Government Bailout - A Necessary Evil

The world today revolves around credit. Most businesses today use debt to finance their operations. Very similar to consumers using credit card for Christmas presents. Not just long term debt (ex. Debt to build factories, or equipment) but short term debt (ex financing of accounts receivables, seasonal credit lines). If the placement of debt stops then business large and small will be in jeopardy. The best analogy would be if your credit cards were turned off just before Christmas.

If these loans do not continue to be available to corporations then business will stop. What does that mean to the typical American worker? It means corporate layoffs, slowdown of growth and in many cases corporate bankruptcies.

This is why the government bailout is so important. After the bailout banks should be able to go back to lending again; albeit at very different terms than just a few weeks ago. Banks will be much more conservative over the next few years.

The problem with the bailout is that the government is now going to have a lot of bad loans to deal with. For investors this will be a great opportunity but for borrowers this will create problems for many years to come. All this distressed debt is going to create an overhang in the debt market for the many years to come. Debt markets will be soft for the next 5 years making borrowing difficult but at least not impossible.

In a few minutes we will see the effect on Wall St. of the bailout plan; unfortunately we will not see the effect on Main St. for many years to come.

The credit markets have to keep in alignment if the country does not want to sink into a depression let's just hope that the effects of this bailout do not create a long term recession.

Feel free to ask any questions.

Make It Happen.
Nick

Wall Street Staggers

http://www.businessweek.com/magazine/content/08_39/b4101000869093.htm?campaign_id=rss_daily

Wall Street Staggers
by Paul Barrett

In times of high stress, many in the financial world seek solace in watery metaphors. We hear of vast irresistible forces converging in "perfect storms" and unforeseeable events contributing to "100-year floods."

How could we have expected, let alone prevented, this?
Count on Warren E. Buffett to cut to the truth. Years ago, referring to reckless corporate debt, Buffett noted (or so the story goes): "You never know who is swimming naked until the tide goes out."

The tide's moving, and we're starting to get the full, not-so-pretty view. Along with the bare swimmers emerging from the soggy murk, we're being reminded of some of the dumb ideas and reckless choices that helped deliver us to our current debacle. As stunning as the scene seems, we've actually had plenty of experience with this sort of thing. But like some stubborn residents of hurricane zones, we swiftly choose to forget the last tempest and reassure ourselves that things will be different from now on. Why don't we learn the obvious lesson to the contrary? Answers: the timeless power of hubris during periods when profits seem easy, and a set of foolish financial notions that have become prevalent over the past three decades.

One of those beliefs is the indiscriminate antiregulatory ideology one hears preached on Wall Street with tent-revival fervor. What makes this thinking so perplexing is that many of the free-market true believers also assume the federal government will save them if they flop. Consider the extraordinary taxpayer-backed rescues of insurance titan American International Group (AIG), housing financiers Fannie Mae (FNM) and Freddie Mac (FRE), and, before those, the Treasury-guided merger of Bear Stearns into JPMorgan Chase (JPM). It brings to mind the homeowner who rants about getting Washington off his back but wants federally guaranteed flood insurance no matter how close to the Gulf Coast he builds his house.

Other by-now-familiar attitudes have helped put us in the drink: In good times, there's no such thing as too much leverage. (Remember Michael Milken?) Derivatives don't require oversight, even though almost no one understands them. (How now, Long-Term Capital Management?) And, don't worry, the quantitative geniuses have devised models to eliminate extreme risk. (Enron, anyone?)

"Now, again, the banks and the Bush Administration and [Treasury Secretary Henry] Paulson and [Federal Reserve Chairman Ben] Bernanke would like you to think these crises are like floods or hurricanes," says Michael Greenberger, a senior official at the Commodity Futures Trading Commission (CFTC) during the Clinton Administration. An advocate of more aggressive regulation of investment banks, he was shot down in the late 1990s by Democratic colleagues, not just GOP foes. Most financial calamities aren't like natural forces beyond control, Greenberger says. "These are predictable events." Predictable events, of course, are more likely to be prevented with sound rules and stiff enforcement.

Different Animals
Alfred E. Kahn offers the long view—a very long view. As the Carter Administration's aviation czar, he unshackled airline routes and fares in the late 1970s, reshaping that industry (for better and worse) and helping spur a lengthy era of economic deregulation. Still sharp at 91, the retired Cornell University economist and part-time consultant recalls that almost as soon as the free-market spirits were set loose, a furious stampede ensued. Lenders, for one, demanded lots more freedom. But they "were a different kind of animal" from airlines and trucking firms, which the Carterites also deregulated, Kahn says. "They were animals that had a direct effect on the macroeconomy. That is very different from the regulation of industries that provided goods and services.…I never supported any type of deregulation of banking."

During the Reagan years, Kahn's cautious industry-by-industry analysis was replaced by the all-encompassing antiregulatory ideology of the University of Chicago. One result: the liberation of an armada of savings and loan pirates, abetted by congressional Democrats as well as Republicans, many of them drunk on S&L campaign largesse. (Wall Street lobbyists with open wallets have since perfected the practice of neutralizing Congress on a bipartisan basis.) Hundreds of thrifts ultimately collapsed in the late 1980s and 1990s amid greedy and, in some cases, fraudulent real estate deals.

As early as 2000, William J. Brennan, a prominent consumer attorney who has represented mortgage borrowers since the S&L catastrophe, warned in testimony before the House Financial Services Committee that real estate finance would return in new guises to haunt us. Few listened. Behind every burst of ill-advised lending lurk financial innovators creating new mechanisms to entice ever-more-sketchy borrowers, says Brennan, the director of Atlanta Legal Aid Society's Home Defense Program. In the 1980s, Michael Milken and his comrades at the now-defunct Drexel Burnham Lambert investment bank exacerbated the S&L fiasco by hawking their thrift clients' high-risk junk bonds. More recently the likes of soon-to-be-defunct Lehman Brothers and Bear Stearns engineered the securitization of mortgages, encouraging home lenders to spew wildly unwise loans. "Lending without regard [for] the ability to pay back started with the S&L scandal," says Brennan. In the 1980s the borrowers were reckless shopping-mall developers; in the recent boom, unsophisticated and sometimes cavalier homeowners.

Wall Street transformed dicey subprime mortgages into the toxic securities that have required hundreds of billions in writedowns and that drove once-mighty Merrill Lynch (MER) to sell itself to Bank of America (BAC). One of the most striking aspects of the current turbulence is the degree to which banks invested in the noxious fare themselves, notes Emanuel Derman, who heads risk management at Prisma Capital Partners, a hedge fund in Jersey City, N.J. "These guys ate their own cooking; they didn't just pass it on to clients."

The outsize appetite on Wall Street for hazardous mortgage-backed securities and even more obscure derivatives has had a lot to do with the people in the kitchen failing to understand fully what was in their recipes. All of this is painfully familiar to anyone who paid attention to past adventures with wizards who claimed their esoteric models had magically eliminated risk and uncertainty. Hedge fund Long-Term Capital Management (LTCM) couldn't imagine Russia defaulting on its debt, much as Lehman apparently couldn't conceive of housing prices across the country deteriorating simultaneously, followed by a paralyzing credit crunch.

For four years in the mid-1990s, LTCM boasted extraordinary profits based on supposedly flawless computer formulas devised by a team that included two Nobel laureates. But in the summer of 1998, Russian credit disintegrated, one of several concurrent global shocks that the LTCM crew had failed to factor into their algorithms. After losing more than $4 billion in a few months—in retrospect, the amount seems almost quaint—the hedge fund received a federally organized rescue, although it later shut down altogether.

Financial "rocket scientists," says Henry T. Hu, a corporate law professor at the University of Texas in Austin, have a knack for neglecting low-probability, catastrophic events. The smartest guys in the room at Enron similarly assumed away risks they didn't want to confront. "These models…work in normal circumstances but not during times of market stress, when it really matters," Hu says. "It is almost like a safety belt that only fails in a serious car crash."
One of the things that dismayed outsiders about LTCM after it came apart was the size and complexity of its derivatives portfolio. Some in the Clinton Administration pushed for more oversight of the unregulated, privately traded instruments whose value derives from price shifts in currencies, securities, or other assets. Then-Fed Chairman Alan Greenspan, allied with Robert E. Rubin, Clinton's Treasury Secretary (and now a director and senior counselor at Citigroup (C), opposed tougher policing of derivatives. Banks could watch over each other more effectively than regulators could, Greenspan argued. This turned out to be shortsighted.

In an interview, Greenspan doesn't back down, even after all we've seen lately. "The majority of lawyers, in my experience, seek to regulate—that is, to contain certain activities with little weight given to the lost benefits of such activities," he says. "The question is: What do you lose? In this case, a very valuable instrument [credit default swaps, the derivatives at the core of the current mess] for the diminution of systemic risk. You can stop the system dead and eliminate speculative losses. But you will also get significantly reduced economic activity and ultimately lower standards of living."

Greenspan adds: "I've been extraordinarily distressed by how badly the most sophisticated people in the business handled risk management. But the question is: If, protecting their own resources, they can't do it, who's going to do it better?" (Well, maybe regulators who don't have big bonuses at stake would be less likely to get carried away by the euphoria.)
Rubin says separately that he didn't oppose the general idea of scrutinizing derivatives, but instead argued against particular proposals in the late '90s to expand CFTC authority. "I have always been concerned about derivatives," he says.

Michael Greenberger served as the CFTC's director of trading and markets at the time. A proponent of tougher oversight, he recalls the Greenspan-Rubin resistance as being fierce and across-the-board. "If we had prevailed, the [subprime-securitization] party would never have gotten started; the wildness wouldn't have happened," he says. "There would have been auditing requirements, capital requirements, transparency. No more operating in the shadows. Bear Stearns, Lehman, Enron, and AIG would be thriving, and spending every waking hour complaining about regulatory restraints imposed upon them." Now a law professor at the University of Maryland, Greenberger adds: "In a booming economy, people couldn't be convinced that without corrections, LTCM would happen again—bigger and with more ramifications." Today, Bear, Lehman, and AIG have untold amounts of outlandish derivatives on their books. It could be years before anyone untangles what they're worth.

One other legacy of LTCM is "moral hazard": the prospect that other financial actors would take greater risks because at some level they'd assume that they, too, would be considered "too big to fail." Surely one can surmise that Fannie Mae and Freddie Mac overstepped in part because of an implied federal safety net that turned out to be a very real one.

Edward S. Lampert, the hedge fund tycoon who controls Sears Holdings (SHLD), worries about yet another twist. He says the current wave of federal intervention sends the opposite signal from what's intended: that officials are panicking because of broader instability. "As an investor, that was my immediate reaction" to the Fannie and Freddie moves, he says. "They completely destroyed confidence in any financial institution."

Lampert frets that with investment banks failing and merging, the resulting consolidation will concentrate risk and invite more rescues. "You are going to have Citi, JPMorgan, and Bank of America with $2 trillion-plus in assets each," he notes. "That's three times the size of Fannie and Freddie. Now if they end up with problems, what do you think is going to happen? They are too big to fail."

Interesting Article

http://www.cnbc.com/id/26858394

Nickolas W Jekogian
www.NWJCompanies.com
917 763 3500

The Economy and NWJ

Last week what started out as a $100B problem ended on Friday with the Feds agreeing to solve a $700B problem. But does that solve the problem? Can the Feds solve the problem? What else is out there? And what does that do for me, my job, and our company?

The times are very reminiscent of the early 90s when real estate brought down the economy. It seems that real estate never gets credit for the good times (essentially the past 5 years of economic growth were driven by peoples ability to borrow against increasing home values) but does get the blame for the bad times ( housing declines cause economy to fall). One thing about the real estate market and housing in particular is that leverage substantially changes the upside and downside swings. With the ability to borrow up to 95% of a homes value comes the inverse problem of; if the house value declines by 10% your investment is not only wiped out but you owe substantial money on top of that. Now multiply that problem by the millions of home owners that received cheap, easy credit in the last few years.

Over the years investment bankers became the lender of choice for home owners (mortgage backed securities). They bought the loans by the Billions. But when the music stopped and the real values of these loans started to become apparent they wanted out of them as quickly as possible and some sold them cheap (Merrill Lynch started it with 22 cents on the dollar sale of loans.). Once that started everyone had to start adjusting the pricing of these loans so what they could have on their books was $1B that now became worth $220M almost overnight. Problem was that bankers are even better at leverage than home owners so they had to cover the loans they took out against these diminishing assets. It created a ripple effect that has pretty much eliminated all investment banks, many commercial banks, and insurance companies (they liked the high returns of these loans in good times).

The problem in the real estate industry as we are seeing in the finance markets with a decrees in value of these loans we are going to begin seeing in the real estate market. Fortunately or unfortunately depending on how you look at it the real estate market is not priced on a daily basis. So the drop will take a little longer to take effect but it will come. We have already seen drops of 10% in most markets over the past 12 months and now that the ability to borrow has substantially dried up we are going to see even steeper drops.
So what do we do as a company?

First off we have to make sure that what we have stays profitable and cash flows. In the good times of easy credit we always pushed to get to the next refinance to solve our cash issues. Well now there isn't going to be a refinance out for a few years. So we need to double our focus on profitable operations.

Next we need to make sure that the projects we have that are being stabilized continue as quickly and efficiently to stabilization so that we don't have to worry about continuing to fund them. We still do have a few funding sources to refinance these projects through but they need to be truly stabilized projects.

On the acquisition front we need to really pay attention to our fundamentals (Proforma). We need to make sure that we are not making projections based on what the economy has been doing (the real estate values can only go up syndrome). Times like these will provide lots of opportunity and the key is not to deploy limited capital into projects that will not allow immediate and substantial returns. If we follow that acquisitions model the rewards when prices start accelerating upwards will be tremendous. I speak from experience of seeing values stay very steady for years (best time to buy) and then spiking substantially in the early 2000s (best time to sell or refi).

We played the market perfectly in the mid-90s early 00s. And now it’s our chance to play it again with a much better management team, and better capital sources.

Let's Make It Happen
Nick

Fw: (BN) Schwarzman Raises the Bar,Buffett Wields Cash in Distressed-Assets Glut

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Nickolas W. Jekogian
917 763 3500
Jekogian@NWJcompanies.com

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From: Jonathan Colton <jlcolton@me.com>
Date: Mon, 22 Sep 2008 04:51:19 -0400
To: Nick Jekogian<jekogian@nwjcompanies.com>; dmclain@nwjcompanies.com<dmclain@nwjcompanies.com>
Subject: (BN) Schwarzman Raises the Bar, Buffett Wields Cash in Distressed-Assets Glut

Bloomberg News, sent from my iPod.

Schwarzman Raises Investing Hurdle, Buffett Uses Cash

Sept. 19 (Bloomberg) -- Bankrupt Lehman Brothers Holdings Inc. and government-seized American International Group Inc. top the list of distressed sellers seeking buyers for at least $1 trillion of assets. So far, bargain hunters aren't biting.

The same uncertainty that erased $3.1 trillion from global stocks in the first four days of this week has all but paralyzed the market for unpaid corporate debt, non-performing mortgages, degraded securities and repossessed real estate. Before takeovers are pursued that help troubled companies bolster capital and pay off creditors, hedge funds and buyout firms that have raised $163 billion this year face roadblocks such as a lack of financing.

``We're raising the hurdles for putting money out there because there are going to be increasingly better opportunities,'' Blackstone Group LP Chief Executive Officer Stephen Schwarzman said in an interview. ``You're most aggressive when you're coming off the bottom.''

Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben S. Bernanke and members of Congress pledged yesterday to fill the void by moving bad debt to a government institution that would sell it.

``The goal of that would be to assure people that there is a way to price the assets,'' said Neal Soss, chief economist at Credit Suisse Holdings USA Inc. in New York. ``Then private investors would gain courage and come back more actively in the markets.''

Berkshire Hathaway

The winners from Lehman's bankruptcy and AIG's government bailout will be investors such as billionaire Warren Buffett who can buy without borrowing and, in some cases, afford to hold onto their purchases for as long as five years without cashing them in, said Thomas Priore, chief executive officer of New York-based ICP Asset Management, which originated and oversees $13 billion in collateralized debt obligations.

Buffett's Omaha, Nebraska-based Berkshire Hathaway Inc. has been involved in eight acquisitions since October, including yesterday's $4.7 billion purchase of Constellation Energy Group Inc. in Baltimore. That compares with six in the previous 12 months, when Berkshire's largest acquisition cost $350 million. The deals were possible because the company had cash on hand totaling $31.2 billion at the end of June.

Pre-Crisis Position

``The ability to raise capital, no matter who you are, has changed dramatically,'' Richard Friedman, global head of merchant banking at Goldman Sachs Group Inc., said Sept. 16 at the Dow Jones Private Equity Analyst conference in New York. ``People are winning by not losing at the moment. It's going to be eerie for a while.''

Priore estimates financial firms will have to sell $1 trillion of assets worldwide to make up for the shortfall between the $518 billion they have lost or written down, and the $364 billion in new money they've been able to raise.

If the average bank has borrowed 10 or 11 times that amount, multiplying by the roughly $100 billion difference means ``that's $1 trillion worth of assets they need to shed to get back to the position they were in pre-crisis,'' Priore said.

Funds run by Washington-based Carlyle Group, Sailfish Capital Partners LLC of Stamford, Connecticut, and Peloton Partners LLP in London have shut down because of mortgage- related losses, illustrating the perils of jumping in too early.

Hedge Fund Losses

Hedge funds that invest in distressed assets and corporate restructurings have lost 4.9 percent so far this year, compared with gains of 5.1 percent for all of 2007 and 15.9 percent in 2006, according to Hedge Fund Research Inc. in Chicago. Hedge funds are private pools of capital whose operators receive management and performance fees.

Sovereign wealth funds, money controlled by countries or their rulers, were among the first called upon by banks starting last year to shore up their capital. The funds responded by investing more than $46 billion. The share price declines of the beneficiaries, including New York-based Merrill Lynch %26 Co., Citigroup Inc. and Morgan Stanley, mean government-owned funds, such as Korea Investment Corp. and the Government of Singapore Investment Corp., have losing positions.

The pain prompted at least one fund, Mubadala Development Co., the Abu Dhabi government-owned investment company, to withhold any new lifelines to the U.S. financial services industry, Waleed al-Muhairi, Mubadala's chief operating officer, said in a telephone interview.

``In the U.S., it's typically new investors who come in and they wipe out older ones,'' said Yngve Slyngstad, executive director of Norges Bank Investment, which runs Norway's sovereign fund, the world's second-largest.

Savings and Loan

Hedge funds have raised $129 billion to invest in distressed assets and restructurings, data compiled by Hedge Fund Research show. Buyout firms have amassed $33 billion so far this year for distressed assets and are in the process of raising $30.5 billion more, according to London-based Private Equity Intelligence Ltd.

Distressed assets expected to flood the market dwarf what was available to investors following the collapse of the U.S. savings and loan industry in the early 1990s, said Paul E. Johnson, president of Southwest Next Capital Management, a real estate fund in Phoenix.

As mayor of Phoenix from 1990 to 1994, Johnson had a front- row seat when the government closed 747 thrifts, costing taxpayers $140 billion.

Asset Disposal

``For Arizona, 1990 was brutal,'' Johnson said. ``I think with what's going on right now with the financial institutions, this is going to be bigger.''

Resolution Trust Corp., created by the federal government to liquidate assets of failed thrifts in an effort to repay creditors, ended up recovering almost $400 billion from asset sales, its acting chief executive, John Ryan, said when the RTC concluded its operations.

Former Federal Reserve Chairman Alan Greenspan, Bill Gross, manager of the world's biggest bond fund at Pacific Investment Management Co. in Newport Beach, California, and Representative Barney Frank, chairman of the House Financial Services Committee, are among those who have called for an agency styled after the RTC to dispose of devalued assets.

``The best answer is to get these assets cleared, reset and get the economy going again,'' Johnson said. ``Even so, we may have done such a colossal job of fooling ourselves it will take years to get out of this.''

22 Cents

Before Lehman filed for bankruptcy Sept. 15, the New York- based securities firm was already selling off pieces of itself. Lehman shed 19 percent of its gross assets in the second quarter, Chief Financial Officer Ian Lowitt said on a June 16 conference call. It was part of the firm's plan to pursue sales in a measured way, Lowitt said at the time.

That process was disrupted July 28, when Merrill Lynch said it sold $30.6 billion of CDOs to an affiliate of Dallas-based Lone Star Funds for $6.7 billion, or about 22 cents on the dollar. Merrill, the world's biggest brokerage firm, agreed Sept. 14 to be sold to Charlotte, North Carolina-based Bank of America Corp.

More than $125 billion of junk bonds, including some of those most likely to default, will mature in the next three years, said Daniel Arbess, founder of New York-based Perella Weinberg Partners' Xerion hedge fund.

When the bonds mature, it will be in a new credit environment in which lenders will be less likely to refinance that type of high-risk debt, Arbess said.

Default Rates

``That creates a very high likelihood of near-record defaults,'' Arbess said.

Default rates for high-yield corporate debt probably will rise to 4.9 percent by the end of this year and 7.4 percent in 2008, according to a Sept. 8 report by New York-based Moody's Investors Service.

Instead of buying now, it's better to wait for terms to improve, Arbess said.

``Our single best asset in the portfolio right now is patience,'' Mark Patterson, chairman of New York-based Matlin Patterson Global Advisors, said at a Sept. 16 investors' conference. Patterson's company has raised $5 billion to buy distressed companies.

BlackRock Inc., the largest publicly traded U.S. money manager with $1.4 trillion in assets, began raising $3 billion this month to buy loans that banks are selling at a loss.

``The deleveraging that's occurring is putting a lot of big asset pools up for sale,'' Laurence Fink, New York-based BlackRock's CEO, said in an interview. ``We're looking at one or more big opportunities.''

Real Estate for Sale

Lehman has a $32.6 billion commercial real estate portfolio, according to Real Estate Alert, a Hoboken, New Jersey-based industry newsletter.

Local developers have been teaming up with private equity firms to buy raw land, lots that have been prepared for building, and unfinished or unsold single-family homes, apartments and condominiums, said David Tobin, principal of Mission Capital Advisors LLC in New York, which advised on about $5 billion of whole home-loan sales in 2007.

``Money wants local knowledge,'' he said.

Last month, Miami developer Jorge Perez, with Lubert-Adler Partners LP, a Philadelphia-based private equity firm headed by Dean Adler, bought 120 new condos on Biscayne Boulevard for $30.3 million, about half the price of individually sold units. It was the largest bulk sale of downtown Miami condos to date.

Falling Prices

Today, IndyMac Federal Bank FSB, the Pasadena, California, mortgage lender that was seized by the Federal Deposit Insurance Corp. on July 11, will put eight pools of California properties on the market, according to IndyMac Director of Corporate Communications Evan Wagner.

``Some of these sales are going on now because we want to sell before prices decline further,'' Wagner said. The goal is to sell the pools by the end of November, he said.

The median price of a new home in the U.S. has fallen 12 percent since the peak in March 2007, according to the U.S. Commerce Department.

That's not far enough for some bargain hunters -- not for homes, not for mortgages, not for corporate debt and not, in Scott Sperling's case, for companies he might want to buy.

``Prices still need to drop dramatically,'' said Sperling, co-president of Thomas H. Lee Partners LP, a closely held leveraged buyout firm in Boston, at the Dow Jones conference. ``Just because prices are down doesn't mean it's cheap.''

To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net .

Find out more about Bloomberg on iPhone: http://bbiphone.bloomberg.com/iphone

Sent from my iPod

Good History Lesson on Government Bailout of RE Industry

http://www.americanprogress.org/issues/2008/09/learing_from_the_past.html


Nickolas W Jekogian
www.NWJCompanies.com
917 763 3500

Chaos Creates Opportunities

There is no doubt about it the US economy is in a recession! Things are bad on Main Street, Wall Street and everywhere in between. These times are difficult but they also prove great opportunities. The greatest real estate companies have been created in the down cycle of the market swing and not during the high times.

"There is no such thing as bad weather. Just improper clothing." Anonymous

We as a company have an amazing opportunity to prosper in these turbulent times if we flawlessly execute on our model over the next few years. Under performing properties will not make it in this business climate. We need to find them and buy them.

Our focus on the resident is the right model for today’s market. Residents have options and we need to make sure that staying in a Signature Community is the best one for them. We can do that.

Ability in financing in a market like this is key to our existence. Fortunately, we have a good track record with our lenders and continue to perform extremely well in regards to paying off loans and meeting our promises to lenders. If we want to continue borrowing then we need to make sure that we make no mistakes in this area. Performance is our existing portfolio it is our only track record to point to. We must keep that record up in order to continue of acquisitions pace.

"You can't build a reputation on what you are going to do." - Henry Ford

Our Investors relationships, although relatively new, are strong because of our performance over the past few months in these difficult times. They continue to expand into new opportunities but again it will only last as long as our success.

"Vision is the art of seeing what is invisible to others." - Jonathan Swift

The one thing I have always found interesting about Wall Street is its win-lose proposition. One side has to win and the other has to lose. Today many Billions of dollars are being lost but that means that someone is making them somewhere else. It’s up to us to take advantage of the opportunity.

Let's Make It Happen!
Nick

Moving Forward

I started my career in real estate in 1987. I was a freshman in college and was hired as an accounting intern for a shopping center developer. For the first 6 months of my employment it looked like this company could do no wrong. The company grew quickly, making deals all over the east coast and banks were lending 110% of each deal. But by the end of my six month internship everything had changed. Tax laws changed, lender liquidity issues arose, retailers declared bankruptcy and the economy contracted. This was the start of a real estate downturn that lasted 10 years.

The year 2007 and 2008 are very similar to the late 80s. Lenders stopped lending, tax laws are about to change, retailers are declaring bankruptcy left and right, and the economy has slowed to a trickle. This makes for some pretty tight times going forward in the next few years. In the 80s and 90s only the well run and financed companies were able to continue and that's going to be the same going forward now.

In the last few years many investors bought apartment buildings because they thought the market was going to keep going up; easy money. Well, now those investors are seeing that this business is not that simple.

See link to Stuyvesant deal ----
http://seekingalpha.com/article/94321-manhattan-real-estate-is-teetering-barron-s

I feel that we have positioned our company well for the coming years. We have one of the best management teams in the Multifamily business. We have a solid team and group of contractors to stabilize new projects. We have financed more than Half a Billion in debt and continue to attract some of the best lenders in the industry. We have created a differentiating factor for ourselves with our Signature Community brand that continues to lead the industry in innovation and customer service for our residents. And we have one of the largest most aggressive acquisitions group in the industry.

The upcoming year 2009 thru 2012 are going to be difficult years but with our team and our focus on the NWJ/Signature Model we will turn adversity into opportunity. The times are going to make us into the Billion dollar company we have been striving for.

"You buy when the blood is in the street. That little formula has worked miracles. It's just the opposite of what the average guy does. You want to buy [when there is] 'panic' and sell [when there is] 'euphoria.' It's all market psychology. It's all fear and greed." - J.P Morgan

Thanks for Making It Happen.
Nick