APPRAISAL OF REAL PROPERTY
SUMMARY REPORT
Brookhollow Industrial Park Property
Located at:
8901 Directors Row, Dallas TX 75247
As of:
December 9, 2006
Prepared For:
Dr. Andrew Hansz
University of Texas at Arlington
P.O. Box 19449
Arlington, TX 76019
Prepared By:
Tu Le, Ofelia Garcia, Leonard Garcia
TOS Appraisal
December 9, 2006
Dr. Andrew Hansz, Ph.D.
College of Business Administration
University of Texas at Arlington
UTA Box 19449
Arlington, TX 76019
Dear Dr. Hansz,
This appraisal is in response to your request to prepare an appraisal of the commercial property located at
8901 Directors Row Dallas, Texas 75247. We have personally made an inspection of the subject property.
This inspection was made for the purpose of estimating the market value, as defined in this report, of the
leased fee interest in the subject property as of September 20, 2006, the effective date of the appraisal.
The accompanying report, which comprises 50 pages, describes the three approaches to value and the
conclusions derived by application of the approaches. Please note the assumptions and limiting conditions
on page 48.
The appraisal is intended to conform with the Uniform Standards of Professional Appraisal Practice
(USPAP), the Code of Professional Ethics and Standards of Professional Appraisal Practice of the
Appraisal Institute, and the appraisal guidelines of the University of Texas at Arlington. The appraisal is
also prepared in accordance with the appraisal regulations issued in connection with the Financial
Institutions Reform, Recovery and Enforcement Act (FIRREA).
Based upon our investigation and analysis of the data gathered with respect to this assignment, we have
formed the opinion that market value of the lease fee interest in the subject property was, as of September
20, 2006, measured in the amount of
Value Conclusion
Appraised Premise
Interest Appraised
Date of Value
Value Conclusion
Prospective Market
Leased Fee
September 20, 2006
$550,000
Value
If you have any questions or comments, please contact the undersigned. Thank you for the opportunity to
be of service.
Respectfully submitted,
TOS Appraisal
8901 Directors Row
Dallas, TX 75247
TABLE OF CONTENTS
Summary of Salient Facts and Conclusions…………………………………………………..5
General Information……………………………………………………………………………6
Identification of Subject………………………………………………………………....6
Current Ownership and Sales History…………………………………………………...6
Purpose, Property Rights and Effective Date…………………………………………....6
Definition of Market Value……………………………………………………………...6
Definition of Property Rights Appraised………………………………………………..6
Scope of Work…………………………………………………………………………..7
Economic Analysis……………………………………………………………………………….8
The Dallas/Fort Worth Metropolitan Area Analysis…………………………………….8
Surrounding Area Analysis……………………………………………………………..15
Property Analysis………………………………………………………………………………..17
Land Description Analysis..……………………………………………………………..17
Improvements Description and Analysis………………………………………………..20
Real Estate Tax Analysis………………………………………………………………..24
Highest and Best Use Analysis………………………………………………………….26
Valuation Analysis……………………………………………………………………………….27
Valuation Methodology………………………………………………………………….27
Sales Comparison Approach…………………………………………………………….28
Cost Approach…………………………………………………………………………..33
Income Capitalization Approach………………………………………………………..38
Reconciliation and Conclusion of Value………………………………………………..46
Certification……………………………………………………………………………………...47
Assumptions and Limiting Conditions…………………………………………………………48
Addenda
Definitions…………………………………………………………………………Addendum A
Subject Photographs……………………………………………………………….Addendum B
Financials and Property Information………………………………………………Addendum C
Comparable Data…………………………………………………………………...Addendum D
SUMMARY OF FACTS AND CONCLUSIONS
Property Type
Location
Storage warehouse building
8901 Directors Row
Dallas, TX 75247
Date of Value Estimate
September 20, 2006
Property rights appraised
Leased Fee interest
Site
A 1.123 acre lot with 150 ft
frontage that is fully improved and
conforms to all appropriate
ordinances
Improvements
A 46 year old warehouse with
16,000 square feet lease area;
building is 81’x 200’ with bricks
over blocks; A 25x15 shed in the
back separated by a cement curb
Zoning
Industrial/Research District
Highest and Best Use
Industrial Use
Site Value
$65,000
Cost Approach
$400,000
Sales Comparison Approach
$545,000
Income Capitalization Approach
$600,000
Final Value Conclusion
$550,000
GENERAL INFORMATION
Identification of Subject
The subject is an existing industrial property containing 16,000 square feet of rentable area. The
improvements were constructed in 1960. The site area is 1.123 acres, or 48,896 square feet. The street
address is 8901 Directors Row, Dallas County, Texas 75247. It is identified by the tax assessment office as
follows: 77923. A legal description of the property is in the addenda.
Current Ownership and Sales History
The owner of record is English O B. This party has owned the property for a period exceeding
three years.
To the best of our knowledge, no sale or transfer of ownership has occurred within the past three years, and
as of the effective date of this appraisal, the property is not subject to an agreement of sale or option to buy,
nor is it listed for sale.
Purpose, Property Rights and Effective Date
The purpose of the appraisal is to develop an opinion of the prospective market value of the leased
fee interest in the property as of the effective date of the appraisal, September 20, 2006.
Definition of Market Value
Market value is defined as: “The most probable price which a property should bring in a
competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting
prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this
definition is the consummation of a sale as of a specified date and the passing of the title from seller to
buyer under conditions whereby:
•
•
•
•
•
Buyer and seller are typically motivated;
Both parties are well informed or well advised, and acting in what they consider their best interests;
A reasonable time is allowed for exposure in the open market;
Payment is made in terms of cash in United States dollars or in terms of financial arrangements
comparable thereto; and
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.” (Source: 12 C.F. R. Part
34.42(g); 55 Federal Register 34696, August 24, 1990, as amended at 57 Federal Register 12202, April
9, 1992; 59 Federal Register 29499, June 7, 1994)
Definition of Property Rights Appraised
Fee simple estate is defined as an: “Absolute ownership interest 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.” (Source: The Dictionary of Real Estate Appraisal, Fourth Edition,
2002.)
Leased fee interest is defined as: “An ownership interest held by a landlord with the rights of use
and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the lessee
are specified by contract terms contained within the lease.” (Source: The Dictionary of Real Estate
Appraisal, Fourth Edition, 2002.)
Leasehold interest is defined as: “The interest held by the lessee (tenant or renter) through a lease
transferring the rights of use and occupancy for a stated term under certain conditions.” (Source: The
Dictionary of Real Estate Appraisal, Fourth Edition, 2002.)
Scope of Work
To determine the appropriate scope of work for the assignment, we considered the complexity of
the property, the needs of the user, and other pertinent factors. Our concluded scope of work is described
below.
Valuation Methodology
Appraisers usually consider the use of the three approaches to value when developing a market
value opinion for real property. These are the cost approach, sales comparison approach, and income
capitalization approach. Use of the approaches in this assignment is summarized as follows:
Approach
Sales Comparison Approach
Cost Approach
Income Capitalization Approach
APPROACHES TO VALUE
Applicable to Subject
Applicable
Not applicable
Applicable
Use in Assignment
Utilized
Utilized
Utilized
The sales comparison approach is the most reliable valuation method for the subject property due to the
following:
• There is an active market for similar properties, and sufficient sales data is available for analysis.
• This approach directly considers the prices of alternative properties having similar utility.
The income capitalization approach is an applicable valuation method because:
• The probable buyer of the subject would base a purchase price decision primarily on the income
generating potential of the property and an anticipated rate of return.
• There is sufficient market data regarding income, expenses, and rates o return, is available for
analysis.
The cost approach is applicable to the assignment considering the following:
• There is an active land market, making estimates of underlying land value reasonably reliable.
• The user wanted this approach to be used.
Other Research and Analysis
Additional steps taken to gather, confirm, and analyze relevant data, are detailed in individual
sections of the report.
Property Inspection
We have conducted an interior and exterior inspection of the property on September 20, 2006.
Report Format
This report is prepared under the self-contained report option of Standards Rule 2-2 of USPAP.
Accordingly, the report contains all information significant to the solution of the appraisal problem.
ECONOMIC ANALYSIS
Dallas/Fort Worth Metropolitan Area Analysis
Location – DFW
The subject property is located in the Dallas/Fort Worth Metropolitan Area. The Dallas-Fort Worth
Metroplex is located in North Central Texas, approximately 250 miles north of the Gulf of Mexico. The
Dallas/Fort Worth Metroplex is the fifth largest metro area in the country.
MAJOR HIGHWAYS - DFW
The Dallas/Fort Worth Metroplex is served by seven interstate.
IH-35E (North/South) – Dallas
IH-45 (North/South) – Dallas
IH-635 (Loop) – Dallas
IH-30 (East/West) – Dallas/Fort Worth
IH-20 (East/West) – Dallas/Fort Worth
IH-35W (North/South) – Fort Worth
IH-820 (Loop) – Fort Worth
Various U.S. & state highways also serve the Dallas/Fort Worth Metroplex.
Dallas
US-67 – (Northeast/Southwest) merges with IH-30 in downtown area
US-75 – (North) from downtown area
US-77 – (North/South) follows IH-35E
SH-180 - (East/West) South of IH-30
Dallas/Fort Worth
SH-183 - (East/West)between Dallas & Fort Worth(access to South end of DFW International Airport)
SH-114 - (East/West)between Dallas & Grapevine (access to North end of DFW International Airport)
SH-360 – (North/South) between Dallas and Forth Worth
Fort Worth
US-377 – (Northeast/Southwest)
US-287 – (Northwest/Southeast)
SH-26 – (North) from SH-183
SH-121 – (North) from SH-183
SH-199 – Northwest from downtown area
CLIMATE - DFW
The Dallas-Fort Worth climate is humid subtropical with hot summers. There is a wide range of annual
temperature and precipitation varies from less than 20 to 50 inches. Mild winters have sudden drop in
temperature when northers occur a few times a month. Brief intervals of severe cold temperatures due to
sudden drops in temperature occur periodically when northers come through. The average last occurrence
of 32°F or below is mid March and the average first occurrence of 32°F or below is in late November.
Windstorms occurring during thunderstorm activity are sometimes destructive and snowfall is rare. The
average length of the warm season (freeze-free period) in the Dallas-Fort Worth Metroplex is about 249
days. Summer daytime temperatures frequently approach and exceed 100°F. Air conditioners are
recommended for maximum comfort indoors and while traveling via automobile. Periods of rainy weather
last for only a day or two, and are followed by several days with fair skies. Thunderstorms occur
throughout the year, but are most frequent in the spring. Hail falls on about two or three days a year,
ordinarily with only slight and scattered damage.
PUBLIC TRANSPORTATION
The Dallas Area Rapid Transit authority (or DART) is the transit agency in the city of Dallas that operates
buses, light rail (including an underground station), commuter rail, and HOV (High-occupancy vehicle)
lanes in Dallas and 12 of its suburbs. As of 2005, DART provides a network covering 700 square miles in
Dallas, 13 surrounding suburban communities and serves 2.1 million passengers. There are 687 buses, 95
light rail cars, 6 locomotives, 100 lift-equipped vans, and 77 sedans in service for DART.
The Fort Worth Transportation Authority (or T) is the operator of the bus system of the city of Fort Worth.
The T partners with DART through the Trinity Railway Express (TRE) to offer commuter rail service
between Fort Worth, DFW International airport and downtown Dallas. The T has 36 bus routes and offers
vanpool/carpool service to groups of at least seven people who can share the cost of getting to and from
work.
Greyhound Lines is the largest North American provider of intercity bus transportation, serving more than
3,100 destinations with 16,000 daily departures across North America. As of 2005, Dallas is the seventh
busiest terminal based on total number of customers.
Dallas/Fort Worth International Airport (DFW) is the busiest airport in Texas, the third busiest airport in
the world in terms of aircraft movement, and sixth busiest airport in terms of passenger traffic with
59,064,360 passengers in 2005. DFW Airport is the largest airport in Texas in terms of land area with
almost 18,000 acres, the second largest in the United States, and fourth largest in the world. Dallas/Fort
Worth International Airport has five terminals and could one day accommodate up to thirteen. The DFW
Airport serves 129 domestic and 36 international destinations. Dallas/Fort Worth International Airport is
the largest hub for American Airlines and American Eagle. Dallas/Fort Worth International Airport
handles sixty percent of all air cargo in Texas. DFW Airport is within a four-hour flight time of 95% of
U.S. population. DFW has an annual impact on the North Texas economy of over $14.3 billion and
supports nearly 268,500 jobs.
Dallas Love Field (DAL) is a public airport located five miles northwest of the central business district of
Dallas. The airport has three runways and the land area is approximately 1,300 acres. Love Field is a
secondary airport since the completion of Dallas/Fort Worth International Airport in 1974. DAL is
primarily served by Southwest Air Lines, a low-fair airline. The Wright Amendment of 1979 governed the
air traffic at DAL and limited most nonstop flights to Texas and neighboring states. In June 2006, a law
repealing the Wright Amendment was established. Dallas Love Field is also home a number of charter
flight companies.
Fort Worth Meacham International Airport (Meacham Field) is an airport in the city of Fort Worth near the
downtown business district. Meacham Field is used for corporate aircraft, commuter flights and student
pilot training. It has three runways, two parallel and a crosswind runway.
Fort Worth Alliance Airport (AFW) is located 14 miles north of Fort Worth. AFW is the world’s first
purely industrial airport. The airport is owned by the City of Fort Worth and managed by Alliance Air
Services. AFW covers almost 1200 acres and has two runways.
POPULATION
The Dallas/Fort Worth Consolidated Metropolitan Statistical Area (CMSA) in north central Texas is
embodies a couple of Metropolitan Statistical Areas (MSA).
The Dallas Metropolitan Statistical Area contains six counties (Dallas, Denton, Collin, Rockwall, Kaufman,
and Ellis).
Dallas Metropolitan Statistical Area
Population by County
1970
Dallas
1,327,696
Denton
75,633
Collin
66,920
Rockwall
7,046
Kaufman
32,392
Ellis
Percent
Percent
Percent
Percent
Change
Change
Change
Change
1980 to
1990 to
2000 to
1970 to
1990
1990
2000
2000
2005
2005
1980
1980
17.23% 1,556,419 19.04% 1,852,810 19.76% 2,218,899 6.31% 2,358,850
89.24% 143,126 91.28% 273,775 58.49% 433,897 29.11% 560,200
116.04% 144,576 82.63% 264,036 86.22% 491,675 32.81% 653,000
106.19%
14,528 76.24%
25,604 68.25%
43,080 46.12%
62,950
20.45%
39,015 33.85%
52,220 36.56%
71,313 29.85%
92,600
46,638 28.10%
59,743 42.56%
85,167 30.75%
111,360 20.29%
133,950
Percent
Change
2005 to
2006 Est. 2006
1.04% 2,383,300
3.27% 578,500
5.74% 690,500
9.29%
68,800
3.29%
95,650
3.14%
138,150
The Fort Worth Metropolitan Statistical Area contains three counties (Tarrant, Parker and Johnson).
Fort Worth Metropolitan Statistical Area
Population by County
Percent
Change
1970 to
1970
1980
1980
Tarrant 715,587 20.30% 860,880
Johnson 45,769 47.81% 67,649
Parker
33,888 31.64%
Percent
Percent
Percent
Change
Change
Change
1980 to
1990 to
2000 to
1990
1990
2000
2000
2005
2005
35.92% 1,170,103 23.60% 1,446,219 13.60% 1,642,950
43.63%
97,165 31.52% 127,793 16.99% 149,500
44,609 45.23%
64,785 36.60%
88,495 21.81%
107,800
Percent
Change
2005 to
2006 Est. 2006
3.61% 1,702,250
2.37% 153,050
3.90%
112,000
EMPLOYMENT
Texas is a right-to-work state with approximately 6.3 percent of all workers covered by union or similar
employee contracts in 2004. Dallas/Fort Worth has 5.3% of the unionized workers. Texas is #1 state and
DFW is the #2 metro for relocations in 2005. In the North Central Texas region, there are 1,294
companies with 250 or more employees combined to employ 896,607 persons.
Rank Name
North Central Texas
Top 10 Employers
City
Employees Industry
1 LOCKHEED MARTIN CORP
FORT WORTH
16,000
MANUFACTURING
2 AMERICAN AIRLINES/AMR
DFW AIRPORT
12,000
TRANSPORTATION
3 TEXAS INSTRUMENTS HQ
DALLAS
11,300
MANUFACTURING
4 UNIVERSITY OF NORTH TEXAS
DENTON
7,400
EDUCATION
5 PARKLAND MEMORIAL HOSPITAL
DALLAS
6,857
HEALTH CARE
6 UT SOUTHWESTERN MED CENTER
DALLAS
6,000
HEALTH CARE
7 NAS FORT WORTH JOINT RESERVE BASE FORT WORTH
5,361
PUBLIC ADMINISTRATION
8 COMPUCOM CAMPUS
DALLAS
5,300
WHOLESALE
9 BAYLOR UNIVERSITY MEDICAL CENTER
DALLAS
5,225
HEALTH CARE
10 CITIGROUP
IRVING
5,000
FINANCE
HOUSEHOLD UNITS AND SIZE
Income
The state of Texas has no personal or corporate income tax and no state property or unitary tax.
The median income for a household in the city was $37,628 and the median income for a family was
$40,921. Males had a median income of $31,149 versus $28,235 for females.
The per capita income for the city was $22,183.
Real Estate
The median price for a house was $123,800 in 2006. There has been a steady increase in the cost of homes
over the past six years.
Year
Historical
Current
Projected
2001 $
2002 $
2003 $
2004 $
2005 $
2006 $
2007 $
2008 $
2009 $
2010 $
2011 $
Income Per Capita Comparison
State of Texas
Dallas MSA
Income/Capita
% Change
Income/Capita
% Change
27,796
$
33,993
28,076
1.0%
$
34,456
1.4%
27,365
-2.5%
$
36,165
5.0%
29,477
7.7%
$
37,953
4.9%
30,559
3.7%
$
39,837
5.0%
31,479
3.0%
$
41,189
3.4%
32,381
2.9%
$
42,478
3.1%
33,205
2.5%
$
43,702
2.9%
33,962
2.3%
$
44,778
2.5%
34,693
2.2%
$
45,764
2.2%
35,353
1.9%
$
46,767
2.2%
Education
According to the Census Bureau, 2.9 million residents in DFW hold high school diplomas and more than
1.3 million have completed at least four years of college. Two Education Service Regions serve DFW and
surrounding counties with more than 1800 schools in 205 Independent School Districts (ISDs) enrolling
over 1 million students in 2004-2005. Over 240 accredited schools (private and parochial) in Dallas/Fort
Worth Metroplex are enrolling more than 90,000 primary and secondary students. The DFW area is home
to five community college districts, several of which offer multiple campuses, enrolling 130,514 students.
Dallas/Fort Worth enrollment in both public and private 4-year institutions is 149,758.
Largest School Districts
2004-2005 Enrollment
1. Dallas ISD
158,027 students
2. Fort Worth ISD
79,769 students
3. Arlington ISD
62,267 students
4. Garland ISD
56,236 students
5. Plano ISD
52,406 students
6. Lewisville ISD
45,527 students
7. Mesquite ISD
34,815 students
8. Richardson ISD
34,139 students
9. Irving ISD
31,917 students
10. Carrollton-Farmers Branch ISD 25,860 students
Fastest-Growing School Districts
1999-2000 to 2004-05 Enrollment Change
1. Frisco ISD
188.60%
2. Little Elm ISD
141.60%
3. Argyle ISD
87.20%
4. Wylie ISD
80.60%
5. Forney ISD
78.20%
6. Prosper ISD
76.10%
7. Mansfield ISD
71.50%
8. Melissa ISD
66.80%
9. McKinney ISD
64.50%
10. Lovejoy ISD
58.70%
GOVERNMENT
The City of Dallas has a mayor/city council system of government, and is split into 14 different council
districts. The current structure operates as a mayor-council government. The city’s total budget for the
fiscal year 2006-2007 was $2,344,314,114. This has been a steady increase over the last several years.
UTILITIES
Water supply is maintained by Dallas Water Utilities, which runs many waste treatment plants. TXU
Electric Delivery (parent company TXU) is a main provider of electricity. The Sanitation Services
department of the City of Dallas provides garbage pickup and recycling service. Many companies offer
telephone networks, broadband Internet and cable/television services.
RECREATION
The City of Dallas maintains 406 parks on 21,000 acres of land. There are 17 lakes spanning 4,400 acres
that are contained with the parks. There are 47 community and neighborhood recreation centers that offer
an assortment of activities such as sports fields, swimming pools, playgrounds, basketball courts, volleyball
courts, tennis courts, picnic areas, gold courses, driving ranges and athletic fields.
The City of Dallas is home to the first and largest zoo in the state of Texas, the Dallas Zoo with 95 acres.
Six Flags Over Texas is the largest theme park in the country and is located west of Dallas in Arlington.
Hurricane Harbor is the largest water park and also located in Arlington.
The American Airlines Center located adjacent to downtown Dallas is home to the Dallas Desperados,
(Arena Football League), Dallas Mavericks (National Basketball Association) and the Dallas Stars
(National Hockey League).
The Dallas Cowboys play at Texas Stadium located in Irving, TX and the Texas Rangers play at the
Ballpark in Arlington.
TOURISM
DFW’s central US location is equally close to North America’s five largest business centers: New York,
Chicago, Los Angeles, Mexico City and Toronto.
Dallas has several momentous events during the year. The annual State Fair of Texas held at Fair Park
brings $350 million to the city’s economy with about 22 million people. This event includes the Red River
Shootout game at the Cotton Bowl. Other events include Cinco de Mayo celebrations, Independence Day
activities, Saint Patrick’s Day parades, Juneteenth festivities and the annual Halloween parade on Oak
Lawn.
HOSPITAL
There are many medical research facilities and hospital within the City of Dallas. One of the major
research centers is UT Southwestern Medical Center and UT Southwestern Medical School that includes
Parkland Memorial Hospital and Children’s Medical Center Dallas.
Other hospitals located in different areas throughout Dallas include Baylor University Medical Center,
Central Methodist Hospital, Charlton Methodist Hospital, Medical City Dallas, Presbyterian Hospital and
the Texas Scottish Rite Hospital for Children.
The Dallas Veterans Affairs Medical Center, a VA hospital, is in south Dallas. The Consolidated Mail
Outpatient Pharmacy, a new initiative by the Department of Veteran Affairs to provide mail order
prescriptions.
SURROUNDING AREA ANALYSIS
Location – Dallas
The subject property is located in the northwest portion of the City of Dallas. This area is located within a
quadrant that is bounded by SH-183 on the North, IH-30 on the South, Dallas North Tollay/IH-35E on the
East and Tarrant County Line on the West. Dallas is the ninth largest city in the nation and the third largest
in the state of Texas. Dallas is in the midst of the fastest growing metropolitan area in the United States
and headquarters to 22 Fortune 500 companies.
DEMOGRAPHIC PROFILE
Demographic Factors
5 Mile Radius Population # of Households
1990
203,319
76,304
2000
246,919
84,940
2005
260,456
83,229
2010 (proj.)
271,221
80,432
Median Income
$
26,957
$
39,133
$
42,441
$
47,354
As of Census 2000, there were 1,188,580 people, 451,833 households, and 266,581 families residing in the
city. The population density was 3,469.9 people per square mile. The racial makeup of the city was
50.83%, 25.91% Black or African American, 0.54% Native American, 2.70% Asian, 0.05% Pacific
Islander, 17.24% from other races and 2.72% from two or more races. Hispanics outnumbered AfricanAmericans for the first time in the 2000 Census as the largest minority group in Dallas with 35.55% of the
population.
There were 451,833 households out of which 30.3% had children under the age of 18 living with them.
38.8% were married couples living together, 14.9% had a female householder with no husband present, and
41.0% are classified as non-families by the United States Census Bureau. The average size of a household
was 2.58 and the average family size was 3.37.
PROPERTY ANALYSIS
Land Description Analysis
Location
The property is located Southwest side of Directors Row, Southeast of Regal Row.
Land Area
The following table summarizes the subject’s land area. The source of the land area is the survey provided.
Tax Id
Land Area Summary
Sf
7724
48,896
Acres
1.123
Shape and Dimension
The site is rectangular in shape, with dimensions of approximately 200 ft in with and 80 ft in depth. Site
utility base on shape and dimensions is average.
Topography
The site is level. The topography does not result in any particular development limitations.
Drainage
No particular drainage problems were observed or disclosed at the time of field inspection. This appraisal
assumes that surface water Collection, both on-site and in public streets adjacent to the subject, is adequate.
Flood Hazard Status
The following table provides flood hazard information:
Flood hazard status
Community panel Number
1611111515156
Date
August 23 2001
Zone
X
Description
FEMA Zone X: Area Determined to be outside the 500 YearFloodPlain.
Environmental Hazards
The concrete on the site appears to be discolored in the in the photographs. The potential exists for
impacted soil to exist in areas of historical staining on the property. However based on the use of the site
as mix of several large trucks and cars are visible on the subject property on the tenants and commercial
facility, the stains are probably oil, diesel, or radiator coolant which has leaked from trucks. Because of the
concrete the materials likely have not significantly impacted the underlying soils, and therefore would not
present a significant concern. Based on this we are not recommending an investigation of potential impacts
of the site from this source.
Ground Stability
Soils report was not provided for our review. Based on our inspection of the subject and observation of
nearby sites, there are no apparent ground stability problems. However, we are not experts in soils analysis.
We assume that the subject’s soil bearing capacity is sufficient to support the existing improvements.
Streets Access and Frontage
Details pertaining to street access and frontage are provided in the following table.
Street, Access and Frontage
Streets
Frontage Feet
Paving
Curbs
Sidewalks
Lanes
Direction of traffic
Condition
Traffic Levels
Signals/ traffic control
Access/Curb Cuts
Visibility
Ambassador
150
Asphalt
Yes
No
Two
Northwest/Southwest
Average
Low
Stop signs at Profit
One
Average
Utilities
The availability of utilities to the subject property is summarized in the following table.
Utilities
Service
Water
Sewer
Electricity
NaturalGas
Local Phone
Provider
City of Dallas
City of Dallas, TXU,
others
Atmos
Energy Southwestern
Bell
Zoning
The Subject is zone IR, Industrial research, by City of Dallas. The IR zone is intended to provide for a
variety of commercial industrial uses. Specific zoning requirements are summarized in the following table:
Zoning Jurisdiction
Zoning Designation
Description
Legally Conforming?
Zoning change Likely?
Permitted Uses
Zoning Summary
City of Dallas
IR
Industrial Research
Yes
No
Industrial and Manufacturing
Category
Zoning Requirements
Minimum Lot Area
Minimum Front setback
None
150
30 feet where adjacent to or directly across an alley
from a residential or multifamily district; none
otherwise.
However, if a rear or side yard is provided, it must
be a minimum of 10 feet.
200 feet
80%
2.0
1 space per 500 square feet of building
Area (140 required /167 provided
Maximum building Height
Maximum site coverage
Maximum Floor Area Ratio
Parking Requirement
Source: City of Dallas
According to the local planning department, there are no pending or prospective zoning changes. It appears
that the current use of the site is a legal and conforming use.
Other Land Use Regulations
We are not aware of any other land uses that would affect the property.
Easements, Encroachments and Restrictions
We are not provided a current title report to review. We are not aware of any easements, encumbrances, or
restrictions that would adversely affect value. Our valuation assumes no adverse easements, Encroachments
or restrictions and that the subject has a clear and marketable title.
Conclusion of Site Analysis
Overall the physical characteristics of the site and the availability of utilities suitable for a variety of uses
including those permitted by zoning. Uses permitted by zoning include industrial and manufacturing. There
are no other particular restrictions of development noted in the analysis.
Improvement Description and Analysis
Overview
The subject is an existing industrial property containing 16,000 square feet of rentable area. The
improvements were constructed in 1985 and are 100 % leased as of the effective appraisal date. The site
area is 1.123 acres, or 48,896 square feet. The following description is based on our inspection of the
property and discussions with ownership.
Name of Property
General Property Type
Property Sub type
Occupancy
Percent Leased
Tenant Size Range (SF)
Number of Tenants
Number of buildings
Stories
Building Shape
Construction Class
Construction Type
Construction Quality
Condition
Gross Building Area (SF)
Rentable Area
Percent Office Space
Building Efficiency Ratio
Land Area Ratio (SF)
Floor Area Ratio (RA/Land SF)
Floor Area Ratio (GBA/Land SF)
Building Area Source
Year built
Actual Age (Yrs.)
Estimated Effective Age (Yrs.)
Estimated Economic Life ((Yrs.)
Remaining Economic Life (Yrs.)
Number of Parking Spaces
Source of parking count
Parking Type
Parking Spaces /1000 SF GBA
Landscaping
Special Features
Improvements Description
8901 Directors Row
Industrial
Warehouse
Single tenant
100.0 %
16000
1
1
1
Rectangular
C
Masonry
Average
Average
16000
5000
30%
100.0%
48,896
2.0
0.75
Lease
1960
46
35
45
29
13
Site plan
Concrete
2.38
Minimal
2/2 dock high/floor level
Foundation
Basement
Structural Frame
Exterior Walls
Windows
Roof
Ceiling Height
Dock height Loading doors
Interior Finishes
Floors
Walls
Ceiling
Lighting
HVAC
Electrical
Plumbing
Elevators
Rests Rooms
Sprinklers
Fence
CONSTRUCTION DETAILS
Reinforced Concrete Slab
None
Frame is wood above ceiling with basic shoehorn layout
Block on block interior/ brick exterior
Insulated, aluminum framed glass in office areas
Built up tar and gravel and rubber membrane
16
2/grade level 2/high doors with levelers.
Exposed treated concrete for warehouse areas with vinyl and/or
carpeting in offices
Painted masonry in warehouse. Painted drywall with variations
to tenant specifications in office area
Exposed in warehouse area, 2’4 acoustic tile in office area
Suspended and recessed florescent and incandescent lighting to
tenant specifications.
30% office, HVAC/ gas heat, 70% warehouse ceiling Heat units
(2) 1 closet dead storage
Adequate and to City code
None
1.5
none
8 ft across east/rear and n/w perimeters.
Occupancy Status
The property is100% leased to a total of 1 tenant
Improvements Analysis
Quality and conditions
The improvements are of average quality construction and are in average condition. The quality of the
subject is considered to be consistent with that of competing properties, and maintenance appears to have
been consistent with that of competing properties. Overall, the market appeal of the subject is consistent
with that of competing properties.
Functional Utility
The improvements appear to be adequately suited to their current use. The subject offers an adequate site
layout, overhead doors and clear ceiling height to accommodate a variety of flex/warehouse space tenants.
Based on our inspection and consideration of the foregoing, there do not appear to be any significant items
of functional obsolescence.
Deferred maintenance
No deferred maintenance is apparent from our inspection and none is identified based on the budget
provided and discussions with management.
ADA Compliance
Based on our inspection and performance provided there do not appear to be any ADA issues. However, we
are not experts in ADA matters and
Further study would be recommended to assess ADA compliance.
Hazardous Substance
A phase I environmental report was prepared for the subject by Dames & Moore Group, Dated January 13,
1998. Dames & Moore revealed a potential Recognized Environmental Condition in connection with the
property as described below:
The concrete on the site appears to be discolored in the in the photographs. The potential exists for
impacted soil to exist in areas of historical staining on the property. However based on the use of the site
as mix of several large trucks and cars are visible on the subject property on the tenants and commercial
facility, the stains are probably oil, diesel, or radiator coolant which has leaked from trucks. Because of the
concrete the materials likely have not significantly impacted the underlying soils, and therefore would not
present a significant concern. Based on this we are not recommending an investigation of potential impacts
of the site from this source.
Personal Property
There are non-reality items that would be significant to overall valuation.
Conclusion of Improvement Analysis
In comparison to other competitive properties in the region, the subject improvements are rated as follows:
VISIBILITY
DESIGN AND APPEARANCE
AGE/CONDITION
% OFFICE
LOADING DOCKS
CLEAR CEILING HEIGHTS
IMPROVEMENTS RATINGS
Average
Average
Average
Average
Average
Overall the quality of, condition, and functional utility of the improvements are typical for their age and
location.
REAL ESTATE TAX ANALYSIS
The assessed value of the subject property is determined by the Dallas County Appraisal District
and is estimated by jurisdiction on a county basis for the subject. The commercial account # is 77923.
Real estate taxes in this state and this jurisdiction represent ad valorem taxes, meaning a tax applied in
proportion to value. The real estate taxes for an individual property may be determined by dividing the
assessed value for a property by $100, then multiplying the estimate by the composite rate. The
composite rate is based on the tax rates of the local taxing districts for this market area and is shown
below in the following table.
Taxing Entity
2006
2005
2004
2003
2002
City of Dallas
Dallas ISD
.7292
1.50264
.7417
1.68836
.7197
1.6694
.6998
1.6395
.6998
1.58753
Dallas County
Dallas Community
College
Parkland Hospital
Total Tax Rate
Annual Change
.553934
.081
.5548
.0816
.54366
.0803
.54116
.0778
.5155
.06
.254
3.120774
.254
3.32046
6.4%
.254
3.26386
-1.704%
.254
3.21226
-1.58%
.254
3.11683
-2.97%
The 2006 assessed value for the subject property is $480,000, divided by 100, then multiplied by the
composite rate of $3.120774 per $100 of valuation for a total of $14,979.72 which reflects $0.94 per square
foot of Rentable Area.
The historical assessments of the subject are presented below.
Year Improvement
Land
Total Market Homestead Capped
2006
$333,310
$146,690
$480,000
N/A
2005
$229,800
$135,000
$364,800
N/A
2004
$229,800
$135,000
$364,800
N/A
2003
$229,800
$135,000
$364,800
N/A
2002
$215,000
$135,000
$350,000
N/A
2001
$215,000
$135,000
$350,000
N/A
2000
$215,000
$135,000
$350,000
N/A
1999
$303,170
$135,000
$438,170
N/A
In order to thoroughly analyze the appropriate real estate tax expense associated with the subject, we
surveyed and compared several competitive warehouse properties, summarized below:
Property
Address
SF per
TAD
Assessed
Value / SF
Total Taxes
Taxes/SF
8516 Directors Row
Preliminary
Assessed
Value
$301,500
Brook hollow
Industrial Park
10,050
$30.00
$8,999.35
$0.895
Brook Hollow
535 Regal Row
$735,000
31,335
$23.46
$21,938.72
$0.70
Brook Hollow
7800 Sovereign Row
$715,000
25,544
$27.99
$21,345.71
$0.835
Brook Hollow
7300 Ambassador Row
$561,420
18,714
$30.00
$16,757.60
$0.895
Subject
8901 Directors Row
$480,000
16,000
$30.00
$14,979.72
$0.837
Tax assessments for comparable properties range from $23.46 to $30.00 per square foot, as compared with
the subject of $30 per square foot. On balance, the subject seems to be under assessed. We anticipate if the
subject were to sell the assessment could increased substantially.
The governor of Texas, Rick Perry, signed a bill (HB 1) into law on May 12, 2006 which decreased school
taxes in the State of Texas by $0.17 for 2007 and $0.33 for 2008. However, schools maybe permitted to add
an additional of $0.04 enrichment tax, which creates a net $0.13 potential school tax reduction in 2007 and
$0.29 in 2008.
Highest and Best Use Analysis
Process
A subject property must be analyzed as if vacant and as improved in order to prepare an assessment of
highest and best use. The highest and best use of a subject property must be:
• Physically possible
• Legally permissible
• Financially feasible
• Maximally productive
Highest and Best Use as if Vacant
Physically Possible
The existing aspects of the subject property do not seem to establish abnormal limitations on
development. In general, the physical characteristics of the property and the possibility of utilities
result in practical utility suitable for an assortment of uses.
Legally Permissible
There are no legal restrictions such as easements or deed restrictions that would limit the use of the
property. The property area is zoned IR (Industrial Research), which allows for industrial,
manufacturing, wholesale distribution and storage uses. Based on the current land use pattern,
industrial uses are given more consideration in determining highest and best use of land.
Financially Feasible
There is sufficient demand of industrial use in the vicinity of the subject area. The industrial use of the
property is thought to be financially feasible. Given anticipated population and employment growth in
the subject’s area, we expect rents and improved property values to increase to a level at which
industrial use would be financially feasible in the future.
Maximally Productive
There is not another probable use of the land perceived that would create a higher land value than
industrial use. The industrial use that is allowed by zoning laws is the maximally productive use of the
property.
Conclusion
The highest and best use of the property would be development of the site for industrial use.
Improved
The subject property is developed with an industrial type building but currently vacant.
The subject property would exceed its value, as if vacant, with the existing improvements. Therefore,
this subject property would be maximally productive and at its highest and best use as improved.
Based on our analysis, there does not appear to be any alternative use that could reasonably be
expected to provide a higher present value than the current use, and the value of the existing improved
property exceeds the value of the site, as if vacant. For these reasons, continued industrial use is
concluded to be maximally productive, and the highest and best use of the property as improved.
Most Probable Buyer
Based on the characteristics of the property, the most probable buyer would be a regional investor.
VALUATION ANALYSIS
Valuation Methodology
Appraisers usually consider the use of the three approaches to value when developing a market
value opinion for real property. These are the cost approach, sales comparison approach, and income
capitalization approach.
The sales comparison approach assumes that an informed purchaser would pay no more for a
property than the cost of acquiring another existing property with the same utility. This approach is
especially appropriate when an active market provides sufficient reliable data. The sales comparison
approach is less reliable in an inactive market, or when estimating the value of properties for which no
directly comparable sales data is available. The sales comparison approach is often relied upon for owneruser properties.
The cost approach assumes that the informed purchaser would pay no more than he cost of
producing a substitute property with the same utility. This approach is particularly applicable when the
improvements being appraised are relatively new and represent the highest and best use of the land, or
when the property has unique or specialized improvements for which there is little or no sales data from
comparable properties.
The income capitalization approach reflects the market’s perception of a relationship between a
property’s potential income and its market value. This approach converts the anticipated net income from
ownership of a property into a value indication through capitalization. The primary methods are direct
capitalization and discount cash flow analysis, with one or both methods applied, as appropriate. This
approach is widely used in appraising income-producing properties.
Reconciliation of the various indications into a conclusion of value is based on an evaluation of
the quantity of available data in each approach and the applicability of each approach to the property type.
Sale Comparison Approach
The sales comparison approach develops an indication of value by comparing the subject to sales of
similar properties. The steps taken to apply the sales comparison approach are:
• Identify property sales;
• Research and assemble pertinent data for the most relevant sales;
• Analyze the sales for material differences compared with the subject;
• Reconcile the analysis of the sales into a value indication for the subject.
Our search for comparable sales focused on transactions most relevant to the subject in terms of property
type, size, location, age, quality, and transaction date.
For this analysis, we use price per square foot of rentable area as the appropriate unit of comparison
because market participants typically compare sale prices and property values on this basis. The sales
considered most relevant are summarized in the following table.
Sales date
No. Name address
Rory E. Sterling
535 regal
Dallas
TX 75247
Bunzl USA
7800 sovereign
row
Dallas
TX 75247
Group 701 LLC.
7300 Ambassador
row
Dallas
TX 75247
May-05
Summary of comparable improved sales
Yr. built;
Acres;
Clear height;
# Stories
FAR;
% Office;
% Occ
Parking ratio Prop Rights
Sales Price
1959
1.242
16’
$700,000
1
.47
10%
100%
3.52/1,000
Leased Fee
Rentable
SF
25,575
$/Rentable
SF
27.37
Cap rate
10%
Jan05
1956
1
100%
1.24
.47
n/a
16
18%
Leased Fee
$725,000
25,544
28.38
7.2%
Feb
05
1975
1
100%
1.80
.24
2.31/1000
14
39%
Leased Fee
$560,000
18,714
29.92
5.7%
7300 Ambassador Row
535 Regal Row
7800 Sovereign Row
Address
City
State
Sale Date
Sale Price
Rentable Area
Year Built
% Office
% HVAC
Ceiling Height
Comparative Properties Locations
Subject
Comparable 1
Comparable 2
8901 Directors row 535 regal row
7800 Sovereign
Dallas
Dallas
Dallas
Texas
TX
TX
May-05
Jan-05
480,000
700,000
725,000
16,000
25,575
25,544
1960
1959
1956
30%
10%
18%
70%
10%
18%
18’
16’
16’
Price per SF of rentable area
Property rights
% Adjustment
Financing Terms
% Adjustment
Conditions of Sales
% Adjustment
Market Conditions
9/30/2006
Annual % Adjustments
2%
Cumulative Adjusted Price
Location
% Adjustment
Access/Exposure
% Adjustment
Size
% Adjustment
Parking
% Adjustment
Land to Building ratio
% Adjustment
Building Quality
% Adjustment
Age condition
% Adjustment
Economic characteristics
% Adjustment
Office and HVAC area
Utility Characteristics
% Adjustment
Net$ Adjustment
Net % Adjustment
Final Adjusted Price
Overall Adjustment
Range of Adjusted Prices
Average
Indicated Value
27.37
Leased fee
0%
Cash to seller
0%
0%
May-05
3%
28.19
Similar
0%
Similar
0%
Inferior
10%
Similar
0%
Similar
0%
Similar
0%
Similar
0%
Similar
0%
Inferior
15%
Similar
0%
$7.04
25%
$35.23
28%
28.38
Leased fee
0%
Cash to seller
0%
0%
Jan-05
4%
29.51
Similar
0%
Similar
0%
Inferior
10%
Similar
0%
Similar
0%
Similar
0%
Similar
0%
Similar
0%
Inferior
10%
Similar
0%
$5.00
20%
34.51
24%
$32.66 - $35.23
$34.00
$34.00
Comparable 3
7300 Ambassador row
Dallas
TX
Feb-05
560,000
18,714
1975
40%
40%
14’
29.92
Leased fee
0%
Cash to seller
0%
0%
Feb-05
4%
31.11
Similar
0%
Similar
0%
Similar
0%
Similar
0%
Similar
0%
Similar
0%
Similar
0%
Similar
0%
Similar
0%
Inferior
5%
$1.55
5%
32.66
9%
Prior to adjustments the sales reflect a range of $27.37 to $29.92 per square foot. After adjustment, the
adjusted range is $32.66 to $35.23 per square foot, with an average of $34.13 per square foot. To arrive at
the indicated value, we place primary emphasis on sales 2 and 3 due to their minimal adjustments.
Value Indication Sales Comparison Approach
Adjustment Factors
The sales are compared to the subject and adjusted to account for material differences that affect value.
Adjustments are considered for the following factors, in the sequence shown below.
ADJUSTMENT FACTORS
Effective Sales Price
Accounts for atypical economics of transaction, such as excess land non
reality components, Expenditures by the buyer at the time of purchase, or
other similar factors. Usually applied directly to sale price on a lump sum
basis
Real Property Rights
Leased fee, Fee simple, leasehold, partial interest, etc
Financing Terms
Seller Financing, or assumption of existing financing, at non market terms
Condition of Sales
Extraordinary motivation of buyer or seller, such as 1031 exchanges
transaction, assemblage, or forced sale.
Market Conditions
Changes in the economic environment over time that affect the appreciation
and depreciation of real estate.
Location
Market or Submarket area influences on sale price; surrounding land use
influences.
Access/ Exposure
Convenience to transportation facilities; ease of site access; visibility from
main thoroughfares; traffic counts.
Size
Inverse relationship that often exists between building size and unit value.
Parking
Ratio of parking area to land area; also known as floor area ratio (FAR)
Building to Land Area
Ratio
Ratio of building area to land area; also known as floor area ratio(FAR)
Building Quality
Construction Quality, amenities, market appeal, functional utility.
Age/Condition
Effective Age/ Physical Condition
Economic Characteristics
Non-stabilized occupancy, above below market rents, and other economic
factors, Excludes differences in rent levels that are already considered in
previous adjustments, such as for location or quality.
Issues requiring elaboration are addressed in the following paragraph.
Market Conditions
The sales took place from January 2005- May 2005. Market conditions have generally been strengthening
over this period through the effective date of value. As a result we apply upward adjustments of 2% per
year to account for this trend.
Analysis and Adjustments of Sale
The analysis and adjustment of comparable sales is discussed in the following paragraphs
Location- The following chart illustrates the submarket occupancy rates and flex space rental rates of the
comparables.
LOCATION ADJUSTMENT (FLEX SPACE)
Comp.
Submarket
Submarket
Occupancy
Submarket Rental
Rate
1-3
West Brook hollow
88%
4.00
Access/Exposure- Access and exposure characteristics of the comparables are similar to the subject with
no adjustment required.
Size – all relatively were similar in size. Sale 1 and 2 were smaller in size and were adjusted upward. Sale 3
require no adjustment.
Parking-Each of the comparables had similar parking characteristics and no adjustment was necessary.
Land to building ratio- The subject has a land to building ratio of .38. The comparables have similar land
to building ratios with no adjustment warranted.
Building quality- building quality of the comparables to subjects with no adjustments required.
Age/ condition- Each of the comparables was constructed from 1956-1984 and represent similar
age/condition characteristics in comparison t the subject.
Economic characteristics- No adjustments for economic characteristics was warranted
Office and HVAC AREA- Sales 1 and 2 were inferior in office and HVAC area and were adjusted
upward. Sales 3 required no adjustment.
Utility characteristics- The utility characteristics of comparable 3 (clear ceiling height and loading doors)
were inferior similar to the subject and upward adjustment was warranted.
Based on the preceding analysis, we arrive at a value indication by the sales comparison approach as
follows:
Sales comparison approach
Indicated value
Indicated value per SF
$34.00
Subject Square Feet
16,000
Indicated Value
$545,000
Rounded
$545,000
Cost Approach
The cost approach develops an indication of value by estimating the cost to reproduce (or replace)
a property, as if it were new, less any depreciation, plus the land value produces the estimate of market
value. The steps taken to apply the cost approach are:
1. Estimate the land value assuming it is vacant and will be put to its highest and best use using
comparable sales data.
2.
Estimate the reproduction (or replacement) cost of the building including hard costs, soft costs,
and developers’ profit. There are three methods to do the cost estimation.
• The methods are comparative unit, unit in place, and quantity survey.
• Comparative unit- this is based on the dollar cost per unit of area or volume
• Unit in place- this is based on using unit costs for various building components or
(building units).
• Quantity survey- this method is the most detailed of the three methods. It breaks down
the individual materials and labor costs.
The primary sources of building cost data is either from local professional builders or cost data
services or published manuals such as the Marshall Valuation Service.
3.
Estimate the accrued depreciation costs and deduct it from its reproduction (or replacement) cost.
There are four techniques to use to depreciate a building. The techniques are the breakdown
method and lump-sum age/life method.
• The breakdown method uses these three categories to identified depreciation and is
attached in the financial information of the addenda.
o The first category is physical deterioration. Physical deterioration is the wear
and tear over time which can be breakdown into curable or incurable.
o Curable is a deferred maintenance that can be an easy fix such as peeling paint.
o The incurable has short lived and long lived life. The short lived incurable items
are things that need periodical replacement such as carpet. The long lived
incurables are items such as the frame and foundation fixes.
o The second category is functional obsolescence.
o Functional obsolescence is lost of property value due to the function of the
building such as poor design layout.
o Functional obsolescence is break down into curable and incurable.
o Curable functional obsolescence is subcategorized into deficiencies, defects, and
super adequacies.
o Deficiencies are the lack of items or components such as no A/C in a house.
o Defect is the items or components which are there but not enough of it is there
such as an outdated A/C.
o Super adequacy is the excess of items or components such as a commercial A/C
in a house.
o Incurable functional obsolescence depreciation value is determined by if the
costs of the item to be cured exceeding the resulting increase in the property’s
value then it is incurable.
o The third category is external obsolescence. External obsolescence is something
that is located off the subject property but affect the value of the subject
property.
o External obsolescence divides into two subcategories which is locational or
economic.
o Locational is something near your neighborhood such as a sewer treatment plant
built in the neighborhood. Economic is like mortgage rates going up or value of
house sale price going down.
• The age/ life method to estimate accrued depreciation using lump sum based on a ratio of
the property’s age to its economic life. The formula is:
4.
Accrued depreciation = (Effective age/Economic life) x reproduction cost new
Add the estimated land value to the depreciated cost of the improvements and building to arrive at
the estimate of the property’s market value.
LAND VALUE ANALYSIS
The first step of the cost approach is to develop an opinion of the subject’s land value. To accomplish
this, we analyze four sales of vacant land parcels on a price per square foot basis. The sales took place
between March 2001 and January 2004, and reflect a range of unadjusted unit prices of $0.69 to $4.32
per square foot, summarized as follows:
subject
1
2
CITY
STATE
DATE OF SALE
SALE PRICE
CASH EQUIV/AMT
LAND SIZE (SF)
LAND SIZE (ACRES)
8901 Directors
Row
Dallas
TX
N/A
N/A
N/A
48,896
1.123
Hansboro
Ave.
Dallas
TX
1/9/2004
$79,087
$79,087
79,088
1.82
ZONING
TOPOGRAPHY
IR
level
LI
level
LOCATION
3
4
Sea Harbor Rd.
Gardner Rd.
Dallas
TX
4/10/2001
$203,500
$203,500
155,104
3.56
Dallas
TX
3/14/2001
$250,000
$250,000
57,935
1.33
Wildlife
Blvd.
Grand Prairie
TX
8/14/2002
$90,000
$90,000
130,680
3
IR
level
IR
level
PD-39
level
$1.00
$1.31
$4.32
$0.69
8%
$1.08
0%
$1.31
12%
$4.83
0%
$0.69
0.00%
0.00%
-25.00%
5.00%
Site Size
%adjustment
7.00%
15.00%
5.00%
12.00%
Availability of Utilities
dollar amt.
Net Percent Adjustment
Adjusted Price
$0.00
7.00%
$1.16
$0.00
15.00%
$1.51
$0.00
-20.00%
$3.87
$0.00
17.00%
$0.81
PRICE PER SQ FT
Time/Market condition
%adjustments
TIME ADJ PRICE PER
SQ FT
Location
%amount
SUMMARY OF COMPARABLE LAND SALES
No.1
1
2
3
4
Subject
Address
Hansboro Ave. Dallas, TX 75233
10127 Gardner Rd. Dallas, TX
75220
652 Wildlife Blvd. Grand Prairie,
TX 75050
Sea Harbor Rd. Dallas, TX 75212
8901 Directors Row Dallas, TX
75247
Sale Date
1/9/2004
Sale Price
$79,087
Square
Feet
79,088
Price per
SF
$1.00
3/14/2001
$250,000
57,935
$4.32
8/14/2002
4/10/2001
$90,000
$203,500
130,680
155,104
$0.69
$1.31
48,896
We compare each sale to the subject and adjust its unit price to compensate for all significant
differences that affect value. Size adjustments were required to all sales. Based on this analysis, the
sales provide a range of values from $0.81 to $3.87 per square foot with an average of $1.84 per SF.
Placing more weight on Comparable No. 2 as it is requiring minimal adjustment, with consideration of
Comparable No. 1, it is our opinion that the applicable unit value is $1.33 per square foot. This results
in an indicated land value as follows:
…..INDICATED LAND VALUE…..
48,896 SQ FT @
$1.33 PER SQ FT =
$65,032
ROUNDED TO:
$65,000
Analysis and Adjustment of Sales
Our rating of each comparable sale in relation to the subject is the basis for the adjustments. If the
comparable is superior to the subject, its sales price is adjusted downward to reflect subject’s relative
inferiority; if the comparable is inferior, its prices are adjusted upward. The elements of comparison are:
Time- Market Conditions
Real estate values normally change over time. The rate of this change fluctuates due to investors’
perceptions of prevailing market conditions. This adjustment category reflects value changes, if any, that
have occurred between the date of sale and the effective date of the appraisal. According to the market,
commercial land has an annual appreciation rate of 4% and it has been applied to the comparables 1 and 3.
Sale comparables 2 and 4 were not on the market.
Location
Location has a great impact on property values. This adjustment category considers general market
influences as well as a property’s accessibility and visibility from a main thoroughfare. Land Sale 4 is
located in Grand Prairie with limited access when compared to the subject. A positive adjustment of 5%
was made. Land Sale 3 has better access when compared to subject property therefore a negative
adjustment of 25% was made.
Physical Characteristics
This adjustment category generally reflects difference such as site size and availability of utilities.
Utilities
This adjustment category generally addresses any differences between available utilities. For this
analysis, all sales are similar to the subject and no adjustments were made.
Site Size
This adjustment addresses the differences between the sizes of the land. As square footage
increases, $/SF will go downward. All comparables has a positive adjustment because the comparables has
more square footage than the subject property.
COST ESTIMATION
We estimate the replacement cost new of the subject’s improvements using Marshall Valuation
Service (“MVS”). MVS includes all direct costs as well as some – but not all – indirect costs. For this
reason, we add a 24% allowance for additional indirect costs over and above those included in MVS and an
allowance for entrepreneurial incentive. As shown in the calculations below, we estimate the total
replacement cost new of the improvements to be $871,819.
Replacement Cost Estimate
MARSHALL VALUATION SERVICE
SECTION
PAGE
CLASS
BASE COST
14
6
C
Distribution
building
Average
1960
30
45
46
TYPE
Quality
Year Built
Effective Age
Economic Life
Actual Age
DIRECT COSTS
BUILDING IMPROVEMENTS
Distribution Building
16,000
Current Cost Multiplier
Local Cost Multiplier
ADJUSTED BASE COST
$38.15
1.05
.90
$36.05
SF
@
$36.05
=
$576,800
SF
@
$3.25
=
$ 123,760
linear ft
@
$16.80
Site Improvements
Parking
Fenced
38,080
150
TOTAL DIRECT COSTS
$703,080
Overall Property
Replacement Cost New- Building Improvements
Replacement Cost New- Site
Improvements
Subtotal Replacement Cost New
Indirect Costs and Entrepreneurial profit
Total Cost New
$2,520
$576,800
$ 126,280
$703,080
(24%)
$168,739
$871,819
To estimate accrued depreciation for the subject, we make no deductions for deferred maintenance.
Utilizing the age-life method, we estimate accrued depreciation for building improvement costs at
66.67% based on a 30-year effective age and a 45-year economic life. We use 66.67% depreciation for
the site improvements, which have shorter lives and depreciate more rapidly. In our opinion, additional
deductions for functional or external obsolescence are not necessary.
ESTIMATING ACCRUED DEPRECIATION
BUILDING IMPROVEMENTS
Replacement Cost New
Age/Life Depreciation 30/45= 66.67%
Depreciated Replacement
Cost
Replacement Cost New Improvement
Age/Life Depreciation 10/15= 66.67%
Depreciated Replacement Cost
$ 576,800
- $ 384,533
$ 192,267
$ 126,280
-$84,191
$42,089
Overall Property
Replacement Cost New- Building Improvements
Age/Life Depreciation
$871,819
-$570,432
Depreciated Replacement Cost
$301,387
Combining the land value conclusion of $65,000 with the depreciated replacement cost of the
improvements of $301,387, we arrive at an overall property value indication as follows:
Value Indication By Cost Approach
Replacement Cost New
Less Accrued Depreciation
Depreciation Replacement Cost
Plus Land Value
$871,819
-$570,432
$301,387
$65,000
Final Indicated Property Value
$366,387
Rounded
$400,000
Income Capitalization Approach
The income capitalization approach converts anticipated economic benefits of owning real property into a
value estimate for a subject property through capitalization.
•
•
•
•
Analyze revenue potential
Consider appropriate allowances for vacancy, collection loss, and operating expenses
Calculate net operating income by deducting vacancy, collection loss, and operating expense from
potential income
Apply the most appropriate capitalization methods to convert anticipated net income to an indication of
value
Leased Status of the Property
There is one current tenant that is leasing and occupying 100% of the subject property. The rental rate is
$4.50 per square foot with 16,000 total square feet in the subject property. The monthly rent is $6,000 and
annually $72,000.
Expense Structure
The expenses of the subject property are divided between Owner and Tenant as detailed in table.
Subject Expense Structures
Expense type
Owner
Real Estate Taxes
Insurance
Utilities
Repairs
x
Maintenance
General Administrative
x
Management
x
Tenant
x
x
x
x
x
Market Rent Analysis
Contact rents usually determine income for leased space and market rent is the foundation for computing
income for current vacant space and future theoretical re-leasing of space. It is important to compare
current contract rent levels with market rent levels. To estimate market rent, we analyze comparable
rentals most relevant to the subject in terms of location, building class, size, and transaction date.
The subject property exist in the Brookhollow Industrial District that is composed of mainly older office
warehouse properties.
Rent 1 – 3000 Irving Blvd.
Rent 2 – 4930 Cash Road
Rent 3 – 2959 Irving Blvd.
Rent 4 – 8740 Diplomacy Road
Rent 5 – 8617 Ambassador Row (photo – not available)
Rental Analysis Factors
Market conditions – changes in the environment over time that affect the value of the land
Location – influence of surrounding land use
Access/Exposure – accessibility to transportation facilities; ease of site access
Size – differences in rental price that is often dependent on size of space
Building quality – construction quality
Age/Condition – Effective age and/or physical condition
Office and HVAC area – office space and a/c areas
Utility characteristics – characteristics of the comparables
Analysis of Comparable Rentals
Location – location of comparables similar to subject property and no adjustment was necessary
Access/Exposure – locations of comparables are in the same vicinity and all have access to the
same roads, so no adjustment was necessary
Size – adjustment to size was necessary due to differences in sizes of comparable properties to
subject property
Building Quality – comparables have similar building quality to subject property and no
adjustment was necessary
Age/Condition – comparable 1 and 3 were similar to subject property and no adjustment was
necessary; Comparable 2, 4 and 5 were superior and a negative adjustment was required
Office/HVAC Areas – comparables had varying size of office space and HVAC area, adjustments
were made accordingly
Utility characteristic – comparables were similar to subject property and no adjustment was
necessary
Analysis of Operating Expenses
The following summarizes our analysis.
Capitalization Rate Selection
A capitalization rate is used to convert net income into an indication of value. Selection of an appropriate
capitalization rate considers the future income pattern of the property and investment risk associated with
ownership.
Analysis of Comparable Sales
Capitalization rates from comparable sales are shown in the following table.
The capitalization range falls within the range of 5.7% to 10% for these sales with an average of 8.2%.
National Investor Surveys
Data from Korpacz, ACLI, and Viewpoint are summarized below in regards to investment grade properties.
INDUSTRIAL CAPITALIZATION RATE TRENDS
9.50
9.00
Rate
8.50
8.00
7.50
7.00
6.50
4Q-03
1Q-04
2Q-04
3Q-04
4Q-04
1Q-05
2Q-05
3Q-05
4Q-05
1Q-06
ACLI
8.20
8.50
8.30
7.70
8.40
7.90
8.00
8.00
8.00
7.40
WHSE
8.51
8.45
8.35
8.27
8.12
7.88
7.83
7.50
7.29
7.25
7.04
FLEX
9.19
9.02
8.81
8.77
8.76
8.69
8.63
8.39
8.08
8.13
8.08
Quarter/Year
The Korpacz survey shows capitalization rates for national flex warehouse markets fall into a range 6.25%
to 10.0% with an average of 8.08%.
2Q-06
Band of Investment
The band of investment derives a capitalization rate from the weighted average of the mortgage and equity
demands on net income generated from the property. This method uses and estimate of standard financing
terms and an estimate rate of return on equity capital. This should be sufficient to attract investors.
Capitalization Rate Conclusion
Going-in Capitalization Rate
8.00%
Direct Capitalization Analysis
Net operating income is divided by the capitalization rate to indicate the stabilized value of the subject.
Valuation of the subject by direct capitalization is shown below.
Reconciliation and Conclusion of Value
Reconciliation involves the weighting of alternative value indications, based on the judged reliability and
applicability of each approach to value, to arrive at a final value conclusion. Reconciliation is required
because different value indications result from the use of multiple approaches and within the application of
a single approach. The values indicated by our analyses are as follows:
SUMMARY OF VALUE INDICATIONS
Cost Approach
Sales Comparison Approach
Income Capitalization Approach
Reconciled
$400,000
$545,000
$600,000
$550,000
Cost Approach
The cost approach is most reliable for newer properties that have no significant amount of accrued
depreciation. As previously discussed, the Cost Approach is judged to be inapplicable but we will use it in
our analysis.
Sales Comparison Approach
The sales comparison approach is most reliable in an active market when an adequate quantity and
quality of comparable sales data are available. In addition, it is typically the most relevant method for
owner-user properties, because it directly considers the prices of alternative properties with similar utility
for which potential buyers would be competing.
The analysis and adjustment of the sales provides a reasonably narrow range of value indications.
Nonetheless, it does not directly account for the income characteristics of the subject. Therefore, this
approach is providing support to the Income Capitalization Approach in the conclusion of the value.
Income Capitalization Approach
The income capitalization approach is usually given greatest weight when evaluating investment
properties. The value indication from the income capitalization approach is supported by market data
regarding income and expenses.
An investor is the most likely purchaser of the appraised property, and a typical investor would
place greatest reliance on the income capitalization approach. For these reasons, the income capitalization
approach is given greatest weight in the conclusion of value.
Final Value Estimate
Based on the preceding valuation analysis, and subject to the definitions, assumptions, and
limiting conditions expressed in the report, our opinion of value is as follows:
Appraised Premise
Prospective Market
Value
Value Conclusion
Interest Appraised
Date of Value
Leased Fee
September 20, 2006
Value Conclusion
$550,000
CERTIFICATION
We certify that to the best of our knowledge and belief:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
The statement of fact contained in this report is true and correct.
The statements of fact to this report analysis, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and is our personal, impartial, and unbiased
professional analysis, opinion, and conclusions.
We have no present or prospective interest in the property that is subject of this report and no
personal interest with respect to the parties involved.
We have no bias with respect to the property that sis the subject of this report or the parties
involved with these assignment.
Our engagement in this assignment was not contingent upon developing or reporting
predetermined results.
Our compensation for completing this assignment is not contingent upon the development or
reporting of a predetermined value or direction in value that favors the cause of the client, the
amount of the value opinion, the attainment of a stipulated result, or the occurrence of subsequent
event directly related to the intended use of this appraisal.
Our analysis, opinions and conclusions were developed, and this report has been prepared, in
conformity with the requirements of the Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute, which includes the uniform Standard of Professional
Appraisal Proactive) USPAP) and also in conformity with the appraisal regulations issued in
connection with the Financial Institutions Reform, Recovery, and Enforcement Act of
1989(FIRREA).
The use of this report is subject to the requirements of the Appraisal Institute relating to review by
its duly authorized representatives.
Made a personal inspection of the property that is subject to this report. Has personally inspected
the subject.
No one provided significant real property appraisal assistance to the person signing this
certification.
This appraisal is not based on request minimum valuation, a specific valuation, or the approval of
a loan.
we have not relied on unsupported conclusions relating to characteristics such as race, color
religion national origin, gender, marital status, familial status, age, receipt of public assistance
income, handicap or and unsupported conclusion that homogeneity of such characteristics is
necessary to maximize value.
We have experienced in appraising properties similar to the subject and are in compliance with the
Competency rule of USPAP.
As of the date of this report has completed the continuing education program of Appraisal
institute.
General Assumptions and Limitations
This appraisal report has been made with the following assumptions and limiting conditions:
1. No responsibility is assumed for the legal description of for matters including legal or title
considerations. Title to the property is assumed to be good and marketable unless otherwise
stated.
2. The property is appraised free and clear of any or all liens or encumbrances unless otherwise
stated.
3. Responsible ownership and competent property management are assumed.
4. The information furnished by others is believed to be reliable. No warranty, however, is given for
its accuracy.
5. All engineering is assumed to be correct. The plot plans and illustrative material in this report are
included only to assist the reader in visualizing the property.
6. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or
structures that render it more or less valuable. No responsibility is assumed for such conditions or
for arranging for engineering studies that may be required to discover them.
7. It is assumed that there is full compliance with all applicable federal, state, and local
environmental regulations and laws unless noncompliance is stated, defined, and considered in the
appraisal report.
8. It is assumed that all applicable zoning and use regulations and restrictions have been complied
with, unless nonconformity has been stated, defined, and considered in the appraisal report.
9. It is assumed that all required licenses, certificates of occupancy, consents, or other legislative or
administrative authority from any local, state, or national government or private entity or
organization have been or can be obtained or renewed for any us on which the value estimate
contained in this report is based.
10. It is assumed that the utilization of the land and improvements is within the boundaries or property
lines of the property described and that there is no encroachment or trespass unless noted in the
report.
11. There are no existing judgments or pending or threatened litigation that could affect the value of
the property.
12. The revenue stamps placed on any deed referenced herein to indicate the sale price are in correct
relation to the actual dollar amount of the transaction.
13. An appraisal is inherently subjective and represents our opinion as to the value of the property
appraised.
14. The conclusions stated in our appraisal apply only as of the effective date of the appraisal, and no
representation is made as to the effect of subsequent events.
15. No changes in federal, state or local laws, regulations or codes (including, without limitation, the
Internal Revenue Code) are anticipated.
16. No environmental impact studies were either requested or made in conjunction with this appraisal,
and we reserve the right to revise or rescind any of the value opinions based upon subsequent
environmental impact studies. If any environmental impact statement is required by law, the
appraisal assumes that such statement will be favorable and will be approved by the appropriate
regulatory bodies.
17. Unless otherwise agreed to in writing, we are not required to give testimony, respond to any
subpoena or attend any court, governmental or other hearing with reference to the property
without compensation relative to such additional employment.
18. We have made no survey of the property and assume no responsibility in connection with such
matters. Any sketch or survey of the property included in this report is for illustrative purposes
only and should not be considered to be scaled accurately for size. The appraisal covers the
property as described in this report, and the areas and dimensions set forth are assumed to be
correct.
19. No opinion is expressed as to the value of subsurface oil, gas or mineral rights, if any, and we
have assumed that the property is not subject to surface entry for the exploration or removal of
such materials, unless otherwise noted in our appraisal.
20. We accept no responsibility for considerations requiring expertise in other fields. Such
considerations include, but are not limited to, legal descriptions and other legal matters such as
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
legal title, geologic considerations such as soils and seismic stability, and civil, mechanical,
electrical, structural and other engineering and environmental matters.
The distribution of the total valuation in the report between land and improvements applies only
under the reported highest and best use of the property. The allocations of value for land and
improvements must not be used in conjunction with any other appraisal and are invalid if so used.
The appraisal report shall be considered only in its entirety. No part of the appraisal report shall
be utilized separately or out of context.
Neither all nor any part of the contents of this report (especially any conclusions as to value, the
identity of the appraisers, or any reference to the Appraisal Institute) shall be disseminated through
advertising media, public relations media, new media or any other means of communication
(including without limitation prospectuses, private offering memoranda and other offering
material provided to prospective investors) without the prior written consent of the person signing
the report.
Information, estimates and opinions contained in the report, obtained from third-party sources are
assumed to be reliable and have not been independently verified.
Any income and expense estimates contained in the appraisal report are used only for the purpose
of estimating value and do not constitute predictions of future operating results.
If the property is subject to one or more leases, any estimate of residual value contained in the
appraisal may be particularly affected by significant changes in the condition of the economy, of
the real estate industry, or of the appraised property at the time these leases expire or otherwise
terminate.
No consideration has been given to personal property located on the premises or to the cost of
moving or relocating such personal property; only the real property at the time these lease expire
or otherwise terminate.
The current purchasing power of the dollar is the basis for the value stated in our appraisal; we
have assumed that no extreme fluctuations in economic cycles will occur.
The value found herein is subject to these and to any other assumptions or conditions set forth in
the body of this report but which may have been omitted from this list of Assumptions and
Limiting Conditions.
The analyses contained in the report necessarily incorporate numerous estimates and assumptions
regarding property performance, general and local business and economic conditions, the absence
of material changes in the competitive environment and other matters. Some estimates or
assumptions, however, inevitably will not materialize, and unanticipated events and circumstances
may occur; therefore, actual results achieved during the period covered by our analysis will vary
from our estimates, and the variations may be material.
The Americans with Disabilities Act (ADA) became effective January 26, 1992. We have not
made a specific survey or analysis of any property to determine whether the physical aspects of the
improvements meet the ADA accessibility guidelines. In as much as compliance matches each
owner’s financial ability with the cost to cure the non-conforming physical characteristics of a
property, we cannot comment on compliance to ADA. Given that compliance can change with
each owner’s financial ability to cure non-accessibility, the value of the subject does not consider
possible non-compliance. A specific study of both the owner’s financial ability and the cost to
cure any deficiencies would be needed for the Department of Justice to determine compliance.
The appraisal report is prepared for the exclusive benefit of the Client, its subsidiaries and/or
affiliates. It may not be used or relied upon by any other party. All parties who use or rely upon
any information in the report without our written consent do so at their own risk.
No studies have been provided to us indicating the presence or absence of hazardous materials on
the subject property or in the improvements, and our valuation is predicated upon the assumption
that the subject property is free and clear of any environment hazards including, without
limitation, hazardous wastes, toxic substances and mold. No representations or warranties are
made regarding the environmental condition of the subject property and the person signing the
report shall not be responsible for any such environmental conditions that do exist or for any
engineering or testing that might be required to discover whether such conditions exist. Because
we are not experts in the field of environmental conditions, the appraisal report cannot be
considered as an environmental assessment of the subject property.
33. The person signing the report may have reviewed flood maps and may have noted in the appraisal
report whether the subject property is located in an identified Special Flood Hazard Area. We are
not qualified to detect such areas and therefore do not guarantee such determinations. The
presence of flood plain areas and/or wetlands may affect the value of the property, and the value
conclusion is predicated on the assumption that wetlands are non-existent or minimal.
34. The appraisal report and value conclusion for an appraisal assumes the satisfactory completion of
construction, repairs or alterations in a workmanlike manner.
35. All prospective value estimates presented in this report are estimates and forecasts which are
prospective in nature and are subject to considerable risk and uncertainty. In addition to the
contingencies noted in the preceding paragraph, several events may occur that could substantially
alter the outcome of our estimates such as, but not limited to changes in the economy, interest
rates, and capitalization rates, behavior of consumers, investors and lenders, fire and other
physical destruction, changes in title or conveyances of easements and deed restriction, etc. It is
assumed that conditions reasonably foreseeable at the present time are consistent or similar with
the future.
36. The distribution, if any, of the total valuation in this report between land and improvements
applies only under the stated program of utilization. The separate allocations for land and
buildings must not be used in conjunction with any other appraisal and are invalid if so used.
37. Possession of this report, or a copy thereof, does not carry with it the right of publication. It may
not be used for any purpose by any person other than the party to whom it is addressed without the
written consent of the appraiser, and in any event it may be used only with proper written
qualification and only in its entirety.
38. The appraiser herein by reason of this appraisal is not required to give further consultation or
testimony or be in attendance in court with reference to the property in question unless
arrangements have been previously made.
39. Neither all nor any part of the contents of this report (especially any conclusions as to value, the
identity of the appraiser, or the firm with which the appraiser is connected) shall be disseminated
to the public through advertising, public relations, news, sales, or other media without the prior
written consent and approval of the appraiser.
ADDENDUM A
DEFINITIONS
DEFINITIONS
•
•
•
These definitions have been extracted, solely or in combination, from definitions and descriptions
printed in:
The Dictionary of Real Estate Appraisal, Fourth Edition, Appraisal Institute, Chicago, Illinois,
2002 (Dictionary)
The Appraisal of Real Estate, Twelfth Edition, Appraisal Institute, Chicago, Illinois, 2001
(Twelfth).
Marshall Valuation Service, Marshall & Swift, Los Angeles, California, (MVS).
Accrued Depreciation
The difference between the reproduction or replacement cost of the improvements on the effective
date of the appraisal and the market value of the improvements on the same date. (Dictionary)
Deferred Maintenance
Curable, physical deterioration that should be corrected immediately, although work has not
commenced; denotes the need for immediate expenditures, but does not necessarily suggest
inadequate maintenance in the past. (Dictionary)
Effective Date
The date at which the analyses, opinions, and advice in an appraisal, review, or consulting service
apply. (Dictionary)
Entrepreneurial Profit
A market-derived figure that represents the amount an entrepreneur receives for his or her
contribution to a project and risk; the difference between the development cost of a property and
its market value upon completion and stabilization, which represents the entrepreneur’s
compensation for the risk and expertise associated with development. Entrepreneurial profit is an
amount earned, estimated after completion, while entrepreneurial incentive is an amount
anticipated, prior to development. (Twelfth)
Exposure Time
The time a property remains on the market. A retrospective estimate based on an analysis of past
events assuming a competitive and open market. The overall concept of reasonable exposure
encompasses not only adequate, sufficient and reasonable time but also adequate, sufficient and
reasonable effort. Exposure time is different for various types of real estate and value ranges and
under various market conditions. (Dictionary)
Floor Area Ratio (FAR)
The relationship between the above-ground floor area of a building, as described by the building
code, and the area of the plot on which it stands; in planning and zoning, often expressed as a
decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building is twice the total
land area. (Dictionary)
Gross Building Area (GBA)
The total floor area of a building, including below-grade space but excluding unenclosed areas,
measured from the exterior of the walls. All enclosed floors of the building including basements,
mechanical equipment floors, penthouses, and the like are included in the measurement. Parking
spaces and parking garages are excluded. (Dictionary)
Highest and Best Use
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. (Dictionary)
Leased Fee Interest
An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease
to others. The rights of the lessor (the leased fee owner) and the lessee are specified by contract
terms contained within the lease. (Dictionary)
Leasehold Interest
The interest held by the lessee (the tenant or renter) through a lease transferring the rights of use
and occupancy for a stated term under certain conditions. (Dictionary)
Market Rent
The rental income a property would probably command in the open market; indicated by the
current rents that are either paid or asked for comparable space as of the date of the appraisal.
(Twelfth)
Market Value
The most probable price which a property should bring in a competitive and open market under all
conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably,
and assuming the price is not affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and the passing of the title from seller to buyer under
conditions whereby:
•
•
Buyer and seller are typically motivated;
Both parties are well informed or well advised, and acting in what they consider their best
interests;
• A reasonable time is allowed for exposure in the open market;
• Payment is made in terms of cash in United States dollars or in terms of financial
arrangements comparable thereto; and
• 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.”
(Source: 12 C.F. R. Part 34.42(g); 55 Federal Register 34696, August 24, 1990, as
amended at 57 Federal Register 12202, April 9, 1992; 59 Federal Register 29499, June 7,
1994)
Net Net Net Lease
A net lease under which the lessee assumes all expenses of operating a property, including both
fixed and variable expenses and any common area maintenance that might apply, but the landlord
is responsible for structural repairs. Also called triple net lease or NNN but better stated as a fully
net lease. (Dictionary)
Prospective Value Opinion
A forecast of the value expected at a specified future date. A prospective value opinion is most
frequently sought in connection with real estate projects that are proposed, under construction, or
under construction to a new use, or those that have achieved sellout or a stabilized level of longterm occupancy at the time the appraisal report is written. (Dictionary)
Rentable Area (RA)
The amount of space on which rent is based, calculated according to local practice. (Dictionary)
Replacement Cost
The estimated cost to construct, at 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. (Dictionary)
Reproduction Cost
The estimated cost to construct , at current prices as of the effective date of the appraisal, an exact
duplicate or replica of the building being appraised, using the same materials, construction
standards, design, layout, and quality of workmanship and embodying all the deficiencies,
superadequacies, and obsolescence of the subject building. (Dictionary)
Usable Area
The are available for assignment or rental to an occupant, including every type of usable apace;
measured from the inside finish of outer walls to the office side of corridors or permanent
partitions and form the centerline of adjacent spaces; includes subdivided occupant space, but no
deductions are made for columns and projections. (Dictionary)
Value As Is
The value of specific ownership rights to an identified parcel of real estate as the effective date of
the appraisal; relates to what physically exists and is legally permissible and excludes all
assumptions concerning hypothetical market conditions or possible rezoning. (Dictionary)
ADDENDUM B
SUBJECT PHOTOGRAPHS
FRONT
REAR
WAREHOUSE SECTION
OFFICE/RECEPTION AREA
REAR OF BLDG FACING DIRECTORS ROW
FRONT OF BLDG FACING INTERSECTION
ADDENDUM C
FINANCIALS AND PROPERTY INFORMATION
ADDENDUM D
COMPARABLE DATA