WASHINGTON, DC-There is good news and bad news for the CRE industry, at least those who would dearly love to see the status quo of certain government programs and issues maintained. The US Treasury Department reported its largest monthly surplus -- $116 billion-- since before the start of the financial crisis last week. That, actually, is good news for everyone, CRE industry players or not. The good news for the industry specifically, is that one of the reasons for surprise boost were the payments from Fannie Mae and Freddie Mac, which are firing on all cylinders these days.
The bad news? Another reason behind that boost was the sequestration.
First some numbers: Treasury's Financial Management Service reported that the federal government took in $116.5 billion more than it spent in June. In June 2012, the government posted a $59.7 billion deficit.
One reason for the surplus was the combined $66 billion Fannie Mae and Freddie Mac delivered for June, due to stellar earnings in the first quarter.
At the same time, spending for the month dropped to $170 billion, the lowest level in ten years. Cuts were seen across the board – as the sequestration intended – with fewer outlays reported for student loans, Medicare and Medicaid and defense.
The GSEs' contribution to the surplus is good news, at least for those in the CRE community that see their role as integral to multifamily finance, because it will make it that much harder for Congress to scale back or eliminate Washington's support for them.
The contribution of sequestration to surplus is not necessarily good news to property owners that lease to the federal government, though—especially property owners looking for an exit from their investments any time soon.
Kurt Stout, executive vice president of government solutions for Colliers International, recently explained this dilemma for GlobeSt.TV.
"The problem with sequestration and the idea we need to find grand bargain is that it has put agencies in triage mode," he says. The agencies can't make long-term decisions or bets on CRE, which is creating a lot of short term leasing. That is a problem for investors, Stout continues. "There is no way to exit properties is there is no long-term lease in place."
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
