PROGRAM SUMMARY

February Program Summary:
Repositioning in the New Reality:
How bailouts will affect DC's commercial real estate industry

Guest Speaker
Jeffrey DeBoer
Founding President and CEO, Real Estate Roundtable, and author, The Path to Liquidity:  A Five Point Plan

Mr. DeBoer treated us to his explanation of Washington's importance to the economy and real estate in general. Self-proclaimed “truthteller”, “radio dial”, and “myth knocker”, Mr. DeBoer illustrated that the credit market is really the main problem.  Until the credit market is stable again, all the stimulus packages won't matter.  With supporting statistics, he showed that $6 trillion in US office, hotels and retail are supported by 50/50 debt/equity, a lot of which is maturing.  In 2008-9, $300-500B of commercial mortgages mature.  By 2012, that number is $1.8T.  So what happens?  Values drop, and we're in big, big trouble.

Mr. DeBoer has a plan, though, which has five components:

• Implement expansion of Term Asset-Backed Securities Loan Facility (TALF) to include commercial real estate debt
• Encourage foreign investment is US real estate and update the corresponding tax laws
• Modify accounting rules so that financial institutions are required to mark their assets to market
• Encourage debt modifications and tax policies that are “hamstringing” owners
• Reject new anti-real estate investment taxes (e.g., capital gains and others)

In response to questions, Mr. DeBoer said TALF provides direct support to credit markets and will be very powerful.  He was encouraged by Timothy Geithner's acknowledgement that commercial real estate is a big coming problem if it is not dealt with.  Recent government actions are important to restore the credit market so that “people can do business.”  As far as the people are concerned, “they are fixated on the bailout, when they should be focused on recovery.”

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