Word on the Street

·          GDP for the 4^th quarter showed that economy has grown at a healthy pace, despite the housing slump.

·          Strong consumer spending (representing 70% of overall GDP) in the 4^th quarter contributed to the growth.

·          The Fed will likely hold rates steady until the housing slump or the tight labor market outweighs the other.

·          New single-family homes sales in 2006 plunged to its lowest annual growth since 1990.

·          US manufacturing (particularly auto-related) activity show continued weakness, but the services sector added over 100 thousand jobs in January.

Dollars and Cents

·          International survey indicates foreign investors have slightly increased their appetite for riskier strategies in the US market.

·          Value-added real estate represents 25% of foreign investors' targeted acquisitions in 2007.

·          Pension funds have been increasing fund allocations towards mezzanine and bridge loans, as well as B-notes.

·          Growing popularity of CDOs in 2007 will increase liquidity, which translates to lower borrowing rates from such sources.

Real Estate Focus

·          Silicon Valley saw $5.6 billion worth of commercial real estate investment transactions in 2006.

·          This was $700 million higher than the previous year, as business activity in the area has been improving.

·          Associated General Contractors of America forecasts a 6% to 8% rise in commercial construction costs in 2007.