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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: Is your rating on Catellus (NYSE:CDX) still a strong buy?

Mr. Leupp: Yes, and that’s due to the fact that we believe the real estate that Catellus owns is probably worth 23-25 a share, maybe a little more than that. We think the earnings growth rate is going to be in the 15% range year over year consistently. It’s a stock that actually trades at less than 10 times our 2002 estimate, which is in the 1.95, 1.96 range.

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: How should investors be approaching these stocks?

Mr. Leupp: I think that you have to take very much a micro approach, or a stock-specific approach, to these stocks at this point. That sounds like common sense, but let me give you a little bit of context. There are times in the real estate equity markets where you can buy baskets of stocks in specific sectors. For example, you can own a basket of office companies, hotel REITs or retail companies because the stocks are cheap, and the earnings prospects look positive. You don’t have to be very discriminating about what stocks you own. You can own a whole basket of them and you’re going to have very positive performance. We’re in an environment now where investors are really looking to individual stock fundamentals, individual management teams and individual earnings growth prospects. This is where management really earns its compensation. In an environment where real estate fundamentals are in relative equilibrium, demand is challenging. It’s the better management teams that are going to have the outperforming earnings.

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.