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October 21, 2013
Message from the President
 Last week, Congress passed, and President Obama signed, legislation that ended the federal government’s shutdown and extended its borrowing authority.
The legislation funds the federal government through next Jan. 15 and suspends the debt ceiling through Feb. 7. It also calls for a House-Senate budget conference committee to reconcile the separate fiscal year 2014 budgets passed last spring by the House and Senate, setting top-line spending and tax revenue levels for the remainder of 2014 and establishing the basis for a compromise budget. The committee’s report is to be issued by Dec. 13.
Their job will be a tall order since Republicans and Democrats remain far apart on the core issues of taxing and spending. House Republicans want no new taxes and support a funding level specified by the Budget Control Act’s sequester provisions. Senate Democrats want to replace the sequester with a plan that includes spending cuts and tax revenue increases.
A majority of the House conferees and the Senate conferees would have to agree to the budget framework, and previous similar bipartisan budget efforts – such as the Super Committee created after the 2011 debt limit showdown – have not been successful.
If no compromise is produced, the government could again shut down on Jan. 16. Given the negative public reaction to the recent closure, though, a short-term continuing resolution funding the government may be more likely.
The Feb. 7 debt ceiling deadline also is something of a moving target. Last week’s legislation did not limit the Treasury Department’s ability to implement “extraordinary measures,” which could extend the debt ceiling timeline.
NAREIT has actively monitored the budget debate. Earlier this month, we and other organizations partnered with the U.S. Chamber of Commerce in sending a letter to Members of Congress urging them to resolve the impasse and avoid a default on U.S. debt. We will continue to monitor this fluid situation while we also represent our industry’s positions on a broad range of issues on Capitol Hill – from tax reform to advocacy for the U.S. REIT Act.
Steven A. Wechsler
President and CEO
NAREIT Meets with FASB on Leases Proposal
 NAREIT representatives met on Oct. 7 with certain members and staff of the Financial Accounting Standards Board (FASB) to discuss NAREIT’s views on the joint FASB/International Accounting Standards Board (IASB) Leases proposal.
Those representing NAREIT included: Christopher Drula, vice president for financial standards, NAREIT; Tony Edwards, executive vice president and general counsel, NAREIT; David Henry, vice chairman, president and CEO, Kimco Realty Corp. (NYSE: KIM); Mathew Kirschner, vice president and investment analyst, Cohen & Steers Capital Management; Steven Sakwa, senior managing director, ISI Group; David Smetana, managing director, Morgan Stanley; Steven Wechsler, president and CEO, NAREIT; and George Yungmann, senior vice president for financial standards, NAREIT.
NAREIT representatives reviewed NAREIT’s significant comments on the proposed accounting for leases and suggested certain modifications, including:
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Land-only leases should be accounted for as “operating leases;”
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Tenant reimbursables represent lease income and should be reported as such; and
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FASB should consider expanding the definition of property.
Board members were especially interested in the views of our institutional investors and analysts and the views of Kimco’s David Henry as to how the proposed change in accounting for leases might impact real estate lease transactions.
The FASB staff noted that they were in the process of summarizing the over 600 comment letters on the proposed lease accounting and that they would be discussing these comments with the FASB and IASB in November. NAREIT believes that the comment letters consistently raise a number of significant issues with the proposal.
The boards will re-deliberate the feedback received on the proposal during 2014. While the FASB has not established an effective date for the proposal, NAREIT does not believe that the new standard would be effective before 2017.
(Contact: George Yungmann at gyungmann@nareit.com)
NAREIT Participates in Institutional Investor Forum
 In early October, NAREIT’s Investor Outreach team participated in the third-annual Academic Forum of the Defined Contribution Institutional Investment Association (DCIIA), a recently formed organization seeking to incorporate best practices into the $5.4 trillion defined contribution (DC) retirement market. Since it was established in January 2010, DCIIA has steadily built an impressive membership roster, including a vast majority of the most visible thought leaders in the DC industry. As evidence of this, approximately 130 individuals attended the first academic forum in 2011, about 180 attended last year’s event and this year’s event drew more than 300 attendees.
Attendees of the forum, which was held at Intel’s headquarters in Santa Clara, Calif., heard presentations by individuals from the academic community and an industry association who have conducted research on issues relating to retirement and investments. Among the speakers were nationally known retirement experts including: Alicia Munnell, director of the Center for Retirement Research at Boston College; Robert Willis, professor of economics, University of Michigan; Olivia Mitchell, executive director of the Pension Research Council, University of Pennsylvania; Dallas Salisbury, president of the Employee Benefits Research Institute (EBRI); John Shoven, professor of economics, Stanford University; James Choi, associate professor of finance, Yale University; and Michael Drew, professor of finance, Griffith Business School in Queensland, Australia. Also on the program were individuals representing some of the largest defined contribution plans in the U.S., including those maintained by Bechtel Corporation, CalSTRS, Hewlett-Packard, Intel, Kaiser Permanente, Microsoft, Nestle, and the San Francisco Employees’ Retirement System.
In addition to NAREIT, founding members of DCIIA include some of the largest investment consultants, such as Callan Associates, Hewitt EnnisKnupp, Ibbotson Associates, Mercer, Morningstar and TowersWatson. DCIIA members also include major investment managers, such as AllianceBernstein, BlackRock, Fidelity Investments, Goldman Sachs, J.P. Morgan, PIMCO, Russell Investments, T. Rowe Price, UBS, Vanguard, Wellington Management and Wells Fargo. NAREIT maintains an ongoing dialogue with these organizations through its direct meetings program. Plan sponsors of the largest and most influential DC plans also participate.
As a board member, NAREIT serves on the organization's public policy and investment policy and design committees. Advocating for the automation of key aspects of DC plan participation is of particular importance to NAREIT as well as promoting full opportunity for the inclusion of all major asset classes and investment product formats within DC plans.
(Contact: Kurt Walten at kwalten@nareit.com)
NAREIT Joins Coalition in Commenting to FHFA on GSEs
 NAREIT joined a coalition of industry groups in writing to the Federal Housing Finance Agency (FHFA) on Oct. 8 regarding the multifamily businesses of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac and the development of the 2014 Multifamily Scorecard.
Efforts to reduce the GSEs’ multifamily businesses beyond the 10 percent reduction applicable in 2013 are “unnecessary at this time,” according to the groups. The organizations cautioned that further efforts could potentially cause harm to the rental housing market at a time when demand for rental housing is growing.
“For the financing and support of quality and affordable multifamily housing, Fannie Mae and Freddie Mac are effectively mandated to provide liquidity and stability in all market cycles, as well as promote prudent standards in the multifamily finance market,” the organizations wrote. “Their ability to address the financing needs of a range of multifamily property types has been essential, including their role in providing support to secondary, tertiary and affordable rental markets.”
(Contact: Victoria Rostow at vrostow@nareit.com)
Outreach to State Treasurers
 In conjunction with efforts to increase the level of investment in REITs by public sector pension plans, NAREIT has expanded its outreach program to include membership and participation in a number of national and state associations representing the interests of public sector pension and retirement plans. As part of this initiative, NAREIT has been an active member of the National Association of State Treasurers (NAST) since 2010.
Last week, Meredith Despins, NAREIT vice president of investment affairs and investor education, participated in NAST’s Annual Conference in Asheville, N.C. This conference provides an opportunity to engage directly with the treasurers and their investment staffs; an important audience for NAREIT’s outreach initiatives because more than 30 state treasurers serve as trustees and board members of the public pension systems within their states. In many cases, the treasurer serves on multiple pension boards not only at the state level but also the county and municipal levels, representing the interests of a broad range of active and retired pension plan members.
The total pension assets of the 25 largest state funds are $2.3 trillion, representing nearly 40 percent of the entire $5.8 trillion defined benefit market. Further, data from the Standard & Poor's Money Market Directory indicates that 23 of these 25 largest public pension plan sponsors in the U.S. invest in REITs. NAST’s members include all state treasurers or state finance officials with comparable responsibilities from the United States, its commonwealths and territories, and the District of Columbia.
(Contact: Meredith Despins at mdespins@nareit.com)
Register Today for REITWorld
There are now three short weeks until the REIT industry will gather in San Francisco. REITWorld 2013®: NAREIT's Annual Convention for All Things REIT® , Nov. 13-15, provides a unique opportunity where REIT and real estate executives from around the world convene with experienced investors, industry leaders, and academic experts to share their specialized knowledge and experience.
A series of general sessions provides attendees with valuable information, current trends, deeper understanding of specific sectors and insight into the evolution and growth of REITs over the years.
(Contact: Afia Nyarko at anyarko@nareit.com)
ISI Group Earns Top Analyst Award
   For the fourth year in a row, Steve Sakwa and his team at ISI Group top Institutional Investor’s 2013 All-America Research Team in the REIT sector, followed by Citigroup Inc.’s Michael Bilerman in second place and Jeffrey Spector at Bank of America Merrill Lynch in the number three slot.
ISI senior managing director Sakwa has been analyzing REITs since 1993, and his team currently tracks 35 companies. Sakwa told Institutional Investor that while REIT fundamentals still show improvement, with healthy pricing power in several areas, the increase in long-term interest rates is an issue for the sector.
Bilerman, head of the Real Estate and Lodging Research Team at Citigroup, also took the number two position for the fourth consecutive year. His team covers 76 companies.
Bank of America Merrill Lynch’s Spector, whose team gained a top three ranking for the first time, described the news as “great recognition for our team approach and the depth of experience we bring to our research.” Spector’s eight-member team covers 80 REITs spanning most of the core sectors, with the exception of lodging and mortgage.
The All-America Research Team is compiled by sending questionnaires to the directors of research and the chief investment officers of major money management firms. Institutional investors on client lists submitted by Wall Street research directors were also contacted, while questionnaires were sent to analysts and portfolio managers at many top institutions, according to Institutional Investor.
(Contact: Matt Bechard at mbechard@nareit.com)
NAREIT Welcomes New Member
 NAREIT is pleased to welcome Ellington Residential Mortgage REIT (NYSE: EARN) as its newest Corporate Member. Ellington Residential Mortgage REIT is an externally advised residential mortgage REIT the specializes in acquiring, investing in and managing residential mortgage and real estate-related assets, with a primary focus on residential mortgage-backed securities for which the principal and interest payments are guaranteed by a U.S. Government agency or a GSE. Laurence Penn is president and CEO of the Old Greenwich, Conn.-based company.
(Contact: Bonnie Gottlieb at bgottlieb@nareit.com)
REITWise 2014 Planning Underway
 Next year’s REITWise: NAREIT's Law, Accounting & Finance Conference® will be held in Boca Raton, Fla., from April 2-4. NAREIT thanks the program directors for their efforts in helping to put together this important educational meeting: Brad A. Molotsky, executive vice president and general counsel, Brandywine Realty Trust (NYSE: BDN); Andrew D. Richard, managing director - real estate group, Credit Suisse; Stephen E. Sterrett, executive vice president and CFO, Simon Property Group (NYSE: SPG); and Shari L. Thakady, director - tax, Ramco-Gershenson Properties Trust (NYSE: RPT).
Please send any suggested topics or areas of interest that you would like covered at the conference to Dominique Wilburn at dwilburn@nareit.com no later than close of business on Thursday, Oct. 24.
(Contact: Tony Edwards at tedwards@nareit.com)
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