1. What will create the biggest buzz in the REIT industry over the remainder of 2005?
"The biggest buzz will be REITs outperforming the market for the sixth straight year, as it is likely the market will absorb any 10-year Treasury increase. We think the 10-year bond will end the year with a four in front of it. Fund flows will continue to be strong. We expect that a 12 percent or better return for REITs is not out of the question.

In the beginning of the year the media threw everything at this sector in terms of bad press claiming, ‘REITs had their day in the sun. It’s time to take your money off the table.’ However, fund flows have been robust, further validating REITs as a proxy for real estate in a re-priced environment.

2. What advice would you give to an investor buying into REITs for the first time?
"Buy cautiously and over a period of time. It is virtually impossible to time an entry into REITs—waiting for it is a fool’s game. I’d focus on REITs with a track record of dividend increases, and specifically companies with low payout ratios that have a need to increase dividends. Also, I’d diversify holdings across sectors, as you never know when events in the market could take over a sector and cause a drop."

Additionally, unless you are willing or able to buy at least 10 different individual stocks, it is best to put your money in a real estate mutual fund or closed-end fund. These provide diversification without having to pick specific stocks."

3. What professional in the REIT industry do you admire most, and why?
"There are fabulous CEOs in this business and it is really true that management can, and does, add value. Rather than list just one, I have a few that come to mind. The first is Milton Cooper, chairman and CEO of Kimco Realty Corporation (NYSE: KIM). He is constantly challenging himself and his organization to think beyond it being just a collection of assets.

Both Matthew and John Bucksbaum, chairman and CEO of General Growth Properties, Inc. (NYSE: GGP), respectively, are visionaries that are constantly increasing value in their business. More importantly, they recognize that the business is more than just the four walls of their malls.

Jeffrey Schwartz, CEO of ProLogis (NYSE: PLD), has been a leader in making this an international industry. Prior to his tenure as CEO, he was the guy who was physically out there planting seeds in Europe and Asia, which are now maturing."

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?
"Currently we are overweight in the retail sector, specifically in regional malls. The regional mall sector is fairly consolidated (more than 80 percent is owned by public REITs) and it has rent traction that doesn’t exist elsewhere.

In the short term, we are bullish on hotels, as they are back to pre-Sept. 11 travel and occupancy levels. Last year hotels were about occupancy recovery, this year it is about room rate increases, which should boost earnings growth 25 percent to 30 percent.

We are cautious on both the office and apartment sectors, but office is our primary concern right now. The sector still has 15 percent vacancy rates, and it won’t see a portfolio-level recovery any time soon. Tenants are still controlling the deals, and it will be another two years before most office companies can cover their dividends out of free cash flow. Investors seem to be anticipating a recovery that is going to take longer than they think."