GlobeSt.com: You were quoted in Forum as saying that JER has to go to locales and property types that are less favored, which demands a clear understanding of the right point in the cycle. How do you see that philosophy driving your investments going forward?

Buckley: One key element of our strategy is the relative-value approach, both to property sectors and geographies. We look at when you should be going in and when you should be going out. For instance, we've been involved in the healthcare sector for more than seven years and in prior investment vehicles we focused on assisted-living. We saw an opportunity for superior risk-adjusted returns because the industry was capital-starved, but we expected capital to return. It did, yields compressed and we sold out of assisted-living. But while that was happening we were seeing the beginning of a recovery in skilled-nursing, which at the time was also capital-starved. It's recovering and performance is strong, but it still doesn't have the liquidity of other sectors. So we'll continue to invest until there's too much capital. Then we'll most likely sell into that market and look into other sectors that might be more interesting.

GlobeSt.com: Alternative plays are becoming less alternative it seems. Someone even referred recently to the six prime food groups, meaning seniors housing. Does that push you even further out on the risk scale?

Buckley: What other people view as alternative may not be core for us, but we've been investing in those six sectors for 25 years, just in different relative concentrations at different points of time.

GlobeSt.com: Could you break down your percentages?

Buckley: Residential in its various forms is probably around 40%, and that would include multifamily and for-sale. Some 20% is lodging. Some 15% is healthcare, retail is about 5% and the balance is office and industrial.

GlobeSt.com: Do you expect those percentages to shift much in the next 12 months?

Buckley: Yes, a little. We tend to stick to those six groups, but the pie chart changes around the edges, expanding or contracting given our relative-value approach. We watch the trends in each sector and ensure that we know when the inflection points are so we can make our investment decisions. Lodging, for instance, has been changing a little. Ten years ago it was only 15%. For-sale residential will most likely go down a little. It's a sector we are interested in as restructuring opportunities present themselves, but it'll go down a little in the short-run and office will go up a little.

GlobeSt.com: What new geographies are you exploring?

Buckley: We'd like to invest a little more on the West Coast, and we think we could continue to increase our exposure in the Southeast, given the demographics and what's happening in the economy. The only geography that concerns us a little is the middle of the country and the markets that are directly affected by the auto industry. It's something to watch.

GlobeSt.com: What do you foresee for your European activity?

Buckley: There are some very exciting things going on in Europe, and we will be increasing our investment activity there. We're also interested in other emerging markets--Latin America and Russia, for instance.

GlobeSt.com: How do you define your holds?

Buckley: We consider ourselves medium-term holders, and that's anywhere from three to seven years, which pretty much settles in at five. Average holds have come down a little, which is a function of where the capital markets have been. Once we've met our business plan our strategy is to look at selling investments.

GlobeSt.com: Since June, how have you seen the investment market shifting?

Buckley: There's more opportunity to invest in assets that might be showing some signs of distress. I don't want to go too far out and say there's a lot of distress, because there's still tremendous liquidity. But for example within the for-sale residential market, there's a shift. It wasn't surprising that the air came out of the market, but it happened a little faster and was deeper than people expected.

In the office sector, if a Manhattan building is getting 20 to 25 real aggressive bids, that's great, but it's fewer than last year. In another market, they might get 10 to 15, still great but again not as many as last year. A year ago, if you were looking at brokered deals--and despite what anyone says, everyone does some brokered deals--a broker would call you and say if they didn't get your bid tomorrow and it wasn't 10% higher than the day before you were out of luck. Now if there's a bid date you can call the broker and get another day.

None of this is dramatic, but it does tell me that buyers are becoming a bit more discerning in all areas. When there was so much capital in the market there was more opportunity to mask your underwriting mistakes. With a little less capital buyers are becoming more discerning. There's a little more macro risk, a little more interest-rate risk. It doesn't mean it's not competitive. It doesn't mean it's not difficult to find transactions, but the rate of growth has leveled off. Every broker will tell you that's not the case.

GlobeSt.com: And what's the upshot for returns?

Buckley: It depends on when you bought. I don't have a crystal ball, but I wouldn't be surprised if cap rates don't move up a tiny bit. On a national basis, I wouldn't be surprised if they come in 25 basis points higher.