Reducing leverage by buying back debt at a discount was one strategy being employed by CapLease Inc., iStar Financial Inc. and Lexington Realty Trust, all based in New York City, and it seems likely they will continue to do so.

"We've made great progress with respect to our overall leverage," LXP president and CEO T. Wilson Eglin during his REIT's February 25 conference call. "This trend is likely to continue in 2009 and we view the repurchase of our debt at significant discounts as a great opportunity to create value for shareholders, and we expect to continue to use our financial resources to retire debt at attractive discounts going forward."

Another strategy for boosting liquidity during 2009 will be select asset dispositions.

In 2009 CapLease's balance sheet strengthening moves will include asset sales, chairman and CEOr Paul McDowell reported on the REIT's February 26 call. CapLease has identified approximately $50 million of loans and about $250 million of properties for potential sale, the CEO reported.

The primary criteria for which assets to sell is in-place, assumable debt, "which makes them attractive in the marketplace," McDowell said. The REIT will also give particular attention to properties that have some component of their debt on it term facility, so that a sale would help pay down the facility debt.

"Although we have just begun the sale effort in earnest, we have some visibility on sales," McDowell said. "We've gotten some traction on the sale of both loans and properties."

After selling 17 assets for $49.5 million during the fourth quarter, LXP is likewise looking to asset disposition and capital recycling this year. Eglin reported that the company is currently marketing for sale about $400 million of properties, to create additional liquidity to repurchase debt at a discount, and is also focusing on properties with in-place, assumable debt.

The company currently has good visibility on about $85 million of dispositions at an average cap rate of 8.2%, Eglin said, adding that for properties with assumable financing "there's a decent market right now."

iStar Financial has recently taken advantage of investors' preference for long-term credit tenant lease assets by selling a number of such properties for what CEO Jay Sugarman termed "reasonably strong pricing." While the company does not want to sell long-term stable assets that are the core of its CTL portfolio, "where appropriate we have been peeling some of those off," he said.

In the CTL sector, Sugarman added, the market is receptive to assets that will be solid for the next several years but fearful of anything with rollovers or significant exposure to current economic conditions."Long-term CTLs that have a solid credit paying for the next seven, 10, 12, 15 years seem to be very much in favor in the marketplace," he said.

Needless to say, transaction volume was down tremendously in 2008 compared to recent years, and no one in these circles appears to be making a guess as to when the debt market improve enough to spark an uptick in deals. But there is hope it will happen.

"We remain hopeful that we'll be able to overcome the current economic challenges and difficult market and make some more acquisitions this year," said Gladstone Commercial Corp. president and CIO George Stelljes III during the McLean, VA-based company's February 26 fourth quarter call. "Once the long-term mortgage market becomes more readily available, we intend to continue to build our portfolio."

In the meantime, though, Gladstone intends to retain its capital in anticipation of future buying opportunities. And from the perspective of Gordon DuGan, president and chief executive officer of New York City-based W. P. Carey & Co., which is actively raising equity for its newest non-traded REIT fund, while finding debt in today's market is like finding a needle in the haystack there is some cautious optimism about it getting better.

On the bright side, because of the difficult capital environment, Carey sees good investment opportunities. "We're able to get very attractive investments on a risk-return basis," DuGan said during the company's February 26 call. "Where there's this much fear there's opportunity."