ORLANDO, FL — I don’t think any of us will forget the summer andfall of 2008. The financial markets were in free fall, Wall Streetstalwarts, such as Bear Stearns and Lehman Brothers vanished almostovernight, and the government was intervening in the financialmarkets more directly and forcefully than it had at any time since1929.

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That wrenching, wholesale restructuring in the financial marketsand the Great Recession that followed are without a doubt the mostimportant events in commercial real estate (and the economy as awhole) in the last 10 years. They may be the most importanteconomic events, in fact, since the end of World War II. But tounderstand the true impact of those events you have to look back afew years earlier and consider the economic factors that producedthem.

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In the years between 9/11 and the financial market freefall of2008, the U.S. economy experienced solid growth, with real GDPgrowing an average of 2.4 percent annually from 2001 to 2007.Prices in both the commercial and residential real estate marketssoared, development boomed, interest rates remained low andfinancing was easy to get. In hindsight, we now know that financingwas too easy to get and that prices, especially in theresidential markets, soared to irrational levels.

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Just as we had a bubble in the tech economy in the late 1990sand into 2000, we experienced a bubble in real estate. But unlikethe dot-com bubble, the real estate bubble was a lot bigger, andwhen it broke in 2007, the aftermath was devastating. Althougheconomists may have declared that the recession officially endedlast summer, its effects are still lingering, as millions ofAmericans remain unemployed or underemployed. It will likely be afew more years before we work ourselves out of this situation.

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Understanding that the recession was ultimately the result ofmoney that was just too cheap tells us a lot about what the next 10years might look like. Here are some of the Great Recession’slikely after effects:

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Lower leverage levels persist for the nextdecade. It’s clear now that too much real estate, bothresidential and commercial, was simply overleveraged during theearly and middle years of the decade. There has been significantdeleveraging across the economy in the last three years, but goingforward we should expect that leverage levels overall will remainlower than they were, and will likely return to more normalhistorical levels.

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Relationships with lenders are important again.As leverage levels drop, the cost of capital goes up and lenderstighten their lending standards. That means debt financing will nolonger be a commodity available to anyone. Relationships with banksand other lenders will become much more important, as lenders willwant to truly understand sponsors/borrowers and particularlyunderstand how they responded to lenders during this crisis.Stronger relationships will give strong borrowers access to more,and cheaper, financing than their competitors.

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IPOs will become more popular. As lendersstrive for more balance sheet liquidity, many real estate companieswill consider tapping the public financial markets for capital.Expect to see more initial public offerings once the equity marketsbecome less volatile and prospective growth helps propel stockprices to rise sufficiently enough to make new offerings attractiveagain.

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Development models will change. With capitalmore expensive and leverage levels lower, and with lots of vacantproperty still in the market, most stand-alone developmentcompanies that thrived on the cycle of “borrow, build, sell andrepeat” will no longer be viable. There will be less developmentfor several years, and new development will likely be done bycompanies with more diversified business models.

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So who will thrive in this more conservative and moretraditional financial environment? As it always has been,well-managed companies that keep a close eye on their finances willdo better. But more than that, the companies that are diversifiedand are able to establish and maintain reliable access to capitalwill do the best. As we learned from Wall Street in 2007, being abig or well-known name is no guarantee that a company will survive.It’s back to the fundamentals. And I think that’s causing manyexperienced commercial real estate executives to, privately, sighin relief.

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Tom Sittema is CEO of CNL Real Estate Group Inc. Prior tojoining CNL in October 2009, Sittema was managing director of realestate, gaming and lodging investment banking for Bank of AmericaMerrill Lynch. During his career at Bank of America, he led morethan $60 billion in debt, equity and M&A transactions.

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