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HomeMy WebLinkAboutAppraisal City of Bozeman Nelson Rd 11-13AN AP P R AI SAL O F T H E 12 AC R ES LO C AT E D AT T H E N EC O F N E LSO N R O AD AN D F R O N T AGE R O AD I N B O Z E M AN , M O N T AN A. D AT E O F VALU AT I O N N O VE M B ER 12, 2013 F O R C H U C K WI N N , ASSI ST AN T C I T Y M AN AGE R C I T Y O F B O Z EM AN B O Z E M AN , M O N T AN A 59715 B Y J . M I C H AEL J O K I , M AI , SR A H E LEN A, M O N T AN A I N T R O D U C T I O N J. Michael Joki, MAI, SRA HELENA, MONTANA SU B J EC T P R O P E R T Y P H O T O GR AP H Looking northeast at the subject property from the intersection of Nelson Road and Frontage Road. Photograph take November 12, 2013 by J. Michael Joki, MAI, SRA. J. Michael Joki, MAI, SRA HELENA, MONTANA 3 SU M M AR Y O F I M P O R T AN T F AC T S AN D C O N C LU SI O N S PURPORTED OWNER:City of Bozeman LOCATION OF PROPERTY:This site is located at the NEC of Nelson Road and Frontage Road, Bozeman, Gallatin County, Montana. SITE SIZE:A slightly irregular shaped 12 acre site. BUILDING IMPROVEMENTS:None PROPERTY RIGHTS APPRAISED:Fee Simple ZONING:PLI (Public Lands and Institutions District) PRESENT USE:This site was utilized by the City of Bozeman Water Reclamation Facility and supports several infiltration percolation ponds. HIGHEST AND BEST USE:A residential use most likely subject to the R-1 or R-2 zoning ordinance DATE OF VALUATION:November 12, 2013 CONCLUDED ESTIMATE OF MARKET VALUE:$84,000 * *Subject to the Extraordinary Assumptions and Limiting Condition on page 7. J. Michael Joki, MAI, SRA HELENA, MONTANA 4 ASSU M P T I O N S AN D LI M I T I N G C O N D I T I O N S This is to certify that the appraiser in submitting this statement and opinion of value of subject property acted in accordance with and was bound by the following principles, limiting conditions and assumptions. Unauthorized use of this report is set forth below. 1. No responsibility is assumed for matters that are legal in nature nor is any opinion rendered on title of property appraised. 2.Unless otherwise noted, the property has been appraised as though free and clear of all encumbrances. 3.Where the values of the land and the improvements are shown separately, the value of each is segregated only as an aid to better estimate the value which it lends to the whole parcel, rather than value of that particular item if it were by itself. 4.All maps, areas, plans, specifications, and other data furnished your appraiser were assumed to be correct. No survey of the property was made by this firm. Furthermore, all numerical references to linear measurements, area, volume or angular measurements should be assumed to be "more or less" (+/-) and are accurate to a degree consistent with their use for valuation purposes. 5.This appraisal considers only surface rights to the property with consideration of current zoning and land use controls. The estimate of highest and best use will form the basis for the value estimate. This appraisal does not consider mineral, gas, oil or other natural resource rights that may be inherent in the ownership of the property. 6.In this appraisal assignment any potentially hazardous material found on the land such as petroleum residue and/or existence of toxic waste or gases, which may or may not be present on the property, has not been considered. The appraiser is not qualified to detect such substances. Any interested party is urged to retain an expert in this field if there is any question regarding such potentially hazardous material. If such material or substance is present it could adversely effect the value reported. 7.The appraiser is not a seismologist. This appraisal should not be relied upon as to whether a seismic problem exists, or does not actually exist on the property. The property which is the subject of this appraisal is within a geographic area where earthquakes and other seismic disturbances have previously occurred and where they may occur again. Except as specifically indicated in the report, no seismic or geologic studies have been provided to the appraiser concerning the geologic and/or seismic condition of the property. The appraiser assumes no responsibility for the possible affect on subject property on seismic activity and/or earthquakes. I have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed seismic requirements by the City or County. It is possible that a survey of the property could reveal that the property does not meet the required seismic requirements. If so, this fact could have a negative effect upon the value of the property. Since I have no direct evidence relating to this issue, I did not consider possible noncompliance requirements in estimating the value of the property. J. Michael Joki, MAI, SRA HELENA, MONTANA 5 8.All data contained in this report and in the appraiser's files, as obtained from other sources, upon which to any degree the opinions and conclusions were based, are considered reliable and believed to be true and correct. However, the appraiser does not assume responsibility for the accuracy of such items that were obtained from other parties. 9.There shall be no obligation to give testimony or attendance in court by reason of this appraisal with reference to the property in question unless arrangements have been previously made and at an additional fee. 10.Disclosure of the contents of this appraisal 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 the conclusions as to value, the identity of the appraiser, or the firm with which he is connected, or to the MAI and SRA designation, shall be disseminated to the public through advertising media, news media, public relations media, sales media, or any other public means of communication without the prior written consent of the appraiser. 11.J. Michael Joki, MAI, SRA, specifically does not authorize the out-of-context quoting from or partial reprinting of this appraisal report. 12.The liability of J. Michael Joki, MAI, SRA and employees is limited to the client and to the fee collected. Further, there is no accountability, obligations or liability to any third party. If this report is placed in the hands of anyone other than client, the client shall make such party aware of all limiting conditions and assumptions of the assignment and related discussions. The appraiser assumes no responsibility for any costs incurred to discover or correct any deficiencies of any type present in the property; physically, financially, or of a legal nature. 13.The fee for this appraisal report is for the service rendered and not for time spent on the physical report or for the physical report itself. 14.This appraisal report is prepared for the sole and exclusive use of the appraisers’ client the City of Bozeman, Montana. As I understand the subsequent site is part of a potential land swap with the Montana Department of Transportation/State of Montana and personnel from the state agency will be viewing this report as well. No other parties are authorized to rely upon this report without the express written consent of the appraiser. 16.This Summary Appraisal Report is intended to comply with the reporting requirements set forth under Standard Rule 2-2(b) of the Uniform Standards of Professional Appraisal Practice for a Summary Appraisal Report. As such, it presents only summary discussions of the data, reasoning, and analysis that were used in the appraisal process to develop the appraiser’s opinion of value. Supporting documentation concerning the data, reasoning and analysis is contained in the appraiser’s file. No third parties are authorized to rely upon this report without the express written consent of the appraiser. J. Michael Joki, MAI, SRA HELENA, MONTANA 6 EXT R AO R D I N AR Y ASSU M P T I O N & LI M I T I N G C O N D I T I O N An extraordinary assumption is an assumption that is directly related to a specific assignment, which, if found to be false, could alter the appraiser’s opinions or conclusions. Extraordinary assumptions assume as fact otherwise uncertain information about physical, legal or economic characteristics of the subject property, or about conditions external to the property, such as market conditions or trends or about the integrity of data used in an analysis. 1.The current zoning for the subject property is PLI (Public Land and Institutions). I spoke with Doug Reilly at the City of Bozeman Planning Department concerning the current zoning and the potential of a zoning change if the subject property were in private ownership. I have been asked to estimate the market value of the subject property which is based on the highest and best use of this site, and is explained in the Highest and Best Use Analysis the highest and best use of this site is for conversion to a residential zoning ordinance and eventually developed with a residential use. In order to be consistent with this highest and best use analysis sales with the same use or potential use are analyzed in this appraisal report. If the information provided by Doug Reilly is found to be false it could change my conclusion to value in this appraisal report. 2.As shown on the aerial photograph on page 21 the subject property and the land lying directly to the east is a series of infiltration and percolation or IP ponds that were once and integral part of the City of Bozeman Water Reclamation Facility. Apparently these IP ponds would be flooded with effluent and they would retain the liquid until it percolated into the ground and/or evaporated. Herb Bartle, Superintendent of this facility, said these ponds have not been utilized for this purpose for 10+ years and to the best of his knowledge there are no contaminants remaining on this property. If this information is found to be false it could also change my conclusions to value in this appraisal report. J. Michael Joki, MAI, SRA HELENA, MONTANA 7 D E SC R I P T I O N , AN ALYSI S AN D C O N C LU SI O N S J. Michael Joki, MAI, SRA HELENA, MONTANA SC O P E O F T H E AP P R AI SAL A ll k n o w n , av a ilab le , re le v an t m ark et d ata c o n sid e red to hav e an im p a ct o n th e e stim a tio n o f m a rk e t v alu e o f the su b je ct p ro p e rty h a s b ee n co n s id e r ed . A s id en tified u n d er A ss u m p tio n s a n d L im itin g C o n d itio n s a n d a s e x p la in ed u n d er P rop erty R igh ts A p p r a is ed , th e title is a ss u m ed to b e fre e a n d clear o f lie n s an d en cu m b ra n c es . T h e S co p e o f W o rk d e fin e s an d ap p raise r’s c o n clu sio n s a s to w h a t is d e em ed n e ce ssary to p ro v id e a cre d ib le app ra isa l re p o r t. T h e clie n t is id e n tif ie d as th e C ity o f B o z em a n , M o n tan a . T h e in te n d ed u se r if th e c lient, a n d th e in te n d e d u s e w ill b e to a ss is t th e c lien t in a p o ten tia l la n d sw ap fo r a site th at is lo ca te d at th e in terse ctio n o f N o rth R o u se A v e n u e an d O a k S tree t w h ich is cu rren tly o w n e d a n d o cc u p ie d b y th e M o n ta n a D e p artm e n t o f T ran sp o rta tio n /S tate o f M o n tan a . T h e e stim a te o f m ark et v a lu e p ro v id ed in th is a p p raisal re p o r t is su b je c t to th e E x tra o rd in ary A ssu m p tio n s an d L im itin g C o n d itio n s a s sh o w n o n p a g e 7 . I s p o k e w ith H e rb B artle w h o is th e su p erin ten d en t f o r th e C ity o f B o ze m a n W a te r R ec lam atio n F ac ility a n d h e p ro v id e d m e a cc es s to th e su b je ct site. I in sp ected th e su b jec t p ro p e rty o n N o v em b er 1 2 , 2 0 1 3 a n d th is is also th e d ate all p h o to graph s o f th e su b jec t p ro p e r ty w ere ta k e n . In fo rm a tio n p e rtain in g to th e su b jec t p ro p e rty w a s o b ta in ed fro m th e G a lla tin C ou n ty C o u rth ou se . T he n eig h b o rh o o d an d s u rro u n d in g co m p etitiv e m a rk e t a r eas w ere re se a rch ed to fin d co m p a r a b le la n d s a le s. R eal es tate age n ts, real estate ap p raise rs a n d d ev elo p e rs ac tiv e in th is m ark e t w ere in te rv iew e d in a n atte m p t to fin d re le v a n t m a rk e t d ata . M a rk e t d a ta h as b e en co n firm e d b y p e rso n al co n ta ct w ith th e b u ye r, selle r o r real es tate age n t in v o lv e d in th e tr a n sac tio n . M ark et d ata w a s o b ta in ed fro m th e fo llo w in g re so u rc es: •G allatin C o u n ty C le rk a n d R ec o rd ’s O ffic e •C ity o f B o ze m an P lan n in g D e p artm en t •K eith O ’R e illy , M A I, A p p raise r •E d Ja ck so n , A p p rais er •M ik e M cK e n n a , R e a lto r •S co tt D e h len d o rf , D ev elo p er •Ja m e s N ick elso n , E n g in ee r •M ik e H ic k m a n , E ngin e er •D av e O sterm a n , D e v e lo p e r •Ja so n B a sy e, R ealto r •B ill E lflan d , R e a lto r •R a y A tte b e rry, R ealto r •M ik e W ilm er, R ealto r J. Michael Joki, MAI, SRA HELENA, MONTANA 8 E x p o s u r e T i m e : Exposure time is defined by the Appraisal Standards Board of the Appraisal Foundation as follows: "The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of the sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market". Exposure time is typically based on historical data found in the market place. As shown on the comparable sale sheets in the addenda the days on market for these sales range from approximately 1 month to 2 years. The sale that was on the market for nearly 2 years is an “out-layer” as the four other properties sold after 3 weeks, 1 month, 5 months and 12 months. Market conditions in Bozeman are relatively strong which is expected to remain in the foreseeable future. It is my opinion a reasonable exposure time for the subject property is between 6 and 12 months. E f f e c t i v e D a t e : The effective date of this appraisal is November 12, 2013. This is the date of valuation and was the actual date of the property inspection. It is also the date all enclosed photographs of the subject property were taken. This appraisal report was completed on November 22, 2013. Market conditions have remained effectively unchanged between the effective date of appraisal and the completion date of the written report. M a r k e t i n g T i m e : Marketing time is defined as "the estimated time it takes an interest in real property to sell on the market subsequent to the date of appraisal". Exposure time has previously been estimated at 6 to 12 months. Marketing time differs from exposure time if at the date of appraisal market conditions are changing or are expected to change in the near future. However, in this case market conditions are expected to remain at least stable or show moderate growth in the Bozeman real estate market. Therefore, marketing time is estimated at 6 to 12 months and the concluded estimate of market value is based upon that time period. J. Michael Joki, MAI, SRA HELENA, MONTANA 9 D E F I N I T I O N O F M AR K ET VALU E Market value, as used in this report is defined as follows: “The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self interest, and assuming that neither is under undue duress.”1 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 well informed or well advised, and acting in what they consider their own best interests; 3.A reasonable time is allowed for exposure in the open market; 4.Payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and 5.The price represents the normal consideration of the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with this sale. Additional discussion pertaining to exposure time can be seen on page 9 of this appraisal report. P U R P O SE O F T H E AP P R AI SAL The purpose of this appraisal report is to arrive at a supportable estimation of the market value. T he A pp rais a l of R ea l E s tate, 12 E dition , (A pp raisal In s titu te, 20 06 ), p . 2 2 .th1 J. Michael Joki, MAI, SRA HELENA, MONTANA 10 I N T E N D E D U SE O F T H E AP P R AI SAL AN D I N T EN D ED C LI E N T It is understood that the intended use of this appraisal report is to assist the City of Bozeman with a potential land swap for the site that is located at the intersection of North Rouse Avenue and Oak Street in Bozeman, Montana. This site is currently owned by the Montana Department of Transportation/State of Montana. The user of this appraisal report is the City of Bozeman and the Montana Department of Transportation/State of Montana. P R O P ER T Y R I GH T S AP P R AI SED This appraisal is made with the understanding and assumption that present ownership of the subject property includes all rights that may be lawfully owned, and is therefore, title in fee simple as of November 12, 2013. A fee simple estate is subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power and escheat. I D E N T I F I C AT I O N O F P R O P E R T Y AN D LEGAL D E SC R I P T I O N The property which is the subject matter of this appraisal report is a ±12 acre site that is located at the NEC of Nelson Road and Frontage Road in Bozeman, Gallatin County, Montana. The legal description of the land involved is as follows: "T h e w este rn m o s t 1 2 a c res of T ra c t A -1 -A (1 ) lo cated in th e N ½ of S e ctio n 26 , T o w nsh ip 1 S o u th , R a n ge 5 E ast, P M M , G a lla tin C ou n ty , M o n ta n a ." J. Michael Joki, MAI, SRA HELENA, MONTANA 11 P U R P O R T E D O WN E R An investigation was made at the Gallatin County Courthouse Clerk and Recorder's Office, State of Montana. Records within that Office indicate that the City of Bozeman is the current owner of record. It is my understanding the City of Bozeman has owned this site since March, 1982. SALES H I ST O R Y O F T H E P R O P ER T Y There have been no reported sales of subject property in over three years. It appears that the owner of record, as previously cited under "Purported Owner", has maintained exclusive ownership since March, 1982. To the best of my knowledge this property is not currently listed for sale. J. Michael Joki, MAI, SRA HELENA, MONTANA 12 R EGI O N AL M AP J. Michael Joki, MAI, SRA HELENA, MONTANA 13 R E GI O N AL AN D C I T Y AN ALYSI S Bozeman is the county seat of Gallatin County and is one of 56 counties in the State of Montana. Gallatin County is located in a mountainous area of Montana north of the Montana/Wyoming border and Yellowstone National Park. Bozeman primarily lies on the south side of Interstate 90 and is located approximately 140 miles west of Billings, Montana and 80 miles east of Butte, Montana. Gallatin County has grown faster than any other county in the State of Montana over the past decade according to the Census Bureau. Gallatin County includes almost 2,500 square miles of mountainous lands that offer a variety of topography and climate. Nearly half of Gallatin County is under public ownership by the Gallatin National Forest, State of Montana, Bureau of Land Management or the National Park Service. F o r c e s I n f l u e n c i n g P r o p e r t y Va l u e s The value of real estate is influenced by the interaction of four major forces. Social considerations, economic considerations, government and environmental considerations. The four forces are discussed as follows: S o c i a l C o n s i d e r a t i o n s Social forces are exerted largely by population characteristics, including population growth, density, and age distribution. According to the U. S. Census Bureau the population of the City of Bozeman increased from 27,509 in 2000 to 37,280 as of April, 2010 and increase of nearly 9,800 people. This represents an increase in population of approximately 35.5% over this 10 year period, or an average rate of growth of about 3.55%/year. From April, 2010 to April, 2012 the population increased from 37,280 to 38,695, an increase of nearly 1,415 people which equated to a growth of 3.8% over this time frame. Gallatin County’s population increased from 67,831 in 2000 to 89,513 in 2010 or approximately 21,700 people. This represents an increase in population of approximately 32% over a 10 year period or an average growth rate of 3.2%/year. Between April, 2010 and April, 2012 the population increased from 89,513 to 92,614 people or 3,101people which equates to a growth rate of about 3.5% over this time period. Comparatively, the State of Montana grew from 989,417 people in April 2010 to 1,005,140 people in 2012 or 15,724 people which equates to a growth rate of 1.6% over that time frame. In addition to population growth the City of Bozeman continues to see growth in its geographic size. In 1990 the City of Bozeman was approximately 6,420 acres (± 10 square miles) and by the end of 2009 it had expanded to 12,300 acres (±19.25 square miles) resulting in an increase of ±92% over this 19 year period. This growth was to accommodate the increasing population which required new land for residential, J. Michael Joki, MAI, SRA HELENA, MONTANA 14 commercial and industrial development. This growth significantly slowed in 2009 and 2010 which was being seen all throughout this region as the national economic recession took effect. Bozeman has a significantly lower home ownership rate than most other communities in the county primarily due to the student body of Montana State University. Bozeman also has a smaller average household size and a smaller portion of families than other areas of Gallatin County. Bozeman has an average household size of 2.27 people while the average household size for Gallatin County is 2.49 people. Just over half of the Bozeman households are families compared to ±63% countywide. 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 emphasizes the significance of Montana State University being located in Bozeman. Bozeman and Gallatin County has transformed over the past decade from a primarily agricultural based community to a tourism related community. Bozeman and Gallatin County offers a high quality of life due to its low crime rate, offering of many cultural experiences, the presence of Montana State University and its education offerings. An abundance of outdoor activities that include excellent downhill snow skiing, world class fly fishing rivers, streams and access to numerous state and federally owned lands are all nearby. E c o n o m i c C o n s i d e r a t i o n s Bozeman, like many communities in Montana experienced significant growth in population and economy for a number of years. This area was affected by the national recession just like many other areas in the country however new growth and development has begun again and the outlook for Bozeman and the vicinity is quit positive based on a number of factors. C County seat of Gallatin County. C Wide range of skills in the labor force. C Home of Montana State University. •Well located in southwestern Montana. •Numerous recreational opportunities Bozeman is somewhat unique when compared to other communities in Montana because there are few employers who employ a large amount of the population. Missoula, Montana, as an example was very dependent on the lumber and timber industry and Butte, Montana had always relied heavily on the mining industry. When those industries slowed those communities were very heavily impacted. The primary employer in Bozeman is Montana State University. Other major sectors of the economy that provide employment are construction, local and state government, manufacturing, technology, agricultural and retail service. Montana State University currently employs about 3,500 people as permanent faculty/staff and they also employ over 2,000 students in part time work. In the fall of 2,013 the student enrollment at MSU was slightly over 15,000 J. Michael Joki, MAI, SRA HELENA, MONTANA 15 people which certainly has a significant affect on the local economy. Other major employers in Gallatin County include the State of Montana, Gallatin County, the City of Bozeman, Bozeman Deaconess Hospital, Right Now Technologies. With such a diverse employment base the local economy tends to be sheltered from a downturn in any of the Country’s key employment industries. In 2010 Bozeman was declared as the most expensive place to live in Montana based upon a report by Propera Business Network. This report stated that Bozeman’s 2009 cost of living was 4.4% above the national average. The other Montana cities that showed an overall cost of living above the national average were Missoula at 1.8% and Kalispell at 1.5%. Residential rent levels in Gallatin County have remained stable primarily due to the presence of Montana State University. Rents in this community will periodically show a slight decline however they tend to stabilize or even increase rather quickly due to the continued growth of Montana State University. Overall the economic growth has been much stronger in Bozeman and Gallatin County than what is being seen statewide. Historically the sectors in Bozeman and Gallatin County that show the most substantial growth are agricultural services, construction, manufacturing, finance, insurance, real estate and lodging. Currently the unemployment rate in Montana is 6.4% and Gallatin County recorded a slightly lower unemployment rate at 5.8%. Gallatin County’s labor force is currently estimated at 52,070 employees, the third largest labor force in Montana’s 56 counties. Over the past ±10 years residential building permit activity in the City of Bozeman was on the rise and reached its peak in 2005 and then began to decline over the next 5 years, and most significantly in 2008 and 2009. Residential building permits began to increase again in 2010 and have been on a steady incline. Bozeman has been experiencing new growth in several areas of town but no area has provided as much commercial real estate development at the 19th Avenue corridor. Recent stores and restaurants developed along 19th Avenue include Sportsman’s Warehouse, Lowes, IHOP, Bed Bath and Beyond, Staples, World Market and REI. Most recently a new Safeway grocery store (±58,000 SF) was completed in December, 2011 and a Kohls department store (±55,300 SF) was completed in October, 2011. The City of Bozeman facilities over the past 5 years have seen significant development and/or renovation which includes the fire stations, police station, waste water treatment facilities, the completion of a downtown parking garage, City of Bozeman Library, construction of the Gallatin County Detention Center, an expansion of the landfill building etc. Montana State University has also seen significant expansion and renovation which include a significant remodel of the football stadium, addition of the Molecular Biology Center, renovations to the Health and Physical Education Center, addition of the Black Box Theater, renovation of Gaines Hall etc. Tourism brings a significant number of visitors to the Bozeman area. Yellowstone National Park, the first national park in the United States, is located approximately 65 miles south of Bozeman. Big Sky Ski Resort is located approximately 45 miles south of Bozeman and has recently been listed as the seventh best J. Michael Joki, MAI, SRA HELENA, MONTANA 16 ski resort in the United States. This ski area averages over 300" of annual snowfall with skiing available November through April. The Yellowstone Club lies adjacent to Big Sky Ski Resort and is an exclusive vacation/residential development that includes both private skiing and golfing. This exclusive, private development had filed for bankruptcy in 2008 and in 2010 was purchased by Cross Harbor Capital and for several years saw significant decline in sales and values. However the private development has begun to rebound again as sales are starting to climb again. Other ski resorts in Gallatin County include Moonlight Basin which is also adjacent to Big Sky and Bridger Bowl which lies approximately 15 miles to the north of Bozeman. E n v i r o n m e n t a l C o n s i d e r a t i o n s Environmental and physical forces, both natural and man made, can influence property values. These forces include climatic conditions, topography and natural barriers, and transportation systems. Bozeman’s climate clearly reflects its mountain valley location. Bozeman truly has four seasons with its short summers being pleasant which are typically characterized by warm to hot days and cool nights. The average high temperature in the summer is in the upper 80°’s and the average low in the winter is the mid to lower 30°’s. Spring tends to come late in the Gallatin Valley as a of its annual precipitation ±19" falls during May and June. The average annual snowfall in Bozeman is ±72" and the average length of the growing season is about 107 days. The climate of the county varies according to elevation but is generally characterized by relatively cold winters and warm summers. Snow removal is a common operating cost that will affect real estate in the winter months. In contrast air conditioning costs are less during the fairly temperate summer months however heating bills can be quite high during the cold winter months. Bozeman is located on the south side of Interstate 90. Access to the south towards Yellowstone Park is via U.S. Highway 91. There are numerous other state highways and Gallatin County maintained roads that provide access throughout this region. Commercial air service, truck and rail transportation are considered to be adequate. Gallatin Field which is located in the adjacent community of Belgrade is the second busiest airport in the state and provides air service for this area. G o v e r n m e n t a l C o n s i d e r a t i o n s The City of Bozeman is a City Commission/City Manager form of government with an elected municipal judge. There are five commissioners elected with no party affiliation and are elected to a four year term which are overlapping. The City Commissioner elections are held every two years and the terms of the commissioners are staggered and the candidate who receives the most votes in an election becomes the mayor the last two years of their term. The City of Bozeman has approximately 40 police officers and the fire department has approximately J. Michael Joki, MAI, SRA HELENA, MONTANA 17 18 firefighters plus the Fire Chief, Deputy Chief/Marshall, and seven captains. There are three fire stations in the City of Bozeman and overall the fire and police protection services are considered to be good. The Department of Planning and Community Development processes applications for new development in the city limits. This department enforces the zoning regulations within the city limits of Bozeman. Gallatin County administers all zoning for properties outside the city limits and within the “zoning donut”. The Gallatin County Comprehensive Plan encourages development near the existing city limits and/or services and discourages development in more remote locations. In general the planning and zoning regulations in this area are considered stringent. C o n c l u s i o n Bozeman and Gallatin County has population and overall growth trends that are continuing upward. This area offers a wide variety of outdoor recreational opportunities, cultural resources, tourism, and coupled with the presence of Montana State University this area is poised for continued growth. Bozeman has a young and very well educated work force and coupled with its diverse economy the general outlook for Bozeman, Belgrade and the surrounding small communities is good. J. Michael Joki, MAI, SRA HELENA, MONTANA 18 N EI GH B O R H O O D D AT A AN D T R EN D S The subject property is located at the northern edge of the Bozeman city limits and on the north side of Interstate 90. The subject property, which is part of the City of Bozeman Water Reclamation Facility, is located north of the Frontage Road that parallels Interstate 90 and between Nelson Road and Springhill Road. The subject property and several other properties that lie east of Springhill Road are annexed in to the Bozeman city limits otherwise most other properties are in the unincorporated Gallatin County. In the immediate vicinity of the subject property there is a small cluster of commercial development at the intersection of Springhill Road and Frontage Road. Riverside Country Club lies directly to the north on the east side of Springhill Road and there are several residential subdivisions in its immediate vicinity. To the west and on the north side of I-90/Frontage Road a number of farms are still in operation and there is a mix of rural residential subdivisions up to the edge of the Belgrade city limits. The Bozeman-Yellowstone International Airport is located on the eastern edge of Belgrade. Directly to the north of the subject property is more operating farm and ranch properties with a mix of rural residential subdivision that extend to the base of the Spanish Peaks/Bridger Mountain Range. These mountains can be viewed from nearly any location in Gallatin Valley. Directly south of the subject property and across Interstate 90 is the North 19th Avenue corridor that supports much of the new commercial development in Bozeman. North 19th Avenue can be accessed from Frontage Road via the Interstate 90 underpass. This corridor has been developed with a number of new restaurants, hotels, grocery stores, and big box retailers. North 19th Avenue has turned in to the main north/south corridor through Bozeman and leads directly to the western edge of the Montana State University Campus. Several of the east/west thoroughfare streets in Bozeman pass through North 19th Avenue. J. Michael Joki, MAI, SRA HELENA, MONTANA 19 Many of the long time farm and ranch operations that were located between Bozeman and Belgrade have been developed into residential subdivisions. There is still farmland in this area however it is being developed into residential developments as demand for this property type continues to grow and I expect commercial development will also continue to grow where land is available along North 19th Avenue or along West Main Street and towards the Four Corners area. This neighborhood has excellent transportation routes and access to an adjoining neighborhoods via the Frontage Road, Springhill Road, North 19th Avenue, and direct access on to Interstate 90. City water and sewer services are readily available to those properties in the Bozeman city limits. Natural gas and electricity is provided throughout the neighborhood by Northwestern Energy. I expect this neighborhood will continue to experience good demand and growth. A new interchange is being developed just south of the Bozeman-Yellowstone International Airport which will provide direct access to the airport from Interstate 90 and most likely spur more commercial and residential development between Belgrade and Bozeman. Market conditions are continuing to get stronger in the Bozeman/Belgrade market, there is increased demand for residential and commercial property, and this neighborhood is well situated to receive the new growth that is expected in this community. J. Michael Joki, MAI, SRA HELENA, MONTANA 20 P LO T P LAN J. Michael Joki, MAI, SRA HELENA, MONTANA 21 P R O P E R T Y D ESC R I P T I O N S i t e Size:The site that is valued in this appraisal report is ±12 acres in size and is depicted on aerial photograph on the facing page. This aerial photograph was provided to me by the Montana Department of Transportation. As shown on the certificate of survey in the addenda Tract A-1-A (1) is actually 21.99 acres however I am valuing the western most 12 acres of that site. This is part of the aforementioned land swap between the City of Bozeman and the Montana Department of Transportation/State of Montana. Shape:Slightly irregular. Topography:The subject site is developed with four ponds that embanked with a series of dykes that are large enough to support a vehicle. These ponds were constructed to contain effluent from the City of Bozeman Water Reclamation Facility and are known as Infiltration Percolation or IP ponds. These ponds drain into each other in a direction from south to north and each pond gets slightly deeper in that same direction. On average the pond depth is 5' below the top of the dyke. Soil Conditions:No soils test was provided to me and therefore the soil conditions are unknown. As previously explained in the Extraordinary Assumption and Limiting Condition it is my understanding the IP ponds were used by the City of Bozeman Water Reclamation Facility and stored effluent. Herb Bartle with the City of Bozeman Water Reclamation Facility explained to me that the IP ponds have not been utilized for 10+ years and to the best of his knowledge there are no contaminants on this property. Easements:No title policy was provided to your appraiser. A title policy should be used for the final determination of easements and encroachments. As shown on the aerial photograph there is a two lane gravel road along the north property J. Michael Joki, MAI, SRA HELENA, MONTANA 22 boundary. This road has been utilized by the City of Bozeman Water Reclamation Facility and provides ingress and egress to their facility from Nelson Road. It is my understanding this road will remain in place and in use for access to this facility. Access:Currently access to the subject site is from the series of roads to the east that are on top of the dykes. To the best of my knowledge the two lane gravel road along the north property boundary could provide access on to the subject site however no approach has ever been built. It is my understanding there is legal access from Nelson Road and an approach along the subject’s west boundary will be created. Utilities:There is no well or septic system servicing this site and City of Bozeman water and sewer service is currently not available at this location. It is my understanding city water has been extended to the intersection of Frontage Road and Springhill Road, and city sewer service is extended into the City of Bozeman Water Reclamation Facility. These services are approximately ¾ mile southeast of the subject property. Functional Adequacy:The current configuration of this site that supports the IP ponds and dykes severely limits the use of this site. Because this site has a higher and better use than support for the water reclamation facility a cost to excavate the subject site has been obtained so an adjustment can be made to the value estimate in this appraisal report. These issues are further discussed in the following Highest and Best Use Analysis and the Sales Analysis. Flood Plain:The subject is not located in a Flood Hazard Zone. The FEMA Map number is 30031 C 0816 D. This map is dated September 2, 2011. Nuisances or Hazards:To the south of the subject property is Frontage Road and the Interstate 90 corridor with the North 19th Avenue commercial corridor beyond. To the west and the north there is a mix of farmland and rural residential J. Michael Joki, MAI, SRA HELENA, MONTANA 23 subdivisions, and directly to the east is the City of Bozeman Water Reclamation Facility. These surrounding uses are typical to this neighborhood. S i t e I m p r o v e m e n t s It is my understanding when the IP ponds were constructed a catch system was installed ±6' beneath the soil that assists in the percolation of the effluent. Between ponds there is a culvert and/or head gate which controls the flow between these ponds. To the best of my knowledge these are the only site improvements on the subject property and these provide no contributory value to the subject site or its highest and best use and therefore are given no value. Field fencing encloses the entire City of Bozeman Water Reclamation Facility. J. Michael Joki, MAI, SRA HELENA, MONTANA 24 SU B J E C T P R O P E R T Y P H O T O GR AP H S Looking east along Frontage Road. Subject property is to the left. Photograph taken November 12, 2013 by J. Michael Joki, MAI, SRA. Looking north along Nelson Road. Subject property is to the right. Photograph taken November 12, 2013 by J. Michael Joki, MAI, SRA. J. Michael Joki, MAI, SRA HELENA, MONTANA 25 SU B J E C T P R O P E R T Y P H O T O GR AP H S Looking at the NWC of the subject site from Nelson Road. Photograph taken November 12, 2013 by J. Michael Joki, MAI, SRA. Looking east along the two lane gravel road on the north property boundary. Photograph taken November 12, 2013 by J. Michael Joki, MAI, SRA. J. Michael Joki, MAI, SRA HELENA, MONTANA 26 SU B J E C T P R O P E R T Y P H O T O GR AP H S Photograph taken from the NEC and looking south along the east boundary. Photograph taken November 12, 2013 by J. Michael Joki, MAI, SRA. Photograph taken from the NEC and looking west along the north boundary. Photograph taken November 12, 2013 by J. Michael Joki, MAI, SRA. J. Michael Joki, MAI, SRA HELENA, MONTANA 27 SU B J E C T P R O P E R T Y P H O T O GR AP H S Photograph taken from NWC and looking south along the west boundary. Photograph taken November 12, 2013 by J. Michael Joki, MAI, SRA. Photograph taken from the west property boundary and looking southeast over the subject property. Photograph taken November 12, 2013 by J. Michael Joki, MAI, SRA. J. Michael Joki, MAI, SRA HELENA, MONTANA 28 SU B J E C T P R O P E R T Y P H O T O GR AP H S Photograph taken near the west property boundary and looking east across the subject site. A pond is shown on the left and a dyke is shown on the right. Photograph taken November 12, 2013 by J. Michael Joki, MAI, SRA. Photograph taken from SEC and looking north over the subject property. Photograph taken November 12, 2013 by J. Michael Joki, MAI, SRA. J. Michael Joki, MAI, SRA HELENA, MONTANA 29 SU B J E C T P R O P E R T Y P H O T O GR AP H S Photograph taken from near the SEC and looking west along the south property boundary. Photograph taken November 12, 2013 by J. Michael Joki, MAI, SRA. J. Michael Joki, MAI, SRA HELENA, MONTANA 30 Z O N I N G I spoke with Doug Reilly at the City of Bozeman Planning Department and he confirmed that the subject site is currently zoned PLI (Public Lands and Institutions District). This district is intended to provide for and apply to public and quasi public institutional uses and lands, and recreational and public service activities for the general benefits of the citizens of the city. The typical uses in a PLI zoning district are open areas, parks, museums, historic or cultural exhibits, water conservation, flood control, drainage area, natural conservation and preservation area. Institutions including schools, colleges and universities, hospitals, rehabilitation centers, etc. are permitted. Public buildings, cemeteries, memorial stadia are permitted as well. Recreational uses including golf courses, tennis courses, softball fields, swimming pools etc. are also a common use. Currently the subject property is in all respects compatible with the existing zoning. Discussions with Doug Reilly indicated if the subject property transferred to private ownership (nonpublic agency) and was not going to be utilized for the general benefit of the public, a zone change would be required. Mr. Reilly indicated the most likely zoning ordinance for this site would be R-1 (Residential Single Household-Low Density District) or R-2 (Residential Two Household-Medium Density) based upon existing uses in the immediate area. Since its existing use as infiltration percolation ponds is no longer being utilized by the City of Bozeman Water Reclamation Facility and it’s not the highest and best use of this site the following valuation estimate will be based on this site’s highest and best use which is for residential development. J. Michael Joki, MAI, SRA HELENA, MONTANA 31 H I GH E ST AN D B E ST U SE "The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible and that results in the highest value."2 The definition above applies to the highest and best use of vacant land or improved property. It is to be recognized that in cases where a site has existing improvements on it, the highest and best use may very well be determined to be different from the existing use. The existing use will continue, however, unless and until land value in its highest and best use exceeds the total value of the property in its existing use. Quite often in estimating the highest and best use of land, the appraiser is controlled by governmental regulations. These controls are generally zoning ordinances, parking requirements and building codes. Also, in the estimate of highest and best use, one must recognize the attitude of typical investors in the marketplace. Real estate will usually fall into certain definite development patterns, and their uses can be classified as: residential, agricultural, recreational, industrial, commercial and public use. In valuing the highest and best use of the land both as if vacant and improved, the following criteria must be met. 1) legally permissible, 2) physically possible, 3) financially feasible, and 4) maximally productive. L e g a l l y P e r m i s s i b l e The subject property is currently zoned PLI (Public Lands and Institutions District) which allows for a wide range of uses. A number of the allowed uses were previously described in the zoning section. These uses are allowed as long as the property is being used for the benefit of the public. There are no known deed restrictions on the subject site which would prohibit any of the allowable uses under this zoning. The land immediately to the east of the subject property, which is still part of the City of Bozeman Water Reclamation Facility, is also zoned PLI. As previously discussed if the subject property were transferred to private ownership (nonpublic agency) and was not going to be utilized for the general benefit of the public a zoning change would be required. It will be shown in the following land valuation analysis that the highest and best use of the subject site is for residential development. T h e A p p ra is a l o f R e a l E sta te, 1 2 E d itio n , (A p p ra isa l I n stitu te , 2 0 0 6 ), p . 3 0 5 .th2 J. Michael Joki, MAI, SRA HELENA, MONTANA 32 Doug Reilly explained to me several questions need to be answered before a zoning ordinance can be adopted. First, what is the site’s twenty year land use plan as identified in the growth policy? The subject site has been identified for continued use with a PLI zoning. Next, what are the surrounding uses, road locations, and availability of utilities? There is un-annexed “present rural” to the north of the subject property. Frontage Road along the south boundary and Nelson Road along the west boundary are identified as two main roads in this neighborhood. Currently there is no city water and sewer services available at this location as they lie approximately ¾ mile to the southeast. Several of the possible uses for this site can reasonably be eliminated from consideration. There is very limited demand for a commercial or industrial use at this location, and this type of use would require amendments to the land use plan for this neighborhood and according to Doug Reilly it is very unlikely either of these uses would be allowed at this location. Agricultural use is still seen throughout this neighborhood however the relatively small size and uneven topography does not allow for a viable agricultural use. This location along Frontage Road with Interstate 90 directly to the south does not bode very well for a recreational use and this use can also be eliminated from consideration. The subject property has been in a public agency use since it was purchased by the City of Bozeman and is part of their water reclamation facility. These infiltration percolation ponds have not been utilized for 10+ years mostly because of renovation and modernization to the facility and obviously their historic use is no longer needed. It is becoming apparent the most reasonable use of this 12 acre corner site assuming it would be transferred to private ownership is for development with a residential use. P h y s i c a l l y P o s s i b l e In this neighborhood there is a mix of rural residential subdivision, farming and sporadic commercial development. There are still a number of large parcels of land that remain undeveloped with some supporting farm/ranch operations while others await to be developed with a residential use. The subject site is well located at the intersection of Frontage Road and Nelson Road which provides good access to this site. City water and sewer service are located approximately ¾ mile to the southeast near the intersection of Frontage Road and Springhill Road. Rural residential developments are common to this neighborhood and lie to the west, north and east of the subject property. Based upon the physical characteristics of the subject site and the existing properties in this neighborhood the legally permissible, physically possible and reasonable use of this property, assuming private ownership, is for a residential use. J. Michael Joki, MAI, SRA HELENA, MONTANA 33 F i n a n c i a l l y F e a s i b l e Market conditions in Bozeman have improved significantly over the past 18 to 24 months in comparison to when the national and local recession was taking effect. The City of Bozeman Planning Department is reporting more demand for new residential subdivisions and there were a number of existing subdivisions that were put “on hold” until the economy recovered which are now being re-entered into the application re-approval process. The City of Bozeman is naturally expanding to the north and west and significant development was seen along the North 19th Avenue corridor which lies directly south of the subject property and across Interstate 90. Because of this growth pattern a number of rural residential subdivisions were created north, east and west of the subject property. Doug Reilly confirmed that development of the subject site with an R-3 (Residential Medium Density Development) or R-4 (Residential High Density Development) is not very likely at this location. In order to approve a higher density development at this location demand for that property type would need to be proven in the market, and it is not likely at this location. The most reasonable and financially feasible use of the subject site is most likely for a residential use that would adopt the R-1 or R-2 zoning ordinance. Certainly development of the subject site in compliance with the R-1 or R-2 zoning ordinance, or any zoning ordinance for that matter, will have to go through a subdivision process with the City of Bozeman and fulfill any of their requirements before final plat will be approved. M a x i m a l l y P r o d u c t i v e The use that conforms with the requirements of the first three tests and will provide maximum productivity of the subject site is for development with a residential use and most likely subject to the R-1 or R-2 zoning ordinance for the City of Bozeman. The subject site could be purchased and held for future development or be purchased and developed immediately if there is adequate demand to justify the associated costs with developing this property. As previously explained the subject site has very unusual topography with a series of ponds and dykes. No comparable sales could be found in this market that have similar topography, and for the most part the comparables were relatively level and ready for development. I have obtained a cost estimate to have the ponds and dykes leveled and more or less ready this site for development. Application of the cost estimate is further discussed in the following Sales Analysis. J. Michael Joki, MAI, SRA HELENA, MONTANA 34 P R O P E R T Y VALU AT I O N Sufficient data was found in the market to employ the Sales Comparison Approach to value. In the Sales Comparison Approach an indication of value is derived by comparing the relative utility and desirability of the subject property with the comparable properties recently sold. Basic to this approach is the principle of substitution which states that "when a property is replaceable in the market, its value tends to be set by the price required to acquire an equally desirable substitute property." In this appraisal report unimproved land is valued. Therefore the Cost and Income Approaches to value are not applicable. SI T E VALU AT I O N The method employed to value the site as if vacant and available for sale is the Sales Comparison Approach. An investigation of the market revealed several sales and listings indicative of what a well- informed buyer or seller would consider in forming an opinion of value. Three sales and two listings of vacant land were chosen as being most appropriate to compare against the subject land. Descriptive data and photographs of these sales are contained in the Addenda. Ad j u s t m e n t s All comparables differ somewhat from each other, and from the subject in various ways. The usual differences are for cash equivalency, market conditions, location, and a number of physical characteristics. Many of these factors, in varying degrees, are applicable in the appraisal of the subject property. When dissimilarities are found in comparable properties, they are adjusted for by adding to the comparable price when the dissimilar factor is inferior to the same factor found in the subject property. Likewise, a minus adjustment should be made when the comparable sale has a factor which is superior to that found in the subject property. The sale properties, then, are adjusted to the subject property. However, in the market it is often difficult and sometimes impossible to accurately isolate a given factor. In short, one very seldom finds sales which are identical in all respects but one, and thus is able to prove conclusively the value, or lack of it, for any one factor due to a difference in sale price. Often, there are plus and minus factors which offset each other. Thus, the use of professional subjective judgment, to J. Michael Joki, MAI, SRA HELENA, MONTANA 35 some degree, may be exercised. Nevertheless, the differences in values are real and adjustments based on as much fact as can be found, will be made. Then, the appraiser may call upon his experience to make professional subjective judgments. P r o p e r t y R i g h t s Each of the sales involve fee simple property rights. As a result, no property rights adjustments were warranted. F i n a n c i n g : All sales were cash to the seller or on terms considered cash equivalent, and no adjustments were required. C o n d i t i o n s o f S a l e : No non-market conditions motivating the buyer or seller involved in the transactions are known, therefore no adjustments are required. E x p e n d i t u r e s I m m e d i a t e l y Af t e r S a l e : None of the sales required expenditures immediately after sale, and therefore no adjustments are required. M a r k e t C o n d i t i o n s : A market conditions (time adjustment) is required to bring all comparables up to the effective date of the appraisal report. Bozeman was experiencing significant decline in market values when the local and national recession was in effect. Since 2011 real estate values have rebounded in this market and new projects are being developed again and demand for unimproved land is beginning to outweigh the supply. I will utilize five comparables in the following analysis with three sales closing in 2013 and two current listings. In my opinion these comparables are all indicative of current market value. I cannot find enough conclusive market evidence, i.e. paired sales analysis, to extract a monthly rate of appreciation. Each of the developers, real estate agents and real estate appraisers I interviewed in this market were of the opinion that market conditions are currently strong in Bozeman and there is more demand than supply of vacant land, J. Michael Joki, MAI, SRA HELENA, MONTANA 36 and values will at least remain stable and most likely appreciate in the foreseeable future. Because all of the sales used in the following analysis closed within the past 3 months I have not adjusted any of these sales for market conditions. R e m a i n i n g Ad j u s t m e n t s : The remaining adjustments will be explained in a qualitative analysis which is an effective technique that recognizes the inefficiencies of a real estate market and the difficulty in expressing the adjustments with mathematical precision. The adjustments included in the qualitative analysis are location, size, access, topography, shape, utilities and use. The land sales adjustment grid can be seen on the following page. J. Michael Joki, MAI, SRA HELENA, MONTANA 37 LAN D SALE LO C AT I O N M AP J. Michael Joki, MAI, SRA HELENA, MONTANA 38 LAN D SALE AD J U ST M EN T GR I D S U B JE C T S A L E 1 S A L E 2 S A L E 3 S A L E 4 S A L E 5 Sale Price $1,345,000 $250,000 $395,000 $145,000 $105,000 Size (acre)12.00 53.77 20.17 18.32 10.15 4.15 Price/AC $25,014 $12,395 $21,561 $14,286 $25,301 Date of Sale 10/31/13 8/23/13 Listing Listing 8/16/13 Market Adjustment -0--0--0--0--0- Adjusted Price $1,345,000 $250,000 $395,000 $145,000 $105,000 Adjusted Price/AC $25,014 $12,395 $21,561 $14,286 $25,301 Location NEC of Nelson Rd. and Frontage Rd. E. Valley Center and Westlake Two Waters Way Airport Rd.Weaver Rd.Wild Horse Rd. Comparability Superior Superior Superior Superior Superior Size (acre) 12.00 53.77 20.17 18.32 10.15 4.15 Comparability Inferior Similar Similar Similar Superior Access Paved County Road Paved County Road Private Gravel Road Paved County Road Gravel County Road Paved County Road Comparability Similar Inferior Similar Inferior Similar Topography Generally Level*Level Level Level Level Level Comparability Similar Similar Similar Similar Similar Shape Slightly Irregular Slightly Irregular Rectangular Rectangular Irregular Rectangular Comparability Similar Similar Similar Inferior Similar Utilities Proximity to City Water and Sewer Service City Water Service No City Water or Sewer Services No City Water or Sewer Services No City Water or Sewer Services No City Water or Sewer Services Comparability Superior Inferior Inferior Inferior Inferior Highest & Best Use Residential Residential Residential Residential Residential Residential Comparability Similar Similar Similar Similar Similar Overall Comparability Superior Inferior Similar to Slightly Superior Inferior Superior * T he c o s t to hav e th e p ond s a n d d y ke s le v e le d a n d r e a d y th is site fo r d e v elo p m ent is a p p lie d a t the end o f th e S a le s A naly sis J. Michael Joki, MAI, SRA HELENA, MONTANA 39 S a l e s An a l y s i s The subject property is a 12 acre site that is located at the northern edge of the Bozeman city limits and at the NEC of Nelson Road and Frontage Road. The subject property is in proximity to city water and sewer service which is located approximately ¾ mile to the southeast. The subject property is just slightly irregular in its shape and for purposes of the following analysis it is assumed the topography is level. I have made this assumption because all of the comparable properties used in this analysis have more or less level topography. Then at the end of this analysis I will make an adjustment to the value estimate that pertains to the cost of having the subject site leveled and more or less ready for development. As previously explained the highest and best use of the subject site is for residential development. Comparable No. 1 is the sale of the 53.77 acre site that sold on October 31, 2013 at $1,345,000 or $25,014/Ac. This sale is located at the intersection of East Valley Center Road and Westlake Road almost directly across Interstate 90 from the subject property. This site is located on the northwestern fringe of the Bozeman city limits and just west of large retail commercial developments off of North 19th Avenue. Comparable No. 1 has similar access, shape and proximity to city sewer service. City water service was next to this site. The one inferior aspect of Comparable No. 1 is its much larger size. Comparable No. 2 is the sale of 20.17 acre site that sold on August 23, 2013 for $250,000 or $12,395/Ac. Comparable No. 2 is located northwest of the subject property being approximately 2 miles west of Springhill Road and ¼ mile north of Airport Road. For residential development Comparable No. 2 is considered to have a superior location. Comparable No. 2 is similar in its size, shape and use when compared to the subject property, however this comparable is accessed from a privately maintained gravel road and city services are not available at this location. Overall Comparable No. 2 is considered to inferior when compared to the subject property. Comparable No. 3 is the current listing of an 18.32 acre site at $395,000 or $21,561/Ac. Comparable No. 3 is also northwest of the subject property approximately 2 miles west of Springhill Road and on the south side of Airport Road. For residential development Comparable No. 3 is considered to have a superior location. Comparable No. 3 is similar in its size, access and shape when compared to the subject property. The only inferior aspect of Comparable No. 3 is its lack of city services at this location. Overall Comparable No. 3 is considered to be similar or maybe slightly superior when compared to the subject property. Comparable No. 4 is the current listing of a 10.15 acre site at $145,000 or $14,286/Ac. Comparable No. 4 is located on the south side of Weaver Road approximately 5 miles northwest of the subject property which for a residential use is considered to be a superior location. However Comparable No. 4 is accessed from a gravel county road and there are no city services available at this location which are both inferior J. Michael Joki, MAI, SRA HELENA, MONTANA 40 aspects. Also this site is quite irregular in its shape which is also inferior when compared to the subject property. Overall Comparable No. 4 is inferior to the subject property. Comparable No. 5 is the recent sale of a 4.15 acre site that sold for $105,000 or $25,301/Ac. This sale is located on Wild Horse Road in a residential subdivision that lies west of Belgrade and on the south side of Interstate 90. Comparable No. 5 is accessed from a paved county road, is rectangular in its shape and has a similar use when compared to the subject property. However this is a much smaller site than the subject property which cannot be further subdivided . This sale is indicative of a single family residential home site and its value establishes the low end of the range for a rural residential home site in this area. There are several positive and negative attributes to consider when estimating the value of the subject property. The subject property is located at the northern edge of the Bozeman city limits and Frontage Road provides good access to the subject property. There is exposure to Interstate 90. This site is only slightly irregular in its shape which is good for development purposes, and city water and sewer service are relatively close being approximately ¾ mile to the southeast. However, fronting onto Frontage Road with Interstate 90 beyond is not necessarily a positive attribute for residential development, and this property will remain adjacent to the City of Bozeman Water Reclamation Facility which again is not a positive attribute for a residential use. Comparable No. 1 is a recent sale of a site that was purchased for residential development that has many similar features when compared to the subject property. This comparable’s biggest differences are its much larger size and more importantly its location on the south side of Interstate 90 and in proximity to North 19th Avenue. Even though this comparable is much larger than the subject property I believe it is still superior to the subject property. Comparables No. 2 through No. 5 are current sales or listings of similar size sites, with the exception of Comparable No. 5, that all have the same use for residential development. These comparables all lack proximity to city water and sewer service and are accessed from various roads ranging from privately maintained gravel roads to paved county roads. Generally all of these comparables have a location that is more conducive to a residential use. These comparables indicate a value range from $12,395 to $25,301 per acre. Considering this information it is my opinion the subject site has a value of $20,000/Acre “as if” it were level and ready for development. 12 acres x $20,000/Acre = $240,000 J. Michael Joki, MAI, SRA HELENA, MONTANA 41 C o s t E s t i m a t e t o E x c a v a t e t h e S u b j e c t S i t e As shown in the addenda I have obtained a cost estimate from Morrison and Maierle, Inc. to have this site leveled and ready for development. Mike Hickman, PE, Senior Water/Waste Water Engineer provided me the cost estimate which includes a number of drawings and calculations that are pertinent to this estimate. Because of the configuration of the ponds and dykes, the underground perforated piping and the general excavation of the site so it can be accessed from Nelson Road the cost to level this site is $156,000. R e c a p u l a t i o n Estimated site value “as if” level:$240,000 Cost to excavate site:$156,000 “As is” Market Value Estimate:$ 84,000 J. Michael Joki, MAI, SRA HELENA, MONTANA 42 VALU E EST I M AT E AN D C E R T I F I C AT I O N The undersigned does hereby certify that, to the best of his knowledge and belief, except as otherwise noted in this appraisal report: 1.the statements of fact contained in this report are true and correct. 2.the reported analysis, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and/or those found in the letter of engagement or appraisal consultation contract authorizing this report and are my personal, impartial, and unbiased professional analysis, opinions, and conclusions. 3.I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest or bias with respect to the parties involved. 4.I have performed no services, as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three year period immediately preceding acceptance of this assignment. 5.I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. 6.my engagement in this assignment was not contingent upon developing or reporting predetermined results. 7.my compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. This appraisal assignment was not based on a requested minimum valuation, a specific valuation or the approval of a loan. 8.my analysis, opinions and conclusions were developed, and this report has been prepared, in J. Michael Joki, MAI, SRA HELENA, MONTANA 43 AD D EN D A J. Michael Joki, MAI, SRA HELENA, MONTANA COMPARABLE LAND SALE NO. 1 JOKI & ASSOCIATES REAL ESTATE APPRAISERS PO Box 281, Helena, MT 59624, (406) 442-2159 Location: 4900 Westlake Road in Bozeman, Montana. This site is located at the intersection of East Valley Center Road and Westlake Road and on the south side of Interstate 90. Site Data: 1. Size : 53.77 acres 2. Zoning: R-3 Photo Data: 1. Date: November 21, 2013 2. Taken From: North 27th Avenue 3. Facing: West 4. Taken By: J. Michael Joki, MAI, SRA 5. Comp: Boz.008 Current Use: Unimproved Legal Description: Lot 2A of Minor Subdivision No. 221E, being the corrected plat of Lots 1 and 2 of Minor Subdivision No. 221, a tract of land located in the SW¼ of Section 26, Township 1 South, Range 5 East, Gallatin County, Montana. Grantor: Jerald E. Swenson Grantee: Valley Center, LLC Recorded Sales Price: $1,345,000 Confirmed Sales Price: $1,345,000 Instrument: Warranty Deed Confirming Party & Phone No.: Listing Agent - Jason Basye Recorded: October 31, 2013 (406) 587-7653 Recording Info.: 2467102 Confirmed By: J. Michael Joki, MAI, SRA Financing: Cash to the Seller Confirmation Date: November 22, 2013 Property Description: This 53.77 acre site is located on the south side of Valley Center Road and has good exposure to Interstate 90 which is directly to the north. This site is level at road grade with Westlake/Valley Center Road along the north boundary, and North 27th Avenue along the east boundary. This site has relatively level topography and has historically been in an agricultural use. This site is located on the northwestern fringe of the Bozeman city limits and sits just west of a large retail commercial development known as the Gallatin Center and a new Costco store. The listing agent confirmed the one issue that slowed the sale of this property was access to city sewer service. It is my understanding the buyer of this site will pay $50,000 towards a water and sewer analysis and will be required to install a sewer lift station. The buyer’s prorata cost of the sewer service is estimated at $150,000. Extension of the sewer service will be required to develop this site to its highest and best use which is for residential subdivision. City water service is available and the site was annexed into the city limits before the sale closed. This property was listed for sale at $1,450,000 and sold for $1,345,000 after being on the market for 463 days. Indication At Time Of Sale: $1,345,000 ÷ 53.77 acres = $25,014/acre COMPARABLE LAND SALE NO. 2 JOKI & ASSOCIATES REAL ESTATE APPRAISERS PO Box 281, Helena, MT 59624, (406) 442-2159 Location: Two Waters Way in Belgrade, Montana. Site Data: 1. Size : 20.17 acres 2. Zoning: Restrictive Covenants Photo Data: 1. Date: November 21, 2013 2. Taken From: Two Waters Way 3. Facing: West 4. Taken By: J. Michael Joki, MAI, SRA 5. Comp: Belgrade 004 Current Use: Unimproved Legal Description: Parcel 7 of COS 1909C located in Section 4, Township 1 South, Range 5 East, Gallatin County, Montana. Grantor: Eugene Gauss, Jr.Grantee: Paul & Tammy Kraus Recorded Sales Price: $250,000 Confirmed Sales Price: $250,000 Instrument: Warranty Deed Confirming Party & Phone No.: Listing Agent - Bill Elfland Recorded: August 23, 2013 (406) 586-4001 Recording Info.: 2460439 Confirmed By: J. Michael Joki, MAI, SRA Financing: Conventional Confirmation Date: November 21, 2013 Property Description: This site is located on Two Waters Way which is a privately maintained gravel road. This site is located approximately ¼ mile north of Airport Road and 2 miles west of Springhill Road. This site has level topography and its historical use has been as agricultural ground. Land owners in this subdivision have access to the East Gallatin River which lies along the NEC of the subdivision. Other lots in this subdivision are developed with high quality and single family residences. Lots in this subdivision cannot be further subdivided. The listing agent confirmed this property was originally listed for sale at $299,000 which was reduced to $269,000 and eventually sold for $250,000 after 801 days on the market. Indication At Time Of Sale: $250,000 ÷ 20.17 acres = $12,395/acre COMPARABLE LAND SALE NO. 3 JOKI & ASSOCIATES REAL ESTATE APPRAISERS PO Box 281, Helena, MT 59624, (406) 442-2159 Location: 2380 Airport Road in Belgrade, Montana. Site Data: 1. Size : 18.32 acres 2. Zoning: Restrictive Covenants Photo Data: 1. Date: November 21, 2013 2. Taken From: Airport Road 3. Facing: Southeast 4. Taken By: J. Michael Joki, MAI, SRA 5. Comp: Belgrade 003 Current Use: Irrigated hay ground Legal Description: Lot 4-A in the Spring Valley Estates Minor Subdivision No. 357, Section 9, Township 1 South, Range 5 East, Gallatin County, Montana. Grantor: Sharlene Anderson Grantee: N/A Listing Sales Price: $395,000 Confirmed Sales Price: N/A Instrument: N/A Confirming Party & Phone No.: Listing Agent - Ray Atteberry Recorded: N/A (406) 586-1321 Recording Info.: N/A Confirmed By: J. Michael Joki, MAI, SRA Financing: Will be cash to the seller Confirmation Date: November 21, 2013 Property Description: This rectangular shaped, 18.32 acre site is level at road grade. This site is located on the south side of Airport Road and approximately 2 miles west of Springhill Road. There are no city services available at this location. This site has restrictive covenants but there are few limitations to its use. This land has been productive irrigated hay ground but could also serve as a rural residential home site or development which is common to this neighborhood. This property has been listed for sale at $395,000 for 157 days. The listing agent reported there has been no offers on this property. Indication of Listing Price: $395,000 ÷ 18.32 acres = $21,561/acre COMPARABLE LAND SALE NO. 4 JOKI & ASSOCIATES REAL ESTATE APPRAISERS PO Box 281, Helena, MT 59624, (406) 442-2159 Location: Northwest side of Weaver Road and approximately .80 mile east of Frontage Road in Belgrade, Montana. Site Data: 1. Size : 10.15 acres 2. Zoning: Restrictive Covenants Photo Data: 1. Date: November 21, 2013 2. Taken From: Weaver Road 3. Facing: North 4. Taken By: J. Michael Joki, MAI, SRA 5. Comp: Belgrade 006 Current Use: Unimproved Legal Description: Lot 3 as shown on Certificate of Survey No. 2617 located in Section 21, Township 1 North, Range 4 East, Gallatin County, Montana. Grantor: Hill Grantee: N/A Listing Sales Price: $145,000 Confirmed Sales Price: N/A Instrument: N/A Confirming Party & Phone No.: Listing Agent - Mike Wilmer Recorded: N/A (406) 539-8000 Recording Info.: N/A Confirmed By: J. Michael Joki, MAI, SRA Financing: Will be cash to the seller Confirmation Date: November 20, 2013 Property Description: This 10.15 acre site is located on the northwest side of Weaver Road and is irregular in its shape. This site has level topography and historically its use has been agricultural. There are no city services at this location and properties are served with well and septic systems. The listing agent confirmed this property has been listed for sale at $145,000 for 31 days. There have been no offers to purchase this property. This site was listed for sale in years past with no offers. This site has restrictive covenants with few limitations to its use. Indication of Listing Price: $145,000 ÷ 10.15 acres = $14,286/acre COMPARABLE LAND SALE NO. 5 JOKI & ASSOCIATES REAL ESTATE APPRAISERS PO Box 281, Helena, MT 59624, (406) 442-2159 Location: The north side of Wild Horse Road and approximately one block west of Thorpe Road in Belgrade, Montana. Site Data: 1. Size : 4.15 acres 2. Zoning: Restrictive Covenants Photo Data: 1. Date: November 21, 2013 2. Taken From: Wild Horse Road 3. Facing: North 4. Taken By: J. Michael Joki, MAI, SRA 5. Comp: Belgrade 005 Current Use: Unimproved Legal Description: Lot 12 of Wild Horse Trail Properties Subdivision, Gallatin County, Montana. Grantor: Kenneth Bos Grantee: Clarence & Patricia Herbrandson Recorded Sales Price: $105,000 Confirmed Sales Price: $105,000 Instrument: Warranty Deed Confirming Party & Phone No.: Listing Agent - Pat Shampeny Recorded: August 16, 2013 (406) 522-7000 Recording Info.: 2459650 Confirmed By: J. Michael Joki, MAI, SRA Financing: Cash to the seller Confirmation Date: November 20, 2013 Property Description: This 4.15 acre site is a subdivision lot in the Wild Horse Trail Properties Subdivision. This subdivision has paved streets, however it is the buyer’s responsibility to install the well and septic system. Electrical service has been extended to each site. This site lies slightly below street grade however the topography is generally level. The listing agent confirmed this property was listed for sale at $124,500 and sold for $105,000 after 23 days on the market. The covenants allow horses on the sites. The sites cannot be further subdivided. Indication At Time Of Sale: $105,000 ÷ 4.15 acres = $25,301/acre