News Type: Roundtable Weekly

Industry Leaders Respond to Racial Injustice; Rental Concerns Amid COVID-19 Lockdowns Add to Uncertainty

Posted on by Trey Jackson

Real estate industry leaders this week responded to protests against racial injustice throughout the nation sparked by the May 25 death of George Floyd in Minneapolis.

  • Real Estate Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.) on June 2 stated, “The buildup and expression of anger and frustration around racial injustice is real and it is justified.  There are sadly far too many examples of systemic racism, bias and inequality in our society, and there are no fast or easy answers to dismantling hundreds of years of racism.”
  • She added, “We do not condone violence against people or property, which seems to be emanating principally from criminal and other elements, rather than from peaceful protesters who are demanding change. But We CAN stand together as allies, stand against racism when we see it, and take deliberate actions to encourage and promote diversity, equity and inclusion within and beyond our own homes, networks, and communities to ensure that everyone feels like they belong.”  (Full Statement, Ventas, June 2)
  • Real Estate Roundtable President and CEO Jeffrey DeBoer on June 1 told BisNow, “Political, business and community leaders must come together and take concrete actions to significantly and measurably combat the long-standing abuse and unequal opportunities that continue to fall, particularly across race and gender.”  (Bisnow article, June 1)
  • Roundtable Board Member and Related Companies CEO Jeff Blau also told Bisnow on Monday, “… this has been going on for a very, very long time, and I think [inequality] is probably one of the greatest risks to our country’s future that I can imagine. And I think it’s a topic that we all, as business leaders, need to focus on to try to make things better.”

James Whelan, president of the Real Estate Board of New York, said Floyd’s killing underscores “systemic issues of race and class” that the city and country have failed to address.  Whelan told The Real Deal that he condemned violence and pledged the industry would provide solutions, “not just lip service.”  (TRD, June 2) 

Economic Restart and Re-Entry Concerns

Working with its industry partners, The Roundtable is focused on identifying and addressing issues associated with building re-entry as people return to work in many regions.

  • The Real Estate Roundtable’s Building Re-Entry Working Group continues to meet weekly to address issues associated with the restarting of the economy.  This week, the Working Group shared a report from fitwel on how to adapt building design projects to respond COVID 19.
  • A recent Littler survey of more than 1,000 employers show concerns centered on when to bring employees back and how to do so safely; how to accommodate increasing remote-work requests; and liability concerns stemming from the rise in COVID-19-related employment claims and lawsuits.  (View the survey infographic and the May publication).
  • A multi-sector business coalition including real estate, tourism, technology, manufacturing, health care, and energy sector groups – led by the U.S. Chamber of Commerce – called upon Congress in a May 27 letter to enact temporary liability protections for businesses struggling to reopen and operate safely during the COVID-19 pandemic.
  • Among the more than 200 signatories to the letter are The Real Estate Roundtable, American Hotel & Lodging Association, International Council of Shopping Centers, National Apartment Association, National Association of REALTORS®, and the National Multifamily Housing Council.

In recent weeks, Roundtable members have shared their perspectives and experiences with a number of media platforms regarding workplace re-entry strategies and technologies.  (Roundtable Weekly, May 15)  Such questions are also complicated by an evolving patchwork of state-level laws and guidance.  (New York Times Interactive Map, “See How All 50 States are Re-Opening” )

Commercial Rent Shortfalls; Bank Regulator Warns About Lock-Down Impact on CRE

The Washington Post on June 3 reported in “The next big problem for the economy: Businesses can’t pay their rent” that more than 40 percent of commercial retail rents were not paid in April and May, citing Datex Property Solutions.  (Request Datex’ report on National Tenant Payment Trends.)

  • The Post story notes when businesses stop paying rent, it sets off an alarming chain reaction that could threaten the broader economy and put landlords at risk of bankruptcy. The article also mentions how an aggressive proposal in California would force landlords to renegotiate leases with tenants affected by the pandemic, posing a risk to the basis of contract law.  John Worth, executive vice president for research at Nareit, is quoted, “It’s not appropriate policy to have blanket rent forgiveness. It could really create some chaos.”
  • The Times article notes, “As landlords face rent shortfalls and renegotiation because of the pandemic, lenders are also exposed.”  It continues, “Beyond the immediate impact of business closings on tenants’ revenue are larger questions, including the already-dire trends for malls and shopping centers, how office and consumer behavior might change after the pandemic, and the effects of recent looting and vandalism on retail corridors.”
  • The Roundtable has emphasized the vital need to restore the “rent obligation chain” during this economic crisis, which would benefit all stakeholders – business and residential tenants, owners, lenders, municipal and state budgets and retirement investments. (Bisnow video interview with Jeffrey DeBoer, April 30)
  • Separately, Acting Comptroller of the Currency Brian P. Brooks on June 1 urged the nation’s mayors and governors to consider the adverse impacts of long-term regional economic shutdowns on the nation’s financial system and the commercial real estate sector.  (Office of the Comptroller of the Currency news release, June 1)
  • In letters to the National League of Cities, the U.S. Conference of Mayors, and the National Association of Governors, Brooks warned that the lengthy duration and scope of continued lockdown orders “potentially threaten the stability and orderly functioning of the financial system the OCC is charged by law to protect.”
  • Brooks also warned about the negative potential consequences for CRE, stating, “Banks are a major source of commercial real estate finance in the United States. Cutting off utilities to commercial buildings can impair their condition, structural integrity, and value, thus impairing the collateral that secures real estate loans.  Commercial real estate loan collateral is also put at risk by lengthy property vacancies that result from extended stay-at-home orders.”
  • “Apart from damage to the physical collateral, extended lockdown orders obviously impair the ability of businesses, particularly small businesses, to generate the revenue needed to pay their loan obligations,” Brooks stated.  (OCC letter to U.S. Conference of Mayors)

The challenges of restarting the economy and re-entering commercial properties will be a central topic of The Roundtable’s June 11-12 Virtual Annual Meeting and concurrent policy advisory committees.

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IRS Issues Pandemic-Related Relief for Opportunity Zone Investors and Funds

Posted on by Trey Jackson

The Internal Revenue Service (IRS) yesterday issued broad relief for Qualified Opportunity Zone Funds and their investors in response to the ongoing COVID-19 pandemic.  (IRS news release, June 4)

IRS Notice 2020-39 includes five helpful changes and clarifications to the current rules governing the capitalization and operation of opportunity funds.  The Roundtable’s Opportunity Zone Working Group has strongly supported greater flexibility in the Opportunity Zone rules to ensure that capital investment continues to flow to hard-hit, low-income communities during the economic crisis brought about by COVID-19.

Under the new guidance:

  1. if the 180-day investment period to roll gain into an opportunity fund would have expired between 4/1/20 and 12/31/20, the deadline is now extended to 12/31/20;
  1. if an opportunity has a compliance date for the 90% investment asset test that falls between 4/1/20 and 12/31/20, failure to comply is automatically excused under the reasonable cause exception;
  1. the 30-month substantial improvement period for real property owned by an opportunity fund or opportunity zone business from 4/1/20 through 12/31/20 is disregarded;
  1. the IRS has clarified that the working capital safe harbor for opportunity fund working capital assets is extended under the President’s emergency declaration by 24 months (for a total period of 55 months) if the working capital is held by the fund before 12/31/20 and the other requirements for the safe harbor are met; and
  1. the 12-month period for an opportunity fund to reinvest proceeds from the return of capital or disposition of property is extended by an additional 12 months if the original period included 1/20/20, the date of FEMA’s major disaster declaration and other requirements are met.

Additionally, the IRS has updated their Qualified Opportunity Zones Frequently Asked Questions.

  • The Roundtable and a broad coalition of real estate organizations continue to support more significant enhancements to Opportunity Zones that would require congressional action.
  • The 11-member industry coalition urged members of Congress on May 14 to consider Opportunity Zones (OZ) rule changes that could spur investment, promote capital formation and bolster job growth in economically disadvantaged communities impacted by the coronavirus pandemic.  (Coalition letter)
  • The IRS changes this week come not long after the coalition’s letter, and several regulatory recommendations made by Sen. Tim Scott (R-SC) and eight other Senate Republicans on May 4 in a letter to Treasury Secretary Mnuchin and IRS Commissioner Charles Rettig.  (Roundtable Weekly, May 8)

The Roundtable’s Tax Policy Advisory Committee will discuss Opportunity Zone guidance and other tax relief resulting from the COVID-19 pandemic during the first Virtual Roundtable Annual Meeting on June 12.

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Protection from Frivolous Lawsuits Key to Economic Recovery, Business Groups Urge Congress

Posted on by Trey Jackson

A multi-sector coalition including real estate, tourism, technology, manufacturing, health care, and energy sector groups – led by the U.S. Chamber of Commerce – called upon Congress in a May 27 letter to enact temporary liability protections for businesses struggling to reopen and operate safely during the COVID-19 pandemic. 

  • The letter explains that American businesses face risks of frivolous litigation that will impede the nation’s path to economic recovery.  “Absent a targeted safe harbor for [businesses] that work to follow applicable guidelines, the fear and uncertainty from boundless liability threatens to impede our country’s social and economic recovery,” the groups explain.
  • The Chamber-led coalition emphasized that “recourse for those harmed by truly bad actors who engage in egregious misconduct” must be preserved.  Reasonable and temporary liability protections should also be offered for:

(1) businesses, nonprofit organizations, and educational institutions that work to follow applicable public health guidelines against COVID-19 exposure claims;

(2) healthcare workers and facilities providing critical COVID-19-related care and services;

(3) manufacturers, donors, distributors, and users of vaccines, therapeutics, medical devices, as well as PPE and other supplies (such as hand sanitizer and cleaning supplies) that are critical to the COVID-19 response; and

(4) public companies targeted by unfair and opportunistic COVID-19-related securities lawsuit

  • Among the more than 200 signatories to the letter are The Real Estate Roundtable, American Hotel & Lodging Association, International Council of Shopping Centers, National Apartment Association, National Association of REALTORS®, and the National Multifamily Housing Council.
  • Additionally, Building Owners and Managers Association (BOMA) International wrote to congressional leaders on May 27, urging them to consider business protections developed in response to prior emergencies like 9/11 as a guide for responding to Covid-19-related liability issues. (BOMA letter on business liability)  
  • “A tailored, specific legal safe harbor program for those in the commercial real estate sector, who are following public health rules, directives, and guidelines, making plans, and implementing protective measures, will support ongoing recovery efforts,” BOMA’s letter explains.
  • Senate Majority Leader Mitch McConnell (R-KY) and House Minority Leader Kevin McCarthy (R-CA) said in a joint statement early this month that any future Covid-19 relief legislation must include liability protections for employers and businesses. (See Roundtable Weekly, May 1) 
  • Senator John Cornyn (R-TX) emphasized the GOP’s position on May 18, stating on the Senate floor that “Leader McConnell and I … are working on a proposal that would put common sense reforms in place and protect those acting in good faith from being sued into oblivion.”  (Cornyn statement).  Potential employer immunity and anticipated litigation related to Covid-19 were the focus of a May 12 Senate Judiciary Committee hearing.  (Roundtable Weekly, May 15).

Several states have implemented or are considering pandemic-related liability protections that could provide a direction for federal legislation.  Utah, for example, provides law suit immunity to businesses except in cases of reckless or intentional misconduct.  (Salt Lake Tribune, May 4)

Roundtable Members Continue to Drive the “Re-Entry Discussion”

Roundtable Immediate Past Chair Bill Rudin (Co-Chairman & CEO, Rudin Management Company, Inc.) today joined CNBC for a conversation about the path forward for re-populating office spaces in New York and cities nationwide.

Business liability and building re-entry are crucial issues affecting commercial real estate operations in the Covid-19 era.  They will be discussed during The Roundtable’s virtual Annual Meeting on June 11-12, which will include remote events for both business and policy advisory committee meetings.

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Pandemic Risk Insurance Proposals Include House Legislation Modeled on TRIA

Posted on by Trey Jackson

House Democrats and the insurance industry recently released separate proposals aimed at expanding the availability of pandemic-related business interruption insurance. (Bloomberg Law, May 28)

  • Legislation introduced on May 26 by Congresswoman Carolyn B. Maloney (D-NY), above, senior member of the House Financial Services Committee, would create the Pandemic Risk Reinsurance Program – a federal backstop that would provide capacity for pandemic risk insurance and maintain marketplace stability with the private sector, modeled after the Terrorism Risk Insurance Act (TRIA). 
  • Rep. Maloney’s bill – the Pandemic Risk Insurance Act of 2020 (PRIA), H.R. 7011 – has 20 Democratic cosponsors, including four who serve on the House Financial Services Committee.  (PRIA Section-by-Section Summary, Bill text and Rep. Maloney news release).
  • Rep. Maloney commented on the introduction of PRIA this week with stakeholders during a remote news conference.  “We want to solve a market failure by allowing companies to purchase business interruption insurance that covers pandemics so that they can stay in business and keep their workers employed.  To solve this marketplace failure, we need to create a federal backstop just like we did with TRIA,” said Rep. Maloney.  “That’s why I’ve introduced the Pandemic Risk Insurance Act.  This will help relieve some of the economic losses that business are suffering and will protect businesses and the economy from future pandemics.” (PRIA introduction video, May 26)
  • Under PRIA, Maloney stated. “… policyholders and insurers and the federal government will share the risks.  With this backstop, the insurance industry will have more certainty and will be able to safely underwrite this unique risk.”  (PRIA Section-by-Section Summary)
  • Rep. Maloney also noted the insurance industry’s May 21 proposal for a federal program to help businesses meet the financial challenges from future pandemics.  “It was encouraging to see last week the insurance industry’s agreement with so many members of Congress and policyholders from across the country that pandemic insurance is a viable, actuarially sound product – and that there is an immediate need to create a mechanism to provide relief for millions of struggling business owners.”
  • The insurance industry-backed Business Continuity Protection Program, proposed in advance of Rep. Maloney’s PRIA bill, would provide revenue replacement assistance for payroll, employee benefits and operating expenses following a presidential viral emergency declaration. (National Association of Mutual Insurance Companies news release, May 21)
  • The proposals from Rep. Maloney and the insurance industry are prospective, and do not address losses associated with the current coronavirus pandemic.  The Trump administration, lawmakers and state insurance regulators have warned against measures that would have insurers retroactively pay for current pandemic claims.  (Politico, May 21 and Insurance Journal, May 27)
  • The Real Estate Roundtable, along with its industry partners, continues to work constructively with policymakers and stakeholders to develop and enact an effective pandemic risk/business continuity program.

Pandemic risk insurance will be a policy focus during The Roundtable’s Remote Annual Meeting and policy advisory committee meetings on June 11-12.

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House Passes Bill to Relax Restrictions on Small Business PPP Loans

Posted on by Trey Jackson

The House of Representatives yesterday overwhelmingly passed legislation (417-1) intended to ease restrictions on Paycheck Protection Program (PPP) loans to help small businesses keep workers on payroll with benefits during the coronavirus outbreak.  (The Hill, May 28) 

  • H.R. 7010 would make other changes that offer greater flexibility for PPP-eligible businesses, including:
    • Extending the loan forgiveness period from eight weeks to 24 weeks after origination;
    • Extending the PPP re-payment period to five years, for small businesses that do not receive loan forgiveness;
    • Allowing PPP loan recipients to take full advantage of deferral of employment taxes through the end of 2020; and
    • Allowing small businesses to receive forgiveness for up to 40% of PPP loan amounts used for rent and other non-payroll expenses.
  • The Roundtable joined a broad coalition of organizations supporting the flexibility bill – as originally introduced – that would have given small businesses greater discretion to decide how to best apportion PPP proceeds to help pay rent obligations and other ordinary operating expenses.  (Roundtable Weekly, May 22)
  • The original bill would have completely eliminated the so-called “75-25 Rule.”  The rule’s name derives from a Small Business Administration (SBA) regulation that currently requires a qualifying business to use at least 75% of PPP proceeds for payroll and benefits, and no more than 25% for rent, mortgage interest, and utility payments.  (See RER’s “8-Point Plan to Reform the PPP”)
  •  H.R. 7010 as passed by the House yesterday defaulted instead to a “60-40 Rule.”  According to Politico, “Democrats scaled back [the] initial version of the bill to address complaints from labor leaders that it would have given businesses less incentive to hire back workers.”  (POLITICO, May 28)
  • With the Senate scheduled to come back in session on Monday, it could vote next week on its own bipartisan legislation to modify the PPP, the Paycheck Protection Program Extension Act (S. 3833).  Like H.R. 7010, the Senate version would increase the PPP forgiveness period – but only by 16 weeks.  The Senate bill would not address changes to the “75-25 Rule” at all.  (Journal of Accountancy, May 25)
  • A bipartisan group of Senators led by John Cornyn (R-TX), meanwhile, is on record to move the “75-25 Rule” to a “50-50 Rule” where up to half of PPP loan proceeds could be used by a business to pay rent and other non-payroll fixed expenses.  (Cornyn press release, May 6)
  • Treasury Secretary Steven Mnuchin has expressed the Administration’s opposition to changing the “75-25 Rule.”  “Let me just remind people it’s called the Paycheck Protection Program, it’s not called the overhead protection program,” Mnuchin said in a May 21 interview for The Hill. “It was designed that you got eight weeks of payroll plus 25 percent for overhead, which we thought was a reasonable amount.”

House Majority Leader Steny Hoyer (D-MD) claimed earlier this week that House and Senate negotiators are nearing agreement on PPP reforms. (Bloomberg, May 26).  A recent “tracker tool” released by the American Action Forum charts the allocation of PPP loans since the program’s inception in March.   

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Policymakers Debate Timing of Next COVID-19 Response; Fed Report Warns Pandemic May Force Significant CRE Asset Repricing

Posted on by Trey Jackson

The Fed - 2020 Financial Stablity Report

After the House of Representatives last Friday passed a $3 trillion coronavirus relief bill, Republican policymakers have signaled they may be open to another COVID-19 bill, but on a measured basis. (Forbes, May 21) 

  • Senate Republican Leader Mitch McConnell yesterday said, “I think there is a high likelihood we will do another rescue package.  But we need to be able to measure the impact of what we’ve already done, what we did right, what we did wrong … We’re not quite ready to intelligently lay down the next step, but it’s not too far off.”   (Fox News, May 21) 
  • Treasury Secretary Mnuchin said yesterday during a forum hosted by The Hill that “We’re going to carefully review the next few weeks.  I think there is a strong likelihood we will need another bill, but we just have $3 trillion we’re pumping into the economy.” (Advancing America’s Economy forum, May 21) 
  • Sen. Lindsey Graham (R-SC), chairman of the Senate Judiciary Committee and close ally of President Trump, told CNN, “I want to do infrastructure.  I told Trump, this is the time. We got it teed up. This is the time to go big. … It really is a once-in-a-lifetime opportunity to give a facelift to the country.” (CNN, May 20)

The debate in Washington on what will constitute the next large legislative response to the coronavirus pandemic continued as the Federal Reserve released its bi-annual Financial Stability Report, which analyzes vulnerabilities in the economy and identifies significant risks to the U.S. banking system.  (Bloomberg, May 15)

CRE a Focus of Fed’s Financial Stability Report

The Fed report offered a stark warning that asset prices remain vulnerable to significant price declines if the COVID-19 pandemic persists – especially in the commercial real estate sector. (GlobeSt, May 18) 

  • The report states, “The vulnerability stemming from elevated CRE valuation pressures, coupled with a dim outlook for the sector as indicated by recent declines in equity REIT prices, suggests that CRE may undergo a substantial repricing in response to disruptions generated by the COVID-19 pandemic.”  (The Fed’s 2020 Financial Stability Report)
  • The Fed report also notes that non-agency commercial mortgage-backed securities (CMBS) market, which had previously been funding about one-fifth of CRE mortgage debt, stopped new securitizations toward the end of March. “CRE loans that would normally be securitized have been accumulating on bank balance sheets. In addition, data from the April 2020 Senior Loan Officer Opinion Survey on Bank Lending Practices indicated that a major fraction of banks reported weaker demand for CRE loans and tighter lending standards, on net, in the first quarter of 2020,” the report adds.
  • Fed Chairman Jay Powell told a virtual Senate Banking Committee hearing on Tuesday that the Main Street Lending credit facility – a loan program designed to lend to small and medium businesses – should be ready to launch by the end of May.
  • In an April 22 letter sent to Treasury Secretary Steven Mnuchin and Fed Chairman Jay Powell, The Real Estate Roundtable and Nareit urged that the scope of the Federal Reserve’s “Main Street” Lending Programs should be expanded to forestall further disruption and economic dislocations in commercial real estate.
  • Chairman Powell also testified that the Term Asset-Backed Securities Loan Facility (TALF) is one of four Federal Reserve credit facilities that will become operational soon.  Powell testified, “We expect all of them to be stood up and ready to go by the end of this month,” Powell said of the remaining programs. “People are working literally around the clock and have been for weeks.”  (Markets Insider, May 18) 

Previous industry letters to the Fed on March 24 and April 14 addressed the need to broaden the range of TALF, requested that eligible collateral include both outstanding (legacy) CMBS, commercial mortgage loans and newly issued collateralized loan obligations.  On April 9, the Fed confirmed that the TALF would be expanded to include triple-A rated legacy non-agency CMBS and loans.

Roundtable Video Interview 

Economic and other policy issues facing the CRE industry in today’s pandemic environment were discussed recently in a video discussion with Roundtable Chairman Emeritus (2009-2012) Dan Neidich (Chief Executive Officer, Dune Real Estate Partners LP) and Real Estate Roundtable President Jeffrey DeBoer. The video, done as part of several remote Roundtable interviews about pandemic-related policy issues, was hosted by the alumni club of Stanford University – Stanford Professionals in Real Estate (SPIRE).   

  • Neidich and DeBoer address the importance of restoring the “Rent Obligation Chain” and the need for policy makers to help maintain business and residential rental income streams so local governments receive property tax revenues they need to provide essential community services.
  • Steady rent revenues drive building values that support American pensions and retirement savings. Rents to property owners also pay the compensation, health, and other benefits for the millions of workers – at all skills levels – that make U.S. building infrastructure safe, healthy, and functioning.
  • The SPIRE interview also covers a range of other policy matters at the forefront of discussions in our nation’s capital – such as business liability and proposals to help manage risks associated with reopening places of work, education and recreation.

Policymakers’ response to the contagion crisis, whether legislative or regulatory – and how the industry is participating in the process – will be a focus of The Roundtable’s June 11-12 Remote Annual Business and Committee Meetings.

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Senate, House Signal Openness to PPP Reforms as Business Coalitions Urge Policymakers to Strike “75/25 Rule,” Extend Loan Forgiveness Period

Posted on by Trey Jackson

SBA image for PPP

Congressional lawmakers are taking steps to improve key terms of the Paycheck Protection Program (PPP) to help small business borrowers deal with the economic impact of the global pandemic.  (Washington Post, May 20 and Wall Street Journal, May 21) 

  • Under the CARES Act, a portion of PPP loans can be forgiven for the eight week period after origination.  (See “CARES Act and Implications for Real Estate”)
  • Implementing rules and guidance from the U.S. Treasury and Small Business Administration further establish a “75/25 Rule,” whereby 75% of PPP loan proceeds and forgiven amounts must be for payroll.  No more than 25% can be devoted to non-payroll business expenses like rent, mortgage interest, and utility bills.
  • Business coalitions (including the The Real Estate Roundtable) sent letters yesterday urging policymakers to take immediate action to modify these requirements by extending the PPP loan forgiveness period and striking the “75/25 Rule.”
  1. A broad business coalition initiated by the U.S. Chamber of Commerce also recommends extension of the PPP’s June 30 safe harbor date for rehiring and restoration of pay.   
  2. A separate letter focuses support for specific legislation, the Paycheck Protection Flexibility Act (H.R. 6886).  This bipartisan bill is a stand-alone “spin-off” of PPP reform provisions passed by House Democrats last week in the HEROES Act.  (Roundtable Weekly, May 15, 2020)  H.R. 6886 would likewise strike the “75/25 Rule” and extend the PPP forgiveness period to 24 weeks after loan origination.
  • A sponsor of the PP Flexibility Act, Rep. Dean Phillips (D-MN), informed in a press release that House leadership has committed to bring up H.R. 6886 for its own vote possibly as early as next week.  House Speaker Nancy Pelosi (D-CA) reportedly called the 75/25 limitation on small businesses “debilitating.”  (Roll Call, May 20)
  • Over in the Senate, Marco Rubio (R-FL), Chairman of the Senate Small Business Committee and author of the PPP provisions in the CARES Act, predicted in a tweet yesterday that the Senate would pass reforms (S. 3833) to extend the time period beyond the current June 30 deadline by which qualifying small businesses can apply for and use PPP loans.
  • Senator John Cornyn (R-TX), meanwhile, has spearheaded a bipartisan effort to amend the “75/25 Rule” to a “50/50 Rule” – where up to 50% of PPP loan and forgiveness amounts could be used for rent and other ordinary business expenses.  (Cornyn letter, May 5) (Roundtable Weekly, May 8, 2020)
  • Since passage of the CARES Act on March 27, The Roundtable has recommended elimination of the “75/25 Rule” as an inappropriate “one-size-fits-all” restriction that unduly limits businesses in meeting their rent obligations and paying for other ordinary operating expenses.  (RER’s “8-Point Plan to Reform the PPP”) 
  • Treasury Secretary Steven Mnuchin yesterday endorsed congressional efforts regarding extension of the PPP loan forgiveness period.  “One of the things we’re working with Congress on, and there is bipartisan support, is lengthening the eight-week period.  [T]hat’s something we definitely want to fix,” he said. (Advancing America’s Economy forum, May 21)
  • At The Hill’s Advancing America’s Economy forum, Mnuchin also stated he did not support reforming the “75/25 Rule.” “We want most of this money to go to workers and that we believe the 75 percent was exactly consistent with the way the program was designed,” he said.
  • A recent “tracker tool” released by the American Action Forum charts the allocation of PPP loans since the program’s inception in the CARES Act.   

The Paycheck Protection Program will be discussed at The Roundtable’s Remote Annual Business and Committee Meetings from June 11-12. 

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CDC Summarizes “Re-Opening America” Initiatives; EPA Provides Building Water Quality Checklist; Roundtable Board Member Interviewed on Office Return

Posted on by Trey Jackson

CNBC Squawkbox interview with Owen Thomas

The Centers for Disease Control and Prevention (CDC) this week released a comprehensive summary of its initiatives and tools to enable fuller reopening of communities and businesses, as all 50 states are taking steps to return to a “new normal” after months of COVID-19 shutdowns and stay-at-home orders.  (CDC’s “Activities and Initiatives Supporting the Covid-19 Response” and NYTimes national map, May 21)

Meanwhile, the U.S. Environmental Protection Agency (EPA) recently issued an information resource and checklist to address water quality in buildings as they ramp-up operations.  EPA recommends that owners and managers take proactive steps to minimize water stagnation in plumbing systems during temporary shutdowns or reduced operations, prior to building re-population.  See:

Additionally, Roundtable Board Member Owen Thomas (CEO, Boston Properties) was interviewed yesterday on CNBC’s Squawkbox  (photo above) about the pandemic’s impact as employees return to office environments and how cities may compare to suburbs as major work hubs of the future. (CNBC interview, May 21) 

  • “We have a pandemic underway; there will be a gradual return to the office.  But I do think companies will be actively using their offices in the long-term,” Thomas said.
  • “I also hear from customers that remote work is not an acceptable replacement for the in-person interactions that happen in the office space. The ability to mentor younger employees. The spontaneous collaboration and creativity that occurs and also the culture that companies develop – it’s very difficult to do it when we’re all on Zoom and Webex.” (Thomas CNBC interview, May 21)
  • Roundtable members who have recently been interviewed about workplace return strategies and technologies include Immediate Past Chair Bill Rudin, Roundtable Member Scott Rechler and others. (Roundtable Weekly, May 15)

Two industry reports issued this month also address return-to-work guidelines and COVID-19 operational contingency plans:

  • A CBRE analysis of 203 companies’ operations across the globe – “ReEntering the World’s Workplaces” – shows many companies have implemented return-to-work guidelines stricter than local government requirements  (CBRE news release, May 15)  / (GlobeSt, May 18)
  • A Deloitte survey of 100 senior financial service institutions’ (FSI) executives with responsibility for crisis management and business continuity planning reveals that at least half of the respondents are developing COVID-19 operational contingency plans spanning at least the next three months. Part of the complexity around re-opening has to do with the scale and scope of FSI real estate. (Deloitte, May 15)

The Roundtable’s Building Re-Entry Working Group continues to meet weekly to address issues associated with the restarting of the economy. 

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Jim Didion, Real Estate Pioneer, Ex-CBRE CEO, National Realty Committee Chair Emeritus

Posted on by Trey Jackson

Jim Didion - In Memoriam

James Jerrett Didion (Jim) – a pioneer in commercial real estate who served as CEO of CB Richard Ellis and as former Chair of The National Realty Committee (predecessor of The Real Estate Roundtable) – passed away on April 2.

  • “Jim Didion was a driving force not only in the commercial real estate industry – his decades of invaluable public service included work on the National Realty Committee (NRC), the predecessor organization that became The Real Estate Roundtable in 1999,” said Jeffrey DeBoer, Roundtable President and CEO.  He added, “Jim joined NRC in 1972, served in a variety of policy advisory roles for years, including as Chairman from 1993 to 1996 and beyond as NRC  Chair Emeritus.  He will always be remembered as a selfless contributor to the common good of the industry, the country and his community.”
  • His real estate career began at Coldwell Banker Commercial, where he rose to become CEO and Chairman of CB Richard Ellis, leading the firm’s growth from $400 million in annual revenues in 1986 to more than $1 billion in 1999.  Mr. Didion has been widely recognized as a pioneer in building a global, fully integrated, professional services business and credited with leading CB to its position as the largest commercial real estate company in the world.
  • Mr. Didion consulted on real estate issues to the Chancellor of the University of California at Berkeley and served on the advisory board of the Fisher Center at the Haas Business School, as trustee of Community Hospital of the Monterey Peninsula and as National Real Estate Consultant to the U.S. Olympic Committee.

A video of his real estate advisory efforts, with his wife Gloria, on behalf of Montage Health illustrates their community participation and involvement.   (Full obituary, Monterey County Herald)

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Industry Coalition Urges Congress to Consider Opportunity Zone Rule Changes to Spur Investment in Hard-Hit Communities

Posted on by Trey Jackson

An 11-member industry coalition, including The Real Estate Roundtable, urged Members of Congress on May 14 to consider Opportunity Zones (OZ) rule changes that could spur investment, promote capital formation and bolster job growth in economically disadvantaged  communities impacted by the coronavirus pandemic.  (Coalition letter, May 14)

  • Opportunity Zones seek to stimulate jobs and growth where they are most needed by encouraging taxpayers to make long-term, patient investments in targeted, low-income communities.  On Thursday, Federal Reserve Chairman Powell reported that “among people who were working in February, almost 40 percent of those in households making less than $40,000 a year had lost a job in March.” (Chairman’s Prepared Remarks, May 13)
  • The coalition letter asks Congress to make three critical improvements to the Opportunity Zone incentives.  The changes would:
  • Allow opportunity funds to raise capital from all sources, not just gain rolled over from a recently disposed investment.
  • Spur productive real estate investment in low-income communities by providing that a 50 percent increase in the basis of a building constitutes a substantial improvement of the property.
  • Strengthen the economic incentives by codifying the tax rate on deferred gain and extending for two years the recognition date for deferred gain, and consequently, the deadlines that must be met in order to qualify for the increase in basis for gain rolled into an opportunity fund.
  • The coalition’s legislative suggestions come not long after Sen. Tim Scott (R-SC) and eight other Senate Republicans made several regulatory Opportunity Zone recommendations on May 4 in a letter to Treasury Secretary Mnuchin and IRS Commissioner Rettig.  (Roundtable Weekly, May 8)
  • The Senators encouraged 10 specific changes in their letter, which states, “Significant challenges arise from the inability to raise capital; decreased demand for space, products and services; a decline in the local economy; governmental delays; supply chain interruptions; and uncertainty regarding valuations and ability to secure loans and necessary funding apart from Opportunity Zone capital gain investments.”

The role of investment in Opportunity Zones may be addressed in eventual Covid-19 stimulus legislation in Congress.  The Roundtable’s Tax Policy Advisory Committee (TPAC) will continue to collect and share information regarding with policymakers regarding the real estate industry’s experience with the Opportunity Zone tax incentives and the impact on low-income communities of real estate-focused opportunity funds.

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