Name some companies that meet those criteria.
Steers: Simon Property Group [SPG], the largest REIT in the U.S., has considerable leverage with retailers, as they have dominant mall and outlet portfolios. They have a tremendous balance sheet, and they use their size and cost of capital to take advantage of external growth opportunities, either through redevelopment or acquisitions. We also like Prologis [PLD], a very large industrial REIT. It has global reach that leverages tenant relationships around the world—one-stop shopping for tenants looking for global distribution. It also has a strong balance sheet, and it is growing around the world.
What about office buildings?
Cohen: The major urban centers are doing extremely well. Whether it is New York, Boston, Washington, San Francisco, or Chicago, that's where the American population is moving—that's where jobs are growing, and that's where office fundamentals are likely to improve. The office business is very tough, with high capital costs and high incentives needed to attract tenants. But vacancy rates are likely to decline as employment improves. And, frankly, employment trends are improving, although slowly.
Steers: Where the real job growth is occurring is in technology centers, energy centers, and global trading hubs. So whether it is in Houston, San Francisco, Silicon Valley, or port locations around the country, those are the kind of places you want in the U.S. and overseas.
What's the investing outlook for apartments?
Cohen: We are somewhat neutral on apartments because we see the housing recovery continuing, owing to affordability and the availability of credit. And off a very low level, single-family homes are gaining in attraction to our growing population. On the other hand, as jobs grow, the demand for rental apartments is increasing. Now, this is one area where new construction can take place, particularly in suburban areas but not so much in urban areas— though an exception is Brooklyn, an urban area where a lot of apartments have been built in recent years. But overall, we're neutral on apartments.
How would you sum up a few of your other themes outside of real estate?
Steers: In terms of our core portfolios, we want to be more cyclical and more growth oriented. We like commodities and natural-resource stocks because, frankly, they tend to perform well in the latter half of a cyclical expansion as things like capacity utilization start moving higher.
What about the likely increase in interest rates?
Steers: We don't try to predict where rates will specifically end up. But the direction, given our outlook, is higher. That's fine as long as we are right that what's driving interest rates—and potentially inflation—higher is strong cyclical growth, which drives the fundamentals of what we invest in. So if interest rates migrate higher gradually, that's fine. If you look back over time, REITs have delivered double-digit returns in periods of rising interest rates, so they are not bonds. Over time, rising rates increase the cost of capital for all companies, including REITs. And depending on how sharply those rates rise, it can certainly hamper an economic expansion. But at the end of the day, it is about the economy and jobs. And rates are more of a symptom than anything else.
Thanks, gentlemen.
Cohen & Steers Mutual Funds:
http://quicktake.morningstar.com/fundfamily/cohen-steers/0C00001YQF/fund-list.aspx 
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