December 7, 2008

Tim Leigh’s Weekend Market Report
Hoff & Leigh, Inc.
4445 Northpark Drive, Suite 200
Colorado Springs, CO 80907
December 7, 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 = $109.71 (DOWN from $110.83, last week.)
There are currently 110 office buildings for sale.
This is 1,210,092 square feet, which represents a total market value of $132,759,895.

Somewhat interesting property for sale:

905 Motor City Drive: This property intrigues me. It is one of our newer listings. It sits atop of Motor City Drive. It has been used as the Southpointe Lincoln dealership’s tire store. The building is 2,952 square feet. The asking price is $375,000, but I have it on good authority that the Seller will get VERY aggressive to get it sold THIS WEEK! It is perfect for a small auto related business or for your toys. The overhead doors are 12’ feet tall. Your motor home would fit.

3707 Parkmoor Village Drive: This is a bank repo. They are now very interested in selling. The asking price is $60.00 per square foot. This is selling on a 10% cap rate. The physical plant is in good condition. If you are looking for cash flow, this would work. The tenants are B rated and on short term leases, but generally, with buildings of this class, once the tenant is in place, they stay in place.

5030 Boardwalk: This is a good deal because of the financing. The Seller will carry the mortgage on soft terms. Also, this is a USER SALE. The property is a good example where there has been a diminution of value because of a waning trade area. The building is clean and should not need any modification. Typically, a user/purchaser would utilize 1 of the 4 rental units and lease-out the other 3. The building is 6,383 square feet and priced at $84.60 per square foot ($540,000). The Seller will carry financing.

3645 Jeannine Drive: This is the deal of the week, this week. We have decided to drop the price to reflect the current market. The property has been listed at $1,650,000 ($34.67 per square foot), which is the lowest cost per square foot listing in the market. Apparently the market still doesn’t like the pricing so we’re lowering the price to $1,100,000, cash. This property will take about $375,000 to remodel. When its’ done, the $1,475,000 “all-in” investment ($30.99 psf) is a newly remodeled building, (including a new roof, new parking lot, new HVAC, new windows, new paint & carpet), property, with multi-small-tenant leasing opportunities that should generate around $31,000 in gross MONTHLY income. This is a case study of a property where someone wants to buy low, add value and increase the balance sheet and income value.

In case you missed the description last week, the building is a 47,000 sf mixed use facility with warehouse on the ground floor and many small offices littered across the top floor. It is located just south of Austin Bluffs, just west of Academy. The warehouse space should lease-up for $6.00 psf modified gross and the offices should lease-up for $10 psf modified gross. The presumption is that the Tenants will pay rent plus utilities, snow removal, janitorial and landscaping charges.

Want to know more? Contact me Tim@HoffLeigh.com
View 100’s of listings on our web site, www.HoffLeigh.com.
719-630-2277

Tim’s Market Notes:

As they say, those who do not study history are doomed to repeat it. So we should consider the Panama Canal. Here’s the history lesson. The French started construction in 1885. They screwed up the deal and ultimately bailed-out. It was completed by Teddy Roosevelt in 1914 and after WW I, it was opened to commercial trade. This journey from start to finish is amazing and includes theft, corruption, anti-Semitism and the death of over 22,000 people. Bear with me.

A Frenchman, Ferdinand DeLesseps was mainly responsible for the construction of the Suez Canal. The Suez Canal was started in 1858, just before the civil war and between 2 world-wide financial panics, (1837 & 1893). It was completed in 1869. It was built with slave labor. (That was an effective cost cutting measure that’s since been universally outlawed, unless you’re a Realtor, who everyone knows, still works like that.) Beaming from that success, DeLesseps, who was at the time, a Rock Star and who, in the eyes of the French, could do no wrong, took-on the Panama Canal project and started construction 16 years after the Suez. Thinking about a late starting career? DeLesseps is now a guy that was 16 years past his prime and had, in the meantime, 12 new children (with the same wife).

DeLesseps’ idea for Panama was to copy his success with the Suez, which was to dig a flat canal from the Atlantic to the Pacific. (Here’s an interesting geography lesson – the Panama Canal goes from North to South, not east to west.) Unfortunately, unlike the Suez, the Panamanian Isthmus is mountainous and the likelihood of a flat canal was DOA. DeLesseps was a promoter; not an engineer. His original cost estimate, $400,000,000 was funded by an IPO stock offering to the French people who quickly and greedily gobbled up the shares with the idea of becoming rich. (Here’s an interesting financial lesson - All markets are driven by greed or fear.) And in case you’re wondering, I pronounce that our market will turn around when our greed overcomes our fear.

Back to Panama; Somewhere along the way, costs were overrun; death tolls mounted and the deficient engineering became apparent. And all the while, DeLesseps continued to go back to the French government for more money. Everybody repeat after me, “BAILOUT! BAILOUT! BAILOUT!” Now, as the smart guys in Washington (there’s an oxymoron!) convene and think about the various reasons for or against the bailout of the Big 3 this week, they should consider the plan originally offered by DeLesseps.

Contextually, at the time, the French Economist Newspaper wrote “We shall see the most terrible financial disaster of the nineteenth century. . .” if we don’t bail out the canal company. What was the DeLesseps’ idea? And I’m not making this up; he proposed floating “lottery bonds”. Lottery bonds could be sold to the public to raise the cash needed to complete the project. Lottery bonds would be sold with numbered tickets attached, some of which, the winning tickets, would be worth large cash prizes. This was not without precedent, because in the final year of the Suez Canal, when an issue of conventional bonds failed to provide funds sufficient to finish the work, just such a lottery issue had saved the canal. I wonder if the City or County or School District 11 should think about this idea.

As it is, according to the Brookings Institute, there are 2 compelling arguments for providing emergency loans to the Big 3. The 1st is humanitarian. Do we really want to throw thousands of workers out of their jobs when unemployment continues to rise daily? The 2nd is self interest. The economy is already losing more than 400,000 jobs per month. Private consumption is sinking. Investors are leery any investment with risk greater than T Bills. In the case of a Big 3 meltdown, they predict, we’d lose so much consumer confidence that the entire economy could become irretrievable

To validate the Brookings Institute, we read in the Gazette, “According to the Pikes Peak Association of Realtors, in November, 34.4% of all property sales closed in El Paso County was a short sale or foreclosure.” (That’s 1 of every 3 sales!) Furthermore, “November was the lowest volume sales month in the past 8 years.” If that is not enough, you should note that 10% of all homeowners are at least 1 month behind in their mortgage.

Sinclair Lewis wrote that “He is all of us, Americans at 46, prosperous but worried, wanting passionately to seize something more than motor cars and a house before it’s too late.” He went on to describe George F. Babbitt as “a small businessman, a kind of middleman who neither manufactures nor distributes. His trade is selling – in particular, selling people houses for more than they want to pay for them. In short he’s a real estate broker.” Our production’s inefficient; we’ve earned too little; consumed too much; and saved nothing in our pursuit to be Babbitt.

So what the heck does that have to do with commercial real estate in Colorado Springs? Nothing much, except to say that we, as owners of commercial real estate are DeLesseps. And, we are Babbitt. Unfortunately, there is no lottery bond to bail us out.

Now, as I’ve written in the past, the money is made when the blood is flowing in the streets. We are nearly there. So, to take advantage of any market opportunities, I’m forming an investment fund. If you’d like to know if and how you can participate, contact me by phone (719-630-2277) or e-mail Tim@HoffLeigh.com

Want to know more? Contact me at Tim@HoffLeigh.com

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

Sincerely,

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


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