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WHITE PLAINS, NY-”The challenges will be pretty wicked for the next two years, but there’s not a better group to handle it.” That’s how keynote speaker Chris O’Callaghan summed up the economic, business and real estate outlook at Thursday’s RealShare Westchester & Fairfield Counties conference here.

Senior director of Cushman & Wakefield’s Westchester region, O’Callaghan identified silver linings amid the clouds of uncertainty facing commercial real estate locally, regionally and nationally. Among these was the “tremendous energy” of president-elect Barack Obama, coupled with the fact that the new administration will have no choice but to spur economic growth. “He will have to promote business, to entice businesspeople like us to succeed,” said O’Callaghan.

O’Callaghan also saw the upside of the capital markets crisis that has rolled through commercial real estate: it’s weeded out inexperienced players whose buying power made them competitive with more established operations. “Now we’re back to doing business with people who have credibility,” he said.

But O’Callaghan and other experts at the fourth annual event, hosted by GlobeSt.com with Real Estate Forum and Real Estate New York, left no doubt that the impact of the economic upheaval has been dramatic. Kicking off a discussion on investment sales, moderator Marco Lala, associate VP with Marcus & Millichap Real Estate Investment Services, asked panelists which asset classes would fare best and which would fare worst in the current environment. All agreed that retail faced the toughest prospects, along with deals of $50 million or more. “Bigger is badder right now,” said Andrew Merin, vice chairman with C&W.

With that said, even bigger deals can be managed with a creative, flexible approach. Jeffrey Dunne, vice chairman with CB Richard Ellis, cited a $365-million, six-building office portfolio sale his firm completed last month in New Jersey, reportedly the largest such sale in the state’s history. The deal had to be broken into two pieces, meaning two separate closings one month apart, but it went through, Dunne said.

Along with creativity, Dunne advised against dwelling too much on the pessimistic when making income projections. “Be careful not to use the dismal assumptions we have today in all of your thinking,” he warned. “If you do, values will plummet 40% to 50%.”

During the first of the two breakout sessions at Thursday’s RealShare event, participants in the “Finding Clarity in the Capital Markets” offered their thoughts on what needs to happen for that clarity to be achieved. Dan Hartman, senior director with Wrightwood Capital, said there are many fundamentals that need fixing–and many are “far more opaque” than Libor, which the industry assumed would be resolved quickly but has yet to be.

Peter Blass, director at Arbor Commercial Mortgage, observed, “The problem is we over-leveraged everything.” Earlier, during the Town Hall Meeting, CEO Frank Kenny of Willett Cos. similarly stated that “massive de-leveraging” would be needed to stabilize the capital markets.

However, Blass and other panelists offered encouraging signs. For one thing, Blass noted that the Westchester and Fairfield markets’ fundamentals remain healthy. One thing that needs to occur, panelists said, is a repricing of assets. “If we do the discounting, the money’s going to come out” of the sidelines, Blass said.

While many lenders are indeed sitting on the sidelines, there are exceptions. “We’re seeing deal flow we haven’t seen in years,” said Thomas Healey, first VP of People’s United Bank, a regional lender. The market, he said, “has come back” to the kind of strict underwriting his bank has always done.

And although the CMBS market is in eclipse at the moment, David Cohen, regional director for GE Real Estate and a Town Hall Meeting participant, said “there will be some new invention” and CMBS will be back “in some form, somehow, at some time.” That prediction was echoed by Peter Pitsiokos, COO of Gyrodyne Co. of America, during the investment sales panel later that morning. “Wall Street has a short memory when it comes to failure,” he said, drawing a laugh from the audience.

RealShare Westchester & Fairfield Counties drew about 250 attendees, conference producer Jason Young tells GlobeSt.com. The conference, formerly titled RealShare Westchester, was renamed this year to reflect the overlap between the two markets.

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