Last week's GlobeSt.com Quick Poll asked readers if thecredit crisis has ended yet. A total of 65% of voters respondedthat we are in no way out of the worst or near the bottom. GregSchecher, managing director of Johnson Capital in Boca Raton, tellsGlobeSt.com about the challenges facing the credit market inFlorida, and what needs to happen before we see a recovery:

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"Whether or not the credit freeze thaws sooner or later dependsupon quite a few key variables that are not readily discernable asof yet. Billions of dollars of assets, mostly mortgage loans, areslated to be sold by TARP at prices that will be determined byauctions that will occur over an indeterminable period of time. Theabundant volume of investment supply could create downward pressureon all real estate and mortgage asset values. A prolonged saleprocess or the fire sale purchase of TARP assets could serve todamage the prospects of a speedy recovery of the commercial realestate markets.

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"The wild card for the recovery of Florida commercial realestate is the volume of commercial tenant lease defaults. Shouldretailers enjoy strong sales this holiday season, thelower-leveraged retail businesses will use cash flow to supplementborrowing as the general recession eases and credit becomesavailable. Poor holiday sales coupled with the lack of credit willexacerbate the plight of the higher leveraged retailers who areblocked from borrowing. This could result in higher vacancies in2009 and lower asset values thereafter.

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"The Florida office space users are primarily providers ofcommercial or consumer services to the real estate, insurance andfinancial services sector. Therefore, occupancy is inextricablylinked to the economic vitality of these sectors. The underpinningto robust office occupancy is the vibrancy of residential realestate construction and sales. Office occupancy has historicallylagged the general economy by six to 12 months.

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"The recovery will commence in earnest when the supply ofhousing stabilizes. This will occur when the rate of foreclosuresdecline and lenders are able to discern the stabilized market valueof the houses securing the loans.

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"Florida commercial real estate has experienced three extendedmarket disruptions over the past 20 years. Each time, the severityof the disruption was overstated and recovery occurred in a shorterperiod of time than was forecast.

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"This disruption is much more severe and more complicated,therefore much more difficult to forecast the recovery time. In anycase, forecasting the length of the recovery is an academicexercise and is always uncertain at best. What is certain is thatrecovery will occur.

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"Those that are able to corral capital for investment and deploythat capital wisely will realize what has been historically true:Florida real estate is intrinsically valuable. In time, theinvestor with a long-term view will be richly rewarded."

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