Greg Whyte
Morgan Stanley Dean Witter
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3rd Place


Bachelor of commerce degree, Natal University, South Africa. Greg Whyte heads the REIT group at Morgan Stanley Dean Witter. He has been covering the REIT industry since 1988. He joined Morgan Stanley in 1991 after three years at Lehman Brothers, where he covered real estate and financial services companies.

Industry Outlook and Style

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Greg Whyte's outlook for the real estate investment trust industry is mixed, as evidenced by his group's range of ratings across the group's various subsectors. His team now recommends overweighting the downtown office, industrial and multifamily segments. At the same time, the group assigns a market weighting to suburban office properties, regional malls, strip shopping centers, manufactured housing and storage. Morgan Stanley advises underweighting the outlet mall sector.

In the downtown office market, Whyte favors companies that are in markets with high barrier to entry -- those in which new construction is very limited -- such as Boston, New York, Washington, D.C. and San Francisco. Given current economic conditions and good mark-to-market opportunities in most of the downtown portfolios, the analyst expects to see good top-line growth from most of these companies. His top pick both for this subsector and the group overall is Equity Office Properties the stock most favored by first-place winner Jonathan Litt of Salomon Smith Barney as well.

The industrial market is unusual in that most of these properties are built for owner occupancy or to suit a specific tenant. This ensures that supply will not outstrip demand, explains Whyte. The analyst sees continuing strong demand from existing industrial companies and "reasonable" demand from new companies entering the market. In addition, he notes that credit quality for industrial tenants is often higher than for those in other asset classes. "So on a risk-adjusted basis, it remains one of the more attractive sectors for us," says the Morgan Stanley analyst. He likes Duke-Weeks Realty ( DRE - Get Report) in the industrial market.

Although Morgan Stanley currently overweights the multifamily sector, Whyte hints that this could change. "We're watching this subsector pretty closely because of some of the things going on in that particular market from a fundamental perspective. We tend to be biased toward companies with assets in difficult-to-replicate marketplaces, particularly the New England and California markets." BRE Properties ( BRE) is the favorite in the multifamily category.

Concerned that a slower economy could ultimately drive down rent rates in malls and shopping centers, Whyte's group is less enthusiastic about the retail subsectors. Nevertheless, he has two recommendations: General Growth Properties ( GGP) among the regional malls and Kimco Realty ( KIM) among the strips.(Morgan Stanley Dean Witter has or has had investment banking relationships with all the companies mentioned here and is a market maker in all except General Growth Properties.)

Stock Pick
Favorite stock for next 12 months:
Equity Office Properties
"There are three main reasons Equity Office Properties is my top pick: First, downtown office is an asset type that we think is particularly well-positioned. Second, many of the assets this company has are in particularly well-placed markets, so their ability to mark rent rates up pretty significantly as the space rolls is high. Third, and possibly most importantly, Equity Office Properties bought Cornerstone Properties (CPP) in the latter part of the second quarter, and we believe Equity Office Properties is likely to achieve significantly enhanced margins on that portfolio through more aggressive management of the space and more aggressive mark-to-market of the rent rates."

"Consequently, we think that third-quarter operating results probably will show slightly better-than-expected earnings from that portfolio, but by the fourth quarter, it should really be kicking in sharply. So in our opinion there's a decent catalyst here for the stock to begin outperforming. It happens to be cheap relative to its peers anyway."

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Which stock do you like best? Litt and Whyte: Equity Office Properties Raiman: Equity Residential