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Four analysts and top management from twelve sector firms examine the real estate investment trusts sector in this special 63-page Real Estate Investment Trusts issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info471.htm.

TWST: Sam, have real estate investments been seen as a relatively safe place to allocate capital in a difficult environment?

Mr. Lieber: Yes. I’d say for the past year we’ve seen various types of investors go for different aspects of the real estate universe, many looking for safe havens. It’s widely understood that real estate tends to be a good late cycle performer, due to its long-term lease structure, but this has been a different sort of downturn than what we’ve seen before. It’s been a downturn where lower interest rates have helped companies to restructure their balance sheets. As Greg alluded to earlier, the highest yielding companies at the beginning of the year have outperformed, not the defensive stocks. As a matter of fact, 80% of the top 10 performers for the year are secondary to tertiary companies. They were not widely followed; they were small cap companies with challenges and issues. The yields were attractive. With most performing well early in the year, these stocks are up 40%-60% versus the RMS index up 12.3% year to date. A lot of the more defensive stocks have fallen back. For example, apartments were viewed as very defensive. However, they’ve had occupancy versus rent pressures, especially on the West Coast and in the South. For much of the year, the best performing stocks have been interest sensitive stocks and high yielding preferreds. After the horror of September 11, economically sensitive stocks were severely damaged. However, over the past month, very cyclical stocks in the group have been the best performers — i.e., hotel companies, in particular, and shopping mall companies. This is in part because there’s a perception that we’ve got a recovery coming in 2002.

TWST: Sam, Steve has zero buys in the apartment sector. Is he missing some opportunities?

Mr. Lieber: I’ll tell you, we also argue that apartments would be a tough place to make money this year. The key issue for apartments is valuation. If you’re not going to get much growth, why pay a high multiple? Many apartment REITs are trading at 12 plus times multiples, and they haven’t been at those sorts of levels since 1997 when we were looking forward to a couple of years of good prospective growth. Because apartments are a large percentage of the overall REIT universe, benchmarked portfolios are going to keep a fair weighting in the group. That is why the stocks have held up relatively well. The question is if there are not a lot of growth prospects, do they soften a little bit over the next year? We think there will be some better opportunities next year.

TWST: Does that suggest that you are not recommending any apartment REITs right now?

Mr. Lieber: No. We do have a couple of small positions that we had bought at more attractive levels in the past.

TWST: Would you tell us about them?

Mr. Lieber: Town & Country Trust (NYSE:TCT) is a small company and has had less of the growth profile than some other companies, but we think it offers some reasonable value. TCT’s markets have not been overheated. The mid-Atlantic markets are particularly stable, and we think there’s a possibility that there might be some M&A activity down the line.

1) Real Estate Investment Trusts - In an in-depth (11,500 words) Analyst Roundtable, Samuel A. Lieber, CEO/Portfolio Manager at Alpine Asset Management, Steve Sakwa, Senior Analyst at Merrill Lynch Global Securities, Stuart Seeley, Director at UBS Warburg and Greg Whyte, Head of Real Estate and REIT research team at Morgan Stanley, examine the outlook for the sector including overbuilding of offices markets, excess supply and share specific stock recommendations.

2) The TWST confidential Off-The-Record survey of management performance at nineteen sector firms asked market insiders about the ability of management teams to create shareholder value.

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