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COMPLETE APPRAISAL 0 SUMMARY REPORT
of
Empire Building Materials, Inc., a Commercial Office/Industrial Warehouse Property
608 E. Main St.
Bozeman, Gallatin
MT, 59715
As of
February 21, 2005
Prepared For
City of Bozeman, Empire Building Materials, Ponderosa Land Development, &Martel
Construction
Prepared by
Ross Wenger,
Licensed Residential Appraiser
MT-753
and
Jerry R. Gossel,
Certified General Appraiser
MT-106
Appraisal Services
P.O. Box 1076
67A W. Nagy Blvd.
Bozeman, NIT 59771
File 4: 06-094
APPRAISAL SERVICES
.. .
P.Q. Box 1076 406-587-5044
67A Kagy Blvd. 406-587-5481
Bozeman,MT 59771 rossw @montana.com
February 27, 2005
City of Bozeman, Empire Building Materials, Ponderosa Land Development, & Martel
Construction
Re: Empire Building Materials, Inc.
608 E. Main St.
Bozeman, Gallatin County
MT, 59715
Dear City of Bozeman, Empire Building Materials, Ponderosa Land Development, & Martel
Construction
At your request,we have prepared an appraisal for the above referenced property. The purpose
of this appraisal is to estimate the market value of the subject property's fee simple estate for
business purposes. This appraisal is intended for the use of the client.
This is a Complete Appraisal. All applicable research and valuation analyses have been applied.
This is a Summary 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.
We certify that we have no present or contemplated future interest in the property beyond this
estimate of value. Your attention is directed to the Limiting Conditions and Assumptions,
located on page 8. Acceptance of this report constitutes an agreement with these conditions and
assumptions.
February 21, 2005
Page 2
In our opinion, the value of the subject property, as of February 21, 2005, was as follows:
Subject Property "As Is" Premise, Fee Simple Estate
Value Conclusion $2,400,000
Further, we estimate the market exposure period necessary for the subject to have achieved this
value to be 6-12 months.
Respectfully submitted,
Appraisal Services
"'''' 4a
-er,
Ross Wenger, T-753 erry, Gosse
Licensed Residential Appraiser egrtified General A&raiser--
TABLE OF CONTENTS
Summary of Important Facts and Conclusions..............................................................^.........^ ..... 5
AppraisalScope..............................................................................................................................
[JSP/19 Departures.,.~..---^^,'^_--_—.~...^~—.--^-------'--''~'~'~^^~'~^~'`~~—' 8
DepartureTable..............................................,............................................................................ 0
Limiting Conditions and Assumptions ^..^^.~--_--..~~'—~^---'~-^-'^^~--------'--^ g
Purposeand Intended Use/User.................................................................................................... T0
Definitionof Market Value.........^................................................................................................. 10
PropertyRights Appraised............................................................. ...._-.~^,-.............................. l|
RegionalMap............................................................................,^^^..^^-^^.'.^................................ 12
Market Area, Cify,Neighborhood, and Location Data................................................................. 13
PropertyDescription..................................................................................................................... lN
Subject Photographs.... .............................................................................................................22
Zoning...........................................................................................................................................27
Assessmentand Taxes .............................. ................................................'..........^.......................27
Sale/Transfer History...................^^-...................................... ......................................................2g
Highestand Best Use..................................................................................................^^_^-...... ...29
Valuation Methodology...---.—,._'....^^^-----...,^.,._--'—.',.._.^....^-^...^,._----_-.30
CostApproach ........................................................................... ..................................................3}
LandValue....................................................................... ........................................................3}
LandValue Conclusion.................... .................................................... ............^^,.^^^^_^^^~^^. 32
CostAnalysis.........................^................................................^.......................................... ...... 33
DepreciationAnalysis..........................................................^........^...........................................33
CostApproach Conclusion...............................................^.......................................................33
IncomeApproach......................................^...................................................................................35
1)/nec1 Capitalization Analysis......................................................_,.~...._.^^^~^_.^.^^^^. ............35
Potential Gross Income 0,G7 —.—,,~,,~.,,,,,_____^^^.______.____._____.__35
Incomeand Expense Statement.................................... ...........................................................42
IncomeApproach Conclusion...................................................................................................45
Final Reconciliation_~^^^___.,^,,.~.~,,,~,~____, ...........................................................46
ValueIndications..................................................... ................................................................46
ValueConclusion.................................. ...................................................................................48
CertificationStatement.................................................................................................................47
Addenda............................................ ...........................................................................................48
Appraisal Services 4
Summary of Important Facts and Conclusions
GENERAL
Subject: Empire Building Materials, Inc.
608 E. Main St.
Bozeman, Gallatin County
MT, 59715
Owner: Empire Building Materials, Inc
608 E. Main St.
Bozeman, MT 59715
Tax Identification: RGH2546
Date of Report: February 27, 2005
Date of Value: February 21, 2005
Property Rights Appraised: Fee Simple
Intended Use: Business Purposes
Intended User(s): Client
Appraisal Purpose: Market Value
Taxes/Parcel: $8,333.03, $4,208.41, $380.57
Total Taxes: $12,922.01
... P"ROPF TV
Land Area: Parcel#1, 23,225 SF/.533 Acres
Parcel #2, 31,654 SF/.727 Acres
Parcel#3, 10,281 SF/.236 Acres
Total: 1.50 Acres
Usable: 1.50 Acres
Improvements: Building Type: Commercial Office/Industrial Warehouse
Year Built/Rehabbed: 1955/1977
Condition: Average
Number of Stories: I
Gross Building Area: 31,762
Net Leasable Area: 31,762
Number of Units: 4
Zoning: B-3
Highest and Best Use The highest and best use of the subject, as vacant, is for
As Vacant: commercial retail/office development.
Highest and Best Use The highest and best use of the subject is as improved.
As Improved:
u ][ rraaC artarr -
Land Value: $1,057,000
Cost Approach: $2,490,000
Income Approach: $2,340,000
Appraisal Services 5
Reconciled Value Conclusion: Premise: "As Is"
Estate: Fee Simple
Value Conclusion: $2,400,000
Appraisal Services 6
Appraisal Scope
According to the Uniform Standards of Professional Appraisal Practice, it is the appraisers
responsibility to determine the appropriate scope of work. USPAP defines the scope of work as:
The amount and type of information researched and the analysis applied in an assignment. Scope
of work includes, but is not limited to,the following:
• the degree to which the property is inspected or identified;
• the extent of research into physical or economic factors that could affect the property;
• the extent of data research; and
• the type and extent of analysis applied to arrive at opinions or conclusions.
SCOPE OF WORK
Appraisal Type: This is a Complete Appraisal. All applicable research
and valuation analyses have been applied.
Report Type: This is a Summary 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.
Inspection: A complete inspection of the site was made, and
photographs were taken.
Highest and Best Use Analysis: A complete analysis of highest and best use, both as
vacant and as improved, was made.
Market Area and Analysis of A complete analysis of market conditions was made.
Market Conditions:
Valuation Analyses
Cost Approach: A complete cost approach was applied.
Income Approach: A complete income approach was applied.
Appraisal Services 7
USPAP Departures
The Departure Rule of the Uniform Standards of Professional Appraisal Practice allows for
appraisal development with less research and analysis than would typically be developed in a
complete appraisal.
Departure is designed to facilitate a more efficient appraisal development process when the
appraisal problem does not require the comprehensive detail and diligence of a complete
appraisal.
While numerous rules govern the use of Departure,the main criteria are a credible result and
appropriate detail for intended use of the appraisal.
Departure Table
Departures Table
Analysis Departure Description USPAP Reference
Sales Comparison Yes The sales comparison approach is applicable but not Standards Rule 1-4(a)
Approach necessary for a credible appraisal and has not been
developed.
L.......
Appraisal Services 8
Limiting Conditions and Assumptions
Acceptance of and/or use of this report constitutes acceptance of the following limiting
conditions and assumptions; these can only be modified by written documents executed by both
parties.
This appraisal is to be used only for the purpose stated herein. While distribution of this
appraisal in its entirety is at the discretion of the client, individual sections shall not be
distributed; this report is intended to be used in whole and not in part.
No part of this appraisal, its value estimates or the identity of the firm or the appraiser(s) may be
communicated to the public through advertising, public relations,media sales, or other media.
All files, work papers and documents developed in connection with this assignment are the
property of Appraisal Services, Information, estimates and opinions are verified where possible,
but cannot be guaranteed. Plans provided are intended to assist the client in visualizing the
property; no other use of these plans is intended or permitted.
No hidden or unapparent conditions of the property, subsoil or structure, which would make the
property more or less valuable, were discovered by the appraiser(s) or made known to the
appraiser(s). No responsibility is assumed for such conditions or engineering necessary to
discover them. Unless otherwise stated, this appraisal assumes there is no existence of hazardous
materials or conditions, in any form, on or near the subject property.
Unless stated herein, the property is assumed to be outside of areas where flood hazard insurance
is mandatory. Maps used by public and private agencies to determine these areas are limited
with respect to accuracy. Due diligence has been exercised in interpreting these maps, but no
responsibility is assumed for misinterpretation.
Good title, free of liens, encumbrances and special assessments is assumed. No responsibility is
assumed for matters of a legal nature.
Necessary licenses,permits, consents, legislative or administrative authority from any local, state
or Federal government or private entity are assumed to be in place or reasonably obtainable.
It is assumed there are no zoning violations, encroachments, easements or other restrictions
which would affect the subject property, unless otherwise stated.
The appraiser(s) are not required to give testimony in Court in connection with this appraisal. If
the appraisers are subpoenaed pursuant to a court order, the client agrees to pay the appraiser(s)
our regular per them rate plus expenses.
Appraisals are based on the data available at the time the assignment is completed.
Amendments/modifications to appraisals based on new information made available after the
appraisal was completed will be made, as soon as reasonably possible, for an additional fee.
Appraisal Services 9
Purpose and Intended Use/User
The purpose of this appraisal is to develop an opinion of Market Value of the property of
interest. The Intended Use of this appraisal is for business purposes, subject to the stated Scope
of Work,purpose of the appraisal, reporting requirements of this appraisal report form, and
Definition of Market Value. No additional Intended Users are identified by the appraisal.
Definition of Market Value
The definition of"Market Value", as defined by the Office of the Comptroller of Currency
(OCC) under 12 CFR,Part 34, Subpart C-Appraisals, 34.42 Definitions,the Board of Governors
of the Federal Reserve System (FRS) and the Federal Deposit Insurance Corporation in
compliance with Title XI of FIRREA, as well as by the Uniform Standards of Appraisal Practice
as promulgated by the Appraisal Foundation, is as follows.
Market value means 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 the consummation of a sale
as of a specified date and the passing of title from seller to buyer under conditions
whereby,
1. Buyer and seller are typically motivated;
2. Both parties are will informed or well advised,and acting in what they
consider their own best interest;
3 A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of financial
arrangements comparable thereto; and
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.
Appraisal Services 10
Property Rights Appraised
Fee Simple:
A fee simple interest is the most complete interest in real property. A fee simple interest is the
absolute ownership unencumbered by any other interest or estate, subject only by limitations
imposed by the governmental powers of taxation, eminent domain, police power, and escheat.
Leased Fee:
A Leased Fee position is defined in the Dictionary of Real Estate Appraisal, 4th ed. (Chicago:
Appraisal Institute, 2003),as:
An ownership interest held by a landlord with the rights of use and occupancy
conveyed by a lease to others. The rights of the lessor (the leased fee owner) and the
leased fee are specified by contract terms contained within the lease.
Although, specific details of leases vary, a leased fee generally provides the lessor with the
following:
• Rent to be paid by the lessee under stipulated terms
• The right of repossession at the termination of the lease
• Default provisions
• The right of disposition, including the rights to sell, mortgage, of bequeath the property,
subject to the lessee's rights, during the lease period
Appraisal Services
Regional Map
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Appraisal Services 1
Market Area, City, Neighborhood, and Location Data
The four forces that influence value in a market are social, economic, governmental, and
environmental. This analysis identifies the characteristics that influence value trends in the past
and that may affect values in the future.
Bozeman, the county seat, is located in the southwest portion of the state in Gallatin County.
The county area is 2,510 square miles. Billings, the state's largest city, is located 150 miles to the
east; Butte is located approximately 80 miles to the west. Helena, the capitol, is located 90 miles
to the north. Gallatin County is one of the fastest growing areas in the state.
Social Influences
In the market area analysis, the social characteristics that influence property values include:
population density, which is important in central business districts and high-rise residential
neighborhoods; skill levels or employment categories, which are important in industrial or high-
technology districts; age levels, which is important in residential neighborhoods; house-hold size;
employment status, including types of unemployment; extent of crime; extent of litter; quality
and availability of educational, medical, social, recreational, cultural, and commercial services;
and presence of community organizations.
According to the Census and Economic Information Center, Montana Department of Commerce,
the population of Montana in 2003 was 917,621. According to the 2000 Census,the population
of Gallatin County was 67,831 residents, and Bozeman was 27,509 residents. Woods and Poole
Economics estimated the population of Gallatin County in 2004 at 75,637, which make it the
fastest growing county in Montana. According to the Economic Information Center the
population of Bozeman in 2003 was 30,753. The census figures include some students as heads
of household and fluctuations in university enrollment may affect the population data.
Gallatin County has a well-educated work force. Of the county adult population over 25 years of
age, 41% have college degrees; in Bozeman, that number increases to 49.5%.
Gallatin County has experienced steady population growth in recent decades. More than 90% of
the population lives in Bozeman or within 30 minutes of Bozeman. The age distribution for
Gallatin County in 2000 is as follows: under 10, 11.7%; 1019, 15.2%; 20-29, 21.9%, 30-39%;
4049, 16.0%; and 60 & over, 11.4%. The age distribution for Bozeman in 1990 is as follows:
under 10, 11.4%; 10-19, 153%; 20-29, 31.2%; 30-39, 16%; 40-49, 9.3%; and 60 & over, 11.4%.
The average persons per household in Gallatin County for 2000 were 2.46 and for 1990 were
2.50. The average persons per household in Bozeman for 1990 were 2.27.
According to the Montana Employment & Labor Trends Quarterly; the civilian labor force of
Gallatin County in December of 2000 was 43,401,the number of employed workers was 42,114,
and the number of unemployed was 1,287, with an unemployment rate of 3.0%. The civilian
labor force in December of 2001 was 44,329, the number of employed workers was 42,937, and
the number of unemployed was 1,053, with an unemployment rate of 1.2%.
Appraisal Services 13
The historical unemployment rates are as follows:
Year Montana% Gallatin County%
2004 3.84 2.39
2003 4.4 2.5
2002 4.6 2.7
2001 4.6 2.5
2000 4.9 2.7
1999 5.2 2.9
1998 5.6 3.0
1996 5.3 2.6
1994 5.1 2.3
1992 6.9 5.4
The Bozeman Police Division, with 43 law enforcement officers and 7 civilian employees,
provides law enforcement protection to city residents and visitors. The department has a
community policing philosophy and has implemented many positive programs over the past few
years. In 2001,the number of crimes in Bozeman is as follows: homicide, 3; robbery, 7; assault,
12; burglary, 106; larceny, 1071, vehicle theft, 109; and rape, 24.
Gallatin County has 32 schools in 16 school districts, offering educational programs from
kindergarten through high school. Gallatin County's total enrollment of students, including
private school numbers is 10,942.
Montanan State University is one of two university systems within the state. During the 2005
fall semester, 12,300 students were enrolled at MSU-Bozeman. The university offers
baccalaureate degrees in 50 fields, master's degrees in 40 fields and doctorates in 13 fields.
Bozeman has a full range of medical professionals, several clinics,two urgent care clinics, a low-
income clinic, and a modem short-term acute care hospital. There are approximately 100 doctors
and 35 dentists, 114 practical and 377 registered nurses in the community.
The number of increasing passenger boarding at Gallatin Field Airport is an indication of
strength in the tourism and recreation in Gallatin County. Bozeman is a destination point to
Yellowstone National Park, which continues to attract over 3 million visitors each year. The
alpine skiing is excellent with Bridger Bowl located 15 miles north of town and Big Sky, a
destination resort ski area, located 50 miles south of town. Both ski areas offer beginner to
expert ski runs. There are numerous cross-country ski trails in the area. The area is known for
its fishing on three rivers, the Gallatin,the Jefferson, and the Madison, which form the Missouri
River. Access to the Yellowstone River in Park County is 25 miles east of Bozeman.
There are 48 religious organizations in the Bozeman area representing a variety of affiliations
and denominations.
Bozeman has more than 70 motels/hotels with 1,400 rooms and more than 50 restaurants.
Appraisal Services 14
Economic Influences
Economic considerations relate to the financial capacity of a market area's occupants and their
ability to rent or own property,to maintain it in an attractive and desirable condition, and to
renovate it when needed. The economic characteristics include;mean and median household
income, per capita income, income distribution, extent of owner occupancy, property rent levels
and trends, property value levels and trends, vacancy rates for various types of property, and
amount of development.
The economy in Gallatin County and Bozeman is both broad based and diverse, with 3,400
establishments employing over 41,000 people. Major sectors of the economy, in addition to
Montana State University, include recreation, retail trade, agriculture, services, manufacturing,
and natural resource-based industry such as mining and forestry. Growing segments within these
sectors are technology-based, and sports and recreation-based businesses that find university
resources and an educated and recreational active labor force to be significant assets.
The largest employer in the area is Montana State University, which employs approximately
3,500 personnel. Employment numbers indicate that retail trade employee's make-up 26% of the
covered labor force, with government at 20%, and services at 25%. Manufacturing is the next
largest segment, employing 9% of the covered labor force.
In 1999 the median household income for Montana was $33,024 with aPer capita income of
$1"7,151. The median household income for Bozeman was $32,156 with a per capita income of
$16,104.
Housing statistics for 2000 are as follows; Residential housing units in Montana 412,633, and for
Bozeman 10,877. The persons per household in Montana were 2.45 and Bozeman was 2.26 with
the homeownership rate in Montana of 69.1% and Bozeman was 42.9%.
Residential housing starts in Bozeman for single-family and multi family units were as follows:
1997, 309; 1998, 423; 1999, 546; 2000, 415; 2001, 422; 2002, 526; 2003, 612; 2004, 881.
Source: City of Bozeman Planning Office.
The average rental prices in Bozeman as of May 2005 for apartments were: 1 bedroom$300-
$500; 2 bedrooms $5004795; 3 bedrooms $65041000. The average studio rental was $275-
$400. The average house rental was: 2 bedrooms $600-$850 and 3 bedrooms $80041,200.
Source: Peak Property Management.
According to the City of Bozeman Building Division the new construction valuation, including
both residential and commercial for Bozeman:
2000 $81.2 million
2001 $78.9 million
2002 $85.8 million
2003 $133.1 million
2004 $144.2 million
Appraisal Services 15
Governmental Influences
Governmental considerations relate to laws,regulations, and property taxes that affect properties
in the market area and the administration and enforcement of zoning laws, building codes, and
housing and sanitary codes. The governmental characteristics include; property tax burden
relative to services provided compared with other areas in the community; special assessments;
zoning, building, and housing codes; quality of public services, such as fire and police protection,
schools, and other governmental services; and environmental regulations.
In 1921, the city of Bozeman adopted a Commissioner-Manager form of government. The day-
to-day operations of local government are administered by the City Manager. All department
heads are responsible to the City Manager, who is in turn responsible to the City Commission.
Five commissioners are elected at large for four-year overlapping terms. The City Judge, the
only other elected official, is also elected at large for a four-year term.
The city provides water and sewer services that is supported by user fees. Garbage collection
and landfill operations costs are covered by an annual assessment of property-owners. Through
its general taxing authority, the City of Bozeman also provides library, parks, cemetery, street,
and tree maintenance services.
The Bozeman City/County Planning Office advises the Bozeman City Commission, Gallatin
County Commission and Bozeman City/County Planning Board on matters within the planning
jurisdictional area. The staff reviews subdivision requests, annexation requests, Master Plan
amendments, zone changes; conditional uses, and makes recommendations to the respective
bodies. The staff is also responsible for carrying out long range, comprehensive planning
programs. The Department administers the Bozeman area-zoning ordinance, which contains
provisions for site review and planned unit-development. The planning staff administers all
housing-programs and historic preservation.
Environmental Influences
Environmental considerations consist of any natural or man-made features that are contained in
or affect the market area and its location, including: building size, type, density, and
maintenance; topographical features (terrain and vegetation); open space; nuisances and hazards
from nearby facilities; the adequacy of public utilities;the existence and upkeep of vacant lots;
general maintenance; the attractiveness and safety of routes into an out of the area; effective ages
of properties; changes in property use and land use patterns; microclimate characteristics
(temperature, wind, humidity, snowfall, etc.); environmental liabilities (landslides, floods, etc.);
and access to public transportation, schools, stores and services establishments, parks and
recreational facilities, house of worship, and workplaces.
The Gallatin Valley is surrounded by several mountain ranges and thousands of acres of national
forest land, where trail systems and wilderness areas abound. Two of the entrances to
Yellowstone Park, America's oldest and best-known park are within a 90-mile drive of Bozeman.
Yellowstone National Park can be enjoyed year round and Glacier National Park is a short-days
drive to the west.
Appraisal Services 16
Bozeman is near ten national forests that accommodate a variety of outdoor recreational
experiences. There are several areas that are designed to accommodate the needs of people with
disabilities, families with small children, and senior citizens.
Many organizations and Recreation Department use public lands and city/county facilities to
conduct programs. The city of Bozeman supports 23 parks and recreation areas, 19 of which are
owned by the city. The city maintains 17 public tennis courts with three public parks are
converted to outdoor ice skating rinks in the winter.
Bozeman's climate reflects its mountain valley location. Summers are pleasant, characterized by
warm days, cool nights, and an abundance of sunshine. Hot weather and humid conditions are
infrequent. Bozeman is located in one of the few regions in the country where the average
summer climate is comfortable due to the moderate combined heat and humidity.
The average high temperatures for the summers are in the 70's and 80's; the average low
temperatures are in the mid 40's and low 50's. The autumn high daily temperature is 70 degrees
until the middle of October then between 20 and 50 degrees in October and November. The
average monthly high and low temperatures for December, January and February are 35 and 16,
31 and 11, and 37 and 17 degrees. The average temperatures for spring are between 53 and 72
degrees. The average snowfall for Bozeman is 73.1 inches.
Appraisal Services 17
Property Description
SITE
Information Sources: Property owner, deed, assessment records, inspection
Site Size: Parcel #1, 23,225 SF/.533 Acres
Parcel##2, 31,654 SF/327 Acres
Parcel #3, 10,281 SF/.236 Acres
Total Site Size: 1.50 acres
Usable Site Size; 1.50 acres
Corner Lot: The site is a corner lot.
Visibility: Good
Shape: Irregular
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Appraisal Services 18
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Road Frontage/Access: Main St. and Wallace Ave. with Good access.
Topography: Level
Drainage: Appears Adequate
Utilities: Electricity: NorthWestern Energy
Sewer: City
Water: City
Natural Gas: NorthWestern Energy
Adequacy: Good
Site Improvements: Average
Landscaping: Average
Site Utility: Good
Flood Zone: The subject is located in an area mapped by the Federal Emergency
Management Agency (FEMA). The subject is not located in flood
hazard zone.
FEMA Map Number: 3000280012C
FEMA Map Date: July 15a 1988
FEMA Zone Classification: X
Appraisal Services 19
Easements: The appraiser viewed the site and reviewed the zoning map,
subdivision plat, and deed. The appraiser did not observe any
adverse easements affecting the marketability of the site.
Encroachments: The appraiser did not observe any encroachments affecting the
marketability of the site.
IMPROVEMENTS
Building Type: Commercial Office/Industrial Manufacturing & Warehouse
Quality: Average/Average
Year Built: 1955/Unknown
Year Rehabbed: 1977/Unknown
Condition: Average/Average
Effective Age: 25/Unknown
Remaining Useful Life: 45/Unknown
Areas &Ratios: Gross Building Area: 27,389
Net Leasable Area: 27,389
Building Efficiency Ratio: 100%
Units Description:
Unit Type #of Units Description Unit Size Total SF
I I Office 3,520 3,520
1 Storage 5,040 5,040
1 Industrial Manufacturing 2,718 2,718
1 Industrial Warehouse 20,484 20,484.
Totals 4 31,7621
FoUNDATION,FRAmE &EXTERIOR
Foundation: Concrete footings
Frame: Masonry/Steel
Exterior: Masonry/Metal
Roof/Cover: Wood truss-Built-up/Metal
Elevators: None
Appraisal Services 20
INTERIOR
Interior Finish: Drywall and Wood Trim/Metal
Ceilings & Ceiling Gypsum board 10 Feet feet/Unknown
Height:
Floor Cover: Carpet/Concrete
Doors: Wood/Metal
MECHANICAL SYSTEMS
Heating: Gas-fired ducted forced hot air/None
Cooling: Central air conditioning/None
Hot Water: Gas fired hot water heater/None
Electrical: Normal/Normal
Plumbing: Normal/Normal
SITE IMPROVEMENTS
Parking Type and Type: On-Site Gravel
Number of Spaces: Spaces: 22
Condition: Fair-Average
PRoPERTY ANALYSIS
Functional Utility: Average
Design& Appeal: Average
Occupancy: Owner Occupied
Appraisal Services 21
Subject Photographs
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Appraise Services 22
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Subject: Side from Wallace
Appraisal Services 23
Subject: Main Street
Appraisal Services 24
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Subject: Parcels 42 and 43
Appraisal Services 25
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Appraisal Services 26
Zoning
Zoning Classification:B-3
General Description: Central Business District
Conformance: The subject legally conforms to the zoning compliance
Zoning Change: Not Likely
Source: Bozeman Zoning Regulations
Lot Coverage/Floor Area: Entire lot, exclusive of required yards and parking, may be occupied
by the principle and accessory units
Lot Area: No minimum size
Lot Width- No minimum width
Yards: No minimum yards, except a 7 foot yard on Babcock and Mendenhall Streets
Building Height: 55 Feet in the core area, 70 feet outside of the core area
Assessment and Taxes
The State of Montana, through the Department of Revenue, is responsible for valuing all taxable
and real property.
The Montana Department of Revenue is composed of six divisions:
The Customer Service Division is designed to provide centralized and consistent customer
service, revenue collection, and document processing for the department and for state agency
partners.
The Business and Income Taxes Division oversees audits and verifies compliance with
Montana tax law for all taxes, and completes appraisals and assessments of industrial and
centrally assessed property.
The Property Assessment Division is responsible for the valuation and assessment of real and
personal property throughout the state for property tax purposes. The division is comprised of a
central office located in Helena and six regions. There is a local DOR office located in each
county seat within the regional areas.
The Resource Management Division provides service and support to the department by
integrating Human Resources, Payroll and Benefits, Education and Training, Liquor Distribution,
Accounting, Purchasing, and Facilities and Asset Management.
The Information Technology Division provides service in the area of data support, applications
support, technology support, and user assistance that enables the department to meet its business
objectives.
Appraisal Services 27
The Director's Office supports the agency's director and is composed of six work units. The
basic function for each unit is:
• Legal Services supervises the overall legal efforts of the department, which includes
rules,policies, bankruptcy, disclosure officer and the Office of Dispute Resolution.
• Tax, Policy& Research is responsible for the preparation of legislative fiscal notes that
affect revenue,the analysis of legislative proposals affecting the department, and
department economic data analysis.
• Budget Analyst provides ongoing oversight of the department budget.
• Communications manages the department's communication activities, including
information dissemination,media relations, document editing, stakeholder relations,
website maintenance, public involvement and special events.
• Internal Quality Manager is responsible for providing management with information
about the adequacy and the effectiveness of its system of internal controls and quality of
its operations with established standards and management expectations.
• Administrative Support assists all units in the Director's Office with administrative
responsibilities including,preparing for legislative committees, editing correspondence
and finalizing mass mailings.
The property tax is determined by multiplying the property's value by a tax rate. The Montana
Legislature sets the tax rate. The taxable value is then multiplied by the mill levy. The local tax
jurisdictions, city and county government, school districts, and other public services influence the
mill levy.
The general property tax equation is:
Value x Tax Rate= Taxable Value
Taxable Value x Mill Levy= General Property Tax
The Property Assessment Division is responsible for determining the value of real property
throughout the state for property tax purposes. State Law requires the Department of Revenue's
Property Assessment Division to reappraise property periodically. The tax information for each
of the three parcels being appraised is as follows,respectively.
Assessor Parcel fi: RGH2546, RGH26407, RGH2547
Year. 2005
Taxes: $8,333.03, $4,208.41, 380.57
'Total Taxes: $12,922.01
2003 Reappraisal Value: $464,675, $306,760, $40,578
Taxable Market Value: $343,687, $243,607, $23,172
Appraisal Services 28
Sale/Transfer History
According to Public Records the subject has not transferred within the last three years.
According to MLS the subject is not currently listed for sale.
Highest and Best 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.I
• Permissible Use. What uses are permitted by zoning and other legal restrictions?
• Possible Use. To what use is the site physically adaptable?
• Feasible Use. Which possible and permissible use will produce any net return to the
owner of the site?
• Maximally Productive. Among the feasible uses which use will produce the highest net
return, (i.e.,the highest present worth)?
Highest and Best Use As Vacant
The highest and best use of the subject, as vacant, is for commercial retail/office development.
The main level could be used for retail and the second level could be used for office. The intent
of the B-3 Central Business District is to provide a central area for the community's business,
government services, and cultural activities. The City of Bozeman defines the "core area" as the
area between Grand Avenue and Rouse Avenue.and the alleys one-half block north and south
from Main Street. The intent of the Central Business District's"core area" is to encourage high
volume, pedestrian-orientated uses in ground floor space. A commercial retail/office building is
considered to be the ideal improvement as it is located in adjacent to the"core area".
The appraiser estimated the land value of each parcel through extraction. The appraiser used
current market data, as supported in the appraiser's file.
1. A cost approach was applied, that a potential developer would pay for the potential
improvements. The appraiser used an 85%®building to land ratio, estimated the cost of
construction at$185 per SqFt, then added the estimated cost of demolition of the current
structure, plus the cost to purchase required parking.
2. An income approach was applied, that a potential tenant would pay for the proposed
improvements. The appraiser estimated an income stream of$16.00 per SqFt per year
NNN. The income stream was then divided by a capitalization rate of 7.5%. Since the
income stream in the highest and best use analysis is based on a commercial retail/office
building a 7.5% capitalization was used.
I The Appraisal of Real Estate 11th Edition, Page 297, Appraisal Institute
Appraisal Services 29
3. Then the developers cost of the improvements was subtracted from the appraiser's
estimation of value through the income approach to determine a land value that is
considered to be financially feasible to a developer.
Potential Income Approach
Estimated,Development Cost of Proposed Improvements
Estimated Land Value
Highest and Best Use As Improved
The highest and best use of the subject is as improved.
Valuation Methodology
Three basic approaches may be used to arrive at an estimate of market value. They are:
• The Cost Approach
• The Income Approach
• The Sales Comparison Approach
The appraisal process concludes with the Final Reconciliation of the values derived from the
approaches applied for a single estimate of market value. Different properties require different
means of analysis and lend themselves to one approach over the others.
In this appraisal:
1. A complete cost approach was applied.
2. A complete income approach was applied.
The sales comparison approach was applicable but not necessary for a credible appraisal and
has not been developed. The reason the sales comparison was not used is due to the lack of
comparable sales. Standards Rule 1-4 (a)
Appraisal Services 30
Cost Approach
The Cost Approach is based on the principle of substitution-that a prudent and rational person
would pay no more for a property than the cost to construct a similar and competitive property,
assuming no undue delay in the process. The applied process is as follows:
• Estimate the land value
• Estimate the replacement cost of the building and site improvements
• Estimate the physical, functional and/or external depreciation accrued to the
improvements
• Sum the depreciated value of the improvements with the value of the land for an
indication of value
Land Value
The appraiser estimated the land value of each parcel through extraction. The appraiser used
current market data.
4. A cost approach was applied, that a potential developer would pay for the potential
improvements. The appraiser used an 85%building to land ratio, estimated the cost of
construction at $185 per SqFt,then added the estimated cost of demolition of the current
structure,plus the cost to purchase required parking,
5. An income approach was applied,that a potential tenant would pay for the proposed
improvements. The appraiser estimated an income stream of$16.00 per SqFt per year
NNN. The income stream was then divided by capitalization rate of 7.5%. Since the
income stream in the highest and best use analysis is based on a commercial retail/office
building a 7.5% capitalization was used.
6. Then the developers cost of the improvements was subtracted from the appraiser's
estimation of value through the income approach to determine a land value that is
considered to be financially feasible to a developer.
Potential Income Approach
Estimated Development Cost of Proposed Improvements
Estimated Land Value
Appraisal Services 31
Parcel 1 Parcel 2 Parcel 3
Lot
Size GBA Lot Size GBA Lot Size GBA
23098 31654 10281
Estimated Land
Value
Income Approach $8,376,875 $10,762,360 $3,495,540
Cast Approach $7,653,771 $10,545,923 $3,368,375
Lot GBA SgFt 23098 31654 10281
Indicated Land Value $713,104 $216,437 :1x127,156
Total
Land
Value $1,056,706
Land Value Conclusion
Based on the above analysis, we have reconciled to a site value of$1,057,000 as of February 21,
2005, and subject to the Limiting Conditions and Assumptions of this appraisal.
Appraisal Services 32
Cost Analysis
The next step in the Cost Approach is to estimate the replacement cost of the buildings and site
improvements. The replacement cost of the subject site and building improvements are based on
Marshall & Swift Valuation Services, Local Area Contractors and Suppliers.
Soft Costs
Where appropriate, we have included the following soft costs:
• Engineering
• Architectural
• Permits and Legal
• Marketing & Leasing Commissions
• Contingency
• Developer's Profit
Depreciation Analysis
Depreciation may be defined as any loss of value from any cause. There are three general areas
of depreciation: physical deterioration, functional obsolescence.and external obsolescence.
Depreciation may be curable or incurable, the test being that money spent to cure the
depreciation be gained in value. If the depreciation costs more to fix than will be gained in value,
then the depreciation is considered incurable.
Depreciation Accrued to The Subject
Component Effective Age Life Percent
Physical Depreciation: Building 25 70 36%
Physical Depreciation- Site 0 1 0%
Functional Obsolescence Building .......... ...... ........ ................. 0%
External Obsolescence Building .......... .................. ... 0%
Cost Approach Conclusion
Based on the analysis detailed on the following page, we have reconciled to a cost approach
value of$2,350,000, as of February 21, 2005, subject to the Limiting Conditions and
Assumptions of this appraisal.
Appraisal Services 33
Building Improvements :J F- Cost Section I of I
Item Unit T Cost Quantity Total
Commercial Office Sq. Ft, $185.00 3,520 $651,200
Storage Sq. Ft, $115.00 2,880 $331,200
2nd Floor Storage Sq. R $25.00 2,160 $54,000
Industrial Manufacturing Sq. FL $28,00 2,718 $76,104
Industrial Warehouse Sq. Ft. $28.00 20,484 $573,552
$1,686,056
Per SF GBA $53.08
Site Improvements
Item Unit Type Cost Quantity Total
Parking, Sidewalks Lump Sum $50,000.00 1 $50,000
$0
$50,000
$1,736,056
Per SF GBA $54.66
Soft Costs
Item Percent Type Total
Engineering 5.0% % Building Cost $84,303
Architectural .................... 10,0% % Building Cost $168,606
Permits&Legal ...... ............. ....... ....................... ........... $0
Leasing ...... ....... $0
$252,908
Contingency @ 2.0% $34,721
Entrepreneurial Profit 10.0% $173,606
$2,197,291
Per SF GBA $69A8
Cost Allocation
Total Building Costs ... ....... ...............-............ ..................... $2,147,291
Total Site Costs ........... .............. ............ ....................... $50,000
Depreciation —1
Component Effective Age Life Percent Amount
Physical Depreciation: Building 25 70 36% $766,890
Physical Depreciation:Site 0 1 0% $0
Functional Obsolescence Building ................................................... 0% $0
External Obsolescence Building ........................................... 0% $0
$766,890
$1,430,401
Per SF GBA $45.03
Land Value
Land Value ....................... ................................................ $1,057,000
$2,487,401
$2,490,000
Per SF GBA $78.40
@Value SoRmire-wwwatvatuemm
Appraisal Services 34
Income Approach
The Income Approach to value is based on the present worth of the future rights to income. This
type of analysis considers the property from an investor's point of view, the basic premise being
that the amount and quality of the income stream are the basis for value of the property,
Direct Capitalization Analysis
The steps involved in capitalizing the subject's net operating income are as follows:
Develop the subject's Potential Gross Income (PGI) through analysis of the subject's
actual historic income and an analysis of competitive current market income rates.
➢ Estimate and deduct vacancy and collection losses to develop the Effective Gross Income
(EGI).
➢ Develop and subtract operating expenses to derive the Net Operating Income (NOI).
➢ Develop the appropriate capitalization rate (R,,).
Divide the net operating income by the capitalization rate for an estimate of value
through the income approach.
Potential Gross Income (PG1)
Current Income
The table below summarizes the subject's historic, current and owner's income budget.
Income History and Budget
Budget
Owner's Appraiser's Year Ending
Statement Account 2/1712006
Rent Commercial Office Base Rent $51,040
Rent lndustdalMarehouse Base Rent $151,973
Total lncome $203,013
Excluded Income: $0
Adjusted Income: $203,013
Appraisal Services 35
COMPARABLE LEASE 1
Property Type: Office Lessor: Jerry Locati
Address: 402 E.Main St. Suite 202, Lessee: D.A. Davidson
Bozeman
Terms: NNN Confirmed By: Keith O'Reilly,MAI
Term: SYr. Confirmed With: Jerry Locati
SITE DATA
Location: Good Site Topography: Level
Parking: Adequate Zoning: B43 Central Business
Access: Good District
Corner: Main&Rouse Electric: Northwestern Energy
Water&Sewer: City Gas: Northwestern Energy
IMPROVEMENT DATA
Gross Building.Area(SF): 2665 Year Built: 1994.
Lease Rate: $17.00/SF Condition: Good
IMAGES
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NOTES
Cy)�Valuc Software—www.atvalue,com
Appraisal Services 36
COMPARABLE LEASE 2
Property Type: Office Lessor: Mike Huemphner
Address: 2054 Stadium Or., Lessee: State Farm
Bozeman
Terms: iVNN Confirmed By: Keith O'Reilly,MAI
Term: 5 Yr, Confirmed With: Mike Huem Finer
SITE DATA
Location: Good Site Topography: Level
Parking: Adequate Zoning: R-O
Access: Good
Corner: No Electric: Northwestern Energy
Water&Sewer: City Gas: NorthWestern Energy
Location: Good Site Topography: Level
IMPROVEMENT DATA
Gross Building Area(SF): 6548 Year Built: 2003
Lease Rate: $14.50 Condition: Good
IMAGES
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Appraisal Services 37
COMPARABLE LEASE 3
;Property Type: Industrial Warehouse Lessor: McLaughlin
Address: 94 Falcon Lane#3,Bozeman Lessee: Safetrek
Terms: Gross Confirmed By: Ross Wenger
Term: 3 Yr.Ending 04/01108 Confirmed With: Peak Property
Management
SITE DATA
Location: Good Site Topography: Level
Parking: Adequate Zoning: No Zoning
Access: Good
Corner: No Electric: NorthWestern Energy
Water &Sewer: None Gas: NorthWestern Ener
IMPROVEMENT DATA
Gross Building Area(SF): 4480 Year Built: 1997
Lease Rate: $6.90 Condition: Avg-Good
IMAGES
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NOTES
@Value Software—www.atvalue.com
Appraisal Services 38
COMPARABLE LEASE 4
Property Type: Industrial Warehouse Lessor: McLaughlin
Address: 94 Falcon Lane#2,Bozeman Lessee: Yellowstone Club
Terms: Gross Confirmed By: Ross Wenger
Term: 2.5 Yr.Ending 09/30/08 Confirmed With: Peak Property
Management
SITE DATA
Location: Good Site Topography: Level
Parking: Adequate Zoning: No Zoning
Access: Good
Corner: No Electric: Northwestern Energy
Water&Sewer: None Gas: Northwestern Ener
IMPROVEMENT DATA
Gross Building Area(SF): 3840 Year Built: 1997
Lease mate: $6.92/SF Condition: Avg-Good
IMAGES
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NOTES
@Value Software M-wwwAtvalue.com
Appraisal Services 39
Market Rent
In order to determine if the subject's rent is at, above or below market levels,we have researched
the following rental data.
Comparable Rents Map
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Appraisal Services 40
Comparable Rent Adjustment Grid
Analyst:Poass V*nger Subject ble 1 Comparable 2 Comparable 3 Comparable 4
Property Name Badlawod Bu ildng Stare Farm Vftehouse warehouse
Address 402 E.Main St.4202 2054 Stadium Dr. 94 Falcon Lane#3 94 Falcon Lane#2
state MT Mr MT MT
Lease Rate $1T00 $14.50 $5.90 $6.92
Lessee : DA Davidson State Farm Sane Trek Yellowstone Club
Lessor LOMtl We Hurernphner Robert Md-augh in ftbeert Mdaughlin
Conditions of NNN NNN Gross Gross
%,4d-ustme 0.00% 0.00% -5.00% -5.00%
EmnomicT 2/2112005
%miustme 0,00%0 0% 00/0 0% 0%
AdjLOW Rent $17.00 $1450 $6.56 $6.57
Location Good Good Good Gard Good
Comparison
Aditastment U% 0.0% 0.0°/0 0.0°f°
$Ad"usttinerrt $0,00 $0.00 $0.00 $0.00
Property Condition Avg-Good Good Good Avg-Good Av9-G-ood
%Ad`ustlrrent -5.0% -5.0% 0.0% 0.00/0
$Adjustment] ($0..85) ($013) $0.00 $0.00
Gross Building Area 2665 6548 4480 3840
%Adjustn'ent U% 0.00/0 U% 0.0%
$Adjustmentl $0.00 $0.00 $0.00 $0.00
Final Adjusted Rent $16.15 $18.78 $6.56 $5.57
Net Adjustments ($0.85) ($0.73) $0.00 $0.00
Market Rent Reconciliation
The comparable rents were reconciled using the comparables above. The comparable leases
were considered to be similar properties and were adjusted for their differences. In this market
the unit of measurement for commercial office buildings is by the square foot. Based on the
above analysis,we have reconciled a value of$14.50 per square foot for commercial office and
:$6.90 per square foot for industrial warehouse. Triple Net leases are the most common leases in
the Bozeman market area.
Income Projection
Income projection
Property Name Empire Building Materials Analyst Ross Wenger
Property Address 608 E. Main St. Firm Appraisal Services
MT,59715 Date 2/2112005
Size Number Income Market Contract Rent %of
Tenant SF of Units Type Rent Rent Applied Income Total
1 Commercial Office 3,520 1 $/SF/Year $14.50 Market $51,040 25.1%
2lndustrial/Warehouse 23,202 1 $/SFNear $6.55 Market $151,973 74.9%
Totals 26,722 2 Potential Gross Income $203,013
Vacant &Collection Loss 3.0%
Effective Gross Income $196,923
Other Income $0
Total Effective Gross Income $196,923
Effective Gross Income Per SF $7.19
Appraisal Services 41
Vacancy and Collection Loss
Based on a review of the market conditions and the subject's operating history we have projected
vacancy and collection loss at 3.0%.
Current Expenses
The table below summarizes the subject's historic, current and owner's expense budget.
Expense History and Budget
Budget
Owner's Appraiser's Year Ending
Statement Account 211712006
Management Management 5% $2,403
Total Expenses: $2,403
Excluded Expenses: $0
Adjusted Expenses: $2,403
$200,6
Income and Expense Statement
Income Summary and Expense Projection
Income Amount % of Total
Effective Gross Income:Section 1 $196,923 100%
Total Effective Gross Income Per SF: $7.19
Expense Type % or$ Amount Per Unit
Mane2ement %of EGI 5.0% $9,846 $9,846
Total Expenses: $9,846 $9,846
Net Operating Income: $187,077
Net Operating Income Per SF: $6.83
Capitalization Rate
The capitalization rate is the factor that coverts the stabilized net operating income (NOI) to a
present value. It is the ratio of net income to value or sale price.
N01= Sale Price = Capitalization Rate
For example, if a property sells for$500,000, and has a stabilized NOT of$50,000, the indicated
capitalization rate is 10%.
Appraisal Services 42
Market Extracted Rates
The table below details capitalization rates extracted from the market.
Comparable Property Capitalization Rates
Address ci!y Sale Price Date N01 Cap Rate
2407 W.Main St. Bozeman $1,150,000 05/18/05 $98,900 8,6%
1709 W.College St. Bozeman $1,740,000 02/19/03 $140,800 8.1%
1122 E. Main St. Bozeman $460,000 09101/05 $27,450 6.1%
Band of Investment
This technique utilizes lender and real estate investor investment criteria to develop, or
synthesize a capitalization rate. There are four key inputs necessary for this method:
1. The loan-to-value ratio (M)
2. The mortgage interest rate (i)
3. The loan term (n)
4. The equity cap rate or equity dividend rate (RE)
The mortgage variables are used to build the mortgage constant(Rm), which is the total amount
of the payments made in one year, expressed as a percentage of the original loan amount.
Payments x 12 /Original Loan Amount=Mortgage Constant (Rm)
The equity cap rate is the annual return to the investor, expressed as a percent of the original
amount invested. The annual return to the investor is also known as the equity dividend rate; it is
the profit remaining after debt service and all other expenses.
After Debt Service Profit/Equity Investment= Equity Cap Rate(RE)
Note that the equity cap rate is not the same (usually,that is) as the equity yield rate. The equity
yield rate reflects the total return to the investor over the life of the investment. Factors such as
appreciation and mortgage pay down affect and-usually increase this return to a point higher than
the equity dividend rate. In markets where substantial appreciation is expected, investors will
often accept a low or even negative equity dividend rate, anticipating a compensating payoff
when the property is eventually sold. In markets where little appreciation is expected, much more
weight is given to the annual equity dividend.
Formula:
Rol xM =rate
Rr x (I-M) =rate
= Cap Rate (R.)
Debt Coverage Ratio Analysis
This technique develops a capitalization rate based on typical mortgage terms. There are four
variables necessary for this method:
I. The loan-to-value ratio (M)
Appraisal Services 43
2. The mortgage interest rate (i)
3. The loan term (n)
4. The debt coverage ratio (DCR)
Items I through 3 are discussed above under the Band of Investment section. In this method it is
also used to develop the mortgage constant (Rm). The debt coverage ratio is the factor by which
income exceeds debt on an annual basis.
Formula:
Debt Coverage Ratio x Loan to Value Ratio x Mortgage Constant= P,a
or: DCRxMxRm=&
We have researched mortgage rates and terrns typical of the subject market segment for the
Bozeman area. The table below details the Band of Investment and Debt Coverage Ratio
Analyses calculations.
Capitalization Rate Calculations
Capitalization Rate Variables
Mortgage Interest Rate 8.00%
Loan Term 20 Years
Loan To Value Ratio 70%
Debt Coverage Ratio 1.10
Equity Dividend Rate 7,00%
Band of Investment Analysis
Mortgage Constant Loan Ratio Contributions
0100372808 X 70.0% = 7.03%
Equity Dividend Rate Equity Ratio
7.00% x 30% = 2.10%
Band of Investment Capitalization Rate = 9.13%
Debt Coverage Ratio Anainis
Debt Coverage Ratio x Loan to Value Ratio x Mortgage Constant
1.10 x 70.0% x 0.10037 = 0.07729
r7- Debt Coverage Ratio q2Litalizatlon Rate = 7.73%
Capitalization Rate Summary and Conclusion
Capitalization Rate Reconciliation
Indicator Capitalization Rate
Comparable Properties 6A% -8.6%
Band of Investment 9,13%
Debt Coverage Ratio 7.73%
Survey 1 0.00%
Survey 2 0.00%
Reconciled Capitalization Rate 8.00%
Appraisal Services 44
Capitalization to Value
Income Capitalization
Per Unit Per SIF
Potential Gross Income $203,013 $203,013 $7.41
Vacancy&Collection Loss (3.0%) $6,090 $6,090 $0.22
Effective Gross Income $196,923 $196,923 $7.19
Expenses(5,0%) $9,846 $9,846 $0.36
filet peratlng Income $187,077 $187,077 $6.83
Capitalization Rate 8.00% 8.00% 8.00%
Indicated Value $2,338,457 $2,338,457 $85.38
Rounded $2,340,000 $2,340,000 $85.44
Income Approach Conclusion
Based on the analysis detailed above, we have reconciled to an income approach value of
$2,340,000 , as of February 21, 2005, subject to the Limiting Conditions and Assumptions of this
appraisal.
Appraisal Services 45
Final Reconciliation
The process of reconciliation involves the analysis of each approach to value. The quality of data
applied, the significance of each approach as it relates to market behavior and defensibility of
each approach are considered and weighed. Finally, each is considered separately and
comparatively with each other.
Value Indications
Land Value: $1,057,000
Cost Approach- $2,460,000
Mcome Approach: $2,340,000
Cost Approach
The Cost Approach was considered the least reliable method of valuation. The appraiser used the
extraction to estimate the land value, due to the lack of recent land sales. The building costs for
the improvements were based on Marshall & Swift Valuation Services, local area suppliers and
contractors' costs and are considered to be reliable cost data. The improvements are functional in
design and do not have any functional depreciation.
Income Approach
The Income Capitalization Approach was considered the most reliable method of valuation due
to the income producing characteristics of the comparable properties. Justification for market
rents, operating expenses, average vacancies, and the comparable capitalization rates were
adequately documented from the market.
Value Conclusion
Based on the data and analyses developed in this appraisal, we have reconciled to the following
value conclusions, as of February 21, 2005, subject to the Limiting Conditions and Assumptions
of this appraisal.
Reconciled Value Conclusion Premise: "As Is"
Estate: Fee Simple
Value Conclusion: $2,400,000
Appraisal Services 46
Certification Statement
We certify that,to the best of our 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 are my personal, unbiased professional
analyses, opinions and conclusions.
• We have no present or contemplated future interest in the property that is the subject
of this report, and we have no personal interest or bias with respect to the parties
involved.
• Our 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.
• Our analyses, opinions, and conclusions were developed and this report has been
prepared in conformity with the Uniform Standards of Professional Appraisal Practice
(USPAP).
• We have made a personal inspection of the property that is the subject of this report.
• No one provided significant professional assistance in the development of the
conclusions contained in this report.
• We certify sufficient competence to appraise this property through education and
experience, in addition to the internal resources of the appraisal firm.
• The value conclusion(s) and other opinions expressed herein are not based on a
requested minimum value, a specific value or approval of a loan.
Appraisal Services 47
Addenda
Ross Wenger
Licensed Residential #753
rossw@montana.com
(v)406-587-60" Appraisal Services
(f) 406-587-5481 P.O. Box 1076
(c)406-539-9564 Bozeman, Montana 59771
............ ...............
Education
Appraisal Institute
Basic Income Capitalization Appraisal Institute January 25-February 2, 2006
The Professional's Guide to the URAR June 30, 2005
15-Hour National USPAP Course Appraisal Institute April 26-27, 2004
Appraisal Principles Appraisal Institute April 12-17, 2004
Appraisal Procedures Appraisal Institute April 19-24, 2004
National Association of Independent Fee Appraisers
IAA Residential Report Writing January 26-27, 2004
1.IN Principles of Residential Real Estate Appraising January 15-18, 2004
Montana State University, 2000-2003.
Major: B.S. in Business Management: Course study; Management, Economics, Entrepreneurship
and Small Business, Finance, Business Communications, and Accounting
Work Experience
Licensed Appraiser-Appraisal Services Sept 2005-Present.
Bozeman, Montana. Working as a Licensed Appraiser. Residential appraisals. 3500+hours of
valuation experience preparing appraisal reports using the cost approach, comparable sales
approach, and income approaches to value. URAR, 2055, Condominium, Land, and 2-4 Family
forms
Appraiser in Training-Appraisal Services Aug 2004-Sept 2005.
Bozeman, Montana. Worked as a Licensed Trainee with a Licensed Mentor. Residential
appraisals. 3000 hours of valuation experience preparing appraisal reports using the cost
approach, comparable sales approach, and income approaches to value. URAR, 2055,
Condominium, Land, and 2-4 Family forms
Appraisal Services 48
Appraiser in Training-Joel Peterson Appraisals,Inc., Jan 2003-June 2004.
Bozeman, Montana. Residential appraisals. Prepared appraisal reports making internal and
external inspections of properties for URAR, 2055, Condominium, Land, and 2-4 Family forms
using property valuation of cost approach, comparable sales approach, and income approach
Memberships
Appraisal Institute
Bozeman Area Appraisers
National Association of Realtors@
Montana Association of Realtors@
Gallatin Association of Realtors@
References
Kennedy American Mortgage
Marie McSpadden, Mortgage Broker
1.632 West Main St.
Bozeman, MT 59715
(406) 585-3737
US Bank Home Mortgage
John Thom, Mortgage Broker
104 E. Main St.
Bozeman,MT 59718
(406) 585-5238
Allied Home Mortgage Capital Corporation
Denise Weidhaas, Branch Manager
2023 Stadium Drive, Suite 2-B
Bozeman, MT 59715
(406) 585-5476
Appraisal Services 49
JERRY R. GOSSEL
Appraisal Services
67A West Kagy Blvd.
P.O. Box 1076
Bozeman, Montana 59771
Facsimile: (406) 587-5481 Telephone: (406) 587-5044 E-Mail:jgoss@avicom.net
............. .............
APPRAISAL EXPERIENCE
Appraisal Services, Bozeman, Montana
Owner 1.985 to Present
Certified General Real Estate Appraiser- Certificate #106
Licensed in State of Montana January 1992
Small Business Administration, Helena, Montana
Commercial 1986 to Present
Veterans Administration, Fort Harrison, Montana
Residential 1986 to Present
US Bank Bozeman, Bozeman, Montana
Residential and Commercial 1985 to Present
Norwest Bank, Bozeman, Montana
Residential and Commercial 1983 to Present
First Security Bank, Bozeman, Montana
Residential and Commercial 1983 to Present
Trans America Relocation Service, Walnut Creek, California
Residential 1983 to Present
Home Equity Relocation, San Mateo, California
Residential 1982 to Present
Merrill Lynch Relocation Management, Inc., Bellevue, Washington
Residential 1982 to Present
Federal Housing Administration, Helena, Montana
Residential 1977 to Present
Federal National Mortgage Assn., Los Angeles, California
Approved 1975 to Present
Federal Home Loan Banking Board
Approved 1975 to Present
American Bank, Bozeman, Montana
Residential and Commercial 1973 to Present
Lender Services, Inc., Pittsburgh,Pennsylvania
Residential 1993 to Present
Mortgage Support Services, Mount Laurel, New Jersey
Residential 1993 to Present
Big Sky Western Bank, Big Sky, Montana
Residential and Commercial 1993 to Present
Appraisal Services 50
Countrywide, Billings, Montana
Residential 1990 to Present
First Federal Savings & Loan, Great Falls,Montana
Broker 1973 to 1979
Small Business Administration, Rapid City, South Dakota
Residential and Commercial 1972 to 1973
REAL ESTATE EXPERIENCE
Real Estate Sales and Development
Spring Creek Realty, Bozeman, Montana
Co-Owner, Broker, Real Estate Sales and Developer1980 to 1985
Barker Realty, Bozeman, Montana
Real Estate Salesperson and Developer 1976 to 1980
United Agencies, Bozeman, Montana
Real Estate Salesperson 1973 to 1976
FORMAL EDUCATION
Montana State-Bozeman, Bozeman, Montana.
M.S. Candidate- Family Science/Child Development 2000 to Present
Montana State - Bozeman, Bozeman, Montana
B.S. - Health& Human Development- Family Science 1995 to 2000
Augustana College, Sioux Falls, South Dakota
Major: Business Administration 1958 to 1962
PROFESSIONAL EDUCATION
Residential Appraisal, Society of Real Estate Appraisers, Course 101 1974
Principals of Residential Real Estate Appraising January 1988
Professional Standards of Practice,N.A.I.F.A October 1990
Income Property Appraising Course#1,N.A.I.F.A November 1990
Income Property Appraising Course#2,N.A.I.F.A December 1990
Concepts, Terminology and Techniques October 1991
Partners in Success, PHH Network Services September 1993
Financing Course #93-30 December 1993
Professional Standards of Practice,N.A.I.F.A. January 1994
New URAR Appraisal Institute January 1994.
Environmental Conditions, HUD March 1994
Limited Scope Appraisals,N.A.I.F.AJune 1994
1995 Outlook Seminar February 1995
Appraisal Services 51
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