Facing a tough reelection battle in a newly competitive district, Texas Republican Rep. Van Taylor has brandished his conservative bona fides by taking hard-line stances against legislation to forgive some student debt and to provide assistance for renters facing eviction during the pandemic.
Taylor’s fiscal conservatism, however, has not extended to the real estate industry, which is not only his largest campaign donor but which he is personally invested in. Taylor, a real estate mogul, has pressured federal regulators to funnel cash to commercial real estate companies, and he has authored legislation that would create a bailout fund for his industry and direct the government to guarantee riskier commercial real estate loans.
In a press release, Taylor touted his legislation, which has been cosponsored by an array of finance-friendly Democrats, as a way to provide “flexibility and support” for the commercial real estate sector, designed to “keep their doors open, drive their local economies, and support families across the country.”
It could also provide direct support for Van Taylor. Federal disclosure records reviewed by the Daily Poster show that Taylor has invested in more than two dozen commercial real estate properties worth up to $10.7 million. Taylor has also accepted more than $200,000 in campaign contributions from the real estate industry this election cycle.
Taylor’s push for legislation that could preserve the value of his own investment holdings follows revelations that Republicans’ 2017 real estate tax breaks may have enriched a number of GOP lawmakers who sculpted that legislation.
A spokesperson for Taylor did not respond to multiple requests for comment.
Some watchdogs say that Taylor’s investments raise concerns.
“This activity could diminish the public’s trust,” said Kedric Payne, the former deputy chief counsel for the Office of Congressional Ethics and the general counsel and senior director of the Campaign Legal Center. “They don’t know if the elected official is acting on behalf of the public or on behalf of their personal interests.”
An heir to oil tycoon Robert E. Lee Blaffer, Taylor was first elected to the Texas House of Representatives in 2010, before serving in the Texas State Senate. In 2019, he was elected to represent Texas’s 3rd Congressional District, which has been held by Republicans since 1968 but is considered increasingly competitive.
Taylor is running against Lulu Seikaly, a Plano-based labor and employment lawyer. In August, the Democratic Congressional Campaign Committee added the race to its list of targets for the 2020 cycle. A September poll of the race had Taylor leading Seikaly by just one point. On Monday, a DCCC poll of the district showed Seikaly up by two.
Lucrative Loans for Commercial Real Estate Owners
The commercial real estate sector is uniquely vulnerable to the COVID-19 pandemic. Since the crisis started, many offices have been closed, consumers have avoided malls and stores, and hotels are operating at half-capacity at best. In response, many businesses have stopped paying rent, which makes it harder for the owners of commercial properties to make payments on their commercial loans.
If businesses walk away from offices and close retail outlets, those deferred loan payments can become defaults, leading to diminished property values, a lower commercial property tax base for local governments, and potential trouble in financial markets. Many commercial real estate loans are bundled into securities, much like the securities backed by residential mortgages in 2008. There is between $500 billion and $1 trillion outstanding in commercial mortgage-backed securities, and potential losses will spread out to investors.
Complicating matters, the commercial real estate sector has been accused of engaging in a 2008-like scheme of fraudulently increasing the value of properties in order to qualify for better commercial loans.
Taylor in June authored a letter — signed by 104 other lawmakers from both parties — to Treasury and Federal Reserve officials asking them to provide “targeted economic support to bridge the temporary liquidity deficiencies facing commercial real estate borrowers.”
So far, regulators have been reluctant to create programs tailored to the commercial real estate sector. In a September 16 interview on CNBC, Federal Reserve chairman Jerome Powell said the Fed has not wanted to create programs targeted at specific industries, and noted the Fed has already given to the industry through existing programs.
A month after the letter, Taylor introduced the Helping Open Properties Endeavor (HOPE) Act. In addition to directing the Treasury to establish a new bailout facility specifically for commercial real estate, the HOPE Act would require the Treasury to fully guarantee banks’ commercial real estate loans that are at a higher risk of not being paid back.
The legislation would specifically guarantee bank loans for so-called preferred equity, which is a kind of commercial real estate loan that only gets paid back in bankruptcy court after other more senior creditors are reimbursed. If the legislation passes and the government were to guarantee those loans, banks could be incentivized to make more of them, because the risk would be eliminated. Financial institutions would know they would get paid back in full by the government even if real estate owners can’t pay.
New resources for such loans could be a windfall for the commercial real estate industry, because many existing legal covenants make preferred equity one of the only ways for the industry to obtain additional financing during the pandemic.
The Real Estate Industry Celebrates Taylor’s Legislation
Taylor’s legislation was met with praise from real estate lobbyists, who began pushing for the bill. The International Council of Shopping Centers, which represents malls, and the NAIOP, known as the Commercial Real Estate Development Association, both lobbied on the bill and have publicly supported it. Other groups, like the American Hotel and Lodging Association and the Building Owners and Managers Association, made statements in support of the bill.
The commercial real estate industry has a long relationship with Taylor. While serving in the Texas State Senate, Taylor simultaneously worked as a director for the Churchill Capital Company, a Texas real estate firm. Taylor’s Linkedin profile describes his role as primarily focused on commercial real estate financing.
Donors from the real estate industry are collectively Taylor’s largest campaign contributor. They have given him roughly $217,000, including $46,000 worth of PAC money. Some of the donors are the groups lobbying for his legislation.
For example, the International Council of Shopping Centers’ political action committee contributed $1,000 to Taylor’s campaign. The group touted a meeting they had with the congressman in January on their website, and wrote that Taylor “expressed a willingness to work with ICSC on other legislative priorities.”
Similarly, PACs belonging to NAIOP and the American Hotel and Lodging Association both contributed $5,000 to Taylor’s campaign in June of 2020, FEC filings show. The contributions came a month before Taylor introduced the HOPE Act.
“Raises Conflict of Interest Concerns”
Taylor himself is heavily invested in commercial real estate. The congressman’s 2019 financial disclosure lists twenty-nine investments in commercial real estate properties valued at between $3.7 million and $10.7 million. The documents also list nine investments in commercial real estate that were sold, earning Taylor additional income.
Some of his largest investments are properties in Texas, including Spring Creek Retail, a property in Plano that appears to be located within Taylor’s congressional district. Taylor’s financial disclosures list two investments in the Plano property, collectively valued at between $1.1 million and $5.3 million.
Other large Taylor properties include the 1100 NASA Parkway office property in Houston, the 4100 Spring Valley office property in Farmers Branch, and the 3005 West Airport hotel building in Bedford. The two office buildings in Houston and Farmers Branch both have space available to rent, according to the real estate website LoopNet.
Craig Holman, a government ethics lobbyist for Public Citizen, said that Taylor’s advocacy for the HOPE Act “certainly raises conflict of interest concerns.” However, he said, it may not be prohibited under thin congressional ethics rules because “Taylor would have to stand to benefit directly and significantly, generally more so than the industry as a class.”
Still, Holman said, “In order to avoid the appearance of self-dealing, this is a field that Van Taylor should not be championing.”