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The volume of investment sales recently has been extraordinarily weak whether you look at aggregate sales price or number of transactions. In fact, we are on pace to see sales volume hit the lowest level we have seen in the 26 years we have been tracking these statistics.Our recently completed analysis of the Manhattan property sales market, through the first three quarters of 2009, shows only $3.2 billion in volume; a remarkable reduction in the aggregate sales price of 82% from the first three quarters of 2008 and 92% from this cycle’s peak in the first three quarters of 2007. For those of you familiar with the Manhattan market, our study analyzes sales which occurred south of 96th Street on the eastside and south of 110th Street on the westside.In the first three quarters of 2009, there have been 209 Manhattan sales. This number of transactions is down by 60% from 2008 and 75% from 2007.The above data would lead one to believe that people are just not interested in purchasing investment properties in New York. Nothing could be farther from the truth. We have noticed trends in the marketplace and have been saying that the market is in a severe supply constrained dynamic since the middle of 2008. This is now manifesting itself in a very low volume of sales activity.Average property value has falled in New York by 32% from its peak levels. Clearly, this percentage variesdepending on product type and building classification. Multi-family properties have been performing best, having lost only 16% of value while office buildings with significant expoure to the marketplace have been the most negatively affected, seeing a reduction in value of about 70%.These reduced values have peaked the interest from the buying community as investors are looking for core assets at greatly reduced prices. Conversely, discretionary sellers are seeing these pricing trends as a tangible reason not to place properties on the market at the present time. The difficulties in the financing market have been a major contributing factor to the reduction in value. With banks underwriting more conservatively, additional equity is required and , therefore, prices buyers can pay have been going down. We are all aware that equity costs a lot more than debt does.This supply constrained enviromnent is illustrated in the listings portfolio of my firm, Massey Knakal. At the height of the market in the first half of 2007, we had, at one point, 836 exclusive listings. Today, we have just 513 and have been below 600 for the entire year ( I am only using Massey Knakal data because this exclusive listing data is not readily available from any of the research firms as brokerage companies are not required to pubically divulge their exclusive listings ).These dynamics have not, however, reduced demand for New York City investment properties. For the transactions that we have marketed and sold thus far in 2009, we’ve been pleasantly surprised by the number of bids we have received. For stable cash flowing properties,  we have received dozens of offers on each listing. Properties which are vacant or have a value-added component have also seen above trend numbers of offers.Most interestingly, for the notes that we have sold for lenders thus far in 2009, we have had in excess of 50 offers for each of them. Where is this demand coming from?Institutional capital was a significant driver of the increase in values in the 2005-2007 period. When the credit crisis tangibly took hold in the summer of 2007, this institutional capital all but evaporated. Fron the summer of 2007 until recently, nearly all of our properties have been sold to high net worth individuals and old-line New York families that have been investing in the city for decades. These buyers remain very active today and continue to seek opportunities to buy well located assets at today’s reduced values.Additionally, we have seen tremendous interest from high net worth foreign based purchasers. Remarkably, these foreign purchasers are typically not real estate professionals in their countries of origin. They have made money in other industries such as technology, manufacturing or financial services. They are choosing to deploy theri capital into the U.S. which is perceived to be at the very low pint in the value cycle. We have not seen the influx of foreign capital that we have seen recently since the mid-1980s.In addition, on the demand side, we have seen resurgence, within the past month or two, of institutional capital. As I mentioned earlier, this capital all but evaporated from the marketplace in the summer of 2007 and many of these institutional real estate players have formed distressed asset funds looking to buy properties. These funds are now in the market actively bidding on opportunities.This all leads to an extremely healthy demand side for New York investment properties.We remain hopeful that the supply side of the equation will get better as distressed assets appear to be coming to the market in slightly better numbers than we have seen thus far in the cycle. There have been a number of legislative changes that have created tremendous inertia within the distressed asset marketplace but, notwithstanding these modifications, we believe that fundamentally troubled properties will ultimately come to the market, in one form or another, before too long adding to our supply. This would certainly be a welcome happening for the brokerage community and all of the purchasers waiting for opportunities.

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