July 25, 2008

Tim Leigh’s Weekend Market Report
Hoff & Leigh, Inc.
4445 Northpark Drive, Suite 200
Colorado Springs, CO 80907
July 25, 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 is 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.

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All Market Average Office Building Sale Price PSF = $112.52
There are currently 125 office buildings for sale.
This is 1,205,565 square feet, which represents a total market value of $135,654,593
If the 2 buildings listed for over $400 psf sold, the average for office building price would drop to $109.05 psf.

All Market Average Warehouse Building Sale Price PSF = $69.04
There are currently 89 industrial buildings for sale.
This is 1,634,248 square feet, which represents a total market value of $112,827,925.
If sold for a 7% average real estate commission, these sales would generate $7,897,955 in commissions.

All Market Average Office Condo Sale Price PSF = $167.48
There are currently 91 office condos for sale.
This is 194,600 square feet, which represents a total market value of $32,591,778.
Interior build-outs for shell space ranges between $30 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.
The status of this market not changed in more than month.

I’m pretty sure that, financially, “I’ve made it”, at least according the Bill Berenz, President of American National Bank. I was telling Bill that, while I live in a single family detached home, I have people for everything. In fact, I am an employer with global presence. I have 2 Mexican ladies who clean the house; 4 Mexicans who maintain my sprinkler, mow the grass & pull the weeds; a Chinese laundry service; a Louisiana tree man; and a Polish handy-man. I told Bill, the only difference between my house and a 5 Star Hotel is the missing turn-down service. He told me to be careful about what I wish for; that my was sounding more & more like assisted living!

And, what’s up with snoring? Snoring is an interesting body function. It’s something I know something about. I have great experience with snoring. My wife snores; the Freedom Fighters snore - (The Freedom Fighters are my 2 dogs, Lindsey & Belle) - and I have a cat that buzzes in my ear all night long. Ever wonder why my day starts at 4:00 AM? It’s not because I love the

McDonald’s coffee server lady. Most nights, my bedroom lights up with the cacophony snoring-sound-of-music and to find a little peace, I have to leave the building!

The early starts and long hours have been paying great dividends for most of our building owners. And yes, thankfully, it’s been another good week at HLI. We have several new transactions in process.

It’s my opinion that the leasing and sale market is heating up.

RD and I are working with several new clients with large requirements and Holly, Steve and Andrey are working with several smaller tenant requirements. Holly took a listing 318 East Colorado Avenue a couple of weeks ago. It had been listed with Brand X. It had not had a showing in 2 years! What’s amazing is that it had not had a showing in 2 years! Holly was able to lease-it-up 100% within 2 weeks! She validates my statement, “You can make anything work if you just work!” Holly is working hard and doing a great job. On a similar note, Andrey Trinidad is finally hitting his stride. He wrote 3 leases this week, in 3 days! I preach mere competency. That is what we strive for. Telling our story and merely executing on our story, competently.

We are working El Taco Rey. They are moving just around the corner to our listing at 15 South Wahsatch. They prove what I have been saying for 25 years, “In most cases, a new tenant or buyer is already located within shouting distance of the new listing.” When construction is completed, their new restaurant will seat 80. Here is the great salesman story. We showed them the property at 7:00 PM one night. We had the entire Aguilar extended family, Eddie, Rose Mary, 5 children & spouses, kids and I think a few admirers at the showing. When they asked what the next step was, I told them all to raise their right hands and proclaim, “We love the building and want to buy it.” What magic! That chorus was not a cacophony, but a symphony!

Under the heading of stupid stuff that I can’t figure out, I wonder why the city would demand studs & sheetrock to cover a brick wall to mitigate a potential fire. I don’t know, but I think sheet rock and lumber are more combustible than brick. None-the-less, our city fathers demand that the re-developer sheetrock over and cover existing old-brick in a newly remodeled project at 502 East Pikes Peak Avenue. This is the former eye-sore, construction materials salvage building. Developers need encouragement and incentives to take risk. Sometimes I just don’t understand our city. Covering old-brick diminishes the building’s charm and value.

From my mail box, I received the following from my friend Lee, who lives Down Under:

“I enjoy reading your market reports, and I think that while some sectors of the Australian economy are going to do well, the financial problems are not even close to being worked out. . .

Last week, commercial banks increased interest rates on their variable rate loans...AGAIN. This was despite the Australian central bank keeping the discount rate unchanged. Most variable rates are now over 9.50% a year. Gasoline here has reached the equivalent of over US $6.00 a gallon. . . .

The results of the high interest rates and increasing prices can be easily seen in the trains each morning. The parking lots at the train stations fill up early and there is usually only standing room after a couple of stops - and that is at 6:45 in the morning. Even 6 months ago that was rare. Going home in the afternoon is even worse.

More for sale signs are showing up on property around here as well. One house sold for over $A410,000 (within a month of listing), one had a mortgagee auction two weeks ago for A$400,500 and some "fool" plunked down A$499,500 for a 500 square meter block of land in a new subdivision about a 5 minute walk from us.”

And from my dear friend, and almost mother, Gert, from Salt Lake, who lived through the great depression,

“I have read all your previous letters with interest!!! I’m safe as far as the $100,000 bit goes. So no worries there. But let me tell you a story of my early life. Near the end of the big depression of the late 20’s as a 10 year old, I had a savings account of maybe $20 garnered from birthday gifts. That’s when $.50 cents or a dollar was BIG money. I had it in the local bank. When all the banks closed, there went my savings account never to appear again!! It was a very bad time for everyone. That’s when the feds started insurance with banks for the $100,000 bit. So now you wonder just where all this will end. Utah is in the same position as other states with bankruptcies higher than ever. To make a long story short, I keep cash on hand (not too much) but enough to feel a bit of comfort if money is needed in a hurry, - so the mattress bit!!!”

A developer friend, who built a beautiful vacation home on the Big Island is suffering through the market down-turn, and says he needs help. He writes:

Hi Tim,

I need to pay-off my investors, who I’m late 7 months in paying back = $287,500. I need to pay-down my revolving debt, which payments & interest are killing me each month and making it very difficult to make my mortgage payment and pay any other bills = $126,000
Total need = $413,500

Payback:
I will give an investor 50% of all future rental revenue and 50% of the profit when the house sells.

Equity and Rental Income
The house appraised for $2.5M in March and I will not sell the house for less than $2.5M. I owe $1.74M currently on the house and that would be the baseline for my cost. My cost plus investor cost is a total cost basis of $2,153,500. A sale at $2.5M will yield a profit of $346,500 minus cost to sell of approximately $25,000 divided by 2 = $160,750 minimum ROI for investor (=38% ROI plus vacation rental revenue share).

The house has generated great vacation rental revenue of $118,000 YTD. I think the offer is attractive in that the investor shares in the additional revenue stream of vacation rental income until the house sells. I’m also willing take the house off the market and keep the house as a vacation rental for a longer period of time if the partner has that financial bandwidth and wants to optimize that revenue opportunity.

Know of anyone?

Lastly, as an additional indication that the market is still correcting, anecdotally, we have taken on 3 new assignments from people in professional practice. We have been hired to negotiate with their existing Landlords to work-out deals to lower their rent. Strange times.

The week, like every week, was filled with good and bad. I hope yours was mostly good.


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