Author: Trey Jackson

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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The Real Estate Roundtable Stands in Solidarity Against Racism and Injustice

Posted on by Trey Jackson

Statement from Real Estate Roundtable Chair Debra Cafaro (Chairman and CEO, Ventas, Inc.)  and Roundtable President and CEO Jeffrey DeBoer:

Systemic racism and injustice is a pandemic that has plagued our nation for far too long. 

The real estate industry must help to eliminate at its core this scourge in our society and economy.  

Our industry must prioritize efforts to mitigate racism’s impact with nothing less than the ultimate goal to eradicate it.  

We must be persistent with these efforts long after we recover from the coronavirus in the coming months.        

The killings of George Floyd and Breonna Taylor reflect deep systemic racism and injustice in America. These crimes are horrific but they are not isolated incidents.

As leaders in the real estate industry, and as citizens of our great nation, of course we must condemn overt forms of racism. Insidious forms of discrimination embedded in our governmental and economic systems must be as loudly denounced.

The Real Estate Roundtable must work harder than ever to reform our institutions so they empower folks with equal opportunities to thrive at home, at work, at school, and to rise out of poverty. Vandalism is not the answer, and innocent business owners should not be collateral damage particularly as they are trying to re-hire their workers after being shuttered for weeks.  “Certain conditions continue to exist in our society which must be condemned as vigorously as we condemn riots,” Dr. King preached – words that resonate profoundly during these turbulent times as they did in 1967.  We should all pause and continually study his “The Other America” speech.

Without significant, measurable actions that make deliberate progress to halt abuse and inequality, our nation is destined to repeat again and again the failures of the past. 

We must do our part to set the country on a new path. Black people, brown people, poor people, indigenous people, disabled people, LGBTQ people — the American people — must all be able to take it on faith that they are fully and equally protected under our laws and that hard work, education, and determination can take you where you want to go in life.

The moment for leadership is now. The Real Estate Roundtable commits to motivate meaningful and lasting change within our spheres of influence.

These are not hollow words.  We consider it a moral and economic imperative for our industry and organization to take immediate and concrete actions that stand against racism and for inclusion.

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House Democrats Unveil Infrastructure Bill to Reauthorize Highway Trust Fund Before Sept. 30 Expiration

Posted on by Trey Jackson

A five-year, $494 billion surface transportation bill unveiled June 3 by House Transportation and Infrastructure Committee Democrats would authorize highway, railroad, and transit programs to replace the current $226 billion Highway Trust Fund that expires on Sept. 30.  (The Investing in a New Vision for the Environment and Surface Transportation in America – INVEST in America Act – Bill text | Factsheet | Bill Summary | Section-by-Section)

  • Rep. Peter DeFazio (D-OR), chairman of the Transportation and Infrastructure (T&I) Committee, said, “We are in multiple crises at the moment …  But we have to move forward with our very important reauthorization of surface transportation.  (BGov, June 3)
  • The INVEST in America Act is part of a $760 billion “Moving Forward Framework” rolled out in January by House Speaker Nancy Pelosi (D-CA) with the chairs of three House committees to address national infrastructure investment.  (Roundtable Weekly, Jan. 31, 2020)
  • A plan on how to pay for the new bill has not yet been determined by the House Ways and Means Committee.  The Roundtable submitted extensive comments on infrastructure policy to both committees last year.  (March 20, 2019 W&M comments; April 29, 2019 T&I comments.)

This week’s T&I bill contains elements that align with Roundtable policies including:

  • Improve the Transportation Infrastructure Finance Innovation Act (TIFIA) loan program to encourage more public-private partnerships for infrastructure projects;
  • Encourage high-density, transit-oriented development by incorporating the Build More Housing Near Transit Act (H.R. 4307), which would require localities applying for Federal Transit Administration grants to assess feasibility of affordable housing construction along mass transit routes (Up for Growth Action’s 1-page summary);
  • Authorize a Vehicles Miles Travelled (VMT) pilot program as a potential, more sustainable funding source for the Highway Trust Fund as opposed to the controversial federal “pay-at-the-pump” gas tax;
  • Revise current Capital Investment Grant (CIG) and TIFIA program state/local “cost share” commitments to allow funding for major projects (like the New York-New Jersey Gateway Program along the Amtrak Northeast Corridor); and
  • Prioritize use of Highway Trust Funds with a “fix it first” strategy to focuses on repair and rehabilitation of decaying infrastructure.
  • The House bill also includes measures on climate resiliency and Amtrak that are expected to face opposition by the Republican majority in the Senate.  For example, the measure would require the U.S. Department of Transportation (DOT) to establish new greenhouse gas performance measures, and authorize a new DOT program to support carbon pollution reduction.
  • The Democratic T&I committee bill is considered the first salvo in the transportation funding debate to reauthorize the Highway Trust Fund before it expires on September 30, 2020.  Additional committees from both the House and Senate need to produce other portions of the final legislation.
  • The T&I committee is scheduled to consider the INVEST in America Act on June 17 – and a vote on the House floor is could occur at the beginning of July. (BGov, June 3)
  • The need for infrastructure investment to help restart the economy and encourage long-term  growth was also the focus of a June 3 meeting between President Trump and New York Gov. Andrew Cuomo at the White House.  (Wall Street Journal and New York Times, June 3)
  • Gov. Cuomo said, “It was about: How do we supercharge the reopening?  It was a good conversation.”  The two policymakers discussed obstacles to federal funding and expedited approvals for significant New York transportation initiatives such as the Gateway Project, which would require new rail tunnels under the Hudson river.  (WSJ, April 18, 2019)
  • President Trump on June 4 signed an executive order that cites an economic emergency to waive laws for expediting federal approval for highways, pipelines and other projects.  The Washington Post cites a senior administration official stating that the action will help the economy recover from novel coronavirus losses.  (Washington Post, June 4)

The Real Estate Roundtable will host an infrastructure discussion with Gov. Cuomo on June 11 during the organization’s first Virtual Annual Meeting.

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Paycheck Protection Program Changes Signed Into Law; Next COVID-19 Stimulus Legislation Expected by July

Posted on by Trey Jackson

Architect of the Capitol

Legislative changes to the Paycheck Protection Program (PPP) signed into law today will ease restrictions on forgivable loans to small businesses seeking to retain and pay workers affected by COVID-19.  (BGov, June 4)

  • H.R. 7010 passed the House (417-1) on May 28, cleared the Senate by unanimous consent on June 3 and was signed into law by President Trump today.  (Roundtable Weekly, May 22 and AP, June 5)

The bill also:   

  • Replaces the “75-25 Rule” on the use of PPP loan proceeds for loan forgiveness purposes with requirements to spend at least 60% for payroll costs and up to 40% for covered mortgage interest, rent, and utility payments;

  • Extends the PPP re-payment period to five years for small businesses that do not receive loan forgiveness;
  • Allows PPP loan recipients to take full advantage of deferral of employment taxes through the end of 2020; and
     
  • Provides borrowers a “safe harbor” from the loan forgiveness rehiring requirement if the borrower is unable to rehire an individual who was an employee of the recipient on or before February 15, 2020, or if the borrower can demonstrate an inability to hire similarly qualified employees on or before December 31, 2020;  (Congressional Research Service summary, May 28)

Senate Majority Leader Mitch McConnell (R-KY) said additional  technical fixes to the PPP will follow at the requests of Sen. Ron Johnson (R-WI), Senate Small Business and Entrepreneurship Chairman Marco Rubio (R-FL) and Sen. Susan Collins (R-ME) (RollCall, June 3)

Next COVID-19 Stimulus; Fed Expands Muni Loan Program

The Trump Administration is considering policy options for the next legislative response to the coronavirus pandemic.  The Wall Street Journal reports a senior administration official stated this week, “We’ve been through the rescue phase and we’re now in the transitional reopening phase and I think generally speaking we’d like to move into a growth-incentive phase for the future economy.”  (WSJ, June 2)

  • White House aides, according the Journal, stated the nation’s mass unrest over police brutality and racial inequality, along with the progress of business reopening efforts, will influence the pace of discussions – but they do not expect the completion of a package until July.
  • House Ways and Means Committee Chair Richard E. Neal (D-MA) on Wednesday said he is continuing negotiations with Treasury Secretary Steven Mnuchin on another round of coronavirus relief legislation that could include major infrastructure spending and tax credit proposals.  (Law360, June 4)
  • Neal said on June 3 that in addition to infrastructure investment, he intends to propose an expansion of new markets tax credits for private investment in low-income communities, low-income housing tax credits to build affordable housing, and historic rehabilitation tax credits for preservation purposes. (TNT, June 4)
  • This week also saw the Federal Reserve expand the scope of its $500 billion a lending program for state and local governments to include smaller borrowers.   (Fed news release, June 3)
  • The Fed’s expansion of its Municipal Liquidity Facility (MLF) will now enable all U.S. states “… to have at least two cities or counties eligible to directly issue notes to the MLF regardless of population.”  Governors from each state will also be able to select two bond issuers “…whose revenues are generally derived from operating government activities (such as public transit, airports, toll facilities, and utilities) to be eligible to directly use the facility.’  (MLF term sheet, June 3)
  • The MLF expansion may now allow sparsely populates states to designate two areas hard hit by the economic repercussions of the pandemic, or bond issuers like New York’s subway system, to sell debt to the Fed as a way to maintain critical services.  (New York Times, June 3)

The various policy response to economic impacts of COVID-19 will be a focus next week during The Roundtable’s Virtual Annual Meeting, which will include a discussion with Treasury Secretary Steven Mnuchin.

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

Posted on by Trey Jackson

DC protest DD

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

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

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

Economic Restart and Re-Entry Concerns

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

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

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

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

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

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

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

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

Posted on by Trey Jackson

Baltimore MD Opportunity Zone

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

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

Under the new guidance:

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

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

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

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

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

Posted on by Trey Jackson

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

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

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

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

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

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

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

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

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

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

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

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Pandemic Risk Insurance Proposals Include House Legislation Modeled on TRIA

Posted on by Trey Jackson

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

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

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

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