Hungry For a Tasty Deli Opportunity

If you (or a client) have a taste for the deli business, here’s an exciting new recipe for success. Don’t lease your space—buy it.

Delicatessens often face high labor costs and narrow margins, making it critical to manage expenses efficiently. One of a deli owner’s largest expenses is occupancy costs.

Now, at Junction Office Center, 2051 Junction Avenue in San Jose, you can purchase space for your deli—and lock-in your occupancy costs, while enjoying the significant tax advantages and other benefits of property ownership.

• High-quality, 1,286 sq. ft. facility
• Exclusive access to 400 sq. ft. outdoor dining area
• Only deli in 52 unit, 77,400 sq. ft. office complex—for built-in clientele
• Street signage provided
• Ideal Golden Triangle location—56,000 employees within 3 miles and 220,000 employees within 5 miles
• Plumbing and electrical infrastructure in place
• Plenty of customer parking
• Turnkey plan available

BIC-015 fund in conjunction with Aster Avenue Associates raises $10 million; Sunnyvale townhome project now underway

Opportunities are often fleeting, but this one was particularly short-lived.  Borelli Investment Company raised $10 million in only one week for its latest investment fund—BIC-015—offered in conjunction with Aster Avenue Associates.  Investors snapped up the $100,000 shares, which are projected to pay an annual return of 12 percent over the expected 18- to 24-month holding period.

With the money for the project now raised, KB Home—California’s largest builder of new homes and one of the nation’s top five—has begun construction of a community of 80 townhomes in a close-in location near Lawrence Expressway and Monroe in the heart of Sunnyvale. The townhomes will put residents close to high-tech jobs and near major transportation arteries, in addition to CalTrain. KB Home plans to price the townhomes toward the affordable end of the spectrum for Silicon Valley.

“Affordable housing remains critical for Silicon Valley’s vitality,” said Ralph N. Borelli.  “KB Home recognized that, and so did the investors who bought into the fund. We continue to look for other projects that make economic sense as the target vehicles for future investment funds.”

Interested parties who would like more information about the recently closed fund, or who would like to inquire about future investment opportunities, can reach Ralph Borelli at (408) 453-4700,  or e-mail ralph@borelli.com.

This is not an offer to sell, nor a solicitation of an offer to buy shares in any current or future investment funds offered by Borelli Investment Company. Investment shares in BIC funds are offered only in conjunction with the offering prospectus. Please read carefully before you make any investment decision, and consult with an investment professional for advice and guidance regarding your personal financial situation.

When It Comes to Leasing… The Little Things Borelli Does Mean a Lot

The executive vice president of a small technology company based in San Diego hops a flight to San Jose. An hour and a half later, he’s in his rented car leaving the airport. His mission: find space for a small secondary location in Silicon Valley. Where does he turn?

His specific interests and requirements create a challenge for many brokers:

• He is looking for less than 1,500 square feet of space. In fact, he would prefer it to be no more than 500 square feet to start.
• If he can find an office in the 500 square foot range, he would like a flexible lease that will enable him to expand his space quickly and cost-efficiently if the location “takes off”.
• Because there’s no guarantee that this secondary location will be successful, he needs a short-term lease so he doesn’t get stuck with having to sublease the space.
• He wants to be able to sign the papers and get the office set up within a week, when the regional manager will be joining the company.

“Honestly, there aren’t many brokers who would work this small space requirement on such short notice,” said Buddy Parsons, senior vice president-asset management for Borelli Investment Company. “We are geared to handle any type of space requirement, regardless of the size—big or small.”

Borelli Investment Company provides real estate services that go far beyond the ordinary, and its leasing services are tailored to companies with smaller space requirements and for which little things—such as added flexibility and responsiveness—mean a lot.

Smaller Spaces, Shorter Leases

One of Borelli’s specialties is serving emerging growth companies and start-ups. Because of this first-hand experience over the years, Borelli Investment Company’s team of talented agents and brokers has gained a true understanding of what smaller companies need to succeed.

To start, Borelli has one of the largest inventories of smaller office and industrial spaces in Silicon Valley, according to Parsons.

• A high percentage of Borelli’s inventory ranges from 1,200 square feet to 6,000 square feet. Often, Borelli has an array of options within the same park, so if a client outgrows a smaller space within a year or two, he or she can move to a larger space within the park and won’t have to undergo a major relocation.
• Borelli has a surprising number of spaces under 1,000 square feet, with some as small as 300 square feet for one- or two-person businesses. This makes Borelli the ideal choice for out-of-the-area companies looking to start a secondary office in Silicon Valley, or for start-up businesses that need a modest space to lease.

In addition to smaller spaces, Borelli is also willing to work with clients on short-term leases.

“While we obviously prefer multiple-year leases, we recognize fast-growing companies have more difficulty committing for extended periods of time,” Parsons remarked. “As a result, we’ll agree to leases as short as one year. We’ll also work with a client who outgrows a multiple-year lease within the first year, and have been known to terminate a lease obligation if the client agrees to move to a larger space within the same business park.”

Creative Leasing Alternatives

Sometimes, one of the biggest challenges to completing a lease is the business’ or individual’s credit history. Many new or emerging companies—such as those that have just signed incorporation papers or home businesses that suddenly need office space due to the addition of employees—lack any credit history.

Borelli has a number of creative solutions for meeting a building owner’s credit requirements, including additional security deposits, prepaid rent, or a personal guaranty. Borelli is always willing to work creatively with a client to help that client get into a lease.

Local Knowledge and Improved Responsiveness

In today’s fast-paced business world, it is not uncommon to have a client fly into town or call Borelli with a need for business space with a few days. Very few brokers or building owners can get a company into the right space and handle all the paperwork within 48 hours. Borelli has done that many times for its clients.

“We have an outstanding group of agents and brokers ready to respond,” explained Parsons. “Lock boxes are on-site at nearly every property we represent, so in the rare case we can’t tour a client through a vacant space, that client can gain quick access himself or herself.”

One of the keys to Borelli’s responsiveness is superior knowledge of its managed properties, according to Parsons.

“For example, we may have a client who has a special leasing requirement, such as power, HVAC, or specific building improvements,” he said. “Because we have managed and leased many of our properties for years, our people can match a given leasing requirement to a particular property. Our owners also empower us as decision-makers, so we can answer questions such as ‘Can I add an extra door here or install a power outlet on that wall?’ without lengthy delays.”

In addition, Borelli is highly responsive when it comes to maintenance or other requests once a business has occupied its space. Landport, a web-based client support system, enables tenants to submit service requests online, quickly and easily. Borelli property managers and field personnel are notified immediately via cell phone, pager, or PDA. Landport even lets tenants track the status of a request online until it is completed.

Of course, Borelli offers the essential qualities every client is looking for in all of its properties:

• Competitive pricing
• Immediate occupancy
• Flexible terms
• Large and varied inventory

But when it comes to specific experience, market knowledge, and willingness to go beyond the ordinary to accommodate clients with special needs, it’s the little things Borelli does that make a BIG difference—whether a client’s space requirements are large or small.

For more information about Borelli Investment Company’s leasing services or its current inventory of space, contact Buddy Parsons at (408) 453-4700, or e-mail buddy@borelli.com.

15-Year Perspective: Resale Value of Borelli’s Commercial Condos Rises Up to 18% Annually

Commercial condominiums are one of the hottest trends in real estate today. In a commercial condominium transaction, rather than leasing space, a business buys one or more units. That business then enjoys all the benefits of property ownership, such as:

• Tax deductions, including IRC Section 179 write-offs of up to $112,000 and accelerated depreciation through the cost segregation accounting method
• Loan interest deductions
• The ability to lock-in occupancy costs
• Equity buildup plus potential long-term appreciation

The smaller size of commercial condominium transactions—for example, purchasing a single unit of perhaps 1,000 to 3,000 square feet rather than an entire building—is what has driven the hot sales trend. This puts commercial condos within the reach of almost any business or professional firm.

In addition to creating a “forced savings” plan for the owner of a small business, one of the big attractions of commercial condos is undoubtedly the prospect of owning an asset that will appreciate over time, and can be used for retirement or to pass on to family members. As a leader in the commercial condominium business—both as a developer and as a reseller—Borelli Investment Company has gained a unique 15-year perspective on how commercial condominium values have increased over the years. And in short, the answer is—very well.

Better Than Expected Return on Investment

Many commercial condo buyers are initially attracted by the equity buildup and tax benefits. Instead of “throwing away” thousands of dollars on rent, payments increase the equity in a condo property, and enable the business to write off the payments against taxes. When creating a “lease vs. buy” analysis for the prospective buyer, Borelli Investment Company has been very conservative when it comes to appreciation.

Run your own numbers using our on-line lease vs. buy calculator. Use Borelli Investment Company’s exclusive Lease vs. Buy Calculator to do a personal analysis of how much money you can save when buying an office condominium compared to leasing space. Plug in actual numbers. Get the answer in seconds.

“We have typically used a figure of two percent appreciation annually,” said Ralph Borelli. “This was based on a general historical model for Silicon Valley commercial real estate. Recently, we decided to conduct a more specific study of our own.”

Over the years, Borelli Investment Company has developed a number of commercial condominium properties—both conversions of existing properties and construction of new buildings. More than 150 units have been sold at the three complex listed below, and at Borelli’s newest project—Junction Office Center (first sale, December 2005). Many units have changed hands at least once since the original sale. Based on an in-depth analysis of current resales at our previously developed commercial condos, Borelli calculated the following rates of appreciation (see table for detail):

• De La Cruz Commercial Condominiums—first sale, January 1992: 9% annually
• Ringwood Business Center—first sale, June 2004: 18% annually
• AirTech Office Condominiums—first sale, December 2004: 15% annually

“Those are remarkable figures,” Borelli noted. “With a wealth of history on De La Cruz, an owner who bought in 1992 would have enjoyed nine percent annual appreciation, 4 1/2 times what we have been using in our analysis for buyers. And the recent hot market for commercial condos seems to have resulted in even higher value increases at our newer complexes.”

Of course, past returns do not guarantee future results, and Borelli Investment Company encourages all prospective buyers to talk with their advisors. Borelli currently has new office condominium units available at just two complexes: AirTech Office Condominiums (only two units remaining) and Junction Office Center (nearly 70 sold or occupied).

It All Adds Up

To further assist potential buyers, Borelli Investment Company has created a powerful, online Lease vs. Buy Calculator. This exclusive tool enables buyers to enter a variety of actual estimated figures for their current leased space, projected price per square foot, potential down payment, loan sizes and rates, tax rates, and more for a specific unit or units. Then, the Calculator draws upon its detailed data to provide “real” calculations in minutes—based upon the various scenarios—so buyers will know precisely where they stand.

“On virtually every projection, buying comes out ahead of leasing on an after-tax basis,” stated Borelli. “With these figures at their fingertips, buyers can make better decisions.”

For more information about Borelli’s Junction Office Condominiums, contact Larry Bengiveno larry@borelli.com or Monte Pasquinelli about Airtech Office Condos monte@borelli.com. Or call (408) 453-4700.

Race fans can enjoy the ride of a lifetime in a historical NASCAR car, and help in the drive to detect cancer at its earliest, most curable stages.

San Jose, Calif., February 28, 2007 — If you’ve ever dreamed of seeing the checkered flag wave as you flash across the finish line in an auto race, here’s your chance. The Historic Stock Car Racing Series (HSCRS)-an organization dedicated to the restoration, preservation, and continued competition of former NASCAR stock cars-is offering a limited number of rides to donors in the HSCRS Ride Of Your Life.

The 10-lap race will be held on Saturday morning, July 28th as part of the San José Grand Prix weekend on the same 1.44 mile circuit the Champ Cars run on in downtownSan Jose. Historic NASCAR stock cars that were originally driven by leading drivers such as Jeff Gordon and Richard Petty will reach top speeds of 140 mph or more on the same course the San José Grand Prix uses. And the riders in the HSCRS Ride Of Your Life will be right there in the passenger seat, taking it all in from a participant’s point-of-view.

To ride in one of these powerful and storied NASCAR stock cars, interested individuals must offer to contribute a minimum of $3,500 through HSCRS to San José Grand Prix charity Canary Foundation, which provides needed funding to researchers on the frontlines of cancer detection and prevention. The highest contributors will be chosen by June 1st for the limited number of HSCRS Ride Of Your Life seats available.

“This is a true win-win proposition,” said John Davis, HSCRS President. “Donors get a once-in-a-lifetime opportunity to experience the thrill of a stock car race first-hand. At the same time, their contribution can help Canary Foundation make significant progress on ways to detect cancer at its earliest, most curable stages.”

Among the cars that will be accepting riders are:

• #24 DuPont 1993 Jeff Gordon Chevrolet
• #43 STP 1992 Richard PettyPontiacGrand Prix
• #22 Maxwell House 1991 Ford Thunderbird, the 1992 Daytona 500 pole sitter

“We are passionate about restoring, preserving, and racing these cars in authentic and historic ways,” explained Ralph Borelli. “But we are equally passionate about helping Canary Foundation in its mission to take on cancer at its root-when it can be dealt with most effectively. The HSCRS Ride Of Your Life is one way car owners and the riders with the winning contributions can give to this important cause.”

Last year, the San José Grand Prix and related events such as the HSCRS Ride Of Your Life raised a total of more than $1 million for Canary Foundation. Among other projects, this has helped fund researchers working toward a standardized family of biomarker signatures for more effective and accurate detection of all forms of cancer.

“I think many of our extended families have been touched by cancer at some point,” saidDavis. “The HSCRS Ride Of Your Life says it all-contributors can enjoy a once-in-a-lifetime ride, and at the same time, contribute to what hopefully will become significant progress in the detection and prevention of cancer within their lifetimes.”

About HSCRS
The Historic Stock Car Racing Series is committed to the restoration and preservation of authentic and historical NASCAR stock cars, while providing for continued competition in a safe and entertaining environment. New members who share the group’s mission and goals are encouraged to join. More information about HSCRS may be obtained by calling (408) 280-0285, or visiting www.hscrs.com.

About the San José Grand Prix
Now in its third year, the San José Grand Prix has become an institution in the Bay Area. It will be the tenth stop on the 2007 Champ Car World Series schedule. The series features some of the greatest race car drivers in the world, competing in the most exciting series in the world. The three-day festival—which includes concerts, interactive displays, a family fun area, and many events for the race’s charity, Canary Foundation—is expected to generate a significant economic benefit for Northern California’s largest city. For more information about the race and its related activities, visit www.sanjosegrandprix.com.

About Borelli Racing and Borelli Investment Company
Ralph Borelli is the founder of Borelli Racing, and has been a part of Borelli Investment Company—founded by his father, Nelo—for more than 33 years. Borelli Investment Company is one of the oldest commercial real estate firms in the Santa Clara Valley, providing a full range of commercial real estate services—from development and construction management to land sales and consulting for sales and leasing. More information about Borelli Investment Company’s services may be obtained by calling (408) 453-4700, or visiting www.borelli.com.

Contact
John Davis, President
Historic Stock Car Racing Series (HSCRS)
381A Stockton Avenue
San Jose, CA 95126
Ph: 408.280.0285
Fax: 408.280.0868
E-mail: john@tmfcinc.com
http://www.hscrs.com

HSCRS Ride Of Your Life Gets Fans into the Race at San Jose Grand Prix Race fans can enjoy the ride of a lifetime in a historical NASCAR car, and help in the drive to detect cancer at its earliest, most curable stages.

San Jose, Calif., February 28, 2007 — If you’ve ever dreamed of seeing the checkered flag wave as you flash across the finish line in an auto race, here’s your chance.  The Historic Stock Car Racing Series (HSCRS)-an organization dedicated to the restoration, preservation, and continued competition of former NASCAR stock cars-is offering a limited number of rides to donors in the HSCRS Ride Of Your Life.

The 10-lap race will be held on Saturday morning, July 28th as part of the San José Grand Prix weekend on the same 1.44 mile circuit the Champ Cars run on in downtown San Jose.  Historic NASCAR stock cars that were originally driven by leading drivers such as Jeff Gordon and Richard Petty will reach top speeds of 140 mph or more on the same course the San José Grand Prix uses.  And the riders in the HSCRS Ride Of Your Life will be right there in the passenger seat, taking it all in from a participant’s point-of-view.

To ride in one of these powerful and storied NASCAR stock cars, interested individuals must offer to contribute a minimum of $3,500 through HSCRS to San José Grand Prix charity Canary Foundation, which provides needed funding to researchers on the frontlines of cancer detection and prevention.  The highest contributors will be chosen by June 1st for the limited number of HSCRS Ride Of Your Life seats available.

“This is a true win-win proposition,” said John Davis, HSCRS President.  “Donors get a once-in-a-lifetime opportunity to experience the thrill of a stock car race first-hand.  At the same time, their contribution can help Canary Foundation make significant progress on ways to detect cancer at its earliest, most curable stages.”

Among the cars that will be accepting riders are:

• #24 DuPont 1993 Jeff Gordon Chevrolet
• #43 STP 1992 Richard Petty Pontiac Grand Prix
• #22 Maxwell House 1991 Ford Thunderbird, the 1992 Daytona 500 pole sitter

“We are passionate about restoring, preserving, and racing these cars in authentic and historic ways,” explained Ralph Borelli.  “But we are equally passionate about helping Canary Foundation in its mission to take on cancer at its root-when it can be dealt with most effectively.  The HSCRS Ride Of Your Life is one way car owners and the riders with the winning contributions can give to this important cause.”

Last year, the San José Grand Prix and related events such as the HSCRS Ride Of Your Life raised a total of more than $1 million for Canary Foundation.  Among other projects, this has helped fund researchers working toward a standardized family of biomarker signatures for more effective and accurate detection of all forms of cancer.

“I think many of our extended families have been touched by cancer at some point,” said Davis.  “The HSCRS Ride Of Your Life says it all-contributors can enjoy a once-in-a-lifetime ride, and at the same time, contribute to what hopefully will become significant progress in the detection and prevention of cancer within their lifetimes.”

About HSCRS The Historic Stock Car Racing Series is committed to the restoration and preservation of authentic and historical NASCAR stock cars, while providing for continued competition in a safe and entertaining environment. New members who share the group’s mission and goals are encouraged to join. More information about HSCRS may be obtained by calling (408) 280-0285, or visiting www.hscrs.com.

About the San José Grand Prix Now in its third year, the San José Grand Prix has become an institution in the Bay Area. It will be the tenth stop on the 2007 Champ Car World Series schedule. The series features some of the greatest race car drivers in the world, competing in the most exciting series in the world. The three-day festival—which includes concerts, interactive displays, a family fun area, and many events for the race’s charity, Canary Foundation—is expected to generate a significant economic benefit for Northern California’s largest city. For more information about the race and its related activities, visit www.sanjosegrandprix.com.

About Borelli Racing and Borelli Investment Company Ralph Borelli is the founder of Borelli Racing, and has been a part of Borelli Investment Company—founded by his father, Nelo—for more than 33 years. Borelli Investment Company is one of the oldest commercial real estate firms in the Santa Clara Valley, providing a full range of commercial real estate services—from development and construction management to land sales and consulting for sales and leasing. More information about Borelli Investment Company’s services may be obtained by calling (408) 453-4700, or visiting www.borelli.com.

Contact           John Davis, President             Historic Stock Car Racing Series (HSCRS)             381A Stockton Avenue             San Jose, CA 95126             Ph: 408.280.0285             Fax: 408.280.0868  E-mail: john@tmfcinc.com http://www.hscrs.com

Higher sales prices, shrinking inventories, and growing construction costs are creating urgency for businesses looking for commercial space.

San Jose,Calif.,February 1, 2007— 5-4-3-2-1 Liftoff! That thundering you hear is the sound of lease rates onSilicon Valleycommercial real estate leaving the launching pad and climbing back toward sustainable levels. No one expects rents to go through the stratosphere, but after being exceptionally low for the past five years or so, lease rates on commercial real estate are due for a significant rise. Business owners and property investors who are sitting on the sidelines trying to time the market would be well advised not to wait any longer.

Let’s turn back the calendar a few years to understand what is going on. Following decades of steady appreciation in property values and healthy rental levels, the dot-com explosion of the mid- to late-1990s sent commercial real estate rents through the roof. The belief that almost any idea involving the Internet was a money-maker created a tremendous demand for commercial space inSilicon Valleyby venture capital-based dot-com startups. But as so often happens, when the dot-com bubble burst in 2001, the overheated market cooled off quickly, driving rents down. Enormous amounts of inventory—at one point as much as 60 million square feet of space by some estimates—stood vacant. It was a renter’s market; companies leasing space felt they had the upper hand in negotiations with property owners.

Today, there are clear signs the commercial real estate market has come back into balance, after the rollercoaster ride of the past decade.

• Lincoln Property just purchased the four-building, 15-acre former Acer Computer campus on Trimble Road in San Jose for $27 million—handing Apollo Real Estate a tidy $8 million profit on the property it had bought less than a year earlier for $19 million.
• A joint venture between Westbrook Partners and Four Corners Properties just laid out $94 million forMontagueParkinSan Jose, providing the previous owners a $19 million profit in just 15 months.
• Significant rent increases of up to 30 percent have taken place over the past 12 months—with the upward trend especially noticeable on incubator spaces of 5,000 square feet or smaller.

“The evidence is indisputable,” said Ralph Borelli. “Big real estate companies are buying again inSilicon Valley. The bottom of the market for commercial real estate in the Valley was most likely reached in 2004 or early 2005. The rebound began in earnest last year, and this is fueling the rise in rents now being felt throughout the Valley.”

Multiple Contributing Factors

What is causing the recent increases in property values and rents? In Borelli’s opinion, there are several contributing factors:

• Strengthening job market—According to the Association of Bay Area Governments (ABAG), theSouthBayexperienced significantly stronger job growth than had been expected in 2006, increasing by 1.8%. TheSan Josearea outperformedCaliforniaand the nation, and in fact only trailed the combined San Francisco/San Mateo/Marin area andSolanoCountyin the creation of new jobs last year. ABAG expects the upswing to continue in 2007, with theSouthBaypredicted to add another 11,500 jobs—many in the technology sector.
• Rapidly decreasing inventories—With the job market on the rise, planning departments have approved the conversion of obsolete commercial and industrial property into residential space. Perhaps 25 percent of the vacant standing inventory has been or will be torn down for new housing by leading homebuilders such as KB Home, according to Borelli. At the same time, big-name businesses such as Google, Yahoo, and Apple have collectively purchased millions of square feet of space over the past several years—effectively removing these buildings from the rental base. This has decreased the vacancy rate for office space from 20 percent or more to approximately 10 percent, according to CoStar Group, the number one provider of information services to commercial real estate professionals in the U.S. and U.K. Industrial and “flex” space still shows slightly higher vacancy rates, but is definitely trending lower.
• Limited land—The Valley floor is largely built out. Unlike in the wide-openSacramentoarea or theCentral Valley,Silicon Valleyhas natural geographic obstacles to growth—the foothills on either side of the Valley—placing a finite limit on where building can be done. Open space regulations have slowed growth on hillsides, and areas such asSan Jose’sCoyoteValleyare still being held for future development. With so little vacant land available, land prices can’t help but increase.
• Rising construction costs—The cost of construction has also risen. It is simply more expensive today to build buildings than it was a decade ago. And the cost of new construction is considerably higher than renovating existing commercial/industrial space.

“The wild swings of the dot-com period are behind us,” Borelli remarked. “The most educated guess is that rents will quickly return to “pre-bubble” rates, as property owners look to get their economics back into line. Meanwhile, property values will resume their slow, but steady climb—makingSilicon Valleycommercial real estate a very good long-term investment.”

Important Implications for Business Owners

As business owners look to manage occupancy costs in the coming months and years, they have several viable options.

• Purchase space—Smaller companies and professional firms now have the same option of owning their own space as larger corporations. At business condominiums such as Borelli Investment Company’sJunctionOfficeCenteronJunction AvenuenearBrokaw RoadinSan Jose, down payments start at $29,900 with 90 percent financing available from the SBA. Sales prices for brand new office condos in the $10 million Junction renovation are actually below the replacement cost if that space had to be built from scratch. Further, business owners can take advantage of significant tax write-offs, and also enjoy the potential appreciation predicted for Valley real estate.
• Lease quality Class B space—Rents on much of the Class A space that has changed hands at large premiums over the past couple of years have already jumped. Now is the time to look for quality Class B incubator office space (5,000 square feet or less) and sign longer-term agreements that lock-in lease rates.

“As more property changes hands at increased prices, rental rates and property values are going to continue to climb,” Borelli commented. “The risk of less predictable markets is largely behind us. The time for businesses to act is now.”

Having celebrated its 50th anniversary last year, Borelli Investment Company is one of the oldest commercial real estate firms in the Santa ClaraValley. The company provides a full range of commercial real estate services—from development and construction management to land sales and consulting for sales and leasing. More information about Borelli Investment Company’s services may be obtained by calling (408) 453-4700 or visiting www.borell-inv.com.

Having celebrated its 50th anniversary last year, Borelli Investment Company is one of the oldest commercial real estate firms in the Santa Clara Valley. The company provides a full range of commercial real estate services-from development and construction management to land sales and consulting for sales and leasing. More information about Borelli Investment Company’s services may be obtained by calling (408) 453-4700 or visiting www.borell-inv.com.

Contact:
Ralph Borelli, CEO
Borelli Investment Company
1770 Technology Dr.
San Jose, CA 95110
Ph: 408.453.4700
Fax: 408.453.4636
E-mail: ralph@borelli-inv.com
http://www.borelli-inv.com

Higher sales prices, shrinking inventories, and growing construction costs are creating urgency for businesses looking for commercial space.

San Jose, Calif., February 1, 2007 — 5-4-3-2-1 Liftoff! That thundering you hear is the sound of lease rates on Silicon Valley commercial real estate leaving the launching pad and climbing back toward sustainable levels. No one expects rents to go through the stratosphere, but after being exceptionally low for the past five years or so, lease rates on commercial real estate are due for a significant rise. Business owners and property investors who are sitting on the sidelines trying to time the market would be well advised not to wait any longer.

Let’s turn back the calendar a few years to understand what is going on. Following decades of steady appreciation in property values and healthy rental levels, the dot-com explosion of the mid- to late-1990s sent commercial real estate rents through the roof. The belief that almost any idea involving the Internet was a money-maker created a tremendous demand for commercial space in Silicon Valley by venture capital-based dot-com startups. But as so often happens, when the dot-com bubble burst in 2001, the overheated market cooled off quickly, driving rents down. Enormous amounts of inventory—at one point as much as 60 million square feet of space by some estimates—stood vacant. It was a renter’s market; companies leasing space felt they had the upper hand in negotiations with property owners.

Today, there are clear signs the commercial real estate market has come back into balance, after the rollercoaster ride of the past decade.

• Lincoln Property just purchased the four-building, 15-acre former Acer Computer campus on Trimble Road in San Jose for $27 million—handing Apollo Real Estate a tidy $8 million profit on the property it had bought less than a year earlier for $19 million.
• A joint venture between Westbrook Partners and Four Corners Properties just laid out $94 million for Montague Park in San Jose, providing the previous owners a $19 million profit in just 15 months.
• Significant rent increases of up to 30 percent have taken place over the past 12 months—with the upward trend especially noticeable on incubator spaces of 5,000 square feet or smaller.

“The evidence is indisputable,” said Ralph Borelli. “Big real estate companies are buying again in Silicon Valley. The bottom of the market for commercial real estate in the Valley was most likely reached in 2004 or early 2005. The rebound began in earnest last year, and this is fueling the rise in rents now being felt throughout the Valley.”

Multiple Contributing Factors

What is causing the recent increases in property values and rents? In Borelli’s opinion, there are several contributing factors:

• Strengthening job market—According to the Association of Bay Area Governments (ABAG), the South Bay experienced significantly stronger job growth than had been expected in 2006, increasing by 1.8%. The San Jose area outperformed California and the nation, and in fact only trailed the combined San Francisco/San Mateo/Marin area and Solano County in the creation of new jobs last year. ABAG expects the upswing to continue in 2007, with the South Bay predicted to add another 11,500 jobs—many in the technology sector.
• Rapidly decreasing inventories—With the job market on the rise, planning departments have approved the conversion of obsolete commercial and industrial property into residential space. Perhaps 25 percent of the vacant standing inventory has been or will be torn down for new housing by leading homebuilders such as KB Home, according to Borelli. At the same time, big-name businesses such as Google, Yahoo, and Apple have collectively purchased millions of square feet of space over the past several years—effectively removing these buildings from the rental base. This has decreased the vacancy rate for office space from 20 percent or more to approximately 10 percent, according to CoStar Group, the number one provider of information services to commercial real estate professionals in the U.S. and U.K. Industrial and “flex” space still shows slightly higher vacancy rates, but is definitely trending lower.
• Limited land—The Valley floor is largely built out. Unlike in the wide-open Sacramento area or the Central Valley, Silicon Valley has natural geographic obstacles to growth—the foothills on either side of the Valley—placing a finite limit on where building can be done. Open space regulations have slowed growth on hillsides, and areas such as San Jose’s Coyote Valley are still being held for future development. With so little vacant land available, land prices can’t help but increase.
• Rising construction costs—The cost of construction has also risen. It is simply more expensive today to build buildings than it was a decade ago. And the cost of new construction is considerably higher than renovating existing commercial/industrial space.

“The wild swings of the dot-com period are behind us,” Borelli remarked. “The most educated guess is that rents will quickly return to “pre-bubble” rates, as property owners look to get their economics back into line. Meanwhile, property values will resume their slow, but steady climb—making Silicon Valley commercial real estate a very good long-term investment.”

Important Implications for Business Owners

As business owners look to manage occupancy costs in the coming months and years, they have several viable options.

• Purchase space—Smaller companies and professional firms now have the same option of owning their own space as larger corporations. At business condominiums such as Borelli Investment Company’s Junction Office Center on Junction Avenue near Brokaw Road in San Jose, down payments start at $29,900 with 90 percent financing available from the SBA. Sales prices for brand new office condos in the $10 million Junction renovation are actually below the replacement cost if that space had to be built from scratch. Further, business owners can take advantage of significant tax write-offs, and also enjoy the potential appreciation predicted for Valley real estate.
• Lease quality Class B space—Rents on much of the Class A space that has changed hands at large premiums over the past couple of years have already jumped. Now is the time to look for quality Class B incubator office space (5,000 square feet or less) and sign longer-term agreements that lock-in lease rates.

“As more property changes hands at increased prices, rental rates and property values are going to continue to climb,” Borelli commented. “The risk of less predictable markets is largely behind us. The time for businesses to act is now.”

Having celebrated its 50th anniversary last year, Borelli Investment Company is one of the oldest commercial real estate firms in the Santa Clara Valley. The company provides a full range of commercial real estate services—from development and construction management to land sales and consulting for sales and leasing. More information about Borelli Investment Company’s services may be obtained by calling (408) 453-4700 or visiting www.borelli.com.
Having celebrated its 50th anniversary last year, Borelli Investment Company is one of the oldest commercial real estate firms in the Santa Clara Valley.  The company provides a full range of commercial real estate services-from development and construction management to land sales and consulting for sales and leasing. More information about Borelli Investment Company’s services may be obtained by calling (408) 453-4700 or visiting www.borelli.com.

Contact: Ralph Borelli, CEO Borelli Investment Company 1770 Technology Dr. San Jose, CA 95110 Ph: 408.453.4700 Fax: 408.453.4636 E-mail: ralph@borelli.com http://www.borelli.com

Major Land Sales at Old Hacienda Gardens Shopping Center

Announcing the Approval and Sale of the North Half of the Hacienda Gardens Shopping Center on September 22, 2005 San Jose, California

Now called Willow Glen Place

A 206 Unit Residential   Townhome Community will be Developed by Toll Brothers

Borelli Investment Company would like to thank:

The Sellers: KT Properties The Buyers: Toll Brothers The City of San Jose

Brokered by: Ralph Borelli and Tom Zolezzi

Patricia Robinson and Ron Van Wagner Win Borelli Broker “Race”— Get Luxury Treatment and Exclusive Trackside View

The San Jose Grand Prix is indeed “more than a race” as its slogan declares. While Sebastien Bourdais was steering his #1 McDonald’s Ford-Cosworth/Lola/Bridgestone to victory on the tight 1.44 mile downtown circuit, Canary Foundation was raising approximately $1,070,000 to further its goal of finding new ways to detect cancer at its earliest, most curable stages.

Meanwhile, Borelli Investment Company was doing its part to support both the race and the fundraising efforts. Ralph Borelli auctioned rides in his vintage #22 Maxwell House stock car—a former pole sitter at the NASCAR Daytona 500—with all the money going to the charity.

In addition, the company offered a series of prizes for anyone who closed a deal or referred leads for office condominium sales, sales and leases of other Borelli properties, or property management contracts. First through third place awards included seats in Borelli Investment Company’s two-story, luxury trackside suite, pit crew access, cash vouchers, and for the grand prize winners—rooms for the weekend at the Hilton hotel. Everyone who closed a deal or made a referral got grandstand seats to see the race.

The top producers for 2006 were brokers Patricia Robinson and Ron Van Wagner of Grubb & Ellis, who worked together on a transaction to purchase office condo suites 128 and 138 at Borelli’s Junction Office Center in San Jose.

Congratulations to Patricia and Ron, and thanks to all who contributed to Canary Foundation or supported this great motor sports event that continues to gain traction in San Jose. See you at the starting line next year!