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There are many facets to this issue. First is the interest rate impact on REIT stock prices, and the negative impact they have as rates rise. While rates were near zero, REITs were a good place for investors to stash funds on which they could get both a current return with reasonable safety, but also an increase in valuation as real estate generally returned to favor and profitability. For several years it was a winning place to be. Now the REIT sector has to compete with bonds for returns on a current basis and, with CRE generally fully priced, and possibly going into slight decline, there is little incentive for investors to be in REIT shares. This is likely to just remain the same or deteriorate over the next two or three years as the ten year rises over 3% and eventually possibly over 4%. For REITs, it just makes it much harder to raise new capital and to grow the portfolio.

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Joel Ross

Joel Ross began his career in Wall St as an investment banker in 1965, handling corporate advisory matters for a variety of clients. During the seventies he was CEO of North American operations for a UK based conglomerate, and sat on the parent company board. In 1981, he began his own firm handling leveraged buyouts, investment banking and real estate financing. In 1984 Ross began providing investment banking services and arranging financing for real estate transactions with his own firm, Ross Properties, Inc. In 1993 Ross and a partner, Lexington Mortgage, created the first Wall St hotel CMBS program in conjunction with Nomura. They went on to develop a similar CMBS program for another major Wall St investment bank and for five leading hotel companies. Lexington, in partnership with Mr. Ross established a hotel mortgage bank table funded by an investment bank, and making all CMBS hotel loans on their behalf. In 1999 he formed Citadel Realty Advisors as a successor to Ross Properties Corp., focusing on real estate investment banking in the US, UK and Paris. He has closed over $3.0 billion of financings for office, hotel, retail, land and multifamily projects. Ross is also a founder of Market Street Investors, a brownfield land development company, and has been involved in the acquisition of notes on defaulted loans and various REO assets in conjunction with several major investors. Ross was an adjunct professor in the graduate program at the NYU Hotel School. He is a member of Urban Land Institute and was a member of the leadership of his ULI council. In 1999, he conceived and co-authored with PricewaterhouseCoopers, the Hotel Mortgage Performance Report, a major study of hotel mortgage default rates.

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