On the morning following President Trump’s State of the Union address, RXR Realty chairman Scott Rechler called the president’s $1.5 trillion infrastructure pitch unrealistic.
“It’s not a reality. The trillion-and-a-half dollars isn’t possible,” Rechler said at a panel for the Urban Land Institute New York on Wednesday morning. “The money that we would use for infrastructure was repatriation dollars… has been used for tax reform. Not saying good or bad, but the answer is, there’s no trillion-and-a-half dollars.”
Since the 2016 campaign, Trump has proposed reviving America’s outdated roads, bridges, airports and other infrastructure by leveraging mostly private investment, offering incentives to those willing to take on new projects. Rechler — who advised Trump on the matter during the presidential transition last January and who is a board member of the Metropolitan Transportation Authority — said he is largely supportive of public-private partnerships, but suggested that much of the infrastructure work that needs to be done wouldn’t result in a profit for private firms. He used the potential repair of water systems without a consummate rise in the price of water as an example.
“There’s no revenue stream for the private sector to come in and potentially take advantage of that,” he said. “So I think this concept of we’re going to invest $200 billion dollars and that’s gonna raise a trillion to a trillion-and-half dollars is not realistic.”
Rechler was joined on the panel by TPG Real Estate Finance Trust’s CEO Greta Guggenheim and Jimmy Kuhn, the president of Newmark Knight Frank. The talk was moderated by PwC’s Mitch Roschelle. The participants discussed the outlook of national real estate in 2018 and even swapped some insider gossip about where Amazon’s second headquarters may be likely to land (Rechler’s heard the Washington, D.C., suburbs, but Guggenheim said she’s been hearing Atlanta).
All of the panelists commented that recently enacted federal tax reforms, which will cut effective rates for most real estate investors, was positive for the industry, though some conceded that there may be unintended consequences that will reveal themselves with time. Rising interest rates were also a key topic of the discussion. Guggenheim cited the U.S.’s “interest rate bull market for 30 years” that is now changing, with a still to be determined effect on real estate capital markets.
Rechler previously served on the board of the Port Authority of New York and New Jersey, but left in early 2016, citing frustration with the body’s internal and external political disputes. He is currently the chairman of the Regional Plan Association.