Barry Sternlight and Mort Zuckerman are in the thick of it. Both run REITs that focus on two of the most battered sectors in the business: mortgages and office buildings. Sternlicht, a commercial real estate veteran, took Mortgage REIT Starwood Properties Trust (STWD), public in August, while 72 year old Zuckerman has been running Boston Properties (BXP), an Office REIT, for forty years.

Boston Properties has 143 office properties concentrated in cities hard hit by the financial meltdown (Boston, New York and San Francisco) and one city not so hard hit (Washington D.C.), while Starwood has deployed almost $450 million in cash to buy loans and distressed CMBS since going public.

In these two separate videos, Zuckerman and Sternlicht talk about the current market, property valuations, the economy, and where we go from here. In this interview on January 8, 2010 (click “continue” after the ad”) Zuckerman, says the major markets may have bottomed:

Sternlicht, in a less sanguine Bloomberg TV interview one month earlier (December 9, 2009), is not so sure about a bottom. For what it’s worth, I agree with his primary point: the government’s policy measures with respect to the bank owned commercial loan portfolios has had a huge dampening effect on transaction volume – and therefore price discovery. Many investors are still not sure what these assets are worth. As Sternlicht points out, not all banks are able to hold on, and some owners are also being forced to sell, but the only real game in town when it comes to distressed assets is still FDIC loan sales

Whether you refer to this reticence among bankers as “extend and pretend” or “delay and pray”, there is no question that the lack of selling is delaying the necessary catharsis in commercial real estate. REITs managed to recapitalize last year with billions massively dilutive equity offerings, but without new investments they will remain just that. Instead of delay and pray, we’ll all be better off when the government tells the banks to just “confess that we made a mess”. Enjoy the vids! Chris Germain San Francisco

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