The analysts surmised that the current outlook for the office sector might be "more bullish than historically expected at this point in the cycle" as short supply continues to stay ahead of the anticipated fallout from slower economic growth. They said the "more aggressive and opportunistic management teams" might be able to take advantage of an adverse environment and add value for shareholders despite uncertainty in market trends and in access to capital.

Looking at specific companies, the analysts said Kilroy Realty Corp. has not yet experienced a decline in its new developments leasing activity to date, but the analysts anticipate a slower leasing environment through most of 2008. The analysts also believe new developments not under construction are likely to be delayed.

Kilroy Realty shares lost 3.04% to close at $51.01 on Monday.

The analysts also commented on Alexandria Real Estate Equities Inc.'s plans to expand into international markets such as Scotland, India and China. "We are much more comfortable with management's ability to execute the international effort in a profitable way, especially given management's ability to [control] the pace of expansion," the analysts said, while noting that the expansions will most likely not take place until 2010 to 2015.

Alexandria Real Estate shares shed 1.38% to end at $101.45 on June 9.

Looking at the multifamily space, BMO Capital Markets analyst Richard Anderson said in a June 9 report that the weakness in the sector seems more manageable compared to the decline experienced in 2001, thanks in part to limited supply. A slower transaction environment, changes in the shadow supply market, favorable tax structures and debt reduction also may be keys to weathering the downturn, the analysts said.

Camden Property Trust, for example, is uniquely exposed to the shadow supply market, they said. The analysts said that although Camden is "arguably the most exposed REIT" to competitive pressures from high foreclosure rates and a falling condo market, the company is more afraid of the weak demand that results from job losses than it is of a shadow market impacted by a high rate of foreclosures. "This is consistent with our thesis: Although there are numerous derivatives to consider, a foreclosed home on a tree-lined street is not likely to attract a tenant away from the social environment (think bikinis) of an apartment building," the analysts said.

Real estate taxes, on the other hand, are the biggest concern for Mid-America Apartment Communities Inc., and the analysts imply that rates are due to rise, as they have been kept "unsustainably low" in the past through lobbying efforts. The impact on the company's bottom line would be minimal, however, the analysts said.

Camden shares fell 3.57% to $46.98, and Mid-America shares lost 1.16% to $54.53 on Monday.

In a separate report, the BMO analysts on June 9 weighed in on UDR Inc.'s operations initiatives that are intended to create more efficiencies in the leasing cycle. The analysts said the innovations, which include online move-ins and a more flexible call center, should cost $12 million to $18 million on an incremental basis and are expected to capture $17 million of NOI once fully implemented.

"With a much more marketable portfolio, we think UDR is moving in the right direction and deserving of at least an in-line multiple," the analysts said.

UDR shares declined 2.37% to $24.26 on June 9.

Speaking during a presentation at NAREIT's REITWeek in New York, Fascitelli noted that Vornado has hoarded cash in preparation for a downturn, noting that the company now has "almost $1.5 billion on our balance sheet, and it's growing." He further noted that the property company has another $2.6 billion of unused capacity on its credit lines.

"That's $4 billion that we could call down tomorrow," he said. "We consider it to be scarce capital and we want to get great returns for deploying that money."

But when asked during the presentation about what sort of opportunities Vornado may use that capital for, the executive stressed that the company is happy to sit on the money until the right deals come along.

"It's conceivable that we don't use that money for quite a while, maybe it's the end of this year," he said. "We don't feel any pressure to invest that money. We feel the reverse pressure about finding that very, very good deal and making a lot of money."

He explained that the company has no targets for acquisitions, nor does it have a timetable for using its available cash.

"It's very tough to describe to you what we need to see to deploy that money, but we have to feel extremely good that we're getting tremendous value for deploying what we think is scarce liquidity," the executive told conference participants.

Fascitelli added that the "pressure to get rid of assets has not been so great that we've seen enough of a price decline that we would use that money at the current time."

Vornado also plans to keep its search for opportunities limited in terms of asset class and geography, with Fascitelli saying the company plans to focus primarily on office and retail assets in prime markets.

Fascitelli also left open the possibility that Vornado could look to purchase real estate in markets outside of the United States, particularly in London. Vornado's only significant non-U.S. property holdings are in India.

"We have looked at other international areas, and the most we've looked at is London," the president said in response to a question from the audience. "Quite frankly, we like London, especially when prices started to get crushed over in London, and the share prices of the public companies got crushed."

Fascitelli said Vornado began to "fanaticize about entering that market" amid that turmoil but got snagged by the weakening of the U.S. dollar against the British pound.

"Along the way, the pound went from about $1.40 to $2.00," he noted. "That made it expensive dreaming."

But the executive added that London "remains an interest" long term, noting that it carries "a lot of the same characteristics as New York."

As for other international markets, Fascitelli said the company has not "come close to doing anything else."

He further noted that Vornado has no international strategy, explaining that it has "no reason to go international unless we think we're going to make more money doing it."