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Three analysts and top management from fourteen sector firms examine the REIT sector in this special 56-page Wachovia 5th Annual REIT Conference issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info459.htm.

TWST: Speaking specifically to your three segments — retail, lodging, and storage — where are they with respect to risk and cash flows and their ability to be transparent over the next six to 12 months?

Mr. Donnelly: Picking the grocery/drug sector first, it’s a very simplistic way to look at it, but the old adage “everybody has to eat” really does apply. Consumers have no alternative distribution channel for where they buy their food. In fact, I think this is the only property where consumers have no conveniently available alternative to visiting a grocery store. Webvan and other Internet grocery delivery-based models have proven to be failures and have gone out of business. Aside from growing food in their own backyard, the grocery store still remains the channel through which the overwhelming majority of people buy their groceries. People still make two to three trips to the grocery store each week, and as a result, sales for grocers tend to be pretty consistent over time. What tends to drive revenues for a grocer are inflation and population growth, and history has shown that our domestic population grows 2%-3% per annum. It’s reasonable to assume that the grocery business will never be seen as a growth business, but that’s okay — its stability is widely appreciated. However, as a result of the grocers’ presence and success, other higher growth, higher margin necessity goods and services tenants (dry cleaners, video rental, etc.) perform quite well. We would be hard-pressed to see a situation that would lead to a dramatic decline in consumer demand for their goods. In some ways, the same conditions apply for the storage sector. Demand for storage space is driven by many, many factors. In fact, so many events are drivers of storage demand that the companies that have been in this industry for over 30 years still can’t exactly pinpoint all of them. Typically the storage decision involves events such as corporate relocations, affordable alternatives to larger dwellings, etc., that require people to rent out space to find shelter for their personal effects. Because of the low-cost nature of storage, it’s not the first area of the budget I would expect to be cut, especially since the alternative likely requires spending the additional monies that led them to seek out storage as a cost-effective solution in the first place. The hard data confirms our thesis. Public Storage (NYSE:PSA) has been in the business longer than most and their long operating history shows occupancies at storage properties remain stable even through economic downturns. As a result, we believe storage is a very defensive sector.

TWST: Let’s move over to the storage side and the company that you cover. Where does it stand and what are you basing its rating on at this point?

Mr. Donnelly: Right now we only follow one storage company, and that’s Public Storage and we rate their shares Strong Buy. Public Storage deserves this rating for a couple of reasons in our view. Public Storage clearly is the dominant storage company in the nation. They have superior access to capital, a superior balance sheet, and operationally speaking their household brand recognition translates into occupancy and rate premiums over the competition — not to mention the inherent value of the name itself. As a result of the steady and consistent performance that we expect in the years ahead and the almost defensive nature of the business itself, we believe that Public Storage will be a name that investors will continue to seek out.

This special conference issue includes:

1) Outlook for REITs - In an in-depth (3,100 words) Analyst Interview, Christopher P. Haley, Senior Analyst at Wachovia Securities, Inc., examines the outlook for the sector and shares specific stock recommendations.

2) REIT Stocks - In an in-depth (6,100 words) Analyst Interview, Jeffrey J. Donnelly, Vice President of Equity Research in the Real Estate and Lodging Group at Wachovia Securities, examines the outlook for the sector and shares specific stock recommendations.

3) The REIT Industry - In an in-depth (4,000 words) Analyst Interview, Stephen C. Swett, Analyst at Wachovia Securities, Inc., examines the outlook for the sector and shares specific stock recommendations.

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