That delevering process has already gotten under way "big time"in the public markets, Vornado's president and CEO said Tuesday.The massive fund-raising that REITs such as Vornado undertook overthe past 12 months often occurred at the expenses of stock pricing;Fascitelli said that at one point, nearly half of the 180 REITsregistered with the Securities and Exchange Commission were sellingshares at single-digit prices.

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"The dilution that occurred was painful, but they did it,"Fascitelli said. He called it "preventative medicine." Theequivalent delevering on the private side will be far more gradual,he predicted.

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While calling the government's leniency on extending commercialloans a "reasonably prudent" move to give banks some leeway,Fascitelli also held it partly responsible for putting off thatinevitable day of reckoning. Another reason that matters haven'tcome to a head yet, he said, has been the challenge of pricediscovery in a market with few transactions to serve ascomparables. "When people say loan to value, they know what the 'l'means, but they don't know what number the 'v' stands for," hequipped.

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However, he predicted a potential flood of buying opportunitiesas beleaguered owners eventually realize that their properties'depressed fundamentals will stay challenged and values "won't popback up." Fascitelli said the process of working through all ofthis would require "a year or two, or three."

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In the meantime, he welcomed a return to more conservativeunderwriting. From a lender's perspective, a property's value is"an overstated concept," Fascitelli said. "It's all about the cashflow."

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That more conservative approach will extend to securitization,which Fascitelli predicted will come back "stronger than anyonethinks." But the new model for CMBS will be "simpler" as well asstricter. "The mentality that 'I'll originate anything if I cansell it' will change," Fascitelli said, predicting that a soberapproach to CMBS underwriting will probably be enforced bylegislation requiring lenders to retain some degree of risk.

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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.