"When the financial community saw that the world wasn't comingto an end and the banking system wasn't going through Armageddon,the focus started to shift to where the value was, and it wasclearly in the REIT sector," says Schonbraun, who's also head ofFTI Consulting's global real estate practice. "They're generallywell-capitalized, low-leverage companies, and they're going to bethe most powerful over the next year, because private capital justhasn't returned to the marketplace in any meaningful fashion."

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With about $20 billion in public equity raised last year, REITsrallied from a nosedive in their stock values following the WallStreet meltdown of September 2008. "In hindsight, it's clear thatthe REIT stocks took an early hit," Schonbraun says. "They weremarked to market way before the private market. The public marketsmay overreact at times, but they tend to be right. Having beenbeaten down as far as the REITs were, they became a goodopportunity on a relative basis."

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Some of those REITs that successfully raised funds werelong-established players such as Boston Properties and SL GreenRealty Trust, while others were newly minted. There will be morewhere they came from, Schonbraun says.

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"At the end of last year and the beginning of this one, we sawwhat seemed to be a large door opening and a wave of new REITscoming out," he says. "Over the past few weeks, the number of IPOshas backed up a bit. I'm not sure whether that had to do with someindigestion over all these companies coming out, or the broadermarket getting beat up. But it seems clear to me that you're goingto see a number of IPOs in the marketplace."

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Schonbraun predicts that for institutional investors with cashto invest, REITs, rather than assets, will be the vehicle ofchoice. In addition to the liquidity offered by REITs, he says, thepublic markets are "marked" daily, thereby providing institutionalinvestors with a clear picture of the state of theirinvestments.

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In turn, Schonbraun predicts that REITS will invest in a diversearray of property types this year. Student housing, healthcarefacilities, self-storage and multifamily properties will all beattractive sectors as far as REITs are concerned.

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As for private capital, it will get back into the market whenliquidity does, says Schonbraun. "Without reasonably priced debt,it's extraordinarily difficult for private money to come into themarketplace," he says.

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When that begin to occur, Schonbraun predicts more transactions."When there's more buyers and sellers, there will be a validationof value," he says. "Surprisingly, there are more buyers right nowthan sellers, because there's very little forced selling. In fact,it's difficult to validate where prices have adjusted to."

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Debt maturities will spur sellers to act, as will the need forprivate equity firms to return proceeds to limited partners.Additionally, Schonbraun cites recent changes to REMIC rules as acatalyst for more proactive solutions to CMBS servicers. Moreover,he says banks may be more inclined to work out their commercialreal estate loan portfolios as their own profits increase.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.