August 8, 2008

Tim Leigh’s Weekend Market Report
Hoff & Leigh, Inc.
4445 Northpark Drive, Suite 200
Colorado Springs, CO 80907
August 8, 2008

Attached is our complete listing of all properties for sale in Colorado Springs, based on property type - office, industrial and condo. This is the most complete listing that we are aware of. It’s our goal to provide this information, updated weekly. We develop these lists by basic research and cross-checking data points from the PPCIE, local broker's individual web sites, The Turner Book and any other public information domain we can find.

You are receiving this information because, at some point, you asked or a friend referred your name to be included in our e-mail Insider’s List. If you no longer wish to receive this information, send an e-mail reply to me (tim@hoffleigh.com) and ask to be removed. Alternatively, if you know someone who could benefit from the receipt of this information, forward this e-mail to them, and suggest they contact us, so we can consider adding them to our exclusive list.

All Market Average Office Building Sale Price PSF = $109.10
There are currently 131 office buildings for sale.
This is 1,316,823 square feet, which represents a total market value of $143,666,593

All Market Average Warehouse Building Sale Price PSF = $69.39
There are currently 90 industrial buildings for sale.
This is 1,670,297 square feet, which represents a total market value of $115,897,925.

All Market Average Office Condo Sale Price PSF = $160.48
There are currently 92 office condos for sale.
This is 188,522 square feet, which represents a total market value of $30,253,617.
Interior build-outs for shell space ranges between $50 to $100 psf.

All Market Average Industrial Condo Sale Price PSF = $83.01
There are currently 31 industrial condos for sale.
This is 106,962 square feet, which represents a total market value of $8,878,523.

More listings and lower prices - that seems to be the general trend of the market.

We’ve added a new property matrix this week. It’s still in a rough state & in process, but I feel that the information is so insightful, that while its not 100%, it’s useful enough for dissemination. Our new property matrix reports on office lease rates for class B property sorted by zip code then sub-sorted by price per square foot. Here is an example of what you’ll find: In the 80903 zip code, for at typical Class B office building, lease rates range from $7.80 - $17.50 psf gross; 80907 shows $6.75 - $14.00 and 80917 shows $4.00 - $24.00. This is a list in-process and hopefully, over the next few weeks, it will encompass most of the market. Our ongoing goal is to provide you with good information and analysis and thereby opportunity. Hopefully, over time, we can assimilate data points and draw useful conclusions that will help you make wiser real estate decisions.

The opening ceremony is over and it seems like everybody is excited about the Olympics. Personally, I think the Olympics are so highly anticipated because the country is collectively searching for something positive. People are sick of the election process & the dearth of good candidates. People are sick of brutal financial news and dread uncertainty of living in flux between now and November. And while the Chinese government crows about their economic engine, their political climate is still as oppressive as their air. None-the-less, I presume most eyes will be glued to KOA for the next couple of weeks. One Olympic athlete’s story you won’t hear is Phillip’s.

Phillip is not attending the Olympics this year. After graduating from West Point, he moved to Colorado Springs, where his 1st duty assignment as a newly minted lieutenant, was with the world class athlete program at the Olympic Training Center. For 2 years, he’d go to his work at the OTC and wrestle. Unfortunately, he is the 3rd best wrestler in his weight class. In our culture, we say we reward good performance, but, truth be told, we actually penalize poor performance. And what’s the penalty for being 2nd loser? Phillip gets a reassignment from the bright lights of the OTC and Beijing to dark nights and hot days of Iraq. In this Olympic season, stories like this help us keep this event in perspective. It’s the ultimate thrill of victory & agony of defeat!

When does a protégé become a mentor? I had the occasion to discuss the state of the world with a former mentor last week. He is 10 years older and a lot smarter. He was in a quandary. He wondered, should he or should he not buy a 4-plex in Grand Forks North Dakota. (A better question is, “Should anybody buy any real estate in Grand Forks?” Do you know how cold it gets in the winter?) As he described the deal to me, it was a small unit in a good neighborhood and it would generate 8.5% cash-on-cash. Like most Buyer’s, he was hung up on the wrong issue. He was hung up on price. He was going to pass on a good deal because of $3,000.

His banker advised him against the deal because of $3,000 and his Realtor advised him against the deal because of $3,000. I reminded him that 30 years ago he taught me that many bankers, lawyers & Realtors are deal killers because of their conservative aversion to risk. It’s in their nature to error on the side of caution. Remember what we learned in college? “Those who can do; those who can’t teach – or become bankers, lawyers or Realtors!” LOL! Come-on – it’s a joke!

I asked him about the lot. Was the unit located on a good lot? He affirmed that the lot was a home-run. I told him that good real estate is good real estate. In some cases, it is worth paying a premium to obtain it. In most cases, you’re not really buying the building, you’re buying the lot. And in all cases, you’re buying the location. The income generated from the building is anecdotal and merely a way to carry the lot as it appreciates. Then I asked the killer question. "Is the property going to be worth more or less in the future?" He said more. Case closed. The protégé became the mentor.

The fight continues. I got a call from one of our Tenants yesterday. He told me that he no longer has the stomach to fight the homeless at 408 East Fillmore Street. They have moved-in and taken-over. I have been told by the CSPD that part of the problem is that the city has tried to relocate the homeless away from the downtown and the Fillmore & Nevada area is one of the new AAA Homeless Hotel destinations. Don’t think the problem is real? Here’s the math of losing this 1 tenant: 13,500 sf building x $4.50 psf rent = $60,750 in lost net income. Choose any CAP rate you’d like, but the capitalized loss is significant. In addition to this building, this tenant was going to lease a 2nd building with similar financial implications.

Adding insult to injury, our building has now become a target for a band (likely illegal) of Mexicans. Looking out the window to our back lot the other day, I noticed a mattress on top of one of our mobile storage units. On inquiry, I was told that we’ve been infested by a small gang of Mexicans who have decided that the area along the rail road tracks, just south of Garden of the Gods Road and behind our storage, is a great place to spend Friday nights. We are not taking this situation lightly. I’ve hired an armed guard service to spend the entire night tonight and tomorrow night patrolling our property. We have contracted to install more lighting. We are organizing our neighborhood to fund & fight this battle privately because we know the CSPD does not have the resources. What does it take for us to collectively wake up and properly fund the boys in blue? We need to get the CSPD properly armed with manpower and technology so they can fight these problems. The homeless and illegal Mexican problems are no longer merely statistical data points and interesting conversation. They are real problems with real financial implications for real people.

Follow-up. About a month ago, I wrote about a house deal I was working on. It turned out that the house was located in a geological land slide area. There are many such areas in Colorado Springs. You can see the map at http://web.uccs.edu/geogenvs/Hazards/def_landslide.html. When inspected, the soil and structural engineers confirmed that the entire house was sliding down hill, and ultimately, unless mitigated at an approximate cost of $50,000, it will end-up in the neighbor’s back yard. I’m still trying to figure out the winners & losers. Would the neighbors like another house in their back-yard? Would that be good rental property? Is this a good way to house a mother-in-law?

Congratulations to Any Wilfong for leading Infinity Systems, Inc. http://www.infinity.aero/ to be the #1 small to medium sized company (25 – 49 employees) to work for, in Colorado, as ranked by Colorado Biz Magazine. Infinity Systems is one of our valued friends & clients and we like to acknowledge their success. Infinity provides engineering services, software & support to the defense industry, primarily in the way of global positioning satellite systems for space and military programs. GE Johnson Construction was acknowledged as the 12th best great place to work in the state, in the large business category.

The Lafaette Park Hotel. I want to thank my friend Charlotte Papedis, the front office manager at the Lafayette Park Hotel for arranging another Class A stay for me while I travel to the bay area for business & pleasure next month. For anyone traveling to the bay area, I highly recommend you check them out. http://www.lafayetteparkhotel.com/index.html.

Check your date. Holly is in the final stages of planning an event for the Red Cross. She is hosting a Red Ribbon Cutting for the Red Cross on September 25th. This is a free, “no-ask” charity event to help heighten awareness of the Red Cross in the Pikes Peak area. There will be free wine tasting, hors d'oeuvres, entertainment and genial conversation. If you’d like to know more, contact Holly or me. Holly@HoffLeigh.com or Tim@HoffLeigh.com.

The post script. I was contacted by 2 banks last week who asked for proposals to handled REO property. The story is that the closer we get to the end of year, the more motivated banks will become to clean-up their balance sheets and unload undesirable assets. In fact, I just got off the phone with one lender that now wishes he had taken 1 of the 2 offers we presented as short sales several months ago. As it is, we will now have 2 buildings newly on the market for $55 per square foot, and they cash flow! They want to get them off their books! I think bargains may start hitting the streets within the next couple of months. This is where the opportunity lays.

Speaking of market uncertainty. I have been advised that the financial mess is now overflowing to the title industry. If you have a closing scheduled, make sure the title insurer is financial solvent. Many of the large banks have cancelled closings with several title companies because of their insolvency. For-warned is forearmed. If you want to know more, contact my friends at Unified Title, http://www.unifiedtitle.com/index.shtml. Or call them at 719-578-5900.

I hope you had a profitable week and next week is better!


Sincerely,

TJL
Tim Leigh
719-337-9551
Tim@HoffLeigh.com


To view our Office Matrix List please click below
http://hoffleigh.com/OfficeInsider.aspx

To view our Industrial Matrix List please click below
http://hoffleigh.com/IndustrialInsider.aspx

To view our Office Condo Matrix please click below
http://hoffleigh.com/HLIOfficeCondos.aspx