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After marathon session of megadeals and capital-raising last year, the real estate industry--spearheaded by real estate investment trusts (REITs)--is anticipating an even busier period in the next few years. During the last five years, REITs, which are mutual funds that raise money to invest in real estate, have been responsible for pumping money into the beleaguered real estate industry.
But they are not yet omnipotent. So far they own just more than 5% of the real estate in the country--leaving tremendous potential for the REIT revolution to continue. But what kind of stamina do these investment powerhouses have, particularly with the bullish stock market long overdue for a tumble? Most industry watchers believe that REITs can only grow in strength and influence.
Bruce Schonbraun, managing partner of Schonbraun Safris Sternlieb & Co., a real estate accounting and consulting firm in Roseland, says that the REIT revolution is in its infancy. "I am firmly convinced that the securitization of real estate is only just beginning. Rents are rising and vacancies are decreasing. Only when we get closer to a market equilibrium will opportunities start to change. There is still time for that," he adds.
In the first quarter of 1998 alone, REITs raised between $3 billion and $4 billion in the market, Schonbraun points out. Saddle Brook-based Vornado Realty Trust, one of the country's most aggressive REITs, raised $401 million earlier this month through the sale of 10 million common shares. Also, Mack-Cali Realty in Cranford, a $3-billion REIT that was formed last year when Cali...