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[IMGCAP(1)]Jillian Ambroz is contributing editor of the upcoming digital newsletter Distressed Assets Investor.

DALLAS-Get ready for RTC 2.0. At least, that’s Mark Grinis’ take on the current commercial real estate market. Grinis, speaking at RealShare’s Distressed Assets conference here yesterday, said this downturn could be “tougher than the last cycle.” Today, unemployment has already surpassed the last cycle and delinquencies continue to trend upward, the Distress Service Group leader for Ernst & Young LLP said. The event was co-sponsored by GlobeSt.com and Real Estate Forum.

While there’s some comfort in the industry’s cyclical nature, this is an unprecedented moment. “Look at the footprint or the starting point of this recovery–it’s built on a foundation that is untested,” Grinis said to a crowd of more than 300 gathered at the Hotel Adolphus. “That places a level of uncertainty and complexity on this go-round.” Grinis’ session, “How Much Is in Distress and Where?” kicked off the conference, which explored Distressed Assets from a variety of viewpoints–from pricing the assets to negotiating workouts with lenders.

He was followed by Robert M. White, Jr., founder and president of Real Capital Analytics, in a special presentation entitled, “Putting Distress in Perspective.” Therein, White stressed the opportunities on the table, even while delivering some dismal data points. There’s about $135 billion in defaulted commercial mortgages, which has more than doubled since the beginning of the year, he said. Each month, another $10 billion comes onto the distressed markets. And CMBS loans are defaulting faster than any other loans out there.

Still, White believes now’s the time in the market when people are starting to get active and vested. Noting that the transaction market has most likely hit bottom, White said that Q3 should show a 20% gain in transaction volume in the US. He also noted that some international markets, such as Asia, the UK and Australia, are already seeing a “tremendous rebound of activity.” But, he noted, it’s tough to say right now in a market where there are so few trades.

[IMGCAP(2)]Or, as Jon Barry, national managing director of Colliers Asset Resolution Team, put it, the buyer is at the party waiting for the seller to arrive. Barry spoke on a panel focused on “Opportunities in Distressed Assets and Restructured Finance.”

That said, the current market is not devoid of activity, pointed out fellow panelist Robert Knakal, chairman of Massey Knakal Realty Services in Manhattan, who noted that institutional investors are starting to re-emerge. “Institutional capital has had to reinvent itself and funds have been raised to buy distressed assets,” he said. “On notes we’ve sold in the city, we get more than 50 offers on every one.”

But buyers and sellers alike need to rethink and redefine before any serious trading can begin. In a “Debt & Equity Update,” Richard Rudd made just that point. “Those with the equity need to feel comfortable that the market has bottomed. They need to see some signs the economy has stabilized. And sellers need to recognize that what they have is not worth what it was in 2007.” Rudd, a senior managing director at boutique firm Allied Advisors LLC, said the bid-ask gap is narrowing and that by the second quarter of next year, we’ll be in a very active transaction market.

Bob White returned to the podium later in the day on a panel “Appraising the Current Value of Distressed Assets.” He noted that, until liquidity returns, it’s a waiting game. And the consensus on pricing assets was that there is no consensus; performing loans are all over the map and non-performing loans are anybody’s guess. There haven’t been enough deals to test the market with pricing, either. Still, there’s no doubt that we’ve moved far way from the pricing of two years ago. In fact, as of July, trades are showing a price decline of 37% from the peak, White said.

But it was Jon Barry who summed up the day, and the essential truth of the current market. “Whatever the ’07 values were, they’re now just a curiosity,” he said. “It’s no longer relevant. This is a completely different pricing model. We’ll come out of this, but in an entirely different marketplace than we’ve ever experienced.”

Part II in our exclusive coverage of RealShare Distressed Assets will appear Thursday morning.

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