GlobeSt.com: In light of Falcon's $888 million year in2007, do you think you can approach that same number in2008?

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Sweeney: I think 2008 is going to be verydifferent from the way most of 2007 was. The credit squeeze, thehousing market and the slowing of the economy all put questions onthe market so we will be very happy if we can reach a transactionlevel in 2008 that is similar to what we accomplished in 2007.We're on the sidelines a little bit right now, waiting to see wherethe economy goes, and also to see how this credit squeeze resolvesitself, but even so we are still looking for opportunities becausethere are always opportunities in real estate. And in fact rightnow, we are in the process of acquiring two properties, amulti-tenant office building and a single-tenant officebuilding.

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GlobeSt.com: Considering the niche that you havedeveloped in attracting foreign investors, what percentage of yourfunds come from offshore and what percentage come from theUS?

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Sweeney: The non-US investor base is our nichebecause we have a lot of experience with it and we are able to setup specialized investment strategies for certain types of clients.For example, we have a lot of experience in setting up investmentsthat are Islam compliant and Sharia [Muslim] compliant. About 10%of our client base today is domestic investors and we are going tobe pushing to increase that this year because, at the end of theday, we are still doing real estate transactions in the US.

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GlobeSt.com: Has the weakening dollar prompted moreforeign sources to invest with Falcon or caused some of yourexisting foreign investors to increase their investment levels withyou?

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Sweeney: A lot of countries see US real estate asa value now, especially when they include their currency into themix. We are talking to a lot of people from Germany and Ireland whoare looking for opportunities now. Part of their reasoning is thatnot only has pricing come down a bit, but the currency play evenbrings more of a benefit to them. In addition to the historicallystrong interest we have had from the Middle East because of theprice of oil and other factors, we even have interest right nowfrom the Japanese, who have not been active here for a while.

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GlobeSt.com: You mentioned a single-tenant and amulti-tenant office deal that you have in the works. Do you haveany preferences there?

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Sweeney: Our portfolio is about 20% single-tenantoffice and about 20% multi-tenant office. We focus on very strongCBD gateway locations, infill locations or real estate that may bemixed use and have an office component along with good publictransportation. We are also looking at the very top tier secondarymarkets for office investment.

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GlobeSt.com: Do you expect to see prices adjustingdownward for office properties?

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Sweeney: It depends on the asset quality. I reallyhaven't seen any pricing on core-plus assets adjusting. One deal wemarketed and closed the fourth quarter of last year was our GemGateway Property [a 162,326-sf suburban office complex near LosAngeles that sold for $48.5million], which is the leading multi-tenant office projectfor that market. The cap rate was as aggressive as it has ever beenand the competition was very intense, but what did change in thattransaction was that the all-cash institutional buyers stepped upto the pricing while the highly leveraged buyers did not. There wasa very big gap between the all-cash buyers and those who werehighly leveraged.

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GlobeSt.com: Will the distress of some over-leveragedowners result in opportunities for companies like Falcon to step inand buy at good prices this year?

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Sweeney: I think there will some parties that haveto sell because it's their exit strategy, because they bought atthe right price at the right time, because they have made theirprofit and they need to get on to the next deal. There will also beopportunities with owners who used too much leverage, bought theirproperties at too high a price with aggressive underwriting andwill be squeezed when they try to refinance. For the rightproperty, we might be able to provide mezzanine debt to bridge thegap or go in as a JV, but only on the right property.

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GlobeSt.com: What do you recommend to yourinternational investors in terms of geographic assetallocation?

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Sweeney: We typically advise a client that investsglobally to place about a third of their equity in the US. We thentake that equity and we put it into different properties indifferent regions for diversification. We look at all propertytypes and it really depends on their objectives and risk toleranceas well as the exit strategy for the property.

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GlobeSt.com: How long do you hold your investmentsbefore exiting?

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Sweeney: Our clients typically hold theirinvestments for three to 10 years. A few years ago it was three tofive years, but when pricing got higher, we went to longer-termhorizons.

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GlobeSt.com: Does Falcon invest in core assets,core-plus, value-added or all of these types? Do you invest acrossall property types such as office, industrial, retail, multifamilyand hotel?

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Sweeney: We look at all of the property types youmentioned and we also place equity in development JVs. The oneproduct type that we don't work on is hotels.

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GlobeSt.com: Why should an investor chooseFalcon?

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Sweeney: We've always focused on real estate 101so we're really just buying quality properties in stable locationswith growing rents. We practice realistic underwriting andconservative leverage and we always try to have a clear exitstrategy, so our IRR has been tested both in good markets and inbad. The best barometer of our success is that we've done well over$4 billion in transactions and our IRR is more than 18% from theinception of our firm.

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