Home builder confidence is up, according to the most recent survey by National Association of Home Builders/Wells Fargo housing market index (HMI). According to NAHB chief economist David Crowe, “low interest rates, affordable home prices and solid job creation are contributing to a steady housing recovery,” He went on to say “after a slow start to the year, the HMI has remained above the 50-point benchmark for five consecutive months, and we expect the momentum to continue into 2015.” “Growing confidence among consumers is what’s fueling this optimism among builders,” said Kevin Kelly, a home builder and NAHB’s chairman. This last statement is especially important for the second home and vacation property market as growing consumer confidence is one of the most important ingredients that positively affect the real estate market in resort areas such as Southwest Colorado.

 MORE GOOD NEWS :Despite mild October temperatures, lodging reservations for the six-month winter season (November through April) are currently running ahead of the same time last season. Denver-based DestiMetrics, an organization that tracks mountain lodging bookings in 19 Western mountain resorts in six states, said that reservations as of Oct. 31 are up 7.4 percent over last year. From our initial survey of lodging companies here in Pagosa Springs it looks like this winter ski season could be a strong one in terms of the number of visitors. The snow last week helped get things kicked off at Wolf Creek Ski Area and reports are the conditions were quite good. With the new ownership at Durango Mountain Resort we are all anxious to see what changes Purgatory Ski Area will implement this ski season. If I can help you or any of your family or friends with real estate matters, recommendations for places to eat or lodging options, give me a call at: 970 264-7000 or email me at:



The vacation or second home market is driven by a number of factors. Among them are proximity to employment centers, growth in disposable income, recreational attractions, consumer confidence and availability and cost of mortgage credit.

Few of these factors are within the control of those of us that live here and depend upon this segment of our community’s economy, but, to the extent we can have impact on any of these factors, we need to be involved.

Traditionally, the Pagosa Springs area, and southwest Colorado in general have attracted visitors from New Mexico, Arizona and Texas as well as from the front range of Colorado. The demographics in these locations changed as a result of the prolonged recession. New Mexico in particular has seen its economy continuing to struggle, with further bad news on the near term as it appears Intel may not continue to reinvest in the huge chip plant in Rio Rancho.

Arizona is in better shape as it attracts more businesses and jobs escaping the high taxes and cost of living in California. We expect to see more of these folks returning to our area as second home buyers in the next year or two.  The Arizona housing market had a strong start in 2014, though it began to fade in the second half of the year as cash buyers exited their market when housing prices began to rise too quickly.

The greatest opportunity Pagosa Springs has in front of it is to increase the flow of visitors it attracts our next door neighbors in the state of Texas. The state’s economy is humming with strong growth in employment numbers, including recently transferred employees from California. See:

Texans love to come to Southwest Colorado to escape the heat of the summer, hunting in the fall and to enjoy the great skiing we offer during the winter. I have found there are many thousands of financially qualified Texans that have never heard of Pagosa Springs. Would it not be appropriate to devote a significant percentage of our Lodging Tax Revenue to market specifically to this effort?

While we may not be able to effectively reach all of them, I suggest we start by specifically targeting those in the upper management levels of the energy firms that are generating record profits. Let’s target those prospects by advertising to them directly, in the magazines and trade journals they read. They can then access any and all services within our community via the   website our Town Tourism Committee maintains.  These are the folks that will come to Pagosa, stay in a nice hotel or condo, go out to dinner several times, take private ski lessons and frequent our local gifts shops. Who knows, after they visit a few times, they might decide they want to own a second home or condo here. Just a thought-

Thanks for reading-




It is the end of the summer, a good time to look back on the prior nine months and ahead at the last three. Two great music festivals, a number of running events, four great professional theatre productions, a wonderful Color Fest, nourishing summer rains, no fires, the new Walmart is under construction, and an improving economy with increased sales and lodging tax collections. Overall it has been a good summer in Pagosa Springs. So far, our Pagosa Springs, Colorado real estate market reflects improving trends, though not across all property and price categories.

Entry Level-Up to $250,000- Hurry- Limited Supply Good Price Support

The 94 Closed Sales of homes priced under $250,000 accounted for nearly 48% of the total number of homes sold thus far this year. In terms of dollar volume, this segment represented 26% of the total. The total number and dollar volume results were both up slightly as compared to 2013, with the average and median selling prices up slightly as well.

In general, homes priced under $250,000 in the Pagosa Springs Area ranged from 1,000-2,000 square feet, with a few older homes up to 2,500 square feet. Often the trade-off for larger, older homes with more space is less energy efficiency. Carefully weigh your present and future space needs against monthly utility and maintenance expenses. The inventory within this price level was reduced significantly with 88 Active Listings on the market at the end of August, approximately an eight month supply, down from the average inventory levels over the last three years.

$250,000-$500,000 Price Range: More Inventory- Weaker Price Support

This range showed improvements over the prior year as well. The 77 Closed Sales were 7 ahead of last year. Average selling times were reduced, with the average and median selling prices remaining mostly unchanged. At the end of August there were a total of 183 Active Single Family Home Listings within this price range, representing about 21 months of inventory at the current absorption rate.

$500,000-$750,000 Range- Buyer’s Market- More Supply- Less Demand

Sales in the $500,000-$750,000 range were also slightly improved from last year with 16 closings thus far this year as compared to 15 for the first nine months of 2013. Average and median selling prices were off slightly from the prior year. 65 active listings were on the market within this price range at the end of August, representing roughly 37 months of inventory.

$750,000 and Above- Strong Buyer’s Market

Results decline considerably for single family homes priced above $750,000 in the Pagosa Springs area. Thus far in 2014 only 8 sales have closed, while in 2013 there were 11 closings for the first nine months.  The total Closed Sales Dollar volume for homes priced above $750,000 was down nearly 33% from 2013, $9 million as compared to $13.4 million for the prior year. The average and median selling prices also dropped within this bracket. Further, the inventory within this price range increased substantially in 2014, with 82 Active Listings on the market at the end of August representing 11 years of inventory. This reality is not pleasant for Sellers with homes priced in the upper price ranges.

Prices on many of the upper-end listings are 20%-30% below current replacement cost and in some cases substantially below the Sellers’ actual cost. Among the few higher-end homes that have sold, several were deeply discounted in order to move them. One would think many more of these luxury homes would have been snapped up by folks looking for great values. For a few of our Sellers that proved to be the case, but for most, the wait continues.

A more in depth look indicates that a good number of highly qualified, affluent Buyers opted to build rather than buy an existing home within the Pagosa Springs area. In a few cases some of these Buyers looked at a few existing homes, but many never looked at what was available except perhaps within the internet. Buyers could have realized substantial savings by acquiring an existing home, even with some remodeling and updating costs. Instead, they contracted with a local custom builder to have their own dream home designed and constructed. For the majority of these consumers, especially those investing $1 million or more, it is more important to get exactly what they want in a home rather than save 20%-30%, largely because they can make that choice without sacrificing anything in terms of their lifestyle.

More affluent Buyers are willing and able to pay a substantial premium in order to obtain the home of their own design with finishes and features suited to their particular tastes and preferences. How many of these consumers made this choice so far this year? From our research, we are estimating as many as a dozen from existing and pending high-end construction contracts within the Pagosa Springs area. It is possible some of the pending contracts may cancel prior to the start of construction, but it is equally likely others will replace those that fall out.


As is normal for this time of year, many listing prices are being lowered in hopes of capturing the few Buyers still looking this late in the season. In the last 30 days we have seen 84 price reductions.

As we continuously review the market data here in Pagosa as well as from other mountain communities across Colorado we can see where the real estate trends are heading. We will continue to see high-end homes purchased or built in Pagosa Springs by families and individuals from Texas and other states with strong energy economies during the next few years. We have yet to see a return of Buyers in any large numbers from California, though we are beginning to see more interest coming to Pagosa Springs from Arizona. New Mexico’s economy continues to struggle and we expect fewer Buyers coming from our neighbor to the south until their state’s employment conditions improve. The Albuquerque business community is working hard to improve the attractiveness of their area: ABQ Re-Inventing Itself  Albuquerque is determined to attract expanding companies and jobs, but they are not making much headway to date. See: Business Leader Interview 

Pagosa Springs would be wise to invest a significant portion of its tax-generated marketing resources towards our neighbors in Arizona and Texas. Folks from Phoenix can depart from Sky Harbor Airport at 9:00 a.m. and be in Pagosa just after 12 noon. These visitors will typically spend more on lodging, restaurants, lift tickets, lessons and gifts are more financially qualified to invest in area homes, cabins and condos.

Texas has historically delivered many tourists and vacation home buyers to SW Colorado over the last thirty years. With its strong economy and growing population there are thousands of Texans that are not aware of the fabulous recreational experiences Pagosa Springs has to offer, let alone the great value our real estate represents relative to other mountain communities here in Colorado. We are the closest ski area with consistently good snow for all of Texas. Since 2008, Texas has consistently delivered the largest share of high-end Home Buyers within Pagosa Springs. The growth in jobs and household income from expanded energy activities is creating many thousands of new potential visitors for Pagosa Springs and other mountain resort towns. Read:

Our Lodging Tax Dollars need to specifically and effectively attract more of these Buyers to our area. These folks contribute substantially to our local economy with very little impact on our infrastructure. They also have many choices as to where they invest their discretionary income and Pagosa Springs must be willing to compete with other mountain communities delivering the experiences they seek in order to bring their resources to our area.

We have many fine staff members and volunteers engaged in promoting our area, but we must face the fact that we are far behind many other mountain communities in effectively attracting more tourism dollars to our community. The competition is stiff and we must become better at determining and tracking the best means of improving the flow of visitors and resources to our area.

I will be attending the Mountain and Western Slope Real Estate Summit next month being co-sponsored by University of Denver and the Rocky Mountain Commercial Brokers. I have been a partner in this group for the last two years and we are excited to bring together highly informed Presenters and Speakers to share what the research indicates will be the future of mountain communities in terms of jobs and lifestyle here in the Rockies. If you are interested in attending: Mountain and Western Slope Real Estate Summit October 2014 Avon, Colorado

If you would like more information on the local real estate market or assistance with any real estate related matter, please give me a call at 970 264-7000, or email me at:


INTEREST RATES: Trending slightly higher

We expect mortgage interest rates to be trending slightly upward. Don’t expect to see 30 year money at rate of 6.5%-7%, but we would not be surprised if rates reached as high as 5.5% during the year. With the announced intention of the Fed to slow down the printing presses, we are projecting some upward pressure on rates as there will likely be more borrowers competing for funds.


Entry-level priced homes in Pagosa will be the tightest inventory category during 2014. We saw supply pressure moving prices up a bit during 2013 and we expect the tight supply and increasing demand to continue during the current year. The inventory of existing homes priced above $400,000 will continue to be over-supplied, until downward pressure on pricing stimulates more demand. Currently there is 26 month supply of homes priced above $400,000. There is a 68 month supply of homes priced above $800,000 within the Pagosa Springs market.


Speculative homebuilding will increase only slightly during the year. There are a handful of builders that are sufficiently capitalized to fund construction when the market remains in a very slow recovery mode. Banks will not commit to construction lending without a much larger cash investment from the builder than in years past. The cost of basic new home construction exceeds the cost of average existing homes by 15-30%. In order to profitably build and sell homes with these conditions a builder would need to have some extraordinary cost advantages. A number of the better custom homebuilders will remain busy during 2014 and beyond. There is always a limited number of affluent customers that can afford the choice of having a large custom home built to their design specifications. In nearly every case the appraisal value of a to-be-built custom home has been significantly under the estimated construction cost.


Land values will vary during 2014. We expect the significant over-supply of 35 acre tracts to put downward pressure on pricing for this component of the land inventory. Good, close-in 3-5 acre tracts with views and central utilities should see moderate increase in demand during the year. We could see some improving values towards the middle of the summer.

High quality recreational ranch properties with premium water features should gain more attention during 2014. Early signs indicate this segment is experiencing increased demand as an asset class for capital preservation and long term value appreciation.


Commercial lease rates will continue to drift during the year as owners work to fill vacant space. Presently Walmart is set to start construction in the spring and as yet, no additional nearby commercial construction projects have been announced. We would anticipate lease rates for anything to be built near Walmart would be 20-30% above other locations such as Pagosa Country Center and Village Commercial.

For information on any component of the local or regional real estate market, give me a call at 970 264-7000, or email me at:


The Pagosa Springs Area ended 2013 with positive improvements in nearly every category of its real estate market. It looks like we are gaining momentum on our way out of the ditch! We were slow to enter the recession that started in 2007 and it has been slower coming into the recovery, but the data for 2013 clearly indicate we are on a positive upward trend line.

Total Real Estate Sales Volume was $114 million as compared to $105 million for 2012, an increase of 8.8%. The Median Selling Price (which is a composite of all types of property; homes, condos, land, etc.) was up 11.5%. The Total Unit Volume for 2013 was only 3 below the prior year at 529 closings. Yes, we are a long ways off from the peak years of 2001-2006, but we now have a “New Normal” that we are learning to live with.

For the benchmark Single Family Residence Sales*, the figures were more impressive. We had 250 Closings for the year. Total Sales Volume was up by over 10.5% for the year. Pagosa Springs had $79.7 million in Closed Sales for 2013 as compared to $72.1 million for 2012. The Median Selling Price rose by 15.4% to $250,500 versus $217,000 for the year earlier.

There are two trends indicated. One is a decline in the percentage of foreclosure sales and the other is the price appreciation that is starting to show up in the market, first appearing at the entry level prices. The inventory of available homes under $250,000 has declined significantly and as demand has remained strong, prices have moved upward for this bracket. There were a total of 277 Single Family Residence Listings across all price categories at year end. This is a 13 month supply, down slightly from year-end 2012.


Looking more closely at different price points within the Single Family Residence Inventory we note there were 10 sales of homes priced above $800,000 that closed during 2013 for a total of $12.7 million, up 6% from 2012 totals. The Median Selling Price declined by 11% from $1.2 million to $1.07 million. There were 54 listings in this price category at year-end, representing 65 month supply. This remains the most Buyer-Friendly segment of the market in Pagosa Springs.

Total Sales Volume for homes priced between $500,000 and $800,000 was double the amount from 2012 by both unit and dollar volume. The Median Selling Price moved up by 5.6% to $645,000. Some Sellers finally responded to market pressures and lowered prices. This is further indicated by the decline in the average and median number of days on market for the highest price range homes.

For homes priced between $250,000 and $500,000, Total Sales Volume increased by 16.6% to $30.3 million. Here again, the Median Selling Price declined by 2.3% and the median and average number of days on market declined, an indication that Sellers gave in to market pressure and lowered prices in order to achieve sales.

Finally, we saw real strength in the category of homes priced under $250,000. Here Total Sales Volume for 2013 was up over 20% from 2012, while the number of sales declined from 164 to 125. These 125 sales represented 50% of the Total Unit Volume for all single family homes sold in 2013. The Median Selling Price for homes under $250,000 increased by 7% for 2013.

Foreclosure Impact Declines

The number of foreclosure sales as well as recorded defaults slowed considerably during 2013 while demand for entry-level priced housing was strong from both Owner-Occupant and Investor Purchasers. We expect demand to remain strong in the entry-level price range during 2014 which will put upward pressure on prices, eventually into higher priced homes. At the point at which existing home prices more closely approach new construction cost we should see a big uptick in new housing permits in the area, something many in the construction trades would welcome. In 2013 we had a trickle of new homes being built on speculation and we expect that activity to increase moderately during 2014.

Condo and Townhome sales for 2013 also showed improvements over the prior year. Total Sale Volume was $7.2 million as compared to $6.8 million a year ago. The Median Selling Price increased by 8%, from $125,000 to $135,000 for 2013. Two new condo/townhome projects came on stream during 2013 along the San Juan River. Pagosa Riverwalk sold two of its recently completed units during December. At year end there were 57 Condo Listings, which represents a 15 month supply.

Commercial Market Finally Gaining Traction

Commercial property sales were on the upswing for 2013 with an increase in Total Sales Volume of 18% over the prior year. 18 Closings were recorded totaling $4.1 million for the year as compared to $3.5 million during 2012. The Median Selling Price edged up by 4% over the prior year. With Tractor Supply completing their new store this spring and Walmart expecting to start construction within the next 120 days the commercial market will show further improvements during 2014. We are having preliminary discussions with several national restaurant and retailers interested in locating near Walmart.

Land- Slowly Improving

One of the last components to show improvement has been the land market. For 2013 we see solid improvements here as well. Total Sales Volume was $9.4 million for 2013, up by nearly 20% from 2012’s total of $7.9 million. The Median Selling Price increased by 6.2% for the year. The inventory of available residential and ranch land parcels remains high, with an 81 month supply of 35-Acre Tracts, a 76 month supply of 5 Acre Tracts and a 52 month supply of 1-5 Acre Tracts still in the Multiple Listing Service.

The Wrap Up:

So, in summary, 2013 may not have been a banner year, but we experienced solid improvements within our real estate economy. Mortgage rates have risen nearly 1% above a year ago, but, 30 year money for less than 5% is still very cheap money. The Fed seems to indicate they will slow down the printing presses during 2014, but most economic forecasters do not expect significant increases in long term interest rates. America still represents the strongest and safest economy on the planet. Thankfully, our private property rights, rule of law and level of accounting transparency continue to make us an attract place to invest.

We have a great selection of available properties here in Pagosa and homes priced above $500,000 represent some fabulous buying opportunities. I do not expect these conditions to last much longer. Other mountain resort areas have moved further along in the price appreciation curve and that will make our values here stand out more during 2014. I regularly interface with my associates within Durango, Telluride, Vail, Aspen, Steamboat Springs, Summit County and the other mountain resort communities. We share market data and help each other improve our businesses. As the real estate markets in each of those areas continue to ramp up, we will follow; as the strength of their current increases, our economy will be pulled along.

Perhaps Pagosa Springs can speed up the recovery process by all working together to improve our community for ourselves and the visitors we depend on for our livelihood. Over the holidays my wife Lauri and I attended a party hosted by close friends and clients that spend time here as their second home. This couple has invested well in excess of several million dollars in our community. At their party on New Year’s Eve $100,000 was raised to fund the planning process for expansion of our hospital. Three of the major contributors were second home owners. There are many great aspects to Pagosa Springs. Its people: the residents, second home owners and visitors continue to be its most valuable resource. I was greatly humbled by the outpouring of generosity I witnessed that evening. I am so blessed to be able to live here and serve the good people that live and spend time in this special place. We are grateful for the efforts of our Contract Manager, Robin Curvey and to have our son Michael Richard helping in the office. 2013 was a rough year for our family and our business. Our continuing journey has been sustained and rewarded greatly by your support, encouragement and friendship.

Thank you,

Mike and Lauri Heraty, Managing Broker/Owners, Pagosa Source Real Estate Advisors.

*For my market metrics I define Single Family Residences as “site-built” or “stick-built” residential structures.  I exclude manufactured homes, mobile homes, fractional ownership residences and duplex units. The number of duplex unit sales within our market over the last five years has not been significant enough to warrant analysis. Data provided by the Colorado Real Estate Network.


A recent article in ColoradoBiz Magazine explored the current state of the Ski Economy. It is an interesting article suggesting the future is not so clear and not so rosy for the ski industry with the Rocky Mountain Region. The article points out “As the old saying goes for real estate: location, location, location. For the ski industry, there are also three ingredients to success, and they are just as simple: snow, snow, snow.” And that ingredient is in fact the issue. This season Wolf Creek Ski Area benefited from some very good early snow that enabled us to open early and to gain some good publicity in the process. However, two years ago our state suffered a bad snow year with the lowest total visitor count in 20 years, according the David Beline, director of consulting services for Boulder-based RRC Associates, a research consulting firm specializing in travel, tourism and skiing. Ski resorts have a limited number of tools to counter low snow years such as snow making equipment, but it too is weather dependent and in warmer winter seasons, snow making can be severely limited.

It matters not what you choose to believe regarding global warming; ski areas and the communities connected to them are looking at different ways to insulate themselves from unfriendly winters and means of diversifying their revenue generation away from total dependence on good ski conditions. One of the main focuses among the larger resort owners is a push to build more summer business. In late 2011 the Ski Area Recreational Opportunity Enhancement Act, was passed to allow summer activities on U.S. Forest Service Lands (which would include most of the acreage at Wolf Creek Ski Area) to include Zip Lines, Mountain Bike Terrain Parks and Trails, Frisbee Golf Courses and Rope Courses. It specifically prohibits however, tennis courts, water slides, golf courses and amusement parks, in case anyone would be tempted to transfer the failed Reservoir Hill plans to the other side of the Continental Divide. Vail is spending some $20 million to enhance summer activity offerings at their Colorado resorts and similar developments are expected at many of the state’s ski resorts. Competition for tourism dollars has become brutally competitive. What are we doing in Pagosa Springs and what is Wolf Creek Ski Area doing to proactively address these realities? You can read the full article in ColoradoBiz Magazine and related articles in Ski Area Management “SAM” Magazine.

Speaking of skiing. If you are looking for a wonderful ski home within walking distance of all the fun and recreation in the downtown area of Pagosa Springs, be sure to check our website: or call me at 970 264-7000. We have the ideal setup in an historical home right all Lewis Street, two blocks from the Hot Springs, less than a block to Riff Raff Brewery, the Alley House Grill, Kips and more. Very Cool, and Very Reasonable!




Don’t just come to Southwest Colorado in the winter months for great skiing at Wolf Creek Ski Area and the soothing waters of our Hot Springs! Be sure to look at the great values to be had in real estate!

Winter months in Pagosa Springs and Durango usually brings a big slowdown in home buying activity. During the fall, kids and grandkids are back in school, hunting season is underway and the better part of the ski season hasn’t started. Tourist traffic drops off and it is easy to get a table at the better restaurants in Durango and Pagosa Springs, even on the weekends. Many of the homes that remain on the market this time of year have dropped their prices in hopes of capturing a sale before the heart of winter sets in. Sellers’ motivation tends to increase so the odds of the Sellers being willing to consider lower offers also increases.

Typically, the number of monthly closings drops off by a third during the months of November, December and January, last year averaging 20 closings per month versus 34 closing per month for the summer months. A reduced number of Buyers active in the market for the winter months and downward price adjustments give Buyers much more leverage. Another important factor to compel you to seriously consider buying in the winter is the availability of contractors and subcontractors for repair work and remodel work during the winter months. Many of the larger projects are shut down for the winter and a many in the construction trades are hungry for work. With fewer competing jobs and more available skilled workers, your remodel and repair funds will go further.

Before embarking on your buying journey, be sure you are well briefed on current market conditions. Know how much inventory is available, how long it has been on the market, what homes have been taken off the market (and are likely to come back into the inventory in the spring), carefully analyze the most recent Comparable Sales, and get a clear understand of how the market is trending. Spare yourself the learning curve, save lots of money and time, and call me at 970 264-7000 or stop in at Pagosa Source Real Estate Advisors at 286 Pagosa Street, five doors west of Alley House Grill and two doors down from Riff Raff Microbrewery when you are ready to start the process.

Whatever you choose to do, please enjoy a great Thanksgiving. From all of us at Pagosa Source Real Estate Advisors.


That’s what we were told last week over coffee with Travis “Buck” Kingman III when he stopped by our office to get more details on the coming Whole Foods Market.

First, he asked us if it was true that Pagosa Source Real Estate Advisors had sold the old downtown City Market building to a company with financial ties to Whole Foods.  He said he was in the Bear Creek Saloon and the bartender and two of the waitresses confirmed the story. He went down the road to the Pagosa Bar and was told the same thing by Cletus Ledbetter, a 4th generation local. He was wondering why we hadn’t told him anything about it when we had seen him earlier in the month having dinner at the Alley House Grill.

I told Buck we have known the new owner of the old City Market Building for 20+ years and we were unaware of any ties to Whole Foods or any other grocery chain. I explained that another privately owned chain, headquartered in Texas did come and look at the building with several of their top executives earlier in the fall. They flew into Pagosa in two private jets, spent about five hours looking at the building and town and then returned to Texas. They informed us about a week later that they were not going to pursue things further at this time. I suggested to Buck that might have been how the rumor of Whole Foods got started, considering they are also headquartered in Texas.

Travis “Buck” Kingman III

Buck did get us thinking and according to Walter Robb, Co-Chief Executive Officer of Whole Foods, the chain will not be opening a store here in Pagosa Springs, at least not in the near future and the company is not connected with the Purchaser of the building.

It would certainly be a plus for the area if they were going to locate a store here. Whole Foods has grown considerably since opening the first Whole Foods Market in Austin, Texas in 1980. Today the company has 340 stores in North American and the United Kingdom. Whole Foods’ experience entering the grocery business in the United Kingdom has been much more successful than Britain’s Tesco PLC’s attempt with their Fresh and Easy grocery store brand. The giant British grocery chain opened 200 stores in California, Arizona and Nevada. After five years they threw in the towel, to the tune of $1.8 billion in losses. While we had a home in Phoenix, my wife Lauri liked to shop at Fresh an Easy but I never cared for the store layout or all the packaged fresh food products.

Whole Foods has much more accurately gauged, adapted and, to some extent directed, the changing preferences of the supermarket consumer. They maintain very good margins, prompting some of my friends to rename the chain “Whole Wallet”. They have done a great job of targeting a very specific grocery customer profile where Fresh and Easy seemed to have missed all the signals and trends.

So far, even Durango does not have the requirements Whole Foods looks for when considering a community to locate a new store within. The first hurdle is the population base. Whole Foods looks for 200,000 or more people living within a 20 minute drive of its location. Pagosa Springs certainly can’t reach that threshold and even with Durango and Farmington, we don’t have the population needed to get there. Pagosa Springs, Durango and Farmington do meet most of the other requirements. There are 25,000 square foot and larger facilities available in our market areas. We have a large number of college educated residents. Our communities have store locations available with good access to roadways next to lighted intersections with excellent visibility. We also have store facilities available in high traffic areas for foot and/or vehicle traffic, another Whole Foods requirement. The CDOT traffic count in front of the old City Market is quite high. But, all for nothing without the critical population base Whole Foods requires.

It seems Whole Foods knows what works for their business model and they plan to stick with it. Had Tesco followed a sound business plan with their Fresh and Easy stores they might have spared their owners the $1.8 billion misadventure.

We were sorry we were unable to confirm the rumors that Buck had shared with us. (If Pagosa had been able to reach the  population growth PAWS had projected in obtaining loan funding for the land acquisition of the proposed Dry Gulch Reservoir Project, we could probably support two Whole Foods Markets!)


Square Top at Sunset by: Barbara Rosner


The Square Top Ranch development plans were in fact unrealistic from the start. The level of density they proposed would have taken many decades to absorb, even if the real estate bubble had continued to expand. At one point they were proposing as many as 340 homes for the site, which in fact would have ruined the view corridors, drastically changed the wildlife habitat of the area and far exceeded the capacity of the existing road system in the Basin. Their projected selling prices had no relation to the local market or comparable sales within Southwest Colorado and their plan did not include any type of Market Feasibility Study. (In spite of, or, perhaps, because of this, they were able to secure over $15 million in equity investments.) The color renderings, site plans and marketing materials they created were impressive, especially to investors with limited market knowledge for Southwest Colorado.

The Archuleta County Planning Commission rejected their initial development plan and Mackey and Company went back to the drawing board, and back to the investors. By then they were already running low on funds and needed to recruit fresh equity partners. Interestingly, their marketing materials shown to their equity partner prospects still included financial projections based on the density levels that had already been turned down by the county.

As Mackey and Co. worked hard to reconfigure a development plan reducing the density down to 225 home sites, which the county might consider, the economy began to slow down. Their golf course developments in Pinehurst, North Carolina were floundering and their equity partners were starting to raise questions about expenses, unmet projections and an overall lack of progress with all of their projects. Loans against other projects they were involved in went into default as they were unable to raise more equity capital and unable to obtain additional loan extensions. Funding stopped and all work on Square Top came to a grinding halt.

For months equity partners in Square Top considered a number of different exit strategies. One of the larger equity partners proposed buying the others out and put forth an offer. There were many complications because of entanglements involving founding partner Walter J. “Rusty” Mackey Jr.’s bankruptcy filing. Finally a deal was struck and one of the partners completed the buyout in March of this year. The recorded price was $9,000,000. Financing was provided by Farm Credit in the amount of $4.85 million and $2.65 million was carried back by the exiting partners on a no-interest five year note. My guess is the Buyer probably did not have to put any more cash into the purchase other than his initial equity contribution.

Square Top Ranch had previously traded to the Mackey Group for $13,000,000 in 2006. In addition to the $4 million loss on the sale, I estimate another $1,000,000 or more was lost on related development expenses, consulting fees, legal expenses and holding costs. The new owner, Square Top Ranch, LLC lists Mathew Cook of Oak Park, IL, as Manager. Recently the ranch hosted the Outdoor Recreation Heritage Fund (ORHF) for a special October hunt for Wounded Veterans, what a generous use of a special property! Reportedly, it has no plans to develop Square Top Ranch, a relief no doubt to other property owners in the Upper Blanco Basin.


Square Top Ranch

Formerly owned by Hence Barrows, the 1,733 acre Square Top Ranch in Blanco Basin of Southwest Colorado outside Pagosa Springs was sold to the Russell Family of Albuquerque in 1992 for $1.9 million. They sold it to Kansas City developer Tom Smith for $7.75 million in 2004. Smith held ownership just long enough to qualify for long-term capital gains tax treatment before signing a contract to flip Square Top Ranch for $13 million to a developer group lead by Rusty Mackey of North Palm Beach, Florida in 2006. The Mackey Group struggled during the escrow to come up with the cash needed close on the purchase, extending the closing deadline several times while they lined up equity partners. Mackey had been involved in golf course community developments in the South and had gained a following of celebrity investors that included television Talk Show Host Maury Pauvich as well as an assortment of professional athletes.

Mackey’s group immediately engaged planning firm RPI to draft development plans that envisioned hundreds of new homes in the pristine Upper Blanco Basin. Their plans included quite optimistic revenue projections which were used in their marketing packages to secure more equity investors. All this was taking place while the real estate bubble was inflating at a high rate of speed in Southwest Colorado and elsewhere.

As initial details of their development plans began to leak out of meetings with Archuleta County Planning Officials, opposition lined up among existing property owners in the Upper Blanco Basin. Residents enlisted the help of Robert Lindner, owner of several thousand acres of ranches in SW Colorado, including El Rancho Pinoso in the Upper Blanco Basin. (Robert and his brother Carl earned their way to billionaire status through United Dairy Farms, Chiquita Brands International, American Financial and other companies they built, acquired or controlled.) Durango attorney Jeff Robbins was retained by Lindner  and other Blanco Basin property owners to strategize legal challenges to development of the Ranch.  Mackey and Co. would not even get a lead off first base ahead of the firestorm they had ignited in the Blanco Basin. They certainly didn’t expect the crowd that overflowed out of the County Commissioner’s Room and into the halls for the first public meeting.