July 26, 2009

Tim Leigh’s Weekend Market Report
Hoff & Leigh, Inc.
Leasing; Sales; Management; Buyer or Tenant Representation
4445 Northpark Drive, Suite 200
Colorado Springs, CO 80907
July 26, 2009

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 = $112.18 (DOWN from $112.97 last week.)
We are currently tracking 150 office buildings for sale.
This is 1,538,303 square feet, which represents a total market value of $173,781,132.

All Market Average Industrial Building Sale Price PSF = $83.92 (UP from $83.24 last week.)
We are currently tracking 130 industrial buildings for sale.
This is 1,639,646 square feet, which represents a total market value of $137,591,656.

To view our most recent Colorado Springs Business Journal Ad please click below
http://hoffleigh.com/Doc/7.17.09..pdf


Tim's Market Notes

I took the Freedom Fighters to work with me today. After 1 day of training, they’re animals.

Finally, I’m free at last. I made my 1st post surgery trip up The Manitou Incline today (Thanks Mr. Mayor!) and the parking was pretty. . pretty. . pretty. Sure, my knee still hurts and I wonder about the sarcastic statement my bone-doc made when I went to the follow-up exam, “I’m clearing you to do all the stupid stuff I know you’re going to do, anyway!” Nice; real-nice. I get no respect!

And other than a sore knee, how in the world are we doing, anyway? Well, our commercial real estate market is as empty as the egg of a nightingale is pregnant with music. Whew! I know – “The King of BS”. Say that after about 3 glasses of good wine; or bad wine; or any wine. Anyway you look at it, it can’t be good. You get the point. “It just ain’t happenin right now!”

We’ve seen several building owners start to realize that unless they partake in the free-fall, they’re going to go splat. Unless prices come-down deals will continue to be scarce. I know several building owners who are offering a year of “free rent” to entice any warm body. I’ve seen “make-me-an-offer” style lease proposals that I haven’t seen since the RTC days of the Mid-80’s. I’m currently working on an office-space-lease for about 4,000 square feet. The agreed upon rate is $5.00 per square foot, gross (as in, that’s all they pay) with 20% per year increases, and by the way, “Don’t pay rent until your current building sells!” Bing. Bing. Bing. The Tenant just hit-it out-of-the-ball-park and the Landlord’s delighted watch it sail over the fence! In a leasing market as depressed as this, most any deal starts to look good.

Personally, I dropped the asking price of my crown jewel at 2500 North Circle Drive. I used to carry that asset on my balance sheet at $1,100,000. Really; I was delusional as the rest of the market. I’m now asking $695,000 and still don’t have any serious prospects. In my case, I’m probably OK because I’m not really that motivated and I still have a Tenant and I know I can re-lease the property when they vacate. But, I’m an anomaly and we’re seeing many other building owners drop ‘em and roll. Here are a few examples:

Consider 2361 East Boulder. This is a clean, small industrial building. Its 1,440 square feet; zoned C-6 and is currently being used as an auto-repair garage. It’d been for sale for $199,000, and in a normal market, it would have fetched that price. What’s the new & improved price? The Seller’s now asking only $149,000, which is a drop of $34.72 psf - this week!

The ugly continues by looking at 2760 North Academy which has been advertised for sale as “the least expensive “cost-per-square-foot” office building in Colorado Springs”. We haven’t been able to find the right buyer so it looks like it’ll be a short sale. (Real Estate Lesson 101: A short sale is where the lender writes-off the difference between the debt and the sale price.) “I can’t remember if I fired 5 or 6 shots; so, do you feel lucky?” It was priced at $40.98 psf. I’m not sure if we’ve found the bottom on this one yet and yes, this pricing reminds me of those days, long-long ago, when I sported shoulder-length (yes, it was all brown then) hair, blue jeans and golf shirts.

And if you haven’t taken a good whoopin’ lately, consider a friend of mine. I helped him buy 4615 Northpark Drive about 2 years ago. At the time, it seemed like a great idea. It’s funny how passing-time changes what looks good (or not). And if you want confirmation, think about this - “The longer you go into a night of hard drinking, the better looking the women (sic – men) get.” Now, the building’s back on the market and under contract for 65% less than what my friend originally paid. The lender sensing that the market may be “aways-away”, offered to help make the deal by offering a new 5-year loan at 3.5% (interest only in year 1); then 3.5% amortized with 1% increase each subsequent year for 4 years.

1130 Elkton Drive sold last week. The final price was a deep discount from its original, asking price; 1831 Austin Bluffs is a 5,880 office building that shaved $60,000 off its price this week; 1825 Austin Bluffs is a 5,200 square foot office building that shaved $52,000 off its asking price this week; and the list goes on and on and on.

Every week, (seriously), I get someone new in my office who shares their story. It goes something like this, “I have enough money to last me to the end of the year. When it’s gone, I’m gone. I’ll be out of the game. I need to sell my property at any price.” Here’s a meaningful question borne from the times, “What happens to the guy providing the safety net when he runs out of net?”

Another phenomenon I’m seeing more of that I’ve not personally encountered before, is the report from people who have been “taken-in” by Ponzi artists (Ponzi schemes are where the 1st guy in the deal gets paid with the last-guy’s money). I’m aware of one party who lost several million in an oil & gas scheme. I’m aware of another party that actually borrowed all the money they could from their retirement accounts; from the equity in their home; from the equity in their commercial building portfolio, to invest in deals with an alleged financial genius who promised fantastic cash-flow on land deals. They were going to get paid monthly. The only trouble is, there’s no cash flow on vacant land! It truly makes you sick. (I reminded both parties (for future reference) that if someone offers you a deal that sounds so damn good, ask him, “If it’s so damn good, why do you need my pathetic little contribution?” Here’s a truism ladies, “Most guys promising big returns are going be disappointing.”

And speaking of land, what’s up with that? (See the attached report if you want all the dirt). Suffice to say, there are not many land deals being done right now. You only need vacant land if the economy is robust and the market demands new buildings, or if the cost is so low that speculators sweep-in and snatch future profits. And, in our case, that’s not the case, yet.

According to our research team (way to go Matt), the lowest-cost land-deal in our market right now is a 22 acre parcel for sale at $.81 per square foot. The lowest cost per square foot closing to occur this year was a 1 acre parcel for $.34 per square foot. The best deal in the market right now is a 30 acre parcel for $1.68 per square foot. (It’s the SE corner of the intersection of I-25 & Monument Hill.) This deal is pre-approved for development by the County; it offers 17 (1.5 acre) residential lots and numerous commercial sites which are perfect for a hotel; truck stop; C-store, etc. The trouble is, there’s no demand even at this discounted price.

Turner says we still have over 1,000,000 square feet of empty space which equates to a diminution of nearly $97,000,000 in property value (and if you didn’t have to pay it), a potential diminution in tax collections of about $6,000,000. From what I hear, the buzz is about to begin, “Ladies & Gentlemen; start your engines. We’re shutting-off the lights. We’re moving to a better place; a place where there are no cats and the streets are paved with cheese.”

We’re moving that is, if we want a great quality of life, (clean, safe, fun) because, we’re told, it ain’t happening here. We’re told that “we’re going broke” and it’s the end of the earth as we know it. We’re told that, as a community, “We’ve got too much month at the end of our money”. Wait; wait; I can fix it. We don’t have to move. We can stay. Pay & stay; pay & stay. That’s sounds like the start of a new campaign if I ever heard one. I mean, it’s not as if we don’t have enough other stuff to worry about.

Ok; Ok; settle down, now. I've been through all of this before. It's not the end of the earth.

Want to talk? Take 2 aspirin and call me - 719-337-9551.

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