Roundtable to Establish Standing Policy Committee on Diversity and Inclusion; Industry Executives Discuss Needed Actions
Q2 Economic Sentiment: Commercial Real Estate Execs Confirm COVID-19 Market Downturn
More Than 100 Members of Congress Urge Trump Administration to Aid CMBS Borrowers
House Democrats Release Infrastructure Package Details; Vote Expected Next Week
Roundtable Weekly
June 26, 2020
Roundtable to Establish Standing Policy Committee on Diversity and Inclusion; Industry Executives Discuss Needed Actions

Roundtable Meeting

The Real Estate Roundtable’s Board of Directors recently approved establishment of a new standing committee to address inclusivity and diversity in the industry and as part of the organization’s policy agenda.  (Roundtable Weekly, June 12)

  • The new committee’s working name is the “Real Estate Diversity and Inclusion Policy Advisory Committee” (REDIPAC).  Its intended objectives are to: 

    • Encourage Roundtable members to adopt and report on quantifiable standards for attracting workers across all skill- and corporate-levels from minority and other pools of talent historically under-represented in our industry;

    • Leverage The Roundtable’s existing advocacy agenda on tax, capital, climate/energy, housing, and infrastructure policies with a view toward also including policy elements aimed to dismantle racial and other barriers to equality; and

    • Build coalitions with civil rights and real estate industry organizations to scale the effectiveness of joint initiatives.

  • The new committee’s mission statement, leadership and requests for participants are expected to be announced in July.

  • This week, African American real estate executives discussed actions needed to expand diversity at all levels of the industry during a webinar on “The Black Experience in Real Estate,” hosted by NYU’s Schack Institute of Real Estate
  • Schack Associate Dean Sam Chandan lead the remote discussion with four panelists:  

  • The panelists expressed their hope that recent executive-level responses to the deaths of George Floyd and other African Americans at the hands of police officers represent not simply a “moment but a movement.”  The webinar participants also agreed what is needed now are tangible actions that could bring measurable, positive changes to increase opportunities for minorities in real estate. (The Real Deal, June 26) and Bloomberg, June 23, “Black Real Estate Executives Seek Lasting Change in Diversity”)

  • The four leaders discussed their personal experiences with systemic racism and recommended inclusivity steps that CRE leaders should take in their companies.  (Registration required to watch the June 9 webinar

Separately, a June 24 Walker & Dunlop webinar focused on the first African American woman REIT CEO – Leslie Hale of RLJ Lodging Trust.  Roundtable Member Willy Walker, W&D’s Chairman & CEO, hosted the discussion, which addressed the opportunities for increasing diversity in commercial real estate, Ms. Hale’s approach to diversity and inclusion, the current outlook for the hospitality and retail industries, the U.S. economy and more. 

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Q2 Economic Sentiment: Commercial Real Estate Execs Confirm COVID-19 Market Downturn

Q2 2020 Sentiment Index - Homepage

Commercial real estate executives confirmed a downturn in Q2 market conditions due to job losses and business shutdowns related to COVID-19, according to The Real Estate Roundtable’s 2020 Q2 Economic Sentiment Index released today.  The report also shows there is an expectation for an improvement in market conditions by next year, dependent upon the return of jobs and the ability to safely reopen businesses. 

  • “The commercial real estate industry, like all industries, experienced in the second quarter a sudden onset of economic disruption due to business lockdowns and stay-at-home shutdown orders put in place to combat the pandemic,” said Real Estate Roundtable President and CEO Jeffrey DeBoer.  “The economic damage to commercial real estate has been particularly harmful for the retail and lodging sectors of the industry.  Although our Q2 survey results show there is hope for improved conditions within the next year, there are significant concerns that other sectors of the industry could be dragged down if jobs don’t rebound and government assistance tapers off.  The fear is that business and residential tenants may be suddenly unable to pay rent beyond the sectors already impacted and struggling to come back,” DeBoer added.

  • The report’s Topline Findings include:

    • The Real Estate Roundtable Q2 2020 Sentiment Index registered a score of 38, a decrease of 14 points from the first quarter of 2020.   Many respondents confirm tenants are having increased difficulties paying their rent obligations as a result of massive job losses.  Most survey participants expect the eventual reopening of businesses and resolution of rental obligations will lead to improved real estate market conditions.

    • Many survey respondents have seen the industry quickly adapt to new social distancing environments by implementing technologies and online processes that provide some continuity for current operations.  Market volatility is leading to uncertainty about how future retail real estate and multifamily demand will be affected.

    • Job losses have led to widespread economic uncertainty.  Lockdowns and stay-at-home orders have also impaired the ability of survey respondents to accurately value commercial real estate assets.  As a result, transactions have slowed until a medical solution to the outbreak may allow reopening of properties, renewed business activity and underwriting of investments. 

    • The majority of survey participants indicated the availability of debt and equity are worse today than one year ago.  Many respondents indicated they believe there is plenty of equity capital on the sidelines, but it is unwilling to invest in a market without price discovery.  As for debt markets, debt funds have been largely absent from the market and only the most pristine assets are qualifying for new debt capital.  

    • The Roundtable’s Q2 Overall Sentiment Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive. 

  • The Q2 Current Conditions Index dropped to 13 from Q1’s score of 55 – yet the Q2 Future Conditions Index increased 12 points to register 62 when compared to Q1’s score of 50.
  • The 49-point disparity between the Q2 Current Index (13) and Future Index (62) is the most significant difference registered by The Roundtable’s Quarterly Economic Sentiment Survey in its 12-year history.  The next highest disparity previously occurred in Q1 2009, when the difference between current and future indices registered 40 points during the financial crisis.
  • DeBoer noted, “The unprecedented wave of job losses is disproportionally impacting women, minorities and veterans.  Unemployment and business closures have added tremendous stress on people worried about taking care of their families and maintaining their housing. And it also has added to the worries of business owners, particularly in terms of meeting their payroll and rent obligations.  The Roundtable continues to support the Federal government’s efforts to date including the CARES Act, the FED lending facilities and the expanded unemployment benefits.  In addition to finding ways to improve and extend these programs, we now call on Congress to create a temporary assistance program specifically designed to help COVID impacted residential and commercial tenants meet their rent obligations."

  • He added, “Such a program would help people and businesses cope with the current economic downturn. It would help building owners maintain their workforce that is necessary to ensure that visitors to buildings are safe and  healthy.  It would ease pressure on financial institutions and local governments.  The next COVID relief bill must include a rent assistance program for people and businesses.”

Data for the Q2 survey was gathered by Chicago-based FPL Associates on The Roundtable’s behalf.  The Roundtable’s Q3 Sentiment Index will be released in early August.

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More Than 100 Members of Congress Urge Trump Administration to Aid CMBS Borrowers
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Commercial mortgage-backed security borrowers could face a historic wave of foreclosures starting this fall, impacting local communities and jobs across the country, without a long-term federal relief plan to combat liquidity deficiencies facing commercial real estate borrowers caused by the COVID-19 pandemic.  That is the bipartisan message sent on June 22 to the Federal Reserve and Trump Administration by more than 100 members of Congress, who are seeking support for real estate borrowers unable to keep up with payments on debt tied to CMBS.  (Wall Street Journal, June 23)

  • The bipartisan letter acknowledges the existence of the Fed’s lending facilities, yet warns about “the looming crisis in commercial real estate adversely impacted by the COVID-19 pandemic, including the $540 billion Commercial Mortgage-Backed Security (CMBS) market that, if left unchecked, may lead to a wave of foreclosures, exacerbating the current downturn in the U.S. economy and ultimately result in permanent job loss in multiple industries and communities across the country.”   (Congressional letter, June 22)
  • The congressional letter also requests the Fed to “devise a relief plan for these borrowers, who through no fault of their own, have experienced a significant drop in revenue on account of the COVID-19 pandemic and related governmental orders.”
  • Rep. Van Taylor (R-TX) is leading the effort to show policymakers the troubles faced by many hotels, shopping malls and office buildings that borrow money in the CMBS market – with some  owners expressing concerns their properties could go to foreclosure.  (Wall Street Journal, June 4)
  • A June 26 letter from four national hotel trade associations to Treasury and the Fed emphasizes the unique pressures they face when pursuing loans using the Fed’s Main Street Lending Program (MSLP), which utilizes strict criteria based on Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA).  
  • The hoteliers detail multiple unnecessary obstacles in accessing desperately needed liquidity and how the industry’s asset-heavy business model shut them out from utilizing the MSLP because of the rigid EBITDA leverage test. “Most hotels are financed via mortgage debt, which means that their total outstanding debt is generally already above the maximum six-times EBITDA threshold established in the Main Street Lending Facility,” the letter notes.
  • The hotel coalition letter also details specific “actions that would allow this critical industry access to liquidity to keep workers employed and help survive the crisis.”
  • The Real Estate Roundtable and Nareit on April 22 wrote to Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell urging that additional measures be adopted to expand the scope of the MSLP to forestall further disruption and economic dislocations in the commercial real estate sector during the pandemic.  (MSLP comment letter, April 22)
  • Previous industry letters to the Fed on March 24 and April 14 addressed the need to broaden the range of a separate credit facility – the Term Asset Backed Securities Facility (TALF).  Those letters requested that TALF eligible collateral include both outstanding (legacy) CMBS, commercial mortgage loans and newly issued collateralized loan obligations.  On April 9, the Fed confirmed that the TALF would be expanded to include triple-A rated legacy non-agency CMBS and loans.


  • The Federal Reserve Bank of New York reported this week that the TALF had done $145,213,948 of "commercial mortgage" collateralized financing – legacy CMBS – out of a total of $252,155,890 of total volume, or 57.59%.
  • Overall, the CMBS market over the next two years could see 13,000 loans totaling $148 billion go into default, according to a recent analysis by CoStar Risk Analytics.  (CoStar News, April 30)
  • Additionally Fitch reports that $21 billion of CMBS loans are now in Special Servicing due to the coronavirus pandemic’s impact on tenants and borrowers.  This total is more than double the amount of CMBS loans that went into special servicing all of last year.  (GlobeSt, June 23 and The Real Deal, June 22 and Fitch, June 17)
  • Real Capital Analytics reports that the volume of deals for U.S. commercial properties including, offices and hotels, plummeted 79% in May compared with a year earlier. Deals to purchase hotels plunged 95% in May, the largest drop of any property type. Retail property transactions were down 83%.  (BGov, June 25)

The June 22 congressional letter led by Rep.Taylor requests that Treasury and the Fed urgently consider targeted economic support to bridge the temporary liquidity deficiencies facing all commercial real estate borrowers.  The letter concludes, “We believe an opportunity exists for responsible federal government investment in the commercial real estate market to provide a pathway to stabilize affected properties, the local jobs and businesses they enable, and the neighborhoods they serve.”

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House Democrats Release Infrastructure Package Details; Vote Expected Next Week

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House Democrats on June 22 released details of a $1.5 trillion infrastructure package – the Moving Forward Act  (H.R. 2) – that they plan to bring to a vote before July 4, although the measure’s prospects in the GOP-controlled Senate are uncertain. (Bill Text | Section-by-Section | Fact Sheet)

  • The comprehensive Democratic infrastructure package, totaling about $1 trillion, has been combined with a $494 billion surface transportation bill – the INVEST in America Act – that would fund roads, bridges, and mass transit before current finding for the Highway Trust Fund expires on September 30.   (House Transportation and Infrastructure Committee news release, June 22)
  • The broad Moving Forward Act also addresses the nation’s housing, water, broadband, clean energy, and education systems.  More than 300 amendments to the package are expected to be considered on Monday by the House Rules Committee before it is advanced to the House floor.  (Miller & Chevalier, June 25)
  • About two-thirds of the infrastructure package does not appear to have specifics for funding, although some financing measures are listed for elements of the bill.  (CQ, June 22). 
  • The House Transportation and Infrastructure (T&I) Committee issued an excerpt of the 2,309-page bill containing the revenue provisions. 
  • Rep. Richard Neal, (D-MA), chair of the House Ways and Means Committee, floated the idea of reinstating “Build America” government bonds that could help spur private investment, as well as “a massive expansion of the Low Income Housing Tax Credit”. (Ways & Means news release, June 18) 
  • Rep. Sam Graves (R-Mo.), T&I’s Ranking Member, last week announced an alternative bill for surface transportation programs and on June 23 stated, “Now the bill has been completely swallowed up … and turned into a colossal $1.5 trillion wish list for the Majority.”
  • The Trump administration is reportedly preparing a nearly $1 trillion infrastructure package proposal focused on transportation projects. (Reuters, June 15)
  • The critical need for infrastructure improvements was supported this week by a National League of Cities survey, which showed that coronavirus-related expenses have forced more than 700 U.S. cities to suspend or terminate plans to upgrade critical infrastructure.  (Washington Post, June 23)

“The survey found that 65% of cities are being forced to delay or completely cancel capital expenditures and infrastructure projects, which will not only stifle job growth and slow local economic activity, but further jeopardize economic recovery efforts in communities across the nation," said Clarence Anthony, CEO and Executive Director, National League of Cities. "Without congressional action now, the forced delay or cancellation of infrastructure projects will create an economic ripple effect throughout the nation not felt in decades.” (National League of Cities, June 23)

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