By Erin Corcoran

1. Where do you see the strongest investment opportunities in the real estate securities market?

Year-to-date, equity REITs have posted slight positive total returns well ahead of broad equity market benchmarks, after a difficult 2007 in which equity REITs were down about 16 percent. Large-cap REITs have outperformed thus far in the year. With that backdrop in mind, we would continue to identify those companies that have a concentration of assets in high barrier markets. Assets in these markets are not as vulnerable to the largest price corrections and are more readily financed.

An example that fits these criteria is Forest City Enterprises (NYSE: FCE.A), a real estate operating company. Forest City’s shares have been under pressure due to concerns regarding its higher-than-average leverage and its significant development pipeline. The company’s shares are down over 20 percent year-to-date, and more than 40 percent from their June 2007 high, while large-cap REITs are up almost 10 percent in 2008.

Shares of Forest City present long-term investors with an opportunity to invest in a high- quality, diversified real estate company and the leading real estate developer of mixed-use projects in high-barrier markets.

2. With the trend for companies to go green, what is your outlook for the impact sustainability will have in the real estate industry?

There certainly has been a noticeable shift within the real estate development community to focus on building new green projects.

The energy savings that many projects can now obtain through new innovations or design can make additional project costs economically viable. Pushing these sustainability efforts forward are the driving forces from the investor community that desire to direct investment dollars to LEED certified buildings or green developments. In the future, it is likely projects will have an environmental focus, based on the fact that some investment dollars are targeting green real estate projects and shunning high energy costs.

3. Which REIT sectors are best suited to weather the current economic situation?

Initially, sectors with longest lease terms are poised to weather the downturn better—this would include the triple-net lease sector and the health care sector. While the office and retail sectors also have longer leases, each of these sectors are likely to face some headwinds (varying by market) on the demand side.

4. What are the most daunting challenges and intriguing opportunities ahead for the REIT sector?

One of the overall challenges for real estate continues to be the absence of a fully functioning securitization debt market. The excesses from a CMBS market in over-drive were not positives for real estate in the long-term. However, the absence of liquidity in the commercial real estate securitization market and the discount that CMBS bonds are trading at, in some cases, are drawing some commercial real estate lending dollars to the CMBS bonds at a discount, rather than returning to real estate mortgages. This is clearly a challenge for the sector that will work out over time.

The major opportunity for REITs is the return of the external growth or acquisition strategies. Over the next year, REITs should be increasingly more active acquiring real estate properties.