There may be some improvement in the availability of financing for real estate in 2010, but not much, according to panelists at a University of Michigan conference Wednesday.

"Preparing for the New Reality" is the title of the event, a joint effort between U-M and the Urban Land Institute, and the four speakers on the financial system didn't paint a pretty picture of that reality.

Tim Marshall, president and CEO of Bank of Ann Arbor, said there is no shortage of people looking for loans, but the quality of the applications is not what it once was, often due to falling land values.

"We get presented these opportunities, but none of the opportunities are like they were three or four years ago," he said. "The appraisal market is very difficult."

David Baker, a senior vice president at KeyBank's Real Estate Capital division, said the new reality of stricter scrutiny for all potential borrowers is here to stay. He said that over the past six months, banks' focus on loan-to-value ratios has shifted somewhat toward looking more at existing cash flow and how it relates to debt service.

"New deals are only getting done (for borrowers that have) relationships that are well-established with banks. As we start to come out of this cycle, we're clearly going to see much more conservative underwriting standards for several years," Baker said.

Moderator Dennis Bernard of Bernard Financial Group in Southfield asked panelist Steven Chaben of Marcus & Millichap about the gap between expectations of buyers and sellers of real estate.

Chaben said that when the financial crisis hit, prices were at historically high levels, pushing sellers' expectations way above what buyers were willing to pay once the downturn took hold.

"Over the past two years or so, there's been a tightening of that gap," he said. "It's still wide, but probably more stable. Where it goes is the $64,000 question."

Marshall said new rules from federal bank regulators may offer some relief. He said a set of regulations released this week will allow banks to avoid writing down the value of a loan if it continues to perform, regardless of the underlying real estate appraisal.

When the focus of the discussion turned to how to actually make money in this type of recession, Bernard recounted a transaction he recently helped complete in which a buyer purchased a property from a lender with a debt load that ended up being $29 per square foot.

"He was in between five buildings that had debt at $100 a foot. He lowered rent and leased 60,000 square feet in six months," Bernard said. "He made money."

In August, new owners of commercial real estate off South State Street in Pittsfield Township started offering space below the established market rate.

Chaben said opportunities to buy real estate at hugely discounted rates will be abundant in southeast Michigan, and determining whether they are worth pursuing is based on a simple question: Do you think the Michigan economy will rebound, or not?

"Those buys in southeast Michigan going to be more dramatic than anywhere else ... if you don't believe there's a future in this economy in southeast Michigan, you should leave right now," he told as the audience of more than 200 in a ballroom at the Michigan League. "Everyone in room believes there is, that's why we're here ... you believe the future of economy is right here, outside front doors of this building."

Freelance reporter Dan Meisler can be reached at danmeisler@gmail.com.