Reckson heads down under to fund spin-off property trust.

No matter how much capital abounds in today's markets, you can never have quite enough.

Hence the recent announcement by Long Island based REIT, Reckson Associates, that it will be tapping Australian capital to fund a spin-off property trust.

The formation of the new investment pool is the kind of move that could help preserve the REIT's share price if other institutional investors constrict their allocation of capital into the sector, a phenomenon that REIT naysayers have long been predicting, despite the sector's recent track record of strong returns.

Just as diminishing capital flows have the potential to threaten current REIT share prices, so too does the prospect of rising capitalization rates that result from decreasing real estate value. Many have speculated that buyers who have been busy during the peak of the real estate cycle will take a hit if pricing diminishes and fundamentals don't strengthen at a quicker pace.

So far, REITs have been spared this scenario as fundamentals have been on a slow track of recovery while real estate pricing for commercial property has seemingly never been higher.

While the battle amid REIT believers and critics rages on, Reckson's president and CEO, Scott Rechler, explained to REW how his firm has focused on the potential for increasing cash flow for the assets it acquires and has also worked to establish the kind of market concentration that will allow it to positively influence fundamentals--both key factors in controlling the destiny of the firm's returns.

Although there is a risk attached to acquisitions these days, Rechler said it is outweighed by the tremendous buying opportunities. According to him, because the spread between long and short-term rates has compressed so dramatically, owners have been faced with the choice to either lock in long term financing or sell. Because of the high prices properties are fetching and investors' typical hesitancy to commit long term to a property, many owners have chosen to sell.

"It's a great time to be a seller, but it's also a great time to be a buyer," Rechler said.

Reckson has responded to the availability of high profile properties and bagged the Citibank Tower in Long Island City for $470 million as well as EAB Plaza in Uniondale, Long Island for $240 million.

"Our whole strategy is to be heavily concentrated in strategic markets," Rechler said. "We own the majority of trophy property on Long Island and I think we'll be able to influence what rents should be."