Second quarter holds promise of good, bad and ugly.

AS we enter the second quarter of 2006, Gross Domestic Product is expected to expand to slightly less than 4% for the year, with overall job growth accelerating to about 1.9%, slightly above the decade average.

The yield on the 10 year US Treasury has held in the mid to high four percent range since the end of last year and is expected to rise modestly; as of the writing of this article it reached 5% for the first time in almost half a decade, perhaps witnessing in the future a dampening on stocks and other assets.

The uncertainty in the financial markets as to whether rate hikes from the Federal Reserve will or will not be enacted has already been priced into the equity markets and it is unknown.

All of this makes for an confluence of data with, in this author's perception, the positives and negatives of the economy and marketplace equally weighted as to whether it is a good time to advance acquisitions or a time to perhaps be somewhat patient and witness what the rest of the year has to offer on the macro-economic level and in the real estate marketplace.

The labor market continues to send strong signals as well, with job creation and wages growing at their fastest rate in several years.

We believe that the effects on whatever way the Federal Reserve does will be minimal on the overall real estate marketplace. Counter intuitive to other data, the New York City marketplace remains strong with buyers of both commercial and residential assets remaining strong.

This is further validated when looking at statistics and data of principal real estate investors.

The total value of private equity in transactions in 2004 was $160 billion, 2005 statistics are indicating $200 billion of assets changing hands a double digit percentage increase in sales.

Smaller players that typically focus on assets valued at less than $20 million are out in front, with $40 billion accountable for in this level or about 31% of the deals. Troutbrook Company fits into this category.

Troutbrook Company, a full service real estate firm, looks at infill pockets of opportunity in so called "commodity markets"; in the NYC Metropolitan Statistical Area creating for sale housing product at a price point between a $200K to $600K acquisition price for the homebuyer.

We are in the process of completing the Terraces at Court Street where select units--due to our in house design capabilities--have attained a sales price of $700 PSF, which is extraordinary for the location.

Despite mortgage rates, for all major loan types on the home front, reaching its highest level in mid April since 2002, Troutbrook hopes to have 50% of the units sold in the coming weeks, with most units having gone to contract in this past calendar month.

This project and our understanding of "B" locations in the Borough of Brooklyn has given us the confidence to move forward on another acquisition of a block front of property of approximately 21,000 square feet of land.

What we have witnessed on the residential development front, in the NYC locale, is that locations that are in somewhat tertiary marketplaces, pricing on the acquisition of properties has become softer and it appears for the moment that FAR build able acquisition pricing in established areas has remained strong with competitive bidding constantly being accomplished.

We believe the market will remain stable with deals that have been acquired, perhaps, at an aggressive acquisition price re-entering the marketplace with some developers not willing to take the risk of a somewhat softer sales marketplace.

All of this provides for an interesting backdrop as to what to expect as we begin the second quarter.

BY MARC J. FREUD,

PRINCIPAL, TROUTBROOK COMPANY