief package this week immediately after the CARES Act (Phase 3) was signed into law last Friday. (Roundtable Weekly, March 27)House Speaker Nancy Pelosi (D-CA) adjusted her messaging from earlier in the week that another massive legislative package should include economic recovery projects such as infrastructure improvements. Today, she emphasized Phase 4 should provide additional direct payments to individuals and expanded loans for businesses. (CNBC, April 3)“I think right now we need a fourth bipartisan bill—and I think the bill could be very much like the bill we just passed. So I’d like to go right back and say ‘let’s look at that bill. Let’s update it for some other things that we need,’ and again put money in the pockets of the American people,” Pelosi told CNBC’s Squawk on the Street today. She added, “While I’m very much in favor of doing what we need to do to meet the needs of clean water, more broadband and the rest of that,that may have to be for a bill beyond this.” On March 31 a broad-based business coalition, including The Real Estate Roundtable, urged President Trump and congressional leaders to establish a COVID-19 Business and Employee Continuity and Recovery Fund. (Coalition comment letter, March 31)The proposed Recovery Fund would provide additional liquidity for impaired industries and businesses to avoid an unprecedented systemic, economic crisis. The coalition states the establishment of the Fund is necessary to supplement lending expansion efforts included in the $2.2 trillion CARES Act. (Roundtable Weekly, March 27)The coalition letter states, “Without broad-based and expeditious federal action, long-term damage to the financial markets, rampant unemployment, and irreparable harm to communities are almost certain.”Additionally, Roundtable President and CEO Jeffrey DeBoer yesterday wrote to Treasury Secretary Steve Mnuchin and Small Business Administration (SBA) Adminstrator Jovita Carranza urging the release of important clarifications to small business loan issues included in last week’s CARES Act. (Payroll Protection Program letter, April 2)The Payroll Protection Program (PPP) included in the CARES Act provides an additional $367 billion to SBA to assist small businesses and contains a number of provisions aimed at granting temporary regulatory relief. (Top-line overview of the program and PPP Interim Final Rule)The April 2 letter recommends 13 principles and clarifications to PPP based on questions from Roundtable members who are trying to determine whether their businesses are eligible under the new loan program. The letter requests that Congress’s intent should be implemented by providing as much loan assistance as possible to as many small businesses as possible.Late yesterday, Treasury issued an update to its PPP Borrower Application Form. (Treasury Dept Assistance for Small Businesses webpage and The Roundtable’s Coronavirus webpage resources.)Today, the launch of the Payroll Protection Program was met with widespread reports about chaotic attempts to use the PPP portal – unprepared banks not accepting applications; confusion about the need to revise loan applications; and the SBA website crashing from heavy demand. (Politico, April 2 and Axios, April 3)However, GlobeSt reported today that anecdotal examples show retail tenants are taking a positive stance in negotiations with landlords. “Tenants and landlords are being proactive and cooperative with each other, although there have been exceptions with some tenants engaging in hardball with their landlords,” according to the April 3 article.For the business community, a number of financial programs are available from the CARES ACT, depending on how many workers are employed by a given business concern. See Roundtable summaries of provisions that target:Independent contractors, sole proprietors, and businesses with 500 employees or lessMid-sized businesses with 501 to 10,000 employees Businesses with any number of employees over 500Tax Considerations As negotiations begin on a framework for a Phase 4 relief package between the House of Representatives and the Administration, the Senate is scheduled to return from recess on April 20. The Roundtable will remain engaged at all levels and offer timely policy alerts as the coronavirus crisis continues to unravel.# # #

Capital and Credit

April 3, 2020

Roundtable Weekly

Roundtable Requests Industry Regulators to Suspend Mark-To-Market Accounting Rules and Suspend New CECL Accounting Standard to Prevent Exacerbating Economic Crisis

CECL Mark to Market

The Real Estate Roundtable this week submitted two requests to the Financial Accounting Standards Board (FASB) and securities regulators to prevent exacerbating the destructive economic repercussions of the coronavirus crisis. The first letter urges the immediate suspension of “mark-to-market” accounting rules (FAS 157). The second letter encourages the expansion a provision in the CARES Act that suspends the new Current Expected Credit Losses (CECL) for banks – by including non-banking financial institutions and insurance companies. (Mark-to-Market letter, March 31 and CECL letter, April 1)On March 31, The Roundtable addressed the mark-to-market – or “fair value” – rules in a comment letter to regulators. Measuring an asset at fair value records it at a price it would obtain in an orderly market instead of the asset’s original purchase cost. During unfavorable or volatile markets, the method does not accurately represent an asset's true value. (BGov, March 31)When the market-based measurement no longer accurately represents the underlying asset’s true value, a company should not be forced to calculate the selling price of these assets or liabilities during unfavorable or volatile times, such as today’s COVID-19 crisis.The Roundtable letter explains that the mark-to-market rules will further exacerbate the growing financial crisis. As many tenants will not be able to meet their debt obligations, liquidity in credit and capital markets has frozen, and the value of asset-backed securities collateral (including commercial mortgage-backed securities, or CMBS) is now set to decline.“In light of these events, it is important for the Financial Accounting Standards Board (FASB) to take action to immediately suspend mark-to-market accounting. It is simply not possible to properly value assets in illiquid and non-functioning markets,” the letter states.During the financial crisis of 2008-2009, the FASB voted on and approved new guidelines that allowed for asset valuation to be based on a price that would be received in an orderly market rather than a forced liquidation. The Roundtable letter encourages the FASB to take similar action now.On April 1, The Roundtable wrote to the FASB and the Securities and Exchange Commission (SEC) urging the regulators to expand the suspension of the new Current Expected Credit Losses (CECL) accounting standard during the current COVID-19 crisis beyond banks – to include all companies, including non-bank financial companies and insurance companies. (Roundtable CECL letter, April 1)The CARES Act allows federally insured financial institutions to delay the implementation of the CECL standard. Additionally, federal banking regulators recently issued an interim final rule allowing lenders to delay the estimated impact on regulatory capital. The new CECL standard changes the way banks calculate reserves on assets, requiring banks and nonbanking finance companies to estimate the expected loss over the life of a loan. For real estate, there is concern that this new standard will exacerbate the current liquidity crisis.While CECL is expected to have the greatest impact on banks (which typically have extensive financial instrument portfolios), even non-banking entities are very likely to hold financial instruments within the scope of CECL.U.S. commercial and multifamily real estate encompasses approximately $16 trillion in income-producing assets, supported by over $4 trillion in debt – mostly provided by commercial banks, life companies and commercial mortgage backed securities (CMBS).Therefore, it is important to apply this CECL suspension to non-bank finance companies, including life companies who also play a significant role in providing essential liquidity to the commercial real estate industry. The Roundtable letter encourages the FASB to suspend application of the new CECL standard for all companies. The Roundtable’s Real Estate Capital and Credit Policy Advisory Committee (RECPAC) will continue to provide expertise and insight into policy steps that will help support the restoration of necessary market liquidity resulting from the COVID19 crisis. # # #

April 2, 2020

Policy Comment Letter

4-2-2020 – SBA Rules Letter

April 1, 2020

Policy Comment Letter

4-1-2020 SEC FASB CECL Letter

March 30, 2020

Policy Comment Letter

3-30-2020 – FASB-Suspend Mark to Market Accounting Rules

Coronavirus Response

March 27, 2020

Roundtable Weekly

President Trump Signs Historic $2 Trillion Coronavirus Relief Package; Roundtable Analyzes Loan Programs, Tax Relief, Federal Reserve Actions

Coronavirus

A massive $2.2 trillion emergency coronavirus relief bill was signed into law today by President Trump shortly after passage by the House of Representatives, following unanimous approval on March 25 by the Senate. The historic legislative package—the Coronavirus Aid, Relief, and Economic Security (CARES) Act—comes as the United States registered the largest amount of coronavirus cases in the world and a record 3.3 million jobless claims in one week. (White House video of signing and Axios March 27, Wall Street Journal March 27 and New York Times March 26)The CARES Act—the largest rescue package in U.S. history—includes $100 billion for hospitals and the medical workforce to obtain products, medicine, and equipment needed to meet the capacity surge in patients throughout the country. (Bill text here, summary from Senate Appropriations Committee Republicans here, and summary from Senate Appropriations Democrats here.)The 883-page bill includes direct financial assistance to a wide swath of Americans and significantly expands unemployment assistance. The legislation also provides loans, grants and other financial assistance to state and local governments, as well as to and all types and sizes of U.S. businesses.For the business community, The CARES ACT establishes a number of assistance programs, largely based on how many workers are employed by a given business concern. The Roundtable’s CARES Act webpage provides an analysis of the bill. Separate Roundtable documents below summarize the provisions that target:Independent contractors, sole proprietors, and businesses with 500 employees or less Mid-sized businesses with 501 to 10,000 employees Businesses with any number of employees over 500 Tax Considerations The CARES Act authorizes $500 billion for direct loans and guarantees, including $454 billion for the Federal Reserve to support its lending facilities and $29 billion for direct lending to passenger and cargo air carriers.An additional $367 billion is available to assist small businesses through the Small Business Administration (SBA). The Act also contains a number of provisions aimed at granting temporary regulatory relief. Despite the enormity of the assistance provided by the CARES Act, additional financial assistance legislation is expected if the duration of the national emergency continues for a greater period of time. (Senate Republican Conference Summary, March 27)CARES Act Support for Financial InstitutionsThe CARES Act also includes a number of other provisions designed to support financial institutions during the COVID-19 pandemic.It authorizes the Federal Deposit Insurance Corporation to further guarantee obligations of solvent insured depository institutions and depository institution holding companies – provided that any such guarantee must terminate no later than December 31, 2020. The legislation does not set the maximum amount to be guaranteed. The Act also temporarily authorizes the Office of the Comptroller of the Currency to exempt any transaction from its lending limits, if the exemption is in the public interest.The legislation also allows a financial institution to suspend, during a covered period, requirements under U.S. Generally Accepted Accounting Principles for loan modifications related to the COVID-19 pandemic that would otherwise be categorized as a troubled debt restructuring – and the federal banking agencies must defer to the financial institution's determination. The covered period begins on March 1, 2020, and ends the earlier of December 31, 2020 – or 60 days after the date on which the national emergency declaration related to coronavirus terminates. The legislation also permits an insured depository institution, bank holding company or any affiliate thereof to temporarily delay measuring credit losses on financial instruments using the new Current Expected Credit Losses (CECL) accounting standard until the earlier of December 31, 2020, or the date on which the coronavirus-related national emergency declaration terminates. Finally, in addition to providing financial support for the Federal Reserve's lending programs, as discussed above, the legislation would temporarily suspend the statutory limitation on the use of the Treasury Department's Exchange Stabilization Fund for guarantee programs for the U.S. money market mutual fund industry. Any such guarantee must terminate not later than December 31, 2020.Industry Briefings and What’s NextThe ongoing legislative and regulatory efforts to combat the COVID-19 outbreak were the subject of a March 23 Real Estate Roundtable “Townhall” conference call moderated by Roundtable President and CEO Jeffrey DeBoer. Approximately 230 Roundtable members participated in the conference call, which is available here. The Roundtable’s Homeland Security Task Force held a conference call on March 26, featuring Dr. Jay Butler, Deputy Director for Infectious Diseases (DDID) with the Centers for Disease Control and Prevention (CDC), who addressed the U.S. public health agencies' efforts to confront the crisis.Future Roundtable Townhalls may be offered as policy responses evolve with the fluid developments of the Coronavirus pandemic. Next week, a Marcus & Millichap Webcast on “Getting Through the Global Health Crisis Together” will cover an updated economic assessment; government initiatives and potential impact; state of real estate financing and transaction markets; and challenges by property type. Register here for the webcast, which will be held on Thursday, April 2 at 4:00pm Eastern /1:00pm Pacific. Congressional leaders have already mentioned the possibility of a fourth coronavirus relief measure. House Speaker Nancy Pelosi (D-CA) on Bloomberg TV yesterday said that subsequent relief bills may “lean toward recovery” and include funds for frontline health-care workers, along with support for COVID-19 health-care services that go beyond testing. She added that a future legislative package would focus on job creation measures and U.S. infrastructure building. Vice President Mike Pence yesterday said the administration was open to a fourth bill during a White House press conference. “I think the secretary of the Treasury’s already indicated and congressional leadership has already indicated a willingness to remain open to that. Already we’re hearing from some governors about the need for additional resources, and we will evaluate those very carefully,” Pence said. (BGov, March 27)In the Senate, another Coronavirus relief bill likely will have to wait until Senators return from recess on April 20.# # #

Capital and Credit

March 27, 2020

Roundtable Weekly

Federal Reserve Expands Emergency Capital Liquidity Facilities; Industry Coalitions Urge Inclusion of Non-Agency CMBS & Relief for COVID-19 Loan Modifications

Coronavirus

The Federal Reserve took unprecedented actions this week to aggressively support markets in an attempt to contain the economic damage of the coronavirus pandemic – announcing it is “committed to using its full range of tools to support households, businesses and the U.S. economy overall in this challenging time.” (New York Times, March 23)After the Fed last week cut the federal fund rate to zero and re-started its Quantitative Easing program, it established several new credit facilities this week aimed at injecting a massive liquidity flow to various sectors of the economy. (Roundtable Weekly, March 20)According to a March 23 Fed statement, the Federal Open Market Committee (FOMC) “will purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy. In addition, the FOMC will include purchases of agency commercial mortgage-backed securities in its agency mortgage-backed security purchases.” Loans, loan guarantees, and other investments will be made available by the Fed through its recently established credit facilities:Commercial Paper Funding Facility (CPFF)Primary Dealer Credit Facility(PDCF)Money Market Mutual Fund Liquidity Facility(MMLF)Primary Market Corporate Credit Facility(PMCCF)Secondary Market Corporate Credit Facility(SMCCF)Term Asset-Backed Securities Loan Facility(TALF) Main Street Business Lending Program (pending establishment)The Fed’s new credit facilities will be backed by the Treasury Department’s Exchange Stabilization Fund, which was allocated $454 billion in the congressional coronavirus economic rescue package signed by President Trump today.TALF, Private-Label CMBS, and Mortgage Servicers Task ForceThe Fed’s Term Asset-Backed Securities Loan Facility (TALF) credit facility, previously used during the 2008 financial crisis, was relaunched on March 23 to “enable the issuance of asset-backed securities (ABS) backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.” (Fed news release, March 23)This week also saw two key actions affecting Agency commercial mortgage-backed securities (CMBS) by the Fed, Treasury and the Federal Housing Finance Agency (FHFA), which regulates Fannie and Freddie. Agency CMBS are securities backed by mortgages on commercial and multifamily properties guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac.First, the Fed announced it extended its support of financial markets to include agency CMBS, retaining BlackRock Financial Markets Advisory to begin purchasing securities today.Second, FHFA authorized Fannie Mae and Freddie Mac to provide agency CMBS investors with short-term financing of their positions, providing liquidity to these investors.While the TALF now includes Agency CMBS, non-agency CMBS and other certain other commercial assets are currently excluded. (GlobeSt. Fed Announces Unlimited Bond Purchases, Will Buy Apartment CMBS, March 23)An industry coalition, including The Real Estate Roundtable, on March 24 urged the Federal Reserve, Treasury, and Federal Housing Finance Agency to expand the TALF to include non-agency CMBS – including legacy private-label conduit and single-asset single borrower (SASB) assets. The coalition states the inclusion of private-label assets would stabilize asset prices and shore up the balance sheets of market participants. (Joint Industry letter, March 24)The letter notes, “CMBS is a visible proxy for real estate loans, where banks, life companies, and other lenders have significant exposure.” The coalition letter also explains that investors in both Agency and private-label CMBS include public pension funds for many employees at the frontlines of the crisis (hospitals, firefighters, police, and teachers). Separately, Treasury Secretary Steven Mnuchin on March 26 said he has formed a task force of U.S. financial regulators on how to respond to a severe liquidity shortfall facing mortgage service firms, who collect monthly payments from borrowers and facilitate payments to mortgage bond investors. (GlobeSt, March 27)Most mortgage servicers are nonbank firms that do not currently have access to emergency lending from the Federal Reserve. Despite an anticipated wave of forbearance requests from borrowers, mortgage servicers remain obligated to advance funds to investors – the owners of most of the nation’s $11 trillion residential mortgages. The Mortgage Bankers Association estimates that if 25% of borrowers ask to postpone their payments for six months, the cost could exceed $75 billion. (Bloomberg Law, March 26) Secretary Mnuchin has asked the task force of the Financial Stability Oversight Council, which also includes the heads of the Federal Reserve and Securities and Exchange Commission, for recommendations by March 30. (Wall Street Journal, March 26)Relief from Troubled Debt Restructuring (TDR) LabelThe Fed joined the Federal Deposit Insurance Corporation (FDIC) and other banking regulators in a March 22 Interagency Statement that encourages banks to avoid automatically categorizing short-term loan modifications linked to the COVID-19 crisis as a Troubled Debt Restructuring (TDR). The joint statement also encourages borrowers experiencing cash flow problems due to the pandemic to reach out to any FDIC-insured lenders about modifying their loans, without adverse consequences to the bank or the borrower that traditionally come with the TDR label. According to the Statement, “Short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. This includes short-term — for example, six months — modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.”A separate coalition that also includes The Real Estate Roundtable wrote to the National Association of Insurance Commissioners on March 25 to request clarifying guidance that would relieve mortgage loan modifications linked to COVID-19 from the classification as a TDR. The letter informed NAIC, “Servicers for mortgages held by life insurance companies are fielding pressing calls from borrowers seeking temporary relief due to the impact of COVID-19.” The coalition emphasizes that clarifying guidance from NAIC will “better enable life insurance companies to work prudently and swiftly with borrowers; mitigate COVID-19 impacts on borrowers, life insurance companies and the nation’s economy; and ultimately lead to improved loan performance and reduced credit risk.” (View Letter)Language that supports the efforts of regulators and lenders to work on loan modifications with borrowers affected by the pandemic is also included in the $2 trillion dollar coronavirus response legislation.Real Estate Roundtable Jeffrey DeBoer commented on how lenders may react to in an article yesterday in GlobeSt entitled, “Where CRE Liquidity Stands Today.” “Congress can’t tell them what to do, but the FDIC has issued a statement giving banks more leeway in modifying loans without having to label the loan as a TDR. There are efforts underway to get the NAIC to issue a similar statement for life companies. All of this is positive,” DeBoer said. “And in turn, we are trying to make sure when property owners try to meet their obligation their lenders will allow flexibility.”On March 24, The Real Estate Roundtable called on all owners and operators of business and residential rental real estate to voluntarily, proactively work in a positive and constructive manner with their COVID-19 impacted tenants respecting current rent obligations. (Roundtable news release, March 24)As fast-moving coronavirus developments continue to roil markets, The Roundtable’s Real Estate Capital and Credit Policy Advisory Committee (RECPAC) will continue to provide constructive recommendations as The Roundtable continues to communicate the industry’s ongoing concerns about the crisis to policymakers and regulators.# # #

March 25, 2020

Policy Comment Letter

3-25-20 – Joint_Letter_to_NAIC_requesting_RBCclarification032520

March 24, 2020

Policy Comment Letter

3-24-20 – Joint Trades Support for CMBS – March 24 2020

March 24, 2020

Policy Comment Letter

3-24-20 SBA Letter

Like-kind Exchanges

March 23, 2020

Policy Comment Letter

Roundtable and Trade Associations Request Like -Kind Exchange Deadline Relief

LikeKind Exchanges LKEs,

March 21, 2020

Policy Comment Letter

Joint Trades COVID-19 Business and Employees Fund Letter, 3-31-20

March 20, 2020

Policy Comment Letter

3-20-2020 – Main Street Reponse to COVID-19

Cancellation of Indebtedness (COD) Income

March 20, 2020

Policy Comment Letter

Roundtable Urges Administration to Waive Cancellation of Indebtedness (COD) Income

Cancellation of Indebtedness COD Income, Tax Policy,

March 19, 2020

Policy Comment Letter

3-19-2020-Rubio-Collins-Letter

Yes In My Backyard (YIMBY)

March 2, 2020

Policy Comment Letter

Roundtable and Housing Coalition Urge House of Representatives’ Leaders in Support of “Yes in My Backyard (YIMBY) Act”

Affordable Housing, Housing, Yes In My Backyard YIMBY,

Yes In My Backyard (YIMBY)

February 24, 2020

Policy Comment Letter

Roundtable and Coalition Support Bipartisan “Yes in My Backyard (YIMBY) Act” in House of Representatives

Affordable Housing, Housing, Yes In My Backyard YIMBY,

Foreign Investment in Real Property Tax Act (FIRPTA)

February 20, 2020

Policy Comment Letter

FIRPTA letter to Sec. Mnuchin on withdrawal of Section Two of IRS Notice 2007-55– 2-20-20

FIRPTA,

February 11, 2020

Policy Comment Letter

2-11-2020-Real Estate Roundtable Support Letter for ESIC Act (HR 3962)

Energy And Climate Policy

February 7, 2020

Roundtable Weekly

House Democrats Aim for 100 Percent “Clean Energy Economy” by Mid-Century; Proposal Includes Ramped-Up Building Codes

Energy and Climate Policy Energy Efficiency

Democratic leaders on the House Energy and Commerce (E&C) Committee released a far-reaching bill on January 28, signaling their plans for climate legislation based on the outcome of next November’s elections. The bill includes rigorous efficiency targets for building energy codes and a framework to drive the U.S. electric grid toward net-zero carbon emissions. [E&C press release]“The CLEAN Future Act,” sponsored by E&C Chairman Frank Pallone (D-NJ) — above in photo — and Subcommittee Chairmen Paul Tonko (D-NY) and Bobby Rush (D-IL), would implement a climate policy framework announced last month. [See Roundtable Weekly, January 10] The 622-page “discussion draft” sets an overall target for a “100 percent clean energy economy” by 2050. The draft proposes a number of de-carbonization and renewable energy mandates and incentives affecting the real estate, power generation, transportation, and manufacturing sectors of the U.S. economy. [CLEAN Future Act section-by-section analysis]Commercial and residential buildings would be subject to increasingly stringent “model” energy codes for new construction and major retrofit projects. States and localities typically adopt these model codes into law, but they have authority to alter them.The CLEAN Future Act would require codes to reach a target for buildings to save 50 percent more energy by 2030 (relative to a 2016 baseline). The bill’s 50-percent-improvement target would not consider the expenses incurred by owners and developers to install more costly – but efficient – HVAC, windows, lighting, and other equipment in their assets. In contrast, a competing bipartisan proposal pending in the House and Senate — known as the Energy Savings and Industrial Competitiveness (ESIC) Act — would evaluate cost effectiveness and small business impacts as iterations of energy codes are developed. The Roundtable has long-supported the ESIC Act, sponsored by Senators Rob Portman (R-OH) and Jeanne Shaheen (D-NH), and Representatives Peter Welch (D-VT) and David McKinley (R-WV). [Roundtable Weekly, Sept. 27, 2019].While the CLEAN Future Act’s building-related provisions emphasize increasingly stringent energy codes, it does not impose energy consumption, carbon reduction, or “labeling” mandates on building owners that have gained traction at the state and local levels. [E.g., Roundtable Weekly, April 19, 2019]. Nor does the bill propose a “tax on carbon” as a means to cut greenhouse gas emissions.Other notable elements of the CLEAN Future Act include: Creation of a market to buy and sell “clean energy certificates,” to drive more renewable energy to the U.S. electric grid and render the electricity sector “net-zero” carbon emissions by 2050; New federal loan and other incentive programs to help finance microgrids and “distributed energy” projects, which would trigger Davis-Bacon prevailing wage requirements; Mandate connection of renewable energy facilities to the electric grid, and eliminate any monopolies in the U.S. where public utilities control all levels of production, transmission, and sale of power in wholesale electricity markets; and Projects supported with federal funds must “buy clean” construction materials and products that generate lower greenhouse gas emissions during their manufacture. In addition to the CLEAN Future Act, the House’s Select Committee on the Climate Crisis is expected to release its own principles for legislation by the end of March. [Roundtable Weekly, Nov. 22, 2019]. Prospects to advance the CLEAN Future Act through Congress this year are virtually zero, as the bill does not presently align with Republican priorities in the Senate. Nonetheless, as Democrats are soliciting input on their climate framework, The Real Estate Roundtable’s Sustainability Policy Advisory Committee (SPAC) has convened a “task force” process to review the omnibus package and provide comments to the bill’s House majority sponsors.# # #

Affordable Housing

February 7, 2020

Roundtable Weekly

Minneapolis Fed President Neel Kashkari Endorses More Private Sector Development to Counter Affordable Housing Crisis, Echoing Roundtable’s Policy Agenda

Affordable Housing

The increasing cost burden of rental housing is now reaching middle-income Americans, according to a Harvard University Joint Center for Housing Studies (JCHS) report, America’s Rental Housing 2020. Federal Reserve Bank of Minneapolis President and CEO Neel Kashkari introduced the report at a Jan. 31 event. "We need a lot more private sector development to come in, build many, many more units across the spectrum, create more supply, that'll make things more affordable for everyone. Unless we unlock the private sector, we're never going to help the vast majority of people who are struggling with affordability today," Kashkari said. (KSTP video, Jan. 31)Kashari noted the challenge is how to encourage the private sector to create and preserve affordable housing alternatives at scale so that other targeted government programs can also do their part. “Our research has shown, as many others have shown, that if the private sector builds more units, even market-rate units, it adds supply to a city or region that ends up creating space for everybody, Kashkari said. (YouTube video of JCHS event and ULI’s Urban Land Magazine, Feb. 5) The latest research from Harvard shows rising rental demand and constricted supply have reduced the stock of low- and moderate-cost units. This shift has significantly altered the profile of the typical renter household, resulting in a growing number of renters with incomes between $30,000 and $75,000 paying more than 30 percent of their income for housing – meeting the definition of “cost-burdened.” (JCHS interactive map of the U.S.). The report also notes that the rising cost of affordable rentals has resulted in a majority of lower-income renters spending more than half of their monthly income on housing – conditions that have led to increases in homelessness, particularly in high-cost states. (Bloomberg, Jan. 31 and JCHS chart) According to the JCHS, climate change also poses a threat to the stability of American renter households. Between 2008 and 2018, 10.5 million of the country's 43.7 million renter households live in zip codes that incurred at least $1 million in home and business losses due to natural disasters. Additionally, 8.1 million renter households report that they do not have the financial resources to evacuate their homes if and when a disaster strikes. The report’s Executive Summary concludes, “Local governments have found themselves on the front lines of the rental affordability crisis. In response, many jurisdictions have adopted a variety of promising strategies to expand the affordable supply, including increased funding and reform of zoning and land use regulations to allow higher-density construction. Organizations ranging from hospitals and universities to tech companies have also started to address the crisis. Ultimately, though, only the federal government has the scope and resources to provide housing assistance at a scale appropriate to need.” (PDF of entire JCHS report) Industry Response The Real Estate Roundtable’s recently released 2020 Policy Agenda addresses affordable housing challenges facing the nation’s communities. The policy agenda states, “The Roundtable aims to galvanize policy makers and like-minded real estate organizations around a set of pro-housing recommendations designed to increase the dearth of affordable units across the nation. ‘One-sizefits-all’ rent control mandates and anti-eviction laws will only further distort the housing supply-and-demand curve without addressing the underlying conditions that create market shortages in the first place.” The Roundtable recommends more enduring solutions, such as: Federal grants could put a premium on local commitments to high-density zoning, the expansion of by-right multifamily zones, transit-oriented growth and affordable housing. Ensure that banks receive “credit” under the Community Reinvestment Act for lending to middle class families. Support the production of manufactured housing. Free up under-utilized federal properties for affordable housing development. Consider the impact of student loan debt on federally-backed mortgage qualification. Short-term housing rentals must be regulated to combat long-term housing shortages. The Roundtable also remains focused on legislative and regulatory action that will increase the availability of housing, like a more robust low-income housing tax credit program from Congress and a plan to reasonably reform Fannie Mae and Freddie Mac. On Jan. 21, The Roundtable submitted a suite of policy suggestions to the Department of Housing and Urban Development (HUD) to improve access to affordable housing. (Roundtable Weekly, Jan. 17) The Roundtable’s comments to HUD offer policies intended to bring more safe, decent, and affordable housing within reach of indigent and low-income households. It also urges HUD to focus on the scarcity of homes accessible to middle class families, and recommends policies to increase both purchase and rental options for teachers, first responders, and other contributors in America’s workforce. During The Roundtable’s State of the Industry meeting last week in Washington, DC, a discussion of housing availability and affordability featured Federal Housing Finance Agency Director Mark Calabria and Rep. Patrick McHenry (R-NC), Ranking Member of the House Financial Services Committee. (Roundtable Weekly, Jan. 31)# # #

2020 State of the Industry Meeting

January 31, 2020

Roundtable Weekly

Policymakers and Industry Leaders Address Affordable Housing and Other National Issues as The Roundtable Rolls Out 2020 Policy Agenda

Roundtable Meeting Roundtable Weekly

The Real Estate Roundtable’s 2020 State of the Industry (SOI) Meeting this week in Washington featured discussions with policymakers and industry leaders on affordable housing solutions, economic development and job creation, infrastructure, tax regulations affecting CRE and other national issues. Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.) launched the meeting on Tuesday by announcing the release of the organization’s 2020 Policy Agenda, which was developed with input from a recent membership survey, discussions held throughout the year among policy advisory committees, and consultation with 18 national real estate trade association partners and The Roundtable's Board of Directors.Before unveiling The Roundtable’s agenda for tax, capital & credit, energy & climate, homeland security, and infrastructure & housing issues – Cafaro reviewed the organization’s 2019 policy accomplishments, including a seven-year reauthorization of the Terrorism Risk Insurance Act. She also noted the organization’s ongoing, successful efforts to attract greater diversity to its membership, along with its new, mobile-friendly website.Policy Issues & Featured Speakers The SOI meeting included the following speakers: Federal Housing Finance Agency Director Mark Calabria addressed his agency’s oversight of Fannie Mae and Freddie Mac – the Government Sponsored Enterprises (GSEs) – who own or guarantee $5.6 trillion in single and multifamily mortgages. Dr. Calabria spoke about the conservatorships the GSEs have operated under since 2008 and the need to responsibly privatize them while ensuring sufficient private capital is in place to protect taxpayers, along with access to affordable rental housing.House Financial Services Committee Ranking Member Patrick McHenry (R-NC) focused on affordable housing in the discussion with Dr. Calabria, moderated by Willy Walker, chairman & CEO, Walker & Dunlop. Rep. McHenry has served as Chief Deputy Whip to build consensus for the House Republican Conference’s agenda – including passage of the Tax Cuts and Jobs Act last year. He spoke about his committee’s recent hearings on challenges for effective affordable housing policies, which include a decrease in available housing supply due in part to counterproductive regulations and zoning laws at local and state levels.House Ways and Means Committee Member Stephanie Murphy (D-FL) is the first Vietnamese-American woman elected to Congress and a member of the powerful House Ways and Means Committee that originates tax legislation affecting the industry. Rep. Murphy spoke of her efforts to build consensus among her House colleagues by co-chairing the Blue Dog Coalition, a bloc of Democrats who emphasize fiscal restraint – and her efforts to build a solutions-oriented policy approach that can bridge the gap between left and right.Rhode Island Governor Gina Raimondo (D), recently re-elected, discussed her state-wide successes in attracting increased economic investment, decreasing unemployment and implementing innovative solutions to the challenges of homelessness and affordable housing. Gov. Raimondo spoke of her recent proposal to build more affordable housing using a housing bond and dedicated funding stream, along with her support for the federal Opportunity Zones program. She also discussed her executive order committing Rhode Island to be powered by 100 percent renewable electricity by the end of the decade. Mike Allen, co-founder and Executive Editor of Axios – a three-year old digital media company delivering news and insights on policy, politics, business and tech – discussed the confluence of this election cycle, social media and the “War for Attention” to gain consumer, and voter, brand loyalty.George Will, syndicated columnist and political commentator, concluded the meeting’s evening event with comments on how historical, economic and societal trends directly influence the current political environment, providing a bellwether for what can be anticipated in future elections.Roundtable Policy Committees SOI also included meetings of The Roundtable's policy advisory committees, which analyzed policy issues in detail with high-level congressional and agency staff.Research and Real Estate Capital Policy Advisory Committee (RECPAC):During this joint meeting, two panels of industry experts addressed investment and market insights into the current real estate market cycle, along with the state of real estate capital and debt markets.Tax Policy Advisory Committee (TPAC): The chief tax counsels from the Senate Committee on Finance discussed what lay ahead for tax legislative priorities affecting commercial real estate. The discussion, moderated by Russ Sullivan (Brownstein Hyatt Farber Schreck), included Mark Warren, chief tax counsel for Senate Finance Committee Republicans and Tiffany Smith, chief tax counsel for Senate Finance Committee Democrats. Additional discussions delved into recent and future real estate-related tax regulations with Treasury Department Attorney-Advisor Bryan Rimmke, as well as new Opportunity Zone rules, proposed LIBOR tax regulations, and the tax challenges confronting foreign investment in US real estate. Sustainability Policy Advisory Committee (SPAC): U.S. Environmental Protection Agency speakers provided an update on the ENERGY STAR for Tenants program. Additionally, U.S. Energy Information Administration speakers provided SPAC information on the Commercial Building Energy Consumption Survey (CBECS) and its impact on ENERGY STAR scores. The New York Independent System Operator (NYISO) discussed its efforts to create a carbon pricing market — an emerging issue as the real estate sector confronts rising obligations to draw clean power from a de-carbonized electric grid. Homeland Security Task Force meeting (HSTF) and Risk Management Working Group (RMWG): The joint meeting attendees heard briefings by government officials on challenges presented by homelessness – and the risk picture posed by the coronavirus to the United States. The Task Force was also briefed on cyber threats and the state of insurance markets after the recent seven-year reauthorization of the Terrorism Risk Insurance Act (TRIA), enacted one year before its scheduled expiration date – a major policy accomplishment of The Roundtable in 2019.Next on The Roundtable's FY2020 meeting calendar is the Spring Meeting on March 31 in Washington, DC. This meeting is restricted to Roundtable-level members only.# # #

Infrastructure

January 31, 2020

Roundtable Weekly

House Democrats Propose $760 Billion Infrastructure Framework as Ways and Means Committee Considers Pay-Fors

Climate Policy Infrastructure Roundtable Weekly

House Democratic leaders on Jan. 29 released a five-year, $760 billion framework to improve the nation’s highways, bridges, transit and broadband as the Ways & Means (W&M) Committee held a hearing to consider how to pay for the plan. (Factsheet and Framework text)The 19-page “Moving Forward Framework” was unveiled by House Speaker Nancy Pelosi (D-CA) and the chairs of three House committees – Transportation Committee Chair Peter DeFazio (D-OR), Energy Committee Chair Frank Pallone (D-NJ), and W&M Committee Chair Richard Neal (D-MA). (Video of news conference)Elements of the “Moving Forward” blueprint, estimated to create 10 million jobs, include:$434 billion for highways, bridges, transit and other surface transportation – comprising the package’s financial bulk – with incentives for projects that reduce carbon pollution and improve resiliency to climate change impacts;Streamlining the Transportation Department’s underwriting process for low-interest TIFIA loans;Prioritizing spending from the national Highway Trust Fund (“HTF”) with a “Fix It First” strategy to repair crumbling roads and bridges ;A pilot to sustain the long-term solvency of the HTF (which is frequently bailed-out by Congress) through a “vehicle miles traveled” user fee;Quicker federal grant approvals for transit projects of national and regional significance, to support critical investments like the NY-NJ Gateway program;Priorities for investments that help transform U.S. rail and airport networks;Expansion of renewable energy infrastructure and investments to de-carbonize the electric grid; andNew infusions of capital for Brownfields re-development.The Roundtable has long supported legislation for a comprehensive infrastructure overhaul. It has recommended a number of measures reflected in the Democratic framework. (E.g., March 20, 2019 W&M comments; April 29, 2019 T&I comments.)Projects supported by federal dollars in the “Moving Forward” plan would trigger prevailing wage requirements for laborers and contractors under Davis-Bacon standards.Meanwhile, the W&M Committee held a hearing Jan. 29 on “Paving the Way for Funding and Financing Infrastructure Investments.” The hearing explored potential funding options for a national infrastructure effort, including raising the gasoline tax; expanding tax-exempt bonds; establishing a vehicle-miles traveled user fee; and greater use of public-private partnerships (P3s). The Congressional Budget Office reported last week that P3s have accounted for only 1 to 3 percent of spending for highway, transit, and water infrastructure since 1990. Chairman Neal and Ranking Member Kevin Brady (R-TX) both endorsed an expansion of dynamic budget scoring beyond tax cuts for infrastructure investments. In his opening statement, Neal cited tax-preferred bonds, including Build America Bonds, as an important infrastructure financing tool, while also highlighting the new markets tax credit, the low-income housing tax credit, and the historic tax credit. Rep. Brady proposed creating Opportunity Zones for infrastructure. (Politico, Jan. 30)The Trump Administration and Congressional Democrats have long touted a comprehensive infrastructure package as an area for bipartisan agreement. Senate Majority Leader Mitch McConnell recently stated that infrastructure policy could advance after the impeachment trial ends. (Roundtable Weekly, Jan. 24)However, during this election year, prospects for a more modest infrastructure plan (compared to the expansive Democratic framework) are higher. The current Highway Trust Fund of approximately $226 billion – the main funding source for roads, bridges and transit – is set to expire on September 30, 2020. Shoring-up the HTF is expected to be the main focus of Congress and stakeholders for the rest of FY 2020. (Roundtable Weekly, Oct. 4) # # #

Industry Leadership

January 31, 2020

Roundtable Weekly

National Multifamily Housing Council President Doug Bibby Announces 2021 Departure

Industry Leadership Roundtable Weekly

National Multifamily Housing Council (NMHC) President Doug Bibby – an industry leader for nearly two decades who has played a major role in advancing real estate’s policy agenda in Washington, DC – announced on Jan. 29 that he will depart the organization in 2021. “It has been, and continues to be, a great honor and privilege to serve in this position,” said Bibby. “Representing the apartment industry has been one of the most fulfilling and gratifying experiences of my career. I am proud of the work the team at NMHC has done and the strides the industry has taken during my tenure,” he added. (NMHC’s bio on Doug Bibby)Roundtable President and CEO Jeffrey DeBoer noted, “Among the 18 national real estate trade associations that The Real Estate Roundtable works with on common issues of importance to commercial real estate, NMHC is one that has shown outstanding leadership on important policies such as housing affordability, regulatory reform and the recent reauthorization of the Terrorism Risk Insurance Act. Doug Bibby has played an essential and exemplary role in his large organization’s successes on the policy front since June 2001. He deserves the thanks of the entire industry and we wish him well as he prepares for his next endeavor.”NMHC’s officers have engaged an executive search firm, Russell Reynolds Associates, and hope to introduce Bibby’s successor at its January 2021 Annual Meeting.# # #

Infrastructure

January 24, 2020

Roundtable Weekly

House Democrats to Introduce Infrastructure Proposal

Infrastructure Transportation

A proposal to improve the nation’s infrastructure and surface transportation will be unveiled by House Democratic leaders next week – as the House Ways and Means Committee considers how to pay for it during a Jan. 29 hearing on “Paving the Way for Funding and Financing Infrastructure Investments.” (Deloitte Tax News & Views, Jan. 17)Ways and Means Committee (W&M) Chairman Richard Neal (D-MA) and Transportation and Infrastructure Committee (T&I) Chairman Peter DeFazio (D-OR) will be tasked with considering how to offset the costs of a national infrastructure improvement effort and surface transportation bill. (BGov, Jan. 23)The Ways and Means Committee hearing will explore potential funding options, including raising the gasoline tax; expanding tax-exempt bonds; establishing a vehicle-miles traveled tax; and greater use of public-private partnerships (PPPs). The Congressional Budget Office reported this week that PPPs have accounted for only 1 to 3 percent of spending for highway, transit, and water infrastructure since 1990.The Roundtable submitted extensive comments on infrastructure policy to both committees last year. (March 20, 2019 W&M comments; April 29, 2019 T&I comments.)The nation’s largest financing source for roads, bridges, tunnels, and mass transit – the federal Highway Trust Fund (HTF) – expires on Sept. 30, the end of the government’s 2020 fiscal year. With HTF reauthorization considered a “must do” legislative priority during this election year, a transportation funding bill will likely become part of the broader infrastructure proposal, which could total $1 trillion or more. The Roundtable and more than 150 national trade associations also wrote to Senate Majority Leader Mitch McConnell (R-KY) and Senate Minority Leader Chuck Schumer (D-NY), on Sept. 30 to reauthorize the HTF before its scheduled expiration. (Roundtable Weekly, Oct. 4) Chairman DeFazio said his possible funding sources could incorporate federal gas tax revenues and a bonding proposal. (BGov, Jan. 17)In the Senate, four committees will play a role in crafting a long-term HTF package. Last summer, the Senate Environment and Public Works (EPW) Committee unanimously advanced a bill (S. 2302) that would authorize $287 billion over five years to repair and maintain the nation's surface transportation. (EPW Committee news release, July 30) Senate Majority Leader Mitch McConnell (R-KY) recently discussed with GOP committee leaders possible transportation and infrastructure agendas that could be advanced after the impeachment trial ends.Additionally, the Trump Administration on Jan. 9 proposed changes to federal environmental review requirements to speed major infrastructure projects such as highways, airports, tunnels and pipelines. (Roundtable Weekly, Jan. 10)The proposal by the White House’s Council on Environmental Quality (CEQ) to streamline the infrastructure approval process complements the similar, bipartisan efforts in the Senate to speed-up delivery for infrastructure projects. (Roundtable Weekly, Aug. 2)Federal infrastructure efforts, and their vital importance to commercial real estate, are a focus of The Roundtable’s 2020 Policy Agenda, which will be discussed at the organization’s State of the Industry Meeting on January 28-29 in Washington. # # #

Tax Policy

January 24, 2020

Roundtable Weekly

House Ways and Means Committee Signals Green Energy Tax Bill; Trump Administration Developing “Tax 2.0” Proposal

Energy Policy Tax Policy

House Ways and Means Committee Chairman Richard Neal (D-MA) recently confirmed plans to advance legislation in 2020 that would expand and create new renewable energy and energy-efficiency tax incentives. “We talked about (the markup) this morning,” Neal told reporters on Jan. 14. He added, “We are scheduling events.” (BGov, Jan. 15 and Jan. 24) The starting point for green energy tax legislation in the Ways and Means Committee is likely a draft bill unveiled last November by Rep. Mike Thompson (D-CA), who chairs the Subcommittee on Select Revenue Measures. Rep. Thompson’s discussion draft of the Growing Renewable Energy and Efficiency Now (GREEN) Act would modify the enhanced deduction for energy-efficient commercial building property (section 179D);create an expanded tax credit for the developers of new, energy-efficient home (section 45L); and modify the tax credit for energy-efficient improvements to existing homes (section 25C). (Roundtable Weekly, Nov. 22) (Rep. Thompson news release with link to the GREEN tax draft legislation, Nov. 19) The Real Estate Roundtable and other real estate and environmental organizations are encouraging Members of Congress to consider an additional proposal that would incentivize existing buildings to purchase and install energy-efficient upgrades that reduce greenhouse emissions, generate taxpayer savings, and spur innovation and investment. Specifically, draft legislation under review would create a new category of energy-efficient qualified improvement property (E-QUIP) that is subject to an accelerated 10-year depreciation period. The E-QUIP benefit would apply to purchases of modern and energy-efficient HVAC, lighting, and building envelope improvements, such as energy-saving roofs and windows. (Roundtable Weekly, May 10)Separately, President Trump on Jan. 22 said a substantial middle-class tax cut – referred to as “Tax Cut 2.0” – will be released within 90 days, during an interview with Fox Business' Maria Bartiromo at the World Economic Forum in Davis, Switzerland. (Reuters, Jan. 22)Treasury Secretary Steven Mnuchin told CNBC at the same conference, “The president has asked us to start working on what we call ‘tax 2.0,’ and that will be additional tax cuts. They’ll be tax cuts for the middle class, and we’ll also be looking at other incentives to stimulate economic growth.” (CNBC, Jan. 23)Larry Kudlow, director of the White House National Economic Council, told FOX Business' Liz Claman on Jan. 17 that "The president directed me to produce what we're calling 'tax cuts 2.0.’ It will be published sometime during the campaign, has a message for future Trump economic growth policies, particular emphasis on the middle class in his second term." A legislative path toward passage of individual tax bills in an election year is very narrow, but separate tax proposals by Congress and the White House could culminate in an end-of year compromise package. Tax issues for 2020 will be a focus at next week’s Roundtable State of the Industry Meeting in Washington – both during the Jan. 28 business meeting and the Jan. 29 Tax Policy Advisory Committee (TPAC) meeting. # # #

Affordable Housing

January 20, 2020

Policy Comment Letter

RER Comments to HUD to Eliminate Barriers to Affordable Housing

Affordable Housing, Housing, HUD Housing and Urban Development agency,

Affordable Housing

January 17, 2020

Roundtable Weekly

Roundtable Submits Comments to HUD on Barriers to Affordable Housing Development; NMHC Releases 2020 Outlook on States’ Rent Control Efforts

Affordable Housing Housing Low Income Housing Tax Credit LIHTC Yes In My Backyard YIMBY YIMBY

The Real Estate Roundtable today submitted a suite of policy suggestions (revised January 21, 2020) to the Department of Housing and Urban Development (HUD) to improve access to affordable housing. The comments respond to HUD’s Request for Information seeking public feedback on laws, regulations, land use requirements and administrative practices posing barriers to housing affordability and availability. Roundtable Recommendations The Roundtable’s comments offer policies intended to bring more safe, decent, and affordable housing within reach of indigent and low-income households. It also urges HUD to focus on the scarcity of homes accessible to middle class families, and recommends policies to increase both purchase and rental options for teachers, first responders, and other contributors in America’s workforce. Recognizing “there is no single, best solution to promote housing affordability and increase housing supplies,” The Roundtable suggests a number of strategies to address the challenges and opportunities for public, low-income, and middle-class housing, including: Expand the Low-Income Housing Tax Credit (LIHTC) program, and provide a similar tax incentive focused on housing development for America’s middle class; Use GSE reform to re-focus the mission of Fannie Mae and Freddie Mac on liquidity in the mortgage markets for low- and middle-income home buyers, while also encouraging GSE interventions to enhance middle-class rental housing; Reform procedures and rules under the Community Reinvestment Act (CRA), so banks can receive “credit” when they serve lending needs and increase housing supplies in middle-class neighborhoods (80-120 percent of Area Median Income); Foster a Yes in My Backyard – or “YIMBY” – environment whenever states and cities seek the “carrot” of federal grants, that obliges localities to implement land-use laws to deliver high density zoning needed to entitle affordable housing projects; Promote greater production of manufactured housing as a high quality, less costly alternative to site-built homes; and Direct the General Services Administration to prioritize increasing affordable housing supplies when it disposes of surplus federal properties for re-development by states, localities, and the private sector. The comments conclude with an assessment of rent control laws which have “a long-term effect to worsen the housing crisis,” The Roundtable wrote to HUD. The letter notes that numerous studies show these laws decrease housing supplies and can illogically benefit high-income earners who have no incentive to move out of controlled units. In a related development this week, the National Multifamily Housing Council (NMHC) released a report on “Rent Control: A 2019 Recap and a 2020 Look Forward,” which provides a national assessment of rent cap efforts by multiple states. The new report supplements NMHC’s Housing Affordability Toolkit that explains the cost drivers behind apartment development and delves into best practices to address the affordability challenge. During The Roundtable’s January 28 State of the Industry meeting in Washington, DC, a discussion of housing availability and affordability will feature Federal Housing Finance Agency Director Mark Calabria and Rep. Patrick McHenry (R-NC), Ranking Member of the House Financial Services Committee. # # #

CFIUS

January 17, 2020

Roundtable Weekly

Treasury Issues Final Regulations Affecting National Security Concerns Over Foreign Investment, Including Real Estate Transactions

CFIUS CFIUS Reform Roundtable Weekly

The Treasury Department on Jan. 13 issued two final regulations that increase the U.S. executive branch's ability to address national security concerns arising from certain foreign investments, including real estate transactions. (Treasury’s full text of the final regulations & related resources)The new rules, which go into effect Feb. 13, will comprehensively implement the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). The Act authorizes the Committee on Foreign Investment in the United States (CFIUS) to review certain transactions involving foreign investment to determine potential effects on U.S. national security.FIRRMA, enacted with bipartisan support in August 2018, established CFIUS’ jurisdiction over certain real estate transactions. It also broadened CFIUS’ jurisdiction over certain non-controlling investments into certain U.S. businesses involved in critical technology, critical infrastructure, or sensitive personal data. The new regulations were released in two parts: Provisions Pertaining to Certain Investments in the United States by Foreign Persons (31 C.F.R. part 800); and Provisions Pertaining to Certain Transactions by Foreign Persons Involving Real Estate in the United States (31 C.F.R. part 802). (Skadden, Jan. 16 – "CFIUS’ Final Rules: Broader Reach, Narrow Exceptions and Foretelling Future Change")“These regulations strengthen our national security and modernize the investment review process,” said Treasury Secretary Steven T. Mnuchin. “They also maintain our nation’s open investment policy by encouraging investment in American businesses and workers, and by providing clarity and certainty regarding the types of transactions that are covered.” (Treasury statement, Jan. 13)The new rules create exemptions to CFIUS jurisdiction for so-called “excepted foreign states” that include nationals, entities, and governments of certain countries. The current list of eligible foreign states includes Australia, Canada and the United Kingdom, but may expand to include other nations in the future. The Real Estate Roundtable submitted comments to Treasury last year about the original, proposed CFIUS rules and requested clarifications about how investments in commercial real estate would be affected. (Roundtable Weekly, Sept. 20, 2019 and Roundtable Letter, Oct. 17, 2019)FIRRMA expands the list of covered transactions to include some foreign purchases and leases of real estate near military and other strategic facilities. Responding to concerns raised by The Roundtable and other industry groups, language is included in the rules that exempts real estate located in an 'urbanized area' from the criteria of a covered transaction. The Census defines an urbanized area as one comprising more than 50,000 people.The new rules include other modifications to the proposed rules affecting real estate transactions. The final rules lower the threshold for investors to qualify as “excepted investors.” A foreign person who now qualifies as an excepted investor will not be subject to CFIUS’ jurisdiction for non-controlling investments regarding real estate transactions. (Law 360, Jan. 15)A Ropes & Gray Jan. 15 summary – “CFIUS Issues Final Rules Implementing FIRRMA: Key Changes and Developments" – reports that an entity may be deemed an “excepted investor” if, among other requirements:75 percent or more of the members and 75 percent or more of the observers of the board of directors (or comparable body) are citizens of either the United States or an excepted foreign state – instead of the 100 percent requirement articulated in the Proposed Rules, andAll investors that hold a 10 percent or greater equity interest are citizens of either the United States or an excepted foreign state – instead of the 5 percent or greater requirement set forth in the Proposed Rules.According to a Jan. 16 JD Supra report — “Key Takeaways from CFIUS Final Rules Implementing FIRRMA — the final rules also broaden the covered real estate exception for retail trade, accommodation, and food service stores. The new rules apply the exception to leases and concessions of real estate that are “used only for the purpose of engaging in the retail sale of consumer goods or services to the public.”CFIUS also intends to make a web-based tool available in the near term to assist the public with assessing what qualify as “covered real estate transactions” that are potentially subject to CFIUS review.With these final rules, investors and companies now face a more complicated CFIUS framework that accounts for evolving national security risks involving foreign investments and real estate transactions. The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) and Homeland Security Task Force (HSTF) plan to study the 132-page rule (part 802) affecting foreign transactions in U.S. real estate for more insight into how the new rules may impact commercial real estate investment.# # #

Labor Policy

January 17, 2020

Roundtable Weekly

U.S. Labor Department Adopts “Joint Employer” Rule, Returns to “Direct and Immediate Control” Standard

Joint Employer Labor Policy Roundtable Weekly

The Labor Department on Jan. 12 released its final “joint employer” rule, returning to a standard where businesses can only be held responsible for workplace violations and collective bargaining obligations regarding workers over which they have “direct and immediate” control. (Final Rule, Federal Register and Fact Sheet, Dept. of Labor).This week’s rule takes effect on March 16. It upholds a federal labor standard that was in effect for more than thirty years, before it was upended by a National Labor Relations Board (NLRB) decision in 2015. That 2015 NLRB decision instituted an expansive interpretation of workplace relationships, where employees hired by a local franchise operator (or subcontractor) could also be considered an employee of the “parent” company (or general contractor) that had no role in hiring decisions. The new regulation revives the long-standing rule that two separate employers are considered “joint employers” only where they both have “direct and immediate control” over hiring standards, employment terms and working conditions. In practical terms, the Jan. 12 rule means that a local franchisee remains obligated to sit down and negotiate with unionized employees – but the remote franchisor company that never hired the workers has no collective bargaining responsibilities to them. Similarly, a subcontractor that commits workplace safety violations is responsible to its laborers, but a general contractor is not similarly responsible unless it has “direct and immediate” control over job site conditions.Advocacy over the joint employer rule has spanned the Obama and Trump Administrations. For example, as part of a broad multi-industry coalition, The Roundtable wrote to congressional leaders back in 2017 about the harm to businesses caused by the NLRB’s Obama-era position, essentially advocating for the Labor Department’s rule handed down this week. (See past Roundtable Weekly stories – March 2, 2018 / Dec. 15, 2017 / Nov. 10, 2017 / Sept. 11, 2015) On Jan. 12, DOL Secretary Eugene Scalia and White House Chief of Staff Mick Mulvaney wrote in the Wall Street Journal about the new joint employer rule.“The new rule also gives companies in traditional contracting and franchising relationships confidence that they can demand certain basic standards from suppliers or franchisees—like effective antiharassment policies and compliance with employment laws—without themselves being deemed the employer of the other company’s workers. That will help companies promote fair working conditions without facing unwarranted regulatory costs,” according to the two Trump Administration officials. (Wall Street Journal, Jan. 12)# # #

Energy And Climate Policy

January 10, 2020

Roundtable Weekly

House Democrats Outline Climate Legislation, Address Buildings and Energy Efficiency

Energy and Climate Policy Energy Policy

House Democrats on Jan. 8 released a legislative framework on climate policy that addresses buildings and energy efficiency among its sector-specific proposals. The goal for the House Energy and Commerce Committee’s Climate Leadership and Environmental Action for Our Nation’s (CLEAN) Future Act is to achieve overall net-zero greenhouse gas emissions (GHG) for the United States by 2050.The legislative text of the draft CLEAN Future Act will be released by the end of this month while hearings and stakeholder meetings continue throughout the year. (Committee news release, Jan. 8). The proposal addresses the efficiency of new and existing buildings, as well as the equipment and appliances that operate within them. The bill proposes national energy savings targets from continued stringency of model building energy codes (frequently adopted into law at the state and local level), with a requirement of “zero-energy-ready buildings” by 2030.The legislative framework also proposes requirements on utilities and other retail electricity suppliers to de-carbonize the U.S. electric grid. Under the proposal, they must provide an increasing supply of clean electricity to consumers starting in 2022, rising to 100 percent clean energy by 2050.The legislative framework will also direct the Federal Energy Regulatory Commission (FERC) to facilitate the integration of localized distributed energy, energy storage, and renewable energy resources into the electric grid.While the CLEAN Future Act proposal is not expected to garner support from Republicans, measures that would “clean” the electric grid and direct FERC to modernize energy markets could theoretically impact emerging obligations on building owners to comply with certain local-level carbon reduction mandates (such as New York City’s Local Law 97.) (See Roundtable Weekly, April 19, 2019)Meanwhile, the House Select Committee on the Climate Crisis is expected to issue legislative policy recommendations by March 31, 2020. (See Roundtable Weekly, October 25, 2019)The Real Estate Roundtable submitted detailed energy and climate policy recommendations to the House Select Committee on November 21, 2019. The comments offer a suite of priorities developed by The Roundtable’s Sustainability Policy Advisory Committee (SPAC), including:* Improve the model building energy codes process by enacting the Portman-Shaheen Energy Savings and Industrial Competitiveness (ESIC) Act. (Roundtable Weekly, September 27, 2019) * Enhance EPA’s voluntary ENERGY STAR incentive programs for both commercial buildings and tenants.* Create meaningful accelerated depreciation periods to encourage investments in high performance equipment to retrofit existing commercial and multifamily buildings. (Roundtable Weekly, May 10, 2019)House Speaker Nancy Pelosi (D-CA) has stated the House will act on a climate bill in 2020 (Bloomberg Environment, Dec. 6, 2019). Majority Leader Steny Hoyer (D-MD) also told reporters this week that climate policy would be a "huge issue" this year. (E&E News, Jan. 9)In the Senate, a different approach to energy policy has evolved over the past year. The Senate Energy and Natural Resources (ENR) Committee passed 52 bills in 2019 on a largely bipartisan basis. Several of these bills address commercial and residential real estate, including the Energy Savings and Industrial Competitiveness Act (ESIC) Act (Portman-Shaheen), long-supported by The Real Estate Roundtable. The ESIC Act “is exactly the kind of smart, forward-looking policy that will help building owners respond to our modern, evolving economy” Roundtable President and CEO Jeffrey DeBoer stated in a Senate news release upon the bill’s introduction this past summer. (Roundtable Weekly, July 19) (Video of DeBoer’s statement)Energy and climate legislation will be a focus of discussion during The Roundtable’s upcoming January 28 State of the Industry Meeting in Washington. The Roundtable’s Sustainability Policy Advisory Committee (SPAC) will also meet on January 29.# # #

Infrastructure

January 10, 2020

Roundtable Weekly

Trump Administration Proposes Changes to Environmental Reviews to Speed Federal Infrastructure Projects

Infrastructure

The Trump Administration – in a continuing effort to streamline government approvals of major infrastructure projects such as highways, airports, tunnels and pipelines – yesterday proposed the most significant changes in over four decades to federal-level environmental review requirements. (Watch White House news conference video) . The proposal by the White House’s Council on Environmental Quality (CEQ) would affect implementation of the National Environmental Policy Act (NEPA). Comments on the proposal are due by March 10, 2020. ”[W]e want to build new roads, bridges, tunnels, highways bigger, better, faster, and we want to build them at less cost. That is why, for the first time in over 40 years, we are issuing a proposed new rule … completely overhaul the dysfunctional bureaucratic system that has created these massive obstructions,” President Trump said yesterday at a news conference unveiling the proposal. He added, “In the past, many of America’s most critical infrastructure projects have been tied up and bogged down by an outrageously slow and burdensome federal approval process. The builders are not happy. Nobody is happy. These endless delays waste money, keep projects from breaking ground, and deny jobs to our nation’s incredible workers.” (White House remarks, Jan. 9)According to CEQ, U.S. federal agencies prepare approximately 170 Environmental Impact Statement per year, which average 600 pages in length and take 4.5 years to conclude. (Reuters, Jan. 9)White House Council on Environmental Quality Chairwoman ,Mary Neumayr, stated at yesterday’s event, “It’s important to note that the proposal would reform the process of gathering information on environmental effects, but would not change any substantive environmental law or regulation, such as the Clean Air Act, the Clean Water Act, and the Endangered Species Act.”Transportation Secretary Elaine Chao also noted during the news conference, “We all care about the environment. What we are talking about are cumbersome, unnecessary, overly burdensome, duplicative, and outdated regulations. Many of these regulations have not been updated, modernized, in decades. What we’re seeking is commonsense solutions.” (White House remarks, Jan. 9)The Administration’s proposal to streamline the infrastructure approval process complements similar, bipartisan efforts passed by the Senate Public Works Committee in July to speed-up delivery for infrastructure projects. (Roundtable Weekly, Aug. 2, 2019)Secretary Chao has addressed the need to streamline the government approval process affecting infrastructure projects for years, including at The Roundtable’s Spring 2017 Meeting in Washington, DC.The Roundtable has been a long-standing advocate of increased national infrastructure investment to benefit the economy, job creation and local communities. In June 2017, Roundtable President and CEO Jeffrey D. DeBoer addressed the infrastructure permitting issue on CNBC’s Squawk Box. “We need to streamline and make a lot more efficient the permitting process in a lot of these infrastructure projects. That’s something the President wants to do and it’s hard to argue against it.” DeBoer added, “Permitting is a key part of lowering the costs, lowering the timeframe and reducing the amount of money that is needed for these projects.” (DeBoer on Squawk Box) It is unlikely that the Administration’s proposal will be finalized before the 2020 general election so that federal agencies can begin applying the updated review criteria. A core issue regarding the proposed changes is whether the government must incorporate climate change concerns as it analyzes an infrastructure project for approval. # # #

Homeland Security

January 10, 2020

Roundtable Weekly

Industry and Federal Agencies Share Threat Information Amid Recent International Tensions and Homeland Security Concerns

Homeland Security HSTF REISAC

During recent military actions between the United States and Iran, the real estate industry engaged in intensive information-sharing efforts with government agencies on a variety of homeland security concerns.As international tensions increased, informational bulletins on the potential for homeland security threats were shared by federal homeland security officials through the Real Estate Information Sharing and Analysis Center (RE-ISAC) – a public-private information sharing partnership organized and managed by The Real Estate Roundtable. The Roundtable’s Homeland Security Task Force (HSTF) – co-chaired by Roundtable members Dan Kennedy (URW) and Charlie McGonigal (Brookfield) – works closely with the REISAC and federal agency partners on protective measures that CRE businesses may consider as they implement infrastructure resistant to physical damage and cyber breaches. HSTF also addresses a variety of CRE homeland security issues, including the recently reauthorized Terrorism Risk Insurance Act (TRIA). The REISAC sends a Daily Report to members to raise awareness on domestic concerns and cyber threats affecting the U.S. commercial facilities sector, while sharing guidance from the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA). On Jan. 3, CISA conducted a situational update on Iranian-U.S. tensions with industry contacts. The conference call also addressed planning and preparedness efforts related to cyber, physical, and communications readiness – and coordinating information for reporting suspicious activity and/or events related to the events. On Jan. 6, CISA released an alert on “Potential for Iranian Cyber Response to U.S. Military Strike in Baghdad.” The same day, The New York Post reported that a senior adviser to Iran's president posted a tweet on Sunday with a link to a Forbes article listing all of The Trump Organization's significant properties, along with a quote from the late Ayatollah Khomeini threatening revenge against any enemies of Islam. The Daily Beast reported on Jan. 7 that an anonymous senior member of the U.S. intelligence community said Trump Tower in Midtown Manhattan could be more effective a target than even the White House.The RE-ISAC on Jan. 8 shared the retail-focused BMAP Special Advisory Bulletin which warned that, “individuals inspired to commit acts of terrorism may try to acquire or legally purchase common household items such as explosive precursor chemicals (EPCs), explosive powders, and IED components at retailers in your community to construct IEDs for use against infrastructure targets.” The bulletin also provided a list of “Suspicious Activity and Purchasing Behavior: Recognize and Report.” The RE-ISAC also recently distributed an announcement regarding a collaboration with the FBI and InfraGard National Capital Region to launch the Commercial Facilities Cyber Working Group (CCWG). Those who work at the intersection of commercial facilities and information security are invited to join the new Working Group by registering at https://cf.epicplatform.com. Additional ontact information for the REISAC is available here. The next Homeland Security Task Force (HSTF) meeting is scheduled for Jan. 29, in conjunction with The Roundtable’s State of the Industry Meeting on Jan. 28 in Washington, DC. # # #

Terrorism Risk Insurance Program

December 20, 2019

Roundtable Weekly

Seven-Year TRIA Reauthorization Passed as Part of $1.4 Trillion Spending Bill

EB5 National Flood Insurance Program NFIP Roundtable Weekly Tax Policy Terrorism Risk Insurance Program Travel amp Tourism TRIA

A seven-year reauthorization of the Terrorism Risk Insurance Act (TRIA) was approved this week by the House and Senate as part of a year-end funding bill (H.R. 1865). The provision reauthorizes TRIA through 2027, a year ahead of its slated sunset date of Dec. 31, 2020. (TRIA provisions on pages 1233–1236 of the year-end funding legislation). The measure is part of a massive $1.4 trillion congressional spending deal to fund the government until the end of the fiscal year – Sept. 20, 2020. President Trump is expected to sign two separate funding bills to keep the government open past midnight tonight. Roundtable Chair Debra Cafaro (Ventas, Inc.) stated, “The Real Estate Roundtable is pleased that TRIA will be extended until 2027. This federal terrorism insurance backstop was enacted following 9-11 and has been extended and reformed several times since. We cannot overstate the valuable safety and liquidity that the program brings to the US economy, businesses of all manner and commercial real estate markets.”A long-term, “clean” reauthorization of TRIA, well in advance of its expiration, has been a top policy goal of The Roundtable. This was achieved a full year ahead of schedule. (Roundtable background on TRIA)In addition to TRIA, the omnibus appropriations bill (H.R. 1865) contains several other positive measures affecting real estate. The tax and funding extensions include: The EB-5 Regional Center Program, which provides visas to foreign nationals who pool their investments in regional centers to finance U.S. economic development projects. The program would be extended until Sept. 2020. Department of Homeland Security (DHS) regulations that took effect in November presently govern key elements of the EB-5 program regarding investment levels and Targeted Employment Area (TEA) definitions. The National Flood Insurance Program. Without the extension, the program’s borrowing authority would have been reduced from $30.4 billion to $1 billion. The program would also be extended until Sept. 2020. (BGov and CQ, Dec. 20)Tax measures would be extended through the end of 2020. They include (1) the section 179D tax deduction for energy efficient commercial building property; (2) the section 25C tax credit for energy efficient improvements to principal residences; (3) the section 45L tax credit for construction of new energy efficient homes; (4) the tax exclusion for home mortgage debt forgiveness; (5) the tax deduction for mortgage insurance premiums; and (6) the New Markets Tax Credit;The Brand USA program would be extended through fiscal year 2027. Brand USA promotes travel to the U.S. through a public-private partnership that is funded through private-sector donations and funds collected from foreign visitors to the U.S.This week also saw the House pass legislation (H.R. 5377) that would temporarily raise and then eliminate for two years the $10,000 cap on state and local tax (SALT) deductions, which would be paid for by permanently raising the top individual tax rate to 39.6%. This “messaging” bill is unlikely to be taken up in the GOP-controlled Senate and President Trump has also threatened to veto it.After a flurry of year-end policymaking amid impeachment proceedings, both chambers of Congress recessed today and will return in early January.# # #

Opportunity Zones

December 20, 2019

Roundtable Weekly

Final Opportunity Zones Regulations Remove Uncertainty, Should Mobilize Real Estate Investment in Low-Income Communities

Opportunity Zones OZs

The Treasury Department yesterday released final regulations implementing Opportunity Zones (OZ) tax incentives. The details of the 544 pages of regulations are still under review, but the highly anticipated rules appear to embrace key Roundtable recommendations aimed at spurring capital formation and economic development in low-income communities. (Roundtable comment letter, July 1, 2019)The final regulations provide helpful guidance in several areas that should remove taxpayer uncertainty and allow productive real estate investments in low-income communities to move forward. Specifically, the final rules:Clarify the types of gains that may be invested in opportunity funds and when. For example, they amend a general rule in the proposed regulations that only capital gain may be invested in an opportunity fund. The rules allow a taxpayer to invest the entire amount of gain from the sale of business property, which can include gain from the sale of real estate. Clarify when gain may be excluded from tax after an investment is held for a 10-year period. The proposed rules did not allow an investor to exclude gain when the subsidiary of an opportunity fund sold an asset. The final regulations liberalize these rules, which should greatly facilitate the formation and operation of real estate-focused opportunity funds that invest in multiple properties. Include important changes to how an investment is measured when testing whether an opportunity fund has substantially improved real estate. The rules provide opportunity funds with greater flexibility to aggregate multiple assets. For example, they permit a group of two or more buildings located on the same parcel(s) of land to be treated as a single property—thus eliminating the need to increase the basis of each building by 100 percent.Allow a vacant property to be treated as being put to its original use in an opportunity zone if the property has been vacant for a continuous period beginning one year prior to the census tract’s designation as an opportunity zone. The proposed regulations would have required a property to be vacant for five years. A property that meets the original use requirement is not subject to the substantial improvement requirement. Provide important refinements to the previously proposed working capital safe harbor. The safe harbor provides opportunity funds with a minimum of 31 months to invest their working capital in qualified opportunity zone property, rather than the six months suggested in the statute. This longer runway aligns better with the practical realities of real estate investment. The final regulations ensure that an opportunity fund that is using working capital to improve real estate will be able meet the opportunity zone requirement that it be engaged in a trade or business.The most recent Roundtable regulatory recommendations were submitted on July 1, 2019. The Roundtable also submitted prior letters on the OZ tax incentives in June 2018 and December 2018. The Roundtable has strongly supported the Opportunity Zone tax incentives since their enactment as a potentially powerful catalyst for transformative real estate investment in economically struggling parts of the country. (GlobeSt.com interview with Roundtable President and CEO Jeffrey DeBoer and Roundtable SVP and Counsel Ryan McCormick –July 16, 2018).The Roundtable’s Tax Policy Advisory Committee and its Opportunity Zone Working Group will be analyzing fully this week’s 544 pages of rules and will report on the details during The Roundtable’s Jan. 28-29 State of the Industry meeting. # # #

Foreign Investment in Real Property Tax Act (FIRPTA)

December 20, 2019

Roundtable Weekly

Bipartisan Senate Letter Urges Treasury to Withdraw IRS Notice Hindering Foreign Investment in U.S. Real Estate

FIRPTA Foreign Investment in Real Property Tax Act Roundtable Weekly

This week, 11 Senators sent a bipartisan letter urging Treasury Secretary Steven Mnuchin to withdrawal section 2 of IRS Notice 2007-55, which applies U.S. capital gains tax to certain types of inbound real estate investment transactions that were previously treated as nontaxable under the Foreign Investment in Real Property Tax Act (FIRPTA). (Roundtable background on FIRPTA)Specifically, prior to the Notice, a domestically controlled REIT could sell its assets and liquidate, and the liquidation would be treated as a sale of stock (and a foreign investor in the REIT would not owe U.S. capital gains tax). This “sale of stock” treatment is consistent with how corporate liquidations are regularly taxed. The IRS Notice reversed the longstanding tax treatment of these transactions and took the position that a liquidating distribution of a domestically controlled REIT is a taxable sale of the underlying real estate assets.The letter, led by Sens. Johnny Isakson (R-GA) and Robert Menendez (D-NJ), notes, “This unintended tax burden discourages foreign investors from putting capital to work to create jobs and improve our communities.” The group of Senators, which includes Senate Banking Committee Chairman Mike Crapo (R-ID) and the Democratic co-chair of the Senate Real Estate Caucus, Senator Ben Cardin (D-MD), requests that Treasury restore Congress’s intended treatment of liquidating REIT distributions, encourage increased foreign investment in U.S. real estate, and further spur job creation in the United States by reversing the IRS Notice. According to the Senators, “trillions of dollars in global capital are estimated to be available that could be invested in the U.S. real estate market. Our tax policies should welcome such investment, not discourage it.” (Senators’ letter, Dec. 18)In addition to Senators Isakson, Menendez, Crapo, and Cardin, the signatories included: Sen. Pat Roberts (R-KS), Sen. John Thune (R-SD), Sen. Debbie Stabenow (D-MI), Sen. Rob Portman (R-OH), Sen. Steve Daines (R-MT), Sen. Tom Carper (D-DE), and Sen. Tim Scott (R-SC). All eleven signatories are members of the Senate Finance Committee. A similar letter was sent in October 2017 by 32 Members of the House Ways and Means Committee. The Roundtable’s Tax Policy Advisory Committee (TPAC) Chairman Frank Creamer Jr. (FGC Advisors, L.L.C.), said, “The efforts of Senators Isakson, Menendez and the nine other signatories demonstrates the strong, bipartisan support for reducing the burden of FIRPTA on real estate jobs and investment.” Creamer added, “FIRPTA is an outdated law that imposes a discriminatory capital gains tax on foreign investors in U.S. real estate and infrastructure. It does not apply to any other asset class. Outside of complete FIRPTA repeal, Treasury could take a meaningful regulatory step and repeal IRS Notice 2007-55.”On Oct. 30, a panel of industry experts that included Ryan McCormick, Senior Vice President and Counsel for The Real Estate Roundtable convened at the National Press Club in Washington for an in-depth discussion on how IRS Notice 2007-55 is impeding jobs and foreign investment in U.S. real estate and infrastructure. (Roundtable Weekly, Nov. 1, 2019)In April 2019, Representatives John Larson (D-CT) and Kenny Marchant (R-TX) introduced the Invest in America Act (H.R. 2210), a bill to repeal FIRPTA altogether. The Roundtable and 19 national trade organizations – representing every aspect of constructing, developing, financing, owning, and managing real estate and infrastructure in the United States – wrote to Ways and Means Committee Members and other key House lawmakers urging them to support the legislation. (Comment Letter, March 28).President Trump in early 2017 directed the Treasury Department to review existing tax regulations to identify rules that are unnecessarily burdensome. Repeal of IRS Notice 2007-55 would represent another significant step toward reforming FIRPTA by reducing a tax regulatory burden.# # #

Roundtable In The News

December 20, 2019

Roundtable Weekly

Roundtable President and CEO Jeffrey DeBoer Recognized Among “The Hill’s Top Lobbyists 2019”

Roundtable Weekly

The Washington, DC policy news publication The Hill on Dec. 12 released its annual Top Lobbyists list, whioh includes The Real Estate Roundtable’s President and CEO, Jeffrey DeBoer.The list recognizes several Washington industry representatives for their 2019 advocacy efforts and recognizes “the people who wielded their clout and knowledge most effectively on behalf of their clients,” according to the publication. The Hill list also notes, “The ranks of Washington’s policy experts and influencers run deep, but these are the players who stand out for delivering results for their clients in the halls of Congress and the administration.”The Roundtable’s DeBoer commented, “I am proud to work for an organization of industry leaders and with a staff of effective advocacy professionals who are all committed to a fact-based, non-partisan approach to economic growth policies – an approach that benefits the country, its communities and commercial real estate markets. This recognition by The Hill is appreciated and is a compliment to all those who work with The Real Estate Roundtable.”DeBoer was also quoted Dec. 12 in Bisnow on “5 Policy Issues That Could Affect Commercial Real Estate In 2020.”During a whirlwind policy month in DC that saw the passage of a $1.4 trillion spending deal with many positive policies affecting CRE – and the United-States-Mexico-Canada Agreement – DeBoer participated in a discussion that addressed the USMCA and other national issues.On the USMCA, DeBoer noted, "If you're in the real estate business, you want the underlying economy to be as healthy as possible, and the lack of an agreement here had been a drag on overall economic activity in the country." He added. "This agreement will both be a direct benefit in terms of the trading of materials that are used to construct assets, but also an indirect benefit because the underlying economy and businesses that trade goods will benefit from this."DeBoer also addressed the issue of affordable housing and GSE reform in the upcoming year. He stated, "We want to see a positive debate where people talk about the real problems of housing availability in America, which has to do with the permitting process, the ability to develop dense properties, the ability to use the Section 8 and the Low Income Housing Tax Credit programs, and maybe those things should be expanded." DeBoer also said, “"GSE reform is not going to solve the housing problems, but it's going to be an aspect of housing reform in the country along with a variety of other things that need to be done."These policy issues and others that will comprise The Roundtable’s 2020 National Policy Agenda will be discussed during the organization’s State of the Industry Meeting on Jan. 28-29 in Washington, DC.# # #

December 18, 2019

Policy Comment Letter

2019-12-2 CIAT McConnell letter 2019

Policy Landscape

December 13, 2019

Roundtable Weekly

Congress Reaches Spending Deal to Avert Shutdown; Roundtable and Business Coalition Urge Year-End TRIA Reauthorization

Policy Landscape Roundtable Weekly TRIA

A bipartisan spending deal to fund the government before a Dec. 20 deadline has been agreed to in principle, with details and a vote expected next week, according to top congressional lawmakers. During the year-end policy rush to attach other legislation to the must-pass spending bill, The Roundtable and a diverse business coalition on Dec. 11 urged Congress to extend the Terrorism Risk Insurance Act (TRIA) for 7 years by passing S. 2877.After rounds of funding negotiations between leaders of Senate and House appropriators this week, House Speaker Nancy Pelosi (D-CA) and Treasury Secretary Steven Mnuchin, House Appropriations Chairwoman Nita Lowey (D-NY) on Thursday reported, “There’s a meeting of the minds.” (Wall Street Journal, Dec. 12 and The Hill)“Let me say in no uncertain terms, nobody wants to have a government shutdown,” said Sec. Mnuchin. (Bloomberg Tax, Dec. 12)Funding for the National Flood Insurance and EB-5 investor programs are currently operating under a four-week spending bill signed by President Trump on Nov. 21. If a new round of funding is not agreed to by policymakers, the programs will shutdown on Dec. 21. (Roundtable Weekly, Nov. 22)The spending agreement would avert a shutdown by spreading nearly $1.4 trillion in discretionary government spending over a dozen appropriations bills for FY2020, which ends Sept. 30, 2020. The specific bills are likely to be unveiled Monday. (BGov, Dec. 13)The contentious issue of funding for border wall along the Mexican border, which led to a 35-day government shutdown last year, is reportedly part of an agreement on immigration issues. The spending deal would provide the same funding for the border wall that Congress offered for fiscal year 2019 – $1.375 billion, instead of $5 billion requested by the White House. (Roll Call, Dec. 12)A flurry of policy developments this week may result in lawmakers agreeing to the massive funding bill, a U.S.-Mexico-Canada trade agreement and a Phase One Deal with China.As lawmakers work to assemble the final spending package to pass by Dec. 20, several other measures – including a seven-year TRIA reauthorization and tax extenders – may compete for inclusion in the final “omnibus” bill.Roundtable Urging TRIA ReauthorizationOn Dec. 11, The Roundtable and a diverse business coalition sent a letter to all members of the Senate urging action on the Terrorism Risk Insurance Program Reauthorization Act of 2019 (S. 2877) as soon as possible. The Senate bill would extend TRIA for seven years, “allowing the program to continue providing vital economic protections against acts of terrorism that companies throughout the nation rely on,” according to the letter. The letter also notes, “Since its initial enactment in 2002, TRIA has served as a vital public-private risk sharing mechanism, ensuring that private terrorism risk insurance coverage remains available to commercial businesses, educational institutions and non-profit organizations at virtually no cost to the taxpayer.”A seven-year TRIA reauthorization passed the House on Nov. 18 (H.R. 4634) as the Senate Banking Committee advanced a similar bill (S. 2877) on Nov. 20. (Roundtable Weekly, Nov. 22)Last week, The Roundtable and its partners in the Coalition to Insure Against Terrorism (CIAT) urged Senators to include the TRIA reauthorization in a possible year-end spending package. (CIAT Letter, Dec. 2)Roundtable President and CEO Jeffrey DeBoer commented on the importance of TRIA in a Dec. 12 Bisnow article on “5 Policy Issues That Could Affect Commercial Real Estate In 2020.”"The reason it's important is you want your assets, the property and potential damage to be covered by insurance, but you also want the people in your building to be covered by insurance if, God forbid, something happened," DeBoer said. "If you don't have all risk coverage on your asset, typically it's very difficult to get financing for that asset from a bank or pension fund.""We're optimistic we can get it done before the end of 2019," he said. "If that does not happen, our top priority in 2020 will be to extend TRIA and maintain that Act." (Bisnow, Dec. 12)House Majority Leader Steny Hoyer (D-MD) said yesterday that a final omnibus containing the spending bill and other measures may be grouped into two packages and voted on Tuesday. Congress is expected to adjourn for the holiday recess by Dec. 20. (The Hill, Dec. 12) # # #

Opportunity Zones

December 13, 2019

Roundtable Weekly

White House Reviewing Final OZ Tax Regulations; Senate Legislation Introduced on Reporting Requirements

Opportunity Zones OZs

The White House’s Office of Management and Budget (OMB) is reviewing a set of highly anticipated final rules for the Opportunity Zones program created by the 2017 Tax Cuts and Jobs Act, according to a Dec. 6 OMB notice. The rules will address requirements of qualified opportunity funds that invest in opportunity zones (OZs).OZ investors are looking for clarifications on a number of open issues that will help qualified opportunity funds drive economic development in economically distressed communities nationwide.Treasury released its first set of proposed OZ rules in Oct. 2018, followed by expanded guidance in April 2019. The Treasury rulemakings have reduced investor uncertainty and encouraged capital formation, job creation and productive real estate. However, certain questions remain that warrant additional guidance, such as whether an existing owner can retain a carried interest when selling property to a related Opportunity Fund. The Real Estate Roundtable on July 1, 2019 submitted recommended clarifications for final OZ tax regulations, which may be issued by the Treasury Department before the end of this year (Roundtable Comment letter, July 1). The Roundtable also submitted prior letters on OZ tax incentives in June 2018 and December 2018.) In Congress, GOP senators on Dec. 6 introduced a bill that would expand information reporting requirements for OZ investments, including requiring investors to report the number of full-time workers employed by opportunity zone projects. (BGov, Dec. 8 and Sen. Marco Rubio news release, Dec. 9)The Senate’s “Improving and Reinstating the Monitoring, Prevention, Accountability, Certification, and Transparency Provisions of Opportunity Zones (IMPACT) Act” would “… help show communities and investors that the initiative is working, as well as help root out any fraud or abuse,” according to Sen. Tim Scott (R-SC), the lead sponsor of the bill. (The Hill, Dec. 6)Democratic lawmakers in the Senate and House have also recently proposed measures that would require more reporting requirements about Opportunity Zone investments – as well as reform the tax incentive, and formally investigate recent allegations of wrongdoing related to the program. (Roundtable Weekly, Nov. 8)The Roundtable has strongly supported the Opportunity Zone tax incentives since their enactment as a potential powerful catalyst for transformative real estate investment in economically struggling parts of the country. (GlobeSt.com interview with Roundtable President and CEO Jeffrey DeBoer and Roundtable SVP and Counsel Ryan McCormick –July 16, 2018).Through its Tax Policy Advisory Committee and Opportunity Zone Working Group, The Roundtable will continue to contribute to the implementation and oversight of the Opportunity Zone incentives, offering constructive comments and recommendations to Members of Congress and Treasury officials. # # #

Partnership Regulations

December 13, 2019

Roundtable Weekly

IRS Delays and Modifies Several New Partnership Tax Reporting Requirements

Partnership Liability Roundtable Weekly Tax Policy

Responding to concerns raised by The Real Estate Roundtable and others, the Internal Revenue Service (IRS) on Dec. 9 issued Notice 2019-66 modifying and postponing several proposed changes to partnership tax reporting requirements. (Bloomberg Tax, Dec. 9)The Real Estate Roundtable on Nov. 18 sent a letter to Treasury and the IRS urging the government to postpone certain reporting requirements in the new partnership tax return forms for 2019. The letter encouraged the IRS to seek formal input from stakeholders regarding specific items. The Roundtable noted in the letter that the reporting requirements as originally proposed were generating significant taxpayer uncertainty; could lead taxpayers to adopt inconsistent approaches to computing information; and may result in more harm than good. (Roundtable letter, Nov. 18)Twelve other national real estate organizations sent a joint letter on Nov. 22 seeking a delay in the requirements and requesting a comprehensive comment processThis week’s IRS Notice makes the following changes:The requirement to report partners’ shares of partnership capital on the tax basis method is delayed until 2020 (for 2019, capital accounts will be reported consistent with the reporting requirements in 2018);The requirement for partnerships to report to partners information about separate “Section 465 at-risk activities” is delayed until 2020;The Notice clarifies the requirement for partnerships and other persons to report a partner’s share of “net unrecognized Section 704(c) gain or loss” by defining this term for purposes of the reporting requirement. It exempts publicly traded partnerships from the requirement to report their partners’ shares of net unrecognized Section 704(c) gain or loss; andIt also provides relief from certain reporting penalties imposed under the tax code for taxpayer who follow the Notice. These penalties include the failure to furnish correct payee statements; the failure to file a partnership return that shows required information; and the failure to furnish information required on a Schedule K-1.Significant changes were made to the partnership audit rules in 2015, in response to widespread government concerns related to the challenges of administering partnership tax rules. The Roundtable and members of its Tax Policy Advisory Committee (TPAC) have actively contributed to the development and modification of partnership audit reform legislation. (Roundtable Weekly, Jan. 5, 2018 and October 11, 2019)TPAC will continue to engage IRS and Treasury officials about timely stakeholder concerns with regulatory issues affecting real estate and the economy.# # #

Tax Policy

December 13, 2019

Roundtable Weekly

Year-End Tax Package Uncertain; House Ways & Means Votes to Suspend Cap on State and Local Tax Deduction

SALT Tax Policy

[Above: Members of the House Ways and Means Committee, including Chairman Richie Neal (D-MA), top center, and Ranking Member Kevin Brady (R-TX), top right.]Prospects for a year-end tax bill are uncertain as congressional leadership and the Trump Administration expect to reveal details of a nearly $1.4 trillion FY2020 spending deal next week. Meanwhile, the House Ways and Means Committee on Dec. 11 approved a temporary suspension of the $10,000 deduction cap on state and local taxes (SALT) enacted in the 2017 tax reform bill.The Restoring Fairness for States and Localities Act (H.R. 5377) passed Ways and Means on a mostly party line vote of 24-17. The bill would raise the SALT deduction cap from $10,000 to $20,000 for married couples in 2019 and repeal the limit entirely for 2020 and 2021.The measure’s costs would be offset by an increase in the top individual tax rate from 37 percent to its pre-2017 tax law level of 39.6 percent through 2025, when tax provisions in the 2017 tax overhaul are set to expire. (The Hill, Dec. 11)A description of the proposed changes to the SALT cap and top rate bracket are available from the Joint Committee on Taxation. H.R. 5377 is expected to pass the House if it gets a vote next week on the House floor. The House Rules Committee has announced a hearing on the bill for December 16. However, the GOP-led Senate is unlikely to consider the legislation. (BGov, Dec. 11)If any tax measures are to be enacted this year, they would likely have to ride on an “omnibus” spending bill, which may be broken into two packages for votes next week before Congress is scheduled to recess on Dec. 20.Disagreements between House Democratic and Senate Republican tax-writers over what measures should have priority, combined with the large number of tax items competing for consideration, are complicating prospects for agreement. Senate Majority Whip and Finance Committee member John Thune (R-SD) on Dec. 12 said, “At the moment, nothing’s happening.” (Deloitte Tax News & Views, Dec. 13)Senate Finance Committee member Sherrod Brown, (D-OH) commented to reporters Dec.12 about what tax measures are under negotiation. “It’s still all over the place,” Brown said. Committee member Sen. Rob Portman (R-OH) stated, “I’m frustrated because I don’t think we have an agreement yet on anything.” (Tax Notes, Dec. 13)A summary of the expired and expiring tax deductions, credits, and incentives that would be renewed through 2020 under the Taxpayer Certainty and Disaster Relief Act (H.R. 3301), which the House Ways and Means Committee approved on June 20, is available from Deloitte Tax LLP.# # #

December 11, 2019

Policy Comment Letter

2019-12-11 TRIA letter Joint Trades S 2877

Policy Landscape

December 6, 2019

Roundtable Weekly

Tax Measures and TRIA Among Year-End Policy Rush

EB5 National Flood Insurance Program NFIP Policy Landscape Tax Policy

Congress faces a Dec. 20 deadline to fund the government or risk a shutdown as the impeachment process continues in the House, with a likely trial in the Senate beginning in January.Funding for the National Flood Insurance and EB-5 investor programs are currently operating under a four-week spending bill signed by President Trump on Nov. 21. Without a spending bill or a “Continuing Resolution” (CR) extending current funding, the programs will shutdown on Dec. 21 until Congress reaches a resolution. (Roundtable Weekly, Nov. 22)Several legislative measures – including an end-of-year tax policy bill and reauthorization of the Terrorism Risk Insurance Act (TRIA) – may compete for inclusion in a must-pass “omnibus” spending package. Yet lawmakers may not have enough time to complete fiscal 2020 appropriations before current funding runs out in two weeks. Another CR is a possibility before Congress breaks for the holiday. The contentious issue of appropriating Department of Homeland Security (DHS) funds for a wall on the border with Mexico remains a sticking point in negotiations. This same issue led to a historic, 35-day government shutdown from Dec. 22, 2018 to Jan. 25, 2019.This year, the Trump Administration has requested $8.6 billion for Fiscal Year 2020 to build the wall – and an additional $3.6 billion to restore military base funding that was previously transferred toward partial wall construction. An administration official said President Trump will not sign any nondefense bill until funding for DHS and a border wall are resolved. (CQ, Dec. 4)Among the legislative measures of importance to commercial real estate that may be included in a year-end omnibus are tax extenders and technical corrections. Negotiations on a tax package and extenders have been difficult, according to Senate Finance Chairman Chuck Grassley (R-IA). "It's different this year from other years," he said. (Politico, Dec. 5)House Ways and Means Committee Chairman Richie Neal (D-MA) said yesterday that some technical corrections to the 2017 tax overhaul law could become part of a year-end tax bill. “I’m interested in some technical corrections,” Neal said, adding that they could include a fix to an error that prevents restaurants and retailers from immediately expensing the cost of interior renovations. (BGov Tax, Dec. 5)A top legislative priority for CRE that is also outstanding is a seven-year TRIA reauthorization, which passed the House on Nov. 18 (H.R. 4634) as the Senate Banking Committee advanced a similar bill (S. 2877) on Nov. 20. (Roundtable Weekly, Nov. 22)The Real Estate Roundtable is working with its partners in the Coalition to Insure Against Terrorism (CIAT) to urge Senators to include the TRIA reauthorization in a possible year-end spending package. CIAT sent a letter this week to all Senators urging them to co-sponsor S. 2877 and secure its passage before the end of 2019. (CIAT Letter, Dec. 2)The Roundtable and its CIAT partners continue to meet with Senate offices to encourage increased support for S. 2877. Sen. Thom Tillis (R-NC) is the lead sponsor, with 17 bipartisan cosponsors. As Congress attempts to juggle many legislative priorities – including an updated version of a trade agreement with Mexico and Canada (USMCA) and a bill on prescription drug costs – the pressure to pass multiple appropriations bills funding government agencies may lead to a Continuing Resolution extending current funding.House Majority Leader Steny Hoyer (D-MD) told reporters this week, "I don't want to contemplate having bills pushed over [into 2020] because we can't get agreement.” (CQ, Dec. 4)# # #

Affordable Housing

December 6, 2019

Roundtable Weekly

HUD Requests Stakeholder Comments on Barriers to Affordable Housing

Affordable Housing

[Left to right: Roundtable Chair Debra Cafaro (Ventas, Inc), HUD Secretary Ben Carson and Roundtable President and CEO Jeffrey DeBoer discuss affordable housing issues during The Roundtable's Fall 2019 Meeting.] The U.S. Department of Housing and Urban Development (HUD) on Nov. 22 published a Request for Information (RFI) seeking public comment on Federal, State, local, and Tribal laws, regulations, land use requirements, and administrative practices that may pose barriers to affordable housing development. HUD is also asking stakeholders for their recommendations about innovative practices that promote increased housing supply. (HUD news release, Nov. 26 and HousingWire, Nov. 27) The RFI is part of an effort undertaken by HUD Secretary Ben Carson as chair of the White House Council on Eliminating Regulatory Barriers to Affordable Housing. The Council’s eight Federal member agencies are tasked with engaging governments at all levels and private-sector stakeholders on ways to increase the housing supply and access to affordable housing. (Roundtable Weekly, June 28) HUD’s outreach to stakeholders is a result of President Trump’s June 25 Executive Order, “Establishing a White House Council on Eliminating Regulatory Barriers to Affordable Housing.” State and local law barriers identified in the Order include overly restrictive zoning and environmental laws, rent regulations, excessive energy and water efficiency mandates, impediments to higher-density projects, time-consuming permit procedures, complex labor requirements, and inordinate development impact fees. (White House Fact Sheet, June 25) Responses to HUD’s RFI are due by Jan. 21, 2020. The Roundtable will submit comments after finalizing a multi-faceted housing availability and affordability strategy recommending policies that encourage: • State and local governments to adopt and implement Yes in My Backyard (“YIMBY”) land-use policies such as high-density zoning and expanding by-right multifamily zoned areas, to entitle affordable housing projects; • Development of low-income and workforce housing units as a priority when the U.S. government disposes under-utilized and surplus federal properties; • Construction of manufactured housing – the only form of housing regulated by a Federal building code that includes standards for health, safety, and energy efficiency – as a gateway that opens the door for homeownership for millions of families; • An assessment of how short-term rental platforms (like Air BnB and Vrbo) may reduce supplies of units otherwise available for long-term housing; • Mortgage underwriting standards that reduce barriers for first-time buyers with student loan debt to also qualify for federally-backed FHA loans geared toward low- and moderate-income borrowers; • Increased support for HUD’s Section 8 voucher program to assist very low-income, elderly, and disabled Americans to afford housing in the private market; and • Modernizing the role of Fannie Mae and Freddie Mac through GSE reform, to focus their mission on providing liquidity in mortgage markets geared toward low-income and middle-class home ownership. On November 1, Roundtable President and CEO Jeffrey D. DeBoer raised these priorities in a housing affordability summit at the White House with HUD Secretary Carson and other industry leaders. DeBoer’s comments followed on the heels of Secretary Carson’s remarks to The Roundtable several days prior during its 2019 Fall Meeting. (Roundtable Weekly, November 1, 2019). Affordable housing will be a focus of discussion during The Roundtable’s Jan. 28-29 State of the Industry Meeting in Washington, DC. # # #

Industry Award

December 6, 2019

Roundtable Weekly

The Roundtable Recognized as Leading Industry “Influencer” by Real Estate Forum Magazine

The Real Estate Roundtable is featured as one of the industry’s “Influencers in Marketing and Communications” in the November / December issue of Real Estate Forum magazine published this week. Managing Editor Erika Morphy offers her perspective on the 24 individuals, 10 marketing organizations, 7 company teams and 1 trade group (The Roundtable) profiled in the issue. “We like to think these lists are special to the industry. Why influencers at all? That is simple: because even though commercial real estate is all about physical buildings and the trends that govern their supply and demand, it also is very much a relationship-oriented space. Who you know, who you’ve heard about and who you would like to know is the name of the game.” Morphy writes. (Digital issue and GlobeSt. article, Dec. 3) The Real Estate Forum article notes that “The Roundtable’s leaders seek to ensure a cohesive industry voice is heard by government officials and the public, concerning real estate’s important role in the global economy.” The Forum report also mentions The Roundtable’s successes related to the Tax Cuts and Job Acts of 2017 and the 20% deduction for qualified pass-through businesses – in addition to its continued work on Opportunity Zones with the Treasury Department and IRS. The report adds, “Under the leadership of Roundtable chair, Debra Cafaro, the organization is also committed to building an industry network that reflects the diversity of the membership.” Roundtable President and CEO Jeffrey DeBoer commented on the recognition. “We are proud to be named as a leading industry Influencer by Real Estate Forum. The Roundtable continually strives to clearly communicate our views on policy issues affecting CRE to our membership, policymakers and throughout the industry. Our communications approach reflects how we present the industry’s positions to lawmakers in person – in a balanced, nonpartisan way, supported by detailed analysis on legislative and regulatory proposals.” The Roundtable will debut its 2020 National Policy Agenda publication during its State of the Industry Meeting on Jan. 28-29 in Washington, DC. # # #

Terrorism Risk Insurance Program

November 22, 2019

Roundtable Weekly

House Passes Seven-Year TRIA Reauthorization; Senate Banking Committee Advances Similar Bill

Terrorism Risk Insurance Program TRIA

A seven-year reauthorization of the Terrorism Risk Insurance Act (TRIA) passed the House this week (H.R. 4634) as the Senate Banking Committee advanced a similar bill (S. 2877). Both bills would reauthorize the Terrorism Risk Insurance Program (TRIP) through December 31, 2027.The House passed the Terrorism Risk Insurance Program Reauthorization Act of 2019 (H.R. 4634) on Nov. 18 by a vote of 385–22. The measure was previously passed unanimously (57-0) by the House Financial Services Committee on Oct. 31. (Roundtable Weekly, Nov. 1)House Financial Services Committee Chairwoman Maxine Waters (D-CA) stated on the House floor before the chamber vote, “Congress [originally] passed TRIA to ensure that terrorism risk insurance coverage would remain available and affordable. And since that time the program has been effective at doing just that … Treasury data also demonstrates that TRIA is important across America and not just in densely populated urban areas. In fact, they take up rate is higher in the Midwest than it is in the Northeast. I would urge all my colleagues to support this important legislation.”In the Senate, a seven-year extension of the Terrorism Risk Insurance Program (TRIP) was advanced by the Banking Committee on Nov. 20. The reauthorization bill (S. 2877) was introduced last week by Sens. Thom Tillis (R-NC) and Tina Smith (D-MN), along with 13 bipartisan cosponsors. The bill now goes to the full Senate, which has not yet scheduled a vote.Chairman Crapo commented during the markup on the importance of TRIP which is scheduled to expire at the end of 2020. “Since its establishment in 2002, the Program has been reauthorized three different times, in 2005, 2007 and 2015. Given the Program’s importance to our nation’s economy, regardless of region or state, and the broad bipartisan support in both the House and Senate, it makes sense for the Banking Committee to consider the Program’s reauthorization now,” Crapo said.The similar approach of the House and Senate bills increases the prospect that final passage of a TRIA reauthorization may be included as part of an end-of-the-year funding bill, although prospects of that outcome are uncertain. Roundtable Chair Debra Cafaro (Chairman and Chief Executive Offer, Ventas Inc.) commented, “The Real Estate Roundtable strongly supports a seven-year reauthorization of TRIA to ensure that terrorism risk insurance coverage will remain available and affordable . The Roundtable will continue to work with Senate and House policymakers and with the Coalition to Insure Against Terrorism to encourage enactment of this top legislative policy priority as soon as possible to add certainty to the marketplace and reassure stakeholders across many industries who rely on the availability of terrorism insurance coverage for their businesses. Passage will promote the creation of jobs, enable new projects to proceed, and protect state pension fund investments and lender portfolios.”# # #

Federal Funding

November 22, 2019

Roundtable Weekly

President Trump Signs Spending Bill to Fund Government Until Dec. 20

EB5 Flood Insurance

Congress this week passed a four-week spending bill that was by signed President Trump last night to fund the government beyond Nov. 21 and avoid a shutdown.The Continuing Resolution (CR) locks in current funding levels for government operations until Dec. 20 – including the National Flood Insurance and EB-5 investment programs. The measure, passed by the House on Tuesday and the Senate on Thursday, gives Congress three weeks after the Thanksgiving recess to agree on allocating $1.37 trillion for the 2020 fiscal year, which began Oct. 1. (Roundtable Weekly, Sept. 27)To avoid future stopgap measures for FY2020, policymakers will need to settle the contentious issue of funding for a wall along the U.S.-Mexico border. Last Dec. 22, the government shutdown for 35 days when Congress and President Trump could not reach agreement on border-security funding for a wall. (Wall Street Journal, Nov. 22)Senate Appropriations Chairman Richard Shelby (R-AL) commented on recent efforts to reach an agreement for funding the Department of Homeland Security, which oversees border security. “We gotta deal with the wall, too," Chairman Shelby said this week. "The wall is still there." (Politico, Nov. 21)The CR’s extension for the EB-5 investment program until Dec. 20 does not include any legislative reforms. However, long-anticipated regulatory changes to key elements of the EB-5 regional center program took effect Nov. 21. (Roundtable Weekly, March 8, 2019). Negotiations to modernize the investment visa program are expected after the Thanksgiving recess in light of a comprehensive EB- reform bill introduced earlier this month (Roundtable Weekly, November 8, 2019). The Real Estate Roundtable, U.S. Chamber of Commerce, EB-5 Investment Coalition, and other real estate organizations sent a letter on Nov. 15 in support of the bipartisan Immigrant Investor Program Reform Act (S. 2778) – sponsored by Senate Judiciary Chairman Lindsey Graham (R-SC), Democratic Leader Charles Schumer (D-NY), and Sens. Mike Rounds (R-SD) and John Cornyn (R-TX).The Senate is scheduled to return on Dec. 2 and the House on Dec. 3.# # #

Q1 Sentiment Index

November 22, 2019

Roundtable Weekly

CRE Execs Report Solid Q4 Market Fundamentals Ease Concerns Over Economic Uncertainty and Geopolitics

Economic Growth amp CRE Quarterly Sentiment Index

Commercial real estate executives report solid fundamentals are countering concerns about economic uncertainty and geopolitics, maintaining an optimistic outlook for market conditions in 2020, according to The Real Estate Roundtable’s 2019 Q4 Economic Sentiment Index released today. The Q4 Sentiment Index dropped one point from the previous quarter to register a score of 49, which shows a positive view regarding the U.S. economy and real estate market conditions. The Overall Economic Sentiment Index is scored on a scale of 1 to 100 by averaging Current and Future Indices and a score of approximately 50 is viewed as positive.For Q4, the Current-Conditions Index of 53 remains the same as the previous quarter. The Q4 Future-Conditions Index of 45 decreased three points from Q3. The Overall Sentiment Index has registered between 49 and 77 every quarter since Q3 2009 – except for Q1 2019 (45 score) and Q4 2016 (48 score).“Our Q4 Sentiment Index shows that macro real estate markets remain fundamentally sound and reasonably leveraged, with balanced supply and demand,” said Real Estate Roundtable President and CEO Jeffrey DeBoer (above). “The markets continue to benefit from business and consumer spending, encouraged by low unemployment, rising wages and low energy prices.”The report’s Topline Findings include:The Real Estate Roundtable Q4 2019 Economic Sentiment Index registered a score of 49 – a one-point decrease from the previous quarter. Survey participants remain confident in stable market fundamentals, but are concerned about recession talk, troubled international markets and politics. Sixty-two percent of Q4 survey respondents believe markets conditions will be about the same or better in 2020. Approximately 82% of respondents see today’s market as about the same or better compared to the same time last year. More than 65% of respondents anticipate asset values to maintain their current level or be somewhat higher going into 2020. Additionally, half also suggested asset values increased over the past year. Respondents consistently suggested the number of buyers for assets was decreasing, a factor which is creating challenging selling and buying circumstances. Most respondents feel debt and equity capital are readily available for quality investments. The availability of capital and refinancing opportunities are offsetting a decline in buyers/investors in some markets.DeBoer added, “Real estate leaders cautiously await the outcome of several unpredictable influences on the global and domestic economies. Despite the uncertainty, U.S. real estate markets have shown consistent stability, which positions them well to withstand potential economic gyrations in the future.” He also said, “Washington policymakers need to keep their focus on policies that encourage long-term job creation and support economic growth in local communities.”Data for the Q4 survey was gathered in October by Chicago-based FPL Associates on The Roundtable’s behalf. For the full survey report, visit www.rer.org/q4-2019-sentiment-index-report# # #

Energy and Tax Policy, Roundtable Weekly

November 22, 2019

Roundtable Weekly

Roundtable Submits Comments to House Climate Crisis Committee; House Democrats Unveil Green Energy Tax Draft

Climate Policy Energy Policy Roundtable Weekly Tax Policy

The Roundtable submitted energy and climate policy recommendations to the House Select Committee on the Climate Crisis on Thursday, while members of the House Ways and Means Committee unveiled a draft legislative package of more than 20 energy tax incentives – including incentives to promote commercial and residential building energy efficiency. The Roundtable’s climate letter submitted Nov. 21 responds to a request for information from the Select Committee. This panel has no authority to write legislation but is authorized to study climate change and issue legislative policy recommendations (expected by March 31, 2020).In its study and review of climate policy recommendations, the Select Committee has held a series of hearings featuring various stakeholders – including one focused on “Cleaner, Stronger Buildings.” (Roundtable Weekly, October 25, 2019) .The Roundtable’s comments to the Select Committee highlighted the priorities advocated by its Sustainability Policy Advisory Committee (SPAC) to: Improve the model building energy codes process by enacting the Portman-Shaheen Energy Savings and Industrial Competitiveness (ESIC) Act. (Roundtable Weekly, September 27, 2019) Enhance EPA’s voluntary ENERGY STAR incentive programs for both commercial buildings and tenants.Improve the quality and reliability of the national data collected by the federal Commercial Building Energy Consumption Survey.Create meaningful accelerated depreciation periods to encourage investments in high performance equipment to retrofit existing commercial and multifamily buildings. (Roundtable Weekly, May 10, 2019)Foster public-private partnerships to finance safety and resiliency improvements to the electricity grid, the natural gas pipeline network, and other energy infrastructure assets.Meanwhile, a discussion draft of the Growing Renewable Energy and Efficiency Now (GREEN) Act was released Nov. 19 by the chairman of the House Ways and Means Subcommittee on Select Revenue Measures – Rep. Mike Thompson (D-CA). The GREEN Act would extend and revise a number of expired tax incentives, including provisions aimed at encouraging taxpayers to improve the energy efficiency of homes and commercial buildings. Specifically, the discussion draft includes:An updated and enhanced deduction for capital expenditures on energy-efficient commercial building property (section 179D)An expanded tax credit for the developers of new, energy-efficient homes (section 45L)A modified tax credit for energy-efficient improvements to existing homes (section 25C)Under the bill, the revised tax incentives would be available through 2024. Following release of the draft legislation, House Ways and Means Committee Chairman Richie Neal (D-MA) stated, “The climate crisis requires bold action, and I’m pleased that we’re using the legislative tools at Ways and Means’ disposal to create green jobs, reduce carbon emissions, and help heal our planet.” We look forward to hearing from stakeholders to ensure this bill is effective in helping improve energy efficiency and eliminating carbon emissions.”Prospects for passing the GREEN Act are unclear as it is a Democratic initiative that currently lacks Republican support. Additionally, The Roundtable and coalition partners continue to lay the research and data foundation for a new tax incentive that would provide accelerated depreciation for high performance, HVAC, lighting, windows, and other equipment to retrofit existing commercial and multifamily buildings, known as “E-QUIP.” (See Roundtable Weekly, May 10, 2019). The coalition’s objective is for bipartisan introduction of an E-QUIP bill in early 2020.The Roundtable’s Tax Policy Advisory Committee (TPAC) plans to analyze the proposed measures and respond to any eventual energy tax legislation that may be introduced in the New Year.# # #

Climate Risk Reporting

November 21, 2019

Policy Comment Letter

The Roundtable Submits Policy Comments to House Climate Crisis Committee

Climate Policy, Climate Risk Reporting, Reporting on Climate Risks,

November 19, 2019

Policy Comment Letter

2019-11-19 – CIAT Letter SBC Markup November 2019

November 19, 2019

Policy Comment Letter

2019-11-19 RER-TRIA Senate Banking Committee Letter

November 18, 2019

Policy Comment Letter

2019-11-18 RER-TRIA House Letter

November 18, 2019

Policy Comment Letter

2019-11-18 RER-1065 Comment Letter

Roundtable Weekly, Terrorism Risk Insurance Program

November 15, 2019

Roundtable Weekly

TRIA Reauthorization Legislation: Seven-Year Extension Introduced in Senate; Vote on Similar House Bill Scheduled Next Week

Terrorism Risk Insurance Program TRIA

A bipartisan, seven-year TRIA reauthorization bill – the Terrorism Risk Insurance Program Reauthorization Act of 2019 (S. 2877) – was introduced in the Senate yesterday by Thom Tillis (R-NC) along with 15 original cosponsors – including Senate Banking Committee Chairman Mike Crapo (R-ID) and Ranking Member Sherrod Brown (D-OH).The Senate bill is similar to a House measure that would reauthorize the Terrorism Risk Insurance Program through December 31, 2027. (Roundtable Weekly, Nov. 1). Both bills preserve taxpayer reforms included in the Terrorism Risk Insurance Program Reauthorization Act of 2015 and would also :* Align the timing of mandatory recoupment from private insurers by the federal government in the event of an act of terrorism covered by the Terrorism Risk Insurance Program with the seven-year extension of the Program;* Direct the Treasury Department in its biennial report on the Terrorism Risk Insurance Program and its effectiveness to include an evaluation of the availability and affordability of terrorism risk insurance, including specifically for places of worship; and* Direct the Government Accountability Office to analyze and address, and report on, the vulnerabilities and potential costs of cyber terrorism, adequacy of coverage under the Program, and to make recommendations for future legislative changes to address evolving cyber terrorism risks.Roundtable Chair Debra Cafaro (Chairman and Chief Executive Offer, Ventas Inc.) said, “The Roundtable is encouraged to see such positive momentum on TRIA legislation in both chambers of Congress. We will continue to work with policymakers on both sides of the aisle to communicate how this essential long-term reauthorization contributes to economic growth; avoids disruption to real estate capital flows; and ensures businesses of all types nationwide can obtain terrorism insurance well before the program’s scheduled expiration at the end of 2020.”The Senate Banking Committee will markup the bill on Wednesday, Nov. 20. While amendments are expected to be offered, the committee is expected to approve the bill on a bi-partisan basis.In the House, Majority Leader Steny Hoyer today addressed legislation that will be considered next week in a leadership colloquy on the House floor. “Madam Speaker, we will consider several bills on suspension of the rules including H.R. 4634 – the Terrorism Risk Insurance Program Reauthorization Act – a very significant and very bipartisan bill,” Hoyer said.Bills considered under suspension of rules are subject a 40-minute limit on debate; a prohibition against floor amendments; and a two-thirds vote of those present and voting for passage.The House Financial Services Committee on October 31 passed (57-0) the Terrorism Risk Insurance Program Reauthorization Act of 2019 (H.R. 4634). In addition to extending TRIA for seven years, H.R. 4634 would also require a study on the cyber terrorism market and expand an ongoing study to also determine the availability and affordability of TRIA coverage for places of worship. (Roundtable Weekly, Nov. 1).The Roundtable expects H.R. 4634 will pass the House next week as S. 2877 advances beyond the Senate Banking Committee.# # #

Beneficial Ownership & CRE

November 15, 2019

Roundtable Weekly

Industry and Business Coalitions Raise Concerns About Unintended Negative Consequences of Beneficial Ownership Legislation

Beneficial Ownership Corporate Transparency Act CTA FinCEN

As Congress strives to address the challenges of controlling the use of shell companies engaged in money laundering, tax evasion and terrorism financing, a number of legislative proposals are being considered that could impair capital formation and threaten important privacy protections for real estate. In two recent comment letters (Nov. 6 industry coalition letter and a Nov. 13 broad business coalition letter), The Roundtable and other organizations detail their concerns about the measures. As stated in the Nov. 6 industry letter to the Senate Banking Committee, “While well-intentioned, we believe the proposals currently under consideration that are designed to increase the transparency of the ownership structure of limited liability companies (LLCs) and real estate transactions would have negative, unintended consequences on the broader real estate market. Several of these bills would place a significant compliance burden on owners of small businesses classified as corporations and LLCs, subject these businesses to potentially harmful privacy breaches and expose them to excessive and punitive damages.”The letter also states, “While we support efforts to eliminate terrorism financing and money laundering, we remain concerned about the cost of imposing additional beneficial ownership reporting requirements on real estate partnerships and the extent to which these provisions could impair capital formation, threaten important privacy protections and increase compliance burden.”The four specific legislative measures under consideration in the House and Senate are: * On Oct. 22, the House passed the Corporate Transparency Act of 2019 (H.R. 2513) – introduced by Reps. Carolyn Maloney (D-NY) and Peter King (R-NY) – that would shift FinCEN reporting requirements from banks to the business community, requiring every business with fewer than 20 employees to register their beneficial owners.* Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings, Illicit Cash Act (S. 2563)* True Incorporation Transparence for Law Enforcement, TITLE Act, (S. 1889)* Corporate Transparency Act (S. 1978) The Financial Crimes Enforcement Network’s (FinCEN) Customer Due Diligence (CDD) rule became applicable on May 11, 2018. The CDD rule requires financial institutions to collect the beneficial ownership information of business customers when they open accounts. The congressional proposals would attempt to shift the reporting requirements from large banks – those best equipped to handle reporting requirements – to millions of small businesses – those least equipped to handle reporting requirements.A coalition, including The Roundtable, sent a letter June 10 to the committee's leadership opposing the Maloney-King bill. "This legislation would impose burdensome, duplicative reporting burdens on approximately 4.9 million small businesses in the United States and threatens the privacy of law abiding, legitimate small business owners," the letter states.In the Nov. 6 letter from six real estate organizations, concerns about several of the four bills address:* Unreasonable Lookback Reporting* Duplicative Reporting* Unclear Guidance* Access and Disclosure Raises Privacy Concern* Notification and Process for Compliance Untested* Severe and Punitive PenaltiesIn the Nov. 13 letter, the broader business coalition expresses strong opposition to Title IV of S. 2563 – the Senate’s Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act – introduced in June by Sens. Mark Warner (D-VA), Tom Cotton (R-AR), Doug Jones (D-AL) and Mike Rounds (R-SD). (Homeland Preparedness News, June 12).The Nov. 13 letter states, “Under this legislation, millions of small businesses would be required to register personally identifiable information with FinCEN, file updated reports within 90 days of any ownership changes, and file additional updated reports within a year of any ownership information changes, such as an expiration of a passport number or a change in address. Failure to comply with these reporting requirements could result in civil penalties of $500 per day up to $10,000, criminal penalties of up to 4 years in prison, or both.”The Roundtable is working with policymakers to stake out a balanced position on the beneficial ownership issue that would inhibit illicit money laundering activity, yet not place unnecessary costs and legal burdens on the real estate industry.# # #

Economic Growth - Travel & Tourism

November 15, 2019

Roundtable Weekly

Brand USA Reauthorization Bill Advanced by House Subcommittee

Travel amp Tourism

Legislation to reauthorize Brand USA – the organization that promotes the U.S. globally as a travel destination – easily cleared a markup by the House Energy and Commerce Subcommittee on Consumer Protection and Commerce on Nov. 14. Brand USA is a public-private partnership that attracts international travelers to the U.S. to encourage tourism spending at America's hospitality, retail, attraction and other properties. The marketing organization operates at no expense to taxpayers – private sector contributions fund the program, matched by U.S. government fees collected from foreign visitors who enjoy visa-free entry to the U.S. The federal portion of Brand USA funding is scheduled to expire in September 2020.Subcommittee Chairman Frank Pallone (D-NJ) during the House markup of The Travel Promotion, Enhancement, and Modernization Act (H.R. 3851) stated, “Tourism is critical to our economy and every one our communities. Overseas travelers spend more than their domestic counterparts—an average of $4,200 per trip. It is critical that we renew Brand USA as soon as possible.” (Rep. Pallone remarks, Nov.14)In the Senate, the Committee on Commerce, Science and Transportation passed the “Brand USA Extension Act” on July 24. S. 2203 would extend the federal cost-share until 2027, and increase the foreign traveler fees that pay for the federal portion. (Roundtable Weekly, August 9)The Real Estate Roundtable is part of the Visit U.S. Coalition which advocates for Brand USA reauthorization. The coalition, led by the U.S. Travel Association (USTA) and the American Hotel and Lodging Association, also includes the American Resort Development Association and the U.S. Chamber of Commerce. U.S. Travel Association Executive Vice President of Public Affairs and Policy Tori Barnes noted, “International visitation to the U.S. is flat at a time when global travel is booming, which means that we are leaving a huge opportunity for economic growth on the table. The situation would be far worse without Brand USA’s demonstrated effectiveness at bringing lucrative international visitor dollars to our shores, and House and committee leaders are to be commended for recognizing the urgency to renew Brand USA this year.” (USTA press release, Nov. 14)The importance of international travel to the domestic economy, job growth, and CRE was the focus of a panel discussion during The Roundtable's 2018 Annual Meeting. (Roundtable Weekly, June 15, 2018).The Visit U.S. Coalition is urging inclusion of a bipartisan Brand USA reauthorization bill in must-pass legislation before the end of the year.# # #

November 15, 2019

Policy Comment Letter

2019-11-15 EB-5 Letter

Affordable Housing

November 8, 2019

Roundtable Weekly

Senate Banking Committee Considers Legislation to Promote Affordable Housing; White House Hosts Housing Roundtable

Affordable Housing

The Senate Banking, Housing, and Urban Affairs Committee on Thursday held a hearing, "Examining Bipartisan Bills to Promote Affordable Housing Access and Safety," to discuss bipartisan legislation aimed at expanding access to affordable housing generally and improving safety conditions in federally-assisted housing specifically. Among the bills considered at the hearing were: the HUD Manufactured Housing Modernization Act (S.1804). This bill would confirm for state and local recipients of funding from the Department of Housing and Urban Development (HUD) (such as Community Development Block Grants), that manufactured housing is eligible for public dollars for construction and repair; and the Fostering Stable Housing Opportunities Act (H.R. 4300), which advanced unanimously by the House of Representatives’ Financial Services Committee in September. This bill would authorize HUD to allocate Section 8 housing choice vouchers directly to any public housing agency that aims to assist youths aging out of foster care and at risk of losing their housing safety net. Mark Yost (CEO, Skyline Champion Corp.) testified on behalf of the Manufactured Housing Institute (“MHI”) in support of S. 1804. He stated that increased construction costs combined with labor shortages render manufactured housing a logical solution to help increase affordable housing options. (Mark Yost Testimony) The Roundtable advocates that safe, decent and affordable housing is essential to the well-being of America's families, communities and businesses. The Roundtable is developing a multi-faceted strategy and is assessing policies such as those that encourage: State and local governments to adopt and implement Yes in My Backyard (“YIMBY”) land-use policies to entitle affordable housing projects, such as high-density zoning and expanding by-right multifamily zoned areas; Development of low-income and workforce housing units as a priority when the U.S. government disposes under-utilized and surplus federal properties; Construction of manufactured housing – the only form of housing regulated by a Federal building code that includes standards for health, safety, and energy efficiency – as a gateway that opens the door for homeownership for millions of families; Increased support for HUD’s Section 8 voucher program to assist very low-income, elderly, and disabled Americans to afford housing in the private market; and Modernizing the role of Fannie Mae and Freddie Mac through GSE reform, to focus their mission on providing liquidity in mortgage markets geared toward low-income and middle-class home ownership. On November 1, Roundtable President and CEO, Jeffrey D. DeBoer, raised these priorities in a housing affordability summit at the White House with HUD Secretary Ben Carson and other industry leaders. DeBoer’s comments followed on the heels of Secretary Carson’s remarks to The Roundtable several days prior at its 2019 Fall Meeting. (Roundtable Weekly, November 1, 2019). The Roundtable will continue to work with our industry partners, the Administration, and Congress to implement a multifaceted strategy that addresses the nation’s housing affordability crisis. # # #

Opportunity Zones

November 8, 2019

Roundtable Weekly

Lawmakers Seek Greater Opportunity Zone Oversight and Information Reporting, Float Possible Reforms

Opportunity Zones OZs

In response to allegations that the Treasury Secretary improperly intervened in the designation of certain census tracts as Opportunity Zones, key Democratic lawmakers put forward proposals this week to enhance Opportunity Zone information reporting, reform aspects of the tax incentives, and formally investigate the reports of wrongdoing.The allegations, published in the New York Times, have been denied by both Treasury Secretary Steven Mnuchin and Michael Milken, the implicated private investor. (Bloomberg, Oct. 29, 2019) (Letter from Michael Milken to the Milken Institute Community)On Monday, the Chairman of the House Ways and Means Committee Richie Neal (D-MA) and the Ranking Democrat on the Senate Finance Committee Ron Wyden (D-OR) announced they were launching an investigation to determine “whether political appointees interfered in the process to potentially steer millions in tax breaks to longtime associates.” (Letter to Treasury Secretary Mnuchin requesting a wide range of documents and records.)The same day, Chairman Neal, Senator Wyden, Ways and Means Oversight Subcommittee Chairman John Lewis (D-GA), and Senator Cory Booker (D-NJ) sent a letter asking the Government Accountability Office (GAO) to collect and analyze information about how the Opportunity Zones incentive has been implemented by Treasury and the IRS, how census tracts were designated as Opportunity Zones, what compliance measures were used to ensure adherence to the law, and how the Treasury Department can measure the effectiveness of the tax incentive.Just two day later, on Wednesday, Senator Wyden introduced the Opportunity Zone Reporting and Reform Act (S. 2787). Under the bill, in addition to requiring greater taxpayer reporting, certain previously certified census tracts would no longer qualify as Opportunity Zones. Several types of real estate assets would be blacklisted and ineligible for investment (e.g., self-storage property, stadiums, casinos). In the case of opportunity funds that are renovating or rehabilitating existing structures, the bill would increase the level of new investment required to qualify for benefits.The Wyden bill would exclude multifamily housing as an eligible Opportunity Zone investment unless 50 percent or more of the housing units are rent-restricted and occupied by tenants whose income is 50 percent or less of the area median income. (Detailed Summary)If enacted, the restriction on multifamily housing could have a profound negative impact on future Opportunity Zone investment. New research indicates that multifamily construction starts represented over one-half (53.2%) of the total commercial real estate investment in Opportunity Zones over the last 18 months. (CBRE, Multifamily Development: A Bright Spot in Opportunity Zone Initiative, Nov. 6, 2019)Also on Wednesday, Representatives Ron Kind (D-WI), Mike Kelly (R-PA), and Terri Sewell (D-AL) unveiled bipartisan draft legislation to enhance reporting requirements for opportunity funds. The Opportunity Zone Accountability and Transparency Act would require opportunity funds to submit annual information reports that would be publicly available. In the case of real estate investments, funds would report information such as: the aggregate amount invested, structures’ square footage, the number of residential units, the number of low-income residential units, and the number of employees, Failure to report information accurately could trigger a penalty up to $200,000. Since its enactment, The Real Estate Roundtable has strongly supported the Opportunity Zone tax incentives as a potential powerful catalyst for transformational real estate investment in economically struggling parts of the country. Through its Tax Policy Advisory Committee and Opportunity Zone Working Group, The Roundtable has played an active role throughout the lengthy rulemaking process, offering constructive comments and recommendations to Treasury officials. (GlobeSt.com interview with Roundtable President and CEO Jeffrey DeBoer) (Roundtable Weekly, Dec. 21, 2018) # # #

EB-5

November 8, 2019

Roundtable Weekly

EB-5 Reform Bill Introduced in Senate; DHS Regulations Scheduled to Take Effect November 21

EB5

A comprehensive legislative overhaul of the EB-5 investment program was introduced in the Senate on Tuesday – as both the program’s expiration and the effective date for new agency regulations are expected on November 21.The Immigrant Investor Program Reform Act (S. 2778), sponsored by Senators Mike Rounds (R-SD), Judiciary Committee Chairman Lindsey Graham (R-SC), and John Cornyn (R-TX), would extend the EB-5 regional center program until September 30, 2025. The bill includes a comprehensive suite of long overdue measures to deter fraud and optimize national security protections, in the context of inbound foreign investment capital that helps finance U.S. economic development and spur American job growth. Key elements of S. 2778 include provisions to: Establish an EB-5 Integrity Fund to provide rigorous program oversight, to be funded by regional center participants;Provide DHS with improved investigative tools to ensure that an investor’s funds are derived from legitimate and lawful sources;Clarify DHS’s authority to deny or revoke immigrant investor petitions for reasons including fraud, misrepresentation, or national security concerns;Allow bona fide sovereign wealth funds to co-invest in projects supported by EB-5 capital;Provide visa “set asides” to help direct EB-5 capital to projects in rural areas and census tracts designated by the U.S. Treasury as “opportunity zones”; andEstablish new investment levels to $1 million for projects in rural and opportunity zone Targeted Employment Areas (TEAs); and to $1.1 million for non-TEA projects. Compromise reform principles set forth by a coalition of rural and urban stakeholders in May reflect a number of provisions in the new bill. (Roundtable Weekly, May 17, 2019)The rural and urban business interests recommending EB-5 modernization have consistently urged holistic reforms from Congress, as opposed to piecemeal regulatory changes by the Department of Homeland Security (DHS). (Roundtable Weekly, March 8, 2019) The imminent agency regulations – scheduled to take effect on November 21, unless they are superseded by Congress – do not accomplish important objectives set forth in the Rounds-Graham-Cornyn bill, such as the fraud deterrence provisions, national security enhancements, and visa set asides for investors in rural and distressed urban area projects. (Roundtable Weekly, July 26, 2019) November 21 is also the date that the underlying legislative authorization of the program expires, as connected to the current continuing resolution (CR) that keeps the federal government running. For the past five years, Congress has consistently extended the EB-5 regional center program concurrently with spending measures that continue federal operations. The timing of the DHS rules’ effectiveness and the program’s expiration on November 21, along with S. 2778’s introduction, are expected to spur new rounds of legislative negotiation for long-term EB-5 reform in the coming weeks.# # #

Beneficial Ownership & the Corporate Transparency Act

November 7, 2019

Policy Comment Letter

Joint Real Estate Trade Association Letter to Congress on Corporate Transparency Bills

Beneficial Ownership, Beneficial Ownership amp the Corporate Transparency Act, Corporate Transparency Act CTA,

November 4, 2019

Policy Comment Letter

2019-11-13 Illicit Cash Act letter to SBC Beneficial Ownership

Beneficial Ownership, Corporate Transparency Act CTA, FinCEN,

Terrorism Risk Insurance Program, TRIA

November 1, 2019

Roundtable Weekly

Seven-Year TRIA Reauthorization Advanced by House Financial Services Committee

Terrorism Risk Insurance Program TRIA

The House Financial Services Committee yesterday unanimously (57-0) passed the Terrorism Risk Insurance Program Reauthorization Act of 2019 (H.R. 4634) – a "clean" seven-year extension of the Terrorism Risk Insurance Act (TRIA), which is a top policy priority of The Real Estate Roundtable. The bipartisan House compromise bill also requires two studies: a U.S. Government Accountability Office (GAO) study on the cyber terrorism market and a biennial Treasury reporting on the 'availability and affordability' of TRIA coverage for places of worship.Committee Chairwoman Maxine Waters (D-CA), above, in her opening committee markup statement noted, “This bipartisan bill provides a simple long-term reauthorization of the Terrorism Risk Insurance Program. Without a reauthorization, the program would expire at the end of 2020, but we could experience the harmful effects of a failure to reauthorize as soon as January of 2020. I am very pleased that I have reached a bipartisan compromise with Ranking Member [Patrick] McHenry [R-NC] on this issue for a seven-year reauthorization of this very important program.” (Committee Markup documents and video, Oct 29)The Coalition to Insure Against Terrorrism (CIAT), which includes The Real Estate Roundtable, wrote to the committee’s leadership on Tuesday in support of H.R. 4634. (CIAT letter, Oct. 29)TRIA, originally passed in 2002, has been extended in 2005, 2007 and again in 2015 – following a 12-day lapse when Congress failed to complete their work on reauthorization at the end of 2014.TRIA was the focus of a discussion during The Roundtable’s Oct. 30 Fall Meeting with American Property and Casualty Insurance Association President and CEO David Sampson. The discussion emphasized that a long-term, clean TRIA reauthorization by Congress is needed as soon as possible to avoid market dislocation and provide certainty to commercial real estate policy holders who are actively renewing their coverage. Roundtable President and CEO Jeffrey DeBoer noted during an October 1 podcast episode of Through The Noise, “Businesses and facilities of all types need to see the terrorism risk insurance program extended. This need applies to hospitals, all commercial real estate buildings, educational facilities, sports facilities, NASCAR and theme parks, and really any place where commercial facilities host large numbers of people.”The next step toward TRIA reauthorization is a floor vote in the House, which may occur before year-end. # # #

Roundtable Meeting, Roundtable Weekly

November 1, 2019

Roundtable Weekly

Industry Leaders and Policymakers Address National Issues Affecting CRE, Including TRIA, Affordable Housing, Tax and Monetary Policy

This week’s Real Estate Roundtable Fall 2019 Meeting in Washington featured discussions with congressional lawmakers on national policy issues affecting economic growth, job creation, local communities and the commercial real estate industry. Roundtable members engaged policymakers and other speakers on a wide range of issues, including terrorism insurance; affordable housing; GSE reform; opportunity zones; FIRPTA repeal; infrastructure; energy and climate; and monetary policy. Roundtable Chair Debra A. Cafaro (Chairman & CEO, Ventas, Inc.) launched the meeting by noting how the organization remains focused on its national policy agenda. Cafaro added that The Roundtable continues to move forward from its 20-year foundation with 17 industry association partners and membership-driven policy advisory committees. She emphasized, “We will continue to do the research necessary to make our case on issues with policymakers, and work across product types and entity classifications to advance strong, sustainable national policy for the industry.” Speakers at The Roundtable’s Fall Meeting included: Dr. Ben Carson—Secretary, U.S. Department of Housing and Urban Development (HUD)—discussed the Administration’s efforts to reshape the role of the Government Sponsored Enterprises (GSEs) by capitalizing Fannie Mae and Freddie Mac before ending their government conservatorship. He also noted a Stanford University study on rent control legislation that found such actions decreased rental costs in the short-term, yet decreased the supply of affordable housing in the long-term. Sen. Jacky Rosen (D-NV)—Member, Senate Committees on Commerce, Science and Transportation; Homeland Security and Governmental Affairs; and member of the Problem Solvers Caucus while she served in the House of Representatives—noted the importance of public-private partnerships for infrastructure investments, economic growth and community improvements. She also lauded Opportunity Zones as an incentive to create more affordable housing in her state. Sen. Rick Scott (R-FL)—Member, Senate Committees on Budget; Commerce, Science and Transportation; Homeland Security and Governmental Affairs—addressed the importance of bipartisanship to achieve legislative goals. He discussed the efforts of policymakers to reach solutions on immigration issues such as DACA, border security and Visa reform.David Sampson—President and CEO, American Property Casualty Insurance Association—discussed the need to reauthorize the Terrorism Risk Insurance Act (TRIA) and current efforts in Congress to enact a “clean” multi-year extension as soon as possible. He added that cyberterrorism was an increasing risk to business interruption in the marketplace. Dana Peterson—Global Economist, Citgroup—spoke about how consumer spending trends, demographics and market conditions have led to the 11th year of economic expansion in the U.S. She also forecast continued growth as domestic companies lead the way in technology areas affecting Artificial Intelligence, 5G and blockchain. Charlie Cook—Political Analyst for The National Journal Group; Editor and Publisher of The Cook Political Report—spoke about the electoral landscape, the increase in “tribal” partisanship and how a sharp increase in voter engagement is expected in the upcoming presidential election. Following the business meeting, informal dinners were held with congressional policymakers and Roundtable members to discuss policy issues in more detail. Next on the Roundtable’s meeting calendar is the all-member State of the Industry Meeting on January 28, 2020, which will be held in conjunction with its policy advisory committee meetings in Washington, DC.# # #

Foreign Investment in Real Property Tax Act (FIRPTA)

November 1, 2019

Roundtable Weekly

Panel Draws Attention to How IRS Guidance is Impeding Jobs, Foreign Investment in U.S. Real Estate and Infrastructure

FIRPTA Foreign Investment Foreign Investment in Real Property Tax Act

Leading industry experts convened on Oct. 30 at the National Press Club in Washington for an in-depth discussion on IRS Notice 2007-55, which levies discriminatory tax penalties on foreign investment in U.S. real estate and infrastructure. The panel detailed how the Notice subjects foreign owners of domestically controlled real estate investment trusts (REITs) to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) when the REIT liquidates, thereby suppressing capital investment and job creation in the real estate industry.The 2007 tax guidance from the IRS overturned long-standing practice that treated liquidating distributions and redemptions of REITs as sales of stock. Under Notice 2007-55, these transactions are now treated as taxable distributions and subject to a burdensome capital gains tax – affecting only foreign shareholders. In the 12 years since Treasury issued the Notice, there have been no clarifying regulations, which has created uncertainty among potential investors and deterred foreign investment in U.S.-based real estate and infrastructure.Panelists at the event, sponsored by Unibail-Rodamco-Westfield, included Ryan McCormick, Senior Vice President and Counsel for The Real Estate Roundtable (far right in photo above); John Jones, Vice President of Government Relations for Nareit; Kevin Klein, Director of Tax Policy for the Organization of International Investment (OFII); Darin Mellott, Director of Research, Americas at CBRE; and David Polster, Tax Partner at Skadden Arps.McCormick emphasized that FIRPTA is a tax burden that does not apply to any other asset class and noted that FIRPTA hurts the ability of the United States to attract outside capital for infrastructure improvements. Treasury could act on its own to remove much of the FIRPTA burden simply by withdrawing the IRS guidance. “Anything the Administration can be doing now to drive our economy forward and create jobs, they should,” said McCormick.Outright repeal of the outdated FIRPTA law is The Roundtable’s ultimate policy goal. In April 2019, Representatives John Larson (D-CT) and Kenny Marchant (R-TX) introduced the Invest in America Act (H.R. 2210), a bill to repeal FIRPTA altogether. The Roundtable and 19 national trade organizations – representing every aspect of constructing, developing, financing, owning, and managing real estate and infrastructure in the United States – wrote to Ways and Means Committee Members and other key House lawmakers urging them to support the legislation. (Comment Letter, March 28)Both Republican and Democratic lawmakers agree on the negative impact that the Notice continues to exert on infrastructure investments. In 2017, 32 bipartisan members of the House Ways and Means Committee wrote to Treasury Secretary Steven Mnuchin urging him to repeal the Notice. The lawmakers pointed to billions of dollars’ worth of investment that flowed to small and mid-sized communities when 2015 legislation eased some of the tax burden for foreign investors.A report by the Rosen Consulting Group (RCG) estimated that FIRPTA repeal would generate an initial increase of between $65 billion and $125 billion in international investment in U.S. commercial real estate. This new level of activity would lead to the creation of 147,000 to 284,000 jobs throughout the economy and increase taxpayers' income by $8 billion to $16 billion. (Unlocking Foreign Investment in U.S. Commercial Real Estate, July 2017) # # #

October 29, 2019

Policy Comment Letter

2019-10-29 – CIAT Letter House Markup 2019

Housing Finance & Rent Control, Roundtable Weekly

October 25, 2019

Roundtable Weekly

Administration Officials Testify on GSE Reform, Housing Affordability; NMHC Releases Data on Ramifications of States’ Rent Control Legislation

The House Financial Services Committee held an Oct. 22 hearing – “The End of Affordable Housing? A Review of the Trump Administration’s Plans to Change Housing Finance in America” to review the Trump administration’s plans to change housing finance in the U.S. (Committee memorandum, Oct. 17)Witnesses included Treasury Secretary Steven Mnuchin; Dr. Ben Carson, Department of Housing and Urban Development (HUD) Secretary; and Dr. Mark Calabria, Federal Housing Finance Agency (FHFA) Director. Topics discussed included reforms to the Government Sponsored Entities (GSEs) Fannie Mae and Freddie Mac, Housing Affordability and Rent Control. (Video of the Oct. 22 hearing)Treasury and HUD unveiled plans last month to wind down the 11-year long federal conservatorships of Fannie and Freddie, which support the multi-trillion U.S. housing market by securitizing and guaranteeing residential mortgages. (Roundtable Weekly, Oct. 4 and (CQ, Oct. 22)The administration plans to reduce the size of Fannie and Freddie with an explicit government guarantee that would be open to private competitors who comply with underwriting standards from FHFA, the federal government’s GSE regulator.Committee Chairwoman Maxine Waters (D-CA) stated that the Trump Administration’s housing finance reform plan would be disastrous for the U.S. housing system. She said that the Administration’s plan would abolish affordable housing goals that help to support affordable home ownership and rental housing, replacing them with a mortgage fee that has not been explained in detail. Treasury Secretary Mnuchin testified, “I was surprised and disappointed by the title of this hearing. To be clear, Treasury does not propose – and indeed opposes – reducing or eliminating the government-sponsored enterprises' longstanding support for affordable housing.”During Q&A, HUD Secretary Carson stated that opportunity zone tax incentives revitalize business in specific geographic areas, which then incentivizes the building of affordable housing.In response to question about rent control from Rep. Alexandria Ocasio-Cortez (D-NY), FHFA Director Calabria agreed there is a lack of affordable rental housing, especially in certain cities like New York – but added he did not think it should be the federal government’s responsibility to tell someone what price they have to rent their property.In a separate development, new data released this week by the National Multifamily Housing Council (NMHC) highlights the ramifications of California joining Oregon and New York in passing sweeping rent control legislation. (Roundtable Weekly, Oct. 11) The October NMHC Quarterly Survey shows 34% of multifamily firms who operate in rent control jurisdictions have reduced investments in those areas – a significant jump from the July survey, where 20% of firms indicated they were cutting back investment in rent controlled areas. (NMHC, Oct. 22)Roundtable President and CEO Jeffrey DeBoer addresses rent control in Walker and Dunlop’s recently released “Quarterly Multifamily Outlook Quarterly Report for Fall 2019.” DeBoer states, “Although we focus on national issues, we do have concerns about the more local trend to enact rent control. These laws are destructive. They may help those people in the short term but those same people are hurt in the long run by giving them lower and lower quality housing. It ends up being very inequitable over time and hopefully the trend will not gain additional traction.”Regarding housing finance and GSE reform, The Roundtable and 27 industry organizations on March 1 submitted principles for reforming the GSEs. The letter emphasized that compelling evidence must show the private market is capable of an expanded role before efforts are made to reduce the GSEs' current housing finance footprint. "Ultimately, we believe any reform, be it administrative or legislative, must seek to further two key objectives: 1) preserving what works in the current system, while 2) maintaining stability by avoiding unintended adverse consequences for borrowers, lenders, investors, or taxpayers." (Roundtable Weekly, March 1)GSE reform, housing affordability and recent state measures on rent control will be discussed during The Roundtable’s Fall Meeting on Oct. 30 in Washington.# # #

Capital and Credit

October 25, 2019

Roundtable Weekly

House Passes Beneficial Ownership Bill; Senate Version Faces Uncertain Future

Beneficial Ownership Corporate Transparency Act CTA FinCEN

The U.S. House of Representatives on Oct. 22 passed the Corporate Transparency Act of 2019 (H.R. 2513), which would require corporations and limited liability companies (LLCs) to report their beneficial owners to the Treasury Department's Financial Crimes Enforcement Network (FinCEN). The bill – introduced by Reps. Carolyn Maloney (D-NY) and Peter King (R-NY) – would shift the FinCEN reporting requirements from banks to the business community, requiring every business with fewer than 20 employees to register their beneficial owners with FinCEN.A coalition that includes The Real Estate Roundtable sent a letter June 10 to the committee's leadership opposing the Maloney-King bill. "This legislation would impose burdensome, duplicative reporting burdens on approximately 4.9 million small businesses in the United States and threatens the privacy of law abiding, legitimate small business owners," the letter states. The coalition emphasized that it supports the overall goal of preventing wrongdoers from exploiting United States corporations and LLCs for criminal gain. Yet the coalition letter detailed significant problems with H.R. 2513. (Roundtable Weekly, June 15)In the Senate, the Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act was introduced in June by Sens. Mark Warner (D-VA), Tom Cotton (R-AR), Doug Jones (D-AL) and Mike Rounds (R-SD). (Homeland Preparedness News, June 12) Additionally, a Senate bill addressing beneficial ownership is entitled the True Incorporation Transparency for Law Enforcement (TITLE) Act (S. 1889). A coalition that includes The Real Estate Roundtable on Oct. 16 sent a letter to Senate Judiciary Committee leaders strongly opposing the bill. The letter states, “This legislation would impose duplicative and problematic reporting burdens on millions of small businesses in the United States and would threaten the privacy of law-abiding small business owners.” (Policy Comment Letter, Oct. 16)The Senate versions have different provisions, have not yet been the focus of a committee hearing, and prospects for a floor vote are uncertain. (BGov, Oct. 22)The White House budget office commented this week that the House measure “represents important progress” but said it must be improved as it moves through the legislative process. Among the steps recommended by the Administration are “protecting small businesses from unduly burdensome disclosure requirements, and providing for adequate access controls with respect to the information gathered under this bill’s new disclosure regime.” The statement concludes, “The Administration looks forward to continuing to engage in a bipartisan fashion with the House and Senate to address these important issues.”The Roundtable plans to work with policymakers to stake out a balanced position on the beneficial ownership issue that would inhibit illicit money laundering activity, yet not place unnecessary costs and legal burdens on the real estate industry. # # #

Energy And Climate Policy

October 25, 2019

Roundtable Weekly

House Hearing Focuses on Reducing Carbon Emissions from Buildings

Climate Change Energy and Climate Policy Energy Efficiency

An Oct. 17 hearing before the House Select Committee on the Climate Crisis, “Solving the Climate Crisis: Cleaner, Stronger Buildings,” focused on reducing carbon pollution and improving resilience in residential and commercial buildings across the nation as a method of countering the effects of climate change. (Hearing video and witness statements)The Select Committee is chartered to study and make recommendations to reduce greenhouse gas emissions and develop solutions to combat climate change. It lacks authority to introduce legislation, but is scheduled to publish a set of recommendations for bill-writers by March 31, 2020.Committee Chair Kathy Castor (D-FL), above, stated at the hearing that “[a]n ambitious national plan for cleaner, stronger buildings requires national leadership. And Congress needs to offer smart incentives, to set a direction for the numerous federal, state, and local officials involved in the buildings sector.”Committee Ranking Member Garret Graves (R-LA) emphasized that reauthorization of the flood insurance program and other Committee recommendations must “advance[ ] the goal of resiliency, [housing] affordability, and energy efficiency conservation. [W]e can achieve multiple goals.”The Real Estate Roundtable has long been a leading advocate for energy efficiency in buildings, spearheading significant policy developments in this arena. For example, the Sustainability Policy Advisory Committee (SPAC) was critical to the creation of EPA’s ENERGY STAR for buildings program in 1998, and its evolution to ENERGY STAR for Tenants in 2015.Recently, SPAC’s assistance to EPA resulted in improved and updated models for federal ratings regarding building energy efficiency performance. (Roundtable Weekly, July 19). Current SPAC initiatives include efforts to refine the next version of ENERGY STAR for Tenants (to be unveiled in 2020 and cover retail as well as office leased spaces), and coordinate with the agency on key data it collects regarding the carbon footprint of the nation’s electricity grid.On the legislative front, The Roundtable has long supported the Energy Savings and Industrial Competitiveness (ESIC) Act (S. 2137), co-sponsored by Sens. Rob Portman (R-OH) and Jeanne Shaheen (D-NH). (Roundtable support letter for S. 2137) The Senate Energy Committee advanced the ESIC Act last month. (Roundtable Weekly, Sept. 27).The ESIC Act “is exactly the kind of smart, forward-looking policy that will help building owners respond to our modern, evolving economy” Roundtable President and CEO Jeffrey DeBoer stated in a Senate news release upon the bill’s introduction this summer. (Roundtable Weekly, July 19) (Video of DeBoer’s statement)Also in the Senate, Delaware Democrat Chris Coons and Indiana Republican Mike Braun have formed a climate caucus aimed at creating bipartisan consensus on ways to reduce carbon dioxide emissions. The purpose of the Senate Climate Solutions Caucus is outlined by the two Senators in an Oct. 23 opinion piece in The Hill. The Roundtable will provide comments to the House Select Committee on the Climate Crisis, summarizing our energy efficiency advocacy agenda. The committee’s questions for stakeholders are posted at https://climatecrisis.house.gov/inforequest, with submissions due by November 22.# # #

Roundtable Weekly, Terrorism Risk Insurance Program

October 18, 2019

Roundtable Weekly

Ten-Year TRIA Reauthorization Bill Scheduled for Late-October Markup in House

Homeland Security TRIA

House Financial Services Committee Chairwoman Maxine Waters (D-CA) formally introduced H.R. 4634 – the Terrorism Risk Insurance Program Reauthorization Act of 2019 – on October 16 and stated it will be part of an October 29-30 full committee markup. (Chairwoman Waters at podium, above). The announcement came before a joint House subcommittee hearing, which focused on the program and a possible fourth reauthorization of the Terrorism Risk Insurance Act (TRIA). “We want to reauthorize [the Terrorism Risk Insurance Act] just as it is,” Waters told CQ Roll Call. “We’ve got support from the Senate, that’s what the Senate wants to do. And you know it’s not easy for both sides to come together.” (CQ, Oct. 16)During the Wednesday news conference, Waters stated, “Nearly two decades after TRIA was enacted, TRIA has thankfully never been triggered, and the program is working as intended, effectively protecting our economy from the costs of a terrorist attack and providing security for many of our nation’s hospitals, stadiums, schools and small businesses.”She added, “Without a reauthorization, the program would expire at the end of 2020, but we could experience the harmful effects of a failure to reauthorize as soon as January of 2020. And so, I am pleased to put forth … a bill that provides a ten-year clean reauthorization of TRIA.” (Committee news release, Oct. 16)TRIA has been extended in 2005, 2007 and again in 2015 – following a 12-day lapse when Congress failed to complete their work on reauthorization at the end of 2014.A long-term, clean TRIA reauthorization is a top priority for The Real Estate Roundtable. Before the House hearing, the Coalition to Insure Against Terrorism, which includes The Roundtable, wrote to the subcommittees’ leadership in support of H.R. 4634. (CIAT letter, Oct. 16)The Roundtable and nearly 350 companies and organizations also urged Congress on September 17 to swiftly pass a long-term TRIA reauthorization. (Roundtable Weekly, Sept. 20)House Financial Services Committee Ranking Member Patrick McHenry (R-NC) stated during the Wednesday hearing that Congress should first update TRIA to address cyberterrorism risks. “We've had substantial changes internationally since the last reauthorization. I want to make sure we do the right thing when it comes to cyber threats, and I don’t believe what we have currently in law is sufficient for that,” said McHenry. (CQ, Oct. 16)In the Senate, TRIA reauthorization was a focus of a June Banking Committee hearing chaired by Sen. Mike Crapo (R-ID). (Roundtable Weekly, June 21)Roundtable President and CEO Jeffrey DeBoer noted during an October 1 podcast episode of “Through The Noise,”, “Businesses and facilities of all types need to see the terrorism risk insurance program extended. This need applies to hospitals, all commercial real estate buildings, educational facilities, sports facilities, NASCAR and theme parks, and really any place where commercial facilities host large numbers of people."TRIA will be the focus of an October 30 discussion during The Roundtable’s Fall Meeting with American Property and Casualty Insurance Association President and CEO David Sampson.Chairwoman Waters stated during the news conference that after the late October committee markup of H.R. 4634, “I am committed to bringing the bill to the floor soon afterward, and I will be exploring vehicles for the bill to be attached to.”# # #

Immigration & The Workforce, Roundtable Weekly

October 18, 2019

Roundtable Weekly

Roundtable Joins SCOTUS Brief in “Dreamers” Case Emphasizing Need for Immigrant Workers to Fill Essential Real Estate Jobs

Immigration

The Real Estate Roundtable on October 4 joined an amicus brief filed with the Supreme Court of the United States (SCOTUS), to emphasize the critical need for foreign-born workers to fill labor shortages in construction, hospitality, building maintenance, and other real estate sector jobs. The case, Department of Homeland Security v. Regents of the University of California, concerns the Deferred Action for Childhood Arrivals (DACA) program. DACA has allowed nearly 800,000 undocumented young adults brought to the U.S. as children – the “Dreamers” – to apply for work permits and protection from deportation.The Obama Administration established DACA in 2012. In 2017, the Trump Administration announced its own directive to end the program – thus priming the matter for SCOTUS’s review.The Roundtable’s amicus brief, led by the National Association of Home Builders, also includes the Essential Worker Immigration Coalition, representing members concerned with the shortages of lesser-skilled labor in the U.S. workforce. The brief states, “DACA-eligible immigrants are a crucial component” of real estate jobs, as 41% of them work in industries represented by the amici.The brief also explains that foreign-born workers generally are essential to fill labor shortages that constrain the productivity of the real estate workforce. Foreign-born labor accounts for:Close to 25% of construction workers, a percentage that has been rising since the Great Recession; An estimated 31% of hotel and lodging, and 22% of restaurant workers;As much as 25% of workers providing hands-on care to the elderly and people with disabilities; and Over 35% of building and grounds cleaning and maintenance occupations.The case has attracted numerous other briefs. One brief in support of DACA was filed by a consortium of 140 companies and 18 business associations representing a broad array of industries, including retail, tech, tourism and communications. (The Hill, Oct. 4)The consortium brief included participants such as the American Hotel & Lodging Association, Hilton Worldwide, Host Hotels and Resorts, Marriott International, the U.S. Chamber of Commerce, and numerous Silicon Valley firms. “By expanding the opportunities available to DACA recipients, this program has benefitted America’s companies, our Nation’s economy, and all Americans,” their brief says. Other stakeholders filing briefs to support the DACA program include Apple, Microsoft and the government of Mexico. (CNBC’s Closing Bell, Oct. 2 and The Hill, Oct. 4). Oral argument is scheduled for Nov. 12 and a decision is expected by summer. (ScotusBlog, Sept. 10)# # #

Capital and Credit, Roundtable Weekly, Volcker Rule

October 18, 2019

Roundtable Weekly

Volcker Rule Changes Finalized, Easing Banking Restrictions

Reforms to the Volcker Rule, which aimed to restrict proprietary trading practices at banks, received final approval Oct. 8 by the Federal Reserve and four other regulatory agencies. (AP, Oct. 8)The final Rule – expected to enhance liquidity to commercial mortgage-backed securities (CMBS) markets – takes effect on January 1, 2020 with a compliance date of January 1, 2021. (Federal Reserve, Oct. 8) Under the revised Rule, firms that do not have significant trading activities will have simplified and streamlined compliance requirements, while firms with significant trading activity will have more stringent compliance requirements. Community banks generally are exempt from the Volcker rule by statute. The revisions continue to prohibit proprietary trading, while providing greater clarity and certainty for activities allowed under the law.The final Rule represents the most significant revision to date of the original 2013 Volcker Rule regulations. The Roundtable has long advocated revisions to the Volcker rule, raising concerns about how it could “negatively impact liquidity and capital formation in commercial real estate."Real Estate Roundtable President and CEO Jeffrey DeBoer commented on the Volker Rule changes. “This positive action will benefit liquidity and the commercial mortgage backed securities market, potentially increasing investment in job-creating construction activities," DeBoer said. (Roundtable Weekly, June 1, 2018)The revisions are expected to make it easier for 'banking entities' to hold and trade CMBS and could enhance market liquidity. Commercial banks and CMBS are two of the top sources of private debt for commercial and multifamily real estate. The changes were jointly developed by the Federal Reserve Board, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission.# # #

October 17, 2019

Policy Comment Letter

2019-10-17 – CFIUS Real Estate Reform NPR Comment Letter

October 16, 2019

Policy Comment Letter

2019-10-16 CIAT TRIA Letter

October 16, 2019

Policy Comment Letter

2019-10-16 – TITLE Act Business Coalition Letter FINAL

Roundtable Weekly, Terrorism Risk Insurance Program

October 11, 2019

Roundtable Weekly

Draft Legislation to Reauthorize TRIA 10 Years Circulated by House Financial Services Committee

Modern tower buildings or skyscrapers in financial district with cloud on sunny day in Chicago, USA. Construction industry, business enterprise organization, or communication technology concept A draft bill to reauthorize the Terrorism Risk Insurance Act (TRIA) for 10 years is expected to be the focus of next week’s House Financial Services Committee hearing “Protecting America: The Reauthorization of the Terrorism Risk Insurance Program.” A committee memo distributed this week notes that Committee Chairwoman Maxine Waters (D-CA) will introduce the draft reauthorization bill. The Oct. 16 hearing will be webcast live here. According to background provided by the Financial Services Committee memorandum, following the September 11, 2001 terrorist attacks, “Analysts warned that the disappearance of affordable terrorism risk coverage would negatively affect the larger U.S. economy due to the importance of commercial insurance in a variety of business transactions.” In response, Congress passed the Terrorism Risk Insurance Act of 2002 (TRIA), which established the first federal backstop for terrorism risk insurance. Specifically, TRIA established the Terrorism Risk Insurance Program (TRIP) within the Department of Treasury to provide federal reinsurance in the event of catastrophic losses. TRIA was extended in 2005, 2007 and again in 2015 – following a 12-day lapse when Congress failed to complete their work on reauthorization at the end of 2014. With TRIA currently set to expire at the end of 2020, a long-term, clean reauthorization is a top priority for The Real Estate Roundtable. TRIA was a key topic of discussion last week during meetings of The Roundtable’s Homeland Security Task Force and Real Estate Capital Policy Advisory Committee in New York City. During an October 1 podcast episode of “Through The Noise,” Roundtable President and CEO Jeffrey DeBoer noted, “Businesses and facilities of all types need to see the terrorism risk insurance program extended. This need applies to hospitals, all commercial real estate buildings, educational facilities, sports facilities, NASCAR and theme parks, and really any place where commercial facilities host large numbers of people." The Roundtable and nearly 350 companies and organizations urged Congress on Sept. 17 to swiftly pass a long-term TRIA reauthorization. (Roundtable Weekly, Sept. 20) A 2018 Treasury Department report noted that 78 percent of all TRIA-eligible policies included terrorism risk insurance coverage. Treasury data also showed that the take-up rate for terrorism risk insurance did not vary significantly by region (74 percent in the Northeast, 82 percent in the Midwest, 76 percent in the South, and 82 percent in the West). Treasury concluded that TRIP has been effective in making terrorism risk insurance available and affordable in the insurance marketplace. (Treasury, Report on the Effectiveness of the Terrorism Risk Insurance Program, June 2018) Additionally, Financial Services Committee Member Carolyn Maloney (D-NY) hosted an Oct. 8 roundtable discussion on TRIA reauthorization in New York City with Reps. Nydia Velazquez (D-NY), Gregory Meeks (D-NY) and industry stakeholders. Rep. Maloney stated, “The magnitude and importance of the Terrorism Risk Insurance Act cannot be overstated. TRIA provides critical government backup to private insurers in the event of a terrorist attack and is especially vital to the economy of New York City. This morning I hosted a roundtable meeting alongside my colleagues in Congress and industry stakeholders to discuss how TRIA is working now, whether there should be any changes made to this legislation before reauthorization, and when Congress needs to act.” She added, “What we learned today is that all the stakeholders agree that Congress should pass a clean, long-term reauthorization of this critically important legislation — without delay. The Terrorism Risk Insurance Act is one of the most important issues before Congress and it must be renewed with no disruption to coverage and no lapse in renewal.” (Rep. Maloney news release, Oct. 8 and Twitter photo) # # #

Roundtable Weekly, Tax Policy

October 11, 2019

Roundtable Weekly

Treasury Issues Final Regulations Modifying Rules for Allocating Real Estate Debt Among Partners

Partnership Liability Tax Policy

Final regulations released by the Treasury Department last Friday and effective October 9 provide new tax guidance on the allocation of liabilities between partners in a real estate partnership. The new rules bring to a conclusion a regulatory project that started over six years ago. How real estate debt and other liabilities are allocated among partners when property is contributed to a partnership carry important tax consequences. Allocation rules can determine whether built-in gain is recognized or deferred at the time of the contribution. The rules also affect whether a partner obtains sufficient tax basis to deduct future losses. Generally, a partner receives full basis for partnership debt if the debt is recourse and the partner is obligated to pay off the loan in the event the partnership defaults. The new regulations will likely complicate taxpayers’ ability to achieve a preferred allocation of real estate liabilities (and deductions) through the use of liability guarantees such as “bottom guarantees,” capital account deficit restoration obligations, and other payment or reimbursement arrangements. A bottom guarantee is a guarantee of the last dollars of a liability. The lender may pursue the guarantor only if the lender is unable to collect at least the guaranteed amount of the loan from the borrower. The final rules will largely restrict the use of bottom guarantees. Treasury expressed concerns that bottom guarantees lack a non-tax commercial purpose, are “structured to insulate the obligor from having to pay,” and do not represent a real economic risk of loss. On four separate occasions, The Roundtable submitted comments on the partnership liability regulatory project, which began in 2013. Additionally, a working group from The Roundtable’s Tax Policy Advisory Committee (TPAC) previously met with Treasury and IRS officials. The Roundtable had concerns that changes would disrupt longstanding partnership tax rules and increase the tax liability of previously untaxed real estate reorganization transactions. [Roundtable Comment Letters: March 13, 2013 and April 7, 2017 and August 7, 2017 ] Input from The Roundtable, TPAC members and other stakeholders contributed to several revisions to the proposed rules over the last five years. The rules published in the Federal Register on October 9 finalize temporary regulations under section 752 that were released in 2016 and scheduled to expire this month. Those 2016 regulations were revised versions of the rules initially proposed in 2014. The October 9 rules also finalize proposed regulations issued in June 2018 that walked back 2016 proposed regulations with respect to the allocation of debt in “disguised sales” transactions under section 707. The preamble to the final rules notes that Treasury continues to consider the appropriate treatment of “exculpatory liabilities” that are recourse to an entity under state law, but where no partner bears the economic risk of loss. The final regulations provide critical transition relief. The rules generally apply to liabilities incurred or assumed by a partnership, and to payment obligations imposed or undertaken with respect to a partnership liability, on or after October 9, 2019. The new restrictions do not apply if the liability was incurred or assumed by a partnership, or the payment obligation was imposed or undertaken, pursuant to a written binding contract in effect prior to October 9. # # #

LIBOR Reform, Roundtable Weekly

October 11, 2019

Roundtable Weekly

Treasury Unveils Proposed Regulations to Resolve Tax Questions Related to LIBOR Cessation

LIBOR

The Treasury Department on Monday released proposed regulations to clarify the tax consequences of replacing the expiring London Inter-bank Offered Rate (LIBOR) in existing financial contracts, including real estate loans. The proposed rules largely align with Roundtable recommendations submitted over the summer. (Roundtable LIBOR letter, June 6 and Roundtable Weekly, June 7) LIBOR is used as a reference rate in an estimated $200 trillion of financial contracts, including $1.3 trillion of commercial real estate loans. In response to concerns regarding manipulation of LIBOR, UK financial authorities are phasing it out; LIBOR is expected to cease operation as working interest rate index by 2021. The replacement of LIBOR in existing agreements presents important tax questions. “If the terms of a debt instrument are significantly modified, for Federal income tax purposes there is a deemed exchange of the old debt for a new (modified) debt instrument," wrote Roundtable President and CEO Jeffrey DeBoer in the organization’s June 6 comment letter. Without relief, this deemed exchange could trigger the recognition of taxable gain or loss for the lender, or debt discharge income for the borrower. "Moreover, the tax consequences of the deemed exchange can arise without generating actual cash to pay any ensuing tax liability," continued DeBoer. As The Roundtable had recommended, the Treasury’s proposed regulations give borrowers and lenders the flexibility they need to replace LIBOR with virtually any other index that reflects objective changes in the cost of borrowing money – such as a broad index of Treasury or corporate borrowing rates – in addition to a list of rates suggested by various regulators. Don Susswein (RSM), a member of the Roundtable’s Tax Policy Advisory Committee (TPAC) and one of the architects of The Roundtable’s comments, noted, “The key to the flexibility is a reasonable safeguard to ensure that the parties are acting in good faith primarily to preserve their original deal—not modifying it to compensate for changed circumstances.” As a safeguard to prevent potential abuse, the proposed regulations require that the fair market value of the modified instrument be “substantially equivalent” to its value before modification. Another key TPAC member, Joe Forte (Sullivan & Worcester) said, “It is clear that the hesitation of many market participants to transition from LIBOR to SOFR has been uncertainty concerning the tax and accounting treatment of the rate modification. Following on FASB’s Exposure draft on reference rate reform last month, the new Treasury/IRS guidance addressing the tax consequences of rate modification of cash contracts and derivatives has proposed two safe harbors similar to those The Roundtable proposed.” “The Treasury and IRS deserve high marks for proposing a sound, rational framework early in the LIBOR transition to address with these challenging issues and remove tax uncertainty,” said DeBoer. Comments on the proposed rules are due by November 25, 2019. Taxpayers may rely immediately on the proposed rules when evaluating the tax consequences of an alteration of the terms of a loan or other contract, provided the taxpayer consistently applies the rules. # # #

Affordable Housing, Roundtable Weekly

October 11, 2019

Roundtable Weekly

California’s Governor Signs Rent Control Law Amid Growing List of Jurisdictions Seeking to Address Housing Affordability

California Governor Gavin Newsom (D) on October 9 signed into law a statewide rent cap of 5 percent plus inflation, along with enhanced tenant eviction protections. California is now the third state in the nation – amid a growing list of other jurisdictions – to enact rent control laws in an attempt to address housing affordability problems. (LA Times and Gov. Newsom website, Oct. 9 and Roundtable Weekly, June 21) California’s law (AB 1482) is set to expire in 10 years – unlike New York, which permanently increased New York City rent control measures in June, while allowing other areas in the state to implement the policy. In Oregon, a permanent statewide rent cap of 7 percent plus inflation was enacted in March. (Axios, Oct. 9 and NMHC interactive national map) In a state of nearly 40 million people, California’s rent control measure could affect an estimated 8 million residents of rental homes and apartments. (Realtor Magazine, Sept. 12). The 5% rent increase cap would not apply to housing built within the last 15 years or to single-family homes that are not corporate-owned. (LA Times, Oct 8 and Curbed Los Angeles, Oct 10) Gov. Newsom signed 18 other bills this week to address California’s housing affordability crisis, including measures to encourage construction of accessory dwelling units (ADUs), which encompass the renovation of existing garages into affordable housing. (KABC-TV, Oct. 10 and Newsom website, Oct. 9) An interactive national map by the National Multi Housing Council (NMHC) details the trend in how various state capitals are attempting to address affordable housing through rent control measures. The rent control movement is partially influenced by a loose network of local activist groups that continue to organize successful efforts in some of the nation’s largest cities and states, according to an Oct. 3 article in The Real Deal. "Although they are well-intended, we know from decades of experience that rent control regulations distort markets, create shortages, and depress business investments. They often harm the communities they seek to help," said Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable. "Policy makers should avoid rent control measures and rather seek solutions that grow America's residential stock, to enable our communities to provide safe and decent housing for low-income families and the teachers and first-responders in our workforce." Housing affordability has emerged as a policy focus in this presidential campaign cycle. The housing and real estate-related campaign platforms of the 12 candidates who will participate in the Oct. 15 Democratic primary are profiled by Bisnow this week. (“Here's Where All The Democratic Presidential Candidates Stand On Housing,” Oct. 8) In June, the White House established a Council on Eliminating Regulatory Barriers to Affordable Housing, chaired by Housing and Urban Development (HUD) Secretary Ben Carson. (White House Executive Order, June 25). The council includes members from across eight federal agencies who will analyze how federal, state, and local regulations impact the costs of developing affordable housing and the economy. It will also recommend ways to reduce regulatory burdens at all levels of government that hinder affordable housing development. (White House Fact Sheet, June 25) # # #

Roundtable Weekly, Terrorism Risk Insurance Program, TRIA

October 4, 2019

Roundtable Weekly

House Hearing on TRIA Reauthorization Announced for Oct. 16

TRIA

House Financial Services Committee Chairwoman Maxine Waters (D-CA), above, yesterday announced an Oct. 16 subcommittee hearing that will focus on “Protecting America: The Reauthorization of the Terrorism Risk Insurance Program.” (Committee news release, Oct. 3)Additionally, Financial Services Committee Member Carolyn Maloney (D-NY) will host a roundtable discussion on the reauthorization of the Terrorism Risk Insurance Act (TRIA) on Oct. 8 in New York City.With TRIA currently set to expire at the end of 2020, a long-term, clean reauthorization is a top priority for The Real Estate Roundtable. Yesterday, TRIA was a key topic of discussion during meetings of The Roundtable’s Homeland Security Task Force and Real Estate Capital Policy Advisory Committee in New York City. TRIA was originally enacted in 2002 in response to the inability of insurance markets to predict, price and offer terrorism risk coverage to commercial policyholders. The law was extended in 2005, 2007 and again in 2015 – following a 12-day lapse when Congress failed to complete their work on reauthorization at the end of 2014.The Roundtable and nearly 350 companies and organizations urged Congress last week to swiftly pass a long-term TRIA reauthorization. (Roundtable Weekly, Sept. 20)The Sept. 17 coalition letter notes, “The American business community remembers all too well the twelve-day lapse in the program in early 2015 and the disruption that lapse played in a variety of markets. We urge Congress to help provide much needed certainty by passing a long-term reauthorization of this important program without delay.”Absent TRIA, there is not sufficient insurance and reinsurance capital available to provide comprehensive terrorism coverage to U.S. insurance buyers,” the coalition states. (Reinsurance News, Sept. 17) A 2019 Marsh study shows the highest “take-up” rates for terrorism risk insurance are in the education, media, financial institutions, real estate, hospitality and gaming, and health care sectors – all above 70%.During an October 1 podcast episode of “Through The Noise,” Roundtable President and CEO Jeffrey DeBoer noted, “Businesses and facilities of all types need to see the terrorism risk insurance program extended. This need applies to hospitals, all commercial real estate buildings, educational facilities, sports facilities, NASCAR and theme parks, and really any place where commercial facilities host large numbers of people.”# # #

GSE Reform, Roundtable Weekly

October 4, 2019

Roundtable Weekly

Trump Administration Allows Fannie, Freddie to Retain Earnings in Move Toward Privatization

Fannie Mae Freddie Mac GSE Reform

The Trump Administration took a key step on Sept. 30 to release Fannie Mae and Freddie Mac from conservatorship by allowing them to retain a total of $45 billion in earnings annually. (Wall Street Journal, Sept. 30)Fannie and Freddie received $191 billion in government support during the financial crisis, but since entering conservatorship Sept. 6, 2008, they have paid the Treasury $292 billion in dividends, according to research from Keefe, Bruyette & Woods. (Reuters, March 27)Under their modified governing agreements, Fannie Mae will now be allowed to retain $25 billion and Freddie Mac $20 billion annually (Bloomberg, Sept. 30)The Treasury Department and Federal Housing Finance Agency (FHFA) jointly announced the modifications to the Government-Sponsored Enterprises’ (GSEs) Preferred Stock Purchase Agreements (PSPAs) – designed in the wake of the financial crisis to ensure Fannie and Freddie maintain positive net worth, meet outstanding obligations and continue providing liquidity to the multi-trillion dollar mortgage market. (Fannie Mae Capital Agreement and Freddie Mac Capital Agreement) “These modifications are an important step toward implementing Treasury’s recommended reforms that will define a limited role for the Federal Government in the housing finance system and protect taxpayers against future bailouts,” said U.S. Treasury Secretary Steven T. Mnuchin. (Treasury news release, Sept. 30)FHFA Director Mark Calabria – Fannie and Freddie’s chief regulator – stated, “FHFA commits to working with Treasury in the coming months to amend the share agreements and further advance broader housing finance reform. These reform goals include limiting the government’s role in housing finance, increasing marketplace competition, focusing on affordable housing, and sustainable homeownership. The status quo is not an option. Now is the time to act.” The Washington Post reported on Oct. 2 that Fannie, Freddie, and the Federal Housing Administration guarantee 33 percent more debt than before the housing crisis, more than at any other point in U.S. history.In Congress, Senate Banking Committee Chairman Mike Crapo (R-ID) on Feb. 1 released an outline for reforming the nation's housing finance system, including the GSEs (Crapo Statement and Housing Reform Outline, Feb. 1). At the end of March, Crapo’s committee held two days of hearings on reforming the multi-trillion dollar housing finance markets. (Roundtable Weekly, March 29)The Real Estate Roundtable and 27 industry organizations on March 1 submitted principles for reforming the GSEs. The letter emphasized that compelling evidence must show the private market is capable of an expanded role before efforts are made to reduce the GSEs' current housing finance footprint. "Ultimately, we believe any reform, be it administrative or legislative, must seek to further two key objectives: 1) preserving what works in the current system, while 2) maintaining stability by avoiding unintended adverse consequences for borrowers, lenders, investors, or taxpayers." (Roundtable Weekly, March 1)# # #

Infrastructure, Roundtable Weekly

October 4, 2019

Roundtable Weekly

The Roundtable and Trade Associations Urge Congress to Pass Transportation Reauthorization before Sept. 2020 Expiration

Infrastructure

The Real Estate Roundtable and more than 150 national trade associations urged Congress this week to reauthorize the Highway Trust Fund – the nation’s primary source for road and mass transit funds – ahead of its September 30, 2020 expiration. (Coalition letter, Sept. 30)The coalition, led by the National Association of Manufacturers and the Associated General Contractors, wrote to Senate Majority Leader Mitch McConnell (R-KY) and Senate Minority Leader Chuck Schumer (D-NY) on Monday supporting a long-term, robustly-funded surface transportation reauthorization bill. (NAM news release, Sept. 30)The Infrastructure Working Group’s letter notes the unanimous passage in July of S. 2302, America's Transportation Infrastructure Act of 2019, by the Senate Environment and Public Works (EPW) Committee. S. 2302 would authorize $287 billion over five years to repair and maintain the nation's surface transportation. (Roundtable Weekly, Aug. 2)EPW’s bipartisan approval of S. 2302 may provide momentum for the full Senate to consider a package that addresses recommendations in the coalition’s letter, including:Significantly increasing direct federal investments in infrastructure;Fixing chronic challenges and recurring shortages in key federal infrastructure accounts such as the Highway Trust Fund;Complementing and strengthening financing tools, such as municipal bonds, that successfully deliver infrastructure investments at the federal, state and local levels;'Facilitating opportunities for private investment in U.S. infrastructure; andCreating efficiencies in the federal permitting process, while continuing to provide environmental protections.In related news, last week the Senate Appropriations Committee advanced a bill (31-0) to allocate federal dollars to fund the agencies responsible for transportation, housing assistance, and community development. (Appropriations Committee news release, Sept. 19). The spending bill – covering federal FY 2020, which started on Oct. 1 – supports the Gateway Program, a proposed $30 billion modernization of Amtrak’s Northeast Corridor connecting New Jersey and New York City. Gateway would double rail capacity for the biggest train traffic bottleneck on the East Coast. (Senate Appropriations Markup, Sept. 26, and BGov, Sept. 24)The Roundtable continues to provide infrastructure policy recommendations to Congress. (Roundtable Weekly, May 3, 2019, and March 22, 2019). Additionally, Roundtable President and CEO Jeffrey D. DeBoer discussed the role of public-private partnerships in modernizing the nation’s infrastructure on CNBC's Squawk Box in June 2017.# # #

News

October 4, 2019

Roundtable Weekly

ULI Releases “Emerging Trends in Real Estate 2020”; Podcast Features Roundtable’s DeBoer on Industry Issues

CRE Trends Policy Landscape Roundtable Weekly

The publication Emerging Trends in Real Estate 2020, released by the Urban Land Institute (ULI) and PwC, reports that U.S. real estate remains a favored asset class, as economic uncertainty and societal changes have resulted in successful industry adaptations to space design, development and business operations. "Throughout this period of extended economic growth, real estate development has been dominated by creative mixed-use projects that have revived many urban areas,” said ULI Global Chairman W. Edward Walter. “Going forward, those who continue to innovate with spaces that can be easily be repurposed as cities evolve will have a competitive edge. Staying ahead of change means being flexible and adaptable.” (ULI news release, Sept. 19)Trends highlighted in the report include: ESG – There is a growing commitment to the tenets of ESG (environmental, social and governance) principles among corporations in general and real estate in particular. Sustainability evaluation is becoming a checklist item for institutional investors domestically and worldwide. Strong interest by millennials in environmentally and socially conscious business practices is a major factor driving this trend.Infrastructure – Real estate professionals waiting for a federal solution to America’s infrastructure needs are looking to states and localities that are committed to improved infrastructure as a foundation for economic growth.Housing Affordability has reached a crucial point, even in markets that previously boasted of low-cost housing. There is a rise in co-living arrangements, among older as well as younger generations.Hipsturbia – The live-work-play districts that spurred 24-hour downtowns in the 1990s has spread to many suburban communities, which are seeking to become hip destinations, or “hipsturbs.” The key to success: transit access, walkability, and abundant retail, restaurant and recreation options.Technology – Property managers are turning to technology solutions for productivity enhancements and improved operational efficiency. Demand is also increasing from occupants and capital sources for technological sophistication across all sectors.The report also notes that the industrial/distribution sector continues to be ranked highest for investment and development prospects, reflecting the impact of e-commerce and rising demand for storage and delivery facilities. Multifamily and single-family housing are also highly favored, as housing needs continue to change for millennials and baby boomers. Societal trends and public policy issues affecting commercial real estate are also featured in an Oct. 1 interview with Roundtable President and CEO Jeffrey DeBoer (left in photo above) during an episode of the podcast, “Through The Noise.” In a wide-ranging, 50-minute interview, DeBoer explains The Roundtable’s role in industry efforts in Washington, including terrorism insurance, affordable housing needs, energy efficiency and opportunity zones. DeBoer states in the podcast, ““Whether rural or urban; multifamily or office … we're working together as an industry and talking about how development projects contribute to jobs and local communities. Commercial real estate provides 70% of local budgets to pay teachers and build roads. Healthy, strong real estate is good for everyone and helps every part of our society.”Public policies affecting CRE will be discussed during The Roundtable’s Fall Meeting on Oct. 30 in Washington, where guests will include U.S. Housing and Urban Development (HUD) Secretary Ben Carson. # # #

September 30, 2019

Policy Comment Letter

2019_09-30_IWG_SurfaceReauthorization

Policy Landscape

September 27, 2019

Roundtable Weekly

Congress Passes Government Funding Through November 21; President Trump Expected to Sign

Policy Landscape

A “Continuing Resolution” (CR) to fund the government at current levels through November 21 was approved by the Senate yesterday after House passage last week, sending the stopgap measure to President Trump for his signature. A senior White House official said President Trump will sign the CR, which avoids the threat of a government shutdown on October 1, the start of the government’s fiscal year. The measure includes funding for programs of importance to commercial real estate, including the EB-5 Immigrant Investor Regional Center Program and National Flood Insurance Program. (BGov, Sept. 26 and Roll Call, Sept. 23)The CR gives lawmakers more time to negotiate spending levels and policy differences, since none of the 12 annual discretionary spending bills have been signed into law yet. One of the most contentious issues in the appropriations process is funding for a wall on the southern border, which is overseen by the Department of Homeland Security. Disagreements over wall funding led to the historic 35-day partial government shutdown in 2018–2019. (Politico, Jan. 25)President Trump’s request for $5 billion for a southern border wall resulted in Democrats proposing an amendment in the Senate Appropriations Committee on Thursday to block the funds. (Washington Post, Sept. 26)Senate Appropriations Chairman Richard C. Shelby (R-AL) said, “As we close out this month, I think, we must acknowledge the progress we have made while also recognizing that we still have a long way to go in fulfilling our duty to fund the government. Most importantly for those negotiations to end in success ... my Democratic colleagues and the president will have to reach an agreement, once again, on border security."The appropriations dispute exists despite an agreement over the summer between Congress and the administration on a broad deal that allocated more than $2.7 trillion in discretionary federal spending over two years and suspended the debt ceiling until July 2021. (Roundtable Weekly, Aug. 2) Congress will return from a two-week recess on Oct. 15 to face the Nov. 21 funding deadline, or the prospect of another partial government shutdown. The tight timeframe poses the possibility of more stopgap measures if differences over funding levels cannot be resolved. Another scenario is the prospect of a full-year CR. (CQ and Politico, Sept. 26)# # #

Energy Policy

September 27, 2019

Roundtable Weekly

Senate Committee Advances Portman-Shaheen Energy Efficiency Bill

Energy Policy PortmanShaheen

The Senate Energy and Natural Resources (ENR) Committee passed a bill on Wednesday that emphasizes voluntary measures and incentives to drive energy efficiency improvements in U.S. buildings, manufacturing, and other economic sectors. The Energy Savings and Industrial Competitiveness (ESIC) Act (S. 2137) – sponsored by Senators Rob Portman (R-OH), above left, and Jeanne Shaheen (D-NH), right, and long endorsed by The Real Estate Roundtable – was advanced by the panel, along with several other energy bills.Senator Lisa Murkwoski (R-AK), chairman of the ENR Committee, noted during the hearing, “For several Congresses now, [S. 2137] has been the Senate’s flagship effort on energy efficiency. I’m hopeful that we are going to be able to see this into law.”The ESIC Act passed the committee by a substantial margin (14-6), although provisions regarding voluntary building energy codes failed to garner a majority of Republican votes. Murkowski added that the codes sections still needed more work to gain fuller bipartisan support. She was optimistic that the “prevailing concerns” of industry stakeholders could be resolved. (Committee video, Sept. 25) The ESIC Act would improve current laws by adding “open government” and transparency provisions that do not currently apply to the development of building energy codes. Real estate and other stakeholders would be provided a platform to comment on DOE code proposals affecting the industry. The measure also includes a new requirement that would compel the U.S. Department of Energy (DOE) to consider costs and small business impacts as part of the codes development process. (Roundtable support letter for S. 2137)S. 2137 would also direct the two federal agencies that separately collect critical nationwide data on building energy use – namely, the Energy Information Administration and the Environmental Protection Agency – to coordinate on their respective programs and take steps to ensure higher quality, more consistent data.The ESIC Act “is exactly the kind of smart, forward-looking policy that will help building owners respond to our modern, evolving economy” Roundtable President and CEO Jeffrey DeBoer stated in a Senate news release upon the bill’s introduction this summer. (Roundtable Weekly, July 19) (Video of DeBoer’s statement)Further negotiations to refine the ESIC Act are anticipated in the coming weeks before it might advance to the full Senate for a vote. Companion legislation is pending in the House (H.R. 3962), sponsored by Peter Welch (D-VT) and David McKinley (R-WV).# # #

Cannabis

September 27, 2019

Roundtable Weekly

House Passes Legislation to Permit Banking Services for Legal Cannabis-Related Businesses

Cannabis Capital and Credit

Real Estate Roundtable President and CEO Jeffrey DeBoer The House of Representatives on Sept. 11 passed the Secure and Fair Enforcement (SAFE) Banking Act [H.R. 1595 (116)] – a Roundtable-supported bill that would allow federally regulated banks to provide mortgage and financial services to state-licensed, cannabis-related businesses (“CRBs”) without the threat of federal penalties. (Wall Street Journal, Sept. 25)The SAFE Banking Act would also provide protection from the threat of federal enforcement action for real estate owners, law firms and other businesses that provide services to state-approved CRBs.The bill – authored by Reps. Ed Perlmutter (D-CO) and Denny Heck (D-WA) and cosponsored by Reps. Steve Stivers (R-OH) and Warren Davidson (R-OH) – passed by a vote of 321 to 103.Today, 47 states, four U.S. territories, and the District of Columbia – representing 97.7 % of the U.S. population – have legalized some form of recreational or medical marijuana, including CBD oil. (Rep. Perlmutter news release, Sept. 25)Rep. Perlmutter stated, “Thousands of employees, businesses and communities across this country have been forced to deal in piles of cash because of the conflict between state and federal law. After six years of working on this bill, the SAFE Banking Act will go a long way in getting cash off our streets and providing certainty so financial institutions can work with cannabis businesses and employees.” The Real Estate Roundtable sent a letter urging swift enactment of SAFE Act in March to the leadership of the House Financial Services and Judiciary Committees. Roundtable President and CEO Jeffrey DeBoer noted in the letter, “H.R. 1595 clarifies that banks could not take adverse action on a loan to a real estate owner solely because that owner leases property to a legitimate CRB. The measure also protects sellers and lessors of real estate and other CRB ‘service providers’ by clarifying that proceeds from legitimate marijuana-related transactions do not derive from unlawful activity, and thus do not provide a predicate for federal criminal money laundering.” (Roundtable letter, March 25, 2019)In the Senate, the Banking, Housing and Urban Affairs Committee in July held a hearing on the banking-related challenges faced by CRBs. The hearing featured testimony by Sens. Cory Gardner (R-CO) and Jeff Merkley (D-OR), co-sponsors of the SAFE Banking Act (S. 1200). Sen. Gardner stated on Wednesday, “The conflicting federal and state marijuana laws make it difficult for legitimate businesses to use basic financial services, and this bipartisan legislation gets Washington out of the way and gives them the access they need to do business and pay taxes. Today’s historic action in the people’s House adds to the momentum the SAFE Banking Act gained following the Banking Committee’s hearing in July. The Senate should move forward with the SAFE Banking Act and deliver it to the President for his signature.” (Gardner news release, Sept. 25)In an interview with Politico, Senate Banking Chairman Mike Crapo (R-ID) said, “"This is an issue in which I have seen strong support not only across the country from various banking institutions, even the small community banks in states that don't have the issue, but also among colleagues on both sides of the aisle," he said. "I think there will be good support for it." (Politico, Sept. 27)Sen. Crapo also said he may consider new additions to a Senate cannabis banking bill that could include anti-money laundering measures. Amendments were added to the House SAFE Banking Act to make it more appealing to Senate leadership, yet prospects for the bill’s passage in the Senate remain uncertain. (MarketWatch and Politico, Sept 26)# # #

Terrorism Risk Insurance Program

September 20, 2019

Roundtable Weekly

Broad Business Coalition Urges Congress to Extend Terrorism Risk Insurance Act (TRIA)

TRIA

A broad business coalition urged Congress in a September 17 letter to swiftly pass a long-term reauthorization of the Terrorism Risk Insurance Act (TRIA), which is currently set to expire at the end of 2020. Nearly 350 companies and organizations signed the letter including The Real Estate Roundtable. (Coalition Letter ) TRIA was originally enacted in 2002 in response to the inability of insurance markets to predict, price and offer terrorism risk coverage to commercial policyholders. The law was extended in 2005, 2007 and again in 2015 – following a 12-day lapse when Congress failed to complete their work on reauthorization at the end of 2014.The coalition letter notes, “The American business community remembers all too well the twelve-day lapse in the program in early 2015 and the disruption that lapse played in a variety of markets. We urge Congress to help provide much needed certainty by passing a long-term reauthorization of this important program without delay.” The coalition emphasizes that TRIA has served as a vital public-private risk sharing mechanism, ensuring that private terrorism risk insurance coverage remains available to commercial businesses, educational institutions and non-profit organizations at virtually no cost to the taxpayer. According to a 2019 Marsh study, the education, media, financial institutions, real estate, hospitality and gaming, and health care sectors had the highest 'take-up' rates among the 17 industry segments surveyed – all above 70%.Additionally, a 2018 Treasury Department report stated that “the Program has made terrorism risk insurance available and affordable in the United States, and the market for terrorism risk insurance has been relatively stable for the past decade.” The letter emphasizes, “The undersigned organizations urge Congress to promptly enact a ‘clean’ long-term extension of this vital program. Making changes to the TRIA mechanism to increase insurer retentions could affect the ability of many insurers, particularly smaller and mid-sized companies, to write risks or markets altogether, which ultimately impacts the ability of policyholders to secure adequate coverage.Absent TRIA, there is not sufficient insurance and reinsurance capital available to provide comprehensive terrorism coverage to U.S. insurance buyers,” the coalition states. (Reinsurance News, Sept. 17) # # #

Affordable Housing

September 20, 2019

Roundtable Weekly

California Law Reflects National Affordable Housing Trend in Rent Regulations

Affordable Housing

California lawmakers passed legislation (AB 1482) September 11 that imposes a statewide cap limiting annual rent increases to 5% after inflation – the latest measure from a growing list of jurisdictions seeking to address housing affordability though rent regulations. California Governor Gavin Newsom (D) has said he will sign the bill. (New York Times, Sept. 11 and NMHC, Sept. 12) In a state of nearly 40 million people, California’s rent control measure could affect an estimated 8 million residents of rental homes and apartments. (Realtor Magazine, Sept. 12). The 5% rent increase cap would not apply to housing built within the last 15 years or to single-family homes that are not corporate-owned. National Multifamily Housing Council (NMHC) President Doug Bibby responded, “After Californians overwhelmingly rejected the rent control ballot initiative less than a year ago, lawmakers today went against their constituents by passing a measure that will discourage investment, shrink the availability of affordable housing that already exists and squeeze even more people struggling in the housing market. This makes the problem worse. The housing affordability crisis is real, real Americans are being harmed by it every day and we need real solutions – not restrictive policies that we know don’t work." (NMHC news release, Sept. 12) An interactive national map, above, by the NMHC details the trend in state capitals addressing rent control measures. In New York, a rent control law signed by Governor Andrew Cuomo on June 14 directly impacts about 40 percent of New York City's apartment stock; freezes "stabilized" NYC apartments from moving to market rental rates; and discourages owners from modernizing aging housing. (Wall Street Journal, June 14 and Roundtable Weekly, June 21). Meanwhile, candidates on the 2020 campaign trail are offering plans to address the nation's affordable housing needs. (NPR, June 18) Affordable housing proposals in Congress include an expansion of the low-income housing tax credit program (e.g., S. 1703, H.R. 3077), and a similar tax credit geared to moderate-income, workforce housing (S. 3365, 115th Cong.). Housing and Urban Development Secretary Ben Carson recently offered a strategy to boost affordable housing by encouraging localities to ease their own building restrictions. (Politico, June 14). Secretary Carson is scheduled to discuss housing policy issues with Roundtable members during the organization’s Fall Meeting on October 30 in Washington. # # #

CFIUS Reforms

September 20, 2019

Roundtable Weekly

Treasury Releases Regulations Addressing National Security Concerns and Foreign Investment in Real Estate

CFIUS Reform Homeland Security

The Treasury Department yesterday issued proposed regulations to comprehensively implement the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which seeks to more closely scrutinize certain investments and real estate transactions potentially affecting national security. (New York Times, Sept. 17) The proposed regulations include reforms to the Committee on Foreign Investment in the United States (CFIUS) – an interagency committee authorized to review certain transactions involving foreign investment in the United States for national security concerns. The CFIUS reforms in FIRRMA received broad support in Congress and were signed by President Trump on August 13 as part of a defense funding bill. (Wall Street Journal, Aug. 15 and Roundtable Weekly, August 17) The Treasury released the rules, which affect real estate and private equity transactions, in two parts:Provisions Pertaining to Certain Investments in the United States by Foreign Persons (31 C.F.R. part 800)Provisions Pertaining to Certain Transactions by Foreign Persons Involving Real Estate in the United States (31 C.F.R. part 802)The second part of the regulations clearly demonstrate that the federal government is intent on reviewing more real estate transactions for security concerns, while considering country-specific exemptions for the first time. The text affecting real estate includes, "FIRRMA expands CFIUS’s jurisdiction to include certain types of real estate transactions involving the purchase or lease by, or a concession to, a foreign person of certain private or public real estate located in the United States.”The rule continues, “FIRRMA focuses on two general categories of real estate and provides certain exceptions. The first category of real estate is described by its relation to airports and maritime ports. The second category of real estate is described by its relation to U.S. military installations and other facilities or properties of the U.S. Government that are sensitive for national security reasons."An analysis of the proposed CFIUS reform regulations is available via Bloomberg Law.The full text of the proposed regulations and frequently asked questions can be found on the Department of the Treasury’s website. The Roundtable plans to prepare comments, which are due by October 17, 2019 before the law is scheduled to go into effect in February, 2020. # # #

Condominium Tax Accounting

September 20, 2019

Roundtable Weekly

Roundtable Requests Regulatory Correction to Unfair Tax Rules Affecting New Condo Construction

Condonimiums

The Roundtable on August 21 wrote to Treasury Secretary Steven Mnuchin requesting regulatory relief from existing tax accounting rules that unfairly accelerate federal income tax liability for new condominium construction. (Roundtable letter ) Current condo tax accounting rules require multifamily developers of condominium buildings with five or more residential units to recognize income and pay tax on their expected profit as construction is ongoing — well before pre-sale transactions are closed and full payment is due from the buyer. The existing rules create a mismatch of cash flow and tax liability. Home builders of single-family homes, townhouses and row houses are not subject to this accounting rule restriction. Roundtable President and CEO Jeffrey DeBoer states in the letter, “The existing, discriminatory tax rule for condominium construction is particularly harmful in light of the significant and often measureable economic, environmental, and social benefits of high-density residential development. High-density development brings down the costs of infrastructure, as well as the costs of key public services: police, fire, and emergency medical assistance. The environmental benefits include reduced vehicle emissions and smaller ecological footprints that minimize encroachment on farms, forests, and other sensitive areas. In addition, research links high-density growth to greater labor productivity and economic innovation.” The Roundtable’s letter details how the completed contract method of accounting – rather than the percentage of completion method – would more accurately fit the economics of condominium construction. (Tax Notes, August 23)In 2008 the IRS and Treasury released proposed regulations (REG-120844-07) under section 460 that would treat individual condo units as townhouses or rowhouses. The Roundtable letter explains, “The Treasury Department can solve this problem, however, and provide a lift to homebuilding and the economy by simply finalizing a previously proposed regulation that regrettably fell off the Department’s regulatory agenda in the last Administration. Pending, proposed Treasury regulations would modify what is considered a home construction contract and clarify that condominium construction qualifies for the completed contract method of accounting.” A House bill introduced in the last Congress by Reps. Carlos Curbelo (R-FL) and Joe Crowley (D-NY) aimed to correct this disparity. Although the Fair Accounting for Condominium Construction Act (H.R. 3659) stalled in 2017, it could serve as a template for development of new legislation to correct current condominium tax accounting rules. # # #

September 17, 2019

Policy Comment Letter

2019-09-17 TRIA Coalition letter

Policy Landscape

September 13, 2019

Roundtable Weekly

Congress Returns to Packed Agenda, Funding Deadlines

Policy Landscape

Congress returned this week from recess to a full legislative agenda and a September 30 government funding deadline. (Roll Call, Sept. 10) None of the 12 annual discretionary spending bills have been signed into law yet. Lawmakers still must negotiate appropriations affecting contentious issues such as funding for a wall on the southern border, which is overseen by the Department of Homeland Security. Disagreements over wall funding led to the historic 35-day partial government shutdown in 2018–2019. (Politico, Jan. 25) Of interest to real estate, funding for the EB-5 Immigrant Investor Regional Center Program and the National Flood Insurance Program (NFIP) is also set to expire September 30 – the end of the current fiscal year. FY’20 begins October 1. (Roundtable Weekly, Feb. 15). In order to give lawmakers more time to negotiate spending levels and policy differences, congressional leaders have endorsed a stopgap funding bill, or Continuing Resolution (CR). The CR emerging from discussions between House and Senate appropriators is expected to run through November 22. Both EB-5 and NFIP are expected to be included within a funding extension measure. (Wall Street Journal, Sept. 10 and The Hill, Sept. 9) Several tax priorities are also vying for attention and could form the basis for an end-of-year agreement on tax legislation. These issues include tax extenders, clean energy incentives and tax technical corrections. On September 4, the National Multifamily Housing Council, The Real Estate Roundtable, and other industry organizations sent a letter to Congressional tax-writers urging them to enact a technical correction related to the cost recovery period for residential rental property. The correction would clarify that taxpayers electing out of the new limitation on business interest deductibility can depreciate their existing rental properties over 30 years, rather than 40 years. The 30-year period applies to newly acquired or constructed residential rental properties, and should also apply to existing holdings. (Letter on Cost Recovery Period for Residential Rental Property under Section 163(j), Sept. 4) Congress is scheduled to be in legislative session for three weeks in September, three weeks in October and a few weeks in November. Both chambers aim to adjourn for the year by December 13, 2019. # # #

Tax Policy

September 13, 2019

Roundtable Weekly

Top Senate Democratic Tax-Writer Proposes New Capital Gains Regime, Ending Preferred Rate

Mark to Market Ron Wyden

On Thursday, Senate Finance Committee Ranking Member Ron Wyden (D-OR) presented and released a detailed white paper outlining his plan to reform the taxation of capital gains. (News Conference Video, Center for American Progress Action Fund, Sept. 12) Entitled “Treat Wealth Like Wages,” the proposal is billed by the top Democratic tax-writer in the Senate as “a plan to fix our broken tax code, ensure the wealthy pay their fair share, and protect Social Security.” Sen. Wyden’s proposal would end the preferred tax rate for capital gains and impose annual mark-to-market taxation of capital assets for taxpayers above certain income thresholds.Both proposals represent dramatic departures from existing tax law. They are direct challenges to two fundamental principles that support capital formation, entrepreneurship, and long-term investment: (1) tax on capital gain should be deferred until it is realized, and (2) capital gain should be subject to a reduced tax rate.The mark-to-market rules, which Sen. Wyden refers to as “anti-deferral accounting rules, would apply to taxpayers averaging $1 million in income or $10 million in assets over the last 3 years. “Tradable” assets such as stocks and bonds would be subject to annual taxation of unrealized gains. Taxpayers could take a deduction for unrealized losses.While “non-tradable” assets like real estate would not be subject to mark-to-market on an annual basis, they would be subject to an additional layer of tax – a “look-back charge” – for the theoretical benefit of the tax deferral when the asset is sold, or certain other revaluation events occur. This look-back charge would be in addition to the capital gains tax, which would be set at the top ordinary income tax rate. The structure of the look-back charge is undefined. Sen. Wyden’s paper describes a few options: (1) an interest charge on deferred tax; (2) a yield-based tax designed to eliminate the benefits of deferral; or (3) a surtax based on an asset’s holding period. The look-back charge would also be imposed at death, even if the asset is not sold (the basis of the asset would step up at death).Special rules would apply for pass-through entities. For example, the Wyden proposal would require a partnership to calculate the lookback charge when real estate is contributed to or distributed from the partnership – and report each partner’s share.Built-in gain on existing assets would be subject to the tax, paid over an unspecified transition period. The estimated $1.5 - $2 trillion of revenue raised from the proposal would be dedicated towards shoring up the long-term solvency of Social Security. (CNBC, Sept. 12)“Congress should strengthen tax rules that promote capital formation, not weaken them, which is what Sen. Wyden’s proposal would do,” said Real Estate Roundtable President and CEO Jeffrey DeBoer. He added, “Rewarding risk-taking, long-term investment, and entrepreneurship is at the heart of the American economic model. By eliminating any tax incentive to pursue projects that have a pay-off that is far in the future, the proposal would discourage businesses and individuals from undertaking the long-term, capital-intensive investments that drive productivity and economic growth by deepening and enriching our Nation’s capital stock, including its commercial real estate.” Sen. Wyden invited comments about the proposal on a wide variety of issues, such as how to calculate the look-back charge and whether debt should reduce the value of property when measuring a taxpayer’s aggregate assets. The Roundtable’s Tax Policy Advisory Committee (TPAC) plans to review the proposal in detail and submit comments. # # #

Energy Policy

September 13, 2019

Roundtable Weekly

Portman-Shaheen Energy Efficiency Bill Considered In Senate Hearing

Energy Policy PortmanShaheen

The Senate’s Energy Subcommittee on Wednesday held a hearing that considered bipartisan legislation to help further advance energy efficiency in U.S. buildings without federal regulations – but through data-driven, voluntary measures.The Senate panel assessed the Energy Savings and Industrial Competiveness (ESIC) Act (S. 2137) – co-sponsored by Senators Jeanne Shaheen (D-NH), above at left, and Rob Portman (R-OH), right, –along with nine other energy policy bills at the subcommittee’s Wednesday hearing. The Roundtable is a strong supporter of the Portman-Shaheen bill.Sen. Portman testified at the hearing, noting that the ESIC Act passed the Senate by an overwhelming margin in a prior session of Congress. He remarked that the legislation contains no “heavy-handed mandates” and that its building code sections are “completely voluntary.” He added that the measure would result in “greenhouse gas emissions reductions [that] are equivalent to taking about 11 million cars off the road.” (Portman press release, Sept. 11.)Sen. Shaheen’s testimony emphasized that “energy efficiency is the cheapest, fastest way to deal with our energy needs,” and that the bill would produce a policy trifecta to reduce emissions, protect the environment, and create jobs. (Shaheen press release, Sept. 11.)The Roundtable submitted a letter for the hearing’s record to reiterate its support for the bill. Roundtable President and CEO Jeffrey D. DeBoer also spoke in support of the bill when it was announced at a press conference in July. (Video of DeBoer’s statement on Portman-Shaheen)The ESIC Act “is exactly the kind of smart, forward-looking policy that will help building owners respond to our modern, evolving economy” DeBoer stated in a Senate news release upon the bill’s introduction this summer. “The needs of business tenants have changed dramatically since the turn of the century to power the data centers, IT, and communications systems upon which our workforce depends. Building owners are meeting their tenants' 24/7 energy demands while constructing and managing their assets more efficiently – and reducing their carbon footprints." (Roundtable Weekly, July 19, 2019) Companion legislation to S. 2137 is pending in the House (H.R. 3962), sponsored by Peter Welch (D-VT) and David McKinley (R-WV). As the next step in the Senate’s process, a mark-up of S. 2137 by the full Senate Energy Committee is expected this fall.# # #

Housing Finance Reform

September 13, 2019

Roundtable Weekly

Senate Banking Committee and Administration Weigh In On GSE Reform Plan; FHFA Announces New Multifamily Cap Structure

GSE Reform Housing Finance Reform

The Senate Banking Committee's September 10 hearing on "Housing Finance Reform: Next Steps" focused on the Trump Administration's efforts to reform the U.S. housing finance system, including their proposal to overhaul the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac. Treasury Secretary Steven Mnuchin testified before the committee about the Administration's Housing Reform Plan released last week to revamp and recapitalize the GSEs before releasing them from conservatorship. The Administration’s goal is to reduce the federal government’s footprint in housing finance, increase the role of the private sector and private capital in the market and, eventually, return Fannie Mae and Freddie Mac to private shareholder ownership. Mnuchin testified that if Congress fails to act, the Administration will pursue an agreement with the GSEs' regulator, the Federal Housing Finance Agency (FHFA) to change the terms of the government's bailout agreements reached 11 years ago.The FHFA announced today a revised cap structure on the multifamily businesses of Fannie Mae and Freddie Mac. The new multifamily loan purchase caps will be $100 billion for each organization, a combined total of $200 billion in support to the multifamily market, for the five-quarter period Q4 2019 – Q4 2020. The new caps are significantly higher than the existing ones and apply to all multifamily business – no exclusions. To ensure a strong focus on affordable housing and traditionally underserved markets, FHFA directs that at least 37.5 percent of the Enterprises' multifamily business be mission-driven, affordable housing.After Fannie and Freddie received $191 billion in government support during the financial crisis of 2008 and entered conservatorship, they have become profitable. Under the Administration's plan, Fannie and Freddie profits would no longer go to Treasury, but would be dedicated to building their capital bases. (Wall Street Journal, Sept. 10)Mnuchin also testified that Treasury's plan “would preserve the longstanding government support of the 30-year, fixed-rate mortgage loan.” The Treasury plan acknowledges the disincentives posed by regulatory barriers such as rent control and calls for enhancing private involvement in multifamily lending by refocusing the GSEs on affordable and workforce housing.Democratic senators clashed with Republicans during Tuesday’s hearing, emphasizing the reform outlines would raise home borrowing costs and neglect lower-income homeowners. Sen. John Kennedy (R-LA) called for a specific Administrative proposal, stating, "This whole thing is a car wreck. It’s a dumpster fire...We spent $190 billion of taxpayer money, and we’re in worse shape.” (AP, Sept. 10)The Roundtable submitted comments this week in advance of the hearing (Roundtable letter, Sept. 9). The Roundtable and 27 industry organizations also submitted principles for reforming the GSEs in March. (Roundtable Weekly, March 1)The path to reaching bipartisan consensus on housing finance reform remains unclear, especially before the 2020 presidential election. Housing finance reform will be a focus of discussion with Housing and Urban Development (HUD) Secretary Ben Carson during The Roundtable’s Fall Meeting on October 30 in Washington.# # #

September 11, 2019

Policy Comment Letter

2019- 09-11ESIC Act (S 2137) FINAL Real Estate Roundtable Support Letter

September 9, 2019

Policy Comment Letter

9-9-19 Comment Letter of Housing Reform Plan – Senate Banking

August 21, 2019

Policy Comment Letter

2019-08-21 condo construction – Treasury

August 21, 2019

Policy Comment Letter

condo construction – Treas. ltr 08.21.2019

News Release, Q1 Sentiment Index

August 16, 2019

Roundtable Weekly

Commercial Real Estate Executives Report Stable Market Conditions for Q3

Despite Positive Sentiment About Q3 and Future Market Conditions, Industry Remains Cautious(WASHINGTON, D.C.) — Commercial real estate industry leaders continue to see balanced and stable economic market conditions, according to The Real Estate Roundtable’s 2019 Q3 Sentiment Index released today. “As our Q3 Index shows, industry executives are entering the second half of the year with confidence in stable market fundamentals, supported by a solid economy with low employment,” said Real Estate Roundtable President and CEO Jeffrey DeBoer. “Although there is political uncertainty and the economic recovery is historical in length, commercial real estate market dynamics remain sound, with balanced supply and demand in most markets, and debt and equity readily available, particularly for high grade investments,” DeBoer added.The Roundtable’s Q3 2019 Sentiment Index’s registered a score of 50 — a one point decrease from the previous quarter. [The Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive.] Both the Current-Conditions Index of 53 and Future-Conditions Index of 48 for this quarter remained the same from the previous quarter, reflecting the stabilized real estate market conditions and the overall economy. The report’s Topline Findings include: The Real Estate Roundtable Q3 2019 Sentiment Index registered a score of 50 – a one point decrease from the previous quarter. Survey participants are confident in today’s market dynamics. However, many respondents feel the US real estate market has become fragmented during this cycle and is more accurately examined as a group of separate but correlated markets distinguished by geographic location and property type. Many respondents feel a change in the market is imminent, but are unable to identify a definitive potential cause for a decline as they recognize economic fundamentals appear strong. Nearly half of respondents suggested market conditions one year from now would be similar to the prevailing conditions today. Asset prices remain high for the best assets in the best locations. Many question whether the real estate cycle may be nearing an end and prices could decline in the near future. Sixty percent of respondents believe real estate asset values will be the same one year from now. Availability of debt and equity capital remains strong for high grade investments. Respondents identified a trend of renewed construction financing availability from financial institutions which had previously pulled back from the market.While 50% of survey participants reported Q3 asset values today are “about the same” compared to this time last year, 60% of respondents believe that one year from now, values will be “about the same” suggesting real estate asset pricing will remain steady through the remainder of the year. Some respondents believe there is still opportunity for growth for high quality assets in certain markets. Data for the Q3 survey was gathered in July by Chicago-based FPL Associates on The Roundtable’s behalf. View Full Report# # #

Climate and Immigration, Energy, Roundtable Weekly, Tax Policy

August 16, 2019

Roundtable Weekly

Senate Finance Committee Task Force Proposes Making Tax Deduction for Energy Efficient Buildings (sec. 179D) Permanent

A bipartisan group of Senate Finance Committee policymakers this week recommended the tax deduction for energy efficient commercial buildings (section 179D) should become a permanent provision in the federal tax code. Section 179D expired at the end of 2017. ( BloombergTax , Aug. 13) Senate Finance Chairman Chuck Grassley (R-IA), right, and Ranking Member Ron Wyden (D-OR), left, set up five bipartisan task forces in May to consider long-term solutions for more than 40 temporary provisions in the federal tax code that repeatedly expire and come up for renewal.Senate Finance Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) set up five bipartisan task forces in May to consider long-term solutions for more than 40 temporary provisions in the federal tax code that repeatedly expire and come up for renewal. Three of the task forces released reports on Wednesday, addressing the areas of cost recovery (e.g., sec. 179D) and energy (e.g., sec. 45L credit for energy-efficient new homes). In addition to recommending permanency for section 179D, the Cost Recovery Temporary Tax Policy Task Force led by Senators Mike Crapo (R-ID) and Ben Cardin (D-MD) noted that further improvements to the provision would accelerate its positive impact.The reports refer to extensive comments from stakeholders, including The Real Estate Roundtable and industry coalitions. The committee also posted further information about the temporary tax policies that the task forces examined. The task forces' "thorough and bipartisan approach will form the foundation of the committee's work to provide more certainty to temporary tax policy," Grassley said. "The next step will be to put together a legislative package based on the proposals that the taskforces received, the areas of consensus among the taskforce members and continued bipartisan discussions." (SFC news release, Aug. 13) In the House, the Ways and Means Committee on June 20 passed legislation to extend a host of expired and expiring tax credits through 2020, including section 179D. (Markup of House Tax Legislation and Roundtable Weekly, June 21) The Taxpayer Certainty and Disaster Tax Relief Act of 2019 (H.R. 3301) includes other provisions affecting real estate: • Credit for construction of new energy efficient homes (sec. 45L)• Credit for energy efficient improvements to existing homes (sec. 25C)• Exclusion of mortgage debt forgiveness (sec. 108(a)(1)(E))• Deductibility of mortgage insurance premiums (sec. 163(h)(3)(E))• New markets tax credit (sec. 45D) • Empowerment zone tax incentives (sec. 1391-97)Building Owners and Managers Association (BOMA) International President and Chief Operating Officer, Henry Chamberlain, testified before Ways and Means last year to support Section 179D's permanence. ( BOMA testimony -March 14, 2018)Building Owners and Managers Association (BOMA) International President and Chief Operating Officer, Henry Chamberlain, testified before Ways and Means last year to support Section 179D's permanence. (BOMA testimony, March 14, 2018) On a separate track from extenders and 179D is an energy efficiency tax proposal urged by The Roundtable and a broad coalition of real estate and environmental organizations. The groups urge House and Senate tax writers to establish an accelerated depreciation schedule for a new category of Energy Efficient Qualified Improvement Property installed in buildings – or "E-QUIP" – with a 10-year cost recovery period (Coalition E-QUIP Letter, May 8) Roundtable President and CEO Jeffrey DeBoer stated, "The purpose of establishing a new E-QUIP category in the tax code is to stimulate productive, capital investment on a national level that modernizes our nation's building infrastructure while helping to lower greenhouse gas emissions." (Roundtable Weekly, May 10) When Congress returns on September 9 from summer recess, additional changes to the Ways and Means extenders bill may be made as it moves to the House floor, and then to the Senate. However, passage of spending bills to fund the government beyond September 30 are considered must-pass legislation. Whether an extenders bill can be attached to an FY'20 appropriations bill is uncertain at this time. # # #Return to Top

Policy Comment Letter

OppZone Comment Letter – 7-1-19

June 27, 2019

Policy Comment Letter

2019-06-27 fabricated steel ltr – Sec Ross

June 6, 2019

Policy Comment Letter

2019-6-6 LIBOR Comment ltr

June 6, 2019

Policy Comment Letter

6-6-19 LIBOR Comment ltr

May 17, 2019

Policy Comment Letter

2019-05-17 EB-5 Reform Principles Letter — Final

May 6, 2019

Policy Comment Letter

2019-05-08 E-QUIP Letter

May 1, 2019

Policy Comment Letter

2019-05-01 SAFE Banking Act Senate Letter

April 29, 2019

Policy Comment Letter

2019-04-29 TI Letter

April 19, 2019

Policy Comment Letter

Real Estate Coalition ADS Tax Reform Letter to HWM and SFC 9-4-19

News

April 12, 2019

Bipartisan lawmakers unveil “Invest in America Act”

FIRPTA TCJA

Legislation would spur American job creation and investment in U.S. communities, infrastructure and Opportunity Zones (WASHINGTON, DC) — The American Institute of Architects (AIA) and The Real Estate Roundtable (RER) are pledging support for the “Invest in America Act” (H.R. 2210), which was unveiled yesterday afternoon by U.S. Reps. John Larson (D-CT) and Kenny Marchant (R-TX). The legislation has the potential to create as many as 284,000 American jobs and attract as much as $125 billion in global investment in U.S. communities, which would support addressing America’s aging buildings and crumbling infrastructure. The legislation does so by repealing the “Foreign Investment in Real Property Tax Act” (FIRPTA). Originally enacted in 1980, FIRPTA is an arcane tax that deflects global capital from U.S. cities and towns by imposing a capital gains tax on global investors that finance any U.S. real property. Consequently, the law greatly inhibits state and local leaders from partnering with global investors—in addition to leveraging domestic partners—to improve their communities, including renovating aging buildings; constructing roads, bridges, tunnels, hospitals and airports; developing affordable housing; and utilizing new Opportunity Zones. “Under current law, global investment is discouraged in the United States and investors are driven to other countries,” said AIA EVP/Chief Executive Officer Robert Ivy, FAIA. “This legislation will put the U.S. on equal footing in the competition for investment dollars, which can be put directly into American communities through partnerships with local and state governments. This will result in meaningful jobs not only for architects but other professionals in design and construction as well as manufacturing and service industries.” A partial repeal of FIRPTA occurred in 2015 with passage of the “Protecting Americans from Tax Hikes Act.” Changes to the law increased global investment in U.S. cities of all sizes and locations by 33 percent, proving that a full repeal would have a significant benefit to many more state and local economies. "The FIRPTA regime is an anti-competitive outlier that deflects global capital to other countries,” said RER President and CEO Jeffrey DeBoer. “Our infrastructure challenges demand a holistic approach and innovative solutions. Now is the time to build on the recent success of the 2015 reforms by eliminating FIRPTA outright and unlocking private capital for even more job growth and infrastructure improvements." Learn more about the legislation by visiting the Invest in America Coalition’s website.

April 11, 2019

Policy Comment Letter

2019-04-11 Main Street Employers 199A Permanence Letter

News

March 29, 2019

Roundtable Weekly

House Ways & Means Committee Signals Upcoming Tax Legislation; Roundtable Weighs in Regarding Carried Interest, FIRPTA Repeal

The House Ways and Means Committee this week signaled its upcoming tax policy priorities after holding a hearing on the 2017 Tax Cuts and Jobs Act (“TCJA”) entitled “The 2017 Tax Law and Who It Left Behind.” The March 27th hearing was the first one focused on the TCJA since Democrats took control of the House, with policymakers examining which provisions they plan to reverse or refine. House Ways and Means Committee Chairman Richard Neal (D-MA) signaled the committee's upcoming tax policy priorities . Ways and Means Chairman Richard Neal (D-MA) on Wednesday also announced the committee will hold its first legislative mark-up next week on bills to encourage retirement savings (H.R. 1007) and bipartisan IRS reform. “Our plan here is to move legislation and we’re going to start doing that next week,” Neal said. He indicated that bills addressing other tax issues, including a tax extender package, must first be negotiated with Senate Finance Chairman Charles Grassley (R-IA). (BGov and CQ, March 27)A future Ways and Means mark-up may also address “technical corrections” to the TCJA. On March 26, House Ways and Means Committee members Jimmy Panetta (D-CA) and Jackie Walorski (R-IN) introduced the Restoring Investment in Improvements Act. The House bill (H.R. 1869) would correct a TCJA mistake that inadvertently lengthened the cost recovery period for qualified improvement property (QIP). A companion bill in the Senate (S. 803) was introduced earlier this month by Sens. Pat Toomey (R-PA) and Doug Jones (D-AL). (Roundtable Weekly, March 15). The Roundtable strongly supports the legislation.Comment Letters – Carried Interest and FIRPTA RepealThe Roundtable and 13 other national real estate organizations sent a letter this week to members of the House Ways and Means Committee about the adverse impact that recently introduced carried interest legislation (H.R. 1735) would have on U.S. real estate and entrepreneurial risk taking.The letter notes how the bill would result in a huge tax increase on Americans who use partnerships in businesses of all types and sizes – and would be particularly harmful to the nearly 8 million partners in U.S. real estate partnerships. The Roundtable and 13 other national real estate organizations submitted comments about recently introduced carried interest legislation (H.R. 1735). The March 26 letter states, “The false narrative surrounding the carried interest issue is that it targets only a handful of hedge fund billionaires and Wall Street executives. The carried interest legislation is far broader and would apply to real estate partnerships of all sizes—from two friends owning and leasing a townhome to a large private real estate fund with institutional investors.”Additionally, The Roundtable and 19 national trade organizations – representing every aspect of constructing, developing, financing, owning, and managing real estate and infrastructure in the United States – wrote to Ways and Means Committee Members and other key House lawmakers on March 28, urging them to support the Invest in America Act. The legislation would repeal the arcane and punitive Foreign Investment in Real Property Tax Act (FIRPTA) of 1980. FIRPTA imposes a discriminatory layer of capital gains tax on foreign investment—a tax burden that does not apply to any other asset class. Private investors cite FIRPTA as a principal obstacle to attracting greater foreign capital for infrastructure projects. (Roundtable FIRPTA Letter, March 28)Reps. John Larson (D-CT) and Kenny Marchant (R-TX) are expected to introduce the bipartisan legislation soon.Repealing FIRPTA is a key policy action Congress could take to help spur infrastructure improvements and contribute to economic growth, according to recommendations submitted March 20 by The Real Estate Roundtable to the House Ways and Means Committee. (Roundtable Statement for the Record)

Government Sponsored Enterprises (GSEs), Housing Finance Reform, Roundtable Weekly

March 29, 2019

Roundtable Weekly

Senate Banking Committee and President Trump Launch Efforts to Address Housing Finance Reform, Including GSEs

Fannie Mae Freddie Mac GSE Reform Housing Finance Reform

Senate Banking Committee Chairman Mike Crapo (R-ID) and President Trump this week launched separate efforts aimed at reforming the multi-trillion-dollar financial market for single-family and multifamily mortgages, including the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac. Senate Banking Committee Chairman Mike Crapo (R-ID) held hearing this week on reforming the multi-trillion-dollar housing finance markets. Two days of hearings before the Senate Banking Committee concluded Wednesday, with twelve witnesses testifying about Chairman Crapo's recent housing reform outline – a proposal that would return the GSEs to private control. (Roundtable Weekly, Feb. 8)Crapo stated during the hearing, “This outline sets out a blueprint for a permanent, sustainable new housing finance system that: protects taxpayers by reducing the systemic, too-big-to-fail risk posed by the current duopoly of mortgage guarantors; preserves existing infrastructure in the housing finance system that works well, while significantly increasing the role of private risk-bearing capital; establishes several new layers of protection between mortgage credit risk and taxpayers; ensures a level playing field for originators of all sizes and types, while also locking in uniform, responsible underwriting standards; and promotes broad accessibility to mortgage credit, including in under-served markets.” (Senate Banking Committee, Day One Testimony and Day Two Testimony) The Real Estate Roundtable and 27 industry organizations on March 1 submitted principles for reforming the (GSEs). Following the hearings, President Trump released a presidential memodirecting “the Secretary of the Treasury and the Secretary of Housing and Urban Development to craft administrative and legislative options for housing finance reform.” (Wall Street Journal, March 27)President Trump aims to end the GSEs' conservatorship, “promote competition in the housing finance market ... create a system that encourages sustainable homeownership and protects taxpayers against bailouts.” The memo also calls for the preservation of the 30-year fixed-rate mortgage. (White House announcement, March 27)The GSE’s received $191 billion in government support during the financial crisis, but since entering conservatorship, they have paid the Treasury $292 billion in dividends, according to research from Keefe, Bruyette & Woods (Reuters, March 27)The Real Estate Roundtable and 27 industry organizations on March 1 submitted principles for reforming the (GSEs). The coalition’s letter was sent to Acting Federal Housing Finance Agency (FHFA) Director Joseph Otting and Washington policymakers days after the Senate Banking Committee advanced the nomination of Mark Calabria as FHFA Director. (Roundtable Weekly, March 1)Calabria is awaiting full Senate confirmation, which is expected soon.

Cannabis, Capital and Credit, Roundtable Weekly

March 29, 2019

Roundtable Weekly

House Committee Approves Bill Allowing Banks to Serve Legal Cannabis Businesses; Roundtable Urges Enactment

The House Financial Services Committee on March 27 approved the Secure and Fair Enforcement (SAFE) Banking Act of 20119 (H.R. 1595), which would allow financial institutions to legally work with state-authorized cannabis-related businesses. The Roundtable earlier in the week sent a letter urging swift enactment of the legislation to the leadership of the House Financial Services and Judiciary Committees. The bipartisan bill, approved by a 45-15 vote, was co-sponsored Reps. Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH) and Warren Davidson (R-OH).The Real Estate Roundtable earlier in the week sent a letter urging swift enactment of the legislation to the leadership of the House Financial Services and Judiciary Committees. Roundtable President and CEO Jeffrey DeBoer notes in the letter, “The SAFE Banking Act provides much-needed clarity for the banking, real estate, and business sectors to function within the contours of state laws that have legalized marijuana.”The Roundtable letter emphasizes that federal and state law differences on cannabis policy leaves banks and real estate providers trapped between their mission to serve lawful businesses in local communities – and the threat of federal enforcement action. If H.R. 1595 is enacted, federally regulated banks would no longer face the threat of sanction simply by providing financial services to a legitimate cannabis-related businesses (CRB).“Without a bank account, dispensaries and other legal CRBs must operate on a cash basis,” DeBoer notes. “Risks of crime thus increase and tax revenues to pay for infrastructure and other government services are potentially lost. H.R. 1595 can significantly address these problems by providing protections for banks, real estate firms and their employees from punishment simply because they aim to serve businesses within the 46 states that have legalized marijuana to varying degrees,” DeBoer stated. (Roundtable SAFE Act letter, March 25)Rep. Perlmutter noted the broad support for the legislation from the business community, including The Roundtable, in a March 28 news release. Perlmutter added, “With 152 cosponsors at the time of the committee vote – over a third of the entire House – the bill will next move to the floor of the House. A Senate companion bill is also expected to be introduced in the coming weeks.”

Foreign Investment in Real Property Tax Act (FIRPTA)

March 28, 2019

Policy Comment Letter

FIRPTA Repeal Invest in America – RER Support Letter – 3-28-2019

FIRPTA, Foreign Investment in Real Property Tax Act,

March 28, 2019

Policy Comment Letter

2019-03-28 Invest in America Support Letter

Carried Interest

March 26, 2019

Policy Comment Letter

Roundtable Weighs in Regarding Carried Interest

Carried Interest,

March 25, 2019

Policy Comment Letter

2019-03-25 RER Letter SAFE Banking Act FINAL

March 22, 2019

Roundtable Weekly

Roundtable Recommends Policies to Spur Infrastructure Investment and Economic Growth

Repealing FIRPTA, streamlining permit procedures and passing infrastructure financing measures will help spur infrastructure improvements and contribute to economic growth, according to recommendations submitted this week by The Real Estate Roundtable to the House Ways and Means Committee. (Roundtable Statement for the Record)Repealing FIRPTA, streamlining permit procedures and passing infrastructure financing measures will help spur infrastructure improvements and contribute to economic growth, according to recommendations submitted this week by The Real Estate Roundtable to the House Ways and Means Committee. (Roundtable Statement for the Record) In the March 20 Statement for the Record for a recent hearing regarding “Our Nation’s Crumbling Infrastructure,” Roundtable President and CEO Jeffrey DeBoer states, “A holistic approach to expanding and modernizing our aging infrastructure will create American jobs, boost economic growth, and improve the quality of life in all regions of the country.” The Roundtable recommendations include the following: Unlocking private capital by repealing the Foreign Investment in Real Property Tax Act (FIRPTA). FIRPTA imposes a discriminatory layer of capital gains tax on foreign investment—a tax burden that does not apply to any other asset class. Repealing FIRPTA would serve as a market-driven catalyst to finance improvements in our nation’s infrastructure.Streamlining the permitting process. A report by the nonprofit organization Common Good estimates that a six-year delay in starting construction on public projects costs the nation more than $3.7 trillion. Permit delays dampen private sector investment and add to the overall costs of infrastructure projects. Increasing the federal gas “user fee” in a responsible and sustainable manner. The gas user fee (18.4-cents a gallon) that capitalizes the Highway Trust Fund has not been raised since 1993. The Roundtable supports proposals to sustain the HTF by increasing the user fee by five cents a year for the next five years, and indexing it to inflation thereafter.Revising IRS “volume caps” and other limitations on private-activity bonds (PABs). Congress should broaden availability of these tax-exempt municipal bonding tools. Bipartisan measures that advance PAB financing, including the Move America Act (H.R. 1508), the Public Buildings Renewal Act ( H.R. 1251), and the BUILD Act (S. 352), warrant close analysis. Improving the Transportation Infrastructure Finance Innovation Act (TIFIA) loan program through measures such as the RAPID Act (S. 353). Congress should consider establishing a similar credit enhancement program to encourage public-private partnerships to help repair an aging pipeline grid and remediate gas leaks that impact climate change. DeBoer discussed the role of public-private partnerships to develop infrastructure projects on CNBC’s Squawk Box in June 2017. “There’s a lot of capital that wants to invest in infrastructure,” DeBoer said. (Roundtable Weekly, June 9, 2017). Ways and Means Chairman Richard Neal (D-MA) has indicated he intends for his committee to consider an infrastructure bill this spring.

News

March 22, 2019

Roundtable Weekly

Democrats Reintroduce Legislation to Tax Carried Interest At Ordinary Income Rate

Legislation to reform the taxation of carried interest was introduced on March 13 by Sen. Tammy Baldwin (D-WI) and House Ways and Means Committee member Bill Pascrell, Jr. (D-NJ). (News releases: Baldwin and Pascrell)Legislation to reform the taxation of carried interest was introduced on March 13 by Sen. Tammy Baldwin (D-WI) and House Ways and Means Committee member Bill Pascrell, Jr. (D-NJ). The Carried Interest Fairness Act of 2019 would reverse decades of partnership tax law by characterizing profits earned through certain investment partnerships as ordinary income. The legislation would recast capital gains earned by some partners—including gain associated with the sale of appreciated real estate—as income taxable at the maximum individual rate. The current top capital gains rate is 20 percent and the top tax rate on ordinary income is 37 percent. Similar legislation was introduced in the 115th Congress. The 2017 tax overhaul included a change to carried interest taxation, increasing the length of time from one to three years that partners with a carried interest must hold their investment to qualify for long-term capitals gains treatment. (The Hill, March 13)The Democrats’ carried interest bill is under consideration by congressional tax-writing committees as a possible revenue offset for separate legislation to extend temporary tax breaks that lapsed on Jan. 1, 2018. According to one press report, when asked whether carried interest could be an offset for his tax bill, House Ways and Means Chairman Richard Neal (D-MA) responded, “I think you're on the right track." (CQ password-protected, March 14)The Real Estate Roundtable opposes proposals such as the Carried Interest Fairness Act. General partners earning a carried interest in a real estate partnership bear significant risks beyond direct capital contributions. These risks can include funding predevelopment costs, guaranteeing construction budgets and financing, and exposure to potential litigation over countless possibilities.

News

March 22, 2019

Roundtable Weekly

Roundtable’s DeBoer Profiles Industry Policy Agenda, Including TRIA, Infrastructure, FIRPTA

Roundtable President and CEO Jeffrey DeBoer yesterday discussed the organization’s national policy priorities in the current Congress with Roundtable Board Member Holly Neber (CEO, AEI Consultants and President, CREW Network) during the 2019 Connect Los Angeles conference. (Watch video of DeBoer’s discussion, March 21)RER President and CEO Jeffrey DeBoer yesterday discussed the organization’s national policy priorities in the current Congress with Roundtable Board Member Holly Neber during the 2019 Connect Los Angeles conference . The policy discussion, “What’s Next!? What’s Happening in Washington and What Does it Mean for Your Business?” explored topics such as terrorism, infrastructure, foreign investment and tax reform before a standing-room only crowd of more than 500. (Video, LA Connect)DeBoer profiled several compelling policy issues of importance to commercial real estate, including terrorism risk insurance. DeBoer explained, “… TRIA, the Terrorism Risk Insurance Act, put in place after 9-11 because the direct insurance industry and the resinsurance industry said they couldn’t measure and predict a terrorism attack. If they can’t measure and predict it, they can’t offer the product. If they can’t offer the product, businesses can’t get all-risk insurance. If you can’t get all-risk insurance, you can’t get financing. So this issue of TRIA being extended … since being in place since 2002, is very important to liquidity. It’s very important to market stability. And we want to get it extended by the end of this Congress, by the end of 2020.” TRIA was enacted in 2002 and was extended in 2005, 2007 and 2015. Without Congressional reauthorization, the program will expire on December 31, 2020.DeBoer also addressed the need for Congress to pass legislation that will address infrastructure improvements on a national level. "We need to recognize that we are in a new transportation revolution. And it’s changing and we’re going to change in the next 10, 15 years; the way we access our infrastructure. We want to get this infrastructure bill done. We want to get it as broad as possible. We want to bring in as much private capital as we can," DeBoer said, emphasizing that public-private partnerships can play a major role in infrastructure improvement projects. (see Infrastructure story above)He also discussed tax policy priorities, including repeal of the Foreign Investment in Real Property Tax Act (FIRPTA) and recently introduced legislation that would change taxation of carried interest (see Tax Policy story above).Among the other policy issues that DeBoer said The Roundtable is focused on are reform of the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac; encouraging the development of affordable and workforce housing; and environmental issues with the EPA, including ENERGY STAR. (Video of DeBoer’s discussion, March 21)The Roundtable released its 2019 National Policy Agenda during its January State of the Industry Meeting in Washington (Roundtable Weekly, Feb. 1).

March 20, 2019

Policy Comment Letter

2019-03-20 Infrastructure Statement for the Record

Roundtable Weekly, Tax Policy, Tax Reform Technical Corrections

March 15, 2019

Roundtable Weekly

Senators Introduce Bipartisan Legislation to Correct Cost Recovery Period for Nonresidential Real Estate Improvements

Cost Recovery Period QIP Tax Policy

This week U.S. Senators Pat Toomey (R-PA) and Doug Jones (D-AL) introduced bipartisan legislation, the Restoring Investment in Improvements Act (S. 803), to correct a mistake in the Tax Cuts and Jobs Act that lengthened the cost recovery period for qualified improvement property (QIP). U.S. Senators Pat Toomey (R-PA) and Doug Jones (D-AL) introduced bipartisan legislation, the Restoring Investment in Improvements Act ( S. 803 ), to correct a mistake in the Tax Cuts and Jobs Act that lengthened the cost recovery period for qualified improvement property (QIP). The unintended drafting error has resulted in a significantly longer 39- or 40-year cost recovery period for most improvements to the interior of nonresidential real estate. The intent of Congress was to allow the immediate expensing of QIP – or provide a 20-year recovery period in the case of taxpayers electing out of new limitations on the deductibility of business interest.Prior to the law's enactment, commercial building tenants, retail store owners and restaurant owners could write off the costs of their renovations over a span of 15 years. The legislation drafted by Sens. Toomey and Jones would allow many businesses to immediately deduct the full cost of interior renovations, and would apply retroactively to January 1, 2018. (The Hill, Mar. 14)The Tax Cuts and Jobs Act included a strict new limitation on the deductibility of business interest expense, but also provided an exception for an “electing real property trade or business.” In general, taxpayers that develop, rent, manage, or operate real estate are not subject to the interest limits, but are subject to longer cost recovery periods for their real estate and real estate improvements. The Toomey-Jones bill would ensure that the QIP of an electing real property trade or business is depreciated over 20 years, rather than 40 years. Roundtable President and CEO Jeffrey D. DeBoer applauded the Senators bipartisan legislation introduced this week. “The Restoring Investment in Improvements Act ( S. 803 ) introduced by Senators Toomey and Jones is a simple and straightforward technical correction to the Tax Cuts and Jobs Act," he said. “The Restoring Investment in Improvements Act (S. 803) introduced by Senators Toomey and Jones is a simple and straightforward technical correction to the Tax Cuts and Jobs Act. An acknowledged drafting error significantly lengthened the depreciation period for building improvements. This has caused a large increase in the after-tax costs of modernizing and altering buildings of all types and uses, from shopping centers to office buildings to industrial properties and restaurants. The result is an immediate and unnecessary drag on building investment, construction activity, and job creation, said Roundtable President and CEO Jeffrey D. DeBoer. “Congress should act quickly to pass this legislation and reinstate a much shorter cost recovery period for building improvements.”In October 2018, the Roundtable along with 239 businesses and trade groups, wrote to Secretary Mnuchin urging the Treasury Department to provide taxpayers with administrative relief from the drafting error. (Roundtable Weekly, Oct. 12, 2018) On Thursday, Treasury Secretary Steven Mnuchin told reporters that he has discussed fixing technical errors in the 2017 tax law with congressional leaders on both sides. “This is something we’re very interested in doing. There’s a lot of demand,” he said following his testimony before the Senate Finance Committee. (Bloomberg, Mar. 14)

Property Rights, Roundtable Weekly

March 15, 2019

Roundtable Weekly

Roundtable Joins Amicus Brief Urging SCOTUS to Address Constitutional Rights in Income-Producing Private Property

The Roundtable joined the National Association of Home Builders (NAHB) and National Federation of Independent Business (NFIB) today, in an amicus brief requesting the nation’s highest court to accept a case that addresses significant property rights issues. The Roundtable joined the National Association of Home Builders (NAHB) and National Federation of Independent Business (NFIB) today, in an amicus brief requesting the nation’s highest court to accept a case that addresses significant property rights issues. In Love Terminal Partners, LP v. United States, developers and investors acquired rights to construct and provide flight service from a passenger terminal at Love Field airport near Dallas, Texas. The venture never proved profitable. The U.S. Congress subsequently codified a third-party agreement between affected cities, airlines, and the DFW airport regarding interstate air travel to and from the Dallas area. The Love Terminal investors were not a party to that agreement, which gave the City of Dallas authority to demolish their terminal. The agreement also provided the terminal could “never” be used for passenger service.The Love Terminal owners thereafter sued the U.S. government for a Fifth Amendment property “taking” by effectuating the agreement in federal law. At trial, the land owners won a $133.5 million “just compensation” award. On appeal, however, the Federal Circuit reversed and entirely erased the trial court’s award. The Love Terminal property owners thus requested the U.S. Supreme Court to hear the case. The coalition supported that petition today with its amicus brief.Prior Supreme Court precedents determine whether a taking has occurred under these circumstances. Penn Central (1978) considers the economic impact of land-use regulation, and whether the investor has reasonable investment expectations in the property. Lucas (1992) establishes a “categorical” rule that a taking occurs when government regulations completely “wipe-out” the property’s economic uses. “[T]his case presents an opportunity … to lay down the law—for the sake of consistency in both Penn Central and Lucas cases—when assessing fair market value for a property that is alleged to have prospective economic value for the buyer,” the brief explains.Notably, the case addresses whether income producing property needs to turn a profit to support a takings claim. In deciding no taking occurred, the intermediate appeals court stressed that revenue never exceeded the owner’s carrying costs. The amicus brief takes issue with that finding. It states: “By that standard virtually all start-up companies and development projects would be vulnerable because it often takes years to begin turning a profit on a new venture …. [I]t is improper to ignore the economic realities driving business decisions to invest in a property that will prove profitable in the future.”The brief continues: “Entrepreneurs and business investors typically have a long-term strategy, which assumes a return on investment over an extended period of time. This is especially true for home builders and commercial developers because they bear major upfront financial burdens before they can ever hope to turn a profit …. [I]t is simply wrong to say that negative cash-flow equates to zero value. Negative cash-flow is commonly an accepted cost of doing business in the beginning of a new venture.”The Supreme Court will decide whether (or not) it accepts the Love Terminal case likely after its next term starts in October 2019. If it does, briefing on the merits would take place next fall, and a decision would be expected by June 2020.

News

March 8, 2019

Roundtable Weekly

Roundtable Warns of Potential Economic Harm if New Duties are Imposed on Fabricated Structural Steel Imports

The Commerce Department has initiated investigations into whether a key material used in major real estate and infrastructure projects – fabricated structural steel (FSS) from Canada, China and Mexico – is being sold in the U.S. for less than fair value. (Commerce Department announcement, Feb. 26)The Commerce Department has initiated investigations into whether a key material used in major real estate and infrastructure projects – fabricated structural steel (FSS) from Canada, China and Mexico – is being sold in the U.S. for less than fair value. The Roundtable on March 4 wrote to the U.S. International Trade Commission (ITC) urging a cautious approach to the investigation, emphasizing the potential economic harm that new tariffs could cause. Roundtable President and CEO Jeffrey DeBoer concludes in the letter that “… unless supported by conclusive evidence of unfair dumping or subsidies, I urge you to reject calls for new tariffs on U.S. imports of fabricated structural steel.” (Roundtable comment letter, March 1)The antidumping and countervailing duty investigations are based on petitions from the American Institute of Steel Construction. If Commerce and the ITC affirm that dumped and/or unfairly subsidized U.S. imports of fabricated structural steel from Canada, China, and Mexico are causing injury to the U.S. industry, punitive duties could be imposed on those imports. (Reuters, Feb. 26)The Roundtable letter emphasizes the negative effects of FSS tariffs. “New duties could have a chilling effect on job creation and productive investment, slowing economic growth and reducing employment in industries directly and indirectly affected by real estate development,” DeBoer states.In 2017, imports of fabricated structural steel from Canada, China, and Mexico were valued, respectively, at an estimated $658.3 million, $841.7 million, and $406.6 million (Commerce Department Fact Sheet).Rising costs due to the shortage of skilled labor are currently putting pressure on new real estate development. Steel prices in the United States also rose significantly after the imposition of 25 percent tariffs on many steel imports last March. (Roundtable Weekly, March 9, 2018)The declining competitiveness of domestic steel fabricators could be attributed to the unfortunate downstream economic consequences of steel tariffs imposed last year – and may not reflect clear evidence of dumping or illegal subsidies.As The Roundtable letter notes, “… there is significant cross-border integration and cooperation in the fabricated structural steel industry. Foreign fabricators operate facilities in the United States, utilize U.S.-made steel in their finished products, and regularly form joint ventures with U.S. firms to take on large and complex projects.” DeBoer also states, “… rather than spurring real estate and infrastructure developers to purchase fabricated steel from domestic sources, unjustified government intervention in the form of new duties may lead potential U.S. buyers to shelve projects that would create well-paying jobs and produce a lasting economic impact in communities.”The ITC is scheduled to make its preliminary determinations by March 21, 2019.

News

March 8, 2019

Roundtable Weekly

House Ways and Means Committee Explores Funding for National Infrastructure Improvements

The tax-writing House Ways and Means Committee held a hearing this week on the need to launch a national infrastructure improvement program and potential funding sources. The Joint Committee on Taxation issued an “Overview Of Selected Internal Revenue Code Provisions Relating To The Financing Of Public Infrastructure.” Bipartisan agreement on the need to pursue infrastructure improvements was expressed during the hearing, “Our Nation’s Crumbling Infrastructure and the Need for Immediate Action,” but there was no clear consensus on how to pay for what could be a $1.5 trillion package. (New York Times, Feb. 12) In conjunction with the hearing, the Joint Committee on Taxation issued an “Overview Of Selected Internal Revenue Code Provisions Relating To The Financing Of Public Infrastructure.” The report addresses the following funding options:Highway Trust FundAirport and Airway Trust Fund Excise TaxInland Waterways Trust Fund Excise TaxHarbor Maintenance Trust Fund Excise TaxTax-Exempt Financing for Public Infrastructure; andPublic-Private PartnershipsThe hearing covered the looming shortfall in the Highway Trust Fund and the viability of potential revenues sources – such as an increase in the gas tax and the imposition of a Vehicle Miles-Traveled fee– to help finance increased infrastructure spending.House Ways and Means Chairman Richard Neal (D-MA) said President Trump’s interest in “a massive infrastructure package,” shows Congress has “a real opportunity to work together and do something big here.” (Chairman Neal statement, March 6)commercial real estate market. Ways and Means Chairman Richard Neal (D-MA) noted how “meaningful, sustained investments in our nation’s infrastructure” would create more jobs, encourage a more competitive business climate and revitalize local communities. Neal also said President Trump’s interest in “a massive infrastructure package,” shows Congress has “a real opportunity to work together and do something big here.” (Chairman Neal statement, March 6)President Trump stated during his January State of the Union address, "I know that Congress is eager to pass an infrastructure bill. And I am eager to work with you on legislation to deliver new and important infrastructure investment, including investments in the cutting edge industries of the future. This is not an option, this is a necessity," Trump said. (Roundtable Weekly, Feb. 8)The need to repair aging roads, bridges, transit, airports and harbors throughout the country was also the focus last month at a House Transportation and Infrastructure Committee hearing on "The Cost of Doing Nothing: Why Investing in Our Nation's Infrastructure Cannot Wait." (Chairman Peter DeFazio’s (D-OR) Opening Remarks, Feb. 7)The Roundtable’s 2019 Policy Agenda notes that every $1 billion spent on infrastructure creates an estimated 13,000 jobs. “The quality of infrastructure systems—including transportation, utilities, and telecommunications—has been cited as the most important factor influencing real estate decisions around the world. The productivity of our cities, towns and workforce depend on systems that safely and reliably transport people, supply power, and share information across the built environment,” according to the report. (The Roundtable's 2019 Policy Agenda Infrastructure section.)The Roundtable sent a comment letter to President Trump in Jan. 2018 offering specific suggestions on how innovative financing sources may be used to help pay for infrastructure improvements – and how restructuring a lengthy permitting process and cutting unnecessary red tape will help control project costs and delays.

News

March 8, 2019

Roundtable Weekly

Rural-Urban Coalition Supports Legislative Reforms for Stronger EB-5 Investment Program In Lieu of Inadequate Regulations

Comprehensive legislative reforms to the EB-5 investment program are needed to provide stronger safeguards to combat fraud and safeguard national security while balancing rural and urban areas’ access to the program, according to a coalition of 11 national industry organizations. (Coalition letter, March 8)A coalition of 11 national industry organizations recommends comprehensive legislative reforms to the EB-5 investment program are needed to provide stronger safeguards to combat fraud and safeguard national security while balancing rural and urban areas’ access to the program. ( Coalition letter , March 8) The coalition—in a letter sent today to the Office of Management and Budget’s (OMB) Director Mick Mulvaney—maintains that regulations proposed during the Obama era lack national security and anti-fraud provisions essential to overhaul the program. These proposed regulations also do not provide for a “set aside” of EB-5 investment visas for projects in so-called “Targeted Employment Areas” – a key policy component of stakeholder negotiations to encourage fair access to EB-5 capital in urban, suburban, and rural communities.The letter also recommends that EB-5 Targeted Employment Areas should overlap with Opportunity Zones designated by the Treasury Department in June 2018. Both geographic designations are census tract-based and share the common objective to channel investment capital to the nation’s distressed communities. “We cannot discern a sound policy basis to establish two different sets of census tract designation criteria to achieve the same policy objective,” the organizations wrote.President Trump on December 12, 2018 signed an Executive Order directing all federal agencies (including OMB) to consider how their programs can enhance revitalization efforts in new Opportunity Zones. (White House statement and PBS Video, Dec. 12, 2018)The coalition letter concludes that final publication of these rules by the Department of Homeland Security would undermine congressional efforts to improve and sustain the EB-5 program over the long term. “Our organizations continue to believe that congressional action is the best way to achieve lasting reform,” the letter states. Sen. Tim Scott (R-SC) – who led the effort in Congress for enactment of the Opportunity Zones program – discussed its goals and incentives on Jan. 29 in a discussion with Roundtable member Geordy Johnson (CEO, Johnson Development Associates, Inc.) during The Roundtable's State of the Industry Meeting (Roundtable Weekly, Feb. 15)

March 8, 2019

Roundtable Weekly

Business Coalition Urges Implementation Delay for FASB’s ‘Current Expected Credit Loss Accounting Standard’ (CECL), Pending Impact Analysis

A business coalition that includes The Real Estate Roundtable on March 5 wrote to the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) to urge a delay in the implementation of the proposed Current Expected Credit Loss (CECL) accounting standard, which may begin to reduce aggregate bank lending as early as next year. (Coalition Letter, March 5)The March 5 coalition letter cites a 2018 KPMB survey showing companies are struggling to make certain accounting, modeling and data decisions to be in compliance with CECL. (KPMG, Financial institutions feeling the crunch in countdown to CECL implementation) The new CECL model will change the way banks calculate reserves on assets, requiring certain financial institutions to estimate the expected loss over the life of a loan beginning in January 2020. For real estate, there is concern is that banks may reduce lending volumes as they build up additional capital reserves to be in compliance with CECL. The accounting rule change was issued by the Financial Accounting Standards Board (FASB) in June 2016 as a result of the 2008 financial crisis.The regulatory change in how banks estimate losses in their allowance for loan and lease losses (ALLL) will require substantial changes in data analytics and financial methodologies. The March 5 coalition letter cites a 2018 KPMB survey showing companies are struggling to make certain accounting, modeling and data decisions to be in compliance with CECL. (KPMG, Financial institutions feeling the crunch in countdown to CECL implementation)According to Trepp’s Looking at Historical CRE Losses for CECL, “To benchmark and fine-tune loss methodologies for CECL, the key for banks will be a four-letter word: data. Unfortunately, many banks have very little in the way of granular historical data, and a number of those that do have good data have taken few to no losses in their history. This has made it difficult for those banks to effectively model future losses.” (Trepp article by Joe McBride, April 21, 2017)To avoid unintended economic consequences, the coalition states in its letter, “We believe it is important to delay implementation of CECL in order to allow for time to conduct a quantitative impact analysis and to consider potential alternatives, while allowing for post-issuance field testing. Time for further assessment will also allow regulators to better understand and address the key consequences of any proposal for capital and other regulatory purposes.”The 8 signatories to the coalition letter are the U.S. Chamber of Commerce, American Bankers Association, Bank Policy Institute, The Real Estate Roundtable, Commercial Real Estate Finance Council, Mortgage Bankers Association, National Association of Realtors, Credit Union National Association and National Association of Federal Credit Unions.

March 8, 2019

Policy Comment Letter

2019-03-08 OIRA Letter FINAL

March 5, 2019

Policy Comment Letter

2019-03-05 Comments_JointTrades_SEC_FASB_CECL

March 4, 2019

Policy Comment Letter

2019-03-04 RER letter to USITC re steel

March 1, 2019

Roundtable Weekly

Roundtable Asks Treasury to Clarify Real Estate Exception to New Limit on Business Interest Deductibility

The Real Estate Roundtable on Tuesday wrote to the Treasury Department and IRS about the new limitation on business interest deductibility enacted in the Tax Cuts and Jobs Act of 2017 (TCJA). The provision allows qualifying businesses to continue fully deducting interest related to commercial real estate debt. (Roundtable comment letter, Feb. 26)The Roundtable's Feb. 26 letter on business interest deductibility. Roundtable President & CEO Jeffrey DeBoer sent the detailed comments as Treasury officials work to finalize proposed regulations implementing TCJA's new section 163(j), which limits the deductibility of business interest to no more than 30% of modified, adjusted taxable income. Section 163(j) includes a critical exception for real estate.On December 28, 2018 Treasury published proposed regulations clarifying that partner-level debt may qualify for the real estate exception-if the debt is allocable to a partnership engaged in a real property trade or business (RPTOB). DeBoer notes in The Roundtable's Feb. 26 letter, "In light of the clear legislative intent to enact a broad real estate exception and its importance to the health and stability of real estate markets, the final Treasury regulations should build on the proposed rules and not limit unnecessarily the ability of a real property trade or business (RPTOB) to elect out of the provisions of section 163(j)."DeBoer adds, "No issue in tax reform is more important to the health and stability of U.S. commercial real estate than the new rules related to the taxation of business-related borrowing. U.S. commercial real estate is leveraged conservatively with roughly $14 trillion of total property value and $4 trillion of debt."The letter includes detailed comments on several 163(j) implementation issues and makes the following recommendations:The need to preserve the deduction for income-producing real estate was at the center of Jeffrey DeBoer's testimony and exchanges with Senate Finance Committee members before final passage of the 2017 tax overhaul law. (Roundtable Statement for the Record, Sept. 19, 2017 and video clips). The real estate exception should extend through all "tiered" investment structures. The real estate exception should apply fully to non-rental activities. Treasury regulations should not "whipsaw" corporations/REITs through conflicting definitions of a "trade or business" that can effectively block their ability to use the real estate exception. Treasury regulations should modify the anti-abuse rule for related-party leases. The small business exception should not prevent otherwise eligible partners from qualifying for the real estate exception. Debt allocation rules should not undercount real estate assets for purposes of the real estate exception.Treasury regulations should confirm that senior housing constitutes a real property trade or business.The economic consequences of changes to the deductibility of business interest expense, and particularly the potential impact on real estate, was a central focus of lawmakers during consideration of the historic tax overhaul in 2017. The need to preserve the deduction for income-producing real estate was at the center of DeBoer's testimony and exchanges with Senate Finance Committee Chairman Orrin Hatch – and other members of the committee – during the last congressional hearing on business tax reform prior to votes on the TCJA. (Roundtable Statement for the Record, Sept. 19, 2017 and video clips).

Government Sponsored Enterprises (GSEs), GSE Reform, Roundtable Weekly

March 1, 2019

Roundtable Weekly

Industry Coalition Promotes GSE Reform Principles; Senate Banking Committee Advances New FHFA Director

Fannie Mae Freddie Mac GSE Reform

The Real Estate Roundtable and 27 other industry organizations today submitted principles for reforming the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac, which underpin the multi-trillion-dollar financial market for single-family and multifamily mortgages. (GSE Reform Coalition letter, March 1)The Real Estate Roundtable and 27 other industry organizations today submitted principles for reforming the Government-Sponsored Enterprises (GSEs). "We believe that comprehensive legislative reform, including an end of conservatorship, is ultimately necessary in order to codify structural changes that ensure safety and soundness and provide the certainty needed for private capital to establish a more reliable presence in housing finance," according to the comments.The letter emphasized that compelling evidence must show the private market is capable of an expanded role before efforts are made to reduce the GSEs' current housing finance footprint. "Ultimately, we believe any reform, be it administrative or legislative, must seek to further two key objectives: 1) preserving what works in the current system, while 2) maintaining stability by avoiding unintended adverse consequences for borrowers, lenders, investors, or taxpayers." Fannie and Freddie recently announced they will pay a combined $4.7 billion in dividends to the U.S. Treasury Department. The government took control of the two GSEs in September 2008 during the financial crisis. (Reuters, Feb. 14)The GSE coalition reform principles were sent to Acting Federal Housing Finance Agency (FHFA) Director Joseph Otting and Washington policymakers days after the Senate Banking Committee advanced the nomination of Mark Calabria as FHFA Director. Calabria, currently chief economist to Vice President Mike Pence, would lead the agency that oversees the GSEs. A vote to approve Calabria now moves to the full Senate, where it is expected to pass. (Housing Wire, Feb. 26 and Senate Banking Committee nomination hearing, Feb. 14) The coalition states in today's letter that FHFA should establish policies that ensure a continuation or expansion of: The coalition states that FHFA should establish certain policies to support the continuation or expansion of a robust housing market. A liquid national market with broad and fairly-priced access to affordable credit and improved infrastructure for the single-family secondary market;Support for strong and sustained liquidity in the multifamily rental market;Equal secondary market access and pricing for all lenders, regardless of size or volume; andThe sustainable transfer of appropriate credit risk to the private sector. The letter also advocates that principles governing any potential administrative reforms to the GSEs should be guided by the potential impact on borrowers, taxpayers, and market structure dynamics. Any reform that would meaningfully alter the GSEs' market presence-single-family, multifamily, or both-should also seek to maintain and enhance the stability and liquidity of the housing finance system. (GSE Reform Coalition letter, March 1) Roundtable President and CEO Jeffrey DeBoer added, "Housing finance reform should support the GSE's overall mission-ensure Americans across a broad range of income levels have access to a diverse supply of housing." Senate Banking Committee Chairman Mike Crapo (R-ID) on Feb. 1 released an outline for reforming the nation's housing finance system, including the GSEs. (Crapo Statement and Housing Reform Outline, Feb. 1 / Roundtable Weekly, Feb. 8)

March 1, 2019

Policy Comment Letter

2019-03-01 GSEs joint letter Principles

February 26, 2019

Policy Comment Letter

2019-02-26 RER 163j comment ltr

Q1 Sentiment Index, Roundtable Weekly

February 22, 2019

Roundtable Weekly

Commercial Real Estate Executives Report Positive Q1 Market Conditions; Future Clouded By Uncertainty of Economy’s Historic 10-Year Expansion Cycle

The Real Estate Roundtable's 2019 Q1 Sentiment Index released today reveals confidence from commercial real estate industry executives that today's fundamentally sound CRE markets will prove resilient when the decade-long expansion of the U.S. economy inevitably slows down. The Real Estate Roundtable's 2019 Q1 Sentiment Index released today reveals confidence from commercial real estate industry executives that today's fundamentally sound CRE markets will prove resilient when the decade-long expansion of the U.S. economy inevitably slows down. The historically long economic expansion, stable interest rates and demand driven supply have sustained the current healthy real estate market conditions. Unpredictability about the future longevity of the economic expansion tempers the forward looking industry outlook. "The unsettling year-end capital market turbulence caused a degree of early 2019 industry concern. However, as the first quarter moved forward, the equity markets strengthened and positive job creation continued to fuel steady economic growth. These conditions bolstered the already well-balanced commercial real estate markets in Q1," said Roundtable CEO and President Jeffrey D. DeBoer. "Looking ahead, our CRE executive survey reveals the timing of a natural economic cycle slowdown is concerning, but that is moderated by fundamentally sound commercial real estate markets," DeBoer added.The Roundtable's Q1 2019 Sentiment Index registered at 45 - a five point drop from the previous quarter. [The Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive.] This quarter's Current-Conditions Index of 47 decreased six points from the previous quarter, while this quarter's Future-Conditions Index of 42 came in at five points lower compared to Q4 2018.DeBoer noted, "Over the last decade, the commercial real estate industry has not overbuilt or over-leveraged, resulting in disciplined markets that could act as a resilient buffer to any potential slowdown in the U.S. economy. Our Q1 survey shows industry executives have concerns over unpredictable influences on the economy, such as the recent government shutdown and uncertain outcome of ongoing international trade talks. Policymakers need to focus on bipartisan pro-growth policies designed to encourage further investment, spur job creation and propel the economy forward for all." Economic Slowdown Forecasts St. Louis Fed President James Bullard told CNBC yesterday he expects the economy to slow to a 2.25% annual rate this year from 3% in 2018. Bullard is a voting member of the Federal Reserve's Federal Open Market Committee, which meets regularly to set the direction of U.S. monetary policy and interest rates. St. Louis Fed President James Bullard told CNBC yesterday he expects the economy to slow to a 2.25% annual rate this year from 3% in 2018. "It does seem the economy is slowing down some – not terribly – but some. That's not a terrible outcome. I don't really think we're in any trouble," Bullard said. (CNBC full interview, Feb. 21)Additionally, Fannie Mae yesterday released its February Economic Outlook, which forecasts s GDP growth of 2.2% this year, down from 3.1% in 2018. (Fannie Mae's Economic & Strategic Research Group, Feb. 21) "We reduced first quarter growth expectation slightly, but our forecast for full-year 2019 growth remains unchanged" said Fannie Mae Chief Economist Doug Duncan. "The labor market is strong, unemployment is at a very low level historically, and wages are rising modestly, enticing workers to come off the sidelines. Uncertainty regarding terms of trade remains a downside risk, as does slowing global economic growth."Dr. Ken Rosen (Chairman, Rosen Consulting Group) led a discussion during The Roundtable's Jan. 29 State of the Industry Meeting about recent Fed actions, stock market volatility and how signs of weakness in the Chinese economy may affect future U.S. growth. (Roundtable Weekly, Feb. 1)

News

February 22, 2019

Roundtable Weekly

Vice President Pence Promotes Opportunity Zones Program; Wall Street Investors Focus on Opportunity Funds

Vice President Mike Pence and Sen. Tim Scott (R-SC) promoted the new Opportunity Zones (OZ) program in South Carolina yesterday as an example of how economically distressed areas can be redeveloped to benefit lower-income communities. (WCBD video, Feb. 21)Vice President Mike Pence and Sen. Tim Scott (R-SC), above, promoted the new Opportunity Zones (OZ) program in South Carolina yesterday as an example of how economically distressed areas can be redeveloped to benefit lower-income communities. (WCBD video, Feb. 21). "The truth is, Opportunity Zones help address unique needs by forming partnerships between the federal government with regard to tax benefits, state and local leaders, and local investors to create that incentive that makes it even more possible for people to invest at the point of the need," Pence said. (Pence Remarks, Feb. 21)Vice President Pence added, "As President Trump said just a few months ago, when he established what came to be known as the White House Opportunity and Revitalization Council – which is going to be coordinating efforts and identifying Opportunity Zones all across the country – as the President said, and I quote, 'No citizen will be forgotten, no community will be ignored…no American will be left on the sidelines.' "Sen. Scott – who led the effort in Congress for enactment of the Opportunity Zones program – discussed OZ goals and incentives on Jan. 29 in a discussion with Roundtable member Geordy Johnson (CEO, Johnson Development Associates, Inc.) during The Roundtable's State of the Industry Meeting (Roundtable Weekly, Feb. 15)Wall Street's interest in OZs was profiled this week in the New York Times, which reported more than 80 opportunity funds have been established since January 2018 – and that the program "has unleashed a flurry of investment activity by wealthy families, some of Wall Street's biggest investors and other investors." (New York Times, Feb. 20)The article also notes that "The National Council of State Housing Agencies, which is tracking opportunity-zone funds, found that money managers and nonprofits had so far sought to raise over $18 billion." A recent IRS hearing focused on how OZ regulatory guidance may affect long-term investments in certain low-income communities. The Treasury Department is expected to release its second set of OZ regulations in the coming weeks. Another public hearing will follow before rules for the program are finalized. (Roundtable Weekly, Feb. 15)

Policy Landscape, Roundtable Weekly

February 15, 2019

Roundtable Weekly

Policymakers Agree on Government Funding Through Sept. 30; Second Partial Government Shutdown Avoided

Policy Landscape

A $333 billion spending package passed by Congress yesterday and signed by President Trump today funds the government through Sept. 30 (end of FY2019), avoiding a second government shutdown. (Senate Appropriations Committee summary, Feb. 15) President Trump today declared a national emergency over illegal immigration at the border. White House officials said executive powers will be used to reprogram $6.6 billion in Pentagon and Treasury funds to build a border wall. The legislative measure signed today includes funding for the Department of Homeland Security (DHS) and six other government agencies. The debate over DHS funding for a wall along the southwestern border with Mexico led to a five-week partial government shutdown. During the shutdown, the EB-5 Immigrant Investor Regional Center Program and federal cleanups at Superfund sites around the nation were suspended. With today's funding package, EB-5 has received another extension through Sept. 30. (Roundtable Weekly, Jan. 25). Policymakers this week agreed to appropriate $1.38 billion for 55 new miles of barriers along the Mexican border. President Trump originally requested $5.7 billion to construct 234 miles of barriers. (Wall Street Journal, Feb. 15). President Trump today also declared a national emergency over illegal immigration at the border. White House officials said executive powers will be used to reprogram $6.6 billion in Pentagon and Treasury funds to build a border wall. (The Hill, and New York Times, Feb. 15)House Speaker Nancy Pelosi (D-CA) and Senate Minority Leader Charles Schumer (D-NY) responded they would use “every available remedy” to overturn the emergency declaration. (Pelosi-Schumer joint statement, Feb. 15)House Democrats plan to introduce legislation to block the president’s effort to reprogram funding for wall construction. Legal challenges, which are also expected, could end up in the Supreme Court. (USA Today, Feb. 14 and AP, Feb. 15)President Trump said he expected a legal battle over the emergency proclamation. “I expect to be sued. I shouldn’t be sued,” he said today. “We will possibly get a bad ruling. And then we’ll get another bad ruling. And then we’ll end up in the Supreme Court, and hopefully we’ll get a fair shake,” he added. (Wall Street Journal, Feb. 15)

News

February 15, 2019

Roundtable Weekly

IRS Holds Hearing on Opportunity Zones; Roundtable Working Group Meets With Treasury Officials on OZ Regulations

Opportunity Zones OZs

An IRS hearing this week focused on how Opportunity Zone regulatory guidance may affect long-term investments in certain low-income communities. The hearing, originally scheduled for Jan. 10, was rescheduled due to the government shutdown in December. An IRS hearing this week focused on how Opportunity Zone regulatory guidance may affect long-term investments in certain low-income communities. Earlier in the week, a delegation from The Real Estate Roundtable’s Opportunity Zone Working Group met with Treasury officials to discuss proposed and forthcoming tax regulations. The meeting addressed key areas where additional guidance could help ensure the Opportunity Zone tax incentives succeed in stimulating productive, job-creating real estate investment in the designated low-income communities. Among the issues discussed:Determining what constitutes the original use of property for Opportunity Zone purposes, and in particular, whether a Qualified Opportunity Fund can purchase a newly constructed building before it is placed in service;Clarifying how land is treated for purposes of the Opportunity Zone asset test, and how to account for leased property;Facilitating contributions of real property to Opportunity Funds by current property ownersEnsuring that capital gain in multi-asset Opportunity Funds can qualify for the tax incentives;Clarifying the tax consequences of refinancing and debt distribution transactions, particularly those that involve appreciated Opportunity Zone assets;Encouraging capital formation and growth in Opportunity Zones through favorable gain reinvestment, roll-over, and holding period rules at the investor, fund and business level; andEnhancing the 31-month working capital safe harbor through additional safeguards and relief for fund investors making a good faith effort to deploy their capital. Sen. Tim Scott (R-SC) led the effort in Congress for enactment of the Opportunity Zones program. Similar issues were raised by 23 witnesses at the five-hour IRS hearing on Thursday. (Bisnow, Feb. 14). A letter on Feb. 5 from Senators Chris Coons (D-DE) and Michael Bennet (D-CO) to Treasury Secretary Steven Mnuchin raised additional issues and expressed concerns regarding the potential for waste and abuse, including in the context of real estate investment. (Delaware Business Now, Feb. 6).The Opportunity Zone program's goals and incentives were the focus of a Jan. 29 discussion during The Roundtable’s State of the Industry Meeting, which featured Sen. Tim Scott (R-SC) – who led the effort in Congress for enactment of the program – and Roundtable member Geordy Johnson (CEO, Johnson Development Associates, Inc.).Sen. Scott and the original co-sponsors of the Investing in Opportunity Act sent a bipartisan letter to Treasury Secretary Mnuchin on Jan. 24, urging Treasury to clarify its initial set of regulations, particularly as it relates to operating businesses. (Congressional Letter to Treasury, Jan. 24). The Real Estate Roundtable provided formal comments on Dec. 19, 2018 that encouraged Treasury and the IRS to clarify certain tax issues for potential Opportunity Zone (OZ) investors and Qualified Opportunity Zone managers. The letter was the second round of Roundtable comments following Treasury’s initial set of proposed OZ regulations issued last October. (Roundtable Weekly, Oct. 21, 2018 and Dec. 19, 2018)The highly-anticipated, second set of Treasury OZ regulations are expected in the coming weeks. Another public hearing will follow before rules for the program are finalized.

Policy Landscape, Roundtable Weekly

February 8, 2019

Roundtable Weekly

Border Security Negotiators Optimistic; Democratic “Green New Deal” Resolution Includes Energy Efficiency Goals for Buildings

Policy Landscape

Congressional negotiators reported progress on a border-security deal this week, as they aim to pass legislation by Feb. 15 to fund approximately 25% of the government. Without a new funding measure, the government will face a second partial shutdown. (Roundtable Weekly, Feb. 1) Senate Appropriations Chairman Richard Shelby (R-AL) met with President Trump yesterday, stating: "[The president] said to me again he would like for us to wrap it up, to get a legislative solution. We're negotiating on the substance, serious stuff now..." Senate Appropriations Chairman Richard Shelby (R-AL) met with President Trump yesterday, stating: "[The president] said to me again he would like for us to wrap it up, to get a legislative solution. We're negotiating on the substance, serious stuff now. ...This is the most positive I've been or I've seen in the talks since, oh gosh, maybe ever." (CQ and Roll Call, Feb. 7)House Appropriations Chairwoman Nita Lowey (D-NY) said yesterday that negotiators are acting in "good faith" but may not be able to finish work by Friday. Shelby added, "I think we're looking at Monday right now. But there's a lot to do." (BGov and Fortune, Feb. 7)If the 17 members of the conference negotiation committee reach agreement by Monday, legislative text could reach the House floor by Thursday, Feb. 14 – followed by action in the Senate.Infrastructure President Trump also briefly commented during the SOTU on the need for funding national infrastructure improvement projects. "I know that Congress is eager to pass an infrastructure bill. And I am eager to work with you on legislation to deliver new and important infrastructure investment, including investments in the cutting edge industries of the future. This is not an option, this is a necessity," Trump said. (Politico, Feb. 5) House Transportation and Infrastructure Committee Chairman Peter DeFazio (D-OR) on "The Cost of Doing Nothing: Why Investing in Our Nation's Infrastructure Cannot Wait." House Transportation and Infrastructure Committee Chairman Peter DeFazio (D-OR) responded to the SOTU, stating: "None of this can happen, however, if we continue to ignore the looming crisis facing the Highway Trust Fund. I will work to build bipartisan agreement around legislation, but I can't do it alone. This will require massive effort from the White House, stakeholders, and supporters in Congress to get something real across the finish line." (DeFazio Statement, Feb. 5)The need to repair aging roads, bridges, transit, airports and harbors throughout the country was the focus of Chairman DeFazio's Infrastructure Committee hearing yesterday on "The Cost of Doing Nothing: Why Investing in Our Nation's Infrastructure Cannot Wait." (Chairman DeFaizo's Opening Remarks, Feb.7)The Roundtable sent a comment letter to President Trump in Jan. 2018 offering specific suggestions on how innovative financing sources may be used to help pay-for infrastructure improvements – and how restructuring a lengthy permitting process and cutting unnecessary red tape will help control project costs and delays. (Reference: The Roundtable's 2019 Policy Agenda Infrastructure section). "Green New Deal" This week also saw the unveiling of a sweeping Democratic congressional resolution called the "Green New Deal" that aims to "achieve net-zero greenhouse gas emissions" in the next 10 years. (Sen. Ed Markey new release, Feb. 7) Rep. Alexandria Ocasio-Cortez (D-NY) and Sen. Ed Markey (D-MA) introduced a sweeping Democratic congressional resolution called the " Green New Deal " that aims to "achieve net-zero greenhouse gas emissions" in the next 10 years. Rep. Alexandria Ocasio-Cortez (D-NY) and Sen. Ed Markey (D-MA) yesterday introduced the resolution. The measure is a non-binding, aspirational blueprint that includes a federal jobs guarantee, basic income and universal health care. All the declared 2020 Democratic presidential candidates in the Senate are among the co-sponsors of the resolution. (Wall Street Journal and CNBC, Feb. 8)The proposal includes the goals of upgrading every existing building in the United States and requiring that new buildings should "achieve maximal energy efficiency, water efficiency, safety, affordability, comfort, and durability, including through electrification." (Fast Company, "AOC's Green New Deal is a Wake-up Call for the Building Industry," Feb. 7)Federal data show that commercial building energy use has decreased dramatically since the late 1970s. The Roundtable's membership and Sustainability Policy Advisory Committee (SPAC) have worked closely with policymakers and federal agencies for years to achieve substantial reductions in CRE's energy consumption and carbon footprint on a national scale. (Reference: 2019 Policy Agenda's Energy section)The Roundtable and SPAC continue to advocate further steps in achieving greater energy efficiency in buildings. The Roundtable currently is working with stakeholders on a proposal to reduce the after-tax cost of energy efficient systems and equipment, in light of the 2017 tax overhaul's new framework for expensing building improvements.Energy efficiency for commercial buildings, government funding and infrastructure and were among the topics discussed last week during The Roundtable's State of the Industry Meeting, where Speaker of the House Nancy Pelosi (D-CA) was a featured speaker. (Roundtable Weekly, Feb. 1)

Reforming the Government Sponsored Enterprises (GSEs), Roundtable Weekly

February 8, 2019

Roundtable Weekly

Senate Banking Committee Releases Housing Finance Reform Outline; Real Estate Coalition Working to Establish GSE Reform Principles

GSE Reform

Senate Banking Committee Chairman Mike Crapo (R-ID) on Feb. 1 released an outline for reforming the nation's housing finance system, including the Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac. (Crapo Statement and Housing Reform Outline, Feb. 1)Senate Banking Committee Chairman Mike Crapo (R-ID) on Feb. 1 released an outline for reforming the nation's housing finance system, including the Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac. (Crapo Statement and Housing Reform Outline, Feb. 1)Fannie and Freddie form the underpinnings of a $5.3 trillion financial market for single-family and multifamily mortgages.Crapo's outline states, "The multifamily businesses of Fannie Mae and Freddie Mac will be sold and operated as independent guarantors." The proposal outlines a new housing finance system that aims to: Reduce the systemic, too-big-to-fail risk posed by the current duopoly of mortgage guarantorsPreserve existing infrastructure in the housing finance system that works well, while significantly increasing the role of private risk-bearing capitalEstablish several new layers of protection between mortgage credit risk and taxpayersEnsure a level playing field for originators of all sizes and types, while also locking in uniform, responsible underwriting standardsPromote broad accessibility to mortgage credit, including in underserved markets The Committee has also tentatively scheduled a Feb. 14 nomination hearing on Mark Calabria as director of the Federal Housing Finance Agency (FHFA). Calabria is currently chief economist to Vice President Mike Pence. The FHFA oversees Fannie Mae and Freddie Mac, which have been held in conservatorship since September 6, 2008. ( Wall Street Journal, Feb. 5) "Housing finance reform must appropriately balance taxpayer protections with the need to establish an efficient marketplace that can provide strong and sustained mortgage liquidity in single family and multifamily markets – as well as affordable housing," said Roundtable President and CEO Jeffrey DeBoer. White House Spokeswoman Lindsay Walters stated on Tuesday, "Housing finance reform is a priority for the administration. The White House expects to announce a framework for the development of a policy for comprehensive housing finance reform shortly." She added the administration intends to work with Congress to formulate a reform plan that will address taxpayer risks and housing affordability. (Bloomberg, Jan. 29) House Financial Services Committee Chairwoman Maxine Waters (D-CA) is expected to oppose measures that seek to limit the government's role in the mortgage market. Industry Developing Principles for Reform The Real Estate Roundtable continues to work as part of an industry coalition to develop certain principles that would form the foundation of GSE reform legislation "Housing finance reform must appropriately balance taxpayer protections with the need to establish an efficient marketplace that can provide strong and sustained mortgage liquidity in single family and multifamily markets – as well as affordable housing," said Roundtable President and CEO Jeffrey DeBoer. "Reform should encourage the transfer of appropriate credit risk to the private sector, while building on the highly effective risk sharing mechanisms utilized in Fannie Mae's existing Delegated Underwriter Servicing (DUS) program and Freddie Mac's K Deals," DeBoer added.

Roundtable Weekly

February 1, 2019

Roundtable Weekly

House Speaker Nancy Pelosi Addresses National Policy Issues; Roundtable Introduces 2019 Policy Agenda

Speaker of the House of Representatives Nancy Pelosi (D-CA) and Sen. Tim Scott (R-SC) were among the guests who addressed national policy issues during The Real Estate Roundtable’s 2019 State of the Industry (SOI) meeting this week in Washington.Speaker of the House Nancy Pelosi (D-CA) addressed the Democrats' legislative priorities in the 116th Congress. (- enlarge photo -) Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.) launched the meeting on Tuesday, noting that 2019 marks the 20th anniversary of The Real Estate Roundtable's advocacy efforts in Washington. She also announced the release of The Roundtable's 2019 Policy Agenda – developed with input from a recent membership survey; discussions held throughout the year by policy advisory committees; consultation with 17 national real estate trade association partners; and The Roundtable's Board of Directors.Roundtable President and CEO Jeffrey DeBoer discussed policy initiatives the organization will focus on with the new Congress and the Trump Administration. The issues include ongoing implementation of the 2017 tax overhaul; FIRPTA repeal; infrastructure; affordable housing; renewal of the Terrorism Risk Insurance Act (TRIA); and energy efficiency initiatives affecting commercial real estate – all vital to spurring job creation and sustaining economic growth. Policy Issues & Featured Speakers The SOI meeting included the following speakers: Speaker Pelosi, Roundtable President and CEO Jeffrey DeBoer, and Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.) (- enlarge photo -) Speaker of the House Nancy Pelosi addressed the Democrats' legislative priorities in the 116th Congress, including infrastructure improvements; the low-income and workforce housing crisis; and policies that will continue to foster economic growth. She emphasized the need for lawmakers to find common ground for the good of the nation, despite their differences on policy.Sen. Tim Scott, a leader in the development of legislation that established the new Opportunity Zones program, discussed the OZ program with Roundtable Member Geordy Johnson (CEO, Johnson Development). Sen. Scott delved into the creation and ongoing development of the OZ program – designed to channel investment and spur economic development, affordable housing, and job creation in distressed areas throughout the US. He also offered his views on how members in both the Senate and House need to inspire civility, opportunity and fairness in public life and the private sector. Sen. Tim Scott (R-SC), left, a leader in the development of legislation that established the new Opportunity Zones program, discussed the OZ program with Roundtable Member Geordy Johnson (CEO, Johnson Development). (- enlarge photo -) Dr. Ken Rosen , chairman of the Rosen Consulting Group, offered a presentation on "Continued Recovery or Brink of Recession." Joining Dr. Rosen in a discussion about recent Fed actions, stock market volatility and how signs of weakness in the Chinese economy may affect U.S. growth, were Roundtable Board Members Ric Clark (Senor Managing Partner & Chairman, Brookfield Property Group); Thomas Arnold, Global Head of Real Estate, Abu Dhabi Investment Authority); and Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.). Jim VandeHei , co-founder and CEO of Axios – a media company delivering news and insights on politics, business, media and tech – discussed the confluence of recent elections, social media and emerging global influences such as Artificial Intelligence.Jeff Flake (former US Senator, 2013-2018) and Joseph Crowley(former Member of the House, 1999-2018) discussed prospects for policymaking in a divided Congress with Roundtable President and CEO Jeffrey DeBoer.Roundtable Policy Committees SOI also included meetings of The Roundtable's policy advisory committees, which analyzed policy issues with high-level congressional and agency staff Rep. French Hill (R-AR) at the joint Research and Real Estate Capital Policy Advisory Committee (RECPAC) meeting.(- enlarge photo-) Research and Real Estate Capital Policy Advisory Committee (RECPAC)During this joint meeting, Rep. French Hill (R-AR) – member of the influential House Committee on Financial Services – discussed recent, positive reforms to the High Volatility Commercial Real Estate Loans (HVCRE) rules, which he played a key role advancing in Congress. Other issues discussed with Rep. Hill included reform of the Government Sponsored Enterprises and reauthorization of the National Flood Insurance Program, Export-Import Bank and terrorism risk insurance. A panel of industry experts also addressed the current real estate market cycle and the state of real estate capital and debt markets.Tax Policy Advisory Committee (TPAC)A panel of all four chief tax counsels from the congressional tax-writing committees described what lay ahead for tax legislative priorities affecting commercial real estate. The discussion, moderated by Russ Sullivan (Brownstein Hyatt Farber Schreck), included Andrew Grossman, Chief Tax Counsel, House Ways & Means Majority; Tiffany Smith, Chief Tax Counsel, Senate Finance Minority; Randy Gartin, Chief Tax Counsel, House Ways & Means Minority; and Mark Warren, Chief Tax Counsel, Senate Finance Majority. An additional panel addressed the evolving Opportunity Zones program and featured Shafron (Shay) Hawkins, Legislative Assistant for Sen. Tim Scott (R-SC). Roundtable Senior Vice President & Counsel Ryan McCormick, left, with the four chief tax counsels of the congressional tax-writing committees at the Jan. 30 TPAC meeting.(- enlarge photo -) Sustainability Policy Advisory Committee (SPAC) U.S. Energy Information Administration speakers updated SPAC on the Commercial Building Energy Consumption Survey (CBECS) and its impact on ENERGY STAR scores. Additionally, Curtis Ravenel, Bloomberg LP's Global Head of Sustainable Finance and Business, addressed environmental, social and governance (ESG) risks and opportunities.Homeland Security Task Force meeting (HSTF) and Risk Management Working Group (RMWG)Representatives of the FBI briefed the Joint Meeting on the current threat picture and discussed the recent efforts of its Critical Incident Response Group (CIRG) Special Events/Crisis Management Unit. The Task Force was also briefed on that status of reauthorization of the National Flood Insurance Program and the Terrorism Risk Insurance Act (TRIA), a major policy focus of The Roundtable in 2019.Next on The Roundtable's FY2019 meeting calendar is the Spring Meeting on April 9 in Washington, DC. This meeting is restricted to Roundtable-level members only.

Infrastructure, Policy Landscape, Roundtable Weekly

February 1, 2019

Roundtable Weekly

Lawmakers Focus on Preventing Second Partial Government Shutdown; House Committees Prep for Action on Tax and Infrastructure Issues

Infrastructure Policy Landscape

The federal government this week resumed full-time operations after a 35-day partial shutdown. A three-week bill signed by President Trump last Saturday now funds approximately 25% of the government – including the Department of Homeland Security (DHS), Treasury and the Internal Revenue Service (IRS) – until Feb. 15. If a new funding measure is not passed, the government will face another partial shutdown.President Trump is scheduled to deliver the State of the Union to Congress on Tuesday, Feb. 5. (C-Span) The nonpartisan Congressional Budget Office released a report on Monday showing the partial shutdown reduced gross domestic product by $3 billion. (Wall Street Journal, Jan. 28) A House-Senate conference committee began negotiations Wednesday on a border security funding measure to resolve the same issue that caused the shutdown in December – a wall on the Mexican border.President Trump yesterday said, "On Feb. 15th, the committee will come back and if they don't have a wall, I don't even want to waste my time reading what they have because it's a waste of time." (Bloomberg, Jan. 31)House Speaker Nancy Pelosi (D-CA) yesterday stated, "There's not going to be any wall money in the legislation. However, if they have some suggestions about certain localities where technology, some infrastructure [is appropriate] ... that's part of the negotiation." If a new funding measure is not passed by Feb. 15, the government will face another partial shutdown. The House Speaker added that House rules require the congressional conference committee to complete an agreement by Feb. 8 to pass it by Feb. 15. "In order to have a bill signed by the president, we have to have a signed conference report by next Friday. So we only have this week plus one day, with the State of the Union in between, to get this done," Pelosi said. (The Hill, Jan. 31)President Trump is scheduled to deliver the State of the Union to Congress on Tuesday, Feb. 5, when he is expected to address his proposed increase in border security funding, including $5.7 billion for wall construction. (Daily Caller, Jan. 30) House Committee Hearings on Tax, Infrastructure House Ways and Means Committee Chairman Richard Neal (D-MA) recently addressed his legislative priorities. House and Senate tax-writing committees are preparing for action on their policy agendas in the 116th Congress.House Ways and Means Committee Chairman Richard Neal (D-MA) addressed his priorities during a Jan. 24 organizational meeting. Neal stated that in addition to retirement security and health care costs, "Another issue requiring our attention is America's infrastructure. We must ensure our infrastructure systems are both safe and efficient it's essential for our global competitiveness. We'll also closely examine the Republicans' tax law and its various problems. So we'll be conducting thorough oversight of this law – oversight that frankly is well overdue. (Ways and Means, Neal Statement, Jan. 24.)Rep. Mike Thompson (D-CA), chairman of the Ways and Means' Subcommittee on Select Revenue Measures (formerly the tax policy subcommittee), said his panel's first hearing will focus on infrastructure, although he has not set a date for the hearing. Thompson added that the subcommittee will also review the 2017 tax code overhaul and how tax policies, such as a carbon tax or renewable energy tax breaks, impact climate change. (CQ, Jan. 31)The Ways and Means Subcommittee on Oversight, chaired by Rep. John Lewis (D-GA), has also scheduled a Feb. 7 hearing on "Legislative Proposals and Tax Law Related to Presidential and Vice-Presidential Tax Returns." The House Transportation and Infrastructure Committee, chaired by Rep. Peter DeFazio (D-OR), has scheduled a Feb. 7 hearing on "The Cost of Doing Nothing: Why Investing in Our Nation's Infrastructure Cannot Wait." DeFazio told CQ last week, "What happens if the rail tunnels under the Hudson River fail, what happens when the tunnel under Baltimore fails, built in the Civil War? We need to begin thinking about what are the costs and the potential for calamity if we don't make these investments." (Roll Call, Jan. 30)The Ways and Means Subcommittee on Oversight, chaired by Rep. John Lewis (D-GA), has also scheduled a Feb. 7 hearing on "Legislative Proposals and Tax Law Related to Presidential and Vice-Presidential Tax Returns." ( Washington Post, Jan. 31)Senate Finance Committee Chairman Charles Grassley this week said that retroactive renewal of more than 20 tax deductions that expired at the end of 2017 should be tied to a spending measure to keep the government fully funded beyond Feb. 15. "The only vehicle that I see in the next few weeks is what comes out of this closing-down conference," Grassley said,. "And if we don't have something ready to go when that's done, have a compromise on extenders ... then it's going to be a long time before we get another opportunity." (CQ, Jan. 31)

Border Security, Roundtable Weekly

January 25, 2019

Roundtable Weekly

President Trump, Congress Agree to 3-Week Shutdown Reprieve As Negotiations Proceed Over Border Security

President Trump today announced an agreement with congressional Democrats to reopen the federal government for three weeks—under the condition that negotiations proceed over border security, including his demand for a wall on the Mexican border.After announcing the agreement, President Trump added, “We really have no choice but to build a powerful wall or steel barrier. If we don’t get a fair deal from Congress, the government will either shutdown on Feb. 15 again or I will use the powers afforded to me under the laws and constitution of the United States to address this emergency.” (C-Span, Jan. 25) The short-term agreement comes after two bills in the Senate to reopen the government failed yesterday, largely along party lines. Today’s agreement would pave the way for Congress to quickly pass a Continuing Resolution (CR), restoring operations to approximately 25 percent of government agencies affected by the shutdown and providing back pay for 800,000 federal workers who have been furloughed or told to report to work without pay. The agreement would allow funding for agencies affected by the shutdown to continue at current levels through Feb. 15—including the Department of Homeland Security (DHS), which oversees border and immigration issues (such as the EB-5 investment program). The deal would also require negotiations to proceed between the House and Senate over a full-year DHS funding bill that would address all aspects of border security. After announcing the agreement, Trump added, “We really have no choice but to build a powerful wall or steel barrier. If we don’t get a fair deal from Congress, the government will either shutdown on Feb. 15 again or I will use the powers afforded to me under the laws and constitution of the United States to address this emergency.” (C-Span, Jan. 25)The Senate approved the funding legislation tonight by a voice vote. The House followed, passing the CR by unanimous consent and sending the bill to President Donald Trump for his signature. (The Hill and CNNand Associated Press, Jan. 25)The reprieve comes as airports along the East Coast reported delays today due to a lack of air traffic controllers. The Federal Aviation Administration (FAA) reported flight delays to LaGuardia Airport in New York, Newark’s Liberty International Airport in New Jersey and Philadelphia International Airport. (FAA Statement, Jan. 25)Earlier this week, three aviation unions — the National Air Traffic Controllers Association, the Air Line Pilots Association and the Association of Flight Attendants-CWA — issued a statement citing the shutdown’s increasing threat to air transportation safety. “We cannot even calculate the level of risk currently at play, nor predict the point at which the entire system will break. It is unprecedented,” according to the statement. (AFA news release, Jan 23)During the shutdown, the Environmental Protection Agency (EPA) deactivated the website of its Energy Star program. The Roundtable’s Sustainability Advisory Policy Committee (SPAC) has worked closely with EPA on both their Energy Star whole-building and tenant-space labeling programs. The shutdown also posed a risk that payments by federal tenants to office owners could not be met. The General Services Administration (GSA), which makes the government's rent payments in arrears after the end of the month, faced the repercussions of the shutdown by posting a message on its website to landlords. The GSA stated it "is aware of concerns from the Lessor community regarding GSA's ability to make timely rent payments," and "is diligently exploring all available options." (Bisnow, Jan. 18) A map showing the GSA’s lease footprint illustrated the potential impact of the shutdown, as the agency rents over 187 million square feet for federal workers and business. (Bloomberg, Jan. 4)During the shutdown, the Environmental Protection Agency (EPA) deactivated the website of its Energy Star program. The deactivation could impact local-level regulatory compliance deadlines in major urban markets that require owners to use EPA’s tools to benchmark and publicly disclose building energy consumption data. The Roundtable’s Sustainability Advisory Policy Committee (SPAC) has worked closely with EPA on both their Energy Star whole-building and tenant-space labelingprograms.On Jan. 17, Energy and Commerce Committee Chairman Frank Pallone, Jr. (D-NJ) wrote to EPA Acting Administrator Andrew Wheeler requesting information on the Energy Star’s site deactivation. Pallone also announced this week that the full Committee will hold a hearing on Jan. 31 about the impact of the shutdown on affected agencies within its jurisdiction.The impact of the partial government shutdown and prospects for a long-term resolution beyond Feb. 15 will be a focus of discussion during The Roundtable’s State of the Industry Meeting and Policy Advisory Committee meetings on Jan. 29-30 in Washington, DC.

Pass-Through Deduction, Roundtable Weekly, Tax Policy

January 25, 2019

Roundtable Weekly

Treasury Releases Highly Anticipated Final Regulations on New Pass-Through Deduction

The Treasury Department on Jan. 18 issued final regulations and new guidance on the 20 percent deduction for qualified pass-through business income (under Internal Revenue Code section 199A).The Treasury Department on Jan. 18 issued final regulations and new guidance on the 20 percent deduction for qualified pass-through business income (under Internal Revenue Code section 199A). The new 20% deduction for pass-through business income is one of the most important – and complex – elements of the 2017 tax overhaul law. The deduction was designed to provide relief to the 30 million businesses in the United States that are not C corporations, and thus don’t benefit from the corporate tax cut. The proposal was a key topic of Roundtable President and CEO Jeffrey DeBoer's testimony before the Senate Finance Committee shortly before lawmakers released the first version of their tax overhaul in the fall of 2017, and The Roundtable was closely involved in the legislative development of the provision. (Roundtable Weekly, Sept. 22, 2017) The final regulations are largely positive, addressing several concerns highlighted in Roundtable comments that could have limited taxpayers’ ability to apply the deduction against real estate rental income. For example, Treasury agreed with The Roundtable and reversed its prior position on how non-recognition transactions, such as a like-kind exchange or a contribution of property to a partnership, affect the pass-through deduction. The proposed regulations effectively would have penalized taxpayers for engaging in non-recognition transactions. Treasury adopted the Roundtable request to allow for aggregation of trades or businesses at the “entity” level, not just the individual level. Treasury also adopted the Roundtable request to allocate the basis of a property to partners based on “book” depreciation rules, not tax depreciation rules. In certain areas, the final rules did not adopt specific recommendations offered in Roundtable comments, but nonetheless set forth helpful guidance. The proposal was a key topic of Roundtable President and CEO Jeffrey DeBoer's testimony before the Senate Finance Committee shortly before lawmakers released the first version of their tax overhaul in the fall of 2017. ( Roundtable Weekly, Sept. 22, 2017) The Roundtable had asked Treasury to clarify that all real estate rental income would be considered income from a trade or business—a requirement of the statute. Treasury declined to go this far, but did issue a proposed revenue procedure (IRS Not. 2019-07) that would establish a safe harbor for real estate rental income earned by taxpayers who spend 250 hours, directly or indirectly, on the activity. The Roundtable had encouraged Treasury to allow taxpayers to aggregate all real estate rental activities, including those conducted in separate entities, at the individual level. While Treasury did not adopt this simplification, it did offer helpful new examples to clarify when real estate activities are sufficiently similar to permit aggregation by individuals.In addition, proposed regulations issued alongside the final rules ensure that investors who receive REIT dividends indirectly through an interest in a mutual fund are eligible for the pass-through deduction—a priority for The Roundtable, Nareit, and others. TPAC will discuss issues related to the Section 199A regulations during its next meeting on Jan. 30 in Washington, held in conjunction with The Roundtable’s State of the Industry (SOI) Meeting. House Ways and Means Committee Chairman Richard Neal will also participate in the SOI meeting. Neal – the long-standing co-chair of the House Real Estate Caucus – will discuss prospects for tax policy legislation with Roundtable Board Member John Fish (Chairman and CEO, SUFFOLK) on Jan. 29.

Policy Landscape, Roundtable Weekly

January 18, 2019

Roundtable Weekly

White House Doubles Estimate of Shutdown’s Economic Impact

Policy Landscape

Nearly a month into the partial government shutdown, the impasse over funding of a border wall on the Mexican border continues with no sign that an agreement between President Trump and Congress is near. (Axios, Jan. 16 White House Council of Economic Advisers Chairman Kevin Hassett this week doubled the estimate of how the government's partial shutdown is reducing economic growth. The initial cost to the economy, estimated at 0.1 percentage point in growth every two weeks, was revised to 0.13 percentage point every week. ( Fox interview , Jan. 15 /Forbes, Jan. 16 / Vox, Jan. 18 ) White House Council of Economic Advisers Chairman Kevin Hassett this week doubled the estimate of how the government's partial shutdown is reducing economic growth. The initial cost to the economy, estimated at 0.1 percentage point in growth every two weeks, was revised to 0.13 percentage point every week. (Forbes, Jan. 16 and Vox, Jan. 18) Another potential impact of the shutdown may affect landlords who rent to the federal government. According to Bloomberg Government, the General Services Administration (GSA) usually issues the government's rental obligations, but with furloughed staff unable to process the checks, the payments may stop. "The GSA leased more than 190 million square feet in nearly 7,000 buildings nationwide at the start of its 2018 fiscal year, representing roughly $5.6 billion in annual rent payments," BGov reported Jan. 15. The GSA states it "is aware of concerns from the Lessor community regarding GSA's ability to make timely rent payments," and "is diligently exploring all available options." Federal Reserve Chairman Jerome Powell said last week that if the shutdown is prolonged, it would start to noticeably affect the economy. "If we have an extended shutdown, I do think that would show up in the data pretty clear." Powell added that the full economic impact of closed government agencies is difficult to track because data usually provided by the Commerce Department is not currently available, due to the shutdown. (Economic Club of Washington video interview at 13:30 and The Hill, Jan. 10) The results of a Federal Reserve survey of the 12 regional Fed banks through Jan. 7 known as "the beige book" were released this week, showing a generally positive picture for the U.S. economy but revealing an undercurrent of worry. (WSJ, Jan. 16) The Fed' s " beige book " shows a generally positive picture for the U.S. economy but reveals an undercurrent of worry. (WSJ, Jan. 16) According to the Fed report, "Outlooks generally remained positive, but many Districts reported that contacts had become less optimistic in response to increased financial market volatility, rising short-term interest rates, falling energy prices, and elevated trade and political uncertainty." The report adds that "A number of Districts reported rising home prices, while prices for commercial and industrial space either increased or were flat" while noting that U.S. labor markets were shown to have tightened as businesses struggled to find workers at any skill level. (Reuters, Jan. 16) The Fed's Open Market Committee will meet next on Jan. 29-30, the same time as The Roundtable's State of the Industry Meeting in Washington.

News

January 18, 2019

Roundtable Weekly

Industry, Investors Await Opportunity Zones’ Clarifying Guidance Amid Shutdown Delay

Opportunity Zones OZs

The government shutdown is slowing progress on tax guidance important to real estate, including Opportunity Zone incentives. The IRS cancelled a Jan. 10 administrative hearing on the October proposed regulations. However, under a special two-year IRS appropriation for tax reform implementation, and the agency’s own contingency plan, background work continues on Opportunity Zone rules and other critical regulatory guidance.”The Wall Street Journal reported on Jan. 15 that “there has been a surge in site acquisitions in the zones last year as developers planned for a surge of investments. There were 58% more deals [in] the zones in the third quarter of 2018, compared with the same quarter in 2017.” (WSJ, Jan. 15 and Real Capital Analytics.)— enlarge graphic— The Wall Street Journal reported on Jan. 15 that “there has been a surge in site acquisitions in the zones last year as developers planned for a surge of investments. There were 58% more deals [in] the zones in the third quarter of 2018, compared with the same quarter in 2017.” (WSJ, Jan. 15 and Real Capital Analytics.)John Lettieri, chief executive of the Economic Innovation Group, a public policy organization that advocated for the inclusion of opportunity zones in last year’s tax overhaul, told The Journal, “The sooner you get regulatory clarity, the more benefit is available to investors and the sooner they can stand up a marketplace.” (WSJ, Jan. 15)The Real Estate Roundtable on Dec. 19 provided formal commentsthat encourages Treasury and the IRS to clarify a number of tax issues that would remove uncertainty for potential opportunity zone investors and opportunity fund managers. The letter was the second round of Roundtable comments on opportunity zones following Treasury’s publication of proposed regulations last October. (Roundtable Weekly, Oct. 21, 2018 and Dec. 19, 2018)Roundtable Senior Vice President & Counsel Ryan McCormick participated this week in a CBRE conference call presentation on qualified opportunity zones. Joining McCormick was Steven Kennedy (Director, PwC), a member of The Roundtable’s Tax Policy Advisory Committee Working Group on Opportunity Zones, and experts from CBRE’s capital markets and research team. The Jan. 16 CBRE PowerPoint presentation can be downloaded here.Also this week, Jared Bernstein, a former chief economist to former Vice President Joe Biden, authored an op-ed in the Washington Postin support of the opportunity zone program. Bernstein and Kevin Hassett, current chairman of the White House Council of Economic Advisers, wrote the original paper that put forward the opportunity zone concept. In the Jan. 14 op-ed, Bernstein states, “[M]ost OZ communities have faced disinvestment and depopulation for so long, they have both the need and capacity to absorb new investment, development and people without displacing local residents ... I suggest we give OZs a chance, while scrutinizing their progress.”The future of the OZ program will be discussed by Sen. Tim Scott (R-SC) – who led the effort in Congress for enactment of the opportunity zone program – and Roundtable member Geordy Johnson (CEO, Johnson Development Associates, Inc.) on Jan. 29 during The Roundtable’s State of the Industry Meeting in Washington, DC. Opportunity Zones will also be a focus of The Roundtable’s TPAC meeting on Jan. 30.

116th Congress, Roundtable Weekly

January 18, 2019

Roundtable Weekly

House Congressional Committees Move Forward on Policy Agendas, Add New Members

With Democrats now in control of the House of Representatives, key congressional committee chairs this week announced their policy agendas and appointed additional members. (Roundtable Weekly, Jan. 11)House Financial Service Committee:Rep. Maxine Waters (D-CA), the new chair of the powerful House Financial Services Committee, on Wednesday outlined a broad range of priorities that include policy issues affecting commercial real estate. In her first speech as committee chairwoman, Waters said, “Some of the big issues we are going to try to work on a bipartisan basis include long-term reauthorization and reform of the National Flood Insurance Program (NFIP), Terrorism Risk Insurance (TRIA), and the reauthorization of the job-creating Export-Import Bank.” (House Financial Committee Services, Jan. 16) Rep. Maxine Waters (D-CA), the new chair of the powerful House Financial Services Committee , outlined a broad range of priorities that include policy issues affecting commercial real estate. [The Terrorism Risk Insurance Act, enacted following 9/11 and extended three times since 2002, is currently scheduled to sunset at the end of 2020. A long-term extension of TRIA is a major policy focus of The Real Estate Roundtable. Terrorism risk insurance coverage is essential for many businesses – including commercial real estate. Without TRIA, private markets cannot provide the American economy with the coverage it needs. The Roundtable also supports a long-term reauthorization of NFIP and improvements to the program that would expand private markets.]Chairwoman Waters addressed a broad range of other financial policy priorities, including regulatory oversight of Wall Street; the future of the government sponsored enterprises Fannie Mae and Freddie Mac; diversity in the workplace; and housing affordability.[A Federal Reserve report released this week addresses how student debt hinders homebuying for young adults and the role it plays on their decisions to live in rural or urban areas (Wall Street Journal and CNBC, Jan. 16). “Over 20 percent of the overall decline in homeownership among the young can be attributed to the rise in student loan debt. This represents over 400,000 young individuals who would have owned a home in 2014 had it not been for the rise in debt,” according to the report. “As policymakers evaluate ways to aid student borrowers, they may wish to consider policies that reduce the cost of tuition …” (Federal Reserve, Consumer & Community Context, Jan. 2019) ]Chairwoman Waters also announced 16 new Democratic appointees to the financial services committee, including eight who are members of the Congressional Progressive Caucus. The new committee members include Reps. Alexandria Ocasio-Cortez (D-NY), Katie Porter (D-CA), Ayanna Pressley (D-MA), and Rashida Tlaib (D-MI). (House Financial Services Committee, Jan. 16 and Vox, Jan. 17)Waters added in her Wednesday speech, “As Chairwoman I will continue to find areas where we can all work together. Ranking Member McHenry and I have a relationship, and just last Congress we worked together on several bills … So I am very hopeful that we will be able to get some good bipartisan work done in Committee.” (House Financial Services Committee, Jan. 16) Rep. Patrick McHenry (R-NC), the House GOP’s former chief deputy whip, is now the committee’s ranking member.House Financial Services member Rep. J. French Hill (R-AR) will address a joint Real Estate Capital Policy Advisory Committee and Research Committee (RECPAC) meeting on the morning of Jan. 29, before the start of the Roundtable’s State of the Industry business meeting.House Ways and Means Committee:New House Ways and Means Committee Chairman Richard Neal (D-MA) announced this week the committee's membership and new chairs for its subcommittees for the 116th Congress. (Ways and Means, Jan. 16) New House Ways and Means Committee Chairman Richard Neal (D-MA) announced the committee's membership and new chairs for its subcommittees for the 116th Congress. (Ways and Means, Jan. 16)Chairman Neal this week also invited Treasury Secretary Steven Mnuchin to testify at the Ways and Means Committee’s first hearing on Jan. 24 on the government shutdown’s impact on Treasury and American taxpayers. Earlier in the week, the Treasury Department released a 132-page shutdown contingency plan for the IRS for the tax-filing season and a brief update for taxpayers on its overall operations. Treasury deputy assistant secretary Jennifer Bang responded to Neal’s invitation by offering other officials to testify. “If the purpose of the upcoming hearing is to inform Congress and the public, we are confident that goal will be best served by testimony from the senior Department officials with the deepest and broadest expertise on the subject of the hearing,” (The Hill, Jan. 17) Yesterday, Neal urged Mnuchin to reconsider the request, noting that Mnuchin's trip to Davos, Switzerland for the annual World Economic Forum next week has been cancelled. “With more than 70,000 Treasury employees furloughed and missing paychecks, I strongly believe Secretary Mnuchin himself should appear before our committee and answer members’ questions. Nearly a month into the shutdown and with tax filing season rapidly approaching, the Treasury Department has announced plans to call more than 35,000 employees back to work, but has not provided details about this action to our committee,” Neal stated. (House Ways and Means News Release, Jan. 17)Chairman Neal – the long-standing co-chair of the House Real Estate Caucus – will discuss prospects for tax policy legislation with Roundtable Board Member John Fish (Chairman and CEO, SUFFOLK) during The Roundtable’s State of The Industry Meeting on Jan. 29 in Washington, DC.

Border Security, Roundtable Weekly

January 11, 2019

Roundtable Weekly

Partial Government Shutdown Continues Over Border Wall Disagreement

Unless an agreement with Congress is reached soon, President Trump this week indicated he is considering declaring a national emergency in order to fund the construction of a border wall on the southern border. A national emergency declaration would face significant legislative and legal opposition, yet it could create a path to end the partial government shutdown that tomorrow will become the longest in U.S history, exceeding the 21-day shutdown of 1995-96. (New York Times, Jan. 9 / NBC News, Jan. 10 / Politico, Jan. 10Unless an agreement with Congress is reached soon, President Trump this week indicated he is considering declaring a national emergency in order to fund the construction of a border wall on the southern border. Federal Reserve Chairman Jerome Powell said this week that if the current situation is prolonged, it would start to noticeably affect the economy. "If we have an extended shutdown, I do think that would show up in the data pretty clear." Powell added that the full economic impact of closed government agencies is difficult to track because data usually provided by the Commerce Department is not currently available, due to the shutdown. (Economic Club of Washington video interview at 13:30, Jan. 10)Nine of the 15 Cabinet-level departments remain unfunded, including Agriculture, Homeland Security, State, Transportation, Interior and Justice. 800,000 federal workers won't receive paychecks due today. (AP, Jan. 11). Historically, federal workers ultimately do receive back pay for government shutdowns.According to S&P Global Ratings Chief U.S. Economist Beth Ann Bovino, "We estimated that this shutdown could shave approximately $1.2 billion off real GDP in the quarter for each week that part of the government is closed." (CNBC, Jan. 11) White House Council of Economic Kevin Hassett last week offered a similar assessment, estimating economic output would decrease by about 0.1 percent every two weeks. (Bloomberg, Jan. 3)President Trump this week cancelled a planned Jan. 21 trip to the annual World Economic Forum in Davos, Switzerland after recently saying he may keep the government closed for "months or even years." (Time, Jan. 10 and AP, Jan. 4) Federal Reserve Chairman Jerome Powell said that if the current situation is prolonged, it would start to noticeably affect the economy. "If we ave an extended shutdown, I do think that would show up in the data pretty clear." (Economic Club of Washington video interview at 13:30, Jan. 10, 2019) Despite the shutdown, The IRS announced this week that the 2018 tax filing season will begin on Jan. 28. Last year, the IRS issued nearly $300 billion in tax refunds to 102 million taxpayers between January and May, with an average refund of more than $2,700. Any major disruption in tax refunds could dampen economic growth. A detailed IRS contingency plan for handling the tax filing season and enforcement and taxpayer assistance is expected soon. (IRS, Jan. 7 and TIME, Jan. 9) Additionally, until the shutdown ends, the EB-5 Immigrant Investor Regional Center Program and federal cleanups at Superfund sites around the nation are suspended.The National Association of Realtors yesterday reported that the partial shutdown is starting to cause transactional delays related to federal housing, mortgage, and other programs of interest to the real estate industry (NAR, Jan. 10). "All the fluctuations that's going on puts a pause on companies deciding what long-term investments to make," NAR chief economist Lawrence Yun said. "Do they actively purchase a commercial property knowing there could be further disruption in the future? They could be more hesitant or go on a more [smaller] scale." (Commercial Observer, Jan. 2)Negotiations over the border wall impasse broke down this week when President Trump ended a meeting with Democratic leaders. Trump tweeted that the meeting had been a "total waste of time" and reported that when House Speaker Nancy Pelosi (D-CA) told him that Democrats wouldn't approve border-wall funding, "I said bye-bye, nothing else works!" (Wall Street Journal, Jan. 10) The effects of the government shutdown and prospects for policymaking in the new Congress will be topics for discussion during The Roundtable's Jan. 29-30 State of the Industry Meeting in Washington, DC.

116th Congress, Roundtable Weekly

January 11, 2019

Roundtable Weekly

Congress Ushers In New Leadership on Key Committees

The 116th Congress convened last week with Democrats in control of the House for the first time in eight years as Nancy Pelosi (D-CA) was reelected House Speaker. Among the new leadership is a fresh slate of committee chairs who will address issues of importance to real estate in the areas of tax; capital and credit; energy; infrastructure; homeland security and other policy areas. The lawmakers who will set agendas for key committees in a divided Congress include:Rep. Richard Neal of Massachusetts – the long-standing co-chair of the House Real Estate Caucus – is the new Democratic chairman of the tax-writing House Ways and Means Committee . Tax:Rep. Richard Neal of Massachusetts – the long-standing co-chair of the House Real Estate Caucus – is the new Democratic chairman of the tax-writing House Ways and Means Committee. He will be joined by 10 new Democratic committee members. Former Chairman Kevin Brady (R-TX) – a principal author of the 2017 tax overhaul law – now serves as ranking member. Neal has indicated he may hold several rounds of hearings on the legislation’s economic impact and alternative proposals. Ways and Means may also consider a technical corrections bill – including a correction related to the depreciation schedule for nonresidential, interior real estate improvements (Roundtable Weekly, Dec. 7 and Jan. 4)Sen. Chuck Grassley (R-UT) is now the chairman of the tax-writing Senate Finance Committee, following the retirement of Sen. Orrin Hatch (R-UT). This will be Senator Grassley’s third tenure at the helm of Finance. Sen. Ron Wyden (D-OR) retains his ranking minority member seat. The committee may consider proposals affecting the retroactive renewal and extension of temporary tax breaks. Grassleyreleased his tax priorities for the committee yesterday and stated this week that Congress will not grant President Trump any expansion of his executive authority over tariff and trade issues. (Reuters, Jan. 9)Capital and Credit: Rep. Maxine Waters (D-CA) is the first woman and African-American to lead the House Financial Services Committee . Rep. Maxine Waters (D-CA) is the first woman and African-American to lead the House Financial Services Committee. Among the wide-ranging issues addressed by the committee that would require Republican support for enactment is a long-term approach to Terrorism Risk Insurance. The Terrorism Risk Insurance Act (TRIA) has been extended three times since 2002 and is currently scheduled to expire at the end of 2020. Waters has historically been a strong supporter of TRIA and will play a pivotal role in the reauthorization process. The committee is also expected to address the reauthorization of National Flood Insurance Program, which is scheduled to sunset on May 31, 2019. Waters has also expressed interest in working with the Senate on reforming government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. (Insurance Journal, Jan. 7) Rep. Patrick McHenry (R-N.C), the House GOP’s former chief deputy whip, is now the committee’s ranking member.In the Senate, the Banking, Housing and Urban Affairs Committee is led by Chairman Mike Crapo (R-ID), with Sen. Sherrod Brown (D-OH) serving as the ranking member. Along with terrorism risk insurance, flood insurance and reform of the GSEs, several capital formation proposals considered during last year’s lame duck session may be addressed by the committee in 2019. Last year, the committee passed important banking legislation to reduce regulatory burden and clarify the High Volatility Commercial Real Estate (HVCRE) rules.Energy and CommerceThe House Energy and Commerce Committee will be chaired by Frank Pallone, Jr. (D-NJ), who yesterday announced the Committee’s six subcommittees for the 116th Congress – including one on Environment and Climate Change. Rep. Greg Walden (R-OR) is the ranking member. Climate change will be a focus of the full committee’s first round of hearings. Policy issues affecting energy efficiency in buildings will likely be considered by the committee. The Senate Committee on Energy and Natural Resources is now chaired by Sen. Lisa Murkowski (R-AK), who is expected to propose a broad energy bill that she first introduced in 2015. House E&C also has jurisdiction over the public-private partnership “Brand USA” program to boost U.S. job creation, grow our economy, and reduce the foreign trade imbalance to attract more international travelers to visit our country. The Roundtable is a member of the Visit U.S. coalition, which advocates for Congress to reauthorize BrandUSA (which expires in 2020 without legislative action). Building codes that could promote increased energy efficiency may also be addressed by the Senate Committee on Energy and Natural Resources, now chaired by Sen. Lisa Murkowski (R-AK), with Sen. Joe Manchin (D-WV) serving as the ranking member. Murkowski is expected to propose a broad energy policy bill that she first introduced in 2015. (Roundtable Weekly, April 25, 2016)Climate:In addition to the climate subcommittee mentioned above, a House Select Committee on the Climate Crisis was announced by Speaker Pelosi in her opening remarks for the 116th Congress (Politico, Jan. 3). Chaired by Rep. Kathy Castor (D-FL), the committee was formerly a select committee on global warming and energy independence. (National Public Radio, Dec. 30)Infrastructure:The House Transportation & Infrastructure Committee will be led by Rep. Pete DeFazio (D-OR) with Rep. Sam Graves (R-MO) as ranking member. DeFazio recently stated, “As Chairman, I will be a tireless advocate for the kind of infrastructure investment that results in job creation, increased economic growth, and decreased emissions.” (Committee News Release, Jan. 4) The House Transportation & Infrastructure Committee will be led by Rep. Pete DeFazio (D-OR). Roundtable President and CEO Jeffrey D. DeBoer addressed the nation's evolving infrastructure needs in an interview on CNBC Squawkbox in June 2017. (Roundtable Weekly, Oct. 16, 2018).Sen. John Barrasso (R-WY) will continue to chair the Senate Environment & Public Works Committee while Sen. Tom Carper (D-DE) will remain the ranking Democrat. Legislation to reauthorize surface transportation programs – including the Highway Trust Fund that finances most federal spending for roads and mass transit – will likely be a priority for both committees.Homeland Security:Rep. Bennie Thompson (D-MS) will chair the House Committee on Homeland Security with Rep. Mike Rogers (R-AL) as ranking member. Last year, the committee passed multiple bipartisan cybersecurity bills, including one creating the Cybersecurity and Infrastructure Security Agency within the Department of Homeland Security. The Senate Committee on Homeland Security and Governmental Affairs continues to be chaired by Sen. Ron Johnson (R-WI), and includes new ranking member Sen. Gary Peters (D-MI). Chairman Johnson said yesterday he continues to focus on national issues such as “border security, cybersecurity and critical infrastructure protection … during the 116th Congress.” (Committee News Release, Jan. 9)The Roundtable's Homeland Security Task Force (HSTF) and Real Estate Information Sharing and Analysis Center remain focused on information sharing and working with law enforcement and intelligence agencies to encourage measures that businesses can take to more effectively mitigate and manage risk from a variety of physical and cyber threats. Sen. Lindsey Graham (R-SC) will Chair the Senate Judiciary Committee . Immigration and Visa Policy:The House and Senate Judiciary committees have oversight over immigration-related issues such as the EB-5 investment program, visas to attract workers at all skill levels, and tourist visa reforms advocated by the Visit U.S. coalition to boost international travel to our country. The House Judiciary Committee will be chaired by Rep. Jerrold Nadler (D-NY) with Rep. Doug Collins (R-GA) as ranking member. Sen. Lindsey Graham (R-SC) takes the gavel of the Senate Judiciary Committee from Sen. Chuck Grassley (R-IA), with Dianne Feinstein (D-CA) returning as Ranking Member. Many national policy issues affecting CRE that fall within the jurisdiction of these committees in the 116th Congress will be discussed at The Roundtable’s next State of The Industry business meeting and policy advisory committee meetings on Jan. 29-30 in Washington, DC.

Policy Landscape, Roundtable Weekly

January 4, 2019

Roundtable Weekly

116th Congress Sworn In; House Elects Nancy Pelosi (D-CA) Speaker As Partial Government Shutdown Continues

Policy Landscape

A partial federal government shutdown over the issue of funding for a wall on the Mexican border continued this week after the new 116th Congress was sworn in and Democrats elected Rep. Nancy Pelosi (D-CA) as House Speaker. Democrats elected Rep. Nancy Pelosi (D-CA) as House Speaker at the start of the 116th Congress. The shutdown began Dec. 21 after negotiations were unable to resolve President Trump's request of at least $5 billion for construction of a wall versus Democrats' offer of approximately $1.3 billion for border security. After taking control of the House yesterday with a 235-199 majority (one seat is still contested), Democrats passed legislation to reopen the government. Their legislative proposals consist of a six-bill spending package (H.R. 21) to fund a number of agencies for the rest of the fiscal year until September 30 - with a continuing resolution (H.J. Res 1) to fund the Department of Homeland Security (DHS).Senate Majority Leader Mitch McConnell (R-KT) stated yesterday he will not allow funding legislation on the Senate floor for a vote unless it is supported by President Trump. (New York Times, Jan. 4)Congressional leaders met with President Trump twice this week in attempts to negotiate a spending deal. After today's White House meeting, Trump said he "absolutely" told policymakers that the shutdown could last months or years, but that he hopes planned talks this weekend will lead to an agreement. (BBC News, Jan. 4)The impasse has halted operations for about 25% of government agencies, with approximately 380,000 federal employees on furlough and another 420,000 working without pay. The shutdown affects seven agencies, including DHS, which has temporarily halted operations for immigration programs including the EB-5 investment program.The partial government shutd own began Dec. 21 after negotiations were unable to resolve President Trump's request of at least $5 billion for construction of a wall versus Democrats' offer of approximately $1.3 billion for border security. The National Flood Insurance Program, administered by the Federal Emergency Management Agency (FEMA), said it would continue to allow sales of new flood insurance policies during the shutdown. FEMA Administrator Brock Long noted that Congress reauthorized the flood insurance program through May 31, 2019 and Trump signed the legislation (S. 3628) before the shutdown began. Brock also cited The National Association of Realtors estimate that the inability to sell new flood insurance policies would affect 1,400 home closings each day. (NAR, Dec. 27 and CQ, Dec. 28)White House Council of Economic Kevin Hassett said yesterday that the shutdown will cut U.S. economic output by about 0.1 percent every two weeks. "Our estimate is that GDP in the first quarter could go down by about a tenth if this were to resolve in the next few weeks," Hassett said at the White House. (Bloomberg, Jan. 3)Separately, the new Democratic majority in the House has established a Select Committee on the Climate Crisis, which will be chaired by Rep. Kathy Castor (D-FL). "We must ... face the existential threat of our time: the climate crisis," Pelosi said in her opening address to Congress Thursday. (Politico, Jan. 3) Additionally, the House Energy and Commerce Committee announced this week that climate change would be the subject of its first hearing in 2019. (Energy and Commerce, Jan. 3)The effects of the government shutdown and prospects for policymaking in the new divided Congress will be topics for discussion during The Roundtable's Jan. 29-30 State of the Industry Meeting in Washington, DC.

Roundtable Weekly, Tax Policy, Tax Reform, Tax Reform Implementation, Tax Reform Technical Corrections

January 4, 2019

Roundtable Weekly

Tax Technical Corrections Draft Bill Released by Outgoing House Ways and Means Chair; New Chair Plans Hearings on Tax Overhaul’s Impact

Outgoing House Ways and Means Chairman Kevin Brady (R-TX) released a draft bill on Jan. 2 that includes tax technical corrections to previously enacted legislation, including the Tax Cuts and Jobs Act (TCJA) overhaul. Outgoing House Ways and Means Chairman Kevin Brady (R-TX) released a draft bill on Jan. 2 that includes tax technical corrections to previously enacted legislation, including the Tax Cuts and Jobs Act (TCJA) overhaul. Rep. Brady stated, "We are releasing this discussion draft of technical corrections with respect to the TCJA and other tax legislation to inform stakeholders and provide the American people an opportunity to submit feedback on the draft provisions. I look forward to gaining valuable feedback from the public and working with my colleagues in the House and Senate on both sides of the aisle as we continue to provide clarity and certainty for job creators across the country seeking to invest in their workers and our communities." The path forward for a technical corrections bill in the 116th Congress will be set by the new Ways and Means Chairman – Rep. Richard Neal (D-MA).The 90-page text of the discussion draft bill is complemented by a Joint Committee on Taxation explanation of the legislation. The bill includes several provisions important to real estate:Clarification that the recovery period for qualified improvement property is 15 years, or 20 years under the alternative depreciation system (ADS);Clarification that REIT dividends received indirectly by a mutual fund shareholder qualify for the 20% pass-through deduction;Clarification that the Opportunity Zone tax deferral benefit only extends to capital gains – a position that was also incorporated in Treasury’s October proposed regulations.Numerous other clarifications in the Brady draft relate to business interest (§ 163(j)), the pass-through deduction (§ 199A), and the limitation on active losses (§ 461(l). The path forward for a technical corrections bill in the 116th Congress will be set by the new Ways and Means Chairman – Rep. Richard Neal (D-MA) . There is strong bipartisan support for certain technical corrections, such as the 15-year recovery period for qualified improvement property, which could help spur action on a larger tax package. However, the current draft does not clarify that a business electing out of the new interest limitation is subject to a 30-year ADS recovery period for residential rental property placed in service before 2018. The issue could be addressed in future versions of the legislation. Prospects for enactment of technical changes is uncertain, although Ways and Means Chairman Neal stated this week that hearings on tax legislation may be held in early 2019 on the TJCA’s impact and alternative proposals. Neal also suggested that he will seek agreement with Ranking Member Brady on legislation addressing healthcare, infrastructure and retirement savings. (Wall Street Journal and Tax Notes, Jan. 4)The Roundtable’s Tax Policy Advisory Committee (TPAC) will review these proposals, which will be a focus during TPAC’s Jan. 30 meeting, held in conjunction with The Roundtable’s State of the Industry Meeting in Washington, DC.

Policy Landscape, Roundtable Weekly

December 21, 2018

Roundtable Weekly

Washington Prepares for Partial Federal Government Shutdown

Policy Landscape

The federal government will partially shutdown unless Washington policymakers can pass a year-end funding bill by midnight tonight. Negotiations over a spending measure have deadlocked over President Trump's request of at least $5 billion for construction of a wall on the Mexican border. (The Hill, Dec. 21) Negotiations over a spending measure have deadlocked over President Trump's request of at least $5 billion for construction of a wall on the Mexican border. (The Hill, Dec. 21) The Senate passed a seven-week stopgap bill on Wednesday, which President Trump said he would not sign, due to the fact there was no funding for a wall on the southern border. On Thursday, the Republican controlled House passed its own version of a stopgap measure, which would add $5.7 billion for border security and $7.8 billion for disaster relief. (The Hill, Dec. 21) The Senate is expected to reject the House-passed measure in votes today – leaving the federal government on the precipice of its third shutdown in two years.A December 10 meeting between President Trump and Democratic leaders resulted in sharp disagreements over the wall that played out before the media. "I am proud to shut down the government for border security," Mr. Trump told Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Nancy Pelosi (D-CA) in the Oval Office. "I will take the mantle. I will be the one to shut it down," Trump said. (Wall Street Journal, Dec. 11)A possible partial government shutdown of seven agencies, including the Department of Homeland Security (DHS), would furlough hundreds of thousands of workers and cost taxpayers millions. A shutdown would temporarily halt DHS operations of the National Flood Insurance and EB-5 investment programs. The federal government will partially shutdown unless Washington policymakers can pass a year-end funding bill by midnight tonight. (The Hill , Dec. 21) If approximately 25% of the government shuts down tonight at midnight, a decision on funding could be pushed until the new Congress is sworn in on January 3 and Democrats assume the majority in the House. Minority Leader Nancy Pelosi (D-CA) is likely to be elected House Speaker, push for a stopgap Continuing Resolution, and seek to re-open the government at that time if it remains closed over the holidays. In other policy news, the House voted 220-183 to advance legislation that would extend tax breaks for biodiesel and correct errors in the TCJA of 2017, including a provision that unintentionally lengthened the cost recovery period for improvements to the interior of nonresidential real estate. Both the House and Senate could take-up the legislation again after the new Congress convenes in January. (Bloomberg, Dec. 20)In addition, after passing the House and Senate with rare bipartisan support earlier in the week, President Trump signed the First Step Act into law this afternoon. The new criminal justice reform legislation gives judges more leeway at sentencing for federal crimes, increases vocational and rehabilitation opportunities for incarcerated individuals to re-enter society, and expands early release programs. (New York Times, Dec. 18.)

News

December 21, 2018

Roundtable Weekly

Roundtable Comment Letter Recommends Additional Guidance from Treasury and IRS to Accelerate Capital Investment in Opportunity Zones

Opportunity Zones OZs

This week the Real Estate Roundtable provided formal comments regarding opportunity zones to the Treasury Department and the IRS. The letter encourages Treasury to clarify a number of tax issues that would remove uncertainty for potential investors and opportunity fund managers. This is the second Roundtable comment letter on opportunity zones, following Treasury’s publication of proposed regulations in October. ( Roundtable Weekly, Oct. 19) This week the Real Estate Roundtable provided formal comments regarding opportunity zones to the Treasury Department and the IRS. The October proposed rules provided a strong foundation for opportunity fund formation and investment. Building on the rules, the Roundtable letter prioritizes five areas where additional guidance from Treasury would accelerate the pooling of capital and job creation in opportunity zones. The letter recommends that Treasury: Remove barriers to the formation of multi-asset opportunity funds through flexible exit rules; Clarify the circumstances in which land and previously vacant buildings constitute qualified opportunity zone business property; Allow appropriate refinancing of opportunity fund assets and avoid overly restrictive debt-distribution rules; Encourage continued investment in opportunity zones with flexible gain reinvestment, roll-over, and holding period rules at the investor, fund, and business level; and Provide additional protections in the working capital safe harbor and the substantial improvement rules for taxpayers making a good faith effort to comply with opportunity zone requirements. “Real estate development and redevelopment is a key component of any region’s economic strength and growth, wrote Roundtable President and CEO Jeffrey D. DeBoer. “The Roundtable foresees opportunity fund investors and fund managers actively partnering with local leaders and entrepreneurs on projects that both drive economic activity and respond to the needs of communities. Additional guidance along the lines described above will help ensure that the opportunity zone incentives fulfill their ambitious objectives.” The Treasury Department could issue a second set of proposed regulations on opportunity zones as soon as January, according to Treasury Assistant Secretary David Kautter (Roundtable Weekly, Dec. 14). The underlying legislation directs Treasury to report to Congress on opportunity zones’ effectiveness. The Roundtable letter encourages Treasury to consider, as part of its reporting, the aggregate impact of opportunity zone investments on the overall health and wellbeing of targeted communities, including the impact on the local tax base, surrounding infrastructure, and their ability to attract and retain employers. The Roundtable comments are the product of an active Tax Policy Advisory Committee (TPAC) Opportunity Zone Working Group that includes leading real estate developers, owners, investors, lenders, industry organizations, and outside advisors. The TPAC working group will continue to work closely with government officials to help ensure the program fulfills its ambitious objective of stimulating economic development and job creation in low-income communities.

Opportunity Zones

December 19, 2018

Policy Comment Letter

RER Opp. Zone Comment Letter-12-19-2018

Policy Landscape, Roundtable Weekly

December 14, 2018

Roundtable Weekly

Border Wall Disagreement Looms Over Possible Government Shutdown; House Republicans Face Uphill Effort to Add Tax Provisions to Year-End Funding Bill

Policy Landscape

The federal government will partially shutdown unless Washington policymakers can pass a year-end funding bill by Dec. 21. Negotiations over a spending measure have deadlocked over President Trump's request of at least $5 billion for construction of a wall on the Mexican border versus Democrats' offer of approximately $1.3 billion for border security. (The Hill, Dec. 13)A meeting between President Trump and Democratic leaders this week resulted in sharp disagreements over funding for a border wall. (Wall Street Journal, Dec. 11) A meeting on Tuesday between President Trump and Democratic leaders resulted in sharp disagreements over the wall that played out before the media. "I am proud to shut down the government for border security," Mr. Trump told Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Nancy Pelosi (D-CA) in the Oval Office. "I will take the mantle. I will be the one to shut it down," Trump said. (Wall Street Journal, Dec. 11)Both the House and Senate left Washington today with no votes on a funding bill. The Senate returns Monday and the House on Dec. 19, leaving little time to reach a deal. A possible partial government shutdown of seven agencies, including the Department of Homeland Security (DHS), would furlough hundreds of thousands of workers and cost taxpayers millions. (Politico, Dec. 13)A shutdown would temporarily halt DHS operations of the National Flood Insurance and EB-5 investment programs.If approximately 25% of the government shuts down, a decision on funding could be pushed until Jan. 3, when Democrats assume the majority in the House. Minority Leader Nancy Pelosi (D-CA) is likely to be elected House Speaker, push for a stopgap Continuing Resolution and re-open the government. The Senate would likely pass such a measure. Prospects for Revised Tax Bill in Doubt; Roundtable, Stakeholders Push for Technical Correction to Depreciation Rules A must-pass spending package could be the last opportunity in 2018 for lawmakers to pass other legislation, such as a revised package of tax provisions introduced Monday by House Ways and Means Chairman Kevin Brady (R-TX). The new measure does not include extensions of temporary tax breaks, which were part of the initial legislation. (Wall Street Journal, Dec. 11 and Roundtable Weekly, Nov. 30 / Reference: 253-page text of the revised tax bill) The Roundtable on Dec. 10, 2018 joined more than 260 stakeholders in a letter to congressional leadership urging a correction of the qualified improvement property (QIP) provision. Specific provisions affecting real estate in the revised legislation include technical corrections to fix errors in last year's Tax Cuts and Jobs Act. The bill would: shorten the cost recovery period for qualified improvement property (QIP)—a new category of depreciable property that covers upgrades and improvements to the interior of nonresidential buildings, andclarify that the new 20 percent deduction for pass-through business income extends to REIT dividends received by mutual fund shareholdersThe Roundtable on Monday joined more than 260 stakeholders in a letter to congressional leadership urging a correction of the QIP provision. A drafting error in the 2017 tax overhaul requires taxpayers to depreciate building improvements over 39 years, instead of one year as contemplated under the Act. This large difference in the after-tax cost of making improvements is causing a delay in store, restaurant and leasehold remodeling projects, as well as causing retailers to decline opportunities to purchase or lease new store locations that would require substantial improvements. (Comment Letter, Dec. 10 and Marketplace, Dec. 12) Key Senators, such as Finance Committee Ranking Member Ron Wyden (D-OR), suggested the revised House bill was unlikely to be included in a final spending agreement, "To me it is really sort of the equivalent of putting up the white flag of surrender on the idea that you're going to have a bipartisan tax policy." (Washington Examiner, Dec. 10)If Congress does not pass tax legislation by year-end, the incoming Chairman of the House Ways and Means Committee stated that tax extenders will be a priority in the next Congress. Ranking minority member Richard Neal (D-MA) referred to retroactive renewal of more than 20 extenders when he told Tax Notes on Dec. 12, "We'll have to wait and see [how many are considered], but we certainly intend to move on them fast."

News

December 14, 2018

Roundtable Weekly

White House Executive Order Aims to Stimulate Opportunity Zone Investment by Channeling Federal Resources; Additional OZ Regulations Expected in January

Opportunity Zones OZs

President Trump on Dec. 12 signed an Executive Order that seeks to facilitate long-term equity investment in new Opportunity Zones and other low-income communities. The order formally established the White House Opportunity and Revitalization Council. (White House statement and PBS Video, Dec. 12)President Trump on Dec. 12 signed an Executive Order that seeks to facilitate long-term equity investment in new Opportunity Zones and other low-income communities. (White House statement and PBS Video) Congress created Opportunity Zones in the 2017 Tax Cuts and Jobs Act to encourage long-term, capital investment in economically struggling, low-income communities. Opportunity Funds that invest in tangible business property, such as real estate, located in a qualifying zone are eligible for tax benefits that are tied to the investment holding period. The capital gain on an Opportunity Fund investment is excluded from tax altogether if the asset is held for 10 years or more. In June 2018, the Treasury Department designated 8,761 communities in all 50 States, the District of Columbia, and five Territories as Opportunity Zones. (IRS Notice 2018-48 and Roundtable Weekly, June 22) The new Council will lead joint efforts across executive departments and agencies to implement reforms that streamline existing regulations, optimize the use of federal resources, and align the requirements for public and private investment programs in economically distressed communities. The Council will also present the President with a number of reports identifying and recommending ways to encourage investment in these areas. (White House statement, Dec. 12). The White House signing was live streamed and included comments from Sen. Tim Scott (R-SC), the original author and sponsor of Opportunity Zone legislation. (New York Times, Jan. 29, 2018)The Council-chaired by Secretary of Housing and Urban Development Ben Carson-will be comprised of officials from 13 Federal agencies and include Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross.Second Round of Opportunity Zone Regulations Expected in JanuaryThe Treasury Department released its first round of Proposed Regulations governing the Opportunity Zone program in October. An Oct. 26 GlobeSt.com interview with Real Estate Roundtable President & CEO Jeffrey DeBoer and Roundtable SVP and Counsel Ryan McCormick focused on the initial regulatory guidance and its implications for the real estate industry. The next round of Opportunity Zone regulations may be released in January, according to Treasury Assistant Secretary for Tax Policy David Kautter, above. (Tax Notes, Dec. 14). The next round of Opportunity Zone regulations may be released in January, according to Treasury Assistant Secretary for Tax Policy David Kautter. (Tax Notes, Dec. 14)The day after the White House Executive Order signing, Kautter told reporters that it would be "about January before we come out with additional guidance." Kauter noted, "The first set of regulations was designed to provide rules for getting funds up and operating, and the second set of rules is more about the operational aspects of the funds themselves."According to the New York Times, an anonymous administration official said Tuesday that the coming regulations would include reporting requirements for investments in Opportunity Zones to evaluate the program's impact. (New York Times, Dec. 12)The Roundtable's Tax Policy Advisory Committee (TPAC) recently convened a panel on Opportunity Zones that included the tax counsel for Senator Tim Scott (R-SC). TPAC's Opportunity Zone Working Group is developing additional comments on how the industry can help the program fulfill its ambitious objective of stimulating economic development and job creation in low-income communities. (Roundtable Comment Letter, June 28 and Roundtable Weekly, July 20)

Policy Landscape, Roundtable Weekly

December 7, 2018

Roundtable Weekly

Roundtable’s Trump Signs Measure Funding Government Until Dec. 21; Border Wall Issue Threatens Partial Government Shutdown Issues

Policy Landscape

President Trump today signed a spending measure to fund the government until Dec. 21, buying time for policymakers to negotiate over the key issue of funding a border wall on the Mexican border. (RollCall, Dec. 7)The 115th Congress is now scheduled to end on Dec. 21. Today was the original deadline for funding the government's FY2019 budget (through Sept. 30, 2019). The short-term Continuing Resolution passed by Congress this week accommodated observances in honor of former President George H. W. Bush. The extension includes funding for the National Flood Insurance and EB-5 investment programs until Dec. 21.Policymakers will now focus on an appropriations package affecting several government agencies, including the Department of Homeland Security. If an agreement on funding is not reached for FY2019, they may pass another short-term extension or face a partial shutdown.A key issue in the funding negotiations is construction of a wall along the U.S.-Mexican border. The president is scheduled to meet with Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Nancy Pelosi (D-CA) on Tuesday about his initial request for at least $5 billion to build the wall. Trump told a law enforcement conference today, "Congress must fully fund border security in the year-end funding bill." (NBC News and Fox News, Dec. 7)Schumer said yesterday that a bipartisan Senate plan for $1.6 billion in border security funding does not include money for a wall, adding that the money "can only be used for fencing" and technology security features. Pelosi, who is likely to become the next speaker of the House, yesterday referred to the construction of a wall as "immoral, ineffective, and expensive." (AP, Dec. 6)Sen. Lindsey Graham (R-S.C.) met with Trump this morning, tweeting that the president "indicated he supports" adding a bipartisan criminal justice reform bill to the year-end spending measure - potentially adding another complicating factor to negotiations. (CNBC)Separately, a House GOP tax bill introduced last week, which includes tax "extenders" and technical corrections of importance to commercial real estate, faces an uncertain future in the remaining weeks of the lame duck session. Congressional tax-writers and leaders do not appear to be any closer to an agreement that would include certain tax provisions in the end-of-year spending bill, such as a technical correction related to the depreciation schedule for nonresidential, interior real estate improvements. (Roundtable Weekly, Nov. 30 and BGov, Dec. 7)The 115th Congress is scheduled to end on Dec. 21.

Economic Growth - Travel & Tourism, Economic Growth & CRE, Roundtable Weekly, Trade Policy

December 7, 2018

Roundtable Weekly

Trump 2016 Campaign Advisor: Foreign Tourism Supports U.S. Economic Growth, Job Creation and Reduces Trade Deficit

A Dec. 4 report by Heritage Foundation Economist Stephen Moore finds that "promoting and facilitating foreign tourism to the United States can be an effective way to increase American jobs and national output while reducing the nation's trade deficit."According to Tourism to the U.S. Means More Growth, More Jobs, Lower Trade Deficit by Stephen Moore, when international travelers visit the United States, their spending at hotels, retail stores, attraction properties and restaurants totals nearly $250 billion per year. This economic activity supports approximately 1.2 million U.S. jobs and at least $30 billion in worker pay and benefits. Moore advised President Trump during the 2016 campaign and worked closely with Larry Kudlow, now the chief White House economic adviser. (Washington Examiner, Dec. 4)Moore's analysis shows the impact of foreign travel on the U.S. economy and how the growth rate of visitor spending in the U.S. has fallen in comparison to other nations in recent years. According to the report, when international travelers visit the United States, their spending at hotels, retail stores, attraction properties and restaurants totals nearly $250 billion per year. This economic activity supports approximately 1.2 million U.S. jobs and at least $30 billion in worker pay and benefits.The report also shows that tourism from abroad lowers the trade deficit. In 2017, international tourism generated a $77 billion trade surplus — more than any other industry except for ﬁnancial services — which reduces the U.S. overall trade deﬁcit by an equivalent amount. (Tourism to the U.S. Means More Growth, More Jobs, Lower Trade Deficit by Stephen Moore)The Roundtable is part of the Visit U.S. coalition, which advocates for reauthorization of the Brand USA program — a public-private partnership that markets the United States as a travel destination to international travelers. The Roundtable joined a coalition of nearly 600 organizations last week in a letter urging Congress to pass legislation that puts Brand USA funding at risk. (Roundtable Weekly, Nov. 30)Today, Brand USA operates at a 29:1 return on investment-a program with undeniable economic benefits at no cost to the taxpayer. If Congress does not renew Brand USA this year, $17.7 billion in visitor spending, $5 billion in tax revenue, and 51,000 American jobs generated are at risk. (Return On Investment Analysis, Oxford Economics and Visit U.S. Letter to Congressional Leadership, Nov. 30) The economic importance of foreign travel and tourism to the United States' economy and commercial real estate industry was the focus of a panel discussion during The Roundtable's 2018 Annual Meeting. (Roundtable Weekly, June 15, 2018).

News

December 7, 2018

Roundtable Weekly

Roundtable Comments Support Proposed Implementation Rule for High Volatility Commercial Real Estate Loans

The Real Estate Roundtable's support for a federal proposal that would implement modified capital rules for High Volatility Commercial Real Estate (HVCRE) loan exposures is detailed in a Nov. 26 comment letter to three banking agencies. The Agencies — tasked with developing a rule consistent with Section 214 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) to clarify the capital treatment of HVCRE Acquisition, Development, or Construction (ADC) loans — invited comments on their Notice of Proposed Rulemaking. (Roundtable Weekly, May 25)The Real Estate Roundtable's support for a federal proposal that would implement modified capital rules for High Volatility Commercial Real Estate (HVCRE) loan exposures is detailed in a Nov. 26 comment letter to three banking agencies.. The Roundtable's comment letter to the Office of the Comptroller of the Currency; the Board of Governors of the Federal Reserve System; and the Federal Deposit Insurance Corporation states the current implementation proposal "more realistically aligns the requirements for HVCRE loans on commercial real estate projects with the actual periods of development or construction risk." The letter also notes that when the final proposal is implemented, it "will aid economic growth and job creation, while maintaining adequate capital levels to manage the risks associated with ADC lending." (Roundtable Comment Letter, Nov. 26)The changes to the capital rules address key deficiencies in the agencies' prior regulations governing the criteria for HVCRE or HVADC loans by providing the following modifications and clarifications:The 15% equity requirement would be revised to expressly include contributed land/property at the appreciated land value as determined by a FIRREA appraisal and bank review (versus the cost basis under the current rule).Clarifies that loans made to acquire existing property with rental income and/or do cosmetic upgrades and other improvements don't trigger the capital penalty.A new exemption would be added to the HVCRE rule covering acquisition/refinancing loans for performing income producing properties.Allows borrowers to use internally generated capital in the project and, once the development/construction risk period has passed, outside the project, rather than forcing them to refinance the loan (possibly away from the original lender).All ADC loans made prior to January 2015 would be grandfathered and do not have to satisfy current HVCRE exemption criteria.Banks would able to withdraw HVCRE status prior to the end of an ADC loan's term.Roundtable President and CEO Jeffrey DeBoer also suggests in the letter that periodic industry forums be held on the implementation of the capital rules. "This feedback would allow the Agencies to appropriately address any possible unintended economic consequences resulting from the regulation by supervisory personnel or by the institutions they supervise that might threaten the soundness of the banking system or the stability of the real estate lending market," DeBoer added.The Roundtable's letter is supported by The American College of Real Estate Lawyers (ACREL) and The American College of Mortgage Attorneys (ACMA). (Joint Letter of Support, Nov. 27)The Agencies' HVCRE proposal was one of the issues discussed at this week's meeting of The Roundtable's Real Estate Capital Advisory Committee (RECPAC). Since 2015, The Roundtable's HVCRE Working Group and industry coalition partners have played a key role in advancing specific reforms to the HVCRE Rule. (Roundtable HVCRE Comment Letter, March 2).

Policy Landscape, Roundtable Weekly

November 30, 2018

Roundtable Weekly

Congress Returns for Lame Duck Session; Government Funding Deadline Threatens Partial Shutdown

Policy Landscape

Lawmakers returned to Washington this week for their post-election “lame duck” session, facing a Dec. 7 government funding deadline that threatens a partial government shutdown.Lawmakers returned to Washington this week for their post-election “lame duck” session, facing a Dec. 7 government funding deadline that threatens a partial government shutdown. Seven FY2019 spending bills await congressional action by next Friday to fund the departments of Agriculture, Commerce, Justice, Homeland Security, Interior, State, Transportation and Housing and Urban Development, and several smaller agencies. If Congress and President Trump do not reach agreement on an appropriations package for the fiscal year, these departments and agencies may be subject to a partial government shutdown or another short-term extension. Several immigration programs, including the EB-5 investment program, also face expiration on Dec. 7. (USA Today, Nov. 28) A key issue in the funding negotiations is construction of a wall along the U.S.-Mexican border. President Trump said he would "totally be willing" to shut down the federal government if $5 billion is not approved for the wall by Congress during a Nov. 28 Oval Office interview with Politico. Senate Minority Leader Chuck Schumer (D-NY) and other Democratic leaders have pledged $1.6 billion for border security. (The Hill, Nov. 29)The lame-duck session could be the final opportunity for Republicans to pass significant funding for the wall, as Democrats will reclaim the House majority in January. A government program scheduled to expire today – the National Flood Insurance Program (NFIP) – was extended yesterday by Congress for the seventh time in 12 months. The NFIP extension will also expire Dec. 7 unless Congress attaches a longer-term flood insurance extension to a spending bill, or passes another continuing resolution. (BGov, Nov. 30) The Real Estate Roundtable and 14 other industry groups urged Congress in a June 12, 2017 comment letterto reauthorize and reform the NFIP to help protect the nation’s commercial and multifamily business-owners, their properties, residents, and the jobs they create from the financial perils of flooding. (Roundtable Weekly, Sept. 14, 2018) The Roundtable is also part of a coalition advocating for the reauthorization of the Brand USA program – a public-private partnership that markets the United States as a travel destination to international travelers. The Roundtable is also part of a coalition advocating for the reauthorization of the Brand USA program – a public-private partnership that markets the United States as a travel destination to international travelers. The Visit U.S. coalition today sent a letter urging Congress to correct a financial provision that puts Brand USA funding at risk. Legislation is needed to ensure that international visitor fees funding the program will not be diverted to the Treasury Department, as currently scheduled. The fee assessed on international travelers coming to the U.S. is matched 1:1 by funds from the private sector travel industry. The letter states, “Without this funding, private sector partners of Brand USA are limited, and in some cases deterred, from marketing to highly valued international travelers.” (VisitU.S. Coalition letter, Nov. 30) Brand USA is estimated to have generated international visitor spending since FY2013 that produced $486 million in federal tax revenue, and another $526 million in state and local tax revenue. (Return On Investment Analysis, Oxford Economics)Lawmakers are scheduled to stay in session until Dec. 14 to close out the 115th Congress.

Roundtable Weekly, Tax Policy

November 30, 2018

Roundtable Weekly

House Ways and Means Chairman Kevin Brady (R-TX) Releases Tax Bill Addressing “Extenders” and Technical Corrections

Tax Policy

House GOP leaders yesterday delayed a vote on a $54 billion dollar tax bill released Monday (H.R. 88) by House Ways and Means Chairman Kevin Brady (R-TX) that includes tax "extenders" and technical corrections of importance to commercial real estate. (Brady Statement, Nov. 26 and CQ, Nov. 30) GOP leaders yesterday delayed a vote on a $54 billion dollar tax bill released Monday (H.R. 88) by House Ways and Means Chairman Kevin Brady (R-TX), above, that includes tax "extenders" and technical corrections of importance to commercial real estate. (Brady Statement, Nov. 26) Specific provisions affecting real estate include technical corrections to fix errors in last year's Tax Cuts and Jobs Act. The bill would: shorten the cost recovery period for qualified improvement property, a new category of depreciable property that covers upgrades and improvements to the interior of nonresidential buildings;clarify that the new 20 percent deduction for pass-through business income extends to REIT dividends received by mutual fund shareholders;temporarily extend the expired deduction for energy-efficient commercial building property (Section 179D); andtemporarily extend other expired provisions affecting homeowners, such as a deduction for mortgage insurance premiums and a tax exclusion for mortgage debt forgiveness. (Roundtable Weekly, Oct. 19) In October, The Roundtable along with 239 businesses and trade groups, wrote to Secretary Mnuchin urging the Treasury Department to provide administrative relief from a drafting mistake that increased the cost recovery period for qualified improvement property (QIP) to 39 years, instead of 15. (Roundtable Weekly, Oct. 12) It is uncertain when the wide-ranging tax bill will be considered but debate on the legislation may take place next week. Senate Democrats, whose support is needed to assure passage of any tax changes before next year, reportedly, "are determined to win concessions in exchange for providing votes to fix errors in last year's law. (Wall Street Journal, Nov. 30) Yet it remains unclear what concessions Democrats are seeking. When asked about the bill's prospects in the Senate, Sen Charles Grassley (R-IA), the likely Senate Finance chairman next year, said "Not if brought up separately, only if it's put in the funding bill." (CQ, Nov. 28).

Interest Deductibility, Roundtable Weekly, Tax Policy

November 30, 2018

Roundtable Weekly

Treasury Proposes Detailed Rules for New Restrictions on Deducting Business Interest

Business Interest Deduction Interest Deductibility

On Tuesday, the Treasury Department released proposed regulations governing the new limitation on the deductibility of business interest expense, including the exception for real estate businesses. On Tuesday, the Treasury Department released proposed regulations governing the new limitation on the deductibility of business interest expense, including the exception for real estate businesses. Under the Tax Cuts and Jobs Act (TCJA), businesses generally can no longer deduct their interest expense to the extent it exceeds 30 percent of their annual earnings before interest, tax, depreciation and amortization (EBITDA). Business interest deductibility was a key issue in Real Estate Roundtable President & CEO Jeffrey DeBoer's testimony before the Senate Finance Committee shortly before consideration of the tax bill. (Roundtable Statement for the Record, Sept. 19, 2017)DeBoer testified that the proposal could have severe unintended consequences. Noting that the cost of debt is a necessary expense that must be accounted for when measuring income, he testified that our capital markets are the envy of the world and that responsible, appropriate leverage helps entrepreneurs and contributes to economic growth and job creation. (Roundtable Weekly, Sept. 29 and testimony video clips)The final bill included a critical exception from the interest limit for an electing real property trade or business. An electing real property trade or business is defined broadly to cover: any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business. In February, the Roundtable submitted comments to Treasury with recommendations for how the real estate exception should work in the case of tiered business structures, and in the case of businesses that involve both real estate and non-real estate activities. (Roundtable Weekly, Feb. 23, 2018) Business interest deductibility was a key issue in Real Estate Roundtable President & CEO Jeffrey DeBoer's testimony before the Senate Finance Committee shortly before consideration of the tax bill. (Roundtable Statement for the Record, Sept. 19, 2017 and video clips ). The proposed regulations are largely favorable. Most importantly, the regulations clarify that partner-level borrowing qualifies for the real estate exception. Thus, at the election of the taxpayer, the real estate exception can extend to debt that is incurred by a partner to acquire an interest in a partnership that is engaged in a real property trade or business. In addition, the regulations confirm the broad definition of a real property trade or business. The regulations also clarify that capitalized interest, which commonly arises during the development of real estate, is not subject to the interest limit.With respect to taxpayers engaged in both real estate and non-real estate activities, the proposed regulations generally would allocate and apportion debt based on the relative amount of the taxpayer's adjusted basis in assets used in those activities. However, taxpayers would directly trace and allocate qualified nonrecourse indebtedness to the asset securing the loan (with no apportionment). This latter rule should result in the allocation of a larger share of debt to assets qualifying for the real estate exception.Some concerns remain. Notably, the attribution rule that allows partners to qualify for the real estate exception based on partnership-level activities does not extend broadly to all upper-tier borrowing for investment in lower-tier real estate businesses. Thus, except in limited circumstances, debt incurred by a taxpayer to invest in a corporation (or REIT) that is engaged in a real property trade or business is not eligible for the real estate exception. The Roundtable's Tax Policy Advisory Committee is continuing to review the 439-page regulatory package to understand its full implications for the financing of U.S. real estate. Comments on the proposed regulations will be due 60 days after their publication in the Federal Register.

Climate and Immigration, Energy, ENERGY STAR, Roundtable Weekly

November 30, 2018

Roundtable Weekly

Roundtable Submits Recommendations to Improve ENERGY STAR Scoring Models; EPA Seeks Additional Feedback from Building Owners

The Real Estate Roundtable on Nov. 26 sent recommendations to the U.S. Environmental Protection Agency (EPA) to improve the agency’s ENERGY STAR scoring methods, which rate a building’s energy efficiency performance. (Roundtable Letter and Recommendations)The Real Estate Roundtable on Nov. 26 sent recommendations to the U.S. Environmental Protection Agency (EPA) to improve the agency’s ENERGY STAR scoring methods, which rate a building’s energy efficiency performance. (Roundtable Letter and Recommendations) Nearly 35,000 buildings and plants – representing more than 5 billion square feet of commercial space – have earned EPA’s ENERGY STAR. Pension funds and other institutional investors frequently rely on the label as a market signal for well-managed assets with smaller carbon footprints. Business tenants also seek to locate in ENERGY STAR-certified buildings to lower their utility expenses.Last August, EPA announced the first updates to its ENERGY STAR scoring models in over a decade. Initial analyses by The Roundtable’s Sustainability Policy Advisory Committee (SPAC) and other stakeholders indicated that EPA’s new models produced arbitrary scoring results. Offices over 500,000 square feet in size, and buildings located in colder climates requiring more heating throughout the year, appear to have sustained the most significant ENERGY STAR score declines.EPA thereafter suspended certifications for office, warehouse and other property types and opened a “study period” in September to assess its scoring models. (Roundtable Weekly, Sept. 14)Roundtable President and CEO Jeffrey DeBoer in October told the Wall Street Journal, “Revisions to ENERGY STAR are much needed and very important. However, to be truly effective the data sources and projections relied upon in the revision must be transparent and reflect industry leading practices.” (Wall Street Journal, Oct. 9)The Roundtable's Nov. 26 summary and recommended changes to EPA’s scoring methods seek to ensure a level-playing field for the ENERGY STAR label – so that buildings of all sizes located in varying climate zones across the country are rated fairly. EPA has requested additional data from owners and managers to test its methods on specific buildings and portfolios. Stakeholders interested in working with the agency to assess how particular properties have fared since new ENERGY STAR scores were released last August should consult EPA’s website, “How to Respond to Data Requests in Portfolio Manager.” EPA plans to wrap-up its review period and resume issuing ENERGY STAR building labels by next spring.

November 26, 2018

Policy Comment Letter

13. 11-26-18 Real Estate Roundtable HVCRE Comment Letter

EPA’s ENERGY STAR Certification for Buildings

November 26, 2018

Policy Comment Letter

The Roundtable Submits Recommendations to Improve ENERGY STAR Scoring Models

Energy Policy, ENERGY STAR,

Roundtable Weekly, Tax Policy

November 16, 2018

Roundtable Weekly

Lawmakers May Address Tax “Extenders” and Technical Corrections in Lame Duck Session; Sen. Charles Grassley (R-IA) to Succeed Sen. Orrin Hatch (R-UT) as Chair of Finance Committee

Tax Policy

Congress returned to Washington this week to prepare their lame duck session agenda, which is expected to address a federal government spending bill and possible tax legislation. Specific tax policies affecting commercial real estate that may be addressed in the lame duck session include technical corrections to fix errors in last year's Tax Cuts and Jobs Act. On Tuesday, outgoing House Ways and Means Committee Chairman Kevin Brady (R-TX) outlined several tax priorities, including legislation that may address tax deduction extensions and 70 to 80 technical corrections (The Hill, Nov. 13). "We're prepared and ready if there's an appetite to move some of these things and get them off of Congress's plate this year," said Chairman Brady. (Tax Notes, Nov. 14) Specific tax policies affecting commercial real estate that may be addressed include technical corrections to fix errors in last year's Tax Cuts and Jobs Act, including:the cost recovery period for qualified improvement property (QIP);Section 179D reforms to incentivize private sector retrofits for energy efficient building improvements, andother expired provisions affecting homeowners, such as a deduction for mortgage insurance premiums. (Roundtable Weekly, Oct. 19) In October, The Roundtable along with 239 businesses and trade groups, wrote to Secretary Mnuchin urging the Treasury Department to provide administrative relief from a drafting mistake that increased the cost recovery period for qualified improvement property (QIP) to 39 years, instead of 15. (Roundtable Weekly, Oct. 12) On Friday, Senator Charles Grassley (R-IA) announced he would give up his position leading the Senate Judiciary Committee to assume the chairmanship of the Senate Finance Committee when Congress reconvenes in January. Senator Orrin Hatch, the current Finance Chairman, is retiring after 42 years in the U.S. Senate. This will be the third time that Sen. Grassley has chaired the Finance Committee, having held the panel's top job twice in the 2000s. (Bloomberg, Nov. 16)Congress will return for the lame duck session to address these issues and many more, the week after Thanksgiving. Roundtable Weekly will resume publication on Nov. 30.

News

November 16, 2018

Roundtable Weekly

FBI Briefs Roundtable’s HSTF on Commercial Sector Holiday Security; Real Estate Information Sharing and Analysis Center Featured in Homeland Security Today; FINCEN Expands Metro Areas Subject to Real Estate Purchase Review

A day-long briefing this week by senior officials of the Federal Bureau of Investigation (FBI) to The Roundtable’s Homeland Security Task Force (HSTF) and the National Retail Federation focused on maintaining vigilance in the commercial sector during the holiday season; counterterrorism trends; criminal gang trends; organized retail crime; terrorism financing and an analysis of recent active shooter and workplace violence incidents. This week, the Real Estate Information Sharing and Analysis Center ( RE-ISAC ) was featured in an article in Homeland Security Today written by Roundtable SVP Clifton “Chip” Rodgers Jr. and Andy Jabbour of Gate15, which provides support to the RE-ISAC. The special joint session meeting coincided with an article about the Real Estate Information Sharing and Analysis Center (RE-ISAC) in Homeland Security Today by Roundtable Senior Vice President Clifton “Chip” Rodgers Jr. and Andy Jabbour of Gate15, which provides support to the RE-ISAC. (RE-ISAC Working to Secure the Facilities That House America’s Economy, Nov. 13)"Terrorism continues to pose a clear and present danger to our nation, to the American economy and to the commercial facilities sector." Homeland Security Today notes, “In response to these ongoing threats, the RE-ISAC has brought together industry organizations to work together with federal, state and local law enforcement and intelligence agencies to prevent, detect and respond to terrorist threats and malicious incidents.”The article also states, “The RE-ISAC is the designated conduit of terrorism, cyber and natural hazard warning and response information between the government and the commercial facilities sector.” The Real Estate Roundtable in February 2003 organized the RE-ISACas a public-private partnership between the U.S. commercial facilities sector and federal homeland security officials to proactively manage risk and strengthen the security and resilience of the U.S. commercial facilities/real estate critical infrastructure.While the Department of Homeland Security’s National Protection and Programs Directorate (NPPD) is the primary federal partner of the RE-ISAC, the organization also works with the FBI, the National Joint Terrorism Task Force, Federal Emergency Management Agency (FEMA) and a number of other law enforcement and intelligence agencies.DHS announced yesterday that Congress passed legislation to reorganize the NPPD, creating the Cybersecurity and Infrastructure Security Agency – CISA. (DHS, Nov. 13)The CISA Act (H.R. 3359), which passed the House yesterday, the Senate in October, and was signed by President Trump today, will prioritize CISA’s mission as “the Federal leader for cyber and physical infrastructure security."Separately, The Financial Crimes Enforcement Network (FinCEN) on Nov. 15 announced the issuance of revised Geographic Targeting Orders (GTOs) that require U.S. title insurance companies to identify the natural persons behind shell companies used in all-cash purchases of residential real estate. The purchase amount threshold, which previously varied by city, is now set at $300,000 for each covered metropolitan area. The GTOs cover certain counties within the following major U.S. metropolitan areas: Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle. (Wall Street Journal, Nov. 15)

Policy Landscape, Roundtable Weekly

November 9, 2018

Roundtable Weekly

Midterm Elections Produce Divided Congress; Lame Duck Session Faces Government Funding Deadline

Policy Landscape

Lawmakers return to Washington next week for a Lame Duck session after midterm elections that secured Democratic control of the House in January. Policymakers will immediately face a Dec. 7 deadline to fund parts of the government that may collide with President Trump’s goal to fund a border wall on the Mexican border – a possible impasse that could threaten a partial government shutdown.Lawmakers return to Washington next week for a Lame Duck session after midterm elections that secured Democratic control of the House in January. Senate Majority Leader Mitch McConnell (R-KY) this week cautioned against a possible shutdown. "75 percent of the government got funded before the end of September and we all know we need to work together here at the end to finish that up. So we're going to do the best we can to achieve the president's priorities. And hopefully we won't be headed down that path," McConnell said. (Politico, Nov. 7) Several immigration programs (including the EB-5 investment program) are scheduled to expire on Dec. 7 unless Congress pursues its typical course and extends them as part of the next government funding measure. However, Congress also faces a Nov. 30 funding expiration for the National Flood Insurance Program. Other major legislation is not expected to pass during the Lame Duck, although President Trump and Democrats have recently expressed interest in working together on an infrastructure package (CNBC, Nov. 7). Congress may also consider a tax bill with technical corrections and an extension for expiring tax breaks that could carry over to the new year.Beyond the Lame Duck, it is expected that both parties in the 116th Congress will introduce legislation to maneuver for public favor affecting the 2020 presidential campaign. (AP, Nov. 7) Roundtable President and CEO Jeffrey DeBoer said, "We believe we will continue to be successful in Washington – regardless of which party controls the power levers – by maintaining our focus on smart research; strong political relationships; and our long-standing positive bipartisan approach to advocacy that emphasizes commercial real estate's contributions to job creation, communities, retirement savings and overall economic strength." A new Congress will also bring Democratic control of House committees and a substantial new policy dynamic. Extensive hearings on last year's tax overhaul are expected from the new chair of the House Ways and Means Committee Richard Neal (D-MA), the long-standing leader of the House Real Estate Caucus. Nancy Pelosi (D-CA), who served as Speaker of the House from 2006-2011 and is favored to re-assume that role, stated her caucus plans to revive a "Select Committee on Energy Independence and Global Warming" that will lend heightened focus on risks and impacts from climate change and extreme weather events. (The Hill, Nov. 8.) It is also possible that GSE reform and a focus on housing issues could gain traction in next year's House Financial Services Committee, which will be led by incoming Chair Maxine Waters (D-CA). Her committee will also consider reauthorization of the federal terrorism insurance program. GlobeSt reported this week there "is one piece of must-pass legislation for the CRE industry that will require bipartisan support – the Terrorism Risk Insurance Act, which is set to expire at the end of 2020. This law impacts most business properties and is a key to transactions and refinancing. Without a doubt it has to be extended." (What A Divided Government Means For CRE, Nov. 7) The new dynamic of a divided Congress will refocus the commercial real estate industry on its policy agenda. Roundtable President and CEO Jeffrey DeBoer said, "The Real Estate Roundtable will maintain its steady course. We believe we will continue to be successful in Washington – regardless of which party controls the power levers – by maintaining our focus on smart research; strong political relationships; and our long-standing positive bipartisan approach to advocacy that emphasizes commercial real estate's contributions to job creation, communities, retirement savings and overall economic strength."The Roundtable will hold its State of the Industry Meeting on January 29, 2019 in Washington, DC.

Internet Sales Tax, Roundtable Weekly, Tax Policy

November 9, 2018

Roundtable Weekly

Virginia Plans to Advance Internet Sales Tax Legislation as Opponents Aim to Roll Back Supreme Court's Wayfair Decision

Internet Sales Tax South Dakota v Wayfair

The Supreme Court's recent South Dakota v. Wayfair decision allowing States to collect tax owed on remote internet sales purchases could generate an estimated $250 million in annual revenue for the state of Virginia, which is aiming to start its online sales tax program this summer. The Real Estate Roundtable and seven other national trade organizations wrote to congressional leaders on Sept. 17, 2018 opposing any legislation that reverses or limits the Supreme Court's June 22 decision in South Dakota v. Wayfair, which allows States to collect tax owed on remote internet sales purchases. Many states are seeking to expand their tax authority over online sales in the wake of the Supreme Court's June 21 South Dakota v. Wayfair decision. The 5-4 Wayfair ruling strongly suggests that South Dakota's law requiring remote sellers to collect sales tax on more than $100,000 of in-state sales or 200 transactions complies with constitutional law. Virginia Finance Secretary Aubrey L. Layne Jr. recently told Bloomberg Tax that a state bill in next year's Virginia legislative session would align with principles supported in the high court's Wayfair decision. Layne said details of the bill may be unveiled in December and added, "My guess is it probably won't be effective until July." (BNA, Oct. 30) Despite the Wayfair ruling, a bipartisan quartet of House members led by Rep. Jim Sensenbrenner (R-WI) introduced legislation on Sept. 13 that would prohibit states from requiring remote sellers with less than $10 million in national annual sales from collecting and remitting sales and use taxes - pending a compact approved by Congress. In addition to Sensenbrenner's Online Sales Simplicity and Small Business Relief Act of 2018 (H.R. 6824), other bills in Congress would go even further in reversing the Wayfair decision. (Tax Notes, Nov. 7)Opponents of the decision are asking Congress to include restrictions on States in an end-of-year bill. (Bloomberg, Oct. 24). However, legislation to roll back Wayfair is unlikely. Any major legislation must be negotiated by leaders of both parties, who have limited time during a Lame Duck session. Congressional negotiators are expected instead to focus on a handful of "must pass" bills. The Real Estate Roundtable and seven other national trade organizations wrote to congressional leaders on Sept. 17 opposing legislation that reverses or limits Wayfair. (Wayfair Comment Letter, Sept. 17) The business coalition letter explains that for more than a decade, industry groups "have undertaken significant efforts to establish economic parity between online and brick-and-mortar sellers that would better reflect the changing dynamics of today's omnichannel marketplace. For Congress to insert themselves post-ruling only creates additional uncertainty and further complicates the implementation process, while undermining the level playing field created by the Wayfair decision." (Roundtable Weekly, Sept. 21) The eight organizations conclude the letter by offering to work with Congress on any problems that may arise from state implementation of remote internet sales tax collection allowed by Wayfair. (Roundtable Weekly, June 22)

Q1 Sentiment Index, Roundtable Weekly

November 2, 2018

Roundtable Weekly

Commercial Real Estate Industry Leaders See Positive Market Fundamentals for Remainder of 2018

Quarterly Sentiment Index

Commercial real estate executives continue to see strong and balanced market conditions for the remainder of 2018 and moving forward into the new year, according to The Real Estate Roundtable’s Q4 2018 Economic Sentiment Index released today.Commercial real estate executives continue to see strong and balanced market conditions for the remainder of 2018 and moving forward into the new year, according to The Real Estate Roundtable’s Q4 2018 Economic Sentiment Index. “Our latest Sentiment Index finds commercial real estate industry leaders experiencing continued positive market conditions and cautiously predicting solid performance into 2019. Concerns exist about interest rate and construction cost increases, as well as labor shortages. However, these concerns have not yet caused significant market disruption.” said Roundtable President and CEO Jeffrey DeBoer. “With some exceptions, supply and demand in major markets remains essentially in balance, and access to debt and equity remains strong. Disciplined, not aggressive, development and investment are the current watchwords of smart real estate executives,” DeBoer added. The Roundtable’s Q4 2018 Sentiment Index registered at 50 — a two point decrease from Q3 2018. [The Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive.] This quarter’s Current Conditions Index of 53 decreased by three points from the previous quarter. This time last year, the Q4 2017 Current Conditions Index registered at 53 as well, highlighting the sustained equilibrium in the market this past year. This quarter’s Future Conditions Index of 47, decreased by two points from the previous quarter. The report’s Topline Findings include:The Q4 index came in at 50, a two point drop from Q3. Most suggest that current market conditions are positive and expect such conditions to continue into the new year. However, some responders continue to question, “How much longer can this last?” Responders pointed to the increase in costs for constructions projects and the corresponding decline in development returns as a concerning market factor. As a result, fewer responders were highly optimistic about market conditions in 2019 as yield becomes increasingly hard to find. For the first time in many quarters, a large proportion of responders are indicating a belief that asset values will start declining. However, pricing is expect to stay relatively strong for assets in major markets. Responders feel debt and equity capital are plentiful in today’s market. Equity investors and lenders alike continue to show strong appetite for real estate.Ninety percent of survey participants report Q4 2018 asset values today are “about the same” or “somewhat higher” compared to this time last year. Looking ahead, a minority of participants said they expect values to be “somewhat lower” one year from now with 55% of respondents seeing no significant value declines.DeBoer noted, “After the midterm elections we look forward to continuing to work on positive, pro-growth national public policy. The nation needs policy action to address the growing labor shortage and infrastructure needs. The terrorism risk insurance act will also need to be extended in the new Congress. We intend to try to help policymakers tackle these and others issues by offering smart research and positive bipartisan advocacy that emphasizes commercial real estate’s contributions to job creation, communities; and retirement savings.” Data for the Q4 survey was gathered in October by Chicago-based FPL Associates on The Roundtable’s behalf.

Interest Deductibility, Roundtable Weekly, Tax Policy

November 2, 2018

Roundtable Weekly

Guidance on Business Interest Deduction Limit May Address Real Estate Investment Issues

Interest Deductibility

The Treasury Department and Internal Revenue Service are close to issuing draft regulations on the new business interest expense limitation, enacted in last year’s tax overhaul. Regulations related to the Tax Cuts and Jobs Act can be designated for an expedited, 10-day review by the White House Office of Management and Budget before publication and public release, though the timetable can be extended if needed.A Feb. 21, 2018 Roundtable letterurged Treasury to clarify that interest (other than investment interest) on debt that is allocable to an owner of an entity engaged in a real property trade or business is exempt from the new business interest limitation rule – if that trade or business has elected out of the rule. The Tax Cuts and Jobs Act capped the amount of interest that a business with revenue over $25 million can deduct annually – to no more than 30 percent of earnings before interest, taxes, depreciation, and amortization. The provision also includes an important exception for an "electing real property trade or business." This exception reflects policymakers' understanding that limits on the deduction for interest expense could have enormous negative consequences for property values, real estate markets, and economic growth. (Reference: Real Estate Forum, Jan/Feb 2018, Decoding The New Tax Bill) The Real Estate Roundtable on Feb. 21, 2018 wrote to Treasury Secretary Steven Mnuchin and offered a number of recommendations to resolve ambiguities in how the new limitation will apply. The Roundtable requested clarifications to ensure the exception operates as intended for common real estate ownership arrangements – focusing on the scope and application of the exception for an electing real property trade or business. The letter urged Treasury to clarify that interest (other than investment interest) on debt that is allocable to an owner of an entity engaged in a real property trade or business is indeed exempt from the new business interest limitation rule – if that trade or business has elected out of the rule. As relevant examples, the letter describes four common scenarios where the financing of a real property trade or business occurs through a tiered structure. Clarifying the rules for real estate in the context of tiered arrangements will help avoid potential disruptions. (Roundtable comment letter, Feb. 21, 2018)In April, Treasury and the IRS released Notice 2018-28 to provide interim guidance on the new limit until the proposed regulations are issued. For real estate investors, however, the Notice leaves unanswered some of the key issues related to the financing of real estate. (IRS, April 2 and Roundtable Weekly, April 6) On Oct. 25, OMB's Office of Information and Regulatory Affairs (OIRA) acknowledged receipt of the proposed section 163(j) rules from Treasury. After OIRA completes its review, the proposed guidance will be issued. A second set of regulations, focused specifically on pass-through entities, is expected in December.The Roundtable's Tax Policy Advisory Committee will continue to seek appropriate clarifications as Treasury moves forward with regulatory projects related to implementation of the Tax Cuts and Jobs Act.

Like-kind Exchanges, Like-Kind Exchanges And Economic Growth, Tax Policy

October 31, 2018

Academic Study

Highlights – Like-kind Exchanges Study

Likekind Exchanges, LikeKind Exchanges LKEs,

News

October 26, 2018

Roundtable Weekly

Real Estate Roundtable Perspective: Opportunity Zone Regulations Answer Critical Questions Regarding Real Estate Investment

Opportunity Zones OZs

Recent Proposed Treasury Regulations governing the new "Opportunity Zone" investment program – and its potential to spur productive real estate investment in struggling, low-income communities – is the focus of an Oct. 26 GlobeSt.com interview with Real Estate Roundtable President & CEO Jeffrey DeBoer and Roundtable SVP and Counsel Ryan McCormick. In the interview, DeBoer and McCormick provide answers to critical questions regarding the highly anticipated regulatory guidance and its implications for the real estate industry. DeBoer notes, "For real estate, the proposed regulations are unquestionably positive. They clarify key technical questions and open issues, and they should allow investments in funds and in underlying projects to go forward. While some important questions remain, we continue to believe that the Opportunity Zone program will be a powerful catalyst for transformational real estate investment in these designated low-income areas."The Treasury in June designated more than 8,700 low-income census tracts in the United States, Puerto Rico, and territories as qualified Opportunity Zones. (IRS Notice 2018-48 and Roundtable Weekly, June 22 and Interactive Map, Economic Innovation Group)The Wall Street Journal reported this week that the highly-anticipated guidelines have offered investors greater certainty to begin the process of raising and investing billions of dollars into new real-estate funds targeting opportunity zones. (WSJ , Oct 23)The GlobeSt Q&A also clarifies who can defer gain by investing in an Opportunity Fund; the 180-day time period when investors are required to roll capital gain into a Fund; and how the proposed rules allow a Fund to mobilize capital over a period of nearly three years. McCormick explains in the article : "The proposed rule creates a 'working capital safe harbor.' Opportunity Funds have a minimum of 31 months to invest their working capital in qualified opportunity zone property. The longer runway aligns better with the practical realities of real estate investment." DeBoer also offers clarifications about the "original use" and "substantial improvement" tests of an Opportunity Zone property, noting that they "… are critical elements of the Opportunity Zone program, and they are clarified in important ways in the proposed rules. Keep in mind, Congress wanted to stimulate new capital investment, not simply the transfer of income-producing assets from one owner to another. Therefore, property must either be put to its original use by the fund, or the fund must substantially improve the property. The Opportunity Zone law defines substantial improvement as the doubling of the adjusted tax basis of the property. The regulations provide that the original use and substantial improvement requirements only relate to the structure and not the underlying land."Further clarification about the program is expected. According to DeBoer, "Some of the most important questions relate to Opportunity Fund transactions and the tax consequences when a fund buys, sells, and/or reinvests in Opportunity Zone property … Treasury and the White House have indicated that additional guidance is forthcoming before the end of the year. The Roundtable will be working with policymakers to ensure the next tranche of guidance and the final rules maximize productive, job-creating investment in Opportunity Zones."The Roundtable's Tax Policy Advisory Committee (TPAC) recently convened a panel on Opportunity Zones that included the tax counsel for Senator Tim Scott (R-SC), the original author and sponsor of Opportunity Zone legislation. TPAC's Opportunity Zone Working Group will continue to provide insight into how the industry can help the program fulfill its ambitious objective of stimulating economic development and job creation in low-income communities. (Roundtable Comment Letter, June 28 and Roundtable Weekly, July 20)

Homeland Security, Roundtable Weekly, Terrorism Risk Insurance Program

October 26, 2018

Roundtable Weekly

Pipe-Bomb Mailings Draw Attention to Building Security, Terrorism Risk Insurance Program

Homeland Security TRIA

In the wake of this this week's national pipe-bomb mail campaign, the implications for building security and terrorism risk insurance are profiled in today's The Real Deal. (Real Deal NY, Oct. 26)In the wake of this this week's national pipe-bomb mail campaign, the implications for building security and terrorism risk insurance are profiled in today's The Real Deal. (Real Deal NY, Oct. 26) Real Estate Roundtable Senior Vice President Chip Rodgers is quoted in the article, which reports how numerous building managers are ramping up security after multiple suspicious packages containing potential explosive devices were found mailed to high-profile Democrats throughout the country. The Real Deal also reports that the Terrorism Risk Insurance Act (TRIA) helps building owners manage the risks associated with large-scale acts of terrorism.Rodgers comments that although the small size of the devices discovered this week are not likely to trigger TRIA, the attempted attacks show how "terrorism continues to pose a clear and present danger to our nation, to American businesses and to real estate." With the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) scheduled expiration date at the end of 2020, The Roundtable is advocating for the long-term reauthorization of the program.Rodgers also notes that "TRIA does not stop terrorist attacks, but it does undermine the goals of terrorists who seek to weaken or destroy our economy." He adds other nations have permanent terrorism insurance programs because they "recognize that markets cannot underwrite this risk.""There is no homeland security without economic security," Rodgers told The Real Deal.The Roundtable's Homeland Security Task Force (HSTF) and Risk Management Working Group (RMWG) met on Oct. 18 at the Federal Bureau of Investigation's New York City office to discuss the threat landscape and real estate industry concerns. HSTF and RMWG will meet next on Nov. 13 at the FBI's Washington, DC headquarters.

News

October 26, 2018

Roundtable Weekly

President Trump Aims to Negotiate Infrastructure Plan With Democrats; Gateway Project Faces Federal-State Cost Share Issues

This week President Trump and key Democrats have spoken out about the possibility of a "grand bargain" infrastructure deal in the new Congress, if Democrats gain control of the House in the mid-term elections next month. (Politico, Oct. 22). In February, the Trump Administration released its long-awaited Legislative Outline for Rebuilding Infrastructure in America. In February, the Trump Administration released its long-awaited Legislative Outline for Rebuilding Infrastructure in America, proposing at least $1.5 trillion in new investment across infrastructure asset classes; incentivizing greater state and local funding; and shortening the project permitting process to two years. (Roundtable Weekly, February 17, 2018).President Trump recently told Fox Business that his administration is aiming to slash the amount of time it takes to complete transportation projects and will focus on infrastructure legislation in the upcoming congressional Lame Duck session. "Infrastructure is going to be starting right after the midterms and we think that is going to be an easy one," Trump said. (Fox Business, Oct. 17)Despite both parties acknowledging the importance of infrastructure legislation, the fundamental issue of how to pay for projects remains – with many Republicans expected to balk at massive deficit spending to fund the package. ( Politico, Oct. 22)Last week, New York Gov. Andrew Cuomo sent a video to President Trump, urging him to provide federal aid for the completion of the Gateway tunnel project that connects New York and New Jersey, and services a key rail link in the Northeast Corridor between Washington, D.C. and Boston. Both New York and New Jersey have already agreed to contribute half of the estimated $12.7 billion it will cost to repair and rebuild, and the states expect the federal government to contribute the remaining amount. (Curbed New York, Oct. 19) The Trump administration, however, has stated the federal commitment for Gateway should not exceed 20 percent. (POLITICO Magazine, July-August 2018). In September 2017, The Roundtable submitted comments to the Federal Transit Administration (FTA), in response for public input on a proposed rule that would make "greater use of public-private partnerships (P3s) and private investment in public transportation capital projects." The comments emphasize how real estate and infrastructure have a synergistic, two-way relationship, where growth in one asset class benefits the other. (Roundtable Weekly, Sept. 29, 2017)Roundtable President and CEO Jeffrey D. DeBoer addressed the impact of these demographic trends, and their impact on real estate and the nation's evolving infrastructure needs, in an interview on CNBC's SquawkBox last June. (CNBC Squawkbox interview and Roundtable Weekly, June 9, 2017). Another influence on the need for innovative transit-oriented infrastructure projects are societal trends. As Millennials dominate the work force and Baby Boomers retire from it, more public transportation options will be critical as profound changes are anticipated in car use and ownership. Innovations in driverless vehicles and ride-hailing services are accelerating a "transportation revolution" as household vehicle ownership is forecast to drop, massive numbers of parking spaces may become obsolete, and billions of square feet of transit-oriented real estate could be unlocked for development.Roundtable President and CEO Jeffrey D. DeBoer addressed the impact of these demographic trends, and their impact on real estate and the nation's evolving infrastructure needs, in an interview on CNBC's SquawkBox last June. ( CNBC Squawkbox interview and Roundtable Weekly, June 9, 2017).In January of this year to President Trump on infrastructure development, Roundtable President and CEO Jeffrey DeBoer commented on the positive economic benefits that infrastructure legislation would bring to the nation. "Modernizing our roads, tunnels, mass transit, drinking water, power grid, and telecommunications systems – in rural and urban areas alike – are vitally important to economic growth, productivity and America's global competitiveness," DeBoer said.He added, "Real Estate Roundtable members are experienced in addressing the financing, permitting and government partnership issues that frequently slow or stop infrastructure projects. We intend to provide positive feedback and ideas to all policymakers working to facilitate improvements in our nation's infrastructure." (Roundtable Letter on Infrastructure Funding, Jan. 11)

Interest Deductibility, Roundtable Weekly, Tax Policy

October 19, 2018

Roundtable Weekly

Treasury Proposes Detailed Rules for New Restrictions on Deducting Business Interest

Business Interest Deduction Interest Deductibility

On Tuesday, the Treasury Department released proposed regulations governing the new limitation on the deductibility of business interest expense, including the exception for real estate businesses. On Tuesday, the Treasury Department released proposed regulations governing the new limitation on the deductibility of business interest expense, including the exception for real estate businesses. Under the Tax Cuts and Jobs Act (TCJA), businesses generally can no longer deduct their interest expense to the extent it exceeds 30 percent of their annual earnings before interest, tax, depreciation and amortization (EBITDA). Business interest deductibility was a key issue in Real Estate Roundtable President & CEO Jeffrey DeBoer's testimony before the Senate Finance Committee shortly before consideration of the tax bill. (Roundtable Statement for the Record, Sept. 19, 2017)DeBoer testified that the proposal could have severe unintended consequences. Noting that the cost of debt is a necessary expense that must be accounted for when measuring income, he testified that our capital markets are the envy of the world and that responsible, appropriate leverage helps entrepreneurs and contributes to economic growth and job creation. (Roundtable Weekly, Sept. 29 and testimony video clips)The final bill included a critical exception from the interest limit for an electing real property trade or business. An electing real property trade or business is defined broadly to cover: any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business. In February, the Roundtable submitted comments to Treasury with recommendations for how the real estate exception should work in the case of tiered business structures, and in the case of businesses that involve both real estate and non-real estate activities. (Roundtable Weekly, Feb. 23, 2018) Business interest deductibility was a key issue in Real Estate Roundtable President & CEO Jeffrey DeBoer's testimony before the Senate Finance Committee shortly before consideration of the tax bill. (Roundtable Statement for the Record, Sept. 19, 2017 and video clips ). The proposed regulations are largely favorable. Most importantly, the regulations clarify that partner-level borrowing qualifies for the real estate exception. Thus, at the election of the taxpayer, the real estate exception can extend to debt that is incurred by a partner to acquire an interest in a partnership that is engaged in a real property trade or business. In addition, the regulations confirm the broad definition of a real property trade or business. The regulations also clarify that capitalized interest, which commonly arises during the development of real estate, is not subject to the interest limit.With respect to taxpayers engaged in both real estate and non-real estate activities, the proposed regulations generally would allocate and apportion debt based on the relative amount of the taxpayer's adjusted basis in assets used in those activities. However, taxpayers would directly trace and allocate qualified nonrecourse indebtedness to the asset securing the loan (with no apportionment). This latter rule should result in the allocation of a larger share of debt to assets qualifying for the real estate exception.Some concerns remain. Notably, the attribution rule that allows partners to qualify for the real estate exception based on partnership-level activities does not extend broadly to all upper-tier borrowing for investment in lower-tier real estate businesses. Thus, except in limited circumstances, debt incurred by a taxpayer to invest in a corporation (or REIT) that is engaged in a real property trade or business is not eligible for the real estate exception. The Roundtable's Tax Policy Advisory Committee is continuing to review the 439-page regulatory package to understand its full implications for the financing of U.S. real estate. Comments on the proposed regulations will be due 60 days after their publication in the Federal Register.

Condominium Tax Accounting, Roundtable Weekly, Tax Policy

October 19, 2018

Roundtable Weekly

Congressional Lame Duck Session Could Consider Condominium Tax Accounting and Other Real Estate Tax Policy Issues

Tax Policy

Following the Nov. 6 mid-term elections, a “Lame Duck” session of Congress is expected to consider various tax policies of importance to commercial real estate. Several tax issues of importance to real estate may be in play during the November "Lame Duck" congressional session, including condo tax accounting rules; technical corrections; the cost recovery period for qualified improvement property (QIP);and tax extenders. As part of a potential year-end omnibus spending bill to fund the government, tax policies that may be addressed include condo tax accounting rules; technical corrections; the cost recovery period for qualified improvement property (QIP); and tax extenders. (Roundtable Weekly, Oct. 12) Current condo tax accounting rules require multifamily developers of buildings with five or more residential units to recognize income and pay tax on their expected profit as construction is ongoing — well before pre-sale transactions are closed and full payment is due from the buyer. This mismatch of cash flow and tax liability prevents income tax deferment until a condo building is finished. Home builders of single-family homes, townhouses and row houses are not subject to this accounting rule restriction. A House bill introduced last summer by Reps. Carlos Curbelo (R-FL) and Joe Crowley (D-NY) aimed to correct this disparity. Although the Fair Accounting for Condominium Construction Act (H.R. 3659) stalled in 2017, it could serve as a template for inclusion in year-end tax legislation. The Real Estate Roundtable supports lawmakers' efforts to pass H.R. 3659. Other congressional efforts to ensure that development accounting rules treat condos like other residential construction included a 2016 letter from 10 members of the Senate Finance Committee urging regulatory corrections to former Treasury Secretary Jack Lew. Roundtable President and CEO Jeffrey DeBoer on April 7, 2017 sent a letter to Treasury Secretary Steven Mnuchin outlining eight regulatory actions the Treasury Department could take to stimulate new real estate investment, job creation, and economic growth. Among the recommendations addressed in the letter are tax accounting for new condominium construction; the Foreign Investment in Real Property Tax Act, tax treatment of private real estate funds and partnership tax rules. Last week, an article on the condo tax accounting issue in The Real Deal included a quote from Roundtable Senior Vice President & Counsel Ryan McCormick, who commented on the outlook for correcting the current rules. "Legislation may be the most likely route, in light of all the work ongoing at Treasury with tax reform," McCormick said.

In Memoriam, Roundtable Weekly

October 19, 2018

Roundtable Weekly

Commercial Real Estate Industry Pioneer Marshall Bennett

In Memoriam

The commercial real estate industry mourns the recent passing of real estate industry icon Marshall Bennett. He was 97. (Chicago Tribune, Oct. 16)Commercial real estate industry icon Marshall Bennett passed away this week at the age of 97. Marshall Bennett was one of the most successful real estate developers in Chicago and a pioneer of the modern industrial park. In 1946, Bennett and Louis Kahnweiler, with financial backing from Jay Pritzker, launched Centex Industrial Park in the 1950s on more than 2,000 acres in Elk Grove Village—opening up the O'Hare submarket to large, industrial properties. This facility would become the nation’s largest and serve 1,500 companies. Throughout their partnership, Bennet and Kahnweiler amassed a portfolio of 26 industrial parks around the country. (RE Journals, Oct. 16)Among his many accomplishments, Bennett was a World War II Navy veteran; was inducted into the Chicago Board of Realtors Hall of Fame in 1989; and served on the board of the East-West Institute global think tank. He also co-founded the Chicago Ten, an interfaith group that worked for peace in the Middle East.Notably, Bennett co-founded Roosevelt University’s Marshall Bennett Institute of Real Estate in 2002. He helped raise $11 million to start the school as a training ground for real estate professionals. Since its inception, the program has graduated almost 325 in two master’s degree programs. (Crain’s Chicago Business, Oct. 15)

Climate and Immigration, Energy, ENERGY STAR, Roundtable Weekly

October 12, 2018

Roundtable Weekly

EPA Gathers Feedback from Building Owners During “Review Period” for New ENERGY STAR Scoring Models

The Environmental Protection Agency continues the temporary suspension of ENERGY STAR building certifications, after assessing feedback from a number of building owners and stakeholders. Last month, the EPA announced it would commence a “review period” to solicit building owners feedback on recent ENERGY STAR scoring models, in response to the new model announced in August, which would unfairly downgrade some already certified ENERGY STAR buildings. (Roundtable Weekly, September 14) The EPA continues the temporary suspension of ENERGY STAR building certifications, after assessing feedback from a number of building owners and stakeholders. ENERGY STAR is the key federal label that rates and compares U.S. buildings' energy performance. Currently, EPA lists 34,625 buildings and plants, representing more than 5 billion square feet of commercial space across the country, as ENERGY STAR certified. Through initial analyses of Sustainability Policy Advisory Committee (SPAC) membership, The Roundtable learned that the application of the new 2012 data appears to result in materially different outcomes on scores depending upon building size, geography, and source of heating, and these outcomes were inconsistent. RER on behalf of the industry highlighted the issues to the EPA, and the EPA responded with the announced review period.“Revisions to ENERGY STAR are much needed and very important,” said Roundtable President and CEO, Jeffrey DeBoer. “However, to be truly effective the data sources and projections relied upon in the revision must be transparent and reflect industry leading practices. (Wall Street Journal, Oct. 9)During the review period, EPA and real estate stakeholders have the opportunity to assess variables such as a building's size, location, and fuel mix, to fully consider if these and other factors have had an indiscriminate impact on the new scoring models. “EPA is looking into concerns raised by industry that score changes for some buildings are different than expected,” said an EPA spokeswoman. (Wall Street Journal, Oct. 9)“We commend EPA in taking this step toward transparent decision making, and are focused intently on assisting during this review period,” said DeBoer. The Roundtable’s Sustainability Policy Advisory Committee will continue working with the EPA during the remainder of the review period.

News

October 12, 2018

Roundtable Weekly

Roundtable and Business Coalition Seek Administrative Relief, Shorter Cost Recovery Period for Nonresidential Real Estate Improvements

This week The Real Estate Roundtable, along with 239 businesses and trade groups, wrote to Secretary Mnuchinurging the Treasury Department to provide taxpayers with administrative relief from a drafting mistake in last year’s tax overhaul that increased the cost recovery period for qualified improvement property (QIP).This week, The Real Estate Roundtable, along with 239 businesses and trade groups, wrote to Secretary Mnuchin urging the Treasury Department to provide taxpayers with administrative relief from a drafting mistake in last year’s tax overhaul that increased the cost recovery period for qualified improvement property (QIP). The drafting error in the tax law has resulted in a significantly longer 39-year cost recovery period for new, qualified nonresidential interior improvements. The intent of Congress was to allow the immediate expensing of QIP – or provide a 20-year recovery period in the case of taxpayers electing out of new limitations on the deductibility of business interest. In the Oct. 9 letter to Secretary Mnuchin, the coalition addressed the need for a QIP correction, along with the unintended consequences if action is not taken. The letter raised concerns that the drafting error is resulting in “[d]elays in store and restaurant remodeling projects,” “[b]usinesses refraining from purchasing or leasing vacant stores or other leasehold spaces that require improvements,” and “[l]oss of construction jobs associated with commercial renovation projects.” The coalition letter was sent in response to the Administration’s request for comments on newly proposed regulationsimplementing the additional first year depreciation deduction (immediate expensing) benefit. The coalition submission also included two recent letters—one from 16 Democratic Senators to Treasury Secretary Steven Mnuchin and the other from 58 House Republicans to GOP leadership—reiterating the importance for policymakers to correct this unintentional drafting mistake in last year’s legislation, while recommending that Treasury should issue interim guidance and refrain from enforcing the drafting error. (House Letter, Oct 2 and Senate Letter, Sept 24)The Real Estate Roundtable and a broad-based business coalition urged Secretary Mnuchin in August to issue guidance clarifying certain provisions included in tax overhaul legislation enacted last year – including the cost recovery period for qualified improvement property. (Coalition letter, Aug. 22)Congress could address the issue during the lame duck congressional session between the mid-term election and January. Senate Republican Conference Chairman John Thune (R-SD) said GOP lawmakers are motivated to address a number of tax issues that are outstanding, including tax reform technical corrections and expired tax provisions. (The Hill, Oct. 11)

October 10, 2018

Policy Comment Letter

1. 2018-01-09 HVCRE Comment Letter – Senate Banking

October 10, 2018

Policy Comment Letter

12. 2018-10-10 QIP Coalition Letter to Sec. Mnuchin_IRS_REG-104397-18

October 10, 2018

Policy Comment Letter

2018-10-10 QIP Coalition Letter to Sec. Mnuchin_IRS_REG-104397-18

Pass-Through Deduction, Roundtable Weekly, Tax Policy

October 5, 2018

Roundtable Weekly

Roundtable Comment Letter Urges Treasury to Simplify, Streamline New Pass-Through Deduction Regulations

The Real Estate Roundtable on Monday submitted detailed recommendations to the Treasury Department on simplifying and streamlining the new 20 percent tax deduction for pass-through businesses. (Roundtable letter, Oct. 1)The Real Estate Roundtable on Monday submitted detailed recommendations to the Treasury Department on simplifying and streamlining the new 20 percent tax deduction for pass-through businesses. (Roundtable letter, Oct. 1) Passed as part of last year's tax overhaul, the deduction can reduce the top tax rate on qualifying pass-through income, including rental income, to 29.6 percent. Once it is fully implemented, section 199A will be a powerful incentive for capital investment and job growth.The comment letter from Roundtable President and CEO Jeffrey DeBoer suggests four major simplifications that would provide greater certainty, lessen the need for wasteful restructuring, and reduce taxpayer-government controversies. Trade or business definition The final regulations should clarify that rental income from real property held for the production of rents will be considered a trade or business for purposes of section 199A;Aggregation The final regulations should allow taxpayers to treat all qualifying real estate rental activities, whether held directly or through a pass-through entity, as if held in a single “trade or business” for purposes of section 199A;Non-recognition transactions When assets with associated unadjusted basis immediately after acquisition (UBIA) are transferred in a non-recognition transaction (such as a like-kind exchange or the contribution or distribution of assets involving a partnership or S corporation), the general rule should be that the UBIA of an asset (and its duration) carries over; andSeparating trades and businesses The final regulations should provide rules to help taxpayers ascertain when multiple activities (including multiple activities conducted in a single entity) constitute discrete trades or businesses.With a few exceptions, last year's Tax Cuts and Jobs Act limited the pass-through deduction to businesses with employees or capital-intensive businesses that invest in long-lived (i.e., depreciable) assets, including real estate. This so-called wage/capital limitation applies to partnerships, S corporations, and sole proprietorships, but does not apply to ordinary REIT dividends and income from publicly traded partnerships.During the tax reform debate, The Roundtable's Tax Policy Advisory Committee (TPAC) formed a task force to review the regulations, analyze their impact on real estate investment and jobs, and craft specific recommendations for policymakers. The pass-through deduction (section 199A) was a key element of Roundtable President and CEO Jeffrey DeBoer's testimony before the Senate Finance Committee shortly before lawmakers released the first version of the proposal in the fall of 2017. (Roundtable Weekly, Sept. 22, 2017)TPAC will continue to offer insight to Treasury officials and congressional tax-writing committees before final regulations are expected by the end of the year.

Roundtable Weekly, Tax Reform Technical Corrections

October 5, 2018

Roundtable Weekly

Senate Democrats and House Republicans Urge Tax Policy Correction for Real Estate Improvements’ Cost Recovery Period

Cost Recovery Period QIP TCJA

Two recent letters – one from 16 Democratic Senators to Treasury Secretary Steven Mnuchin and the other from 58 House Republicans to GOP leadership – urge policymakers to fix an unintentional drafting mistake in last year’s tax overhaul that mistakenly increased the cost recovery period for qualified improvement property (QIP). (House Letter, Oct 2 and Senate Letter, Sept 24) The tax policy drafting error currently affects leasehold improvements, expenditures made to improve common spaces in shopping centers and office buildings, and other interior improvements to nonresidential structures. The drafting error in the tax law has resulted in a significantly longer 39-year cost recovery period for new, qualified nonresidential interior improvements. The original intent of Congress was to allow the immediate expensing of QIP – or provide a 20-year recovery period in the case of taxpayers electing out of new limitations on the deductibility of business interest. The mistake currently affects leasehold improvements, expenditures made to improve common spaces in shopping centers and office buildings, and other interior improvements to nonresidential structures. The current, longer cost recovery period effectively increases the after-tax cost of upgrading and improving commercial real estate. ("Correcting the Drafting Error Involving the Expensing of Qualified Improvement Property" – The Tax Foundation , May 30) In Monday's joint letter to House Speaker Paul Ryan (R-WI) and House Ways and Means Committee Chairman Kevin Brady (R-TX), 58 House Republican members state, "While they wait for Congress to act to correct this error, these businesses are forgoing renovations, halting plans to revitalize declining malls, and placing safety improvements on hold. Not only does this hurt restaurants and retailers, but also the businesses involved in the planning and renovations, and ultimately our communities. This week's House letter urges GOP leadership to address the QIP investment drafting error via legislation, while also recommending that Treasury should issue interim guidance while refraining from enforcing the drafting error. Congress could address the issue during the lame duck congressional session between the mid-term election and January. In the Sept. 24 joint letter to Secretary Mnuchin, 16 Senate Democrats address the need for a QIP correction, stating: "Improper implementation of this portion of the 2017 law would cause disruption to a wide range of industries, including the nation's retail, restaurant and commercial property industries. Given this, and the potential for considerable harm to local economies, we believe it would be prudent for Treasury to address this issue and its interpretation through guidance." The Real Estate Roundtable and a broad-based business coalition urged Secretary Mnuchin in August to issue guidance clarifying certain provisions included in tax overhaul legislation enacted last year – including the cost recovery period for qualified improvement property. (Coalition letter, Aug. 22) Roundtable President and CEO Jeffrey DeBoer stated, "In 2015, Congress voted overwhelmingly to permanently extend the 15-year recovery period for certain property improvements. By passing tax reform, Congress intended to consolidate those changes. Treasury should now use its authority to provide taxpayers with relief until a technical corrections bill is enacted. Treasury guidance will remove taxpayer uncertainty, unlock investment, and spur job-creating property upgrades and renovations." (Roundtable Weekly, Aug. 24)Congress could address the issue during the lame duck congressional session between the mid-term election and January. A number of tax issues are outstanding, including tax reform technical corrections and expired tax provisions.

October 5, 2018

Roundtable Weekly

Roundtable Calls for Congress to Pass Cyber Security Bill, Increase Digital Competitiveness

The bipartisan Cyber Diplomacy Act (H.R. 3776) will advance America’s public and private efforts to safeguard cyberspace and enhance the nation’s economic competitiveness in a global digital economy. That is the message sent by The Roundtable, U.S. Chamber of Commerce and five other national trade organizations in a joint letter last week to Senate Majority Leader Mitch McConnell (R-KY), Minority Leader Chuck Schumer (D-NY) and all other U.S. Senators. (Joint Letter, Sept. 26)The Roundtable and six other national trade organizations sent a Sept. 26 joint letter on cybersecurity policy to all members of the U.S. Senate. (Joint Letter) The bill – introduced by House Foreign Affairs Committee Chairman Ed Royce (R-CA) – passed the House in January, was reported out of the Senate Committee on Foreign Relations in June and is currently under consideration by the Senate.H.R. 3776 would task the State Department with establishing a unified Office for Cyberspace and Digital Economy, which would consolidate efforts relating to international cybersecurity, internet access, internet freedom, digital economy, cybercrime, deterrence, and international responses to cyber threats. (The Washington Times, Sept. 27)The Sept. 26 joint letter states, “We believe that a focused, centralized, and appropriately placed office led by an ambassador-rank official would aid U.S. cybersecurity and digital economy efforts. We believe that enactment of this bill would send a powerful message that the U.S. intends to preserve and protect a secure, reliable, and open internet.” The cybersecurity issue is a key focus of The Roundtable’s Homeland Security Task Force (HSTF), which encourages measures to address the global cyber threat and effective information sharing..The Roundtable’s Homeland Security Task Force will discuss cyber security and other issues affecting real estate during its upcoming meetings at FBI offices in New York (Oct. 18) and Washington, DC (Nov. 13).

October 1, 2018

Policy Comment Letter

9. 2018-10-1 RER – 199A Comment Letter FINAL

Fall 2018 Roundtable Meeting, Roundtable Weekly

September 28, 2018

Roundtable Weekly

Policymakers, Roundtable Members Focus on Economy, Elections, And Monetary Policy

This week’s Real Estate Roundtable Fall Meeting featured discussions with U.S. policymakers regarding national public policies affecting the commercial real estate industry, job creation and the economy. Roundtable Chair Debra A. Cafaro (Chairman & CEO, Ventas, Inc.) Roundtable Chair Debra A. Cafaro (Chairman & CEO, Ventas, Inc.) opened the meeting stating: "The 'results-oriented' focus of The Roundtable continues to emphasize our optimism about the economy and the positive contributions the real estate industry provides as a job creator and a cornerstone for retirement savings." She added, "we must continue to proactively advance policies that promote a healthy balance of capital and people flows to create sustainable economic growth that is good for our industry and our national economy." Meeting speakers included: Colorado Governor John Hickenlooper (D-CO) called for private-public collaboration to address a range of national policy challenges affecting urban, suburban and rural areas, including workforce housing and infrastructure.Sen. Tim Kaine (D-VA) discussed incentivizing the private sector to achieve pro-growth economic policy. Colorado Governor John Hickenlooper (D-CO) called for private-public collaboration to address a range of national policy challenges affecting urban, suburban and rural areas, including workforce housing and infrastructure. Craig S. Phillips — counselor to U.S. Department of Treasury Secretary Steven Mnuchin — addressed issues such as GSE reform; reauthorization of the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) beyond its scheduled expiration date at the end of 2020; the ongoing implementation of recent tax law changes; and the new federal "Opportunity Zones" investment program. (Roundtable Comment Letter, June 28) Sen. David Perdue (R-GA) — member of the Senate Banking, Housing and Urban Affairs Committee and the only former Fortune 500 CEO in Congress — emphasized the need for bipartisanship in Congress to address an ongoing budget deficit crisis and eliminate regulatory redundancy.Kevin Warsh — former Governor, Federal Reserve (2006-2011) — discussed the strength of the current economy and future potential economic risks. Mr. Warsh's op-ed in the Wall Street Journal this week addresses the Fed's nearly $3 trillion balance sheet and maintaining a "neutral real interest rate."Bob Woodward — Pulitzer Prize-winning Journalist & Author, The Washington Post — spoke about his latest book, Fear: Trump in the White House and the mid-term elections. The Roundtable's State of the Industry Meeting and it's policy advisory committees will meet January 29-30, 2019 in Washington, DC.

Policy Landscape, Roundtable Weekly

September 28, 2018

Roundtable Weekly

House Passes “Tax Reform 2.0” Legislation; President Trump Signs Government Funding Bill

Policy Landscape

he House today passed “Tax Reform 2.0” legislation (H.R. 6760) that would make permanent the 2017 tax cuts for individuals and certain pass-through businesses – currently set to expire at the end of 2025. The House today passed “Tax Reform 2.0” legislation (H.R. 6760) that would make permanent the 2017 tax cuts for individuals and certain pass-through businesses – currently set to expire at the end of 2025. As GOP policymakers seek to highlight last year's Tax Cuts and Jobs Act (P.L. 115-97) as their signature achievement before the November mid-term elections, today's bill passed on a mostly partisan vote of 220-191. Among the provisions in H.R. 6760:Individual marginal rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%;Capping the deduction for state and local taxes (SALT) at $10,000; anda 20% tax deduction for the business income of certain pass-through businesses. "By making the new code permanent for families and small businesses, the Protecting Family and Small Business Tax Cuts Act will keep America’s economy booming," House Ways and Means Committee Chairman Kevin Brady (R-TX) said on the House floor. The House on Thursday passed two other tax bills (H.R. 6756 and H.R. 6757) that would expand incentives for retirement savings and startup businesses. All three bills now go to the Senate, where chances to pass H.R. 6760 are unlikely without support from Democrats. Also today, President Trump signed a spending bill that funds most government programs through Sept. 30, 2019 while extending others via a “Continuing Resolution” until Dec. 7. Funding for those programs was scheduled to expire on Sunday at midnight. (White House Statement, Sept. 28) Among the programs extended for another year is the EB-5 immigration investment program – the 14th extension since Sept. 2015.As the confirmation process for President Donald Trump’s Supreme Court nominee Brett Kavanaugh dominated the Senate this week, the House adjourned today until after the midterm elections. (Politico, Sept. 28).

Internet Sales Tax

September 21, 2018

Roundtable Weekly

Real Estate and Business Organizations Oppose Legislation Challenging Supreme Court Decision on Internet Sales Tax

Internet Sales Tax South Dakota v Wayfair

The Real Estate Roundtable and seven other national trade organizations wrote to congressional leaders this week opposing legislation that reverses or limits the Supreme Court's June 22 decision in South Dakota v. Wayfair, which allows States to collect tax owed on remote internet sales purchases. (Wayfair Comment Letter, Sept. 17)The Real Estate Roundtable and seven other national trade organizations wrote to congressional leaders this week opposing legislation that reverses or limits the Supreme Court's June 22 decision in South Dakota v. Wayfair, which allows States to collect tax owed on remote internet sales purchases. Despite the high court's Wayfair ruling, a bipartisan quartet of House members led by Rep. Jim Sensenbrenner (R-WI) introduced legislation on Sept. 13 that would bar states from collecting taxes from out-of-state internet vendors until 2019.The Online Sales Simplicity and Small Business Relief Act of 2018 (H.R. 6824) would also prohibit states from requiring remote sellers with less than $10 million in national annual sales from collecting and remitting sales and use taxes – pending a "simplification compact" that Congress would have to approve. Other bills would go even further in reversing the Wayfair decision. They include the Stop Taxing Our Potential Act of 2018 (S. 3180), introduced by Sen. John Tester (D-MT) and the Protecting Small Business from Burdensome Compliance Costs Act (H.R. 6724). introduced by Rep. Bob Gibbs. The likelihood that legislation challenging Wayfair will get through the current Congress, especially with the mid-term elections fast approaching, is slim. (Politico, Sept 17)The business coalition letter to Senate and House leadership explains that over the better part of a decade, these industry groups "have undertaken significant efforts to establish economic parity between online and brick-and-mortar sellers that would better reflect the changing dynamics of today's omnichannel marketplace. For Congress to insert themselves post-ruling only creates additional uncertainty and further complicates the implementation process, while undermining the level playing field created by the Wayfair decision." The eight organizations conclude the letter by offering to work with Congress on any problems that may arise from state implementation of remote internet sales tax collection allowed by Wayfair. (Roundtable Weekly, June 22)

Capital and Credit, HVCRE, Roundtable Weekly

September 21, 2018

Roundtable Weekly

Banking Regulators Invite Comments on Proposed Rule for High Volatility Commercial Real Estate (HVCRE) Loans

Three federal banking agencies on Tuesday invited public comment on a proposal to modify capital rules for high volatility commercial real estate (HVCRE) exposures – as required by Sec. 214 of the bipartisan Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155). (Roundtable Weekly, May 25)Three federal banking agencies on Sept. 18, 2018 invited public comment on a proposal to modify capital rules for high volatility commercial real estate (HVCRE) exposures. Following the enactment of S. 2155 on May 24, federal regulatory agencies were tasked with developing a rule to clarify the treatment of High Volatility Commercial Real Estate acquisition, development, or construction (HVCRE ADC) loans in accordance with the new statute. The law's changes to the HVCRE capital rules are aimed at clarifying and promoting sustainable acquisition, development and construction and lending by addressing key deficiencies in the agencies' prior regulations governing the criteria for HVCRE or HVADC loans. (Roundtable HVCRE Comment Letter, March 2) The proposal by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation also asks for comment on certain terms contained in the revised definition of high volatility commercial real estate.The changes, when finalized, would apply to all banking organizations subject to the agencies' capital rules. Comments will be accepted for 60 days after publication in the Federal Register. Since 2015, The Roundtable's HVCRE Working Group and industry coalition partners have played a key role in advancing specific reforms to the HVCRE Rule and will develop a comment letter to the agencies in response to the current proposal.

Homeland Security, Homeland Security Task Force (HSTF), Roundtable Weekly

September 21, 2018

Roundtable Weekly

New Anti-Terrorism Guide for Commercial Building Security Professionals

An online anti-terrorism tool to help commercial office building security professionals perform facility assessments was released this week by The Department of Homeland Security's (DHS) Science and Technology Directorate. (Facility Executive, Sept. 17).Businesses filing for SAFETY Act protections can receive Designation and Certification for their Qualified Anti-Terrorism Technology, which can cap their liability. The web-based tool – based on the Best Practices for Anti-Terrorism Security (BPATS) for commercial office buildings – streamlines the application process for building owners seeking to obtain Qualified Anti-Terrorism Technology (QATT) status. (Homeland Preparedness News, Sept. 19) The BPATS Assessment Tool for Commercial Facilities is a program for evaluating a building's security system. This assessment approach can be included in support of an application should a building owner chose to seek protections under the Support Anti-Terrorism by Fostering Effective Technologies (SAFETY) Act. Businesses filing for SAFETY Act protections can receive Designation and Certification for their Qualified Anti-Terrorism Technology, which can cap their liability. The SAFETY Act was enacted in 2002 because of concerns that liability would hinder investment in the latest security technologies and programs following the attacks of September 11, 2001. (DHS News Release, Sept. 17) "With the BPATS, our goal was to develop a comprehensive tool that security professionals could use to assess the anti-terrorism security of commercial office buildings," said Bruce Davidson, Director of DHS' Office of SAFETY Act Implementation (OSAI). "The output from their BPATS assessment should enable building leadership to take steps to enhance their building's security and provide the foundation for a well-structured follow-on SAFETY Act application." The preferred users of this tool are trained security professionals whose credentials will be reviewed by the National Institute of Building Sciences before gaining access to the tool. They would be trained in using the checklist to evaluate various components of building security by SAFETY Act standards, including access control, risk awareness, physical security, IT security, and more. The guide spans seven categories, 411 best practices, and approximately 60 associated common practices. The DHS' Science and Technology Directorate reached a significant milestone earlier this year approving its 1,000th application for SAFETY Act protection. The Roundtable's Homeland Security Task Force has worked constructively with DHS on this issue over the years. The Task Force will be meeting in two special sessions this fall. Publications:Best Practices for Anti-Terrorism Security (BPATS) for Commercial Office Buildings Field Guide: Conducting BPATS Based Assessments of Commercial Facilities

September 17, 2018

Policy Comment Letter

8. 2018-09-17 WayfairLetter

National Flood Insurance Program (NFIP), Natural Catastrophe Risk, Roundtable Weekly

September 14, 2018

Roundtable Weekly

Hurricane Florence Magnifies Need to Extend and Reform National Flood Insurance Program

As Hurricane Florence made landfall this morning near Wrightsville Beach, NC, the storm’s large size and slow speed are expected to produce severe flooding, affecting millions of individuals who have evacuated affected coastal areas and thousands of businesses in the Carolinas. (National Hurricane Center, Hurricane Florence)As communities in the Carolinas and beyond contend with catastrophic storm surge, rain deluge, high winds and loss of property, Real Estate Roundtable President and CEO Jeffrey DeBoer expressed concern about the disaster and its victims, encouraging those in the industry to participate in relief efforts. Today, President Trump announced more than 3,800 Federal Employees, including more than 1,000 from the Federal Emergency Management Agency (FEMA), are working with State and local partners to respond to Hurricane Florence. (White House Statement, Sept. 14)In the wake of last year’s Hurricane Harvey disaster in Texas, policymakers in Washington are again expected to appropriate disaster relief this fall and address legislation reforming the National Flood Insurance Program (NFIP), scheduled to expire on Nov. 30. (Roundtable Weekly, Sept. 8, 2017)As communities in the Carolinas and beyond contend with catastrophic storm surge, rain deluge, high winds and loss of property, Real Estate Roundtable President and CEO Jeffrey DeBoer expressed concern about the disaster and its victims, encouraging those in the industry to participate in relief efforts. DeBoer stated, "Action is needed to help assist families today and help facilitate recovery for the future. For our part, members of The Real Estate Roundtable, and everyone involved in the broader real estate industry, should do what they can to provide immediate assistance. The National Voluntary Organizations Active in Disaster (NVOAD) lists organizations where you can donate time, money or other resources." "The Real Estate Roundtable has also activated our industry public-private information sharing partnership with the federal government (Real Estate Information Sharing and Analysis Center – REISAC) in an effort to provide ongoing industry updates on a range of critical matters arising from Florence’s landfall – such as search and rescue efforts by the National Guard; anticipated flooding in communities as the storm’s impact moves eastward; refuge information provided by the Red Cross; energy disruptions; and phishing scams on social media,” added DeBoer.As legislation moves on Capitol Hill this fall to extend and reform the NFIP, The Roundtable plans to advocate for reforms that will assist housing re-development in flood-prone areas; help protect the nation's commercial and multifamily business-owners, their properties, and residents; and foster resilient and cost-effective infrastructure. President Trump announced more than 3,800 Federal Employees, including more than 1,000 from the Federal Emergency Management Agency (FEMA), are working with State and local partners to respond to Hurricane Florence. (White House Statement, Sept. 14) The Roundtable has also advocated for a voluntary exemption for mandatory NFIP coverage if commercial property owners have adequate flood coverage.Under the NFIP, commercial property flood insurance limits are very low – $500,000 per building and $500,000 for its contents. Lenders typically require this base NFIP coverage, and commercial owners must purchase Supplemental Excess Flood Insurance for coverage above the NFIP limits. A niche market of carriers typically provides this type of excess coverage. The Roundtable and its coalition partners support NFIP reauthorization with the inclusion of provisions that permit the "commercial exemption."The Real Estate Roundtable and 14 other industry groups urged Congress in a June 12, 2017 comment letter to reauthorize and reform the NFIP to help protect the nation’s commercial and multifamily business-owners, their properties, residents, and the jobs they create from the financial perils of flooding.In November 2017, the House passed the 21st Century Flood Reform Act (H.R. 2874), which would reform and reauthorize NFIP for five years. The bill included: funding for flood mitigation assistance; lower flood insurance rates, support for the private flood insurance market, modernization of flood zone mapping; and flood mitigation practices for homebuilders and land developers. However, the measure was not been taken up in committee in the Senate. ( Roundtable Weekly, Nov. 17, 2017)The Roundtable will continue to work closely with lawmakers and our coalition partners to ensure that the NFIP is renewed prior to its expiration date on Nov. 30, 2018.

Climate and Immigration, Energy, ENERGY STAR, Roundtable Weekly

September 14, 2018

Roundtable Weekly

EPA to Commence Review Period of New ENERGY STAR Building Scores; Office, Industrial Certifications Temporarily Suspended Pending Further Analysis

Last month the Environmental Protection Agency (EPA) announced the first updates to its ENERGY STAR scoring models in over a decade, as the agency moved from 2003 to 2012 data for its foundation to rate buildings. (See Roundtable Weekly, Aug. 17.) EPA announced yesterday that it will commence a "review period" to solicit stakeholder feedback on these recent ENERGY STAR score updates. Certifications for office, industrial, and certain other building categories will be temporarily suspended during this review period.EPA announced yesterday that it will commence a "review period" to solicit stakeholder feedback on recent ENERGY STAR score updates. Certifications for office, industrial, and certain other building categories will be temporarily suspended during this review period. ENERGY STAR is the key federal label that rates and compares U.S. buildings' energy performance. Currently, EPA lists 34,625 buildings and plants, representing more than 5 billion square feet of commercial space across the country, as ENERGY STAR certified. Through initial analyses of Sustainability Policy Advisory Committee (SPAC) membership, The Roundtable learned that the application of the new 2012 data appears to result in materially different outcomes on scores depending upon building size, geography, and source of heating, and these outcomes were inconsistent. RER on behalf of the industry highlighted the issues to the EPA, and the EPA responded with the announced review period. "The review period will help us ensure that the models are working as intended to deliver energy performance metrics that empower … the business case for owning and operating energy-efficient buildings," the agency stated. During the review period, EPA and real estate stakeholders will have the opportunity to assess variables such as a building's size, location, and fuel mix, to fully consider if these and other factors have had an indiscriminate impact on the new scoring models."We commend EPA in taking this step toward transparent decision making so our industry can recommend any necessary, data-driven changes to ENERGY STAR's updated scoring models ," said Roundtable President and CEO, Jeffrey D. DeBoer. "The Roundtable and our Sustainability Policy Advisory Committee look forward to partnering with EPA during its review period."Other federal agencies, state and local governments, and non-governmental organizations frequently rely on ENERGY STAR's tools and rating system for their own programs related to building energy efficiency. EPA advised it will "coordinate with program implementers and policymakers that leverage the ENERGY STAR score on the appropriate use of the new metrics during the review period."The review period and temporary suspension of ENERGY STAR building certifications do not apply to multifamily, data center, hospital, senior care communities, and manufacturing facilities, according to EPA.

Roundtable Weekly, Tax Policy, Tax Reform, Tax Reform Implementation, Tax Reform Technical Corrections

September 14, 2018

Roundtable Weekly

Ways and Means Passes “Tax Reform 2.0” Legislation; House GOP Leaders Plan September Floor Vote

The House Ways and Means Committee yesterday passed “Tax Reform 2.0” legislation along party lines (21-15) that would make permanent individual and pass-through business tax cuts set to expire at the end of 2025. House leaders plan a full chamber vote by the end of this month to highlight the GOP’s signature economic policy achievement before the November mid-term elections. (House Ways and Means Committee Mark-up Resourcesand Reuters, Sept. 13)House Ways and Means Chairman Kevin Brady (R-TX) during the "Tax Reform 2.0" mark-up on Sept. 13. The proposed legislation consists of three bills that would make permanent the individual and pass-through business provisions of the Tax Cuts and Jobs Act (P.L. 115-97); boost employer and individual retirement plans; and allow startup businesses to write off more of their costs. (Ways and Means summary of Protecting Family and Small Business Tax Cuts Act of 2018 – H.R. 6760)House Ways and Means Chairman Kevin Brady (R-TX) commented on the 2.0 package in an interview with CNBC’s Squawkbox, “We expect to have it ready for a floor vote in September. Locking in the permanence, we think, is fair and it’s pro-growth, creating another million and a half new jobs in the long run.”Despite statements by Brady and House Speaker Paul Ryan (R-WI) about a full House vote this month, attracting support from GOP incumbents in high-tax states may be difficult due to a permanent extension of the new cap on federal deductions for state and local tax deductions (SALT). The tax reform package is also unlikely to pass the Senate without support from Democrats, although the three House bills may be considered separately.The nonpartisan, congressional Joint Committee on Taxation released a report on Sept. 12 estimates that the House’s second round of tax cuts could cost more than $657 billion over a decade. The costs of making the tax cuts permanent alone would cost about $631 billion, according to the report.The House will be out of session until Sept. 25, which gives Congress four days to pass government funding by Oct. 1 to avoid a shutdown. Yesterday, House Appropriations Chairman Rodney Frelinghuysen (R-NJ) announced at a meeting of House and Senate conferees that a deal has been reached on a continuing resolution to keep all of the government funded through at least Dec. 7.

Economic Growth - Travel & Tourism, Roundtable Weekly

September 7, 2018

Roundtable Weekly

Hospitality CEOs Meet With President Trump to Advocate Reauthorization of Brand USA Program; Visa Application Process Improvements

Economic Growth

The vital contributions to the U.S. economy and job creation by the travel and tourism industry were the focus of a meeting Tuesday between President Trump and CEOs of 13 hospitality companies, including four members of The Real Estate Roundtable. Among the hotel CEOs participating in the White House meeting on travel and tourism this week were former Real Estate Roundtable Chairman Chris Nassetta of Hilton, along with Roundtable members Elie Maalouf of InterContinental Hotels Group; Patrick Pacious of Choice Hotels International; and James Risoleo of Host Hotels & Resorts, Inc. - enlarge photo - The White House meeting focused on ways the Trump Administration and private industry can work together to achieve travel-related economic growth. Among the policies discussed to help improve inbound travel: expanding and enhancing secure visa policies; supporting the Brand USA destination marketing agency; the importance of international inbound travel to reduce the growing trade deficit; and transportation infrastructure — all critical to increasing both international and domestic travel. Among the hotel CEOs participating in the meeting were former Real Estate Roundtable Chairman Chris Nassetta of Hilton, along with Roundtable members Elie Maalouf of InterContinental Hotels Group; Patrick Pacious of Choice Hotels International; and James Risoleo of Host Hotels & Resorts, Inc. The Visit U.S. coalition, which includes The Roundtable, is urging Congress to reauthorize Brand USA — the nation's tourism marketing program, which is not supported by taxpayer dollars, but through fees on foreign visitors who do not require a visa when entering the U.S. Legislation is needed to authorize the program beyond 2020 and ensure that visitor fees authorized for collection from 2021 to 2027 will not be diverted to the Treasury Department, as currently scheduled. An FY2017 return on investment analysis showed each dollar of Brand USA marketing generated almost 28 dollars in visitor spending. Moreover, Brand USA-generated international visitor spending is estimated to have produced 486 million dollars in federal tax revenue, and another 526 million dollars in state and local tax revenue.Roger Dow, president and CEO of the U.S. Travel Association, said, "The president is a keen listener whenever you're talking about growing the economy, and he was receptive to the idea that travel growth can be achieved without compromising security." A panel discussion at The Roundtable's June 14 Annual Meeting focused on the travel and tourism issue. Participants included Senator Amy Klobuchar (D-MN); Roundtable Board Member Anthony E. Malkin, Chairman and CEO, Empire State Realty Trust; USTA's Roger Dow; and American Hotel & Lodging Association's President and CEO Katherine Lugar. (Roundtable Weekly, June 15, 2018.)

Capital and Credit, GSE Reform, Roundtable Weekly

September 7, 2018

Roundtable Weekly

Top Republican Unveils Bipartisan Housing Finance Reform Bill

House Financial Services Committee Chairman Jeb Hensarling (R-TX) on Sept. 6 unveiled a sweeping proposal to overhaul the housing finance system in the United States during a hearing entitled, "A Failure to Act: How a Decade without GSE Reform Has Once Again Put Taxpayers at Risk."House Financial Services Committee Chairman Jeb Hensarling (R-TX) on Sept. 6 unveiled a sweeping proposal to overhaul the housing finance system in the United States during a hearing entitled, "A Failure to Act: How a Decade without GSE Reform Has Once Again Put Taxpayers at Risk." (Hensarling statement on YouTube). This fall marks ten years since the height of the financial crisis, when the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac were placed into government conservatorship on September 6, 2008. According to a committee summary of yesterday's hearing, "The subsequent financial bailout of Fannie Mae and Freddie Mac has required over $190 billion in taxpayers contributions to date, and taxpayers remain explicitly obliged to provide over $254 billion should future losses materialize. Never intended as a permanent solution, the conservatorship continues ten years later." The discussion draft of the "Bipartisan Housing Finance Reform Act of 2018" proposes to "repeal the GSEs' charters, permanently ending their monopoly, and transition to a system that allows qualified mortgages backed by an approved private credit enhancer with regulated, diversified capital resources to access the explicit, full government securitization guarantee provided by Ginnie Mae," according to Chairman Hensarling's opening committee statement. The bill is co-sponsored by Jim Hines (D-CT) and John Delaney (D-MD). In a Wall Street Journal Op-Ed, Hensarling further explained the proposal – "Loan originators would have to acquire coverage from an approved 'credit enhancer,' or private mortgage credit guarantor, to use the Ginnie Mae system. That would function as a private capital buffer on the loan, which could then be securitized by any of Ginnie Mae's more than 400 approved issuers with an explicit, full government guarantee of mortgage-backed securities." (Wall Street Journal Op-Ed, Sept. 6) The day before the hearing, a coalition of the housing industry's largest trade groups and affordable housing advocates wrote to the Trump Administration and Congress to enact permanent reforms to the government-sponsored enterprises. ( Coalition letter and HousingWire, Sept 5) A private sector solution to GSE reform was offered in a Sept. 4 Op-Ed in The Hill by Roundtable member Willy Walker, Chairman and CEO of Walker & Dunlop, one of the largest commercial real estate finance companies in the United States.In his Op-Ed, Mr. Walker writes, "The GSEs' multifamily lending businesses, where they back loans to owners of apartment buildings across the country, is the model that should be applied to all lending done by the GSEs. It's the same role they play in financing single-family homes, but with a fundamental difference: In the multifamily business, private capital is required to take risk on every loan the GSEs guarantee, protecting the GSEs and taxpayers in the process." (A fix for Fannie Mae and Freddie Mac already exists, Sept. 4) The proposed legislation has slim chances of advancing during an election year, yet Reps. Hensarling and Delaney said it could serve as a road map that lawmakers in the next Congress could use to push for GSE reform. Hensarling is not running for re-election. (Bloomberg, Sept 6) Hensarling concluded his committee statement, "If the political will to enact such reform stalls in this Congress or the next, the Administration can and should effectuate change. The President will appoint a new Federal Housing Finance Agency Director in January. With apologies to The Rolling Stones, 'you can't always get what you want, but if you try some time, you just might find, you get what you need' to avert the next housing crisis." (Hensarling statement on YouTube)

FIRPTA, Roundtable Weekly, Tax Policy

September 7, 2018

Roundtable Weekly

FIRPTA Repeal Bill Introduced; “Tax Reform 2.0” Mark-Up Next Week

FIRPTA Tax Policy

As House Republican leaders this week promoted a second round of tax cuts before the mid-term elections, Reps. Kenny Marchant (R-TX) and Joe Crowley (D-NY) introduced legislation yesterday to repeal the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). A recent report by the Rosen Consulting Group (RCG) estimated that FIRPTA repeal would generate an initial increase of between $65 billion and $125 billion in international investment in U.S. commercial real estate. FIRPTA subjects foreign investment in U.S. real property to a much higher tax burden than foreign investment in any other class of assets. As a result, overseas investors are often discouraged from investing in U.S. real estate. FIRPTA effectively deters billions of dollars of capital that would strengthen U.S. infrastructure, expand the tax base and create much-needed domestic jobs.The Marchant-Crowley Invest in America Act would build on FIRPTA reforms Congress passed in the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) by repealing FIRPTA altogether. The PATH Act exempted foreign pension funds from FIRPTA and increased the share of a publicly traded US REIT that a foreign investor can hold without triggering FIRPTA. The PATH Act changes injected billions of dollars in foreign investment into the U.S. real estate market, and contributed to a spike in capital investment in many parts of the country. (Roundtable Weekly – Oct 13, 2017)A recent report by the Rosen Consulting Group (RCG) estimated that FIRPTA repeal would generate an initial increase of between $65 billion and $125 billion in international investment in U.S. commercial real estate. The report determined that repealing FIRPTA would generate between $26 and $49 billion in total economic activity — a boost of 10 to 30 basis points to U.S. GDP. This new level of activity would lead to the creation of 147,000 to 284,000 jobs throughout the economy and increase taxpayers' income by $8 billion to $16 billion. RCG's report concluded that repealing FIRPTA would not have a meaningful impact on the federal budget, as FIRPTA accounted for less than 0.002% of federal tax receipts from 2009 to 2013. (Unlocking Foreign Investment in U.S. Commercial Real Estate, July 2017)FIRPTA reform is a long-standing goal of The Roundtable. The economic benefits of a comprehensive FIRPTA repeal was a focus of testimony by Real Estate Roundtable President and CEO Jeffrey DeBoer before the U.S. Senate Finance Committee on Sept. 19, 2017. (Roundtable Weekly) "In 2015, Congress passed the most significant reforms of FIRPTA since its passage in 1980. Congress should build on the recent success by repealing FIRPTA outright as part of tax reform. Unleashed by FIRPTA's repeal, capital from abroad would create jobs by financing new real estate developments, as well as the upgrading and rehabilitation of existing buildings. Architects, engineers, construction firms, subcontractors, and others would be put to work building and improving commercial buildings and infrastructure," DeBoer testified. (Roundtable Statement for the Record, Senate Finance Committee Sept 2017) Tax Reform 2.0GOP leaders aiming to pass another round of tax reforms through the House before the November mid-term elections are planning next week to introduce "Tax Reform 2.0" legislation. The bill would make the individual tax cuts contained in President Donald Trump's December tax overhaul permanent, while expanding taxpayer savings opportunities. House Ways and Means Committee Chairman Kevin Brady (R-TX) commented, "... next week we will introduce legislation to make permanent the small business and individual tax cuts that are driving these positive economic numbers. This investment into our workers will produce over a million and a half new jobs, continue to boost wages, and increase America's competitiveness for years to come." (Accounting Today, Sept. 7). Today, House Ways and Means Committee Chairman Kevin Brady (R-TX) commented on the 2.0 legislation expected to be marked up by his committee next week while reacting to the U.S. Bureau of Labor Statistics' August jobs report showing a gain of 201,000 jobs."August was another solid month of job growth, marking over 1.6 million jobs created this year and the highest level of wage gains since 2009. And we know we can do even better to continue creating greater financial security for our workers and Main Street businesses. That's why next week we will introduce legislation to make permanent the small business and individual tax cuts that are driving these positive economic numbers. This investment into our workers will produce over a million and a half new jobs, continue to boost wages, and increase America's competitiveness for years to come," Brady said. (Accounting Today, Sept. 7)In July, Brady released a two-page framework for "Tax Reform 2.0" that would make individual and small business tax cuts. Although last December's Tax Cuts and Jobs Act made corporate tax cuts permanent, most provisions for individuals and pass-through businesses are set to expire at the end of 2025. Yesterday, Ways and Means Committee Republicans released an updated outline of the Tax Cuts 2.0 package.Bloomberg reported this week that House Majority Whip Steve Scalise stated, "We're not resting on our laurels. We're seeing this great economic growth, and so we're starting to put together tax cuts 2.0." (Los Angeles Times, Sept. 5)The central feature of the reform proposal — a permanent extension of tax cuts for individuals — is unlikely to pass the Senate, where it would need Democratic support (The Hill, July 24). Additionally, the introduction of a Tax Reform 2.0 bill may delay legislation addressing tax technical corrections until after the November elections. (Roundtable Weekly, July 20)

Roundtable Weekly, The Fed

August 24, 2018

Roundtable Weekly

Fed Poised to Raise Interest Rates Amid Growing Concerns About Escalating Trade Disputes

Interest Rates The Fed

Federal Reserve policymakers this week signaled they are likely to raise interest rates next month, after releasing minutes of their most recent Federal Open Market Committee (FOMC) meeting showing growing concerns over the economic repercussions from escalating trade disputes. Fed Chairman Jerome Powell today delivered remarks on "Monetary Policy in a Changing Economy" at the Federal Reserve Bank of Kansas City's annual economic symposium . (reference: Powell's speech, Aug. 24) Fed Chairman Jerome Powell today delivered remarks on "Monetary Policy in a Changing Economy" at the Federal Reserve Bank of Kansas City's annual economic symposium . Powell said the Fed faces two major risks of "moving too fast and needlessly shortening the expansion, versus moving too slowly and risking a destabilizing overheating. I see the current path of gradually raising interest rates as the FOMC approach to taking seriously both of these risks." ( Powell's speech , Aug. 24) As central bankers and economists gathered this week for the symposium, Kansas City Fed President Esther George yesterday told Bloomberg Television, "My own forecast is that it will be appropriate to raise rates a couple more times this year." Dallas Fed President Robert Kaplan added in a CNBC interview that he sees three or four rate increases necessary over the next nine to 12 months. FOMC members are aiming to set interest rates to a "neutral" setting — one that neither spurs nor slows economic growth. Powell's comments at today's symposium come after his testimony before the Senate Banking Committee last month, when he stated, "With a strong job market, inflation close to our objective, and the risks to the outlook roughly balanced, the FOMC believes that – for now – the best way forward is to keep gradually raising the federal funds rate," (Roundtable Weekly, July 20) Regarding commercial real estate, the FOMC's meeting minutes released Wednesday show "CRE loans at banks maintained solid growth over the past several quarters, with growth shared across all three major CRE loan categories." FOMC minutes show growing concern among monetary policymakers over how trade disputes could pose a threat to economic growth. The minutes also show growing concern among monetary policymakers over how trade disputes could pose a threat to economic growth. "All participants pointed to ongoing trade disagreements and proposed trade measures as an important source of uncertainty and risks. Participants observed that if a large-scale and prolonged dispute over trade policies developed, there would likely be adverse effects on business sentiment, investment spending, and employment," according to the Fed's minutes. "Moreover, wide-ranging tariff increases would also reduce the purchasing power of U.S. households. Further negative effects in such a scenario could include reductions in productivity and disruptions of supply chains," the minutes continue. Yesterday, the U.S. and China started implementation of 25 percent tariffs on $16 billion worth of each other's goods, according to Reuters. The negative economic impact of tariffs on each state is the focus of a recent U.S. Chamber of Commerce analysis. (Politico's Morning Money, Aug. 23) Commenting on last week's Q3 Real Estate Roundtable Economic Sentiment Index, Roundtable President and CEO Jeffrey DeBoer noted, "Looking to future market conditions, industry executives are noting uncertainties regarding the November midterm elections and growing interest rate and international trade concerns. Policymakers must stay focused on developing pro-growth policies that continue to benefit the overall economy and spur job growth." The FOMC's next meeting is scheduled for Sept. 25-26. Former Fed Governor Kevin Warsh (2006 to 2011) will address Roundtable members on Sept. 26 during The Roundtable's Fall Meeting in Washington, DC.

Roundtable Weekly, Tax Reform Technical Corrections

August 24, 2018

Roundtable Weekly

Business Coalition Urges Treasury Secretary Mnuchin to Issue Guidance on Cost Recovery Period for Real Estate Improvements

Cost Recovery Period QIP

A broad-based business coalition that includes The Real Estate Roundtable urged Treasury Secretary Steven Mnuchin on Wednesday to issue guidance clarifying certain provisions included in tax overhaul legislation enacted last year — including the cost recovery period for qualified improvement property (QIP). ( Coalition letter , Aug. 22)A broad-based business coalition that includes The Real Estate Roundtable urged Treasury Secretary Steven Mnuchin on Wednesday to issue guidance clarifying certain provisions included in tax overhaul legislation enacted last year — including the cost recovery period for qualified improvement property (QIP). (Coalition letter , Aug. 22) An unintentional drafting mistake in the tax law has resulted in a significantly longer 39-year cost recovery period for new, qualified nonresidential interior improvements. Congress intended to allow the immediate expensing of qualified improvements, or provide a 20-year recovery period in the case of taxpayers electing out of new limitations on the deductibility of business interest. The drafting error affects leasehold improvements, expenditures made to improve common spaces in shopping centers and office buildings, and other interior improvements to nonresidential structures. The longer cost recovery period effectively increases the after-tax cost of upgrading and improving commercial real estate. ("Correcting the Drafting Error Involving the Expensing of Qualified Improvement Property " – The Tax Foundation , May 30) The August 22 letter includes 283 signatories, who state the delay in correcting the QIP provision is delaying some store and restaurant remodeling projects, and causing some retailers to decline opportunities to purchase or lease new store locations that would require substantial improvements. The coalition letter further explains, "These decisions not only deny communities the jobs associated with substantial construction projects, but also deny our communities the opportunity to bring new, permanent jobs to an otherwise abandoned store or to revitalize a declining mall. The delayed investment in remodeling projects is also causing a decline in sales by manufacturers that supply products used in remodels, like energy-efficient lighting and plumbing supplies." The coalition urges Secretary Mnuchin "to issue guidance that will facilitate the intent of the law and eliminate the imposition of large additional tax compliance and accounting burdens on taxpayers, as well as associated tax enforcement burdens on the Internal Revenue Service." Last week, all Republican members of the Finance Committee and Chairman Orrin Hatch (R-UT) wrote to Treasury and the IRS, requesting "guidance that is consistent with the congressional intent" of the new tax law regarding QIP expensing and two other tax policy areas. (Roundtable Weekly, Aug. 17) Roundtable President and CEO Jeffrey DeBoer stated, "In 2015, Congress voted overwhelmingly to permanently extend the 15-year recovery period for certain property improvements. By passing tax reform, Congress intended to consolidate those changes. Treasury should now use its authority to provide taxpayers with relief until a technical corrections bill is enacted. Treasury guidance will remove taxpayer uncertainty, unlock investment, and spur job-creating property upgrades and renovations."

August 22, 2018

Policy Comment Letter

11. 2018-08-22 Group Ltr to Treasury on QIP and NOL

August 19, 2018

Policy Comment Letter

Department of Treasury border

Climate and Immigration, Energy, ENERGY STAR, Roundtable Weekly

August 17, 2018

Roundtable Weekly

New ENERGY STAR Building Scores Available August 27

The Environmental Protection Agency (EPA) announced this week that long-anticipated, updated ENERGY STAR scores that rate and compare U.S. buildings' energy performance will be available on Monday, August 27. [EPA website]The EPA currently lists 34,226 commercial buildings and plants located in all 50 states as ENERGY STAR-labeled – representing 4.95 trillion square feet of space. EPA currently lists 34,226 commercial buildings and plants located in all 50 states as ENERGY STAR-labeled – representing 4.95 billion square feet of space. This number of "top of class" assets is expected to decrease, as average building "scores" will drop in light of updates to metrics in ENERGY STAR's Portfolio Manager energy usage benchmarking tool. For most types of buildings, an ENERGY STAR score (registered on a scale of 1 to 100) is based on the Commercial Buildings Energy Consumption Survey (CBECS), conducted periodically by the U.S. Department of Energy. The latest CBECS data, which forms the base for the new EPA scores, became available in 2016. Prior to the update, for years ENERGY STAR scores have reflected data collected in 2003. EPA's move to update its building scores has been in the works for several years and has been a continual focus of The Roundtable's Sustainability Policy Advisory Committee (SPAC). Many Roundtable member companies own and/or operate ENERGY STAR properties, and market their ratings to attract an increasingly Millennial-dominated workforce. Pension funds and other institutional investors also rely on the label as a signal for well-managed assets with smaller carbon footprints. EPA's annual Top Cities list shows which metro areas were home to the most ENERGY STAR certified buildings in the previous year. "We have to face the facts: ENERGY STAR building certification will likely be much harder to achieve," said Tony Malkin, Chairman and CEO of Empire State Realty Trust, and chairman of The Roundtable's SPAC. "The U.S. commercial real estate industry has made huge strides, and those strides are reflected in the new data set about to be deployed by the EPA. ENERGY STAR has always been a mark of highest achievement. With more efficient buildings in the data set, there will be a reduction in the number of buildings which qualify on a relative basis." "There are new technologies and practices, as well as inducements, such as ENERGY STAR for Tenants on which RER worked hard to put in place, which justify capital investments in buildings to reach even higher levels of performance, encourage greater collaboration between commercial landlords and tenants, and create thousands of well-paying retrofit construction jobs that cannot be exported," Malkin continued. (See Roundtable Weekly, June 15, 2018.) EPA reports that Portfolio Manager will be down on Sunday, August 26. New ENERGY STAR building scores, with updated Portfolio Manager metrics, will be available on Monday, August 27. EPA encourages ENERGY STAR users to documents their current scores now – and their new scores starting August 27. EPA's recommendations for how to prepare for the upcoming changes and webinars about the new metrics are available online.

Economic Growth - Travel & Tourism, Roundtable Weekly, Tourism, Trade Policy

August 17, 2018

Roundtable Weekly

Trump 2016 Campaign Advisor: Boost Foreign Tourism to Lower the Trade Deficit

Club for Growth founder and economic advisor to the Trump 2016 campaign, Stephen Moore, writes in an August 15 op-ed that boosting foreign tourism to the United States will increase economic growth and lower the trade deficit — a view shared by the VisitU.S. Coalition. (Boston Herald, Aug. 15)The economic importance of foreign travel and tourism to the United States' economy and commercial real estate industry was the focus of a panel discussion during The Roundtable's 2018 Annual Meeting in June. – enlarge photo – Moore notes in his commentary, "Washington is ignoring one easy way to trim the trade deficit without new tariff threats or complicated trade deals that could take years to consummate. Get more foreigners to travel to the United States and buy things here. Recently, I met with officials from the Visit U.S. Coalition - which is made up of owners of businesses such as hotels, restaurants, airlines, amusement parks and shopping centers – and they alerted me to this lost opportunity."Led by the U.S. Travel Association (USTA) and the American Hotel and Lodging Association (AH&LA), the VisitU.S. Coalition includes The Real Estate Roundtable, U.S. Chamber of Commerce and the American Resort Development Association. The multi-industry coalition aims to safely and securely welcome more overseas visitors, who stay an average of 18 nights and spend an estimated $4,360 at U.S. hotels, stores, restaurants and attraction properties.Moore also comments in his op-ed: "Prior to 9/11, the U.S. was the destination for about 1 in 6 international trips, but now we are the destination for about 1 in 8. The travel industry economists calculate that this decline has reduced foreign purchases of American goods and services by some $32 billion. They estimate about 100,000 fewer jobs have been created as a result of fewer tourists arriving from abroad." To address the drop of 7.4 million international visitors to America from 2015-2017, the VisitU.S. coalition encourages policies to help the nation regain its lost share of the global travel market by 2020 and help achieve the Administration's economic goals. (Roundtable Weekly, Jan. 19 and Feb. 9) VisitU.S. Coalition video on the State of International Travel. Specifically, the coalition is urging Congress to reauthorize the Brand USA program — the nation's first public-private partnership that markets the U.S. as a premier travel destination and communicates U.S. visa and entry policies. "The travel industry itself needs to do a better and more comprehensive job marketing America and our natural and man-made wonders," Moore noted in his editorial. Entry fees on foreign visitors – not federal taxpayer dollars – support Brand USA. An FY2017 return on investment analysis showed each dollar of Brand USA marketing generated almost 28 dollars in visitor spending. Brand USA is also estimated to have produced 486 million dollars in federal tax revenue, and another $526 million in state and local tax revenue. Travel and tourism policies to boost economic growth were addressed in a panel discussion during The Real Estate Roundtable's June 14 Annual Meeting. Participants included USTA's Roger Dow, AH&LA's Katherine Lugar, Senator Amy Klobuchar (D-MN) and Anthony E. Malkin (Chairman and CEO, Empire State Realty Trust). (Roundtable Weekly, June 15, 2018.)

CFIUS Reforms, Roundtable Weekly

August 17, 2018

Roundtable Weekly

President Trump Signs Bill Expanding Federal Review of Foreign Investments

President Trump on Monday signed a defense funding bill into law that includes an expansion of federal authority to review and potentially block foreign investments based on national security considerations. (Law.com, Aug. 13 and Wall Street Journal, Aug. 15)CFIUS recently ordered Chinese conglomerate HNA Group Co., Ltd to sell its majority stake in a 21-story Manhattan building whose tenants include a police precinct assigned to protect Trump Tower. The defense bill included the Foreign Investment Risk Review Modernization Act of 2018 (FIRMMA), which expands the authority of the Committee on Foreign Investment in the United States (CFIUS) — a U.S. interagency committee that conducts national security reviews of foreign investment. (Pensions & Investments, Aug. 13)CFIUS's scope now expands to cover the national security implications of transactions that could result in control of a U.S. business by a foreign person — and to block transactions or impose measures to mitigate any threats to U.S. security. (Law.com, Aug. 13)FIRRMA expands the list of covered transactions to include some foreign purchases and leases of real estate near military and other strategic facilities. Responding to concerns raised by The Roundtable and other industry groups, language is also included that exempts real estate located in 'urbanized areas' from the criteria of a covered transaction. The Census defines an urbanized area as one comprising more than 50,000 people. See pages 820-826 of the final congressional conference report. CFIUS recently ordered Chinese conglomerate HNA Group Co., Ltd to sell its majority stake in a 21-story Manhattan building whose tenants include a police precinct assigned to protect Trump Tower. (Bloomberg, Aug. 8 and The Wall Street Journal, Aug. 10)

Roundtable Weekly, Tax Reform Technical Corrections

August 17, 2018

Roundtable Weekly

Senate GOP Taxwriters Request Treasury Secretary Mnuchin to Clarify Cost Recovery Period for Real Estate Improvements

TCJA

Senate Finance Committee Republicans yesterday sent a letter to Treasury Secretary Steven Mnuchin and Acting IRS Commissioner David Kautter requesting clarifications to the tax overhaul legislation enacted last year – including guidance related to a drafting error that unintentionally pushed the cost recovery period for qualified property improvements (QIP) from 15 to 39 years. (The Hill, Aug. 16)The August 16 letter, signed by all Republican members of the Finance Committee and Chairman Orrin Hatch (R-UT), urges Treasury and the IRS to "issue guidance that is consistent with the congressional intent" of the new tax law regarding QIP expensing and two other tax policy areas. The unintentional drafting mistake has resulted in a longer cost recovery period for qualified nonresidential interior improvements – a category that previously covered leasehold improvements, retail improvements, and new restaurant construction. (" Correcting the Drafting Error Involving the Expensing of Qualified Improvement Property" – The Tax Foundation, May 30) As a result of the mistake, businesses across the country are delaying, or significantly reducing, capital expenditures for building improvements, undermining job creation and economic activity. The August 16 letter, signed by all Republican members of the Finance Committee and Chairman Orrin Hatch (R-UT), urges Treasury and the IRS to "issue guidance that is consistent with the congressional intent" of the new tax law regarding QIP expensing and two other tax policy areas. On the depreciation of real property, the letter notes: "[I]n eliminating the separate definitions of qualified leasehold improvement, qualified restaurant, and qualified retail improvement property and providing a new single definition of qualified improvement property, the language...failed to designate qualified improvement property as 15-year property under the modified accelerated cost recovery system ("MACRS"). In addition, there is a typographical error in a cross-reference identifying qualified improvement property as property which is recovered over 20 years under the alternative depreciation system ("ADS"). Congressional intent was to provide a 15-year MACRS recovery period and a 20-year ADS recovery period for qualified improvement property. Such intent is set forth in the Conference Report to accompany (the Tax Cuts and Jobs Act )." ( H.R. Rep. 115-466, at p. 366)." During a February hearing in the House, Treasury Secretary Mnuchin testified about the QIP issue: "I am aware of the error and it obviously was unintended. We are looking at whether there is anything we can do with regulations. I think it is likely that this is something that may need to be fixed in the bill. We look forward to working with you." (Ways and Means Committee – Mnuchin's testimony and hearing video and Roundtable Weekly, June 1) The letter, signed by Senate Finance Committee Chairman Orrin Hatch (R-UT) and other GOP tax writers, states they will also introduce legislation to correct unintentional mistakes in the new tax, although support from Democrats would be needed to pass such a bill. An amendment (# 3597) introduced July 26 by Sen. Pat Toomey (R-PA) to an appropriations bill (H.R. 6147) would have corrected the QIP drafting error, but did not receive a vote. The letter also notes that the Finance Committee continues to review the law for potential areas that may require regulatory guidance or technical corrections: "After this review, we intend to introduce technical corrections legislation to address any items identified." (Senate Finance Committee News Release, Aug. 16)

Roundtable Weekly, Tax Policy

August 10, 2018

Roundtable Weekly

Treasury Issues Regulations on New Pass-Through Business Income Deduction

Tax Policy

The Internal Revenue Service (IRS) and the Department of the Treasury on August 8 released guidance on the new pass-through deduction enacted in last year's tax overhaul bill. "The pass-through deduction is an important tax cut for small and mid-size businesses, reducing their effective tax rates to their lowest levels since the 1930s," said Treasury Secretary Steven Mnuchin, above. "Pass-through businesses play a critical role in our economy. This 20-percent deduction will lead to more investment in U.S. companies and higher wages for hardworking Americans." The Tax Cuts and Jobs Act signed by President Trump in December included a new 20 percent pass-through deduction (section 199A) that can lower the top tax rate on qualifying pass-through business income to 29.6 percent. Such income was previously taxed at a top rate of 39.6 percent. According to Treasury's press release, the guidance is intended to: "Ensure that all small business income below $315,000 for married couples filing jointly (and $157,000 for single filers) is eligible for the deduction"; "Provide clarity and flexibility for filers over those income thresholds by: • Including 'aggregation rules' for filers with pass-through income from multiple sources;... • Issuing guidance relating to specified service, trade or business (SSTB) income above the thresholds, which may be subject to limitation for the purposes of claiming the deduction; and... • Allowing a de minimis exception to avoid unnecessary compliance costs for businesses earning only a small percentage of SSTB income"; and "Establish anti-abuse safeguards to prevent improper tax avoidance schemes, such as relabeling employees as independent contractors." "The pass-through deduction is an important tax cut for small and mid-size businesses, reducing their effective tax rates to their lowest levels since the 1930s," said Treasury Secretary Steven Mnuchin. "Pass-through businesses play a critical role in our economy. This 20-percent deduction will lead to more investment in U.S. companies and higher wages for hardworking Americans." "The proposed pass-through regulations are a critical step forward in the implementation of tax reform provisions affecting real estate investment, jobs, and economic activity," said Jeffrey DeBoer, Real Estate Roundtable President and CEO. "A regulatory framework for the pass-through deduction is necessary to give taxpayers the certainty they need to move forward with new job-creating real estate projects that strengthen and enhance communities." The proposed regulations address several issues affecting real estate, such as the ability to aggregate income from multiple real estate partnerships. Some areas may need further development, such as the rules related to like-kind exchanges. In January, The Roundtable wrote to Treasury Secretary Mnuchin offering several suggestions designed to maximize the economic impact of the pass-through deduction and avoid unnecessary disruptions to business activity. [Roundtable Letter, Jan. 18]. The 184-page proposed regulation on the deduction will be formally published in a future edition of the Federal Register. Stakeholders and other interested parties will then have 45 days to submit public comments, followed by a public hearing on the proposed regulation on October 16.

Q1 Sentiment Index, Roundtable Weekly

August 10, 2018

Roundtable Weekly

Roundtable Q3 Survey: Commercial Real Estate Executives Report Balanced and Strong Current Market Conditions, Concern for the Future

Quarterly Sentiment Index US Economic Outlook

The Real Estate Roundtable’s latest quarterly Economic Sentiment Index reported commercial real estate industry executives continue to see balanced and stable market conditions for Q3, despite growing concerns that the market may be at peak pricing and could be nearing the end of its current cycle. The Roundtable’s Q3 2018 Economic Sentiment Index registered at 52 — a one point increase from the last quarter. However, this quarter’s Future-Conditions Index of 49 is seven points lower than the Current-Conditions index of 56. “As we move into the second half of the year, we continue to see robust markets, with debt and equity available, and asset values strong. The commercial real estate industry remains confident for the remainder of 2018,” said Roundtable CEO and President Jeffrey DeBoer. “The positive snapshot of current commercial real estate markets reflects a general absorption of recent interest rate increases, coupled with overall economic stimulation from tax reform.” The Roundtable’s Q3 2018 Sentiment Index registered at 52 — a one point increase from the last quarter. [The Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive.] This quarter’s Current-Conditions Index of 56 increased four points from the previous quarter, and rose 5 points compared to the Q3 2017 score of 51. However, this quarter’s Future-Conditions Index of 49 is seven points lower than the Current-Conditions index of 56.The report’s Topline Findings include:Roundtable CEO and President Jeffrey DeBoer noted, “Looking to future market conditions, industry executives are noting uncertainties regarding the November midterm elections and growing interest rate and international trade concerns. Policymakers must stay focused on developing pro-growth policies that continue to benefit the overall economy and spur job growth.” The Q3 index came in at 52, a one point increase from Q2. Responders view the market as balanced in terms of property supply and demand. Some responders pointed to pockets where the balance is slipping, but felt the general market conditions are positive and will continue to be so, barring an unexpected event. Most responders feel market conditions are stable, but there is growing sentiment suggesting the industry is nearing the end of its current cycle. This sentiment is reflected in the seven point spread between current and future real estate conditions shown in Exhibit 1.Most responders suggested asset values have reached peak pricing for many property types, and certainly in major gateway cities. Despite potential peak pricing, industrial properties continue to attract a large volume of investors. Debt and equity capital sources remain plentiful, but responders expressed concerns about the amount of debt available and the ramifications of the mounting time pressure some lenders have to invest their capital.DeBoer added, “Looking to future market conditions, industry executives are noting uncertainties regarding the November midterm elections and growing interest rate and international trade concerns. Policymakers must stay focused on developing pro-growth policies that continue to benefit the overall economy and spur job growth.” Data for the Q3 survey was gathered in July by Chicago-based FPL Associates on The Roundtable’s behalf. The next Sentiment Survey covering Q4 2018 will be released in November.

National Flood Insurance Program (NFIP), Roundtable Weekly

August 3, 2018

Roundtable Weekly

National Flood Insurance Program Extended through Nov. 30

A five-month extension of the National Flood Insurance Program (NFIP) was passed by Congress hours before its scheduled July 31 expiration and signed by President Trump later that day. The NFIP extension gives the House and Senate additional time to work towards long-term reauthorization.If the National Flood Insurance Program had lapsed, the Federal Emergency Management Agency would not have been able to issue new policies, and its borrowing authority would have been reduced to $1 billion from $30.4 billion. This would have had major effects on the real estate markets in coastal areas, where a flood insurance policy is mandatory for obtaining a new mortgage. If the program had lapsed, the Federal Emergency Management Agency (FEMA) would not have been able to issue new policies, and its borrowing authority would have been reduced to $1 billion from $30.4 billion. This would have had major effects on the real estate markets in coastal areas, where a flood insurance policy is mandatory for obtaining a new mortgage. (BGov, July 31) On July 25 the House voted 366-52 to pass the National Flood Insurance Program Extension Act of 2018 (S.1182), as amended, and on July 31 the Senate followed suit with a vote of 86-12. The measure reauthorizes FEMA to enter into new contracts for flood insurance and borrow from the Treasury up to specified amounts through Nov. 30, 2018 - the official end of the Atlantic hurricane season. The bill received pushback from Senate and House Republicans who wanted reforms to make the NFIP financially sustainable - after more than a decade of historic storms put the program deeply into debt. (CQ, July 25) A White House statement last week supported efforts to keep the flood insurance program from expiring, but noted Congress needs to enact long-term changes to ensure the program's long-term viability. (The White House, July 25) In November 2017, the House passed long term legislation - the 21st Century Flood Reform Act (H.R. 2874) - that would reform and reauthorize NFIP for five years. The bill included: funding for flood mitigation assistance; lower flood insurance rates, support for the private flood insurance market, modernization of flood zone mapping; and flood mitigation practices for homebuilders and land developers. However, the measure was not been taken up in committee in the Senate. (Roundtable Weekly, Nov. 17, 2017) The Roundtable will continue to work with lawmakers and our coalition partners to assist with NFIP reforms and a long-term reauthorization, that would help protect the nation's commercial and multifamily business-owners, their properties, and residents.

CFIUS Reforms, Roundtable Weekly

August 3, 2018

Roundtable Weekly

Congress Passes Defense Legislation Addressing Foreign Investment Risk; Includes Language Addressing Real Estate

The Senate on August 1 approved the National Defense Authorization Act for Fiscal Year 2019 (NDAA) – a compromise $717 billion defense policy bill aimed at building up the military and blunting Chinese foreign investment – which includes language that may affect some foreign purchases and leases of real estate near military and other strategic facilities.The final version of the NDAA – including FIRRMA – would expand the list of covered transactions to include some foreign purchases and leases of real estate near military and other strategic facilities. It is anticipated that President Trump will sign the legislation in August. The NDAA bill also includes the Foreign Investment Risk Review Modernization Act of 2018 (FIRMMA), which reforms the Committee on Foreign Investment in the United States (CFIUS) – a U.S. interagency committee that conducts national security reviews of foreign investment. FIRMMA expands the review authority of CFIUS to review national security implications of transactions that could result in control of a U.S. business by a foreign person and to block transactions or impose measures to mitigate any threats to U.S. security.FIRRMA also expands the list of covered transactions to include some foreign purchases and leases of real estate near military and other strategic facilities. Responding to concerns raised by The Roundtable and other industry groups, language is also included that exempts real estate located in 'urbanized areas' from the criteria of a covered transaction. The Census defines an urbanized area as one comprising more than 50,000 people. See pages 820-826 of the final congressional conference report.A congressional conference committee reconciled House and Senate versions of the NDAA last month. The final version of the NDAA – including FIRRMA – passed the House on July 26 and the Senate on Wednesday. It is anticipated that President Trump will sign the legislation in August.

News

August 3, 2018

Roundtable Weekly

Bipartisan Legislation Introduced to Create Task Force on Affordable Housing Policy

With millions of workforce and low-income Americans facing a lack of affordable housing, a group of nine bipartisan Senators recently introduced legislation that would create a task force focused on policy recommendations to address the nation's housing scarcity problem. (Sen. Heller News Release, July 18)With millions of workforce and low-income Americans facing a lack of affordable housing, a group of nine bipartisan Senators recently introduced legislation that would create a task force focused on policy recommendations to address the nation's housing scarcity problem. (Sen. Heller News Release, July 18) The Task Force on the Impact of the Affordable Housing Crisis Act – introduced by Senators Dean Heller (R-NV), Todd Young (R-IN), Maria Cantwell (D-WA), Angus King (I-ME), Tim Kaine (D-VA), Doug Jones (D-AL), Cory Gardner (R-CO), Marco Rubio (R-FL), and Chris Coons (D-DE) – would create an 18-member Task Force with two co-chairs. The affordable housing task force would evaluate and quantify the impact of housing costs on other government programs and provide recommendations to Congress on how to increase affordable housing. (One-page Task Force Overview) Sen. Heller commented, "While we welcome (an) explosion of growth and the jobs and economic opportunities that come with it, there is a lack of affordable housing because the demand for it is outpacing the supply. We need to develop solutions." Sen. Cantwell noted, "This year we were able to boost the Low Income Housing Tax Credit, which has built 90 percent of affordable housing in our country. More needs to be done to get to the root causes of the affordable housing crisis and show that the LIHTC is cost-effective and creates jobs." Sen. Cantwell discussed the shortage of housing for workforce and low-income Americans with Roundtable President and CEO Jeffrey DeBoer last year during a Senate Finance Committee hearing on business tax reform. (Hearing Video Clip, Sept. 19, 2017) Roundtable President and CEO Jeffrey DeBoer testified before the Senate Finance Committee: "And we need to focus on ways to incentivize affordable housing, not just low-income housing, which is obviously needed, but workforce housing as well ... it is certainly a growing and troubling problem. And as we go forward, that part of our nation has to be included in whatever is done in economic growth." (Hearing Video Clip, Sept. 19, 2017)In response to a question from Sen. Cantwell, DeBoer said, "Most businesspeople that operate certainly in urban areas recognize that there's a tremendous and growing shortage of what we would call workforce housing. And so people that are middle-American citizens, firemen, teachers, what have you, combined incomes, working very, very hard, are being priced out of our nation's cities." DeBoer continued, "And we need to focus on ways to incentivize affordable housing, not just low-income housing, which is obviously needed, but workforce housing as well ... it is certainly a growing and troubling problem. And as we go forward, that part of our nation has to be included in whatever is done in economic growth." (Hearing Video Clip, Sept. 19, 2017) Housing in the nation's economically distressed communities could also benefit from the new federal "Opportunity Zones" program, which seeks to encourage investment, economic development, and job creation in low-income areas. Opportunity Zones are the focus of a July 16 GlobeSt.com interview with Real Estate Roundtable President & CEO Jeffrey DeBoer and Roundtable SVP and Counsel Ryan McCormick. With implementation guidance about the program expected soon from the U.S. Department of the Treasury, the article highlights major tax considerations and regulatory questions, which are also discussed in greater detail in a Roundtable June 28 Opportunity Zone comment letter. (Roundtable Weekly, July 20). Treasury rules are expected to confirm that Opportunity Zone tax benefits extend to the construction and rehabilitation of affordable housing. The Roundtable's 2018 Policy Agenda, released in February, recognizes the affordable housing challenge – "As many of our nation's urban areas become more expensive, our industry continues to recognize and support housing not only for lower income residents, but also for the nation's middle income workforce. A stable, healthy commercial and residential real estate economy facilitated by sensible federal policies can continue to improve our national standard of living." (Introduction, 2018 Roundtable Policy Agenda)

Roundtable Weekly, Tax Policy

July 27, 2018

Roundtable Weekly

House GOP Unveils “Tax Reform 2.0” Outline; Capital Gains Indexing Bill Introduced

Tax Policy

House Ways and Means Committee Chairman Kevin Brady (R-TX) on July 24 outlined a proposed second round of tax cuts to House Republicans, who hope to vote on “Tax Reform 2.0” before the midterm elections..In an interview with CNBC, Brady expanded on the three core components of the Tax Reform 2.0 proposal. Chairman Brady stated. "With this framework, we are taking the first step to change the culture in Washington D.C. where tax reform only happens once a generation. We plan to work off this framework to build on the growing successes of the Tax Cuts and Jobs Act and ensure this energized economy continues moving forward." (House Ways and Means Statement, July 24)In an interview with CNBC, Brady expanded on the three core components of the 2.0 proposal: making the individual and small business tax cuts enacted by the 2017 Tax Cuts and Jobs Act permanent'promoting family savings through retirement accounts, a new universal savings account, andexpanded 529 education savings accounts; and spurring business innovation by allowing new businesses to write off more of their initial start-up costs, and removing barriers to growth.The central feature of the proposal – a permanent extension of tax cuts for individuals – is unlikely to pass the Senate, where it would need Democratic support. (The Hill, July 24) Senior Ways and Means Committee Member Devin Nunes (R-CA) has introduced legislation (H.R. 6444) to index capital gains to inflation – a proposal that would reduce the tax burden on long-lived assets, including real estate. Although House Republicans aim to vote on "Tax Reform 2.0" legislation in September, a tax technical corrections bill may not be voted on until after the November elections. (Roundtable Weekly, July 20)Meanwhile, senior Ways and Means Committee Member Devin Nunes (R-CA) has introduced legislation (H.R. 6444) to index capital gains to inflation – a proposal that would reduce the tax burden on long-lived assets, including real estate. An inflation adjustment for capital gains previously passed the House in the 1990s but died in the Senate. House tax-writers may consider indexing capital gains as part of Tax Reform 2.0. (The Hill, July 20)Separately, attention this week was focused on a mistake affecting qualified improvement property cost-recovery tax rules. An amendment (# 3597) introduced yesterday by Sen. Pat Toomey (R-PA) to an appropriations bill (H.R. 6147) would correct a drafting error in the Tax Cuts and Jobs Act that unintentionally pushed the recovery period for property improvements from 15 to 39 years. As a result of the mistake, businesses across the country are delaying, or significantly reducing, capital expenditures for building improvements, undermining job creation and economic activity. (BGov, July 26)Additionally, the Treasury Department has sent draft regulations regarding the new deduction for pass-through business income to the White House Office of Management and Budget (OMB) for formal review. Under a recent agreement between the two agencies, OMB has 10 days to review the regulations before they are issued, unless the parties mutually agree to extend the review period. (TaxNotes, July 25)In January, The Roundtable wrote to Treasury Secretary Mnuchin offering several suggestions designed to maximize the economic impact of the pass-through deduction and avoid unnecessary disruptions to business activity. [Roundtable Letter, Jan. 18].

Infrastructure, Roundtable Weekly

July 27, 2018

Roundtable Weekly

House Proposal Suggests Gas Tax Increase, Public-Private Partnerships to Fund Infrastructure Improvements

Infrastructure Transportation

Rep. Bill Shuster (R-PA), the outgoing chairman of the House Transportation and Infrastructure Committee, released "discussion draft" language on July 23 aimed at improving and sustainably financing U.S. transportation and other infrastructure systems. (Section-by-Section analysis of the proposal) Roundtable President and CEO Jeffrey D. DeBoer appeared last summer on CNBC’s Squawk Box, emphasizing the importance of P3s as a platform to finance the design, building, operation and long-term maintenance of projects across all infrastructure asset classes(CNBC, June 7, 2017). Shuster, who is retiring after the upcoming midterm elections, provided a "vision statement" explaining that the draft "is intended to further the national conversation about the current state of America's infrastructure and highlight some of the major roadblocks to funding and improving our transportation network." He stated his proposal reflects "input from Members of Congress from both sides of the aisle" in an effort to build bipartisan support.The wide-ranging draft proposes to phase-in increases to the "pay at the pump" gas tax and then eliminate it after 10 years; pilot a per-mile travelled "user fee"; shore-up the federal loan and guarantee program for mass transit; establish a public-private partnership (P3) program to construct and rehabilitate federal buildings; and establish a one-stop federal permitting shop to expedite project approvals. (Eno Transportation Weekly, July 23) Any broad infrastructure policy conversation would likely address federal-state cost sharing arrangements for mass transit projects - such as the Gateway program to improve bridge and tunnel crossings between New York and New Jersey. For example, a June 29 letter from Trump Administration transit officials indicated a change in agency policy - that loans by the U.S. Transportation Department, repaid by state and local governments, should factor into grant decisions. The effect would be to reduce the amount of federal grants for mass transit and increase the state/local share. (B-Gov, July 3) Anticipating infrastructure as an issue for possible compromise after the upcoming elections, The Roundtable has offered a number of comments to the Administration and Congressional committees on real estate's role in creating public-private partnerships to help repair roads, transit, broadband, power grid and other systems that are needed to make communities safe, productive and competitive. (Roundtable Weekly, January 26) Roundtable President and CEO Jeffrey D. DeBoer appeared last summer on CNBC's Squawk Box, emphasizing the importance of P3s as a platform to finance the design, building, operation and long-term maintenance of projects across all infrastructure asset classes. Policies starting with streamlined permitting and a range of financing platforms should all be considered by lawmakers as layers in the "capital stack" for infrastructure," DeBoer told Squawk Box. (CNBC, June 7, 2017)

Economic Growth - Travel & Tourism, Roundtable Weekly, Tourism

July 27, 2018

Roundtable Weekly

Jobs Originating through Launching Travel (JOLT) Act Introduced to Spur International Tourism and Job Creation Issues

In a bipartisan effort to spur tourism to the U.S., create jobs, reform outdated visa laws and increase national security, Reps. Mike Quigley (D-IL) and Tom Rice (R-SC) yesterday introduced the Jobs Originating through Launching Travel (JOLT) Act of 2018."By improving the visa process, strengthening national security, and welcoming vetted travelers, the U.S. will be able to realize economic benefits at hotels, restaurants, retail store, and attractions around the country," said VisitU.S. Coalition spokesman Amos Snead. (VisitU.S. News Release, July 26) Rep. Quigley said, "By updating outdated visa laws, we can drive tourism and job growth in our cities and assist the U.S. intelligence community with their mission to spot and stop terrorist threats. The JOLT Act accomplishes both of those objectives by stimulating economic activity and improving national security."Rep. Rice added, "The JOLT Act will enhance our economic competitiveness and strengthen national security by modernizing the Visa Waiver Program (VWP), which facilitates streamlined travel into the United States for pre-approved travelers from member countries."In 2016, 22 million people traveled to the U.S. from VWP countries, accounting for 59% of overseas arrivals to the U.S. Travelers from these countries generated more than $90 billion for the U.S. economy. (Rep. Quigley News Release, July 26)The VisitU.S. Coalition applauded introduction of the Act. Coalition spokesman Amos Snead commented, "By improving the visa process, strengthening national security, and welcoming vetted travelers, the U.S. will be able to realize economic benefits at hotels, restaurants, retail store, and attractions around the country," said VisitU.S. Coalition spokesman Amos Snead. (VisitU.S. News Release, July 26)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. The coalition is also urging Congress to reauthorize the Brand USA program, which is funded through fees on foreign visitors who do not require a visa when entering the U.S. Legislation is needed to authorize the program beyond 2020 – and ensure that visitor fees authorized for collection from 2021 to 2027 will not be diverted to the Treasury Department, as currently scheduled. (Roundtable Weekly, June 29)A panel discussion at The Roundtable's June 14 Annual Meeting focused on travel and tourism, economic growth and CRE. Participants included Roger Dow, President and CEO, U.S. Travel Association; Katherine Lugar, President and CEO, American Hotel & Lodging Association; Senator Amy Klobuchar (D-MN) and Anthony E. Malkin (Chairman and CEO, Empire State Realty Trust). (Roundtable Weekly, June 15, 2018.)

News

July 20, 2018

Roundtable Weekly

New Federal Opportunity Zones Profiled in Q&A with Roundtable Staff; House Speaker Ryan Touts Benefits of Investment Program

Opportunity Zones OZs

A new federal “Opportunity Zones” investment program – and its potential to boost job creation, entrepreneurship, and economic development in low-income communities – is the focus of a July 16 GlobeSt.com interview with Real Estate Roundtable President & CEO Jeffrey DeBoer and Roundtable SVP and Counsel Ryan McCormick. With implementation guidance about the program expected soon from the U.S. Department of the Treasury, the article highlights the major tax considerations and regulatory questions for real estate, many of which are discussed in greater detail in The Roundtable’s June 28 Opportunity Zone comment letter. Roundtable President & CEO Jeffrey DeBoer, right, and Roundtable SVP and Counsel Ryan McCormick, left, discussed the new federal "Opportunity Zones" investment program in a July 16 GlobeSt.com interview. Last month, the Treasury Department formally designated more than 8,700 low-income census tracts in the United States, Puerto Rico, and territories as qualified Opportunity Zones. (IRS Notice 2018-48 and Roundtable Weekly, June 22)DeBoer explained in the GlobeSt interview, “The point of the program is to encourage capital formation and patient, long-term investment in these areas by reducing or eliminating capital gains taxes for taxpayers investing in newly established Opportunity Funds.”McCormick told GlobeSt that property in an Opportunity Zone – real estate or otherwise – must be acquired by the fund after Dec. 31, 2017. He added, “The law delegated many of the key implementation issues to the Treasury Department to resolve. These include: (1) how an Opportunity Fund is certified (2) how quickly must an Opportunity Fund deploy new capital, and (3) when has an existing real estate asset qualified as an eligible investment?”A July 13 Wall Street Journal article on Opportunity Zones reported, “Unlike earlier federal efforts to spur economic development in poorer communities, the program takes a free-market approach and isn’t backed with federal spending.”House Speaker Paul Ryan (R-WI) on July 12 spoke at length regarding the program before the Economic Club of Washington. “With these opportunity zones, we are essentially offering private investors a set of incentives. The longer you maintain your investment in these areas, the more tax benefits you receive. Right now, we have $6 trillion of unrealized capital that can be deployed to help alleviate poverty in distressed communities and improve people’s lives,” Ryan said.DeBoer also noted in the GlobeSt interview, “Investors and real estate fund managers are actively in the process of evaluating options, setting up funds, and conducting due diligence. As time passes and the regulatory regimes takes shape, the pool of Opportunity Fund investors may grow. We anticipate Treasury will soon issue guidance, hopefully within the next 30 days.”The Roundtable Tax Policy Advisory Committee (TPAC) recently convened a panel on Opportunity Zones that included the tax counsel for Senator Tim Scott (R-SC), the original author and sponsor of Opportunity Zone legislation. TPAC’s Opportunity Zone Working Group will continue to provide insight into how the industry can help the program fulfill its ambitious objective of stimulating economic development and job creation. (Roundtable Comment Letter, June 28)

Roundtable Weekly, Tax Reform, Tax Reform Implementation, Tax Reform Technical Corrections

July 20, 2018

Roundtable Weekly

GOP House Leadership Plans Votes on “Tax Reform 2.0” in September; Technical Corrections Bill After Mid-Term Elections

House Republican leaders aim to vote on “Tax Reform 2.0” legislation in September, followed by a tax technical corrections bill after the November mid-term elections.House Speaker Paul Ryan (R-WI), right, and House Ways and Means Committee Chairman Kevin Brady (R-TX), left, pledged action on Tax Reform 2.0. Ryan said taxwriters are compiling a list of "glitches and issues" in the new tax law that could be in a technical corrections bill. House Ways and Means Committee Chairman Kevin Brady (R-TX) on Tuesday said a second round of tax cuts would include permanently extending individual tax cuts passed last year in the Tax Cuts and Jobs Act. Twenty-three provisions in the law relating to individual income taxes are currently scheduled to expire at the end of 2025. (Tax Foundation, January 18)During the July 17 meeting with President Trump and other members of his committee, Brady said, "We anticipate the House voting on this in September and the Senate setting a timetable as well." After the meeting, Brady added, "We talked about timing and the importance of this. ... We're very well aligned with the White House on 2.0." In a televised interview on Wednesday morning, Chairman Brady expanded on his vision for the next major tax bill, which he said would create 1.5 million additional jobs. (Fox Business, July 18)Such a bill likely would face significant challenges in the Senate, where it would need Democratic support to pass. Senate Finance Committee Chairman Orrin Hatch (R-UT) supports making the tax cuts permanent and “will continue to work with his colleagues to find a viable path and timing to achieve this goal,” according to a spokeswoman. (Wall Street Journal, July 19)House Speaker Paul Ryan (R-WI) last week also pledged action on Tax Reform 2.0 and added that a technical corrections tax bill would be introduced after the mid-term elections. Ryan said taxwriters are compiling a list of "glitches and issues" in the new tax law that could be corrected in the bill. Chairman Brady also confirmed the timeline last week, stating, “We’re continuing to develop the technical corrections. It’s always been assumed that we would want to see how Treasury lays out its rules, from everything from pass-throughs to international.” (CQ, July 12 and Bloomberg Tax, July 13)Among the technical corrections needed is a drafting mistake that added nearly a quarter-century to the depreciation life for qualified improvement property that has negatively affected commercial real estate development. Roundtable SVP and Counsel Ryan McCormick explained at a recent NYU tax conference that while Congress intended for qualified improvement property to receive bonus depreciation — setting the recovery period at 15 years — a drafting error put the recovery period at 39 years. “In addition to conflicting with the clear legislative intent, this result is ... antithetical to the basic direction of the underlying bill,” McCormick said. (Tax Notes, July 2 and Wall Street Journal, July 10 – "Legislative Mistake Causes Some Companies to Postpone Renovations")

News

July 20, 2018

Roundtable Weekly

Fed Chairman Testifies to Congress on Interest Rates; Banks Concerned About CRE Lending Risk

In testimony before Congress this week, Federal Reserve Chairman Jerome Powell testified about interest rates and monetary policy. “With a strong job market, inflation close to our objective, and the risks to the outlook roughly balanced, the FOMC believes that – for now – the best way forward is to keep gradually raising the federal funds rate,” Powell told the Senate Banking Committee on Tuesday. In testimony before Congress this week, Federal Reserve Chairman Jerome Powell testified about interest rates and monetary policy.After the Fed raised short-term U.S. rates twice in the first half of 2018, it is expected to issue two more increases this year, starting in September. (MarketWatch, July 17 and Wall Street Journal, July 19)President Donald Trump criticized the Federal Reserve's monetary policy again today after his initial critical remarks yesterday. In a statement to CNBC, the White House clarified, "Of course the President respects the independence of the Fed. As he said he considers the Federal Reserve Board Chair Jerome Powell a very good man and that he is not interfering with Fed policy decisions." (CNBC, July 19) In Chairman Powell's Senate testimony, he said the Fed expects, with appropriate monetary policy, that the job market will remain strong and inflation will stay near two percent over the next several years. He added that the Fed’s economic forecast faces the uncertain impact of trade policies and tax legislation. “It is difficult to predict the ultimate outcome of current discussions over trade policy as well as the size and timing of the economic effects of the recent changes in fiscal policy,” Powell testified. The Fed yesterday released its "Beige Book" of current economic conditions, which notes the effects of newly-imposed tariffs: “Manufacturers in all Districts expressed concern about tariffs and in many Districts reported higher prices and supply disruptions that they attributed to the new trade policies. Tariffs contributed to the increases for metals and lumber.” According to the report’s national summary commercial real estate markets show stable or improving growth. (Reuters, July 18 and GlobeSt, July 19) During the House Financial Services Committee on Wednesday, Powell also commented on CRE asset pricing. “Broadly speaking, commercial real estate prices are in the upper range, I think, generally elevated. I wouldn't use the bubble word here, but I would say that many financial asset prices are elevated above their normal ranges.”According to a July 16 Financial Times article, U.S. banks are increasingly concerned about the effects of rising interest rates on CRE lending, with executives saying they are worried about an overheated market. “US bankers have warned about mounting risks in commercial real estate, with figures showing they are putting the brakes on loans to buyers of office buildings, hotels and shopping malls,” the Times reports. The effects of monetary policy and tax legislation on commercial real estate will be a focus of The Roundtable’s September 26 Fall Meeting in Washington, DC.

News

July 13, 2018

Roundtable Weekly

"Building Success" Reports on The Roundtable’s FY2018 Policy Activities in Tax, Capital and Credit, Homeland Security, Energy and Infrastructure Issue Areas

The Real Estate Roundtable has released its FY2018 Annual Report “Building Success,” which reports on the organization’s policy activities from July 1, 2017 to June 30, 2018 and outlines its policy priorities for the coming year. "We are extremely proud of our success this past year and equally eager to build on its foundation as we move into our new fiscal year. As always, we will continue to inform lawmakers with consistent and credible policy analysis that encourages economic growth, job creation, and a healthy national real estate market,” said Roundtable President and CEO Jeffrey D. DeBoer. Immediate Past Roundtable Chair (2015-2018) William C. Rudin (Co-Chairman and CEO, Rudin Management Company, Inc.) noted the continued efforts of promoting greater diversity throughout the organization and his efforts during his tenure as Chair. “We have made measurable progress at identifying and recruiting more highly qualified women and people of color to join, and participate at The Roundtable. With greater membership diversity, we ensure that our decisions are better informed and more sustainable.” The Report includes summaries showing continued progress on the policy front, including: In late 2017, the most comprehensive tax reform in over 30 years, the Tax Cuts and Jobs Act, was signed into law. Due in large part to the Roundtable’s advocacy efforts, TCJA preserved interest deductibility; retained like-kind exchanges for real estate; and maintained depreciation and cost recovery rules. The Roundtable and its Tax Policy Advisory Committee is continuing its efforts with Treasury and the Administration to ensure appropriate implementation of the comprehensive law. Congress passed financial deregulation legislation – Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155) – that included important reforms to the Basel III High Volatility Commercial Real Estate (HVCRE), which promote sustainable development and lending, and lowers financial barriers for job-creating projects. The Federal Reserve and four other federal agencies approved a proposal to simplify and ease the Volcker Rule. The proposal, known as Volcker 2.0, seeks to simplify regulatory requirements by giving banks new quantitative “bright-line rules” to provide more clarity on what activities are prohibited and permitted. As a long-time supporter of the ENERGY STAR Program, The Roundtable was a key player in the creation and ongoing development of the EPA’s new charter tenant program “ENERGY STAR for Tenants” labeling platform of high-performance leased office spaces. Anticipating infrastructure as a policy issue for possible compromise after the upcoming midterm elections, The Roundtable offered comments to the Administration and Congressional committees on real estate’s role in creating public-private partnerships to help repair the roads, transit, broadband, power grid and other systems needed to make our communities safe, productive and competitive. Newly elected Roundtable Chair Debra A. Cafaro (Chairman and Chief Executive Officer, Ventas, Inc.) emphasized that The Roundtable’s policy agenda remains full of key issues that require our engagement as a non-partisan industry voice. “Above all, we must uphold our independent and respected position on Capitol Hill, emphasizing our optimism about the economy and the positive contributions the real estate industry provides as a job creator and as a cornerstone for retirement savings. We are committed to proactively advancing policies that promote a healthy balance of capital and people flows to create sustainable economic growth that is good for our members, our industry and our national economy,” said Cafaro. The publication includes a listing of all Roundtable members, as well as the FY2019 Board of Directors and Committee Leadership, and has been mailed to all Roundtable members, congressional offices on Capitol Hill, and is available online.

LIBOR Reform, Roundtable Weekly

July 13, 2018

Roundtable Weekly

Regulators Emphasize Need for Transition Away From LIBOR to New Standard by End of 2021; Roundtable to Address Impact on Commercial Real Estate Finance

LIBOR

International regulators this week urged banks to speed up their transition plans away from the London Inter-bank Offered Rate (LIBOR) to a new standard for setting the price of trillions of dollars of loans and derivatives worldwide. LIBOR is an important reference rate for commercial real estate and the broader economy, underlying approximately $373 trillion worth of cash and derivative contracts globally. The Fed's Alternative Reference Rates Committee (ARRC) will meet on July 19 to address risks in contract language and actions that could minimize disruptions associated with a possible end to LIBOR. With LIBOR set to expire at the end of 2021, the status of reform efforts and their impact on commercial real estate finance is profiled by Joseph Forte (Sullivan & Worcester) – a member of The Roundtable's Real Estate Capital Policy Advisory Committee (RECPAC) – in his recent article, "Après LIBOR: Black Swan or Y2K." LIBOR's credibility was badly undermined a decade ago by a rate-manipulation scandal. These illegal actions damaged the public's trust in LIBOR, financial markets and institutions. The United Kingdom's Financial Conduct Authority (FCA), which regulates LIBOR, announced last year that it will phase out the global borrowing index by 2021. In December 2018, FCA Chief Executive Andrew Bailey said, "There is some good news to report on the important steps taken towards transition. But the pace of that transition is not yet fast enough. There is much further to go." (FCA, "Interest rate benchmark reform: transition to a world without LIBOR") With LIBOR set to expire at the end of 2021, the status of reform efforts and their impact on commercial real estate finance is profiled in Joseph Forte's recent article, " Après LIBOR: Black Swan or Y2K ." . The Federal Reserve Bank of New York in April began publishing an alternative U.S. benchmark to work alongside LIBOR – the Secured Overnight Financing Rate (SOFR), which is seen as the next step to transition trillions of dollars in securities away from LIBOR. SOFR is seen as more reliable, as it is based on interest rates in the U.S. market for repurchase agreements instead of LIBOR's estimated quotes by bankers in the relatively thin interbank loan market. Yesterday, The Wall Street Journal reported that international regulators are urging banks to stop using LIBOR for new contracts and plan to accommodate legacy contracts that are set to expire after LIBOR sunsets at the end of 2021. "Legacy contracts represent arguably the greatest challenge for regulators and industry groups," according to the July 13 article. Former President of the Federal Reserve Bank of New York William Dudley spoke about LIBOR in May. "Time is of the essence, and we must manage it well," he told a Bank of England forum. "Because of the great uncertainty over LIBOR's future and the risks to financial stability that would likely accompany a disorderly transition to alternative reference rates, we need aggressive action to move to a more durable and resilient benchmark regime," Dudley added. (Reuters, May 24, 2018) The Fed's Alternative Reference Rates Committee (ARRC) will meet on July 19 to address risks in contract language and actions that could minimize disruptions associated with a possible end to LIBOR. See "Alternative Reference Rates Committee Releases Principles for Fallback Contract Language Guiding Principles Mark a Key Milestone in Meeting the ARRC's Mandate" and the ARRC website for additional information. The Roundtable's RECPAC has formed a LIBOR Working Group to address this challenge and work toward the development and implementation of an effective, new replacement benchmark that does not impair liquidity, needlessly increase borrowing costs or cause market disruptions.

Homeland Security, Roundtable Weekly, Terrorism Risk Insurance Program, TRIA

July 13, 2018

Roundtable Weekly

Treasury Department Reports on Effectiveness of Terrorism Risk Insurance Program

TRIA

The federal government's Terrorism Risk Insurance Program has been effective in making terrorism risk insurance available and affordable throughout the United States, according to a recent report by the U.S. Department of the Treasury’s Federal Insurance Office. The Treasury based its June “Report on the Overall Effectiveness of the Terrorism Risk Insurance Program” on marketplace data collected for the past two years, along with public comments such as those submitted by the broad-based Coalition to Insure Against Terrorism (CIAT), which includes The Real Estate Roundtable. The Terrorism Risk Insurance Program – authorized by the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) of 2015 – provides a federal backstop for certain U.S. property and casualty insurance losses resulting from a certified act of terrorism.Treasury based its June “Report on the Overall Effectiveness of the Terrorism Risk Insurance Program” on marketplace data collected for the past two years, along with public comments such as those submitted by the broad-based Coalition to Insure Against Terrorism (CIAT), which includes The Real Estate Roundtable. TRIPRA directs Treasury to provide reports on the Program’s effectiveness and estimate the total amount of premiums earned on terrorism risk insurance since January 1, 2003. Treasury published its first Program effectiveness report two years ago. (Roundtable Weekly, July 8, 2016).In last month’s report, Treasury’s estimate of total earned premiums for terrorism risk insurance from 2003 to 2017 is approximately $37.6 billion (excepting captive insurers). This amount is between 1 and 2 percent of the total premiums earned in the Program-eligible lines of insurance during that period. Treasury estimates that an additional $7.4 billion has been earned by captive insurers. The total of terrorism risk premiums earned is comparable to the loss sustained by the insurance industry in connection with the attacks on September 11, 2001. While the purchase of terrorism risk insurance is not mandated by the Program, a significant proportion of commercial policyholders nationwide have elected to obtain such insurance, and take-up may be even higher in metropolitan areas at greater risk of terrorism. Without Congressional action, the Terrorism Risk Insurance Program, authorized by TRIPRA, will expire on Dec. 31, 2020. The Roundtable is working with industry partners to develop a proposal that would make terrorism insurance available for the long-term.

Industry Outreach, Roundtable Weekly

July 13, 2018

Roundtable Weekly

29 Industry Organizations Launch "Careers Building Communities" to Encourage Real Estate Talent Development

Industry Outreach

The Roundtable and 28 other real estate industry organizations – representing more than 10 million jobs – yesterday launched Careers Building Communities, a website highlighting diverse career paths within the real estate sector. The public policy area of the site links to Roundtable resources. Careers Building Communities highlights diverse career paths within the real estate sector. With changing demographics, technological advances and evolving preferences in how different generations live, work and play, Careers Building Communities seeks to encourage students, educators, career changers and others to explore opportunities in real estate. Housing Wire reported today that individuals can use the website to learn about real estate industry trends and take an interactive quiz to explore possible career pathways in the industry.Roundtable President and CEO Jeffrey DeBoer said, “This is the kind of positive collaboration that has proven to be a winning formula for policy action in Washington. And now, thru this new collaboration, we will apply this formula to raise the awareness that everyone, particularly young people, minorities and people of color, have regarding the tremendous career opportunities that real estate offers.”By attracting diverse talent to the many careers available across the built environment, Careers Building Communities also responds to a consistent theme among industry stakeholders – the increased need for talent.

News

June 29, 2018

Roundtable Weekly

Ventas’ Debra A. Cafaro is New Chair of FY2019 Roundtable Board of Directors

The Real Estate Roundtable has elected Debra A. Cafaro (Chairman and Chief Executive Officer, Ventas, Inc.) as its new Chair for a three-year term starting July 1, 2018. She succeeds William C. Rudin (Co-Chairman and CEO, Rudin Management Company, Inc.). The Roundtable's membership also approved a 23-member Board of Directors for its 2019 fiscal year (July 1, 2018 - June 30, 2019). Left to Right: Roundtable President and CEO Jeffrey D. DeBoer; Roundtable Chair Debra A. Cafaro (Chairman and Chief Executive Officer, Ventas, Inc .); and Immediate Past Roundtable Chair William C. Rudin (Co-Chairman and CEO, Rudin Management Company, Inc .) – enlarge photo – Ms. Cafaro leads Ventas, Inc., an S&P 500 company and real estate investment trust with a portfolio of more than 1,200 seniors housing, healthcare and research properties in the United States, Canada and the United Kingdom.“For two decades, The Real Estate Roundtable has taken a non-partisan approach aimed at providing practical policy solutions to lawmakers in DC,” Cafaro said. “I intend to carry this approach forward, by continuing to shape and articulate a unified real estate industry perspective for policymakers, and as the first woman elected to this role, to showcase the diversity of our highly respected membership on national public policies.” The Roundtable’s Immediate Past Chair William Rudin noted, “I was honored to serve as the Roundtable Chair the past three years and pleased that Debra will succeed me. She has an incredibly successful background, a sterling reputation, and the positive skills and qualities needed to successfully prioritize and advance the real estate industry’s policy agenda in Washington.” Roundtable President and CEO Jeffrey D. DeBoer said, "The Roundtable now begins our 20th year of bringing together the leaders in our industry with the major industry trade associations to work positively with national lawmakers on policy issues related to our industry and the overall economy. Our past success has been directly related to our high quality membership, our fact-based, nonpartisan problem-solving approach to policy issues, and the collective work with the overall industry. We look forward to Deb Cafaro as our new Chair, not only to carry on our traditional approach to Washington, but also to lead The Roundtable to a new, enhanced level of effectiveness.”Also joining The Roundtable’s Board of Directors as of July 1 are: · Thomas J. Baltimore, Jr., Chairman, President and CEO of Park Hotels & Resorts and Chair, Nareit®;· Tray E. Bates, CCIM SIOR CIPS, Principal, Bates Commercial LLC and Former Commercial Committee Chair, National Association of Realtors®; · Steven Hason, Managing Director and Head, Americas Real Estate & Infrastructure, APG Asset Management US Inc. and Chairman, Pension Real Estate Association; · Kathleen McCarthy, Global Co-Head of Blackstone Real Estate, Blackstone; and · Tara L. Piurko, Partner, Miller Thomson LLP and President, CREW Network. See the complete list of the FY2019 Roundtable’s Board of Directors here. Stepping down from The Roundtable Board as of July 1 are: · Kenneth F. Bernstein, President & Chief Executive Officer, Acadia Realty Trust and Immediate Past Chairman, International Council of Shopping Centers; · Kevin Faxon, Managing Director – Head of Real Estate, Americas, J.P. Morgan Asset Management and Immediate Past Chairman, Pension Real Estate Association; · Timothy J. Naughton, Chairman, CEO and President, AvalonBay Communities, Inc and Immediate Past Chair, Nareit®; and · Robert S. Taubman, Chairman, President & CEO, Taubman Centers, Inc., and Chair Emeritus, The Real Estate Roundtable.

Capital and Credit, CFIUS Reforms, Homeland Security, Roundtable Weekly

June 29, 2018

Roundtable Weekly

House Follows Senate in Passing Bills Addressing Foreign Investment Risk; Includes Language Affecting Real Estate

CFIUS Reform

The House of Representatives on June 26 voted 400-2 to pass legislation (H.R. 5841) that overhauls federal review of transactions involving foreign companies or countries, including certain real estate transactions. The Senate on June 18 passed its version of the legislation (S. 2098). (Dechert, June 2018) Both the House and Senate FIRRMA bills would expand the list of covered transactions to include some foreign purchases and leases of real estate near military and other strategic facilities. The bills would update the review authority of the Committee on Foreign Investment in the U.S. (CFIUS) to review national security implications of transactions that could result in control of a U.S. business by a foreign person – and to block transactions or impose measures to mitigate any threats to U.S. security.Both the House and Senate bills would expand the list of covered transactions to include some foreign purchases and leases of real estate near military and other strategic facilities. Responding to concerns raised by The Roundtable and other industry groups, each bill includes similar language designed to exempt real estate located in 'urbanized areas' from the criteria of a covered transaction. [See Title II, Sec. 201in the House’s Foreign Investment Risk Review Modernization Act of 2018 (FIRMMA) and for S. 2098, see pages 7 through 9]. The Census defines an urbanized area as one comprising more than 50,000 people.While the House and Senate bills are similar, the definition of “critical technology” differs and will require reconciliation before a final vote in each chamber. The Trump Administration has shown support for reforming FIRRMA to strengthen CFIUS’ oversight.

News

June 29, 2018

Roundtable Weekly

Roundtable Comment Letter Addresses Productive Real Estate Investment in New Opportunity Zones

Opportunity Zones OZs

The Real Estate Roundtable on Thursday provided formal comments to Treasury Department and IRS officials regarding implementation guidance that could maximize real estate investment, capital and jobs into newly designated Opportunity Zone communities. Last week, the Treasury Department formally designated more than 8,700 low-income census tracts in the United States, Puerto Rico, and territories as qualified Opportunity Zones. (IRS Notice 2018-48 and Roundtable Weekly, June 22) The Real Estate Roundtable provided formal comments regarding implementation guidance for newly designated Opportunity Zone communities. “Real estate development and redevelopment is a key component of any region’s economic strength and growth,” wrote Roundtable President and CEO Jeffrey DeBoer. “In our view, successful implementation of the Opportunity Zone program requires careful consideration of how the new rules will apply to real estate and real estate investment activities.” The Roundtable comments focus on: the certification of Opportunity Funds; the deferral or exclusion of gain; and the Opportunity Fund asset test, including questions regarding when real estate improvements constitute a qualified investment. Congress created Opportunity Zones in the Tax Cuts and Jobs Act to encourage long-term, capital investment in economically struggling, low-income communities. Opportunity Funds must invest in tangible business property located in a qualifying zone, which can include real estate, and the tax benefits are tied to the investment holding period. The capital gain on an Opportunity Fund investment is excluded from tax altogether if the asset is held for 10 years or more. The Roundtable comments are the product of The Roundtable Tax Policy Advisory Committee (TPAC) Opportunity Zone Working Group. TPAC recently convened a panel on Opportunity Zones that included the tax counsel for Senator Tim Scott (R-SC), the original author and sponsor of Opportunity Zone legislation.

Economic Growth - Travel & Tourism, Roundtable Weekly, Tourism

June 29, 2018

Roundtable Weekly

“VisitU.S.” Advocates Reauthorization of Brand USA Travel and Tourism Program; Improving Efficiency of Visa Application Process

The significant, positive role of international travel and tourism in boosting the U.S. economy, creating American jobs and helping the foreign trade imbalance was the focus of efforts by the VisitU.S. Coalition this week on Capitol Hill. A VisitU.S. coalition video with CEO testimonials was released to address the drop of 7.4 million international visitors to America from 2015-2017. Roger Dow, President and CEO of the U.S. Travel Association, above. Roundtable President and CEO Jeffrey D. DeBoer joined coalition CEOs on Wednesday in Congressional meetings. The following day, a coalition video with CEO testimonials was released to address the drop of 7.4 million international visitors to America from 2015-2017. While foreign travel has increased globally, the U.S.’s reduced market share translates to 32 billion dollars in lost spending and 100,000 fewer jobs in this country. The drop in foreign visitation also widens the foreign trade imbalance, as spending by international visitors is the U.S.’s top service export accounting for 245 billion dollars in total travel exports in 2017. (Roundtable Weekly, June 8, 2018.)Wyndham Hotel Group President and CEO Geoff Ballotti said, “We have had five or six great years of record growth in terms of international inbounds but the share that we are capturing is continuing to slip and that’s what we are all very focused on – maintaining that great market share.” (VisitU.S. video, June 28) The coalition is urging Congress to reauthorize the Brand USAprogram, which is not supported by taxpayer dollars, but through fees on foreign visitors who do not require a visa when entering the U.S. Legislation is needed to authorize the program beyond 2020 — and ensure that visitor fees authorized for collection from 2021 to 2027 will not be diverted to the Treasury Department, as currently scheduled. An FY2017 return on investment analysis showed each dollar of Brand USA marketing generated almost 28 dollars in visitor spending. Moreover, Brand USA-generated international visitor spending is estimated to have produced 486 million dollars in federal tax revenue, and another 526 million dollars in state and local tax revenue. The economic importance of foreign travel and tourism to the United States' economy and commercial real estate industry was the focus of a panel discussion during The Roundtable's 2018 Annual Meeting this month. – enlarge photo – "Robust international travel helps to power the U.S. commercial real estate markets, not only hospitality properties but retail, attraction, health and investment properties as well,” said DeBoer. "National tourism policies that boost overall economic growth, support and create jobs, and generate revenues help modernize our infrastructure, and generally improve the quality of life in our communities. The Real Estate Roundtable will continue our work with the VisitU.S. Coalition to emphasize that America is a uniquely welcoming, interesting and safe travel destination for international visitors,” DeBoer added.The meetings on Capitol Hill also focused on the need to improve the visa application process for foreign visitors. Other CEOs joining DeBoer in Wednesday’s congressional visits were Roger Dow with the U.S. Travel Association; Katherine Lugar with the American Hotel & Lodging Association; Robert Cresanti with the International Franchise Association; Chip Rogers with the Asian American Hotel Owners Association; and Steve Shur with Travel Tech. A panel discussion at The Roundtable’s June 14 Annual Meeting focused on the travel and tourism issue. Participants included USTA’s Roger Dow, AH&LA’s Katherine Lugar, Senator Amy Klobuchar (D-MN) and Anthony E. Malkin (Chairman and CEO, Empire State Realty Trust). (Roundtable Weekly, June 15, 2018.)

Opportunity Zones

June 28, 2018

Policy Comment Letter

Comment Letter Addresses Productive Real Estate Investment in New Opportunity Zones

Opportunity Zones OZs, Tax Policy,

Internet Sales Tax, Roundtable Weekly

June 22, 2018

Roundtable Weekly

Supreme Court Rules States Can Collect Sales Tax from Online Retailers; Uniform Collection Standards Present Significant Challenge

Internet Sales Tax South Dakota v Wayfair

The Supreme Court yesterday ruled 5-4 in South Dakota v. Wayfair to expand States' authority to collect sales and use taxes on Internet consumer purchases from retailers who do not have a physical presence in a state. The Supreme Court yesterday ruled 5-4 in South Dakota v. Wayfair to expand States' authority to collect sales and use taxes on Internet consumer purchases from retailers who do not have a physical presence in a state. Real Estate Roundtable President and Chief Executive Officer Jeffrey DeBoer commended the Court's long-anticipated ruling. He noted the decision "rejects an antiquated 'physical presence' standard. That test exempted on-line retailers from collecting sales and use taxes – yet imposed those obligations on traditional 'brick-and-mortar' retailers. DeBoer also noted the ruling "will enable states to collect much-needed revenue to provide public services and invest in local infrastructure projects." (Roundtable Statement, June 21)The Roundtable on March 5, 2018 joined The International Council of Shopping Centers (ICSC), Investment Program Association, Nareit®, the National Association of REALTORS® , the National Multifamily Housing Council, NAIOP, the American Farm Bureau Federation and the South Dakota Farm Bureau Federation in filing an amicus curiae brief. (Roundtable Weekly, March 9) While the Wayfair decision overturns previous case law, it also creates the potential for a patchwork of state-level collect and remit statutes, which may lead to efforts by Congress to simplify States' tax collection practices. Justice Anthony Kennedy wrote in the majority opinion: "Eventually, software that is available at a reasonable cost may make it easier for small businesses to cope with these problems. Indeed, as the physical presence rule no longer controls, those systems may well become available in a short period of time, either from private providers or from state taxing agencies themselves. And in all events, Congress may legislate to address these problems if it deems it necessary and fit to do so." (Supreme Court opinion, South Dakota vs. Wayfair) In the dissent, Chief Justice John Roberts reflected his belief that the decision could preclude a federal solution from Congress: "Armed with today's decision, state officials can be expected to redirect their attention from working with Congress on a national solution, to securing new tax revenue from remote retailers." (Supreme Court opinion, South Dakota vs. Wayfair) ICSC President and Chief Executive Officer Tom McGee said, "We understand this is a major step in a long process, but look forward to working with policymakers and business owners to find state-level legislative solutions which promote fairness and competition." (CoStar News, June 21) The Roundable's DeBoer added, "We stand ready to assist policymakers should they respond to today's decision with legislation that provides our nation's businesses with fair standards to collect the tax that is owed on online sales." (Roundtable Statement, June 21)

News

June 22, 2018

Roundtable Weekly

Treasury Designates More than 8,700 Census Tracts as Opportunity Zones

Opportunity Zones OZs

The Treasury Department on June 20 designated more than 8,700 low-income census tracts in the United States, Puerto Rico, and territories as qualified Opportunity Zones. (IRS Notice 2018-48) A Roundtable Tax Policy Advisory Committee working group is finalizing a comment letter to the Treasury Department and IRS with recommendations on how to structure implementing rules that facilitate productive real estate investment. Congress created the Opportunity Zone tax incentive program in the Tax Cuts and Jobs Act. Incentives reward Opportunity Fund investors with a capital gains deferral or exclusion on their invested capital in low-income communities.Opportunity Funds must invest in tangible business property located in a qualifying zone, which can include real estate, and the tax benefits are tied to the investment holding period. The capital gain on an Opportunity Fund investment is excluded from tax altogether if the asset is held for 10 years or more. (Opportunity Zones: An Innovative Investment Vehicle Created by the TCJA , Accounting Today, June 6, 2018).Real estate investment aligns with the underlying objectives of the Opportunity Zone program – job creation, infrastructure development and growth in the tax base supports local public services. Opportunity Zones were the topic of a panel discussion at The Roundtable’s Tax Policy Advisory Committee (TPAC) meeting last week. Speakers included Shay Hawkins, Tax Counsel for Senator Tim Scott (R-SC), the original author or Opportunity Zone legislation. Treasury’s Tax Legislative Counsel Tom West also addressed a number of questions related to Opportunity Zones. A TPAC working group is finalizing a comment letter to the Treasury Department and IRS with recommendations on how to structure implementing rules that facilitate productive real estate investment. The letter will address topics such as the Opportunity Fund certification process, the requirements necessary for real estate to be treated as a qualified Opportunity Zone investment, and the tax consequences of real estate asset sales and acquisitions by an Opportunity Fund during the holding period.

Roundtable Weekly, Tax Reform, Tax Reform Implementation, Tax Reform Technical Corrections

June 22, 2018

Roundtable Weekly

Six-Month Anniversary of Tax Reform Showing Success; House Ways and Means Committee Chairman Kevin Brady Awarded Roundtable’s “Champion of the Economy” Award

Marking the half-year anniversary of the final passage of the Tax Cuts and Jobs Act (TCJA), House Ways and Means Committee Chairman Kevin Brady (R-TX) joined Speaker Paul Ryan (R-WI) and Secretary of the Treasury Steven Mnuchin in recognizing the law's benefits to American taxpayers and businesses. (Video, National Association of Manufacturers, June 21) House Ways and Means Committee Chairman Kevin Brady (R-TX), center, was awarded The Real Estate Roundtable's Champion of the Economy Legislative Leadership Award for his efforts on the Tax Cuts and Jobs Act. “In the six months since we reformed the tax code, we have the fastest growth in investments, new equipment, and technology since 2011. We’ve now seen almost nine out of ten manufacturers increase their investments—investing in their business, workers and their future.” (Brady remarks, June 21). Brady also touted tax reform’s results to-date in a Wall Street Journal commentary, “Six Months After Tax Reform, Something Big Is Happening.” Chairman Brady was awarded The Real Estate Roundtable's Champion of the Economy Legislative Leadership Award last week for his efforts on the TCJA. Roundtable President and CEO Jeffrey DeBoer and Roundtable Chair William C. Rudin (Co-Chairman & CEO, Rudin Management Company, Inc.) presented the award during The Roundtable’s 2018 Annual Meeting. DeBoer said, “Consumer confidence is at a 17-year high. Nearly one million jobs have been created since tax reform passed. The 3.8 percent unemployment rate has been matched only once since 1969. Wage growth is accelerating – 2.8 percent year-over-year last month. GDP growth is widely expected to come in well over 3 percent in the second quarter. All of this is happening as inflation remains stable near the Fed-targeted rate of 2 percent. In short, the bill has kick started the American economy and extended the economic cycle.”DeBoer added, “Chairman Brady successfully achieved what he set out to achieve—a positive investment environment, greater job growth, and more money in the pockets of American families and businesses.”In his acceptance comments, Brady noted that the Ways and Means Committee is “continuing to clarify new parts of the tax code, work with Treasury and get technical corrections made.” Brady also said his goal is to continue encouraging growth and investment. “Early signs are very encouraging. The best is yet to come.”

Roundtable Weekly

June 15, 2018

Roundtable Weekly

Industry Execs Engage Lawmakers on National Policy Issues; Ventas CEO Debra Cafaro Elected Roundtable Chair

Congressional lawmakers and industry leaders discussed national policies affecting commercial real estate this week during The Real Estate Roundtable's 2018 Annual Meeting, where Debra A. Cafaro (Chairman & CEO, Ventas, Inc.) was elected to a three-year term as Roundtable Chair. Debra A. Cafaro (Chairman & CEO, Ventas, Inc.), right, was elected to a three-year term as Roundtable Chair, following William C. Rudin 's (Vice Chairman & CEO, Rudin Management, Inc.), left, term. Roundtable Chair William C. Rudin (Vice Chairman & CEO, Rudin Management, Inc.) kicked off yesterday's business meeting with a summary of the organization's successful efforts to diversify the membership and announced its newly-released FY2018 Annual Report, "Building Success." Following Cafaro's approval as Chair starting July 1, Real Estate Roundtable and President Jeffrey DeBoer said, "Bill Rudin and Deb Cafaro follow a long line of distinguished business leaders who have pursued a fact-based, pro-growth agenda in Washington on behalf of the industry. We are confident that our new Chair will continue that tradition and we look forward to her leadership." Cafaro noted The Roundtable's public policy agenda remains full of key issues that require further engagement with policymakers: "Above all, we must uphold our independent & respected position on Capitol Hill, emphasizing our optimism about the economy and the positive contributions the real estate industry provides as a job creator and as a cornerstone for retirement savings." Cafaro's election as the first female chair for The Roundtable culminates years of service. She joined its board of directors in 2011, became board secretary in 2015 and chair-elect and secretary in 2017. National policymakers and featured speakers at yesterday's meeting included: The economic importance of foreign travel and tourism to the United States' economy and commercial real estate industry was the focus of a panel discussion during The Roundtable's 2018 Annual Meeting. (enlarge photo) House Majority Leader Kevin McCarthy (R-CA) and Senate Minority Leader Chuck Schumer (D-NY) discussed policy issue priorities for their party. House Ways and Means Committee Chairman Kevin Brady (R-TX) was presented with The Roundtable's Champion of the Economy Legislative Leadership Award. He also engaged meeting attendees on the results of recently enacted tax legislation. Rep. John Larson (D-CT) and Rep. Gregory Meeks (D-NY) focused on the House Democratic legislative agenda. The economic importance of foreign travel and tourism to the United States was the focus of a discussion that included Sen. Amy Klobuchar (D-MN); American Hotel & Lodging Association President & CEO Katherine Lugar; U.S. Travel Association President & CEO Roger Dow; and Empire State Realty Trust Chairman and CEO Tony Malkin. The Roundtable is a member of the VisitU.S. Coalition, which is encouraging policy solutions to address a recent drop in travel to the U.S. and the resulting loss to the economy and jobs. (Roundtable Weekly, Feb. 9) Cook Political Report National Editor Amy Walter and former Governor of Virginia Terry McAuliffe offered separate insights and remarks on the upcoming mid-term elections. An evening dialogue with former White House Press Secretary to President Barack Obama Josh Earnest and former Deputy White House Chief of Staff to President George W. Bush Karl Rove focused on how their experience with past Administrations offers perspective about current and future legislative efforts. The Roundtable's Policy Advisory Committees also met this week in conjunction with the Annual Meeting for in-depth discussions in the policy areas of tax; capital and credit; energy and environment; and homeland security. Next on The Roundtable's calendar is the Fall Meeting on September 26 in Washington, DC (Roundtable-level members only).

Climate and Immigration, Energy, ENERGY STAR, Roundtable Weekly

June 15, 2018

Roundtable Weekly

EPA Recognizes Roundtable Members with “ENERGY STAR for Tenants” Award for High Performance Office Spaces

The Environmental Protection Agency (EPA) on June 12 announced the first-ever federal government awards for energy efficiency in leased office spaces. Many Roundtable members and their tenants are recognized among the award's inaugural winners. (EPA list of tenants and landlords) SPAC Chairman Tony Malkin (Chairman and CEO, Empire State Realty Trust ) stated, "This is a great example of the Roundtable at work. We took best industry practice, formulated policy around it, and worked with staff and members of Congress to develop legislation for the good of the economy, our industry and the environment." Originally envisioned by The Roundtable's Sustainability Policy Advisory Committee (SPAC), EPA's ENERGY STAR for Tenants program has been long-supported by the industry. After the enactment of the 2015 "Tenant Star" law, EPA was tasked with piloting the branding program for energy-efficient tenant spaces that met certain design criteria. (Roundtable Weekly, June 30, 2017) SPAC Chairman Tony Malkin (Chairman and CEO, Empire State Realty Trust) stated, "This is a great example of the Roundtable at work. We took best industry practice, formulated policy around it, and worked with staff and members of Congress to develop legislation for the good of the economy, our industry and the environment. At the same time, our Sustainability committee worked with the Department of Energy and the EPA within their structures, rules, and regulations for years to create a new label for energy efficient tenant spaces, to complement existing programs that award whole-building efficiency. This voluntary program will lead to a significant increase in cost-saving leased spaces as companies vie for EPA's tenant label in the future." Roundtable President and CEO Jeffrey DeBoer noted the national value of the new federal recognition program. "Without any tax credit or subsidy, EPA's new seal of approval can motivate tenants and landlords across the country to demonstrate their commitment to energy efficiency in leased commercial building space. As EPA's new office space program expands, CRE leaders will have more opportunities to distinguish their buildings for investors, tenants, and the Millennial workforce who place a premium on sustainable assets." To earn the label, applicants must verify how they drive energy efficiency in five key areas in the design and construction of high performance leased spaces. (EPA Documents and Tools for Tenants) As funding for the federal ENERGY STAR program also affects the new EPA Charter Tenant program, a Senate Appropriations subcommittee on Tuesday affirmed the Trump Administration's recommendation to continue ENERGY STAR program funding for FY2019 (starting October 1, 2018). For the agency's programs overall, the Senate panel recommended that appropriations be maintained at the status quo for the next fiscal year. (The Hill, June 12) The 2018 ENERGY STAR Charter Tenants program was a focus during today's SPAC's meeting in Washington, which included presentations from EPA and other key federal agency officials.

Economic Growth - Travel & Tourism, Roundtable Weekly

June 8, 2018

Roundtable Weekly

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

Economic Growth Travel amp Tourism

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) 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 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.

Capital and Credit, Roundtable Weekly, Volcker Rule

June 8, 2018

Roundtable Weekly

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)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.

News

June 8, 2018

Roundtable Weekly

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. 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).

Capital and Credit, Roundtable Weekly, Volcker Rule

June 1, 2018

Roundtable Weekly

The Fed and FCIC Vote to Simplify and Ease Volcker Rule

A proposal to simplify and ease the Volcker Rule, which restricts proprietary trading practices at banks and is enforced by five separate federal agencies, was unanimously approved this week by both the Federal Reserve and Federal Deposit Insurance Corp. (FDIC). (Roundtable Weekly, May 25) The Fed's proposal is part of a broader regulatory rollback. (“ The Volcker Rule’s Proposed Revision Could Add Liquidity To CMBS ” – GlobeSt, May 31) The nearly 400-page proposal, known as Volcker 2.0, would seek to simplify regulatory requirements by giving banks new quantitative “bright-line rules” to provide more clarity on what activities are prohibited and permitted. The Fed proposal is part of a broader regulatory rollback, which includes the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) that included Roundtable-supported revisions to the Basel III High Volatility Commerical Real Estate (HVCRE) Rule. For CRE, the Volcker Rule has put a damper on secondary market trading of commercial mortgage backed securities (CMBS) by limiting the ability of banks to hold inventories of secondary market securities, thereby diminishing market liquidity. In addition to restricting banks from buying certain securities for their own accounts (so-called proprietary trading), it also has prohibited them from investing in hedge or private-equity funds – including real estate. (“ The Volcker Rule’s Proposed Revision Could Add Liquidity To CMBS ” – GlobeSt , May 31)Real Estate Roundtable President and CEO Jeffrey DeBoer commented on the Volker Rule proposal. “This positive action will benefit liquidity and the commercial mortgage backed securities market, potentially increasing investment in job-creating construction activities," DeBoer said.One of the most significant changes in the Volcker 2.0 proposal would give banks more latitude by making it easier for them to show they are trading to help clients — a permitted activity known as market making — rather than proprietary trading .In a memorandum to the Fed's Board of Governors, Fed Vice Chairman for Supervision Randall Quarles details the changes in the proposal .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 Fed and its regulatory partners are seeking public comment on its Volcker rule reform proposals. The Roundtable plans to work with its Real Estate Capital Policy Advisory Committee (RECPAC) to submit comments before a final rule is expected to be in effect by January 1, 2019.

News

June 1, 2018

Roundtable Weekly

Trump Administration Imposes Tariffs on Imported Steel and Aluminum from European Union, Canada and Mexico

The Trump Administration today imposed a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports from the European Union, Canada and Mexico, sparking rebukes from congressional Republicans and foreign policymakers, who have threatened retaliatory measures. The Trump Administration imposed a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports from the European Union, Canada and Mexico, sparking rebukes from congressional Republicans and foreign policymakers, who have threatened retaliatory measures. When the steel and aluminum tariffs were initially proposed in March, an exemption was granted until June 1 for certain trade partners, including Canada, Mexico and the EU – yet negotiations about the Administration's domestic production concerns were not resolved by today's deadline. Roundtable President and CEO Jeffrey DeBoer noted the commercial real estate industry's concerns, stating "For every job in the steel production industry, there are more than 50 jobs in the US construction industry (140,000 vs. 7-10 million). New tariffs on construction materials like steel could have the unfortunate, unintended side effect of raising construction costs and reducing jobs in real estate development." (Roundtable Weekly, March 9) According to the U.S. Department of Commerce, the U.S. imported 34.6 million metric tons of steel last year, a 15% increase from 2016. The International Trade Administration reports the largest supplier of steel to the U.S. is Canada, accounting for 77% – while Mexican steel accounts for about 9% of U.S. imports. USA Today reports that the majority of that metal is used in construction, auto manufacturing and appliances. (USA Today, May 31) House Ways and Means Chairman Kevin Brady (R-TX) today stated, "These tariffs are hitting the wrong target. When it comes to unfairly traded steel and aluminum, Mexico, Canada, and Europe are not the problem-China is. This action puts American workers and families at risk, whose jobs depend on fairly traded products from these important trading partners," Brady said. Sen. Mike Lee (R-UT) said he would introduce legislation next week to curtail the president's powers to impose tariffs for reasons of national security. (The Hill, June 1) "You don't treat allies the same way you treat opponents," Sen. Ben Sasse (R-NE) stated. "Blanket protectionism is a big part of why we had a Great Depression. 'Make America Great Again' shouldn't mean 'Make America 1929 Again.'" In the Federal Reserve's latest "Beige Book" about economic conditions, positive growth is tempered by widespread concerns about trade tariffs. The report summary also notes that steel and aluminum prices rose, "sometimes dramatically" due to recent duties imposed by the Trump Administration. (Roundtable Weekly, March 9) The Beige Book is one of the first official reports showing the economic impact of the new tariffs on domestic business. (Wall Street Journal, April 18)

Economic Growth - Travel & Tourism, Roundtable Weekly, Tourism

June 1, 2018

Roundtable Weekly

Roundtable, Industry Coalition Voice Concerns That “Enhanced Vetting” Proposal Could Dampen Economy by Deterring International Visitors to U.S.

A multi-industry travel and tourism coalition that includes The Real Estate Roundtable submitted formal comments on May 29 urging the State Department to withdraw an "enhanced vetting" proposal for visitors traveling to the U.S. – a dramatic expansion of information collection that could further reduce the downward trend of in-bound tourism and its significant economic benefits. The Roundtable is also part of the VisitUS Coalition , which expressed concerns about the proposal in April. [Roundtable Weekly, April 13, 2018.] A multi-industry travel and tourism coalition that includes The Real Estate Roundtable submitted formal comments on May 29 urging the State Department to withdraw an "enhanced vetting" proposal for visitors traveling to the U.S . The business coalition concerns submitted this week addressed: The "highly competitive" global market to capture foreign travelers "is sensitive to new and evolving security protocols." The comments also address the department's proposal to require all visitors seeking a U.S. visa – about 15 million applicants each year – to provide extensive information on social media use, history of international travel, and other matters. Currently, only a much smaller subset of visa applicants identified as presenting a "threat profile" to national security must answer these questions. "New requirements that make it more challenging to obtain U.S. visas can affect the willingness and interest of international travelers to visit the United States rather than other countries," the coalition wrote. "Safeguarding national security and growing the U.S. economy by encouraging international visitors are compatible, significant objectives. America can be both the most secure and the most visited country in the world." Noting that the U.S. has attracted 7.4 million fewer overseas travelers in 2016-2017 – with corollary declines in visitor spending at American hotels, resorts, stores and attraction properties – the coalition urged the State Department to re-think its "enhanced vetting" proposal. The comments also explained that the dip in the U.S. share of the global travel market hinders the Trump Administration's foreign trade goals. "Money spent here by foreign travelers counts as an export for the United States; indeed, international travel is our country's largest export of services accounting for $245 billion in total travel exports, and the second largest of any economic sector," the coalition wrote. Roundtable Panel on Enhancing International Travel and TourismThe Trump Administration also announced this week that it will begin limiting the length of validity for some visas issued to Chinese citizens, starting June 11. (Bloomberg, May 29) To address policies that may encourage or discourage in-bound travel to the U.S.– 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. The American Hotel & Lodging Association and the U.S. Travel Association lead the multi-industry VisitUS coalition, which also includes the U.S. Chamber of Commerce and the American Resort Development Association. (VisitU.S. Policy Agenda, Roundtable Weekly, March 2)

News

June 1, 2018

Roundtable Weekly

Tax Foundation Releases Report on 15-Year Qualified Improvement Property Drafting Error; Technical Corrections Bill Likely to Address QIP

A Tax Foundation report released this week urges policymaker to correct a technical drafting error regarding cost recovery for qualified improvement property (QIP) that was included in the tax overhaul legislation enacted last year. The unintentional drafting mistake has resulted in a longer cost recovery period for qualified nonresidential interior improvements – a category that previously covered leasehold improvements, retail improvements, and new restaurant construction. ("Correcting the Drafting Error Involving the Expensing of Qualified Improvement Property" – The Tax Foundation, May 30) Chart from " Correcting the Drafting Error Involving the Expensing of Qualified Improvement Property " – The Tax Foundation, May 30 – enlarge chart image. Key Points of the Tax Foundation Report:The Tax Cuts and Jobs Act (TCJA) stimulated investment by allowing businesses to immediately deduct the cost of certain assets and expenditures under a 100 percent bonus depreciation provision. It also sought to consolidate the cost recovery period for nonresidential real estate improvements into a single, 15-year period for qualified improvements. However, due to an unintended drafting mistake, the law accidentally excluded the 15-year reference, and qualified improvements defaulted to a 39-year recovery period. As a result, investments of this type face a higher tax burden than under prior law.More restrictive cost recovery treatment for interior improvements to buildings will increase costs and discourage companies from making these types of investments.Policymakers should work to ensure that cost recovery for qualified improvement property (QIP) does not remain worse off due to a technical drafting error, and that it is eligible for 100 percent bonus depreciation.Legislative vs. Regulatory Correction: Treasury SecretarySteven Mnuchin During a February hearing in the House, Rep. Jim Renacci (R-OH) explained to Treasury Secretary Steven Mnuchin that Ways and Means members are working to address the tax reform drafting mistake that should have provided for a 15-year recovery cost-recovery period to qualified property improvements, instead of the 39 year period that was enacted. Mnuchin responded to Renacci: "I am aware of the error and it obviously was unintended. We are looking at whether there is anything we can do with regulations. I think it is likely that this is something that may need to be fixed in the bill. We look forward to working with you." (Ways and Means Committee – Mnuchin's testimony and hearing video ). The Real Estate Roundtable and its industry partners are working actively with key lawmakers to advance a legislative technical correction or obtain formal, clarifying guidance from the Treasury Department.Along with TCJA rulemaking and implementation, potential technical corrections that impact CRE will be a focus of discussion at The Roundtable's Annual Business Meeting and its Tax Policy Advisory Committee (TPAC) Meetings on June 14-15 in Washington, DC.

May 29, 2018

Policy Comment Letter

6. 2018-5-29 Business Community Comments on DOS-2018-0002 Application for Nonimmigrant Visa

Capital and Credit, HVCRE, Roundtable Weekly

May 25, 2018

Roundtable Weekly

President Trump Signs Dodd-Frank Reform Bill With HVCRE Revisions

DoddFrank Reform HVCRE

Revisions to the 2010 Dodd-Frank Act – including significant Roundtable-supported reforms to the Basel III High Volatility Commercial Real Estate (HVCRE) Rule – were signed into law by President Trump yesterday, two days after the House passed The Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155). Revisions to the 2010 Dodd-Frank Act – including significant Roundtable-supported reforms to the Basel III High Volatility Commercial Real Estate (HVCRE) Rule – were signed into law by President Trump yesterday, two days after the House passed The Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155). S. 2155 previously passed the Senate in March with the same clarifications and reforms as the House bill. The HVCRE Rule created needless confusion and increased borrowing costs in the industry for CRE Acquisition, Development and Construction (ADC) lending.Senate Banking Committee Chairman Mike Crapo (R-ID) commented, “This step toward right-sizing regulation will allow local banks and credit unions to focus more on lending, in turn propelling economic growth and creating jobs on Main Street and in our communities.” (Sen. Mike Crapo News Release, May 22)Details of the new measure addresses key deficiencies in current and proposed regulations. Real Estate Roundtable HVCRE Working Group Co-Chair Joseph Forte (Sullivan and Worcester) noted, “This legislative action is a welcome solution to a poorly designed regulatory capital scheme that has not matched with risk. This caused an unnecessary cost burden to all commercial banks and their real estate development customers. In addition, it restores to borrowers the ability to offer appreciated land value as equity to banks, when validated through appraisal practices established in earlier statutes." (Passage of Dodd-Frank Reform Encourages Investment, Economic Growth in Local Communities –Roundtable News Release, May 22) The Roundtable and twelve other real estate organizations detailed the industry's HVCRE policy positions and urged inclusion of the language in broader Dodd-Frank reform legislation (S. 2155). (Roundtable HVCRE Comment Letter, March 2)“The Reform Bill, in provisions that are now effective, overrides certain highly conservative provisions in both the federal banking agencies’ (Banking Agencies) Basel III capital rule and their interpretations of it.” ( Dodd Frank 2.0: Reforming U.S. HVCRE Capital Treatment, Gibson Dunn, May 24)Since 2015, The Roundtable's HVCRE Working Group and industry coalition partners have played a key role in advancing specific reforms to the HVCRE Rule. During next month's Real Estate Roundtable Annual Meeting, HVCRE will be a focus of discussion, with more specific details offered during the Real Estate Capital Policy Advisory Committee (RECPAC) meeting on June 14.

Roundtable Weekly, Volcker Rule

May 25, 2018

Roundtable Weekly

Fed to Consider Changes to Volcker Rule

The Federal Reserve announced this week that it will consider a proposal to modify the “Volcker Rule” at a May 30 meeting of its board. As a provision of the 2010 Dodd-Frank Act that puts restrictions on proprietary trading practices at banks, enforcement of the Volcker Rule is currently shared by five separate federal agencies – The Fed, Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC). (Fed Statement, May 23) The Federal Reserve announced this week that it will consider a proposal to modify the “Volcker Rule” at a May 30 meeting of its board. “The Fed is the first regulator to set a date for discussing the proposal known as ‘Volcker 2.0.’ Four other agencies are also expected to adopt modifications to the rule. The changes will give large Wall Street banks more trading freedom, as regulators tweak restrictions on market making, hedging and other activities..” (The Wall Street Journal, May 25)Fed Vice Chairman for Supervision Randal Quarles in a March speech said, "It should be clearer and more transparent what is subject to the Volcker Rule’s implementing regulation and what is not. The definition of key terms like 'proprietary trading' and 'covered fund' should be as simple and clear as possible." (American Banker, May 23)House policymakers are considering adding to must-pass budget legislation a measure that would put the Fed in charge of regulating the Volcker Rule. The measure, sponsored by Rep. French Hill (R-AR), passed the House in April but has faces an uncertain fate in the Senate. (U.S. House Considers Adding Volcker Rule Shift to Budget Bill, Bloomberg, May 21)The Dodd-Frank reform bill signed into law yesterday by President Trump exempts banks with less than $10 billion in assets from the Volcker Rule (named for former Fed Chairman Paul Volcker).

Capital and Credit, CFIUS Reforms, Homeland Security, Roundtable Weekly

May 25, 2018

Roundtable Weekly

Senate and House Committees Approve Bills Addressing Foreign Investment Risk; Includes Language Affecting Real Estate

CFIUS Reform

Separate bills that would overhaul the process for reviewing foreign investment risk – including a purchase or lease by a foreign party of domestic properties located close to sensitive U.S. facilities – received unanimous approval Wednesday by the Senate Banking and House Financial Services Committees. (Lexology, May 23) Real estate provisions in S. 2098 appear on pages 7 through 9. The committees’ revised versions of the Foreign Investment Risk Review Modernization Act (FIRRMA) – S. 2098 and HR 5841 – seek to modernize and strengthen how the Committee on Foreign Investment in the United States (CFIUS) reviews acquisitions, mergers, and other foreign investments in the United States for national security risks. Both bills would expand the list of covered transactions to include some foreign purchases and leases of real estate near military and other strategic facilities. (Real estate provisions in S. 2098 appear on pages 7 through 9.)As a result of industry discussions with Senate and Treasury staff, the new legislative drafts include the addition of language designed to exempt real estate in 'urbanized areas' from the criteria of a covered transaction. The Census defines an urbanized area as one comprising more than 50,000 people. FIRRMA may be ready for floor consideration in the House and Senate before the August congressional recess. The Trump Administration has shown support for reforming FIRRMA to strengthen CFIUS’ oversight.

Capital and Credit, HVCRE, Roundtable Weekly

May 18, 2018

Roundtable Weekly

House Expected to Vote May 22 on Dodd-Frank Reform Bill That Include HVCRE Revisions

DoddFrank Reform HVCRE

The House of Representatives is expected next week to pass a bipartisan package of revisions to the Dodd-Frank Act of 2010 and send it to President Trump for his signature. The House bill (S. 2155), which passed the Senate (67-31) in March, includes significant Roundtable-supported clarifications to the Basel III High Volatility Commercial Real Estate (HVCRE) Rule – a top industry priority that will benefit CRE acquisition, development and construction (ADC) lending and promote economic growth.The House is expected to vote on S. 2155 – the Economic Growth, Regulatory Relief, and Consumer Protection Act – as early as Tuesday, May 22 – separate financial deregulation legislation championed by House Financial Services Chairman Jeb Hensarling (R-TX) is expected to soon follow. House is expected to vote on S. 2155 – the Economic Growth, Regulatory Relief, and Consumer Protection Act – as early as Tuesday, May 22 – separate financial deregulation legislation championed by House Financial Services Chairman Jeb Hensarling (R-TX) is expected to soon follow. (CNBC, House Expected to Vote on Senate Bill Rolling Back Some Bank Rules Next Week, May 15)Certain elements within the Senate-passed bill (including the HVCRE provision) have already passed the House as part of other legislation. The White House has said President Trump will sign the bill. (Bloomberg, House Set to Vote Next Tuesday on Senate Version of Dodd-Frank Rollback, May 15) What it Means for CRE The HVCRE measure contains important clarifications and reforms to the Basel III High Volatility Commercial Real Estate (HVCRE) Rule, which has created needless confusion and increased borrowing costs in the industry. Under the new measure, commercial borrowers will be able to satisfy the 15% equity requirement through the appreciated value of contributed land/property – versus the cost basis under the current rule. The measure also clarifies that loans made to acquire existing property with rental income and/or do cosmetic upgrades and other improvements don't trigger the HVCRE capital penalty. (Roundtable Weekly, May 4 and May 11)The Roundtable and twelve other real estate organizations on March 2, 2018 sent a comment letter detailing the industry’s policy positions and urging inclusion of the HVCRE measure within the broader Dodd-Frank reform package (S. 2155).HVCRE reform has been a top policy priority of The Real Estate Roundtable and its industry coalition partners, who have submitted numerous policy comment letters to policymakers since 2015. The Roundtable's HVCRE Working Group has also played a key role in advancing these welcome reforms.

CFIUS Reforms, Roundtable Weekly

May 18, 2018

Roundtable Weekly

Senate and House Committees to Mark Up Bills Addressing Foreign Investment Risk Review on May 22; Includes Language Affecting Urban Real Estate

Legislation that would reform the process for reviewing foreign investment risk introduced by Senator John Cornyn (R-TX) in the Senate and Congressman Robert Pittenger (R-NC) in the House – including a purchase or lease of domestic properties in close proximity to sensitive U.S. facilities by a foreign party – will be marked up May 22 by both the Senate Banking Committee and the House Financial Services Committee.The Senate Banking Committee will mark up S. 2098 – the Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA) – on Tuesday, May 22. The revised real estate provision appears on page nine of the committee’s amended legislative discussion draft . The legislation (S. 2098) is intended to modernize and strengthen the process by which the Committee on Foreign Investment in the United States (CFIUS) reviews acquisitions, mergers, and other foreign investments in the United States for national security risks.The Senate Banking Committee will mark up S. 2098 – the Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA) – on Tuesday, May 22. The revised real estate provision appears on page nine of the committee’s amended legislative discussion draft. The original Senate legislative draft raised concerns about the implications for real estate investment in urban areas that may be in close proximity to "sensitive U.S. military installations or other U.S. government facilities". As a result of industry discussions with Senate and Treasury staff, the new draft Manager's Amendment includes the addition of a definition that would exempt real estate in 'urbanized areas' – as defined by the U.S. Census Bureau – from the criteria of a "covered" transaction. The Census Bureau identifies two types of urban areas: (1) Urbanized Areas (UAs) of 50,000 or more people; and (2) Urban Clusters (UCs) of at least 2,500 and less than 50,000 people).The Hill reports that the House Financial Services Committee will also mark up a CFIUS bill next week. (The Hill, May 16, House Panel Will Consider Bill to Boost Foreign Investment Review Powers Next Week)According to Bloomberg Law, The House committee will take up a modified bill from the original (H.R. 4311) on May 22. “I think that we'll hopefully have a bill that's broadly supported on both sides of the aisle,” Hensarling said. “We'll see what happens on Tuesday.” (Bloomberg Law, May 17, Foreign Investment Bill to Get Votes in House, Senate Panels, subscription only)“The revised bill, according to drafts reviewed by The Wall Street Journal, would have the government vet domestic and overseas transactions through separate processes. The proposed legislation spells out CFIUS’s authority to vet the purchase or lease of real estate near sensitive U.S. facilities, and its right to review any deal structured to evade its jurisdiction such as transactions that use shell companies to obfuscate the would-be buyer’s ownership. Both the Senate Banking Committee and the House Financial Services Committee … now plan to mark up the bill’s text as soon as next week after reaching the compromise.” (The Wall Street Journal, May 17, Legislation to Curb Chinese Deals Moves Through Congress)

Roundtable Weekly, Tax Policy, Tax Reform, Tax Reform Implementation, Tax Reform Technical Corrections

May 18, 2018

Roundtable Weekly

Ways & Means Launches Hearings on Impact of Tax Reforms; Top Treasury Official Outlines Timeline for Implementation Guidance

Tax Policy TCJA

The House Ways and Means Committee this week held the first in a series of hearings on how the Tax Cuts and Jobs Act (TCJA) is affecting job creation and the economy five months after its enactment.House Ways and Means Chairman Kevin Brady (R-TX) in his opening statement offered a list of favorable economic statistics and projections that he said are attributable to the new law The May 16 full committee hearing on Tax Reform: Growing Our Economy and Creating Jobs will be followed by a May 23 Tax Policy Subcommittee hearing on how tax reform is affecting small businesses and investment in local communities.During the Wednesday hearing, House Ways and Means Chairman Kevin Brady (R-TX) in his opening statement offered a list of favorable economic statistics and projections that he said are attributable to the new law. “[W]e're starting to see it have an exciting impact on our economy. The Tax Cuts and Jobs Act was designed to deliver tax relief to middle-income families and grow the U.S. economy – and we’re accomplishing both,” Brady said.New data shows tax reform is resulting in more capital investment and expenditures. (Roundtable Weekly, May 11 – Tax Reform’s Impact on Economic Investment and Commercial Real Estate)Treasury Assistant Secretary Sketches Timetable for Regulations Implementing Tax Reform Certain provisions of the TCJA of interest to commercial real estate could be addressed in upcoming IRS guidance or in a congressional technical corrections bill.Acting IRS Commissioner David Kautter on May 12 said that Treasury and the IRS hope to complete proposed regulations on section 199A passthrough deduction by mid- to late-July. (Tax Notes, May 15, “Kautter Talks Timelines for TCJA Guidance Projects” and Roundtable Weekly, May 4).Kautter added that the target date for a notice of proposed rulemaking on section 163(j) business interest deduction limitation is late summer or early fall. (Roundtable Weekly, April 6).)Natalie Tucker, legislation tax accountant at the Joint Committee on Taxation, recently said that the cost-recovery period for qualified improvement property rises to the level of consideration for a “technical correction.” While Congress was formulating the TCJA, a new category—qualified improvement property—wasn't assigned a cost-recovery period, and fell to the 39-year period by default, rather than the intended 15-year period. That was not the intent of Congress and therefore qualifies for inclusion in a technical corrections bill, according to Tucker. (Bloomberg Law, May 11, “Agreement Reached on Three ‘True’ Technical Corrections”)Along with TCJA rulemaking and implementation, the legislation's impact on CRE will be a focus of discussion at The Roundtable's Annual Business Meeting and Policy Advisory Committee Meetings on June 14-15 in Washington, DC.

News

May 11, 2018

Roundtable Weekly

Impact of Tax Reform on Economic Investment, Commercial Real Estate

Capital and Credit, HVCRE, Roundtable Weekly

May 11, 2018

Roundtable Weekly

House Will Vote on Dodd-Frank Reform and HVCRE Before Memorial Day

DoddFrank Reform HVCRE

House Majority Leader Kevin McCarthy (R-CA) yesterday said the House will vote on the Senate's Dodd-Frank reform bill (S. 2155), before Memorial Day. S. 2155 includes a measure to reform the Basel III High Volatility Commercial Real Estate (HVCRE) Rule – a top Roundtable priority. (Roundtable Weekly, May 4) House Majority Leader Kevin McCarthy (R-CA) said the House will vote on the Senate's Dodd-Frank reform bill ( S. 2155 ), before Memorial Day. Ryan: GOP has deal on bill easing Dodd-Frank, The Hill (May 8) – House Speaker Paul Ryan (Wisconsin) on Tuesday said the House will hold a vote on the Senate Dodd-Frank reform bill in exchange for the Senate taking up a separate set of financial reform bills supported by House Financial Services Committee Chairman Jeb Hensarling (R-TX) Texas).House Speaker Ryan, American Banker (May 8) – "I had a good meeting with [Senate Majority Mitch McConnell] over the break on this and so we've got an agreement to be moving different pieces of legislation." Bill to Roll Back Post-Financial-Crisis Banking Rules Gets Clear Path to Passage, Washington Post, May 8 –- As the sponsor of more ambitious Dodd-Frank reforms approved by the House last year, Hensarling said he was confident that the new approach to separate the legislative effort into two bills would "create regulatory policy that will help us achieve sustained 3% economic growth." The Roundtable and 12 other real estate organizations on March 2, 2018 sent a comment letter urging all members of the Senate Banking Committee to enact the HVCRE measure by including the measure in the broader Dodd-Frank reform package (S. 2155). HVCRE Reform Measure Included (Roundtable Weekly, Jan. 12) – The Senate bill would clarify which types of loans should be classified as High Volatility Commercial Real Estate Loans (HVCRE) to ensure they do not impede credit capacity or economic activity, while still promoting economically responsible commercial real estate lending. GlobeSt.com, (March 19) – "The HVCRE rule, promulgated by Basel III, went into effect in 2016. It established a new risk-weight category requiring banks to hold more capital - 150% or one and half times as much - for such loans. The result has been a pull back on construction lending among other types of bank finance." Real Estate Industry Comment Letter, (March 2) – The Roundtable and twelve other real estate organizations on March 2, 2018 sent a comment letter urging all members of the Senate Banking Committee to enact the HVCRE measure by including it in the broader Dodd-Frank reform package (S. 2155).Since 2015, The Roundtable's HVCRE Working Group and industry coalition partners have played a key role in advancing specific reforms to the HVCRE Rule. During next month's Real Estate Roundtable Annual Meeting, HVCRE will be a focus of discussion, with more specific details offered during the Real Estate Capital Policy Advisory Committee (RECPAC) meeting on June 14.

Q1 Sentiment Index, Roundtable Weekly

May 11, 2018

Roundtable Weekly

Commercial Real Estate Industry Leaders See Balanced Market Fundamentals for Q2

Quarterly Sentiment Index

The Roundtable's Q2 2018 Economic Sentiment Index released yesterday shows that as plentiful financing and equity continue to drive commercial real estate investment activity, industry leaders continue to see balanced market fundamentals, despite rising costs of construction and an uncertain outlook for markets in 2019. The Roundtable's Q2 2018 Economic Sentiment Index shows plentiful financing and equity continue to drive commercial real estate investment activity. The report's Topline Findings include: The Q2 index came in at 51, a three point drop from Q1. Awareness of the length of current cycle and trepidation about economic conditions in 2019 has led to a general feeling of cautiousness. That said, availability of affordable financing and plentiful equity for the best quality investments are driving continued investment activity. Despite rising costs of construction, development continues somewhat unabated. Some responders pointed to the expectations of the millennial generation as the driver for reimagined building uses and new developments. Asset values are perceived as peaking for the most property types and markets. Industrial and multifamily assets are viewed as classes with room to continue pricing growth, whereas many felt retail assets are overpriced and possibly overbought.Roundtable President and CEO Jeffrey DeBoer, "As our Q2 Index show, with debt and equity readily available for quality investments and new development opportunities, industry leaders are being forced to reevaluate, innovate, and reimagine their buildings – driven by an influx of the millennial generation and their new set of expectations for office and multifamily markets." Responders noted the absence of previously ubiquitous Asian capital this quarter. Despite this absence, all responders felt debt and equity was readily available for quality investments. "Real estate fundamentals continue to remain strong into 2018, where balance between supply and demand in almost every sector is healthy, while debt and equity for real estate as an asset class remains abundant," said Roundtable President and CEO Jeffrey DeBoer. "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." DeBoer added, "As our Q2 Index shows, with debt and equity readily available for quality investments and new development opportunities, industry leaders are being forced to reevaluate, innovate, and reimagine their buildings – driven by an influx of the millennial generation and their new set of expectations for office and multifamily markets. It is vital for our industry to continue developing new technology solutions for the ever evolving demands of the market." Data for the Q2 survey was gathered in April by Chicago-based FPL Associates on The Roundtable's behalf. The next Sentiment Survey covering Q3 2018 will be released in August.

News

May 4, 2018

Roundtable Weekly

House GOP Leaders Signal Renewed Dodd-Frank Reform Effort; Legislation Includes Roundtable-Supported HVCRE Changes

House GOP leaders have recently signaled a deal could be reached this month between the House and Senate to pass the first rewrite of the 2010 Dodd-Frank Act (DFA). A Senate DFA financial reform bill passed in March includes a measure to reform the Basel III High Volatility Commercial Real Estate (HVCRE) Rule – a top Roundtable priority. House Financial Services Committee Chairman Jeb Hensarling, (R-TX) said he is open to moving the Senate-passed Dodd-Frank reform bill without changes if there are "other pathways" to advance House financial reform bills not included in the Senate plan. ( Wall Street Journal , April 26) The bipartisan HVCRE measure originated in the House of Representatives as the Clarifying Commercial Real Estate Loans bill (H.R. 2148), which was introduced by House Financial Services Committee members Representatives Robert Pittenger (R-NC) and David Scott (D-GA). After being voted out of the committee by a near unanimous vote (59-1), it passed the House by voice vote in November of last year (Roundtable Weekly, Nov. 10). The Senate Banking Committee took up an identical bill in February (S. 2405), which was co-sponsored by Senators Tom Cotton (R-AR) and Doug Jones (D-AL). With the HVCRE measure included in the Senate-passed DFA financial reform bill, the legislation has lingered in the House amid requests from conservatives, led by House Financial Services Committee Chairman Jeb Hensarling, (R-TX), for more extensive changes. (Roundtable Weekly, March 16 and March 23) Substantive changes by the House would likely send an amended bill back to the Senate, which could threaten support by Senate moderates and sink the prospects for passing the legislation. Hensarling told reporters last week, "I'm not naïve. Ultimately the fate of these House bills rests in approximately eight self-styled moderate Senate Democrats." (Reuters, April 26) Hensarling added that he is open to moving the Senate bill without changes if there are "other pathways" to advance House financial reform bills not included in the Senate plan. (Wall Street Journal, April 26) Speaker of the House Paul Ryan (R-WI) on Monday said, "… the capstone of our regulatory reform agenda is our replacement of Dodd Frank. We already have a bill out of the House. We have a bill out of the Senate, which is pretty amazing. So, we're gonna get that done." He added, "We're a few weeks away from getting our bill into law that rewrites the Dodd Frank law." (The Weekly Standard, April 30) House Majority Leader Kevin McCarthy (R-CA) this week reiterated that the effort to pass modest DFA reforms, versus repeal, will come soon. "I think you are within a month of getting it ... done," McCarthy said Monday during the Milken economic conference. He pledged that the legislation will be delivered to President Trump before November's midterm elections, saying, "At the end of the day there will be a bill at the President's desk." (Reuters, April 30) Changes to HVCRE Rule If the Senate bill moves forward in the House, its Roundtable-supported HVCRE language would clarify and reform the Basel III High Volatility Commercial Real Estate (HVCRE) Rule that has created needless confusion and increased borrowing costs. The Roundtable and twelve other real estate organizations on March 2, 2018 sent a comment letter urging all members of the Senate Banking Committee to take the necessary steps to enact S. 2405 by including the measure in the broader Dodd-Frank reform package (S. 2155). The current HVCRE Rule is overly broad and includes many stabilized loans without construction risk in this HVCRE category, unduly burdening those loans with capital charges meant to protect banks from heightened construction risks. As a result, banks, including small community financial institutions, have been deterred from making this type of loan, which can represent up to 50 percent of a small bank loan portfolio. The Senate's HVCRE measure would clarify which types of loans should be classified as HVCRE loans to ensure they do not impede credit capacity or economic activity, while still promoting economically responsible commercial real estate lending. ( Roundtable Weekly, Jan. 12). Importantly for borrowers, the 15% equity requirement would be revised to expressly include contributed land/property at the appreciated land value as determined by a FIRREA appraisal and bank review (versus the cost basis under the current rule). The measure would also clarify that loans made to acquire existing property with rental income and/or do cosmetic upgrades and other improvements don't trigger the capital penalty. HVCRE reform has been a top policy priority of The Real Estate Roundtable and its industry coalition partners, who have submitted numerous policy comment letters to policymakers since 2015. The Roundtable's HVCRE Working Group has also played a key role in advancing these specific reforms. (Roundtable letter, March 2)

News

May 4, 2018

Roundtable Weekly

Top Democrat on House Ways & Means Committee Requests Treasury Guidance on New Pass-Through Deduction

Homeland Security, Roundtable Weekly, Terrorism Risk Insurance Program, TRIA

May 4, 2018

Roundtable Weekly

Coalition To Insure Against Terrorism (CIAT) Submits Comments to Treasury on Effectiveness of Terrorism Risk Insurance Act(TRIP)

Homeland Security TRIA

The Roundtable and its partners in the Coalition to Insure Against Terrorism (CIAT), submitted detailed comments Monday on the overall effectiveness of the Terrorism Risk Insurance Program (TRIP) to the U.S. Department of Treasury's Federal Insurance Office (FIO). This week's comments support TRIP as a "tremendous success" yet provide recommendations on three primary aspects of the program: Standalone terrorism insurance; Nuclear, Biological, Chemical or Radiological (NBCR) availability; and Cyber terrorism. The Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) requires Treasury to issue proposed rules to implement changes to TRIP, which is set to expire on Dec. 31, 2020 (Roundtable Weekly - Jan. 16, 2015) As FIO works on preparing its 2018 report on TRIP's effectiveness, the coalition's comment letter presents views from policyholders and risk managers – and supplement earlier remarks submitted by CIAT in 2016 (Roundtable Weekly, June 3, 2016). This week's comments support TRIP as a "tremendous success" yet provide recommendations on three primary aspects of the program: Standalone terrorism insurance; Nuclear, Biological, Chemical or Radiological (NBCR) availability; and Cyber terrorism. The CIAT comments note there has been no evidence that private markets can develop adequate terrorism risk capacity without some type of federal participation. The letter also notes that "in the wake of a major terrorist attack, (the program) ensures that a significant portion of the costs of recovery would be borne by the private sector." The comments also include a suggestion that FIO should consider making the program permanent, stating that most other countries insurance programs are "of continuous duration, and it would benefit market stability to make TRIP permanent as well." How other nation's implement terrorism risk insurance programs was the focus of a discussion with Julian Enoizi, chief executive of Pool-Re during last week's Spring Roundtable Meeting in Washington, DC. Additionally, Marsh recently released its 2018 Terrorism Risk Insurance Report, which presents data on purchasing and pricing trends in the terrorism insurance marketplace. The report finds that the highest terrorism insurance take-up rates by industry in 2017 were real estate companies, education entities, health care organizations and financial institutions. It also explores how the terrorism insurance market continues to innovate and respond to the needs of global organizations in light of an evolving risk landscape. (BusinessInsurance, April 20, 2018) With TRIP set to sunset at the end of 2020, The Roundtable has formed a Terrorism Risk Insurance Working Group to explore potential options in advance of the reauthorization debate that is expected to begin in earnest next year. The Working Group's goal is to develop a strategy for a permanent, or long-term, national terrorism insurance program that would enable policyholders to secure the terrorism risk coverage they need without facing periodic renewals by the government.

News

April 27, 2018

Roundtable Weekly

Roundtable Members Engage Key Policymakers on Economic Growth, Homeland Security, Mid-Term Elections Issues

Real estate industry and trade association leaders gathered this week with key policymakers in Washington, D.C. for The Roundtable's 2018 Spring Meeting, where major topics of discussion included current market conditions and the economic outlook; the upcoming mid-term elections; infrastructure funding; terrorism risk insurance; immigration reform; and tax reform implementation. Real estate industry and trade association leaders gathered this week in Washington, D.C. for the Roundtable's 2018 Spring Meeting. Roundtable Chair William C. Rudin (CEO & Vice Chairman, Rudin Management Company, Inc.) launched the Spring Roundtable Meeting with a report outlining the Roundtable's policy priorities, such as working closely with the Treasury Department to ensure proper tax reform implementation; Dodd-Frank reform; a more market-oriented terrorism risk insurance program; attracting overseas tourists through the "Visit U.S." coalition; reforming the EB-5 immigrant investor program; and regulatory reforms and streamlining processes for infrastructure modernization.The Roundtable's business meeting featured the following speakers: Tom Brokaw, Senior Correspondent, NBC NewsSen. Mitch McConnell (R-KY), Senate Majority LeaderSen. Chris Coons (D-DE)Sen. Rob Portman (R-OH)Ray W. Washburne, President & CEO, Overseas Private Investment CorporationJulian Enoizi, Chief Executive, Pool Reinsurance Company Limited World-renowned journalist and NBC News reporter Tom Brokaw with Roundtable Chair William C. Rudin (CEO & Vice Chairman, Rudin Management Company, Inc. ) . World-renowned journalist and NBC News reporter Tom Brokaw spoke to Roundtable members about his lengthy career in Washington and a variety of current events. Brokaw said that while the nation faces issues of gun violence; an ever-evolving digital transformation; challenges of statesmanship; and generational differences, he emphasized the "U.S. is a nation built on big ideas" that is open to positive change – and there must be great leaders willing to be involved in their communities and businesses. Senate Majority Leader Mitch McConnell's dialogue with Roundtable members focused on the positive aspects of the past 15 months in the Senate, specifically the Tax Cuts and Jobs Act of 2017; confirmation of 12 circuit judges (the most since the 1800s); and 15 regulatory repeals made possible by the Congressional Review Act. Sen McConnell also discussed the electoral landscape for November's mid-term elections; the challenges of raising capital and financing infrastructure projects without having to solely rely on the federal government; and plans to continue to work with the administration on comprehensive immigration reform. Senate Majority Leader Mitch McConnell (R-KY) A common theme echoed throughout the day was the continued need for bipartisanship in the House and Senate. Sen. Chris Coons (D-DE) and Sen. Rob Portman (R-OH) both members of the Senate Foreign Relations Committee, and Ray Washborne, CEO and President of Overseas Private Investment Corporation (OPIC), discussed the recent introduction of The Better Utilization of Investments Leading to Development Act of 2018 (the BUILD Act (S.2463). The legislation is intended to promote sustainable growth in developing economies through U.S. business investment and provide more accountability for taxpayers at no expected cost. The development finance corporation will leverage the U.S. private sector's expertise and investment capital to generate economic growth in the developing world that will support American interests. (Senate Foreign Relations Committee, Feb. 2018)Julian Enoizi, Chief Executive of Pool Reinsurance Company Limited, who works closely with The Roundtable's Homeland Security Task Force (HSTF) and Real Estate Information Sharing and Analysis Center (RE-ISAC), engaged Roundtable members in discussions regarding the constantly evolving terrorism threat and provided insight into developing a long-term or permanent U.S. reinsurance pooling mechanism for terrorism risk – similar to programs in the United Kingdom and throughout Europe. After the business meeting, approximately 30 additional policymakers attended a reception and dinner that evening at the Newseum, where real estate CEOs and trade association leaders had the opportunity to further discuss policy issues with lawmakers in an informal setting. Next on The Roundtable's calendar is the all-member Annual Meeting on June 14-15 at the InterContinental Hotel-The Wharf in Washington, D.C.

Infrastructure, Roundtable Weekly

April 27, 2018

Roundtable Weekly

House Passes FAA Reauthorization, Including Roundtable-Backed “One Engine Inoperative” Language Regarding Allowable Building Height

Legislative language that could affect the allowable heights of buildings near airports passed the House today (393-13) as part of a bill ( H.R. 4 ) extending authorization of the Federal Aviation Administration (FAA) for five years. The so-called One Engine Inoperative (OEI) language included in the House-passed FAA bill addresses an Obama-era proposal that could affect land development and property values near U.S. airports. The proposed 2014 policy change would alter decades-old standards by compelling the FAA to consider whether a building or other structure poses a hazard to navigable airspace if a plane engine fails on takeoff. The FAA's current funding and revenues are set to expire this September 30. With the House's passage of FAA reauthorization today, the Senate is expected to follow suit and aims to have long-term reauthorization in place by August. ( Roll Call , April 16 and CNN , April 27) The so-called One Engine Inoperative (OEI) language included in the House-passed FAA bill addresses an Obama-era proposal that could affect land development and property values near U.S. airports. The proposed 2014 policy change would alter decades-old standards by compelling the FAA to consider whether a building or other structure poses a hazard to navigable airspace if a plane engine fails on takeoff. According to a study of the issue, approximately 4,000 buildings near 380 airports throughout the U.S. could become "non-conforming" if such OEI policies were ever to take effect. The proposed standards would modify take-off and landing flight paths in a manner that restricts allowable building heights and development potential in growth centers and transportation hubs surrounding the nation's airports. When the FAA proposed the policy change, it explained it was not due to any public safety concerns but rather to allow airlines to carry more passenger and freight cargo. [See technical comment letter submitted July 2014 by The Roundtable and coalition partners]. The language passed by the House would require that any changes to current OEI policies must first go through a full public rulemaking process. Additionally, the White House Office of Management and Budget would be compelled to conduct a full cost-benefit analysis of any such FAA action. The Roundtable, the National Association of Real Estate Investment Trusts (NAREIT), and other real estate trade groups have long urged Congress to include the OEI rulemaking and cost-benefit language in any FAA reauthorization bill. (Roundtable Weekly, Feb. 12, 2016). The Roundtable will continue to monitor the Senate's actions on FAA reauthorization and urge inclusion of similar provisions as the legislation now moves to the other side of Capitol Hill.

Internet Sales Tax, Roundtable Weekly, Tax Policy

April 20, 2018

Roundtable Weekly

Supreme Court Appears Divided During Oral Arguments on Expanding States’ Authority to Collect Taxes on E-Commerce Purchases; Decision Expected by June

The U.S. Supreme Court on Tuesday heard oral arguments on a long-awaited case (South Dakota v. Wayfair, Inc., No. 17-494 ) that addresses the constitutionality of states' authority to collect sales and use taxes on Internet consumer purchases from retailers who do not have a physical presence in a state.The U.S. Supreme Court heard oral arguments on a long-awaited case (South Dakota v. Wayfair, Inc., No. 17-494 ) that addresses the constitutionality of states' authority to collect sales and use taxes on Internet consumer purchases from retailers who do not have a physical presence in a state. The Wayfair case challenges two pre-Internet Supreme Court decisions from 1991 and 1967 (Quill Corp. v. North Dakota, 504 U.S. 298, and National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753, respectively). This pair of decades-old opinions exempts many internet merchants from collecting billions of dollars in sales taxes. The U.S. Government Accountability Office (GAO) estimates that state and local governments could have collected an estimated 8 to 13 billion dollars in 2017 if states were given authority to require sales tax collection from all remote sellers. (GAO report, Dec. 18, 2017). During this week's oral argument on Wayfair, the nine justices offered divided views. For example, Justice Elena Kagan commented, "Congress is capable of crafting compromises and trying to figure out how to balance the wide range of interests involved here." Justice Sonia Sotomayor added, "Is there anything we can do to give Congress a signal it should act more affirmatively in this area?" (CQ, April 17) Three justices – Neil Gorsuch, Clarence Thomas and Anthony Kennedy - have expressed a willingness in past writings to rethink the Court's case law in this area. On Tuesday, Justice Ruth Bader Ginsburg suggested now is the time for the Quill ruling to be corrected. Ginsburg asked, "If time and changing conditions have rendered it obsolete, why should the court which created the doctrine say, 'Well, we'll let Congress fix up what turns out to be our obsolete precedent?'" (Reuters and Wall Street Journal, April 17 / AP, April 18)Justice Stephen Breyer also noted, "When I read your briefs, I thought absolutely right. And then I read through the other briefs, and I thought absolutely right. And you cannot both be absolutely right." (Bloomberg Law, April 17) During the Supreme Court's oral argument on Wayfair , the nine justices offered divided views. See transcript . Throughout decades of congressional efforts, legislation to level the tax playing field between Internet-based retailers and "brick and mortar" stores has never passed both chambers. More recently, President Trump has signaled his support for legislation authorizing states to impose sales tax collection requirements on online purchases. (Roundtable Weekly, Feb. 23) The Roundtable joined The International Council of Shopping Centers, Investment Program Association, Nareit®, the National Association of REALTORS® , the National Multifamily Housing Council, NAIOP, the American Farm Bureau Federation and the South Dakota Farm Bureau Federation in filing an amicus curiae brief on March 5, urging the Justices to overrule the antiquated, pre-internet, "physical presence" test that imposes collection of sales and use taxes on traditional "brick-and-mortar" retailers – while exempting on-line retailers from those same obligations. The March brief re-iterated many points set forth by a real estate coalition in an initial amicus brief filed last November. (Roundtable Weekly, March 9, 2018 and Nov. 3. 2017) On Wednesday, a USA Today editorial supported the real estate industry's viewpoint, while also including an opposing view. (USA Today, Tax Online Shopping Like All Others, April 17) The Supreme Court is expected to render a decision in Wayfair by the end of June. (Wall Street Journal, April 17 and Roundtable Weekly, Jan. 12)

Roundtable Weekly, Tax Policy

April 20, 2018

Roundtable Weekly

GOP Leaders Considering Legislation to Make Recent Tax Cuts Permanent; House Speaker Paul Ryan Announces Retirement, Endorses Majority Leader Kevin McCarthy

House and Senate GOP leaders signaled this week they intend to pursue legislation that would make permanent the individual tax provisions enacted as part of the Tax Cuts and Jobs Act (P.L. 115-97) enacted last December (Roundtable Weekly, Dec. 22, 2017) House Majority Leader Kevin McCarthy (R-CA), left, and House Ways and Means Committee Chairman Kevin Brady (R-TX) discussed the impact of recent tax reform; a possible phase 2 effort; the recent resignation of House Speaker Ryan; and the endorsement of McCarthy as his successor on CNBC’sSquawk on the Hill . Under current law, many of the individual provisions – including the lower effective tax rate on pass-through business income – will sunset after 2025. Although the nonpartisan Congressional Budget Office (CBO) projected last week that the tax bill would add 1.9 trillion dollars to the national debt over a decade, making permanent the cuts that lapse after 2025 could add an additional 1.5 trillion over the next decade, according to a Tax Foundation analysis. (Roundtable Weekly, April 13 and Reuters, April 17) House Speaker Paul Ryan (R-WI) on Tuesday said, "We fully intend to make these things permanent, and that’s something we'll be acting on this year." (Reuters, April 17). Senate Majority Leader Mitch McConnell (R-KY) added, "If they are interested in making the individual rates permanent that’s something we ought to take a look at. I don’t know why we wouldn’t want to do that" (Politico, April 17) In addition to making the individual provisions permanent, House Ways and Means Committee Chairman Kevin Brady (R-TX) has also floated making immediate business expensing permanent, among other changes. (Bloomberg, March 28 and Miller & Chevalier, DC TaxFlash, April 17) Although prospects for passing what President Trump calls a "phase-two" tax cut bill in the House are possible, a Senate bill would require 60 votes for passage, which Democrats could prevent in the closely divided chamber. (CNBC, April 5) Brady and House Majority Leader Kevin McCarthy (R-CA) on Tuesday discussed the impact of recent tax reform; a possible phase 2 effort; the recent resignation of House Speaker Ryan; and the endorsement of McCarthy as his successor on CNBC’s Squawk on the Hill . After recently announcing his retirement from Congress when the current legislative session ends in early 2019, Ryan declared his support for McCarthy as the next GOP House Speaker. (Deloitte, April 13 and ABC News, April 13) The next GOP House Speaker candidate must get 218 votes in a floor vote, which gives the 30-member conservative House Freedom Caucus leverage to propose one of their members for a leadership position. Such negotiations will be irrelevant if Republicans lose the House in the 2018 midterm elections. (USA Today, April 18)

News

April 20, 2018

Roundtable Weekly

Fed’s Beige Book Reports Widespread Concern About Tariffs Despite Economic Growth; CRE Activity Improves

Commercial real estate activity in the Fed's 12 regional districts show mostly positive results, yet concerns about trade tariffs are widespread, according to the Federal Reserve's latest "Beige Book" report about economic conditions. (The Fed, April 18)Commercial real estate activity in the Fed's 12 regional districts show mostly positive results, yet concerns about trade tariffs are widespread, according to the Federal Reserve's latest "Beige Book" report about economic conditions. (The Fed, April 18) A new focus on the threat of a trade war appears in the report, with the word "tariff" used 36 times, compared with zero references in the prior survey. The second line in the report states, "Outlooks remained positive, but contacts in various sectors including manufacturing, agriculture, and transportation expressed concern about the newly imposed and/or proposed tariffs." (Reuters, April 18)The report summary also notes that steel and aluminum prices rose, "sometimes dramatically" due to the new duties imposed by the Trump Administration. (Roundtable Weekly, March 9) The Beige Book is one of the first official reports showing the economic impact of the new tariffs on domestic business. (Wall Street Journal, April 18)Contacts in nine of the 12 districts commented directly on the impacts of tariffs, citing concerns related to rising prices, future uncertainty, investment decisions, and how to pass increased costs on to consumers.A summary of each Fed district is included in the report, which shows economic expansion at a modest to moderate pace throughout March and early April, with the labor market described as "tight."Although the Fed reports that commercial real estate activity and construction has improved since March, prices have increased for building materials, especially for lumber, drywall, and concrete. (GlobeSt, April 19)The Fed will consider the Beige Book findings during its next meeting on May 1-2. On Monday, New York Fed President William Dudley said the Fed would likely rise interest rates three or four times in 2018. (Fed Calendar and CNBC, April 16)Roundtable President and CEO Jeffrey DeBoer noted the commercial real estate industry's concerns earlier this month, stating, "Proposed tariffs, coupled with the earlier tariffs on steel and ongoing dispute with China could have unfortunate and unintended effects on the U.S. economy by raising construction costs, and reducing jobs in real estate development. China has continually taken advantage of trade practice laws, particularly intellectual property-vital for the U.S. to continue developing new technology, whether it be machinery, software, or energy efficient building solutions and should be held accountable but in a measured way." (Roundtable Weekly, April 6)The economy and CRE will be a focus at The Roundtable's Spring Meeting next week in Washington, which will include Senate Majority Leader Mitch McConnell (R-KY) as a featured guest.

Economic Growth & CRE, Roundtable Weekly, Tax Policy, Tax Reform, Tax Reform Implementation

April 13, 2018

Roundtable Weekly

New Reports Measure Impact of Tax Reform on Real Estate Investment and CRE's Impact on National, State Economies

TCJA

Tax reform enacted late last year will cause investment in nonresidential structures to increase by an average of more than $23 billion from 2019-2028, and rise nearly $10 billion this year alone, according to new projections released Monday by the Congressional Budget Office (CBO). (The Budget and Economic Outlook: 2018 to 2028, April 9)CBO chart: Effects of the 2017 Tax Act on Investment Through Changes in Incentives affecting Nonresidential and Residential Structures. Click to Enlarge— Page 119 of full CBO Report The new report isolates and analyzes the impact of recent tax reform legislation on different types of economic activity, including investment in structures. Tax reform’s positive impact on nonresidential investment stems from the corporate and individual rate reductions, as well as the new pass-through deduction. Combined, these changes reduce the user cost of capital. Cost recovery rules for structures were largely unchanged in the recent tax policy changes.CBO projects tax reform will have a dampening effect on investment in residential housing: -$9 billion in 2018, and an average of -$13 billion annually from 2019-2028. These numbers reflect the combined, net effect of a reduction in investment in owner-occupied housing and an increase in investment in rental housing. Limitations on the deductibility of property taxes and mortgage interest are putting downward pressure on investment in owner-occupied housing. Rental property investment, in contrast, benefits from the same tax reforms that affect nonresidential investment. As a nonpartisan arm of Congress, CBO's annual economic and budget outlook is widely watched by the private sector for indications of how recent policy changes are affecting the overall economy.CBO: Trillion Dollar Deficits by 2020According to the report, borrowing to fund tax cuts and increased spending will also send deficits soaring past $1 trillion in the coming years and increase the overall debt burden to 96 percent of GDP by 2028. (The Hill, April 9)Under the recent $1.3 trillion spending agreement, defense and non-defense spending will increase by nearly $300 billion over the next two years. (Roundtable Weekly, March 23)Although economic growth is projected by CBO to rise to 3.3 percent in 2018 – much higher than the 2.6 percent recorded last year – the estimated growth rate will decrease to 2.4 percent in 2019, followed by a drop to an average of just over 1.7 percent for the subsequent eight years of the ten-year budget period. (The Washington Post, April 10)Deficits are also forecast to climb dramatically. CBO anticipates a deficit of $804 billion in 2018 (43 percent higher than it projected just last June, prior to the tax bill and spending agreement). The amount of debt held by the public will approach 100 percent of GDP over the next ten years, an amount far greater than any period since World War II. (CNN, April 11)NAIOP: Building Accounts for 18.0 % of National Economic Activity in 2017 According to the NAIOP report , combining residential and nonresidential buildings, as well as infrastructure, the total impact of construction spending (direct, indirect and induced) – accounted for 18.0 percent of all the nation's economic activity in 2017. In related news, a report recently published by the NAIOP Research Foundation shows that commercial real estate in 2017 supported 7.6 million American jobs and contributed $935.1 billion to the nation's GDP. (Economic Impacts of Commercial Real Estate, 2018 Edition, NAIOP)The annual study, authored by economist Stephen S. Fuller, Ph.D, measures the contributions to GDP, salaries and wages generated, and jobs created and supported from the development and operations of commercial real estate – and includes detailed data on commercial real estate development activity in all 50 states. According to the study, combining residential and nonresidential buildings (warehouse/industrial, office, retail, health care, entertainment, education, public safety, religious and lodging) – as well as infrastructure for water, sewer, highways and power, the total impact of construction spending (direct, indirect and induced) — accounted for 18.0 percent of all the nation’s economic activity in 2017.“The importance of commercial development to the U.S. economy is well established, and the industry’s growth is critical to creating new jobs, improving infrastructure, and creating places to work, shop and play,” said Thomas Bisacquino, NAIOP president and CEO. (NAIOP news release).CRE as a driving force of national economic growth, as well as tax reform’s impact on the industry, will be a focus of The Roundtable’s April 25, 2018 Spring Meeting, which will feature Senate Majority Leader Mitch McConnell (R-KY) and other key policymakers.

Economic Growth - Travel & Tourism, Roundtable Weekly, Tourism

April 13, 2018

Roundtable Weekly

Trump Administration Proposes Increased Vetting of Foreign Tourists; Visit U.S. Coalition Encourages International Travel as Key to Domestic Growth

The State Department recently announced a proposal to require visa applicants to provide further extensive information on their social media presence, email addresses, and work histories when applying to travel to America. Inbound tourists, business and convention travelers, students, and other non-immigrants would be subject to such “extreme vetting” policies proposed by the Trump Administration, along with immigrants seeking permanent U.S. residency. The Visit U.S. Coalition released “ America is Open for Business ,” a video highlighting international travel as a key driver of the health of America’s economy. This newly proposed screening requirements would have affected nearly 15 million travelers last year alone from key long-haul markets such as China, India, Mexico and other nations that do not participate in the visa waiver program (VWP) with the U.S. ( Visit U.S. Coalition, April 11.) The new proposal would not affect travelers from countries granted visa-free travel status to the U.S. including most of Europe, Canada, Australia and Japan.Under the proposed new requirements, U.S. visa applicants would be required to submit five years’ worth of personal information regarding telephone numbers, email addresses and details about their social media accounts on platforms such as Facebook and Twitter. Fifteen years’ worth of physical address, employment, and foreign travel history would also be required. (See State Department Form 5535.) Currently, such information is only requested on a case-by-case basis when particular visa applications are flagged to warrant additional scrutiny due to terrorism or national security-related concerns. The new proposal would require the additional information as a matter of course to supplement the already-exhaustive online visa form that tourists and other non-immigrants must currently submit when seeking U.S. entry.“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.”Last month, the multi-industry Visit U.S. Coalition (which includes The Roundtable) released its policy agendaaimed at promoting and increasing inbound international travel to the United States. The coalition advocates for policies 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 spend 294 billion dollars in travel exports – crucial to achieving the Administration’s economic goals. (Roundtable Weekly, March 2)Following the State Department’s announcement of further intense screening for foreign inbound travelers, on Wednesday the Visit U.S. Coalition released “America is Open for Business,” a video highlighting international travel as a key driver of the health of America’s economy.The State Department will be accepting public comments on the proposed enhanced vetting requirements until May 29.

News

April 6, 2018

Roundtable Weekly

Trump Administration Announces Tariffs on China Imports; China Responds Swiftly With Similar Duties Targeting American Imports

On Thursday, President Trump escalated ongoing trade tensions with China by instructing U.S. trade officials to consider tariffs on an additional 100 billion dollars in imports from China, in addition to the tariffs issued earlier this week— totaling 150 billion dollars in Chinese imports across 1,300 categories of products. This action prompted a swift response from the Chinese government, with import levies on American soybeans, cars, chemicals and airplanes. (The Washington Post, April 4)President Trump escalated ongoing trade tensions with China by instructing U.S. trade officials to consider tariffs on an additional 100 billion dollars in imports from China, in addition to the tariffs issued earlier this week— totaling $150 billion in Chinese imports. This decision by President Trump comes a month after he authorized levies of 25 percent on imported steel and 10 percent on aluminum, while exempting Canada, Mexico and potentially other countries, based on a country-by-country review of bilateral security agreements. President Trump justified the tariffs by citing alleged violations of U.S. intellectual property laws and unbalanced trade practice. (Roundtable Weekly, March 9)Roundtable President and CEO Jeffrey DeBoer noted the commercial real estate industry’s concerns, stating, “These proposed tariffs, coupled with the earlier tariffs on steel and ongoing dispute with China could have unfortunate and unintended effects on the U.S. economy by raising construction costs, and reducing jobs in real estate development. China has continually taken advantage of trade practice laws, particularly intellectual property—vital for the U.S. to continue developing new technology, whether it be machinery, software, or energy efficient building solutions and should be held accountable but in a measured way.” (The Washington Post, April 5)Since the announcement last month, along with the addition of more tariffs this week, U.S. and global market volatility show no signs of letting up, leaving two of the world’s largest economies on the brink of a possible trade war that could negatively impact U.S. agriculture and industry.Newly appointed National Economic Council Director and Assistant to the President for Economic Policy, Larry Kudlow, said that he expected the U.S. and China to resolve their issues, noting that the announcements by both countries where just “proposals.” (Financial Times, April 5)Kudlow, who comes to the Trump administration as a former Wall Street economist, CNBC commentator and advocate of free trade, still believes that the U.S. can strike a deal with China—anticipating continued trade will eventually lead to faster growth and higher wages in the U.S. (Politico, April 4; BNA, April 6)Commerce Secretary Wilbur Ross echoed Kudlow’s reassurance, noting that the U.S. tariffs won’t take effect before the end of May, after a period for public comment, and that the administration may seek to resolve the trade dispute at the bargaining table. The next opportunity for both parties to discuss the ongoing dispute will be later this month at the meeting of the International Monetary Fund and World Bank and in Washington, D.C. (The Washington Post, April 4; Reuters, April 4)

Interest Deductibility, Roundtable Weekly, Tax Policy

April 6, 2018

Roundtable Weekly

Treasury Releases Guidance on New Business Interest Deduction Limit, but Questions for Real Estate Investment Remain

Business Interest Deduction Interest Deductibility TCJA

On Monday, the Treasury Department and the Internal Revenue Service (IRS) released Notice 2018-28, which provides guidance on the new limitation on the deductibility of business interest, (Section 163(j)), enacted in the Tax Cuts and Jobs Act. In the Feb. 21 letter the Roundtable asked Treasury to clarify that interest on debt incurred by an owner to fund an investment in a partnership or other entity engaged in a real property trade or business, constitutes interest on debt properly allocable to that real estate business . The Notice focuses on interest expense carryforwards from prior years, corporate interest deductions, and consolidated corporate groups, while leaving unresolved certain key questions for real estate investors. Taxpayers can rely on the guidance at least until proposed regulations are issued.In general, for taxpayers with revenue over $25 million, the Tax Cuts and Jobs Act capped the amount of business interest that a business can deduct annually to no more than 30 percent of earnings before interest, taxes, depreciation, and amortization. The provision includes several exceptions, including an exception critical to real estate for an “electing real property trade or business.” Notice 2018-28 addresses a concern that partners in partnerships could effectively double-count certain interest income when calculating the limitation on partner-level borrowing. Other highlights of the Notice include:Carryforward of interest expense. The Notice states that forthcoming regulations will allow taxpayers with disqualified interest under the old law to carry forward such interest as business interest under the new law. Such interest could be disallowed under the new limitation in the same manner as any other business interest. Corporate business interest. The Notice clarifies that interest paid by a C corporation is business interest for purposes of the interest limit. Forthcoming regulations will address whether and when interest paid by a partnership, including a partnership with a corporate partner, should be treated as business interest for the corporate partner. Consolidated groups. The Notice confirms that the business interest limit properly applies at the level of a consolidated group. Forthcoming regulations will address how the interest limit applies to a consolidated group when one of the members is an electing real property trade or business, and to a consolidated group in which a member holds an interest in a partnership that is engaged in a real property trade or business.Earnings and profits. The Notice clarifies that a disallowed business interest deduction will not affect whether or when the interest expense reduces a C corporation’s earnings and profits. For real estate investors, however, the Notice leaves unanswered some of the key issues related to the financing of real estate. For example, The Real Estate Roundtable has asked Treasury to clarify that interest on debt incurred by an owner to fund an investment in a partnership or other entity engaged in a real property trade or business, constitutes interest on debt properly allocable to that real estate business (Comment Letter, Feb 23; Roundtable Weekly, Feb. 23).The Treasury Department and the IRS are expected to issue additional guidance and regulations in the future, and request comments on the rules described in the notice and what additional guidance should be issued to assist in computing the business interest expense limitation under Section 163(j). (IRS, April 2)Depending on the outcome of the rule-making process, the new limitation on business interest expense (Section 163(j)) could have significant implications for real estate markets and the financing of real estate transactions. Clarifying the rules for real estate in the context of tiered arrangements will help avoid potential disruptions.The Roundtable and TPAC will continue to play an active role in seeking appropriate clarifications affecting the most significant changes to the tax code.

Partnership Law, Roundtable Weekly

April 6, 2018

Roundtable Weekly

New York’s High Court Upholds Sanctity of Partnership Contracts, Confirms “Goodwill” Value for Real Estate Assets

New York’s highest court issued a significant decision on March 27 regarding the governance, operation and dissolution of businesses structured as general partnerships; the value of “goodwill” that can inure to real estate assets; and the discounts that apply when valuing the stake of an investor with only a minority position in an enterprise.As the vast majority of U.S. general partnerships are real estate enterprises, The Roundtable filed an amicus brief last year supporting the continuing partners. Congel v. Malfitano concerns a general partnership formed to build, own and operate a 1.2 million square foot retail mall in upstate New York. A 58-page agreement executed when the partners formed their business covers all aspects of its operations. For example, the agreement prescribes two, sole means to dissolve the concern, either by (1) a majority vote of the partners, or (2) by the occurrence of an event that makes it unlawful for the business to carry on.After negotiations to buy-out the defendant’s 3.08 percent minority stake failed, he sent a notice letter to unilaterally dissolve the partnership. Concerned that the letter could force liquidation and preclude refinancing the asset, the remaining partners continued the business and filed suit. They alleged that the minority partner committed a “wrongful dissolution” that breached their written agreement. The Court of Appeals agreed with the ongoing partners on the dissolution issue. It re-affirmed prior holdings that, while “partners are statutorily empowered [under New York law] to dissolve the partnership at any time, wrongfully dissolving partners may be liable to the expelled partner for breach of the partnership agreement.” Moreover, the minority partner could not obtain recourse to “default” statutory standards for dissolving “at will” partnerships – which can be unwound unilaterally by any single partner – because the written agreement at issue left “no room for other means of dissolution” and the parties “clearly specified under what terms [their partnership] could be dissolved.” Accordingly, the court deemed the minority partner’s dissolution letter as wrongful. Congel further addressed key principles to ascertain the value of the minority stake owed to the defendant by the partners who continued operations, including:Goodwill Value: New York law provides that a wrongfully dissolving partner should not benefit from the enterprise’s “goodwill,” an intangible asset attributable to the “patronage and support of regular customers” and the “positive advantage … acquired by a proprietor in carrying on a business.” The appeals court thus affirmed the trial court’s factual finding “that the shopping mall and the mall’s tenants attract regular loyal, shoppers” – such that the value of partnership’s goodwill component (aside from its real property and cash holdings) should be deducted from the defendant’s minority interest.Minority Discount: The Congel decision acknowledged that “a minority discount is a standard tool in valuation of a financial interest, designed to reflect the fact that the price an investor is willing to pay for a minority ownership interest in a business, whether a corporation or a partnership, is less because the owner of a minority interest lacks control of the business.” It held that a minority discount applied here, to reflect a “determination of the fair market value of the wrongfully dissolving partner’s interest as if that interest were being sold piecemeal and the rest of the business continu[ed] as a going concern.”As the vast majority of U.S. general partnerships are real estate enterprises, The Roundtable filed an amicus brief last year supporting the continuing partners. The Building Owners and Managers Association (BOMA) International, CRE Finance Council, International Council of Shopping Centers, Nareit®, National Association of Home Builders, National Multifamily Housing Council, New York State Association of REALTORS®, and the Real Estate Board of New York also joined the amicus brief.

Budget & Policy Landscape

March 23, 2018

Roundtable Weekly

Congress Passes Omnibus $1.3 Trillion Spending Bill Funding Government Through September; Two-Week Congressional Recess Begins

In a week of intense budget negotiations, a $1.3 trillion dollar “omnibus” spending bill (H.R. 1625) to fund the government through September 30 was introduced Wednesday night to avoid a government shutdown today. The 2,232-page measure passed both the House and Senate by comfortable margins, and President Trump signed it this afternoon. (Wall Street Journal, March 23)As Congress leaves for a two-week recess, the omnibus goes into effect with many non-spending policy provisions and others affecting revenue. As Congress leaves for a two-week recess, the omnibus goes into effect with many non-spending policy provisions and others affecting revenue. Of interest to real estate:Tax technical corrections positively affecting Foreign Investment in Real Property Tax Act (FIRPTA) provisions; partnership audit reform rules; and an expansion of the low-income housing tax credit. (Joint Committee on Taxation, Technical Explanation Summary.)The National Flood Insurance Program is decoupled from the omnibus and reauthorized through the end of July – as an incentive for policymakers to pass a longer renewal before their August recess.The EB-5 immigration investment program is extended for six months until Sept. 30 – the 13th extension since Sept. 2015.The Environmental Protection Agency’s Brownfields program is reauthorized as part of the BUILD Act, which includes an expansion of brownfield eligibility to non-profits; makes brownfield sites acquired prior 2002 eligible; and increases funds for cleanup up to $500K (or $650,000 w/waiver).Funding for Infrastructure – although specific funding for a “Gateway” railway project between New York and New Jersey is not included, the omnibus includes billions from a variety of sources that could be utilized for such a project. (CNN, March 22)Prior to congressional passage of the bill, it was reported that measures addressing the internet sales tax and joint employer issues were under consideration for inclusion, yet both did not make it in the final legislative text. The repercussions of the omnibus will be discussed during the April 25 Spring Roundtable Policy Meeting in Washington, DC.

News

March 23, 2018

Roundtable Weekly

House Considers Changes to Senate-Passed Dodd-Frank Reform Bill That Includes Roundtable-Backed HVCRE Provision

The House of Representatives is considering adding changes to bipartisan Dodd-Frank reform legislation (S. 2155) passed last week by the Senate that includes a Roundtable-supported measure to reform the Basel III High Volatility Commercial Real Estate (HVCRE) Rule. (Roundtable Weekly, March 16)House Republicans and Financial Services Committee Chairman Jeb Hensarling (R-TX) are motivated to push for more changes to the Senate bill in an effort to rollback more financial industry rules in the Dodd-Frank Act.House Republicans, led by Financial Services Committee Chairman Jeb Hensarling, (R-TX) are motivated to push for more changes to the Senate bill in an effort to rollback more financial industry rules in the Dodd-Frank Act.Proposals approved by the committee on Wednesday include a change to the Volcker Rule that would put the Federal Reserve in charge of enforcing the Dodd-Frank Act ban on proprietary trading – instead of the five agencies now assigned to the task. (BNA, March 21)Substantive changes to the “Volcker Rule” and other provisions by the House would likely send an amended bill back to the Senate, which could threaten support by Senate moderates and require a legislative conference between the two chambers. (NREI, March 21)The HVCRE measure included in the Senate-passed Economic Growth, Regulatory Relief, and Consumer Protection Act originally was introduced in the House as the Clarifying Commercial Real Estate Loans bill (H.R. 2148). An identical HVCRE measure was then included in the Senate bill (S. 2405) that passed March 14. The Roundtable-supported HVCRE text would modify the current, overly broad Rule by providing bank lenders with more specific requirements for acquisition, development, or construction (ADC) loans. These reforms to HVCRE loan definitions would provide greater assurances for performing loan portfolios with low risk, bolster credit capacity and preserve economically responsible commercial real estate lending. (Roundtable Weekly, Jan. 12).HVCRE reform has been a top policy priority of The Real Estate Roundtable and its industry coalition partners, who have submitted numerous policy comment letters to policymakers since 2015. The Roundtable's HVCRE Working Group has also played a key role in advancing these specific reforms. (Roundtable letter, March 2)

The Fed

March 23, 2018

Roundtable Weekly

Fed Raises Interest Rates, Signals More Hikes, Boosts Economic Forecasts

In the Federal Reserve's first major decision under new Chairman Jerome Powell, the central bank on Wednesday raised the federal funds rate 25 basis points (to a range of 1.5 percent to 1.75 percent) and boosted its U.S. economic growth forecast for 2018 and 2019. (Federal Reserve Statement and Projections, March 21).Federal Reserve Chairman Jerome Powell held his first news conference since becoming Chairman, echoing the Federal Open Market Committee's views on a strengthened economic outlook in recent months.During a week when the Trump Administration slapped $50 billion in trade tariffs on China, followed by a 724 point plunge in the Dow Jones Index, the Fed also voted unanimously to approve a 25-basis-point increase in the primary credit rate to 2.25 percent, affecting what commercial banks and other depository institutions pay on loans from regional Federal Reserve Banks.The Fed is expected to lift the rate two or three more times this year, and three times next year, citing a strengthening labor market and moderately rising economic activity, partnered with a consistent low unemployment rate, as reasons for further hikes. (Reuters and Federal Reserve Statement, March 21).Chairman Powell held his first news conference since becoming Fed Chairman, echoing the Federal Open Market Committee's views on a strengthened economic outlook in recent months, “Fiscal policy has become more simulative, ongoing job gains are boosting incomes and confidence, foreign growth is on a firm trajectory, and overall financial conditions remain accommodative.” (The Washington Post, March 21)Fed officials significantly changed their economic forecast from their previous projection done before the Tax Cuts Jobs and Act passed in December, with GDP for 2018 originally at 2.5 percent increased to 2.7 percent, and increased the 2019 expectation from 2.1 percent to 2.4 percent. (The Washington Post, March 21).“The job market remains strong, the economy continues to expand, and inflation appears to be moving toward the FOMC’s 2 percent longer running goal,” said Powell. (Bloomberg, March 21)The Federal Reserve will hold their next meeting in early May.

News

March 16, 2018

Roundtable Weekly

Senate Passes Dodd-Frank Reform Legislation With Roundtable-Backed HVCRE Provision; Bill Faces Headwinds in House

The Senate on Wednesday passed (67-31) bipartisan Dodd-Frank reform legislation (S. 2155) that includes a Roundtable-supported measure to reform the Basel III High Volatility Commercial Real Estate (HVCRE) Rule, which would clarify specific requirements for acquisition, development, or construction (ADC) loans. The Senate bill , crafted by Banking Committee Chairman Mike Crapo, represents the most significant change to financial regulatory law since 2010. The HVCRE measure included in the Economic Growth, Regulatory Relief, and Consumer Protection Act originated in the U.S. House of Representatives as the Clarifying Commercial Real Estate Loans bill (H.R. 2148) – introduced by House Financial Services Committee members Rep. Robert Pittenger (R-NC) and Rep. David Scott (D-GA). An identical measure in the Senate – S. 2405 – co-sponsored by Senators Tom Cotton (R-AR) and Doug Jones (D-AL), was taken up in February by the Senate Banking Committee. With S. 2405 included in the larger Senate bill, crucial clarifications to the HVCRE Rule now move forward to the House. The current, overly broad Rule would be modified by providing bank lenders with more specific requirements for acquisition, development, or construction (ADC) loans. These reforms to HVCRE loan definitions would provide greater assurances for performing loan portfolios with low risk, bolster credit capacity and preserve economically responsible commercial real estate lending. (Roundtable Weekly, Jan. 12). HVCRE reform has been a top policy priority of The Real Estate Roundtable and its industry coalition partners, who have submitted numerous policy comment letters to policymakers since 2015. The Roundtable's HVCRE Working Group has also played a key role in advancing these specific reforms. (Roundtable letter, March 2) The Senate bill, crafted by Banking Committee Chairman Mike Crapo, represents the most significant change to financial regulatory law since 2010. It raises the amount at which banks are considered "too big to fail" – from the current $50 billion threshold to $250 billion – while providing additional relief for community banks and credit unions. The Roundtable and twelve other real estate organizations recently sent a comment letter urging that the HVCRE measure (S. 2405) be included in the broader Dodd-Frank reform package (S. 2155). The bill also exempts banks with assets valued at less than $10 billion from the "Volcker Rule," which prohibits banking agencies from engaging in proprietary trading or entering into certain relationships with hedge funds and private-equity funds. Certain banks are also exempted from specified capital and leverage ratios, with federal banking agencies directed to develop new requirements. Onward to the House The Senate legislation faces significant challenges next week in the House, which passed the Financial CHOICE Act (H.R. 10) in June with more far-reaching revisions to Dodd-Frank. House Financial Services Committee Chairman Jeb Hensarling (R-TX) has identified approximately 30 additional House bills he would like to see attached to the Senate deal, which could jeopardize the support of Senate moderates. (Bloomberg, March 15) Hensarling yesterday said that House Speaker Paul Ryan (R-WI) promised that no action will be taken on the Senate's Dodd-Frank rollback until members from both chambers meet to negotiate. "It is a little presumptuous or naïve that the House would not expect to enter into a negotiation with the Senate," Hensarling said. "Some seem to be under the impression that we are going to vote on their bill." (BNA, March 15) According to a White House statement immediately following passage of the Senate bill, "The President looks forward to discussing any further revisions the House is interested in making, with the goal of bipartisan, pro-growth Dodd-Frank relief reaching his desk as soon as possible." Negotiations between House members, and between the two chambers, will begin in earnest next week, prior to the two-week Easter recess scheduled for the end of the month.

Budget & Policy Landscape

March 16, 2018

Roundtable Weekly

Omnibus Spending Bill Delayed as Government Funding Deadline Looms

Lawmakers struggling over policy and program disagreements related to a $1.2 trillion “omnibus” spending bill have pushed a congressional vote to next week – closer to March 23, when current funding expires. Lawmakers struggling over policy and program disagreements related to a $1.2 trillion “omnibus” spending bill have pushed a congressional vote to next week – closer to March 23, when current funding expires. After President Trump signed a budget deal in February that ended a nine-hour government shutdown, a fifth Continuing Resolution is in place that funds the government through next Friday. House and Senate appropriators have since been working on an all-encompassing omnibus, which would fund government programs through September 30, when the FY2018 budget period ends. (Roundtable Weekly, Feb. 9)Of importance to commercial real estate, the National Flood Insurance and EB-5 programs are funded through March 23. EB-5 is operating under its 12th, short-term, status quo extension since Sept 2015.Disputes over funding for various programs will delay release of the omnibus spending package text until Sunday night or Monday morning. That timeline would likely result in a House vote on March 21, leaving only two days for the Senate to vote before current funding expires. (BNA, March 15)Senate Majority Whip John Cornyn (R-TX) yesterday noted several programs that he does not expect to be included in the omnibus, including a bill that addresses the future of young undocumented immigrants covered by the Deferred Action on Childhood Arrivals program (DACA). Cornyn also said a border security plan, including funding for a wall on the Mexican border, is also unlikely to be included in any funding legislation. (BNA, March 15) When asked if a sixth continuing resolution would be necessary to avoid a government shutdown beyond March 23, Rep. Mario Diaz-Balart (R-FL.), chairman of the House Appropriations Transportation-HUD Subcommittee, responded, “Oh God, please tell me no. I don’t think so. Maybe I’m just an optimist, but no, I really don’t think so.” (BNA, March 15)An omnibus spending package could be the last major bill passed by Congress before the 2018 midterm elections.The government’s FY2018 budget and its effect on programs affecting commercial real estate will be a focus of The Roundtable’s April 25 Spring Meeting in Washington, DC.

News

March 9, 2018

Roundtable Weekly

President Trump Authorizes Tariffs on Imported Steel and Aluminum; Exemptions for Canada, Mexico and Potentially Other Countries After Security Reviews

Despite pushback from GOP leaders, congressional members and allies overseas, President Trump yesterday authorized levies of 25 percent on imported steel and 10 percent on aluminum to take effect March 23, while exempting Canada, Mexico and potentially other countries based on a country-by-country review of bilateral security agreements. (MarketWatch, March 8 and Bloomberg, March 9) President Trump authorized levies of 25 percent on imported steel and 10 percent on aluminum. The Presidential Proclamation exempts Canada and Mexico based on renegotiation of terms in the North American Free Trade Agreement (NAFTA) and includes a degree of flexibility for exempting other nations.Roundtable President and CEO Jeffrey DeBoer noted the commercial real estate industry’s concerns, stating “For every job in the steel production industry, there are more than 50 jobs in the US construction industry (140,000 vs. 7-10 million). New tariffs on construction materials like steel could have the unfortunate, unintended side effect of raising construction costs and reducing jobs in real estate development. Exemptions will be important to mitigating the harm to the US economy.”In response to Trump’s initial tariff announcement last week, Senate Majority Leader Mitch McConnell (R-KY) commented on Tuesday, "There is a lot of concern among Republican senators that this could sort of metastasize into a larger trade war.” (NPR, March 8) Roundtable President and CEO Jeffrey DeBoer: "New tariffs on construction materials like steel could have the unfortunate, unintended side effect of raising construction costs and reducing jobs in real estate development. Exemptions will be important to mitigating the harm to the US economy." A March 7 letter to Trump from 107 House Republicans, including Ways and Means Chairman Kevin Brady, expressed concern that “adding new taxes in the form of broad tariffs would undermine” the economic benefits in recently-passed Tax Cuts and Jobs Act legislation. The letter also suggests conditions for imposing tariffs to minimize negative consequences. European Central Bank (ECB) President Mario Draghi said in a news conference yesterday, “If you put tariffs against what are your allies, one wonders who the enemies are.” Discussing the potential effects of the tariffs, he added, “Is there going to be a retaliation or not? What’s going to be the response of the exchange rate? …and the effect on confidence is very difficult to assess.” (CNBC, March 8)The tariff announcement comes after a recent White House infrastructure proposal that seeks to leverage $200 billion in federal funding to leverage $1.5 trillion in local, state and private funding over the next decade. Higher tariffs on imported steel and aluminum could present new challenges to obtain the raw materials needed for extensive infrastructure projects. Funding options for the Trump administration’s infrastructure proposal were discussed during a March 6 House Transportation and Infrastructure Committee that featured Transportation Secretary Elaine Chao. (Hearing, March 6)

Internet Sales Tax, Roundtable Weekly, Tax Policy

March 9, 2018

Roundtable Weekly

Real Estate Industry Urges Supreme Court to Expand States’ Authority to Collect Taxes on E-Commerce Purchases

The Roundtable joined an industry coalition in filing an amicus curiae brief on March 5 with the U.S. Supreme Court in South Dakota v. Wayfair, Inc., No. 17-494 – a case that addresses the constitutionality of states’ authority to collect sales and use taxes on Internet consumer purchases. (SCOTUSblog) The Roundtable joined an industry coalition in filing an amicus curiae brief on March 5 with the U.S. Supreme Court in South Dakota v. Wayfair, Inc., No. 17-494 – a case that addresses the constitutionality of states’ authority to collect sales and use taxes on Internet consumer purchases. After the high Court accepted Wayfair in January, the case has become the long-awaited judicial vehicle that may level the playing field between Internet-based retailers and “brick and mortar” stores. The industry amicus brief, drafted by former U.S. Solicitor General Seth Waxman and his colleague Ari Holtzblatt, urges the Supreme Court to overturn a pair of decades-old decisions (e.g., Quill Corp. v. North Dakota (1992) and National Bellas Hess, Inc. v. Department of Revenue of Illinois (1967). Wayfair directly challenges these pre-Internet opinions, which prohibit states from imposing tax collection obligations on web-based, catalog, and other retailers that lack an in-state physical presence.In today’s e-commerce driven world, the brief notes, the law should focus on retailers’ economic rather than physical presence, and level the playing field for all retailers who have in-state sales above a certain threshold.The brief explains how the outmoded court decisions continue to have damaging effects that reach far beyond actual brick-and-mortar outlets. “First, the loss of physical stores, many of which are integral to the social fabric of their communities, increases unemployment and creates a sense of dislocation among community residents. Second, the decline in the retail sector reduces the value of retail real estate, discourages further development of retail properties, and impedes innovation in the retail sector. Third, the lost revenue from sales, property, and income taxes threatens the ability of state and local governments to provide much-needed public services, including those that benefit online retailers,” the brief states.The Roundtable joined The International Council of Shopping Centers, Investment Program Association, Nareit®, the National Association of REALTORS® , the National Multifamily Housing Council, NAIOP, the American Farm Bureau Federation and the South Dakota Farm Bureau Federation on the amicus brief, which re-iterates many points set forth by a real estate coalition in an initialamicus brief filed last November. (Roundtable Weekly, Nov. 3, 2017)Trump Administration Solicitor General Noel Francisco also joined the wave of other submissions to SCOTUS on March 5. The Justice Department brief states, “In light of internet retailers’ pervasive and continuous virtual presence in the states where their websites are accessible, the states have ample authority to require those retailers to collect state sales taxes owed by their customers.” (Amicus brief of USA and Wall Street Journal, March 5)SCOTUS is scheduled to hear oral argument on April 17 and is expected to render a decision by the end of June. (Roundtable Weekly, Jan. 12)

Capital and Credit, HVCRE, Roundtable Weekly

March 9, 2018

Roundtable Weekly

Dodd-Frank Reform Legislation Includes Measure to Modify Banking Rule Affecting Acquisition, Development, or Construction Loans; Congressional Votes Next Week

DoddFrank Reform HVCRE

The Senate is expected to vote early next week on bipartisan Dodd-Frank reform legislation (S. 2155) that includes a Roundtable-supported measure to reform the Basel III High Volatility Commercial Real Estate (HVCRE) Rule, which would clarify specific requirements for acquisition, development, or construction (ADC) loans. The Senate is expected to vote early next week on bipartisan Dodd-Frank reform legislation ( S. 2155 ) that includes a Roundtable-supported measure to reform the Basel III High Volatility Commercial Real Estate (HVCRE) Rule, which would clarify specific requirements for acquisition, development, or construction (ADC) loans. The Economic Growth, Regulatory Relief, and Consumer Protection Act(S. 2155) represents the most significant change to financial regulatory law since 2010, when the Dodd-Frank Act was enacted. Among the financial issues it addresses, the Act would raise the amount at which banks are considered “too big to fail” – from the current $50 billion threshold to $250 billion – and provides additional relief for community banks and credit unions.Amendments added this week to the Manager’s Amendment for S. 2155 include a bipartisan HVCRE measure that originated in the U.S. House of Representatives as the Clarifying Commercial Real Estate LoansHVCRE bill (H.R. 2148), introduced by House Financial Services Committee members Rep. Robert Pittenger (R-NC) and Rep. David Scott (D-GA). After passing the House by voice vote in November of last year (Roundtable Weekly, Nov. 10), the Senate Banking Committee took up an identical bill in February – S. 2405 – co-sponsored by Senators Tom Cotton (R-AR) and Doug Jones (D-AL). Last Friday, the Roundtable and twelve other real estate organizations sent a comment letter urging all members of the Senate Banking Committee to take the necessary steps to enact S. 2405 by including the measure in the broader Dodd-Frank reform package (S. 2155).The current HVCRE Rule is overly broad and includes many stabilized loans without construction risk in this HVCRE category, unduly burdening those loans with capital charges meant to protect banks from heightened construction risks. As a result, banks, including small community financial institutions, have been deterred from making this type of loan, which can represent up to 50 percent of a small bank loan portfolio. The Roundtable and twelve other real estate organizations sent a comment letter urging all members of the Senate Banking Committee to take the necessary steps to enact S. 2405 by including the measure in the broader Dodd-Frank reform package (S. 2155). The Senate’s HVCRE measure would clarify which types of loans should be classified as HVCRE loans to ensure they do not impede credit capacity or economic activity, while still promoting economically responsible commercial real estate lending. (Roundtable Weekly, Jan. 12).Senate Banking Committee Chairman Mike Crapo (R-ID) and House Financial Services Committee Chairman Jeb Hensarling (R-TX) continue to work with their colleagues to advance bipartisan reform measure that will muster enough votes for passage in both chambers. It remains uncertain whether Crapo’s efforts will attract the support of House Republicans, who must approve the bill before it can be sent to the President for his signature. Hensarling said yesterday that the updated Senate bill doesn’t go far enough and needs more provisions to reflect “the will of the House.” (BNA, March 9)HVCRE reform is a is a top policy priority of The Real Estate Roundtable and its industry coalition partners, who have submitted numerous letters to policymakers since the measure was enacted in 2015. The Roundtable’s HVCRE Working Group played a critical role in drafting the measure and aiding efforts to advance legislative reforms. (Roundtable letter, March 2)Financial regulation and its effect on commercial real estate lending will be a focus of The Roundtable’s April 25 Spring Meeting in Washington, DC.

Infrastructure, Trade Policy

March 2, 2018

Roundtable Weekly

President Trump’s Plans to Slap Global Tariffs on Imported Steel and Aluminum Spark Concerns Regarding Real Estate and Infrastructure Investment

President Trump yesterday said he will sign a formal order next week imposing tariffs of 25 percent on imported steel and 10 percent on aluminum for “a long period of time” – an act that could raise domestic construction costs and create new challenges for real estate development and infrastructure projects. (White House Remarks, March 1)President Trump yesterday said he will sign a formal order next week imposing tariffs of 25 percent on imported steel and 10 percent on aluminum.Roundtable President and CEO Jeffrey DeBoer voiced concern about how such a broad international penalty could rebound against the domestic commercial real estate industry. “In the United States, forty-two percent of steel is consumed by the construction industry, which employs millions of Americans directly and millions more indirectly,” said DeBoer. “Aluminum is also a key material used in energy efficient building construction. The current healthy state of the U.S. commercial real estate industry could be hard hit with the unintended consequences from such broad penalties targeting metals essential to construction. Tariffs will lead to higher construction costs that make many new projects simply uneconomic and unviable — hurting investment and job creation,” DeBoer noted. Trump’s announcement, made during a White House meeting with U.S. metals industry executives, sparked a bout of stock market volatility and immediate responses from Canada and the European Union promising “countermeasures” to “rebalance” international trade with the U.S. Federal Reserve Chairman Jerome Powell, following testimony this week before the House and Senate, said, “The best approach is to deal directly with the people who are affected, rather than falling back on tariffs.” (Wall Street Journal, March 1) According to an analysis by the Cato Institute, more than 200 anti-dumping and countervailing duty orders aimed at preventing unfair competition currently constrain U.S. imports of steel and iron products from a long list of countries. The effect has been an increase in U.S. prices well above global levels to the detriment of the large manufacturing and construction sectors in America that use steel to make higher-value products. (CATO Institute, CNN Commentary, Aug. 2, 2017 and Engineering News-Record, Feb. 22, 2018) The impact of tariff penalties on President Trump’s recent infrastructure proposal are uncertain. Transportation Secretary Elaine Chao yesterday testified before a Senate committee about the Administration’s infrastructure plan, which emphasizes policies to lower project costs and reduce project delays. Higher tariffs on steel – a material necessary to build and repair bridges, tunnels, pipelines, and rail lines – could further constrain the federal state, local and private funding sources touted by the Administration as necessary to finance U.S. infrastructure repair and modernization. (Bloomberg, March 1) Infrastructure and national policies affecting economic growth will be discussed during The Roundtable’s Spring Meeting on April 25 in Washington, DC.

Joint Employer, Joint Employer Standard, Roundtable Weekly

March 2, 2018

Roundtable Weekly

NLRB Restores Broad, Obama-Era “Joint Employer” Standard; Industry Coalition Calls for Congress to Pass Unified National Definition

A conflict of interest by a newly-appointed member of The National Labor Relations Board (NLRB) prompted the agency on Monday to restore a 2015 ruling that renders employers vulnerable to claims by “indirect” workers who are not immediate hires – a move with significant implications that again subjects hotels, other franchise-model businesses, and companies that hire contractors to an expansive “joint employer” liability standard.With Browning-Ferris revived, an expanded, vague test – based on “indirect ” and “ potential ” control over workers’ terms and conditions of employment – will replace a more predictable and clear “direct and immediate control” standard for determining joint employer liability.Last December, the NLRB issued its decision in Hy-Brand Industrial Contractors, Ltd. , which overturned the Obama-era “joint employer” standard announced in Browning-Ferris Industries of California, Inc. (Roundtable Weekly, Dec. 15, 2017) With Hy-Brand now vacated – because the board’s inspector general recommended that a Trump appointee who previously worked for a law firm that represented one of the companies in Browning-Ferris should have recused himself – the 2015 decision is back in effect.The withdrawal of Hy-Brand creates an uncertain and complicated legal landscape for ongoing franchise-related cases. (New York Times, Feb. 26) With Browning-Ferris revived, an expanded, vague test – based on “indirect” and “potential” control over workers’ terms and conditions of employment – will replace a more predictable and clear “direct and immediate control” standard for determining joint employer liability. The decision exposes a broad range of contractors and subcontractors, and franchisors and franchisees, to workplace liability for another employer’s actions and a potential obligation to collectively bargain with workers they have not directly hired. (Wall Street Journal, Dec. 14.)As the NLRB’s action vacating Hy-Brand demonstrates, congressional action could definitively address the joint employer standard and insulate the issue from whichever party has enough appointees to swing the majority on the highly politicized labor board. The House of Representatives in November 2017 passed the Save Local Business Act (H.R. 3441), which would codify the “direct and immediate control” standard when deeming employers liable for workplace violations.A multi-industry coalition, including The Real Estate Roundtable, on Feb. 15 wrote Senate leaders urging them to take up H.R. 3441 as soon as possible to provide certainty for small business owners and other employers in all industries, while clarifying protections for American workers.

Economic Growth - Travel & Tourism, Roundtable Weekly, Tourism

March 2, 2018

Roundtable Weekly

“Visit U.S. Coalition” Unveils Policy Goals to Encourage Foreign Tourism and Boost Job Growth

The multi-industry Visit U.S. Coalition (which includes The Real Estate Roundtable) on Wednesday released its policy agenda aimed at promoting and increasing inbound international travel to the United States. (VisitU.S.Policy Agenda, Feb. 28)The multi-industry Visit U.S. Coalition (which includes The Real Estate Roundtable) on Wednesday released its policy agenda aimed at promoting and increasing inbound international travel to the United States. ( VisitU.S. Policy Agenda , Feb. 28) The coalition advocates for policies that urge 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) "Robust international travel helps to power the U.S. commercial real estate markets, not only hospitality properties but retail, attraction, health and investment properties as well,” said Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable. "We look forward to continuing to work to emphasize that America is a uniquely welcoming, interesting and safe travel destination for international visitors. Positive national tourism policies boost overall economic growth, support and create jobs, generate revenues to help modernize our infrastructure, and generally improve the quality of life in our communities,” DeBoer added. The 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. The coalition’s agenda encourages federal policy makers to:Embrace International Travel to the U.S. as a National PriorityExpand Intelligence Sharing and Streamline the Travel Entry ProcessMake America’s Visa System More Secure and Accessible to International TravelersIncrease Security and Efficiency in America’s Travel Screening Systems at U.S Ports of EntryLed by the U.S. Travel Association and the American Hotel and Lodging Association, the coalition also includes the U.S. Chamber of Commerce and the American Resort Development Association.

March 2, 2018

Policy Comment Letter

5. 2018-03-02 Real Estate Industry HVCRE Comment Letter – Senate Banking – FINAL (002)

Internet Sales Tax, Roundtable Weekly, Tax Policy

February 23, 2018

Roundtable Weekly

Mnuchin: President Supports Sales Tax for Online Purchases; GAO Study Shows States Losing Billions from Tax-Free Sales

As expectations grow that the Supreme Court will rule on the issue of state and local taxation of internet purchases by this summer, Treasury Secretary Steven Mnuchin recently testified before two congressional committees about President Trump’s support for an online sales tax. Treasury Secretary Steven Mnuchin recently testified before two congressional committees about President Trump’s support for an online sales tax. During a hearing before the Senate Banking Committee, Mnuchin addressed taxing online purchases through the Marketplace Fairness Act, stating: "[T]he president fundamentally supports the idea of some type of sales tax across the board ... There are aspects of that he likes a lot and he looks forward to working with you and others on it." (Video of Exchange with Sen. Jon Tester (D-MT), C-Span, Jan. 30) At a Feb. 15 House Ways and Means Committee hearing, Mnuchin said the president "does feel strongly" that the U.S. should impose a sales tax on purchases made over the Internet. (Bloomberg, Feb. 15)The U.S. Government Accountability Office (GAO) released a study in December estimating that state and local governments could have collected an estimated 8 to 13 billion dollars in 2017 if states were given authority to require sales tax collection from all remote sellers. (GAO report, Dec. 18, 2017). The Roundtable has recommended that sales taxes collected from on-line consumer purchases may provide a reliable source of state and local revenue to help pay for President Trump's recently proposed infrastructure re-building plan. (Roundtable Weekly, Jan. 26, 2011.)The Supreme Court is scheduled to hear oral argument in South Dakota v. Wayfair, Inc., on April 17 to resolve the constitutionality of collecting sales and use taxes that are due on Internet purchases. The high court is expected to render a decision by the end of June. (Roundtable Weekly, Jan. 12)The International Council of Shopping Centers, Investment Program Association, Nareit®, and the National Association of REALTORS® will join The Roundtable on an amicus brief to be filed early next month in Wayfair, urging the Supreme Court to overturn a pair of decades-old opinions prohibiting states from imposing sales and use tax collection obligations on web-based, catalog, and other retailers lacking an in-state physical presence. The upcoming brief will re-iterate many of the points that the real estate coalition set forth in an initial amicus brief filed last November (Roundtable Weekly, Nov. 3, 2017.)

February 23, 2018

Roundtable Weekly

Roundtable Proposes Framework for Implementing the Real Estate Exception to the New Business Interest Deduction Limit

The Real Estate Roundtable on Wednesday wrote to Treasury Secretary Steven Mnuchin regarding the new limitation on business interest deductibility created in the Tax Cuts and Jobs Act, including rules that allow taxpayers to continue fully deducting interest related to commercial real estate debt. (Roundtable letter, Feb. 21) The Feb. 21 Roundtable letter urges that Treasury clarify that interest (other than investment interest) on debt that is allocable to an owner of an entity engaged in a real property trade or business is exempt from the new business interest limitation rule – if that trade or business has elected out of the rule. The exception for interest allocable to a real property trade or business reflects policymakers' understanding that limits on the deduction for interest expense could have enormous negative consequences for property values, real estate markets, and economic growth. (Reference: Real Estate Forum, Jan/Feb 2018, Decoding The New Tax Bill)The Feb. 21 comment letter requests clarification to ensure the real estate exception operates as intended for common real estate ownership arrangements – focusing on the scope and application of the exception for an electing real property trade or business. The letter urges that Treasury clarify that interest (other than investment interest) on debt that is allocable to an owner of an entity engaged in a real property trade or business is exempt from the new business interest limitation rule – if that trade or business has elected out of the rule. As relevant examples, the letter describes four common scenarios where the financing of a real property trade or business occurs through a tiered structure. The letter demonstrates why treating the interest expense of an upper-tier entity as properly allocable to the real property trade or business of a lower-tier entity is consistent with the legislative intent and conforms with existing tax rules and principles. The letter also addresses the allocation of indebtedness within entities, requesting that Treasury guidance apply the tracing rules found in existing authorities, which are already used for purposes of the passive loss rules. During a Feb. 20 tax conference, both Treasury's Deputy Tax Legislative Counsel Krishna Vallabhaneni and Deputy Assistant Secretary for Tax Policy Dana Trier said a notice on language limiting interest expenses under the new tax law will be issued soon. (Bloomberg Law, Feb. 20). This week's letter is a follow-up to a Jan. 18 Roundtable letter, which identified several areas where Treasury rulemaking would reduce uncertainty and facilitate continued investment. [Roundtable Weekly, Jan. 19] As Treasury and Congress continue to focus on implementation and technical corrections to the new tax law, The Roundtable and TPAC will play an active role in seeking appropriate clarifications affecting the most significant changes to the tax code in more than three decades.

February 21, 2018

Policy Comment Letter

2018-02-021 Tax BizDeduct 163j letter

Roundtable Weekly, Tax Policy, Tax Reform, Tax Reform Technical Corrections

February 16, 2018

Roundtable Weekly

Policymakers Pledge to Issue Technical Corrections and Guidance to Implement New Tax Law

Treasury Secretary Steven Mnuchin testified before Senate and House tax-writers this week about implementation of the new tax law – including needed corrections affecting carried interest limitations and a drafting mistake that subjects qualified property improvements to a 39-year recovery period, rather than 15 years. Secretary Mnuchin testified on tax issues before the Senate Finance Committee on Feb. 14, followed by his appearance before the House Ways and Means Committee on Feb. 15. Ways and Means Chairman Kevin Brady (R-TX) pledged during a Feb 15 hearing to address errors included in the Tax Cuts and Jobs Act (P.L. 115-97). Brady stated, "We know that certain parts of this provision are having unintended consequences" and that he was "committed to working with our Ways and Means Members, with Senator Hatch and the Senate Finance Committee, and the Administration and stakeholders to develop the right solution now – one that is thoughtful, carefully crafted, and successful restoring balanced competition in the marketplace." (Brady's Opening Statement, Feb. 15) [Earlier that day, Brady invited input from stakeholders on potential problems and unintended consequences arising from the new tax law. "We expect to develop a punch list of provisions that need to be addressed either administratively or through changes in the code itself," he said. (BNA, Feb. 15)] During the House hearing, Rep. Jim Renacci (R-OH) explained to Secretary Mnuchin that Ways and Means members are working on a tax reform drafting mistake that should have provided for a 15-year recovery cost-recovery period to qualified property improvements, instead of the 39 year period that was enacted. Mnuchin responded to Renacci: "I am aware of the error and it obviously was unintended. We are looking at whether there is anything we can do with regulations. I think it is likely that this is something that may need to be fixed in the bill. We look forward to working with you." (Ways and Means Committee, Mnuchin's testimony and hearing video) If a focused corrections bill cannot be quickly passed by Congress, policymakers are considering adding a corrections provision to a must-pass spending bill to keep the government funded beyond by March 23. (Bloomberg Law, Feb. 13) Mnunchin also testified during a Feb 14 Senate Finance Committee hearing that Treasury will issue guidance this month regarding new tax laws affecting carried interest. Under the new tax law, investment fund managers and others qualify for carried interest tax treatment after holding assets for three years, instead of one year. Yet the new law doesn't apply to S corporations' carried interest profits. (The Hill, Feb. 14) "We will be putting out guidance and regulations to make sure that people can't abuse the pass-throughs," Mnuchin testified. "The IRS and [Treasury office of] tax policy intends to send out within the next two weeks guidance that we do believe that taxpayers will not be able to get that loophole by going through [S corporations]," he added. (Bloomberg, and CQ, Feb. 14) In January, The Roundtable wrote to Treasury Secretary Mnuchin offering several suggestions aimed at ensuring the long-term success of the Tax Cuts and Jobs Act (TCJA). [Roundtable Letter, Jan. 18]

News

February 16, 2018

Roundtable Weekly

Trump Administration Proposes Framework for Nationwide Infrastructure Improvements

The Trump Administration on Monday released its long-awaited Legislative Outline for Rebuilding Infrastructure in America, which proposes at least $1.5 trillion in new investment across infrastructure asset classes; incentivizing greater state and local funding; shortening the project permitting process to two years; investing in rural projects; and improving worker training. (White House Fact Sheet, Feb. 12) The Trump Administration on Monday released its long-awaited Legislative Outline for Rebuilding Infrastructure in America , which proposes at least $1.5 trillion in new investment across infrastructure asset classes. ( White House Fact Sheet , Feb. 12) President Trump proposes that the government would spend $200 billion in infrastructure investment to spur states, localities and the private sector to raise the $1.3 trillion balance. According to the Administration's proposal, states, localities and the private sector are asked to "step-up" their presence to catalyze a larger, modernized, and broader investment market. New federal funds would be allotted to boost existing federal infrastructure financing (like the TIFIA loan program for surface transportation) and expand federal financing platforms to reach airports, ports, short-line and passenger rail, rural broadband, stormwater, flood remediation and prevention, Brownfields remediation, and others. Transportation Secretary Elaine Chao will appear before Senate and House infrastructure panels in early March to discuss the Administration's proposal. (Bloomberg Law, Feb. 13) Since odds for passing a bill with additional spending this year are slim, serious consideration of a specific infrastructure bill is not expected until after the mid-term elections and a new Congress is sworn-in. Roundtable President and CEO Jeffrey DeBoer commented on the positive economic benefits that such an infrastructure program would bring to the nation. "Modernizing our roads, tunnels, mass transit, drinking water, power grid, and telecommunications systems – in rural and urban areas alike – are vitally important to economic growth, productivity and America's global competitiveness," DeBoer said. He added, "Real Estate Roundtable members are experienced in addressing the financing, permitting and government partnership issues that frequently slow or stop infrastructure projects. We intend to provide positive feedback and ideas to all policymakers working to facilitate improvements in our nation's infrastructure." (Roundtable Letter on Infrastructure Funding, Jan. 11)

News

February 16, 2018

Roundtable Weekly

House Passes ADA Reform Bill to Counter “Drive-By” Lawsuits

The House of Representatives on Wednesday passed legislation (H.R. 620) to reform the American With Disabilities Act (ADA) to curb unscrupulous lawsuits alleging minor and easily correctable impediments to building access. The House of Representatives on Feb. 14 passed legislation ( H.R. 620 ) to reform the American With Disabilities Act (ADA) to curb unscrupulous lawsuits alleging minor and easily correctable impediments to building access. Approved by a 225-192 vote, The ADA Education and Reform Act (H.R. 620), attracted 12 Democratic votes to address the rise in so-called "drive-by" lawsuits where disabled individuals never actually seek access to properties that are allegedly ADA non-compliant. A 60 Minutes segment in 2017 reported on lawyers filing ADA complaints simply after driving by a business or reviewing properties online via Google Earth. Many business owners subjected to such "drive-by" ADA claims have found it less costly to settle complaints and avoid the litigation process. (International Council of Shopping Centers, ADA Lawsuit Reform) Under H.R. 620, individuals intent on suing hotels, restaurants or other businesses over an ADA violation must first give the business 60 days to address specific complaints, detailed in an initial written notice, about physical barriers that prevent access or otherwise discriminate against disabled customers. Before a law suit can be filed, another 60 days must be allowed for the business to make "substantial progress" toward remedying the problem. (Washington Post and BNA, Feb. 15) House Judiciary Committee Chairman Bob Goodlatte (R-VA) noted, "All this bill does is require those unscrupulous trial lawyers to do what ethical lawyers already do: give fair notice of a violation before thousands of dollars in attorneys' fees are racked up against a small business, diverting money from accessibility where it belongs," Goodlatte said. (The Hill, Feb. 15, 2018) Tom McGee, president and CEO of the International Council of Shopping Centers (ICSC), applauded policymakers for "ensuring that the landmark [ADA] continues to protect disabled people from discrimination in their everyday life - from employment to accessing public places. The retail real estate industry is fully committed to the collective goals of more accessibility and ensuring fair compliance with this important law," he said. (Roundtable Weekly, Sept 8, 2017) ICSC and other real estate groups intend to pursue a strategy to pass ADA litigation reform in the Senate in the coming months.

Budget & Policy Landscape

February 9, 2018

Roundtable Weekly

President Trump Signs Budget Deal That Extends Government Funding Until March 23, Lifts Debt Ceiling for One Year and Sets Two-Year Budget Agreement

During a week of thousand-point gyrations in the stock market and last-minute congressional votes to keep the government open, President Trump this morning signed a budget deal into law that ended a nine-hour government shutdown. [Bipartisan Budget Act legislation (H.R. 1892)]The budget deal and spending measure – which passed the Senate today just before 2:00 AM, followed by a narrow approval vote in the House about 5:30 AM – includes:The Congress passed the budget deal and spending measure early on the morning of Feb. 9, hours after the government technically shut down. Another short-term Continuing Resolution funding the government through March 23;An increase in the debt ceiling that is expected to last one year, addressing the matter until well after the mid-term elections;An agreement to increase budget caps – and significantly increase spending – by $320 billion over the next two years, split between defense and non-defense domestic spending;Disaster relief funding and renewal of a slew of expired tax provisions. (The bill does not address the controversial DACA issue – the status of immigrants brought to the U.S. as children.)Although the measure includes a clean, one-year retroactive extension of the Section 179D tax deduction for energy efficient buildings through 2017, it does not include any technical corrections to the landmark tax overhaul enacted in December. Those corrections are expected later this year in separate legislation.Next, President Trump is scheduled to submit the Administration’s 2019 budget proposal as House and Senate appropriators begin work on 12 bills that may fund the government beyond March 23 – until the remainder of FY2018 through September 30. The Senate Finance Committee released its Summary of the Tax Extenders Agreement explaining the extension of several temporary tax provisions. The Joint Committee on Taxation issued JCX-4-18, estimating that the tax provisions in the Bipartisan Budget Act of 2018will cost about 17.4 billion dollars over the next decade. Other real estate-related tax provisions in the bill extend tax credits for energy-saving improvements to homes, continue the income exclusion when home mortgage debt is forgiven, and extend the individual deduction for home mortgage insurance. The National Flood Insurance and EB-5 programs are also extended through March 23, 2018. This is the 12th short-term, status quo extension of EB-5 since Sept 2015.Next, President Trump is scheduled to submit the Administration’s 2019 budget proposal on Monday as House and Senate appropriators begin work on 12 bills that may fund the government beyond March 23 – until the remainder of FY2018 through September 30.

Q1 Sentiment Index

February 9, 2018

Roundtable Weekly

Commercial Real Estate Executives Positive Despite Cautious 2019 Outlook

Commercial real estate industry leaders continue to acknowledge positive conditions in the economy and current real estate markets, while expressing some caution about 2019, according to The Real Estate Roundtable’s Q1 2018 Economic Sentiment Index released yesterday. Participants in the Q1 survey responded they are feeling comfortable about the stability of the real estate market in 2018, but many expressed concerns about what the market may look like in 2019. — Full Report — “As our Q1 Index shows, commercial real estate executives continue to anticipate strong near term asset values and capital availability,” said Roundtable President and CEO Jeffrey DeBoer. “Strong, growing commercial real estate markets go hand in hand with overall positive economic growth. Moreover, healthy commercial real estate markets directly benefit local communities by providing significant revenue to support local budgets and services,” DeBoer added.The report’s Topline Findings include:While the Q1 index came in at 54, there is a noticeable gap between the scores for current conditions (57) and future conditions (51). Responders are feeling comfortable about the stability of the real estate market in 2018, but many expressed concerns about what the market may look like in 2019.With asset values nearing perceived peaks in gateway cities, the real estate community has demonstrated discipline many feel was absent in the previous cycle. Debt and equity sources of capital are making thoughtful, risk-weighted decisions.Asset values continue to increase in secondary and tertiary markets as investors chase yield. In gateway and coastal cities, many responders feel that markets are nearing peak values.For high quality investments in primary markets, responders feel there are many sources of debt and equity capital. Many responders suggested alternative lending platforms are providing increased competition.

Economic Growth - Travel & Tourism, Roundtable Weekly, Tourism

February 9, 2018

Roundtable Weekly

International Visitor Spending in the U.S. Drops; “Visit U.S.” Coalition Aims to Spur Tourism and Economic Growth

Spending by international travelers to the U.S. decreased 3.1 percent over the past year, the second consecutive annual drop in 15 years, according to Department of Commerce data released Tuesday. (U.S. Travel Association, Feb. 7)Travel Exports vs. All Other Exports (U.S. Travel Association) — enlarge — As the U.S. hospitality sector is a vital component of the commercial real estate industry – providing significant capital investment, opportunities and infrastructure improvements in local communities throughout the country – The Real Estate Roundtable recently joined 12 other national trade organizations as a member of the "Visit U.S." Coalition to work with policymakers in reversing the decline. (Roundtable Weekly, Jan. 19). The two-year fall-off in international visitor spending confirmed by Commerce data also tracks America’s loss in long-haul market share – a decrease from 13.6 percent in 2015 to 11.9 percent in 2017. Overall travel volume increased 7.9 percent in the same period – meaning that foreign travelers are opting to visit other countries than the US and spending their money elsewhere. (U.S. Travel Association, Travel Exports vs. All Other Exports, Feb. 2)"The slide (in international travel to the U.S.) has deprived our economy of an estimated $32 billion in additional spending and 100,000 additional jobs." U.S. Travel Association President and CEO Roger Dow “We are certainly concerned about the statistics,” said Craig Kalkut, vice president of government affairs at the American Hotel and Lodging Association (AHLA) – a founding member of the Visit U.S. coalition. Kalkut added, “It’s important for the hotel industry but also the businesses that surround [and occupy] hotels and the economy overall, so it’s time to take some action.” (Commercial Observer, Feb. 8)USTA President and CEO Roger Dow stated, “International inbound travel is America’s No. 2 export overall; directly supports more than a million American jobs; and brings in $245 billion a year to our economy. But the U.S. share of the growing global long-haul travel market has been eroding since before the start of the Trump administration … That slide has deprived our economy of an estimated $32 billion in additional spending and 100,000 additional jobs. The good news? The problem is fixable, through balanced messaging and sound policymaking.” (USTA, International Visitors Are Crucial to President Trump’s Priorities, Feb. 7)In the coming weeks, Visit U.S. will advance policy recommendations that support its shared objectives with the Trump administration. (Visit U.S., Jan. 16)

In Memoriam

February 9, 2018

Roundtable Weekly

Roundtable Member Joe Stettinius – Cushman & Wakefield’s CEO of Americas

The Real Estate Roundtable is saddened by the recent passing of real estate industry veteran Joe Stettinius. An active Roundtable member, he was most recently named executive vice chairman of strategic investments for the Americas at Cushman & Wakefield.Joe Stettinius – Cushman & Wakefield’s CEO of Americas Since the mid-1980s, Joe worked in every aspect of commercial real estate – from financing to development to research and leasing. In 2010, he helped launched Cassidy Turley from a network of brokerages affiliated with Colliers International and his former employer, Cassidy & Pinkard. He played a key role in two significant mergers – Cassidy Turley’s merger with DTZ in January 2015, followed by DTZ’s merger with Cushman & Wakefield, which created a 43,000-employee global giant. (Biz Journals and BizNow, Feb. 2)Cushman & Wakefield issued a statement that included, “Joe was committed to his friends and colleagues, helping them transform into the best version of themselves. He will be remembered for his dedication to diversity – building a culture where all could succeed.” (Cushman & Wakefield, Feb. 2)

Economic Growth & CRE, Infrastructure

February 2, 2018

Roundtable Weekly

Trump’s State of the Union Includes Increased Infrastructure Investment Proposal; New Reports Show Debt Ceiling Will Be Reached in March

In his State of the Union address this week, President Trump called for a bipartisan approach on infrastructure and immigration – policy issues that could define the second year of his Administration before mid-term elections in November.In his State of the Union address this week, President Trump called for a bipartisan approach on infrastructure and immigration. The president's address included a proposed 50 percent increase in infrastructure spending compared to a 1 trillion dollar goal stated earlier. (USA Today, Jan. 5). "Tonight, I am calling on the Congress to produce a bill that generates at least 1.5 trillion dollars for the new infrastructure investment we need. Every federal dollar should be leveraged by partnering with state and local governments and, where appropriate, tapping into private sector investment, to permanently fix the infrastructure deficit," Trump said. Although the president's comments did not include details about how to fund the infrastructure initiative, he also emphasized the need to reduce the average permitting time for infrastructure projects from 10 years to two – noting that the Empire State Building was built in one year. Roundtable President and CEO Jeffrey DeBoer commented on the positive economic benefits that such an infrastructure program would bring to the nation. "Modernizing our roads, tunnels, mass transit, drinking water, power grid, and telecommunications systems – in rural and urban areas alike – are vitally important to economic growth, productivity and America's global competitiveness," DeBoer said. He added, "Real Estate Roundtable members are experienced in addressing the financing, permitting and government partnership issues that frequently slow or stop infrastructure projects. We intend to provide positive feedback and ideas to all policymakers working to facilitate improvements in our nation's infrastructure." (Roundtable Letter on Infrastructure Funding, Jan. 11) The White House said on Wednesday that it will offer Congress detailed principles on the infrastructure proposal in the coming weeks. (Bloomberg, Feb. 1). Roundtable President and CEO Jeffrey DeBoer noted that both infrastructure and immigration policies could create more jobs and spur higher wages. President Trump also made immigration a key focus of his address, proposing a four-point immigration reform and border security framework. A vote may be held next week in Congress on the Deferred Action for Childhood Arrivals (DACA, or "Dreamers") immigration program. The Roundable's DeBoer noted that both infrastructure and immigration policies could create more jobs and spur higher wages. "Pro-growth immigration reform that honors our roots as a nation of immigrants and safeguards our nation's security is also critically important to continue the upward trajectory of our economy," DeBoer stated. Debt Ceiling Looming over policy debates on Capitol Hill and a Feb. 8 scheduled expiration of government funding is the nation's debt ceiling, which will be reached in March according to reports this week from the Treasury Department and Congressional Budget Office. The debt ceiling allows the government to finance commitments that have already been made — it does not authorize new spending. Both reports forecast the government will be unable to meet its debt obligations in March. Treasury Secretary Steven Mnuchin on Wednesday urged congressional leaders to "act promptly" to increase the limit. (Reuters, Jan. 31). Congressional lawmakers are reportedly working on a fifth Continuing Resolution this fiscal year to fund the government through March 23 — it needs to pass next week to prevent another government shutdown. (BNA, Feb. 1)

Infrastructure, Roundtable Weekly, Scaffold Law

February 2, 2018

Roundtable Weekly

House Judiciary Committee Passes Infrastructure Expansion Act to Counter Inequities in “Scaffold Law”

Legislation aimed at lessening the harsh impact of an antiquated 133 year-old labor "Scaffold Law" – an economic burden on infrastructure projects crossing state lines – passed the House Judiciary Committee on Tuesday. (Committee Mark-up Video, Jan. 30)The Jan. 29, 2018 industry coalition letter in support of the Infrastructure Expansion Act (H.R. 3808). The Infrastructure Expansion Act of 2017 (H.R. 3808), sponsored by Rep. John Faso (R-NY), passed along party lines by a 16-14 vote. The Real Estate Roundtable, Associated General Contractors, and 17 U.S. organizations representing the contracting, insurance and real estate sectors urged the committee to pass the bill. (Coalition Letter, Jan. 29) The coalition letter provides several examples of transportation projects (such as the Northeast Corridor Gateway Program) that would benefit multiple states and the national economy, yet are hindered by application of the Scaffold Law. Courts have interpreted the New York law to subject property owners and contractors to "absolute liability" for slips, falls, and height-related accidents that occur during commonplace painting, cleaning, remodeling, and construction activities. Under this standard, any negligence by a worker that may cause an accident or intensify his own injuries is disregarded. As an example, an inebriated worker who stumbles and falls at a project site would not be held accountable to the extent his intoxicated state caused his own injuries. (Roundtable Weekly, Jan. 19). As a result, absolute liability under the Scaffold Law has caused premiums for general liability insurance at New York development sites to skyrocket. H.R. 3808 would deny federal funding to construction projects that use New York's "absolute liability" standard for workplace injuries caused by falls. The bill does not diminish or alter Federal or state OSHA obligations, nor does it foreclose "no-fault" workers' compensation. Committee Chairman Goodlatte (R-VA) broadened the bill's scope to require states use either a "comparative negligence" or "contributory negligence" standard for falls on federally subsidized projects. In a statement, Goodlatte also offered detailed reasons explaining why the legislation should be enacted. Although the Infrastructure Expansion Act may continue to gain predominantly GOP support in the House, its prospects in the Senate are far more challenging.

News

February 2, 2018

Roundtable Weekly

Janet Yellen Concludes Tenure as Federal Reserve Chair; Jerome Powell Begins Four-Year Term on Feb. 5

Janet Yellen concluded her final meeting as chair of the Federal Reserve on Wednesday after four-years of overseeing a cautious approach to monetary policy at the central bank. The Fed released a statement the same day about positive trends in the national economy, citing information "that the labor market has continued to strengthen and that economic activity has been rising at a solid rate." (Federal Reserve Statement, Jan 31)The Federal Reserve in Washington, DC The Senate on Jan. 23 voted 84-13 to confirm Fed Governor Jerome "Jay" Powell as the next Fed chairman. After the Fed's Federal Open Market Committee (FOMC) this week unanimously affirmed Powell as its chair, he will be sworn into office for a four-year term on Feb. 5. President Trump now has the opportunity to fill four of seven seats empty on the Fed's board. Powell is expected to continue monetary policies pursued in the Yellen-era. In December, Ms. Yellen said, "There is strong consensus in the committee for the gradual approach that we've been pursuing, and governor Powell has been part of that consensus." (Wall Street Journal, Jan. 31) During her tenure, Yellen raised borrowing costs five times since late 2015 and recently initiated a reduction process in the central bank's 4.5 trillion dollar balance sheet. Most economists foresee another interest rate increase when the Fed meets for its next scheduled policy meeting in March under Chairman Powell. (Los Angeles Times, Jan. 31) Before President Barack Obama appointed him to serve as Fed Governor in 2012, Powell served at the Treasury Department under President George H.W. Bush and served as a managing director at Carlyle Group.

January 29, 2018

Policy Comment Letter

4. 2018-01-29 FINAL HR 3808 Support Letter

News

January 26, 2018

Roundtable Weekly

Roundtable Debuts 2018 Policy Agenda, Engages Policymakers on Key Issues

Top U.S. policymakers and industry leaders met this week for The Roundtable’s State of the Industry (SOI) Meeting in Washington, DC to discuss policy issues of compelling interest to CRE. Launching the SOI meeting on Wednesday, Roundtable Chair William C. Rudin ( Rudin Management Company, Inc. ), right, and Roundtable President and CEO Jeffrey DeBoer, left, noted how Roundtable efforts are the result of research and analysis to find correct answers that benefit economic growth and job creation. The Roundtable also issued its 2018 National Policy Agenda: Building For The Future. Specific issues included in the Policy Agenda were identified after a comprehensive, annual membership survey; frequent meetings held by The Roundtable's policy advisory committees (see below); and participation by The Roundtable's Board of Directors. Launching the SOI meeting on Wednesday, Roundtable Chair William C. Rudin (Rudin Management Company, Inc.) noted how Roundtable efforts are the result of research and analysis to find correct answers that benefit economic growth and job creation. Rudin also said that the organization consistently communicates positions to policymakers that illustrate how healthy real estate markets are intertwined with the entire economy. This approach – "analysis first, followed by advocacy" – will continue to be the model for The Roundtable through 2018 and beyond, Rudin commented. Illustrating how The Roundtable relies on member participation, he commented on the organization's successful 2017 policy year regarding tax policy, sustainability and other efforts: "This past year we had great participation from Roundtable members who traveled to Washington when needed to personally meet with policymakers and discuss the obvious, and sometimes not so obvious, consequences of a policy decision." He added, "We testified, wrote comment letters, led industry coalitions, submitted economic analysis, organized targeted meetings, and continued to brand The Roundtable as a trusted voice on national policy issues." Illustrating how The Roundtable relies on member participation, Rudin spoke about the organization's successful 2017 policy year regarding tax policy, sustainability and other efforts to the SOI audience. Rudin also outlined various policy initiatives The Roundtable will focus on in the upcoming fiscal year with the Trump Administration and Congress, including implementation of the new tax law; financial regulatory issues; internet sales tax; infrastructure; attracting overseas tourists through the "Visit U.S." coalition; and high performance buildings — all vital to spurring job creation and sustaining economic growth. Roundtable President and CEO Jeffrey DeBoer then offered an overview of the recent changes in tax law, along with upcoming issues in play. He also noted the vital role of The Roundtable's 17 national real estate trade association partners in presenting a unified voice on issues to policymakers in Washington. Policy Issues and Meeting Speakers Five U.S. Senators were among the featured SOI guests, which included: Senate Minority Leader Chuck Schumer (D-NY) engaged Roundtable members on the need for a massive plan to revamp the nation's airports, bridges, roads, seaports, broadband and other critical infrastructure. Senate Minority Leader Chuck Schumer (D-NY) engaged Roundtable members on the need for a massive plan to revamp the nation's airports, bridges, roads, seaports, broadband and other critical infrastructure. Sen. Schumer emphasized how critical infrastructure improvements are to commercial real estate, job creation and the national economy. He also spoke about the need to pass the Marketplace Fairness Act to bolster states' collection of internet sales taxes, which could be used to assist state funding of infrastructure improvements. Sen. Mark Warner (D-VA) emphasized the need for bipartisanship in Congress in light of the recent tax legislation passed by Republicans. He noted that bipartisan efforts on issues such as GSE and housing finance reform could provide relief to the housing affordability crisis, while encouraging capital flows and competition. Sen. Warner said that regulatory relief on Dodd-Frank was also possible in upcoming months in Congress. Sen. Ron Wyden (D-OR), ranking member of the Senate Finance Committee, spoke about the need for a bipartisan effort to address low income housing needs. Sen. Wyden described the "Build America Bonds" program, which he helped create, as an example of successful legislation that could spur infrastructure investment through innovative tax financing. Temporarily authorized in 2009 and now expired, 181 billion dollars in Build America Bonds were issued in the years immediately following the financial crisis. Sen. Ron Wyden (D-OR), left, ranking member of the Senate Finance Committee, spoke about the need for a bipartisan effort to address low income housing needs. Sen. Ron Johnson (R-WI) spoke with Roundtable members on the need for more deregulation and pro-growth policies. He also described his central role in ensuring that tax reform provided relief for all job-creating businesses, including pass-throughs. As the chairman of the Senate Homeland Security and Governmental Affairs Committee, Rep. Johnson also discussed the increasing need for cybersecurity in an age where future geopolitical conflicts will increasingly be conducted in cyberspace. Sen. Doug Jones (D-AL) commented about his recent election, appointment to the Senate Banking Committee and the need for broadband internet access in rural areas as part of an infrastructure program. Serving his first month in Congress, Sen. Jones noted he is receptive to all approaches to policy that encourage economic growth and looks forward to working with The Roundtable. Jim VandeHei — the co-founder of and CEO of Axios, gave a candid view of upcoming mid-term elections; prospects of the House flipping to Democrat majority; and the news dissemination role of large tech companies like FaceBook in past and future elections. Bob Schieffer — the former Face the Nation moderator participated in a discussion with incoming Roundtable Chair Deb Cafaro (Chairman & CEO, Ventas, Inc.) about the emerging era of "fake news" within a media landscape of fractured outlets and a deluge of partisan information.Roundtable Policy CommitteesIn conjunction with the SOI Meeting, The Roundtable's Policy Advisory Committees met on Jan. 24-25, discussing policy issues in detail with high-level congressional and agency staff. In the wake of the most significant tax measures passed in 31 years, TPAC attracted a large audience to address the details of what lay ahead in implementing the new tax law. Research and Real Estate Capital Policy Advisory Committee (RECPAC) During this joint committee meeting, two panels of industry experts addressed the current real estate market cycle and provided an update on the state of real estate capital and debt markets. Participants also discussed High Volatility Commercial Real Estate (HVCRE) and the Roundtable's response to the recently proposed High Volatility Acquisition, Development or Construction Loans (HVADC) rule, as well as potential GSE reform.Tax Policy Advisory Committee (TPAC) In the wake of the most significant tax measures passed in 31 years, TPAC attracted a large audience to address the details of what lay ahead in implementing the new tax law. A panel of experts from the congressional tax-writing committees described the evolution of the key partnership and real estate-related provisions. Following presentations by TPAC members, Dana Trier, Deputy Assistant Secretary of Treasury for Tax Policy, outlined the rulemaking process going forward and provided insight on how Treasury may resolve certain open questions important to real estate investment. SPAC hosted Dr. Joseph Allen, Assistant Professor, Harvard T.H. Chan School of Public Health, right and John Mandyck, Chief Sustainability Officer, United Technologies Corporation, left, who presented new research on the health co-benefits of Green Buildings. Sustainability Policy Advisory Committee (SPAC) In addition to other guests, SPAC heard updates from Environmental Protection Agency (EPA) staff on the ENERGY STAR building- and tenant-level recognition programs, which recognizes leased spaces for high-performance design, construction and energy efficiency in CRE assets. Homeland Security Task Force meeting (HSTF) and Risk Management Working Group (RMWG) Representatives of the FBI briefed the Joint Meeting on the current threat picture and discussed psychological profiles of the recent homegrown violent extremists (HVEs). The Task Force was also briefed on current cyber threat picture and how businesses should be addressing this risk.Next on The Roundtable's FY2018 meeting calendar is the Spring Roundtable Meeting on April 25 at The Newseum in Washington, DC. This meeting will be restricted to Roundtable-level members only.

News

January 26, 2018

Roundtable Weekly

Trump Administration Prepares to Unveil Nationwide Infrastructure Proposal; Roundtable Submits Specific Suggestions for Innovative Infrastructure Financing Sources

Infrastructure

A six-page document leaked to the media this week purports to show details of the White House’s anticipated infrastructure plan just before President Trump is scheduled to offer his first State Of The Union address on Jan. 30. White House spokeswoman Lindsay Walters declined to comment on the contents of the leaked document, but said the Administration looks forward to announcing a plan "in the near future." (Axios, Jan. 22) A six-page document leaked to the media this week purports to show details of the White House’s anticipated infrastructure plan just before President Trump is scheduled to offer his first State Of The Union address on Jan. 30. According to the document, leaked Monday to Axios and Politico, approximately 10 percent of the plan’s funds would go to “transformative projects” – a category that includes a “commercial space” sector that could compete for funds. (CQ, Jan. 25) The Roundtable on Jan. 11 sent a comment letter to President Trump offering specific suggestions on how innovative financing sources may be used to help pay-for infrastructure – and how restructuring a lengthy permitting process and cutting unnecessary red tape will help control project costs and delays. Sen. John Barrasso (R-WY), chairman of the Senate Environment and Public Works Committee, said that permit streamlining would be an important part of an infrastructure plan. (CQ, Jan. 23). Barrasso’s committee oversees all public works projects and the Environmental Protection Agency, which would be a path to streamlining EPA and other agencies’ permitting approvals. The Roundtable letter suggests several innovative financing sources, including:Responsibly and sustainably increase the federal gas “user fee;” Allow states to capture lost tax revenues from Internet sales – and devote it to infrastructure; Attract more foreign investment to U.S. infrastructure by repealing or scaling back the Foreign Investment in Real Property Tax Act (FIRPTA); Assess whether IRS “volume caps” and other limitations on private-activity bonds (PABs) should be revised to boost infrastructure development; The Roundtable on Jan. 11 sent a comment letter to President Trump offering specific suggestions on how innovative financing sources may be used to help pay-for infrastructure – and how restructuring a lengthy permitting process and cutting unnecessary red tape will help control project costs and delays. Couple successful federal loan programs (like TIFIA) with state and local “value capture” techniques to re-pay that debt – and attract private investors;Develop best practices that channel public-private partnerships (P3s) for appropriate projects in appropriate geographies;Prioritize the limited proceeds from the Highway Trust Fund with a “Fix it First” strategy;Limit “formula grants” and move toward performance-based criteria;Enact common sense reform measures that limit taxpayers’ carrying costs for exorbitant liability insurance premiums on public infrastructure projects. Ease regulatory burdens for projects of same size and scope in same location as existing infrastructure.More details on each of the suggestions above are included in The Roundtable letter. Also this week, Special Assistant to the President for Infrastructure Policy DJ Gribbin met on Tuesday with Roundtable members in an open exchange of ideas about a national infrastructure plan. On Thursday, Gribbin spoke to the U.S. Conference of Mayors about the Trump Administration’s upcoming plan, stating that it will not require any new funding. Gribbin said that 200 billion dollars in existing federal funds would be shifted to infrastructure projects, which would be leveraged to attract an additional 800 billion in state and private investment. (CQ, Jan. 25) Infrastructure was a major topic of discussion during The Roundtable's Jan. 24-25 State of the Industry meeting (see story above). The Roundtable will remain engaged with policymakers as the Administration’s infrastructure plan moves forward in 2018.

News

January 19, 2018

Roundtable Weekly

Shutdown Looms Over Federal Funding Debate; Roundtable Submits Requests to Treasury for Guidance on New Tax Laws

Without a last-minute funding deal before midnight tonight, much of the federal government will shut down on the one-year anniversary of President Trump’s inauguration. The budget affects issues of importance to commercial real estate such as the National Flood Insurance and EB-5 foreign investment programs. In an effort to identify temporary or immediate guidance that would provide a boost to economic growth and jobs, Real Estate Roundtable President & CEO Jeffrey DeBoer yesterday wrote to Treasury Secretary Mnuchin, offering several suggestions aimed at ensuring the long-term success of the Tax Cuts and Jobs Act (TCJA). [Roundtable Letter, Jan. 18] Despite White House talks today between Minority Leader Chuck Schumer (D-NY) and President Trump, disagreements on immigration policies such as the Deferred Action for Childhood Arrivals (DACA, or "Dreamers") program threaten to scuttle a possible Senate vote on a government funding bill. If a deal is reached, the House is prepared to act again - after passing a fourth "Continuing Resolution" (CR) in FY2018 last night, which would extend government funding through Feb. 15. The budget battle comes on the heels of last December's enactment of the largest overhaul of the tax code in 31 years. As businesses and individuals adjust to the new tax law's various provisions, it is expected that the IRS will issue guidance on technical questions affecting commercial real estate and other industries. In an effort to identify temporary or immediate guidance that would provide a boost to economic growth and jobs, Real Estate Roundtable President & CEO Jeffrey DeBoer yesterday wrote to Treasury Secretary Mnuchin, offering several suggestions aimed at ensuring the long-term success of the Tax Cuts and Jobs Act (TCJA). [Roundtable Letter, Jan. 18]The Jan. 18 Roundtable letter is based on input received from real estate leaders across the country, who share the goals of avoiding economic disruptions and reducing inefficient business restructuring or inactivity pending the issuance of final rules. The Roundtable letter identifies several areas where rulemaking would reduce uncertainty and facilitate continued investment, including: the scope of the real estate exception to the new limitation on business interest deductibility;the requirements that apply when calculating a taxpayer's eligibility for the new 20% deduction for pass-through business income; and the applicable cost recovery periods under the new tax law. The letter describes each issue and suggests clarifications that would be useful, in the short term, to ensure the new tax law spurs investment, growth and job creation. In conjunction with next week's Roundtable State of the Industry Meeting in Washington, DC, the Tax Policy Advisory Committee (TPAC) will analyze these areas in detail. Additionally, The Roundtable's business meeting will feature key congressional leaders, including Senate Minority Leader Schumer, who will engage attendees in a variety of policy discussions, including the current budget situation.

Climate and Immigration, Energy, Infrastructure, Labor Policy, Scaffold Law

January 19, 2018

Roundtable Weekly

The Roundtable and 16 Real Estate, Insurance and Contracting Organizations Urge Passage of Infrastructure Expansion Act to Counter Inequities in “Scaffold Law”

The Real Estate Roundtable, Associated General Contractors, and 16 U.S. organizations representing the contracting, insurance and real estate sectors today urged the House Judiciary Committee and key congressional offices to swiftly pass the Infrastructure Expansion Act of 2017 (H.R. 3808), sponsored by Rep. John Faso (R-NY). (Coalition Letter, Jan. 19) According to the coalition letter , the Infrastructure Expansion Act seeks to provide is a 21st century solution to ameliorate the harsh impact of an outdated 19th century law, which is restraining modern interstate commerce and economically burdening transportation projects that cross state lines. H.R. 3808 is a common sense tort reform effort aimed at correcting inequities from New York State's outdated "Scaffold Law." Passed during the Industrial Revolution – long before the advent of Federal and state Occupational Safety and Health Administration and workers' compensation laws – the Law holds property owners, employers, and contractors fully liable for all fall-related injuries at building and infrastructure construction sites. As a result, courts have interpreted the New York law to subject property owners and contractors to "absolute liability." Under this standard, the costs of injuries from commonplace painting, cleaning, remodeling, and construction activities are completely borne by property owners and contractors, even if they do not directly employ the injured worker. The Scaffold Law also deems property owners and contractors as absolutely liable for height-related incidents, without regard to whether the worker caused the accident and intensified his or her own injuries. Under this standard, even an inebriated worker who stumbles and falls at a project site is not held accountable to the extent his intoxicated state caused his own injuries. (Roundtable Weekly, Oct. 27, 2017) The House bill counters the absolute liability standard by specifying that lawsuits against property owners and contractors for injuries associated with slips, falls, and "gravity-related risks" at Federally-assisted projects should instead be held to a "comparative negligence" standard. When workers proximately cause their own injuries, comparative negligence factors such self-inflicted harm to proportionately limit damages awarded by judges and juries. H.R. 3808 fosters the comparative negligence legal standard adopted by the overwhelming majority of courts, legislatures, and legal scholars across the United States. According to the coalition letter, the Infrastructure Expansion Act seeks to provide is a 21st century solution to ameliorate the harsh impact of an outdated 19th century law, which is restraining modern interstate commerce and economically burdening transportation projects that cross state lines. Rep. John Faso (R-NY) introduced the Infrastructure Expansion Act of 2017 (H.R. 3808) , intended to counter New York State’s “Scaffold Law.” Among specific examples offered in the letter showing the economic impacts of the Scaffolding Law is the Gateway Program, a Department of Transportation-assisted rail tunnel project of overwhelming national significance. The New York law is estimated to drive-up costs by as much as 300 million dollars for this project, which will modernize the power grid, update a century-old tunnel inundated by Superstorm Sandy, and help eliminate a train "bottleneck" in the Northeast Corridor that contributes $50 billion to US GDP annually. H.R. 3808 can help reduce the substantial added costs from insurance coverage, excessive litigation pay-outs, and project delays for interstate infrastructure construction like Gateway. "On the heels of a major federal infrastructure initiative, Rep. Faso's bill is welcome news – enacting it would drive down costs of proposed infrastructure projects like the vital Gateway tunnel project between New York and New Jersey, said John Banks, President of the Real Estate Board of New York. (See REBNY Newsroom, Oct. 25, 2017). Additionally, the Infrastructure Expansion Act of 2017 does not diminish or alter Federal or state OSHA obligations, nor does it foreclose "no-fault" workers' compensation. The coalition letter addressed to House Judiciary Committee Chairman Bob Goodlatte (R-VA) and Ranking Member Jerrold Nadler (D-NY) concludes that H.R. 3808 "… simply makes property owners, contractors, and workers accountable for their own choices and conduct at construction sites benefitting from Federal taxpayer dollars. We encourage swift passage of the 'Infrastructure Expansion Act.'"

Economic Growth - Travel & Tourism, Roundtable Weekly, Tourism

January 19, 2018

Roundtable Weekly

The Roundtable Joins “Visit U.S.” Coalition to Spur International Tourism, Domestic Job Creation and Economic Growth

The Real Estate Roundtable joined 10 national trade organizations as a member of the "Visit U.S." Coalition, which launched on Wednesday with the goals of spurring job creation and economic growth while reversing a decline in international visitors to the United States. (Visit U.S., Jan. 16). According to the U.S. Travel Association, global travel volume to the United States from 2015 to 2017 fell from 13.6 percent to 11.9 percent — the first decline after more than a decade of consistent growth. The statistics also show that if the U.S. had maintained its 2015 international travel market share, its economy would have gained an additional 4 million international visitors, $32.2 billion in spending and 100,000 jobs. – enlarge chart – The coalition represents a broad cross-section of industries that have come together to address the recent drop in travel to the U.S. and resulting opportunity cost to the economy and jobs. According to the U.S. Travel Association, global travel volume to the United States from 2015 to 2017 fell from 13.6 percent to 11.9 percent — the first decline after more than a decade of consistent growth. The statistics also show that if the U.S. had maintained its 2015 international travel market share, its economy would have gained an additional 4 million international visitors, $32.2 billion in spending and 100,000 jobs. "As a vital component of the commercial real estate industry, the U.S. hospitality sector provides significant capital investment, creates enormous job opportunities and encourages infrastructure improvements in local communities throughout the country," said Roundtable President and CEO Jeffrey DeBoer. "CRE is the provider of secure spaces where people live and play in the United States, and we welcome the opportunity to work with the Trump Administration and our coalition partners to encourage a positive uptick in international tourism to our cities, towns, destinations and attractions," added DeBoer. Roundtable members were recently briefed on the drop in foreign travel to the United States and the economic ramifications by Katherine Lugar, president and chief executive officer of the American Hotel & Lodging Association (AHLA) — the largest trade association representing the U.S. lodging industry. (Roundtable Weekly, Oct. 6, 2017) AHLA, a founding member of Visit U.S., supports policy initiatives such as reforms that enable safe and secure processing of visitor visas to strengthen business and leisure travel — as well as the H-2B program to provide valuable support for businesses looking to supplement their workforce with temporary seasonal employees when American workers are unavailable. During the travel coalition's launch this week, Lugar said, "Fewer visitors means fewer hotel stays, fewer meals eaten in our restaurants, fewer goods purchased in our retail stores, and fewer visits to our national attractions. It also means fewer American jobs and a loss to our economy. We are committed to working together with the Administration to balance a welcome message with strong security to ensure we don't fall behind to other countries." U.S. Travel Association President and CEO Roger Dow, another founding member of Visit U.S., added, "America is the best country in the world to visit, but we're losing the competition for international travelers and the dollars they spend when they come here. The Visit U.S. Coalition is founded on the principle that we can have strong security but at the same time welcome robust numbers of international business and leisure travelers. We can do both." Left to Right: Roundtable President and CEO Jeffrey DeBoer, American Hotel & Lodging Association President and CEO Katherine Lugar , and Roundtable Chairman William C. Rudin ( Rudin Management Company, Inc .) – enlarge photo – "The U.S. economy is on the upswing, but we can grow even more by encouraging more travel to America," said U.S. Chamber of Commerce President and CEO Thomas J. Donohue, also part of the coalition. "Travel creates jobs and economic activity across a swath of industries and sectors as people visit the U.S. and spend their time and money with American businesses. The Chamber is proud to join with our partners in the business community to make the case for a renewed focus on travel as a driver of economic growth and American prosperity."Media coverage regarding the coalition's launch includes:Los Angeles Times:Coalition formed to reverse the drop in international visitors to the U.S.AP: US-travel-industry-launches-plan-to-reverse-tourism-declineBloomberg News: America Has a Foreign Tourist Problem.Chicago Tribune:US travel industry launches plan to reverse 'Trump slump' tourism declineNewsday:US travel industry launches plan to reverse tourism declineFortune:A Multibillion-Dollar Industry Is Getting Nervous as the US Loses Favor Among TouristsThe Hill:decline-in-us-travel-spurs-business-push-for-visitors

January 18, 2018

Policy Comment Letter

2. 2018-01-18 TCJA implementation – Sec. Mnuchin ltr

News

January 12, 2018

Roundtable Weekly

Congress Considering Another Continuing Resolution To Avoid Government Shutdown Next Week

House Republicans this week said efforts on a two-year budget deal to fund government programs and agencies are progressing as the current, short-term government funding extension is set to expire on Jan. 19. Consensus on outstanding policy disagreements did not emerge this week, despite a bipartisan meeting at the White House on Tuesday between President Trump and congressional leaders. ( White House video , Jan. 9) Congress may pass a fourth "Continuing Resolution" (CR) for FY2018 to fund the government until mid-February and buy time to address spending limits on military and nondefense programs – including immigration policies such as border security and the Deferred Action for Childhood Arrivals (DACA, or "Dreamers") program. The budget affects other issues of importance to CRE such as the National Flood Insurance and EB-5 foreign investment programs. If an agreement among policymakers is not forged next week and another CR cannot be passed, the government will shut-down. House Minority Leader Nancy Pelosi (D-CA) told reporters yesterday that a negotiated solution on both spending caps and Dreamers is uncertain. "There is no point in having another CR unless we have an agreement on DACA and funding, disaster aid, a number of issues that have to be dealt with," Pelosi said. House Majority Leader Kevin McCarthy (R-CA) this week said, "I believe we can get to a solution here in the next day or two so we can move forward. If we're able to have that budget agreement, we'll need some time for appropriators to do their work, so we'd have a continuing resolution." (CQ, Jan. 11) Consensus on outstanding policy disagreements did not emerge this week, despite a bipartisan meeting at the White House on Tuesday between President Trump and congressional leaders. (White House video, Jan. 9) Other issues under discussion include the fate of a bill introduced by Senate Finance Committee Chairman Orrin Hatch (R-UT) late last year that would extend various expired energy and other temporary tax provisions. (Wall Street Journal, Dec. 21, 2017) A separate tax "technical corrections" bill to address gaps and inconsistencies in last year's landmark Tax Cuts and Jobs Acts is expected this quarter. House Ways and Means Chairman Kevin Brady (R-TX) said this week that several extenders may be included in an upcoming CR. "I think it's important for Democrats and Republicans to really come together on a lot of key issues … I'm hopeful they all stay at the table and bring us either in one or two steps what we need to do," Brady said. It is unclear whether Senate Majority Leader Mitch McConnell (R-KY), with only a slim one-vote majority in the chamber, will be able to attract enough votes to pass a budget resolution. A separate tax "technical corrections" bill to address gaps and inconsistencies in last year's landmark Tax Cuts and Jobs Acts is also expected this quarter. Republicans would need to attract Democratic votes to reach a 60-vote threshold to pass another tax measure. (Roundtable Weekly, Jan. 5) The Roundtable and its Tax Policy Advisory Committee will discuss these issues in detail during The Roundtable's Jan. 24-25 State of the Industry Meeting in Washington. Among the prominent policymakers who will engage Roundtable members during the business meeting is Senate Finance Committee Ranking Member Ron Wyden (D-OR) and the Treasury Department's Deputy Assistant Secretary for Tax Policy Dana Trier.

Internet Sales Tax, Roundtable Weekly, Tax Policy

January 12, 2018

Roundtable Weekly

U.S. Supreme Court to Address Marketplace Fairness Issue; Decision Expected by July Regarding Sales Tax Collection on E-Commerce Purchases

The Supreme Court of the United States (SCOTUS) today agreed to address an issue that has long vexed the retail real estate sector, and deprived states and localities of much-needed tax revenue for infrastructure development and other community needs. The nation's highest court "granted cert" in South Dakota v. Wayfair, Inc., to resolve the lingering debate over the constitutionality of collecting sales and use taxes that are due on consumer purchases made over the Internet. South Dakota v. Wayfair, Inc. is the latest judicial vehicle to seek a ruling from the nation’s highest Court to resolve the lingering debate over Internet sales tax collection. The International Council of Shopping Centers, Investment Program Association, Nareit®, and the National Association of REALTORS® joined a November, 2017 amicusbrief , above, with The Roundtable. In Wayfair, the Justices are expected to squarely resolve whether an antiquated legal doctrine known as the "physical presence" test should be overruled. This test exempts on-line sellers from collecting sales and use taxes under the U.S. Constitution's Commerce Clause unless they have an actual, physical retail outlet or other footprint in the state where the purchase is made – thus imposing sales tax collection burdens primarily on traditional brick-and-mortar" stores.A coalition of real estate groups (including The Real Estate Roundtable) filed an amicus curiae brief with SCOTUS last November, urging the Justices to accept the Wayfair case to challenge pre-Internet decisions from 1991 and 1967 (Quill Corp. v. North Dakota, 504 U.S. 298, and National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753, respectively). . (See Roundtable Weekly, Nov. 3, 2017.) This pair of decades-old opinions prohibits states from imposing sales and use tax collection obligations on web-based, catalog, and other retailers lacking an in-state "physical presence.""The direct harm that the [physical presence] rule inflicts on brick-and-mortar retail stores in considerable," the real estate groups wrote in their brief. "Local businesses struggle and increasingly fail to compete against online retailers that can offer customers identical goods for what is in effect up to a 10 percent discount."The amicus brief explains the "cascading effects" that call for the Supreme Court to revisit Quill and Bellas Hess. Many brick-and-mortar stores "are integral to the social fabric of their communities," and losing them because Internet retailers have a competitive tax collection advantage "increases unemployment and creates a sense of dislocation among community residents." The outdated "physical presence" rule also causes "lost revenue from sales, property and income taxes" which "threatens the ability of state and local governments to provide much-needed public services" to their communities, the brief maintains. Research data from The National Conference of State Legislatures and International Council of Shopping Centers shows that nearly 26 billion dollars in state and local sales taxes from online sales went uncollected in 2015. (NCSL and ICSC, March 2017) The Supreme Court is likely to hear oral argument in April and render a decision by the end of June. Now that the case moves to the merits phase, a number of advocacy groups are expected to filed a second round of briefs urging a more modern, national standard from SCOTUS to reflect the purchasing preferences and habits of consumers this century. (See SCOTUSblog's Wayfair page.) Since the 1992 Quill opinion, technological advances are now available to address the complexity of administering an online sales tax. Amazon, for example, collects and remits sales tax for consumer transactions in 45 states and the District of Columbia.With today's cert grant, additional briefing on the Internet sales tax issue is expected throughout the winter and early spring. The high Court is likely to hear oral argument in April and render a decision by the end of June, when it traditionally breaks for the summer. The International Council of Shopping Centers, Investment Program Association, Nareit®, and the National Association of REALTORS® joined last November's amicus brief with The Roundtable.

Capital and Credit, HVCRE

January 12, 2018

Roundtable Weekly

Roundtable Encourages Senate Banking Committee to Consider HVCRE Legislation That Would Clarify Banking Rule Affecting Acquisition, Development, or Construction Loans

The Real Estate Roundtable on Tuesday encouraged Senate Banking Committee leadership to consider a bipartisan measure similar to one passed in the House of Representatives in November that would reform and clarify the Basel III High Volatility Commercial Real Estate (HVCRE) Rule for certain acquisition, development, or construction loans (ADC). (Roundtable Comment Letter, Jan. 9)The Roundtable's letter this week to Senate Banking, Housing, and Urban Affairs Committee Chairman Mike Crapo (R-ID) and Ranking Member Sherrod Brown (D-OH) expressed concerns about the HVCRE Rule since its effective date of January 1, 2015. The House passed the Clarifying Commercial Real Estate Loans Act (H.R. 2148) on November 7, 2017 following a nearly unanimous vote by the House Financial Services Committee (59-1). Since the Rule's effective date of January 1, 2015, necessary clarification for key elements of the Rule have not been provided by regulators despite ongoing requests. Instead, the regulatory agencies proposed yet another, duplicative exposure category for ADC loans – HVADC. This bipartisan legislation – introduced by House Financial Services Committee members Rep. Robert Pittenger (R-NC) and Rep. David Scott (D-GA) – would help address concerns regarding the Basel III HVCRE Rule by amending the Federal Deposit Insurance Act and clarifying requirements for certain ADC loans. Clarification of the HVCRE Rule would ensure that credit capacity and economic activity would not be impeded, while promoting economically-responsible commercial real estate lending. (Roundtable Weekly, Nov. 10) The Roundtable's letter this week to Senate Banking, Housing, and Urban Affairs Committee Chairman Mike Crapo (R-ID) and Ranking Member Sherrod Brown (D-OH) expressed concerns about the HVCRE Rule since its effective date of January 1, 2015. The letter states: "The current rules are overly broad and include many stabilized loans without construction risk in this HVCRE category, unduly burdening stabilized loans with capital charges appropriate to protect banks from heightened construction risks. Many banks, including small community financial institutions, have been deterred from making this type of loan – which can represent up to 50 percent of a small bank loan portfolio." The Roundtable also submitted comments on Dec. 21, 2017 to banking agencies in response to their Notice of Proposed Rulemaking (NPR) – "Simplifications of and Revisions to the Capital Rule related to High Volatility Acquisition Development or Construction (HVADC) Exposures" as issued on Oct. 27. The Roundtable encourages the agencies to review the language in Clarifying High Volatility Commercial Real Estate Loans (H.R. 2148) and utilize such an approach to clarify the current HVCRE rules and build on this construct in a new consolidated HVCRE/HVADC rule.Real Estate Roundtable President and Chief Executive Officer Jeffrey DeBoer commended the Senate Banking Committee for recognizing the important link between bank regulatory policy and economic growth and for taking steps to identify potential ideas that would foster job creation and economic activity. The Roundtable comments on the NPR were submitted through its HVCRE Working Group and Real Estate Capital Policy Advisory Committee (RECPAC) to the Office of the Comptroller of the Currency; the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation. These comments raise concerns about the creation of yet another exposure category for acquisition, development, or construction loans – High Volatility Acquisition, Development, or Construction (HVADC) – while providing no clarification for the existing High Volatility Commercial Real Estate (HVCRE) Rules. The Roundtable and eight other national policy organizations also submitted a separate, joint letter in late December to the banking agencies about the NPR. (Roundtable Weekly, Dec. 22, 2017) Following these efforts late last year in the House and comments to the banking agencies, this week's letter to the Senate Banking Committee leadership also explains how the HVCRE Rule issue is not only a problem for commercial real estate owners and bank lenders – but one for the broader economy. Without adequate credit capacity for commercial real estate lending, jobs and tax revenue will be lost and economic growth impeded. "As financial institutions absorb a multitude of overlapping Dodd-Frank and Basel regulations, we are concerned about the cumulative impact these rules are having on real estate credit capacity, liquidity, capital formation and job growth," the letter states. Real Estate Roundtable President and Chief Executive Officer Jeffrey DeBoer also commends the Senate Banking Committee for recognizing the important link between bank regulatory policy and economic growth and for taking steps to identify potential ideas that would foster job creation and economic activity. DeBoer concludes the letter: "We look forward to working with the Senate Banking Committee on measures such as these that will help craft a sensible financial framework for growing a healthy economy."

January 11, 2018

Policy Comment Letter

3. 2018-01-11 Infrastructure Letter to POTUS

Policy Outlook

January 5, 2018

Roundtable Weekly

2018 Ushers In Sweeping Tax Code Changes and a Loaded Congressional Agenda Under Threat of Jan. 19 Government Shutdown

With sweeping tax code changes enacted last month now in effect, both chambers of Congress are returning to a packed legislative to-do list and looming policy deadlines – including the expiration of the latest round of government funding on Jan. 19. With sweeping tax code changes enacted last month now in effect, both chambers of Congress are returning to a packed legislative to-do list and looming policy deadlines. As businesses and individuals adjust to the new tax law's various provisions, it is expected that the IRS will issue guidance on the largest change to the tax code in 31 years – including the 20 percent deduction for qualified business income; limitation on deductibility of business interest and losses; and deprecation and expensing of assets. The Roundtable will participate throughout 2018 in the regulatory and rulemaking process as technical questions and detailed tax guidance affecting commercial real estate are addressed by policymakers in Washington. (Roundtable Weekly, Dec. 22) This week, congressional leaders and Trump Administration officials met to discuss the need for a government spending measure to avoid a shutdown when the current "Continuing Resolution" (CR) expires Jan. 19. Policymakers will seek to link other issues to a funding deal, such as overhauling the nation's immigration system; funding for a border wall; and the status of "Dreamers" – undocumented immigrants brought to the country as children. Other pressing policy issues needs that may be wrapped into the spending debate include disaster relief, electronic surveillance laws and the Children's Health Insurance Program. Senate Minority Leader Chuck Schumer (D-NY) said on the Senate floor last month, "We can't leave any of those issues behind." (BNA, Jan. 3) The budget also affects issues of importance to CRE such as the National Flood Insurance and EB-5 foreign investment programs. Since only eight scheduled legislative days are available for Congress and the Administration to agree on a new spending measure before the Jan. 19 expiration, another short-term CR may be passed to keep the government open – or a shutdown will result. This week also saw two new Democrats join the Senate, narrowing the Republican majority to 51-49. After Sens. Doug Jones (D-AL) and Tina Smith (D-MN) were sworn in yesterday, the ability of Senate Majority Leader Mitch McConnell (R-KY) to attract 60 votes to pass most legislation in the Senate will become a greater challenge. In the House, Republican Speaker Paul Ryan (WI) has a 239-193 majority, yet pushback from certain Republican coalitions may necessitate Democratic votes to pass legislative initiatives.Rep. Mark Meadows (R-NC), the chairman of the conservative House Freedom Caucus, recently told Bloomberg, "People are not going to come back singing the Sound of Music together. January is going to be contentious." (Bloomberg Government, Jan..2) The upcoming Roundtable State of the Industry Meetings will take place just days before President Trump's first State of the Nation address on Jan. 30, when he may emphasize his infrastructure initiative. Additionally, House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) announced this week that he will not seek re-election, but emphasized he will be dedicated to passing an infrastructure bill this year. Shuster, who addressed the Roundtable last spring (see Roundtable Weekly, April 7, 2017) said upon announcing his retirement, "About a week or so ago I had a private meeting with the president at the White House. Now when I say private meeting, it was the president and I in the Oval Office with his senior advisers and some of my senior people, and we talked about the infrastructure bill. He's very excited. He seems to be ready to go, as we are, and so I think we're going to have a good working relationship as we move forward." (Washington Examiner, Jan. 2.) President Trump met yesterday with governors and local government leaders about nationwide infrastructure improvements. Trump also will meet with Republican congressional leaders this weekend to discuss making infrastructure a top legislative priority this year. According to USA Today, the Administration will issue a new proposal later this month that would shift infrastructure project responsibilities to states and private investors by leveraging 200 billion dollars in federal funding to leverage 1 trillion in improvements. (USA Today, Jan. 5) Details of the new tax overhaul law, along with the budget outlook, immigration, infrastructure and other policy topics will be discussed in detail during The Roundtable's State of the Industry and Policy Advisory Committee meetings on Jan. 24-25 in Washington. The meetings will take place just days before President Trump's first State of the Nation address on Jan. 30, when he may emphasize his infrastructure initiative.

News

January 5, 2018

Roundtable Weekly

Treasury’s New Partnership Audit Rules Avoid Entity-Level Tax on Real Estate Tiered Partnerships

New partnership audit rules will allow real estate investors to continue using tiered partnership structures without the risk of a new entity-level tax on the partnership. Proposed Treasury regulations published on Dec. 19 end the two-year uncertainty over whether new partnership audit rules would create a significant tax liability for investors in real estate partnerships. [ link to regulations ] Proposed Treasury regulations published on Dec. 19 end the two-year uncertainty over whether new partnership audit rules would create a significant tax liability for investors in real estate partnerships. At issue was the question of whether the IRS could require partnerships to pay taxes that are appropriately owed by its individual partners. The tax code has long recognized that partnerships are "pass-through" entities, and that partners in partnerships are only subject to tax on their share of the partnership's income. But under the new partnership audit reform law, some argued that the IRS could impose an entity-level tax burden in certain cases. The Treasury regulations clarify that tiered partnerships will be permitted to use the "push-out" method, in which a partnership is relieved of the entity-level tax after an audit as long as it timely transmits revised K-1 tax statements to its partners, including other partnerships. [link to regulations] [IRS Guidance on Partnership Audit Regime Eases Some Concerns, Accounting Today (Dec. 26, 2017)] Real Estate Roundtable Tax Policy Advisory Committee (TPAC) Member Donald Susswein testified specifically on this issue on behalf of The Roundtable at a September IRS hearing. At the hearing, Susswein stated that, "the most urgent thing is that prospective investors know that they're only going to be subject to tax on their own tax liability, correctly determined." He further testified that, "In order to ensure that this new law does not create a hindrance on the economy, it is very important to reassure investors that there is going to be a push-out method for tiered partnerships. And that can be done now, in 2017, even if other aspects of the regulations are reserved." [Roundtable Weekly, Sept. 22, 2017) Real Estate Roundtable Tax Policy Advisory Committee (TPAC) Member Donald Susswein, left, testified on behalf of The Roundtable about the new partnership audit rules at a Sept. 2017 IRS hearing. Congress enacted new rules for auditing partnerships and collecting partnership tax adjustments in the Bipartisan Budget Act of 2015 (BBA). An early version of the legislation would have shifted partnership tax liability to the entity level and imposed joint and several liability on individual partners and the partnership for the full amount owed. The Roundtable successfully argued, at the time, that entity level taxation of partnerships would disrupt capital formation and discourage business activity, ultimately hurting job creation and economic growth. The Roundtable was heavily involved in developing the final BBA approach, which allows partnerships to "push out" tax adjustments through partnerships to the appropriate partner. The legislation was silent, however, on how the rules would apply to tiered partnerships. Although enacted in late 2015, the new partnership audit rules will only take effect for audits of 2018 and later years. The audits themselves are unlikely to start until 2019 or 2020. Clarity on the application of the new rules for tiered partnerships is important, however, because of the impact on real estate investor decisions and partnership formations.

January 1, 2018

Policy Comment Letter

10. Multi-Association.Support.Letter.to.Senate.HR.3776 (002)

Foreign Investment in Real Property Tax Act (FIRPTA)

October 11, 2017

Policy Comment Letter

FIRPTA Letter – Mnuchin + Ways and Means – 2017-10-11

FIRPTA, Foreign Investment in Real Property Tax Act,

Foreign Investment in Real Property Tax Act (FIRPTA)

October 11, 2017

Policy Comment Letter

FIRPTA House to Mnuchin Letter – 2017-10-11

FIRPTA, Foreign Investment in Real Property Tax Act,

August 7, 2017

Policy Comment Letter

2017_08_07 – Sec 752 Comment Letter

June 12, 2017

Policy Comment Letter

2017_06_12 Coalition Letter to HFSC Re CRE NFIP for Markup

National Flood Insurance Program NFIP,

April 1, 2017

Policy Comment Letter

2017_4__07 – Real Estate Reg Reform Letter

Energy & Climate, ENERGY STAR

March 30, 2017

Policy Comment Letter

Joint Trades Letter Supporting ENERGY STAR Program Funding

ENERGY STAR, EPAs ENERGY STAR Tenant Space Recognition, EPAs ENERGY STAR Certification for Buildings,

November 1, 2016

Policy Comment Letter

11-1-16 RER ltr-Family business estate tax regs

January 1, 2016

Policy Comment Letter

2016_TRIP_Effectiveness_ Report_FINAL

Like-kind Exchanges

May 29, 2015

Academic Study

Like-kind Exchange Study – Economic Impact of Repealing or Limiting Section 1031

Likekind Exchanges, LikeKind Exchanges LKEs,

March 13, 2013

Policy Comment Letter

2013-3-13 – Section 752 Comment Letter