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Home My WebLink About961294.tiff RESOLUTION RE: THE BOARD OF EQUALIZATION, 1996, WELD COUNTY, COLORADO PETITION OF: AUBURN INNS, INC. do ROGER DEBRING 90 Clay Cliff Drive Tonka Bay, MN 55331 DESCRIPTION OF PROPERTY: PIN: R3882086 PARCEL: 096120306018 - 3301 West Service Road, Evans, Colorado - EVS 13141G S2/3 LOT B NW4SW4 20 5 65 LOT C NW4SW4 20 5 65 LYING W OF HWY S2/3 LOT E NW4SW4 20 5 65 LOT D NW4SW4 20 5 65 S2/3 L11 NE4SW4 20 5 65 LYING W OF HWY & VAC DENVER ST BETWEEN S2/3 LOT B & E. . . WHEREAS, the Board of County Commissioners of Weld County, Colorado, organized as the Board of Equalization for the purpose of adjusting, equalizing, raising or lowering the assessment and valuation of real and personal property within Weld County, fixed and made by the County Assessor for the year 1996, and WHEREAS, said petition has been heard before the County Assessor and due Notice of Determination thereon has been given to the taxpayer(s), and WHEREAS, the taxpayer(s) presented a petition of appeal of the County Assessor's valuation for the year 1996, claiming that the property described in such petition was assessed too high, as more specifically stated in said petition, and WHEREAS, said petitioner being represented by Kyle Cleven, Vice President, Auburn Inns, Inc., and WHEREAS, the Board has made its findings on the evidence, testimony and remonstrances and is now fully informed. NOW, THEREFORE, BE IT RESOLVED by the Board of County Commissioners of Weld County, acting as the Board of Equalization, that the evidence presented at the hearing clearly supported the value placed upon the Petitioner's property by the Weld County Assessor. Such evidence indicated the value was reasonable, equitable, and derived according to the methodologies, percentages, figures and formulas dictated to the Weld County Assessor by law. The assessment and valuation of the Weld County Assessor shall be, and hereby is, affirmed as follows: 961294 AS0034 f.As , aahann BOE -AUBURN INNS, INC. Page 2 ORIGINAL Land $ 341,321 Improvements OR Personal Property 1,258,679 TOTAL ACTUAL VALUE $ 1.600.000 BE IT FURTHER RESOLVED that a denial of a petition, in whole or in part, by the Board of Equalization may be appealed by selecting one of the following three options: 1. Board of Assessment Appeals: You have the right to appeal the County Board of Equalization's (CBOE's) decision to the Board of Assessment Appeals (BAA). Such hearing is the final hearing at which testimony, exhibits, or any other evidence may be introduced. If the decision of the BAA is further appealed to the Court of Appeals, only the record created at the BAA hearing shall be the basis for the Court's decision. No new evidence can be introduced at the Court of Appeals. (Section 39-8-108(10), CRS) Appeals to the BAA must be made on forms furnished by the BAA, and should be mailed or delivered within thirty (30) days of denial by the CBOE to: Board of Assessment Appeals 1313 Sherman Street, Room 523 Denver, CO 80203 Phone: 866-5880 OR 2. District Court: You have the right to appeal the CBOE's decision to the District Court of the county wherein your property is located. New testimony, exhibits or any other evidence may be introduced at the District Court hearing. For filing requirements, please contact your attorney or the Clerk of the District Court. Further appeal of the District Court's decision is made to the Court of Appeals for a review of the record. (Section 39-8-108(1), CRS) OR 3. Binding Arbitration: You have the right to submit your case to arbitration. If you choose this option the arbitrator's decision is final and your right to appeal your current valuation ends. (Section 39-8-108.5, CRS) 961294 AS0034 BOE -AUBURN INNS, INC. Page 3 Selecting the Arbitrator: In order to pursue arbitration, you must notify the CBOE of your intent. You and the CBOE select an arbitrator from the official list of qualified people. If you cannot agree on an arbitrator, the District Court of the county in which the property is located will make the selection. Arbitration Hearing Procedure: Arbitration hearings are held within sixty days from the date the arbitrator is selected. Both you and the CBOE are entitled to participate. The hearings are informal. The arbitrator has the authority to issue subpoenas for witnesses, books, records, documents and other evidence. He also has the power to administer oaths, and all questions of law and fact shall be determined by him. The arbitration hearing may be confidential and closed to the public, upon mutual agreement. The arbitrator's written decision must be delivered to both parties personally or by registered mail within ten (10) days of the hearing. Such decision is final and not subject to review. Fees and Expenses: The arbitrator's fees and expenses are agreed upon by you and the CBOE. In the case of residential real property, such fees and expenses cannot exceed$150.00 per case. The arbitrator's fees and expenses, not including counsel fees, are to be paid as provided in the decision. The above and foregoing Resolution was, on motion duly made and seconded, adopted by the following vote on 24th day of July, A.D., 1996. BOARD OF COUNTY COMMISSIONERS WELD COUNTY, COLORADO 4n Crts O r Barb J. Kirkmeyer, Chair 1861 Q i ty Clerk to the Board / . ,A � u� /v y i �f eorge E. Baxter, Pr Tem s�' ®� ,� Deputy Clerktfo the Board Dale K.Hall APPROVED AS TO FORM: FXCI ism DATF OF SIC;NINC; (AYF). �, im Constance L. Harbert "v ( LC o Co my tt A ey W. H. Webster� 961294 AS0034 (4,7/ � BOE DECISION SHEET 179 PIN #: R3882086 PARCEL#: 096120306018 Auburn Inns, Inc. c/o Roger Debring 90 Clay Cliff Drive Tonka Bay, MN 55331 HEARING DATE: 24th day of July, 1996 A f � t� ✓fi� �� ) 42 7), HEARING ATTENDED? (Y/N) NAME: AGENT NAME: APPRAISER NAME: (:, 7 DECISION: DECREASE IN VALUATION INCREASE IN VALUATION NO CHANGE IN VALUATION ASSESSMENT RATIO ACTUAL VALUATION ORIGINAL SET BY BOARD Land R 141,121 $ L?4//, 3a-/ Improvements OR Personal Property 17�8,67a 4 2C$7j L1/ Total Actual Value $ 1,600.000 $ 4 4 one-7 COMMENTS: MOTION BY +1 TO --rt-1. SECONDED BY J /j h/ Kirkmeyer Y ) Baxter et ) Failed to prove appropriate value Hall -op, ) No comparables given Harbert -i"' ) Other: Webster - ) RESOLUTION NO._ 961294 OFFICE OF COUNTY ASSESSOR • NOTICE OF DENIAL 1400 NORTH 17th AVE. f 6 EVS 13141G S2/3 LOT B NW4SW4 GREEL8EY,CO 80631 20 5 65 LOT C NW4SW4 20 5 65 LYING W v (970)353-3845,EXT.3650 OF HWY S2/3 LOT E NW4SW4 20 5 65 LOT D NW4SW4 20 5 65 52/3 L11 t ' � PHONE Wi`P C DE4VE4 20 5 65 LYING W OF d, E.E VAC f DENSER ST BETWEEN S2/3B LOT B E & t COLORADO OWNER: AUBURN INNS INC AUBURN INNS INC LOG 16 C/O ROGER DEBRING PARCEL 096120306018 90 CLAY CLIFF DR ACCOUNT R3882086 TONKA BAY, MN 55331 YEAR 1996 06/14/1996 The appraisal valueC' of property is based on the appropriate consideration of the approaches to value required by law. The Assessor has determined that your EgAIRSITlIQt t1Ria5 4 t}S(h l n�Ta P TNG THE MARKET APPROACH. AGRICULTURAL LAND VALUE IS DETERMINED SOLEY BY THE EARNING OR PRODUCTIVE CAPACITY OF THE LAND, CAPITALIZED AT A RATE SET BY LAW. ALL OTHER PROPERTY, INCLUDING VACANT LAND, IS VALUED BY CONSIDERING THE COST, MARKET, AND INCOME APPROACHES. If your concern is the amount of your property tax,local taxing authorities(county,city,fire protection,and other special districts)hold budget hearings in the fall. Please refer to your tax bill or ask your Assessor for a listing of these districts,and plan to attend these budget hearings. The Assessor has55�carefullylly studiedp �� aalllyl avaiilableginformation, rgiving �particular attention to the specifics included on your protest and has determined the Av 11982oCOLOR9DOdCONSTITUTIION L C GEnRREQUUIREiEfeCOMMERCIALaPROPERTY TO BE VALUED BASED ON THE 1994 LEVEL OF ACTUAL VALUE AND ASSESSED AT 29% FOR 1996. REPLACEMENT COST, MARKET, AND INCOME ARE APPROACHES USED TO DETERMINE THE ACTUAL VALUE OF YOUR PROPERTY. YOUR VALUATION IS SUPPORTED BY THE APPRAISAL PROCEDURES REQUIRED BY LAW. PETITIONER'S ASSESSOR'S VALUATION PROPERTY CLASSIFICATION ESTIMATE OF VALUE ACTUAL VALUE ACTUAL VALUE PRIOR TO REVIEW AFTER REVIEW • LAND 341321 341321 IMPS 1258679 1258679 1600000 $ 1600000 TOTALS $ $ 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. Please see the back of this form for detailed information on filing your appeal. 06/28/1996 By: WARREN L.LASELL WELD COUNTY ASSESSOR DATE I5-DPT-AR Form PR-207-8794 ADDITIONAL INFORMATION ON REVERSE SIDE PC A, S(5ctatpson" YOU HAVE T.HE RIGHT TO APPEAL THE ASSESSOR'S DECISION The County Board of Equalization will sit to hear appeals beginning July 1 and continuing through August 5 for real property (land and buildings) and personal property (furnishings, machinery, and equipment) 39-8-104 and 39-8- 107(2), C.R.S. APPEAL PROCEDURES: If you choose to appeal the Assessor's decision you must appeal to the County Board of Equalization. To preserve your right to appeal, your appeal must be POSTMARKED OR DELIVERED ON OR BEFORE JULY 15 FOR REAL PROPERTY, AND JULY 20 FOR PERSONAL PROPERTY. WELD COUNTY BOARD OF EQUALIZATION 915 10th Street, P.O. Box 758 Greeley, Colorado 80632 Telephone (970)356-4000 Ext. 4225 NOTIFICATION OF HEARING: You will be notified of the time and place set for the hearing of your appeal. COUNTYBOARD OF EOUALIZATION'S DETERMINATION: The County Board of Equalization must make a decision on your appeal and mail you a determination within five business days. The County Board must conclude their hearings by August 5. TAXPAYER RIGHTS FOR FURTHER APPEALS: If you are not satisfied with the County Board of Equalization's decision you must file within thirty days of the County Board of Equalization's written decision with ONE of the following: Board of Assessment Appeals (BAA): Contact the BAA at 1313 Sherman, Room 315, Denver, Colorado 80203, (303)866-5880. District Court: 9th Avenue and 9th Street, P.O. Box C Greeley, Colorado 80632 Telephone (970) 356-4000, Ext. 4520 Arbitration: WELD COUNTY BOARD OF EQUALIZATION 915 10th Street, P.O. Box 758 Greeley, Colorado 80632 Telephone (970) 356-4000, Ext. 4225 If you do not receive a determination from the County Board of Equalization, you must file an appeal with the Board of Assessment Appeals by September 18. TO PRESERVE YOUR APPEAL RIGHTS, YOU MUST PROVE YOU HAVE FILED A TIMELY APPEAL; THEREFORE, WE RECOMMEND ALL CORRESPONDENCE BE MAILED WITH PROOF OF MAILING. PETITION TO THE COUNTY BOARD OF EQUALIZATION In the space below, please explain why you disagree with the Assessor's valuation. IN ACCORDANCE WITH 39- 8-106(1.5), C.R.S., YOU MUST STATE YOUR OPINION OF VALUE IN TERMS OF A SPECIFIC DOLLAR AMOUNT. Attach additional documents as necessary. `3 cam.r.7c"�-�u� � 4c,g— Sth rU!(t.0 Pbll --- p r . I- UA Eh Royale Hospitality Group, Inc. July 3, 1996 Weld County Board of F_.qualii.� 915 loth Street Greeley_ Colorado 80632 re: Auburn Inns. Inc/dba Hei , To whom it may concern_ We wish to appeal the Assess, . ,, rision and valuation ofuur property (Parcel ti 096120306018) We believe that the value of th, 1,i,q'city has gone down ovc the past Iwo years as a result of the addition of four nc', u„otels to the market. Our occupancy has declined and profit has been reduced to less 'F1;it s,alf of what it was before the new properties were built. We have enclosed a cop, appraisal Ihal was recently completed by our Iendei in conjunction with the extension tur mortgage The value established by the appraisal was $1-550,000, including all In -ii property Our personal properly is asses,c.l approximately S I s0 001i therelore_ we believe that the correct value tot the propel i . .400,000 (`i:I js0.01)1) appraised value. less $150,000 personal property) II„ is a need tin anyone io he present at any of your meetings, Kyle Cieven. a Vice P;c-,hlent of the Company would be available to meet with you. Very nub yours, Roger F Dehring,-- President Auburn Inns, Inc 250 N. River Ridge Circle, Suite 190 Bumsville, MN 55337 (612)890-8279• FAX(612)890-6827 C.B.O.E. HEARING DATE : JULY 24 , 1996 TIME : SUBJECT: AUBURN INNS, INC. HERITAGE INN ADDRESS : 3301 WEST SERVICE ROAD EVANS, COLORADO 80620 PARCEL# : 0961-20-3-06-018 PIN. # 3882086 APPRAISAL DATE AS OF : JUNE 30, 1994 "BIT 713fl o?/. SUMMARY OF SALIENT FACTS AND CONCLUSIONS Purpose of the Appraisal: Estimate market value on June 30 , 1994 Property Rights Appraised: Unencumbered fee simple interest Property Address: 3301 West Service Road, Evans, Colorado Improvement: Hotel Complex Land Size: 341, 321 square feet Zoning: B-1 General Business Assessor' s Value: 1996 Land Value: $ 341, 321 Imps Value: 1, 258, 679 Total Value: $1, 600, 000 Highest and Best Use: Present use as a hotel complex Size of Improvements : Hotel facility Above grade 47, 676 square feet Storage basement 11, 171 square feet Number of guest rooms 73 Year of Construction: 1964 Effective Age: 19 years Remaining Economic Life: 31 years Estimated Land Value: $341, 321 Estimate of Values: Cost Approach: Land Value : $ 341, 321 Improvement Value : 2 , 428, 679 Total Value Rounded: $2 , 770, 000 Sales Comparison Approach: $1, 606 , 000 Income Approach: $2 , 830, 000 Final Estimate of Value: $1, 600 , 000 Date of Value: June 30 , 1994 2 PHOTOGRAPHS OF THE SUBJECT PROPERTY a. a✓ q • -• Tr ..,- • ....t.4.:,=;44.54.....-:'•,„41:14,4• . - km 4, • ' .6,04.,, Y . ..., . 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' `''' .- 4.,.-., ': :!4,'741'.. "•,-,-- .- ::- .' 1:‘74-'''' ‘P‘'T'IL:4' '''`-'•:,`J ,....t. - %1 " . •it,"4k'"• ' ia:ta•1'• I: j'' : ' 1 • • ' 'lc,-. . -. ./ . -- ' .. ' .2*, ' ' 4 ---..p4' ", -. ' ' ' .4. It4-451W ta • t. ‘,..., -tr :1;:k•C:•":'' ' : .„ , ..tcr.ry,. . . . , ' '44.,:.• '' 4. . '' . • . .t • . ...„, . , (9/2lb....e•-A/ ••••...• , , • , . . . , . . , .t <1 _ , . LL cI O ti¢ Q 9 O r Ril Z 4 y � • a A Q •t a\ J n V - Il T :11 • 9 3 d, cc co 0 c. l-. > t Q. . - T o cJ M V c 9 4IJ 4 W Q II • • . . . CI • -! _q .- +._-,c -T-_�.,-, ..�-._ _�__. . _ _ COST APPROACH In the Cost Approach -an indication of value is obtained by adding the estimated land value to an estimate of .the depreciated replacement cost of the buildings and other improvements. Replacement cost, as opposed to reproduction cost, will be utilized to estimate the cost of the subject building. Replacement cost is the cost of creating a -new structure with similar utility as the subject but using current designs and building techniques. Reproduction cost is the cost of creating an exact replica, using the same or nearly the same materials. Replacement Cost New There are three generally accepted methods of estimating replacement costs: quantity survey, unit in place, and comparative. The quantity survey method is the most comprehensive and most accurate. It is the method contractors use in determing the quantity and quality of each type of material used, estimating labor hours required, and applying unit costs to the material and labor in addition to all other direct and indirect costs. Unit in place method, is based upon the unit prices of various building components, such as roofing, floors, plumbing and heating, excavating, plastering, et cetera. Unit costs are then assembled to estimate the entire cost of the improvement. The comparative method is utilized by comparing costs of recently constructed, similar buildings to the building being appraised after reducing them to a common unit of comparison such as square foot or cubic foot. The unit cost must be properly adjusted to reflect variables, such as size, shape, finish, equipment, and all other attributes of the building. Cost level changes from date of construction to date of value must be reflected. In this report, the comparative method will be employed. The Marshall and Swift computer cost service was utilized to estimate the construction cost of the improvements. This source is commonly employed by appraisers and cost estimators in the market and is considered to be reliable. This data is updated continually and utilize local multipliers in order to adjust costs to reflect conditions in the specific area in which the property being appraised is located. The costs contain normal construction interest, sales taxes on materials, contractors' overhead and profit including job supervision, builders's insurance, etc. They are intended to be the final costs to the owner. Replacement cost new utilizing the marshal and swift computer cost service results in an estimate of $2, 770, 000 can be seen on the following pages. 6 LAND SALES S SALEZEAIC+ f Ct?I ARARLE DA E PRI R 4• I . PRIG/S RA SEE tOcATIt�IT; Subject $341, 321 341, 321 $1 . 00 Phelp Tointon/ Carson St . Comp #1 05/16/94 74 , 400 103 , 672 . 72 Wernsman Evans, CO Evans Moore/ Industrial Humane Park Comp #2 02/18/94 65, 000 70 , 785 . 92 Society Evans, CO 2700 47th Monroe/ Ave . Comp #3 01/04/94 276 , 650 92 , 233 3 . 00 Eaton Bank Greeley, CO 7251 W. 4th Tech Center/ St . Comp #4 03/11/94 250 , 000 222 , 958 1 . 12 Elec Fab Greeley, CO Approx. Tech Center/ 7251 W. 4th Comp #5 05/03/94 250 , 000 241, 665 1 . 03 Elec Fab St . 2560 W. 29th Watson/ St. . Comp #6 01/07/94 265 , 110 266 , 809 1 . 00 Calvin Greeley, CO 3103 23rd WalMart/ Ave . Comp #7 08/15/94 275 , 000 100, 144 2 . 75 Golden Greeley, CO Corral 2400 W. 29th Dayton/ St . Comp #8 01/20/94 723 , 366 480 , 473 1 . 51 Iowaland Greeley, CO 7 Parcel Number : 096120306018 Property Owner : AUBURN INNS INC Address : 3301 W SERVICE ROAD City, State, ZIP: EVANS, CO, 80620 Surveyed by : CCJ Date of Survey : 063094 Occupancy: Hotel Floor Area : 47, 676 square feet Number of stories : 2 . 0 Class : Masonry Average story height : 9 . 0 feet Cost rank: Average Effective age : 19 years Cost as of : 6/94 Heating and Cooling: Hot & Chilled Water 100% Other features : Units Cost Total Basic structure cost 47, 676 58 . 23 2 , 776, 174 Basement : Unfinished Basement 11, 171 15 . 34 171, 363 Building Cost New 47, 676 61 . 82 2 , 947, 537 Extras : POOL 24 , 000 CONCRETE 16 , 928 ASPHALT 85, 920 Subtotal 126, 848 Replacement Cost New 3 , 074 , 385 Less Depreciation: Physical and Functional <21 . 0%> <645, 620> Depreciated Cost 2 , 428, 679 Miscellaneous : Land 341, 321 Total 2 , 770 , 000 Cost data by MARSHALL and SWIFT 8 MARKET APPROACH THE FOUR MARKET TRANSACTIONS OF HOTEL SALES TABULATED ON THE FOLLOWING PAGE SHOW UNADJUSTED VALUES RANGING FROM $20,922 TO $26,469 PER GUEST ROOM OR UNIT. THE MEAN IS $24,048 PER UNIT AND THE MEDIAN IS $24,397 PER UNIT. THE SUBJECT PROPERTY DOES NOT HAVE AN AFFILIATION WITH A NATIONAL CHAIN HAS SALES COMPARABLES #1, #2, AND #4. EVEN SO, THE SUBJECT HAS THE FACILITIES TO OFFER A FULL RANGE OF SERVICES HAS COMPARED TO THE COMPARABLE SALES WHICH ARE LIMITED SERVICE HOTELS. THE SUBJECT IS ALSO CONSIDERED TO BE OF A BETTER QUALITY CONSTRUCTION.. AS A RESULT OF THIS SALE COMPARISION STUDY, THE MARKET VALUE OF THE SUBJECT PROPERTY HAS BEEN ESTIMATED TO BE AS FOLLOWS: $22.000 PER UNIT X 73 UNITS EOUALS $1.606.000 ROUNDED INDICATED VALUE PER THE INCOME APPROACH $1,600.000 9 SALE COMPS _ ____ r— .. - DATmxisupaEcT... __ 7Hcomp...i/ ncomp2 /.:.—COMP:3,:::_ . .... :COMP: 4 :: , Property Name : Heritage Red Coach Inn Super 8 Super 8 Inn Super 8 3301 W. 2446 Main 10805 Turner 33215 Hwy 1020 Park Address : Service Rd. St . Blvd 85 St . Evans, CO Longmont, CO Longmont, CO Lucerne, CO Castle Rock Sales Date : 10/04/94 06/23/94 03/22/94 03/94 Sales Price : $1, 886 , 000 $1, 300, 000 $394 , 800 $1 , 575 , 000 FF & E: 172 , 000 (192 , 000) (128 , 800) (18 , 000) (175, 000) Adjusted (Assessor' s Sales Value) Price : $1 , 600 , 000 $1 , 694 , 000 $1, 171, 200 $376, 800 $1, 400, 000 Services Provided: Full Limited Limited Limited Limited Effective Year Year Built : 1975 1980 1986 1963 1980 Quality: Inferior Inferior Inferior Inferior National Chain Affiliation None Yes Yes None Yes Number of Units : 73 64 46 18 60 Unadjusted Price Per Unit : $21,-918 $26 , 469 $25, 461 $20 , 933 $23 , 333 10 COMPARABLE SALE NO. • i t 1 I'M' - • L�ti V l Location: 2446 Main Street., Longmont,Colorado (Super 8 Motel) Date of Sale: October 4, 1994 Sale Price: $1,886,000 Number of Rooms: 64 Sale Price per Room: 029,469.;: Grantor: Longmont Lodging Ltd. Partnership Grantee: MOA Midwest Corporation Book& Page: 60016-4547 Financing: Cash ADR: $43 to $44.50 EGIM: 1.9 to 1.8 Overall Rate: 16.0% to 16.5%(including FF&E) FF&E Value: $192,000 NOI/Room $4,708 to$4,873 Comments: The property was sold as part of five properties. There was a partnership break up. The seller indicates the property was not actively marketed. The sales price was lowered to facilitate.the sale of the five properties. Other motels in this package were not operating as successful as this. Seller and local realtor knowledgeable about the property both indicate the property was worth close to $2,350,000. At this price the following is indicated: $36,719/Room; 2.34 to 2.26 EGIM; 12.8%to 13.2%Cap. Rate. The occupancy rate for the past two years was at 83%. The exterior had been painted. There was new carpet and bedspreads throughout. Seller: Gary Mueller(605)432-5393 II COMPARABLE SALE NO. O - I _ L t. e. Al • • • • Location: 10805 Turner Blvd., Longmont, Colorado (Del Camino) (Super 8 Motel) Date of Sale: June 23, 1994 Sale Price: $1,300,000 Number of Rooms: 46 Sale Price per Room: tO.s.2$36l ,21 Grantor: Longmont partnership, II, a Nebraska General Partnership (Hiatt, Dennis& Jackie) Grantee: Longmont Group, Inc. Book& Page: 02394749 Financing: $1,000,000 at market rate(Colorado National Bank of Pueblo); no other details are available ADR: $29.55 EGIM: 2.62 Overall Rate: I1.6%(including FF&E) -FF&E Value: $128,800 NOURoom $3,285 Comments: Very successful motel at the Del Camino truck stop east of Longmont, Colorado on Interstate 25. A Dairy Queen, motel,Texaco truck stop,a truck wash, and a McDonalds are adjacent to this property. There are six showers, a 1,185 square foot manager's unit. Most of the FF&E is new or recently replaced and in very good condition. The truck wash next door has contaminated the site. The property went under contract once it appeared the site was clean. Confirmation with Dennis Hiatt(303) 772-0888(prior to the sale). � 2 COMPARABLE SALE © �iJ L 1.0% • 's ''Ff}" cft • a o PIN: 1257786 PARCEL # : 80318000006 OCCUPANCY: MOTEL ADDRESS: 33215 HWY 85 LUCERNE PROJECT: 0 SALE DATE: 03/22/94 BOOK # : 1433 SALE PRICE: $394 ,800 RECEPTION # : 2380081 ADJ SALE PRICE: $376 ,800 GRANTOR: WILLIAMS JOEL GRANTEE: FULLER EARL A YEAR BLT: 1963 LAND/BLDG RATIO: 6. 27 BLDG SIZE: 6 ,942 IMPS PRICE/PSF: $44.87 CLASS: C SALE PRICE/PSF: $54.28 CONSTRUCTION—QUAL: AVG CASH DOWN: $74 ,800 WALL HEIGHT: 18 LOAN: NEW STORIES: 2 INTEREST RATE: 9 .5% BSMT SIZE: 696 LOAN TERM (YRS) : 19 LAND SIZE: 43 , 525 POINTS PAID: 0 LAND VALUE: 65, 287 REMARKS: 18 UNIT MOTEL 6942 SF PLUS 2 BDRM OWNER APT W/BSMT 696 SF STORAGE AND 1350 SF UTILITY GAR. EST GROSS $157,000 NET $109,000 PSF $54 . 28 ROOM $20,933 SALE—$18 ,000 PP=376, 800 . 13 COMPARABLE SALE is • Name: Super 8 - Castle Rock Location: 1020 Park Street Castle Rock, Colorado Type: Limited Service Motel Number of Rooms/Units: 60 Grantor. Castle Rock Super 8 Motel, Inc. Grantee: Kuros (Anrezej & Helen) and Zloza (Wladysyaw & Zophia) Instrument Warranty Deed Recording: Book 1185, Page 2026 Facilities: The 60 room property, constructed in 1980, includes a manager's apartment and in-house and public laundry facilities, located off Interstate 25 in Castle Rock, Colorado, approximately 25 miles south of Denver, in Douglas County (a county that is considered part of the Denver MSA). Buyer planned to spend approximately $100,000 on upgrading all of the guest room's furniture, fixtures and equipment. Listing Data: (financial data for 1993) Date of Sale: March 1994 Sale Price: $1,575,000 Gross Revenue: $614,988 Room Revenue: $608,000 (70.0% at $39.50) Net Operating Income: $255,650 (41.6%) Total Expenses: $359,338 (58.4% - includes management fees and reserve allowance) • Terms: $700,000 down (44%), with balance carried at 10%, 25 year term, considered cash equivalent. Comments: This property operates in a county that currently is experiencing rapid growth in both commercial and residential developments,with the most notable being the Castle Rock Factory Outlet Mall. In addition, this property has minimal competition and is the only franchised lodging facility in the area servicing the I-25 tourist/transient traffic. The property was listed at$1,600,000 for six months. Sales price represents a 1.6% reduction from listing price. Units of Comparison: After Renovation/Repairs Before Renovation/Repairs Sale Price $1,675,000 $1,575,000 Sales Price Per Room $27,917 $26,250 Gross Income Multiplier 2.72 2.56 Effective Room Revenue Multiplier 2.75 2.59 Capitalization Rate 15.26% 16.23% VT INCOME APPROACH THE INCOME APPROACH IS BASED UPON THE PREMISE THAT THE VALUE OF A PROPERTY IS REPRESENTED BY THE PRESENT WORTH OF ANTICIPATED FUTURE BENEFITS TO BE DERIVED FROM OWNERSHIP. THIS INVOLVES THE ESTIMATION OF GROSS INCOME LEVELS AS WELL AS EXPENSES. FOR THE PURPOSE OF THIS STUDY, WE HAVE USED THE DIRECT CAPITALIZATION TECHNIQUE, WHICH CONVERTS THE NET OPERATING INCOME INTO A VALUE ESTIMATED THROUGH THE USE OF A CAPITALIZATION RATE. TO DETERMINE THE SUBJECT'S VALUE PER THE INCOME APPROACH WE USED THE SUBJECT PROPERTY'S ACTUAL NET OPERATING INCOME DURING THE BASE YEAR PERIOD OF THE YEAR 1993 THROUGH JUNE OF 1994 AS SHOWN ON THE FOLLOWING PAGE. 15 AUBURN INNS, INC HERITAGE INN 3301 W. SERVICE ROAD EVANS, CO, 80620 ACTUAL ACTUAL 1993 1994 REVENUES 1,409,501 1,378,172 DEPARTMENTAL COST AND EXPENSES (421,690) (449,535) GROSS OPERATING INCOME 987,811 928,637 OPERATING EXPENSES* (482,954) (479,328) NET OPERATING INCOME 504,857 449,309 CAP. RATE ** 16% 16% INDICATED VALUE WITH PERSONAL PROPERTY 3,155,356 2,808,181 LESS PERSONAL PROPERTY (152,692) (152,692) INDICATED VALUE PER THE INCOME APPROACH 3,002,664 2,655,489 ROUNDED 3,000,000 2,655,000 AVERAGE 1993 AND 1994 VALUES $2.827,000 *Operating expenses include reserves and replacement "'Property taxes (effective tax rate) included in the cap rate and not expensed. I6 CORRELATION AND FINAL ESTIMATE OF VALUE COST APPROACH $2,770,000 SALES COMPARISON $1,600,000 INCOME APPROACH $2,827,000 THE FINAL ESTIMATE OF VALUE IS ESTIMATED TO BE $1,600.000 17 � , `�'7vI HERITAGE INN ,111111�V 4 iI EVANS.COLORADO SCHEDULE OF ESTIMATED CASH FLOW FROM OPERATIONS BEFORE DEBT SERVICE AND INCOME TAXES (EXPRESSED IN THOUSANDS OF CURRENT'DOLLARS) APPRAISER FINANCIAL COMPARISONS ESTIMATED F"` -ACTUAL 1996 :1 1995 (STABILIZED) i AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO REVENUES: ROOMS $1,097,663 77.9% $1,062,040 77.1% $853,440 77.1% $778,000 76.7% I ' FOOD AND BEVERAGE 236,002 16.7 234,891 17.0 195,512 17.7 180,000 17.7 TELEPHONE 22,137 1.6 20,771 1.5 13,002 1.2 13,000 1.3 MINOR OPERATED DEPARTMENTS 40,300 2.9 52,537 3.8 40.253 3.6 37,000 316 RENTALS AND OTHER-INCOME(NET) 13.399 1.0 7,933 0.6 5,345 0.5 7.000 0.7 ITOTAL 1,409,501 100.0 1,378,172 100.0 1,107,552 100.0 1,015,000 100.0 DEPARTMENTAL COSTS AND EXPENS IROOMS 215,162 19.6 229,615 21.6 220,201 25.8 196,000 25.2 FOOD AND BEVERAGE 172,587 73.1 185,120 78.8 180,165 92.2 147,000 81.7 TELEPHONE 18,428 83.2 16,186 77.9 14,503 111.5 12,000 92.3 MINOR OPERATED DEPARTMENTS 15,513 38.5 16,614 35.4 22,035 54.7 15,000 40.5 TOTAL 421,690 29.9 449,535 32.6 436,904 39.4 370,000 7.'6.5 GROSS OPERATING'1NCOME 987,811 70.1 928,637 67.4 670,648 60.6 -645,000 S3.5 UNDISTRIBUTED OPERATING EXPENSES. IADMINISTRATIVE AND GENERAL 113,384 8.0 107.640 7.8 83,916 7.6 99.000 9.8 MANAGEMENT FEE 96,022 6.8 77,446 5.6 33,365 3.0 30.000 3.0 MARKETING 74048 5.3 71,758 5.2 57,232 5.2 35,000 3.4 J ! ENERGY COSTS 103,845 7.4 108.451 7.9 108,357 9.8 113,000 11.1 PROPERTY OPERATION AND MAINT 66,579 4.7 76,618 5.6 -64,715 5.8 76.000 7.5 TOTAL 453.878 32.2 441,913 32.1 347,585 31.4 353,000 -24.8 CASH FLOW FROM OPERATIONS BEFORE FIXED CHARGES, DEBT SERVICE AND INCOME TAXES 533.933 37.9 486.724 35.3 323,063 29.2 292,000 28.8 IFIXED CHARGES: ' PROPERTY TAXES 35,459 2.5 34,536 2.5 36,000 3.3 46,000 4.5 I INSURANCE 22,250 1.6 30,606 2.2 .21,600 2.0 20,000 2.0 RESERVE FOR REPLACEMENT 0 0.0 0 0.0 0 0.0 30,000 3.0 TOTAL 57,709 4.1 65,142 4.7 57,600 5.2 96.000 9.5 CASH-FLOW FROM OPERATIONS BEFORE DEBT SERVICE AND:INCOME TAXES +''(NET OPERAATING INCOME) � '= 33.8% �¢B 70.6% $265,463 24.0% $196,000 9.J% I STATISTICS; PERCENTAGE OCCUPANCY 73.89% 69.36% 56.19% 50 00% IAVERAGE ROOM RATE $56.42 $57.92 -$57.32 S58.50 NOTES: I. PERCENTAGES OF DEPARTMENTAL EXPENSES ARE TO DEPARTMENTAL REVENUES; 1 ALL OTHER PERCENTAGES ARE TO TOTAL REVENUE 2. THE COMMENTS AND ASSUMPTIONS CONTAINED IN THIS REPORT ARE AN INTEGRAL PART OF THIS ESTIMATED SCHEDULE 3. PERCENTAGE TOTALS.MAY NOT ADD DUE TO ROUNDING. I - -_ -- YyY� •Vlyf r M • s has been stated, this method for determining the value of the property, using the direct `capitalization technique,is by capitalizing the first year's net operating income. In our DCF analysis, trtrcan'be seen that the,first year estimate of occupancy is 50% and the estimate of net operating income is$196,000 after deductions for reserves for replacements. Considering the anticipated overall quality, age,location,access, estimated income and expenses for of the subject in relation to similar :,`"-. buildings which have sold in the marketplace, it is our opinion that a 13.0% capitalization rate is 1'3.4 ." appropriate for applying to the first year's net operating income. Under this scenario, the value indication is as follows: Net Operating Income - Year 1 $ 196,000 Divided by Capitalization Rate 13.0% Indication of Value $1,507,333 51,510,000 Rounded To:; Accordingly, the"As Is"Market Value indication as of February 13, 1996, by the direct capitalization technique is $1,510,000. Typically, we believe the method of direct capitalization is somewhat more reliable than the DCF method, however the difference in value is only approximately 4.6% ($1,510,000 vs. S1,580,000). Although the DCF analysis provides a potentially more accurate value indication than the direct capitalization technique, it also requires more assumptions. In this situation, however, because we are dealing with a property that we believe will operate at a stabilized level in Year 1, albeit a level significantly below where it has operated in recent history,due primarily to the recent and anticipated introduction of new supply into the competitive market; similar assumptions are necessary to determine the first year's (the stabilized year) net operating income also. Consequently, will weight both approaches nearly equally and conclude that the "As Is" Market Value by the Income Approach is $1,550,000. "AS IS" MARKET VALUE INDICATION BY THE INCOME APPROACH FEBRUARY 13, 1996 S1,550,000 'I b I I CJ RECONCILIATION 92 v `* The purpose of the reconciliation section is to evaluate the separate value indications developed by the approaches to value in order to derive a final value estimate. The analysis requires consideration of the quantity and quality of the data available under each approach and the relevancy of each approach to the subject property and the appraisal problem. The value indications of the fee simple estate value are as follows: INCOME APPROACH: $1,550,000 SALES COMPARISON APPROACH: $1,630,000 To $1,870,000 COST APPROACH: Reviewed Only In our opinion, the value of the subject is best indicated by the Income Approach which is based upon the premise that value is the present worth of future benefits and utilizes actual income and expense information. Prudent investors, as owners of investment properties, are interested in the income producing capabilities of a property. In the Income Approach, nine competitive/comparable properties (two of which are under construction) were analyzed as to their estimated 1991 through 1995 occupancy and average room rates, along with current published -and average room rates for each of the properties. This information was tempered by our knowledge of other hotel properties and industry operations. After the various income and expense categories were estimated, these figures were then analyzed over a ten year holding'period through the use of a DCF analysis. The annual cash flows were converted into a present value estimate by the use of a discount rate derived from survey information prepared by Scott, Stahl, Burbach & Decker and supplemented by data from the NCR.EIF report, the 1. American Council of Life Insurance, and yield rates on various financial instruments. The reversionary capitalization rate used was 14.0%, recognizing the potential for variability in the income and expense estimates over a ten year holding period. The discount rate used to convert the future cash flows and reversionary value into a present value estimate was 14.0%. Using this-approach, an "As Is" Market Value of $1,580,000 was derived. We also completed an analysis using a direct capitalization technique which converted the first years's net operating income into a value estimate by -dividing the income by a capitalization rate. The capitalization rates derived by the comparable sales are based upon the previous year's actual income and/or projections for the coming year. Therefore, these rates represent "going-in" capitalization rates which tend to be lower than reversionary or terminal rates. The capitalization rate used under this technique was 13.0%, which produced an "As Is" Market Value estimate of $1,510,000. Typically, we believe the method of direct capitalization is somewhat more reliable than the DCF method, although the difference in value is only approximately 4.6% ($1,510,000 vs. $1,580,000. • Although the DCF analysis provides a potentially more accurate value indication than the direct capitalization technique, it also requires more assumptions. In this situation, however, because we are dealing with a property that we estimate will operate at a stabilized level in Year 1 -albeit 44Ievel significantly below where is has operated in recent history,due primarily[tithe recent and,anttcipated rrw " introduction of new supply into the competitive market, similar -assumptions are qiecessari° to' determine the first year's(the stabilized year) net operating income also. Consequently,'we weighted both approaches nearly equally and concluded that the"As Is" Market Value by the IncomeApproach was $1,550,000. In the Sales Comparison Approach, ten transactions (from both Colorado and nationally)'which 1 occurred between March 1994 and November 1995 were analyzed. Due to locational differences as!. relatively few sales, a comparison on the basis of the price per room/unit for hotels is`gene • considered a less reliable indicator of Market Value unless the properties are venisitnil• construction and market characteristics. The differences in quality and amenities offered ca• • r� / . tea A -.. C RE N ILIATI N 93 a substantially between properties as well. A much more reliable indicator of value is the effective room revenue multiplier (ERRM) which analyzes actual rooms revenue being generated,. by a ' particular property. This ratio tended to fall within a narrow range in spite of geographic differences in the properties. For the value conclusion, we used an ERRM of 2.10 to 2.40, applied to the first year's room revenue figure which produced a range of value of $1,630,000 to $1,870,000. These multipliers reflected the current condition of the property. , The Cost Approach is based upon the premise that the value of a property can be estimated by adding the Market Value of the land to the current cost new of the improvements after subtracting accrued depreciation from all sources. The Cost Approach generally is not given significant weight as this approach is limited for existing and operating properties because deductions must be made for depreciation, and the determination and allocation of this depreciation becomes a matter of mathematical calculations rather than an interpretation of market perceptions. Additionally,investors for this type of property invariably-look at the income potential of the property, tempered by an analysis of comparable properties which have sold. Again, it isour opinion that the Income Approach best measures the value of the property as it is a direct reflection of investor expectations. The Sales Comparison Approach is given less weight in this • appraisal although the low end of the value range supports the Income Approach. Therefore, based upon our investigation and analysis, it is our opinion that the "As Is" Market Value of the subject property, as of February 13, 1996 is: I ONE MILLION FIVE HUNDRED FIFTY THOUSAND DOLLARS $1,550,000 01 PROSPECTIVE MARKETING TIME Part of this appraisal assignment was to report a typicalgql.1 based on the previous value conclusion. Generally, the marketing period for the subject property l' nition of 1,6 Market Value which, in this case, states that "a reasonable time is-allowed for exposureineriod is tied to the �the open 'lia market." Therefore, the research must focus on what the market considers a reasonable time to be in the current market for this type of property, i.e. a 73 unit full service motel. This marketingtime1,1 estimate is based on the known and-expected characteristics of the property, , estate market during that period of time to the point of a negotiated sales contract.rons and the real G An important distinction to be made here is the difference between exposure time and marketing period. As with most appraisal issues, supportk comparable is taken from market transactions. For example, n the adjusted for time (date ofsale), whereas options are under contract othat callf for t�futurve e closinges of adateslue rare generally adjusted back to the date of a e not usually 1,,ppraisal. In other words, it is the"meeting of the minds"as to price and Iii terms that influences the appraisal, therefore, in this report, "reasonable exposure time"is viewed as It an historical event ending on the valuation date. Conversely, the"marketing period"is the appraisers' I estimate of the length of time necessary to secure a binding sales contract on the property in the future, i.e. ifiI prospective marketing time. :�1 ; In estimating the appropriate marketing period for the subject property, reference is made to the previous sales data. The actual marketing �I )' as to the probable future marketing period of the comparable sales can be an excellent guide 1 4` ing the sale ranged from two months to over aryear.d oMore typically,r the subject. these properties selle time between withinonng and e year if 1 reasonably priced. ` 2 I ,}' U I I I A COMPLETE, SELF-CONTAINED APPRAISAL OF THE 73 ROOM HERITAGE INN MOTEL LOCATED AT 3301 WEST SERVICE ROAD IN 111 EVANS, COLORADO I PREPARED FOR American Bank, N.A. 11 c/o Mr. Jerry Lindeen Real Estate Analyst 101 East 5th Street St Paul, Minnesota 55101-1860 I AS OF February 13, 1996 I PREPARED BY IScott, Stahl, Burbach & Decker 216 • 16th Street Mall, Suite 1060 11 Denver, CO 80202 I I I I SCOTT, STAHL, BURBACH & DECKER REAL ESTATE APPRAISERS AND CONSULTANTS 216.16TH STREET MALL.SUITE 1060 DENVER.COLORADO 80202 TELEPHONE(303)825-8825 FACSIMILE(303)825-5828 111 yI February 26, 1996 American Bank, N.A. Mr. Jerry Lindeen Real Estate Analyst 101 East Fifth Street St. Paul, Minnesota 55101-1860 RE: A complete, self contained appraisal of the Heritage Inn Motel located at 3301 West Service Road In Evans, Colorado Dear Mr. Lindeen: In accordance with you engagement letter dated January 22, 1996, we have appraised the property captioned above. The purpose of this appraisal is to estimate the"As Is" Market Value of the subject Heritage Inn Motel, as of February 13, 1996, for loan collateral analysis purposes. The legal interest appraised is the fee simple estate, under market conditions observed as of our inspection date of the property, February 13, 1996. The appraisal was prepared to conform to Title XI of the Federal Financial Institutions Reform Recovery and Enforcement Act of 1989(FIRREA),the Uniform Standards of Professional Appraisal Practice (USPAP) promulgated by the Appraisal Standards Board of the Appraisal Foundation, and the Appraisal Institute. The subject property is located on a 10.252 acre (446,586 square feet) parcel of land located at 3301 West Service Road, City of Evans, County of Weld, Colorado. Current improvements to the site include two buildings,connected via a glass enclosed hallway,containing 73 guest rooms,a restaurant, lounge, approximately 2,400 square feet of meeting space and an outdoor swimming pool. The methods which have been used for this valuation,as well as all pertinent data gathered,have been summarized for inclusion in this report. Our information has been obtained from sources believed to be reliable. We certify that we have no present or contemplated future interest in this property beyond the estimate of value. Your attention is specifically directed to the Standard Conditions and Assumptions and to the Appraisers'Comments where the parameters are outlined in more detail. The value and the associated financial estimates are intended solely for your information and may not be used for any purpose other than that indicated in the appraisal. Further, we have not been engaged to evaluate the effectiveness of management, and we are not responsible for future marketing efforts and other management actions upon which actual results will depend. MARCUS B.SCOTT.MAI•RICHARD G.STAHL,MAI•JAMES R.BURBACH,MAI•ROBERT D.DECKER,MAI MEMBERS,APPRAISAL_INSTITUTE • American Bank, N.A. February 26, 1996 Page 2 Our report is based upon estimates, assumptions and other information h developedcertainf information research of the market, knowledge of the industry and meetings during provided to us. The sources of the information and bases of the estimates and assumptions are stated in the appropriate sections of the report. Under the terms of this engagement,we have no obligation to revise this report or the estimated financial results to reflect events or conditions which occur subsequent to the date of this report. However, we will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the property. As a result of our investigation and analysis, it is our opinion that the "As Is" Market Value of the I subject property as of February 13, 19965 is as follows: ONE MILLION FIVE HUNDRED FIFTY THOUSAND DOLLARS $1,550,000 We believe that a reasonable marketingtime for the property is six to twelve months based upon this II valuation. A discussion of this marketing time is contained further within this report. Neither the whole, nor any part of this report or any reference thereto may be included in and ofy docume the fent, statement, or circular-without Scott, Stahl, Burbach & Decker's prior written app rovaand context in whichit will appear. Respectfully submitted, SCO P , TAHL, BURBACH & DECKER Ja es ' . Burbach, MAI '.rtI-r C ified General Appraiser olorado #CG00001727 William J. Kottenstette I A COMPLETE, SELF-CONTAINED APPRAISAL OF THE 73 ROOM HERITAGE INN MOTEL LOCATED AT 3301 WEST SERVICE ROAD EVANS, COLORADO TABLE OF CONTENTS STANDARD CONDITIONS AND ASSUMPTIONS 1 SUMMARY OF SALIENT FACTS AND CONCLUSIONS 3 APPRAISERS' COMMENTS/SCOPE OF THE APPRAISAL 4 INTRODUCTION 6 PROPERTY IDENTIFICATION 6 PURPOSE OF THE APPRAISAL 6 FUNCTION OF THE APPRAISAL 6 PROPERTY RIGHTS APPRAISED 6 i DEFINITION OF VALUE 7 EFFECTIVE DATE OF VALUE 7 HISTORY OF THE SUBJECT PROPERTY DESCRIPTIVE DATA 8 REGIONAL AND COMMUNITY DATA 16 NEIGHBORHOOD ANALYSIS 16 SUBJECT PROPERTY DESCRIPTION 19 SITE ANALYSIS 19 IMPROVEMENTS 2821 ZONING REAL ESTATE ASSESSMENT AND TAX INFORMATION 30 29 HIGHEST AND BEST USE ' VALUATION PROCESS 35 INCOME APPROACH 35 LODGING MARKET OVERVIEW ' COMPETITIVE/COMPARABLE SUPPLY ANALYSIS 35 FUTURE SUPPLY 8 HISTORICAL ROOM NIGHT DEMAND 39 ' FUTURE LODGING DEMAND 3 421 ESTIMATED COMPETITIVE POSITION 45 PROSPECTIVE LEVELS OF UTILIZATION 45 1 PROSPECTIVE AVERAGE ROOM RATES BASES FOR PROSPECTIVE FINANCIAL ANALYSIS 58 DISCOUNTED CASH FLOW ANALYSIS 58 DIRECT CAPITALIZATION TECHNIQUE I I A COMPLETE, SELF-CONTAINED APPRAISAL OF THE 73 ROOM HERITAGE INN MOTEL LOCATED AT 3301 WEST SERVICE ROAD EVANS, COLORADO TABLE OF CONTENTS (Continued') VALUATION PROCESS (Cont.) SALES COMPARISON APPROACH 74 COST APPROACH 80 RECONCILIATION 92 PROSPECTIVE MARKETING TIME 93 CERTIFICATION 95 QUALIFICATIONS OF THE APPRAISERS 96 EXHIBITS EXHIBIT A - SURVEY 20 EXHIBIT B - IMPROVEMENT SKETCH/AREA TABLES 27 MAPS MAP 1 THE UNITED STATES 15 MAP 2 STATE OF COLORADO 15 MAP 3 GREELEY/EVANS AREA 15 MAP 4 NEIGHBORHOOD MAP 18 MAP 5 ZONING MAP 20 MAP 6 FLOOD PLAIN MAP 20 MAP 7 COMPARABLE LODGING PROPERTIES 37 MAP 8 COMPARABLE SALES - REGIONAL/NATIONAL 76 MAP 9 COMPARABLE LAND SALES 82 ADDENDA ADDENDUM A - SUBJECT PHOTOGRAPHS AND LEGAL DESCRIPTION ADDENDUM B - PHOTOGRAPHS OF COMPARABLE LODGING PROPERTIES ADDENDUM C - PHOTOGRAPHS OF COMPARABLE SALES ADDENDUM D - ENGAGEMENT LETTER AND ATTACHMENTS 111 0 I i ' STANDARD CONDITIONS AND ASSUMPTIONS 1 1. Title to the property is assumed to be good and marketable. ' 2. No responsibility for legal matters is assumed, nor are the appraisers required to give testimony or appear in court unless prior arrangements have been made in writing. ' 3. All information in this report has been obtained from sources deemed to be reliable. The appraisers cannot, however, guarantee or be responsible for the accuracy of information furnished by others. 4. Sketches and reproductions in this report are intended for illustrative purposes only. ' S. Possession of this report does not grant the right of reproduction of all or part of the contents of the report without the written consent of the appraisers. 6. Neither all nor any part of the contents of this report shall be conveyed to the public through advertising, public relations, news, sales or other media without the written consent and approval of the authors, particularly as to valuation conclusions, the identity of the appraisers or firm with which they are connected, or any reference to the Appraisal Institute, or to the ' MAI designation. 7. The report and data investigated,except that furnished by the client, remains the sole property ' of our firm. 8. The terms of the agreement between the client and the authors are such that the authors have • no obligation to update the report or revise it in any manner because of events or transactions occurring subsequent to the date of such report. 9. Loss or removal of any portion of this report invalidates the entire report. 10. The appraisers assume that there are no hidden or unapparent conditions of the property, subsoil or structures which would render it more or less valuable than otherwise comparable properties. The appraisers do not assume responsibility for such conditions or for engineering which might be required to discover such deficiencies. 11. The report does not take into consideration the possibility of the existence of asbestos, PCB transformers, or other toxic, hazardous, or contaminated substances and/or underground storage tanks containing hazardous material. According to independently prepared reports supplied to the appraisers by the owners, these conditions appear not to exist. A Phase I Environmental Site Assessment,prepared by Ecnon Environmental Services,May 25, 1994, was provided to the appraisers by She client. According to this assessment, the site inspection and regulatory review did not identify evidence of environmental conditions associated with the current or past use, storage, or disposal of hazardous substances or petroleum products at the property. In addition, according to information provided by Asbestos Removal Specialists, asbestos wasremoved from the subject in May 1989. This report assumes that the findings and conclusions of these reports are accurate and reliable. 12. In developing the estimated operating results, we have assumed that the public perception of the property will be compatible with the existing improvements. In our opinion, the subject is anticipated to be capable of supporting the estimates arrived at in this report. To attain these estimated operating levels,we have assumed competent,efficient management exercising strong I STANDARD CONDITIONS AND ASSUMPTIONS 2 marketing and high levels of property maintenance and guest services in all departments, as well as good management control over revenues and expenses. 13. According to the Federal Emergency Management Agency National Flood Insurance Program, Flood Insurance Rate Map, Community Panel No.080182 0001 B,effective date April 2, 1979, the subject property is not located within a flood hazard area. 14. We have no objection to your use of our firm name as the author of the report which was prepared and hereby consent to your making reference to such report in your reports or financial statements and in any document filed with any government agency, provided that 1) prior to making any such reference in any report or statement or any document filed with the Security and Exchange Commission or other governmental agency, we are allowed to review and approve the text of such reference to determine the accuracy and adequacy of such reference to the report prepared by our firm; 2) in our opinion the proposed reference is not untrue or misleading and is adequate for the purposes intended in light of the circumstances under which it was made; and 3) such reference to the report includes language to be approved by our firm. 15. This report has been prepared to conform to the appraisal standards required by Title XI of the Federal Financial Institutions Reform,Recovery and Enforcement Act of 1989(FIRREA), the Standards of Professional Practice and the Code of Professional Ethics of the Appraisal Institute and also conforms to the Uniform Standards of Professional Appraisal Practice promulgated by the Appraisal Standards Board of the Appraisal Foundation. 16. We -were provided with an improvement survey plat of the property prepared by Burdick Engineering Company, Inc. of Lakewood,Colorado dated February 6, 1989 and revised March 3, 1989. From this information the site size and improvement square footages were determined. 17. The subject Heritage Inn is currently not affiliated with a national lodging franchise company (i.e. Holiday Inn, Ramada Inn, etc.). For this analysis, it is assumed that this condition will exist throughout the estimated holding period. 18. The subject currently consists of 73 rooms, 14 of which are specialty rooms called FantaSuites. Each FantaSuite has its own unique theme(Arabian Nights,The Bronco,Jungle Retreat,Space Odyssey, etc.) and are very popular. In addition, these rooms are able to attain average room rates well in excess of 3.5 times what the remaining 59 rooms attain($143 in 1995 for the suites versus$38 for the regular rooms). This analysis assumes that the lodging property will continue to offer the FantaSuite concept in at least 14 guest rooms throughout the holding period. In addition, this analysis also assumes that the existing facilities will continue to be available throughout the analysis period. In addition to the guest rooms, these facilities include the following: . a restaurant; . a lounge 1111 . approximately 2,400 square feet of meeting space; and . an outdoor heated swimming pool. 19. The American with Disabilities Act("ADA") became effective January 26, 1992. We have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA, but we believe the property is accessible to handicapped individuals. U U SUMMARY OF SALIENT FACTS AND CONCLUSIONS 3 PROPERTY IDENTIFICATION: 73-Room Heritage Inn Motel lPROPERTY LOCATION: 3301 West Service Road(West Service Road is the western frontage road for U.S. Highway 85) in Evans, Colorado. EFFECTIVE DATES OF VALUE: February 13, 1996 IPROPERTY RIGHTS APPRAISED: Fee Simple Estate SITE DESCRIPTION: The overall subject site is irregular in shape and contains approximately 446,586 square feet or 10.252 acres. The primary entry into the subject site would is from West Service Road, a frontage road for U.S. Highway 85. Primary access from U.S.Highway 85,onto West Service Road is from 31st Street. Secondary access to West Service Road, from U.S. Highway 85 is from 35th Street to the south. IMPROVEMENT DESCRIPTION: A full service lodging facility contained in two, I 2-story buildings, connected via a glass enclosed hallway, containing 73 guest rooms,a restaurant, lounge, approximately 2,400 square feet of meeting space and an outdoor heated swimming pool. ZONING: B1 - Business District, Town of Evans, Colorado. FLOOD PLAIN STATUS: The subject-property is not located in a flood hazard area according to the Federal Emergency I Management Agency National Flood Insurance Program,Flood Insurance Rate Map,Community Panel No. 080182 0001 B, effective date April 2, 1979. TAX SCHEDULE NUMBERS Real Property 3862086 ' Personal Property 0004470 INDICATIONS OF "AS IS" MARKET VALUE INCOME APPROACH: $1,550,000 ' SALES COMPARISON APPROACH: $1,630,000 to $1,870,000 COST APPROACH: Reviewed Only FINAL ESTIMATE OF VALUE $1,550,000 ' VALUE OF FURNITURE, FIXTURES & EQUIPMENT $270,000 I I APPRAISERS' COMMENTS/SCOPE OF THE APPRAISAL 4 The subject of this appraisal is the Heritage Inn Motel located in Evan, Colorado. The subject property is located on a 10.252 acre (446,586 square feet) parcel of land located at 3301 West Service Road, City of Evans, County of Weld, Colorado. Current improvements to the site include two buildings, connected via a glass enclosed hallway, containing 73 guest rooms, a restaurant, lounge, approximately 2,400 square feet of meeting space and an outdoor heated swimming pool. 111 In the appraisal of income producing properties, there are three basic methods by which data is generally processed into an indication of value. These methods are known as the Cost, Income,and 111 Sales Comparison Approaches to value. In the Cost Approach, the cost to reproduce or replace the improvements is estimated. A deduction is made for any depreciation and the result is combined with the estimated value of the underlying land. This approach is applicable when each component is independently measurable, and when the sum of all components is believed to reflect Market Value. This approach is not applicable to unimproved land or obsolete improvements, and is most applicable to proposed projects, yet to be developed. For proposed properties, the Cost Approach is used to help determine financial feasibility for a 111 property. This is important because the economic recession which has impacted the local area and the Rocky Mountain Region as a whole, has affected hotel properties as well as most commercial real estate classifications since the mid 1980s. As a-direct result of this economic downturn, income for most income producing classifications of real estate has dropped significantly. These lower income levels often prevent the feasibility of new construction of investment grade real estate. For this reason, the Cost Approach is more applicable for proposed properties to justify feasibility. However, for investment grade real estate, most emphasis by investors is placed upon the Income and Sales Comparison Approaches. Therefore, the Cost Approach is not typically considered a primary indicator of value for improvements such as the subject. The Sales Comparison Approach compares the proposed property to other properties which have changed hands, preferably fairly recently. This approach is most meaningful when there is adequate market data involving comparable properties. Reliability of the approach varies directly with the quantity and quality of available market data. This approach is fully developed in this appraisal, but is considered to provide a somewhat less reliable indication of value than the Income Approach. This is due to a scarcity of comparable sales data in the Greeley and the northern Colorado area for properties with similar characteristics as the subject. To supplement local sales information,we have compiled a list of comparable sales along the Colorado Front Range as well as from other areas of the country and made a comparison on the basis of a ratio analysis; specifically, an effective room revenue multiplier analysis (ERRM). Although the physical characteristics of the various hotel sales are different,the ERRM's generally fall within a relatively narrow range,providing credibility to this approach in spite of the geographic differences in the properties. The Income Approach analyzes the property's capacity to generate income and converts this capacity into an indication of value. This approach is suitable for properties which have obvious earning power and investment appeal, but inappropriate for properties which have no readily discernable income potential. The traditional approach is to estimate the stabilized income and expenses for the property and capitalize the resulting net income by an overall capitalization rate. This technique is most applicable when a property has been operating and has a financial history. When analyzing a property in which no financial history exists, and due to the complex characteristics of hotel cash flows, the technique most often utilized is the discounted cash flow (DCF) technique. This valuation method estimates the present worth of the net income stream and the reversionary interest in the property over a holding period. We have also completed a direct capitalization analysis. APPRAISERS' COMMENTS/SCOPE OF THE APPRAISAL 5 The Income Approach is generally more reliable than the Cost and Sales Comparison Approaches when analyzing income producing properties. Investors are more concerned about the income which the property will actually generate. Therefore,the Income Approach has been given the most weight, with some consideration to the Sale Comparison Approach which, through the use of a ERRM analysis also considers the income being generated by the property. The scope of this appraisal is to perform the necessary research and analysis to prepare a report in accordance with the Standards of Professional Practice of the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation. The following steps were taken in regard to the subject property: 1. The property was inspected February 13, 1996. Photographs of the subject property were also taken February 13, 1996. 2. Regional, city,county and neighborhood data werebased on information compiled from office files and published sources including the U.S. Bureau of Census, Cities of Greeley and Evans, Colorado, Colorado Department of Labor, and various local entities such as chambers of commerce and conventions and visitors bureaus. 3. The subject property data was based on a legal description provided by the client, physical inspection of the property and public records of Weld County. 4. The estimation of the highest and best use for the subject property was based upon data collected in the three steps noted above. 5. Market Data was collected from published real estate transactions and our data bases. Confirmation-of this data was accomplished by examination of deeds, deeds of trust, and/or other public records. Additional confirmation was obtained through discussions of the individual transactions with principals and/or brokers involved in the transactions. The data presented in this report does not represent the entire range of market transactions for this type of property. Rather, the data presented is the most comparable to the subject and is taken from sales transactions believed to be reliable indicators of value as of the effective date of this appraisal. I I I I I I I I INTRODUCTION I I I I I I I p I PROPERTY IDENTIFICATION 6 The subject property is known at the Heritage Inn Motel located at 3301 West Service Road in Evans, Colorado. The property is primarily market oriented as a transient (both tourist and commercial) lodging facility which has been analyzed on the bases of 73 existing units. This room mix includes 14 individually decorated and themed FantaSuites,and 59"standard"motel rooms(27 with two double beds called double/doubles, 10 with one queen bed and 22 with one king bed). Additional facilities include a restaurant,lounge,approximately 2,400 square feet of meeting space and an outdoor heated swimming pool. It is reported that the hotel opened in 1964, and was partially renovated in 1990. According to the Weld County Assessor's office, the adjusted year of construction is 1975. The overall subject site, according to a provided survey prepared by Burdick Engineering Company, Inc.in February 1989, is irregular in shape and contains approximately 446,586 square feet,or 10.252 acres. The primary entry into the subject site is from West Service Road, a frontage road for U.S. Highway 85. Primary access from U.S. Highway 85, onto West Service Road is from 31st Street. Secondary access to West Service Road, from U.S. Highway 85 is from 35th Street to the south. The legal description, as obtained from a title policy prepared by Transamerica Title Insurance Company dated March 17, 1989, can be found in Addendum A of this report. PURPOSE OF THE APPRAISAL IThe purpose of this appraisal is to estimate the "As Is" Market Value of the fee simple estate interest of the subject property as of February 13, 1996. FUNCTION OF THE APPRAISAL The function of this report is to estimate the Market Value of the fee simple estate interest for loan collateral analysis purposes. PROPERTY RIGHTS APPRAISED IThe property rights being appraised represent the fee simple ownership of the property. Fee simple is defined as follows: I "Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power and escheat"' DEFINITION OF VALUE For the purpose of this report, the definition of value shall be that of Market Value, which is defined as follows: - I "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: I 1 The Dictionary of Real Estate Aooraisal. Third Edition, Appraisal Institute, 1993, Page 140. I I DEFINITION OF VALUE 7 a. buyer and seller are typically motivated; b. both parties are well informed or well advised, and each acting in what they consider their own best interests; c. a reasonable time is allowed for exposure in the open market: d. payment is made in terms of cash in U.S. 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."2 EFFECTIVE DATE OF VALUE The site was physically inspected February 13, 1996. The valuation date for the "As Is" premise will also be February 13, 1996. 111 HISTORY OF THE SUBJECT PROPERTY The current owners of the subject property, Auburn Inns, Inc., purchased the property from ANB U Realty Corporation on March 16, 1989. The recorded purchase price, via warranty deed (recorded Book 1227, Reception 02173751 - Weld County, Colorado)was$1,275,000. After Auburn Inns, Inc. purchased the Heritage Inn, the property was partially renovated, including the development of the 14 FantaSuites. At the present time, the property is currently being marketed for sale by Grubb & Ellis. The asking price is $2,450,000. At the present time, we are not aware of any offers for the subject property. I I I I a I 1 2Federal Financial Institutions Reform, Recovery, and Enforcement Act of 1989. DESCRIPTIVE DATA I IREGIONAL AND COMMUNITY DATA 8 Evans, Colorado, is located in northeast Colorado, approximately 50 miles northeast of Denver, the I state capital. Evans is located in Weld County, and is located adjacent to the City of Greeley,the county seat. The entire county has been designated a Metropolitan Statistical Area(MSA)by the U.S. Census Bureau and is often referred to as the Greeley MSA. Weld County is basically considered an I agricultural county, with 2,500,000 acres, or 96% of the 4,000 square miles in the county devoted to farming and raising livestock. Weld County (Greeley MSA) has a population of over 140,000, and is larger in size (total square miles) than Delaware, Rhode Island and Washington D.C. combined. Elevation ranges from 4,400 to 5,000 feet above sea level. IWeld County ranks fourth in the nation, and first in the state, in the value of agriculture products sold. The bulk of the county's agriculture economy is centered in livestock production. In fact, I Greeley is the home base of Montfort of Colorado (a livestock processing company), one of several ConAgra companies based in the county. Other majoragriculture companies include Western Sugar and National Farms, Inc. The maps on the following pages indicate the property's location in relation I to the United States, the State of Colorado and the local area: Evans/Greeley portion of Weld County. Our analysis of selected economic and demographic indicators for the Greeley MSA and the State of Colorado indicate steady growth for this area over the past five years,with stronger growth occurring 111 since 1990. The City of Greeley and Weld County have taken a more aggressive approach to economic development over the past several years in an attempt to diversify the economy from that of a primarily agricultural based one,which included the establishment of an economic development office I called the Greeley/Weld Economic Development Action Partnership, Inc. As noted by this partnership, economic diversification is occurring. Wage income in the late 1980s totaled 28% from manufacturing, 17% from farming, 15%from government, 14%from wholesale and retail trade, 12% I from services and 8% construction. Eastman Kodak, Montfort, Hewlett Packard, Western Sugar, Coors and State Farm Insurance are some of the nationally known corporations with major facilities in the Weld County area. I The main roadway access to the Evans/Greeley area includes I-25, a major north/south route within the State of Colorado, via U.S. Highway 34 (U.S. 34), an east/west route connecting the prairies to the east, with the mountains to the west, and U.S. Highway 85 (U.S. 85) a north/south U.S. highway I primarily servicing Denver to the south, and Cheyenne, Wyoming to the north. The subject Heritage Inn Motel is located just south of Downtown Greeley, in Evans, along the U.S. 85 Frontage Road, south of the intersection of 31st Street, approximately one-half mile south of the intersection of U.S. 34 Bypass and U.S.85. The highway location is important because it brings commerce as well as IItourist traffic to and through the Evans/Greeley area. As for the history of the area, Weld County was first explored by Major Stephen H. Long in 1821. I In 1835, a government expedition came through the area, and in the next year, Lt. Lancaster Lupton returned and established a trading post located just north of the present town of Ft. Lupton. In 1837, I 111 Colonel Ceren St. Vrain established Fort St. Vrain. In 1861, the U.S. Congress took parts of the Territories of Nebraska, Kansas, New Mexico and Utah to create the Territory of Colorado. Weld County, in a form slightly larger than that of which exists today, was one of seventeen original counties established by territorial legislation in September 1861. Weld County was named for Lucas Weld, the first territorial secretary. The first territorial seat of Weld County was St. Vrain. Weld County has had a multitude of county seats during its history. After St. Vrain came Lathem, to Evans, to Greeley, to Evans again, and in 1877, back to Greeley. Much of Weld County's original population consisted of people of German decent who migrated from Russia in the early 1900s. Originally they came as railroad workers, but soon many worked in the productive beet fields and eventually became landowners. Weld County's Spanish population began to arrive in the mid 1920s as laborers for the sugar beet industry. REGIONAL AND COMMUNITY DATA 9 Because of the county seat location, Greeley became the economic center of the county. Evans is the second largest city in Weld County, and is located directly south, while being adjacent to, the City of Greeley. There are nearly 100 businesses located in Evans,primarily due to its location along U.S. 85. The area's relatively semi-arid climate offers moderate summers, with crisp cool nights, and sunny, relatively mild winters. To the east and northeast of the area are prairies and the Pawnee National grasslands and buttes. To the south is the metropolitan area of Denver, and allof its offerings, and to the west, within one hour's drive, are the Rocky Mountains which offer numerous opportunities for the outdoor recreationalist. The following table shows the driving distances between Greeley and other selected cities in the Colorado and Wyoming area. Approximate Driving Distances from Greeley Approximate City Driving Mileage Metropolitan Denver 50 Boulder, Colorado 50 I Loveland, Colorado 19 Estes Park, Colorado 45 Ft. Collins, Colorado 29 Cheyenne, Wyoming 50 Source: Greeley/Weld Chamber of Commerce A significant factor in the relative success of a lodging property is the strength and growth in the market area as reflected in its economy. Following are various conclusions and statements that may be made through an analysis of selected economic and demographic data. IPopulation Factors contributing to historical and future population growth are important in evaluating the strength of a market area. While the local populace does not typically generate a substantial amount of room-night demand, the magnitude of population growth is an indication of an area's economic vitality. ' While the United States population grew at an average annual compound rate of 1.1% from 1970 to 1985, Weld County's growth rate was over 2.9% over the same period of time. While population ' growth for Weld County has shown slow growth,when compounded annually between 1989 and 1994, due to changing regional economic patterns (primarily the energy bust of the mid-1980s which affected most of the front range communities of Colorado and Wyoming), the pace of-growth is ' anticipated to increase in the later 1990s, as is illustrated in the increase between 1993 and 1994. By the year 2000, according to the Greeley/Weld Chamber of Commerce projections, the population is estimated to be approximately 152,000 for the county. Today, Weld County, and more specifically the Evans/Greeley area, is concentrating on developing into a diversified metropolitan area through capitalizing on its central location, proximity to other state population centers, and quality of living attributes. I I I IREGIONAL AND COMMUNITY DATA 10 TOTAL POPULATION IYear Colorado Greeley MSA I 1989 1990 3,372,500 139,500 3,321,100 132,300 1991 3,367,900 133,600 1992 3,489,800 136,700 I 1993 3,616,000 140,800 1994 3,715,900 146,000 IAACGR* 1.96% 0.92% * Average Annual Compound Growth Rate ISource: Sales and Marketing Management magazine - "Survey of Buying Power", 1990-1995 issues IRetail and Eating and Drinking Place Sales Retail Sales: Historical retail sales are an indicator of an area's recent overall business activity. As I the following chart indicates, the Greeley MSA retail activity has shown an average annual increase of 9.4%over the past five years;however,the strongest percentage of increase occurred between 1991 and 1993 (approximately 32.1%). The State of Colorado has also shown similar trends,approximately 6.4%compounded annually,with a 18.8%increase between 1991 and 1993. It is our belief that as the Ieconomy continues to recover, continued growth is expected in the forthcoming years. ITOTAL RETAIL SALES (000s) year. Colorado Greeley MSA I 1989 $26,200,000 $636,272 1990 27,600,000 674,935 1991 28,000,000 697,313 I 1992 31,300,000 808,417 1993 33,261,000 921,287 1994 35,670,000 995,938 IAACGR* 6.4% 9.4% i * Average Annual Compound Growth Rate Source: Sales and Marketing Management magazine -"Survey of Buying Power", 1990-1995 issues IIIIEating and Drinking Place Sales: Historical eating and drinking place sales are another indicator of an area's business activity. The statistics indicate that both have shown strong increases since 1989. I For Weld County,we attribute this to the diversification of the economy,and the transformation from a primarily agricultural economyto one that has a strong manufacturing and service influence. While this information does not tie in directly with lodging sales, growth in retail and eating and drinking place sales is generally considered an indicator of a market's economic vitality. II REGIONAL AND COMMUNITY DATA 11 EATING AND DRINKING PLACE SALES (000'S1 Colorado Greeley MSA 1989 $2,542,664 $61,588 1990 2,731,682 65,435 1991 2,930,401 71,034 1992 3,165,843 85,000 1993 4,042,419 100,257 1994 4,472,220 117,073 AACGR* 12.0% 13.7% * Average Annual Compound Growth Rate Source: Sales and Marketing Management magazine- 'Survey of Buying Power', 1990-1995 issues Effective Buying Income The following table shows total effective buying income after taxes for the Greeley MSA. Effective buying power increased steadily during the 1980s; however, in 1990, there was a 0.5%decrease. The average annual increase between 1989 and 1994 has been 6.7%. This indicates improving economic conditions for the area. TOTAL El-l-LCTIVE BUYING INCOME (AFTER TAXES) - GREELEY MSA Year EBI (000's) Percent Change 1989 $1,403,186 -- 1990 1,396,383 (0.5) 1991 1,605,796 15.0 1992 1,645,124 2.4 1993 1,790,181 8.8 1994 1,944,820 8.6 Source: Sales and Marketing Management Magazine 'Survey of Buying Power, 1990-1995 issues. The median household effective buying income (after taxes) for the Greeley Metropolitan area for 1982 was $18,577. In 1994, the median household income increased to $31,211, representing an average annual growth rate of 4.4% for the period 1982 to 1994, 7.7% annually since 1988 (EBI was S19,944 in 1988). Employment Historically, Weld County has been an agricultural based economy, as is partially evidenced by the county's largest employer, ConAgra Companies. ConAgra Companies products include meat packing (Montfort), agriculture commodities and agriculture services. As previously noted,.however, Weld County has been able to diversify somewhat over the last several years. II IREGIONAL AND COMMUNITY DATA 12 Eastman Kodak, Hewlett Packard, Western Sugar, Coon and State Farm Insurance are some of the II nationally known corporations that have located substantial operations in Weld County, and more generally the Evans/Greeley, area. II Regarding non-agricultural employment, government, services, and wholesale and retail trade dominate in Weld County. These sectors alone in 1994 accounted for approximately 65%of all non- agricultural jobs. Manufacturing is also strong, accounting for approximately 18.9% of all non- agricultural jobs. According to the Colorado Department of Labor, the unemployment rate for Weld I County for year end 1994 was 4.9%. Through November 1995, the unemployment rate for Colorado and the Greeley MSA was 3.6% and 3.7%, respectively. Total employment growth rates have also been positive in recent years for Weld County (or Greeley MSA) as evidenced by averaging 3.4% II annual employment growth between 1989 and 1994. This is similar to Colorado's annual growth rate in employment of 3.7%. IAVERAGE EMPLOYMENT Year Colorado Greeley MSA I 1989 1,597,000 63,030 1990 1,678,000 62,846 1991 1,694,000 64,457 I 1992 1,712,000 64,458 1993 1,801,000 68,517 1994 1,912,000 74,493 IAACGR* 3.7% 3.4% * Average Annual Compound Growth Rate I Source: Colorado Department of Labor I Principal industry groups (non-agriculture)within the Greeley MSA area are shown on the following chart as of 1987 and 1994 along with the average annual percentage change over this period. Non-Agricultural Wage and Salary Employment - Greeley MSA I 1987 1994 Average Annual Industry Average Average PercentageChange IMining500 Contract Construction 2,520 3,350 9.84.2% Manufacturing 8,530 10,260 2.7 I Transportation and Public Utilities 2,160 2,100 (0.4) Wholesale and Retail Trade 9,290 12,480 4,3 IFinance, Insurance and Real Estate 1,950 2,440 3.3 Services 7,610 12,170 6.9 Federal, State & Local ' Government 9 191 10.670 2.2 Total 41 751 54,430 3.9% ISource: Colorado Department of Labor REGIONAL AND COMMUNITY DATA 13 As the above chart illustrates,the strong growth areas of the Weld County economy are in the contract construction, mining, wholesale and retail trade, and the services sectors. These statistics reflect the diversification process that is occurring away from agricultural dependence. Four employment categories (government, services, wholesale and retail trade and manufacturing) accounted for approximately 84% of the total non-agricultural employees in the Greeley MSA area in 1994. This is not surprising given the economic profile of the city consisting of numerous high- tech manufacturing/service companies (Eastman Kodak and Hewlett Packard), numerous service industries to support the workers at these types of manufacturing/service companies, hotel/motel facilities, the University of Northern Colorado, Aims Community College and the county and city offices located in the Greeley area. In addition, the county's largest employer, ConAgra, employs approximately 4,305 people and is not included in the above statistics because the jobs are agriculturally based. The following outlines the major employers, as well as the approximate number of employees, in the Greeley MSA area according to the Greeley/Weld Economic Development Action Partnership: MAJOR EMPLOYERS - GREELEY MSA, COLORADO Employer Number of Employees ConAgra 4,305 Eastman Kodak 2,300 School District #6 1,675 North Colorado Medical Center 1,357 Aims Community College 1,167 University of Northern Colorado 1,100 Weld County 1,000 Hewlett Packard 1,000 State of Colorado 930 City of Greeley 844 State Farm Insurance 719 McLane Western 550 Source: Greeley/Weld Economic Development Action Partnership Greeley is the home of the University of Northern Colorado (UNC) and Aims Community College. UNC, which is located on 236 acres in the southern portion of the city, currently offers over 2,700 academic courses and enrolls more than 10,000 students. In addition, UNC is the site for the annual Denver Broncos Training Camp, which typically occurs for several weeks in late July and early August. Aims Community College has been in existence for 28 years and has an enrollment of over 18,500. Aims is the largest of Colorado's 15 public community colleges. The North Colorado Medical Center is a 326 bed regional medical center that supports the entire northeastern Colorado area. In addition to being an education hospital, this center employs over 1,357 people. 1 rREGIONAL AND COMMUNITY DATA 14 Transportation ' Highways: The Evans/Greeley area is serviced by U.S.Highways 85(north/south)and 34(east/west). U.S. Highway 85 connects the Greeley area to Denver to the south and to Cheyenne, Wyoming to the north. U.S. 34 intersects with Interstate Highway 76 (a diagonal highway connecting northeastern Colorado and western Nebraska)at Wiggins,Colorado to the east. To the west, U.S. 34 intersects with Interstate 25(north/south route)before entering the Rocky Mountains and passing through Estes Park and finally Rocky Mountain National Park. The Evans/Greeley internal roadway system is set up in a grid pattern, allowing for efficiency in traffic flow as well as ease in location of specific addresses. Air Service: The nearest commercial air service to the area is located at the Fort Collins/Loveland Airport, approximately 15 miles west of the Evans/Greeley area. United Express currently offers approximately 10 daily flights to and from Denver's Stapleton International Airport. However, the majority of the commercial air traffic accessing the area originates/terminates at Denver's new airport, Denver International Airport, which opened in early 1995, and is located 40 miles south of ' Evans/Greeley. The subject area's proximity to Denver International Airport generally precludes, and will continue to preclude, a significant number of passengers commuting to the Fort Collins/Loveland Airport. In addition to the Fort Collins/Loveland Airport, there are two other general aviation airports in the area;however,neither accept commercial traffic:Greeley/Weld County Airport and the Erie Airport. Tourism: Attractions and Activities Attractions: A selection of the Greeley area's attractions and activities include the following: Greeley Independence Stampede is a 15 day event running in the latter part of June through the July 4th weekend. Scheduled events include nightly shows highlighting top country/western acts, a carnival midway and a 4th of July rodeo. This event attracts people from all over the State of Colorado, from surrounding states, and from all over the country. Festivities at Lincoln Park - Each spring and summer, thousands of people visit Lincoln Park in Downtown Greeley for two of the largest festivals in northern Colorado: the Cinco de Mayo/Semana Latina's Outdoor Festival and the Arts Picnic. Denver Broncos Training Camp begins in mid-July and typically lasts 4 to 6 weeks. The Denver Broncos Football team uses the University of Northern Colorado Campus, and the public is welcome to watch the team's practices and scrimmages. Weld County Fair is held annually during the last week in July at Island Grove Park in Greeley. This county fair is the largest in the state, with the exception of the annual Colorado State Fair held in Pueblo, Colorado. Traditional cultural attractions also exist in the Greeley area. Every year the University of Northern Colorado hosts a Jazz Festival, which features both national and local musicians. The Union Colony Civic Center is often referred to as the cultural gem of Northern Colorado. It houses the 1,667 seat Montfort Concert Hall, the 220 seat Hensel Phelps Theatre and the 1,000 square foot Tointon Gallery for the Visual Arts. Owned and operated by the City of Greeley, the Union Colony Civic Center is home to a variety of event: Broadway productions, dance, theatre, film and the University of Northern Colorado's Jazz Festival. In addition, the civic center often accommodates meetings, I IREGIONAL AND COMMUNITY DATA 15 conferences and receptions. And finally, Greeley is home to one of the area's most extensive Imuseums, the Greeley Municipal Museum. ` Summary The previous analysis indicates a recent history of moderate growth in the Evans/Greeley and Weld County economy. Based on this, as well as on other information presented, the general trend for the coming years is for positive growth for the area. This is supported by a cursory review of selected economic and demographic indicators over the past five years, which tend to indicate a growing economy. Local business leaders are attempting to diversify the economic base to complement the strong agriculturally based economy to help insure future growth and stability. The city's location with respect to area population centers such as Denver and Ft. Collins, proximity to the State of Colorado's recreation areas of the Rocky Mountains, it's transportation system, readily available utilities and pro-business climate are expected to encourage future growth in the Greeley and Weld County area economy which should also prove beneficial for the subject property. I I I I I I I I I I I I a i z\ - Ya3 Y. .Y�'i�WS�YS e N ••r. i = a eC j C• i 2. F tit. C m : t o ( 17 a • Iwz f.' �, 2 a: 41) = 0 , Q U • I. 1 . 2 iz :e. s1' z 4 <4 t �_}y$��1 °� x: • V II Fy 'IZ i _ 1^ la i4° .'•MwL 3 a t _ - a "Ilia `� a .. • r s�E _ {'�.I �Y o m '9 Z 7. r< $ a 4 I wl o�Ill ¢ ,,e • a 3 {u ��Y II B,, ra F0° ' 4 v. 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I ° _ c 10 » ` , I � ° , I , I % ! \ [ / ! $ 1 . lI \ 1 ! ! ; - ( ` c . c ! � _ 8 . ! i - [ \ ` j ! , [ ' al o , \ | L � ) , ® , ra ° / / -- I, - | E } { ` | [ \ \� - I \ : \ , , �� E/� 11 I I TO CHEYENNE I I GREELEY m C O LO RAD O IBLANG GROVE :ED' I PARKCENTENNIAL jVILLAGEII5TH ST W CI •.0_a BUS •'�1 e• UNN COLONY = CICCENTER' _ GRELEYCENTER' ` 9TH ST I FOR RECREATION r t SENIOR CENTER US 34 BUSINESSro LOVELAND/11 __ lFT COLLINS 13TH ST a ESTES PARK a 'k HAMBER x OF 0. v 16TH STHOSPITAL •MMERC= i IVERSI1 \ < < OF US 341•RTXERN70FTMOf1lAIMSrr •LORAO COMMUNITYel COLLEGE w ul 20TH ST QO 3 ' ,_ - UNC I 4,p WEST QVi`O CAMPUS i 25TH S n US 34 BYPASS ca ils Denotes Major Retail Centers Street Numbering System EVANS t I Avenues run north and south,stints run east and west COLORADO Lowest numbers begin at the north end and east side. ,.'��.� 1 l Subject :/`� NEIGHBORHOOD ANALYSIS 16 The site of the subject Heritage Inn Motel is located along West Service Road, which is essentially the western frontage road for U.S. Highway 85 (U.S. 85), one-half mile south of the intersection of U.S. 85 and U.S. Highway 34 (U.S. 34) Bypass in Evans, Colorado. The subject site is bounded by West Service Road to the east, vacant land to the south and to the west, and a recreational vehicle storage and sales facility to the north. The subject neighborhood borders the southeast portion of the City of Greeley, in Weld County, Colorado. More specifically, the subject neighborhood basically encompasses the majority of the Town of Evans as well as a portion of the City of Greeley. General neighborhood boundaries are U.S. 34 Bypass to the north, 1st Avenue to the east, the South Platte River to the south, and 23rd Avenue to the west. Major traffic arterials within the neighborhood include U.S. 85, which connects Greeley to the Denver Metropolitan Area to the south, and Cheyenne, Wyoming to the north; and U.S. 34 Bypass, which connects with U.S. 34 and Loveland and Estes Park to the west, and U.S. 34 and Ft. Morgan and Sterling to the east. There are several "motel' style lodging facilities located in the subject's neighborhood. These include a Motel 6, the Heritage Inn, the Winterset Inn and the just completed Sleep Inn. The immediate area consists of industrial, commercial and residential developments, as well as a significant amount of vacant land. The majority of the industrial/commercial developments are located along the major thoroughfares of U.S. 85 and 34 Bypass, with the other areas being primarily residential. The vacant land is located in both the industrial/commercial areas as well as the residen- tial portions of the neighborhood. In determining the site's suitability for the subject improvements,we reviewed accessibility,visibility, proximity to generators of lodging demand as well as surrounding land uses. Accessibility Access to the subject site is considered adequate. The site is situated on the U.S. 85 western frontage road (West Service Road), which has access from several local east west traffic arterials. These arterials, proximate to the subject, include 31st Street to the north and 35th Street to the south. Generally speaking, the majority of the lodging demand for the subject accesses the site via the signalized intersection of U.S. 85 and 31st Street. Ingress and egress to the subject property is good via two entrances off West Service Road. Visibility The subject property has adequate visibility for motorists traveling both directions on U.S.Highway 85. Given the set-back of the subject property from West Service Road and U.S. 85, as well as the curvature of the roads and landscaping, the actual visibility of the subject improvement is very limited, less than one block. However, visibility is enhanced significantly via the well lighted sign that exists along the subject's frontage. This sign enhances the visibility of the subject by approximately three to four blocks, either direction, along U.S. 85. Proximity to Demand Generators In comparison to existing lodging facilities in the local market area(including those in the immediate area, those located in the downtown portions of Greeley,and the newer lodging facilities located near the Greeley Mall along U.S.34 Bypass and 23rd Avenue)the subject is both at a-competitive advantage and disadvantage for attracting potential segments of the lodging market. The subject attracts guests from highway traffic on both U.S. 85 and U.S. 34 Bypass (which is a significant source of business); I NEIGHBORHOOD ANALYSIS 17 however, the site is not located in what would be considered the primary-commercial area, or downtown core, which somewhat limits its commercial appeal. The subject, however, is proximate to a major employer in the area,State Farm Insurance Company,located approximately one-half mile to the north. This company does provide commercial room night demand for the market. In addition, the subject is located proximate to the University of Northern Colorado campus, and enjoys the benefits from this location, i.e. football games, homecoming, parents weekend, graduation, etc. Overall however, it is the highways in the area that have the most influence on the subject property. The subject property is located in an area which consists of several other motels, that represent the first lodging for most travelers entering the area on U.S. 85. In addition, there are very few full- service lodging facilities (those that include restaurants, lounges, meeting space, etc.) in the Greeley/Evans area. Consequently, demand which seeks full-service facilities increases the opportunities for the subject. The major non-tourist/transient demand generator in the area is commercial business resulting from and servicing the high-tech, agricultural, university and service industries of the Greeley area and various groups that come to the Greeley area for regional meetings. As noted, State Farm Insurance Company has a regional office, employing approximately 700 people, located in a building approximately one-half mile north of the subject. The majority of the other commercial related businesses, including the city and county government offices, are generally located in the downtown and western portions of the Greeley area. Until recently (late 1994) because of the subject neighborhood's lack of quality, nationally franchised hotel/motel facilities, the majority of the commercial demand generated in the area stayed at the downtown properties or other franchised properties outside of the area; in Ft. Collins and Loveland, for example. However, since 1994, four new lodging properties have been developed, or are under construction, in the immediate Greeley/Evans market area. These include a Fairfield Inn and a Super 8 Motel, which both opened in late 1994 near the Greeley Mall (U.S. 34 Bypass and 23rd Avenue), and the under-construction Holiday Inn Express (also near the Greeley Mall) and a Sleep Inn (located proximate to the subject). The introduction of these properties into the market helped, and should continue to help, accommodate lodging demand that was previously using properties in Loveland and Ft. Collins due to the immediate area's lack of quality facilities. Surrounding Land Uses Beginning with the subject property and going north, improvements consist of a recreational vehicle sales and storage center(Economy R.V. Center) and the Evans Business Center. The Evans Business Center contains two office/industrial buildings whose two primary tenants include the Colorado Department of Transportation and Benchmark. Improvements further north, at the intersection of U.S.Highway 85, West Service Road and 31st Street,includes a small retail strip center with a grocery store anchor (Steffens Center) and a Western Sizzlin' Steak House. Improvements to the east of the subject,across West Service Road and U.S.85, include a mobile home sales company (All American Homes), the Western Trailer and Tractor company, the Winterset Inn lodging facility, a Phillips 66 gasoline service station, and some residential development. Vacant land is located immediately south of the subject with industrial and residential developments located further south beyond this vacant land, along Service Road. Immediately to the west is vacant land, with several industrial buildings located further to the west. I I I NEIGHBORHOOD ANALYSIS 18 Conclusion Overall, the location of the subject facility appears to be well suited for the area given its proximity to U.S. 85 as well as to U.S. 34 Bypass. The property has adequate access, good ingress and egress, I adequate visibility that is enhanced through signage, as well as a location that generally benefits from many of the lodging market's existing and potential future lodging demand generators. I I I I I I I I I Neighborhood Map ` .• .9h M1S ry9es. Of = 5T < Z ; it apt, I` 40 Set 19TN I ST I 1TTNST Ro . �" 'O tat" O.. 18TN-T H �' • CUN UNIVERSITY T 444 U Ro n MONry1 C 4...0O < CT C IIiTN Y• EW B CRANFORO OF Si COTTONW000 = GLENFAIR et 01.A >ti� COLORADO Am 19TN3 gust I OR TyW V \ uAtnO! 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CARSON ST JIST ST ROMST 0 i15l ST C �W--+�' C. LATMAN ST - J O0 O D. MCCOOK 42ND al A SI C O R y » 92N0ST -w r EVANSYTP«�>�i4R0 ;ST <2RDSTi��1380. ST I _O 4P< •�.ST 1 7 T - _— 55TN sr/ I i SUBJECT PROPERTY DESCRIPTION 19 SITE ANALYSIS Location: 3301 West Service Road (West Service Road is the frontage Road for U.S. Highway 85) in Evans, Colorado. Land Area: The overall subject site is irregular in shape and contains approximately 446,586 square feet or 10.252 acres. General Dimensions: North 762.40 feet East - 638.25 feet South - 682.05 feet West - 667.78 feet Shape: Irregular Topography: Generally flat, with the western boundary slightly elevated along the Evans Irrigation Ditch. Soil: A soils report was not provided; therefore, we cannot comment on the soil conditions, but we assume no unusual conditions exist. Drainage: Drainage appears to be adequate with a slight downward slope to the south and east. Type of Lot Interior lot with street frontage on one side. Frontage: Approximately 638.25 feet along the west side of West Service Road. Street Improvements: West ServiceRoad (U.S. 85 western frontage road). Width/Lanes: 60 feet right-of-way/2 lanes Surface: Asphalt paving Curbs: None Sidewalks: None Street Lights: None Parking: Not permitted Flood Zone: The subject property is not located in a flood hazard area according to the Federal Emergency Management Agency National Flood Insurance Program, Flood Insurance Rate Map, Community Panel Number 080182 0001 B, effective date April 2, 1979. - Zoning: This site is governed by the B1 - Business District by the Town of Evans, Colorado. A variety of uses are permitted in this district including multi-family residential, office, lodging, restaurants,-and retail. Access: The site is situated on the U.S. 85 western frontage road(West Service Road), which has access from several local east westtraffic arterials. These arterials, proximate to the subject, include 31st Street to the north and 35th Street to the south. Ingress and egress to the subject property is excellent via two entry points along West Service Road. I SUBJECT PROPERTY DESCRIPTION 20 Utilities & Services: Gas: Greeley Gas Company Electric: Public Service Company of Colorado Water. City of Evans. Sanitary Sewer. City of Evans Storm Sewer. Surface drainage to the south and east ofthe subject property. Adjacent Land Uses: Beginning with the subject property and going north, improvements consist of a recreational vehicle sales and storage center (Economy R.V. Center) and the Evans Business Center. The Evans Business Center contains two office/industrial buildings whose two primary tenants include the Colorado Department of Transportation and Benchmark. Improvements further north, at the intersection of U.S. Highway 85, West Service Road and 31st Street, includes a small retail strip center with a grocery store anchor (Steffens Center) and a Western Sizzlin' Steak House. Improvements to the east of the subject,across West Service Road and U.S.85, include a mobile home sales company(All American Homes), the Western Trailer and Tractor company, the Winterset Inn lodging facility, a Phillips 66 gasoline service station, and some residential development. Vacant land is located immediately south of the subject with industrial and residential developments located further south beyond this vacant land, along Service Road. Immediately to the west is vacant land, with several industrial ' buildings located further to the west. Functional Adequacy and Utility: The size, topography and shape of the site make it adaptable to a variety of legal and permitted uses. The subject's size, which according to the provided survey, contains approximately 446,586 square feet, or approximately 10.252 acres. This size is sufficiently large to allow for a number of development plans. Assessor's Tax Schedule Numbers: Real Property - 3862086 Personal Property - 0004470 Easements: According to the survey provided by the owners of the parcel, there do not appear to be any easements pertaining to this property. The title policy provided,prepared March 17, 1989 by Transamerica Title Insurance, also indicates that there are no known recorded easements pertaining to this property. Consequently, there appear to be no easements that could restrict the development potential of the property. rRestrictions: According to the title commitment prepared by Transamerica on march 17, 1989, the water flowing through the Evans Ditch that crosses the property on the west, is permitted by right-of-way. 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A 4 1 0 ■ 4 N Zoning Map I ©) ` d p ;77 - CITY LIMITS- ' jj�ICyA 3t 6 /' t N ,- eO �s3 o�h� it I �►0s,`i0!+�O i / I1 ► O j / 7 t,• r 0' �d� • ;5 co / z le At I - O I oJu r - 1I ' �` I x DRIVE ' It . IN, 'rI - r11:aall r- " ill. x = m /; � � / I 111/4 *MIL - - i " a 1 'L i�i - - / x 1 . 9iCT C . -h � L � - ..hIN a Y 01 ' ] 4 7 it O / r �, 32NI tCE ' III w, Sub1@gi /17\ x I a ii .. ii ,;/ a� ��• 182 i 161 160 158 N 2 4e 157 �S` ''ACATIN , 35TH STREET _ n i' i = �I 4! fEp i EEIth I 35TH SS-T7REET gesso^•.e w Ccon...r II, I Flood Plain Map ) a I 7 ...,.......„ ..._ I , _3/4,3/4,...,3/4 „„11„,„, 1 I , ( C3 1 _1 \---..\\ I 1 i I /I ( i _ oa 1� I 1 F • a(11 I z' • S R T Sa bi •W' YAWL HSU if1fuu/WWYM I iE (7/ I . FIRM L MOO INSURANCE RATE YAP w ,. air a! yr^i EVANS.COLORADO A. vino calm wad,.. y 2 I � vd OMl7 PANEL MOB 47 I 1. u Iik is ,1p�.�., COIOIOIUTTMI E"Tit: I I :**��,�,kl a1C111 IIOI C F1:7-117".1.. 1 MIME BATE , r i'* " mansURBAN e OflC II .tills a.—a—'— I SUBJECT PROPERTY DESCRIPTION 21 IMPROVEMENTS The Heritage Inn is a tourist/transient and commercial market oriented lodging facility which contains approximately 47,636 square feet, plus a 21,553 square foot full basement, based upon our calculated measurements given the dimensions provided via the provided improvement survey plat, prepared by Burdick Engineering Company in February 1989. Facilities and amenities for the subject property include two buildings, connected via an -enclosed glass hallway, containing 73 guest rooms, a restaurant, lounge,approximately 2,400 square feet of meeting space and an outdoor swimming pool. The general layout of the improvement is L-shaped. The main building (running north and south) includes regular guest rooms,one FantaSuite,lobby,restaurant and meetingrooms. Beneath the main building is a full basement which contains the maintenance area, laundry/housekeeping areas and general storage facilities. The southern building includes regular guest rooms and thirteen of the FantaSuites. According to information provided to the appraisers by the owners, the subject property was originally constructed in 1964. It was also reported, but not confirmed, that the restaurant and meeting space portion of the improvement was destroyed by fire in the late 1970s or early 1980s, and was reconstructed. In 1990, after the current owners purchased the property, the facility was partially remodeled. The remodeling that occurred included the development of the 14 FantaSuites as well as well as the soft and case goods upgrade of ten of the more traditional motel style guest rooms. ' The lodging facility is interior corridored with all of the facilities contained in two,2-story buildings. The regular guest rooms are approximately 295 square feet, and the fourteen FantaSuite rooms range in size, however, the typical size of a FantaSuite was approximately 388 square feet. As noted, the FantaSuite rooms are larger. The 59 regular guest rooms are made up of the following bed types: Double/Double _ 27 Queen 10 King - 22 Total 59 The 14 FantaSuites are made up of the following: King - 8 Queen - 1 King Waterbed _ 3 Queen Waterbed ? Total 14 There are several stairways(some interior,some exterior)located throughout the facility. In addition, there are two elevators, both of which are not working. Both elevators access the basement as well as the two above ground floors of the main lodging building; one located proximate to the lobby, the other in the back-of-the-house kitchen and maintenanceareas. The administration offices are located on the main floor of the main building,while the maintenance, housekeeping/laundry and boiler room/utility areas are located in the basement of the main building. I ISUBJECT PROPERTY DESCRIPTION 22 1 The gross building area for the subject consists of the following: ` Sauare Feet Main Building/First Floor 21,553 Second Floor Meeting Area 1,194 Main Building/Second Floor 7,471 Walkway/First floor 1,232 Walkway/Second Floor 1,232 South Building/First Floor 7,477 South Building/Second Floor 7.477 Above Ground Total 47,636 Basement 21.553 Total 6 9.189 The basic facility includes the following: . 73 guest rooms (59 "regular" motel rooms and 14 FantaSuites); . a restaurant (Portofino's); a lounge; . approximately 2,400 square feet of meeting space (consisting of three rooms, one of which is ' divisible into three separate rooms); and an outdoor heated swimming pool. The following description is a detailed summary of the construction and observed condition of the t subject improvements. It is important to note that no building plans were provided to us. Consequently, the following descriptions are based on visible observations and Weld County Assessor provided information. Age: As noted, the property was reportedly constructed in 1964, with the restaurant and meeting areas replaced in the late ' 1970s or early 1908s. Therefore, the weighted chronological age of the property is approximately 29 years. Condition Overall, the subject improvements are considered to be in ' average condition. The fourteen FantaSuites weredeveloped in 1990 and are in average-to-good condition. In addition, ten regular guest rooms had soft and case good upgrades in 1990, and those rooms are in average condition. In 1995, ten additional rooms were upgraded (new furniture, televisions, curtains, and bed spreads), and these rooms are in average to good condition. The remaining 38 regular guest rooms are in need a remodeling, at least new carpets, bedspreads, curtains and furniture. -These rooms have not been updated for at least 10 years, and currently appear to be in below average condition. In addition, the public areas are in need of remodeling, especially the carpets. The common area carpets would be considered to be in less that average condition, and need I SUBJECT PROPERTY DESCRIPTION 23 replacing as soon as possible. These include the carpets in the lobby, restaurant, lounge, meeting rooms, and guest room corridors. Future capital request items noted by management include the completion of the renovation of the 39 guest rooms and new carpets. The manager estimated these expenses to be approximately $60,000 ($40,000 for the 39 guest rooms and $20,000 for the public area carpets). In addition, the estimated cost to fix the elevators is $7,000. Common area corridors also need new wailcoverings due to damage from housekeeping carts. It is likely that some of the ten rooms remodeled in 1990 will need to be recarpeted in the future as well as the ten rooms remodeled in 1995, which were not recarpeted. However, the expenditure for these rooms could possibly be deferred until later. This cost could approximate another $10,000. The exterior trim of the property needs to be repainted and this cost could easily be an additional $5,000 to $10,000. Some of the asphalt portions of the parking lot are also in less than average condition. There are some areas of the parking lot that need to be replaced or patched, and the entire parking area needs to be resealed and striped. A budget has not been prepared for paving, but the cost could approach $50,000 or more. While-we believe that these improvements, as well as others, will be needed at some point during the holding period, the cost of these improvements canbe paid for from the reserve for replacement fund (approximately two years worth) that should be set aside annually (see Income Approach section of this appraisal). Consequently, we do -not believe that an additional cost-to-cure adjustment is necessary for this property within this appraisal. Management indicated that the roof is in good condition, and there has not been an any significant leakage problems in the past. However, given the age of the improvements, the composition of the roof (wood shake) as well as the fact the ownership does not know when the roof was last replaced, we recommend that the roof condition be further investigated by a qualified roof expert, so that the condition of the roof, as well as its remaining life expectancy, can be determined. At this time, we are assuming the roof is in adequate condition; however, should major immediate roof repairs and/or replacement be needed, a cost-to-cure adjustment from the final opinion of value presented within this appraisal would be warranted. No other deferred maintenance was apparent or mentioned by the general manager. I ISUBJECT PROPERTY DESCRIPTION 24 I Quality of Construction: The quality of the materials used in construction of the subject appears to be good and consistent with similar buildings built within this time frame. Workmanship appears to have been I conducted in a professional manner. However, the property has some functional obsolescence pertaining to the basement area. The full basement extends under the entire main I building and at one time consideration may have been given to finishing this area. However,although mechanical,laundry and employee facilities are located in this area,approximately half of the basement would be considered an over I improvement. As related to the excess cost this area is also sprinklered and has a floor to ceiling height of approximately eleven feet. IEffective Age: The effective age of the subject improvements is estimated to be approximately 25 years. The condition of the property appears to be comparable to hotels which were constructed in I the 1960s. It appears that whatever upgrades have occurred over the years since construction have been relatively minor, and primarily pertain to the furniture and fixtures; therefore, I we consider the effective age of the property to be similar to the chronological age. I Economic Life: The economic life of the subject property is affected by many factors including location, demand, and the competitive environment. The estimate attempts to estimate the point at which the improvements fail to contribute value to the site. I Assuming that the property will be well maintained, the subject property is considered to have an economic life of approximately 60 years from the time of construction. I Remaining Economic Life: The remaining economic life of the subject is an estimate of how long the existing improvements will continue to I contribute value to the site. It is calculated by subtracting the estimated effective age of the property from the total economic life. Therefore, the difference between the economic life and the effective age of the subject is 35 years, I which represents the remaining economic life of the improvements. I Building Area: Based upon information provided by Burdick Engineering Company, and calculated and spot checked by us, by us, there is a total of approximately 47,636 square feet of gross building I area with an additional 21,553 square feet of mostly unfinished basement space. This figure differs from what was provided by the Weld County Assessor's Office, (47,676), as they appear to have omitted the basement portion of the timprovements. Foundation: Reinforced poured concrete. I I I ISUBJECT PROPERTY DESCRIPTION 25 Exterior Walls: Weeping brick masonry around the majority of the Iimprovement with painted cedar siding around the lobby area. Windows: Prefinished aluminum frames with single and double paned Iinsulated glass. Roof Structure: Wood shake shingle. I Floors: Wood(first floor main building)and concrete. Floor to ceiling height is approximately8 feet, with a floor to floor height of approximately 8.5 feet. The floor to ceiling height in the I basement is approximately II feet. Walls and Interior Finish: Partition-walls between the rooms are generally painted and I wallpapered drywall. In addition, wallpapered drywall exists around the baths. Floors aretypically finished with carpeting, with ceramic tiles and plaster in the bathroom areas. II Ceilings are typically acoustical tile or a sprayed textured finish. I Bathrooms consist of three fixtures including a water closet, lavatory, and a combination tub/shower. Hallways consists of painted drywall,wallpaper,acoustical tile IIceiling grids and commercial carpet. Interior doors between the rooms and the hall are solid wood II core fire doors with metal frames, while the bathroom doors within the rooms are hollow core doors. I Guest Unit Finishing: Regular Guest Rooms - Each unit contains a double/double, queen or king bed configuration. Additional furnishings include bed-side tables, small tables and chairs, a dresser/credenza, multiple lamps, a III television with remote, telephone and clock. In addition, approximately 30 rooms have small refrigerator units. II FantaSuite Units - The fourteen FantaSuite units each have their own unique theme. They include Arabian Nights; The Bronco; Ceaser's II Court; Casino Royale; Cupid's Corner; Jungle Retreat; Jungle Safari; Northern Lights; Pink Cadillac; Sherwood Forest; and Space Oddessy. Each waterbed or mattress bed has a unique shape and built in stereo. In addition, each room has a II whirlpool, wet bar, coffee maker, two televisions, and unique furniture decor to match the unique theme. Meeting Room II Finishing: Room finishes include commercial grade carpet, painted and wallpapered drywall, acoustical ceiling grid system and recessed fluorescent lighting. There are three general areas . used as meeting space. The University Room, located on the second floor between the lobby and the restaurant in the main S I ISUBJECT PROPERTY DESCRIPTION 26 building, the Evans Room and the larger, divisible meeting I room that contains 1,585 square feet(when divided into three rooms, the rooms are called the Stampede, Frontier and Colorado Rooms). IRestaurant/Lounge: The restaurant is called Portofino's, and is currently operated for only breakfast and dinner. The restaurant seats 80, and I includes booths, tables and a natural gas fireplace. Interior finish includes a partial vaulted ceiling, painted drywall and commercial carpet. I The lounge operates under the same name as the restaurant, and seats approximately 35 people. Interior finish is similar to the restaurant except the ceiling is acoustical grid style. I Access to the restaurant and lounge is from the lobby as well as a separate outside entrance from the parking lot. I The full service kitchen is located between the restaurant and the meeting rooms and consists of standard kitchen cooking and preparation equipment. ILobby Area: The lobby consists of the guest registration area, a gas fireplace and an open staircase accessing the guest rooms on I the second floor. In addition, the administrative offices are located behind the front desk in the lobby area. The ceiling in the lobby is vaulted. I Heating & Cooling: Heating for all guest rooms, with theexception of the fourteen FantaSuites,is from centralized boilers and cooling units(two- pipe only) located in the basement of the main building. The I 14 FantaSuites have individual through-the-wall heating and cooling units. The basement heating is provided by individual ceiling mounted electric units. I Hot water is provided by gas fired water heaters located in the basement of the main building. I Miscellaneous: Recreational amenities include an outdoor heated swimming pool, a concrete finished patio that can accommodate up to 300 people, a volleyball court and horse shoe pit. The in-house laundry consists of two Milnor washers and two dryers (one Cissell and one Drymaster). The subject has two hydraulic elevators;one passenger and one freight, both reportedly out-of-order. Fire safety is provided by a hard-wired smoke detector system in the guest room areas. The kitchen, lounge, restaurant, and meeting areas as well as the full basement are served by a-wet pipe sprinkler system. I SUBJECT PROPERTY DESCRIPTION 27 Site Improvements: The property has over 300 paved and stripped parking spaces contained in the lots located around the lodging improvement. In addition, there is a gravel truck parking area located to the north and west of the lodging improvement. As noted, the parking lot is considered to be in below average condition and there are numerous areas that need repair and/or patching. In addition, the entire asphalt area needs to be resealed and striped. 111 An asphalt driveway and frame porte cochere lead to the lobby entrance of the main building. The outdoor swimming pool area is surrounded by a chain link fence, and the perimeter areas of the property are landscaped with grass, trees, shrubs and rocks. The vegetation is watered via automatic sprinklers. The entire building is surrounded by a concrete sidewalk with the main entrance walkway being covered. Land to Building and Coverage Ratios: Based upon the gross building area, the land to building ratio is 9.37 to 1.0 (446,586 square feet of land area divided by 47,636 square feet of above ground improvement). Conversely, the floor area ratio (FAR), or coverage ratio, is 10.7%. This is a high land to building ratio which would normally indicate excess land. However, the improvements are located in the center of the parcel and it would not be practical to sell any of the excess land given visibility/access considerations and adjacent land uses. Photographs of the subject improvements are contained in Addendum A. A typical guest room floor plan, as developed by our measurements, is located on the following pages. A drawing depicting the building layout upon the subject site is located on the following pages as well. p 1 I I SKETCH/AREA TABLE ADDENDUM File No: 96003 B. Borrower/Client I U HERITAGE INN MOTEL B PropeM Addrso J. 3301 WEST SERVICE ROAD E. city County Sub L9 Code O EVANS WELD COLORADO 80620 T Lander AMERICAN BANK I IMain Building 1.1 I M Meeting P R O V ._ 1 E M E N Secc d T Main S S or Flo K Sauth Wing/Upper E I T c H I Sauth Wing/Lower LSeca d Level Walkway I SCALE:I Inds-70bet IAREA CALCULATIONS SUMMARY LIVING AREA CALCULATIONS A Area Name of Area Size Totals k Breakdown Subtotals I R GSA Main/First Floor 21552.65 ./ E Second Floor Meeting 1193.64 A MeiNSecad floor 7471.21 il Walkway/First floor 1232.39AWalkway/Second Floor 1232.39 L South Wing/Lower 7476.62 L. South Yins/yyer 7476.62 47635 52 U I L A T I O 0 N S TOTAL UNABLE (rounded) 0 0 SCd1T:STAn41 Y-B-i�Rll .Y4:tsoFTYME.aC.I ontatsaate ADEllike2130 Exhibit B I I SKETCH/AREA TABLE ADDENDUM File No: 96003 B Borrower/picot I U B HERITAGE INN MOTEL Property Harm J 3301 WEST SERVICE ROAD E Gs, County State AP Code ' C EVANS WELD COLORADO 50620 T Lamer AMER/CAN BANK TYPICAL ROOM I M 1 P R 0 V I E M E T 24.4' I s S K E II T C H s OO I 12.1 ' II SCALE 1 kwh a f feet IIAREA CALCULATIONS SUMMARY LIVING AREA CALCULATIONS A Area Name of Area Size Totals 9 Breakdown Subtotals i R 9LAt TYPICAL 50M 295.24 200.24 t 12.10 X 24.40 295.24 E A g 1. C I A a L C U I L A 4 T N I S IITOTAL LIVABLE (rounded) 295 295 • ,'AFL :I1 ., .. ,a,w,,,,,r, .,, . z,a I I SKETCH/AREA TABLE ADDENDUM Skala 96003 I S ewrower/Giant U HERITAGE INN MOTEL B Property Mrlraea J 3301 WEST SERVICE ROAD E City County Sulu Zip Cosa LaM I C EarVANS WELD COLORADO 80620 T AMERICAN BANK I I 21 .2' I 00In' M r N I P R O C l V L l ENNN . M N 9.2' 24.4' T S 14' K E II T C H il 12 TYPICAL FANTASUITE I SCALE:I Intl)-11M IAREA CALCULATIONS SUMMARY LIVING AREA CALCULATIONS AArea Name of Area Size- Totals R„�' Breakdown Subtotals I A CLAI TYPICAL FAIITASUITE 388.48 358.48 ?1 21.20 X 18.40 220.48 . 12.00 X 14.80 168 00 C c j II L C U l 111 A t T 1 O N i 111 S IITOTAL LIVABLE (rounded) 388 388 ISCaIT,6Mall:jF Qi APFx SOF1WNf.IC.I pig too am MF%t Fain 2ne I I SUBJECT PROPERTY DESCRIPTION 28 ZONING The subject property is located within an area zoned Bl --Business District, by the City of Evans, Colorado. Permitted uses within this zoning classification include multifamily residence, group residence, travel trailer park, community facilities (churches, schools, etc.), amusements (bowling alleys, theaters, etc.), hospitals, medical and dental clinics, nursing homes, jails, hotels, motels and tourist homes, personal service establishments(barbershops, shoe repair, laundry, etc.),office, retail (includes restaurants),parking lots,and public service establishments(police station,fire station,etc.). The only yard requirements are that the minimum side yards be at least thirty feet from any residentially zoned district boundary line. There are no requirements pertaining to building floor area as compared to the size of the site. The only other minimum requirements besides a detailed signage provision, pertain to parking. According to the Evans Zoning Office, there mustbe one parking space for every hotel/motel room offered. Additional spaces are required if the lodging improvement includes a restaurant, lounge, meeting space, etc. Although the subject's parking lot is currently insufficiently stripped, given the size of the site, as well as the amount of the site that is asphalt paved, we believe that there would be approximately 300 parking spaces at the subject. This far exceeds the requirements for a 73-unit, full service lodging product. Given the above restrictions and requirements, the subject Heritage Inn, as it is currently being utilized, appears to conform to the zoning regulations and would be considered a conforming use. REAL ESTATE ASSESSMENT AND TAX INFORMATION In the State of Colorado, the assessment rate for 1995 is 29.0% of actual value for all non-residential properties. Along with the assessment ratio, actual values are established for taxation purposes according to Colorado statute. Experience has shown that actual value typically has little or no relationship to the current Market Value as defined in this appraisal report and is included in this report for informational purposes only. Real estate taxes in the state are payable in arrears, whereby 1995 taxes are payable in 1996. The mill levy for the 1995 taxes payable in 1996 (the current mill levy) is 89.847. The 1994 mill levy was 90.769. The subject property's real property assessment Parcel ID Number is 3882086 and the personal property assessment ID Number is 0004470. Real Property ID Number 3882086 Actual Value Assessed Value Tax 1995 Real Property Land $ 341,321 $ 98,980 Improvements 1.258.679 365.010 Total $1,600,000 $ 463,990 $41,688 1994 Real Property Land $ 341,321 $ 98,980 Improvements 783.679 2274260 Total $1,125,000 $ 326,240 $29,612 U IlSUBJECT PROPERTY DESCRIPTION 29 Personal Property ID # 0004470 IIIActual Value Assessed Value Tax U 1995 Personal Property $175,414 $50,870 $4,571 1994 Personal Property 187,034 54,240 4,923 As the real property tax information indicates, the real property actual value and corresponding 1111 assessment is higher than the opinion of value presented within this analysis. Consequently, a property tax appeal is probably warranted at this time. N To determine the value of the subject property, it is necessary to estimate the applicable real and personal property taxes. Recognizing that each hotel/motel property is somewhat unique given general construction and design considerations, and that the taxes are impacted by the age of the 0 facility, we did not attempt to make tax comparisons with other properties. Invariably, these comparisons will vary widely and are typically not reliable. The most reliable information is the historic expense for the property. Consequently, the Year 1 estimate of taxes, located within the Income Approach section of this appraisal, will be the 1995 real and personal property tax figures presented above. These taxes would be due in April 1996, and our Year 1 estimate encompasses this time period. Given this, the current taxes due, per the Weld County Treasurer's Office, is $46,259. For this analysis, for Year 1, we will use $46,000. All subsequent years will be escalated accordingly throughout the holding period. I I I I I HIGHEST AND BEST USE 30 For purpose of this appraisal report, highest and best use is defined as follows: "The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results ' in the highest value. The four criteria the highest and best use must meet are legal permissibility,physical possibility,financial feasibility,and maximum profitability."3 When reaching a determination as to the highest and best use of a site, an improved site would be analyzed as if vacant and then secondly, as improved. "If existing improvements do not represent the highest and best use of the property, consideration of conversion or change of uses is suggested. The highest and best use of improved property (land and buildings together) may not necessarily be the ' same as the highest and best use of the vacant site alone. If the two do not correspond, the structure is an inappropriate improvement on the land as judged by the current market. The property then suffers from physical deterioration, functional obsolescence, economic obsolescence, or some ' combination of the three. The selection of highest and best use among alternative possibilities involves a choice of both the type of use and the intensity of use of the space. Therefore, zoning and other use regulations - which t typically control both type and intensity of land and building use - must be studied in detail by the R appraiser because they limit this range of alternatives."4 Implied in this definition is that the determination of highest and best use takes into account the contribution of a specific use to the community and community development goals as well as the benefits of that use to individual property owners. Hence in certain situations, the highest and best ' use of land may be for parks, green belts, preservation, conservation, wildlife habitats, and the like. "The highest and best use of both land as though vacant and property as improved must meet four criteria. This highest and best use must be (I) physically possible, (2) legally permissible, (3) financially feasible, and (4) maximally productive. These criteria are usually considered sequentially;a use may be financially feasible,but this is irrelevant if it is physically impossible or legally prohibited. Only when there is a reasonable possibility that one of the prior, unacceptable conditions can be changed is it appropriate to proceed with the analysis."b ' The following tests must be met in estimating the highest and best use: the use must be legal; the use must be probable, not speculative or conjectural; and there must be a profitable demand for such use and it must return to the land the highest net return for the longest period of time. In arriving at the estimate of highest and best use, the subject site was analyzed: as though vacant and available for development, and as improved. 1 I 3The Dictionary of Real Estate Appraisal. Third Edition, Appraisal Institute, 1993, Page 171. 4William N. Kinnard, Jr., Industrial Real Estate. Second Edition, Society of Industrial Realtors, 1975, Page 416. I 5The Appraisal of Real Estate. 9th Edition, by the American Institute of Real Estate Appraisers, 1987, Page 274. p HIGHEST AND BEST USE 31 HIGHEST AND BEST OF LAND OR A SITE AS THOUGH VACANT "Among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination. The use of a U property based on the assumption that the parcel of land is vacant or can be made vacant by demolishing any improvements."6 Physically Possible The first constraint on the possible use of the property is dictated by the physical aspect of the site itself. The site and location within a given block are the most important determinants of value. In general, the larger the site, the greater its potential to achieve economies of scale and flexibility in development. The overall subject site contains approximately 446,586 square feet, or 10.252 acres. The site is somewhat irregular in shape, and is of sufficient size to permit many types of commercial, retail, or residential developments suitably scaled to the site. Legally Permissible Legal restrictions as they apply to the subject property are private restrictions and the public restrictions of zoning. There are no known private restrictions adversely affecting title. The subject property is located within an area zoned Bl - Business District, by the Town of Evans, Colorado. Permitted uses within this zoning classification include multifamily residence, group residence,travel trailer park,community facilities(church,schools,etc.),amusements(bowling alleys, theaters, etc.), hospitals, medical and dental clinics, nursing homes, jails, hotels, motels and tourist homes, personal service establishments (barbershops, shoe repair, laundry, etc.), office, retail (includes restaurants),parking lots,and public service establishments(police station,fire station,etc.). Financially Feasible In order to be financially feasible, a potential use will be required to produce a positive return on invested capital. Typically, the test for such feasible uses relies on two major categories:(I) financial feasibility and (2) market feasibility. Both of these categories are closely tied together and compare the value of the improved property to the cost of constructing such improvements. However, due the vast amount of over building of almost all types of non-residential properties in the Front Range areas of Colorado during the early and mid-1980s,retail,office and light industrial properties can typically be purchased today for less than the cost of construction, indicating a lack of financial feasibility. As a result, new construction of commercially related improvements cannot be justified as of the date of this appraisal, except in narrowly defined niches, such as in communities like Evans/Greeley. Financial feasibility is a result of the site's location in Evans, Colorado, basically along U.S.Highway 85 (U.S. 85), one-half mile south its intersection with U.S. Highway 34 Bypass (U.S. 34 Bypass) in Evans, Weld County, Colorado. The general area has good access from both U.S. 85 and U.S. 34 Bypass. Based on the anticipated physical attributes and the legal restrictions, utilization of the site with a development which would benefit from good highway and street access and visibility would be most appropriate. Based on this, uses which could take economic advantage of the site include: 6The Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute, 1993, Page 171. HIGHEST AND BEST USE 32 . office/commercial; . limited retail; . hotel/motel; and . restaurant, lounge and/or fast food establishment. Of the uses noted above, which all are legally permissible uses facilitated by the site's size and topography, we consider a hotel/motel to be the most financially feasible. As discussed in the Descriptive Data and Income Approach sections of this report, a primary consideration of lodging guests in selecting a hotel/motel is its proximity to area demand generators, easy accessibility and proximity to other activities. The subject site possesses an advantage with its location along U.S. Highway 85, its proximity to U.S. Highway 34 Bypass, as well as its proximity to the area's major commercial and governmental center,Greeley. In addition,access, including ingress and egress, and visibility to the subject is considered good. In addition, U.S. 85 provides access to and from the Denver Metropolitan Area, and U.S. 34 accesses the Rocky Mountains to Estes Park and ultimately Rocky Mountain National Park. As has been noted in other sections of this report, the surrounding environment consists of vacant land, other lodging facilities, retail such as a gasoline service station and grocery store, a restaurant, and some office/industrial/retail development(recreational vehicle sales and storage, Evans Business • Park, State Farms Insurance Company, tractor sales, etc.). In addition,there is significant residential development to the west of the site. We believe that these types of surrounding developments, coupled with the location along a major access point in the Evans/Greeley area,may stimulate future growth in this section of the community. This is supported by the Sleep Inn lodging facility that has just been completed approximately five blocks north of the subject. Types of commercial growth anticipated would include restaurants, hotel/motel (Sleep Inn), entertainment complexes such as movie theaters, and various other retail establishments. Until October 1994, there were few existing quality, name-brand franchised, lodging properties in the Evans/Greeley area. These included the Motel 6, located to the north of the subject site, and the Best Western Ramkota Inn and the Holiday Inn Greeley (now called the Camfield and soon to be called the Ramada Inn Greeley), both located in Downtown Greeley; approximately two miles north of the subject. Since October 1994, the Holiday Inn has become the Camfield II and will become the Ramada Inn Greeley, and two new limited service properties (a Fairfield Inn and a Super 8 Motel) have been developed proximate to the Greeley Mall. In addition,two new,limited-service properties: A Holiday Inn Express near the Greeley Mall, and the previously discussed Sleep Inn. Given the growth potential for this specific site area, it's locational attributes, as well as the initial success of the two new limited service lodging facilities in the market, in addition to the analysis in the Income Approach section of this appraisal, it appears that a lodging use is feasible for this site. Occupancy for the competitive/comparable properties (fully identified and explained in the Income Approach analysis) over the past five years are summarized on the following chart. I IHIGHEST AND BEST USE 33 ESTIMATED TOTAL 1991 THROUGH 1995 ROOM NIGHT DEMAND IGREELEY/EVANS COMPETITIVE/COMPARABLE MARKET Room Room I Nights Nights Occupancy Year Available Occupied' Percentage" 1991 178,120 105,800 59.5% I 1992 178,120 108,800 61.0 1993 178,120 113,500 63.5 1994 188,249 119,000 63.0 I1995 218,635 132,600 60.5 * Rounded to the nearest one hundred I " Rounded to the nearest one-half occupancy point As has been stated, in Fall 1994, two new hotels opened: the Fairfield Inn - Greeley and the Super 8 Motel - Greeley. Because of these additions to supply, the occupancy of the market has dropped Islightly despite the annual growth in room night demand. This is a result of the growth in supply growing slightly faster than the growth in demand. As the above chart indicates, occupancy again grew in 1995, however is anticipated to drop again in 1996 due to two more properties entering the Imarket. Other indications of the potential strength in the lodging demand can be seen in the Descriptive Data I section of this report concerning many of the area's economic and demographic indicators. As shown, many of the selected economic and demographic indicators showed generally moderate growth for the Evans/Greeley/Weld County area annually over the last several years. I In summary,we believe that there is no other legal use that would produce a greater return to the land at this time. IMaximally Productive The demand for transient lodging facilities in the Evans/Greeley area,is strongest during the summer I months, especially when related to the tourist/transient market segment. In addition, in the local market, the demand tends to be strongest on weekend nights as compared to demand for week nights. This, in addition to the data presented in the Income Approach section, indicates that there is economic demand for a motel at the subject site. As the local economy continues to grow, the I tourist/transient as well as potential commercial related demand is expected to grow,and the avenge room rates are also expected to increase. I In the final analysis, a determination must be made as to which use is the highest and best use assuming the land is vacant. The property's accessibility, location, and proximity to U.S. 85 and U.S. 34 Bypass, as well as the subject site's proximity to Denver, Ft. Collins and the Rocky Mountains, I leads us to conclude that the optimal use of the subject parcel is that of a limited service or limited full service, lodging development. However,given the recent development of numerous new lodging facilities, all located within one mile of the subject, the local lodging market may be approaching a ' point of saturation in that the supply growth has far exceed the demand growth. Given this scenario, it could take several years for the demand catch up with supply, and again warrant new development. Consequently, at this time, we believe that the highest and best use of the land, as though vacant, would be to hold for future development into a lodging facility. A more in-depth discussion of the Imarket demand considerations is located in the Income Approach section of this appraisal. I I HIGHEST AND BEST USE 34 HIGHEST AND BEST USE AS IMPROVED Highest and Best Use as Improved is defined by the Dictionary of Real Estate Appraisal is as follows: "Highest and best use of a property as improved pertains to the use that should be made of an improved property in light of its improvements. The use that maximizes an investment property's return on a long term basis is its highest and best use as improved." Physically Possible By virtue of the structure existing on the site, the physical possibility has been confirmed. Legally Permissible The subject property is located within an area zoned B1 - Business District, by the Town of Evans, Colorado. As was more fully discussed in the Zoning section of this appraisal, the subject appears to be a legal conforming use. Financially Feasible This criterion has been examined in the valuation section of this report. The Heritage Inn has been operating for over thirty years and is considered to add value to the land as though vacant. On the basis of the results of our market demand and financial analysis, we believe that the existing structure is financially feasible. Maximally Productive The subject property is considered to be maximally productive to the site since it is an operating hotel which is contributing value. We believe that the current use of the property results in a net operating income greater than that obtained by placing an alternative use on the site. In addition, the cost of removing or altering the existing improvements is considered prohibitive and not feasible. As a result, the highest and best use as improved of the site, is the existing limited, full service hotel facility. I U I I N I I N INCOME APPROACH 35 The Income Approach is based upon the premise that the value of a property is represented by the present worth of anticipated future benefits to be derived from ownership. This involves the estima- tion of gross income levels as well as the accompanying expenses. For the purpose of this appraisal, we have used both a discounted cash flow(DCF)technique,which converts the estimated future cash flows and reversionary value estimate into a present value estimate; and a direct capitalization technique, which converts the net operating income (from the stabilized year of operation) into a value estimate through the use of a capitalization rate. 11/ To estimate the subject's potential financial performance, seven competitive/comparable properties (which includes the subject) were analyzed (located in the local market), as to estimated occupancy and average room rates, along with current asking room rates for each of the properties. While direct comparison of the subject to any of these properties could be misleading, the property does share general operational similarities due to common markets and economic patterns. Information obtained from these properties has been used in estimating the income and expenses for the subject. In addition, we have taken into consideration two additional lodging properties that are currently under construction, both anticipated to open by March 1, 1996. In developing operating estimates for the subject, we have assumed that the public's perception of the property will be compatible with it's quality. Throughout this appraisal we have assumed that the subject will be managed and marketed in an aggressive and efficient manner. The significant assumptions of this appraisal are enumerated in the Standard Conditions and Assumptions section noted at the beginning of this report. In our opinion, the subject is capable of supporting reasonable estimates of operating performance over the long term. It should be noted that this analysis assumes that the subject property will be properly maintained throughout the holding period. Due to the confidential nature of occupancy and average room rate information throughout the industry, these figures have not been revealed for the individual properties analyzed. However, composite results are presented which we believe provide sufficient detail to support this report's findings. LODGING MARKET OVERVIEW Typically, market studies for hotels and motels, proposed or existing, are performed using a supply and demand analysis. In a supply and demand analysis, the characteristics of the local market area, including its existing and planned lodging facilities,directly affect the market potential and operating levels of the subject lodging facility. In formulating our opinion of value, an analysis of the Greeley lodging market was performed. This analysis included an evaluation of the existing competitive supply, historic and anticipated future levels of lodging demand in the market, the subject's future anticipated competitive position and the prospective levels of future utilization, or occupancy, and average room rate for the Heritage Inn. COMPETITIVE/COMPARABLE SUPPLY ANALYSIS The general Greeley lodging market consists of hotels and motels. Of these, we have chosen those properties which are considered most comparable to the subject lodging facility given a variety of parameters. The representative facilities selected to be competitive/comparable to the proposed subject lodging facility were selected based on the following: U I I 1 INCOME APPROACH 36 . Greeley or Evans, Colorado location; 1 . a full service, or higher end limited service product; . similar room rate structure (published and/or average room rate realized); . less than 200 rooms; . similar service and amenity orientation; and • national franchise affiliation; . similar perception in the marketplace. Lodging facilities which were determined to be competitive/comparable to the subject include motels and hotels that cater to the mid-market, those which compete for the tourist/transient segment and the commercial segments of demand. In studying the identified market area,six facilities were identified as being competitive/comparable, to varying degrees, with the subject. The total local competitive/comparable supply (including the subject), as of December 31, 1995, consisted of approximately 599 guest rooms. On or about March 1, 1996,two additional competitive/comparable properties, both currently under construction,should open. Consequently, the identified market area, subsequent to March 1, 1996, will increase to nine properties encompassing approximately 724 guest rooms. It should be noted that there are several other lodging facilities located in the market area, including several in the local market. However, because of their size, location, market orientation and/or quality, they were determined not to be directly competitive with the subject and were therefore not included in the competitive/comparable lodging supply. These include, but are not limited to, the El Centro Motel, the Greeley Inn, Inn Towne Motel, the Rainbow Motel, the Red Coach Inn, the Redwing Motel, the Sterling House Inn and the U.S. Motel. Typically, the lodging facilities not included are smaller (all less than 38 rooms, most less than 20), and have a quality level and market segmentation that differs significantly from what the subject has and thus are not considered to be primary competitive/comparable. We have specifically noted the Greeley area properties only because of their location within the local market. The chart on the following page provides a summary of the existing competitive lodging facilities which were used in our analysis, which includes their respective facilities, services, amenities and location. This chart is followed by a map which identifies the location of these properties in relation to the subject. In addition, descriptions of the identified competitive/comparable properties are presented in Addendum B. 3 I I 37 m uw 0- O O ll E m o m w w w Q U W C O O G U U U U c 1 o` a ^ ^ tO ICI m m o c GL >O CAHCOw N CO O ppH H N qN co NO QZ OH dL O to 0 _ U 0m CCO d T V C O _ Y 6 a N d a coN coN m N m W N 0 C m E o 1] Q H a. COm H q q L a __ C n N m N N !� t a O N ] E d E C N H N N N N P C d O ; d O H H M H H H E CC J -N 2 U I < < o00 ui d N C ¢ 0 I ■ _ o a a E 0 f As E > O e I N ll ¢ CCH I Ill 1 -I 0 ¢ T d O q d m a a at II N a L c N fl O 0 E o d o II U o N U to m II ' > W O 0- II w c N Co N NF ¢ a z 2IOCO J < )2 (2Wa 7 O O 7 7 w w >w ° u a 0 R. j -I' ^ C IE 3O N. v. v. O V N m coN V U N 2 ¢ ^ a a O u T q O e Tu. e - o t m N 6 0 = b ]. C G q T O H T O C 6 d V V T j Co > C -L O t 0y Y ; W j a O T a a 6 g 6 c 0 N 6 'a- o d o C d 2 3 d C n C T r - >0 1- <d O a a T m 2 d 2 O O O 0.1 Z x U ¢ d e E d C d V 1- J y= c U x 3 d 2 _ a w C _ C O dd _ m _ m . c 9m -dV N : O c OaO a d c V ` .. m T V CV a c '' E c cda . m s = a N U U - w 2 3 = ? N a O N 0 P N m N. m� Z � q ICOMPETITIVE/COMPARABLE LOCATION MAP II TO CHEYENNE I I GREELEY to COLORADO ISLAND GROVE a. 111 PARK a1I I • CENTENNIAL on VILLAGE i 5TH ST w �•.. < �•,U�,,�•� UNION COLONY _ �aSI 6 CIVIC CENTER F m i Y CENTER' N 9TH ST L ..'. FOR FOR RECREATION US34 BUSINESS ^ _ L_ -' F SENIOR CENTER r- r IO LOVELAND E �! FT COLLINS > • `_ ESTES PARK < = 4,h HAMBER - :- OF a 16TH ST HOSPITAL -•MMERC: "\. L l / IVERSI OF US 3M AIMS t r •LORADO TO FT.MOAT COMMUNITY N COLLEGE 20TH ST P�'P JO UNC <0 WEST 1 S /7 CAMPUS S 1- 25TH S • N CI US 34 BYPASS `'� - -- r� , 9 3 2 .i Denotes Major Retail Centers 6 Street Numbering System EVANS O f Avenues run north and south,streets run east and west COLORADO ";`, Lowest numbers begin at the north end and east side. 1 _ -- '• N 4z. ect / :-. I I IlINCOME APPROACH 38 FUTURE SUPPLY IIt should be noted in this section that two new, national franchise affiliated, properties opened in the local market in fall 1994. These include the 62 room Fairfield Inn (opened September 30, 1994) and I the 49 room Super 8 Motel (opened October 4, 1994). Both of these properties are located approximately one mile west of the subject, proximate to 24th Avenue and 29th Street, near the Greeley Mall. These properties are noted in this section of the appraisal because they are considered to be "new supply" in that they have only been open for slightly longer that one year. IIn addition, two new properties are currently under construction, with both anticipated to open by March 1, 1996. The first is a limited service 61 room Sleep Inn (a Choice Hotels International I product) and the other is a 64 room Holiday Inn Express (Holiday Inn Worldwide's limited service product). The Sleep Inn is located approximately four blocks north of the subject, along 8th Avenue at Southgate Drive (considered the U.S. 85 frontage road in this area). This property, locally owned, features 61 rooms, complimentary continental breakfast, a small meeting room and an indoor swimming pool. IThe Holiday Inn Express is located approximately one block north of the new Super 8 and Fairfield Inn along 29th Street at approximately 27th Avenue, near the Greeley Mall, one mile west of the subject. This property, which has the same ownership as the Fairfield Inn, will have 64 rooms, a complimentary continental breakfast, and an indoor swimming pool. Given the anticipated market orientation of these two new properties, as well as their location, they both have been included in this analysis as future supply. It is also important to note in this section that the Camfield II property, located downtown, was a Holiday Inn prior to January 1995. Given the fairly poor condition of this property,it lost its Holiday Inn franchise in December 1994. In 1995, it operated as the independent Camfield II property. Over the past several years, this property has lost significant market share as a result of its deteriorating condition as well as its loss of franchise affiliation. However, in December 1995, the owners signed a franchise agreement with Ramada Inns, and as of March 1, 1996, this property will be called the Ramada Inn Greeley. As part of this franchise affiliation, the owners have agreed to renovate and repair the property to bring it up to Ramada Inn standards. In any event, we believe that this property's franchise affiliation and renovation will make it more competitive within the marketplace, in effect acting as if new supply entered the market. r In summary, on January 1, 1994, the competitive/comparable market for the subject generally consisted of five properties (including the subject) with 488 rooms. With the addition of the new properties in 1994 and the two new properties in 1996, the competitive/comparable market now F consists of nine properties with 724 rooms, an increase of 48%. And finally, the Camfield II's 14 affiliation with Ramada Inns, also scheduled for March 1, 1996, should put additional competitive pressure on the market as in effect, an existing property should become more of a competitive force. In addition to the above, and as a result of our fieldwork, several "rumored" proposed lodging properties were investigated. A local developer, Linda McSwain, has proposed that a conference center and hotel be developed at the site of the Greeley Elks Club in Southwest Greeley. The f developer is interested in improving this site with a first class conference center and hotel, a facility that would be marketed to the higher-end conference and commercial business. In addition to the fact that this facility is anticipated to be market oriented as a more upscale facility than the subject, plans for this conference center and hotel are still very preliminary and financing does not exist. This I INCOME APPROACH 39 property has been discussed for over five years and has never advanced from the "discussion"stage". Consequently, this property has not been included in this analysis. And finally, a local developer was considering developing an apartment/hotel on a vacant site at approximately 24th Avenue and 28th Street,east of the existing Carmike Cinemas,approximately one mile west of the subject. At this time, however after purchasing the site, we believe the developer has abandoned plans for this project citing that it was not feasible at this time in the Greeley marketplace. It is our understanding that the development would have been used to house students during the school year,and possibly rented out on a nightly basis during the other times of the year. Given the status of this project (not moving forward), as well as its potential unique market positioning, it has not been included in this analysis. We have identified no other proposed or rumored competitive properties which have a high likelihood of being developed during the period analyzed. With the recent addition of the four limited service lodging projects, and the franchise affiliation of a fifth property, given the current size of the competitive lodging market, as well as current economic trends, we believe that it is unlikely that any new additional lodging development will occur in the near-to-mid term. The"rumored"develop- ments are noted here primarily for information purposes to further illustrate the current status of the local market. Should any other projects be developed,there could be a material effect on the subject, as well as the conclusions contained in this report. HISTORICAL ROOM NIGHT DEMAND Based on our study of the Greeley area competitive/comparable lodging market, interviews with the area property managers, fieldwork and our knowledge of the area lodging industry, the historic lodging demand can be categorized into three general classifications: tourist/transient, commercial and meeting/conference. Commercial - This segment consists of individuals travelling to the market area for business and industry related activities, including University of Northern Colorado related business, and also includes those traveling on a government per diem. This market segment generates the major portion of its demand during the Monday through Thursday night period, with generally little demand experienced during weekend and holiday periods. Typically, the individuals in this segment are less price-sensitive than those in other segments, but often negotiate discount rates based on volume and/or frequency. In addition, commercial travelers tend to stay in nationally recognized, name brand, hotel/motel facilities. It is estimated in the Greeley market that this demand accounts for approximately 45% of the total room night demand. The Fairfield Inn has significant success in attracting this demand; to the point of operating at capacity during the Monday through Thursday night periods. Along with an active environment, quality of service, particularly with regard to food and beverage, are important factors in effectively attracting commercial travelers. Although the level of commercial demand accommodated by the competitive properties tends to weaken slightly during the summer months and significantly during holiday periods, it is relatively steady throughout the remainder of the year. This demand segment is strongest for the Fairfield Inn property located in the south portion of Greeley as well as for the lodging facilities located in Downtown Greeley (Ramkota Best Western and the Camfield II) given their "brand name" affiliation and/or their full-service market orientation. Significant commercial room night generators in the immediate area include the ConAgra companies,the various high tech companies around Greeley, the University of Northern Colorado, State Farm Insurance(including a large amount of demand for training purposes),the International Guard and the regional medical facility. I I IINCOME APPROACH 40 Tourist/Transient - This segment consists of tourists and individual leisure travelers, most U traveling by automobile, and may include visitors to area residents and various uncategorized sources of demand. For the identified market properties, especially the competitive supply not located in Downtown Greeley, this demand is estimated to be approximately 45% of all room I nights. Overall, tourist demand is strongest during the summer season and on weekends and holidays during the remainder of the year. Tourist demand generally is characterized by the highest level of double occupancy of the three segments, and a higher level of price sensitivity than the commercial and meeting/conference segments. In addition, this segment includes motor il coaches (tour busses) which is strongest during the weekends of the summer season. The key to capturing this demand in this market is a property's proximity to the area's attractions as well as its proximity to the area's automobile transportation network (U.S. Highways 85 and 34). IMeeting/Conference-This segment consists of individuals and groups(association,corporate,and leisure) traveling to the market area to attend conferences, meetings, conventions, seminars and I social events and other functions. Meeting/conference demand is somewhat more price sensitive than commercial demand, and typically requires a high level of service,available public space and accessible amenities. It is also characterized by a somewhat higher level of double occupancy than commercial demand. The subject, the Best Western Ramkota and to a lesser extent the Caulfield III property generally offer the facilities(meeting space and on-site food and beverage)to compete successfully for this limited demand. In addition, Greeley currently is not considered a primary location for state association meetings, meetings that "rotate" from city to city annually, partially I because of its relative lack of meeting/conference facilities, and to a certain extent, because of its proximity to Denver, and that market's significant amount of quality meeting and conference facilities. It is estimated that approximately 10% of the total market demand is Imeetings/conference related. On the basis of interviews with property managers and representatives of hotel franchise companies, analysis of historical operating data and fieldwork, the identified competitive/comparable properties I in the Evans/Greeley area, in 1995, experienced 60.5% occupancy with an average room rate of approximately $42.00. I Competitive market supply and demand patterns for the past five years,along with the corresponding annual occupancy rate, is presented below: IESTIMATED TOTAL 1991 THROUGH 1995 ROOM NIGHT DEMAND IDENTIFIED COMPETITIVE/COMPARABLE MARKET IRoom Room Nights Nights Occupancy Year Available Occupied; Percentage** I1991 178,120 105,800 59.5% 1992 178,120 108,800 61.0 1993 178,120 113,500 63.5 1994 188,349 119,000 63.0 1995 218,635 132,600 60.5 I ' Rounded to the nearest one hundred ** Rounded to the nearest one-half occupancy point I I P 111 INCOME APPROACH 41 As has been stated, in Fall 1994, two new hotels opened; the Fairfield Inn - Greeley and the Super 8 Motel- Greeley. In addition,a major facility within the competitive supply, the 100-room Holiday Inn Greeley, dropped its Holiday Inn franchise, and is now called the Camfield II. IFUTURE LODGING DEMAND Future lodging demand is typically estimated on the basis of historical growth rates for lodging demand and an analysis of select relevant economic and demographic information. As can be seen, hotel market occupancies grew steadily between 1991 and 1993. The occupancy drop in 1994 and 1995 is a result of the room supply growing faster than the room demand, thus creating a lower occupancy than in the previous year. Between 1993 and 1994, with the introduction of the Fairfield Inn by Marriott and Super 8 Motel, both in October, the room supply grew 5.7% (three months of growth - October through December), while the growth in room demand was 4.8%. The result was that the market occupancy dropped from 63.5 to 63%. The growth between 1994 and 1995 represents that remaining nine months of growth resulting from the two new products in October 1994. This growth was 16.1% while the growth in demand between 1994 and 1995 was only 11.4%. The result again was a decrease in market occupancy although demand actually grew. P Overall, between 1991 and 1993, the average growth in demand in the Evans/Greeley competitive/comparable market was approximately 3.6% while the supply remained constant. Between 1993 and 1995, the average annual growth in demand increased to 8.1% annually, while the growth in supply averaged a 10.8% annual increase. The stronger demand growth occurring simultaneously with the supply growth indicates that there P was some latent and unaccommodated demand existing within the market prior to the new properties opening. This includes demand that previously used other properties outside of the identified marketplace because of capacity constraints during certain periods of the year and/or because of the market's lack of preferred accommodations. The new properties appear to have captured some of this unaccommodated demand, thus the demand growth figures for the last two years are stronger than those when the supply remained constant. In March 1996, two additional properties will enter the market. Currently there are 599 rooms in the competitive/comparable supply. When the two new properties open, there will be 724. This represents an increase of approximately 20.9%. Between 1993 and 1995, the supply grew 22.7%while the demand grew 16.8%. As stated, we believe that demand -was able to grow at this strong rate because the two new, high quality products offered additional capacity to the market as well as a quality product to a market that previously had limited quality lodging facilities. Consequently, we believe there was significant latent and unaccommodated demand that existed prior to these properties opening. Once opened, they were able to accommodate this demand, and thus demand growth was stronger than what had been realized historically. However, while we believe that there may be another slight "bump" in demandgrowth as a result of two new properties offering new "franchised" products to the market, given the current market occupancies for Greeley, we believe that the level of any unaccommodated and/or latent demand has decreased significantly. Consequently, the growth in demand likely will be significantly lower than the growth in supply in the initial years of the holding period. The select economic and demographic indicators analyzed in previous sections of this report indicate moderate growth for the local market area over the last five years. As a result of combining the historical market growth rates in both room supply and room demand with the selected historic and demographic indicators, it is anticipated that lodging demand related to the various market segments P will exhibit a moderate rate of growth over the next ten years. Based on this premise, for this analysis, we have assumed the following growth rates for the competitive/comparable market. INCOME APPROACH 42 1996 - 6% 1997 - 5% 1998 - 2005 4% Accordingly, our estimates of future room night demand in the Greeley/Evans competitive/comparable market area for the next five years are as follows: ESTIMATED TOTAL FUTURE ROOM NIGHT DEMAND IDENTIFIED COMPETITIVE/COMPARABLE MARKET Room Room INights Nights Occupancy Year Available Occupied* Percentage** I 1995 218,635 132,600 60.5% 1996 256,885 140,600 54.5 1997 264,260 147,600 56.0 1998 264,260 153,500 58.0 1999 264,260 159,600 60.5 2000 264,260 166,000 63.0 I * Rounded to the nearest one hundred ** Rounded to the nearest one-half occupancy point II As has been stated, the growth in room nights available between 1996 and 1997 is the two new properties scheduled to open in March 1996. Since these properties are only open for a partial year in 1996, the market will see room night supply growth in both 1996 and 1997 (ten months in 1996 and two months in 1997). I ESTIMATED COMPETITIVE POSITION I The subject hotel's potential occupancy was evaluated in terms of its "fair share" of market demand. Fair share is defined as the portion of rooms represented by the subject hotel in relation to the total market supply of rooms. There are currently seven lodging properties (including the subject) that I would be considered to be competitive in the market. Assuming that each competitive property received only its fair share of the market demand, each would achieve the estimated market area occupancy. This method assumes that all competitive properties have similar characteristics and have no advantages or disadvantages in relation to the competition. In order to refine the analysis and account for qualitative factors affecting the potential guest's choice of lodging accommodations, the subject's advantages and disadvantages in relation to the P competitive/comparable properties were assessed. The following factors were considered in determining the penetration potential of the subject facility relative to its competitive market I I I I I INCOME APPROACH 43 - room rate structure; location; - level of service; - market orientation; size and physical appearance of the property; national franchise affiliation - access and visibility; and - facilities and amenities offered. The subject,as of the date of inspection,was not affiliated with a national hotel company. In making future estimates, we have assumed that this lack of affiliation will exist throughout the estimated holding period. In addition,it has been assumedthat it will be professionally managed and marketed, and that the service levels at the facility will be as good as, or better than, those currently being offered by any of the competitive/comparable properties included in this analysis. Consequently, we believe the subject has the following competitive advantages and disadvantages when compared to the competitive/comparable lodging marketplace: Advantages: Location Advantage#1 - The subject property is located approximately one-half mile south of the intersection of U.S. Highway 85 and U.S. Highway 34 Bypass. This is advantageous in attracting the tourist/transient business, a significant amount of which is generated along these highways. Location Advantage #2 - The subject property is located proximate to numerous demand generators in addition to the noted highways. These include the regional State Farm Insurance Center, the Greeley Mall, the University of Northern Colorado, the Denver Broncos Training Camp held annually at the University of Northern Colorado, and the Northern Colorado Medical Center. This proves advantageous, as well as a location within two miles of Downtown Greeley, in attracting commercial demand. Location Advantage #3 - The subject property is a full service property in that it offers guest rooms, food and beverage facilities(including room service) as well as dedicated meeting space for groups, meetings and banquet functions. This is advantageousin that there are very few full service products in the Greeley area(the subject, the Best Western Ramkota and the Camfield II), and is the only one located in the southern portion of the Greeley area. The four new properties in the market are all limited service products offering facilities and amenities very similar to one another. FantaSuites Concept - The subject offers 14 FantaSuite units that are unique to the area as-well as being unique to the entire Colorado region. This is advantageous in that it creates a special demand segment for the subject that no other product in the market can penetrate. Given this, these suites are able to command average room rates well in excess of$140 per night, over three times what the Greeley/Evans market is achieving. These suites are most successful in attracting business during the weekends all year,and the weeknights during the summer months. While the occupancy of the suites and the regular hotel rooms is similar in terms of the occupancy percentage, the elevated room rates that the FantaSuites command enable the subject property to achieveoverall average room rates well in excess of the market. Visibility - The property's visibility for highway travelers, especially given the fact that this visibility is enhanced through signage, is considered a competitive advantage. I I INCOME APPROACH 44 Accessibility - Accessibility to the property is considered good via the two proximate U.S. Highways, 85 and 34 Bypass. In addition, ingress/egress to the property is also considered good via two road cuts off Service Road (the U.S. Highway 85 Frontage Road), generally at 31st for the majority of the traffic. Facilities and Amenities - The subject facility offers facilities and amenities that should have a high price/value relationship(good product for a good price). A potential guest can experience a full service product for a room rate that is generally less than what is offered at all of the other competitive/comparable facilities. Market Orientation - The subject property has a market orientation that is ideal for the area in that it offers a full service product catering to the mid-market tourist/transient and commercial market segments. These segments are the most typical demand segments in the market. Disadvantages: Competitive Environment - The subject is located in an area that has seen two new properties open within the past 16 months (the Fairfield Inn and the Super 8) and two new properties are anticipated to opened by March 1, 1996. In addition, an existing independent property, the Camfield II, will become a Ramada Inn on March 1, 1996. Consequently, a relatively small market is being flooded with generally new, franchised affiliated limited service products that offer superior product and competitive pricing. The result is that a prospective guest has four similar new products from which to choose, three of which are located proximate to the Greeley Mall, restaurants, movie theaters, etc. This is what we would consider a superior location. And the fourth property, a Sleep Inn, is a new product located only four blocks north of the subject. This location is also likely to cause competitive problems for the Heritage Inn (a brand new product in a similar location for only a slightly increased cost). Given this, the subject is at a competitive disadvantage because there are other new, high quality products that can steal the subject's potential market premium. Proximity to Certain Demand Generators - Pertaining to attracting certain commercial demand, this location could be considered slightly inferior to others. Many of the commercial demand generators are located in areas of town west of the subject, i.e. Montfort, Hewlett Packard and Eastman Kodak. In addition the commercial growth area of the Greeley MSA is generally I considered those areas located west of the City of Greeley. The positive to this is the limited competition on the west side of Greeley. This should enable the subject to attract some commercial demand despite this disadvantage; however, there are other properties encountered earlier(primarily those located along U.S.34 Bypass)than the subject by potential guests coming 1 from the west. ! Facilities - The Heritage Inn is a property with portions of the structure over thirty years old. 1 Unfortunately, it must directly compete with products that are 16 months old or less. The effect r of the age is somewhat lessened by offering guest rooms for a lower rate than does the competition. However, in a market such as Greeley, where the room rates are already relatively I reasonable and the spread between the best and worst is not significant, even the lure of a lower room rate is often times not enough to capture, or recapture, demand. Franchise Affiliation - The subject's lack of affiliation with a nationally franchised lodging I company and the national reservation system that would accompany it is considered a competitive disadvantage in the marketplace. I I INCOME APPROACH 45 PROSPECTIVE LEVELS OF UTILIZATION The prospective levels of utilization, or occupancy, are based on estimates of the subject's ability to capture anticipated room night demand in the market area. Our estimates of demand penetration are based on the subject's anticipated future competitive position, an analysis of existing com- petitive/comparable hotels in the identified market and our knowledge of the industry. The market penetration and occupancy levels which the subject is anticipated to achieve are based on a fair share analysis. The Heritage Inn's fair share was estimated based on its available inventory of guest rooms relative to the competitive supply. As previously discussed, the seven properties (including the 73 room subject) in the competitive/comparable supply have a combined inventory of 599 guest rooms. Accordingly,the fair share ratio for the subject Heritage Inn is the ratio of available rooms relative to the total market, which would be 12.2%. Once the additional two new properties open in March 1996(125 new rooms), this fair share ratio decreases to 10.1%for the remainder of the holding period(the subject's 73 rooms divided by the 724 market rooms). To estimate prospective occupancy levels for the subject,we evaluated its future potential penetration of the various market demand segments. In addition, we considered the performance of the 14 FantaSuite units versus the performance of the 59 "regular" lodging units. Historic occupancies for the subject are as follows: HISTORICAL OCCUPANCY RATES HERITAGE INN - 73 ROOMS Occupied Percentage Year Room Nights Occupancy* 1993 19,687 73.9% 1994 18,481 69.4 1995 14,971 56.2 * Rounded to the nearest one-tenth percentage point Source: Owners of the Heritage Inn The following charts present the comparisons between the FantaSuite units and the"regular" lodging • units in terms of annual occupancy since 1993. - HISTORICAL OCCUPANCY RATES 14 FANTASUITE UNITS • Occupied Percentage Year Room Nights Occupancy* 1993 3,301 64.6% 1994 3,168 62.0 1995 2,773 54.3 • Rounded to the nearest one-tenth percentage point Source: Owners of the Heritage Inn I INCOME APPROACH 46 HISTORICAL OCCUPANCY RATES 59 "REGULAR" 11� TS Occupied Percentage Year Room Nights 1993 16,394 76.1% 1994 15,313 71.1 1995 12,198 56.6 * Rounded to the nearest one-tenth percentage point Source: Owners of the Heritage Inn It is important to note that the significant drop in occupied room nights between 1994 and 1995 is likely a result of the drop in market occupancy due to the supply growth outpacing the demand growth aswell as the subject's lost market premium due to the development of two new properties proximate to the subject. As can be seen, occupancy is down in both the regular rooms as well as in the FantaSuites. Given that the FantaSuites are such a unique product for the market area and their occupancy is also down, this may indicate that the subject's overall market premium share is also being decreased given the age and general condition of the subject. Historically, the subject's market penetration is as follows: Subject Market Year Occupancy (%) Occupancy (%) Penetration (%) 1993 73.9 63.5 116.4 1994 69.4 63.0 110.1 1995 56.2 60.5 92.5 As the above illustrates, the subject has lost considerable market penetration since 1993, when there was limited quality competition. Consequently, the property not only lost occupancy as a result of the "pie" being further divided with the introduction of new supply (and demand growth not outpacing supply growth), it has lost market penetration due to the new products capturing, or "stealing"some of the subject's demand(both commercial and tourist/transient). The potential reasons for this lost market share include: the overall condition/quality of the subject as compared to the new properties, the locational competitive disadvantages the subject has when compared to the new products and the fact that the new products are nationally franchised affiliated;something the market had very little of prior to 1994. Given the strong occupancy performanceof the two new products (both are estimated to have well exceeded 75% occupancy for 1995), it is likely that the potential penetration loss to the subject was lessened somewhat because of the other product's operating at capacity and the subject likely benefitted from some overflow. However,given the performance of the other products in the market, as well as the 1995 performance of the subject, this benefit likely was minimal. For 1996, with the introduction of additional new supply, more market share will be lost because supply growth is anticipated to well outpace demand growth. In addition, the subject will likely have some additional market penetration loss due to the two newer hotels' (Sleep Inn and Holiday Inn Express) ability to benefit from the overflow that may exist. However, this loss is not likely to be as significant. This is because the subject can market position itself(in terms of room rate structure) below that of the newer properties, and consequently should be able to attract a clientele of business I IINCOME APPROACH 47 that is more room rate sensitive. In addition, the subject's ability to offer a full service product at I a room rate less than what is being offered at the newer limited service properties, should help the subject to maintain levels of penetration similar to what it achieved in 1995. I However, because the estimated future market occupancies are estimated to only be in the low to mid 60%area for the next five years, the new products will have to be competitive in terms of room rate structure to attract their market share. Consequently, it is likely that the subject will continue to lose market share penetration to these new properties, including the newly re-franchised Ramada Inn, Ithroughout the holding period. Based on the above noted considerations, the following chart details the estimated occupancy I percentage levels for the subject lodging facility. For this analysis, we are estimating the subject's occupancy on a annual basis, from January 1, 1996 through December 31, 2006. I PROSPECTIVE LEVELS OF OCCUPANCY/UTILIZATION HERITAGE INN MOTEL - EVANS. COLORADO Occupied Percentage IYear Room Nights' Occupancy" 1996 - 2000*** 13,300 50.0% I ' rounded to the nearest one hundred ** rounded to nearest percentage point "' represents stabilized level IThis translates into an estimated occupancy of 49% for the 59 standard lodging units and 53% for the FantaSuite units. IThese occupancy estimates assumes the property will be properly managed and maintained in the coming years and is supported by the overall market performance and the subject's potential to Icompete in this market given its facilities and amenities (penetration of fair share). As the previous chart illustrates, the property is anticipated to operate at a stabilized occupancy of 50% in the first year of the holding period. This is a result of the property's likely appearance, Iincreased competitive environment that contains four new, similarly market oriented lodging properties all located proximate to the subject,anticipated future marketorientation, the anticipated occupancy of similar products in the competitive/comparable market and the subject's location. IThe following presents the subject's anticipated market penetration for the next five years. N Subject Market Year Occupancy (%) Occupancy (%) Penetration (%) I 1996 50.0 54.5 91.7 1997 50.0 56.0 89.3 1998 50.0 58.0 86.2 1999 50.0 60.5 -82.3 I2000 50.0 63.0 79.4 This chart clearly illustrates the subject's loss of penetration annually, while still being able to ■ maintain a stabilized occupancy. Unfortunately,given the current conditions that exist at the subject, I I wINCOME APPROACH 48 coupled with the greatly enhanced competitive environment, the subject will not be able to generate occupancies at levels prior to 1994 during the holding period. PROSPECTIVE AVERAGE ROOM RATES To estimate the future average room rates for the Heritage Inn, we studied its historic performance (including FantaSuites verses regular lodging units) to evaluate its relationship to the overall market, as well as to evaluate previous room rate discounting practices and room rate increases. We also considered the subject's historic and anticipated future competitive position, the competitive market and our knowledge of the industry. The following presents the recent historic average room rates achieved at the subject property. HISTORIC AVERAGE ROOM RATES - HERITAGE INN MOTEL 59 Regular 14 Year Total 73 Rooms Guest Rooms FantaSuites 1993 $56.42 $40.15 $137.18 1994 57.92 39.76 145.73 1995 57.32 37.85 142.97 Source: Owners of the Heritage Inn The above clearly illustrates the negative effect the new lodging supply has had on the subject, particularly as it relates to the regular guest rooms. Based on the survey of the competitive/comparable lodging facilities in the identified market area, as well as on the facilities and quality of the subject property, future average room rates have been estimated. These estimates consider the following: . historical average room rates achieved by the subject, including the relationship of FantaSuite average room rates and regular guest room average room rates; . historical average room rates achieved by the competitive/comparable hotels and motels in the identified local market area; . the room rate positioning/performance of the two recently opened new limited service lodging facilities in the market (Fairfield Inn and Super 8); the anticipated room rate positioning of the two under construction limited service lodging facilities in the market (Holiday Inn Express and Sleep Inn); . seasonal variations in demand; . anticipated room rate discounting policies; . double occupancy factors; . the anticipated quality level and facilities and amenities offered by the subject; and . estimated effects of inflation. I INCOME APPROACH 49 The following average room rates were estimated based on the various factors noted above. PROSPECTIVE AVERAGE ROOM RATES HERITAGE INN MOTEL - EVANS. COLORADO Current/ Inflated Year Dollars' Year 1 $58.50 Year 2 60.25 Year 3 62.00 Year 4 64.00 Year 5 65.75 Year 6 67.75 Year 7 69.75 Year 8 72.00 Year 9 74.00 Year 10 76.25 Year 11 78.50 • rounded to the nearest quarter of a dollar The 1996 average room rate estimate for the subject($58.50) translates into an average room rate of $37.00 for the regular rooms and$143.00 for the FantaSuites. While the occupancy of the suites and the regular hotel rooms is generally similar in terms of the occupancy percentage, as can be seen, the elevated room rates that the FantaSuites command enable the subject property to achieve overall average room rates well in excess of the market. Without the FantaSuites, the average room rate for the subject would have been $37.00 (for 1996). We have used a 3.0% increase in revenues and expenses over the holding period. This rate was based upon a number of considerations,including industry standards and consumer price index comparisons. Looking at major expense categories on a historical basis, in studies completed by Pannell Kerr Forster(PKF) between 1981 and 1993 for the United States,on an available room basis,departmental expenses increased at an average annual rate of 2.9%. Undistributed operating expenses, including administrative and general, franchise fees, marketing, energy and property operations and maintenance increased at an average annual rate of 4.5%. The total of all operating expenses increased at an annual rate of 3.6%. The following chart illustrates the historical changes in the consumer price index as well as future estimates of changes: HISTORICAL U.S. CONSUMER PRICE INDEX (ALL URBAN) 1979 - 1984 7.7% 1984 - 1989 3.7% 1989 - 1994 3.7% Source: U.S.Bureau of Labor Statistics I I I INCOME APPROACH 50 As the chart shows, the inflation rate has decreased significantly since the 1979 - 1984 time period. Future estimates also indicate levels lower than that of the early 1980s. The preliminary 1995 estimate of inflation is 2.5%, with the 1996 and 1997 estimates at approximately 3.0%. The following presents the historical averages of the consumer price index,from 1980 to 1994 for the United States and Denver. HISTORICAL CONSUMER PRICE INDEX CHANGES U.S. All Urban Denver All Urban Current 5 year average 3.4% 4.1% Current 10 year average 3.5% 4.9% Current 15 year average 5.0% 6.0% Source: U.S. Department of Labor As this information shows, the ten year average is 3.5% and 4.9% for both indexes. The 15 year averages of 5.0% and 6.0% respectively, need to be tempered slightly due to the very high inflation rates in the late 1970s and early 1980s. In addition, for the identified market area, between 1991 and 1995, the average room rate increased at an average of approximately 2.5% annually(from$38.00 in 1991 to$42.00 for 1995). The subject has experienced an average annual increase significantly lower than that of the market at 0.8% annually since 1993. However,this is similar to the market's 1.2%average annual increase since 1993. The recently slower room rate growth, both for the market as well as for the subject, is likely a result of the market shifting that is occurring given the significant introduction of new supply into a market that is not currently operating at capacity. And finally, in a Summer 1995 Real Estate Investment Survey of the Rocky Mountain Region, prepared by Scott, Stahl, Burbach & Decker, most respondents anticipated future increases of 3.0% to 5.0% for investment grade properties both in terms of revenues and expenses. Based on the historical factors and the future market occupancy estimates presented, as well as the fact that the subject is located in an area that was analyzed as having relatively slow to moderate economic growth potential, we have used a 3.0% rate throughout the holding period. BASES FOR PROSPECTIVE FINANCIAL ANALYSIS Estimates of annual operating results for the subject Heritage Inn lodging property were prepared for eleven years, beginning January 1, 1996 to December 31, 2006. These estimates are based on an analysis of the subject's historic performance,analysis of other selected,similarly performing lodging facilities, industry data for similar hotels and our knowledge of the industry. All amounts have been rounded to the nearest one thousand dollars, and revenue and expense classifications generally conform to the definitions prescribed by the American Hotel and Motel Association in the Uniform System of Accounts for Hotels. Various revenues and expenses in the provided historical financial information had to be re-classified to generally conform to these definitions noted. It should also be noted that our estimates are based on the anticipated competitive position of the subject which was previously discussed. The historic revenue and expense information for 1993 through 1995, as well as our Year 1 (stabilized year) future estimates are presented at the end of this section. In addition, all figures presented are expressed in current 1996 dollars and should be escalated accordingly to reflect the years being analyzed. INCOME APPROACH 51 Revenues Rooms revenue is calculated using the estimated occupancy and average room rate for each year in the holding period as follows: CALCULATION OF ROOMS REVENUE Estimated Avg. Estimated Estimated Room Rate Rooms Revenue • Annual Percentage in Current/ In Current/ Room Nights of Inflated Year Inflated Year Year Occuoied* Occuoancv** Dollars*** Dollars**** 1996 13,300 50 $58.50 $778,000 1997 13,300 50 60.25 801,000 1998 13,300 50 62.00 825,000 1999 13,300 50 64.00 851,000 2000 13,300 50 65.75 874,000 2001 13,300 50 67.75 901,000 2002 13,300 50 69.75 928,000 2003 13,300 50 72.00 958,000 2004 13,300 50 74.00 984,000 2005 13,300 50 76.25 1,014,000 2006 13,300 50 78.50 1,044,000 * Rounded to nearest hundred ** Rounded to nearest whole percentage point *** Rounded to nearest quarter dollar **** Rounded to nearest thousand dollars Food and Beverage revenues are based on estimated utilization of the subject's food and beverage facilities by the guests. As noted, the subject facility offers a full breakfast, bar and dinner service for guests of the hotel as well as for the general public. Given the relatively small size of the hotel, in term of number of guest rooms, as compared to other full service hotels industry-wide, we have relied more on historical performance to estimate future revenues rather than on typical industry performance for larger full service hotels because these type of hotels are not applicable in this analysis. Food revenue will be derived primarily from hotel guests and others using the subject facilities for breakfast and to a lesser extent for dinner. These sales are estimated at approximately $9.00 per occupied room throughout the holding period, and have been escalated accordingly. Historically, these revenues have been $8.41 per occupied room in 1993, $8.67 in 1994 and $8.61 in 1995. We believe that with the addition of new competitive supply each offering a complimentary continental breakfast, additional revenue growth for breakfast service may be limited. In fact, to remain competitive today, many corporate, and all FantaSuite guests receive a complimentary breakfast at { the subject. Consequently, we have estimated the food revenue to be $9.00 per occupied room, similar to the present. Beverage revenue is derived primarily from guest utilization of the lounge facilities. Again, based primarily on the historic performance,beverage revenue has been estimated to be approximately$4.50 per occupied room. Historically, beverage revenue was $3.54 per occupied room in 1993, $4.03 in 1994 and $4.46 in 1995. I INCOME APPROACH 52 Given the nature of the subject property, as well as the nature of the competition, we have not estimated any other food and beverage revenue such as public room rental and set-up fees due to their relative lack of applicability. Historically at the subject these revenues have been very minimal: $755 in 1993, $180 in 1994 and a $200 loss in 1995). Telephone revenues from the sale of local and long distance telephone calls are expected to be approximately$1.00 per occupied room and have been escalated accordingly throughout the holding period. Historically, these revenues have been approximately$1.12 per occupied room in 1993,$1.12 per occupied room in 1994, and $0.87 in 1995. Minor Operated Department consists of the revenues from those items sold in conjunction with the FantaSuites (i.e. fruit baskets, roses, cheese, bath accessories, keepsakes, etc.) in addition to other amenity sales and valet income. Historically, these revenues have been approximately $2.05 per occupied room in 1993, $2.84 per occupied room in 1994, and $2.69 in 1995. Based upon the recent revenue performance as well as on the performance of comparable hotels in similar market conditions, we believe that it is reasonable to estimate potential revenue in this category at approximately $2.75 per occupied room, which has been escalated accordingly throughout the holding period. Rentals and Other Income (nett in this appraisal generally includes commissions from the vending machines located on each floor of the subject and various other miscellaneous sources such as the rent for the small office located above the lobby (rented by the Evans Chamber of Commerce). Historically, these revenues have been approximately $0.68 per occupied room in 1993, $0.43 per occupied room in 1994, and$0.36 in 1995. Based upon the recent revenue performance as well as on the performance of comparable hotels in similar market conditions, we believe that it is reasonable to estimate potential revenue in this category at approximately$0.50 per occupied room, which has been escalated accordingly throughout the holding period. Departmental Costs and Expenses Rooms department expenses consist of payroll and other expenses. Payroll expenses include the costs of staffing the front desk, housekeeping and laundrydepartments. These expenses are calculated on the basis of staffing schedules and were supported by the subject's historical experience as well as the experience of comparable hotel operations. Fixed and variable portions were assigned to our payroll estimates to reflect increased efficiency as occupancy levels rise;decreased efficiency should they fall. Rooms other expenses consist of guest supplies, paper goods, cleaning supplies, laundry, linen, and other items necessary for maintaining guest rooms. Total rooms expenses are estimated to be approximately 25.2% of rooms revenue in Year I, the stabilized year of operation. This equates to approximately$196,000 for Year 1. Historically, these expenses have been$215,162 (19.6%of room revenue) in 1993, $229,615(21.6%of room revenue) in 1994 and$220,201 (20.1%of rooms revenue)in 1995. This increase in expense ratio for the estimated years, as compared to the historic, is a result of the lower rooms revenues coupled with the fixed variable relationship of the rooms department expenses. Even though revenues are down in our estimates, some rooms department expenses are fixed, thus increasing the expense ratio. Food and Beverage department expenses consist of the cost of food and beverage sales, payroll and related expenses, and other expenses such as china, glass, silver,cleaning supplies and entertainment. We believe that the historic performance of the subject, supported by the performance in similar hotels within the industry, is the best indicator for future expenses for this department. Total food and beverage expenses are estimated at 81.7% of food and beverage revenues in 1996, the stabilized year of operation. Historically, these expenses were 73.1% in 1993, 78.8% in 1994 and N I INCOME APPROACH 53 1 92.2% in 1995. This expense ratio assumes that a certain amount of complimentary breakfasts will be given away to certain room night demand throughout the analysis period. Telephone department expenses, which consist of the cost of telephone calls, service and equipment, and other expenses, are estimated at approximately 90% of telephone sales throughout the holding period. The applicable industry statistics indicate similar expense ratios for properties such as the subject that operate with leased telephone equipment. Historically, this expense was 83.2% of telephone revenues in 1993, 77.9% in 1994 and 111.5% in 1995. The actual generated expense estimate will range between 86.7%and 92.9%of telephone sales as a result of the rounding that occurs on the revenue line item (thousands). Minor Operated Departments expenses (generally the actual costs associated with the minor operated department revenues) are based solely on the performance of similar lodging operations, general industry statistics and the recent historical performance. Given this, the expense for this department has been estimated at 40% of minor operated department revenues throughout the holding period. The actual generated expense estimate will range between 39.1% and 41.0% of minor operated department sales as a result of the rounding that occurs on the revenue line item (thousands). Historically, this expense was 38.5% of minor operated department revenues in 1993, 35.4% in 1994 and 54.7% in 1995. Undistributed Operating Expenses Administrative and General is typically a combination of payroll and related expenses and other expenses. These expenses represent payroll costs for the general manager as well as for the night audit staff. Payroll and benefits are anticipated to be approximately 5.7%of total sales,or$58,000 in 1996, the stabilized year. Administrative and general other expenses include such items as the cost of accounting and legal fees,credit card commissions,bad debt,printing,stationery,office supplies,and postage costs, and are estimated at approximately 4.8% of total sales by the stabilized year of operation. As a result, total administrative and general costs are estimated to be approximately $99,000, or 9.8% of total sales, in 1996, the stabilized year of operation. Historically, these expenses were 8.0% ($113,384) in 1993, 7.8% ($107,640) in 1994 and were 7.6%of total revenues ($83,916) in 1995. As can be seen, as this expense is considered relatively fixed, as the revenues are anticipated to decrease in the coming years as compared to the past three years, the cost ratio tends to increase. Management Fee is estimated at 3.0%of total revenue throughout the holding period. This represents a base fee only and is based on similar type operations in Colorado and the Rocky Mountain Region. Historically, the current management has charged as little as 3%of total revenues in 1995 and as high as 6.8% in 1993. Marketing is strictly a reflection of the expenses needed to obtain the occupancies and average room rates presented in this appraisal. Typically, it includes a combination of payroll and related expenses • and other marketing expenses. However, given the relatively small size of the subject(73 rooms), as well as the anticipated occupancy and average room rate performance, we have not budgeted a marketing person for this property. We believe the general manager can be responsible for this task (this payroll has been charged to the administration and general category). Consequently, there is no estimate for marketing personnel,nor has there historically been any. Currently,the general manager at the subject has the marketing responsibility. Marketing other expenses are estimated at 3.5%(3.4%in Year 1 due to rounding of thousands)of total revenue ($35,000 in 1996) throughout the holding period. Marketing other expenditures include the costs associated with advertising and promotional efforts (including trade-outs) for the subject. Historically, these expenses were 5.3% in 1993 ($74,048), 5.2% ($71,758) in 1994 and 5.2% ($57,232) in 1995. Our estimates are slightly lower than those recently achieved, however, we believe that for 0 INCOME APPROACH 54 the hotel to achieve the revenue estimates that have been described in this analysis, the expenditures estimated, supported by the performance of similar type properties and other industry statistics, should be sufficient. Franchise Fees have not been estimated for this analysis as the subject, at least for the past several years, has not been operating under a national franchise flag, and this appraisal assumes that it will not be in the future. Given the recent operational situation of operating as an independent lodging property, historically no franchise fees have been charged to the property. Energy Costs represent expenditures for electricity,fuel,water,waste removal,and operating supplies for the subject. The historical figures have ranged between$5.27 per occupied room in 1993 to $7.24 per occupied room in 1995. Although the per occupied room statistic varies widely between 1993 and 1995, on an actual expenditure bases, the expenses from 1993 to 1995 area quite similar. $103,845 in 1993, $108,451 in 1994 and $108,357 in 1995. What this indicates is that for this property, the energy expenditure is a relatively fixed expense and not one that tends to vary with fluctuations in occupancy. This is very typical of older hotel/motel properties as the original utility systems are not as efficient as modern ones. Consequently, we will rely primarily on the historical performance of this expense, and will estimate approximately 5113,000 in 1996, escalated accordingly for the remainder of the holding period. Property Operation and Maintenance is a combination of payroll and related expenses and other maintenance expenses. These expenses represent payroll costs for all maintenance personnel and expenditures for periodic preventive maintenance and repairs to mechanical equipment,painting and decorating, grounds maintenance,and the supplies necessary to operate this department. Payroll and benefits are anticipated to be approximately $43,000 in 1996, or approximately 4.3% of total sales. This represents the payroll and related expenses for two full-time people, something the current owners agree is necessary given the age and condition of the property. Reportedly, until recently, this property has not been staffed to this level. Total property operation and maintenance other expenses were estimated at approximately $2.50 per occupied room throughout the holding period, escalated accordingly. As a result, the total property operation and maintenance expense is estimated at 7.5% of total revenue, or $76,000, in 1996, the stabilized year of operation. Historically, these expenses were 4.7% ($66,579) in 1993, 5.6% ($76,618) in 1994 and $64,715 (5.8%) in 1995. Our estimates are slightly higher than recent historical levels to account for the fact that the property is aging, and maintenance becomes more expensive as a property continues to get older. In this analysis, to help combat this problem, we have assumed slightly increased payroll over historical operations. Fixed Charges Property Taxes are based on the real and personal property taxes for the subject for tax year 1995, due in 1996, which are approximately $46,000 according to representatives of Weld County. This figure has been used for the Year I estimate, and has been escalated accordingly throughout the holding period. Insurance was estimated based on recent historic performance, comparable properties and industry statistics. According to the current owners, the historical insurance figures, especially in 1994, included costs not accountable to the subject. Historically these expenses were $22,250 in 1993, 530,606 in 1994(of which management reports$8,300 was not attributable to the subject)and$21,600 in 1995. Based on these historic figures, as well as the insurance expenses of similar products and overall industry statistics, we have estimated this expense to be $20,000 for Year 1, escalated accordingly throughout the holding period. I IINCOME APPROACH 55 Reserve for Replacement of fixed assets is estimated at 3% of total revenue for all years of the holding period. This level of reserve is anticipated to satisfy the capital needs of the subject throughout the holding period and is typical of industry standards. Cash Flow From Operations Before Debt Service and Income Taxes Cash flow from operations before debt service and income taxes is the amount of income the subject facility is estimated to generate after all expenses and fixed charges associated with normal operations are subtracted from total revenues, also referred to as net operating income. On the following page we present a schedule of the estimated cash flow from operations before debt service and income taxes over the ten year holding period (the eleventh year is estimated for reversionary purposes). ® Following this chart is a summary of the historical expenses for the subject property as well as our * 1996 estimated performance for the subject property. I I I I I I I I I I I I I I 56 r II HERITAGE INN EVANS,COLORADO SCHEDULE OF ESTIMATED CASH FLOW FROM OPERATIONS BEFORE DEBT SERVICE AND INCOME TAXES (EXPRESSED IN THOUSANDS OF CURRENT DOLLARS) APPRAISER I FINANCIAL COMPARISONS ESTIMATED ACTUAL ACTUAL ACTUAL 1996 1993 1994 1995 (STABILIZED) AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO REVENUES: - ROOMS $1,097,683 77.9% $1,082,040 77.1% $853,440 77.1% $778,000 76.7% FOOD AND BEVERAGE 238,002 16.7 234,891 17.0 195,512 17.7 180,000 17.7 I TELEPHONE 22.137 1.8 20,771 1.5 13,002 1.2 13.000 1.3 MINOR OPERATED DEPARTMENTS 40,300 2.9 52,537 3.8 40,253 3.8 37,000 3.6 RENTALS AND OTHER INCOME(NET) 13,399 1.0 7,933 0.8 5,345 0.5 7,000 0.7 ITOTAL 1,409,501 100.0 1,378,172 100.0 1,107,552 100.0 1,015,000 100.0 DEPARTMENTAL COSTS AND EXPENS I ROOMS 215,162 19.8 229,815 21.8 220,201 25.8 196,000 25.2 FOOD AND BEVERAGE 172,587 73.1 185,120 78.8 180,165 92.2 147,000 81.7 i TELEPHONE 18,428 83.2 18,186 77.9 14,503 111.5 12,000 92.3 IMINOR OPERATED DEPARTMENTS 15,513 38.5 18,614 35.4 22,035 54.7 15,000 40.5 TOTAL 421,690 29.9 449,535 32.6 436,904 39.4 370,000 38.5 1 GROSS OPERATING INCOME 987,811 70.1 928,637 67.4 670,648 60.6 645,000 63.5 UNDISTRIBUTED OPERATING EXPENSES: I ADMINISTRATIVE AND GENERAL 113,384 8.0 107,640 7.8 85918 7.6 99,000 9.8 MANAGEMENT FEE 96,022 8.8 77,448 5.8 33,365 3.0 30,000 3.0 MARKETING 74,048 5.3 71,758 5.2 57,232 5.2 35,000 3.4 I ENERGY COSTS 103,845 7.4 108,451 7.9 108,357 9.8 113,000 11 1 PROPERTY OPERATION ANO MAINT 66,579 4.7 75618 5.6 84,715 5.8 76,000 7 5 TOTAL 453,878 32.2 441,913 32.1 347,585 31.4 353,000 34.8 CASH FLOW FROM OPERATIONS BEFORE I FIXED CHARGES, DEBT SERVICE 1 AND INCOME TAXES 533,933 37.9 488,724 35.3 323,063 29.2 292,000 28.8 IFIXED CHARGES: PROPERTY TAXES 35,459 2.5 34,536 2.5 36,000 3.3 46,000 4.5 INSURANCE 22,250 1.6 30,606 2.2 21,800 2.0 20,000 2.0 RESERVE FOR REPLACEMENT 0 0.0 0 0.0 0 0.0 30,000 3.0 N TOTAL 57,709 4.1 65,142 4.7 57,600 5.2 96,000 95 CASH FLOW FROM OPERATIONS BEFORE DEBT SERVICE AND INCOME TAXES I (NET OPERATING INCOME) ==$4776,,224 ==33.88%'a$4211,,55822 =a 30.66%_-5265,4463 ==24.=%=_$19,,000 _-1..3% STATISTICS: PERCENTAGE OCCUPANCY 73.89% 69.38% 56.19% 50.00% IAVERAGE ROOM RATE $58.42 $57.92 $57.32 $58.50 NOTES: 1. PERCENTAGES OF DEPARTMENTAL EXPENSES ARE TO DEPARTMENTAL REVENUES; ALL OTHER PERCENTAGES ARE TO TOTAL REVENUE. 2. THE COMMENTS AND ASSUMPTIONS CONTAINED IN THIS REPORT ARE AN INTEGRAL PART OF THIS ESTIMATED SCHEDULE. 3. PERCENTAGE TOTALS MAY NOT ADD DUE TO ROUNDING. 1 � L 00 ci .. •7 .1 cc 0 ec .0 c- c, •C •C I ° 0 a 7 a ! 0 I e t ^ ^ 0 a 0 ' p. .- a ci g n9gg g 21 aa6 ; ^ 17, 1 g 4 ., fl a - s - a : 2 - - - a • 1 t 3 .1 g 1 74 ,c4,. t2 :•., ",...3 5 --; P:.-,--.._ 4 67. 1 411 sig » ly." 21 ; I 11 a : "AE =224E . 0 0 i ge - eeig hin. .. .. i .. o 009 -70191 hi 9r919 9 28 o i 0 ..: -, 961 8 8288 13 8 aimm - ..: i01 i < `' nia e - E: •-=. ih. i ` i i 1 1 ; MI , r ! .. n Z i wEE.t. ° 10 g 3 , Etw n 2i ;-: < I 15 q 01 02 - 8 ' 8 r J.. = i 'i • • 2aa - 8 ag4 ' 1g- i r.".28 ,ila mo ,-- 010 8888 A 8 g8823 I » I g 1 A g : I _A - - ; • : n : I I I I i I .“. .IN , Ia1 al ^ - ala mm - r. 0 . - In ! 81 ' nen . 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I I an t el el I .c2N W I- > 2 w 2 i I 0 0 < I 1 i I 0 0 Leh90h191 9 a n a : 0 .11 a <W " 0 0 0 0 : ne; I 14,1 al ei0 1 .0 ; S `L Vic • w ° arz - ria 81 882313 2 - m I I 1 t.- < CO CC I I I : 0 <6. 0 . . » 00o , 0= = # .9 0 Z .: e .6 8 m„. m0 0 0 00 . 70 6 .16 - h w 91 999H - rzca < g :ttsj g CA - n g ; '1" .,.. . . '8 1 888iI:i 8 Er0 3» 2 r,5w4,!,.3u03'Yi. 2 c ua S i ;0oQ171 , 2 = 0 = 12 0 2 h w ww P EtEi a o. 2 z ow 6 m :1- b w . . . w 0 5 0 PC 2 2 PIZ < OW 2 3 a 2 a 3 O — .4 ur 8 4 6 i szi 3 181;1 “' 6 : 8 w '<z ..-4., b3 ° 8A 0 .7. 8 ouJ aP- llta 0 3 5 9 6 ta. < _, az .1i'J 5 ,Li ,_,s' 3 °- - 'm 1 360 56 ,J3 ,2 W a 3 U C 3 P 0 tiLL Op J , '" ,.! 2 = 1 =62 az > hi L>j imh - .'5 Eg a < c ,5 , u ‘ ,-,i . ,,, dud ' 64, 5 w ..:. :cc 4 . - , , s 0 0 a, , - woo 0 3 -5 < uZz z.ia = gc.iV2Y u-252 u = 12 > ,N6 2.5 ;2 Lice 8z - c. 6 iRIS R- 5 F—E, ; 2 ban ,, ,_ < 0- < 2 .: ,: c•i o 5 i 'i' w 5 '.'g5.5w *0. -. W wuwi w - w 5 6 Q226, -s. 62i 8 .Iti u . K. OMMMEMS ..1 •••=0. 11MS__ I li INCOME APPROACH 58 DISCOUNTED CASH FLOW ANALYSIS IDiscounted Cash Flow (DCF) can be defined as: "The procedure in which a discount rate is applied to a set of projected income streams and a reversion. The analyst specifies the quantity, variability, timing, and duration I of the income streams as well as the quantity and timing of the reversion and discounts each to its present value at a specified yield rate. DCF analysis can be applied with I any yield capitalization technique and may be performed on either a lease-by-lease or aggregate basis."7 I The DCF approach attempts to present a model of the entire investment from the date of value to the estimated termination through eventual resale. The actual timing of cash receipts and disbursements are analyzed on an annual basis. This is a cash basis accounting technique which presents a model of Ithe timing of anticipated cash flows unique to the subject property. For purposes of this report, we have utilized an anticipated holding period of ten years. This holding period is typical of investment properties and is based upon survey information and our discussions with investors and lenders. The cash flow analysis has been prepared based upon the following criteria: I Reversion: In addition to the annual cash flows, the yield on an investment must reflect the additional cash flow arising from property appreciation over the holding period. This additional cash flow is realized upon the hypothetical sale of the property at the end of I the ten year holding period. The estimation utilizes the income producing potential of the subject property at the time of the anticipated disposition. As per the cash flow analysis to follow, Iwe applied a direct capitalization technique to the eleventh year's net operating income (cash flow from operations before debt service and income taxes). I Derivation of Terminal Capitalization Rate: To estimate a terminal capitalization rate, we have relied upon input from a number of market sources. Respondents to the Scott, Stahl, Burbach & Decker Summer 1995 Investment Survey I indicated terminal capitalization rates ranging from 10.0% to 15.5%for motels/hotels. The more typical range was 12% to 14%. These rates typically apply to prime conventional properties. A Icopy of this survey is located on pages 65 to 68. In addition to the survey information, we have considered the I comparable lodging sales listed in the Sales Comparison Approach section of this appraisal. The sales data included overall rate indicators based on the net operating income (NOI). For the I purpose of appraisal applications, the NOI is defined as revenues less all fixed and operating expenses except debt service and depreciation. This figure excludes non-recurring capital expendi- tures and is referred to as the effective NOI. The resulting overall I I7The Dictionary of Real Estate Appraisal. Third Edition Appraisal Institute, 1993, Page 102. I I MINCOME APPROACH 59 capitalization rates, before and after anticipated IIrenovations/repairs, from the sales are as follows: CAPITALIZATION RATES IIRate Before Rate After Sales Repairs (%) Repairs (%) NOI Rate (%) II 1 16.23 15.26 41.6 2 16.49 46.0 3 --- 12.84 34.0 II 4 ___ 13.85 38.0 5 19.75 47.0 6 10.20 9.27 25.0 II 7 12.53 10.86 26.0 8 12.49 11.02 22.0 9 --- 9.81 24.0 10 --- 20.95 55.0 For the four sales which needed repairs/renovations, the average capitalization rate was 12.86%. For all ten sales, after the needed repairs for the four transactions, the sales have capitalization rates ranging from 9.27% to 20.95% and reflect various market conditions and performance levels. Typically, a very low capitalization rate represents a "going-in" rate rather than a stabilized rate. The average for the sales is 14.01%, and without the high and the low is 13.74%. When analyzing these transac- tions, one should remember that the rates are being derived from actual income levels from the previous year and/or projected income for the coming year. These rates therefore represent "going-in" capitalization rates which can tend to be lower than terminal or reversionary rates used in a DCF analysis. In general, the sales with very low rates typically indicate that investors in these properties anticipate significant future growth in net income and subsequently, value. We have also considered information published by the American Council of Life Insurance. This information represents reporting insurance companies which account for 2/3 of the commercial mortgages held by U.S. Life Insurance Companies. This infor- mation is tabulated on a quarterly basis and the capitalization rate used is derived for each loan by dividing the net stabilized earnings by the property value. This information is summarized as follows: INCOME APPROACH 60 Hotel/Motel Properties Number Avg. Loan Average Quarter of Loans Amount (000) Can Rate 3rd-1995 11 $12,985 11.9% 2nd-1995 8 13,618 10.6 lst-1995 4 6,893 10.4 4th-1994 3 23,305 9.9 3rd-1995 6 10,983 10.6 2nd-1994 7 7,824 10.7 1st-1994 1 22,400 a 4th 1993 5 27,956 11.1 * Data not listed for limited number of loans. Source:American Council of Life Insurance Capitalization rates from this survey range from 9.9% to 11.9%, 1 with an average of 10.7%. Those highest quarters in terms of number of loans would probably be more reflective of an average Icapitalization rate, as quarters with a limited number of loans could be skewed by one or two large properties. Insurance companies in this survey also tend to finance larger and high 1111 quality projects. All of the previous information needs to be tempered by the fact that a DCF analysis requires a number of assumptions over a ten year holding period. In view of the preceding data,observed rate N trends, and giving consideration to the prospects, quality, and market position of the subject facility, a terminal capitalization IIIrate of 14.0% has been used. Sales Expense: This represents our estimate of the cost of resale expressed as a II percentage of the prospective resale price. The amount used, 6.0%,includes such fees as title insurance,legal fees,closing costs, brokerage fees and tax preparation. According to the Scott, Stahl, N Burbach & Decker Summer 1995 Real Estate Investment Survey for the Rocky Mountain Region, this rate is consistent with current brokerage fees for properties such as the subject. NValue of Reversion The reversionary value was determined by capitalizing the eleventh year's NOI by the 14.0% IIcapitalization rate. From this reversionary value, the 6.0%sales expense is deducted. The reversion estimate is calculated as follows: N I I INCOME APPROACH 61 Reversion Calculation Net Annual Income (Year 11) $ 255,000 Divided By Terminal Capitalization Rate 14.0% Estimated Sale Price $ 1,821,429 Less 6% Costs of Sale (109.286) ' Net Sales Proceeds (Reversion) Before Discounting: $ 1,712,143. Discount Rate As the annual cash flows and reversionary value are estimated eleven years into the future, it is necessary to discount these values into a present value estimate. Present value is today's cash lump sum which represents the current value of the right to collect the future payments and reversion. It is the aggregate value of the discounted future payments and reversion. The discount rate used must reflect a sufficient rate of return for a developer or owner of a property over the holding period. The rate must take into consideration the time value of money and charges for holding costs. The rate must also reflect an adequate rate of return for the risk involved when compared to other types of investments. When analyzing discount rates, it is important to realize that all investments are in competition with each other for the investment dollar. The investor has a choice of (1) bank rate securities such as government bonds, industrial or municipal bonds and debentures, (2) stocks and other securities, or (3)selected enterprises or other real estate investments at varying rates of return. The acceptable rate of return to the investor is affected by considerations of risk, burden of management, degree of liquidity and other factors (including personal preference). The analysis quite often follows the historical summation of these factors, known as a "built-up" rate. As an example, an adjustment for risk is added to a safe or minimum risk rate as an increment to compensate for the extent of risk believed to be involved in the use of the capital sum. An additional upward adjustment is made to the rate to account for the need for management of the investment. Another adjustment is usually made for non-liquidity due to the time required to realize cash from the resale of the property. The resale period may vary with the general marketability of the type of property and the amount of the cash investment required. The principle of discounting money to be received in the future is based upon the fact that today's dollar can be invested to earn a return, while the expected future dollar not yet generated, cannot. The discount rate must reflect what is called the "opportunity cost of capital." Thus, the investor is compensated by the discount rate for the current lost opportunity in investing in alternative assets. Although the investment vehicle being analyzed herein is real property, competition for investment dollars in other investment media is keen, and the prudent investment manager must carefully consider all alternatives. The charts on the following pages present current yields for alternative investments which are in competition for the investment dollar. I I I INCOME APPROACH 62 A. All Property Types - Russell - NCREIF Property Index I Total Market Value No. of I of Sample Properties Change Change Total Date ($Mil) in Sample In Income In Value Change I12/85 $11,101.3 1,000 7.52% 2.45% 10.10% 12/86 $12,522.0 1,070 7.27% (0.60%) 6.63% 12/87 $13,253.7 1,121 7.03% (1.29%) 5.67% I 12/88 516,335.2 1,213 7.05% (0.01%) 7.04% 12/89 $18,541.5 1,318 6.71% (0.48%) 6.21% 12/90 $22,759.8 1,534 6.71% (4.99%) 1.47% 12/91 $22,389.5 1,673 6.91% (12.34%) (6.08%) I 12/92 $24,065.8 1,892 7.69% (12.02%) (5.03%) 12/93 $22,029.3 1,624 8.76% (7.39%) 0.88% 12/94 $23,533.6 1,558 9.16% (2.28%) 6.73% I Sample Mean: 7.48% (3.90%) 3.36% I Retail Buildings I12/85 $1,919 134 7.71% 3.96% 11.90% 12/86 $2,337 135 7.35% 3.94% 11.51% I 12/87 $2,635 135 6.85% 4.48% 11.56% 12/88 $3,433 145 7.10% 5.99% 13.40% 12/89 $4,231 152 6.44% 3.92% 10.54% II 12/90 $5,221 214 6.45% (0.29%) 6.15% 12/91 $5,836 293 6.39% (8.32%) (2.33%) 12/92 $6,332 318 7.01% (9.01%) (2.48%) 12/93 $6,013 308 7.73% (2.16%) 5.44% I12/94 $7,188 284 7.86% (2.53%) 5,18% Sample Mean: 7.09% 0.00% 7.09% I Source: The Russell -NCREIF Property Index,Fourth Quarter, 1994 II r II NI INCOME APPROACH 63 B. Commitments of$100,000 +on Multi-family and Non-Residential Mortgages Made by Life Insurance Companies During the Third Quarter of 1995. No. Of Interest Loan/Value Term Property Category Loans Rate Ratio (Yr,/Mo,) Bldgs. w/Loans Less than $2 Million 67 8.11% 67.1% 13/1 $2 to $4.99 Million 165 7.96 70.0 12/2 $5 to $14.99 Million 231 7.85 69.2 11/5 $15 to $24.99 Million 52 7.73 68.1 10/9 $25 Million and over 14 7,73 ¢$,$ l0/1 Total - All Properties 569 7.80% 68.9% 11/8 Source: •Investment Bulletins,American Council of Life Insurance,No. 1121,December 29, 1995. C. Yields on Selected Securities Corporate Corporate 5-Year Aaa Baa Date US Bonds Bonds Bonds 12/85 8.74% 10.16% 11.58% 12/86 6.67 8.49 9.97 12/87 8.45 10.11 11.29 12/88 9.09 9.57 10.65 12/89 7.75 8.86 9.82 12/90 7.73 9.05 10.43 12/91 6.19 8.31 9.26 12/92 6.08 7.98 8.81 12/93 5.15 6.93 7.69 12/94 la $4¢ 11 Sample Mean: 7.36% 8.79% 9.86% ISource: Moody's Bond Survey 10 II N I I I IINCOME APPROACH 64 D. Selected Interest Rates I6 Month Prime Treasury IDate Rate Bills 12/85 9.50% 7.09% I 12/86 7.50 5.56 12/87 8.80 6.32 12/88 10.50 8.24 I 12/89 10.50 7.45 12/90 10.00 6.76 12/91 7.21 4.16 I 12/92 6.00 3.39 12/93 6.00 3.25 12/94 8.50 6.21 Sample Mean: 8.45% 5.84% Source: The Wall Street Journal,Monthly Averages. E. Investment Survey (See chart on pages 65 to 68). 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L.1 uu, u7. o Ira =U uU < mU a u1 ? uo 'mu CLmn C�IJ 4,a- W_ E0 Wi ea out y3 Y1 mu Lei � � ° a E CO 0 ° `a- m golf `00 6 zu OZU 04i UC Mc (Jima, au ZMO -0 Ili ao a o �y T H N N CVCln Cl cal Cl i p INCOME APPROACH 69 By definition, these yield or discount rates are known as the Internal Rate of Return (IRR): "The IRR is the rate of return on invested capital that is generated, or is capable of being generated, within an investment during the period of ownership. In other words, it is a rate of profit (or loss) or a measure of performance. It is literally, an interest rate. The effective interest rate on a real estate investment is the equity investor's IRR. The yield to maturity on a bond is the bond holder's IRR. when the bond is held for its full term. The IRR is the rate of return on capital expressed as a ratio per unit of time: for example 10% per annum."8 In estimating a discount rate applicable to the subject investment, Tables A, B and E present the most direct reflection of real estate as an investment media. Table A is prepared by the National Council of Real Estate Investment fiduciaries (NCREIF). NCREIF is a non-profit research organization of institutional equity real estate managers- banks,insurance companies and independent advisors. The organization's purpose is to foster real estate investment research, develop real estate databases, and to create a link between the institutional real estate industry and academia. The Russell-NCREIF Property Index combines property-specific data contributed by the membership of NCREIF. As the membership grows, new contributors submit historic data on properties under management;in this way, the sub-indexes are expanded,and better reflect the institutional real estate market to which the subclass belongs. Subclasses analyzed include office, apartment, warehouse, retail, and R&D/office. Of particular significance in Chart A is the column titled Total Percent Change. These figures represent the total yield for the data sample for that particular year. The final row indicates an average yield rate for the past 10 year period from 3.36% to 7.09%. However, prior to 1993, there had been a definite downturn over the prior eight years for all properties. Retail rates have been more stable (hotels have not been analyzed in a separate category) with a major drop in returns occurring only in the four years prior to 1993. Due to the elementof risk involved in real estate investments versus alternative investment vehicles, the prudent investment manager must compare rates of return. Chart B reflects mortgage interest rates as reported by the American Council of Life Insurance. Typically,conventional mortgages have fixed rates to maturity, and the mortgage interest rate would therefore be the IRR or yield for that particular investment. The face rates range from 7.73% to 8.11%. Also, the initial terms of the mortgages range from 10 years/1 month to 12 years/2 months, which is only slightly higher than the holding period utilized in this analysis. These terms are the call dates for the loans as opposed to loan amortization schedules which are typically 20 or more years. Bonds have fixed rates and face values which do not change. However, they are generally for longer terms and have various degrees of security. Yields are controlled by discounting the face value in exchange transactions. If a bond is held to maturity, its yield or IRR is the face value if purchased at par value. Chart C reflects bond yields ranging from 7.36% to 9.86%. Generally, as the degree of security decreases, the required yield rate will increase. Due to the inherent risk factors in real estate and the additional management burden which is not present in a bond investment, the rate for Baa Bonds at 9.86% would tend to be a more relevant indicator. 8The Internal Rate of Return in Real Estate Investors. Charles B. Akerson, A.S.R.E.C., Chicago, Illinois, 1978. I IINCOME APPROACH 70 Chart E reflects the criteria of investors making investments in real estate. This data reflects their I acceptance criteria, but discussions with some of the participants indicated that because of the keen competition for investment grade real estate, these indicators are sometimes compromised if the quality of the property is exceptional. The overall discount rates, for all types of commercial real I estate, typically range from 10.0% to 20.0%, but there is a significant grouping around 12.0% to 14.0%. Hotel rates ranged from 12.0% to 15.0%, but also predominately 12.0% to 14.0%. The discount rate to be applied to the cash flows of the subject property must reflect the quality and I durability of the income estimate, as well as the likelihood of real, long term gain in asset value. As discussed, the yield to the investor or IRR must be at a level commensurate with alternative investment vehicles. The most comparable rates, as previously discussed include: ' NCREIF Property Index 3.36% to 7.09% Mortgage Yield Rates 7.73% to 8.11%- Bond Yields 7.36% to 9.86% 1 Short Term Yields 5.84% to 8.45% Investor Requirements 10.00% to 20.00% - Hotels Predominantly 12.00% to 14.00% IThe unique investment characteristics of real estate,as compared to the investment types listed above, must be considered in arriving at the discount rate to be utilized herein. Real estate has proven to I be a good hedge against inflation because of the"upside"potential which can be realized through asset appreciation. In that sense, real estate is more desirable than conventional mortgages or long term bonds. I Alternatively, the performance of real estate is dependent upon, and could fluctuate with, the degree of quality of management, unexpected competition, disasters, or economic cycles, particularly in the current market. Therefore, it entails a greater degree of risk than instruments such as government pbacked bonds or fixed rate mortgages. Since the subject property is best represented by the range indicated by the Investor Requirements I for hotel properties, that particular range would tend to set the parameters. Considering these factors and the particular attributes of the subject property concerning competitive pressures within the market area and the fact that hotels are generally considered national and even international investments,a discount rate of 14.0% is considered appropriate. This considers the locational aspects IIIof the property as well as the recent and anticipated new competition in the local market. The value indicated by the discounted cash flow analysis is equal to the future net operating income II discounted to present value, plus the present value of the reversionary sale proceeds. The result of this procedure utilizing the market derived discount rate of 14.0%is presented on the following pages. II It is our opinion that the"As Is"Market Value of the fee simple estate interest in the subject property (including contributory value of furniture, fixtures, and equipment and the integral business value), as of February 13, 1996 as indicated by the DCF technique is $1,580,000. II "AS IS" MARKET VALUE INDICATION BY THE DCF TECHNIQUE $1,580,000 II N • a it O O I § -%a: c (0 q >r ' » 71 0 § o j § a a � I ` 1 74 I N N12w w ° >-v, SI. § § g O N I N •• a O a N O Yi X Fib. L Q0 2$$$ § I N 2$ m)• yy n el a a N N �G ill N YY:.: N 0 1M O gm m F Y 0N I cl a $ fri i V. Q g S :j g ° 1 Z$ 2 I 2 S. , m t� � I ? I O 2 90 Y :4 N I a O I byG m 6` a e n N a I � o1 � I '! j Y q C s p, § O I 88° N ? 4 I U v g Id Y 1. V N oi QO N I -M O N j O Y f W z1 41 a > W to O 3V N N n 1 g °CO. 4 0 �A:a N O N 0 a ~ Y f."' r 5 w_ : o I i i -71 o 6 .. q M1 o x y MO a ccY IA, n °ou Gv 1. I .m C 3g N 'IS Si h O$ $ N - IN - wcs ci y p p S• I Oy ^ l I ' } AS. N N N I In 3 L J 'e a ° N - d Q m b 3 fi o - 5 g o LL ° th m a ' m To t u 'a ® > c ® 5 n ¢ m n 9 °F o m U. 'o w a m U m o C S. Fa c a m .. y ° a m m 3 ° 6 g o )- S @ a m > > a a 0 > w ° > < O > I' I H z m >` > > z s =O w m 5 m > > Z u. , .+ 3 > a U = m O m Oa O p m $ > a n ¢ m o v a 0 o z a z a a00 ` N - O -1 z a -a _ ._ _ ._ -o. ___. I I INCOME APPROACH 72 DIRECT CAPITALIZATION TECHNIQUE Direct Capitalization can be defined as: "1. A method used to convert an estimate of a single year's income expectancy into an indication of value in one direct step, either by dividing the income estimate by an appropriate rate or by multiplying the income estimate by an appropriate factor. 2. A capitalization technique that employs capitalization rates and multipliers extracted from sales. Only the first year's income is considered. Yield and value change are implied, but not identified."9 This method for determining the value of the property via the direct capitalization technique, as used in this report, is by capitalizing the first year's estimate of net operating income. Reviewing the sales in the Sales Comparison Approach, the sales have capitalization rates ranging from 9.27% to 20.95% and reflect various market conditions and performance levels. Typically, a very low capitalization rate represents a"going-in"rate rather than a stabilized rate. The average for the sales is 14.01%, and without the high and the low is 13.74%. When analyzing these transactions, one should remember that the rates are being derived from actual income levels from the previous year and/or projected income for the coming year. These rates therefore represent "going-in" capitalization rates and can tend to be lower than terminal or reversionary rates used in a DCF analysis. Those sales with very low rates indicate that investors in these properties anticipate significant future growth in net income and subsequently, value. It is this rate that would be more applicable in a direct capitalization approach as opposed to the terminal capitalization used in the discounted cash flow analysis. For hotel and motel properties, there has gradually been more reliance placed upon the direct capitalization technique rather than the DCF technique. This is due to the various assumptions regarding a DCF analysis and buyer sophistication. Buyers perceive more reliability in actual or probable first year income and expenses than in an analysis which depends upon a ten year holding period. Any one of the income or expense estimates has the ability to change significantly due to potential government regulations/interaction, rate structure changes or the addition of unknown competition. That the subject's estimated stabilized occupancy and average room rates are somewhat different than historic performance, and the fact that the estimates assume that proper capital expenditures will occur to keep the property competitive in the marketplace,there are some additional uncertainties involved when estimating ten years worth of financial performance. Buyer sophistication for these properties is generally such that a DCF analysis is not completed unless the property has been operating at below stabilized levels, and then the process is still rudimentary for most buyers. Often, more reliance is placed upon a direct capitalization technique along with an effective room revenue multiplier(ERRM)as described in the Sales Comparison Approach. The DCF technique tends to be more applicable for properties with long term leases, such as office buildings and shopping centers. • Additionally, we considered survey information published by the American Council of Life Insurance. This survey information represents reporting insurance companies which account for 2/3 of the commercial mortgages held by U.S. Life Insurance Companies. This information is tabulated on a quarterly basis and the capitalization rate used is derived for each loan by dividing the net 9The dictionary of Real Estate Anoraisal, Third Edition, Appraisal Institute, 1993, Page 100. I I INCOME APPROACH 73 stabilized earnings by the property value. Over the last eight quarters analyzed, the capitalization rates from this survey ranged from 9.9% to 11.9%. The quarters with the highest number of loans tend to be more reflective of an average capitalization rate. Those quarters that experienced more than five loans had an average capitalization rate of 10.95%. 11 As has been stated, this method for determining the value of the property, using the direct capitalization technique,is by capitalizing the first year's net operating income. In our DCF analysis, it can be seen that the first year estimate of occupancy is 50% and the estimate of net operating income is$196,000 after deductions for reserves for replacements. Considering the-anticipated overall quality, age, location, access, estimated income and expenses for of the subject in relation to similar buildings which have sold in the marketplace, it is our opinion that a 13.0% capitalization rate is appropriate for applying to the first year's net operating income. Under this scenario, the value indication is as follows: Net Operating Income - Year 1 $ 196,000 Divided by Capitalization Rate 13.0% Indication of Value $1,507,333 11 Rounded To: $1.510.000 Accordingly, the"As Is"Market Value indication as of February 13, 1996, by the direct capitalization technique is $1,510,000. Typically, we believe the method of direct capitalization is somewhat more reliable than the DCF method, however the difference in value is only approximately 4.6% ($1,510,000 vs. $1,580,000). Although the DCF analysis provides a potentially more-accurate value indication than the direct capitalization technique, it also requires more assumptions. In this situation, however, because we are dealing with a property that we believe will operate at a stabilized level in Year I, albeit a level significantly below where it has operated in recent history,due primarily to the recent and anticipated introduction of new supply into the competitive market; similar assumptions are necessary to determine the first year's (the stabilized year) net operating income also. Consequently, we will weight both approaches nearly equally and conclude that the "As Is" Market Value by the Income Approach is $1,550,000. "AS IS" MARKET VALUE INDICATION BY THE INCOME APPROACH FEBRUARY 13, 1996 $1,550,000 N I U N N U I ISALES COMPARISON APPROACH 74 The "Sales Comparison Approach" is defined as: I "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 I units of comparison, and making adjustments to the sale prices of the comparables."t A hotel such as the subject property is classified as income producing real estate. As such, the value is generally established by the net income it can be expected to generate. Given this premise, the Sales Comparison Approach will not serve as a primary indicator of value; rather it should measure and discuss the reasonableness of the value estimate indicated in the Income Approach as supported 1 by the best comparable sales data available in the market. The Sales Comparison Approach typically emphasizes the physical elements of the subject property. II This approach is usually not a primary indicator of value for hotels due to the lack of a sufficient number of truly comparable sales by which to establish the existence of an active market for a given hotel. The reason for this is that hotel markets are generally segregated into a series of submarkets catering to small, well-defined demand segments. Economy, rooms-only hotels/motels, and quality I chain affiliated hotels/motels in particular, tend to dominate the transient market they cater to in any given market area, leading to a semi-monopolistic situation in which a small number of facilities capture most of the demand. In such a market, properties change ownership infrequently, and when I they do, the buyer motivations are usually dominated by economic considerations related to the potential income that can be generated from the property within that market. I The Sales Comparison Approach is based on-a comparison of recently sold properties which are similar to the subject. Differences between the comparable sales and the subject property are adjusted from the comparable to the subject. In other words, if a sale has a feature that is superior to the subject, a downward adjustment is made for this feature. If the subject property is superior III in some aspect when compared to the comparable sale, an upward adjustment is required. The steps in applying the Sales Comparison Approach include the following: II 1. A study of the market is undertaken to select sales of properties which are considered the most comparable to the property being appraised. IR 2. Collection and verification of data regarding these properties as to sales price, date of transaction, physical and locational characteristics, and any special conditions. 3. An analysis of each comparable property to the property being appraised as to time of sale, IIIlocation, physical characteristics and conditions of sale. 4. Adjustments are made to each comparable property for dissimilarities between it and the 11 property being appraised. 5. Reconciliation of the adjusted prices of the comparable properties into an indication of the rn Market Value of the appraised property. When analyzing hotel sales, it is frequently difficult to obtain good operating data important in U developing the overall rate and other indices used for estimating value. The multiplicity of income streams as well as management, contributes to the reliability (or lack thereof) of this data. Another factor which must be considered, but is not always available, is the degree of success the comparable 111 t°The Dictionary of Real Estate Appraisal. Third Edition, Appraisal Institute, 1993, Page 318. N I SALES COMPARISON APPROACH 75 hotel has achieved in its market. This is generally measured by room rates, levels of occupancy and net income. It is necessary to recognize the risks associated with a management intensive real estate venture like a hotel. This risk is reduced as the hotel operation matures and gains market acceptance. Due to these factors, it is more important than typical to have all of the details of the sale available for analysis. The age of the hotel, its operational success and details surrounding the sale and the market all contribute to the degree of comparability that each sale has to the subject. In a market where the details of the sale and operation are so important, we have found that the reliability and availability of this data sometimes is not commensurate with our analysis needs. Therefore,while we attempt to obtain as much information as possible, the Sales Comparison Approach for hotel properties is typically given less weight than the Income Approach as more general indicators of value are applied. The approach is fully developed but the conclusions are used more as collaborative evidence with greater emphasis placed on the Income Approach. When the information available from sales is analyzed, the particular market segment in which the subject competes should be analyzed as well as market penetration (room rate and occupancy), chain affiliation and net income estimates. In recent years, there has been limited sales activity of lodging facilities in the Northern Colorado area. Because of the lack of recent sales in this area specifically, we have included lodging property sales that have occurred throughout Colorado as well as a number which have occurred nationally. The chart on the following page highlights information from the identified sales. We have summarized information on a number of indicators, where available, for each of the comparable properties, including gross income multipliers, room revenue multipliers, overall capitalization rates, net operating income ratios, and the price per unit. For the comparable lodging sales we have included additional descriptive information for each property in Addendum C. In addition, where available, we have also included photographs in this Addendum. I m U U I I m a U U m m 00 m r. O OJcv co CJ co L mN Cl. N 0 N O v NI n tom 0 P iO co N GG m C N N N N P al N N P N N CO M 7V C a w w V. w w w w w w w w a� 44 w D O_ m 76 N m 0 x 0 0 .O O O O O O O O O O Z F Tr0- 0to cd t7 ei In N N N N N c O co t0 0) P to N O N. C) O CO N in V 0 N N P co co r N N 10) P O. 0 0) .0 coU) 6 ' ^ O O A N O N ,- 0) N i - - E C O. O) Lo r N o r 0 r. ' N. 0 C) O N m j N r a! O A N P (O P 1� O O 1� W ¢ Q N N.. N N N N N N N " C) (-4 m m 0 E C CO N 0 CO i. n N CO v c 0) N O C) O o i° n N 0 n N V. 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'�N. i 3 7 iz N `•vw0. i I x S 3} i c h. OJ• 3 u E r. 1 g a O n -•�- j- - �z_ 6 _ s_ c 1 2 p j O .'' .a �.+t1''in = 9 • a v . G'� w I a a i j u M 2i I �" ' J. .v _ O z � o C [ :`Staff L^II Y e �E a f � ' ai 4-T� C r2 - 24 .f c s e •I w m i �' 3� y • -. i= :� ° e y: sue,_ _ a < ' E W < n P3 J : W p >O� ttY >• • L� y a V .� / till E lv A4e C • p If • a • <.t' ♦ J + ¢ ,E-' • �,.: qIt i °D.N/ e '_ ,s ,i .11 i„r . 0 t it�. �. wif 2j }.et C s g �' u• c -_ g tr0. '4 eeter 42 time` a z cr r / 1. .`` _O „+ Scc 3 •�{( y� 1111 •o _ s W s o yT c tr x E f • I SALES COMPARISON APPROACH 77 In reviewing the comparables, the following items have been considered: location, age and condition, facilities and amenities offered, time since date of sale, and economic conditions such as occupancy at the time of the sale,expense ratios, gross and net operating income levels and the relative economic strength of the area. Physical Units of Comparison (price per room/unit) As previously indicated, the Sales Comparison Approach derives a value indication by comparing the property being appraised to similar properties recently sold. This approach requires that certain adjustments be made to the comparable sales under review to reflect their strengths and weaknesses relative to the subject. Due to the differences among the comparables in comparison to the subject in terms of size, location, overall quality and amenities offered, the sales price per room/unit of comparison is considered to be an unreliable indicator of value. This is evident by the extremely wide range in the prices per room/unit. Economic Unit of Comparison The unit of comparison used in this analysis is the ERRM. The basis for this economic unit of comparison is derived from the Income Approach section of this report. The principal advantage of this technique is that the reflection of rental income is direct. Therefore, differences between properties which would involve adjustments, based on judgement estimates, have been resolved by the free actionof the market. If the comparable properties have some advantage over the subject property in terms of age, condition, accessibility, location or physical characteristics, the difference in actual income presumably reflects the extent of this advantage. The ERRM is a factor derived by dividing the sales price by the total room revenue. For example, hypothetically, if a 150 unit hotel sold for$4,000,000 and the lodging property had an occupancy rate of 70% and an average room rate of$50, the ERRM is as follows: Sales Price $4,000,000 Number of guest rooms available annually (150 x 365 days) 54,750 Occupancy 70% Average room rate $50 Annual Room Revenue (54,750 x 70% x $50) $1,916,250 ERRM ($4,000,000/$1,916,250): 2.09 By examining the comparable properties' ERRMs, an appropriate multiplier can be selected for the subject. To calculate the subject's value, its average room rate is multiplied by the number of occupied rooms, and then by the selected ERRM. I I I I SALES COMPARISON APPROACH 78 The following table illustrates the expense ratios and ERRM's for the comparable sales. NOI Average Sale Ratio Occupancy Room Rate ERRM` ERRM" 1 41.6% 70.0% $39.50 2.59 2.75 2 46.0 74.0 46.00 --- 2.87 3 34.0 65.4 50.00 --- 2.85 4 38.0 55.0 40.00 --- 2.98 5 53.0 60.0 29.69 --- 2.27 6 25.0 50.6 41.86 2.43 2.67 7 26.0 58.4 26.69 2.14 2.47 8 22.0 46.0 77.93 1.79 2.03 9 24.0 64.0 75.85 --- 3.00 10 55.0 69.8 44.31 2.72 * ERRM based on actual sales price, before renovations/repairs " ERRM based on adjusted sales, assuming renovations/repairs are completed The ERRMs, after repairs/renovations, for the sales range from 2.03 to 3.00 with an average of 2.66. Without the high or the low, the average is 2.70. Factors influencing this ratio include the occupancy at the time of the sale, the average room rate, and the percentage of gross room revenue to total gross revenue. With all things being equal, those sales with a higher net operating income ratio are considered to be a better investment. As the subject requires some repairs/renovations,-we also considered the ratios for the four sales which needed repairs. Before the completion of repairs, the ERRMs for these sales ranged between , 1.79 and 2.59, with an average of 2.24. The discount from the renovated ratios for the four properties was 10%. To estimate an appropriate ERRM for the subject in its "As Is"considion the comparable sales were weighted to reflect their differences from the subject in terms of occupancy, average room rate and net operating income ratio. As the ERRMs mostly reflect properties in very good condition with no repairs required, we discounted the ratio to reflect the"As Is"condition for the subject. As a detailed budget estimate was not available for the deferred maintenance items, we used a discount of 10% to 20%. The multipliers were then applied to the subject hotel's Year 1 rooms revenue estimate. During this year, the subject is expected to achieve 50% occupancy with a$58.50 average room rate and an NOI ratio of approximately 19.3% (expense ratio of-80.7%). r I SALES COMPARISON APPROACH 79 On a renovated basis, the weighting of the sales, and their corresponding ERRMs is illustrated in the Ifollowing chart. Sale ERRM Weighting Total I 1 2.75 6.00 16.50 2 2.87 5.00 14.35 3 2.85 6.00 17.10 4 2.98 9.00 26.82 5 2.27 7.00 15.89 6 2.67 10.00 26.70 7 2_47 10.00 24.70 8 2.03 7.00 14.21 9 3.00 6.00 18.00 10 2.72 5_00 13.60 Total 71.00 187' 7 Weighted Average (187.87/71.00): 2.65 The weighted average ERRM for the ten sales on a repaired/renovated basis is 2.65. Discounting this ratio 10% to 20% to reflect the "As Is" condition of the property produces a range of ERRMs of approximately 2.10 to 2.40. This range also brackets the average ERRM of 2.24 for the four sales which needed repairs before the adjustment for the renovations. The multipliersare applied to the first year's estimate of rooms revenue. The Year 1 estimate for rooms revenue for the subject is approximately$778,000, as noted previously. Applying the ERRMs would result in the following values: $778,000 x 2.10 $1,633,800 Rounded: $1,630,000 $778,000 x 2.40 $1,867,200 Rounded: $1,870,000 Based on the above, the value of the fee simple interest of the subject, supported by the Sales Comparison Approach is $1,630,000 to $1,870,000. "AS IS" VALUE INDICATION BY THE SALES COMPARISON APPROACH - FEBRUARY 13, 1996 $1,630,000 - $1,870,000 COST APPROACH SO a udent The Cost Approach is based primarily on the principle of substitution which states thath ther same I purchaser would pay no more for a propertythan the cost to produce another property utility. The steps under the Cost Approach are as follows: r 1) Estimating the value of the land as if vacant by comparison with other properties. ` 2) Estimating the reproduction or replacement cost new of all of the improvements. I 3) Estimating and deducting any depreciation which may be physical, functional or economic in nature. I 4) Adding the value of other depreciated on-site improvements to obtain the total depreciated value of the improvements. I 5) Adding the land value to the total depreciated value, arriving at the estimated property value under the Cost Approach. I As noted above, in the Cost Approach,the cost to reproduce or replace the improvements is estimated. A deduction is made for any depreciation and the result is combined with the estimated value of the underlying land. This approach is applicable when each component is independently measurable,and when the sum of all components is believed to reflect Market Value. This approach is not applicable I to unimproved land or obsolete improvements, and is typically most applicable to proposed projects, unlike the subject. I There are a number of problems inherent within the Cost Approach,particularly for an improvement such as the subject, portions of which are over thirty years old, and given the fact the management does not have a detailed breakdown of the items of furniture,fixtures and equipment. This approach RI is additionally limited due to a number of reasons: Various rooms have been partially upgraded over the past several years, including the ill development of the FantaSuite units in 1990, which may have an effect of reducing the effective age of the property. Nevertheless, a deduction should still be made for the non-curable physical deterioration of the structure. Allocation this depreciation become I a matter of mathematical calculation rather than an interpretation of market perceptions. � . The Cost Approach does not recognize the additional value, or lack thereof, created by variable occupancy and room rates. Ill . The best measure of depreciation is by abstraction from sales of similar properties.. Given the general uniqueness of construction types, particularly for hotel andmotel properties, there are no truly comparable sales by which to abstract depreciation rates for athis property. . Most importantly, investors buy these properties on the basis of the income potential,not Ni cost. For these reasons the Cost Approach to value has been reviewed only in this analysis, with no weight IIIgiven to the value conclusion. I I COST APPROACH 81 Laud Value Analysis The subject consists of approximately 446,586 square feet(10.252 acres), and is located at 3301 West Service Road in Evans, Colorado. In order to estimate the Market Value for the subject site, we investigated the local market for comparable transactions and found sales which we believe provide reasonable indications of value. As the sales indicate, there has been very limited vacant land sales activity in the immediate area of the subject, however, there have been several sales, including four for the purposes of developing lodging properties that occurred on 28th and 29th Streets, proximate to the Greeley Mall, approximately one mile west of the subject. Research of public sources, together with a thorough investigation of the market area, indicated that the following sales were sufficient to estimate the value of the land, assumed vacant. Conclusions ■ drawn from the information were synthesized with the opinion of informed sources in the area(real e` estate brokers, bankers, investors, and other lenders). In addition, when possible, either the buyer or the seller, or a third party was interviewed to determine motivation and other factors affecting the sale price and the degree of comparability to the subject property. Of the data reviewed,we identified eight sales which webelieve provide the best indications of value and are included in our analysis. The data is summarized on the following page,and the locations of the sales are presented on the map following the land sale summary sheet. For purposes of this valuation, we have analyzed the data using a price per square foot analysis. The chart of the following page offers a summary of the information pertaining to the identified land sales and listings. I I U N p I p U I e z2 ! ! ! i ! ; § . s7 ! ° , . , , / § § } \ s ; , § ) ; § \ § } ) ) \ I \ . | ; _ en ; ! . f ; | - } ! k \ } 3 . 4 1 ! 8 k ] f 3 - 8 7 ! 5 } 88 27 ƒ 2 ! ƒ ! ! ! 32 $ ! ! o Z 284 > 8v # f ! / 52 k } § k ! k ƒ { ) k ( \ 0-0 ! ) k \ / | # k / 0 - Si j - f 0 , 1 0. . ; ; ! ! k ! � ®CC CC 0 } ! Ci § ® ! , ; n ! � ) \ N § � wr - « � ^ ; � \ / / ; 3 ; ; ; ; ; 0 ; el ou r k ` - § § ) ) § } NT ! } k } § ; \ < < - -ill IL Z CO ! 0rc Lie I 0 | ! | ` Di I 0 f ei ! 0en ! ¥ crl® ƒ 0 4 / \ / 0 { k % I ] § 3 - ! ! \ ) 0 ) q ! . 5 ! « -J a ! \ ) a ! / } I ! ! § ■ ® § � ; ! o § ! ! ) ) § \ Z ! § ! ± f CC I ] § — ea Cy . 0 0 N. al I Comparable Land Sales EST O If to J O °Z�S�T AO O �i 2]RO ST 1AE 3 .R. <STR° 1 OQ•L a n -> �,/n T 1 a 1� RO ST 1- = 3]ROI if 1Y • 40 2S 23M O 4 ri i O < 25I O '•Ip♦ PARNE \ _ 2STN 1,4 t• 4 / 42,.5T ^� W rh-*. 4_, 1tU I , w1 O a ST O PO oT .4 n< �T JdTO " IO f . ^ < al iI I A NT\....rrir • `• 2 ul 46` 28241 =25TN -: RD 4 W < _ ST F''�e o 'f1A '� WP W" djT�OBAENTW00D MIX ° i < �?.�� 2a1N •� n 2STN e 51 61' q/qf F 2YTNSTRO W n z w nuns x Sid 4 n : n ^ ' 1 r z z ^ l U A (4,'E, 22TH ST'nt 2TTN f 4 ST n e^i NTN fT R df ^ I-= n 2T1N ST i SSAli YEADOMSnOON n Ta rnws= mum TVS ST 2iTN PAREPAss ST i n 11TNlA R 2QN ST IPRON J M. 2lT11 T i 1 _ 'a O / .� 2STMSTP° iL S'`\\I 1 I II i 1 T1° ' Y © T Z F ti sT w I aIEN L1�A'!1 G li Y j T i TATOR _ NTRSIPD 2STNST RD I TO4i�S : xTRNTNsT < 30TN5Td JSTN ST EMORIAL m ZYYi NTN SigO R Y < D OGATE- 315T STI m FORn SI _�,;7]ISTSTRO i NTNDST I Ol x m r/ DY // Yx FI 1_--- w� {H °a P W e �' - I PLEASANTACPES F / fl < r z.n ^<u I z DRIVE ° 31ST / it n < }y 1 n� ]DU7TH/fA P"A�EII J2N0 1M ST ]]RO ST /NMOS ul JPTN 6 Y <I U J F ;��i t J MIN N 1 i �h 4 p Y O� 2 I MN ST I J O J O C)• i Ttt\vt; ;T 0uNO z ^ ST 'S4 ti i2TTN ST T 11 I. --. STY 1 y � it I ti 2-S.WT CT 1O Y h <y < 2nm 1u111AMAVE °1 NTN ST 0 0 a s VALMONT T N a, O 2S E 11D 4 Ii y+. a s 1 ir.N JlTM + a ]STN ST 9 O i SSI�SI I Ili aim ST 3W9/ I ST ET C NMRC! 1 c Z a 0 n O 6 O 6 0 11 A.VILLMOPT ST IIST O N u W �. S. 8C.LATHAM. CARSON ST Ilg sr RR 3 "ST ST II- U CN CAD.NPCOOK� amal AIS+CID' NONO ST a STR EVANS NQ��. p 0RO IST °o a Y NTM ST i c O 4. -MTN0 ST T I / Z /// NTM ST QYj I ?•4 O 2STN ST 7C----..--.56:7--- 85 N i area Y..t.-, —Y.w On ea Ya000R1YRNTI s I U qCOST APPROACH 83 All of the eight comparable sales analyzed are located within the City of Greeley, and all are zoned C-4, Service Business. This zoning is comparable to the subject's zoning of B-1, City of Evans. All of the identified sales are located in the southern portion of Greeley, proximate to the Greeley Mall. The sales range in size from 40,075 to 266,807 square feet, or 0.92 to 6.13 acres. Sale 1 represents vacant land that is located in the southeast corner of 29th Street and 31st Avenue, south of the U.S. Highway 34 Bypass. This parcel fronts the 31st Avenue loop, has some visibility from the U.S. Highway 34 Bypass(U.S. 34 Bypass), but likely has limited retail potential. We believe that this site is limited to more business-park type uses. Sale 2 represents the sale of land purchased for the expansion of a lawn and garden retail center, located at 2560 29th Street, south of the U.S. 34-Bypass, on the south side of 29th Street. Once the north side of 29th Street is completely developed, this site will have limited visibility from the U.S. 34 Bypass. 111 Sale 3 consists of the site upon which the Fairfield Inn lodging property was developed. Its location is west of the Greeley Mall, on the southern side of U.S. 34 Bypass (no direct access) along 29th Street, proximate to its intersection with 24th Avenue. The land was acquired in March 1994, and the Fairfield Inn opened in September 1994. Sale 4 consists of a parcel of land adjacent to Sale 1, and purchase by the same buyers. All of the attributes noted in the Sale 1 description are applicable to this site as well. Sale 5 consists of the site upon which the Super 8 Motel was developed,just west of the Fairfield Inn, also on 29th Street. This sale occurred in May 1994, and the Super 8 Motel opened in late October 1994. Sale 6 consists of land adjacent to the Carmike Cinemas in the northwest corner of 24th Avenue and NI 28th Street, on the north side of U.S. Highway 34 Bypass (no direct access). The buyers originally planned on developing a modified student housing improvement; however, it was determined not to be feasible. At this time, the land is not listed for resale, however it is rumored that the owners may 111 be considering putting it back on the market. Sale 7 consists of a parcel of land, west of the Super 8 Motel, on the north side of 29th Street, with frontage along U.S. 34 Bypass. The sale occurred in April 1995, and it is rumored that the owners were considering developing a 63 room Country Inn lodging facility on the site. Theses plans have reportedly been put on-hold given all of the other recent development of lodging facilities within the local market. 111 Sales 8 consists of a parcel of land, just westof Sale 7 noted above, upon which the Holiday Inn Express is currently being constructed. Adjustments An analysis of the comparable sales and listings requires adjustments for characteristics such as financing, time, location, corner influence, zoning, size, topography, access and visibility. The previously described sales were compared to the subject based on the above attributes in an effort to estimate the value of the land being appraised. Financing - Because of the variety of financing options available in the market and their varying favorability to the buyer,sales must be adjusted for financing if terms are involved. The procedure is to convert sales terms to a"cash equivalent" value that would result if the — COST APPROACH 84 seller received cash for the property. The eight sales were all cash to seller transactions. Therefore, no adjustments for cash equivalency were necessary for the comparables. Time - All of the sales occurred between December 1993 and August 1995. In determining the impact of the passage of time on land values in the area, we attempted to match individual sales with similar characteristics and compute the annual compounded rate of change demonstrated by each pair. However, due to locational, size and exposure differences, as well as the limited number of applicable comparisons, no specific, or clear pattern is apparent. 6 Our discussions with various people in the real estate industry as well as with the Weld County Assessor, indicates that there has been some appreciation over the past several years, especially for available land located where these nine sales occurred. This can be evidenced, somewhat, through an analysis of the land that was sold for the I development of four lodging properties. However, in other parts of the area, not proximate to these sales, especially vacant land more proximate to the subject, an indication of appreciation may not be warranted. This is supported by the lack of recent vacant land sales in the immediate area. However, in analyzing the sales near Ithe Greeley Mall, west of the subject site, there does not appear to be a clear trend in value appreciation, albeit an upward trend appears warranted. As a result, we have applied only a very nominal upward adjustment for time to the oldest transactions. ILocation - As noted, the sales are all generally located in one area, the Greeley mall area along U.S. 34 Bypass, which is considered superior to the subject area. The I Greeley Mall area has experienced more growth than the subject area, and includes a number of relatively new retail developments. Consequently, the sales have been ill adjusted downward to reflect this superior location. Sales 1, 2 and 4 are generally considered to have slightly inferior locations when compared to the other sales. This is because these parcels are further set back from the U.S. 34 Bypass, and are further west from the majority of the commercial development that is occurring in the immediate area. Consequently, these sales will be adjusted slightly less than the other pfive sales. Access - Ease of access also typically has an effect on value. The subject is located I along the frontage road of U.S. Highway 85, with access typically off 31st Street. Most of the sales are considered to have similar access advantages and disadvantages, requiring no adjustments. ISize - The comparables range in size from 40,075 square feet to 266,807 square feet. Typically,smaller parcels will sell for a higher incremental value,and vice-versa. The difference is attributed to the typical extended development and holding period I required for larger sites, which creates some discounting along with the principle of utility and diminishing returns with larger parcels. Based on these concepts, adjustments were made for size with smaller parcels adjusted downward, and the I larger parcels adjusted upward. In this analysis, all of the sales are smaller than the subject, consequently, all of the sales have been adjusted downward. Zoning- All of the comparables are zoned C-4, City of Greeley, while the subject is Izoned B-1, City of Evans. While some minor distinctions do exist between the two categories, both are very comparable to one another. Consequently, no adjustments were warranted to reflect this condition. I I COST APPROACH 85 Corner Influence - The subject is not considered to be located on a corner, and thus does not have corner influence, with ingress and egress from one street, West Service Road. A corner location is considered to have a positive impact on value, especially pertaining to commercially zoned real estate. None of the sales have true corner influence. Consequently, no adjustments were warranted. T000ttraohv - All sales appear to have similar topographical features, therefore no adjustments were necessary for this factor. The table on the following page presents the comparable sales with the above described adjustments illustrated and the indication of value for the subject site. Considering the array of-data,the relative price levels exhibited and various other characteristics upon which value is based, it is our opinion that the value of the site is $1.00 per square foot. The total estimate of Market Value for the subject site, as of February 13, 1996 is as follows: 446,586 Square Feet @ $0.90/Square Foot $401,927 Rounded To: $400,000 I I _ . . . . . . . . . . . - ,, ! n 8. ■ a , » ! 98888 ® ® i ° \ ; 08188 . 8_8 # E 42« „ i ; 0 I , - 0 0 0 § ■ < ! 4 86 Il ! ` % ] , 22 2 ] ! 2j } } }2 § ] § } { ! § ! L. § , y X § § ! ! « o i7 '° ® § 22 k -az aa a % %2 !| ] § Xy ! 4 X i § ! # K4o ! ® ! a U. a@ & qn / _ Ia ■ aa / @ , m 4 ■ , a , ; , - a ; $aaaa ; » a , I , : ! . § < ! ■ ! - mono ■ a as e � 0 `! § ; } aaaa ` 822 - : � ;; ; ; - a ; aaaaa« a ; ° ;Q ` at ° g § f ! ! < 4 § I X ° - � a ¥ @ ■ & ° ! ; ©aaaa ! " , N ia ¥ @ =\ ! 7 , 2a ; e = ; # § i� ■ # a # a0a ; ; ; ; = a ; ° ` ! ; \- at t at o ° o ( f ! ■ K ! ( ° k ! ■ a ■ a V". ■ \ F8888 ` 882 ! . ! aa ; ; - a ; § a aaaaa k a - a ° — g K ! !7 # ■ ! f _ A ` ! ( ( 51 ! - ! a 88 88 ! ! : ! « s@aaw ■ ¥ a ! _ ! , y f \ ; ! ; ; g ; � ; ; : ; saaaa $ ; tea g - 2» c - 0 {77k ! § ! az ° ` - § f ! ! ! K § \ \) ) ( I < < .0 $ I ci i ! CO § . . . CS / , 73 » t. i . k ) j\ 04; 3. u. 2 !} 5 \° ] / ° { \ ; ! t : 0- 1 ! 8 - Cs c 1 � ) \o -nit \ II & ; ! | | #] J < ! \\ , } I I _ . }_\ ); § f § fV \ Z - /� U)-ODD $ 8 I I COST APPROACH 87 REPLACEMENT COST OF IMPROVEMENTS The next step in the Cost Approach is to estimate the cost new of the improvements. Replacement Cost is defined as: "The estimated cost to construct, as current prices as of the effective appraisal date, a building with utility equivalent to the building being appraised, using modern materials and current standards, design and layout."11 In order to estimate the value of the real property, it is necessary to estimate the replacement cost of the improvements as of the date of the appraisal. The best indication for estimating these costs would be to review an actual construction budget for the property, and compare these figures with construction costs for similar properties. However,the current representatives of the property do not have this information available, as the property was reportedly constructed in 1965. As a result, the cost to replace the subject improvements was estimated from the Marshall Computerized Valuation Service (MVS). The method of estimating the cost of improvements was the calculator cost method. This method estimates the cost on a square foot basis. Base Costs: A detailed inspection of the improvement has been made, and a description of the component parts is presented in previous sections. The replacement cost of the improvements, including furniture, fixtures, and equipment, was developed from our investigation. According to j the MVS,the motel structure was estimated to be in above average construction quality. A direct cost of$76.59,applied to the above ground square footage of the subject(although the basement costs are included in the above base cost figure) was indicated from the cost service. These direct cost estimates include materials,labor, normal interest on building funds and processing fees during the period of construction, architect and engineering fees,sales tax on materials, utilities from structure to hot line, contractor's overhead and profit including job supervision, workman's compensation, fire and liability insurance, and unemployment insurance. This cost does not include the cost of furniture, fixtures or equipment, landscaping, driveways, parking, walkways, or developer's overhead and profit. These costs will be included separately. Furniture. Fixtures and Eouioment Costs: The furniture, fixtures and equipment(FF&E)costs were estimated using the Marshall Swift Valuation Serviced and through other various sources, including published Hospitality Valuation Service information. Our research indicates that estimated costs for FF&E for lodging properties that are considered standard, full service properties range from approximately $9,800 to $17,400 per room. It should be noted that typically, the more extensive the public space, food and beverage outlets, and meeting facilities, the more expensive these per room costs are. Given that the subject hotel is considered a standard, motel-style facility, with fairly limited public space, banquet space and food and beverage facilities, we believe an estimate at the lower end of the noted range would be reasonable. However, given the existence of the FantaSuite units that are furnished more extensively than the"typical"motel unit,an adjustment of this estimate would be warranted. In addition, MVS estimates that FF&E typically costs between 18.5%and 32% of the total base construction costs. As our replacement cost estimate will indicate, our FF&E estimate is within this range. Given all of the above information, we believe an estimate of approximately$13,000 per room is reasonable, given the type and market orientation of the property envisioned. The total cost would therefore equate to $949,000. 11The Dictionary of Real Estate Aporiasal. Third Edition, Appriasal Institute, 1993, Page 303. COST APPROACH 88 Entrepreneurial Profit and Miscellaneous Costs: In order to accurately reflect Market Value by the Cost Approach, some increment of entrepreneurial profit should be included as well as a provision for other miscellaneous costs. Entrepreneurial profit represents the amount an entrepreneur(one who assumes the risk and management of a business) receives over and above the costs incurred. This represents the incentive for or reward to an entrepreneur to undertake a project and its associated risk. The amount of profit that one should reasonably expect to receive varies with the specific factors affecting the riskiness of a project. Based on our knowledge of, and experience with what market players perceive to be a reasonable profit, as well as interviews with several representative from hotels chains currently developing similar properties, we have utilized 15%of the improvement cost to account for entrepreneurial profit and miscellaneous indirect costs. This rate used is also supported by the discount rates summarized in the Scott, Stahl,Burbach&Decker Investment Survey contained in the Income Approach. Accrued Depreciation As defined in the Dictionary of Real Estate Appraisal published by the Appraisal Institute, accrued depreciation is the difference between the improvement's reproduction or replacement cost and its present value as of the date of the appraisal. Depreciation is divided into three classifications: (1) physical deterioration, curable and incurable;(2) functional obsolescence,curable and incurable; and (3) external obsolescence. In measuring accrued depreciation, the appraisers are interested in identifying and measuring the loss in utility experienced by the subject structure in its present condition, as compared to the utility it would have as a new improvement representing the highest and best use of the site. Accrued depreciation is sometimes referred to as diminished utility. Physical Deterioration is divided into two categories;curable and incurable. Below is an explanation of each type of physical deterioration. Physical Deterioration Incurable: Elements of physical deterioration which either cannot be corrected; or if possible to correct, cannot be corrected except at a cost in excess of their contribution to the value of the property. Physical Deterioration Curable: Those items of physical deterioration and functional obsolescence which are economically feasible to cure and -hence are customarily repaired or replaced by a prudent property owner. The estimate of this depreciation is usually computed as-a dollar amount of the cost-to-cure. Physical Deterioration Incurable - The subject improvements were reportedly constructed in 1964. The actual or chronological age of the improvements is approximately 32 years. A portion was reconstructed in the late 1970s or early 1980s after being destroyed by a fire. The actual age of the improvement can be different from the effective age due to renovations, repairs, replacements, or minimal use of some rooms. As a result building depreciation has been based on an economic life concept verses a physical life. However in this analysis, we believe both are similar given that it appears that whatever upgrades have occurred over the years since construction have been relatively minor, and primarily pertain to the furniture and fixtures. Therefore, we consider the weighted effective age to be similar to the weighted chronological age, and have used 25 years. Considering the hotel's effective age of 25 years and a life expectancy of 60 years, there is approximately a 15% depreciation rate derived from the MVS depreciation tables. These tables accelerate depreciation in the latter years of the improvement's life. Physical Deterioration Curable - Overall, the subject improvements are considered to be in fair to average condition. The fourteen FantaSuites were developed in 1990 and are in average-to-good condition. In addition, ten regular guest rooms had soft and case good upgrades in 1990, and those COST APPROACH 89 rooms are in average condition. In 1995, ten additional rooms -were upgraded (new furniture, televisions, new carpets curtains,and bed spreads), and these rooms are in average to good condition. The remaining 39 regular guest rooms are in need of remodeling, at least new carpets, bedspreads, curtains and furniture. These rooms have not been updated for at least 10 years,and currently appear to be in below average condition. The renovated rooms may also need new carpeting in the future, but not as urgently as the 39 rooms. In addition,the public areas are in need of remodeling,especially regarding the carpets. The common area carpets would be considered to be in less than average condition, and need replacing as soon as possible. These include the carpets in the lobby, restaurant, lounge, meeting rooms, and guest room corridors. Future capital request items noted by management include the completion of the renovation of the 39 guest rooms and these new carpets. The manager estimated these expenses to be approximately $60,000 ($40,000 for the 39 guest rooms and $20,000 for the public area carpets). In addition, the estimated cost to fix the elevators is $7,000. The rooms corridors also need new vinyl wall coverings and the exterior trim of the building needs to be repainted. The asphalt portions of the parking lot also-appear to be in less than average condition. There are many areas of the parking lot that need to be either sealed or patched, and the entire parking area needs to be repainted and striped. This cost could very likely approach $50,000. Total costs of repair/renovations could very likely approach $150,000. Personal Property Depreciation/Valuation: The ideal method of placing a value on these items would be to inventory and depreciate all of the items considered F,F&E within the subject. To do this I however, the information required includes a detailed inventory of the items and the data and actual • costs of the purchase. Unfortunately, this information is not available for the subject. In addition, the subject's , chronological age of 16 to 32 years, and the fact that the subject has at least been partially renovated once in its history, makes it additionally hard to abstract depreciation. Different F,F&E items were purchased and replaced at different times, including the Fantasuite development in 1990, making it increasingly difficult to reconcile the specific age of specific items. Given the fact that a small percentage of the F,F&E was first replaced last year, we believe that it is possible to estimate the effective age using a weighted average. According to MVS, F,F&E for motels have a typical average life of approximately eight years. This would be supported by the fact that now certain F,F&E replacements have occurred atthe subject, and others are scheduled in the coming year. Given this, if zero upgrades had occurred in the past year, the estimated depreciation, according to MVS, would have been 74%. Assuming 5% of the F,F&E items have recently been replaced, within the last year, the deprecation would be 10% for those items today. Given this, the weighted average is 95% of the items depreciated at 74%, and 5% of the items depreciated at 10%. The result is a weighted depreciation average of 71%. We will use this in our analysis. Functional and External Depreciation - Functional obsolescence is a loss of utility resulting from the decreased capacity of the structure, or a part thereof, to perform the function for which it was intended. Functional obsolescence is also subdivided into both curable and incurable categories. An item of functional obsolescence is curable when the cost of replacing the unacceptable component is offset by the increase in utility. Items of incurable functional obsolescence are those whose cost to replace cannot be justified by increased utility. I ICOST APPROACH 90 Curable - This form of depreciation is known as a curable defect caused by a flaw in the structure, I material, or design. The use of the MVS represents a Replacement Cost estimate which is the total cost of construction required to replace the building being appraised with a building of equivalent utility using modern materials and current standards, design and layout. As such, in general, most I curable functional problems are addressed in the base costs, and do not require additional adjustments. Incurable - This form of obsolescence is an incurable defect caused by a deficiency or super- adequacy in the structure, materials, or design. It is our opinion that a portion of the basement would be considered functionally obsolete,and would not be reconstructed in a replacement situation. This is the portion of the basement that is considered storage, or approximately 10,777 square feet. According to MVS, the replacement cost to build this space was $165,327. Adding the cost of sprinklers ($2.00 per square foot, and the entrepreneurial profit and miscellaneous costs (15%), less the previously determined incurable physical deterioration, the resulting functional obsolescence is $182,916 ($215,195 - 15%). External/Economic Depreciation: External/Economic obsolescence is the loss in value due to the economic or environmental factors which are external to the subject property. This obsolescence is usually incurable. This loss in value can sometimes be quantified by comparing similar properties that are not affected by the externality or by measuring the rent loss attributable to the negative externality. In this case the loss cannot effectively be measured,only approximated. Comparing the Income Approach conclusion to the Sales Comparison Approach, the concluded value may approximate $1,600,000 giving equal weight to the Income Approach and the low end of the range of the Sales Comparison Approach. For the Cost Approach to equal this value, the implied economic obsolescence would be approximately $2,424,810 as illustrated on the following page. As there is not enough market support for these depreciation estimates,we have not concluded a final value estimate by this approach. ,`. yi . I COST APPROACH 91 Conclusion of Cost Approach COST APPROACH SUMMARY Sa.Ft. !iL Basic Structure Cost 47,636 68.01 $3,239,704 Basement Finished: 5,388 25.93 139,717 Utility: 5,388 19.18 103,347 Storage: 10,777 15.36 165,527 Subtotal: 408,591 Building Cost New: 47,636 76.59 $3,648,295 Furniture, Fixtures & Equipment (73 Rooms @ $13,000 each) $949,000 Total Base Cost New $4,597,295 Add: Entreprenurial Profit and Miscellaneous Costs (15%) 689.594 Total Base Cost $5,286,889 Less: Depreciaion Physical Curable $150,000 Normal Physcial/Functional (15% Reduced by Curable) 770,533 F,F&E (71% Reduced by 15%) 658,630 Functional-Basement Area 182,916 (1,762,079) Add: Depreciated Value of Site Improvements (Landscaping, Swimming Pool, Paved Drives, Walkways) 100.000 Total Depreciated Value of the Improvements: $3,624,810 Add: Land Value 400.000 $4,024,810 Less: Implied Economic Obsolescence By Comparison with Income and Sales Comparison Approaches (2.424.810) Indicated Value by Cost Approach - Review Only $1,600,000 I RECONCILIATION 92 The purpose of the reconciliation section is to evaluate the separate value indications developed by the approaches to value in order to derive a final value estimate. The analysis requires consideration of the quantity and quality of the data available under each approach and the relevancy of each approach to the subject property and the appraisal problem. The value indications of the fee simple estate value are as follows: INCOME APPROACH: $1,550,000 SALES COMPARISON APPROACH: $1,630,000 To $1,870,000 COST APPROACH: Reviewed Only In our opinion, the value of the subject is best indicated by the Income Approach which is based upon the premise that value is the present worth of future benefits and utilizes actual income and expense information. Prudent investors, as owners of investment properties, are interested in the income producing capabilities of a property. In the Income Approach, nine competitive/comparable properties (two of which are under construction) were analyzed as to their estimated 1991 through 1995 occupancy and average room rates, along with current published and average room rates for each of the properties. This information was tempered by our knowledge of other hotel properties and industry operations. After the various income and expense categories were estimated, these figures were then analyzed over a ten year holding period through the use of a DCF analysis. The annual cash flows were converted into a present value estimate by the use of a discount rate derived from survey information prepared by Scott, Stahl, Burbach&Decker and supplemented by data from the NCREIF report, the American Council of Life Insurance, and yield rates on various financial instruments. The reversionary capitalization rate used was 14.0%,recognizing the potential for variability in the income and expense estimates over a ten year holding period. The discount rate used to convert the future cash flows and reversionary value into a present value estimate was 14.0%. Using this approach, an "As Is" Market Value of$1,580,000 was derived. We also completed an analysis using a direct capitalization technique which converted the first years's net operating income into a value estimate by dividing the income by a capitalization rate. The capitalization rates derived by the comparable sales are based upon the previous year's actual income and/or projections for the coming year. Therefore, these rates represent "going-in" capitalization rates which tend to be lower than reversionary or terminal rates. The capitalization rate used under this technique was 13.0%, which produced an "As Is" Market Value estimate of $1,510,000. Typically, we believe the method of direct capitalization is somewhat more reliable than the DCF method, although the difference in value is only approximately 4.6% ($1,510,000 vs. $1,580,000. Although the DCF analysis provides a potentially more accurate value indication than the direct capitalization technique, it also requires more assumptions. In this situation, however, because we are dealing with a property that we estimate will operate at a stabilized level in Year 1, albeit a level significantly below where is has operated in recent history,due primarily to the recent and anticipated introduction of new supply into the competitive market, similar assumptions are necessary to determine the first year's(the stabilized year)net operating income also. Consequently,we weighted 1 both approaches nearly equally and concluded that the "As Is"Market Value by the Income Approach was $1,550,000. In the Sales Comparison Approach, ten transactions (from both Colorado and nationally) which occurred between March 1994 and November 1995 were analyzed. Due to locational differences and relatively few sales, a comparison on the basis of the price per room/unit for hotels is generally considered a less reliable indicator of Market Value unless the properties are very similar in construction and market characteristics. The differences in quality and amenities offered can differ I RECONCILIATION 93 substantially between properties as well. A much more reliable indicator of value is the effective room revenue multiplier (ERRM) which analyzes actual rooms revenue being generated by a particular property. This ratio tended to fall within a narrow range in spite of geographic differences in the properties. For the value conclusion, we used an ERRM of 2.10 to 2.40, applied to the first year's room revenue figure which produced a range of value of $1,630,000 to $1,870,000. These multipliers reflected the current condition of the property. The Cost Approach is based upon the premise that the value of a property can be estimated by adding the Market Value of the land to the current cost new of the improvements after subtracting accrued depreciation from all sources. The Cost Approach generally is not given significant weight as this approach is limited for existing and operating properties because deductions must be made for depreciation, and the determination and allocation of this depreciation becomes a matter of mathematical calculations rather than an interpretation of market perceptions. Additionally,investors for this type of property invariably look at the income potential of the property, tempered by an analysis of comparable properties which have sold. Again, it is our opinion that the Income Approach best measures the value of the property as it is a direct reflection of investor expectations. The Sales Comparison Approach is given less weight in this appraisal although the low end of the value range supports the Income Approach. Therefore, based upon our investigation and analysis, it is our opinion that the "As Is" Market Value of the subject property, as of February 13, 1996 is: ONE MILLION FIVE HUNDRED FIFTY THOUSAND DOLLARS $1,550,000 PROSPECTIVE MARKETING TIME Part of this appraisal assignment was to report a typical marketing period for the subject property based on the previous value conclusion. Generally, the marketing period is tied to the definition of Market Value which, in this case, states that "a reasonable time is allowed for exposure in the open market." Therefore, the research must focus on what the market considers a reasonable time to be in the current market for this type of property, i.e. a 73 unit full service motel. This marketing time estimate is based on the known and expected characteristics of the property,it's environs and the real estate market during that period of time to the point of a negotiated sales contract. An important distinction to be made here is the difference between exposure time and marketing period. As with most appraisal issues, support is taken from market transactions. For example, comparable properties which are under contract on the effective dates of value are not usually adjusted for time (date of sale), whereas options that call for future closing dates are generally adjusted back to the date of appraisal. In other words,it is the"meeting of the minds" as to price and terms that influences the appraisal. therefore, in this report, "reasonable exposure time" is viewed as an historical event ending on the valuation date. Conversely, the"marketing period" is the appraisers' estimate of the length of time necessary to secure a binding sales contract on the property in the future, i.e. prospective marketing time. In estimating the appropriate marketing period for the subject property, reference is made to the previous sales data. The actual marketing period of the comparable sales can be an excellent guide as to the probable future marketing period for the subject. The time between listing and closing the sale ranged from two months to over a year. More typically, these properties sell within one year if reasonably priced. I RECONCILIATION 94 As additional support, we have reviewed responses to an investment survey prepared by Scott, Stahl, Burbach & Decker, this survey is published at six month intervals and summarizes the responses of regional lenders,developers,investors and brokers. In the most recent survey,participants were asked to define a"reasonable market time" under current market conditions. The question assumes market price/professional marketing and asked for estimates of(I) marketing time to contract and (2) time from contract to closing. Although not allocated by property type, 79%of the respondents indicated that properties were typically placed under contract within six months if reasonably priced to begin with, with an additional one to three months from contract to closing. ' Given the, current market conditions of the subject area, and more specifically the motel/hotel submarket, we believe a reasonable marketing time for the subject property is between six and twelve months at the estimated Market Value. Essential to this conclusion is the marketing of the property by competent professionals. VALUE OF FURNITURE, FIXTURES & EQUIPMENT Based upon our analysis, as detailed within the Cost Approach section of this appraisal, we estimate the current value of the furniture, fixtures and equipment to be approximately S270,000 rounded. I I I I I I I I I I I I CERTIFICATION 95 We certify that, to the best of our knowledge and belief,... . the statements of fact contained in the accompanying report dated February 26, 1996, prepared for American Bank,covering the valuation of the 73 room Heritage Inn Motel in Evans,Colorado are true and correct. . the report analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions, and conclusions. . we have no present or prospective interest in the property that is the subject of this report, and have no personal interest or bias with respect to the parties involved. . our compensation is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. . our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute and in conformity with the Uniform Standards of Professional Appraisal Practice. . the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. . the appraisal assignment was not based on a requested minimum valuation, a specific value, or on the approval of a loan. . James R. Burbach, MAI is currently certified under the continuing education program of the Appraisal Institute and has made a personal inspection of the property. . William J. Kottenstette and James R. Burbach have made a personal inspection of the property that is the subject of this report. . no one else provided significant assistance in the preparation of this report. • the undersigned hereby acknowledge that they have the appropriate education and experience to appraise this property classification. . it is our opinion that the fee simple Market Values of the above referenced property as of February 13, 1996 is as follows: "As Is" February 13, 1996 $1,550,000 dirK/S.frirj jaC , KO-lbeti26— ames . Burbach, MAI William J.Kottenstette Colo do Certified G eral Appraiser • CG00001727 PROFESSIONAL QUALIFICATIONS JAMES R. BURBACH, MAI 216 • 16th Street Mall, Suite 1060 Denver, Colorado 80202 (303) 825-8825 PRESENT POSITION: Mr. Burbach is an independent fee appraiser and principal in the real estate appraisal and consulting firm of Scott, Stahl, Burbach & Decker. He is also President of Burbach & Associates, Inc. EXPERIENCE: Mr. Burbach has been actively engaged in the real estate and appraisal professions since 1974. He has performed and prepared appraisals of real property in commercial, industrial, multi-family residential, recreational, and agricultural use. Mr. Burbach has had extensive experience in a number of real estate disciplines including valuation,market and feasibility analysis,investment analysis,demographic studies and computer applications. PREVIOUS • EMPLOYMENT: Mr. Burbach is a former Manager with the Real Estate Appraisal Services Division of the international accounting firm of Laventhol & Horwath, and was Vice President of the Appraisal and Investment Analysis Division of Joseph Farber and Company, Incorporated. EDUCATION: Mr. Burbach received a Bachelor of Business Administration Degree, Finance, from the University of Wisconsin - Whitewater and a Master of Science Degree, Real Estate Appraisal& Investment Analysis, from the University of Wisconsin - Madison. He has completed numerous advanced appraisal courses sponsored by the American Institute of Real Estate Appraisers and the Society of Real Estate Appraisers. PROFESSIONAL ORGANIZATIONS: Member - Appraisal Institute Member - Denver Board of REALTORS Member - Colorado Association of REALTORS Member - National Association of REALTORS Approved Level III Appraiser, FNMA Past President Colorado Chapter of the Real Estate Securities and Syndication Institute Hotel & Motel Brokers of America COURT TESTIMONY: U.S. Bankruptcy Court U.S. District Courts Various County Courts in Colorado, Wisconsin, Utah and Montana Currently Certified - Appraisal Institute Colorado Certified General Appraiser #CG00001727 New Mexico Certified General Appraiser #00762-G Montana Certified General Appraiser *361 I PROFESSIONAL QUALIFICATIONS WILLIAM J. KOTTENSTETTE 370 17th Street, Suite 2100 Denver, Colorado 80202 (303) 595-4000 I U PRESENT POSITION: William J. Kottenstette is principal as well as Vice President of Montgomery & Associates, a hospitality consulting firm which services hotel, restaurant, and resort related clients. In addition, he is a director of Horwath Hospitality Consulting,a national network of hospitality industry consultants, of which Montgomery & Associates is a member. EXPERIENCE: Mr. Kottenstette has over five years consulting experience (three years with Laventhol & Horwath and two years -with Montgomery & Associates) performing hotel appraisals (most recently in conjunction with James R. Burbach, MAI of Scott, Stahl & Burbach), hotel and restaurant operational analysis, market feasibility research, and financial analysis and eight years experience in hotel and restaurant operations,including hospitality marketing, strategic planning, and hotel facility management. Mr. Kottenstette has consulted on engagements throughout the United States. Clients include property owners, hotel/motel franchise companies, hotel management companies, various independent developers and investors and lending institutions. PREVIOUS EMPLOYMENT: Prior to his tenure at Laventhol & Horwath, and subsequently Montgomery & Associates, Mr. Kottenstette worked for the Potomac Hotel Group, a hotel management company based in Washington D.C., and held management positions including General Manager and Corporate Systems Analyst. EDUCATION: Mr. Kottenstette graduated from the University of Denver with a BSBA Degree in Hotel and Restaurant Management. PROFESSIONAL ORGANIZATIONS: Member - Colorado Hotel and Lodging Association Member - Colorado Restaurant Association CIVIC ORGANIZATIONS: Member - Downtown Denver LIONS Club PREVIOUS SIGNIFICANT APPRAISAL ASSIGNMENTS City and County of Denver. Colorado Appraisal of Land Designated for the Colorado Convention Center.Denver. Colorado This assignment involved the appraisal of 44 separate real estate parcels under 23 separate ownerships as part of the acquisition process for the expansion of the Currigan Convention Center. In addition to parking lots, hotel, retail, office and apartment properties were appraised for the City and County of Denver. I Butterfield Savings and Loan Association The Executive Tower. Denver. Colorado A mixed-use office and hotel property in Denver's Central Business District. Constructed during 1973 and 1974 the building has a gross floor area of 431,536 square feet. The office component has a net rentable area of 155,777 square feet and the hotel component includes 336 guest rooms. This is a full-service lodging facility providing two restaurants, one lounge, extensive meeting facilities and full health club. Federal Home Loan Bank Board of San Francisco Five Apartment Projects. Colorado Springs. Colorado This assignment involved the appraisal of the New Horizons, Shannon Glen, Timbers, Pine Creek Village, and El Vecino apartment complexes. The appraisal was used as part of foreclosure proceedings and involved a total of 841 apartment units. First Interstate Bank of Denver, N.A. Riverfront Festival Center. Littleton. Colorado A specialty retail center containing 199,706 square feet of gross building area, 138,384 net rentable square feet. This center was originally developed by the Writer Corporation in cooperation with the City of Littleton. An appraisal was completed for asset management purposes. Bear Valley Corporation Bear Valley Shopping Center, Denver, Colorado A regional shopping center containing 367,938 square feet of gross building area, 354,395 net rentable square feet. Originally built in 1959, with additions through 1984, the assignment involved a number of mixed uses including retail, office, and pad sites. The property was also encumbered by a long term ground lease. An appraisal was completed for partnership dissolution and disposition of the asset. SYNCAR Corporation Chancery Office Building, Denver. Colorado A 16 story office building containing 536,927 square feet of gross building area, including a 630 car parking facility. This was a consulting assignment involving an investment analysis under different scenarios for potential acquisition of the property. PREVIOUS SIGNIFICANT APPRAISAL ASSIGNMENTS East West Partners Highlands Lodge. Beaver Creek. Colorado This was an appraisal of a proposed 33 unit luxury condominium project located at the base of the Beaver Creek ski area. These were to be three bedroom, three bath units ranging from 2,900 to 4,100 square feet in size. This phase also included commercial space and underground parking for the units. New York Life Insurance Company Nautilus Pegasus Building a.k.a, Colorado National Bank Building. Denver. Colorado Appraisal of a 26 story office building in Denver's Central Business District. Constructed in 1974, the structure has 631,769 square feet of gross building area. This property was partially encumbered by a ground lease and was valued for asset management purposes. Cotter Corporation Uranium/Vanadium Mill, Canon City. Colorado This assignment was completed for assessment appeal purposes. Constructed in 1979, the uranium mill suffered from significant economic/external obsolescence due to the downturn in price for uranium concentrates, which also began in 1979. A significant reduction in the assessment was granted by the Assessment Appeals Board. First Interstate Bank of Denver. N.A. Lake Catamount. Steamboat Springs. Colorado A mixed use land assemblage located five miles south of Steamboat Springs. Containing 3,341-acres with the 495 acre Lake Catamount. Development was proposed for 1.15 units per acre with the possibility of a ski permit. The appraisal was made for asset management purposes. California Public Employees' Retirement System One Civic Center Plaza (The Denver Post Building), Denver. Colorado This property is a 22 story office building in Denver's Central Business District. Completed in 1984, the building has 627,492 square feet of gross building area. The property is subject to an air rights lease and was valued for asset management purposes. Mitsubishi Bank, Ltd. Proposed Hyatt Hotel. Beaver Creek, Colorado An appraisal completed for financing purposes. The property as proposed was to have 302 guest rooms, ten luxury penthouse condominium units, and approximately 23,000 square feet of retail and office space. Located at the base of the ski area, a first class resort hotel property. I PREVIOUS SIGNIFICANT APPRAISAL ASSIGNMENTS FIMSA, Inc., Denver. Colorado 1999 Broadway. Denver. Colorado IThis property is a 42 story office building located in Denver's Central Business District. The structure has 635,737 square feet of net rentable area and was completed in 1985. A nine story parking structure was also part of the project. The site was assembled with the Holy Ghost Church, which was preserved,and the office tower being constructed with a concave glass facade around the church structure itself. RTC as Receiver for Santa Barbara Savings & Loan. Santa Barbara. California Oxford Hotel & Office Annex. Denver. Colorado A historic hotel and office property located in Lower Downtown Denver which was renovated in 1983. The hotel was constructed in 1887 and contains 81 rooms along with a restaurant and meeting facilities. The office annex was constructed in 1910 and contains 43,292 square feet. Most of the office is used as executive suites. There is also a health club. Seafirst Real Estate Group. Seattle, Washington The Westin Hotel. Vail. Colorado A first class, full service lodging facility containing 322 rooms. Constructed in phases since 1982, the property has two restaurants, meeting facilities, and a 29,050 square foot conference center. American Real Estate Group, Stockton, California Ramada Inn, Albuaueraue, New Mexico A two story full service hotel constructed in 1970. Containing 204 rooms, the property also has a 60 seat restaurant, a 175 seat lounge area, and approximately 1,950 square feet of divisible meeting space. Valley National Bank of Arizona. Phoenix. Arizona Best Western Courtyard Pines. Denver. Colorado This 193 room facility was constructed in two phases in 1969 and 1973. The project was undergoing a renovation program and also has a lounge, restaurant, and approximately 7,565 square feet of meeting space. Metropolitan Life Insurance Company, Tulsa. Oklahoma 1616 Glenarm Building. Denver, Colorado A 31 story office building constructed in 1964 in the Denver Central Business District. Containing 410,742 square feet of net rentable area, the property was valued for assessment appeal purposes. I IPREVIOUS SIGNIFICANT APPRAISAL ASSIGNMENTS IFIMSA, Inc.. Denver. Colorado Diamond Hill Office Center. Denver. Colorado A four building office complex constructed in 1970 and 1972. The project has 375,759 square feet of net rentable area,along with a sub-surface parking garage. The valuation was a leasehold estate as the property was subject to a long term ground lease. Coast Savings. Granada Hills. California Denver Marriott Residence Inn. Denver. Colorado An extended stay, all suites hotel which opened in 1982. The property has 156 suites; 118 are studio units and 38 are penthouse units. These units are contained in 20 free standing buildings. Key Bank. Buffalo. New York Hitching Post Inn. Cheyenne, Wyoming This property is a full service lodging establishment constructed in phases between 1940 and 1974. ' Containing a total of 238 units, there were six apartment style units as well. Facilities include two lounges, three restaurants, and miscellaneous office and retail space. I I I I I I SUBJECT PHOTOGRAPHS AND LEGAL DESCRIPTION I.1/. f. . 1 /./. .. . n.11.1 .\n/. rA� �nnn• •J r. SCHEDULE A - Continued The land referred to herein is situated in the State of Colorado , Count} of Weld, and is described as follows: The South 2/3 of Lots B and E, all of Lot 0 and that part of Lot C lying West of the right of way of Highway No. 85 , LYNCH ' S SUBDIVISION, of the CITY OF EVANS, being a part of the NW1/4 of the SW1/4 of Section 20 , Township 5 North, Range 65 West of the 6th P .M. , lying East of the Evans Irrigating Ditch. Also that part of the South 2/3 of Lot 11 of the NE1/4 of the SW1/4 of Section 20 , Township 5 North, of Range 65 West of the 6th P. M. , according to the Subdivision of Lands as made by the ST. LOUIS WESTERN COLONY, in the CITY OF EVANS, lying West of the right of way of Highway No. 85 , Also that portion of Denver Street as platted which lies between the South 2/3 of Lots B and E and between Lots C and D of LYNCH ' S II" SUBDIVISION, of the CITY OF EVANS , as vacated by Ordinance recorded June 5 , 1959 in Book 1533 at Page 268 , EXCEPT the North 20 feet of the above described parcel. 111 111 I ■ ■ I I I I I I I I I assie I PHOTOGRAPHS OF COMPARABLE LODGING PROPERTIES I I I I I I I r I � .�• ,�r . U U • " V 4�'es / is Uyp 1 — i~- Al WV/ . ' • I Competitive/Comparable Property 1 (Subject) Name: Heritage Inn Location: 3301 West Service Road Evans, Colorado Description of Improvements: This facility provides 59 typical guest rooms in addition to 14 "FantaSuites" guest rooms, all located in a two story interior corridor roadside type structure. Additional facilities and amenities include a U restaurant,lounge, approximately 2,400 square feet of meeting space, and an outdoor swimming pool. The "FantaSuites" are individually decorated suites which follow a theme,Le.Bronco Suite,Jungle Safari, Space Odyssey, Pink Cadillac, etc. In addition, each suite includes a customized whirlpool. Current Published Room Rates: Single: $37.00 - $62.00 Double: $45.00 - $70.00 FantaSuite: $125.00 - $210.00 I I r I I 4: }yy • tee II la • , nin in n1r � Inn I I Competitive/Comparable Property 2 Name: Fairfield Inn - Greeley Location: 2401 West 29th Street Greeley, Colorado Description of Improvements: This limited service facility, which opened in Fall 1994, features 62 guest rooms, an indoor swimming pool and spa, complimentary continental breakfast and one small meeting room. General Information: This property is located along U.S. Highway 34 Bypass, west of the Greeley Mall, approximately one mile from the subject. This new lodging facility is directly competitive -with the subject for the transient commercial and tourist/transient business. This property, in its brief history, has become the market leader in both occupancy and average room rate due primarily to its success in attracting the area's commercial demand;some of which is at the expense of the subject as well as the Best Western Ramkota Inn. Current Published Room Rates: Single: $52.00 - $63.00 Double: $58.00 - $70.00 I I I I ,� . I i t � »< Ali� Ali iiLUllili*Il1in It - a :. ',w.a r ®i I' - I v I Competitive/Comparable Property 3 IName: Super 8 Motel - Greeley I Location: 2423 29th Street Greeley, Colorado Description of I Improvements: This limited service facility, which opened in October 1994, features 49 guest rooms and a complimentary continental breakfast. This facility is proximate to several food and beverage facilities, as well as 1 being proximate to the Greeley Mall and several movie theaters. General Information: This property is located adjacent to the new Fairfield Inn, I approximately one mile west of the subject. Like the Fairfield Inn, the Super 8 Motel offers a good quality product at a reasonable price. This property is most competitive with the subject for the tourist/transient demand, however it has been successful in attracting Icommercial demand as well. Current Published I Room Rates: Single: $38.88 Double: $44.88 I I II II Il ill r , i 1 r 1 ! I I 3 8 L- --- -« r hisi— iset= .-0,/ _*r ,t• n 3.g rye" >aMI 7 ,. mil ' h:,,:';,A 4, r, t -4".'- _ "l ,tsiesill @ 111 Competitive/Comparable Property 4 IName: Best Western Ramkota Inn & Conference Center 0 Location: 701 8th Street Greeley, Colorado Description of Improvements: This property is located in downtown Greeley and consists of 148 guest rooms, an indoor swimming pool, a full service restaurant and lounge, and approximately 10,600 square feet of meeting space. IGeneral Information: Prior to the opening of the Fairfield Inn and the Super 8 Motel, this property was the newest facility in Greeley, having been developed in 1986, and was the primary commercial and meetings/conference Ilodging property in the area. The Fairfield Inn has been successful in capturing some of the commercial demand that previously used this property, and subsequently, the occupancy performance for 1995 was I significantly lower than in 1994. The Heritage Inn is competitive with this property for the meetings/conference business as well as the lower rated tourist/transient and commercial business, although the subject I may have a slight disadvantage due to its current condition and this property's full service, downtown location. Current Published Room Rates: Single: $52.00 - $57.00 IDouble: $60.00 - $65.00 I I I I I r w , Ts I Competitive/Comparable Property 5 IName: Camfield II(formerly known as Holiday Inn Greeley,and as of March 1, 1996 will be known as Ramada Inn Greeley) ILocation: 721 13th Street Greeley, Colorado I Description of Improvements: This property is also located in downtown Greeley, proximate to the Best Western Ramkota Inn. The property contains 100 guest rooms, I an outdoor swimming pool, a restaurant, a lounge and approximately 5,000 square feet of meeting space. In addition, all guests receive a complimentary continental breakfast. I General Information: This property competes most directly with the Best Western Ramkota Inn for commercial, meeting/conference and tourist/transient business. In addition, given this property's market orientation and I anticipated franchise affiliation,we believe it will be competitive with the subject for both tourist/transient as well as for commercial business. ICurrent Published Room Rates: Single: $42.95 Double: $49.95 I I I I r. UAW z, -, Ali - Iliiili� _� ir-. y Rom'" . �1. t • . J - , I Competitive/Comparable Property 6 IName: Motel 6 - Greeley I Location: 3005 8th Avenue Evans, Colorado I Description of Improvements: This property is a 114 room facility located approximately five blocks north of the subject along 8th Avenue (U.S. Highway 85 frontage road) and Southgate Drive. Additional facilities include an outdoor Iswimming pool. General Information: This property is directly competitive with the -subject, given its I location, market orientation and nationally recognized brand name, and in addition, to a certain extent, room rate structure. This Motel 6 has one of the highest occupancies in the area, although the average room rate is lower, as would be expected, than the market average. I This motel is most popular with the price conscious tourist/transient as well -as the lower rated commercial demand. This market orientation is similar to what the subject's market positioning is I becoming as a result of the influx of new, high quality, competitive supply into the local area. I Current Published Room Rates: Single: $27.95 Double: S33.95 I I U 111 $k" .i ul1 I . lL; n • I Competitive/Comparable Property 7 Name: Winterset Inn Location: 800 31st Street Evans, Colorado Description of Improvements: This facility provides 53 guest rooms in a two-story, motel style structure. Additional facilities and amenities include a small meeting room and an outdoor swimming pool. The property was developed in 1969, and was last completely renovated in 1979. General Information: This limited service motel-style property is located directly across U.S. Highway 85 from the subject, and has been -included in the competitive supply based upon its location, market position and non- franchise affiliation. Given its condition and lack of national franchise affiliation,this property almost exclusively market positions itself towards the more rate conscious tourist/transient market, a strong market segment for the subject property as well. Current Published Room Rates: Single: $27.95 Double: $30.95 I I I .a.m.......s,ve. ae. .., ''.MSCRi�4Y•iko. ..n.: ,.Nr✓i. - I .r I9.:1 dial' i I B 3 p 'L p • .ea 11. r al mi im IN . . — .. F um •,: u r use �- ...3JL ,-r p, ak.i fr I ., � s I Competitive/Comparable Property 8 IName: Holiday Inn Express - Greeley (under construction) ILocation: 2563 West 29th Street Greeley, Colorado I Description of Improvements: This facility, scheduled to open in March 1996, consists of 64 rooms, a heated indoor swimming pool and whirlpool, a small meeting room Iand complimentary continental breakfast for all guests. General Information: This limited service lodging facility, located directly west of the I Fairfield Inn and Super 8,approximately one mile west of the subject, shares similar ownership with the Fairfield Inn. This property is anticipated to be competitive with the subject for the transient commercial and tourist/transient demand. In addition, given the I immediate success of the Fairfield Inn, and considering that these properties have the same owner, cross referrals will also benefit this property, and possibly hurt the subject. ICurrent Quoted Room Rates: Single: will be determined atopening IDouble: will be determined at opening I I U 11 9' 1/ • OIN -�i Ripaa j (CIFI r ' r- 1111 I I Competitive/Comparable Property 9 Name: Sleep Inn - Greeley (under construction) Location: 3025 8th Avenue Evans, Colorado Description of Improvements: This facility, anticipated to open by March 1, 1996, consists of 61 guest rooms in a two story, interior corridored building. Additional facilities and amenities include an outdoor swimming pool, one small meeting room and an "upgraded" continental breakfast bar. General Information: This limited service property is located approximately four blocks north of the subject, and given this location and its anticipated room 111 rate structure, this property is likely to be directly competitive with ' the subject for commercial and tourist/transient demand. The subject generally could be considered at a disadvantage when compared to this property given the Sleep Inn's national franchise affiliation, and new, high quality product. Current Quoted Room Rates: Single: $40.00 (quoted as introductory rates) Double: $44.00 (quoted as introductory rates) 1 I I I I I I 1 I 1 PHOTOGRAPHS OF COMPARABLE SALES 1 I I 1 I COMPARABLE SALE 1 I , ,i , ;Irral"74111 inciiiiiiii "ail._ , ,.01 th:141:611;7111111114- Virl IS Lay 11,7, t7.1.- ii%,;1?: Pq7,.e. SUPER 8 MOTEL, CASTLE ROCK, COLORADO l I ICOMPARABLE SALE 1 Name: Super 8 - Castle Rock I Location: 1020 Park Street Castle Rock, Colorado Type: Limited Service Motel I Number of Rooms/Units: 60 Grantor. Castle Rock Super 8 Motel, Inc. Grantee: Kuros (Anrezej & Helen) and Zloza (Wladysyaw & Zophia) IInstrument Warranty Deed Recording: Book 1185, Page 2026 Facilities: The 60 room property, constructed in 1980, includes a manager's apartment and in-house and public laundry facilities, located off I Interstate 25 in Castle Rock, Colorado, approximately 25 miles south of Denver, in Douglas County (a county that is considered part of the Denver MSA). Buyer planned to spend approximately $100,000 on Iupgrading all of the guest room's furniture, fixtures and equipment. Listing Data: (financial data for 1993) Date of Sale: March 1994 I Sale Price: $1,575,000 Gross Revenue: $614,988 Room Revenue: $608,000 (70.0% at $39.50) I Net Operating Income: $255,650 (41.6%) Total Expenses: $359,338 (58.4% - includes management fees and reserve allowance) I Terms: $700,000 down (44%), with balance carried at 10%, 25 year term, considered cash equivalent. Comments: This property operates in a county that currently is experiencing rapid Igrowth in both commercial and residential developments,with the most notable being the Castle Rock Factory Outlet Mall. In addition, this property has minimal competition and is the only franchised lodging I facility in the area servicing the I-25 tourist/transient traffic. The property was listed at$1,600,000 for six months. Sales price represents a 1.6% reduction from listing price. IUnits of Comparison: After Renovation/Repairs Before Renovation/Repairs Sale Price $1,675,000 $1,575,000 ISales Price Per Room $27,917 $26,250 Gross Income Multiplier 2.72 2.56 Effective Room Revenue I Multiplier 2.75 2.59 Capitalization Rate 15.26% 16.23% I I I I COMPARABLE SALE 2 4^ Mir • pI I P SUPER 8 MOTEL, TEMPE, ARIZONA 5 I I 1 COMPARABLE SALE 2 1 Name: Super 8 - Tempe I Location: 1020 East Apache Boulevard Tempe, Arizona Type: Limited Service Motel I Number of Rooms/Units: 39 Grantor. Confidential Grantee: Confidential Instrument: Not Available Recording: Not Available Facilities: The 39 unit property opened in 1967 and is of concrete block construction. Additional facilities include an outdoor heated I swimming pool and a vacant building,previously a restaurant that was closed in 1994. The building was scheduled to be demolished and the area may be used for a possible rooms expansion. No Irenovations/repairs were required. Listing Data: (financial data for 1993) Date of Sale: May 1994 Sale Price: $1,425,000 Gross Revenue: $516,000 Room Revenue: $496,000 (74.0% at $46.00) I Net Operating Income: $235,000 (46.0%) Total Expenses: $281,000 (54.0% - includes management fees and reserve allowance) I Terms: Cash to Seller Comments: This property was listed at$1,610,000. Sales price represents an 11% discount from the asking price. Units of Comparison: Sale Price: $1,425,000 I Sales Price Per Room: $36,538 Gross Income Multiplier. 2.76 Effective Room I Revenue Multiplier. 2.87 Capitalization Rate: 16.49% I I I I I I f COMPARABLE SALE 3 1 fi � L. *: ! t © .,� it F . I . r r. _ . . ,-, , _- pill ., , ,„ , ' ill ,i4F0441 _ . . ILL,,F_____., i , . , ,, iL _ _ _ _ .. , , it ... . .r.-r., . .) ._ li „s 4, ...•- ILI - .. f t. .— F i __ If z a BEST WESTERN ESCONDIDO HOTEL, ESCONDIDO, CALIFORNIA COMPARABLE SALE 3 Name: Best Western Escondido Hotel Location: 1700 Seven Oaks Road Escondido, California Type: Limited Service Hotel Number of Rooms/Units: 100 Grantor. Sumitomo Bank Grantee: Inn-Spired Investments, Inc. Instrument Not available Recording: Not available Facilities: This property opened in 1989 and was in excellent condition. It is a four-story structure of wood frame construction. Building is fully I sprinklered with alarm system. The property includes a manager's unit, 1,264 square foot meeting room and a pool/spa. No repairs/renovations were reported as being necessary at the time of I sale. Sales Data: (financial data for 1993) Date of Sale June 1994 I Sale Price $3,700,000 (all cash offer of $3,400,000) Gross Revenue $1,279,000 Room Revenue $1,193,000 (65.4% at $50.00) I Net Operating Income Total Expenses $436,630 (34.0%) $842,370 (66.0% - includes management fees and reserve allowance) I Terms: $1,100,000 down (30%), balance of $2,600,000 carried at prime plus 2%, 25 year amortization with five year call. Property was priced to sell with seller financing. Cash offer of $3,400,000 was considered, but property had a good debt coverage ratio and higher offer accepted. IThis sale was analyzed based on cash to seller price of$3,400,000. Comments: The property was listed at$3,800,000. Due to the seller financing, six I to seven offers were made within four weeks. Sales price represents a 2.6% discount from the asking price. I Units of Comparison Sale Price $3,400,000 Sales Price Per Room $34,000 I Gross Income Multiplier 2.66 Effective Room Revenue Multiplier 2.85 ICapitalization Rate 12.84% I I I jj COMPARABLE SALE 4 *11- Prow g 1 I —sue c r �-... :may K .. SUPER 8 MOTEL, BINGHAMPTON, NEW YORK I p I I V I I COMPARABLE SALE 4 Name: Super 8 Motel Location: 650 Old Front Street Binghampton, New York Type: Limited Service Motel Number of Rooms/Units: 64 Grantor. Ming Family Grantee: Travelers Inns Instrument: Not available ' Recording: Not available Facilities: This property opened in 1983 and was in good condition at the time of sale with no repairs needed. The structure is a two-story building, interior corridor with wood frame construction. Building is fully sprinklered with hard wire smoke detectors. Sales Data (financial data for year ending July 31, 1993) Date of Sale October 1994 Sale Price $1,500,000 Gross Revenue $541,239 Room Revenue $502,903 (55.0% at $40.00) Net Operating Income $207,763 (38.0%) Total Expenses $333,476 (62.0% - includes management fees and reserve allowance) Terms: Cash to seller Comments: The property was listed at$1,575,000 for approximately seven months. Sales price represents a 5% discount from the asking price. Units of Comparison: Sale Price $1,500,000 Sales Price Per Room $23,438 Gross Income Multiplier 2.77 Effective Room Revenue Multiplier 2.98 Capitalization Rate 13.85% I COMPARABLE SALE 5 !�" i III I i II V k . r , 111 It _ I FARMINGTON LODGE, FARMINGTON, NEW MEXICO (1 IP I fR a 0 i ICOMPARABLE SALE 5 Name: Farmington Lodge ' Location: 1510 West Main Street Farmington, New Mexico Type: Limited Service Motel Number of Rooms/Units: 33 Grantor. Walter Overbeck/Bud Purling Grantee: Ramesh Nagin/Monju Patel ' Instrument: Not Available Recording: Not Available Facilities: Concrete block construction, built in 1960. New roof in 1985, parking lot redone in 1992. Swimming pool redone in 1984, new AC/heat fpumps installed in 1993. Sale Data: Date of Sale: November 1994 Sale Price: $540,000 Gross Revenue: $213,966 (12 Months September '94) Room Revenue: $213,966 (12 Months September '94 - 60% at $29.69) ' Net Operating Income: $95,990 (Year End 1993 - 47%) Total Expenses: $108,244(Year End 1993 - 53%)includes management fees and reserve allowance. fTerms: $200,000 down (37%), seller carried balance @ 9% interest, 15 Year amortization. Discounted 10% for cash equivalency. ' Comments: Property was listed at $540,000; seven months between listing and closing dates. Property was in good condition with no renovations planned. Units of Comparison: Cash Equiv. Sale Price: $486,000 ' Sales Price Per Room: S14,727 Gross Income Multiplier. 2.27 Effective Room ' Revenue Multiplier. 2.27 Capitalization Rate: 19.75% I I p 1 COMPARABLE SALE 6 17 i 4 . .e Si • I: I Y . -a 7. �{ i a r ry Ar F( STD •,� w?y...��._ �•._ ems..—.� -.r +F,._+1s7...yry '•w•:. . . --'s": . -"Lin-' v `L.- Y.a.Y'-� per,. aes.n : • j r a 1 J 111 i t �_ -� �. _ y; ate.. _ it f DAYS INN, EASTON, MARYLAND I I COMPARABLE SALE 6 Name: Days Inn Location: Route 50 and Bypass 322 Easton, Maryland Type: Limited Service Hotel Number of Rooms/Units: 80 Grantor. ABR Realty Grantee: Ruff Hotel Investments Instrument: Not available Recording: Not available Facilities: This property opened in 1966 as a Holiday Inn. It was renovated in 1990, and the existing restaurant and lounge were closed. Restaurant area is now used for meeting space (approximately 2,022 square feet). Building is of brick and concrete block construction. The meeting space/administration office is located in a one story structure while the guest rooms are located in two, 2-story, exterior corridor buildings. Buyer planned $150,000 in renovations/repairs (10% of sales price). Sales Data: (financial data 1993) Date of Sale December 1994 Sale Price $1,500,000 Gross Revenue $621,000 Room Revenue $618,000 (50.6% at $41.86) Net Operating Income $153,000 (25.0%) Total Expenses $468,000 (75.0% - includes management fees and reserve allowance) ' Terms: Cash to seller Comments: The property was listed at $2,000,000 for approximately 2.5 months. ' Sales price represents a 25% discount from the asking price. Units of Comparison: After Renovation/Repairs Before Renovation/Repairs ' Sale Price $1,650,000 $1,500,000 Sales Price Per Room $20,625 $18,750 Gross Income Multiplier 2.66 2.42 ' Effective Room Revenue 2.43 Multiplier 2.67 Capitalization Rate 9.27% 10.20% I I I C. it COMPARABLE SALE 7 w .1 r` h =ie-:<.ti - I_ ( * A. "'' L x .a..... '3 ,' ._ L.4�NtM . YY^'^ ua,A� le MOTEL 6, REDLANDS, CALIFORNIA a COMPARABLE SALE 7 game: Motel 6 ration: 1160 Arizona Street Redlands, California Type: Limited Service Motel Number of Rooms/Units: 80 Grantor. Sycamore Properties Grantee: Shashikant Patel 4 Instrument: Not available 4 Recording: Not available Facilities: This property opened in 1973 and is of concrete block/stucco construction. Motel consists of one, 2-story building with exterior stairs and guest room corridors. Additional facilities include an outdoor swimming pool and satellite television. Buyer planned $150,000 in renovations/repairs to convert the property to a Super 8 Motel (15% of sales price). Sales Data: (financial data for 1993) Date of Sale December 1994 Sale Price $975,000 -^ Revenue $462,000 .nue $456,000 (58.4% at $26.69) '.et Operating Income $122,140 (26.0%) Total Expenses $339,860 (74.0% - includes management fees and reserve allowance) Terms: Cash to seller Comments: The property was listed at$1,400,000 for approximately five months. Sales price represents a 30% discount from the asking price. -prison: After Renovation/Repairs Before Renovation/Repairs Sale Price $1,125,000 $975,000 Sales Price Per Room $14,063 $12,188 Gross Income Multiplier 2.44 2.11 Effective Room Revenue Multiplier 2.47 2.14 Capitalization Rate 10.86% 12.53% i 4 COMPARABLE SALE S it No Photograph Available it ii I► I HIGH COUNTRY LODGE, ALTO, NEW MEXICO G II I 01 I ICOMPARABLE SALE 8 Name: High Country Lodge I Location: North Highway 48 Alto (Near Ruidoso), New Mexico Type: Limited Service Motel I Number of Rooms/Units: 32 Grantor. Investment Properties, Inc. Grantee: David Singletary Instrument Not Available IRecording: Not Available Facilities: 16 duplex buildings, brick and concrete block construction, opened in 1964. Amenities include indoor heated swimming pool,sauna,hot tub, I recreation room, playground, tennis court, manager's quarters and meeting room. Sales Data: IDate of Sale: February 1995 Sale Price: $750,000 Gross Revenue: $420,000 (12 Months Sept. '94) I Room Revenue: $418,739 (Year End 1994 - 46% at $77.93) Net Operating Income: $93,666 (Year End 1993 - 22%) Total Expenses: $333,573(Year End 1993 - 78%)includes management fees and reserve Iallowance. Terms: Cash to Seller IComments: Property was listed at $850,000; nine months between listing and closing dates. Sales price represents a discount of 11.8% from this list price. Buyers plan on spending up to$100,000 for repairs/renovations. Units of Comparison: Before Repairs/Renovations After Repairs/Renovations Sale Price: $750,000 $850,000 I Sales Price Per Room: $23,438 $26,563 Gross Income Multiplier. 1.79 2.02 Effective Room Revenue Multiplier. 1.79 2.03 ICapitalization Rate: 12.49% 11.02% I I I I I COMPARABLE SALE 9 R it • M T 7 - - r-�- • ti BEST WESTERN HIGH MESA INN, SANTA FE, NEW MEXICO I COMPARABLE SALE 9 Name: Best Western High Mesa Inn Location: 3347 Cerrillos Road Santa Fe, New Mexico I Type: Full Service Hotel Number of Rooms/Units: 210 Grantor. SunWorld Properties Grantee: Sunstone Hotel Investors Instrument Not Available Recording: Not Available Facilities: Nine buildings, three story masonry construction. Built in 1985. Amenities include a restaurant/lounge,swimming pool,exercise room, two whirlpools and 6,500 square feet of meeting space. Sales Data: (Financial data for year ending 1994) I Date of Sale: August 1995 Sale Price: $11,200,000 Gross Revenue: S4,657,509 ' Room Revenue:Net Operating Income: $3,733,046 (64% at$75.85) S1,098,488 (24%) Total Expenses: $3,559,021 (76% - includes management fees and reserve allowance) Terms: Cash to Seller Comments: Property was listed at $12,900,000; nine months between listing and closing dates. Sales price represents a discount of 13.2% from the list price. Buyers plan to convert the property to a Doubletree Inn. I Units of Comparison Sale Price: $11,200,000 Sales Price Per Room: $53,333 Gross Income Multiplier. 2.40 I Effective Room Revenue Multiplier. 3.00 Capitalization Rate: 9.81% I I I I COMPARABLE SALE 10 • • r � � tea • ,:, � , G 1 Wets- -- - - - am solonism.••• - BEST WESTERN, BRUSH, COLORADO t u SALE 10 Best Western - Brush ' - = 1208 North Colorado Avenue ,�f Brush, Colorado Limited Service Motel ,,. +m( looms;Units 44 Western Lodges, Inc. t.s Robert and Pamie Karr 4.`' Not Available a: Not Available ,. The property opened in 1967 with 32 rooms. The second phase of 12 1 rooms was completed in 1974. This motel is a reinforced concrete block structure with face brick and stucco. It is two stories in height and currently consists of 44 guest rooms. Amenities include an outdoor -_ swimming pool. (financial data for year end 1994) !• Su November 1995 c S1,375,000 ensue S522,402 1 4 ,Rreaue 5505,137 (69.8% at$44.31) •g Income: S288,046 (55.0%) tprafes 5234,356 (45.0% - includes management fees and reserve allowance) i Cash to Seller ------ _ x This entire property was recently renovated, including a new roof. mi This property has Best Western's three diamond rating. A restaurant is located adjacent to the property. The was property was listed at S1,550,000. Consequently, the sale price represents a discount of 11% from the list price. CaosptrllnR • r a5,000 Per Room. $31,250 - lscnee Multiplier. 2.63 ,n Room t Multiplier: 2.72 =!�,`1i ' 20.95% c - i I Kee tisie** ::, CLERK TO THE BOARD PHONE (970) 356-4000 EXT.4225 FAX: (3 915 10 STREETTHSTREET P.O. BOX 758 wagCGREELEY COLORAD 80632 COLORADO July 16, 1996 Parcel No.: 096120306018 PIN No.: R3882086 Auburn Inns, Inc. do Roger Debring 90 Clay Cliff Drive Tonka Bay, MN 55331 Dear Petitioner(s): The Weld County Board of Equalization has set a date of Wednesday, July 24, 1996, at or about the hour of 10:00 a.m., to hold a hearing on your valuation for assessment. This hearing will be held at the Weld County Centennial Center, 915 1 Qth Street, Greeley, Colorado, in the First Floor Hearing Room. You have a right to attend this hearing and present evidence in support of your petition. The Weld County Assessor will be present before the Board. The Board will make its decision on the basis of the record made at the aforementioned hearing, as well as your petition, so it would be in your interest to have a representative present. If you plan to be represented by an agent or an attorney at your hearing, prior to the hearing you shall provide, in writing to the Clerk to the Board's Office, an authorization for the agent or attorney to represent you. If you do not choose to attend this hearing, a decision will still be made by the Board by the close of business on August 5, 1996, and mailed to you on or before August 10, 1996. Because of the volume of cases before the Board of Equalization, all cases shall be limited to 15 minutes. Also due to volume, cases cannot be rescheduled. It is imperative that you provide evidence to support your position. This may include evidence that similar homes in your area are valued less than yours or you are being assessed on improvements you do not have. Please note: The fact that your valuation has increased cannot be your sole basis of appeal. Without documented evidence as indicated above, the Board will have no choice but to deny your appeal. At least two (2)working days prior to your hearing, the Assessor will have available at your request the data supporting his valuation of your property. Auburn Inns, Inc. - R3882086 Page 2 Please advise me if you decide not to keep your appointment as scheduled. If you need any additional information, please call me at your convenience. Very truly yours, BOARD OF EQUALIZATION Donald D. Warden, Clerk to the Board BY: Carol A. Harding, Deputy cc: Warren Lasell, Assessor I I Y 1 f p • y`�♦[ N.♦ -rZ - "� _ Nm .Avg' t ■ MAIN ENTRY INTO PROPERTY - LOOKING SOUTHWEST 111 .\ . �\ 111 \ _ 1 i r a ---" v-4 i.. 4 r" ', t+_ ♦ ti "`'�'k ice'}_Ys 4 r.tkKa . a aMAIN BUILDING ENTRY a IIIPhotographs Taken 2/13/96 By J. Burbach ati- .... , _ a ' _ a�� .._ 7-a- -:1-1—"Ill..:7:771— y i , _ ... _ . .; SOUTHEAST SIDE OF MAIN BUILDING - LOOKING NORTHWEST �'_ f ,F�.p A:` ., e, g _"`� I tA . I j 1 s' r ce t s+y 4.. .q :. • NORTH SIDE OF MAIN BUILDING Photogcsphe Taken 2/13/96 By J. Burbach s_ i I 1 I ., .1 v.:. ..,.._ P I niiiorenter-, • -.."”2 • '' ":::;:•::. ., ',._, ,, f..7,zi, . I '. --- .."4„.:J,7.-*•"' c• - -_--44 . ..)\,, ,j, ,7; . . • TT ,tr 1" 1 • k .c. _ : -___.- _-j, ---.17-- r.-cr. : - ..... --". S.'? - .-- -..- ---..."—••----.-.7-------- 4.,..C.---,....--;- i.- ... ;luktr: _ --.....„ - - - - .. , . ,.. -.4111111411Wiereed4- ASEM; .. ,•.... r de pill . A , ' 4'''Cr; - 4 ......e...1 -'' <, WEST SIDE OF MAIN BUILDING 6 ....„. _„...,..... , ...... .14. . . , - - . - I 4. I iTh !L —, i 1,:v--.."-Ali `valrgi !:.' Ee'S -_ — 1 ---- I .- ,....,..1 ........___. , . 1 i 1 I. , .salsir 7 1 _ --- , ciPerimi. - 1. 7. - . ,------- -- 1 i ,... • . -__ _- -- , .. . . • , . . ISWIMMING POOL AREA TO WEST OF MAIN BUILDING I IPhotographs Taken 2/13/96 By J.Burbach Pk V_ 4 L pi 0 .. erM 1 ;&cs " art• i,;. _Lr- � 4% J ENCLOSED WALKWAY 4, , , . La.„.„,_ „._ ..._„.„____________________,. .... ____:....r..„ „_____:. _ _____.=______ . . . , ,,,. , ,„ Iiimpatil k tt . 4 ri‘s ,.. _ , . . .ta l�I. .r .4 _ ,.01 c . ww .a • 4141111 . - • INTERIOR OF ENCLOSED WALKWAY Photographs Taken 2/13/96 By J.Burbach e II I t I , ' ' ' i , . •s.,s;s . ,,, 4 , „..i ...,, , t\tv,.. ,,;,,, . „..,., .,) i,,,,,,,.1. .1csitisti' I d i • I c 1-.-'\L_.LP" kt...i 11 r 71 riipit, , . • w . , { i ;t , 111 11 i 1 . I i! :171- or 01 t , ','J t, 1 1 i / II IC : • lligi" ! II #1 HI I N "JUNGLE RETREAT" FANTASUITE (ROOM 130) 11 ______ , ' ' ,T . ' • ' ( • , , , M i k'II II , I 1 1 . ;,- ?•,-:. i I _ "A4 1 a i I 4. . - I` • • \ ' . 10 Itt li • , . \ - \ ‘'\ , - -:• • '-'--- :4 L----- . • i ' ,--_--, -_ -- /- " --- --,_ -I),,-;: t•c• 't P' , -.) .--- ',A.------- .- ' . O il - , '/ / /4 . . , , / ,_ ----1.---1-- i / I i 1 - _ 1111/ ;! III . . , 1 , ' Is . - - a "JUNGLE RETREAT" FANTASUITE (ROOM 130) . 1111 Photographs Taken 2/13/96 By J.Burbach I 1 24.% _ II 1 s` rcti 'lit frit" 41/4 f "JUNGLE RETREAT" FANTASUITE - BATHROOM (ROOM 130) • � r - Ir �1. "ARABIAN NIGHTS" FANTASUITE (ROOM 223) Photographs Taken 1/13/96 By 7. Burbach I I _ - I _ i foil! ,, t i .; al ; jib ' ui/I,i { 1 r'� .� i . rt iSw. L „et I _ I "ARABIAN NIGHTS" FANTASUITE (ROOM 223) Uram.:. L eat „iP ,,.__ "ARABIAN NIGHTS" FANTASUITE - BATHROOM (ROOM 223) Photographs Taken 2/13/96 By I Burbach l ��- :• a _ . �.''`- -" - i ♦ : c t �✓� a �4 :ram w "-re .. • $ o • *sI •*� 1r.�r�..dip •?'.• :�• � et* a 1. }� .y r. y x , �LZJii♦ - - REDONE SUITE IN 1990 - ROOM 226 d _ I lif � t > REDONE SUITE IN 1990 - ROOM 226 Photographs Taken 2/13/96 By J. Burbach ' �T11 M 4 An? I?-le; .. _ _ �. . ORIGINAL ROOM FINISH - ROOM 220 I , I :-,,„.- I 1 II J ITYPICAL HALLWAY FINISH 1111 IIPhotographs Taken 2/13/96 By J.Burbach I I A Ipt. ' _ 1 ' fa I I J . GUEST REGISTRATION AREA III AI ® • 4, ►'- ell . _I t a n II rl . _ ,, . IMAIN LOBBY III . Photographs Taken 2/13/98 By J. Burbach I I -. I IN um. 111,1P7 ill 1#, 11 I D ■ MAIN LOBBY or 0 RRr OS ■ 4 r ■ � I AREA ABOVE MAIN LOBBY Photograph.Taken 2/13/96 By J. Burbach sise I I ----C-Lt it..r.r, -c, . ,..,-,•' 2.1',.- .jet 3 . --ir II*-* , '151,,A". •' 4 - . -,—,.... ....,..awsWeNs *Mr I •i-‘ ..z: 49 . --___,.....-. I P 4. I _ I , k Ik s • 1 Lk 4 t I 91 a . . 9 t ii_ • 1 , 1•• I - • r t, L...- 11-- * 4_ . I Ai -- lirrst,.._CT'. 1 . I 9 \Nit. 41 *"" •, " "t ' .11..407,7% • III r 111 RESTAURANT I M t _ ".''‘k-- * ‘ .... -icer' - et, f k.-. 2ttT IF- II —._ ..,....... nn .1 1 .. . II . . - ...._....... k 1 , rt r 'I , 9 A.." 4•11 ti I i i III 1 t .611Ir- 1. MLOUNGE M 1 Photographs Taken 2/13/96 By J.Burbach Hello