Monetizing Real Estate.

• Position: Corporations - Brief Article

Times are tough. Public securities markets are pulling in their horns and providing less access to capital, and the initial public offerings market is largely dead, especially in the high-tech sector. Private equity is less liquid than it was a year or two ago, and the control features associated with private equity, such as a board seat, may be exorbitant for many companies.

But corporate real estate presents a resource that can be effectively used for raising cash, says Russell Appel, president of the Praedium Group, a real estate investment firm that has made more than $2 billion in investments in the U.S. and Canada. "Where access to capital is limited, real estate is a hidden asset that can provide capital," he says. "This can be done without burdensome covenants or control features.

"Companies can borrow against their real estate, usually from a bank or insurance company," Appel said in an interview. "Frequently, banks are offering floating-rate paper at shorter terms. So companies that have owned assets could recognize gains. As companies look forward, there are significant opportunities to use their occupancy to team up with capital sources to lower their occupancy costs.

"Struggling companies also can give back a lot of space. The corporate headquarters can be sold and vacated, and excess space can be sold and vacated. Some may choose to maintain space for their core executives and relocate some of their employees and subdivisions to less expensive space. If you're in...