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[IMGCAP(1)]NEW YORK CITY-Traditional capital for real estate has dried up in the past year, and although panelists at Incisive Media’s second annual RealShare Investment and Finance Summit were relatively optimistic about the future of the current credit void, they agree that it will get worse before it gets better.

In a near-stagnant investment sales year, except for a flurry of activity in some sections, panelists on both morning power sessions, say that things will return to normal, it is just a matter of when, and who is left standing in the end.

[IMGCAP(2)]“There will be opportunity eventually, but the crisis is far from over,” said Michael Fascitelli, president and trustee of Vornado Realty Trust, in the Investor Power Panel, first session of the day. Fascitelli joined moderator Steve Pumper, executive managing director of Transwestern, as well as panelists including: Trevor Michael, managing director of real estate acquisitions at TIAA-CREF; Stephen Quazzo, CEO of Transwestern Investment Co.; Michael Katz, co-CEO at Sterling American Property Inc; and Robert Underhill, managing director and capital transactions group head at Shorenstein Properties LLC.

Panelists agreed that the investment market today is not a pretty site, pointing to less velocity, and fewer transactions. However, some noted that pricing hasn’t come down as much as expected. Fascitelli, for example, said that as far as “getting back into the water,” it is important to be “cautious” for the next two to three years.

“Private equity pricing has been sticky and slow to react,” Underhill said. He later explains that “there seems to be a fair bit of denial,” explaining that it isn’t just a cycle, it is more systematic, more global and more synchronized.

Quazzo, who says there is a massive deleveraging going on across the board, says that as people decide it is time to get back into the water because things are OK, everyone jumps in at the same time. “I’d rather jump in early,” he said.

Katz told the audience, of more than 200 people, that a rapidly-growing niche sector for his firm is going to where others don’t want to. He explained that Sterling American Property is focusing on investing in the residential sector–all over the country–and is moving away from the office sector. “The residential side has predictable cash flows and financing,” he said. “We think it is an opportunity with realistic dollars.”

The general consensus of the market from panelists, is that it will bottom out around Q2 ’09, however TIAA-CREF’s Michael said that when a rebound comes, it will come back sharply, words that were also expressed at CityScape USA the day before, as GlobeSt.com reported.

The Financing Power Panel, with Cliff Mendelson, senior managing director of Transwestern as moderator, said it is important to be very careful “on which deals you do, and how you do them.” Panelist Steve Plavin, COO of Capital Trust, noted that you also have to be careful who you buy from. Other panelists included: Roy Lapidus, managing director of Goldman Sachs; Randy Reiff, managing director of JP Morgan; and Mitchell Gould, EVP of BRT Realty Trust.

“The best opportunities are still coming,” Reiff said, adding that his firm is looking at Q4 to start pursuing more opportunities and start filling the credit void. “In the near term, floating is as good of an opportunity as fixed.”

Some panelists pointed to fundamentals as key in today’s environment. Reiff said that having good fundamentals isn’t necessarily the only thing that’s important though, “you have to be forward thinking. The key is to find a balance, which is hard to do.”

In order for spreads to contract, some panelists said that loan quality needs to improve and people have to believe in those transactions. Plavin explained that that process will take a year or two to work out, noting that a few things need to happen first: Wall Street needs to get rid of existing inventory; and investor confidence and loan quality needs to rise.

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