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Paul Bubny is editor of Real Estate New York, from which this article is excerpted.

NEW YORK CITY-In keeping with the uncertainty in commercial real estate at present, a presentation on capital markets yesterday offered few ironclad guarantees other than that fallout from the subprime crisis will linger for months to come.

Keynote speaker Richard J. Mack, partner with Apollo Real Estate Advisors, told the audience at Herrick Feinstein LP’s breakfast presentation at the Harvard Club that he had “no idea” when the clouds over the market would finally lift. Mack, in charge of new investments and investment management at Apollo, did predict that the worst is yet to come, and that conditions would probably start to deteriorate as 2008 segues into 2009.

In his keynote speech, Mack delivered a message consistent with one he had offered at a Real Estate Lenders Association presentation earlier in the week. He predicted continued weakness in the debt market until repricing of assets occurs, although he added that some pressure is already being exerted on the system as mark to market occurs on the debt side.Mack also said the market could be in for an outbreak of “tranche warfare,” defining this as “prospective battles amongst and between members of different tranches of loans with differing levels of rights and seniority in the capital stack.”

However, Mack said that while Europe’s capital markets are characterized by less securitization and CMBS than the US equivalent, they’re also in worse shape and will take longer to recover. One reason, he said, was that Europe lacks the kind of securitized market to sell paper that can be found here.

Locally, the New York City region has “relatively good fundamentals,” Mack said, although he added that he’s concerned about a glut of for-sale multifamily product in the range of $1,300 to $2,000 per sf. The office sector is “relatively healthy” and he predicted that financial institutions would be far less likely to give up large blocks of space than they were in the slump of the late 1980s and early 1990s.

Following Mack’s presentation, Herrick Feinstein partner Carl Schwartz participated in a panel that also included two panelists from AIG, which cosponsored the event. Shaun Kelly, president of AIG/Lexington Insurance Co., noted that in a market with as many dislocations as this, proper valuation and insuring to value is “very important.”

Asked whether the subprime crisis would lead to federal lawmaking along the lines of the Sarbanes-Oxley Act, Schwartz said there’s been talk of legislation, but nothing meaningful. He added that there could be new laws against predatory lending practices.

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