Type
Issues
Issues
Policy Landscape
November 17, 2023
Roundtable Weekly
Lawmakers Extend Government Funding Into Early 2024; Outlook Uncertain for Tax Policy and Other Priorities
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 proposalsinclude 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
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
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
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) #  #  #
CRE Policy News
November 17, 2023
Roundtable Weekly
Roundtable Weekly Will Resume Publication on Friday, December 1
The Roundtable’s policy news digest will resume publication on Friday, December 1 after the Thanksgiving break. Recent issues of Roundtable Weekly can be searched by keyword here.
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),
Policy Landscape
November 9, 2023
Roundtable Weekly
Congress Aims for Continuing Resolution by Nov. 18 Funding Deadline
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
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
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
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
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
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
Bonus Rate, Clean Energy Tax Incentives, Inflation Reduction Act, Prevailing Wage,
Cities & Infrastructure, Housing Policy
October 30, 2023
RER Policy Priorities
Housing, Infrastructure, and Cities – 2023 Fall Policy Priorities
Affordable Housing, CRE Conversions, Infrastructure Funding (Bipartisan Infrastructure Investment and Jobs Act), Public-Private Partnerships, Streamlining the Permitting Process, Workplace Return,
Homeland Security
October 30, 2023
RER Policy Priorities
Homeland Security – 2023 Fall Policy Priorities
Cyber Risks, Physical Risks, Real Estate Information Sharing and Analysis Center (RE-ISAC), RER's Homeland Security Task Force (HSTF),
Tax Policy
October 30, 2023
RER Policy Priorities
Tax – Fall 2023 Policy Priorities
Capital Gains, Carried Interest, Like-Kind Exchanges (LKEs), Opportunity Zones, Partnerships & Pass-Through Taxation, Partnerships & Pass-Throughs, Step-Up In Basis, Unrealized Gains ("Billionaire Tax"),
Energy & Climate
October 30, 2023
RER Policy Priorities
Energy & Climate – 2023 Fall Policy Priorities
Building Performance Standards, Clean Energy Tax Incentives, Healthy Buildings, Reporting on Climate Risks, Science-Based Targets,
Roundtable Leadership
October 27, 2023
Roundtable Weekly
Roundtable Chair John Fish Honored at Annual Lamplighter Awards
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
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
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
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
Elevated commercial real estate valuations are increasingly viewed as a near-term risk that could stress the U.S. financial system, according 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,
Capital & Credit, Cities & Infrastructure, Energy & Climate, Homeland Security, Housing, Partnerships & Pass-Through Taxation, Tax
October 24, 2023
RER Policy Priorities
Fall 2023 Policy Priorities
Fall Roundtable Meeting
October 20, 2023
Roundtable Weekly
Policymakers and Roundtable Members Discuss Domestic and Global Issues Impacting CRE
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
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
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
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 & 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
(WASHINGTON, D.C.) — 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. Chair-Elect McCarthy will succeed John Fish (Chairman & Chief Executive Officer, Suffolk) who has served as Roundtable Chair since 2021. “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." 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.” About Kathleen McCarthy Kathleen McCarthy is the Global Co-Head of Blackstone Real Estate. Blackstone 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). Blackstone Real Estate is an industry leader in opportunistic, core plus and debt investing across North America, Europe and Asia. Ms. McCarthy focuses on driving performance and growth for Blackstone’s Real Estate business. Ms. McCarthy previously served as Global Chief Operating Officer of Blackstone Real Estate. Before joining Blackstone in 2010, Ms. McCarthy worked at Goldman Sachs, where she focused on investments for the Real Estate Principal Investment Area. Ms. McCarthy began her career at Goldman Sachs in the Mergers & Acquisitions Group. Ms. McCarthy received a BA with Distinction from Yale University. She serves on the Boards of City Harvest, the Real Estate Roundtable, the PREA Foundation, and the Blackstone Charitable Foundation, and is the President of the Board of Trustees of The Nightingale-Bamford School. About John Fish The Real Estate Roundtable’s Board of Directors is chaired by John Fish, who is Chairman and CEO of Suffolk. Under his vision and leadership, Suffolk has grown into one of the leading privately held general building contractors in the country. With over $4.5 billion in annual revenue, Suffolk is currently ranked #23 on the Engineering News-Record national list of “Top 400 Contractors.” He serves on numerous Boards focused on improving the economy, strengthening business and creating jobs. He also serves on the Executive Committee of the Real Estate Board of New York and a member of the Partnership for New York City and New York Building Congress. Mr. Fish is a graduate of Bowdoin College in Brunswick, Maine with a Bachelor’s Degree in Political Science.  He received an Honorary Doctorate of Engineering Technology Degree from Wentworth Institute of Technology. He is also the recipient of an honorary degree from Regis College and Curry College 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. #   #   #
Capital & Credit
October 17, 2023
RER Policy Priorities
Capital & Credit – 2023 Fall Policy Priorities
Capital & Credit,
Roundtable Statement
October 13, 2023
Roundtable Weekly
Roundtable Condemns Violence; Urges Humanitarian Aid
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
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
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 -- 2023,
October 13, 2023
RER Policy Priorities
Fall 2023 Executive Summary
Building Performance Standards, Cities & Infrastructure, Clean Energy Tax Incentives, Corporate Disclosure, Cyber Risks, Foreign Investment, Healthy Buildings, Infrastructure, Like-Kind Exchanges (LKEs), National Flood Insurance Program (NFIP), Pandemic Risk Insurance Program, Pass-Throughs, 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
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
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
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
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”
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
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, Tax Policy,
Tax Policy
September 22, 2023
Roundtable Weekly
Bipartisan House Legislation Would Encourage Debt Workouts
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
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
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, above, 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
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
John C. Cushman, III—Cushman & Wakefield’s chairman of global transactions, real estate industry titan for 60 years, and one of the founding members of The Real Estate Roundtable—passed away yesterday.Industry IconReal Estate Roundtable Chair John Fish (Chairman and CEO, SUFFOLK) said, “As a founding member of The Roundtable, and later as a member of our Board of Directors, John Cushman consistently helped us with his knowledge, his relationships and his voice. John’s legacy will live on in the real estate industry and in the countless communities he touched.”“The loss of John Cushman is a sad day,” said Jeffrey DeBoer, Roundtable President and CEO. “John’s personable and passionate approach to life was unique and inspiring. His sharp focus on structuring real estate transactions to meet the needs of business tenants and building owners was unparalleled. Time and again he rallied the industry to support positive economic and job growth initiatives. He made an enormous contribution to the commercial real estate industry—and to The Real Estate Roundtable’s advocacy efforts. The Roundtable, and I personally, will deeply miss him. We will always remember him as a generous, kind, and thoughtful friend.”Cushman & Wakefield Executive Chairman Brett White said, “John was an extraordinary businessperson and global citizen who significantly impacted Cushman & Wakefield, the commercial real estate industry and broader community.”The Cushman family stated, “John’s successes in commercial real estate were extremely notable but his positive impact on so many careers are what mattered to him even more. John always valued the importance of giving back and was a staunch supporter of many philanthropic efforts. His contributions to so many organizations will contribute to his legacy.” (John Cushman’s community involvement)An Exemplary Career(John Cushman with Jeffrey DeBoer at a Real Estate Roundtable meeting)Over the course of his career, John Cushman played an essential role in advancing Cushman & Wakefield to its position as one of the top commercial real estate firms in the world. Prior to his becoming chairman of global transactions and co-chairman of the Board of Cushman & Wakefield, John was acknowledged as the top office-leasing broker in the United States. (List of clients and assignments)He began his career in 1963 in New York City with Cushman & Wakefield, founded by his grandfather John Clydesdale Cushman and his great uncle Bernard Wakefield. In 1967, he moved to Los Angeles to open Cushman & Wakefield’s first office in Southern California. In 1965, as President of the Western Region, he was responsible for 60% of Cushman & Wakefield’s offices in the United States.John and his twin brother, Louis B. Cushman, started their own firm in 1978, Cushman Corporation Realty, which they grew from two offices to operations in 11 US cities with over 200 employees. In September 2015, Cushman & Wakefield merged with DTZ, with the newly formed organization retaining the storied Cushman & Wakefield name. In 2017, John served as chairman of the Centennial Committee for Cushman & Wakefield’s 100th anniversary.Cushman & Wakefield is now among the largest real estate services firms with 52,000 employees in over 400 offices and approximately 60 countries. In 2022, the firm had revenue of $10.1 billion across core services of property, facilities and project management, leasing, capital markets, and valuation and other services.The Cushman family respectfully asks that individuals who would like to make a gesture in John’s honor visit a national park site or make a donation to the National Park Foundation on behalf of John C. Cushman, III.#  #  #
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
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
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
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
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, EPA, EPA’s 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 & 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
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
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[SS4]  “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 to clarify the definition of a “controlling interest” that impacts exceptions to the law based on an investor’s meaningful ownership or influence. (SB 264 text). The letter also 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.” News Service Florida cited the letter in their Sept. 7 article “Real Estate Group Concerned About Land Law.” The Roundtable continues to raise concerns about measures that may impair capital formation and supports the important role that legitimate foreign investment plays in U.S. real estate, the broader economy and job growth. #  #  #      
Restrictions on Foreign Investment in U.S. Real Estate
September 5, 2023
Policy Comment Letter
Roundtable Requests Clarifications to Florida Law Restricting Certain Foreign Investments in Real Estate
Capital and Credit, Foreign Investment, Restrictions on Foreign Investment in U.S. Real Estate, SB 264,
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, Foreign Investment, Restrictions on Foreign Investment in U.S. Real Estate, SB 264,
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, Climate and Energy Policy, Nareit, SBTi, Science-Based Targets,
Q3 Sentiment Index
August 16, 2023
Press Release
Commercial Real Estate Executives Optimistic Despite Challenging Market Conditions
Economic Growth & 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
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
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.  #   #   # 
Climate and Labor Policy
August 11, 2023
Roundtable Weekly
New Federal Rules Issued Regarding Real Estate Construction, Clean Energy Projects
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”
2023 Annual Report
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, Climate and Energy Policy, EPA, Science-Based Targets,
Tax Policy
August 4, 2023
Roundtable Weekly
House Ways and Means Members Call on Treasury to Withdraw FIRPTA Regulatory Proposal
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 esate 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 destablization. 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
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
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
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
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
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
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, Fannie, FHFA, Freddie, 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
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
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
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
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
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
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. [Photo above: SPAC Chair Tony Malkin, left, (Empire State Realty Trust Chairman President and CEO) and Vice-Chair Ben Myers, right, (BXP Senior Vice President, Sustainability)]. 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, Climate and Energy Policy, Nareit, SBTi, Science-Based 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
Section 199A, Tax Policy, Tax Policy Section 199A,
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
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
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
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
Ohio, REITs,
CRE By The Numbers 2023
June 27, 2023
Industry Report
“CRE By The Numbers” — entire report (pdf)
CRE By The Numbers -- 2023, Economic Growth & CRE,
Capital and Credit
June 23, 2023
Roundtable Weekly
Fed Chairman Addresses CRE as Leading Economic Concern During Congressional Hearings
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
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
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
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
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
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
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 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
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
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
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
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, E-QUIP, Housing, Low Income Housing Tax Credit (LIHTC), Opportunity Zones, Property Conversions, YIMBY,
Policy Landscape
May 19, 2023
Roundtable Weekly
Administration Unsuccessfully Seeks to Add Like-Kind Exchange Restrictions to Debt Ceiling Talks
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
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
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
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
Section 199A, Tax Policy, Tax Policy Section 199A,
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
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
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”
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
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
John C. Cushman, III—Cushman & Wakefield’s chairman of global transactions, real estate industry titan for 60 years, and one of the founding members of The Real Estate Roundtable—passed away yesterday.Industry IconReal Estate Roundtable Chair John Fish (Chairman and CEO, SUFFOLK) said, “As a founding member of The Roundtable, and later as a member of our Board of Directors, John Cushman consistently helped us with his knowledge, his relationships and his voice. John’s legacy will live on in the real estate industry and in the countless communities he touched.”“The loss of John Cushman is a sad day,” said Jeffrey DeBoer, Roundtable President and CEO. “John’s personable and passionate approach to life was unique and inspiring. His sharp focus on structuring real estate transactions to meet the needs of business tenants and building owners was unparalleled. Time and again he rallied the industry to support positive economic and job growth initiatives. He made an enormous contribution to the commercial real estate industry—and to The Real Estate Roundtable’s advocacy efforts. The Roundtable, and I personally, will deeply miss him. We will always remember him as a generous, kind, and thoughtful friend.”Cushman & Wakefield Executive Chairman Brett White said, “John was an extraordinary businessperson and global citizen who significantly impacted Cushman & Wakefield, the commercial real estate industry and broader community.”The Cushman family stated, “John’s successes in commercial real estate were extremely notable but his positive impact on so many careers are what mattered to him even more. John always valued the importance of giving back and was a staunch supporter of many philanthropic efforts. His contributions to so many organizations will contribute to his legacy.” (John Cushman’s community involvement)An Exemplary Career(John Cushman with Jeffrey DeBoer at a Real Estate Roundtable meeting)Over the course of his career, John Cushman played an essential role in advancing Cushman & Wakefield to its position as one of the top commercial real estate firms in the world. Prior to his becoming chairman of global transactions and co-chairman of the Board of Cushman & Wakefield, John was acknowledged as the top office-leasing broker in the United States. (List of clients and assignments)He began his career in 1963 in New York City with Cushman & Wakefield, founded by his grandfather John Clydesdale Cushman and his great uncle Bernard Wakefield. In 1967, he moved to Los Angeles to open Cushman & Wakefield’s first office in Southern California. In 1965, as President of the Western Region, he was responsible for 60% of Cushman & Wakefield’s offices in the United States.John and his twin brother, Louis B. Cushman, started their own firm in 1978, Cushman Corporation Realty, which they grew from two offices to operations in 11 US cities with over 200 employees. In September 2015, Cushman & Wakefield merged with DTZ, with the newly formed organization retaining the storied Cushman & Wakefield name. In 2017, John served as chairman of the Centennial Committee for Cushman & Wakefield’s 100th anniversary.Cushman & Wakefield is now among the largest real estate services firms with 52,000 employees in over 400 offices and approximately 60 countries. In 2022, the firm had revenue of $10.1 billion across core services of property, facilities and project management, leasing, capital markets, and valuation and other services.The Cushman family respectfully asks that individuals who would like to make a gesture in John’s honor visit a national park site or make a donation to the National Park Foundation on behalf of John C. Cushman, III.#  #  #
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
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
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
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
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
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
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
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
Climate and Energy Policy, ENERGY STAR
March 31, 2023
Fact Sheet
“NextGen” EPA Label for Low-Carbon Buildings – Fact Sheet
ENERGY STAR, EPA's NextGen Building Label,
Debt Ceiling
March 29, 2023
Policy Comment Letter
Real Estate Coalition Urges Congress to Raise Debt Limit ASAP
Debt Ceiling,
Capital and Credit
March 24, 2023
Roundtable Weekly
Bank Failures Increase Pressure on CRE Capital Markets
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
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
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
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
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, debt restructuring, Halting Pro-Cyclical Policy Measures and Increases in Regulatory Capital, Jeffrey D. DeBoer, 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
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
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
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
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
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
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, Look-Through 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, EPA's NextGen Building Label, low-carbon 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, Look-Through Rule FIRPTA,
Workplace Return
February 24, 2023
Roundtable Weekly
New Study Forecasts Remote Work Will Restructure Office Sector
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
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 Relaunched​More 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
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, Look-Through 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 #    #    #
and Inclusion, Diversity
February 17, 2023
Roundtable Weekly
Roundtable and Coalition Partners Launch Industry-Wide Initiative to Advance “Supplier Diversity” in Real Estate
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) ConsortiumThe 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 GoalsSupplierGATEWAY 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 StepsThe 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.Visit https://creds.suppliergateway.com to 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 J. Desiderio ( ddesiderio@rer.org), 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
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, Inclusion and Diversity
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 Roundtable Leadership
  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 https://creds.suppliergateway.com 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. #  #  #
and Inclusion, Diversity
February 10, 2023
Roundtable Weekly
“Supplier Diversity” Platform Available to Roundtable Members
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 FAQ document)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 FAQ document)  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. Its website is now live.Points of ContactRoundtable 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
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
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
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.#  #  # 
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
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
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
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.#  #  # 
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
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 BasesReal 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 AheadYardi’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
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
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 ResponseThe 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 SolutionsThe 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
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
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
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
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, 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
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
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
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
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 Congr