News Type: Roundtable Weekly

Real Estate Roundtable Supports Bipartisan Legislation to Clarify the Basel Rule and Aid Economic Growth

Posted on by Trey Jackson

(WASHINGTON) — Bipartisan legislation (H.R. 2148) introduced today by Rep. Robert Pittenger (R-NC) and Rep. David Scott (D-GA) would help clarify and reform the Basel III High Volatility Commercial Real Estate (HVCRE) Rule, which is negatively affecting certain commercial real estate loans and impairing economic growth. The bill is supported by The Real Estate Roundtable and a coalition of national real estate organizations 1 . 

Real Estate Roundtable President and Chief Executive Officer Jeffrey D. DeBoer said, “Congressmen Pittenger and Scott are to be commended for recognizing the negative economic impact that the HVCRE Rule is having on acquisition, development and construction lending and for taking steps to introduce legislation intended to correct these problems. The Roundtable and our coalition partners support regulatory agencies’ efforts to promote economically responsible CRE lending, and the Pittenger-Scott bill will help guide the agencies in clarifying and reforming the HVCRE Rule, while encouraging sound lending practices, spurring economic growth and creating jobs in local communities.”  

By amending the Federal Deposit Insurance Act to clarify capital requirements for certain acquisition, development, or construction loans (ADC), the legislation would address concerns regarding the HVCRE Rule. 

As currently written, the Rule is overly broad and is applied to many stabilized loans without construction risk, unduly burdening stabilized loans with capital charges after the construction risk has passed. Many banks, including small community financial institutions, have been deterred from making this type of loan – which can represent up to 50 percent of a small bank loan portfolio.  

Since introduction of the HVCRE rules in January 2015, necessary clarification for key elements of the rule have not been provided by regulators despite ongoing requests.  Without modifications, the consequences of the HVCRE rule could have an adverse economic impact on commercial real estate lending, local economies and job creation. Without a response from the regulatory community, the proposed legislation is intended to address the problem. 

Among the clarifications in the legislation are the following:

  • Once the development/construction risk period has passed, and the project is cash flowing, it would allow borrowers to use internally generated cash outside the project, rather than forcing them to refinance the loan (possibly away from the original lender).
  • Clarify that loans made to do general upgrades and other improvements on existing properties with rental income do not trigger the capital penalty.
  • Allows banks to establish borrower land value as equity into projects as established by certain safeguards, such as a fully-compliant appraisal and thorough bank review. 
  • Excludes from application and compliance any loans made before January 1, 2015.

As the House Financial Services Committee considers legislation in the 115th Congress to address the HVCRE rule, The Roundtable and its industry partners will continue to encourage policies that permits stable capital formation and balanced lending in a sensible financial regulatory framework.

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1 Building Owners and Managers Association International, CCIM Institute, Commercial Real Estate Finance Council, Institute of Real Estate Management, International Council of Shopping Centers, Mortgage Bankers Association, National  apartment Association, National Association of Home Builders, NAIOP Commercial Real Estate Development Association, National Association of Real Estate Investment Trusts, National Association of Realtors, and National Multifamily Housing Council

New “Tenant Star” Law Expected to Spur U.S. Jobs, Investment, Energy Efficiency

Posted on by Trey Jackson

(Washington, D.C.) – The Real Estate Roundtable commends today’s enactment of widely bipartisan “Tenant Star” legislation, which is expected to encourage optimum energy efficiency in leased commercial spaces and increased investment and job creation, while helping the environment. President Obama signed the bill into law today at an Oval Office ceremony.

The new law authorizes the U.S. Environmental Protection Agency (EPA) and the U.S. Department of Energy (DOE) to jointly create a voluntary “Tenant Star” program that will provide national branding recognition to landlord and tenant teams who  design, construct and operate highly energy efficient leased spaces in commercial buildings.  “Tenant Star” — modeled after the long-running ENERGY STAR program for whole buildings — will be the first government-endorsed label in the United States to recognize leased spaces within commercial buildings for sustainable design and operation.

The “Tenant Star” bill arrived at President Obama’s desk today for his signature after the Senate and House approved the bill by wide bipartisan margins over the last two months. Various federal agencies are now directed to conduct studies, gather data, and develop guidelines to implement the program over the next several years. RECPAC Mtg

“ ‘Tenant Star’ will align office tenants with their landlords to make smart, cost-effective investments in energy-efficient leased spaces.  Broad adoption will save businesses billions of dollars on energy costs in the coming years and generate new American jobs in the energy efficiency field that cannot be exported,” said Anthony E. Malkin, chairman, president and CEO of Empire State Realty Trust, Inc. (NYSE: ESRT) and chairman of The Roundtable’s Sustainability Policy Advisory Committee (SPAC).  

 
Roundtable President and CEO Jeffrey D. DeBoer called ‘Tenant Star”  a “triple win that will spur the economy by creating jobs, enhancing energy security, and preserving our environment by cutting greenhouse gases.” He added, “The program will allow building owners to attract financiers, investors, and tenants in the increasingly competitive national and global markets for real estate.”
 
About The Real Estate Roundtable
The Real Estate Roundtable brings together leaders of the nation’s publicly-held and privately owned real estate ownership, development, lending and management firms with the leaders of national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy. Collectively, Roundtable members’ portfolios contain over 12 billion square feet of office, retail and industrial properties valued at more than $1 trillion; over 1.5 million apartment units; and in excess of 2.5 million hotel rooms.  Participating trade associations represent more than 1.5 million people involved in virtually every aspect of the real estate business.
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About Empire State Realty Trust
Empire State Realty Trust, Inc. (NYSE: ESRT), a leading real estate investment trust (REIT), owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building, the world’s most famous office building. Headquartered in New York, New York, the Company’s office and retail portfolio covers 10.0 million rentable square feet, as of September 30, 2014, consisting of 9.3 million rentable square feet in 14 office properties, including nine in Manhattan, three in Fairfield County, Connecticut and two in Westchester County, New York; and approximately 731,000 rentable square feet in the retail portfolio. The Company also owns land at the Stamford, Connecticut Transportation Center that supports the development of an approximately 380,000 rentable square foot office building and garage.
 

Roundtable Welcomes New Study Quantifying Vast Economic Benefits of “Like-Kind” Property Exchanges

Posted on by Trey Jackson

(WASHINGTON) The Real Estate Roundtable welcomes today’s release of an economic study that quantifies the vast economic benefits of “like-kind” property exchanges (authorized under Section 1031 of the U.S. tax code), while illustrating the unintended negative economic impacts of proposals to scale back or repeal this nearly 100-year-old tax provision.

Drs. David Ling (University of Florida) and Milena Petrova (Syracuse University), who co-authored the study —“The Economic Impact of Repealing or Limiting Section 1031 Like-Kind Exchanges in Real Estate” — based their findings on more than 1.6 million real estate transactions spanning 18 years (1997-2014) and totaling $4.8 trillion (unadjusted for inflation).

“The new Ling-Petrova study demonstrates how critical like-kind exchanges are to the health and vibrancy of real estate activity in the United States,” said Roundtable President and CEO Jeffrey DeBoer. As he explained, “Acquiring and improving commercial real estate requires large amounts of capital, and section 1031 helps real estate businesses grow and expand organically — with less debt. In short, like-kind exchanges allow property owners to put more of their earnings back into the private sector — hiring workers, upgrading and improving properties, and generating much-needed economic activity.”

Like-kind exchange rules allow taxpayers to defer tax when they exchange one property held for investment or business use for other property of a “like kind.” They also contribute to a more dynamic real estate sector by eliminating potential “lock-in” effects (particularly in the case of less-productive assets).

Such exchanges, thus, foster increased investment and reinvestment activity; allow real estate owners to better allocate resources; and decrease debt levels in commercial and multifamily real estate transactions. Additionally, “1031 exchanges” help to safeguard property values — which underlie local government budgets across the country — and help to protect tenants by stabilizing rents.

In a letter to congressional tax-writers in March, The Roundtable and coalition partners asserted, “There is strong economic rationale for the like-kind exchange provision’s nearly 100-year existence in the Code. Limitation or repeal of section 1031 would deter and, in many cases, prohibit continued and new real estate and capital investment.”

As the coalition explained, like-kind exchanges:
  • are integral to the efficient operation and ongoing vitality of thousands of American businesses, which in turn strengthen the U.S. economy and create jobs.
  • facilitate taxpayers’ ability to exchange a property for more-productive property; to diversify or consolidate holdings; and to transition to meet changing business needs.
  • are used by companies large and small in a wide range of industries, using different kinds of business structures.

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Rudin Succeeds Taubman as Real Estate Roundtable Chairman

Posted on by Trey Jackson

(WASHINGTON, D.C.) — William C. Rudin (Rudin Management Company, Inc.) has been elected chairman of The Real Estate Roundtable, and is poised to succeed Robert S. Taubman (Taubman Centers, Inc.) in this role as of July 1. At the organization’s annual meeting on June 3, members also approved a new, 22-member board of directors and policy advisory committee chairs for the 2015-16 fiscal year.

“We could not have a better choice to lead our industry than Bill Rudin,” said Taubman, who has served as Roundtable chairman for the past three years. Taubman noted that Rudin “brings a deep understanding of what is needed for real estate markets to thrive — including jobs, economic demand, financing, and infrastructure — and how all of this relates to healthy cities, local government budgets and a healthy U.S. economy. With his broad experience in every facet of the business, and leadership role in various civic organizations, Bill Rudin is well suited to help the nation’s political leaders understand real estate’s views on key policy issues.” 

Roundtable President and CEO Jeffrey D. DeBoer added, “Thanks to his deep engagement over the years, and the respect he enjoys from peers and elected officials at all levels of government, Bill Rudin has contributed immeasurably to The Roundtable’s success in Washington. These contributions range from tax and technology issues, to homeland security policy, and real estate’s positive role in creating jobs and addressing U.S. energy challenges. I’m thrilled to be working with Bill in this new role, and look forward to many policy successes under his leadership.”

Rudin is vice chairman and CEO of Rudin Management Company, Inc., one of the nation’s largest and most well regarded privately-owned real estate companies, with 10.2 million square feet of commercial space and 4.7 million square feet of residential space.

Rudin has served as chairman-elect of The Real Estate Roundtable since last June. He was a founding member of the organization in 1999; joined its board in 2008; and became board secretary in 2012. 

“I am deeply honored to take on the leadership of this highly respected policy advocacy organization,” said Rudin. “For over 15 years, it has been bringing together a diverse cross-section of industry leaders to discuss, shape and articulate a unified real estate industry perspective on key federal policy issues,” he added. As the nation faces an array of consequential policy challenges — such as immigration, infrastructure funding, and the need for sustainable job creation — Rudin called for real estate to maintain a “pro-active” approach in Washington, and for policymakers to consider real estate as “part of the solution.”

Rudin is very active with many civic, policy-oriented and philanthropic organizations. He chairs the Association for a Better New York (ABNY). He is a long-time member of the Real Estate Board of New York (REBNY). He is active with the Citizens Budget Commission, Economic Club of New York, Council on Foreign Relations, and the Partnership for New York City. Additionally, he sits on the boards of institutions such as New York University, the Battery Conservancy, the Metropolitan Museum of Art, and the Mayor’s Fund to Advance New York City.

The Roundtable’s board of directors includes the leaders of public and privately-held national real estate firms involved in real estate ownership, development, lending and management — and representing an array of property types (e.g., office, hospitality, retail, industrial, multi-family and senior living). The board also includes the elected leaders of five major national real estate trade groups — out of 17 that hold permanent membership in The Roundtable.

Joining the board, as of July 1, are: Thomas R. Arnold, Head of Americas–Real Estate, Abu Dhabi Investment Authority, Chairman of the Association of Foreign Investors in Real Estate (AFIRE) and Chairman, Pension Real Estate Association (PREA); Stephen D. Lebovitz, President and CEO of CBL & Associates Properties, Inc., and Chairman, International Council of Shopping Centers (ICSC).

Stepping down from the Roundtable board are: Ronald L. Havner, Jr., Chairman, CEO and President, Public Storage, Inc., and Immediate Past Chairman, National Association of Real Estate Investment Trusts (NAREIT); Steven D. Martin, Managing Principal, SDM Partners, and Chairman, NAIOP – the Commercial Real Estate Development Association; and Daniel M. Neidich, CEO, Dune Real Estate Partners LP, and Immediate Past Chairman, The Real Estate Roundtable.

Roundtable, Coalition Partners Urge FIRPTA Reform as House Tax-Writers Seek Multi-Year Infrastructure Funding Solutions

Posted on by Trey Jackson

(WASHINGTON, D.C.) — In conjunction with a House Ways & Means Committee hearing today exploring long-term funding solutions for the Highway Trust Fund (HTF) — whose latest funding “patch” expires July 31 — The Real Estate Roundtable and a coalition of business and labor organizations urged reform of the Foreign Investment in Real Property Tax Act (FIRPTA) as a “simple, cost-effective” way to “galvanize billions in new private capital for investment in U.S. transportation and infrastructure.”

In a letter submitted for the hearing record, the coalition said the 1980 law “is a major hurdle for the foreign investor seeking to invest in US infrastructure projects.” It also characterized FIRPTA as a “punitive,” “anti-competitive” law that “subjects foreign investment in U.S. real estate or infrastructure to a much higher tax burden than applies to a foreign investor purchasing a U.S. stock or bond, or an investment in any other asset class.”  In some cases, the FIRPTA tax burden is as high as 54.5 percent. [A similar letter is being submitted to Senate tax-writers in conjunction with their scheduled HTF hearing tomorrow.]

In the view of The Roundtable and its coalition partners, any long-term HTF funding bill should include FIRPTA reforms such as those in H.R. 2128 — legislation introduced by Ways and Means Committee members Kevin Brady (R-TX) and Joseph Crowley (D-NY). The “Real Estate Investment and Jobs Act of 2015” would increase (from 5 percent to 10 percent) the ownership stake that a foreign investor can have in a U.S. publicly traded REIT without triggering FIRPTA liability (extending this provision to certain collective investment vehicles); and exempt foreign tax-exempt pension funds from FIRPTA altogether. 

“By providing relief from FIRPTA, the Brady-Crowley bill will spur domestic real estate investment, create jobs and help provide the capital we need to rebuild the nation’s crumbling infrastructure,” said Roundtable President and CEO Jeffrey D. DeBoer. Since the bill’s re-introduction in April, 31 (of 39) Ways & Means Committee members have signed on as co-sponsors.

Earlier this year, the Senate Finance Committee unanimously passed legislation (S. 915) that contains a significant part of what The Roundtable and its coalition partners are seeking, in terms of FIRPTA reform. Also illustrating the strong bipartisan support for FIRPTA reform, the full House cleared similar legislation in 2010 by a vote of 402-11. 

Because of the close connection between FIRPTA and infrastructure investment, the Administration included a FIRPTA reform proposal in its 2013 Rebuild America infrastructure initiative, and in its last three budget submissions to Congress. 

Real Estate Roundtable Applauds House Vote on Bill to Spur Energy Efficiency in Leased Commercial Space

Posted on by Trey Jackson
(WASHINGTON, D.C.) — The Real Estate Roundtable commends today’s House passage of “Tenant Star” legislation that will foster energy efficiency in leased commercial space, thus addressing a critical piece of the energy efficiency equation in commercial buildings, and helping to curb greenhouse gases while boosting innovation and the U.S. economy.

With Tenant Star already cleared by the Senate on March 27, the legislation can now be sent to the White House for President Obama’s anticipated signature.

     The bill authorizes the U.S. Environmental Protection Agency (EPA) and Department of Energy (DOE) to create a voluntary “Tenant Star” program modeled after the highly successful, market-based ENERGY STAR program. Once it is signed into law — and implementing guidelines are written — “Tenant Star” will provide national branding recognition to property owners and tenant teams that design, construct and operate highly energy efficient spaces within commercial buildings.

     The House-passed bill tracks legislation long championed by Senators Rob Portman (R-OH), Jeanne Shaheen (D-NH), Kelly Ayotte (R-NH) and Michael Bennet (D-CO)  in the upper chamber (“Tenant Star” also cleared the Senate as an amendment to Keystone XL pipeline legislation earlier this year).  The key House sponsors, Reps. David McKinley (R-WV) and Peter Welch (D-VT), previously won overwhelming House passage (375-36) in March 2014 and pursued approval again today to ensure that both sides of Capitol Hill passed “Tenant Star” in the same congressional session.

     Empire State Realty Trust (NYSE: ESRT) Chairman, President and CEO Anthony E. Malkin, who chairs The Roundtable’s Sustainability Policy Advisory Committee (SPAC), said, “Tenant Star is a voluntary program — with no federal mandate or cost — that will encourage commercial tenants and landlords to design and construct leased spaces in office buildings to achieve high levels of energy performance.”

     With office tenants often accounting for over 50 percent of the energy consumed in an office building, he explained, “Tenant Star will encourage office tenants to incorporate into the construction of their leased premises common sense, cost-effective measures that yield excellent returns on investment over short pay-back periods.” 

     Added Malkin, “Tenants will favor landlords whose buildings can support such installations. Broad adoption will save businesses billions of dollars on energy costs in the coming years. The reduced consumption will afford savings in future capital outlays for energy generation and related infrastructure.”

     Real Estate Roundtable President and CEO Jeffrey D. DeBoer said, “‘Tenant Star’ is a ‘triple win’ that will spur the economy by creating jobs, enhancing energy security, and preserving our environment by cutting greenhouse gases. It will boost innovation in the real estate sector and go a long way toward ensuring that our country’s commercial and multifamily stock — and the separate spaces leased within them — are at the vanguard of advances in technology and energy conservation. The ‘Tenant Star’ program will allow building owners to attract financiers, investors, and tenants in the increasingly competitive national and global markets for real estate.”

 

     The Real Estate Roundtable supports legislation that encourages energy efficiency and energy production as components of an “all of the above” national energy policy.

“We look forward to our continued work with Congress and the Obama Administration to ultimately sign ‘Tenant Star’ into law,” DeBoer said. “Meanwhile, we continue working to advance broadly supported measures that  strive to balance economic growth with complementary polices to foster environmental stewardship.” 

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About The Real Estate Roundtable: The Real Estate Roundtable brings together leaders of the nation’s publicly-held and privately owned real estate ownership, development, lending and management firms with the leaders of national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy. Collectively, Roundtable members’ portfolios contain over 12 billion square feet of office, retail and industrial properties valued at more than $1 trillion; over 1.5 million apartment units; and in excess of 2.5 million hotel rooms.  Participating trade associations represent more than 1.5 million people involved in virtually every aspect of the real estate business.
 
About Empire State Realty Trust:  Empire State Realty Trust, Inc. (NYSE: ESRT), a leading real estate investment trust (REIT), owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building, the world’s most famous office building. Headquartered in New York City, the company’s office and retail portfolio covers 10.0 million rentable square feet, as of Dec. 31, 2014, consisting of 9.3 million rentable square feet in 14 office properties, including nine in Manhattan, three in Fairfield County, Conn., and two in Westchester County, N.Y.; and approximately 728,000 rentable square feet in the retail portfolio.