In late September, 2001, I authored an article for this publication titled "The Supply of Capital to Finance New York Investment Real Estate Remains Strong." At that point in time, New York City, the United States, and the entire world for that matter, had only experienced several weeks of the "new era of terrorism." Before then, most New York Real Estate professionals would have thought that the "Axis of Evil" referred to a particular tenant advocacy group or community coalition fighting to preserve an obsolete commercial building shrouded by a cast-iron façade. In fact, as I prepared that article in late September, the title was an accurate depiction of the state of the local real estate finance market. I must confess that, at that time, I was seriously concerned about what would happen if all at once our lending community became "spooked" by the events of September 11th and collectively decided to "sit it out for awhile." After all, these events were unprecedented in our country's history and the immediate economic fallout was still unknown. I am happy to report from the financing front line that my observations of five months ago and my predictions for the near term outlook have generally been correct.

Speaking strictly from my own experience (our office arranges & closes approximately 300 commercial mortgage loans annually), and from what I gather from colleagues and the Lenders we deal with, the volume of transactions has not greatly suffered from the events of September 11th. This may not be true for some capital markets lenders who specialize in financing the property types most affected by September 11th. But, most active Lenders report robust loan requests and steady closings. The rent stabilized & "affordable" multifamily housing market, for instance, has remained remarkably strong and those assets still trade at record multiples.

In addition, the supply and availability of commercial loans remains unabated. Utilizing underwriting assumptions that have been adjusted to reflect the realities of today's rental and sales market, almost all active lenders without exception seem to have an inexhaustable ability to fund qualified loans. Our office routinely entertains visits from Lenders seeking loan opportunities, and many talk about their desire to double loan production, but bemoan the fact that there is not enough "product". Back in the 80's, this phenomenon would have resulted in the loosening of credit standards and underwriting criteria. But today's Lenders have taken a sober approach to loan analysis and have been much more nimble in adjusting to new underwriting assumptions.

Finally, the number of prospective Lenders continues to expand. Of course we still have the tried and true members of the lending community that have remained steadfast in their commitment to New York Real Estate. However, we have also seen new Lenders, some from out of state, entering the New York arena. Some of these Lenders already had a presence in the area but have now decided to expand loan operations. Others have already been active in more localized areas and see opportunities to expand their target areas or loan products. Consolidations in banking through M & A activity continue and whispers in the industry call for more announcements in the near future.

All this generally points to a healthy mortgage market, and it is. But, we cannot ignore the realities. Although record prices are still being paid for some multifamily properties and housing costs for ownership apartments and suburban homes remain near record levels, rental rates for apartments and many types of commercial properties have declined. We have observed market rents for apartments suffer reductions between 10% to 30%. Free Rent has once again been introduced to the Leasing Brokers' vocabulary as they look toward the Landlord to pay their fees.