Lehman says the mood was somber at Tuesday's 5th Annual Future of REITS conference as fund managers contemplated the probability of lackluster 2002 performance. Yet panel members noted the real estate industry's strong overall performance compared to previous recessions and participants largely agreed that REITs looked whistle-clean when compared other investment sectors rife with accounting misdeeds.

Sam Zell, chairman of Chicago-based Equities Office Properties Trust, noted that real estate firms' uncomplicated business models help keep financial shenanigans to a minimum. "While there will always be crooked deals, we do not have channel stuffing or swap issues." Zell said that he expects economic relief to kick in late this year or in Q1 of 2003, with the recovery driven by a "tsunami of federal stimulation."

Terror insurance discussions left many investors attending panel discussions at the conference with the sense that REIT executives are hiding their heads in the sand regarding the issue. Boston Properties' Ed Linde suggested, "The breadth of the problem will lead to a government solution." A participant who compared providing insurance against acts of terrorism to the lingering issues concerning asbestos liability challenged that view, however.