While it may not be the most glamorous or controversial subject we could cover, energy remains one of the most critical expense-related items facing real estate companies today. And the impact energy costs can have on companies’ bottom lines can be seen in the proactive approaches many REITs are taking to improve efficiency and reduce long-term expenses.

In this issue, we take a look at energy from both an investor’s perspective as well as on a sector-by-sector basis. To the extent that energy efficiency improvements can raise a REIT’s net operating income and enhance a property’s value, investors have taken notice and added these factors to the mix when evaluating investment opportunities. From a sector standpoint, the implications of energy expenses can vary widely based on a company’s core business, tenant base and lease structures.

Efficiency improvements can come with large and small price tags. Companies can overhaul the entire building envelope or simply update the light fixtures. In the office sector, for example, a significant amount of energy has been wasted as equipment like computers, copiers and other machines sat idle. Increasingly these products are being built to shift into a "low-energy" mode when not in use.

That is just one example and there are countless steps, too numerous to list here, that companies can take to improve efficiency and lower costs. For further reference, visit the U.S. Department of Energy’s Web site at www.eere.energy.gov or the Environmental Protection Agency’s Energy Star Web site at www.energystar.gov.

Also In This Issue

There is no doubt that 2003 was a sensational year for REITs and real estate mutual funds. This issue’s cover story, "Top Rank," lists 76 of the largest funds ranked by their 2003 returns, courtesy of Lipper, and interviews some of the leading managers to see what set their funds apart from the rest. The chart provides detailed information on each fund including one, three and five-year returns and contact information.

Also, I would like to congratulate the winners of the 2003 Real Estate Portfolio Stock Challenge—Barry Vinocur, Jeff Donnelly and Lee Schalop. To read the methodology behind their selections and what these three proficient prognosticators think about 2004, turn to "And the Winners Are..."

Matthew Bechard
Editor in Chief