Industry hopeful as some deals tank.

The roiling stock market has hit some residential purchasers, publicly traded real estate stocks, investment bankers, lenders and borrowers, but so far, hasn't deflated the optimistic attitudes of most real estate executives. And those with dollars to park from recent sales now see the return of the adage: "Cash is king."

Meanwhile, the conduit lenders are pulling back commitments and letters, and some tell friends they are unsure of how to price their loans.

Several lenders lost money on their last securitization sales of bundled deals and now don't even have the cash to lay out for closings. Those that do, however, want to keep the cash for the smartest buys.

"We don't even know how to price," said one investment banker, who asked not to be identified.

Many of the biggest names that have propped local investors, such as Lehman Bros. and CS First Boston, have admitted to losing money and pulling back from deals. CS First Boston, which helped begin the climb from recession by making loans to investors such as Steven Witkoff, has now found the chute that goes back to the beginning of the game, and wants a premium in both bricks and interest for their bucks.

"The Wall Street houses have found out they are getting beaten up on the pools because the ultimate buyer is not taking the rates," said Richard Pergolis, a principal of Pergolis Swartz Associates, a major mortgage brokerage. "That's why they are taking the pools back and re-quoting deals."

Deals that the firm was negotiating, were in the application phase or in the commitment stage were being re-traded on spreads, he said, because of the uncertainty of the lenders being able to sell the final paper on rates.

In the recent past, Pergolis said, they had been closing rates in the mid-sixes. One $38 million deal closed with rates at 6.625 percent and 6.75 percent.

But another deal that closed last week after the market tanked was locked in at 6.875 percent.

"There were other deals that were not that fortunate," he added. "They couldn't hold onto the rates and told us they will have to re-trade the spread, and it's only good for a certain amount of days, and they wanted a spread locking fee.

Now, he says, the lenders are coming back with changes in spreads anywhere from 10 basis points to 50 basis, depending on the type of property or if it is a conservative or highly leverage deal.

Still, with loans still being made in the 6 to 7 percent range, compared to the 10 to 14 percent rates obtained on the balloon loans that are now rolling over, Pergolis snorted, "You would think the borrowers would be happy. But borrowers are not happy."

He is still refinancing loans into 10-year balloons with rates based on a 25-year payout schedule.

"Now they can come out into the better rate," he noted. "We're still closing deals. What's occurred is hurting most of the Wall Street houses, but it's had a sobering effect on borrowers, and they will now go back to the traditional lenders that can close with them on a rate basis and not a spread basis," Pergolis said, adding "Go ahead and buy if the new spread works."

Last week's stock market and lending events came in "a ripple effect," Pergolis explained, because the overseas markets and currencies were unstable. "There was a flight to Treasuries, and our rates were off Treasuries, and the lenders were fearful the spreads were too narrow," he said. "So they were going to hold back, or get a higher spread because they didn't want to get caught with the paper or take a discount."

Simply, as the currencies were devalued in Asia, China, Japan and Russia, and the arbitragers lost money, it also made the cost of the overseas goods cheaper against the American dollar. That prospect for the future means American goods would be more costly, and the products might not sell as well as those made overseas, causing less that would need to be manufactured, and therefore less need for labor and the space that needs to be occupied for both production, warehousing and offices. But right now, those are still problems for the future.

"If the world disappears on us, we still have huge rental increases coming in Class A office space in Manhattan," noted Anthony Malkin, a partner with W&M Properties, large owners in New York, Fairfield, Westchester and other states. "People don't stop renting space overnight. There is zero unspoken for new supply."

Malkin is one of those seeking deals in which to park capital to shelter gains made from other building sales, and he is not worried about the bad news.

"There is a tremendous amount of demand for space in the pipeline and no new construction," he noted. While he sees conduits as being "handicapped" and real estate investment trusts "incapacitated," he still sees a pent-up demand from pension funds for purchases, and while he notes they do take their due diligence seriously - as they have as they have vetted his leasehold interest at 1185 Avenue of the Americas, which is still on the market - he says they are "credible buyers."

Early last week, Stephen Anfang, an experienced adviser to asset laden major corporations and substantial investors, predicted that lenders would be looking more carefully at their forward loans.

"They are going over every major department at this very moment," he said. "They can't do anything about what they did, but they can about what they were about to do."

In the residential world, of several brokers canvassed, only Barbara Corcoran, head of The Corcoran Group, has found instances where the buyers were about to sign their contracts and backed out, blaming the stock market dives. Out of 51 transactions ready to be signed between Thursday and the following Tuesday, five tanked.

"I will probably find that my brokers have already resold those apartments for more money this week," she laughed. "The broken will resume working with the [buying] customer when the customer calms down, and at that point they will probably pay more for a similar apartment."

And despite the cancelled contract signings, "Not one seller reduced their price," said Corcoran. "I thought that some sellers would get nervous, but no one reduced their price."

When the market went south in 1987, people had a different view of real estate, because the Eighties had distorted the investment perspective from long-term to short-term, said Alan Rogers, managing director of Douglas Elliman.

"They tried to make it short term and speculative and that [attitude] took a while to [get over and] get back to basics, and that happened in the early Nineties," said Rogers. "People are now buying because it's a home for them and their family. They are looking for a certain lifestyle and to have their family housed in the right manner, and that is the primary concern. We haven't had buyers running around saying, 'How much am I going to make?,' and no one is talking about appreciation. What they hope that it keeps up with inflation. And it's done pretty well."

Similarly, Louise Sunshine, who heads The Sunshine Group that is currently selling apartments at 610 Park Avenue and Trump International, among other sites, finds that people are buying these apartments to partake in a lifestyle appropriate for their family and wealth.

"We're in the super luxury niche, and these people have made a lot of money and are very wealthy and have multiple residences," she said.

None of these deals died last week, even though buyers are also paying, for instance, an average of $1,200 a foot for their new spaces at 610 Madison, the closings on which begin this week. Her sales office at 90 East End Avenue opens this week too, and she is not worried about selling that one out either.

Nancy Packes, who is the exclusive rental agent for the new Trump Boulevard apartments, says there is "unlimited demand" even for studios renting at $2,000 a month.

"There is half as much product and almost none for sale, and no overhang of rentals coming out of the sales market to depress the rental market as there was in the early 1990s," she said. "This is also a more diversified economy."

In the 1980's, city developers were constructing about 15,000 units a year, while now, even though there appears to be many new buildings coming on the market, they are only totalling 5,000 to 7,000 units at the most a year. With new college grads, MBAs and relocating executives, not to mention immigrants in need of less costly residences coming from all over the world to New York City, the need for housing is only receiving appetizers.

"Everyone feels the fundamentals of the New York and U.S. economy are so strong that business will be good, and there will be bonuses aplenty," said Clark Halstead, who heads his eponymous firm.

He too thinks there is a shortage of $2,000 studios, and that "newly minted $150,000 MBAs will take these," while all the lower paid employees are commandeering apartments in places like Brooklyn's Carroll Gardens, and many other improving areas.

Corcoran believes the industry has been able to take this latest stock market hit "in stride" because the real estate market is so strong.

"There was actually a sigh of relief ... we now have that shadow on our shoulder out of the way," said Corcoran. "It's not about theory or conjecture, but every buyer is finding they have to pay more the next week. Plus, half the buyers have had the experience of falling in love with an apartment and losing it."

Rogers knows there will be some people who have lost a great deal of money and that Wall Street bonuses could be severely curtained come December.

"A percentage of that money does flow into this marketplace," he noted. But with interest rates low, and people primarily concerned with buying a home, he doesn't think the low or lack of bonuses will hurt the market, as there is so much demand at all price points.

Meanwhile, everyone is retrenching, whether buyers of big properties or small, re-evaluating their portfolios, their price range options, interest rates and tax situations, and recalculating what they thought were their profits.

"We have been focusing on being properly capitalized to have a strong footing going forward," said Malkin of W&M Properties. "We've done a tremendous amount of refinancing. We're looking to close one deal where we have our rate locked in - thankfully - and we are in our own sense preparing for a downturn. That's what we're all about. We're very defensively postured," he said, adding, "Expect the worse and prepare for the worst."