Former Federal Housing Commissioner (1989-90) C. Austin Fitts. now president of Hamilton Securities in Washington, sketched a picture of the commercial real estate finance industry of the future in an interview with The Mortgage Marketplace. Fitts is president of the Hamilton Securities Group Inc. a real estate in Washington. DC. Following are excerpts from the interview. Additional excerpts will be published in future issues. MMP: What's your prescription for the commercial real estate market?

Fitts: In order to work, the first thing that needs to happen in the market is for the current outstanding debt to be restructured. and by that. I mean to be rewritten into an A and B and a C piece. Second debt needs to be put in a form where it is either securitized or it is held by an entity that can access the capital markets. It's critical that the debt be held by an institution that can freely access the capital markets without the burdens of regulation and capital requirements. The debt must be made more liquid. whether it's through securitization or it's a variation. liMP:. What is your goal at Hamilton Securities? Fitts: After that process of debt restructuring occurs in the mortgage community. Hamilton Securities is aiming to do the equivalent for real estate equity. We are returning to a world where real estate profit is determined by cash flow. not primarily by inflation and rising asset values. And several things are going to happen. First. the company or the organization that can maximize its cash flow is the one that can provide the best services (i.e., get the highest price and the lowest cost). On the service side. what that means is that instead of buying and selling assets for profit. companies are going to he in the business of delivering housing services or office space services that are attractive to the market. And that will require a real change in attitude.

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