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Seven money managers examine portfolio management strategies in the latest issue of The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info505.htm

TWST: To start with a general question, what makes the real estate arena a good investment?

Mr. Pauley: Real estate is attractive as an investment for several reasons. The REITs today provide one of the most attractive yields for an equity investment in the capital markets. The current average yield on equity REITs is about 7% and that’s difficult to find in today’s market. The REITs also, because they invest in real estate, have over a long period of time, provided attractive portfolio diversification to stocks in other industry sectors and to bond investments. The REITs have lower volatility than most types of equities, so they’re very attractive to investors in times of uncertainty like we’ve had over the last couple of years.

TWST: Do you invest in all sectors of the real estate sector?

Mr. Pauley: We invest in all public companies that own commercial and residential rental real estate as a long-term investment. We don’t typically invest in industrial companies that are asset-rich or real estate service companies. We’re trying to provide our clients with a proxy for participation in real estate so that they can get the benefit of the diversification that comes with direct real estate investments. We invest in apartments, office, retail, industrial, hotels and some more specialized property types, such as mobile homes, self-storage and health care.

TWST: Perhaps we can talk about your specific REITs now, and you can explain your reasons for picking some REITs in the office and apartment sectors that did not do so well last year.

Mr. Pauley: Another mall company we like is the Rouse Company (NYSE:RSE). They also focus on higher-quality malls. Both Simon and Rouse, while they did reasonably well last year, didn’t do nearly as well as the second- and third-tier mall companies in terms of their price performance. We think the main reason for this was they have somewhat lower dividend yields because of lower payout ratios. But we think that, given the weakness in the economy, it’s particularly important to focus on the companies with the highest-quality assets and the highest-quality management teams. Given the underperformance of some of the quality names last year, we think it’s a very good time to be focused on quality. Rouse has one of the very best mall portfolios. They have average sales per square foot in their properties of over 400 a square foot. They have trailed the other mall companies this year on a price basis. Currently, they trade at an above-average discount to the underlying value of their assets. We think they’ve been a little bit weaker than the others because they just participated in a significant acquisition of properties from another mall company, and they did an equity offering to finance the acquisition that was slightly dilutive to their net asset value. We think Rouse is well-positioned in terms of their balance sheet, and they will have pretty good growth relative to the other mall companies and relative to the overall REIT sector over the next two years. We’re projecting they’ll have 8% growth in earnings in 2002 and about 7% growth in 2003.

This special Investing Strategies Report includes:

1) Investing in REITS - William K. Morrill, Jr. and Keith R. Pauley, both Managing Directors at LaSalle Investment Management, examine portfolio management strategies in this timely and deeply informative 6,800-word interview from The Wall Street Transcript.

2) Investing in REITS - Damon J. Andres, Vice President at Delaware Investments, examines portfolio management strategies in this timely and deeply informative 2,800-word interview from The Wall Street Transcript.

3) Investing in REITS - Kenneth T. Rosen, Chief Executive Officer and Michael A. Torres, President, both respectively at Lend Lease Rosen Real Estate Securities, examine portfolio management strategies in this timely and deeply informative 4,600-word interview from The Wall Street Transcript.

4) Kyle Prechtl Legg, President at Legg Mason Capital Management, examines portfolio management strategies in this timely and deeply informative 3,900-word interview from The Wall Street Transcript.

5) Richard D. Steinberg, President at Steinberg Global Asset Management, Ltd., examines portfolio management strategies in this timely and deeply informative 3,900-word interview from The Wall Street Transcript.