Author: Trey Jackson

More Than 100 Members of Congress Urge Trump Administration to Aid CMBS Borrowers

Posted on by Trey Jackson

Buildings sky x475w

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

Posted on by Trey Jackson

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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House Democrats Release Infrastructure Package Details; Vote Expected Next Week

Posted on by Trey Jackson

Capitol Dome close x475W

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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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

Posted on by Trey Jackson

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

Posted on by Trey Jackson

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

Posted on by Trey Jackson

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

Posted on by Trey Jackson

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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