Integra Realty Resources Kentucky-Southern

Transcription

Integra Realty Resources
Kentucky-Southern Indiana
Appraisal of Real Property
Days Inn @ Renfro Valley
Hotel Property
1630 Richmond St.
Mt. Vernon, Rockcastle County, Kentucky 40456-2313
Prepared For:
Community Trust Bank Inc.
Effective Date of the Appraisal:
April 21, 2015
Report Format:
Appraisal Report – Standard Format
IRR Kentucky-Southern Indiana
File Number: 0800-0001-15 (E)
1630 Richmond St.
Mt. Vernon, Kentucky
Kaden Tower, Suite 601
6100 Dutchmans Lane
Louisville, KY 40205-3284
T 502.452.1543
F 502.451.3657
www.irr.com
May 11, 2015
Ms. Patricia Estep (Brown)
Vice President
50 Weddington Branch Road
Pikeville, KY 41501
SUBJECT:
Market Value Appraisal
1630 Richmond St.
IRR Kentucky-Southern Indiana File No. 0800-0001-15 (E)
Dear Ms. Estep:
Integra Realty Resources Kentucky-Southern Indiana is pleased to submit the accompanying
appraisal of the referenced property. The purpose of the appraisal is to develop an opinion
of the market value as is of the fee simple interest of the going concern in the property. The
client for the assignment is Community Trust Bank Inc., and the intended use is for internal
use, including but not limited to, rendering a decision relative to a financial transaction.
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 applicable state appraisal regulations. The
appraisal is also prepared in accordance with the appraisal regulations issued in connection
with the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).
May 11, 2015
Page 2
To report the assignment results, we use the Appraisal Report option of Standards Rule 22(a) of USPAP. As USPAP gives appraisers the flexibility to vary the level of information in an
Appraisal Report depending on the intended use and intended users of the appraisal, we
adhere to the Integra Realty Resources internal standards for an Appraisal Report –
Standard Format. This format summarizes the information analyzed, the appraisal methods
employed, and the reasoning that supports the analyses, opinions, and conclusions.
The subject is an existing hotel property containing 99 rooms. The improvements were
constructed in 1991. The site area is 2.43 acres or 105,633 square feet.
Based on the valuation analysis in the accompanying report, and subject to the definitions,
assumptions, and limiting conditions expressed in the report, our opinion of value is as
follows:
Value Conclusion
Appraisal Premise
Market Value As Is
Interest Appraised
Fee Simple
Date of Value
April 21, 2015
Value Conclusion
$2,110,000
Allocation of Going Concern Value
Amount
% of Total
Tangible Property
Land & Improvements
Tangible Personal Property (FF&E)
$1,660,000
$410,000
78.7%
19.4%
Total Tangible Property
Intangible Assets
$2,070,000
$40,000
98.1%
1.9%
Market Value As Is*
$2,110,000
100.0%
*Specifically excluded from the valuation are cash and equivalents and current liabilities.
The allocation of value components is based on the going-concern premise, which holds that
the value of a business as a going-concern is equal to the sum of the values of the tangible
and intangible assets. The allocation assumes continued operation of the hotel business.
Were the hotel business to cease operations, the values of the individual components would
likely be different from the allocated values of the going concern.
Extraordinary Assumptions and Hypothetical Conditions
The value conclusions are subject to the following extraordinary assumptions that may affect the assignment
results. An extraordinary assumption is uncertain information accepted as fact. If the assumption is found to
be false as of the effective date of the appraisal, we reserve the right to modify our value conclusions.
1. None
The value conclusions are based on the following hypothetical conditions that may affect the assignment
results. A hypothetical condition is a condition contrary to known fact on the effective date of the appraisal
but is supposed for the purpose of analysis.
1. None
May 11, 2015
Page 3
The opinions of value expressed in this report are based on estimates and forecasts that are
prospective in nature and subject to considerable risk and uncertainty. Events may occur
that could cause the performance of the property to materially differ from our estimates,
such as changes in the economy, interest rates, capitalization rates, financial strength of
tenants, and behavior of investors, lenders, and consumers. Additionally, our opinions and
forecasts are based partly on data obtained from interviews and third party sources, which
are not always completely reliable. Although we are of the opinion that our findings are
reasonable based on current market conditions, we are not responsible for the effects of
future occurrences that cannot be reasonably foreseen at this time.
If you have any questions or comments, please contact the undersigned. Thank you for the
opportunity to be of service.
Respectfully submitted,
Integra Realty Resources Kentucky-Southern Indiana
Stacey S. Nicholas, MAI, MRICS
Senior Managing Director
Certified General Real Estate Appraiser
Kentucky Certificate # 3870
Telephone: 502-452-1543, ext. 774
Email: [email protected]
Shannon M. Goodman
Analyst
Telephone: 502-452-1543, ext. 775
Table of Contents
Summary of Salient Facts and Conclusions
1
General Information
Identification of Subject
Sale History
Pending Transactions
Purpose of the Appraisal
Definition of Market Value
Definition of As Is Market Value
Definition of Going-Concern Premise
Definition of Property Rights Appraised
Intended Use and User
Applicable Requirements
Report Format
Prior Services
Scope of Work
2
2
2
2
2
2
3
3
3
3
4
4
4
4
Economic Analysis
Rockcastle County Area Analysis
Surrounding Area
Lodging Market Analysis
7
7
13
17
Property Analysis
Land Description and Analysis
Improvements Description and Analysis
Real Estate Taxes
Highest and Best Use
30
30
34
42
43
Valuation
Valuation Methodology
Sales Comparison Approach
Adjustment Factors
45
45
46
50
Income Capitalization Approach
53
Room Revenue Projection
53
Income and Expense Data
54
Revenues
57
Departmental Expenses
58
Undistributed Operating Expenses
59
Fixed Expenses
61
Net Operating Income
63
Capitalization Rate Selection
64
Direct Capitalization Analysis
67
Reconciliation and Conclusion of Value
68
Final Opinion of Value
69
Exposure Time
69
Marketing Time
69
Allocation of Going-Concern Value
70
Value of Furniture, Fixtures and Equipment
(FF&E)
70
Value of Intangible Assets
71
71
Certification
72
Assumptions and Limiting Conditions
74
Addenda
A. Appraiser Qualifications
B. Definitions
C. Financials and Property Information
D. Comparable Data
E. Engagement Letter
1
Property Name
Address
Property Type
Owner of Record
Tax ID
1630 Richmond St.
Hotel - Motel
Aum Shanti Corporation
045W-00-029
Land Area (Gross)
Number of Rooms
Gross Building Area
Year Built; Year Renovated
2.32 acres; 101,059 SF
99
31,600 SF
1991; 2008
Zoning Designation
Highest and Best Use - As if Vacant
Highest and Best Use - As Improved
Exposure Time; Marketing Period
Effective Date of the Appraisal
Date of the Report
Property Interest Appraised
No zoning in Mt. Vernon or Rockcastle County, No zoning in
Mt. Vernon or Rockcastle County
Hotel use
Continued hotel use
12 months; 12 months
April 21, 2015
May 11, 2015
Fee Simple
Market Value Indications
Cost Approach
Market Value Conclusion
Not Used
$2,180,000
$2,110,000
$2,110,000
($22,020/Room)
($21,313/Room)
($21,313/Room)
The values reported above are subject to the definitions, assumptions, and limiting conditions set forth in the accompanying report of which this
summary is a part. No party other than Community Trust Bank Inc. may use or rely on the information, opinions, and conclusions contained in the
report. It is assumed that the users of the report have read the entire report, including all of the definitions, assumptions, and limiting
conditions contained therein.
1. None
1. None
General Information
2
General Information
Identification of Subject
The subject is an existing hotel property containing 99 rooms. The improvements were constructed in
1991. The site area is 2.43 acres or 105,633 square feet. A legal description of the property is in the
addenda.
Property Identification
Property Name
Address
Tax ID
1630 Richmond St.
Mt. Vernon, Kentucky 40456-2313
045W-00-029
Sale History
The subject is owned by Aum Shanti Corporation which purchased the property in March 2007 for
$1,650,000 as recorded in Deed Book 215, Page 46 of the Rockcastle County public records. The seller
was CB&R Investments, Inc.
Our market value conclusion differs significantly from the sale price due to the passage of eight years
and market appreciation. To the best of our knowledge, no sale or transfer of ownership has taken
place within a three-year period prior to the effective appraisal date.
Pending Transactions
To the best of our knowledge, the property is not subject to an agreement of sale or an option to buy,
nor is it listed for sale, as of the effective appraisal date.
Purpose of the Appraisal
The purpose of the appraisal is to develop an opinion of the market value as is of the fee simple
interest of the going concern in the property as of the effective date of the appraisal, April 21, 2015.
The date of the report is May 11, 2015. The appraisal is valid only as of the stated effective date.
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 title from seller to buyer under conditions whereby:

Buyer and seller are typically motivated;
General Information

Both parties are well informed or well advised, and acting in what they consider their own
best interests;

A reasonable time is allowed for exposure in the open market;

Payment is made in terms of cash in U.S. 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.”
3
(Source: Code of Federal Regulations, Title 12, Chapter I, Part 34.42[g]; also Interagency Appraisal and
Evaluation Guidelines, Federal Register, 75 FR 77449, December 10, 2010, page 77472)
Definition of As Is Market Value
As is market value is defined as, “The estimate of the market value of real property in its current
physical condition, use, and zoning as of the appraisal’s effective date.”
(Source: The Dictionary of Real Estate Appraisal, Fifth Edition, Appraisal Institute, Chicago, Illinois,
2010; also Interagency Appraisal and Evaluation Guidelines, Federal Register, 75 FR 77449, December
10, 2010, page 77471)
Definition of Going-Concern Premise
Going-Concern Premise is defined as, “one of the premises under which the total assets of a business
can be valued; the assumption that a company is expected to continue operating well into the future
(usually indefinitely). Under the going-concern premise, the value of a business as a going concern is
equal to the sum of the value of the tangible assets and the value of the intangible assets, which may
include the value of excess profit, where asset values are derived consistently with the going-concern
premise.”
2010)
Definition of Property Rights Appraised
Fee simple estate is defined as, “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.”
2010)
Intended Use and User
The intended use of the appraisal is for internal use, including but not limited to, rendering a decision
relative to a financial transaction. The client and intended user is Community Trust Bank Inc. . The
appraisal is not intended for any other use or user. No party or parties other than Community Trust
Bank Inc. may use or rely on the information, opinions, and conclusions contained in this report.
General Information
4
Applicable Requirements
This appraisal is intended to conform to the requirements of the following:

Uniform Standards of Professional Appraisal Practice (USPAP);

Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal
Institute;

Applicable state appraisal regulations;

Appraisal requirements of Title XI of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 (FIRREA), revised June 7, 1994;

Interagency Appraisal and Evaluation Guidelines issued December 10, 2010;

Appraisal guidelines of Community Trust Bank Inc.
Report Format
This report is prepared under the Appraisal Report option of Standards Rule 2-2(a) of USPAP. As
USPAP gives appraisers the flexibility to vary the level of information in an Appraisal Report depending
on the intended use and intended users of the appraisal, we adhere to the Integra Realty Resources
internal standards for an Appraisal Report – Standard Format. This format summarizes the information
analyzed, the appraisal methods employed, and the reasoning that supports the analyses, opinions,
and conclusions.
Prior Services
USPAP requires appraisers to disclose to the client any services they have provided in connection with
the subject property in the prior three years, including valuation, consulting, property management,
brokerage, or any other services. We have not performed any services, as an appraiser or in any other
capacity, regarding the property that is the subject of this report within the three-year period
immediately preceding acceptance of this assignment.
Scope of Work
To determine the appropriate scope of work for the assignment, we considered the intended use of
the appraisal, the needs of the user, the complexity of the property, and other pertinent factors. Our
concluded scope of work is described below.
General Information
5
Appraisers usually consider the use of 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:
Approaches to Value
Approach
Cost Approach
Applicability to Subject
Not Applicable
Applicable
Applicable
Use in Assignment
Not Utilized
Utilized
Utilized
The income capitalization approach is the most reliable valuation method for the subject due to the
following:

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.

Sufficient market data regarding income, expenses, and rates of return, is available for
analysis.
The sales comparison approach is an applicable valuation method because:

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 cost approach is not applicable to the assignment considering the following:

The age of the property would limit the reliability of an accrued depreciation estimate.

There are limited land transactions in the market area of the subject, making estimates of
underlying land value subjective.

This approach is not typically used by market participants, except for new or nearly new
properties.
Research and Analysis
The type and extent of our research and analysis is detailed in individual sections of the report. This
includes the steps we took to verify comparable sales, which are disclosed in the comparable sale
profile sheets in the addenda to the report. Although we make an effort to confirm the arms-length
nature of each sale with a party to the transaction, it is sometimes necessary to rely on secondary
verification from sources deemed reliable.
General Information
6
Inspection
Stacey S. Nicholas, MAI, MRICS, conducted an interior and exterior inspection of the property on April
15, 2015. Shannon M. Goodman conducted an on-site inspection on April 29, 2015 . Interior
inspections included a total of seven rooms, representing all of the room types.
7
Economic Analysis
Rockcastle County is located in southcentral Kentucky approximately 40 miles south of Lexington. It is
317 square miles in size and has a population density of 52 persons per square mile. It is a rural
market that is part of the Richmond-Berea micropolitan statistical area but a part of no metropolitan
statistical area.
Population
Rockcastle County has an estimated 2015 population of 16,354, which represents an average annual
0.8% decrease from the 2010 census of 17,056. Rockcastle County lost an average of 140 residents per
year over the 2010-2015 period, and its downward trend in population contrasts with the State of
Kentucky which had a 0.4% average annual increase in population over this time.
Population Trends
Mount Vernon city
Rockcastle County, KY
Richmond-Berea, KY
Kentucky
Population
2010 Census
2,477
17,056
99,972
4,339,367
2015 Est.
2,489
16,354
103,123
4,417,839
2020 Est.
2,361
15,779
105,988
4,502,374
Compound Ann. % Chng
2010 - 2015 2015 - 2020
0.1%
-1.1%
-0.8%
-0.7%
0.6%
0.5%
0.4%
0.4%
Source: Claritas
Looking forward, Rockcastle County's population is projected to decrease at a 0.7% annual rate from
2015-2020, equivalent to the loss of an average of 115 residents per year. Rockcastle County's decline
in population contrasts with Kentucky, which is projected to increase at a 0.4% rate.
Employment
Total employment in Rockcastle County is currently estimated at 3,648 jobs. Between year-end 2004
and the present, employment rose by 229 jobs, equivalent to a 6.7% increase over the entire period.
There were gains in employment in seven out of the past ten years despite the national economic
downturn and slow recovery.
Rockcastle County's rate of employment growth over the last decade surpassed that of Kentucky,
which experienced an increase in employment of 3.7% or 65,080 jobs over this period.
8
Employment Trends
Year
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014*
Total Employment (Year End)
Rockcastle
%
County
Change
3,419
3,431
0.4%
3,452
0.6%
3,377
-2.2%
3,426
1.5%
3,341
-2.5%
3,400
1.8%
3,204
-5.8%
3,361
4.9%
3,472
3.3%
3,648
5.1%
Overall Change 2004-2014
229
Avg Unemp. Rate 2004-2014
Unemployment Rate - March 2015
6.7%
Kentucky
1,762,740
1,785,471
1,816,695
1,830,546
1,781,751
1,725,073
1,747,316
1,770,982
1,795,763
1,818,829
1,827,820
65,080
%
Change
1.3%
1.7%
0.8%
-2.7%
-3.2%
1.3%
1.4%
1.4%
1.3%
0.5%
Unemployment Rate (Ann. Avg.)
Rockcastle
County
Kentucky
5.6%
5.4%
7.1%
5.9%
6.8%
5.7%
6.6%
5.4%
7.3%
6.4%
13.3%
10.4%
10.5%
10.2%
11.5%
9.4%
9.1%
8.2%
7.8%
8.0%
7.2%
6.5%
3.7%
8.4%
6.4%
7.4%
5.5%
*Total employment data is as of September 2014; unemployment rate data reflects the average of 12 months of 2014.
Source: Bureau of Labor Statistics and Economy.com. Employment figures are from the Quarterly Census of Employment and Wages (QCEW).
Unemployment rates are from the Current Population Survey (CPS). The figures are not seasonally adjusted.
A comparison of unemployment rates is another way of gauging an area’s economic health. Over the
past decade, the Rockcastle County unemployment rate has been generally higher than that of
Kentucky, with an average unemployment rate of 8.4% in comparison to a 7.4% rate for Kentucky. A
higher unemployment rate is a negative indicator.
Recent data shows that the Rockcastle County unemployment rate is 6.4% in comparison to a 5.5%
rate for Kentucky, a negative sign for Rockcastle County economy but one that must be tempered by
the fact that Rockcastle County has outperformed Kentucky in the rate of job growth over the past
two years.
Major employers in Rockcastle County are shown in the following table.
9
Major Employers - Rockcastle County, KY
1
2
3
4
5
6
7
Name
Brodhead
EST Tool & Machine Inc.
Mount Vernon
B & H Tool Works Inc of Rockcastle County
eNomalies LLC
Hanson Aggregates
Plastisud
SOURCEHOV Inc.
Weltrans Inc.
Number of Employees
27
26
7
14
24
53
5
Source: Kentucky Economic Development (4/25/15)
Gross Domestic Product
Gross Domestic Product (GDP) is a measure of economic activity based on the total value of goods and
services produced in a defined geographic area. Although GDP figures are not available at the county
level, data reported for the State of Kentucky is considered to be sufficiently representative of
economic activity for Rockcastle County to be meaningful when compared to the GDP of the United
States overall.
Economic growth, as measured by annual changes in GDP, has been somewhat lower in Kentucky than
the United States overall during the past eight years. The State of Kentucky has grown at a 0.5%
average annual rate while the United States has grown at a 0.9% rate. As the national economy
improves, Kentucky continues to underperform the United States. GDP for Kentucky rose by 1.6% in
2013 while the United States GDP rose by 1.8%.
Kentucky has a per capita GDP of $38,830, which is 21% less than the United States GDP of $49,115.
This means that Kentucky industries and employers are adding relatively less value to the economy
than their counterparts in the United States overall.
10
Gross Domestic Product
Year
2006
2007
2008
2009
2010
2011
2012
2013
Compound % Chg (2006-2013)
GDP Per Capita 2013
($ Mil)
Kentucky
164,734
162,859
162,707
156,149
164,068
166,681
168,022
170,667
$38,830
% Change
-1.1%
-0.1%
-4.0%
5.1%
1.6%
0.8%
1.6%
0.5%
($ Mil)
United States
14,612,582
14,824,616
14,728,947
14,328,006
14,639,748
14,868,836
15,245,906
15,526,715
% Change
1.5%
-0.6%
-2.7%
2.2%
1.6%
2.5%
1.8%
0.9%
$49,115
Source: Bureau of Economic Analysis and Economy.com; data released September 2014. The release of state and local GDP
data has a longer lag time than national data. The data represents inflation-adjusted "real" GDP stated in 2009 dollars.
The figures in the table above represent inflation adjusted “real” GDP stated in 2005 dollars.
Income, Education and Age
Rockcastle County has a considerably lower level of household income than Kentucky. Median
household income for Rockcastle County is $30,254, which is 31.7% less than the corresponding figure
for Kentucky.
Median Household Income - 2015
Rockcastle County, KY
Kentucky
Median
$30,254
$44,328
Comparison of Rockcastle County, KY to Kentucky
- 31.7%
Source: Claritas
Residents of Rockcastle County have a lower level of educational attainment than those of Kentucky.
An estimated 10% of Rockcastle County residents are college graduates with four-year degrees, versus
21% of Kentucky residents. People in Rockcastle County are older than their Kentucky counterparts.
The median age for Rockcastle County is 42 years, while the median age for Kentucky is 39 years.
11
Conclusion
Rockcastle County is recovering from the economic downturn of 2008-2009 at a slower pace than
many areas of the country.
The Rockcastle County economy will struggle with a declining population base and lower income and
education levels. Rockcastle County experienced growth in the number of jobs over the past decade,
and it is reasonable to assume that employment growth will occur in the future.
Considering all positive and negative factors, we anticipate that growth in Rockcastle County will be
limited, and there will be continued weakness in the demand for real estate in general.
12
Surrounding Area
13
Surrounding Area
Boundaries
The subject is located in the Mt. Vernon area of Rockcastle County. Mt. Vernon is the county seat. The
city surrounds the intersection of US Routes 25 and 150 on the southwest side of I75 between exits 59
and 62.
A map identifying the location of the property follows this section.
Demand Generators
The area is very rural and there are no employers with more than 100 employees. The subject area’s
main attraction is the Renfro Valley Entertainment Center.
Renfro Valley is a neighborhood which has its own United States Post Office, zip code 40473. Since
being founded by local area native John Lair and others in 1939, Renfro Valley Entertainment Center
has hosted the Renfro Valley Barn Dance, a traditional country music show which gave entertainers
such as Hank Snow, Hank Williams, Red Foley, and Homer and Jethro the spotlight early in their
careers. The Barn Dance and other programming originating in Renfro Valley was broadcast over the
CBS Radio Network until the late 1950s.
Today, Renfro Valley is known throughout Kentucky and the rest of the country for its rich history of
"Real Country Music by Real Country Folks." This tradition continues today with outstanding stage
shows put on by the current cast of Renfro Valley entertainers. Also, since 1992, Renfro Valley
Entertainment Center has hosted Headliner Concerts that feature a mixture of well-known country
singers with newer artists, as well as bluegrass, gospel, and comedy acts. It has a regional and
national draw with capacity for thousands of tour buses and church groups.
Renfro Valley is also home to the Kentucky Music Hall of Fame and Museum.
Demographics
A demographic profile of the surrounding area, including population, households, and income data, is
presented in the following table.
Surrounding Area
14
Surrounding Area Demographics
2015 Estimates
Population 2010
Population 2015
Population 2020
Compound % Change 2010-2015
1-Mile Radius
196
186
178
-1.0%
-0.9%
3-Mile Radius
3,988
3,747
3,553
-1.2%
-1.1%
5-Mile Radius
7,530
7,131
6,808
-1.1%
-0.9%
Rockcastle
County, KY
17,056
16,354
15,779
-0.8%
-0.7%
Kentucky
4,339,367
4,417,839
4,502,374
0.4%
0.4%
Households 2010
Households 2015
Households 2020
84
79
75
-1.2%
-1.0%
1,637
1,532
1,447
-1.3%
-1.1%
3,013
2,842
2,703
-1.2%
-1.0%
6,750
6,477
6,247
-0.8%
-0.7%
1,719,965
1,756,596
1,793,880
0.4%
0.4%
Median Household Income 2015
Average Household Size
College Graduate %
Median Age
Owner Occupied %
Renter Occupied %
Median Owner Occupied Housing Value
Median Year Structure Built
Avg. Travel Time to Work in Min.
$29,457
2.3
12%
43
66%
34%
$87,199
1984
26
$27,803
2.3
11%
41
67%
33%
$78,379
1981
28
$29,588
2.4
11%
42
73%
27%
$79,487
1982
29
$30,254
2.5
10%
42
76%
24%
$79,000
1983
30
$44,328
2.4
21%
39
69%
31%
$130,604
1979
25
Source: Claritas
As shown above, the current population within a 3-mile radius of the subject is 3,747, and the average
household size is 2.3. Population in the area has declined since the 2010 census, and this trend is
projected to continue over the next five years. Compared to Rockcastle County overall, the population
within a 3-mile radius is projected to decline at a faster rate.
Median household income is $27,803, which is lower than the household income for Rockcastle
County. Residents within a 3-mile radius have a similar level of educational attainment to those of
Rockcastle County, while median owner occupied home values are similar.
Surrounding Area
15
Land Use
In the immediate vicinity of the subject, predominant land uses are related to the interstate
interchange including gas stations, fast food, the subject and one other flagged hotel and a Denny’s
restaurant.
Surrounding Area Land Uses
Character of Area
Rural
Predominant Age of Improvements
30 years
Predominant Quality and Condition
Average
Approximate Percent Developed
40%
Infrastructure/Planning
Average
Predominant Location of Undeveloped Land
All directions
Prevailing Direction of Growth
None
Development Activity and Trends
During the last five years, there has been no new development near the subject.
Surrounding Area
16
Outlook and Conclusions
The area is in the stability stage of its life cycle. Given the history of the area and the growth trends, it
is anticipated that property values will remain stable in the near future.
In comparison to other areas in the region, the area is rated as follows:
Surrounding Area Attribute Ratings
Highway Access
Above Average
Demand Generators
Average
Convenience to Supporting Land Uses
Average
Convenience to Public Transportation
Average
Employment Stability
Below Average
Police and Fire Protection
Average
Property Compatibility
Average
General Appearance of Properties
Average
Price/Value Trend
Average
17
To assess market conditions that are relevant to the hotel/lodging industry as a whole, and to the
subject in particular, trends at the national, state, and local level have been analyzed. Performance
characteristics of the most comparable local properties have also been considered, and are analyzed
as part of a TREND report prepared by Smith Travel Research.
Competitive Segments
The subject is best described as a limited service hotel competing in the economy segment of the local
market. The subject’s competitors consist primarily of other economy hotels that are located within
the 40-50 mile stretch of I-75 from Richmond to Corbin. Most compete in the economy price
segments, and nearly all are chain-affiliated. For the subject, the same competitive position would be
anticipated by a typical investor, assuming continued use as a hotel.
National Trends
The United States hotel market experienced another strong gain in 2013, which follows rebounds in
the industry which began in 2010, following precipitous drops in all key hotel performance metrics
during 2009. In 2012, business travelers returned to the roads and skies to fuel an increase in overall
occupancy rates, which drove a rise in revenue per available room and average daily rates, as shown in
the table below:
Source: HOST Almanac 2014
18
Nationwide occupancy rebounded from an 8.8% decline in 2009 to a 5.4% increase in 2010, 4.2%
increase in 2011, and then most recently, a 1.5% increase in 2013. The U.S. hotel industry closed 2010
with an occupancy rate of 54.6%, but occupancy rates have since grown with rates of 59.9% in 2011
and 61.3% in 2012 – a 2.4% increase from the prior year- to 62.2% in 2013. RevPAR has also steadily
increased from $56.46 in 2010 to $68.64 in 2013. ADR has finally reached its prerecession level of
$107.41 in 2007, to $110.33 in 2013, an increase of 3.9% over the previous year.
Supply showed only a modest 0.7% annual gain in 2013, while demand, meanwhile jumped 2.2% in
2013. Since a 6.2% decline in 2009, demand has risen annually each of the subsequent four years, with
a high of a 7.2% in 2010. Net income has also risen each year since a low of $19.5M in 2009, and was
reported at $25.2M in 2013. The charts on the following page further illustrate the market activity.
Source: HOST Almanac 2014
19
Hotel Horizons by PKF Hospitality Research
The June 2014 Hotel Horizons forecast report anticipates a strengthening across the hospitality
industry with recoveries in ADR and NOI, and projects that occupancy rates will reach their highest
levels since 1995. In its December 2013 edition, PKF projected that US hotels will achieve RevPAR
gains of 6.6% in 2014, along with a 12.8% increase in net operating income. Forecasts include the
following:
“…the U.S. lodging industry will achieve an occupancy level of 63.6 percent in 2014, topping
the pre-recession peak of 63.1 percent reported by STR, Inc. (STR) in 2006. Given this
favorable balance between supply and demand, PKF-HR predicts that hotel owners and
operators will begin to see real (inflation adjusted) recoveries in average daily rates (ADR) and
net operating income (NOI).
The U.S. lodging industry is at a place in the business cycle where a confluence of market and
operational factors will lead to impressive performance on both the top- and bottom-line.”
- Hotel Horizons, PKF Hospitality Research, June 2014
20
One lingering concern among hoteliers may be the recent rise in interest rates. Moody’s
Analytics, PKF-HR’s source for the economic forecasts that drive our econometric models, has
been projecting a 150 basis point increase in interest rates by year end 2014. Accordingly, our
positive lodging forecasts do incorporate any detrimental influence this may have on
investments and inflation.
Occupancy Outlook
For 2014, PKF-HR is forecasting a very strong 3.0 percent growth in lodging demand, along
with a projected increase in supply of just 1.8 percent. The net result is a 1.8 percent gain in
occupancy to a level of 63.2 percent in 2014, the highest annual occupancy rate since 1997.
Furthermore, by the end of 2015, PKF-HR projects an occupancy rate of 64.6 percent, which
would be six consecutive years of increasing occupancy – the longest streak since 1988.
“We are very encouraged by Moody’s outlook for the national economy in 2014,” said John B.
(Jack) Corgel, PhD., the Robert C. Baker professor of real estate at the Cornell University
School of Hotel Administration and senior advisor to PKF-HR. “As lodging forecasters, it is our
role to interpret the economic variables provided by Moody’s and produce projections of
hotel performance. Moody’s has identified certain economic factors that we believe will have
a very positive impact on the growth of lodging demand and room rates over the next few
years.” The following statements highlight Moody’s current outlook for the economy in 2014
and beyond:
 Accelerating job growth should allow the U.S. to reach full employment in three years.
 Debt burdens have fallen, businesses are flush with cash, and profit margins are strong.
 Confidence has been the missing ingredient, but signs point to stronger investor and
consumer sentiment.”
- Hotel Horizons, PKF Hospitality Research, December 2013
21
Rates and Profits
Throughout the recovery, PKF-HR has been pleasantly surprised by the surge in demand.
Conversely, the growth in average daily rates (ADR) has been underwhelming. Starting in
2014, we foresee economic and market conditions that should allow managers to become
more aggressive with their pricing policies. From 2014 through 2016, PKF-HR is forecasting
annual ADR growth rates of more than five percent.
“While the enjoyment of U.S. hotel owners and operators may have been restrained in 2013,
they should be jubilant the next two years. PKF-HR’s lodging forecasts are driven by economic
projections provided by Moody’s Analytics (Moody’s). According to Moody’s, 2014 is showing
all the signs of being a “breakout year.”
- Hotel Horizons, PKF Hospitality Research, December 2013
PwC Real Estate Investor Survey
In its report for Q3 2014, the PwC Real Estate Investor Survey notes that hotels across the spectrum of
chain scale segments benefitted from occupancy and average daily rate (ADR) gains in 2014. The
industry reported a rise of 4.1% in ADR, and a 3.3% increase in occupancy for the year. Supply is
projected to accelerate from 1.0% in 2015 to 1.6% in 2015 with supply growth in the higher-priced
chain scale segments outpacing growth in the lower-priced segments.
22
Occupancy
“Occupancy for the U.S. lodging industry was 63.7% for the first half of 2014, a 3.3% increase from the
same period in 2013, according to STR. Occupancy improved in each of STR's chain-scale segments
over this time period with the economy chain-scale segment posting the largest gain of 3.9%. The
luxury segment reported the smallest occupancy gain at 0.2%. For 2014,occupancy for the U.S. lodging
industry is forecast to increase 3.1%.”
- PwC Real Estate Investor Survey, Q3 2014
Average Daily Rate (ADR)
“ADR for the U.S. lodging industry was $114.06 for the first half of 2014, a 4.1% increase from the
same period in 2013, according to STR. ADR grew in each chain-scale segment during this period with
the luxury (4.7%), upper-upscale (4.5%), upscale (4.5%), and economy (4.3%) chain-scale segments
surpassing the industry average. For 2014, ADR for the U.S. lodging industry is forecast to increase
4.4%.”
Investment Activity
“Hotel sales reached $8.0 billion in the second quarter of 2014, the highest quarterly total since 2007,
according to Real Capital Analytics. This sales volume represents a 25.0% year-over year increase and
brought the midyear total to $15.4 billion, up 26.0% year over year.
Full-service hotel properties drove most of the volume gains in the second quarter with sales volume
up 49.0% year over year. At the same time, limited-service hotel properties saw a small decline in
activity. At midyear 2014, sales volume for both sectors was up compared to last year with full-service
hotels again recording stronger results than limited service hotels.”
Charts illustrating the previous and forecasted trends, as compiled by PwC, are provided below on the
following page.
23
24
Limited Service Economy Market Analysis
Demand
The subject, Days Inn Renfro Valley, competes in the economy sector. The following chart from the
2013 HOST Almanac displays the percent changes from 2011 to 2012 for occupancy, ADR, RevPAR and
house profit PAR.
As shown in the above chart, the economy market class had higher overall gains relative to other
market classes in gross operating profit. The luxury class properties outperformed all other property
classes in each category except GOP.
The charts on the following pages were obtained from Days Inn Renfro Valley Monthly STAR Report,
and displays recent data regarding occupancy, ADR, RevPAR, and census/sample – properties & rooms
for the subject property, market, market class, tract, tract scale and competitive set. Furthermore,
they include data pertaining to supply, demand, revenue, and pipeline.
25
26
Metro Area Trends
We have analyzed hotels in the subject neighborhood that are considered to compete directly with
the subject. The following table summarizes the properties. These are the properties used in the
subject’s STAR analysis. Please note the STAR analysis is limited in scope and time, as a full STR for the
subject was not available for review.
According to local management, occupancy levels vary depending on the time of the year with the
peak months being between March and October. Furthermore, the general manager stated that
occupancy rates are higher during the weekdays than the weekends.
Note that the Econolodge is the subject’s only direct, nearby competitor in the city of Mt. Vernon.
A map illustrating the location of the competitive properties is located below on the following page.
27
Competition Map
28
29
Projections – Market Supply, Demand, and Average Daily Rate
We have used data and trends for the previously identified competitive set as the basis for the
subject’s occupancy, ADR, and RevPAR projections. Historical changes in supply and demand have
been considered, along with other relevant factors and influences – such as national lodging trends
and market indicators, local demographics trends, and local employment conditions.
Projections for May 2015 through April 2016
Based on historic market performance and prior year indicators for the subject, we have projected
occupancy and ADR growth as follows (relative to 2013 and 2014 indicators).

Room Nights Available: Stable – no new product scheduled

Room Nights Sold: No Increase – subject showed declines while market increased only slightly

Average Daily Rate: No Increase – subject showed slight increases while market decreased
Projections for 2016 - 2018
Based on historic market performance and trends, we have projected occupancy and ADR growth as
follows.

Room Nights Available: Stable

Room Nights Sold: Increase by 1%

Average Daily Rate: Increase by 2% per year
In considering the projections for ADR, it should be noted that the subject benefits from a low number
of local competitors and the interstate location near a tourist attraction. Over time, both factors
should have a positive impact on demand for the subject.
Consistent with most economic forecasts, these projections assume gradually improving economic
conditions at the local and national levels.
Conclusion
The subject has had substantially lower occupancy and occupancy declines than its competitors, but
has higher ADR and ADR growth. The subject is one of only two flagged hotels near Renfro Valley and
there are few alternative lodging facilities. On the day of inspection, per the general manager,
occupancy was at about 6% occupancy. About 20% of reservations reportedly come from the
corporate reservation system and they also receive weekly and monthly rentals from road
construction crews and the Christian Appalachian Project in Corbin. Based on both a review of data
for the competitive properties as well as the subject, and historic data for the subject, the projected
occupancy and ADR are as follows: Occupancy at 29% and ADR at $63.00.
30
Property Analysis
Location
The property is located on the southeast side of Richmond Street (US 25) approximately 200 yards
southwest of its intersection with I-75.
Land Area
The following table summarizes the subject’s land area.
Land Area Summary
Tax ID
045W-00-029
SF
101,059
Acres
2.32
Source: Deed
Shape and Dimensions
The site is irregular in shape. Site utility based on shape and dimensions is average.
Topography
The site is generally level and at street grade. 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
Date
Zone
Description
Insurance Required?
21203C0100C
August 3, 2009
X
Outside of 500-year floodplain
No
31
Environmental Hazards
An environmental assessment report was not provided for review, and during our inspection, we did
not observe any obvious signs of contamination on or near the subject. However, environmental
issues are beyond our scope of expertise. It is assumed that the property is not adversely affected by
environmental hazards.
Ground Stability
A soils report was not provided for our review. Based on our inspection of the subject and observation
of development on 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.
Streets, Access and Frontage
Street
Frontage Feet
Paving
Curbs
Sidewalks
Lanes
Direction of Traffic
Condition
Traffic Levels
Signals/Traffic Control
Access/Curb Cuts
Visibility
Richmond
None - access easement through Dennys and gas station
Asphalt
No
No
Four
Northeast/ Southwest
Average
Moderate
None
One
Good
Utilities
The availability of utilities to the subject is summarized in the following table.
Utilities
Service
Water
Sewer
Electricity
Natural Gas
Local Phone
Provider
City of Mt. Vernon
Mt. Vernon Sewer Department
KU Electric
Jackson Propane
Various Carriers
Zoning
There is no zoning in Rockcastle County or in the City of Mt. Vernon.
32
Other Land Use Regulations
We are not aware of any other land use regulations that would affect the property.
Easements, Encroachments and Restrictions
Based upon a review of the deed and property survey, there do not appear to be any easements,
encroachments, or restrictions other than those that are typical for the property type. Exceptions to
title of this type would not appear to adversely affect value. Our valuation assumes no adverse
impacts from easements, encroachments, or restrictions, and further assumes that the subject has
clear and marketable title.
As stated, there is an ingress/egress easement shared with the adjacent gas station, Dennys
restaurant and Arbys restaurant for access to and from Richmond Street. It does not appear to have a
negative impact and this is common near interstate interchanges.
Conclusion of Site Analysis
Overall, the physical characteristics of the site and the availability of utilities result in functional utility
suitable for a variety of uses. Positive factors for a hotel use include the visibility from the interstate
and location of nearby demand generators such as Renfro Valley.
Aerial of Site
33
34
Overview
The subject is an existing hotel property containing 99 rooms. The improvements were constructed in
1991. The site area is 2.43 acres or 105,633 square feet. The following description is based on our
inspection of the property, discussions with ownership, and a review of the Quality Assurance
Evaluation Report by Days Inn corporate on November 5, 2014.
Improvements Description
Ǹame of Property
General Property Type
Property Sub Type
Number of Buildings
Stories
Construction Class
Construction Type
Construction Quality
Condition
Number of Rooms
Rooms per Acre (Density)
Gross Building Area (SF)
Land Area (SF)
Floor Area Ratio (GBA/Land SF)
Building Area Source
Year Built
Year Renovated
Actual Age (Yrs.)
Estimated Effective Age (Yrs.)
Estimated Economic Life (Yrs.)
Remaining Economic Life (Yrs.)
Number of Parking Spaces
Parking Type
Parking Spaces/Room
Hotel
Motel
1
2
C
Masonry
Average
Average
99
42.7
31,600
101,059
0.31
PVA & Measured at Inspection
1991
2008
24
17
40
23
111
Asphalt
1.1
Construction Details
Foundation
Basement
Structural Frame
Corridor
Exterior Walls
Windows
Roof
Ceiling Height in Feet
Interior Finishes
Floors
Walls
Ceilings
Lighting
–HVAC
Electrical
Plumbing
Hot Water
Elevators
Rest Rooms
Sprinklers
Security
Room Description
Entry Type
Interior Walls
Floor Cover
Ceiling Heights
Bathroom Fixtures
Slab
No
Steel
Exterior
Masonry
Fixed aluminum
Standing seam metal
8
Typical for Days Inn
Carpet
Drywall with paint and paper
Drywall
Incandescent
PTAC units
Adequate to code
Adequate to code
Five 100-gallon
None
1/2 bath in breakfast area
Wet system only in office/lobby
Adequate
Exterior Walk Up
Drywall with paint and paper
Carpet
8
Full bath with tub/shower
35
36
Room Mix
The subject’s room mix and building areas are detailed in the following table.
Room Mix and Building Areas
Room Type
Single Queen 1st Floor
Double Queen 1st Floor
King 1st Floor
Accessible King 1st Floor Only
Single Queen 2nd Floor
Double Queen 2nd Floor
King 2nd Floor
Count
9
31
4
5
5
40
5
Total
Lobby/Breakfast Area
Entrance
Sitting Area
Dining Area
Front Desk
Meeting Room
Fitness Center
Pool
99
x
x
x
x
Furniture, Fixtures & Equipment (FF&E)
As previously noted, non-realty items necessary for the continued operation of the property include
the room and common area FF&E.
Furniture, Fixtures & Equipment
Location
Guest Rooms
Lobby
Fitness Room
Breakfast Area
Laundry
Source: Inspection
Description
Rooms feature a bed, a television with cable, a microwave and refrigerator in
almost all rooms, free wifi, hair dryers, coffee makers, a desk and chairs.
Desk, chairs, computer equipment etc. Also ice makers, cleaning equipment.
Treadmill, stationary bike and combo machine
Four 4-top tables, counters, drink machines, warmers, waffle iron, etc.
Commercial laundry with two washers and dryers, guest laundry with one washer
and one dryer.
37
Room Features and Hotel Amenities
Room Features
Television
Pay-Per-View
Iron / Board
Hair Dryer
Coffee Maker
Jacuzzi
Wireless Internet
Wired Internet
Keycard Access
Safe
Microwave / Refigerator
Kitchenette
At Subject
x
x
x
x
x
x
x
x
x
Hotel Amenities
Indoor Pool
Outdoor Pool
Fitness Center
Restaurant
Bar / Lounge
Parking
Guest Laundry
Business Center
Wireless Internet
Wired Internet
Complimentary Breakfast
Arcade
At Subject
x
x
x
x
x
Improvements Analysis
Quality and Condition
The improvements are of average quality construction and are in average condition. Within the past
three years, the following capital improvements have been made:

Roof 2012

100th room finished as fitness center 2012

Parking Lot repair and seal 2014

Lobby and breakfast area renovation 2014

Flat screen TVs 2014
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. In general, flagged hotels tend to
be fairly consistent and well maintained in order to retain the brand.
Functional Utility
The improvements appear to be adequately suited to their current use. Our inspection did not reveal
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 or discussions with ownership.
38
ADA Compliance
Based on our inspection and information provided, we are not aware of any ADA issues. However, we
are not expert in ADA matters, and further study by an appropriately qualified professional would be
recommended to assess ADA compliance.
There are four rooms designated for handicapped accessibility.
Hazardous Substances
An environmental assessment report was not provided for review and environmental issues are
beyond our scope of expertise. No hazardous substances were observed during our inspection of the
improvements; however, we are not qualified to detect such substances. Unless otherwise stated, we
assume no hazardous conditions exist on or near the subject.
Conclusion of Improvements Analysis
In comparison to other competitive properties in the region, the subject improvements are rated as
follows:
Improvements Ratings
Visibility
Design and Appearance
Age/Condition
% Sprinklered
Lobby
Interior Amenities
Floor to ceiling heights
Elevators
Room Sizes and Layouts
Bathrooms
Parking Ratios
Landscaping
Room Features
Hotel Amenities
Above Average
Average
Average
Average
Average
Average
Average
Average
Average
Average
Average
Average
Average
Average
Overall, the quality, condition, and functional utility of the improvements are average for their age
and location.
39
Photo# 1
View of Property
Photo# 2
View of Property
Photo# 3
Exterior Entry
Photo# 4
Stair
Photo# 5
Lobby
Photo# 6
Breakfast Area
40
Photo# 7
Typical King Room
Photo# 8
Typical QQ Room
Photo# 9
Typical King Room
Photo# 10
Typical Bathroom
Photo# 11
Typical King Room
Photo# 12
Typical Bathroom
41
Photo# 13
Fitness Room
Photo# 14
Commercial Laundry
Photo# 15
Guest Laundry and Ice
Photo# 16
Mechanical Room
Photo# 17
Street Scene – Richmond Road to Northeast (subject and
I-75 interchange)
Real Estate Taxes
42
Real Estate Taxes
Real estate tax assessments are administered by the property valuation administrator and are
estimated by jurisdiction on a county basis for the subject. The property is located in Rockcastle
County. Real estate taxes in this state and this jurisdiction represent ad valorem taxes, meaning a tax
applied in proportion to value. In Kentucky, assessed value is 100% of market 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 a consistent
state tax rate throughout this state, in addition to one or more local taxing district rates. The taxes are
paid in arrears.
Real estate taxes and assessments for the current tax year are shown in the following table.
Taxes and Assessments - 2014
Assessed Value
Tax ID
045W-00-029
Total
$1,604,000
Taxes and Assessments
Ad Valorem
Tax Rate
Taxes
Total
0.786000%
$12,607
$12,607
Based on the concluded market value of the subject, the assessed value appears low. In the income
approach which follows, we have applied a tax expense based on the estimated market value of the
property.
43
Process
Before a property can be valued, an opinion of highest and best use must be developed for the subject
site, both as if vacant, and as improved or proposed. By definition, the highest and best use must be:

Physically possible.

Legally permissible under the zoning regulations and other restrictions that apply to the site.

Financially feasible.

Maximally productive, i.e., capable of producing the highest value from among the
permissible, possible, and financially feasible uses.
Highest and Best Use As If Vacant
Physically Possible
The physical characteristics of the site do not appear to impose any unusual restrictions on
development. Overall, the physical characteristics of the site and the availability of utilities result in
functional utility suitable for a variety of uses. The site has good exposure to the interstate and
adequate access.
Legally Permissible
There is no zoning in Rockcastle County. To our knowledge, there are no legal restrictions such as
easements or deed restrictions that would effectively limit the use of the property. Given prevailing
land use patterns in the area, only hotel use is given further consideration in determining highest and
best use of the site, as though vacant.
Financially Feasible
Based on our analysis of the market, there is limited demand for additional hotel development at the
current time. It appears that a newly developed hotel use on the site would not have a value
commensurate with its cost; therefore, hotel use is not considered to be financially feasible.
Nevertheless, we expect an eventual recovery of the market accompanied by a rise in property values
to a level that will justify the cost of new construction. Thus, it is anticipated that hotel development
will become financially feasible in the future.
Maximally Productive
There does not appear to be any reasonably probable use of the site that would generate a higher
residual land value than holding the property for future development of a hotel use. Accordingly, it is
our opinion that holding the property for future hotel use, based on the normal market density level,
is the maximally productive use of the property.
44
Conclusion
Holding the property for future development of a hotel use is the only use that meets the four tests of
highest and best use. Therefore, it is concluded to be the highest and best use of the property as if
vacant.
As Improved
The subject site is developed with a 99-room Days Inn, which is consistent with the highest and best
use of the site as if it were vacant.
The existing improvements function as an operating hotel that produces a significant positive cash
flow that we expect will continue. Therefore, a continuation of this use is concluded to be financially
feasible.
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 hotel use is
concluded to be maximally productive and the highest and best use of the property as improved.
Most Probable Buyer
Taking into account the size and characteristics of the property and its occupancy, the likely buyer is a
local or regional investor such as an individual or partnership.
45
Valuation
Appraisers usually consider three approaches to estimating the market value of real property. These
are the cost approach, sales comparison approach and the income capitalization approach.
The cost approach assumes that the informed purchaser would pay no more than the 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 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
owner-user 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 discounted 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 and quality of available data in each approach and the applicability of each approach to the
property type.
The methodology employed in this assignment is summarized as follows:
Approaches to Value
Approach
Cost Approach
Applicability to Subject
Not Applicable
Applicable
Applicable
Use in Assignment
Not Utilized
Utilized
Utilized
46
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 relevant property sales;

Research, assemble, and verify pertinent data for the most relevant sales;

Analyze the sales for material differences in comparison to the subject;

Reconcile the analysis of the sales into a value indication for the subject.
To apply the sales comparison approach, we searched for sale transactions within the following
parameters:

Property Type: Economy Hotels

Location: States contiguous to KY

Size: Any

Age/Quality: Any

Transaction Date: Last three years
For this analysis, we use price per room 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.
47
Summary of Comparable Improved Sales
Sale
Date;
Status
Feb-15
Closed
Yr. Built;
# Stories;
% Occ.
# Rooms;
SF
100
30,136
Effective Sale
Price
$1,700,000
$/Room;
$/SF
$17,000
–
NOI/Room;
NOI/SF;
Exp. Ratio
No. Name/Address
1
Days Inn - Weldon
1611 Julian R. Allsbrook
2
Roanoke Rapids
–
NC
2
Days Inn Montgomery
Aug-13
1997
50
$850,000
$17,000
4180 Troy Hwy.
Closed
2
30,316
–
Montgomery
40%
AL
Comments: This hotel was conveyed to an owner-user. The estimated ADR and occupancy at time of sale was $60
and 40%, respectively.
3
Days Inn - Lakewood
Feb-13
1951
66
$2,320,000
$35,152
$1,522
12019 Lake Avenue
Closed
2
34,322
$67.60
$2.93
Lakewood
56%
87%
OH
Comments: Per the seller, the hotel had notable deferred maintenance (estimated at $500,000) and required a PIP
(estimated at an additional $500,000), and $1,000,000 is added to determine the effective sale price. Trailing 12month room revenue for July 2012 was $793,975 per the listing flyer. Per the seller, NOI was not a driving factor in
the purchase decision; rather, price per key was given greater consideration. As of April 2014, the property is still
operating as a Days Inn and has not yet undergone renovations per a hotel employee.
4
Red Roof Inn
Jan-15
60
$1,399,995
$23,333
1100 Interstate Dr.
Listing
2
35,000
–
Winchester
45%
KY
Comments: Property was converted to a Red Roof Inn on 3/5/2014 with $250,000 of required PIP completed.
Remaining items to be completed by 2017. There are 3 banquet rooms, a bar area (currently not operational), and a
4-room manager apartment. Stated occupancy at time of listing of about 45%.
5
Country Inn & Suites
Oct-14
75
$3,700,000
$49,333
2035 W. Hwy 92
Closed
2
49,248
$75.13
London
–
KY
6
Former Best Western
Apr-15
55
$826,000
$15,018
1116 N. Highway 27 St.
Closed
29,000
$28.48
Whitley City
KY
Subject
1991
99
$2,133
2
31,600
$6.68
Mt. Vernon, KY
68%
Comparable Improved Sales Map
48
49
Sale 1
Days Inn - Weldon Roanoke Rapids
Sale 2
Days Inn Montgomery
Sale 3
Days Inn - Lakewood
Sale 4
Red Roof Inn
Sale 5
Sale 6
Former Best Western
50
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 Sale Price
Accounts for atypical economics of a transaction, such as excess
land, non-realty components, expenditures by the buyer at 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.
Conditions of Sale
Extraordinary motivation of buyer or seller, such as 1031 exchange
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 spaces to building area.
Building to Land 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 paragraphs.
Market Conditions
The sales took place from February 2013 to April 2015. Market conditions generally have been stable
over this period through the effective date of value. As a result, we apply no adjustment for time.
51
The following table summarizes the adjustments we make to each sale.
Improved Sales Adjustment Grid
Property Name
Address
City
County
State
Sale Date
Sale Status
Sale Price
Price Adjustment
Description of Adjustment
Effective Sale Price
Gross Building Area
Number of Rooms
Year Built
Database ID
Price per Room
Property Rights
% Adjustment
Financing Terms
% Adjustment
Conditions of Sale
% Adjustment
Market Conditions
Annual % Adjustment
Cumulative Adjusted Price
Location
Size (# of Rooms)
Age/Condition/Quality
Amenities
Economic Characteristics
Use
Net $ Adjustment
Net % Adjustment
Final Adjusted Price
Overall Adjustment
Subject
Days Inn @ Renfro
Valley
1630 Richmond St.
Comparable 1
Days Inn - Weldon
Roanoke Rapids
1611 Julian R.
Allsbrook Highway
Comparable 2
Days Inn
Montgomery
4180 Troy Hwy.
Comparable 3
Comparable 4
Days Inn Red Roof Inn
Lakewood
12019 Lake Avenue 1100 Interstate Dr.
Comparable 5
Country Inn &
Suites
2035 W. Hwy 92
Comparable 6
Former Best
Western
1116 N. Highway
27 St.
Mt. Vernon
Rockcastle
Kentucky
Roanoke Rapids
Halifax
NC
Feb-15
Closed
$1,700,000
–
Montgomery
Montgomery
AL
Aug-13
Closed
$850,000
–
Lakewood
Cuyahoga
OH
Feb-13
Closed
$1,320,000
–
Winchester
Clark
KY
Jan-15
Listing
$1,399,995
–
London
Laurel
KY
Oct-14
Closed
$3,700,000
–
Whitley City
Mccreary
KY
Apr-15
Closed
$826,000
–
$1,700,000
30,136
100
$850,000
30,316
50
1997
1092699
$17,000
Fee Simple
–
$1,399,995
35,000
60
$3,700,000
49,248
75
$826,000
29,000
55
1089457
$23,333
Fee Simple
–
1132468
$49,333
Fee Simple
–
1132508
$15,018
Fee Simple
–
–
$2,320,000
34,322
66
1951
653170
$35,152
Fee Simple Going
–
Cash to seller
–
–
–
–
–
Aug-13
–
$17,000
–
–
–
–
–
–
$0
0%
$17,000
0%
–
Feb-13
–
$35,152
-20%
–
–
–
–
–
-$7,030
-20%
$28,121
-20%
-10%
Jan-15
–
$21,000
–
–
–
–
–
–
$0
0%
$21,000
-10%
–
Oct-14
–
$49,333
–
–
-10%
-10%
-10%
–
-$14,800
-30%
$34,533
-30%
–
Apr-15
–
$15,018
10%
–
–
–
25%
–
$5,256
35%
$20,275
35%
31,600
99
1991
Range of Adjusted Prices
Average
Indicated Value
1116451
$17,000
Fee Simple
–
Cash to seller
–
–
Feb-15
–
$17,000
–
–
–
–
–
–
$0
0%
$17,000
0%
$17,000 - $34,533
$22,988
$22,000
52
Value Indication – Sale Price Analysis
Prior to adjustment, the sales reflect a range of $15,018 to $49,333 per room. After adjustment, the
range is narrowed to $17,000 - $34,533 per room, with an average of $22,988 per room.
Sales 1-3 are included because they are recent Days Inn flagged sales in relatively comparable
locations. Comparable 3 is a listing in nearby Winchester KY of a property that is most recently a Red
Roof but was formerly a Days Inn. This property sold in 2013 for about $13,500 per room but was not
well operated and/or flagged at the time of sale. The last two sales are in areas relatively similar to
the subject with different flags. The Country Inn & Suites is substantially superior to the subject in
terms of ADR and occupancy and amenities. We also know of two other sales of limited service hotels
in Lexington in the last 18 months for just over $25,000 per room. We would expect our location to be
lower than the values experienced in Lexington.
To arrive at an indication of value, we place primary emphasis on sales 1, 2 and 3 because they are
Days Inn flagged properties and because they are recent transactions.
Based on the preceding analysis, we arrive at a value indication as follows:
Price per Room Analysis
Indicated Value per Room
Subject Rooms
Indicated Value
Rounded
$22,000
99
$2,178,000
$2,180,000
53
The income capitalization approach converts anticipated economic benefits of owning real property
into a value estimate through capitalization. The steps taken to apply the income capitalization
approach are:

Analyze the revenue potential of the property.

Consider appropriate allowances for vacancy, collection loss, and operating expenses.

Calculate net operating income by deducting vacancy, collection loss, and operating expenses
from potential income.

Apply the most appropriate capitalization methods to convert anticipated net income to an
indication of value.
The two most common capitalization methods are direct capitalization and discounted cash flow
analysis. In direct capitalization, a single year’s expected income is divided by an appropriate
capitalization rate to arrive at a value indication. In discounted cash flow analysis, anticipated future
net income streams and a future resale value are discounted to a present value at an appropriate yield
rate.
In this analysis, we use only direct capitalization because investors in this property type typically rely
most on this method.
Room Revenue Projection
Economic rent is market rent or the average room rate a potential patron is warranted in paying and
the motel operator is warranted in receiving for services. Forecasting of the subject’s economic
income involves an analysis of room sales. This is best accomplished by stabilized historical operation
in conjunction with comparison with other similar motel properties available within the subject's
effective market area. This was conducted in the Market Analysis section of this report. Stabilized
average daily rate (ADR) and occupancy levels on a stabilized basis were previously concluded.
Total room nights available (RNA), room nights sold (RNS) and room revenue is calculated as follows.
ADR $63 X 99 rooms X 365 X 29% occupancy = $660,186.
54
Income and Expense Data
To develop projections of stabilized income and expenses, we analyze industry benchmarks, recent
financial statements of the subject, and data from comparable properties. Industry data from PKF
Hospitality Research and Smith Travel Research are presented first in the following tables.
2014 PKF Data - Limited Service Hotel
Summary
Revenue
Rooms
Food and Beverage
Other Operated Departments
Rentals and Other Income
Total Revenues
Departmental Costs & Expenses
Rooms
Food and Beverage
Total Departmental Expenses
Total Departmental Profit
Administrative and General
Sales and Marketing
Property Operation and Maintenance
Utility Costs
Total Undistributed Expenses
Gross Operating Profit
Management Fees
South Central
Under 100 Rooms
Under $75
% of
Revenue
$ / Room
% of
Revenue
$ / Room
% of
Revenue
$ / Room
% of
Revenue
$ / Room
98.1%
0.0%
1.1%
0.8%
100.0%
$23,025
$0
$269
$187
$23,481
98.1%
0.0%
1.2%
0.7%
100.0%
$20,059
$0
$240
$151
$20,450
98.7%
0.0%
0.6%
0.6%
100.0%
$24,142
$0
$149
$157
$24,448
99.0%
0.0%
0.4%
0.6%
100.0%
$14,803
$0
$61
$89
$14,953
25.6%
58.8%
26.2%
73.8%
$5,887
$0
$268
$6,155
$17,326
24.7%
67.3%
25.6%
74.4%
$4,962
$0
$263
$5,225
$15,225
27.4%
99.7%
28.3%
71.7%
$6,622
$0
$305
$6,927
$17,521
28.0%
78.7%
28.5%
71.5%
$4,145
$0
$118
$4,263
$10,690
9.1%
9.4%
5.2%
4.6%
28.3%
45.4%
$2,128
$2,208
$1,231
$1,088
$6,655
$10,671
9.6%
8.6%
5.5%
4.7%
28.3%
46.1%
$1,958
$1,756
$1,126
$952
$5,792
$9,433
10.2%
9.7%
5.6%
4.5%
30.0%
41.6%
$2,502
$2,372
$1,379
$1,088
$7,341
$10,180
10.0%
6.3%
6.4%
6.1%
28.8%
42.6%
$1,498
$942
$954
$919
$4,313
$6,377
2.9%
$692
2.6%
$529
3.4%
$821
1.9%
$286
Income Before Fixed Charges
Selected Fixed Charges
Property Taxes
Insurance
Less: Replacement Reserves
Adjusted Net Operating Income
42.5%
$9,979
43.5%
$8,904
38.3%
$9,359
40.7%
$6,091
4.5%
1.5%
36.5%
0.0%
36.5%
$1,062
$347
$8,570
$0
$8,570
4.5%
1.6%
37.5%
0.0%
37.5%
$919
$324
$7,661
$0
$7,661
4.3%
1.3%
32.7%
0.0%
32.7%
$1,044
$326
$7,989
$0
$7,989
4.6%
2.5%
33.7%
0.0%
33.7%
$689
$367
$5,035
$0
$5,035
Average Daily Rate per Occupied Room
$93.01
$85.55
$97.23
$64.32
Percentage of Occupancy
67.8%
64.2%
68.0%
63.1%
Average Size (Rooms)
111
109
74
118
Source: PKF Trends in the Hotel Industry 2014
55
2014 HOST Data - Limited Service Hotels
East South Central
Interstate
Small Town / Metro
Midscale/Economy
% of Revenue
$ / Room
$/Occ.
Room
98.0%
0.0%
0.0%
0.0%
0.0%
0.1%
1.6%
0.4%
100.0%
$20,186
$0
$0
$0
$0
$22
$322
$90
$20,599
$78.81
$0.00
$0.00
$0.00
$0.00
$0.09
$1.26
$0.35
$80.42
98.7%
0.0%
0.0%
0.0%
0.0%
0.1%
0.9%
0.4%
100.0%
$20,702
$0
$0
$0
$0
$11
$183
$92
$20,978
$83.02
$0.00
$0.00
$0.00
$0.00
$0.04
$0.74
$0.37
$84.13
98.7%
0.0%
0.0%
0.0%
0.0%
0.0%
0.9%
0.4%
100.0%
$23,600
$0
$0
$0
$0
$11
$219
$95
$23,913
$97.02
$0.00
$0.00
$0.00
$0.00
$0.04
$0.90
$0.39
$98.31
1.0%
0.0%
0.0%
0.0%
0.0%
0.1%
1.2%
0.4%
100.0%
$16,068
$0
$0
$0
$0
$20
$202
$62
$16,333
23.5%
0.0%
623.1%
101.3%
25.0%
75.0%
$4,738
$0
$139
$417
$5,155
$15,444
$18.50
$0.00
$0.54
$1.63
$20.13
$60.29
24.2%
0.0%
1473.7%
124.0%
25.5%
74.5%
$5,011
$0
$160
$341
$5,353
$15,625
$20.10
$0.00
$0.64
$1.37
$21.47
$62.66
24.1%
0.0%
1345.6%
109.7%
25.2%
74.8%
$5,680
$0
$144
$344
$6,024
$17,889
$23.35
$0.00
$0.59
$1.42
$24.77
$73.54
19.6%
0.0%
353.3%
40.8%
19.9%
80.1%
$3,145
$0
$72
$108
$3,253
$13,080
9.4%
0.1%
3.1%
3.2%
0.1%
0.1%
12.7%
62.3%
$1,935
$1,528
$641
$2,170
$1,169
$1,163
$6,436
$9,008
$7.55
$5.97
$2.50
$8.47
$4.56
$4.54
$25.12
$35.17
10.5%
6.0%
3.7%
9.6%
5.4%
4.9%
30.4%
44.1%
$2,202
$1,252
$768
$2,020
$1,124
$1,029
$6,375
$9,250
$8.83
$5.02
$3.08
$8.10
$4.51
$4.12
$25.57
$37.09
9.7%
6.4%
3.6%
10.0%
5.1%
4.8%
29.6%
45.2%
$2,310
$1,527
$873
$2,400
$1,209
$1,159
$7,077
$10,812
$9.50
$6.28
$3.59
$9.86
$4.97
$4.76
$29.09
$44.45
8.4%
6.5%
0.4%
6.9%
5.8%
6.1%
27.1%
53.0%
$1,364
$1,056
$72
$1,128
$950
$989
$4,431
$8,648
Management Fee
2.9%
$592
$2.31
3.1%
$645
$2.59
3.4%
$806
$3.31
1.2%
$198
Income Before Fixed Charges
Fixed Charges
Property Taxes
Insurance
59.4%
$8,416
$32.85
41.0%
$8,604
$34.51
41.8%
$10,006
$41.13
51.7%
$8,451
3.6%
1.1%
54.7%
$738
$232
$7,446
$2.88
$0.91
$29.07
3.9%
1.3%
35.8%
$819
$271
$7,514
$3.28
$1.09
$30.13
3.5%
1.2%
37.1%
$841
$286
$8,879
$3.46
$1.18
$36.50
5.3%
1.8%
44.7%
$867
$291
$7,292
Less: Replacement Reserves
Adjusted Net Operating Income
1.3%
53.4%
$265
$7,181
$1.03
$28.03
1.3%
34.5%
$270
$7,244
$1.08
$29.05
0.9%
36.2%
$215
$8,664
$0.88
$35.62
0.1%
44.5%
$18
$7,275
Revenue
Rooms
Food
Beverage
Other Food & Beverage
Food and Beverage Income
Telecommunications
Rentals & Other Income
Total Revenue
Departmental Costs & Expenses
Rooms Expense
Food and Beverage Expense
Telecommunications Expense
Total Departmental Profit
Administrative & General
Marketing
Franchise Fees
Sales & Marketing
Property Operations & Maintenance
Utilities
Average Daily Rate
Occupancy (of Sample)
Average Size Of Property (Rooms)
Source: HOST Study 2014, Smith Travel Research
$78.81
70.2%
109
% of Revenue
$83.02
68.7%
92
$ / Room
$/Occ.
Room
% of Revenue
$ / Room
$/Occ. Room
% of Revenue
$ / Room
$97.02
67.3%
90
$62.26
70.8%
116
56
Income and expense statements for the subject property were obtained for the years of 2012 to 2014
and two months of 2015. We reclassified the owner’s income and expense items into standard
categories and excluded items that do not reflect normal operating expenses for this type of property.
The following table summarizes our analysis.
Operating History and Projections
Actual
2012
Actual
2013
Actual
2014
2 Months
Annualized
2015
IRR
Projection
$649,149
0
49,150
0
0
$698,299
$640,897
0
17,359
0
0
$658,256
$617,529
0
2,794
0
0
$620,324
$358,163
0
2,565
0
0
$360,727
$660,186
0
9,900
0
0
$670,086
$157,601
0
88
0
$157,689
$540,610
$176,908
0
0
0
$176,908
$481,348
$163,698
0
0
0
$163,698
$456,625
$129,624
0
0
0
$129,624
$231,103
$145,241
0
0
0
$145,241
$524,845
$24,126
15,389
36,524
75,421
0
$151,459
$389,151
18,732
$12,129
16,369
16,288
72,249
0
$117,036
$364,313
30,000
$16,440
17,506
52,284
86,473
0
$172,704
$283,921
42,700
$13,266
7,331
11,297
94,453
0
$126,346
$104,757
27,692
$53,607
20,103
33,504
80,410
0
$187,624
$337,221
20,103
$0
16,392
19,790
72,580
$108,762
0
$0
18,977
19,363
72,972
$111,312
0
$0
18,713
23,004
54,674
$96,392
0
$0
0
3,954
26,593
$30,547
0
$0
19,800
24,750
41,592
$86,142
19,800
Total Expenses
$436,642
$435,255
$475,494
$314,210
$458,910
$261,657
$223,001
$144,830
$46,518
$211,177
62.5%
66.1%
76.7%
87.1%
68.5%
Income
Rooms
Food & Beverage
Rentals & Other Income
Miscellaneous Revenue
Total Income
Expenses
Rooms
Food & Beverage
Payroll
Departmental Profit
Undistributed Expenses
Administrative & General
Sales & Marketing
Property Operations & Maintenance
Utilities
Repairs & Maintenance
Management Fees
Fixed Expenses
Rent
Property & Other Taxes
Insurance
Franchise Fees
Total Fixed Expenses
Replacement Reserves
Operating Expense Ratio
57
Revenues
Rooms Revenue
Room revenue was projected at the beginning of this section at $660,186. This is supported by a
detailed penetration and yield study within the Market Analysis section.
2014 HOST Study
% of Total Revenue
East South
Central
98.0%
2014 PKF
Interstate
98.7%
Small Town /
Metro
98.7%
Midscale/Economy
1.0%
South
Summary Central
98.1%
98.1%
Under
100
Rooms
98.7%
Under
$75
99.0%
Rooms Income
Total
% of Total Income
$/Room
$/Occ. Room Night
Comp 1
2014
–
100.0%
$15,124
–
Comp 2
2013
–
98.8%
$20,997
$71.30
Comp 3
2013
–
100.0%
$24,782
$88.93
Actual
2012
$649,149
93.0%
$6,557
–
Actual
2013
$640,897
97.4%
$6,474
$61.00
Actual
2014
$617,529
99.5%
$6,238
$63.06
Annualized
2015
$358,163
99.3%
$3,618
–
IRR
Projection
$660,186
98.5%
$6,669
$63.00
At the subject, this category includes miscellaneous sources, such as telephone revenue, that are
offset by a corresponding expense.
2014 HOST Study
% of Total Revenue
$ / Occ Room Night
$ / Room
East South
Central
1.6%
$1.26
$322
2014 PKF
Interstate
0.9%
$0.74
$183
Small Town /
Metro
0.9%
$0.90
$219
Midscale/Economy
1.2%
$0.78
$202
South
Summary Central
1.1%
1.2%
--$269
$240
Under
100
Rooms
0.6%
-$149
Under
$75
0.4%
-$61
Other Operated Departments Income
Total
% of Room Income
% of Total Income
$/Room
$/Occ. Room Night
Comp 1
2014
–
–
–
–
–
Comp 2
2013
–
1.3%
1.2%
$265
$0.90
Comp 3
2013
–
–
–
–
–
Actual
2012
$49,150
7.6%
7.0%
$496
–
Actual
2013
$17,359
2.7%
2.6%
$175
$1.65
Actual
2014
$2,794
0.5%
0.5%
$28
$0.29
Annualized
2015
$2,565
0.7%
0.7%
$26
–
IRR
Projection
$9,900
1.5%
1.5%
$100
$0.94
58
Total Revenue Projections
The following table summarizes historic and both the budgeted and our projection of total revenue.
Income History and Projections
Rooms
Food & Beverage
Actual
2012
$649,149
$0
$49,150
Actual
2013
$640,897
$0
$17,359
Actual
2014
$617,529
$0
$2,794
2 Months
2015
$59,694
$0
$427
Annualized
2015
$358,163
$0
$2,565
IRR
Projection
$660,186
$0
$9,900
Total Income
$698,299
$658,256
$620,324
$60,121
$360,727
$670,086
Rooms Expense
Rooms expense includes wages for front desk and housekeeping personnel, payroll taxes, guest
supplies, cleaning supplies and laundry, linens, and miscellaneous expenses.
2014 HOST Study
% of Room Revenue
$ / Occ Room Night
$ / Room
East
South
Central
23.5%
$18.50
$4,738
2014 PKF
Small
Town /
Interstate Metro
24.2%
24.1%
$20.10
$23.35
$5,011
$5,680
Midscale/
Economy
19.6%
$12.19
$3,145
Comp 2
2013
–
24.2%
23.9%
$5,074
$17.23
Actual
2012
$157,601
24.3%
22.6%
$1,592
–
South
Summary Central
25.6%
24.7%
--$5,887
$4,962
Under
100
Rooms
27.4%
-$6,622
Under
$75
28.0%
-$4,145
Rooms Expense
Total
% of Room Income
% of Total Income
$/Room
$/Occ. Room Night
Comp 1
2014
–
8.5%
8.5%
$1,282
–
Comp 3
2013
–
32.9%
32.9%
$8,157
$29.27
Actual
2013
$176,908
27.6%
26.9%
$1,787
$16.84
Actual
2014
$163,698
26.5%
26.4%
$1,654
$16.72
Annualized
2015
$129,624
36.2%
35.9%
$1,309
–
IRR
Projection
$145,241
22.0%
21.7%
$1,467
$13.86
59
Administrative and General
Administrative and General expenses include the general manager and administrative salaries, office
expenses, supplies, credit card fees, accounting, bookkeeping, computer expense and systems, bank
charges, professional fees, etc.
2014 HOST Study
% of Total Revenue
$ / Occ Room Night
$ / Room
East
South
Central
9.4%
$7.55
$1,935
2014 PKF
Small
Town /
Interstate Metro
10.5%
9.7%
$8.83
$9.50
$2,202
$2,310
Midscale/
Economy
8.4%
$5.29
$1,364
South
Summary Central
9.1%
9.6%
--$2,128
$1,958
Under
100
Rooms
10.2%
-$2,502
Under
$75
10.0%
-$1,498
Administrative & General Expense
Total
% of Room Income
% of Total Income
$/Room
$/Occ. Room Night
Comp 1
2014
–
25.3%
25.3%
$3,830
–
Comp 2
2013
–
6.3%
6.2%
$1,326
$4.50
Comp 3
2013
–
8.6%
8.6%
$2,136
$7.66
Actual
2012
$24,126
3.7%
3.5%
$244
–
Actual
2013
$12,129
1.9%
1.8%
$123
$1.15
Actual
2014
$16,440
2.7%
2.7%
$166
$1.68
Annualized
2015
$13,266
3.7%
3.7%
$134
–
IRR
Projection
$53,607
8.1%
8.0%
$541
$5.12
Sales and Marketing Costs
Marketing expenses include national franchise marketing fees including both the royalty fee and the
national advertising fee. Additionally it includes the cost of local marketing efforts.
2014 HOST Study
% of Total Revenue
% of Room Revenue
$ / Occ Room Night
$ / Room
East
South
Central
3.2%
10.7%
$8.47
$2,170
Small
Town /
Interstate Metro
9.6%
10.0%
9.8%
10.2%
$8.10
$9.86
$2,020
$2,400
2014 PKF
Midscale/
Economy
6.9%
7.0%
$4.37
$1,128
South
Summary Central
9.4%
8.6%
9.6%
8.8%
--$2,208
$1,756
Under
100
Rooms
9.7%
9.8%
-$2,372
Under
$75
6.3%
6.4%
-$942
60
Sales & Marketing Expense
Total
% of Room Income
% of Total Income
$/Room
$/Occ. Room Night
Comp 1
2014
–
8.1%
8.1%
$1,220
–
Comp 2
2013
–
5.0%
4.9%
$1,046
$3.55
Comp 3
2013
–
5.4%
5.4%
$1,334
$4.79
Actual
2012
$15,389
2.4%
2.2%
$155
–
Actual
2013
$16,369
2.6%
2.5%
$165
$1.56
Actual
2014
$17,506
2.8%
2.8%
$177
$1.79
Annualized
2015
$7,331
2.0%
2.0%
$74
–
IRR
Projection
$20,103
3.0%
3.0%
$203
$1.92
Property Operation and Maintenance
Repair and maintenance expenses include building maintenance and repair, parking lot maintenance,
lawn care, landscaping, minor room repair and maintenance costs.
2014 HOST Study
% of Total Revenue
$ / Occ Room Night
$ / Room
East
South
Central
0.1%
$4.56
$1,169
2014 PKF
Small
Town /
Interstate Metro
5.4%
5.1%
$4.51
$4.97
$1,124
$1,209
Midscale/
Economy
5.8%
$3.68
$950
South
Summary Central
5.2%
5.5%
--$1,231
$1,126
Under
100
Rooms
5.6%
-$1,379
Under
$75
6.4%
-$954
Property Operations & Maintenance Expense
Total
% of Room Income
% of Total Income
$/Room
$/Occ. Room Night
Comp 1
2014
–
2.0%
2.0%
$309
–
Comp 2
2013
–
3.9%
3.8%
$810
$2.75
Comp 3
2013
–
4.1%
4.1%
$1,016
$3.64
Actual
2012
$36,524
5.6%
5.2%
$369
–
Actual
2013
$16,288
2.5%
2.5%
$165
$1.55
Actual
2014
$52,284
8.5%
8.4%
$528
$5.34
Annualized
2015
$11,297
3.2%
3.1%
$114
–
IRR
Projection
$33,504
5.1%
5.0%
$338
$3.20
Utility Costs
Energy costs include all heat, light and power costs.
2014 HOST Study
% of Total Revenue
$ / Occ Room Night
$ / Room
East
South
Central
0.1%
$4.54
$1,163
Small
Town /
Interstate Metro
4.9%
4.8%
$4.12
$4.76
$1,029
$1,159
2014 PKF
Midscale/
Economy
6.1%
$3.83
$989
South
Summary Central
4.6%
4.7%
--$1,088
$952
Under
100
Rooms
4.5%
-$1,088
Under
$75
6.1%
-$919
61
Utilities Expense
Comp 1
2014
–
6.4%
6.4%
$974
–
Total
% of Room Income
% of Total Income
$/Room
$/Occ. Room Night
Comp 2
2013
–
5.1%
5.1%
$1,079
$3.66
Comp 3
2013
–
6.2%
6.2%
$1,540
$5.53
Actual
2012
$75,421
11.6%
10.8%
$762
–
Actual
2013
$72,249
11.3%
11.0%
$730
$6.88
Actual
2014
$86,473
14.0%
13.9%
$873
$8.83
Annualized
2015
$94,453
26.4%
26.2%
$954
–
IRR
Projection
$80,410
12.2%
12.0%
$812
$7.67
Management
Management costs are for off-site professional management. The projection is based on typical hotel
operations.
Management expense classified by hotel type is in the following chart.
Hotel Management Fees (% of Total Revenue)
Range
Average
Economy/Ltd Svc
Select-Service
Full Service
Luxury/Upscale
2.0% - 5.0%
3.60%
2.5% - 6.0%
3.50%
1.0% - 5.0%
2.75%
2.0% - 5.0%
3.36%
Source: PwC Real Es tate Inves tor Survey, 3Q-2014.
2014 HOST Study
% of Total Revenue
$ / Occ Room Night
$ / Room
East
South
Central
2.9%
$2.31
$592
2014 PKF
Small
Town /
Interstate Metro
3.1%
3.4%
$2.59
$3.31
$645
$806
Midscale/
Economy
1.2%
$0.77
$198
South
Summary Central
2.9%
2.6%
--$692
$529
Under
100
Rooms
3.4%
-$821
Under
$75
1.9%
-$286
Management Fees Expense
Total
% of Room Income
% of Total Income
$/Room
$/Occ. Room Night
Comp 1
2014
–
5.0%
5.0%
$756
–
Comp 2
2013
–
3.0%
2.9%
$625
$2.12
Comp 3
2013
–
3.7%
3.7%
$906
$3.25
Actual
2012
$18,732
2.9%
2.7%
$189
–
Actual
2013
$30,000
4.7%
4.6%
$303
$2.86
Actual
2014
$42,700
6.9%
6.9%
$431
$4.36
Annualized
2015
$27,692
7.7%
7.7%
$280
–
IRR
Projection
$20,103
3.0%
3.0%
$203
$1.92
Fixed Expenses
Real Estate Taxes
Real estate taxes were presented in the Real Estate Tax Analysis section of this report. While data is
shown for both national and competitive properties, taxation practices in the local area are a better
measure for estimating taxes on an on-going basis.
62
2014 HOST Study
% of Total Revenue
$ / Occ Room Night
$ / Room
East
South
Central
3.6%
$2.88
$738
2014 PKF
Small
Town /
Interstate Metro
3.9%
3.5%
$3.28
$3.46
$819
$841
Midscale/
Economy
5.3%
$3.36
$867
South
Summary Central
4.5%
4.5%
--$1,062
$919
Under
100
Rooms
4.3%
-$1,044
Under
$75
4.6%
-$689
Property & Other Taxes Expense
Total
% of Room Income
% of Total Income
$/Room
$/Occ. Room Night
Comp 1
2014
–
1.6%
1.6%
$248
–
Comp 2
2013
–
3.2%
3.2%
$679
$2.30
Comp 3
2013
–
3.9%
3.9%
$958
$3.44
Actual
2012
$16,392
2.5%
2.3%
$166
–
Actual
2013
$18,977
3.0%
2.9%
$192
$1.81
Actual
2014
$18,713
3.0%
3.0%
$189
$1.91
Annualized
2015
$0
–
–
–
–
IRR
Projection
$19,800
3.0%
3.0%
$200
$1.89
Consistent with local assessment practices, the projected amount is based on an assessed market
value at the estimated market value, less the estimated value of the FF&E.
Insurance
The insurance expense covers fire, theft and liability for the subject. This expense is fixed and is best
measured as the cost per available room.
2014 HOST Study
% of Total Revenue
$ / Occ Room Night
$ / Room
East
South
Central
1.1%
$0.91
$232
2014 PKF
Small
Town /
Interstate Metro
1.3%
1.2%
$1.09
$1.18
$271
$286
Midscale/
Economy
1.8%
$1.13
$291
South
Summary Central
1.5%
1.6%
--$347
$324
Under
100
Rooms
1.3%
-$326
Under
$75
2.5%
-$367
Insurance Expense
Total
% of Room Income
% of Total Income
$/Room
$/Occ. Room Night
Comp 1
2014
–
1.9%
1.9%
$289
–
Comp 2
2013
–
0.9%
0.9%
$191
$0.65
Comp 3
2013
–
0.9%
0.9%
$221
$0.79
Actual
2012
$19,790
3.0%
2.8%
$200
–
Actual
2013
$19,363
3.0%
2.9%
$196
$1.84
Actual
2014
$23,004
3.7%
3.7%
$232
$2.35
Annualized
2015
$3,954
1.1%
1.1%
$40
–
IRR
Projection
$24,750
3.7%
3.7%
$250
$2.36
63
Reserves for Replacement
A reserve for replacement is included in our analysis to account for long term replacement of items
such as paving, mechanicals, carpeting and furniture, fixtures and equipment. Discussions with buyers
regarding their parameters indicate reserves at predominantly 4%. National survey data supporting
this estimate is presented below.
Hotel Replacement Reserves (% of Total Revenue)
Range
Average
Economy/Ltd Svc
Select-Service
Full Service
Luxury/Upscale
1.0% - 5.0%
3.40%
1.0% - 5.0%
3.20%
2.0% - 5.0%
3.75%
1.0% - 6.0%
4.00%
Source: PwC Real Es tate Inves tor Survey, 3Q-2014.
2014 HOST Study
% of Total Revenue
$ / Occ Room Night
$ / Room
East
South
1.3%
$1.03
$265
Interstate
1.3%
$1.08
$270
Small
Town /
0.9%
$0.88
$215
Midscale/
Economy
0.1%
$0.07
$18
A recent study published by the International Society of Hotel Consultants suggests that reserves are
required at a significantly higher percentage of revenue. However until the marketplace recognizes
this as a deduction from NOI and adjusts corresponding purchase parameters we have relied on
market norms.
Based on all of the above information a $200 per room reserve is applied.
Based on the preceding income and expense projections, stabilized net operating income is projected
as follows:
Net Operating Income Projection
Room Income
Total Income
Expenses
NOI
Total
$660,186
$670,086
$458,910
$211,177
$/Room
$6,669
$6,769
$4,635
$2,133
% of Total
Income
98.5%
100.0%
68.5%
31.5%
64
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. We use the following methods to derive a capitalization rate for the
subject: analysis of comparable sales, review of national investor surveys, interviews with market
participants, and the band of investment method.
Analysis of Comparable Sales
Capitalization rates derived from comparable sales are shown in the following table.
Capitalization Rate Comparables
No.
1
2
3
Property Name
Super 8
Rodeway Inn
Days Inn - Lakewood
Year
Built
1993
1998
1951
Sale
Date
5/2/2014
12/12/2014
2/27/2013
No.
Rooms Cap Rate
62 13.01%
49 10.27%
66
4.33%
Average (Mean) Cap Rate:
9.20%
National Investor Surveys
Data pertaining to investment grade properties are summarized in the following tables.
Capitalization Rate Surveys – Hotel Properties
Range
Average
PwC 1Q-2015
Economy/Ltd Svc
7.50% - 10.00%
8.95%
Source: PwC Real Es tate Inves tor Survey
PwC 1Q-2015
Select-Service
5.00% - 11.00%
8.20%
PwC 1Q-2015
Full Service
6.00% - 10.0%
7.71%
PwC 1Q-2015
Luxury/Upscale
4.75% - 9.00%
7.10%
65
National survey data indicates that a going-in capitalization rate for economy hotel properties ranges
from 7.50% to 10.0% and averages 8.95%. We would expect the rate appropriate to the subject to be
above the average rate in the survey data because it is in a tertiary location. Accordingly, based on the
survey data, a capitalization rate within a range of 8.0% to 11% could be expected for the subject.
Band of Investment
The band of investment method derives a capitalization rate from the weighted average of the
mortgage and equity demands on net income generated from the property. This method involves an
estimate of typical financing terms as well as an estimated rate of return on equity capital sufficient to
attract investors. The rate indicated by this method is shown in the following table.
66
Band of Investment Method
Mortgage/Equity Assumptions
Loan To Value Ratio
Interest Rate
Amortization (Years)
Mortgage Constant
Equity Ratio
Equity Dividend Rate
65%
6.00%
20
0.0860
35%
12.00%
Weighted Average of Mortgage and Equity Requirements
Mortgage Requirement
Equity Requirement
65%
35%
x
x
8.60% =
12.00% =
5.59%
4.20%
Indicated Capitalization Rate
Rounded
9.79%
9.80%
Capitalization Rate Conclusion
Based on the preceding analysis, a going-in capitalization rate for the subject is indicated within a
range of 9% to 10%.
To conclude a capitalization rate, we consider each of the following investment risk factors to
determine its impact on the capitalization rate. The direction of each arrow in the following table
indicates our judgment of an upward, downward, or neutral impact of each factor.
Risk Factor
Issues
Income Characteristics
Subject ADR, occupancy, penetration and RevPar
trends.
↑
Competitive Market Position
Construction quality, appeal, effective age,
functional utility.
↓
Location
Market area demographics and life cycle trends;
proximity issues; access and support services.
↔
Market
ADR and occupancy trends, potential for new
supply.
↑
Highest & Best Use
Upside potential from redevelopment,
adaptation, expansion.
↔
Overall Impact
Accordingly, we conclude a capitalization rate as follows:
Impact on
Rate
↑
67
Capitalization Rate Conclusion
Going-In Capitalization Rate
10.00%
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.
Direct Capitalization
Effective Gross Income
Expenses
Capitalization Rate
Indicated Value
Rounded
$670,086
$458,910
$211,177
10.00%
$2,111,769
$2,110,000
68
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
Not Used
$2,180,000
$2,110,000
Reconciled
$2,110,000
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 and is not utilized.
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.
Significant adjustments are required for many of the sales because of differences in the various
elements of comparison. This reduces the reliability of this approach. As a result, the sales comparison
approach is used primarily as support for the 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, expenses and required rates of return.
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.
69
Final Opinion of Value
Based on the preceding valuation analysis and subject to the definitions, assumptions, and limiting
conditions expressed in the report, our opinion of value of the going concern is as follows:
Value Conclusion
Appraisal Premise
Market Value As Is
Interest Appraised
Fee Simple
Date of Value
April 21, 2015
Value Conclusion
$2,110,000
1. None
1. None
Exposure Time
Exposure time is the length of time the subject property would have been exposed for sale in the
market had it sold on the effective valuation date at the concluded market value. Exposure time is
always presumed to precede the effective date of the appraisal. Based on our review of recent sales
transactions for similar properties and our analysis of supply and demand in the local hotel market, it
is our opinion that the probable exposure time for the subject at the concluded market value stated
previously is 12 months.
Marketing Time
Marketing time is an estimate of the amount of time it might take to sell a property at the concluded
market value immediately following the effective date of value. As we foresee no significant changes
in market conditions in the near term, it is our opinion that a reasonable marketing period for the
subject is likely to be the same as the exposure time. Accordingly, we estimate the subject’s marketing
period at 12 months.
Our estimate is supported by the following national investor survey data.
Hotel Average Marketing Time (Months)
Range
Average
PwC 1Q-2015
Economy/Ltd Svc
2.0 - 12.0
7.0
Source: PwC Real Es tate Inves tor Survey
PwC 1Q-2015
Select-Service
2.0 - 12.0
6.6
PwC 1Q-2015
Full Service
3.0 - 9.0
6.6
PwC 1Q-2015
Luxury/Upscale
3.0 - 12.0
6.3
70
As part of the assignment, we have been asked to separate the tangible, intangible, and real property
components of the going-concern value. In performing this analysis, we consider the following
definitions from The Dictionary of Real Estate Appraisal, Fifth Edition, Appraisal Institute, Chicago,
Illinois, 2010.
Going-Concern Value: 1) The market value of all the tangible and intangible assets of an
established and operating business with an indefinite life, as if sold in aggregate; more
accurately termed the market value of the going concern. 2) The value of an operating
business enterprise. Goodwill may be separately measured but is an integral component of
going-concern value when it exists and is recognizable.
Tangible Property: Property that can be perceived with the senses; includes land, fixed
improvements, furnishings, merchandise, cash, and other items of working capital used in an
enterprise.
Real Property: The interests, benefits, and rights inherent in the ownership of real estate.
Furniture, Fixtures and Equipment (FF&E): Business trade fixtures and personal property,
exclusive of inventory.
Intangible Property: Nonphysical assets, including but not limited to franchises, trademarks,
patents, copyrights, goodwill, equities, securities, and contracts as distinguished from physical
assets such as facilities and equipment.
In the case of the subject, our opinion of going-concern value reflects the continuing hotel operation,
including the contributory value of land, building improvements, furniture, fixtures and equipment
(FF&E), and intangible property assets. Specifically excluded from the valuation are cash and
equivalents and current liabilities.
Value of Furniture, Fixtures and Equipment (FF&E)
According to Marshall Valuation Service, the typical cost range of FF&E is $2,300 to $7,600 per room
plus lobby and reception area furniture and equipment including the PBX system at the time of
construction.
Based on the age and condition of the subject FF&E, we estimate the contributory value as follows:
Furniture, Fixtures & Equipment
Appraisal Premise
Market Value As Is
Rooms
99
Value/Room
$4,106
Total
$406,522
Rounded
$410,000
71
Value of Intangible Assets
In this case, the economy hotel income attributable to affiliation is lower than would be expected for
some chain scales. These can range from zero to 20%. Given the subject’s occupancy and ADR history,
an intangible asset value contribution at the lower end of the range is supported.
Intangible Asset Value
Room Income
Estimated % Attributable to Affiliation*
Net Affiliation-Driven Room Revenue
Expense Ratio
Affiliation-Driven NOI
Intangible Asset Capitalization Rate
Intangible Asset Value
Rounded
70%
IRR Projection
$660,186
5%
$33,009
-$23,107
$9,903
25%
$39,611
$40,000
*Net of franchise costs
The allocation of value components is based on the going-concern premise, which holds that the value
of a business as a going-concern is equal to the sum of the values of the tangible and intangible assets.
Allocation of Going Concern Value
Amount
% of Total
Tangible Property
Land & Improvements
Tangible Personal Property (FF&E)
$1,660,000
$410,000
78.7%
19.4%
Total Tangible Property
Intangible Assets
$2,070,000
$40,000
98.1%
1.9%
Market Value As Is*
$2,110,000
100.0%
*Specifically excluded from the valuation are cash and equivalents and current liabilities.
The preceding allocation of value components assumes continued operation of the hotel business.
Were the hotel business to cease operations, values of the individual components would likely be
different from the allocated values of the going-concern.
Certification
72
Certification
We certify that, to the best of our knowledge and belief:
1.
The statements of fact contained in this report are true and correct.
2.
The reported analyses, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions, and are our personal, impartial, and unbiased
professional analyses, opinions, and conclusions.
3.
We have no present or prospective interest in the property that is the subject of this report
and no personal interest with respect to the parties involved.
4.
We have not performed any services, as an appraiser or in any other capacity, regarding the
property that is the subject of this report within the three-year period immediately preceding
acceptance of this assignment.
5.
We have no bias with respect to the property that is the subject of this report or to the parties
involved with this assignment.
6.
Our engagement in this assignment was not contingent upon developing or reporting
predetermined results.
7.
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 a
subsequent event directly related to the intended use of this appraisal.
8.
Our analyses, opinions, and conclusions were developed, and this report has been prepared,
in conformity with the Uniform Standards of Professional Appraisal practice as well as
applicable state appraisal regulations.
9.
The reported analyses, opinions, and conclusions were developed, and this report has been
prepared, in conformity with the Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute.
10.
The use of this report is subject to the requirements of the Appraisal Institute relating to
review by its duly authorized representatives.
11.
Stacey S. Nicholas, MAI, MRICS, and Shannon M. Goodman have personally inspected the
subject.
12.
No one provided significant real property appraisal assistance to the person(s) signing this
certification.
13.
We have experience in appraising properties similar to the subject and are in compliance with
the Competency Rule of USPAP.
Certification
14.
73
As of the date of this report, Stacey S. Nicholas, MAI, MRICS, has completed the continuing
education program for Designated Members of the Appraisal Institute.
Senior Managing Director
Certified General Real Estate Appraiser
Kentucky Certificate # 3870
Telephone: 502-452-1543, ext. 774
Shannon M. Goodman
Analyst
Telephone: 502-452-1543, ext. 775
74
This appraisal and any other work product related to this engagement are limited by the following
standard assumptions, except as otherwise noted in the report:
1.
The title is marketable and free and clear of all liens, encumbrances, encroachments,
easements and restrictions. The property is under responsible ownership and competent
management and is available for its highest and best use.
2.
There are no existing judgments or pending or threatened litigation that could affect the value
of the property.
3.
There are no hidden or undisclosed conditions of the land or of the improvements that would
render the property more or less valuable. Furthermore, there is no asbestos in the property.
4.
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.
5.
The property is in compliance with all applicable building, environmental, zoning, and other
federal, state and local laws, regulations and codes.
6.
The information furnished by others is believed to be reliable, but no warranty is given for its
accuracy.
This appraisal and any other work product related to this engagement are subject to the following
limiting conditions, except as otherwise noted in the report:
1.
An appraisal is inherently subjective and represents our opinion as to the value of the
property appraised.
2.
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.
3.
No changes in any federal, state or local laws, regulations or codes (including, without
limitation, the Internal Revenue Code) are anticipated.
4.
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
any 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.
5.
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.
75
6.
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.
7.
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.
8.
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 legal title, geologic considerations such as soils and seismic stability; and civil, mechanical,
electrical, structural and other engineering and environmental matters. Such considerations
may also include determinations of compliance with zoning and other federal, state, and local
laws, regulations and codes.
9.
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.
10.
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, news 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 persons signing the report.
11.
Information, estimates and opinions contained in the report and obtained from third-party
sources are assumed to be reliable and have not been independently verified.
12.
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.
13.
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.
14.
Unless otherwise stated in the report, 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 has been considered.
15.
The current purchasing power of the dollar is the basis for the values stated in the appraisal;
we have assumed that no extreme fluctuations in economic cycles will occur.
16.
The values found herein are 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.
76
17.
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.
18.
The Americans with Disabilities Act (ADA) became effective January 26, 1992. We have not
made a specific survey or analysis of the property to determine whether the physical aspects
of the improvements meet the ADA accessibility guidelines. We claim no expertise in ADA
issues, and render no opinion regarding compliance of the subject with ADA regulations.
Inasmuch as compliance matches each owner’s financial ability with the cost to cure the nonconforming physical characteristics of a property, 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.
19.
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.
20.
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. Integra Realty Resources Kentucky-Southern Indiana, Integra Realty Resources, Inc.,
Integra Strategic Ventures, Inc. and/or any of their respective officers, owners, managers,
directors, agents, subcontractors or employees (the “Integra Parties”), 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.
21.
The persons signing the report may have reviewed available 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 nonexistent or minimal.
22.
Integra Realty Resources Kentucky-Southern Indiana is not a building or environmental
inspector. Integra Realty Resources Kentucky-Southern Indiana does not guarantee that the
subject property is free of defects or environmental problems. Mold may be present in the
subject property and a professional inspection is recommended.
23.
The appraisal report and value conclusions for an appraisal assume the satisfactory
completion of construction, repairs or alterations in a workmanlike manner.
77
24.
It is expressly acknowledged that in any action which may be brought against any of the
Integra Parties, arising out of, relating to, or in any way pertaining to this engagement, the
appraisal reports, and/or any other related work product, the Integra Parties shall not be
responsible or liable for any incidental or consequential damages or losses, unless the
appraisal was fraudulent or prepared with intentional misconduct. It is further acknowledged
that the collective liability of the Integra Parties in any such action shall not exceed the fees
paid for the preparation of the appraisal report unless the appraisal was fraudulent or
prepared with intentional misconduct. Finally, it is acknowledged that the fees charged herein
are in reliance upon the foregoing limitations of liability.
25.
Integra Realty Resources Kentucky-Southern Indiana, an independently owned and operated
company, has prepared the appraisal for the specific intended use stated elsewhere in the
report. The use of the appraisal report by anyone other than the Client is prohibited except as
otherwise provided. Accordingly, the appraisal report is addressed to and shall be solely for
the Client’s use and benefit unless we provide our prior written consent. We expressly reserve
the unrestricted right to withhold our consent to your disclosure of the appraisal report or any
other work product related to the engagement (or any part thereof including, without
limitation, conclusions of value and our identity), to any third parties. Stated again for
clarification, unless our prior written consent is obtained, no third party may rely on the
appraisal report (even if their reliance was foreseeable).
26.
The conclusions of this report are estimates based on known current trends and reasonably
foreseeable future occurrences. These estimates are based partly on property information,
data obtained in public records, interviews, existing trends, buyer-seller decision criteria in the
current market, and research conducted by third parties, and such data are not always
completely reliable. The Integra Parties are not responsible for these and other future
occurrences that could not have reasonably been foreseen on the effective date of this
assignment. Furthermore, it is inevitable that some assumptions will not materialize and that
unanticipated events may occur that will likely affect actual performance. While we are of the
opinion that our findings are reasonable based on current market conditions, we do not
represent that these estimates will actually be achieved, as they are subject to considerable
risk and uncertainty. Moreover, we assume competent and effective management and
marketing for the duration of the projected holding period of this property.
27.
All prospective value opinions 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 restrictions, etc. It is assumed that conditions reasonably foreseeable at the present
time are consistent or similar with the future.
28.
78
The appraisal is also subject to the following:
1. None
1. None
Addenda
Addendum A
Appraiser Qualifications
Experience
6100 Dutchmans Lane
Louisville, KY 40205
Senior Managing Director, Integra Realty Resources Kentucky-Southern Indiana of Louisville,
Kentucky. Significant experience in the appraisal of commercial, office, retail including shopping
centers, strip retail, and free standing, hotel/motel, industrial including office/warehouse
distribution and manufacturing, special purpose properties such as recreational facilities,
institutional properties, and educational campuses, and multi-family residential, as well as
market studies and consulting assignments for a variety of purposes. Member of Integra Realty
Resources' Specialty Properties Expertise team in Senior Housing and Healthcare Facilities, and
Hospitality and Lodging. Portfolio work includes valuation of student housing, hospitals,
nursing homes, and assisted and independent living for seniors. Also has experience in minority
interests and conservation easement valuation.
Professional Activities & Affiliations
Appraisal Institute, Member (MAI) , April 2009
Appraisal Institute Leadership Development and Advisory Council, 2000
My Old Kentucky Home Chapter Appraisal Institute, 2001, Board of Directors
Member Bluegrass Chapter Appraisal Institute, 2012-2014 Board
Member Kentucky CCIM Chapter
Royal Institute of Chartered Surveyors, Member (MRICS) , April 2012
Appraisal Institute-Professional Development Program-Valuation of the Components of a Business
Enterprise
SBA Going Concern Registry
Appraisal Institute Leadership Development and Advisory Council, 2015
AI Volunteer of Distinction
Licenses
Kentucky, General Real Property Appraiser, 003870, Expires June 2016
Indiana, General Appraiser License, CG41100006, Expires June 2016
Education
University of Kentucky, Bachelor Administration (1991)
[email protected] - 502.400.3774
T 502.452.1543
F 502.451.3657
irr.com
Shannon M. Granzow
Experience
6100 Dutchmans Lane
Louisville, KY 40205
Appraiser trainee, Integra Realty Resources Kentucky-Southern Indiana. Performs data collection
and analysis for specific projects.
T 502-452-1543
F 502-451-3657
Education
University of Louisville, BA Psychology
[email protected] - 502-400-3775
irr.com
Integra Realty Resources, Inc.
Corporate Profile
Integra Realty Resources, Inc. offers the most comprehensive property valuation and counseling coverage in
the United States with 61 independently owned and operated offices in 34 states and the Caribbean. Integra
was created for the purpose of combining the intimate knowledge of well-established local firms with the
powerful resources and capabilities of a national company. Integra offers integrated technology, national data
and information systems, as well as standardized valuation models and report formats for ease of client
review and analysis. Integra’s local offices have an average of 25 years of service in the local market, and
virtually all are headed by a Senior Managing Director who is an MAI member of the Appraisal Institute.
A listing of IRR’s local offices and their Senior Managing Directors follows:
ATLANTA, GA - Sherry L. Watkins., MAI, FRICS
AUSTIN, TX - Randy A. Williams, MAI, SR/WA, FRICS
BALTIMORE, MD - G. Edward Kerr, MAI, MRICS
BIRMINGHAM, AL - Rusty Rich, MAI, MRICS
BOISE, ID - Bradford T. Knipe, MAI, ARA, CCIM, CRE, FRICS
BOSTON, MA - David L. Cary, Jr., MAI, MRICS
CHARLESTON, SC - Cleveland “Bud” Wright, Jr., MAI
CHARLOTTE, NC - Fitzhugh L. Stout, MAI, CRE, FRICS
CHICAGO, IL - Eric L. Enloe, MAI, FRICS
CINCINNATI, OH - Gary S. Wright, MAI, FRICS, SRA
CLEVELAND, OH - Douglas P. Sloan, MAI
COLUMBIA, SC - Michael B. Dodds, MAI, CCIM
COLUMBUS, OH - Bruce A. Daubner, MAI, FRICS
DALLAS, TX - Mark R. Lamb, MAI, CPA, FRICS
DAYTON, OH - Gary S. Wright, MAI, FRICS, SRA
DENVER, CO - Brad A. Weiman, MAI, FRICS
DETROIT, MI - Anthony Sanna, MAI, CRE, FRICS
FORT WORTH, TX - Gregory B. Cook, SR/WA
GREENSBORO, NC - Nancy Tritt, MAI, SRA, FRICS
GREENVILLE, SC - Michael B. Dodds, MAI, CCIM
HARTFORD, CT - Mark F. Bates, MAI, CRE, FRICS
HOUSTON, TX - David R. Dominy, MAI, CRE, FRICS
INDIANAPOLIS, IN - Michael C. Lady, MAI, SRA, CCIM, FRICS
JACKSON, MS - J. Walter Allen, MAI, FRICS
JACKSONVILLE, FL - Robert Crenshaw, MAI, FRICS
KANSAS CITY, MO/KS - Kenneth Jaggers, MAI, FRICS
LAS VEGAS, NV - Charles E. Jack IV, MAI
LOS ANGELES, CA - John G. Ellis, MAI, CRE, FRICS
LOS ANGELES, CA - Matthew J. Swanson, MAI
LOUISVILLE, KY - Stacey Nicholas, MAI, MRICS
MEMPHIS, TN - J. Walter Allen, MAI, FRICS
MIAMI/PALM BEACH, FL - Scott M. Powell, MAI, FRICS
MIAMI/PALM BEACH, FL- Anthony M. Graziano, MAI, CRE, FRICS
MINNEAPOLIS, MN - Michael F. Amundson, MAI, CCIM, FRICS
NAPLES, FL - Carlton J. Lloyd, MAI, FRICS
NASHVILLE, TN - R. Paul Perutelli, MAI, SRA, FRICS
NEW JERSEY COASTAL - Halvor J. Egeland, MAI
NEW JERSEY NORTHERN - Matthew S. Krauser, CRE, FRICS
NEW YORK, NY - Raymond T. Cirz, MAI, CRE, FRICS
ORANGE COUNTY, CA - Larry D. Webb, MAI, FRICS
ORLANDO, FL - Christopher Starkey, MAI, MRICS
PHILADELPHIA, PA - Joseph D. Pasquarella, MAI, CRE, FRICS
PHOENIX, AZ - Walter ‘Tres’ Winius III, MAI, FRICS
PITTSBURGH, PA - Paul D. Griffith, MAI, CRE, FRICS
PORTLAND, OR - Brian A. Glanville, MAI, CRE, FRICS
PROVIDENCE, RI - Gerard H. McDonough, MAI, FRICS
RALEIGH, NC - Chris R. Morris, MAI, FRICS
RICHMOND, VA - Kenneth L. Brown, MAI, CCIM, FRICS
SACRAMENTO, CA - Scott Beebe, MAI, FRICS
ST. LOUIS, MO - P. Ryan McDonald, MAI, FRICS
SALT LAKE CITY, UT - Darrin W. Liddell, MAI, CCIM, FRICS
SAN DIEGO, CA - Jeff A. Greenwald, MAI, SRA, FRICS
SAN FRANCISCO, CA - Jan Kleczewski, MAI, FRICS
SARASOTA, FL - Carlton J. Lloyd, MAI, FRICS
SAVANNAH, GA - J. Carl Schultz, Jr., MAI, FRICS, CRE, SRA
SEATTLE, WA - Allen N. Safer, MAI, MRICS
SYRACUSE, NY - William J. Kimball, MAI, FRICS
TAMPA, FL - Bradford L. Johnson, MAI, MRICS
TULSA, OK - Owen S. Ard, MAI
WASHINGTON, DC - Patrick C. Kerr, MAI, SRA, FRICS
WILMINGTON, DE - Douglas L. Nickel, MAI, FRICS
CARIBBEAN/CAYMAN ISLANDS - James Andrews, MAI, FRICS
Corporate Office
Eleven Times Square, 640 Eighth Avenue, 15th Floor, Suite A, New York, New York 10036
Telephone: (212) 255-7858; Fax: (646) 424-1869; E-mail [email protected]
Website: www.irr.com
Addenda
Addendum B
Definitions
Addenda
Definitions
The source of the following definitions is The Dictionary of Real Estate Appraisal, Fifth Edition,
Appraisal Institute, Chicago, Illinois, 2010, unless otherwise noted.
As Is Market Value
The estimate of the market value of real property in its current physical condition, use, and zoning as
of the appraisal date.
Deferred Maintenance
Needed repairs or replacement of items that should have taken place during the course of normal
maintenance.
Depreciation
A loss in property value from any cause; the difference between the cost of an improvement on the
effective date of the appraisal and the market value of the improvement on the same date.
Discounted Cash Flow (DCF) Analysis
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 of the income streams
and the quantity and timing of the reversion, and discounts each to its present value at a specified
yield rate.
Disposition Value
The most probable price that a specified interest in real property should bring under the following
conditions:
1.
Consummation of a sale within a future exposure time specified by the client.
2.
The property is subjected to market conditions prevailing as of the date of valuation.
3.
Both the buyer and seller are acting prudently and knowledgeably.
4.
The seller is under compulsion to sell.
5.
The buyer is typically motivated.
6.
Both parties are acting in what they consider to be their best interests.
7.
An adequate marketing effort will be made during the exposure time specified by the client.
8.
Payment will be made in cash in U.S. dollars or in terms of financial arrangements comparable
thereto.
9.
The price represents the normal consideration for the property sold, unaffected by special or
creative financing or sales concessions granted by anyone associated with the sale.
This definition can also be modified to provide for valuation with specified financing terms.
Addenda
Effective Date of Appraisal
The date on which the analyses, opinions, and advice in an appraisal, review, or consulting service
apply.
Entrepreneurial Profit
1. 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 total cost of a property (cost of
development) and its market value (property value after completion), which represents the
entrepreneur’s compensation for the risk and expertise associated with development. An
entrepreneur is motivated by the prospect of future value enhancement (i.e., the
entrepreneurial incentive). An entrepreneur who successfully creates value through new
development, expansion, renovation, or an innovative change of use is rewarded by
entrepreneurial profit. Entrepreneurs may also fail and suffer losses.
2.
In economics, the actual return on successful management practices, often identified with
coordination, the fourth factor of production following land, labor, and capital; also called
entrepreneurial return or entrepreneurial reward.
Excess Land; Surplus Land
Excess Land: Land that is not needed to serve or support the existing improvement. The highest and
best use of the excess land may or may not be the same as the highest and best use of the improved
parcel. Excess land may have the potential to be sold separately and is valued independently.
Surplus Land: Land that is not currently needed to support the existing improvement but cannot be
separated from the property and sold off. Surplus land does not have an independent highest and best
use and may or may not contribute value to the improved parcel.
Exposure Time
1. The time a property remains on the market.
2.
The estimated length of time the property interest being appraised would have been offered
on the market prior to the hypothetical consummation of a sale at market value on the
effective date of the appraisal; a retrospective estimate based on an analysis of past events
assuming a competitive and open market.
Fee Simple Estate
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.
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.
Addenda
Gross Building Area (GBA)
Total floor area of a building, excluding unenclosed areas, measured from the exterior of the walls of
the above-grade area. This includes mezzanines and basements if and when typically included in the
region.
The reasonably probable and legal use of vacant land or an improved property that is physically
possible, appropriately supported, financially feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal permissibility, physical possibility, financial
feasibility, and maximum productivity. Alternatively, the probable use of land or improved property –
specific with respect to the user and timing of the use – that is adequately supported and results in
the highest present value.
Insurable Value
Value used by insurance companies as the basis for property insurance. Insurable value is not
intended to be market value. (Source: Integra Realty Resources)
Lease
A contract in which rights to use and occupy land or structures are transferred by the owner to
another for a specified period of time in return for a specified rent.
Leased Fee Interest
A freehold (ownership interest) where the possessory interest has been granted to another party by
creation of a contractual landlord-tenant relationship (i.e, a lease).
Leasehold Interest
The tenant’s possessory interest created by a lease.
Liquidation Value
The most probable price that a specified interest in real property should bring under the following
conditions:
1.
Consummation of a sale within a short time period.
2.
The property is subjected to market conditions prevailing as of the date of valuation.
3.
Both the buyer and seller are acting prudently and knowledgeably.
4.
The seller is under extreme compulsion to sell.
5.
The buyer is typically motivated.
6.
Both parties are acting in what they consider to be their best interests.
7.
A normal marketing effort is not possible due to the brief exposure time.
8.
Payment will be made in cash in U.S. dollars, or in terms of financial arrangements comparable
thereto.
Addenda
9.
The price represents the normal consideration for the property sold, unaffected by special or
This definition can also be modified to provide for valuation with specified financing terms.
Marketing Time
An opinion of the amount of time it might take to sell a real or personal property interest at the
concluded market value level during the period immediately after the effective date of an appraisal.
Marketing time differs from exposure time, which is always presumed to precede the effective date of
an appraisal.
Market Rent
The most probable rent that a property should bring in a competitive and open market reflecting all
conditions and restrictions of the lease agreement, including permitted uses, use restrictions, expense
obligations, term, concessions, renewal and purchase options, and tenant improvements.
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 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 own
best interests;

a reasonable time is allowed for exposure in the open market;

payment is made in terms of cash in U.S. dollars or in terms of financial arrangements
comparable thereto; and

the price represents the normal consideration for the property sold unaffected by special or
(Source: Code of Federal Regulations, Title 12, Chapter I, Part 34.42[g]; also Interagency Appraisal and
Evaluation Guidelines, Federal Register, 75 FR 77449, December 10, 2010, page 77472)
Prospective Opinion of Value
A value opinion effective as of a specified future date. The term does not define a type of value.
Instead, it identifies a value opinion as being effective at some specific future date. An opinion of
value as of a prospective date is frequently sought in connection with projects that are proposed,
under construction, or under conversion to a new use, or those that have not yet achieved sellout or a
stabilized level of long-term occupancy.
Addenda
Rentable Area (RA)
For office buildings, the tenant’s pro rata portion of the entire office floor, excluding elements of the
building that penetrate through the floor to the areas below. The rentable area of a floor is computed
by measuring to the inside finished surface of the dominant portion of the permanent building walls,
excluding any major vertical penetrations of the floor. Alternatively, the amount of space on which the
rent is based; calculated according to local practice.
Replacement Cost
The estimated cost to construct, at current prices as of the effective appraisal date, a substitute for
the building being appraised, using modern materials and current standards, design and layout.
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.
Stabilized Income
Income at that point in time when abnormalities in supply and demand or any additional transitory
conditions cease to exist and the existing conditions are those expected to continue over the
economic life of the property; projected income that is subject to change, but has been adjusted to
reflect an equivalent, stable annual income.
Addenda
Addendum C
Financials and Property Information
Addenda
Addendum D
Comparable Data
Hotel Sale Profile
Sale No. 1
Location & Property Identification
Property Name:
Days Inn - Weldon Roanoke
Rapids
Address:
1611 Julian R. Allsbrook
Highway
City/State/Zip:
Roanoke Rapids, North
Carolina 27870
Country:
United States
County:
Halifax
Sub-Property Type:
Limited Service, Economy
Affiliation:
Wyndham Worldwide
Location:
Small Town / Metro
IRR Event ID:
1116451
GBA-SF:
Sale Information
Sale Price:
Eff. R.E. Sale Price:
Sale Date:
Sale Status:
$/SF GBA:
$/SF NRA:
Eff. Price/Unit:
Grantor/Seller:
Grantee/Buyer:
Property Rights:
% of Interest Conveyed:
Financing:
Terms of Sale:
Document Type:
Recording No.:
Verification Type:
$1,700,000
$1,700,000
02/13/2015
Closed
$56.41
$56.41
$17,000 /Hotel Room
RAM Hotels, Inc.
Shree Bhavani, LLC
Fee Simple
100.00
Cash to seller
Arm's length
Deed
2461/416
Not Verified
Improvement and Site Data
MSA:
Roanoke Rapids, NC Micro
MSA
Legal/Tax/Parcel ID:
1203235 & 1203329
Days Inn - Weldon Roanoke Rapids
NRA-SF:
Acres(Usable/Gross):
Land-SF(Usable/Gross):
Usable/Gross Ratio:
Construction Desc.:
No. of Buildings/Stories:
No. of Units/Unit Type:
Multi-Tenant/Condo.:
Shape:
Topography:
Corner Lot:
Frontage Feet:
Frontage Desc.:
Density-Unit/Gross Acre:
Density-Unit/Usable Acre:
Bldg. to Land Ratio FAR:
Zoning Desc.:
Flood Plain:
Utilities:
Utilities Desc.:
Source of Land Info.:
30,136
30,136
4.09/4.09
177,943/177,943
1.00
Brick and Stucco Exterior
1/2
100/Hotel Rooms
Yes/No
Irregular
Level
No
747
77' Julian Allsbrook Highway;
670' Country Club Ro
24.48
24.48
0.17
Commercial
No
Electricity, Water Public,
Sewer
All available
Other
Hotel Sale Profile
Sale No. 2
Property Name:
Days Inn Montgomery
Address:
4180 Troy Hwy.
City/State/Zip:
Montgomery, Alabama 36116
Country:
United States
County:
Montgomery
Sub-Property Type:
Limited Service
Market Orientation:
Suburban
IRR Event ID:
1092699
GBA-SF:
Sale Information
Sale Price:
Sale Date:
Sale Status:
$/SF GBA:
$/SF NRA:
Eff. Price/Unit:
Grantor/Seller:
Grantee/Buyer:
Property Rights:
Document Type:
Recording No.:
Verified By:
Verification Date:
Verification Type:
$850,000
$850,000
08/22/2013
Closed
$28.04
$28.04
$17,000 /Hotel Room
Saibaba Properties, LLC
Jay Kashumbal, Inc.
Fee Simple
Warranty Deed
44820-0836
Blake P. Fine
1/16/15
Secondary Verification
Operating Data and Key Indicators
ADR:
Occupancy:
$60
40%
MSA:
Days Inn Montgomery
Montgomery, AL
NRA-SF:
Usable/Gross Ratio:
Year Built:
Property Class:
M&S Class:
Construction Quality:
Improvements Cond.:
Exterior Walls:
Shape:
Topography:
Corner Lot:
Frontage Type:
Traffic Flow:
AccessibilityRating:
Visibility Rating:
10-07-35-03-002-009.003
30,316
30,316
1.30/1.30
56,628/56,628
1.00
1997
C
C
Average
Average
Stucco
1/2
50/Hotel Rooms
No/No
Irregular
Level
No
2 way, 2 lanes each way
Moderate
Average
Average
38.46
38.46
0.54
Hotel Sale Profile
Improvement and Site Data (Cont'd)
Zoning Code:
Zoning Desc.:
Flood Plain:
B2
Commercial
No
Public Records
Comments
This hotel was conveyed to an owner-user. The estimated ADR
and occupancy at time of sale was $60 and 40%, respectively.
The property is located on the south side of Troy Hwy. The
property operates as a Days Inn.
Days Inn Montgomery
Sale No. 2
Hotel Sale Profile
Sale No. 3
Property Name:
Days Inn - Lakewood
Address:
12019 Lake Avenue
City/State/Zip:
Lakewood, Ohio 44107
Country:
United States
County:
Cuyahoga
Sub-Property Type:
Limited Service
Market Orientation:
Suburban
IRR Event ID:
653170
Sale Information
Sale Price:
Sale Date:
Sale Status:
$/SF GBA:
$/SF NRA:
Eff. Price/Unit:
Grantor/Seller:
Grantee/Buyer:
Assets Sold:
$1,320,000
$2,320,000
02/27/2013
Closed
$67.60
$67.60
$35,152 /Hotel Room
Origin Capital I LLC
Romara LLC
Going concern, total assets of
the business
Property Rights:
Financing:
Document Type:
Verified By:
Verification Date:
Verification Source:
Fee Simple Going Concern
Cash to seller
Deed
Michael P. Hunter
4/9/14
Michael Episcope, Origin
Capital Partners
Verification Type:
Confirmed-Seller
ADR:
Occupancy:
Room Revenue:
Days Inn - Lakewood
$55
56%
$793,975
Other Revenue:
Total Revenue:
Expenses:
Net Operating Income:
Operating Data Type:
GRM Actual:
RRM Actual:
OAR(Cap. rate)Actual:
Expense Ratio:
$8,109
$802,084
$693,532
$100,443
Trailing-12
2.89
2.92
4.33%
87.35%
MSA:
Cleveland-Elyria-Mentor, OH
Metropolitan Statistical Area
GBA-SF:
312-29-007
34,322
34,322
1.15
50,094
1951
66/Hotel Rooms
47
1.37
47
1.37
0.71
NRA-SF:
Acres(Gross):
Land-SF(Gross):
Year Built:
Total Parking Spaces:
Park. Ratio 1000 SF GLA:
No. Surface Spaces:
Park. Ratio 1000 SF GBA:
Parking Ratio(/Unit):
Hotel Sale Profile
Improvement and Site Data (Cont'd)
57.39
0.68
Other
Comments
Per the seller, the hotel had notable deferred maintenance
(estimated at $500,000) and required a PIP (estimated at an
additional $500,000), and $1,000,000 is added to determine
the effective sale price. Trailing 12-month room revenue for
July 2012 was $793,975 per the listing flyer. Per the seller, NOI
was not a driving factor in the purchase decision; rather, price
per key was given greater consideration. As of April 2014, the
property is still operating as a Days Inn and has not yet
undergone renovations per a hotel employee.
Days Inn - Lakewood
Sale No. 3
Hotel Sale Profile
Sale No. 4
Property Name:
Red Roof Inn
Address:
1100 Interstate Dr.
City/State/Zip:
Winchester, Kentucky 40391
Country:
United States
County:
Clark
Sub-Property Type:
Limited Service, Economy
Affiliation:
Red Roof
Market Orientation:
Small Town - Non Metro
IRR Event ID:
1089457
GBA-SF:
Sale Information
Listing Price:
Eff. R.E. Listing Price:
Listing Date:
Sale Status:
$/SF GBA:
$/SF NRA:
Eff. Price/Unit:
Grantor/Seller:
Grantee/Buyer:
Assets Sold:
$1,399,995
$1,399,995
01/01/2015
Listing
$40.00
$40.00
$23,333 /Hotel Room
Cool Breeze Inc
Listing
Going concern, total assets of
the business
Property Rights:
Document Type:
Verification Type:
Fee Simple
Listing Flyer
Listing Flyer
Confirmed-Seller Broker
Occupancy:
Operating Data Type:
45%
In Place
MSA:
Red Roof Inn
Lexington-Fayette, KY
053-0000-03400
NRA-SF:
Usable/Gross Ratio:
M&S Class:
35,000
35,000
4.10/4.10
178,596/178,596
1.00
C
1/2
60/Hotel Rooms
14.63
14.63
0.20
Broker
Comments
Property was converted to a Red Roof Inn on 3/5/2014 with
$250,000 of required PIP completed. Remaining items to be
completed by 2017. There are 3 banquet rooms, a bar area
(currently not operational), and a 4-room manager apartment.
Stated occupancy at time of listing of about 45%.
Hotel Sale Profile
Sale No. 5
Property Name:
Address:
2035 W. Hwy 92
City/State/Zip:
London, Kentucky 40741
Country:
United States
County:
Laurel
Sub-Property Type:
Limited Service
Market Orientation:
IRR Event ID:
1132468
GBA-SF:
Sale Information
Sale Price:
Sale Date:
Sale Status:
$/SF GBA:
$/SF NRA:
Eff. Price/Unit:
Grantee/Buyer:
Property Rights:
Document Type:
Verified By:
Verification Date:
Verification Type:
$3,700,000
$3,700,000
10/31/2014
Closed
$75.13
$75.13
$49,333 /Hotel Room
Longman Properties II LLC
Fee Simple
100.00
Deed
Shannon M. Goodman
5/5/15
Sale comp, pva
Sale Analysis
Current Use:
Proposed Use Change:
Limited Service Hotel
No
MSA:
London, KY Micro MSA
062-50-00-030.00
NRA-SF:
Usable/Gross Ratio:
Property Class:
Elevators/Count:
Corner Lot:
Environmental Issues:
Flood Plain:
49,248
49,248
1.93/1.93
84,070/84,070
1.00
B
75/Hotel Rooms
Yes
No
38.86
38.86
0.59
No
No
Public Records
Hotel Sale Profile
Sale No. 6
Property Name:
Former Best Western
Address:
1116 N. Highway 27 St.
City/State/Zip:
Whitley City, Kentucky 42653
Country:
United States
County:
Mccreary
Sub-Property Type:
Limited Service
Market Orientation:
IRR Event ID:
1132508
GBA-SF:
Sale Information
Sale Price:
Sale Date:
Sale Status:
$/SF GBA:
$/SF NRA:
Eff. Price/Unit:
Property Rights:
Document Type:
Recording No.:
$826,000
$826,000
04/30/2015
Closed
$28.48
$28.48
$15,018 /Room
Fee Simple
100.00
Other
Loopnet Sale Comp # 5259337
Verified By:
Verification Date:
Verification Type:
Shannon M. Goodman
5/4/15
PVA, Sale comp
Sale Analysis
Current Use:
Proposed Use Change:
Limited service hotel
No
Former Best Western
NRA-SF:
Usable/Gross Ratio:
Property Class:
Construction Quality:
Improvements Cond.:
Exterior Walls:
Flood Plain:
29,000
29,000
3.95/3.95
172,062/172,062
1.00
B
Average
Average
Brick
55/Rooms
No/No
13.92
13.92
0.17
No
Public Records
Addenda
Addendum E
Engagement Letter

Integra Realty Resources Kentucky-Southern

Transcription

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