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Fire Hall/Bridger Appraisals
A SUMMARY REPORT OF A COMPLETE APPRAISAL OF: Fire Hall 34 N Rouse Bozeman,MT 59715 PREPARED FOR: Mr.Ron Brey City of Bozeman 411 E Main St Bozeman,MT 59715 PREPARED ON: February 2,2006 EFFECTIVE DATE OF VALUATION: January 31,1,2 006 PREPARED BY: Keith O'Reilly,MAI General Certified Appraiser Bridger Appraisals, Inc. PO BOX 11145 Bozeman,Montana 59719 AND: Jerry Gossel,#106 General Certified Appraiser Appraisal Services 67 W Kagy Blvd Bozeman, Montana 59715 A , fir. ,, . �'BlR APPRAISALS- K-11, O'F,, My,M AI February 2,2006 City of Bozeman 411 E Main St Bozeman MT, 59715 Re: Fire Hall Bozeman,MT 59715 Dear Mr.Brey: In accordance with your request and authorization,we have inspected 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 January 31,2006. Our 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 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 our inspection of the appraised property,comparable properties, and analysis of all pertinent data. f— 406 S97 7742 (,lF 4(]6 587 2452 rc) 13—11145 C4iaaran ir�a�,M 1"59719 As a result of our investigation and analysis,it is our opinion that the Market Value of the Fee Simple Interest,"As Is",in the subject property,as of January 31,2006,is: NINE HUNDRED AND FIFTY FIVE THOUSAND DOLLARS ($9551000) The following report contains(50)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 Je. 0 G eral ertifiedAppra' 106 Stake o ontana TABLE OF CONTENTS ITEM: PAGE NO= PHOTOGRAPH UFTHE SUBJECT PROPERTY..................................---........................ ____________5 ASSUMPTIONS AND LIMITING C0NDlTI8NS—.........----......... ............................—_---_----_--..6 SUMMARY 0D IMPORTANT FACTS AND CONCLO8IUN8— .................. ..............---............. y SCOPE OFTHE APPRAISAL............. ............ —................. ................................... ----------------]] PURPOSE AND INTENDED USE AND USER OF THE A9PDAISAL ..... .................. ..............—_--..........l2 DEFINITION Of MARKET VALUE......---......... ...................................... ...............---.................. ................ l2 PROPERTY RIGHTS APPRAISED.............. _ ..... .... —............................ ........---........... —............... .............t3 EXPOSURETIME..........................................---......... ...................... — ................---............—_........................14 V\LL&\II0N DATE........ — ...................................... .....— ....... ............... ......... ...................................... —........)4 IDENTIFICATION AND HISTORY 0FTHE SUBJECT..... ....... ....... _.................................. ............... .............l5 REGIONAL, CITY,AND NEIGHBORHOOD ANALYSIS.......................... ..................................................... ....]X TAXES AND ASSESSMENT ANALYSIS ......................... — ....................... ..... ... ......— ................. .......... ....25 SITEDATA AND ANALYSIS......— ...................... .......... -- ...................... ........... ..._ ................. ... ............26 ZUNlNGAND ............. _--.........—........ --...............................................29 PHOTOGRAPHS UPTHE SUBJECT PROPERTY....... ....... ....... ...—.................................-- ............ — .......30 DESCRIPTION"r IMPROVEMENTS............. _ ......................................--------------------3l HIGHESTAND BEST USE...... ....... --........... ..................... ......... — ..... ............................. —_.....................32 THEAPPRAISAL PROCESS................... ......... ...... ......... .............................................. .......... ......... .................33 COSTAPPROACH...... ...... ........................ ---......— .............. ....... ...............— ........... _ .............._..........34 FINAL ......... .................._ ......... ..................... ........................ .............................................47 CERTIFICATION..................... —' .................. ........__ ..................... ................. ...........................................4y i ADDENDUM Resume | ' � � i PHOTOGRAPH OF THE SUBJECT PROPERTY iu 1 View of the subject property looking from west to east. Photo taken on January 31,2406 by Keith O'Reilly,MAI, r View of subject property looking from across Mendenhall northwest to southeast, Photo taken on January 31,2446 by Keith O'Reilly,MAI. Brid,-T-Apprraisak his. ' 5 Keith O'Reilly,N/1A1 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 snaps,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. A. 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, a, 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. 6. 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 snake any appearance in court,before conunission, 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, kyldl,�u pprajl ak In C' 6 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. 7 6. The forecasts,projections, or operating estimates contained herein are based on current market conditions, anticipated short-term supply and demand factors, and a continued stable economy. These forecasts are, therefore, subject to changes with fixture 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. K.od O'RoiHk- "IAI SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS Client: Ron Brey,City of Bozeman Owner of Property: City of Bozeman Date of Valuation: January 31,2006 Date of Preparation: February 2,2006 Rights Appraised: Fee Simple Legal Description: Lots 15-19 Block F,Rouse"s 1st Addition,Sec 7,T2S R6 E. Location of Property: 34 N Rouse Bozeman MT 59715 Improvements: 9,287sf of improvements Highest and Best Use: The highest and best use of the subject property as is is for the redevelopment of the current improvements into useable retail and office space. Present Use: The highest and best use of the subject property as if vacant is for the construction of at least a two story retail/office building with parking acceptable to the market. Zoning/Governmental: B-3 Site Shape and Size: The subject site is Rectangular in shape and contains 19,875.O0sf I d I1,Errs. Q' 9 Environmental: We have inspected the subject site and did not observe any suspicious materials or any situation that would lead us to conclude that there were any environmental contamination concerns nor were any brought to our attention by the owner of the property or the client. However,we are not experts in these matters, and recommend a professional evaluation if the reader of this report wants more reliable information. Market Status: There has been good demand for commercial building sites in the Bozeman area, Presently there is a considerable amount of commercial and retail construction in the subject neighborhood. There has been a considerable amount of land with preliminary plat approval for residential development. Concluded value For each appraisal: Site Value as Vacant: $315,000 Cost Approach: $955,000 Sales Comparison Approach: Not Applicable Income Approach: Not Applicable Concluded Market Value: '$955,000 Estimated Exposure Time: 1-6 months Estimated exposure time is based on current sales of commercial properties within the Bozeman area.The estimated exposure time is predicated on the final opinion of value. 10 1��.IKI't CJ'fdtial'hy,�t�-�1 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,we have personally inspected the subject site and improvements and considered pertinent characteristics of the site and improvements in comparison to current market standards.We have analyzed the subject neighborhood and competing markets for current sales,cost 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 Steffani(Bozeman Broker Group),Neil Ainsworth(Gallatin Valley Real Estate), and Gene Cook(Gene Cook Real Estate). We inspected the subject site on January 31,2006. General and specific data were obtained through personal and telephone interviews with government officials, property managers,developers,and other market participants. We have considered the highest and best use of the property as if vacant and as improved,and have applied the cost approach valuation method.All three approaches to value have been considered for the subject property and the Departure Rule of USPAP has not been invoked.The results indicated by this method has 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 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. The information contained in this report is specific to the needs of the client and for the 'intended use as stated in this report. �'ts..i t1ya�i�aF,il•, la�c�. C, ll 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 January 31, 2006 , 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 Client,City of Bozeman, in Potentially Marketing the Subject Property.Insurable value has not been estimated. 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: I. 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 made 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.J.. `Sourm Federal Register,vol.55,August 22,1990,also quoted in the Uniform Standards of Professional Appraisal Practice, The Dictionary of Real Estate Appraistil,3rd ed.(Chicago;Appraisal Institute,1993),pp.222-223, \p[nais�k Inc. 12 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.z .eased Fee.An ownership interest held by a landlord with the right of use and occupancy conveyed by lease to others;usually consists of the right to receive rent and the right to repossession at the termination of the lease.' The Dictionary of Real Estate Appraisal,op. cit.,p. 140. ' The DictionaiT of Real Estate Appraisal,tap,cit.,p.140. 13 �dc:il Y '.b%iw7 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 would the subject property 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,bow 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. Seven current sales of commercial space have been analyzed to estimate the exposure time for the subject property. The five sales were all listed on the market less than twelve months. This data is very representative of the current market and is specific to the commercial office real estate market in Bozeman. Based upon the preceding data we have estimated the exposure time for the subject property to be 1-6 months. VALUATION DATE The effective date of the appraisal is January 31,2006.This is the date of valuation and the date that the subject property was personally inspected. 14 IDENTIFICATION AND HISTORY OF THE SUBJECT The legal description of the subject property is: Lots 15-19 Block F,Rouse's I st Addition, See 7, T2S R6E. Sale History: The subject property is owned by the City of Bozeman and has been used as a fire hall for years. The subject property is not currently listed for sale and has not transferred within the past three years, 15 MONTANA REGIONAL AND CITY MAPS TOOLE I , gi LWCOLN OLQCJER Cul Di- DANCLS SHOWAN Eby O D^ahce y LMERTY( � p NA'L' FM1WVrtq OCdfina�k FLATHEAD i4 OKHBfti�VO'q g PCYND5RA OL7M(E Behar VALLEY .... ROOSEVELT onrod.... i P)4xlIPS 0 OWw3nw SAtl Pp sn NDOW Fx' ? Cf M.. Fan Boma. FECKAhM Os O lirrmp LAPW TETON ., % UTEAG Fp.Nirs AMCCOAW Cmk1 S14pow, ' CASCADE UIL Sinrth6P7� FEROUS GARFIELD Gk,md qau +.ESSOUY.A PO LLE1'VS&CLIRK D 4uwAs]pvnrt, WYUi�sWGi. ��F'.. ' r ' SUBJECT FETROLEI6q PRA mvAw WAG D Fhulbpabwr9q�"aF Laayy BauWpaa 1p W4'hako5 WNFnATYAND n R g JAILuTWOmwtidu Fogs h Was My FALLDN ORAN7TE I f tin FLama w D Yaruocaarh9 wrn Hy-sl,nm N D RAVAW P.Mae4. D WWADWAr6t ...... OOAAIEN VALLEY TREASURE COSTER OE'Eq LOCO, Be,9ua l D, FFkfRSON 01EET GRASS RO5EEWD E"Wk. YELLWS'TDNE D' ..` +SiMER 9Y7LV S BW T"un.r°Mr , wArE' a� STiu: xgman CnarmRrers ® .. @1vn9C�a D 7 8'.4d.. ' MAK 1 .a-" CARTER OA1LATk! DAL HORN WA M.Car J POMERRIVER OLLRpn D BEAVERNEAD NgDYSON ' �" Red LOg9b ., r CARBON .. /�' ,, ,, Y,EJ.L:EyWSTONEr ARK Y.nL�naC iai*ap uaau�q arwn.,-�A Bridg r appraisals Inc, K:; 16 Kciih O'Rciliy,MM � MKS � i y. k / r po / � lk d i XV r � / r � / / 5�,% a..... FSubj Cx �ry /' / r � to € OF nil (fib ID%i`/a//H�f l/ ✓ r / WI" H � �✓ Y m /5 /""'a /� - 1 is OG rrtl VT � "° r �� b �+ / �ti` t r" W ills, B&Ua A"Awk Mn 17 K61 URay MM r 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,MT is located in Gallatin County, in an area more commonly referred to as the Gallatin Valley,Gallatin County is the most populated and fastest growing county in southwest Montana, The county covers 2,500 square miles of mountainous lands varying in topography and climate.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, The City of Bozeman is located approximately 140 miles to the west of Billings,MT and 65 miles to the north of Yellowstone National Park.Bozeman is the fifth largest city and Gallatin County is the fifth largest county in Montana.Bozeman is the County Seat of Gallatin County, Social Factors: Social influences that affect value include,but are no limited to,population characteristics such as growth, population density, age distribution,household sizes, employment status, availability of education and the quality of life. Historic 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:22,660 in 1990 to 27,509 in 2000-an increase of 4,849 people.This represents an increase in population of approximately 21 percent over a ten- year period, or an average rate of growth of about 2.1 percent per year.in contrast,the City grew by only 1,015 people during the 1980s.Between 1980 and 1990,the City's population increased from 21,645 to 22,550-4.7 percent increase or an average rate of growth of about 0.47 percent per year. Gallatin County's population increased from 50,463 in 1990 to 67,831 in 2000-an increase of 17,368 people.This represents an increase in population of approximately 34 percent over a ten-year period,or an average growth rate of )A percent per year.The entire state of Montana grew by 12.9 percent between 1990 and 2000(799,065 in 1990 and 902,195 in 2000) with an average growth rate of approximately 1.29 percent per year. is City, County and State Historic Population Trends: 1900—2000 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 Bozeman 3,419 5,107 6,183 8,855 8,665 11,325 13,361 18,670 21,645 22,660 27,509 Gallatin County 9,553 14.079 15,864 16,124 18,269 2.1,902 26,045 32,505 42,865 50,463 67,831 State of Montana 243,329 376,053 548 889 537,606 559,456 591,024 674,767 694,409 786,690 799,065 902,195 Recent Population Trends-City of Bozeman It is estimated that the City's population grew by approximately 1,400 people(or 4.7 percent)in 2003, and the City's population was approximately 31,600 at the end of 2003.By the end of 2004,it was estimated that the City's population had grown by approximately another 2,000 people(or 63 percent)for a total of approximately 33,600 people. 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 persons,while the average household size for Gallatin County is 2.49 persons.Just 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 residences in 2000 was 30.4 years and 32.9 years respectively.The median age for Montana residences for this time period was 36.4 years. The City of Bozeman has a significantly higher educational attainment level than Gallatin County or Montana in general.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. Quite frankly,what drives most of the new residents to the Bozeman area and Gallatin County is the quality of life,including low crime rates. Outdoor activities are abundant throughout Gallatin County.Activities include excellent snow skiing developments, world class fly fishing rivers and streams,miles of hiking trails and almost any other outdoor recreation that comes to mind. 19rE�.V.cM 4��,}7rai,v6l 1Ptl4, <" 19 Economic Factors: Historically Bozeman is somewhat different than the rest of the State of Montana and the Nation as a whole economically, One of the primary reasons is the fact that there are not a large number of employers who employ a significant number of the population.For example other areas of Montana like Missoula are very dependent on the lumber industry,when the lumber industry slows,Missoula is more likely to feel the impact.The primary employer in Bozeman is Montana State University. The economy in Bozeman and Gallatin County are both broad based and diverse,with 3,400+business establishments employing over 41,000 people,Major sectors of the economy in addition to Montana State University include recreational„retail trade, agricultural services, manufacturing and natural resource based industry including mining and forestry, The largest single employer in the area is Montana State University that employees approximately 3,500 people,In the spring of 2005 the student enrollment at MSU was 12,000.The student body has a significant effect on the local economy,. Overall economic growth has been much stronger in Bozeman and Gallatin County than statewide, earnings increased 116%over the 1989 to 1998 period but only 60%in all of Montana. Sectors in Gallatin County and Bozeman showing the most substantial growth include agricultural services,construction,manufacturing,finance, insurance,real estate and hotels and lodging. Unemployment has been extremely low in both Gallatin County and Bozeman for several years,even as the size of the labor force has increased.The total labor force increased by 31%from just fewer than 32,000 in 1992 to nearly 42,000 in 2000,while unemployment declined from 5.4%to 2.9%over the same time period.Employment rates have not been as strong statewide;the labor force grew by 12%between 1992 and 2000,with unemployment declining from 6.9%to 5.2%over the same time period. Median household income for Gallatin County is$35,710,which is above the statewide median of$29,672 and ranks the County sixth highest in the State.Nearly every sector of the economy is experiencing increased activity. For the first six months of 2003,the South West Montana Multiple listing Service reported that 430 residential properties representing$92.6 million were sold in Bozeman and the surrounding areas, compared to 400 units and .$85.3 million for the same period in 2002.From 2002 to 2003 the average price for residential property increased by 5%to$174,703 while the median price was$162,000. Of the residential sales, 171 units were single-family houses and 102 were condominiums or townhouses. 20 K I h()°k K,V1,1,I The average price for a newly constructed single family home in the City Limits increased 17%to$211,121 with a median price of S 188,500.This is not to say all houses in the Bozeman City Limits have seen this increase. Several new subdivision within the City Limits,primarily Sundance Springs and South Meadow,have skewed these statistics due to the high priced homes in these developments. Rent levels increased significantly over the past ten years;however,due to the increase in inventory rental rates have stabilized and some have slightly declined for residential properties. As shown in the table below,residential building permit activity in the City of Bozeman has been strong ever since 1991,and set another record in 2004 with 881 housing units permitted-an increase of 43.7 percent over 2003 when 613 new housing units were permitted.A break down of these permits by type is presented below. Since 1990, single-household units have been the most popular housing type permitted at approximately 40 percent, followed by multi-household units at almost 22 percent. Of the 881 housing units permitted in 2004,29.5%were for single household residences;7.9%for townhomes; 16.4%for duplexes; 5.1 %for triplexes; 13.6%for four-plexes; 26.7%for apartment buildings;and 0.8%for manufactured homes. Residential Units Permitted by Type: 1990—2004 1990 1991 1992 '1993 1994 1995 1996 1997 1998,1999 2000. 2001 2002 2003 2004 Total Percent Single-household 50 101 104 139 130 100 113 98 135 155 158 229 259 215 260 2246 39.78 Townhouse 0 4 4 38 11 53 52 40 35 26 34 0 28 52 70 447 7.92 Duplex 2 20 32 50 38 24 46 48 40 56 23 51 37 108 144 719 12.73 Tri-Plex 3 18 6 0 6 21 21 3 6 3 6 3 6 12 45 159 2.82 Four-Plea 12 28 32 24 16 64 24 48 52 136 60 12 16 44 120 688 12.19 Multi-household 0 0 0 30 82 160 119 8 60 116 73 71 132 146 235 1232 21.82 Manufactured home 0 0 0 0 0 1 1 7 S 1 7 0 20 25 36 7 155 2.75 Total 67 171 178 281 283 423 376 252 379 499 354 386 503 613 881 5646 100.00 Governmental Factors: The City of Bozeman is a City Commission/City Manager form of government with and 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 HtiEil�,a 1pwisr;a� ti» Bnti,:. ':' 21 Cw�i2i�t7"fy"ct�fl.,:�1�11' and 18 firefighters and support staff.There are two fire stations, one located on South 13th and one located on North Rouse. Both fire and police protection is considered good. 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 general the planning and development process has become very burdensome to developers. Stringent planning regulations have made it difficult to develop new subdivisions. In addition,the City adopted a"Big Box"ordinance to limit the size and number of big box retailers. Consequently low supply and high demand have had a significant impact on real estate values.The overall consensus is that the Bozeman City Commission has been anti-business and anti-growth, 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.The appraised property is affected similarly as other competitive properties with respect to taxation. There is no sales tax in the State of Montana, The City has continued to expand its boundaries over the past ten years.In addition to population growth the City continues to grow in geographical size.In 1988,the City was approximately 5,840 acres in size.By the end of 2002,. the City was approximately 8,750 acres in size;this is a 51.8%increase. In addition to population growth,the City of Bozeman continues to grow in geographic size.In order to accommodate increasing population and business growth,new land for residential, commercial and industrial development continues to be annexed to the City.In 1990,the City was approximately 6,210 acres(9.7 square miles)in size.By the end of 2004,the City was approximately 10,375 acres (16.2 square males)in size.This is a 67 percent increase in the size of the City in 15 years! The DPCD processed 16 annexation applications in 2004. Annexation to the City of Bozeman(in.Acres): 1990 2004 1990 1991 1992 1993 1994 10.38 0.00 85.92 31.36 11.92 1995 1996 1997 1998 1999* 540.14 11.50 958.96 90.04 104.06 2000 2001 2002 2003 2004 632.09 794.06 222.746 186.582 484.467 *In 1999,©.12:9 acres were de-annexed from the City of Bozeman. 22 Vi it>.L¢ c. t.. 1..4'.11.1(} M'cd�l�,�'e A I 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 warm days,cool nights and an abundance of sunshine.Hot weather and humid conditions are infrequent,Most summer have seven or fewer days were temperatures exceed 90 degrees. There average high temperatures in the summer are in the 70s to 80s and the average lows are in the mid 40s to low 50s. The average monthly high and low temperatures for December,January, and February are 35 degrees and 16 degrees,31 degrees and I I degrees, and 37 degrees and 17 degrees respectively. Springs tend to come late in the Gallatin Valley with average temperatures in April,May and June of 53 degrees, 63 degrees and 72 degrees respectively. One third of the annual precipitation of 18.61 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 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 mild summers cool air condition costs are less;however,heating bills can be high due to the relatively cold winter months. 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 and County roads provide access throughout the region and commercial air,truck and rail(commercial service only)transportation are adequate. Gallatin Field near Belgrade(ten 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 Bozeman and surrounding communities is good.The area has seen significant growth over the past ten years. Significant growth in the construction sector is expected to remain strong and building permits have seen an upward trend, Current population trends continue in an upward direction and growth has been sustained over the past decade. 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.Bozeman's City government and stringent planning department have curbed rapid expansion and caused increases in property values. BlidgcV Apr)m��fl, ( 23 Ke)�11 NI'M The quality of life and outdoor activity will continue to be one of the driving factors for population growth in Gallatin Valley, Current population trends continue in an upward direction and growth has been sustained over the past decade, Commercial buildings like the subject should see stable demand and good marketability in the future. ?rtr.Ss,t p)m—ai ao 1 kic. 24 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 December 31, 2002. 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. No taxes are assessed on the subject property. u'n,l ao IIn , < 2 SITE DATA AND ANALYSIS Location: 34 N Rouse Bozeman MT 59715 Dimensions: See Attached Plat Map Land Area: 19,875.00sf Areas&Ratios: Gross Building Area:PDIGBAsf Shape: Rectangular Drainage: Adequate Flood Zone: Census"Tract: 7. Zone: X.The subject Is Not located in flood hazard zone. FEMA Map Number: 300028 00120. FEMA Map Bate: 07/15/88 Topography: Level Frontage: 130`on Mendenhall and 150'on Rouse Ave. Visibility: Good Landscaping: 'Typical for neighborhood Site Utility: Average Off-Site Improvements: Concrete Sidewalks Street Access: Average Maintenance: Typical for neighborhood Surface: Asphalt Sewer and Water: Sewer: City Sewer Water: City Water Utilities: Northwestern Energy Curb/Gutter: Concrete Sidewalk: Concrete Streetlights: Gas 2005 Real Estate Taxes: N/A Adverse Easements or None Noted Encroachments: Adjacent Uses: Commercial I 26 SUBJECT PLAT' MAP MEN ENHALL STREET lat W a 28, 26, 28" 4 28" 1 fit, �r ' 26, 28• T F65oci A5 16 17 18' 19 20 21 22' 2 24 25 ,..... r ..�,, IDSrm N k fry �, 15 r✓�M79 a Wr N l�+"ra.r� 16r IL Flc m, TS:ub:ject 15-19 231 -t ' /� 34 13 12 11 10 9 8 7 6 5 LAJ 281 281 28m 28t 28, 28V 28, 28s F. .'k r.• +t' ".a, MA I N STREET l9ridger Appraisals Inc, (C'' 27 Keith O'Rcilly,MAI FOOD MAP �... i r_' .._.w ... ..__ . . ...�. .. Subject ..... �Bszeman .e 84',. �. 4 a . . �. .. _ .i......... � . _ ....a.. .. _ _:. .._ . _a r " ,b w u Flood Zones SFHA(Flood Zone); Out drem inundated by 500-year flooding Within 250 ft. of multiple Flood zone? Yes .gear outs Ile ofthe tou and 500 year flood Community: 300028 plains Community Name: BOZEMAN,CITY OF ,rgE inundated by teo ar flooding Zone:X Panel:300028 00120 Panel Date:. 07/15/1988 Aram inundated ty 1001aar flooding wth FIPS Cade:30031 Census Tract. 0007..00 Vebo ty hard This Flood Report is for the sole benifit of the Customer that ordered and paid t bodw araao for the Re®ort and is based on the prooerty information provided by the customer.That customer's use of this report is subiect to the terms agreed by pbodwayareas w th Vebciy hazard that customer when accessina this product.No third oarty is authorized to use or rely on this report for any pumose.NEITHER FIRST AMERICAN FLOOD ArOM of unddermined bu#possibteflood DATA SERVICES NOR THE SELLER OF THIS REPORT MAKES ANY hazard REPRESENTATIONS OR WARRANTIES TO ANY PARTY CONCERNING Ares not mappea an any psbleted Fiat 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 Repo shall have any liability to any third party For any use or misuse of this Report, f3ridger Appraisals Inc. 'C, 28 Keith O'Re iffy,1l Ai Conclusions 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 Rouse Avenue and Mendenhall Street. The site size is typical of sites developed into commercial retail or office space. ZONING AND GOVERNMENT RESTRICTIONS I E LAN=ST � E��7atta�w5T YrIV?pvrcunn > -1 F� 4i F h1k;N.D N�x'J4NM#.s � � moo. +. L J Subject AT ST r 57 c"�s ilkIINs b"A The subject site is zoned by the City of Bozeman as B-3. The intent of the B-3 central business district is to provide a central area for the community's business,government service and cultural activities. Uses within this district should be appropriate to such a focal center with inappropriate uses being excluded.Room should be provided in appropriate areas for logical and planned expansion of the present district. 1. It is the intent of this district to encourage high volume,pedestrian-oriented uses in ground floor space in the"core area"of Bozeman's central business district,i,e., along main Street from Grand to Rouse and to the alleys one-half block north and south from Main Street. Lower volume pedestrian uses such as professional offices may locate on ground floor space in the B-3 area outside the above defined core. The subject improvements are legal and conforming. Bridger Appraisals Inc. ([_ 29 Kcitit.O'ReiIIl.;+ AI PHOTOGRAPHS OF THE SUBJECT PROPERTY —� r�1fr /JrJ 9o�iA� �/��rraira,u�u� /r u View of street scene looking from north to south down Rouse Ave.. Photo taken on January 31,2006 by Keith O'Reilly,MAI. t � r /// � uV�� Illlllllul NIIIIIIIIIVIII I I IV� !li�SI�i ipi Is'I�li I���,! 'o I View of street scene leaking from west to east down Mendenhall St. Photo taken on January 31,2006 by Keith O'Reilly,MAT. Bridger App aisaN Inc. .:c 30 Keith O'Reilly,NIM DESCRIPTION OF IMPROVEMENTS Since the intended user occupies the subject building and is more familiar with the improvements than the appraisers,the report is not going to detail the improvements, The subject property is currently used as a fire hall for the City of Bozeman.The improvements contain approximately 9,287sf of building area.Below is a diagram of the subject. 3a b .......... APU�A LJVI 9R" 0 N, "WIMM '320 0 1 R Not LIVABLE Am. R.unded 1 9287 7 Jtema Poundod) 9267 Hridgcr Appraisals Inc, 31 Kcith O'Rtilly, VAI HIGHEST AND BEST USE Highest and best use is defined in the fourth edition of The Dictionary of Real 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 profitability. 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 detemune the ideal improvement. The final step is a comparison between the ideal improvement and the existing improvement. At this point, the determination 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.4 1. Permissible Ilse,What uses are permitted by zoning and other legal restrictions? 2. Possible Ilse.To what use is the site physically adaptable? 3. Feasible Ilse.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 The highest and best use of the subject property as is is for the redevelopment of the current improvements into useable retail and office space. Highest and Best Use As Vacant The highest and best use of the subject property as if vacant is for the construction of at least a two story retail/office building with parking acceptable to the market. 4 The Appraisal of Real Estate 11'"Edition,Page 2.97,Appraisal Institute �zi1,, .r �1Ca��ra7ti4ti I,e�. Q' 32 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 former 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.' 5 Boyce,op.cli.,pp.63,132,and 160. 33 COST APPROACH The Cost Approach is one of the three traditional approaches in valuing real property. This approach is based on the proposition that an informed purchaser would pay no more than the cost of producing a substitute property with the same utility. The approach represents an alternative course of action available to a purchaser considering the acquisition of the subject property, i.e., instead of buying the subject property, what would it cost to build an improvement offering the same utility? Estimating Market Value for the subject property by use of the Cost Approach involves the following procedures: a. Estimating value of the site as if vacant and available to be put to its Highest and Best Use, b. Estimating Reproduction Cost New of the Improvements. C. Subtracting the total depreciation, if any, from the reproduction cost new of the improvements,which results in an estimate of the depreciated value of the improvements. d. Adding site value to the depreciated value cost of the improvements. The suer of these estimates represents a value indication of the subject property via the Cost Approach. The following pages present data and analysis utilized in estimating the value of the subject property by the Cost Approach. Site Valuation: 34 LAND SALE NO. 1 � 0 PROPERTY DATA Grantor: Gape France,Inc. date of Sale: Ukn Grantee: Dennis and Joni Balian Recording Date: 08/16/05 Location: Lot 29 Stoneridge Sub Recording Doe#: 2198247 Bozeman County: Gallatin Terms: Cash to seller Marketing Time: Ukn Property Rights: Fee Simple Confirmed By: Keith O'Reilly Price: $407,133 Confirmed With: Dennis Balian Phone Number: 539-8762 Legal Description: Lot 29 Stoneridge Sub Phase 2B SITE DATA Site Size(Acres): 1.10 acres Dimensions: Irregular Site Size(SF'): 47,898sf Site Topography: Level Front Ft: 439' Water: City Corner: Yes Utilities: Public Zoning: R_p Improvements: Vacant site Access: Good Price psf: $8.50 Dridger Apps iostiils hic. :S'i 35 J deli(J'Rcilly,MAI LAND SALE NO. 2 r/j // �/ i/iii �/%///✓/���� ���� � PROPERTY DATA Grantor: Cape-France Inc Date of Sale: 02/28/05 Grantee: Smania,Clark, Sovulweski Recording Date: 00/15/05 Location: Lot 24A Stoneridge Recording Doc##: 2191100 Bozeman County: Gallatin Terms: Cash to seller Marketing Time: 91 Days Property Fights: Fee Simple Confirmed By: Keith O'Reilly Price: $307,730 Confirmed With: Tom Clark Phone Number: 522-7000 Legal Description: Lot 24A of Stoneridge SITE DATA Site Size(Acres): .853 acre Dimensions: Irregular Site Size(SF): 37,168sf Site Topography: Level Front Ft: N/A Water: City Corner: Yes Utilities: All Zoning: R-O Improvements: *lone Access: Paved/Good Price psf: $8.28 This is a newer commercial development which began in 2002. 936tiger App aisak Inc, C, 36 Keith O'Rcifly,Mr"I LAND SALE NO. 3 M9i I PROPERTY DATA Grantor: Cape Prance Inc Date of Sale: 02/28/05 Grantee: Dennis Balian Recording Date: 06/02105 Location: Lot 25 Stoneridge Bozeman Recording Doe#: 2189582 County: Gallatin Terms: Cash to seller Marketing Time: 91 Days Property Rights: Pee Simple Confirmed By: Keith O'Reilly Price: $296,650 Confirmed With: Kevin Schlender Phone Number: 522-7000 Legal Description: Lot 25 of Stoneridge PUD Major Sub Phase 2B SITE DATA Site Size(Acres): 0.8 acre Dimensions:. Irregular Site Size(Sly): 34,848sf Site Topography: Level Front Ft N/A "Water: City Corner: No Utilities: All Zoning: R-0 Improvements: None Access: Paved/Good Price psf: $8.50 93iidgr Appraisals fwtc, ;c;' 37 LAND SALE NO. 5 all, i 1 PROPERTY DATA Grantor: Falgers,Inc. Date of Sale: Ukn Grantee: L.A.S.T.LLC Recording Date: 06/29/04 Location: Stoneridge Drive Bozeman Recording Doc#: 2156163 County: Gallatin Terms: cash to seller Marketing Time: Ukn Property Rights: Fee Simple Confirmed By: Keith O'Reilly Price: $495,000 Confirmed With: Patrick Asay Phone Number: 497-3670 Legal Description: Lot 6 of Stoneridge P.U.D.Major Sub Pbase 2A SITE DATA Site Size(Acres): 1.06 acres Dimensions: Rectangular Site Size(SF): 46,299sf Site Topography: Level Front Ft: N/A Water: City Corner: No Utilities: All Zoning:: B-1 Improvements: Access: Paved/Good Price psf: $10.69 NOTES This is a newer commercial development which began in 2002. The site has excellent frontage and exposure to North 196 Ave., but no direct access. Bridgcr Al Inc. ',C', 39 K601 O'Reilly, MAI LAND SALE NCO. 6 r PROPERTY DATA Grantor: Cape-France,Inc. Date of Sale: Ukn Grantee: First National Bank of Recording Date: 05 116 103 :Montana Location: 1336 Stoneridge Dr Recording Doe#: 2108487 County: Gallatin Terms: Cash to seller Marketing Time: Ukn Property Rights: Fee Simple Confirmed By: Keith O'Reilly Price: $755,760 Confirmed With: Patrick Asay,MAI Phone Number: 497-3670 Legal Description: Lot 22 of Stoneridge PUD Major Sub Phase 2B SITI:DATA Site Size(Acres): 1.32 acres Dimensions: Rectangular Site Size(SF): 57,284sf Site Topography: Level Front Ft: 193' Water: City Corner: Yes Utilities: All Zoning: B-2 Improvements: None Access: Paved/Good Price psf: S1„3.19 DTIaS This is a newer commercial development which began in 2003. This is the premium lot in the development,it is located at the southwest corner of North 19th Avenue and Oak Street. This site has excellent frontage and access. First National Bank constructed a new banking facility on the site. kridger Apl)raisals Inc. C 40 Keith O'Reffly,MAI LOCATION OF COMPARABLE SALES IMP ,w N A.F �M W� e 0.M" I 1 `M � r ..r. .� _ Camp 3 w Comp 2 a Comp 6 l 2S 6 � y jComp I s t A � :ahw x , OZEMr u PM6 W. I ,1 Subject mr" Comp r � a " I ; p pµ ' lm 7 0.,q q k F ridger Appra'os,,fls.Inc.. �0 41 Kw ilh O'Reilly,NlAI Units of Comparison-Property Valuation: Since the subject property is a commercial office/retail building site,value is derived from the square footage of the site. It is logical to use the square footage of the subject site to derive a value from other comparable sales. The preceding sales have been analyzed and compared with the subject property. We have considered adjustments in the areas of • Property Fights Sold • Economic Trends(time) • Financing • Location • Conditions of Sale • Physical Characteristics In conjunction with previous appraisal reports we have recently prepared to the client.We have reconciled a finial opinion of value for the subject site at$15.75psf.Although this value psf is higher than the comparable sales,the subject site is located in the CBl3. In addition current market conditions have seen increasing property values. Sale b has been given the most consideration.The concluded value is 19,875sf x$15.75 or$313,031 rounded to$315,000. V<.e - �gp�etiMr oil<;Inc, 42 4ctil'h d)"C;cdi",MM Reproduction Cost New: The next step in the Cost Approach to Value is estimating the Reproduction Cost New of the Improvements, as of the date of valuation. Reproduction Cost New of the improvements is defined as: The cost of construction at current prices of an exact duplicate or replica using; the same materials, construction standards, design, layout, and quality of workmanship, embodying all the deficiencies, superadequacies, and obsolescence of the subject building.' Reproduction Cost New,then, involves the cost associated in reproducing the exact physical structure with all items of functional and locational obsolescence built-in. The structure and the cost thereof together with accrued depreciation(functional,locational, and physical) are analyzed, estimated and deducted in the next step of the Cost Approach. Reproduction Cost New is contrasted to replacement cost which involves the cost associated with replacing utility, not the physical structure;therefore,the cost of functionally obsolete components would not be included. Reproduction Cost New reflects all ingredients of cost to the most probable,typical purchaser. Specifically,they include direct,or hard, costs and indirect,or soft,costs. Direct costs include labor,materials, equipment and subcontractor's fees and charges. Indirect costs involve such items as contractor's overhead and profit; architectural, engineering and legal fees;taxes and insurance during construction; construction financing cost, etc. Reproduction Cost New of the subject is estimated using the Calculator Cost Method in the Marshall and Swift Valuation Service.. Costs are classified by class and quality of construction. Buildings typical of a certain quality have many characteristics in common. For example,a "Good Quality"building will usually have good quality roofing so modifications for roof differences on a quality-classified building are seldom necessary. Marshall Valuation Service, compiled and published by Marshall and Swift Publication Company of Los Angeles, California,was used as a source of cost data. Marshall Valuation Service is a cost data manual based on analysis of the cost of new buildings on a national basis. The costs are updated quarterly via a current cost multiplier compiled on a regional basis. The costs are further refined to a metropolitan area by use of a local multiplier. Therefore, Boyce,op.cit.,p.205. 43 k". 01 0 k^i.".ilk .Mi:' 0 current cost for the Western United States are modified by a Bozeman,Montana Area multiplier and reported on a unit or component basis. The Marshall"Valuation Service has long been recognized as an authoritative source of cost data and has been used extensively by the appraisal profession. The RCN has been estimated using(1)the Marshall Swift Cost Manual,(2)analysis of other construction projects. The following page contains the cost calculations by Marshall Swift Commercial Estimator. Bmly ul 44 Marshall Swift Cost Guide Subject Size Cost Including Totals Locational Multipliers Class C Storage Fire 9,287sf $133.50 x 1.01 x 0.95 $1,188,736 Stations Section 15,Page $128.09 29 Total Cost Improvements $1,188,736 Less Depreciation 17% $202,085 Functional.Obsolescence 30% $348,262 Total Value Improvements $638,389 Site Value $315,000 Indicated Value $953,389 Rounded to $955,000 Sri l 4 i 007rr„u�•;!n,;. �. 45 Developer's Profit This factor reflects the profit necessary for the developer to undertake the management,responsibility and risks of construction associated with the subject property. Current valuation theory states that the four components that create value are land, labor,capital and coordination. Developer's profit as used in the Cost Approach reflects the coordination component of value. Typically, developer's profit runs 10%to 20%: we have computed developer's profit at 0%of construction costs since properties similar to the subject are not typically built for speculation. 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. Physical Deterioration This results from deterioration from aging and use. This type of depreciation may be curable or incurable. Functional Obsolescence This results from a lack of utility or desirability due to design or market perception of the improvements. This type of depreciation may be curable or incurable. The subject property is currently a Fire Hall and any potential new purchaser will not be using it for this use.An estimate of 30%for functional obsolescence is reasonable,but not necessary well supported with market data. External Obsolescence This is due to circumstances outside the property itself,such as industry,demographic and economic conditions or an undesirable proximate use.This type of depreciation is rarely curable. Market data suggests that properties similar to the subject depreciate at a rate of approximately 1.5%per year.The subject improvements are older and would require some serious renovation from a new purchaser. Cost Approach Conclusion Based on the analysis detailed on the following page,we have reconciled to a cost approach value of$955,000,as of January 31,2006,subject to the Limiting Conditions and Assumptions of this appraisal. klci'dh 0"P, WII ,� �\1 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 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 Cost Approach: $955,000 Land Value: $315,000 Income Approach The income approach to value is not applicable to the subject property.Primarily due to the Highest and Best Use and the fact that the subject property is a special use(Fire Hall).It would be a guess at best to estimate what the property would lease for in the market.The income approach is not applicable. Cost Approach The data for the cost approach to value is reasonable,the only weakness in the cost approach is the estimate for functional obsolescence,We estimated 30%for functional obsolescence which is reasonable but not well supported with market data. If we were able to firmly support the estimate we would have sales of Fire Halls, which obviously we do not have. The cost for the improvements as if new and the estimated land value are well supported.The estimated opinion of value is reasonable and reliable. Sales Comparison Approach As stated earlier there were no sales of fire halls to apply to the sales comparison approach.However, it is reasonable to research the subject neighborhood for commercial properties that have recently sold.There are sales between$80.00 on the low end for office space that is considered inferior in condition to the subject and there are commercial sales of office and retail space for$130 to S140psf which in considered more functional than the subject.The middle of this range is approximately around$100,00psf which reconciles with the cost approach.The majority of the sales which we have just referred to can be found in the other reports we have recently submitted to the City in conjunction with this assignment. 47 N1 \1 Value Conclusions The cost approach is the only applicable approach to value for the subject property.The highest and best use analysis does not support razing the current improvements on the site.There is still economic life left in the subject improvements. The quality and quantity of market data is good and the indication of value is reasonable and reliable. Based on the data and analyses developed in this appraisal,we have reconciled to the following value conclusions, as of January 31,2006,. subject to the Limiting Conditions and Assumptions of this appraisal. Reconciled Value Conclusion: Premise:"As Is" Estate:Fee Simple Value Conclusion: $955,000 As a result of our investigation and analysis,it is our opinion that the Market Value of the Fee Simple Interest,"As Is",in the subject property, as of January 31,2006,is: NINE HUNDRED AND FIFTY FIVE T14OUSAND DOLLARS (5,955,000) 48 CERTIFICATION As a result of a request for an appraisal assignment of the property,identified as: Fire Hall 34 N Rouse Bozeman MT 59715 We certify: 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 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. We have no present or prospective 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 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 Practice(USPAP)published and copyrighted by the Appraisal Foundation. Keith O'Reilly and Jerry Gossel have made a personal inspection of the property that is the subject of this report. No person other that 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. 3u�ls.i lap�>>ra�,.ila� IBVC. <` 49 The reported analyses, opinions and conclusions were developed, and this report has been prepared in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. 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,1,Keith O'Reilly,MAI, have completed the continuing education program of the Appraisal Institute, As a result of our investigation and analysis,it is our opinion that the Market Value of the Fee Simple Interest,"As Is",in the subject property,as of January 31,2006,is: NINE HUNDRED AND FIFTY FIVE THOUSAND DOLLARS (S955,000) Respectfully Submitted, Keith O'Reilly,MAI General Certified Appraiser#400 State of Montana Jerry Gossel General Certified Appraiser#106 State of Montana 50 K,e, 010TC ik. MAI Keith O'Reilly, MAI Fee Appraiser State of Montana General Certificate#400 Expires 3-31-06 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 course 1110 Appraisal Principles, Completed the Seminar"The New URAR", Appraisal Appraisal Institute, Institute Successfully completed course 1120 Appraisal Procedures, Completed the Seminar "High Tech Appraisal Office", Appraisal Institute Appraisal Institute Successfully completed course 1210 Residential Case Completed the Seminar "Fundamental of Relocation", Study,Appraisal Institute Appraisal Institute Successfully completed course 1410 Standards of Completed the Seminar "Understanding Limited Professional Practice,AT Appraisals Residential",AT Successfully completed course 1420 Standards of Completed the Seminar "Understanding Limited Professional Practice,Al Appraisals General",AI Successfully completed course 310 Basic Income Completed the Seminar "660- Small Hotel/Motel Capitalization,Al Valuation,AI Successfully completed course 430 Standards of Completed the Seminar "620- Mixed Use Valuation Professional Standards Part C,A Analysis"AT Successfully completed course 510 Advanced Completed the Seminar "Appraising Manufactured Income Capitalization,Al Housing"AI Successfully completed course 520 Highest & Best Completed the Seminar "Data Confirmation and Use and Verification Methods"AT Market Analysis,AT Completed fled Whitener's Comprehensive Appraisal Successfully completed course 530 Advanced Sales Work Shop,Dallas Texas Comparison and Cost Approaches,AI Completed the Seminar "Partial Interest Valuation- Successfully completed course 540 Report Writing and Undivided"AI Valuation Analysis,AT Completed the Seminar"Appraisal Review General"' Successfully completed course 550-.Advanced Application,AT Completed the Seminar"2004 7hr USPAP Update" e•,_�'ith�)"V^'gill+.,MAI APPRAISAL EXPERIENCE:'.: Specializes in the appraisal of residential & commercial properties located in Gallatin County, .Montana since May of 1992. My experience includes an apprenticeship with Henry Neils, MAI & Pah°ick Nolan, MAI, SRA. Appraising residential properties including single family, 2-4 family, and condominiums. Appraising industrial sites and buildings,commercial sites and buildings, and insurable value appraisals. I am a native of the Bozeman area and have been for approximately 34 years. I currently serve as a board member for the Montana Board of Real Estate Appraisers. I have completed work for the following:. Washington Mutual, American Bank, Intermountain. Mortgage, Wells Fargo Horne Mortgage, Country Wide Mortgage, Prudential Relocation, First Interstate Bank, Talley Bank of Belgrade, Heritage Bank, 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 iiEl? pproir[l: Inva B G:itFi O'R nlh.MM