Throughout the economy the mood is shifting. Panic has been replaced by impatience and no small amount of fatigue. Capital is still on the sidelines and lending has not recovered. Yet, there is a growing sense of competition in the air. Conversations are become more focused and pointed. It reminds me of the feeling before the start of a regatta. There are penalties for crossing the line early, so everyone is wary of committing, but they are jockeying for position. The difference between the current situation and a sailboat race is that the actual race will have started long before the news reports it. The predictive indicators are important now to help you with the timing. Deal flow is still low and pricing is still declining. Will pricing turn as sales volume increases? Or will volume only increase when pricing

falls below a certain level? Clearly there are too many moving parts to say for sure what the precise levels will be for volume or pricing, but there are a few pieces we can state with certainty.

Transaction volume will increase steadily through the end of 2010.

With volume as such low levels, this is not a difficult prediction. Further though, volume will increase due to forced sales as delinquencies, which predicate forced sales, have doubled. With CMBS maturities of $18bn in 2009, more than twice the 2008 volume, and credit markets still stuck in low gear, many owners will face inflexible deadlines. Worse, the numbers nearly double again to $33bn in 2010, rising steadily through 2012. The peak is in 2017 with $121bn due. These volumes are 5 and 10 year echoes of the sales volumes of 2002 through 2007. The $700bn CMBS market is just a fraction of the $3.5 trillion overall commercial real estate market, but it is more transparent. Clearly pressure is mounting to break the log jam. One way or another, transaction volume will increase.

The last newsletter forecast a 60% decline in pricing by the end of 2011 derived from an increase in cap rates and a decrease in net operating income. Feedback on that piece showed a consensus view of a 35-45% decline though all admit that 60% is also possible. General Growth, the second largest Mall owner in the U.S. filed for bankruptcy on April 16th after a long period of successful negotiation with their main debt holders. Finally though, a group of bond holders sued for resolution. This relatively small group's inflexibility forced the end. There are many lessons in this example, especially the need to understand all of the constraints of an organization. Owners holding debt secured by bonds may be unable to negotiate extensions. Lenders able to assist with mezzanine debt, or other small components may be able to do so at very high yields and with greater than normal rights in case of default. In this environment, I expect increasing opportunities requiring the following information different data for different aspects of CRE business. The resources page on http://www.caswell.org/resources.php can help you find these and other sources. I can help you navigate the optimal methods for choosing, contracting and using these sources.