Question: In terms of Wien & Malkin investment objectives and overall approach to direct real estate investment, how has the last decade differed from earlier periods?

The most significant change is that we have sold all our interests in Class-A Manhattan office towers. We thought the market had driven pricing so high it was an opportunity to sell. Trophy CBD buildings represent huge concentrations of investment and have exposure to large financial requirements when their typically larger leases roll - including the costs of tenant installations and commissions, as well as free rent - all of which can disrupt cash distributions. We think other types of property, such as suburban office buildings, urban retail properties, and multi-family housing, will be less exposed to cash flow disruptions and will offer our investors diversified sources of income.

Q. What are some of the new factors influencing your current investment strategy?

We have made, and continue to make, huge investments in information technology. Our in-house intranet system provides communication capabilities to acquire and operate property in other parts of the country. Our IT department enables remote implementation of our company-wide management, marketing, and reporting systems and processes with consistency and accountability. Our geographic and product diversity helps to shelter investors in our program from major swings in any one region or type of investment.Technology facilitates that diversity.

Q. You assumed your leadership role at a time when real estate values were falling sharply. What did you learn then which guides you now?

What I learned is something that our family has always understood: protect against the downside, and the upside will take care of itself. The two most important elements to downside protection are to maintain conservative levels of debt in our deals, and allocate capital continually to maintenance and improvements. This helps ensure that we can survive economic downturns and always improve the competitive position of our properties.

We continue to focus on acquiring well located properties that either are, or can be, improved and repositioned as Class-A. We look for economically diverse markets with significant barriers to competition. Finally, we recognize that sometimes the market will pay more than the value we assign to the long-term prospects of a property, and in these circumstances we are prepared to sell and redeploy our investors' equity.

Q. What impact have new capital sources had on your strategies? What might the future bring in that regard?

Equity and debt innovation have certainly been a hallmark of the '90s. In the past, real estate equity typically was provided by privately directed capital, including insurance companies, pension funds, banks, syndicators, overseas buyers and wealthy individuals. Wall Street houses certainly raised a lot of public capital in the '90s. Now it looks like the big flurry of activity in recent years was the result of Wall Street pushing a new product - the REIT - whose impact on real estate equity capitalization was merely incremental rather than fundamental.

The significance of publicly placed debt, however, is much more profound. The bundling of mortgages for sale as collateral for bonds has grown immensely and competes effectively with traditional debt sources. Some industry participants believe that in the future, collateralized securities will be the dominant source of debt capital. Others fear that the public markets' appetite will go sour with the first failures of publicly placed debt in the inevitable downturn to come, and banks, life companies and pension funds are the lenders of the future.

Whatever the future holds, we have positioned our partnerships defensively to be as efficient as possible in terms of raising capital from all sources. All of our investor groups formed after 1988 are structured to allow merger into one or more ownership entities owning many properties. Thus merged, our investor groups will have the size and strength to compete effectively in the public debt markets and even issue their own debt instruments. We are certainly not thinking of "going public" and have no present plans to change anything, but we have protected our investors for whatever the market throws our way.

Q. Income-producing real estate is much more expensive now than a decade ago. How does Wien & Malkin continue to deliver value to its investors?

We measure our performance against our investors' comparable risk alternatives. Our aim is to provide better after-tax current returns - with capital appreciation potential, capital preservation and inflation protection - than do high- grade or United States government bonds. We review thousands of acquisition submissions annually and focus on those where we can add value to the investment through our ability to fix a capitalization, marketing, maintenance or partnership problem. We look for inefficiencies and repair them for the long-term benefit of our investors and ourselves. I think we can do that in any market cycle and provide a better performance than comparable alternatives.

Q. The relationship between the Malkin family and Wien & Malkin investors is a special one. What about that relationship is important to you?

Most important to me is to fulfill the trust that investors place in us. They rely on us to provide secure long-term income for themselves, their relations, and successive generations. They look to us for that reliable check that arrives every month. They expect us to know when to buy, refinance, and sell, and how best to preserve and grow their investment dollars. My father and I make these decisions for three generations of our family, as well. It's an awesome responsibility that has changed my life and the way I look at the world. It has altered the time frames I take into account when I make decisions, shunning the quick profit and focusing on what's best for the next 20 years. What's important to me is maintaining the trust of our investors every day.