1. What will create the biggest buzz in REIT news during the second half of 2005?
"I anticipate we'll see an increase in development activity. Many companies have stated that they expect to increase their development programs throughout the year, and I expect we'll see this across the board [in all sectors]. AvalonBay Communities, Inc. (NYSE: AVB) is a perfect example of this. At year-end 2004, the company's development program was at $550 million. AvalonBay has said that number will more than double in 2005.

Something else that might create a buzz is negative fund flows, specifically in terms of how fast they could flow out. The Fed is being more aggressive in raising interest rates, and higher rates could trigger the negative fund flows."

2. What advice would you give to an investor buying into REITs for the first time?
"There is a good deal of confusion around technical real estate terms and specifically REIT-related terms. An example is valuation method. There is no primary valuation criteria; rather, a variety of methods are utilized. That is one reason why it is such a challenge to try and pick specific stocks, particularly as an individual investor. Until you become more familiar with the terminology and understanding of REITs, I think it's best to invest in a REIT mutual fund. I would also advise someone new to REITs to think about diversifying your holdings by investing via a fund that gives you a range of investments [both in terms of stocks and sectors]."

3. What professional in the REIT industry do you admire most, and why?
"Over the last five years, I've been particularly impressed with the larger mall companies. I think they've done a terrific job improving operations and economies of scale. With that said, I admire John S. Gates Jr., co-chairman at CenterPoint Properties Trust (NYSE: CNT), and the team he has created around him [Gates served as chief executive from the firm's foundation through 2004]. CenterPoint's business model has changed a lot, but John uses the best model around, which is buying well, adding value, coupled with a willingness to sell and start the model over again. It's a simple model, but one REITs tend not to use."

4. Over the next 12 months, which real estate sector(s) will perform the best, and why? Additionally, which sector(s) will face the biggest challenge, and why?
"The continuing strength of the consumer will provide the retail sector with a scope for outperformance. With a seemingly improving economy and decent job growth, the consumer will help retail property owners do well.

I think apartments will face the biggest challenge. Although the sector did well coming into an improving economy in the early 1990s when new supply was restrained, I think currently investment pricing has gotten ahead of itself. Presently we are seeing historically high levels of residential supply and people buying single-family homes. Most apartment landlords have little pricing power. Meanwhile investment buying has bid up prices aggressively. We might need to see even a protracted period of recovery in apartment income to justify current prices."