Here we go again. Just like this time last year, industry pundits are once again forecasting the REIT run to come to an end. After all, what goes up must come down. It is fundamental market logic that every sector that outperforms eventually reverts to the norm. But will 2005 be the year it happens to listed REITs?

Many forecasters expected REIT returns to slow significantly in 2004. However, through the first 11 months of the year REIT returns were up more than 24 percent, once again outperforming most major market indices. While the five leading investment managers featured in our 2005 Investor Roundtable stopped short of predicting where REIT returns would be in 12 months, they maintained a positive stance on the sector, the characteristics of public REITs and the opportunities that the global market offers. For a longer excerpt of the roundtable discussion, visit www.realestateportfolio.com.

Impressively, this REIT run has occurred amidst some very difficult property market fundamentals. In most sectors, fundamentals have nowhere to go but up. For a review of what could drive improvements in fundamentals and impact sector performance read "Fundamental Improvement."

Numerous factors, some known and others unforeseen, will ultimately shape whether REITs post their sixth-straight year of outperformance in 2005 or if the run finally slows down. However, regardless of any single-year performance data, REITs are and will remain a valuable long-term investment alternative for investors seeking both dividends and portfolio diversification.

Also In This Issue

For the past year we have interviewed leading investment experts in our "Capital Markets" column. This issue, Christopher Wright talks with the father of indexing John Bogle for his thoughts on the state of the mutual fund industry and how sector investing, including REITs, fits into his overall thinking.

In addition, House Majority Whip Roy Blunt comments on the benefits of the REIT Improvement Act in "Window on Washington" and Tom Bell outlines how recent developments will impact Cousins Properties in 2005 and beyond.

Matthew Bechard
Editor-in-Chief