ICSC Supports Legislation to Jumpstart Commercial Real Estate

Asks Congress to Support the Community Recovery and Enhancement Act

WASHINGTON--(BUSINESS WIRE)--U.S. Representatives Devin Nunes (R-CA) and Shelley Berkley (D-NV) have introduced (H.R. 1147) the Community Recovery and Enhancement (CRE) Act of 2011, which provides short term tax incentives to jumpstart reinvestment in commercial real estate, thereby stabilizing community banks as well as preventing additional foreclosures and job losses.

“ICSC appreciates the recognition by Congress that this challenge is still very critical to the commercial real estate sector”

With lenders finding it increasingly difficult to refinance existing commercial loans and borrowers faced with paying off loans that are greater than their current property values, the CRE Act offers tax incentives that would attract an infusion of new equity into commercial real estate. The central provision of the CRE Act is that at least 80 percent of the newly invested capital must be used to reduce the outstanding balance of the commercial loan, with the remainder going toward capital improvements, such as energy efficiency enhancements, and leasehold improvements to attract new tenants. Additionally, the new investment would qualify for a 50 percent bonus depreciation and investors would be able to deduct losses without regard to passive loss limitations. Together these incentives would provide an opportunity to lower the loan-to-value ratios of existing properties as well as improve debt coverage ratios, giving lenders the ability to responsibly refinance debt and rebalance capital reserve levels, thus freeing up additional lending capacity for the overall economy.

In February 2011, the Congressional Oversight Panel held a hearing on “Commercial Real Estate Losses and the Risk to Financial Stability.” Foresight Analytics testified that “the rising volume of maturing mortgages has put pressure on real estate debt markets and...will continue to do so for several years. Annual maturities will be $350 billion a year between 2011 and 2013 and as much as half of all maturing mortgages are underwater, and two thirds of those are underwater by 20% or more. The greatest concentration is among banks with assets of between $1 billion and $10 billion.”

“ICSC appreciates the recognition by Congress that this challenge is still very critical to the commercial real estate sector,” said Betsy Laird, ICSC’s senior vice president of global public policy. “We support this temporary and targeted legislation as it incorporates market factors and economic incentives, rather than direct government involvement. To date, small and medium size commercial real estate businesses have been left out of government programs designed to stimulate the economy. The CRE Act offers owners of commercial real estate a helping hand by moderating their loan structures, and in turn, frees up additional capital for the economy at large,” Laird added.

Founded in 1957, ICSC is the premier global trade association of the shopping center industry. Its more than 55,000 members in over 90 countries include shopping center owners, developers, managers, marketing specialists, investors, retailers and brokers, as well as academics and public officials. As the global industry trade association, ICSC links with more than 25 national and regional shopping center councils throughout the world. For more information, visit www.icsc.org.