"The Wall Street money spigot has been turned off for many ofthese telecommunications companies," says Jim Clewlow. "Developerswho are shedding core assets to move into telecom hotel developmentare embarking on a very risky strategy. Our models show us thatthese projects aren't as attractive on a risk-adjusted basis asmany seem to think."

CenterPoint is focusing on expanding its relationship with coreclients like web hosting giant Exodus Communications. "These guyswill be one of the players left standing after the skakeout," saysClewlow. CenterPoint leases half its 100,000-sf headquartersbuilding to Exodus, which just leased an entire speculativewarehouse project near O'Hare from CenterPoint. Clewlow saysCenterPoint is scouting for sites to build up to 400,000-sf ofadditional space for Exodus in the Chicago area and has justobtained permits for a 60,000-sf expansion of Exodus' space at theREIT's headquarters building.

Over the past couple of years, telecom startups by the dozenhave been raising billions in equity and junk bonds to fund majorexpansion pushes. Much of the money to pay for telecom hoteldevelopment, and the huge rents these developments support, hascome from this unprecedented telecom financing boom. But startingthis summer, many of these startups began missing optimisticrevenue forecasts and some have had to seek bankruptcy protection.Many junk bonds in the sector are now trading at 60 cents to 70cents on the dollar and the ability to fund further networkexpansion is now in serious doubt.