A Message from Larry Lehr
Senior Vice President, Grace Capital Group

Following funding records set in 2005, our first quarter of 2006 continued on a very strong path. For the first quarter, Grace Capital closed on more than $50 million in real estate financing comprised of land, residential condo development and conversions, all including both senior debt and mezzanine financing. The second quarter looks even stronger with over $60 million scheduled to close during this period.

So what is driving our strong funding schedule? First, it helps that the capital markets continue to be awash in funds that are eager to participate in the continuing expansion of the real estate market. Secondly, the nations economic growth continues to expand at a sustainable level with little evidence of harmful inflation. Job growth is strong in most regions of the country and this too spurs demand not only for housing, but for the commercial space employers require.

Lastly, we feel most importantly, Grace Capital's growth has been based on our abilities to underwrite and form structures that appeal greatly to our lending sources, especially on complex land development projects. The financial markets have come to rely on Grace's presentations that allow them to quickly evaluate the request, saving both the investor and borrower time in developing a financial structure that works for both parties. Our experience and relationships developed over the last 25 years ensure our clients the most productive combination of capital to make their projects successful.

Going forward in 2006 we expect to see a leveling off of real estate prices to a more sustainable level. Real estate is at historic highs in both price to cash flows and yield relative to the Treasury bonds as interest rates move ever higher. We would expect that overall transaction volume continues at a pace similar to 2005, but there will be some shift of investor capital funds to other more diversified investment vehicles.

A great example of one of our solution driven capital providers is a national firm with terrific programs whose offerings include;
-Libor based pricing
-Non-recourse financing
-Both first position and mezzanine financing
-Fast closes to take advantage of quick sales, other lender fall-outs, etc.
-No appraisals required
-Abundant money to put into the market

Inspiration

"[This day} will be the most memorable epic in the history of America. I am apt to believe that it will be celebrated by succeeding generations as the great anniversary festival. It ought to be commemorated as the Day of Deliverance by solemn acts of devotion to God Almighty...with pomp and parade, with shows, games, sports, guns, bells, bonfires, and illuminations from one end of this continent to the other from this time forward forever more."

John Adams to Abigail Adams on July 4, 1776
Second President 1797-1801

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