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[Note: To follow is an excerpt of a radio show interview conducted by Peter L. Mosca, host of Income Property Investment Talk dot com, with Blaine Walker, 2010 Chairman of the National Association of Realtors Commercial Division and Chere LaRose-Senne, Managing Director of Commercial Member Services. To listen to the show archive or download an MP3, go to www.IncomePropertyInvestmentTalk.com/020310.]

Mosca: There are positives and negatives to all aspects of our professional and personal lives, and in 2009 most would argue there were more negatives than positives. In fact, the industry as a whole probably didn't shed too many tears saying goodbye to 2009. Before we get going with the NAR Commercial Division, I was wondering if you could just give us your thoughts about 2009, maybe provide us with an overall market perspective of what's happening so far in 2010?

Walker: A lot of people are glad to see 2009 leave, although the last two quarters did show some up ticks. The housing market did fairly well. A lot of that had to do with the tax incentives offered by the Federal government, and many states also had incentives. In the commercial market, it appears there is going to be a lot of distressed assets coming on the market. We don't think we've seen the bottom of everything yet; however there have been a few changes in the marketplace. There have been some changes in the IRS code that allows for the CMBS market to be refinanced without a taxable consequence to those that are providing that funding. We may not see as hard a hit on the commercial market as we originally had thought. There are a lot of markets out there that are distressed and it varies market by market. It seems that the West and the Southeast were hit harder, but that's because a lot of that was the growth that took place and the rapid increases in prices. The Midwest seems to have avoided a lot of the problems that the West and the Southeast ran into. This year is one that we can look forward to. As far as the opportunities, we're still buying real estate at a good price. I think we'll see some bottoming out before the end of the year. Overall, I think 2010 is going to be better than 2009.

Mosca: Chere I know having a similar background to yours having worked for a variety of associations we always like to have our leaders, the folks on the street, be our spokespeople, but we're glad you joined us here today. I know you speak to commercial brokers and agents from across the country, and I'm wondering if you could share maybe a little bit about what you're hearing from them?

LaRose-Senne: What we hear from them most often now is they're really focused on advocacy. What's going on in Washington? How are the new regulations? How are the discussions that are going on? Everything from that to the state of the union, how does that impact my business? How can we utilize our relationships in Washington in order to make that better? Obviously, a lot of the issues regarding financing and the banks that all is wrapped up in DC.

Walker: It's a good time to look at real estate and buy it. If you come back to the fundamentals of real estate in general and look at properties that are in the marketplace you need to identify number one the type of property you are comfortable being involved with, whether that's multi-family, office, retail, industrial etc. Then you need to look at that market, analyze it carefully and look at that marketplace and see what's occurring, where the best possibilities for investment may be, and then analyze the property that you're interested in very carefully. Check out the strength of the tenants, the cash flow, what the internal rate of return is, and the expenses. Each area has a unique expense situation you have to deal with such as taxes or utilities that may be higher in one area than another and impact your bottom line. So, remember the basics, the fundamentals. A big issue is whether or not you're going to be able to finance the property. If you've cash obviously you're going to get a better deal on the property, and you're not going to have to worry about the financing.

Mosca: I know you were in DC recently. Did the topic of commercial financing come up down there?

Walker: We did not meet with any specific legislators the last two days but we did have a planning meeting, getting ready for the upcoming year and preparing for what we need to do as far as advocacy goes. NAR [National Association of REALTORS] prepared a letter for the secretary of the treasury, Tim Geithner, and also to the chairman of the Fed, the honorable Ben Bernanke. That letter, signed by 79 congressmen, requested that Secretary Geithner and Chairman Bernanke encourage broader lending by the banks and the different lending organizations, in an effort to help stabilize the commercial real estate market. That letter has gone out. It's now hopefully going out to lenders and that we'll get some traction with them in opening up the marketplace.

Mosca: A lot of the advocacy that NAR Commercial supports is also on a state and local level as well. Talk a little bit more about the national efforts, what's happening, what you are hoping to do and accomplish in 2010?

Walker: To wrap up, the letter that went to Geithner and Bernanke asked them to act now to alleviate the credit crunch. We also spearheaded the Commercial Economic Real Estate Outreach group, where we brought in 19 commercial real estate industry firms and organizations to discuss the issues that we are dealing with in the commercial area, both legislative and regulatory. We talked heavily on the finance issue. That's what generated or started this letter to Secretary Geithner and Chairman Bernanke. We are trying to help the banks understand that this is not just an issue coming from NAR or the Mortgage Bankers Association. This is coming from 19 different groups that are involved in the commercial real estate industry. One of the problems that banks run into are they are getting conflicting signals. On the one hand, the Fed is requiring them to have certain reserves and being careful in the types of loans they make and on the other hand, they are telling them to be more lenient in redoing existing loans, so there is some conflicting signals going out there.

Mosca: Any examples?

Walker: As an example, you have a loan that the payments are being made on, but because of a change in the marketplace, decline in the values, or maybe the cash flow has dropped down below debt coverage ratio. The banks are now saying this is a nonperforming loan. The payments are still being made. The payments have never been in default and yet it's a nonperforming loan. We need to correct that dichotomy and allow for the banks to go in and renegotiate that loan or reevaluate it and let that loan stay in place thereby not putting that property back on the market and further causing a problem or decline in the marketplace. That's just one example. There are other examples but it's just a matter of using some common sense and also taking out of the dangers indicated within the CMBS market. The IRS has made a revenue procedure change to where a taxable event doesn't occur on behalf of the CMBS provider and they lose their tax status, they can make some loan modifications prior to them going into default so that the property doesn't come back on the market or does not go into default. By making some modifications in IRS rulings, by working with the Fed and with the Treasury, hopefully we can make things easier so that banks can get back in the lending process and not be damaged when they do that either from a tax standpoint or from the asset base.

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