• Global and domestic credit and liquidity issues. Global and domestic credit and liquidity issues have led to and are expected to continue to lead to an economic downturn, including but not limited to a commercial real estate market downturn, which in turn has led to a decrease in transaction activity and lower values, all of which are expected to continue for the foreseeable future. The current situation in the global credit markets whereby many world governments (including but not limited to the U.S. where the Company transacts virtually all of its business) have had to take unprecedented and uncharted steps to either support the financial institutions in their respective countries from collapse or take direct ownership of same is unprecedented in the Company's history. Restrictions on the availability of capital to the broad market as a whole, both debt and/or equity, have created significant reductions and could further reduce the liquidity in and flow of capital to the commercial real estate markets, as is currently the case and is expected to continue for the foreseeable future. These restrictions could also cause commercial real estate prices to decrease due to the reduced amount of equity capital and debt financing available, as is currently the case and is expected to continue for the foreseeable future. In particular, global and domestic credit and liquidity issues may reduce the number of acquisitions, dispositions and loan originations, as well as the respective number of transactions and transaction volumes, which could also adversely affect our capital markets services revenues including our servicing revenue, as is currently the case and is expected to continue for the foreseeable future.

• Decreased investment allocation to commercial real estate class. Allocations to commercial real estate as an asset class for investment portfolio diversification may decrease for a number of reasons beyond our control, including but not limited to poor performance of the asset class relative to other asset classes or superior performance of other asset classes when compared with continued good performance of the commercial real estate asset class, or the poor performance of all assets classes. In addition, while commercial real estate is now viewed as an accepted and valid class for portfolio diversification, if this perception changes, there could be a significant reduction in the amount of debt and equity capital available in the commercial real estate sector. In particular, reductions in debt and/or equity allocations to commercial real estate may reduce the number of acquisitions, dispositions and loan originations, as well as the respective number of transactions and transaction volumes, which could also adversely affect our capital markets services revenues including our servicing revenue, as is currently the case and is expected to continue for the foreseeable future.

• Fluctuations in interest rates. Significant fluctuations in interest rates as well as steady and protracted movements of interest rates in one direction (increases or decreases) could adversely affect the operation and income of commercial real estate properties as well as the demand from investors for commercial real estate investments. Both of these events could adversely affect investor demand and the supply of capital for debt and equity investments in commercial real estate. In particular, increased interest rates may cause prices to decrease due to the increased costs of obtaining financing and could lead to decreases in purchase and sale activities, thereby reducing the amounts of investment sales and loan originations and related servicing fees. If our investment sales origination and servicing businesses are negatively impacted, it is likely that our other lines of business would also suffer due to the relationship among our various capital markets services.

The factors discussed above have affected and continue to be a risk to our business as evidenced by the significant disruptions in the global capital and credit markets, especially in the domestic capital markets. In particular, global and domestic credit and liquidity issues reduced in 2008, and the first half of 2009, and are likely to continue to reduce for the foreseeable future, the number of acquisitions, dispositions and loan originations, as well as the respective number of transactions and transaction volumes. This has had and may continue to have a significant adverse effect on our capital markets services revenues for the foreseeable future. The significant balance sheet issues of many of the CMBS lenders, banks, life insurance companies, captive finance companies and other financial institutions have adversely affected and will likely continue to adversely affect the flow of commercial mortgage debt to the U.S. capital markets and can potentially adversely affect all of our capital markets services platforms and resulting revenues, all of which are expected to continue for the foreseeable future.
The ongoing economic slow down and/or domestic and global economic recession also continue to be a risk, which is expected to continue for the foreseeable future, not only due to the potential negative adverse impacts on the performance of U.S. commercial real estate markets, but also to the ability of lenders and equity investors to generate significant profits and capital to continue to make loans and equity investments available to the commercial real estate market, especially in the U.S. where we operate.
Other factors that may adversely affect our business are discussed under the heading "Forward-Looking Statements" and under the caption "Risk Factors" in this Quarterly Report on Form 10-Q.

Results of Operations
Following is a discussion of our results of operations for the three months ended June 30, 2009 and June 30, 2008. The table included in the period comparisons below provides summaries of our results of operations. The period-to-period comparisons of financial results are not necessarily indicative of future results. For a description of the key financial measures and indicators included in our consolidated financial statements, refer to the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Financial Measures and Indicators" in our Annual Report on Form 10-K for the year ended December 31, 2008.

                                          For the Three Months Ended
                                                   June 30,
                                     2009                             2008
                                                                                               Total             Total
                                             % of                             % of            Dollar           Percentage
                           Dollars         Revenue          Dollars         Revenue           Change             Change
                                                     (dollars in thousands, unless percentages)
Revenues
Capital markets
services revenue           $ 15,028            91.4 %       $ 42,194            96.8 %       $ (27,166 )             (64.4 )%
Interest on mortgage
notes receivable              1,049             6.4 %            521             1.2 %             528               101.3 %
Other                           356             2.2 %            874             2.0 %            (518 )             (59.3 )%

Total revenues               16,433           100.0 %         43,589           100.0 %         (27,156 )             (62.3 )%
Operating expenses
Cost of services             10,195            62.0 %         27,041            62.0 %         (16,846 )             (62.3 )%
Personnel                     1,383             8.4 %          2,720             6.2 %          (1,337 )             (49.2 )%
Occupancy                     1,924            11.7 %          1,904             4.4 %              20                 1.1 %
Travel and
entertainment                   472             2.9 %          1,934             4.4 %          (1,462 )             (75.6 )%
Supplies, research
and printing                    498             3.0 %          2,407             5.5 %          (1,909 )             (79.3 )%
Other                         3,774            23.0 %          4,157             9.5 %            (383 )              (9.2 )%

Total operating
expenses                     18,246           111.0 %         40,163            92.1 %         (21,917 )             (54.6 )%

Operating (loss) /
income                       (1,813 )         (11.0 )%         3,426             7.9 %          (5,239 )            (152.9 )%
Interest and other
income, net                   1,989            12.1 %            920             2.1 %           1,069               116.2 %
Interest expense               (316 )          (1.9 )%            (5 )          (0.0 )%           (311 )            NM

(Loss) / income
before income taxes            (140 )          (0.9 )%         4,341            10.0 %          (4,481 )            (103.2 )%
Income tax (benefit)
/ expense                      (231 )          (1.4 )%           361             0.8 %            (592 )            (164.0 )%

Net income                       91             0.6 %          3,980             9.1 %          (3,889 )             (97.7 )%
Net income
attributable to
noncontrolling
interest                        291             1.8 %          2,912             6.7 %          (2,621 )             (90.0 )%

Net (loss) / income
attributable to
controlling interest       $   (200 )          (1.2 )%      $  1,068             2.5 %       $  (1,268 )            (118.7 )%

"NM" - Not Meaningful
Revenues. Our total revenues were $16.4 million for the three months ended June 30, 2009 compared to $43.6 million for the same period in 2008, a decrease of $27.2 million, or 62.3%. Revenues decreased primarily as a result of the decrease in production volumes in several of our capital markets services platforms brought about, in significant part, by the unprecedented disruptions in the global and domestic capital and credit markets coupled with a slowing economy and/or recession, both globally and domestically.
• The revenues we generated from capital markets services for the three months ended June 30, 2009 decreased $27.2 million, or 64.4%, to $15.0 million from $42.2 million for the same period in 2008. The decrease is primarily attributable to a decrease in both the number and the average dollar value of transactions closed during the second quarter of 2009 compared to the second quarter of 2008, brought about in significant part, by the unprecedented disruptions in the global and domestic capital and credit markets coupled with a slowing economy and/or recession, both globally and domestically.

• The revenues derived from interest on mortgage notes receivable were $1.0 million for the three months ended June 30, 2009 compared to $0.5 million for the same period in 2008, an increase of $0.5 million. Revenues increased primarily as a result of increased volume of Freddie Mac loans in the second quarter of 2009 compared to the second quarter of 2008.

• The other revenues we earned, which consists of expense reimbursements from clients related to out-of-pocket costs incurred, were approximately $0.4 million for the three month period ended June 30, 2009 and $0.9 million for the three month period

ending June 30, 2008, a decrease of $0.5 million, or 59.3%. Other revenues decreased primarily as a result of the decrease in production volumes.

Total Operating Expenses. Our total operating expenses were $18.2 million for the three months ended June 30, 2009 compared to $40.2 million for the same period in 2008, a decrease of $21.9 million, or 54.6%. Expenses decreased primarily due to decreased cost of services due to a decrease in capital markets services revenue, decreased personnel costs primarily due to a decrease in revenue and decreased travel and entertainment and supplies, research and printing.
• The costs of services for the three months ended June 30, 2009 decreased $16.8 million, or 62.3%, to $10.2 million from $27.0 million for the same period in 2008. The decrease is primarily the result of the decrease in commissions and other incentive compensation directly related to the decrease in capital markets services revenues. Also contributing to the decrease in cost of services is the impact of our cost saving initiatives to reduce headcount and suspend the Company's 401(k) matching contribution. Cost of services as a percentage of capital markets services and other revenues were approximately 66.3% and 62.8% for the three month periods ended June 30, 2009 and June 30, 2008, respectively. This percentage increase is primarily attributable to the fixed portion of cost of services, such as salaries for our analysts and fringe benefit costs, being spread over a lower revenue base.

• Personnel expenses that are not directly attributable to providing services to our clients for the three months ended June 30, 2009 decreased $1.3 million, or 49.2%, to $1.4 million from $2.7 million for the same period in 2008. The decrease is primarily related to a decrease in profit participation expense resulting from the lower operating income during the three months ended June 30, 2009 and a decrease in salaries due to a lower headcount.

The stock compensation cost, included in personnel expenses, which has been charged against income was $0.2 million for each of the three months ended June 30, 2009 and 2008. At June 30, 2009, there was approximately $1.1 million of unrecognized compensation cost related to share based awards. The weighted average remaining contractual term of the nonvested restricted stock units is two years as of June 30, 2009. The weighted average remaining contractual term of the nonvested options is twelve years as of June 30, 2009.

• Occupancy, travel and entertainment, and supplies, research and printing expenses for the three months ended June 30, 2009 decreased $3.4 million, or 53.7%, to $2.9 million compared to the same period in 2008. These decreases are primarily due to decreased supplies, research and printing and travel and entertainment costs stemming from the decrease in capital markets services revenues and the impact of our cost saving initiatives.

• Other expenses, including costs for insurance, professional fees, depreciation and amortization, interest on our warehouse line of credit and other operating expenses, were $3.8 million in the three months ended June 30, 2009, a decrease of $0.4 million, or 9.2%, versus $4.2 million in the three months ended June 30, 2008. This decrease is primarily related to decreased marketing and advertising expense of $0.2 million, decreased outsourcing of $0.2 million and a decrease in professional fees of $0.3 million. These decreases were slightly offset by increased interest on warehouse lines of credit of $0.3 million due to the increased volume of Freddie Mac loans.

Net Income. Our net income for the three months ended June 30, 2009 was $0.1 million, a decrease of $3.9 million versus income of $4.0 million for the same fiscal period in 2008. We attribute this decrease to several factors, with the most significant cause being a decrease of revenues of $27.2 million. Contributing to our lower net income was increased interest expense which was offset by increased interest and other income, net and an income tax benefit.
• Interest and other income, net for the three months ended June 30, 2009 was $2.0 million, an increase of $1.1 million as compared to $0.9 million for the same fiscal period in 2008. This increase is primarily due to recognizing a $1.1 million gain on the sale of servicing rights on certain loans that we serviced.

• The interest expense we incurred in the three months ended June 30, 2009 totaled $0.3 million, an increase of $0.3 million from $5,000 of similar expenses incurred in the three months ended June 30, 2008. This increase is primarily due to the recording of the commitment fee on the unused amount of credit on our Amended Credit Agreement. During the three months ended June 30, 2009, the Company corrected an error related to previously unrecorded commitment fees on its unused line of credit and recorded approximately $260,000 of interest expense that represented the cumulative amount of commitment fees for the period from February 5, 2007 to March 31, 2009 and recorded an additional $30,000 of expense related to the three months ended June 30, 2009. The prior period correction was not considered material to restate prior period financial statements.

• Income tax benefit was approximately $0.2 million for the three months ended June 30, 2009, as compared to income tax expense of $0.4 million in the three months ended June 30, 2008. This decrease is primarily due to the decrease in net operating income experienced during the three months ended June 30, 2009 compared to the same period of the prior year. During the three months ended June 30, 2009, the Company recorded a current income tax expense of approximately $0.1 million which was offset by deferred income tax benefit of approximately $0.4 million.

Following is a discussion of our results of operations for the six months ended June 30, 2009 and June 30, 2008. The table included in the period comparisons below provides summaries of our results of operations. The period-to-period comparisons of financial results are not necessarily indicative of future results. For a description of the key financial measures and indicators included in our consolidated financial statements, refer to the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Financial Measures and Indicators" in our Annual Report on Form 10-K for the year ended December 31, 2008.

                                              For the Six Months Ended
                                                      June 30,
                                       2009                               2008
                                                                                                    Total             Total
                                               % of                                % of            Dollar           Percentage
                            Dollars          Revenue             Dollars         Revenue           Change             Change
                                                      (dollars in thousands, unless percentages)
Revenues
Capital markets
services revenue            $ 26,898              90.7 %        $  73,562            97.1 %       $ (46,664 )             (63.4 )%
Interest on mortgage
notes receivable               1,599               5.4 %              723             0.9 %             876               121.2 %
Other                          1,164               3.9 %            1,484             2.0 %            (320 )             (21.6 )%

Total revenues                29,661             100.0 %           75,769           100.0 %         (46,108 )             (60.9 )%
Operating expenses
Cost of services              20,884              70.4 %           49,351            65.1 %         (28,467 )             (57.7 )%
Personnel                      3,410              11.5 %            4,858             6.4 %          (1,448 )             (29.8 )%
Occupancy                      3,765              12.7 %            3,759             5.0 %               6                 0.2 %
Travel and
entertainment                  1,487               5.0 %            3,885             5.1 %          (2,398 )             (61.7 )%
Supplies, research and
printing                       1,243               4.2 %            4,318             5.7 %          (3,075 )             (71.2 )%
Other                          6,808              23.0 %            7,710            10.2 %            (902 )             (11.7 )%

Total operating
expenses                      37,597             126.8 %           73,881            97.5 %         (36,284 )             (49.1 )%

Operating (loss) /
income                        (7,936 )           (26.8 )%           1,888             2.5 %          (9,824 )            (520.3 )%
Interest and other
income, net                    2,402               8.1 %            1,926             2.5 %             476                24.7 %
Interest expense                (322 )            (1.1 )%             (11 )          (0.0 )%           (311 )                NM
Decrease in payable
under the tax
receivable agreement               -               0.0 %            3,580             4.7 %          (3,580 )                NM

(Loss) / income before
income taxes                  (5,856 )           (19.7 )%           7,383             9.7 %         (13,239 )            (179.3 )%
Income tax (benefit) /
expense                       (1,041 )            (3.5 )%           4,464             5.9 %          (5,505 )            (123.3 )%

Net (loss) / income           (4,815 )           (16.2 )%           2,919             3.9 %          (7,734 )            (265.0 )%
Net (loss) / income
attributable to
noncontrolling
interest                      (2,572 )            (8.7 )%           2,814             3.7 %          (5,386 )            (191.4 )%

Net (loss) / income
attributable to
controlling interest        $ (2,243 )            (7.6 )%       $     105             0.1 %       $  (2,348 )                NM

"NM" - Not Meaningful
Revenues. Our total revenues were $29.7 million for the six months ended June 30, 2009 compared to $75.8 million for the same period in 2008, a decrease of $46.1 million, or 60.9%. Revenues decreased primarily as a result of the decrease in production volumes in several of our capital markets services platforms brought about, in significant part, by the unprecedented disruptions in the global and domestic capital and credit markets coupled with a slowing economy and/or recession, both globally and domestically.
• The revenues we generated from capital markets services for the six months ended June 30, 2009 decreased $46.7 million, or 63.4%, to $26.9 million from $73.6 million for the same period in 2008. The decrease is primarily attributable to a decrease in both the number and the average dollar value of transactions closed during the first half of 2009 compared to the first half of 2008, brought about in significant part, by the unprecedented disruptions in the global and domestic capital and credit markets coupled with a slowing economy and/or recession, both globally and domestically.

• The revenues derived from interest on mortgage notes receivable were $1.6 million for the six months ended June 30, 2009 compared to $0.7 million for the same period in 2008, an increase of $0.9 million. Revenues increased primarily as a result of increased volume of Freddie Mac loans in the first half of 2009 compared to the first half of 2008.

• The other revenues we earned, which consists of expense reimbursements from clients related to out-of-pocket costs incurred, were approximately $1.2 million for the six month period ended June 30, 2009 and $1.5 million for the six month period ending June 30, 2008.

Total Operating Expenses. Our total operating expenses were $37.6 million for the six months ended June 30, 2009 compared to $73.9 million for the same period in 2008, a decrease of $36.3 million, or 49.1%. Expenses decreased primarily due to decreased cost of services and personnel costs as a result of the decrease in capital markets services revenue and cost savings initiatives, and decreased supplies, research and printing, travel and entertainment, professional fees and marketing and advertising.
• The costs of services for the six months ended June 30, 2009 decreased $28.5 million, or 57.7%, to $20.9 million from $49.4 million for the same period in 2008. The decrease is primarily the result of the decrease in commissions and other incentive compensation directly related to the decrease in capital markets services revenues. Also contributing to the decrease in cost of services is the impact of our cost saving initiatives in reduced headcount and the suspension of the Company's 401(k) matching contribution. Cost of services as a percentage of capital markets services and other revenues were approximately 74.4% and 65.8% for the six month periods ended June 30, 2009 and June 30, 2008, respectively. This percentage increase is . . .