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Seven analysts and top management from twenty-seven sector firms examine the REITs sector in this special 141-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info380.htm

TWST: Many people are concerned about the recession and what the consumer will do. Does that worry you, and is it reflected in the way you look at the retail REITs?

Mr. Haley: Concurrent, or coincident, with our November 2000 investment downgrade of the office REIT group, we upgraded numerous retail REITs. The predominant reasons we upgraded the retail group at that point in time were, one, we thought the stocks themselves were under-owned by institutions; two, if you owned them and you were concerned about an economic slowdown or about supply issues or just supply/demand dynamics, if you owned them you really wanted to own them, so you were unlikely to turn over your position; and three, supply growth was actually slowing and demand growth was never really robust, so we saw a modest change on the new capacity side. And given the relative valuations that the stocks traded at, the 52-week lows or two-year lows versus the office group, which was at two-year highs, we made that allocation, or portfolio change. Since then, retail-mall stocks have outperformed the REIT sector by nearly 1,300 basis points, and the retail strips have outperformed the REIT index (Morgan Stanley REIT Index, RMS) by 700 basis points. The retail-mall outperformance is comparable to the 1,800 basis-point outperformance that the retail malls and the strip centers did in 1997 and 1998, or over the 18-month time period from early 1997 to late 1998. If you remember, in late 1997 and 1998 there were also concerns of an economic slowdown — reduced consumer confidence, high consumer installment debt — yet that didn’t really factor into the performance of the stocks. What happened was, the retail stocks did well because the Federal Reserve started cutting interest rates. And when you look at the performance of the retailers themselves, over that time period the S&P Retail Index was outperforming the S&P 500 by 55%, or 5500 basis points. Beginning in October 2000, the same index, the S&P Retail Index, started to move up dramatically, and we felt that the market was saying, we believe the retail stocks will do well from a fundamental perspective because the Federal Reserve is cutting interest rates. Now, that has carried through. The Federal Reserve has continued to cut interest rates, even in the face of waning consumer confidence, still high levels of consumer installment debt and concerns of negative, or even flat, GDP growth, yet none of those pieces of information would we call incrementally new pieces of information.

TWST: Do you have a bias toward malls or strip centers?

Mr. Haley: We have a bias predominantly toward the strip-center community, mostly because of the composition of a typical strip center. Tenants include consumer-based product sellers, such as the grocery store, dry cleaning, etc. So we view the consistent use/demand of the strip center as more compelling, and we think it carries less downside risk. The one company that we recommend in strip centers is Pan Pacific (NYSE:PNP), a West Coast company with some of the most significant internal growth prospects. Additionally, its merger with Western Properties Trust last year provides upside to current earnings/cash flow expectations into 2002 (positive revision trends, positive earnings momentum, etc.).

This special issue includes:

1) REITs - In an in-depth (15,800 words) Analyst Roundtable, Samuel Lieber, CEO/Portfolio Manager at Alpine Management & Research LLC, Daniel Pine, Senior Vice President at Alliance Capital Management, Lawrence Raiman, Managing Director at Credit Suisse First Boston, David Shulman, Managing Director at Lehman Brothers, Ross Smotrich, Managing Director at Bear, Stearns & Co. and Louis Taylor, Managing Director at Deutsche Banc Alex. Brown, examine the outlook for the sector including, recent stock performance, prospects for upside growth and share specific stock recommendations.

2) The TWST confidential Off-The-Record survey of management performance at twenty-six sector firms asked market insiders about the ability of management teams to create shareholder value.

3) Outlook for REITs - In an in-depth (5,500 words) Analyst Interview, Christopher Haley, Director of Real Estate Securities Group at First Union Securities Equity Research, examines the outlook for the sector and shares specific stock recommendations.

4) CEO interviews (average 2,500 words). Top management of twenty-seven sector firms examine the outlook for their firm and the sector.