The Path to Liquidity:

A Five Point Plan

Clifton E. (Chip) Rodgers, Jr.

Senior Vice President
The Real Estate Roundtable
Washington, DC
www.rer.org
 Credit Market Tsunami
• $6 trillion U.S. property market faces worst
liquidity challenge since Great Depression
• Of $3 trillion in CRE debt, estimated $200-
$500 billion CRE loans mature in 2009
• Maturities increase next few years
• Focus to restore market confidence
• Strategies to stop the falling knife
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 Five Point Plan
1. Expand the Term Asset-Backed
Securities Loan Facility (TALF) program
to include CMBS
2. Encourage foreign investment in U.S. real
estate – revise Foreign Investment in
Real Property Tax Act (FIRPTA)
3. Ensure accounting rules do not have a
pro-cyclical impact on credit capacity
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 Five Point Plan
1. Encourage banks to extend performing
loans, temporarily amend real estate
mortgage investment conduit (REMIC)
rules; suspend "cancellation of
indebtedness income” tax policy
2. Reject new anti-real estate investment
taxes (e.g., capital gains, like kind
exchanges and proposed tax hike on
partnership “carried interest”)
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 Good News
• TALF lending on ABS has grown to $28.5 billion
• New Issue CMBS eligible for TALF – June
• Legacy CMBS eligible for TALF – July
• REITs have raised $15.2 bn equity YTD and
$2.6 bn unsecured debt
• Banks have raised over $100 bn in capital
• Since February enactment of Cancellation of
Indebtedness (COD) provision, over $1 trillion in
debt restructuring and deleveraging
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 Current Challenges
• FAS 166, 167 amend FAS 140/FIN 46(R) impact
on treatment of off-balance sheet vehicles
• Pending “consolidation” rules hurt efforts to
remove securitized loans from balance sheets
• FASB’s 157 reforms failed to establish effective
impairment standard to address legacy assets
• Legacy Loans Program stalls – key part of P-PIP
• S&P downgrade report creates uncertainty about
Legacy CMBS for TALF

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 Proposed Securitization Regulatory Reforms
• Tougher supervision of securitized markets
• New reporting standards for ABS issuers
• Credit rating agencies will be required to
address conflicts of interest
• Requires originator and others to retain
interest in long-term performance of ABS
• Securitization sponsors required to stand
behind products sold to investors
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 Policymaker Discussions Continue
• Many concepts: no one solution
– GSE for commercial real estate
– Ginnie Mae-like guarantee program
– Financial institutions consortium
– Adaptation of the LLP - PPIF “new” loans
– Other ideas

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The Real Estate Roundtable