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HomeMy WebLinkAboutIntermodal Facility Appraisal for 26 E. Mendenhall Street #201 A SUMMARY REPORT OF: 26 E.Mendenhall Street 4201 Bozeman,MT 597I5 PREPARED FOR: Mr.Paul Bums City of Bozeman Bozeman,MT 59715 PREPARED ON: July 23,2012 EFFECTIVE DATE OF VALUATION: July 12,2012 PREPARED BY: Keith O'Reilly,MAI General Certified Appraiser Bridger Appraisals,Inc. PO Box 11145 Bozeman,MT 59719 r BRIDGER APPRAISALS= Keith O'Reilly.MAt July 23,2012 City of Bozeman Bozeman,MT 59715 Re: 26 E.Mendenhall Street#201 Bozeman,MT 59715 Dear Mr.Bums, In accordance with your request and authorization,I have viewed the referenced property,also referred to as the appraised or subject property in the following report,and have estimated its current Fee Simple value,"As Is"as of July 12,2012. My professional opinion is based upon analysis of market data gathered for this purpose and upon the assumptions and limiting conditions stated on pages 6-8 of the following report. This is a Summary Appraisal Report as defined by Uniform Standards of Professional Appraisal Practice under Standards Rule 2-2(B).This format provides a summary of the appraisal process,subject and market data and valuation analyses.The information contained in this report is specific to the needs of the client and for the intended use as stated in this report. The appraiser is not responsible for unauthorized use of this report. The opinions stated in the accompanying report are based on my viewing of the appraised property,comparable properties,and analysis of all pertinent data. lax:406.587.7742 tel: 406.587.2452 CO.Bo 11145 Baxemnn,MT 59719 As a result of my investigation and analysis,it is my opinion that the Market Value of the Fee Simple Interest, "As Is," in the subject property,as of July 12,2012 is: ONE HUNDRED TWEN'T'Y SEVEN THOUSAND DOLLARS ($127,000) The following report contains(56)pages plus an addendum that provides the data and analysis to support the stated value estimates. Respectfully submitted, Keith O'Reilly,MAI General Certified Appraiser#400 State of Montana TABLE OF CONTENTS ITEM: PAGE NO. PHOTOGRAPH OF THE SUBJECT PROPERTY......................................................................................................5 ASSUMPTIONS AND LIMITING CONDITIONS .....................................................................................................b SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS.................................................................................9 SCOPE OF THE APPRAISAL...................................................................................................................................I 1 PURPOSE AND INTENDED USE AND USER OF THE APPRAISAL..................................................................12 DEFINITION OF MARKET VALUE........................................................................................................................12 PROPERTY RIGHTS APPRAISED...........................................................................................................................13 EXPOSURETIME......................................................................................................................................................14 VALUATIONDATE..................................................................................................................................................14 IDENTIFICATION AND HISTORY OF THE SUBJECT.........................................................................................15 REGIONAL,CITY,AND NEIGHBORHOOD ANALYSIS.....................................................................................18 TAXES AND ASSESSMENT ANALYSIS................................................................................................................28 SITEDATA AND ANALYSIS....................................................................................................... .......................29 ZONING AND GOVERNMENT RESTRICTIONS..................................................................................................33 DESCRIPTION OF IMPROVEMENTS.....................................................................................................................34 THEAPPRAISAL PROCESS ....................................................................................................................................39 SALES COMPARISON APPROACH........................................................................................................................40 FINALRECONCILIATION.......................................................................................................................................54 CERTIFICATION.......................................................................................................................................................55 ADDENDUM Resume PHOTOGRAPH OF THE SUBJECT PROPERTY Stibiect Unit View of the subject property looking from the corner of Mendenhall and Black. Photo taken on July 12,2012 by Keith O'Reilly,MAI. r Street scene looking southwest along Mendenhall Street. Photo taken on July 12,2012 by Keith O'Reilly,MAI. Bridger Appraisnls htc. U Keith O'Reilly,MAI ASSUMPTIONS AND LIMITING CONDITIONS This appraisal report,the letter of transmittal,and certification are subject to the following assumptions and limiting conditions;and also,any special qualifying conditions that may be contained elsewhere in the report are incorporated by reference. Assumptions 1. That the legal description,as furnished,is correct;and that the title to the property is good and marketable.All existing liens and encumbrances,if any,have been disregarded.The property is appraised as though free and clear of other burdens,under responsible ownership and competent management. 2. That the land dimensions taken from available maps,plats,and/or surveys are correct.It has been assumed that those boundaries that are apparent are correct. 3. It is assumed that the use of the Iand and improvements is confined within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in the report. 4. That no adverse water table or soil conditions exist,and no representation regarding such conditions is made in this report unless specifically stated;and,that the value estimated is predicted on the absence of any such conditions occurring. 5. It is assumed that the subject property conforms to all applicable zoning and use regulations and restrictions unless nonconformity has been identified,described and considered in the appraisal report. (. Those opinions,estimates,data and statistics supplied by others in the course of this study,are correct;the assumption has been made that the sources are reliable,but no responsibility has been inferred for their accuracy. 7. This report does not contemplate any court action,nor does it obligate the appraiser to give any testimony or make any appearance in court,before commission,arbitrator or any other individual,body or agency.If court action or appearance later becomes necessary in the interest of the client,the terms of the additional service shall be negotiated at that time. Bridger Appraisals hic. V, 6 Keiih O'Reilly.MAI 8. Unless otherwise stated in this report,the appraiser did not observe the existence of hazardous material,which may or may not be present on the property.I have no knowledge of the existence of such materials on or in the property. i am not qualified to detect such substances. The presence of potentially hazardous materials may affect the value of the property.This extends to any leaks from underground fuel storage tanks,and identification of Asbestos containing materials.The value estimate is predicated on the assumption that there is no such material on or in the property.No responsibility is assumed for any such conditions or for any expertise or engineering knowledge required to discover them.The client is urged to retain an expert in this field,if desired,Any such environmental risk discovered at a later date may require a revised estimate of value that may or may not be simply a reduction of the value by the estimated cost to cure the environmental condition. Properties known to have environmental risk may also carry a stigma in the market place that may or may not affect the value.If future soil tests should reveal the existence of any such soil conditions or hazardous waste,I reserve the right to review and adjust this appraisal accordingly. Limiting Conditions: 1. The appraiser is not responsible for any matter legal in character,nor is any opinion rendered as to title,which is assumed to be marketable. 2. The value reflected in the analysis applies only to the program of utilization considered in this report.The use of the value in conjunction with any other appraisal or under other influences invalidates the conclusions developed. 3. This analysis and estimate of value is made for the exclusive use and benefit of the clients to whom it is addressed,and,possession of this report or a copy,does not carry with it the right of publication,nor may it be used for any purpose other than that intended without the previous consent of the appraisers. In any event only the entire report may be used and no part shall be taken or used out of context. 4. Included as an integral part of this report are maps and photographs of the appraised properties and sales.The maps and photographs were prepared and taken by the appraisers,and although they do not purport to represent survey accuracy,they are substantially correct and adequately serve as visual reference to the property. 5. Disclosure of the contents of this report is governed by the By-Laws and Regulations of the Appraisal Institute. Neither all nor any part of the contents of this report(especially any conclusions of value,the identity of the appraisers or the firm with which they are connected)shall be disseminated to the public through advertising media,public relations,news media,sales media,or any other public means of communication without the prior written consent and approval of the authors. Bricipf Appraisals Inc. 7 Keith O'Reilly.MAI h. The forecasts,projections,or operating estimates contained herein are based on current market conditions, anticipated short-terns supply and demand factors,and a continued stable economy. These forecasts are, therefore,subject to changes with future conditions. 7. The Americans with Disabilities Act(ADA)became effective January 26, 1992. The appraiser has not made a specific compliance survey or analysis of the property to determine whether or not it is in conformity with the various detailed requirements of ADA. It is possible that a compliance survey of the property and a detailed analysis of the requirements of the ADA would reveal that the property is not in compliance with one or more of the requirements of the act. If so,this fact could have a negative impact upon the value of the property. Since the appraiser has no direct evidence relating to this issue,possible noncompliance with the requirements of ADA was not considered in estimating the value of the subject property. Bridges Appraisals Inc. Kcinh O'Reilly,MAI SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS Client: Paul Burns, City of Bozeman Owner of Property: City of Bozeman Date of Valuation: July 12,2012 Date of Preparation: July 23,2012 Rights Appraised: Fee Simple Legal Description: Unit 201 of the intermodal Commerce Condo located on Parcel C being Lots 13-14 in Block F of the Original Plat of Bozeman. Location of Property: 26 E.Mendenhall Avenue,Bozeman,MT 59715 (Bozeman Parking Garage) Improvements: 944sf of commercial office space shell Highest and Best Use: Commercial office space. Present Use: Vacant conunercial office space with no interior build aut. ZoninglGovernmental: Central Business District(B-3) Site Shape and Size: The subject site is nearly rectangular in shape and is common. Environmental: I have viewed the subject common site and did not observe any suspicious materials or any situation that would lead me to conclude that there were any environmental contamination concerns nor were any brought to my attention by the owner of the property or the client. However,I am not an expert in these matters,and recommend a professional evaluation if the reader of this report wants more reliable information. 13ridger AppraikRls Inc, 'C 9 Keith O'Reiluv,NIA] Market Status: There has been more real estate activity in the last 12 to 18 months than in the preceding years.The real estate market peaked in 2006 and then began to decline up until about mid 2011.There appears to be some stability taking place in the market.Downtown Bozeman as seen several retail properties transact along with several new retail tenants occupying space. Estimated Exposure Time: 6-12 months Estimated exposure time is based on current sales of conunercial properties within the Bozeman area that are similar to the Subject. The estimated exposure time is predicated on the final opinion of value. Bridger Appraisals Inn, 10 Keith O'Reilly,MA] SCOPE OF THE APPRAISAL The scope of work consists of the amount and type of information researched and analyzed in an assignment. In preparing the appraisal,I have personally viewed the subject site,improvements,plans and specifications and considered pertinent characteristics of the site and improvements in comparison to current market standards.I have analyzed the subject neighborhood and competing markets for current sales and lease data. Local commercial real estate agents and brokers were consulted with to confirm sales and lease information.The offices and brokers include Mike McKenna(McKenna Realty),Dick Stefani (Bozeman Broker Group), Steve Olson (NAI Landmark Reality), Chris Pope(NAI Landmark Reality),Mike Elliot(Grub&Ellis),Kasey Hart(NAI Landmark Reality)and Tom Starner and Kevin Black(Gene Cook Real Estate). I viewed the subject property on July 12,2012. General and specific data was obtained through personal and telephone interviews with government officials, property managers,developers,and other market participants.I have considered the highest and best use of the property as improved,and have applied the sales comparison approach.The subject property is part of a commercial condominium and the cost approach is not applicable. The income approach to value is not being completed,had a income approach been analyzed the estimated value would be no more reliable. The results indicated by these methods have been reviewed and reconciled based on the reliability,relevance and reasonableness of the data,and the purpose and intended user of the appraisal. This is a Suimnary Appraisal Report as defined by Uniform Standards of Professional Appraisal Practice under Standards Rule 2-2(B).This format provides a summary of the appraisal process,subject and market data and valuation analyses. The information contained in this report is specific to the needs of the client and for the intended use as stated in this report. Bridget Appraisals Inc. Keith O'Reiily,MAI PURPOSE AND INTENDED USE AND USER OF THE APPRAISAL The purpose of this appraisal is to estimate a credible opinion of the Current Market Value of the subject property's Fee Simple Interest,"As Is"as of July 12,2012,in accordance with the Uniform Standards of Professional Appraisal Practice(USPAP)and supplemented by the Appraisal Institute. The intended use of the appraisal is to assist the Clients,City of Bozeman,in possibly selling the subject property.There is no other intended user and this appraisal is not being completed for a lending transaction. DEFINITION OF MARKET VALUE Market value is defined as the most probable price,which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus, implicit in this definition is consummation of a sale as of a specified date and passing of title from seller to buyer under conditions whereby: 1. Buyer and seller are typically motivated; 2. Both parties are well informed or well advised,and each acting in what they consider their own best interest; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is trade in terms of cash in U.S.dollars or in terms of financial arrangements comparable thereto; 5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale., 'Source: Federal Register,vol,55,August 22,1990,also quoted in the Unifonu Standards of Professional Appraisal Practice, The Dictionan qt Real Estate App aisal,4th ed.(Chicago;Appraisal Institute,2002),pp.177-178. Bridger Appraisals inc. �Q 12 Keith O'Rcilly,hIAI PROPERTY RIGHTS APPRAISED Property rights are ownership interests in real estate and have value. It is important to know what property right(s) or estate(s)are involved in the appraisal,because the estate identifies the rights being valued.The subject property rights being appraised are the Fee Simple Interest. Fee Simple:Absolute ownership unencumbered by any other interest or estate,subject only to the limitations imposed by the governmental powers of taxation,eminent domain,police power and escheat.' Leased Fee:An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others.The rights of the lessor(the leased fee owner)and the lessee are specified by contract terms contained within the lease? ' The Dictionary of Real Estate Appraisal,op,cir.,p, 113. The Dictionary of Real Fstatc Appraisal,op.err.,p. 161. Bridgcr Appraisals Inc. V) 13 Keith O'Reillv,MA1 EXPOSURE TIME Exposure time should not be confused with the marketing period.Exposure time precedes the effective date of the appraisal.In other words,how long the subject property would be actively marketed prior to the effective date of the appraisal to bring the estimated opinion of market value determined in the appraisal. Marketing time is the period after the effective date of the appraisal. In other words,how long would it take to sell the subject property,at the appraised market value,after the effective date of the appraisal?Typically,in a stable market the marketing time and exposure time should be relatively similar. Current sales in the Bozeman market have been relied upon to estimate the exposure time of the subject property. Due to the size of the Bozeman market,the best estimate for exposure time is derived from sales of similar type property.The Southwest Montana MLS tracks sales of commercial property;however,the data is limited and all commercial properties are grouped as one.For example,the data is not segregated into categories of office, industrial,medical or retail property types.In addition,it is not a requirement of the Southwest Montana MLS to require its members to report commercial sales activity. It is a requirement for them to report residential activity. Based upon the current market conditions and sales data in the report,I have estimated the exposure time for the subject property to be 6-12 months. VALUATION DATE The effective date of the appraisal is July 12,2012.This is the date of valuation and the date that the subject property was personally viewed, Bridgcr Appraisals Inc. 14 Keith O'Reilly,MAI IDENTIFICATION AND HISTORY OF THE SUBJECT The legal description of the subject property is: Unit 201 of the Intenrtodai Commerce Condo located on Parcel C being Lots 13-14 in Block F of the Original Plat of Bozeman. Sale History: The subject property has not transferred since being constructed by the City of Bozeman. Current Listing or Contract: The City of Bozeman is presently looking to sell the subject property.I understand that there is a contract in place; however,this has not been presented to me and was not available upon the engagement of this assignment. Bridger Appraisals Inc. 3 15 Keith O'Reilly.MAI MONTANA REGIONAL AND CITY MAPS P TOO" • i LAMM auk 8.nk aAMH.9 sl�L�4N RA71RAa * sn®by Lemon 'mu •CW-k • • LiALA f ky�' v� twaarsr • ism •°"'av" wer r L AMM POW i eM+w •caA Laakn a�clL.Lto r •Thamknen F, • TWON amumu LA LCCOLS • • usual •Jordan mkwsoN L OiA •AMILD • ia9.L L • LaiNrtoiel kLawtlk JLD MAAM • • FM i u MOM AEA YAr�a svmaa LLISSBLIq.L ddLiMIF par : J+ndup mb.cly • soy � � III�A76ArN • 8a • ±oarth FALLON INVAL!! YA L OV8TY7 SUBJECT viv lfff i a AOSMKI •g Y=QWSM sLW e s i i i e �•rtlN FAME CAKW m2 mm • •vamp• 101�lANY[ • maws JW eaaYaaraa CARLON m MAW u<.L..cre.ad p>rrW rw�-� Bridger Appraisals lru. 16 Keith O'Reilly,MAl .. -060. � . Subject � u11L1RY ' i 7 - r f Bridger Appraisals Inc. C 1 Keith O'Reilly,NIAI REGIONAL, CITY, AND NEIGHBORHOOD ANALYSIS The purpose of this section is to identify the pertinent social,economic,governmental and environmental factors that affect property value and to analyze their impact on the appraised property's current market value. This analysis begins with regional information and moves to relevant information about the city and the subject's neighborhood.A neighborhood is defined as a grouping of similar land uses. From an appraisal viewpoint,this is the area where the subject property competes with other properties and where the most comparable market data is obtained. Bozeman,Montana is located in Gallatin County,in an area more commonly referred to as the Gallatin Valley. Gallatin County is a mountainous area that is located in the southwestern part of the state between Park and Madison Counties,north of the Montana-Wyoming border and Yellowstone National Park.In the past decade,Gallatin County has grown faster than any other county in the State of Montana and according to the 2010 Census 89,513 people called Gallatin County home.Gallatin County covers 2,500 square miles of mountainous lands varying in topography and climate.Additionally,nearly half of all of the land in Gallatin County is under public ownership by the Gallatin National Forest,State of Montana,Bureau of Land Management or the National Park Service. Bozeman,the county seat for Gallatin County,is located approximately 140 miles to the west of Billings,Montana and 65 miles to the north of Yellowstone National Park.Bozeman is the fourth largest city in Montana.In 2007, Gallatin County's population surpassed that of Flathead County,making it the state's third largest county. A report by Prospera Business Network that was released February 2010 declared Bozeman as the most expensive place to live in Montana. Social Factors: Social influences that affect value include,but are not limited to,population characteristics such as growth, population density,age distribution,household sizes,employment status,availability of education and the quality of life. Historic and Recent Population Trends-City of Bozeman,Gallatin County and the State of Montana According to the U.S. Census Bureau,the City of Bozeman's population increased from 27,509 in 2000 to 37,280 as of April 1,2010--an increase of 9,771 people.This represents an increase in population of approximately 35.5% over a ten-year period,or an average rate of growth of about 3.S5%per year. In contrast,the City of Bozeman's average growth rate between 1980 and 1990 was about 0,41%per year. Bridger Appraisals luc. ':i`' 18 Keith O'Reilly.MAl Gallatin County's population increased from 67,831 in 2000 to 89,513 in 2010-an increase of 21,682 people. This represents an increase in population of approximately 32%over a ten-year period,or an average growth rate of 3,2% per year.The entire state of Montana grew by 9.7%to 989,415 residents as of April 1,20I0 adding 87,220 people over the last 10 years. Montana continues to be ranked 44"'among the 50 states in population. C, County and State H t ' PopuWbon Trends:1910.2010 1910 19201 1930 19401 1950 1960 1970 1980 1990 2000 2010 Bozeman 5,107 6,183 8,855 8,665L 11,325 13,361 16,670 21,345 22,660 27,509 37,2811 Gallatin County 14,079 15,864 16,124 18,269 21,942 26,045 32,505 42,89 50,463 67,831 89,513 State of Wnlana 376,053 348,889 97,606 559,4561 591,024 674,767 694,409 786,690 799,065 902,195 989,415 Census Pow aEim E'mte5' Cenus %Change April 1,2010 20€19 2048 2U07 2048 2005 2084 Apra 1,2DO0 20w-2010 GeopWhy Gallatin County 89,513 90,343 89,824 87,359 84,489 80.748 77,472 67,831 32% 130grade 7,3139 8.192 8.185 8.047 7,842 7,343 7,304 5,728 29% Bozeman 37,280 39.282 39.442 37,981 38.981 35,012 33,578 27.509 35.50% Manhattan 1,520 1,877 1.822 1,541 1,557 1,513 1,520 1,398 8.80% Three Forks 1,889 1,970 1.928 1,917 1,925 1,945 1,920 1,726 8211% West Yelowsione 1,271 1.502 1.511 1,435 1,283 1.261 1,263 1.177 8.00% Baance of Gallatin Cty 40,164 37,720 37.138 38,438 35.101 33,714 31.689 30,293 32.30% Taken Juty 1 of respective year Source:U.S.Census Bureau,Population Estimates Program and Census information In addition to population growth, the City of Bozeman continues to grow in geographic size. In order to accommodate the increasing population and business growth,new land for residential,commercial and industrial development has been annexed into the City. In 1990,the City was approximately 6,420 acres(10 square miles)in size.By the end of 2009,the City was approximately 12,318.9 acres(19.25 square miles) in size resulting in a 91 percent increase in size over the past 19 years. The recent two years have only seen annexation rates of 0.43 acres in 2009 and 0.00 acres in 2010. The Bozeman DPCD received three annexation applications in 2010;all three remain under review, The City has a reserve of developable land within its current boundaries, Asz O_-%XR ron to the G'iry Acmes): 1990-8010 1990 1991 1992 1993 1994 1995 10-38 0.00 85.92 31.36 11.92 540.24 1995 1997 1998 1999* 2000 2001 11.50 958.96 90.04 104.06 632.09 794.06 2002 2003 2004 2005 2006 2007 222,75 186.58 484.47 444.50 716.80 1 468.26 2008 2009 2010 103.50 0.43 0.00 BiidgerAppraisils Jtnc. .�:: 19 Keith Q"Rciil .MAI Bozeman is characterized by a smaller portion of families and an average household size somewhat smaller than Gallatin County as a whole. Bozeman has an average household size of 2.27 people,while the average household size for Gallatin County is 2.49 people.lust over half of Bozeman households are families compared to 63% countywide.Bozeman also exhibits a significantly lower homeownership rate than the county as a whole,primarily due to the student body of Montana State University. The population of Bozeman is considerably younger than Gallatin County as a whole,and even more so in comparison to the State of Montana. Again this shows the significant impact of Montana State University on Bozeman and Gallatin County.The estimated median age for Bozeman and Gallatin County residents in 2000 was 30.4 years and 32.9 years respectively.The median age for Montana residents for this time period was 36.4 years. In general,the City of Bozeman has a significantly higher educational attainment level than Gallatin County or Montana.Approximately 47%of Bozeman residents' ages 25 and older have a college degree,compared to 39%for Gallatin County and 25%for the State of Montana. Bozeman and Gallatin County have transformed over the past decade from a primarily agricultural based community to a tourism related community.The drive to the Bozeman and Gallatin County area has been due to the high quality of life that this area offers.This quality of life is due to low crime rates,the offering of many cultural experiences and abundant outdoor activities.Having many outdoor activities is due to excellent snow skiing developments,world class fly fishing rivers and streams,miles of hiking trails and land for almost any other outdoor recreation that comes to mind. Economic Factors: Historically,Bozeman has been somewhat different than the rest of the State of Montana and the nation as a whole economically speaking.One of the primary reasons of this difference is the fact that there are not a large number of employers who employ a significant amount of the population. For example,other areas of Montana,like Missoula, are very dependent on the lumber industry and when the lumber industry slowed,Missoula felt the impact.In contrast,the primary employer in Bozeman is Montana State University. The economy of Bozeman and Gallatin County is both broad based and diverse,with 5,305 establishments that employ over 42,000 people.Major sectors of the economy include industries in the areas of construction, government,manufacturing,technology,retail service and agriculture which all play significant roles. The largest single employer in the area is Montana State University(MSU)that employs over 3,500 people as permanent faculty/staff and graduate teaching/research assistants.MSU also employs over 2,000 students in part-time jobs.In the Fall of 2011,the student enrollment at MSU was approximately 14,000. The student body of MSU has a significant effect on the local economy. Other significant employers in the county include the State of Montana, Gallatin County,the City of Bozeman,Bozeman Deaconess Hospital,RightNow Technologies and Wal-Mart. As the county's employment base continues to diversify,the local economic health will be buffered from a downturn in any of the county's key industries. Brid`erAppaisal%lnc. 20 Keith O'Reilh•_AIAI In 2009 the average annual wages in Gallatin County was 533,253,which was slightly below the statewide average of 533,762.Residential rent levels in Gallatin County have remained fairly stable in previous years due to the presence of Montana State University. Since 2008 we have seen a slight decline in rental rates however these rates stabilized quickly due to the foreclosures in the market and the continued growth of Montana State University, Overall,economic growth has been much stronger in Bozeman and Gallatin County than statewide;earnings increased 116%over the 1989 to 1 998 period but increased only 60%in all of Montana during this period. Historically the sectors in Gallatin County and Bozeman that have shown the most substantial growth include agricultural services,construction,manufacturing,finance,insurance,real estate and lodging. From February 2010 to February 2011,Montana's non-agricultural employment increased by 0.5 percent to approximately 417,300 employees. The largest increases were in the heavy and civil engineering construction sector (14.7%), the administrative support 1 professional business sector(10.5%),the employment service sector(10%)and the accorrnnodation hospitality sector(9.7%).During this same time period,the wood manufacturing industry saw employment decreased by 300 jobs,or 11.50 percent.The construction building sector,from February 2009 to February 2010,saw employment decreased by 700 jobs or 12.5 percent. The largest sectors of employment in Montana for February 2011 was the trade,transportation&utilities sector(approx. 85,600 employees),government (88,800 employees),education&health services(64,300 employees)and leisure&hospitality(54,100 employees), In February 2011,Montana was ranked 14`x'in the Nation at a 7.4%unemployment rate. Gallatin County recorded a slightly higher unemployment rate of 7.5%in February 2011. Gallatin County's labor force is currently estimated at 46,782 employees. Gallatin County has the third largest labor force in Montana's 57 counties. At the time of the 1990 Census,the City of Bozeman had 9,117 dwelling units in the City limits.By the 2000 Census that number had increased to 11,577 dwelling units. This represents a 27%increase in the City's housing stock in 10 years. As shown in the table below,residential building permit activity in the City of Bozeman has decreased since its high in 2005. Over the decade 2001-2010,single-household units have remained the most popular housing type permitted at approximately 37.58%,followed by multi-household units at 26.99%.Of the 208 housing units permitted in 2010,69.231%were for single-household residences,9.62%for townhomes, 1.92%for duplexes, 1.92%for fourplexes, 17.31%for multi-household units,and 0%for manufactured homes and triplexes. Additionally in 20I0 there were no Accessory Dwelling Units permitted. Since 2005 the City has seen the amount of permits issued decrease from a high of 955 to a low of 182 permits in 2009. Furthermore,the amount of permits issued in 2009 is similar to the amounts issued in the early 1990s. Bridger Appraisals Inc. 21 ltieiih O'Reilly,hl A[ Annual Decade 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total Peacent ae Percentage Single-household 229 259 215 260 265 257 214 93 71 144 2,007 69.23% 37.58% Townhouse 0 28 52 70 63 63 71 35 12 20 394 9.62% 7.389/a Duplex 51 37 108 144 141 58 80 30 0 4 649 1.92 a/o 12.15% xi lex 3 1 6 12 45 105 45 33 9 3 0 261 0.00a/0 4.89% F-L, lex 12 16 44 120 100 92 44 32 32 4 492 1.929/o 9.210/0 i4ti-household 71 132 146 235 281 155 314 43 64 36 1,441 17,31% 26.99% Manufactured home 20 25 36 7 0 0 8 0 0 0 96 0.009/. 1.809/a Total 386 503 613 881 955 670 764 242 182 208 5,340 100.00% 100.009/o Economic Development: Economic development can also be measured by the amount of new commercial and institutional construction activity within the City. In 2007, a number of major commercial developments were approved and pennitted for construction, including: CFT Office Building(71,295so; City of Bozeman Intermodel Parking Facility (13,578sf); Costco Gasoline Facility (6,300sf); Social Security Administrative Building (5,399sf); and Owenhouse Ace Hardware(39,114sf). The North 19"' Avenue Corridor has evolved as a significant area of commercial real estate development in Bozeman. In 2007 the following retail stores and restaurants opened along North 19'x' Avenue: Sportsman's Warehouse,IHOP,Lowe's,Bed Bath&Beyond, Staples,World Market and Linen's&Things. Since the beginning of 2009 Linen's and Things has gone out of business ( REI has taken their place), Sportsman's Warehouse was bought out by Wholesale Sports and Old Navy has also gone out of business. Additionally,the Borders location in Bozeman has been renovated for two new tenants. The Safeway grocery chain (58,000sf) was completed in December of 2011 and Kohls(55,363sf)department store was completed in October of 2011. At the Montana State University campus a$10 million football stadium expansion was completed in the Fall 2011. Other developments to Montana State University that had significant development in Bozeman included a new Molecular Biology Center ($454,000), a Health and Physical Education Center ($4.9 million), the Black Box Theater ($1.2 million), the Marsh Laboratory ($2.0 million), the biology building ($25 million), the Gaines Hall renovation($28.5 million)and the new USDA Ag Research Building and Teaching Facility($36.5 million). Significant developments to the City of Bozeman over the past five years have included an addition to Fire Station No. 1 (S3.5 million), police station ($400,000), additions to the waterlwastewater treatment plants ($32.2 million), additions to city hall($3.0 million),the completion of the Downtown Parking Garage($12 million), the construction of the Fire Station No. 3 and Gallatin County 911 Dispatch Center in Bozeman(approximately$7.1 million),a new water reclamation facility(S32 million), renovation of the old City of Bozeman Library into the new City Hall (S2 million),the construction of the Gallatin County Detention Center(S32 million)and both expansions of the landfill building located at the old landfill(5300,000)and of the vehicle maintenance building/Stream Line bus barn . Brridger Appraisals Inc. <.` 22 Keillt O'Reilly,NiAI Market Trends For Single Family Houses in the City Limits of Bozeman (Sales Price Range-$150K to S550K) Year #of Units Sold Avg.List Price Avg.Sales Price 2004 390 $253,334 $251,247 2005 453 $290,043 $287,423 2006 355 $326,242 $320,395 2007 311 $321,771 $313,226 2008 292 $311,222 $300,745 2009 284 $281,523 $268,673 2010 311 $276,464 $265,796 2011 336 $271,553 $261,625 2012 thru April 30 97 $281,753 $273,493 The preceding data was supplied by the Southwest Montana MLS.The data shows that the market in Bozeman peaked sometime in late 2005 early 2006.The data is inclusive of single family residences within the City Limits of Bozeman that are on parcels less than one acre and had values between$150,000 and$550,000. The data clearly shows an average decline in value from the peak in 2006 through 2010 of 17%. The sales volume in 2010 was equal to the volume attained in 2007. The other interesting fact is the sales price to list price ration;at the height of the market in 2005 and 2006 sales were closing within about 2%of list price;in 2009 sales closed at approximately 5%of list price and in 2010 sales closed at approximately 4%of list price. Tourism: Yellowstone National Park is a significant generator of visitation to Bozeman. Yellowstone visitation has gradually increased over the years, ranging from 2,752,346 visitors in 2001 to a record number of visitors in 2010 of 3.6 million. Yellowstone was the first U.S. national park, and with 3,472 square miles of land is larger than Rhode Island and Delaware combined. It features an active volcano,more than 300 geysers,approximately 290 waterfalls and the 136 square mile Yellowstone Lake. Through the National Park Service, the park employs around 340 people year-round and 400 during its peak summer season. In addition, approximately 3,700 people work for concessionaires operating such services as lodging,foodservice,retail and transportation. The Big Sky resort area is located approximately 45 miles south of Bozeman. Skiing Magazine has listed Big Sky as the seventh best skiing resort in the nation and in April 2009 Big Sky was named North America's Favorite Resort by Onthesnow.com, the internet snow reporting website for the Mountain News Corporation, The area averages over 300 inches of annual snowfall, with skiing available November through April. In addition, Big Sky has evolved as more of a year-round destination over the past several years. Big Sky Resort was conceived and built by the late NBC newscaster,Chet Huntley. It first opened for skiing in 1974. In 1976,Michigan-based Boyne USA Bridger Appraisals Inc, 23 Keith O'Reilly,MA1 Resorts purchased the resort and has owned and managed it since then. Under the management of Boyne USA,Big Sky Resort continues to grow. In 1990, the resort invested S18 million in the Shoshone Condominium Hotel and the 46,000-square-foot Yellowstone Conference Center which can accommodate 950 people. In 1995, the Lone Peak Tram was built hoisting skiers to 11,150 feet and giving Big Sky one of the nation's largest total vertical drops at 4,180 feet. Big Sky completed the single largest development since the resort's inception in 2000 when the Summit at Big Sky, a luxury hotel condominium complex was constructed. The resort now offers 658 units,including guest rooms,suites, studios and condos. In 2001,Boyne USA announced a 10-year plan which will include$400 million in improvements to the Village and ski terrain at Big Sky. The ski terrain has grown from an original four ski lifts serving 18 runs to 21 lifts servings more than 150 ski runs. During the winter season,the resort offers winter activities such as snow shoeing and gives skiers/snowboards the opportunity to skilboard over 3,812 skiable acres and 150 runs. During the summer season the resort offers many outdoor activities such as mountain biking and horseback riding. Other activities in the Big Sky area include scenic lift rides,hiking,rock climbing,tennis,fly fishing and whitewater rafting. In addition,the scenic 18-hole, par 72 Golf Course at Big Sky was originally designed by Arnold Palmer and has a classic links style, winding along the banks of the West Fork of the Gallatin River. The golf course and entire area are populated with beavers,geese,deer,marmot,rainbow trout and moose. The golf course is also served by the Bunker Bar and Grill and a fully-equipped pro shop. Overall the Big Sky Resort hosts approximately 300,000 skiers per year. Another development near Big Sky is the Yellowstone Club,an exclusive vacation/residential development that has a $300,000 membership fee and a 522,000 annual fee. This development includes private skiing and golfing. In November of 2008, the Yellowstone Club filed for bankruptcy and in July 2010 was purchased by Cross Harbor Capital. Since bankruptcy, the Yellowstone Club has seen declines in property values of 25-30% and a decline in land value of 50%. However,the Yellowstone Club continues to lead the market in gross sale prices. Additional ski areas in Gallatin County include Moonlight Basin near Big Sky with an adjacent condo development, and Bridger Bowl, 15 miles to the north of Bozeman. Moonlight Basin is currently in bankruptcy proceedings and the affect of the bankruptcy have yet to be known. Also, the region's excellent fishing and other outdoor activities generate many visitors to the area. Glacier National Park, located near the northwestern corner of the state also generates lodging demand in Bozeman due to Bozeman's location between Glacier and Yellowstone National Parks. Other attractions in the Bozeman area include the Museum of the Rockies, Emerson Cultural Center, American Computer Museum("Compuseum")and the Pioneer Museum. The Bozeman Area Convention & Visitors Bureau has organized a Tournament Committee which brings to Bozeman ten to twelve amateur sporting events per year. These events are usually held at the facilities on the Bridger Appraisals hic. S: 24 Keith O'Reilly.ALAI Montana State University campus or at the Special Events Center in Belgrade, located seven miles west Bozeman. The events typically fill numerous area hotel rooms. Governmental Factors: The City of Bozeman is a City Conmlission/City Manager form of government with an elected Municipal Judge. These three entities form the legislative,executive and judicial branches of government.Five commissioners, elected with no party affiliation,make up the City Commission. They are elected to four year,overlapping terms and are part time officials.Terms are staggered,and elections are held every two years.The candidate who receives the most votes in an election becomes the Mayor the last two years of their term. The Bozeman Police Department consists of 40 sworn officers and six civilian employees.The Bozeman Fire Department includes the Fire Chief,Deputy Chief/Training Officer,and Deputy Chief/Marshall,seven Captains and eighteen firefighters and support staff.There are three fire stations,one located on South 19th Avenue,one located on North Rouse Avenue and one on Davis Lane.Both the fire and police protections are considered good. The State of Montana assesses an ad valorem property tax to run public schools and other government agencies. There is also a State levied income tax in Montana but there is no sales tax in the State. Zoning Activity: Gallatin County administers the zoning code for properties outside the city limits,but within the zoning doughnut. In general,planning and zoning regulations in the area are considered stringent.The Gallatin County Comprehensive Plan encourages development near existing cities and discourages those in more remote locations. Bozeman's Planning Department enforces zoning regulation within the City Limits. In addition,the City adopted a "Big Box"ordinance to limit the size and number of big box retailers. Consequently,Iow supply and high demand have had a significant impact on real estate values. As shown in the table below,the Department of Planning and Community Development processed 36 zoning applications in 2010 which is a decrease from 52 zoning applications in 2009—a decrease of 30.8%,Zoning projects include Site Plans,Conditional Use Permits(CUP),Planned Unit Development(PUD)Concept Plans and PUD Preliminary Plans. 1996 1997 1999 1919 2000 2001 2002 1200,112004 2005 12006 2007 2008 2009 2010 Site PLan 24 26 36 24 20 40 40 39 46 53 53 29 14 37 22 UP 6 14 25 12 14 14 12 16 11 14 14 6 5 14 13 PUD Cuncej2t P11n 1 4 6 0 1 4 9 5 6 6 6 2 0 1 1 Prehium-my PUD 1 3 7 3 3 4 6 6 2 7 7 2 1 0 0 ot11 32 1 47 1 74:E739 71 38 1 62 1 67 66 -65-] 80 7W]-3-91-20 1 52 1 36 BridgerAppnis.als]nti. V 25 Keith O'Reilly,MAT In 2010,DPCD also processed 9 Zone Map Amendments(ZMA),3 Master Site Plans,25 Final Site Plans, 1 Master Signage Plan,31 Reuse/Further Development applications, 3 Zone Code Amendments(ZCA),2 Variances,2 Appeals,36 Modifications to Approved Plans, 11 Special Temporary Use Permits,18 Improvement Agreements, 10 Condominium Conversions, 17 Informal reviews and no Sketch Plans. Subdivision Activity: Subdivision activity stalled in 2008,decreased in 2009 and slightly increased in 2010. In 2010,final plat applications for 136 lots were received(up from 10 in 2009)and preliminary plat applications for 14 lots were received(38 in 2008 and 9 in 2009). Since the beginning of 1996,approximately 6,139 new building lots have been created in the City. In 2010,the Department of Planning and Community Development processed 14 subdivision applications(15 in 2008 and 11 in 2009). Since the beginning of 1996,659 subdivision applications have been pro- cessed. 1996 1997 1998 1999 2000 2001 2002 2003 2004'2005 2006 2007 2008 12009 2010 Pre-a licadons 12 12 17 7 15 10 15 15 18 26 18 11 4 4 7 Minor Prel. Plats 3 10 9 8 6 9 9 7 5 11 7 3 3 3 2 Major Prel.Plats 9 8 13 5 10 6 8 7 10 12 12 7 2 0 1 Final Plats 13 11 18 25 15 12 16 18 19 17 30 21 6 4 4 Total 37 41 57 45 46 37 1 48 1 47 1 52 1 66 1 67 1 42 15 11 1 14 1996 1997 1998 1999 2000 2001 2002 24103 2004 2005 2006 2007 2008 2009 2010 re ary Plat Lots 219 416 513 333 258 671 700 413 661 1,637 6BU1,4341 38 1 6 14 final Plat Lots 248 1337 1278 1330 1265 1405 1343 1564 1581 1 495 11,2111861 1 61 1 10 136 Environmental Factors: Environmental factors consist of both natural and man-made features that can influence property values. These forces include but are not limited to climate,topography,natural barriers and transportation systems. Bozeman's climate reflects its mountain valley location.Bozeman,Gallatin County and the entire State of Montana truly have four seasons.Summers are pleasant and characterized by warts to hot days,cool nights and an abundance of sunshine, Humid conditions are infrequent.The average high temperatures in the summer are in the upper 80s and the average lows in the winter are in the tnid 20s to lower 30s. The average high and low monthly temperatures for December,January,and February are 34 degrees and 15 degrees,33 degrees and 14 degrees,and 39 degrees and 18 degrees respectively. Springs tend to come late in the Gallatin Valley. One third of the annual precipitation of 19.29 inches falls during May and June. The average annual mean snowfall in Bozeman is 72.1 inches and the average length of the growing season is 107 days.The climate of the county varies according to elevation,but it is generally characterized by relatively cold winters and warm summers.Typical operation costs that affect real estate are the inclusion of snow removal in the wintertime, Due to the fairly temperate summers,cool air conditioning costs are less;however,heating bills can be high due to the cold winter months. Bridget Appraisal,,lite. `'' 26 Keilb O'Reilly,h4A1 Bozeman is located in Southwest Montana and has access going east and west on U.S, Interstate Highway 90, Access to the south towards Yellowstone National Park and Salt Lake City is via U.S,Highway 191.Interstate 90, State of Montana and Gallatin County maintained roads provide access throughout the region and commercial air, truck and rail(commercial service only)transportation are adequate. Gallatin Field near Belgrade(seven miles west of Bozeman)is the second busiest airport in the state and provides adequate service to the region. Conclusion: In general,the outlook for Belgrade,Bozeman and the surrounding communities is good.Bozeman's economy is diverse and anchored by Montana State University.As far as the labor market,Bozeman has a young and very well educated work force.The duality of life and outdoor activity will continue to be one of the driving factors for population growth in the Gallatin Valley. Gallatin County has a wide variety of excellent outdoor recreational opportunities. There are cultural and additional recreational resources in Bozeman due to the presence of MSU,and the tourism industry in southwestern Montana is poised for continued growth. Current population trends continue in an upward direction and growth has been sustained over the past decade. There are no local employers or industries that are in imminent danger of changing unemployment levels.As well there are no perspective employers moving into the area that are going to create a demand for employees.I anticipate normal to steady growth,and no major change in population that would create a under supply or residential real estate. B idger Appraisals Inc, 27 filth O'Reilly,MAI TAXES AND ASSESSMENT ANALYSIS The State of Montana,through the Department of Revenue, is responsible for valuing all taxable real and personal property.Department of Revenue field offices accomplish this property valuation. State guidelines are followed to ensure property is appraised in a fair and equitable manner.According to the Department of Revenue,all three approaches to value are considered in the appraisal process. The amount of property tax paid is not determined solely by a property's value.The property's value is multiplied by a tax rate,set by the Montana Legislature,to determine its taxable value.The taxable value is then multiplied by the mill levy established by various taxing jurisdictions,city and county government,school districts and others, to provide services in the property's area. The following calculations are used to determine general property tax: Value x Tax Rate=Taxable Value Taxable Value x Mill Levy=General Property Tax The property tax process begins with an appraisal of the property. State law requires the Department of Revenue to reappraise property periodically.The most recent reappraisal was completed on July 1,2008. Each year,the Department of Revenue field offices must certify the taxable value of all properties incorporated within the boundaries of each existing tax jurisdiction or school district.This valuation is then submitted to the taxing jurisdictions and the county commissioners. The taxing jurisdictions then set mill levies based on these values and the budget required to provide the necessary services.The levy is calculated by dividing the necessary budget by the taxable value. In addition to local levies, there are statewide mills mandated by the Montana Legislature to provide school equalization and funding for the university system. The real estate taxes have not been assessed and are unknown at the present time since the subject property is owned by the City of Bozeman. 1 have no reason to believe there is any excessive tax burden on the subject property. Bridger Appraisals Lie, 28 Keith O'Reilly.NiAl SITE DATA AND ANALYSIS Location: 26 E.Mendenhall Street,Bozeman,MT 59715 Dimensions: See Attached Plat Map Land Area: Common---48,372sf Shape: Nearly rectangular Drainage: Appears Adequate Flood Zone: Census Tract: 7. The subject Is Not located in flood hazard zone. FEMA Map Number: 300028 0012C. FEMA Map Date: 07/15/88 Topography: Level Frontage: Common frontage along East Mendenhall Street Visibility: Good Landscaping: None Site Utility: Good Off-Site Improvements: Asphalt paved city(public)roads and concrete sidewalks. Street Access: Good-East Mendenhall Street,North Tracy Avenue and North Black Avenue Maintenance: Public Surface: Asphalt Sewer and Water: Sewer: City of Bozeman(Municipal) Water: City of Bozeman(Municipal) Utilities: NorthWestern Energy Curb/Gutter: Concrete Sidewalk: Concrete Streetlights: Public 2011 Real Estate Taxes: S Unknown Adverse Easements or None Noted Encroachments: Adjacent Uses: Primarily cormnercial retail IIridger Appraisals Ink:, i4' 29 Keitli O'Reilly,MAI SUBJECT PLAT MAP PRce 777, 9 O ! i CManll ,ta-Sb43626'M 'I 3-W W117'47N 232.60' tl aS 73.40' 8.26' �$ ja WENR&NRALL STREET'(Bo') • w -• CNIX--LS THORPE 2/45) --------- FN;'A6 r�nw•.,2a n�__ W27'47`E 150,20'---- •J 'E 17 gy res. c �P IK . 56,65• 30`26"E ayu 6 t FWD o a, I 56.65 r BLOck LWE s Y�rtNER ink '�, d o D. O5 k W PARTS OF LOTS 16-24 DLO lo6i 3-15 $ LOTS 18-21 1 iS,SOi Sq�l wt ����pp„di 21.]65'_fit ps N aC ~ Es .r pRCe !agte @� R F! Le q 3 / PMCEL C 2a'MtE,' ,'� PcRCEL @ RcS.vti�, Im -x�oa MBT51'1 321.65' 2aoa s�.a6' '> �,Na pg 21 15 tera5'zE ppp•r AG sevLM'7 e'E -- r 61 J, ' Subject common site= Lots 13-24 l3ridger Appraisal~Inc. ':�`.' 30 Keith O'Reilly,MAl FLOOD MAP tiY p <lak ai �� E C1als St Eeirch St t I-Junipar5l E Tam arack SA X10 Subject Erks4erl gt All E attonw St• I �r W Dursxsn ftd z E Pe h t p i� t � Short St IT rh LJ M W M ndAnhaFl51 E all St 111 � �;L-r lit ay a4 Huffine Lr, $4 c �.r,trrarF W 6a bcock St � iJlIV St a �7 CEt t 4 CD ID ag Y h—M on t us 1 It I rO � E Cie�veland Si a a � S 1 mL 1 fLJ rtielaF�t r$ ' 4 Ha+js S[ r"+ Gran 9tQ # ��ng U and St ' .a i Nor Flood Zone 1 Flood Zones SFHA(Flood Zone): Out Areas inundAid by-W-year flooding Within 250 ft. of multiple flood zone? No Areal outaideofthe 140 and 5oo year iboa Community: 300028 plains Community Name: BOZEMAN,CITY OF Areal inundalad by ioo-ffiear flooding Zone:X Panel:300028 00120 Panel Date: 07/15/19$8 Areas inundated by 100-year fboaing win FIPS Code, 30031 Census Tract: 0087.00 vorncly hazard This Flood Repbrt is for th sole beniflt of the Customer that ordered and paid Fbodwayardae For the Report and is bas :on th oroberty information provided by the customer.That customers use o this rebort is subiect to the terms acreed by FbodWay areas w in veloo iy hazard that customer when accessina this oroduct.No third aarty Is authorized to use or reiv on this rencrt for any aumose.NEITHER FIRST AMERICAN FLOOD Areae ofunddbermined but pen iblaflood DATA SERVICES NOR THE SELLER OF THIS REPORT MAKES ANY hazard REPRESENTATIONS OR WARRANTIES TO ANY PARTY CONCERNING Aram not mapped on any pubiebed FIRM THE CONTENT ACCURACY OR COMPLETENESS OF THIS REPORT INCLUDING ANY WARRANTY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.Neither FAFDS nor the seller of this Reoo shall have any liability to any third party For any use or misuse of this Report. Briduer Appraisal%Inc.V 31 Keith O'Reilly.MAI 4 , Subject site— Lots 13-24 214 AlLs I -e 4 t Conclusion: The subject site has many attributes that make it ideal to develop to its Highest and Best Use.The topography of the site is level to slightly sloping for adequate drainage. All utilities are in place, NorthWestern Energy supplies electricity and natural gas. There is good access via East Mendenhall Street,North Tracy Avenue and North Black Avenue.The site also has good visibility from East Mendenhall Street.The site size is typical of sites developed into commercial retail and office space. Bridger Appraisals Inc, 32 Keith O'Reilly.NIAI ZONING AND GOVERNMENT RESTRICTIONS T=RI ' 'B -I 7 I � i Q < Ef Ilu``.rrsr Z Subject it— ._L ST .OLTVH..ST The subject site is zoned by the City of Bozeman as Central Business District(B-3). The subject improvements are legal and conforming. The intent of the B-3 central business district is to provide a central area for the commwunity's business,government service and cultural activities. Uses-.vitlun this district slnoixld be appropriate to such a focal center with inappropriate uses being excluded.Room should be provided in appro- priate areas for logical and planned expansion of the present district. f. It is tlne intent of this district to encourage higli volume,pedestrian-oriented uses in growynd floor space in tine"core area"of Bozemaan's central business district,i.e.,along main Street from Ga;al:nd to Rouse and to the alleys one-half block north and south from Main Street. Lower vohune pedestrian wises such as professional offices may locate on groimd floor space in the B-3 area outside the above defined core. Bridger Appraisals lue.i<_;, 33 Keith O'Reillv.MAI DESCRIPTION OF IMPROVEMENTS IMPROVEMENTS Building Type: Commercial condominium space Building Class: The Subject is a Class-B Constniction: Steel-Concrete Quality: Good Year Built: 2005-2009 Condition: New Remaining Useful Life: 50 years Areas &Ratios: Gross Building Area: 944sf FOUNDATION,FRA:NtE &EXTERIOEt Foundation: Concrete Slab Basement/Lower Level: None Frame: Steel Exterior: Brick Roof/Cover: Trussed-Commercial Membrane Bridger Appraisals hic. t 34 Keith O'Reilly,NTA1 INTERIOR Ceilings&Ceiling Height: 9' Floor Cover: Concrete-Unfinished Doors: Steel MECHANICAL.SYSTEMS Heating: Ceiling mounted HVAC Cooling: Ceiling mounted HVAC Hot Water: Gas Fired Hot H2o Electrical: Northwestern Energy Plumbing: Copper&PVC PROPERTY ANALYSIS Design&Appeal: The improvements are well designed and have good curb appeal.The condominium units within the parking garage have been well received by the market.The subject unit is the last condo unit to be sold.All the other units have transacted since being constructed. Occupancy: Currently vacant. Adjacent Uses: Primarily commercial retail B idger Appraisals Inc. 35 Keith O'Reilly.hIAI Conclusion: The improvements are in good condition and of good quality construction suffering minimal to no physical depreciation.No functional or external obsolescence was noted at the time of viewing. I364,er Appraisals Inc.C C 36 Keith O'Reilly,MAl PHOTOGRAPHS OF THE SUBJECT View of the interior of the subject unit. Photo taken on July 12,2012 by Keith O'Reilly,MAI. d View of the interior of the subject unit. Photo taken on July 12,2012 by Keith O'Reilly,MAI. Bridger Appraisals Inc. C 37 Keith O'Reilly,NIAI HIGHEST AND BEST USE Highest and Best Use is defined in the fourth edition of The Dictionary gfReal Estate Appraisal(Appraisal Institute, Chicago,2002),as follows: The reasonably probable and legal use of vacant land or an improved property,which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the Highest and Best Use must meet are legal permissibility,physical possibility,financial feasibility,and maximum productivity. Highest and Best Use analysis is a three-step process. The first step involves the Highest and Best Use of a site as though vacant. The determination must be made to leave the site vacant or improve it. If the conclusion is to improve the site,the second step is to detennine the ideal improvement. The final step is a comparison between the ideal improvement and the existing improvement. At this point, the detennination must be made to maintain the property in its present form or to modify the improvements to more closely conform to the ideal use, Highest and Best Use may be defined as the reasonably probable and legal use of vacant land or improved property, which is physically possible,appropriately supported,financially feasible,and that results in the highest value. 1. Permissible Use,What uses are permitted by zoning and other legal restrictions? 2. Possible Use.To what use is the site physically adaptable? 3. Feasible Use.Which possible and permissible use will produce any net return to the owner of the site'? 4. Maximally Productive. Among the feasible uses which use will produce the highest net return, (i.e.,the highest present worth)? Conclusion Highest and Best Use As Improved: Is to build out the interior of the subject unit and use as professional office space. 4Boyce,op,cit.,p, 135. Bridger Appraisais]nc. [' 38 Keilh()'Reilly,MAI THE APPRAISAL PROCESS Typically,real estate can be valued by applying three approaches. Cost Approach: That approach in appraisal analysis that is based on the proposition that the informed purchaser would pay no more than the cost of producing a substitute property with the same utility as the Subject property. It is particularly applicable when the property being appraised involves relatively new improvements that represent the Highest and Best Use of the land or when relatively unique or specialized improvements are located on the site and for which there exist no comparable properties on the market.5 Sales Comparison Approach: Traditionally, an appraisal procedure at which the market value estimate is predicated upon prices paid in actual market transactions and current listings; the fonner fixing the lower limit of value in a static or advancing market(price wise),and fixing the higher limit of value in a declining market; and the latter fixing the higher limit in any market. It is a process of analyzing sales of similar recently sold properties in order to derive an indication of the most probably sales price of the property being appraised.The reliability of this technique is dependent upon (a) the availability of comparable sales data, (b) the verification of the sales data, (c) the degree of comparability or extent of adjustment necessary for time differences and (d) the absence of non-typical conditions affecting the sale price.' Income Approach: That procedure in appraisal analysis that converts anticipated benefits (dollar income or amenities) to be derived from the ownership of property into a value estimate. The Income Approach is widely applied in appraising income-producing properties, Anticipated future income and/or reversions are discounted to a present worth figure through the capitalization process.' In essence,all approaches to value(particularly when the purpose of the appraisal is to establish market value)are market data approaches since the data inputs are presumably market derived. 'Boyce,op,cit.,p.67. 'Boyce,op,cit.,p.245,255. 'Boyce,op.cil.,p.343. Bridger.4pprtisals Inc. lc:; 39 Keith O'Reiily.MAT SALES COMPARISON APPROACH The Sales Comparison Approach is one of the three traditional approaches to value. it is also referred to as the Market Data or Market Comparison Approach, It is defined as follows: That approach in appraisal analysis which is based on the proposition that an informed purchaser would pay no more for a property than the cost to him acquiring an existing property with the same utility. Basic real estate appraisal principles involved in this approach are the principles of substitution, anticipation and contribution. The 'principle pf substitution"is the underlying premise from the Sales Comparison Approach and its definition is very similar to that of the approach itself. This principle fundamentally states that the value of a property is influenced to a large extent by the prices being paid in the open market for similar properties offering the same utility. It is irrational for somebody to pay an amount of money for a property that is greater than the price at which an equally desirable substitute may be acquired. The market,which is made up of substitute properties, thus represents alternatives for a prospective buyer and tends to set the range of values. The "principle of anticipation"states that prices paid for property is a reflection of the market's expectation of future benefits that accrue from ownership, It follows,then, that if the property is old and nearing the end of its economic life, or for another reason has a dismal future, the present worth of all future benefits would be considerably lower than if the property was new and could generate benefits for a longer period of time. The value of real property, therefore,can be considered the present worth of all future benefits that can be derived from its ownership. The 'j7rinciple of contribution"'is the underlying rationale for the adjustment process in the Direct Sales Comparison Approach. This principle views the sale price of real property as the sum of all value contributing characteristics. The individual characteristics are measured by the effect their presence or absence has on the total sale price. Not only is their mere presence important,but also the quantity and quality in which they exist. There are other appraisal principles involved in Direct Sales Comparison, but the three mentioned are considered most pertinent. "Boyce,op.cit.,p.255. Bridger Appraisals Ine. k 40 Keith O'Reilly,MAT IMPROVED SALE NO. 1 n Property Type: Commercial Retail Date of Sale: Unknown Location: Mendenhall and Tracey Sale Price: $255,000 County: Gallatin Grantor: City Center Commerce LLC Financing: Cash to seller Grantee: Johnstone Marketing Time: Unknown Recording Date: 07109/2010 Property Rights: Fee Simple Recording Doc#: 2365045 Asking: Unknown Confirmed With: Bill Johnstone Legal Description: Unit R-3 of Mendenhall Marketplace Condominiums situated within the Retail Unit of IntermodaI Commerce Condominium located in COS C-1-F(Lots 13-24,Block F Original Plat of Bozeman)in the City of Bozeman. SITE DATA Site Size(Acres): Common Site Topography: Level Site Size(SF): Common Zoning: B-3 Dimensions: Common Landscaping: Minimal Frontage: Mendenhall Parking: Surface Parking Access: Average Water: Municipal Corner: No Utilities: NorthWestern Energy 13ridger Appraisals Inc. V 41 Keith O"Reilly.MAI IMPROVEMENT DATA Gross Building Area(SF): 1,4I7sf Condition: New Year Built: 2008 Other Improvements: INCOME DATA No financial concessions were noted. PRICE PER SF: SALE PRICE PSF= $179.95 NOTES This is the sale of a corner unit retail condominium suite located in the new parking garage for the central business district.This is shell space only;there are no interior TI's. This is the last available unit in the development for sale. Bridger Appt sisals Ine. 42 Keith O'2eilh,MA1 IMPROVED SALE NO. 2 - � f Property Type: Restaurant Date of Sale: Unknown Location: 24 North Tracy Ave Sale Price: $495,000 County: Gallatin Grantor: City Center Commerce LLC Financing: Cash to seller Grantee: Chow Hound LLC Marketing Time: Unknown Recording Date: 08/13/2009 Property Rights: Fee Simple Recording Doe#: 2339645 Asking: Unknown Confirmed With: Jerry Gossel Phone Number: 406-587-5044 Legal Description: Unit R-I and R-2 of Mendenhall Marketplace Condominiums situated within the Retail Unit of Intermodal Conunerce Condominium located in COS C-1-F(Lots 13-24,Block F Original Plat of Bozeman)in the City of Bozeman. SITE DATA Site Size(Acres): Common Site Topography: Level Site Size(SF): Common Zoning: B-3 Dimensions: Colmnon Landscaping: Minimal Frontage: Mendenhall Parking: Surface Parking Access: Average Water: Municipal Corner: No Utilities: NorthWestern Energy 1364,er Appraisals lne. 43 Keith O'Reilly,MA1 IMPROVEMENT DATA Gross Building Area(SF): 2,793sf Condition: New Year Built: 2008 Other Improvements: INCOME DATA No financial concessions were noted. PRICE PER SF: SALE PRICE PSF= $177.23 NOTES This is the sale of an end unit retail condominium suite located in the new parking garage for the central business district.This is shell space only;there are no interior TI's. Bddger Appraisals Inc. 44 Keith O'Reillc,h9 Al IMPROVED SALE NO. 3 Property Type: Office Date of Sale: 12/10/2008 Location: 26 East Mendenhall St Sale Price: 5235,320 County: Gallatin Grantor: City Center Commerce LLC Financing: Cash to seller Grantee: Edith Jane and Christopher John Marketing Time: Unknown Gillette Recording Date: 04107/2009 Property Rights: Fee Simple Recording Doc#: 2326394 Asking: Unknown Confirmed With: Keith O'Reilly Phone Number: 406-587-2452 Legal Description: Unit R-7A of Mendenhall Marketplace Condominiums situated within the Retail Unit of lntermodal Commerce Condominium located in COS C-1-17(Lots 13-24,Block F Original Plat of Bozeman)in the City of Bozeman. SITE DATA Site Size(Acres): Common Site Topography: Level Site Size(SF): Common Zoning: B-3 Dimensions: Common Landscaping: Minimal Frontage: Mendenhall Parking: Surface Parking Access: Average Water: Municipal Corner: Yes Utilities: NorthWestern Energy Bridger Appraisals Inc. 45 Kciflh O'Reilly.MAI IMPROVEMENT DATA Gross Building Area(SF): 1,334sf Condition: New Year Built: 2008 Other Improvements: INCOME DATA No financial concessions were noted. PRICE PER SF: S,kLE PPJCE PSF= $176.40 NOTES This is the sale of a corner unit retail condominium suite located in the new parking garage for the central business district. This is shell space only;there are no interior TI's. I3ridger Appraisals Inc. iC; 46 Keiih O'Reilb.KJAI IMPROVED SALE NO. 4 a � r Property Type: Commercial Office Condo Date of Sale: 0111212011 Location: 6I4 Ferguson Drive Suite 3 Sale Price: $118,000 County: Gallatin Grantor: Brian&Carolyn Gorman Financing: Cash Grantee: JBP Real Estate LLC Marketing Time: 92 Days Recording Date: 02/25/2011 Property Rights: Fee Simple Recording Doe#: 2383180 Asking: $118,000 Confirmed With: Cameron Holt Phone Number: 406-290-0127 Legal Description: Unit 31 in Building 48 of Pinewood Professional Center Condo Minor Sub 261,Gallatin County,Montana SITE DATA Site Size(Acres): Common Site Site Topography: Level Site Size(SF): Common Site Zoning: CC&R's Dimensions: More or less Rectangular Landscaping: Good Frontage: None Parking: Surface Access: Good Water: Community Corner: Yes Utilities: NorthWestern Energy I31idger Appraisals hie. 0 47 Keith O'Reilly.MAT IMPROVEMENT DATA Gross Building Area(SF): 810 Condition: Good Year Built: 2002 Other Improvements: INCOME DATA PRICE PER SF: SALE PRICE PSF= $145.67 NOTES This is a small main level unit located just off of Ferguson in a successful development.It appears as though the purchaser has plans for a major interior remodel. Bridger Appraisals]nc. 48 Keith O'Reilly.NIAI IMPROVED SALE NO. 5 Property Type: Commercial Retail Date oi'Sale: Unknown Location: 11 East Main Street Sale Price: $385,000 County: Gallatin Grantor: Vickie Miller Financing: Cash to seller Grantee: DB LLC Marketing Time: Uknown Recording Date: 09/17/2010 Property Rights: Fee Simple Recording Doc#: 2370353 Asking: Unknown Confirmed With: Mike McKenna Phone Number: 406-581-0792 Legal Description: Unit A of Barnett Condominium-East 5' of Lot 4 and West 26' of Lot 5 in Block F of Original Plat,Bozeman,MT. SITE DATA Site Size(Acres): Common Site Site Topography: Level Site Size(SF): 4,650sf Zoning: B-3 Dimensions: More or less Rectangular Landscaping: Minimal Frontage: Main Street Parking: Street Access: Good Water: Municipal Corner: No Utilities: NorthWestern Energy 13ridger Appraisals hic. 49 Keilh O'Rei[ly,MA] IMPROVEMENT DATA Gross Building Area(SF): 1,764sf main Level+852sf Condition: Good Mezzanine +2,360sf of basement storage Year Built: 1890 Other Improvements: INCOME DATA No financial concessions were noted. PRICE PER SF: SALE PRICE PSF� $147.17 NOTES This property was actually under contact twice at the same price,There is a mezzanine area of 852sf that was unused at the time of sale.According to the Broker the purchaser may sell this space to an adjacent attorney for 5100,000 or $117.3 7psf. Bridger Appraisals Inc. 50 Keith O'Reilly.MA1 LOCATION OF COMPARABLE SALES '�baWWi 2-S 6P 1 a Comp 2 Comp 1 `` Com p 4 Subject f Com p 3 BOZEMA f Col-lip 7 it en - -LU IRL+Jl.�A�AIITJA TE � � al.l°1i1�1 _ 1 Bridgcr AppraiFsiU Ine. $1 Keith O'Reilh'.MAI Units of Comparison-Property Valuation: Since the subject property is a condominium unit,value is derived from the square footage of the improvements. It is logical to use the square footage of the gross building area to derive a value from other comparable sales. The preceding sales have been analyzed and compared with the subject property. I have considered adjustments in the areas of •Property Rights Sold •Economic Trends(time) •Financing • Location • Conditions of Sale •Physical Characteristics The first three sales support a market value for"shell"space in the Bozeman Parking Garage. However,all of these units are on the main level and more retail oriented versus the Subject being office oriented.The actual market value and sales price of the units in the parking garage have remained relatively stable.The three sales indicate value of $179.95psf,$177.23psf and$176.40psf. Sale 3 has actually resold as part of the dental practice within the unit.The only major adjustment to comparable Sales 1-3 is for location of the second floor which carries with it a different use of office versus retail. There are no recent sales of first and second floor office to pair up and give a indication of the market reaction. However,when the market office was good back in 2000 there were documented sales in Ken LeClair's subdivision that showed a difference of about 20%for second level versus main level.Applied to the Subject,this would indicate a value of$175.00psfx.80 or$140,00psf. The only other real method of supporting a value difference is looking at potential rent.Currently main level retail is going to support approximately$15.00psf NNN in the downtown market were as second level office is going to be closer to S11,00psfNNN a difference of approximately 26%.Applied to the Subject,this would equate to $I75.00psf x.74=$I29.54psf. Sale 4 was added only because of the smaller size of the unit, The location is not in the CBD.The purchaser totally removed all the interior TI's and basically renovated from a shell state.The indicated value from this sale was $145.67psf;however,the space was usable at the time of demolition. Bridger Apprai als Inc. 52 Keith O'Reilly.MA1 I have reconciled the market value of the subject property between 5129.00psf and$140.00psf at$135.00psf or $127,440 rounded to 5127.000. Sales Comparison Approach Conclusion Based on the above analysis,I have reconciled to a"As-Is"value of$127,000,as of July 12,2012,and subject to the Limiting Conditions and Assumptions of this appraisal. $rideer Appraisals hie. " 53 Keith O`61h.,h4At FINAL RECONCILIATION The process of reconciliation involves the analysis of each approach to value.The quality of data applied and the significance of each approach relating,to market behavior and defensibility of each approach are considered and weighed. Finally,each is considered separately and comparatively with each other. Sales Comparison Approach The quality and quantity of data for the sales comparison approach is good and the indication of value is reasonable and reliable.All of the commercial condominiums in the Bozeman Parking Garage sold as shell space. Quite frankly there are no other second floor office condominiums that are unfinished on the interior that have sold in the Bozeman market.The values have remained relatively stable as the most current sale is more or less equal to the first sale. Value Conclusions The quality and quantity of market data is good and the indication of value is reasonable and reliable. The most consideration has been given to the sales comparison approach to value. Based on the data and analyses developed in this appraisal,I have reconciled to the following value conclusions,as of July I2,2012,subject to the Limiting Conditions and Assumptions of this appraisal. Reconciled Value Conclusion: Premise:"As Is" Estate:Fee Simple Value Conclusion: $127,000 As a result of my investigation and analysis,it is my opinion that the Market Value of the Fee Simple Interest, 6°As Is,"in the subject property,as of July 12,2012 is: ONE HUNDREED TWENTY SEVEN THOUSAND DOLLARS ($127,000) BridgerAppraisals Inc. 0 54 Keith O'Reilly.NIAI CERTIFICATION As a result of a request for an appraisal assignment of the property,identified as: 26 E.Mendenhall Street#201 Bozeman,MT 59715 I certify: To the best of my knowledge and belief,the statements of fact contained in this report are true and correct. The reported analyses,opinions,and conclusions are limited only by the reported assumptions and limiting conditions,and is my personal,unbiased professional analyses,opinions,and conclusions. The appraisal assignment was not based on a requested minimum valuation,a specific valuation,or the approval of a loan. I have no present or prospective interest in the property that is the subject of this report,and I have no personal interest or bias with respect to the parties involved. My compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client,the amount of the value estimate,the attainment of a stipulated result,or the occurrence of a subsequent event. My analyses,opinions,and conclusions were developed,and this report has been prepared,in accordance with the standards and reporting requirements of and in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute,and the Uniform Standards of Professional Appraisal Praclice(USPAP),published and copyrighted by the Appraisal Foundation, Keith O'Reilly,MAI,has made a personal viewing of the property that is the subject of this report. No person,other than the appraiser signing this report,provided significant professional assistance to the persons signing this report. Further,the value reported is based upon cash in U.S.dollars or in terms of similar financial arrangements. Bridger Appniisals Inc. 55 Keith O'Reilly.MA1 The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. As of the date of this report,I,Keith O'Reilly,MAI,have completed the continuing education program of the Appraisal Institute. I have performed no services,as an appraiser or in any other capacity,regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment. As a result of my investigation and analysis,it is my opinion that the Market Value of the Fee Simple Interest, "As Is," in the subject property,as of July 12,2012 is: ONE HUNDREED TWENTY SEVEN THOUSAND DOLLARS ($127,000) Respectfully Submitted, Keith O'Reilly,MAI General Certified Appraiser#400 State of Montana Bridger Appraisals Inc. 56 Keiih O'Reilly.MAl ADDENDUM I3ridsTer Alspraisals lne. V K6117 O'Reilly,NIAl Keith O'Reilly, MAI State of Montana General Certificate#400 Expires 3-31-2013 Qualifications EDUCATION • Educated in the Bozeman and Billings Public Schools Systems,Bozeman and Billings,MT. • Obtained a B.S.degree in Business Marketing from Montana State University in 1992. APPRAISAL EDUCATION COURSES: • Successfully completed the following courses and seminars from Appraisal Institute: Courses from Appraisal Institute Seminars from Appraisal Institute I l 10 Appraisal Principles "The New URAR" 1 120 Appraisal Principles "High Tech Appraisal Office" 1210 Appraisal Principles "Fundamental of Relocation" 1410 Appraisal Principles "Understanding Limited Appraisals Residential" 1420 Appraisal Principles "Understanding Limited Appraisals General" 310 Basic Income Capitalization "660-Small Hotel/Motel Valuation" 430 Standards of Professional Standards Part C "620-Mixed Use Valuation Analysis" 510 Advanced Income Capitalization "Appraising Manufactured Housing' 520 Highest&Best Use and Market Analysis "Data Confirmation and Verification Methods' 530 Advanced Sales Comparison and Cost Approaches "Partial Interest Valuation-Undivided" 540 Report Writing and Valuation Analysis "Appraisal Review General' 550 Advanced Application "2004 7hr USPAP Update" + Completed Ted Wlriuner's Comprehensive Appraisal Work Shop,Dallas Texas APPRAISAL.EXPERIENCE: I have specialized in the appraisals of residential and commercial properties located in Gallatin County, Montana since May of 1992. My experience includes an apprenticeship with Henry Neils,MAI&Patrick Nolan,MAI,SRA. Appraising residential properties including single family,2-4 family,and condominiums,industrial sites and buildings,commercial sites and buildings,and insurable value appraisals. I am a native of Bozeman and have resided in the area for approximately 38 years.I served as a board member for the Montana Board of Real Estate Appraisers from 2001 -2007 and was the Chainnan of the Screening Panel Committee for the Board of Appraisers. I have completed work for the following: American Bank,Wells Fargo Home Mortgage,Prudential Relocation,First Interstate Bank, Valley Bank of Belgrade,United States Government General Services Administration,Big Sky Western Bank, Sterling Savings and Loan,First Security Bank of Bozeman,U.S.Bank,American Federal Savings Bank,Wells Fargo Bank,Bozeman Deaconess Hospital,Burlington Northern Santa Fe Railroad. Bridger Appraisals hic. <" Keith O'Reilly.MAI