News Type: Roundtable Weekly

2020 Annual Report – Leading Through Crisis

Posted on by Trey Jackson

 

View Full Report – 2020 Annual Report – Leading Through Crisis

Intro

COVID-19 RER Response Timeline

Tax

Capital and Credit

Infrastructure and Housing

Energy and Climate

Homeland Security

Roundtable Discussion with North America’s Building Trades Unions President Sean McGarvey on COVID-19, Racial Inequality, Workforce Training and Infrastructure

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Sean McGarvey, above, President of North America’s Building Trades Unions (NABTU) and Roundtable President Jeffrey DeBoer this week discussed compelling issues of importance to CRE and the Trades, including COVID-19 responses, infrastructure investment, racial inequality,  workforce development, infrastructure and capital investment.  (Watch the remote discussion on The Roundtable’s Youtube channel.)

  • NABTU is an alliance of 14 national and international unions in the building and construction industry that collectively represent over 3 million skilled craft professionals in the United States and Canada.
  • DeBoer and McGarvey’s discussed possible ways the two sectors could work constructively together on issues, including:
  • COVID-19.  McGarvey commented on how at the onset of the pandemic outbreak, a large amount of NABTU’s workforce was laid idle.  The unions urgently worked with DHS and state leaders on how the construction industry could remain in business by pursuing guidance with federal agencies such as the Centers for Disease Control and Prevention Centers (CDC).  NABTU’s extensive efforts in funding COVID-19 vaccine research and trials are also recounted. 
  • Nondiscriminatory work environments.  The discussion touched on NABTU’s June 1 statement issued in response to the nationwide protests over racial inequality.  In the remote discussion with DeBoer, McGarvey said, “At this point where people want to compare it to 1968 … its so much different now that I really thing we’re going to get somewhere this time. And the Building Trades when it comes to diversifying our membership … we even have a couple dozen formerly incarcerated programs where we are teaching curriculum inside the state prison system (until Covid came) to prepare people for when they get out to come into our training programs and go to work.”
  • Apprenticeships and training.  “There’s only one institution in the world that trains more people in hard skills than NABTU. That’s the United States military,” McGarvey noted.  The unions and their signatory contractor partners invest over $1.6 billion in private-sector money to fund and operate over 1,900 apprenticeship training and education facilities across North America that produce highly trained, craft workers.  Several Roundtable member companies participate in NABTU workforce programs.
  • Infrastructure. The effectiveness of public-private partnerships in large infrastructure investments was addressed by DeBoer and McGuire.  The two also discussed the difficulty of financing construction projects during the pandemic and how it affects the economic security of the entire industry.  The Roundtable is currently working with policymakers and stakeholders to develop and enact an effective pandemic risk/business continuity program that would add more confidence to the marketplace while a health solution is vigorously pursued on the medical front.
  • Capital investment strategies.  NABTU has interests in nearly $700 billion of capital investments and assets that include funds focused on pensions, commercial real estate development, infrastructure and other investment.   “We are about partnerships,” McGarvey noted. “We are partnered with public pension funds who see it like us … who want a minimum amount of standards of who they are going to lend to and who they are going to invest with.  So you take our nearly $700 billion … we are thinking that in about 3 years we’ll be up to about $3 trillion worth of pension fund money that’s going to have minimum requirements.”    

The remote discussion concluded on a positive note about exploring possible ways The Roundtable and NABTU could work together on mutually beneficial issues.

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SCOTUS Decision Protects “Dreamers” from Deportation For Now, and Sets the Stage for Election Year Controversy

Posted on by Trey Jackson
The Supreme Court
Facade of US Supreme court in Washington DC on sunny day

The Supreme Court of the United States (SCOTUS) handed down a highly-anticipated decision yesterday, ruling that Obama-era forbearance against deporting unauthorized immigrants brought by their parents to this country as children – the “Dreamers” – stands in place for the time being.  (SCOTUSblog analysis, June 18)

  • Chief Justice John Roberts wrote the 5-4 decision in Dep’t of Homeland Security vs. Regents of the Univ. of California. The Court’s majority decided that the Trump Administration’s 2017 efforts to thwart the Deferred Action for Childhood Arrivals (DACA) program, established in 2012, was a wrongful “arbitrary and capricious” action.
  • Approximately 700,000 immigrants have sought DACA protections. The program allows unauthorized foreign-born individuals who “only know this country as home” to apply for two-year forbearance on deportation, as well as work permits and eligibility for Social Security and Medicare.  A 2014 program extended similar protections to the Dreamers’ parents.”
  • The Trump Administration rescinded both programs in 2017. The high Court majority decided the rescission was illegal because, among other reasons, DHS purported to strike the entire policy – and did not consider whether the “deferred removal” elements of DACA could be retained while eliminating the “federal benefits” components.
  • Chief Justice Roberts also wrote that DHS’s rescission was arbitrary because the agency failed to consider the extent of the Dreamers’ reliance on the program, noting that DACA recipients have served in the military, enrolled in college, started businesses and careers, purchased homes, got married and had children, and paid taxes.  (Opinion at 24-25).
  • The Real Estate Roundtable last October joined an amicus brief in the case, led by the National Association of Home Builders, requesting that DACA remain in place. The brief explained the importance of the immigrant workforce to construction, hospitality, and building maintenance functions, stating that “DACA-eligible immigrants are a crucial component” of real estate jobs as 41% of them work in industries represented by the amici (Roundtable Weekly, October 18, 2019)
  • SCOTUS likewise noted the economic contributions of DACA beneficiaries: “[E]xcluding DACA recipients from the lawful labor force … [would] result in the loss of $215 billion in economic activity and an associated $60 billion in federal tax revenue over the next ten years.” (Opinion at 25)

Immigration groups heralded yesterday’s decision, but called for Congress to enact a permanent solution to protect DACA recipients. (The Hill, June 19) In what will surely become a contentious issue leading up to the November elections, President Trump tweeted today that his Administration will “be submitting enhanced paperwork shortly” to again try and rescind the program and eliminate protections afforded to the Dreamers. (USA Today, June 19)

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House Democrats, Republicans Propose Infrastructure Plans as Highway Trust Fund Faces Sept. 30 Expiration

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House Speaker Nancy Pelosi (D-CA) and several Democratic chairs are using a surface transportation bill as a base for a broader $1.5 trillion infrastructure plan they announced yesterday, to also invest in the nation’s housing, water, broadband, clean energy, and education systems.  (POLITICO, June 18 – see also Pelosi remarks and Youtube video, June 18).

  • Action on transportation infrastructure is considered a “must-do” item in Congress before the November elections because the nation’s main source to fund roads, bridges, and mass transit – the Highway Trust Fund – expires on September 30.  (New York Times, June 17)
  • The Democratic surface transportation piece – the INVEST in America Act – would authorize $494 billion in spending over five years. Key elements of this bill align with Roundtable policies, such as state/local cost share allocations that would help finance significant projects like the Northeast Corridor Gateway Program. (Roundtable Weekly, June 5 and Bill text | Factsheet | Bill Summary | Section-by-Section)
  • Meanwhile, the Ranking Member on the House Transportation and Infrastructure Committee, Sam Graves (R-MO), announced an alternative bill for surface transportation programs. The Republicans’ STARTER Act (section-by-section summary) would bolster permit streamlining and the “One Federal Decision” framework, measures long-supported by The Roundtable.  (Roundtable Weekly, August 2, 2019)  
  • Pelosi said yesterday that the comprehensive Democratic infrastructure package – the Moving Forward Act – would “make real the promise of building infrastructure in a green and resilient way,” and that “[i]t’s job-creating in its essence, but also commerce-promoting.”  (The Hill, June 18). A framework for the omnibus measure was released in January.  (Roundtable Weekly,  January 31)
  • The critical issue with any infrastructure proposal is how to pay for it. House Ways and Means (W&M) Committee Chairman Richard Neal (D-MA) yesterday outlined several tax provisions to be included in the Democratic leadership’s measure.
  • Neal stated, “We leaned on our tax code and will reinstate Build America Bonds, to not only provide financing to state and local governments but also spur investment in the private sector,” according to a W&M Committee press release. “There is a desperate need for modernizing low-income housing, and the Committee proposed a massive expansion of the Low Income Housing Tax Credit to get us there.” A W&M fact sheet outlines other provisions.  
  • The Senate is expected to focus on infrastructure in the coming weeks after the House acts. Last summer, the Senate Environment and Public Works Committee (EPW) unanimously approved a five-year, $287 billion surface transportation plan. (Roundtable Weekly, August 2, 2019).

The Trump Administration has long stated that infrastructure is one of its top priorities. It is reportedly preparing another $1 trillion plan that it may present to Congress next month.  (Bloomberg, June 16) Pelosi said yesterday she anticipates the Democratic Moving Forward Act will come to a House vote before Congress breaks for the July 4th recess and urged the Administration to begin negotiations about funding it.

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IRS Proposes Favorable New Rules for Like-Kind Exchanges

Posted on by Trey Jackson
IRS building in Washington DC

The IRS on June 11 released proposed regulations for like-kind exchanges under section 1031 that implement changes enacted in the Tax Cuts and Jobs Act (TCJA) of 2017.  TCJA restricted section 1031 to exchanges of “real property.”  The proposed rules would provide a favorable definition of “real property” and establish a safe harbor for certain personal property received in an exchange. 

  • Like-kind exchange rules allow taxpayers to defer capital gains tax when they exchange property held for investment or business use for another property of a “like kind.”  
  • Ryan McCormick, senior vice president and counsel at The Real Estate Roundtable, described in Bloomberg  Tax (June 11) why real estate like-kind exchanges are critical in the current environment: “Like-kind exchanges are even more important during periods of economic stress, like today, when traditional financing is less reliable.”
  • TPAC Member Richard Lipton (Baker McKenzie LLP) noted favorable aspects of the proposed rules, “It’s a very broad definition and many practitioners will be happy with the inclusion of inherently permanent structures being broadly defined, and also the inclusion of certain intangible property,” Lipton said.  (Bloomberg Tax, June 11).
  • Under TCJA, items like machinery, equipment, vehicles, artwork, collectibles, and patents no longer qualify for deferral under section 1031, but exchange treatment remains available for real property, including “land and generally anything built on or attached to it.” (IRS New Release 2018-227, Nov. 19, 2018).

The proposed rules appropriately treat licenses, permits, and other rights that derive their value from real property as eligible assets.  The regulations also provide a helpful safe harbor for incidental personal property (up to 15% of the aggregate value of the replacement property) that is typically transferred, in standard commercial transactions, with the real property.  (Federal Register, June 12, Statutory Limitations on Like-Kind Exchanges)

Like-Kind Exchange Deadlines

Like-kind exchanges must meet strict deadlines to qualify for deferral.  The pandemic has greatly complicated the ability to complete an exchange.  The reasons include: stay-at-home orders, flight restrictions, an inability to visit sites or perform appraisals, the closure of local governmental offices, and a general inability to conduct the necessary due diligence. 

  • In March, The Roundtable and other real estate organizations requested an extension of 1031 deadlines.  (Coalition LKE letter, March 23)
  • The Treasury Department in early April extended the 45-day deadline for identifying like-kind exchange replacement property and the 180-day deadline to close on a like-kind exchange transaction until July 15, 2020.  (IRS Notice 2020-23)
  • “It seemed like a good-government, reasonable thing to do,” The Roundtable’s Ryan McCormick recently told The New York Times.  Real estate investors could not travel because of pandemic lockdowns and completing due diligence steps such as an appraisal became difficult, if not impossible. “Taxpayers were seeking some additional time to work through that,” McCormick told the Times.  (The New York Times, June 5)
  • An industry coalition, including The Real Estate Roundtable, on April 20 wrote to the Treasury Secretary seeking further clarification and relief on 1031 deadlines.  (Coalition letter, April 20, 2020)

The Roundtable’s TPAC will review the June 11 proposed regulations and comment on any further like-kind exchange issues that may need clarification. 

TPAC Video Discussions

TPAC held its first remote meeting in conjunction with The Roundtable’s Annual Meeting on June 12.  Wide-ranging TPAC discussions touch on recent social unrest; the COVID-19 pandemic and the CARES Act; partnership audit reform;  section 199A;  like-kind exchanges, COD income; energy-efficiency incentives; REIT related party rules; section 163(j); and much more. TPAC recordings on The Roundtable’s YouTube channel include:

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Fed Chairman Testifies Congressional Stimulus Measures Should Continue as Main Street Lending Program Launches; Regulators Support Financing to Non-Bank Lenders

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Federal Reserve Chairman Jerome Powell told House and Senate policymakers this week that economic support for workers and businesses adversely affected by COVID-19 should continue, adding that until COVID-19 is fully contained, “a full recovery is unlikely.” 

  • Powell testified remotely on June 16 before the Senate Banking Committee and on June 17 before the House Financial Services Committee to deliver his Semiannual Monetary Policy Report to Congress.
  • “It would be wise to look at ways to continue to support people who are out of work and also smaller businesses that may not have vast resources for a period of time…so that we can get through this critical phase,” Powell said. “That support would be well placed at this time.” (Wall Street Journal, June 17 and 18)
  • The Fed Chairman acknowledged some economic indicators have suggested “a modest rebound.” He also cautioned, “That said, the levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery.”  (BGov, June 17 and Marketwatch, June 18)
  • During his two days of congressional testimony, Powell defended the Fed’s aggressive purchases of assets and corporate bonds.  “I don’t see us as wanting to run through the bond market like an elephant, doing things and snuffing out price signals,” he said. “We just want to be there if things turn bad in the economy.”  (Bloomberg, June 16)
  • Powell delivered his remarks to Congress after stating last week that the central bank will continue buying large quantities of bonds and leave interest rates near zero through at least 2022.”  (USA Today, June 10)
  • The Fed Chairman also warned that the economic downturn could widen inequalities between rich and poor.  “Low-income households have experienced, by far, the sharpest drop in employment, while job losses of African-Americans, Hispanics and women have been greater than that of other groups,” Mr. Powell said. “If not contained and reversed, the downturn could further widen gaps in economic well-being that the long expansion had made some progress in closing.”  (New York Times, June 16)

Former Federal Reserve Chairs Ben Bernanke and Janet Yellen signed a June 16 letter to congressional leaders, endorsed by more than 150 economic scholars, stating, “Congress must pass another economic recovery package before most of the support in the CARES Act expires this summer.  Congress should address this risk, and the already occurring economic damage, by passing, as soon as possible, a multifaceted relief bill of a magnitude commensurate with the challenges our economy faces.” (Washington Center for Equitable Growth, June 16 statement)

Main Street Lending Program Launches

The Real Estate Roundtable and Nareit on April 22 wrote to Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell urging that additional measures be adopted to expand the scope of the Main Street Lending Programs (MSLP) to forestall further disruption and economic dislocations in the commercial real estate sector during the pandemic.  (MSLP letter, April 22)

  • On June 8, The Federal Reserve Board expanded its MSLP to allow more small and medium-sized businesses to be able to receive support. (Roundtable Weekly, June 12)
  • This week, the Federal Reserve’s MSLP opened for lender registration.  The Federal Reserve Bank of Boston announced on June 15 that lenders can find the necessary registration documents and are encouraged to begin making Main Street program loans immediately.  (News Release)
  • The program offers five-year loans with floating rates, with principal payments deferred for two years and interest payments deferred for one year. The loans range in size from $250,000 to $300 million to support a broad set of businesses.

The MSLP intends to purchase 95% of each eligible loan that is submitted to the program after meeting all requirements. The Program will also accept loans that were originated under the previously announced terms, if funded before June 10, 2020. 

Regulators Support Financing to Non-Bank Lenders

Federal banking regulators responded favorably this month to a request from a business coalition, including The Real Estate Roundtable, that requested clarifications about financial institutions working with borrowers impacted by COVID-19. (Regulators April 7 guidance—Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus.)

  • The coalition on May 15 wrote to the regulators requesting clarification that – in addition to traditional loan products – lending and financing arrangements, such as warehouse lines and repurchase agreements secured by multifamily and commercial real estate loans and commercial mortgage-related securities, are within the scope of the guidance.  (Coalition May 15 letter)
  • The coalition’s focus was the debt financing extended by commercial banking institutions to non-bank lenders (NBLs) who, in turn, provide mortgage loan funding to commercial and multifamily property owners of all types.  The coalition received two affirmative replies, from Acting Comptroller of the Currency (OCC) Brian P. Brooks on June 4 – and on June 18 from Federal Deposit Insurance Corporation (FDIC) Chairman Jelena McWilliams.

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) continues to work to address the current crisis, pursuing measures that will enhance liquidity and capital formation, and to help develop an effective insurance program that provides the economy with the coverage it needs to address future pandemics. 

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Treasury Secretary Mnuchin and Industry Leaders Address Coronavirus Policy Response, Racial Injustice, and Reopening Challenges

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RER 2020 Annual Meeting visual

The Real Estate Roundtable’s first Virtual Annual Meeting this week attracted nearly 300 Roundtable members who remotely accessed discussions with Treasury Secretary Steven Mnuchin and industry leaders on COVID-19 policy responses, racial injustice and business reopening challenges.  The Roundtable’s policy advisory committee meetings also held their first remote meetings to analyze policy issues in the tax, capital and credit, sustainability and homeland security areas with subject matter experts from Capitol Hill, federal agencies and the private sector.  

  • Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.) launched the business meeting yesterday, noting the June 9 statement on racial injustice she issued with Roundtable President and CEO Jeffrey DeBoer.  (See related story below for more details)
  • Cafaro noted The Roundtable’s intense focus on the economic repercussions of the coronavirus.  She explained how the organization has successfully pivoted its focus to advocating policies that support economic recovery, including a pandemic risk insurance program modeled after TRIA; ongoing efforts to reform the Paycheck Protection Program; Federal Reserve credit lending facilities that accommodate CMBS; and federal efforts that could preserve the “rental obligation chain.”

  • Cafaro also announced that four individuals will join The Roundtable’s Board of Directors and three current Directors will depart, effective July 1.  The new Board Members are:
  • The exiting Board Members, who Cafaro thanked for their accomplished service, are:


Policy Issues & Featured Speakers   
The Roundtable’s June 11 Annual Business Meeting included the following speakers: 

  • Treasury Secretary Steven Mnuchin discussed the Administration’s work with Congress to address the economic fallout from the outbreak with The Roundtable’s Jeffrey DeBoer. Secretary Mnuchin emphasized how recent improvements to the Paycheck Protection Program (PPP) has helped small business borrowers deal with the economic impact of the global pandemic.  He added that the Administration is also considering business liability protections and pandemic risk insurance.
  • Citi’s Vice Chairman Raymond McGuire discussed “Real Estate’s Role in Addressing Racial Injustice” with Roundtable Immediate Past Chair William Rudin (Co-Chairman and CEO, Rudin Management Inc.).  McGuire noted that fortunate opportunities for an excellent education is what made the difference in his life experience and that providing similar opportunities to African American youths is of vital importance. 

  • “Reopening the Economy, Returning to the Workplace, Reinforcing Health Protections” panel featured leading industry executives discussing reopening strategies, operational protocols, potential liability concerns and more.  The discussion is available to stream at your convenience.  Separately, Roundtable Board Member and Sustainability Policy Advisory Committee Chair Tony Malkin (Chairman and CEO, Empire State Realty Trust, Inc.) was interviewed on CNBC this week on safety protocols and other measures that can be utilized for reopening businesses.  (CNBC interview, July 9)

  • Governor Jared Polis (D-CO) focused on Colorado’s approach to managing the outbreak, as it has recently reopened most businesses while practicing social distancing.  In his video interview, “States Set the Pace,” Gov. Polis discusses how state government can work with the real estate industry on practical safety measures to help businesses looking to reopen.

  • Dr. Scott Gottlieb, former Food and Drug Administration Commissioner (2017-2019) and Roundtable Chair Debra Cafaro discussed medical aspects of the novel coronavirus and his health policy perspectives on the crisis.  Dr. Gottlieb noted, “We still have a slowly expanding epidemic in the United States” that has a high case fatality rate.  He added that the world could see multiple vaccines with some targeting specific populations based on age or other factors.

  • Charlie Cook, Editor and Publisher of the Cook Political Group, outlined the dynamics of the upcoming election cycle during a health pandemic and economic downturn. Cook emphasized the importance of approximately 5 percent of independent voters who will make a choice in an election without third-party candidates. 


Roundtable Policy Committees 

The Roundtable’s Policy Advisory Committees and associated task forces also met remotely in conjunction with the Annual Meeting, offering a combination of live and recorded presentations for participants.  A video featuring all Roundtable Committee Chairs providing updates on each committee’s policy efforts is available on The Roundtable’s youtube channel.  

This week’s committee meetings analyzed policy issues in detail with high-level congressional and agency staff:

  • Research and Real Estate Capital Policy Advisory Committee (RECPAC):
    Rep. French Hill (R-AR), who serves on the House Financial Services Committee and the Congressional Oversight Commission on the CARES Act, provided insights on recent and future COVID-19 economic relief and stimulus during this joint committee meeting.  Additionally, industry experts discussed the state of real estate capital and credit markets, including the Fed’s Term Asset-Backed Securities Loan Facility (TALF). 
  • Tax Policy Advisory Committee (TPAC):
    House Ways & Means Chief Tax Counsel Andrew Grossman joined TPAC to share his perspective on committee priorities and the tax legislative outlook.  A panel of leading real estate tax authorities also discussed legislative proposals focused on the current distress in U.S. real estate – particularly debt restructurings, impaired rent and cancellation of indebtedness (COD) income.  Additional wide-ranging tax policy TPAC discussions are available on demand: 

  • Sustainability Policy Advisory Committee (SPAC):
    U.S. Environmental Protection Agency speakers provided an update on the ENERGY STAR certification program and its Portfolio Manager Benchmarking tool in the Covid-19 Era.  EPA and the Centers for Disease Control and Prevention (CDC) speakers discussed “Reopening Guidance for Cleaning and Disinfecting Workplaces.”  SPAC members also focused on “Healthy Building Strategies in a Global Pandemic” with the senior executives from the Center for Active Design and the International WELL Building Institute.  
  • Homeland Security Task Force meeting (HSTF) and Risk Management Working Group (RMWG):
    The joint meeting attendees heard briefings by government officials on the threat of civil unrest, looting, homegrown violent extremists and organized attacks on commercial properties – and the security, management and health challenges related to building re-entry.  The Task Force was also briefed on the need to enact a federal business continuity/pandemic risk program aimed at providing capacity for policyholders in need of insurance protection from the enormous costs associated with pandemics.

Next on The Roundtable’s meeting calendar is the September 22 Fall Meeting, which is restricted to Roundtable-level members only.  The Roundtable has also posted its 2021 meeting calendar dates.

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Talks Continue on Next Phase of Coronavirus Stimulus as Federal Reserve Expands Main Street Lending Program

Posted on by Trey Jackson

The Federal Reserve in Washington, DC

Trump Administration officials are signaling support for another Coronavirus stimulus package that Congress is expected to consider next month.  (Wall Street Journal, June 11)

  • After the House of Representatives on May 22 passed a $3 trillion coronavirus relief bill, congressional Republicans have signaled they may be open to another COVID-19 legislative package, but on a measured basis. (Forbes, May 21 and Roundtable Weekly, May 22) 
  • Treasury Secretary Steven Mnuchin on June 10 testified before the Senate Small Business and Entrepreneurship Committee: “I definitely think we are going to need another bipartisan legislation to put more money into the economy.  I think whatever we do going forward needs to be much more targeted, particularly to the industries and small businesses that are having the most difficulty in reopening as a result of COVID-19.” (RollCall, June 10)
  • Mnuchin on June 11 responded to a question by Jim Cramer of CNBC’s “Squawk on the Street” about future coronavirus stimulus plans and rental payment pressures faced by commercial real estate.
  • Mnuchin said, “On the commercial side … it is more complicated.  You have companies, particularly in retail, that are having a lot of issues. They are going to have to deal with the rent.  The landlords then have to deal with mortgage payments.”
  • The Treasury Secretary continued, “…how do we help the industries that are especially impacted –- and I would say hotels, travel, entertainment, restaurants are right up there.  So we are going to need to be much more targeted in making sure that we get people back to work and help these industries.”
  • White House economic adviser Kevin Hassett on June 9 said the odds of passing additional coronavirus economic stimulus before Congress breaks for its August recess “are very, very high.”  Hasset added that the issue of business liability protections for employers is one of the “biggest problems” facing passage of another coronavirus package.  (Wall Street Journal, June 9 and Forbes, June 6).
  • Sen. John Cornyn (R-TX) emphasized the GOP’s position on May 18, stating on the Senate floor that “Senate Majority Leader McConnell (R-KY) and I … are working on a proposal that would put common sense reforms in place and protect those acting in good faith from being sued into oblivion.”  (Cornyn statement).  Potential employer immunity and anticipated litigation related to Covid-19 were the focus of a May 12 Senate Judiciary Committee hearing.  (Roundtable Weekly, May 15).
  • Sen. Cornyn this week stated the Republican liability proposal will be released next month. He added the plan would allow employers to choose which government coronavirus safety guidelines to follow while shielding them from lawsuits if their customers or workers contract the virus. (BGov, June 10)

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

Federal Reserve Actions

Federal Reserve Chairman Jerome Powell on June 10 stated the central bank will continue buying large quantities of bonds and leave interest rates near zero through at least 2022 as it anticipates the outbreak “will weigh heavily on economic activity” and “poses considerable risks to the economic outlook.”  (USA Today, June 10)

  • Powell added after the Fed’s two-day meeting this week, “This is the biggest economic shock, in the U.S. and the world, really, in living memory.  We went from the lowest level of unemployment in 50 years to the highest level in close to 90 years, and we did it in two months.”  (New York Times, June 10)
  • Powell stated, “To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions.”  (FOMC statement and Economic Projections, June 10)
  • The Fed has purchased agency mortgage bonds during the pandemic at a record pace totaling $719 billion, more than $12 billion per day on average, according to the New York Fed. (BGov, June 11)
  • On June 8, The Federal Reserve Board on expanded its Main Street Lending Program to allow more small and medium-sized businesses to be able to receive support. The Board expects the Main Street program to be open for lender registration “soon” and to be actively buying loans shortly afterwards. (Fed news release)
  • The Main Street Lending Program was established with the approval of the Treasury Secretary and with $75 billion in equity provided by the Treasury Department from the coronavirus economic relief package, The CARES Act.

The changes include:

  • Lowering the minimum loan size for certain loans to $250,000 from $500,000;
  • Increasing the maximum loan size for all facilities;
  • Increasing the term of each loan option to five years, from four years;
  • Extending the repayment period for all loans by delaying principal payments for two years, rather than one; and
  • Raising the Reserve Bank’s participation to 95% for all loans.
  • This chart has additional details on the changes.
  • Once lenders have successfully registered for the program, they will be encouraged to make Main Street loans immediately. The Main Street Lending Program intends to purchase 95% of each eligible loan that is submitted to the program after meeting all requirements. The Main Street Lending Program will also accept loans that were originated under the previously announced terms, if funded before June 10, 2020.

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) and Research Committee discussed the Fed’s actions as part of the economic outlook and the state of real estate capital and credit markets during its remote meeting yesterday held in conjunction with The Roundtable’s Virtual Annual Meeting.

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Roundtable Recommends Congressional Focus on Emergency Rental Assistance for Residential, Business Tenants Impacted by Covid-19

Posted on by Trey Jackson

Skyline Philadelphia

The Real Estate Roundtable on June 8 urged Congress to develop a policy solution that assists residential and business tenants, economically harmed by the pandemic, with meeting their due and owing rent obligations.  The letter sent was submitted for the record of a June 10 virtual hearing on “The Rent is Still Due: America’s Renters, COVID-19, and an Unprecedented Eviction Crisis” by the House Financial Services Subcommittee on Housing, Community Development. 

  • The Roundtable emphasizes in the letter that a specific rent assistance program for both residential and business tenants is needed to:
    • Keep workers housed and employed;
    • Maintain property taxes for state and local budgets that pay for essential community services;
    • Safeguard Americans’ retirement savings; and
    • Avoid a cascade of mortgage foreclosures.
  • The letter explains that tenants’ rental revenues are the foundational link in an “obligation chain” that supports local government property taxes to pay for essential community services, provides the revenue to pay the salaries and benefits of real estate industry workers, maintains the stability of the mortgage system, and supports Americans’ pension and retirement savings.  
  • Articles and studies cited in an attachment to the letter describe drastic declines in rent collections since April, especially from businesses in the retail and hospitality sectors.  A cited article published in the Washington Post on June 3 – “The next big problem for the economy: Businesses can’t pay their rent” – reports:
    • “The problem for the broader U.S. economy is that when businesses … stop paying rent, it sets off an alarming chain reaction. Landlords are now at risk of bankruptcy, too. Commercial real estate prices are falling. Jobs at property management companies and landscapers face cuts. Banks and private investors are unwilling to lend to most commercial real estate projects anymore, and cash-strapped city and local governments are realizing the property taxes they usually rely on from business properties are unlikely to be paid this summer and fall”
  • Additionally, the letter cites CoStar Risk Analytics, which reports the commercial real estate market can expect to see borrowers default on more than 13,000 loans totaling $148 billion in value.
  • The depressed state of business rent collections is a foreboding sign of diminishing commercial real estate asset values, which translates to lower property tax revenues for state and local governments to pay for infrastructure and essential health care and first-responder services. 
  • The letter’s proposes that “Congress should strengthen the ‘obligation chain’ with a robust rental assistance program specifically designed to help business and residential tenants through the current crisis.”  General assistance criteria for business and residential tenants to qualify for emergency rent support are suggested in The Roundtable’s June 8 letter.
  • The House subcommittee also heard from a coalition of national housing associations that submitted a letter focusing on the need for a residential rent assistance program.  “It is a top priority for the rental housing industry that Congress establish an emergency rental assistance program,” the groups wrote in their June 9 letter.  “We expect a significant number of residents will continue to be negatively affected by the pandemic, inhibiting their ability to pay their rent, even with the assistance provided in the CARES Act.”    

The need for policies to preserve the “rental obligation chain” and sustain economic recovery from the fallout of Covid-19 was a central topic during The Roundtable’s June 11-12 Virtual Annual Meeting.

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Real Estate Roundtable Issues Industry Imperative to Act Against Racism and Injustice

Posted on by Trey Jackson

Jeff DeBoer with Roundtable Attendees

It is a moral and economic imperative for The Real Estate Roundtable and CRE companies to take immediate and concrete actions that stand against racism and for inclusion, stated Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.) and Roundtable President and CEO Jeffrey DeBoer, in a statement issued on June 9.  (DeBoer, above center, with Roundtable meeting attendees in 2019)

  • The statement preceded a discussion yesterday on “Real Estate’s Role in Addressing Racial Injustice” between Roundtable Immediate Past Chair William Rudin (Co-Chairman and CEO, Rudin Management Inc.), and Raymond McGuire (Vice Chairman, Citi and Chairman, Banking, Capital Markets and Advisory), during The Roundtable’s first Virtual Annual Meeting.
  • McGuire said that fortunate opportunities for an excellent education is what made the difference in his life experience and that providing similar opportunities to African American youths is of vital importance.  “I do see this as a defining moment.  It’s a challenge we have to answer for history,” McGuire said.  
  • McGuire also discussed steps to combat systemic racism this week on CNBC’s Squawk Box. “We welcome the millions of dollars. We welcome the relatable messages, but we need to do more. Otherwise, it will have been another sad day in the neighborhood,” McGuire said.
  • The Roundtable’s Board yesterday approved the establishment of a standing committee to further equal opportunities and address racial disparities in the industry, with the goal of taking specific actions to bring more career opportunities to African American and other historically marginalized youth.
  • Ken McIntyre, Chief Executive Officer of the Real Estate Executive Council (REEC), will join The Roundtable’s Board of Directors, along with three other new members, effective July 1. REEC is a professional trade association composed of minority leaders in the commercial real estate industry – and is now officially one of 19 national real estate trade association partners that The Roundtable coordinates with on industry policy issues.

Cafaro and DeBoer’s statement concludes, “The moment for leadership is now. The Real Estate Roundtable commits to motivate meaningful and lasting change within our spheres of influence.”

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