I've been selling investment properties in New York City for 25years and have never seen anything like the low level of sales thatthe market experienced in the first quarter of 2009.In order toknow just how abysmal the volume of sales has been, let's review alittle history. In order to study volume of sales we track a sampleof 125,000 properties which fall into the C, D, S & K classesof properties which include multifamily apartment buildings, retailand mixed-use properties. During the last 25 years, the averagevolume of sales has been 2.5% of this total stock of properties orabout 3,125 sales per year. The best years we have seen were1986 and 2006 with 3.4% turnover, 1988 with 3.5% and apinnacle in 1998 at 3.9%.On the other side of the coin, weexperienced the lowest level of turnover in both 1992 and 2003which were both years at the end of recessionary periods andwere years in which we reached cyclical highs in New YorkCity unemployment. The volume of sales in those years was1.6%. We had always thought that this 1.6% level of turnover was abaseline representing only those sellers who had no choice butto sell due to reasons such as death, divorce, taxes,insolvency, partnership disputes and the like. Our assumptionwas that volume would never get lower than the 1.6% threshold.Enter 2009.If we annualize the turnover the market experience inthe first quarter of 2009, in which there were only 233 salesclosed, the volume of sales would beonly 0.7%!We certainly do not expect this trend tocontinue to an annual level of 0.7% but it is very likely that wemay not see enough activity to hit the 1.6% level. Webelieve that this extraordinarily low level of sales was created bythe virtual paralysis that the market experienced after thefundamental dismantling of Wall Street on September 15th. Contractexecutions evaporated in the fourth quarter of 2008 as investorsbecame timid and credit markets froze which resulted in the enemicnumber of closings in 1Q09.We believe the volume of sales willincrease as the year progresses as it simply could not get anylower. A factor which will artificially add to the low volume willbe the fact that many lenders will opt to sell notes rather thangoing through the foreclosure process and then selling the assets.If the lender wants to maximize their note sale proceeds, they willsell the notes to real estate investors who will want to own theassets on a long term basis. Many properties which werefinanced in the 2005-2007 period have negative equity to an extentthat it is highly unlikely that the borrower will be able to payoffthe loan or would even want to. This will result in the buyer ofthe note foreclosing and holding the asset. This "shadow" salemarket will not be reflected accurately in the 2009 numbers.Whileall of the percentages mentioned above related to number oftransactions, we track the aggregate sales price volume aswell. Let's compare the first quarter of 2009 with thefirst quarter of 2008 and the height of this market cycle - thefirst quarter of 2007. The best performing submarket wasBrooklyn which was down by "only" 56.5% in the number of sales and63.5% in aggregate sales price from 1Q08. When comparing 1Q09with 1Q07, the number of sales was down by 65.6% and aggregateprice was down by 68.7%. Remarkably, those numbers were the mostpositive.In Queens, 1Q09 number of sales was off by 68.5% andaggregate sales price was down by 82.9% from 1Q08. When comparing1Q09 to 1Q07, the number of sales was down by 71.5% and aggregate prices by 77.6% .In Northern Manhattan, 1Q09 number ofsales was down 62.3% and aggregate sales price was off by 88.9%from 1Q08. Comparing the numbers to 1Q07, the number of sales wasdown by 77.1% and aggregate sales price dropped by a staggering93.5%.The Bronx experienced a reduction of 74.4% in the number ofsales and a reduction of 75.7% in aggregate sales price in 1Q09from 1Q08. Comparing 1Q09 to 1Q07, the number of sales was down by86.7% and aggregate sales price was down by a whopping93.8%.Manhattan activity has fallen off a cliff as comparing 1Q09to 1Q08, the market experienced reductions of 85.5% in the numberof sales and 86.9% in aggregate sales price. Compared to 1Q07,these numbers were down by 88.2% and 92.0% respectively.Clearly,there is nowhere to go but up from here but the question is: Howrapidly will the rate of activity increase? The degree of sellercapitulation we see and the availability of debt will be twoimportant factors in answering this question.

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