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Institutional Investors Still Waiting

“For institutional investors, even if you're an all-cash buyer you're probably going to want to remain on the sidelines because the conventional wisdom is that we still have a ways to go before we bottom out on the pricing in the industry,” says Steve Pumper, executive managing director of Transwestern's investment services group in Dallas. “There is still a bid/ask spread and people are going to hold off.”

One glimmer of hope is the latest Congressional action, which has institutional investors learning a whole new set of acronyms when it comes to commercial real estate investing. Thanks to the new Emergency Economic Stabilization Act of 2008 (EESA) signed into law on Friday, Oct. 3, the Troubled Asset Relief Program (TARP) is quickly gearing up to buy billions of dollars in toxic assets from financial institutions to help unfreeze the credit markets.

While the legislation is designed to prop up strained balance sheets of Wall Street investment banks and Main Street commercial banks alike, many industry observers believe the legislation will do little in the short term to quell continued tight credit issues and stem falling property values.

“When I made a prediction earlier this year that the values would fall by as much as 30%, people thought I was off-base,” said Mike Kirby, director of research for Green Street Advisors. “The latest predictions are more than this.” Kirby made his point during a panel discussion at last month's annual Pension Real Estate Association conference.

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