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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: As we look back on the real estate equities market in 2001, what kind of investor interest was there and how did it reward or disappoint investors?

Mr. Morrill: There was very strong investor interest in real estate in 2001. On the public side, the REITs did well compared to the NASDAQ and the S&P 500. The REITs returned 10.5%, if you look at the Wilshire Index, and 13.9% if you look at the NAREIT Index, versus losses of 20.8% for NASDAQ and 11.9% for the S&P 500. The REITs became the darlings of individual investors who were looking for high yields this year. Interestingly enough, the REITs that did the best were some of the smaller, second-tier REITs, with very high dividend yields. These companies were attractive to investors who were moving away from growth stocks and looking for defensive stocks to invest in. So the REITs did quite well and had a fairly strong interest among individual investors last year. The pension funds and the institutions were a little bit less interested in 2001, although they were quite interested and did a lot of investing in REITs in the year 2000.

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. Morrill: In the office sector, one of the stocks that has not done particularly well from a stock standpoint, although it’s done well from an operating standpoint, is Boston Properties (NYSE:BXP). It significantly underperformed the NAREIT Equity Index last year. We think it will outperform over the next few years. They have a very strong management team. They have excellent development capabilities, and they also do acquisitions quite well. They have a very high-quality portfolio, but they are invested in markets like San Francisco, which, because of the tech meltdown, is one of the weaker markets in the country. They are also in Boston and Washington, DC. They have a very strong high-quality tenant base. They have very little rollover over the next couple of years. They still have good reversionary potential in their portfolio, which means that the rents in their markets, even though they may have come down, are still below the rents in their portfolio. So we see them having some market growth potential from a rental standpoint. They trade at a 13% discount to their real estate value. We believe they are going to show above average growth for the next two years. We have projected 10% growth in 2002 and 7.9% growth in 2003. The dividend is about 6.3%. So again, you have the potential for fairly good returns from a company with a very high-quality portfolio. We like to buy companies that we think are going to be particularly attractive two or three years from now. We think this company is one of the best companies in the office sector. It is undervalued right now and two or three years from now it will have proven to be an excellent investment.

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.