Summary

More than $950 billion of U.S. commercial real estate mortgages are estimated to mature in 2025. To help rebalance the wave of maturing loans, it is important to advance measures that will encourage additional capital formation and loan restructuring.

• As urged by RER, a policy statement—Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts—issued by regulatory agencies encouraging financial institutions to work constructively with creditworthy borrowers on CRE loan workouts is helping to see loans through the current environment.
• Many of these loans require additional equity, and borrowers still need time to restructure this debt. 
• Capital formation is vital to help restructure maturing debt and fill the equity gap.

It is also important to avoid pro-cyclical regulatory actions such as the Basel III Endgame.

A revised Basel III Endgame proposal announced in September 2024 would have increased Tier 1 capital requirements for global systemically important banks by roughly 9 percent. Concerns remain that any increase in capital requirements will have a pro-cyclical impact on credit capacity and carry a cost to commercial real estate and the overall economy, increasing the cost of credit and constraining capacity. 

In a January 2024 letter, RER raised industry concerns about the negative impact of the Basel III Endgame proposal, including the higher cost of credit and diminished lending capacity, and requested that the proposal be withdrawn.

The Fed and other regulators remain deadlocked on advancing the revised proposal. With the appointment of Michelle Bowman to the post of Vice Chair for Supervision, however, there is speculation that the proposal could ultimately be withdrawn or end up being capital neutral.

Key Takeaways

• Providing banks with the flexibility to work constructively with their borrowers during times of economic stress has led to billions of dollars of loan restructurings and reduced undue stress in bank loan portfolios.
• The proposed Basel III Endgame regulationswould come at a significant economic cost without clear benefits to the economy.
• The largest U.S. banks’ capital and liquidity levels have grown dramatically since the original Basel III standards were implemented in 2013 in response to the 2008 Global Financial Crisis. Since 2009, Tier 1 capital has increased by 56 percent and Common Equity Tier 1 capital has tripled. Today, as the Federal Reserve recently observed, the U.S. “banking system is sound and resilient, with strong capital and liquidity.”[1]
• Further, it is important to bring more foreign capital into U.S. real estate by lifting legal barriers to investment, as well as repealing or reforming the archaic Foreign Investment in Real Property Tax Act (FIRPTA).
  
  

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Summary

The proliferation of natural catastrophe threats has raised concerns about commercial insurance coverage for real estate. These concerns have highlighted the lack of—and need for—insurance capacity and various lines of commercial insurance. Risks from natural disasters like floods, hurricanes, wildfires, hail, tornadoes and drought cost the U.S. billions of dollars each year. Even if policyholders are able to find coverage for these various lines, prices are increasing dramatically. A lack of adequate coverage will lead to economic uncertainty, harm stakeholders, and undermine the growth of communities.   

The budget debate in Congress has called into question the future of the National Flood Insurance Program (NFIP), which is subject to temporary funding extensions and must be reauthorized by September 30, 2025.

RER, along with its industry partners, continues to work constructively with policymakers and stakeholders to address market failure and enact a long-term reauthorization of an improved NFIP.

Key Takeaways

• The increased frequency and severity of natural disasters is leading to increased premiums for commercial properties.
• As economic losses caused by disasters increase, it is important to find new strategies in order to effectively manage natural catastrophe risk. 
• Expanding coverage gaps and increased costs present challenges for businesses across many industries, including real estate.
• Without adequate coverage, the vast majority of natural catastrophe losses are likely to be absorbed by policyholders. These widening coverage gaps and price hikes bring about serious economic concerns about protection gaps, coverage capacity, and increased costs from natural catastrophes and business interruption losses.
• Commercial property owners can take steps to mitigate the risk of natural disasters and potentially lower their insurance costs.

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Summary

Under the Corporate Transparency Act (CTA), many U.S. businesses are required to disclose information on their “beneficial owners” under regulations issued (and to be issued) by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

The rule imposes heavier compliance burdens on real estate businesses with numerous legal entities that own and operate real property across all asset classes.

On March 2, 2025, the Treasury Department announced it would suspend enforcement of the Corporate Transparency Act (CTA) against U.S. citizens and domestic reporting companies, including beneficial ownership information reporting requirements, citing a move to reduce regulatory burden and focus on foreign entities. The Treasury Department will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only.

RER continues to track this important issue and plans to comment on the proposed rulemaking after it is released.

Key Takeaways

• While the CTA and its implementing regulations are not specifically targeted to real estate businesses, it will have a direct impact on the industry.
• Certain types of entities will be exempt from the reporting requirements; however, these exemptions will not apply to many typical real estate limited liability companies and partnerships formed to own and operate commercial properties. 
• There is significant concern about the CTA’s far-reaching scope and its impact on many commercial and residential real estate businesses that use the LLC structure for conducting business.

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Summary

In 2023, the Securities and Exchange Commission (SEC) proposed changes to require SEC-registered investment advisers to put all their clients’ assets, including all digital assets like Bitcoin and certain physical assets like real estate, with “qualified custodians.” The proposal would also require a written agreement between custodians and advisers, expand the “surprise examination” requirements, and enhance recordkeeping rules. These rules were originally designed for digital assets. “Reasonable” safeguarding requirements is ambiguous as applied to real estate. Furthermore, the SEC’s release contains an inaccuracy regarding the way deeds evidencing ownership of real estate are recorded.

RER sees no policy reason to impose the proposed rule on real estate and has advocated for an exception for real estate.

Key Takeaways

• Due to a variety of factors, real estate cannot readily be stolen, making the rule seem irrelevant to this asset class. 
• In addition to the proposed Custody Rule, the SEC has a number of proposed rulemaking measures that could have a chilling effect on real estate capital markets, further impair liquidity, and be a “death by a thousand cuts” for commercial real estate. 
• Capital formation is vital when credit markets tighten to restructure maturing debt.  

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Summary

The U.S. faces a strategic imperative to modernize its immigration system in a way that strengthens the domestic labor force and unleashes private capital for economic growth. The push for immigration reforms has prompted renewed interest in investor programs like the EB-5 Visa and the proposed “Gold Card” concept. Both programs can attract high net-worth individuals who can contribute to America’s economy.

Key Takeaways

• The Gold Card ideas sketched by the Trump administration would help reduce the national deficit. Individuals would pay $5 million to receive legal residency status with a path to citizenship.
• The EB-5 program has delivered $350 billion in economic impact and created over 1.5 million American jobs—at no cost to taxpayers.
• EB-5 investment can help finance housing, grid modernization, and manufacturing plants to further recent executive orders and national priorities.
• The Gold Card program can be supercharged and its deployment accelerated by supplementing the existing EB-5 program that uses private investments to create jobs for American workers.

See the full fact sheet.