October 27, 2008

Tim Leigh’s Weekend Market Report
Hoff & Leigh, Inc.
4445 Northpark Drive, Suite 200
Colorado Springs, CO 80907
October 27, 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 = $107.96 (UP from $107.81, last week.)
There are currently 135 office buildings for sale.
This is 1,503,742 square feet, which represents a total market value of $162,337,228.
RD and I have been scouring & scrubbing the office buildings for sale list and I expect very significant changes to the list next week. There are several buildings that have been on the office buildings for sale list for the past several months. We are tossing them off-the-island. There are many mixed-use properties that could be office buildings for sale, but are not really office buildings per se. That being said, I predict significant PRICE DECLINE reporting on the list next week. If you normally gloss over this information, next week would be a good week to study the list.

All Market Average Industrial Building Sale Price PSF = $74.43 (NO Change from last week.)
There are currently 97 industrial buildings for sale.
This is 1,384,127square feet, which represents a total market value of $103,016,425.

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 53 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:
316 North Tejon Street: This is a former funeral home & former law office. In both cases, people were dying to go there! It is now an architect’s office. It is nicely appointed with good off-street parking. It’s immediately north of the El Paso Club. The property is 12,000 square feet for sale at $1,075,000, ($89.58 per square foot). When this really hits the market, I presume someone will, once again be dying to make a deal.

New Industrial Building listed this week:
None Reported

Somewhat interesting property for sale:

1047 Dale Avenue, Hoople, ND: How about a 6 unit apartment building for sale in Hoople, North Dakota? According to Doug Carter, apartments are “the” stable place to be and this is an apartment building. The property is listed for sale at $99,000. The annual gross income is $25,200. It was constructed in 1976; it’s in good condition; has 6 garages and is conveniently located at 1047 Dale Avenue, which is just between Elm and 1st Street on the right hand side. http://www.flexmls.com/cgi-bin/mainmenu.cgi?cmd=url+other/run_public_link.html&public_link_tech_id=20081022023721518301000000&id=1&s=4

495 Uinta Way, Denver: 1,266 sf medical condo for sale for $375,000 - $296.21 per square foot
1117 Cherokee Street, Denver: 12,738 sf office building for sale for $3,175,000 - $249.25 per square foot

Look at the price per square foot in the 2 markets. In North Dakota, land is cheap and therefore, real estate is cost less. In Denver, land is scarce and more expensive and therefore property is (generically) more expensive. What’s the lesson? Good real estate is good real estate. Bad real estate bought cheaply is still bad real estate. Location matters more than any other variable. The prices we see in the Denver market is a Rolling Thunder heading south along the Front Range and will ultimately drive our prices higher.

2808 West Colorado Avenue: This was the deal of the week last week. I discussed this property in this space over the past 2 weeks, on the hunch that I could sell it because of the owner-carry financing. I was correct. The property sold for full-price and closes November 4th.

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 $500,000 to remodel. When its’ done, the $1,600,000 “all-in” investment 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.

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.

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).

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:

“We are a stalwart and stouthearted people, and never more so than in hard times. People weep in the dark and arise in the morning and go to work. The wave’s crash on your nest egg and a chunk is swept away . . . Your broker kept saying, "Stay with the portfolio, don't jump ship," and you felt a strong urge to dump the stocks and get into the money market where at least you're not going to lose your shirt, but you didn't do it and didn't do it, and now you're holding a big bag of brown bananas.”
Time Line:

September 3, 1929: The Dow Jones Industrial (DOW) average reaches an historic high – 381.
October 24, 1929: Black Thursday. Nearly 13 million shares trade, mostly down, but the DOW recovers most of losses by the end of the day.
October 29, 1929: Black Tuesday. The DOW drops from 261 to 230.
December 11, 1930: The Bank of the United States closes; 1,350 banks failed in 1930. Rumor has it that it’s likely that 3 – 4 local Community Banks will fail in the Colorado Springs market by year end.
April 14, 1934: Black Sunday. The dust is so thick across Southern Colorado that you literally cannot see your hand held in front of your face.
March 15, 1933: The Dow climbs 15% to 62. This is the greatest percentage gain ever seen up to that time.
November 5, 1940: FDR wins his 3rd term and no, he’s not showcased on TV. The next day, the DOW closes at 132.
October 2007: The DOW sets an all-time high.
Today: So far this month, the DOW has lost 23% of its value.
Today: The DOW has lost 41% of its value from the all-time high - October, 2007.
Today: The NASDQ fell 9.3% last week, down 26% for the month & down 46% from its all-time high.

I ask my clients daily how they are doing. One actually responded by e-mail. He said, “Tim, we are 55% off. Add to that, slimmer deals.” That seems like the sentiment on the street. Dave Csintyan reports that the Chamber of Commerce has seen a lot of small businesses slow down lately. Matt Wood, Southpointe Lincoln, told me that auto sales in Motor City are way-off, but more so for the “big boys” than others.

I had a chance to visit with one of my banker friends over the weekend. Overlooking the Garden of the Gods and Pikes Peak, with the sun setting, deer grazing and the wine warming our souls and sharpening our minds, he assured me that it’s not the end of the world. It is merely the end of easy credit for most small businesses. I agree. In these times, patience is the name of the game. Easier credit will eventually return to the market (along with some sanity). The FED seems like it’s doing everything it can to stimulate credit & the economy. In fact, it’s likely that the FED will lower interest rates again this week; some predict ½ % point reduction and others predict 1%. Their policy of flooding the capital markets is contrary to what the FED did during the Great Depression, (which so many have voiced their concerns to me, that we may be heading that way again. – Reassuring note to self – we’re not.)

In October of 1931, the FED raised the discount rate from 1.5% to 2.5%; then, only a week later, they raised the rate again to 3.5%, because, “previous easy-money policy had failed.” The real rubber hits the road for people like me who have a credit line. With each rate reduction I save money every month. Those savings are channeled into other uses. That’s a good thing. I lamented that I wished my fixed-rate loan-rates would drop, too. My banker friend told that that would not likely be the case and in fact, I should look to increasing loan costs rates. He said that increasing risks are causing increasing costs. He said that his branch in Denver was already increasing their borrowing costs, now charging 50% down and rates in the 7% range. I accused him of gouging. If they could borrow from the FED at 1.5% and loaned at 6% they had a 4.5% spread and that with millions in loans, they should be raking-in huge profits. He told me that at 4.5%, they break even. Everyone’s got a problem! I was lucky. Before the fit-hit-the-shan, I secured 5 year loans at 6% for many of our syndicated and personally-owned commercial projects. By now, we were on our 3rd glass of wine, and I was assured of my brilliance.

Frankly, I think what we’re witnessing is the decoupling of our institutions & the globalization of our financial system and all this at Mach speed which is allowed by technology. If you are a conspiracy theorist, don’t worry. This is the natural evolution of the modern economy and painful as it may be now, in the long-run, it was inevitable and ultimately will prove to be healthy. If you want to read more about that, pick up a copy of Toffler’s book, “Revolutionary Wealth” or call me and offer to buy me coffee. I’m really a cheap date!

I think it is important to keep a historical perspective on the state of the economy and I’m reminded of a speaker’s story that history (and life) is a series of problems, like the waves crashing on the shore. It goes like this; “problem, problem, problem, crisis!” It’s his thesis that it’s not the times, but how we respond to the times. This is where I should make the unabashed claim that, in times like these, Real Estate is the only “real” investment.

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

Focus on Charitable Event

What: Red Kettle Breakfast
When: December 2nd, 7:00 AM
Where: Antler’s Hilton
Why: Fundraising Kick-Off for The Salvation Army
How: Show up and pay up

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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http://hoffleigh.com/OfficeInsider.aspx

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