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					           COMMERCIAL REAL E ESTATE
                        BOR LLI




                                                    50
           insider
 Fall 2007 Issue number 7
                                                      Y E A R S




                                                                                                                                      www.borelli-inv.com




                                          Local Commercial Real Estate
                                          Market Largely Unaffected
                                          by Residential Difficulties

                                                                                                                        BORELLI
 Vacancy Rates and Late Loan                      in commercial real estate vacancy rates in            Silicon Valley Commercial Real
 Payments Among Lowest in 5 Years;                Silicon Valley, according to a Grubb & Ellis          Estate Market at a Glance
                                                  report. Vacancy rates for the Valley as a
 Tighter Money Creating Some                      whole have broken through the 10 percent            • 5.67 – 6.76 million sq. ft.: range
 Challenges                                       threshold for the first time in several years,
                                                                                                                  Y     A R S
                                                                                                        of 2006 qrtly.Egross absorption1
                                                  spurring the construction of new office             • 5.71 million sq. ft.: 1st qtr. 2007
 Unless you have been stranded on a desert
                                                  space. In the meantime, according to the              gross absorption1
 island lately, you are no doubt aware of the
                                                  same Grubb & Ellis report, lease rates for
 turmoil that has been created in the resid-                                                          • $2.2 billion of venture capital
                                                  premium Class A commercial space rose
 ential real estate market by the relatively                                                            invested in 1st qtr. 20072
                                                  nearly 6 percent in the most recent quarter,
 large numbers of nonprime mortgages
                                                  while lease rates for Class B space have            • 21,500 new jobs added in
 that have defaulted over the past year.
                                                  increased approximately 3 percent.                    12 mos. ended 3/30/071
 The difficulties have impacted home loan
 borrowers, lending institutions, investors       Clearly, this is not the case for residential       • 4.4% unemployment rate in 3/07,
 in subprime mortgage securities, and the         property, where recent defaults have driven           down from 4.6% in 2/071
 various financial markets themselves. But        home prices considerably lower, and reduced
 what has remained largely untouched to-          loan availability as lenders try to increase liq-   • .03% delinquency on comml.
 date has been commercial real estate. Even       uidity as quickly as possible.                        real estate loans, lowest in 5 yrs.3
 with the recent announcement that the deal                                                           • Less than 10% vacancy rate on
                                                  “From our vantage point, the commercial
 to buy Carl Berg’s $1.8 billion Mission West                                                           comml. real estate4
                                                  and residential real estate markets are apples
 Properties’ portfolio of commercial real
                                                  and oranges,” said Tom Purtell, chief operat-       • 6% increase in rental rates on
 estate had fallen through due to the inability
                                                  ing officer of Borelli Investment Company.            Class A office space4
 of the prospective buyer to secure financing,
                                                  “Occupancy rates on the properties we
 the commercial real estate market remains                                                            • 3% increase in rental rates on
                                                  manage have remained historically strong in
 strong and largely untroubled.                                                                         Class B office space4
                                                  in both up and down markets for more than
 “Thus far, the fallout from the subprime         25 years. This most recent turmoil is primarily       Sources
 residential loan crisis appears to have had      impacting only the residential side of the            1 Colliers International 2007 1st Quarter Report
 a limited effect on the local commercial         industry. For our properties, lease rates are         2 Dow Jones Venture Capital
                                                                                                        3 California Mortgage Banker Association
 real estate market,” said Edwin K.S. Ryu,        still rising, our commercial condominiums are         4 Grubb & Ellis
 principal and co-founder of Legacy Wealth        selling well, and there’s very little weakness.”
 Advisors, LLC, a San Jose-based investment
 advisory and wealth management firm.             What It All Means
                                                  While taking a wait-and-see approach or
 Underpinnings Still Strong                       making low offers on desired properties may
 In examining the commercial real estate          be a viable approach in the current residen-
 market, virtually every pillar supporting        tial real estate market, it is not likely to be a
 the industry in Silicon Valley remains solid.    successful strategy in commercial real estate
                                                  in Silicon Valley, according to Ryu—who
• Recent earnings reports by Silicon Valley
                                                  was recently selected as one of the top 150
  leaders such as Cisco Systems and Apple
                                                  financial advisors to doctors in the nation
  have been almost uniformly positive.
                                                  by Medical Economics magazine.
• Unemployment rates in the Valley have
                                                  “Value comes from scarcity, and there is only
  been trending steadily downward, even
                                                  so much commercial real estate available
  as job creation rates have been rising.
                                                  here in Silicon Valley, perhaps the choicest
• The conversion of older R&D and industrial      place in the world to do business,” Ryu
  space into residential space in large areas     remarked. “There will continue to be cycles,
  of the Valley coupled with comparatively        which we need to understand and respect.
  little new construction the past few years      But in the long run, I view the overall market
  has resulted in a shrinking supply of           as a bullish one.”
  commercial space.
                                                  For further details or to review the latest
Increasing demand in the face of a decreasing     commercial real estate information, contact
supply has led to significant declines            Tom Purtell at (408) 453-4700, or e-mail
                                                  tom@borelli-inv.com.
                                  A members-only club for your car. And you.


Borelli Investment Company Begins Presales                                                           separately metered, and individually climate-
                                                                                                     controlled condos are available. Borelli
At Club Auto Sport in North San Jose                                                                 Investment Company, the developer of the
                                                                                                     project, is also offering turnkey units with
Innovative Concept Offers Commercial Condominiums                                                    standard or customized interiors.
with Concierge Services and an Exclusive Club for                                                    Because owners are purchasing space—not
Car Enthusiasts                                                                                      leasing it—they receive a number of benefits:
                                                                                                     • Quick, but secure 24x7 access to vehicles
Some people who possess a true passion for        view some of the club members’ most                • Control over occupancy costs
auto racing or a love of vintage automobiles      notable cars on display or to cheer on their
                                                                                                     • Ability to customize the space in any
become serious car collectors. In the past,       favorite drivers and
                                                                                                       way desired, subject to Club Auto Sport
these growing collections have in turn            race teams.
created growing problems for their owners.                                                             bylaws
                                                  One of the biggest benefits of Club Auto
Where does one store all these cars?                                                                 • Potential long-term appreciation
                                                  Sport is the wide variety of services available
Stashing autos at friends’ homes or in                                                               “Plus, if the space is being purchased as
                                                  to save time. Need to have one of your cars
parking garages typically proves to be an                                                            part of a business, owners enjoy significant
                                                  detailed, taken in for service, or filled up
impractical and expensive proposition.                                                               tax write-offs,” Borelli commented. “These
                                                  before you come to pick it up? Want your
Now, there is Club Auto Sport—Silicon             RV cleaned out, the tanks serviced, the refrig-    benefits include cost segregation, the
Valley’s first purpose-built commercial           erator turned on, and the fuel and oil             $112,000 Section 179 tax incentive, interest
condominium facility designed for racing          checked so it’s ready to go? Our “arrive-and-      deductions, and other write-offs.”
and car enthusiasts—with a full line of time-     drive” services are for you. Plus, owners can      Construction won’t start until early fall, with
saving concierge services and an exclusive        have their cars delivered to their homes           the first units available in late spring of 2008.
club for owners.                                  whenever they wish. All they have to do is call    However, presales are already underway, with
                                                  the Club Auto Sport concierge to arrange it.       Phase I approximately 30 percent sold out.
The two-building, 120,000 square foot
complex at 521 Charcot Avenue in North            Club Auto Sport’s banquet and hospitality          Club Auto Sport is truly a new concept
San Jose—which is being developed by a            facilities will be some of the best in the area,   in commercial condominiums, with Borelli
partnership led by avid car collectors and        making the club ideal for charitable, political,   Investment Company, a trendsetter in
vintage racecar owners John Davis, Ralph          corporate, or social gatherings of all kinds.      business condominiums, guiding the
Borelli and long-time local racecar driver, IRL   Ample onsite parking will accommodate up           development.
and CART team owner, John Della Penna—            to 100 cars outside the security gates for visi-
will be undergoing $15 million in renova-         tors. The complex’s central location in the        “People who are passionate about auto racing
tions. When completed, it will feature a clean    Golden Triangle makes it easily accessible for     and car collecting have had few options in
high-tech design, 10,000 square foot state-       owners and invited guests via I-880 or Hwy         the past,” remarked John Della Penna, of
of-the-art showroom and lounge area for           101 or 237, or even flying in to Mineta San        Della Penna Motor Sports. “Club Auto
watching televised motor sports events,           Jose International Airport—five minutes away.      Sport is a unique place for cars—and their
a large conference room with audio and                                                               owners.”
                                                  “Club members will be able to participate
video conferencing, banquet and hospitality                                                          For more information about Club Auto Sport,
                                                  in organized automobile and racing-related
facilities, sophisticated electronic security                                                        contact Ralph Borelli at (408) 453-4700, or
                                                  activities,” noted John Davis, founder of
with CCTV inside and out, and automated                                                              e-mail ralph@borelli-inv.com.
                                                  Air Systems, Inc. and president of Davis
roll-up truck doors hidden from the street.
                                                  Motorsports. “These could include instruc-
“We think this is an exciting concept that        tional track driving days, touring events,
will appeal to the many successful business       celebrity guest appearances, dinners, or
people in and around Silicon Valley who have      high-profile charity events.”
become car collectors,” said Ralph Borelli,
CEO of Borelli Investment Company. “Club          Benefits of Condominium Ownership
Auto Sport provides safekeeping for an            Buyers at the Club Auto Sport condominium
owner’s cars, together with unique service        complex can purchase as much or as little
and social components. There really is            space as needed, with units from 800 to
nothing like it in Northern California.”          10,000 square feet. The smallest units will
                                                  accommodate up to 4 cars, and more if
The Place for Auto Enthusiasts                    stacking systems are used. All units have
Club Auto Sport promises to be a gathering        full-height demising walls, with built-in
place for fans of racing’s top Formula One,       ventilation systems. The complex meets the
IRL, Champ Car, NASCAR, and other                 strictest building codes, including the latest
events—as well as dedicated car collectors.       fire protection systems. Owner amenities can
Condo owners will be able to store and care       include private bathrooms (in addition to the
for their cars in the purpose-built units, get-   building’s common restrooms with showers),
ting together in the showroom or lounge to        kitchens, offices, and more. Utilities are
                                  Borelli’s Exclusive Lease vs. Buy Calculator


Borelli’s Exclusive Lease vs. Buy Calculator                                                      • Enter the required information. This can
                                                                                                    include information about your current
Right on the Money with Buyers                                                                      lease including size of your space, current
                                                                                                    rent, operating expenses, and scheduled
                                                                                                    rent increases; the purchase price, closing
Perhaps you’ve heard about one of the           Introduced in May, the Lease vs. Buy                costs, and mortgage information for your
hottest trends in commercial real estate:       Calculator is available to anyone considering       proposed purchase; association dues and
office condominiums. And perhaps you’ve         the purchase of an office condominium.              any other costs; your state and federal tax
wondered whether buying an office condo-        You can easily do it yourself from the              rates; and estimated annual appreciation.
minium might be the right move for you and      comfort of your home or office, or one of
your business. But how can you know for         our professional sales representatives will       • Then, click “Calculate”.
sure? How can you really “run the numbers”      be happy to walk through it with you.             In seconds, you’ll have a real set of numbers
and compare buying versus continuing to                                                           based on your specific situation that will help
                                                “Deciding to buy rather than lease office
lease your office space?                                                                          you make a more intelligent decision about
                                                space is a major financial decision,” said
Now there’s a fast, easy way to make a          Tom Purtell, chief operating officer of Borelli   whether to lease or buy your office space.
“real-world” comparison for your specific       Investment Company. “We wanted to ensure          “With summer coming to an end, now is the
situation with Borelli Investment Company’s     that our clients had all the tools they needed    time to start doing your year-end tax plan-
exclusive online Lease vs. Buy Calculator.      to make a well-informed choice. The Lease         ning,” Purtell noted. “If you want to be able
                                                vs. Buy Calculator has been very well-            to make any substantial moves to reduce
                                                received since we introduced it last spring.”     your tax liability for 2007, there’s no time to
                                                To use the Lease vs. Buy Calculator, all          waste. Purchasing property is one of the best
                                                you have to do is:                                ways to reduce taxes, while acquiring an
                                                                                                  asset that historically has appreciated over
                                                • Go to www.borelli-inv.com
                                                                                                  time—in good markets and bad.”
                                                • Click on the icon for “Lease vs. Buy? —
                                                                                                  For more information about the Borelli
                                                  Run the numbers”
                                                                                                  Lease vs. Buy Calculator, contact your
                                                • Select the Borelli office condominium           Borelli sales representative or Tom Purtell
                                                  property you’re interested in                   by calling (408) 453-4700, or you can
                                                                                                  e-mail tom@borelli-inv.com.
                                                • Select a specific unit for sale




           Borelli Property Management Services Extend Beyond Silicon Valley

Borelli Investment Company is well-known for its high-quality property
management services. Borelli’s professional property managers work closely
with owners to set rents and efficiently lease space, maintain and improve
properties, respond to tenant requests, and keep the books in good order.
                                                                                                                                Borelli now manages
Clients know they can count on high occupancy rates and proper positioning                                                      multiple properties in
to maintain value over time in up markets and down.                                                                             Tracy, Turlock, Stockton,
                                                                                                                                Elk Grove, and West
                                                                                                                                Sacramento.
What you may not be aware of is that Borelli    to minimize risk, reduce operating expenses,
Investment Company provides its property        and increase the long-term asset value
management services not only here in Silicon    of properties located up and down the
Valley, but also in other markets throughout    Central Valley.”
Northern California.
                                                A good example of the benefits Borelli
A Growing Central Valley Portfolio              provides can be found at the 250,000
                                                square foot Countryside Plaza retail center
One of Borelli’s hottest growth areas in
                                                in Turlock. When Borelli was selected as
recent times has been the Central Valley.
                                                property manager in 2004, Countryside Plaza
Borelli now manages multiple properties in                                                        relationships or negatively impacting
                                                had not increased its lease rates in years.
Tracy, Turlock, Stockton, Elk Grove, and West                                                     occupancy. We have also begun a program
                                                The prior owner had been hesitant to do so,
Sacramento—among other Central Valley                                                             of planned improvements to ensure that
                                                because he was skeptical that rates could
towns and cities. The holdings include retail                                                     the center is always well-maintained and
                                                be raised without causing long-time tenants
centers, a variety of office buildings, and                                                       modernized.”
                                                to move out. Borelli managed an increase
industrial properties.
                                                in rents to market levels and maintained          Property Management Everywhere
“California’s Central Valley is experiencing    virtually 100 percent occupancy during the
                                                                                                  Wherever you decide to buy, contact
rapid growth,” said Buddy R. Parsons,           adjustment period.
                                                                                                  Borelli if you need professional property
president of Borelli Investment Company.
                                                “It simply didn’t make sense to leave rental      management. For more information about
“Many of our clients are interested in taking
                                                rates unchanged,” Parsons explained. “By          Borelli’s professional property management
advantage of the attractive ownership oppor-
                                                acting on the owner’s behalf, we were able        services and pricing that pays for itself,
tunities there. Once they have purchased a
                                                to negotiate appropriate increases for ten-       contact Buddy Parsons at (408) 453-4700,
property, they need to work with someone
                                                ants without hurting the owner’s established      or e-mail buddy@borelli-inv.com.
they trust to manage it. We have the ability
l

                                                                                  Staff Spotlight


                                                                        Lynn Hawkins
                                                                        Executive Assistant and Sales Associate

                                                                        Background: Brought 22 years of experience in commercial real estate and commercial
                                                                        mortgage banking to her position at Borelli Investment Company.
                                                                        Expertise included commercial brokerage and sales in the East and Southeast, including loan
                                                                        originations, underwriting, processing, servicing, and loan closings. As group vice president,
                                                                        managed loan portfolios as large as $6.5 billion encompassing nearly all 50 states. Born
                                                                        and raised in Baltimore, MD. Attended the University of Maryland with a concentration in
                                                                        computer science and business management.
        Meet Lynn Hawkins, executive assistant                          Held a broker's license in GA, a sales license in VA, and is currently a licensed real estate
        and sales associate for Borelli Investment                      salesperson in CA. Is active in numerous industry organizations including BOMA, NAR,
                                                                        the Mortgage Bankers Association, the National Association of Female Executives, and
        Company’s brokerage, special projects,                          the Reebok Professional Instructor Alliance.
        and development group. Since joining
                                                                        Responsibilities: Handles every condominium transaction, from purchase contracting
        Borelli in 2002, Lynn has worked side-                          through escrow closings. At the Capitol Auto Mall, moves each deal from lease LOI
        by-side with Larry Bengiveno in the                             to signing.

        marketing and sales of nearly 100 Borelli                       Business Philosophy: “I am committed to achieving a win-win in every deal I touch.
        business condominiums, handling re-sale                         Meeting the client’s objectives and expectations, and staying within the guidelines and
                                                                        goals of the company, can be achieved through clear communication and a high level
        listings and property management at                             of professionalism.”
        these projects, as well as the marketing
                                                                        Secret to Success: “Lynn focuses on providing personalized service and assistance to our
        and leasing of space at the Capitol Auto                        clients, from the moment they are going into contract until the close of escrow,” said
        Mall Plaza retail center.                                       Tom Purtell, Borelli Investment Company’s chief operating officer. “In staying connected
                                                                        throughout the process, Lynn always strives for the highest in customer satisfaction.”




        Inside this Issue




        Local Commercial Real                                Introducing Club Auto                    Borelli’s Exclusive                    Property Management
        Estate Largely Unaffected                            Sport, a members-only                    Lease vs. Buy Calculator               Services Extend to
        by Residential Difficulties                          club for your car.                                                              Central Valley
                                                             And you.




                                            Borelli Investment Company         Phone: 408-453-4700                                                                  PRSRT STD
                                            2051 Junction Avenue, Suite 100    Fax 408-453-5636                                                                    U.S. Postage
                                            San Jose, CA 95131-2100            info@borelli-inv.com                                                                     PAID
                                                                                                                                                                   San Jose, CA
                                                                                                                                                                  Permit No. 1513

        Borelli Investment Company has provided a full range of
        commercial real estate services to clients in Northern and
        Central California for 50 years. We provide services for:

    •   Property Management
    •   Sales & Leasing
    •   Land Sales and Repositioning
    •   Investment
    •   Asset Management
    •   Property Development
    •   Construction Management
    •   Court-Appointed Receiverships
               BORELLI
    •   Prime Syndicated Investment Opportunities

        More information about Borelli Investment Company’s
        servicesYmay beSobtained by calling (408) 453-4700 or
                  E A R
        visiting www.borelli-inv.com.

				
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