Paul Bubnyis editor of RealEstate New York, from which this article is excerpted.

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NEW YORK CITY-In keeping with the uncertainty in commercial realestate at present, a presentation on capital markets yesterdayoffered few ironclad guarantees other than that fallout from thesubprime crisis will linger for months to come.

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Keynote speaker Richard J. Mack, partner with Apollo Real EstateAdvisors, told the audience at Herrick Feinstein LP's breakfastpresentation at the Harvard Club that he had "no idea" when theclouds over the market would finally lift. Mack, in charge of newinvestments and investment management at Apollo, did predict thatthe worst is yet to come, and that conditions would probably startto deteriorate as 2008 segues into 2009.

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In his keynote speech, Mack delivered a message consistent withone he had offered at a Real Estate Lenders Associationpresentation earlier in the week. He predicted continued weaknessin the debt market until repricing of assets occurs, although headded that some pressure is already being exerted on the system asmark to market occurs on the debt side.Mack also said the marketcould be in for an outbreak of "tranche warfare," defining this as"prospective battles amongst and between members of differenttranches of loans with differing levels of rights and seniority inthe capital stack."

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However, Mack said that while Europe's capital markets arecharacterized by less securitization and CMBS than the USequivalent, they're also in worse shape and will take longer torecover. One reason, he said, was that Europe lacks the kind ofsecuritized market to sell paper that can be found here.

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Locally, the New York City region has "relatively goodfundamentals," Mack said, although he added that he's concernedabout a glut of for-sale multifamily product in the range of $1,300to $2,000 per sf. The office sector is "relatively healthy" and hepredicted that financial institutions would be far less likely togive up large blocks of space than they were in the slump of thelate 1980s and early 1990s.

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Following Mack's presentation, Herrick Feinstein partner CarlSchwartz participated in a panel that also included two panelistsfrom AIG, which cosponsored the event. Shaun Kelly, president ofAIG/Lexington Insurance Co., noted that in a market with as manydislocations as this, proper valuation and insuring to value is"very important."

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Asked whether the subprime crisis would lead to federallawmaking along the lines of the Sarbanes-Oxley Act, Schwartz saidthere's been talk of legislation, but nothing meaningful. He addedthat there could be new laws against predatory lendingpractices.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.