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Dodge Appraisal.pdfvalbridge.com June 26, 2015 Carrie Hite Parks, Recreation and Cultural Services Director City of Edmonds 700 Main Street Edmonds, WA 98020 Re: Addendum to review of an appraisal prepared for Civic Center Field Property dated November 25, 2014, located at 310 6th Avenue N., Edmonds, WA. (our Job No. 14-160-2) Dear Ms. Hite: This is a letter addendum to the above referenced appraisal review. Purpose of the addendum is to correct a mathematical error in Mr. Dinniene's revised letter of November 20, 2014 that I missed and to address holding cost issues. A summary of my value estimate shown on Page 3 of the review is revised herein to reflect the total value less cost to rezone at $3,625,000 and not $3,525,000. Upon subsequent review of the lease agreement, it has been determined that holding costs of real estate taxes and maintenance would be passed through to the tenant and not an expense to the owner/purchaser. A nominal insurance cost to the purchaser of $30,000 is estimated for the 6.5 year duration of the lease. I have revised my Appraisal Review, dated November 25, 2014, of Jack Dinniene's appraisal revisions dated November 20, 2014, The Determination of Value is revised from $2,000,000 to $2,540,000. All other discussions and conclusions are unchanged from the referenced appraisal review. A summary of the revisions is shown on the following page. LETTER OF ADDENDUM, JIM DODGE Corporate Office Smith Tower 2927 Colby Avenue , 18728 Bothell Way NE 419 Berkeley Avenue Valbridge 506 2nd Avenue Suite 100 Suite B Suite A PROPERTY ADVISORS Suite 1001 Seattle, WA 98104 Everett, WA 98201 425-258-2611 phone Bothell, WA 98011 425-450-4040 phone Fircrest, WA 98466 253-274-0099 phone Allen Brackett Shedd 206-209-3016 phone 425-252-1210 fax 425-688-11319 fax 425-688-1819 fax Macaulay & Associates 425-688-1819 fax valbridge.com June 26, 2015 Carrie Hite Parks, Recreation and Cultural Services Director City of Edmonds 700 Main Street Edmonds, WA 98020 Re: Addendum to review of an appraisal prepared for Civic Center Field Property dated November 25, 2014, located at 310 6th Avenue N., Edmonds, WA. (our Job No. 14-160-2) Dear Ms. Hite: This is a letter addendum to the above referenced appraisal review. Purpose of the addendum is to correct a mathematical error in Mr. Dinniene's revised letter of November 20, 2014 that I missed and to address holding cost issues. A summary of my value estimate shown on Page 3 of the review is revised herein to reflect the total value less cost to rezone at $3,625,000 and not $3,525,000. Upon subsequent review of the lease agreement, it has been determined that holding costs of real estate taxes and maintenance would be passed through to the tenant and not an expense to the owner/purchaser. A nominal insurance cost to the purchaser of $30,000 is estimated for the 6.5 year duration of the lease. I have revised my Appraisal Review, dated November 25, 2014, of Jack Dinniene's appraisal revisions dated November 20, 2014, The Determination of Value is revised from $2,000,000 to $2,540,000. All other discussions and conclusions are unchanged from the referenced appraisal review. A summary of the revisions is shown on the following page. LETTER OF ADDENDUM, JIM DODGE Value today as rezoned $3,700,000 Less cost of rezoning 75 000 21 Total $3,625,000 Inflation at 3% for 6,5 years $4,392,886 Deduct holding costs 3 Total future value $4,362,886 Present worth of property at 5% discount $3,177,192 Less 20% risk 80% Value today $2,541,754 (R) $2,540,000 Reviewer's Determination of Value No. 2 (revised) Market value before acquisition $2,540,000 Market value after acquisition $0 Difference $2,540,000 Respectfully submitted, VALBRIDGE PROPERTY ADVISORS I MACAULAY & ASSOCIATES Ji(�E. Dodge, Senior Ap raiser WA State Certified - General Appraiser No. 1100557 Valbridge Property Advisors I Macaulay & Associates Addendum Civic Field review 14-160-2.doc — Copyright © 2015 2 Appraisal Review of Civic Center Field Property prepared by Jack Dinniene, MAI Location: 250 & 310 6"' Avenue N. Edmonds, WA 98020 Ostensible Owner(s): Edmonds School District # 15 Prepared for: Carrie Hite Parks, Recreation and Cultural Services Director City of Edmonds 700 Main Street Edmonds, WA 98020 Date of Valuation: July 9, 2014 Date of Review: November 25, 2014 Job #14-160-2 PrMared by: Jim E. Dodge, Senior Appraiser MACAULAY & ASSOCIATES, LTD,. Everett, Washington APPRAISAL REVIEW, JIM DODGE Certification I, the undersigned appraiser, do hereby certify that, except as otherwise noted in this appraisal review; I.. I completed a field review of the subject property and comparable market data on August 25 and November 25, 2014. I have made a personal inspection of the property contained in the appraisal report under review, as agreed to with the client. 2. 1 certify that, to the best of my knowledge and belief, the statements of fact contained in the appraisal review are true and correct. 3. 1 further certify that the reported appraisal analyses, opinions and conclusions are limited only by the assumptions and limiting conditions stated in this review report and are my personal unbiased, professional analyses, opinions and conclusions. No one provided significant professional assistance to me in the preparation of this review. 4. I further certify that I have no specified present or prospective interest in the appraised property and I have no personal interest or bias with respect to the parties involved. My compensation is not contingent on any action or event resulting fiom the analysis or opinions in, or the use of, this appraisal review. 5. The appraisal review was developed and this review report has been prepared in conformity with the requirements of the Code of Professional Ethics of the Appraisal Institute, Manual 3 Acquisition Projects - Washington State Recreation and Conservation Funding Board and Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation. The use of this appraisal review is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 7. I do not authorize the out -of -context quoting from or partial reprinting of this appraisal review. This review is intended to satisfy the requirements of Standard 3 of the Uniform Standards of Professional Appraisal Practice and Section 5 of Manual 3 of the RCO. Other than as cited herein, the research upon which the appraisal is based has not been verified by the reviewer. I have relied upon the appraiser to provide accurate, comprehensive information on the subject property and the other primary and secondary data presented in this report. Further, neither all nor any part of this appraisal report shall be disseminated to the general public by use of the media for public communication, without the prior written consent of the appraiser signing this appraisal review. 10. That the Determination of Value stated in this appraisal review has been independently estimated based on the appraisal and other available data. IL I have not performed services as an appraiser or in any other capacity, regarding the property that is the subject of this report within the three year period immediately preceding acceptance of this assignment. Respectfully submitted, MA AULAY & ASSOCIATES, LTD. 1 n E. Dodge, S 1rio1 l lalalser WA State Certified -General Appraiser No. 1100557 DETERMINATION OF VALUE NO. 2 TO: Carrie Hite Parks, Recreation and Cultural Services Director City of Edmonds 700 Main Street Edmonds, WA 98020 FROM: Jim E. Dodge, Senior- Appraiser Macaulay & Associates, Ltd. 2927 Colby Avenue, Suite 100 Everett, WA 98201 The lollowing appraisals have been made on sul 'ecl prolrertx Date of Before After Value Appraiser's Allocation Appraiser Valuation ._mage Value Value Difference, Taking Da 1. Jack Dinniene, MAI 7/9/2014 $2,675,000 $0 $2,675,000 $2,675,000 $0 The following prior determinations of value have been made on the sub el �t pro erty Reviewer Date of Review Ata:riser Prior DV DV Amount µµµµµX 1. Jim E. Dodge 8/25/2014 Jack Dinniene, MAI Rejected NAmmmITITITITITm The following appraisal is the subject of this review: Appraiser/Firm: Jack Dinniene, MAI Northwest Valuation Services 15817 25'1' Drive S.E. Mill Creek, WA 98012 Date of Report: Date of Revision: Date of Valuation: Estimated Market Value: Determination of Value: Reviewer: Date of Valuation: Effective Date of Review: Determination of Value: June 15, 2014 November 20, 2014 July 9, 2014 $2,525,000 Jim E. Dodge, Appraiser July 9, 2014 November 25, 2014 $2,000,000 Property Rights .f g lts App°aiscd Property lights appraised and reviewed herein is the fee simple market value for total acquisition of fee simple property rights. 14-160-2Macaulay &....� ..-...... .....- ._...�.. ._...._�e mmmITITIT�ITmm��ITIT�mmm Associates, Ltd. 1 1 ug)ose alyd Use of Review The purpose of this review is to determine adequacy of valuation methods used, analysis of market and subject data and conformance to the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation and Section 5 -Appraisal Requirements of Recreation and Conservation Office's Manual 3. The review is to be used by the client for negotiation, voluntary acquisition and funding. A prior review of the subject property was completed by the reviewer on August 25, 2014. The result of the previous review was rejection of the report due to scope of work for the report being inconsistent with the client expectations. The report was based on a market value and the client anticipated a value based on current use. hrtended User of the Review hitended user of this review is the client — City of Edmonds and the Recreation and Conservation Office (RCO). Sco ae ofd T~�ev� As requested, the assignment is for a field review which includes a field inspection of the subject property and comparable market data. As directed, scope of the appraisal review assignment is to ensure compliance with USPAP and review appraisal standards in Section 5 of Manual 3 of the Washington State Recreation and Conservation Funding Board (RCO). Date of Review Effective date of this review is November 25, 2014, �Lom ebeilp 1 Reviewer° The reviewer has the knowledge and experience required to competently perform this appraisal review. A statement of qualifications is contained herein. The reviewer is approved by the Washington State Department of Transportation to perform fee appraisal reviews and is a state certified appraiser, general classification No. 1100557. Review Anal sis The appraisal report is reported to be a self-contained format and complies with applicable appraisal standards of USPAP and RCO. Purpose of the appraisal is to estimate market value of the subject property for total acquisition of fee simple property rights. The appraisal is dated June 15, 2014 with a valuation date of July 9, 2014. The discrepancy for the appraisal date prior to valuation date is attributed to the City of Edmonds sending the report back to the appraiser for corrections and no change to date of report made. The appraisal was originally received for review on August 15, 2014. The original scope of work as defined by the City of Edmonds was to estimate market value of the subject property as encumbered by current zoning of Public (P). The appraiser valued the property on the basis of a re -zone to RM 1.5, a multi -family designation by the City of Edmonds. Due to inappropriate scope of work on which the appraisal 14-160-2 Macaulay & Associates, Ltd. _ 2 was based, the appraisal was rejected in its entirety. The client's request for a value subject to current zoning is likely to result in a "value in use" instead of a "market value". USPAP allows different definitions of value and only requires that the definition of value to be used is identified and disclosed. The appraiser is correct in his discussion of market value being an economic use as required by the Uniform Appraisal Standards for Federal Land Acquisitions (UASFLA) or "Yellow Book". However, the appraisal report is not subject to UASFLA requirements. Following discussions with the client and appraiser, the scope of work was defined to be for market value and not a value in use. I subsequently requested the appraiser correct items in the report as detailed in the attached letter dated October 24, 2014. The appraiser's response to requested corrections was by letter dated November 20, 2014 and received November 24, 2014. The appraiser responded adequately to most concerns regarding the appraisal. The appraiser revised his risk estimate from 15% to 20%. The appraiser declined to use an extraordinary assumption regarding the re- zone from Public to RM 1.5. However, the appraiser states that a buyer would inherit the 6.5 year lease to a government tenant and therefore would not have taxes, insurance and other holding costs. The reviewer does not agree, market value implies purchase by a private party. The buyer would be subject to taxes, insurance and other potential holding costs, regardless of whether the tenant is a government agency or not. Based on current assessed value of $7,968,200 and 2014 levy rate, annual taxes would be approximately $88,500 or $575,000± over the 6.5 year holding period. Insurance and minimal maintenance is estimated at $24,000 per year or $156,000 for 6.5 years. Holding costs conservatively total $731,000 over 6.5 years. The appraiser revised his value conclusion from $2,675,000 to $2,525,000. The appraiser's revised value estimate is summarized below with an additional deduction for holding costs deemed necessary by the review appraiser. Value today as rezoned: $3,700,000 Less cost of rezoning (. 5 0 Total $3,525,000 Up for inflation at 3% for 6.5 years $4,335,305 Deduct holding costs (per review appraiser)7',I(lf�f) Total future value $3,604,305 Present worth of property (5% discount rate) xOIT.728448 Discounted value $2,625,549 Less 20% risk x 0.80 Value today 2,100,439 (R) $2,000,000 14-160-2 Macaulay & Associates, Ltd. 3 Reviewer's Determination of Value No. 2 The appraisal report and subsequent addendum letter that is the subject of this review was adequately prepared to herein described standards with adequate discussion and market data to support the value conclusions contained therein, except as revised by the reviewer, as of November 25, 2014. Market value before acquisition .................................... $25000,000 Market value after acquisition.....................................................l0 Difference .................................................................... $2,000,000 Reviewer's allocation of ��st co��� e�tsatio�a: Acquisition: Land Fee Total land Improvements Total acquisition Damages Special benefit Total Compensation $2,000,000 $2,000,000 $2,000,000 $0 $2,000,000 City of Edmonds Concurrence and Authorization: Project title: Civic Center Field Property Project parcel: Edmonds School District # 15 The City of Edmonds does hereby indicate concurrence with the estimate of Just Compensation discussed above and does authorize further action to proceed with the acquisition of the designated property according to established procedures. Date 14-160-2......�._._.�_ 1VI. �. �....ww _.... �..._.. _._ acaulay & Associates, Ltd. 4 Assumptions and/or Limiting Conditions 1. This review report is based on data and information contained in the appraisal report that is the subject of this review. It is assumed that the data and information contained therein are factual and accurate. 2. The reviewer reserves the right to consider any additional data or information that may subsequently become available and to revise opinions and conclusions if such data and information indicate the need for such change. 3. All of the assumptions and limiting conditions contained in the appraisal report that is the subject of this review are also conditions of this review, unless otherwise stated. 4. That the title to the property appraised in this report is good in that no liability is assumed on account of matters of legal character affecting the property such as title defect, encroachments, liens, or overlapping property lines, etc. 5. The property is appraised free and clear of any or all liens and encumbrances unless otherwise stated. 6. That the appraisal is to be used only in its entirety. Distribution of the total value estimate between land and improvements applies only under the proposed conditions of utilization and reflects their estimated contribution to the overall value of the property. 7. Responsible ownership and competent property management are assumed.. 8. That there are no hidden or unapparent conditions of the property subsoil or structures which would render it more or less valuable. No responsibility is assumed for such conditions, including hazardous waste or asbestos materials, or for engineering and other investigations which might be required to discover such conditions. 9. It is assumed that the property is in full compliance with all applicable federal, state, and local environmental regulations and laws unless the lack of compliance is stated, described, and considered. Further, it is assumed that the property conforins to all applicable zoning and use regulations and restrictions unless a nonconformity has been identified, described and considered in the appraisal report. 10. No requirements shall be made of the appraiser for testifying or attending in court by reason of this review with reference to the property in question, unless arrangements have been made previously therefore. 11. Unless otherwise stated in this report, the existence of hazardous materials, which may or may not be present on the property, were not known by the reviewer. The reviewer has no knowledge of the existence of such materials on or in the property. The reviewer, however, is not qualified to detect such substances. 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 client is urged to retain an expert in this field, if desired. 14-160-2 Macaulay &Associates, Ltd. 5 JIM E. DODGE, ASSOCIATE APPRAISER Washington State License No. 1100557 EDUCATION 1977 Bachelor of Science, Business Management; University of Idaho, Moscow, ID Seminars. 2014 Uniform Standards of Professional Appraisal Practice (USPAP) 2013 IRWA.' 403 -Easement Valuation & 802 - Legal Aspects of Easements; AL Business Practice & Ethics, Agricultural Special Use 2011 & 2002 Al: Uniform Appraisal Standards for Federal Land Acquisitions (Yellow Book) 2010 Al: Easements & Divided Partial Interests, Errors & Misconceptions in Yellow Book 2009 AL USPAP, Evaluating Commercial Construction, Business Practices & Ethics 2008 AI: Attacking/Defending Appraisals in Litigation, Fall Real Estate Conference 2007 Al: Real Estate Finance, Statistics & Valuation Modeling, Course 300 2005 AL Eminent Domain & Condenmation, Conservation Easements, Analyzing Distressed Properties 2003 Appraisal Review Overview (WSDOT ) 2001 Al: Partial Interest Valuation 2000 Al: Condemnation Appraising - Basic Principles, 710 Appraisal Institute Coat.res: 1983 - 1999 Standards of ['rail"essionaal Practice SPP- Part C., Standards tai"Professional Practice S1111- Part 13Report Writing and Valuation Aua'lvsis. Case Studies 2-1, Uniforan Standards of ilrofessiotnal Appraisal Practice, Module A, Calnitalezatfon'Theory & Technitues, Darts" 1 BA & IBB, Basic Valuation Procedures IA1 Real Estate Appraisal Nit-ctples 1A� Other Courses: 1979 Basic Appraisal, Course 1, Idaho State Tax Conunission Income Approach to Valuation, Course 11; Int"1 Association of Assessing Officers 1978 Real Estate Finance and Appraising, Idaho Real Estate Commission EXPERIENCE 1986 79 - 1985 t Western Appraisals and Surveys, Let rWA to p y Lewiston, ID Assignments have included fire and ad valoreant a )prais<als of connntcreial, industrial residential, agric altural and special use properties. Qualified as an expert wittiness in,! ano�nom:ish Count and Island County SupaWaror f Curti. Ad Valorcan apinraarsal contracts completed for several northern Idaho ccnnarttics. Tasks included field ianspectioara,, analysis of market data, agricultural �pra;rduct:ion income/costs, depreciation studies and board of equalization. A variety of right-o"l=way acluisitiotn ap aratsals have been completed, typically involving multiple parcel anssiganane its. Projects include trail acquisaniorr for tine nohomasln County Parks Department and the Skaai,�ii Court Parks De��artmetint. Rrht-cel-way acquisition for retied widening pta�tlao;es have been contpfeted for Snolraranulr arncl� Skagit oaarnty 1tablic'Works departrments and the cities of Marysville, Snohonnish, Stanwood, I..,ake Stevens find Everett. A 'highway tight -of -way acquisition project l"or tlae Montana Department of Highways involved approximately 100 properties Eminent domain. appraisals have been completed for the "A ashingtoo State Department ofTransportation. Currently ort (lie WSDOT approved list for flac and review appraiaaers, Valuation assignrnems connpleted cover a wide„ variety of commercial, industrial, residential, agricultural and special use � properttes in addition to teal estate consultations with private individuals and organizations. LID Special Benefit Steady experience includes the 1,400 acme Northwest Landing developnnent by WeyerhaeuserReal Estate Company at DuPont,„ WA., City of"Ocean Slaoscs sewer LID 98-01 and various studies flier Snohomish County PUD No. I and Skaagit Coaanty 1'1.II� No. 1.. _....� . _.....,,.........�.,.w� ............... ........ _... _ 14-160-2 Macaulay & Associates, Ltd. 6 BUSINESS AND PROFESSIONAL AFFILIATIONS Associate Appraiser, Macaulay & Associates, Ltd., Everett, WA. Certified Real Estate Appraiser - General Classification, State of Washington (No. 1100557) Candidate for Designation, Appraisal Institute. Member hiternational Right of Way Association APPRAISAL CLIENTS SERVED Anderson Hunter Keithly, Weed, Graafstra & Benson Arthur Andersen, Inc. King County Wastewater Treatment Division Bank of Washington Les Schwab City of Burlington Lummi Indian Nation City of Edmonds Millstone City of Everett Montana Department of Highways City of Lake Stevens Mukilteo School District City of Lynnwood Naval Facilities Engineering Command NW City of Marysville Northcoast Electric City of Monroe Northwest Pipeline Corporation City of Mountlake Terrace Perteet Engineering, Inc. City of Oak Harbor Providence Hospital City of Snohomish Seafirst National Bank City of Stanwood Seattle City Light City of Ocean Shores Snohomish County Parks Department City of Woodinville Snohomish County Public Works Coates Field Service, Inc. Snohomish County PUD No. 1 Cross Valley Water Association Skagit County Parks Department Everett General Hospital Skagit County PUD No, 1 Everett Mutual Bank Stanwood School District Farm Credit Services Steel Fab First Heritage Bank The Commerce Bank First Interstate Bank Tulalip Tribes of Washington Frontier Savings Bank Tyr Energy Granite Falls School District U.S. Bank HDR/Pharos Corporation Universal Field Service, Inc. Hill Street Development WA State Department of Transportation Industrial Electric Weyerhaeuser Real Estate Co. Island County Prosecutor's Office Whatcom County Public Works 14-160-2 Macaulay & Associates, Ltd. 7 acaulayT ssoclates, Ltd. Real Estate Appraisers &Consultants 2927 Colby Avenue, • Everett, WA 98201 www.macaulayltd.com- a4425-258-2611 • Fax 4-2-5-252-1210 October 24, 2014 Jack Dinniene, MAI Northwest Valuation Services 15817 25°' Drive SE Mill Creek, WA 98012 RE: Civic Center Field Property appraisal prepared for City of Edmonds and owned by Edmonds School District No. 15, located at 250 & 310 61" Avenue N., Edmonds, Washington. Dear Mr. Dinniene: I have reviewed the above referenced appraisal prepared by you with a report date of June 15, 2014 and valuation date of July 9, 2014. The purpose of this letter is to request revisions of items that are not in compliance with USPAP and to ask for re -consideration and clarification of other items. Following your response to this letter I can complete my review of the appraisal. TransLnittal Letter A minor typographical correction, date of report should not precede the date of value. Report USPAP SR 2-2 requires that each written real property report be prepared under one of two options and prominently state whether it is an "Appraisal Report" or "Restricted Appraisal Report". Certification. USPAP requires a statement in the certification regarding whether the appraiser has performed some service related to the subject property in the prior three years. Currently includes a statement that the report conforms to UASFLA (not required by client). The report has several deficiencies under UAFSLA requirements, primarily for incomplete reporting of comparable sales data. Should remove statement or add necessary data for compliance. lv�rket value definition 1Pu 2} USPAP requires that source of definition is identified. Current definition is similar to definition for federally insured financial institutions. Jack Dinniene, MAI October 24, 2014 Page 2 l xtraordi�nary_�a sw�ala�pts nsll� )othetical conditions P) 4 As was discussed in the conference call, the re -zone needs to be identified as an EA or HC. USPAP requires that an EA or HC be `clearly and conspicuously' disclosed and that their use might have affected assignment results. Intended Users (Pg,7) Recreation and Conservation Office (RCO) should be identified as an intended user. Pro pert valuation (Pg 24 I am not clear as to relevance of using Sale 1 which you state as having a highest and best use of commercial. Sale No. 3, the seller is Union Bank not Michael Construction. I have attached a sale of multi -family land along the Everett Bothell Highway from our data base. It is a larger site than the subject at a sale price of $21,842/du. Please review and incorporate in your analysis if you deem it relevant. 1 ease discount ft 32 The conclusion of a 5% discount rate for a 6.5 year wait to develop is not supported. A 15% discount and cost for re -zone are deducted at the end of 6.5 years. However, a potential purchaser is assuming all the risk up front on the effective date of value (date of purchase). This risk includes; holding costs (such as real estate taxes and maintenance) for 6.5 years, risk of market changes (downward/upward), and risk associated with the re -zone together with actual cost to re -zone. A 5% discount indicates a relatively safe investment and not reflective of the high risk inherent in acquiring the property. Purchase by a private party will have ongoing costs and no incoming cash flow for at least 6.5 years. Please re -visit your analysis and provide supporting data. Respectfully submitted, MACAULAY & ASSOCIATES, LTD. . Im E. Dodge, Senior Appraiser WA State Certified -General Appraiser No. 1100557