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SAN DIEGO – Questions posed by Arthur Adler, managing director and CEO of Jones Lang LaSalle Hotels, during a breakout session at the Americas Lodging Investment pretty much summed up the current state of the transactions market.

“How many of you are willing to buy this year?” he asked during The Transactions Outlook session.

Hands went up around the room.

“How many of you are willing to sell?” he continued.

Hands went down around the room.

The stark difference in answers to the questions illustrates why the transactions market has been stifled.

“You have to have willing buyers and willing sellers,” Adler said.

Lenders hanging on

Transaction volume in 2009 was 5 percent what it was in 2007, Adler said.

“2010 will look a lot like 2009,” he said. “There will probably not be much activity until next year.”

Lenders are going to have to loosen their grip on the assets they hold on their balance sheets in order for transactions to make a comeback, said Robert T. Koger, president of real estate advisor Molinaro Koger.

“The lenders clearly weren’t being aggressive in (selling properties) because the impairments are so large,” he said.

But some lenders at least appear to be willing to keep these distressed assets on their balance sheets for the long term, said Robert B. Stiles, executive VP and principal of real estate services firm Cushman Wakefield Sonnenblick Goldman. The lenders are better off from a value standpoint by holding onto the property rather than selling into the current market.

“I think you’re going to be surprised at how long some of these lenders will hold assets,” he said. “We’ve heard some special servicers say, ‘If we have to, we’ll hold onto it for 10 years.” Stiles added that loan maturities are still being pushed farther out by lenders.

That strategy by the banks could prove disastrous, Adler said.

“There’s going to be a day of reckoning as this debt matures,” he said.

More deals ahead?

The panelists seemed to disagree over how strong the rebound in transaction activity would be in 2010—if it occurs at all.

“The only way this is resolved is there has to be a securitized market to bring money back in,” Stiles said.

Still, today’s environment should be an ideal time for deals to get done, Koger said.

“The worst is behind us,” he said. “If you’re a buyer, you have to believe things are getting better. The gap between where buyers are willing to buy and where sellers are willing to sell will close … It can’t happen fast enough.”

Patrick J. Deming, managing director of real estate investment banking firm Eastdil Secured, does expect to see more volume in 2010.

“But it will still be very selective and very choppy,” he said.

Adler isn’t so sure.

“If flat is the new up,” he said, “then I guess 2010 will be up.”