hunneman - AuctionAZ

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HUNNEMAN
Tel
Fax
URL
APPRAISAL & CONSULTING CO.
617 457-3400
617 457-3309
www.naihunneman.com
303 Congress Street
Boston, MA 02210
APPRAISAL REPORT
High Bay Warehouse and an Office/Flex/Manufacturing Property
Located at 40 and 50 Fordham Road
In the Town of Wilmington, MA 01887
File No. 14113
OWNED BY
Wilmington Realty Trust
PREPARED FOR
Ms. Lindsay Dube
Vice President Credit Officer
Eagle Bank
350 Broadway
Everett, MA 02149
DATE OF VALUATION
December 10, 2014
PREPARED BY
Scott M. Cochrane
Hunneman Appraisal & Consulting Company
303 Congress Street
Boston, MA 02210
REAL ESTATE COUNSELING · APPRAISALS · FEASIBILITY STUDIES · LITIGATION SUPPORT · ARBITRATION/MEDIATION
HUNNEMAN
14113
HUNNEMAN
Tel
Fax
URL
617 457-3400
617 457-3309
www.naihunneman.com
303 Congress Street
Boston, MA 02210
January 15, 2015
Ms. Lindsay Dube
Eagle Bank
350 Broadway
Everett, MA 02149
RE:
Appraisal of two adjacent industrial buildings under the same ownership although on
separate sites located 40 and 50 Fordham Road in the Town of Wilmington,
Middlesex County, MA 01887. The property located at 40 Fordham Road, also known
as Buildings 1 and 1A which are attached, contains a total of 233,172 gross square
feet of high bay warehouse space and mezzanine office. The property located at 50
Fordham is an office/flex/manufacturing facility that was renovated in 2008 and has
79,140 square feet of gross building area.
Dear Ms Dube:
In accordance with your request, I have prepared an appraisal report of the above-referenced
properties.
This report is issued in compliance with the minimum standards prescribed in the Uniform
Standards of Professional Appraisal Practice (USPAP) and Title XI of the Financial Institution
Reform, Recovery, and Enforcement Act of 1989 (FIRREA). This is an appraisal report, which
is intended to comply with the reporting requirements set forth under Standards Rule 2-2 of the
Uniform Standards of Professional Appraisal Practice (USPAP) for an appraisal report formerly
known as a Summary Appraisal Report as Standard 2.2 (b) in the 2012-2013 Uniform Standards
of Professional Appraisal Practice.
The purpose of this report is to express my opinion of the market value of the Leased Fee
interest in the subject property. The date of the “As Is” valuation is December 10, 2014. The
property was inspected on December 10, 2014 and it is in this context that the property has been
valued, including my analysis of local and regional market conditions, including comparable
sales. I considered all generally accepted approaches to valuation and, as discussed in the report,
I have relied on the Income Capitalization and Sales Comparison Approaches in developing my
opinion. The Cost Approach was considered but not completed, as it was not felt to lead to a
reasonable estimate of value.
This report is subject to normal limiting conditions and assumptions, as well as, if any, specific
non-standard limitations that have been disclosed or expressed to me and are outlined in the
accompanying report. The intended use of this report is to assist the client, Eagle Bank with its
mortgage financing. The appraisal has not been based on a requested minimum valuation.
REAL ESTATE COUNSELING · APPRAISALS · FEASIBILITY STUDIES · LITIGATION SUPPORT · ARBITRATION/MEDIATION
HUNNEMAN
Ms. Dube
January 15, 2015
Page 2
Also, as noted in the Reconciliation and Final Value Estimate section of this report, given current
market conditions and specifics relating to the subject property, an exposure to the market time
period of six to twelve months is considered likely at the indicated value estimate.
40 FORDHAM ROAD
It is, therefore, my opinion that the market value of the “As Is” Leased Fee interest of the
subject property under review, in accordance with the assumptions and limiting conditions
prescribed in the report, as of the date of December 10, 2014, is fairly represented by the amount
of:
“As Is” Opinion of Market Value
$9,960,000
Nine Million Nine Hundred Sixty Thousand Dollars
50 FORDHAM ROAD
Likewise, it is my opinion that the market value of the “As Is” Leased Fee interest of the subject
property under review, in accordance with the assumptions and limiting conditions prescribed in
the report, as of the date of December 10, 2014, is fairly represented by the amount of:
$7,560,000
Seven Million Five Hundred Sixty Thousand Dollars
Respectfully Submitted,
Hunneman Appraisal & Consulting
Scott M. Cochrane
Massachusetts Certified General RE Appraiser #1328
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TABLE OF CONTENTS
Executive Summary .........................................................................................................................1
Report Option...................................................................................................................................4
Certification .....................................................................................................................................5
Definition of Market Value ..............................................................................................................7
Leased Fee Interest ..........................................................................................................................7
Purpose of the Appraisal ..................................................................................................................7
Appraisal Date .................................................................................................................................8
Intended Use of Report ....................................................................................................................8
Intended Users of Report .................................................................................................................8
Scope of Assignment .......................................................................................................................8
Exposure Time and Marketing Time .............................................................................................10
Competency Provision ...................................................................................................................10
License Provision ...........................................................................................................................10
Property Identification ...................................................................................................................11
Ownership, Sales History & Legal Description of Property..........................................................11
Special Assumptions and Limiting Conditions..............................................................................12
Area and Neighborhood Description .............................................................................................12
Suburban Industrial Market ...........................................................................................................21
Site Description - 40 Fordham Road .............................................................................................26
Site Description - 50 Fordham Road .............................................................................................30
Improvement Description - 40 Fordham Road ..............................................................................35
Improvement Description - 50 Fordham Road ..............................................................................50
Assessment – 40 and 50 Fordham Road ........................................................................................59
Zoning and Other Land Use Controls ............................................................................................60
Highest & Best Use ........................................................................................................................66
Valuation Methodology & Analysis ..............................................................................................68
Sales Comparison Approach – 40 Fordham Road .........................................................................69
Income Capitalization Approach – 40 Fordham Road ..................................................................77
Reconciliation & Final Value Estimate - 40 Fordham Road .........................................................91
Sales Comparison Approach - 50 Fordham Road..........................................................................94
Income Capitalization Approach - 50 Fordham Road .................................................................102
Reconciliation & Final Value Estimate – 50 Fordham Road ......................................................115
Reconciliation & Final Value Estimates for 40 and 50 Fordham Road ......................................117
ADDENDUM ..............................................................................................................................118
Assumptions and Limiting Conditions ........................................................................................119
Engagement Letter .......................................................................................................................123
Deeds............................................................................................................................................131
Qualifications and License of Appraiser......................................................................................137
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EXECUTIVE SUMMARY
Location:
40 and 50 Fordham Road, within the Town of Wilmington,
Middlesex County, MA 01887
Owner of Record:
Wilmington Realty Trust
Title Reference:
Middlesex County Certificates #19842, 19837, 19841,
19838, 16620, 19840, 19839, 142137 and 142138
Prepared For:
Ms.Lindsay Dube
Eagle Bank
350 Broadway
Everett, MA
Purpose of the Appraisal:
Provide my opinion of the “As Is” market value of the
subject property.
Property Rights Appraised:
Leased Fee Interest
Inspection Date:
December 10, 2014
Valuation Date:
December 10, 2014
Date of the Report:
January 15, 2015
Zoning:
The subject properties are located in the Highway Industrial
district and also in the Ground Water Protection District.
Flood Zone:
Community Panel #25017C0292E dated July 4, 2010,
Flood Zone X and A
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Assessment Data:
Assessment Data
Address
Map / Lot
Owner
Land Area (Acres)
Building Area
Land Assessment
Building Assessment
Extra Features
Out Buildings
Total Assessment
Comercial Tax Rate
Residential Tax rate
Commercial Tax Expense
Residential Tax Expense
Total Tax Expense
Community Preservation Act Percent
Community Preservation Act Expense
Total Taxes
Taxes/SF of GBA
Assessment/SF of GBA
Site Data:
Area
Primary Frontage
Topography
Shape
Improvements
FAR
Land to Building Ratio
Improvement Data
40 Fordham Road
50 Fordham Road
Map 91 Lot 131
Map 91 Lot 131-A
Wilmington Realty
Trust
Wilmington Realty
Trust
21.74
221,174
$3,782,200
$797,900
$9,400
$462,000
$5,051,500
$33.04
$14.24
$166,901.56
$0.00
$166,901.56
0.00%
$0.00
$166,901.56
11.64
79,140
$2,474,600
$2,599,700
$39,800
$3,200
$5,117,300
$33.04
$14.24
$169,075.59
$0.00
$169,075.59
0.00%
$0.00
$169,075.59
$0.75
$22.84
$2.14
$64.66
946,994 Square Feet or 21.740 Acres
Fordham Road
The subject has a level topography
The site is irregular in shape
40 Fordham Road
18.882
0.056 to 1
The subject properties consist of two adjacent buildings
located at 40 and 50 Fordham Road in Wilmington, MA
and are owned by the same entity, Wilmington Realty
Trust. The building located at 40 Fordham Road is a
233,172 gross square foot high bay warehouse including
about 41,030 square feet of second floor office space. This
building is further subdivided into Building 1 and Building
1A. Both sections of the building are currently being
renovated on a rent-to-suite basis. Building 1 has a letter of
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intent from Colonial Systems to lease 89,040 square feet
consisting of 39,842 square feet of high bay (23' 6')
warehouse space, 35,666 square feet of low bay (11' 6')
warehouse space and 13,532 square feet of second floor
office space leaving about 27,862 square feet of second
floor office space, vacant and available for lease. Building
1A contains 104,273 square feet of gross building area,
being almost entirely high bay (23' 6') warehouse space
including a small 8,000 square foot first floor office area on
the northwestern section of the building. The building
located at 50 Fordham Road is a 79,140 gross square foot
office/flex/manufacturing building having a height of about
16 feet. The building was renovated to suite the current
tenant AMETEK Inc. in 2008. The building has about
46,801 square feet of perimeter offices, bull pen cubicles,
conference rooms, lunch room and fitness room with the
balance of the space 31,379 square feet being engineering
clean rooms, manufacturing lab space, general
manufacturing space and a shipping and receiving area for
a total net rentable building area of 78,180 square feet.
Highest and Best Use:
As If Vacant:
Maximum density industrial use
As Improved:
Office/Warehouse/Manufacturing Building
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VALUE INDICATIONS
“As Is” Value
40 Fordham Road
“As Is” Value
50 Fordham Road
Sales Comparison Approach
$9,990,000
$8,400,000
Income Capitalization Approach
Direct Capitalization
$9,960,000
$7,560,000
Not Applicable
Not Applicable
$9,960,000
$7,560,000
TECHNIQUE
Cost Approach
Final Value Estimate
REPORTING OPTION
This is an appraisal report, which is intended to comply with the reporting requirements set forth
under Standard Rule 2.2 of the 2014-2015 Uniform Standards of Professional Appraisal Practice
(USPAP) for an appraisal report. Although most supporting documentation concerning the data,
reasoning, and analyses is contained within this report, additional information is retained in the
appraiser's file. The depth of the discussion contained in this report is specific to the needs of the
client and for the intended use stated herein. The appraiser is not responsible for unauthorized
use of this report.
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CERTIFICATION
I, the undersigned, do hereby certify that:

I have inspected the subject property.

To the best of my knowledge and belief, the statements of fact contained in this report,
and/or retained in my files, upon which the analyses, opinions and conclusions expressed
herein are based, are true and correct.

The reported analyses, opinions and conclusions are limited only by the reported
assumptions and limiting conditions, and are my personal, impartial and unbiased
professional analyses, opinions and conclusions.

Employment in and compensation for making this appraisal are in no way contingent
upon the reporting of a predetermined value or direction in value that favors the cause of
the client, the amount of the value estimate, the attainment of a stipulated result, or the
occurrence of a subsequent event directly related to the intended use of this appraisal.

The appraisal assignment was not based on a requested minimum valuation, a specific
valuation or the approval of a loan.

I have performed no service 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.

I certify that I have no interest, either present or contemplated, in the subject property.

I have no personal interest or bias with respect to the subject matter of this appraisal
report or the parties involved in this assignment.

No one provided significant professional assistance to the person signing this report.

The use of this report is subject to the requirements of the Appraisal Institute relating to
review by its duly authorized representatives, and this report has been prepared in
conformity with and is subject to the requirements of the Code of Professional Ethics and
Standards of Professional Practice of the Appraisal Institute and Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation.
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40 FORDHAM ROAD
By reason of my inspection and as a result of my research and analysis, it is my opinion that the
"As Is" market value of the subject property as of the valuation date of December 10, 2014 is
fairly represented by the amount of:
$9,960,000.
50 FORDHAM ROAD
It is, therefore, my opinion that the market value of the “As Is” Leased Fee interest of the
subject property under review, in accordance with the assumptions and limiting conditions
prescribed in the report, as of the date of December 10, 2014, is fairly represented by the amount
of:
$7,560,000
Respectfully Submitted,
Hunneman Appraisal & Consulting
Scott M. Cochrane
Massachusetts Certified General RE Appraiser
#1328
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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 are the consummation of a sale as of a specified date and the passing of
title from seller to buyer under conditions whereby:
 The 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.
 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.”1
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).”2
PURPOSE OF THE APPRAISAL
The purpose of this appraisal is to estimate the current 'As Is' market value for financing
purposes. The subject properties are located at 40 and 50 Fordham Road, in the Town of
Wilmington, Middlesex County, MA.
1 Final Rule of the Office of the Controller (OCC), Aug. 24, 1990, Section 34.42 (f).
2 Appraisal Institute, The Dictionary of Real Estate Appraisal, Fifth Edition, copyright 2010, Page 111.
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APPRAISAL DATE
The effective date of this appraisal is December 10, 2014, and is based on the inspection, data,
analyses and conclusions on that date.
INTENDED USE OF REPORT
This appraisal is intended to assist the clients, Eagle Bank, to appropriately estimate the market
value of the Leased Fee interest for mortgage financing.
INTENDED USERS OF REPORT
The intended users of this report are Eagle Bank and their successors and/or assigns.
SCOPE OF ASSIGNMENT
In preparing this appraisal, the appraiser:
1. Inspected the interior and the exterior of the subject property on December 10, 2014.
2. Gathered and analyzed data on regional, city and neighborhood characteristics.
3. Gathered pertinent data regarding the subject property and recent sales of high bay warehouse
properties and office/flex/manufacturing buildings in the general market area.
4. Analyzed the site characteristics, existing improvements, existing and potential zoning,
surrounding land uses, and supply and demand to establish the highest and best use of the site.
5. Analyzed the comparable property data to arrive at a probable range of value for the subject via
the Sales Comparison Approach and analyzed the income and expenses of the property to arrive
at a probable range of value for the subject via the Income Capitalization Approach. The Cost
Approach was not considered applicable to this analysis due to the age and condition of the
improvements, which would make the estimation of accrued obsolescence from all sources
extremely difficult and of questionable relevance and the fact that market participants
purchased properties based on their economics.
6. Reconciled the results of these analyses into a final market value for the subject property.
7. In connection with this assignment, the appraiser was provided or collected the following
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items, which will be referenced in this report.

A copy of the title commitment/title policy from the Middlesex County Registry of Deeds
and a Purchase and Sale Agreement.

Site plans for the subject from the Wilmington Assessor’s Office and Middlesex County
Registry of Deeds.


The property card and assessment data from the Wilmington Assessor’s Office.
Limited expense information was provided by the owner.
8. In connection with this assignment, the appraiser interviewed and/or obtained information
from:

The owner of the property

The Zoning, Inspectional Services, and Assessor’s Departments of the Town of
Wilmington

FEMA Flood Maps

Real Estate Brokers

Real Estate Owners and/or Property Managers

Real Estate publications from several commercial real estate companies.
To develop the opinion of value, the appraiser completed an appraisal that conforms to the
Uniform Standards of Professional Appraisal Practice, in which all approaches to value were
considered in order to achieve a credible opinion of value. This appraisal report is a
recapitulation of the appraiser’s data, analyses and conclusions. Supporting documentation is also
retained in the appraiser’s files.
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EXPOSURE TIME AND MARKETING TIME
Marketing Time is defined as: “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 the appraisal."3 The appraised property would be
expected to sell within a marketing period of 6-12 months after the effective date of value.
Exposure Time is defined as: “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 appraisal; a retrospective estimate based on an analysis of past
events assuming a competitive and open market."4
Exposure time varies with the type of real estate and value range. A reasonable exposure period
is a function of the price, time and use. Exposure time can be dependent upon the action of the
seller as well as market forces, capital availability, the degree of exposure and the number of
competitive offerings. An unrealistically high asking price may artificially lengthen the exposure
time. Weak market conditions may also act to extend exposure periods. In this case, I believe it
would take 6-12 months or less to sell this property from the date of appraisal.
COMPETENCY PROVISION
The appraiser is professionally competent to perform this appraisal assignment by virtue of
previous experience with similar assignments and appropriate research and education regarding
the specific property type being appraised. The professional qualifications of the appraiser are
included in this report's addendum for specific reference.
LICENSE PROVISION
The appraiser is a Certified General Real Estate Appraiser and is licensed by the Commonwealth
of Massachusetts to perform this appraisal assignment. All continuing education requirements
have been met. Mr. Scott M. Cochrane's license expires on March 1, 2016.
3 Ibid, Page 121.
4 Ibid, Page 73.
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PROPERTY IDENTIFICATION
The subject located at 40 and 50 Fordham Road, in the City of Wilmington, Middlesex
County, Massachusetts. It is identified by the Town of Wilmington Assessor’s Office as Parcel
ID 0254 4635 0137 0000. The subject properties consist of two adjacent buildings located at 40
and 50 Fordham Road in Wilmington, MA and are owned by the same entity, Wilmington Realty
Trust. The building located at 40 Fordham Road is a 233,172 gross square foot high bay
warehouse including about 41,030 square feet of second floor office space. This building is
further subdivided into Building 1 and Building 1A. Both sections of the building are currently
being renovated on a rent-to-suite basis. Building 1 has a letter of intent from Colonial Systems
to lease 89,040 square feet consisting of 39,842 square feet of high bay (23' 6') warehouse space,
35,666 square feet of low bay (11' 6') warehouse space and 13,532 square feet of second floor
office space leaving about 27,862 square feet of second floor office space, vacant and available
for lease. Building 1A contains 104,273 square feet of gross building area, being almost entirely
high bay (23' 6') warehouse space including a small 8,000 square foot first floor office area on the
northwestern section of the building. The improvement is located on a 21.740 acres or 946,994
square feet of land.
The building located at 50 Fordham Road is a 79,140 gross square foot office/flex/manufacturing
building having a height of about 16 feet. The building was renovated to suite the current tenant
AMETEK Inc. in 2008. The building has about 46,801 square feet of perimeter offices, bull pen
cubicles, conference rooms, lunch room and fitness room with the balance of the space 31,379
square feet being engineering clean rooms, manufacturing lab space, general manufacturing space
and a shipping and receiving area for a total net rentable building area of 78,180 square feet.
OWNERSHIP, SALES HISTORY & LEGAL DESCRIPTION OF PROPERTY
According to a review of public records, the subject property is owned by Wilmington Realty
Trust and the deed is recorded in the Middlesex County Registry in Certificates #19842, 19837,
19841, 19838, 16620, 19840, 19839, 142137 and 142138.
The subject property consisting of six parcels of land was sold by Leonard Barbo and Joseph N.
Cannarozzo as Trustees of Barbo Realty Trust for nominal consideration of $1.00 to Rosemarie
Stanieich, Joseph O. Branzetti Jr and Henry A. Dardeno as trustees of Wilmington Realty Trust
on September 10, 1973.
I do not represent that I am qualified to render a title examination. The legal descriptions detailed
above were gathered from the Middlesex County Registry of Deeds. A title search is beyond the
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scope of this assignment. If the situation warrants it, a qualified attorney, who is experienced
with title searches, should be retained.
SPECIAL ASSUMPTIONS AND LIMITING CONDITIONS
My valuation analysis and conclusions are premised on the following special assumptions and
limiting conditions. Should any of the statements below be found to be inaccurate, then my value
conclusion may require adjustment.
1.
It is assumed that the information provided to this firm by the client(s) in regard to general
building data and other pertinent data regarding the building is accurate and correct.
2.
It is assumed that the improvements are in accordance with the rules and regulations of the
local, county and state authorities.
3. It is assumed that all income and expense data and lease and rent roll data provided by the
owner is accurate and correct.
AREA AND NEIGHBORHOOD DESCRIPTION
Location Description – Wilmington
The subject property is located along the eastern side of Fordham Road just west of the
intersection of Fordham Road and Concord Street and Exit 39 off Route 93.
The town of Wilmington is a suburban industrial town occupying 17.2 square miles of the
watershed of the Ipswich River. Wilmington borders the towns of Andover, North Reading,
Reading, Woburn, Burlington, Billerica, and Tewksbury. Much of Wilmington was built on or
still is wetlands. The Ipswich River starts in Wilmington, and the Shawsheen River forms part of
Wilmington's border with Billerica.
The town had a primarily agricultural economy, with residents growing fruit, vegetables and
cranberries, but also had a number of slaughterhouses. The major industry in Wilmington,
however, was the Perry, Cutler and Company tannery. Since 1940 the population more than
quadrupled with particular growth between 1950 and 1965 after the completion of Route 128.
Although the town remained principally a farming community during the 18th, 19th and early
20th century, producing milk and eggs, suburban residential development has made a major
impact on Wilmington.
Today Wilmington is a mixed residential, commercial, industrial suburban community. It is
located 16 miles north /northwest of Boston and 11 miles southeast of Lowell. The town’s
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location allows for ready access to multiple modes of transportation. Interstates 495, 93 and 95
and Route 3 are within minutes of Wilmington. The Haverhill and Lowell MBTA commuter rail
lines make stops in Wilmington. Boston’s Logan International Airport and South Station,
terminus for the Amtrak rail line, are short commutes from Wilmington. Since Wilmington was
historically developed as a farming community, large sections of the town’s 17 square miles of
area remained undeveloped well into this century. The availability of buildable land and low to
moderate land values is in marked contrast to the urban communities that ring Boston. That
contrast coupled with Wilmington’s proximity to transportation modes which allow relatively
easy access to points throughout New England and beyond and Wilmington’s proximity to the
state’s capital city, the major technology and financial services businesses as well as medical and
educational institutions in the region have created significant growth pressures on the community.
A strong demand for housing and the completion of Interstate 93 in the early 60’s and Interstate
495 in the late 60’s were three major events, which spurred growth in this area. A strong economy
in the mid 1980’s and during the 1990’s has accelerated development across much of eastern
Massachusetts. As land and housing prices have increased in communities inside the Route 128
belt, businesses and homebuyers have come to Wilmington amongst other communities in search
of more affordable property. Other factors such as the desire to live in a more suburban setting,
concerns over public schools and crime have undoubtedly played a role in this migration. Growth
pressures have led to a significant reduction of open space in Wilmington. The consequence is
less land being available to satisfy the demands and needs of more people.
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REGIONAL LOCATION
(Middlesex County is highlighted in pink and Wilmington is highlighted in red)
The headwaters of the Ipswich River are in Wilmington. The town is rich in water resources, as
evidenced by the wetlands that cover 25% of the town’s total area. Groundwater aquifers
underlying Wilmington supply the majority of the town’s drinking water, as well as neighboring
and downstream communities (See Map 1). While the ample supplies of drinking water were an
important factor in encouraging development, the town’s water resources also impose limits on
that development. Settlement patterns have focused on fragmented upland areas, and regional
concerns about groundwater quality and quantity have increased as development has encroached
upon the environmentally sensitive lands of Wilmington and surrounding communities.
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REGIONAL MAP - 40 and 50 FORDHAM ROAD
Wilmington is highlighted in pink and the subject’s location is identified with a red arrow
Wilmington has an open town meeting form of government and an unemployment rate of 5.0%
and a Moody’s Bond rating and Standards and Poor Bond rating of AA+.
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Wilmington’s population has grown from 21,363 inhabitants in 2000 to 22,325 in 2010 a 4.5%
increase.
The median household income in the town was $71,544 in 2000 increasing to $84,628 in 2007
increasing further to $100,861 in 2011.
Residential Real Estate Market
Real estate values in Wilmington for single-family homes and condominiums have been on a
roller coaster ride over the last few years. Median single family home values previously peaked
in 2005 at $385,000 decreasing to $315,000 in 2011 then increasing to $342,000 in 2012 and to
$365,000 in 2013 with a further increase to $374,000 in the first ten months of 2014. This
represents an increase of 6.73% in 2013 and 2.47% for the first ten months of 2014.
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Condominium sale prices increased by 9.71% in 2013 and by another 7.90% in the first ten
months of 2014.
Source: The Warren Group
Transportation
Transportation routes divide Wilmington, carrying traffic to Boston, Lowell, and neighboring
towns. Employees from throughout the region are drawn to industrial districts along Interstate 93
in the eastern section of town. The town’s shopping center along Route 38 brings considerable
traffic. Industrial and commercial centers in Woburn and Burlington and beyond attract passthrough traffic along Routes 62 and 38.
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MBTA Commuter Rail provides service from Boston's North Station with the Wilmington
station on its Lowell Line and the North Wilmington station on its Haverhill/Reading
Line. LRTA provides bus service from Wilmington station via Route 38 to Lowell Station.
Wilmington is very accessible by automobile and rail. There are 4 exits off Interstate 93, three
state routes (62, 129, and 38, which connects with route 128), and two MBTA commuter rail
stations. There is no bus transit, although the MBTA does provide The Ride, a paratransit service
for the elderly and disabled. Biking and walking are not always feasible given the spread out
pattern of development, and main roads are not always conducive to walking or biking.
While the town has an ongoing sidewalk improvement program designed to allow students to
walk safely to school, there is no similar effort to make existing roads more bicycle friendly. The
MAPC’s 1996 regional transportation plan places a high priority on a bike lane along route 38, as
well as bike racks at the town’s two commuter rail stations.
General Character of the Neighborhood
The subject property is located in the eastern section of Wilmington just east of Route 93 at Exit
39 and off the northern side of Concord Street less than one half of a mile from Route 93 and
abutting the reading town line to the east.
Fordham Road is a dead ended cul de sac developed with mostly office/flex/manufacturing
building and industrial uses. At the beginning of Fordham Road at the intersection of Fordham
Road and Concord Street and abutting the subject properties 40 Fordham Road building to the
south is the International Family Church although the building is designed more as of an office
building than a church.
Across Fordham Road to the west is at 99 Fordham Road is a 98,481 square foot multi-tenanted
complex of low bay office/warehouse space. Also across Fordham Road is the 100-110 Fordham
Road complex consisting of four buildings. This complex has two office buildings of 39,368 and
98,730 for a total of 138,098 square feet of office space, a research and development building
containing 22,701 square feet and a warehouse building containing 131,649 square feet all on a
40.1 acre site.
Further north along Fordham Road is 260 Fordham Road a 67,176 square foot light industrial
building with four tenants. At the end of the cul de sac is the Shriners Auditorium. All in all
Fordham Road is a commercial/industrial developed roadway.
In addition directly across the signalized intersection of Fordham Road and Concord Street is a
development known as Riverpark Drive. Riverpark drive has of five large buildings consisting of
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office, flex, and warehouse style building occupied by Teradyne, Paycheck, Soft link, Avnet and
several other smaller users.
NEIGHBORHOOD MAP - 40 and 50 FORDHAM ROAD
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NEIGHBORHOOD AERIAL MAP - 40 and 50 FORDHAM ROAD
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SUBURBAN INDUSTRIAL MARKET
The subject property is located in what is considered the Route 128 North submarket. In
analyzing the 128 North submarket, several market research studies were relied on including
CBRE Suburban Boston Industrial Market View, Cushman Wakefield’s Marketbeat Industrial
Snapshot Q3 2014, CoStar and NAI Hunneman.
Source: CBRE
Overall, the amount of industrial space in the Route 128 North submarket area varies depending
upon the survey. Estimates range from 17,240,9435 square feet to 26,690,229 square feet of
industrial space in the Route 128 North submarket. The differences are largely due to differences
in the cities and towns included in each of their submarket boundaries.
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According to CBRE the Boston industrial market picked up steam in 2013 and 2014 and now is
nearing a strong recovery across all submarkets. There was a consistent and significant increase
in tenant and user/buyer velocity and consequently a stream of positive absorption and dwindling
availability. While the market for low-bay industrial space has remained static, the big story has
been a flight to quality, with distributors focused solely on modern, high bay warehouse space.
The decreasing supply of Class A availabilities has forced attention to low-bay space, which is
just now showing early signs of recovery. This trend should progress as the prospect of new
Class A availabilities seems challenged.
The solid absorption of and lack of quality supply for Class A warehouse space has pushed rents
upwards throughout the market. Class A warehouse space with 30’+ clear heights is now
commanding rental rates above $6.00/SF NNN, a level that has not been seen since the last
market cycle. The momentum is expected to continue and speculative construction is back on the
horizon. According to the CBRE Survey the 128 North Submarket has 14.1% availability and an
11.8% vacancy with average asking rents of $8.67 per square foot.
Source: CBRE
Cushman & Wakefield’s survey indicates an overall vacancy of 9.4% in the Route 128 North
submarket and an average rental rate of $6.63/SF for industrial space.
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Source: Cushman & Wakefield
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NAI Hunneman’s Survey places 26,690,229 square feet in the Route 128 North and 4,716,687 in
the 128 Northwest submarket. The vacancy rate in the 128 North Submarket is reported at 3.9%
and 6.4% in the 128 Northwest Submarket. Average rental rate are estimated at $7.07 in the 128
North Submarket and $6.89 in the 128 Northwest Submarket.
Source: NAI Hunneman Industrial Market Review Q2/2014
Overall, the entire Greater Boston Industrial market continued to trend in a positive direction.
This marks the eighth consecutive quarter of positive traction. Transaction activity has pushed
total industrial vacancy down year-over-year. Overall, continued tightening in the market and a
general lack of new supply will continue to strengthen market fundamentals, driving up rental
rates and potentially leading to build-to-suit and speculative construction discussions in 2015.
Moving forward, continuing positive absorption will strengthen market fundamentals and rents
should increase in certain well-located markets.
Economy
The U.S. economy is expanding at the fastest pace since 2003, providing ample evidence that
GDP growth will be on solid footing as 2015 begins. Equity markets are hovering near all-time
highs, unemployment is below 6 percent and falling, and job gains have been impressive — all
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reflective of strong economic momentum. Consumers echoed the good feelings as confidence
reached an eight-year high in December. In addition, with foreclosures from the housing crisis
beginning to fall off credit reports, home values have begun a solid recovery. This convergence of
positive trends will cause the Federal Reserve to deeply consider its interest rate strategies. The
headwinds still confronting growth include the sizable divergence between the health of the U.S.
economy and that of many of its trading partners, and risks spawned by the rapid plunge in oil
prices. Nonetheless, GDP growth should exceed 3 percent in 2015 and could surprise to the
upside, depending on Fed policies in the coming months.
GDP growth was 5 percent in the third quarter, the highest level achieved in 11 years. An increase
in consumer spending drove much of the gain during the period. Consumers contributed 2.2
percentage points of economic expansion as spending focused on healthcare. Businesses also
supported the rise in GDP through expenditures on software and structures. The impact of fiscal
drag is finally gone, which boosted spending by the government on a year-ago basis for the first
time since 2009.
Oil prices have fallen 40 percent since the most recent peak last summer, creating a ripple effect
throughout the world. In the U.S., commuters are partially redeploying the savings into
consumption, which helped drive last quarter’s blistering GDP growth.
The movement of goods from U.S. ports to manufacturers, retailers and distributors is supporting
a significant increase in transportation and warehouse staffing. Including the addition of 13,300
positions in October, more than 100,000 workers have been hired year to date to handle the
stocking and movement of goods. New space needs are also arising in warehouse and distribution
properties, keeping the national industrial vacancy rate on course to fall 100 basis points this year
to 7.1 percent.
Summary
Overall, the amount of industrial space in the Route 128 North Submarket area varies depending
upon the survey. Although market fundamentals are improving throughout the region, values for
industrial property continue to vary greatly depending on the location and circumstances of each
transaction.
Overall vacancy rates for the Route 128 North submarket vary depending upon the survey used,
with vacancy rates ranging from 3.9% to 11.0% for all industrial space.
Average rental rates ranged from $6.83 per square foot to $8.67 per square foot for all properties
and form a tighter range than the vacancy rates quoted.
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Although the different research overviews vary, the true numbers are most likely somewhere in
the middle. Taken as a whole these surveys all indicate a strengthening industrial market with
employment holding steady and relatively little new construction over the last several years,
which should increasingly constrict the availability of quality properties.
SITE DESCRIPTION – 40 FORDHAM ROAD
The following grid summarizes the significant site data
40 Fordham Road, Wilmington, MA
SITE CHARACTERISTICS
Location:
The subject property is located along the eastern side of Fordham Road
just west of the intersection of Fordham Road and Concord Street and
Exit 39 off Route 93.
Current Use of the Property:
The subject property is being renovated for use as a high bay
warehouse with mezzanine office.
Parcel Size:
According to assessor’s records, the site has 946,994 square feet or
21.740 acres of land area.
Frontage/Access:
Fordham Road frontage with two curb cuts accessing the property
Shape:
The site is irregular in shape.
Visibility:
The site has good visibility to Fordham Road
Topography:
The subject has a level topography.
Flood Plain, Wetlands, and
Watershed:
Community Panel #25017C0292E dated July 4, 2010, Zone X and A.
The subject property is located in a Zone X and A Flood Zone.
Soil, Subsoil, and Drainage:
The soil conditions observed at the subject property appear to be typical
of the region and adequate to support development.
Utilities:
All utilities are available to the site including gas, electric, sewer and
water. The property has an on-site waste water treatment facility
Site Improvements:
The site is improved with a single story 233,172 gross square foot high
bay warehouse with parking for 284 vehicles and 75 tractor
trailer spaces.
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Deed Restrictions:
None noted.
Easements/Encroachments:
No known encumbrances or easements noted. A title search is beyond
the scope of this assignment. If the situation warrants it, a qualified
attorney, who is experienced with title searches, should be retained.
Hazardous Substance:
No known environmental issues were uncovered. An environmental
site assessment is beyond the scope of this report. If the situation
warrants it, a qualified environmental survey firm who are experienced
with environmental site assessments should be retained.
Landscaping:
None
Parking:
This property has 284 parking spaces allocated to Building 1 and
1A of the 1,327 parking spaces of the total property consisting of
40 and 50 Fordham Road. This property also has an additional
75 tractor trailer parking spaces behind the building that are
rented to TJX on a Tenant at Will basis.
Adverse Conditions:
None noted.
For reference, see attached maps.
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ASSESSOR’S MAP - 40 and 50 FORDHAM ROAD
40 Fordham Road is the lower larger building – 50 Fordham Road is the upper smaller building
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DETAILED ASSESSORS MAP
40 Fordham Road
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SITE DESCRIPTION – 50 FORDHAM ROAD
The following grid summarizes the significant site data
SITE CHARACTERISTICS
Location:
The subject property is located along the eastern side of Fordham Road
just west of the intersection of Fordham Road and Concord Street and
Exit 39 off Route 93.
Current Use of the Property:
The subject property is used as a office/flex/manufacturing building
Parcel Size:
According to assessor’s records, the site has 507,038 square feet or
11.64 acres of land area.
Frontage/Access:
Fordham Road frontage with two curb cuts accessing the property.
Shape:
The site is irregular in shape.
Visibility:
The site has good visibility to Fordham Road
Topography:
The subject has a level topography.
Flood Plain, Wetlands, and
Watershed:
Community Panel #25017C0292E dated July 4, 2010, Zone X and A.
The subject property is located in a Zone X and A Flood Zone.
Soil, Subsoil, and Drainage:
The soil conditions observed at the subject property appear to be
typical of the region and adequate to support development.
Utilities:
All utilities are available to the site including gas, electric, sewer and
water. The property has an on-site waste water treatment facility
Site Improvements:
The site is improved with a 78,180 square foot
office/flex/manufacturing building with parking for 250 vehicles
and 18 to 20 tractor trailer spaces.
Deed Restrictions:
None noted.
Easements/Encroachments:
No known encumbrances or easements noted. A title search is beyond
the scope of this assignment. If the situation warrants it, a qualified
attorney, who is experienced with title searches, should be retained.
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Hazardous Substance:
No known environmental issues were uncovered. An environmental
site assessment is beyond the scope of this report. If the situation
warrants it, a qualified environmental survey firm who are experienced
with environmental site assessments should be retained.
Landscaping:
None
Parking:
This property has 250 parking spaces allocated to the tenant of
the 1,327 parking spaces of the total property consisting of 40
and 50 Fordham Road. This property also has an additional 18 to
20 tractor trailer parking spaces behind the building that are
rented to Air Tiger on a Tenant at Will basis.
Adverse Conditions:
None noted.
For reference, see attached maps.
DETAILED ASSESSORS MAP
50 Fordham Road
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AERIAL SITE VIEW 40 and 50 FORDHAM ROAD
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SITE PLAN 40 and 50 FORDHAM ROAD
BUILDING LAYOUT 40 and 50 FORDHAM ROAD
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FLOOD MAP – 40 and 50 FORDHAM ROAD
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IMPROVEMENT DESCRIPTION – 40 FORDHAM ROAD
The following grid summarizes the significant improvement data.
IMPROVEMENT CHARACTERISTICS
Property Type & Description:
The subject properties consist of two adjacent buildings located at
40 and 50 Fordham Road in Wilmington, MA and are owned by
the same entity, Wilmington Realty Trust. The building located at
40 Fordham Road is a 233,172 gross square foot high bay
warehouse including about 41,030 square feet of second floor
office space. This building is further subdivided into Building 1
and Building 1A. Both sections of the building are currently
being renovated on a rent-to-suite basis. Building 1 has a letter of
intent from Colonial Systems to lease 89,040 square feet
consisting of 39,842 square feet of high bay (23' 6') warehouse
space, 35,666 square feet of low bay (11' 6') warehouse space and
13,532 square feet of second floor office space leaving about
27,862 square feet of second floor office space, vacant and
available for lease. Building 1A contains 104,273 square feet of
gross building area, being almost entirely high bay (23' 6')
warehouse space including a small 8,000 square foot first floor
office area on the northwestern section of the building.
Year Built:
1970
Gross Building Area (GBA):
GBA = 233,172 square feet
Net Rentable Building Area
(NRA):
NRA = 221,175 square feet based on the leases reviewed and
discussions with the unit owner.
Construction Quality:
Good
Occupancy:
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Pro Rata
Unit/SF
Share
Building 1
89,040
76.17%
Unit
Tenants
1
Colonial Systems
2
Mezzaine
27,862
Totals
116,902
23.83%
Monthly
Rent
Annual
Rent
Rent/SF
$37,100.00
$445,200
$5.00
Vacant
Building 1A
1
2
High Bay
Warehouse
High Bay
Warehouse
Totals
52,136
50.00%
Vacant
52,136
50.00%
Vacant
104,272
Renovations:
The property is being renovated on a rent-to-suit basis
Condition:
Good.
Appeal/Appearance:
Typical for market.
FOUNDATION, FRAME & EXTERIOR
Foundation:
Poured concrete foundation with a slab floor.
Basement Use:
NA
Floor
Construction:
Poured Concrete
Structural
Framing:
Steel frame
Exterior Walls:
Concrete block and brick with pre-finished metal above.
Windows/Doors:
Aluminum frame plate glass windows.
Roof:
Flat
Roof Cover:
Carlisle Rubber membrane
Service Access/
Overhead Doors:
10 Loading Docks
Other:
NA
INTERIOR BUILD OUT
Building Interior
Layout:
The building known as 40 Fordham Road is further divided into Building 1 and
Building 1A. Building 1 has a total of 116,902 square feet with 39,842 square feet
of high bay (23' 6') warehouse space, 35,666 square feet of low bay (11' 6') space
and 41,394 square feet of second floor office space. Building 1A has a total of
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104,273 square feet of mostly high bay warehouse space with about 8,000 square
feet of first floor office space.
Floor Covering:
Walls:
Painted concrete in the warehouse areas and carpeting in the office areas.
Painted Concrete in the warehouse area and painted drywall in the office
areas.
Ceilings:
Acoustical tile ceilings in the office areas and an exposed painted steel roof
joists and corrugated metal ceiling.
Lavatories:
Three sets of men's and women's restroom
Lighting:
New halogen suspended lighting and strip florescent lighting is to be installed in
the warehouse with recessed florescent lighting in the office areas.
MECHANICAL SYSTEMS
Heat:
Gas-fired package heat/AC Systems.
Cooling:
Fully air conditioned
Electric:
Four 2000 amps, 480 volt, 3-phase electrical system
Plumbing
Condition:
Water treatment facility
Elevator:
One elevator to be installed.
ADA Compliance:
The subject property appears to be handicapped accessible, however the appraiser is
not an expert in ADA compliance and a qualified expert should be consulted.
Security Features:
Security systems and fire protection are assumed to be in good working order,
adequate for the building, and to meet all local fire marshal requirements.
Sprinkler:
Wet Sprinkler systems
PROPERTY ANALYSIS
Design &
Functional Utility
The overall design, lay-out and functional utility of the building is typical of the
current market.
Deferred
Maintenance:
No deferred maintenance noticed at the time of inspection in 50 Fordham Road.
The buildings at 40 Fordham Road are being renovated as they are leased and any
deferred maintenance is being renovated on an as needed basis. The appraiser
does not represent himself as an engineer or building inspector. If the
situation warrants it, a qualified engineer or building inspector should be
retained.
Additional
Features:
Current there are four loading dock and six will be added to the Colonial Systems
space for a total of 10 dock height loading doors with load levelers, electric roll up
doors, bumpers and air cushions.
Comments:
The subject property is in average condition. It was originally constructed in 1998.
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BUILDING SKETCH – 40 FORDHAM ROAD
40 Fordham Road
This 3,810/SF building was demolished to make way for additional parking
Artist’s Rendering 40 Fordham Road After Renovations
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LEASE DETAILS - 40 FORDHAM ROAD - Building 1 and 1A
Unit
Tenants
1
Colonial
Systems
Mezzaine
Totals
Unit
Area
89,040
Pro Rata
Share
76.17%
Start
Date
End Date
7/1/2015 06/31/2025
27,862 23.83%
116,902 100.00%
Vacant
52,136
50.00%
Vacant
52,136
50.00%
Vacant
Term Monthly
(Yrs)
Rent
Building 1
10
$18,386
Annual
Rent
Rent
SF Options
$220,630
The tenant will pay for all of their
2 5-Year utilities, and their pro-rata share of
$5.00
Options operating expenses and real estate
taxes.
Terms
Building 1A
1
2
High Bay
Warehouse
High Bay
Warehouse
Totals
104,272 100.00%
Totals 1 and 1A
$18,386
$220,630
221,174
Colonial Systems Lease Cash Flow
Colonial Systems
Year
1
2
3
4
5
6
7
8
9
10
Option
Option
Annual Rent Monthly Rent
$/SF
7/1/2015
6/30/2016
$150,000 $12,500.00
$5.00
7/1/2016
6/30/2017
$250,000 $20,833.33
$5.00
7/1/2017
6/30/2018
$489,720 $40,810.00
$5.50
7/1/2018
6/30/2019
$489,720 $40,810.00
$5.50
7/1/2019
6/30/2020
$511,980 $42,665.00
$5.75
7/1/2020
6/30/2021
$511,980 $42,665.00
$5.75
7/1/2021
6/30/2022
$534,240 $44,520.00
$6.00
7/1/2022
6/30/2023
$534,240 $44,520.00
$6.00
7/1/2023
6/29/2024
$556,500 $46,375.00
$6.25
6/30/2024
6/29/2025
$556,500 $46,375.00
$6.25
95% of Fair Market Rent
Two 5 Year Options
Unit Area
89,040
% Increase SF Leased
30,000
0.00%
50,000
10.00%
89,040
0.00%
89,040
4.55%
89,040
0.00%
89,040
4.35%
89,040
0.00%
89,040
4.17%
89,040
0.00%
89,040
As the value requested in this analysis by the client is the “As Is” value for the property, I
accomplished this by first valuing the property “As Complete” as plans for the property call for it
to be leased and renovated on a rent-to-suit basis. The lease to Colonial System calls for the unit
to be fit up at a total cost of $1,737,797 or $19.52 per square foot. Added to the Colonial Systems
renovation is the cost to also renovate the 27,862 square feet of vacant mezzanine office space
totaling $35.00 per square foot or $975,170 for a total renovation cot of $2,712,967 or $23.21 per
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square foot. The renovation costs are broken down into tenant fit up expenses and capital
improvements. It is assumed that the capital improvements are required to achieve the rent agreed
to by Colonial Systems.
The fit up costs for Colonial System was provided by the owner of the property and consists of
actual expense and also quote for work that has not been completed. Detailed in the following
exhibit are the fit up costs for the Colonia System unit.
Colonial Systems Fit Up Expenses
Description
40 Fordham Street Building 1
Renovation Expenses
Expenses
Area
Office & Showroom Fit up
Additional Docks
Foundation under pinning
Floor Seal
Ceiling painted
Interior wall paint
Lighting
Electrical metering
Fire & Life Safety system upgrade
Excavation & Paving
Bathroom upgrade
Façade with windows
New South Entrance
Landscaping
Irrigation system replacement
Architectural & engineering Fees
Elevator state Inspection
HVAC maintenance
Roof penetrations repairs
Permitting
Variance allowance for adjustment
Total Colonial Fit Up Expense
Additional Mezzanine Office Build-Out
Total Fit Up Expense Building 1
$35.00
$15,000.00
$30,000.00
$1.00
$0.32
$1.00
$80,000.00
$25,000.00
$80,000.00
$2.75
$15,000.00
$35.00
$315,000.00
$15,000.00
$20,000.00
$180,000.00
$2,000.00
$15,000.00
$1,500.00
$1,737.80
Contingency
$35.00
8,800
6
1
76,000
76,000
24,240
1
1
1
40,000
3
3,200
1
1
1
1
1
1
3
1
SF
Loading Docks
SF
SF
SF
SF
SF
27,862 SF
Tenant Improvements
Landlord Capital Improvements
Dollars
$308,000
$90,000
$30,000
$76,000
$24,320
$24,240
$80,000
$25,000
$80,000
$110,000
$45,000
$112,000
$315,000
$15,000
$20,000
$180,000
$2,000
$15,000
$4,500
$1,737
$180,000
$1,737,797 $19.52
$975,170
$2,712,967
$23.21 Per SF
$1,840,230
$872,737
Likewise, I have estimated the cost to renovate Building 1A in a similar fashion to Building 1 and
the Colonial Systems fit up. Assuming that the Building 1A would most likely be leased as two
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equal units of 52,136 square feet with about 8,000 square feet of finished office space for each
unit. I have estimated the fit up expenses from the estimated renovation cost for Building 1
Colonial Systems projected renovations costs. Renovation costs are detailed below.
Building 1A - 40 Fordham Road Estimated Fit Up Expenses
Description
Office & Showroom Fit up
Additional Docks
Foundation under pinning
Floor Seal
Ceiling painted
Interior wall paint
Lighting
Electrical metering
Fire & Life Safety system upgrade
Excavation & Paving
Bathroom upgrade
Façade with windows
New South Entrance
Landscaping
Irrigation system replacement
Architectural & engineering Fees
Elevator state Inspection
HVAC maintenance
Roof penetrations repairs
Permitting
Variance allowance for adjustment
Total Fit Up Expense Building 1A
40 Fordham Street Building 1A
Estimated Renovation Expenses
Expenses
Area
$35.00
$15,000.00
$30,000.00
$1.00
$0.32
$1.00
$80,000.00
$25,000.00
$80,000.00
$2.75
$15,000.00
$35.00
$315,000.00
$15,000.00
$20,000.00
$180,000.00
$2,000.00
$15,000.00
$1,500.00
$2,453.65
Contingency
16,000
6
1
104,273
104,273
104,273
2
2
2
40,000
4
3,200
1
2
2
1.5
2
2
6
1
SF
Loading Docks
SF
SF
SF
SF
SF
Tenant Improvements
Landlord Capital Improvements
Dollars
$560,000
$90,000
$30,000
$104,273
$33,367
$104,273
$160,000
$50,000
$160,000
$110,000
$60,000
$112,000
$315,000
$30,000
$40,000
$270,000
$4,000
$30,000
$9,000
$1,737
$180,000
$2,453,650
$23.53 SF
$1,286,913
$1,166,737
Total fit-up costs are estimated at $2,453,650 or $23.53 per square foot to bring the property up
to a level where a rent of $6.50 per square foot could be obtained.
It is assumed that the capital improvements are required to achieve the market rent estimated for
this space.
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40 and 50 FORDHAM ROAD REAR PARKING
In addition the income that the buildings provide, the rear of the paved parking area has been
leased to two tenants on a Tenant At Will basis.
TJX rents 75 tractor trailer parking spaces behind 40 Fordham Road property for 5 to 6 months
out of the year during their busy season at $100 per space per month providing additional income
of between $37,000 and $45,000 annually and have been doing so for over five years.
Similarly, Air Tiger rents 18 to 20 tractor trailer parking spaces behind 50 Fordham Road on a
Tenant at Will basis for a similar rental rate of $100 per parking space per month, considerably
adding $21,600 in income to the property.
As these two tenants do not have formal leases and are rented on a Tenant at Will basis and would
require a substantially higher capitalization rate than the income from the buildings I have not
included this cash flow in the income analysis.
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SUBJECT PHOTOS - 40 FORDHAM ROAD
Fordham Road looking north. Subject properties are to the
right
South side of 40 Fordham Rd Building 1
South and rear side of 40 Fordham Rd Building 1
Rear of 40 Fordham Rd Building 1
Rear loading docks 40 Fordham Rd Building 1
Rear of 40 Fordham Rd Building 1
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Rear loading docks 40 Fordham Rd Building 1A
Rear of 40 Fordham Rd Building 1A
Driveway access to 40 and 50 Fordham Rd
Courtyard between 40 and 50 Fordham Rd
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North side entrance to 40 Fordham Rd Building 1A
North and west side of 40 Fordham Rd Building 1A
West side of 40 Fordham Road
South side of 40 Fordham Road
Rear parking area
First floor office area in Building 1
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High bay warehouse area in Building 1
Low bay warehouse area in Building 1
Low bay warehouse space Building 1
High bay warehouse space Building 1A
High bay warehouse space Building 1A
Electrical sub panel Building 1A
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High bay warehouse in Building 1A
First floor office area in Building 1A
High bay warehouse in Building 1A
Mezzanine office area Building 1
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High bay warehouse in Building 1
Typical bathroom
Electrical service Building 1
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Roof Building 1
Roof Building 1A
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IMPROVEMENT DESCRIPTION – 50 FORDHAM ROAD
The following grid summarizes the significant improvement data.
IMPROVEMENT CHARACTERISTICS
Property Type &
Description:
The building located at 50 Fordham Road is a 79,140 gross square
foot office/flex/manufacturing building having a height of about 16
feet. The building was renovated to suite the current tenant
AMETEK Inc. in 2008. The building has about 46,801 square feet
of perimeter offices, bull pen cubicles, conference rooms, lunch
room and fitness room with the balance of the space 31,379 square
feet being engineering clean rooms, manufacturing lab space,
general manufacturing space and a shipping and receiving area for a
total net rentable building area of 78,180 square feet.
Year Built:
1970
Gross Building Area
(GBA):
GBA = 79,140 square feet according to assessors records.
Net Rentable Building Area
(NRA):
NRA = 78,180 square feet based on the leases reviewed.
Construction Quality:
Good
Occupancy:
Unit
Tenants
1
AMETEK
Totals
Pro Rata
Share
Building 1
78,180
100.00%
78,180
Unit/SF
Monthly
Rent
Annual
Rent
Rent/SF
$46,647.33
$559,768
$7.16
Renovations:
The property was renovated for the current tenant in 2008
Condition:
Good.
Appeal/Appearance:
Typical for the market.
FOUNDATION, FRAME & EXTERIOR
Foundation:
Poured concrete foundation with a slab floor.
Basement Use:
NA
Floor
Construction:
Poured concrete
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Structural
Framing:
Steel frame
Exterior Walls:
Concrete block and brick with pre-finished metal above.
Windows/Doors:
Aluminum frame plate glass windows.
Roof:
Flat
Roof Cover:
Carlisle Rubber membrane
Service Access/
Overhead Doors:
3 Loading Docks
Other:
NA
INTERIOR BUILD OUT
Building Interior
Layout:
The building has a lobby area off the parking area on the southern side of the
building. The eastern end of the building is built-up with perimeter individual
offices, a section of cubical offices, interior individual offices, conference rooms,
and a men's and ladies restrooms. The central section of the building contains the
executive offices and a second men's and ladies restrooms and the general
manufacturing area. Manufacturing lab space and clean lab space outlines the
central core manufacturing area with additional executive offices along the western
perimeter of the building. The rear or southern side of the building is built-out with
the mechanical room, shipping and receiving area, exercise room and another
general manufacturing area.
Floor Covering:
Painted concrete and vinyl tile in sections of the manufacturing and lab areas
and carpeting in the office areas
Walls:
Painted concrete and painted drywall in the lab and manufacturing areas and
painted drywall in the office areas.
Ceilings:
Acoustical tile ceilings in the office and lab areas and an exposed painted steel
roof joists and corrugated metal ceiling.
Lavatories:
Two sets of men's and women's rest rooms
Lighting:
Recessed florescent lighting is the office areas and strip florescent in the lab
and manufacturing areas.
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MECHANICAL SYSTEMS
Heat:
Gas-fired package heat/AC Systems.
Cooling:
Fully air conditioned
Electric:
Four 2000 amps, 480 volt, 3-phase electrical system
Plumbing
Condition:
Plumbing is assumed to be built to local building codes.
Elevator:
None
ADA
Compliance:
The subject property appears to be handicapped accessible, however the
appraiser is not an expert in ADA compliance and a qualified expert should
be consulted.
Security
Features:
Security systems and fire protection are assumed to be in good working order,
adequate for the building, and to meet all local fire marshal requirements.
Sprinkler:
Wet Sprinkler System
PROPERTY ANALYSIS
Design &
Functional Utility
The overall design, lay-out and functional utility of the building is typical of the
current market.
Deferred
Maintenance:
No deferred maintenance noticed at the time of inspection in 50 Fordham Road. The
buildings at 40 Fordham Road are being renovated as they are leased and any
deferred maintenance is being renovated on an as needed basis. The appraiser
does not represent himself as an engineer or building inspector. If the
situation warrants it, a qualified engineer or building inspector should be
retained.
Additional
Features:
Waste water treatment plant
Comments:
The subject property is in average condition. It was originally constructed in 1998.
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BUILDING SKETCH – 50 FORDHAM ROAD
LEASE DETAILS - 50 FORDHAM ROAD
Unit
1
Tenants
Unit
Area
Pro Rata
Share
Start
Date
End Date
AMETEK
78,180
100.00% 11/1/2008 4/30/2019
Total
78,180
100.00%
Term Monthly
(Yrs)
Rent
10
Annual
Rent
$18,386
$559,768
$18,386
$559,768
Rent
SF
$7.16
Options
Terms
2 Five- The tenant will pay for all of their
Year utilities, and operating expenses
Options and provide routine maintenance.
AMETEK, Inc is a global manufacturer of electronic instruments and electromechanical devices
with headquarters in the United States and over 80 manufacturing sites worldwide.
Ametek today consists of two major groups (the Electronic Instruments Group and
the Electromechanical Group). Together, these two groups and their respective divisions combine
a total of over 100 brands, including analytical instruments, monitoring, testing and calibration
devices as well as electrical motors, pumps and interconnects. The company's headquarters are in
Berwyn, Pennsylvania.
AMETEK is listed on the New York Stock Exchange. The common stock of AMETEK is a
component of the S&P 400 index and the Russell 1000 Growth Index and has a Standard and
Poor’s credit rating of BBB.
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Year
6 Months
1-5
5-10
Option
10-15
15-20
AMETEK
Begin
11/1/2008
6/1/2009
6/1/2014
78,180 SF
End
Annual Rent Monthly Rent
5/31/2009 5/31/2009
$0.00
5/31/2014 $520,678
$43,389.83
5/31/2019 $559,768
$46,647.33
6/1/2019
5/31/2024
6/1/2024
5/31/2029
Two 5 Year Options
$/SF
$0.00
$6.66
$7.16
% Increase
0.00%
0.00%
7.51%
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Front view from across Fordham Road
Front view from across Fordham Road
Driveway access to main entrance
Main entrance
Main entrance
Courtyard between 40 and 50 Fordham Road
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Rear parking lot
Rear of the subject property
Rear loading docks
North side of the subject property
North side entrance
North and front side of the subject property
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North side driveway access
Main lobby
Bull pen cubicle area
Engineering Lab Work Area
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General manufacturing area
Shipping and receiving area
General manufacturing area
Electrical service
Exercise room
Rest room
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ASSESSMENT - 40 and 50 FORDHAM ROAD
According to assessors' records, the subject property located at 40 Fordham Road has 233,172
square feet of gross building area and is located on a 21.74 acre site. The property located at 50
Fordham Road has a gross building area of 79,140 square feet and is situated on a 11.64 acre site.
The property located at 50 Fordham Road also includes the waste water treatment plant.
Assessment Data
Address
Map / Lot
Owner
Land Area (Acres)
Building Area
Land Assessment
Building Assessment
Extra Features
Out Buildings
Total Assessment
Comercial Tax Rate
Residential Tax rate
Commercial Tax Expense
Residential Tax Expense
Total Tax Expense
Community Preservation Act Percent
Community Preservation Act Expense
Total Taxes
Taxes/SF of GBA
Assessment/SF of GBA
40 Fordham Road
50 Fordham Road
Map 91 Lot 131
Map 91 Lot 131-A
Wilmington Realty
Trust
Wilmington Realty
Trust
21.74
221,174
$3,782,200
$797,900
$9,400
$462,000
$5,051,500
$33.04
$14.24
$166,901.56
$0.00
$166,901.56
0.00%
$0.00
$166,901.56
11.64
79,140
$2,474,600
$2,599,700
$39,800
$3,200
$5,117,300
$33.04
$14.24
$169,075.59
$0.00
$169,075.59
0.00%
$0.00
$169,075.59
$0.75
$22.84
$2.14
$64.66
The tax rate in the Town of Wilmington for residential property is $14.24 of assessed value and
the commercial property tax rate is $33.04 per thousand of assessed value. There is no add-on to
the tax expense for the Community Preservation Act.
The current assessment for 40 Fordham Road is not based on the to-be-renovated building.
Therefore I have reviewed other high bay warehouse properties in Wilmington to determine an
estimated assessment and tax expense for the renovated building. Several comparable properties
tax assessments and tax expenses are detailed in the following grid.
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Address
42 Industrial Way
377 Balardvale Rd
255 Andover St
301 Ballardvale St
Average
City
Wilmington
Wilmington
Wilmington
Wilmington
Building
Area
124,815
48,000
85,488
123,700
Land
Assessment
$1,747,200
$1,004,900
$1,048,300
$1,763,100
Building
Assessment
$4,449,800
$1,672,700
$2,571,900
$5,863,600
Total
Assessment
$6,197,000
$2,677,600
$3,620,200
$7,626,700
Taxes
$204,749
$88,468
$119,611
$251,986
Taxes Per SF
$1.64
$1.84
$1.40
$2.04
$1.73
For this analysis I have used the average tax expense per square foot ($1.73) for the subject
property’s renovated building indicating a tax expense of $382,616 for the subject property.
ZONING AND OTHER LAND USE CONTROLS
The subject properties are located in the Highway Industrial district and also in the Ground Water
Protection District.
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ZONING MAP
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ZONING MAP DETAIL
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DIMENSIONAL REGULATIONS
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TABLE OF USES
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Required and Existing Dimensional Requirements for 40 and 50 Fordham St.
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HIGHEST & BEST USE
A prerequisite to a meaningful valuation is a sound estimate of the most profitable likely use of a
property. Highest and best use is defined as "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."5
Implied within this definition is recognition of the contribution of that specific use to community
environment or development goals in addition to wealth maximization of individual property
owners. Also implied is that the determination of highest and best use result from the appraiser’s
judgment and analytical skills, i.e., that the use estimated from analysis represents an opinion, not
a fact to be found. In appraisal practice, the concept of highest and best use represents the
premise upon which value is based.
My analysis addresses four criteria of highest and best use. These are as follows:
Physically Possible
To what uses is it physically possible to put the site in
question?
Legally Permissible
What uses are permitted by zoning and deed restrictions on
the site in question?
Financially Feasible
Which possible and permissible uses will produce a net
return to the owner(s) of the site?
Maximally Productive
Among the feasible uses, which will produce the highest net
return or the highest present worth?
Highest and best use is analyzed in two steps. The first assumes the site is vacant and the second
analyzes it as improved.
Highest and Best Use – As Vacant - 40 Fordham Road
The subject property consists of a total of 946,994 square feet of land area or 21.740 acres. It is
located in the Town of Wilmington in an area of industrial development. The subject properties
are located in the Highway Industrial district and also in the Ground Water Protection District.
5 Ibid, Page 93.
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I find that if the land were vacant and available for development, it would be most suited for a
maximum density, industrial use in keeping with the surrounding neighborhood uses.
Highest and Best Use – As Improved - 40 Fordham Road
The subject is improved with a 233,172 gross square foot industrial building that is being
renovated on a rent-to-suit basis. The building was originally constructed in 1970 and occupied
by GE for a number of years. Currently Colonial Systems has signed a Letter of Intent to lease
89,040 square feet of Building 1 at 40 Fordham Road leaving about 27,862 square feet of second
floor office space available in Building 1. Building 1A at 40 Fordham Road having 104,273
square feet is being renovated and could be subdivided to accommodate smaller users.
I do not see any more efficient use of the site. I cannot identify a different improvement or use of
the subject building that would command greater demand (create additional value) for the
property than the current improvements. Therefore, the subject property’s highest and best use is
as improved as high bay warehouse space with supporting mezzanine office space.
Highest and Best Use – As Vacant - 50 Fordham Road
The subject property consists of a total of 507,038 square feet of land area or 11.64 acres. It is
located in the Town of Wilmington in an area of industrial development. The subject properties
are located in the Highway Industrial district and also in the Ground Water Protection District.
I find that if the land were vacant and available for development, it would be most suited for a
maximum density, industrial use in keeping with the surrounding neighborhood uses.
Highest and Best Use – As Improved - 50 Fordham Road
The subject is improved with a single-story 79,140 gross square foot office/flex/manufacturing
building occupied by AMETEK Inc. The building was renovated in 2008 to the tenants’
specifications as office, engineering lab space, manufacturing lab space and general
manufacturing. The building was originally constructed in 1970 and was also occupied by GE for
several years.
I do not see any more efficient use of the site. I cannot identify a different improvement or use of
the subject building that would command greater demand (create additional value) for the
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property than the current improvements. Therefore, the subject property’s highest and best use is
as improved as an office/flex/manufacturing building.
VALUATION METHODOLOGY & ANALYSIS
There are three methods of estimating the value of real estate: the Sales Comparison Approach,
the Income Capitalization Approach and the Cost Approach.
The Sales Comparison Approach considers actual sales of similar properties that have occurred in
an open, competitive market. The basis for this approach is that a prudent buyer will guide his
actions by the behavior of others. This approach is usually expressed as a unit of comparison,
such as price per square foot, per room, per unit, etc.
The Income Capitalization Approach analyzes a property's capacity to generate net income and
converts this capacity into an indication of value. The Income Capitalization Approach reflects
the value of the subject relative to prevailing income levels, expenses and capitalization rates. It
is an approach seen through the eyes of an investor whose primary interest is cash profit as
opposed to amenity value. This approach is most effective when used for income-generating
properties that do not rely on owner-occupancy for an appreciable income stream.
The Cost Approach requires an estimate of value of the underlying land as though vacant and
available to be put to its highest and best use. The cost of the improvements, less accrued
depreciation, is then added to the land value to arrive at a total value indication. This approach is
usually most effective for properties that have relatively new improvements and in areas where
there may be similar land available for development. The Principle of Substitution dictates that a
potential buyer might not pay more for an existing property if he could build one for the same (or
less) effective cost.
The three approaches vary in importance in the course of each appraisal. There are cases where
all three may not be applicable to a particular appraisal problem, as in the case of a special
purpose property or the lack of satisfactory market data. All three approaches can play some role
through the appraisal process in arriving at a final value estimate and all three have been
considered in the preparation of this report.
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APPLICATION TO SUBJECT
In this report, the Sales Comparison and the Income Capitalization Approaches are illustrated.
The Cost Approach was not developed because investors typically do not place significant weight
on replacement costs when valuing a property like the subject.
SALES COMPARISON APPROACH - 40 FORDHAM ROAD
The Sales Comparison Approach is a valuation method based upon a comparative analysis of the
subject property with similar properties which have recently sold and for which the sales prices
and terms are known. Appropriate value adjustments are made to the most comparable sales to
compensate for differences in location and physical characteristics, as well as changes in market
conditions since the time of sale, special financing, property interest acquired, or special
conditions affecting the sale.
The various adjustments are made individually, and then all of the adjustments believed necessary
to compensate for the differences between the sale property and the subject are combined into an
overall adjustment factor. This factor is then applied to the sale price unit of comparison to arrive
at an indicated value for the subject property.
As a final step, the indicated values are weighed according to the sold properties’ degree of
comparability to the subject, thereby arriving at an indication of value by the Sales Comparison
Approach.
In estimating the market value via the Sales Comparison Approach, sales of comparable high bay
warehouse properties were analyzed and the most relevant data regarding sales and current
listings was considered. All data contained herein has been verified through sources considered
reliable. In all, I uncovered four sales of high bay warehouse properties considered comparable to
the subject properties.
Keep in mind that I have made adjustment based on the subject property “As Complete” being
completely renovated and tenant ready and deducted the renovation cost in determining the “As
Is” value of the subject property.
The unit of comparison is price paid per square foot of gross building area. Details of the four
most comparable sales used in this analysis are as follows:
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UNADJUSTED COMPARABLE SALES – 40 FORDHAM ROAD
Comp
Address
City
Date
Price
GBA
Price Per
SF
Subject
40 and 50 Fordham Road
Wilmington
12/10/2014
$0
312,312
$0
1
31 Olympia Avenue
Woburn
7/11/2014
$11,350,000
140,060
$81
2
250 Revolutionary Way
Taunton
2/20/2013
$8,600,000
139,079
$63
3
26 Dartmouth St
Westwood
12/8/2014
$14,725,000
169,080
$87
4
360 Cedar Hill St
Marlborough
6/20/2013
$9,750,000
119,819
$81
COMPARABLE SALES MAP – 40 FORDHAM ROAD
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Comparable 1
Transaction
ID
Address
City
State
County
Grantor
Grantee
Legal Description
Property Rights
229
31 Olympia Avenue
Woburn
MA
Middlesex
Quincy Woburn LLC
AMERCO Real Estate
Bk 63900 Pg 135
Leased Fee
Date
Price
Price Per SF
Property Sub Type
Financing
Loan Amount
Loan to Value
Days on Market
Transaction Type
7/11/2014
$11,350,000
$81
Warehouse
No Financing Recorded
$0
0.00%
NA
Closed
Site
Acres
Land SF
Road Frontage
Shape
Utilities
8.31
361,983
595 Feet
Irregular
All Available
Source For SF Area
GBA
No. of Units
Year Built
Sprinklers
Condition
Assessors
140,060
One
1984
Wet
Average
Topography
Zoning
FAR
Encumbrance or
Environmental Issues
Level
I-P
0.390
NA
NA
Improvements & Financial Data
Ceiling Height
Percent Office
No. Loading Docks
No. of Drive-In Doors
Cap Rate
EGIM
20'
33.00%
3 Loading Docks
11 Drive-In Doors
NA
NA
Comments
This is the sale of a 140,060 square foot high bay warehouse property that was constructed in 1984 and has
33% office space with three loading docks and 11 drive-in doors. . The property was vacant at the time of
the sale and the building will be owner occupied. Contact is Rob Cronin Lincoln property Company 617951-4100.
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Comparable 2
Transaction
ID
Address
City
State
County
Grantor
Grantee
Legal Description
Property Rights
230
Taunton
MA
Bristol
AUTC Revolutionary Way
JCC Revolutionary Way
Bk 20849 Pg 205
Leased Fee
Acres
Land SF
Road Frontage
Shape
Utilities
20.9900
914,324
NA
Irregular
All Available
Source For SF Area
GBA
No. of Units
Year Built
Sprinklers
Condition
NA
139,079
NA
2007
Wet
Average
Date
Price
Price Per SF
Property Sub Type
Financing
Loan Amount
Loan to Value
Days on Market
Transaction Type
2/20/2013
$8,600,000
$63
Warehouse
$0
0.00%
NA
Closed
Site
Topography
Zoning
FAR
Encumbrance or
Level
Ind
0.15
NA
NA
Ceiling Height
Percent Office
No. Loading Docks
Cap Rate
EGIM
30'
9.00%
17 Loading Docks
2 Drive-In Doors
7.09%
NA
Comments
This property is located in the Taunton Industrial Park a master planned industrial park located just off
Route24 and Route 495 in Taunton. At the time of the sale the property was 88% occupied and the units are
net leased. The vacant space was being offered for $5.50 for a 16,645/SF unit and $6.25 for a 36,036/SF
unit. The contact is Matthew Pullen Cushman Wakefield 617-330-6966.
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Comparable 3
Transaction
ID
Address
City
State
County
Grantor
Grantee
Legal Description
Property Rights
231
26 Dartmouth St
Westwood
MA
Norfolk
26 Dartmouth Street
Dartmouth Street
Doc # 1319450
Leased Fee
Acres
Land SF
Road Frontage
Shape
Utilities
5.9500
259,182
NA
Irregular
All Available
Date
Price
Price Per SF
Property Sub Type
Financing
Loan Amount
Loan to Value
Days on Market
Transaction Type
12/8/2014
$14,725,000
$87
Warehouse
Conventional
$9,571,250
65.00%
NA
Closed
Site
Topography
Zoning
FAR
Encumbrance or
Level
Ind
0.65
NA
NA
Source For SF Area
GBA
No. of Units
Year Built
Sprinklers
Condition
Assessors
169,080
NA
1975
Wet
Average
Ceiling Height
Percent Office
No. Loading Docks
Cap Rate
EGIM
8' 6" - 22' 6"
52.00%
11 Loading Docks
8 Drive-In Doors
NA
NA
Comments
This is the sale of a high bay warehouse with 52% of first and second floor office space. The building is
located off Route 128 in a master planned industrial park off University Avenue and near the commuter rail.
The building was renovated in 1999. The contact is Rhino Capital 617-894-9597.
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Comparable 4
Transaction
ID
Address
City
State
County
Grantor
Grantee
Legal Description
Property Rights
232
360 Cedar Hill St
Marlborough
MA
Middlesex
Ipers Cedar Hill Inc.
360 Cedar Hill Holdings
Bk 62059 Pg 587
Leased Fee
Acres
Land SF
Road Frontage
Shape
Utilities
NA
438,213
NA
Irregular
All Available
Source For SF Area
GBA
No. of Units
Year Built
Sprinklers
Condition
Broker
119,819
NA
1999
Wet
Average
Date
Price
Price Per SF
Property Sub Type
Financing
Loan Amount
Loan to Value
Days on Market
Transaction Type
6/20/2013
$9,750,000
$81
Warehouse
Conventional
$6,337,500
65.00%
NA
Closed
Site
Topography
Zoning
FAR
Encumbrance or
Level
IC
0.27
NA
NA
Ceiling Height
Percent Office
No. Loading Docks
Cap Rate
EGIM
30'
10.00%
23 Loading Docks
One
NA
NA
Comments
This property sold with a 77% occupancy leased to two tenants; Fresenius medical Care and Gentle Giant
Moving Company. The building was constructed in 1999 has a 30 foot clear height with 23 tailboard loading
docks. About 27,533 square feet was available for lease at the time of the sale. The contact is Robert
Griffin of Cushman Wakefield 617-330-6966
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Since there are variations between the properties that could affect value, adjustments are made to
account for these differences. The following grid illustrates simple adjustments that are made for
the most obvious and reasonable differences between the subject and the comparable sales.
ADJUSTMENT GRID – 40 FORDHAM ROAD
Comp 1
Address 40 Fordham Road
Wilmington
City
MA
State
12/10/2014
Date
$0
Price
$0
Price Adjustment
$0
Adjusted Price
312,312
GBA
$0
GBA Unit Price
Transaction Adjustments
Leased Fee
Property Rights
Conventional
Financing
Conventional
Conditions of Sale
Adjusted GBA Unit Price
0.0%
Market Trends
12/10/2014
Location
Average
% Adjustment
GBA
% Adjustment
Condition
% Adjustment
Land SF
FAR
% Adjustment
Percent Office
% Adjustment
Ceiling Height
% Adjustment
233,172
Average
946,994
0.246
12.50%
23' 6'
No. Loading Docks 10 Loading Docks
w/Levelers
% Adjustment
No. of Drive-In Doors 3 Drive-In Doors
% Adjustment
Net Adjustments
Comp 2
31 Olympia Avenue 250 Revolutionary
Woburn
MA
7/11/2014
$11,350,000
$0
$11,350,000
140,060
$81
Taunton
MA
2/20/2013
$8,600,000
$0
$8,600,000
139,079
$62
Comp 3
Comp 4
26 Dartmouth St
360 Cedar Hill St
Westwood
MA
12/8/2014
$14,725,000
$0
$14,725,000
169,080
$87
Marlborough
MA
6/20/2013
$9,750,000
$0
$9,750,000
119,819
$81
Leased Fee
0.0% Leased Fee
0.0% Leased Fee
No Financing 0.0% No Financing 0.0% Conventional
Recorded
Recorded
None Known 0.0% None Known 0.0% None Known
0.0%
0.0%
Leased Fee
Conventional
0.0%
0.0%
0.0%
None Known
0.0%
$81
0.0%
$81
Similar
$62
0.0%
$62
Similar
$87
0.0%
$87
Superior
$81
0.0%
$81
Similar
0.0%
140,060
-5.0%
Average
0.0%
361,983
0.390
0.0%
33.00%
-5.0%
20'
0.0%
3 Loading Docks
0.0%
139,079
-5.0%
Average
0.0%
914,324
0.150
0.0%
9.00%
0.0%
30'
-5.0%
17 Loading Docks
-5.0%
169,080
-5.0%
Average
0.0%
259,182
0.650
0.0%
52.00%
-10.0%
8' 6" - 22' 6"
0.0%
11 Loading Docks
0.0%
119,819
-5.0%
Average
0.0%
438,213
0.270
0.0%
10.00%
0.0%
30'
-5.0%
23 Loading Docks
5.0%
11 Drive-In Doors
-5.0%
$73
-10.0%
-5.0%
2 Drive-In Doors
0.0%
$53
-15.0%
0.0%
8 Drive-In Doors
-2.5%
$67
-22.5%
-10.0%
One
0.0%
$65
-20.0%
Following is a discussion of the comparable sales and adjustments.
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Sale Price Adjustments – No adjustments to the comparable sales are considered necessary.
Property Rights Conveyed – No adjustment for property rights conveyed is considered necessary.
Financing – Favorable financing may influence the sale price of a property.
were considered necessary for financing.
No adjustments
Conditions of Sale – Unusual sale terms, such as sales at foreclosure auction, can affect the sale
price of a property. No adjustments for conditions of sale were considered necessary.
Market Condition – The sales all transferred between 2013 and 2014 in similar market conditions
and therefore do not require any adjustments.
Location – The subject property is located along Fordham Road with convenient access to Route
93 and in an industrially developed area. Sale #3 is considered to be in a superior location and
was adjusted downward.
Building Area – All sales are smaller than the subject property and smaller properties tend to sell
for more on a per square foot basis; therefore, all sales are adjusted downward.
Building Condition – The subject property is considered to be in average condition after
renovations. All of the sales are considered to be in average condition and no adjustment is
considered necessary.
Land Area/FAR – Floor area ratio is the ratio of building area to land area. A lower FAR reflects
a greater area of land in proportion to the overall building area, which is an advantage as it allows
for better parking, easier access to the building and possible expansion. Conversely, a higher
FAR indicates less available land area for parking, drive areas, and possible expansion. Although
the subject property has a larger land area than all of the comparable sales, a section of the
property has some wetlands. The exact area of the site that could possibly be unusable due to the
wetland was not available. Therefore for this analysis no adjustment is made for land area FAR.
Percent Office – The subject property will have about 12.5% office after renovations. Sales #1
and #3 have considerably more office and were adjusted downward.
Ceiling Height – The subject property has a 23 foot clear height. Sales #2 and #3 have a 30 foot
clear height and were adjusted downward.
Loading Docks: - Sale #1 has only three loading docks and was adjusted upward. Sales #2 and
#4 have 17 and 23 loading docks and were adjusted downward.
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Drive-In Doors: - The subject property has three drive–in doors. Sales #1 and #3 have 11 and 8
drive-in doors and were adjusted downward.
After adjustments, the comparable sales indicate a range of value of between $53 and $73 per
square foot producing an average adjusted price of $65 per square foot and a median adjusted sale
price of $66 per square foot.
Approach.
All of the sales have differences from the subject property, however they are the best high bay
warehouse sales uncovered in the current market. In my opinion, the adjusted sale price of $65
per square foot is the most reasonable indicator of value for the subject property “As Complete”.
$65 per square foot X 233,172 square feet = $15,156,180
In determining the value of the subject property “As Is” the cost to renovate the property to the
same quality and condition of the comparable sales is deducted from the “As Complete” value.
The total costs of the renovations are estimated at $5,166,617. Deducting the renovation costs of
$5,166,617 from the “As Complete” indicated value produces the “As Is” value of the subject
property as follows.
“As Complete” Value
Less Renovation Costs
“As Is” Value
“As Is” Value Rounded
$15,156,180
$5,166,617
$9,989,563
$9,990,000
Therefore, my opinion of the "As Is" market value for the subject property located at 40
Fordham Road, via the Sales Comparison Approach, as of the date of inspection of December
10, 2014, is estimated at $9,990,000.
INCOME CAPITALIZATION APPROACH - 40 FORDHAM ROAD
This approach is based on the assumption that the prudent investor will assess the quantity,
quality and durability of the income stream from a particular property and will pay no more for
the forecasted income than could be obtained from an alternative investment having a similar risk
profile.
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The subject is an 233,172 gross square foot high bay warehouse property with 221,175 square feet
of net rentable building area.
The two techniques considered for income capitalization are Direct Capitalization and Discounted
Cash Flow Analysis. In this case, I applied the Direct Capitalization method.
This valuation methodology is based on an estimate of a single year’s stabilized net operating
income. The steps in this approach are listed as follows:
1. Estimate potential gross income, recoverable operating expenses, vacancy rates, and effective
gross income.
2. Estimate recoverable and non-recoverable operating expenses.
3. Estimate stabilized net operating income.
4. Select an appropriate capitalization method or technique and capitalize or discount the
estimated net operating income at a market-driven rate in order to arrive at an estimate of
value.
In order to estimate the potential gross income, I reviewed the comparable rents I uncovered in
the market and from several industrial property surveys of rental rates in the subject’s market area
and interviews with commercial/industrial real estate brokers who specialize in the subject’s
market area. The following schedule includes rents of industrial properties in the subject’s
market area.
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RETAIL RENTAL SURVEY – 40 FORDHAM ROAD
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Analysis
Comparable rents found in surveys for high bay warehouse buildings in the subject’s market area
range from $4.88 per square foot for a 74,928 foot square foot unit up to $7.95 per square for a
66,598 square foot unit. A much large building of 153,641 square feet was leased for $5.95 per
square foot. The bulk of the rents were in the $6.00 to $7.00 per square foot range, all being triple
net leases.
The subject has a lease proposal in place to lease 84,090 square feet to Colonial Systems for 10
years on a graduated scale starting at $5.00 per square foot increasing to $5.50 when all the space
is taken increasing every other year by $0.25 per square foot topping out at $6.25 per square foot
in years 9 and 10. According to several brokers interviewed, the Colonial Systems lease is
considered to be at the lower end of the range for high bay warehouse space in the 128 North
submarket.
Based on the location of the property, the size of building, the quality and condition of the
property, I have estimated a market rental rate of $6.50 per square foot for both the 52,136 square
foot units in Building 1A at the subject property on a NNN basis and $6.50 for the balance of the
office mezzanine space in Building 1.
Potential Gross Rent
Potential gross rent consists of the income generated from leasing the subject property at the
current estimated market rental rate. Current potential gross rental income is estimated at
$1,348,591.
Recoverable Operating Expenses
The subject property is assumed to be leased on a NNN basis where the tenant is responsible for
all of the operating expenses of the building. The owner is on responsible for the expenses when
the property is vacant. A schedule of recoverable operating expenses is detailed below.
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Unit Area
Pro Rata Share
Real Estate Taxes
Building Insurance
Operating Expenses
Total Reimbursable Expenses
Total CAM Per/SF
89,040
100%
$382,616
$65,327
$27,000
$474,943
$5.33
Total Recoverable Expenses
$474,943
Potential Gross Income
Potential Gross Rent plus Recoverable Operating Expenses produce the Potential Gross Income
detailed below.
Rent Schedule
Unit Breakdown
Rent
SF Per SF Monthly Rent
Annual
Average
Rent
Building 1
Colonial Systems
Vacant Office Mezzanine
Total Building 1
89,040
27,862
116,902
$5.50
$6.50
$5.74
$40,810
$15,092
$55,902
$489,720
$181,103
$670,823
Building 1A
High Bay Warehouse
High Bay Warehouse
Total Building 1A
52,136
52,136
104,272
$6.50
$6.50
$6.50
$28,240
$28,240
$56,481
$338,884
$338,884
$677,768
221,174
$6.10
$2.15
112,383
$39,579
$1,348,591
$474,943
$1,823,534
Total Potential Rental Income
221,174
Vacancy and Credit Loss Estimates
The vacancy allowance accounts for fluctuations in the gross income attributed to unexpected
vacancies due to tenant rollover, while the collection (credit) loss allowance recognizes loss in
income due to debt loss.
The previous industrial market surveys by CBRE indicated the 128 North Submarket had a 14.1%
availability and an 11.8% vacancy. The Cushman & Wakefield survey indicates an overall
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vacancy of 9.4% in the Route 128 North submarket and NAI Hunneman’s vacancy rate in the 128
North Submarket is reported at 3.9% and 6.4% in the 128 Northwest Submarket. Also mentioned
in the CBRE Survey was that there was a consistent and significant increase in tenant and
user/buyer acquisitions and consequently induced a stream of positive absorption and dwindling
availability. Transaction activity has pushed total industrial vacancy down year-over-year.
Therefore for this analysis I have estimated a stabilized vacancy rate of 10.00% for the subject
property slightly lower that the CBRE and Cushman Wakefield study and higher than the NAI
Hunneman survey.
Effective Gross Income
Effective gross income generally consists of potential gross income less an allowance for vacancy
and bad debt for a single stabilized operating year.
INCOME:
Vacancy Rate
Effective Gross Income (EGI)
10.00%
Annual
$1,823,534
$182,353
$1,641,181
$/SF
$8.24
$0.82
$7.42
% of Gross
100.00%
10.00%
90.00%
Operating Expense Analysis
For this analysis, the Post Master in charge of operating the subject property provided verbal
amounts for their expenses. Detailed below is my estimate of the stabilized expenses for the
subject property. The subject property is assumed to be leased on a NNN basis and the owner
would only be responsible for the expenses when the property was vacant.
Real Estate Taxes – In order to estimate a tax expense for the subject property “As
Complete” I reviewed assessment and taxes for other high bay warehouse buildings in
Wilmington previously discussed in the tax assessment section of this report. Real estate
taxes are set at $382,616.
Building Insurance – The insurance expense was provided for both building under a
package blanket policy at $88,457 or $0.28 per square foot. Based on 40 Fordham Road’s
gross building area of 233,312 sq. ft., the building’s insurance expenses is projected at
$65,327.
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Repairs and Maintenance –As the property will be totally renovated prior to it being
leased, I have estimated the repairs and maintenance that the owner would be responsible
for at 12,000 annually.
Utilities – All the utilities are assumed to be paid for by a tenant leasing the property and
no utility expenses was deducted.
Snow Removal and landscaping – I have used an estimated amount of $15,000 in this
analysis.
Management: I have included a management fee in my analysis at 4.00% of effective
gross income. The management fee is not included in the recoverable operating expenses.
Reserves for Replacement: A reserves for replacement fund is an amount allocated for
periodic replacement of building components during a property’s economic life. For this
analysis, I have used the mid-range of reserves for replacement expense of $0.20 per
square foot of gross building area. The reserves for replacement fee is not included in the
recoverable operating expenses.
Total Expenses
Total operating expenses for the subject property are detailed below. Expenses total $573,122 or
$2.46 per square foot of net rentable building area and 34.92% of the effective gross income,
which is in line with other high bay warehouse properties appraised by our firm.
EXPENSES:
Real Estate Taxes
Building Insurance
Repairs and Maintenance
Snow Removal & Landscaping
Management
Reserves for Replacement
Total Recoverable Operating Expenses
NET OPERATING INCOME:
4.00%
$0.20
Annual
$/SF
% of EGI
$382,616
$65,327
$12,000
$15,000
$53,944
$44,235
$573,122
$1,068,059
$1.64
$0.28
$0.05
$0.06
$0.23
$0.19
$2.46
$4.83
23.31%
3.98%
0.73%
0.91%
3.29%
2.70%
34.92%
65.08%
Net Operating Income
Net operating income is calculated by subtracting recoverable and non-recoverable operating
expenses from the effective gross income. This results in net operating income (NOI) before
depreciation and debt service. Net operating income is estimated at $1,068,059 .
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CAPITALIZATION RATE DEVELOPMENT – 40 FORDHAM ROAD
To value the ownership of an income producing property, valuation models have been developed
to quantify the projected benefits from ownership. The capitalization rate is commonly referred
to as an expression of the ratio between one year's net operating income and value.
The overall rate utilized is generally obtained by three methods: a) market extraction, b) industry
surveys, and c) band of investment. The methods of deriving the appropriate capitalization rates
are as follows.
Extraction of Overall Rate
Extraction of overall rates from comparable sales is generally given primary consideration when
the income and expenses of a property that sold are verifiable. I uncovered four sales of industrial
properties where a capitalization rate could be extracted.
Below is a table of capitalization rates extracted from the market. It should be understood that the
calculations, methodology and/or figures used to arrive at these capitalization rates were not
available for review for accuracy. Nonetheless, this survey indicates capitalization rates ranging
from 6.75% to 8.75% with an average of 7.70%.
Property Address
19, 41 & 53 Brigham St
30 Inner Belt Road
60 Maple Street
900 Middlesex Turnpike
244 Vanderbilt Ave
54 Winter St
9 Stuart Rd
26 Southbridge St
235 Barnum Road
Average
Property
City
Sale Price
Marlborougs
Somerville
Mansfield
Billerica
Taunton
Norwood
Malden
Chelmsford
Auburn
Devens
$14,500,000 12/15/2014
$26,100,000 11/5/2014
$7,050,000 6/26/2013
$7,175,000 9/27/2012
$8,600,000 2/15/2013
$3,800,000
8/7/2013
$700,000 10/2/2013
$10,755,000 10/21/2013
$21,500,000 9/25/2014
$11,450,000 10/6/2014
Sale Date
Gross
Building
Area
169,230
197,000
226,200
94,174
139,079
44,406
9,900
286,000
285,000
184,077
Price Per
SF
Property
Type
Actual Cap
Rate
$85.68
$132.49
$31.17
$76.19
$61.84
$85.57
$70.71
$37.60
$75.44
$62.20
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
7.80%
6.75%
8.25%
8.00%
6.96%
8.75%
7.70%
8.32%
7.53%
6.90%
7.70%
Industry Surveys
I reviewed two separate surveys (PwC and RealtyRates.com) for capitalization rates. Both
surveys PwC and RealtyRates.com are nationally-oriented surveys and tend to indicate a wider
range of rates because they cover the entire country or a region rather than individual sub-markets
or specific property types.
The PwC Investor Survey is displayed below.
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Source: 4th Quarter 2014 - PwC Real Estate Investor Survey
The PwC Survey indicated capitalization rates from 4.50% to 7.00% with an average of 5.82%.
According to the PwC Survey the warehouse industrial ranks as the top pick among investors with
regard to investment prospects in the year ahead, as per Emerging Trends in Real Estate® 2015,
published by PwC and ULI.
The optimism felt for this property type is due to rising demand trends and limited additions to
supply. According to one surveyed investor, the locale of the warehouse property and up-to-date
amenities are key attributes looked for by buyers. “Newly constructed, infill warehouses are one
of the hottest property types right now,” states a participant.
As investor demand has heated up, so have prices. Our Survey results show that prices in the
national warehouse market range from 80.0% to 125.0% of replacement cost and average 101.8%.
While some investors sense it’s a good time to buy warehouse assets, others recommend either
selling or holding them. “Sell or hold as it is too expensive to buy,” suggests a participant, who
believes that 2015 will be the most active year for warehouse property trades ever due to the
aggressive capital being placed by U.S. and overseas buyers.
In addition, RealtyRates.com for Warehouse and Distribution Centers was also reviewed and the
survey is detailed as follows.
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Source: RealtyRates.com 4th Quarter 2014
The results of the surveyed rates are detailed below.
Capitalization Rate Surveys
Survey
Range
Averages
Extracted Capitalization Rates
6.75%
8.75%
7.70%
PwC Real Estate Investor Survey National Warehouse Market
4.50%
7.00%
5.82%
RealtyRates.com Investor Survey 4th Qtr
2014 Industrial - All Types
4.61%
11.56%
8.35%
4.50%
11.56%
Range
5.82%
8.35%
Mortgage Equity Technique
I have developed a capitalization rate via the Mortgage Equity Technique, which recognizes the
influence of mortgage financing on the rates of return in real estate investments. Current indexes
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indicate a Long-Term Fixed Rate Loan program for stabilized properties with good occupancy
history, moderate leverage, satisfactory sponsors, and limited near-term rollover having interest
rates between 4.25% and 5.25% with a 25-year amortization. I have estimated an interest rate of
4.75% for the subject property with a 70.00% loan to value and an amortization of 20 years. I
have estimated that an equity yield rate of 12.00% would be necessary as of the effective date of the
appraisal in order to attract equity capital to a property of this type, considering the risk of tenant
turnover, age, condition, and overall investment characteristics of the property versus alternative
investments.
I have assumed a 5.00% appreciation factor over the 10-year holding period or 0.50% per year. The
table below details my assumptions and calculations for the Mortgage Equity Technique.
Capitalization Rate Assumptions
Amortization Period
20 Years
Mortgage Interest Rate
Loan to Value Ratio
4.75%
70.00%
Equity Yield Rate
12.00%
Appreciation
Term of Mortgage
5.00%
10 Years
The following table outlines the calculations applied in developing a capitalization rate via the
Mortgage Equity Technique:
MORTGAGE EQUITY TECHNIQUE
Debt
70.00%
7.75%
5.43%
Equity Yield Rate
30.00%
12.00%
3.60%
Weighted Average
100.00%
=
9.03%
Less Credit for Equity Build-Up:
L-T-V x
P X
70.00%
38.37%
SFF
5.70%
-1.53%
Basic Rate
Unload For Appreciation
5.00%
5.70%
7.50%
-0.28%
Load For Depreciation
0.00%
5.70%
0.00%
Level Income Cap Rate
7.21%
K-Factor For Changing Income (Divide By)
1.0000
Final Cap Rate
7.21%
7.25%
Call
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Capitalization Rate – Conclusion
The following capitalization rate was estimated per the following sources:
Extracted capitalizations rates ranged from 6.75% to 8.75% with an average of 7.70%. The PwC
and RealtyRate.com survey capitalization rates and extracted capitalization rates ranged from
4.50% to 11.56% with averages ranging from 5.82% to 8.35%.
The mortgage equity technique indicated a capitalization rate of 7.21% rounded to 7.25%.
Relying on the three methods I have applied a capitalization rate of 7.00% to the subject
property’s net operating income.
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Income and Expense Analysis
Stabilized Pro Forma Net Operating Income Statement
"As Is"
High Bay Warehouse
Rent Schedule
Unit Breakdown
Rent
Annual
Average
Rent
Building 1
Colonial Systems
Vacant Office Mezzanine
Total Building 1
89,040
27,862
116,902
$5.50
$6.50
$5.74
$40,810
$15,092
$55,902
$489,720
$181,103
$670,823
Building 1A
High Bay Warehouse
High Bay Warehouse
Total Building 1A
52,136
52,136
104,272
$6.50
$6.50
$6.50
$28,240
$28,240
$56,481
$338,884
$338,884
$677,768
221,174
$6.10
$2.15
112,383
$39,579
$1,348,591
$474,943
$1,823,534
Annual
$1,823,534
$182,353
$1,641,181
Annual
$/SF
$8.24
$0.82
$7.42
$/SF
% of Gross
100.00%
10.00%
90.00%
% of EGI
$382,616
$65,327
$12,000
$15,000
$53,944
$44,235
$573,122
$1,068,059
7.00%
$15,257,982
$15,260,000
$1,105,870
$1,737,797
$2,453,650
$9,962,683
$1.64
$0.28
$0.05
$0.06
$0.23
$0.19
$2.46
$4.83
23.31%
3.98%
0.73%
0.91%
3.29%
2.70%
34.92%
65.08%
221,174
INCOME:
Vacancy Rate
10.00%
EXPENSES:
Real Estate Taxes
Building Insurance
Management
4.00%
$0.20
CAPITALIZED AT
"AS COMPLETE" ESTIMATED VALUE
"AS COMPLETE" ROUNDED TO:
DEDUCTION FOR LEASING COMMISSIONS
DEDUCTION FOR TENANT FIT-UP BUILDING 1
DECUCTION FOR TENANT FIT-UP BUILDING 1A
"AS IS" ESTIMATED VALUE
"AS IS" ESTIMATED VALUE ROUNDED TO:
$9,960,000
$65 Per SF GBA
$5.00 Per SF NRA
$43 Per SF GBA
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Applying the 7.00% capitalization rate to the stabilized net operating income of $1,068,059
indicates an “As Complete” market value by the Income Capitalization Approach of $15,257,982
which is rounded to $15,260,000 or $65 per square foot.
In determining the “As Is” Market Value of 40 Fordham Road the cost to complete the tenant fit
up and leasing commissions need to be deducted from the “As Complete” value of the property.
Leasing commissions are based on $5.00 per square foot of net rentable building area. The
Colonial Systems leasing commission is split between the listing broker and the leasing broker
and totals $454,828 or $5.01 per square foot based on the 89,040 square feet leased. Therefore I
have used the $5.00 per square foot leasing commission for the entire 221,174 square feet of net
rentable building area or $1,105,870.
The cost to fit up Building 1 for the Colonial System tenant is estimated at $1,737,797 or $19.52
per square foot and the cost to fit up the additional mezzanine office area is estimated at $975,170
or $35.00 per square foot. In addition the cost to fit up the entire Building 1A for use as a similar
high bay warehouse subdivided into two units of 52,136 square feet each is estimated at
$2,453,650 or $23.21 per square foot.
Deducting the total fit up costs for both Building 1 and Building 1A located at 40 Fordham Road
estimated at $5,166,617 from the “As Complete” value of $15,260,000 indicates an “As Is”
value of $9,962,683 rounded to $9,960,000 or $43 per square foot of gross building area.
Therefore, it is my opinion that the “As Is” market value for the subject property, via the Direct
Capitalization Technique of the Income Capitalization Approach, as of December 10, 2014, is
estimated at $9,960,000 or $43 per square foot. This value approximates what an investor would
pay to purchase the property and renovate it and collect the cash flow based on market rents for
the subject property for a return on investment.
RECONCILIATION AND FINAL VALUE ESTIMATE – 40 FORDHAM ROAD
The subject property is an 233,172 gross square foot high bay warehouse property located at 40
Fordham Road in Wilmington, MA.
In estimating the “As Is” Market Value, the Sales Comparison and Income Capitalization
Approaches were used and the results are detailed below.
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VALUE INDICATIONS - 40 FORDHAM ROAD
TECHNIQUE
"As Is" Value
40 Fordham Road
$9,990,000
$9,960,000
Cost Approach
Not Applicable
$9,960,000
The Income Capitalization Approach, utilizing the Direct Capitalization method, was considered a
reliable valuation method in appraising the subject property. The Income Capitalization
Approach accurately reflects the expectations and criteria of investors for high bay warehouse
properties in the Town of Wilmington. The valuation of the property via this method considered
current contract rent at the subject property and market rents for similar industrial buildings in the
Wilmington area. Stabilized operating expenses were estimated from conversations with the
Postmaster and from other industrial properties appraised by our firm and from market-supported
assumptions regarding expectations for property yields were estimated. This approach reflects the
actions of buyers in the marketplace. The value indicated by the Income Capitalization Approach
is typically what an investor would pay for the property based on current market rents and
expenses for a return on his investment.
The Sales Comparison Approach reflects an estimate of value as indicated by the sales market and
concentrated on utilizing the most recent sales of similar high bay warehouse properties in the
area. Out of the sales investigated, four were chosen as the most reasonable comparable properties
to the subject property. Since no sales are exactly alike, adjustments were made to each sale for
the most obvious differences and the adjusted sales prices per square foot of gross building area
was used to indicate value for the subject property.
However the weakness in this approach is that none of the sales were truly comparable to the
subject, as evidenced by the range of sale prices per square foot for the comparable sales. While
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analysis of the major differences between the sales and the subject intuitively indicates that the
subject property value is, most likely, in the $70.00 to $90.00 per square foot range, the
adjustments for these differences are subjective, which limits the reliability of this valuation
method.
In the final analysis, I have on the Income Approach as this would mostly likely be the
methodology a purchaser of the property would evaluate the acquisition and I used the Sales
Comparison Approach as a check of reasonableness.
It is, therefore, my opinion that the market value of the Leased Fee interest of the subject
property located at 40 Fordham Road, in accordance with the assumptions and limiting
conditions prescribed in the report, and considered for its most productive use "As Is" as of
December 10, 2014 is fairly represented by the amount of:
"As Is" Opinion of Market Value
$9,960,000
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SALES COMPARISON APPROACH - 50 FORDHAM ROAD
The Sales Comparison Approach is a valuation method based upon a comparative analysis of the
subject property with similar properties which have recently sold and for which the sales prices
and terms are known. Appropriate value adjustments are made to the most comparable sales to
compensate for differences in location and physical characteristics, as well as changes in market
conditions since the time of sale, special financing, property interest acquired, or special
conditions affecting the sale.
The various adjustments are made individually, and then all of the adjustments believed necessary
to compensate for the differences between the sale property and the subject are combined into an
overall adjustment factor. This factor is then applied to the sale price unit of comparison to arrive
at an indicated value for the subject property.
Approach.
In estimating the market value via the Sales Comparison Approach, sales of comparable
office/flex/manufacturing properties were analyzed and the most relevant data regarding sales and
current listings was considered. All data contained herein has been verified through sources
considered reliable. In all, I uncovered four sales of office/flex/manufacturing properties
considered comparable to the subject property.
The unit of comparison is price paid per square foot of gross building area. Details of the four
most comparable sales used in this analysis are as follows:
UNADJUSTED COMPARABLE SALES – 50 FORDHAM ROAD
Comp
Subject
Address
City
Date
Price
Price Per SF
40 and 50 Fordham Road
Wilmington
12/10/2014
$0
$0.00
1
16 Elizabeth Drive
Chelmsford
9/30/2013
$11,275,000
$134.00
2
400 Research Drive
Wilmington
12/5/2013
$10,485,000
$98.00
3
11 State Street
Woburn
12/30/2013
$6,000,000
$97.00
4
234 Ballardvale St Bldg D
Wilmington
6/18/2013
$10,530,000
$105.00
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COMPARABLE SALES MAP - 50 FORDHAM RD
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Comparable 1
Transaction
ID
Address
City
State
Grantor
Grantee
Legal Description
Verification Source
225
16 Elizabeth Drive
Chelmsford
MA
Brooks Automation, Inc
16 Elizabeth LLC
Bk 27719 Pg 148
CoStar/Registry/Assessor
Acres
Land SF
Parking
Shape
Utilities
5.65
246,114
288 Surface Spaces
Irregular
All Available
Date
Price
Price Per SF
Financing
Loan Amount
Loan to Value
Days on Market
Conditions of Sale
9/30/2013
$11,275,000
$134
Conventional
$7,475,000
66.30%
NA
None Known
Site
Topography
Zoning
FAR
Encumbrance or
Level
1A
0.34
---
Source For SF Area
GBA
No. of Units
Year Built
Percent Office
Condition
Assessors
83,974
One
1983
50.36%
Average
Ceiling Height
Sprinklers
No. Loading Docks
Cap Rate
EGIM
10 Feet
Wet Sprinkler
4 Loading Docks
None
7.50%
--
Comments
This is the sale of a office/felx/manufacturing building that was sold fully leased to Teleflex Medical who
took occupancy in May of 2013. The seller Brooks Automation considered the property surplus real estate
as they consolidated. Prior to placing the vacant property on the market the property was leased and they
marketed with a long term lease in place with a reported 7.50% capitalization rate. Effective rent over the 10
year leased term is $11.94/SF NNN. Contact Mike McCarthy Hunneman 617-457-3224
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Comparable 2
Transaction
ID
Address
City
State
Grantor
Grantee
Legal Description
Verification Source
226
400 Research Drive
Wilmington
MA
RREEF America REIT III400 Research Drive LLC
Bk 27867 Pg 161
Acres
Land SF
Parking
Shape
Utilities
5.72
249,299
247 Surface
Irregular
All Available
Source For SF Area
GBA
No. of Units
Year Built
Percent Office
Condition
Assessors
107,460
Four
1987
25.00%
Average
Date
Price
Price Per SF
Financing
Loan Amount
Loan to Value
Days on Market
Conditions of Sale
12/5/2013
$10,485,000
$98.00
0
0
NA
None Known
Site
Topography
Zoning
FAR
Encumbrance or
Level
Ind
0.43
---
Ceiling Height
Sprinklers
No. Loading Docks
Cap Rate
EGIM
16 Feet
Wet Sprinklers
11 Loading Docks
-8.50%
--
Comments
This is the sale of a multi-tenanted office/flex/manufacturing building. The property is within an established
industrial park in Wilmington with access from the interchange of I-93 and State Route 125 via Ballardville
Road. The property was constructed in 1987 and has had a variety of upgrades since then. The building was
sold 100% leased to four tenants. The building has 13 tailboard height loading docks along with several
knock-out panels to accommodate additional loading docks. The suites contain about 25% office space and
the clear height is the industrial area is 16 feet. Contact Doug Jacoby 617-330-8000 Colliers.
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Comparable 3
Transaction
ID
Address
City
State
Grantor
Grantee
Legal Description
Verification Source
227
11 State Street
Woburn
MA
Woburn State
Resin Designs Properties
Bk 63129 Pg 289
CoStar/registry/Assessors
Date
Price
Price Per SF
Financing
Loan Amount
Loan to Value
Days on Market
Conditions of Sale
12/30/2013
$6,000,000
$97.00
Conventional
$4,410,000
88.50%
NA
None Known
Site
Acres
Land SF
Parking
Shape
Utilities
3.21
139,827
11 Surface Spaces
Irregular
All Available
Topography
Zoning
FAR
Encumbrance or
Level
I-P
0.44
---
Source For SF Area
GBA
No. of Units
Year Built
Percent Office
Condition
Assessors
62,000
two
1989
34.00%
Average
Ceiling Height
Sprinklers
No. Loading Docks
Cap Rate
EGIM
12' to 20'
Wet Sprinkler
2 Loading Docks
3 Drive in-Doors
---
Comments
This property was purchased by an existing tenant who leases about 40% of the building and owner occupies
the 60% or the balance of the space. The building was reported to have high quality interior office build-out
and a fitness center. Contact Stuart Pratt 617-457-34-- Hunneman
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Comparable 4
Transaction
ID
Address
City
State
Tax ID
Grantor
Grantee
Legal Description
Verification Source
228
234 Ballardvale St Bldg D
Wilmington
MA
-234 Ballardvale Street
Ballardvale Street Limited
Bk 27390 Pg 137
Acres
Land SF
Parking
Shape
Utilities
14.27
621,601
219 Surface
Irregular
All Available
Source For SF Area
GBA
No. of Units
Year Built
Percent Office
Condition
Assessors
100,225
7
1980
33.00%
Average
Date
Price
Price Per SF
Financing
Financing
Loan Amount
Loan to Value
Days on Market
Conditions of Sale
6/18/2013
$10,530,000
$105.00
Conventional
Conventional
$15,600,000
148.15%
NA
None Known
Site
Topography
Zoning
FAR
Encumbrance or
Level
Ind
0.16
---
Ceiling Height
Sprinklers
No. Loading Docks
Cap Rate
EGIM
12' to 18'
Wet Sprinkler
39 Loading Docks
Two
---
Comments
This property is a multi-tenanted office/flex/manufacturing property with seven tenants. The property was
purchased by an abutting owner who owner's 220, 230 and 240 Ballardvale Street and the financing for the
purchased included these other properties. Contact Doug Jacoby 617-330-8000 Colliers
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Since there are variations between the properties that could affect value, adjustments are made to
account for these differences. The following grid illustrates simple adjustments that are made for
the most obvious and reasonable differences between the subject and the comparable sales.
ADJUSTMENT GRID - 50 FORDHAM RD
Analysis Grid
Subject Property
Address
50 Fordham Road
Wilmington
City
MA
State
12/10/2014
Date
0
Price
0
Price Adjustment
0
Adjusted Price
79,140
GBA
GBA Unit Price
Transaction Adjustments
Property Rights Leased Fee
Financing
0
Comp 1
Comp 2
Comp 3
Comp 4
16 Elizabeth Drive
400 Research Drive
11 State Street
234 Ballardvale St Bldg
Chelmsford
MA
9/30/2013
$11,275,000
$0
$11,275,000
83,974
$134.27
Wilmington
MA
12/5/2013
$10,485,000
$0
$10,485,000
107,460
$97.57
Woburn
MA
12/30/2013
$6,000,000
$0
Wilmington
MA
6/18/2013
$10,530,000
$0
$10,530,000
100,225
$105.06
Leased Fee
Conventional
Conventional
None Known
Conditions of Sale Conventional
Market Trends Through
Location
12/10/2014
0.0%
Good
% Adjustment
GBA
79,140
% Adjustment
Condition
Average
% Adjustment
Percent Office
59.86%
% Adjustment
Ceiling Height
% Adjustment
Land SF
FAR
% Adjustment
No. Loading Docks
w/Levelers
% Adjustment
Net Adjustments
Gross Adjustments
16'
507,038
0.16
3 Loading Docks
$6,000,000
62,000
$96.77
0.0% Leased Fee
0.0% Leased Fee
0.0% No Financing 0.0% Conventional
Recorded
0.0% None Known 0.0% None Known
0.0% Leased Fee
0.0% Conventional
0.0%
0.0%
0.0% None Known
0.0%
$134
$98
$97
$105
0.0%
0.0%
0.0%
0.0%
$134
$98
Good
0
107,460
5.0%
Average
0.0%
$97
Good
0
62,000
0.0%
Average
0.0%
$105
Good
0
100,225
5.0%
Average
0.0%
25.00%
34.00%
33.00%
10.0%
7.5%
7.5%
16 Feet
12' to 20'
12' to 18'
Good
0%
83,974
0.0%
Average
0%
50.36%
0.0%
10 Feet
0.0%
246,114
0.34
0.0%
4 Loading Docks
0.0%
$134
0.00%
0.00%
0.0%
0.0%
0.0%
249,299
0.43
139,827
0.44
621,601
0.16
0.0%
0.0%
0.0%
11 Loading Docks
2 Loading Docks
39 Loading Docks
-5.0%
$107
10.00%
20.00%
0.0%
$104
7.50%
7.50%
-10.0%
$108
2.50%
22.50%
Following is a discussion of the comparable sales and adjustments.
Sales Price Adjustments – No adjustments to the comparable sales are considered necessary.
Property Rights Conveyed – No adjustment for property rights conveyed is considered necessary.
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Financing – Favorable financing may influence the sale price of a property.
were considered necessary for financing.
No adjustments
Conditions of Sale – Unusual sale terms, such as sales at foreclosure auction, can affect the sale
price of a property. No adjustments for conditions of sale were considered necessary.
Market Condition – The sales all transferred in 2013 in similar market conditions and therefore
do not require any adjustments.
Location – All of the sales are considered to be in similar location and no adjustments were
considered necessary.
Building Area – Sales #2and #4 are larger than the subject property and larger properties
generally sell for a lower price per square foot due to economies of scale. Therefore, upward
adjustments are made to Sales #2 and #4.
Building Condition – The subject property is considered to be in average condition. All of the
sales are considered to be in average condition and no adjustments are made.
Percent Office: - The subject property has almost 60% office space in the building. Sales #2, #3
and #4 all have less office space than the subject property and were adjusted upward.
Ceiling Height – The subject property has an 16 foot clear height. All of the sales have a similar
ceiling height and are adequate for office/flex/manufacturing properties; therefore, no adjustments
are considered necessary.
Land Area/FAR – Floor area ratio is the ratio of building area to land area. A lower FAR reflects
a greater area of land in proportion to the overall building area, which is an advantage as it allows
for better parking, easier access to the building and possible expansion. Conversely, a higher
FAR indicates less available land area for parking, drive areas, and possible expansion. Although
the subject property has a larger land area than all of the comparable sales a section of the
property has some wetlands. The exact area of the site that could possibly be unusable do to the
wetland was not available. Therefore for this analysis no adjustment is made for land area FAR.
Number of Loading Docks: - The subject property has three loading docks. Sales #2 and #4 have
more loading docks than the subject property and were adjusted downward.
After adjustments, the comparable sales indicate a range of value of between $104 and $134 per
square foot producing an average adjusted price of $113 per square foot and a median adjusted
sale price of $108 per square foot.
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Approach.
Sale #1 is an outlier at $134 per square foot. This property was leased at a considerably higher
rental rate ($11.94 per square foot effective rate over the life of the lease) than the subject
property and was eliminated from further consideration.
Sales #2, #3 and #4 have differences from the subject property, however they are the best
office/flex/manufacturing sales uncovered in the current market. In my opinion, the average
adjusted sale price of Sales #2, #3 and #4 at $106 per square foot is the most reasonable indicator
of value for the subject property.
$106 per square foot X 79,140 square feet = $8,416,559
Rounded to $8,400,000
Therefore, my opinion of the "As Is" market value for the subject property located at 50
Fordham Road, via the Sales Comparison Approach, as of the date of inspection of December
10, 2014, is estimated at $8,400,000.
INCOME CAPITALIZATION APPROACH - 50 FORDHAM ROAD
This approach is based on the assumption that the prudent investor will assess the quantity,
quality and durability of the income stream from a particular property and will pay no more for
the forecasted income than could be obtained from an alternative investment having a similar risk
profile.
The subject is an 79,140 gross square foot office/flex/manufacturing property with 78,180 square
feet of net rentable building area.
The two techniques considered for income capitalization are Direct Capitalization and Discounted
Cash Flow Analysis. In this case, I applied the Direct Capitalization method.
This valuation methodology is based on an estimate of a single year’s stabilized net operating
income. The steps in this approach are listed as follows:
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1.
Estimate potential gross income, recoverable operating expenses, vacancy rates, and
effective gross income.
2.
Estimate recoverable and non-recoverable operating expenses.
3.
Estimate stabilized net operating income.
4.
Select an appropriate capitalization method or technique and capitalize or discount the
estimated net operating income at a market-driven rate in order to arrive at an estimate of value.
In order to estimate the potential gross income, I reviewed the current lease for the subject
property, the quality of the tenants. I also reviewed comparable rents I uncovered in the market
and from several similar properties and interviewed commercial/industrial real estate brokers who
specialize in the subject’s market area. The following schedule includes rents of industrial
properties in the subject’s market area.
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OFFICE/FEEX/MANUFACTURING - RENTAL SURVEY - 50 FORDHAM ROAD
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Analysis
Comparable rents found in surveys for office/flex/manufacturing buildings in the Route 128 north
submarket range from effective rents over the life of the lease from $6.35 up to $15.75 per square
foot. The bulk of the rents are in the $8.00 per square foot range with the owner offering tenant
build-outs between $5.00 and $10.00 per square foot.
Based on the location of the property, the size of building, the quality and condition of the
property, I have estimated a market rental rate of $8.00 per square foot for the subject property on
a NNN basis. The subject property is currently leased for $7.16 per square foot on a triple net
basis and appears to be below current market rental rates as the lease was negotiated in 2008. The
rent increases to 95% of fair market rent in 2019 which should increase the cash flow to the
owner. Nevertheless I have used the current contract rent in this analysis.
Potential Gross Rent
Potential gross rent consists of the income generated from leasing the subject property at the
current contract rent. Current potential gross rental income is estimated at $559,768.
The subject property is leased on a NNN basis where the tenant is responsible for all of the
operating expenses of the building. The owner is on responsible for the expenses when the
property is vacant. A schedule of recoverable operating expenses is detailed below.
Unit Area
Pro Rata Share
Real Estate Taxes
Building Insurance
Operating Expenses
Total Reimbursable Expenses
Total CAM Per/SF
Total Recoverable Expenses
78,180
100%
$169,076
$22,415
$16,000
$207,491
$2.65
$207,491
Potential Gross Rent plus Recoverable Operating Expenses produce the Potential Gross Income
detailed below.
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Rent Schedule
Unit Breakdown
AMETEK Inc.
Rent
$7.16
$46,647
78,180
78,180
$7.16
$46,647
$2.65
78,180
Annual
Average
Rent
$559,768
$559,768
$207,491
$767,259
Vacancy and Credit Loss Estimates
The vacancy allowance accounts for fluctuations in the gross income attributed to unexpected
vacancies due to tenant rollover, while the collection (credit) loss allowance recognizes loss in
income due to debt loss.
The previous industrial market surveys by CBRE indicated the 128 North Submarket had a 14.1%
availability and an 11.8% vacancy. The Cushman & Wakefield survey indicates an overall
vacancy of 9.4% in the Route 128 North submarket and NAI Hunneman’s vacancy rate in the 128
North Submarket is reported at 3.9% and 6.4% in the 128 Northwest Submarket. Also mentioned
in the CBRE Survey was that there was a consistent and significant increase in tenant and
user/buyer acquisitions and consequently induced a stream of positive absorption and dwindling
availability. Transaction activity has pushed total industrial vacancy down year-over-year. As
the subject property is leased by a BBB credit tenant with four years remaining on their original
lease and two five year options, I have estimated a vacancy rate of 2.00% for the subject property.
Effective Gross Income
Effective gross income generally consists of potential gross income less an allowance for vacancy
and bad debt for a single stabilized operating year.
INCOME:
Vacancy Rate
2.00%
Annual
$767,259
$15,345
$751,913
$/SF
$9.81
$0.20
$9.62
% of Gross
100.00%
2.00%
98.00%
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Operating Expense Analysis
For this analysis, the Post Master in charge of operating the subject property provided verbal
amounts for their expenses. Detailed below is my estimate of the stabilized expenses for the
subject property. The subject property is assumed to be leased on a NNN basis and the owner
would only be responsible for the expenses when the property was vacant.
Real Estate Taxes: Real estate taxes for the subject property are set at $169,076.
Building Insurance – The insurance expense was provided for both building under a
package blanket policy at $88,457 or $0.28 per square foot. Based on 50 Fordham Road’s
gross building area of 79,140 square feet, the building’s insurance expense is projected at
$22,415.
Repairs and Maintenance –For this analysis I have used an amount of $6,000.
Utilities – All the utilities are assumed to be paid for by a tenant leasing the property and
no utility expenses was deducted.
Snow Removal & Landscaping – Snow removal and landscaping is estimated at
$10,000.
Management: I have included a management fee in my analysis at 4.00% of effective
gross income. The management fee is not included in the recoverable operating expenses.
Reserves for Replacement: A reserves for replacement fund is an amount allocated for
periodic replacement of building components during a property’s economic life. For this
analysis, I have used the mid-range of reserves for replacement expense of $0.15 per
square foot of gross building area. The reserves for replacement fee is not included in the
recoverable operating expenses.
Total Expenses
Total operating expenses for the subject property are detailed below. Expenses total $241,609 or
per square foot of net rentable building area and $3.09 of the effective gross income, which is in
line with other office/flex/manufacturing properties appraised by our firm.
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EXPENSES:
Real Estate Taxes
Building Insurance
Management
4.00%
$0.15
Annual
$/SF
% of EGI
$169,076
$22,415
$6,000
$10,000
$22,391
$11,727
$241,609
$510,305
$2.16
$0.29
$0.08
$0.13
$0.29
$0.15
$3.09
$6.53
22.49%
2.98%
0.80%
1.33%
2.98%
1.56%
32.13%
67.87%
Net Operating Income
Net operating income is calculated by subtracting recoverable and non-recoverable operating
expenses from the effective gross income. This results in net operating income (NOI) before
depreciation and debt service. Net operating income is estimated at $510,305 .
CAPITALIZATION RATE DEVELOPMENT - 50 FORDHAM ROAD
To value the ownership of an income producing property, valuation models have been developed
to quantify the projected benefits from ownership. The capitalization rate is commonly referred
to as an expression of the ratio between one year's net operating income and value.
The overall rate utilized is generally obtained by three methods: a) market extraction, b) industry
surveys, and c) band of investment. The methods of deriving the appropriate capitalization rates
are as follows.
Extraction of Overall Rate
Extraction of overall rates from comparable sales is generally given primary consideration when
the income and expenses of a property that sold are verifiable. I uncovered several sales of
office/flex/manufacturing properties where a capitalization rate could be extracted.
Below is a table of capitalization rates extracted from the market. It should be understood that the
calculations, methodology and/or figures used to arrive at these capitalization rates were not
available for review for accuracy. Nonetheless, this survey indicates capitalization rates ranging
14113-109
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Property Address
16 Elizabeth St
234 Balardvale Street
400 Research Drive
300 Riverpard Drive
20 Seyton Street
11 State Street
Average
Property
City
Sale Price
Chelmsford
Wilmington
Wilmington
North Reading
Watertown
Woburn
$11,275,000 9/30/2013
$10,530,000 6/10/2013
$10,485,000 12/5/2013
$32,250,000 6/28/2013
$11,000,000 12/20/2014
$6,000,000 12/30/2013
Sale Date
Gross
Building
Area
83,974
100,225
107,460
208,921
94,268
62,000
Price Per
SF
Property
Type
Actual Cap
Rate
$134.27
$105.06
$97.57
$154.36
$116.69
$96.77
Flex
Flex
Flex
Flex
Flex
Flex
7.50%
8.30%
8.50%
7.00%
7.40%
8.00%
7.78%
Industry Surveys
I reviewed two separate surveys (PwC and RealtyRates.com) for capitalization rates. Both
surveys PwC and RealtyRates.com are nationally-oriented surveys and tend to indicate a wider
range of rates because they cover the entire country or a region rather than individual sub-markets
or specific property types.
The PwC Investor Survey is displayed below. The PwC Survey indicated capitalization rates
Source: 4th Quarter 2014 - PwC Real Estate Investor Survey
In addition the PwC Survey also posts an Institutional-Grade vs. Non-institutional-grade property
basis-point spread. Non-intuitional grade properties have a basis-point spread of 2.50% to 4.00%
basis points above the Institutional-grade properties and averages 1.46% basis points above the
average capitalization rate indicating capitalization rates from 8.50% to 14.00% and an average of
8.99% for Non-intuitional properties however the subject property would be considered a
Intuitional Grade asset.
According to the PwC Survey Flex/R&D properties have a rating of 3.10 on a scale of 1(abysmal)
to 5 (excellent) in terms of investment prospects in the year ahead, the U.S. R&D industrial sector
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ranked as the 9th preferred property type out of 14 in Emerging Trends in Real Estate® 2015,
published by PwC and ULI, ahead of suburban office and the three retail property types. Although
many investors still see this market as “neutral”, tenant demand has started to pick up in certain
metros, but has yet to fully impact rental rate growth. This quarter, the average initial-year market
rent change rate holds steady for the second straight quarter at 2.40%. At the same time, however,
the average amount of free rent offered slips slightly. “Face rents aren’t moving much, but
effective rents are up a bit for us,” shares a participant. Looking ahead, future rent growth is
expected as several surveyed investors are using rent spikes in their cash flow analyses. Rent
spikes average 5.3% and occur two to three times between years one and four. Certain investors
suspect that 2015 could be a good year for the U.S. flex/R&D market as rising occupancy levels
in suburban office locations spillover into flex/R&D properties, resulting in higher tenant
demand, rental rates, and property values.
In addition, RealtyRates.com for Industrial Flex/R&D Properties was also reviewed and the
survey is detailed as follows.
Source: RealtyRates.com 4th Quarter 2014
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The results of the surveyed rates are detailed below.
Survey
Range
PwC Real Estate Investor Survey National Flex/R&D Market
PwC Real Estate Investor Survey NonInstitutional Grade Properties - National
Flex/R&D Market
Range
7.00%
8.50%
Averages
7.78%
6.00%
10.00%
7.53%
8.50%
14.00%
8.99%
5.69%
13.44%
9.97%
5.69%
14.00%
7.53%
9.97%
Survey
PwC Real Estate Investor Survey National Flex/R&D Market
PwC Real Estate Investor Survey NonInstitutional Grade Properties - National
Flex/R&D Market
Range
7.00%
Range
8.50%
Averages
7.78%
6.00%
10.00%
7.53%
8.50%
14.00%
8.99%
5.69%
13.44%
9.97%
5.69%
14.00%
7.53%
9.97%
Mortgage Equity Technique
I have developed a capitalization rate via the Mortgage Equity Technique, which recognizes the
influence of mortgage financing on the rates of return in real estate investments. Current indexes
indicate a Long-Term Fixed Rate Loan program for stabilized properties with good occupancy
history, moderate leverage, satisfactory sponsors, and limited near-term rollover having interest
rates between 4.25% and 5.25% with a 25-year amortization. I have estimated an interest rate of
4.75% for the subject property with a 75.00% loan to value and an amortization of 20 years. I
have estimated that an equity yield rate of 12.00% would be necessary as of the effective date of the
appraisal in order to attract equity capital to a property of this type, considering the risk of tenant
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turnover, age, condition, and overall investment characteristics of the property versus alternative
investments.
I have assumed a 5.00% appreciation factor over the 10-year holding period or 0.50% per year. The
table below details my assumptions and calculations for the Mortgage Equity Technique.
Capitalization Rate Assumptions
Amortization Period
20 Years
Mortgage Interest Rate
Loan to Value Ratio
4.75%
75.00%
Equity Yield Rate
Appreciation
Term of Mortgage
12.00%
5.00%
10 Years
The following table outlines the calculations applied in developing a capitalization rate via the
Mortgage Equity Technique:
MORTGAGE EQUITY TECHNIQUE
Debt
75.00%
7.75%
5.82%
Equity Yield Rate
25.00%
12.00%
3.00%
Weighted Average
100.00%
=
8.82%
Less Credit for Equity Build-Up:
L-T-V x
P X
75.00%
38.37%
SFF
5.70%
-1.64%
Basic Rate
Unload For Appreciation
5.00%
5.70%
7.18%
-0.28%
Load For Depreciation
0.00%
5.70%
0.00%
Level Income Cap Rate
6.89%
K-Factor For Changing Income (Divide By)
1.0000
Final Cap Rate
6.89%
6.75%
Call
Capitalization Rate – Conclusion
The following capitalization rate was estimated per the following sources:
Extracted capitalizations rates ranged from 7.00% to 8.50% with an average of 7.78%. The PwC
and RealtyRate.com survey capitalization rates and extracted capitalization rates ranged from
5.69% to 14.00% with averages ranging from 7.53% to 9.97%.
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The mortgage equity technique indicated a capitalization rate of 6.89% rounded to 6.75%.
The subject property is in good condition being renovated to the specifications of the current
tenant AMETEK Inc. and AMETEK Inc. is a BBB credit tenant with four year remaining on their
original lease with two five year options at what appears to be a below current market rate rent.
Based on the quality of the building the strength of the tenants and the length of the lease I have
applied a capitalization rate of 6.75% to the subject property’s net operating income.
Income and Expense Analysis
Stabilized Pro Forma Net Operating Income Statement
"As Is"
Office/Flex/Manufacturing Building
Rent Schedule
Unit Breakdown
AMETEK Inc.
Rent
$7.16
$46,647
78,180
78,180
$7.16
$46,647
$2.65
78,180
INCOME:
Vacancy Rate
2.00%
EXPENSES:
Real Estate Taxes
Building Insurance
Management
4.00%
$0.15
CAPITALIZED AT
ESTIMATED VALUE
ROUNDED TO:
Annual
Average
Rent
$559,768
$559,768
$207,491
$767,259
Annual
$767,259
$15,345
$751,913
Annual
$/SF
$9.81
$0.20
$9.62
$/SF
% of Gross
100.00%
2.00%
98.00%
% of EGI
$169,076
$22,415
$6,000
$10,000
$22,391
$11,727
$241,609
$510,305
6.75%
$7,560,072
$7,560,000
$2.16
$0.29
$0.08
$0.13
$0.29
$0.15
$3.09
$6.53
22.49%
2.98%
0.80%
1.33%
2.98%
1.56%
32.13%
67.87%
$97 Per SF GBA
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Applying the 6.75% capitalization rate to the stabilized net operating income of $510,305
indicates an “As Is” market value by the Income Capitalization Approach of $7,560,072 which is
rounded to $7,560,000 or $97 per square foot.
Therefore, it is my opinion that the “As Is” market value for the subject property, via the Direct
Capitalization Technique of the Income Capitalization Approach, as of December 10, 2014, is
estimated at $7,560,000 . This value approximates what an investor would pay to purchase the
property and collect the cash flow based on market rents for the subject property for a return on
investment.
RECONCILIATION AND FINAL VALUE ESTIMATE - 50 FORDHAM ROAD
The subject property is an 79,140 gross square foot office/flex/manufacturing property located at
50 Fordham Road in Wilmington, MA.
In estimating the “As Is” Market Value, the Sales Comparison and Income Capitalization
Approaches were used and the results are detailed below.
VALUE INDICATIONS 50 FORDHAM ROAD
TECHNIQUE
50 Fordham Road
"As Is" Value
$8,400,000
$7,560,000
Cost Approach
Not Applicable
$7,560,000
The Income Capitalization Approach, utilizing the Direct Capitalization method, was considered a
reliable valuation method in appraising the subject property. The Income Capitalization
Approach accurately reflects the expectations and criteria of investors for off/flex/manufacturing
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properties in the Town of Wilmington. The valuation of the property via this method applied
current contract rent at the subject property and although the estimated market rent for the subject
property is higher than the current contract rent market the lease encumbers the subject property
for another 4 years on the original lease with two five-year options. The property is leased on a
triple net basis where the tenant is responsible for all of the buildings operating expenses
including HVAC maintenance and the maintenance of the other mechanical systems. Marketsupported assumptions regarding expectations for property yields were also estimated. This
approach reflects the actions of buyers in the marketplace. The value indicated by the Income
Capitalization Approach is typically what an investor would pay for the property based on current
contract rent over the life of the lease and through options. Furthermore, a buyer for the subject
property would also consider the strength of the current tenant’s bond rating.
The Sales Comparison Approach reflects an estimate of value as indicated by the sales market and
concentrated on utilizing the most recent sales of similar office/flex/manufacturing properties in
the area. Out of the sales investigated, four were chosen as the most reasonable comparable
properties to the subject property. Since no sales are exactly alike, adjustments were made to
each sale for the most obvious differences and the adjusted sales prices per square foot of gross
building area was used to indicate value for the subject property.
The sales comparison produces a higher value than the income approach most likely due to the
fact that market rents are higher now than they were when the subject properties lease was
negotiated back in 2007-2008.
In the final analysis, I have relied primarily on the Income Capitalization Approach as the subject
property is encumbered by a lease that is in-place until 2019 with two five-year options. The
Sales Comparison Approach was used as a check of reasonableness.
It is, therefore, my opinion that the market value of the Leased Fee interest of the subject
the report, and considered for its most productive use "As Is" as of December 10, 2014 is fairly
represented by the amount of:
"As Is" Opinion of Market Value
$7,560,000
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RECONCILIATION AND FINAL VALUE ESTIMATES FOR 40 AND 50 FORDHAM
ROAD
VALUE INDICATIONS
“As Is” Value
40 Fordham Road
“As Is” Value
50 Fordham Road
$9,990,000
$8,400,000
$9,960,000
$7,560,000
Not Applicable
Not Applicable
$9,960,000
$7,560,000
TECHNIQUE
Cost Approach
Final Value Estimates
40 FORDHAM ROAD
It is, therefore, my opinion that the market value of the “As Is” Leased Fee interest of the subject
“As Is” Opinion of Market Value $9,960,000
50 FORDHAM ROAD
It is, therefore, my opinion that the market value of the “As Is” Leased Fee interest of the subject
$7,560,000
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ADDENDA
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ASSUMPTIONS AND LIMITING CONDITION
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ASSUMPTIONS & LIMITING CONDITIONS
In order to highlight the frame of reference in which this appraisal was made, the more
significant assumptions and limiting conditions are listed below. Additional discussion or
amplification may be included in the preceding sections of the report.
1.
This appraisal is based upon the condition of the national and regional economies, the
purchasing power of the dollar, and financing rates prevailing as of the effective date of
appraisal.
2.
This report expresses the opinion of the signer as to the market value of the subject
property as of the "As Is" date of December 10, 2014 and have in no way been contingent
upon the reporting of specified values nor of any findings to be reported.
3.
No responsibility is assumed for matters legal in nature nor is this report to be construed as
rendering an opinion of title, which is assumed to be good.
4.
The subject property has been appraised as though fully merchantable and under
responsible ownership without regard to existing encumbrances, if any, such as tax liens,
mechanic's liens, mortgages, etc., except as noted herein.
5.
Areas and dimensions stated in this report are based upon the appraiser’s measurements as
well as upon plot plans, legal descriptions, and building plans provided by the Assessor’s
Office, the client, the property owner, and/or the Registry of Deeds and are considered
authoritative for the purpose of this report.
6.
The exhibits included with this report are intended to provide visual assistance to the reader
and were prepared by the appraiser for illustrative purposes only.
7.
The appraiser made no survey of the property and assumes that there are no hidden or
unapparent conditions of the properties, subsoil or structures, which would make them
more or less valuable. The appraiser assumes no responsibility for such conditions or for
engineering, which might be required to discover such factors.
8.
The execution of this appraisal does not obligate the appraiser to give court testimony. If
this is necessary, a separate agreement covering additional time and material expense
incurred by the appraiser in preparing for and delivery of that service will be required.
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9.
Possession of a copy of this report does not carry with it the right of publication nor may it
be used for any purpose by anyone but the client without the previous written consent of
the appraiser. If consent is granted, the report must be used in its entirety.
10.
No environmental impact studies were either requested or made in conjunction with this
appraisal, and the appraiser hereby reserves the right to alter, amend, revise, or rescind any
of the value opinions based upon any subsequent environmental impact studies, research or
investigation.
11.
Disclosure by the appraiser of the contents of this appraisal report is subject to review in
accordance with the bylaws and regulations of the professional appraisal organizations with
which the appraiser is affiliated.
12.
All facts set forth in this report are true and accurate to the best of the appraiser’s
knowledge. Information furnished by others is believed to be reliable but is not
guaranteed.
13.
In this appraisal assignment, the existence of potentially hazardous material used in the
construction or maintenance of the building, such as the presence of urea-formaldehyde
foam insulation, and/or the existence of toxic waste, which may or may not be present on
the property, was not observed by the appraiser; I have no knowledge of the existence of
such materials on or in the property. I have not been provided with a site assessment report
and have also not performed comprehensive independent investigations regarding the
presence of toxic waste, asbestos, etc. The appraiser, however, is not qualified to detect
such substances. The existence of urea-formaldehyde insulation or other potentially
hazardous waste material may have an effect on the value of the property. The appraiser
urges the client to retain an expert in this field if desired.
14.
Neither all nor any part of the contents of this report (especially any conclusions as to value,
the identity of the appraiser, or the firm with which the appraiser is connected) shall be
disseminated to the public through advertising, public relations, news, sales, or other media
without the prior written consent and approval of the appraiser.
15.
The Americans with Disabilities Act (ADA) became effective January 26, 1992. The
appraiser has not made a specific compliance survey and analysis of this property to determine
whether or not it is in conformity with the various detailed requirements of the ADA. It is
possible that a compliance survey of the property together with a detailed analysis of the
requirements of the ADA could reveal that the property is not in compliance with one or more
of the requirements of this act. If so, this fact could have a negative effect upon the value of
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the property. Since the appraiser has no direct evidence relating to this issue, the appraiser did
not consider possible noncompliance with the requirements of ADA in estimating the value of
the subject property.
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ENGAGEMENT LETTER
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DEEDS
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LOT 4 and LOT 6
Two (2) certain parcels of land located in the Town of Wilmington, County of Middlesex,
Massachusetts; said two (2) parcels of land located easterly of Fordham Road, in Wilmington,
Massachusetts; and said two (2) parcels of land shown as Lot 4 and Lot 6 on “Plan of land in
Wilmington, Mass.” dated February 28, 1978, Dana F. Perkins & Assoc., Inc., Civil Engineers
and Surveyors, Reading-Lowell, Massachusetts; which plan is filed in Middlesex North Registry
District of the Land Court, as Plan No. 36899-B.
The said two (2) parcels of land are bounded and described as follows:
LOT 4 as shown on said Plan.
NORTHWESTERLY:
by land now or formerly of Carl Realty, Inc., seven hundred
thirty-one and 40/100 (731.40) feet;
NORTHEASTERLY:
by Lot 6 as shown on said plan, two hundred seventy-five and
02/100 (275.02) feet;
EASTERLY:
by Lot 3 as shown on said plan, ninety-two and 44/100 (92.44)
feet; and
SOUTHEASTERLY:
by land now or formerly of George E. Dunn, along the Town
Line dividing Wilmington and North Reading, seven hundred
fifty-five and 87/100 (755.87) feet.
SOUTHWESTERLY:
by land now or formerly South Mass. Land Developers, Inc.,
two hundred thirty and 27/100 (230.27) feet.
LOT 6 as shown on said plan.
NORTHWESTERLY:
by land now or formerly of Carl Realty, Inc., two hundred
ninety-seven and 00/100 (297) feet;
SOUTHEASTERLY:
by Lot 5 as shown on said plan, four hundred thirty-five and
67/100 (435.67) feet; and
NORTHEASTERLY:
by Lot 4 as shown on said plan, two hundred seventy-five and
02/100 (275.02) feet.
For title of Trustees of THE WILMINGTON REALTY TRUST to said Lot 4 and Lot 6,
see Middlesex North Registry District of the Land Court, Certificate of Title No. 19842,
recorded in Registration Book 102, Page 83.
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LOT 7
A certain parcel of land, located in the Town of Wilmington, County of Middlesex,
Commonwealth of Massachusetts, said parcel shown as Lot 7 upon a plan entitled “Plan of Land
in NORTH READING & WILMINGTON, MASS.”, dated September 21, 1983, DANA F.
PERKINS and Assoc., Inc., Civil Engineers and Surveyors, and filed with the Engineering
Division of the Land Court of Massachusetts as Plan 31713 C and Plan 31713 D bounded and
described as follows:
NORTHWESTERLY by the Northeasterly line of Fordham Road, eighty-four and 60/100
(84.60) feet;
NORTHWESTERLY by a radius 1081.41 along the Northeasterly line of Fordham Road, six
hundred fifty-nine and 84/100 (659.84) feet;
NORTHERLY
by the Northeasterly line of Fordham Road, two hundred (200) feet;
NORTHEASTERLY by lands shown on said Plan as “Lot 30”, six hundred twenty-one and
74/100 (621.74) feet’
NORTHERLY
by lands shown on said Plan as “Lot 30”, ninety-two and 55/100 (92.55)
feet
NORTHEASTERLY by lands shown on said Plan as “Lot 30”, two hundred thirty and 29/100
(230.29) feet;
SOUTHWESTERLY by the Town Line between Wilmington and North Reading as shown on
said plan, nine hundred seven and 9/100 (907.9) feet;
WESTERLY
by Lot 8, as shown on said Plan, eighty-eight and 69/100 (88.69) feet;
SOUTHEASTERLY by Lot 8, as shown on said Plan, eighty (80) feet; and
SOUTHWESTERLY by Lot 8 as shown on said Plan, two hundred fifty-five (255) feet.
Said Lot 7, all within the Town of Wilmington, comprises 12.63 acres, more or less, (549,973
square feet of land, more or less), as shown on said plan.
Said Lot 7 is a subdivision of certain lots, title to which is registered in the Land Registration
Office, North Registry District of Middlesex County, and as follows:
- of Lot 31, as shown on Plan No. 34588-C (Certificate of Title No. 19837);
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- of Lot 25, as shown on Plan No. 34588-A (Certificate of Title No. 19841); and
- of Lot 4, as shown on Plan No. 31713-A (Certificate of Title No. 19838).
LOT 33
That certain parcel of land situated in Wilmington, in the County of Middlesex, Commonwealth
of Massachusetts, bounded and described as follows:
WESTERLY
by the Easterly line of Fordham Rd. by several lines measuring together,
eleven hundred eighty-seven and 97/100 (1,187.97) feet;
NORTHEASTERLY
by land now or formerly of Carl Realty, Inc., five hundred thirty-two and
01/100 (532.01) feet;
NORTHEASTERLY
again by land now or formerly of Max Siegel et al, two hundred ninetyseven (297) feet;
EASTERLY
by land now or formerly of So. Mass. Land Developers, Inc., five
hundred ninety-nine and 28/100 (599.28) feet; and
SOUTHEASTERLY
by Lot 30, six hundred seventy-two and 36/100 (672.36) feet.
All of said boundaries are determined by the Land Court to be located as shown on subdivision
plan 34588-E, drawn by Dana F. Perkins and Sons, Inc., Surveyors, dated January 27, 1969, as
approved by the Court, filed in the Land Registration Office, a copy of a portion of which is filed
with Certificate of Title 16620, and said land is shown as Lot thirty-three (33) on said plan.
Being the same premises evidenced by Certificate of Title No. 19840 (Middlesex North Registry
District).
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LOT 30
That certain parcel of land situate in Wilmington, County of Middlesex, Commonwealth of
Massachusetts bounded and described as follows:
SOUTHWESTERLY by the Northeasterly line of Fordham Road, two hundred fifty (250) feet;
NORTHWESTERLY by land now or formerly of Carl Realty, Inc., six hundred seventy-two
and 36/100 (672.36) feet;
EASTERLY
by land now or formerly of So. Mass. Land Developers, Inc., two
hundred fifty-five and 07/100 (255.07) feet; and
SOUTHEASTERLY
by land now or formerly of Carl Realty, Inc., six hundred twenty-one
and 74/100 (621.74) feet.
All of said boundaries are determined by the Land Court to be located as shown on subdivision
plan 34588-B, drawn by Dana F. Perkins & Sons, Inc., Surveyors, dated April 9, 1968, as
approved by the Court, filed in the Land Registration Office, a copy of a portion of which is filed
with Certificate of Title 16261, and said land is shown as Lot thirty (30) on said plan.
Being the same premises evidenced by Certificate of Title No. 19839 (Middlesex North Registry
District).
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LOT 10
A certain parcel of land, located in the Town of North Reading, County of Middlesex,
Commonwealth of Massachusetts, said parcel shown as Lot 10 upon a plan entitled “Plan of
Land in NORTH READING & WILMINGTON, MASS.”, dated September 21, 1983, DANA F.
PERKINS and Assoc., Inc., Civil Engineers and Surveyors, and filed with the Engineering
Division of the Land Court of Massachusetts as Plan 31713 C and Plan 31713 D bounded and
described as follows:
NORTHERLY
by the Town Line between North Reading and Wilmington, as shown on
said Plan, nine hundred seven and 09/100 (907.09) feet;
NORTHWESTERLY by land shown on said Plan as “Town of North Reading” ninety-eight and
43/100 (98.43) feet;
SOUTHEASTERLY by Lot 9, as shown on said Plan, four hundred twenty-three and 16/100
(423.16 feet;
SOUTHWESTERLY by Lot 9, as shown on said Plan, one hundred ten and 41/100 (110.41)
feet;
SOUTHEASTERLY by Lot 9, as shown on said Plan, three hundred ninety and 49/100 (390.49)
feet; and
SOUTHWESTERLY by Lot 9, as shown on said Plan, two hundred forty-eight and 36/100
(248.36) feet
Said Lot 10, all within the Town of North Reading, comprises 3.91 acres of land, more or less
(170,477) square feet of land, more or less), as shown on said Plan.
Said Lot 10 is a subdivision of certain lots, title to which is registered in the Land Registration
Office, South Registry District of Middlesex County, and as follows:
- of Lot 26, as shown on Plan No. 34588-A (Certificate of Title No. 142137); and
- of Lot 6, as shown on Plan No. 31713-B (Certificate of Title No. 142138).
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QUALIFICATIONS AND LICENSE OF APPRAISER
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QUALIFICATIONS OF SCOTT M. COCHRANE
EDUCATION
Graduate of Keene State College with Bachelor of Arts in Psychology.
Successfully completed numerous real estate appraisal courses and seminars pertaining to a wide
variety of properties and valuation concepts.
PROFESSIONAL TRAINING AND TRADE AFFILIATIONS
Appraisal Institute - Real Estate Appraisal Principles, Basic Valuation Procedures,
Capitalization Theory & Techniques Part I & II, Valuation Analysis and Report Writing,
Case Studies in Real Estate Valuation, Standards of Professional Practice; Awarded 5 years
of experience credit for MAI Designation
Course on Underwriting Commercial Mortgages from the Program for Real Estate Studies –
Boston University Metropolitan College.
Courses on Land Planning Disposition and Development, Site Evaluation Planning and
Development, Advanced Real Estate Financial Analysis from the Real Estate Studies
Certificate Program – Harvard Graduate School of Design.
Course on Using Computers for Real Estate Analysis from the Center for Real Estate
Development – Massachusetts Institute of Technology.
Course on Fundamentals of Real Estate Investment and Taxation – National Association of
Realtors – CCIM
Certified General Appraiser, Commonwealth of Massachusetts
Qualified before Plymouth County Superior Court as expert witness on real estate valuation
issues.
PROFESSIONAL EXPERIENCE
March 2012 – Present: Employed by Hunneman Appraisal & Consulting Company as a Staff
Appraiser
2009 – 2012: Cochrane Appraisal & Consulting Self-Employed Commercial Fee Appraiser;
provided services to other appraisers (including Lane Valuation Group, Hingham, MA),
commercial banking industry, attorneys and non-profit organizations. Assignments included
medical office buildings, convenience stores with petroleum product sales, automotive
service stations with petroleum product sales, automobile dealerships, apartment buildings,
cranberry bogs, restaurants, churches, food processing/cold storage facilities, industrial
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buildings, retail buildings, office buildings, flex buildings, land subdivisions and
conservation land.
1998 – 2009: Employed by East Coast Equity & Investments, Pembroke, Mass. as
residential mortgage broker and functioned as an independent commercial real estate
appraiser.
1985 – 1997: Boston Valuation Group, Weymouth, Mass. as Senior Commercial Real Estate
Appraiser (annually ranked first in overall billings). Managed variety of notable assignments
with substantive value estimates for Boston Valuation Group; for which portfolio included
suburban office buildings in Washington, D.C. ($200M) and Boston Metro Northwest
($20M); an apartment complex in Boston Metro South ($6M) and R&D facilities in Boston
Metro North ($18M) as well as “as is”, “as if completed” and “as stabilized” analysis of
proposed retail shopping center in Boston Metro South ($16M).
This professional experience involved fee appraisals, marketability/feasibility studies,
discounted cash flow analyses, direct capitalization, stabilized reconstructed income and
expense analyses, highest and best use studies, mortgage underwriting and credit analyses,
cash flow modeling, special use properties, and expertise on restaurants, cranberry bogs, and
golf courses, as well as knowledge of construction cost estimates and construction
management.
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REPRESENTATIVE LIST OF CLIENTS
East Boston Savings Bank
Cambridge Savings Bank
Northern Bank and Trust Company
Belmont Savings Bank
The Talbots, Inc.
Needham Bank
Peoples United
United Bank
Century Bank and Trust Company
Brookline Bank
Sovereign Bank, N.A.
Cape Cod Five Cents Savings Bank
Boston Private Bank & Trust
East Cambridge Savings Bank
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APPRAISER LICENSE
14113-141

hunneman - AuctionAZ

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