HomeMy WebLinkAbout20111877.tiff (icteijj\\
CLERK TO THE BOARD
PHONE (970) AX: (915, Ext.352 4226
FAX: 5 0) 3 STREET
1150 O STREET
P. O. BOX 758
GREELEY, COLORADO 80632
C.
COLORADO
August 26, 2011
FOX RUN OFFICE I LLC
1711 61ST AVE STE 200
GREELEY, CO 80634
RE: THE BOARD OF EQUALIZATION, 2011, WELD COUNTY, COLORADO - STIPULATE
PETITIONER'S APPEAL AND AFFIRM ASSESSOR'S VALUE
DESCRIPTION OF PROPERTY:ACCOUNT#: R3368105 PARCEL#: 095909430006-GR FRBP
L6 FOX RUN BUSINESS PARK
Dear Petitioner:
On July 26, 2011,the Board of County Commissioners of Weld County, Colorado, convened,
and acting as the Board of Equalization, pursuant to Section 39-8-101, C.R.S., et.seq., considered
the Stipulation on your petition of appeal of the County Assessor's valuation of your property
described above, for the year 2011.
The Stipulation was entered into between the Assessor and said petitioner(s),and accepted
by the Board of Equalization, agreeing that the assessment and valuation of the Weld County
Assessor be Stipulated as follows:
ACTUAL VALUE AS ACTUAL VALUE
DETERMINED BY AS STIPULATED
ASSESSOR
$1,827,063 $1,699,830
crc' PLY(/eier) 8-a%-oiO// 2011-1877
FOX RUN OFFICE I LLC - R3368105
Page 2
If you have questions or need additional information, please do not hesitate to contact me at
(970) 336-7215, Extension 4226.
Very
truly yours,
Esther E. Gesick
Deputy Clerk to the Board
cc: Christopher Woodruff, Assessor
GROOM PATRICK
822 7 ST SUITE 760
GREELEY, CO 80631
2011-1877
AS0079
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2011
COUNTY BOARD OF EQUALIZATION
WELD COUNTY
ASSESSOR'S ACCOUNT NUMBER R3368105
STIPULATION (As To Tax Year 2011 Actual Value)
RE PETITION OF :
NAME: Fox Run Office I LLC
ADDRESS: 1711 61"Ave Suite 200
Greeley, CO 80634
Petitioner(s),Fox Run Office I LLC and the Weld County Assessor, hereby enter into
this Stipulation regarding the tax year 2011 valuation of the subject property, and jointly
move that the Board of Equalization to enter its order based on this Stipulation.
Petitioner(s) and the Assessor agree and stipulate as follows:
1. The property subject to this Stipulation is described as:
GR FRBP L6 FOX RUN BUSINESS PARK
2. The subject property is classified as Commercial
property.
3. The County Assessor originally assigned the following actual value to the subject
property for tax year 2011.
Land $ 333,652
Improvements$ 1.493.411
Total $ 1.827,063
4. After further review and negotiation,the petitioner(s) and Weld County Assessor
agree to the following actual value for the subject property.
Land $ 333.652
Improvements$ 1.366.178
Total $ 1.699.830
do/14277
5. The valuations, as established above, shall be binding only with respect to tax
year 2011.
6. Brief narrative as to why the reduction was made: Value was adjusted based
upon the general market prices per sa. ft. that were in place in the base period,
additionally the income was considered as backup for the market.
7. Both parties agree that the hearing scheduled before the Weld County Board of
Equalization on DATE at TIME am be vacateq; or, a hearing has not yet
been scheduled before the Board of Equalization _x (check if
appropriate).
DATED this 22nd day of July, 2011.
41/
Pet b e�r Attorney ,.rr>r eye'—Petiti ner(s) or A ney
Address: Address:
1707 61st Ave Ste 101 822 7th St. , Ste. 760
rarer+ley, rn Rn6'i4 Greeley, CO 80631
Telephone: (970) 381-3591 Telephone:
/R/le;0 / /?1
CountyAssessor
Address:
1400 N.17th Avenue
Greeley, CO 80631
(970) 353-3845 ext. 3656
3: /Zy
NOTICE OF DETERMINATION
Christopher M. Woodruff Date of Notice: 6/22/2011
Weld County Assessor Telephone: (970) 353-3845 or (720) 652-4255
1400 N 17th Ave Fax: (970) 304-6433
Greeley, CO 80631 E-mail: appeals@co.weld.co.us
www.co.weld.co.us Office Hours: 8:00 AM - 5:00 PM
SCHEDULE/ACCOUNT NO. TAX YEAR TAX AREA LEGAL DESCRIPTION/
PHYSICAL LOCATION
R3368105 2011 2081 GR FRBP L6 FOX RUN BUSINESS PARK
1711 61 AV, GREELEY
CC
Z FOX RUN OFFICE I LLC
C 1711 61ST AVE STE 200
GREELEY,CO 80634
O
O
cr
•
ASSESSOR'S VALUATION
ACTUAL VALUE PRIOR TO
PROPERTY CLASSIFICATION REVIEW ACTUAL VALUE AFTER
REVIEW
COMMERCIAL 2,455,310 1,827,063
TOTAL $2,455,310 $1,827,063
The Assessor has carefully studied all available information, giving particular attention to the
specifics included on your protest. The Assessor's determination of value after review is based
on the following:
CM03 -After review of your property, we have made adjustments. This was done because of
additional information obtained, or provided thru the appeal process.
If you disagree with the Assessor's decision, you have the right to appeal to the County
Board of Equalization for further consideration, § 39-8-106(1)(a), C.R.S.
The deadline for filing real property appeals is July 15.
The deadline for filing personal property appeals is July 20.
The Assessor establishes property values. The local taxing authorities (county, school district,
city, fire protection, and other special districts) set mill levies. The mill levy requested by each
taxing authority is based on a projected budget and the property tax revenue required to
adequately fund the services it provides to its taxpayers. The local taxing authorities hold
budget hearings in the fall. If you are concerned about mill levies, we recommend that you
attend these budget hearings. Please refer to last year's tax bill or ask your Assessor for a
listing of the local taxing authorities.
Please refer to the reverse side of this notice for additional information.
GROOM PATRICK IS :II Ci E I '`!r 11^1
822 7 ST SUITE 760
GREELEY CO 80631
2011-1877
APPEAL PROCEDURES
County Board of Equalization Hearings will be held from July 1 through August 5
at 915 10th Street, Greeley, CO
To appeal the Assessor's decision, complete the Petition to the County Board of Equalization
shown below, and mail or deliver a copy of both sides of this form to:
Weld County Board of Equalization
915 10'"Street, P.O. Box 758
Greeley, CO 80632
Telephone (970) 356-4000 Ext, 4225
To preserve your appeal rights, your Petition to the County Board of Equalization must be
postmarked or delivered on or before July 15 for real property and on or before July 20 for
personal property— after such date, your right to appeal is lost. You may be required to prove
that you filed a timely appeal; therefore, we recommend that all correspondence be mailed with
proof of mailing.
You will be notified of the date and time scheduled for your hearing. The County Board of
Equalization must mail a written decision to you within five business days following the date of
the decision. The County Board of Equalization must conclude hearings and render decisions
by August 5, § 39-8-107(2), C.R.S. If you do not receive a decision from the County Board of
Equalization and you wish to continue your appeal, you must file an appeal with the Board of
Assessment Appeals by September 12, § 39-2-125(1)(e), C.R.S.
If you are dissatisfied with the County Board of Equalization's decision and you wish to continue
your appeal, you must appeal within 30 days of the date of the County Board's written decision
to ONE of the following:
Board of Assessment Appeals District Court
1313 Sherman Street, Room 315 9th Avenue and 9th Street
Denver, CO 80203 P.O. Box C
(303) 866-5880 Greeley, Colorado 80632
www.dola.colorado.ciov/baa (970) 356-4000 Ext. 4520
Binding Arbitration
For a list of arbitrators, contact the County Commissioners at the address listed for the County
Board of Equalization.
If the date for filing any report, schedule, claim, tax return, statement, remittance, or other
document falls upon a Saturday, Sunday, or legal holiday, it shall be deemed to have been
timely filed if filed on the next business day, § 39-1-120(3), C.R.S.
PETITION TO COUNTY BOARD OF EQUALIZATION
What is your estimate of the property's value as of June 30, 2010? (Your opinion of value in terms of
a specific dollar amount is required for real property pursuant to § 39-8-106(1.5), C.R.S.)
$ 1,400,000.00
What is the basis for your estimate of value or your reason for requesting a review? (Please attach
additional sheets as necessary and any supporting documentation, i.e., comparable sales, rent roll,
original installed cost, appraisal, etc.)
The estimate of value is based on the appraisal dated March 4, 2010 and
prepared by Harold Sommers, MAI, SRA and Todd Finn.
ATTESTATION
I, the undersigned owner or agent' of the property identified above, affirm that the statements contained
herein and on any attachments hereto are true and complete.
§igna ure Telephone Number Date
Attach letter of authorization signed by property owner.
Letter of Authorization for Property Tax Matters
I/We,the undersigned, as the owner of the property listed below located in Weld County, delegate the
agent listed below full authority to handle all matters relative to assessments and to represent me/us,
with the assistance of legal counsel if necessary, in the appeal process for taxyear 2011 .
Patrick M. Groom, Esq.
Agent Name
All correspondence regarding my/our appeal of the value of the property listed below should be directed to:
Patrick M. Groom, Esq.
Witwer, Oldenburg, Barry & Johnson, LLP
822 7th St. , Ste. 760
Greeley, CO 80631
Owner Information:
Property Owner Name Fox Run Office I, LLC
Please Print
Property Owner Signature
Date 7 /Z/�
Property Information(Please attach additional sheets as necessary)
1. Parcel#and/or Account# R3368105
Property Address 1711 61st Ave. , Greeley, CO
2. Parcel#and/or Account#
Property Address
3. Parcel#and/or Account#
Property Address
4. Parcel#and/or Account#
Property Address
5. Parcel#and/or Account#
Property Address
A SUMMARY APPRAISAL
of the
EXISTING OFFICE BUILDING
located at
1711 61st Avenue,
Greeley, Colorado 80634
ASG FILE NO.TB2010-0396PMC
:°
'° »*,+ X55 h
r •
PREPARED FOR
David S. Wolfe
JPMorgan Chase Bank,N.A.
Appraisal Services Group
700 North Pearl Street, 15th Floor
Mail Code: TX1-2677
Dallas,TX 75201-7424
EFFECTIVE DATE
March 4, 2010
PREPARED BY
Harold Sommers, MAI, SRA
and
Todd Finn
File No. 2089
Appraisargliecialitajn61
.'ollins', Colorado 1
PAGE INTENTIONALLY INSERTED FOR TWO SIDED PRINTING
Appraisal Specialties,Inc.
Harold Sommers, MAI, SRA
105 South Meldrum Street, Unit No. 1
Fort Collins, Colorado 80521
March,25,2010
David S.Wolfe
JPMorgan Chase Bank,N.A.
Appraisal Services Group
700 North Pearl Street
15th Floor
Mail Code: TX1-2677
Dallas, TX 75201-7424
Re: A Summary Appraisal of the existing multi-tenant office building located at 1711
61st Avenue,Greeley, Colorado. TB2010-0396PMC.
Dear Mr. Wolfe:
As you requested,we have made an inspection and analysis of the above-referenced property along
with the contract leases that have been provided. The purpose of this inspection and analysis is to
develop an estimate of"As-Is" and "As-Stabilized"market value for the subject property based on
the Leased Fee Estate. The Effective Date of this appraisal is March 4, 2010, the date of the last
complete physical inspection of the subject property.
The subject property consists of a two-story, multi-tenant office building that was constructed in
2007. The building contains approximately 18,555 square feet of gross building area,not including
the 1,543 square foot storage basement. The space is currently configured with three tenant spaces
on the main level and four tenant spaces on the upper level. All of the three main level tenant
spaces have been leased to individual tenants. One of the tenants has placed his unit on the market
for sublease however. Of the four upper level spaces: one space is leased with a contract in place;
two are verbal month-to-month agreements; and one is vacant being offered as core and shell. As a
multi-tenant building that is partially leased,values both"As-Is", and"Upon Stabilized Occupancy"
will be presented. If the leases vary from the current market a value in both Leased Fee Estate and
Fee Simple Estate will also be presented.
The Scope of Work includes preparation of all appropriate approaches to value, analysis of the
region, neighborhood, demand factors, along with a physical inspection of the subject property.
For this analysis the Cost, Income, and Sales Comparison Approaches to Value are appropriate
and have been prepared. The appraisal has been provided in a Summary Reporting Format.
As such, it may not include full discussions of the data, reasoning, and analyses that were used in
the appraisal process to develop the appraisers' opinion of value.
Commercial and Residential Real Estate Appraisers
Serving Larimer, Weld and Boulder Counties,Colorado,and Laramie and Albany Counties, Wyoming
Phone: (970) 493-7700 Fax: (970) 482-6771 Web: AppraisalSpecialties.com
Per your request, two printed and bound copies and one digital copy of this analysis have been
provided for your use. The original report and digital media used within will be maintained in the
appraisers' file. This appraisal has been prepared in accordance with the Uniform Standards of
Professional Appraisal Practice and Title XI of FIRREA, along with the requirements of JP Morgan
Chase Bank, N.A. This appraisal is subject to the Assumptions and Limiting Conditions, and
Certification of Value attached.A Summary of Salient Facts is presented,beginning on page one.
Respectfully submitted,
liCietese
Harold Sommers,MM, SRA
CO-CG01321901,Exp. 12/31/11
WY-336, 3/18/12
7 /
Todd Finn,Associate
CO-CG40024874,Exp. 12/31/11
WY-774,09/06/10
Appraisal Specialties,Inc.
Harold Sommers, MAI,SRA
Commercial and Residential Real Estate Appraisers
TABLE OF CONTENTS 1
SUMMARY OF SALIENT FACTS 14
ASSUMPTIONS AND LIMITING CONDITIONS 6
CERTIFICATION OF VALUE 6
APPRAISAL ASSIGNMENT 7
INTENDED USE AND FUNCTION OF THE APPRAISAL 7
INTENDED USER 7
PURPOSE OF THE APPRAISAL 7
PROPERTY RIGHTS 9
EXTRAORDINARY ASSUMPTION 10
EFFECTIVE DATE 10
SCOPE OF THE ASSIGNMENT 1 I
ENVIRONMENTAL HAZARDS 11
OWNERSHIP 33
SUBJECT NEIGHBORHOOD 33
THE SUBJECT PROPERTY AND THE CURRENT MARKET 44
SUBJECT PROPERTY 55
HIGHEST AND BEST USE 55
APPROACHES TO VALUE 57
COST APPROACH 54
ESTIMATED REPLACEMENT COST OF THE IMPROVEMENTS 66
SALES COMPARISON APPROACH 76
INCOME APPROACH
TABLE OF EXHIBITS 32
REGIONAL AREA MAP 36
SUBJECT NEIGHBORHOOD MAP 36
SUBJECT PHOTOGRAPHS 59
COMPARABLE LAND SALES
COMPARABLE LAND SALES ADJUSTMENT TABLE 59
60
COMPARABLE LAND SALES MAP 65
1
MARSHALL&SWIFT COST ESTIMATE 65
COMPARABLE IMPROVED SALES 67
COMPARABLE IMPROVED SALES TABLE 69
COMPARABLE IMPROVED SALES MAP 79
COMPARABLE LEASES 75
COMPARABLE LEASE TABLE 75
COMPARABLE LEASE MAP 86
PRO FORMA INCOME AND EXPENSE STATEMENT 85
DISCOUNTED CASH FLOW MODEL,FEE SIMPLE ESTATE 93
DISCOUNTED CASH FLOW MODELS 93
RECONCILIATION 99
QUALIFICATIONS OF HAROLD L.SOMMERS 199
QUALIFICATIONS OF TODD FINN
ADDENDUM
ENGAGEMENT LETTER
CONTRACT LEASES(SEPARATE FILE)
INSURABLE REPLACEMENT COST
APPRAISERS' STATE LICENSES
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
1
SUMMARY OF SALIENT FACTS
PURPOSE: To estimate the "As-Is" and Stabilized Market Value of the
subject property in Leased Fee Estate.
INTENDED USE: To aid in, or support decisions,related to the subject property
for the benefit of the client,JP Morgan Chase Bank,N.A.
INTENDED USER: The intended user of this report is the client, JP Morgan
Chase Bank,N.A.
SCOPE: This appraisal utilizes Cost, Income, and Sales Comparison
Approaches to Value. The scope of work includes
preparation of all appropriate approaches to value, analysis of
the region, neighborhood, and demand factors, along with a
physical inspection of the subject property, and an analysis of
the plans and specifications that have been provided. The
analysis has been reported in a Summary format. Additional
information has been retained in the appraisers' files.
LOCATION: The subject property is located at 1711 61st Avenue,Greeley,
Colorado 80634. This location is near the center of the Fox
Run Business Park. The subject's development is
approximately two blocks west of 59th Avenue and two
blocks north of 20th Street in the southwestern sector of
Greeley. The improvements have good visibility from within
the development but only minimal visibility from either of
these major arterials.
LEGAL DESCRIPTION: GR FRBP L6 FOX RUN BUSINESS PARK
DATE OF INSPECTION: March 4,2010
EFFECTIVE DATE: March 4,2010
PROPERTY RIGHTS: Leased Fee Estate
SITE DESCRIPTION: The site is an irregular-shaped, mostly level parcel with a
total of approximately 64,164 square feet(1.47 acres). The
site is slightly above the grade of the surrounding private
roads. Asphalt paved parking is located along all four sides
of the building. Typical utility easements are in place. This
site has public water, gas, sewer, and electricity. Access to
the subject's development is via 61st Avenue, which is a
curved road that extends southwest from 59th Avenue to
201 Street. 59th Avenue is a major arterial that extends to
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
2
10`h Street (US Highway 34 Business Route) one mile
north. 59`" Avenue also extends to US Highway 34 By-
Pass, approximately one mile south.
EXISTING IMPROVEMENTS: The existing improvements consist of a freestanding, wood-
framed, two-story, multi-tenant office building with a partial
basement. The main level contains approximately 10,480
square feet and the upper level contains approximately 8,075
square feet for a total of 18,555 square feet of above grade
gross building area. The basement portion is located between
the crawl spaces directly below the main common areas on
the other levels. This space is used as building and tenant
storage, and for mechanical equipment. This space is
unfinished and contains approximately 1,543 square feet.
After deducting the common area on each of the above grade
levels, the net leaseable areas are 9,040 square feet on the
main level and 6,975 on the upper level, for a total net
leaseable area of approximately 16,015 square feet.
ZONING: "C-L": Commercial - Low Intensity District in the City of
Greeley. The existing improvements are a legal and
conforming use of the site in its current zoning district.
ENVIRONMENTAL HAZARDS: No environmental hazards were observed during inspection.
The appraisers are not experts in the field of environmental
hazards, and it is recommended that the client should retain
an expert in this field if there is a concern.
FLOOD ZONE: The subject property is located on FEMA flood insurance
rate map 080266 0617C, dated September 28, 1982. The
property is located in Zone 'C', and is NOT located in a
Flood Hazard area.
EXTRAORDINARY
ASSUMPTIONS: For this analysis we made an Extraordinary Assumption that
the two month-to-month tenants will sign longer term
contract leases. This assumption is based on comments from
one of these tenants, and discussions with the property
manager. If it is found that no contracts are put in place for
these spaces, the value estimate developed in this analysis
could be adversely affected.
HYPOTHETICAL CONDITIONS: The value estimate provided at stabilized occupancy is based
on the Hypothetical Condition(s) that the necessary tenant
Appraisal Specialties,Inc.
Harold Sommers,MA.',SRA
Commercial and Residential Real Estate Appraisers
3
finish to lease the vacant units has been completed, and that
the building is at stabilized occupancy.
MOST LIKELY PURCHASER: The most likely purchaser is thought to be an investor
interested in the amount and quality of the income stream, or
an owner-user who would use a portion of the space for
his/her business and lease out the remainder in order to help
off-set mortgage payments. (Note that under current market
conditions, investors are showing interest only in leased
properties that have strong credit tenants in place).
HIGHEST AND BEST USE: As Vacant: Commercial development consistent with the
commercial zoning district available to the site. Given the
current vacancy concerns in the area, holding the site for
future development is thought to be the highest and best use
of the subject site as if vacant.
As Developed: The existing improvements contribute
significant value to the subject site and constitute a
reasonable highest and best use of the site as developed.
MARKET/EXPOSURE TIME: Less than one year if properly priced and marketed by
experienced commercial brokers.
PERSONAL PROPERTY
GOING CONCERN No personal property or going concern was included in this
analysis.
FINAL VALUE CONCLUSION:
The value conclusions derived in this report are as follows:
reitTiq
imp
Cost Approach $2,810,000 $2,810,000
Sales Comparison Approach $2,380,000 $2,380,000
Income Approach $1,360,000 $1,300,000
Final Value Estimate $1,400,000 $1,340,000
Appraisal Specialties,Inc
Harold Sommers, MAI,SRA
Commercial and Residential Real Estate Appraisers
4
ASSUMPTIONS AND LIMITING CONDITIONS
The market value estimate provided in this appraisal report is subject to the following assumptions
and limiting conditions and to other such specific and limiting conditions as may be set forth by the
Appraiser/s in this report.
1. Any user of this report agrees to the attached limiting conditions.
2. This is a Summary Appraisal Report, which is intended to comply with the reporting requirements set
forth under Standard Rule 2-2(b) of the Uniform Standards of Professional Practice for a Summary
Appraisal Report. As such, it may not include full discussions of the data, reasoning, and analyses that
were used in the appraisal process to develop the appraisers' opinion of value. Supporting documentation
concerning the data,reasoning, and analyses is retained in the appraiser's file. The information contained
in this report is specific to the needs of the client and for the intended use stated in this report. The
appraiser/s are not responsible for the unauthorized use of this report.
3. No responsibility is assumed for legal or title considerations. Title to the property is assumed to be good
and marketable unless otherwise stated in this report.
4. The property is appraised free and clear of any or all liens and encumbrances unless otherwise stated in this
report.
5. Responsible ownership and competent management are assumed unless otherwise stated in this report.
6. All engineering is assumed to be correct. Any plot plans and illustrative material in this report are included
only to assist the reader in visualizing the property. The Appraiser/s have made no survey of the property.
7. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that
render it more or less valuable. No responsibility is assumed for such conditions or for arranging
engineering studies that may be required to discover them.
8. It is assumed that there is full compliance with all applicable federal, state, and local environmental
regulations and laws unless otherwise stated in this report.
9. It is assumed that all applicable zoning and use regulations and restrictions have been complied with,unless
nonconformity has been stated,defined,and considered in this report.
10. It is assumed that all required licenses, certificates of occupancy or other legislative or administrative
authority from any local, state, or national government, or private entity or organization have been or can
be obtained or renewed for any use on which the value estimates contained in this report are based.
11. It is assumed that the utilization of the land and improvements is within the boundaries or property lines of
the property described and that there is no encroachment or trespass unless otherwise stated in this report.
12. The Appraiser/s are not required to give testimony, appear in court,or give further consultation because of
having made the appraisal with reference to the property in question, unless arrangements have been
previously made therefore.
13. Any distribution of the valuation in this report between land and improvements applies only under the
existing program of utilization. The separate valuations for land and building must not be used in
conjunction with any other appraisal and are invalid if so used.
14. The Appraiser/s are not qualified to detect hazardous waste and/or toxic materials. Any comment by the
Appraiser/s that might suggest the possibility of the presence of such substances should not be taken as
confirmation of the presence of hazardous waste and/or toxic materials. Such determination would require
Appraisal Specialties,Inc
Harold Sommers,MM,SRA
Commercial and Residential Real Estate Appraisers
5
investigation by a qualified expert in the field of environmental assessment. The Appraiser/s have no
knowledge of the existence of such materials on or in the property;however,they are not qualified to detect
such substances. The presence of potentially hazardous materials may affect the value of the property. The
value estimate is predicated on the assumption that there is no such material on or in the property that
would cause a loss in value. 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.
15. Unless otherwise stated in this report, the subject property is appraised without a specific compliance
survey having been conducted to determine if the property is or is not in conformance with the
requirements of the American's with Disabilities Act. The presence of architectural and communication
barriers that are structural in nature and would restrict access by disabled individuals may adversely affect
the property's value,marketability,and/or utility.
16. Possession of this report or a copy thereof does not imply right of publication nor use for any purpose by
any other than the person to whom it is addressed, without the written consent of the Appraiser/s. The
Client or Assigns shall indemnify the Appraiser/s against third party lawsuits.
17. Neither all nor any part of the contents of this report shall be conveyed to the public through advertising,
public relations, news, sales or any other media, without the written consent and approval of the author,
particularly as to the valuation conclusions, the identity of the Appraiser or firm with which he is
connected,or any references to the Appraisal Institute.
18. On all appraisals subject to satisfactory completion, repairs, or alterations, the appraisal report and value
conclusion are contingent upon completion of the improvements in a good workmanlike manner and a
completion inspection by the Appraiser/s.
19. Satisfactory road maintenance agreements, condominium declarations, and other pertinent agreements are
assumed to be recorded.
20. The Appraiser/s assume that financing,as discussed in the report,is available for potential purchasers.
21. It should be understood that this is an Opinion of Value,based upon the data available to the Appraiser/s,
not a guarantee or warranty of value.
22. The limit of liability shall be no more than the remuneration received.
Appraisal Specialties,Inc.
Harold Sommers, MAI,SRA
Commercial and Residential Real Estate Appraisers
6
CERTIFICATION OF VALUE
The Appraiser/s certify that to the best of my/our knowledge and belief:
1. The Appraiser/s have no unreported present or prospective interest in the property that is the subject of this
report. Further, I/we have no personal interest or bias with respect to the subject matter or the parties
involved.
2. The Appraiser/s have personally inspected the property, both inside and out, and have made an exterior
inspection of all comparable sales listed in this report. To the best of the Appraiser's knowledge and belief,
all statements of fact and information in this report are true and correct, and the Appraiser/s have not
knowingly withheld any significant information, subject to the stated assumptions and limiting conditions
contained in this report.
3. The Appraiser/s certify that, to the best of my/our knowledge and belief, the reported analyses, opinions
and conclusions were developed,and this report has been prepared in conformity with the requirements of
the Uniform Standards of Professional Appraisal Practice, and the Code of Professional Ethics and the
Standards of Professional Appraisal Practice of the Appraisal Institute.
4. The Appraiser/s certify that the use of this report is subject to the requirements of the Appraisal Institute
relating to review by its duly authorized representatives.
5. All conclusions and opinions conceming the real estate set forth in this appraisal report were prepared by
the Appraiser/s whose signatures appear on this appraisal report, unless indicated as "Review Appraiser".
No change of any item in this appraisal report shall be made by anyone other than the Appraiser/s, and the
Appraiser/s shall have no responsibility for any such unauthorized change.
6. The Appraiser/s 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. Furthermore,the appraisal assignment was not based on a
requested minimum valuation,a specific valuation,or the approval of a loan.
7. The reported analyses, opinions, and conclusions are complete only by the reported assumptions and
limiting conditions, and are the Appraiser/s personal, unbiased professional analyses, opinions, and
conclusions.
8. No one provided significant professional assistance to the person signing this report. If there are
exceptions,the name of each individual providing significant professional assistance has been stated.
9. As of the date of this report, the Appraiser/s, if Members or Candidates of the Appraisal Institute, have
completed the requirements of the continuing education program of the Appraisal Institute.
Harold L.Sommers,MAI,SRA Date 03/25/2010
CG-01321901,Exp. 12/31/1
WY-336,3/18/12
/;eld f�
Todd R.Finn,Associate Appraiser Date 03/25/2010
CO-CG40024874,Exp. 12/31/11
WY-774,09/06/10
•
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APPRAISAL ASSIGNMENT
This report concerns the appraisal of the property located at 1711 61st Avenue, Greeley, Colorado,
80634. This location is near the center of the Fox Run Business Park. The subject's
development is approximately two blocks west of 59`" Avenue and two blocks north of 20s'
Street, in the southwestern sector of Greeley. The site is an irregular-shaped, mostly level parcel
with a total of approximately 64,164 square feet (1.47 acres). The existing improvements consist
of a freestanding, wood-framed, two-story, multi-tenant office building with a partial basement.
The structure contains a total of 18,555 square feet of above grade gross building area. The
basement portion is located between the crawl spaces directly below the main common areas on the
other levels. This space is used for the mechanical area and building and tenant storage;this area is
unfinished.
INTENDED USE AND FUNCTION OF THE APPRAISAL
The intended use and function of the appraisal is to aid in decisions related to the subject property
for the benefit of the client,JP Morgan Chase Bank,N.A.
INTENDED USER
The intended user is the client,JP Morgan Chase Bank,N.A.
PURPOSE OF THE APPRAISAL
The purpose of the appraisal is to estimate the "As-Is" Market Value of the subject property's
improvements as of the effective date of this report. 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, knowledgeably and
assuming the price is not affected by undue stimulus. Implicit in this
definition is the consummation of a sale as of a specified date and the
passing of title from seller to buyer under conditions whereby:
a. Buyer and seller are typically motivated;
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b. Both parties are well informed or well advised, and each acting in what he
considers his own best interest;
c. A reasonable time is allowed for exposure in the open market;
d. Payment is made in terms of cash in US dollars or in terms of financial
arrangements comparable thereto; and
e. 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"
PROPERTY RIGHTS
The subject property is a multi-tenant office building with signed contract leases in place for four of
the seven tenant spaces. Two others are month to month and one unit is vacant. As a multi-tenant
building that is partially leased, the property is appraised in Leased Fee Estate. A value in Fee
Simple Estate has also been provided along with a value of the Leasehold, if one is present. No
separate consideration has been given to fractional interests, interests of tenants in possession, or
mortgage holders.
"Fee Simple Estate" is defined as:
"Absolute ownership unencumbered by any other interest or estate;
subject only to the limitations of eminent domain, escheat, police
power, and taxation."2
"Leased Fee Estate" is defined as:
"An ownership interest held by a landlord with the rights of use
and occupancy conveyed by lease to others. The rights of the
lessor (the leased fee owner) and the lessee are specified by
contract terms contained within the lease."3
"Leasehold Interest" is defined as:
"The interest held by the lessee (the tenant or renter) through a
lease transferring the rights of use and occupancy for a stated term
`The Dictionary of Real Estate Appraisal, 3rd Ed., 1993,Appraisal Institute,pages 222-223.
2The Dictionary of Real Estate Appraisal,3rd Ed., 1993, Appraisal Institute,pg. 140.
3The Dictionary of Real Estate Appraisal,3rd Ed., 1993, Appraisal Institute, pg. 140.
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under certain conditions. See also negative leasehold; positive
leasehold."4
EXTRAORDINARY ASSUMPTION
Extraordinary assumption is defined as:
An assumption, directly related to a specific assignment, which, if found to be
false, could alter the appraiser's opinions or conclusions. Extraordinary
assumptions presume 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. An extraordinary assumption may be used in an
assignment only if:
• It is required to properly develop credible opinions and conclusions;
• The appraiser has a reasonable basis for the extraordinary assumption;
• Use of the extraordinary assumption results in a credible analysis; and
• The appraiser complies with the disclosure requirements set forth
in USPAP for extraordinary assumptions.
• (USPAP, 2002 ed.)
This analysis has been prepared using the following Extraordinary Assumptions:
For this analysis we made an Extraordinary Assumption that the two month-to-month tenants will
sign longer term contract leases. This assumption is based on comments from one of these tenants,
and discussions with the property manager. If it is found that no contracts are put in place for these
spaces,the value estimate developed in this analysis could be adversely affected.
HYPOTHETICAL CONDITION
Hypothetical Condition is defined as:
"That which is contrary to what exists but is supposed for the purpose of analysis. Hypothetical
conditions assume conditions contrary to known facts 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. A hypothetical condition may
be used in an assignment only if:
4The Dictionary of Real Estate Appraisal 4th Ed.
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1) Use of the hypothetical condition is clearly required for legal purposes, for purposes of
reasonable analysis,or for purposes of comparison;
2) Use of the hypothetical condition results in a credible analysis;and
3) The appraiser complies with the disclosure requirements set forth in USPAP for
hypothetical conditions.
(USPAP,2002 ed.)"
This analysis has been prepared using the following Hypothetical Condition:
The value estimate provided at stabilized occupancy is based on the Hypothetical Condition(s) that
the necessary tenant finish to lease the vacant units has been completed, and that the building is at
stabilized occupancy.
EFFECTIVE DATE
The effective date of this Appraisal is the most recent date of inspection,March 4,2010.
SCOPE OF THE ASSIGNMENT
The scope of this appraisal is to develop an Appraisal in a Summary Report using the Cost,Income,
and Sales Comparison Approaches to Value. The scope of work includes the preparation of all
appropriate approaches to value, analysis of the region, neighborhood, and demand factors, along
with a physical inspection of the subject property. The valuation process will include:
a. Obtaining County records on the subject property including zoning,
physical information,tax information,and previous sales.
b. A thorough inspection of the subject site and the existing
improvements. And analysis of any leases and income and expense
data.
c. Searching the County records, Multiple Listing Service, title
company publications, and interviewing buyers, sellers and Realtors
for comparable sales,leases,and land sales.
d. An analysis of the subject property and data collected.
e. Processing data via the appropriate valuation techniques.
f. The presentation is provided in a Summary Report. As such, it
may not contain full discussions of the data, reasoning, and analysis
that were used in the appraisal process to develop the appraiser's
opinion of value. Additional supporting documentation concerning
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the data, reasoning, and analyses has been retained in the appraiser's
file. The Appraiser/s are not responsible for the unauthorized
use of this report.
ENVIRONMENTAL HAZARDS
Unless otherwise stated in this report,the existence of hazardous material,which may or may not be
present on the property, was not observed by the appraiser. The appraiser has no knowledge of the
existence of such materials on or in the property. The appraiser,however, is not qualified to detect
such substances. The presence of substances such as asbestos, urea-formaldehyde foam insulation
or other potentially hazardous materials may affect the value of the property. The value estimate is
predicated on the assumption there is no such material on or in the property that would cause a loss
in value. No responsibility is assumed for any such conditions or for any expertise or engineering
knowledge required discovering them. The client is urged to retain an expert in this field, if there is
concern.
OWNERSHIP
The subject property,Lot 6 of the Fox Run Business Park, is currently listed under the ownership of
Fox Run, LLC who purchased the subject as a vacant pad site on December 8, 2006, and improved
the site with the existing improvements. The purchase of the site is listed under reception number
3440561,and lists the current owner as the Grantee and Fox Run Business Park LLC as the Grantor.
The subject property is not currently listed for sale. No other transactions involving the subject
property are known to have occurred in the last three years.
4
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CITY AND REGIONAL DATA
The subject property is located in the Front Range of Northern Colorado. Both Larimer and
Weld County comprise the Front Range area which is commonly referred to as "Northern
Colorado." There are four forces that affect property value: Social, Economic, Governmental,
and Environmental forces. Each of the four forces affecting value will be discussed in detail in
the following text.
awesome Northern Colorado
irli faill
uTx aa,
- . .1; � :<
* horn
sextet ..c,4y!!• di '1r
:' "'11
Social
Social forces that affect property values relate to population characteristics. The demographic
composition of the population reveals the potential demand for real estate. Property values are
affected by not only population changes and characteristics, but also by the entire spectrum of
human activity. The total population, its composition by age and gender and the rate of
household formation and dissolution strongly influence property values. Social forces are also
manifested in attitudes toward education,law and order, and lifestyle options.
POPULATION: According to figures released by the United States Census Bureau and the
Colorado Department of Local Affairs, the FSCPE (The Federal State Cooperative Program for
Population Estimates) estimated Larimer County's population was 291,906 people in 2008 and
Weld County's population was estimated to be approximately 249,775 people. The median age
for Larimer County residents is 34.6 years old. Weld County actually boasts a younger median
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age of 31.2 years old. Residents 65 and older make up the smallest percentage of residents in
both Larimer and Weld County. The below charts are from 2006, which is the most recent data
available. However, it is reasonable to assume that they are indicative of current population
demographics.
The Age Disldhutlot of People In Lorimer County,Colorado in 2006
65 end over 10%
45 to 64 25%
2510 44 29%
1810 24 14%
Under 18 22%
0 10 20 30 40 50 60 70 80 90 100
Percent of population
Source'.American Community Survey.2006
The Age 0istnb ienlon of People in Weld County,Colorado in 2006
65 and over 6%
45 to 64 21%
25 to 94 31%
r3 18 to 24 13%
ry
a'
under 18 27%
0 10 20 30 40 50 60 70 80 90 100
Percent of population
Source.American Community Survey,2006
Larimer County's population is spread across 2,640 square miles and the majority of the
population lives in the cities of Fort Collins, whose estimated population as of July, 2006 was
129,467, and Loveland,with an estimated population as of July 2006 of 61,122.
Weld County's population is spread across 4,004 square miles and a large percentage of the
residents reside in Greeley with an estimated population in July, 2006 of 89,046 people.
However, a larger percentage lives in smaller rural towns. Western Weld County has
experienced significant growth throughout the past decade due in part to the neighboring county
of Larimer and its proximity to I-25, which is a major north south interstate that dissects Larimer
and Weld counties. The interstate is used in both transit and commerce. A great many of the
residents of Weld County work in Larimer County and opt to commute because historically the
cost of housing is much less in Weld County than that in the neighboring county of Larimer.
a
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Estimated Population Growth in Larimer County
340,000
-- _------ 333,381
328.418—._. "... _
330,000 ---- —
319,490 �- -
-
320,000 --- -_ —" --- 312 588f.
s ' —.
-- — 305,886— x -
I 310,000 — -- — Cxx
299040 _
s 300,000 — 292,890 i se . Cr _ n
290.000 288.972— Yt _—
EEE - , , . — —— t :.
—
280,000 �.:. . r- 1 . ..
x ^
270000 ^ ,'. � * � .
260,000
2008 2009 2010 2011 2012 2013 2014 2015
Year
Estimated Population Growth in Weld County
350,000 302 398 311,809
284.227. 293,184 i. ..
275492— `,
300,000 -. 287,032 .:
250,835 258,840 fix,. _-
5 250,000 �. a
I
200 000 kill z°
'
9 150,000 °..
E __ ,1. _.-
'$ 100.000 ', .
50,000 ' . '" ^
0 �: .. 2015
2008 2009 2010 2011 2012 2013 2014
Year
(Source:Colorado Department of Local Affairs 08/08)
It can be seen in the above graphs that both Larimer and Weld County are expected to increase in
population year over year in the foreseeable future. Larimer County is expected to grow at an
annual rate of growth of 1.75 percent, while Weld County is expected to grow at 2.5 percent
annually.
EDUCATION: Both Larimer and Weld County employ a highly educated work force, due in
part to the major institutions of higher education located in the two counties. Larimer County is
home to Colorado State University and Front Range Community College. Weld County is home
a
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to the University of Northern Colorado as well as Aims Community College. The two counties
also have smaller educational centers including an extension of Regis University and the Institute
of Business and Medical Careers. In 2006, 70 percent of residents living in Larimer County had
at a minimum some college experience, while most had an associates degree or higher.
Likewise, 54 percent of residents living in Weld County had at a minimum some college
experience. Colorado State University,which is world renowned for their veterinary college, has
an annual enrollment of approximately 26,800 students and the neighboring University of
Northern Colorado has an annual enrolment of 11,800 students. Aimes and Front Range
Community Colleges provide transferable credits to both of the larger major universities.
The EducaaOnel/ttambnt of People In Lorimer County,Colorado In 2006
Graduate or
prmevgnN n%
degree
Bachelors degree 25%
Z Associates 6%
!s regret
Some Gee : 22%
"re=
[tool
4 tom.or 23%
ego '[y
Less Men m high ,%
school acute i. •.
0 10 20 30 40 50 60 70 80 90 100
Percent of people 25 years and over
Source'.American Cottony Survey.2606
The Educational Attatnnent of People in Wed County,Colorado in 2006
Graduate or
ateCelnn 0%
regret
B•cheiots degree 17%
Associates
degree 9%
I Some coo. ;it:: 20%
Yq tool
dpnm.or 130%
ea then
fcnoe,'dein la%
0 10 20 30 40 50 60 70 80 90 100
Percent of people 25 years and over
Source American Cainnunty Survey.2006
Economic
Economic forces deal with the fundamental relationship between supply and demand, both
current and anticipated, and the economic ability of the population to satisfy its wants and needs
through its purchasing power. Specific market characteristics considered are employment and
wage levels, industrial expansion, the economic base of the area, price levels, and the cost and
availability of mortgage credit. Also considered are the supply of available properties, new
development in progress, occupancy rates, price patterns of existing construction, and
construction costs.
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CREDIT MARKETS/LENDING: While supply and demand can be limited or encouraged by
regional influences, credit, credit supply, and credit terms are generally influenced by the
national economy of scale. Currently, interest rates, historically speaking, are relatively low.
However, supply of mortgage monies has been severely restricted to only the most credit worthy
borrowers. As such, this has had a bearish affect on the housing and commercial real estate
sectors.
10•)0 . .. . . Ati.. ..
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if • S 4' 3 4 .'i 5�! Y 4 1 •Y' 1 a' & k m 9t q $ it •t a' IF ,i CF ?, ;
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.... " ran mOd QS$n et7�9ete.1-Yea(S,rij,1992-ptatent.
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Copyright O 2009 MmadPpe-X.eamt
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Reprinted with pe<mmwm
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RESIDENTIAL HOUSING CHARACTERISITICS: Effects of the national economic
downturn have begun to ripple through Northern Colorado; an area typically resilient to
economic peril. Total sales volume is down in terms of residential housing sales, and prices have
retracted from their highs reached in 2007. Each of the three areas tracked below are retracing
their 2004 pricing levels. It is it unclear whether or not they will continue the downward trend
considering prevailing economic conditions or if the worst is over for the housing market (YTD
2009 is through September).
NORTHERN COLORADO AVERAGE
RESIDENTIAL SALE PRICE
$315,000
$295,000
$275,000
$255,000
$235,000
$215,000
$195,000
$175,000
$155,000
$135,000 '09 ,07 '08 '09
'04 '05
af'Fort Coffins 'ee•Loveland semGreeley
NORTHERN COLORADO RESIDENTIAL HOME SALES
4500
4000
00
3000 MP 1.11
2000 r ME : IMF
2000 1 , ,` �` 7 t II
1500 1 ma s •"`i •` ,
Mir
'00 '01 '04 '05 '09 '07 '08 '09
•Fort Collins ■Greeley/Weld ■Loveland/Berthoud
Vacancy rates have decreased and rental rates have increased in the residential rental market as
more and more people are renting as a result of tightening lending practices. Participants who
once were qualified to buy with little or no money down are now finding it harder, if not
impossible,to obtain suitable financing for purchases. Instead,they are choosing or are forced to
rent as a result.
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FORECLOSURES: Much has been made of the influence of foreclosures nationwide and
Colorado is not immune to such influences. Colorado was listed number five for foreclosures in
the nation for first quarter 2008 by Irvine-based RealtyTrac—having since fallen to a much
better ranking. Weld County has faired badly in terms of foreclosure activity. According to
statistics recently released by the Division of Local Affairs through the Division of Housing, for
September 2009, foreclosure activity in Weld County was up 100 percent from 2008. For
Larimer County things were not quite as bleak with foreclosure filings up only 56.2 percent in
terms of year over year comparison. Most market experts agree that foreclosure activity in Fort
Collins will not get significantly worse; however, there seems to be no end in site in Weld
County;partly due to the significant standing REO inventory.
EMPLOYMENT: Weld County unemployment, as is evidenced by the accompanying chart, is
trending at a historical all time high. The rate posted its highest level of 8.8 percent in June
unemployment rate
2009. However, since then the rate has
declined and is now at 8.0 percent. Most
market participants hypothesize that the
worst is over, so it is reasonable to
assume that the unemployment rate will
2
not likely trend much higher. 1990 1992 1994 1996 1999 2000 2002 2004 2006 2008
Mouth
unemployment rats Larimer County unemployment, as evidenced
by the accompanying chart is also trending at
an all time high. Information from August
2009 estimates that the current unemployment
0 rate in Larimer County is 6.0 percent; the
2
1990 1992 1994 1996 1999 2000 2002 2004 2006 2009 highest it has been since 1991. Although as
Month
bleak as 6.0 percent is historically speaking, it is down 12 percent from the high posted in March
of 2009. As bleak as unemployment may seem from a historical perspective locally, Colorado
tends to fair much better than the national economy of scale. As of this writing, the national
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unemployment rate was 9.8 percent; whereas, as seen above both Weld County (8.0 percent) and
Larimer County's(6.0 percent) rates are something considerably less.
COMMERCIAL MARKET CHARACTERISITICS: Commercial Real Estate has been
waylaid by fallout in the credit markets. By and large lease rates in all property sectors and in all
classes have begun to decline. As economic fundamentals erode, demand for commercial space
retracts. With very few investment sales taking place, the remaining purchasing activity is being
made up by owner-users. Only the "strongest"buyers are currently being financed and as banks
continue to raise owner equity requirements and tightening their lending criterion, look for
continued decline in commercial purchasing activity. The one lone bright spot (although not
"bright" by historic standards) of the commercial market seems to be leasing. Most market
participants are reporting that would be purchasers are opting to lease and conserve their capital
rather than purchase. On a most basic level it typically makes sense if a tenant can secure a
property with virtually no money out of pocket so they can continue to reserve whatever capital
they may have for other business activity.
A summary table of vacancy rates for all classes of commercial real estate is presented on the
following page. (Note the town of Berthoud is included in Loveland's overall vacancy rate.)
For additional information specific to the subject property please refer to the market demand
section found later in this report.
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NORTHERN COLORADO COMMERCIAL VACANCY RATES
'4 11111 Fort Collins
Sep-06t 10.3% 5.7% 4.3% . 14
,A Dec-06 11.1% 5.6% 4.8% 16.0% '.i.
it Apr-07 12.4% 7.7% 3.9% 14.0% - -- - --
Jun-07 11.8% 7.2% 4.5% ,'
Q3 07 11.9% 7.7% 4.1% 12.0%
•
Q4 07 12.6% 6.6% 4.7% 100% - - i
--once
O1 08 13.2% 7.5% 5.7% a.ox - '- Retell
' Q2 08 14.2% 8.6% 5.8% industrial
Q3 08 14.4% 8.8% 6.1% - 60%--- -- -- -....--
Q4 08 14.5% 7.4% 6.1% 4.0x -
Q109 15.2% 9.1% 5.6%
Q2 09 14.7% 9.5% 5.8%
Q3 09 15.5% 10.4% 6.3% 0.0% -
n
x ,� +',_.,„t=4,. . "TM .i1iM1'RkL,�O k:'.:iN•MRFkleet �
a' - .. Ftihti§',lttdial' Loveland
Sep-06 6.9% 3.6% 5.1%
Dec-06 11.5% 3.9% 5.4% 14 ox
Apr-07 7.2% 3.9% 4.1%
Jun-07 8.0% 7.1% 4.3% ' 12.0% -----
Q307 8.8% 5.3% 4.6% 10 0%
Q4 07 9.4% 5.5% 6.4%
Q1 08 10.3% 5.3% 4.2% • a.ox _ i_-Mob
Q2 08 8.3% 6.4% 3.9% I Rata I
''.
Industrial
Q3 08 9.7% 7.6% 6.6%
Q4 08 9.7% 7.6% 6.6% 4 o-._
Q109 11.1% 8.6% 8.0%
Q2 09 8.3% 7.6% 8.3%
Q3 09) 10.5% 7.9% + 7.8% • o.o% . , '
AVNft1�' a -.A. $ 5.8`1 ao {0�� o� 6\ �o, oe ab,� ,„;S6
.';,s ,r ,iCy '1' xi. ` rc 9 1/4 �,, O5 Gt. O Ol' Ob t? O Off" a
'K::;.$
,x',4 M::t r i g Sri ..` . 11 ;' •tom f�'�7'. , ,
Sep-06 20.2% 5.5% 8.8% Greeley
Dec-06 18.9% 6.7% 8.6%
Apr-07 18.2% 9.1% 8.3% 25.0%
Jun-07 17.1% 9.3% 8.1% ':
Q3 07 15.7% 9.6% 6.7% 20.0% ;
Q4 07 15.2% 9.6% 6.4% '
Q1 08 15.2% 11.1% 9.2% 15.0x -Oilld
' Q2 08 16.0% 12.1% 9.5%
Q3 08 16.3% 14.0% 9.4% to.ox —1n°"s°w
Q4 08 17.3% 13.8% 9.3%
01 09 16.6% 14.6% 9.7% 5.4%— -- -
Q2 09 17.5% 15.0% 9.0%
Q3 09 18.2% 14.9% 9.5% 00% .
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21
Governmental
PUBLIC SERVICES: Some of the municipalities in Northern Colorado control utilities and
public services at the local city level, with little or no overlap at the county level. Fort Collins
provides residents within the city limits lighting and electricity, while Xcel Energy provides
natural gas for heating. Water is provided for by the city, while much of the county is on either
wells, or smaller water service providers. Loveland and the remainder of Larimer County are
similar since some utilities are provided by the city, while most are contracted to third party
service providers. Weld County is more rural in nature as large parts of its residents draw water
from wells and rely on propane as a means for energy generation. Some cities, including
Greeley and Windsor, provide water and utility services. All cities in Northern Colorado have
their own branch of service providers or have contracted with larger neighboring cities with
regards to police, fire, and emergency personnel. Larimer and Weld County maintain sheriff
personnel and the State of Colorado Highway Patrol maintains law and order on the state
highways.
TAXATION: Colorado ranked 44th per capita in state government spending in 2008. When
looking at tax revenues relative to personal income, Colorado places 48th among the 50 states for
state level taxes. (Source: Colorado Office of Economic Development and International Trade)
The State of Colorado collects a 2.9 percent sales and use tax on goods purchased or used in
Colorado that are not intended for resale. Colorado's state sales tax rate is the lowest among the
45 states that collect sales tax. (Source: Colorado Office of Economic Development and
International Trade)
The state does not levy a property tax. Depending on the location within Larimer County,
property taxes typically amount to approximately 1.0 percent to 2.5 percent of the actual value of
real estate. Commercial property is assessed for tax purposes at 29 percent of actual value in
both Larimer and Weld Counties. Residential property is reassessed in odd numbered years.
Even despite the economic downturn the 2009 assessment values generally are an increase over
the 2007 values. The County sales data considers sales statistics from one and one half years
prior to the assessment year. I.e. for the 2009 assessment year sales from mid 2007 are being
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
22
used. Therefore, a downward trend in assessment values will not likely be manifest until the
2011 reassessment. The mill levy represents the dollars levied for each$1,000 of assessed value.
For example, with a mill levy of 95.000 mills, the property owner would pay $95.00 for every
$1,000 in assessed value.
ZONING AND LAND USE POLICY: Larimer County still maintains rather arduous
development processes and standards. Minimum open space requirements make development
fmancially unfeasible in all but a minority of cases. Conversely, Weld County has indicated that
they are favorable of planned and organized growth and development. However, some
community resistance in both counties has resulted in delays, or denial of new projects. For the
most part the major cities of Fort Collins, Loveland, Greeley, and Windsor have all adopted
limited growth policies that allow only for very controlled development with typically arduous
development standards. The exception to this would be the city of Johnstown, who tends to
foster a more liberal development environment.
Environmental
Natural and man-made environmental factors influence property values. On a regional level
natural forces include climactic conditions, topography and soil, and natural features such as
rivers, mountains, and oceans. Man made considerations include transportation systems such as
highways,railroads, airports, and navigable waterways.
CLIMATE: Residents of Montana,Wyoming and other mountainous areas with harsher weather
refer to Northern Colorado as the "Banana Belt". The Front Range area is located at an elevation
averaging 5,000 feet above sea level at the base of the Rocky Mountains. The weather is
generally mild with over 300 days of sunshine per year. Fort Collins is the largest city in
Larimer County and stands as a "Bell Weather" for the larger county as a whole. Generally
northern and western Larimer County have more extreme climates than the rest of the county as
they are situated in the more mountainous regions of the county. Greeley is the largest city in
Weld County and it serves as a "Bell Weather" for the larger county as well. Average
Appraisal Specialties,Inc..
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
23
temperatures and precipitation have been detailed in the following charts for both Fort Collins
(Larimer County)and Greeley(Weld County).
Average climate in Fort Collins,Colorado
Based on data reported by ovOf 4,000~thee stet,Ons
yyyy�Average Temperatut'ee
Precipitation
e•
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r f... Arn�M tree sirs t
z. ki;s14tut
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t7'F >•� ,��� ® Feb Mar Apr MeY Jut.NI Aug Sep 00 Nov Oeo
err•tan Fe0 Mw Apr May> .N.�+9�0 Nov 6ec
Source ra r 1Faa o!1 otoredD.hsnll
Average climate in Greeley,Colorado
Based on data reported by over 4.000 weather staborts
Average Temperatures ae
Precipitation
30,
-� 3n ,s440
J�+t�,.,�,�
wF .l //!r//►\"aiR ,, .
toi 9•i�•�■®�®�'e D w Jan Feb Mar Apr May Jun Al Aug Sep Ou Nov Dec
Jan Feb ML Apr May Jut Ai Aug Seri CO Nov Dot
Sou=(hS@. / x' 1 v-Colond0.bbd)
ROAD TRANSPORTAION: The principal transit system in the region is Interstate 25, a
north/south route connecting the region to Denver, and extending from Mexico to Billings,
Montana with access to all east/west interstate highways along the way. Other Greeley,
highways within the region are US Highway 34, an east/west route that extends through
effectively dissecting it, extending to Interstate 76 in eastern Colorado; and e tP through
Loveland into the Rocky Mountain National Park after traversing through Estes
US
Highway 85 is a north/south route with four lanes of traffic that bounds eastern Greeley, and
connects Denver north to Cheyenne, Wyoming. US Highway 85 is a heavily traversed shipping
route for various commercial appliqué including large semi-tractor trailers. More than 150 motor
freight companies provide services in the Denver metro area with additional operations that span
the entire Front Range.
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
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AIR TRANSPORTATION: Northern Colorado is ideally located for access to major air,motor,
and rail arteries, with Denver's International Airport (DEN) approximately one hour away.
Motor connections can be easily made with Interstate 25 (north-south artery) adjacent to the city.
Connection to Interstate 80 (east-west artery) is just 40 miles to the north. Interstate 70 (east-
west artery) can be reached just 60 miles to the south
Denver International Airport (DIA) is currently the sixth busiest airport in the United States and
11th in the world. In 2005, DIA averaged 1,555 commercial flights daily (arrivals and
departures) and served over 43 million passengers, an increase of 2.6 percent over 2004. DIA
provides over 130 daily,nonstop flights to national and international cities.
The Fort Collins/Loveland Airport (FNL) is an FAA certified general aviation airport located on
the high plains along the Interstate 25 corridor approximately fifty-five miles north of Denver.
The airport currently has limited commercial airline service. Allegiant Air has flights to and
from Las Vegas, NV, as well as routes to Florida. The airport also supports additional corporate
and general aviation needs. According to the Fort Collins Coloradoan, there are 100,000
landings and takeoffs at the airport annually. The Coloradoan reported that the airport receives
Federal funding from Congress through the Airport Improvement Program to maintain runways,
hangars, and such. The report stated that the airport receives the money because they can handle
medical flights, and serve the general public in ways which larger regional airports cannot.
Reportedly the airport has received $17 million in the past 28 years. A The Fort
Collins/Loveland Airport has convenient nearby accommodations and access to the area's many
recreational amenities, including Rocky Mountain National Park. The runway, which is 8,500
feet long and 100 feet wide, is serviced with high intensity lighting and an instrument landing
system. You will experience direct, no-delay, all weather ATC approaches to the airport's ILS
runway with full ILS,VOR/DME and RNAV.
RAIL SERVICE: Union Pacific and Burlington Northern provide major non-passenger rail
service throughout most of Northern Colorado. Passenger rail service is available south of the
region in Denver, Colorado. While Northern Colorado is home to many small towns and
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Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
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municipalities, the major metropolitan areas of interest are detailed in the following pages, along
with recent notable commercial developments in Northern Colorado.
CityCityof Collins
Fort Collins- All around commercial growth and construction is typically strong in Fort Collins
in all categories and classes considering its desirability being located in Northern Colorado.
Since mid 2008 and the cessation of the credit markets however, new development has been
virtually at a stand still. A few build-to-suit projects are being completed, but by and large the
only projects coming on-line were those that had gained development approval and which had
been under construction prior to mid 2008. Detailed below are the noteworthy projects recently
completed or currently underway.
Most recently the Harmony Corridor has gained notoriety as being the "Gateway" to Fort
Collins. As such, a large investment by the city and market participants has been made along the
corridor from I-25 west to College Avenue.
Notable construction includes the Front Range Village, an 800,000 square foot mixed use
shopping center located at the intersection of Corbett Drive and Harmony Road. This $100
million dollar development is anchored by a Super Target and Lowe's Home Improvement. The
major anchor spaces of the project are complete and have been opened for business for
approximately one year now. Remaining smaller in-line retail spaces are being finished on an as
needed basis as tenant demand warrants. Prior to completion, as much as 600,000 of the 800,000
square feet available was either pre-leased or subject to a letter of intent. Along side this
development is a neighborhood shopping center called The Pads at Harmony which is located at
the corner of Harmony Road and Snow Mesa Drive. This center includes smaller retail spaces
along with new office spaces and was absorbed very quickly.
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
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Numerous high-tech places of employment are located along the Harmony Corridor and include:
Hewlett Packard, Avago (formerly Agilent), Intel, rival chip manufacturer AMD, and LSI logic.
An additional 105 acres that had been under the ownership of Hewlett Packard was recently sold
to MAV Development Company. The development company has recently begun installation of
infrastructure for the development itself; which when completed, will be called the Harmony
Technology Park. This new area will offer sites ranging from 2 to 30 acres in size and will
include Class A multi-tenant office and flex buildings; totaling approximately 250,000 square
feet. One purchaser has already built a facility at the new site. Recently Custom Blending, a
spice mixture company, relocated their operations from three other locations in the city to a
building that they had built specifically for their uses. The building was completed in late 2008.
Further to the north of the Harmony Corridor Fort Collins recently voted down a proposal to
rezone the quadrant of land located at Prospect Road and I-25. This parcel of land and the
adjacent parcels comprising a total of 229 acres are approximately five miles north of the
Harmony Corridor. It is unclear as to why the council opted not to approve the re-zoning efforts;
however, in doing so they curtailed any growth and development efforts in the area, at least for
the foreseeable future.
CITY OF LOVELAND
Loveland- Fort Collins' neighbor to the south, Loveland has, and will likely continue to
experience exponential growth and development once the prevailing economic headwinds shift
from the latest retraction.
Although there is very little new development taking place, a Mini Cooper dealership is under
construction along the west side of Interstate-25. near the Crossroads Boulevard interchange.
This is despite the fact that there is already a vacant auto dealership located in the "L2" auto
complex.
Appraisal Specialties,Inc
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
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For the past few years most development has been concentrated along US-Highway 34 and
Interstate 25. The interchange coined "2534" is becoming the regional shopping hub for Fort
Collins, Greeley,Johnstown,Loveland, and many of the other smaller communities.
In 2007 near the 2534 interchange, a 570,000 square foot hospital named the "Medical Center of
the Rockies"was opened. This hospital is capable of handling 136 inpatients and"thousands" of
outpatients on a daily basis. The Promenade Shops at Centerra, located adjacent east of the
medical center, came online in late 2005 and is gaining tremendous acceptance in the
marketplace in spite of the downturn in the national retail sector. The shopping center which is
being touted as a"Lifestyle Center" is an open atmosphere shopping center that allows patrons to
stroll from one shop to the next via large sidewalks on the exterior of the buildings. The center is
home to 60 specialty shops and restaurants, with more on the way. The entire center
encompasses 668,000 square feet.
Adjacent east of the Promenade shops McWhinney Enterprises; the developers of the Promenade
shops had been planning, and had recently begun a project called "Grand Central Station." The
project was to encompass roughly 110 acres; and once completed would have been home
approximately one million square feet of retail, hotel, office, convention, entertainment, and
residential space. However, McWhinney Principal Chad McWhinney stated in late 2008 that
considering the recession,they had decided to put the project on hold"indefinitely."
Further to the north of the Promenade shops is the Crossroads Business Park which has been
developed with industrial warehouses and secondary retail uses. Wal-Mart has a regional
distribution center located in this park. Budweiser, who owns and operates a large brewery in
Fort Collins, also has a large distribution center located in the park. Adjacent north of the
Crossroads Business Park is the Larimer County Fairgrounds Facilities. These facilities opened
in September of 2003 and are comprised of six buildings and encompass almost 150 acres. The
facilities are used for concerts, rodeos, and special events. The main building, called the
Budweiser Events Center,has been listed as one of the top ten entertainment venues in the nation
based on size. Embassy Suites, who is leasing a portion of ground within the fairgrounds
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Commercial and Residential Real Estate Appraisers
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complex recently completed and opened a 275 suite accommodation facility that includes an
80,000 square foot convention center.
As well as becoming the retail center of the region, Loveland is positioning itself as the health
care center of the region also. In addition to the previously mentioned Medical Center of the
Rockies, a new state of the art medical simulation and education center is being added to the
McKee Medical Center Campus located, ten miles west of the Medical Center of the Rockies.
This state of the art facility will offer training and education not available anywhere else in the
region. The center is expected to cost $1,000,000, and will be able to simulate care scenarios for
hospital staff in emergency, surgery, critical care obstetrics, and other medical environments.
l� I MAG I N E
e JOHNSTOWN
Johnstown- Johnstown is south of the larger city of Loveland and has been able to capitalize on
some of the "critical mass" that was taking place at the 25/34 interchange and the Promenade
Shops at Centerra. Johnstown had a very lax development policy circa 2006-2008 as they hoped
to attract developers to the area and in turn capitalize on the tax revenue as a result.
A noteworthy project in the area is a mixed-use development being spearheaded by Chrisland
Inc., a local development and real estate brokerage firm. The development or "Master Planed
Community" was recently annexed into the Town of Johnstown. The 500 acre site will
eventually include 500,000 square feet of retail space, a 48,000 square foot rehabilitation center,
an 110,000 square foot health club center, and 150 single family homes. Some of the homes
already built have prices beginning at$300,000 to over $1,000,000.
The principals at Chrisland Inc. have also purchased a 60 acre site adjacent the larger
development, and intend on building 500,000 square feet of additional retail space as market
demands warrant. Further, they have alluded to also building upwards of 100,000 square feet of
office space as well.
a
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V%-iN
of
Greeley
Greeley- Recent construction in Greeley includes a $130 million dollar expansion to the
Northern Colorado Medical Center which is not to be confused with the Medical Center of the
Rockies located in Loveland. The medical center services the needs of Greeley residents, and
the surrounding towns,as well as some patients from the neighboring state of Nebraska.
Colorado Springs based Bethesda Real Estate Group recently acquired the 120,000 square feet
Chase Plaza Building in downtown Greeley. The seven story office building is home to multiple
tenants including its largest, Chase Bank, as well as the Weld County Public Defenders offices.
The building which sold for $10 million is the most notable purchase in downtown Greeley in
recent years. While expansion of Greeley has been predominately westward until the economic
collapse there was a resurgence of interest in revitalizing downtown Greeley, especially
considering the purchase of the Chase Bank building.
Denver based Leprino Foods, who is the nation's largest producer of mozzarella cheese, recently
purchased the Western Sugar Cooperative site located at 1g Avenue, and 13th Street in Greeley.
The cheese supplier is the exclusive provider of cheese to Pizza Hut and Domino's Pizza. They
have since begun construction of the cheese processing plant in earnest, although the date of
completion is unknown. Greeley city manager Roy Otto said that the plant would provide Weld
County with four to five billion dollars worth of economic stimulus if the plant is built in
Greeley.
a
t
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* in.
y
Windsor- Owens-Illinois recently completed a 450,000 square foot bottling plant in the town of
Windsor. The plant,which added 150 new primary jobs is capable of producing one billion glass
bottles for neighboring Anheuser-Busch, a.k.a Budweiser, Brewery in any given year. The
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facility is already running at capacity and it is in talks with neighboring land owners regarding
possible expansion.
More recently a Danish company named Vestas began a hiring push to staff their 200,000 square
foot factory which is used to manufacturer wind-turbine blades for windmills. Originally
projected to employ 150 full time employees demand is such that now 250 full time employees
were added to the payroll. The plant when operating at full capacity will produce 1,400 blades
annually.
Windsor Land Company, which is developing a 56 acre parcel on the north side of Main Street
between 15th and 17'h Streets, has completed onsite and offsite improvements to its seven lots in
preparation for Wal-Mart and several other interested retailers. Wal-Mart, who purchased a 20
acre site in December 2007, is expected to break ground on a 190,000 square foot super center
sometime in the coming years. Jeff Kaplinski, director of operations for Windsor Land
Company was originally quoted in the Coloradoan in early 2008 as saying, "they are in
negotiations with either Home Depot, or Lowe's Home Improvement to occupy a portion of the
site as well." While the additions of these big-box retailers would be the first of its kind and
signaling a paradigm shift in growth and planning in the town of Windsor, it is doubtful
considering the state of the economy they are on the immediate horizon.
Summary
In summary, Northern Colorado is considered by a majority of people to be a desirable place to
live. While the region is comprised of a younger populace, it is an attractive place to live for all
age demographics. With an increase in population expected over the coming years, demand for
real estate and the infrastructure thereof is thought to remain bullish—once the economy begins
to improve. With a highly educated workforce to draw upon, companies both large and small are
locating or expanding their operations in Northern Colorado, which until recently had been
keeping unemployment numbers low.
Although not totally insulated from the turmoil in the national economy, Northern Colorado has
avoided the brunt of the economic collapse. Desirability in terms of a place to live and work has
Appraisal Specialties,Inc
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
31
made it attractive to both residents as well as investors. Once the Commercial Mortgage Backed
Securities Market (CMBS) improves and credit begins flowing again, it is likely that investor
interest in the area will resume. With an established governmental structure and moderate
climate Northern Colorado is poised for growth over the long term. As commercial ventures
generally chase, and/or are supported by residential demand in an area, a continued rebound in
the housing sector could spell increased demand for commercial uses. Sales volume and prices
for residential homes has contracted,but by and large the contraction has not been a"free fall" as
it has been in other parts of the county.
Appraisal Specialties,Inc.
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Commercial and Residential Real Estate Appraisers
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33
SUBJECT NEIGHBORHOOD
The subject neighborhood is bordered by West 10th Street (US Highway 34 Business Route) on
the north edge, the US Highway 34 By-Pass and St. Michael's development on the south edge,
47th Avenue on the east edge, and 83`t Avenue on the west edge.
Access into the neighborhood is from 20th Street in the east/west directions, and from 47th,
59th/65th, and 71" Avenues in the north/south directions. All of these two-lane arterials provide
access to US Highway 34 Business Route (10th Street), US Highway 34 By-Pass, and the
remainder of Greeley. West 20th Street has recently been widened allowing for two lanes for
each east and west bound traffic. This street improvement project was a result of the large
amount of growth that was and still is planned for this sector of the city.
The neighborhood contains a combination of agricultural, residential, and small commercial
uses. The eastern sector of the neighborhood contains Aimes Community College, the Greeley
Country Club, and Highland Hills Municipal Golf Course. Homes in this sector of the
neighborhood have a wide range of values, from $215,000 for starter homes in Highland Park, to
$426,000 for custom homes on small acreages or on the golf course. The western sector of the
neighborhood also has a wide variety of home prices from $170,000 for recent construction in
Weber West, to $700,000 for new construction in Covington Knolls, a gated community. Most
new construction is clustered in the western sector of the neighborhood where new subdivision
development was occurring at a rapid pace, up until the recent economic contraction. Newer
residential subdivision development in the neighborhood includes St. Michael's, Drakes
Crossing,Mountain Vista, Westridge Farms, Eagle Ridge, and Loma Linda Estates.
Commercial uses in the neighborhood include the existing offices and secondary retail at the
northeast corner of 59th Avenue and West 20th Street; the Mountain Vista Academy; a
convenience store at the northeast corner of 47th Avenue and West 20th Street; and newer offices
at the southeast corner of this same intersection. The Greeley Youth Sports Complex, centrally
located in the neighborhood, provides recreation for the neighborhood. This complex has several
illuminated ball fields.
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
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Recent construction in the neighborhood includes a new public library, a church, the Northern
Colorado Medical Center Surgical Center, new offices and retail along both sides of West 20th
Street which include the Fox Run Business Park and the Mountain Vista Office Park
development. Future plans call for additional single and multi-family residential development
north of the sports complex located at the northeast corner of 65th Avenue and 20th Street.
Recently, the 14,000-square-foot, vacant Eckerd Drugs store at the northwest corner of 59th
Avenue and 20th Street was redeveloped into a multi-tenant retail building. Just north of the
Eckerd site, Good Samaritan has constructed a large apartment complex for independent-living
seniors.
At the southwest corner of 65th Avenue and US Highway 34 By-Pass is the St. Michael's
residential/commercial development. This development has been approved for 369 residential
units, including single-family homes, patio homes, and brownstone town homes. The
development also includes a limited amount of commercial buildings at the "Town Square."
Although the project was readily accepted by the market at the beginning, the current economic
downturn and the slowing of the residential market have taken its toll on this development.
Although prominently located and highly visible, absorption of the commercial component and
the residential components of this development has stalled. Recently, the developer has given
the project back to the bank, in order to avoid a foreclosure.
In addition to the projects mentioned above, MH Crews, LLC has purchased Envelope D, in the
southern sector of the Fox Run Business Park, and is currently nearing completion of their one-
story 5,100 square foot office building. According to the listing agent, the buyer/developer
wanted to be in the area, and although there are existing buildings in the area, wanted to build his
own.
The subject neighborhood, along with the remainder of Greeley and the Northern Colorado Front
Range, has been adversely affected by the sub-prime mortgage implosion which has slowed, and
in many cases halted residential construction. Based on comments from market experts, it will
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
35
likely be several years before the residential market improves significantly. Once the residential
market improves, it is thought that the commercial sector will begin to see improvement. Agents
who were interviewed noted that it might be up to five years before the commercial market fully
recovers.
In general, Greeley appears to be very supportive of growth and willing to work with developers
of both commercial and residential subdivisions in the neighborhood. Zoning in the
neighborhood is a combination of residential and commercial districts located both inside and
outside the City Limits. The neighborhood is found on FEMA Flood Panels 080266 0616 C and
080266 0617 C. Only a small portion of the neighborhood is located in a flood hazard area.
All utilities are available to the neighborhood. The neighborhood is mostly located in the city
limits of Greeley due to recent annexations. As the remainder of the neighborhood is annexed
and developed with residential uses, the area will be able, to support additional commercial
development.
In summary, the subject neighborhood is located in the direct path of residential growth for the
City of Greeley, and will need additional commercial uses as the residential construction
continues once the residential market improves. Greeley, along with most of the towns and cities
along the Northern Colorado Front Range is welcoming growth in order to maintain or even
increase tax revenues. However, the slowing of the economies remains an issue and very
limited, if any growth is occurring at this time.
s
Appraisal Specialties,Inc
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers.
SUBJECT NEIGHBORHOOD PHOTOGRAPHS
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Appraisal Specialties,Inc.
``( 7' H Som MAI, SR-A'
Commercial and Residaroldentialmers,Real Estate Appraisers
View looking
southwest
from the south
side of the
' subject
building .
Additional
office uses in
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development
•
- are noted.
-.we"
•
•
•
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Y :t xd r 3 construction
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3. , occurring on
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� ra , . an office
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xA building
• # • t .. t _fie+
within the
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This office is
-w .� n "" � north of the
s ••^ - - . — .; subject and
> t r • .r. - one of the few
•
n w
construction
projects
underway in
the area.
-1 ppraisal Specialties,Inc.
Harold Sommers, MAI, SRI!
Commercial and Residential Real Estate,lppraisers
Viewing north
along the
development
• street that runs
along the west
side of the
,. subject
t
� building .
� -, �_ a- .,.. • �� Adjacent
� � •
-•-•;- office uses are
x noted.
Viewing east
from the east
side of the
subject at an
office building
that has been
listed for sale
1 or lease for
several years.
- This building
was not used
r:.. _- in this analysis
due to its
- .._
smaller size.
Ippraisal Specialties, Inc.
Harold Sommers, MAI, SRA,
Commercial and Residential Real Estate Appraisers.
�I� - A. d - ,
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37
THE SUBJECT PROPERTY AND THE CURRENT MARKET
Demand for Office Space
Realtec Commercial Real Estate Service's reports the following office vacancy rates for the
Greeley market area through the fourth quarter of 2009:
spy k 44-4-454,r:
•
� "..p"' 'T' � * � �i`�,✓ �'F'N�a' aC ru'A. � M i� qT` sego- i,�•�ostirit- f ,s,:, Greeley
Jun-06 20.9% N/A s;
Sep-06 20.2% -0.8% a
Dec-06 18.9% -1.3%
Apr-07 18.2% -0.7% p^" - ---- --- "-- _- - - E•
Jun-07 17.1% -1.1% ,an
Q
Q3 07 15.77% -1.44°h
O407 15.2% -0.5% .' an --- -- -Q1 08 15.2% 0.0% .�
Q2 08 16.0% 0.8% i...
O308 16.3% 0.3% IVA
Q408 17.3% 0.9% °ow __ .. ---- - ---- -- ;a
Q1 09 16.6% -0.6%
O209 17.5% 0.9% Batt
Q3 09 18.2% 0.7% sa„
O4 09 19.9% 1.7%
A C 1� `'` s� /adp^l1'o^ o^ 00 oe oe oa,66 cS�Ada c4
�s�s� / o o? o^ otio'' d' o otio d
f-l4 a_ E� a ' S r
3 1 aA' Y
Leasing Activity
As the chart above illustrates, vacancy rates have been on a general upward trend since a low
posted in the fourth quarter of 2007 and first quarter of 2008. The minor correction in the first
quarter of 2009 year is thought to be a result of landlords lowering their lease rates in order to
attract and maintain what few tenants which were active in the marketplace at that time. Tenants
were able to lease additional space often times at deeply discounted rates from where they had
been in years past. Most tenants that could did in fact take advantage of the depressed market
conditions. Realtec reports vacancy of 19.9 percent in the Greeley area as of the fourth quarter
of 2009. Given the current state of the local and national economies, and the large amount of
inventory; which continues to increase as foreclosures occur, it is likely that the rate will exceed
the 20 percent threshold in the near future. (It is important to note that this vacancy rate includes
the large (250,000 SF) Hewlett Packard Campus in the northern sector of Greeley which has
remained vacant for years. If this property is removed from the calculations, a representative of
Appraisal Spediallies,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
38
Realtec, whom compiles the vacancy data, estimated a vacancy rate in the "mid to low teens").
For the subject, a vacancy rate of 14 percent is estimated, which equates to 2,242 square feet of
vacant space annually.
The following chart illustrates leasing volume for Weld County over the previous five years.
Please note that this graph only considers leasing transactions from Class-A and B office
properties, and those transactions between 2,000 and 20,000 square feet in size. However, the
graph is indicative of the overall trend in the industry, and the underlying fundamentals.
Lease transactions Weld County
25
20
15
4 105
u
0 __-
2000 2005 2008 2007 2008 2009
The market is seeing a significant decline in leasing volume, and this is confirmed in our
interviews with brokers who are active in the area; volume is off from 2008. However, the
results for 2008 might be considered a bit skewed, in that, for the first part of 2008, the market
had been very bullish, reversing course mid-year. Of particular note: for the latter half of the
year(2008) and continuing into 2009, the transactions that had been taking place were a result of
landlords lowering their lease rates, and tenants taking advantage of the market conditions, as
mentioned earlier. Low leasing volume in 2007 can be attributed to high purchasing activity.
Due to low interest rates relative to historical norms, would be tenants actually were able to
purchase rather than lease. Most market participants we have interviewed are of the opinion that
2005 represents a typical year for the Northern Colorado area, specifically Greeley. The market
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
39
at that time was not so unstable, but rather resembled an adequately supplied market with
proportionate demand.
A significant amount of new construction of office space has occurred in Greeley and throughout
the region. This new construction consists mainly of smaller offices, those smaller than 4,000
square feet, and spaces built for specific users. However, there have been a few larger
speculative build to suit commercial office buildings that were completed after the beginning of
the credit crisis—simply because development of the buildings had begun prior to the downturn.
A sign of the times is that there are still a number of vacant first generation (completed in 2006-
2007) office buildings for lease and for sale in the Greeley market area. In some cases, landlords
are offering very liberal T.I. allowances in hopes of attracting a tenant. For landlords, the good
news is that there will be very little new supply coming on-line in the next couple of years;
conversely, with the economic contraction continuing,businesses are going to struggle and could
be at risk of vacating spaces.
We are aware of at least one property in the area that was willing to lease a space for less than
the NNN expenses. This building is located at 1701 23`s Avenue in Greeley. The landlord was
offering a gross lease rate of$7.50 per square foot for spaces ranging in size from 2,000 to 7,300
square feet. The listing agent estimated the triple-net expenses to be $8.50 per square foot. This
situation is somewhat of an anomaly, but it does illustrate to what extent some landlords are
willing to go in order to generate any revenue whatsoever, albeit at times, a negative net return.
According to Nick Berryman, an experienced commercial real estate Broker with Realtec
Commercial Real Estate Services in Greeley, tenant demand across the board has been adversely
affected by the slowing of the economy. He stated that they saw an uptick in business towards
the first part of 2009, as landlords began offering aggressive incentives to tenants; however, he
said that demand has subsided. What few deals that are getting done he said is typically the
result of substantially reduced rates or concessions such as free rent or increased tenant
improvement allowances. He noted that for the later part of 2009, sales and leasing of office
properties in the area was next to zero.
. .
Appraisal Specialdes,Inc
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
40
As a result of diminishing demand and apparent oversupply in the area, often times landlords are
in a position where they are forced to lower their respective lease rates for a period of time, or
risk loosing tenants all together. In some cases, landlords are accepting lease rates of fifty
percent less than they were asking. The strategy is two fold: it allows the space to be filled, and
it buffers a property from further deterioration in the market.
According to Ron Kohl, an experienced commercial real estate broker in the Greeley area with
more than 30 years of experience, landlords are viewing leases through the prism that if they can
be at a reasonable market rate within three years considering escalators they are ahead of the
curve. For example, Mr. Kohl had recently closed a lease whereby the lease rate was $5.00 per
square foot year one, and escalated to $11 per square foot by year three. This example of$3.00
per square foot annual escalators is not unusual in the market at this time; however, in the past,
common practice had been three to five percent escalators. Mr. Kohl is not the only agent who is
using creative means in order to lease office space. Mr. Berryman of Realtec said that he was
aware of several of these situations as well.
The self perpetuating cycle is that, as landlords reduce their lease rates, often times in a drastic
measure, other landlords, in order to remain competitive have to lower their respective lease rates
as well. As we discussed earlier,one landlord had been willing to accept a gross lease rate which
was less than the owner's triple-net expenses. This is a highly disruptive episode in the
marketplace, in that there is a negative net return for the investor. The ideology of some
landlords is that you can either loose a little, or you can loose a lot. Until that mindset changes,
declining lease rates are going to continue.
Application to the Subject Property
The subject property is located in what was the direct path of growth. The recent growth that
occurred in this area is due to its location and close proximity and easy access to the neighboring
communities of Windsor, Loveland, and Fort Collins. These factors suggest that once the
economies improve, growth will once again occur in this sector of the City. The subject property
is located in the Fox Run development which is located northwest of the signalized intersection
of 59th Avenue(a major north-south arterial)and 20th Street(a major east-west arterial).
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
41
The subject property had been able to attract three tenants several years ago, and three tenants,
two who are verbal and month-to-month, in the last nine months. A $40 per square foot tenant
improvement allowance was provided and, due to contractors lowering prices to obtain work, the
amount was sufficient to provide quality finishes. Although we are not considering the verbal,
month-to-month leases due to the lack of a written contract, they do show that the owner of the
subject property is using creative methods in order to fill his vacant units.
In addition to these month-to-month leases,the property manager informed us that Security Title,
who is leasing the larger 6,014 main level space, is offering their space for sublease. He stated
that this company was purchased by a larger, national title company who has opted to downsize
due to the current slowing economies. The tenant is still paying their lease, but is willing to
sublease it for lease it for $9.00 per square foot NNN, which equates to a loss of $11.55 per
square foot compared to their current rate of $20.55 per square foot NNN (a reduction of 56
percent); this lease expires in November of 2011. The listing agent reported minimal interest for
the space. The property manager stated that they have begun to look at splitting this larger space
into smaller units,but it is problematic due to access and plumbing issues.
Morgan Stanley,who is leasing unit 202, a second level 2,824 square foot space, has been in the
building since July of 2008. This lease had an initial rate of$15.22 per square foot for the two
year term of the contract. According to the property manager, the tenant approached him a few
months ago, and is offering to stay for an additional year with at a rate of$12.00 per square foot
NNN (a reduction of 21 percent). The property manager stated that the owner has agreed to this
rate, and the new one year contract is to be signed in the next week or two.
In summary the office market in Greeley has been adversely affected by the economic downturn.
The subject property, which was completed just prior to the slowdown, has suffered as well.
Although it was able to attract three tenants to the property within a year of completion, one of
tenants is leaving, one has asked for and received a rent reduction, and the other has some ties to
the building, and therefore will remain in place. Of the remaining spaces, one was leased with a
contract, and two were leased verbally on a month-to-month basis. Given the cyclical nature of
Appraisal Specialties,Inc
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
42
real estate, the economies will rebound, growth will resume in the subject area, and demand will
increase. Although it is impossible to say for certain when things will improve, market experts
who as early as last year estimated a two to three year timeframe, have extended their estimates
to three to five years,with most saying it will be five years before the market stabilizes.
Estimated Absorption of the Subject's Vacant Spaces
As noted above, the subject property includes one 2,415 square foot vacant space that is being
offered as core and shell. The asking rate for this space is$13.00 per square foot,which includes
a $30 tenant improvement allowance. There are also two spaces that are leased on a month to
month basis with no contract in place. At lease one of these tenants indicated that he would like
to stay in the building,but might need more space if his business improves. The other month-to-
month tenant did not comment on their intentions, but we are assuming that they would likely
sign a longer term(2-3 year contract), if asked. The remaining spaces are leased with contracts,
and/or extensions in place, even though one has requested and been granted a rent reduction, and
one will vacate the building as his lease expires in November of 2011, and is currently offering
his space for sub-lease.
The above discussion concerning the subject and the office market in Greeley paints a relatively
bleak picture for the subject. The property owner and manager have shown that they are willing
to negotiate with tenants in order to fill spaces and retain existing tenants. However, based on
comments from market participants,being flexible is necessary in today's market.
For this analysis we have estimated a vacancy and collection loss of 16 percent. Based on the
extraordinary assumption that the subject's two month-to-month tenants do sign contract leases,
the only vacant space in the subject building is the unfinished 2,415 square foot space. The
vacancy and collection loss (with 15 percent allocated to vacancy) used allows for 2,402 square
feet of vacant net leasable space in the subject building. As a result the subject building is at
stabilized occupancy.
•
Appraisal Specialties,Enc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
43
One issue that could be a concern is that the tenant in 110 has offered his space for sublease,
indicating he will not renew his lease which expires in November 2011, creating some
competition within the subject building. However, this space is much larger, and unless it can be
reconfigured, will not truly compete with the subject's vacant unit. Once this unit is vacant, we
feel that it may take an additional year for it to be re-leased if the market does not improve. This
estimated absorption period accounts for the fact that the unit is currently being marketed for
lease at a rate of$9.00 per square foot NNN. Assuming a tenant can be attracted at this rate, it is
likely that they would stay longer, if the extended contract rate is reasonable. Given the property
manager's history of decreasing rental rates, and attracting tenants with verbal contracts, this
assumption is relatively safe.
Also note that we have assumed that the two month-to-month, verbal tenants will stay. This
assumption is based on comments from one of the tenants, and a true extraordinary assumption
concerning the other. The property manager stated that he is working on contract leases for these
two tenants,but has yet to put them together.
Appraisal Specialties,Inc
Harold Sommers,MALI,SRA'
Commercial and Residential Real Estate Appraisers
44
SUBJECT PROPERTY
Location/Address
The subject property is located at 1711 61st Avenue, Greeley, Colorado, 80634. This location is
near the center of the Fox Run Business Park. The subject's development is approximately two
blocks west of 59th Avenue and two blocks north of 20th Street in the southwestern sector of
Greeley.
Legal Description
GR FRBP L6 FOX RUN BUSINESS PARK
Site Description
The site is an irregular-shaped, mostly level parcel with a total of approximately 64,164 square
feet (1.47 acres). The site is slightly above the grade of the surrounding private roads. Asphalt
paved parking is present along all four sides of the building. Typical utility easements are in
place. This site has public water, gas, sewer, and electricity.
Flood Zone
The subject property is located on FEMA flood insurance rate map 080266 0617C,dated September
28, 1982. The property is located in Zone 'C',and is NOT located in a Flood Hazard area.
Zoning
The subject is zoned"C-L": Commercial—Low Intensity District in the City of Greeley. This is
a broad category that allows uses that include office uses, medical clinics, banks, retail,
restaurants, and other miscellaneous commercial/retail uses. Therefore, the existing office
building is a legal and conforming use of the site in its current zoning district.
Utilities
The site is served by all public utilities.
Access and Visibility
Access to the subject's development is via 61st Avenue, which is a curved road that extends
southwest from 59th Avenue to 20th Street. 59th Avenue is a major arterial that extends to 10th
Street (US Highway 34 Business Route) one mile north. 59th Avenue also extends to US
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
45
Highway 34 By-Pass, approximately one mile south. The improvements have good visibility
from within the development but limited visibility from either of these major arterials.
Easements
Typical utility easements are assumed. The roads located adjacent to the subject property are
private and will be maintained by the owner's association. Cross easements are assumed in place
in order to allow access from public roads to the private roads within the development. The
subject appears to have dedicated parking within its site boundaries based on the site plan
provided.
Adjacent Uses
The subject site is located north of the center of the Fox Run Business Park. Most of the
development is a combination of vacant lots and vacant pad sites. All existing improvements are
situated along the west edge of the business park and consist of typical office condominium
buildings that are roughly 5,000 square feet with condominium offices that are 1,500 to 2,400
square feet in size. The exception is a large office building located at the southwest corner of the
development predominantly occupied by a bank.
Adjacent west of the development is the Greeley Youth Sports Complex, which has several
lighted athletic fields. Directly south is a public library that fronts 20th Street. Directly east of
the library is the Village at Fox Run commercial development. This development consists of a
combination of retail and office uses. At the northwest corner of 20th Street and 59th Avenue is a
multi-tenant retail center that is occupied by two restaurants, a drycleaners, and a travel agency.
North of this property are more pad sites for the Village at Fox Run. Further north, at the
southwest corner of 59'h Avenue and 61" Avenue is a freestanding office building occupied by a
bank. North of the bank and adjacent east of the subject's development is the Good Samaritan
apartment complex for independent-living seniors. Adjacent north of the development is vacant
land and farther north are single-family homes.
Surplus/Excess Land
No surplus or excess land is associated with the subject property.
Appraisal Specialties,Inc,
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
46
EXISTING IMPROVEMENTS
The existing improvements consist of a freestanding, wood-framed, two-story, multi-tenant, office
building with a partial basement. The building was constructed in 2007. The main level contains
approximately 10,480 square feet of gross building area, and the upper level contains approximately
8,075 square feet of gross building area. The total above grade space totals approximately 18,555
square feet. After deducting the common area on each of the above grade levels, the net leaseable
areas are: 9,040 square feet on the main level, and 6,975 on the upper level; for a total net leaseable
area of 16,017 square feet. The basement portion of the subject building contains approximately
1,543 square feet of space. This area is unfinished and is used for building and tenant storage and
the mechanical area. The building has been configured for seven tenant spaces. As of the effective
date of this report, four have been leased, two are month-to-month, and one is vacant and on the
market for lease.
Structural
The construction type is a wood-framed building supported by a concrete foundation. The
basement is located near the center of the building below the common areas. The remainder of
the main level space is situated above the crawl space(s). Floors are chipboard supported by TR
engineered joists that span steel beams. The roof is comprised of pre-engineered wood trusses,
wood sheathing, underlayment, and composition shingles. Walls are wood frame.
Exterior Finishes
Exterior finishes consist of E.I.F.S. (stucco) walls with a stone wainscot. The roof is composition
shingles supported by wood trusses.
Doors and Windows
The exterior doors are storefront glass hung in aluminum frames. Interior doors are primarily
solid-core wood with wood frames. Windows are double-pane wood units with metal cladding,
both fixed and casement. The windows along the north side of the building are heated. Each of
these northern windows has an individual thermostat. The owner of the building stated that these
windows are a"test"product and appear to be very functional.
Appraisal Specialties,Inc.
Harold Sommers, MM,SRA
Commercial and Residential Real Estate Appraisers
47
Insulation
Insulation levels consist of R-19 bet insulation in the exterior walls and R-30 batt insulation
under the roof. The floor between the main and upper level has been treated with concrete slurry
which increases insulation levels somewhat and reduces the noise between levels. This slurry
was not applied to the main level floor. During our inspection the noise from walking on the
floor was notable,but not overwhelming.
Mechanical Systems
Heat is supplied by forced air gas-fired furnaces that are located in the crawlspace, and the roof.
Air conditioning is provided by a combination of rooftop units and six compressors located along
the north side of the subject building. Sufficient zoning is in place to allow each tenant space to
have at least one HVAC zone, with the exception of units 204 A and B. This was originally one
larger space that has been divided into two spaces with separate entrances. Utilities and HVAC
to these two units are shared.
Plumbing
There are two shared one-half bathrooms on each of the main and the upper level of the subject
building. A janitor's closet with a mop sink is present in the basement. A shower has been roughed
into the basement underneath one of the stairways and each of the existing tenants has a break area
with a sink. The smallest unit on the main level has exterior access only. This unit has been
equipped with a one,half bathroom,washer/dryer hookups, and a break area with a sink.
Fire Protection
The building has been equipped with fire-sprinklers on each of the three levels.
Electrical and Lighting Fixtures
The exterior of the building is illuminated by wall pack fixtures, soffit lights, and pole mounted
light fixtures. Interior lighting is a combination of recessed fluorescent and incandescent
fixtures. Sufficient lighting is present.
Trade Fixtures
No items of trade fixtures or personal property have been included in this analysis. This includes
furniture, appliances, fixtures, and other equipment that may be on site.
Appraisal Specialties,Inc
Harold Sommers,MAI,SPA
Commercial and Residential Real Estate Appraisers
48
Going Concern
No going concern or business value was included in this analysis.
Parking
On-site striped asphalt parking is present around the perimeter of the subject building. It consists
of 80 standard stalls plus four handicap designated stalls; which appears to be sufficient parking
the subject building.
Landscaping
Landscaping consists of ground cover, trees, shrubs, concrete sidewalks, and rock. Automatic
sprinklers were noted.
Individual units
The subject building has been configured with three tenant spaces on the main level and four on
the upper level. The main entrance to the building is from the south. This main entry door leads
to a hallway that runs north to south between the east and western portion of the building.
Access to the two larger units on this level is from this common hallway. Two one-half
bathrooms are located in the northern portion of this level along the east side of the common
hallway. The remaining unit is located in the southernmost section of the western portion of the
building. This unit is accessible only from the exterior of the building; access from interior
hallways to this unit is not present.
The upper level of the building is accessed by three interior stairways, one in the northern
portion of the building, one in the central portion of the building, and one in the southern portion
of the building. The second level has a similar configuration as the main level with a common
hallway running north to south through this level. The second level bathrooms are located in the
central portion of the building along its east side. The western portion of this level has two units
and the eastern portion has one unit.
Unit 102
This unit is located in the western sector of the building at the southern end. Access to this unit
is via an exterior doorway along the south side of this unit or an exterior doorway along the east
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
49
side of the unit. This unit was recently leased by a skin care business and is configured with a
reception area, an office, two treatment rooms, a break room and a one-half bathroom. It
contains a total of approximately 1,026 square feet of net leasable space. Finishes in this unit
include good quality ceramic tile in all but the office, which has good quality industrial
carpeting. Walls are textured and painted drywall and the ceiling is suspended acoustical rile,
with recessed incandescent light fixtures. Trim is stained wood and interior doors are sold core
wood units that have been stained.
Unit 104
Unit 104 is located in the eastern portion of the main level. This unit contains a total of
approximately 2,001 square feet of net leaseable space. This unit has been configured with a
reception area at the main entrance of the unit, six offices around the east and northern
perimeters, a conference area in the center of the unit and in the southeast corner. There is a
break area located in the central western sector of the unit that includes a sink. Access to this
unit is from the main entrance to the building or a pedestrian door in the break area along the
western demising wall of the unit.
Finishes in this unit are of good quality. They include good quality industrial carpeting in the
office and conference areas and vinyl rile in the break area. Walls are textured and painted
drywall. Ceilings are suspended grid acoustical tile with recessed fluorescent indirect light
fixtures. Recessed can fixtures were noted in the center conference room. Rubber baseboards
are present along with stained wood trim. Interior doors are solid core wood units that appear to
be hickory.
Unit 110
This unit is a 6,014 square foot unit that is located in the western sector of the building. Access
to the unit is from a doorway leading from the common hallway, near the main entrance, or from
the vestibule located on the southern end of the building. This unit is currently configured with
two offices along the southern perimeter, six offices in the northern end, an open bullpen area
along the western side, and a larger storage/administrative area toward the center. Cubicles have
been installed by the current tenant in the bullpen area. A break area with a sink is located in the
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
50
central northern portion of the unit. Finishes in this unit consists of good quality industrial
carpeting, in the office and hallways, and vinyl tile in the break area and storage room. Walls are
textured and painted drywall. The ceiling is suspended acoustical tile with recessed indirect
fluorescent and incandescent fixtures. Rubber baseboards are present. Interior doors are solid
core wood units in wood frames with wood trim.
Unit 202
This unit contains a total of approximately 2,484 square feet of net leasable area. It is located in
the southwest corner of the second level of the subject building. Access to this unit is from a
doorway leading to and from the common hallway near the southern end of the unit, or a second
door that leads from the hallway near the north end of the unit. This unit includes a reception
area, offices around the south and west perimeters, a larger conference room and two smaller
conference rooms, storage areas, a small break area, and a storage closet. Finishes in this unit
are similar to those present in the remaining finished units. They include good quality industrial
carpeting in the office, conference and reception areas, and vinyl tile in the break area. Rubber
baseboards are present. Walls are textured and painted drywall. The ceiling is suspended
acoustical tile with recessed indirect fluorescent and incandescent fixtures. Rubber baseboards
are present. Interior doors are solid core wood units in wood frames with wood trim.
Unit 203
This unit is located in the northwest corner of the second level. This unit is located in the
northeastern sector of the second level of the building. It is currently vacant and unfinished. It
contains a total of approximately 2,411 square feet of net leasable space.
Unit 204 A
This unit is located in the northeastern sector of the second level of the building. It has been
configured with a reception area, two offices, a file storage room and a break area with a sink.
This unit contains a total of approximately 849 square feet of net leasable space. Finishes in this
unit include good quality industrial carpeting, textured and painted drywall walls, a suspended
acoustical tile ceiling with recessed fluorescent light fixtures and rubber baseboards. Doors in
this unit are solid core wood units that have been stained.
Appraisal Specialties*Inc.
Harold Sommers, MAI,SRA
Commercial and Residential Real Estate Appraisers
51
Unit 204 B
This unit is located at the northeastern sector of the second level of the building. It has been
configured with a reception area, two offices, a conference room, and a break area with a sink.
This unit contains a total of approximately 889 square feet of net leasable space. Finishes in this
unit include good quality industrial carpeting in all but the break area which as good quality
ceramic file, textured and painted drywall walls, a suspended acoustical tile ceiling with recessed
fluorescent light fixtures and stained wood baseboards. Doors in this unit are solid core wood
units that have been stained. The break area includes good quality wood cabinetry; a polymer
sink and granite counter tops.
Note that units 204 A and 204 B were created by dividing a larger vacant space on this level.
This was easily accomplished due to the common hallway that runs along the west side of this
space. Reconfiguration required only demising and partitioning walls, and installing a doorway
along the west side of Unit 204 B, which accesses the common hallway. According to the
property manager and one of the tenants, the $30 per square foot tenant improvement allowance
was sufficient to install the existing finishes and create the existing units.
Common area Finishes
Finishes in the common areas include ceramic tile flooring in the hallways, and bathrooms,
textured and painted drywall partitioning, suspended acoustical tile ceilings with recessed
fluorescent lighting. Bathrooms walls are tiled wainscoting on the lower portion and textured
and painted drywall on the upper portion.
Tenant Improvement Allowance
The owner of the subject property is offering prospective tenants $30 per square foot in tenant
improvement allowances. Based on our experience, an allowance of $30 per square foot is
sufficient to install good quality office finishes. Previously a cost of$40-$60 was required, but
due to economic conditions, contractors are working for less, and materials can be found for less
as well. This assumption is supported by the tenant of Unit 204 B who has good quality finishes
and reportedly did not go over his $30 per square foot tenant finish allowance.
Appraisal Specialties,Inc.
Harold Sommers, MAI,SRA
Commercial and Residential Real Estate Appraisers
52
Condition and Quality of the Improvements
The overall condition of the property is very good for newer office uses in the neighborhood. No
deferred maintenance was noted due to the recent construction. The improvements are of good
quality with generally high-end interior finishes and slightly superior to other office spaces in the
area.
Functional and External Obsolescence
No forms of functional or external obsolescence were noted during the inspection for the subject
building specifically. However, current economic conditions could be considered a form of
external or economic obsolescence. This fact has been addressed in this report.
Summary
This report concerns the appraisal of the property located at located at 1711 6I st Avenue, Greeley,
Colorado 80634. This location is near the center of the Fox Run Business Park. The subject's
development is approximately two blocks west of 59th Avenue and two blocks north of 20`s
Street in the southwestern sector of Greeley. The site is an irregular-shaped, mostly level parcel
with a total of approximately 64,164 square feet(1.47 acres). The existing improvements consist
of a freestanding, wood-framed, two-story, multi-tenant, office building with a partial basement.
The building is essentially a two wing configuration with a south(main)portion and a smaller wing
offset at a 45 degree angle to the northwest. The main level contains approximately 10,480 square
feet and the upper level contains approximately 8,075 square feet for a total of 18,555 square feet of
above grade gross building area. The basement portion is located between the crawl spaces directly
below the main common areas on the other levels. This space is dedicated to storage and
mechanical equipment uses and contains approximately 1,543 square feet. Six of the seven units
are leased to various tenants. Finishes in these units are thought to be of good quality and condition.
The remaining unit is vacant and has not been finished.
Taxes
The subject property is found under Weld County Parcel Number 095909430006. According to
the Weld County Assessors Office, the 2008 tax burden for the subject property due and payable
in 2009 is as follows:
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
{
53
r
Improvements $1,457,857 $422,780 X 0.075811 = $32,051
Land $417,065 $120,950 X 0.075811 = $9,169
TOTALS $1,874,922 $543,730 X 0.075811 = $41,220
According to the Weld County Treasurer's office,the taxes are current for the subject property.
Appraisal Specialties,Inc
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
AERIAL MAP
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Appraisal Specialties, fnc.
Harold Sommers, MAI, SRA'
Commercial and Residential Real Estate Appraisers
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GROSS BUILDING AREA CALCULATIONS
GROSS BUILDING AREA CALCULATIONS
MAIN LEVEL
Overall Footprint 149 ft x 106 ft = 15,794 SF
Northwest End 0.5 x 27 ft x (87) ft = (1,175) SF
North Entry 7 ft x 15 ft = 105 SF
Northeast End 0.5 x 62 ft x (20) ft = (620) SF
East Side 0.5 x 22 ft x (40) ft = (440) SF
Southeast Side 73 ft x (41) ft = (2,993) SF
East Staircase 18 ft x 6 ft = 108 SF
South End 6 ft x (25) ft = (150) SF
South End 6 ft x (25) ft = (150) SF
10,480 SF
UPPER LEVEL
Overall Footprint 126 ft x 93 ft = 11,718 SF
Southwest Corner 19 ft x (4) ft = (76) SF
West Side 15 ft x (4) ft = (60) SF
Northwest Corner 17 ft x (4) ft = (68) SF
Northwest Corner 0.5 x 1 ft x (4) ft = (2) SF
Northwest Corner 0.5 x 20 ft x (78) ft = (780) SF
Northwest Corner 15 ft x 4 ft = 60 SF
Northwest Corner 15 ft x 4 ft = 60 SF
Northeast Corner 48 ft x (15) ft = (720) SF
Northeast Corner 15 ft x 4 ft = 60 SF
East Side 0.5 x 12 ft x (4) ft = (24) SF
East Side 12 ft x (17) ft = (204) SF
East Side 0.5 x 5 ft x (17) ft = (43) SF
East Side as x 5 ft x (14) ft = (35) SF
Southeast Corner 60 ft x (32) ft = (1,920) SF
Southeast Corner 18 ft x 6 ft = 108 SF
8:075 SF.
TOTAL ABOVE GRADE G.B.A. = 18,555 SF
BASEMENT
Main Storage Area 64 ft x 18 ft = 1,152 SF
East section 31 ft x 5 ft = 155 SF
Southwest Section 0.5 x 28 ft x 10 ft = 140 SF
Southwest Section 0.5 x 2 ft x 6 ft = 6 SF
South Section 9 ft x 10 ft = 90 SF
1,543 SF
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(Second Floor Configuration)
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NET LEASEABLE AREA CALCULATIONS
Unit 104 Reaitec
65x 30x 1= 1,950
6x 5x 1 = 30
9x 9x 1 = 81
15x 12x 1= 180
10x 24x -1= -240
2,001
Unit 110 Security Title
68 x 64 x 1= 4,352
32x 36x -1= -1,152
4x 22x 1= 88
3x 10x 1 = 30
9x 15x 1= -131
48x 56x 1= 2,688
36x 10x -0.5= -180
18.5x 6x 0.5= 56
12.5x 42x 0.5= 263
6,014
Unit 102 Lakin
32x 36x 1 = 1,152
4x 22x 1 = -88
3x 10x 1 = -30
2.5x 18x -1 = -44
4.5x 8x 1 = 36
1,026
Unit 202 Morgan Stanley
42 x 54 x 1 = 2,268
26x 4x 1= 104
26x 16x 1= 416
4x 10x 1= 40
3x 3x -0.5= -5
2,824
Unit 203 Vacant 2,415
Crews and Zeran
Unit 204 A Month to Month Verbal
28 x 31 x 1 = 868
4x 17x 1 = -67
12x 11x 1 = 132
10x 4x 1 = -40
8 x 6 x 1= -44
849
Casseday
204 B Month to Month Verbal
17x 16x 1= 272
15x 32x 1= 480
3x tOx 1 = -31
6x 28x 1 = 168
889
16,017
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SUBJECT PHOTOGRAPHS
Viewing
northwest at
the south and
east sides of
the subject
property from
the entrance
' _i ` • -,to the
,". W` "a development.
, k;
• Ts ,r`" q�
�� 1 f� : �2� �y
1 t i .. RJy� R=ja } 1IA .
F
View
`'1-'''" southeast at
the west and
north sides of
the subject
=.-z, .; building
from near the
"..`"""""--�-----__ northeast
1 it 144 sob* 4. corner of the
# ""•ion on k subject site.
1,
1ppraisaiSpecialties, Inc.
Harold Sommers, MAI, SRA
Commercial and Residential Real Estate.appraisers
^ 4, ...,!?.4..,,,Y•ww 47, v ..v, 4,,2, , -:-
rfi
Viewing east
.. from southern
vestibule
III . , located at the
i main entrance
IN, ,;,, , to the subject
i mo s building. The
ili
1; pedestrian
j
�- elevator is
Ai if
4 , . i noted on the
''`�A left, and the
°�' Fs�..: ! .ky main entrance
f I., -. to unit 204 is
mmionmadminumnmeh
i MOW noted in the
center.
g,,gi
X�. Viewing a
common
= hallway on
,r ' the second
1 •° level.
t
,
i.
Appraisal Specialties, Inc.
Harold Sommers, MAI, SRA
Commercial and Residential Real Estate;Appraisers
is
Viewing the
7 . k, 4,-, break area in
� unit 104.
l `� Typical
� � �•. �.. - •
.r 1 x• ,,,F,4,' �� finishes are
rg pt.-1,F,
noted.
.a. s" ass.-Y 4 ...d mop z.
Y'
Y
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typical office
_ --- • area in unit
104.
arnilMIIII
t =NAIIIIIIIIIIIIIIIII R1.
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Appraisal Specialties,Inc.
Harold Sommers, MAI, SR4
Commercial and Residential Real Estate Appraisers
x ,,,14..,,•,4.4'40.,..."'- '''''..i,' � .. Viewing the
D" � �`,, -7,,,
.M R,,,i, , 64'x° p + Y ,,:', St, ^r x k .,_w. �`. y.� .
� _ . _ conference
Y` �� room m unit
z 104.
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A
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t
door and
. reception area
in unit 104.
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Appraisal Specialties, In
Harold Sommers, MAI, SRA:
Commercial and Residential Real Estate Appraisers
`T _ _° - Viewing a
conference
room in unit
• : 110.
.x,.
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•
•
•
7 _ _ 1 .r�-• wIP• ' �'_ 4, reception area
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in unit 110.
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Finishes that
• are typical to
'security Title Guara:;!
this unit are
noted.
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4 1
f5 li9 NM.
Appraisal Specialties, lnc..1
Harold Sommers, MAI, SRA
Commercial and Residential Real Estate Appraisers
Viewin a g
,a
a t typical office
I.
..,'''3‘ ` r . s �..t..._'..;.,'. are in unit
T 6 i
� � . x '� ,Y < _ ' I t 110.
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110.
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,-appraisal Specialties, Inc..
{A" Harold Sommers, i'IAI, SRA
Commercial and Residential Real Estate�t ppraisers
= �r • 1 Viewing the
file storage
'�
a n d
administrative
area in unit
110.
f
Viewing the
main entry and
8 • -'' Xr reception area
of unit 110.
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: y�
•
.:, ... :•
,4ppraisal Specialties, Inc.
Harold Sommers, MAI, SR,4
Commercial and Residential Real Estate Appraisers
Viewing an
office in unit
Typical 102. T tcal
finishes are
t noted.
i a
:
:•
lif..ro �.,
II 11 '\ ' * JJ
4,1
�.. •,.1' Y' y.,.sY: e
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� 'i --7-...,,i. ...„.Y r _.. break area in
_ . ,.,. ,.> , . 4;� unit 102.
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P 1
7 •k
'• y
4
Appraisal Specialties, Inc.
Harold Sommers, M4I, SRA
Commercial and Residential Real Estate Appraisers
� zi Viewing a
3 y` ��'j"Iir 17 e7 �w
r � -. _ typical office
�' � , ,� , � ,----`_ with typical
"` finishes in unit
i.,,,,,.,,,2,. 204-B.
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- --•
, reception area
.........
in unit 204-A.s..., , , r. , �* ! "� g
i% l� et A, 1;M
,rp , j 4
•
Appraisal Specialties, Inc.'.
o ,
CommercialMaroid and ResideSntialmmers,Real EstateMA!AppraiSRAsers-
rpt-
,, Viewing the
`� .- -!� interior of
,, - � --�'' t unit 203.
' IIi1I1Ilifil ill , 'i ' • -
in -• �,r, vim. .
,sue ate, _ °'.Se^. µ .
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gar
Appraisal Specialties,Inc.
Harold Sommers, MAI, SRA
Commercial and Residential Real Estate Appraisers
"'"'" Viewing an
administrative
.' area in unit
202
9 . , ,. ,, , ,
y, z j
fIJi :: ,�
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Appraisal Specialties, Inc.
Harold Sommers, MAI, SRA
Commercial and Residential Real Estate Appraisers
55
HIGHEST AND BEST USE
Highest and Best Use is defined as:
"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".6
Legal/Political Considerations
The subject is zoned"C-L": Commercial—Low Intensity District in the City of Greeley. This is
a broad category that allows uses that include office uses, medical clinics, banks, retail,
restaurants, and other miscellaneous commercial/retail uses. The existing improvements are
allowed in the current zoning district and are a legal, conforming use of the site.
Physical Considerations
The subject site is sufficient in size and depth for the existing development. The appraiser is not
aware of any soil conditions that would prevent development, but a soils report has not been
provided to the appraiser. Development has occurred adjacent to the subject and the subject has
been in existence since 2007;as such,the development of the site is physically possible.
Financially Feasible and Maximally Productive
The subject property is located in a neighborhood that was in a life cycle of rapid growth until
the recent slowing of the economies. The development is accessed from a major arterial road,
but the site does not have good visibility from any major arterial. The zoning district is intended
for low intensity commercial development such as retail or office uses. The lack of retail
visibility suggests that the current use as an office building is a reasonable Maximally Productive
and highest and best use of the subject site as if vacant, but holding until the economy improves
is recommended. The existing improvements contribute significant value to the site and are
thought to be the highest and best use of the site as improved. Given the lack of visibility from
'The Appraisal of Real Estate, 10th Ed., 199Z p. 275.
6 The Dictionary of Real Estate Appraisal, 3` Ed.,1993,p. 171
Appraisal Specialties,Ina
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
56
major arterials, an office use similar to that present on the site is also thought to be Maximally
Productive.
Feasibility of the Project
Given falling lease rates, and rising vacancy and capitalization rates it is unlikely that the project
would be financially feasible to develop today.
Appraisal Specialties,Inc.
Harold Sommers, MAI,SRA
Commercial and Residential Real Estate Appraisers
57
APPROACHES TO VALUE
The appraisal process customarily includes the Cost, Income, and Sales Comparison Approaches to
Value,which are then reconciled to arrive at a final value estimate for the subject property.
The Cost Approach is defined as:
"A set of procedures through which a value indication is derived for the fee
simple interest in a property by estimating the current cost to construct a
reproduction of, or replacement for,the existing structure; deducting accrued
depreciation from the reproduction or replacement cost; and adding the
estimated land value plus an entrepreneurial profit."'
The Income Capitalization Approach is defined as:
"A set of procedures through which an appraiser derives a value indication
for an income-producing property by converting its anticipated benefits
(cash flows and reversion) into property value. This conversion can be
accomplished in two ways. One year's income expectancy can be
capitalized at a market-derived capitalization rate or at a capitalization rate
that reflects a specified income pattern, return on investment, and change in
value of the investment. Alternatively, the annual cash flows for the holding
period and the reversion can be discounted at a specified yield rate."8
The Sales Comparison Approach is defined as:
"A set of procedures in which a value indication is derived by comparing the
property being appraised to similar properties that have been sold recently,
applying appropriate units of comparison, and making adjustments to the
sale prices of the comparables based on elements of comparison."9
The use of one or more of these techniques may be determined by the quantity or quality of data
available and the nature of the appraisal assignment. For this appraisal the Cost, Income, and
Sales Comparison Approaches to Value are appropriate and have been presented.
' The Dictionary of Real Estate Appraisal, 3rd Ed.,1993, p. 81
8
The Dictionary of Real Estate Appraisal, 3rd Ed.,1993, p. 178
9 The Dictionary of Real Estate Appraisal, 3rd Ed.,1993, p. 318
Appraisal Specialties,Inc
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
58
COST APPROACH
The first step in the Cost Approach is to estimate the value of the land as if vacant and ready for
development. The costs of engineering, planning, site development, off-site costs, and
landscaping are added at a later point.
The search for sales included a detailed review of the County and Multiple Listing Service records,
along with discussions with Realtors and owners active in the area market. The search originally
was focused specifically on the City of Greeley. However, due to a lack of sales in Greeley, the
search was expanded to include other areas located in the Northern Colorado Front Range.
Additionally, sales of larger office pad sites are not available, so smaller sites had to be used. The
lack of more similar comparables is thought to be a direct result of current economic conditions.
In the end, four closed sales and two active listings were found and have been used to estimate the
value of the subject site as if vacant and ready for development. Please note that there are older
closed sales in Greeley that are available but they are not thought to be reflective of the current
market, and thus have not been presented. The unit of comparison is the sale price per buildable
area. These sales are summarized in the following table and discussed on the following pages.
am
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
COMPARABLE LAND SALE NO. 1
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Location: 61 st Avenue Envelope D Greeley,CO
CompiD: 15788
Legal Description: GR FRBP BE D FOX RUN BUSINESS PARK SITUS:GREELEY 000000000
Land Area in SF: 6,752 Land Area in Acres: 0.16
Parcel Number: 095909430010 Buildable SF: 5,100
Sales Information .
Date: 11/15/2009
Price: $190,000
Economic Adjustments Adjusted Units of Comparison:
Property Rights: Fee Simple Estate $0 Price/SF: $28.14
Financing: Cash to Seller D0 Price/Acre: $1,225,806
Cash Equiv.Price: $190,000 Price/Buildable SF: $37.25
Conditions of Sale: Market $0
Expenditures Post Pur. None $0
Final Adjusted Price $190,000 Reception# 3655565
Marketing: Two years
Annexed: Yes
Source: Jack Snyder Zoning: "CL":Commercial
Confirmed By: Zach Smith, 12/09 Off Site Costs: None
Grantor: Fox Run Business Park,LLC Water Incl.: None
Grantee: MH Crews LLC Utilities: All to site
Remarks:
Site is a pad site in the Fox Run Office Park, According to the seller's agent the listing had been on the market for
around two years, and it just so happened that they found a buyer who had been looking for a while now. The buyer
apparently was persuaded to purchase because of the depressed pricing in the area. The site is level and faces east
across a portion of open space. The envelope supported development of a 5,100 square foot office building, which is
what the buyer intends on building.
Appraisal Specialties,Inc.
ffarold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
COMPARABLE LAND SALE NO. 2
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Location: N of NEC Harmony Rd&Inovation Dr. Fort Collins,CO
CompID:15830
Legal Description: LOT 10,LESS N 10 FT,GOLDEN MEADOWS BUSINESS PARK,FTC
Land Area in SF: 25,265 Land Area in Acres: 0.58
Parcel Number: 87314-06-010 Buildable SF: -Aew.vwmN.Tlwo-romfmr.g
Sales Information
Date: 9/4/2009
Price: $165,000
Economic Adjustments Adjusted Units of Comparison:
Property Rights: Fee Simple Estate $0 Price/SF: $8.11
Financing: Cash to Seller 0 Price/Acre: $353,448
Cash Equiv.Price: $165,000 Price/Buildable SF: $29.29
Conditions of Sale: Market $0
Expenditures Post Pur. $40,000 $40,000
Final Adjusted Price $205,000 Reception# 20090062889
Marketing: Over 1 Year
Annexed: Yes
Source: Joshua Guernsey,Brinkman Partners Zoning: E:Employment
Confirmed By: Todd Finn Off Site Costs: None
Grantor: 4818 Innovation LLC Water Incl.: None
Grantee: Stewart King Utilities: All to Site
Remarks:
This pad site is located one lot north of Harmony Road,along the east side of Innovation Drive. The site is permit ready
and fully approved for a 5,000 to 10,000 square foot office building. The buyer is improving the site with a 7,000
square foot owner-occupied flex building. Completion of the pad site will require the installation of 30 parking spaces
which is estimated at $40,000 per the listing agent. The Harmony Corridor location is a benefit, however due to
adjacent buildings,this site and the future building will have little if any visibility from Harmony Road.
:•1 ppraisal Specialties, Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers;
COMPARABLE LAND SALE NO. 3
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Location: 2033 W Eisenhower Blvd Loveland,CO
ComptD: 15766
Legal Description: LOT 1,HIGHWAY ADDITION;LOV;LESS ROW PER 20090060021
Land Area in SF: 29,760 Land Area in Acres: 0.68
Parcel Number: 95104-39-001 Buildable SF: 6,000
Sales Information
Date: 7/17/2009
Price: $285,000
Economic Adjustments Adjusted Units of Comparison:
Property Rights: Fee Simple Estate $0 Price/SF: $9.58
Financing: Cash to Seller Price/Acre: $417,157
Cash Equiv.Price: $285,000 Price/Buildable SF: $47.50
Conditions of Sale: Market SO
Expenditures Post Pur. None $0
Final Adjusted Price $285,000 Reception# 20090049449
Marketing: Over 1 Yr
Annexed: Yes
Source: Nathan Klein,Loveland Commercial Zoning: B:Developing Business
Confirmed By: Todd Finn Off Site Costs: None
Grantor: 2021 LLC Water Incl.: N/A
Grantee: 2033 WEB LLC Utilities: All to Site
Remarks:
This parcel is located in the western sector of Loveland along the north side of West Eisenhower. The location of the
site provides it with good visibility and exposure from West Eisenhower. According to the listing agent,the location,in
western Loveland is not conducive to primary retail uses due to the lack of activity in this portion of the city. The site
was purchased by a retail paint store who has improved the site with a retail store. All utilities were to the site and no
atypical on or offsite costs were reported.
.-lppraisal Specialties, Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
COMPARABLE LAND SALE NO. 4
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Location: 1826 65th Ave No 1 Greeley,CO
Comp[D: 15459
Legal Description: GR POP BLDG ENV A-1 PINNACLE OFFICE PARK
Land Area in SF: 5,097 Land Area in Acres: 0.12
Parcel Number: 095915118007 Buildable SF: 4,761
Sales Informatio :<•_ „t
Date: 1/14/2008
Price: $331,500
Economic Adjustments Adjusted Units of Comparison:
Property Rights: Fee Simple Estate $0 Price/SF: $65.04
Financing: Cash to Seller Price/Acre: $2,833,333
Cash Equiv. Price: $331,500 Price/Buildable SF: $69.63
Conditions of Sale: Market $0
Expenditures Post Pur. None $0
Final Adjusted Price $331,500 Reception# 3529377
Marketing: Over 1 Yr
Annexed: Yes
Source: Ron Randel,Wheeler Zoning: CL:Commericial Low Int.
Confirmed By: Todd Finn Off Site Costs: None
Grantor: P2 HIGHLAND PROPERTIES LLC Water Incl.: None
Grantee: PINNACLE PARK BUILDING Al LLC Utilities: All to Site
Remarks:
This pad site is located along the south side of West 20th Street in the northwest corner of the Pinnacle Office Park. The
site has been improved with a 4,761 square foot general office building. Although for sale, there has been little interest
in the new building.
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
COMPARABLE LAND SALE NO. 5
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Location: TBD 11th Street Greeley,CO
CompID: 15790
Legal Description: GR MSSC LOT 1 MARKET SQUARE SHOPPING CENTER
Land Area in SF: 23,388 Land Area in Acres: 0.54
Parcel Number: 095911137001 Buildable SF: 5,500
Sales In ormationr° ` n
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Date: Active __.._
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Price: $125,000
Economic Adjustments Adjusted Units of Comparison:
Property Rights: Fee Simple Estate $0 Price/SF: $4.81
Financing: Cash to Seller
D. Price/Acre: $208,333
Cash Equiv.Price: $125,000 Price/Buildable SF: $20.45
Conditions of Sale: Active(-10%) ($12,500) Reception# TBD
Expenditures Post Pur. $0 Marketing: Active,01/08
Final Adjusted Price $112,500 Annexed: Yes
Source: Jerry Chilson Zoning: "CL":Commercial Low
Intensity
Confirmed By: Zach Smith, 12/09 Off Site Costs: N/A
Grantor: Amalfi, LLC Water Incl.: Does not include
Grantee: TBD Utilities: All in road adjacent site
Remarks:
Site is located near the intersection of 39th Avenue and 11th Street, which turns into a cul-de-sac 1/2 block west of the
intersection. The property is flat,and slightly above the grade of 11th. The site has visibility from 11th and 39th,which
in this area are feeder streets; however, it does not have visibility from any major arterials. The location is amongst a
number of other secondary commercial as well as residential uses, and is located behind a shopping center. The listing
agent stated that his activity has been "next to nothing." The seller had owned the adjacent shopping center and is just
looking to "dump" this remaining piece after having sold the center. The broker reported that the owner had plans that
the city had approved allowing him to build an office property between 5,000 and 6,000 square feet.
Appraisal Specialties, Inc..
Harold Sommers,MA!,SRA
Commercial and Residential Real Estate Appraisers
COMPARABLE LAND SALE NO. 6
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Location: 702 W.Drake Rd. Fort Collins,CO CompID:9174
Legal Description: BLD ENVELOPE I,H,and J CENTRE FOR ADVANCED TECHNOLOGY PUD, 19TH
FIL,FTC
Land Area in SF: 6,970 Land Area in Acres: 0.16
Parcel Number: 97233-59-007 Buildable SF: 5,260
Sales Information '
Date: Active
Price: $125,000
Economic Adjustments Adjusted Units of Comparison:
Property Rights: Fee Simple Estate $0 Price/SF: $16.14
Financing: Cash to Seller $9 Price/Acre: $703,125
Cash Equiv. Price: $125,000 Price/Buildable SF: $21.39
Conditions of Sale: Acitive(-l0%) (S12,500) Reception# TBD
Expenditures Post Pur. None $0 Marketing: Active 04/17/2007
Final Adjusted Price $112,500 Annexed: Yes
Zoning: NC:Neighborhood
Commercial
Source: Stuart McMillan,Everitt Commercial
Confirmed By: Todd Finn Off Site Costs: None
Grantor: EVERITT ENTERPRISES LP NO 1 Water Incl.: None
Grantee: TBD Utilities: All to Site
Remarks:
There are three remaining pad sites in this development. Building "I" pad site has 5,000 buildable square feet, building
"J" has 7,000 buildable square feet, and building "H" has 9,000 buildable square feet. The sites have prices of$23.81
per buildable square foot regardless of size or allowable building size. They have been on the market for several years.
The original asking prices were$42 per buildable SF, but have been reduced due to lack of activity and current market
conditions. The sites are set back from West Drake Street, a location that provides minimal visibility along this major
east to west arterial.
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA-.
Commercial and Residential Real Estate Appraisers,
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62
Adjustments to the Comparables
ECONOMIC ADJUSTMENTS
Comparables one, two, three, and four are closed sales, which were reportedly cash to seller,
market derived transactions. The remaining comparables are active and have not yet cleared the
market. These comparables are assumed to be market derived cash to seller transaction upon
sale. No seller points were reported for the four closed sales; and none are assumed for the
active listings. All of the sales were Fee Simple Estate and financing was all "cash to seller."
With the exception of sale four, adjustments for appreciation over time were not necessary due to
the recent nature of the closed transactions and current market conditions. A subjective negative
adjustment of 30 percent has been made to comparable four, a January 2008 sale; this adjustment
considers softening land values in the area. A subjective negative adjustment of ten percent has
been made to the active listings to account for probable negotiations between the seller and
future buyer.
PHYSICAL ADJUSTMENTS
Physical adjustments need to be made to the comparables to account for the differences between
the comparables and the subject. Quantitative adjustments were made where sufficient market
data was available to derive a dollar adjustment. When sufficient market data was not available
to derive actual dollar or percentage adjustments, plus or minus indicators (qualitative
adjustments) were used to indicate a direction of adjustment. While subjective, these qualitative
adjustments do indicate a direction of adjustment and lead the reader in the appraisers' thought
process to an area of central tendency.
Quantitative Adjustments
The buyer of comparable two was required to install on-site parking which is typically included
in a pad site sale. According to the listing agent the cost of this parking area was $40,000. This
comparable has been adjusted by this amount in order to account for the lack existing of parking
present on the site. Sufficient information was not available to make any quantitative
adjustments for this analysis.
•
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
63
Qualitative Adjustments
Qualitative adjustments were made to the comparable sales for lot size, location, access, and
visibility. As a summary report detailed explanations of the qualitative adjustments have not
been presented.
Reconciliation of Adjustments
Each of the comparable sales was sold as completed pad sites on a price per buildable square
foot basis. After adjustments the comparables develop a range of between $20 and $35 per
square foot for the subject. The most weight is given to comparable one, as it is the most recent
closed sale, and is located in the subject development. It suggests a value of$35 per square foot
for the subject. Secondary consideration is given to comparable two, a September 2009 sale of a
pad site that was approved for a 7,000 square foot building, the largest buildable square footage
of the closed comparables presented.
The subject is located in the western sector of Greeley, an area that was growing at a relatively
rapid rate prior to the slowing of the national and local economies. It has limited visibility,
which is not a significant detriment to an office building, but having visibility does add some
value. Additionally, the magnitude of the subject is beyond what the market currently desires.
After accounting for these factors, a value toward the lower end of the range suggested by the
primary and secondary comparables, or $25 per buildable square foot is selected for the subject
property. Based on this analysis,the estimated value of the subject site is calculated as follows:
alitiOny
"' r k4�e' c» sxat„ :z_, r, r� ��. a k �`� ..oar
18,555 x $25 = $463,875
Rounded to $460,000
Appraisal Specialties,Inc.
Harold Sommers,MM,SRA
Commercial and Residential Real Estate Appraisers
64
ESTIMATED REPLACEMENT COST OF THE IMPROVEMENTS
To estimate the replacement cost of the proposed improvements, the Marshall Valuation Service
has been utilized, with adjustments for local variables. The cost figures used apply to a good
quality Class D Office Building with good quality interior finishes and a partial basement used
for storage. Marshall & Swift uses Classes A, B, C, D, and S to denote construction materials
and types, not quality. These cost figures can be found in Section 15, page 17 of the Marshall
Valuation Service. Entrepreneurial Profit of 10 percent of the improvement cost was also
included. The combined cost figures, plus land value and on-site improvements, indicate an
estimated value by the Cost Approach for the subject property. The calculations are presented in
the table on the following page.
The cost figures provided in the Marshall and Swift Valuation book consider finished space.
Given that 2,415 square feet of the subject building is unfinished, a deduction based on our
estimated tenant improvement allowance required to attract a tenant of$30 per square foot has
been deducted as a line item for the "as-is" value. Leasing commissions for the vacant space has
not been deducted as a line item as the building is currently at stabilized occupancy. The tenant
improvement allowance equates to $72,450.
Depreciation is based on the effective age/life method of depreciation. The improvements
should be functionally adequate for their intended use. There appears to be no functional
obsolescence. No external factors are thought to exist that would be a detriment to the subject's
value (other than economic conditions mentioned earlier in this report). The total value estimate
as indicated on the final value page of the Marshall and Swift Valuation cost estimate is:
S2,810,000
Appraisal Specialties,Inc
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
COST APPROACH
Proposed Office Building
MARSHALL&SWIFT VALUATION SERVICE
Section 15,Page 17
Base Cost per Square Foot Class'D'-'Good'Office Building $122.39
Multiplied by Factors For Office Building
Size-Shape Ratio 0.975
Story Height 0.977
Location Modifier 0.990
Current Cost Update 0.980
Combined Modifier 0.924188265
Anal Adjusted Base Cost $113.11
Estimated Replacement Cost of Main Level 18,555 x $113.11 $2,098,782
Base Cost per Square Foot Class'D'-"Good"Office-Basement $28.73
Multiplied by Factors For Office Building
Size-Shape Ratio 0.975
Story Height 0.977
Location Modifier 0.990
Current Cost Update 0.980
Combined Modifier 0.924188265
Anal Adjusted Base Cost $26.55
Estimated Replacement Cost Basement 1,543 x $26.55 $40,970
Fire Sprinklers $3.00 x 18,555 • $55,685
Elevator $50,000
Total Extras $105,665
Cost to Finish Unit 203 ($72,450)
Total Estimated Cost of Building Improvements $2,172,967
Plus Soft Costs Not Included in Base Rate:
Appraisal $2,900
Insurance $6,000
Total Soft Costs $8,900
Estimated Total Cost of Building $2,181,887
Less Depreciation:
Physical(Modified Age/Ltie Method)
Actual Age 3
Effective Age 1
Economic Life 50 Years
Effective Age/Total Economic Life=Physical Depreciation
Years/ 50 Years= 2%
Functional Obsolescence $0
External Obsolescence 0%
Total Accrued Depreciation ($43,637)
Estimated Depreciated Cost of Building $2,138,229
Plus Contributory Value of Site improvements:
None,Included in Pad Site Value $0
Total Value Site Improvements $0
Total Estimated Cost of Improvements $2,138,229
Plus Entrepreneurial Profit 10.00% $213,823
Plus Estimated Site Value $460,000
Final Indicated Value via the Cost Approach $2,812,052
Rounded to $2,810,000
( $151.44 /SF GBA)
66
SALES COMPARISON APPROACH
As discussed in the Approaches to Value section of this report, the Sales Comparison Approach
gives an indication of what purchasers are willing to pay for properties that are similar to the
subject. The comparable sales can be analyzed in three ways: 1) Gross sale price per a
measurable unit of comparison such as price per square foot, unit, bedroom, etc.; 2) Sale price
allocated to building and land separately; and 3) the Effective Gross Income Multiplier
Technique.
The subject property consists of a good quality office building that contains approximately
18,555 square feet of above grade gross building area. In order to estimate the value of the
subject property via the Sales Comparison Approach to Value, we researched the subject's
market area in order to find comparable sales and listings of office buildings. The search
revealed four closed sales and two active listings that are though to be considered reasonable
alternatives to purchasing the subject. These comparable sales are summarized in the Sales
Comparison Approach Adjustment Table in this section and discussed in detail on the following
pages.
The most readily available means to analyze the sales found is the sales price per square foot
technique,with adjustments made for differences in quality, location, and other meaningful features.
For this reason, the Sales Comparison Approach will use the sales price per square foot of gross
building area as the unit of comparison. Qualitative and quantitative adjustments are made and
compared to the subject to derive an estimated value per square foot of main floor area.
Appraisal Specialties,Inc
Harold Sommers,MAI,SRA'
Commercial and Residential Real Estate Appraisers
COMPARABLE OFFICE SALE NO. 1
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Name: CompID: 15388
Location: 4745 Boardwalk Drive Fort Collins,CO
GBA: 13,490 SF Units: 4 Construction: Stucco/Stone
Parcel Number: 9601163003 Year Built: 2001
Sales Information
Date: 5/1/2009
Price: $2,600,000
Economic Adjustments Adjusted Units of Comparison:
Property Rights: Fee Simple Estate SO Price/SF GBA: $192.74
Financing: Cash to Seller SO Price/Unit: $650,000
Cash Equiv. Price: $2,600,000
Conditions of Sale: Market SO
Expenditures Post Pur. None SO
Surplus Land Adj: None SO Reception# 20090027973
Final Adjusted Price $2,600,000 Marketing: One Year+
Source: Ron Young
Confirmed By: Todd Finn
Grantor: MIRAMONT OFFICE PARK OWNERS ASSN
Grantee: Sunny Meadows Villa:e_ LLC
Income Summary: ➢'F ®
Ro: 8.44% EGIM: 10.90 Exp.Ratio: 8.00% Exp.Per Unit: $4,770
Remarks:
Building is a Stucco two story contemporary building with clay tile roof. Finishes throughout are consistent with other
Class A office buildings in Fort Collins. Building is designed as a multi-tenant office building,and currently leased to a
Doctor, Microsoft, and a title company. The property according to the listing agent is in excellent condition. Parking
ratio is 4:1 according to Realtor.
Appraisal Specialties,Inc.
Itarold Sommers, .1.1.41,SRA
Commercial and Residential Real Estate Appraisers
COMPARABLE OFFICE SALE NO. 1 CONT.
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N/A
i. „• 12" __'.+ 'ra r -/dtaFF .�e SYiffa-Nk
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ger m..' xl� $/.: j T pY£'C.e' :�:!T001,44;',143 5J14:11::'•;""7-e
v ».f `.»' a .. 44
Site Size: 59,974 SF or 1.38 Acres
Access: Adequate
Parking: Adequate
Surplus Land Details: N/A
Description: Site is flat and affords the subject visibility from Boardwalk Drive. Site is bounded on
the west by a school/playground with views of the Mountains, and on the east by the
shared parking lot.
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'g »4a�r.,x ' ..,a•. w S; s5'5�'"� k yn„Ga a C�e'e.;
Year Built: 2001
GBA: 13,490 SF
Stories: 2
Units: 4
Construction Quality: Average
Condition: Average
Description: Building is a Stucco two story contemporary building with clay tile roof. Finishes
,«- ,, throughout y are consistent with other Class A office buildings in Fort Collins. �pi
inc.N«,( a c' $".=wx w`' Ytj++e aa" e. ... ui S �r"S+`r y4eStR
Income information is based on comments from listing agent.Existing lease rates range from$14-$18 per square foot.
Potential Gross Income: $265,000
Less 10.00%Vacancy&Credit Loss: $26,500
Effective Gross Income: $238,500
Less Expenses:
Management @ 5.00% $11,925
Reserves @ 3.00% $7,155
Total Operating Expenses: $19,080
Net Operating Income: $219,420
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EGIM: 10.90 Ro: 8.44%
Expense Ratio: 8.00% Expense per unit: $4,770
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COMPARABLE OFFICE SALE NO. 2
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Name: CompID: 1549
Location: 3780 North Garfield Avenue Loveland,CO
GBA: 17,000 SF Units: 5+ Construction: Wood Frame
Parcel Number: 9501285001 Year Built: 1995
Sales Infbrmatto=.
Date: 06/27/2008
Price: $2,080,000
Economic Adjustments Adjusted Units of Comparison:
Property Rights: Leased Fee Estate $0 Price/SF GBA: $122.35
Financing: Cash to Seller 5t1 Price/Unit: N/A
Cash Equiv.Price: $2,080,000
Conditions of Sale: Market SO
Expenditures Post Pur. None $0
Surplus Land Adj: None Reception# 20080041903
Final Adjusted Price $2,080,000 Marketing: 6+Months
Source: Nathan Klien
Confirmed By: Zach Smith 08/2008
Grantor: Creekside North Properties,LLC
Grantee: Paul Ehrlich,Revocable Trust
Income Summary:
Ro: 7.14% EGIM: 12.88 Exp.Ratio: 8.00% Exp.Per Unit: N/A
Remarks: .:
Office space with great frontage on US Hwy 287. Majority of the space is leased to Keller Williams Realty, and
Countrywide Home loans. Smaller units present are typically garden level and have walkout basement access to the east
side parking lot. The garden level has windows in all office units. Main level space is 5,500/SF but is divided into two
units. Finishes are good for office space. Building has been converted to condominiums but no value placed on this
attribute by buyer at time of purchase.
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA`:
a. �• Commercial and Residential Real Estate Appraisers
COMPARABLE OFFICE SALE NO. 2 CONT.
'4'atitsw4a..W - .,�`;,. .a'a.46,z✓s::,,,. c ,w ,,a'ks.₹'r t.w "�':
N/A
Inrai
N/A
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Site Size: 49,999 SF or 1.15 Acres
Access: US Hwy 287(Garfield)&37th Street
Parking: Abundant
Surplus Land Details: N/A
Description: Nice site that fronts on arterial North Garfield also known as Colorado Highway 287.
The lots slopes west to east and allowed the building to be designed with a full walk-out
lower level with windows in all the lower level offices. Access from Garfield is
adequate.
�� .Thrf1i1T1fti `' m a`3'p'vtt .arl4. ��.₹��i ��i++ �� ₹₹�pp��YYyy,, f��i�14O:2524. �`
"� A 'YS+&:rvd'TiA. k 5r,4 .a.:.✓S rf..
Year Built: 1995
GBA: 17,000 SF
Stories: 1
Units: 5+
Construction Quality: Average plus
Condition: Average
Description: Nice Brick office building that fronts on Garfield (a.k.a Highway 287). There is
adequate visitor parking in the front but abundant parking behind the building.
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Income information provided by Selling Broker
Potential Gross Income: $170,000
Less 5.00%Vacancy&Credit Loss: $8,500
Effective Gross Income: $161,500
Less Expenses:
Management @ 5.00% $8,075
Reserves @ 3.00% $4,845
Total Operating Expenses: $12,920
Net Operating Income: $148,580
yy �(. N/, � 4 >₹ aa:gµe 6ts +".st• t,. h R.s=^. yg Wqu% z v z�° '' '
Irrges64is
EGIM: 12.88 Ro: 7.14%
Expense Ratio: 8.00% Expense per unit: N/A
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COMPARABLE OFFICE SALE NO. 3
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Location: 4025 St Cloud Drive Loveland,CO
GBA: 14,715 SF Units: 4 Construction: Stone/Wood Frame
Parcel Number: 85031-18-100,150,200,210,230 Year Built: 2006
Saks Information' ,,..
Date: 5/29/2008
Price: $2,450,000
Economic Adjustments Adjusted Units of Comparison:
Property Rights: Leased Fee Estate $0 Price/SF GBA: $166.50
Financing: Cash to Seller SO Price/Unit: $306,250
Cash Equiv.Price: $2,450,000
Conditions of Sale: Market SO
Expenditures Post Pur. None $0
Surplus Land Adj: None SO Reception# 20080034391
Final Adjusted Price $2,450,000 Marketing: One Year
Source: Kevin Brinkman
Confirmed By: Zach Smith, 12/08
Grantor: FLAGSTONE OFFICE I,LLC
Grantee: KMB AND R,LLC
Income Summary:
Ro: 7.99% EGIM: 11.51 Exp.Ratio: 8.00% Exp.Per Unit: $2,128
Remarks: .�. .
Newly constructed class A office in a high growth area along Crossroads Blvd, which has become a main thoroughfare for
Windsor/Water Valley residents. Site has visibility& immediate access to 1-25,easy commute to surrounding cities&located
directly south of the John Q. IIammons Convention Center/Embassy Suites Hotel(U/C)& Budweiser Events Center. Listing
agent stated that property had been previously marketed prior to his successful listing/sale. The owner/developer had leased
the building, and then had offered the property for sale at a 7% cap; however, no interest from the market was exuded.
Ultimately the agent encouraged the owner to take a lesser offer given deterioration in the overall economy.
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
COMPARABLE OFFICE SALE NO.3 CONT.
Financing Detsik} , ;n,,,, -..,,,,:',,f .i; r;v14 r,'t ,. ,. , , ,. _7.,'. _. , , 3,r , .. u,
N/A
Post'. . .�y ".`w G v.fatg _„ ,�,wY' ^ +, '.Y zs cx�,.ay x"xf . la lOti .'•�.
I'O�F a(lMrF�R,e -,st,FM. '*�tiAi ,..�,f2�,�, -J x..._as.Ua.a'h a.aik.�n.^a,�, f„ v�.
N/A
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Site Size: 25,942 SF or 1.76 Acres
Access: Adequate
Parking: Adequate
Surplus Land Details: None
Description: Mostly level site located south of Crossroads Boulevard, along the north side of St
Cloud.Drive.
Improvement Informatiot id . mn r ,.,.,. ae.. . ₹,r, . c >, . x, "„
Year Built: 2006
GBA: 14,715 SF
Stories: 2
Units: 8
Construction Quality: Good
Condition: Very Good
Description: Class A office building recently completed. Finishes are consistent with other Class A
buildings,and include,Granite,Slate,Maple,etc.
IncansaInformatiotV 1 't1#>. , xv r a. t ,,,f» + e;•.W,}Y a .?. .'. , `#.,. <, . . ,,, +
Income data is based on the asking and consummated leases
Potential Gross Income: $224,000
Less 5.00%Vacancy&Credit Loss: $11,200
Effective Gross Income: $212,800
Less Expenses:
Management @ 5.00% $10,640
Reserves @ 3.00% $6,384
Total Operating Expenses: $17,024
Net Operating Income: $195,776
Income Characterhtict , r,xs a t „ ,4.a_ t M.. ,,7. . ., t 3�..0
EGIM: 11.51 Ro: 7.99%
Expense Ratio: 8.00% Expense per unit: $2,128
a ',:..J.:. t ,, tads < . sfi ,' o- d An**"y001 In
f s'" r r; ` ` ax {u r. s Harold 3oI1ma • s S
COMPARABLE OFFICE SALE NO. 4
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as
Name: Pinnacle Professional Office Building Comp[D: 13580
Location: 1175 58th Avenue Greeley,CO
GBA: 14,920 SF Units: 6 Construction: Wood frame
Parcel Number: 095910227010 Year Built: 1999
Sales Information
Date: 1/14/2008
Price: $1,700,000
Economic Adjustments Adjusted Units of Comparison:
Property Rights: Leased Fee Estate $0 Price/SF GBA: $113.94
Financing: Cash to Seller SO Price/Unit: $283,333
Cash Equiv. Price: $1,700,000
Conditions of Sale: Market SO
Expenditures Post Pur. None $0
Surplus Land Adj: None SO Reception U 3529017
Final Adjusted Price $1,700,000 Marketing: Two years
Source: Kate Struzenberg,Realtec
Confirmed By: Todd Finn
Grantor: DJ CD Fagerberg Ltd
Grantee: Jan Wagner
Income Summary:
Exp.Ratio: 8.00% Exp.Per Unit: S2,652
Ro: 10.76% EGIM: 8.55
Remarks:
This site is located on the west side of the 58th Avenue, but has frontage along 59th Avenue,which is a major arterial
that extends north and south through the western sector of Greeley. This building is a single-story, multi-tenant office
building with a walk-out basement. Because the site slopes down from the eastern edge,both levels have visibility from
59th Avenue.
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate,l ppraiser$
COMPARABLE OFFICE SALE NO. 4 CONT.
Financing M rY to .+. v LK. ,f.'i. :e 3 e t .N'w
N/A
- �...rt._ .'-_ `--.• x o,o8°"ra ale "k r� r ei � � a �.,wx,.-,. tt x4;Ts.ss
N/A
+1Nf
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Site Size: 60,548 SF or 1.39 Acres
Access: 10th St&58th Ave
Parking: Adequate
Surplus Land Details: N/A
Description: This site is located on the west side of the 58th Avenue, but has frontage along 59th
Avenue,which is a major arterial that extends north and south through the western sector
of Greeley.
,� .. ..r: _ � x.43 r 44-1e-7."M(1.;-+�+¢resa��..+,e��. e�� "Y �""�s`� k' �• Y" `5s"
Iap ovsall not + ' ', %• .. a, e <.t+� a ,wj-14.4% a �. .
Year Built: 1999
GBA: 14,920 SF
Stories: 2
Units: 6
Construction Quality: Average
Condition: Good
Description: This building is a single-story, multi-tenant office building with a walk-out basement.
Because the site slopes down from the eastern edge,both levels have visibility from 59th
Avenue.
I t ;�T
ncome Inform Yvdk
Income data is based on current leases and an asking rate for two vacant spaces($13.50/SF NNN main level spaces and
$14.50/SF walkout level spaces). Walkout spaces have higher finish quality as they are medical tenants.
Potential Gross Income: $221,000
Less 10.00%Vacancy&Credit Loss: $22,100
Effective Gross Income: $198,900
Less Expenses:
Management @ 5.00% $9,945
Reserves @ 3.00% $5,967
Total Operating Expenses: $15,912
Net Operating Income: $182,988
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EGIM 8.55 Ro: 10.76%
Expense Ratio: 8.00% Expense per unit: $2,652
+, h ,N.3 AFFniseiSPOCONes,I
`' } 'm s _; + os+rz4 s'a rr r t` b :I+ viz 1� a $r;,9,�1g+7Hmma% 1144 SA4
� Nth c' ...tsG.. ..,-,CY and RI�IR eaiEsta 'App{
COMPARABLE OFFICE SALE NO. 5•
.-'' ; I 14 ' ' 17 ""air°48*4.444444461".I; SLAP ti +.:.;. a . —,,semi . ,..--s e ._,. _ .
..:.;-..- — Ito ,
Name:
Location: 1275 58th Avenue ComplD:9265
GBA: Greeley,CO
20,187 SF Units: 4 Construction: Brick
Parcel Number: 095910227009 Year Built: 1998
Sales Information
Date: Active
Price: $2,330,000
Economic Adjustments Adjusted Units of Comparison:
Property Rights: Leased Fee Estate SO Price/SF GBA: $109.65
Financing: Cash to Seller SO Price/Unit: $553,375
Cash Equiv. Price: $2,330,000
Conditions of Sale: Active(-5%) (S 116,500)
Expenditures Post Pur. None $0
Surplus Land Adj: N/A SO Reception# TBD
Final Adjusted Price $2,213,500
Marketing: Active one year
Source: Ron Kohl, Remax
Confirmed By: Zach Smith, 11/09
Grantor: PINNACLE INVESTMENTS LLC
Grantee: TBD
Income Summary:
Ro: 5.74% EGIM: 16.04 Exp. Ratio: 8.00% Exp. Per Unit: $2,760
Remarks:
The existing improvements consist of a freestanding wood-framed single-story office building with a partial walk-out basement that
contains approximately 13,311 square feet on the main level and approximately 6,876 square feet on the basement level for a total of
20,187 square feet of gross building area. The subject property is located at the northeast corner of the non-signalized intersection of
59th Avenue and 13th Street. The lot extends east along the north side of 13th Street to 58th Avenue. The subject property is situated
in the western sector of Greeley. The improvements have good visibility along the east side of 59th Avenue, as well as along the
north side of 13th Street, and the west side of 58th Avenue. The listing agent stated that interest has"not really been present." He
stated that one of the tenants is struggling, and the owner has decided to reduce their rent by almost 50 percent. He said that the
building would be best suited for an owner-user considering the return at this time,and that he had an interested medical client who
backed out mid-way through the year because of budget cutbacks.
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA,
Commercial and Residential Real Estate Appraisers
COMPARABLE OFFICE SALE NO. 5 CONT.
frail-- " fitanitiv .t. ' a �.' �mr a"�»'`u+t�-,�srar .w kc ,.c ;L . , lais-1:2.�-.'a.y..Ma,+,a�"a'
N/A
a. Maria , ' ;..`;'`r')'
N/A
Site Size: 57,499 SF or 1.32 Acres
Access: 59th Ave& 13th St
Parking: Adequate off-street
Surplus Land Details: N/A
Description: The site is a flag-shaped,mostly level parcel with a total of approximately 57,499 square feet(1.32
acres). The site is slightly above the grade of the 58th Avenue and well above the grades of 13th
Street and 59th Avenue. There is approximately 270 feet of frontage along the west side of 58th
Avenue, 160 feet of frontage along the north side of 13th Street,and 180 feet of frontage along the
east side of 59th Avenue(based on scaled measurements taken from an aerial photograph from the
Weld County Assessor's website).
y. ' sk +"1`-"'r' r', arirtrigrelnktraggirki
Year Built: 1998
GBA: 20,187 SF
Stories: 1
Units: 4
Construction Quality: Good
Condition: Good
Description: The existing improvements consist of a freestanding wood-framed single-story office building
with a partial walk-out basement that contains approximately 13,311 square feet on the main level
and approximately 6,876 square feet on the basement level for a total of 20,187 square feet of
gross building area. The entry to the basement is via a walkout pedestrian door but there are no
other windows.
'„' ismiki &Il '. '� 43- st a: ^. g' s s .,m+ p e g e, ,z yi 5"r,5
t „Iaa "�: � '� � s.n. �"¥ar ' .... 'bir a �^ , n ���� ..
Income data is based on the current contract leases, although one lease, 8,300 SF in size, is currently being abated by
almost 50 percent.
Potential Gross Income: $156,813
Less 12.00%Vacancy&Credit Loss: $18,818
Effective Gross Income: $137,995
Less Expenses:
Management®5.00% $6,900
Reserves @ 3.00% $4,140
Total Operating Expenses: $11,040
Net Operating Income: $126,956
'.^]STil_n }'Xw�'J&` S Y.t I..Lr.W . Y. `i 4.2
EGIM: 16.04 Ro: 5.74%
Expense Ratio: 8.00% Expense per unit: $2,760
w.t, t�4 ti 4 ',y}q� "' �t�a '5.` ("' as 7 i, 34 `= �' --' - ''z',!I alitta s!
₹�t ,4y °'x v3' s s a�r it' f ss e3- P ...t� ,i )4 y .44,, w�Ol mmtio is
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COMPARABLE OFFICE SALE NO. 6
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, 144
Name: CompID:9146
Location: 1901 56th Avenue Greeley,CO
GBA: 21,581 SF Units: 8 Construction: Steel frame/Brick
Parcel Number: 095910309011 Year Built: 1996
Sales Information x .
Date: Active
Price: $3,500,000
Economic Adjustments Adjusted Units of Comparison:
Property Rights: To be Leased Fee $0 Price/SF GBA: $153.49
Estate
Financing: To be Cash to Seller S0 Price/Unit: $414,063
Cash Equiv. Price: $3,500,000
Conditions of Sale: Active(-5%) (S I87,500)
Expenditures Post Pur. None $0
Surplus Land Adj: N/A Reception# TBD
Final Adjusted Price $3,312,500 Marketing: 1 year+
Source: Mike Eyer
Confirmed By: Zach Smith, 11/09
Grantor: Big Beaver Properties,LLC
Grantee: TBD
Income Summary:,.
Ro 7.82% EGIM: 11.76 Ex..Ratio: 8.00% Ex .Per Unit: $2,816
This building is located in the western sector of Greeley. It has frontage and visibility along the north side of West 20th
Street. Sufficient on-site parking is available. Interior finishes are reportedly good. The property is partially leased to
national tenants UBS and Met Life, as well as strong local tenants. Activity on the listing has been moderate at best.
The agent felt as though if he could get the vacant space leased that the property stood a very good chance of trading
considering the strong tenant roster.
Appraisal Specialties,Inc.,
Harold Sommers,MAI,SRA '
Commercial and Residential Real Estate Appraisers?
COMPARABLE OFFICE SALE NO.6 CONT.
J ^.,w* aP/✓Pm3f�wm..'°`" t"/-74tift.47-. . WAtaa s' Sew>.Nlna uelaF;a*.l:s+`
cl
N/A
4÷11":,4; A::� , "'`ON*, 'V° Fr ,7$ / x,. ".,!..46611:64:4 .:
AS
N/A
Site Size: 6Q579 SF or 139 Acres
Access: 10th St&59th Ave
Parking: Adequate
Surplus Land Details: N/A
Description: Mostly level site located at the northeast corner of W 20th Street y and 59th Avenue
r was • rcaw er " TM 3 _ „3G Year Built: 1996
GBA: 21,581 SF
Stories: 2
Units: 8
Construction Quality: Good
Condition: Good
Description: Metal frame two-story building with brick veneer. Building is reportedly in average-
good condition for a building built circa 1996,as it has had some updating since original
construction.
Income information is based on agent's estimate of the current rent roll, which also includes 12,683 SF currently
available for lease at$11.00/SF NNN.
Potential Gross Income: $320,000
Less 12.00%Vacancy&Credit Loss: $38,400
Effective Gross Income: $281,600
Less Expenses:
Management @ 5.00% $14,080
Reserves @ 3.00% $8,448
Total Operating Expenses: $22,528
Net Operating Income: $259,072
EGIM: 11.76 Ro: 7.82%
Expense Ratio: 8.00% Expense per unit: $2,816
, -M $P 4-t `�
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Comparable Sales Map :.
1h1 6 unn
b sal �''>3� ' .. , i
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� 4 f► •Boettcher La 1.Be Iv e �'�.... As
95 °a
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Mountain Y. ou, eRiver 2s NORTH ‘..\:1,\v1
,
• t:Coiiin969 \'''s
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�A I .lf,i � $„ 257 •t•
• �$everance _
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2
J Comparable Sale One rii. Corner 2s u Bruce iT
4745 Boardwalk Drive , o ali • Greeley Canal No 2
-- B2 ` �_._� wd17 Lucerne
392 t 392 f�. 's-'(392. ._��- - .r' ' ,,,,r
Comparable Sale Two `" v ndsor Comparable Sale Four r
�'- •Bracewell I 1175 58th Avenue
3780 North Garfield Avenue Faml 'no;
�, Comparable Sale Five • e 1
Ri -.v.
287
la
1275 58th Avenue .
r341 A • y'1.283)..,B WS CO
o el nd ,� •officer 1.
� '_ la� akeNF_iel[
H Ilow II Co or r13tS�` -In-P8-'94--4 ; 5 `•Koenig i Subject Property Comparable Sale Six
Comparable Sale Three, 1901 56th Avenue "t
J4025 St Cloud Drive lm es _;
28 --. .-. Thom n h
Johnstown Ri"�" poc.... La Salle
�� (257 2•- 9,,_ • Ott°.-._
•Wet
Hillsboro
1 (s01�-...
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—• erthoud 77
5a •Deno (-2se ,
Lim rkmpson River ti 1
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o� alker a/�`fi" } y
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� • C tree S. Platte VoIIrC°e° yIt. sYk
Maloy V+°u' r `�
45 • St a �� Ar
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k ;- 'glatteville
x287• ,ea GGowanda ' y
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-'m Lo - mont yrwin,.cree r' l, C
gt S 4Q (�
1119. .� }•
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tL1,00Llas,Lorme..Sreet.At es ,SA, 2001 .DT, ,Re1.01/2001 �Q-.._.. one ' ...
i
70
Valuation via the Sales Comparison Approach
Economic Adjustments
The property rights transferred in each case were Fee Simple Estate or Leased Fee Estate.
Financing was all "cash to seller," or"to be cash to seller;" with no seller concessions. Each of
the sales was, or in the case of the active listings, assumed to be market-derived transactions.
Comparable one is a relatively recent sale so not adjustment for current market conditions was
required. Comparables two through four are older sales that occurred prior to the recent slowing
of the economy. These three sales received a negative adjustment of ten percent to account for
current market conditions which include slowing demand and a softening of lease rates. A
negative adjustment of five percent was made to the active listings to account for probable
negotiations between the seller and future buyers.
Physical Adjustments
Physical adjustments need to be made to the comparables for differences between the
comparables and the subject. Quantitative adjustments were made where sufficient market data
was available to derive a dollar adjustment. When sufficient market data was not available to
derive actual dollar or percentage adjustments, plus or minus indicators (qualitative adjustments)
were used to indicate a direction of adjustment. While subjective, these qualitative adjustments
do indicate a direction of adjustment and lead the reader in the appraisers' thought process to an
area of central tendency.
Quantitative Adjustments
Sufficient data was not available to utilize any quantitative adjustments in this analysis.
Qualitative Adjustments
Qualitative adjustments were made to the comparable sales for building size, age, condition,
location, finishes, visibility, and other. As a summary report detailed explanations have not been
presented. (Note that the contributory value of the subject's basement space will be added after
the value of the above grade space has been estimated, and the cost to install tenant finishes in
the vacant space ($70,000 Rounded), as well as leasing commissions ($7,000) will be deducted
for the "As-Is"value estimate.)
Appraisal Specialties,Inc,
Harold Sommer,MAI,SRA
Commercial and Residential Real Estate Appraisers
71
Reconciliation of Adjustments
After adjustments, the indicated range of value for the subject property developed is from $115
to $160 per square foot of gross building area. The upper end of the range is developed by
comparable one,the most recent closed sale. However, this building was leased to strong credit
tenants, which likely affected the sales price. The low indicator is developed by comparable
four, the oldest closed sale, which included a full, finished walkout basement in the gross
building area.
If these two extremes are disregarded, the range tightens to between $125 and $140 per square
foot,with the upper end suggested by an active listing.
For the subject property, the most weight is given to comparables two and three, both similar
magnitude compared to the subject, although slightly older sales. They suggest a value range of
between $125 and $135 per square foot for the subject. After considering the location of the
subject, the continuing softening of the economy, and the difficulty that the subject has
experienced in attracting tenants, a value toward the midpoint that is developed by these two
comparables or$130 per square foot is considered appropriate. Support for a value of$130 per
square foot can be found in the two active listings. They would be direct competition to the
subject if it were placed on the market; and they suggest values of$125 and$140 per square foot
respectively, which brackets our values estimate of$130 per square foot. A value of$130 per
square foot is also well bracketed by the unadjusted sale prices of the comparables, lending
additional support.
The partial basement is only common area with no windows, and is only suitable for storage and
mechanical equipment purposes. Therefore, this area is thought to have a value of significantly
less than the value of the above grade space, by our estimate $30 per square foot. Support for a
contributory value of $30 per square foot is found in the cost approach section of this report.
Marshall and Swift reports a cost of$25 per square foot for basement space such as the subject.
After accounting for size, location and other multipliers, as well as entrepreneurial profit, our
estimate of$30 is well supported.
Appraisal Specialties,Inc.
Harold Sommers,MM,SRA
Commercial and Residential Real Estate Appraisers
72
Based on this analysis, the estimated value of the subject property; including the contributory
value of the basement, and the $70,000 adjustment for the lack of finishes in the vacant unit is
calculated as follows:
Main Level 18,555 x $130 = $2,412,150
Basement Level 1,543 x $30 = $46,290
Stabilized Value $2,458,440
Less Cost of Finishes ($70,000)
Less Leasing Commission Unit 203* ($7,000)
Final "As-Is"Value Estimate $2,381,440
Rounded To: $2,380,000
3Yr Term 6°%Leasing Commission.
Value in Leased Fee Estate
The value presented above is in Fee Simple Estate as no adjustment for a leasehold have been
applied. Later in the Income Approach to Value section, we have estimated the value of the
subject property in both Fee Simple Estate and Leased Fee Estate. The difference is a positive
$60,000 which is the value of the Leasehold. Typically this would be added to the above value
estimate to arrive at the value estimate in Leased Fee Estate. Give the that he value conclusion
developed in the Sales Comparison Approach is significantly higher than developed in the
Income Approach,we do not believe that a further increase in value is justified.
Appraisal Spec!aldes,Ina
Harold Sommers,MAI,SRA.
Commercial and Residential Real Estate Appraisers
73
INCOME APPROACH
The Income Approach analyzes the income characteristics of an income-producing property and
the future benefits to be received by the owner of such a property. In the case of the subject
facility, the income would be derived from the rental of the property to up to seven tenants.
Typically, the furniture, fixtures and equipment are not included in the lease rate. The market
rental rate and estimated vacancy rate, along with deductions for estimated expenses must be
made to arrive at an estimate of the net annual operating income for the property. This estimate
of net operating income is then capitalized into a value estimate with a capitalization rate that is
usually derived from the market.
Market Rent, Vacancy& Collections Loss
"Economic Rent"is defined as:
"The rental income that a property would most probably command
in the open market; it is indicated by the current rents paid and
asked for comparable space as of the date of the appraisal.n10
"Vacancy and Collection Loss" is defined as:
"An allowance for reductions in potential income attributable to
vacancies,tenant turnover, and nonpayment of rent."11
Seven comparable leased or for lease office units located in the western sector of Greeley were
used to estimate the income characteristics that can be expected for the subject property. They
are detailed on the following pages and summarized in the comparable lease table found in this
section.
10 The Dictionary of Real Estate Appraisal, 3rd Ed., 1993, p. 221.
11 The Dictionary of Real Estate Appraisal, 3rd Ed., 1993, p. 384.
Appraisal Specialties,Inc.
Harold Sommers,MAJ,SRA
Commercial and Residential Real Estate Appraisers
COMPARABLE OFFICE LEASE NO. 1 —
a° ._..- ._ --
•
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.`, ,cf. _.1 ai,.A t dt; wY .f 1 7,:i m ii t . and t'�` »EN I 1 4. .,—
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I .4.�.• . rat�. -.1. - . ,;. .
t CompfD: 12486
Name: Re-Max Optimum Group
Location: 5586 W 19 St Greeley,CO
GBA: 9,080 SF Year Built: 1999 Construction: Stucco
Parcel Number: 095910310004 Units: 4
Lease Informadon
Lease Size: 1,754 SF
Lease Date: 09/09/2009
Lease Rate: $5.00/SF NNN
Lease Term: Three years
Escalators: $3.00/SF/Yr
Tennant Finish: None
Cam Charges: $5.50(est by owner)
Options to Renew: None disclosed
Lessor: Kohlorado of Greeley
Lessee: Wadell and Reed Financial Services
Source: Nick Berryman
Confirmed By: Zach Smith, 11/09
Remarks:
Lease is for suite 1100 in the Re/Max Alliance building in Greeley. The finishes are reportedly very nice. The space is
finished out as general office and is being leased to a financial services tenant. The agent involved in the transaction
stated that the lease rate was a"very good deal";even considering the three dollar/year escalators.
Appraisal Specialties,Inc.
Ifarold Sommers,MAI,SR4
Commercial and Residential Real Estate rAppraiser?
COMPARABLE OFFICE LEASE NO. 2
-;;,, ,i, it, .v 4014,1 , ,ti , I.-.1
.., - 1,A' .1te ;qv ,
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a ,
Name: Compm:15782
Location: 7251 W 20th Street Greeley,CO
GBA: 18,000 SF(est) Year Built: 2002 Construction: Stone/Stucco
Parcel Number: Multiple parcel Units: 6
numbers building is
condo'd
Lease Information
Lease Size: 700 SF(Suite G-3)
Lease Date: 07/01/2009
Lease Rate: $9.05/SF NNN
Lease Term: Five years
Escalators: 3%/Yr
Tennant Finish: Existing office
Cam Charges: $2.95/SF
Options to Renew: One,five year
Lessor: Regina Adams
Lessee: Julie Kissok
Source: Ron Randel
Confirmed By: Zach Smith, 11/09
Remarks:
The listing agent stated that the finishes were general office in nature, and that the tenant was a physical therapy
practitioner. He stated that activity had been slow on the listing. The lease is gross and has been converted based on the
NNN expense estimate provided by the listing agent. Also in this complex was a lease consummated in April, 2009 for
2,000 SF reportedly at $15.00 per square foot according the Xceligent; however, we were unable to confirm the lease
with a party to the transaction.
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
COMPARABLE OFFICE LEASE NO. 3
lei ,
•• .` , Y aR,m7*..,.- _...._+w., .�at.+r++..>...vraiul..a...w is4+..•..,.w ...ow.8.-w..�...e...w� �-- ..
t. l� it ' r&
•
�O
r
Name: ComprD:9102
Location: 1815 65th Avenue Greeley,CO
GBA: 7,750 SF Year Built: 2004 Construction: Stucco/Stone
Parcel Number: 095909312005 Units: 2
Lease Information
Lease Size: 2,660 SF(Suite 2)
Lease Date: 10/16/2008
Lease Rate: $11.00/SF NNN
Lease Term: Five years
Escalators: 3%/Yr
Tennant Finish: Existing office
Cam Charges: N/A
Options to Renew: None disclosed
Lessor: J Arthur Real Estate LLC
Lessee: Did not disclose
Source: Ron Randel
Confirmed By: Zach Smith, 11/09
Remarks: 711111E,.
This building is a single-story office building located in the until recently growing western sector of Greeley. The
tenant has a right to terminate after 16 months, and according to the listing agent, it is likely that the owner is going to
make a concession in order to keep the tenant. The listing agent stated that the landlord will likely reduce the rent SI
per square foot for the remainder of the term.
Appraisal Specialties,Inc.
Harold Sommers,MA!,SRA
Commercial and Residential Real Estate Appraisers,
COMPARABLE OFFICE LEASE NO. 4
- I ,
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, ;
1111
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Name: Compm: 15784
Location: 1140 38th Avenue Greeley,CO
GBA: 5,148 SF Year Built: 2001 Construction: Stucco/Stone
Parcel Number: 09591113001 Units: 1
Lease Information
Lease Size: 5,148 SF
Lease Date: 09/18/2009
Lease Rate: $13.32/SF NNN
Lease Term: Five years
Escalators: 1%years one and two,3%thereafter
Tennant Finish: Existing office
Cam Charges: $3.00/SF NNN
Options to Renew: One,five year
•
Lessor: Deck and K LTD,LLC
Lessee: RJ McNutt
Source: Ron Randel,CCIM
Confirmed By: Zach Smith, 11/09
Remarks:
Lease is for a single story office property is central-western Greeley. Listing agent reported that finishes were nice and
the building was in average condition considering it was built in 2001. The lease was gross in nature and has been
converted based on actual expense information for the property. The listing agent reported an option to purchase prior
to the 18th month of the term for$930,000.
.Appraisal Specialties,Inc.
Harold Summers,MAI,SRA
Commercial and Residential Real Estate Appraisers)
COMPARABLE OFFICE LEASE NO 5
I
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t M
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. � - �. aa_a':;Of 4154 _, .:, t 7� , .....
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2
Location:
920 54 Avenue Greeley,CO +
GBA: 13,529 SF Year Built: 1996 Construction: Frame/Brick
Parcel Number: 095914235001 Units: 2
Lease Information
Lease Size: 6,124 SF
Lease Date: 03/01/2010
Lease Rate: $6.00/SF NNN
Lease Term: 2 Yrs.
Escalators: 3%/SF/Yr
Tennant Finish: Existing,No allowance
Caro Charges: $3.25 (est)
Options to Renew: One,two-year
Lessor: Majors,Dale Corp
Lessee: Womens Clinic
Source: Nick Berryman,Realtec
Confirmed By: Todd Finn
Remarks:
This lease is for a portion of a larger two unit building located at the northeast corner of 59th Avenue and 10th Street in
northern Greeley. The listing agent noted that the space is in good condition, but has dated finishes. No tenant
Improvement allowance was given. The location provides good visibility from both 59th Avenue and West 10th Street.
The original asking price was$12.00/SF NNN but a lower rate was accepted due to current market conditions.
Appraisal Specialties,Inc.,
/Iarold Sommers,MAI,SRS
Commercial and Residential Real Estate Appraisers
COMPARABLE OFFICE LEASE NO. 6
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r � .
i J,•Name: CompiD: 13153
Location: 4627 W 20th Street Rd#1 Greeley,CO
GBA: 5,572 SF Year Built: 2004 Construction: Stucco/Stone
Parcel Number: 095914235001 Units: 1-2
Lease Information
Lease Size: 2,786-5,572 SF
Lease Date: Active
Lease Rate: $10.00/SF NNN
Lease Term: Neg.
Escalators: N/A
Tennant Finish: Existing office
Cam Charges: $3.00(est)
Options to Renew: N/A
Lessor: S E 2 Land,LLC
Lessee: TBD
Source: Dale Souther
Confirmed By: Zach Smith, 11/09
Remarks:
The listing is new to the market(11/09),although the listing agent stated he was optimistic about the prospect of leasing
the unit. He stated that the owner had priced the property "competitively." He stated that finishes are very nice for
office, and that the space has offices, a large reception area with vaulted ceilings, a file and computer room with a
kitchenette. He said there is a tenant in the building occupying 1,000 square feet on a month to month lease who could
either stay or go depending on the needs of the new tenant.
,appraisal Specialties, Inc.,
Harold Sommers,:h A!,SRA
Commercial and Residential Real Estate Appraisers
COMPARABLE OFFICE LEASE NO. 7
• .ter; t . - ,+• �.
vow ir•
Name: CompID:13892
Location: 1823 65th Ave Greeley,CO
GBA: 7,599 SF Year Built: 2003 Construction: Brick
Parcel Number: 095909321001 Units: 3
Lease Information
Lease Size: 2,533 SF
Lease Date: Active
Lease Rate: S8.5O/SF NNN
Lease Term: Neg.
Escalators: N/A
Tennant Finish: Existing office
Cam Charges: S3.00(cst)
Options to Renew: N/A
Lessor: Frank Farms,LLP and J Arthur Holdings,LLC
Lessee: TBD
Source: Ron Kohl,County Records
Confirmed By: Zach Smith, 11/09
Remarks:
Nicely appointed executive office with large conference room, reception area, and 6 private offices with high end
finishes and large break room, and two bathrooms. Cat 5 wiring throughout,and the owner touts over$87,000 of tenant
improvements. The listing has been active for one year and the listing agent reports minimal interest at this time;
although,the listing had been marketed for$11.50 per square foot prior to the reduction to the now current rate.
.ippraisal Specialties, Inc.
Harold Sommers,.1'I,4I,SRA
Commercial and Residential Real Estate Appraisers
g
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ar t0T11 ..- yy
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1815 65th Street Lease Comparable Four;
1140 38th Avenue ,/
1
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7251 W 20th Street ■ Lease Comparable Six r �g1
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r� 11901 56th Avenue w22HD lii j 4627 W 20th Street Rd#1 W
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Lease Comparable One > " T A W . '
w 5586 W 19th Street 24TH
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Str
77
Contract Leases
Six of the subject's units are leased, and one vacant (considers the larger vacant unit as one
space).
Unit 102 was recently leased to a Lakin, a skin care business. The space contains a total of
approximately 1,026 square feet of net leasable space. The contract lease is modified gross, with
the tenant paying for utilities only. It has a five year term with one, two-year option. The initial
lease rate is $10.00 per square foot, converted to NNN. The rate increases to $14.00 per square
foot year two, and $18.60 for the remaining three years. The option rate is to be "no less than"
$15.25 per square foot. The tenant was given a tenant improvement allowance of$30 per square
foot which the manager reported was sufficient to install the existing fmishes.
Unit 104 is as 2,001 square foot space that is currently leased to Realtec. This tenant was
originally on the second level, and moved to the main level with an amendment to their contract.
The lease commenced on June 1, 2007, and has a five year term which includes $0.50 per square
foot escalators. There are two, five year options noted in the contract that has been provided
with the same annual escalators indicated. The current rate for this space is $15.04 per square
foot NNN.
Unit 110 is a 6,014 square foot space that is currently leased to Security Title Guaranty
Company. This lease commenced in December of 2006. The lease has a five year term expiring
in November of 2011. The current lease rate for this space is $20.55 per square foot NNN.
Escalators of$0.50 per square foot are noted along with two, five year options to renew with
similar escalators. The tenant is not renewing their lease, and the space is on the market for
sublease with an asking rate of$9.00 per square foot NNN.
Unit 202 is a 2,824 square foot space that is currently leased to Morgan Stanley and Company.
This lease commenced July 17, 2008, and has a two year term with no escalators. Two, three
year options at market rates are noted. The rental rate for the initial two year term is $15.22 per
square foot NNN. Option periods are to be at "95 percent of fair market rent," and are to be
Appraisal Specialties,Inc
Harold Sommers,MAI,SRA.
Commercial and Residential Real Estate Appraisers
78
considered in lieu of market allowances or free rent. The property manager reported that the
tenant and landlord have agreed on a one year extension at$12.00 per square foot NNN.
Unit 204-A is currently leased on a month to month, verbal basis to Crews and Zeran. This
space contains a total of approximately 849 square feet of net leasable area. The lease rate is
reportedly $16.00 per square foot, converted to NNN. Given the month-to-month verbal
agreement nature of this lease, it does not have any significant value as the tenant is not
contractually obligated to stay. The tenant was given a $30 per square foot tenant improvement
allowance which was reportedly sufficient to cover the cost of the finishes that were installed.
Unit 204-B is currently leased on a month-to-month, verbal basis to Casseday Creative Designs.
This space contains a total of approximately 889 square feet of net leasable area. The lease rate
is reportedly $14.50 per square foot, converted to NNN. Given the month-to-month verbal
agreement nature of this lease, it does not have any significant value as the tenant is not
contractually obligated to stay. The tenant was given a $30 per square foot tenant improvement
allowance which was reportedly sufficient to cover the cost of the finishes that were installed.
Asking Rates for Vacant Space
The asking rate for the subject's vacant 2,415 square foot space(unit 203), is$13.00 per square foot
NNN. The agent stated that he has had minimal activity on this listing. His lease rate of$13.00 per
square foot NNN is based on a tenant improvement allowance of$30 per square foot,which should
be sufficient to install good quality general office finishes.
Estimated Market Rent
The existing improvements consist of a freestanding,wood-framed,two-story office building with a
partial basement. The building contains approximately 9,040 square feet of net leaseable area on
the main level, and approximately 6,975 square feet of net leaseable area on the upper level for a
total of 16,017 square feet of net leasable (useable) area. The basement level is only common area.
The following table summarizes the subject's seven units:
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
�rys� tty}�__/(�� 79
VU . xp r ietra
102 1,026
104 2,001
110 6,014
202 2,824
203 2,415
204-A 849
204-B 889
Total 16,017
Although generally a larger space will lease for less per square foot than a smaller one; if all other
things are equal, the comparables that have been presented indicate that the current market is not
adjusting lease rates for sizes similar to the subject. This is evident with the comparables that have
been presented, and comments from local Realtors. Additionally, within the subject building is a
2,415 square foot space for lease, with an asking rate of$13.00 per square foot NNN. As well as
one larger 6,014 square foot space for lease, with an asking rate of $9.00 per square foot. The
Landlord has also reportedly accepted a one year renewal on Unit 202,the 2,824 square foot space,
at $12.00 per square foot. For this reason, the market lease rates for the subject's seven units in
theory should be the same. Based on comments from Realtors who are active in the market, some
landlords are willing to take anything for their vacant spaces. We know of at least two office
buildings in the area that will accept a lease rate that is equal to or less than the NNN costs,just to
fill a space.
For the reasons stated above adjustment for size were not made in the adjustment table. After
adjustments, the comparables suggest a range of between $7.75 and $14.00 per square foot. The
most recent lease, comparable five, suggests a lease rate at the low end of the range,but has inferior
finishes. Of the 2009 leases, comparable four suggests the upper end of the range, but includes a
purchase option in the contract and minimal escalators in the early part of the term.
After disregarding the high and low indicators the range narrows to between $9.25 and $10.50 per
square foot. Focusing on the consummated leases narrows the range further, now between $9.25
and $10.00 per square foot. The active listings, which have been subjectively adjusted for
4
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Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
80
negotiations, suggest a rate of$9.75 and$10.50 respectively. The negative five percent adjustment
made for probable negotiations is likely not sufficient given that lease five has an asking rate double
that that was finally accepted. With that in mind and the fact that one large tenant is leaving, two
are month-to-month, and one has successfully renegotiated his rate downward, the market rent for
the subject is estimated to be$9.50 per square foot,NNN.
Note that although the tenant in unit 202 negotiated for a one year renewal rate of$12.00 per square
foot, it is important to note that there was likely a premium paid as the tenant had established their
self in the building. And considering the costs to move,the rate was likely attractive to the tenant as
it was a $3.00 per square foot reduction. Our estimate market rental rate considers a $30.00 per
square foot tenant improvement allowance for the vacant unit.
Subject's Contract Leases Vs. Our Market Estimates
Summary of Contract Rental Rates
The following table summarizes the contract,verbal and asking rates for the subject:
7 fi
41r T� `mod' ... •B r qu r uJ,
102 1,026 $9.50 $10.00 07/2009-7/2014
104 2,001 $9.50 $15.04 06/2007-5/2012
110 6,014 $9.50 $20.55* 12/2006-11/2011
202 2,824 $9.50 $15.22 Decreases
ases t 0 $12.00/SF
NNN
203 2,415 $9.50 $13.00 Active w/$30 TI
204-A 849 $9.50 $16.00 Month-to-Month/Verbal
204-B 889 $9.50 $14.50 Month-to-Month/Verbal
Total 16,017
•Active sublease at S9.00/SF NNN,limited if any activity
It can be seen that the subject's contract and verbal lease rates are all above market. This is due to
the age of the contract leases, and the fact that a month to month lease will be above a market
contract lease due to the added risk to the landlord. Even though the contract for Unit 102 was
signed in July of 2009, the market has deteriorated further in the last six months. Given the above
Appraisal Specialties,Inc
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
81
market nature of the subject's contract leases, the value of the subject property in Leased Fee Estate
and Fee Simple Estate will differ. For the Value in Fee Simple Estate, the direct capitalization
technique will be used. For the value in Leased Fee Estate, a discounted cash flow model will be
used. The difference is the value of the Leasehold, which will be deducted from the value in Fee
Simple Estate developed in the Sales Comparison Approach to Value in order to arrive at a value in
Leased Fee Estate via the Sales Comparison Approach to Value.
The basement portion will be dedicated to storage and mechanical equipment uses, and contains
approximately 1,543 square feet. Given that none of the basement area is suitable for any other
uses, no credit was given to this space in the Income Approach to Value. Note that most modem
office buildings, such as the subject, also have basement storage space available to the tenants
without additional charge.
Estimated Vacancy and Collection Loss
As detailed in the Demand for the Subject Property Section of this report, current office vacancy,
(excluding the 250,000 square foot Hewlett Packard building), is in the "mid to low teens." The
subject is located in the western sector of Greeley, where demand is reportedly higher than other
sectors of the city. After accounting for this fact a vacancy rate of 15 percent is estimated for the
subject area. After an appropriate measure for collection loss (one percent), a 16 percent
vacancy and collection loss allocation is estimated for the subject building.
Estimated Expenses
Under triple net terms, all taxes, insurance, and maintenance expenses are paid by the tenant.
The remaining expense to the landlord will be management, estimated at five percent of the
effective gross income; as well as reserves for replacement, estimated at two percent. These
reserves cover the repair and replacement of short-lived components with expected remaining
physical lives shorter than that of the entire structure.
Capitalization Rate
The capitalization rate used in this analysis attempts to reflect the degree of risk in owning a
property such as the subject. The capitalization rates were developed from the market and
- -
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
82
derived from the six comparable sales that were used in the Sales Comparison Approach. All of
the sales were true investor purchases. These rates are shown below:
Ro's om the Com,arable Sales
Sale 1 May-09 8.44% 13,490 1998
Sale 2 Jun-08 7.14% 17,000 2006
Sale 3 May-08 7.99% 14,715 1999
Sale 4 Jan-08 10.76% 14,920 2005
Sale 5 Active 5.74% 20,187 1998
Sale 6 Active 7.82% 21,581 1996
Average: 7.98%
Given the current state of the market, the risk associated with purchasing the subject from an
investor's perspective is likely higher than it was in 2008 and even mid-2009. Therefore, we
have relied upon the following exhibit, which was derived from a real estate investment survey
published by PricewaterhouseCoopers (Q2 2009). The exhibit suggests that an increase in
overall capitalization rates for the office sector of 160 basis points from 2008-2009 is warranted.
However, this survey is national in scope, and as a matter of bias (based on supportable market
data) we hold to the notion that Northern Colorado has tended to fare better than the nation in
general. For this reason we will use an adjustment for risk/time of 80 basis points (50 percent of
the national rate). This adjustment will be used for the 2008 sale. Given that comparable two
occurred after the survey was completed, we will adjust this comparable by half again, or 0.40
percent.
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
83
1 5R 1
CLOSED PROPERTY OVERALL CAPITALIZATION RATES
1004 Through lint Quarter 2009
is 2014 a2mf •IOM •lmr wow RI009QI
Office
4
Apartment
Retail
Industrial rtT491�
S0% ).0% ipl 30% 60% S0% 501. f0% IOM
Overall Capitalization Rate
Prior to the adjustment for the added risk associated with the passage of time, the comparables
suggest a range of between 7.14 and 10.76 percent. If we add 0.40 percent to the 2009 sale and 0.80
percent to the three 2008 sales the table is as follows:
Ro'sfrom the Comparable Sales
;u `«Sa t s „ --Vrait4"Mikr, Attitq
Sale 1 May-09 8.44% 0.40% 8.84%
Sale 2 Jun-08 7.14% 0.80% 7.94%
Sale 3 May-08 7.99% 0.80% 8.79%
Sale 4 Jan-08 10.76% 0.80% 11.56%
Sale 5 Active 5.74% 0.00% 5.74%
Sale 6 Active 7.82% 0.00% 7.82%
Average: 7.98% 8.45%
After adjustments the closed sales suggest a range of between 5.74 and 11.56 percent, avenging
8.45 percent.
For this analysis, the most weight is given to comparable one, the most recent closed transaction.
This comparable suggests an adjusted overall rate 8.84 percent which is at the upper end of the
range. The subject property has had difficulty in filling its spaces over the last few years. This fact
r •
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
84
would support an overall rate above 8.84 percent as an investor would likely require a higher return.
In the end,we feel that an overall rate of 9.00 percent is appropriate and will be used for this report.
Support for an overall rate of 9.00 percent is found in the 2009 Korpacz 4th Quarter Real Estate
Investor Survey. While the subject is not an institutional grade property the survey does give
some insight to overall capitalization rate trends. The survey indicates that overall rates for
suburban office properties range from 6.75 to 12.00 percent, averaging 8.75 percent. Given the
Greeley location of the subject, and the difficulty in attracting tenants, an overall rate slightly
above the average is appropriate.
Direct Capitalization Technique
The Proforma Income and Expense Statement presented on the following page uses the
information and analysis presented above in order to arrive at a value estimate for the subject
property in Fee Simple Estate,"As-Is"via the Income Approach to Value of:
$1,240,000
Appraisal Specialties,Inc.
Harold Sommers, MAI,SPA
Commercial and Residential Real Estate Appraisers
I
Proforma Income and Expense Statement Fee Simple Estate'.'
i Units
102 $9.50 x 1,026 SF
104 $9.50 x $9,747
110 2,001 SF $19,010
202 $9.50 x 6,014 SF $57,133
203 $9.50 x 2,824 SF $26,828
$9.50 x 2,415 SF $22,943
204-A $9.50 x
204-B 849 SF $8,066
$9.50 x 889 SF $8,446
Potential Gross Income 16,017
$152,171
Less Vac.& Loss 16%
Effective Gross Income ($24,347)
$127,824
Less Expenses
Management @ 5% $6,391
Reserves @ 2%
Total Expenses $2,556
($8,948)
Net Operating Income
Overall Rate $118,876
9.00Unadjusted Value 4
Less Leasing Commissions Units 202 $1,320,844
Less Tenant Improvement Cost ($7,000)
Indicated Value, Income Approach ,000)
$1,,243243,844
Rounded to
Value/SF $1,240,000
;77.42
86
Discounted Cash Flow Model
Given that the market is cyclical in nature, and that it may or may not be on the downside of this
cycle, it is safe to assume that market conditions will improve. For this reason, it is not thought to
be appropriate to capitalize the current conditions into perpetuity. It is also safe to assume that an
investor who would be interested in the subject property,would analyze the subject based on current
conditions, and what will likely happen in the future. For this reason, a discounted cash flow model
using our estimated market rental rates, along with a "best-guess" concerning the future has been
prepared. This model assumes that improvement begins to be noted in the market in year two,
continuing through a ten year holding period. Under this scenario, market rental rates will increase
by three percent per year for three years, which is a typical term for the market, with vacancy
decreasing by one percent for these three years. In year four, market rental rates are projected to
increase by $0.50 per square foot, with increases of$1.00 per square foot from year seven through
the end of the holding period. Vacancy and collection will decrease by two percent until a stabilized
occupancy of eight percent is achieved. The discount rate and terminal capitalization rate, along
with other income characteristics similar to those used and explained for the Leased Fee Estate
discounted cash flow model have been used.
These increases in rental rates, and decreases in vacancy are just guesses as no one truly knows
when the market will improve or by how much. It does attempt to account for likely improvement,
a scenario that an experienced investor would likely analyze.
The Discounted Cash Flow Model that has been presented on the following page, develops a value
estimate for the subject property in Fee Simple Estate of:
$1,380,000
The value estimates developed for the subject property using the Direct Capitalization Technique
and the Discounted Cash Flow model develop the following value estimates for the subject
property:
Direct Capitalization $1,240,000
Discounted Cash Flow Model $1,380,000
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
87
The value developed by the Direct Capitalization technique is in essences a "snap shot" based on
current market conditions and the Discounted Cash Flow Model attempts to project the future. In
reality, neither approach is perfect for various reasons. In the end we feel that a value estimate for
the subject property in Fee Simple Estate is toward the midpoint of these two value estimates or:
S1,300,000
Appraisal Specialties,Inc.
Harold Sommers,MM,SRA
Commercial and Residential Real Estate Appraisers
a
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Value in Leased Fee Estate
The subject property currently has one vacant space. Based on our assumption that the subject's
two month-to-month tenants will sign contract leases, the subject is currently at stabilized
occupancy; although, each of the subject's contract leases has been found to be above market. For
these reasons, a discounted cash flow model has been presented. Given that we have assumed;
based on comments from one month-to-month tenant, and comments from the property manager,
that the two month-to-month leases will sign contracts,the value at stabilized occupancy is based on
the "As-Is" value estimate, plus the deductions that have been made for tenant improvement
allowance and leasing commissions on the remaining vacant space. This adjustment will be made
later in this section.
The following table summarizes the contract lease terms,and our estimated market lease rates:
_ Ri( -? it la Y t N rv''9 M1I'n JYA i.
-,,7,7a= fita i i ,ft2;4' ? - r `a' i < ,°' ,, $rE x:,:- ;. f 'X.4... i;
102 1,026 07/2014 $10.00 $9.50 Increases to $14.00/sf yr 2, and
$18.60/SF yrs 3-5
104 2,001 05/2012 $15.04 $9.50 $0.50/SF escalators, ending at
$16.04/SF
110 6,014 11/2011 $20.55 $9.50 $0.50/SF escalators, ending at
$21.05/SF, Active Sublease at
$9.00/SF, Tenant will pay
contract rent through lease term.
Asking rate lowered from
$12.00/SF two months ago.
202 2,824 07/2010 $15.22 $9.50 Decreases to $12.00/sf for one
year extension
203 2,415 Vacant N/A $9.50 Asking rate of$13.00/sf has been
in place for over one year.
204-A 849 M-to-M N/A $9.50 Month to month,verbal lease
204-B 889 M-to-M N/A $9.50 Month to month,verbal lease
Given that the value spread between the Sales Comparison Approach and the Income Approach is
significant, we have prepared three discounted cash flow models, two that anticipate improvement
in market conditions, and one that maintains minimal escalators and continued high vacancy. The
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Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
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general consensus is that the market will not stay depressed forever and that we currently are near or
at the bottom.
As with the value estimated for the subject property in Fee Simple Estate, we have presented
various scenarios for the subject property. The first model is based on the following data, and is
thought to be the worst case.
• The holding period is estimated to be ten years. A ten year holding period was
selected as it is likely an investor would hold the property for an extended period of
time in order to maximize profit at the end of the holding period. Additionally, at
least one contract lease has four years remaining. As a result using a shorter holding
period does not adequately model the subject's income performance under market
conditions.
• The contract lease rates and escalators are used for the spaces with contracts in
place. The estimated market lease rates for the remaining spaces are used for the
vacant spaces.
• The contract rates that are above market have been used,but once the leases expire
they are decreased immediately to the escalated market rate.
• Based on comments from the tenant of one space, and comments from the property
manager, it is likely that the two month-to-month tenants would sign a contract if
pressed. Additionally, our market rate is below the reported month-to-month rates,
indicating that the tenants would be wise to secure their spaces with contracts. The
vacant space is assumed to be leased in a one year period. (As-Is Value Model)
• The cost to install tenant improvements correlates with the leasing of the vacant unit.
(As-Is Value Model)
• A terminal capitalization rate of 10.00 percent will be used. A rate slightly above
the gong in overall rate used in the direct capitalization technique is used to account
for the added risk associated with uncertainties in the future.
• A discount rate of 12.00 percent will be used. Support for a discount rate of 12.00
percent is found in the PricewaterhouseCoopers fourth quarter 2009 national survey
which quotes discount rates for non-institutional national suburban offices of
between 8.00 and 14.00 percent, averaging 10.24 percent. The same source for a
private equity investor in the Denver suburban market reports a discount rate
between 7.75 and 15.00 percent, averaging 9.93 percent. The formula Ro+A=Y
(9.00+2=12.00) lends support.
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• Vacancy and collection loss is estimated at 16 percent for year's one and two,
decreasing by one percent throughout the remainder of the holding period
considering improvements in the overall economy.
• Operating expenses were based on the expenses incurred for management, tenant
finish for new tenants, capital improvements, reserves, and CAM costs for vacant
space based on the estimated vacancy rate.
• No leasing commissions are anticipated for year one and only the leasing
commission for the vacant space is incurred for year two. Presumably Security
Title is able to sublease their space and has paid the leasing commissions for the
new tenant. Typically, leasing commissions are paid up front. After year two,
commissions of six percent are applied to the vacancy rate based on a three year
term.
This worst case Discounted Cash Flow Model results in an "As-Is" market value for the subject
property in Leased Fee Estate of:
$1,250,000
The second model presented uses the same data as before, but this time vacancy decreases by two
percent until a stabilized vacancy rate of six percent is achieved, and market rental rates, currently
estimated at$9.50 per square foot NNN, increase by$0.50 per square foot after year three. Contract
rates are used until they expire, then the increased market rate is used. Note that even with $0.50
per square foot escalators beginning in year three, the market rental rate estimates for the subject at
the end of the holding period are still below contract rates for those units with contract leases in
place. A little more than usual tenant rollover is anticipated so $20,000 has been allocated in years
four, seven, and ten to account for tenant improvement allowances. This model develops a value
estimate for the subject property of:
$1,360,000
The third model is a "reasonably best case scenario". It estimates that vacancy decreases to six
percent by year five, and rental rates increase by $1.00 per square foot also beginning in year four.
Once rental rates are increased to $16.00 per square foot, a reasonable rate prior to the slowdown,
they increase by three percent per year. More than usual tenant rollover is anticipated so $40,000
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has been allocated in years four, seven,and ten to account for tenant improvement allowances. This
model develops a value estimate for the subject property of:
$1,550,000
The value estimates developed for the subject property in Leased Fee Estate by the four Discounted
Cash Flow Models are as follows:
Worst Case $1,250,000
Moderate Case $1,360,000
Best Case $1,550,000
It can be seen that the value estimates differ by as much as $300,000 or 24 percent. The first
scenario is very conservative and projects only minimal improvement in the market. The third
scenario projects more radical improvement in the market. For the subject property, we feel that
the value estimate of the moderate case or$1,360,000 is appropriate.
Leased Fee versus Fee Simple Value
The value estimates developed for the subject property in Leased Fee Estate and Fee Simple Estate
differ by$60,000,indicating a positive value of the Leasehold. Therefore,the value estimate for the
subject property in Leased Fee Estate and Fee Simple Estate will differ.
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
I
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RECONCILIATION
The purpose of this appraisal is to estimate Market Value in Leased Fee Estate for the subject
property. Inherent in this definition is the requirement to reflect the attitudes of typical buyers
and sellers in the marketplace.
The facility is designed to be used as multi-tenant office building. The project appears to be well
designed for its intended purpose, and is located in an area that was experiencing a great deal of
commercial growth prior to the recent slowdown. Based on this historical growth and the
location of the subject, it is thought that once the economies improve, the area will once again
see growth, but likely at a slower pace. In order to develop an estimate of Market Value for the
subject property, the Cost, Income, and Sales Comparison Approaches to Value were used.
The Cost Approach researched comparable land sales in the vicinity that would be considered as
a substitute for the subject property. Four closed sales and two active listings were found to
estimate the value of the land "as-if vacant and ready for development." The cost of the
improvements was estimated using the Marshall & Swift Valuation Service. No functional or
economic obsolescence was considered in the improvements. No physical depreciation was
considered due to the recent construction of the subject. Entrepreneurial profit was included, and
the cost to install tenant improvements in the vacant space, as well as leasing commissions, was
deducted in order to arrive at an "As Is" value estimate for the subject property via the Cost
Approach to Value.
The Sales Comparison Approach researched comparable sales of office properties located in the
Northern Colorado market. The unit of comparison used was the price per square foot of the
gross building area. Quantitative and qualitative adjustments were made for physical differences
between the subject and the comparable sales to arrive at a value estimate per square foot of
building area. The value per square foot was multiplied by the above grade gross building of the
subject property. The contributory value of the basement was then added. The result is an "As
Is" value estimate for the subject property in Fee Simple Estate. A $60,000 positive leasehold
was identified in the Income Approach. Because the value in Fee Simple Estate was so far above
- ----- -
Appraisal Specialties,Inc
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
95
that of that developed in the Income Approach is was not thought reasonable to further increase
it here. Therefore for the Sales Comparison Approach the values in Fee Simple and Leased Fee
Estates are the same.
For the Income Approach, a survey was made of comparable office buildings located in Greeley
that are considered to be comparable to the subject, and that are currently leased or currently on
the market for lease. The comparable rental rates, estimated vacancy, collection losses, and
annual expenses were considered in the estimate of the income characteristics for the subject
property. Given the fact that we may or may not see improvement in the market, both a direct
capitalization technique and a discounted cash flow model were prepared using market derived
data. The values developed by these two approaches were then reconciled into a value estimate
for the subject property via the Income Approach to Value, in Fee Simple Estates.
Given that the contract rental rates were found to be above market, we prepared three discounted
cash flows for the subject property in Leased Fee Estate. The first was based on a "worst case"
scenario, a second based on moderate market improvement, and a third was based on a more
radical market improvement. These discounted cash flow models were prepared using both
contract and market income characteristics that consider cost to complete tenant improvements
for the vacant unit, units that turn over, leasing commissions, and other typical expenses. In the
end,the value developed by the moderate market improvement model was used.
The value conclusions derived in this report are as follows:
"As-Is"
t " 1 17i
Cost Approach $2,810,000 $2,810,000
Sales Comparison Approach $2,380,000 $2,380,000
Income Approach $1,360,000 $1,300,000
Appraisal Specialties,Inc
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
96
Generally, the value developed by the Cost Approach to Value sets the upper value limit due to
the principle of substitution. In the case of the subject, the value developed by the Cost
Approach to Value is above the value estimate developed by the remaining two approaches to
value. This is due to the fact that lease rates have softened over the last few years. In the end the
project is considered to not be financially feasible to develop under current market conditions.
The value indications developed by all the Income and Sales Comparison Approaches to Value
vary by a wide margin of over $1,000,000. The large difference is due to the softening of the
market, and the lack of more recent investor sales,which would likely reflect the softening of the
market. For properties that tend to be owner-occupied, the Sales Comparison Approach is
generally given the most weight in the analysis. Conversely, for properties that tend to be
investor owned, the Income Approach generally is given the most weight. The subject property
is designed primarily as a multi-tenant property, so the Income Approach to Value was given the
most weight in this analysis.
Marketing Time and Exposure Time
The national economic downturn has had a hold on Northern Colorado for some time now.
Realtors interviewed indicated that a marketing time of one year is realistic in today's market
assuming aggressive marketing and property pricing. Of the four closed sales used in this
analysis, one occurred in mid 2009, and the remaining three occurred in 2008. Marketing times
were over one year, six month plus, one year, and two years. The active listings have been on
the market for one year and over one year.
The effects of the local and national economies have had a detrimental affect on commercial
properties in the subject's market area. Rental reductions are occurring, along with concessions,
and in some cases tenants walking from their spaces. Realtors who are active in the market have
no idea when things will improve, but are hopeful that improvement will be noted within a three
to five year period. These same agents are reporting some activity and demand from good
quality office buildings that are properly priced. Based on the above discussion, the subject
property, if properly priced and actively marketed by experienced and aggressive Commercial
Realtors, is thought to have a marketing time of less than one year. The economy of the region
Appraisal Specialties,Inc
Harold Sommers,MAI,SRA'
Commercial and Residential Real Estate Appraisers
97
has been in its current condition over the last several years. Therefore, the exposure time is also
thought to have been less than one year. Note that our estimate of marketing time is based on
our value estimate. Most owners of investment property who are not under duress are not going
to sell under the current market conditions.
Based on the analysis of the property and the data presented in this report, the "As-Is" Market
Value of the subject property in Leased Fee Estate with a one year marketing period, as of March
4, 2010, is:
ONE MILLION FOUR HUNDRED THOUSAND DOLLARS
$1,400,000
Value at Stabilized Occupancy
Based on the information presented in this analysis, the subject property is currently at stabilized
occupancy. Therefore the "as is"value and value"as if at stabilized occupancy"are the same.
Leased Fee versus Fee Simple Value
As noted in this analysis, the subject property has contract leases that are above market. The
result is a positive value of the Leasehold of $60,000. Deducting this amount from the value
estimated in Leased Fee Estate results in a value in Fee Simple Estate for the subject property of
$1,340,000.
Disposition Value
"Disposition Value" is defined as:
The most probable price that a specified interest in real property is likely to bring under
all of the following conditions:
1. Consummation of a sale will occur within a limited future marketing period
specified by the client.
2. The actual market conditions currently prevailing are those to which the appraised
property interest is subject.
3. The buyer and seller is each acting prudently and knowledgeably.
4. The seller is under compulsion to sell.
5. The buyer is typically motivated.
6. Both parties are acting in what they consider their best interests.
4
Appraisal Specialties,Inc.
Harold Sommers,MAI,SRA'
Commercial and Residential Real Estate Appraisers
98
7. An adequate marketing effort will be made in the limited time allowed for the
completion of a sale.
8. Payment will be made in cash in U.S. dollars or in terms of financial
arrangements comparable thereto.
9. 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.
OPINION OF DISPOSITION VALUE
According to the market participants who were interviewed, in order to sell the subject property
within a six month marketing period, the pricing of the subject's property would need to allow a
buyer to purchase the subject at a price low enough to minimize the risks associated the
unknowns in the future. Given these unknowns, the increasing vacancy and softening of lease
rates, we estimate that a value of $1,000,000 is a reasonable disposition value for the subject
property with a six month marketing period. Our estimated disposition value is approximately
28 percent below the final value estimate for the subject property in Leased Fee Estate. Realtors
who were interviewed report that a six month disposition value should be between 25 and 30
percent below retail value, lending support.
All the data within this report and the final value conclusions are subject to the Assumptions and
Limiting Conditions and Certification of Value statements attached.
Respectfully submitted,
Harold Sommers,MM, SRA
CO-CG01321901,Exp. 12/31/11
WY-336,3/18/12
gad
Todd R.Finn,Associate Appraiser
CO-CG40024874,Exp. 12/31/11
WY-774, 09/06/10
As of the date of this report Harold L.Sommers has completed the requirements of the continuing education program of the Appraisal Institute.
Appraisal Specialties,Ina
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
101
ADDENDUM
Appraisal Specialties,Inc
Harold Sommers,MAI,SRA
Commercial and Residential Real Estate Appraisers
Harold Sommers, MAI, SRA
Principal
Appraisal Specialties,Inc.
105 South Meldrum#1
Fort Collins,Colorado 80521
(970)493-7700
Fax 482-6771
Education
Architecture Major at Southwest Missouri State University
Appraisal Institute Courses
Principles and Procedures Residential Valuation
Uniform Standards of Professional Practice Case Studies in Real Estate Valuation
Report Writing and Valuation Analysis Capitalization Theory and Techniques Part A&B
Advanced Sales Comparison and Cost Approaches Advanced Applications
Market Analyses and Highest&Best Use Separating Real&Personal Property
Condemnation Appraising Valuation of Small Mixed Use Properties
Other Courses,Seminars and Workshops
The Appraisers Complete Review Market Valuation Analysis
Appraisal of Conservation Easements FIRREA Title 11 Seminar
Uniform Standards of Professional Practice Appraising for the FHA
Sales Analysis,Allocation,Statistics and Graphs New FNMA Guidelines and FIRREA Policy
Fair Lending Seminar Limited Appraisal and Reporting Options
Conservation Easement Tax Credits Small Hotel Motel Valuation
Professional and Trade Affiliations
Appraisal Institute-MAI Member
Appraisal Institute-SRA Member
Colorado Certified General Appraiser #CG0 1321901
Wyoming Certified General Appraiser#336
Member,FHA Roster
Relevant Employment
Sept, 1993 Independent fee appraiser performing a wide variety of residential and commercial appraisal
to present assignments in Larimer and Weld County,Colorado,and Laramie and Albany County,Wyoming.
July, 1991 Associate commercial appraiser for Shannon & Associates of Fort Collins, Colorado. Work
to Dec, 1995 involves the examination of assigned properties,collection and analysis of data,and completion of
the appraisal assignment and report.
July, 1989 Associate appraiser for J. David Appraisals of Tacoma, Washington. Work involved the
to June, 1991 completion of both residential and commercial assignments,along with personnel training.
Prior to Previous employment includes architectural drafting, structural steel detailing and residential
1989 construction.
Todd Finn, Certified General Appraiser
Associate
Appraisal Specialties, Inc.
105 South Meldr m #1
Fort Collins, Colorado 80521
(970) 493-7700
Fax 482-6771
Education
Western State University
Aims Community College
Appraisal Institute Courses
Report Writing and Valuation Analysis
Income Capitalization
Advanced Sales Comparison and Cost Approaches
Sales Comparison Valuation of Small Mixed-Use Properties
Relevant Courses
Basics of Appraisal
Standards of Professional Appraisal Practice
The Valuation Process
Real Estate Markets and Analysis
Highest and Best Use Analysis
Approaches to Value
Economics
Accounting
Certifications
Colorado Certified General Appraiser#CG40024874
Wyoming Certified General Appraisal#774
Relevant Employment
Nov.2001 Certified appraiser for Appraisal Specialties performing a wide
to Present variety of residential and commercial appraisal assignments in both
Colorado and Wyoming
April 2001 Research assistant for Appraisal Specialties performing a wide
to Oct.2001 variety of residential and commercial appraisal tasks including sales
and income research, comparable research and conformation, and
assistance with property inspections and form filling
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