October 12, 2008

Tim Leigh’s Friday Market Report
Hoff & Leigh, Inc.
4445 Northpark Drive, Suite 200
Colorado Springs, CO 80907
October 12, 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 = $110.58 (UP from $110.49, last week.)
There are currently 141 office buildings for sale.
This is 1,516,604 square feet, which represents a total market value of $167,702,128.

All Market Average Industrial Building Sale Price PSF = $74.43 (UP from $73.71 last week.)
There are currently 96 industrial buildings for sale.
This is 1,360,367 square feet, which represents a total market value of $100,266,425.

All Market Average NEW-CONSTRUCTION Office Condo Sale Price PSF = $180.18
There are currently 50 newly-constructed office condos for sale. (There are no changes since last week.) This is 92,066 square feet, which represents a total market value of $16,588,858.
Interior build-out costs from shell-space range between $50 to $100 psf.
We have one office condo scheduled to close this week. The office condo market seems to be picking up a bit of steam, however slowly.

All Market Average 2nd Generation Office Condo Sale Price PSF = $143.71
There are currently 90 2nd generation office condos for sale.
This is 99,289 square feet, which represents a total market value of $14,269,030.
2nd generation office condos are defined as “office condos which have been previously occupied and therefore, are already built-out”. It is my opinion that now is an opportune time to purchase 2nd generation office condos because they can be purchased at very deep discounts from their newly constructed counter-parts and from their replacement costs.

Closed Sales
Currently, we have 42 buildings, sorted by office, retail or warehouse. Our list grows with input from our friends at Unified Title Insurance Company and information from our network of friends, like you. If you are aware of any closed transactions, let us know. We’ll add that data to our list for everyone’s benefit.

New Office Buildings listed this week:
2808 West Colorado Avenue: 9,622 square feet; $ 799,000; $ 83.04 per square foot
4935 North 30th Street: 34,172 square feet; $3,400,000; $ 99.50 per square foot
2500 North Circle Drive: 7,100 square feet; $1,045,000; $147.18 per square foot
1027 North Weber Street: 1,840 square feet; $ 340,000; $184.78 per square foot


New Industrial Building listed this week:
5905 North Nevada Avenue: 23,760 square feet; $2,750,000; $115.74 per square foot

Somewhat interesting property for sale:

2808 West Colorado Avenue: This is a 9,622 square foot, 2 story office building for sale located just west of the Old Colorado City core. It is on 2 floors; there is an elevator up. There are 45 parking spaces. What makes this unique? The financing; with $50,000 down, the seller would carry a note on the following terms: 4.75% rate; 30 year amortization; 10 year balloon. For a user, this is a terrific property.

1027 North Weber Street: This is a very clean Victorian House/Conversion for sale. It is 1,840 square feet on 1.5 floors. There are hardwood floors throughout, a functional fireplace & parking for 5. Originally constructed in 1895, it has since been remodeled and is very nicely appointed.

444 Charter Oak Ranch Road: This is a 12,000 square foot industrial building with 1.68 acres. The property has I-25 visibility and easy access. The Seller said “Enough already! Sell it!” I think that means he’s gotten serious. The asking price is $975,000 ($81.25 psf). There is a deal here.

2539 Weston Road: This is a small industrial warehouse condo. Its 1,500 square feet; located near the Broadmoor, with a 12 foot tall overhead door, it would be very well suited for your toys. The Seller moved to Denver and told us to unload it. It’s priced at $97,500 ($65 psf).

Other, less interesting property for sale:

300 East 17th Street, Cheyenne, Wyoming: The Historic Whipple House. Built in 1883, it is located in the historic capital area of downtown Cheyenne. It is 4,800 square feet and boasts an “open floor plan.” It’s zoned for residential or commercial. The asking price is $645,000 ($134.38 psf). The only problem with this property is the location. It’s a damn long drive to and from work everyday.

2000 Arapahoe Trail, Woodland Park, CO: This is an auction property reminiscent of the Anti-virus King’s auction in Woodland Park, where they offered his estate for $20,000,000 and got $3.5 million. This Pikes Peak Retreat sits on 290 acres and has a 10,600 square foot house with 2 guest apartments & 9 guest cabins. There is a 10 acre horse paddock. The minimum bid is only $3.8 million. Based on current markets, I’d put the sale price close to $1.5 million. The problem is, “who wants to maintain and heat this hummer?”

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


Tim’s Market Notes:

When Autumn opens her box of paints, she chooses yellow and brown and red. And all night long her brushes fly and colors branches overhead . . . . .

I had the good fortune to spend the weekend in Vail and while I did not hit a home-run with “peak leaves,” I managed to hit a triple. It was great to take a break from the noise of the downward spiral (down 370 on Monday; 508 on Tuesday; 189 on Wednesday; 679 on Thursday; and recovering to down “only” 128 points on Friday) of the stock market and the grave concern expressed by everybody watching their life savings disappear “before their very own eyes” in the stock market meltdown. I read all the headlines exemplified by “If you’re not scared, you’re not paying attention!”

These times remind me of the tech stock boom & bust, when every conversation started with “How are your stocks doing today?” At the time, I had managed to accumulate 1,000 shares of QCOM. It would move-up 20 – 30 points on some days. It made me think I was smart. I wasn’t. I was lucky. Now we find ourselves again consumed by the market’s every tick. Isaac Newton, who lived from 1643 – 1727, and whose book, “Philosophiæ Naturalis Principia Mathematica” is considered to be the most influential book in the history of science, said, “I can calculate the motions of heavily bodies, but not the madness of people.” This said just after he lost his entire life’s fortune in 1721 after a stock debacle called the South Sea Bubble, burst. And but for his small government pension, he likely died penniless. And now, we can’t calculate the madness of people who are crying irrationally to sell. One of the best pieces of advice I took from The Rocky Mountain News this weekend was “Buy at the point of maximum fear.” And I recalled the advice from Roosevelt, who said, (in a TV interview I think), “The only thing we have to fear is fear itself.” It seems to me that this is an exciting moment in the financial history of the world. We are witness to a global, apocalyptical shift in our entire system of wealth creation & distribution. Alvin & Heidi Toffler predicted this in their book, “Revolutionary Wealth”. As with any apocalypse, great fortunes will be lost and great fortunes will be made. The losers will be readily identifiable by their irrational thought and erratic behavior. The winners will be recognized by their calm, analytic demeanor; as Kipling called them, “the ones who keep their heads while everybody else is losing theirs!” The advice for Mr. & Mrs. C is to “Be cool; stick with the plan; stay-the-course.” History proves that all markets correct themselves over time.

And here is some historical perspective on our market - Colorado Springs experienced the Little London effect in 1965 (before my time); the gas moratorium in 1973 (also before my time); the failed savings & loan crisis and RTC mess, where Colorado Springs became the “foreclosure capital of America in 1985; and the tech stock bust in the 1990’s. When our market crashed in the 1980’s we were buying & selling commercial buildings for $10 per square foot. The common denominator to all of this is, after each crash, when our market recovered, the next cycle produced greater values than the previous cycle’s high prices. James Grant, editor of Grant’s Interest Rate Observer, says, “People keep on stepping on the same rakes because money, like romance, is only partly an intellectual experience. Money, like sex, brings out some thought, but also much heavy breathing and little stored knowledge. In finance, the process is cyclical. Some people learn from their ancestors, but mostly they repeat the same mistakes. Thus it has always been and thus it will always be.”

Paul Turner’s 3rd quarter report said that overall commercial building occupancy levels in Colorado Springs increased by 323,665 square feet during the 1st three quarters of 2008 vis-à-vis 2007. He went on to claim that that was a dismal number. Heck, in times like these, my feeling is that any increase in occupancy is good. Furthermore, Turner predicts a continuing downward trend. The basis for his pessimism is the 1.4 million square foot Intel plant’s continued vacancy; the downsizing of Honeywell, Agilent & Verizon. While these large building vacancies don’t immediately impact small building owners, there is at trickle down impact. The heart of the matter is not really the vacant space, but the lost jobs that that vacant space reflects. As large employers migrate away from our market, the negative impact works like this; for every lost primary job, we lose 3 local jobs. For the typical small commercial building owner, this is where the rubber hits the road – “for every lost primary job, you lose 3 prospective tenants.”

Today, according to Turner, Colorado Springs has over 10 million square feet of vacant space. Much of that space is contained in a few large floor plates. He says, “unfortunately, many small businesses and therefore, small users of commercial space provide products & services to business who use the large floor plates. As the number of large floor plate users diminish so will the number of small building users.” When combined with the overall sales & service declines forecast for our city, the obvious conclusion is that demand for small buildings will diminish.

Following Turner’s line of thought, and based on the current credit situation, I’m forecasting for the next several months, the sale of small commercial buildings that are suited for “users” will slow. Eventually, leasing activity will pick-up steam first, then, sales will rebound. Furthermore, rental income in these properties will increase because of new demand. I’m forecasting the sale of small commercial buildings suited for investment purposes will increase. In the past, these “C” and “B” class buildings were bought by unsophisticated investors who tried to buy with little or no down payment and who utilized unsophisticated management techniques. Typically, they were lucky enough to be in the right place at the right time and in many cases, the market ran them over. (Read about my experience with QCOM above!) That bus has left the station. My forecast is, going forward, we will see significant equity contributions upfront, better investment decisions & the utilization of professional management techniques and companies, and therefore these buildings will make more sense and generate more cash flow. When that happens, the women will, once again, be beautiful, the men strong and the kids will have straight teeth.

Real Estate 101:

Keys to successfully operating & valuing real estate

1. Location is the number 1, 2, & 3 best rules to successfully owning real estate
1) Path of growth & progress;
2) High traffic;
3) Lighted, hard-corner intersection
2. Condition of the property: Over-maintain the physical plant today to recover your equity later
3. Collection of rent: How much milk does the cow give?
4. Value based on income only: At the end of the day, a building is only worth a multiple of the number of buckets of milk produced.

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


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