PROGRAM SUMMARY

December Program: CREW DC Luncheon--The Credit Crunch

Moderator:
Carter McDowell
Chief Legislative Counsel for Banking Issues
American Bankers Association

Panelists:
Barbara Gertzog
SunTrust Bank

Jeff Neal
Monument Realty

John Duffy
HFF

CREW Members and guests gathered to learn more about the recent credit crunch – how it happened, what exactly is going on, and when will recovery begin. Though his comments were off the record, Mr. McDowell expertly illustrated the current state of affairs in digestible terms – likening money to the oxygen of the economy, and banks as the circulatory system.

Panelists agreed that underwriting standards have tightened as a result of the changing credit market, but that there are still copious amounts of capital seeking placement, so liquidity of equity will probably not be a problem in 2008. Construction starts are expected to drop drastically in 2008, on the other hand. Mr. Duffy also noted that the number of bidders on a given deal has dropped off dramatically, though pricing is still quite competitive. Winners include low leverage, all-cash buyers and REITS. Smaller deals are also easier to finance in the current market as compared to deals requiring large loans.

The experts of this panel concurred that current market conditions encouraged a return to quality, both in real estate product and in the types of customers with whom banks will be making competitive deals in the next 12-24 months. While we may not have seen the worst of the credit crunch, area market fundamentals seem well positioned to weather the storm.

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