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Image courtesy of the Architect of the Capitol<\/p><\/div>\n
Though the presidential campaign is the biggest game in Washington, D.C., these days, industry organizations have much more on their radar than the next White House resident. In the first of two parts, CPE looks at the impact of recent legislation and discusses the priorities of three leading associations.<\/p>\n
As in most election years, 2016 offers only modest expectations that Congress will make major headway on key industry concerns.\u00a0The expected lull follows a year that yielded encouraging, if mixed, results on Capitol Hill. In January 2015, the latest reauthorization of the Terrorism Risk Insurance\u00a0Program\u00a0Act provided a measure of confidence to investors, sponsors and insurance carriers themselves. For 2016, industry insiders are closely watching the ramifications of a welcome, if surprising, flurry of year-end activity.<\/p>\n
New PATH<\/strong><\/h1>\nPerhaps the most significant recent piece of legislation for the industry was contained in the Protecting Americans from Tax Hikes Act of 2015. A crucial element is an overhaul of the Foreign Investment in Real Property Tax Act of 1980. “By breaking down outdated tax barriers to inbound investment, the FIRPTA relief will help mobilize private capital for real estate and infrastructure projects, such as roads and bridges, while driving growth in construction and related jobs,” said Real Estate Roundtable president & CEO Jeffrey DeBoer in a statement following the bill’s passage.<\/p>\n
![\"From](\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2016\/02\/Roundtable2_smaller.jpg\")
<\/a>From left: The Real Estate Roundtable’s recent summit featured a panel discussion on FIRPTA. From left, W. Edward Walter, Host Hotels & Resorts Inc.; Steve Hason, APG Asset Management US Inc,; Thomas Arnold, Abu Dhabi Investment Authority; Thomas Flexner, Citigroup.<\/p><\/div>\n
Reforming FIRPTA had been a longtime industry priority because of its restrictions on capital flows to investment in U.S. assets. In a plus for institutional investors, the revised law also exempts foreign pension funds from tax liability.<\/p>\n
Another element of the PATH Act opens a new chapter for capital investment. The depreciation schedule for tenant improvements was a long-time sore point for owners; a 39-year timeline failed to account for lease terms that are typically far shorter. But last year, the industry\u2019s long campaign for reform finally paid off when Congress established a 15-year threshold. \u201cCommercial building owners now have the economic certainty necessary to invest capital confidently, knowing they will be able to depreciate tenant improvements over 15 years rather than 39,\u201d BOMA International pointed out n a statement issued at the time of the PATH Act\u2019s passage.<\/p>\n
EB-5 Watch<\/h1>\n
Investors, developers and other industry stakeholders are also closely watching the impact of the federal EB-5 program, which will remain in effect through Sept. 30 following its temporary extension by Congress in December.\u00a0 Administered by the Department of Homeland Security\u2019s U.S. Citizenship and Immigration Services, the program is widely credited with giving foreign nationals a channel to provide real estate investment capital.<\/p>\n
\u201cIt\u2019s been used to generate capital for a wide range of projects, from office to mixed-use to affordable multifamily housing,\u201d noted Stockton Williams, Executive Director of ULI\u2019s\u00a0Terwilliger Center\u00a0for Housing. Participants invest $500,000 or more in locations where the unemployment rate is 150 percent higher than the national average. The incentive for sending job-creating capital to those struggling communities: Fast-track consideration for permanent legal resident status.<\/p>\n
In contrast to the reforms it approved through the PATH Act, Congress granted EB-5 its temporary extension without making changes demanded by critics. The program\u2019s future remains uncertain in light of doubts raised in Congress by Democrats and Republicans alike. Too often, those skeptics contend, capital raised through the EB-5 program benefits affluent areas rather than the struggling communities it was meant to help.<\/p>\n
On a variety of other fronts, Congress all but certain to remain deadlocked. Nevertheless, major associations continue to press for action on a variety of topics. Leaders of these organization told CPE how last year\u2019s legislative successes are likely to shape the industry, and explained what tops their lists for 2016.<\/p>\n
The Real Estate Roundtable<\/em><\/h1>\nIn April, the Real Estate Roundtable welcomed the approval of the Tenant Star program. Six months later, it greeted the approval of the budget and the extension of the federal debt ceiling with relief. \u201cA default of the government would have had tremendous negative implications for the economy,\u201d DeBoer told CPE.<\/p>\n
<\/a>From left: The Real Estate Roundtable’s recent summit featured a panel discussion on FIRPTA. From left, W. Edward Walter, Host Hotels & Resorts Inc.; Steve Hason, APG Asset Management US Inc,; Thomas Arnold, Abu Dhabi Investment Authority; Thomas Flexner, Citigroup.<\/p><\/div>\n
Reforming FIRPTA had been a longtime industry priority because of its restrictions on capital flows to investment in U.S. assets. In a plus for institutional investors, the revised law also exempts foreign pension funds from tax liability.<\/p>\n
Another element of the PATH Act opens a new chapter for capital investment. The depreciation schedule for tenant improvements was a long-time sore point for owners; a 39-year timeline failed to account for lease terms that are typically far shorter. But last year, the industry\u2019s long campaign for reform finally paid off when Congress established a 15-year threshold. \u201cCommercial building owners now have the economic certainty necessary to invest capital confidently, knowing they will be able to depreciate tenant improvements over 15 years rather than 39,\u201d BOMA International pointed out n a statement issued at the time of the PATH Act\u2019s passage.<\/p>\n
EB-5 Watch<\/h1>\n
Investors, developers and other industry stakeholders are also closely watching the impact of the federal EB-5 program, which will remain in effect through Sept. 30 following its temporary extension by Congress in December.\u00a0 Administered by the Department of Homeland Security\u2019s U.S. Citizenship and Immigration Services, the program is widely credited with giving foreign nationals a channel to provide real estate investment capital.<\/p>\n
\u201cIt\u2019s been used to generate capital for a wide range of projects, from office to mixed-use to affordable multifamily housing,\u201d noted Stockton Williams, Executive Director of ULI\u2019s\u00a0Terwilliger Center\u00a0for Housing. Participants invest $500,000 or more in locations where the unemployment rate is 150 percent higher than the national average. The incentive for sending job-creating capital to those struggling communities: Fast-track consideration for permanent legal resident status.<\/p>\n
In contrast to the reforms it approved through the PATH Act, Congress granted EB-5 its temporary extension without making changes demanded by critics. The program\u2019s future remains uncertain in light of doubts raised in Congress by Democrats and Republicans alike. Too often, those skeptics contend, capital raised through the EB-5 program benefits affluent areas rather than the struggling communities it was meant to help.<\/p>\n
On a variety of other fronts, Congress all but certain to remain deadlocked. Nevertheless, major associations continue to press for action on a variety of topics. Leaders of these organization told CPE how last year\u2019s legislative successes are likely to shape the industry, and explained what tops their lists for 2016.<\/p>\n