Asked about the role of REITs in today's market, Hersh noted, "in general, REITs have had the mantra of modest leverage. And to some degree, public investors are making a bet that well-positioned REITs will be strong survivors of this debacle," which makes sense, he added, "if you look at the fact there is $1 trillion of securitized debt and a precipitous decline in values, combined with fear and uncertainty in the market." As a result, capital has flowed in significantly to the REIT sector. Still, the only investment opportunities Mack-Cali has seen thus far are in secondary product, which, according to Hersh, "we are not interested in. We will know when to the pull the trigger, but we have not seen any indication that it is time." He added that it could be another two or three years before the company invests.

Following Hersh's remarks, Cocoziello asked Russo where we will be one year from now. "I don't think the market will be significantly different," he replied. "We are getting close to the day of reckoning, but we're not there yet." Russo added that the devaluation of assets has the potential to create major problems for owners, especially with some properties seeing a 20% to 30% decrease in value over the past year. "In late 2010, things even have the potential to be a little worse," he concluded. "Fundamentals are not yet improving," Hersh chimed in. "But we should start to see some economic expansion over the next year or two." Still, he said, "the $800 billion, or so, of securitized debt that is coming due is a real risk to the system."

Hersh agreed with Russo that asset devaluation is a major hurdle. "Stuyvesant Town in New York City is the poster child for devaluation," he said, noting that it was purchased for $5.4 billion, not including capital requirements. "The buyers bet on continued economic prosperity and deregulation of rent control." Looking ahead, Hersh predicted that banks will take write-downs and try to recreate value over a period of time.

Like most meetings in the Garden State, the night would not have been complete without a debate about New Jersey's ability to attract new business. "Can the state really be business friendly?" Cocoziello asked.

Russo responded in the affirmative, "Absolutely. My personal experience is that it's difficult to get approvals, but New Jersey has the tools to compete with other states." However, he noted, "the state needs to be more aggressive and proactive. It will be interesting to see what happens after the election because there is certainly some room for improvement."

According to Hersh, the state has made a good deal of progress through initiatives such as Smart Growth. "And while the tax burdens are excessive, they are not outlandish," he said. "However, we have some very aggressive neighbors so we need to do more." When it comes to image, Cocoziello thinks New Jersey has its work cut out. "The image of the state is appalling," he said. "And more needs to be done to counter this impression."