APPRAISAL REPORT OF 9515 COMMUNITY ROAD & 9539 GREENMEADOW ROAD WINDHAM, PORTAGE COUNTY, OHIO 44288 RIMS #19-000366-01-01
as of June 12, 2019
FOR
Andrew Bowers Silver Hill Funding 4425 Ponce de Leon Boulevard, 4th Floor Coral Gables, FL 33146
US Realty Consultants, Inc. 2154 East Main Street, Suite 302, Columbus, Ohio 43209 614-221-9494 (p) 614-221-9941 (f) www.usrc.com Columbus Chicago West Palm Beach Cincinnati Dallas Washington, DC June 20, 2019
Andrew Bowers Silver Hill Funding 4425 Ponce de Leon Boulevard, 4th Floor Coral Gables, FL 33146
RE: RIMS #19-000366-01-01 9515 Community Road & 9539 Greenmeadow Road Windham, Ohio
Dear Mr. Bowers:
In accordance with the engagement letter dated May 22, 2019, we have appraised the property captioned above. The purpose of this appraisal is to express an opinion of the market value of the property for asset valuation. The client and intended user is Silver Hill Funding. The legal interest appraised is the fee simple estate. The effective date of the value opinion is June 12, 2019. The appraisal is based on market conditions observed as of the current date of our market research, June 12, 2019.
The subject is located in Windham, Ohio. Improvements consist of a two-story, 12-unit apartment complex. A more complete description of the property is included within the appraisal report. The report also presents other information considered in our analyses, and the reasoning behind our value conclusions. Your attention is called to the standard conditions and extraordinary assumptions, which follow.
Market Value
Subject to all conditions and explanations contained in this report, and based on our analyses of the subject and the market, together with our experience and knowledge acquired in appraising similar properties, it is our opinion that the market value of the fee simple estate in the 12-unit subject (including the contributory value of the existing furniture, fixtures, and equipment), expressed in terms of financial arrangements equivalent to cash, as of June 12, 2019, is:
FOUR HUNDRED TEN THOUSAND DOLLARS $410,000
US Realty Consultants, Inc. 2154 East Main Street, Suite 302, Columbus, Ohio 43209 614-221-9494 (p) 614-221-9941 (f) www.usrc.com Columbus Chicago West Palm Beach Cincinnati Dallas Washington, DC Andrew Bowers June 20, 2019 Page Two
Contributory Value of the Furniture, Fixtures, and Equipment
The final opinion of value stated above includes the estimated contributory value of the furniture, fixtures, and equipment (FF&E). Based on our analysis, the contributory value of the FF&E, as of June 12, 2019 is $16,000 [$2,000 per unit x 12 units) * ((15-5)/15), rounded].
This report and its contents are intended solely for your information and assistance for the function stated above, and should not be relied on for any other purpose. Neither our report nor any of its contents nor any reference to the appraisers, U S REALTY CONSULTANTS, INC., may be included or quoted in any document, offering circular or registration statement, prospectus, sales brochure, other appraisal, or other document without U S REALTY CONSULTANTS, INC.'s prior written approval of the form and context in which it appears. This report has been conducted in conformance with Title XI of the Federal Financial Institutions Reform, Recovery and Enforcement Act of 1989 and 1994 (FIRREA), and the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation.
We appreciate the opportunity to be of service to your organization and look forward to working with you again.
Respectfully submitted,
U S REALTY CONSULTANTS, INC.
Stephen P. Faherty, MAI James A. Piwarun Principal and Managing Director Senior Associate 9515 COMMUNITY ROAD & 9539 GREENMEADOW ROAD TABLE OF CONTENTS
ASSUMPTIONS...... 6 EXECUTIVE SUMMARY ...... 9 INTRODUCTION...... 10 PROPERTY IDENTIFICATION ...... 10 PURPOSE AND INTENDED USE OF THE APPRAISAL ...... 10 LEGAL INTEREST APPRAISED ...... 10 EFFECTIVE DATE OF VALUATION...... 10 DEFINITION OF VALUE...... 11 EXPOSURE TIME AND MARKETING PERIOD ...... 11 APPRAISAL DEVELOPMENT AND REPORTING PROCESS...... 12 HISTORY OF THE SUBJECT ...... 14 COMPETENCY OF THE APPRAISERS...... 14 DESCRIPTIVE DATA...... 15 REGIONAL ANALYSIS ...... 15 NEIGHBORHOOD ANALYSIS ...... 21 DESCRIPTION OF THE SITE...... 23 DESCRIPTION OF THE IMPROVEMENTS ...... 26 APARTMENT MARKET ANALYSIS...... 31 COMPARABLE RENTALS...... 36 MARKET RENT ANALYSIS ...... 43 HIGHEST AND BEST USE ...... 45 INCOME CAPITALIZATION APPROACH...... 48 REVENUE ANALYSIS...... 48 EXPENSE ANALYSIS...... 49 DIRECT CAPITALIZATION ANALYSIS ...... 52 SALES COMPARISON APPROACH ...... 55 MARKET SALES DATA...... 55 PHYSICAL UNITS OF COMPARISON ...... 61 RECONCILIATION ...... 63 CERTIFICATION...... 64 INSURABLE REPLACEMENT COSTS...... 65 ADDENDUM Engagement Letter ...... Addenda I Rent Roll...... Addenda II State of Ohio Appraiser License...... Addenda III Qualifications ...... Addenda IV 6
ASSUMPTIONS
The following Standard Conditions apply to real estate appraisals by U S REALTY CONSULTANTS, INC. Extraordinary assumptions are added as required.
Appraisals are performed and written reports are prepared by, or under the supervision of, members of the Appraisal Institute in accordance with the Institute's Standards of Professional Practice and Code of Professional Ethics.
No opinion is rendered as to property title, which is assumed to be good and marketable. Unless otherwise stated, no consideration is given to liens or encumbrances against the property. Sketches, maps, photos, or other graphic aids included in appraisal reports are intended to assist the reader in ready identification and visualization of the property and are not intended for technical purposes.
Appraisal reports may contain prospective financial information, estimates, or opinions to represent the appraisers' view of reasonable expectations at a particular point in time, but such information, estimates, or opinions are not offered as predictions or as assurances that a particular level of income or profit will be achieved, that events will occur, or that a particular price will be offered or accepted. Actual results achieved during the period covered by our prospective financial analyses will vary from those described in our report, and the variations may be material.
It is assumed that legal, engineering, or other professional advice, as may be required, has been or will be obtained from professional sources and that the appraisal report will not be used for guidance in legal or technical matters such as, but not limited to, the existence of encroachments or easements or other discrepancies affecting the legal description of the property. It is assumed that there are no concealed or dubious conditions of the subsoil or subsurface waters including water table and flood plain, unless otherwise noted. We further assume no regulations of any government entity control or restrict the use of the property unless specifically referred to in the report. It is assumed that the property will not operate in violation of any applicable government regulations, codes, ordinances, or statutes.
In the absence of competent technical advice to the contrary, it is assumed that the property being appraised is not adversely affected by concealed or unapparent hazards such as, but not limited to, asbestos, hazardous or contaminated substances, toxic waste, or radioactivity.
The report and the final opinion of value and prospective financial analyses included in it are intended for the information of the person or persons to whom they are addressed, solely for the purposes stated, and should not be relied upon for any other purpose. Neither our report, nor its contents, nor any reference to the appraisers or U S REALTY CONSULTANTS, INC. may be included or quoted in any offering circular or registration statement, prospectus, sales brochure, other appraisal, loan, or other agreement or document without our prior written permission. Permission will be granted only upon meeting certain conditions.
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Information furnished by others is presumed to be reliable, and where so specified in the report, has been verified; but no responsibility, whether legal or otherwise, is assumed for its accuracy, and it cannot be guaranteed as being certain. No single item of information was completely relied upon to the exclusion of other information.
Appraisal assignments are accepted with the understanding that there is no obligation to furnish services after completion of the original assignment. If the need for subsequent services related to an appraisal assignment (for example, testimony, updates, conferences, reprint or copy services) is contemplated, special arrangements acceptable to U S REALTY CONSULTANTS, INC. must be made in advance.
No significant change is assumed in the supply and demand patterns indicated in the report. The appraisal assumes market conditions as observed as of the current date of our market research stated in the letter of transmittal. These market conditions are believed to be correct; however, the appraisers assume no liability should market conditions materially change because of unusual or unforeseen circumstances.
The valuation applies only to the property described and for the purpose so stated and should not be used for any other purpose. Any allocation of total price between land and the improvements as shown is invalidated if used separately or in conjunction with any other report.
Neither the report nor any portions thereof (especially any conclusions as to value, the identity of the appraisers or U S REALTY CONSULTANTS, INC., or any reference to the Appraisal Institute or the MAI, CPA or ISHC designations) shall be disseminated to the public through public relations media, news media, sales media or any other public means of communication without the prior written consent and approval of the appraisers and U S REALTY CONSULTANTS, INC.
The date of the valuation to which the value opinion conclusions apply is set forth in the letter of transmittal and within the body of the report. The values are based on the purchasing power of the United States dollar as of that date.
It should be specifically noted by any prospective mortgagee that the appraisal assumes that the property will be competently managed, leased, and maintained by financially sound owners over the expected period of ownership. This appraisal engagement does not entail an evaluation of management's or owner's effectiveness, nor are we responsible for future marketing efforts and other management or ownership actions upon which actual results will depend.
U S Realty Consultants, Inc. does not, as part of this valuation, perform an audit, review, or examination (as defined by the American Institute of Certified Public Accountants) of any of the historical or prospective financial information used, and therefore, does not express any opinion with regard to same.
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The Americans with Disabilities Act ("ADA") became effective January 26, 1992. We will not be responsible for conducting a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of 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 we have no direct evidence relating to this issue, we have not considered possible non-compliance with the requirements of ADA in estimating the value of the property.
EXTRAORDINARY ASSUMPTIONS & HYPOTHETICAL CONDITIONS
USPAP provides the following definitions for extraordinary assumptions and hypothetical conditions:
“Extraordinary assumption: an assignment-specific assumption as of the effective date regarding uncertain information used in an analysis, which, if found to be false, could alter the appraiser’s opinions or conclusions.” In the Comment to the definition USPAP states: “Comment: Uncertain information might include physical, legal, or economic characteristics of the subject property; or conditions external to the property, such as market conditions or trend; or the integrity of data used in an analysis.”
There are no extraordinary assumptions that have been considered in this appraisal.
“Hypothetical Condition: a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.” The USPAP Comment on hypothetical conditions states: “Comment: Hypothetical conditions are contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.”
There are no hypothetical conditions that have been considered in this appraisal.
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EXECUTIVE SUMMARY
Property Identification 9515 Community Road & 9539 Greenmeadow Road
Property Location 9515 Community Road 9539 Greenmeadow Road Windham, Portage County, Ohio 44288 Pertinent Dates:
Date of Inspection June 12, 2019 Date of Value June 12, 2019
Legal Interest Appraised Fee Simple Estate
Property Data:
Site 0.660 acre Building 12 units
Highest and Best Use:
As Improved Apartments As If Vacant Hold for future single-family development
Indications of Value
Income Capitalization Approach $410,000
Sales Comparison Approach $400,000
Market Value $410,000
Unit of Comparison: Value per unit $34,167
Contributory Value of Furniture, Fixtures & Equipment - Included in Market Value $16,000
Estimate of Exposure Time 6-12 months
Estimate of Marketing Period 6-12 months
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INTRODUCTION
PROPERTY IDENTIFICATION
The subject consists of a 12-unit apartment development located at 9515 Community Road & 9539 Greenmeadow Road in Windham, Portage County, Ohio. The property is further described herein.
PURPOSE AND INTENDED USE OF THE APPRAISAL
The purpose of the appraisal assignment is to communicate an opinion of the market value of the defined legal interest in the subject. The value opinion is to be used for asset valuation.
CLIENT AND INTENDED USER
The client is defined by USPAP as follows: “Client: the party or parties who engage, by employment or contract, an appraiser in a specific assignment.” The USPAP comment on the client definition is as follows: “Comment: The client may be an individual, group, or entity, and may engage and communicate with the appraiser directly or through an agent.”
The Intended User is defined by USPAP as “the client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment.”
The client and intended user is Silver Hill Funding.
LEGAL INTEREST APPRAISED
The legal interest appraised herein is the fee simple estate. A fee simple estate is defined by the Dictionary of Real Estate Appraisal as follows:
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.
The property rights appraised include all items of personal property, including the existing furniture, fixtures and equipment, and licenses and agreements required to operate the property and related facilities.
EFFECTIVE DATE OF VALUATION
The effective date of the value opinion is June 12, 2019. The value opinion is based on market conditions observed on the date of our inspection, June 12, 2019. James A. Piwarun’s inspection included a thorough interior and exterior inspection of the subject including interior inspection of three units. Stephen P. Faherty, MAI did not inspect the subject.
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DEFINITION OF VALUE
The purpose of the appraisal is to communicate an opinion of the market value of the subject property. Market value is defined in the Uniform Standards of Professional Practice, 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 in the open market;
4. Payment is made in terms of cash in United States 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."
EXPOSURE TIME AND MARKETING PERIOD
The concept of exposure time is historical in nature and is presumed to have occurred prior to the effective date of the appraisal. Alternatively, marketing period occurs after the effective date of the appraisal and may or may not be directly related to the value presented. The actual sale price could increase, decrease, or remain static during the marketing period depending upon market conditions and the type of property being appraised.
The PricewaterhouseCoopers’ (PwC) Survey-First Quarter 2019 indicates the following marketing times for the National Apartment market.
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Since most investors' perceptions and estimates of marketing period are based largely on exposure times that they have recently encountered in similar transactions, it stands to reason that there should be some correlation between marketing periods and exposure times. In fact, in the absence of perceived changes in the market or other extenuating circumstances, marketing period and exposure time should be identical. That is to say, if all other things are held constant, a property that (retrospectively) required an exposure time of say one year should be expected to have a marketing period (prospectively) also of one year.
Differences in the two concepts should appear when there is a perceived change in the market. To use the same example presented above, if a property required an exposure time of one year but perceived market conditions are improving, an appropriate estimate of marketing period could reasonably be expected to be less than one year. Conversely, if market conditions were anticipated to worsen, marketing period might exceed exposure time.
Objectively quantifying such differences would be virtually impossible; however, understanding the relationship between the two concepts and how they are affected by perceived changes in the market allows one to better estimate (subjectively) a reasonable period for exposure time and marketing period. This is especially important during periods when actual market evidence is limited by a lack of transactions. Extracting transaction-driven estimates can also be tenuous since many properties are often originally placed on the market at inflated asking prices. It is then necessary to decide if exposure time began when the property was first offered for sale or when the price was dropped to (or near) the ultimate sale price. Further complicating the issue is the question of whether exposure time ends when a sale contract is signed or whether it ends at the closing date of a sale.
Based upon our investigations, we believe that a marketing period of 6 to 12 months is reasonably appropriate. Furthermore, it is our opinion that the exposure time commensurate with our opinion of value for the subject would also be 6 to 12 months.
APPRAISAL DEVELOPMENT AND REPORTING PROCESS
The scope of this appraisal involves the systematic research and analysis necessary to reach a value conclusion for the subject. The initial step was to inspect the subject, general market area, and neighborhood. Market research included the assembly of data from public records, real estate specialists, governmental entities, real estate publications, as well as owners/investors, management and property managers at similar and comparable properties. Information concerning the subject was also collected and consisted of ad valorem taxes, zoning information, sales history, governmental restrictions, environmental regulations and other factors which may affect the subject property. Title studies were not commissioned at the same time USRC was engaged to provide valuation services. USRC reserves the right to amend our value conclusions in the event that additional studies are conducted which reveal material discrepancies. Information from the market area was collected and studied in order to define the character, composition and the propensity for change in the subject trade area. This information is analyzed to determine the influences, which will impact the surrounding market area and the value of the subject property.
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After analyzing the macro-environment, research was conducted relevant to the valuation process, including gathering income, expense, capitalization rate, and discount rate data; comparable improved sales; real estate tax, zoning, and flood plain data and any other information pertinent to the valuation of the subject property. This information was reviewed, confirmed when necessary, and analyzed through the approaches to value.
The subject-specific data considered in our analysis was provided by management of the subject. The apartment market was analyzed. Market comparables were analyzed. Improved sale comparables were analyzed, and where possible were confirmed with the buyer, the seller or a knowledgeable third party.
Applicability of Approaches
The Income Capitalization Approach: This approach analyzes the property's capacity to generate income (or other monetary benefit) and converts this capacity into an indication of market value. The approach is suitable for properties that have obvious earning power and investment appeal but is inappropriate for properties that have no readily discernible income potential.
The Sales Comparison Approach: This approach compares the subject property to other properties that have changed hands fairly recently, at known price levels. The approach is most meaningful when there is adequate market data involving comparable properties. Reliability of the approach varies directly with the quantity and quality of available market data.
The Cost Approach: In this approach, the cost to replace the improvements is estimated. A deduction is made for any depreciation, and the result is combined with the estimated value of the underlying land. The approach is applicable when each component is independently measurable, and when the sum of all components is believed to reflect market value. The approach is not applicable to unimproved land or obsolete improvements.
Applicability to Subject Property: The income capitalization approach was deemed the most applicable method to determine market value for the subject. The sales comparison approach was utilized to provide an additional point of reference. The cost approach does not generally reflect the buying motivations of investors, and is a less reliable approach for older properties such as the subject. Therefore, this approach was not used. At the client’s request, an insurable value was provided. The analysis undertaken and discussed herein is considered sufficient to provide a credible value for the intended purposes of this report.
This appraisal is a complete appraisal in a self-contained report. This appraisal engagement has been conducted using applicable standard appraisal techniques and in conformity with: the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute; the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989 and 1994; and the Uniform Standards of Professional Appraisal Practice (USPAP).
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The definition of market value presented previously discusses the conditions of a market where buyers and sellers are acting freely and are not under duress. Within the valuation process we have attempted to balance the buyer and seller perspectives in our consideration of assumptions and rates. This has been done by evaluating available market data and available surveys. In addition, we have also spoken with active market participants. The primary emphasis of this research was to discover differences in valuation criteria from a buyer's versus a seller's perspective. The results provide support for analysis bases such as capitalization rates.
HISTORY OF THE SUBJECT
Title to the subject is currently vested in H&Y Property Holdings, LLC. The subject was built in 1942 and was renovated in 1991. To the best of our knowledge there has been no transfer of title over the past three years and that the subject is not currently listed for sale or in a purchase contract.
COMPETENCY OF THE APPRAISERS
U S Realty Consultants, Inc. has performed numerous appraisals and reviews of appraisals on income producing properties such as the subject, in Ohio and throughout the United States. We have analyzed over hundreds of apartment properties during the period 1992 through the present. Files are maintained with historical and current data relative to the changing market with respect to the subject. Competency has been established in both the property type and geographical area of the subject either through previous engagements or through current research of germane market trends. Therefore, we possess the knowledge and experience to conduct the inspection, analysis, and reasoning necessary to accurately estimate the value of the appraised interest in the subject.
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DESCRIPTIVE DATA
REGIONAL ANALYSIS
The subject is located in Windham, in Portage County, Ohio. Accordingly, its market value is influenced in a general manner by the economic, political, physical and social characteristics of the Akron Core Based Statistical Area (CBSA). A CBSA is a statistical geographic entity consisting of one or more counties with at least one core city of at least 10,000 people. Adjacent counties included in the CBSA must have a high degree of social and economic integration with the core counties as measured through commuting ties with the counties containing the core. The Akron CBSA includes Portage and Summit Counties.
The value of real property is influenced by the interaction of four basic forces. These forces include social trends, economic circumstances, environmental conditions, and governmental controls and regulations. The interaction of these four forces influences the value of every parcel of real estate in the market.
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Social Forces
Social forces are trends that are exerted primarily through population characteristics. Real property values are affected not only by population changes and characteristics, but also by various forms of human activity.
Demographic Trends: Changing demographics influence unemployment rates, income levels, retail sales and many other key demand parameters analyzed in determining commercial real estate productivity. The following table lists population growth trends for Windham, Portage County, the Akron CBSA, and Ohio.
Population Growth Trends Windham, Ohio 2010 2019 2024 % Change % Change Area Census (Est.) (Proj.) 2010-19 2019-24 Windham 2,209 2,008 1,938 -9.1% -3.5% Portage County 161,419 162,433 163,577 0.6% 0.7% Akron CBSA 703,200 703,754 707,379 0.1% 0.5% Ohio 11,536,504 11,694,041 11,812,720 1.4% 1.0% Source: Claritas, Inc.
As shown in the table, the estimated population of Windham decreased from 2010 to 2019, while all other areas saw little change. These trends are projected to continue.
Recreation and Regional Attractions: Recreational facilities and regional attractions enhance an area’s quality of life. These activities also have a significant economic impact on an area by increasing the demand for services and retail trade created by visitors.
Noted attractions in Akron include the Akron Art Museum, Akron Zoo, Hower House, John Brown Home, Perkins Stone Mansion, Quaker Square, Stan Hywet Hall and Gardens, the Akron Founders Home - the Simon Perkins Stone Mansion and Kent State University Museum. The 2,955-seat E.J. Thomas Performing Arts Hall at The University of Akron campus is home to the Akron Symphony Orchestra. The Ohio Ballet performs at the historic Akron Civic Theatre. The community is home to The Magical Theater, one of only six residence theaters in the nation dedicated to children and family productions.
Canal Park is home of the Akron Rubber Ducks, a Class AA affiliate of the Cleveland Indians. Akron also hosts the All-American Soap Box Derby at Derby Downs.
The 30,000-acre Cuyahoga Valley National Recreation Area lies along the Cuyahoga River in the northwestern section of Summit County and is annually visited by more than three million people. Historical sites and entertainment in this area include Hale Farm & Village and Western Reserve, Boston Mills/Brandywine Ski Resorts, Blossom Music Center, and the Cuyahoga Valley Scenic Railroad.
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Convention Facilities: The John S. Knight Center in downtown Akron features two main exhibit halls (the largest is 30,000 square feet), 18 meeting rooms, and banquet and ballroom space totaling 12,000 square feet. The center annually hosts home and garden shows, shareholder meetings, industry meetings and conventions, and is within easy access of 6,000 hotel rooms. Other noted meeting and event facilities within the Greater Akron area include Arena Complex at the Summit County Fairgrounds and four facilities at the University of Akron - E.J. Thomas Hall, Rubber Bowl, Gardner Student Center Theatre and James A. Rhodes Arena (The JAR).
Economic Forces
Economic forces are the fundamental relationships between current and anticipated supply and demand, and the economic activity of the population to satisfy its wants, needs and demands through its purchasing power.
According to the Federal Reserve’s Beige Book released on April 17, 2019, economic activity expanded at a slight-to-moderate pace in March and early April. While most districts reported that growth continued at a similar pace as the previous report, a few districts reported some strengthening. There was little change in the outlook among contacts in reporting districts, with those expecting slight-to-modest growth in the months ahead. Reports on consumer spending were mixed but suggested sluggish sales for both general retailers and auto dealers. Reports on tourism were generally more upbeat. Reports on loan demand were mixed, but indicated steady growth. Reports on manufacturing activity were favorable, although contacts in many districts noted trade-related uncertainty. Most districts reported stronger home sales, although some districts noted low demand for higher-priced homes. Among reporting districts, agricultural conditions remained weak, with contacts expressing concerns over the impact of current and future rainfall and flooding.
Income: The economic vitality of an area is an important consideration in forecasting the demand and potential income for commercial real estate. Income levels provide an indication of an area’s economic vitality since they reflect an area’s economic growth and its residents’ standard of living. The table below lists median household income levels for Windham, Portage County, the Akron CBSA, and Ohio.
Median Household Income Estimates Windham, Ohio 2010 2019 2024 % Change % Change Area Census (Est.) (Proj.) 2010-19 2019-24 Windham $31,889 $37,492 $39,283 17.6% 4.8% Portage County $44,345 $52,717 $54,444 18.9% 3.3% Akron CBSA $43,024 $54,799 $57,622 27.4% 5.2% Ohio $41,111 $56,290 $61,163 36.9% 8.7% Source: Claritas, Inc.
Overall, these income levels have increased steadily. The income levels for Windham are the lowest listed.
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Effective Buying Income: One indicator often used to measure an area’s ability to buy is the effective buying income (EBI). The EBI is similar to disposable personal income (money income less personal tax and non-tax payments). This data is useful in determining market strength. The following table lists the most current and projected EBI for Windham, Portage County, the Akron CBSA, and Ohio.
Median Household EBI Windham, Ohio 2019 2024 % Change Area (Est.) (Proj.) 2019-24 Windham $34,265 $34,884 1.8% Portage County $46,053 $47,438 3.0% Akron CBSA $47,622 $49,868 4.7% Ohio $48,915 $52,570 7.5% Source: Claritas, Inc.
As shown, the median household EBI for Windham is the lowest listed. From this analysis, we can conclude that residents of the village have a lower level of disposable income, as a whole. By comparison, the level of median household EBI for Portage County is higher, but still below the CBSA and state levels.
Industries and Employment: Information on the size of a region’s labor force and the relative trends in employment and unemployment are key local economic indicators. The widely cited unemployment rate provides a good measure of the relative utilization of labor in a region. These measures are “residency-based”, providing current information on the labor force status of the residents of a county or region.
The following table presents historical unemployment for Portage County, the Akron CBSA, Ohio, and the United States. Generally, unemployment rises during cyclical downturns and falls during periods of rapid economic growth. Based on the current economic uncertainty, rates could fluctuate going forward.
Average Annual Unemployment Rates Windham, Ohio Area 2013 2014 2015 2016 2017 2018 Apr-19 Portage County 7.7% 5.9% 4.9% 5.0% 5.0% 4.6% 3.3% Akron CBSA 7.6% 5.9% 5.0% 5.1% 5.0% 4.6% 3.4% Ohio 7.5% 5.8% 4.9% 5.0% 5.0% 4.6% 3.3% United States 7.4% 6.2% 5.3% 4.9% 4.4% 3.9% 3.3% Source: United States Bureau of Employment Services
As shown, unemployment in Portage County fell from 7.7% in 2013 to 4.6% in 2018. As of April 2019, the unemployment rate was 3.3%.
The distribution of employment helps determine the economic character of an area. The following table presents a historical summary of the Akron CBSA’s nonagricultural employment by industrial sector.
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Nonagricultural Employment by Industry Akron CBSA 2012 2018 2012 2018 Net Change % Change Industry Title Total Jobs Total Jobs % of Total % of Total 2012-18 2012-18 Mining, Logging, and Construction 11,400 14,200 3.5% 4.2% 2,800 24.6% Manufacturing 40,100 39,300 12.3% 11.6% -800 -2.0% Wholesale Trade 17,900 18,300 5.5% 5.4% 400 2.2% Retail Trade 35,700 36,400 11.0% 10.7% 700 2.0% Transportation and Utilities 10,200 12,500 3.1% 3.7% 2,300 22.5% Information 3,800 4,800 1.2% 1.4% 1,000 26.3% Financial Activities 13,000 15,700 4.0% 4.6% 2,700 20.8% Professional and Business Services 49,700 51,300 15.3% 15.1% 1,600 3.2% Education and Health Services 51,100 55,400 15.7% 16.3% 4,300 8.4% Leisure and Hospitality 29,900 34,100 9.2% 10.0% 4,200 14.0% Other Services 13,600 13,500 4.2% 4.0% -100 -0.7% Government 48,800 44,700 15.0% 13.1% -4,100 -8.4% Total 325,200 340,200 15,000 4.6% Source: United States Bureau of Employment Services
Overall employment increased by 4.6% from 2012 to 2018. The largest sectors of the Akron economy in 2018 included Education and Health Services, Professional and Health Services, and Government with 16.3%, 15.1%, and 13.1% of the total, respectively.
The largest employers in the Akron Metropolitan Area are listed in the table that follows.
Largest Employers Akron Metropolitan Area Firm/Organization Type of Business # Employees Summa Health System Health Care 8,100 Akron General Health System Health Care 5,928 Akron Children's Hospital Health Care 3,697 Akron General Medical Center Health Care 3,697 The Goodyeae Tire & Rubber Co. Manufacturing 3,500 Summit County Government 3,468 Kent State University Education 3,400 Akron Public School Education 3,050 The University of Akron Education 2,845 FirstMerit Corp. Health Care 2,695 Source: Business Climate
Environmental Forces
Environmental forces are both natural and manmade forces that influence real property values. Some environmental forces include climatic conditions, natural barriers to future development, primary transportation systems, and the nature and desirability of the immediate areas surrounding a property.
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Highway Transportation: Highway accessibility is a primary consideration in planning an area’s future growth and development. Three interstate highways span throughout the Greater Akron area including Interstates 76, 77 and the Ohio Turnpike (Interstate 80). Interstates 76 and 77 intersect in downtown Akron and are connected by Interstate 277 just south of the downtown area. Other regional interstate highways include Interstates 271 and 480, both of which are located in the northern portion of Summit County.
Public Transportation: The Akron Metropolitan Regional Transit Authority provides public transportation throughout Summit County. The Kent State University Campus Service operates in Kent, Ravenna, Stow and Akron.
Rail Transportation: The Summit County Port Authority, Conrail, Chessie, Wheeling & Lake Erie and the Akron-Barberton Belt Line all provide freight rail service to the Tri-County. A new 26-acre Intermodal Freight Terminal in Stark County provides highway/rail linkage for long distance and overseas freight. Passenger rail service is available via Amtrak in Akron, Cleveland and Canton.
Air Transportation: Stark County is home to the Akron-Canton Regional Airport and is serviced by five airlines (Spirit, American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines) to fifteen nonstop destinations. The airport is also home to a Foreign Trade Zone and the Port Jackson Industrial Park. The following table presents historical air passenger activity at the Akron-Canton Regional Airport.
Airport Activities Akron Canton Regional Airport Year Passenger Enplanements % Change 2017 619,321 -9.7% 2016 685,553 -9.7% 2015 759,335 -1.5% 2014 771,155 -9.5% 2013 851,809 N/A Source: Federal Aviation Administration
Climate: Akron is located in the Great Lakes region approximately 39 miles south of Lake Erie, on the Glaciated Allegheny Plateau. The area has a humid continental climate with four distinct seasons. Winters are cold and dry but typically bring a mix of rain, sleet, and snow with occasional heavy snowfall and icing. Summers are typically very warm and humid. July and August are the warmest months, with an average temperature of 72 degrees, while February is the coldest, with an average temperature of 28 degrees.
Outlook
Our review of the above data indicates that the economy of Windham is somewhat struggling. The area is experiencing population declines and lower but rising income levels, offset by a slight increase jobs within the CBSA.
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NEIGHBORHOOD ANALYSIS
Introduction
The subject is located in the Village of Windham, along the east side of Portage County approximately 35 miles northeast of Akron and 45 miles southeast of Cleveland, Ohio. It is generally bounded by SR 82 to the north, Bryant Road to the west, Smalley Road to the south and the Portage/Trumbull County Line to the east.
Transportation
The primary transportation route serving direct access to Windham is State Route 303. The most proximate Interstate 80 (Ohio Turnpike) exits are 10+- miles west off SR 44 and seven-miles east off SR 5. The Ohio Turnpike bisects Windham, providing access to the larger cities such as Cleveland (45+- miles NW), Akron (35+- miles SW), Warren (12+- miles E) and Youngstown (30+- miles SE).
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Surrounding Land Uses
Windham is mainly comprised of residential development consisting of single and multi-family, as well as scattered commercial development and is generally suburban in nature. The commercial development that services the local residents is located along the primary corridor State Route 303 in the east direction; these facilities include government buildings, restaurants, grocery, pharmacy and various general commercial/retail supportive uses. The area has not experienced any new commercial development in the past several years.
SUBJECT
Summary
The subject's surrounding land uses are complementary and the infrastructure provides for optimum utilization of the land. Access to the neighborhood is good via highways and local routes, which are vital to the success of the neighborhood's development.
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DESCRIPTION OF THE SITE
Location: The subject’s address is 9515 Community Road & 9539 Greenmeadow Road in Windham, Portage County, Ohio.
Size and Shape: The subject is comprised of two contiguous rectangular land parcels each containing 0.33 acres for a total of 0.660 acres. The tax parcel maps are shown below.
Access: The subject buildings are accessed from the east side of Community Road via gravel parking areas and concrete walkways and along the north side of Greenmeadow Road via gravel parking areas and concrete walkways.
Site Conditions: The subject site is generally level at street grade. We have not been provided with a copy of an environmental survey of the subject site. U S Realty Consultants has not performed an engineering study nor test borings and makes no further conclusion as to the condition of the foundation or the soil. Determination of environmental conditions is outside the scope of the appraisal process. In the event an environmental survey is done and concludes there are environmental issues a reanalysis of value would be warranted.
Topography and Drainage: According to Flood Insurance Rate Map# 39133C0181D, dated August 18, 2009, the site is located in a flood zone X, an area of minimal flooding. Drainage is assumed to be adequate. A copy of the flood map can be found on the following page
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9515 Community Road & 9539 Greenmeadow Road 25
Zoning: The subject site is zoned R-2, Residential District. According to the Windham Zoning Office, the purpose of this district is to accommodate single-family residential development and accessory buildings; conditional uses include institutional, schools, facilities of worship, and government buildings. The subject is a legal, non-conforming use. According to the zoning code “Nothing shall prevent the reconstruction, repairing or rebuilding and continued use of any non- conforming building or structure damaged by fire, collapse, explosion, or Act of God and the structure may be rebuilt or restored provided the area is not increased or extended”.
Easements: Normal utility easements are in place. These easements are assumed to have no detrimental effect on the value of the subject. No easements of an adverse nature were indicated at the subject site and none are assumed to exist.
Utilities: The subject is served by all necessary public utilities.
Summary: The subject site is serviced by all necessary utilities and the site blends in well with surrounding residential development.
Real Estate Taxes: Real estate taxes in Portage County, and all of Ohio, are assessed at 35% of market value and are paid semiannually, one year in arrears (i.e. 2018 taxes are paid in 2019). The tax year 2018 county assessed market value, assessed value, and real estate tax for the subject is shown below.
2018 County Market Value Parcel Number Land Value Building Value Total 41-057-10-00.148-000 $15,000 $82,600 $97,600 41-057-10-00.149-000 $15,000 $75,800 $90,800 Total $30,000 $158,400 $188,400
2019 Tax Liability Parcel# Effective Rate Assessed Value Tax Liability 41-057-10-00.148-000 60.7980 $34,160 $2,077 41-057-10-00.149-000 60.7980 $31,780 $1,932 Total $65,940 $4,009 1
For real estate tax purposes, properties in Ohio are appraised as fee simple estates based on market rents. If a property transfers in Ohio, the tax liability is generally based on the most recent transfer price. Accordingly, we have based our real estate tax projection upon our concluded market value (less FF&E), utilizing the current tax rate, as shown in the following table.
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TAX ANALYSIS As Is Market Value $410,000 Less FF&E Value $16,000 As Is Value $394,000 Assessment Ratio 35.00% Estimated Assessed Value $137,900 Effective Tax Rate/$1,000 60.798010 Total Taxes $8,384 Rounded $8,400
DESCRIPTION OF THE IMPROVEMENTS
This description of the subject improvements is based on our personal inspection of the property and information provided by property management.
Improvements consist of two, six-unit apartment buildings originally constructed in 1942 with renovations in 1991. The building located at 9515 Community Road contains 4,944 square feet and has (2) 1-bedroom units, (2) 2-bedroom units, and (2) 3-bedroom units. The building located at 9539 Greenmeadow Road contains 5,464 square feet and has (4) 2-bedroom units and (2) 3- bedroom units. The total rentable area is 10,408 square feet. The buildings are currently 100% occupied. The tenants pay own gas and electric and water is included in the monthly rent.
The buildings are wood-framed with vinyl siding exterior. The roofs area gable asphalt shingled with aluminum gutters and downspouts. The interior floors are a combination of carpeting and vinyl and each unit contains a 40-gallon hot water tank and forced-air gas furnaces. Each unit includes a laundry room with washer/dryer hook-ups, refrigerator, microwave and stove. Site improvements include grassy areas and concrete walkways.
The unit sizes and floor plans were requested but not provided to us. Based upon our inspection, conversation with property management and the total building square footage of 10,408 square feet, we have estimated the one-bedroom units at 600 square feet, two-bedroom units at 860 square feet and the three-bedroom units at 1,012 square feet. The following chart demonstrates the breakdown of the unit types.
Subject Unit Breakdown Type # SF Total SF One-Bedroom, One Bath 2 600 1,200 Two-Bedroom, One Bath 6 860 5,160 Three-Bedroom, One Bath 4 1,012 4,048 Total 12 867 10,408
Conclusion
The improvements are in generally average condition. The subject improvements conform to the surrounding improvements in the neighborhood. Pictures of the subject are presented on the following pages.
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APARTMENT MARKET ANALYSIS
We begin with an overview of the national and regional apartment markets to establish that a market exists for the subject, and further refine the suitability of the subject to meet the demand of the market.
NATIONAL APARTMENT MARKET OVERVIEW
The PwC Real Estate Investor Survey - First Quarter 2019 report provided the following summary of the national apartment market: According to the 1Q 2019 PricewaterhouseCoopers’ Survey (PwC), while this market continues to attract capital in a prolonged cycle, investors cite rising interest rates, oversupply, political uncertainty, and a macro-economic slowdown as potential disruptors in the coming year.
• Despite a supply-demand imbalance in certain submarkets, the overall outlook for rent growth is upbeat.
• The average initial-year market rent change rate rises 24 basis points this quarter to 2.64%, the second highest among the PwC survey’s national markets.
• A dip in its average overall cap rate for the fourth consecutive quarter has 56.0% of investors viewing this market as overpriced while the balance see it as fairly priced.
The combination of these key factors have most PwC surveyed investors in a hold pattern. Most PwC survey participants feel that market conditions favor neither buyers or sellers.
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It is noted that the survey data above is based primarily on investment grade real estate. The average overall capitalization rate in the national apartment market is 5.03%, down 13 basis points from the previous quarter and down 30 basis points from a year prior.
LOCAL MULTI-FAMILY MARKET
The following analysis is from the CoStar Multi-Family Report for the defined subject’s Outlying Portage County submarket, which is part of the larger Akron market.
Outlying Portage County Multi-Family Submarket
The subject is located in the Outlying Portage County Multi-Family Submarket. Again we have used data reported by CoStar for our market analysis. Below, we present the key indicators, by property quality, for the market.
Source: CoStar
Supply: Current supply in the Outlying Portage County MF submarket was 1,300 units. There are no units under development as of the most recent an there has not been any new inventory delivered over the defined historical period. CoStar projects no deliveries through 2023.
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Source: CoStar
Rents: The average asking rent in the submarket was $656 per unit per month, and the average effective rent was $653 per unit per month. Rent growth has been positive since 2013, although growth was negative in 4Q 2017. Rent growth is projected to be negative in 2019 before becoming positive through 2022.
Source: CoStar
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The chart below show market rent growth by bedroom. The subject contains one, two and three bedroom, units. As shown, rent growth has been steady for all three unit types.
Source: CoStar
Vacancy: Year-to-date vacancy in the submarket reported was 4.1%, which is lower than the year-end historical periods shown on the chart on the next page. CoStar projects total yearly vacancy for 2019 to end at 4.1%. Going forward, CoStar projects vacancy to increase to 5.0% by 2023.
Source: CoStar
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Source: CoStar
Net Absoprtion: CoStar reported positive year-to-date absorption of two units. Historical net aborption has generally been positive, though it was negative most recently in 2017 and 2013.
Source: CoStar
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COMPARABLE RENTALS
The following pages detail the rental properties that were analyzed in our estimation of market rents. An analysis of current market rents at comparable apartment properties is considered relevant as an indication of the subject's market competitiveness as of the date of valuation. These properties are most similar to the subject with respect to unit styles, location, age, and amenities. The rent ranges at the comparable rentals reflect their dissimilarities or similarities relative to the subject.
9515 Community Road & 9539 Greenmeadow Road Rent Comparables
Name Unit Count Year Built S Subject 12 1942 1 118 W. Main Street 12 1972 2 208 Ravenna Road 7 1920 3 9544 Cloverleaf Road 10 1942 4 10775 Main Street 12 1890 5 1379 Mahoning Ave 60 1968
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Comparable Apartment Rentals Map
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Comparable Rental #1
Community 118 W. Main Street Newton Falls, Ohio
Description of Project
Year Built: 1975 Total Units: 12 Average Unit Size (sf) 500 Occupancy Rate: 92%
Rent Concessions: Minimal Multi-Family Type Low rise Construction Type: Masonry
Unit Mix and Rental Data
118 W. Main Street Number of Units Number of Bathrooms Size (sf) Rent Rent/sf One Bedroom N/A N/A N/A N/A N/A Two Bedroom 12 1 500 $564 $1.13 Three Bedroom N/A N/A N/A N/A N/A
Unit Amenities: Air conditioning, refrigerator, range
Project Amenities None
Utilities Included Trash; tenant pays water and electric
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Comparable Rental #2
Community 208 Ravenna Road Newton Falls, Ohio
Description of Project
Year Built: 1920 Total Units: 7 Average Unit Size (sf) 655 Occupancy Rate: 100%
Rent Concessions: Minimal Multi-Family Type Garden Construction Type: Wood-framed/wood exteriors
Unit Mix and Rental Data
208 Ravenna Road Number of Units Number of Bathrooms Size (sf) Rent Rent/sf One Bedroom 2 1 397 $456 $1.15 Two Bedroom 5 1 758 $499 $0.66 Three Bedroom N/A N/A N/A N/A N/A
Unit Amenities: Refrigerator, range, washer/dryer hookup
Project Amenities None
Utilities Included Trash
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Comparable Rental #3
Community 9544 Cloverleaf Road Windham, Ohio
Description of Project
Year Built: 1942 Total Units: 10 Average Unit Size (sf) 780 Occupancy Rate: 100%
Rent Concessions: N/A Multi-Family Type Garden Construction Type: Wood-frame/vinyl sided
Unit Mix and Rental Data*
9544 Cloverleaf Road Number of Units Number of Bathrooms Size (sf) Rent Rent/sf One Bedroom N/A N/A N/A N/A N/A Two Bedroom 4 1 612 $422 $0.69 Three Bedroom 4 1 727 $442 $0.61 *The property also offers two, four-bedroom units
Unit Amenities: Refrigerator, range, washer/dryer hookup
Project Amenities None
Utilities Included Trash
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Comparable Rental #4
Community 10775 Main Street Mantua, Ohio
Description of Project
Year Built: 1890 Total Units: 12 Average Unit Size (sf) 1,030 Occupancy Rate: 100%
Rent Concessions: Minimal Multi-Family Type Low-Rise Construction Type: Masonry
Unit Mix and Rental Data
10775 Main Street Number of Units Number of Bathrooms Size (sf) Rent Rent/sf One Bedroom N/A N/A N/A N/A N/A Two Bedroom 11 1 1,000 $819 $0.82 Three Bedroom 1 1 1,355 $813 $0.60
Unit Amenities Refrigerator, range, washer/dryer connections
Project Amenities None
Utilities Included Water, trash; tenant pays gas and electric
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Comparable Rental #5
Community Packard House 1379 Mahoning Ave Warren, Ohio
Description of Project
Year Built: 1968 Total Units: 60 Average Unit Size (sf) 875 Occupancy Rate: 90%
Rent Concessions: N/A Multi-Family Type Garden Construction Type: Masonry
Unit Mix and Rental Data
1379 Mahoning Ave Number of Units Number of Bathrooms Size (sf) Rent Rent/sf One Bedroom 30 1 750 $425 $0.57 Two Bedroom 30 1 1,000 $495 $0.50 Three Bedroom N/A N/A N/A N/A N/A
Unit Amenities Air conditioning, refrigerator, range, garbage disposal
Project Amenities Laundry facilities, playground
Utilities Included Water/Sewer, Heat, Trash
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Analysis of Apartment Comparable Rentals
The preceding comparable data has been analyzed and compared to the subject in order to estimate market rent levels. Variances between the comparable data and the subject are predominantly attributable to differences in the physical characteristics of the improvements and the amenities offered. Other factors, such as the condition of the property, age, and the location also affect the asking rents.
The following table summarizes pertinent data for the comparable properties. The chart also presents the subject’s average in-place rent based on the rent roll provided.
Apartment Survey Ranges 9515 Community Road & 9539 Greenmeadow Road
Unit Types Size Rent Rent/sf
One-Bedroom, One Bath 600 $383 $0.64
Comparable Properties 397 - 750 $425 - $456 $0.57 - $1.15 average of comparables 574 $441 $0.77
Two-Bedroom, One Bath 860 $523 $0.61
Comparable Properties 500 - 1,000 $422 - $819 $0.50 - $1.13 average of comparables 774 $560 $0.72
Three-Bedroom, One Bath 1,012 $635 $0.63
Comparable Properties 727 - 1,355 $442 - $813 $0.60 - $0.61 average of comparables 1,041 $628 $0.60
MARKET RENT ANALYSIS
Contract Rent, Asking Rents and Market Rent Conclusions
According to the rent roll, 9 of the 12 units are Section 8 tenants. Property management indicated that that the subject has historically been very well occupied and that the majority of the existing tenant base is comprised of long-term tenants (up to 20 years). Management confirmed that these tenants are tenant-based Section 8, commonly known as the Housing Choice Voucher program whereby the voucher is attached to the tenant (tenant vacates the assistance transfers). Property management stated that HUD recently completed the annual inspection of the subject and has met the requirements. The subject’s in-place rents for the two-bedroom and three-bedroom units are bracketed by the market comparables on a monthly basis. The subject’s in-place rents are slightly below the market comparables on a monthly basis for the one-bedroom units but are supported on a per square foot basis.
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The table below presents our market rent conclusion. These rates are applied in our analysis via the Income Capitalization Approach that follows.
Market Rent Conclusions USRC Type # SF Estimate Per SF
One-Bedroom, One Bath 2 600 $390 $0.65
Two-Bedroom, One Bath 6 860 $525 $0.61
Three-Bedroom, One Bath 4 1,012 $635 $0.63
Total/Weighted Average 12 867 $539 $0.62
Vacancy
The market comparables indicate overall vacancy rates ranging from 0% to 10% According to CoStar, the vacancy in the Outlying Portage County submarket is 4.1%. As indicated earlier, the subject has historically been very well occupied and that the majority of the existing tenant base is comprised of long-term tenants (up to 20 years).
For pro forma valuation purposes, we have estimated a market vacancy of 4.0%.
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HIGHEST AND BEST USE
The market value of the subject is a function of its highest and best use. Highest and best use may be defined as the most probable, possible, and permissible use for which a property may be used and is capable of being used. The Appraisal Institute defines highest and best use as follows:
The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability.
This definition applies specifically to the highest and best use of land or sites as though vacant. When a site contains improvements, the highest and best use may be determined to be different from the existing use. The existing use will continue unless and until land value in its highest and best use exceeds the sum of the value of the entire property in its existing use and the cost to remove the improvements.
Implied in these definitions is that the determination of the highest and best use results from the appraiser's judgment and analytical skill, which means that the use determined from analysis represents an opinion, not a fact to be found. In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The procedure used to estimate the highest and best use of a property as though vacant and as improved is to test these two situations on the basis of the categories discussed in the definition.
In any land use analysis, the following tests must be met in estimating 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. The synthesis of these four factors was considered to determine a most probable and profitable use for the subject parcel of real estate.
HIGHEST AND BEST USE AS THOUGH VACANT
In estimating highest and best use, there are essentially four criteria:
1. Possible use. What uses are possible based upon the site's size, shape, area, terrain, soil conditions, topography, and access to utilities?
2. Permissible use (legal). What uses are permitted by zoning and deed restrictions on the site in question?
3. Feasible use. What possible and permissible uses will produce a net return to the owner of the site?
4. Highest and best use. Among the feasible uses, which use will produce the highest net return or the highest present worth?
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The highest and best use of land if vacant and available for use may be different from the highest and best use of the improved property. This is true when the improvement is not an appropriate use, but it makes a contribution to the total property value in excess of the site.
These four tests have been applied to the subject site, as though vacant. In arriving at the estimate of highest and best use, the subject site was analyzed as if vacant and available for development.
Possible Use
The physical aspects of the site itself dictate the first constraint imposed on the possible use of a property. The size and location within a given block are the most important determinants of potential use. In general, the larger the site, the greater its potential to achieve economies of scale and flexibility in development. The subject site at contains 0.660 acres. The site is rectangular in shape. The smaller size of the site and the fact that it is surrounded by residential users do impose some constraints on the flexibility of development or on the scope of possible uses.
Permissible Use
Legal restrictions as they apply to the subject are private restrictions and the public restrictions of zoning. The site is located in the R-2, Residential District zone. The zoning is specifically designated for single-family development. The subject is a legal, non-conforming use. If there were damages to the building, the property could rebuild apartment on the site (cannot add more units than is existing). Under the as though vacant scenario, however, it assumes a vacant site. The subject would therefore be subject to the current zoning and only single-family residential development would be permitted.
Feasible Uses
The determination of financial feasibility is more complex than the previous two criteria, requiring an examination of current market conditions. Based on market conditions in the area, it appears that single-family development would not be feasible at this time.
Highest and Best Use
In the final analysis, a determination must be made as to which feasible use is the highest and best use. Based on market conditions it is our opinion that the highest and best use for the property would be to hold for future single-family residential development.
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HIGHEST AND BEST USE AS IMPROVED
In analyzing the highest and best use of the existing improvements, the four tests that were previously discussed are also applied to the subject as improved. This simple test is undertaken in order to determine whether an alternative use could generate a greater return to the land and removal of the existing improvements is justified.
The existence of the improvements indicates that an apartment complex is possible. The current use of the site is considered a legal, non-conforming use under the current zoning designation. Therefore, the improvements are legally permissible and meet the second criterion.
In order to meet the test of financial feasibility, rental rates for an alternative use must support a return on the combined cost of demolishing the existing improvements and the cost of constructing new improvements for the desired alternative use. This usually takes place when the useful life of a property has been realized and the value of the underlying land comprises most or all of the value of the property. Since the improvements, as they currently exist, continue to make a substantial contribution to the overall value of the property, the continuation of the existing use is justified. There is no alternative, economically feasible use that could justify removal or conversion of the existing improvements at this time. Therefore, the highest and best use of the subject, as improved, is for continued use as apartments.
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INCOME CAPITALIZATION APPROACH
This approach analyzes a property's capacity to generate income (or other monetary benefit) and converts this capacity into an indication of value. The approach is suitable for properties that have obvious earning power and investment appeal but is inappropriate for properties that have no readily discernible income potential. Further, this approach is based on the premise that the value of a property is represented by the present worth of anticipated future benefits to be derived from ownership. There are two basic techniques that can be used for analysis purposes: Direct Capitalization and Discounted Cash Flow (DCF).
Direct Capitalization converts an estimate of a single year's income expectancy or an annual average of several years' income expectancies into an indication of value in one direct step. Direct Capitalization is especially useful when analyzing the “as-is” valuation of a property.
The Discounted Cash Flow (DCF) Analysis is a market reflective method of estimating the present worth of anticipated income benefits. This analysis includes the conversion of a stream of expected income into a present value, and is most appropriate when valuing a property’s prospective value.
In valuing the subject, it is our opinion that the most appropriate valuation technique for valuing the subject is the direct capitalization method. On the following pages, our estimate of net operating income will be developed. The estimate will be followed by the application of the direct capitalization technique that will provide a conclusion of market value by this approach.
REVENUE ANALYSIS
Market Rent Conclusion: As discussed and concluded in the market analysis, we utilized market rents for the subject’s units. The monthly market rent is shown below. The annual potential gross rental income is estimated at $77,640.
Market Rent Conclusions USRC Type # SF Estimate Per SF
One-Bedroom, One Bath 2 600 $390 $0.65
Two-Bedroom, One Bath 6 860 $525 $0.61
Three-Bedroom, One Bath 4 1,012 $635 $0.63
Total/Weighted Average 12 867 $539 $0.62
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Vacancy Conclusion: The subject is 100% occupied. The market comparables indicate overall vacancy rates ranging from 0% to 10% According to CoStar, the vacancy in the Outlying Portage County submarket is 4.1%. As indicated earlier, the subject has historically been very well occupied and that the majority of the existing tenant base is comprised of long-term tenants (up to 20 years).
For pro forma valuation purposes, we have estimated a market vacancy of 4.0%.
Effective Rental Income: After the vacancy adjustment, the projected effective rental income totals $74,534.
Other Revenue: This includes late fees and other income. We estimate other revenue to total $1,200 annually based on the historical data.
Effective Gross Income: Our estimate of effective gross income totals $75,734 .
EXPENSE ANALYSIS
All expenses necessary to maintain the production of revenue from operating the property are included in the expense analysis. The property is an apartment building. We were provided with financial statements for 2018 as well as a TTM statement through April 2019. The chart additionally shows two expense comparables and our estimates used in the pro forma.
9515 Community Road & 9539 Greenmeadow Road Income Capitalization Approach 50
Comparable, Historical and Projected Financial Data 9515 Community Road & 9539 Greenmeadow Road
Subject TTM USRC Projection Comp 1 Comp 2 2018 April-19 Year 1 Units 10 12 12 12 12 Square Feet 4,355 10,408 10,408 10,408 10,408 Average Unit Size 436 867 867 867 867 Occupancy 100% 100% 92% 100% 92% Revenues: Dollars Per Unit Dollars Per Unit Dollars Per Unit Dollars Per Unit Dollars Per Unit Potential Rental Revenue $0 $76,322 $6,360 $76,573 $6,381 $77,640 $6,470 Vacancy Allowance $0 $0 $0 $0 $0 -$3,106 -$259 Effective Rent $72,889 $7,289 $89,316 $7,443 $76,322 $6,360 $76,573 $6,381 $74,534 $6,211 Other Revenue $3,977 $398 $8,274 $690 $1,265 $105 $1,153 $96 $1,200 $100 Total Revenue $76,866 $7,687 $97,590 $8,133 $77,587 $6,466 $77,726 $6,477 $75,734 $6,311
Operating Expenses: Repairs & Maintenance $7,048 $705 $31,907 $2,659 $2,004 $167 $2,070 $173 $2,400 $200 Utilities $7,351 $735 $1,553 $129 $12,957 $1,080 $13,408 $1,117 $13,200 $1,100 Real Estate Taxes $10,356 $1,036 $0 $0 $4,175 $348 $4,175 $348 $8,400 $700 Insurance $1,927 $193 $0 $0 $2,551 $213 $2,551 $213 $2,640 $220 General Administrative $0 $0 $7,251 $604 $0 $0 $0 $0 $1,200 $100 Management Fees $2,912 $291 $7,127 $594 $7,632 $636 $7,657 $638 $3,787 $316 Capital Reserve $0 $0 $0 $0 $0 $0 $0 $0 $3,000 $250 Total Operating Expenses $29,594 $2,959 $47,838 $3,987 $29,319 $2,443 $29,861 $2,488 $34,627 $2,886 Total - % of EGI 38.5% 49.0% 37.8% 38.4% 45.7%
NET INCOME $47,272 $4,727 $49,752 $4,146 $48,268 $4,022 $47,865 $3,989 $41,108 $3,426
Capital Expenditures 0 $0 0 $0 0 $0 0 $0 $0 $0 Total Capitalized Costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
CASH FLOW $47,272 $4,727.20 $49,752 $4,146.00 $48,268 $4,022.33 $47,865 $3,988.75 $41,108 $3,425.64
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Repairs and Maintenance: For pro forma valuation purposes, the cost is estimated at $200/unit. The estimate is supported by the historic data but is below the comparable data.
Utilities: The tenants pay electric and gas directly, and some tenants reimburse for water. All other utilities are included. For pro forma valuation purposes, the cost is estimated at $1,100/unit. The estimate is supported by the historic data and is considered reasonable.
Real Estate Taxes: The real estate taxes were previously discussed in the description of the site portion of this report. For pro forma valuation purposes, the subject’s real estate taxes totals $8,400.
Insurance: For pro forma valuation purposes, the cost is estimated at $220/unit. The estimate is supported by the historic data and expense comparables and is considered reasonable.
General and Administrative: This expense covers legal and other miscellaneous fees. The historical did not include an allocation for this expense. However, some of these costs appear to have been accounted for in the higher historical management fee expense (10.0%). We have included an allocation of $1,200 to account for these typical expenses.
Management Fee: Typical management fees for apartment properties in the market range from 2.5% to 5.0% of effective gross income. Based upon typical market terms, we have estimated a management fee of 5.0% of effective gross income.
Capital Expenditures/Replacement Reserve: Periodic replacement of short-lived building and site improvements is essential to maintain the quality image and annual income for the subject facility. Since capital expenditures affect cash flow, our analysis reflected these expenses in the form of reserve for replacement in addition to any planned capital additions. A replacement allowance is generally associated with an apartment development
A survey of institutional investors by Korpacz/PriceWaterhouseCooper indicated that their expectations for apartment reserves ranged between $150 and $2,000 per unit, with an average of $507 per unit. The subject is an older building but it has been well kept. The property has limited FF&E and there are no amenities at the subject. A conclusion towards the lower end of the range, or $250 per unit is considered reasonable and is used in our analysis.
Total Expenses: This line item represents the sum of all of the expense items discussed previously. We have estimated total expenses of $34,627. The resulting expense ratio is 45.7%. This is bracketed by the subject history and expense comparables (34.8% to 49.0%). Considering all of the data available, and considering our inclusion of a replacement reserve and a higher real estate tax estimate, our expense estimates appear reasonable.
9515 Community Road & 9539 Greenmeadow Road Income Capitalization Approach 52
NET OPERATING INCOME
Net operating income (NOI) represents the income to the property after all operating expense obligations have been met. Effective gross income less the operating expenses equals NOI. The prospective NOI is used for estimating the property's market value via a direct capitalization calculation.
Pro Forma Operating Statement 9515 Community Road & 9539 Greenmeadow Road 12 Units
Per Unit Total
Revenue Potential Gross Rental Income $6,470 $77,640 Vacancy & Collection 4.0% $259 $3,106 Effective Rental Income $6,211 $74,534 Other Income $100 $1,200 Effective Gross Income $6,311 $75,734 Expenses Repairs & Maintenance $200 $2,400 Utilities $1,100 $13,200 Real Estate Taxes $700 $8,400 Insurance $220 $2,640 General Administrative $100 $1,200 Management Fees 5.0% $316 $3,787 Replacement Reserve $250 $3,000 Total Expenses $2,886 $34,627
Net Operating Income $3,426 $41,108
DIRECT CAPITALIZATION ANALYSIS
The Direct Capitalization Analysis begins with the estimation of the estimate net income. We utilized the projected net operating income of $41,108. This income figure is converted to an indication of value in a single step by applying a market-derived overall capitalization rate.
Direct Capitalization Rate Selection
We have examined data from investor surveys and extracted rates in order to arrive at an appropriate capitalization rate for the subject.
The following is a summary of apartment buildings less than 20 units with reported capitalization rates which transferred since January 2018 within the Akron, Cleveland and Youngstown market areas.
9515 Community Road & 9539 Greenmeadow Road Income Capitalization Approach 53
According to CoStar Comps, the average overall capitalization rate reported for the 32 closed transactions was 10.4% and ranged from 5.8% to 15.0%.
As of the second quarter of 2019 (covers first quarter 2019 data), RealtyRates.com reported an average overall cap rate of 9.5% for apartment properties in the Cleveland/Akron market.
We have also examined data reported by RERC in their Real Estate Report for the fourth quarter of 2018. Third-tier apartment properties in the Midwest reported a going-in capitalization rate range of 6.3% to 9.0% with an average of 7.8%. Third-tier properties are defined as older properties with functional inadequacies and/or in marginal locations.
The extracted capitalization rate for a comparable sale utilized in the sales comparison approach was 10.0%.
The subject is an older property with limited amenities located in a small market. After considering the foregoing data, investor survey information, the subject's age, quality, condition, and location, our inclusion of a replacement reserve and our higher real estate tax expense, as well as our judgment and experience, we concluded that the subject's market value was best represented by a 10.00% overall capitalization rate. The calculation is presented below.
9515 Community Road & 9539 Greenmeadow Road Income Capitalization Approach 54
As Is Market Value Direct Capitalization Anaylsis 9515 Community Road & 9539 Greenmeadow Road Net Operating Income $41,108 Overall Capitalization Rate 10.00% Value $411,077
Value Rounded $410,000
CONCLUSION
Based on the preceding analyses, it is our opinion that the as is market value of the fee simple estate in the subject (including FF&E), as indicated by the Income Capitalization Approach, as of June 12, 2019, is:
FOUR HUNDRED TEN THOUSAND DOLLARS $410,000
9515 Community Road & 9539 Greenmeadow Road Income Capitalization Approach 55
SALES COMPARISON APPROACH
The Sales Comparison Approach is defined in The Dictionary of Real Estate Appraisal, (published by The Appraisal Institute, 1993), as:
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 has been used to provide a meaningful conclusion of value for the subject. The Sales Comparison Approach is based upon the principle of substitution; that is, the value of a property is governed by prices paid for other similar properties. Since no two properties are ever identical, the necessary adjustments for differences in location, size, and marketability are a function of appraisal experience and judgment.
MARKET SALES DATA
In applying the Sales Comparison Approach to value, primary emphasis was placed on recent sale transactions of similarly-positioned apartment complexes in the region of the subject. Detailed data and information concerning the individual sales are presented on the following pages.
SUMMARY OF COMPARABLE SALES Date of Price Per # Property City Sale Price Units Unit 1 Parkview Apartments Kent September-18 $975,000 24 $40,625 2 Dominion Townhomes Akron February-18 $630,000 19 $33,158 3 496 Schiller Ave Akron November-18 $310,000 12 $25,833 4 Hobart Apartments Akron February-18 $410,000 12 $34,167
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SALE COMPARABLE MAP
9515 Community Road & 9539 Greenmeadow Road Income Capitalization Approach 57
Improved Comparable Sale 1
Address Parkview Apartments 841 Silver Meadows Blvd Kent, Ohio 44240
Date of Sale September 27, 2018
Seller Ep Madison Properties Llc Buyer Petru Properties Llc
Sales Price $975,000 Property Rights Fee Simple Terms Cash Equivalent Price per Unit $40,625
Improvement Data
Number of Units: 24 Average Unit Size: 945 sf Year Built: 1971 Occupancy: 100%
Income Data Net Operating Income $97,500 Overall Cap Rate 10.00%
Comments: This comparable is located in Kent, Ohio. The property includes 20, two-bedroom units and 4, three-bedroom units. The property transferred at an in-place capitalization rate of 10.00%.
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Improved Comparable Sale 2
Address 1723 Dominion Drive Akron, Ohio 44313
Date of Sale February 17, 2018
Seller Warm Sands Llc Buyer Dominion Townhomes Llc
Sales Price $630,000 Property Rights Fee Simple Terms Cash Equivalent Price per Unit $33,158
Improvement Data
Number of Units: 19 Average Unit Size: 1,155 sf Year Built: 1976 Occupancy: 100%
Income Data Net Operating Income: N/A Overall Cap Rate: N/A
Comments: This comparable is located in Akron, Ohio. The property includes three, one-bedroom units and 16 two-bedroom units.
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Improved Comparable Sale 3
Address 496 Schiller Ave Akron, Ohio 44310
Date of Sale November 5, 2018
Seller R2 Akron Llc Buyer Cynthia A Bender
Sales Price $310,000 Property Rights Fee Simple Terms Cash Equivalent Price per Unit $25,833
Improvement Data
Number of Units: 12 Average Unit Size: 481 sf Year Built: 1973 Occupancy: 100%
Income Data Net Operating Income: N/A Overall Cap Rate: N/A
Comments: This comparable is located in Akron, Ohio. The property offers 12, one-bedroom units.
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Improved Comparable Sale 4
Address 1492 Hobart Ave Akron, Ohio 44306
Date of Sale February 27, 2018
Seller 1492 Hobart Llc Buyer Hobart Apartments Llc
Sales Price $410,000 Property Rights Fee Simple Terms Cash Equivalent Price per Unit $34,167
Improvement Data
Number of Units: 12 Average Unit Size: 500 sf Year Built: 1972 Occupancy: 100%
Income Data Net Operating Income: N/A Overall Capitalization Rate: N/A
Comments: This comparable is located in Akron, Ohio. The property includes 12 one-bedroom units.
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COMPARABLE SALES ANALYSIS
For purposes of comparison, the transactions were analyzed in terms of Price per Unit. When applying the Price per Unit analysis, the nature of the current market environment for apartments requires that adjustments be made. Sales comparison is traditionally applied by buyers considering the acquisition of an apartment complex. A grid is provided at the end of the descriptive section which summarizes the adjustment process.
PHYSICAL UNITS OF COMPARISON
Analysis of the physical units of comparison is largely based on the principle of substitution. The sales were compared to the subject and adjusted for differences such as interest transferred, date of sale, location/access/exposure, age/condition, and facilities/amenities. All of the sales are relatively different in various respects. Adjustments for the differences are difficult to support with market data. The adjustments made are subjective and based primarily on judgment. Prior to the adjustments the sales ranged from $25,833 to $40,625 per unit. The following is a summary of the various adjustments to the data sample and the basis utilized for each item.
Property Rights Conveyed: All comparable sales listed conveyed fee simple estates in apartment complexes. No adjustments are required.
Terms and Conditions of Sale: Because of the variety of financing options available in the market and their amount of favor to the buyer, sales must be adjusted for financing. No adjustments are needed, as the sellers provided no known financing.
Market Conditions: This adjustment is based on the appreciation or depreciation that a property has encountered between the date of its sale and the date of valuation. Market conditions since the time of sale generally indicate whether demand has increased or decreased for a property and whether time has had any effect on the value. The comparables transferred between February 2018 and November 218. No adjustment was required.
Location: Sales 2, 3, and 4 are located in areas with superior commercial and retail supportive uses and each were given a downward adjustment.
Unit Size: A small average unit size is considered an inferior trait as it would generate less rent than a larger unit. The subject average unit size is 867 square feet. Sales 2, 3 and 4 were adjusted accordingly.
Age/Condition: The subject was built in 1942 and renovated in 1991. The comparables were constructed between 1971 and 1976. The comparables were in good condition at the time of sale. Each comparable was given a slight downward adjustment for superior chronological age.
The improved sales adjustment grid on the following page shows the adjustments made to each comparable sale. The items which were compared are shown in the left column. The adjustments are shown under each sale.
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COMPARABLE SALES ADJUSTMENT GRID
Sale 1 Sale 2 Sale 3 Sale 4
Property Parkview Apartments Dominion Townhomes 496 Schiller Ave Hobart Apartments City, State Kent Akron Akron Akron Adjusted Sale Price $975,000 $630,000 $310,000 $410,000 Number of Units 24 19 12 12 Sale Price per Unit $40,625 $33,158 $25,833 $34,167 Overall Cap Rate 10.00% N/A N/A N/A Adjustments Terms of Sale/Financing $0 0% $0 $0 Adjusted Price/Unit $40,625 $33,158 $25,833 $34,167 Conditions of Sale Arm's-length Arm's-length Arm's-length Arm's-length Adjustment 0.0% 0.0% 0.0% 0.0% Adjusted Price/Unit $40,625 $33,158 $25,833 $34,167 Property Rights Conveyed Fee Simple Fee Simple Fee Simple Fee Simple Adjustment 0.0% 0.0% 0.0% 0.0% Adjusted Price/Unit $40,625 $33,158 $25,833 $34,167 Date of Sale September-18 February-18 November-18 February-18 Market Conditions 0.0% 0.0% 0.0% 0.0% Adjusted Price/Unit $40,625 $33,158 $25,833 $34,167 Physical Characteristics Location 0% -2% -2% -2% Comparable Superior Superior Superior Avg Unit Size 0% -4% 6% 6% 867 945 1,155 481 500 Comparable Comparable Inferior Inferior Age/Condition -2% -2% -2% -2% Year Constructed 1971 1976 1973 1972 Total Adjustment -2.0% -8.0% 2.0% 2.0% Total Adjusted $/Unit $39,813 $30,505 $26,350 $34,850 Rounded $/Unit $39,800 $30,500 $26,400 $34,900
After adjustments, the overall range indicated by all sales is $26,400 to $39,800 (after rounding) per available unit. The mean of the adjusted sales is $32,900 per unit. All of the sales are similarly sized apartment communities located less than 25 miles from the subject. All of the sales are indicative of market value. Based on the preceding analysis, we conclude to a value indication of $33,000 per unit for the subject. The value calculation is presented below:
$33,000 per unit x 12 units = $396,000 Or $400,000 (rounded) Conclusion
It is our opinion that the market value of the fee simple estate, as indicated by the Sales Comparison Approach, in the subject property (including the contributory value of the furniture, fixtures, and equipment), as of June 12, 2019 is:
Four Hundred Thousand Dollars $400,000
9515 Community Road & 9539 Greenmeadow Road Income Capitalization Approach 63
RECONCILIATION
Two of the three traditional approaches to value -- income capitalization approach and sales comparison approach, -- were used to estimate the market value of the subject. The indications of value as of June 12, 2019 are as follows:
Income Capitalization Approach: $410,000
Sales Comparison Approach: $400,000
These two approaches represent alternative ways of viewing market phenomena. A final estimate of value is selected as the dominant tendency or most probable outcome from a range of possible outcomes.
Within the Income Capitalization Approach, the direct capitalization analysis was used to provide an indication of value. Both income and expense estimates were based primarily upon the subject and comparable expense data. Current investment parameters and market conditions were also considered. The direct capitalization approach provides an indication of value by converting a stabilized year net operating income into value utilizing a market-driven capitalization rate. Since properties like the subject are generally purchased for as an investment we have given full weight to this approach.
The Sales Comparison Approach reflects the value of the subject property based upon an analysis of recent sales of similarly improved properties and reflects the actions of buyers and sellers of comparable properties in the market. The comparables were fairly similar to the subject, and this approach was considered meaningful. This approach was used as support for our conclusion of value.
Market Value As Is
Subject to all conditions and explanations contained in this report, such as the hypothetical condition that the subject has a new roof, and based upon our analyses of the subject property and the market, together with our experience and knowledge acquired in appraising similar properties, it is our opinion that the as is market value of the fee simple estate in the subject (including FF&E), as of June 12, 2019, is:
FOUR HUNDRED TEN THOUSAND DOLLARS $410,000
Contributory Value of the Furniture, Fixtures, and Equipment
The final opinion of value stated above includes the estimated contributory value of the furniture, fixtures, and equipment (FF&E). Based on our analysis, the contributory value of the FF&E, as of June 12, 2019 is $16,000 [$2,000 per unit x 13 units) * ((15-5)/15), rounded].
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CERTIFICATION
We certify that, to the best of our 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 are our personal, impartial, and unbiased professional analyses, opinions, and conclusions.
We have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved.
This appraisal report was developed within the scope of the signatories' certification or licensure, as applicable.
Our engagement in this assignment was not contingent upon developing or reporting predetermined results.
Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.
Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.
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 Standards of Professional Appraisal Practice of the Appraisal Institute.
The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
As this report date, Stephen P. Faherty, MAI has completed the continuing education program of the Appraisal Institute.
James A. Piwarun has made a personal inspection of the property that is the subject of this report. Stephen P. Faherty, MAI has not made a personal inspection of the property that is the subject of this report.
. No one provided significant real property appraisal assistance to the persons signing this certification. We have not performed any service (appraisal or other) in regard to the subject property, for any client in the past three years.
Stephen P. Faherty, MAI James A. Piwarun Ohio Certified General Appraiser #000446915 Ohio Certified General Appraiser # 2006003193 Expires: 1/5/2020 Expires: 1/29/2020
9515 Community Road & 9539 Greenmeadow Road Income Capitalization Approach 65
INSURABLE REPLACEMENT COSTS
At the client’s request, an estimate of insurable value is provided herein. USRC has followed traditional appraisal standards to develop a reasonable calculation based upon industry practices and industry accepted publications such as the Marshall Valuation Service (MVS). The methodology employed is a derivation of the cost approach that is primarily used as an academic exercise to help support the market value estimate and therefore is not reliable for Insurable Value estimates. Actual construction costs and related estimates can vary greatly from this estimate.
This analysis should not be relied upon to determine proper insurance coverage that can only be properly estimated by consultants considered experts in cost estimation and insurance underwriting. It is provided to aid the user as part of their overall decision making process and no representations or warranties are made by USRC regarding the accuracy of this estimate and it is strongly recommended that other sources be utilized to develop any estimate of insurable value.
The insurable value estimate presented herein is intended to reflect the value of the destructible portions of the subject, based on the replacement of physical items that are most likely subject to loss from hazards (excluding indestructible items such as basement excavation, foundation, site work, land value, and direct costs). It is recommended that the user of this report retain the services of a qualified, independent insurance adjuster to determine insurable value prior to making a business decision.
The insurable value of the property excludes the following:
The cost of excavations, grading, backfilling of filling (except those costs made necessary due to repair of buildings insured under this policy from a covered cause of loss), reclaiming or restoring land or water Bulkheads, pilings, piers, wharves, docks, dikes or dams Underground tanks, pipes, flues, drains, tunnels whether or not connected to buildings, mines or mining property
9515 Community Road & 9539 Greenmeadow Road Income Capitalization Approach 66
Conclusion
We have based the insurable value on the MVS development costs less 10% for underground exclusions mentioned above. When estimating insurable value, site improvements, lease-up costs, land value, entrepreneurial profit, and depreciation are not included in the base cost. These are the dominant distinctions between an insurable value analysis and the traditional cost approach. The calculation of replacement cost new less insurable exclusions is presented in the following table.
ESTIMATE OF INSURABLE VALUE Basic Replacement Cost $733,767 Less 10% ($73,377) Plus FF&E $24,000 Total $684,390 Insurable Value (Rounded) $680,000
Based on this analysis, our estimate of insurable replacement cost of the subject, as of June 12, 2019, is:
SIX HUNDRED EIGHTY THOUSAND DOLLARS $680,000
9515 Community Road & 9539 Greenmeadow Road ADDENDUM I 05/22/2019 Re: Real Estate Appraisal Engagement= 19-000366-01-01 Dear Steve P.. Faherty: This letter serves as our engagement for the appraisal services described herein. Please include a signed copy of this engagement letter in the addenda of the appraisal report. This letter is intended to summarize our understanding relative to engaging your professional appraisal services and represents Silver Hill Funding authorization to prepare an independent appraisal report for the real property described below:
Borrower Name: H & Y properties, LLC Property Address: 9515 Community Road & 9539 Greenmeadow Road Property City, State, Zip: Windham, OH44288 Silver Hill Funding Loan 50005983 Number:
Silver Hill Funding is the client for this report. You shall perform this report as an independent contractor and not as an employee/partner, principal, or agent of this company. In addition, by signing this agreement you certify that you have no personal interest in the property to be appraised and that you will abide by the terms of this engagement letter. Please include a copy of this engagement letter within the addenda of your submitted appraisal report. We require that you personally inspect the subject property and comparables included in the report; sub-contracting is not permitted. If anyone other than yourself will be providing assistance in the appraisal process, you must employ him or her, and we must receive their qualifications for approval, prior to accepting this assignment. Additionally, it is required that you include a Market Value opinion and a Disposition Value Opinion for the subject property in your appraisal report. The Disposition Value Opinion is to be developed in accordance with the definitions set forth in the Addenda of this letter. The agreed fee for the appraisal services rendered is $2,300.00. You agree to deliver a signed electronic (PDF or similar) copy of the report (with maps and color photos) on or before June 06, 2019. All appraisal reports must be completed by their due date. A fee reduction of five percent (5%) of the fee per day may be assessed against any appraisal delivered past the due date. The appraiser must notify SHF, in writing, at least one week before the due date of any reasonable delays. Let it be known that future enlistment of your services will be influenced by your performance in meeting the due date as well as by the quality of your appraisal work. The required scope and format of your assignment shall be as follows:
Intended Use: Use - Asset Valuation The intended use of this appraisal is for periodic valuation of the asset per policy
Intended User: User-Silver Hill Funding The intended user of this report is Silver Hill Funding and or affiliates.
Approaches to Value: Approach - Sales Comparison Sales Comparison Approach
Approach - Income Income Approach
Inspection Requirements: Inspect - Full Subject An interior and exterior inspection of the subject property in sufficient detail to
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v.1.1077.0 determine marketability
Invoice: Please upload invoice with appraisal report.
Report Type: Summary
Report Format: Narrative
Premise Qualifier Interest Comment Market Value As-Is Fee Simple Disposition Value As-Is Fee Simple Insurable Value As-Is Fee Simple
Comments: If your schedule does not permit the purposed delivery date, please provide us with a turn time for completion. If you are unable to bid on the job, please advise by entering $0 along with a comment. If the subject property is leased out to tenant(s) with lease terms longer than one year, please provide a Leased Fee value. If the subject property is vacant or owner occupied, please provide a Fee Simple value. If, after being awarded the assignment, you discover a discrepancy between the collateral description furnished to you and what the collateral appears to be on inspection or from other information received, please contact this office immediately. We are striving to have the entirety of the collateral valued as it exists today. When completed, please upload the report, invoice, and signed W-9 to www.rimscentral.com. If you have previously submitted a W-9, you will not be required to do so again. ****The invoice will not be submitted without a copy of your most recent signed W-9 form.**** Required Contents:
1. It is required that your report contains a Table of Contents.
2. Any references to source information pertaining to FIRREA contained within the appraisal report must be from the Federal Deposit Insurance Corporation (FDIC) 12 DFR Part 323.
3. The appraisal and the appraisal report must conform to the most recent versions of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and the Uniform Standards of Professional Appraisal Practice (USPAP).
4. It is required that the appraisal report contain a signed Certification, by each appraiser signing the report, that is consistent with USPAP SR 2-3.
5. For all sale and rental comparables, adjustments must be included; and wherever possible, quantitative adjustments should be made. Rationale for adjustments must be discussed.
6. Include a legal description of the real estate being appraised in addition to the property identification required by USPAP.
7. Include the statement that the purpose of the appraisal assignment is to estimate market value of the subject property as of the effective date of the appraisal. Market value "As Is" must be estimated in addition to market value "As If Stabilized" or market value "Upon Completion of Construction or Rehabilitation" when appropriate. The intended use of your report will be for collateral lending decisions.
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v.1.1077.0 8. Disclosure of Competency: This appraisal report shall make an affirmative statement that the appraiser(s) is/are competent to complete this report in accordance with the Competency Rule in USPAP. In the absence of an affirmative statement, the appraiser must disclose any lack of knowledge and/or experience for this assignment and any necessary steps taken to comply with the competency provision in the USPAP.
9. Define Value: The type of value estimate required in this report is Market Value. The appraiser shall use the definition of market value as it is cited in Title XI of the Financial Institution Reform, Recovery and Enforcement Act of 1989, and regulations promulgated by relevant regulatory agencies pursuant to the act (collectively, "FIRREA"), and (2) the definition of "Market Value" contained in FIRREA be stated in the appraisal report. No alternative definitions are acceptable to this institution. Include the following definition of Market Value in the appraisal report.
The most probable price that 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 in 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.
10. The appraiser must analyze and report in reasonable detail any current or prior sales of the property being appraised that occurred within the three years of the date of appraisal. If the subject property is currently under purchase contract, listed for sale, or has been transferred during the above listed periods, and the purchase price varies significantly (>10%) from the appraised value conclusions, explanation is required to reconcile the price paid with the current value estimate.
11. Analyze and report on current market conditions and trends that will affect projected income of the absorption period, to the extent they affect the value of the subject property. Discussion must include general supply/demand levels, including commentary on vacancies, rent levels and concessions in the property type appraised. Specific to the subject property's submarket, comment on abnormally low (or high) occupancy levels, conditions of neighboring properties, and overall rate of the sub-market (e.g. newly developing, mature, declining, transitioning, etc.)
12. The appraiser must, in the course of the property inspection: 1. Comment on the possible presence of environmental hazards, such as potential lead based paint hazards (chipping and/or peeling paint), underground fuel storage tanks, fuel pumps, surface discoloration, or other telltale evidence that would give rise to close examination by qualified personnel; 2. Physically inspect a representative sample of both occupied and unoccupied units within multi-unit buildings and a sufficiently representative percentage of other property types.
13. Include the financing terms for all sales presented in the analysis with cash equivalency adjustments where necessary.
14. Rental data presented must discuss and appropriately adjust for rent concessions, tenant improvement allowances, lease buyout, load factors, lease commissions, replacement reserves, expense pass-through, Project #: 19-000366-01-01 Page 3 of 7
v.1.1077.0 and common area maintenance (CAM), etc. leading to an indication of comparable effective market rent for the subject. Subsidized apartment properties should be market to market rent levels. Please include name and telephone number of person(s) providing information and/or verification of rental data.
15. For income producing properties, the report should include a current rent roll, historical revenues, occupancy rates and expenses. If your projected rental income, occupancy rate, or expenses vary significantly from the reported historical data, you must reconcile any discrepancy. Furthermore, if the property is operating at a level below its anticipated market share, please discuss the cause, e.g. poor management, deferred maintenance, poor locations, etc. Please state if historical revenues, occupancies, or expenses were not provided.
16. Deductions and Discounts, "As Is" Value: Analyze and report appropriate deductions and discounts for any proposed construction or any completed properties that are partially leased or leased at other than the market rents as of the date of the appraisal, or any tract developments with unsold units. Such deductions are intended to account for all holding costs, leasing commissions, tenant improvement costs and/or repairs necessary to bring the property to the point of stabilized occupancy. If a stabilized value is estimated, include the anticipated time period required for the property to achieve stabilization. Again, all appraisals must contain an "as is" market value estimate. Any reference to deferred maintenance must be disclosed in the improvement description of the appraisal. The cost to cure must be deducted from the stabilized value to present in "as is" value.
17. Marketing Period: Analyze and report a reasonable marketing period for the subject property for all values given including the disclosure of the assumptions used. The "As Is" value opinion would be based on the appraiser's estimated marketing time. The exposure periods for the improved sales must be noted, where possible, and discussed as a means of support for the projected marketing period of the subject. If exposure periods are unavailable for the comparable sales, the appraiser must provide a thorough discussion supporting how the marketing period was derived. For instance, conversations with real estate professionals knowledgeable of the subject's marketplace may be documented.
18. Verification as to whether the improvements conform to zoning and building requirements or whether they are a legal (or illegal) non-conforming use is the appraiser's responsibility and must be stated in the report.
19. Each appraiser signing the appraisal report must list their appropriate state-issued appraiser license or certification number under their signature as it appears within the appraisal report.
20. Your report must include color photographs of all improved sale and rental comparables as well as photographs of the interior of the subject property, unless interior access is not provided.
21. An insurable value must be calculated based on the replacement cost new of the building improvements and reported within the Summary of Important Facts.
22. The income approach, if developed, is to include a minimum of three comparable rental properties. The sales comparison approach, if developed, is to include a minimum of three comparables sale properties. A color photograph of each comparable property used in the appraisal report must be included or an explanation as to its exclusion must be cited within the appraisal report. Please provide copies of comparable property data sources (COMPS publication, listing sheets, etc.)
23. In the valuation of a property as a going concern, we require the appraiser to allocate the estimate of value between the various components that comprise the value, i.e. real estate, furniture, fixtures & equipment (FF&E) and business and/or goodwill. As far as possible, please provide an estimate of the separate value components and/or provide sufficient explanatory comments delineating the actions of market participants.
24. If the subject property is a motel or hotel, we require a Smith Travel Research, STAR or Trend Report to be included in the addenda of the appraisal report. Silver Hill Funding is the client for this appraisal assignment. Silver Hill Funding is also the intended user of the appraisal report. All documents furnished to the appraiser by the client are to be considered confidential information, Project #: 19-000366-01-01 Page 4 of 7
v.1.1077.0 in accordance with the disclosure requirements in the Confidentiality Section of the Ethics Rule set forth in USPAP. Except as provided, neither the appraiser(s) nor the appraisal firm may divulge any operating information pertaining to the property appraisal or the analysis, opinions or conclusions developed in the appraisal report. Nor may they give a copy of the report to anyone other than the client or client's designee as specified in writing. However, this condition does not apply to any request made by professional organizations and/or presiding state appraiser board for the purpose of confidential professional standards or ethics enforcement. Also, this condition does not apply to any order by a court of law or any other body with power of subpoena. The appraiser may not discuss the appraisal or the results thereof with anyone without the prior specific approval from Silver Hill Funding. You may arrange for an interior inspection as well as obtaining all necessary property information (leases, rent rolls, income & expense statements etc.) by contacting the following: Property Contact/Phone #: Henrietta G Regev/650-272-1634 Alternate Contact/Phone #: / For valuation issues, please contact Andrew Bowers 305.646.6480
We request you contact the owner/agent to arrange for an inspection as soon as reasonably possible after receiving this engagement. Please certify your report to: Andrew Bowers Vice President Silver Hill Funding 4425 Ponce de Leon Boulevard, 4th Floor Coral Gables, FL 33146 For Silver Hill Funding,
Andrew Bowers Real Estate Manager 305.646.6480
Project #: 19-000366-01-01 Page 5 of 7
v.1.1077.0 Please sign and email to [email protected] I agree to the terms of this engagement letter.
______Appraiser's Signature Date
______Print Name
______Print Title
______License or Certification # Date
______Tax Identification #
Project #: 19-000366-01-01 Page 6 of 7
v.1.1077.0 Addenda
This appraisal report shall include a Disposition Valueestimate based on the definition referenced in the Appraisal Institute's, "The Dictionary of Real Estate Appraisal, Fifth Edition," (2010, pp. 59-60). We request the marketing period to be Six (6) Months. The most probable price that a specific interest in real property is likely to bring under all of the following conditions:
1. Consummation of a sale will occur within a limited future marketing period specified by the client;
2. Actual market conditions are those currently obtaining for the property interest appraised;
3. The buyer and seller is each acting prudently and knowledgeably;
4. The Seller is under compulsion to sell;
5. The buyer is typically motivated;
6. Both parties are acting in what they consider their best interests;
7. An adequate marketing effort will be made in the limited time allowed for the completion of a sale;
8. Payment will be made in cash in U.S. dollars or in terms of financial arrangements comparable thereto;
9. The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Special Guidance & Assumptions
When appraising vacant land, please include in your appraisal, reference to conversation(s) with local, active real estate brokers about land sale activity, supply and demand, and current levels or buyer's interest. Analysis of property condition is required with appropriate deductions for deferred maintenance, adjusted for unearned profit, as a cost to cure discount. Cap rates and income multipliers should be supported by comparable sales data for similar class properties when the Income Approach is the primary approach to value. Reliance upon hypothetical financial formulized cap rates or multipliers fails to link rates and ratios to the actions of buyers and sellers.
Project #: 19-000366-01-01 Page 7 of 7
v.1.1077.0
RIMS Customer: Bayview Loan Services Project #: : 19-000366-01-1
Award Information Date Awarded: 5/22/2019 Cancelled: No Directly Awarded: No Fee: $2,300.00 Delivery Date: 6/6/2019 Property Contact(s): Henrietta G Regev, 650-272-1634 Award Comments: If, after being awarded the assignment, you discover a discrepancy between the collateral description furnished to you and what the collateral appears to be on inspection or from other information received, please contact this of ce. There are cases where lots have been sold, model homes constructed, additions made, and space leased since the last site inspection. We are striving to have the entirety of the collateral valued as it exists today.
When completed, please upoad the report, invoice, and signed W-9 to www.rimscentral.com. If you have previously submitted a W- 9, you will not be required to do so again. ****The invoice will not be submitted without a copy of your most recent signed W-9 form.****
Job Attachments: File Description Date Uploaded Con rmation Number 5/21/2019 6:22:59 Rent Roll.pdf Rent Roll PM EDT 5/21/2019 6:23:18 YTD Pro t and Loss Statements.pdf YTD Pro t and Loss Statements PM EDT
Bid Information Proposed Fee: $2,300.00 Proposed Delivery Date: 6/5/2019 Signatory Information: Stephen P. Faherty, MAI Of ce Location: Columbus, OH Prior Services: Have you performed or provided any services regarding the subject property within the prior three years, as an appraiser or in any other capacity? If Yes, please provide details in the Comments eld. No Bid Comments: We have extensive experience in northeast Ohio markets for this property type.
RFP Information Purpose Of Request: Re nance Response Deadline: 5/22/2019 Bank Contact: Andrew Bowers Desired Delivery Date: 6/05/2019 Contact Phone: 305-646-6480
ADDRESSEES: First name Last name Company Address Andrew Bowers Silver Hill Funding 4425 Ponce De Leon Blvd Coral Gables, FL 33146 Total Addressees: 1
DISTRIBUTION: Number Of Copies First Name Last Name Company Address 1 Andrew Bowers Coral Gables, FL 33146 Total # Hard Copies: 1
SCOPE OF SERVICES: Intended Use Use - Asset Valuation The intended use of this appraisal is for periodic valuation of the asset per policy
Intended User User-Silver Hill Funding The intended user of this report is Silver Hill Funding and or af liates.
Approaches to Value • Approach - Sales Comparison Sales Comparison Approach
• Approach - Income Income Approach
Inspection Inspect - Full Subject Requirements An interior and exterior inspection of the subject property in suf cient detail to determine marketability
Additional Work Scope
Invoice Please upload invoice with appraisal report.
Report Type: Summary Report Format: Narrative
VALUATION SCENARIOS: Valuation Premise Premise Quali er Property Interest Comment Market Value As-Is Fee Simple
Disposition Value As-Is Fee Simple
Insurable Value As-Is Fee Simple
RFP Comments: If your schedule does not permit the purposed delivery date, please provide us with a turntime. If you are not able to bid on the job, please advise by entering $0 along with a comment. If the subject property is leased out to tenant(s) with lease terms longer than one year, please provide a leased fee value. If the subject property is vacant or owner occupied, please provide a fee simple value.
Property Information Project Name: 50005983 Property Name: 50005983 Property Description / Construction Type: 12 unit multifamily 4784sf and 5252sf Property Type: GE1 - Multi-Family - Other - All other multi-family type properties. Address: 9515 Community Road & 9539 Greenmeadow Road, Windham, OH 44288 County: Portage Improvement Size (Primary): 12 Units Parcel Numbers: 41-057-10-00-148,41-057-10-00-149 Year Built: 1942 Property Status: Existing Property Tenancy: NA
Copyright © 2019 ExactBid, LLC. All rights reserved.
ADDENDUM II # Bedrooms Rent Lease End Section 8
9515 Community A Pat Schaeffer 1 $320 MTM NO B Bob & Jeannie Myers 3 $625 MTM YES C Donna Wortman 2 $425 MTM YES D Libby Zeigler 2 $540 3/31/2018 YES E Shannon Post 3 $640 2/28/2019 YES F Jennifer Folger Browbn/K 1 $445 MTM NO 9539 Greenmeadow A Mike Homacker 2 $525 MTM YES B Nikki Sullivan 3 $625 MTM YES C Jennifer Robinson 2 $550 3/31/2020 YES D Charles Glaze 2 $550 4/30/2020 YES E Deashia Robinson 3 $650 3/31/2020 YES F Lisa Holland 2 $545 MTM NO
TOTAL $6,440 $0.0 ADDENDUM III STATEOFOHIO DTVISIONOFRDALESTATE AND PROFESSIONAL LICENSING
AN APPRAISER LICENSFJCERTIFICATE has been issued under ORC Chapter 4763 to: NAME:Stephen P Faherty LIC/CERT NUMBER: 00044691 5 Llc LEVEL: Cert. General R. E. Appraiser - Reciprocity CURRENT ISSUE DATE: 0111812019 Stephen P Faherty EXPIRATION DATE: 01 /05/2020 2154E Main St Ste 302 USPAP DU E D A'tE : 01 10512020 Columbus, OH 43209-2317 STATEOFOHIO DTVISIONOFREALESTATE AND PROFESSIONAL LICENSING AN APPRAISER LICENSgCERÏFICATE has been issued under ORC Chapter 4763 to:
NAME: James Andrew Piwarun LIciCERT NUMBER: 20060031 93 Lrc LEVEL: Certifìed General Real Estate Appraiser CURRENT |SSUE DATE: 0112412019 James Andrew Piwarun EXPIRATloN DATE : 01 12912020 US Realty Consultants USPAP DUE DATE: Ail2912021 2154 E Main St Ste 302 Columbus, OH 43209-2317 ADDENDUM IV
US Realty Consultants, Inc. Real Estate Appraisal, Hospitality Consulting, and Litigation Support
CORPORATE
QUALIFICATION PACKAGE
CORPORATE HEADQUARTERS 2154 EAST MAIN STREET, SUITE 302 COLUMBUS, OHIO 43209 614-221-9494 WWW.USRC.COM
US Realty Consultants, Inc. Real Estate Appraisal, Hospitality Consulting, and Litigation Support
National Headquarters 2154 E. Main St, Suite 302, Columbus, OH 43209
David A. Feeley, MAI Peter P. Hathaway, MAI Stephen P. Faherty, MAI Principal & Managing Director Principal & Managing Director Principal & Managing Director [email protected] [email protected] [email protected] 614-695-4435 614-695-4438 513-231-4350
Jeffrey H. Walker, MAI, CRE Karen Blosser, MAI Chief Executive Officer Director of Appraisal Services [email protected] [email protected] 614-695-4434 614-695-4442
Regional Offices
West Palm Beach, FL Chicago, IL Dallas, TX
C. Greg McFatter, MAI Michael J. Maslanka, MAI Tracey Burke Director Director Senior Associate [email protected] [email protected] [email protected] 561-741-1182 708-352-0694 630-561-2419
Washington, DC Cincinnati, OH South Bend, IN
Stuart I. Smith, MAI, MRICS Stephen P. Faherty, MAI Noah McCloskey USRC Affiliate Principal & Managing Director Senior Associate [email protected] [email protected] [email protected] 240-614-7713 513-231-4350 574-514-4669
US Realty Consultants, Inc. About Us
Introduction
U S REALTY CONSULTANTS, INC. (USRC), founded in 1983, is a Columbus-based firm that specializes in commercial real estate appraisal and market analysis. With regional and satellite offices located in West Palm Beach, Chicago, Cincinnati, Dallas, Washington D.C. (affiliate), and South Bend, USRC has grown to be one of the premier real estate appraisal and consulting practices in the United States. America is our market. We continue to grow and our professionals annually consult on hundreds of assignments involving billions of dollars of real estate. As we have evolved over the last thirty years, we have become industry leaders in several specific areas for the real estate industry:
Hospitality & Resort Industry Services, Water Park Services, Real Estate Appraisal Services, Self-Storage Industry Services, and Golf and Country Club Services.
Real Estate Appraisal Services
USRC’s reputation in appraisal services is long and respected: our associates were original members of a movement that pioneered the development of a national appraisal practice. As industry leaders, we specialize in the valuation of real estate portfolios, disbursed both geographically and by property type. Our diverse valuation expertise in commercial real estate has emphasized office, industrial, retail, self-storage, mixed-use, hotel, resort, golf course, other special-use, and multifamily projects. Our multi-family projects have included market studies and appraisal applications for submission through HUD Multi-family Accelerated Processing (MAP). These projects included market-rate housing, Section 8 housing, and student housing.
Hospitality & Resort Industry Services
Our Hospitality team is a strong and diverse group whose backgrounds as market analysts, appraisers, and operational specialists have established USRC’s hospitality & resort consulting practice as second-to-none. Our professionally trained hotel and resort specialists have over one hundred combined years of industry experience and with our constant involvement in consulting and appraising hotels, motels, restaurants, resorts, water parks, and convention centers we are entrenched in this dynamic and evolving industry. Our professionals combine in-depth industry experience, strong analytical and communication skills, and the latest market data and technology to yield effective results for each specific engagement.
Golf and Country Club Services
USRC has developed a practice devoted to golf-related and recreational facilities, including valuation and consultation for private country clubs, daily-fee golf courses, surrounding residential development, and resort destinations.
Self-Storage Appraisal Services
Our self-storage appraisal team has appraised over one thousand self-storage facilities since 2000. From our offices in Columbus, Chicago and Florida, as well as our satellite offices in Cincinnati, Washington, D.C., and South Bend, we have handled a multitude of national self-storage projects and portfolios. We have appraised nationally dispersed portfolio projects as well as locally owned single-entity facilities. All of the appraisers on our self-storage team have extensive experience in this property type.
CORPORATE HEADQUARTERS 2154 EAST MAIN STREET, SUITE 302 COLUMBUS, OHIO 43209 614-221-9494 WWW.USRC.COM
US Realty Consultants, Inc. Properties/Locations
The following charts display the approximate breakdown of property types we have appraised, as well as property locations, over the past five years.
Approximate Number of Projects by State
Alabama 26 to 50 Kentucky over 100 North Dakota 11 to 25 Alaska 1 to 10 Louisiana 26 to 50 Ohio over 100 Arizona over 100 Maine 1 to 10 Oklahoma 26 to 50 Arkansas 26 to 50 Maryland over 100 Oregon 51 to 100 California over 100 Massachusetts 11 to 25 Pennsylvania over 100 Colorado over 100 Michigan over 100 Rhode Island 1 to 10 Connecticut 11 to 25 Minnesota over 100 South Carolina over 100 Delaware 1 to 10 Mississippi 51 to 100 South Dakota 1 to 10 DC over 100 Missouri over 100 Tennessee 51 to 100 Florida over 100 Montana 1 to 10 Texas over 100 Georgia over 100 Nebraska 11 to 25 Utah 26 to 50 Hawaii 1 to 10 Nevada 11 to 25 Virginia over 100 Idaho 1 to 10 New Hampshire 1 to 10 Washington 51 to 100 Illinois over 100 New Jersey 51 to 100 West Virginia 51 to 100 Indiana over 100 New Mexico 11 to 25 Wisconsin 51 to 100 Iowa 11 to 25 New York over 100 Wyoming 1 to 10 Kansas 26 to 50 North Carolina over 100
US Realty Consultants, Inc. Sample List of Clients
Lenders
Bank of America BB&T Citizens National Bank Crédit Agricole Fifth Third Bank Goldman Sachs Heartland Bank Huntington National Bank JP Morgan Chase Bank Key Bank PNC Bank Regions Bank Suntrust Bank TD Bank Wells Fargo Wesbanco
Institutional Investors
Blackrock CalStrs Clarion Barings Real Estate Dividend Capital Ohio Teachers Retirement System Illinois Teachers Retirement System JPMorgan PNC Realty Advisors PGIM UBS Realty Investors
Special Servicers
C-III Asset Management LNR Partners
Attorneys
Numerous attorneys for estate planning, tax appeal, and bankruptcy purposes
US Realty Consultants, Inc. Client References
REFERENCES AVAILABLE UPON REQUEST
US Realty Consultants, Inc. Hospitality Industry Services
Among the various segments of the commercial real estate industry, the hotel & resort segment is widely recognized as potentially the most dynamic. In this ever-changing environment, an increasing number of lenders, operators, and individual or multiple property owners require additional support from independent, third-party specialists. USRC’s Hospitality Specialists Group is exceptionally well suited to provide a myriad of services for a wide variety of hospitality uses including hotels, limited-service and select service properties, resorts, casinos, waterparks, spas, residential hotels, interval ownership and residence clubs, convention centers, and mixed- use projects.
While we offer a broad spectrum of services to the hospitality & resort industries, each assignment contains in-depth, detailed analysis, specifically tailored to each client’s needs. Our Hospitality & Resort Industry Services include the following:
Market Studies: Market Analysis, Statistical Demand Analysis, Market Positioning Analysis, and Market Feasibility Analysis.
Impact Studies: Utilize specialized spreadsheet program determining base and incremental impact.
Valuation Studies: Investment Analysis, Portfolio and Asset Analysis, and Tax Appeal Appraisals.
Acquisition Consulting: Purchase price analysis, Proforma Development.
Project Planning: Site Analysis, Concept Development Planning, and Facility Planning and Evaluation.
Legal Support: Litigation Support, and Expert Testimony.
Having completed over 3,000 hotel & resort-related engagements since 1992, USRC has tracked both the growth and decline of the U.S. hospitality industry. We have knowledge of all product segment types, from limited-service to full-service, from economy to luxury destination resort, from commercial to convention, from extended-stay to all-suite. We have been active in specialized property types, including waterparks, spas, interval ownership/timeshares, conference centers, casinos, and destination condominiums. While our scope of services has taken us across the country, we possess strong local market knowledge in most markets nationwide due to the depth of our experience. We provide the USRC Hotel Investor Survey, one of the most widely quoted sources of Hotel Investor parameters, twice annually.
CORPORATE HEADQUARTERS 2154 EAST MAIN STREET, SUITE 302 COLUMBUS, OHIO 43209 614-221-9494 WWW.USRC.COM
US Realty Consultants, Inc. Self-Storage Services
USRC’s self-storage experience includes high-rise, urban facilities in densely populated markets as well as single-story facilities in sparsely populated suburban and rural markets. We have extensive experience in all of the major markets in the United States, as well as larger markets in Canada. We have appraised proposed construction, new construction, and high rise buildings that have been converted to self-storage, as well as existing, older facilities. Self- storage often involves the valuation of additional income generators.
Our list of projects includes a mix of both single-entity facilities across the country as well as the following extensive portfolio work.
Our self-storage appraisal team has appraised over 800 self-storage facilities since 2000, with an average of 150 facilities per year since the beginning of 2003. From our offices in Columbus, Chicago and Florida, as well as our satellite offices in Cincinnati and South Bend, we have been able to handle a multitude of national self-storage projects. We have appraised nationally dispersed portfolio projects as well as locally owned single-entity facilities. All of the appraisers on our self-storage team have extensive experience in this property type.
CORPORATE HEADQUARTERS 2154 EAST MAIN STREET, SUITE 302 COLUMBUS, OHIO 43209 614-221-9494 WWW.USRC.COM
US Realty Consultants, Inc. Golf Industry Services
USRC has developed a practice devoted to golf-related and recreational facilities. The services offered under this practice include valuation and consultation for private country clubs, daily- fee golf courses, surrounding residential developments, and resort destinations.
USRC has the expertise to provide consultation to clubs of all types, with respect to supply and demand, operational reviews, pricing policies, and membership structure.
Valuation Studies: Narrative Appraisal of Market Value, Investment Value, or Value-in -use, Portfolio and Asset Analysis, and Tax Appeal Appraisals.
Lender Due Diligence: Due diligence to help lenders determine if a loan commitment is advisable. This includes evaluations of a facility and its operations, and the best- case/worst-case scenarios the lender could experience if committing to a particular loan.
Market Studies: Market Analysis, Impact Analysis, Statistical Demand Analysis, Market Positioning Analysis, Strategic Business Plans, and Market Feasibility Analyses.
Purchase Consultation/Due Diligence: Analysis of a property vis-a-vis the existing market and the potential for realizing an acceptable return of, and on, invested capital.
Membership Surveys: Surveying membership perceptions and opinions about policies and pricing, effectiveness of club management, etc.
Operational Studies: Operational Review, Food & Beverage Review, Quality Assurance, Strategic Planning, Budgeting Review, Management Evaluation and Interviewing, Staffing and Compensation Review, and Income/Expense Analysis.
Revenue Enhancement: Complete Marketing Management, Marketing Plan Development, Advertising-Promotion-Public Relations Support, Yield Management Analysis, and Sales and Marketing Review.
Project Planning: Site Analysis, Concept Development Planning, and Facility Planning and Evaluation.
Legal Support: Litigation Support and Expert Testimony.
CORPORATE HEADQUARTERS 2154 EAST MAIN STREET, SUITE 302 COLUMBUS, OHIO 43209 614-221-9494 WWW.USRC.COM
Stephen P. Faherty, MAI Principal and Managing Director
Elected to the Appraisal Institute, MAI, 2007, Mr. Faherty has been involved in the valuation of commercial real estate since 1994. Mr. Faherty is a graduate of the University of Cincinnati, Bachelor of Science (Major: Economics), 1992. Mr. Faherty joined USRC in 2000 as an associate of the firm and is now a Director of Appraisal Services. Mr. Faherty has been involved in Appraisal and Portfolio Analysis of Investment-grade Real Estate such as Office Buildings, Apartments, Office/Warehouse, Retail Centers, Student Housing, Hotels, and Self-Storage.
Education
Bachelor of Science (Major: Economics), University of Cincinnati, 1992.
Completed the following Appraisal Institute Courses/Exams:
Appraisal Procedures Basic Income Capitalization Advanced Income Capitalization Highest and Best Use and Market Analysis Advanced Sales Comparison and Cost Approach Advanced Applications All USPAP Courses and Update Courses Appraisal Institute’s Comprehensive Appraisal Examination Appraisal Institute’s Continuing Education Classes
Attended the following Appraisal Institute Seminars:
Various Continuing Education Classes through the Appraisal Institute Appraisal Search Strategies and the Internet General Appraisal Review Evaluation of Commercial Construction General Demonstration Appraisal Report Writing Office Building Valuation: A Contemporary Perspective Various Annual Economic Seminars – Columbus, OH Self-Storage Economics and Appraisal REITs and the role of the appraiser Economic Seminar Various online seminars
Professional Affiliations
Member, Appraisal Institute
State Certification
Mr. Faherty holds certification as a General Real Estate Appraiser in Ohio, Arizona, California, Florida, Georgia, Kentucky, Maryland, Massachusetts, Michigan, New Jersey, New York, Pennsylvania, Utah, Virginia, Washington, and Washington D.C.
Phone 513-231-4350
James A. Piwarun Senior Associate
Since joining the firm in 2000, James Piwarun has provided research, analysis, valuation, and strategic advice on all commercial property types, including extensive work within the self- storage industry. Mr. Piwarun has completed more than 400 self-storage appraisal assignments across the United States, including Alaska and Hawaii. Prior to joining USRC, Mr. Piwarun held positions with Hyatt Hotels and as an Operations/Financial Analyst with several national Hotel Management and Hotel Development Companies. Over the past 12 years, Mr. Piwarun has performed over 150 hotel appraisals including limited- and full-service hotels and major convention hotels. In addition to self-storage properties and hotels, Mr. Piwarun is active in the valuation of other income-producing properties, including office, retail, multifamily and mobile home parks.
Education
Bachelor of Business Administration (Major: Finance), University of Wisconsin Whitewater, 1986
Appraisal Institute Courses
Appraisal Procedures Appraisal Principals Basic Income Capitalization Highest and Best Use and Market Analysis All USPAP Courses and Update Courses
Other courses include Investments Analysis for Appraisers and Appraising Unique Properties
Various Seminars and Programs sponsored by The Appraisal Institute
Various Hilton Corporation Certifications
State Certification
Mr. Piwarun holds certification as a General Real Estate Appraiser in Ohio and Pennsylvania.
[email protected] Phone 513-236-3869