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TWST: Where do you see total returns on investment in 2001, and how favorably will that position the REITs, as opposed to the other investments, particularly some of the defensive investments in 2001?

Mr. Hickey: REITs are required by regulation to pay out 90% of their REIT taxable income in the form of dividends. REITs have thus become the “income investment of choice” with the deregulation of the utility industry. REITs have essentially replaced utilities as a provider of portfolio dividend income. For an investor looking for an income component in their portfolio, REITs are one of the best alternatives. The average dividend yield in the RMS Index at year-end 2000 was approximately 8%, and we would expect total returns from a well-diversified REIT portfolio to be in the low to mid-teens during 2001. Most of the total return would be in the form of dividends, with a small amount of capital appreciation. Many of the quality REITs are paying dividends close to regulatory minimums. As FFO increases through the execution of REIT business strategies, most REITs will be forced to increase dividends. The dividend component of REIT share returns is important and will continue to grow.

TWST: Review Cousins Properties (NYSE:CUZ) and your 2001 expectations.

Mr. Hickey: Cousins Properties Inc. is an Atlanta-based REIT that has produced above average Funds From Operations growth year after year, through numerous iterations of the real estate cycle. CUZ is active in office development, which is their largest component, retail development, and a small medical office division that develops medical office buildings, generally adjacent to a hospital complex. We have a buy rating on CUZ shares, and a price target of 31 per share. CUZ grew FFO during 2000 at about 16%. We would expect them to provide similar levels of FFO growth into 2001, along with similar growth in the dividend. Cousins was recycling capital before capital recycling was cool. Via capital recycling, CUZ has avoided the issuance of public debt, and instead has financed new development via long-term exculpated mortgage debt, the sale of assets, or the contribution of assets to joint ventures. This has allowed CUZ to raise significant capital from institutional sources at attractive rates. Mortgage debt and institutional joint venture capital have also tended to be more readily available during weak points in the real estate cycle, which has benefited CUZ. We also admire Cousins for its development discipline, as CUZ has undertaken new development only within well-defined risk parameters. CUZ has managed development risk via significant pre-leasing prior to commencement of development. In addition, major tenants are also frequently joint venture partners, which provides more certainty regarding lease-up. In its retail division, CUZ has introduced a concept called The Avenue, an open-air retail center with tenants that the shopper would expect to find in a mall, without anchor department stores. This concept has been successful, and we expect this concept could be introduced into new markets. Cousins’ dividend yield is lower than that of its peers, because CUZ’s above-average FFO growth has resulted in a premium valuation. There is also a high degree of insider ownership. In terms of FFO outlook into 2001, CUZ’ development pipeline is at 496 million, and about 86% pre-leased. The high degree of pre-leasing supports our view that CUZ has maintained discipline in managing its development pipeline. The magnitude of the development pipeline provides earnings momentum through 2001 and into 2002.