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NEW YORK CITY-Right now the real estate cycle is hot; prices, values and returns are escalating; and liquidity is unprecedented, with the industry targeting $200 billion in sales for 2005. This is according to Dean Adler, co-founder and principal at Lubert-Adler, who was the keynote speaker at the second annual RealShare Structured Finance this morning.

Adler told the audience of approximately 200 that real estate has become an accepted asset class, it still remains a bargain and with greater liquidity comes less risk; however, all three factors go together: both up and down. "When capital steps in, prices rise and returns soar," he explained. "But when there is too much money, too many parties and poor underwriting, everything suffers."

But where does that leave us today? "It's a joke how much capital is out there," Adler added. "You can borrow mezzanine at 95%. It doesn't make sense." Lenders are basing loans on how quickly they can re-sell the asset off the balance sheet and there is a lot of short-term thinking for long-term assets, according Adler. In addition, when it comes to the parties involved, real estate used to be dominated by operators who add value but now the universe has broadened and capital is everywhere, from hedge funds to traders, for example.