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NEW YORK CITY-”If you underwrite to today’s standards, you’ll do all deals. If you underwrite to traditional standards, you won’t do any.” That’s how Frank Marro of GE Commercial Finance summed up the current funding environment, and it seemed to capture the overall theme of RealShare Structured Finance, held here yesterday and sponsored by Real Estate Media. Some 250 attendees attended the final RealShare event of the 2004 season, and they saw both sides of the table at work–hearing from borrowers and funding sources alike, and the got a front-row look at the tug of war that often exists between value and price.

Current investment challenges–and the differences that exist among competitors for property–came out loud and clear in a session entitled, “Understanding How the Other Side Thinks–Leading Owners, Investors & Developers Assess the Market.” Real Estate Media editor in chief Michael G. Desiato moderated the session. “Capital flow is incredible,” stated Doug Lyons of Transwestern Investment Group. “The challenge is buying. We’re actively seeking anything that even sniffs of stabilization.” “Contrary to what others might say,” countered David Lichtenstein of the Lightstone Group, “the market is full of opportunity.” Of course, Lichtenstein explained that he plays in the “secondary and tertiary markets,” including a recent purchase in Puerto Rico. As a result, “We bought $1 billion this year, and we did not go below double-digit caps once.”

But underwriting can be a tricky situation in the current overheated environment, as panelists in the Capital Sources & Investment Banker Power Panel stated. One panelist suggested a culprit in the loosening of standards: the ratings agencies. Moderator Jeffrey Lenobel of Schulte Roth & Zabel asked the panel if they thought more stringent regulations of the CMBS market would limit questionable underwriting and more favorable ratings. MONY Realty Capital’s Richard Katzenstein retorted that it was an odd conflict because “the ratings agencies set the underwriting standards.”A debate on the relative merits of CMBS and traditional lending sources ensued, with Katzenstein indicating that conduit deals are perceived as less flexible by the borrowing public. “At the end of the day, It’s just sales,” Rob Verone of Wachovia Securities retorted. “We see very few leave in favor of the insurance companies.”While just about all participants agreed that market trends are very strong–although some, like Transwestern’s Lyons, bemoaned the dearth of deals–there was one question that kept coming up throughout virtually all of the sessions: What will happen in ’05 if rates continue to creep up? And, at the end of the day, that was the one question that remained unanswered.When the RealShare series kicks off again in 2005, it will be an expanded program, encompassing the newly purchased Real Estate Conference Group in Los Angeles and offering no fewer than 20 events around the country. First up will be Real Estate 2005 in LA, Feb. 14.

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