In the second of a series of seminars presented Tuesday by the University of California, Irvine, the focus was on issues affecting real estate management. Fosheim moderated a panel discussion regarding the best way to own real estate today--either through a private or public REIT.

For Donahue Schriber, a Newport Beach-based private REIT that transitioned from investing in large shopping malls to smaller local shopping centers in the mid-1990s, being a private REIT was the answer. "Our company has been growing around 15% a year," says Tom Schriber, a principal in the company. "Retail has historically been a low beta business. As a private company there are still opportunities to raise capital. We ended up with three investors who liked our strategy to stay in California and believed in the retail sector."

As EVP and CFO of Kilroy Realty Corp. of Los Angeles, Richard Moran says his company's REIT, which invests in low-rise, office campus-style product and industrial properties, saw an opportunity for the long-term by going public in early 1997.

"We're focused essentially in Southern California from Los Angeles to San Diego," says Moran. "The average project for us is $20 million. By and large we have smart competitors. It was clear our company had to do something different."

Kilroy's reasons for going public included diversification along a wider range of projects, the ability to do things on a larger scale (they do $200 million a year in development), stability and continuity for the principals and staff of the company and some liquidity for the principals, Moran says.

Marc Ley, SVP of capital markets and CIO for the Irvine Company, says his company toyed with the idea of taking the whole company public in the early 1990s, but opted instead to take Irvine Apartment Communities public as a REIT with an initial $1.1 billion IPO. But later in the 1990s the company went private once again.

"Why go private? There are fewer growth constraints as a private company and no potential conflicts of interest among shareholders," Ley says. "The size of the business model was at our discretion, and management was more focused on business rather than stock options."

IAC grew 230% as a public REIT. But the lesson learned was that being public was not for everyone because of volatility, deep business cycles and problems at the management level. Ley left open the possibility that the Irvine Company could go public again if the market conditions are right, but not now.

Fosheim remains positive on the outlook for REITs. They performed well last year, and their business model will continue to evolve and grow this year, but at a moderate pace. Consolidation and privatization of the industry will continue, although at a slower pace than before, he says.