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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. In the case of CoStar Group (Nasdaq:CSGP), CoStar’s business is providing commercial real estate information to the real estate industry. They primarily focus on office and industrial and also some retail commercial information on transactions. CoStar provides market information essentially, what asking rents are and what asking prices are for buildings that are for sale. It is basically comparable sales data, which is a huge part of their business. From that standpoint we try to ascertain who are the users of that information, what the environment is like in those businesses, and what the demand is going to be like for commercial real estate information over the next three years.

TWST: Can you compare CoStar to any other companies you follow?

Mr. Leupp: CoStar is a small to mid-cap size company, in terms of equity market capitalization, that is focused purely on providing information over the Internet to the commercial real estate business. I think a good comparison to CoStar would be Homestore. I think in a perfect world CoStar would like to be the Homestore (Nasdaq:HOMS) of the commercial real estate business, but they’re probably four to five years away from being at the same size and scale. Both companies provide real estate information and marketing services over the Internet, but Homestore is focused on the residential business and CoStar is focused on the commercial business. CoStar is a smaller company and a higher percentage of CoStar’s revenue base is subscription-driven. Homestore is about 55%-60% subscription, and 40%-45% advertising. CoStar is probably 75%-80% subscription, and 15%-20% advertising.

TWST: What are the risks associated with the REITS?

Mr. Leupp: You always run the risk of challenging real estate fundamentals, that is, lack of demand and oversupply. I think you also run some risk, if interest rates start to rise dramatically, that the stocks will come under pressure. If you start to see, in the face of an economic rebound, a 150-200 basis point rise in interest rates, I think that you could see the stocks come under some pressure. The wonderful part about the sector is, you don’t have big quarter-to-quarter earnings risk. That’s one of the reasons why these stocks have done well this year, and why they’re attractive buys right now. They’re very predictable stocks. But I think that the risks for the stocks are much more macro. Also, obviously, a deep recession would be a risk, too. That relates to lack of demand.

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.