For those looking to capitalize or grow their business, the public markets offer the best way to get significant quantities of capital at a cheap price. Because they're lower levered, public companies have equity value and quick access to funds.

"You're going to need large sums of equity to recapitalize these deals, and the public markets are going to provide a good portion of that equity," says David S. Lazarus, senior managing director of New York City-based Edgerock Realty Advisors LLC.

Last year was probably the beginning of the latest wave of IPOs, REITs issued 139 offerings of securities totaling nearly $34.7 billion, including initial public offerings, secondary equity issuances of common and preferred shares and secondary issuances of secured and unsecured debt, according to the National Association of Real Estate Investment Trusts. Nine of those were IPO s that racked up $3 billion in capital.

According to NAREIT, public companies could raise even more capital this year, already through the first quarter of 2010, three companies issued IPOs for $522 million, 17 secondary offerings of common and preferred shares raised almost $2.2 billion and 20 unsecured debt offerings racked up almost $7.7 billion. And whereas most oflast year's funds were used to pay down debt, the bulk of monies collected this year will go toward investment and growth. Within the next two years, the association believes REITs could accumulate more than $580 billion to acquire assets.

Nearly all of the IPOs issued between last spring and today have been blind pools, meaning investors bought shares in the REITs based solely on their confidence in the sponsorship and its investment strategy. The bulk of those blind pools were designed to invest in distressed assets-namely, mortgage debt or lodging properties.

"You're essentially taking a pool of capital with no legacy assets and a team that has a proven ability to deploy other people's money and earn returns," Decker explains. "They say, 'There's a wave of maturities that's coming, and we've got a big, bright pool of capital that we can deploy. We're not going to be dragged down by bad or poorly capitalized investments that were made in the past.''

Perhaps the most successful of the recent IPOs has been Starwood Property Trust, which raised some $950 billion last summer after twice having to increase the number of shares it was offering, its goal was $500 million in the initial filing. The firm has already deployed funds, including the purchase of Corus Bank's loan portfolio.

Almost all the blind pools that have been brought to market to date are targeting distressed opportunities, be it property or debt acquisitions. That's not surprising, with all the talk of the wave of distressed assets to hit the market-not to mention the $1.3 trillion in maturities looming on the horizon-it was a perfect opportunity for firms to pool capital to profit from resulting opportunities.

But, Lazarus says, the market can be quick to change its mind, especially if the opportunities the sponsors expected aren't materializing quickly enough.

"In to day's environment," Decker adds, "the wind's been taken out of their sails a little bit because there just isn't a lot of transactional activity. Until that picks up, I don't know that you'll see the blind pools come back in force."

This phenomenon can be summed up in two words: investor fatigue. Barraged with a plethora of similar offerings, yet with little deal activity, investor confidence has sunk for blind pools, or blank check REITs. A number of firms have had to cut back their offerings due to a lack of demand. Apollo Commercial, which aimed to raise $400 million to invest in maturity opportunities, reduced its offering from 20 million shares to 10 million.

And some IPOs never even get off the ground. Capital Source Healthcare REIT, for instance, in February withdrew its IPO plans to raise $345 million to invest in skilled nursing facilities. And Foursquare Capital, which focused on securitized and commercial whole loans, yanked its $575-million offering from the SEC's shelves.

Investors generally aren't as comfortable with blind pools as they are with IPOs that are backed by brick and-mortar assets because they can underwrite the latter. Until now, real estate players holding performing assets haven't really had to access capital. But with billions of dollars in loans due to roll over, those investors have to find some way of recapitalizing their portfolios. "A lot of the private vehicles that were formed and invested during the run-up in 2005 to 2007 are going to need to seek liquidity because they've got underlying debt problems," relates Marks. "By necessity, they will need to more actively look to the IPO market."

In what's said to be the largest REIT secondary equity offering ever, Macerich Co. sold 30 million common shares, raising $1.23 billion last month. The firm plans to use the proceeds to payoff debt maturities and its line of credit.

It remains to be seen whether an IPO will be a lifeline to those truly distressed borrowers, such as Kent Swig, but there's no downside to trying. Just last month, the Wall Street Journal reported that Bain Capital Partners and KKR & Co. are gearing up to issue IPOs for three

of their holdings, including Toys 'R Us and hospital chain HCA Inc. The offerings would allow the duo, which took on large debt loans to buyout those companies, to partially cash out their stakes, return money to investors and pay down debt. Their IPO could raise more than $3 billion. But that's if it's received well, and the preceding IPO s deploy their capital at expected returns, "We have to be careful to not get into a pie-eating contest and have companies overpaying for assets," says Decker. "Right now, there's a lot more capital than there are transactions. We're going to be bringing a lot more capital into the market if this IPO wave continues, but there will be a matching of some deal supply here in the next six to 24 months."

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