1999 - the year of the operator.

As we begin 1999, our firm, Himmel + Meringoff Properties, is optimistic that we will end this 100 year period with a positive real estate economic environment. Over the last several months, we were brought back to economic reality by the near collapse of the financial markets on August 31st, followed by the resurgence in capital confidence and Wall Street by year-end.

With the present continued economic roller-coaster ups and downs predicted for 1999, our firm stands strong on our existing foundation. Our real estate portfolio now includes over two million square feet of commercial office space in New York City, with a 98 percent occupancy rate.

In the last six months of 1998, we added over $30 million of additional properties to our portfolio, including the acquisition of a portfolio of office buildings owned by an architect, namely 361 Broadway and 1114 First Avenue.

The property at 361 Broadway, located on the southwest corner of Broadway and Franklin Street, is located directly across the street from the company's property at 365 Broadway and is situated at the southern end of TriBeCa, a neighborhood known for its recent resurgence and unique buildings. Built in 1881, this 70,000 square-foot building is one of the largest cast-iron buildings in New York City. Architecturally distinct, the property boasts ceiling heights of 14-feet, and a facade of elaborately detailed ironwork.

The property at 1114 First Avenue is located on the northeast corner of First Avenue and 61st Street. A very unique office building of 44,000 square feet, catering to the nearby hospitals and includes Rockefeller University and Memorial Sloan as its tenants, as well as the New York Restaurant Group (owners of Smith & Wollensky, Post House, Park Avenue Cafe and Maloney & Porcelli). It is directly north of Milstein's new residential tower, which has just broken ground.

At our property at 6 East 32 Street, a 160,000 square foot building located off Fifth Avenue one block away from the Empire State Building, we are in the midst of completely renovating the lobby, which is scheduled to be finished mid-February, and new elevators and cabs are to be installed by the spring. Two leases were signed midyear, one lease for 20,500 square feet having been signed at $20 per square foot to a publishing company, with a renewal option after five years at $23 per square foot.

In addition, we purchased our equity partner's interest in 729 Seventh Avenue to complete the 100 percent ownership of this 162,000 square-foot office building for Himmel + Meringoff Properties. The most significant and exciting rental addition for 729 Seventh Avenue was the erection of a 60 x 60 foot sign atop the building. Working with Van Wagner as the leasing agent, we kicked off the first month's lease by Interscope Records with the cover of the new Marilyn Manson album. Currently the sign is occupied by Teligent, Inc. The sign can be seen from as far south as 30th Street.

Our goals for 1999 include capitalizing on our 20 years in business as an established real estate owner and operator by continuing to purchase secondary office buildings. Many sellers come to us for creative finance and tax structured deals, and we continue to custom tailor each transaction to the seller's needs.

Preferring to remain a private real estate owner versus a public REIT, in 1998 we realized significant cash proceeds from mortgage refinancing, and therefore have a large capital base of our own money to use for acquisitions and continued development. Our firm has been in business since 1979 and we have real estate specialists in every area. As the REIT market has fallen, as the "bigger is better" philosophy has proven not always to work, we are in a competitively advantageous position. 1999 will bring the basics back to real estate and the operators, like ourselves, who can create value in the buildings, will be at the front of the line for acquisitions. The recent fall of REIT stocks, as well as the conduit market, has once more proven that real estate is much more than a financial engineering game. As the countdown to the year 2000 begins, the real estate operators and owners will have a competitive advantage.