Better times are 'just around the corner'. (Insiders Outlook).

Looking upon the second half of 2003, Himmel + Meringoff Properties predicts that better economic times are around the corner. Although terrorism is still a major international threat, the end of the war in Iraq has lifted a heavy cloud. We remain cautiously optimistic that improved consumer confidence, coupled with $350 billion of new, recommended tax cuts, will help lift the economy out of its current recession.

Most importantly, the new dividend tax revision should result in many new equity offerings through Wall Street. Although New York City has a diversified tenant base, the Wall Street finns will benefit greatly from the new tax law and, it is hopeful that, in turn, new hiring will result

One of the most interesting things we have achieved in the past six months has been the purchase of 360 Lexington Ave., a 250,000-SF, 24-story Grand Central area gem with incredible transportation access and stunning views from the tower floors.

We had actively pursued many potential properties in 2002 and after looking at over 40 possible building acquisitions, 360 Lexington was simply the best property offered on the market at the time. The acquisition was complicated, as the seller, Transwestern, an opportunity fund, had been close to selling the property to another purchaser. Negotiations had broken off in early October, yet Transwestern still wanted to sell the property before year's end with a time of the essence, all cash closing.

Himmel + Meringoff was and is, a motivated buyer and we are known for effecting creative transactions with challenging financial structures. We were confident that we could close immediately. However, there would not be enough time to find a new mortgage lender before the end of the year and, as purchasers, we did not want to throw away the mortgage recording tax that was already in place.

The existing lender did consent to an assignment and assumption agreement, but only after receiving multiple layers of approvals from their officers in Germany, as well as its 50% co-participant

We signed a contract on Dec. 31,2002 and the purchase was completed only 13 days thereafter. The property was purchased for $62 million, which is substantially below replacement cost We are now focused on achieving full occupancy of this Grand Central property and have just completed a new lease at 360 Lexington with the law firm Early & Strauss for 6,464 SF. Available space within the property offers both pre-built and build-to-suit units. The building boasts high-speed Internet and Direct TV, has newly renovated elevators and a lobby and common areas that are impeccably maintained.

Additionally on the leasing front, we have welcomed six other new tenants and renewed four long-term tenants for a total of over 62,000 SF. Average occupancy for the past three years has exceeded 95%. Our management and leasing team continues to be active and innovative in this challenging market!

On the political front, I continue my work as co-chair of REBNY's economic development committee. In sharing our revised "Sustaining Growth Report" with New York City Councilwoman Melinda Katz and Andrew Alper, president of the New York City Economic Development Corporation, we had several successful meetings these last six months.

Our ongoing efforts with the Bloomberg administration to create innovative zoning ideas, tax incentives and other ways to stimulate economic development in the city continue to surge forward.

Since the beginning of the year, Himmel + Meringoff has focused on refinancing most of its properties to take advantage of historically low interest rates. This has resulted in significant cash that we plan to reinvest in real estate market opportunities as more sales become available.

As this year ends, Himmel + Meringoff Properties will be entering its third exciting decade as a company dedicated to continuing our successful strategic plan to purchase properties in which we can create value through repositioning, retenanting and renovating. We welcome opportunities to purchase 100% interests or create hybrid structuring (e.g. net lease purchases) that can help solve a seller's tax and leasing challenges.