Roundtable Weekly Newsletter by The Real Estate Roundtable

SPRING 2011 ROUNDTABLE MEETING

Roundtable Members Engage Bernanke, Orszag, Private Equity’s Bonderman and Rubenstein on a Wide Range of Policy, Economic Issues; Obama Unveils Counterpoint to Ryan’s Anti-Deficit Plan   

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Left to right during the April 12, 2011 Spring Roundtable Meeting: Roundtable President and CEO Jeff DeBoer, Fed Chairman Ben Bernanke and Roundtable Chairman Dan Neidich (CEO, Dune Real Estate Partners)  

In a wide-ranging dialogue with Fed Chairman Ben Bernanke and other U.S. policymakers on Tuesday, Real Estate Roundtable members painted a picture of a “bifurcated” commercial real estate market — noting the need for strong economy-wide job creation, policy action to spur foreign equity investment in U.S. commercial real estate, and continued low interest rates to foster recovery in areas beyond the top urban “gateway” markets. With debate reportedly underway within the Fed about the timing of future monetary policy moves, several real estate CEOs expressed concern that rising interest rates could complicate efforts to refinance hundreds of billions of dollars in maturing commercial mortgage debt. 

The Spring 2011 Roundtable Meeting also featured exchanges with former White House budget director Peter Orszag; private equity titans David Bonderman and David Rubenstein, who led efforts to block carried interest legislation on the Hill last year; and Sen. Joe Manchin (D-WVA), who as a member of the Senate Energy Committee recently heard testimony from Roundtable President and CEO Jeff DeBoer about the need for federal energy retrofit incentives for commercial buildings. Later in the day, Roundtable members had an opportunity to meet informally with a number of House and Senate lawmakers of both parties.

Not surprisingly, the epic budget, tax and debt limit battles now underway in Washington were a key focus of the day’s discussions. These encompassed last week’s 11th hour budget deal to avert a government shutdown; House Budget Chairman Paul Ryan’s (R-WI) bold plan to rein in federal entitlement spending; the deficit-reduction plan announced by President Obama on Wednesday; and anti-deficit plans being developed by the so-called “Gang of Six” in the Senate.  

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The Spring 2011 Roundtable Meeting also featured exchanges with former White House budget director Peter Orszag 

Borrowing ideas from the Simpson-Bowles debt commission he created last year, Obama proposed a $4 trillion reduction in federal spending over 12 years, in part through higher taxes on wealthier taxpayers and an overhaul of the tax code (The Washington Post, April 13).   

Notably this week, Senate Democrats Tom Carper (D-DE) and Dianne Feinstein (D-CA) and independent Sen. Joe Lieberman (D-CT) encouraged Obama to strengthen the future solvency of Social Security by raising the retirement age (The Hill, April 13).  A separate plan to reform Social Security was put forth by Senators Lindsey Graham (R-SC), Rand Paul (R-KY) and Mike Lee (R-UT) that would gradually increase the retirement age and tie benefits to income, a concept known as “means testing” (Fox News, April 13).     

While conceding that “not meeting our debt obligations is a very bad idea,” House Majority Leader Boehner (R-OH) this week concurred with Senate Minority Leader Mitch McConnell (R-KY) that the House and Senate would block an increase in the federal debt limit if it wasn’t tied to robust legislation to cut federal deficits. Treasury Secretary Geithner reportedly expects the country to reach the debt limit by mid-May, but that default could be held off until early July (April 13, MSNBC).  

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The epic budget, tax and debt limit battles now underway in Washington were a key focus of the meeting. 

Amid Washington’s intensifying search for spending cuts and revenue raisers, The Roundtable continues to urge policymakers to avoid actions (such as higher capital gains tax rates, or a carried interest tax hike) that would undermine job creation and economic recovery.

The Roundtable’s quarterly Sentiment Surveys have shown strong improvement for top assets in gateway markets (and within the REIT world) since mid- to late-2010, but continued weakness in more mainstream markets around the country. The results of the Q2 2011 survey (on which data collection is closing this week) are scheduled to be released in early May. 

Source:  The Real Estate Roundtable

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