Equis recently reviewed the real estate assets in an operating portfolio of a publicly traded corporate client and found opportunities to extract $4 billion of capital. We are about to start selling those assets, mostly to REITs. The funds will be used to grow the client's core business.

Yet another client is comparing the return on money invested in its business operations against the economics of leasing and owning. It makes sense to sell the operating properties to a REIT, take back a flexible lease for no longer than five years and use the capital infusion to further finance the client's core business activity.

These are just two examples of how the securitization of real estate represents a watershed opportunity for Corporate America to extract capital from property assets, while still maintaining the use of those locations for operations.

This financing has never been so readily available. In the past, one relied more on private funds to extract capital from real estate, which were not as efficient or as available.

At the same time as some analysts see the ravenous hunger of the REIT industry peaking, we see it beginning to turn to more nonoffice properties. The premium now on office space has slowed REITs' acquisitions in that sector. Instead, REITs are targeting what is called mixed-use space (e.g., combined office and equipment space), industrial space, cold storage space and garages.

Meanwhile, using the REIT vehicle, merging companies have learned how to manage profit and loss with the sale-leaseback tool. They also have found that REIT landlords will likely be tenant-friendly in these circumstances. A major trend we are seeing is increased activity in targeting sales to REITs from the RBOCs, "regional bell operating companies," and other business sectors that are replete with merger activity.

What we are not seeing is a slowdown of REITs to acquire and expand, an activity that has been accelerating since the beginning of the decade. Also, confidence has been built among purchasers of these real estate stocks from the regulatory oversight of the Securities and Exchange Commission that ensures sound accounting principles and reporting requirements. According to the National Association of Real Estate Investment Trusts, th e latest figures show the total market capitalization of REITs has nearly doubled in less than two years. In 1996 the total market capitalization of publicly traded REITs was $88.7 billion; it is currently $160 billion. The number of REITs recently jumped to a total of 216 from 119. The projected total market capitalization of REITs could reach as high as $1.3 trillion, representing half the investment-grade commercial property in the United States, according to one national analyst. This phenomenon could be negatively impacted by either high interest rates or government regulation. High interest rates do not appear to be an issue in the immediate future, however. President Clinton has targeted REIT financial reporting practices for closer scrutiny.

We recommend that corporations start to think about leveraging their real estate assets and how they can use REITs to obtain capital and favorable operating arrangements. Global companies that are growing, downsizing or merging should take advantage of REITs, both for financing and the additional benefit of flexibility.

It is important to have an expert at your side who can sort through the portfolio, select appropriate assets and structure a transaction with a corporation's interests and its shareholders in mind. Equis has been leveraging the assets of corporations since 1989 using the REIT vehicle, but the level of activity we have seen in the last 24 months is unprecedented. We will continue to work aggressively with Corporate America to inventory and review its real estate assets, looking for opportunities to extract capital from owned operating properties using REITs. We envision this opportunity for Corporate America to continue for some time.

* The REIT industry is turning to more nonoffice properties.

* Merging companies use the REIT vehicle to manage profit and loss.

* RBOCs target sales to REITs.

* REITs continue to acquire and expand.