After a multi-year downturn, real estate investment trust managers have to be pleased - and somewhat optimistic - as publicly traded real estate prices have risen almost 11 percent in the last month.

The National Association of Real Estate Investment Trusts (NAREIT) pointed out in its recent state of the REIT industry briefing that a growing number of investment advisors are increasingly bullish on REITs.

"Funds from operations per share growth was strong throughout 1999, rising 10 percent on average in the third quarter," said Steven Wechsler, president and CEO of NAREIT. "An overwhelming majority of REITs met or exceeded analysts' earnings expectations. Yet, it was a disappointing year in terms of stock performance."

A glance at NAREIT's market index shows a definite, if not short, upswing. So far this month, the index has seen a 2.62 percent increase. Last month, that number was 3 percent. Before that, the charts are covered with negatives, from a - 1.76 percent return for the last three months to - 3.37 percent for the last three years.

It remains to be seen whether REIT share prices have truly turned the corner, points out NAREIT VP and director of research Michael Grupe.

"Nevertheless, the question active portfolio managers should be asking is: Given how far prices have retreated and valuations have increased over the past two years, compared with past bear markets in REIT stocks, plus the relatively balanced fundamentals evident in property markets, is it an acceptable risk to significantly underweight the sector at this time?" Grupe said.

A particularly large increase has been made in the hybrid category, where returns have risen to 6.21 percent for the month. Hybrids saw a large loss, however, of - 9 percent last month.

This may, in fact, be the perfect time to invest in real estate properties. The market is stabilizing slightly, with office development slowing, industrial development stalling and interest rates on a slight rise.

Investors know full well that the dramatic rise in technology stock prices of last year are unlikely to continue. With more and more investors looking for alternatives, likely increased investments in technology stocks could lead to a significant boost in market prices.

As NAREIT pointed out, many of these stocks have, in fact, beat earnings expectations and are traded at horrendously low price-to-earnings ratios.

For example, Colonial Properties Trust (NYSE: CLP), one of the largest diversified real estate investment trusts in the United States, has funds from operations for 1999 increase 9.8 percent over 1998. Net income available to common shareholders totaled $44.8 million for the year, up from $39.3 million 1998 - an increase of 14.1 percent.

Despite that, the stock trades at a soft 15 P/E ratio. And, unfortunately, that is one of the strongest P/E ratios in the industry.

"While 1999 proved to be a challenging year for REIT stocks, Colonial Properties continued to post solid year over year earnings growth," said Thomas Lowder, chairman and chief executive officer. "During the year, we benefited from our diversified portfolio strategy, which allowed the company to recycle dollars from one asset class to another."

Colonial is trading near $24 ½, smack in the middle of its 52-week range of $21 ¾ to $28 7/8. But even at the high end of that range, the P/E shows the stock to be undervalued.

With five strong buys, six moderate buys and only three holds, this recommended stock illustrates all that is wrong - but could soon be right for investors - in the REIT market.