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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: Stuart, why, in your opinion, have the REITS continued to perform relatively well despite the weakness in the economy and the impact that has had on the fundamentals underlying real estate?

Mr. Seeley: That’s an excellent question. The best we can make of it is that up through early September, there was great uncertainty as to the direction of the economy. REITs, which have high earnings visibility and value relative to other equities, benefited because of that uncertainty. We believe that if there had been a general consensus that the economy was going to recover strongly, people would not have wanted to own REITS or real estate securities. They would want a more leveraged play on the recovery. On the other hand, if people thought that the economy was going into the tank, they wouldn’t want to own REITS, because it’s too cyclical an asset class and is tied to GDP. But because there was so much uncertainty, investors were just looking for a decent place to hide and get current income. We believe that the lack of directional conviction resulted in a technical sweet spot for REITS to perform beyond the fundamentals.

TWST: Stuart, is the real estate industry better positioned today to withstand the challenges of a weak economy than it was at the time of the last recession?

Mr. Seeley: Our sense, and I’ll echo a theme that Sam also mentioned, is that this downturn is very different from what we saw the last time around. The good news is that we generally do not have the massive overbuilding that we had in the late 1980s and early 1990s across almost all property types. The bad news is that we have never seen a pullback in demand, a virtual falloff, like this. And if you look through the data — whether it’s Torto Wheaton or REIS — we have never seen this rapid a spike in vacancy rates. So on the one hand, we do think that we are better positioned to work through the current disequilibrium in the property markets once the economy starts to recover. But on the other hand, we are really in uncharted territory in terms of the fundamentals of the business and the drivers of demand. We are still paying heavily for the borrowed absorption we had in 2000 against hoped for future absorption, which just never took place.

TWST: Stuart, are there any other REIT opportunities that you’d like to bring to the attention of our readers?

Mr. Seeley: I think our views have pretty well been covered in discussing the core property sectors. However, the one stock I would mention outside of what we talked about is iStar (NYSE:SFI). It’s a specialty finance company in REIT clothing. In this type of environment, with declining fundamentals, you may be better off owning a well-structured debt investment in real estate than owning the equity, that is to say, the first loss piece. And iStar is all about non-commodity, well-structured investments. Our view is that iStar effectively underwrites their debt investments with the care and due diligence as if they were underwriting the equity investment, the first loss piece. We believe that is a pretty unusual and pretty stable story in this type of environment.

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.