The public market is a strange beast. While some claim it is efficient and rational, the student of market history knows that it's often fickle, emotional and short-sighted. Manias appear on the investment scene with amazing regularity; the personalities of these creatures are always different, but their ability to make fools of investors is ever-present. The stocks of individual companies and even entire industries are subject to the passions of performance-crazed investors, and for surprisingly long periods prices can soar wildly or sink like stones, regardless of intrinsic values.

Years of above-average performance by the broader market indices have emboldened investors to seek extraordinary returns. Surveys regularly report that a very large number of today's investors would be sorely disappointed with annual returns below 20 percent. Look at the Internet and tech stocks in 1999. Internet-related IPOs regularly double and triple overnight. According to Strategic Insight, the amount of dollars which flowed into high-tech mutual funds in the first ten months of last year was more than the total amount collected by such funds during the prior ten years combined.

Thus it should be no surprise to us that our stocks have been brutally treated despite healthy real estate markets, solid balance sheets and growing cash flows and dividends. I'm not saying that investment style is the only reason for our two year bear market. REITs issued too much equity from 1996 through 1998, while many managements, new to the public markets, made errors of judgment such as issuing equity forwards. And, with hindsight, REIT prices were simply too high in 1997, given the maturity of the real estate cycle and the impending shutdown of the capital markets. Still, the excessive sell-off of REIT shares owes as much to growth-oriented investing and the quest for 20 percent returns as to any other cause. We weren't the only sector which was treated poorly last year.

So where do we go from here? REIT organizations have already begun to adjust to the difficult environment. They should continue to avoid the temptation to lever up the balance sheet (or to raise equity at the first sign of a market turnaround), while taking advantage of the strength in Main Street real estate by culling portfolios. Sale proceeds can be used to reduce debt, fund value-adding developments and buy in stock at significant discounts to NAV. Internally, the morale of the management team shouldn't be neglected. This may require the creation of alternatives to underwater stock options—even if it means additional compensation expense.

REIT organizations would also do well to reach out to investor organizations more frequently to tell their story; not all investors are tech junkies, and many of them would love to add REIT stocks to their portfolios if they can develop confidence

in REITs' future business prospects. Above all, we should continue to refine our understanding of the public market and its expectations, promising only what we can realistically deliver. Our story is a compelling one; we need only dedication, perseverance and patience.