Southwest Colorado News

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 4^th 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

SQUARE TOP RANCH

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.

BEST VALUE AMONG LUXURY HOMES:

Terry Robinson Road Home Outside Pagosa Springs, CO

As we approach the end of October here in Southwest Colorado I think it is a good time to look at the Best Values among the properties available in our market area. First, the upper-end of the residential market offers some outstanding values for Buyers. Our first property is a 8,278 square foot home situated on 46.88 acres at 1242 Terry Robinson Road with commanding 270 degree views of the mountain peaks and ranges. This home offers four bedrooms and six bathrooms, two kitchens a  huge bonus room that could be easily converted to a guest suite, a towering rock fireplace, huge decks and balconies and a five stall barn with fenced pastures. All this for only $1,499,000, which is under $182 per square foot, including the land and barn. By far, this is the best value, dollar for dollar among homes priced $1 million and above.

BEST VALUE IN TIMBER RIDGE:

220 Shooting Star is a 3,586 square foot, three bedroom, three and a half baths custom home, completely remodeled by area custom builder Len Richie. It boasts great views of the east range, a large front deck, large rock fireplace, custom cabinets, rustic wood trip throughout and reclaimed antique wooden floors. The kitchen is well equipped with stainless appliances, slab granite countertops and lots of extra storage. This is the best value within popular Timber Ridge, with paved roads and driveways, common open space and central water and sewer. Priced to sell at only $699,000.

BEST VALUE FOR RIVER PROPERTY

The King Ranch located at 5000 Highway 160, just five miles from downtown Pagosa Springs is comprised of 88 acres with 4,500 feet along the San Juan River. This is an exceptional fly fishing property which local fly fishing guides will confirm. Great views, huge irrigated hay meadows, a large private lake, central water, a well and recorded ditch water rights make all sorts of future development possible within this property. The Owners already recorded a map on the property dividing it into three separate parcels. Property along the San Juan River with these quality features rarely becomes available. This is an exceptional value at $2,900,000.

If you know of anyone interested in property that any one of these offerings might fit, please let us know and pass this information on. We have more detailed information and photographs available on each of these fine properties. Please give me a call at 970 264-7000 for more details and information on these offerings. Thanks,

Mike Heraty.

I returned home last night from four days in Denver attending the Colorado Association of Realtors (“CAR”) Annual Convention. On several levels our state leadership pronounced the event a success. There were a total of 2,000 attendees (there are 20,000 members of the Colorado Association of Realtors), all of the Exhibit Space was totally sold out as were several of the key events. This year there were only five in attendance from Pagosa Springs. In years past, Pagosa Springs had as many as ten of our area brokers at the convention.

Evening View Along 16th Street Mall, Downtown Denver

On Tuesday I attended Market Updates for several of the areas within our state and presented key real estate metrics for the Southwest District of Colorado. Overall, nearly every market has improved over 2012, the impact of distress sales on local property values has diminished significantly, there has been a shortage of inventory within some price brackets, especially along the Front Range, and we are seeing some price appreciation, though several markets remain below the peak valuations of 2007 and 2008.

I toured the Exhibit Hall several times to see what new products and services were being offered to improve our industry. I sat through several demos of Contact Management Software, Social Media Management Programs and viewed several new electronic real estate contract platforms. Though some of these were interesting I did not find any major breakthrough products or services. The mood overall seemed upbeat and optimistic, especially among Denver Area Brokers. Those from outlying areas and the southern part of the state were less exuberant as their economies are not advancing as well as Denver. Most of the Mountain Brokers were reporting greatly improved numbers with some areas already experiencing a shortage of inventory. Except for Aspen, the high-end of the residential market remains a bit weak and in some markets, such as Pagosa, the Trophy Home Market is still a Buyer’s Market.

So, what useful perspectives did I gain from attending the 2013 CAR Convention? First I learned again how fast change comes at our industry. I learned more about changing consumer preferences and buying habits and how consumer expectations must be carefully matched in order to have a successful real estate brokerage. More details concerning changes in Seller Financing was also disclosed, suffice it to say, this form of home financing will be changing radically beginning 2014.

More than ever, consumers want good, timely and accurate real estate information and statistics to help them in the decision process. Our firm will look at additional ways we can deliver more useful data to our clients, this will be one of our objectives for our 2014 Source Planning Session next month.

I also learned how badly our state Realtor Association needs to recruit and groom future leadership. Many of the veterans that I served with on State Leadership during four terms as a Vice President have remained involved at the state level simply because no new leaders have come forward from among the younger crop of brokers that joined our industry in the last ten years. Our new State President, Jolon Ruch has made Leadership Training a priority during her term which is a very positive step.

I also learned how many of those in attendance longed for a return to the Broadmoor Resort in Colorado Springs as our convention site. Unfortunately, CAR has already signed on to hold our convention in the Convention Center, so, next year I will make the extra hour and a half drive to Downtown Denver once again.

I depart tomorrow for our annual Colorado Association of Realtors Convention in Denver. 

I have attended 18 out of the last 19 years. I must admit I don’t enjoy the event nearly as much since they moved it from the Broadmoor Resort in Colorado Springs. The setting, the service and the splendor of the Broadmoor are far more impressive than the downtown area of Denver. Though today’s room rates at the Broadmoor are slightly higher than the host hotel in Denver, I doubt the overall savings amounts to much.

The Broadmoor Resort, Colorado Springs

There is simply no comparison between the Sheraton Downtown Denver and the Broadmoor Resort, but, like many things in real estate, change is inevitable and I drive an extra hour now to attend the CAR Convention in downtown Denver. Okay, I’ve stated my complaint, one shared by many of my fellow Realtors that looked forward to three days each fall at the Broadmoor.

I am excited about a number of things at this year’s convention. I will be presenting the real estate report for Southwest Colorado to my fellow Realtors and gaining more detailed insights into the market conditions along the Front Range and other parts of our state. I will meet up with a number of good brokers from across the state that I have known and networked with over the last 20 years. I will learn what new trends the national home builders are incorporating into their new developments and what new energy saving ideas are being applied to residential properties. I will also see what new technologies are being introduced to make our firm more efficient and effective for our clients and customers and, as always, I will learn what new government regulations are about to be enacted that will impact our industry.

There are a number of changes going into effect in 2014, especially related to real estate financing. It will be much more difficult for Sellers to provide financing to home buyers. Under the new regulations, private, Seller-Financing arrangements will have to follow the same guidelines used by regional and national banks. This, in my opinion is another move by the banking lobby to limit competition. Seller financing has been an important part of the home-buying equation for many years and the latest new regulations may send this option to the trash heap. I will report more on this topic as well as the most important new information I gather during the next three days at the convention. Thanks for reading. Mike