My Plea To Congress

My Plea To Congress
By: Nicholas A. Dunlap, CPM

Recently, I was selected by the Institute of Real Estate Management to join them in Washington, DC to lobby our state and district politicians on behalf of the interests of Commercial Real Estate owners locally and nationwide. Our interests include but are not limited to: preserving the flow of capital into the Commercial Real Estate market, maintaining the current Capital Gains taxation rate of 15%, increasing the Savings and Loan lending caps from approximately 12% to 25%, introducing a sort of Commercial Mortgage insurance to protect the equity gap (difference between market value of a property and the value of the current loan) on performing loans only as well as accelerating depreciation from 39 years to 15 years on leasehold improvements and lastly, extending the terms of currently performing loans so as not to require a balloon payment or “fire” sale type of action.

This event marked my first trip to Washington, DC and clearly illustrated to me the need for Commercial Real Estate professionals to make known the ongoing issues we are facing in our industry. Of the 7 politicians we visited, it was somewhat disheartening to see that a mere 2 of them were aware of the issues. Apparently, the other 5 felt that the issues were not as severe as the residential market and that the market was actually showing signs of improvement. On the contrary, the 2 who were aware of the issues still saw the foreboding shadows ahead. I would like to commend Ken Calvert, a Republican from Corona, California, who was extremely aware of the issues and has been extremely proactive in supporting our causes. For your reference, I have included below a copy of the “canned” speech I was delivering to our Representatives.

“In today’s economic climate, we are seeing performing loans come due on properties where the borrowers have no means of paying the full balance due. Contrary to non-performing loans, these loans are paid on time and the borrowers are not behind in payments. By extending the life of the loan, banks can avoid having to foreclose on these properties, as well as the costly, lengthy, legal battle should the buyer be forced into a Chapter 11 bankruptcy merely to obtain a loan extension.

Further constricting this process is the lack of available credit to re-finance the debt on the property. WIth over 6% of all Commercial Real Estate loans underwater, where the loan amount exceeds the market value of the property, it is prudent for our lending institutions to extend the length of time that borrowers have to pay their loans in full, rather than require a re-finance.

Understand that these performing loans are loans that are supported by the property, where the income generated by the property is sufficient to pay the loan. I ask you, on behalf of the Institute of Real Estate Management, to urge the Federal Reserve and Treasury to provide greater guidance to the holders of Commercial debt. A simple term extension for performing loans could prevent many properties from going into default or foreclosure.

There is no cost to tax payers and simple guidance from our Reserve and Treasury can help the many borrowers who are teetering on the brink of bankruptcy.”