All good things come to an end. What goes up must come down. Pick any cliché you want and throw it out the window when it comes to the ongoing success of real estate stocks. This was not forecast to be a stellar year for REITs. The recovery in the broader markets was supposed to have taken hold by now causing money to flow out of real estate and into other sectors. Well, it hasn't exactly played out that way.

At the start of the year the consensus among industry analysts Portfolio spoke with was that REITs would return somewhere in the neighborhood of 5 percent to 10 percent.

Through the first three quarters of the year, the NAREIT Composite Index has posted a total return of 25.39 percent. Over that same period, the S&P 500 has shown some resiliency, but only managed a total return of 14.72 percent. If these numbers hold, it would mark the fourth straight year REITs have outperformed the S&P.

Now the million-dollar question: will the industry maintain this performance over the fourth quarter and into 2004? Is this 25 percent return too high and are we due for a correction? To use another cliché, only time will tell. But what we may be witnessing is a dramatic shift in investor thinking; no longer are REITs seen as merely a defensive investment but instead are being incorporated as a key component of a well diversified portfolio.

In This Issue

This issue's cover story is a candid interview with the man who is synonymous with publicly traded real estate, Sam Zell. This is the first in Portfolio's new series, "Paving the Way," which will periodically profile those individuals who have helped shape the foundation of this industry and provided vision for the future.

"Undefined Contributions" looks at large corporations that invest in real estate through their defined benefit plans but do not offer their employees a real estate option in their defined contribution plans. "REIT Rookies" provides viewpoints of those fund managers, plan providers and plan sponsors new to REIT investing.

Also, "Equal Opportunities" explores the increasing role of women in the publicly traded real estate industry and its associated fields.

Matthew Bechard
Editor in Chief