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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: Let’s talk about some specific REITs now. What are your largest holdings, and why?

Dr. Rosen: Again, we go for the highest-quality real estate and the highest-quality management, feeling that they are going to be less affected by the recession and able to manage through it better because of the financial controls and the quality of real estate they have. So our largest holding is a company called Equity Office Properties (NYSE:EOP). Our fourth largest holding is AvalonBay Communites (NYSE:AVB), which is also an apartment company here that we’ve been in for a long time with quality properties at the top end of the marketplace. Again, the quality of financial control is really excellent. Leverage at both of these companies is very low, and the properties are diversified on the East Coast, the Northeast, California, the Pacific Northwest and Washington, DC.

TWST: Management performance is extremely important in REITs. How do you go about analyzing that and do you visit or talk with management before or after making investment decisions?

Dr. Rosen: We have to know the management extremely well and feel very comfortable with them before we would make an investment. There are about 120 REITs, and real estate operating companies, and we’ve known the management of many of the companies for 20 years or longer. So we have a long relationship with the companies that were private and then went public in the 1990s. So not only our portfolio managers but also our analysts have to know them well. We’ll not only visit the managements a number of times, but we’ll spend time with them at various real estate events. We also want to look at the real estate very carefully as well, and our analysts do that. So it’s important that we know the management teams. I think that’s a big advantage we have over any other money managers in the field. We’ve been around for a long time — Michael Torres, as a lender and consultant, and I, as a player in the industry for 30 years. We know the teams very well that we’re investing in, and we know their reputations. The reputations are very mixed for some people, and we’ll be very reluctant to enter into investments in those REITs. It’s got to be an A+ reputation basically.

TWST: What is the outlook for REITs in 2002?

Dr. Rosen: I think the key to going forward in the REIT market is how well the economy does. If the economy continues to be soft, real estate fundamentals are going to be somewhat weak. But the consequence of that is we have a very low interest rate environment and that’s very beneficial to the REIT market. So a moderate recovery will be very beneficial to the REIT market. We expect to see dividend yield of about 6.5%-7% and a total return of 8%-12% for the next year period. That’s assuming we have this moderate recession and then a moderate recovery. And that’s what we think is the most likely thing. REITs have a very high cash flow yield. So there’s going to be capital flow coming into the REIT area. As alternative investments, the S&P and NASDAQ still look very pricey, and the bond market looks pricey, so REITs are a good relative value. The absolute value I think is fair, although not a steal, and the relative value is very attractive still. So the capital flows in will make the numbers look, I think, pretty attractive over the next couple of years.

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.