Remarks by Matthew Allen

Executive Vice President and COO
The Related Group

I want to pick up on the finance side. We have around 6,500 units that we are delivering on throughout the state of Florida, mainly in South Florida, and I think that we have kind of hit the perfect storm. We all know that speculation was much greater than was originally projected, whereas, Jack, I think you were pretty much on all along, that there were many speculators.

In addition, what hurt us is the lack of liquidity in the capital market. When the capital market crisis hit, they dried up and most importantly, the mortgage industry blew up, so right now you have everyone running scared. The banks were lending 80, 90, or 100 percent, and we can argue that it was probably too high a couple of years ago. Well now they are not even lending 70 or 80 percent, and people who have decent credit can’t get a mortgage. This has added fuel to the fire. We can live with that, and we can weather through the storm. The problem is when you have the perfect storm and you have the capital market issues and the problems in the mortgage industry that makes it much more challenging. I think it is going to take a little bit longer to clear itself up and I agree that we have not seen the worse locally on the residential side.

You know Scott [Sime] has some very interesting data. But I’m not sure that I would build a brand new office building in South Florida today. I think unemployment going up is a factor that you have to look at; you have to look at some of the downsizing that’s happening in the banking industry, the downturns in the real estate markets, where a lot of jobs are created here. There is a lot of square footage to absorb and I think that vacancies are going to go up a little bit there, but overall the health in South Florida will be there long term.