"We see a pretty good transaction flow, but there's more money out there than there are transactions," says James Kolberg, senior vice president of Cosmopolitan Bank and Trust, a Near North commercial real estate lender that is part of FBOP Corp.

However, Kolberg expresses reservations about hotel deals--"we're entertaining loans in that area but we're taking a cautious approach"--as well as Downtown condominium projects--"We're not sure where the demand is going so we're going to take a wait-and-see."

Likewise, J.P. Morgan Mortgage Capital Corp. vice president Brien P. Wloch sees a continued bullish market for office lending, but not so bright for retail or "other real estate that isn't," such as nursing homes that are better classified as businesses.

"We're a little concerned about retail," Wloch says. "In the fourth quarter, there was a drop-off in sales and the personal savings rate dropped below zero. We're concerned that's going to have an impact on retail sales. We're taking a closer look at individual tenants and locations."

Thomas Cassidy of Capri Capital, LP says his firm's FNMA multifamily lending business is booming, not surprising with 10-year money available at rates under 7%. "Clients are coming in now to do deals they've had on the shelf," Cassidy says. Capri Capital has $180 million in mezzanine financing available in a pool, but $1.2 billion in applications.

However, Kolberg ventures 2001 will be a "very good year," rather than a great year, as his bank strives to originate $1 billion in loans nationally and $300 million in the Chicago market, which would be a 20% increase. Meanwhile, Wloch foresees a "flat" collateralized mortgage-backed securities market that continues to undergo changes in its players.

The CMBS market had 65 lenders just three years ago, compared to no more than 15 today, Wloch says. Banks have doubled their participation from 20% to 40% of the volume while investment banks have reversed their role from 40% to 20%. "We think that trend will continue," Wloch says. "When big returns go away, investment bankers go away."

However, the $60-billion market means more liquidity, and in turn, more demand for the CBMS's, he adds.

Only Cassidy was willing to hazard a guess on the direction of interest rates, repeating a prediction he admits was proven wrong last summer. "Don't expect anything to happen--that's our advice again," Cassidy says. Kolberg and Wloch say expect spreads to widen. "As the rates fall, the spreads will widen," Wloch says. "I don't know what the floor is, but as indices go down, spreads will widen," adds Kolberg.