* Cuts 2009 development starts originally expected at $1 billion by half

* Says in Manhattan one month's free rent has become common and now is standard

for owners to pay brokers fee

((New York Equities Desk; tel: +1 646 223 6000))

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A catalyst for the cautious view is the potential for an increase in default rates in outstanding commercial mortgage-backed securities, as well as higher capitalization rates, analysts at Goldman wrote in a note to clients.

The analysts said they also expect a focus on de-leveraging as REITs largely reverse the rapid growth in assets that has taken place over the last 10 years.

The analysts remained "most cautious" on apartment REITs, but continued to favor retail and office REITs based on their long average lease terms, steady occupancy levels and embedded rent growth.

Goldman added apartment REIT AvalonBay Communities Inc to its Americas conviction sell list and removed industrial REIT ProLogis from it.

The analysts said the shares of AvalonBay continued to trade at a more than 25 percent premium to the broader REIT sector despite below-average growth.

They said AvalonBay's rental stream could be at risk and projected a negative funds-from-operations growth over the next two years.

Goldman removed ProLogis from its Americas Conviction Sell list less than a month after it added the company to the list.

"Much of the negative news has been priced into the stock at this point; in fact, we believe the stock may have over-corrected in light of concerns regarding near-term liquidity, which we think are largely unfounded," the analysts said.

(Reporting by A.Ananthalakshmi in Bangalore; Editing by Vinu Pilakkott) Keywords: REITS/RESEARCH GOLDMAN

A. Ananthalakshmi vj

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* Reports Q3 earnings per diluted share of $2.98

* Says Q3 total revenue increased 6.2 percent to $223.4 million

* Reuters Estimates Q3 earnings per share view $0.62

* Reuters Estimates Q3 revenue view $213.96 million

* Expects Q4 EPS in the range of $1.42 to $1.46

* Expects EPS for the full year 2008 to be in the range of $6.61 to $6.65

* Reuters Estimates Q4 earnings per share view $1.20

* Reuters Estimates FY 2008 earnings per share view $2.39

* Q3 FFO shr/$1.28

* Reuters Estimates Q3 FFO view $1.27

* Q4 FFO per share in the range of $1.25 to $1.29

* Reuters Estimates Q4 FFO view $1.25

((New York Equities Desk; tel: +1 646 223 6000))

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Expected next investor conference call information:
Conference Call Date: 11/6/2008
Conference Call Time: 10:30 AM
Conference Call URL: http://www.snl.com/irweblinkx/QuarterlyResults.aspx?iid=103145

Expected next dividend:
Dividend Announcement Date: 9/18/2008
Dividend Record Date: 10/3/2008
Dividend Pay Date: 10/15/2008
Dividend Amount: 0.8925