What happened to the funds raised inanticipation of this demand?


Petriella: There are a lot of people out therethat want to make loans, but yield requirements have gone up andlenders are seeking returns anywhere from 15% to 20% IRR. Themajority of deals aren't penciling in to meet thoseexpectations.

| Are banks relaxing even a little bitthe higher underwriting standards they put in place last year?


Petriella: Not really. With conventional lenders,if a bank dislikes even one small piece of a deal or an asset –everything else is fine – they simply won't take that deal on. Itis very black and white right now.

| So where are developers that don'thave the best deals or credit finding financing turning?


Petriella: Financing is out there, available fromalternative sources, but it is expensive. For instance, I had oneclient – a publicly traded REIT -- that needed to raise capital fora project it wanted to pursue that was time-sensitive. It owned twocontiguous assets, 15-acres each, one of which had a debt-freesingle tenant office building. So it raised capital using theequity in that 242,000-sf, $32 million asset.

| From where?


Petriella: From a hard money lender on the EastCoast. Those lenders charge rates that are in the low doubledigits, so as I said, it was very expensive. But the REIT got themoney it wanted for the new opportunity.

| What are the bright spots you see inthe current environment?


Petriella: I am doing a lot of refinancing now onconduit loans made seven and 10 years ago, when the rates were inthe mid 7% range. Getting low 6% now is stellar for them.

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