Capital Markets
view the role of partnering in the
capital stack these days?
Halle: The availability of capital
can be uncertain due to capital
market conditions; hence, main-
taining alternative sources of
funding holds considerable value.
This is a desirable quality in any
business, but some REIT initia-
tives have worked better than
others. The tech adventures un-
dertaken by some REITs during
the dot-com bubble in the late
1990s, when REITs were trying
to compete with Internet start-
ups for the attention of investors,
were a failure. They destroyed
shareholder value and cost the
industry credibility.
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into private funds management
over the past decade have pro-
duced better, though still mixed,
results. Interestingly, the motiva-
tion for getting into these areas
is not much different from what
drove REITs into their tech
misadventures. REI Ts turned
to JVs and funds management
as a way to improve their access
to capital, grow revenues, and
leverage investment IRRs at a
time when the capital market
environment made it very dif-
ficult to compete for assets in the
transactions market. But unlike
the tech initiatives, JVs and pri-
vate funds play to REITs’ core
competencies and their expertise
in real estate, just like Steve said
earlier. The downside to JVs
and the funds businesses is that
they complicate the REIT story,
which inevitably reduces trans-
parency and raises questions
about governance, alignment of
interests, and resource allocation.
However, we believe that these
alternative capital initiatives are
a logical extension of the REIT
platform, which is why they have
been more successful in creating
shareholder value.
Brown: I would add that, as
we look into 2010, we continue
to see REITs utilizing the fund
and/or JV model even though
access to equity and unsecured
debt has greatly improved. We
expect this to accelerate in ad-
vance of the expected increased
level of commercial real estate
transaction activity in 2010.
We believe investors accept the
transparency issues as part of
the acquisition opportunity.
For a discussion of Waste Remedies services
contact Chris Krone at 314.732.0194 ext. 71 or
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REI T: What about the transpar-
ency issues?
Lachance: The REITs have
been unevenly transparent in
disclosing the nature of their co-
