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IREM and CCIM Take Commercial Real Estate Issues to Capitol Hill

263 Meetings with Legislators from 38 States Focus on Financing Problems and Energy Efficient Building Issues

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(Chicago, April 28, 2011) Some 347 members of the Institute of Real Estate Management (IREM) and the CCIM Institute recently visited Capitol Hill to raise awareness of key issues affecting the commercial real estate industry. IREM and CCIM Members representing 38 states and the District of Columbia held 263 meetings with their respective senators, representatives and their staffs to voice the industry’s concerns about:

  • Problems that continue to negatively impact commercial real estate financing, including bank liquidity, an equity gap, and a contraction in small business lending
  • Issues related to energy efficient buildings.

FINANCING PROBLEMS
Bank Liquidity Issue- Plummeting commercial real estate values have forced many regional and community banks, a significant source for multifamily and commercial lending, to take steep write-downs, resulting in bank failures and a reduction in credit.

Equity Gap - Over half of all commercial mortgages are currently “underwater” and many lenders are demanding that borrowers come up with additional capital to cover this gap. The problem is exacerbated when loans need to be refinanced.

Small Business Lending - Credit to the small business community has declined, which is leading to a decreased workforce and business failures. Elevated commercial vacancies also have resulted, forcing rent prices to fall. These scenarios have intensified pressure on community banks, resulting in banks’ reducing credit and further perpetuating a negative economic cycle.

IREM and CCIM Position - IREM and CCIM support protecting and enhancing a healthy flow of capital to multifamily and commercial real estate. Recent regulations have become too extreme, which hinders commercial real estate recovery and limits further economic growth.

Action urged in the regulatory arena: IREM and CCIM support two initiatives that would spur more liquidity in commercial mortgages:

  • Provide Term Extensions for Performing Loans - IREM and CCIM ask Congress to urge the Federal Reserve and Treasury to limit restrictions and provide greater flexibility to holders of commercial debt. A simple term extension for performing loans could prevent many properties from going into default or foreclosure.
  • Reject Proposed New Lease Accounting Rules - The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) have proposed new accounting rules that would force many companies to capitalize commercial leases onto their balance sheets. Larger balance sheets would force lessees to shorten lease terms to minimize costs. And since lessors raise financing by using the leases and the value of the property as collateral, the accounts they can borrow in the future could be reduced if lease terms are shortened.

IREM and CCIM are concerned that the new lease accounting proposal will be detrimental to our nation’s economy by reducing the overall borrowing capacity of many commercial real estate lessees and lessors. Also, IREM and CCIM are opposed to lease accounting standard changes that would treat the income producing real estate business as a financing business on a company balance sheet. Such a step would not accurately depict the unique characteristics of the investment real estate sector and, in turn, discounts the usefulness of the industry’s financial statements.

Action urged in the legislative arena:  IREM and CCIM support two initiatives that would spur more liquidity in commercial mortgage markets:

  • Develop Covered Bond Market - Covered bonds are securities created from loans, including mortgage loans. Long an important vehicle to strengthen financial markets in other countries, covered bonds are similar to mortgage-based securities (MBS), but with one major difference. The loans backing the bonds remain on the balance sheets of the issuing banks. IREM urges Congress to pass H.R. 940, the “United States Covered Bond Act of 2011,” that will allow for the development of a covered bond market in the United States.
  • Increase Credit Union Lending Cap -- During previous economic crises consumers and businesses have relied on credit unions to fill the gaps where banks could not serve them. Today, however, credit unions are hampered by a business lending cap of 12.25% of total assets. On March 8, 2011, S. 509 - the “Small Business Lending Enhancement Act of 2011” - was introduced proposing to increase the credit union lending cap to 27.5% of a credit union’s total assets. IREM and CCIM urge Congress to support S. 509 and promote its purpose, which is to expand small business opportunities by increasing the loan threshold amount for credit unions.

ENERGY EFFICIENT BUILDING ISSUES
While the debate over climate change continues, Congress is expected to consider legislation to promote energy efficiency and lessen the United States’ dependence on foreign oil. Such legislation could affect the cost of constructing new and retrofitting existing buildings while also impacting the cost of operating multifamily and commercial structures.

IREM and CCIM Position - IREM and CCIM support the development of voluntary standards for reducing greenhouse gas emissions. They support the use of sustainable materials in the construction of buildings, and programs that reduce the “carbon footprint” of real estate assets. However, requirements to retrofit existing buildings must take into consideration the needs of these buildings and costs associated with such changes. Moreover, additional research is necessary to determine to what level greenhouse gases are affecting the environment versus natural climactic changes humans cannot control.

IREM and CCIM support energy conservation efforts by encouraging the proven energy-efficient technologies to eliminate waste and cut energy costs and positive incentives for energy conservation activities. Specifically, the organizations strongly support energy tax credits and voluntary programs like Energy Star and LEED.

Action Urged: Congress should enact tax and other incentive programs to encourage the commercial real estate industry’s investment in energy efficiency and “green” building. At the same time, it should oppose mandates that artificially raise the cost of construction and operation of commercial real estate properties.

ABOUT THE CCIM INSTITUTE
Since 1969, the Chicago-based CCIM Institute has conferred the Certified Commercial Investment Member (CCIM) designation to commercial real estate and allied professionals through an extensive curriculum of 200 classroom hours and professional experiential requirements.  The CCIM curriculum was redesigned in 2010 to reflect changing student demographics and real estate brokerage services, growth in international markets, new technologies, and new delivery models.  The core curriculum addresses financial analysis, market analysis, user decision analysis, investment analysis, and negotiation—the cornerstones of commercial investment real estate.

An affiliate of the National Association of Realtors, the CCIM Institute also offers powerful technology tools such as the Site To Do Business, an online site analysis and demographics resource, and CCIMREDEX, a single-entry listing and data exchange.

Currently, there are more than 9,000 CCIMs in 1,000 markets in the U.S. and 31 additional countries, with another 6,000 practitioners pursuing the designation, making the institute the governing body of one of the largest commercial real estate networks in the world.  Visit www.ccim.com, www.stdbonline.com, and www.ccimredex.com for more information.

ABOUT THE INSTITUTE OF REAL ESTATE MANAGEMENT
The Institute of Real Estate Management (IREM) is an international community of real estate managers across all property types dedicated to ethical business practices and maximizing the value of investment real estate. An affiliate of the National Association of Realtors, IREM has been a trusted source for knowledge, advocacy and networking for the real estate management community for more than 80 years.

IREM is the only professional real estate management association serving both the multi-family and commercial real estate sectors and has 80 U.S. chapters, 14 international chapters, and several other partnerships around the globe. Worldwide membership includes nearly 18,000 individual members and over 535 corporate members.

IREM promotes ethical real estate management practices through its credentialed membership programs, including the Certified Property Manager (CPM) designation, the Accredited Residential Manager (ARM) certification, the Accredited Commercial Manager (ACoM) certification, and the Accredited Management Organization (AMO) accreditation. These esteemed credentials certify competence and professionalism for those engaged in real estate management. IREM also offers CPM Candidate, Associate, Student, and Academic memberships. All members are bound by the strictly enforced IREM Code of Professional Ethics.

Collectively, CPM Members in the United States manage nearly $2 trillion in real estate assets, including 11.4 million residential units and 10.4 billion net square feet of commercial space. To learn more about the IREM and its chapter network, call (800) 837-0706, ext. 4650 (outside the U.S. call (312) 329-6000) or visit www.irem.org.