The following is an excerpt from “Four Quick Questions… With Evercore’s Martin J. Cicco” from REIT Magazine. To read the complete article, CLICK HERE.

REIT Magazine: How do you think the recent downturn has affected people's view of REITs?

Cicco: While the extreme volatility surrounding REITs in late 2008 and early 2009 was unsettling, REITs have clearly demonstrated their advantages over the past year, most importantly: liquidity for investors, prudent capital structures, transparency and access to capital.

While many private investment vehicles are in distress as a function of too much leverage and acquisitions made at the peak of the market, REITs have spent the better part of the last year fortifying their balance sheets.  As a result, REITs have more than “weathered the storm” and have regained a substantial portion of their equity value, while investors in many private vehicles are left to wonder what their investments are really worth and when they will be able to access the capital they have tied up in these vehicles.

For these reasons, I would not be surprised over the next several years to see REITs obtain an increased market share of commercial real estate ownership versus private investment vehicles.

REIT Magazine: We're half way through 2010. What do you think is in store for the market in the second half of the year?

Cicco: In a word: uncertainty. Macro forces once again appear to be what the markets are focused on and given the unstable situation in Europe currently I would not be surprised to see a return of volatility to all major asset classes, including REITs.

The good news as opposed to a year ago is that the U.S. economy seems to be on stronger footing and REIT balance sheets are in much better shape. The two key variables I am most concerned about are when will real estate fundamentals begin to improve and what will happen with wave of debt maturities in 2011. The job growth report for April was encouraging and if we get similar readings over the coming months we should start to see an improvement in occupancy rates for apartments and office buildings. 

Additionally, improving consumer confidence should bode well for retail real estate. In the face of a relatively benign supply picture, this should clearly be positive for real estate fundamentals. The more difficult issue to quantify is what will be the resolution of all the upcoming commercial real estate debt maturities. While this is not necessarily just a 2H 2010 issue, REIT investors will be looking ahead in order to gauge the likelihood that these maturities can be met without significant market disruption.

Although the unprecedented interest rate environment provides a cushion, a functioning CMBS market will be necessary to handle the upcoming wave of maturities.