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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: Chris, how have the real estate investment trusts performed over the past 12 months?

Mr. Haley: Over the past 12 months, real estate stocks have generated a near-20% total return (market-weighted). More interestingly, however, is that in the most recent six-month period, it has been the smaller cap, higher-yielding REIT stocks that have outperformed their faster-growth, larger cap brethren. We view this relative performance as a modest correction in the larger-cap names (from a late-2000 run-up) combined with increased appetite for higher-yield vehicles (and in many cases, substantially more risk). This yield action may simply be due to tremendous earnings deterioration in the general market, and investors wishing to “lock-in” minimum return levels. With the general market yielding between 1% and 2%, and earnings growth dropping to single-digit, real estate stocks offering 7%-or-better current yields, on top of 6% earnings/cash flow growth, gathered increased investor interest. And layer onto that the fact that earnings trends have improved for real estate stocks (+6.1% average forward growth in early 2000, now at +7.3% on March 31, 2001), whilst the general market’s expectations have soured materially.

TWST: What kind of economic backdrop best favors real estate investment trusts?

Mr. Haley: Our opinion is that it’s the combination of low single-digit economic growth, meaning real GDP growth in the 1.5%-2% range, combined with interest rates in the 6%-7% range. The reasons we are looking at these numbers are as follows. First, if we’re looking at more negative economic growth figures, we believe investors will hold off investing in real estate securities because most of the companies are unproven investments during a contracting economy; most had not been around (publicly traded) during the 1990-1991 economic contraction. Hence, we believe most investors would hold off incremental dollars, not knowing exactly how these stocks and their cash flows performed in the last actual recession.

TWST: Are there any other companies that you’d like to highlight, companies, at least, that should be on an investor’s watch list where there could possibly be a surprise or two in 2002?

Mr. Haley: You were kind enough to invite us to last year’s Roundtable, and the companies that we highlighted at that time were CenterPoint (NYSE:CNT) and TrizecHahn (NYSE:TZH). CenterPoint is an industrial company solely focused in the metropolitan Chicago marketplace, and over the last 12 months they have moved forward rather quickly with a very unique development project named the Joliet Arsenal. This is a massive redevelopment of an old Army munitions base. Federal, state and local governments have all been very cooperative in offering CenterPoint this land for the development of a 650 million intermodal facility, meaning it can handle trucking, rail and water transportation vehicles. And this project, in our view, is unique in the REIT universe because it offers CenterPoint the ability to extract numerous cash flow streams — whether it be land leases, ground leases, participation income streams — as well as the development of 17 million square feet of industrial assets. This project, with a seven-to-10-year buildout period, gives CenterPoint a unique advantage versus its public industrial REIT peers and real estate peers. This project gives CNT five-plus years of earnings visibility, which is very difficult to find in any investment marketplace.

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.