Don Fandetti - Citigroup:
Hi. Ivan, quick question. Obviously, you've been involved in the New York market for quite sometime. There is a concern about financial services. Wanted to get your perspective from a commercial real estate standpoint and also can you comment on the outlook for the condo market in New York?
Ivan Kaufman, Chairman, President and CEO of Arbor:
Sure. First, regarding fortune we have a large part of our portfolio in the New York market and New York has been some sort of anomaly compared to the rest of United States. Some say it is the Europe, some say that New York is still the capital of the world financially. But the fact that the matter is that New York is still extremely on solid ground but let me give you my outlook a little bit on what I think.
If you have condo product to sell today, it is selling very, very nicely. Do I think that that market will soften up? We only got to rate our product to 30% discount to market.
So I think that what's happening on Wall Street. You would think that there would be some softness in the market. We haven't seen it yet but I expect that market to soften and all non-Prime products will suffer first. The client always retains itself fairly well.
But I think we'll have 10% to 20% softening on the prices but I guess if you look at the newspaper yesterday and you saw a guy buying a $150 million apartment, you'd be a little surprised. But that's my outlook, it will soften a little bit.
... It amazes me the rents that people have achieved over the last 12 months and we've guided our underwriters on luxury buildings to still maintain an underwriting profile depending on location of the $60 to $100 range, which is historically [what] New Yorkers supported [for the] new office market.
The $150, $175, $125 rents that were being achieved are not sustainable at least from our underwriting standards. I did hear for the first time these weeks some numbers are low... softening in the office market in New York City.
I suspect that there will some softening, I knew -- you will see office market rent coming down to be more inline with what historical rents have been with some level of appreciation, but not the levels that we have seen."