To: Customer of TCBC, builder of new single family homes in Ouray
Colorado

Subject: Price Projections

FROM: Kent Shields, TCBC

Thanks to you and wife for stopping by 207 8th Avenue and 731 2nd St. in
Ouray. Let me know if I can assist in your interest in the area real
estate. 207 8th Avenue could be used as rental property until a buyer is
ready to relocate / retire / summer home in the area. When furnished and
finished with a nice theater, it well could bring $2000k / week rental. You
would hope to get 10 weeks rental income. Five years later when you retire,
you repaint, etc. www.ourayrealty.com has rentals and other area properties
to look at through their MLS search.

FROM: CUSTOMER:

Thank you very much for showing us your two houses last Saturday. We are
very impressed with the quality of work you put into both houses.

It's interesting that you mention Ouray Realty. Inis and I went to Church
on Sunday Morning at St. Daniels Catholic Church, and while walking back to
the Best Western Twin Peaks, we saw a house for sale that happened to be the
home of Erin Eddy. As I'm sure you know, Erin is the Managing Broker for
Ouray Realty. Erin was outside, and Inis and I got to visit with Erin for
awhile.

We talked about Ouray real estate and the real estate market in general. I
told Erin about a 40 page article I read in the May 2007 issue of Money
Magazine about the current state of the real estate market, how it got to
where it is and where it's going. Erin asked if I could send him a copy of
the article and I said I would scan the article into my computer and email
it to him. It will take some time to scan 40 pages, but I hope to get it
done this weekend. The gist of the article is that the real estate market
is in a price bubble with prices considerably higher than they should be. I
can email a copy of the article to you too if you wish.

Inis and I are exploring the feasibility of buying or building a second
home. Prescott is still a nice place to live, but it's getting too big for
us and I'd like to retire to a much smaller town. I currently have 6 years
left to fly for Southwest Airlines, but the FAA is working to change the
retirement age from 60 to 65 and that would give me a total of 11 years left
to fly for Southwest.

We are looking for a small town in the mountains with a sense of community,
in a beautiful location, where we can walk to everything, with lots of
outdoor recreation and skiing, at a price that I can afford. Ouray fits all
the requirements except for its lack of skiing. Telluride has the skiing,
but not at a price that I can afford. Inis and I both like Ouray very much
even though it's an hour drive to go skiing. We like the house you built at
207 8th Avenue

Please let me know if you have any ideas or opportunities that you think I
may be interested in. Maybe we can get together during our next visit to
Ouray.


REPLY FROM TCBC:

I personally recommend my project for the quality construction and features.
However in-town living isn't for everyone, so I do recommend Erin Eddy. He
works hard and knows the local market. His years of work on the Ouray Ice
Park has helped our winter businesses. His website is www.eerealty.biz, and
the office phone number at Ouray Realty is 970-325-4141.

I don't foresee a price decrease in Ouray real estate and especially new
construction. All area construction labor forces are dedicated to the
billion dollars per year of construction permits set to go over the next
five years in Telluride. And petroleum price increases affect material
costs - material costs have been flat for a couple of years, but no
decrease - only increases. And of course, inside Ouray, there is a limited
supply of land. Resort markets can be different than the mainstream, but
certainly we are affected by the economy and do cycle a little bit. Ouray
specifically and the whole region is a pretty special spot, and with ten
coming years of a percentage of retirees looking to escape the large
metropolitan areas, I believe we are insulated from any downturn that may
happen nationally. In fifteen years, all bets are off, but even then I
remain optimistic based on what an incredibly special place SW Colorado and
specifically Ouray are.

The way I see builders achieve lower prices in new construction is what
frequently happens in the downside of the cyclical building industry - lower
finish levels and lower square footage. There has been a great improvement
in the looks of lower-end finish materials, and people end up with a very
nice look in a new home and get by with less sq. ft. as family sizes are
smaller. Nationally, last month, the median price of new homes fell. The
story behind the scenes (National Association of Home Builders) was smaller
homes and lower finishes, not more value for the dollar. By the end of the
year builders will have had almost two years of reducing inventory, and I
believe you will see an upturn based on an annual requirement nationally in
new housing of almost 2 million starts. Again, the new starts may be smaller
and with a lower finish level to keep the price flat.

Existing inventory, that is homes purchased twenty to thirty years ago, have
flexibility in price if the owner is willing to discount. I see these
prices staying flat, dropping in the northeast and midwest, but continuing
to rise where there is stronger demand. The western slope of Colorado has
strong demand.

In this area, I would purchase now, and rent the property through ORI. It
will almost cash flow. When I am ready to retire in 5-7 years, 1 year
prior, I would spend $50k and repaint, refloor, rebath, and rekitchen the
place so it is like new. If Telluride goes the way of Aspen to Carbondale
to Glenwood Springs, there will be a downstream effect in Ouray and Ridgway.
Your investment could be worth 50% more in those 5-7 years. The question
is, if there is a bubble, and you can question that premise, is it a
national bubble, or a bubble descending upon certain areas, such as Detroit.
Resort areas may be more of a ballon than a popping bubble.

Again, so very nice meeting with you and when you get up this way stop by
and we can chat again. Anything I can do to help in your search, let me
know.

Sincerely,

Kent Shields
TCBC
PO Box 1477
Ouray, CO 81427
480-220-1541 (cell)
skent3@qwest.net