By Kyle Fishburn

1. What is your outlook for the real estate investment marketplace in 2008?
For the first half of 2008, markets will see a moderate improvement over a relatively sluggish 2007. One year ago, limited returns were projected for 2007, due to outperforming stock prices, active cash flow and healthy rent growth prospects. However, as a result of expensive property valuations, the total returns for REITs were below break-even for the year.

Looking forward, as recent uncertainty in the financial markets and temperate job growth have slowed demand for space, property valuations are more attractive than they were a year ago. As a result, we expect moderate market performance for real estate securities. However, slow economic growth and more stringent lending policies due to the credit collapse restrict financing and limit return potential.

2. What challenges do you foresee for the REIT industry this year?
One of the greatest challenges facing the industry is the restrictive borrowing environment. Due to the credit crunch and tighter underwriting standards, investment is more expensive and borrowing capacity has been greatly reduced. These restrictions force higher cap rates, and fewer leveraged buyouts are expected to occur.

Another challenge is real estate's clear dependence on macroeconomic growth. When the economy slows, real estate is put at risk. However, the short-term interest rate cut by the Federal Reserve, which is aimed to stimulate business investment, should lead to higher asset valuations and lenders more apt to lend.

3. Given the REIT industry's past success, how has the typical real estate investor changed?
Though the typical investor in real estate securities has not changed, REITs have earned greater acceptance.

REITs effectively diversify risk, and incorporating REITs into an investment portfolio has been proven to generate superior risk-adjusted returns relative to portfolios that exclude REITs. Additionally, more institutional investors, such as pension funds and insurance companies, continue to use REITs as an investment vehicle. We expect this trend to continue, fostering greater acceptance on a global scale.

4. What advice do you have for new real estate and REIT investors?
For new investors, REITs are a means to achieve higher risk-adjusted returns from an investment portfolio. The best and broadest avenues available to new investors are REIT exchange traded funds (ETFs) or indexed mutual funds, which track REITs through property indexes such as the FTSE EPRA/NAREIT Global Real Estate Index, Dow Jones Wilshire Real Estate Securities Index (RESI), the Dow Jones Wilshire Real Estate Investment Trust (REIT) Index and the Cohen & Steers Realty Majors Index.

Where the institutional investor is more concerned with stock and sector picking, REIT ETFs offer a diversified and liquid alternative to direct stock investment.