With 5,000 members across the country, the National Association of Industrial and Office Properties (NAIOP) represents ownership interests at home and on the Hill.
When Ronnie Duncan moved from Pittsburgh to Boca Raton, Fla., 10 years ago, he needed a way to get involved in the local real estate community. So he went to see one of the region's premier real estate developers to seek advice. That developer, Terry W. Stiles, president of the Stiles Corp., Fort Lauderdale, Fla., made this suggestion: Join the National Association of Industrial and Office Properties (NAIOP).
"Thanks to Terry Stiles, I went to the next meeting of NAIOP and discovered that's where all the developers went to do business - it was their niche, their home," says Duncan, who is a principal and owner of Sevell & Duncan Realty Services, Boca Raton.
"I learned my way around the local Florida market by working with people at the local NAIOP chapter, Duncan says. "At the time I joined the chapter, I had no idea what the national organization of NAIOP had to offer."
Today, Ronnie Duncan is president of NAIOP's Florida chapter and serves as the national association's vice president of public affairs. In fact, he serves on the national executive committee with Terry Stiles, who holds the elected position of secretary.
Duncan's personal journey into NAIOP is not unusual. Many of the association's members have discovered the national organization through its local chapters. The association currently has 5,000 members in 51 chapters across the country and in Canada, representing ownership interests in office and industrial properties.
It is the combination of strength at both the local and national level that is key to the organization's effectiveness in the real estate industry, according to NAIOP's executive vice president, Thomas J. Bisacquino. And it is exactly this powerful network that will allow the organization to influence public policy at all levels of government in an era when Congress is pushing hard to give more, control back to both states and localities,
"NAIOP is well-positioned to lobby issues at the state house levels as well as future state issues that used to be Washington issues," notes Bisacquino, who says that the membership represents a powerful constituency because they are prominent members of their local business communities, people who are highly visible and politically active.
Bisacquino cites, for example, the turnout for the organization's most recent "Capitol Hill Day," an event arranged by NAIOP in January 1995 to provide an opportunity for its chapter leadership to lobby Washington on real estate's behalf.
"Our chapter leaders had more than 200 visits on Capitol Hill, and we hosted a luncheon that more than 70 representatives from both the House and Senate side of Congress attended," Bisacquino says. "They really wanted to hear from us.
One notable indication that NAIOP has gained an influential position on Capitol Hill is the fact that Congressman Clay Shaw (R-FL), chose the NAIOP meeting to announce his intention to introduce legislation reducing the recovery period for tenant improvements to 10 years, to coincide with the average term of a commercial lease. Under current law, the depreciable life for a commercial structure, including leasehold improvements, is 39 years.
Chapter leaders addressed several other priority issues with lawmakers that day, including a reduction in the capital gains tax, Superfund and Wetlands legislation and private property rights. And, according to Bisacquino, the lawmakers were eager to hear NAIOP's perspectives on these issues as well as other topics of vital importance to the commercial real estate industry.
"They really wanted our input," says Bisacquino, who adds, "We're now in the game of helping to shape legislation."
That NAIOP now wields such influence has not come by chance. In fact, the organization has been vigilantly beefing up its public affairs efforts since 1988. Bisacquino says that after the Budget Reconciliation Act of 1986, which made sweeping changes to tax laws affecting real estate and helped push the industry into one of its most severe downcycles in years, NAIOP decided it could no longer be reactive, but rather it had to be proactive in the legislative arena.
Where in the past the association put its heaviest emphasis on education and networking opportunities, Bisacquino says, the time had come to rethink its focus and increase its ability to represent its members in the legislative area. Part of that effort included bringing two lobbyists in-house full-time (before 1988, NAIOP used only outside consultants). But the association went even further, pumping resources into its public affairs efforts at the chapter level.
"We have, over die past five years, moved toward dramatically increasing our ability to lobby issues at all levels, and we've done that primarily by developing and enhancing our grass-roots organization," Bisacquino says.
NAIOP's president, Paul Novak, who also is president and CEO of Bedrock Partners, a private investment group based in Dallas that owns and invests in a variety of commercial real estate, calls this strategyprescient.
"One of the advantages that NAIOP has had and will continue to have in the future is that we're the only commercial real estate organization that has a strong chapter network," Novak says. "Probably the most important thing is that as Congress turned in 1994, it created a lot closer link between the people in Washington and the people at home, and the strength of our chapters and their ability to influence and be aware of what was going on in the regional areas has created an opportunity for them to have a much closer link with their representatives in Washington." Novak says he believes the effectiveness of the association is, in effect, doubled by the members' involvement at both a national and local level.
"There are many associations that are very effective on Capitol Hill; their strength is in Washington, but their grass-roots strength is either nonexistent or much weaker," he says. "While much of Capitol Hill is very interested and will remain interested in hearing from those groups that represent certain industries, it's very clear that they will turn a much greater ear to their constituents. At NAIOP, it's as if we've created an incredible tag team," Novak says.
At the same time it was focusing on internal reorganization and re-prioritizing its agenda, NAIOP also began enhancing its ties with other groups in the real estate industry. Bisacquino notes that it is important for NAIOP to work with its brethren associations on both the commercial and residential side so that "real estate can speak with one voice."
Since 1988, NAIOP has been a member of NREO, or National Real Estate Organizations, a coalition of 12 professional trade associations in Washington, D.C., that works collectively to influence public policy related to real estate. As the host association for NREO in 1995, NAIOP introduced a new program for the group's annual meeting in May, arranging for the coalition of real estate leaders to meet with a number of senatorial offices to advocate its legislative positions on private property rights and specific tax reforms.
According to NAIOP's vice president of public affairs, Ronnie Duncan, Congress was receptive to NREO's position on both capital gains reduction and, especially, on environmental issues.
"We now have a dialogue with the agencies [implementing environmental regulations] at a very high level," Duncan says. "We are in a position to make a difference."
Success after success
The NAIOP leadership is "cautiously optimistic" that the Republican-controlled Congress will look favorably on many issues that will benefit not only the real estate business specifically but the economy as a whole.
The tide changed dramatically for the industry with passage of the Omnibus Budget Reconciliation Act of 1993, which included several provisions beneficial to commercial real estate. Together with its coalition of industry partners, NAIOP lobbied extensively for the passage of a lower capital gains tax rate, the elimination of the passive loss restrictions in the tax code, deferral of taxes on debt forgiveness and flexibility in pension investment.
Although not successful on every measure, the real estate industry did claim victory on several fronts. Congress passed both passive loss reform measures as well as Section 108 relief. It also eliminated the "five or fewer rule" that had restricted pension fund investment in real state and extended the low-income housing tax credit on a permanent basis. Even though the cut in the capital gains tax was not included and the extension of the depreciation schedule to 39 years was added as a way to keep the gains "revenue neutral," the 1993 tax bill was a major turning point for the industry.
Now, NAIOP and its coalition partners are working fervently to keep that winning momentum going, and several actions by the House in 1995 indicated that their efforts are right on track.
For example, the House Transportation and Infrastructure Subcommittee passed the comprehensive Clean Water Act re-authorization proposal, considered a crowning achievement for NAIOP and others who had been working to ensure that the wetlands and stormwater reform provisions remained intact during the mark-up of the bill; it passed the House by a significant margin.
In an ongoing lobbying effort to get Senate action, NAIOP, along with other key real estate groups, commissioned a study refuting environmentalists' claims that the House-passed bill would destroy a majority of remaining wetlands.
In addition, NAIOP was recently appointed to the steering committee of the Republican Leadership's Superfund Reform Group, where it will represent commercial real estate's interests in reforming Superfund legislatioh. NAIOP strongly supports reforms that will expedite the cleanup process by providing more flexibility in voluntary cleanup programs and incentives for environmental remediation of certain properties with development potential. The association also supports changes to more clearly define the specific due diligence requirements that will be a prerequisite for qualification as an "innocent landowner" or "bona fide prospective purchaser."
NAIOP also has taken a lead in advocating real estate's position on the Endangered Species Act, which is expected to come up for re-authorization during the 104th Congress. According to NAIOP's 1995 Issues Papers, the organization believes that the current listing process threatens economic growth and is in great need of reform.
NAIOP advocates endangered species legislation based on focused scientific data, but with economic consequences taken into consideration. NAIOP supports efforts to conserve species more effectively while providing more assurance and fairness to individuals, communitiesand business that need government approvals involving endangered or threatened species and species habitat. What the organization is looking for specifically, Bisacquino say, is a "balance between economic and environmental priorities."
According to NAIOP's assistant vice president of government affairs, Robert Landis, the House of Representatives is sympathetic to business interests on many of these environmental issues, but the challenge for real estate and other business interests will be to persuade the Senate to take action.
On the tax front, NAIOP also is taking the lead in encouraging the rejuvenation of the nation's cities and infrastructure by advocating passage of H.R. 2138, the Commercial Revitalization Tax Credit Act of 1995, which was introduced by U.S. Rep. Phil English (R-PA). This legislation would create a tax credit program for commercial real estate similar to that now in existence on the residential side. The proposed legislation is modeled after the highly successful Low-Income Housing Tax Credit (LIHTC) program and would provide tax incentives encouraging new development, expansion and rehabilitation of commercial properties in areas specifically designated for revitalization by federal, state or local governments.
NAIOP also is pushing for regulatory improvement that would enlarge the secondary market for commercial real estate. This was an especially key proposal when the credit crunch of the early-'90s was fueling the downturn in the commercial real estate industry. Although capital has been flowing back into the real estate market during the last two years, NAIOP believes it is still in the best interest of the industry to pursue measures that could prevent similar crises in the future.
NAIOP's senior director of federal legislative affairs, Michael Kidd, who specializes in tax and finance, is the point person on this particular issue. In his former position with the National Association of Realtors, he was instrumental in establishing the Capital Consortium, a group set up by the real estate industry for the purpose of enhancing the secondary market for commercial real estate.
According to Bisacquino, NAIOP and other real estate organizations have to continue to educate public officials to the fact that what's good for real estate is good for the overall economy.
"No one wants to see a tax treatment of real estate so that buildings are built that have no market," he says. "But we do need to ensure that liquidity and capital exists."
Education for an industry
It's not only the legislators who need educational opportunities, however. Even as it expands its efforts in the area of public affairs, NAIOP continues to offer a strong educational component for its members, particularly at the local level.
"We are a full-service association," Bisacquino says. "So we offer both educational and networking opportunities as well as legislative representation." In addition to industry publications including a monthly newsletter and quarterly magazine that keep members informed of legislative developments as well as industry news and trends, NAIOP also offers a variety of seminars and training sessions both on the local and national level.
NAIOP president Paul Novak says it's particularly critical for new players in the industry to take advantage of the organization's educational offerings.
"It's very important for the new players, especially in the mid-management role, to learn how to do things better and to prevent a situation like what happened in the 1980s - when things were out of control - from happening again," he says.
For the senior players, however, NAIOP has introduced a new program called "National Forums," at which high-level executives will be able to discuss issues of concern with their peers. The forums will allow senior executives to come together in an intimate setting to discuss issues in an unstructured format that will encourage the sharing of information. There will be four forums addressing four topic areas: Industrial Development; Office Development; Asset Management; and Small Development Operations.
The program is being spearheaded by NAIOP's vice president of education, Ronald L. Rayevich, who also is president of RayMar Associates Inc., Hilton Head Island, S.C. Each forum is limited to 30 people appointed for three-year terms. To qualify for an appointment, the executive must have at least 10 years experience in the industry and have been a member of NAIOP for a minimum of three years.
"These are not for novices in the industry," says Rayevich, who notes that "the key element of the forums is what each member hopes to bring away from this, a deeper insight into their particular industry and new ways of doing things that they would not have gotten by attending a traditional education meeting." But even beyond that, Rayevich says, the forums will allow people to develop relationships with their peers and find out what's happening in real estate markets in other parts of the country. The forum will meet twice a year, once before the group's Winter Symposium and once before the Annual "RealMart" conference.
NAIOP also is taking advantage of technological advances to keep members informed of industry news. It is currently working on developing an online service where members can access information from in-house publications as well as other information.
Bisacquino says this is another way for the association to be proactive. "We would like to have a home page on the World Wide Web, and we are rapidly expanding online so that we can be an information facilitator and conduit to other databases. For example,we would eventually like to be the link to a network of financial and other crucial information," he says. The association's goal is to have its online system up and running by Jan. 1, 1996.
With the change in Washington - as well as many state houses - industry leaders are looking for legislative changes that could be beneficial to the business community, including real estate. With its chapter network working at the local and regional level and its national organization focusing on federal legislation, the association's leaders are optimistic that the issues of importance to its members will continue to be effectively addressed.
According to Tom Senkbeil, vice chairman of the Weeks Corporation, Atlanta, and president-elect of NAIOP, the association is in a key position to deal successfully with both property-specific and development issues as well as the resulting needs both from a product and governmental perspective. In addition, he says, the association will continue in the next year to concentrate on membership growth, regaining the momentum it had before the recession took its toll on the industry.
"Like a lot of associations, when the real estate recession hit, not only did a lot of companies decrease in size, but also their ability to belong to associations was hurt," notes Senkbeil. "We've had three years of positive growth now at our association, and that's a good sign that the industry is in recovery and that the economy overall has improved."
Senkbeil says that one of NAIOP's priorities is to expand the membership to encompass the "new owner" of industrial and office real estate. "That means everyone from entrepreneurial groups that have purchased assets to institutions that have acquired real estate, to those pension funds that have direct investment typically represented by asset managers and financial advisors, to the developers who have been dealing with a lot of other issues, besides new development for quite awhile," says Senkbeil. He also adds that the organization will have much to offer the new breed of real estate investment trusts, which have emerged as a significant portion of real estate owners in recent years.
"I think the niche that we fill with NAIOP is that we are the only association that is an owner's advocate for the people who deal in industrial and office properties," says Senkbeil. "I think the association today is as viable and as strong as it's ever been."
Senkbeil also notes that the association is playing a critical role, not only in the legislative arena, but in educating new players in the industry. "We have made a lot of changes over the last few years to adapt to the changes in our industry and needless to say there have been extreme changes," he says. "If you look at virtually every active real estate market in the country, you will find that 50% to 70% of the most active players 10 year ago are no longer there."
Belonging to NAIOP, Senkbeil says, allows the newcomers in the industry to share useful information and achieve a high standard of product and services.
His comments are echoed by his colleague Ronnie Duncan, who says that he would give any executive involved in the ownership of industrial or office properties the same advice today that he was given by Terry Stiles 10 years ago. "Clearly NAIOP has a lot of different resources to offer, both in legislative affairs and in networking and educational opportunities," he says. "I know I get a tremendous return on my investment every year."