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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: How do you analyze a REIT for investment? Once an investor has decided to invest in real estate, how do they know that they’re picking the right REIT?

Mr. Morrill: We have three or four factors that we consider. The first is the quality of the real estate. Since we are part of a real estate firm, we have a group of analysts here and a lot of people in the field who are able to help us analyze the quality of the real estate that is owned by the various REITs. The second factor is the financial structure. The REITs have been one real estate investment that has not used excessive leverage. Most of the debt ratios for the companies are in the 40%-50% range. The one major exception is the regional mall companies, which are pretty stable and which have debt ratios in the 50%-60% range. In general, I would say that the financial structure of these companies has been fairly conservative. We look at both the debt/equity ratios and the coverage ratios. We also look at the amount of floating rate debt versus fixed rate debt. We also look at the coverage of the dividend, which is a very important factor. When we first started in this business, the dividend coverage ratios were close to 1: 1 and sometimes below that. Today, they are probably 1.2:1 to 1.3:1. So most of the companies’ dividends are well covered.

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 apartment sector, one of the companies we like is Archstone-Smith (NYSE:ASN). This is a company that has a fairly national scope and focuses on supply-constrained markets. We believe that some of the apartment markets in the Southeast and Southwest are going to take longer to recover because the supply growth there over the past year or two has been much higher than it has been in some of the other markets. So even though a market like Northern California is a market that is very depressed right now, there are limits to supply there. So when the economy recovers, as we anticipate it will over the next year or so, the fact that there is low supply there will mean that the demand pickup will make those apartments do better than apartments in areas where there is not a supply constraint. Archstone has acquired the Smith Company, which means they now have high-rise apartment expertise, in addition to garden apartment expertise. That expertise can be exported to other markets, and it will help their growth rate longer term. They are selling at a substantial discount to net asset value (12% is the current number) and that compares to a 7% discount for the apartment universe as a whole. We are looking for 2002 cash flow growth of 8% and 2003 cash flow growth of 9.3%. If you combine that with a 6.5% dividend and some potential for multiple expansions as the economy and the sector recover, this becomes a particularly good candidate for investment. They have a strong balance sheet. Their debt is only 41% of their total market capitalization. Their fixed coverage is 2.5 times, and their dividend coverage is also quite strong.

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.