IMN CONFERENCE:
Public Market 'Not There' Right Now, Panelists Say

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Panelists from Wall Street firms didn't provide much hope that the funding outlook for carrier hotels and other telecom projects will change anytime soon.
"I don't think we'll see a true public offering of a carrier hotel company anytime soon," said Andrew Duffy, Director of Commercial Mortgages and Real Estate Securities at TIAA-CREF.
"The public market is not there, and may not be there for years," Duffy added. "Yesterday I heard investment bankers talking about possible public offerings. I think that's wishful thinking."
Some market players have looked to real estate investment trusts (REITs) as potential sources of funding. REITs typically invest in large numbers of properties as a risk management strategy.
But including carrier hotels and data centers in these portfolios would alienate many risk-conscious REIT investors, according to Anthony Paolone, Director of Real Estate Securities at CIBC World Markets Corp.
"We don't expect REITs to be moving into this market in the near future," said Paolone.
The high-yield bond markets have showed more promise then either stocks or REITs in recent months, but have already absorbed nearly $45 billion in telecom debt. While some deals are getting done, they're the exception rather than the rule.
"I think Wall Street is saying 'show us the money' in the form of visible earnings," said John Wilson, President of Wave Exchange LLC.
Wilson believes the funding challenges will be temporary, citing fundamental trends in the growth of the Internet's role in the economy, and the emergence of audio and video. "Falling bandwidth prices will also continue to generate new application for the Internet," Wilson added.
"Some of the most significant users of bandwidth have not even entered the marketplace," noted Bud Mayo, chief executive officer of AccessColo. "Streaming media and content management are just now entering the market."
Jud Pankey, the president of data center developer WiredZone LLC, noted that only 28 percent of Internet traffic and about 8 percent of users access the Web through a high-speed connection.
"That's a staggering number and a staggering opportunity for someone," said Pankey. "We don't feel there's a bandwidth glut or a fiber glut."
"Ultimately, the issue is whether demand will be what people think," summarized Samuel Lieber, founder and chief investment officer of Alpine Real Estate Funds. "We just don't know the pace at which the market will grow. There are many predictions, but they vary widely."

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