News Type: Roundtable Weekly

House Passes Surface Transportation Infrastructure Bill; Negotiations with Senate Ahead

Posted on by Trey Jackson

San Diego Transportation Infrastructure

The House yesterday approved a five-year, $760 billon surface transportation and water bill (H.R. 3684) with climate provisions, which Democrats plan to use in infrastructure negotiations with the Senate. The INVEST in America Act passed by a vote of 221 to 201, with only two Republicans joining Democrats in support. (Washington Post, July 1 and Invest in America Act Fact Sheet)

Must-Pass Transportation Funding

  • The House bill does not detail pay-fors yet, but is considered must-pass legislation, as funding for the nation’s surface transportation programs expires on Sept. 30. (Roundtable Weekly, June 11)
  • Roundtable President and CEO Jeffrey DeBoer last week said, “Americans depend on safe and efficient roads, bridges, and mass transit to commute all across the country. Our nation’s buildings and the people in them depend on reliable supplies of water, power, and broadband to function, and meet the evolving demands of business and individual tenants. In turn, infrastructure and real estate are synergistic, and have a two-way relationship.” (Roundtable news release, June 25)

Different Paths

U.S. Capitol Sunny Sky

  • In the Senate, a bipartisan agreement was reached last week with the White House on the outlines of a package addressing “physical” infrastructure. The agreement nearly fell apart after President Biden said the bill was directly linked to the passage of a separate, multi-trillion dollar “human” infrastructure proposal. (RRoundtable Weekly, June 25)
  • The Senate proposal includes $579 billion in new spending and was initially supported by 11 Republicans, although some have since objected. Ten Republican Senators would be needed to overcome a filibuster in the 50-50 chamber. (Bloomberg, June 25 and Punchbowl News, June 30)
  • The costs for all the infrastructure “asset classes” in the bipartisan framework are detailed in a recent White House memo from Brian Deese, Director of the National Economic Council, and Anita Dunn, Senior Adviser. (Deese-Dunn memo)
  • The Senate infrastructure agreement has not yet been translated into legislation. Republican and Democratic Senators disagree if they should move forward with a stand-alone bill, or insist on pairing it with a massive “social” infrastructure package. As Senate talks continue, the House bill passed this week could present another path toward a final infrastructure bill, since it comes with a Sept. 30 deadline. (Politico, June 30)
  • House Speaker Nancy Pelosi (D-CA) plans to reference the House bill as a base for negotiating changes to the Senate’s $973 billion bipartisan infrastructure framework in the coming weeks. (BGov, June 30)
  • House Transportation and Infrastructure Chair Peter DeFazio (D-OR), the lead sponsor of H.R. 3684, said, “I’m suggesting that substantial amounts of the policy in our bill should be negotiated by the White House, the Senate and the House to be part of that bipartisan proposal.” (New York Times, July 1)

What’s Next

White House bright

  • Senate Minority Leader Mitch McConnell (R-KY) this week said President Biden should encourage Pelosi and Senate Majority Leader Chuck Schumer to support the bipartisan proposal without a dependent, separate bill that would move through a restrictive budget “reconciliation” process. According to McConnell’s June 28 statement, “The President cannot let congressional Democrats hold a bipartisan bill hostage over a separate and partisan process..”

  • White House Press Secretary Jen Psaki commented June 30 on the evolving infrastructure proposals, stating, “It’s up to leaders in Congress to move this forward. The President looks forward to signing both pieces of legislation into law.”  (White House Press Briefing transcript)

Senate Democrats are aiming to pass bipartisan infrastructure legislation and send it to the House before the August recess, in hopes that a package could arrive on President Biden’s desk by the end of September. (Reuters, June 29)

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Roundtable-backed Bipartisan Bill Would Correct Condo Construction Tax Accounting Issue; Roundtable Joins Coalition Letter in Defense of Pass-Through Deduction

Posted on by Trey Jackson

residential construction condo

Two senior members of the House Ways and Means Committee introduced bipartisan legislation this week that would correct current condominium tax accounting rules.

Condo Accounting Relief

  • House Ways and Means Committee members Bill Pascrell Jr., (D-NJ) and Vern Buchanan, (R-FL) on June 22 announced the Fair Accounting for Condominium Construction Act to encourage greater housing development in high-population and high density-areas. (Pascrell news release)
  • Current condo tax accounting rules require multifamily developers of condominium buildings with five or more residential units to recognize income and pay tax on their expected profit as construction is ongoing — well before pre-sale transactions are closed and full payment is due from the buyer.
  • Homebuilders of single-family homes, townhouses and row houses are not subject to this percentage-of-completion tax accounting rule restriction. As a result, current tax accounting rules discriminate against vertical condominium by unfairly accelerating federal income tax liability for new condominium construction.
  • Rep. Pascrell’s legislation would provide for an exclusion from the percentage-of-completion method for condo construction.

Roundtable Endorsement

  • Roundtable President and CEO Jeffrey DeBoer said, “The Pascrell-Buchanan legislation will modernize the outdated percentage-of-completion tax accounting rules that discriminate against condominium construction. The bill will reduce the cost of building new housing, especially in high-cost areas where greater density is needed. The Real Estate Roundtable commends the sponsors for introducing a common sense measure that, when enacted, will help expand the nation’s housing supply.” (Pascrell news release)

Section 199A Support

Sen. Ron Wyden with American flag

  • Separately, The Roundtable, as part of a broad business coalition, this week also weighed in on the 20-percent tax deduction for qualified business income (Section 199A), which was enacted as part of the 2017 Tax Cuts and Jobs Act. (Roundtable Weekly, April 2)
  • Senate Finance Committee Chairman Ron Wyden (D-OR), above, reportedly plans to propose changes to Section 199A affecting partnerships, LLCs, and other entities taxed only at the individual owner level. According to BloombergTax, Wyden’s legislation, which is still being drafted, will likely aim to start phasing out the deduction for individuals making above $400,000 in annual business income. Wyden also plans to keep the deduction in place until it is scheduled to expire at the end of 2025.
  • The business coalition’s June 22 letter to the leadership of the tax-writing Senate Finance and House Ways and Means Committees expressed strong opposition to any reductions or repeal of the Section 199A deduction, including phasing out the deduction above certain income thresholds.
  • The coalition’s letter emphasizes how nearly 40 percent of individually- and family-owned businesses closed their doors during the COVID pandemic – and that Section 199A provided critical tax relief.

The June 22 letter adds, “Proposals to limit or repeal the deduction would hurt Main Street businesses and result in fewer jobs, lower wages, and less economic growth in thousands of communities across the country. Such changes would amount to a direct tax hike on America’s Main Street employers, a key reason why the tax plan released by the White House in March left the deduction fully intact.”

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CDC Issues Final Extension of National Eviction Moratorium until July 31; California Plans to Reimburse Housing Providers for Past-Due Rent

Posted on by Trey Jackson

CDC sign outdoor

The Centers for Disease Control and Prevention (CDC) yesterday issued a final extension of the national moratorium on evictions through July 31 as the Biden administration announced a series of actions involving several federal agencies on housing affordability and evictions. (White House Fact Sheet, Associated Press, Washington Post and New York Times, June 24)

Sluggish Aid Distribution

  • The CDC indicated its action would be the final extension of the federal-level tenant eviction moratorium, first enacted by Congress in March 2020 through the CARES Act pandemic relief law. “Keeping people in their homes and out of crowded or congregate settings — like homeless shelters — by preventing evictions is a key step in helping to stop the spread of COVID-19,” according to the June 24 CDC announcement. (Congressional Research Service, Federal Eviction Moratoriums)
  • The extension also allows more time for federal officials to improve the sluggish distribution of billons in pandemic housing aid authorized by Congress. The urgent financial needs of millions of tenants nationwide have overwhelmed local officials struggling to provide financial assistance under current rules. (Wall Street Journal, June 7)
  • The White House’s announcement yesterday of actions to help state and local governments prevent evictions included a planned summit on housing affordability and evictions, along with new guidance from the Treasury Department aimed at streamlining distribution of emergency aid for renters behind on payment to their housing providers.
  • The Federal Housing Finance Agency (FHFA) yesterday also extended the foreclosure moratorium for mortgages backed by Fannie Mae and Freddie Mac until July 31. (FHFA news release)

Tenants and Housing Providers

  • The National Multifamily Housing Council (NMHC) on June 24 stated, “The continuation of a nationwide, one-size-fits-all, federal eviction moratorium is out of step with the significant progress made in controlling COVID-19 and restoring the economy. Instead of this blanket federal policy, this pandemic has already shown that targeted, efficient relief works.   
  • The statement also noted that earlier this month NMHC released Principles to Work with Residents, which offer practical steps housing providers can take to work hand-in-hand with residents and demonstrate the good faith with which property owners and managers have supported their residents.  

State and Local Action

California Governor Gavin Newsom

  • California Gov. Gavin Newsom, above, and state legislators today agreed to a plan to reimburse housing providers for past-due rent incurred by lower-income tenants during the state’s pandemic eviction moratorium – along with an extension of the moratorium until Sept. 30. (Los Angeles Times, June 25)
  • A senior housing advisor to Newsom told the Associated Press that California likely has enough money from the $5.2 billion in multiple aid packages approved by Congress to cover all of the unpaid rent in the state.

  • Other states and cities have a variety of deadlines related to their own eviction moratoria. CNBC reports that at least 28 state rental aid programs bar landlords from evicting tenants for at least the time period covered by the aid – and in some cases for between 30 and 90 days afterward.

The Roundtable is part of a broad real estate coalition that has consistently urged state, county and municipal officials to distribute the billions in allocated federal funds as soon as possible. (Coalition letter, April 15)

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Bipartisan “Physical” Infrastructure Agreement Announced; Separate Package on “Social Infrastructure” Tied to Reconciliation Path

Posted on by Trey Jackson

Infrastructure Chicago interexchange

President Joe Biden and a bipartisan group of senators yesterday announced a tentative agreement to address the nation’s “physical” infrastructure – as Democrats indicated that its passage into law would depend on enactment of a separate, much larger “social” infrastructure bill structured to bypass Republican votes through a budget “reconciliation” process. 

Goals and Pay-Fors 

  • The total cost of the physical infrastructure deal, according to the White House, is $1.2 trillion over eight years, with $579 billion in new spending for investments in transit, roads, bridges, the electrical grid, and other systems. (White House Fact Sheet, June 24)
  • The 21-member bipartisan Senate group also released a document outlining how the agreement would be funded while avoiding new taxes. Among the pay-fors listed: 
    • Leverage private sector investment through incentivizing use of public private partnerships, expanding use of Private Activity Bonds, and encouraging asset recycling.
    • Create direct-pay municipal bonds to attract more investment in public infrastructure.
    • Repurpose unused COVID relief funds. 

Jeff DeBoer RER Meeting

  • Roundtable President and CEO Jeffrey DeBoer, above, said, “Americans depend on safe and efficient roads, bridges, and mass transit to commute all across the country. Our nation’s buildings and the people in them depend on reliable supplies of water, power, and broadband to function, and meet the evolving demands of business and individual tenants. In turn, infrastructure and real estate are synergistic, and have a two-way relationship.”
  • DeBoer added, “The package has potential to impact GDP, promote job growth, keep the U.S. competitive with other countries that are massively investing in their own infrastructure, and expand the overall economy.”

Next: Reconciliation

Capitol Hill trees clouds in the evening

  • President Biden said that signing the bipartisan physical infrastructure deal into law would be contingent on a separate bill addressing his administration’s “social infrastructure” agenda on matters such as education and child care. “If the [physical infrastructure bill] is the only one that comes to me, I’m not signing it.” Biden said (Wall Street Journal, June 24)
  • Democratic leaders are aiming to move the “social” infrastructure bill through the budget reconciliation process which would only require a simple, 51-vote majority in the Senate. (NPR, June 24)
  • House Speaker Nancy Pelosi (D-CA) said yesterday, “We will not take up a bill in the House until the Senate passes the bipartisan bill and a reconciliation bill. If there is no bipartisan bill, then we’ll just go when the Senate passes a reconciliation bill.” (The Hill, June 24)
  • Senate Majority Leader Schumer stated his timeline is to have both the bipartisan infrastructure bill and the budget reconciliation bill passed in July. (Politico, June 24) 

Housing — New FHFA Director 

FHFA logo

  • President Biden on June 23 removed Fannie Mae and Freddie Mac’s chief regulator, hours after the U.S. Supreme Court ruled that the Federal Housing Finance Agency’s (FHFA) loan director is insufficiently accountable to the president. (CNBC and BloombergLaw, June 23)
  • Mark Calabria, a Trump administration appointee, focused much of his efforts at FHFA trying to end Fannie and Freddie’s 12 years under government conservatorship. A Biden White House official said, “It is critical that the agency (FHFA) implement the Administration’s housing policies.” (CNBC, June 23)
  • Calabria was replaced on an acting basis with FHFA Deputy Director Sandra Thompson. Since 2013, Thompson has led FHFA’s housing and regulatory policy, capital policy, financial analysis, fair lending and all mission activities for Fannie Mae, Freddie Mac and the Federal Home Loan Banks. (FHFA statement, June 24) 

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) works on issues related to Fannie Mae and Freddie Mac and their impact on commercial real estate.

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Real Estate Coalition Urges Lawmakers to Preserve Longstanding Carried Interest Tax Rules

Posted on by Trey Jackson

The need for policymakers to preserve longstanding tax law governing partnerships and profits interests – carried interest – was the focus of a June 16 letter sent by The Real Estate Roundtable and 14 other national real estate organizations to congressional tax writers. 

Pending Proposals

  • The Biden administration’s budget includes a proposal to tax carried interest as ordinary income.  The Biden proposal, as well as pending House legislation (the Carried Interest Fairness Act, H.R. 1068), would result in an enormous tax increase on Americans who use partnerships to develop, own, and operate real estate. (Roundtable Weekly, Feb. 27 and April 30)
  • The real estate coalition’s letter emphasized that the proposed changes to taxation of carried interest would:
    • Increase the cost to construct or improve real estate and infrastructure, including workforce housing, senior living communities, industrial properties or investments that support economic inclusion or bring environmental benefits; 
    • Create unintended consequences for local communities. Property taxes on real estate contribute 75 percent of local tax revenue and provide a stable and reliable source of funding for critical public services like education and law enforcement; 
    • Create new tax barriers during the post-COVID era as buildings throughout the country need to be repurposed and converted.

Reality vs. Perception

  • The industry letter to policymakers also countered the false narrative that the carried interest issue targets only a handful of hedge fund billionaires and Wall Street executives. The letter notes the following realities:
    • The IRS reports that real estate partnerships represent half of the four million partnerships in the United States. These two million partnerships and their 8.6 million partners who own and operate multifamily rental housing, office buildings, shopping centers, hotels, distribution centers, senior living communities, and other commercial real estate in every town, city, and region of the country would face damaging impacts.
    • Carried interest involves recognition of the risks a general partner takes, including the funding of predevelopment costs; guaranteeing construction budgets and financing; and exposure to potential litigation.

Retroactive Change

  • The letter also notes that current proposals would limit capital gain treatment only to taxpayers who have cash to invest. Those who invest entrepreneurial innovation, risk taking, and sweat equity would no longer receive capital gain treatment.
  • The proposals would also apply retroactively to partnership agreements executed years, often decades, earlier.  Changing the tax treatment of proposals agreed to years earlier would undermine the predictability of the tax system and discourage long-term investment that encourages economic growth, according to the letter.

The Roundtable’s Tax Policy Advisory Committee (TPAC) met June 16 during The Roundtable’s Annual Meeting to discuss the carried interest proposals and the current tax legislative landscape in Washington. 

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Congress Continues to Focus on Climate-Related Legislation

Posted on by Trey Jackson

Legislators in both the Senate and House this week continued to work on stand-alone bills designed to lower U.S. energy consumption and reduce the risks posed by GHG emissions, in tandem with the administration’s emphasis on climate change and building “retrofits” through the comprehensive American Jobs Plan proposal. (Roundtable Weekly, May 28 and June 11)

Senate: The INSULATE Buildings Act

  • A bipartisan bill introduced by Sens. Joe Manchin (D-WV) and Lisa Murkowski (R-AK) on June 15 would seek to improve the energy efficiency of buildings and homes by providing financial resources to state-level energy agencies.
  • The INSULATE Buildings Act (summary) would establish a new U.S. Department of Energy “revolving loan program.” State agencies would then use these federal proceeds to distribute loans and grants to eligible businesses and homeowners to upgrade and retrofit to commercial and residential buildings.
  • The program would also seek to provide states that have the poorest efficiency in their commercial and residential building stock with additional aid.  States could also use up to 25% of their capitalization grant to provide direct grants to small businesses and low-income homeowners.
  • Manchin, who chairs the Senate Energy and Natural Resources Committee, remarked that his INSULATE Buildings Act “provides a significant opportunity to improve energy efficiency and reduce energy consumption in buildings.” (News release, June 15)

Davis-Bacon Wage Requirements

  • Both the Manchin-Murkowski bill and a recent Senate Finance Committee energy tax incentives bill would require construction projects receiving federal financial support through these measures to comply with “Davis-Bacon” prevailing wage standards. (Roundtable Weekly, May 28)
  • The Finance Committee, chaired by Ron Wyden (D-OR), in May advanced an improved energy efficiency tax deduction for commercial buildings (Section 179D) that would make the incentive more usable for “retrofits” of older buildings, multifamily structures, and REITs. (Clean Energy for America Act (S. 1298), mark-up video and supporting documents)
  • A May 26 Roundtable letter opposed new prevailing wage mandates proposed by the Senate committee bill. The letter warned that the excessive costs from Davis-Bacon compliance will greatly exceed the amount of any tax deduction that Section 179D might provide to incentivize an energy efficient construction project.

House: Climate Risk Disclosures

Securities and Exchange Commission (SEC) seal
  •  The House on June 16 passed the Corporate Governance Improvement and Investor Protection Act (H.R. 1187) on a partisan vote, which incorporated the texts of several bills with support from the White House.
  • Among its provisions, the Act would require companies to disclose greenhouse gas emissions and describe their climate risk mitigation strategies. It would also direct the Securities and Exchange Commission (SEC) to issue specific rules within two years that address the disclosures.  (House Financial Services Committee summary and section-by-section overview)
  • At the regulatory level, The Real Estate Roundtable on June 9 commented to the SEC on the unique challenges facing commercial real estate businesses if the Commission eventually requires corporate issuers to report on climate-related financial risks. (Roundtable Weekly, June 11).
  • The bill would also require disclosures to the SEC on matters relating to companies’ political action contributions, lobbying efforts, executive compensation and pay raises, and offshore tax havens.

The measure barely passed the House with only Democrats showing support on a 215-214 vote, indicating that the prospects for passage in the Senate are slim.

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Senate Efforts Pursue Two-Track Approach to Infrastructure Package

Posted on by Trey Jackson

Senate members announced this week that they are pursuing a two-track approach in assembling an infrastructure package in response to President Biden’s original multitrillion dollar proposal – a pared-down bipartisan plan, and a much larger Democratic plan that could advance on a narrow, party-line vote path. 

Bipartisan Framework

  • In the wake of failed negotiations last week between the White House and Senate GOP leaders, a group of five Democrats and five Republicans began work on an alternative plan focused on “core, physical infrastructure.” The bipartisan Senate group expanded this week to 21 members, including 11 Republicans. At least 10 Republicans in the 50-50 Senate must approve a bill to reach the 60-vote threshold for passage. (Bloomberg and Washington Post, June 16)
  • A draft outline of the bipartisan group’s infrastructure proposal published on June 16 by Politico revealed a framework that would cost $974 billion over five years, including $579 billion in new spending.
  • President Biden originally proposed $2 trillion in new infrastructure spending, then signaled a compromise closer to $1 trillion. (Roundtable Weekly, June 11)
  • The Senate group’s framework also includes numerous funding sources, such as unspent coronavirus relief aid and public-private partnerships. Since the document’s release, Republicans have provided assurances that a final framework would not include indexing the national gasoline tax to inflation, a proposal opposed by President Biden and House Speaker Nancy Pelosi (D-CA). (Politico and The Hill, June 17)

The Reconciliation Path

U.S. Capitol at sunset
US Capitol building at sunset, Washington DC, USA.
  • Meanwhile, Senate Majority Leader Chuck Schumer (D-NY) this week met with Democratic senators on the Budget Committee to trigger the budget reconciliation process, which would allow a party–line majority vote of an infrastructure package, eliminating the need for Republican votes. (Associated Press, June 17)
  • According to the AP, “Sen. Tim Kaine (D-VA) said the Budget Committee was unified in putting together a package that ‘gives us a latitude to do what we need to do — we can shrink it if there’s a bipartisan deal, we could do the broader deal if there isn’t.’”
  • Schumer said he would like to pass next month both a bipartisan infrastructure package and a larger budget blueprint, which would address a follow-up Democratic legislative. (BGov, June 17)
  • Additionally, Senate Budget Chairman Bernie Sanders (I-VT) said he is seeking a $6 trillion measure that would fund both Biden’s infrastructure proposals, including reforms targeting climate change and an expansion of Medicare. (Wall Street Journal and Washington Post, June 17
  • Sen. Mark Warner (D-VA), a member of the bipartisan group leading infrastructure negotiations, said, “I know there needs to be reconciliation. But that also doesn’t mean that I accept all of what the president proposed and all of what Sen. Sanders has proposed.” (BGov, June 17)
  • The Real Estate Roundtable, along with 16 other national real estate trade organizations submitted detailed comments in May to the Senate Finance Committee and House Ways and Means Committee as part of hearings on how to fund the administration’s infrastructure proposals. (Roundtable Weekly, May 21)

The Roundtable’s Annual Meeting this week also featured discussions with policymakers on the evolving infrastructure debate – and the organization plans to remain fully engaged with lawmakers on any eventual legislative proposal that could affect commercial real estate. 

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National Policy Issues Dominate Roundtable Annual Meeting; John F. Fish Succeeds Debra A. Cafaro as Roundtable Chair

Posted on by Trey Jackson
2021 Annual Roundtable Meeting image

National lawmakers and industry leaders this week discussed a wide range of policy issues – including cybersecurity, infrastructure, climate, taxes, and post-pandemic reopening of businesses – during The Real Estate Roundtable’s 2021 Annual Meeting, where John F. Fish (Chairman and CEO, Suffolk) was elected as Roundtable Chair, effective July 1. (Watch Incoming Chair Fish’s remarks) 

Leadership:

Policy Issues & Featured Speakers  

  • Sen. Chris Coons (D-DE) discussed the administration’s infrastructure proposal, aid for low-income renters, and more.
  • Sen. Ben Sasse (R-NE) focused on bipartisan congressional efforts on infrastructure, return-to-work issues, and national security threats.
  • White House National Climate Advisor Gina McCarthy, above, and Roundtable Sustainability Policy Advisory Committee Chair Tony Malkin (Chairman, President and Chief Executive Officer, Empire State Realty Trust) focused on the commercial real estate industry’s role in climate policy. (watch the discusssion)
  • Rep. Stephanie Murphy (D-FL) discussed tax policies that could encourage economic recovery and avoid unintended consequences.
  • “Current Market Challenges and Coming Opportunities” – above – featured the following industry leaders in a discussion on challenges facing markets during a recovering economy, reopening strategies, and cybersecurity concerns for CRE: (watch the discussion)
    • Thomas M. Flexner (Vice Chairman and Global Head of Real Estate, Citigroup)
    • Kathleen McCarthy (Global Co-Head of Blackstone Real Estate)
    • Mark J. Parrell (President & Chief Executive Officer, Equity Residential) and
    • Owen D. Thomas (Chief Executive Officer, Boston Properties)

Policy Advisory Committees

  • Sustainability Policy Advisory Committee (SPAC) – above
    The outlook for energy efficiency legislation was a focus of discussion with key Hill staff representing Senator Jeanne Shaheen (D-NH). Additionally, officials from the Department of Energy’s Better Buildings initiative and the Environmental Protection Agency’s ENERGY STAR program updated SPAC.  
  • Research and Real Estate Capital Policy Advisory Committees (RECPAC)
    Sen. Steve Daines (R-MT) discussed the importance of enacting measures to encourage job creation and pro-growth tax policy, and the importance of developing a clear strategy to address global and national security threats, including cyber and ransomware attacks.
  • Tax Policy Advisory Committee (TPAC)
    Tax legislative priorities affecting CRE were the focus of discussion with congressional staffers – including proposals to eliminate or limit the use of carried interest and Like-Kind Exchanges, along with increasing the capital gain rate.
  • Homeland Security Task Force (HSTF) and Risk Management Working Group (RMWG)
    This joint meeting was briefed on “Civil Unrest: Challenges for Communities” by Terry Monahan, Senior Advisor for Recovery and Safety Planning for New York City – and an FBI official discussed the current threats of ransomware and cyber challenges.

The Roundtable’s 2021 Annual Report will be distributed in July. Next on The Roundtable’s Meeting Calendar is the Oct. 5 Fall Meeting in Washington, DC. (Roundtable-level members only)

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Roundtable Comments to SEC on Corporate Climate Risk Disclosures

Posted on by Trey Jackson

SEC website image on ESG

The Real Estate Roundtable on June 9 commented on the unique challenges facing commercial real estate businesses if the Securities and Exchange Commission (SEC) eventually requires corporate issuers to report on climate-related financial risks. (See SEC’s 15 Questions for Consideration and The Roundtable’s responses) 

  • The SEC’s March 15 request for public comments is not unique to real estate, but seeks information from all corporate stakeholders on climate change reporting and metrics.  “It’s time to move from the question of ‘if’ to the more difficult question of ‘how’ we obtain disclosure on climate,” said former Acting Chair Allison Herren Lee. (SEC speech, March 15) 
  • On May 6, the new SEC chair, Gary Gensler, testified before the House Financial Services Committee that he intends to propose new rules on corporate climate risk disclosures in the second half of 2021. (Reuters, May 6) 

Roundtable Comments

logo - U.S. Securities and Exchange Commission

  • The Roundtable’s comments recommend a “principles-based” approach to corporate climate risk disclosures as opposed to a prescriptive “one size fits all” reporting standard. It coordinated closely with Nareit in developing its submission to the SEC.
  • More specifically, The Roundtable’s comments provide:
    • Energy consumption and associated emissions from any particular building or portfolio depend on a range of variables – such as a building’s age, location, asset-type, and tenant mix.  The SEC should be flexible in developing reporting standards for companies that develop, own and operate income-producing real estate.
    • The GHG metrics that building owners can most accurately measure and quantify arise from their direct and immediate operations of assets they manage and control on a day-to-day basis. Building owners should not be compelled to measure, quantify or report on indirect emissions that derive from off-site facilities, or the actions of tenants or other third-parties beyond the owner’s immediate control.

    • The SEC should allow a marketplace of reporting frameworks to thrive, flourish, and evolve. No single reporting framework should be mandated.

House Legislation

U.S. Capitol

  • The House Financial Services Committee on May 12 advanced the Climate Risk Disclosure Act of 2021. The bill would direct the SEC to issue rules within two years that require public companies to disclose: 
    • Direct and indirect greenhouse gas emissions;
    • Total amount of fossil-fuel related assets that it owns or manages;
    • How its valuation would be affected if climate change continues at its current pace, and;
    • Risk management strategies related to the physical risks and transition risks posed by the climate crisis.
  • The House bill would also direct the SEC to tailor disclosure requirements to different industries. (JD Supra, May 17). The bill likely faces a more difficult path forward in the Senate.

Investment Industry Comments

  • The Investment Company Institute (“ICI”), which represents firms including BlackRock, Vanguard and JPMorgan Chase, submitted comments to the SEC on June 4. ICI believes “using a combination of principles-based and prescriptive elements is particularly apt in the context of climate-related information.” (Reuters, June 8).
  • While ICI recommends that companies within the SEC’s jurisdiction should report on “direct” emissions (“Scope 1”) and emissions due to electricity purchases (“Scope 2”), it does not believe that companies should be mandated to report on so-called indirect “Scope 3 emissions” at this time.
  • PoliticoPro (June 7) reported that “ICI made the recommendations as investors increasingly demand that companies follow certain environmental, social and governance reporting standards so they can channel capital to green projects and workplaces that promote equity and inclusion.”

The Real Estate Roundtable’s Sustainability Policy Advisory Committee (SPAC) – which meets remotely on June 16 in conjunction with The Roundtable’s June 15 Annual Meeting – will continue to work with policymakers in Congress and the Administration on energy and climate issues of importance to commercial real estate. 

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White House Urges Companies to Build Cyber Defenses as Ransomware Attacks Increase; Commercial Facilities Cyber Working Group Sharing Information on Threats

Posted on by Trey Jackson

Anne Neuberger White House Deputy National Security Advisor for Cyber and Emerging Technology

The increasing frequency and size of ransomware cyberattacks on U.S. companies prompted the White House on June 2 to issue a stark warning urging businesses to take “immediate steps” to increase their ransomware defense based on the federal government’s best practices. (White House  Deputy National Security Advisor for Cyber and Emerging Technology Anne Neuberger, above)

A National Threat

  • Ransomware is a type of malicious computer network attack where criminals encrypt an organization’s data and demand payment to restore access. In some instances, attackers may also steal an organization’s information and demand additional payment in return for not disclosing the information to the public.
  • The document from the White House’s Neuberger notes, “All organizations must recognize that no company is safe from being targeted by ransomware, regardless of size or location. Much as our homes have locks and alarm systems and our office buildings have guards and security to meet the threat of theft, we urge you to take ransomware crime seriously and ensure your corporate cyber defenses match the threat.” (White House, What We Urge You To Do To Protect Against The Threat of Ransomware and Readout of Neuberger Meeting)
  • In the past month, $15 million in cyber-ransom was paid to hackers in bitcoin by Colonial Pipeline and JBS USA, the world’s largest meat-processing company. The U.S. Justice Department reported on June 7 that it had retrieved $2.3 million paid by Colonial. (Axios, June 9 and CNBC, June 8)
  • In an interview with the Wall Street Journal this week, FBI Director Christopher Wray compared the challenge of countering the threat of ransomware to the 9/11 terrorist attacks and that the agency was currently investigating about 100 different types of ransomware.
  • Wray also testified on June 10 before the House Judiciary Committee that companies should not make ransomware payments to hackers but instead contact the FBI for help to restore stolen data. Wray said, “There are a whole bunch of things we can do to prevent this activity from occurring, whether they pay the ransom or not, if they communicate and coordinate with law enforcement right out of the gate. That’s the most important part,” he added. (AP, June 10)
  • Additional hearings this week on ransomware and other cyber threats to infrastructure where held by the Senate Homeland Security and Governmental Affairs Committee on June 8 and the House Homeland Security Committee on June 9.

CRE and Cybersecurity

REISAC logo x475

  • The RE-ISAC has worked with InfraGard National Capital Region (InfraGardNCR) to establish the Commercial Facilities Cyber Working Group (CCWG), a virtual effort to share cyber threat intelligence. The group shares threat reports, ransomware victim examples, and other information on a regular basis. 

Resources and Reference

cybersecurity control room

For more information, contact Gate 15 Managing Director and RE-ISAC staff Andy Jabbour or The Roundtable’s RE-ISAC Executive Director and HSTF Liaison Chip Rodgers.

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