Appraisal - Joni Drive

Transcription

A Summary Appraisal Report
Of
A City Yard Facility
Prepared For:
City of Palm Desert
Attn: Mr. John Wohlmuth
73-510 Fred Waring Drive
Palm Desert, CA 92260
Located At:
74-833 Joni Drive, Palm Desert,
CA
92260-2017;
Otherwise
Known As APN: 624-071-014:
Riverside County, CA.
Date of Report: January 4, 2013
Date of Value: December 15, 2012
Capital Realty Analysts File No.: 12-3752
CAPITAL REALTY ANALYSTS
MICHAEL A. SCARCELLA, MAI
78015 MAIN STREET, SUITE 207
LA QUINTA, CA 92253
PHONE: (760) 564-6222
FAX: (888) 985-9994
EMAIL: [email protected]
January 4, 2013
CAPITAL REALTY ANALYSTS
Real Estate Appraisers ♦ Analysts ♦ Advisors
78-015 Main Street, Suite 207
La Quinta, CA 92253-8962
City of Palm Desert
RE:
A City Yard Facility Located at 74-833 Joni Drive, Palm Desert, CA.
92260-2017: Otherwise Known As APN: 624-071-014: Riverside
County, CA.
Dear Mr. Wohlmuth:
At your request and authorization, I have prepared this summary appraisal
report, setting forth my opinion of the market value of the fee simple estate in
the subject property, as of December 15, 2012. Per your request, the following
market value estimates are provided:
Market Value “As Is”
The report identifies the subject property and its market area and presents the
market data and analysis leading to the final estimate of value. This report is
subject to the requirements of the Code of Professional Ethics and Standards of
Professional Appraisal Practice of the Appraisal Institute. The appraisal report
is intended to comply with the appraisal guidelines of Title XI of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), the
Uniform Standards of Professional Appraisal Practice (“USPAP”), adopted by the
Appraisal Standards Board of the Appraisal Foundation.
I have personally inspected the subject property. I have located and reviewed
current sales and listings of comparable properties in the subject neighborhood
and competing areas, and have analyzed this data in order to arrive at my
estimate of market value. The following table shows the value indicators by
approach, and the final value estimate for the subject property:
PHONE: (760) 564-6222
FAX: (888) 985-9994
EMAIL: [email protected]
January 4, 2013
Capital Realty Analysts / Mr. John Wohlmuth
Description
Market Value "As Is"
Cost
Sales Comparison Income Final Value
Approach
Approach
Approach
Estmate
N/A
$
335,000 $ 320,000 $ 335,000
The undersigned have no personal interest either present or contemplated in
the subject property and certify that no fee, received or to be received for the
employment of our services is in any way contingent on the opinion reported
herein. I hope you find the details of this appraisal report relevant to your
decisions. Thank you for the opportunity to be of service.
Respectfully submitted
CAPITAL REALTY ANALYSTS,
Michael A. Scarcella, MAI
State Certification No.: AG019463
Expiration Date: October 24, 2013
Table of Contents
Summary of Important Facts and Conclusions ...................................... 5 Introduction / History of the Subject ................................................ 11 Purpose of the Appraisal................................................................... 11 Property Rights Appraised ................................................................ 12 Definition of Fee Simple Estate ......................................................... 12 Definition of Market Value ................................................................ 12 Definition of “As Is” Value ................................................................. 12 Appraisal Problem ............................................................................ 13 Scope of Work .................................................................................. 13 Date of Valuation ............................................................................. 14 Legal Description.............................................................................. 14 Assessment & Taxation .................................................................... 14 Regional Analysis – Coachella Valley .................................................... 17 Market Analysis................................................................................... 35 Site Analysis........................................................................................ 41 Plat Map, APN: 624-07; Riverside County, CA ................................... 41 Fault Zone Map (Source: Riverside County GIS) ................................ 46 Flood Zone Map (Source: Riverside County GIS) ............................... 47 Flood Zone Map (Source: FEMA) ....................................................... 48 Liquefaction Hazard Map (Source – Riverside County GIS) ................ 49 MSHCP Map (Source – Riverside County GIS) ................................... 50 Subsidence Hazard Map (Source – Riverside County GIS) ................. 51 Topographical Map (Source – Riverside County GIS) ......................... 52 General Plan Map (Source – City of Palm Desert) .............................. 53 Zoning Map (Source – City of Palm Desert) ....................................... 54 Improvement Description .................................................................... 55 Highest and Best Use Analysis ............................................................ 59 Appraisal Process ................................................................................ 63 Sales Comparison Approach ................................................................ 65 Income Approach ................................................................................ 73 Reconciliation and Final Estimate of Value .......................................... 79 Certification ........................................................................................ 81 Assumptions and Limiting Conditions ................................................. 84 © 2012 CAPITAL REALTY ANALYSTS
Page 4
Summary of Important Facts and Conclusions
Client:
City of Palm Desert
Intended Users:
The Client
Intended Use:
The intended use of this report is for internal use.
This report is not intended for any other use.
Property Type:
The subject of this appraisal report is an existing
city yard facility.
Location:
74-833 Joni Drive, Palm Desert, CA. An
Assessor’s Plat Map is located in the Site Analysis
section of this Report.
Identification:
APN: 624-071-014: City of Palm Desert, Riverside
County, CA.
Thomas Brothers
Guide Reference:
Page 818 Grid H6
© 2012 CAPITAL REALTY ANALYSTS
Page 5
Census Tract Number:
Tract 449.18
Report Format:
Summary
Purpose of the
Appraisal:
The purpose of this appraisal is to estimate the
market value of the fee simple estate in the
subject property under the following conditions:
in accordance with the definition of market value
described in the body of this Report.
Date of Valuation:
December 15, 2012
Date of Appraisal:
January 4, 2013
Page 6
Owner of Record:
A Preliminary Title Report was not submitted or
examined. According to public records, title to the
subject property is vested with the City of Palm
Desert.
Site:
According to the Riverside County Assessor’s Plat
Map, the size of the subject site is .53-acres
(23,139 SF).
Improvements:
The subject consists of .53-acres of land,
improved with 2, 816 SF wood frame & stucco
office areas, a 3,810 SF wood frame warehouse
area, and a 120 SF open storage shed. The
improvements are older, and were observed to be
in fair condition fort their effective age, estimated
at 30-years.
The property has been in use since the 1980’s as
a City Yard facility. Additional improvement
details are included in the Improvement
Description section of the report.
Zoning/General Plan:
According to the official zoning map of the City of
Palm Desert, the subject is zoned S.I., Service
Industrial. The General Plan designation of I-BP is
conforming. The improvements are a legal use
under the existing zoning, which is considered
reasonable and appropriate. Prospects for any
type of zone change in the foreseeable future are
nil. The proposed land use is considered a
homogeneous use in the subject neighborhood.
Highest And Best Use, Hold for future development
“As Vacant”:
Highest And Best Use, Remain “As Improved”
“As Improved”:
Page 7
Property Rights
Appraised:
Fee Simple Estate
Final Value Estimate:
Description
Cost
Approach
Approach
Approach
Estmate
N/A
$
335,000 $ 320,000 $ 335,000
Personal Property:
$0
Marketing Period:
“As Is” - 12 Months
Exposure Period:
“As Is” - 12 Months
Page 8
Photographs Relating to the Subject Property
The subject property viewing S from The subject improvements viewing
Joni Drive.
SE from the yard area.
Street scene viewing E along Joni The northern office area is in use as
Drive. Subject at right.
a Citizens on Patrol office.
The warehouse area is used for The shed is open on 1 side. (note
storage.
perimeter block wall)
Page 9
Aerial Photo of the Subject
Page 10
Introduction / History of the Subject
The subject consists of .53-acres of land, improved with a 1-story, wood
frame & stucco structure of 9,372 SF. There are 2, 816 SF office areas,
and a 3,810 SF warehouse area. Yard improvements include an asphaltpaved drive and yard, wrought iron gate, 120 SF storage shed and a
perimeter wall. The improvements were constructed new many years ago,
and were observed to be in fair condition for their effective age, estimated
at 30-years. The property has been in continuous use for many years as
a City Yard facility. Currently, the Client is evaluating options for the
property, which generated the requirement for this analysis.
Purpose of the Appraisal
To estimate the market value of the Fee Simple Estate in the subject
property under the following conditions,
based upon the definition of market value contained in this Appraisal
Report.
Page 11
Property Rights Appraised
The property rights appraised are those of the Fee Simple Estate. The
definitions of Fee Simple Estate for this appraisal is as follows;
Definition of Fee Simple Estate
"Absolute ownership unencumbered by any other interest or estate,
subject only to the limitations imposed by the governmental powers of
taxation, eminent domain, police power, and escheat."
1
Definition of Market Value
The definition of Market Value for this Appraisal is as follows:
"The most probable price which a property should bring in a competitive
and open market under all conditions requisite to a fair sale, the buyer
and seller each acting prudently and knowledgeably, and assuming the
price is not affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and the passing of title
from seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated.
2. Both parties are well informed or well advised, and acting in what
they consider their best interests;
3. A reasonable time is allowed for exposure on the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
5. 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.
Definition of “As Is” Value
For the purposes of this analysis, the “As Is” value is defined as the
market value of the subject property in its current state (as of the date of
value).
1
(The Dictionary of Real Estate Appraisal, 3rd Edition, Appraisal Institute, Chicago, Illinois, Page 140.)
Page 12
Appraisal Problem
The subject property is consists of a city yard facility located in Palm
Desert, CA. The purpose of the appraisal is to estimate the market value
of the fee simple estate in the subject property under the following
conditions:
The Cost, Sales Comparison and Income Approaches to value are applied
in this appraisal assignment.
Scope of Work
This appraisal report is intended to be an appraisal assignment as
defined in the Uniform Standards of Appraisal Practice (USPAP). It is my
intent that the appraisal service be performed in such a manner that the
results of the analysis, opinions, and conclusions be that of a
disinterested 3rd party. It is my intent that all appropriate data deemed
pertinent to the solution of the appraisal problem be collected, confirmed
and reported in conformance with USPAP and the Code of Professional
Ethics of the Appraisal Institute. The scope of the analysis is intended to
be appropriate in relation to the significance of the appraisal problem. In
preparing this appraisal report, the appraiser performed the following
steps, and applied the following special assumptions and limiting
conditions:
Inspection
I have physically inspected the subject property as of the date of
value. Additionally, I have physically inspected the comparable data
items included within this report.
Information
I searched for comparable data from a variety of sources. These
include published data services, the Desert Area MLS, the County
Tax Roll, and personal interviews with local brokers, lenders and
developers.
Confirmation
Unless otherwise noted, all comparable data applied in this report
has been confirmed with at least 1 party to the transaction. A party
to the transaction may include 1 or more of the following; buyer,
seller, broker, lender, attorney, accountant, title officer, escrow
officer.
Page 13
Scope of Work (cont’d)
Analysis
I have analyzed the data and applied the appropriate techniques
available to arrive at our opinion of market value for the subject
property.
Date of Valuation
December 15, 2012
Date of Appraisal
January 4, 2012
Legal Description
A Preliminary Title Report for the subject property was not submitted or
examined. According to public records, the legal description for the
subject is as follows:
“Lot 36 MB 088/011 TR 5224”
Assessment & Taxation
Real property taxation in the State of California is governed by
Proposition 13, which was passed by the voters in June 1978. The basic
elements of Proposition 13 are as follows:
1.
The tax rate was limited to 1% of the assessed value plus an
additional 1/4% to cover the payment of debts previously approved
by voters.
2.
The assessed value of a property purchased prior to March 1, 1975
was fixed at that property's market value as of March 1, 1975. For
a property purchased after March 1, 1975, the law requires the
assessment to be based on the market value at the time of sale.
3.
All assessed values can increase no more than 2% per year for
inflation.
The subject is currently held by a tax-exempt entity. Consequently I have
no basis for estimating the reasonableness of the effective tax rate.
Page 14
Easements and Encumbrances
A Preliminary Title Report for the subject was not submitted or
examined. Consequently, the subject is being appraised as though there
are no atypical easements and/or encumbrances that may have a
negative impact on the prospective market value or marketability of the
subject property. Any user of this analysis is advised to make an
independent assessment of the condition of title, prior to utilizing this
analysis.
Page 15
Intentionally Blank
Page 16
Regional Analysis – Coachella Valley
Subject
Property
The Coachella Valley is located in Riverside County approximately 110
miles east of Los Angeles, 270 miles west of Phoenix and 75 miles north
of the Mexican border. The Coachella Valley is comprised of about 640
square miles or 400,000 acres, bordered by the Little San Bernardino
Mountains to the north, the Santa Rosas on the south and the San
Jacinto Mountains to the west. Palm Springs is the westernmost City of
the region. Other incorporated desert cities include (from west to east)
Desert Hot Springs, Cathedral City, Rancho Mirage, Palm Desert, Indian
Wells, La Quinta, Indio and Coachella. The unincorporated areas of
North Palm Springs, Thousand Palms, Sun City Palm Desert, Bermuda
Dunes, Thermal, Vista Santa Rosa and Mecca are also located in the
Coachella Valley.
Fast growth had been the dominant theme characterizing the Coachella
Valley from 2000 through 2010. In the early part of the current decade,
Riverside County remained among the fastest growing counties of the
nation’s 3,086 counties with only Maricopa County, Arizona exceeding
Riverside’s numeric population growth.
Page 17
The Coachella Valley continues to grow faster than any other area within
Riverside County. From 1990 to 2006, the population of the Coachella
Valley increased by 71.4% compared to Riverside County’s 66.9%
increase and the 25.8% statewide increase. However, in the past
approximately 5-years, declining economic conditions have slowed
growth substantially.
Demographics
The following table shows the population growth of the Coachella Valley
Region (source: CA Department of Finance):
450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 -‐ 1990 50,000 The regional area generally attracts a high percentage of retirees due to
the favorable climate in the fall, winter and springs seasons. Summers
are hot, resulting in a seasonal population base. Development has
generally been moving from west to east through the region.
Consequently, (with the exception of Desert Hot Springs) the eastern
cities in the region have had the highest growth rates over the past
several years. The table on the following page shows the growth rates of
the cities in the region, from west to east:
Page 18
Demographics (cont’d)
City
Palm%Springs
Desert%Hot%Springs
Cathedral%City
Rancho%Mirage
Palm%Desert
Indian%Wells
La%Quinta
Indio
Coachella
2005
%46,000
%19,507
%50,957
%16,520
%49,595
%%%%4,810
%36,377
%66,539
%30,964
2006
%46,754
%22,163
%51,435
%16,783
%49,879
%%%%4,899
%38,604
%72,142
%35,449
2007
%46,858
%23,544
%52,115
%16,944
%49,752
%%%%4,942
%41,092
%77,146
%38,486
2008
%47,019
%25,939
%51,972
%16,975
%50,686
%%%%5,000
%42,743
%80,962
%40,317
2009
%47,653
%26,584
%52,508
%16,938
%51,570
%%%%5,099
%43,830
%82,325
%41,043
2010
%44,385
%25,852
%51,037
%17,168
%48,132
%%%%4,941
%37,307
%75,122
%40,464
2011 Gain/Loss %5Change
%45,002 %%%%%%%%%(998)
:2.17%
%27,383 %%%%%%%7,876
40.38%
%51,603 %%%%%%%%%%646
1.27%
%17,463 %%%%%%%%%%943
5.71%
%49,111 %%%%%%%%%(484)
:0.98%
%%%%5,010 %%%%%%%%%%200
4.16%
%37,836 %%%%%%%1,459
4.01%
%77,165 %%%%%10,626
15.97%
%41,502 %%%%%10,538
34.03%
Desert Hot Springs and Coachella had the highest overall growth rates
and the lowest median housing prices, reflecting the generally poor
economic conditions that have prevailed in the region over the past
approximately 6-years.
As shown, the current regional population is approximately 448,040. The
region grew rapidly from 1990 to 2005. Since 2005, population growth
has slowed substantially. According to the State Department of Finance
and the Southern California Association of Governments, about 167,000
seasonal residents bring the population close to 600,000. Expectations
are for the pattern of growth experienced in the valley over the last
several years to continue. In the longer term, estimates project the
permanent population of the valley to surpass 600,000 by the year 2020.
The median age in the Coachella Valley varies substantially by city.
Indian Wells has the highest median age while Coachella has the lowest.
The median age, especially in the eastern end of the valley, has been
dropping. The median age of all desert cities is projected to decline over
the next decade. Median household income shows the same pattern,
higher in the central cities and lower in the outer cities. The cities in the
eastern end of the valley report the lowest household incomes. These
same cities report the highest number of people per family. The 2010
census concludes that the average household in the region has 2.65
people. The City of Coachella is the high with 4.72 people per household
while Indian Wells is the low with 1.93 people.
Page 19
Demographics (cont’d)
Palm Springs, the most recognized name of the Valley’s cities, has
experienced the least growth for the last ten years. The slow growth
trend in Palm Springs continues with a fractional percentage growth rate
between 2006 and 2008. Palm Desert, one of the region’s best economic
performers had negative population growth during 2006. This trend
appears likely to reverse in the future as significant residential growth is
projected for the North Sphere area of Palm Desert in the future. Land is
available and more affordable in the eastern end of the Valley as
evidenced by the growth rates of Indio, the Valley’s largest City and La
Quinta and Coachella the fastest growing cities. La Quinta is the valley’s
youngest City. Incorporated in 1982 its population grew an average
9.90% per year between 2000 and 2010.
Regional Demographic Snapshot
Median
City
Median
2011
Pop. %∆
Household
Home
Pop.
2000
Income ($)
Price ($)
Unemploy.
Median
Labor
Age (yrs.)
Force
Rate (%)
8/30/11
Cathedral City
51,603
20.10%
$
45,693
$
294,500
32.0
26,700
14.3%
Coachella
41,502
79.10%
$
43,018
$
204,200
22.8
12,000
22.7%
Desert Hot Springs
27,383
56.40%
$
36,326
$
202,000
30.1
9,300
20.4%
5,010
1.60%
$
114,500
$
613,000
63.4
1,800
5.2%
Indio
77,165
54.80%
$
51,921
$
286,400
27.3
27,600
15.8%
La Quinta
37,836
58.10%
$
75,358
$
448,600
36.4
15,500
7.8%
Palm Desert
49,111
17.70%
$
56,897
$
384,300
48.0
26,100
8.8%
Palm Springs
45,002
4.10%
$
44,728
$
352,700
46.9
27,100
11.5%
Rancho Mirage
17,463
30.00%
$
74,327
$
6,600
13.1%
Unincorporated*
79,852
n/a
Coachella Valley
431,927
n/a
Indian Wells
n/a
$
47,400
$
600,200
60.0
n/a
n/a
n/a
14.7%
378,310
n/a
n/a
n/a
* Estimated at 24 percent of Valley's population
Population estimates as of January 2011 from U.S. Census Bureau
Median household income and median age from Cities
Median home price from DataQuick (includes resale & new single-family residences and condos)
Labor force and unemployment figures (not seasonally adjusted) State of California EDD
Page 20
Economy
Tourism, retail, healthcare, construction and agriculture are the main
industries in the Coachella Valley. Tourism along with its related services
historically has been the driving force in the local economy and remains
the lifeblood of the Valley. Excellent golf and tennis facilities and events
coupled with abundant sunshine attract both domestic and international
visitors. It is estimated that tourism generates more than a billion
dollars annually and according to some researchers, maybe well beyond
that figure. The Palm Springs Desert Resorts Convention and Visitors
Authority reports regional hotel room sales increased every year through
the 1990s. Hotel sales peaked in 2000. In wake of the terrorist attacks
in 2001, hotel room sales were down by 4.8 percent, followed by a
decrease of 3.5% in 2002. Hotel room sales trended up through 2006.
Room sales trended down sharply in 2007 - 2009 as the recession set in
and high oil prices depressed travel. Poor current economic conditions
have kept the pressure on as discretionary travel was trending down, and
the major resorts reported a steep decline in occupancy, average rate and
RevPAR. However, in 2010, occupancy increased sharply and again in
2011. 2012 is projected to see another sharp increase as the tourism
industry is now trending up in the current cycle.
Hotel room sales are an important indicator of regional economic
conditions as the tourism and services segments make up the largest
employment base. Seasonality influences hotel room sales, with the first
quarter of the year the strongest and the summer quarter the weakest
accounting for 12% to 14% of annual volume in recent years. There are
approximately 239 hotels and motels selling rooms to the more than
three and a half million annual visitors. Coachella is the only desert city
with no hotel rooms. Of the Desert Cities, only La Quinta added rooms
in the last year however, there are a number of new hotels, hotel
condominium resorts and timeshare projects in the development
pipeline. The following charts show the key trends in total airline
passengers and regional hotel occupancy:
Page 21
Economy (cont’d)
% Change in Airline Passenger Count
20.00% 15.00% 10.00% 5.00% 0.00% -‐5.00% -‐10.00% -‐15.00% -‐20.00% % Change in Hotel Occupancy
15.00% 10.00% 5.00% 0.00% -‐5.00% -‐10.00% -‐15.00% -‐20.00% Agriculture has traditionally been an important component of the valley’s
economic base. While still a meaningful part of the region’s economy,
farming is pushed eastward as the valley’s population expands. The
following table shows the percentage change trend in construction
spending:
Page 22
Economy (cont’d)
% Change in Construction Spending
60% 40% 20% 0% -‐20% -‐40% -‐60% Unemployment Unemployment
%
As shown in the table at right, the
City
At.8/30/10
At.8/30/11
Change
unemployment rate varies by city; Bermuda(Dunes
7.2%
6.9% 20.3%
15.0%
14.3% 20.7%
with 8 below the countywide rate, Cathedral(City
Coachella
23.6%
22.7% 20.9%
and 4 above the countywide rate. Desert(Hot(Springs
21.2%
20.4% 20.8%
The number of total workers in the Indian(Wells
5.5%
5.2% 20.3%
Indio
16.5%
15.8% 20.7%
Coachella
Valley
is
somewhat La(Quinta
8.2%
7.8% 20.4%
nebulous as illegal immigrants are Mecca
29.2%
28.2% 21.0%
Palm(Desert
9.2%
8.8% 20.4%
active in the local workforce and add Palm(Springs
12.0%
11.5% 20.5%
to the region’s economy. More than Rancho(Mirage
13.7%
13.1% 20.6%
Thousand(Palms
10.8%
10.3% 20.5%
230,000
illegal
workers
are Riverside(County
15.3%
14.7% 20.6%
estimated to be participating in California(
12.4%
12.1% 20.3%
9.6%
9.1% 20.5%
Riverside County’s labor force. In United(States
the Coachella Valley, this segment of the workforce is participating in
and considered vital to the hospitality, construction, agricultural and
landscaping industries.
Primary employment sectors in the Valley include construction,
accounting for approximately 20% of the payroll base; hotel and
entertainment 20%; retail 15%; healthcare 12% and agriculture 10%.
The table shows the largest employers in the desert. In 1991, the State
of California Department of Commerce approved the establishment of the
Coachella Valley Enterprise Zone. The intent was to diversify the valley’s
economy making it less dependent on agriculture and tourism leading to
a more balanced economy. Businesses are offered incentives such as tax
credits and benefits to relocate to the Coachella Valley. The program has
not been successful in attracting large manufacturing or distribution
companies. The program is slated to expire in 2021. The following
sections describe regional condition by sector:
Page 23
Residential
According to the California Association of Realtors, the housing market
for 2012 is expected to pick up 1% in sales volume and 1.7% in retail
price appreciation. The following table shows the historical trend:
Focusing in closer on regional trends, the following table shows the new
homes sales trend for the Coachella Valley (through 2011):
7,000
6,000
5,000
4,000
3,000
2,000
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0
1989
1,000
Page 24
Residential (cont’d)
The following table shows the trend in median price and median price
PSF in the subject region (as of 10/31/12):
Community
All#Combined
Resale#SFR
Resale#Condo
New#Construction
Bermuda#Dunes
Cathedral#City
Coachella
Desert#Hot#Springs
Desert#Hot#Springs
Indian#Wells
Indio
La#Quinta
Palm#Desert
Palm#Desert
Palm#Springs
Palm#Springs
Rancho#Mirage
Thermal
Thousand#Palms
Zip
Code
92203
92234
92236
92240
92241
92210
92201
92253
92211
92260
92262
92264
92270
92274
92276
Sales %*Change
Median
%*Change
Highest
Median %*Change
Count From*2011
Price
From*2011
Price
$/PSF From*2011
#####853
15.70% $#####210,000
26.10% $#6,800,000 $####117
18.70%
#####575
4.20% $#####218,000
31.30% $#6,800,000 $####113
22.50%
#####242
51.30% $#####179,000
9.10% $#####950,000 $####124
6.20%
#######36
44.00% $#####285,000
24.50% $#1,637,000
N/A
N/A
#######73
35.20% $#####198,500
2.50% $#####600,000 $######84
6.50%
#######74
8.80% $#####164,750
31.80% $#####485,000 $######99
25.80%
#######24
J46.70% $#####149,000
18.30% $#####210,000 $######69
3.00%
#######52
J21.20% $############# 80
J12.80% $#####270,000 $######65
13.80%
#########8
166.70% $#####135,000
43.60% $#####275,000 $######90
104.50%
#######13
J35.00% $#####480,000
J23.10% $#1,825,000 $####192
J10.40%
#######68
J17.10% $#####145,000
7.40% $#####540,000 $######95
16.50%
#####116
38.10% $#####275,000
7.30% $#6,800,000 $####138
17.60%
#######94
59.30% $#####259,500
26.00% $#####905,000 $####144
16.40%
#######55
10.00% $#####226,000
13.60% $#3,085,000 $####142
10.30%
#####103
18.40% $#####227,000
5.60% $#1,750,000 $####149
17.40%
#######71
102.90% $#####179,000
J23.80% $#1,200,000 $####127
J2.30%
#######60
11.10% $#####392,500
34.20% $#1,499,000 $####164
10.20%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
#########6 100.00% $#####159,750
133.20% $#####585,000 $######88
39.60%
In this next chart, the regional median home price trend is shown:
Median $ $600,000 $500,000 $400,000 $300,000 $200,000 $0 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 $100,000 Median $ © 2012 CAPITAL REALTY ANALYSTS
Page 25
Residential (cont’d)
In the following chart, the trend in percentage change in the median
price is shown:
% Change in Median Home Price
40.00% 30.00% 20.00% 10.00% 0.00% -‐10.00% -‐20.00% -‐30.00% -‐40.00% -‐50.00% -‐60.00% As shown, both home sales and prices are down sharply from the 2005
peak. With median prices off by nearly 50% since the market peak,
buyers are stepping back into the resale market, as it appears the
residential segment may be bottoming out. Because the resale market
remains well below replacement cost, a short-term recovery in the new
home segment seems unlikely.
While core inflation remains low, all items inflation is up sharply as food
& energy prices, two categories with sharp increases in price are not part
of core inflation. This factor combined with declining retail values and
declining disposable income is particularly troublesome for the Coachella
Valley, where a high percentage of new home sales are second homes.
The land speculator segment makes up the bulk of the current
residential land buyer pool. The multi-family market is active in the
subsidized and tax-credit segments. However, current costs remain
relatively high, limiting feasible for market-rate development of new
units.
Page 26
Office
A boom in new office development through 2007, particularly in the
North Sphere of Palm Desert, added significant new office inventory to
the market. Currently, vacancy may be at or near a bottom as rates have
stabilized and in some sub-market areas, appear to be increasing
slightly. A neutral to slightly decreasing overall capitalization rate
outlook coupled with a continuation of the slight stabilizing trends in
both rental rates and seller expectations are projected for the 4th quarter
of 2012. The mid-range and long-range outlooks remains cloudy for
office, as uncertainty in the business climate makes longer-term
projections speculative. In light of the current supply imbalance,
inventory is expected to remain flat.
Retail
Retail development, which had remained a bright spot in the region, has
moderated. Significant new retail development along the Highway 111
corridor in La Quinta, along with generally increasing retail viability in
most areas of the region occurred through 2007. More recently, declining
economic conditions have been forcing store closures and generally
declining retail sales rates. Consequently, retail land values and rental
rates declined through 2011 and should continue to do so through the
balance of 2012. Lack of redevelopment funds will be a factor in some
areas of the region.
Industrial
Sharply declining new construction impacted the industrial segment
through 2011. As the cost to develop new buildings has risen, coupled
with declining demand and rental rates, the viability for new multitenant speculative development is weak. Alternatively, the building
boom of 2002 through 2005 generated significant demand in the
owner/user segment, and a large number of new light industrial
buildings had been developed through 2006. Many of these buildings are
re-trading for much lower PSF prices, increasing overall business
viability for some owner/users. There is significant light industrial land
inventory, particularly in the eastern end of the region to support
significant future development. However, the lack of a strong labor pool
has historically kept large-scale manufacturing (with a few exceptions)
out of the region. Much of the eastern part of the region is located in an
Enterprise Zone. The economic benefits in this area should attract larger
manufacturing development to the region in the long term. Rental rates
remain well below the level needed to fuel speculative multi-tenant
industrial development. Leasing velocity appears to be increasing
slightly.
Page 27
Conclusion
The Coachella Valley’s economy has historically been seasonal, tied to
the influx of tourists and part-time residents. The region is projected to
continue to grow rapidly (in relation to neighboring regions) over the next
few decades as the large Baby Boomer demographic is now entering
retirement age. The Coachella Valley has historically attracted Baby
Boomers and relatively affluent retirees.
The region continues to
enhance its appeal with this demographic by configuring shopping,
entertainment venues and planned housing developments ranging from
upper middle to high-end geared to the segment. With additional growth
in the permanent population, the economy is likely to become less
vulnerable to seasonality.
Declining economic conditions at the national, state and regional levels
impacted the economy of the Coachella Valley region through 2011. More
recently, the market appears to be bouncing around a bottom, as
transactional activity is increasing, as is the average home price and
absorption rate. Travel is also picking up and the hotel segment, which
had a good year in 2011, appears to be headed for a slightly improved
2012. If credit markets loosen up, a continuation of the slightly positive
uptrend is possible. The continuation of limited new permit issues
projected over the next several quarters should serve to allow demand to
continue to catch up to supply for most real property types. In my view,
generally flat economic conditions are likely to persist through at least
the 4th quarter of 2012. The extraordinary run-up in land values between
2002 and 2005 has completely run its course and with land values
having declined very sharply, I project a modest increase in speculative
land trading activity in the short term, with speculative sales volume
ramping up in the mid-term, as existing properties become re-priced at
levels that are low enough to attract capital in the current market. As the
national, state and regional economies recover in the mid-term, I project
a comparatively strong uptick in regional permit activity along with sales
volume, as pent up demand from the current low cycle breaks out.
Page 28
City Analysis - Palm Desert, CA.
Subject
Introduction
Palm Desert, California is located in the central portion of the Coachella
Valley region. The City is bounded by Indian Wells to the east, Rancho
Mirage to the west, and the Santa Rosa Mountains to the south and
Interstate 10 to the north. Access to Palm Desert is considered good via
Monterey Avenue, Cook Street and Washington Street: direct routes to
the Interstate 10 Freeway. State Highway 111, the major commercial
corridor in the region roughly bisects Palm Desert, running from west to
east. Palm Springs Regional Airport is the nearest regional airport,
located approximately 18 miles west of the City in Palm Springs.
Bermuda Dunes Airport, a general aviation facility is located immediately
east of the City in an unincorporated area known as Bermuda Dunes,
CA. Although Southern Pacific operates rail facilities parallel to the I-10
freeway along the northern border of the City, rail spur access is not
available within the City Limits.
The City was incorporated in 1973, and includes a total land area of
26.96-square miles. Historically, Palm Desert has had a reputation as
one of the best run Cities in the subject region.
Page 29
City Analysis - Palm Desert, CA.
Several good quality master-planned communities have been developed
in Palm Desert. Some of these include Bighorn, Ironwood, Desert Falls,
Palm Valley and Indian Ridge. In addition, Palm Desert has attracted
high quality retail development. El Paseo is the regions premier
pedestrian retail corridor, generally attracting the highest retail rents in
the region. Tenants on the Street include Saks, Tiffany’s, Coach, Tommy
Bahamas and designers such as Louis Vuitton, Gucci, and Ralph
Lauren. Westfield Shopping Town (formerly known as the Palm Desert
Town Center), a regional mall located in Palm Desert sold in 1999. This
facility is the largest (in both size and sales volume) among the 4 regional
malls in the subject region. The facility completed a major renovation in
the mid 2000’s, which brought in new retailers and food court tenants.
Population
As shown in the tables in the Regional Analysis, the population of Palm
Desert has grown approximately 90% in the past decade, to almost
50,000 permanent residents. Current estimates put the seasonal
population of the City at over 71,000. The City's growth has been
enhanced with quality developments, including the City’s Desert Willow
project, Marriott's Desert Springs Resort and a number of excellent
quality retail projects. The northern part of the City includes hundreds of
acres available for new development.
Business & Economy
The fact that Palm Desert has a substantial retail and service based
economy makes for a comparatively high percentage of year-round
population. As shown in the chart below, the City has a high percentage
of employment directly related to the tourism and supporting retail
segments.
Page 30
City Analysis Palm Desert, CA.
Business & Economy (cont’d)
Like the other Coachella Valley Cities, Palm Desert's economic base is
the tourism, construction and retail industries. Palm Desert has the
largest destination resort in the Coachella Valley. The Marriott's Desert
Springs Resort represents almost 50% of the City's over 1,800 hotel
rooms. A 400% increase in hotel room sales has occurred since 1986 to
over approximately $80 million. The recession and subsequent housing
downturn impacted the construction industry in Palm Desert. The
following table shows the permit trend in the City:
Total taxable sales had been posting steady growth through 2005.
However, retail sales have also declined with the recession, as shown in
the following table:
Page 31
City Analysis Palm Desert, CA.
Business & Economy (cont’d)
The Highway 111 corridor and much of the southern portion of Palm
Desert is becoming built-out. However, there is significant room for
future growth in the northern part of the City. Cal State University,
located at the NEC of Frank Sinatra Drive and Cook Street is providing
the catalyst for significant new development in this North-Sphere area.
Several office/retail projects have been developed, or are planned for
future development in this immediate area. Additionally, several hundred
acres of residential land are poised to be developed in the University Park
area as market conditions dictate. A Sam’s Club and a Super Wal-Mart
were completed in the 4th quarter of 2006 at the SEC of Monterey Avenue
and Dinah Shore Drive at the northwest corner of the City.
Page 32
City Analysis Palm Desert CA.
Conclusion
Palm Desert has been one of the top economic performers in the regional
area. Well-managed growth and a realistic municipal approach,
combined with relatively wide economic diversity have created a
comparatively stable community. The City administration has done a
good job of anticipating and adjusting to changes occurring through its
own growth and the growth of the surrounding communities. These
trends are projected to continue through at least the mid-term. The table
shows a statistical profile of the City of Palm Desert:
Page 33
Intentionally Blank
Page 34
Market Analysis
The subject property is located at 74833 Joni Drive, Palm Desert, CA.
The subject neighborhood is known as the Cook Street Corridor. The
neighborhood boundaries are considered to be the I-10 Freeway corridor
to the north, Fred Waring Drive to the south, and Cook Street to the east
and west. Currently, the southern portion of the neighborhood in the
area of the subject is considered to be in the stabilized stage of its
economic life cycle. The northern part of the neighborhood is considered
to be in the growth stage of its economic life cycle.
Page 35
Market Analysis
Access to the subject neighborhood is considered excellent. Cook Street
is a major north / south artery that connects State Highwya111 to the
south to the I-10 Freeway to the north. Major east/west arteries include
Fred Waring Drive, 42nd Avenue, Country Club Drive, Frank Sinatra
Drive, Gerald Ford Drive and the I-10 Freeway. While the Southern
Pacific has rail lines that parallel the I-10 Freeway, rail spur access is not
available in the subject neighborhood. Competing neighborhoods include
the Thousand Palms sub-market to the west, and the East Palm Desert
sub-market to the east.
Interestingly, while most markets in Southern California develop outward
from major Freeways, the subject region developed in towards the
Freeway. The reason is that very high winds blow along the Freeway,
making the Freeway corridor less desirable. However, as much of the
land located between the Freeway and the Santa Rosa Mountains to the
south has been fully developed, development moved into the subject
neighborhood in the early 2000’s.
Regional Industrial Overview
The subject region has
historically supported a
relatively minor industrial
segment.
The
comparatively
low
population of the region
includes
a
high
percentage of seasonal
residents. This feature
makes the labor pool
difficult for large-scale
industrial
users.
The
current existing rentable
area for industrial / flex
space in the subject
region is approximately
16,319,165 SF. Current
vacancy region-wide is
approximately 8%. The
table at right shows the
trend
in
regional
industrial/flex
space
price PSF:
Page 36
Market Analysis
Regional Industrial Overview (cont’d)
The subject’s North Sphere location is among the higher quality in the
region. Most development in the North Sphere took place in 2005-2007.
The bulk of industrial development in the region is located in Indio and
Coachella, where a significant amount of agricultural activity supports
cold storage and ancillary industrial development.
Palm Desert Sub-Market
The following table shows the average price PSF in the subject’s submarket area:
Page 37
Market Analysis
Palm Desert Sub-Market (cont’d)
As shown in the previous table, the price PSF in the subject sub-market
area has hovered around the $80 PSF mark for several quarters. The
most recent quarter shows a steep decline as a function of the fact that
there was only 1 sale in 2012, and it sold for just over $40 PSF.
Similarly, the vacancy rate indication of 18% is skewed due to the lack of
participation by some of the larger complexes that had been lost in
foreclosure and removed from the market; but are now coming back
online. While current vacancy is actually above 10%, the fact that Pointe
Monterey recently began offering units has temporarily increased
vacancy. However, many of these units are being, or have been improved
with offices and marketed as office, even though the SF is still included
in Industrial / Flex. Consequently, market vacancy correlates better with
the regional average of 8%. However, to recognize the increased vacancy
in this sub-market, market vacancy for the subject is estimated at 10%.
In terms of demand, the following table shows the trend in absorption in
the sub-market:
Page 38
Market Analysis
Palm Desert Sub-Market (cont’d)
As shown in the table on the previous page, absorption had been
relatively strong through the 2nd quarter of 2012. The brokers who work
this sub-market attribute the absorption spike to dramatically lowered
rental rates. As a single-tenant building, the subject is not likely to
attract attention from investors, as the available rental rate is too low to
support feasible speculative acquisitions. Clearly, the most likely buyer is
an owner user. Typical uses include light manufacturing and service
commercial uses. Examples include sub-contractors, small part
distributors, etc.
The Subject Property
The subject property is located along Joni Drive in an older light
industrial subdivision in Palm Desert. The improvements in this area are
generally older and support comparatively low PSF values. Alternatively,
the area is becoming fully developed and land values are expected to
increase over the long term in response to declining supply.
Sales activity has been comparatively active in the subject development,
and the key brokers in this sub-market; including Dick Baxley (Baxley
Properties), Polo Doria (Lee & Assoc.), Matt Johnson (Wilson Johnson),
Brian Ward (Lee & Assoc.), Paula Turner/Susan Harvey (Desert Pacific
Prop.), John Boyd (CBRE) and Steve Metzler of Industrial West all report
slightly increasing marketability as interest appears to be picking up.
As a City Yard facility, the subject property includes fenced yard space
and warehouse space. There are 2 small office areas at each end of the
warehouse portion. The northerly office is currently in use for the
Citizens on Patrol office. The southerly office was observed to be in fair
condition and is in use as a storage space. Clearly the property will
appeal to an owner/user. The property appears most suitable as a
contractor’s office/yard or other maintenance yard facility. Demand for
this property type is currently comparatively light, as construction
activity in the region is at or near the bottom of the current cycle.
However, demand appears poised to pick up, as a housing recovery
should provide a boost to the construction industry, where the most
likely buyer pool lies.
Page 39
Market Analysis
Conclusion
The subject property is well located in an established light industrial area
of Palm Desert, CA. It appears that the market may be bottoming out and
could be poised for a modest recovery in terms of marketability. However,
retail price points seem unlikely to move significantly higher in the short
term, as additional new unit inventory remains to be absorbed north of
the subject and in the Gateway sub-market area. Additionally, further
foreclosure activity could continue to place downward pressure on values
over the next several quarters if the recovery fails to take hold. In the
long-term, the locational quality of the sub-market is likely to continue to
attract demand for the foreseeable future.
Page 40
Site Analysis
Plat Map, APN: 624-07; Riverside County, CA
Page 41
Site Analysis
Location:
74-833 Joni Drive, Palm Desert, CA.
Identification:
APN: 624-071-014: City of Palm Desert, Riverside
County, CA.
Site Size:
According to the Riverside County Assessor’s Plat
Map, the size of the subject site is .53-acres
(23,139 SF).
Shape:
Rectangular
Dimensions:
See Plat Map
Frontage:
South side of Joni Drive, Palm Desert, CA.
Topography:
Generally level at curb grade.
Flood Zone:
According to the Flood Insurance Rate Map,
Community Panel Number 06065C 2226G,
revised August 28, 2008, the subject property is
located in Flood Zone X.
Zone X is defined as areas of 500-year flood; areas
of 100-year flood with average depths of less than
1 foot or with drainage areas less than 1 square
mile, and areas protected by levees from 100-year
flood.
Access:
The subject has average access along the south
side of Joni Drive, Palm Desert, CA.
Visibility:
Average
Page 42
Site Analysis
Soils:
The Appraiser was not provided with a soil report
for the subject property. A physical inspection of
the subject property did not reveal obvious
evidence of toxic waste or hazardous materials on
the subject property. This Report assumes that no
toxic or hazardous materials are present on the
subject property. The Appraiser is not qualified to
make a determination as to the existence or nonexistence of hazardous materials on the subject
property, and recommend a qualified engineer be
consulted, if required.
Utilities:
Utilities available to the subject site are as follows:
Electricity:
Southern California Edison
Gas:
The Gas Company
Telephone:
Verizon
Water:
Coachella Valley Water District
Sewer:
Coachella Valley Water District
Hazards:
A physical inspection of the subject did not reveal
any atypical hazards. I am not qualified to
evaluate the site for toxic waste or hazardous
substances. This Report assumes that there are
no hidden or unapparent conditions to, or on the
soil or subsoil that would render the property
more or less valuable.
Page 43
Site Analysis
Improvements:
The subject consists of .53-acres of land,
improved with 2, 816 SF wood frame & stucco
office areas, a 3,810 SF wood frame warehouse
area, and a 120 SF open storage shed. The
improvements are older, and were observed to be
in fair condition fort their effective age, estimated
at 30-years.
The property has been in use since the 1980’s as
a City Yard facility. Additional improvement
details are included in the Improvement
Description section of the report.
Zoning/General
Plan:
According to the official zoning map of the City of
Palm Desert, the subject is zoned S.I., Service
Industrial. The General Plan designation of I-BP is
conforming. The improvements are a legal use
under the existing zoning, which is considered
reasonable and appropriate. Prospects for any
type of zone change in the foreseeable future are
nil. The proposed land use is considered a
homogeneous use in the subject neighborhood.
Earthquake
Hazard:
According to the Riverside County Geographic
Information System, the subject property is not
located within ½ mile of a mapped fault zone.
Special
Resources:
The course of normal data gathering and analysis,
and a visual inspection of the subject, did not
reveal any evidence of natural, cultural,
recreational or scientific resources present upon
the subject site.
Easements and
Encumbrances:
A Preliminary Title Report for the subject was not
submitted or examined. Consequently, the subject
is being appraised as though there are no atypical
easements and/or encumbrances that may have a
negative impact on the prospective market value
or marketability of the subject property. Any user
of this analysis is advised to make an independent
assessment of the condition of title, prior to
utilizing this analysis.
Page 44
Site Analysis
Functional
Adequacy of the
Site:
The size and other physical properties of the
subject are considered typical of other lots that
have been developed with no atypical functional
problems. Consequently, the functional utility of
the subject lot is considered typical.
Relationship to
Adjoining
Properties:
North: Light Industrial
South: Vacant
East: Light Industrial
West: Light Industrial
Units of
Comparison:
In the subject marketplace, land parcels of the
subject’s size and type are typically purchased
based upon a price per SF. Based upon the
market preference, the price per SF will be
applied as the unit of comparison to value the site
“As Vacant”, if required, for this analysis.
Page 45
Site Analysis
Fault Zone Map (Source: Riverside County GIS)
Page 46
Site Analysis
Flood Zone Map (Source: Riverside County GIS)
Page 47
Site Analysis
Flood Zone Map (Source: FEMA)
Page 48
Site Analysis
Liquefaction Hazard Map (Source – Riverside County GIS)
Page 49
Site Analysis
MSHCP Map (Source – Riverside County GIS)
Page 50
Site Analysis
Subsidence Hazard Map (Source – Riverside County GIS)
Page 51
Site Analysis
Topographical Map (Source – Riverside County GIS)
Page 52
Site Analysis
General Plan Map (Source – City of Palm Desert)
Page 53
Site Analysis
Zoning Map (Source – City of Palm Desert)
Page 54
Improvement Description
The subject consists of .53-acres of land, improved with a 5,442 SF
office/warehouse structure and a 120 SF shed. Yard improvements
include a concrete drive, gated entry, and a concrete block perimeter
wall. The 5,442 SF wood frame & stucco structure includes 2 office areas
of 816 SF each, and a 3,810 SF warehouse area. The improvements are
older, and were observed to be in fair condition fort their effective age,
estimated at 30-years. The property has been in use since the 1980’s as
a City Yard facility.. The following sections show the major building
components of the subject:
Page 55
Improvement Description (cont’d)
Floor
Concrete slab on grade
Exterior Walls
Wood frame with stucco
Structural Frame
Wood
Roof Covering
Built-up flat roofing on the warehouse areas, and composition
shingle on the office areas.
Building Insulation
Not observed, but assumed adequate
Ceilings
Open wood frame in the warehouse area, taped and painted drywall
in the office areas.
Restrooms
One in each office space.
Fire Sprinklers
None
Heating and Air Conditioning
Roof mounted FAUs
Lighting Fixtures
Surface mount fluorescent
Landscaping
Olive & palm trees along the Joni Drive frontage.
Overall Land to Building Ratio
4.07:1
Stories & Story Height
1-Story, 14’ to the top of the roof gable.
Page 56
Improvement Description
Overall Parking
Open asphalt-paved
Comments
The improvements appear well designed for their intended use as a City
Yard facility. The property holds current appeal as a construction
office/yard facility or other single tenant adaptive use. The land to
building ratio is high for comparable facilities in the region, indicating
the presence of surplus land. The property location is considered
average+ from a historical perspective. No apparent functional
inadequacies were noted.
The warehouse area includes 4 roll- Pavement is in fair condition
up doors.
The shed abuts the southern 12’ Typical
restroom
concrete block perimeter wall. The w/handicapped rails
east and west lines of the property
abut
adjacent
concrete
block
buildings, adding a measure of
security to the property.
improvements
Page 57
Intentionally Blank
Page 58
Highest and Best Use Analysis
Highest and Best Use is defined as:
1.
The reasonable and probable use that supports the highest present
value of vacant land or improved property, as defined, as of the
date of appraisal.
2.
The reasonably probable and legal use of land or sites as though
vacant,
found to be physically possible, appropriately
supported, financially feasible, and that results in the highest
present land value.
3.
The most profitable use.
Implied in these definitions is that the determination of highest and best
use takes into account the contribution of a specific use to the
community and community development goals as well as the benefits of
that use to individual property owners. Hence, in certain situations, the
highest and best use of land may be for parks, greenbelts, preservation,
conservation, wildlife habitats, and the like.
2
In estimating the highest and best use, there are essentially four stages
of analysis:
1.
2.
3.
4.
Legally Permissible: What uses are permitted by zoning and deed
restriction for the subject site?
Physically Possible: What are the physically possible uses for the
subject site?
Financially Feasible: What physically possible and legally
permissible uses will produce a net return to the owner of the site?
Maximally Productive: Among the financially feasible uses, which
use will produce the highest net return or the highest present
worth?
The following tests must be met in estimating the highest and best use:
The use must be legal. The use must be probable, not speculative or
conjectural. There must be a profitable demand for such use and it must
return to the land the highest net return for the longest period of time.
To estimate the highest and best use, these tests are applied to the
subject property (1) as if vacant and available for development, and (2) as
presently improved.
American Institute of Real Estate Appraisers, The Dictionary of Real Estate Appraisal (Chicago Illinois:
American Institute of Real Estate Appraisers, 1984), Page 152
2
Page 59
"As If Vacant"
Legally Permissible
The legal restrictions that apply to the subject are the public
restrictions of the City of Palm Desert’s S.I. zoning ordinance and
conforming I-BP general plan designation. A large number of similar
zoned lots have been successfully developed in and around the
subject neighborhood, and in the immediate area of the subject with
no atypical legal constraints. The legal constraints of the subject are
considered reasonable and appropriate and would not impair
development of the site to its highest and best use if it were vacant
on the date of value.
Physically Possible
The subject is an interior parcel, located on Joni Drive. The
rectangular
shape,
utility
availability
and
homogeneous
development in the area suggests that the subject lot represents the
standard of acceptability for similar sites that have been
successfully developed with light industrial buildings in the subject
market area. Consequently, the physical aspects of the site would
not impair its ability to be developed to its highest and best use as
of the date of value.
Financially Feasible
The legally permissible and physical possible qualities of the subject
lend it to light industrial development. Financial feasibility for
development of this type is typically estimated with a simple
comparison of costs and benefits. If the cost to construct a
prospective development exceeds the present value of the cash flows
(including the reversion, if applicable), estimated for the proposed
use, the proposed use is not considered feasible. Alternatively, if the
present value of the expected income stream exceeds the cost to
produce the proposed development, the use is considered financially
feasible.
Page 60
"As If Vacant"
Financially Feasible (cont’d)
Clearly, rental rates are insufficient to support financially feasible
new speculative light industrial development as of the date of value.
Evidence is supplied by the fact that neither lenders nor developers
are currently risking new debt and equity on new speculative
projects in the immediate area of the subject. Consequently, I
conclude that development of the subject site with speculative
improvements would not be financially feasible as of the date of
value.
Maximally Productive
The physically possible and legally permissible uses for the subject
property are present in the subject region. Other light industrial
properties in the subject region have been successfully developed.
However, financial feasibility does not exist for speculative
development and consequently, it is my opinion that the market
perception is that the most maximally productive use of the subject
property “As Vacant” is to hold for future development.
“As Improved”
The use that should be made of a property as it exists. An existing
property should be renovated or retained as is as long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing
the existing building and constructing a new one.
3
Legally Permissible Uses
“As Improved”, the subject is a legal conforming use. The current
zoning is considered reasonable and appropriate. No changes in
zoning are projected for the subject property, and this factor does
not impair the subject’s ability to operate to its highest and best use
“As Improved”.
Physically Possible
The site is large enough to provide a typical level of functional utility
for the existing improvements. Access and visibility are considered
average for the existing use. The central location is considered a
positive physical attribute. The site includes surplus land.
3
The Dictionary of Real Estate Appraisal, Fourth Edition, Appraisal Institute, 2002 (Chicago, Illinois)
Page 61
Highest & Best Use Analysis
“As Improved”
Financially Feasible
The subject’s improvements consist of a fair/average quality
office/warehouse building with yard space. The same tests of
feasibility described in the “As Vacant” section, apply in the
improved condition.
The improvements continue to contribute to land value and are
considered to represent the highest and best use of the property, as
no reconfiguration would generate a higher return to the land; as of
the date of value. This feature suggests that the existing
improvements are a financially feasible use “As Improved”.
Maximally Productive
The physically possible and legally permissible uses for the subject
property are present in the subject region. Other similar properties
in the subject region have been successfully developed as light
industrial facilities. “As Improved”, the existing improvements make
a contribution to land value. Based on the available data, I conclude
that the market perception is that the most maximally productive
use of the subject “As Improved” is to remain “As Improved”.
Page 62
Appraisal Process
The first step in the appraisal process is to identify the appraisal
problem. Every real property is different and there are many types of
values that can be estimated for any real property. For this appraisal
assignment, the appraisers are estimating the market value of the fee
simple estate in the subject property, under the following conditions;
Market Value, “As Is”
The definition of market value has been defined in the Purpose of the
Appraisal section of this report. The subject property and the type of
value desired have been identified. Through the appraisal process, it is
our intent to present a properly supported value estimate for the subject
property. The market data, analysis and conclusions presented in the
appraisal report should cause a reasonable person to reach similar
conclusions. There are three traditional approaches to estimating market
value. These are the Cost Approach, the Sales Comparison Approach and
the Income Approach. The approaches to value are defined as follows;
Cost Approach
“A set of procedures through which a value indication is derived for
the fee simple interest in a property by estimating the current cost
to construct a reproduction of, or replacement for, the existing
structure; deducting accrued depreciation from the reproduction or
replacement cost; and adding the estimated land value plus an
entrepreneurial profit. Adjustments may then be made to the
indicated fee simple value of the subject property to reflect the value
of the property interest being appraised.”
4
Sales Comparison Approach
“The Sales Comparison Approach is the process in which a market
value estimate is derived by analyzing the market for similar
properties and comparing these properties to the subject property.
Estimates of market rent, cost, depreciation, and other value
parameters may be derived in the other approaches to value using
comparative techniques. Often, these elements are also analyzed in
the sales comparison approach to determine (estimate) the
adjustments to be made to the sale prices of the comparable
properties. The comparative techniques of analysis applied in the
sales comparison approach are fundamental to the valuation
process.”
5
4
5
The Dictionary Of Real Estate Appraisal, Third Edition, Appraisal Institute, 1993, Page 81
The Appraisal Of Real Estate, Tenth Edition, Appraisal Institute, 1992; Page 367
Page 63
Appraisal Process
Income Approach
“A set of procedures through which an appraiser derives a value
indication for an income-producing property by converting its
anticipated benefits (cash flows and reversion) into property value.
This conversion can be accomplished in 2 ways. One year’s income
expectancy can be capitalized at a market-derived capitalization rate
or at a capitalization rate that reflects a specified income pattern,
return on investment and change in the value of the investment.
Alternatively, the annual cash flows for the holding period and the
reversion can be discounted at a specified yield rate.”
6
The following is a description of the valuation process for each of the
components of the subject;
The Sales Comparison Approach and the Income Approaches to value are
applied in the “As Is” condition. As buildings of this type are selling for
less then cost, and as lenders and developers are not currently risking
new debt and equity on new development in the immediate area of the
subject, the Cost Approach is excluded.
Complete descriptions of the Approaches are included in the introductory
section of each approach. A reconciliation completes the analysis leading
to final value estimates.
7
The Dictionary Of Real Estate Appraisal, Third Edition, Appraisal Institute, 1993, Page 178
Note that computerized spreadsheets may be used in this report. Numbers are typically accurate to 6
decimal points and rounded to the nearest whole dollar or 100th of a percent. Manual calculation of totals
may result in insignificant rounding errors.
6 6
7
Page 64
In the Sales Comparison Approach, the subject property is compared to
similar properties, which have been sold recently or for which listing
prices or offering figures are known. Data for generally comparable
properties are used and comparisons are made to demonstrate a
probable price at which the subject property would be sold if offered on
the market. The Dictionary of Real Estate Appraisal defines the Sales
Comparison Approach as follows;
“A set of procedures in which a value indication is derived by
comparing the property being appraised to similar properties that
have been sold recently, applying appropriate units of comparison,
and making adjustments to the sale prices of the comparables
based on the elements of comparison. The sales comparison
approach may be used to value improved properties, vacant land, or
land being considered as though vacant; it is the most common and
preferred method of land valuation when comparable sales data are
available.”
8
A field investigation was made in order to obtain data on recent,
comparable sale transactions. The primary selection criteria for the
comparables used in this section of the analysis are as follows; current
sales, location, similar improvement type / quality, etc. The typical unit
of comparison for buildings (other than income based methods) is the
price per square foot. In this report the price per square foot is applied as
the unit of comparison.
The Sales Comparison Approach is organized as follows;
Building Sales
Building Sales
Building Sales
Building Sales
Conclusion
8
Map
Grid
Analysis
Adjustment Matrix
The Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute, 1993, page 318
Page 65
Building Sales Map
Building Sales Grid
Sale
#
1
2
3
4
Subject
Name/Location
Sale/List
Date
Size
(SF of GLA)
Sale
Price
Multi-Tenant Industrial
74757-74773 Joni Drive
Palm Desert, CA
3/21/2012
25,000
$1,000,000
$
40.00
Single-Tenant Industrial
74805 Joni Drive
Palm Desert, CA
3/25/2011
12,091
$450,000
$
37.22
74869 Joni Drive
Palm Desert, CA
4/30/2010
8,600
$650,000
$
75.58
74866 Velie Way
Palm Desert, CA
3/21/2012
14,083
$700,000
$
49.71
Single Tenant Industrial
74833 Joni Drive
Palm Desert, CA
Price Per
SF of GBA
5,442
Page 66
Building Sales Analysis
Comparable Sale Number 1
Comparable sale number 1 is the March 2012 sale of a 25,000 SF
multi-tenant industrial building, located at 74757-74773 Joni Drive,
Palm Desert, CA. The sale price of $1,000,000 equates to an
unadjusted sale price of $40.00 per square foot. This data item was
selected for comparison, as the property is located 6 parcels NW of
the subject property. Additionally, the improvements have a similar
effective age. The improvement size is much larger, although the
property is situated on a 1.05-acre parcel. Overall comparability is
considered average.
single-tenant industrial building, located at 74805 Joni Drive, Palm
Desert, CA. The sale price of $450,000 equates to an unadjusted
sale price of $37.22 per square foot. This data item was selected for
comparison for its location, which is 1 parcel west of the subject;
and its similar effective age. Overall comparability for this data item
is considered average.
Comparable sale number 3 is the April 2010 sale of an 8,600 SF
multi-tenant industrial building, located at 74869 Joni Drive, Palm
comparison to demonstrate the highest PSF building sale located on
Joni Drive that I could locate and verify. The property was fully
leased on the date of sale. The improvements are superior to the
subject in quality and condition. Overall comparability is considered
fair.
multi-tenant industrial building, located at 74866 Velie Way, Palm
comparison as the sale date ids comparatively recent, and the
property is located 1 block north of the subject in the same
industrial park. The sale property was 100% leased on the date of
sale. The improvement quality is slightly superior. Overall
comparability is considered average.
Page 67
Adjustments
Adjustments to each of the sales are required for significant differences
that affect value. The appraiser adheres to a sequence of adjustments in
all sales comparison analysis. Using the sequence, the appraiser obtains
intermediate price figures and applies succeeding adjustments to each
previously adjusted price.
The adjustments applied to the price of a comparable property reflect the
comparables' superiority or inferiority in regard to the real property
rights conveyed, financing, conditions of sale, market conditions and
locational and physical characteristics. A common method of extracting
adjustments among the comparable sales is a technique called “Matched
Pairs Analysis”. The goal of Matched Pairs Analysis is to obtain marketbased adjustments.
The basic premise of Matched Pairs is to isolate a particular adjustment
feature among 2 or more sales, where the difference in adjusted prices
would yield the market’s value perception for that feature. Generally, the
appraiser follows a sequence of adjustments, attempting to isolate
market-based adjustments from intermediate adjusted sale prices. In
many cases, adjustment features cannot be isolated.
Limited
comparable data, unique property traits or other factors may cause this.
When adjustment features cannot be isolated, Matched Pairs Analysis is
supplemented with other techniques to adjust the comparable data.
These other techniques typically include cost based adjustments,
adjustments based upon a market survey, adjustments based upon
published data and subjective adjustments. The following is a discussion
of the relevant adjustment features;
Property Rights Conveyed
Among this data set, all of the sales were leased fee estates with
rents at market, of fee estates. No adjustments are required for
property rights for this portion of the analysis.
Financing Terms
All of the sales were reported to be cash equivalent sales with no
indication of any non-market or beneficial financing that would
warrant a cash equivalency adjustment.
Page 68
Adjustments
Conditions of Sale
All of the sales were reported to be arms-length sales between
willing and well-informed buyers and sellers acting in their
perceived best interests. No adjustments for conditions of sale are
applied to the comparable sales.
Market Conditions
Adjustments for market conditions reflect a change in the prices
paid for real property due to changes in markets over time. In this
case, Sales 1 and 4 are comparatively recent and do not require
adjustment for market conditions, which have remained relatively
flat since the date of these sales. Sales 2 and 3 are older sales.
Market conditions have declined slightly since the date of these
sales and consequently, downward adjustments are applied to Sales
2 and 3 for market conditions.
Location
The location of a property will dictate its desirability among similar
properties in the market. Since location remains the 3 most
important factors that influence value, I limited my data search to
the immediate area of the subject property. In this case, 3 of the 4
sales are located on the same street as the subject; within 6 parcels
of the subject property. Sale 4 is located 1 block north on Velie Way.
The locational quality of the subject and all of the comparables are
sufficiently similar that no adjustments for location are required
among this data set.
Age/Quality/Condition
The effective age and quality of a building will affect the rental rates
of a property, and to a somewhat lesser extent, occupancy.
Theoretically, better quality improvements will garner the higher
rents. Occupancy on the other hand, can be achieved in inferior
improvements (which typically sell for less) via lower rental rates.
The subject is an older set of improvements, designed for singletenant occupancy. The single tenant configuration is generally
inferior to a multi-tenant configuration as the risk on the income
stream is spread among more tenants, and a larger demand pool
exists for smaller spaces. Alternatively, the subject has 1,632 SF, or
30% office space; which is superior to all of the comparables.
Page 69
Adjustments
Age/Quality/Condition (cont’d)
Sale 1 is considered slightly superior to the subject in this
adjustment category, as the building is multi-tenant. However, this
feature is offset by the lower amount of office space. No adj8usmtent
is applied to Sale 1 in this adjustment category. Sale 2 is a singletenant building with a similar effective age. No adjustment is
required of this sale in this adjustment category. Sale 3 is a superior
improvement set that requires downward adjustment. Similarly,
Sale 4 is considered slightly superior and downward adjustment is
applied.
Size
The size of a property affects the uses it will support, and the buyers
it will attract. Size adjustments are generally based upon the
concept of “marginal utility”. Marginal utility is defined as follows;
“The increment of total utility added by the last unit of a good at any
given point of consumption. In general, the greater the number of
items, the lower the marginal utility, i.e., a greater supply of an item
or product lowers the value of each item.”
9
The concept of marginal utility generally holds true for industrial
properties in the subject market. However, the lack of current sales
of the subject’s size prevents the application of matched pairs for
size. Small subjective adjustments are applied to the sales
accordingly.
Other Physical Attributes
Art 4.07:1, the subject property has a higher land to building ratio
than the sales; which were 1.83:1, 2.01:1, 2.75:1 and 1.84:1 for
Sales 1-4 respectively. Assuming a typical land to building ratio of
2.0:1, the subject improvements require 10,884 SF of land area,
leaving 12,255 SF of surplus land. At a surplus land value estimate
of $5 PSF, the subject’s surplus land value is estimated at $61,275.
This amount is added as a lump sum adjustment to the final PSFbased value conclusion.
9
The Dictionary of Real Estate Appraisal, 3rd Edition, Appraisal Institute, Chicago, IL., 1993, p.219
Page 70
Conclusion, Market Value “As Is”
The following table shows the Building Sales Adjustment Matrix:
Element
Sale Price
Size (SF)
Unit of Comparison
Sale Price Per SF
Property Rights
Adjustment
Subject
5,442
$ Per SF
Fee Simple
Sale 1
$1,000,000
25,000
$ Per SF
$40.00
Sale 2
$450,000
12,091
$ Per SF
$37.22
Leased Fee Fee Simple
$0.00
$0.00
Sale 3
$650,000
8,600
$ Per SF
$75.58
Sale 4
$700,000
14,083
$ Per SF
$49.71
Leased Fee
$0.00
Leased Fee
$0.00
Terms
Cash Equivalency
Cash
$0.00
Cash
$0.00
Cash
$0.00
Cash
$0.00
Conditions of Sale
Adjustment
Arms-Len.
$0.00
Arms-Len.
$0.00
Arms-Len.
$0.00
Arms-Len.
$0.00
3/21/12
$0.00
3/25/11
($6.43)
4/30/10
($19.88)
3/21/12
$0.00
$40.00
$30.78
$55.70
$49.71
Average
Similar
$0.00
Similar
$0.00
Similar
$0.00
Similar
$0.00
Fair/Average
Similar
$0.00
Similar
$0.00
Superior
($11.14)
Sl. Superior
($4.97)
5,442
25,000
$12.00
12,091
$4.62
8,600
$5.57
14,083
$7.46
Surplus
Land
Inferior
$0.00
Inferior
$0.00
Inferior
$0.00
Inferior
$0.00
$52.00
$35.40
$50.13
$52.19
Date of Sale
Adjustment
12/15/12
Subtotal
Location
Adjustment
Age/Quality/Condition
Adjustment
Size
Adjustment
Other Physical Attributes
Adjustment
Adjusted Sale Price Per SF
The range of values derived from the adjusted comparable sales is from
$35.40 PSF to $52.19 PSF. Sale 3 required significant gross and net
adjustment and consequently, this data point is considered the least
reliable indicator of current value. Sale 2 adjusted to a value well below
the adjusted indicators of the other 3 data points. As a statistical outlier,
limited emphasis is placed on Sale 2 for this portion of the analysis.
Sales 1 and 4 are the most current sales. Both sales are located in the
immediate area of the subject property, and are considered the most
reliable indicators of current value.
Page 71
Conclusion, (cont’d)
Based on the available data, I conclude that the market value of the fee
simple estate in the subject property as of the date of value is as follows:
$50.00 PSF x 5,442 SF = $272,100 + $61,275 (Surplus Land) =
$333,375
$335,000 (Rounded)
(Three Hundred Thirty Five Thousand Dollars)
Page 72
Income Approach
Non owner-user buyer’s in the subject market place primary emphasis
on income-based indicators to estimate value for this property type. For
this property type, there are 2 main income-based valuation methods.
These are Direct Capitalization and the Discounted Cash Flow Analysis.
Direct Capitalization is defined as follows:
“1. A method used to convert an estimate of a single year’s income
expectancy into an indication of value in one direct step, either by
dividing the income estimate by an appropriate rate or by
multiplying the income estimate by an appropriate factor.
2. A capitalization technique that employs capitalization rates and
multipliers extracted from sales. Only the first year’s income is
considered. Yield and value change are implied, but not identified.”
10
In Direct Capitalization, an overall capitalization rate is applied against
the next year’s projected NOI of the property to yield a value estimate.
This method typically works best for single-tenant, smaller and/or
stabilized properties, when overall rates are available from the
comparable sales, such as is the case in this analysis. The 2nd main
technique, the Discounted Cash Flow Analysis (DCF) is defined as
follows:
“The procedure in which a discount rate is applied to a set of
projected income streams and a reversion. The analyst specifies the
quantity, variability, timing and duration of the income streams as
well as the quantity and timing of the reversion and discounts each
to its present value at a specified yield rate. DCF analysis can be
applied with any yield capitalization technique and may be
performed on either a lease-by-lease or aggregate basis.”
11
The DCF is normally considered the best technique for larger, investment
grade properties with multiple and complex leases. Another case where
the DCF can be relevant is new or proposed projects, where an
absorption period is required. In this case, the subject is an older singletenant facility potential income and expenses are well-defined in this
sub-market where properties trade actively. Consequently, direct
capitalization is applied as the income-based value indicator in this
portion of the analysis. The Income Approach is organized in the
following manner;
10
11
The Dictionary Of Real Estate Appraisal, Third Edition, Appraisal Institute, Chicago, Il, 1993, Page 100
The Dictionary Of Real Estate Appraisal, Third Edition, Appraisal Institute, Chicago, Il, 1993, Page 102
Page 73
Income Approach
Direct Capitalization
Income History of the Subject Property
Gross Income Estimate - Market Rent
Vacancy and Collection Loss
Projected Expenses
Overall Capitalization Rate
Direct Capitalization Worksheet
Conclusion, Direct Capitalization
Page 74
Income Approach
Income History of the Subject Property
The subject property has been in continuous use as a City Yard facility
for many years. The property is not leased, and no income and expense
data was provided.
Gross Income Estimate
Gross income for the subject is estimated by applying market rent to the
available space. In addition to the basic building SFG, the subject
includes surplus land in use as yard space. In order to estimate market
rent, I ran a Costar Analytics Report on current rental transactions the
Palm Desert sub-market area, ran a Loopnet search for active listings
and recent rents, and interviewed the key brokers who work this market
area. Among the brokers, Steve Metzler of Industrial West (760) 7734443 appeared to have the largest percentage of market share in this
sub-market. A large number of very current rents are available from the
immediate area of the subject. After correlating the available data, I
conclude that market rent for the subject is $.65 PSF monthly, on an
industrial gross basis. An industrial gross lease for this analysis
assumes the tenant pays their power, telephone and gas. The Lessor
pays all other expenses including water and trash. Consequently,
potential gross income is estimated at $42,448 per year. The surplus
land is include in the total market rent estimate.
Expenses
Expenses are estimated based on the historical expenses reported for the
comparable sales, along with historical data on buildings in the
immediate area of the subject property and data acquired from the local
brokers. The following section describes the expense assumptions
applied to create the Reconstructed Operating Statement expenses for
the subject property;
Real Estate Taxes
Property taxes for the subject are calculated based upon the
assumption that the subject is sold on the date of value for its
estimated market value. In order to calculate the tax expense for the
subject, the following formula is applied: estimated market value by
the Sales Comparison Approach x the estimated effective tax rate.
The results of this calculation are shown as real estate tax expense.
Insurance
Insurance expense is estimated at $.15 PSF annually; based upon
the historical experience of the comparables.
Page 75
Income Approach
Expenses (cont’d)
Repairs & Maintenance
The tenant is responsible for R & M for the interior of the space,
while the lessor pays all exterior maintenance on the subject except
for the reserve items, which are identified separately. Based on the
historical experience of the comparables, R & M expense is
estimated at $2,500 annually.
Landscaping
The subject has a limited number of trees on an automatic irrigation
system. Maintenance is comparatively minor, estimated at $50 per
month.
Waste Disposal
This line item is estimated at $1,750 based upon the expense
reported by the comparables.
Water
Water is used for landscaping plus sinks and water closets on the
property. For this analysis, water is estimated at $1,200.
Management and A & G
While facilities of this size and type are typically owner/managed,
this analysis assumed property management is required. The
standard management fee in this market ranges from 3%-4% of the
effective gross income. For this analysis, 4% of EGI is applied.
Reserves
Reserves are accrued to provide for replacement of long-lived
building components such as the roof, foundation and bearing
walls. Based on the age-life method of depreciation, market reserves
are currently in the 1% to 2% of EGI range for buildings of the
subject’s size and type. The subject is assumed to have a typical
reserve requirement, correlated at 1.5% of EGI.
Page 76
Income Approach
The final required component of the income analysis, and certainly the
most influential, is the overall capitalization rate (OAR). There are 2 main
methods of estimating an OAR, extraction from the market, and
extraction from investor surveys. Generally, the best and most reliable
method of getting the correct OAR is extraction from the market.
When a sufficient number of reliable comparables exist, the OAR can be
extracted with a reasonable degree of reliability. In this case, the rates
extracted from the comparables are overall average indicators for the
subject.
The actual/estimated overall rates for the comparables applied in the
Sales Comparison Approach for Sales 1-4 ranged from approximately
7.50% to approximately 9.8%. As a single-tenant property, the subject
would be expected to attract a cap rate at the lower end of the range, as
the most likely buyer would not be placing emphasis in the income
earning potential of the property. For this analysis, the overall
capitalization rate is correlated at 8.00%.
Conclusion
Having made the required NOI and OAR estimates, an operating
statement can now be reconstructed for the subject building, with NOI
capitalized into value. The table on the following page contains the
reconstructed operating statement for the subject:
Page 77
Income Approach
Conclusion (cont’d)
74833 Joni Drive
Space
Size
(SF)
Contract/Market
Rent/Mo.
Rental Income
Other
%%%%5,442
%%%%%%%%,
$%%%%%%%%%%%%%%% 3,537
$%%%%%%%%%%%%%%%%%%% ,
$
$
42,448
-
$%%%%%%7.80
$%%%%%%%%,
%%%%5,442
$%%%%%%%%%%%%%%% 3,537
$
42,448
$
Potential Gross Income
Market
Rent/Yr.
Vacancy%&%Collection%Loss
10.00% $%%%%%%%%%4,245
Effective Gross Income
$
38,203
PSF
Annually
7.80
$%%%%%%0.78
$
7.02
Expenses
%%Taxes
%%Insurance
%%R%&%M
%%Landscaping
%%Waste%Disposal
%%Water
%%Management
%%Reserves
$%%%%%%%%%3,688
$%%%%%%%%%%%%816
$%%%%%%%%%2,500
$%%%%%%%%%%%%600
$%%%%%%%%%1,750
$%%%%%%%%%1,200
$%%%%%%%%%1,528
$%%%%%%%%%%%%573
$%%%%%%0.68
$%%%%%%0.15
$%%%%%%0.46
$%%%%%%0.11
$%%%%%%0.32
$%%%%%%0.22
$%%%%%%0.28
$%%%%%%0.11
Total Expenses
$/SF/Mo
$
$
12,655
0.19
$%%%%%%2.33
Net Operating Income
$
25,548
$%%%%%%4.69
Value Estimate
Value Estimate, PSF
8.00%
$
$
319,349
58.68
$319,349
$320,000 (Rounded)
(Three Hundred Twenty Thousand Dollars)
Page 78
Reconciliation and Final Estimate of Value
Three methods were used to obtain value indications for the subject
property. These methods are the Cost Approach, the Sales Comparison
Approach and the Income Approach, Direct Capitalization. The results of
these methods are as follows;
Description
Cost
Approach
Approach
Approach
Estmate
N/A
$
335,000 $ 320,000 $ 335,000
The following is an analysis of the strengths and weaknesses of the
approaches:
Cost Approach
The Cost Approach is considered most relevant when the
improvements are new or proposed, as depreciation can be
estimated with a reasonable degree of accuracy. Another case when
the Cost Approach works well is when market conditions are such
that the typical buyer would realize similar yields by building new or
acquiring an existing set of improvements. In this case, neither
condition is true and consequently, the Cost Approach was not
applied as a market value indicator.
The Sales Comparison Approach is most accurate when comparable
improvements with similar uses and locations are available.
Buildings in the immediate area of the subject trade actively, and
there are a large amount of current data points from which to derive
a market value estimate via the Sale Comparison Approach. The
comparable sales selected for this analysis are considered to be
overall average+ as per square foot value indicators. In this case, the
subject is a single-tenant facility that would most likely attract an
owner/.user. As owner/users typically make purchase decisions
based on the cost of functionally equivalent substitutes, the Sales
Comparison Approach is particularly relevant and is granted most
emphasis for this analysis.
Page 79
Reconciliation and Final Estimate Of Value
Income Approach, Direct Capitalization
Direct Capitalization was applied as the income-based valuation
technique for this analysis. As a single-tenant facility, the property
is not likely to attract investors seeking income and consequently,
secondary emphasis is placed on the Income Approach for this
analysis.
Conclusion
Most weight is granted to the Sales Comparison Approach, yielding a
final value estimate as follows:
$335,000
(Three Hundred Thirty Five Thousand Dollars)
Marketing Time
Marketing time is defined as follows;
“The estimated period of time it might take to sell the interest being
appraised at the estimated market value level during the period
immediately after the effective date of an appraisal”
Marketing times for this property type have been extended over the past
few years, but appear to be declining as of the date of value. Acceptable
financing is generally available to qualified buyers for this property type.
The marketing times of the comparable sales, and the opinions expressed
by owners, broker’s and developer’s range from 6 months to 12 months
for this property type. Based on the physical and locational qualities of
the subject, the appropriate marketing time estimate for the subject is
correlated at 12 months in the “As Is” condition.
Exposure Time
Exposure time is defined as follows;
“The estimated length of time the property interest being appraised
would have been offered on the market prior to the hypothetical
consummation of a sale at market value on the effective date of the
appraisal; a retrospective estimate based upon an analysis of past
events assuming a competitive and open market.”
As in the Marketing Time estimate, the exposure time estimate for the
subject is correlated at 12 months.
Page 80
Certification
I certify that, to the best of my knowledge and belief...
The statements of fact contained in this Report are true and correct.
The reported analyses, opinions and conclusions are limited only by the reported assumptions
and limiting conditions, and is my personal, unbiased professional analyses, opinions and
conclusions.
I have no present or prospective interest in the property that is the subject of this Report, and I
have no personal interest or bias with respect to the parties involved.
My engagement in this assignment was not contingent upon developing or reporting
predetermined results.
My compensation for completing this assignment is not contingent upon the development or
reporting of a predetermined value or direction in value that favors the cause of the client, the
amount of the value opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of this appraisal.
My analysis, opinions and conclusions were developed, and this Report has been prepared, in
conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) adopted by
the Appraisal Standards Board of the Appraisal Foundation, except that the Departure
Provision of the USPAP shall not apply to federally related transactions.
I have no bias with respect to the property that is the subject of this report or to the parties
involved with this assignment.
I certify that the use of this Report is subject to the requirements of the Appraisal Institute
relating to review by its duly authorized representatives.
As of the date of this Report, I have completed the requirements of the continuing education
program of the Appraisal Institute.
I have made a personal inspection of the property that is the subject of this Report.
No other person provided significant professional assistance to the person(s) signing this
Report.
This Appraisal assignment was not based on a requested minimum valuation, a specific
valuation or the approval of a loan.
I certify that, to the best of my knowledge and belief, the reported analyses, opinions and
conclusions were developed, and this Report has been prepared, in conformity with the
requirements of the Code of Professional Ethics and the Standards of Professional Appraisal
Practice of the Appraisal Institute.
I have previously appraised the property that is the subject of this report.
Michael A. Scarcella, MAI
State Certification No.: AG019463
Expiration Date: October 24, 2013
Page 81
Intentionally Blank
Page 82
Addendum
Page 83
Assumptions and Limiting Conditions
This appraisal report has been made with the following general assumptions and limiting
conditions:
1.
No responsibility is assumed for the legal description or for matters including legal or
title considerations. Title to the property is assumed to be good and marketable unless
otherwise stated.
2.
The property is appraised free and clear of any or all liens or encumbrances unless
otherwise stated.
3.
Responsible ownership and competent property management are assumed.
4.
The information furnished by others is believed to be reliable. However, no warranty is
given for its accuracy. The appraiser reserves the right to make adjustments to the
analyses, opinions and conclusions in this report, as may be required by consideration
of additional or revised data that may become available.
5.
All engineering is assumed to be correct. The plot plans and illustrative material in this
report are included only to assist the reader in visualizing the property.
6.
It is assumed that there are no hidden or unapparent conditions of the property,
subsoil, or structures that render it more or less valuable. No responsibility is assumed
for such conditions or for obtaining the engineering studies that may be required to
discover them.
7.
It is assumed that the property is in full compliance with all applicable federal, state,
and local environmental regulations and laws unless noncompliance is stated, defined,
and considered in the appraisal report.
8.
It is assumed that the property conforms to all applicable zoning and use regulations
and restrictions unless nonconformity has been identified, described and considered in
the appraisal report.
9.
It is assumed that all required licenses, certificates of occupancy, consents, and other
legislative or administrative authority from any local, state, or national government or
private entity or organization have been or can be obtained or renewed for any use on
which the value estimate contained in this report is based.
10.
It is assumed that the utilization of the land and improvements is confined within the
boundaries or property lines of the property described and that there is no
encroachment or trespass unless noted in the report.
11.
Unless otherwise stated in this report, the existence of hazardous materials, which may
or may not be present on the subject property, was not observed by the appraiser. The
appraiser has no knowledge of the existence of such materials on or in the property.
The appraiser, however, is not qualified to detect such substances. The presence of
substances such as asbestos, urea-formaldehyde foam insulation and other potentially
hazardous materials may affect the value of the property. The value estimated is
predicated on the assumption that there is no such material on or in the property that
would cause a loss in value. No responsibility is assumed for such conditions or for any
expertise or engineering knowledge required to discover them. The intended user is
urged to retain an expert in this field, if desired.
Page 84
12.
Any allocation of the total value estimated in this report between the land and the
improvements applies only under the stated program of utilization. The separate
allocations for land and building must not be used in conjunction with any other
appraisal and are invalid if so used.
13.
Except for use in the Official Statement as required for bond issuance, possession of
this report, or a copy thereof, does not carry with it the right of publication. It may not
be used for any purpose by any person other than the party to whom it is addressed
without the written consent of the appraiser, and in any event only with properly
written qualification and only it its entirety.
14.
The appraiser herein by reason of this appraisal is not required to give further
consultation, testimony, or be in attendance in court with reference to the property in
question unless arrangements have been previously made.
15.
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.
16.
Improved Properties - The Americans with Disabilities Act (“ADA”) became effective
January 26, 1992. I (we) have not made a specific compliance survey and analysis of
this property to determine whether or not it is in conformity with the various detailed
requirements of the ADA. 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 the Act. If so,
this fact could have a negative effect upon the value of the property. Since I (we) have
no direct evidence relating to this issue, I (we) did not consider possible non-compliance
with the requirements of ADA in estimating the value of the property.
17.
Improvements, Proposed Improvements - The value estimates in this report are subject
to
the improvements being completed in the manner represented to the Appraiser(s),
and described in the Improvement Description section of this report.
18.
The legal descriptions, site sizes, dimensions and/or other surveys provided to the
appraiser, including County Tax Plats, are assumed to be accurate. Should a survey
prove these characteristics inaccurate, it may be necessary for the appraisal to be
adjusted.
19.
The forecasts, projections, or operation estimates contained herein are based upon
current market conditions, anticipated short-term supply and demand factors, and a
continued state economy. These forecasts are therefore, subject to change in the future.
20.
The appraiser undertaking this assignment warrants that he is competent in properly
identifying the appraisal problem and has the necessary knowledge and experience to
complete the assignment.
21.
Provision of an insurable value by the appraiser does not change the intended user or
intended purpose of the appraisal. The appraiser assumes no liability for, and does not
guarantee that any estimate or opinion will result in the subject property being fully
insured for any possible loss that may be sustained. The appraiser recommends that an
insurance professional be consulted.
Page 85
22.
Copyright of this material belongs exclusively to Michael A. Scarcella, Inc., and/or
Capital Realty Analysts, Inc. This copy is intended for private use as defined in the
body of the report for the designated client only. No person or entity is permitted to
reproduce this material, in whole or in part, for distribution either free of charge or for
'commercial purposes', unless that person or entity has a signed license agreement with
Michael A. Scarcella, Inc. and/or Capital Realty Analysts, Inc. Reproduction for
commercial purposes is reproduction for the purposes of sale, rent, trade or
distribution, or posting it on the Internet or on electronic bulletin boards.
Page 86
MICHAEL A. SCARCELLA, MAI
Education
1982 B.S., Business, University of Nevada, Las Vegas
All required Appraisal Institute sponsored courses required to attain the MAI
designation, along with Appraisal Institute sponsored courses, seminars and online forums required for continuing education.
Professional Organizations/Licensing
Member of the Appraisal Institute - MAI Member Number 11072
Licensed by the State of California as a “Certified General Real Estate Appraiser”.
Office of Real Estate Appraisers, Appraiser Identification Number AG 019463.
Appraisal Institute – So. Cal. Chapter, 1997, 1998, 2001 Experience Review
Committee; 1999, 2000, 2005 So. Cal. Chapter Ethics Committee
General Experience
1997 to Current Capital Realty Analysts – President
1991 to 1996 - MacKenzie and Associates – Staff Appraiser
1982 to 1991 - Hotel, Construction / Development Controller
Qualified as an expert real estate witness, United States Bankruptcy Court
Qualified as an expert real estate witness, Riverside County Superior Court
Representative List of Clients
Public Sector
Private Sector
United States Of America
RTC/FDIC
Bureau of Indian Affairs
BLM
State of California
State of Arizona
Riverside County
City of Palm Springs
City of Coachella
City of Desert Hot Springs
City of Cathedral City
City of Rancho Mirage
City of Palm Desert
City of Indian Wells
City of Indio
City of La Quinta
Palm Springs Unified SD
Desert Sands Unified SD
Coachella Valley Unified SD
Southern California Edison
Coachella Valley Water Dist.
Mojave Water Agency
Eisenhower Memorial Hsp.
Desert Hospital
Price Waterhouse
Merrill Lynch
CB Commercial
Textron
Bechtel Corporation
KSL Recreation Corp.
United States Filter
Sunrise Company
Trust for Public Land
Mojave Desert Land Trust
Canyon Development
Lennar Homes
Temple Construction
Santa Fe Pacific
Takenaka Corporation
Betty Ford Center
Heart Inst. of the Desert
Basic Capital Management
Estate of Walter Annenberg
Estate of Frank Sinatra
Wessman Development
Attorneys
Developers
Accountants
Institutional Lenders
Bank of America
Rabobank N.A.
Wells Fargo Bank
Pacific Western Bank
Washington Mutual Bank
Bank Midwest
Pacific National Bank
Pacific Premier Bank
Desert Commercial Bank
Pacific Mercantile Bank
Banc One
Fidelity Federal Bank
Bankers Trust Company
Sunrise Community Bank
Union Bank
Commerce Federal Svgs
Great American Bank
Mitsubishi Bank
Indymac Bank
Foothill Independent Bank
El Paseo Bank
Palm Desert National Bank
Bank Six
First Bank
Page 87

Appraisal - Joni Drive

Transcription

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