WHAT DO YOU THINK ABOUT CONGRESS' $700-BILLION BAILOUTPLAN?

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Last week's GlobeSt.com Quick Poll asked readers abouttheir reactions to Congress approving the $700-billion bailoutpackage. Nearly half the respondents indicated that the bailout"stuck it to the American taxpayer," while 23% said the actionderailed any private-sector solution and 29% said the bailout camejust in time because there was no other way out. Howard Taft,managing director with the Miami office of Cohen Financial, says anargument could be made for all three reactions to the plan. Heshares his thoughts on the poll and the bailout's effect oncommercial real estate:

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"I think in this instance, all three effects are [present] inthe current market today. I think more banks would have failed [hadit not been approved] and we would have had a quicker meltdown,like what happened last week in the stock market.

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"In terms of derailing any private-sector solution, there wasn'tany private-sector financing that could have matched the Treasuryfunds. I would also say the bailout absolutely stuck it to thetaxpayer. That's $700 billion we have to borrow from China andother foreign countries.

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"In the short term, it's going to be very difficult [forcommercial real estate] because cost to capital is going up and itwill be difficult to refinance debt that is coming due or get newdebt. It is affecting commercial real estate from the largest REITsto the smallest entrepreneur.

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"Commercial real estate prices are going down and vacancies aregoing up, causing another dichotomy in the market. The credit thatis available is at a lower loan-to-value with tighter underwritingthat is resulting in lower loan proceeds. There are also higher caprates, which reduces the loan amount. It's like a triplewhammy.

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"We're seeing refinancing where the loan proceeds today are lessthan the existing debt, which is causing additional problems andwill be a future issue in the next couple of years. On the brightside, I think that there's plenty of debt out there forwell-located, income-producing properties with good sponsors, butat lower loan-to-values."

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