Vintage Group continues to diversify holdings.

The residential real estate market has held its own despite the changing economy, and opportunities for investing--although not easy to uncover--are still available for buyers seeking a variety of property types to round out their portfolio.

We're finding there are still investment opportunities in multi-family housing, including properties with excellent conversion potential. Buyers seeking to acquire value-added properties to reposition can still find opportunistic investments if they look diligently.

About two years ago we began diversifying our portfolio in anticipation of the changing residential market. At the time, our portfolio was too heavily concentrated in rent-stabilized housing properties in New York City. Rather than trying to reinvent Vintage and move into the office or industrial markets, we decided to diversify within the multi-family housing realm.

Our diversification plans took the form of three different initiatives. We chose to build upon our existing portfolio of New York City rent-stabilized housing by pursuing more opportunistic investment prospects, such as investing in suburban multi-family properties and subsidized housing projects, as well as expanding upon our development platform.

As part of our diversification program, we established a suburban multi-family division, Audubon Communities, which is headed by managing director Andrew Schwarz. Through this initiative we are enlarging our investment, parameters to include strategic opportunities in garden-style and mid-rise apartment properties along the Eastern seaboard and the Gulf south. We are seeking properties that have turnaround potential in desirable or revitalizing, communities--assets that can significantly benefit from an injection of capital, the addition of sought after amenities, and a proactive marketing and management team.

Audubon Communities recently closed on a 328-unit garden apartment complex in Glassboro, N.J. that will undergo substantial improvements to reposition the property as a Class-A residence. In addition, Audubon will soon be closing on a 400-unit garden apartment complex in the Southeast.

This new suburban campaign dovetails nicely with our rent-stabilized and government subsidized housing portfolio in New York City, as well as our development projects.

Our HUD-based and subsidized housing portfolio--run by managing director Scott Jaffee--recently acquired a 35-unit property in Brooklyn and will soon be closing on 150-unit property in East Harlem.

Another transaction in 2003, which illustrates our model of purchasing distressed properties, was the joint venture purchase of Seaview Estates (with Taconic Investment Partners) in Canarsie, Brooklyn. Through our JV, we purchased 190 apartments in the 223-unit complex that are being converted from rentals to condominiums upon completion of a significant upgrade program.

With this transaction, we have an excellent opportunity to provide affordable for-sale housing in a vastly under-served market. And finally, through our development arm, which is run by Managing Director Sam Suzuki, we have properties in various stages of completion throughout Manhattan, Brooklyn, Queens and on Long Island. We just completed plans for a 32,000-SF, five-story office/residential building in Elmhurst, Queens and a loft conversion on West 14th in Manhattan.

Despite the challenging nature of today's marketplace, we continue to offer opportunistic and well-balanced investment options to our stakeholders and capital partners. With our portfolio now at more than 5,000 units in the New York metropolitan area, we're confident that our ability to buy and operate a variety of different property types will allow us to be successful in other regions and housing markets.