REITs have always been a popular play in the industry and as therising and falling tides of the recession reveal the worst from thebest investments across industry divides, a varied search for yieldhas begun. American Realty Capital is betting on variety not onlybeing the spice of life, but the remedy to what ails investors.Currently, they have raised money for five different REITs in thenon-traded space and recently passed the $1 billion mark for equityraised. American Realty's Nick Schorsch sits down with GlobeSt.comto share his view of the future.

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GlobeSt.com: Give us a little background on how thecompany is working.

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Nick Schorsch: We represent over 100,000advisors and reps that are in the marketplace, which is a verybroad distribution for retail. And we are seeing many of thesebroker-dealers responding very well to the fact that we're offeringmultiple product. It's very similar to what happened in the '80sand '90s with insurance; where agents began to sell policies frommultiple parties.

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So what we're doing is selling multiple REITs on one platform.And the exciting news is that the market is really responding. Andit's one of these situations where the retail investor benefitsfrom having options, so that if you were going to sell an advisorone product in one REIT, and you only have office and he doesn'tlike office, you may have net-lease or you may have healthcare, youmay have other products to sell them.

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You can't solve the problem with the system that created it. Ifpeople do the same thing the same way every time, you're going toget the same result. Changing the paradigm, offering new productsthat heretofore have not been actively marketed; it gives theinvestors lots of choices and we're seeing a very positive responsefrom them.

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GlobeSt.com: Have you seen any sectors that are moresought after than others, right now?

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Schorsch: Yes. We're seeing both our healthcareand our net lease product--one net lease being mostly investmentgrade, all single-tenant, high-credit quality--they're seeingdemand because of the strong yield aspects and that they have good,solid growth; particularly when the healthcare sectors has embeddedgrowth because of the aging population and with the medical officespace. We're seeing a lot of interest in our net lease REIT becausewe have such a high investment grade credit component and thoseassets historically have not been available, so that's a uniquefeature to that.

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But we're also seeing a lot of demand for our New York RecoveryREIT, which is all about buying some Manhattan office and retail;we're seeing good strong demand for that. It gives people a blendto their portfolio and some very strong demand for our mortgageREIT--which is called UDF--because people want yield and that'swhere you're going to get yield. It's first mortgage, it's notmezzanine or anything like that.

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But we're bringing these to market based on the fact that we'regetting demand through the advisors for these type of products, sowe're listening to what the advisors are saying and it's causing usto modify our pipeline of products, rather than us putting out aproduct and then saying, "We're hoping we sell it."

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GlobeSt.com: Are you seeing a lot of non-traditionalinvestors?

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Schorsch: A lot of what we see these days arepeople who are not currently investing in REITs at all; they'refixed-income buyers. We're seeing a switch because thefixed-income buyers are looking for yield. And we're also seeingpeople from the stock market. There's a lot of money movingnegatively out of the stock market. People are coming out of thelarge cap into real estate, which is a little less risky with ahigher current yield but less upside. So they're picking yield overcap appreciation. It's a fundamental shift in the type ofinvestor.

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GlobeSt.com: How do you see products playing outover the next two years or so?

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Schorsch: I think you're going to see moreproducts, you'll see more choices.

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GlobeSt.com: Diversification of what's comingout?

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Schorsch: Absolutely, I think they'll be lessand less people going with singular names and they're going to gowith bigger concepts. Historically, publicly-traded REITs have atotal market cap of $400 billion, less than that. That's about thesize of Exxon. All 106 of the REITs are the size of onemultinational. That's not a huge market. And they own about $1trillion of assets. So that's 15% of commercial real estate in theUS. So the other 85% is owned by the funds, by the retirementplans, the endowments, the insurance companies, etc.

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We're seeing a general trend for non-correlation. People want tobuy real estate for the same reason institutions want to buy realestate: They want to have an uncorrelated asset. They don't want tobe in just another equity that moves. If you look at the MorganStanley REIT Index and the S&P, you'll see that they correlatein '05, 06, 07, identically. They go up and down together, becausethey're in the index funds. If you buy the S&P, you're gettingREITS. So the REITs work. They trend with the stocks.

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GlobeSt.com: People are getting closer to theirinvestment.

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Schorsch: All these things have decoupled;they're all working independently. And people who buy real estateare buying it for their specific attributes. They want to buy hardassets, so the non-traded REITS and the funds and all the otherderivatives are out there for them to look at. And we find the moreproducts we offer, the more potential clients that look atit. They say, "I don't like office or I don't likehospitality, but I like malls, I like industrial real estate. Ilike net lease." They find something that resonates. Yes, choicesare definitely on the rise. We think there will be 30-40 companiesover the next five years that will come into this space overmultiple sectors. And we think that's very positive for theindustry, it broadens the industry.

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