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Two analysts and top management from eleven sector firms examine the Real Estate/Property Services sector in this special 51-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info401.htm.

TWST: Will you begin by telling us about the approach you take to real estate development and real estate services, and the companies that you focus on most closely?

Mr. Leupp: The background of our research team is really real estate, and we try to take the real estate approach first, and then value the securities second. We first try to understand the business underlying the securities, that is, the common stocks of the companies we follow, and then position ourselves for a recommendation on whether we think investors should own the stock. We follow 53 companies across the real estate sector. As much as we can, we try to understand each company’s operating strategy and competitive position within either the real estate services or the real estate development business. That’s really a macro real estate approach to the companies. Then we get into a company’s individual markets and their strategy and the prospects for their business.

TWST: What specific risks are the real estate and property services and development companies facing today?

Mr. Leupp: I think that right now most analysts are worried about the demand side. The biggest risk is that demand for apartments, retail space or office space will just dry up completely. I think at various times in the market cycle, when you’re following real estate companies you worry about different things. At certain times you worry about oversupply, which is a constant concern in the real estate market. We’re not as concerned about that right now because the challenging equity and debt markets have helped keep supply additions to manageable levels. You also worry about interest rates hurting both the ability to finance new acquisitions and projects, and hurting the P&L, the profit and loss statement. Again, interest rates are down, so that’s not as much of a worry. The real worry right now is on the demand side. What analysts and investors are most concerned about right now are rent growth and occupancy levels, which go hand in hand. Companies right now are positioning themselves to ride through a tougher occupancy environment. They’re focusing more on keeping buildings full than they are on raising rents. That is having the effect of slowing earnings growth expectations. When earnings growth slows, share prices typically either flatten or drop. We’re in that environment now. Although the stocks have had a good year (on average REITS are up about 10% during the first half), since these concerns have received a lot of attention, the stocks have really traded sideways. They gain a quarter to a half percentage point over a few days, and then they give it back. Probably the best way to put it is that the stocks are treading water.

TWST: Are there any companies that investors should keep an eye on as interesting investment opportunities?

Mr. Leupp:. I think there are two companies in the group that we’ve talked about. Excel Legacy (AMEX:XLG), if you can be very, very patient, could surprise on the upside once its merger is complete and the earnings picture becomes clearer. They’ve got a very bright and creative management team, and now they’re going to have a market capitalization of above $1 billion. Once you get above $1 billion, you have larger acquisition and development opportunities that weren’t available to you when you were a much smaller company. At the same time, you get a lot more investor and analyst attention. So Excel Legacy is one that, if you can be patient, could surprise on the upside.

This special issue includes:

1) Property Services - In an in-depth (3,600 words) Analyst Interview, Jay Leupp, Managing Director and Senior Real Estate Equity Analyst at Robertson Stephens, examines the outlook for the sector and shares specific stock recommendations.

2) Outlook for REITs - In an in-depth (3,800 words) Analyst Interview, Steve Sakwa, Senior Analyst in the Global Securities Research and Economic Group at Merrill Lynch, examines the outlook for the sector and shares specific stock recommendations.

3) CEO interviews (average 2,500 words). Top management of eleven sector firms examine the outlook for their firm and the sector.