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SAN FRANCISCO-A cloud of uncertainty loomed over the opening sessions of the 20th anniversary membership meeting of the Association of Foreign Investors in Real Estate, being held here. Given Wall Street’s free-fall and the uncertainty surrounding the Fed’s $700-billion bailout, the mood was understandable. But, while the good news was hard to uncover, it was there.

It fell to LaSalle Investment Management global strategist Jacques Gordon to open the session and recount the dire news of the past few weeks. Recovery “could be a two-year process,” he stated, and in that two years, we can expect corporate downsizing, a drop in household spending and falling rents and occupancy.

Further, Gordon wondered in an interview after his presentation, whether the Fed bailout was the right way to go. Acknowledging that the Fed’s move was still too new to comprehend fully, he noted that “it would have to be artfully done,” and wondered if it would drag the recovery process out farther than the quick pain of Chapter 11.

That said, he did note in his presentation that while the current crisis could be “terrible news for highly leveraged portfolios,” it might be a “great time” for Afire members, given the weakness of the dollar. And while the markets tumble, Gordon also held out some hope for those investors looking for opportunities, opportunities that lie mostly in such niches as education and student housing, healthcare, legal and energy. “Office and retail are not happy places,” he stated. “But these are the areas for optimism.” Gordon even ventured further optimism in that “fundamentals are still essentially sound, and even if rents remain flat, increases in NOI” are possible where leases are “set to roll.”

The global clouds cleared when the talk turned to local markets, and in a panel discussion of West Coast CEOs, the ever-optimistic side of the real estate community emerged. Depending on the market, there could be some free rent, stated BRE Properties’ Constance Moore, “but leasing continues to be very robust.”

“We’ve been through down cycles before,” said Shorenstein Properties’ Doug Shorenstein. Depending largely on the fundamentals to ride him through the crisis, he noted that his portfolio is 94% leased. Given that renewals are increasingly on a two-year basis “because tenants don’t know where their markets are going,” Shorenstein urged the crowd to “play defensively.”

If you do buy, he added, then buy from sellers who have to be sellers. He referenced his recent purchases from Macklowe in Manhattan and Maguire in Los Angeles as two examples of such opportunity. “But it all comes back to leasing,” he said. “The key to the market now is to understand the fundamentals and play a defensive game.”

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