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HomeMy WebLinkAboutEDA AGN 08-22-06 CITY OF COLUMBIA HEIGHTS 590 40th Avenue N.E., Columbia Heights, MN 55421-3878 (763) 706-3600 TDD (763) 706-3692 Visit Our Website at: www.ci.columbia-heights.f1lll.llS AGENDA COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY August 22, 2006 7:00 p.m., City Hall, Conference Room 1 1. Call to Order/Roll Call Don Murzyn Jr., President Patricia Jindra, Vice President Bruce Kelzenberg, SecretaryfTreasurer Tammera Diehm Gary L. Peterson Bruce Nawrocki Bobby Williams 2. Pledge of Allegiance CONSENT AGENDA 3. Approve Minutes of July, 2006 4. Approve financial report and payment of bills for July 2006, Res. 2006-06. Motion: Move to Approve the Consent Agenda Items #3 and #4, as listed. BUSINESS ITEMS 5. Redevelopment of 2101 37th Avenue, AKA The Apache Theatre Motion: Move to authorize the reallocation of $35,000 of CDBG funds, approve the redevelopment concept, and authorize staff to prepare a redevelopment agreement between the Economic Development Authority (EDA) and Pratt Ordway Properties, Inc. to be approved at the September 26,2006 meeting. 6. Authorization to Negotiate Acquisition of Mady's Retail Property by the EDA Motion: Move to authorize staff to negotiate with the Mady-Foss Partnership. 7. Other Business The next regular EDA meeting will be Tuesday, September 26, 2006 at City Hall. THE CITY OF COLUMBIA HEIGHTS DOES NOT DISCRIMINATE ON THE BASIS OF DISABILITY IN EMPLOYMENT OR THE PROVISION OF SERVICES EQUAL OPPORTUNITY EMPLOYER ECONOMIC DEVELOPMENT AUTHORITY (EDA) REGULAR MEETING MINUTES July 25, 2006 CALL TO ORDER/ROLL CALL President, Murzyn, Jr. called the meeting to order at 7:00 p.m. Present: Don Murzyn Jr., Patricia Jindra, Bobby Williams and Bruce Nawrocki, Tammera Diehm, Gary L. Peterson and Bruce Kelzenberg PLEDGE OF ALLEGIANCE CONSENT AGENDA Minutes of May 23rd and July 10th, 2006 meetings Financial Report and Payment of Bills for May and June 2006, Resolution 2006-06. Nawrocki asked on the May financial reporl, what is the EDAM charge for. Streetar stated that is the Economic Development Authority Conference that Schumacher and he attended. MOTION by Williams, second by Jindra, to approve the consent agenda Items #3 and #4 as listed. All ayes. Motion Carried. BUSINESS ITEMS Lease AQreement between EDA and Michelle BinQham Schumacher stated this is a consideration of a lease between the EDA and Michelle Bingham for a beauty salon at the old Beecroft building on 3710 Central A venue. The building was purchased in 2003 for redevelopment along with two homes just south of it. Bingham is a Columbia Heights resident and a hair salon owner in the City since 1980. She would like to lease one of the units in the Beecroft building from the City as her landlord is requested her to move out by July 1ih due to expanding his dental offices at 425 40tli Avenue. Bingham would have to install a shampoo sink, remove carpet, remove a portion of the suspended ceiling, paint and clean the unit prior to occupancy at her own expense. This building is in a redevelopment area of the City, therefore, the lease is set up on a month-to-month basis, commencing on July 26th, rent at $625/month, she would pay for gas, electric and all City utilities, and wouldn't be allowed to make any additions or improvements without a building permit to the unit. The lease agreement has been reviewed and approved by attorney Mike Norlon, with Kennedy & Graven and Bingham has reviewed and agreed to the terms of the lease. Staff recommends approval of the lease agreement. Nawrocki asked how many square feet is the unit and how did they come up with the cost. Schumacher stated it is about 900 square feet and that on our recent appraisal of properly along Central Avenue was $8.30/sq ft. Nawrocki asked how much does the other tenant pay. Schumacher stated staff has discussed that lease and would be bringing it to the EDA, so we have two similar leases for that building. Streetar stated Economic Development Authority Meeting Minutes July 25, 2006 Page 2 of3 the current rent is about $935/month without utilities, and that the tenant was in the building at the time we bought it. What we are presenting to Bingham is that we collect the rent and she pay the utilities because there is more of an incentive to watch the utility use rather than base it on a flat fee. Nawrocki stated Mike Erlandson, who is running for office called him looking for a place for his campaign office, he then talked to Streetar, who said it would be approx. $1,OOO/month. Streetar stated when he quoted him the $1,OOO/month it was with rent and all the utilities included. Jindra asked, if there wasn't some asbestos issues with the properly. Schumacher stated there wasn't any in that building. Williams asked why we pay for insurance on the building, doesn't the renter pay insurance. Schumacher stated the renter pays a different type of insurance, which is for their properly only, and we pay for the building and grounds. Motion by Peterson, second by Williams, to approve the lease agreement between EDA and Michelle Bingham. All ayes. Motion Carried. ADMINISTRATIVE REPORTS Activity Center Parlenheimer stated the newsletter has been delivered to all the Columbia Heights residents, all information is on the website, the first open house will be tomorrow night, July 26 at tpm at Murzyn Hall. Nawrocki stated we have always had an activity center at Murzyn hall for residents since 1938, which is a viable activity center with all kinds of programs for kids, and seniors. The one thing that we don't have there is a basketball courl. Sarna's Parlenheimer stated the properly has starled to be developed, with excavating, soil corrections and preparations for demolition. Construction should starl soon. 37th & Stinson Parlenheimer stated over the next couple of weeks the developer, is preparing a redevelopment proposal with accompanying financial information and will be brought back to the EDA at a future meeting. 39th & Central Parlenheimer stated staff would be meeting with Bruggemann next Monday to review his development proposal. Information should be available at the next EDA meeting. Williams asked why staff is going to meet with Bruggemann. Parlenheimer stated they are developing plans. In the meeting a few weeks ago with staff, they asked questions on City codes and we provided them some information on utilities. The next meeting, Economic Development Anthority Meeting Minutes July 25, 2006 Page 3 of3 she believed was to talk about the potential plans. Grand Central Lofts Partenheimer stated on July 10th the EDA and City Council directed staff to apply for a Livable Communities Grant (LCDA) for funding a parking ramp to serve 47,698 feet of proposed commercial development. Park View Partenheimer stated Phase" clean up is complete and they are starting to build the first building, with one house sold site un-seen. A total of 64 townhomes have been sold. ADJOURNMENT President, Murzyn, Jr., adjourned the meeting at 7:15 pm Respectfully submitted, Cheryl Bakken Community Development Secretary H :\EDAminutes2006\7 -25-2006 COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY (EDA) Meeting of: August 22, 2006 AGENDA SECTION: Consent Agenda ORIGINATING EXECUTIVE NO: 4 DEPARTMENT: EDA DIRECTOR APPROVAL ITEM: Financial Report and Payment of Bills BY: Cher Bakken BY: DATE: Auaust18, 2006 BACKGROUND: The bound Financial Report for the months of May and June 2006 draft Resolution 2006-06 is attached for review. The enclosed Financial Report lists the Summary (white), the Check History (Green), the Expenditure Guideline with Detail (blue) and Revenue Guideline with detail (yellow) for each fund. The reports cover the activity in the calendar (fiscal) year from January 1 through July 31, 2006. RECOMMENDATION: Staff will be available to answer specific questions. If the report is satisfactorily complete, we recommend the Board take affirmative action to receive the Financial Report and approve the payment of bills. RECOMMENDED MOTION: Move to approve Resolution 2006-06, Resolution of the Columbia Heights Economic Development Authority (EDA) approving the Financial Statement and Payment of Bills for the month of July 2006. EDA ACTION: H:\EDAConsent2006\JulyFin Rep 2006 EDA RESOLUTION 2006-06 RESOLUTION OF THE COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY (EDA) APPROVING THE FINANCIAL STATEMENT FOR JULY 2006 AND PAYMENT OF BILLS FOR THE MONTH OF JULY 2006. WHEREAS, the Columbia Heights Economic Development Authority (EDA) is required by Minnesota Statutes Section 469.096, Subd. 9, to prepare a detailed financial statement which shows all receipts and disbursements, their nature, the money on hand, the purposes to which the money on hand is to be applied, the EDA's credits and assets and its outstanding liabilities; and WHEREAS, said Statute also requires the EDA to examine the statement and treasurer's vouchers or bills and if correct, to approve them by resolution and enter the resolution in its records; and WHEREAS, the financial statement for the month of July 2006 and the list of bills for the month of July 2006 are attached hereto and made a part of this resolution; and WHEREAS, the EDA has examined the financial statement and the list of bills and finds them to be acceptable as to both form and accuracy. NOW, THEREFORE BE IT RESOLVED by the Board of Commissioners of the Columbia Heights Economic Development Authority that it has examined the attached financial statements and list of bills, which are attached hereto and made a part hereof, and they are found to be correct, as to form and content; and BE IT FURTHER RESOLVED the financial statements are acknowledged and received and the list of bills as presented in writing are approved for payment out of proper funds; and BE IT FURTHER RESOLVED this resolution and attachments are to be made a part of the permanent records of the Columbia Heights Economic Development Authority. Passed this _ day of ,2006. MOTION BY: SECONDED BY: AYES: NAYS: President- Don Murzyn Jr. Attest by: Cheryl Bakken, Assistant Secretary H:\Resolutions2006\EDA2006-06 fin July 2006 COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY Meetina of August 22,2006 AGENDA SECTION: Business Items ORIGINATING EXECUTIVE NO: 5 DEPARTMENT: DIRECTOR Community Development APPROVAL ITEM: Redevelopment of 2101 3ih Avenue, BY: Robert Streetar BY: a.k.a. The Apache Theatre DATE: August 9, 2006 BACKGROUND: On March 28, 2006 the EDA entered into a preliminary development agreement with developer Pratt Ordway Properties, Inc. to prepare a redevelopment plan for the Apache Theatre parcel. The developer's initial plan contemplated two - two to three story senior buildings. The first building included between 45 and 65 assisted living units, with 15 units serving memory care residents. The second building included between 45 and 65 independent senior units, where residents could purchase assisted living services on an al a carte basis. The initial plan has been modified based upon a request by the City's liquor operation to purchase approximately one acre of land from the developer to build a new municipal liquor store. The developer has agreed to sell to the City a one-acre parcel adjacent to 3ih Avenue and Hart Boulevard for approximately $506,000. At the August 7 work session, the City Council directed staff to prepare a purchase agreement for approval at a subsequent Council meeting. Consequently, the developer modified their proposal eliminating one senior building. The remaining building will include 64 units with 15 units serving memory care residents. Please find attached the modified redevelopment concept. The developer is requesting up to $115,000 of financial assistance to pay for the demolition of the Apache Theatre. Staff has secured $75,000 of Community Development Block Grant (CDGB) funds from Anoka County. In addition, staff is recommending the EDA reallocate $35,000 of the $200,000 of CDGB funds the City received for the demolition of the Mady's and Columbia Heights Rental buildings. Reallocating the $35,000 would leave $165,000 for demolition, which is more than sufficient to pay for all of the demolition costs. These funds would be available September 30th RECOMMENDATION: Staff recommends the EDA: 1. Approve the redevelopment Concept. 2. Authorize the reallocation of $35,000 of CDBG funds 3. Authorized staff to prepare a redevelopment agreement between the EDA and Pratt Ordway Properties, Inc. to be approved at the September 26th EDA Meeting. RECOMMEDED MOTION: Move to authorize the reallocation of $35,000 of CDBG funds, approve the redevelopment concept, and authorize staff to prepare a redevelopment agreement between the Economic Development Authority (EDA) and Pratt Ordway Properties, Inc. to be approved at the September 26, 2006 meeting. Attachments EDA ACTION: 1 1m 1'1 1II1! ;r'"I''' 5'.t"it" :L""'j'''rt'Hu1';:;'1i'' 'v' 'iI' I' g. S. I '"M' ~h I ~~ ~n II i II~~II w z o w ~ a. ~l ILl It: o olii ~ t1'6 g~v . o o " ~(J s "' . -, ~ . , ;j p:l.. = .o! en: ~ . -, _= 1 0' ~: E ~ IIIE!III ~I" I (!) h " 3= <( It: o o ILl o ::> o ILl It: + ; .....~~.i , . "~" ' ..;r".. .,:,,'(\' .~. "".: ' i - c"-n'C ~;';&J7,fC:ii';~',.".,,;, . ..... - ~ '1,-v,--, I -., ---- . k--..'~ -; , ' ' ....1 . .C, . -., -,4 .:;- ",' ...' I -, , L,.__,,--,~~,,";''' 12 JULY 2006 ~ ~~-~~~-#' ^~ cafu'f6rts -- OF-H-Otne NOI~TH OPTION IIIIIIIIIIIIIIIII II. R . I . S . B . I . E .. :B:. ~(o::lI :1":Uil: ?~4 ITRIV:' ~'~II~, ~, s~o?~ OPTION WITH HART BLVD. AND MUNICIPAL L.IQUOR STORE COMFORTS OF HOME COLUMBIA HEIGHTS SITE PL.AN 6B 1 SCALE: 111..501-011 I 1- ;;~;;..~~ Ilo<i ~ '" Eo< Joooool U "-l ,:Q Eo< - r.f) :I:: Joooool U ~ ~; <~ COMFORTS OF HOME PRoPOSED SENIOR LMNG COLUMBIA HrnolITS MINNESOTA """'OTNO PHASE ONE REDUCED DRAWING COLUMBIA HEIGHTS ECONOMIC DEVELOPMENT AUTHORITY Meeting of August 22,2006 AGENDA SECTION: Business Items ORIGINATING EXECUTIVE NO: 6 DEPARTMENT: DIRECTOR Community Development APPROVAL ITEM: Authorization to Negotiate the BY: Robert Streetar BY: Acquisition of the Mady's Retail DATE: August 9, 2006 Property by the EDA. BACKGROUND: In 2002 the City Council designated the redevelopment of the east side of Central Avenue, north of 39th Avenue, as a redevelopment goal. This area includes the Columbia Heights Rental store, Mady's Bowling and Retail Center, and the old Burger King parcel. Over the last three years the EDA has completed a number of redevelopment tasks on the way to achieving this goal. Staff is requesting authorization to negotiate with the Mady's Foss Partnership for the acquisition of the Mady's Bowling and Retail Center. As Commissioners know, before any redevelopment can occur, all of the three parcels must be under the EDA's control. Currently, there is only one parcel under EDA control and that is the old Burger King parcel. Mr. Lee Frankman, the attorney representing the Mady-Foss Partnership, contacted staff and indicated that the Partnership is a willing seller and earnestly requests the EDA make an offer to purchase. Therefore, in order to continue along the path of achieving this redevelopment goal, staff requests authorization to negotiate on behalf of the EDA and make the following offer to acquire the property from the Mady-Foss Partnership. Purchase Price . Real Estate . Trade Fixtures Total $1,035,000 $201,750 $1,235,000 These real estate and fixture amounts are based upon appraisals completed in January 2006. Please find included the completed real estate and fixture appraisals. Purchase Conditions to Close . That the EDA would have an executed development agreement with Sherman and Associates. . That the EDA would have the completed Response Action Plan that determines the extent and cost of contamination remediation. These conditions ensure and protect the EDA from having to purchase the property until there is an approved development agreement with Sherman and Associates, as well as a determination of the extent and costs of contamination remediation. Essentially, this action only begins the negotiations between the EDA and the Mady-Foss Partnership. If a successful agreement can be reached, staff would return to the EDA at a future meeting for discussion and further direction. 1 RECOMMENDATION: Staff recommends the EDA authorize the staff to negotiate with the Mady-Foss Partnership. RECOMMEDED MOTION: Move to authorize staff to negotiate with the Mady-Foss Partnership. Attachment EDA ACTION: 2 /. , ." . ./'; ,< ~- . <... :.- _n" ',"- \ \ .,,, " MARKET V AWE APPRAISAL OF MAJ)Y~S'B()WLlNG ALLEY , .3919CENTRALAVENUENE COLuMBIA HEIGHTS, MINNESQTA ", . . DATE OF REPQRT: , . - . , FebrLiary 24, 2006 ,.'.: . . . ' , ' PR,EI?ARED FOR: . . " CityDf C61u nlbia H'ei~ht~ ,. " 590 ~4Otli AV~I~LJeNoi:fh~ast, ,Co I '~.~ Iii ~Heigh;~iM N; 54 21'~3$78 .. . - - ';-. .... -' PREPARED BY: PatChill Messner & Dbdd' . . .' ,"." ,-,'. SUli,5~tPolld Execll~iyeOffices.. 13967 West Pre5erv~B9u!evard : BuMVille', MN,55~3f .~ ... ".. ..... i.' ~. t.. . .-.,.;"' .:;' ,~.:. ::-.i 1.f~T~A'rKr,'MESRNE''"R'&DbDb: " - ,......- ,'..., ,,-,.:- " ".:: " ,,," ,'. .J', >....,.::,.: "i~' ';1 .Il i, " , 'i ,;{ ./ ',;! :, : f 'I ;, 'i! , , ". , j,' .. " , ':,. i ~:J J':: ..', ", ::', :., '{ " ~' . .~:. , I '? . 't~ '. ;'1:' . . I, ~" . '1 "" ;: "" "t,',: r I, t,' ? \'.'''. ',\ :(, t,'!. !, Ii", ':;) (". .: :,1; ~ j'l' \: " I,,:' '>' ,PATCHIN' MESSNER & 'DODD. . ,,- - ,", . , ' ;~.: : , " VALUATION' COUNSELORS .: ,"1 February 24, 2606 ' ' ' City of Coli.lrribia Heights , 590 - 40th AyenL!e NOltheast , COIUlllbia Heights, MN 55421"3878, A TTN:, Mr. RobElrt Sti'eEiter ,RE: Market Value ;\ppl:aisaJ of' , MClay's Bowling Alley , 3919CentraJ AvenueNE, CQJ ump i '.LHei ghts, M iri liesota , ' Dear Mr. Streetel:: At your reque?t we have Co III p,1 eted an appFaisalof the above-referenc'ed property for the purpose of.<'estiniating .t,he fee sihlple' market' value, The function'of th(l appraisal: is, ~o provide valuil.tionguidance to the City:of Columbia Heights for 'pqssible ;lcquisitionof the subject. The effectiv~, date:ofaPPI'aisaJ isjan\.{ary 11, 2006, : "" The subject of this repoli is a multi-tenant cohlmercial building with a 16-1,\I)e bowling alley in the basem'ent, and two retail bays on, tlie first ;floor. the bu,ildi,ng was constructeq ih 1957, coptaiils a:&ross.building:;lr~.',l of28i28~SF, and.is~itua~i:ld ona 102,9?OSF.site. ," t. ._." .," ,.' -,,: :":" '.,' ..:..... ;" '.' . This appi'ilisaliSf'ltendedto com'piy witli the<Unifonll'"Stahdards of Pi'ofession,alAppraisal: "" Practice (USP/';PloftheAppraisalF;ouildaHon, Fuither, , theattacheq~ul'nmai'Y appraisal, report, ,as desc;rib$d inU~;PAP Stahda'l:q Rule2~2(b); brietlydescrii;Jestheswbji:ld pr6peiiYi pertinent details :qf tllerhad~etarea, anq viriops infOJ'inatioli concenliilg ,JheappraTs;l1 methodology, market 'data,analysis:and cOhtlusions..of value., Additionaliiiforination,and ~oculT1eritatioILccinc:eming the data: i'uld,'an,\lyses ofthe'''apprai',al: haVe beimreialnedin owr files. .. i " ,'" ",", ,", " , p," , .. " ' " )," -.;.' Based on thee d~ta aildal~alysisas sUhlhlariz~daridI6r'I;~fe!~ehCedii~the~ttach~d repPtJ,itis ,. our opinion,thiiJas of JanualY 11;2006;\he lJ1arl<etyaILieoflhBsubiectis$1,235,000, , , . ".'" . . : ." .' . ,- '" , ONEM1LUON TWO HUNDRED THIRTY~FIVE T~IOUSANb DOLLARS' -. ,. .' . - .,' '. ,-"..., . "-. NOTE -c, The":ab6ve ,,'val ue esti rriaie, :includ~~the' cp~ti'ibutOlY .0aiue ,of. trade fixiLi r~s' , " ($201,750) independentlyap'praisecjbyStevenJ,Wal!, iYW;ASAl of Stev,er; yvall Appi:aisal Services(lnc' , ' .. ' ' ....,... Sunset 'Ponds OffiCi" Park . f~.967.We~t preseiVeS6ulevard" BUI'hsvilie, MN 55337' , "', "Phone'1952IE!?5:1;Z6~' ,Fax: ('i?2J:895.152I ' ' ' ,,' .."., ii -/1 , ' Itshou IdbE(' no(edth~tJllis "I~ltei'of'li:ansiiiittal" does not quaiify as an appraisal, and the- , 'rsflqer,isclii'etted t(l, thEdollowing repolrfor the supporting, dflta, allalysE(S ahd c:oildusiolls, ' , The "Contihgent 3.nd,LilllitingTo)lditicins" sectio,li bf this i'spolt should be thol'oughly 'read , and Yliderstood byfOl:erelvjng on ,any inforlllatioli or ancdys~s presehtedherein.lfyou.h,!vE( . any-questiolls or' conllllents,after readirigthis appraisal repolt, please feel free to contact us . . .' - -. -. . at yoUr convenien,ce.' " ' ' ,;. ~: Respedfully submitted, PA TC]-IIN MESSNER & DODD '?;tu'.' , ' .' ' , ' - " ,,-,,' , .,- .' . " , Eric: Bjoi-klull ; MsA " Minnesota Certified Cen'eral Real Propelty Appraiser License 4003154 ' 3:,", "~'i\",,"'," . , "'~" '~-" " . .,' ,. '. ..-. ,..... - '". . JasoLly\esSnel:, MAl ' """ ,', MinlJe~otaCertifiedGeneral ,Real ProiJerty, Appraiser License 4000836 . I~l -.j:. '~i;': }. t,' . I). v" , ":~;; : ", ' " ' " "l' , ',; ? . !\ , :f.i . -,...., '" " "";,;~'., .', " . 'I. ,1 " ", "'.. .," .," . ) ; :~ Jl 1" ;.~. ' !;" ". "" ',' '<:. "r' " .;. :}; !!,:' ,;i ,'~ ,\;; ~\ , , , .\1, 1, (I' i; ~ " j ;~. , f: " .' ~' (r :,' ',';" ';~' ,':{ .:~ .,; . ~': , ~ ). oj' "fl. ' . ~, , .l :~ I .!~[ ,,'~ . 'f t ,~ :~': ' r /I II: I". :;i' .. ;, '. ' 205109 iii CERTIFICATION I certify that, to the best of my knowledge and belief: 1. The statements of fact contained in this repolt am true and correct. 2. The repolted analyses, opinions, and conclusions are limited only by the repolted assumptions and limiting conditions, and are my personal, un- biased pmfessional analyses, opinions, and conclusions. 3. I have no present or pmspective interest in the pmpelty that is the subject of this report, and I have no personal interest or bias with respect to the pal'ties involved. 4. My compensation is not contingent upon the repol'Ung of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. 5. My ;lIlalyses, opinions, and conclusions were developed, and this repolt has been IJI'epared, in conformity with the Uniform Standards of Pmfes- sional Appraisal Practice of the Appraisal Foundation. 6. I have made an inspection of the pmperty that is the subject of this repolt. 7. The reported analyses, opinions, and conclusions were developed, and this repolt has been prepared, in conformity with the requirements of the Code of Pmfessional Ethics and the Standards of Pmfessional Appraisal Practice of the Appraisal Institute. 8. The use of this report is subject to the requirements of the Appraisal Insti- tute relating to review by its duly authorized representatives. 9. No one pmvided significant pmfessional assistance to the persons signing this report, except as noted herein, '10., The appraisal assignment was not based on a requested minimum valua- tion, a specific valuation, or the approval of a loan. 1 'I. This appraisal cannot be completely understood without reading the "Con- tingent and Limiting Conditions" section of this repOlt, which should be thoroughly read and understood before relying on any information or analysis presented herein. ~e1(~~~ Z~Yhb Date PATCllIN MESSNER&DODD I ! .(:. " " , f. 'i. ,., fi r ~IJ' 1", , ' ! ..1 ~' , , " , " 'I ,r. ;, I .f,~ ;1 :i i' , , :~ "1 ; t f. i " j ; ~ I :i! F i~.~.: "I' I'.; , ) i I; ,. 205109 iv CERTIFICATION I certify that, to the best of my knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The repor'ted analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, un- biased professional analyses, opinions, arld conclusions. 3. I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest or bias with r'espect to the parties involved, 4. My compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. 5. My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standar'ds of Profes- sional Appraisal Practice of the Appraisal Foundation, 6. I have made an inspection of the property that is the subject of this report. 7. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. 8. The use of this report is subject to the requirements of the Appraisal Insti- tute relating to review by its duly authorized representatives. 9. No one provided significant professional assistance to the persons signing this report, except as noted herein. ,10. The appraisal assignment was not based on a requested minimum valua- tion, a specific valuation, or the approval of a loan. 11. This appraisal cannot be completely understood without reading the "Con- tingent and Limiting Conditions" section of this report, which should be thoroughly read and understood before relying on any information or analysis presented herein. 12. As of the date of this report, I have completed the requirements under the continuing education program of the Appraisal Institute. Z-b2--~ I D (,:, ate' PATCHIN MESSNER & DODD Valuation Counselors ;i', I 1. 1 ! i " " "1. i I I I 205109 ,~~ .........IlIDl _~ v SUMMARY OF SALIENT FACTS AND CONCLUSIONS Locati on: Pl'Oper'ty Owner: Date of Appraisal: Date of Inspection: Rights & Interest Appraised: Site Description: Impl'Ovements Description: Zoning: Highest & Best Use: Indications of Market Value: Conclusion of Mar'ket Value: 39'19 Central Avenue NE Columbia Heights, Minnesota Mady-Foss Par'tnersh i p january 11, 2006 january 11,2006 Fee Simple Market Value 2.36 acres or 102,970 SF. Mostly open and level, no wetlands, and soils are assumed stable and free of envil'Onmental contamination. All utilities available, Fl'Ontage and access to four-lane State Highway 65, aka Centr'al Avenue. A 28,286 SF, one-story Class C commercial building with a full basement, built in '/957 and in fair overall condition. The fir'st floor space is pariitioned into two retail storefl'Onts, is 14,000 SF in size, and the basement is a 16 lane bowling alley with '14,286 SF of building area including the first floor entry foyer. CBD, Central Business District As Vacant - Retail commercial development. As Impl'Oved - Continued use as presently impl'Oved. $1,030,000 by the Sales Comparison Appl'Oach $1,035,000 by the Income Appl'Oach $1,035,000 Correlated Value $ 201,750 Value of Trade Fixtur'es* $1,235,000 · As estimated by Steven j. Wall, MAl, ASA. <: ,.,. PATCHIN MESSNER & DODD ? 'f ,~ 205109 vi TABLE OF CONTENTS ITEM PAGE NO. LETTER OF TRANSMITTAL .......... .................................. ....... ........................... ......... i-ii CE RTI FICA TI ONS ...................................................................................................... i i i SUMMARY OF SALIENT FACTS AND CONCLUSIONS ...............................................v TAB LE OF CONTENTS ..................... ............................................................... ........... vi SU BjECT LOCATION MAP ................. ....................................................................... vii SUBjECT PHOTOGRAPHS ..... .............................................. .................................... viii PROPE RTY APPRAISE D ...............................................................................................1 PURPOSE, FUNCTION AND INTENDED USERS OF APPRAISAL...............................1 MARKET VALUE DEFI NED .................... ..................... .................................................2 COMPETE NCY OF APPRAiSER........................... ................................... ......................2 E NVI RONMENT AL CONSI DERA TIONS ............................................ ........................ ..3 SCOPE OF APPRAISAL................................................................................................3 DATE OF APPRAISAL AND DATE OF INSPECTION ....................................................4 SUBJECT OWNERSHIP HISTORY AND NATURE OF USE ...........................................4 TAX AND ASSESSMENT DA TA....................................................................................5 LEGAL DESCRI PTION..................................................................................................5 MARKET AREA DESCRI PTION............................................................ .........................6 SITE DESCRI PTION .................. .................................................................................10 IMPROVEMENTS DESCRI PTION ...............................................................................15 ZO NI NG DATA................ .........................................................................................22 HIG HEST AN D BEST USE ..........................................................................................32 EXPOSURE AND MARKETING TIME .........................................................................36 APPRAISAL PROCEDURES AND TECHNIQUES ........................................................37 SALES COMPARISON APPROACH TO VALUE..........................................................38 INCOME APPROACH TO VALUE..............................................................................59 SUMMARY AND FINAL ESTIMATE OF VALUE..........................................................67 ADDENDA EXHIBIT 1- TRADE FIXTURE SUMMARY - STEVE WALL......................................70 EXHIBIT 2 - LAND VALUE ANAL YSIS................................................................127 CONTINGENT AND LIMITING CONDITIONS .................................................130 APPRAISING QUALIFICATIONS OF ERIC BjORKLUND.................................... 135 APPRAISING QUALIFICATIONS OF JASON L. MESSNER .................................136 PATCHIN MESSNER & DODD Valuation Counselors vii '~r nl. III II II I~ 'I Iii; If : I : , ;Ij " ili tiil IIII-! ~ I' J 'l I," ,I ii' '1.1 \i ~ II I II 1;1 205109 I !!i ill .:.~ ~ ~FILLMORECIRNE I-JNH()PJcr \ J,2.U:LS CH'RiIFfiiii.:o=c.~'-iiI"""""" '- a.. .... --'~~':~~:::::.-~ I 2: 9. - ~ -::.~;;:~:. -. W I3AV,=,~)AN GT , n; cr: 54TH AVE NE ~ ~ ~\i:~~~-:::.::~ ~~_.<..., l~. ~ ~ w ~ ~ ~~~.- 'B'o ~ 0 'l'!~J/~~~ 52NDAVENE _,"f-*'~ ~: u: ~ Si I a<\'(.?-~CW'f.' \H!" , 9ULU~ DR S\l~;~:" @,... - ~~.._~..._._. ~.. i \ . "I~Q T~~~:~~~ ~ -&.,. ~ ~ ~ r 50THAVE"E~ 'l' ~ J~ i '!/,\ i ~ ~ ~. ~ g ~ ~ ~;-- q~:z;;>:' I ~ b; b; t; ~ ~ ~ z ~ 1./)' <P,.. ~ Ul :::c ::r: ::c ::c ~ ...... g -> ffi it-' ffi' =t!;!;;'~:::~cnqlU ~ ill b :: 5 i :: ~ I- ;: 46THAVENE.~ 46THAVENE ill ~ ~ _ ~ ~ MCI<enn:,P>:uhtt ~ !3 47THAVENE; 471HAVENE ...., ~ ~ ~ :::~ ~-tJ) ~ ~ u: b; 46THAVENE@) 46THAVENE ~ ~ i ~ ~ ~ ~ '" ~~ M ~ ~ 0: t; ~ 45THi\VJ;J'{E ~. ~ r.: 0- El ii'i @) MWAVENE ~ ill ~ M1H4VEUE ~\\~ 21 ~ ~ ';M 'H ~I\l,~!>;'" ~ D ORDAVENE s:; ~ t:i ii'i ::; li ~. /: 1J CR2 I 42NDAVENE 42NDAVEtl.E__~ ~,~ S ~. b I _ . wM W ; g ~ ~ ~ ~ i 'l' ~~. ~ ; ~ UJ~ ~~iE~~ ~fit:i J u ~ <Il "l" '" u:>...... ;i ~ ;SC ~:_ .coIUl1lbl:\ H.ight$ ~ C~~l CR1 ~, f41l ,.........<8- Hu~el P8~ w ~ ~ ...... I.:!!.J ,~".. :z:::: PETERBPL ' ~\-w l:n Z ~,.I- aG'lH u.. z 3SrH,AVE,NE"'.'" q.-- ,- ~ *" I- ...... ",' g ~3aTHAvENE _" ,~~ Ol I$'~ ._~ ," f3 '\ g; ~ '. ~ ' ,38"lh'AV!:NI:' "'---Jii ~ ~ @) ~'V', ~ ~ ~,<{l-~ j <.,~ . _ ,',:;.. . _ . _ ,~<RT~J\Yr;!!L31llit'.:l.".~!._.. _.-'Ii.i""<_"___'=~_~-HW!!J\V.€..N,__..._af.~..~~:;;c:;tl\j~ .._ . -' J-(f ~ ;<w 'i~OV~' UI2! __;, 'z' lfJ;t:! ..... 0: <6.,\\ov.: . ..... w 0 t:;:g ~ ..----9s" ::..;,~. ~. ~_';' - C/l z !:!? . c;; ! @ ~ 00'-- . .-,. ::; if:' 9, ~ ~ 9t- ~ - -' ~ iiJ"IH ... ~;,,; ~ ;to:.. n. " CI1 m Ja- AVE NE i ~ ~ F'- /";~ [g'""' g . ,~"N'~"- 2&lH'A,!e.~~ ili 0: cOU:l~'l/\?W' ~ ~,~..- ~ ~ Co!tJl1l11i<"lPlllk: t;; .'-:'~ ''''0 !it, J ! ~., i- " ~ o <;;. :<.! 'l' I;; z ~ "RD @J A.lI8Nfii ~!& z .~~ 't~ "I' I ,,, ;..:] PANORAMA.A'tIE Ni; Ii!- l I "M1NA "' ,~ '" ," " ,~ ~ I.:!' o I'a jj\', r;;A'ffflP\'( ORNb :1.;: i 2 ~ ~_. I H,llIollr~rJ: iiJ ;1,. 1 ~ " ' 1 ~. ! ~ u .';'1 ~Jl ~ ., ~'2' o~~ j11 ~ fnr ~ I u c. " r ~<f.'1-- CR102 N '" u "'-' "_",";r.:(::~:..--:r..-; ~ ~ ti ~ ~ "''' t; 2 ;::; ~ ;;<:,??\. )#...... . ....~~ __ .~ r W<1~~Parl( I;; ~ w ~ 'l' Ii! z ~ z ~ I;; ~ m ~ ~ ~ ~ ~ ill In ~ ~ 9 w w d \;; :i ii'i z ~ i ~ ~ "' ~ ~ "1 'l' Y! ~ ~ 'l' !Ii ~ ;? w w im Z \'> w __..'. d......... ..' .~..__. AudubonPiUk w 'Ii 34TH AVE N~ I;; "' o ~ ~ ~ 31NDAVr;.NE ~ '" l.......~.... 5 lU 31~~AVENE . U"Z'-'--H" ~--.~ bl ~ z g !>, j! 'l' @J .32ND'AY.E NE .31'STAVE)1E Domll1gHelgl1loPmll. , }lS'fAIJUNIi f;,! t:; Ii; ..,'r 'f; ,m ~ . d:'~~::~:' ' : ;~...~_. .~ 29TH AVE NE ::f _..m'--'''''- '" ;~ l wi :t1 1>(- m" ", ........... ....... ....."; " SUBJECT LOCATION MAP PATCIlIN MESSNER & DODD Valual10n Counselors 205109 .~ I i I' if viii SUBJECT PHOTOGRAPHS Front View Rear View - East and North Building Elevations PATCHIN lVlESSNER & DODD Valuation Counselors r I ) ,;' ':}. ..~~ . .f~r '\"~ '," : /.;it ." /1l!i :\~~~I;,... .:';; :.1;.',' :f1i'.3: 205109 PROPERTY APPRAISED The subject of this repolt is a 28,286 SF, two-level, three-tenallt commercial building situated on a 102,970 SF site. It is owned by the Mady-Foss Paltnership, and located at 3919 Central Avenue Northeast, in Columbia Heights, Minnesota. This appraisal does not include a valuation of personal propelty or the business enterprise operating within the improvements. Please refer to the Appraisal Procedures and Techniques section of this repol't beginning on Page 42 for fUlther comments. However, this repolt does include a valuation of immovable trade fixtures. Trade fixtures in the building were identified and independently appraised by Steven J. Wall, MAl, ASA, of Steven Wall Appraisal Selvices, Inc. As such, these items are not included as part of the real propelty appraised in this repOl't, but the value of these trade fixtures is adopted herein and included in the final estimate of market value. Refer to Exhibit 1 in the Addenda for a copy of his appmisal. PURPOSE, FUNCTiON AND INTENDED USERS OF APPRAISAL The purpose of this appraisal is to estimate the fee simple market value of the subject property. The function or intended use of this appraisal is to provide valuation guidance to the City , of Columbia Heights. The City has completed a blight assessment for the subject and other properties in the neighborhood, and has plans for redevelopment of the subject. As such, the market value estimate contained in this report is to be used by the City for possible acquisition of the subject. The intended user(s) of this appraisal repolt are the City of Columbia Heights, its legal counsel and assignees who would require a copy of the repolt to negotiate a purchase of subject. Other users, for any other purpose, are unintended. PATCI:I1N MESSNER & DODD Valuation Counselors 2 '\' ;'; ': 'i ! I il ,I i \ -I. ~;:' ;t '/':' '\\: ".J {~ n. 'J .it. .~, \.t: ,~, ~'i ( i k ~; " T Ii 205109 MARKET VALUE DEFINED Market value as utilized in this appraisal report confol'11lS to the following definition obtained from Pages 177-178 of The Dictionarv of Real Estate Appraisal, Fourth Edition, 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 info/7lled or well advised, and acting in what they consider their own best interest; 3, A reasonable time is allowed for exposure in the open market; 4, Payment is made in telms of cash in United States dollars or in terms offinancial arrangements comparable thereto; and 5, The price represents a normal consideration for the property sold unaffected by special or creative financing or sales concession granted by anyone associated with the sale, The above definition describes market value as an exchange concept. According to The Dictionarv of Real Estate Appraisal, Fourth Edition, at Page 104, "In economics, the attribution of value to goods or selvices based on how much can be obtained for them in exchange for other goods and selvices," The definition goes on to say, "Market value as an appraisal concept is a type of exchange val ue," COMPETENCY Of APPRAISER Eric Bjorklund and Jason L. Messner, MAl have both the knowledge and experiellce to complete this appraisal assignment competently and in compliance with USPAP. Refer to the Appraisers' Qualifications in the Addenda of this report for fUlther details. PATCHIN MESSNER &DODD Valuation Counselors 3 1, I l 205109 ENVIRONMENTAL CONSIDERATIONS A Phase I Environmental Review of the subject has been conducted by ProSource Techlologies Ine. Therein, it is stated that debris from a demolition landfill may underlie portions of the subject, and given the age of the building, it is possible to have some lead base paint and also asbestos containing materials. However, for purposes of this appraisal, it is assumed that no environmental contamination caused by the presence of petroleum related by-products, asbestos, PCBs, toxic or other hazardous materials exist within the subject property as of the date of this appraisal report. When and if the nature of the subject's exact environmental conditions is determined, we reselve the right to adjust the estimated market value contained in this repol't accordingly, SCOPE OF APPRAISAL The scope of appraisal is a description of work effolt made to complete the appraisal assignment. As part of the appraisal process, we have gathered physical, legal and economic data about the subject and other comparable properties, and analyzed this market data to produce an estimate of market value for the subject property. A more succinct description of our work effort follows. ~f' ';+ " 'I' 1; I!: ";1 :'; ,~1. \:; l~ 1. Data collection and analysis of: . Property rights and legal descriptions . Tax and assessment data . Zoning data . Maps - plat, zoning, aerial, survey, ete. . City and market area profile information . Sales and listings of similar parcels of land . Sales and listings of similar buildings . Market rental and expense data of similar buildings . Terms of available financing ;1 'i~ .,;:~ ' ,;1' 1 tL. 'I I- 'l;. : '<';1' f I , I. ,i " n .:i' " " PATCHIN MESSNER & DODD Valuation Counselors i " " ;-i" ". '] '. ~t . " ' /1 j ,. "1' 'I \' '~~;- ;~I: (" ';,J '\ 1:~1 .tll ~~ : ,~ A ~, i 'iJ :. t. " ~ '( r ~ /, , F 't. C' .,~ k fr' :;": 4 205109 SCOPE OF APPRAISAL 2, Inspection of: . Subject interior and exterior, and the neighborhood . Comparable sale and rental data 3, Analysis and completiorl of: . Highest and best use esti mate . Sales comparison and income approaches to value . A firlal value reconciliation The appraisal is presented in a Summary reporting format. As such, only brief summaries of the data, analyses and conclusions are included herein, ThisTeport is not intended to provide a detailed and comprehensive discussion of the various data used and analyses performed. Further, the opinion of market value developed herein is intended to be a Limited appraisal, meaning that the Departure Rule of the Uniform Standards of Professional Appraisal Practice is invoked. Our scope of work does rlot include a Cost Approach, nor did we fully investigate all of the data used in the two approaches to value. DATE OF APPRAISAL AND DATE OF INSPECTION The effective date of this appraisal is January 11, 2006. This was also the date of our , inspection. SUBIECT OWNERSHIP HISTORY AND NATURE OF USE The subject is owned by the Mady-Foss Par'tnership. According to the County assessing department and the owner Mr. Doug Foss, the ownership structure has not changed in the past five years. The last purchase of the subject was in 1993 for $395,000, and it was financed on a contract for deed which was paid off in 1999. The seller was the Blaszcyk Company. PATCHIN MESSNER &DODD Valuation Counselors ,f:' ; " " y, '(. ti. ".. , ;~ :. '(' '~~ . \ f _t%: . f ;I ,,4. '.,' " , 'I: I'! " 1 I i :~ l i .:1 ' :1 ;. i 5 205109 SUBIECT OWNERSHIP HISTORY AND NATURE OF USE As of the date of appraisal, we were unaware of the subject being for sale or under option to purchase. With regard to the conditions of the last sale, we understand that it was purchased (in part) by a long-time tenant, Gene Mady, who operated the bowling alley in the basement since about 1967. Finally, with regard to the nature of the subject's use, we understand that since it was built in 1957, the basement has been used as a bowling alley and the upstairs by various retail stores. TAX AND ASSESSMENT DATA ANOKA COUNTY DATA W'~"".~ ..,,,..,,,,,,,,,,,~,,,-,,>,w,,~_,_,,,,,."~M.,.,<<,,,,:<,,,, "",,,.,.,,;,,,-,.".,,,,~.~,,_-_,.,,,,"p~=,",,<,,",,.,.,,,. "",_,,,,,~,,,,,,.,,,,,"'r",,"""_"'" Property Identification # 36-30-24-33-0148 Property Address 3927 Central Ave NE Columbia Heights 2005 Assessor's Market Value Land $319,100 Building $198 700 Total' $517 ,800 2004 Assessor's Market Value Total $504,800 Real Estate Taxes Payable 2005 3A - Cmeri/lndust Taxes & Solid Waste Fee $15,603,51 Effective Tax Rate 3,09% 2005 Special Assessments $2,109.26 LEGAL DESCRIPTION That part of Block 4, Walton's Rearrangement of Lots 33 & 34, Block 6, Reservoir Hills lying South of the North 330 feet thereof, Except the South 100 feet of the West 183 feet of said Block 4 as measured along the West & South lines thereof, subject to easements of record, fA'rCHIN MESSNER & DODD Valuallon Counselors 'i,: (" ;1'. \:~ ;"l 'J; ;)1 ~I; ',' ii " riti ';1, I) / :.: :1' " , )~ " , '. 6 205109 MARKET AREA DESCRIPTION The subject property is located ill Columbia Heights, Millllesota. Columbia Heights is ill southern Alloka Coullty, alld is a first-tier 1I0rthern suburb of Milllleapolis, the urball core of the 13-coUllty Twill Cities metro area. The most direct route to the celltral busilless district of DOWlltOWII Minlleapolis is approximately five miles, with a non-rush hour driving time of about 10 minutes. The City of Columbia Heights is bordered on the 1I0rth and west by the City of Fridley, and to the east by New Brighton and St. Anthony. The current population of Columbia Heights is about 18,520 accordillg to 2000 celis us data, and is declinillg at a slow rate. In 1990, the population was 18,910. The current population of Anoka County is 298,084, alld the populatioll of the '13-county, Twill Cities metro area is 2.9 millioll persolls. Columbia Heights has a mayor/council form of government, and average to good quality municipal utilities alld services are provided to city residellts. The Columbia Heights IlIdependellt School District 13 covers the elltire city. The maill access routes into the City are provided by State Highways 47 (Ulliversity Avenue) alld 65 (Central Avellue) which rUII north to south through the City, alld Interstate Freeway 694 which rUlls east to west just nOI1:h of the city limits. The most recent Mil/DOT Traffic Count Map (2004) identifies that the average annual daily traffic (AADT) on 1-694 between the Mississippi River and 1-35W ranges from 108,000 to 142,000 with 123,000 vehicles between Hwy 65 and Hwy 47. Also, Highway 65 carries from 21,000 to 32,000 vehicles betweell 37th alld 1-694, and Highway 47 carries 15,600 to 27,000. By the subject, Celltral Avenue has an AADT count of 21,000 vehicles. Low-dellsity residential zoning districts, which are prillcipally improved with single- family homes alld duplexes, cover most (53%) of the City's lalld area, Apal1:ment-type developmellt follows at about 9%, thell commercial at 6% alld industrial at 5%. The balance is relegated to public right-of-way alld park lalld. The lOllillg Map which follows shortly shows the Ilature of most uses ill the immediate neighborhood. The subject is situated ill the City's Celltral Busilless District which focuses 011 the illtersectioll of Celltral Avellue alld 40th Street, alld follows Celltral Avellue, 1I0rth alld south several blocks at a half-block width, alld 40th Street westward two blocks or so. Southwest of the subject is a sillgle-tenallt, one-stolY commercial buildillg used PATCHIN MESSNER & DODD \/::1I1I::1tinn counselors -'~"y- !- i: i: ~;, t .i" ," -di,: "~'.1\ i; ~ ;: : .".'.... :,.,.,'..~f" , !I'i '.' ~ ! . ~l 1r "1., i} ,\, :' \'j . . ~ "-:-'- - 7 205109 MARKET AREA DESCRIPTION by a rent-all business followed by some apartment buildings and single-family houses across 39th Avenue. Abutting the subject to the north and east are more apal1:ment buildings and a single-family house. A vacant site abuts the subject to the nOI1:hwest. It was home to a Burger King restaurant recently purchased and tom down by the City, Otherwise, across the street to the west and further to the nOI1:h and south of the subject along Central Avenue are some old 1.5-story houses, a variety of older one-story service commercial buildings (office, auto shop, etc), and a three-stolY apartment building. The old downtown area of the City is located midway between Central and University Avenue on 40th Avenue about a qual1:er mile west of the subject. Overall, most properties in the market area are about 30 to 50 years old, with the range extending to 100 -I- years old for some residential buildings, to new town homes, condominiums and commercial structures, The commercial and residential buildings along Central Avenue were developed primarily in the 1950's and 1960's (with some exceptions). However, those around the City Hall were developed earlier, beginning in the 1920's. In any event, the area's newest commercial development includes an Advance Auto Pal1:s Store at 461h and Centrali and a Discount Tire store and Applebee's restaurant at 53rd and Central. Also, a Target store is being re-built to the nOI1:hwest, and on the 4900 block of Central Avenue, . the Grand Central Lofts mixed-use project is under construction, including a 10,000 SF retail building, 210 new condominium units and 21 townhomes. Finally, the most significant new development in the City is several hundred housillg units with a mixture of styles, which are noW stal1:ing to be developed in a fonller 35-acre illdustl'ial district between about Jefferson Street and Hwy 47, and 371h and 40th Streets. With pal1:icular regard to the conditions of the real estate market for propel1:y types in the neighborhood, it is considered good. PATCHIN MESSNER & DODD 205109 8 MARKET AREA DESCRIPTION The industl'ial market, is in a state of recovery from the recession which sta/ted in about March, 200"1. Job growth is slowly occurring, and there is even some speculation development planned, especially in areas se/ved by rail. In the housing market, the new urbanism theme has gained acceptance throughout core areas of the metropolitan area, with condominium development leading the way. Lifestyle buildings for seniors and baby-boomers approaching retirement have also been popular as have townhomes. Single-family detached housing, the most prevalent housing style, also continues to develop and to appreciate in value. In Columbia Heights, values have gone up about 2% over the past year. As for the commercial market, the retail and entertainment industries look promising due to constant demand for various retail products, the presence and increase of educated and/or younger workers, and the wealth and prolonged retirement of employees in higher paying service jobs. The service commercial market is probably where most of the job and economic growth is likely to occur over the next decade as the baby boomers eventually retire and the economy becomes more service-based. Lastly, the hotel market, followed by the office market is expected to provide-the greatest rebound relative to past investment petfonnances. With regard to the present state of the larger economy, it is healthy and the future looks promising. Recent indications of growth include increases in the past several qua/tel's of GDP, rising real disposable income, and rising interest rates. For the year 2004, GDP grew 4.4% compared to 3.0% in 2003, and quarterly increases for the first three quarters of 2005 were 3.8%, 3.3% and 4.1 % respectively with the 3rd quarter corporate profits rising 15.7% from the same qua/tel' a year ago. As for income levels, in 2004 real disposable income increased 3.4% after increasing 2.3% in 2003, and thus far in 2005, the upward trends continue. Excluding only the month of August where incomes declined by 1 %, from January through November, incomes each month rose in a range from 0.2% to 2.5%. However, short-term interest rates continue to rise, especially the Federal Funds Rate. PA'lY't-TTM1\/f17C'C'lI.Ili'D.Q. nAnn I .f., , ,r \~ :[i ':) , irl ': ,~ , ;t' ? j _1 ,,,,, ,il ~i" , ::~ ' ! ::,11 · ~~ '.,: 1 , (; }~, .,if ,':1 9 205109 MARKET AREA DESCRIPTION Since December 14, 2005, the Federal Funds Rate has been increased eight times to its current level of 4.25% (as of December 13, 2005). As of the effective date of appraisal, these other economic indicators also help pOliray the current state of the market. . Prime Rate: 7.25% . Yield on Baa rated Corporate Bonds - 6.39% for November, 2005 . 5, 10 and 30 Year Yields on U.S. TreasulY Bonds: 4.34%, 4.41 % and 4.58% . Three Month Libor Rate & One year Adjustable Rate MOIigage (ARM): 4.60% and 4.5% . Interest rates for 30 & 15 year home mortgages - 6% & 5,6% with no points . Office commercial mortgage rates: 5.5% to 6.5% . Retail commercial mortgage rates: 5.5% to 6.5% . Industrial mortgage interest rates: 5.6% to 6,5% . Multi-family mOltgage interest rates: 5.15% to 6.25% . Local Unemployment Rate - November, 2005: 3.7% Fridley, 3.7% Minneapolis, 3.5% Anoka County, 3.5% in TCMA, and 3.6% in State of Minnesota . Close Price of New York Stock Exchange Composite Index: 7,790.99. . Close Price of S & P 500 Index: 1,286.06. . Close Price of Dow Jones Industrial Average: 10,962.36. . CPI-U Index - Minneapolis and St. Paul, All Urban Consumers: 189.6 for 2nd half 2004. 186.6 for 1 sthalf, 2005. Six month change = 1.69%. FA yelliN MESSNER & DODD Valuation Counselorl) .:( '!'. ';:, \: 1 '~t i,~~ "l~ ; :~~ ' .. ,~ . /1 ' .\,' ,j 1 '/ !' 205109 10 SITE DESCRIPTION Locati on: Census Tract 515.01, in Block Group 1, Block 1010. Mailing address is 3919 Central Avenue NE, Columbia Heights, 55421. 2.36 acres or 102,970 SF, subject to survey. Size: Shape: "L" shaped. Streets: The west edge of the subject has 183.34 feet of frontage on Central Avenue. The south edge has 245 feet of frontage on 39th Avenue Northeast. Central Avenue, aka Highway 65, has a 100 wide right-of-way and is improved with a four lane road having asphalt pavement, with concrete curb, gutter, stamped sidewalks and decorative lighting. The speed limit is 35 MPH, and there is also a median with breaks at both the northwest corner of the subject, and at 39th Avenue. 39th Avenue has a 60 foot wide right-of-way, and is improved with a two-lane road having asphalt pavement, with concrete curb and gutter. The speed limit is 30 MPH. Access: Access tolfrom the subject is good. While an alley at the rear of the subject is undeveloped, there is one curb cut developed to the subject on 39th and there are two curb cuts to the property along Central Avenue, a major thoroughfare in the City. Central Avenue has a full interchange with 1-694 about 1.5 miles north. Soils: We have reviewed soils tests and engineering data for the site northwest of the subject site (the old Burger King), but have not reviewed any similar documentation on the subject. As such, since we do not know whether the existing soils are geotechnically sound, it is assumed that conditions are suitable for normal building purposes without any special footings, pilings or required excavation of soft soils. (It is noted, however, that the floor slab in the northwest corner of the basement has settled.) Also, for purposes of this appraisal, it is assumed that soils are not contaminated and without need of remediation. PATCHINMESSl'I'ER & DODD Valuation Counselors ,; , 'I' ;I' ;j." ,;i: 1,1 1)1' i, '.1' ) jl ,i ~ : I ~ ",; ,Ii , .'., I: f~ ' I: 1;1 'i " 'i " ",I ,t ;~ { i, I , , .;t I I I, t' ~ J. " : '~; ;,\ 205109 11 SITE DESCRIPTION :A Soils: According to Prosource Technologies, the old Burger King restaurant site to the northwest of the subject is the location of a demolition landfilL Further, Prosource repor'ts that debris may extend over the property lines, Also, during the demolition of that building, it was discovered that the restaurant had been constructed on pilings, indicating perhaps that the filled site may have been a wetland with unstable soils. Topography: The site is generally level and open. However, near the northeast and southeast corners, as well as along the east property line, the terrain rises 10 to 20 feet, and is vegetated with several trees. Lastly, no wetlands are observed and, based on a review of a flood map of the neighborhood, the subject is not in a flood zone. The community panel number of the flood map is 27001 0-0005B, dated 09/29/1978. Utilities: Phone, electric and gas lines are available in the neighborhood and serve the site. Also, all public utilities are available to the site including municipal water and sanitary sewer. There also appears to be an in-ground storm sewer system on the adjacent streets with concrete gutters directing the storm water into catch basins. Easements & Encumbrances: We have not been provided with a title search in conjunction with this appraisal assignment. As such, we are not aware of arlY recorded easements that affect the subject. However, during the inspection we observed some overhead utility lines along the east edge. As such, a utility easement may encumber this portion of the subject. PATCHIN MESSNER & DODD Valuation Counselors 12 205109 SITE DESCRIPTION I:~ " ~; (I.J ";' (I"") .f-lId.or ,. ( (Z~l) z:-V (2..5\) r\ . 'I ~ 0 ,~m ~ ~O) 4 v;; ~'. ,~ ~ ~ I ,~. I ~ (/48) J ''( ~ ; <(-,;.; ~ 1I"./r;'E.J.#'\fitJ.~ 41 ,~.. . 28.0 ,I ,. -ll ..".... 1 1'1 ,1i"? i8 .!'" k1 (&) /7 ,. 00l1];6, ':l'(!~~~ ~" iT i HALF SECTION MAP PATCHIN MESSNER & DODD Valuation Counselors , , I i' I I I I I I j 205109 SITE DESCRIPTION 13 Street Scene NOl1h on Central Avenue from Southwest Corner Street Scene South on Central Avenue from Northwest Corner P A TeRIN MESSNER & DODD Valuation Counselors 205109 14 SITE DESCRIPTION -11, :;t i ." !' Street Scene West on 39th Avenue from Southeast Comer Street Scene East on 39th Avenue from Southwest Comer PATCIIIN :i\1ESSNER & DODD ValuatIon Counselors ..- 15 205109 IMPROVEMENTS DESCRIPTION The subject site is improved with a olle-story retail buildillg which is situated at the Ilortheast corner of the property. The first floor is partitiolled into two retail bays, and the basement is used as. a bowling alley. The followillg narrative more thoroughly describes the building as well as site improvements. Size: Rectallgle footprillt of 100' N/S x 140' E/W = 14,000 SF, plus all at-grade, 11' x 26' ~ 286 SF entry foyer at the southwest comer of the buildillg which serves only the basemellt. Gross Building Area (GBAl First Floor Area: 14,000 SF Basement Area: 14,286 SF Total: 28,286 SF Age: Accordillg to county assessillg and city buildillg permit records, the subject was constructed in 1957. As such, on the date of appraisal, the subject is about 49 years old. Construction: Foulldatioll Assumed to be poured concrete footings Floors Poured concrete, with the first floor supported by a metal deck, webbed joists, "I" beams alld vertical posts. Walls The exterior walls are paillted COil crete block. 011 the first floor, the wall height from the floor slab to roof deck is about 13.5 feet. In the basemellt, the height is about 14 feet. Roof Flat. III the store area, it is built of metal decking, rigid boards of illsulatioll, alld sealed with a rubber membr'alle. Webbed metal trusses, "I" beams and steel posts support the roof deckillg. III the elltry foyer (stairwell) to the basemellt, the roof is built from sheets of plywood alld wood joists, covered ill all otherwise similar fashioll to the store area. PATCHIN MESSNER & DODD ValuatIon Counselors 16 -] I ".i ..1; ", ".II {ii' . ~\ 1'1 .1;\ 205109 Finish: The main floor is partitioned into two retail bays with a shared bathroom area to the rear. There is also an entry foyer that serves the basement. The gross leasable area of the nOlth bay (presently occupied by a Salvation Army Thrift Store) is about 7,688 SF, and the south bay (presently vacant and last occupied by a furniture outlet store) contains 5,880 SF. The shared common area is 432 SF in size and the entry into the basement is 286 SF. The basement of the subject is suited for only one tenant with demising walls for three basic areas. A pin setting area exists at the far east edge, a large open area in the central regioll of the building contains 16 lanes of bowling equipment, scoring tables etc, and along the west edge of the building are a small mechanical room, two restrooms, a dining mom and bar area, a small office, and a kitchen with walk-ill cooler near the entry stairwell at the southwest corner. Including the entry stairwell, the leasable area of the basement is 14,286 SF. Main Floor In the south bay, the floors are finished with vinyl tiles, the walls are sheetrock, and the ceiling is suspended acoustic tiles. Also, lightillg is provided by flush mounted fixtures with florescent bulbs. The back storage room area has unfinished floors, walls and ceiling. In the north bay, the floors are finished with carpeting, the walls are pegboard over sheetrock, and the ceiling is a mixture of suspended acoustic tiles and panels with lighting provided by flush mounted florescent fixtures. The back stock room area has vi nyl floors but is otherwise unfinished. .;it {/I' " H,i~ j.~;t, 1: (:)[ !:F ~, in 4:1 ~:i \~} .61 ":1" rH :~M :iA~ :J~' :l~i I I/'I"~ /, I \~ l~ IMPROVEMENTS DESCRIPTION Layout: . I III the shared common area at the building rear, there is a build-out for two bathrooms finished with sheetrock on the walls and ceilings, and vinyil tile floors. Each bathroom also has two fixtures (a sink and toilet) and is illuminated by incandescent light bulbs. Outside the bathrooms, the floors are vinyl tiles, and the walls and ceilings are unfinished. , " , {~ , 1,1 ,'I, '~ " . " 'i ii 't ,I " " ,,' f , ' P 'I' , " Basement Bowling area: Floors are COil crete under the elevated wood lanes and ball return area, or finished with vinyl tiles and carpeting in the rest areas behind the lanes. Walls are wood panel and sheetrock, and the ceiling is finished with acoustic tiles having flush mounted fluorescent " PATCHIN MESSNER & DODD Valuation Counselors ..... 17 205109 IMPROVEMENTS DESCRIPTION Fillish: Basement fixtures above the lanes, and hanging incandescent fixtures and ceiling fans over the rest area. Bar/Dining area: In the kitchell, bar and bathrooms, floors are finished with clay and mosaic ceramic tiles. Elsewhere, the floors are carpeted. In the kitchen and bathrooms, walls are finished with sheetrock and ceramic tiles, and ill the bar and dining area, walls are finished by wood panels. In the office and locker storage area, walls are paint-finished sheetrock with some wood panels. Lastly, ceilings are finished with sheetrock in the bathrooms, kitchen and office, acoustic tiles and panels are present elsewhere, and lighting is provided by mostly incandescent bulbs with some florescent fixtures in the kitchen and locker area. Pin setting area: The walls and ceiling are finished with panels of painted fiberboard. The floor is unfinished, and the lighting is provided by suspended strips of florescent bulbs. ' Fenestration: Wi ndows The tenant bays on the main floor have large plate glass windows along the entire front of the buildillg. Doors The store in the north bay of the building has two glass entlY doors at the front, and one metal service door at the rear. The store in the south bay has one front glass entry door, one metal selvice door at the rear, and one overhead garage door along the south side. The entlY foyer selving the basement has two glass entlY doors. Also, there is a metal service door to the basement at the rear of the building which is selviced by a small flight of concrete steps. Lastly, there is one metal service door at the rear of the building which selves the common area. I-WAC: For the most part, the building is heated and cooled by a ducted, forced air system. There are four combination heating and cooling units situated on the roof, with two selving th.e south bay, and two serving the north bay. A natural gas fired furnace heats the basement, and a water cooled chiller provides the air conditioning. PA TCllIN MESSNER & DODD Valuation Counselors i" '~i " , ~t ",\, ".:.'.'."1." ;~{ . li 'I, 'I .t~ " , rrjr v' . VI 'IiI i.l !ii .f,{ "j.I ".1' 'W' It.ll .~ .~ :'1~: ; ,\,'.il ' \.) , ,~ , -;1! ~ il "j ,), ,I I 1. ..\ j ; '~ ',\ "\ :7 {ii " " '.;:' :1 ii;l :f.'i~ . :~ i:~~ (~J \,' ,Hi i " ) { ...,j i'~. , 'II 1\ f, ~ i' I~~ Ii: ,;( ]!l 11 ,,' , ~ : , It j~ ); .'i. . ~:' I ':) I i , I I I J ,I: Fixtures & Equipment: On the date of appraisal, there were operating businesses in the building, with numerous items of movable personal property and immovable trade fixtures present. The movable iterTIs are not valued in our appraisal of the subject real estate, nor are the immovable trade fixtures. However, the trade fixtu res are val ued in a separate report bY Steven Wall, and his values are incorporated into the total property value reported in this report. :;i' I, ::1 t ~ ..~~ I", '.~ " J "i- , :1. , , H ,. '\! I: ,'[ " , : ;1\ , ',11 --- 18 205109 IMPROVEMENTS DESCRIPTJQb! HVAC: suspended blower units otherwise provide supplemental heat in the main floor comlllon area, the storage area of the north bay, and in the entry foyer leading to the basement. Plumbing: Main floor ~'oom in the common area has a white porcelain toilet and a hand sink, and the hot water is provided by small electric water heater situated atop the bathroom ceiling. Basell1ent ~trooms, there are two urinals, two sinks and one toilet in the mens bathroom, and three toilets and one sink in the women's bathroom. Otherwise, plumbing in the , kitchen and bar includes numerous supply lines to several stainless steel sculleries (fixtures) and a porcelain hand sink. There is also one water cooler by the front desk area, and a janitor's wash tub and 50 gallon water heater in a supply closet at the northwest corner. :,r " d, Electric: power to the main floor is provided by foul', 200 amp main switches and several panel breakers. There is no division between the north and south bays. There is however, separate metering to the basement. It is powered by one, 200 amp main switch, and two, 100 amp switches. Other: A 10_foot-wide concrete walkway extends across the entire front of the building, and it is covered by a lighted canopy. AlsO at the northwest corner of the building, the exterior wall rises several feet above the roof line, where one of the store's signs is mounted. PATCHIN MESSNER & DODD Valuation Counselors --------- 205109 19 IMPROVEMENTS DESCRIPTION Site Improvements: Overall Functioll & Condition: . Approx. 77,000 SF asphalt pavement . Approx. 1,400 SF concrete pavemellt . Five parking lot lights; four double & Olle single arm The subject is a multi-tenant commercial building, and appears to sufficiently accommodate the operation of productive businesses; two stores 011 the main floor and a bowling alley in the basement. However, the long-lived building components of the building are 49 years old and exhibit significantphysical deterioration and obsolescence. As for the short-lived items which require periodic replacement during the economic life of the building, besides the parking lot resurfacing which occun'ed in the summer of 2004, there does not appear to have been any replacements for many years. The exterior paint is faded, the store and basement finish is quite dated with several stained ceiling tiles (indicating a leaky roof), worn carpeting and floor tiles, a portion of the floor slab is sunk in the basement, and there is deferred maintenance. I ,1 d. .' ,,' :i ,I.:' " ',I .'i I 'i , , I ..! .'i / : '~i i , " , ., ; , " " ! I i' Examples of deferred maintellance include 1) a broken /-IV AC unit on the roof of the north bay and the suspended heater in the back storage area, 2) missing ceiling tiles, 3) a leaking roof on the entlY foyer and by the roof top /-IVAC units, 4) mold/fungus on the basement water chiller, 5) some non-functioning emergency and canopy lighting, 6) cracked door and window seals, and 7) untrimmed brush along the north side of the building. With regard to obsolescence, problems in the basement include 1) marginal demalld for this type of space, 2) no handicapped access, 3) an undersized and obstructed fire exit, 4) non-vented bathrooms, 5) an outdated /-IV AC system, 6) inefficient lighting, and 7) non-compliant kitchen sinks with no mop tub. Also, problems 011 the first floor include 1) lack of bathrooms for each main flool' tenant, 2) existing bathrooms are not available to public use nor are they handicap accessible, 3) no sprillkler system for multi- tenant occupancy, 4) loading door on the south bay is not flush with the storage area floor, 5) unmarked fire exits lead through storage areas, 6) inefficient lighting, 7) inadequate roof slope. PATCHIN MESSNER & DOI?D Valuation Counselors ,Ii 'i :1' " 205109 20 IMPROVEMENTS DESCRIPTION Front View - West and South Elevations Rear View - South and East Elevations P ATCmN MESSNER & DODD Valuation Counselors I' I, " I i. (. I, !' I , I 205109 " , l 21 IMPROVEMENTS DESCRIPTION South Bay - Front Mercantile Area (' South Bay - Rear Storage Area PATCHIN MESSNER & DODD Valuation Counselors 205109 IMPROVEMENTS DESCRIPTION I, ;{:' i,':;';, fr':l t~~L q,,' :/!L ~;' 'f%../; North Bay - Frollt Mercantile Area 22 Shared Bathrooms PATCIDN MESSNER & DODD Valuation Counselors 109 23 IMPROVEMENTS DESCRIPTION \ I \ \. 1 NOIth Bay - Rear Storage Area Entry Foyer to the Basement PATClIIN :MESSNER &DODD Valuation Counselors ,. 205109 24 IMPROVEMENTS DESCRIPTION fi NOI1:heast View of Bowling Lane Area in Basement Bar and Dilling Room Area PATCIIIN MESSNER & DODD Valuation Counselors IMPROVEMENTS DESCRIPTION 205109 25 1; Office PATCUIN MESSNER &DODD ValuatIon Counselors 26 109 IMPROVEMENTS DESCRIPTION i';' \.:;' , t' p,i;;~ i';i,: {tW", ik ;~p;, 1 'j':; ,~. ~ r:- ~ Pi 11 Setti Ilg Area '-~o";""kJ!;fv?" i;' ;, Ii Locker Area 'i' :1 PATcmN MESSNER & DODD Valuation Counselors 205109 IMPROVEMENTS DESCRIPTION 100.0' Storage b D ~ Store Area 111.0' Fi rst Floor Storage Store Area b .; ~ 11.0' q l' BUILDING SKETCH " 27 Pin Setting Area )J !:}~! "~I :k f;~ :;1 "I' !: j '\l 'F ....~ (~ 1\1 'Ii ,,-., !;{~ :Nl ,II if I "1 !hlj' >11 ';1 ' A !: ; '~ .j; i,~ ,t 16 Lane Bowling Alley .1 II . ii'.l' ~{ , Ii N !,~ ~;~; ,to 'ii'/. ,I .:;~ ~<; .I:'! ,. I ' ;\ ~i Dining Off. Cooler Room Bar Bath Bath I Kitchen .i:;,. .t~ 'i " "1' i.: '!j: i 'I.' , " Basement , , . I;:,: ," r;i" I', (i" \-,': ,. PATClIINMESSNER & DODD ValuatIon Counselors :!,;' t: .. I:::: ::.::.... 'j', 28 205109 J:ONING DATA The subject is located in the CBD (Central Business District) zoning district. According to Section 10 of the zoning ordinance, "The purpose of the CBD district is to provide for the development and redevelopment of the established downtown core, including a mix of retail, financial, office, service and entei'tainment uses. Residential units are allowed within this district when located above a first floor commercial use," According to the zoning ordinance, the following uses are permitted within the CBD district. . Multiple-family residential when located above a first-floor commercial use . Indoor and outdoor recreational facilities . Bowling alley and banquet halls . Medial, dental and veterinary clinics . Retail businesses . Banks and financial institutions . Restaurants; fast food, full service and limited shops/delis . Hotel and motels . Offices and professional service businesses . Movie theaters Also, several examples of uses allowed by a conditional use permit are as follows: . Minor automobile repair . Outdoor' sales and displays . Parking ramps . Clubs and lodges PATCHIN MESSNER & DODD' Valuation Counselors i , , :\ ::1. II ';'1 " ;,~ ::1 il 1-1 )\1\ ,J., .J: ';''t, '!fi " 1"'. '\' 'ii: , ' iil It '. 'I .'.!.'~. ,'.f.. .' "I" I',~ -"I.' ':IIr: "~1 Jl.~~.i '!:~ :~ I ~; " "'! .11 : I i i .i, '\ -i'., i' ~ , ' ',.', I':, I ~ \, " I" ..1,1 (" :1 ..... 29 205109 ZONING Lot and yard standards within the CBD District are as follows: Minimum Lot Area: None Setbacks: Front Yard Side Yard Rear Yard None None 10 Feet None 6.0 " " Building Height: Floor Area Ratio: Comment on zoning designation and site use: A bowling alley is a permitted use in the CBD district, as is a retail store of most new products. However, a second-hand retail store like the Salvation Army Thrift Store is not a permitted use. But, by virtue of being a long-term tenant and allowed as a permitted use under the previous zoning ordinance, this palticular occupant of the subject is a legal non-conforming use. With regard to the improvements in physical comparisoll to the performance standards of the City's zoning and building codes, there are numerous deficiencies in categories like handicapped accessibility and restroom features, but again we assume the subject is a legal non-conforming property due to changes in the zolling code since the building improvements were constructed. Copies of the Future Land Use and Zoning Maps (with legends) showing the subject propelty and immediate neighborhood follow. PATCHIN MESSNER & DODD ValuatIon Counselors :1 i ;\ :1 il 1\ !I ';f \' J l :;, ;'il' 1ill }IL ,:tl "~I: :1\ *1 i~;l~ ',',i;'~,;,' "1:11 ',Ill' "11, ~I ill ,'Ii ,\' I( ~ 11 :, :"1', '\1 I, , , , J , , I l I I 'I II h if , " ,'ii' , I'i' I' 1: i~; , II< ,'i ". Ii: ,'" '"'" ~ 30 ,ZONING DATA Fumee Land Use,: Lovi' Density Re_sideulitll !'.{edimu De:G~ty RNid:en:lud nieh De,n,:;~r,' Residential :nri.1'ih111.cUiilr Reliziou:;;. :n::ititntiom COllunerclrd ~lclllS'tri8.1 CC1llU1:1;1;1l1ity Gelt~el" Dis.trkt TrlUl5Jlt Ol.'Ee-ntNl Deve-]opmelJt Transiticll:ill De;ve:O'Dlu.:-llt ~lnc;ll.nt . P"rk r.rr"'"D -- --' '. .. IiiDi Public: I ., rught-of~\\:(\y Non-City Land: e'ZZ2I City ofHiIltoD IZZZJ Cit~. of 2v1i1m~<1p~(is TOTALS: c::::1 'i,~iater Feu.tUl'e-,'l 54.091 Acte-J /'\V'~ Pfl1"cel Line.'] 0 Rede,';relopn.lent fl.re.a P A TCBIN MESSNER & DODD Valuation Counselors '\,' ,r' i , I i , \. i,i ii ''I: I' 205109 ZONING DATA I ',., / 31 AV , ., Zom:c:g .D~~~ g:t~zticJ~s.: l~.,J.~,Ii;.", j-- E...l. ~ iSmd.: I".'uull!, ?'I:..;.dtnlil'l.: D;:J:I~1 r-e',; ~.-',,'-...r- '::'''u'l'' ".r,,'l~'" r,--:: :.I,.,:~." u..~ ;....'" j,.~,,!,....1 :,..n. }:. "..aM-:,h:-- w,r....,;.;:.l. i_.~._._'; ~'I::,.d ..\.I:.!~; ,1::"..--:::.,' Rt,.n;I,...fJ.;JI,r:-'FIf.~:.1..'. tJl'j'~"'-4 'I" .. 'g"'n "j'h' , ;: "'0' ,..-", .... ',"" '_. ,_ M''''~' " . .,,', r,,""r, "."" L .... ~,....,. .--~.l ,-" ...-' , . ....... ..:.,:1:.::,....::....: i ' ~.l; ~ 'L:.tlii1r...j.t!:_:<ilJ:t~ l:';.!~;L!. ... Ca:r:. ~ 17;,;'.:-.11 ,I :P..\:.~m::':'Y ':'")I-;:;:i.I __ (j:'E. ~ (j'::lIt::~"iJ 7m:<ilNl.t<. D.k.l.l i~l, hCo..a.:J. VJII1 .. !"'{r' . M~~I:,J 't:'a~ D.:,IJ i..:l. Irl'!.'Jt:ll',j 5J""lrl~""'IJI.-.J1:'ilw':IL: ._._ :l~::!~ rhl.J;.;-I'I'II:Dll~:..L': 'P'J:lk l_~_. i1;r~;:I~.,.~',!;I//1.'( H;Y,l.(~I~'1 1.,tl.uJ \}Fn~:' Cd:.-' :,:~HilIl.~!l! PATCIDNMESSNER &DODD Valuation Counselors 32 205109 Highest and best use of property as improved. The use that should be made of a property as it exists. An existing improvement should be renovated or retained as is so long as it continues to contribute to the total market value of the property, or until the retum from a new improvement would nwre than offset the cost of demolishing the existing building and constructing a new one. .\ \ ; i , I I :.1 ,I.; I!t ;:11 ' ,:~ ' I' -, ::It "'1 i:l ,(\'j i: ':"1 , .i!\l1 ,: i~V " j i!1~ [I !It "'I :li 'j I, ""I .' :tl i '1 ,.~ \~ i~ ;, i~ :\ I \ HIGHEST AND BEST USE Highest and best use is defilled in The Dictional\! of Real Estate Appraisal, Fourth Edition, Appraisal Institute, at Page 135, 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, financialfeasibiiity, and nwximum profitability. This publication goes on to distinguish the highest and best use as vacant and as improved, as follows: Highest and best use of land or site as though vacant. Among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination. The use of a property based on the assumption that the parcel of land is vacant or can be made vacant by demolishing any improvements. As Vacant The first test of highest and best use involves identifying those uses which are legally permissible. Legal restrictions can include public restrictions such as the future land use plan, zoning and building codes, and private restrictions such as deed restrictions (easements) and protective covenants. , . I , The City's zoning and land use maps show the subject is located ill a central business district which is designed primarily for commercial development. As for easements or other deed restrictions, we are unaware of any recorded instruments but noted that utility lines exist along the east edge of the site. As such, it is possible that the subject is encumbered by a utility easement in this area. This encumbrance though is typical of platted property in urban locations, and is not viewed to be a significant deterrent for ,I PATCHIN MESSNER & DODD ValuatIon Counselors .1:1 i"';' '~J.sm 33 205109 HIGHEST AND BEST USE As Vacallt developmellt. There are also rear yard setback requiremellts for buildillg improvemellts ill this district, alld utility easemellts typically allow for sUlface uses lalld like lalldscapillg, parkillg alld driveway access. The secolld test of highest alld best use is to determille how the physical characteristics of the subject support what legally may be developed 011 the site. From a physical perspective, all public alld private utilities are available to the site, about 90% of the subject is level alld easily developed with little gradillg, 110 wetlallds exist, alld it has good access from adjacellt streets. Furthermore, we assume it is Ilot affected by allY adverse cOlltamillatioll issues alld it is large ellough that a buildillg of sigllificallt size call be developed ill compliallce with all parkillg alld setback requiremellts. III these respects, the subject is readily developable. From a stalldpoillt of fillallcial feasibility, the ecollomy is healthy alld most types of propelties allowed 011 the subject are beillg cOllstructed throughout the metropolitall area. The last test of highest alld best use is to determille which of the fillallcially feasible uses are most productive. III light of the subject's locatioll 011 a major thoroughfare with good access, retail developmellt is most likely. FUlthennore, givell the size of the site alld all allalysis of competillg busillesses ill the market area, a specialty retail store or a smalllleighborhood strip cellter would be all ideal use of the propelty. Alterllatively, a multi-use buildillg with housillg ullits 011 the upper floors alld retail tellallts 011 the maill floor would be allother good use of the site. P A TCllIN MESSNER & DODD Valuation Counselors \ , 1 1\ ,It i' ~II\ \1 ,I, ,:...,l.~: )'1 ",11 " ',,:\1'1 . 'l!~ :l 'ltl 1'" ,.!l11 \;1) " IU! \1'1.' 'I, .',' JI\ :1 .j ;1 , , ., '. ,,', , i' i :1 !t' '1"1',::" 'I " 1\,: \ ~ ; r 'i i " .... I;:., ..:" " i. :1," '1'1 :;..r ," ." .;:' 1:1' . ~ 1) Raze the ilTlprovements and redevelop the subject site, as previously indicated, unde'r its highest and best use as vacant. 2) Renovate and COllVelt the existi ng use to an alternative use. 3) Allow the existing use to continue, " \ ,I' . I 1 It .. l II It' .11. ';'\; iI' '\11 :11 ,,Ii ,i\ll i~! "El J~ ,'ill I" il II II \I \1 I ~! I 34 205109 HIGHEST AND BEST USE As Improved The subject site is improved with a three-tenant commel-cial building used by a bowling alley and secolld hand store, which are legal and legal non-conforming uses of the CBO. The southerly bay on the main floor is currently vacant. From a physical perspective, despite the building having significant deterioration and obsolescence, it is suitable for cont.inued use in support of the operational needs of a bowling alley and retail store. From an economic standpoint., there are three alt.ernat.ives for an improved property of this t.ype. They are as follows: Based on our analysis of the subject's land value (see Exhibit. 2 ill the Addenda), as well as investigation of improved propelty sales and rental/expense data, it is our opinion that razing the building improvements would not be the most productive use of the property. The improvements still contribute some value to t.he land. Renovation or conversion of the building to a different use also appears unlikely. Based on the City's blight assessment of the subject, t.here appears to be enough deficiencies and inadequacies in the building design to make conversioll or alteration unfeasible. Further, the market is healthy for st.reet level retail businesses seeking lower qualit.y space, and there is demalld for the subject.'s vacant space including a prospect.ive tenant and the exist.ing tenant. wishing to expand sout.hward. Occupancy of t.he subject's basement by a bowling alley also appears to be a suit.able use, even though the bowling industlY is in a state of declining appeal, new construction of bowling alleys is fairly infrequent, and basement locations are not ideal for stand alone commercial businesses. I \. ; !: , " " L .1 P ATCHlN MESSNER & DODD Valuation Counselors ':\;: 'II' -.tlid 35 205109 HIGHEST AND BEST USE As Improved Wallaby's, a proximate basement bowling alley, is no longer ill business, and the Apache Bowl-O-Mat and St. AnthollY Lanes have been demolished. Also, St. Anthony Lanes had a basemellt that was never finished with any bowling equipment. With one apparent exception for Midway Pro Bowl on University Avenue in St. Paul, all other Twin Cities metro area bowling alleys conduct their businesses in above-grade buildings. Even so, the subject's occupant has been long established, competition is limited in the immediate market area, and the bowling alley appears to capture enough business that. the tellant is able to continue operatillg. Also, use of the basement as a bowling alley provides a greater return to the real estate than renting the space to a tenant of the first floor who would just use the basement for storage. Lastly, it is doubtful that any other proprietor of a business allowed as a permitted use in the Central Business District would operate solely out of the subject's basement space. In conclusion, the highest and best use of the subject is for continued use as a commercial building with two store fronts, and a basement bowling alley. PATCHIN MESSNER & DODD Valuation Counselors i i 'I .1 I' ''I ! I I :\ I \l ,,), .~ '~ i " " "j! ",',11,\,:, :': .1. "1'1 .' -,i, ,:<j !~ I,:fi ::I! '.il' :1\ } 'll' i;Jil "",ill '\ .11; .1: ':1\ I: I I ! i I :' I! ., , J " ,I: ,I .,r1 : ,i. " :,1, -I' , i: 1;:1 . . l~ , ; ~, iL';: i{,:: . I: . ~ 36 205109 EXPOSURE AND MARKETING TIME The following definitions are taken from The Dictionary of Real Estate Appraisal, FOUlth Edition, Appraisal Illstitute: ExDOsure 11me: TIte estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at nl1111"t value on the effective !iLlte of the appraisal: a retrospective estinwte based upon an alwlysis of past events assuming a competitive and open nwricet. Exposure time is always presumed to occur prior to the effective date of the appraisal. The overall concept of reasonable exposure encompasses not only adequate, sufficient and reas01wble time but also adequate, sufficient and reasonable eff011. Exposure time is different for various types of real estate and value ranges and under various market conditions. Maricetinl': 11me: The time it takes an interest in real property to sell on the market subsequent _ to the !iLlte of appraisal. Reasonable market time is an estimate of the amount of time it might take to sell an interest in real property at its estimated maricet value during the period immediately after the effective date of appraisal; the anticipated time required to expose the property to a pool of prospective purchasers and to allow appropriate time for negotiation, the exercise of due diligence, and the consumnwtion of a sale at a price supP011able by concurrent market conditions. Marketing time differs from exposure time, which is always presumed to precede the effective date of the appraisal. Assuming the subject were actively listed for sale with a professional broker or exposed for sale by other well recognized channels of advertising, it is estimated the marketing time to achieve a signed purchase agreement would be between three and six months. Exposure time is also estimated to be three to six months. PATCHIN MESSNER & DODD Valuation Counselors , ',1, , I. 1 '1 ! '\ ; l i f .;: l ,! ,I, , ! , " :1" .. I[ 'I il " j; ,,' :t , I I ~' . )" r , 1.\ 'k " 'I " , ~ I : ';:( " I I' \,!'I" 't' .\ I I L ! 1.' \"\ :;. " iX \i!. i, " I',: ~ Three traditional approaches to value are widely accepted in the appraisal of real property. These three approaches are briefly described below. - I } ( I ! I I [ f 205109 37 APPRAISAL PROCEDURES AND TECHNIQUES The Cost Approach - A value estimate is produced through adding the market value of the land, assumed vacant, to the depreciated replacement cost of the improvements. The Sales Comparison Approach - A value estimate is produced by comparing the subject property to sales and/or listings of similar properties in the same or competing areas. The Income Approach - A value estimate is produced by capitalizing the subject property's potential net income. In the development of an opinion of value for the subject property, the Sales Comparison Approach is the most relevant approach, followed by the Income Approach. The Cost Approach, due to the age of the improvements, is not a meaningful indicator of value and is therefore not applied. Its absence is not considered a departure from the Uniform Standards of Professional Appraisal Practice. I; ',' , PATCHIN MESSNER & DODD Valuation Counselors "j:" I:. ,';Ii '/ ,,\;.: ..:1 .j" .' :!~ 38 205109 SALES COMPARISON APPROACH TO VALUE The sales comparison approach to value examines the sales prices of other properties similar to the subject in physical and/or functional characteristics that have sold in the marketplace. This approach is based on the "principle of substitution," which implies that a prudent investor will not pay more to buy a property than it will cost to buy a comparable substitute propel'ty. In this market area, the sales comparison approach is a reliable method to estimate value. An investigation of bowlillg alleys alld similar commercial buildings in the market area disclosed several sales which were useful in our analysis. FUlther, the quality of data is considered adequate with enough information known about the sales to draw meaningful conclusions. However, since no sale included a bowling alley in the basement and retail space above grade, we have compared the bowling alley sales to the basement bowling alley portion of the subject, alld retail building sales to the main floor area of the subject. I. , I I, '1:, I I 1. Grouped by their comparative property types, we then derived a common unit of comparison so their sale prices could be directly compared to the subject. The unit of comparison is sale price per square foot of gross building area; $/SF GBA. The unit price of each sale is then adjusted for any special financing, time of sale or market conditions, location, and physical characteristics that have significant variatioll from the subject. The adjusted unit prices which result provide indications of the subject's value as currently improved. Finally, by a reconciliation process, the various indications of value are correlated into a single unit price for each pOltioll of the subject (bowling alley area in the basement, and retail area above grade) which is reflective of the propel'ty's total market value as improved. ! 1',":1 -I I "I 1',:1 , ! On the following pages are a summalY grid of each group of comparable building sales used, location maps, photos, adjustment grids, narrative sections explaining the adjustments, a reconciliation for each group of building sales, and then a summation of the component values to estimate a final value for the subject. I: " I, i, I!:. ,I I: -T PATCHIN MESSNER & DODD Valuation Counselors " I" I:;' I i~: -'"lI 2051 09 < ~~~ o'~ ~ :3.o.!l .0 " ':'~ ~ iH . ~iB g',i: ~ ~ .~'ii : {!~ ] .. ~ . ~~ ~ ~Jj] ~ ~.s ~ll~ <n~il ",.Eo<! ~~g 0 ~.~ ~~ "ii't; 0" ~ ". iJ;o~ 511 " . .~g .!l .. .0 ~o . . 8~~ H ~~ ~,~ W ., . " ~.'( . o' ~ > . . " 00 , ] ~:! ~ . . ~ ~! . . i ] ;(0 , eEl; llJlfl r :LOll;;: H ~ t ~. t " . ~.t ., . 1l< a " '0 ~ H oOO . I ~ , ~...J ~ . . < , . ~: . ~ ,I~ ~ ~~j "' , ,; ~ ~j ~ z i~ . " ~ . "" ."I,!! ~1~ .!!~:3 .. . "" . " . , ~i ~ . . . . i " ~ o . ,. ~~ ., Il ~ . , 13'\; " i . g. "" r o "'<t "1; ~ ~!~ .'0 ~.!18 g~9 *~g 0.' 0 '2001 l] ih::r :g~ ~~~ !;&j !:J ~;;~ all"" " .Ego "' ,." "'= >< ~~~ "~o "rl'i~ "' ~~!Il ~ ~ z . ~ ~ J! " !it, ~ S.'(~ ll~ ~ ~ 8 "'"!J ~5i ,. 31'!"g g~ '0' _. 0 lll'lg ~j .~ g,g ~~tl: ~~j ~ ~~ 8'goj ~d . " 0 .z 0 . ~ . " ~ ~ . . ;; " ~ . " " ,; ~~~ . li~ g-g ,. 0,3;; 8 ~ . " - - " " - - , . , Id!~ ~ ~~~ " ~ . . ~ . . '" , ~ " ~ . ~ ~ , i " < . . i 0 0 ,. 0 0 0 0 . ., " " " " i - - - - . M . . " - - - - ~ , , , . . , ~ " ~ ~ 0 , , " -'.!loa> "' . ."" >=og! .," ~'1 E:I:o rl!~ PM ~1i 11.l!... '0. ."" ~~~ "" "e ii: ED ",.el!'l ~~:b ~~~ "'''',;, "0 ,h ! , . , ~ ,,"8 .~~ . " ril.!!! iI ~~~ .~ .' ~ ~~i ~~ g l ~.~ . .. " i 0, .~ 1:; r:; ,0, ~,'! M $.2 ti~8 ~~~ m;e3: ~ " 00 . . . 1i :g- . ~ i gR 0' " 0 ~.g oJ 50.. :g ~ ~i l; il ~ ~e~ .!!l':" Jl~B . c , . Gli,l1 k~~ . 0" &u e ~~~ , , .'( Zl . , . . . . r . .. ~i! SlJi:! V>:lE " . . ~ ~ ;;; . " " ~ N " > "' 0' !ll. 3i ~~ o j. 0, ~'g ]8 d. ~ 9 ,0 , < . :2 . , " . , r g! i ~] -," g v>1j.51.1 . ~ ~ ~ " " . " ,; . .. , { g Z' !l ~ 00 ~~ o fli !>" .' .0 ". o. g,~ ~,;: ~ B o :; ~ . TI aE.!,! .Il: a",1s- l'i ~j~ ~ l\l~~ . m ~ . " . . :; " 39 1lg ~lfil . .. ~ ~~ ~g-g i~J1 ]!~~ ~oi~ ::d:~ . ,0 ()~ ,~ 15 .0 .. D. 1l,~ E!,;: ~ " ~ e . , ~~ '" ~* o 00 ,;2 .. 8~ t;~ ~ . '" . , ~ > . i l i , " , " " , r . ~ ,. j , ) " :1,' i .~:: ' " I:. ~. \, ':1 . " lli;!if;' ~~~ :!~~ " I j I 1:1 .;1 'I I ." .1' J ::i! " ," . ~ ~. '1'. .' PATCHIN MESSNER & DODD Valuation Counselors ::1', I" ',,' ,', liil I : ~i! i705109 40 ';i~lES COMPARISON APPROACH TO VALUE i ----'.~~,.~: r~_-m_~\ 1 I I il I i 'CltllM I " ' ~\- i ~......~... ,~ ' -^ "~,I<RI""III' "":@(- .----.-.'1: "" ' ~ , '''''"0 \ 1,<" ...". . ,{i; AlI"'V'l . , @ 'fJH:.1h ({/I'~ "'~""~,,Athel1l1l1le ." -"'''''''?, " ="""'" 1 " , \ I I , :r "' Rolf.lllom... '... lellV;IIl!Y J "'\ i-I 'iil! 1!: ',:! " COMPARABLE BOWLING AllEY SALES LOCATION MAP ',1,0 PATCIllN MESSNER & DODD Valuation Counselors :,< :~; j 'II':! ~ 205109 41 SALES COMPARISON APPROACH TO VALUE Sale No.1: 1600 Cedar Avellue, White Bear Lake -\~:< Sale No.2: 3085 Bridge Street NW, 51. Frallcis PATCHIN MESSNER & DODD Valuation Counselors Sale No.3: 2520 26th Avenue South, Minneapolis i' fu'\LES COMPARISON APPROACH TO VALUE ',,,' 1.': it:' ,~; , .:' "j~ f, :1- :] ,j 'I " , I l.r \ 1 I, .''?'F -'~': ;'f'~"i~\~,;~~~~ ~ ":.~~ZJ , " :,} ,', '" -'~ \ :\:.'hJ~ ,<',:"1';;; ,; " ,1 ~, ,. Sale No.4: 11707 Round Lake Boulevard, Coon Rapids PATCHIN l\1ESSNER & DODD Valuation Counselors 205109 43 y ;1 ,jl ~: , SALES COMPARISON APPROACH TO VALUE Sale No.5: 6720 Riverdale Drive, Ramsey Sale No.6: 16 - 1" Street West, Waconia PATCIIIN MESSNER & DODD Valuation Counselors 205109 44 SALES COMPARISON APPROACH TO VALUE COMPARABLE BOWLING ALLEY SALES ADJUSTMENT GRID Justments nOlcalea Comp. Identificatlonl SalePrlcel Property Righls Markel Building lano:Bldg N,' Subjcc!Valua No. Location SF G8A Finance &Olher Condlllons Location Quallly Condition Size Rallo Adjust PerSF GBA 1 While Bear Bowl $48.26 0.85 1.01 1.00 0.70 1.04 1.05 0.90 0.59 $28.47 1600 Cedar Avenue White Sear Lake 2 PatrlolLanes $42.96 0.82 1.02 1.75 0.65 0.85 1.00 0.85 0.69 $29.64 30B5 Brldge Slreet NW 51. Francis 3 SlarduslLanes $58.14 0.70 1.03 1.00 0.65 1,00 1.05 1.05 0.52 $30.23 2520 26th Avenue Soulh Minneapolis 4 Classic Bowl $63.18 0.76 1.13 1.00 0.65 0.65 1.05 1.00 0.38 $31.61 11707 Round Lake Boulevard Coon Rapids 5 Home Super Bowl $D1.38 0.82 1.13 1.00 0.65 0.85 1.05 0.90 0,48 $29.46 6720 Rlverdale Drive Ramsey 6 Billy's Bowling $38.47 0.90 1.24 1.00 0.65 0.85 0,95 1.15 0.67 $25.77 161stSlreetWest Waconta SubJet;t Mady's Bowling Alley 3919 Central Avenue Columbia HeIghts Explanation of Adjustments Propelty Rights Fi nallci ng & Other; Market Conditions; i 1/11/2006 Average Avg(-) Fair Appraisal Urban Basement locallon 14,286SF 3.64:1 Average '" StdDev'" Correlation Coeffic'" $29.20 $1.97 7% Under this category, consideration is given to any significant leasehold or leased fee interests, creative financing, or any undue motivations that caused the price to reflect something other than market value for the fee simple interest. In each instance, the sales are adjusted downward for values claimed in personal propelty and immovable fixtures (bowling lanes, scoring equipment, kitchen and bar fixtures, etc.). Sale 1 is also adjusted down 10% to reflect'consideration for the purchase of the business, and Sale 6 is adjusted up 10% to reflect the seller's motivations to sell for slightly u llder market. This adjustment aCCDunts for any change in value for this type of real estate that may have occurred between the transaction date of the comparable sale and the effective date of this appraisal. For these sales, there is about a 4.5-year time frame to consider. i I " ,I "I I , :' i! ! PATCHIN MESSNER & DODD Valuation Counselors 205109 45 SALES COMPARISON APPROACH TO VALUE Explanation of Adiustments Market Conditions: Location: . In this market area, as well as the Twin Cities rnetropolitan area, the economy was strong in the late 1990's, but turned recessional'Y in late 2000 and most of 2001 before making a lasting and significant recovery in about the second quarter or 2003. Currently, the market is again strong. During the recessionary period, the manufacturing sector of the economy was particu larly hard hit as was the corporate office market and those industries depending on tourism and travel. Consequently, prices of celtain types of real estate facilitating these segments of the economy declined or remained relatively constant. However, the housing market remained strong as did the service commercial and retail segments of the economy where job growth and spending continued. Consequently, prices of real estate associated with these segments of the mal'ket, and the propelties considered as sales herein, appreciated. For purposes of this appraisal, an average rate of value change is estimated at 5% appreciation per year. Therefore, upward adjustments ranging from 1 % to 24% are applied. I: , , i, 'I Because all sales are located in the same general market area where construction costs are comparatively the same, variation in per SF land values should account for the majority of variation in price due to locational differences. However, due to several factors including 1) proximity to certain customers or population centers within the immediate market area, 2) highest and best use for cOlltinued use, 3) physical deterioration, and 4) obsolescence, absolute price deviation caused by differences in land values is not apparent. Even so, some adjustments are warranted because those buildings on higher value land tend to sell for higher prices and generate higher rent. Most notably, the bowling alley in St. Francis is on much lower value land than the subject, the immediate market area contains less people, and rent in the building is nearly half what comparable space is rented for in Columbia Heights. As such, Sale 2 is adjusted upward 75%. Other sales are generally similar in locational attributes, and are not adjusted, :1 Ii I ,I I I , ~' i ~I i " , ~I , IF I' 'lli' r ,I,' !if '" PATCHIN MESSNER & DODD Valuation Counselors :;;1 'i, ,::' I " 'I '. 205109 46 SALES COMPARISON APPROACH TO VALUE Explanation of Adiustments Quality: The subject is constructed with average quality building materials, similar to the comparable sales. However, none of the comparables are located in a basement like the subject. Given that above-grade space comlTlands higher rent, the subject is inferior to all sales. Downward adjustments are therefore applied at a factor of 0.65 to Sales 2-6 which have 100% of their floor area above grade, and Sale 1 is adjusted by a factor of 0.70 to recognize that about 5-10% of its GBA is comprised of a basement banquet area. Condition: This adjustment is based upon the overall condition of the building and on-site improvements, and considers such attributes as actual age, and any remodeling efforts or deferred maintenance. The subject was constructed in 1957 and is considered to be in fair overall condition. Sales 2, 4, 5 and 6 are in much better condition with longer remaining economic life expectancies. Therefore, these sales are adjusted downwal'd from 15% to 35%. Conversely, Sales 'I and 3 are in similar overall condition. A 4% upward adjustment is applied to Sale 1, due to the buyer's immediate pursuit to fix. a leaky 1'0 of at a cost of $50,000, while no adjustment is applied to Sale 3. Building Size: While total price usually increases as a property becomes larger, the price per SF generally moves inversely with building size. As buildillgs become larger, fewer buyers are able to afford them, and in single tenant structures there are fewer businesses which area able to fully occupy the space. The subject's basement area, at 14,286 SF, is about twice the size as Sale 6, similar in size to Sale 2, and about half the size as Sales 1, 3, 4 and 5. Recognizing the above, 5% upward adjustments are applied to the significantly larger size buildings, alld a 5% downward adjustment is applied to Sale 6. i ~I....,. .1;/...... ""I;'. ~ PA Tcm~ MESSNER & DODD Valuat10n Counselors 205109 47 SALES COMPARISON APPROACH TO VALUE Explallation of Adj ustments Land-to-Bui Iding Area Ratio: .... ,011 In this case, the subject's ratio is 3.64: 1. Adjustments for different ratios are based upon a slope and regression formula of "best fit" developed from a graphic array of the comparables' unit prices against their land-to-building ratio, with the unit prices first made otherwise equal except for one attribute - the variety in price caused by different ratios. What is readily observed on this graph is all upwal'd sloping line. Buildings with higher land-to-building area ratios have higher unit prices ($ per SF) than buildings with lower ratios. Parking and maneuvering space is more abundant, as is future area for potential building expansion. These later attributes cause buyers to pay more for the property. The land-to-building area I'atios of the sales are both larger and smaller than the subject. Sales 1, 2 and 5, with ratios of 6.17:1, 6.94:1 and 6.42:1, are adjusted downward from 10-15%, and Sales 3 and 6, with ratios of 2.40:1 and 1.15:1 are adjusted upward from 5% to 15%. Sale 4, with a similar ratio of 3.51:1, is u nad j usted, The linear I'ed line on the following graph represents the line of "best fit," considering the data points represented by the black line. I ,I,' II ,Ii " " 'I ; ,. ,II , PATCHIN MESSNER & DODD Valuation Counselors 48 205109 ~ALES COMPARISON APPROACH TO VALUE Explanation of Adiustments Land-to-Building Area Ratio: $/SF GBA vs Land:Bldg Ratio. 40.00 ...... ----'" 35.00 30.00 a'i 25.00 C) 20.00 u- ~ 15.00 10.00 5.00 0.00 0.00 1.00 -+.--Series1 ____a-Series2 ,j 2.00 3.00 4.00 5.00 6.00 7.00 6.00 t' , lJ \; 1;) :; ,. Land:Bldg Ratio Summation alld Reconciliation For the bowling alley pOl'tioll of the subject, the six comparable building sales indicate a range of value from $25.77 to $31.61 per SF GBA, after adjustments. The average of all adjusted sales prices is $29.20 arid the standard deviation is $1.97 per SF. Of the six com parables, most weight will be granted to Sale 1, followed by Sale 5 which provide value indications of $28.47 and $29.46 respectively. Sale 1 required the least amount of gross adjustment and is the most recent sale. Sale 5 had good market exposure with well informed parties, and a great deal of detail is known about this transaction. Given the above, the market value of the basement portion of the subject pl'Operty is estimated at $29.00 per SF GBA. At this unit price, its contributory value is calculated as follows: 14,286 SF x $29.00 per SF ~ Rounded $414,294 $415,000 PATCHIN MESSNER & DODD Valuation Counselors 'I '~I 2051 09 49 ~f , ~~j 1 "" ;<>g . , .'e ~~<! .~ ~ \Ii .>; ~::i " 9 ,~ ~6 i ~f ~8.l: fj ~~~ " t '" sri:3 rB.g ~:g g ~~~ ,0 i~I .\J~" , "" :i~ :IE';; "" ~.~ 11~; ~11 . g m eo :ll~1t ~;:: ., lll]l 5"" ~~.,; ,,:.Ei,g ~.!i'~ 113 ~ . ,. ~~~ ~]l . .. ., i1!'Ol ._fO.l< ,5 '" ~ grE !:l% . ~i] ,.,5-" lli'Jil .' < . ex r~ 1;, ~~ i " .. -" . ;,-2 ~ E~; .g~] <! B" J;Ul.g 5~~ b~~ ," . m] ~ ".~ ~,' ~!] ~~] !'ll=ii 8~6 .s~~ .". ~~~ d II e " "" .." co. 0 o. . 0 0 0 0 0 0 0 . ~ 5 " * g~ , ~o ~l " ,00 l~ ,8 ~] .!'2;e! ota~ g .g .-. B 0 D~~ .!'l);:! u!5 'i:i'tj 0" ". 0:;5 ~8'!; 0' 0' ~] ,. ~8 !>.1!] <. 00 ,. ~8 .~8 ~8 .0 ~811 H g>~ ~8 ....,,1\ ,0 ~~~ , . ~. '. eli, a &.2 "' dg m W a] Om 0, d , ., g,W . ,< o' 3;g '0 g, ~ ~ ., 1l.~ '0 ~~ m.. W" .0 If..: " ~,H; . , ~> n: 1 1 ,< ~ ~ ~ ~ < ~ < < < 1: .'l ~ g'~ EjE (j,.~~ !~ . . " r~~ .00 . t~~ " . " .. 0 ill .~ .1:< ~a'I ., !If ~~[ 'OGlr .5<<Ij:J ~,~ . ~.l'l0; 11] ::: ~;:Q !!l .. " . -- 0 .<In.'' c: ~ ~ c:;.~ ~~ ~ m W ~~::. ~~-g ~ &: ~ ~~~ ~gS ~~" ." " ~!H j 5~ :2 .. .!l~~ ~ E';; .. ," , i15~ ~~~ it] . .. . . !fg . ~~~ ~ ~ ';;' i~~ .t~ ~ n~ i':SB " ., I--<(~ e& . . H e o '" "' ~ , ~ ~; ..... ~~ i ;: ~ ~~. ~ ~ . ].2 ~ Cf& " S ~~ ~ UJ~ m ~ ~. ~;a ~ 00 o. Ii(/) ... . H. s, 00 m . " ~ g> ~ 1 ~ ;;: l3 ~~ .0 "" 'i'if! oe 5, e ! ~I~~ .e , g ,. ij3,g ~~ ~d oz o 8 ,~ 00 ~To .0 ;' liqll \t gp!tlJ ~ ~'~~. .f 0> {l;~ .;~ ri o ~ .. ,!.;::.~ ~ ~ " 3 ~~ -. :af o t, .- ~9 ~- 2'. :l 0.~~ afo~ .. 00 ~ !! .< Erg "' ~~F o~;g Dc" ~ ~ e o ~ . "' M % 0> .. . 5 ~ . N Ii! "" "" ,,, ;Io~' .0 -g<g", E ~~ ZOM o , ~ g-~ ~~g ~,~~ ;\ e " a " . ~ o . . " o ro o " . " o " ~ ; . , " ,]\ii jj&~ ". , :;-e;:!; '.0 ,u ~~l4 " 'O>g ~ii ]~~ ~!j~ ~~~ "E'~~ ED" ,-rO o . ~ , \liijll g~\ij ~.,~~ " ~ . ci ~. o . o ~ . o ~ ~ - " [ 8~ ~IH '~] ~ ~o~ m .. ~ 5 B .'" ,,<C,m ~g'~ ill3~ *ld (iji88 " " ~ . o ~ . . . .; ~ , " o . ,; ;; '"~ "0 <. - lfl8,g >=l&;f. 81?~ ~ ~ " , ~ o ., ~h ~€~ ~~~ .g~~ .. - "00 . '" ~~-!: liSIf ~~~ "!In. m ~~1 0.. " ~ o . . N " . " ;. M .; . g . 3 ," ~ ~.!'l", ~8i 1:~~ 8~~ ~ - g - . ~'1; ~~~ .l'l ~.J- x .N :~~ ;U5~ . ., "' iii~ , " l] ... >=,~ -"5'8. ~(ij 3 ~~~ " . o ~ . o . ci a l . . . " . . ~ ;; 0> " 0> N ~ ;; 3 . ~ , o " ~ o ~ ~ - ; 0> ~ .. 2 N . ~ ..q ,-- ~~~ B. - ~J!~ g 0> . .j; ~ ~ ~Jb_ ,.- 03~ go. ... ""''"'' :!l",.. .r,il~ JlJ!~ l~ ;laz '. .0 i~~ ~~~ 0> '. ~~~ . " iDw ~ .z . j~ ~ "8.:( ';:, n. ~ ~5&. ~~~ i J1\!.!::.; !II " ; " I 1': " r, " '. ,'; , \ij1l1l [5]\li ~. il ~ '!' " e ~ o . o i e B TI "'~ ;~ -. -~ ill i' I: I' i: :!I II I" 'I !I I,' I: 'I' "I! 'I I. ,.I II: '1 "I ::1' ' 'lji_ o o ,. <" .> rg~ 8~ . I ~8 j . FA TCHIN MESSNER & DODD Valuation Counselors 205109 SALES COMPARISON APPROACH TO VALUE ", ~~......_1I1U z ~ I "~'M' Ln;'~X~l~ 1; q(,;;;'" " '17 , 33THAVEH \1>.., '5:f. \ '", '", " z .-\",:---~...- - -@}- \ . ~ ,. ~ Co-lun'lbl3 H I)t~ I . --AVj;:~)" ; " L o.!, ~ -r --,-~~ I 1I~ '4::;,-'~-."~0-'''' c;(v",bl.'lP",k 4P ',',". , W I :@ S:llnt An~hony . ~ ." . ----;- .. - . j~.':':' \c--:'-'-:- g '\ i ' %. i /~,..,~~ ~\ . \ I ~. 2\' \ii, \. ", " CRn ,,~'-'--_., ~,- ~"t;:;;J @ I .tEl ~l:lq~~M; I I I -~.- -~~~~~j ~. ,'".t ~ ~ 9ldllsaleND.7 " ,.~._, ~' ;;; +~~ "-i}- '0 ~~ ORB 0,,",""'-- ;; Mound$VI.w . \ I .Frldl*Y ,I I I " @j] ! i 2 ~\~ ,:~,~,.' -, i"' ,-",< lIIewBdr/J1tOri (.' :1 @ ~ ~. ;;; 'I c. f: , @ .Hmtop Bldg Sale No.9 9> ~ 4:ll'rlAVEW ~ " CR" :. _0' ;,\."..::'_:::':(@ ,\ ' .t 'Y' r'~~';~: ::';',;~ ;;1\ !';;i~c ,:t ~TH AVE ME ",' i ~ I.J: " I ' .,~ ';',1. 1 :\ ~ ..,,~, % "', '{i:, COMPARABLE BUILDING SALES LOCATION MAP CRB213 1 ~ 0 50 ~t.~......~.. ;,,' ::!" 0'; , .. ~.wCR"... ,g L "2 ~ "~~ 'tsiiw Mri,).'i! ~ waRD ~9> ~" ~ d z 9> ~. < il. ~ i! .falc.cmH!ll}hts: . ~ < ~ it d' . Z' ~ *' J PATCHlN MESSNER & DODD Valuation Counselors 205109 51 SALES COMPARISON APPROACH TO VALUE Sale No.7: 7101 Central Avenue, Fridley Sale No.8: 8575 Central Avenue, Blaine PATCHIN :MESSNER & DODD Valuation Counselors " i I 'I II .--" 205109 52 r I SALES COMPARISON APPROACH TO VALUE // ;,' :.,,,"~ i l' .t ] i I , , ',,,,,JO Sale No.9: 4036 Central Avenue, Columbia Heights :1 r j \ \ ' ,I j , r <- ,i; Sale No.1 0: 3968 Central Avenue, Columbia Heights I ! I, J PATCHIN MESSNER & DODD Valuation Counselors 205109 SALES COMPARISON APPROACH TO VALUE Sale No. 11: 8465 Plaza Boulevard, Spring Lake Park Sale No. 12: 1312 Glenwood Avenue North, Minneapolis 53 "',1 II: I i I, !: i , I' " i r !.I' :;,: r f ,J , ., I h' II \ n ) T r " i i ~ ,! \ " 'I i I ! I i ,I 'I I" 'I' i i: , ,I "1 ' ~!l I!: I. t ' [I' . 'il I , I PATCHIN MESSNER & DODD Valuation Counselors , I 111 '{ .1 , ill '! I I II 205109 54 SALES COMPARISON APPROACH TO VALUE Sale No. 13: 1900 - 57th Avenue North, Brooklyn Center ,i I: 'I I. ;I 'I Sale No. 14: 2551 Central Avenue Nor1heast, Minneapolis PATCIlI.1'l" MESSNER & DODD Valuation Counselors , I 1 [ II , , , , , . 205109 55 SALES COMPARISON APPROACH TO VALUE (OMPARABLE COMMERCIAL BUILDING SALES ADJUSTMENT GRID Compo lidOntificlItlonl Justments Inl1ma"fij'(] Sale Price! ropertyRights Markot dulldmg Land:Bldg Ne' Subject Value No. Location SF GBA Finance & Other Conditions location Qualily Condition Size Ralio Adjust. PorSFGBA 7 Don Harstad Building $60.85 0.95 1.00 1.05 1.25 0.80 1.00 1.00 0.75 $45.64 7101 CenlralAvenue Fridley 8 PrlntShop $95.84 1.00 1.05 1.05 1.00 0.55 0.95 0.80 0.46 $44.09 8575CenlralAvenue Blaine 9 Jimmy's Pro Billiards Building $41.03 1.00 1.05 1.00 1.00 0.60 1.00 1.25 1.05 $43.08 4036-40 Canlral Avenue Columbia Heights 10 Glass Service Building $31.65. 1.00 1.05 1.00 1.25 0.80 0,95 1.35 1.35 $42:73 _ 396B GentralAvenua Columbia Helghls 11 Dr. Muds!ingerBulldlng $64.10 0,95 1.06 1.00 1.00 0.60 0.95 1.15 0.56 $42.31 8455 Plaza Bouleverd Spring Lake Park 12 Rising Star Foods Bldg $72.28 0.80 1.06 1.00 1.00 0.80 1.00 0,90 0.51 $44.09 1312 Glenwood Avenue Minneapolis 13 Acme Typewriter Building $45.98 1,00 1.07 1.00 1.00 0,85 0,95 1.10 0.95 $44.63 1900~57thAvenue North Brooklyn Center 14 East Side Food Co-Op Bldg $50.30 1.00 1.15 0.90 1.00 0.80 1.00 1.10 0.91 $45.77 2551 Central Avenue NE Minneapolis Ii Ii il I. 'I , , i' I il " f ! 'i" :,1 " Subject Salvation Army Thrift Store Btdg 3919 Central Avenue Columbia Heights 1111/2006 Average Average Appraisal Fair 14,000 SF 3.64:1 Average '" Excluding StdDev"" Basement CorrelallonCoefflc= $44,04 $1.28 3% ',. Ii: I , .il,! I " I I; 'I: , :Ii: ".1:1' 1:,1: iil'i_!: i 1.11: i 'ili ,I:!i :P! 1:11: "ljl Iii: !ii' II" II, , ' Explanation of Adiustments Property Rights Financing & Other: Sale 7 is adjusted down 5% due to its status as a listing rather than a closed transaction. Listing prices are usually higher than closed prices. Sale 11 is adjusted downward by 5% for favorable financing. The interest rate 011 the seller's loan was below market at 4,5%. A 6% rate would be more commensurate with what most lending institutions would have offered. Lastly, Sale 12 is adjusted down by 20% for the $180,000 in fixtures included in the sale price. PA TCmN MESSNER & DODD Valuation Counselors , I: , . I'I I'F. Iii, :'t' "I' " Ii , I I' , !i 'ii ~ q' I' :'1 .:"i '.1 i. , .i'I' , I Market Conditions: Using the same appreciation rate of 5% per annum, the sales are adjusted upward from 5-15%. 205109 56 SALES COMPARISON APPROACH TO VALUE Explallation of Adjustments Location: Quality: Condition: Building Size: Land-to-Bui Iding Area Ratio: Sales 9-13 have similar locations and are not adjusted. Sale 14 is in a better location and is adjusted down 10%. Sales 7 and 8 are in somewhat inferior locatiolls and are adjusted up by 5%. All sales are similar quality buildings (one-story, Class C, average cost). However, because Sales 7 and 10 have basements and the comparative unit price is reflective of the basement area included in the size of these buildings. Therefore, since basement space is lower quality, 25% upward adjustments are applied to these sales. All sales are in much better condition than the subject and have longer remaining economic lives. Those rated in average condition (Sales 9, 10, '12 and 14) are adjusted down by 20%, Sales 7 and 11 in good condition are adjusted down by 40%, Sale 8 rated to be in very good conditioll is adjusted down by 45%, and Sale 13 in below average condition is adjusted down by 15%. Sales 8, 10, 11 and 13 are about half the size of the subject and are adjusted dOWll by 5%. The other buildings are similar in size and are unadjusted Again, the subject's land-to-building ratio is 3.64:1 Sales 9,10,11,13 and 14 are adjusted up from 10% to 35%. Sales 8 and 12 are adjusted down by 20% and 10% respectively. Sale 7 has a similar ratio and is unadjusted. PATCHIN MESSNER & DODD Valuation Counselors ,.. .. " i '[ , ! I[ " Iii .:1 !I ,1' ::ii' ., il ;'1, ~il .:i I,: h Ii .i' i i .~ i' ,I, jil I II' I:i IiI 111\, , III I:' I '11: II': 'I" I. r i I. I :11 i .,\1 ":(:' , ., I L! III 205109 57 SALES COMPARISON APPROACH TO VALUE Explanation of Adlustments Land-to-Bui Iding Area Ratio: $/SF GFA vs Land:Bldg Ratio 60 50 40 ::::::----- " ~ " 30 ~ ~ 7 ----Serles2 ............8eries1 20 ] 0.00 1.00 2.00 3.00 4.00 land:Bldg Ratio 5.00 6.00 7.00 B.OO Summation and Reconciliation For the above-grade, retail pOltion of the subject, the eight comparable building sales indicate a range of value from $42.31 to $45.77 per SF GBA, after adjustments. The average of all adjusted sales prices is $44.04 and the standard deviation is $'1.28 per SF. Of the eight com parables, most weight will be granted to Sales 9 and 13 which provide value indications of $43.08 and $44.63 per SF respectively. These sales required the least amount of gross adjustment. i , i :1 I :1 ! Given the above, the market value of the above-grade portion of the subject propelty is estimated at $44.00 per SF GBA. At this unit price, its contributory value is calculated as follows: 14,000 SF x $44.00 per SF ~ Rounded $616,000 $615,000 PATCHIN MESSNER & DODD , i I 'I Iii \/",11,,,,,,1'\'" ("'"",,.,<,,,,1,,..<, ..... 205109 ...,.~. ':'. ... ='.~~M",'~'."'''.'''~1.I.,..:~.~~M",:"_~,:,"~~~I~~!~''~w.:-'~~_''''1A!~':-W~~.;7.~~E~ 58 SAl[:S COMPARJSON APPROACH TO V AWl: Summation Basement Area: Above-Grade Area Gross Building Area: 14,286 SF 14,000 SF 28,286 SF $ 415,000 $ 615,000 $1,030,000 The above value estimate equates to $36.41 per SF of gross building area. PATCHIN MESSNER & DODD ", [ ,I ij :11 !, II ill ,I, '"I ','I' .. I I II I: ::. I 59 205109 INCOME APPROACH TO VAWE The estimated market rent for the subject is based upon "net" rent. In a net lease for multi-tenant retail property, the lessor is generally responsible for only expenses during periods of vacancy, reselves for major building component, and propelty mallagement. The income approach to value is based on the real estate prillciple of anticipation which affirms that value is increased by the expectatioll of future benefits, or that value is the present wOlth of future benefits. This approach is particularly appropriate for valuing illCome producing pl'Opelties since the future benefits take the form of net income and possible capital gain at the end of the investment holding period. Both net annual income and anticipated future price (reversion) may be discounted to a present worth figure by the capitalization process. The five steps necessalY in the applicatioll of the income approach are: 1. Estimate potential rental income. Based 011 available nlarket data and the subject's floor plan which includes a basement bowling alley, the basis of rent tabulations is rent per SF gross leasable area. 2. Estimate vacancy/credit loss and landlord operating expenses (taxes, insurances, utilities, etc). il 3. Calculate net operating income to the property by deducting vacancy and other landlord expenses from potential rental income. 4. Select an appropriate capitalization rate based on market analysis. 5. Apply the capitalization process to the anticipated net annual income to arrive at an indication of market value. I '" il 'I ii !: Ii , I ii' I, :1 ,,' :1' :\1 'i ~ ' i; Rental Income The subject's rental income will be estimated by examllllng market rents of other comparable retail stores and bowling alleys. The estimated market rent for the subject is based UpOll "net" rent where expenses are passed through to the tenants. In a net rellt lease for multi-tenant retail propelty, the lessor is generally responsible for only expenses PATCIJIN MESSNER&DODD Valuation Counselors :i I .I " I :l , j ~t !. ." ,. 205109 60 INCOME AI'I'~OAiCH TO VAWE i Rental Income during periods of vacancy, reserves for major building components, and propel1y management. ,. " Below is a survey of the comparable rental propel'ties, followed on the next page by an estimate of the subject's market rent. The subject's actual rents are not used in this case to provide any suppol1 for our estimate of market rent. Basement rent is unl'eported, the lease for the Thrift Store in the nOl1h bay is old (initiated in 1995 at $6,25 per, SF including taxes and CAM charges, and now month-to-month at the same rate) and the south bay is vacant with only an unsigned "letter of intent" between parties at an asking rate of the lessor. .1, 'I' :11 COMPARABLE RENTAL SUMMARY GRID PorSf Compo ldonliflcatlonl Dnlonf HOIIIQu,,\o Looood I3ldgSlzu B1dllQualIly No. Location ROl\lQUDlo t-loUGroBs Aroa YnorBulll BIN COn<Jilloll TaKDo CA" Commonto Stores 1 Fllmlly Dollar Slor" 1 I 11 I 2006 SO,05/SF 10,000 SF 94.476 SF Avurogo(+} $1.71/SF SUR/SF 3.22:1 Land 10 Bl<lg Rallo 4037 ConlralAvo, Col HIs ConlrnotRan\ ""' 11162 Avoragll S3.50lSFExponsllo , Hof.ayConlor 1 I 11 I 2006 ill.OO/SF 5,400 SF 73,716 SF Avorago $1.S0ISF S1.50/SF 5.411:1 LOlldto B1dO Rallo 0522_1l4UnlvatsltyAVll,Frlllloy Asking Nol 1950 Avorago S3.00lSFExllonsos 3 MooroLakllPlnzD 1 I 11 I 2006 $10.00ISF 3,4BOSF 55,[}79SF Good $1.a5ISF S2.4B/SF 5.18:1 Lanl/to 81dg RaHo 1202_9BMoorIlLkDrtvll,Frldlay Asking Nol IOOa Good S4.13/SFExpllnllllll 4 ConlrlllPlazll 1 I 11 I 20a6 $7.o4/SF 27,647 SF 125,680 SF AVIIIllga Si.57ISF $1.75/SF 2.B6:1 Lllnd lo81dg Rollo 4500CantralAva,Hllllop Asking N.I loaD AVIIIROO S3.321SFEXpanGlls 5 Co!umblaSqllaro 1 I 11 I 2oa6 Si3.oo/SF 3,524 SF 18,024 SF Gool/ $1.27/SF SU8/SF 1.711:Lllnd10 61dgRaUo 4110ContralAva, Col Hill Asking Nol 10B8 Good S3.05/SFExpllnsaB " CllntralVllluaCllntllr 1 I 11 I 2006 S6.50fSF 2,8B5Sf 123,350 SF AVCfagB S1.89/SF S1.5tISF 3.58:1 LBndlo Bldg Ralla 4300Cantal AVII,Col Hts Asking N.I 1988 Moraga S3.46lSFExpansoa 7 SSMNNlll6ulldlng 1Z I 11 I 2005 $6.40/SF 3,000 SF 8,000 SF AVllrao" $i.02/SF SO.30/SF 3.01:1 Land 10 81dg Rallo 8041 Unlvllrs~ Avo,Frldlll" Contraol N.I \983 AvBra~a S1.3VSFExnllnllllll Bowling Alleys " Palriol Lanlls 80wllng Allay 1 I 11 I 2006 S4.22/SF 12,aOoSF 12,BoOSF AVBIHOO SO.82ISF Unknown 7.49:1 LandloBldgRallo 3065 Brldgo Sl, SI. Francis ConlrllolRant No< AbovaGrada 1984 AVllmo" Rantlnoludesuseofflxturos Inoludllaqulp 121an06 lanlls,bar,kttohanolo , lyndaloLonosBowlingAlloy , I 11 , 2006 $4.61/SF 1o,600SF 10,aODSF Avoragll Si.25/SF Unknown 2.91:1 Londlo81dgRIIUo 933BLyndaloAVII,8loomlnglon ConlrBotRollt N.I AbovaGmde 1954 AvoragB('} RanI Inoludos IISB of fIxluras Inoludooqulp 121onos lanos,nokilohanorbar to Midway Pro Bowl 1 I 11 I 2006 $2.30/SF 3B,OOOSF 331,300 SF AVaragll S1.23/SF S1A9/SF 3.11:1 Land 10 B1dg Ratio 1Bi6UntvllrsHyAva, Sl. Pau! ConlrllotRanl N.I BsmlArao 1960 AvoragB S2.721SFExpenslIs axcludll611qulp 3216nllS Tllnantownllallaqulp 11 Wollabys llowllng Allay 1 I 11 I 2006 $2.87/SF 2B,OOOSF 125,660 SF AVllrago S1.17/SF $1.15/SF 2.68:1 Land to Bldg RBlIo 64545thAveNE,HlIllop Asking N., 8srntAra~ 1960 Avoraga(-) S2.\l2lSFExpensas Inoluclallqulp 241anlls RllnllncludosuBllofoldfixluros' , , ., , ,I ~1 , I Ii I' :1 :i I I. " SUllJ 3910ConlrlllAvonllo CclumbloHlIlghls 1/11/2008 ApprolsalDato 5,660 SF 7,BBBSF 14,266 SF 2B,2B6Sf Avoragll 11157 Fair BnsllmsntAran SO.63/SF Unkno~m 3.64:1 Land 10 Bldg RlllJo PA TeRIN MESSNER & Donn Valuation Counselors 'i I I 1 I i " " 61 205109 iNCOME APPROACH TO VAWE Rental Income As illustrated on the previous page, there is a considerable range in rents for retail stores and bowling alleys, and the difference is largely due to the same factors adjusted for in the sales comparisoll approach; location, size, condition, quality, etc.. Also, the amount of tenant-paid expenses is a determinate of rent, as is the use of trade fixtures, which is principally observed ill the rental data of the bowling alleys; three of the four properties had the equipment already in place. Thus, these factors were considered when estimating the subject's market rent. ,I After adjusting the comparable rentals for differences in location, building conditioll, tenant mix, fixtures/personal property, etc., the following net rent indications are produced, exclusive of the use of immovable fixtures in the bowling alley. Rental Income - Above-Grade Retail Area Rental No.1: $4.96 per SF Rental No.2: $7.47 per SF Rental No.3: $5.70 per SF Rental No.4: $5.91 per SF Rental No.5: $6.63 per SF Rental No.6: $4.62 per SF Rental No.7: $5.12 per SF I ii I , I I .. II I: .1: Best Estimate: $5.70 per SF, with most weight to Rentals No.1, 2 and 3 due to their similarities in size, location and absence of anchor tenallts in adjacent rental bays. ,I , , At this rate, the total rental income for the two retail areas is calculated as follows: "':.\ I'. "I )\ , I North Bay: 7,688 SF GLA x $5.70 per SF = $43,822 South Bay: 5,880 SF GLA x $5.70 per SF = $33,516 PATCHIN MESSNER & DODD Valuatlon Counselors 1 , I' Ii i r , -- 62 205109 iNCOME APPROACH TO VAllJIE Rental Income - Basement Bowling Alley Area Rental No.7: $3.21 per SF Rental No.8: $2.31 per SF Rental No.9: $1.86 per SF Rental No.1 0: $2.04 per SF Best Estimate: $2.30 per SF, with most weight to Rentals No.9 and 10 (the tWD basement bDwling alleys). At this rate, the tDtal rental illCDme fDr the subject's basement area is calculated as fDIIDws: I ~ 14,286 SF x $2.30 per SF GLA ~ $32,858 Vacancy MDst buildings cannDt be expected tD be fully and cDntinuDusly Dccupied. Over a typical holding periDd, vacancy IDss can and dDes occur; tenants can gD DUt of business, Dr leave because of contractiDn Dr expansiDn. CDllectiDn IDsses may alsD DCcur. TherefDre, a deductiDn is made from the 100% rent schedule for anticipated vacancy and credit IDss. Market vacancy rates, as repDlted by Colliers Turley Martin Tucker for Anoka County under the retail propelty sectioll of their 2006 Market RepDrt, amountd to 7.8% for neighborhDod centers in the fourth qualter, 2005. This data cDnsiders a universe of retail space at 2.6 million SF. Also, CB Richard Ellis reports a vacancy rate of 10.67% in the NDrthtDWll market area of their MinneapD/is / S1. Paul Retail FDurth Quarter, 2005 Market View repDlt. This data cDnsiders a universe Df space at 3.07 milliDn SF for all types Df retail buildings. Lastly, the Minnesota Shopping Center Association repolts in their 2005 Retail Real Estate RepDlt that metrD wide, the average vacancy rate in neighbDrhDDd centers (with a universe of 20.86 milliDn SF) is 6.3%. HDwever, the vacancy rate is higher fDr the sUlveyed centers in CDlumbia Heights and adjacent cities Df St. AnthDny, Fridley and New BrightOl1 at 9.07%. PATCffiN MESSNER & DODD Valuation Counselors ~ "..II 63 205109 INCOME APPROACH TO VAWE Considering the above sources, and with further note to basement space in the subject, we will deduct 10% as an allowance for vacancy and collection losses. Other deductions or expenses from potential net income that would be paid by the landlord are as follows. Expenses Operating expenses paid by the owner during periods of vacancy include real estate taxes, and common area maintenance (CAM) charges including insurance premiums, management costs, utility bills for common areas and unoccupied tenant bays, building and site maintenance fees, leasing/marketing charges to attract new tenants. In both instances, taxes and CAM charges would othelwise be "passed through" to the tenants. Expenses which are not usually passed through to the tenant are those costs for replacement of sholi-lived building components. Typically, reselves for replacement would fund replacement of the HVAC units, roof cover and parking lot, and new paint for the building exterior. However, since these expenses are generally not repolied on operating statements of retail property, we will instead account for these costs in the overall capitalization rate. I' I' I I ., Common Area Maintenance Charges and Real Estate Taxes: In this particular case, the total operating expenses for above-grade areas of the subject during periods of vacancy are estimated to be $2.80 per SF, with about $1.40 per SF allocated to taxes, and $1.40 per SF to common area maintenance. . While CAM charges should be the same for basement area, the pro-rata share of tax is adjusted downward for basement area since this space is less valuable on a per SF basis. Based on basement space contributing 40% of the value of above-grade space, the pro-rata share of taxes for basement space is estimated at $0.55 per SF. As such, with 13,568 SF GLA of above-grade building area at ($1.40 + $1.40 =) $2.80 per . SF and 14,286 SF of basement area at ($0.55 +. $1.40 =) $1.95 per SF, the total . expenses are estimated at $65,848. Therefore, the owner's share during periods of vacancy (10%) would be $6,585 per annum. I , PATCHIN MESSNER & DODD Valuation Counselors ~; 64 205109 !NCOME APPROACH TO VAlIUlE Capitalization Rate The capitalization rate reflects the returns demanded by competing forms of investmellt, as well as the risks inherent in a particular property. The capitalization rate is a blend of mortgage interest rates, investor's equity yield and anticipated future appreciation and/or depreciation of the property. There are several techniques by which a capitalization rate may be estimated. For purposes of this appraisal, the Market Sales Technique and Built- up Technique are used and discussed as follows: :i " Market Sales Technique: A long favored technique to generate an overall capitalization rate has been to compare sale prices of similar properties to their net operating income at the time they are sold. The result is an overall capitalization rate that has been extracted "out of the market." In doing so, it is important that market derived capitalization rates are calculated from the sales on the same basis as they will be applied to the subject. This means that vacancy and all expenses are accounted for in the reported net operating incomes. Ten overall rates are estimated from the following sales of retail buildings. RETAIL BUILDING OVERALL CAPITALIZATION RATE COM PARABLES Comp No . Location Sale Date Sale Price NOI Rate Comments 1 2137 Division Street Oct-05 $1,150,000 $98,295 8.55% Mulll tenanl bldg on 2 levels; 14,000 SF GBA North SI. Paul 1978. 90% leased. No accounting for reserves. 2 3085 Bridge Slreel NE . Sep-05 $549,900 $54,000 9.82% Bowling alley. 100% occupied. 12,800 SF St. Francls GBA. 1984. No reserves & fixtures included. 3 5621 Duluth Slreel Jun-05 $7,250,000 $610,818 8.43%' Mulli tenant bldg w/gd anchors. 43,404 SF Goiden Valley GBA, 1971, 100% occupied. No reserves. 4 5600 Bass Lake Road Apr-05 $695,000 $61,577 8.86% Multi lenanl bidg. 5,922 SF GBA. 1978. Cryslal 100% occupied. No reserves, 5 275-301 McKnight SI Mar-05 $1,500,000 $133,000 8.87% Mulll lenanl bldg on 2 levels; 17,400 SF GBA. SI. Paul 1976.97% leased, No accountlno for reserves, 6 3900 Silver Lake Road May-04 $2,000,000 $164,585 8,08% Multi tenanl bldg; 8,520 SF GBA. 1996. SI. Anlhony 5% vacant, no reserves accounted for, 7 797 Sibley Memorial Hwy Mar-04 $2,000,000 $177,375 8.87% Multi tenantbldgs; 38,230 SF GBA. 1961. Wesl SI. Paul 8% vacancy & reserves accounted for. 8 2435-59 Rice Streel Jan-04 $1,500,000 $141,625 9.44% Mulli lenanl bldgs; 16,656 SF GBA. 1987. Rosevll1e 9% vacancy & reserves accounted for, 9 3020 Brookdale Drive Aug-03 $745,000 $70,000 9.40% ' Multi tenanl bldg; 7,000 SF GBA. 1988. Brooklyn Park Fully occupied. No accounting for reserves. 10 5939 John Martin Drive Jun-03 $1,224,700 $103,830 8.47% Single lenant bldg; 14,918 SF GBA. 1982. Brooklyn Center Fully occupied. No accbunting for reserves, I , Average = 8,88% PATCHIN MESSNER &, DODD Valuation Counselors 65 205109 INCOMIE APPROACH 10 V AI.UIE Capitalization Rate Built-up Technique: Capitalization rates can also be developed usillg mortgage interest rates, loan-to-value ratios, investors equity yield requirements, anticipated futul'e appreciation and/or depreciatioll of the propelty, and a lender's debt coverage ratio requirements. Band of Investment Method - This method uses the following formula to estimate the overall rate. II I I' ,I Ro = M X Rm + E x R, Where: Ro = E = M = Rm ~ R.= Overall Rate (Capitalization Rate) Equity-to-Value Ratio Loan-to-Value Ratio MOltgage Constant (Capitalization Rate) Equity Capitalization Rate I II Based on lender contacts, reports of investors who have purchased industrial buildings, and published surveys by RealtyRates.com and Collateral News, the following loall terms were concluded for the subject. 1 'I : ~ ,II" I Interest Rate: Amortization: Balloon (Call): Loan-to-Value: Equity Dividend Rate: 6.5% 20 Years 7 Years 80% 8% 1 .r With the above information, a mOltgage constant of 0.0859 has been calculated. The overall capitalization rate can now be estimated via band of investmellt method. .80 x 0.0895 + .20 x 0.08 ~ 0.0876 or 8.76% ~ATCHlN MESSNER & DODD Valuatlon Counselors 66 205109 INCOME APPROACH TO VALUE Capitalization Rate Considering the preceding data, the best indication of an overall capitalization rate is derived from comparable sales. Overall rates extracted from comparables 1 and 5 are best; these rates reflect similar accounting of vacancy and expenses in NOI as the subject, the buildings are older, and the sales occurred in 2005. Rates from Sales 6 and 8 are also good, but less consideration is given due to older sale dates and newer buildings. Finally, some weight will also be granted to Sale 2 because it was derived from a bowling alley. However, the rate was extracted without any deductions for the contributing value of fixtures or any vacancy expenses. As such, the best estimate of an overall rate for the subject is 9.00%. The built-up rate of 8.76% provides excellent support. Indicated Overall Capitalization Rate: 9.00% Summation The next step in the income approach will be to set up a Pro forma Operating Statement for the subject property. Based on the preceding data, the subject's market value can noW be estimated via the income approach to value. ProForma Potential Net Income: Net Rent Terms I , 1 'I' i Ii " " ii ;\1 Retail G LA: Basement G LA: Total Income 13,568 SF x $5.70 14,286 SF x $2.30 $ $ 77,338 32,858 j' ; I Less: Vacancy & Credit Loss @ 10.0% $ $ 110,196 (11,020) $ 99,176 i I I' I, ; ! I, Effective Net Income Less: Expenses Mgmt & Lessor's Operating Expenses on Vacant Space 13,568 SF Above Grade GLA x $2,80/SF x 10% Vacancy ~ 14,286 SF Basement G LA @ $1. 95/SF x 10% Vacancy ~ Total Expenses $ (5,926) I, , Ii " " $ $ 3,419 2{507 $ 93,250 Net Operating Income 9.00% . Rounded To: $ $ 1,036,111 , , , I I I i Overall Capitalization Rate Indicated Market Value 1/035,000 P A TCllIN MESSNER & DODD Valuation Counselors 67 205109 ~UMMARY AND FINAL ESTIMATE OF VAWE The purpose of this appraisal is to estimate the subject's fee simple market value. The client of this report, the City of Columbia Heights, is proposing to make a purchase offer for the subject, and all appraisal report of the subject with an estimate of its market value will provide guidance for this effolt. \' I 1 The subject is a one-stotY, three-tenant retail commercial building located at 3919 Central Avenue NE, Columbia Heights, Minnesota. The building contains two retail bays above grade, a bowling alley in the basement, and was constructed in 1957. FUlther, the gross building area is 28,286 SF, allocated at 14,000 SF above grade and 14,286 SF basement. Also, the improvements are in fair overall condition, and the site is 102,970 SF or 2.36 acres in size. To estimate the market value of the subject, we have prepared a limited appraisal utilizing the Sales Comparison and Income Approach. Their indications of value follow. Sales Comparison Approach Income Approach $1,030,000 $1,035,000 The two approaches provide similar indications of value, and are supportive of one another. The sales comparison approach is most useful when there are recent sales of similar properties, the data is considered reliable, and purchases are made for owner occupallCY. In this market area, we were able to find several sales of store buildings and bowling alleys. The 14 sales presented herein represent the prilllalY data analyzed, with additional sales in the appraisers' files providing suppoltive data. As such, the sales comparison approach is regarded to be a reliable indicator of value. However, nOlle of the sales were of buildings like the subject, with a bowling alley in the basement and retail space above grade. PATCHIN MESSNER & DODD Valuation Counselors 68 205109 SUMMARY AND f~NAl ESTIMAllE 01' VALUE The income approach is based upon an analysis of the subject's net income earning potential. Estimated market rent and expenses were derived from examining rental and expense data of similar retail buildings and bowling alleys. In addition, celtain subject operating expenses were considered and the capitalization rate was estimated directly from sales of other retail buildings and one bowling alley. Overall, the market data is generally considered good, and we believe the income approach estimate also provides a reliable estimate of market value. Considering that most multi-tenant buildings like the subject are purchased as' an investment to capture their income-earning potential, the income approach should be the better approach. Even so, many good building sales were analyzed in the sales comparison approach and the two indications of value are almost the same. We therefore conclude to a market value for the subject real estate, as of January 11, 2006, of $1,035,000. ONE MILLION THIRTY-FIVE THOUSAND DOLLARS final Estimate of Value As previously discussed, trade fixtures are not included in the above estimate of market value. These trade fixtures were indeperldently appraised by Steven J. Wall, MAl, ASA, of Steven Wall Appraisal Services, Inc., and are added to the above estimate of market value as follows: Correlated Conclusion of Value Plus Value of Trade Fixtures Final Value Estimate of Real Estate $1,035,000 $ 201,750 $1,235,000 (Rounded) FA TClfIN MESSNER & DODD ValuatIon Counselors t,:.'". '( i ~. " t " , I: 'I' I'" k ill I i I, il :1 II II \ , r , I \ I ~i' 'I 69 205109 ADDENDA PATCmNMESSNER & DODD Valuation Counselors I :i II I 'I i J \1 I ;1 :, I I I I I I i 'I I r " I,: r.l i,1 .:i I ! i 70 205109 EXHIBIT 1 Trade Fixture Description By Mr. Steve Wall (Pages 71-126) PATCIDNMESSNER & DODD Valuation Counselors I I [. i i il ! ;1: 'ii ;:' '. f \ ,.. ill ; II q 1 f , II il ", I;; I;: I. I.i :i I:. '. e " ., , , , i. I' 'I " ." . ,i i .BI " COMPLETE SUMMARY APPRAISAL REPORT (File No. 20542) I I J I I I, , ;i I, I, OF THE i' TRADE FIXTURES LOCATED AT I ,I \ I I I MADY'S BOWLING AND LOUNGE VACANT TENANT SPACE SAL V A TION ARMY THRIFT STORE 3919,3927 AND 3929 CENTRAL AVE, NE COLUMBIA HEIGHTS, MINNESOTA FOR MR,ROBERTSTREETAR COMMUNITY DEVELOPMENT DIRECTOR CITY OF COLUMBIA HEIGHTS 590 40TH AVENUE NE COLUMBIA HEIGHTS, MINNESOTA I ;1 AS OF 'I i JANUARY 11, 2006 BY STEVEN J, WALL, MAl, ASA STEVEN WALL APPRAISAL SERVICES, INC 470 W, 78TH STREET, SUITE 110 CHANHASSEN, MINNESOTA CERTIFIED GENERAL REAL PROPERTY APPRAISER MINNESOTA LICENSE #4001239 StevenWALL MAl, ASA January 24, 2006 952-294-9600 sjwall@qwest.net 952-294-9777 fax Mr. Robert Streetar Community Development Director City of Columbia Heights 590 40th Avenue NE Columbia Heights, Minnesota 5542 I I Ii Ii :i: d. RE: Appraisal of trade fixtures in Mady's Bowling and Lounge, a vacant tenant space, and the Salvation Army Thrift Store, 3919, 3927, and 3929 Central Ave. NE, Columbia Heights, Minnesota. Dear Mr. Streetar; ii ~ i : Enclosed is my appl'aisa1 of the trade fixtures in the above referenced property as of the date of the appraisal, January 11, 2006. The date of the inspection was also January 11, 2006. The intent of this appraisal report will be to assist you in negotiating a purchase of the real property and the above referenced property in this appraisal for future redevelopment of the site. The intended users of the report will be you and other City officials of Columbia Heights, the Relocation Specialist, Ken Helvey, and the real estate appraisers, Jason Messner, MAl, and Eric Bjorklund, both of Patchin Messner Dodd and Associates. This report is a Complete Summary Appraisal that is intended to comply with the purpose and reporting requirements set forth by the UniJorm Standards of Professional Appraisal Practice(Sections 7 and 8 of USPAP), and the Code of Ethics and Standards of Appraisal Practice of the American Society of Appraisers. It summarizes the data, reasoning, methods, and analysis that have been used to develop the stated opinion of value. This appraisal is based on a Fair Market Value In Continued Use. This report is the result of an appraisal process where certain allowable departures from specific guidelines of USP AP have been invoked. Specifically, the Sales Comparison and Income Approaches were not processed for this report. Supporting documentation regarding this appraisal is in my files. According to the Uniform Relocation Act (URA) for non residential properties, effective Pebruary 5, 2005, 49-24.205(c)(i)(C), Identification and resolution of personality/rlita,lty issues, it states that "Every effort must be made to identify and resolve realty/personally issues prior to, or at the time of, the appraisal of the property". The differences between. personal property, which is movable, and trade fixtures/fixtures, which are not movable, are made by the fixture appraiser and the real estate appraiser. Thus, the personal property has been listed for each space in the building and is located in the body of this report. STEVEN WALL APPRAISAL SERVICES, INC. M/E. Trade Fixtures, Special Purpose Properties 470 West 78th Street, luite 110, Chanhassen, Minnesota 15317 Fair Market Value in Coutinued U~e is defined by the American Society of Appraisers as the amount expressed 111 terms. of money, as of a certain date, that may be ~'easonably be .expect~d for property 111 exchange between a willing buyer and a wlllIng seller wIth eqUIty to both, neIther under any compulsion to by or sell and both fully aware of all relevant facts, and assum111g that the earnings support the value reported. This amount includes all normal direct and indirect costs, such as installation and other assemblage costs to make the property fully operational, The vacant retail space, formerly occupied by the Furniture and Mattress Outlet is empty and ther~ are no trade, fixtures in this space. Th~ only item categorized as a trade fixture In the SalvatIon Army ThT1ft Store (ThT1ft Store) is their building mounted sign. In Mady's Bo~ling al:d Lounge (Mady's), the major trade fixtures are made up of the bowl1ng eqUIpment such as the lanes, pinsetters, ball retrievers, amI scoring syst~m; the b~ilt in c~binets in the lounge and bowlIng center; hood, s111ks, and walk 111 cooler 111 the btchen, and exterior signage. I' I' , ,j. " :1, This appraisal report consists of this Letter of Transmittal, a Certification the Description and Function of the Property, Subject photographs, a section ~n Highest and Best Use, Appraisal Methods, an Analysis of Data, a Valuation Summary, a listing of the personal property, a listing of the trade fixtures with values, and the Appraisers Qualifications. Based upon my research, investigations, and listings in this report, it is my opinion that the total Fair Market Value in Continued Use of the trade fixture as of January 11,2006, is: s, .'i TWO HUNDRED ONE THOUSAND SEVEN HUNDRED FIFTY DOLLARS ($201,750) Allocated as Follows: Salvation Army Thrift Store Mady's Bowling Center and Lounge TOTAL $ 3,800 $197,950 $201,750 -- STEVEN WA'LL APPRAISAL SERVICES, INC PAGE 2 Sincerely, STEVEN WALL APPRAISAL SERVICES, INC. ~1Ud(J " I' , , , :1 i Steven J. Wall, MAl, ASA Certified General Real Property Appraiser Minnesota License #4001239 i i II I '\ I >-- PAGE 3 STEVEN WALL APPRAISAL SERVICES, INC :,1 ,"j T ABLE OF CONTENTS SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS ................................ 4 CERTIFICATION.. ....... ........................ ........... ......... ...... ............. ....................... 5 ASSUMPTIONS AND LIMITING CONDITIONS .................................................. 7 pURPOSE AND INTENDED USE OF THE APPRAISAL .......................................8 PROPERTY BEING APPRAISED ........................................................................ 8 D EFINITIO NS..................................................................................................... 8 APPRAISAL PROCESS/SCOPE ......................................................................... 11 DESCRIPTION AND FUNCTION OF THE PROPERTy..................................... 12 SUBJECT PHOTOGRAPHS - VACANT SPACE................................................. 16 SUBJECT PHOTOGRAPHS - THRIFT STORE.................................................. 18 SUBJECT PHOTOGRAPHS - MADY'S BOWLING CENTER.............................. 22 HIGHEST AND BEST USE ................................................................................ 34 VALUATION APPROACHES, METHODS AND PROCEDURES ......................... 36 ANALYSIS OF DATA........................................................................................ 40 VALUATION SUMMARY ..................................................................................43 LISTING OF PERSONAL PROPERTY ....................................................................... 44 LiSTING OF TRADE FIXTURESS ............................................................................49 APPRAISERS QUALIFICATIONS .............................................................53 ,I I SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS Name of Property: Mady's Bowling and Lounge (3919) Vacant Retail Space (3927) Salvation Army Thrift Store (3929) ,I' Property Address: 3919-3929 Central Ave. NE Columbia Heights, Minnesota Type of Business: Mady's _ 16 lane Bowling Center with restaurant and lounge Thrift Store - clothing sales Value Premises: Fair Market Value in Continued Use 'I I I Date of Inspection: January 11,2006 Date of Appraisal: January 11,2006 Trade Fixtures Appraised: Mady's : Bowling equipment made up of the lanes, pins etters, ball retrievers, and scoring system; the built in cabinets in the lounge and bowling center; hood, sinks, and walk in cooler in the kitchen, and exterior signage. Thrift Store: Exterior signsge Exclusions: Real estate, inventories, and personal property i i Estimates of Value: Mady's: Thrift Store: TOTAL $197,950 $ 3,800 $201,750 ! ' Clieut: Mr. Robert Streetar Community Development Director City of Columbia Heights 590 40th Avenue NE Columbia Heights, Minnesota 55421 Appraiser: Steven J. Wall, MAl, ASA Steven Wall Appraisal Services, Inc. 470 W. 78th Street, Suite 110 Chanhassen, Minnesota 55317 Certified General Real Property Appraiser Minnesota License #4001239 '1 ~ PAGE 4 STEVEN WALL APPRAISAL SERVICES, INC. CERTIFICATION The undersigned does hereby certify that, except as otherwise noted, in the appraisal of the trade fixtures located in Mady's Bowling and Lounge, 3919 Central Ave. NE, and in the Salvation Army Thrift Store, 3929 Central Ave. NE, Columbia Heights, Minnesota, that: 1. Steven J. Wall, MAl, AS A, has made an inspection of the properties that are the subject of this report. An inspection of the properties was made on the morning of January 11, 2006. 2. No one other than the undersigned performed the trade fixture appraisal report, analysis and conclusions of value in its entirety. 3, My engagement in this assignment and compensation for this appraisal report 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. 4. I have no present or prospective interest or bias with respect to the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 5. To the best of the appraiser's 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 assumptions and limiting conditions set forth in the report and are the personal, impartial and unbiased professional analysis, opinions, and conclusions of the appraiser. 6. The report analyses, opinions, and conclusions were developed, and this report has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation, The undersigned further certifies that the reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute and the American Society of Appraisers, which include the Uniform Standards of Professional Appraisal Practice. 7. The American Society of Appraisers and the Appraisal Institute conduct a formal program of continuing education for its designated members. ASA's and MAl's who meet the minimum standards of these programs are awarded periodic educational certifications. As of the date of this report, Steven J. Wall has completed the requirements under the continuing education programs of the American Society of Appraisers and the Appraisal Institute. Steven J. Wall is a licensed Certified General Real Property Appraiser in the State of Minnesota. -- PAGE 5 STEVEN WALL APPRAISAL SERVICES, INC. 8. The use of this report is subject to the requirements of the American Society of Appraisers and the Appraisal Institute relating to review by its duly authorized representatives. 9. Disclosure of the contents of this appraisal report is governed by the by- laws and regulations of the American Society of Appraisers and the Appraisal Institnte. 10,Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser or the firm with which he is connected, or any reference to the American Society of Appraisers or the ASA designation, or the Appraisal Institute or the MAl designation) shall be disseminated to the public through advertising media, public relations media, news media, sales media, or any other public means of communication without the prior written consent and approval of - the undersigned, II.To the best of the appraiser's knowledge and inspection of the properties, the trade fixture appraisal report ancl its analyses, subject to the limitations and conditions of the report, the estimate of the Fair Market Value in Continued Use of the subject property, as of January II, 2006, was TWO HUNDRED ONE THOUSAND SEVEN HUNDRED FIFTY DOLLARS ($201,750) Allocated as Follows: Salvation Army Thrift Store Mady's Bowling Center and Lounge TOTAL $ 3,800 $197.950 $201,750 Sincerely, STEVEN WALL APPRAISAL SERVICES, INC. 7~~U1kO Steven J, Wall, MAl, ASA Certified General Real Property Appraiser MN License# 4001239 ~ STEVEN WALL APPRAISAL SERVICES, INC. PAGE 6 ASSUMPTIONS AND LIMITING CONDITIONS The Certification of the Appraiser appearing in this appraisal report is subject to the following conditions and to such other specific and limiting conditions as are set forth by the Appraiser in this report: I. The property has been appraised as free and clear and under responsible ownership and management unless otherwise set forth in the appraisal. Debts, mortgages or liens which may exist against the property have not been deducted from the appraised value. It is assumed that the title to the property is good. 2. The information estimates and opinions furnished to the Appraiser, and contained in the report, were obtained from sources considered reliable and believed to be true and correct, however, responsibility for the accuracy of such items furnished to the Appraiser cannot be assumed by the Appraiser. 3. Any sketch or survey in the report may show approximate dimensions and is included to assist the reader in visualizing the property. The Appraiser assumes no responsibility for their accuracy. The Appraiser has made no survey of the property. 4. Disclosure of the contents of the Appraisal Report is governed by the Bylaws and Regulations of the professional appraisal organizations with which the Appraiser is affiliated. 5. This report is not an engineering study or an insurance appraisal and is invalid if used for these purposes. 6. The appraiser did not investigate any financi al data pertaining to the present or prospective earning capacity of the operation in which the property is used. 7. The appraiser has neither present nor contemplated interest in the subj ect property. His employment is not contingent upon the value reported. 8. At the client's request, the scope of this assignment waS limited to the trade fixtures in each of the tenant spaces. No consideration has been given to the land, building improvements, inventories, or personal property. 9. Neither all, nor any part of the contents of the report, or copy thereof (including conclusions as the property value, the identity of the Appraiser, professional designations, reference to any professional appraisal organizations, or the firm with which the Appraiser is a part of), shall be used for any purposes by anyone but the client specified in this report. IO.It is assumed that all required licenses, consents or other legislative or administrative authority from any local, state or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. --- PAGE 7 STEVEN WALL APPRAISAL SERVICES, INC. PURPOSE AND INTENDED USE OF THE AP PRAISAL This appraisal has been undertaken to estimate the value of trade fixtures in Mady's and the Thrift Store located on Central Ave. NE in Columbia Heights, Minnesota. The date of the I11spectlon was January 11, 2006, which is also the date of the appraisal. The intent of this appraisal report will be to assist you in negotiating a purchase of the real property and the above referenced property in this appraisal for future redevelopment of the site. The intended users of the report will be you and other City officials of Columbia Heights, the Relocation Specialist, Ken Helvey, and tl:e real estate appraisers, Jason Messner, MAl, and Eric Bjorklund, both of Patchl11 Messner Dodd and Associates. I , I i , , , I I I I i PROPERTY BEING APPRAISED The subject of this appraisal is a three tenant building located at 3919-3929 Central Ave. NE in Columbia Heights, Minnesota. The two tenant spaces on the main level of the building are about 14,000 SF together. The tenant space at 3927 Central Ave. NE, formerly occupied by the Furniture and Mattress Outlet, is vacant. The north tenant space is occupied by the Salvation Army Thrift Store. The basement level of the building is the 16 lane Mady's Bowling Center with lounge and restaurant. The Property is more fully described in the section titled Description and Function of the Property, which begins on page 12. DEFINITIONS The most commonly used premises used to value machinery, equipment, and trade fixtures are listed below. The definitions have been developed by the American Society of Appraisers and the Appraisal Institute. 1. Fair Market Value in Continued Use 2. Fair Market Value - Installed 3. Fair Market Value 4. Orderly Liquidation Value 5. Forced Liquidation Value 6. Salvage Value Fair Market Value in Continued Use is the amount expressed in terms of money, as of a certain date, that may be reasonably be expected for property in exchange between a willing buyer and a willing seller with equity to both, neither under any compulsion to by or sell and both fully aware of all relevant facts, and assuming that the earnings support the value reported. This amount includes all normal direct and indirect costs, such as installation and other assemblage costs to make the property fully operational. ~ PAGE 8 STEVEN WALL APPRAISAL SERVICES, INC. \ In determining the Fair Market Value in Continued Use the 1 Cost ~ew of the property is for physical deterioration. 'No d~~~ deduction from functlOnal or external obsolescence are made because by def' . . tJons for . 1111tlOn tl is not belllg offered for sale on the open market. This value reI' le property the value of property as designed and installed to the owner t Ulse measures deduction for physical deterioration. ess an appropriate Fair Market Value - Installed is the estimated amount of a . . n lllstall d expressed 1ll terms of money that may reasonably be expected' 'e property between a willing buyer and a willi~lg seller with equity to bot~~l ~Xchange sale on the open market, nelther belllg under. any compulsion to 'b1f offered for both fully aW,are of all relevant fa~ts, lllcludlllg installation, as oty or sdl and TillS amount lllcludes all normal direct and llldirect costs su 1 a speclflc date, and other assemblage costs to make the property fully op~ratfoln~~ lnstallation \ \ This value premise estimates the market value of a system O' . . offered for sale on the open market, exposing it to all of thel/lopnty if it were marketplace: physical deterioration, functional and external ~lC~S In the depreciated installation costs are added to the estimate of m olsO escence. The al eet valu e, Fair Market Value is the amount expressed in terms of mone date, that may be reasonably be expected for property in excl y, as of a certain willing buyer and a willing seller with equity to both neithe lang; between a compulsion to buy or sell and both fully aware of all 'relevan~ ~n er any specific date. acts, as of a Fair Market Value is a "Value in Exchange" and is, for exam I machine, uninstalled, sitting on the warehouse floor. This v~ e, the value of a encompasses all three forms of depreciation because a "Valu ue trel11ise also exposes the property to all the forces in the marketplace. e 1ll ~xchange" Orderly and Forced Liquidation Value premises are values I owner is compelled to sell on an "as is" "where is" basis. TI w ~~;e the property between these two value premises is the amount of time that le ~ ference advertise and dispose of the property. IS glVen to properly Salvage Value is defined as the estimated amount expressed in te' that can be expected for the whole property or a component of tl IlUS of money ~hat is retired from service for use elsewhere. This value premi~e whole property III exchange for machinery and equipment that has been essel t' lei IS also a value 1 la y retired. Other terms used in this appraisal are defined below: Re~1 Property is defined as the land and all that is erected . . affIxed to it any right or interest that an individual has in i;ll;IOWlllg upon, or fhe term real property includes all intercsts, benefits and rig~~Vable things. oWnership of physical real estate. ' s Inherent in the ~ STEVEN WALL APPRAISAL SERVICES, INC, PAGE 9 ; " J. Real Estate is defined as the physical land and all appurtenances affixed to the land. Real estate is immovable and tangible and includes all permanent building attachmelits., e,g., plumbing, electrical, wiring, heating /cooling, installations, and built-in items. , ' , ' A Fixture is defined as an article that once was personal property, but has since been installed or attached to the land or buildings in a pennanent or nearly manner so that it is regarded as part of the real estate. Fixtures are typically owned by the landlord. A Trade Fixture is defined as articles place in or attached to rented or owned bnildings by a tenant or occupant to help carry out their trade or business. Trade fixtures are typically owned by the tenant in a lease situation, but can also be owned by an owner/occupant of a building or space. Personal Property is defined as those tangible items that are not permanently attached to real estate and can be moved. Some characteristics of personal property are 1. It is capable of being moved from one place to another 2. It has specific uses or functions it must perform 3, It may have an effective age that differs from chronological age 4. Its' curable depreciation may be more economical to apply or consider than for real estate Improvements 5. Inmost cases, the use of the land does not affect the value of a personal property asset 6, It can typically stand alone to perform STEVEN WALL APPRAISAL SF,RVICES, INC. PAGE 10 1 I APPRAISAL PROCESS/SCOPE The appraisal process begins with an inspection and inventory of all items within the tenant spaces, Doug Foss, representing ownership, gave the tour of the vacant retail space and the Thrift Store space, Present at the tour was Ken Helvey of SRF Consulting, and Jason Messner, MAl, and Eric Bjorklund, both of Patchin Messner Dodd and Associates, Brett Mady provided the tour of Mady' s Bowling Center. During the inspection and inventory, the appraiser determines which items are movable, categorized as personal property, and those items that for various reasons explained later in this report, are classed as immovable, labeled as trade fixtures. In addition to making this determination between personal property and trade fixtures, the appraiser interviews the owner of the contents of the store to determine if there are items (trade fixtures that would remain with the building) he wishes to retain and have moved to a new location. The trade fixtures are value in this report, since they will remain with the real estate after the tenants are moved out. The determination of movable personal property and immovable (trade) fixtures and equipment is dependent upon the continuation of the highest and best use of the property. In situations where the intent is to demolish the structure, the owner may choose to remove items considered immovable since there is no motivation to preserve the structure in its present design, layout, or use, In those cases, the appraiser reserves the right to re-inspect and re-analyze the property, to determine the actual fixtures left at the site and to adjust the values due to any deletions in fixtures. Published cost guides and catalogues were referenced to determine cost new and installation costs of the items that required electrical hookups, computer wiring, etc. The appraiser also called sales. representatives for cost new information and used values of the major bowling equipment. He also referenced previous appraisals of bowling centers and Cost Guides. This information was gathered from sources believed to be reliable and used to process the approaches for this appraisal; the Cost and Sales Comparison Approach. >-- PAGE 11 STEVEN WALL APPRAISAL SERVICES, INC. ,; i: :i :1, II, ; !~ I;'!' DESCRIPTION AND FUNCTION OF THE PROPERTY Function of the Property The building improvements on the property are made up of one building with two retail spaces on the main level, and a 16 lane bowling center with restaurant and lounge in the lower level. The retail space addressed at 3927, formerly occupied by Furniture and Mattress Outlet, is vacant. The other retail space on the main floor is occupied by the Salvation Army Thrift Store that sells used clothing and household goods. The lower level is occupied by Mady's Bowling Center and Lounge, a 16 lane bowling center with restaurant and lounge. Personal Property vs. Trade Fixtures Items that are movable, not attached to the floor, walls, or ceiling, could be relocated, arc categorized as personal property. Those items attached to the walls, floors, or ceilings that are a part of the real estate, are custom made for a certain function or area of a property, and are necessary to the operation the business, are categorized as trade fixtures. Personal Property Vacant Retail Space, 3927 Central Ave NE This retail space was formerly occupied by the Furniture and Mattress Outlet, and now is vacant. The only personal property left in this space is in the back and consists of two pallet racks, two lawnmowers, a workbench, hand trucks, a paint sprayer, vacuum cleaner, and assorted hand and electric tools in tool boxes and on the pallet racking. Thrift Store - 3929 Central Ave. NE Personal property in this store consists of clothes racks, single and double sided Lozier metal display shelving units in three and four foot widths, glass display cases, and an L-shaped checkout counter with cash register in the front of the store. In the back room where incoming clothes and other merchandise are sorted and priced, there are folding tables, older office desks and chairs, a refrigerator, a file cabinet, and a safe. Mady's Bowling Center - 3919 Central Ave. NE At the entrance to the bowling center, here are eight video games, a pop and candy/snack dispenser, and an A TM machine. STEVEN WALL APPRAISAL SERVICES, INC. PAGE 12 with plastic stack chairs, ceiling and wall mounted Samsung TV's and eight two and three tier bowling ball racks with balls. On the bowling center control countei' is a Dell' PC with monitor and keyboard, two printers, a small safe, several pairs of bowling shoes, a security system with two cameras, VCR, and 111onitor, and a telephone system with three lines in. Near the north end of the center in the back adjacent to the restrooms is a small locker area with a total of 180 foot lockers with key and combination locks. The cleaning equipment consisting of two upright vacuum cleaners and a carpet cleaner are stored in this location. The personal property in the lounge area consists of tables and chairs, undercounter stainless steel bar sinks with ice bins, cocktail stations with speed rails, an under counter single door refrigerator, neon lights, bottle and glass coolers, a rear projection large screen TV, a food grade scale, and a POS computer system with credit card machines. The kitchen is furnished with stainless steel tables, commercial single and two door coolers and freezers, a deep fat fryer and grill with four burner stove, a Scotsman ice cuber with bin, meat slicer, microwave oven, small eclectic pizza ovens, a three well hot food server, and a SS sandwich table with cutting board. The manager's office, just off of the kitchen area, is furnished with a personal computer, file cabinet, and desk chair. In the back of the lanes and pinsetters are two bowling lane oilers, spare bowling balls and pins, a large group of pinsetter repair parts consisting of belts, hoses, nuts/bolts, specialized tooling, etc. Trade Fixturcs Thrift.SJQ re The two items considered trade fixtures for this space is the building mounted exterior sign and the pylon mounted sign on Central Ave. The building mounted sign appears to be painted plywood with two four foot single tube fluorescent light fixtures mounted over the sign. According to Doug Foss, the manager of the retail spaces, the Thrift Store has been in this space about 8 years. The sign's paint has faded to the point of needing repainting. The pylon mounted sign on Central Ave. is a two sided lighted sign in a metal frame in average condition. Mady's Bowling Center The trade fixtures in the bowling center are listed by area. The areas include the bowling area, lounge, and kitchen. PAGE 13 >-- STEVEN WALL APPRAISAL SERVICES, INC. " " The major trade fixtures in the bowling area are the lanes with approaches, ball retrievere-. with gutters, the scoring system, and the pinsetters. i' There are 16 wood lanes with foundations that were installed in 1957 and 1958. Lanes 1 and 2, and lanes 13-16 are equipped with bumpers. For the most part, the wood lanes need replacing because of dclamination between the wood slats that make up the lanes, and they have been sanded down to the point that there are patches to cover up the nails that are showing through. 1n addition, it appears that for several lanes, the first 10 feet of lane has been replaced. The center lanes are in the poorest condition because these lanes get the most use and the first ten feet or so, is the area where the ball first hits the lane. According to the manager, the lanes and approaches have been sanded down about every three years and are refinished at that time. They are oiled on a regular basis. There are eight AMF ball retrieval systems with gutters that were installed in 1958. They are old but still functional. According to John Ellingson, the return units at the back with the pinsetters were replaced in 2002. The scoring system is a Steltronic Automatic Scoring system complete with 16 ceiling mounted monitors, eight floor mounted pedestal scoring pads, and auto scoring controls. This system was installed in 1998. The company still makes these types of scoring systems, but this particular model is no longer made. In the back of the center are 16 AMF type 82-70 pinsetters. According to Mike Klemple of AMF, based upon their serial numbers, these pinsetters were manufactured in or around 1971 and were used in Japan first, and then installed in Mady's in 1975. John Ellingson, the pinsetter service tech for Mady's stated that the pinsetter chassis had new Omega Tech circuit boards replaced about 5-7 years ago. He thought the pinsetters were in good condition for their age. Other trade fixtures in the bowling area include the maple front control counter and back counter, ceiling mounted air cleaners, schedule boards, overhead fans, a water fountain, and a thru wall ventilation fan on the south wall. 1n the lounge area, those item considered trade fixture that are not movable include the booth seating, a large wood cabinets with door and drawers adjacent to the booth seating, the bar counter and back counters, the waitress station and the cash register counter, wall mounted shelving, two overhead fans, and the decorative lighting over the booths. Most of the built in cabinetry is older laminate covered cabinetry that is in fair condition. The trade fixtures in the kitchen are made up of the enamel hand sink, the SS vegetable wash sink with drainboard, and the SS dishwashing sink with dishwasher and auxiliary water heater. The SS slant back hood over the grill is another common trade fixture in commercial kitchens. The particular hood is equipped with an Ansul fire extinguishing system and air makeup. It is in aVerage condition. PAGE 14 ~ STEVEN WALL APPRAISAL SERVICES, INC. \ Just outside of the kitchen is the entrance to the walk in cooler where the beer kegs and bottled beer is stored. There are 10 -16 gallon keg hookups with C02 metering system, and hoses that run to two -4 faucet counter mounted beer taps and one -2 faucet beer tap. The area back of the pinsetters was unlit at the time of the inspection. The items considered fixtures in this area include two workbenches and two shelving unit used to store spare pinsetter parts. The signage on the exterior of the building included a metal framed lighted single faced plastic sign of 75 SF, installed in 1999. It is in good condition. The other sign is out on Central Avenue. It is a double-sided two faced sign for Mady's Bowling Center and the Furniture and Mattress Outlet, which has vacated the property. The signs are mounted in a metal frame, supported by two 6" x 12' high posts mounted in concrete. According to City inspection records, this sign was refaced in 1996. It is in average condition. ~ PAGE 15 ST . EVEN WALL APPRAISAL SERVICES, INC. \, SUBJECT PHOTOGRAPHS-VACANT SPACE 'I : i; . " c)' j, !' ~, ';', '" ;_ .,}.; _ <':'.t.f' , "", " "" "if$\""" ' , -':~,-,,- ' , ' i ',"~"w~L' '1\iW' ' (:f:'F{ ~--~----'----'~'._-"~~~;_', ':_;;;'.Vf'\ij~l___ .. 1~1~' FURNiTURE & MATTRESS QIJTtEf '; ,I lit i: J :1 il " D 'I " " ,~ ';.i The front of the vacant retail space Looking west from the back of the vacant retail space JI~VEN WALL APPRAISAL SERVICES, INC, , PAGE 16 il.1 t. il '\. I:: :'\ : .1 \ \ Ii .. !l il (! ,;1 ~'{ r ;~ Miscellaneous personal property and building materials A workbench and miscellaneous tools PAGEl? , _ , ...r;.1. 1 QTi'l1VrrRS. INC. SUBJECT PHOTOGRAPHS - THRIFT STORE The building mounted sign The checkout counter in front of the store IWEN WALL APPRAISAL SERVICES, INC. 'f" r I , :L 'Ii ,. " , r , , " P I ! " "Ii .' , ., , , ;' i; PAGE 18 '1',. "iI! '''I .~\ r.i ;~:l I. :!!\' 1.1 ,I The glass display cases in front of the store Double rod clothes racks PAGE 19 TEVEN WALL APPRAISAL SERVICES, INC, , , ,I 'I i 'I Island (double sided) metal display shelving in the store ,4tJ,,~ The single sided metal display shelving along the perimeter wall of the store PAGE 20 :mVEN WALL APPRAISAL SERVICES, INC. il\ II II Ii " , Used furniture and wall display shelving along north wall '.--,- "fHRIFT STORE '. r': , ,,;, , ,1-' : ,- ., I /': , . ~ '/" '~~f~;~: :'_,1:,\ ';~~~,: I'-:,f~ ~\~~-~}l :1,{:~, ::~~~~.. , " , ~':;~,! :~~;{;. ...~ ; <;~~, The two sided lighted sign on Central Ave. PAGE 21 ".., ~ T 1 A PPRAISAL SERVICES, INC. -..----- -. ~ !'.. il.. 'I i II R I. ~J , ;{ i; , , $UBJECT PHOTOGRAPHS - MADY'S BOWLING CENTER \ I. i;. r .''i, 1% tl 11 it II .( I , I ".'1 :!' , , ri )1 The two face double sided lighted sign on Central Ave. NE The building mounted sign above the entrance to the bowling center STEVEN WALL APPRAISAL SERVICES, INC. PAGE 22 ":' Looking across the lanes with ball returns in the foreground Looking across the lanes to the front of the center :TEVEN w ALL APPRAISAL SERVICES, INC. 'I i~ .j i~ ;:1 l ~ PAGE 23 'I" 'j ,I ,I I :',: ", , ' li'(: '" ',1 . ~. Looking across all 16 lanes near the pins I' , i , The ball returns and approaches .FrEVEN W ALL APPRAISAL SERVICES, INC. PAGE 24 -1 , , ';~ I ',I,' ;'! t ," ". ,(t' ~,\j fei II 1;\ . ;.l~ [J"1 , ;.j ~ i v' Close up photograph of the Steltronics Automatic Scoring pedestal ( I' The AMF pinsetters in the back PAGE 25 EVIW WA LL APPRAISAL SERVICES, INC. ;> :\ I. , Looking down on lane 14 pinsetter Looking across the pinsetters from the steps in the back '1'lWEN WALL APPRAISAL SERVICES, INC. PAGE 26 ':1' i\ ,i ;1' ,i The movable tables and plastic stack chairs adj acent to the lanes PAGE 27 EVEN WALL APPRAISAL SERVICES, INC. The front control counter with back counter 'EVEN WALL APPRAISAL SERVICES, INC. PAGE 28 t, j, ;, ,il t 1 'I " ',~ il, (1 ;} il \,1 II " I' ," J 'j The bar counter in the lounge PAGE 29 STEVEN WALL APPRAISAL SERVICES, INC. Cabinetry and cash register stand back of bar 'STEVEN WALL APPRAISAL SERVICES, INC, I 11~ PAGE 30 '1 ! I , i I SS underbar equipment si,A .,~iW SS underbar equipment 'EVEN WALL APPRAISAL SERVICES, INC. PAGE 31 The foUl' burner stove with grill and deep fat fryer i r Movable SS tables in the kitchen -1' ; I i i I : i I i J li A iJ .Ii h ~l ,m ;1 '! i;J ,I 'II P, ;111 'I :.1 '.'t ill 't11 I} tl ill l STEVEN WALL APPRAISAL SERVICES, INC. PAGE 32 - i , .f 'I :1 jj :1 ~ I II il I: I , The SS exhaust hood over the grill area in the kitchen STEVEN WALL APPRAISAL SERVICES, INC, PAGE 33 HIGHEST AND BEST USE The Highest and Best Use of personal property and fixtures is a controversial snbject and is only referenced in Standard 7' and 8 of the Uniform Standards of Professional Practice (USP AP), without giving any explanation other than it must meet the following: 1, It is legally permissible 2, It is physically possible 3, It is financially feasible 4, It is maximally profitable , " With regard to real estate, highest and best use indicates that it is to the land and then, at which things may be attached to the land, they would then be measured to say if it meets the criteria of financially feasibly and maximally profitable, In an article titled Highest and Best Use for Personal Property by Mr. Les Miles, ASA, published in 2004-2005 Fiscal Year, Volume 21, No, 1 of the American Society of Appraisers Machinery and Technical Specialists Journal, Mr. Miles states that "personal property and those types of assets have unique characteristics which mayor may not allow them to be considered with the land", He continues "common sense says that all personal property type assets are at their highest and best use when they're capable of functioning for the purpose to which they were designed," "For this reason, the highest and best use analysis for individual personal property assets, as valued individually, would be the consideration for use to which they have been designed, This same analogy is true for trade fixtures, While they may be attached to the real estate, trade fixtures are designed, constructed, and installed for specific functions in a building and are necessary in order to conduct the business, ,:i:. 1 I I I, "j The American Society of Appraisers latest publication regarding the valuation of machinery and equipment, entitled "Valuing Machinery and Equipment, published in 2000, has a two page explanation of highest and best use, It begins the section by stating that making a statement regarding highest and best use is a USP AP requirement, Standard 8-2 (a) (x), which states: "when the purpose of the assignment is any market value, describe the support and rationale for the appraiser's opinion of the highest and best use of the property," For machinery and technical valuation, a highest and best use analysis requirement will not always be either appropriate or applicable, Under the 8,2 (x) Comment, it states that "The report must contain the Appraiser's opinion as to the highest and best Use of the property, unless an opinion as to the highest and best use is unnecessary such as in insurance valuation or "Value in Use" appraisals," The reason is when using "Value in Use", the appraiser is valuing a specific trade fixture, a production line, or a system that is installed, in production, designed for a specific use, Simply stated, the highest and best use of trade fixtures is the function that they were designed for. If they are in disrepair and can not perform their design function, then their highest and best use may become salvage or Scrap value, STEVEN WALL APPRAISAL SERVICES, INC, PAGE 34 The trade fixtures being appraised in this report have been designed for specific functions within: and on the building. Their highest and best use would be the consideration for use to which theY' have been designed and installed. PAGE 35 STEVEN WALL APPRAISAL SERVICES, INC. VALUATION APPROACHES, METHODS AND PROCEDURES For economic analysis and valuation purposes, it is often necessary to define the differences between tangible and intangible assets, as well as between real property, personal property asset, and fixtures, These distinctions are important for a variety of accounting, taxation, legal, eminent domain, and financial reasons, All assets can be categorized as tangible and intangible real estate, and tangible and intangible personal property, Tangible real estate includes land, building improvements, site improvements, and fixtures, whereas tangible personal property includes movable items of property that are not permanently affixed to, or part, the real estate, A fixture is an article that was once personal property, but has since been installed or attached to the land or building in a permanent manner: it is regarded as part of the real estate, Examples of tangible personal property include furniture, tools and dies, machinery and equipment, office and data processing equipment (computer equipment), and rolling stock, In the following section, an explanation of the three traditional approaches to value is discussed, These three approaches, the Cost, Sales Comparison, and the Income Approaches are three valuation techniques used by the appraiser to estimate value, I ~ ~ i' Cost Approach The Cost Approach IS defined as: That approach whereby the appraiser adjusts the replacement cost new of the asset being appraised for the loss in value caused by physical deterioration, functional obsolescence, and external obsolescence,l The principle of substitution, the basis for this approach, states that a prudent investor would pay no more for a property than the cost of producing a substitute property with the same utility as the subject. This approach measures value by estimating the current cost of the personal property and then deducting for the various elements of depreciation such as physical deterioration, functional and economic or external obsolescence, In summary, the current cost of replacement or reproduction less the three forms of depreciation results in an indication of value by the cost approach, < Replacement Cost New is the current cost of a similar new property having the nearest equivalent utility as the property bcing appraised,2 Reproduction Cost New is the current cost to reproducing a new replica of the property being 'American Society of Appraisers, Valuinq Machinerv and Equipment, 2000, p.5 'lJ2.icL p.46 STEVEN WALL APPRAISAL SERVICES, INC, PAGE 36 appraised using the same, or closely similar materials3 Methods of determining cost new include the Detail'Method with direct and indirect costs, the Trending Method, and the Cost to Capacity Method. Quite often, replacement cost must be used because changes in technology will eliminate exact duplicates, model numbers will change and the replacement machine will be an updated model that may be state of the art that suffers no functional obsolescence. A distinction should be made between these two types of cost estimates prior to deducting for the various types of depreciation. The thrce types of depreciation that account for the losses in value are defined below. Physical Deterioration is the loss in value or usefulness of a property due to the using up or expiration of its usefnllife caused by wear and tear, deterioration, exposure to various elements, physical stress, and similar factors.4 The three methods to measure physical deterioration are from Observation, i.e. the age and use, the Formula/Ratio Method, and the Direct Dollar Measurement Method. Functional Obsolescence is the loss in value or usefulness of a property caused by inefficiencies or inadequacies of the property itself, when compared to a more efficient or less costly replacement property that new technology has developed5 This type of obsolescence includes such things as changes in design, materials, or process, resulting in over capacity, inadequacy, excess constrnction, lack of utility, or excess variable operating costs. "~I External Obsolescence is the loss in value or usefulness caused by factors external to the asset.6 These factors include increased cost of raw materials, labor, or utilities, reduced demand for the product, increased competition, environmental or other regulations, or similar factors. The age life method of determining physical deterioration is most commonly used. The concept of age has two elements, those being service life and serviceability. Service life is based on the date that the property was put into service to the appraisal date. Serviceability refers to the utility of the tangible personal property in its use. The denominator in this formula is an estimate of useful life based on its existing age and/or effective age, quality, and condition. The life of a property may be substantially diminished due to technological changes in the marketplace that are not associated to its physical condition or age. In estimating functional obsolescence, the appraiser should note that some of this obsolescence may be due to excess capital and/or capacity costs, which is eliminated when using replacement cost as a starting point. Adjustments for functional obsolescence can also be made by quantifying excess operating costs by capitalizing them over the remaining useful life of the tangible personal 'Ibid., p.46 4rbid. , p. 90 5Ibid., p. 99 6Ibid., p. 104 STEVEN WAj:,L APPRAISAL SERVICES, INC. PAGE 37 property, or by simply identifying the functional obsolescence and assigning an appropriate penalty. Estimating the loss in value due to external obsolescence is often difficult. If a property specific income analysis were conducted, the remaining balance, after physical deterioration and functional obsolescence are deducted, would be attributable to external obsolescence. The shortfall in this method is that it is difficult to assign an economic income stream to individual pieces of tangible personal property. The best method of determining external 0 bsolescence is extracting it from the marketplace; from direct and indirect sales. The sum of all three forms of depreciation is deducted from the replacement cost new or reproduction cost new to arrive at the final value indication of the Cost Approach. Sales Comparison Approach The Sales Comparison Approach is defined by the American Society of Appraiser's most recent publication Valuing Machinery and Equipment as the approach that appraisers adjust the prices that have been paid for assets comparable to the asset being appraised, equating the comparables to the subject,? This approach has also been defined as that approach to value where recent sales and offering prices of similar property are analyzed to arrive at an indication of the most probable selling price of the property being appraised.8 This approach focuses on the actions of actual buyers and sellers. In theory, the approach measures the loss in value from all forms of depreciation that are inherent in the individual asset, assuming appropriate adjustments are made to the comparables to reflect differences between them and the subject. In this approach, recent sale and offering prices of similar property are analyzed to arrive at an indication of the most probable selling price of the property being appraised. The procedure is to gather data, determine the factors to be used for comparison, adjust for the differences between the sales and the subject property, and conclude the most probable selling price. Factors of adjustment can include effective age and vintage of the unit, condition, capacity, features and accessories, location, manufacturer, motivation of the parties, price, quality and quantity, time of sale, and type of sale. The sales comparison approach is most reliable when there is an active market providing a sufficient number of sales of comparable property that van be independently verified through reliable sources. It is, however, not feasible when the property is special purpose or unique to the extent that there are no market transactions or demand. 7 Ibid., p. 6, 'American Society of Appraisers, Appraising Machinery and Equipment, 1989, p.IO. STEVEN WALL APPRAISAL SERVICES, INC. PAGE 38 When estimating a market value in continued use, where the property is installed, the depreciated installation costs are added to the estimate of value of the subj ect property from the secondary market. The two most common techniques used in this approach are the direct match and the comparable match technique. The direct match technique establishes value on the basis of a direct match to an identical asset. The comparable match involves the development of value based on analysis of similar, but not iJentical, properties using some measure of utility (size, capacity, etc,) as the basis for comparison. A third technique used is the percent of cost technique, which is nothing more than establishing the ratio of the selling price to the current cost new of a property at the time of sale.9 Income approach The Income Approach is a measure of the present worth of future benefits of ownership.lo It is not usually applied to individual itemS of equipment since it is difficult, if not impossible, to identify individual income streams. If an aggregate of machines, or the entire plant, including working capital and fixcd and intangible assets is known, this approach can be used. Economic income for tangible personal property can be gross or net rental income, gross or net li'cense income, or net income, The appropriate capitalization rate or present value discount rate should reflect a fair return on the investment in the subject tangible personal property and should consider the opportunity cost of capital, the time value of money, and the risk of the investment. Typically, most maehinery, equipment, and trade fixtures are not rented or leased. It is difficult to project income streams on individual pieces of equipment or trade fixtures. Consequently, the income approach is seldom used by appraisers to value machinery, equipment, or trade fixtures. Summary and Couclusious of Value This section summarizes the purpose and intent of the report, the value premise(s), the effeetive date and the date of the inspection, and a discussion of other pertinent data regarding the appraisal, including its scope. Other topics that might be addressed in this section would include an explanation of the appraisal's organization, possible solutions to particular appraisal questions, and reasoning and recommendations behind the appraisaL II In conclusion, the values of the property being appraised are stated, and an alloeation between property types, categories of equipmcnt, and value premises, are made, 9 Ameriean Soeiety of Appraisers, Valning Maehinery and EqlliJlment, 2000, p, 123. IOIhid" p. 6. II lQi<i., p. 210 STE-VEN WALL APPRAISAL SERVICES, INC. PAGE 39 ANALYSIS OF DATA The purpose of this appraisal is to determine the Fair Market Value In Continued Use of the trade fixtures in the subject property, as of the date of the inspection, January 11, 2006, which is the date of this appraisal. The intent of this appraisal report will be to assist you in negotiating a purchase of the real property and the above referenced property in this appraisal for future redevelopment of the site. The intended users of the report will be you and other City officials of Columbia Heights, the Relocation Specialist, Kcn Helvey, and the real estate appraisers, Jason Messner, MAl, and Eric Bjorklund, both of Patchin Messner Dodd and Associates. , I I I I I \ i I I \ i i , The Cost Approach is applied to estimate Fair Market Value in Continued Use. It is typically used to estimate value for special purpose properties in real estate and is used to value machinery, equipment, trade fixtures, office furniture, etc. ' when comparable market data is not available. For those assets requiring installation to become operational, this value premise includes an estimate of the depreciated cost of installing the asset. Por this value premise, the procedure is replacement cost new lcss physical deterioration, while Market Value is replacement cost new less all three forms of depreciation; physical deterioration, functional obsolescence, and external obsolescence. " , , Replacement Cost New \ \ I \ , I I ! I The components that make up rcplacement cost include the cost of the item, cost of labor and materials for installation if required, freight for transporting the machine to the site, sales tax, and necessary permits and fees. To estimate replacement cost of the various components of the bowling equipment, the appraiser has contacted the regional sales office of AMP, and has received a breakdown of all equipment required in a bowling center from AMP. He has also received similar quotes from Brunswick. These quotes include the cost of the equipment and their installation costs. The total Cost New of a typical bowling equipment package including lanes, ball returns, pinsetters, automatic scoring system, and lane furniture is between $35,000 and $42,000 per lane. The appraiser also referenced Marshall Valuation Services and the 2006 Architects Contractors, and Engineers Cost Guide (ACE) for costs of bowling equipment per lane. Their costs are near the upper range quoted above. Since the subject property does not have all of the assets included in a typical new bowling center assembled by AMP, the appraiser is using the cost new of some of the components of the quote from AMP, such as the cost of t!1e lanes, pinsetters, ball returns, etc. To estimate the cost new of the cabinetry in the bar area, the appraiser has referenced the 2006 ACE manual. For assets in the kitchen, the appraiser has estimated cost new from the Superior Restaurant and Kitchen Catalogue and from the 2006 ACE manual. The cost of signage was estimated from Marshall Valuation Services and from building permit records at the City offices. STF,VEN WALL APPRAISAL SERVICES, INC. PAGE 40 .-- Depreciation The replacement cost new has been estimated using cost guides, catalogues, and calls to sales representatives, The final step in this process is to determine the amount of physical deterioration that is present in the subject property, Factors considered in the depreciation process include age and condition, and the useful life of the equipment. The age/life method is one method considered by the appraiser, but used as a guide only, It is the age, or effective age, divided by an estimate of useful life, which equals the amount of physical depreciation, This straight line linear approach to depreciation is used particularly for individual short lived components, It assumes that the item being appraised depreciates at the same rate per year until it is fully depreciated, The two factors to determine are the age, usually effective age (the numerator) and an estimate of useful life, (the denominator) The numerator in this equation could be based upon the chronological age or the effective age, Chronological age is defined by the American Society of Appraisers (ASA) as the number of years that have elapsed since a property was originally built or placed in service. Effective age, also defined by the ASA, is the apparent age of a property in comparison with a new property of like kind; that is, the age indicated by the actual condition of a property. If a property has had better than average maintenance and care, its effective age will normally be less than chronological age, In situations where the actual dates of installation are unknown, the appraiser estimates the effective age of the items based on their observed physical condition. The denominator in the equation represents the Normal Useful Life. Normal Useful Life is defined by the ASA as the estimated number of years that a new property will actually be used before it is retired from service. This could be a number of years, as estimated by the appraiser. Conversations with City personnel indicate that the subject property was a bowling center started in the late 1950's, It is not known who the tenants were on the main level. According to the manager, Brett Mady, 8 lanes were installed in 1957 and 8 lanes were installed the following year. Some of the bowling equipment is original but has been maintained and is functional. The lanes, for instance, are original, are in poor condition and should be replaced. They have been sanded down to the point that in places the nails are showing through and have been patched. Some of the heavy use sections adjacent to the approaches have been replaced on several of the lanes. However, they are providing a service and function, and property is operating as a bowling center. The ball returns arc original, but according to John Ellingson of Westside Service, the return units in the rear have been replaced three years ago, extending the life of this equipment. STlcVRN WALL APPRAISAL SERVICES, INC. PAGE 41 In regards to the AMF pinsetters, according to Mike Klemple of AMF, these particular pinsetters were manufactured around 1970 and were installed in a bowling center in Japan, and then resold and installed in the subject property in 1975. John Ellingson has serviced and maintained these pinsetters for the Madys and stated that for their age, they are in average to good condition. The chassis controls have been replaced in the past 5-7 years. The Steltroinc Automatic Scoring system was installed in 1998 and although this particular model is no longer made, they are still serviceable and the subject scoring system is still very functional. The Sales Comparison Approach is considered to provide a limited amount of data as it relates to bowling equipment. According to John Ellingson, the ball returns would have no value if removed. The lanes could not be taken out, and furthermore, would have no value if removed because of their condition. Used pinsetters sell for between $500 and $6,000, according to John Ellingson. Internet web sites for used bowling equipment also provide a range of used value. The key element in this valuation of the bowling equipment that most of it would have very little value if offered on the open market for sale, uninstalled. However, installed and functioning as a bowling center, it does have some value. The value of the kitchen equipment, lounge cabinetry and seating, and the other assets listed as trade fixtures, are depreciated according to their perceived age and observed physical condition. Overall, the depreciation applied to the bowling center is 77% of cost new, PAGE 42 STEVEN WALL APPRAISAL SERVICES, INC. VALUATION SUMMARY The purpose of this appraisal has been to estimate the Fair Market Value In Continued Use of the property located at 3919 -3929 Central Ave. NE in Columbia Heights, Minnesota. The primary approach in the valuation of the trade fixtures in the property has been the Cost Approach. Reference has been made to the Sales Comparison Approach where there is sufficient market data to use this approach. Based upon my research, investigations, and listings in this report, it is my opinion that the total Fair Market Value in Continued Use of the trade fixtures, as of January II, 2006, is: TWO HUNDRED ONE THOUSAND SEVEN HUNDRED FIFTY DOLLARS ($201,750) Allocated as Follows: Salvation Army Thrift Store Mady's Bowling Center and Lounge TOTAL $ 3,800 $197,950 $201,750 STEVEN WALL APPRAISAL SERVICES, INC. PAGE 43 Vacant Retail Space 3927 Central Ave. I Co umbia Heiahts MN No. Description Personal Property Vacant Retail Space 1) Lot of building materials and tools consisting of two 12' long two tier pallet racks, two lawn mowers, paint sprayer, workbench, hand trucks, wet/dry vacUUm, hand and electrical tools and miscelaneous items on the pallet racking PAGE 44 STEVEN WALL APPRAISAL SERVICES, INC. Salvation Army Thrift Store 3929 Central Ave i b"H ht MN Co um la elOf S No, Description Personal Property Retail Space 1) Group of Lozier metal display shelving with several shelves consisting of 24 - 4' wide double sided (island) shelving with 4-6 shelves 56 - 4' wide single sided sheiving units along perimeter of store with pegboard uppers and shelving 3) Z shaped clothes racks with casters 6) Glass display cases in front of store 80) Double bar chrome clothes racks, 5' long each 1) L-shaped sales counter with Royal electronic cash reigister in front of store 1) Group of shopping carts and baskets in entlY to store 1) Group of furniture and miscelaneous items in backroom consisting of two older desks with chairs, safe, refrigerator, sorter boxes, four drawer file cabinet, folding'tables, and bookcase STEVEN WALL APPRAISAL SERVICES, INC, PAGE 45 Mady's Bowling Lanes 3919 Central Ave, NE Columbia Heiahts MN No. Description Personal Property Entrance and Video Arcade Area 1) Round table and three stack chairs 2) Folding tables along wall next to pop machine 1) Ten selection Pepsi machine 1) Candy and snack dispensing machine 1) Toy House coin operated machine with crane 1) Triton Network ATM machine 1) Mini sports Arena machine 1) Ultimate Ride gum ball machine 1) Group of four video game machines next to bOWling counter 1) Hand truck Bowling Center 8) Two and three tier bowling ball racks 1) Group of 8 wood tables, 8' long, with 6' wide end, including 6 plastic stack chairs per table and 5 wood stools for end near lanes 2) Square laminate covered tables with two stack chairs per table 3) Plastic trash cans 1) Samsung TV on wall mount above video machines 1) Dell Optimax PC with monitor, keyboard, and mouse on main counter 1) Small safe under main bowling counter 1) HP 7200 color printer 1) Music system and cosmic bowling light system including amps, controls, speakers, equalizer, CD player, foggers above lanes, cosmic bowling lighting 2) Ceiling mounted 35" TV's between scoring monitors bl Security system with VCR, small monitor, two cameras, and oval mirror STEVEN WALL APPRAISAL SERVICES, INC. PAGE 46 r \ \ Mady's Bowling Lanes 3919 Central Ave. NE Columbia Heinhts MN No. Description Personal Property Bowling Center 1) Telephone system with three lines in and telephones 1) Two leaf laminate covered table with casters nad easel with stand 100) Orange and tan foot lockers with key locks in locker area 1) Banl< of 20 blue foot lockers with combination locks 3) Banks of 20 blue foot lockers with combination locks 2) Upri~ht vac, carpet cleaner, and 10' aluminum step ladder Lounge Area 1) True single door bottle cooler 2) Older stools for behind bar 1) pas computer system for bar with credit card verification machines and printer 3) Neon light signs on bar windows - facing bowling center 1) Stainless steel (SS) ice bin under bar with drain board for glasses, small wash sink 78" long, front mounted SS speedrail, 80" long 1) Two burner hot plate 1) Single door underounter refrigerator 1) Perlick beer glass cooler, top open, 24" wide 1) SS underbar cocktail station with three wells, two drain boards, faucet, 60" long 1) Undercounter SS combo sinl< and bottler cooler witll speedrail, 78" long 1) Magnaforce Force 2004 vidoe gambling machine on bar counter 1) Red Bull barrel cooler 1) Commercial drink blender 1) Samsung wall mounted TV 1) Foldin~ table with four stack chairs PAGE 47 STEVEN WALL APPRAISAL SERVICES, INC. Mady's Bowling Lanes 3919 Central Ave. NE I b' H . Co um la elnilts MN No. Description Personal Property Lounge Area 1) Rear projection large screen TV 1) Food grade digital scale with SS platform 5) Square lamainte covered tables; four stack chairs per table and one chiids seat 1) White board Kitchen 4) Wire sheiving units 1) True SS two door commercial freezer 2) Superior singie door SS commercial coolers 1) Double basket Frymaster deep fat fryer 1) Hobart meat slicer and Amana microwave oven 1) Wal'ing food processor 1) Wolf gas four burner stove with oven and grill area 1) Scotman ice cubeI' with bin, 30" wide 1) Bunn Pour-o-matic coffee brewer with two hot plates 1) SS work table, 30" x 6' long with Savory four slice eiectric toaster 2) Small electric pizza ovens above stove 1) Superior sandwich table with cutting board, top open condiment bin, 27" wide 1) Three well electric hot food server, 46" long, with two overhead SS shelves for stacking plates, menu bar 1) Two drawer file cabinet and PC in BI'ett's office off of kitchen area Backroom behind AMF Pinsetters 1) AMF Summit Century lane oiler, S# 1999110501 1) Older lane oiler in back room 1) Large group of pinsetter repair palis, belts, specialized tools, electric hand tools, ball and pin polishers, extra boxes of Dins and bowlinq baiis, 4 drawer file cabinet STEVEN WALL APPRAISAL SERVICES, INC. PAGE 48 or salvation Army Thrift Store 3929 central Ave, NE N Columbia Heiollts M No, Description RCN DEP FMV Trade Fixtures 1) Building mounted painted plywood sign stating "Salvation Army Thrift Store", est. 12' x 18', with two single tube f1uroescent light fixtures over sign, paint faded - poor condt. $ 2,000 80% $ 400 1) pyion mounted two sided plastic lighted sign on Central Ave, statll1g "The Salvation Army Thrift Store", 75 SF, mounted in metal frame on15 high 8" square pole in concrete" Ave. $ 6,800 50% $ 3,400 TOTAL $ 8,800 $ 3,800 ST~V~N WALL APPRAISAL S~RVIC~S, INC, PAGI,49 Mady's Bowling Center 3919 Cenral Ave. NE Columbia Heiahts. MN No. Description RCN DEP FMV Trade Fixtures Bowling Center 1) Built in four door brown wood cabinet along west wall at bottom of stairs, l' deep, 8' long, 40" high $ 400 70% $ 120 1) Wall mounted schedule board on south wali with overllead light $ 90 60% $ 50 1) Thru wall ventilation fan on south wall, 18" diameter $ 210 70% $ 70 2) Ceiling mounted air cleaners $ 2,400 70% $ 720 1) Group of eight AMF ball retreivers with gutters, 1960's return unit In back replaced in 2002, hoods and masks $ 32,000 70% $ 9,600 1) Group of 16 hard maple wood lanes bowling lanes, late 1950's, poor- fair condition, several nail patches, sanded every third year, including raised wooden approach, 16' deep bumpers on lanes 1-2. 13-16, including foundations $220,000 85% $ 33,000 8) American Bowling Steltronics Automatic scoring system with 8 pedestal mounted conputer scoring pads, 16 ceiling mounted TV sets for scoring, Auto scoring back office controls, installed in 1998 $100,000 60% $ 40,000 16) AMF pinsetters, Type 82-70, Contract order U-1540, S# 120730,120731,120738,120821,121258,121259, 121269,121270,121271,121272,121274,121275, 121763,122046,122051,122060, Omega Tech circuit boxes installed on chassis 3 yrs ago, pinsetters mfg In 1971 , installed at Mady's in used condition in 1975 $450,000 80% $ 90,000 1) Wall mounted honor roll board on south side of bowling counter, including two UV lights over board. $ 140 65% $ 50 1) Solid maple control counter with glass front, 47" high, 13 In. feet, 33" deep, interior openings in back for bowling shoes, 7 -10 tiers, including maple stereo cabinet for stereo components, 18" x 2' wide, 3' high, 3 yrs. old, ave. condt. $ 1,800 35% $ 1,170 1) Maple counter In back of above counter with five tiers of openings for bowling shoes, 8' long, 18" wide, with 4' x 8' sheet of wall mounted slatboard $ 900 35% $ 590 D Wall mounted water fountain and 4 ceilinq mounted OH fans $ 960 65% $ 340 PAGE 50 STEVEN WALL APPRAISAL SERVICES, INC. Mady's Bowling Center 3919 Cenral Ave. NE Columbia Heiohts MN No. Description RCN DEP FMV Trade Fixtures Lounge Area 1) L-shaped back bar counter with laminate top, four doors, 5.5 lineal feet, fair $ 1,000 65% $ 350 1) Wall mounted overhead 6" wide shelf for trophies, 12' long $ 100 50% $ 50 1) Wood and laminate covered cash register stand, 21" x 25" wide, fair $ 330 60% $ 130 1) Laminated covered counter above ice bin, 1'3' long, 2' deep, with undershelves $ 300 60% $ 120 2) Four faucet and 1- two faucet counter mounted draft beer taps, including 10 beer keg connections in walk in cooler, with C02 regulators/ meters and hosing $ 6,200 60% $ 2,480 1) Ceiling mounted wood glass rack, 7 slides $ 70 40% $ 40 1) Black laminate counter under front side of bar 24" deep, 53" 53" long $ 800 60% $ 320 1) SS triangle fill in piece behind bar $ 160 50% $ 80 1) Wall mounted back counter with laminate top, 27" x 54" long $ 850 60% $ 340 1) Laminate covered bar with elbow and foot rest, glass rail, 23.5 lineal feet long, including waitress station, 32' wide with smail SS sink with faucet and drain, two doors, 10 bar stoois $ 7,500 65% $ 2,630 5) Ceiling hung decorative lights above booths and two OH fans $ 800 65% $ 280 1) Large wood base cabinet with laminate covered counter, 28" wide, 98" long, 9 drawers and 4 doors $ 650 65% $ 230 4) Vinyl covered double booths with backs and 30" x 48" laminate covered tables attached to wall, single base $ 2,800 65% $ 980 Kitchen 1) Wall mounted enamel hand sink, soap and towell dispenser $ 420 70% $ 130 1) SS vegetable wash sink with LH drain board and single well, 6' long, with 18" square well, 10" deep, faucet, and SS overshelf, l' x 6' long $ 950 70% $ 290 PAGE 51 STEVEN WALL APPRAiSAL SERVICES, INC. T Mady's Bowling Center 3919 Cenral Ave, NE Columbia Heinhts MN No. Description RCN DEP FMV Trade Fixtures Kitchen 1) SS slant back ventilation hood over grill area, 4' x 8' long, Ansul fire extinguishing system with four nozzles, air makup $ 7,600 50% $ 3,800 2) Wood swinging doors from kitchen to lounge $ 80 60% $ 30 1) SS single well sink wih two drainboards, 76" long, backsplash, hand sprayer and faucet, incluiding Hobart dishwasher, Hatco auxiliary water heater, and wall mounted SS slanted glass rack, 21" wide $ 6,680 65% $ 2,340 1) Laminate counter and 30 lineal feet of wall mounted wire shelving in Brett's office off of kitchen $ 450 45% $ 250 1) Waik in cooler with clay tile floor, insulated aluminum wall and ceiling panels, 7' x 10', Larkin 2 fan condenser, one light and door $ 5,400 60% $ 2,160 Back Area 1) Wood work bench, 6' long $ 360 80% $ 70 1) Wood wall mounted rack for pinsetter parts, 11' long $ 220 70% $ 70 1) Old work bench with vise and two wheel bench grinder, 29" x 118" long, and 4' x 8' sheet of wall mounted pegboard $ 650 80% $ 130 1) Metal shelf with four shelves, used for parts storage $ 170 65% $ 60 Building Exterior 1) Building lTlounted plastic face lighted sign, 3 color, metal frame, est. 6' x 15', address numbers- 3919, stating Mady's Bowl and Lounge, good condition, 1999 $ 3,700 40% $ 2,220 1) Two sided lighted plastic faced sign on Central Ave" black metal frame, 8' x 10', four color, upper face - Mattress Outlet, low8l" face _ Mady's Bowling- Liquor Lounge-Good Food, mounted on two 6" dia x 12' metal pipe in concrete footings $ 7,600 65% $ 2,660 TOTAL $ 864,740 $197,950 - PAGE 52 STEVEN WALL APPRAISAL SERVICES, INC. STEVEN J. WALL, MAl, ASA STEVEN W ALL APPRAISAL SERVICES, INC 470 West 78th Street, Suite 101 Chanhassen, Minnesota 55317 Education: University of Montana - Missoula, Montana Bachelor of Science Degree - 1973 Bachelor of Arts Degree - ] 973 Appraisal Education: Appraisal Institute Real Estate Appraisal Principles Valuation Procedures Income Capitalization - Course A & B Case Studies Report Writing and Valuation Analysis Standards of Professional Appraisal Practice - Parts A, B, and C Demonstration Report Writing Seminar Comprehensive Appraisal Workshop Industrial Valuation Easement Valuation AppraisingSmal1 Hotel/Motels American Society of Appraisers Appraisal of Machinery and Equipment Business and Technical Report Writing Machinery and Equipment Appraisal Workshop Basic Machinery Identification Appraisal Affiliations Appraisal Institute - Member (MAl), Recertified to December 3 I, 2008 Regional Ethics Committee - 1996-99 Board of Directors - 2000-2004 Public Relations Chair - 2003-2005 American Society of Appraisers _ Senior Member (ASAl - July, 1987 Recertified Until July 2007 President, Twin Cities Chapter 53 - 1991-1992 Vice President, Twin Cities Chapter - ]990-1991, ]997-98 Committee Chairman - Public Relations, Programs Committee, Recertification Board Chapter State Director - 1993-94 Minnesota Associatibn of Professibnal Appraisers - 1997-98 Minnesota Licensed Real Estate Appraiser - Certified General Real Property Appraiser - License #4001239 - Recertified Annually STEVEN WALL APPRAISAL SERVICES, INC. PAGE 53 Professional Appraisal Experience March 2004 to Present - Steven Wall Appraisal Services, Inc. 470 West 781h Street, Suite 110, Chanhassen, Minnesota 55317 April 1994 to February 2004 - Bettendorf Robrer Knocbe Wall, Inc., 1600 University Avenue, St. Paul, Minnesota 55104 Jannary 1991 to March 1994 - Steven J. Wall Appraisal Company, 7600 Parklawn Ave., Snite 423, Edina, Minnesota 55435 July 1988 to January 1991 - Muske Company, Inc., St. Paul, MN Marcb 1985 to July 1988 American Appraisal Associates, Minneapolis May 1980 to March 1985 - Farm Credit Services of St. Paul Appraisal Specializatioll Mr. Wall's experience consists of appraisal, consulting, and review services related to tbe real estate valuation of commercial, industrial, retail, and investment properties. The valuation services primarily determine market value for buyers and sellers for financing, acquisition, investment, and planning decisions, purchase price allocation, and liquidatiou purposes. Mr. Wall has also completed bighest and best use studies, and ad-valorem appraisals for tax appeals. I-Ie has extensive experience appraising distressed real estate and special purpose properties. His experience includes tbe appraisal of all types of Agri-Bnsiness properties such as grain elevators, feed mills, seed cleaning plants, fertilizer plants, and bulk petroleum plants. I-Ie bas also appraised food and meat processing plants, pasta plants, soybean processing plants, cheese plants, whey drying plants, and edible bean processing plants. Mr. Wall's machinery and equipment appraisal experience includes machine shop and fabrication machines, service stations and petroleum related equipment, rolling stock, office furniture, computer equipment, bank equipment, medical clinic and hospital furniture and equipment, restaurant furniture and kitchen equipment, rubber and plastic injection molding machinery, packaging equipment, aircraft manufacturing equipment, food processing eqnipment, remediation systems and equipment, trade fixtures, store fixtures, and woodworking machinery. His experience includcs Agri- Business related machinery and equipment associated with grain elevators, soybean oil and meal processing equipment, food processing, whey drying, cheese processing, feed mills, and dry and liquid fertilizer equipment. These appraisals bave been conducted using various valuation premises. He has been an expert witness for lawsuits, estate settlements, eminent domain bearings, divorce hearings, and bankruptcy proceedings. STEVEN WALL APPRAISAL SERVICES, INC. PAGE 54 I I I I 1 1 I I i \ 127 205109 EXHIBIT 2 Land Value Analysis (Pages 128-129) PATCillN MESSNER & DODD Valuation Counselors 205109 ~" ~~8 . c%~ ~ ~o Q i2 Cl ~ ct :E :E ::l Vl Vl W ..J ct Vl Q Z ct ..J W ..J aI ~ ct Il. :E o u '~i . ';;.. b ~ <<: ~ . " . .>!u. O::~ . . ,,~ 00 " . -E!~ 8. &$ . c _ 0 .~ o g 0" CC 0; , ">- U~ . c .c ~ ~.g: ~ ~ m~ gig- 0>- m~ * 9 . o . ~ ~ >- !j " ~ " c. 0" ""c l.'l~ o C ~= n. Eo 02 U ~ ~ E ~" <~ ~~ , C .'!! 8 ~i'&E om' owE! a rn " ~ m ~ ~ a a a o N ~ g N - ~ - ~ " ooU ~< ~~ N ro " " c 8411 o. ,,; ~ =~ 00 ':;:N. o. 00 (')~ . a a " ~ ~ II ~ '" 2 . o c . > < .. ~ 1'i c: ~ g ~ . c .c~ ~~2. - ~ "~ .. ",<:: ni .'!!.~ ~ . c . ~~~ o1l<D";;, OJ t.i'E . ~ . ~~1l <3 E g ~ 0 g ~ a" ui.g> ;;;;:0 " ~ . ~ ~ a a a ~ g N - N " ooU 0< ON 00 <;jci o ro U "" o c 0. 0"" ~~ ~z " . 00 O. o~ . . a ~ ~ ~. N ~ ~ 1i ~ ~ l g "~ H o ~g ~ ~ ~t; . ~ 1'1 ~ :>..c: ~ < 00 -lii'iii ~:r:: '" g E:! 1ij U~ 0 ~~~ ~8 ~ N ,; E ~ < . 1i ~ " . 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U a ~ m ~ ~ ~ ~ 51:1 :3 ~-g,o::: g~~ ffi.!1! ~ oE:; g.201S ~8~ " .. a. ~o -ro =1 ~, " mo 0< !n_~ ~N o m U "" g,lg "0 0." .!!i~~ gz.,,';; ""0 o o~ 0" o~ o . ~ ~ ~ ~ o Z " L Ow ~c "' ~o " " " > i~ <m i~ 0:0 01 gj8 ~ o m 128 PATCHIN MESSNER & DODD \,_,..~.,~~ ,...._..___1_._ 1 I I 1 I i \ 129 205109 COMPARABLE LAND SALES ADJUSTMENT GRID ,,,,e,". ..m.- . ,~ . .",."_..,,.hV'" ",. ""fof,f'" ,",. .",' , .~..".~,....~ . .~. ,. >>- "'h"''''''''''''''"'' ",..-.... ,.",.", ..--.- .' .""",,'p.." .,<~"....-"'.' "~ -"', .. ." jU5\menS Indicated Compo Location Sale Prlce MarKel - Sllapo& lotal Value No. (Intended Use) Per SF Other Financing Condltions Location Terrain Size AdJus!. Per SF 1 10141 University Avenue hIE $5.35/SF 1.00 1.00 1.01 1.25 1.10 0.95 1.32 $7.06/SF Blaine (Unknown) 2 4545 Central Avenue $14.38/SF 1.03 1.00 1.05 1.00 0.92 0.95 0.95 $13.66/SF Columbia Heights (AUlD parts store) 3 NWC 93rd & Coon Rapids Blvd $6.DO/SF 1.00 1.00 1.08 1.25 0.92 1.00 1.24 $744/SF coon Rapids {Medical & financial office bldgs} 4 9680 Foley Boulevard $6.58/SF 1.00 1.00 1.13 1.00 1.10 0.95 1.18 $7.76/SF Coon Rapids (Hardware store) 5 4560 Central Avenue $7.79/SF 0.90 1.00 1.15 1.10 1.00 1.00 1.14 $8.B8/SF Hilltop (ExisUng commerGlal uses) 6 4747 Central Avenue NE $6.4D/SF 1.Do 1.00 1.16 1.05 1.00 1.15 1.40 $8.96/SF Columbia Heights (231 un\\S hslng & 10K SF retail) 7 8800Springbrook Drive $7.00/SF 1.00 1.00 1.17 1.10 0.92 1.00 1.18 $8.26fSF Coon Rapids (Grocory Store ~ Ald\'s) 8 8232 Central Avenue $5.54/SF 1.00 1.00 1.20 1.25 0.92 1.00 1.38 $7.B5/SF spring Lake Park (MedlcaICllnlc:) 9 1011 osborne Road $5.40ISF 1.05 1.00 1.30 1.25 0.95 0.95 1.54 $B.32/SF Spring lake Park (professional office btdg) 10 5060 central Avenue $B.111/SF 1.00 1.00 1.30 1.00 0.92 0.95 1.14 $9.33 ISF Columbia Heights (A&W & KFC Restaurant) None Cash Terms 1/11/2008 Appraisal Good 10% Slope 102,970 SF Avg'" $8.73 /SF StDev'" $1.B8/SF Sub 3919 central Avenue Columbia Heights After adjustments, the Indicated per SF values range from $7.06 \0 $13.66 with an average of $B.73. Sal" 2 eod 4, dU' to amoun' of 9"" adju,'mon' eod ,,'all u,e, "a 10'" "lIabla. Thoi' in""lion, ""aga $10.71 pee SF. Given the above, a value estimate of $9.00 per SF or $925,000 \s Indicated for the subject land. ; ! i ! i I I ! \ \ \ I P ATClllN MESSNER &. DODD Valuation Counselors 205109 CONTINGENT AND liMITING CONDITIONS (Pages 131-133) 130 PATCIDN l\1ESSNER & DODD Valuation Counselors 131 205109 CONTINGENT AND LIMITING CONDITIONS The value estimates and conclusions in the appraisal are made subject to these assumptions and conditions: 1. The appraiser(s) has not made a title search and the reader should consult an appropriate attorney or title insurance company for accurate ownership data. Title to the property is assumed to be good and marketable unless othelwise stated. 2. The legal description, furnished or othelwise, is assumed to be correct. No responsibility is assumed for the legal description or for matters including legal or title considerations. 3. The information contained in this report is not guaranteed, but it has been gathered from reliable sources. The appraiser(s) certify that, to the best of their knowledge and belief, the statements, information and materials contained ili the appraisal are correct. 4. All value estimates in this report assume stable soil and allY necessalY soil correctiollS are to be made at the seller's expense, unless otherwise noted. 5. The site plan, if any, in this report is included to assist the reader in visualizing the propelty, but we assume no responsibility for its accuracy. 6. The market value herein assigned is based on conditions which were appli- cable as of the effective date of appraisal, unless otherwise noted. 7. The appraiser(s) that signed this report shall not be required to prepare for, or appear in court, or before any board or governmental body by the reason of the completion of this assignment without predetermined arrangements and agreements. 8. SUlveys, plans and sketches may have been provided in this report. They may not be complete or be drawn exactly to scale. 9. Possession of this report, or a copy thereof, does not carlY with it the right of publication. It may not be used for any purpose by any person, other than the palty to whom it is addressed, without the written consent of the appraiser, and in any event only with properly written qualification and only in its entirety. 10. Information in the appraisal relating to comparable market data is more fully documented in the confidential file in the office of the appraiser. PATCHIN MESSNER & DODD \/",h,,,tirm r.nllnse!ors 205109 132 CONTINGENT AND LIMITING CONDITIONS (Continued) 11. All studies and field notes will be secured ill our files for future referel1Ce. 12. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless a non-conformity has been stated, defined and considered in the appraisal report. And, it is assumed that the utilization of the land and any improvements is within the boundaries 01' property lines of the propeliy described and that there is no encroachment or trespass unless noted within the repoli. 13. The distribution of the total valuation in this repoli between land and allY improvements, if stated, applies only under the reported highest and best use of the pl'Operty. The allocations of value for land and impl'Ovements must 110t be used in conjunction with any other appraisal and are invalid if so used. 14. It is assumed that there is full compliance with all applicable federal, state and local environmental regulations and laws unless non-compliance is stated, defined and considered in the appraisal report. 15. The appraiser was not aware of the presence of soil contamination on the subject property, unless otherwise noted in this appraisal repol-t. The effect upon market value, due to contamination was not considered in this appraisal, unless othelwise stated. 16. The appraiser was not aware of the presence of asbestos or other toxic contaminants in any building(s) located on the site, unless otherwise noted in this repoli. The effect upon market value, due to contamination was not considered in this appraisal, unless otherwise stated. 17, Unless othelwise stated in this repoli, the existence of hazardous material, which mayor may not be present on the propeliy, was not obselved by the appraiser. The appraiser has no knowledge of the existence of such materials on 01' in the propel'ty. The appraiser, however, is not qualified to detect such substances, The value estimate is predicated on the assumption that there is no such material 011 01' in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. 18. The value stated in this repoli is fee simple, assuming responsible owner- ship and management, unless otherwise indicated. This appraisal recog- nizes that available financing is a major consideration by typical purchasers of real estate in the market, and the appraisal assumes that financing is 01' was made available to purchasers of property described herein. 19. The appraiser has neither present nor contemplated interest in the propeliy appraised and employment is not contingent upon the value repolied. PATCHIN MESSNER & DODD Valuation Counselors 133 205109 CONTINGENT AND LIMITING CONDITIONS (Continued) 20. Unless otherwise stated in this report, the appraisers have not made a surveyor analysis to determine whether any buildings on the property are in compliance with "The Americans with Disabilities Act" (ADA). If the property is not in compliance with the ADA, it could have a negative effect on the value of the propeliy. 21. The property is appraised free and clear of any or all liens or encumbrances unless otherwise stated. PATCHIN MESSN1<:R & DODD Valuation Counselors 134 205109 APPRAISER QUALIFICATIONS (Pages 13 5-13 7) PATCHIN MESSNER &DODD Valuation Counselors 205109 PROFESSIONAL AFFiliATIONS BUSINESS BACKGROUND GENERAL EDUCATION SPECIALIZED REAL ESTATE TRAINING APPRAISAL EXPERIENCE APPRAISAL CLIENTS 135 QUALIFICATIONS OF ERIC BJORKLUND Licensed Real Estate Appraiser _ State of Minnesota, Certified General Real Property, I D 4003154. Associate General Member, Appraisal Institute - January, 1994. National Association of Master Appraisers - Apri I, 1998. Patchin Messner & Dodd Appraisals, Inc., June, 2001 to Present. Bjorklund, Carufel, Lachenmayer Appraisals, Inc., June, 1988 - June, 2001. Bachelor of Science Degree, St. Olaf College - June, 1991. Majors in Economics and Biology; 3.0 GPA. High School Graduate, St. Anthony Village High - May, 1987; Honor Student. Appraisallnstitute/American Institute of Real Estate Appraisers Course Work: 110 (Appraisal Principles), 120 (Appraisal Procedures), 210 (Applied Residential property Valuation), 310 (Capitalization Theory & Techniques - Part A), 410 (Standards of Professional Practice - Part A), 420 (Standards of Professional Practice - Part B), 510 (Capitalization Theory & Techniques - Part B), 520 (Highest and Best Use and Market Analysis), 540 (Report Writing and Valuation Analysis), 550 (Case Studies in Real Estate Valuation). Continuing Education for State License: 56 Seminars & counting since being state licensedi various sponsors. Valuation, consulting and review for matters of eminent domain, tax appeal, divorce, probate, financing, buying and selling, special assessment, estate planning & partial interests. Qualified expert witness in district court and commissioners hearings. Properties Appraised: Commercial Real Estate _ Stores, Restaurants, Offices, Auto Service Buildings, Shopping Centers, etc. Industrial Real Estate _ Warehouses, Light & Heavy Manufacturing Plants, Distribution Buildings, etc. Residential Real Estate _ Single Family & Townhomes, 2-4 Family, Condominiums, and Apartments. Vacant Land _ Commercial, Industrial, Residential and Rural. Cities: Big Lake, Blaine, Bloomington, Brooklyn Center, Champlin, Chanhassen, Chaska, Columbia Heights, Crystal, Eden Prairie, Elk River, Farmington, Fridley, Golden Valley, Hopkins, Lindstrom, Maple Grove, Medina, Minneapolis, Minnetonka, Monticello, Mound, Mounds View, New Brighton, New Hope, Plymouth, Prior Lake, Ramsey, Richfield, Robbinsdale, Rochester, Roseville, St. Anthony, St. Paul, Savage, Shakopee, Shoreview, Victoria, Waconia, Woodbury and Wyoming. Counties: Hennepin, Dakota, Ramsey, Scott, Stearns. Banks and CPA's: Copeland & Buhl, Carpenter & Lee, Federal Deposit Insurance Corp (FDIC), Harris Bank, U.s. Bank, Wells Fargo Bank, LaSalle Bank, Stearns Bank, Western Bank, American Savings Bank. Law Firms: Art Benson, Best & Flanagan, Bonner & Borhart, Briggs & Morgan, Campbell Knutson, Faegre & Benson, Guzman Kallheim & Sharpe, Jensen Swanson & Sondrall, Kennedy & Graven, Larkin & Hoffman, Lindquist & Vennum, Mary Jensen, Messerli & Kramer, Rider Bennet, Rinke Noonan, Zappia LeVahn & Huber. Corporations & Other: Army Corps of Engineers, Beisswenger's Hardware, Conoco Phillips 66, Evergreen Land Services, Metropolitan Council, Minnesota Department of Transportation, NW Suburbs Cable Commission, Osseo & Minnetonka Schools, Peat Marwick, University of Minnesota, U.s. Navy, W.o. Shock. PATCHIN :MESSNER & DODD Valuation Counselors 205109 PROFESSIONAL NFl L1A TIONS BUSINESS EXPERIENCE EDUCATIONAL BACKGROUND SPECIALIZED REAL EST ATE TRAINING APPRAISAL EXPERIENCE 136 QUALIFICATIONS OF JASON L. MESSNER MAl Member, Appraisal Institute Certified General Real Property Appraiser, State of Minnesota, License #4000836. Member, Minneapolis Area Association of Realtors. Member (#6591), International Right of Way Association. Patchin Messner & Dodd, inc., President/Principal, 2001 to Present. Patchin Messner Appraisals, Inc., Principal, 1995 to 2000. Peter J. Patchin & Associates Inc., Associate Appraiser, 1986 to 1994. CentulY 21 Granite City Real Estate, Residential Salesperson, 1985. Bacheior of Science Degree, St. Cloud State University, majored in Real Estate, graduated Magna- Cum-Laude, 1986. Associate in AI's Degree in Business Administration, Willmar Community College, graduated with honors, 1984. Basic Valuation Procedures, American Institute of Real Estate Appraisers, 1986. Real Estate Appraisal Principles, American institute of Real Estate Appraisers, 1986. Capitalization Theory and Techniques (palt A), A.I.R.E.A., Minneapolis, MN, 1987. Standards of Professional Practice, A.I.R.E.A., Minneapolis, MN, '1988; Appraisal Institute, Minneapolis, MN, 1994. Capitalization Theory and Techniques (Pa,t B), A.I.R.E.A., Minneapolis, MN, 1989. Case Studies In Real Estate Valuation, American Institute of Real Estate Appraisers, Mpls., MN, 1990. Repolt Writing & Valuation Analysis, Appraisal Institute, Minneapolis, MN, 1991. SEMINARS ATTENDED: Appraisal Institute Income Property Valuation for the 1990's Condemnation: Legal Rules And Appraisal Practices Special-Purpose Properties: The Challenges of Real Estate Appraising in Limited Markets New Industrial Valuation USPAP Update: Standards and Ethics for Professionals The Road Less Traveled: Special Purpose Prope"ies National Uniform Standards of Professional Appraisal Practice Update The Appraiser as Expel' 'Witness The Appraisal of Local Retail Propel,ies Valuation of Detrimental Conditions in Real Estate Minnesota Institute of Legal Education Hazardous Waste Litigation Eminent Domain Properly Tax Appeals Preparation of appraisals for condemnation, tax appeal, litigation, financing, debt restructuring, acquisition/disposal, and special assessment appeal. propel,ies appraised include: office buildings, warehouses, service stations, manufacturing plants, medical and veterinary clinics, shopping centers, restaurants, apartment buildings, subsidized housing, research and development buildings, grain elevators, flour mills, special-purpose properties, lands, air rights, avigation easements, utility easements, highway easements, and environmentally impaired properties. Specialize in litigation valuation of commercial, industrial, development land and investment properties. PATCHIN MESSNER & DODD Valuation Counselors 137 QUALIFICATIONS OF JASON L. MESSNER (CONTINUED) 205109 tELATED :XPERIENCE Participant in the writing of The Effect of Contamination on The Market Value of Pro ert , Federal Highway Admin.; Office of Right-of-Way, Washington, DC, 1993. Faculty participant at the Hazardous Waste Litigation seminar, Minnesota Institute of Legal Education, 1995. Adjunct lecturer on environmental appraisal issues, University of 51. Thomas, Mpls., MN, 1996 and 2002. Faculty participant at the Eminent Domain 101 serninar, Hennepin County Bar Association, 2003. Faculty participant at the Annual Right-of-Wav Professionals Conference, Minnesota Department of Transportation, 2004. Metro/Minnesota Chapter of the Appraisal Institute; Education Coordinator - 1997 through 2001, Secretary _ 2001, Vice President - 2002, President - 2003. APPRAISAL CLIENTS INClUDE All i ant T echsystems, Inc. Bank of America B.P. Oil Pipeline Company Burlington Northern Railroad Company Campbell Soup Company Ceridian Corporation CMC Heartland Partners Deluxe Check Corporation Equitable Life Assurance Co. Exxon Mobil Corporation Farm Credit Services First Bank Systems Heitman Realty Company Honeywell, Inc. IBM Corporation IDS Financial Services Internal Revenue Service Joster15, Inc. LaSalle National Bank Lockheed Martin Louisville Regional Airport Authority Medtl'Onics, Inc. Mpls. Community Development Agency Minnesota Department of Transportation 3M Corporation Northwest Airlines, Ine. Northwestern Mutual Life Insurance Co. Old Dutch Foods Philips Lighting Resolution Trust Corporation Reynolds Metals Company Soo Li ne Rai I road Company Unisys Corporation University of Minnesota U.s. Environmental Protection Agency U.s. Fish & Wildlife U.s. postal Service Wells Fargo Williams Pipeline Company Xcel Energy Other clients include various Cities (Andover, Belle Plaine, Bloomington, Brooklyn Center, Burnsville, Chaska, Cokato, Columbia Heights, Crystal, Duluth, Elk River, Farmington, Jordan, Lake City, Lino Lakes, Marshall, Medina, Minneapolis, New Brighton, Osseo, Prior Lake, Ramsey, Richfield, Robbinsdale, Rochester, SI. Paul, SI. Louis Park, Savage, Shakopee and Victoria), and Counties (Benton, Brown, Carver, Clay, Dakota, Douglas, Goodhue, Hennepin, Jackson, Mcleod, Murray, Nicollet, Otter Tail, Ramsey, Scott, Sherburne, Stearns and Steele) in the State of Minnesota. COURT EXPERIENCE Qualified as an expert witness in Minnesota Tax Court, U. S. District Court (Minnesota), Anoka, CalveI', Dakota, Hennepin, Rice, Scott, Wabasha, Washington and Wright County District Court, and various Commission Hearings. PATCHIN MESSNER & DODD Valuation Counselors TO: EDA FROM: Kirsten Parten heimer, Community Development Specialist DATE: August 22,2006 SUBJECT: August Update of Community Development Activity The following is an update of Community Development activity through mid August of 2006. If you have any comments or questions you may contact Bob Streetar at 763-706-3672. ACTIVITY CENTER On July 26, 2006, the Activity Center Advisory Committee hosted its first open house for the proposed activity center. It was estimated that over 100 people, including residents, ACAC members and staff, attended, and the Committee received approximately 81 feedback forms to review. The Committee will meet on Thursday, August 24 at 7 p.m. in the Grand Central Lofts community center to discuss the open house and begin the second phase of the study process. Information from all meetings will be posted on the City's website at: http://www.ci.columbia- heights.mn.us/departments/CommCenter.asp. Or, from the main page, click on "departments," "Community development" and then "Community Activities Center" under "Redevelopment Updates." SARNA's In ~reparation for the construction of the new Sarna's Pub and Grill, the MGS building at 322 40' Avenue NE was demolished during the week of August 7-11 and soil corrections have begun. Gas and electric have been relocated in anticipation of the new building and crews have removed the frontage road and a portion of Lookout Place. The owners anticipate the restaurant will be open for business in late fall. 39th AND CENTRAL Staff met with Loren Brueggemann on July 31, 2006 to review his firm's development proposal. He is preparing a site plan, which will be presented with financial information at the September or October EDA meeting. GRAND CENTRAL LOFTS On July 10, the EDA directed staff to apply for Livable Communities Demonstration Account (LCDA) funding for a parking ramp to serve 47,698 feet of proposed commercial development. PARK VIEW The cleanup of Phase II is now complete and the first five building pads have been constructed. Sewer and water will be completed in the next six to eight weeks. Ryland has sold 67 units in Phase I and three units in Phase II.