HomeMy WebLinkAbout126-04 RESOLUTION•
RESOLUTION NO. 12 6- 0 4
a
A RESOLUTION TO GRANT APPROVAL TO SOLICIT
SEALED BIDS FROM THE PUBLIC TO PURCHASE
THE PORTION OF CITY PROPERTY (FORMERLY
SHAKE'S FROZEN CUSTARD) NOT USED FOR THE
INTERSECTION IMPROVEMENT ON SIXTH STREET
WHEREAS, the City Council of the City of Fayetteville, Arkansas has already
passed a resolution to offer this property for sale as required by Fayetteville Code §34.27
(A); and
WHEREAS, two simultaneous and independent appraisals of the real property have
been obtained and provided to the City Council pursuant to Fayetteville Code §34.27 (C);
and
WHEREAS, public notification including at least four newspaper publications,
certified mail to all adjacent property owners and signs, prominently displayed at all
approaches to the property, have been accomplished pursuant to Fayetteville Code §34.27
(D); and
WHEREAS, Fayetteville Code §34.27 (E) provides "Upon an affirmative vote of the
City Council, the city shall solicit sealed bids, at a minimum price set by the City Council
from all interested parties. Bids must equal or exceed the minimum price set by the City
Council and the appraised value of the property."
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF FAYETTEVILLE, ARKANSAS:
Section 1: That the City Council of the City of Fayetteville, Arkansas hereby directs
the staff to solicit sealed bids at a minimum price of $178,000.00 for the city owned property
at 2050 W. 6th Street.
PASSED and APPROVED this the 17th day of August, 2004.
ATTEST:
By:
By:
,„a,i t ,FOODY, Mayor
z�V;
NAME OF FILE:
CROSS REFERENCE:
Item #
Date
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Resolution No. 126-04
wlAppraisal Report & Summary of Appraisal Report
Document
1
07/30/04
memo to mayor & City Council
2
draft resolution
3
letter to Jill Goddard
from Real Estate Consultants
4
legal description
5
Staff Review Form
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memo to Jill Goddard
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8
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10
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12
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15
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17
NOTES:
,ems
IIIg/,77o'/
• City Council Meeting of August 17, 2004
.Siv fit` reed
CITY COUNCIL AGENDA MEMO Pro� 12; get/�/
To: Mayor and City Council
Thru: Tim Conklin, Community Planning and Engineering Services Director
Gary Coover, City Engineer
From: Jill Goddard, Land Agent
Date: July 30, 2004
Subject: Approval to solicit sealed bids for the remainder of Parcel No. 765-12164-000
(formerly known as Shake's Frozen Custard, 2050 W. 6th Street). Said sealed
bids to be at a minimum price set by the City Council as based upon review of
the two independent appraisals (attached).
RECOMMENDATION
Staff recommends approval of soliciting sealed bids for the remainder of Parcel No. 765-12164-
000.
BACKGROUND
Parcel No. 765-12164-000 was acquired in its entirety as part of the relocation of Sang Avenue.
Through purchase of the whole, the City avoided a settlement by court action with potentially
high severence damages. The contractor also did not have to take special precautions during
construction to keep access to the business available at all times.
Intent to Sell was approved by City Council at their June 15, 2004 council meeting. Two
independent appraisals of the property have been obtained (copies attached). A survey of the
property has been completed, including the street vacation on the north side (approved at
Planning Commission meeting of July 12, 2004).
DISCUSSION
Now that new Sang Avenue/Sixth Street/ Hollywood Street intersection is completed, the City
can consider the sale of the remainder of Parcel No 765-12164-000, including the building, as it
serves no municipal purpose. As per Ordinance No. 4358, "upon an affirmative vote of the City
Council, the City shall solicit sealed bids, at a minimum price set by the City Council, from all
interested parties. Bids must equal or exceed the minimum price set by the City Council and the
appraised value of the property."
Upon City Council approval, property will be advertised for sale and the sealed bid opening
scheduled. Results be be presented to City Council in the near future.
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RESOLUTION NO.
A RESOLUTION TO GRANT APPROVAL TO SOLICIT
SEALED BIDS FROM THE PUBLIC TO PURCHASE
THE PORTION OF CITY PROPERTY (FORMERLY
SHAKE'S FROZEN CUSTARD) NOT USED FOR THE
INTERSECTION IMPROVEMENT ON SIXTH STREET
WHEREAS, the City Council of the City of Fayetteville, Arkansas has already
passed a resolution to offer this property for sale as required by Fayetteville Code §34.27
(A); and
WHEREAS, two simultaneous and independent appraisals of the real property have
been obtained and provided to the City Council pursuant to Fayetteville Code §34.27 (C);
and
WHEREAS, public notification including at least four newspaper publications,
certified mail to all adjacent property owners and signs, prominently displayed at all
approaches to the property, have been accomplished pursuant to Fayetteville Code §34.27
(D); and
WHEREAS, Fayetteville Code §34.27 (E) provides "Upon an affirmative vote of the
City Council, the city shall solicit sealed bids, at a minimum price set by the City Council
from all interested parties. Bids must equal or exceed the minimum price set by the City
Council and the appraised value of the property."
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF FAYETTEVILLE, ARKANSAS:
Section 1: That the City Council of the City of Fayetteville, Arkansas hereby directs
the staff to solicit sealed bids at a minimum price of $178,000.00 for the city owned property
at 2050 W. 6th Street.
PASSED and APPROVED this the 17th day of August, 2004.
ATTEST:
By:
SONDRA SMITH, City Clerk
APPROVED:
By:
DAN COODY, Mayor
THE
REAL ESTATE
CONSULTANTS
•REALTORS • APPRAISERS • CONSULTANTS•
July 30, 2004
Ms Jill Goddard
The City of Fayetteville
113 W. Mountam
Fayetteville, AR 72701
RE- Appraisal Services
Dear Ms. Goddard:
• •
Former Shake's Frozen Custard Building
2050 W. 6th St.
Fayetteville, AR 72701
118 N. East Ave.
P.O. Box 726
Fayetteville. AR 72702
Phone (479) 442 0762
In compliance with your request, and for the purpose of estimating the current Market Value of the above
captioned property, 1 hereby certify that I have personally inspected the property and made a survey of matters
pertinent to the estimation of its value. The intended use of this appraisal is for sale evaluation purposes of the
client.
I further certify that I have no interest, present or contemplated, in the property under appraisement, & that the
fee was not contingent upon the value estimate reported, nor based upon a percentage of the appraised value.
The following narrative appraisal report contains the data gathered in the investigation, and shows the method of
appraisal in detail. The report has been prepared in conformity with the Uniform Standards of Professional
Appraisal Practice as promulgated by the Appraisal Foundation. This is considered a Complete Summary
Appraisal Report.
Based upon the inspection of the subject property and the investigation and analysis carried out to this report, it
is the considered opinion of the appraiser that the Market Value of the property as of July 21, 2004 and subject
to the assumptions and limiting conditions set forth within the body of this report, is as follows:
ONE HUNDRED SEVENTY EIGHT THOUSAND DOLLARS
($178,000)
Respectfully Submitted,
Mark E Risk, GAA
State Certified General Appraiser
#CG0202
f-1AL
Leslie Manning
State Certified General Appraiser
#CG2445
City of Fayetteville
113 W. Mountain
Fayetteville, Ar. 72701
• •
July 27`h, 2004
RE: Summary Narrative Appraisal Report regarding the Market Value of the land and
commercial building located at 2050 W. 6d' St., Fayetteville, Washington County,
Arkansas.
To Whom It May Concern:
Pursuant to your request, I have conducted an investigation and appraised a tract of land with
commercial improvements located at 2050 W. 6th St., Fayetteville, Arkansas.
The property Legal Description is:
Being +/-0.28 Acres, MOL, and being Part of Block 2, Westwood Addition, Fayetteville,
Washington County, Arkansas.
The purpose of this analysis and valuation report is to estimate the Market Value of the property
as of July 22nd , 2004.
As per our agreement, the data and analysis is presented in a Summary Format and the Report
does not deviate from the USPAP, as permitted upon agreement between client and appraiser. At
our client's request, the results of our investigation and analyses, which comprise a Complete
Appraisal, are being presented via a Summary Appraisal Report Format. Therefore, the
appraiser does not invoke the Departure Rule as allowed under Appraisal Standards Nos. I and 2,
Rule 2-2, adopted by the Appraisal Standards Board on March 22, 1994, effective July 1, 1994,
and revised January 1, 2000. A full file memorandum is maintained in my office
We certify that, to the best of our knowledge and belief,
(1) The statements of fact contained in this report, upon which the analysis, opinions and
conclusions expressed herein are based, are true and correct.
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(2) The reported analyses, opinions and conclusions are limited only by the reported
assumptions and limiting conditions, and is our personal, unbiased professional analyses,
opinions and conclusions.
(3) I have no present or prospective interest in the property that is the subject of this analysis
and I have no personal interest or bias with respect to the property or parties involved with this
assignment.
(4) My compensation is not contingent upon an action or event resulting from the analyses,
opinions or conclusions in, or use of, this report, or upon developing or reporting of a
predetermined value or direction of 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 use of the appraisal.
(5) This assignment was not based upon a requested minimum value, a specific valuation, or
the approval of a loan.
(6) My analyses, opinions and conclusions were developed, and this report has been prepared
in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP), as
promulgated by the Appraisal Standards Board of the Appraisal Foundation, and the Code of
Professional Ethics and Standards of the National Association of Master Appraisers.
I hereby certify that I have inspected the property described, and it is felt that all data gathered by
my investigation is from sources believed reliable and true.
According to Standards Rule 2-2(c), a Limited Restricted/Summary Appraisal Report should
have these minimum requirements:
- Describe the extent of the process, collecting, confirming and reporting data.
- State all assumptions and limiting conditions that affect the analyses, opinions and
conclusions.
- State the appraisal procedures followed, state the value conclusion and reference the
existence of specific file information in support of the conclusion.
- State the appraiser's opinion of highest and best use of the real estate, when such an opinion
is necessary and appropriate.
- State the exclusion of any of the usual valuation approaches.
- Contain a prominent use restriction that limits reliance on the report to the client and warns
that the report cannot be understood properly without additional information in the workfile of
the appraiser, and clearly identify and explain permitted departures from the specific guidelines
of Standard 1.
• •
- Include a signed certification in accordance with Standards Rule 2-3.
The function of this appraisal is to assist the client in determining a fair and equitable Market
Value of the subject property. The value estimate is based on the real property only. No
furniture, equipment or personal property is included in the value estimate.
The value is based on the definition of Market Value as set forth by the FIRREA Act of 1989,
effective August 24, 1990. Please refer to the definition in Exhibit "A" following this letter.
In the accompanying report, you will find the results of my investigation containing the facts,
analysis and conclusions pertaining to the subject property and the final estimate of value.
As a result of investigation, studies and analyses of sales, offers of sales, cost data, and allfactors
in the marketplace which affect value, it is the opinion and judgment of the appraiser that the
property described herein has a Market Value in Fee Simple Interest as of July 22nd , 2004 of:
ONE HUNDRED SEVENTY TWO THOUSAND DOLLARS
$172,000
Intended Purposes/User: This Appraisal Report is intended to be used for estimating
prospective market value for the owner and this appraisal is intended to be used only by the
client/addressee only for such purposes. The client is The City of Fayetteville, Ar. Any other
use or reliance of this report by an unauthonzed third party is prohibited unless otherwise
specified.
Respectfully submitted,
�4..00I1.3mAPsR ititi
yQ,ob GEHrIF/Q j�sf9��
Dor?LJrailitt,154.4.�"
PagisB;AgfitTifigan4E
Stale Cgrtdifafathedil A} praiser
Liccrrjs2' 1 N
•
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R- 20.00 FT
L - 30.20 FT,
40 0 40
SCALE: 1" = 40'
N 6712'42' NI
93 56 FT
:0.28_ ACRES -L._
r ElLOCK 2
-- WEST WOOD
�.. ADDITION
STORY
CONCRETE
BLOCK
L BUILDING' •
2050 W 6th St.
SHAKE'S
• 1T99`IP
24 FT
R - 262.00 PT
L 157.07 FT
- 33.44'21 R
T•B.79 PT
R - 28.96 PT
L . 17.01 FT
LEGAL DESCRIPTION
All that certain tract or parcel of land being a part of the SE ''A of the SWI/4, and part of the NE ''A of the NW I/4of Section
17, Township 16 North, Range 30 West, Washington County, Arkansas. And being more particularly described by metes and
bounds as follows:
Beginning at the SW Corner of the SE ''A of the SW ''A of Section 17, Township 16 North, Range 30 West, Washington
County, Arkansas. Said point being the NW Corner of Block 2 of Westwood Addition to the City of Fayetteville, Arkansas.
THENCE - North 02° 56' 11" East 6.16' to the south right-of-way line of Old Farmington Road;
THENCE - with said right-of-way through the following calls:
THENCE -through a curve to the left with a radius of 225.00', a central angle of 25° 27' 53", arc length of 54.53', a chord
bearing of North 66° 59' 31" East for a distance of 54.40';
THENCE - through a curve to the right with a radius of 20.00', a central angle of 286° 28' 44", arc length of 30.28', a chord
bearing of South 76° 34' 38" East for a distance of 27.47';
THENCE - South 33° 12' 12" East 17.23';
THENCE - through a curve to the right with a radius of 262.00', a central angle of 21° 52' 07", arc length of 57.87', a chord
bearing of South 26° 52' 32" East for a distance of 57.75';
THENCE - through a curve to the right with a radius of 28.96', a central angle of 33° 46' 27", arc length of 17.07', a chord
bearing of South 01° 38' 09" East for a distance of 16.83' to the north right-of-way of State Highway No. 62;
THENCE - South 60° 30' II" West 135.82' with said right-of-way to a set 5/8" 1.Pin;
THENCE - North 02° 42' 11" West 134.89' to the POINT OF BEGINNING. The above described property having been
surveyed by Bart L.Petray contains 0.28 acres of land more or less.
411
STAFF REVIEW FORM - NON-FINANCIAL OBLIGATION
X AGENDA REQUEST
For the Fayetteville City Council Meeting of: August 17, 2004
FROM:
Jill Goddard Engineering Community Planning & Eng. Services
Name Division Department
ACTION REQUIRED: Resolution granting approval to solicit sealed bids for the remainder of Parcel No. 765-
12164-000 (formerly known as Shake's Frozen Custard, 2050 W. 6th Street). Said sealed bids to be at a
minimum price set by the City Council as based upon review of the two independent appraisals (attached).
SUMMARY EXPLANATION:
Property was acquired in its entirety as part of the relocation of Sang Avenue. Now that the new Sang Avenue/Sixth
Street/Hollywood Avenue intersection is completed, the remainder of Parcel No. 765-12164-000 (including the
building) can be sold as it serves no municipal purpose.
Intent to Sell was approved by City Council at the June 15, 2004 council meeting. Two independent appraisals of the
property have been obtained (copies attached). Survey of the property has been completed, including the street
vacation on the north side (approved at Planning Commission meeting of July 12, 2004).
City Council to review the two independent appraisals and to set minimum price to be accepted. Property will then be
advertised for sale with sealed bid opening scheduled. Results to be presented to City Council.
Finance & Internal Services Dir.
Date
Received in Mayor's Office
Cross Reference:
Previous Ord/Res#:
Orig. Contract Date:
Orig. Contract Number:
New Item:
Date
Yes No
•
FAYETTEIALLE
THE CITY OF FAYETTEVILLE, ARKANSAS
City Clerk Division
DEPARTMENTAL CORRESPONDENCE
s
113 West Mountain
Fayetteville, AR 72701
Telephone: (479) 575-8323
To: Jill Goddard
Land Agent
From: Clarice Buffalohead-Pearman
City Clerk Division
Date: August 20, 2004
Re: Resolution No. 126-04
The City Council passed a resolution, August 17, 2004, authorizing the solicitation of sealed bids for 2050
W. 6'" Street. I have attached a copy of that resolution for you.
The resolution with attachments will be recorded in the city clerk's office and microfilmed. If anything
else is needed please let the clerk's office know.
/cbp
attachments
cc: Nancy Smith, Internal Auditor
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MICROFILMED
APPRAISAL REPORT
City of Fayetteville
SHAKES FROZEN CUSTARD
FORMER BUILDING
2050 W 6th St.
Fayetteville, AR
By
The Real Estate Consultants
118 N. East Ave.
Fayetteville, AR 72701
(c) Copyright 2004 by The Real Estate Consultants
1 THE
IREAL ESTATE
CONSULTANTS
1 • REALTORS • APPRAISERS • CONSULTANTS •
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July 30, 2004
Ms. Jill Goddard
The City of Fayetteville
113 W. Mountain
Fayetteville, AR 72701
RE Appraisal Services
Dear Ms. Goddard:
Former Shake's Frozen Custard Building
2050 W. 6th St.
Fayetteville, AR 72701
118 N. East Ave.
P.O. Box 726
Fayetteville, AR 72702
Phone (479) 442 0762
In compliance with your request, and for the purpose of estimating the current Market Value of the above
captioned property, I hereby certify that I have personally inspected the property and made a survey of matters
pertinent to the estimation of its value. The intended use of this appraisal is for sale evaluation purposes of the
client.
I further certify that I have no interest, present or contemplated, m the property under appraisement, & that the
fee was not contingent upon the value estimate reported, nor based upon a percentage of the appraised value.
The following narrative appraisal report contains the data gathered in the investigation, and shows the method of
appraisal m detail. The report has been prepared in conformity with the Umform Standards of Professional
Appraisal Practice as promulgated by the Appraisal Foundation. This is considered a Complete Summary
Appraisal Report.
Based upon the inspection of the subject property and the investigation and analysis carried out in this report, it
is the considered opinion of the appraiser that the Market Value of the property as of July 21, 2004 and subject
to the assumptions and limiting conditions set forth within the body of this report, is as follows:
ONE HUNDRED SEVENTY EIGHT THOUSAND DOLLARS
($178,000)
Respectfully Submitted,
��,v`. R e
.'4Rxe.as$
Mark E Risk, GAA
State Certified General Appraiser
#CG0202
r
STATE
CERTIFIED
GENERAL
• No. CG2F/5
t
Leslie Manning
State Certified General Appraiser
#CG2445
TABLE OF CONTENTS
SUMMARY OF SALIENT FACTS & CONCLUSIONS 1
LOCATION MAP 2
SUBJECT PICTURES 3
SUBJECT PICTURES 7
STATEMENT OF OWNERSHIP 9
PURPOSE OF THE APPRAISAL 9
DATE OF APPRAISAL 9
PROPERTY RIGHTS APPRAISED 9
HISTORY 9
LEGAL DESCRIPTION 10
DEFINITION OF MARKET VALUE 11
ASSUMPTIONS AND LIMITING CONDITIONS 12
THE APPRAISAL. PROCESS 17
SCOPE OF THE APPRAISAL 18
NEIGHBORHOOD DATA 19
SITE DATA 20
SURVEY 21
ZONING MAP 22
COMPLIANCE WITH THE AMERICANS WTI'H DISABILITIES ACT 27
ENVIRONMENTAL ANALYSIS 28
HIGHEST AND BEST USE ANALYSIS 29
MARKET TRENDS 30
DETERMINATION OF MARKET VALUE 31
THE COST APPROACH 32
COMPARABLE LAND SALES MAP 33
COMPARABLE LAND SALES 33
COMPARABLE LAND SALES 34
ANALYSIS OF COMPARABLES & CONCLUSION OF LAND VALUE 37
ESTIMATED CONSTRUCTION COST OF SUBJECT IMPROVEMENTS 38
THE MARKET APPROACH 39
IMPROVED SALES MAP 40
COMPARABLE MARKET DATA 41
ANALYSIS OF COMPARABLES & CONCLUSION OF VALUE 47
MARKET DATA ADJUSTMENT GRID 49
50
51
52
53
54
55
56
57
58
60
61
62
64
66
MARKET DATA ADJUSTMENT GRID - CONTINUED
THE INCOME APPROACH
DETERMINATION OF ECONOMIC RENT
COMPARABLE LEASE DATA
DETERMINATION OF NET OPERATING INCOME
DETERMINATION OF CAPITALIZATION RATE
DETERMINATION OF VALUE - INCOME APPROACH
CORRELATION, ANALYSIS & CONCLUSION
CORRELATION, ANALYSIS & CONCLUSION
CERTIFICATE OF APPRAISER
ADDENDUM
DEED
ZONING CLASSIFICATION (C-2) THOROUGHFARE COMMERCIAL
QUALIFICATIONS
SUMMARY OF SALIENT FACTS & CONCLUSIONS
Property Type: Commercial Restaurant Building
Location:
Effective Date
of the Appraisal:
2050 W. 6th St.
Fayetteville, AR 72701
The subject site was inspected on July 21, 2004. The effective date of the
appraisal is the date of inspection — July 21, 2004. The opinions set forth in this
report are stated as of July 29, 2004.
Zoning: C-2 (Thoroughfare Commercial)
Site: 136.82' x 128.73' x 6.16' x 54.53' x 30.28' x 17.25' x 57.87' x
17.07' - 12,197 Sq. Ft. or 0.28 Acres
Improvements: 1,113SF Commercial Building
Utilities: All municipal utilities available
Highest and Best Use: Drive-Thru Fast Food Restaurant or Drive-Thru Commercial Facility
Flood Data: FEMA Map #05143C0091 D, The subject is located in Flood Hazard
Area Zone X
Value Indications:
Cost Approach $187,000
Market Data Approach $177,000
Income Approach $167,000
Final Estimate of Market Value:
$178,000
Note: This appraisal report has been prepared for the exclusive benefit of The City of Fayetteville. It may
not be used or relied upon by any other party. Any party who uses or relies upon any information in this
report without the preparer's written permission, does so at their own risk. This report is considered a
complete summary appraisal report.
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LOCATION MAP
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Front View of Subject Property — 2050 W. 6th St.
Rear View of Subject Property — 2050 W. 6th St.
SUBJECT PICTURES
W. 6th St. Looking West
W. 6th St. Looking East
4
View of Old Farmington Rd. Looking West
SUBJECT PICTURES
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View of Subject from Southeast Comer
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41
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Interior View of Subject
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SUBJECT PICTURES
Interior View of Subject
PROPERTY IDENTIFICATION
The property under appraisement is a commercial drive thru/carryout restaurant building. It is located at 2050
W. 6°St. at the northwest corner of the intersection of W. 6th St. and Sang Ave. Old Farmington Rd. abuts the
property at the rear and Old Sang Ave. abuts the property to the west. The property lies in the southwestern
portion of the City of Fayetteville, Washington County, Arkansas.
STATEMENT OF OWNERSHIP
As of effective date of the appraisal, the owner of record of the subject property is:
The City of Fayetteville
PURPOSE OF THE APPRAISAL
This appraisal is made for the purpose of estimating the existing Market Value of the subject property as of the
' date contained herein, and under the contingent and limiting conditions set forth in this report. The intended use
of the appraisal is for sale evaluation purposes of the Client
DATE OF APPRAISAL
The effective date of the appraisal is the date of inspection — July 21, 2004.
PROPERTY RIGHTS APPRAISED
The property is appraised as though owned in fee simple and unencumbered. A fee simple title is the fullest type
of private ownership possible, subject to all public limitations including zoning, taxation, and eminent domain;
and also subject to private limitations, which may exist, such as easements and restrictions of record.
HISTORY
The subject property has been held in its current ownership form since December 17, 2002 when Donald E.
& Debra L. Osborne granted the property by Warranty Deed to The City of Fayetteville for a reported
consideration of $240,000, as recorded in Deed Book 2002, Page 194768 in the office of the Circuit Clerk
and Ex -Officio Recorder of Washington County, Arkansas. The Osborne's purchased the property for a
reported $220,000 on February 22, 2000 as recorded in Deed Book 2000; Page 29178. The purchase was
from L.C.A. Enterprises, Inc. who purchased the property from A.B. & W.C. Littlefield on November 24,
1992 for a reported purchase price of $95,000 as recorded in Deed Book 92; Page 64047.
The subject site was substantially reduced in size after the City of Fayetteville utilized the eastern corner of
the site in the construction of a new intersection to connect W. 6t' Street with Sang Ave. and Old
Farmington Rds. According to the City of Fayetteville, the new concrete access apron at the northern edge
of the site has been vacated to the subject to allow access from Old Farmington Rd.
The appraiser is not aware of any listings or recent sales transactions regarding the subject property nor is
the appraiser is aware of any other transactions involving the subject property within the past ten years.
LEGAL DESCRIPTION
All that certain tract or parcel of land being a part of the SE '/4 of the SW '/4, and part of the NE '%4 of the
NW '/4 of Section 17, Township 16 North, Range 30 West, Washington County, Arkansas. And being more
particularly described by metes and bounds as follows:
Beginning at the SW Corner of the SE'/4 of the SW '/4 of Section 17, Township 16 North, Range 30 West,
Washington County, Arkansas. Said point being the NW Corner of Block 2 of Westwood Addition to the
City of Fayetteville, Arkansas.
Thence — North 02 degrees 56' 11" East 6.16' to the south right-of-way line of Old Farmington Road;
Thence — with said right-of-way through the following calls:
Thence — through a curve to the left with a radius of 225.00', a central angle of 25 degrees 27' 53", arc
length of 54.53', a cord bearing of North 66 degrees 59' 31" East for a distance of 54.40';
Thence — through a curve to the right with a radius of 20.00', a central angle of 286 degrees 28' 44", arc
length of 30.28', a cord bearing of South 76 degrees 34' 38" East for a distance of 27.47';
Thence — South 33 degrees 12' 12" East 17.23';
Thence — through a curve to the right with a radius of 262.00', a central angle of 21 degrees 52' 07", arc
length of 57.87', a cord bearing of South 26' 52' 32" East for a distance of 57.75';
Thence — through a curve to the right with a radius of 28.96', a central angle of 33 degrees 46' 27", arc
length of 17.07', a cord bearing of South 01 degrees 38' 09" East for a distance of 16.83' to the north right-
of-way of State Highway No. 62;
Thence — South 60 degrees 30' 11" West 135.82; with said right-of-way to a set 5/8" I.Pin;
Thence — North 02 degrees 42' 11" West 134.89' to the POINT OF BEGINNING. The above described
property having been surveyed by Bart L. Betray contains 0.28 acres of land more or less.
10
DEFINITION OF MARKET VALUE
The Federal National Mortgage Association (Fannie Mae) defines market value as follows:
"The most probable price which a property should bring in a competitive and open market under all conditions
requisite to afair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not
affected by undue stimulus. Implicit in this definition is the consummation ofa sale as ofa specified date and
the passing of title from seller to buyer under conditions whereby:
Buyer and seller are typically motivated
2. Both parties are well informed or well advised, and each
acting in what he considers his own best interest.
3. A reasonable time is allowed for exposure in the open market.
4. Payment is made in terms of cash in U.S. dollars or in terms
offinancial arrangements comparable thereto.
5. The price represents the normal consideration for the property
sold unaffected by special or creative financing or sales
concessions granted by anyone associated with the sale."
It should be noted that market value and market price (what price a property actually sells for) are often not the
same. The appraisers estimate of market value is his prediction of the most likely selling price under the stated
conditions of the report. Actual market prices are often influenced by unknown or hidden factors; thus, an
appraisal does not guarantee that a sale will occur at market value.
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[1
ASSUMPTIONS AND LIMITING CONDITIONS
ACCEPTANCE OF AND/OR USE OF THIS APPRAISAL REPORT BY THE CLIENT OR ANY THIRD
PARTY CONSTITUTES ACCEPTANCE OF THE FOLLOWING ASSUMPTIONS AND LIMITING
CONDITIONS:
Limit of liability:
The liability of TREC, Inc., dba
The Real Estate Consultants, Mark E. Risk GAA,
and associates and
'
employees
is limited to the client only
and to the fee actually received. Further, there is
no accountability,
obligation,
or liability to any third party.
If this report is placed in the hands of anyone other
than the client, the
t client shall make such party aware of all limiting conditions and assumptions of the assignments. The appraiser
is in no way to be responsible for any costs incurred to discover or correct any deficiencies of any type present in
the property - physically, financially, and/or legally. In the case of limited partnerships, client agrees that if any
lawsuit brought by a lender, partner, part owner, tenant, or other party, results in any award or settlements of any
type in such suit regardless of outcome, that the client, who is the intended sole recipient of this report, will hold
' the appraiser completely harmless in any such action.
Copies, publication, distribution, and use of the report:
Possession of this report or any copy thereof does not carry with it the right of publication, nor may it be
used for any purpose other than its intended use. The signer of this report is a member of the National
I
Association of Realtors and its Appraisal Section. The Bylaws and Regulations of this organization require their
members to control the use and distribution of each report signed by such member.
' Therefore, except as hereinafter provided, only the party for whom this report was prepared may
distribute copies of this report, and only in its entirety, to such third parties as may be selected, but not without
prior written consent and approval of the signatory of this report. The physical report remains the property of the
appraiser for the use of the client.
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 National Association of Realtors
or any designations) shall be disseminated to the public through the advertising media, public relations media,
' news media or any public means of communication without prior written consent and approval of the signer of
this report. The authentic copies of this report are sealed with my Seal. Any copy that is not so sealed is
unauthorized and may have been altered.
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Confidentiality and trade secrets:
This appraisal consists of trade secrets and commercial or financial information which is privileged and
confidential and exempted from disclosure under 5 U.S.C. 552 (b) (4). The appraiser may not divulge the
material contents of this report, the analytical findings and conclusions, or give a copy of this report to anyone
other than the client or his designee as specified in writing - except as may be required by the National
Association of Realtors, or other organizations as they may request in confidence for ethics enforcement, or by a
court of law of body with the power of subpoena. This appraisal is to be used only in its entirety and no part is to
be used without the whole report.
No change of any item in the report shall be made by anyone other than the appraiser, and the appraiser
shall have no responsibility if any such unauthorized change is made. The client shall notify the appraiser
signing the report of any request to reproduce this appraisal in whole or part.
Testimony, consultation, and completion of appraisal services:
The contract for appraisal, consultation, or analytical services is fulfilled and the total fee payable upon
completion of this report. The appraiser or those assisting in preparation of this report will not be asked or
required to give testimony or be subpoenaed in court of any public or private hearing because of having made
this appraisal, in full or in part, nor engage in post appraisal consultation with the client or third parties except
under separate and special arrangement and at additional fee. A MINIMUM TWENTY DAYS NOTICE MUST
BE GIVEN BEFORE COURT APPEARANCE FOR PURPOSES OF REVIEW AND STUDY. If testimony or
deposition is required because of any subpoena, the client shall be responsible for any additional time, fees, and
charges regardless of the issuing party.
Information used:
No responsibility is assumed for the accuracy of information as to description (legal, physical, etc.) of the
premises, restrictions, improvements, and income features of the property furnished by others, the client, his
designee, or public records. All information furnished by others is assumed to be true, correct, and reliable and a
reasonable effort has been made to verify such information. An impractical amount of time and money would
be necessary to furnish unimpeachable verification in all instances. It is suggested that the client consider
independent verification if so desired before making a significant commitment regarding the subject property.
No responsibility for the accuracy of data and information obtained or the work of possible subcontractors is
assumed by the appraiser.
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Purchasing power, value change, and market influences:
The estimated market value and the costs used relate only to the effective date of the appraisal. All
dollar amounts are based on the purchasing power and price of the dollar as of the date of the value estimate.
Market value is highly related to exposure, time, promotional effort, terms, motivation, and conditions
surrounding the offering and subject to economic changes in the marketplace over time. In appraisals involving
the capitalization of future income benefits, the estimate of market value reflects the appraiser's interpretation of
income, yields, and other factors derived from general and specific market information. Such estimates are as of
the date of appraisal and subject to dynamic changes in the financial markets that may occur.
Legality of use and related studies:
This report is based on the premise 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 report.
It is assumed that all applicable zoning, building codes, and use regulations and restrictions of all types have
been complied with, unless a nonconformity has been stated, defined, and considered in the appraisal report. It
is assumed that all required licenses, consents, permits, or other legislative or administrative authority from any
local, state, or federal government and/or private entity or organization have been or can be obtained or renewed
for any use on which the value estimate in this report is based.
No environmental or impact studies, special market study of analysis, highest and best use analysis study,
or feasibility study has been requested or made unless otherwise specified in an agreement for services or in the
report. The appraiser reserves the unlimited right to alter, amend, revise, or rescind any of the statements,
findings, opinions, values, estimates, or conclusions based upon any subsequent study or analysis, or any
previous study or analysis pertinent to the assignment that becomes known to him after the report is finished.
Legal and financial assumptions:
No responsibility is assumed for matters of a legal nature affecting title to the property nor is an opinion
of title rendered. The title is assumed to be good and merchantable. The property is appraised in gross as free
and clear of all mortgages, liens, encumbrances, leases, and servitudes unless so specified within the report.
If this appraisal is used for mortgage loan purposes, it should be noted that specific loan ratios, term
amortization, and equity requirements have not been suggested. This appraisal report and value estimate is
subject to change if the physical or legal entity or financing is different than that envisioned in this report.
14
Architectural, structural, mechanical, and engineering assumptions:
No responsibility is assumed for matters of survey, architectural, structural, mechanical, or engineering
nature. The legal description used in this report is assumed to be correct as furnished by the client, his designee
or as derived by the appraiser. It is assumed that the utilization of the land and improvements is within the
boundaries or property lines of the property described, and that there is no encroachment to trespass unless noted
within this report.
The appraiser has inspected as far as possible, by observation the land and the improvements thereon.
However, it was not possible to personally observe conditions beneath the soil, hidden structural components, or
any mechanical components within the improvements and no representations are made as to these matters unless
specifically stated and considered in this report. This appraisal is based on there being no hidden, unapparent or
apparent conditions of the property site, subsoil, or structures that would render it more or less valuable. No
responsibility is assumed for any such conditions or for any expertise or engineering needed to discover such
factors. The appraiser does not warrant against the occurrence of problems arising from the soil conditions.
All mechanical components are assumed to be in operable condition and states standard for properties of
the subject's type. Conditions of heating, cooling, ventilating, electrical, and plumbing equipment is considered
to be commensurate with the conditions of the balance of the improvements unless otherwise stated. No
judgment is made as to the adequacy of insulation or energy efficiency of the improvements or equipment. The
lender, owner, or buyer should inspect the property before purchase or any disbursement of funds. Any of those
parties may wish to require mechanical or structural inspection by a qualified and licensed contractor, civil or
structural engineer, architect, or other expert.
The appraiser has not been requested to make an investigation of the possible existence of any
potentially hazardous insulation or material used in the construction or maintenance of the building, or the
possible existence of toxic waste that may or may not have been stored on the property or the possible existence
of radon gas on the property.
The appraiser represents that he is not qualified to test for the presence or absence of such items and has
not considered, and assumes no responsibility for, such products, which might render the property more or less
valuable. The client is advised to retain an expert in this field if this information is presumed appropriate and
necessary.
This appraisal has not considered conditions relating to surface or subsurface waters; including, but not
limited to water table, flood plain, flood hazard, or rights, if any, claimed nor or in the future in riparian lands
and drainage - unless otherwise noted in this report. The appraiser assumes no responsibility for any costs or
consequences arising from the need for flood hazard insurance. An agent for the Federal Flood Insurance
Program should be contacted to determine the actual need for Flood Hazard Insurance.
15
Management of Property:
It is assumed that the property being appraised will be operated under prudent, responsible, and
competent ownership and management - being neither inefficient nor super efficient.
Exhibits:
The sketches and maps in this report are included only to assist the reader in visualizing the property and
are not necessarily to scale. Various photos, if any, are included for the same purpose and are not intended to
represent the property in other than actual status as of the date of the photos. Site plans are not surveys unless
shown from a separate surveyor.
Component values:
The distribution of the total valuation in this report between land and improvements applies only under
the reported highest and best use of the property. Neither the analysis and conclusions herein, nor the allocations
of value for land and improvements may be used in conjunction with any other appraisal and are invalid if so
used.
Personal property:
Furnishings, fixtures, or equipment of the business operation except as specifically indicated and
typically considered as a part of the real estate have been disregarded unless otherwise stated. For some property
types, business and real estate interests and values are combined.
Federal after tax analysis:
Any after tax income and investment analysis or measures of return on investment are intended only to
reflect possible and general market considerations at an assumed value of price paid. The appraiser does not
claim expertise in tax matters and advises the client and any other person using this appraisal to seek competent
tax advice. The appraiser is in no way to be considered a tax or investment advisor.
16
THE APPRAISAL PROCESS
IA professional appraisal begins with a thorough inspection of the property being appraised. This includes a
physical inspection of the site and all improvements, which have contributory value. It also includes an
inspection of the neighborhood and of site improvements, which may positively or negatively affect the value of
the subject property. And finally, it includes a review of the general area of the subject in order to ascertain any
favorable or unfavorable environmental or economic conditions which may exist, such as proximity to
employment and commercial centers, industry, residential neighborhoods, schools, etc.
After a thorough analysis of the subject, its neighborhood and general area, the appraiser then attempts to
ascertain a fair market value. Three time -tested appraisal approaches are utilized in the profession in order to
' develop a value indication. These approaches are the Market Data Approach, the Cost Approach, and the
Income Approach. Each approach is described as follows:
The Market Data Approach - A comparison is made between the subject
property and similar properties, which have sold recently in the market place.
The Cost Approach - A replacement cost new of the improvements is
• determined and the applicable amount of depreciation is deducted in order to
obtain a value estimate.
The Income Approach - Bases a value estimate upon the amount of net income
the property can reasonably produce over its expected lifetime.
Each approach utilizes the various principles of value, which exist in the marketplace. These value principles
include supply and demand, balance, contribution, conformity, external items, opportunity costs, and utmost -
substitution. The principal of substitution states simply that a knowledgeable, prudent purchaser has three
alternatives. That is, 1) to buy a vacant site and construct a duplicate or similar property without delay (Cost
Approach), 2) to purchase another existing property with equal or similar desirability and utility (Market Data
Approach), or 3) to invest in or acquire a comparably yielding income stream of similar quality, quantity and
longevity (Income Approach).
All three approaches may not be used in all appraisal assignments depending upon the applicability of the
approach to the property being appraised and the scope of the appraisal assignment.
After the appraiser applies the applicable approaches to the subject property, he must reconcile the differences in
value so indicated. Based upon the appraiser's experience and judgment, this may involve selecting one of the
three approaches that is deemed more reliable or it may involve employing a weighted average of the three
approaches in his final correlation or conclusion of value.
With respect to the subject property, all three appraisal approaches are deemed applicable.
17
SCOPE OF THE APPRAISAL
The scope of the appraisal encompasses the necessary research and analysis to prepare a report in accordance
with its intended use, the Standards of Professional Practice of The National Association of Independent Fee
Appraisers, and the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation.
This appraisal is based upon the information gathered by the appraiser from the public records, other identified
sources, and an inspection of the subject property and neighborhood. Data believed to be unreliable was not
included in this report nor used as a basis for the value conclusion.
The appraiser physically inspected the subject property on July 21, 2004. The owner accompanied the appraiser
during the inspection. Subject photographs were taken on the above date.
Area, city, county, and neighborhood data were based on information in the Real Estate Consultants library and
files. The neighborhood section was based upon a physical inspection of the area as well as data from the City
of Fayetteville and Washington County.
The subject property data was based upon the physical inspection of the property and information obtained from
municipal authorities.
In evaluating the highest and best use for the subject property, an analysis was made of data compiled in the
steps noted above. In addition, a study of the commercial restaurant, retail market in the subject area has been
made to help determine the feasibility of the subject project.
In developing the appraisal approaches to value, market data used were collected from the Real Estate
Consultants' office files; other appraisers, Realtors, courthouse records, or persons knowledgeable of the subject
property marketplace; and the municipal offices in the Northwest Arkansas area.
After assembling and analyzing the data defined in this scope of the appraisal, a final estimate of market value
was made.
IF
NEIGHBORHOOD DATA
Location: Southwest Fayetteville. Neighborhood boundaries could be:
N- Old Farmington Rd., W- Interstate I-540, S- 6 h St. &
E- Razorback Rd. (Hwy. 112)
% Developed: 97%
Growth Rate: Stable
Property Values: Increasing
Present Land Use: 95% Commercial
3% Public
2% Residential
Change in Present
Land Use: Unlikely
Predominant
Occupancy: Owner -Occupied
Adequacy of Utilities: Average
Property Compatibility: Average
Police & Fire Protection: Average
General Appearance
of Properties: Average
Accessibility: Average
Age of Structures: New to 50Yrs.
Appeal to the Market: Good
Comments: The subject neighborhood is primarily the commercial corridor of W. 6th St. and is
predominately composed of commercial uses. 6th Street traverses east to west and is
the major thoroughfare of the southwestern area of the city. The subject
neighborhood enjoys good appeal to the market due to its close proximity to The
University of Arkansas. No adverse conditions were noted.
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SITE DATA
Land Dimensions: 136.82' x 128.73' x 6.16' x 54.53' x
30.25' x 17.23' x 57.87' x 17.07'
' Total Size: 12,197 Sq. Ft.; or 0.28 Acres +/-
Street Frontage: 135.82' along W. 6t' St.
Approx. 107.30' along Sang Ave.
'
Approx. 69.66' along Old Farmington Rd.
Zoning Classification: Thoroughfare Commercial (C-2)
' Electricity: SWEPCO
Natural Gas: Arkansas Western Gas Co.
Water: City of Fayetteville
Sanitary Sewer: City of Fayetteville
Street Access: From Old Sang Ave. via right-of-way Street Easement
From Old Farmington Rd., a 2 -Lane Asphalt Street
Topography: Gentle to Moderate Slope
Shape: Irregular
' View: Average - Urban
Drainage: Adequate Upon Inspection
' Comments: The subject site is an irregularly shaped lot with road frontage on four
' sides providing it with good visibility. The site is improved with
concrete curb and gutter, 4 -foot sidewalks on two sides, concrete
access drive, parking pad to rear of building and storm sewer. A
' concrete parking area at the eastern side of the lot has poor access
from access drives. Access to the site is via Old Farmington Rd. at the
north side and the Old Sang Ave. right-of-way easement on the west
' side. This is a small site of only 12,197 Sq. Ft., limiting the available
area for building improvements. Zoning regulations restrict building
area to no more than 60% of the site. Zoning requirements also
' require 50 Foot Building and 10 Foot Landscaping Setbacks along
street frontages. Parking would therefore be limited given
consideration for aisles and turning lanes. Normal utility easements
' apply.
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SURVEY
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-- .� o coauA ACRES l - arrt NE -NW
-I : BLOCK 2
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11 ',,...'WEST. D T 4 R
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LEGAL DESCRIPTION
All that certain tract or parcel of land being a part of the SE '/. of the SW 1/4, and part of the NE '/. of the NW 1/4of Section
17, Township I6.North, Range 30 West, Washington County, Arkansas. And being more particularly described by metes and
bounds as follows:
Beginning at the SW Comer of the SE'/. of the SW '/. of Section 17, Township 16 North, Range 30 West, Washington
County, Arkansas. Said point being the NW Comer of Block 2 of Westwood Addition to the City of Fayetteville, Arkansas.
THENCE - North 02° 56' 11" East 6.16' to the south right-of-way line of Old Farmington Road;
THENCE - with said right-of-way through the following calls:
THENCE -through a curve to the left with a radius of 225.00', a central angle of 25° 27' 53", arc length of 54.53', a cord
bearing of North 66° 59' 31" East for a distance of 54.40';
THENCE - through a curve to the right with a radius of 20.00', a central angle of 286° 28' 44", arc length of 30.28', a cord
bearing of South 76° 34' 38" East for a distance of 27.47';
THENCE - South 330 12' 12" East 17.23;
THENCE - through a curve to the right with a radius of 262.00', a central angle of 21 ° 52' 07", arc length of 57.87', a cord
bearing of South 26° 52' 32" East for a distance of 57.75;
THENCE - through a curve to the right with a radius of 28.96', a central angle of 33° 46' 27", arc length of 17.07', a cord
bearing of South 010 38' 09" East for a distance of 16.83' to the north right-of-way of State Highway No. 62;
THENCE - South 60° 30' 11" West 135.82' with said right-of-way to a set 5/8" I.Pin;
THENCE - North 02° 42' 11" West 134.89' to the POINT OF BEGINNING. The above described property having been
surveyed by Bart L.Petray contains 0.28 acres of land more or less.
21
ZONING MAP
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22
C
IMPROVEMENT DATA
Type: Commercial Fast Food Restaurant Building
Age: 11 Years
' Size: Approx. 1,113 Sq. Ft.
Exterior Walls: Concrete Block Building with
' Dryvit on Front Portion
Roof Material: Built -Up, Flat Roof on Metal Decking
Foundation: Concrete Slab
Frame: Metal Studs
Windows: Double Pane Aluminum Windows
Glass Block Windows
' (2) Sliding Drive-Thru Bronzed Aluminum Windows,
One of the Drive-Thru Window Panes is broken
Doors: Exterior — Metal Security Door
Interior - Masonite Hollow Core
Insulation: 6" Fiberglass ban insulation in Ceiling
None in Walls — Interior walls are Concrete Block
IIVAC: Central HVAC located on Roof
1 Floors: Vinyl Tile in Fair to Poor Condition
Interior Walls: Washable Vinyl Paneling over Sheetrock
Ceiling is Dropped Acoustic Tile
Electrical: Standard Code Wiring in exposed Conduit
(2)- 150 Amp Electric Panels
Recessed Flourescent Lighting
Neon Decorative Lighting on Front
Exterior Spot Lights
Flourescent Flushmount Fixtures under Canopy
Exterior Incandescent Lights
Plumbing: Standard code plumbing, average grade fixtures, (1) '/z -Bath with (2)
fixtures; a sink and a toilet
40 -gallon Hot water heater
(3) Sides of the Building is plumbed and includes copper water lines and
PVC drain lines
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IMPROVEMENT DATA, CONTINUED
Quality of Construction: Average
Condition of Improvements: Fair to Average
Est. Remaining Economic Life: 30 Years
Other Improvements:
Exterior -
Building related- 11.5' x 25.3' Canopy over Ceramic Tile Patio with
Stainless Steel Railing and Posts, Metal Guttering,
(2) 3' x 6" Cloth Awnings over Drive-Thru windows
Yard related- Approx. 2,750±SF Concrete Parking Area
4' Sidewalks on two sides, Concrete Curb and Guttering
Approx. 1,648+SF Concrete Drives
291+SF Patio with Ceramic Tile
500SF Concrete Access Apron
Comments: The 1,113+SF subject improvements are of average quality construction in
average condition. Previous uses of the building have been both as drive-thru
fast food establishments that require minimal building size, no inside seating,
and parking. The building is a concrete block frame with Dryvit around the
front portion of the building. The interior framing is metal stud and the
interior wall finish is a washable vinyl paneling over sheetrock in average
condition. The ceiling is acoustic tile with some tiles missing. The concrete
slab foundation is covered with vinyl tile flooring in fair to average condition.
The building is plumbed on 3 -sides and there is (1)'h -bath with a sink and
toilet, all in average condition. There are (2) broken windowpanes in the
sliding drive-thru windows and the metal security door at the rear of the
building is in fair condition. Neon decorative lighting on the building and a
ceramic patio with stainless steel rails and posts covered by a metal canopy
are in average condition. The minimal interior wall framing includes
basically a small office area and the bath area.
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BUILDING SKETCH
1
AREA CALCULATIONS SUMMARY
Cc" Dac dpdco Sin Not Taal.
GiNl First Floor 1112.51 1112.51
P/P Porch 290.95 290.95
TOTAL BUILDING
b
c
BUILDING
AREA
BREAKDOWN
Bnfldo
So'-'. au
First hear
2.3
x
10.0
23.00
2.3
x
7.3
16.79
25.3
x
42.4
1072.72
1113 I 13 Calwlatlons Total (rounded) I 1113
25
TAX AND ASSESSMENT DATA
The Assessor's Office of Washington County has valued the subject real property as follows:
Parcel Number(s) Assessor's Appraisal Assessment
765-12164-000
I 1
$ 100,100 $ 20,020
Improvements $ 131,650 $ 26,330
Total
$ 231,750 $ 46,350
Millage Rate = 52.50 mills
2003 Taxes = $2,277.28
The assessed valuation in Washington County is based on 20% of the total estimated value. These valuations
should be used as a guide only, since they rarely reflect Market Value. The subject was last assessed in 2003.
COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT
The Americans With Disabilities Act (ADA) was enacted in July 1990, and is legislation designed to extend
civil rights protection to persons with disabilities. The law prohibits discrimination against the disabled in
employment, state and local government services, public transportation, public accommodations and
telecommunications.
The impact of this legislation as it would pertain to real estate involves primarily accessibility and
accommodations for the disabled. New buildings designed and constructed for first occupancy after January 26,
1992 must be made fully accessible to and usable by persons with disabilities. The law would also apply to
alterations made to existing public and commercial facilities after the above date. In addition to technical
requirements for new construction and alterations, the ADA contains specific requirements for business and
mercantile establishments, lodging, restaurant, libraries, and medical facilities. The final rules implementing the
ADA were published in the Federal Register of July 26, 1991.
The Appraiser has made no audit as to the compliance/non-compliance of the subject property, whether existing
or proposed, and assumes no responsibility for implementation of the ADA. The appraiser recommends that
certification of compliance be obtained from the contractor, developer or other appropriate entities before new
construction or significant alterations are made.
ENVIRONMENTAL ANALYSIS
The appraiser's routine inspection of and inquiries about the subject property did not develop any
information that indicated any apparent significant hazardous substances or detrimental environmental
conditions that would affect the subject property negatively. The value estimated in this report is based on
the assumption that the property is not negatively affected by the existence of hazardous substances or
detrimental environmental conditions. However, the appraiser is not an expert in the identification of
hazardous substances or detrimental environmental conditions. It is unlikely but possible that tests and
inspections made by a qualified hazardous substance and environmental expert would reveal the existence
of hazardous substances or detrimental environmental conditions on or around the property that would
negatively affect its value.
28
HIGHEST AND BEST USE ANALYSIS
The Appraisal Foundation defines highest and best use as follows:
"The reasonably probable and legal use of vacant land or improved property, which is physically possible,
appropriately supported, financially feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility,
and maximum profitability."
The following tests must be met in estimating the highest and best use of the subject:
1. It must be physically possible based on the subject site characteristics.
2. It must be a legal use under current or likely zoning regulations.
3. It must be probable and not based upon conjecture or speculation.
4. There must be a profitable demand for such use and it must return to the land the
highest net return for the longest period of time.
These tests have been applied to the subject property by the appraiser. It is the appraiser's opinion that the
highest & best use of the subject as if vacant would be for the development of a fast food restaurant, drive-
thru commercial use, or professional office or studio that could operate with minimal parking. The subject
site is situated at the northwest comer of the intersection of W. 6"' St. and Sang Ave; with Old Farmington
Rd. fronting the site's north side. Access to the site is from Old Farmington Rd. on the north side and by
right-of-way access easement from Old Sang Ave. on the west side. Current zoning and present land use
' trends in the neighborhood support fast food and drive-thru commercial facilities and are the most probable
and profitable use of the site. Zoning regulations restrict building area to no more than 60% of the site. The
current building setback requirements of 50 Feet from Street Frontages also restrict the size of building that
' could be constructed on the site and application for variances would most likely be necessary to
accommodate building, parking and landscape requirements.
It is the appraiser's opinion that the highest & best use of the subject as improved is as a drive -thin fast food
restaurant or other drive-thru commercial facility. The irregularly shaped lot with road frontage on four
sides provides the site with good visibility. Access to the site is via Old Farmington Rd. at the north side
and the Old Sang Ave. right-of-way easement on the west side. This is a small site of only 12,197 Sq. Ft.,
limiting the available area for building improvements. The existing building does not meet current building
setbacks along 6th St. and current improvements would be considered legal nonconforming and
grandfathered. Upon destruction of the existing nonconforming structure or portion of structure of greater
than 50% of its replacement cost at time of destruction, it shall not be reconstructed except in conformity
with the provisions of the Zoning Ordinance consequently requiring application for variances to zoning
requirements. Drive-Thru regulations require a vehicle stacking area of 4 -Cars. The existing drive along
the western side of the building is of sufficient length to meet the requirements allowing drive-thru traffic to
enter the site from the Old Farmington Road drive and exit at the Old Sang Ave. drive. Employee parking
would be accommodated along the Eastern side of the building. The highest and best use of the site as
improved as a drive-thru fast food restaurant or drive-thru commercial facility is the most profitable and
probable use based on current zoning, present land use trends in the area and the physical characteristics of
the lot and existing improvements.
1 29
MARKET TRENDS
(gENE L COMMENTS- Northwest Arkansas has just undergone a significant growth period
with very strong demand for real estate in general. The area is prospering, with advances in per capita
income and unemployment rates below state and national averages. Historically low interest rates also
assist in buoying this strong market. This growth and demand has resulted in upward pressure on real estate
values in recent years throughout the region. Currently, the market remains solid, with steady price
appreciation and generally balanced supply and demand relationships in the basic market sectors.
The commercial sector also exhibits healthy overall tendencies as it continues to respond to demand created
by the population influx.
9KAR?Cj77NG 779KE- `Reasonable marketing time' is an estimate of the amount of time it might
take to sell a property interest at the estimated market value during the period immediately after the
effective date of an appraisal. An estimated marketing time may be expressed as a range, and can be based
on one or more of the following: statistical information about days on the market, information gathered
through sales verification, interviews with market participants, and anticipated changes in market
conditions. `Reasonable marketing time' is a function of price, time, use, and anticipated market conditions
such as changes in the cost and availability of funds, and is not intended to be a prediction of a date of sale.
The appraiser has estimated a normal marketing period for the subject property of six to twelve months.
The subject
property is not
currently offered for sale nor under contract for
sale at this time. The appraiser
is not aware
of any listings
or recent sales transactions
regarding the subject
property.
30
DETERMINATION OF MARKET VALUE
An appraisal of real property is an attempt by the appraiser to so called "Minor the Market"; that is, to
reflect the attitudes of the typical buyer and seller in the marketplace. Three time -tested appraisal
approaches or techniques are utilized in the profession in order to develop a value indication. These three
approaches are the Market Data Approach, the Cost Approach, and the Income Approach. Each approach is
briefly described as follows:
The Market Data Approach - A comparison is made between the subject property and similar
properties, which have sold recently in the market place.
The Cost Approach - A replacement cost new of the improvements is determined and the
applicable amount of depreciation is deducted in order to obtain a value estimate.
The Income Approach - Bases a value estimate upon the amount of net income the property can
reasonably produce over its expected lifetime.
Each approach utilizes the various principles of value, which exist in the marketplace. These value
principles include supply & demand, balance, contribution, conformity, external items, opportunity cost,
and utmost - substitution. The principal of substitution states simply that a knowledgeable, prudent
purchaser has three alternatives. That is, 1) to buy a vacant site and construct a duplicate or similar property
without delay (Cost Approach), 2) to purchase another existing property with equal or similar desirability
and utility (Market Data Approach), or 3) to invest in or acquire a comparably yielding income stream of
similar quality, quantity and longevity (Income Approach).
All three approaches may not be used in all appraisal assignments depending upon the applicability of the
approach to the property being appraised. With regards to the subject property, all three appraisal
approaches are deemed applicable.
31
n
TAE COST APPROACH
I
The Cost Approach is based upon the principle of substitution, which states that:
"A purchaser will not pay more for an existing property than the cost to
reproduce it in the current market & in a similar location."
' The Cost Approach is particularly applicable when the subject improvements are new or relatively new and
represent the highest & best use of the land; and also when the subject improvements are unique or special
purpose improvements for which there exist few if any comparable properties in the market.
The Cost Approach for fastfood restaurant buildings such as the subject property indicates a
value estimate as follows:
' 1) Reproduction or Replacement Costs of all existing improvements based upon current labor
& material costs is estimated.
' 2) Any depreciation due to physical, functional or external inadequacies is deducted from the
cost estimate.
3) The estimated value of the land is then added to the depreciated cost to obtain a total value
estimate for the subject property.
' The traditional method of determining the value of land is by comparing the subject site to comparable
properties that have sold recently. The following land sales have been researched and analyzed and are
used as the basis for determining the subject's land value.
1
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' 32
COMPARABLE LAND SALES MAP
h
r
1
SO -
J.
{ "�H 33lu W'13 MS SOS I 1 •.
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33
COMPARABLE LAND SALES
LAND SALE #1
(Grant=. M & M Hudson Enterprises, Inc.
Grantee: Jeffrey & Kimberly Kisor
Location: NE comer of Highway 62 & Oak St. Intersection
Legal Description: Part of the W/2 of the NE/4, Section 19-16-30
Date ofSaf• 07/18/03
ct4porteIConsideration.• $170,000
Site Cliaractertsticr Cleared, gently rolling corner tract with all utilities available.
90.0+ feet of Highway frontage along its' Northern side.
Size: 0.48+ Acres or 20,908 Sq. Ft.
Improvements: None
Zoning: C-2 (Thoroughfare Commercial)
Qe�marl�,r. Sale of a small corner lot just north of Wal-Mart. Curren tiste of a new car
wash facility. Previously sold 05/99 for a reported $163,000 ($7.80/SF).
IndreatedPrice: $8.13/SF or $1,889/FrtFt
LAND SALE #2
Grantor. Gary Stearman
grantee: Bencor School Ltd Partnership
Location: 302 W. 6"' St.
Lega(Description.• Lots 1-6 & Pt. Lot 6, Block 10, Ferguson Addition
(Date of Sale. 4/11/03
9(cportedConsideration: $250,000
Size: 0.965 Acres or 42,000 Sq. Ft.
Zoning: C-2 Thoroughfare Commercial
Improvements: None
cRjmar, • Assessor's Parcel #765-05447-000, Deed Book 2003, Page 22687
In 1catedrgice.• $5.95/SF or $1,561/Fr.Ft.
34
LAND SALE #3
grantor. Cobb, Westphal, & Clegg, et al
Grantee: Superior Bank
(Date ofSa( 08/16/02
Location: South side of Highway 62, adjacent to the W side of Wal-Mart
Lega((Description: Pt. SE/4, NW/4, Section 19-TI6N-R30W
Current Zoning: (C-2) Commercial Thoroughfare
Site Characteristics: Mostly cleared, gently rolling tract with all utilities available. 253.75± feet
Highway frontage along its' northern side.
Tract Size: 63,598 SF or 1.46± Acre
Improvements: None
lCportedConsi&eration: $451,000
4e�marks.• Sale of a larger tract with good frontage. Sale also included a deeded access
easement. Current location of a Superior Bank branch.
Indwated Price. $8.13/SF
LAND SALE #4
Grantor. Ermel Fox, et al
grantee: MJF Investments, LLC
Date ofSale: 08/01/02
Location: North side of 6"' Street (Hwy 62 W), just West of Lewis St.
Legai�Descriptioiu Part of Lot 9, Bert Lewis S/D
Current Zoning: (C-2) Thoroughfare Commercial
Site Characteristics: Cleared tract sloping upward from roadway with all utilities available.
153.82± feet of Highway frontage along its' Northern side.
Tract Size: 48,352+SF or 1.11± Acre
Improvements.• None
R.cported Consideration.• $190,000
4icmarkr. Sale of a larger tract located east of the subject. Current site of a Kentucky
Fried Chicken franchise.
Indicated4iice: $3.93/SF or $1,235/Fr.Ft.
35
LAND SALE #5
Grantor. Entertainment Innovators, Inc.
Grantee: Navona Investments, Inc.
(Date ofSafe: 01/22/04
Location: 615 N. College Ave.
LegahDescrfption: Lots I & 2, Block 14, Trents Replat of Blocks 14-15
Current Zoning: Commercial Thoroughfare (C-2)
Site C6aracteristicr Comer Lot with 140± feet of frontage along College Ave. and 139' Frontage
along Trenton St., all utilities available
Tract Size.' 20,878 SF or 0.470± Acre
Improvements: None
RpporteIConsideration: $115,000
9eemarf�s: Tax Assessor Parcel #765-03847-000 & #765-03848-000; Deed Book 2004;
Page 3280, MLS #396842
IndreatetcPrice.' $5.51/SF
LAND SALE #6
Grantor. Jack Tidball Post 2722 Veterans of Foreign Wars of the
United States of America
Grantee.' Joe & Angela Stevens
(DateofSa&, 09/11/03
Location: South side of 6"' St., east of Sang Ave. intersection
LegafcDescription: Pt. Lots 5 & 6, Block 1, Sunset Addition
Current Zoning: Heavy Commercial & Light Industrial (I-1)
Site Characteristics: Cleared, gently rolling tract with all utilities. 100+ feet 6th St. frontage on
southern side.
Tract Size.' 12,000+SF or 0.28± Acre
Improvements' An old 2,451 SF building is on the site; but is considered to have no
contributory value.
ReportetCons�eration: $85,000
�C►narks: Recent sale of a small tract of similar size as the subject. This property was
purchased by the adjoining property owner for plottage.
Indreated (Price: $7.08/SF or $850/Fr.Ft.
36
L
' ANALYSIS OF COMPARABLES & CONCLUSION OF LAND VALUE
In the appraiser's opinion there has been a sufficient amount of land sales to obtain a reliable estimate of the
subject's land value as if vacant. The appraiser has researched and included in this report sir land sales
considered comparable to the subject property. These sales are considered the most reliable data available
and the best available for comparison at this time. The following table summarizes the value indications of
each sale:
SALE DATE SIZE PRICE $/SF COMPARABILITY
1 07/03 • 20,908 SF $170,000 $ 8.13 Superior
2 04/03 42,000 SF $250,000 $ 5.95 Superior
'• 3 08/02 63,598 SF $451,000 $ 7.09 Superior
4 08/02 48,352 SF $190,000 $ 3.93 Similar
5 01/04 20,878 SF $115,000 $ 5.51 Superior
6 09/03 12,000 SF $ 85,000 $ 7.08 Similar
All sales are parcels of Commercial Thoroughfare (C-2) zoned properties in the city of Fayetteville. Sales
of small, vacant commercial parcels truly similar to the subject property are infrequent in the neighborhood.
Sale #1 is the sale of a parcel located west of the subject parcel and is similar in location and visibility.
This sale is superior to the subject in size and utility.
Sale #2 is the sale of a larger parcel located on 6th St., east of S. School Ave. This sale is superior in size,
access and utility.
' Sale #3 is the dated sale of a larger parcel located adjacent to Wal-Mart and considered superior to the
subject in size and utility. An adjustment for time appreciation would be applied to this sale.
Sale #4 is the dated sale of a parcel located in very close proximity to the subject. This sale would require
Ian adjustment for time appreciation and is considered superior in size and utility; but similar in location and
visibility.
Sale #5 is the recent sale of a parcel located on N. College Ave. at Trenton St. This corner lot is superior to
' the subject in size and utility; but similar in location and visibility.
Sale #6 is the sale of a very small parcel similar to the subject in size, location, access and utility. It is
located in very close proximity to the subject and was purchased by the adjacent owner for plottage.
' These sales indicate a value range between $3.93/SF and $8.13/SF. The lower end of the range is a larger
parcel and the upper end of the value range are parcels with superior attributes. It is the appraiser's opinion
' that the subject's value would fall in the upper section of this range after adjustments are made for size,
time, location, utility, & overall appeal.
' Therefore, based upon the comparable land sales researched and analyzed by the appraiser, and after
adjustments are made for differences in location, access, visibility, zoning, size and other economic factors,
it is the considered opinion of the appraiser that the subject's land value as of the date of the appraisal is as
' follows:
12,197 SF @ $7.00/SF = $85,379
' Say $85,000
I
1 37
I
ESTIMATED CONSTRUCTION COST OF SUBJECT IMPROVEMENTS
The following cost estimates were compiled by the appraiser from data in his files and with the assistance
of the Marshall & Swift Valuation Service as well as cost estimates from the contractor for the existing
improvements. Estimates were checked where possible with local contractors/suppliers. Functional
obsolescence noted due to irregular size of subject site and inability to acquire plottage.
COST APPROACH GRID
Average Quality Class D Fast Food Bldg. 1,113 SF
SF COST ADJUSTMENTS
Basic Square Footage Cost $84.93
Current adjustment multiplier 1.02
Local adjustment multiplier 0.90
Adjusted SF Cost $77.97
TOTAL ESTIMATED COST NEW OF STRUCTURE 1,113 SF @ $77.97 $86,776
Add Estimated Cost New of Related Improvements:
Asphalt Parking & Drives (w/curb & gutter 4,898 SF @ $13.00 $63,674
Concrete Apron and Storm Sewer $6,000
Stainless Steel Railings & Posts & Lighted Canopy $16,750
Ceramic Tile Patio 291 SF@ $15.00 $4,365
Landscaping $7,500
Neon Decorative Lighting $5,000
Concrete Walks 68 SF @ $3.50 $238
Exterior Incandescent Lights/Guttering 2 500
Estimated Cost New of Related Improvements $106,027
Total Estimated Cost New of all Improvements: $192,803
Add for Indirect Costs 6% $11,568
Add for Entreprenurial Profit 10% M.2a2Q
Total Estimated Value New $223,651
Less Depreciation:
Physical (I 0Yr Eff./30 Yr Economic Life) 33% $63,625
Functional 30% $57,841
Economic 0% 0
Total Depreciation $121,466
FINAL INDICATED VALUE- ALL IMPROVEMENTS $102,186
ADD LAND VALUE $85,000
FINAL INDICATED VALUE- REAL ESTATE RELATED $187,186
SAY $187,000
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' THE MARKET APPROACH
The Market Data Approach or Sales Comparison Approach is an attempt to measure the reactions of typical
buyers and sellers in the market. In this approach a direct comparison is made between the property being
appraised and comparable properties that have either sold recently, have received bona fide offers by
prospective buyers, or are currently offered for sale.
The value of the property being appraised is inferred from the selling prices, offers, and asking prices of the
comparable properties. To be "comparable" a property need not be identical to the subject. The word
"comparable" is used in its ordinary sense meaning something that is capable of being compared with or
worthy of comparison.
The appraiser assumes that a typical buyer in the market will not pay more for the subject property than it
would cost to buy a comparable substitute property. The price a typical buyer is willing to pay is generally
the result of an extensive searching process in which he is constantly comparing alternative properties. In
the meantime, the typical seller is usually trying to obtain the highest possible price for his property based
upon his knowledge of the market place.
In applying the Market Data Approach, the appraiser takes the following steps:
1. Researches the market for available comparable properties for which actual sales, listings, or
offerings have occurred.
' 2. Confirms the prices and bona fide nature of the data and qualifies the terms and motivating
forces.
3. Compares the property being appraised with each of the comparable properties, under the
general division of location, time, physical characteristics, and other economic factors.
4. Formulates an opinion of the market value of the property being appraised based upon the
price of each comparable property.
I
Pursuant to the appraisal of the subject property, the appraiser has researched the courthouse
records, reviewed his files, and interviewed area Realtors and lenders in order to locate recent market
activity involving properties comparable or similar to the subject.
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IMPROVED SALES MAP
40
COMPARABLE MARKET DATA
IMPROVED SALE #1
grantor: Donald E. & Debra L. Osborne
grantee: Springdale -Marketplace, LLC
(Date: 01/06/03
Location: 2835 N. College Ave.
Zoning: Thoroughfare Commercial (C-2)
Site: 0.44± Acre or 19,166± SF; level irregular shaped lot with all utilities available.
Frontage along the west side of College Ave.
Improvements: (1) Average+ quality Class 'D' Fast Food Restaurant building with 1,204± SF.
1± year actual/l± year effective age in average -good overall condition.
Site: Concrete parking/drives, Fenced Patio, Landscaping
Building: Drive-Thru Windows, Neon decorative lighting
Safes TPiice: $200,000
(Data Source.' Assessor's parcel #765-15941-001, Deed Book 2003-3144, Front exterior inspection
4ecma1*J Recent sale of another Shake's Frozen Custard Establishment located on College
Ave.
Induated•1Prce: $166.1 I/SF
:tJ
IMPROVED SALE #2
grantor.
Total Road Runner, Inc., A Colorado Corporation
grantee:
Ken & Bichtram, Nguyen
[Date:
09/30/03
Location:
2518 W. 6`h St.
Zoning:
Thoroughfare Commercial (C-2)
Site.'
30,492± SF or 0.70± Acre; cleared irregular lot with all utilities available.
Improvements:
(1) Average quality Class 'D' Commercial services building with 2,440± SF.
12± year effective age in average overall condition.
Currently configured for use as a beauty salon, minimal office space.
Site: Concrete parking, minimal landscaping.
Building: Minimal Interior Walls, Some Built -Ins.
Sales A'ice:
$315,000
cDataSource:
Assessor Files/ Deed Book 2003; Page 52591
Rcmarfr.
Recent sale of a small, commercial property located in close proximity to the subject.
No equipment conveyed.
Ind cated'reice:
$129.10/SF
42
IMPROVED SALE #3
(grantor.
Janice Bartholomew
grantee.•
St. Paul's Episcopal Church of Fayetteville, AR
Date:
07/13/04
Location:
241 N. College Ave.
Zoning:
Thoroughfare Commercial (C-2)
Site.•
0.26± Acre or 11,300± SF; level rectangular lot with all utilities available.
Frontage along west side of College Ave. & south side of Dickson St.
Improvements:
(1) Average quality Class 'D' Restaurant building with 2,256± Total SF.
15+ Year effective age in average overall condition
Site: Concrete parking area, landscaping.
Building: Small Covered Front Entry, Some Built -Ins, Minimum extras.
Sates 4'rice.•
$350,000
(DataSource:
MLS #410675; Tax Parcel #765-01647-000
Rjmarkf,
Very Recent sale of a small restaurant building on a small lot. This sale included
furniture and was purchased by the adjacent Church. It is the appraiser's opinion that the
actual $ per SF price is lower after deducting the salvage value of the furniture and the
premium interest of the buyer.
Indwated tPrice:
$155.14/SF
43
[1
IMPROVED SALE #4
grantor. Jey Investments, A Texas Ltd. Partnership
grantee: B & A Investments, Inc.
(Date: 12/31/03
Location: 2940 W. 60' St. Fayetteville, Located on the western side of I-540 at the
intersection of One Mile Rd.
Zoning: Thoroughfare Commercial (C-2)
Site: 0.84 Acres or 36,590 Sq. Ft.
Improvements: (1) Average+ quality Class 'D' Commercial Structure with 2,512± SF.
22± year actual age and 15 year effective age in average overall condition.
Site: Concrete parking area. Lighted Canopy
Building: Covered Entry Walk
Safes (Price: $402,000
Data Source.' Assessor Parcel #765-14709-000, Deed Book 2004; Page 480
c1tmarfr: Recent sale of an older convenience store building located west of the subject.
Indicated(Price: $160.03/SF
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Grantor.
Grantee:
(Date:
Location:
Zo�
Site:
'
Improvements:
Safes Bice:
I(Data Source:
`RCmatfs:
IndicatedT ce:
I
IMPROVED SALE #5
Complements, Inc.
Tracy K. & Lori C. Hoskins
04/02/04
3107 N. College Ave. Fayetteville, Located on the western side of College Ave. just
north of Rolling Hills Dr.
Thoroughfare Commercial (C-2)
0.56 Acres or 24,394+/- Sq. Ft.
(1) Average+ quality Class 'D' Commercial Structure with 4,505± SF.
23+ year actual age and 15 year effective age in average overall condition.
Site: Asphalt parking area
Building: Canopied Entry/Covered Walk
$460,000
Assessor Parcel #765-15917-000, Deed Book 2004; Page 13224
Very recent sale of a site utilized as a liquor store.
$102.11/SF
[1
45
IMPROVED SALE #5
(Grantor. Drew Spears
(Grantee: Fred Kouchebagh & Sammy Mohandessian
Date: 02/04/03
Location: 318 Archibald Yell Blvd., Fayetteville, Located on the northern side of Archibald
Yell Blvd at the comer of Locust. St.
Zoning: Thoroughfare Commercial (C-2)
Site: Approx. 0.33+Acres or 14,180+/- Sq. Ft.
Improvements: (1) Average+ quality Class 'D' Commercial Structure with 1,369± SF.
36+ year actual age and 20 year effective age in average overall condition.
Site: Asphalt parking area
Building: Minimal Improvements
Safes cA'ice: $120,000
Data Source.• Assessor Parcel #765-05465-000, Deed Book 2003; Page 11654
RCn+ar6: Sale of a small building on a small, irregular lot. This is current site of the Philly
Grill and Kabob House, a fast food restaurant with limited seating and parking.
Indicated oice: $87.66/SF
46
ANALYSIS OF COMPARABLES & CONCLUSION OF VALUE
The appraiser analyzed and included 6 verified sales in this report, which are either located in close
proximity to the subject property or are properties of similar characteristics. Of the sales researched, the
sales included are all transactions within the past 18 months and were chosen for their overall similarities to
the subject property. All of the sales included are considered the best available and reliable indicators of
the subject's value. Most were purchased for use as fast food or restaurant facilities, others for retail or
professional services purposes. The appraiser feels there is an adequate amount of sales data available to
obtain a reliable value estimate of the subject property. The sales are summarized as follows:
fI
DATE
SIZE
SALES $
$/SF
1
01/03
1,204
SF
$200,000
$166.11
2
09/03
2,440
SF
$315,000
$129.10
3
07/04
2,256
SF
$350,000
$155.14
4
12/03
2,512
SF
$402,000
$160.03
5
04/04
4,505
SF
$460,000
$102.11
6
02/03
1,369
SF
$120,000
$ 87.66
The subject lot's small size is an important factor of the subject's marketability and was an attribute that the
appraiser searched for in comparable properties. Four of the comparables included have lots of superior
size; but Sale Comparable #3 is the very recent sale of a restaurant building on a lot very similar to the
subject. The sales comparables included also represent differing uses that are permitted uses in the
subject's zone classification.
Sale #1 is the sale of another Shake's Frozen Custard enterprise. The existing building is almost identical to
the subject improvements; but superior in age and condition. Improvements to the site are also similar to
the subject. This sale could be considered to be the most similar to the subject in site improvement
attributes.
Sale #2 is the sale of a small retail building in close proximity to the subject. This comparable, located just
west of the 1-540 and 6`h St. Bypass is similar to the subject property in location, access, effective age and
visibility. This sale is utilized as a beauty salon and as such would have similar building amenities as the
subject.
Sale #3 is the very recent sale of a property that has been operating as a successful restaurant for many
years. This site is only 13,506 Sq. Ft. in size and is situated at the busy intersection of N. College Ave. and
Dickson St. This sale was purchased by the adjoining property owner. This sale is considered very similar
to the subject property in many aspects and will be given weight in the determining of a value estimate.
Sale #4 is the sale of an older convenience store on a corner lot located across Hwy. 62W from Wal-Mart
west of Interstate I-540. This sale is considered similar in location and visibility, inferior in age and
condition; but superior in access and utility.
Sale #5 is the very recent sale of a building that is utilized as a liquor store. This sale is superior to the
subject in size, but similar in location, access, visibility and condition.
Sale #6 is the sale of a small building on a small, irregular lot similar to the subject. This building is now
utilized as a fast food restaurant with limited seating. This sale will be adjusted for time appreciation,
inferior age and condition and inferior location.
47
ANALYSIS OF COMPARABLES & CONCLUSION OF VALUE, CONTINUED
The sales indicate a per square foot value range between $87.66 and $166.11. The lower end of this range
is the sale of a much larger building or a property of inferior age, condition and location. The upper end of
this value range includes sales of small building similar to the subject property. In general, prices paid per
square foot increase as size decreases; however, the subject's site size is an important consideration in
determining the subject's place in this value range.
The above range is normal when considering differences in size, quality, interior finish/layout, amenities,
and date of sale. The sales included are considered the best available for comparison at this time. It is the
appraiser's opinion that the subject's value would fall at the top of the stated value range, mainly due to its
quality, condition, and extra amenities. The appraiser has prepared a grid on the following page that shows
the adjustment process in detail.
Therefore, based upon the comparable sales recited in this report and analysis thereof, and after adjustments
are made for all economic factors, it is the considered judgment of the appraiser that the market data
indicates a Market Value of the subject property as follows:
INDICATED VALUE FROM SALES GRID
SAY $177,000
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MARKET DATA ADJUSTMENT GRID
1
1
1
1
1
SUBJECT
SALE #1
SALE #2
SALE #3
2050W. 6th
2835 N. College
2518 W. 6th
241 N. College
Fayetteville
Fayetteville
Fayetteville
Fayetteville
PRICE DATA
PURCHASE PRICE
$
200,000
$
315,000
$
350,000
DATE OF SALE
N/A
Jan -03
Sep -03
Jul -04
Adjustment
$
20,000
$
15,750
$
ADJUSTED PRICE
$
220,000
$
330,750
$
350,000
SITE/LOCATION
12,197SFAN. 6th
19,166SF/Similar
30492SF/Similar
13,506SF/Similar
Adjustment
$
(25,000)
$
(100,000)
$
BUILDING SIZE (SF)
1,113SF
1,204SF
2,4408E
2,2565E
Adjustment (SF)
$
-
$
(79,620)
$
(85,725)
AGE/QUALITY
10 Yrs/Avera a
1Yr Eff/Avg
12 vrsfAvg
20 Yr Eff/Avg
Adjustment
$
44,000
$
16538
$
(87,500)
INTERIOR
None
None
None
Builtins
Adjustment
$
-
$
-
$
(2,500)
EXTERIOR/APPEAL
Paco w/Canopy,Fnce
Fenced Patio
Coy EntranceiAvg
Small Coy E/Avg
Adjustment
$
10,000
$
15,000
$
15,000
SITE -RELATED
WaIksJParldn ndsc
Walks/Perldng/Lndsc
Wall¢/Parldng/Min.Lndsc
Parking/Landscp
Adjustment
Lump Sum
$
-
$
-
$
-
OTHER
Si na a/Li hts/Neon
Signage/Ughts/Neon a/Li hts/Neon
Signage/Lights a/Li hts
Sale m ci Furniture
Adjustment
Lump Sum
$
-
$
-
$
(15,000)
NET ADJUSTMENT
$
(59,000)
$
(148,083)
$
(175,725)
INDICATED PRICE
$
161,000
$
182,668
$
174,275
MEAN
$177,166
FINAL INDICATED VALUE VIA SALES
APPROACH
$177,000
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MARKET DATA ADJUSTMENT GRID - CONTINUED
SUBJECT
SALE #4
SALE #5
SALE #6
2050 W. 6th
2940 W. 6th
3107 N. College
318 Archibald Yell
Fayetteville
Fayetteville
Fayetteville
Fayetteville
PRICE DATA
PURCHASE PRICE
$
402,000
$
460,000
$
120,000
DATE OF SALE
N/A
Dec -03
Apr -04
Feb -03
Adjustment
$
-
$
-
$
7,200
ADJUSTED PRICE
$
402,000
$
460,000
$
127,200
SITE/LOCATION
12,197SF/W. 6th
36,590SF/Su erior
24,394SF/Similar
14,180SF/Inferior
Adjustment
$
(150,000)
$
(100,000)
$
25,000
BUILDING SIZE (SF)
1,113SF
2,512SF
4,505SF
1,369SF
Adjustment (SF)
$
(104,925)
$
(169,600)
$
(11,520)
AGE/QUALITY
10 Yrs/Average
12 Yr Eff/Avg
10 Yrs Elf/Avg
20 Yrs Eff/Avg
Adjustment
$
20,100
$
-
$
31,800
INTERIOR
None
None
None
None
Adjustment
$
-
$
-
$
-
EXTERIOR/APPEAL
Patio w/Canopy, Fnce
Canopy/Avg
Canopy/Coy Prch/Avg
None
Adjustment
$
-
$
-
$
10,000
SITE -RELATED
Walks/Parkin Lndsc
Walks/Parkin
Walks/Parkin Lndsc
Walks/Parking
Adjustment
Lump Sum
$
-
$
-
$
5,000
OTHER
S' na e/L hts/Neon
L' hts/S' na a
Signage
Signage
Adjustment
Lump Sum
$
-
$
-
$
-
NET ADJUSTMENT
$
(234,825)
$
(269,600)
$
60,280
INDICATED PRICE
$
167,175
$
190,400
$
187,480
MEAN
$
177,166
FINAL INDICATED VALUE VIA SALES
APPROACH
$177,000
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n
' THE INCOME APPROACH
' In the Income Approach, real estate is valued on the basis of its capacity to produce income. The approach is
based on the premise that the value of a property may be determined by the amount of Net Income it can
reasonably produce over its remaining economic life. The following equation is used to ascertain a value
' estimate:
Net Income
' Value=
Capitalization
This approach is of particular significance when applied to those properties capable of generating an income
stream.
' The steps under taken by the appraiser in order to obtain a value estimate utilizing the Income Approach is as
follows:
1) Obtain a reliable Economic or Market rent for the subject property from research of comparable
rentals in the market place or if the property is under a long term lease, obtain contract rent from
tthe lease agreement.
2) Develop an Income Statement for the subject property. Gross Income is determined, usual and
' ordinary operating expenses are deducted to indicate the net operating income that the subject
property can be expected to produce under competent management.
' 3) Develop an overall capitalization rate applicable to the subject property. The capitalization rate
takes into account the rate of return that a prudent investor would seek, the degree of risk
involved, illiquidity, returns available on alternative type investments, current mortgage terms,
' mortgage principal reduction, & potential appreciation.
4) The capitalization process is performed. The capitalization rate is applied in the appropriate
manner to the net operating income to indicate the value of the subject property.
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DETERMINATION OF ECONOMIC RENT
"Economic Rent" is the amount of rental the property would likely command in the open market if it were
vacant and available for rent. "Contract Rent" is the rental stipulated by a contract; that is, under the terms of a
lease.
Properties such as the subject are limited in variety to utilization choices. They are usually owner -occupied
buildings used as a small business venture or a franchised fast food facility. Due to its' configuration the
property would be leased by a single tenant. Generally, if leased, the owner is responsible for taxes, building
hazard insurance, and exterior/mechanical maintenance. The lessee(s) is usually responsible for basic interior
(cosmetic) maintenance with utilities being negotiable.
Regarding the subject, the subject improvements have been vacant since purchased by the City of Fayetteville.
An owner historically has been and would most likely be the entity, which utilizes the property. Therefore, no
lease information exists. In addition, the appraiser has researched the market area for rental rate data of similar
use operations and has only located owner -occupied facilities. Due to this, the appraiser has performed a cursory
study of comparable rentals in the subject neighborhood and immediate area to determine typical economic rent.
Rental properties include mixed -use properties with tenants occupying small portions of a commercial building
or restaurant comparables. A digest of the rentals studied is offered on the following page.
It is the appraiser's opinion that a sufficient amount of market rental data exists to determine an economic rent
for the subject. After surveying, analyzing, and comparing similar properties in the area, the appraiser has
determined that the subject's economic rent would be $17.00/SF/Annum as an entire unit. Therefore, for the
purposes of this report, the appraiser will use an economic rent of $17.00/SF/Annum when determining value via
the Income Approach.
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COMPARABLE LEASE DATA
Arena Village 1241 W. 6"' St. $11.00-$12.50/SF per annum Various Terms
This is a 15,000 SF strip center located in close proximity to the subject. This property includes a mixed -
use of tenants. Net Leases.
Electric Cowboy 2127 W. 6`h $5.00-10.50/SF per annum 5-Yrs
23,022+SF Average quality commercial strip center divided into multiple tenant units. Located essentially
across the street from the subject property, unit sizes ranged between 980-12,000+SF with smaller units
leasing in the upper rent range. Tenants include a restaurant, music retail store & beauty college. Most
leases are long-term with escalator clauses. Tenant pays all utilities.
The Rollston Building 318 N. Campbell $13.00-18.67/SF per annum Various Terms
This is a small mixed use building located north of the subject between Rollston and Campbell Ayes.. 2 -
Levels. Includes a variety of tenants, including two restaurants on the main floor and residential apartments
on the 2"d level. Net leases. The high end of the rent range is finished out restaurant space.
The Laundry Building 326 N. West Ave. $10.00-14.00/SF per annum Various Terms
This is a renovated commercial building one block off of Dickson St.. Current tenants include two
restaurant/bars. Net Leases.
The Blue Parrot 605 W. Dickson $12.00/SF per annum
Appx. 4,250 sq.ft. bar west of Georges Majestic Lounge. Updated older building. No kitchen facilities.
Large new bar. Net Lease.
Colton Restaurant 642 E. Millsap Rd. $23.405F per annum
Appx. 7,665 sq.ft. restaurant. Triple net lease. Single tenant building. Percentage rent 10.5 % of total
projection cost for the ls` 5 years, 140,000 per year. Escalation clause is 11% of total projection 2nd 5 years,
and .05% thereafter. 10 -year lease with 4 options to renew for 5 years.
Gypsy Club 405-404 W. Dickson St. $18.95/SF per annum
Appx. 3,800 sq.ft. bar with kitchen facilities. 2nd level apartment not included in the square footage.
Sublease situation. Also includes large patio and adjacent undeveloped lot previously used for parking but
plans are to make it into a patio.
On The Mark 2588 N. Gregg Street. $10.00/SF per annum
Appx. 6,000 sq.ft. bar with kitchen facilities. Two years remain on a three-year lease with annual rent
increase of $500 per month per year. This lease includes the furniture and non -permanent equipment. An
option to renew for 10 more years exists. Net lease. Landlord pays taxes, insurance, and maintains the
exterior of the building.
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' DETERMINATION OF NET OPERATING INCOME
The following income statement has been prepared based upon the previously discussed rental rates, actual and
estimated expense data for the subject, and the appraiser's knowledge of the local market and expenses related to
this type of property.
' INCOME STATEMENT
DETERMINATION OF NET OPERATING INCOME
Potential Gross Income: 1,113 SF @ $17.00 /Annum $18,921
Less: Allowance for Bad debts & Vacancies 5.00% $946
Effective Gross Income
Less: Operating Expenses
Property Taxes (Actual)
Insurance (Estimated)
Utilities (Paid by Tenant)
Maintenance/Other (Est.)
Management
Replacement Reserves
Total Expenses
Net Operating Income
$2,277
$1,000
$0
$1,000
5% $899
5% $899
$17,975
&2Z4
$11,900
Notes to the above Income Statement:
The vacancy rate is based on discussions with area property owners & managers.
It is estimated the vacancy rate would run between 5-8% over the holding period.
Because the subject would likely be rented on a net lease basis, the lessor would
pay property taxes, carry a landlord policy on the improvements, & maintain the
exterior of the building & mechanicals.
Mgmt fees included even though the owner may choose to manage the property.
Management fees for this type of property are typically in the 5-10% range.
Reserves for replacement are funds set aside for replacement of big ticket items
' requiring replacement occasionally over the life of the improvements. Examples
include items such as the air heating/cooling systems, floor coverings, etc..
These components have an economic life less than the entire subject structure.
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DETERMINATION OF CAPITALIZATION RATE
-MORTGAGE EQUITY TECHNIQUE
The mortgage equity technique is a precise method of obtaining a capitalization rate. Unlike other methods,
mortgage equity analysis considers financing in its determination of a capitalization rate and hence value. This
method recognizes that a prudent investor in today's market will seek the best mortgage financing available in
order to get a maximum yield on a minimum down payment.
In doing so, the mortgage equity technique considers two (2) factors beyond those used in conventional
capitalization rates. First, the technique makes a compensation for equity build-up. As time passes the owner
through the payment of debt service is slowly building up his equity in the property by reducing the principal.
Therefore, a deduction from the basic capitalization rate is necessary to compensate for the equity build-up from
mortgage principal reduction. Secondly, the mortgage equity method includes a provision for the depreciation
or appreciation of the property during the income projection period (holding period). For example, if the
property is going to increase in value over time, it is not necessary to make a provision for the recapture of the
investment; therefore, the investor is willing to accept a lower return on his investment. He will receive his
recapture of the investment and a capital gain upon resale.
As a result, in applying the mortgage equity method to the subject property the following assumption were made:
Typical investors in property of this type would be able to acquire financing under the following
terms:
80% Loan to Value Ratio at 6.5% amortized for 20 Yrs.
2. Typical investors at this time would demand a 10% return on their investment in property of the
subjects type; hence, an equity yield rate of 10% will be used.
3. From analysis of occupancy of this type, a typical investor will hold the property for 10 years.
4. From analysis of market data and projections of stabilized property values, it is the appraisers
opinion that the subject property land will appreciate 20% over the holding period, and the
subject improvements will depreciate 10% over the holding period.
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DETERMINATION OF VALUE - INCOME APPROACH
DEVELOPMENT OF THE CAP RATE
LN * Amortization Factor
1st Mortgage 80.00% 0.089468 0.071574
EN * Equity Yield Rate
Equity 0.20 0.100 0.0200
Total 0.091574
Less Credit for Equity Build-up:
(% Mortgage paid off W`Sinking Fund)
Equal to 0.343384 0.800 x 0.062745 0.017237
BASIC RATE 0.074338
Unload for Land Appreciation
(Appreciation over Holding Period*Sinking Fund
Equal to 20% 0.062745 0.012549
Capitalization Rate for the Subject Land 0.061789
Unload for Building Depreciation:
(Depreciation over Holding Period'Sinking Fund)
Equal to 10% 0.062745 0.006275
Capitalization Rate for the Subject Building 0.080612
Financial Assumptions:
Terms- 80% Loan to Value Ratio for 20 years at 6.5%, 1 year Balloon
Return- 10% Return on Investment, 10% Equity yield rate
10 year Investment period, Average interest rate of 6.5% over holding period
20% Land appreciation over holding period
10% Building depreciation over holding period
Ratios & Factors utilized:
LN ratio
80.00%
EN ratio
20.00%
Yield
10.00%
Amortization factor
0.089468
% Mort. pd. in holding perioc
0.343384
Sinking fund factor
0.062745
Land appreciation
20.00%
Building depreciation
10.00%
Land Value
$85,000
W
DETERMINATION OF VALUE
Net Operating Income
Less: Income attributable to the land
(Land Value * Land Capitalization Rate)
Equal to $85,000 0.061789
Income Attributable to the Improvements
Capitalize @ Building Cap Rate
Equal to $6,648 0.080612
Add Land Value
Value Indicated by Income Approach
$11,900
55,252
$6,648
$82,474
$85,000
$167,474
SAY $167,000
57
CORRELATION, ANALYSIS & CONCLUSION
The three appraisal approaches were used to estimate the market value of the subject property. The Market Data
Approach was used to estimate the value of the subject as improved and the subject land as if vacant. The Cost
and Income Approaches were used to estimate the value of the subject property as improved. These approaches
resulted in the following indicated values:
THE COST APPROACH $187,000
THE MARKET DATA APPROACH $177,000
THE INCOME APPROACH $167,000
It is the appraiser's opinion that an adequate amount of Market Data was available to obtain a reliable value
estimate for the subject land as if vacant. A sufficient amount of sales activity has occurred in the general
vicinity of the subject property in Fayetteville. There are limited annual sales of vacant Commercial zoned land
along the major thoroughfares in the city. Nonetheless, the land sales utilized are considered reliable and do
indicate the prices being paid for similar tracts. Furthermore, the appraiser has researched and analyzed several
improved sales of fast food drive-thru restaurant, retail and personal service buildings in the immediate area.
The sales comparables utilized are considered to be the best available and reliable indicators of the subject's
value.
The value estimate indicated by the Cost Approach is also considered reliable. The appraiser has consulted with
developers, area contractors familiar with similar construction, and the Marshall and Swift Valuation Service.
The cost estimates derived in this report are considered accurate. The Cost Approach best reflects the principal
of substitution in the marketplace. Functional obsolescence was noted at the site due to it's small size and
characteristics. This approach will be given considerable weight in determining a final value estimate of the
subject.
The Income Approach also indicates a reliable value estimate based upon the subject property's capacity to
generate income. The Income Approach bases its value estimate upon the current market rental rates of similar
service facilities, and the estimated vacancies & expenses for such uses. By capitalizing the income stream, the
appraiser has obtained a value estimate that reflects the value a prudent investor would place on the property.
The current low interest rate market environment indicates the attractive returns that income -producing property
can generate compared to other investment alternatives. Due to the lack of market rentals truly similar to the
subject property, it is the appraiser's opinion that this appraisal approach should be weighted slightly less than
the other two appraisal approaches in arriving at a final value estimate.
58
' CORRELATION, ANALYSIS, & CONCLUSION (CONT'D.)
The three appraisal approaches have resulted in value estimates within a reasonably close range. All three
approaches are considered reliable. All three approaches to value will be given the equal weight in arriving at a
final value estimate. The separate appraisal approaches will be weighted as follows:
I
Cost Approach $187,000 x 0.35 = $ 65,450
Market Data Approach $177,000 x 0.35 = $ 61,950
Income Approach $167,000 x 0.30 = $ 50,100
Total $177,500
Therefore, based upon the data collected and analyzed within this report and the preceding discussion, it is
the considered opinion of this appraiser that the Market Value of the subject property of the subject property
as of July 21, 2004 as follows:
ONE HUNDRED SEVENTY EIGHT THOUSAND DOLLARS
$178,000
59
II
CERTIFICATE OF APPRAISER
II hereby certify, that to the best of my knowledge and belief, that the statements of fact contained in this
report are true and correct; that the reported analysis, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are my personal, unbiased professional analyses,
' opinions, and conclusions; that I have no present or prospective interest in the property that is the subject of
this report, and I have no interest or bias with respect to the property that is the subject of this report or to
the parties involved with this assignment; that my engagement in this assignment was not contingent upon
' developing or reporting predetermined results; that my compensation for completing this assignment is not
contingent upon the development or reporting of a predetermined value or direction in value that favors the
cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence
' of a subsequent event directly related to the intended use of this appraisal.
I hereby certify, that my 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 National Association of Realtors; that the use of this report is subject to the
requirements of the National Association of Realtors relating to review by its duly authorized
' representatives; that I have made a personal inspection of the property that is the subject of the report; that
no one provided significant professional assistance to the persons signing this report.
The appraiser further certifies that the analyses, opinions and conclusions were developed, and this report
was prepared, in conformity with the Uniform Standards of Professional Appraisal Practice ("USPAP"),
• except that the Departure Provision of the USPAP does not apply.
In the previous sections of this report, the appraiser has analyzed the relevant facts and applied the
'
appropriate appraisal processes to the subject property. It is the considered opinion of this appraiser that the
Market Value of the subject property as of July 21, 2004, is:
I1
ONE HUNDRED SEVENTY FOUR THOUSAND DOLLARS
($174,000)
II
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Respectfully Submitted,
Mark E. Risk GAA
State Certified General Appraiser #CG0202
1=
STATE
CERTIFIED
GENERAL
No. CG2U!
Leslie Manning
State Certified General Appraiser #CG2445
I60
DEED
Rated Ma can
M.gaa as.r-ee.a e.c �r r...w.
awrr>rest2tae.aa
craw: •;•1:C {"
WARRANTY DEED 2cD0EC 18 AM 9:36
«uaeaa uo we
two n.ae►ahaaa.ry sal pw.q i:lij Lii, Ah
B. STAMPS'
BE a KNOWN BY THESE PRESENTS:
THAT Donald E. Orbonll and Data L Oabomw, HS and wife.
hereinafter called GRANTORS. for and In aanalderation d ths eras a One Dollar
(81.00) ad olive good and vaNable amyaretlorh, the rewlq d whkih Is hereby
a nc,Sdged. do hereby Wait bagS.., sec and corny ado the City at
Fays b reds. Arlene, a mar4'Ipd corporell .. hadnaiar caged GRANTEE,
ad ado Grantee's arcwasas and auger, the ftlbwbp desomed lad amwed
in the County of Was*.tort Suds at Arka sas, a.nit
All that certain tract a pawl d lad behp a pad of the Noram" Quarter (NEY.) alga NoMr_N Quamw
(NW%) of Section 20, Township 18 NOM, Range 30 West Washington Coady. Mann say beer behp
the bad as des ribed In Document No. 2000-029178 of the Office of the Circuit Clark and Ex Oflcio
Rends of Wet" n Calmly. Adan. and being maw Pa icaarty described by it and bounds
afdaaa: Beginning at tteea. a comer of the NE% d the NWY. d Becton 20. TorwMIp IS NorBt
Westwood Ada. the d Fayetav Ar agla
nce South Orr 1 End fora aaence d
4 215.70 feet Sap the cdh right ofwy OneofOld Famlogton Road b a point on the oath right orwy one
of BIM Street (Sate Highway Na 180); tiriaa South 03 b W Ea a 1090 feet with aid north right of
ddeelb a Or I 2?. along void right wary; tra Song a curve to the left i4th whm South 07 3711 We � fore daw1472.39
s e of 1test,
7t50 reef
with said right d way: thence North err 43' 2r Wert for a distance of 18.90 fed .4th aid right of way to
e poet co the coal right d wy prod Bap Avahw; thaw Nash 02' 47 11' Ewa err a dlalaas of 134.08
fed with said as right Sway line to the Point of BegaSng, and aorddang 0.39 eau, more a lea.
.
4 .. .I .1.
______
ACKNOWLEDGMENT
STATE OF ARKANSAS
a
COUNTY OF WASHINGTON
BE IT REMEMBERED, that on Oft date, before the rah0eralgned, a duly aommaawted and s:Wrg Notary Public
wit in and for sSd County and Sate, personally tOPeaed Donald L ton. tad Dana L Oabara, lersoad and wife.
to me wag known a the paver Net aaaae the taagoing docanent, and who as I ad sbawledged that they lad
a aprNd, ersovred middsNerwd add Instrument bite amid rationf.� sea aid papoastwain mentionedad ad form.
WITNESS my had ad seal or. ns - 2002.
f+uuu�u�u�nuuilu�u�uuut
later R. Davit Ndery ik
MY COM.ISSION EXPIRES: T BNna.TAp
Bpire 0177Qf
u'
2002194769
62
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' MINIMUM STANDARDS CHECKLIST
Regulatory Compliance - Minimum Standards Checklist
Federal regulations for lending institutions regarding appraisals were amended as of June 7, 1994.
These regulations require 5 Minimum Standards for appraisals performed for federally related
transactions.
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The following checklist states each of these minimum standards and the appraisers compliance there of
Conform to generally accepted appraisal standards as evidence by the USPAP unless
principles of safe and sound banking require compliance with stricter standards:
The appraisers certify that this appraisal meets the minimum appraisal standards
currently required by the USPAP.
2. Be written and contain sufficient information and analysis to support the institution's
decision to engage in the transaction:
This requirement has been met through the use of the following narrative
appraisal report. See Body of Report.
3. Analyze and report appropriate deductions and discounts for proposed construction or
renovation, partially leased buildings, non -market lease terms, and tract developments
with unsold units;
X The subject property is not proposed construction, partially leased, or a
tract development. Hence, this requirement is not applicable.
See Income Approach Method.
See Correlation, Analysis, and Conclusion.
The subject property is to be owner occupied upon the completion of
remodeling, consequently, no deduction or discount is necessary.
4. Be based upon the definition of market value as set forth in the regulation:
The appraiser has based the appraisal upon the definition of Market Value, as developed
by FNMA, and FHLMC. See Definition of Market Value. Page 12.
Be performed by State licensed or Certified appraiser.
Mark E. Risk is a State Licensed Certified General Appraiser (#CG0202) and is in good
standing with the state's regulatory board. Leslie Manning is a State Licensed Certified
General Appraiser (#CG2445) and is in good standing with the slate's regulatory board.
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63
ZONING CLASSIFICATION (C-2) THOROUGHFARE COMMERCIAL
[A] Purposes
The thoroughfare commercial district is designed especially to encourage the functional
grouping of these commercial enterprises catering primarily to highway travelers.
[B] Uses Permitted
Unit I -
Citywide uses by right
Unit 4 -
Cultural and recreational facilities
Unit 12 -Offices,
Studios and Related Services
Unit 13-
Eating -places
Unit 14-
Hotel, Motel and Amusement Facilities
Unit 15-
Neighborhood shopping goods
Unit 16-
Shopping goods
Unit 17-
Trades and Services
Unit 18-
Gasoline service stations and Drive-in restaurants
Unit 19-
Commercial recreation
Unit 20-
Commercial recreation: Large sites
Unit 33-
Adult live entertainment club or bar
Unit 34 — Liquor Store
[C] Conditional Uses
Unit 2 - City-wide uses by conditional use permit
Unit 3 - Public protection and utility facilities
Unit 21- Warehousing and wholesale
Unit 28- Center for collecting recyclable materials
Unit 32 — Sexually oriented business
Unit 35 — Outdoor music establishments
Unit 36 — Wireless communications facilities
[D] Bulk and Area Regulations
Setback lines shall meet the following minimum requirements:
Front 50 feet
Side None
Side, when contiguous to a residential district 15 feet
Rear 20 feet
[E] Building Area
On any lot the area occupied by all buildings shall not exceed sixty (60) percent of the total
area of such lot.
ZONING CLASSIFICATION (Cont'd)
[19 Height Regulations
In District C-2 any building which exceeds the height of 20 feet shall be set back from any
boundary line of any Residential District a distance of one foot for each foot of height in
excess of 20 feet. No building shall exceed six (6) stories or 75 feet in height.
(Code 1965, App. A., Art. 5(VI); Ord. No. 1833, 11-1-71; Ord. No. 2351, 6-2-77; Ord. No. 2603, 2-19-80;
Ord. No. 1747, 6-29-70; Code 1991, Sect. 160.036; Ord. No. 4034, Sect.3, 4, 4-15-97; Ord. No. 4100, Sect. 2
(Ex. A), 6-16-98; Ord. No. 4178, 8-31-99)
65
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QUALIFICATIONS
Mark E. Risk, GAA
Real Property Appraiser
TREC, INC. dba THE REAL ESTATE CONSULTANTS
118N EAST AVE. / P. O. BOX 726
FAYETTEVI LLE, AR 72702
(501) 442-0762
STATE STATE OF ARKANSAS - #CG -0202
CERTIFIED
GENERAL
APPRAISER
LICENSED REAL STATE OF ARKANSAS - Principal Broker #00005933
ESTATE BROKER
EDUCATION UNIVERSITY OF ARKANSAS, MBA 1979
UNIVERSITY OF ARKANSAS, BSBA 1977
MAJOR: REAL ESTATE AND FINANCE
AMERICAN INSTITUTE OF APPRAISERS
COURSE IAl REAL ESTATE APPRAISAL PRINCIPLES
COURSE 1A2 BASIC VALUATION PROCEDURES
COURSE 2-3 STANDARDS OF PROFESSIONAL PRACTICE
CAPITALIZATION THEORY AND TECHNIQUES (U of A)
MARSHALL & SWIFT BUILDING COST SEMINAR
EASEMENT VALUATION -- INTERNATIONAL RIGHT OF WAY ASSOC.
GRI COURSE 306 - ARKANSAS REALTORS ASSOCIATION
NAIFA COURSES - STANDARDS OF PROFESSIONAL PRACTICE
- REVIEWING THE URAR FORM
THE NEW URAR REPORT - NAIFA,
SPRINGDALE, AR
SALES COMPARISON APPROACH - ARKANSAS REALTORS ASSOC.
ENVIRONMENTAL SITE ASSESSMENT - LINCOLN GRADUATE CENTER
HUD/FHA APPRAISER TRAINING SEMINAR - LITTLE ROCK HUD OFFICE
ASS INFORMATION MEETING (Revisions to the USPAP) -- DALLAS, TX
NATIONAL ASSOCIATION OF REALTORS USPAP UPDATE COURSE
INSTRUCTORS' TRAINING INSTITUTE (ITI) -- SAN ANTONIO, TX
PROFESSIONAL NATIONAL ASSOCIATION OF REALTORS (NAR) - APPRAISAL SECTION
MEMBERSHIPS ARKANSAS REALTOR'S ASSOCIATION
METRO AREA BOARD OF REALTORS
ROGERS BOARD OF REALTORS
PROFESSIONAL GENERAL ACCREDITED APPRAISER (GAA) - NATIONAL ASSOCIATION
DESIGNATIONS OF REALTORS
STATE BOARDS Appointed to the APPRAISER'S LICENSING AND CERTIFICATION BOARD by
GOVERNOR BILL CLINTON in January 1992. Reappointed by Governor Jim Guy
Tucker in 1994. Term Expired in January of 1997.
I
Mark E. Risk Appraiser
NATIONAL NATIONAL ASSOCIATION OF REALTORS Appraisal Section
COMMITTEES Subcommittee 1995-1998
Chair- 1998
Appraisal Forum 1995
Appraisal Committee 1997,`98
ACTIVELY APPRAISING REAL ESTATE IN NORTHWEST
ARKANSAS SINCE 1979
ASSOCIATED WITH JIM SULLIVAN
(SULLIVAN AGENCY), 1979 TO 1989
ASSOCIATED WITH TOM REED
(REED& ASSOCIATES), 1981 TO 1985
EMPLOYED BY KEITH L. SCHULTZ (ASSOCIATED APPRAISERS)
1980-81
TEACHING REAL ESTATE INSTRUCTOR AT THE UNIVERSITY OF
ARKANSAS (1981 TO DATE) COURSES TAUGHT INCLUDE
REAL ESTATE PRINCIPLES, APPRAISAL, AND FINANCE
CONTINUING EDUCATION SEMINARS: BASIC STEPS TO
RESIDENTIAL APPRAISAL, ENVIRONMENTAL CONCERNS
PUBLICATIONS "RECREATIONAL LAND VALUES AND TRENDS IN NORTHWEST ARKANSAS",
ARKANSAS BUSINESS AND ECONOMIC REVIEW, VOL. 16, NO. 1, 1983; PICKED
UP FOR REPRINT BY THE INTERNATIONAL ASSOCIATION OF ASSESSORS
CLIENTS SERVED
*LENDING 66 FEDERAL CREDIT UNION
INSTITUTIONS AMERICAN AIRLINES CREDIT UNION
ARKANSAS NATIONAL BANK
BANK OF ARKANSAS
BANK OF BENTONVILLE
BANK OF ELKINS
BANK OF EUREKA SPRINGS
BANK OF FAYETTEVILLE
BANK OF LINCOLN
BANK OF OKLAHOMA
COMMERCE BANK OF BARRY COUNTY, MISSOURI
COMMUNITY BANK
COMMUNITY FIRST BANK
FARMERS & MERCHANTS BANK OF PRAIRIE GROVE
FIRST EUREKA SPRINGS BANK
FIRST FEDERAL BANK
FIRST FINANCIAL BANK
FIRST NATIONAL BANK OF BERRYVILLE
FIRST NATIONAL BANK OF SPRINGDALE
FIRST NATIONAL BANK OF ST. LOUIS
MCILROY BANK AND TRUST
NATIONS BANK
NEW SOUTH FEDERAL SAVINGS BANK
67
Mark E. Risk Appraiser
CLIENTS SERVED (Cont'd.
*LENDING
SPRINGDALE BANK & TRUST
INSTITUTIONS
SUPERIOR FEDERAL BANK
(Cont'd.)
UARK FEDERAL CREDIT UNION
UNITED FEDERAL SAVINGS BANK
*MORTGAGE AMERIQUEST MORTGAGE
COMPANIES ARVEST MORTGAGE COMPANY
BROYLES MORTGAGE COMPANY
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FANNIE MAE)
JAMES RIVER MORTGAGE COMPANY
LOMAS & NETTLETON
NORWEST MORTGAGE
PHH HOME MORTGAGE
PULASKI MORTGAGE COMPANY
SOUTHERN MORTGAGE
U.S. MORTGAGE
DEVELOPERS AIMH DEVELOPMENT CORPORATION
BRITTNEY DEVELOPMENT CORPORATION
LARRY CARTER DEVELOPMENT CORPORATION
CASTLE DEVELOPMENT
EAST AVENUE DEVELOPMENT, LLC.
DR. J. B. HAYS
GORDON WILKINS
RELOCATION ASSOCIATES RELOCATION
COMPANIES BOATMEN'S GENREL
COLDWELL BANKER RELOCATION
COMMONWEALTH RELOCATION SERVICES
EQUITABLE RELOCATION MGMT. CORPORATION
EXECUTIVE RELOCATION
FORWARD MOBILITY
HOME EQUITY CORPORATION
PRUDENTIAL RELOCATION MANAGEMENT
RE/MAX RELOCATION
RELOCATION FUNDING CORPORATION
RELOCATION RESOURCES
WEICHERT RELOCATION
MISCELLANEOUS ANHEUSERBUSCH
BALL CORPORATION
BELL INTERNATIONAL
BUSCH SKIL COMPANY
CARGILL CORPORATION
CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS
CITY OF EUREKA SPRINGS
CITY OF FAYETTEVILLE
CITY OF SPRINGDALE
Mark E. Risk Appraiser
CLIENTS SERVED (Cont'd.)
MISCELLANEOUS COLGATE PALMOLIVE
Cont'd. CTS CORPORATION
DEERE CREDIT SERVICES
FEDERAL DEPOSIT INSURANCE CORP. (FDIC)
FULBRIGHT ENTERPRISES
GATES RUBBER COMPANY
GENERAL MOTORS
KRAFT, INC.
LOVE BOX COMPANY
MGIC
MICHELIN TIRE COMPANY
PHIZER, INC.
PROCTER & GAMBLE
RECORD DATA, INC.
RESOLUTION TRUST CORPORATION
ROADWAY EXPRESS
SALVATION ARMY
SIOUX TRANSPORTATION
SOUTHWESTERN ELECTRIC POWER COMPANY (SWEPCO)
STATE FARM INSURANCE COMPANY
TRW
TYSON FOODS, INC.
MANY OTHER ATTORNEYS, DOCTORS, AND INDIVIDUALS
COURT BENTON COUNTY CIRCUIT COURT
TESTIMONY CARROLL COUNTY CIRCUIT COURT
U.S. FEDERAL BANKRUPTCY COURT
WASHINGTON COUNTY CIRCUIT COURT
GEOGRAPHIC NORTHWEST ARKANSAS
AREA SERVED WASHINGTON, BENTON, CARROLL & MADISON COUNTIES
QUALIFICATIONS
Leslie Manning
Real Property Appraiser
STATE CERTIFIED
GENERAL APPRAISER
STATE OF ARKANSAS - #CG2445
EDUCATION UNIVERSITY OF ARKANSAS — cum laude BSBA — 1993
MAJOR: REAL ESTATE AND FINANCE
UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL
PRACTICE - 1994, 1999, 2003
BASIC REAL ESTATE COURSE
APPRAISAL FOUNDATIONS V
HUD - APPRAISING MULTI -FAMILY PROPERTIES
RELEVANT APPRAISING REAL ESTATE IN NORTHWEST ARKANSAS
EXPERIENCE SINCE 1992
ASSOCIATED WITH MARK RISK
(THE REAL ESTATE CONSULTANTS)
1992-1994, 1998-2000, 2003 -PRESENT
MORTGAGE LOAN OFFICER
(ARVEST BANK EUREKA SPRINGS)
1994-1998
NATIONAL ZONING CONFORMANCE ANALYST
(THE PLANNING & ZONING RESOURCE CORP.)
2000-2003
CLIENTS SERVED
LENDING
INSTITUTIONS
BANK OF EUREKA SPRINGS
ARVEST BANKS
COMMUNITY FIRST BANK
FIRST NATIONAL BANK OF BERRYVILLE
FIRST STATE BANK
SUPERIOR FEDERAL BANK
MORTGAGE
AMERIQUEST MORTGAGE
COMPANIES
ARVEST MORTGAGE COMPANY
JAMES RIVER MORTGAGE COMPANY
PHH HOME MORTGAGE
MILLENIUM MORTGAGE
REPRESENTATIONS MORTGAGE
DEVELOPERS
LARRY DEAN CONSTRUCTION
MISCELLANEOUS
FIRST AMERICAN EAPPRAISEIT
COURT BENTON COUNTY CIRCUIT JUDGE
TESTIMONY
GEOGRAPHIC
AREA SERVED NORTHWEST ARKANSAS
BENTON, WASHINGTON, CARROLL AND MADISON
COUNTIES
70
rA
SUMMARY
APPRAISAL REPORT
ON
LAND & COMMERCIAL IMPROVEMENTS
LOCATED AT 2050 W. 6TH ST.
FAYETTEVILLE, WASHINGTON COUNTY, ARKANSAS
FOR
THE CITY OF FAYETTEVILLE
113 WEST MOUNTAIN ST.
FAYETTEVILLE, ARKANSAS
AS OF
DATE OF REPORT - JULY 27TH 2004
DATE OF INSPECTION - JULY 22ND , 2004
DATE OF VALUATION - JULY 22ND 2004
DON L. CRAMER, MSA
PARRISH APPRAISALS, INC.
P.O. BOX 846
FAYETTEVILLE, ARKANSAS 72702
STATE CERTIFIED
GENERAL REAL ESTATE APPRAISER
CG2171
®AIL
July 27`h, 2004
City of Fayetteville
113 W. Mountain
Fayetteville, Ar. 72701
RE: Summary Narrative Appraisal Report regarding the Market Value of the land and
commercial building located at 2050 W. 6`h St., Fayetteville, Washington County,
Arkansas.
To Whom It May Concern:
Pursuant to your request, I have conducted an investigation and appraised a tract of land with
commercial improvements located at 2050 W. 6t° St., Fayetteville, Arkansas.
The property Legal Description is:
Being +/-0.28 Acres, MOL, and being Part of Block 2, Westwood Addition, Fayetteville,
Washington County, Arkansas.
The purpose of this analysis and valuation report is to estimate the Market Value of the property
as of July 22"d , 2004.
As per our agreement, the data and analysis is presented in a Summary Format and the Report
does not deviate from the USPAP, as permitted upon agreement between client and appraiser. At
our client's request, the results of our investigation and analyses, which comprise a Complete
Appraisal, are being presented via a Summary Appraisal Report Format. Therefore, the
appraiser does not invoke the Departure Rule as allowed under Appraisal Standards Nos. 1 and 2,
Rule 2-2, adopted by the Appraisal Standards Board on March 22, 1994, effective July 1, 1994,
and revised January 1, 2000. A full file memorandum is maintained in my office.
We certify that, to the best of our knowledge and belief,
(1) The
statements of fact
contained in this report, upon which the analysis, opinions and
conclusions
expressed herein are based, are
true and correct.
(2) The reported analyses, opinions and conclusions are limited only by the reported
assumptions and limiting conditions, and is our personal, unbiased professional analyses,
opinions and conclusions.
(3) I have no present or prospective interest in the property that is the subject of this analysis
and I have no personal interest or bias with respect to the property or parties involved with this
assignment.
(4) My compensation is not contingent upon an action or event resulting from the analyses,
opinions or conclusions in, or use of, this report, or upon developing or reporting of a
predetermined value or direction of 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 use of the appraisal.
(5) This assignment was not based upon a requested minimum value, a specific valuation, or
the approval of a loan.
(6) My analyses, opinions and conclusions were developed, and this report has been prepared
in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP), as
promulgated by the Appraisal Standards Board of the Appraisal Foundation, and the Code of
Professional Ethics and Standards of the National Association of Master Appraisers.
I hereby certify that I have inspected the property described, and it is felt that all data gathered by
my investigation is from sources believed reliable and true.
According to Standards Rule 2-2(c), a Limited Restricted/Summary Appraisal Report should
have these minimum requirements:
- Describe the extent of the process, collecting, confirming and reporting data.
- State all assumptions and limiting conditions that affect the analyses, opinions and
conclusions.
- State
the appraisal
procedures
followed,
state
the value conclusion and reference the
existence
of specific file
information
in support
of the
conclusion.
- State the appraiser's opinion of highest and best use of the real estate, when such an opinion
is necessary and appropriate.
- State the exclusion of any of the usual valuation approaches.
- Contain a prominent use restriction that limits reliance on the report to the client and warns
that the report cannot be understood properly without additional information in the workfile of
the appraiser, and clearly identify and explain permitted departures from the specific guidelines
of Standard 1.
- Include a signed certification in accordance with Standards Rule 2-3.
The function of this appraisal is to assist the client in determining a fair and equitable Market
Value of the subject property. The value estimate is based on the real property only. No
furniture, equipment or personal property is included in the value estimate.
The value is based on the
definition of Market Value as
set forth by
the FIRREA Act of 1989,
effective August 24, 1990.
Please refer to the definition in Exhibit "A"
following this letter.
In the accompanying report, you will
find the results of
my
investigation containing the facts,
analysis and conclusions pertaining to
the subject property
and
the final estimate of value.
As a result of investigation, studies and analyses of sales, offers of sales, cost data, and all factors
in the marketplace which affect value, it is the opinion and judgment of the appraiser that the
property described herein has a Market Value in Fee Simple Interest as of July 22 , 2004 of:
ONE HUNDRED SEVENTY TWO THOUSAND DOLLARS
$172,000
Intended Purposes/User: This Appraisal Report is intended to be used for estimating
prospective market value for the owner and this appraisal is intended to be used only by the
client/addressee only for such purposes. The client is The City of Fayetteville, Ar. Any other
use or reliance of this report by an unauthorized third party is prohibited unless otherwise
specified.
Respectfully submitted,
EXHIBIT "A"
Market Value Definition
Financial Institution Reform, Recovery and
Enforcement Act of 1989 (FIRREA)
Effective August 24, 1990
Market Value means the most probable price which a property should bring in a competitive and
open market under all conditions requisite to a fair sale, the buyer and seller each acting
prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit
in this definition is the consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised, and acting in what they consider their
own best interest;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements
comparable thereto; and
(5) The price represents the normal consideration for the property sold unaffected by special
or creative financing or sales concessions granted by anyone associated with the sale.
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TABLE OF CONTENTS
PAGE NO.
Title Page
Letter of Transmittal
Table of Contents
INTRODUCTION
Summary of Important Facts and Conclusions ........................................
l
Statement of Limiting Conditions.......................................................2
BasicAssumptions........................................................................
Purpose of the Appraisal.................................................................
Effective Date of Appraisal..............................................................
Function of Appraisal.....................................................................7
Brief Legal Description...................................................................7
MarketingPeriod..........................................................................
6
7
7
7
Ownership.................................................................................
TaxInformation............................................................................8
Census Tract Number....................................................................
Statement of Environmental Condition ................................................
Definition of Market Value.............................................................10
Preface.....................................................................................11
Scope and Basis of the Appraisal......................................................12
7
8
9
DESCRIPTION. ANALYSES. CONCLUSIONS
Fayetteville Area Analysis................................................................ 13
NeighborhoodData.......................................................................14
Washington County Data................................................................ 17
SiteData................................................................................... 22
ImprovementData........................................................................ 26
Highest& Best Use..................................................................... 29
TheCost Approach...................................................................... 34
Direct Sales Comparison Approach....................................................44
Income Approach to Value..............................................................48
Reconciliation of Approaches........................................................... 64
Certificate of Appraisal.................................................................. 66
Appraiser Qualifications.................................................................................... 68
ImprovedSales Map............................................................................................70
EngagementLetter...............................................................................................71
WarrantyDeed.....................................................................................................72
SalesConti -act... ............... ............. ................ ............... .............. ......73
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1
SUMMARY OF IMPORTANT FACTS AND CONCLUSIONS
Date of Appraisal
Date of Inspection
Date of Report
IFN
Purpose of Appraisal
Property Rights Appraised
Highest and Best Use
Site Data
July 22"d, 2004
July 22"d, 2004
July 27`h, 2004
900436
Determine Market Value
Fee Simple, Estate
Commercial Restaurant Building
+/- 0.28 Acres
Improvement Data
1,084
Sq.Ft.
Commercial Building
Flood Plain Data
Zone
X
(Outside 100 -Year Flood Plain)
Zoning Commercial -2
Census Tract 0111.00
VALUE CONCLUSIONS
Estimated Marketing Period 6 Months
Estimated Exposure Period 6 Months
Direct Sales Approach $173,000
Income Approach $172, 000
Cost Approach $181,000
Final Value Conclusions
Market Value $172,000
1
*Page 1*
STATEMENT OF LIMITING CONDITIONS
CONTINGENT AND LIMITING CONDITIONS: The Certification of the Appraiser appearing
in the Appraisal Report is subject to the following conditions and to such other specific and
limiting conditions as set forth by the Appraiser in the Report.
1. The Appraiser assumes no responsibility for matters of legal nature affecting the property
appraised or the title thereto, nor does the Appraiser render any opinion as to the title,
which is assumed to be good and marketable. The property is appraised as though under
responsible ownership.
2. Any sketch in the report may show approximate dimensions and is included to assist the
reader in visualizing the property. The Appraiser assumes no responsibility for its
accuracy and has made no survey of the property.
3. The Appraiser is not required to give testimony or appear in court in any connection with
the preparation of this appraisal, the subject property or the valuation thereof, unless
arrangements have been previously made therefor.
4. Any distribution of the valuation in the report between land and improvements applies
only under the existing program of utilization. The separate valuations for land and
building must not be used in conjunction with any other appraisal and are invalid if so
used.
5. The Appraiser assumes that there are no hidden or unapparent conditions of the property,
' I subsoil or structures which would render it more or less valuable. The Appraiser assumes
*Page 2*
no responsibility for such conditions or for engineering which might require discovering
such factors.
6. 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, no responsibility for accuracy of such items furnished the Appraiser
can be assumed by the Appraiser.
7. Disclosures by the Appraiser of the contents of this Appraisal Report are subject to
review in accordance with the by-laws and regulations of the professional appraisal
organization with which the Appraiser is affiliated. The above conforms to the ethics of
the National Association of Master Appraisers.
8. Neither all, nor any part of the contents of the report or copy thereof (including
conclusions as to the property value, the identity of the Appraiser, professional
designations, reference to any professional appraisal organizations or the firm with which
the Appraiser is connected), shall be used for any purposes by anyone but the client
specified in the report, the borrower if appraisal fee is paid by same, the mortgagee or its
successors and assigns, mortgage insurers, consultants, financial institution, any
department, agency or instrumentality of the United States or any state or the District of
Columbia, without the previous written consent of the Appraiser; nor shall it be conveyed
by anyone to the public through advertising, public relations, news, sales or other media,
without the written consent and approval of the Appraiser.
*Page 3*
9. On all appraisals, subject to satisfactory completion of repairs and alterations, the
Appraisal Report and value conclusions are contingent upon completion of the
improvements in a good workmanlike manner.
10. No environmental impact studies were either requested or made in conjunction with this
appraisal, and the Appraiser hereby reserves the right to alter, amend, revise or rescind
any of the value opinions based upon any environmental impact studies, research or
investigation.
*Page 4*
SPECIAL REPORT CONDITIONS, APPRAISER'S
LIABILITY LIMITATIONS, AND CLIENT AGREEMENTS
The acceptance of this report and its use by the Client in any manner whatsoever or for any
purpose is acknowledgment by the Client that the designated recipient or assignee has personally
read the report, and specifically agrees that the data herein is accurate to the best of the
Appraiser's ability.
The report remains the personal property of the signer and may not be transmitted to a third party
without the signer's written permission. (Permission is granted to transmit to a third party
mortgagee.)
The Appraiser's personal responsibility does not extend to a third party under any circumstances
whatsoever.
As a part of the Appraiser/Client employment agreement, the Client agrees to notify the
Appraiser of any error, omission or invalid data herein within 15 days of receipt and to return the
report along with all copies to the Appraiser for correction prior to any use whatsoever.
Under no circumstances shall the Company's or Appraiser's liability exceed the fee actually
collected for this report, and then only in case of gross error which would have materially
affected the Appraiser's value opinion as of the date of valuation.
Thus, by acceptance of this report, Client acknowledges that a value opinion is the product of a
professionally -trained mind, but nevertheless is an opinion only, and not a provable fact. As a
personal opinion, valuation may vary between Appraisers based on the same facts.
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*Page 5*
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Thus, the Appraiser warrants only that the value conclusion is his best opinion estimate as of the
exact day of valuation.
BASIC ASSUMPTIONS
This analysis is subject to the following basic assumptions:
1. That the economy of the nation and the general subject market area (Washington County)
will remain approximately level or slightly improving.
2. That there will be no substantial change in federal, state or local tax or insurance rates
which could adversely affect the cash position of the property.
3. It is assumed that there are no hidden or unapparent conditions of the property, subsoils
or structures which would render it more or less valuable. No responsibility is assumed
for such conditions or for engineering which may be required to discover such factors.
4. It is assumed that there is full compliance with all applicable federal, state and local
governmental regulations and laws unless non-compliance is stated, defined and
considered in the appraisal report.
*Page 6*
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PURPOSE OF THE APPRAISAL
The purpose of this Appraisal is to estimate the Market Value of the subject property as of the
effective date of the appraisal.
EFFECTIVE DATE OF THIS APPRAISAL
The effective date of the appraisal is July 22"a, 2004. The property was inspected on July 22na
2004.
EFFECTIVE DATE OF REPORT
The effective date of the Report is July 27`", 2004.
FUNCTION OF APPRAISAL
The function of this Appraisal is to estimate the Market Value of the subject property for use in
financial considerations.
BRIEF LEGAL DESCRIPTION OF PROPERTY
Being +/-0.28 acres and being a part of the SE '/a of the SW %., and part of the NE '/. of the NW
%< of S17-T16N-R30W, Westwood Addition, Fayetteville, Washington County, Arkansas. Also
known locally as the old "Shake's Frozen Custard" Restaurant, 2050 W. 6`" St., Fayetteville,
Arkansas.
MARKETING PERIOD
Based
on
discussions with Realtors and a review
of the available listings in the
subject area
versus
the
actual sold properties, a marketing period
of up to 12 months is estimated.
OWNERSHIP HISTORY OF SUBJECT
According to the Washington County Deed Records, City of Fayetteville Municipal Corporation.,
and Osborne, Donald E. & Debra L. have owned the subject tract for in excess of three years.
*Page 7*
PERSONAL PROPERTY
No personal property was appraised as part of this analysis.
TAX INFORMATION
The Subject property is located in the taxing jurisdictions of the Fayetteville School District,
Washington County, City of Fayetteville, and the State of Arkansas. Parcel Number is 765-
12164-000.
CENSUS TRACT NUMBER
The Subject property is located in U.S. Census Tract Number 0111.01
INSTRUCTIONS TO APPRAISER
The instructions to this appraiser were to prepare a Complete Appraisal and provide a Summary
Appraisal Report in order to estimate the market value of the subject property as described.
*Page 8*
STATEMENT OF ENVIRONMENTAL CONDITION
Upon the routine inspection of the subject property, no evidence of any hazardous wastes or
detrimental environmental conditions was noted; however, if hazardous wastes are found on the
subject property, it may affect the value of the site and we suggest that the client obtain the
services of a qualified expert to determine the status of the situation. This appraisal has been
made under the assumption that the subject property does NOT have any potential hazardous
waste deposits. It is possible that tests and inspections made by a qualified hazardous substance
and environmental expert would reveal the existence of hazardous materials that the appraiser is
not qualified to detect.
*Page 9*
MARKET VALUE DEFINED
Market Value is defined as "The most probable price which a property should bring in a
competitive and open market under all conditions requisite to a fair sale, the buyer and seller
each acting prudently and knowledgeably, and assuming the price is not affected by undue
stimulus." Implicit in this definition are the consummation of a sale as of a specified date and the
passing of title from seller to buyer under conditions whereby:
1. Buyer and Seller are typically motivated;
2. Both parties are well informed or well advised, and acting in what they consider their
own best interests;
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements
comparable thereto; and
5. The price represents the normal consideration for the property sold unaffected by
special or creative financing or sales concessions granted by anyone associated with
the sale.
*Page 10*
i''bJ4Vien
An appraisal is a type of investigation into the law of probabilities with respect to real estate
valuation. Through the appraiser's experience, training and integrity, we are able to project the
past activities of buyers in the marketplace into a forecast of real estate value. In reaching a
conclusion, comparison of properties often involves adjustments due to the individuality and
uniqueness of each property. Transactions involving real estate are often influenced by
sentiment, bias, specific needs, politics, familiarity, lack of understanding, and other conditions
not considered to be impartial to the appraiser. The appraiser cannot lend credence to these
possible factors unless he misrepresents the very reason for his profession.
An appraisal cannot be guaranteed, nor can it be proven. The opinion can, however, be
substantiated and the final opinion is the result of a thorough, professional analysis of a vast
quantity of physical and economic data. An appraisal must not be considered absolute, but
should be used as a basis of negotiation between concerned parties, whatever their interest.
The subject property is currently improved with an average quality, single story, commercial
mixed use building. The Direct Sales, Income and Cost Approaches to value were utilized in
this Report. With the preceding in mind, the reader's attention is invited to the following report,
which points out the facts and reasoning leading to the final estimate of value.
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*Page 11*
SCOPE AND BASIS OF THE APPRAISAL
This appraisal has been made in accordance with the Uniform Standards of Professional Appraisal
Practice of the Appraisal Foundation (12 C.F.R.). At our client's request, the results of our
investigation and analyses, which comprise a Complete Appraisal, are being presented via a
Summary Appraisal Report Format as permitted by Standard 2-2a. The value set forth herein
was estimated after application and analysis of the applicable approaches to value, i.e., the Income
Approach, the Cost Approach and Sales Comparison Approach. This appraisal included the
inspection of the Subject property on July 22"d , 2004 and an analysis of the surrounding
neighborhood with recognition of existing and future trends. Market data, including sales and
lease information on comparable properties were obtained from sources believed to reliable. There
was no personal property included in this valuation process.
*Page 12*
FAYETTEVILLE AREA ANALYSIS
Analysis of the market area in which a particular property is located is an essential part of every
appraisal. The subject property's market area is considered to be the Fayetteville — NW Arkansas
Metropolitan Statistical Area that consists of the cities of Fayetteville, Springdale, Rogers,
Bentonville, and Washington & Benton Counties.
Topography. The topography of the area is irregular and located within the Boston Mountains.
The southern portion of the area is prairie with few trees, while the northern portion of the area is
heavily wooded. There are no natural barriers or topographical features which adversely affect
any type of building conditions.
Soil and Subsoil Conditions. This area's soil and subsoil conditions are adequate for all types
of construction as evidenced by the existing improvements in the area.
Climate. The climate of Fayetteville is mild with temperatures ranging from 10 degrees to 88
degrees.
Economic Base. The Fayetteville SMSA has a multiple industry -based economy to include:
natural resources, manufacturing, marketing, merchandising, banking, research and development,
and agri-business.
Conclusions. Fayetteville economy continues to maintain a strong recovery and subsequent
expansion represent a return of a wide variety ofjobs.
A very important caveat surrounds the events of September 11, 2001. With the terrorist attacks
on the World Trade Center and the Pentagon, the national economy has experienced substantial
turmoil. It is still too early to project the intermediate and long-term effects on the economy.
*Page 13*
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NEIGHBORHOOD ANALYSIS
As used in this narrative report, the area of neighborhood is defined as follows:
"A homogeneous grouping of individual buildings, business enterprises or land
used within, or as a part of a larger community. These groupings may be devoted
to residential, cultural, trade and service, industrial or civic activities."
A neighborhood is considered to be that area most closely surrounding the subject property. The
neighborhood may be a specific subdivision, a section of a community, or in a small town or city,
an entire community. The neighborhood may be comprised of a mixture of commercial,
residential or agricultural utilizations. A neighborhood may be termed as a group of comple-
mentary land uses affected by similar operation of four forces that affect value.
Comparable sales used may or may not be within the defined neighborhood, but should be
similar in present and future land use trends.
A neighborhood is an area with distinguishing characteristics and is generally defined by physical
boundaries such as streets or roads, bodies of water, waterways or railroad tracks, and is often
designated by zoning ordinances or deed restrictions.
A neighborhood analysis is made to determine change or stability and the effect of the four forces
that affect value.
A neighborhood generally goes through stages of growth, stability, decline and revitalization.
These stages affect value when compared to other neighborhoods. Growth is a period during
which the neighborhood gains public favor and acceptance; stability is a period of equilibrium
*Page 14*
without marked gains or losses; decline is a period of diminishing demand and revitalization is a
period of renewal, modernization and increasing demand.
The four forces affecting value are social, economic, governmental and environmental. Social
consideration includes population density, education and age levels, occupant employment type,
neighborhood organizations and educational, medical, social and recreational services available.
Economic considerations include income levels, degree of owner occupancy, rent levels, property
value levels, vacancy rates, type of construction, age of properties and property use changes.
Governmental considerations include such factors as land use and size, terrain, use density, noise
levels or other nuisances, traffic volume, property maintenance and upkeep, availability and
quality of utilities, surrounding development and proximity to churches, employment, shopping
and schools.
The neighborhood in which subject property is located is physically defined by the following
boundaries:
The City Limits of Fayetteville, Arkansas.
The subject property is located on the north side of 6 St/Hwy 180. It is independently situated
on a lot bordered by Old Farmington Rd. at the north, Old Sang Ave at the west, Sang Ave at the
east and 6`h St./Hwy 180 at the south. It is located in close proximity to IH 540 and is located in a
very good commercial area of Fayetteville. The area has all public utilities available.
The neighborhood may generally be characterized as good quality urban commercial mixed -use.
The Subject has good visibility and land uses in the immediate area are a mixture of residential,
commercial and retail uses. Neighborhood maintenance and appeal are considered good.
*Page 15*
Property within the neighborhood is inside the Fayetteville City Limits, being taxed by school,
city, county and state authorities. The area is subject to zoning. Fayetteville and private firms
provide fire/police, trash collection and other services. Public schools are part of the Fayetteville
School District.
Topography appears adequately drained and Lot 10 is OUTSIDE the 100 -Year Flood Plain.
*Page 16*
Washington County Area Data
Washington County is located in the northwest region of Arkansas. Benton County on the north,
Carroll and Madison Counties on the east, Crawford County at the south, and the Oklahoma
State line on the west border the area. The total square area of Washington County is 963 square
miles.
Real property values are reflected and influenced by four major forces; Social trends; Economic
circumstances; Governmental controls and regulations; and Environmental conditions. These
forces directly or indirectly affect every aspect of the real estate market.
Social Forces: Social forces are exerted primarily through characteristics of population. The
demnvranhic cmmmnsitinn of the nnnulation reveals the nntential and primary demand for real estate
The population
of Washington County in
1990 was 113,409.
The population
of Washington
according to the
2000 census was 157,715.
It is important to note that the area's
population was
estimated to have
increased 2.6% over the 2000 Census through
the first quarter of
2001.
Fayetteville is the County Seat of Washington County. This city is located in the north central
part of the county. The 2000 population of Fayetteville was indicated to be 58,047. This
represents a 37.9% increase since 1990. Fayetteville is also the largest city in the county.
Springdale is the second largest city in Washington County. Its 1990 population of 29,941,
showed a 27.6% increase since 1980. The 2000 population of Springdale was indicated to be
45,798. This represents a 53% increase since 1990. The 2000 population figure for Springdale
includes an indicated 2011 people living in the Benton County portion of the city.
Some of the smaller cities in Washington County include Prairie Grove, Lincoln, Farmington,
West Fork, Johnson and Elm Springs. There are a total of 13+/- incorporated cities and towns
within Washington County. A small part of Elm Springs is located in Benton County.
The Region's population capacity, which includes Benton County, reached an estimated 316,798
by the end of 2000. Capacity is the population the region would hold if all permits issued since
the latest Census were built and occupied.
The increased population trend is expected to continue in the Benton -Washington County area.
This should have a positive effect on real property values.
Economic Forces: Economic forces are also significant to real property values. It is necessary to
analyze the fundamental relationships between current and anticipated supply and demand and the
economic ability of the population to satisfy its wants, needs, and demands through its purchasing
power.
*Page 17*
I
For 2001, the Fayetteville -Springdale -Rogers Metropolitan Statistical area (MSA) was listed as
the 55`h best place to live in America. This was an increase from the 90`h the year before. The
Fayetteville -Springdale -Rogers MSA ranked 10`h nationally in salary growth in the years 1998-
1999.
Within the 10 -year period
from 1989-1999, the
per capita personal income for the MSA
went
from $15,859 to $24,213.
This represented a
5.3% annual growth rate compared to
4.4%
nationally.
The Washington County civilian labor force averaged 70,050 for the same time span. The
unemployment rate in Washington County averaged about 2.3%. The average unemployment
rate for the Fayetteville -Springdale -Rogers MSA for 2000 was 2.1%. The MSA had an average
civilian labor force for 2000 of 148,175. The 2000 average unemployment rates for the State of
Arkansas and the United States were Fayetteville -Springdale -Rogers MSA at 1.9%. As of May
2000, the rate was 2%. The average for the entire State of Arkansas in May of 2001, was 4.6%,
while the national average was at 4.4%.
Building permits for the region, which includes both Benton and Washington Counties reached a
total of $571,604,490 and increase of 1% for 1999. Categories of permits for the two county
areas showed residential up 14%, commercial down 25%, industrial up 633%, additions down
23% and others up 30%. Washington County had 48.9% of the region's permit value in 2000,
with Benton County comprising the other 51.1%. New dwellings in the residential area are up
approximately 1% from 1999, based on the number of permits dispersed. The Northwest
Arkansas Regional Planning Commission showed the following figures with regard to the overall
value of building permits issued for 2000 as a percentage of the region:
II
I'
II
LJ
II
Bentonville 18.3%
Fayetteville 25.0%
Siloam Springs 4.5%
Other Cities 13.2%
Bella Vista 7.3%
Rogers 12.2%
Springdale 19.5%
Because of the non -requirement of building permits outside the city limits, there are no rural
figures for new construction. County appraisers have visually inspected these areas and have
seen healthy growth, especially in the agricultural and residential areas.
The Northwest Arkansas Regional Planning Commission indicated building permits issued in the
two county area had a total value of 127.9 million. This was a decrease of approximately 1.1%
from the first quarter of 2000 which totaled $129.3 million. Residential construction totaled
close to $83.8 million for the two counties.
Statistical information from the two counties revealed an economic shift is moving north, from
the Washington County area to Benton County. County data also showed that new residential
construction is outpacing non-residential buildings throughout both Washington and Benton
County. Based on figures from the Regional Planning Commission, Washington County building
*Page 18*
permits, as of the first quarter of 2001, totaled 56.5 million. Through the first quarter of 2001,
Springdale had a total of $27.9 million in total permits, with approximately $13 million being
strictly residential. Fayetteville's permits totaled 27 million, with Springdale leading the area
with $6.4 million in commercial permits.
The economic foundation for this region, is comprised of four primary areas: 1. Agricultural
Production. This aspect is comprised primarily of beef cattle, dairy cattle, and poultry. Tyson
Foods, which is the national leader in the chicken industry, maintains its head office in
Springdale. The Washington County total sales of agricultural products, in 1992, (as researched
by the Arkansas State and County Economics Data) were $284,469,000. Agricultural land values
decreased, as with most of the Midwest throughout the early and mid 1980's. The largest
decrease in values occurred between 1984 and 1986. Recently agricultural land values have
leveled, and seem to be gradually increasing. 2. Higher Education. The University of
Arkansas, located in Fayetteville had enrollment, which ranged between 13,000 and 15,000
annually. In addition to the educational value, the university provides a considerable amount of
employment opportunities. 3. Recreation. Recreational activity takes place primarily in the
northeast part of Washington County. Beaver Lake, A Corps of Engineers Reservoir on the
White River, is the major attraction for most individuals. The lake provides such activities as
fishing, swimming, skiing, boating, etc. 4. Industrial and Manufacturing Businesses. The
general office for retail giant Wal-Mart, are located in Bentonville. Because of the amount of
jobs, which this company provides, many people are willing to commute. The approximate
driving distance from Fayetteville to Bentonville is 30-40 minutes. The same is true for other
area companies. J.B. Hunt, Inc., a major trucking company located in Lowell. The majority of
the larger companies are located in the larger cities. Washington County, as indicated by
Arkansas State and County Data, stated that manufacturing added $647,600,000 in revenues to
the areas economy.
The majority of financial institutions, within the Washington County area, are located in the
larger cities, i.e. Fayetteville, Springdale. These institutions provide funding for many of the
residential, commercial, industrial, and agricultural growth. Interest rates, currently running
between 5%-6%, are stimulating many areas of the real estate market, especially in the area of
residential building. Arkansas State and County Economic Data indicated total bank deposits in
Washington County in 1999 to be $1,806,729,000. Deposits in 1995 were approximately
$1,351,213,000.
The overall development of real estate has been primarily centered around the larger cities; such
as Fayetteville and Springdale, and in the smaller communities such as Farmington and
Westfork. However, it is apparent that the rural areas of Washington County are also
experiencing significant growth.
According to the available economic data, current trends would imply that the area would
continue to see growth, as well as stable and increasing property values.
Governmental Forces: Governmental, political, and judicial decisions at all levels have a direct or
indirect impact on real property values
*Page 19*
Municipal governmental bodies are under the direct supervision of County Judge and the
Quorum Court. Other elected county officials include Sheriff, County Clerk, Circuit Clerk, Tax
Collector, Tax Assessor, County Treasurer, and the Coroner, etc.
The property taxes in Arkansas are collected at the county level and distributed to each county,
city, and school district. In Arkansas, all real property, with the exception of agricultural land is
appraised at market value. Agricultural land is valued based upon soil class productivity. The
assessed value is one -fifth of the actual appraisal value. The assessed value is multiplied by the
appropriate millage rate to arrive at the annual property tax. In 2001, a tax relief act was passed
in Arkansas, which limited the annual increase in property taxes from the base year. Taxes are
due October 10, a year after it is levied. There have been a significant increase in property taxes,
partly due to more accurate county appraisals, and increasing property values.
At this time there is no county zoning in Washington County. The larger cities in the area do
have zoning regulations. To date there are no adverse legislative restrictions on the use and
development of real property in the area. The only restriction worth noting, is within a 660'
distance of I-540/Fulbright Expressway, as the traverse the city. This is commonly referred to as
the Overlay District.
Washington County's rural area has public utilities such as electricity water and telephone
service. Natural gas is available in certain areas. Public sewer is available in the larger cities and
some of the smaller.
Washington County is considered to have adequate medical, educational, lodging and religious
facilities for the entire area. Enrollment for 2000-2001 in the public school district was around
26,500. The 1990 enrollment was 20,000.
In general, governmental bodies have a positive effect on real estate values. The absence of
public water and sewer in rural areas is considered a negative factor, but the new Two -Ton Water
Project in Benton and Washington County is addressing this issue currently.
Environmental Forces: Environmental forces, both natural and man-made, have an influence on real
property values. The term "Environmental forces" includes such things as climatic conditions,
topography and soil, natural barriers to future development, primary transportation systems, and the
nature and desirability of the immediate surrounding area.
' The Washington County area weather conditions are moderate, with warm summer, and mild
winters. The humidity levels accompany high temperatures in the summer months. The average
daily temperatures are approximately 57 degrees. Each year there are approximately 2 months
'
when temperatures exceed 90 degrees, and very few weeks when temperatures drop to freezing
and below. The region has an average of 6 to 12 inches of snow annually, and rainfall averages
around 46 inches annually.
*Page 20*
The City of Fayetteville and the surrounding area contain over-all hilly and rolling terrain. The
elevation is approximately 1,000 to 1,700 above sea level. In general the soil is conducive to
agricultural uses.
Transportation routes within the Washington County area consists primarily of U.S. 71/1-540
(north -south) and U.S. 412 (east -west). Each of these is heavily traveled traffic arteries. There
are seemingly adequate state highways, and local roads provide access throughout the area.
The Northwest Arkansas Regional Airport was completed in 1998. It is located near the small
city of Highfill, in the northeast part of the region. There are now direct flights available to
Chicago, Dallas, Atlanta, Little Rock, New York, Charlotte, Kansas City, and St. Louis. The
number of people utilizing this facility are far above what was expected, so. current airport
expansion is in the works.
Overall, Environmental forces are considered an asset to future development of real property in
the area.
SUMMARY
The Forces discussed here, either directly or indirectly affect real property values in the
Washington County area. In general, these factors should make a positive contribution to real
' property values. The increase in population combined with consistent economic growth should
provide a solid base for the community.
1
1
*Page 21
SITE DATA
LOCATION:
The Subject Site is located on the north side of W. 6th St. The Subject Site is partly accessible
from Old Farmington Rd. Accessibility specifics are discussed later in the Report.
Subject Survey
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LEGAL DESCRIPTION
r
40 0 40
SCALE: 10 T 40'
9L s sw — N e _ - - - - - L D
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- v.ar R NE -NW
- _Yi,- a
- IT er
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All that certain tract or parccl of land being n pan ni the SE Y. Oldie SW I/4. and pan of the NE A of the NW 1/4of Section
17. Township 16 North. Range 30 West. Washington County. Arkansas. And being more particularly described by recto and
bounds as follows:
Beginning at the SW Comer ol'the SE %. of the SW -4 .,1'Section 17, Township 16 North, Range 30 We5L Washington
County. Arkansas. Said point being die NW Comer of flock 2 or Wesiwt,nd Addition to the City of Irayencville, Arkansas.
TI IENCE - North 020 5G I I fast 6.16' to the south right-ol=way line at Old Fannington Road:
TI'IfNCI? - with said right-a,l'-way through the following calls:
THENCE-thmugh n curvc to the tell with a radius of 225.O(r. a ccnuul angle o125° 27' 53'. Tire length o15&53'. a cord
hearing of Nona 66 59. 31- East for n distance of 54.40:
TliENCE - through a curve to the right with a radius of 20.00'. a ccntml angle of 2860 28' 44-, arc length of 30.28'. a curd
hearing of Saouth 760 34 38- Bast li,r At distance of 27.47;
THENCE - South 330 12' 12- East 17-23:
Tii ENCE - thnmglt a curve 6, the right with a rrdius of 262.((1'. n central angle of 210 52' 07 me length of 57.87. a cord
hearing of South 260 5T 32' Enst liv it distance oh 5.75:
THENCE - through it curve to the right with a radius of 28AM1', a central angle of 330 46' 27-. tire length of 17.07'. a cord
hearing of South 010 38. 119^ fast for a distance nl' 16.83' to the nonb right -of wav of State I lighway No. 62:
THENCE - South 600 30' II" West 135.82' with said right-.,1=wvy to a set 5/8- I.pin:
THENCE - North 020 42' 11- West 134.80' to the p(InNT or REGINNING't'hc above described property having been
surveyed by Ran Lpetmy contains 0.28 acres of land more or less.
*Page 22*
SIZE/SHAPE:
The Subject Site contains approximately 0.28 acres of area, as per a provided survey from The
City of Fayetteville. The site is irregular and bounded on the north Old Farmington Rd.
ACCESS:
Access to the subject property is considered very limited. The property can not be accessed from
6`h St, nor can it be accessed from Sang Ave. The only current access the subject property has is
via Old Sang Ave, which is still considered extremely limited. The property could possibly be
accessed by way of Old Farmington Rd, but improvement to the current driveway access would
have to be implemented.
FRONTAGE:
The site has approximately 136 linear feet of road frontage on the north side of W. 6ch St.,
approximately 129 linear feet on the east side of Old Sang Ave (per provided survey),
approximately 100 linear feet on the west side of Sang Ave, and approximately 75 linear feet on
the south side of Old Farmington Rd.
IMPROVEMENTS:
The Subject Site is improved with an average quality single story commercial fast food restaurant
structure of approximately 1,084 sq. ft. of average quality restaurant or mixed use space. For a
further description of the improvements, please refer to the Improvement Section of this Report.
UTILITIES:
The Subject Site has all public utilities available.
*Page 23*
ZONING: The subject is located in the incorporated City Limits of Fayetteville and is subject to
zoning ordinances. The subject property is zoned C-2 Commercial.
I
/I I SUBJECT
OLD
W
q V1
0
It
r�'0.028mi
FLOOD PLAIN:
Subject property is OUTSIDE the 100 -Year Flood Plain according to FEMA Flood Plain Map
05143C0091D, dated July 21, 1999.
In to rFlo.__
v. n.vM1•. \
P r.ir.d To.:
:TA wt'" M1I
•. ]$]4L63]3
S NUi I a
SONI]'jr� �-/ L\OOII9Gr'Y
Furl Mvv.� A�
O••= i 20
to,. el' .i— —r-
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i
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a1
*Page 24*
EASEMENTS/ENCROACHMENTS:
There are typical utility easements. No adverse easements or encroachments onto the Tract were
noted by the appraiser. There is currently right-of-way issues which are currently being
discussed.
TOPOGRAPHY AND SOIL CONDITIONS:
Rocky clay type, which is typical of the area and appears satisfactory for most local foundation
applications.
ADJACENT PROPERTIES:
Existing land uses are commercial in nature, including restaurants and retail, within three blocks
of the subject. The area is considered a commercial area.
CONCLUSIONS:
The Subject Site is uniquely situated to contribute and benefit from the trends of commercial
development, which are currently underway in the Fayetteville Area. It is accessible from all
areas of Fayetteville and NW Arkansas. It is a functional tract, being compatible with the area.
Overall, the Subject Site is considered to be a marketable property, having no apparent adverse
encroachments or easements affecting value.
*Page 25*
IMPROVEMENT DATA
The Subject property is improved with an average quality single story restaurant structure of
approximately 1,084 sq. ft. The existing building is steel and wooden frame and concrete block
building, which is designed and will function as an average quality restaurant building. The
structure could be used and or leased as a single tenant restaurant building with kitchen, work
rooms, and restrooms are well placed for functional and efficient use.
As described previously, the various areas of the existing building are adapted for serving,
kitchen offices, work space units, and a restroom. The building is designed to conform to any
and all building Codes and Health related requirements.
The Site is improved with a concrete driveway and parking area. The building has a functional
layout for an average restaurant commercial facility. The general appeal is considered to be
average. The Site is considered adequate to accommodate the existing structure.
*Page 26*
t
f
II
HIGHEST AND BEST USE
A property must be appraised in terms of its highest and best use. According to Income Property
Appraising, page 8, copyright 1981, by the National Association of Independent Fee Appraisers,
highest and best use is defined as follows:
"Real estate is appraised in terms of its highest and best use, which may or may not
correspond to its present use. Defined, highest and best use is the use of the land which, at the
time of appraisal, is legal and which will yield the highest net return in the reasonably
foreseeable future. The assumption that the property will be put to its highest and best use is the
basis for valuation."
Highest and best use is not an absolute fact, but reflects an appraiser's opinion based on market
knowledge and an analysis of prevailing market conditions. In appraisal theory and practice,
highest and best use represents the premise upon which value is based. There are two types of
highest and best use. One is the highest and best use of the site or land as though vacant. The
other is highest and best use of the property as improved.
The first type of highest and best use, as though vacant, assumes that the site or land is vacant or
can be made vacant through removal of improvements. In an analysis of this type, the appraiser
must determine the best utilization of the site or what improvements should be placed thereon. If
a site being studied is not vacant, it is often analyzed as though it were. The appraiser must
determine if the existing improvements represent the best use of the site.
The second type of highest and best use, as improved, considers the use of the property as it
exists. Consideration must be made whether the improvements should remain as they are at time
of appraisal or whether they should be renovated, remodeled, expanded or replaced.
*Page 29*
• Consideration must also be made as to whether utilization of existing improvements should
tremain the same. Generally, the existing improvements or use will continue until the value of the
' land or site in its highest and best use exceeds the sum of the entire property plus the cost to
remove improvements.
Implicit in the above definitions of highest and best use are the concepts of time (duration period
of that estimated highest and best use) and social, economic, governmental and physical
(including locational) factors which influence value.
The procedure used in
this
report to estimate
the
highest and best use of the
subject site was to
'
consider, in sequence,
the
site's possible use,
its
legally permissible use, its
financially feasible
' use and finally, the optimum or maximally productive use. Data collected and analyzed for
purposes of the neighborhood and particularly the site data was useful in arriving at a final
decision.
Subject Property As If Vacant
1
' Physically Possible
' Factors such as size, shape, terrain, frontage to depth ratio, availability and sufficiency of
utilities, easements and rights -of -way, flood plain designation and surrounding development may
' or may not affect the site, and the site has existing excess land available for future development.
The Subject property contains approximately 0.28 acres of land. The site is irregular in shape
with frontage on the south side of north side of W. 6 St. The site has adequate size for its
*Page 30*
1
proposed use. Utilities are currently available to the site. The site is outside the 100 -Year Flood
Plain.
Surrounding development is not considered adverse.
Legally Permissible
Numerous factors determine whether a use is legally permissible. Some of these factors include
deed restrictions, zoning ordinances, environmental regulations, building codes or existing
leases.
The City of Fayetteville is subject to Zoning Ordinances. The Subject Tract is currently Zoned
for Commercial Development.
Financially Feasible
The appraiser must estimate future potential income from the determined highest and best use in
determining financial feasibility of the subject site.
The economic conditions, which are and have been indicators of financial success in the
Fayetteville Area, continue to indicate positive results for sales, rental and income of properties
in the subject market area. Continued development and individual efforts toward property
improvements are strong indicators of future growth and values. The subject's location makes
its use as a commercial restaurant structure financially feasible.
Maximally Productive
After consideration of current market conditions, location, zoning and surrounding development,
the most productive use of the tract as if vacant is considered to be for mixed -use commercial
use.
*Page 31*
In summary, the appraiser's opinion of the highest and best use of the Subject site as if vacant
would be for mixed -use commercial for the tract.
Highest
and
Best Use
As Improved
Highest
and
best use
as improved analyzes the property to determine needed remodeling or
renovations
and the capital expenditure required for renovation. The use is tested for two
reasons.
The first is
to determine if the use will produce the highest return on the invested
capital.
The
second is
to help in identifying comparable properties.
The Subject Tract is improved with an average commercial restaurant structure.
Physically Possible
As determined in the analysis of the site as though vacant, the subject site is of sufficient size and
configuration to meet the needs of the existing improvements. The size of the improvements is
considered adequate for the intended use and the improvements are in poor condition, and will
require considerable renovation for any future use. All utilities are available.
Legally Permissible
The present use does comply with local ordinances. As mentioned, there is zoning in effect and
the tract is zoned for Commercial Development. The subject improvements are in conformance
with this use.
Financially Feasible
As discussed in the highest and best use analysis as vacant, the current market indicates that the
proposed improvements and utilization represent the most logical uses. The existing improve -
*Page 32*
THE COST APPROACH
The Cost Approach is also called the summation approach to estimating value. In this approach,
the most probable current cost of reproducing all improvements to a property is estimated. This
estimate of cost new is subtracted from accrued depreciation. Physical deterioration and obsoles-
cence account for accrued depreciation, with the most significant component of physical deterio-
ration usually being the limited economic life of structures. After depreciation is subtracted from
cost new, the resulting depreciated value is added to site value, as previously developed.
Reproduction cost estimates may be developed from comparison to newly constructed local
buildings or from available cost estimation services.
Depreciation, physical deterioration, and functional or economic obsolescence, may be curable or
incurable. Curable items are those conditions which a prudent purchaser would anticipate
correcting upon purchase of a property whereas incurable items maintain sufficient value not to
warrant correcting as of the date of appraisal.
' The Cost Approach to value estimate is valid if the land value estimate is sound, if reproduction
' costs have been accurately estimated, and if the estimate of depreciation is correct. Estimation of
this latter factor is not subject to precise determination and largely depends upon the experience
and judgment of the appraiser. The older a property and the more accrued depreciation, the less
' reliable the Cost Approach is generally believed to be.
I
I
*Page 34*
I
I
LAND VALUE
The Direct Sales Approach Method was utilized to derive the value of the land "as if"
' unimproved. Land sales were located in the market area of the subject property. These sales
were compared to the subject "As If Vacant" and adjusted for any differences. Additionally, the
' land value must be estimated. The following table is a summary of the land sales utilized in this
analysis.
SUMMARY OF LAND SALES
I
*Page 35*
Sale No.
Location
Sale Price
Sale Date
Ac Land
Price/SF
Sub'.
2050 W. 6` St -Fayetteville
028
1
2800 W. 6` St -Fayetteville
$170,000
7/03
0.480
$8.13
2
Wedington Dr -Fayetteville
$375,000
7/04
1.207
$7.13
3
406 School Ave. -Fayetteville
$110,000
3/02
0.500
$5.05
4
6` St. -Fayetteville
$195,000
Pending
0.540
$8.28
LAND SALES ADJUSTMENT ANALYSIS
In excess of 10 Sales and Listings of property located in the Subject area have been analyzed and
four have been listed and summary information has been provided. It has been the intent of the
appraiser to use the most recent and similar sales, as compared to the Subject, as indicators of
value for the Cost Approach for the Subject. The Subject property is located in a very visible
high quality commercial subdivision in Fayetteville, which is currently developing in to a high
quality restaurant location.
The market data has been utilized by analysis and abstraction to determine what features inherent
in any given property caused that property's sales price to vary relative to any measure for
adjustment factors. The following areas of noticeable differences have been addressed and
analyzed in determining the adjustments and indicated values of the listed sales.
' TIME
Values in the subject area enjoyed substantial increases in value during the 1990's and early
' 2000's. To establish an indicated value trend for the subject property, it was necessary for this
appraiser to use sales of property sold from 2002 to the present. An adjustment was deemed
Inecessary for date of sale for Comp. # 3.
' LOCATION
Locational adjustments are typically based on the analysis of actual sales in the subject
' neighborhood that are similar except for differences in location. Then the differences in sales
' price can be attributable to the difference in location. However, in the absence of reliable and
comparable evidence, the location adjustments require subjective judgment and are based on the
' relative desirability of the various comparable sales, vis-a-vis the subject. Positive locational
factors for most properties include neighborhood quality, supply/demand and amenities on and
' near the site.
*Page 36*
SIZE
Larger tracts typically bring smaller unit prices than otherwise equally desirable smaller tracts.
The primary reason for this is that the purchase of large tracts requires a much larger capital
outlay which restricts the number of potential purchasers compared to the generally large
numbers of potential purchasers of smaller tracts.
UTILITY
Utility refers to the concept that the greater the potential number of uses to which a particular site
may be utilized, the greater its value. Some relevant variables include frontage/depth ratios,
topographical considerations, site shape and configuration.
UTILITIES
The availability of sewer and water service is a major factor affecting value. Some of this
difference can be quantified to a dollar figure if cost will rectify it, such as putting in sewer
capacity, etc. However, the availability of capacity is also significant when considering
commercial developments. The Subject Tract and all comparables had utilities available at time
of sale.
ACCESS
Access includes frontage on major thoroughfares, comer site influence and accessibility to area
amenities.
DESIRABILITY
Desirability is closely related to locational factors; however, it also takes into consideration
surrounding land use and existing or potential adverse influences restricting the use of the
Subject site.
*Page 37*
DISCUSSION OF LAND SALES
Sale 1. This Sale is located in the same general area as the subject. This sale is located west of
the 1H 540 interchange on 6`h St. Due to locational factors and overall property characteristics,
no adjustment was deemed.
Sale 2.
This Sale is
located north of
the subject property, and is
significantly larger than the
subject.
It contained
identical zoning
capacity, and was the most
recent sale available. It was
adjusted
upward 10%
for size.
Sale 3. This Sale is located southeast of the subject property and was considered to have inferior
location due to the lower quality commercial development in the area. It was also adjusted for
inferior visibility, as well as later date of sale. The resulting net adjustment was +40%.
Sale 4. This Sale is located in the same commercial area of the subject, but like comparable #1
west of the IH 540 interchange. It is a pending sale and has been giving minimal weighting and
added primarily for support purposes.
CONCLUSIONS. These land sales were considered for purposes of Cost Approach analysis to
the Subject property only.
' Thus, the Market Value of the site is estimated to be:
I
+/- 0.28 Acres X 43,560 SF x $8.00 PSF = $97,576.00
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SAY $98,000.00 (Rounded)
*Page 38*
IMPROVEMENT VALUE
This portion of the Cost Approach involves estimating the replacement or reproduction cost of
the improvements. Reproduction cost is the cost to create a replica of the subject improvements
using identical materials and original construction practice. Replacement cost is the cost to build
a structure with the same functional utility as the subject improvements, employing present
construction practices and materials. For new construction, reproduction cost equals replacement
cost. Most appraisal assignments require the development of replacement cost. The exception
is historical properties or properties with unique characteristics or building materials. The
replacement cost is utilized for estimating the cost of subject improvements. Replacement costs
have been derived from local contractor estimates and from Marshall and Swift® Valuation
Service. The Commercial Estimator Method of Marshall & Swift® has been utilized in
' estimating the various components of the Subject buildings and site improvements. The Subject
' property consists of land, site improvements and a single story professional office structure. The
following pages represent the Marshall & Swift® Commercial Estimator estimates of the Subject
property.
*Page 39*
Marshall & Swift - SwiftEstimator
Commercial Estimator - Detailed Report
General Information
Estimate ID: 900436 Date Created: 07-27-2004
Property Owner: City of Fayetteville Date Updated: 07-28-2004
Property Address: 2050 W. 6th St. Date Calculated: 07-28-2004
Fayetteville, AR 72701
Local Multiplier:
Architects Fee:
Section 1
Cost Data As Of: 07-2004
Report Date: using default
Area 1084 Overall Depreciation %
Stories in Section 1 Physical Depreciation 25
%
Stories in Building 1 Functional Depreciation
%
Shape rectangular External Depreciation
Perimeter (auto-calc)
Effective Age
Occupancy
349 Fast Food Restaurant
Total Percentage
System : Land and Site
61 Land and Site : Land
% Class Height Quality
100 S 12 2.0
100
%/Units Quality Depr% Other
98000 Occ.
Unit
Total
Less
Total Cost
Units
Cost
Cost New
Depreciation
Depreciated
Basic Structure
Base Cost
1,084
77.82
84,357
21,089
63,268
Exterior Walls
1,084
10.99
11,913
2,978
8,935
Heating & Cooling
1,084
13.33
14,450
3,613
10,837
Basic Structure Cost
1,084
102.14
110,720
27,680
83,040
*Page 40*
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Less Depreciation
Physical 25.0% 27,680 83,040
Depreciated Cost 1,084 76.61 27,680 83,040
Miscellaneous
Land 98,000 98,000
Total Cost 1,084 192.55 208,720 27,680 181,040
TOTAL MARSHALL & SWIFT® COST APPROACH ANALYSIS
Total Land, Building & Site Improvements = $181,040
$181,000.00 (ROUNDED)
ONE HUNDRED EIGHTY ONE THOUSAND DOLLARS
1
1
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1
*Page 41*
DEPRECIATION
After the replacement cost of the improvements is estimated, the appraiser must then estimate the
accrued depreciation from all causes.
Depreciation is defined as "A loss in value for any reason. It is the difference
between replacement or reproduction cost new and the present value of the
improvements. It does not apply to land, since land continues into perpetuity."
The effect of depreciation is to shorten the remaining economic life of the improvements,
diminish utility or reduce future benefits. There are three types of depreciation: physical deterio-
ration, curable and incurable; functional obsolescence, curable and incurable and economic
obsolescence.
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PHYSICAL DETERIORATION may be curable or incurable and is caused by wear and tear in
use, aging of the improvements, deferred or inadequate maintenance, breakage, insect infestation
and the elements. All improvements suffer varying degrees of depreciation. Physical Curable
covers such items as doors, fascia, broken windows, peeling paint, floor coverings and roof
coverings. In general, those items or conditions which a prudent purchaser would anticipate
correcting upon purchase. These items are curable if the cost to repair or replace is at least offset
by added value, increased income stream or maintenance or present income stream. Physical
Incurable covers those items which maintain sufficient value as not to warrant correcting as of
the date of appraisal. Items covered under incurable deterioration normally include the
foundation and the structural framework.
FUNCTIONAL OBSOLESCENCE is also rated as curable or incurable. It is the loss in value
brought
about by inadequacy, overcapacity, or changes in
the
market standards of acceptability. It
is also
the inability of a structure to perform functions
of
its current employment adequately.
*Page 42*
Functional Curable obsolescence includes conditions that warrant correcting in order to increase
or maintain benefits. Examples of functional curable include outmoded bathroom and kitchen
fixtures, lack of carpeting or inadequate heating and cooling systems. Functional Incurable
obsolescence includes conditions which are considered physically or economically imprudent to
correct. Such conditions include poor design or room layout, lack of sufficient bathrooms,
inadequate parking allowance or other conditions within the boundaries of the property that the
cost to cure or correct would not be justified by the increase in benefits.
ECONOMIC OBSOLESCENCE is considered to be incurable, for it is due to forces outside the
subject property which decrease the desirability of the neighborhood in which the property is
located. This type of obsolescence is also referred to as locational or environmental. Examples
of economic obsolescence are rezoning of land adjoining the subject, encroachment of industrial
or commercial operations which are considered to be a nuisance, inadequate drainage or other
adverse factors which are out of the control of the owner.
Depreciation is measured by the market and is derived by varying methods which include the
Comparative Sales Method, Capitalization of Income Method, Age -Life (Straight Line) Method
and the Engineering Breakdown Method. Physical depreciation of the existing Subject Building
is estimated to be 25%. Additionally, no functional or economic obsolescence was observed in
the building.
*Page 43*
DIRECT SALES COMPARISON APPROACH
The Direct Sales Comparison Approach is the method of estimating market value by making
direct comparisons of the subject property with similar properties that sold recently under normal
sales conditions. Adjustments are often made to sales to enhance comparability, for such factors
as date of sale, terms of financing, size, age, condition, construction, appeal and site.
This Approach applies the principle of substitution in that a prudent purchaser would pay no
more for a real property than the cost of acquiring an equally desirable substitute on the open
market. Therefore, sales and/or listings of properties with comparable location, characteristics
and/or future earning capabilities would influence a prudent purchaser by offering alternative
investments. This is the only approach which directly reflects the balance of supply and demand
in actual trading in the marketplace. Units of comparison employed in the market are used to
compare the comparable sales directly to the subject. Assuming reliable sales information to be
available, this method is often recommended above all others.
Two units of comparison are derived from this approach, physical and economic. The physical
unit of comparison is the value derived by dividing the sale price of the similar properties by the
' square foot, room, unit or other unit of comparison, depending upon property type. The
economic unit of comparison applies to income characteristics of similar properties. Units of
' comparison may be the gross rent multiplier for residential properties or the gross income
' multiplier for income producing properties. The gross income multiplier is derived by dividing
the sales price of similar properties by the gross annual income. The gross income multiplier is
' then applied to the potential gross income of the subject property to derive an indicated estimate
of value by this method.
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*Page 44*
The existing Subject
improvements consist
of an average single story
commercial structure
of
approximately 1,084
sq. ft. The commercial
sales considered similar to
the subject, to be used
in
the Direct Sales Comparison Approach, follow.
SUMMARY OF IMPROVED SALES
IMPROVED SALES ANALYSIS
1
_ ________________
Adjusted Mean $161.04
Adjusted Median $157.85
I.
*Page 45*
Sale
Address
Sale
Date
Sale Price
SF
Bldg.
Price/SF
Land/Bldg
Ratio
Sub'.
2050 W. 6t° St.. — Fay.
1,084
1
2518 W. 6` St. -Fay
9/03
$315,000
2,440
$129.10
NA
2
2117 W. 6` St -Fa
7/02
$375,000
3,258
$115.10
NA
3
241 N. College -Fay
7/04
$350,000
2,256
$155.14
NA
4
2940 W. 6` St
12/03
$402,000
2,512
$160.03
NA
SALE
NO.
LOC.
ADJ.
BLDG.
SQ.FT.
SIZE
ADJ.
AGE/
CONST.
SALE
DATE
NET
ADJ.
- PRICE
PER SF
ADL
i : PRICE
PER SF
Sub'.
1,084
1
+10%
2,440
+10%
+10%
-0-
+30%
$129.10
$167.83
2
-0-
3,258
+10%
+20%
+10%
+40%
$115.10
$161.14
3
-10%
2,256
+10%
-0-
-0-
-0-
$155.14
$155.14
4
-0-
2,512
-0-
-0-
-0-
-0-
$160.03
$160.03
DISCUSSION OF IMPROVED SALES
As previously discussed, the Subject has approximately 0.28 acres of land associated with the
existing improvements and that is considered adequate for the Subject. This analysis considers
that most of the Sales consist of minimal parking and other site improvements, and therefore the
primary square footage of the building represents the primary value consideration. The existing
Subject restaurant building consists of 1,084 sq. ft. and the following is results of the analysis.
Sale 1. This Sale is located west of the subject on the west side of the H -I 540 Interchange. It is
currently functioning as a salon. It was larger in size than the subject, and was considered to
have inferior visibility and location in contrast to the subject. The net adjustment was +30%.
Sale 2. This Sale is located directly southwest of the subject on W. 6th St. It was also larger than
the subject. It was formerly the "Kentucky Fried Chicken" Restaurant. It was adjusted for +10%
for time, +10% for age and construction, and +10% for size. The net adjustment to the
comparable was +40%.
Sale 3. This Sale is located at the intersection of Dickson St., and College Ave. It is currently
occupied as the "Jerry's
Restaurant".
It was not deemed
to
require
an adjustment.
Sale 4. This Sale is in
the subject's
immediate area, and
is
located
on the west side of the IH 540
interchange. It was previously occupied by the "E -Z Mart" convenient store. It was not deemed
to require any adjustment.
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*Page 46*
Conclusions. Before adjustments, the Sales have a range of values from $115.10 to $160.03 per
square foot. After adjustments, the range becomes $155.14 to $167.83 per square foot with a
Mean of $161.04 and a Median of $157.85 per square foot. The Sales have similar adjustments,
and based on this analysis a unit value of $160.00 PSF was indicated after adjustments.
Therefore, the estimated value of the Subject Building and associated land by the physical
indicator is:
1,084 SF X $160.00 PSF = $173,440.00
$173,000.00 (ROUNDED)
Complete economic data was not available for the Sales. Therefore, the Gross Income Multiplier
and Overall Rate calculations have not been considered in this analysis. All weight has been
placed on the physical measure of value. Thus, the final estimate of value of the existing Subject
' Building, and utilizing the Direct Sales Comparison Approach as of July 22n°, 2004 is:
ONE HUNDRED SEVENTY THREE THOUSAND DOLLARS
$173, 000
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*Page 47*
1
INCOME APPROACH
The Income Approach to value is predicated on the assumption that there is a direct relationship
between the amount of income a property produces and its market value. In this approach, the
appraiser processes expected future income benefits into an indication of value. Value is
therefore the present value of future income a property will likely generate. This approach
depends upon the accuracy of three basic steps; they are: forecasting income and expenses;
deriving a net income and selecting or developing an appropriate rate; and capitalizing the net
income at an appropriate rate of return by the property method.
In applying the income approach, the appraiser follows certain steps. He projects the quantity of
the prospective gross income after considering the record of actual gross income in previous
years and current contract rent, market rental rates for comparable space and the effect of
vacancy and/or credit loss. He projects the quantity of expenses after considering the record of
actual expenses for previous years, and expense histories of comparable properties, and by
abstraction, computes the expected net operating income to be capitalized. The Income Stream is
analyzed by way of several methods as follows:
1. Obtain actual rent schedules for the property being appraised as well as the comparable
properties in the area, then derive the gross rental data as well as projected gross income
expectancy.
2. Appraiser obtains and analyzes the actual occupancy data for the subject property and for
the comparable properties in the area. Then a projected occupancy rate is estimated for
the subject property which is deducted from the gross income to arrive at an adjusted
gross income estimate.
' I 3. Appraiser obtains and analyzes expense data such as taxes, insurance, utilities, and other
Ipertinent costs for the property being appraised and other comparable properties in the
*Page 48*
area. An expense estimate is derived for the property which is deducted from the
adjusted gross income to derive a net income estimate.
4. An estimate of the remaining economic life is made to establish an estimated life of the
income stream.
5. Appraiser selects the appropriate capitalization rate.
6. Using capitalization rate, appraiser derives estimated market value by way of net income.
The net income is capitalized by the appropriate rate and method, to derive an estimate of value
for the property being appraised, by the formula, Value = Income divided by Rate.
Area Rent Survey
A rent survey is made to establish market rates for similar properties and to identify the
competitiveness of the area market. The subject improvements have been and are planned to be
commercial mixed use leaseable space, as is true of most of the similar properties in the
immediate neighborhood. A sufficient number of reasonably similar rental properties were
identified and are summarized in this report. The following is information on the survey for this
analysis.
*Page 49*
ANALYSIS OF GROSS ECONOMIC RENT AND GROSS INCOME ESTIMATE
The Subject property consists of an average quality commercial fast food restaurant facility. It
has been previously owner occupied, however it will accommodate tenant -occupied status, and
actual income and expenses were not available. In any event, proper appraisal technique dictates
that income and expenses be derived from the marketplace.
' The NW Arkansas Area was searched for comparable market rents of restaurant properties which
might be used to compare to the Subject property in determining the gross income potential of
the Subject property. The subject neighborhood is diverse in the types of properties which can be
' found therein. The market rents are therefore somewhat diverse. The following are the
comparable rentals which were used in this report.
SUMMARY OF RENTAL COMPARABLES
1
Note: All lease comparables used, represent currently leased, or for lease price per sq. ft. being charged
at the time this appraisal was conducted.
*Page 50*
RENT
NO.
LOCATION
SQ.FT.
LAND
SQ.FT.
IMPR.
%
RETAIL
RENTAL
RATE
YEAR
BUILT
Subj.
2050 W. 6`n St. -Fay
NA
1,084
100
1993
1
1008 W. Sunset-Spde
NA
2,500
100/Rest
$1.28
1980
2
2612 6` St. -Fay
NA
NA
100/Retail
$0.67
1985
3
577 Millsap
NA
2,224
100/Retail
$1.17
NA
4
Baker Bld.-Dickson
NA
2,500
Retail/Rest
$1.20
NA
5
Baker Bld. Dickson
NA
2,500
Retail/.Rest
$1.45
NA
SUMMARY OF RENTAL DATA
The existing Subject property is designed to consist of an average quality commercial restaurant
structure, and access driveways and parking. The structure will provide space with flexibility for
the various business enterprises.
Upon investigation of the subject marketplace, some reasonably comparable properties were
identified and summarized on the preceding pages. They were generally similar to the subject in
size and appeal. They were considered to be similar in most aspects, as related to locational
factors and similarities in overall uses (In this case restaurant or retail occupancy).
As can be seen, the rental rates for this category of property and located within the Fayetteville
Area range from $0.67 PSF to $1.45 PSF depending on condition, location, interior finish, and
size. Generally, market conditions indicate $1.25 per sq. ft. per mo. for the Subject Building, or
$15.00 per year lease rate in the Subject property area.
1,084 SF @ $1.25 PSF X 12 Months = $16,260.00 (R)
*Page 51*
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Income Capitalization Analysis
To obtain a reliable indication of a property's Market Value from the Income Capitalization
Approach, it is necessary to gather, verify, analyze, and reconcile all reasonably available data
that may influence that property's value. Since Market Value is a short term value, the data
considered in a market value -- income capitalization analysis must be pertinent (or adjusted) to
the effective date of analysis.
This income capitalization analysis is based on consideration of the following data that reflect
market conditions and factors that particularly pertain to the market value of the subject property.
The reported market rate data are based on information from the lender and/or investor segments
of the investment real estate market. The property performance data are based on past, current,
and prospective future operations of the subject property and/or favorably comparable properties,
plus information from various parties considered to be knowledgeable and well informed
regarding current market conditions for such properties. The reported income and expense data
are based on consideration and analyses of past, current, and probable future income for the
subject property -- as well as favorably comparable properties. All data used in this analysis are
particularly relative to 07-28-2004.
MARKET/PROPERTY PERFORMANCE DATA:
Loan -to -Value Ratio (M) is the relationship of loan amount to total property value (or a
surrogate of value such as appraised value, sale price, etc.). It is usually stated as a decimal
fraction or a percentage and is calculated by dividing the loan amount by total property value.
This analysis uses a probable Loan -to -Value Ratio of 80.000000%.
• Debt Coverage Ratio (DCR) is the relationship of annual net operating income to annual debt
and interest payments. Sometimes referred to as annual debt service coverage ratio, annual debt
t service ratio, debt coverage, etc., it is usually stated as a decimal fraction and is often calculated
by dividing annual net operating income by annual debt service. This analysis considers the
' probable Debt Coverage Ratio to be 1.200000.
Nominal Interest Rate is that annual rate that is usually stated (named) in discussions related to
' typical mortgage lending transactions. Unlike the effective interest rate, the nominal rate does not
reflect the effect of periodic compounding. The nominal interest rate for this analysis is
6.000000%.
' Amortization Term is that period of time over which a loan is fully repaid. It is typically stated as
a given number of years during which periodic payments will be paid. The total number of
' payment periods in the full amortization term (together with the effective periodic interest rate,
and principal loan amount) serves as the basis for calculating the required periodic payment
amounts. The amortization term used for this analysis is 25 Years.
An Investment Holding Period eriod is that period of time from acquisition of an investment property
until that same property is either sold or refinanced.
When an investment property is refinanced, its financial characteristics are changed, and the
*Page 52*
resulting (changed) property effectively represents a new investment -- with a new Investment
Holding Period. The tern "Investment Holding Period" does not necessarily refer to the time
span of ownership of a particular property interest (such as fee interest, etc.). This analysis is
based on a holding period of 10 Years.
Payments per year refers to the total number of mortgage payments (including principal and
interest) for typical mortgage loan financing for the type of property being analyzed. This
analysis considers the number of payments per year at 12.
Initial Finance/Closing Costs (sometimes referred to as "soft costs") include all costs typically
incurred by a buyer in the course of securing mortgage financing for, and closing, the purchase
of an income producing property. These costs may include such things as: origination fee, points,
legal fee, appraisal fee, survey costs, etc.
Typically, Initial Finance/Closing Costs are not considered as part of the initial equity
investment, and do not alter the initial Loan -to -Value Ratio. They do, however, affect the total
return realized by the equity investor, and may reasonably be considered as an operating expense
that occurs only in the first year of an investment holding period.
In income capitalization analyses, operating income and expense amounts are typically
considered as being annual ordinary annuity amounts. That is, they are regarded as being
amounts realized at the end of each year of a specified holding period -- rather than at the
beginning of each year of the holding period. The initial finance/closing costs, on the other hand,
are typically realized at the beginning (in advance) of the 1st year of the holding period. To
maintain consistency in the analyses, it is therefore necessary to convert the initial
finance/closing costs to a year end amount. This analysis accomplishes this task by multiplying
the actual initial finance/closing costs amount by a factor equal to one, plus the equity yield rate.
This process recognizes that an investor would be entitled to earn a reasonable return on these
costs -- equal to the return on equity investment. The initial finance/closing costs used in this
analysis are 3.000000%.
Total Property Appreciation (or Depreciation) is the overall change in property value that occurs
from the time of property acquisition to the date of sale or refinance. This is a lump sum amount
expressed as a percent of initial total property value. For this analysis, projected total property
appreciation is 21.899442%.
Total Property Appreciation % per Year is the compound annual rate of change in total property
value that is projected to occur from the time of property acquisition to the date of sale or
refinance. This amount is also expressed as a percent of initial total property value. Consistent
with the preceding Total Property Appreciation (or Depreciation) conclusion, projected total
property appreciation % per year is 2.000000%.
Change in Gross Potential Operating Income refers to the projected constant annual rate of
change in Gross Potential Operating Income (GPI). It is a compound annual rate of change based
on estimated GPI at the beginning of the investment holding period, and is applied to GPI for
*Page 53*
each year of the holding period. It is expressed as a percent of initial GPI. The projected annual
change in gross potential income used in this analysis is 1.000000%.
Change in Operating Expenses per Year refers to the projected constant annual rate of change in
Total Operating Expenses. It is a compound annual rate of change based on estimated Total
Operating Expenses at the beginning of the investment holding period, and is applied to each
Operating Expense input for each year of the holding period. It is expressed as a percent of initial
Total Operating Expenses. The projected annual change in operating expenses used in this
analysis is .500000%.
Costs of Refinance or Sale at end of Holding Period refers to the projected total costs which is
likely to be incurred when the subject property is either refinanced or sold. It is a lump sum
(percentage) amount based on the projected Value at the end of the selected Holding Period. The
analysis projects costs of sale or refinance at end of the holding period at 3.000000%.
1ST YEAR INCOME & EXPENSES:
Gross Potential Operating Income (GPI) is the total income that the property could be expected
Ito produce at full (100%) occupancy, with no deduction for possible collection loss. As
illustrated by the following income and expense summary, projected GPI for the first (1st) year of
' the projected holding period is $16,260.00.
Vacancy & Collection (V&C) Loss refers to the periodic loss of potential gross operating income
' due to a projected stabilized rate of vacancy or uncollected rents (etc.) over an entire holding
period. It is usually stated as a percentage of potential gross operating income.
' When the purpose of analysis is to obtain an indicated Market Value, determination of the
appropriate allowance for this consideration should be based on the typical rates of vacancy
and/or collection loss for the type of property being analyzed. In this regard, a reasonable
' allowance for V & C Loss is typically warranted -- even if the property being analyzed has a
history of 0% V & C Loss, or is leased (at full occupancy) for the foreseeable future. This is true,
for instance, where typical operations of similar properties reflect losses of potential gross
' income due to these causes. The V & C Loss used in this analysis is $813.00.
Effective Gross Operating Income (EGI) is the gross income amount actually realized from
' operation of a property. It is calculated by deducting vacancy and collection loss from potential
gross operating income. As illustrated by the following income and expense summary, projected
Effective Gross Operating Income for the first (1st) year of the projected holding period is
'$15,447.00.
Variable Operating Expenses refers to those operating expenses which are often directly
influenced by occupancy and/or collection levels for the property being analyzed.
Variable Operating Expenses typically include such expense categories as: Accounting,
*Page 54*
Administration, Advertising, Contract Services, Repair & Maintenance, Management, Utilities,
Etc. In other words, Variable Operating Expenses include any legitimate operating expense
(other than Fixed Operating Expenses and Reserves for Replacement) which would typically be
incurred in operating an income producing property under sound management practices. As
illustrated by the following income and expense summary, Variable Operating Expenses for the
first (1st) year of the holding period are projected at $1,544.70.
Fixed Operating Expenses refers to those operating expenses which are not usually influenced by
occupancy and/or collection levels for the property being analyzed.
Since the Assessed Value of a property, and its resulting property tax liability, is not usually
considered to be effected by variations in occupancy levels, Property Tax is generally considered
to be a Fixed Operating Expense. Likewise, Real Estate Insurance expense is generally regarded
as being a Fixed Expense since it is relatively unaffected by yearly variations in a property's
occupancy level. As illustrated by the following income and expense summary, Fixed Operating
Expenses for the first (1st) year of the holding period are projected at $772.35.
The Replacement Reserves (Reserves) Operating Expense category is a projected allowance for
periodic replacement of short lived component parts of real estate improvements. This expense
category accounts for those reasonably anticipated future expenses that normally occur less
frequently than once a year.
In projecting the appropriate replacement reserves allowance, care has been taken to avoid
duplication of normal repair & maintenance expenses. Expenses for such things as roof repairs,
interior and/or exterior painting, and other normal maintenance items are typically not considered
under replacement reserves. As illustrated by the following income and expense summary,
projected Reserves for the first (1st) year of the holding period are projected at .00.
Net Operating Income (NOI) is that annual income amount left over after all operating expenses
have been deducted from effective gross operating income. As shown below, this income
capitalization analysis does not consider annual debt service or income tax as operating expenses.
NOI for the first (1st) year of the holding period is projected at $8,363.83.
Stabilized Net Operatintu Income (Stabilized NOI) is a stream of level income amounts that
has a present value equal to the present value of a series of uneven income amounts -- when both
income streams are discounted at the same rate, over the same period of time.
In this context, the word Stabilized specifically refers to NOI and simply signifies that the
pattern of income is level (stable) -- or that it has been changed from one with variable or uneven
amounts, to one with level or stable (equal) amounts. It does not imply anything about the pattern
of operating performance levels for the property being analyzed.
As shown below, the calculated Stabilized NOI income used in this analysis is $12,791.42.
*Page 55*
Year 1 Income and Expense Summary
Per Month
Per Year
Year I Gross Potential Income
$1,355.00
$16,260.00
Vacancy and Collection Loss
5.000000%
$813.00
Year I Effective Gross Income
$15,447.00
Operating Expenses
% of EGI
Per Year
Variable
10.000000%
$1,544.70
Fixed
5.000000%
$772.35
Reserves
.000000%
$.00
Total Operating Expense
15.000000%
$2,317.05
Initial Finance/Closing Costs
$4,766.12
Year I Net Operating Income
$8,363.83
Stabilized Net Operating Income for Holding Period
$12,791.42
An Overall Capitalization Rate (OAR) is a ratio of one year's Net Operating Income to the Value
of the property that produces that income.
It is used in the Income Capitalization Approach to convert anticipated future income into an
indicated value. When the rate is applied directly to the forecast income (dividing the income by
the rate), the procedure is called "Direct Capitalization".
An OAR can be obtained by various generally accepted methods and/or techniques. These
include: the Comparative Method, Band -of -Investment Techniques, the Built -Up Rate Method,
Yield Analysis Methods, and others. Regardless of how its obtained, an OAR is nothing more
than a measure of the relationship between a property's Value and its NOT for one (particular)
year.
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In this analysis, the OAR has been calculated and verified by several different methods --
including the mortgage equity band of investment technique illustrated below:
80.000000% X
plus 20.000000% X
equals
7.731617%
6.185293%
7.422352%
An Equity Dividend Rate (Re) is a ratio of one year's Equity Dividend to the Value of initial
Equity Investment.
Equity Dividend is the operating income balance, after operating expenses and mortgage
payments (principal & interest) have been deducted from effective gross operating income.
Equity Dividend is sometimes referred to as cash flow or cash -on -cash.
*Page 56*
Based on the previously reported data, the stabilized equity dividend rate was calculated for this
analysis at 6.185293%.
Equity Yield Rate (Ye) is the interest rate (or internal rate of return) for the equity investor. It is
also the discount rate at which the Present Value of all anticipated future Cash Flow amounts
equal the Value of initial Equity Investment. It reflects consideration of annual Cash Flow
amounts and equity appreciation (or depreciation).
With consideration of the calculated equity dividend rate (noted above) and the projected equity
appreciation (reported below) , the equity yield rate calculated for this analysis is 15.232969%.
Overall Yield Rate (Yo) is an interest rate similar to the Equity Yield Rate, but based on annual
Net Operating Income (NOI) amounts rather than annual Cash Flow amounts. It is also the
discount rate at which the Present Value of all anticipated future NOI amounts, plus reversion
equals the initial Total Property Value. It reflects consideration of annual NOI amounts and total
property appreciation (or depreciation).
With consideration of the previously calculated overall capitalization rate and projected total
property appreciation, the overall yield rate calculated for this analysis is 8.643650%.
Mortgage Constant (Rm) is the ratio of uniform annual mortgage payments @rincipal and
interest) to the initial loan amount. It is analogous to a mortgage capitalization rate.
Like most other Income Capitalizers, the appropriate Mortgage Constant for an Income
Capitalization Analysis can be computed in (at least) several different ways. These include:
Dividing the constant annual mortgage payment by the initial loan amount, Adding the sinking
fund factor to the mortgage interest rate, Using conventional "installment to amortize $1"
formula, etc.
Using the projected Nominal Interest Rate and Amortization Term data, the appropriate mortgage
constant for this analysis has been calculated at 7.731617%.
Terminal Cap Rate (T-Ro) is the ratio of projected NOI for the 1st year immediately following an
investment holding period, to the property's Value at the end of the holding period.
Based on the projected
net
operating income and property appreciation data, the calculated
terminal capitalization
for
this analysis is
6.962944%.
TOTAL EQUITY APPRECIATION:
I
I
Total
Equity
Appreciation
(or depreciation)
is the total change
in equity value that occurs over
the term
of an investment holding period.
Based on consideration of projected total property appreciation, initial equity investment, and
equity balance at the end of the projected holding period, total equity appreciation has been
*Page 57*
calculated for this analysis at 185.804371%.
Total NOI Change is the total change in
Net Operating
Income that occurs over the full term of
an investment holding period.
Based on the projected gross potential
operating income
and operating expense previously
reported, the total NOI change for this
analysis is 74.890616%.
Annual NOI Change is the compound
annual rate of change
in NOI that corresponds
to Total
NOI Change that occurs over the full term of an investment holding period.
The calculated annual NOI change for
this analysis is 5.749093%.
DATA SUMMARY & MARKET VALUE
RESULTS:
Market/Prop. Performance Data
Income Capitalizers
Loan -To -Value Ratio
80.000000%
Overall Cap Rate (Ro)
7.422352%
Debt Coverage Ratio
o
1.200000%
Equity Dividend Rate (Re)
0
6.185293 /o
Nominal Interest Rate
6.000000%
Equity Yield Rate (Ye)
15.232969%
Amortization Term (Years)
25
Overall Yield Rate (Yo)
8.643650%
Holding Period (Years)
10
Mortgage Constant (Rm)
7.731617%
Payments Per Year
12
Terminal Cap Rate (T-Ro)
6.962944%
Initial Finance/Closing Costs
3.000000%
Total Equity Appreciation
185.804371%
Total Property Appreciation
21.899442%
Total NOI Change
74.890616%
Total Property Appreciation Per Year
2.000000%
Annual NOI Change
5.749093%
Change in GPI Per Year
1.000000%
Change in Operating Expense Per Year
.500000%
Cost of Refinance or Sale at End of Holding
3.000000%
Period
Market Value Results
Market Value by Direct Capitalization
$172,336.42
Initial Loan Amount
$137,869.13
Initial Equity
$34,467.28
Annual Debt Service
$10,659.51
Annual Equity Dividend
$2,131.90
Market Value at end of Holding Period
$210,077.13
Sale or Refinance Cost at end of Holding Period
$6,302.31
Mortgage Balance at end of Holding Period
$105,265.82
Equity Balance at end of Holding Period
$98.509.00
*Page 58*
II
Year 1 Income and Expense Summary
Per Month Per Year
' Year I Gross Potential Income $1,355.00 $16,260.00
Vacancy and Collection Loss 5.000000% $813.00
Year 1 Effective Cross Income $15,447.00
Operating Expenses % of EGI Per Year
' Variable 10.000000% $1,544.70
Fixed 5.000000% $772.35
Reserves .000000% $.00
Total Operating Expense 15.000000% $2,317.05
Initial Finance/Closing Costs $4,766.12
Year I Net Operating Income $8,363.83
Stabilized Net Operating Income for Holding Period $12,791.42
Year 2 Income and Expense Summary
Per Month Per Year
Year 2 Gross Potential Income $1,368.55 $16,422.60
Vacancy and Collection Loss 5.000000% $821.13
Year 2 Effective Gross Income $15,601.47
Operating Expenses % of EGI Per Year
' Variable 9.950495% $1,552.42
Fixed 4.975248% $776.21
Reserves .000000% $.00
• Total Operating Expense 14.925743% $2,328.64
Year 2 Net Operating Income $13,272.83
Year 3 Income and Expense Summary
' Per Month Per Year
Year 3 Gross Potential Income $1,382.24 $16,586.83
Vacancy and Collection Loss 5.000000% $829.34
Year 3 Effective Gross Income $15,757.48
' Operating Expenses % of EGI Per Year
Variable 9.901235% $1,560.19
Fixed 4.950618% $780.09
Reserves .000000% $.00
' Total Operating Expense 14.851853% $2,340.28
Year 3 Net Operating Income $13,417.21
' Year 4 Income and Expense Summary
Per Month Per Year
Year 4 Gross Potential Income $1,396.06 $16,752.69
' Vacancy and Collection Loss 5.000000% $837.63
Year 4 Effective Gross Income $15,915.06
Operating Expenses % of EGI Per Year
Variable 9.852219% $1,567.99
' Fixed 4.926110% $783.99
Reserves .000000% $.00
Total Operating Expense 14.778329% $2,351.98
Year 4 Net Operating Income $13,563.08
1
*Page 59*
1
Year 5 Income and Expense Summary
Per Month
Per Year
Year 5 Gross Potential Income
$1,410.02
$16,920.22
Vacancy and Collection Loss
5.000000%
$846.01
Year 5 Effective Gross Income
$16,074.21
Operating Expenses
% of EGI
Per Year
Variable
9.803446%
$1,575.83
Fixed
4.901723%
$787.91
Reserves
.000000%
$.00
Total Operating Expense
14.705169%
$2,363.74
Year 5 Net Operating Income
$13,710.47
Year 6 Income and Expense Summary
Per Month
Per Year
Year 6 Gross Potential Income
$1,424.12
$17,089.42
Vacancy and Collection Loss
5.000000%
$854.47
Year 6 Effective Gross Income
$16,234.95
Operating Expenses
% of EGI
Per Year
Variable
9.754914%
$1,583.71
Fixed
4.877457%
$791.85
Reserves
.000000%
$.00
Total Operating Expense
14.632371%
$2,375.56
Year 6 Net Operating Income
$13,859.39
Year 7 Income and Expense Summary
Per Month
Per Year
Year 7 Gross Potential Income
$1,438.36
$17,260.32
Vacancy and Collection Loss
5.000000%
$863.02
Year 7 Effective Gross Income
$16,397.30
Operating Expenses
% of EGI
Per Year
Variable
9.706623%
$1,591.62
Fixed
4.853311%
$795.81
Reserves
.000000%
$.00
Total Operating Expense
14.559934%
$2,387.44
Year 7 Net Operating Income
$14,009.86
Year 8 Income and Expense Summary
Per Month
Per Year
Year 8 Gross Potential Income
$1,452.74
$17,432.92
Vacancy and Collection Loss
5.000000%
$871.65
Year 8 Effective Gross Income
$16,561.27
Operating Expenses
% of EGI
Per Year
Variable
9.658570%
$1,599.58
Fixed
4.829285%
$799.79
Reserves
.000000%
$.00
Total Operating Expense
14.487855%
$2,399.37
Year 8 Net Operating Income
$14,161.90
*Page 60*
I
Year 9 Income and Expense Summary
' Per Month Per Year
Year9GrossPotentialIncome $1,467.27 $17,607.25
Vacancy and Collection Loss 5.000000% $880.36
Year 9 Effective Gross Income $16,726.89
' Operating Expenses % of EGI Per Year
Variable 9.610755% $1,607.58
Fixed 4.805378% $803.79
Reserves .000000% $.00
Total Operating Expense 14.416133% $2,411.37
Year 9 Net Operating Income $14,315.52
' Year 10 Income and Expense Summary
Per Month Per Year
Year 10 Gross Potential Income $1,481.94 $17,783.32
I
Vacancy and Collection Loss 5.000000% $889.17
Year 10 Effective Gross Income $16,894.15
Operating Expenses V. of EGI Per Year
Variable 9.563177% $1,615.62
' Fixed 4.781589% $807.81
Reserves .000000% $.00
Total Operating Expense 14.344766% $2,423.43
Year 10 Net Operating Income $14,470.73
Year 11 Income and Expense Summary
Per Month Per Year
' Year II Gross Potential Income $1,496.76 $17,961.15
Vacancy and Collection Loss 5.000000% $898.06
Year 11 Effective Cross Income $17,063.10
Operating Expenses % of EGI Per Year
Variable 9.515835% $1,623.70
Fixed 4.757917% $811.85
Reserves .000000% $.00
Total Operating Expense 14.273752% $2,435.54
Year 11 Net Operating Income $14,627.55
1
1
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*Page 61*
DISCOUNTED CASH FLOW ANALYSIS:
' "Discounted Cash Flow Analysis" is the income capitalization technique of converting
anticipated periodic future Cash Flow amounts to a present value that will provide a specified
rate of return on investment.
' The term Cash Flow, typically refers to the amount of net operating income available to an equity
investor, after payment of annual debt service (mortgage principal and interest). Thus, in simplest
terms, it is annual Net Operating Income minus annual Debt Service.
In the last year of an investment holding period, Cash Flow also includes the investor's net
tproceeds (reversion) from sale or refinance of the investment property. Cash Flow is also
sometimes referred to as Cash -on -Cash, and (when it includes reversion) is appropriately called
Equity Yield.
The rate of return on investment for the equity investor is analogous to the interest (or yield) rate
' for a mortgage lender. It is a compound annual rate of return that reflects consideration of all
annual income amounts realized (or anticipated) by the equity investor. The generally accepted
name for this rate of return is Equity Yield Rate.
The process of converting anticipated periodic future Cash Flow amounts to a present value,
essentially involves an arithmetic process of reverse compounding. For example: At an annual
t compound interest (yield) rate of 10%, a $1.00 investment will have a future value of about $1.21
two years after the date of initial investment. This result can be calculated by multiplying the
original investment of $1 by 110% and then multiplying again by 110%. To reverse this
' compounding process, the future value amount of $1.21 is divided by 110% -- then the result is
again divided by 110%. This reverse compounding process is called Discounting.
' The Discount Rate used in Discounted Cash Flow Analysis is the Equity Yield Rate for the
particular investment property being analyzed.
Discounted Cash Flow Analysis at a Discount Rate of 15.232969%
Cash Flow Present Value Factor Present Value
Year 1 -$2,295.68 .867807% -$1,992.21
Year 2 $2,613.32 .753089% $1,968.06
Year 3 $2,757.69 .653536% $1,802.25
Year 4 $2,903.57 .567144% $1,646.74
' Year5 $3,050.96 .492171% $1,501.59
Year 6 $3,199.88 .427110% $1,366.70
Year7 $3,350.35 .370649% $1,241.80
Year 8 $3,502.39 .321652% $1,126.55
' Year 9 $3,656.00 .279132% $1,020.51
Year 10 $102,320.20 .242233% $24,785.29
Init. Mort. $137,869.13
Total $172,336.42
*Page 62*
OVERALL RESULTS SUMMARY:
Overall Results Summary
' Stabilized NOI for 10 Year Hold. Period $12,791.42 Year I Effective Gross Op. Income $15,447.00
Overall Cap Rate to Stabilized NOI 7.422352% Year I Operating Expenses $2,317.05
Equity Div. Rate na, Stabilized NOI 6.185293% Initial Finance/Closing Costs $4,766.12
Equity Yield Rate (d, Stabilized NOI 15.232969% Year I Net Operating Income $8,363.83
' Term. Cap Rate @ 11th Year NOI 6.962944% Overall Cap Rate (a, Year I NOI 4.853298%
Year I GrossPotential Op. Income $16,260.00 Gross Inc. Multiplier (a, Year I NOI 10.598800
Year I V & C Loss 5.000000% EGI Multiplier P. Year I NOI 11.156630
' Thus, the final estimate of value of the existing Subject Building, and utilizing the Income
Approach as of July 22nd, 2004 is:
ONE HUNDRED SEVENTY TWO THOUSAND DOLLARS
$172, 000
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*Page 63*
RECONCILIATION OF APPROACHES
Value
Indicated
by
the Cost Approach
= $181,000
Value
Indicated
by
Direct Sales Approach
= $173,000
Value
Indicated
by
the Income Approach
= $172,000
As discussed in the Appraisal Process Section of this Report, there are three traditional
Approaches to Value. The Replacement Cost Approach indicated a value of $181,000. The land
value was determined to be $98,000, which was based on a value of $8.00 per square foot. This
Approach incorporates the principle of substitution in that no rational person would pay more for
a property than the amount for which he can obtain, by the purchase of a site and the construction
of a building, without undue delay, a property of equal utility. In the case of the Subject
improvements, the estimated cost is felt to be reflective of current construction costs less
depreciation and to provide a supporting indicator of value for the Subject.
The Direct Sales Approach was used to determine the land value. The Direct Sales Approach was
also used to value the land and improvements and indicated a value of $173,000. The strength of
the Direct Sales Approach is that it attempts to directly measure the actions of the buyers and
sellers in the marketplace. Its weakness is that no two properties are alike and the process of
making adjustments is a sometimes difficult and inexact process. In order to utilize the Direct
Sales Approach, improved sales in the greater NW Arkansas Area were abstracted and analyzed.
This market data was adjusted for quality of location, construction, utility, and age. Additionally,
those sales which were considered to be most comparable to the Subject property were identified
and compared, one-on-one, to the subject, and the adjustments were considered excessive for this
assignment.
The Income Approach indicated a value of $172,000. Its strength is that it attempts to
demonstrate what a property would be purchased for assuming its business income -producing
capabilities. Its weakness is that it is sometimes difficult to derive and forecast market rents and
*Page 64*
CERTIFICATE OF APPRAISAL
1
The appraiser has no present or contemplated future interest in the property appraised,
and neither the employment to make the appraisal, nor the compensation for it, is
contingent upon the appraised value of the property.
The appraiser has no personal interest in or bias with respect to the subject matter of the
appraisal report or the participants to the sale. The "Estimate of Market Value" in the
appraisal report is not based in the whole or in part upon race, color or national origin of
the present owners or occupants of the properties in the vicinity of the property appraised.
The appraiser has personally inspected the property. To the best of the appraiser's
knowledge and belief, all statements and information in this report are true and correct,
and the appraiser has not knowingly withheld any significant information.
All contingent and limiting conditions are contained herein (imposed by the terms of the
assignment or by the undersigned affecting the analysis, opinions and conclusions
contained in the report).
This Appraisal Report has been made in conformity with and is subject to requirements of
the Code of Professional Ethics and Standards of the Professional Conduct of the
appraisal organization with which the appraiser is affiliated, the National Association of
Master Appraisers.
All conclusions and opinions, concerning the real estate, that are set forth in the appraisal
report were prepared by the appraiser whose signature appears on the appraisal report.
No change of any item in the appraisal report shall be made by anyone other than the
appraiser, and appraiser shall have no responsibility for any such unauthorized change.
*Page 66*
The National
Association of
Master Appraisers conducts a mandatory program
of continuing
education for
its designated
members. Those who meet the standards of this
program are
considered to
have recertified.
I am certified under this program through December
31, 2004.
In my opinion, the estimated prospective Market Value of the property described above as of
July 22"d , 2004, is as follows:
ONE HUNDRED SEVENTY TWO THOUSAND DOLLARS
$172,000
JCERTIFIED
'
Don L. Crjmez, L
PARRISH WR "$,•
STATE CEIribd
REAL ESTATE "Afpm l
ER, CG2171
�MSRS1APPB'i
/ - ``.`eQ,'iJb GEXTIF/�•A Ldp �'' _
REGISTERED ;�
Joshua A. Smith_
PARRISH E.
STATE REG �„ �fr
REAL ESTATE APPRAISER, SR 2277
*Page 67*
72 West Sunbridge, Fayetteville Phone 479-442-5804; Fax 479-442-7782
DON L. CRAMER
EDUCATION 1960-1965 University of North Texas Denton, Texas
Bachelors of Science
1975-1977 University of No. Colorado Greeley, Colorado
Master of Arts
APPRAISAL AND REAL ESTATE RELATED COURSES:
Real Estate Appraisal * Prin. Of Real Estate * Real Estate Investments *
Appraisal Principles * Cap A Theory *Cap B Theory * Standards of Prof.
Practice * Basic Valuation Procedures * Fundamental R.E. Invest. &
Taxation * Real Estate Brokerage * Principles R.E. Appraisal * Standards
Of Prof. Practice * Practice Of R.E. Appraisal * Farm & Land Appraisal *
Manufactured Housing Appraisal * USPAP Update * Writing a Narrative
Appraisal * HUD Appraisal Standards Update * USPAP Update *
Residential Update Income Approach * HUD/FHA Review * Financial
Analysis of Income Property * Appraising Timber & Timberland * Land
Valuation
DESIGNATIONS
• Appraiser Cert. Arkansas Certified General — CO 2171
• Master Farm and Land Appraiser (MFLA)
• National Association of Master Appraisers
• Master Senior Appraiser (MSA) — (N.A.M.A.)
*Page 68*
72 West Sunbridge, Fayetteville
Joshua A. Smith
Phone 479-442-5804; Fax 479-442-7782
Education 1997-2000 Ouachita Baptist University Arkadelphia, AR
Bachelors of Science in Business Administration -Finance
Phi Beta Lambda Business Fraternity
Business -Related Courses Completed
Business Law * Business Statistics * Principles of Macroeconomics
Principles of Microeconomics * Accounting I & II * Computer
Information Systems * Management Strategy * Organizational Behavior
Principles of Investments Financial Markets & Institutions * Principles of
Marketing * Principles of Real Estate
Professional Training
Arkansas -State Registered Appraiser, SR 2277 - 2003
Arkansas -State Licensed Real Estate Agent — 2002
Licensed Property Manager -2002
Appraiser Educational Courses
Principles of Real Estate Appraisal -Austin, Texas — 2003
Practice of Real Estate Appraisal — Austin, Texas — 2003
Appraisal of Residential Property — Austin, Texas — 2003
National USPAP Course - Austin, Texas - 2003
Writing the Narrative Appraisal — Austin, Texas — 2003
Advanced Income Capitalization -Atlanta, Georgia -2003
Experience 2003 Parrish Appraisals Inc. Northwest Arkansas
2002 Real Estate Sales Agent Fort Smith, AR
2000 Wells Fargo Fin. /Loan Officer Roland, OK
*Page 69*
SALES COMPARABLE LOCATION MAP
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*Page 70*
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FAYETTEVILLE
THE CITY OF F*YETILVILLE. 1RMIW944
June 28, 2004
Don Cramer
' Parrish Appraisals Inc.
72 W. Sunbridge
Fayetteville, AR 72703
RE: Appraisalof 2050 W. 8'" Street
Formerly Shake's Frozen Custard
Potential Sale of Property
Dear Mr. Cramer:
The Fayetteville City Council has approved the sale of the remainder of the property at 2050 W.
' Sixth Street (formerly used as Shako's Frozen Custard). In December 2002, the City of Fayetteville
purchased said property (then being 0.39 acres and including the building) for 8240,000,00. Enclosed
you will find a copy of the deed, offer and acceptance contract, surve, u: ...r::; p.,.d appraisal
summary sheet (with property valued at $245,000.00) for that transaction-
, The City purchased the entire tract and used 0.11 acre fnr right-of.wav associated with the
relocation of Sang Avenue. Before advertising for sale toy saaled bids), the City must first got two
appraisalbth aid in setting the sale price. Enclosed is a survey drawing depicting the remaining 02acre
to be sold (including the approximately 1500 square foot building). This 0,28 acre also includes some Old
Farmington Road street right-of-way to be vacated )going before Planning Commission this weak).
Enclosed is a copy of the assessors cord. This property is zoned C-2 and will not be re -zoned prior to
' sale.
Please note that the old portion of Sang Avenue to Ina west of said property is not right-of-way
owned by the City (right-of-way through Street Easement only), thus cannot and will not be vacated and
made a part of this property. However, although there is no longer access to Sixth Street by this read it is
' still to be maintained as a city street and provides access to said property.
Also enclosed is your copy of Purchase Order No. 04-0002404-001 in the amount of $490.00 (as
we verbally agreed) for the preparation of this appraisal. If you have any questions or need additional
Information, please feel free to call me at 444-3407.
ncerety, 475 (p
kt
Jill, S Godd rd
Land Agent
rag
Enclosures
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FAX 9r94J69zy
*Page 71
11
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TndNat ': if'• "'r) , U
Iwr ' WARRANT/ DEED 2811DEC (84119:36
a*enR hroICu y+,dDCM ,:t ll;"4 I 1,1
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BE IT KNOWN BY THESE PRESENTS:
THAT Donald E. Osborne and Debra L. Osborne, husband and wife,
hereinafm caged GRANTORS, for and in conskleratan of the mm of One Dotlar
(11.00) and ota good and valuable oanshmilal, the receipt of which Is hereby
acanwvladged, do hereby gran, bargain, sell and convey unto the Cty of
FayWw94, AtkmW, a i amldpal corporation, hereinafter caged GRANTEE,
and unto Granees mocassare and assigns, the following deserted Will situated
in the County of WashIngtan Stets of Arkansas, to+vtt
A0 that certain tad or parcel of land being a part of to Northeast Querar (NEV.) of the NWiwasl Quarter
(NWY.) of Section 201 Townh 18 Nair, Range 30 West,Washington County, Aitansas, said tract being
the beat m described in Document No. 2000-029178 of to Office of the Circuit Clerk and Ex-0Tdelo
Recada of Washi gton County, Agrarian and being more particularly described by mates and bounds
a fellow Beginning at the Northwest caner of the NEY. of the NW34 of Section 20, Township 16 North,
Range 30 West. Washington Canty, Arkansas, said pin being the Nochwed caner of Block 2 of
Westwood Addition to the City of Fayetteville, Anconaas; thence South 87.12' 42' East for a distance of
215.70fad along 0%southngtdofwey line of OM Fambgton Roadtoapdm an the north rightof way One
of Sixth Street (State Highway No. 180); thence South 03' 4a' Sr East 10.90 feet with said north right of
way fine; thence along a curve to the left wide an ac length of 66:74 feet, a radius of 1472.39 feet, and a
data of 02' 17 29', along sad right of way; thence San 80' 30 11' West fora distance of 176.60 feel
wit said do of way; thence North Or 4T 27' Wed fa a distace of 18.98 fed with said rght d way to
a point an to east rghtof way lined Sang Avenue; Me North 0Y 42' 11' East fa a dlsance of 134.66
feel with said east right Sway line to the Point of Beginni g, and containing 0.39 acre, more or less.
• • • • r 1 1 :r 1 :11.1 .:. 1.: •' 1 JII 1 p
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STATE OF ARKANSAS
COUNTY OF WASHINGTON
WITNESS my hand a d set on ads 1 " day d h .2002
MY COMMISSION EXPIRES:
ACKNOWLEDGMENT
St
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LtIaR.Davls Notary
J gfddafA3sms
My thnu,ils.,
eg m
Li
2002194769
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OFFER AND ACCEPTANCE CONTRACT
Page 4 of 5
ACKNOWLEDGMENT
STATE OF Mi •,iii
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6a.
COUNTY OF ___Yt
BE IT REMEMBERED, that on this date, before the undersigned, a duly commssioned and acting Notary Public
within and for said County and State, personally appeared Donald E. Osborne and Debra L. Osborne, husband and
wife, tome well known as the persons who executed the foregoing document, and who stated and acknowledged that
they had so signed, executed and delivered said instrument for the consideration, uses and purposes therein mentioned
and set forth.
WITNESS my hand and seal on lt — day of fl Qua, M p C .2002.
„k WILA 'S.
MY or. 3',9 A4 tary Pubik
MY COMMISSION EXPIRES: S
O •''•CauJ
ACKNOWLEDGMENT
STATE OF ARKANSAS
as,
COUNTY OF WASHINGTON )
�cina
BE IT REMEMBERED, that on this date, before the undersigned, a duly corn issioned and acting Notary
Public within and for said County and State, personally appeared Dan Goody and W1$firWoodnjff, tome well known
ras the persons who executed the foregoing document and who stated and acknowledged that they are the Mayor and
lxpui—I City Clark of the City of Fayetteville, Arkansas, a municipal corporation, and are duly authorized in the rrespecAe
capacities to execute the foregoing instrument for and in the name and behalf of said municipal corporation, and further
stated and acknowledged that they had so signed, executed and deliveredsaid instrument for the consideration, uses
and purposes therein mentioned and set forth.
WITNESS my hand end seal on this ?XNN day of 2002,
No ry ublic
MY COMMISSION EXPIRES: "�'^••..
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