The great flood, at least in real estate terms, has not repeatedhistory. Unlike in the previous distressed down cycle of the early1990s, banks haven't dumped assets, in part due to governmentIntervention.

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Now, said panelists at the Real Share Chicago event last month,those in pursuit of problem properties are evaluating longer leadtimes and complicated workouts, or are now on the sidelines,waiting to see if the dam will ever burst.

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The general consensus from the speakers at the event, attendedby about 300 brokers, developers, owners and lenders, is that theextend-and-pretend trend may go on for years. "I think the $1.4trillion worth of loans coming due will be this decade's Y2K," saidpanelist Bruce Cohen, board chairman and CEO of Wrightwood Capital."And talk about

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distress ... the entire real estate industry's been in distressthe past 18 months. The question is, will there be a greatopportunity for others?"

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The distressed sites that are available, said the speakers, aremore likely to

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be in smaller packets or singular deals than in largeportfolios. However, these properties are out there for people whoare looking hard enough, said Jennifer Pierson, managing directorof the private clients group for CB Richard Ellis. "I prefer towork directly with the special servicers, as a third party, they'rethe most removed from the 'punch to the gut: They make the mostrobust sellers," she said

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For the most part, the panelists agreed that the CMBS market ison its way back, and it is joined by a diverse field of capital,all with pockets full. It may not be enough, however, said EarlWebb, president of US operations for Avison Young. "If you've got$1.4 trillion coming due, but only about $600 million to $700million to cover it, where's the rest going to come from?" heasked. "You are seeing an enhanced public market, with new REITsforming. Conduits are coming back. And even lenders like Bank ofAmerica are starting to show they can work with borrowers." Thatisn't to say things have gotten easier. "There's definitely morecomplexity with this era of workouts," said Donald Shapiro,president and CEO of Foresite Realty Partners LLC. "The banks andcourts can't keep up." Finally, many panelists also agree that itmay have been a better idea for the government just to allow thecollapse, forcing the assets off the balance sheets and returningpricing normality to the market much faster. "What really definedthis past decade was the speed at which deals could be done," saidWebb. "For this next cycle, it's going to have to be won byintellectual capital, how to solve complicated problems. It won'tbe an easy 10 years."


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