Thursday, June 11, 2009

Investors in Commercial Real Estate Lobby Treasury To Adjust Tax Rules

Since I will probably miss the moment when this tax change actually passes (so much lobbying activity to keep track of at once), I just thought I'd pass along some more information we'll file under "This Day in Lobbying". I just continue to marvel that lobbyists have such an easy time grabbing the ear of our Treasury Department or Federal Reserve.

Based on the timeline of the last time the commercial real estate lobby was able to make these political entities jump, at most we should be talking 5 months before this successfully is implemented. See below for the path to salvation (i.e. unloading risk onto the taxpayer)
  1. [Dec 22, 2008: Wall Street Journal - Property Developers Ask for Government Bailouts]
  2. [Jan 13, 2009: Bailout Nation Continues in Commercial Real Estate Land - "Lemme In on that Money"]
  3. [Feb 23, 2009: Fed May Need to Recast TALF on Commercial Real Estate]
And... victory ---> May 19: The U.S. Federal Reserve on Tuesday further widened its safety net for downtrodden credit markets by making older commercial property loans eligible for an emergency program.

So by Thanksgiving our tax rules for commercial real estate investing should be "fixed" to "appropriate levels" as deemed by those in the top 0.2%.

Although Treasury might not wait that long and per this story, the goodies can be unleashed by the end of summer. Talk about Return on Investment - every dollar in lobbying has to be pay itself back 100 fold in America. Now we see why these REITs are flying off the handle - just like the banks our folks in government are jumping each time the high brow CRE investors demand it. (and each victory for CRE is also a victory for the banks)

Sorry... this is where I say "Main Street = Wall Street". Mmm... Kool Aid.

Via Bloomberg
  • The U.S. Treasury Department is considering issuing rules this summer to allow lenders to modify commercial real estate loans without triggering tax penalties on investors as the industry braces for an increase in defaults, a person familiar with the matter said.
  • The Real Estate Roundtable, a Washington trade group, began in December to urge Treasury and the Internal Revenue Service to waive tax penalties that would otherwise be assessed on investor pools known as Real Estate Mortgage Investment Conduits and Real Estate Investment Trusts. (aha! they wanted it all in December - priorities lobbyist group, one thing at a time - you got the TALF completely changed to include your loans so the taxpayer can take the burden and backstop your loans.... tax changes can come later) A person familiar with the matter said the Real Estate Roundtable’s requests were shelved by Treasury officials at the end of last year as the administration focused on other aspects of the financial crisis.
  • “The worst is yet to come,” Steven Kandarian, chief investment officer of New York-based MetLife Inc., the biggest U.S. life insurer, said in an interview today. (no it's not Mr Kandarian - the taxpayer has backed it all up and now bears the risks. Oh wait, I assumed you were talking about the people who originated these awful loans, and took the risks. In their case the worst is not only over, they are getting a new playing field to do all the same bad behavior... because if they make mistakes the taxpayer will be there for them in 2013-2015 all over again. But if you mean the worst is yet to come for the taxpayer - yes you nailed it on the head. As we now see clearly risks are to be born by the taxpayer and rewards born to the investor - heads they win, tails they still win... starting to notice a theme around here)
  • Tax relief for investors of commercial mortgage-backed securities is a necessary step to restructuring troubled mortgages, Jeffrey D. DeBoer, the Real Estate Roundtable’s president and chief executive, wrote in a letter to the Treasury Department on Dec. 18. (completely unbiased source)
And what exactly is the Real Estate Roundtable? From their own website

The Real Estate Roundtable plays a leadership role in the national policy process on behalf of the real estate community. We achieve our mission by educating policymakers and the public about real estate and its significance to the economy and by communicating real estate's views on a range of vital national policy issues.

The Real Estate Roundtable cannot contribute financially to the lawmakers and political candidates who shape federal public policy. That’s why it established REALPAC — The Real Estate Roundtable Political Action Committee.

REALPAC helps elect candidates who give thoughtful consideration to — and are supportive of — public polices advocated by the real estate community in the national public interest. REALPAC is funded by voluntary contributions from individual members of The Real Estate Roundtable.

I for one appreciate the 'education' you are giving policymakers. I also eagerly perused whose compaigns you contributed the most to in 2008 - lo and behold Rahm Emanual and Nancy Pelosi were your top 2. Well played PAC! Covers the White House and Congressional Leadership in 2 fell swoops.

As for myself, I am like my own 1 man lobbyist group - "educating" the public on how you are "educating" our policymakers. So you see, Real Estate Roundtable - we're really one and the same. Except I can't make Timmy Geithner jump like my personal waterboy. While you can... kudos.
  • Treasury Department spokeswoman Nayyera Haq declined to comment.
As I said a few days ago, I have about 10 stories of this ilk; picking and choosing which to post is in many ways moot. They all have the same plot. You pay, you play. With our money. Peasants are useful like that.

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