Alamos, Sonora, Mexico and Pagosa Springs

Posted on February 21, 2012 by Mike

This blog entry will not have much to do with real estate. If you want or need specific real estate data or assistance, drop me an email at MikeHeraty@frontier.net, or call me at 970 264-7000.

ALAMOS, SONORA, MEXICO

I recently returned from a trip to northern Mexico at the edge of the Sierra Madres to the town of Alamos within the State of Sonora. Interestingly, the town is about the same size as Pagosa Springs. It is a Spanish Colonial Mining Town founded in 1681 following the discovery of silver in the area. Because of the great wealth created from nearby silver mines, scores of large colonial Spanish mansions were built in the town. Many were destroyed in the early 1900’s before Americans began to rediscover the area in the 1940’s. A number of the families living in Alamos can trace their heritage back to first settlers that came to work the mines.  Presently there are a number of Americans that maintain homes there for the winter months, and a few that live there all year, though I have found the summer heat to be quite intense. Like Pagosa Springs, Alamos has struggled during the recession to continue to attract tourists that are willing to spend money locally. Unlike Pagosa Springs, they have also had to deal with all the negative press relating to the drug wars that continue to plague many parts of the country. Though there has not been any drug violence in Alamos (it is far enough off the cocaine highway) the number of visitors from the U.S. has declined sharply and the town has seen a significant reduction in U.S. tourist dollars flowing into its coffers. Interestingly, those funds have been replaced, by and large by visitors from within Mexico. Alamos has been the location for the filming of a Novella (Mexican Soap Opera) which has been tremendously successful. They have been in town for the summer months, which historically have been the months most hotels see few visitors. In December of last year they filmed a full feature movie in the area. When it is released later this year into the Mexican market, Alamos expects to see more visitors as the movie includes some interesting history of the area.

The residents, business owners and town employees and leaders work hard to keep their city clean, safe and friendly. They do a good job of promoting Alamos with a series of events scheduled throughout the year. While I was there last month the 28th Annual Festival Alfonso Ortiz Tirado was underway. This is a music and art festival named after a famous opera singer and doctor that was born in Alamos in 1893.

This year performers came from Puerto Rico, Brazil, Cuba, Costa Rica and other Central and South American countries. The following link will take you to the Festival Program Guide- get ready to polish up on your Spanish:  Alamos Festival         The event was attended by loads of Mexican nationals, many from within the region, but many from as far away at Mexico City and Oaxaca. About a third of those attending the festival were foreigners, from Central America, Europe, South America and Gringos like myself from the U.S.  Everything was very well organized, events began and ended on schedule and provided everyone with a fabulous variety of musical performances. Thursday evening the group Puerto Rican Power played for the crowd and had everyone on their feet dancing the salsa:  Friday evening the group Opera Prima Rock performed a two hour tribute to the music of Queen. I was amazed how popular their music was and how many members of the audience knew all the lyrics. The group had everyone on their feet for the encore “We Are the Champions”.

 

OPERA PRIMA ROCK 

Saturday evening the Italian Tenor Alessandro Safina performed. In 2007 he recorded a duet with British Soprano Sarah Brightman for her Symphony album and joined her on her Symphony World Tour for 2008 and 2009. His vocals and his orchestra were fabulous. Following his performance,  Callejoneada con la Estudiantina Dr. Alfonso Ortiz Tirado completed the music celebration with all of the musical artists dressed in 17th century Spanish costumes, parading through the streets and alleys of Alamos playing traditional songs and telling stories. This went on until the wee hours of the morning. In all, the experience was wonderful.

Anyway, what I found most interesting is how well attended the Festival was. You had to travel 30 miles west of Alamos to the city of Navajoa to find lodging if you had not made a reservation at least two months earlier. The Festival has been sponsored and coordinated by a group of stakeholders including the Town of Alamos and surrounding communities, the State of Sonora the National Institute of Fine Arts, with commercial financial support from Coca Cola, Corona, and Telmex. This is a festival I would highly recommend to any music and culture lover. The people are warm and friendly, lodging is great within Alamos if you plan ahead. My two favorite lodging facilities in Alamos happen to be owned by Americans: Hacienda de los Santos and Hotel Colonial.

 Hacienda de los Santos, one of three pools.

 Both of these hotels are exceptional. Within HDLS is the Poncho Villa Cantina, where Poncho Villa stood after entering the town. If you are a Tequilla drinker, you will find over 500 different bottles of the spirit within the bar. If you can’t find one you like, you’d better think about changing drinks!

 

 

 Pancho Villa Tequilla Bar at Hacienda de los Santos

Hotel Colonial, Alamos. Janet Anderson, Proprietor.

The restaurants in Alamos are very good and very economical.  I love the food at Hacienda and Las Palmeras is a great spot for lunch or a casual dinner. Terisita’s Panaderia y Bistro is my favorite for a cappuccino and breakfast pastry, a great place to start the day and check email with their WiFi connection.

 Outside Seating at Terisita’s Panaderia Y Bistro

 

You can reach the town of Alamos by driving a little over one hour south from Ciudad Obregon, where you can catch a flight from Phoenix on Aero Mexico with a connection in Hermosillo. Alternatively, if you don’t mind a longer and much more economical journey, you can take a first class luxury bus with on board video sets and Wi-Fi from Phoenix or Tucson. While in town I did check out the local real estate scene. Not much had changed from my previous visit in June of last year. A few properties are moving, but very slowly and at prices well below the peak of 2007. Few Americans are buying and many more are trying to sell. Very few Sellers have shown a willingness to greatly reduce their asking prices. Instead, they seem determined to remain patient, a concept that seems more abundant within Mexico.  The decline in buying interest from Americans has, to some extent been partially offset by a renewed interest from Mexican nationals.  It was also interesting to see the increase in Canadians in Alamos.  Alamos Gold of Toronto, Canada owns a huge gold mining and milling operation just west of Alamos which is targeting production in excess of 150,000 ounces of gold for the year, generating gross revenues of over $200 million. Perhaps this investment in the area will create more visitors to Alamos from our northern neighbor. I initiated a discussion with a resident American of creating a Sister City relationship with Pagosa Springs. The Town of Alamos currently has a Sister City relationship with an Arizona community, but nothing with any Colorado towns. It might be a mutually beneficial relationship, given the similarities of the towns. If you think you would enjoy the wonderfully interesting culture of Old Mexico, I highly recommend you consider a visit to Alamos, and I would suggest visiting during the Festival Alfonso Ortiz Tirado in January. Be sure to book your trip early in order to obtain good local lodging.

Quite Street in Alamos at 6:30 a.m.A Quiet Street Scene in Alamos at 6:30 a.m. the day after the end of The Festival.

 

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PAGOSA SPRINGS AND ALBUQUERQUE–“What Up With That?”

Posted on February 20, 2012 by Mike

Is the Albuquerque Real Estate Market Important to Pagosa Springs?

Good question. Yes, actually, the Albuquerque economy is important to Pagosa Springs for several reasons. Historically, a large number of second home owners came to our area from Albuquerque. Today we still have a good number from Albuquerque and the Santa Fe area. Albuquerque is our closest neighbor of any real size and it has weathered the current recession relatively well. It continues to benefit from defense spending with several military installations as well as the large number of folks employed at Sandia Labs. Also, on the West Side of Albuquerque, Intel has had a major presence with several expansions and increases in employment.

So, our neighbor to the south is important to us and we benefit when their economy is doing well. I recently received a report on their real estate market from a broker I work with there. The numbers are encouraging. Though the average selling price for single family homes is down slightly, the number of transactions is up and the total dollar volume is up. Closings are up over 13% from the prior year. Also, the amount of inventory on the market in Albuquerque has declined by nearly 22% over last year. The Absorption Rate now indicates that Albuquerque has a 7 month supply, down from a 10 month supply in July of last year. These figures confirm their real estate market is improving and that will be good for Pagosa Springs. If our community, through the Town Tourism Committee, the Chamber of Commerce, the Downtown Merchants Association, Board of Realtors and Builders Association, can come up with a creative and effective marketing campaign, perhaps we can attract more affluent visitors from Albuquerque.

For many years the timeshare operators pulled visitors up from New Mexico with free golf, dinners and balloon rides in exchange for sitting though a sales presentation. Perhaps we can attract more Albuquerque visitors by communicating the unique qualities and experiences Pagosa Springs has to offer. I have confidence in the marketing creativity members of our community can come up with.

For information on real estate in the Pagosa Springs or Durango area, be sure to visit our web site- www.pagosasource.com. Also, if you would like to discuss your real estate concerns or goals, please give me a call at 970 264-7000, or, drop me an email at: MikeHeraty@frontier.net

Thanks,

Mike

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First Glimpse at 2012 and Some Insights On Bank-Owned Properties

Posted on January 22, 2012 by Mike

Initial results recorded in our local MLS indicate we are ahead of last year in the first three week of the New Year. Total closed sales volume for the first three weeks was $3,570,000 as compared to $1,928,700 for the first three weeks of 2011. There were 13 closings for 2012 compared to 9 closings for the first 21 days of last year. The initial closings for 2012 included one sale at $1,350,000 with the highest dollar sale recorded in early 2011 of $454,500. Even adjusting for the effect of the high dollar closing, the figures clearly indicate we are starting 2012 with better results than the beginning of last year.

As discussed in my earlier article on the Year End Real Estate Results posted January 2nd, challenges remain in our local economy that will continue to impact our ability to experience any sort of sustained economic recovery. Still, the early results would indicate we are off to a start that confirms a slowly improving set of real estate market statistics.

Recently I met with representatives of two of our regional banks to discuss the values and marketing of land inventory they have acquired through foreclosure. During the boom years of 2002-2007, the market absorbed land inventory of all types at a fast pace while prices appreciated beyond all expectations. It seemed back then that an investor or developer could acquire land at the then market price, wait a short period of time and resell it at a substantial profit. For the developer, by getting zoning and entitlements for future development, value could be increased exponentially.  It was within this environment that local and regional banks began to provide financing to both land developers and investors here in SW Colorado. Appraisals confirmed values by the number of Comparable Sales that were closing and by discounting the projected future cash flows that the developers projected within their business plan. Back then it was rare for a lender to require a Feasibility Study to validate the assumptions made by the borrower-developer regarding projected selling prices, market share and absorption rates. In many cases the lenders knew they could package the loans with others into collaterized mortgage ‘ (“CMO’s”) and pass the future risk on to other investors. In some cases the lenders retained a small percentage of the loan as well as the loan servicing. Additionally, they often participated the loan among other banks, and sometimes those sales or participations had buy-back provisions. In other cases the regional banks simply held the debt as portfolio loans and accepted all the risk. So long as all went well- no worries. Of course as we all have the clear vision now provided by looking in the rear view mirror, things began to unravel in the real estate world, and all did not go well.

Land inventory is presently the most over-supplied real estate category within our market. Commercial land is at the top of the list because the demand has dropped so significantly that there are few sales actually closing. This makes valuing commercial land very difficult. My objective in valuing a property for an owner is different than an appraiser. For my Sellers, typically the objective is to move the property at the best possible price, within an acceptable timeframe. In addition to reviewing the historical data, I look more closely at the current and projected future market conditions to estimate the ratio of supply and demand. It is important to know many similar properties have sold in the prior 6-12 months, as well as how many are presently on the market. I further review the properties for sale to determine how many are lender-owned, or likely to become lender-owned. Our local MLS will not provide all the details needed to properly assess current market value. A close look at the data within the County Recorder’s Office, discussions with local lenders and a review of our in-house foreclosure database provides the details which help more clearly define the market forces.

Without a sufficient number of sales closed during the prior 6-12 month period, one has to look further back in time. For our area, this still doesn’t provide much useful data, even going back another 12 months. Ultimately when end-user demand has nearly evaporated from the current market, the value of land drops to that level needed to attract purely speculative investors. These “Bottom Feeders” are the brave souls that will wade back into the swamp before it has been drained and all the alligators have exited. These are the risk takers that analyze the market carefully and decide to step in ahead the point in time the investing public sees a solid real estate recovery trend. In return for bearing a very high level of risk, they require a very high potential rate of return. They will only buy at the price they feel minimizes further downside risk. They typically diversify their investments knowing some will do really well, but some will not. In the technology world, these risk takers are known as Venture Capitalists. The name is probably equally appropriate for the high risk, early phase real estate investors.

For the banks that now own an increasing share of the vacant commercial land within our area, they have some difficult choices. In order to liquidate these assets they will likely be forced to accept considerably below what the property was last appraised at. In some instances they will have to sell below what they have written the value down to. If they choose to hold the asset waiting for the market to improve, they must bear the cost of property taxes and P.O.A. dues and be comfortable with the possibility of more downside risk. Further complicating the decision are the requirements of the bank examiners as well as their auditing firm. Taking a loss further impairs their capital and reduces their lending capacity.

Though in today’s economy a bank’s cost of capital is extremely low (think how low a rate your savings account earns today) banks do not want their lending constrained. They need to be able to make good loans when the demand is present. In order to do so, they have to maintain a certain “capital ratio” or net-worth level that is mandated by the banking regulators. When they sustain loan losses in excess of the reserves they have set aside, their capital is reduced and they must either raise capital by selling stock or other assets they have unrealized gains in, or, reluctantly, they must reduce their lending activities and reduce their total assets.

At times it is difficult to understand the decisions banks make regarding the sale of their real estate. Unlike private investors, they have auditors, banking regulators as well as shareholders to answer to. In today’s challenging economy, with financial regulations changing continuously, they have their work cut out for them. Like all of us, our regional banks want things to improve sooner rather than later.

You will find a number of interesting articles discussing the tough choices facing many of our regional banks within this magazine:

http://www.mortgageservicingnews.com/    If you would like information on any property in Southwest Coloroado, be sure to check our website: http://www.pagosasource.com/

 

 

 

 

 

 

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THANKFULLY WE HAVE GOOD SNOW AT WOLF CREEK SKI AREA

Posted on January 12, 2012 by Mike

 

Though our Wolf Creek Ski Area has the best snow in Colorado, (or nearly anywhere in the Rockies) we do need some fresh powder. The Ski Area is doing a good job grooming the runs, but without some additional snow in the next 7-10 days, it may start to get a little thin and hard packed. For those of us that live here, this year’s snow has been a bit of a disappointment, except for the great conditions during the months of October and November. Normally our base would be another 12-36 inches deep by this time in January. Wolf Creek Ski Area saw it earliest opening day this year due to some great storms that dumped an abundance of snow and temperatures that stay low up on the mountain. While I was there last weekend I spoke to several skiers that were experiencing Wolf Creek for the first time. They usually skied in Summit County, at Keystone, Breckenridge or Copper Mountain. When they looked at the snow depth up there, they decided our area was the place to ski. I met skiers from Minneapolis, Omaha, Kansas City and Orange County, California. All were impressed with our Ski Area and high praises for the mountain grooming and the good food in the Main Lodge. Hopefully those visitors will tell others and we will see more new skiers later this year and beyond. On Sunday it was College Day and Wolf Creek Ski Area had a mountain full of college students taking advantage of good skiing conditions and cheap lift tickets. Everyone seemed to be enjoying their friends and the sunny day on the slopes. This week things have quieted down a bit with a few visitors still in town on semester break and extended Christmas vacations. The restaurant owners I have spoken to seemed pleased with the volume of business they did during the Christmas holidays. As the normal seasonal business cycles work here in Pagosa Springs, everyone now has to hunker down and wait for the influx of tourists and visitors during Spring Break. The early indications are that we should see numbers improved from last year. Much depends on our weather and the snow conditions at other resort areas in the Rockies. This is historically a slow time for real estate in SW Colorado. We typically get few Buyers during ski season. Some will look during the winter and return in the early summer to get serious about owning property here. We have seen some Buyer traffic, mostly focused on the best buys available within the available inventory. We have not seem many further price reductions this winter as normally Sellers settle to wait out the winter, hoping for better selling conditions in the spring and summer. So far, the number of new foreclosure filings looks to be improving. We will wait until the end of this month to see if the backlog we have been hearing rumors about materializes. If not, it may well be that we are in fact past the worst of the market correction and the likelihood of further price erosion may be very limited.  I recently viewed a chart of each of the 50 states which categorized them as to how many homes have negative equity. Colorado looked pretty good, especially when compared to AZ, CA, FL and NV. You can click the link below to the article: http://www.kcmblog.com/2012/01/06/negative-equity-state-by-state/  If you would like to view all of the properties available within our area, be sure to visit our website: www.pagosasource.com   If you have questions or comments, drop me a line by email: MikeHeraty@frontier.net  or give me a call at 970 264-7000. Thanks for taking the time to read this.  Mike

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2011 DATA SHOWS IMPROVING REAL ESTATE MARKET- Part Two

Posted on January 4, 2012 by Mike

PART TWO:

 2011 REAL ESTATE MARKET SUMMARY 

Results for 2011 improved in most categories. 507 closings totaling $114 million in sales were recorded for the year. During 2010 there were 400 closings for a total of $87 million. The total number of transactions increased 27% during 2011. Total dollar volume was up 31% from the prior year. We saw an increase in the number of homes sold and a decline in the number of units on the market at year-end. The negative impact of foreclosure properties is beginning to lessen as well as the number of foreclosure notices filed declined from 231 to 157. The number of loan modifications recorded was only down slightly from last year, at 71. This is significantly below the 177 loan modifications recorded in 2007 at the beginning of the downturn. Land continues to experience weak demand and an oversupply of inventory.

 

Residential- All Types

For all residential property categories, (stick- built detached, condos, townhomes, duplexes, mobile and modular homes,) there were 329 units sold for the year, versus a total of 251units for 2010, an increase of 31%.

Total dollar volume for residential sales was up 24% over the prior year, ($82.8 million versus $66.8 million for 2010). Year- end inventory count for 2011 was reduced by 31.5%, with 400 Active Listings on 12/31/2011 as compared to 526 at the end of 2010.

 

Residential- Single Family Detached

A total of 252 single family homes (stick built) were sold during 2011, versus 206 units during 2010, an increase of 22.3%. Total dollar volume was $74.6 million for the year as compared to $61.5 million for 2010, an increase of 21.3%. At year-end the number of unsold homes remaining on the market declined by 27% over the prior year, (298 units vs. 378 units at the end of 2010).

Residential High-End

The upper-end of the residential market remains significantly over-supplied. There were 31 properties priced above $1 million remaining on the market at year-end.  During 2010 there were 3 sales recorded above the $1 million mark. For all of 2011 there were 8 residential sales recorded above $1 million, indicating we have about 46 month supply of high-end homes going into 2012.

Residential-Multi-Family

There were 40 condo/townhome sales closed during 2011, an increase of nearly 43% over the 28 sales recorded for 2010. The total dollar volume of $5.3 million for 2011 was up 36% for 2011 over 2010 total dollar volume of $3.9 million.

Commercial

 

 For 2011, the downtown properties formerly owned by David Brown made up the largest portion of the sales closing during the year.

As mentioned above, our firm handled the bulk sale of the BJM Property Portfolio to a Nevada company, as well as the breakup and remarketing of 22 of the 24 properties. Sold properties included the two acre site at the base of Reservoir Hill, the former Kleckner home and adjacent vacant land on 1st  Street, the three lots of the former Ampride site at the northeast corner of  Pagosa Street and 1st Street, the former Bolt property next to the Pinewood Inn, the Alley House Building (home to the Alley House Grill) and adjacent vacant tracts, the vacant sites approved for the Three Lanterns Boutique Hotel just east of Handcrafted Interiors, the Poma property next to the county courthouse, the San Juan Plaza, the Sielstad Building (new home to Pedal and Powder) and the two vacant tracts above the river on east of 6th Street.

For the year ended 12/31/2011 there was a total of 23 commercial property closings, with total dollar volume of $5.3 million, down 40% from $8.8 million in commercial property sales closed during 2010. There were a total of 23 commercial sales reported to the MLS for 2011 as compared to 21 reported in 2010.

During 2010, three major lodging properties changed hands. Pueblo Bank and Trust sold the San Juan Motel, listed at $1.9 million and selling for $1,275,000. The Pagosa Lodge, with a Listing Price of $4 million was sold for $2 million by the Nightingale family to Pagosa Lodging, LLC. Another noteworthy sale during 2010 was the Wolf Creek Run R.V. Park, developed by the late John E. and Phyllis Brown. It was sold for $1.2 million to MTTD, LLC of Eugene, Oregon. These three sales comprised $4.5 of the commercial sales total volume of $8.9 million closed during 2010. It is interesting to note that each of the sales involved financing provided by the Sellers, a sign of the continuing difficulty within the commercial lending environment.

Land

Land sales declined during 2011. Though the total number of parcels sold remained unchanged at 120, total dollar volume was down by 25% for the year, $7.3 million during 2011, as compared to $9.8 million in 2010. The inventory of land offerings at the end of 2011 increased from 871 to 936 Active Listings.

Land-35 Acre Tracts

For the year there were 9 sales recorded totaling $1.7 million. During 2010 there were 16 sales for a total of $3.7 million. At year end 91 listings remained on the market representing a 10 year supply.

Land-3-10 Acre Parcels

27 sales totaling $1.9 million were recorded for the year as compared to 22 sales totaling $2.5 million recorded during 2010. There were 183 parcels on the market at the end of the year, an 81 month supply.

Land- Small Lots (.15-2.99 Acre Home Sites)

The number of sales closed for the year remained unchanged from the prior year at 77 with $2.6 million in total sales. During 2010 sales totaled $2.7 million. 504 lots remained on the market at year-end. This represents a 78 month supply of home sites.

Conclusion

While it is true we are far from being out of the woods, the statistics indicate we are heading in a positive direction with a defined path out in front of us. A decline in available inventory, an increase in total sales, a slowdown in new foreclosures and change in ownership of a large number of downtown properties are all positive factors. In order for us to realize further improvements, we need more middle income Americans returning to our area and investing in our real estate. This requires a higher level of consumer confidence, which is today, largely a function of job creation and growth in household income. These factors will likely be slow in coming, regardless of the shape the national political landscape takes in the months ahead. In the meantime, as a community we can focus on harnessing more of the exceptional creative and intellectual capacity of our members to address the challenges that lie ahead.

 

If you have questions about any of the information presented, give me a call at 970 264-7000, or email me at:

MikeHeraty@frontier.net. You can access additional information within our website: www.pagosasource.com and on our blog site: www.southwestcoloradonews.com.

 

Thank you to all our clients and customers for your support during 2011.

Mike

 

Note: Information presented above was obtained for the CREN MLS for the Pagosa Springs Area Association of Realtors and internal data from Pagosa Source Real Estate Advisors. These sources are deemed reliable, but author does not guarantee the accuracy of the data. Some figures have been rounded.

cialis

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YEAR END FIGURES SHOW IMPROVING REAL ESTATE MARKET

Posted on January 2, 2012 by Mike

PART ONE: 

Another year is gone and the results are in the book. 2011 was a better year for the local economy, at least by most measurements. Yes, there still were too many foreclosures and too many distress sales, and many of our local businesses have continued to struggle as visiting tourists have not loosened up their spending as much as needed. Still, we have improved from where things were, especially when we compare figures from 2008-2010 to 2011.

 

There remains an abundance of commercial vacancies in town. Our firm, Pagosa RealEstate Advisors successfully closed on sales of 22 different commercial properties within the downtown and East Village area, formerly owned by BootJack Management and related entities. Nearly every property was purchased by locals or buyers that have vacation homes or ranches here in the area. Plans are being studied for the development of some of these properties in the near term and we think that is good for the entire community. These sales represent a solid vote of confidence in the long term viability of our area. The purchasers were successful business owners or professionals with significant achievements in the business world. None were first time investors, purchasing to flip the properties for a for short term profit.

Much has changed since David Brown attempted to move development forward in the East Village of Pagosa Springs and the mood and cooperative spirit among the Town Council and Administrators has improved significantly. A more sensible “pro-business”, pro-job-growth” philosophy seems to be developing. Perhaps there are some genuine regrets for having kicked the community’s former gift horse in the mouth.

With a high real rate of unemployment and the lack of much new construction over the last several years, community leaders have had to take a different approach to managing the future of our area. No doubt there will be substantial challenges ahead for the Town and the County, but I sense a stronger willingness to roll up our sleeves and do the hard work required to build towards a more sustainable and vibrant future. There is and will continue to be more controversy, whether it is related to the Big Box Retailers, the development of Reservoir Hill, county road maintenance or school facilities. I choose to believe our exceptional community will come up with solutions beyond what others might expect who believe we are nothing more than “average”. I strongly disagree with the opinion stated in the Pagosa Sun December 29th Editorial titled “A New Year in an Average Place”  http://pagosasun.com/opinion.html   I look forward to our community proving Karl Isberg is wrong in his assessment of Pagosa and its stakeholders.

Market stats will be published on this site tomorrow, January 2nd.

Many thanks to all our clients and customers for their support during 2011.

Mike

 

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WHO IS BENEFITTING FROM RECENT GAS WELL DRILLING?

Posted on December 11, 2011 by Mike

Gas Well Drilling Site Off Trujillo Road Where San Juan Flows Into Navajo Reservoir

BIG GAS WELL DRILLING PLAY IN ARCULETA COUNTY

A few days back I took a long drive down Cat Creek Road. The last time I traveled more than five miles down this road was when I was showing the Candelaria Ranch to a client from Boston, about five years ago. Not much had changed along most of the route. There are still many thousands of acres of dry grazing lands, what isn’t now part of the Southern Ute Tribal lands is mostly owned by the Gallegos, Espinosa, Pacheco and Padilla families that have been in the area for many years. It is still an area that suffers from a lack of good developed water resources. The limited amount of surface water draining through the area won’t support much crop production, nor will it provide good livestock grazing. There are a few places along the way where the creeks provide enough flow for shallow wells and some irrigation, but not many.

Decades ago, much of the land was home to thousands of sheep, but the sheep industry began to decline significantly after World War II and into the 1950’s. The loss of labor from World War II, changes in consumer preferences as well as the repeal of the National Wool Act all contributed to a substantial reduction in the size of the sheep herds grazing lands here in Southwest Colorado and across America.  Today you are more likely to see large herds of elk and mule deer where once thousands of sheep grazed, watched over by descendants of the early Spanish settlers.

The scenery is still gorgeous and interesting; with large rock outcroppings, tall ridgelines covered with Ponderosa Pines and huge gently rolling grassy parks, divided by deep arroyos from periods of heavy rain and fast runoff.

As I traveled further south I passed the Espinosa, Pacheco and Padilla family lands before reaching Pagosa Junction. It was disappointing to see the old wooden water tower along the rail siding had collapsed, and few buildings were still standing on the site of the once thriving lumber town. Apparently the last of the descendants of the families that settled and ranched in the area have left Pagosa Junction, and time and weather have taken over. (I will write more about Pagosa Junction in later articles). The San Juan River quietly flows by what is left of Pagosa Junction on its way to Navajo Reservoir.

Continuing south below the merger of Cat Creek and Trujillo Roads, the scenery begins to change drastically. The county road has been widened and evidence of a major natural gas pipeline installation is seen parallel to the road. There are lines of survey stakes along the right side of the road. Ahead a bit further on the left is a large well drilling rig and an operations yard with job site trailers and RV’s for the oilfield workers. I steer to the far right of the road to allow several large low-boy trucks to pass with their cargo of huge tanks and drilling supplies. I pass half a dozen other trucks hauling materials, equipment and supplies to the drilling site. Driving ahead another 4-5 miles I spotted another large drilling rig and passed more oilfield service trucks heading to and from the second drilling rig. I continued to Highway 151 and drove south towards Arboles, pulling off the highway to look across the lake, back towards the drilling rigs. This is a big change for the neighborhood. My later research at the courthouse confirmed the drilling activity has generated a flurry of leases for land and mineral owners in the area. Additionally, far more than the two sites I viewed have been approved for well drilling. The big players in the area are Red Willow Production Company, an affiliate of the Southern UteTribe:   www.rdpc.us  and Energen, an oil and gas exploration and production company headquartered in Alabama. www.energen.com . You can view the location of the drilling activity and permitted drill sites from this link:   http://www.eser.org/10-32n-5w-archuleta-county-colorado

What, if anything will this drilling and pipeline activity do for the coffers of Archuleta County? Will this generate any substantial taxes for our county? Given the distance from Pagosa, much is taking place outside the viewing range of most of our residents. Property owners in nearby Andrews and Piedra Park subdivisions and Arboles are watching closely. Changes in groundwater quality and quantity in the area will also become a concern as we have seen over the years in La Plata County. Perhaps more of the county property residents and owners should join in and keep and pay attention to what is developing. For information on real estate market conditions or properties available for sale, be sure to check our website:

www.pagosasource.com

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LET’S TREAT ALL OUR VISITORS LIKE GOLD!

Posted on November 21, 2011 by Mike

THE EXTRA IMPORTANCE OF GOOD CUSTOMER SERVICE IN A TOUGH ECONOMY

While visiting the Pagosa Baking Company recently I encountered a group of six Hispanic women that were ordering food and coffee at the counter. As I often do with strangers, I asked where they were from and what they were doing in Pagosa. The spokesperson for the group, speaking perfect English responded that they were all from San Antoino, Texas, in town to enjoy early season skiing and snowboarding. She went on to explain that all the women were best friends or related and that they typically take 2-3 trips together each year. This was their first visit to Pagosa Springs. I asked them what they thought of our little town. Interestingly, she said the scenery was gorgeous, the food, especially at the PBS was great, as was the skiing, but that they were treated a bit rudely on several occasions when they revealed they were from Texas. She said they experienced this unfortunate reception on two occasions, once during a visit to a local store and the other time while eating in one of our restaurants; I might add it was not the PBS, Kips, Alley House, Farrago’s, or Summit Ski and Sports, ( I always look out for the merchants in my end of town.) Anyway, I assured them that what they experienced was rare, and certainly not the attitude the majority of the folks in Pagosa Springs have towards Texans, or visitors from any other state. I went on to explain that we love our tourists and want to be sure they have a great experience while visiting our area. She warmed up a little and went on to explain that they were a bit surprised at the rough reception because they live in an area of Texas that gets a lot of outside visitors and their community really encourages that and their Chamber of Commerce helps their merchants to improve their customer service with regular workshops, speakers and training. I did everything I could to give them the best face of Pagosa I could and encouraged them to not judge us by the two bad apples they encountered.

I recall, probably 8-10 years ago that the Downtown Merchants group in Durango had a presentation by a marketing consultant that gave them the results of exit interviews with tourists in the Durango region. The single common negative content in the feedback was poor customer service and attitude. I high number of respondents commented that they were often treated by clerks and wait staff as though they were an inconvenience.  A lack of a friendly greeting and a seldom heard “thank you” at the end of a transaction were regular comments from survey respondents.  Durango then when about to promote significant changes to their customer service. They started by empowering their business owners and their employees with an understanding of the importance of delivering excellent customer service, to all the patrons of its stores, shops and restaurants. I don’t recall following up, or whether Durango did a follow up survey, but, from my experience as a regular consumer and visitor in Durango over the last five years, I would say they made substantial improvements.

Here in Pagosa, we can all learn from my brief conversation with the ladies from San Antonio as well as the experience of business owners in Durango. We are a service oriented economy, driven by tourism. Our visitors are spending discretionary dollars that they can direct anywhere they wish. There are many communities here in the Rockies and elsewhere competing for tourists. If we want to attract them and get them to return in greater numbers, we need to treat them like gold. They have the economic power to make or break our community.  If we really understand this relationship, we will all brush up on our customer service skills. There are plenty of resources available to help any business owner or conscientious employee in this area. Here are a  couple:

Inc. Magazine Article:

http://www.inc.com/guides/improve-your-companys-customer-service.html

This article is like putting your mouth over a fire hydrant and cranking the valve open!

http://www.slideshare.net/Batjaa_sh/101-ways-to-improve-customer-service

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Another Zombie Bank Bites the Dust, Part One

Posted on November 16, 2011 by Mike

COMMUNITY BANKS OF COLORADO

262 PAGOSA STREET, PAGOSA SPRINGS, CO

In one of my earlier Blog Articles last month I mentioned the Bank Ratings of a couple of our local lending institutions. Shortly after I launched that article on the Blog Site, a former member of the local lending scene was shut down and its deposits, loans and non-performing assets were transferred to another bank.

Community Banks of Colorado began lending in our area in 2001 from their office in Durango, Colorado. Eventually, during a growth period they decided they should open a branch here in Pagosa Springs, eventually opening a total of 40 banking locations.  For several years they were located on the street level of the Town Terrace Building at 262 Pagosa Street, just east of the former Victoria’s Restaurant Building. They never really had much impact in the local market and being a relatively late entrant to the real estate boom period here, they didn’t capture the best of the available lending business. When they began to grow their lending activities in our area they were competing with more established lenders, many of which had the best business tied up. Community Banks of Colorado found itself bidding for business from the riskier developers and marginal projects that were looking for construction financing in 2005-2007. Pagosa Springs, Colorado properties within Town Terrace and Aspen Village were financed by Community Banks of Colorado as well as other smaller speculative housing projects.

While things were booming here in Southwest Colorado, management of Community Banks of Colorado decided to expand further west and went on a buying binge in Central California. At the time the housing market was exploding with an abundance of new large housing tracts attracting homebuyers commuting into the San Francisco Bay Area in order to find affordable housing. It seemed as though the market would continue to grow, but shortly after moving into the area, the market started to slow down and then came to a complete stand still.

Read Part Two…

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Another Zombie Bank Bites the Dust, Part Two

Posted on November 16, 2011 by Mike

In Part One we talked about the history of Community Banks of Colorado in the Pagosa Springs market.

When things turned south in the California markets, the markets Community Banks of Colorado was in within Colorado began to slow down and suddenly their non-performing loans ballooned out of control. Initially they worked feverishly to work with their large borrowers to try to restructure loans in order to avoid taking them in foreclosure. This is often a tactic used to buy time in hopes a short term problem doesn’t extend into a long term crisis, but this time the problems grew and the timeframe expanded.

The Bank watched as its capital eroded way beyond the levels permitted by banking regulators. Fortunately for the Bank, there were so many other banks in their district that were larger and in deeper trouble that they were able to remain somewhat under the radar for a time. Community Banks of Colorado had become a Zombie Bank; a walking dead, waiting for plot to be readied at the cemetery. Eventually the bank examiners caught up with them, issuing their first written reprimand and warning letter in March of 2009. Subsequently, on February 8th of this year a “Prompt Corrective Action Directive” was issued which effectively sealed its fate. This Directive, issued by the Board of Governors of the Federal Reserve System instructs the Bank that it has 90 days to raise sufficient new capital to regain solvency, or to arrange for its sale to another solvent banking entity. Typically these Directives are extended once or twice if the regulators feel there is progress being made, or, if their current workload does not provide them adequate time to arrange a merger or liquidation of the bank.

Officials arrived at the bank facilities at closing time last Friday, without advance notice as the Federal Deposit Insurance Corporation was appointed receiver for the 40 branches of Community Bank of Colorado, including branches in Durango, Cortez, South Fork, Del Norte and Alamosa, Colorado.  A friend of mine that worked on the receivership team for FDIC related to me how they would secretly check into the towns with banks they were closing using fictitious identities one to two days ahead of the bank closures. This was one of the precautions they practiced to avoid a run on the bank by local depositors.

Bank Midwest of Kansas City, Missouri entered into a purchase and assumption agreement to assume all the deposits of Community Banks of Colorado.  The FDIC and Bank Midwest also entered into a loss share agreement on $714.2 million of the total of $1.38 billion in total assets, with FDIC estimating a total loss to the FDIC of around $224.9 million. Bank Midwest is protected against any losses sustained among the assets it agreed to assume. You can view the related FDIC press release here.

Within the pile of assets being transferred to Bank Midwest are several loans within the Aspen Village development here in Pagosa Springs, Colorado. How will the new owner of that debt deal with our struggling local economy? Will they exercise more forbearance, giving our area more time to get on more solid footing? Or, with the loan loss guarantees of the FDIC, will they move swiftly to liquidate assets and return as much cash to its coffers as quickly as possible? The borrowers and tenants of the properties involved will be watching how things unfold later this month.

It is interesting to note that on September 30, 2010, the net worth reported for Community Banks of Colorado was $82.7 million. So, it would appear then when all is said and done, according to the estimate stated by FDIC, the estimated losses of $224.9 million will be nearly three times the value held by the bank’s shareholders a year earlier. Permitting these type of Zombie Banks to continue to exist any longer than absolutely necessary seems a vast waste of resources.

For information on real estate in Southwest Colorado, be sure to visit our website: www.pagosasource.com

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