Very simply, there's an excess of sellers and no buyers.
    Fitzpatrick: So why the disconnect? Well, consider these statistics: Year to date, real estate mutual funds have experienced more than $500 million of net outflows. That's an average of almost $13 million per week. In the latest week [for which that data is available], the outflow was $19 million.
    In contrast, the average equity mutual fund has had inflows of $4.3 billion per week. Basically, two weeks of inflows into the average equity mutual fund is equal to the assets under management for the entire real estate mutual fund industry.
    So what we have is an excess of sellers and no buyers. Prices are moving south not because of fundamentals, but because of selling pressure that's basically feeding on itself. So stock prices really aren't influenced right now by fundamentals or by values.

The disconnect isn't fun, but we like the opportunities.
    Fitzpatrick: Our response to this environment is to focus on long-term returns and value creation at the companies we own. And based on these criteria, we're very pleased with the progress that our companies are making. Instead of being upset by this environment, although we admit that we are frustrated, we are grateful for the opportunities that we have - the numerous opportunities we have - in the publicly traded real estate world.
    We continue to add to our stake in Longleaf Realty Fund. And as painful as it might be for some of you, we would encourage you to do the same.

    Fitzpatrick: So what can turn things around? Well, we're seeing the following: Several companies have announced management-led LBOs [leveraged buyouts]. Also, private buyers are beginning to enter the market. These firms are paying prices well in excess of our appraisals - which suggests that the companies we own are even cheaper than we believe them to be.

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