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APPRAISAL IN SUMMARY REPORTING FORMAT
Subject Property: Dan Lord Plumbing
Ownership of Record: James D Lord, et ux
Street Address: 2609 S Farmerville Street
City and State: Ruston, LA
Parish: Lincoln
Property Type: Commercial
Date of Value Estimate: July 28, 2010
Prepared for: Prepared by:
City of Ruston
Economic Development Department
401 N Trenton Street
Ruston, LA 71270
Michael A. Graham, MAI
1300 Hudson Lane, Suite No. 1
Monroe, Louisiana 71201
Real Estate Appraisal Services
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
2
MICHAEL A. GRAHAM, MAI Real Estate Appraisals and Consultation
1300 Hudson Lane Suite # 1
Monroe, La. 71201
Phone: 318-387-9092
Fax: 318-325-5776
e-mail: [email protected]
July 28, 2010
City of Ruston
ATTN: Lewis Love
Public Works Director
701 East Tennessee
Ruston, LA 71270
Dear Mr. Love,
Pursuant to your request, the undersigned appraiser has made a personal and careful
inspection of the property identified above and has thoroughly investigated and analyzed
matters pertinent to the estimation of “Market Value” of said property.
To report the findings of my investigation, I offer this appraisal in a summary reporting format.
This appraisal follows the minimum guidelines set forth in standards rule 2-2 (b) of the Uniform
Standards of Appraisal Practice, 2010 - 2011 Edition, published by The Appraisal Foundation.
The appraisal report may not be limited to the information found herein. The reader may
consult with Appraiser's project files to find more comprehensive definit ions; broad area
analysis; comparable factual data; and additional assumptions and limited conditions. This
appraisal considers such additional information a part of this analysis and is available upon
request.
Assumptions and Limiting Conditions are listed in this report. These are typical for appraisal
reporting; there are special contingencies, over and above the typical, that would influence the
estimated value. Also, my certification statement, to include the value estimate, is listed and
follows the Limiting Conditions.
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
3
Upon inspection of the property, I do not find obvious evidence of an Environmental Hazard.
However, I am not an expert in this field and do not certify concerning this matter. A Phase I
environmental study was not provided to the appraiser.
Market Value Conclusion
Appraisal Premise Interest Appraised Effective Date Conclusion
“As-Is” Full ownership, less
minerals July 28, 2010
$150,000
Thank you for the opportunity to work with you on this appraisal assignment. If I can offer
additional assistance relative to this appraisal or help you with another matter, please contact
me.
Respectfully submitted,
_______________________________ _____________________________
MICHAEL A. GRAHAM, MAI KARA A. PLATT
LA STATE GENERAL CERTIFIED APPRAISER: #GO938 LA STATE GENERAL CERTIFIED APPRAISER: #G2088
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
4
TABLE OF CONTENTS
SUMMARY OF SALIENT FACTS AND CONCLUSIONS .......................................................................... 5
SUMMARY OF APPRAISAL PROBLEM .................................................................................................. 6
TYPE OF PROPERTY:.................................................................................................................................... 6 CLIENT: ....................................................................................................................................................... 6 INTENDED USER .......................................................................................................................................... 6 PURPOSE OF THE APPRAISAL ....................................................................................................................... 6 FUNCTION OF APPRAISAL: ............................................................................................................................ 7 PROPERTY RIGHTS APPRAISED .................................................................................................................... 7 EFFECTIVE DATE OF APPRAISAL ................................................................................................................... 7 APPRAISAL REPORT TYPE ............................................................................................................................ 7 EXPOSURE TIME .......................................................................................................................................... 7 USE OF PROPERTY AT DATE OF APPRAISAL .................................................................................................. 7 USE OF PROPERTY REFLECTED IN APPRAISAL: ............................................................................................. 7
SCOPE OF WORK .................................................................................................................................. 8
CERTIFICATION STATEMENT ............................................................................................................. 10
ASSUMPTIONS AND LIMITING CONDITIONS ..................................................................................... 11
OWNERSHIP INFORMATION AND SALE HISTORY ............................................................................ 13
AREA DATA .......................................................................................................................................... 14
LOCATION OF SUBJECT PROPERTY ................................................................................................. 16
SITE DATA ............................................................................................................................................ 17
SITE PLAN ............................................................................................................................................ 19
AERIAL PHOTOGRAPHS ..................................................................................................................... 21
IMPROVEMENT ANALYSIS .................................................................................................................. 23
FLOOR PLAN ........................................................................................................................................ 26
HIGHEST AND BEST USE .................................................................................................................... 27
HIGHEST AND BEST USE OF LAND AS THOUGH VACANT ............................................................................... 28 HIGHEST AND BEST USE OF PROPERTY AS IMPROVED ................................................................................. 29
LAND VALUATION ................................................................................................................................ 30
COMPARABLE LAND SALES SUMMARY ............................................................................................ 31
LAND ADJUSTMENT GRID .................................................................................................................. 45
COST APPROACH ............................................................................................................................... 46
COST APPROACH SUMMARY ............................................................................................................. 49
SALES COMPARISON APPROACH ..................................................................................................... 50
IMPROVED SALES SUMMARY TABLE ................................................................................................ 51
UNIT OF COMPARISON / DISCUSSION OF ADJUSTMENTS .............................................................. 75
INCOME APPROACH TO VALUE ......................................................................................................... 79
RECONCILIATION OF VALUE .............................................................................................................. 94
ADDENDA............................................................................................................................................. 95
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
5
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
The subject property is located on the east side of S Farmerville just north of Tennessee in
Ruston, LA.
Subject Property: Dan Lord Plumbing
Property Type: Commercial
Report Type: Summary
Interest Appraised: Full ownership, less minerals
Appraisal Date: July 28, 2010
Value Date: July 28, 2010
Inspection Date: July 28, 2010
Highest & Best Use As Vacant: Light Industrial or General commercial
Legal Description: See the legal description in the addenda
Owner ID: 2102 (Ruston Parish Assessor)
Opinion of Market Value: $150,000
Range of Value: $145,000 to $160,000
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
6
SUMMARY OF APPRAISAL PROBLEM
TYPE OF PROPERTY:
Commercial
CLIENT:
City of Ruston
INTENDED USER
City of Ruston
PURPOSE OF THE APPRAISAL
The purpose of this appraisal is to estimate the “Market Value” of the subject in it’s “as-is”
condition. "Market Value" is defined by the United States Treasury Department, Comptroller
of the Currency 12 CFR part 34, 34.42 ( f ) 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 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 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."
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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FUNCTION OF APPRAISAL:
Internal decision making
PROPERTY RIGHTS APPRAISED
Full ownership, less mineral rights
EFFECTIVE DATE OF APPRAISAL
July 28, 2010
APPRAISAL REPORT TYPE
Summary
EXPOSURE TIME
Definition (Dictionary of Real Estate Appraisal): The estimated length of time the property
interest being appraised would have been offered on the market prior to the hypothetical
market value on the effective date of the appraisal; a retrospective estimate based upon an
analysis of past events assuming a competitive and open market. Exposure time is always
presumed to occur prior to the effective date of the appraisal. The overall concept of
reasonable exposure encompasses not only adequate, sufficient and reasonable time but also
adequate, sufficient, and reasonable effort. The exposure time for the subject property is
estimated to be six months.
USE OF PROPERTY AT DATE OF APPRAISAL
Commercial
USE OF PROPERTY REFLECTED IN APPRAISAL:
Commercial
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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SCOPE OF WORK
The Appraiser
a. Has inspected the subject property to note the characteristics of the property that are
relevant to its valuation.
b. Has investigated available market data for use in the sales comparison, cost and
income approaches to value.
The appraiser’s investigations will include research of public records through the use of
commercial sources of data such as printed comparable data services and
computerized databases. Search parameters such as dates of sales, leases,
locations, sizes, types of properties and distances from the subject will start with
relatively narrow constraints and, if necessary, be expanded until the appraiser has
either retrieved data sufficient (in the appraiser’s opinion) to estimate market value, or
until the appraiser believes that he or she has reasonably exhausted the available pool
of data. Researched sales data will be viewed and, if found to be appropriate, efforts
will be made to verify the data with persons directly involved in the transactions such
as buyers, seller, brokers or agents. At the appraiser’s discretion, some data will be
used without personal verification if, in the appraiser’s opinion, the data appear to be
correct. In addition, the appraiser will consider any appropriate listings or properties
found through observation during appraiser’s data collection process. The appraiser
will report only the data deemed to be pertinent to the valuation problem;
c. Has investigated and analyzed any pertinent easements or restrictions, on the fee
simple ownership of the subject property. It is the client’s responsibility to supply the
appraiser with a title report. If a title report is not available, the appraiser will rely on a
visual inspection and identify any readily apparent easements or restrictions;
d. Will analyze the data found and reach conclusions regarding the market value, as
defined in the report, of the subject property as of the date of value using appropriate
valuation approaches (es) identified above;
e. Has prepared the appraisal in compliance with the Uniform Standards of Professional
Appraisal Practice as promulgated by The Appraisal Foundation and the Code of
Professional Ethics and Certification Standard of the Appraisal Institute;
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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f. Is not responsible for ascertaining the existence of any toxic waste or other
contamination present on or off the site. The appraiser will, however, report any
indications of toxic waste or contaminants that may affect value if they are readily
apparent during appraiser’s investigations. Appraiser cautions the user of the report
that appraiser is not expert in such matters and that appraiser may overlook
contamination that might be readily apparent to parties who are experts in such
matters.
g. Did prepare a Summary Appraisal Report, as defined in USPAP, which will include
photographs of the subject property, descriptions of the subject neighborhood, the site,
any improvements on the site, a description of the zoning, a highest and best use
analysis, a description of the most important sales used in the appraiser’s valuation, a
reconciliation and conclusion, a map illustrating the sales in relationship to the subject
property, and other data deemed by the appraiser to be relevant to the assignment.
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
10
CERTIFICATION STATEMENT
I certify that, to the best of my knowledge and belief:
1. the statements of fact contained in this report are true and correct.
2. the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions.
3. I have no present or prospective interest in the property that is the subject of this report, and no
personal interest or bias with respect to the parties involved.
4. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.
5. my engagement in this assignment was not contingent upon developing or reporting predetermined
results.
6. 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.
7. I have made a personal inspection of the property that is the subject of this report.
8. I have performed within the context of the competency provision of the Uniform Standards of
Professional Appraisal Practice
9. Kara Platt, General Certified Appraiser, provided significant real property appraisal assistance to the person(s) signing this certification.
10. The reported analyses, opinions, and conclusions were developed, and this report has been
prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice.
11. The use of this report is subject to the requirements of the Appraisal Institute relating to review
by its duly authorized representatives.
12. As of the date of this report, Michael A. Graham has completed the continuing education program of the Appraisal Institute.
13. That my opinion of the Market Value as of July 28, 2010, is:
$150,000 (One Hundred Fifty Thousand Dollars)
_______________________________ _____________________________
MICHAEL A. GRAHAM, MAI KARA A. PLATT
LA STATE GENERAL CERTIFIED APPRAISER: #GO938 LA STATE GENERAL CERTIFIED APPRAISER: #G2088
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
11
ASSUMPTIONS AND LIMITING CONDITIONS
This appraisal is made under the following assumptions and limiting conditions:
1. No responsibility is assumed for the legal description provided or for matters pertaining to
legal or title considerations. Title to the property is assumed to be good and marketable
unless otherwise stated.
2. The property is appraised free and clear of any or all liens or encumbrances unless
otherwise stated.
3. Responsible ownership and competent property managements are assumed.
4. The information furnished by others is believed to be reliable, but no warranty is given for its
accuracy.
5. All engineering studies are assumed to be correct. The plot plans and illustrative material in
the report are included only to help the reader visualize the property.
6. It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or
structures that render it more or less valuable. No responsibility is assumed for such
conditions or for obtaining the engineering studies that may be required to discover them.
7. It is assumed that the property is in full compliance with all applicable federal, state, and
local environmental regulations and laws unless the lack of compliance is stated, described,
and considered in the appraisal report.
8. It is assumed that all required licenses, certificates of occupancy, consents, and other
legislative or administrative authority from any local, state, or national government or private
entity or organization have been or can be obtained or renewed for any use on which the
opinion of value contained in this report is based.
9. It is assumed that the use of the land and improvements is confined within the boundaries
or property lines of the property described and that there is no encroachment or trespass
unless noted in the report.
10. Unless otherwise stated in this report, the existence of hazardous material, which may or
may not be present on the property, was not observed by the appraiser. The appraiser has
no knowledge of the existence of such materials on or in the property. The appraiser,
however, is not qualified to detect such substances. The presence of substances such as
asbestos, urea formaldehyde foam insulation or other potentially hazardous materials may
affect the value of the property. The value estimate is predicated upon the assumption that
there is no such material on or in the property that would cause a loss in value. No
responsibility is assumed for any such conditions, or for any expertise or engineering
knowledge required to discover them. The client is urged to retain an expert in this field, if
desired.
11. Any allocation of the total value estimated in this report between the land and the
improvements applied only under the stated program of utilization. The separate values
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
12
allocated to the land and buildings must not be used in conjunction with any other appraisal
and are invalid if so used.
12. Possession of this report, or a copy thereof, does not carry with it the right of publication.
13. The appraiser, by reason of this appraisal, is not required to give further consultation or
testimony or to be in attendance in court with reference to the property in question unless
arrangements have been previously made.
14. Neither all nor any part of the contents of this report shall be disseminated to the public
through advertising, public relations, news, sales, or other media without the prior written
consent and approval of the appraiser.
15. Any opinions of value provided in the report apply to the entire property, and any proration
or division of the total into fractional interests will invalidate the opinion of value, unless such
proration or division of interests has been set forth in the report.
16. If subject property is a proposed construction, only preliminary plans and specifications
were available for use in the preparation of this appraisal; the analysis, therefore, is subject
to a review of the final plans and specifications when available.
17. Any proposed improvements are assumed to have been completed unless otherwise
stipulated, so any construction is assumed to conform with the building plans referenced in
the report.
18. The appraiser assumes that the reader or user of this report has been provided with copies
of available building plans and all leases and amendments, if any, that encumber the
property.
19. In the event no legal description was provided by the client, the appraiser used the parish
tax plat to ascertain the physical dimensions and acreage of the property. Should a survey
prove this information to be inaccurate, it may be necessary for this appraisal to be
adjusted.
20. The forecasts, projections, or operating estimates contained herein are based on current
market conditions, anticipated short term supply and demand factors, and a continued
stable economy. These forecasts are, therefore, subject to changes with future economic
conditions.
21. The Americans with Disabilities Act (ADA) became effective January 26, 1992. The
appraiser has not made a specific compliance survey or analysis of the property to
determine whether or not it is in conformity with the various detailed requirements of ADA.
It is possible that a compliance survey of the property and a detailed analysis of the
requirements of the ADA would reveal that the property is not in compliance with one or
more of the requirements of the act. If so, this fact could have a negative impact upon the
value of the property. Since the appraiser has no direct evidence relating to this issue,
possible noncompliance with the requirements of ADA was not considered in estimating he
value of the property.
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
13
OWNERSHIP INFORMATION AND SALE HISTORY
OWNERSHIP OF RECORD: James D Lord, et ux (per the Lincoln Parish Assessor)
4428 Hwy 818
Ruston, LA 71270
SUBJECT PROPERTY
ADDRESS:
2609 S Farmerville St.
Ruston, LA 71270
LEGAL DESCRIPTION: See the legal description in the addenda
TAX ASSESSMENTS: Land: $4,195
Improvements: $11,372
Total: $15,567
Millage Rate: 8908
Current Tax Burden: $1,386.70
Future Taxes: If the subject property transfers for or
around the reported opinion of value,
annual taxes are expected to increase.
LAST TRANSFER: Date: 07/10/2009
Vendor: Adair Asset Management LLC / US
Bank
Vendee: James D. Lord et ux
Consideration: $1,847
Book/Page: 1274 / 236
Remarks: Property transferred to Adair Asset
Management for the 2008 Taxes that
were $1,369 on June 1, 2009 in
conveyance book 1272 page 387.
PREVIOUS TRANSFER: Date: 01/17/2007
Vendor: Ronnie L. Walker et ux
Vendee: James D. Lord et ux
Consideration: $120,000
Book/Page: 1212 / 479
ACTIVE LISTINGS: The subject property had been listed for sale with Today’s Realty
from 2/26/2009 until it expired on 2/2/2010 for a list price of
$175,000. To the appraiser’s knowledge, there have been no
offers on the property and no purchase agreements are in place
at the date of the appraisal.
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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AREA DATA
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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LOCATION OF SUBJECT PROPERTY
The subject property is located on the east side of South Farmerville in Ruston, Louisiana
71270. The area is composed of vacant land, multi – family residential and industrial.
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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SITE DATA
Square Feet Acres
Primary Site: 48,352 1.110
Surplus Land: 0 0.000
Excess Land: 0 0.000
Total Area: 48,352 1.110
Note: There is a discrepancy in the legal description of the subject property. The legal
describes going to the centerline of S Farmerville and also states the tract being 1.11 acres;
however, the size of the subject going to the centerline would be approximately 55,000 SF or
1.26 acres. For the purpose of this appraisal, the subject size stated on the legal of 1.11 acres
will be used as the subject size since it would be considered the useable area. The appraiser
recommends hiring a professional surveyor to survey the subject property. The survey on the
following page is of the neighboring property dated July 2004.
DIMENSIONS: 200’ x 242’ (approximately)
SHAPE: Rectangular
TOPOGRAPHY: Property slopes from west to east but adequate for intended use
DRAINAGE: Adequate in times of normal rainfall
UTILITIES:
Water: City of Ruston
Sewer: City of Ruston
Electricity: Entergy
Gas: Arkla Gas
FLOOD ZONE:
Based on FIRM Flood Insurance Rate Map No. 22061C0245D (April 2, 2009)
for Lincoln Parish, Louisiana, this property lies in Flood Zone “X” See addenda
for a copy of the flood plain map.
ACCESS: Direct access to S Farmerville Street
STREET TYPE: S Farmerville is a two lane asphalt roadway
ZONING / RESTRICTIONS The subject property is zoned D-1 Light industrial district
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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SETBACKS, HEIGHT,
BUILDING COVERAGE:
There are no building restrictions under zoning D-1 Light industrial district but
all improvements have to be approved by The City Planning & Zoning
Department.
CONFORMITY TO
RESTRICTIONS: The subject conforms to the D-1 zoning restrictions
SITE CONDITION: The site is improved with a metal warehouse building and related site
improvements.
SURROUNDING LAND
USES: Public / Institutional, light industrial / business, light business, single and multi –
family residential
SERVITUDES/
ENCROACHMENTS: None noted that would adversely influence the property value
NUISANCES / HAZARDS: None noted
UNIT OF COMPARISON: The land valuation section of this report will focus on the value per square foot
as the unit of comparison.
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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SITE PLAN
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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AERIAL PHOTOGRAPHS
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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IMPROVEMENT ANALYSIS
The subject property is located on the East side of S Farmerville Street in Ruston, LA It is
improved with a class “S,” metal building, concrete parking and sidewalks, crushed rock and
asphalt for use as drives and soil stabilizer and 6 ft chain link fencing with 3 strand barb wire.
The building was built in 1982 and the crushed asphalt, fencing and signage were added 2
years ago.
Improvements:
Heated Office: 723 SF
Warehouse: 3,290 SF
Total area under roof: 4,013 LF
Site Improvements / Other:
Concrete parking: 1,950 SF
Concrete sidewalk: 445 SF
Gravel & crushed asphalt: 15,005 SF
Chain link fencing: 236 LF
3 ft chain link gate: 1 Unit
25 ft chain link gate: 1 Unit
Signage: 1 Unit
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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Exterior Description
Foundation: Concrete slab
Framing: Class “S” steel frame
Insulation: Typical
Exterior Walls: Metal sheeting
Exterior Doors: insulated metal and overhead 8 ft roll up doors
Windows: Metal frame
Roof and Drain System: Metal sheeting; gutter system
Chimneys & Vents: No chimney, typical venting
Interior Description
Walls: Office – painted drywall
Warehouse - exposed vinyl lined insulation
Doors: Office - hollow core doors
Storage Areas: Typical closet storage
Flooring System: Concrete slab
Ceilings: Textured drywall
Floor Coverings: Office – carpet and vinyl flooring
Warehouse - concrete
Other: N/A
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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Equipment and Mechanical Systems
Plumbing: City sewer with 1 bathroom to include a toilet, sink and shower
Hot Water System: Hot water heater for the bathroom
Heating & Cooling: HVAC system for the finished office area; no heating or cooling
in warehouse
Electrical Systems: Typical
Fire Protection: N/A
Elevators, ramps, stairs: N/A
Alarms, and call systems: Security system in office and warehouse
Attached Equipment: N/A
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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FLOOR PLAN
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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HIGHEST AND BEST USE
Market forces create market value, so the analysis of market forces that have a bearing on the
determination of highest and best use is crucial to the valuation process. When the purpose of
an appraisal is to develop an opinion of market value, highest and best use analysis identifies
the most profitable, competitive use to which the property can be put.
The highest and best use of a specific parcel of land is not determined through subjective
analysis by the property owner, the developer, or the appraiser; rather, highest and best use is
shaped by the competitive forces within the market where the property is located. Therefore,
the analysis and interpretation of highest and best use is an economic study and a financial
analysis focused on the subject property.
In all valuation assignments, opinions of value are based on use. The highest and best use of
a property to be appraised provides the foundation for a thorough investigation of the
competitive position of the property in the minds of market participants. Consequently, highest
and best use can be described as the foundation of which market value rests.
Highest and best use may be defined as follows “The reasonably probable and legal use of
vacant land or an improved property that is physically possible, appropriately supported, and
financially feasible and that result in the highest value.”
In addition to being reasonably probable, the highest and best use of both the land as though
vacant and the property as improved must meet four implicit criteria. That is, the highest and
best use must be
1. Physically possible
2. Legally permissible
3. Financially feasible
4. Maximally productive
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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HIGHEST AND BEST USE OF LAND AS THOUGH VACANT
Note: For an improved property, the valuation of the land as though vacant is a necessary
procedure within the appraisal process, but is one that is performed under a hypothetical
condition, i.e., that the subject site is vacant.
Legally Permissible: The site is zoned D-1 Light Industrial District which allows for any
use permitted in B-3 General Business District except for
dwelling use can only be used for night watchmen or custodians.
The uses include but not limited to: automotive service and
repair, child day care services, communications facility, offices
and restaurant.
Physically Possible: The topography of the site allows for construction of legally
permissible uses.
Financially Feasible: Light industrial or general commercial
Maximally Productive: Light industrial or general commercial
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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HIGHEST AND BEST USE OF PROPERTY AS IMPROVED
The highest and best use of a property as improved may be continuation of the exiting use,
renovation or rehabilitation, expansion, adaptation or conversion to another use, partial or total
demolition, or some combination of these alternatives.
Legally Permissible: The zone D-1 Light Industrial District does not have building
requirements therefore the current improvements are legally
permissible.
Physically Possible: The existing improvements are obviously physically possible, and no
significant physical modifications need to be considered because of
the condition, functional utility, and / or maintenance associated with
the improvement. The continuation of the existing use meets the
physical possibility test.
Financially Feasible: The property “as-improved” produces a positive return on investment
and is financially feasible.
Maximally Productive: The appraiser has found no evidence to suggest that changes to the
property will result in a higher value. The most productive use of the
property is for continued use as a metal building for light industrial or
general commercial use.
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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LAND VALUATION
The valuation of a parcel of land begins by identifying the real estate and property rights to be
valued, any encumbrances on those property rights, the land’s physical characteristics, and
the available utilities and site improvements. Comparable data on similar parcels is collected
and the highest and best use of the subject site is analyzed. Once these tasks are complete,
the appraiser chooses an appropriate method to employ in the valuation process. Accepted
methods of land valuation are as follow:
Sales Comparison Approach
Extraction
Allocation
Direct Capitalization (land residual and ground rent capitalization)
Yield Capitalization (discounted cash flow / subdivision development analysis)
The Sales Comparison Approach is usually the preferred methodology for developing a land
value conclusion. However, when sales of similar parcels of land are not plentiful enough for
the application of sales comparison, alternative techniques may be used.
In this particular appraisal report, my research has revealed an adequate number of sales for
comparison to the subject property. That said, the sales comparison approach is employed to
value the subject land. The following tasks have been performed to develop an opinion of
land value:
Gather data on actual sales as well as listings, offers, and options.
Identify the similarities and differences in the data
Identify the highest and best use of each potential comparable sale
Identify units of comparison that explain market behavior
Adjust the sale prices of the comparables to account for the dissimilar characteristics of
the land being appraised.
Form a conclusion as to the market value of the subject land
The following pages will offer a summary chart and location map. The addenda will contain a
detailed data sheet on each comparable land sale.
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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COMPARABLE LAND SALES SUMMARY
No. Location Sale Date Price Size in Acres
Size in SF Price/ SF
1. Link Drive 02/04/2004 $30,000 1.074 46,801 $.64
2. McDonald and Franke Drive 01/31/2005 $13,487 2.997 130,549 $.10
3. 1619 Link Drive 10/20/2005 $30,000 0.537 23,400 $1.28
4. 1401 McDonald Avenue 01/22/2007 $40,000 2.820 122,839 $.33
5. South Farmerville Street 05/20/2004 $41,300 4.130 179,903 $.23
6. South Farmerville Street 07/28/2004 $132,000 15.038 655,055 $.20
7. South Farmerville Street 07/06/2005 $25,156 6.289 273,949 $.09
8. Between 167 and S Farmerville 01/01/2008 $350,000 13.936 607,070 $.58
9. Industrial Drive 07/15/2009 $60,000 0.537 23,392 $2.56
10. Industrial Drive 10/23/2009 $60,000 0.537 23,392 $2.56
MICHAEL A. GRAHAM, MAI
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MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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Land Sale No. 1
Property Identification Record ID 1742 Property Type Industrial, Industrial Address Link Drive, Ruston, Lincoln Parish, Louisiana 71270 Location Lot 9, Interstate Commercial Park Sale Data Grantor Centerpoint Energy Resources Corp. Grantee Citadel Resources, Inc Sale Date February 04, 2004 Deed Book/Page 1156 / 548 Property Rights Fee Financing Cash Verification Bill Elmore; 318-548-5760, June 10, 2009 by KPlatt Sale Price $30,000 Land Data Zoning D-1, Light Industrial Shape Rectangle Land Size Information Gross Land Size 1.074 Acres or 46,801 SF Front Footage 130 ft Total Frontage: 130 ft Link Drive Indicators Sale Price/Gross Acre $27,923 Actual or $27,923 Adjusted Sale Price/Gross SF $0.64 Actual or $0.64 Adjusted Sale Price/Front Foot $231 Actual or $231 Adjusted Remarks Per vendee, the lots were selling for $30,000 a lot but they made offer for 2 at $30,000 and it was taken. No plans for improvements to property and tract is partially wooded
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Land Sale No. 2
Property Identification Record ID 874 Property Type Industrial, Industrial Address McDonald and Franke Drive, Ruston, Lincoln Parish, Louisiana Location Southeastern Industrial Area Sale Data Grantor Louisiana Soil Products of Ruston, LLC Grantee Franke Consumer Products, Inc Sale Date January 31, 2005 Deed Book/Page 1169/698 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Sale Verification John Thompkins; 318-251-8955, December 05, 2005; Confirmed
by Justin Preaus Sale Price $13,487 Land Data Topography Level Utilities Available Shape Semi-rectangular Land Size Information Gross Land Size 2.997 Acres or 130,549 SF Front Footage 782 ft McDonald;157 ft Franke Indicators Sale Price/Gross Acre $4,500 Actual or $4,500 Adjusted Sale Price/Gross SF $0.10 Actual or $0.10 Adjusted Remarks Vacant industrial property fronting McDonald Avenue. Purchased by Franke Consumer Products for assemblage with a factory located south of the roadway. Negligible timber value. Buyer also purchased an adjoining 22.72 acre parcel on the same date for a similar unit price.
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Land Sale No. 3
Property Identification Record ID 1743 Property Type Industrial, Industrial Address 1619 Link Drive, Ruston, Lincoln Parish, Louisiana 71270 Location Lot 11, Interstate Commercial Park Sale Data Grantor Ruston Land Development Corp. Grantee Lee B Waltman, et ux Sale Date October 20, 2005 Deed Book/Page 1184 / 453 Property Rights Fee Financing Cash Verification Mr. Waltman assistant; 251-3955, June 10, 2009; Confirmed by
Kara Platt Sale Price $30,000 Land Data Zoning D-1, Light Industrial Dimensions 130' x 180' Shape Rectangle Depth 180 Land Size Information Gross Land Size 0.537 Acres or 23,400 SF Front Footage 130 ft Total Frontage: 130 ft Link Drive Indicators Sale Price/Gross Acre $55,846 Actual or $55,846 Adjusted Sale Price/Gross SF $1.28 Actual or $1.28 Adjusted Sale Price/Front Foot $231 Actual or $231 Adjusted Remarks Property located in the Interstate Commercial Park. Site improvement ready at purchase. Property purchased for Drainage Structures and currently improved with gravel and chain link fencing.
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REAL ESTATE APPRAISAL SERVICES
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Land Sale No. 4
Property Identification Record ID 1744 Property Type Industrial, Industrial Address 1401 McDonald Avenue, Ruston, Lincoln County, Louisiana
71270 Location Sec 19-18-2 Sale Data Grantor Don J Beasley Grantee Claud James Irby Jr Sale Date January 22, 2007 Deed Book/Page 1212 / 669 Property Rights Fee Conditions of Sale Arm's Length Financing Cash Verification Gilbert Realty; 251-9107, June 10, 2009; Confirmed by Kara
Platt Sale Price $40,000 Land Data Zoning D-2, Industrial Shape Rectangular Land Size Information Gross Land Size 2.820 Acres or 122,839 SF Indicators Sale Price/Gross Acre $14,184 Actual or $14,184 Adjusted Sale Price/Gross SF $0.33 Actual or $0.33 Adjusted Remarks Property is wooded and backs up to railroad tracks. Per Gilbert Realty, the property was purchased to build a body shop. No improvements have been made to the property.
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REAL ESTATE APPRAISAL SERVICES
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Land Sale No. 5
Property Identification Record ID 798 Property Type Unknown Address South Farmerville Street, Ruston, Lincoln County, Louisiana Location Near old Ruston airport Sale Data Grantor Milt Douglas Andrews, et ux Grantee Golden Ages Senior Village Limited Partnership Sale Date May 20, 2004 Deed Book/Page 1159/783 Conditions of Sale Arm's Length Financing Cash Sale Verification Milt Douglas Andrews; 318-255-4686, January 24, 2005;
Confirmed by Justin Preaus Sale Price $41,300 Land Data Zoning R-3, Multi-Family Topography Variable, rolling hills Utilities All available Shape Rectangular Flood Info No hazard Land Size Information Gross Land Size 4.130 Acres or 179,903 SF Front Footage 200 ft S. Farmerville St. Indicators Sale Price/Gross Acre $10,000 Actual or $10,000 Adjusted Sale Price/Gross SF $0.23 Actual or $0.23 Adjusted Remarks 4.13 acre tract located on the western side of South Farmerville Street, across from the Frostee Factory. The property was purchased for the development of a senior citizens apartment village. Topography slopes slightly from west to east. At the time of sale, the tract was uncleared and growing a small amount of hardwood timber.
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
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Land Sale No. 6
Property Identification Record ID 800 Property Type Unknown Address South Farmerville Street, Ruston, Lincoln County, Louisiana Location Near old Ruston airport Sale Data Grantor Michael Lee Freeman et al Grantee City of Ruston, Louisiana Sale Date July 28, 2004 Deed Book/Page 1162/446 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Sale Verification Mr. Burnside; 318-251-8689, January 24, 2005; Confirmed by
Justin Preaus Sale Price $132,000 Land Data Zoning C-3, Central Business Topography Sloping, with creek drainage Utilities All Available Shape Semi-rectangular Flood Info Hazard along creek bed Land Size Information Gross Land Size 15.038 Acres or 655,055 SF Front Footage 325 ft S. Farmerville Indicators Sale Price/Gross Acre $8,778 Actual or $8,778 Adjusted Sale Price/Gross SF $0.20 Actual or $0.20 Adjusted Remarks 15.038 acre tract located just north of the junction of East Tennessee Avenue and South Farmerville Street. This property joins two tracts owned by the City of Ruston utilized for the Public Works Department. Topography slopes from north to south and east to west. A creek system runs through the property. All utilities are available. The tract was growing timber at the time of sale. Timber value is thought to be roughly equal to cost of clearing.
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REAL ESTATE APPRAISAL SERVICES
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Land Sale No. 7
Property Identification Record ID 1139 Property Type Unknown Address South Farmerville Street, Ruston, Lincoln County, Louisiana Location In Section 36, T18N, R3W Sale Data Grantor City of Ruston Grantee On Time Feeders, Inc Sale Date July 06, 2005 Deed Book/Page 1178/198 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Sale Sale Price $25,156 Land Data Topography Low lying Utilities Available Shape Semi-rectangular Land Size Information Gross Land Size 6.289 Acres or 273,949 SF Front Footage 400 ft S. Farmerville Indicators Sale Price/Gross Acre $4,000 Actual or $4,000 Adjusted Sale Price/Gross SF $0.09 Actual or $0.09 Adjusted Remarks Parcel purchased for the construction of a light industrial facility for On Time Feeders. Low lying topography will require filling and grading as well as additional care to improvement design and layout.
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Land Sale No. 8
Property Identification Record ID 1456 Property Type Special Purpose Property Name Future Campus Community Assembly of God Address Between 167 and S Farmerville, Ruston, Lincoln County,
Louisiana Location Sec 36, T18N, R3W Project Name: LTRP Sale Data Grantor Milt T Andrews et ux Grantee Campus Community Assembly of God, Inc Sale Date January 01, 2008 Deed Book/Page 1240/93 Property Rights Fee Sale Price $350,000 Land Data Zoning R-15, Single Family Residential Dimensions 330' x 1829' x 330' x 1850' Shape Rectangular Land Size Information Gross Land Size 13.936 Acres or 607,070 SF Front Footage 330 ft Hwy 167;330 ft S Farmerville Indicators Sale Price/Gross Acre $25,114 Sale Price/Gross SF $0.58 Remarks Wood tract located between 167 and S Farmerville just north of Timbers Ave.
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Land Sale No. 9
Property Identification Record ID 1798 Property Type Industrial Property Name Interstate commercial park Address Industrial Drive, Ruston, Lincoln County, Louisiana 71270 Location Lot 50 unit 3 Sale Data Grantor Ruston Land Development Corporation Grantee Mary Elizabeth Foster, et ux Sale Date July 15, 2009 Deed Book/Page 1274 / 451 Property Rights Fee Conditions of Sale Arm's Length Financing Cash Sale Price $60,000 Land Data Zoning D-1, Light Industrial Dimensions 125'x x199' Shape Rectangle Depth 199 Land Size Information Gross Land Size 0.537 Acres or 23,392 SF Front Footage 125 ft Total Frontage: 125 ft Industrial Drive Indicators Sale Price/Gross Acre $111,730 Actual or $111,730 Adjusted Sale Price/Gross SF $2.56 Actual or $2.56 Adjusted
MICHAEL A. GRAHAM, MAI
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Land Sale No. 10
Property Identification Record ID 1858 Property Type Industrial Property Name Interstate commercial park Address Industrial Drive, Ruston, Lincoln County, Louisiana 71270 Location Lot 52 unit 3 Sale Data Grantor Ruston Land Development Corporation Grantee K & J Properties of Ruston, LLC Sale Date October 23, 2009 Deed Book/Page 1278/102 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Credit Sale Sale Price $60,000 Land Data Zoning D-1, Light Industrial Dimensions 125'x x199' Shape Rectangle T/R/Section 18/02/18 Depth 199 Land Size Information Gross Land Size 0.537 Acres or 23,392 SF Front Footage 125 ft Industrial Drive Indicators Sale Price/Gross Acre $111,730 Actual or $111,730 Adjusted Sale Price/Gross SF $2.56 Actual or $2.56 Adjusted
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Selecting Unit of Comparison
After sales data has been gathered and verified, systematic analysis begins. Because like
units must be compared, each sale price should be stated in terms of appropriate units of
comparison. The units of comparison selected depend on the appraisal problem and nature of
the property. Units of comparison are used to facilitate comparison of the subject and
comparable properties. Examples of units of comparison include: total property price, price
per square foot, price per acre, price per front foot, etc. After an analysis of the comparable
sales, the most reliable unit of comparison, in my opinion, is as follows:
Concluded Unit of Comparison: Price per square foot of site area ($ / SF)
Analysis and Adjustment of Comparable Sales
Ideally, if all comparable properties are identical to the subject property, no adjustments would
be required. However, this is rarely the case. Once the data is collected and verified, it can
be organized in a market data grid for comparison. The grid will illustrate and recognize any
important differences between the comparable properties and the subject. These differences
are often referred to as elements of comparison. The adjustment grid contains 10 basic
elements of comparison that should be considered in sales comparison analysis.
Elements of Comparison
1.) Real Property Rights Conveyed: When real property rights are sold, they may be the
sole subject of the contract or the contract may include other rights, less than all of the real
property rights, or even another property or properties. Before the price of a comparable sale
property can be used in sales comparison analysis, the appraiser must first ensure that the
sale price of the property applies to property rights that are similar to those being appraised.
To do so may require one or more adjustments to the price before specific differences in the
physical real estate can be compared.
2.) Financing Terms: The transaction price of one property may differ from that of an
identical property due to different financing arrangements. The typical definition of market
value recognizes cash equivalent terms provided the calculation of these terms reflects the
market. In the event a property sells via atypical financing terms, the sale must be analyzed
and a conclusion made as to how the below or above market financing influences the sales
price.
3.) Conditions of Sale: Adjustments for conditions of sale usually reflect the motivations of
the buyer and the seller. In many situations the conditions of sale significantly affect
transactions prices; these are not considered arm’s length transactions. Examples warranting
an adjustment for this element of comparison include: assemblage, plottage, liquidation sale,
MICHAEL A. GRAHAM, MAI
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inter family transfer, and depressed sale. In most cases, a sale that is not considered arm’s
length is omitted from the sales comparison analysis unless market information is available to
support the atypical condition.
4.) Expenditures made immediately after purchase: A knowledgeable buyer considers
expenditures that will have to be made upon purchase of a property because these costs
affect the price the buyer agrees to pay. Such expenditures include: costs to cure deferred
maintenance, costs to demolish and remove any portion of the improvements, costs to
petitions for a zoning change, costs to remediate environmental contamination. These costs
are often quantified in price negotiations and can be discovered through verification of
transaction data. The relevant figure is not the actual cost that was incurred but the cost that
was anticipated by the buyer and seller.
5.) Market conditions (time): Comparable sales that occurred under market conditions
different from those applicable to the subject on the effective date of value require adjustment
for any differences that affect their values. An adjustment for market conditions is made if
general property values have appreciated or depreciated since the transaction dates due to
inflation or deflation or a change in investor’s perceptions of the market over time.
6.) Location: An adjustment for location within a market area may be required when the
locational characteristics of a comparable property are different from those of the subject
property. Excessive locational differences may disqualify a property from use as a
comparable. Locational differences are usually handled with quantitative adjustments.
7.) Physical characteristics: If the physical characteristics of a comparable property and
the subject property differ in many ways, each of these differences may require comparison
and adjustment.
8.) Use / Zoning: Any difference in the current use or the highest and best use of a
potential comparable sale and the subject property must be addressed. The appraiser must
recognize the difference and determine if the sale is an appropriate comparable and, if so,
whether an adjustment is required. In most cases the buyer or buyer’s agent must confirm the
ultimate use for which the comparable was purchased.
9.) Non – realty components of value: Non-realty components of value include personal
property, business concerns, and other items that do not constitute real property but are
included in either the sale price of the comparable or the ownership interest in the subject
property. These items should be analyzed and reported separately from the realty.
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LAND ADJUSTMENT GRID
Subject Land Sale 1 Land Sale 3 Land Sale 10
Date of Sale: Feb-04 Oct-05 Oct-09
Deed Price: $30,000 $30,000 $60,000
Rights Conveyed: $0 $0 $0
Financing Adjustment: $0 $0 $0
Conditions of Sale: $0 $0 $0
Cash Equivalent Price: $30,000 $30,000 $60,000
Expenditures after sale: $0 $0 $0
Misc. Adjustment: $0 $0 $0
Adjusted Sales Price: $30,000 $30,000 $60,000
Market Conditions (% adj.) 5.00% 5.00% 0.00%
Adjusted Sales Price: $31,500 $31,500 $60,000
Unit of Comparison SF
Units (SF; FF; Acres) 48,352 46,801 23,400 23,392
Price per Unit: $0.67 $1.35 $2.56
Other Adjustments:
Location: -30.00% -30.00% -30.00%
Size: 0.00% -10.00% -10.00%
Shape / Utility: 0.00% 0.00% 0.00%
Topography: 0.00% 0.00% 0.00%
Utilities: 0.00% 0.00% 0.00%
Site Condition: 0.00% 0.00% 0.00%
Corner Lot: 0.00% 0.00% 0.00%
Frontage to Depth: 0.00% 0.00% 0.00%
Use / Zoning: 0.00% 0.00% 0.00%
Other: 0.00% 0.00% 0.00%
Net Adjustment: -30.00% -40.00% -40.00%
Adj. Unit of Comparison: $0.47 $0.81 $1.54
SUMMARY OF VALUE
Range of Unit Value: $0.47 to $1.54
Average of Unit Value: $0.94
Median Unit Value: $0.81
Concluded Unit Value: $1.00
Subject Size: 48,352 SF
Indicated Site Value: $48,352
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COST APPROACH
The cost approach may be defined as a set of procedures through which a value indication s
derived for the fee simple interest in a property by estimating the current cost to construct a
reproduction of, or replacement for, the existing structure plus any profit or incentive;
deducting depreciation from the total cost; and adding the estimated land value. Other
adjustments may then be made to the indicated fee simple value of the subject property to
reflect the value of the property interest being appraised. In the cost approach, a property is
valued based on a comparison with the cost to building a new or substitute property. The cost
estimate is adjusted for the depreciation evident in the existing property.
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Cost New
Cost Basis: Replacement cost new: The estimated cost to construct, at
current prices as of the effective appraisal date, a building with
utility equivalent to the building being appraised, using modern
materials and current standards, design, and layout.
Method: Comparative unit: A method used to drive a cost estimate in
terms of dollars per unit of area or volume based on known costs
of similar structures that are adjusted for time and physical
differences; usually applied to total building area.
Source: Marshall Valuation / Cost comparables and local building
contractors.
The cost new estimate includes the following:
Direct Costs: Expenditures for the labor and materials used in the construction
of improvements.
Indirect Costs: Expenditures or allowances for items other than labor and
materials that are necessary for construction but are not typically
part of the construction contract. Indirect costs may include
administrative costs; professional fees; financing costs and the
interest paid on construction loans; taxes and the builder’s or
developer’s all risk insurance during construction; and marketing,
sales, and lease up costs incurred to achieve occupancy or sale.
These costs can vary by property type.
Entrepreneurial Incentive: A market derived figure that represents the amount an
entrepreneur expects to receive for his or her contribution to a
project and risk. The estimation of entrepreneurial incentive is a
necessary component of total cost.
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DEPRECIATION
Depreciation is the difference between the contributory value of an improvement and its cost
at the time of appraisal:
Replacement Cost of Improvement
Minus: Contributory Value of Improvement
Equals: Depreciation
By estimating the depreciation incurred by an improvement and deducting this estimate from
the improvement’s replacement cost, an appraiser can conclude the depreciated cost of the
improvement. This depreciated cost approximates the improvement’s contribution to the
property’s market value. Depreciation in an improvement can result from three ma jor causes
operating separately or in combination.
1. Physical deterioration – wear and tear from regular use and the impact of the elements.
2. Functional obsolescence – a flaw in the structure, materials, or design that diminishes
the function, utility, and value of the improvement.
3. External obsolescence – a temporary or permanent impairment of the utility or salability
of an improvement or property due to negative influences outside the property
Depreciation for the major building improvements is supported by market extracted data. Site
improvements are depreciated at a similar rate if the age, condition and economic life are
concluded to be similar to the primary building structure. Any site improvement that has a
different age, condition or economic life may be depreciated at a different rate.
Conclusion:
Actual Age of Subject (+/-): 27 Years
Concluded Economic Life: 50 Years
Ind. Overall Depreciation %: 45.00%
Ind. Annual Depr. Rate: 1.67%
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COST APPROACH SUMMARY
Direct Costs SF $ / SF Total
Office and Warehouse: 4,013 @ $33.95 = $136,256
Site improvements / Other: $35,506
N/A: 0 @ $0.00 $0
Total = $171,762
Indirect Costs $5,153
Entreprenuerial Incentive 5.00% $8,588
Total Cost New $185,503
Depreciation
Overall Depreciation 45.00% $83,476
Total Depreciation: -$83,476
Cost Approach Summary
Est. Improvement Value $102,027
Est. Land Value $48,352
Indication of Value: $150,379
Add / Subtract: N/A $0
Conclusion - Cost Approach: $150,379
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
50
SALES COMPARISON APPROACH
In the sales comparison approach, the appraiser develops an opinion of value by analyzing
similar properties and comparing these properties with the subject property. The comparative
techniques of analysis applied in the sales comparison approach are fundamental to the
valuation process. Estimates of market rent, expenses, land value, cost depreciation, and
other value parameters may be derived in the other approaches to value using similar
comparative techniques. Similarly, conclusions derived in the other approaches are often
analyzed in the sales comparison approach to estimate the adjustments to be made to the
sale prices of comparable properties.
In the sales comparison approach, an opinion of market value is developed by comparing
properties similar to the subject property that have recently sold, are listed for sale, or are
under contract. A major premise of the sales comparison approach is that the market value of
a property is related to the prices of comparable, competitive properties.
The procedure applied in the sale comparison approach includes the following steps:
1) Research transactional data
2) Verify the data as accurate and representative of arm’s length transactions
3) Selecting relevant units of comparison
4) Determine how the comparables differ from the subject and adjust the price for
differences in various elements of comparison.
5) Reconcile multiple value indications into a single value or range of value.
MICHAEL A. GRAHAM, MAI
REAL ESTATE APPRAISAL SERVICES
51
IMPROVED SALES SUMMARY TABLE
No. Location Sale Date Price Building Size (SF)
Price/ SF
1. 1703 Link Drive 05/04/2006 $160,000 5,000 $32.00
2. 1800 Trade Drive 12/12/2007 $115,000 4,000 $28.75
3. 2829 Hwy 33 04/13/2007 $160,000 2,800 $57.14
4. 1601 Link Drive 03/24/2008 $200,000 4,500 $44.44
5. 2609 S Farmerville 01/17/2007 $120,000 4,013 $29.90
6. 2609 S Farmerville 07/07/2006 $110,000 4,013 $27.41
7. 2314 Hwy 33 06/28/2007 $300,000 8,489 $35.34
8. 120 Railroad Avenue 05/24/2007 $120,000 4,284 $28.01
9. 508 South Monroe Street 08/12/2005 $90,000 3,062 $29.39
10. 7087 Hwy 80 West 07/25/2005 $62,000 3,200 $19.38
11. 2419 Hwy 33 08/20/2004 $100,000 4,900 $20.41
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Improved Sale No. 1
Property Identification Record ID 915 Property Type Industrial, Industrial (<20,000 SF) Property Name Elliott Electric Supply Address 1703 Link Drive, Ruston, Lincoln Parish, Louisiana Location Lot 12 of Interstate Commercial Park Sale Data Grantor Thermon Holstead, etux Grantee Elliott Partners, LTD Sale Date May 04, 2006 Deed Book/Page 1196/103 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Sale Verification Danny Mora; 936-569-1184, November 26, 2007; Other
sources: Deed, Confirmed by Kara Platt Sale Price $160,000 Land Data Land Size 0.540 Acres or 23,522 SF Zoning D-1 Shape Rectangle General Physical Data Building Type Single Tenant Gross Area SF 5,000 Construction Type Class "S" Roof Type Metal Foundation concrete slab Electrical Typical Stories 1 Floor Height 14
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Indicators Sale Price/ SF $32.00 Actual or $32.00 Adjusted Floor Area Ratio 0.21 Land to Building Ratio 4.70:1 Remarks Per vendee representative, property at date of purchase was a shell. It had 2 restrooms and suspended heaters.
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Improved Sale No. 2
Property Identification Record ID 1307 Property Type Industrial, Industrial (<20,000 SF) Property Name PCI Electric Address 1800 Trade Drive, Ruston, Lincoln Parish, Louisiana 71270 Location Lot #3 Interstate Business Park Sale Data Grantor Randolf A. Greene Grantee Allen Blake Holdings, LLC Sale Date December 12, 2007 Deed Book/Page 1237 / 315 Property Rights Fee Conditions of Sale Arm's length Financing Cash Verification Rex Rinehart; 318-251-1061, June 11, 2009; Confirmed by Kara
Platt Sale Price $115,000 Land Data Land Size 0.599 Acres or 26,081 SF Front Footage 120 ft Total Frontage: 120 ft Trade Drive Zoning D-1, Light Industrial Utilities all public available Shape Rectangle General Physical Data Building Type Single Tenant Gross Area SF 4,000
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Area Breakdown Office 1,600 Warehouse 2,400 Construction Type Steel Beam Roof Type Metal panel Foundation concrete slab Floor Height 12' wall Year Built 1980 estimated Indicators Sale Price/Gross Area SF $28.75 Actual or $28.75 Adjusted Floor Area Ratio 0.15 Land to Building Ratio 6.52:1 Remarks No improvements after purchase of property. Owners were tenants before purchase. (2) 10' x 10' overhead doors, chain link fencing and concrete parking. Site value estimate @ $30,000.
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Improved Sale No. 3
Property Identification Record ID 1308 Property Type Commercial, Industrial (<20,000 SF) Address 2829 Hwy 33, Ruston, Lincoln Parish, Louisiana 71270 Location Sec 5-18-2 Sale Data Grantor Gary M. Smith, et ux Grantee Northside Management Company Sale Date April 13, 2007 Deed Book/Page 1219 / 753 Property Rights Fee Financing Cash Verification John Stephenson, selling agent; 318-514-9970, June 10, 2009;
Confirmed by Kara Platt Sale Price $160,000 Land Data Land Size 1.654 Acres or 72,040 SF Front Footage 139 ft Total Frontage: 139 ft Hwy 33 Zoning No zoning Dimensions 139' x 546' x 125' x 607' Shape Rectangular Depth 576 General Physical Data Building Name Ruston Alternator Building Type Single Tenant Gross Area SF 2,800 Per MLS Area Breakdown Office 300 Warehouse 2,500 Construction Type Steel Frame Roof Type Metal Foundation concrete slab
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Sprinklers None Year Built 1994 Indicators Sale Price/Gross Area SF $57.14 Actual or $57.14 Adjusted Floor Area Ratio 0.04 Land to Building Ratio 25.73:1 Remarks (2) 12' overhead doors and (1) 14' overhead door; Storage above shop and office, Whirl Wind model building constructed by Russell Buildings. Entire building is heated and cooled per leasing agent. Out of City Limits and fronts Hwy 33. Vendee built self storage warehouses behind existing building since purchase.
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Improved Sale No. 4
Property Identification Record ID 1309 Property Type Industrial, Industrial (<20,000 SF) Address 1601 Link Drive, Ruston, Lincoln Parish, Louisiana 71270 Location Lot 8, Interstate Commercial Park Sale Data Grantor Donald R Lindsey, et ux Grantee James M Foster, et ux Sale Date March 24, 2008 Deed Book/Page 1244 / 380 Property Rights Fee Financing Cash Verification Donald Lindsey; 318-777-9030, June 10, 2009; Confirmed by
Kara Platt Sale Price $200,000 Land Data Land Size 0.670 Acres or 29,200 SF Zoning D-1, Light Industrial Shape Irregular General Physical Data Building Type Single Tenant Gross Area SF 4,500 Construction Type Steel Roof Type Metal Foundation slab HVAC Central Year Built 2004 estimated
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Improved Sale No. 4 (Cont.) Indicators Sale Price/Gross Area SF $44.44 Actual or $44.44 Adjusted Floor Area Ratio 0.15 Land to Building Ratio 6.49:1 Remarks Grantor stated at date of sale, building did not have finished office, had 1 bathroom, HVAC, 3 exterior metal doors and 2 roll up doors.
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Improved Sale No. 5
Property Identification Record ID 1315 Property Type Industrial, Industrial (<20,000 SF) Property Name Dan Lord Plumbing Address 2609 S Farmerville, Ruston, Lincoln Parish, Louisiana 71270 Sale Data Grantor Ronnie Lynn Walker, et ux Grantee James Daniel Lord, et ux Sale Date January 17, 2007 Deed Book/Page 1212 / 479 Property Rights Fee Conditions of Sale Arm's Length Financing Cash Verification Other sources: Inspection and deed, Confirmed by Kara Platt Sale Price $120,000 Land Data Land Size 1.263 Acres or 55,000 SF Front Footage 200 ft Total Frontage: 200 ft S Farmerville Zoning D-1, Light Industrial Dimensions 200' x 275' Shape Rectangle Depth 275 General Physical Data Building Type Single Tenant Gross Area SF 4,013 Area Breakdown Office 723 Warehouse 3,290
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Construction Type Steel Roof Type Metal Foundation slab HVAC office Sprinklers none Year Built 1982 Indicators Sale Price/Gross Area SF $29.90 Actual or $29.90 Adjusted Floor Area Ratio 0.07 Land to Building Ratio 13.71:1 Remarks Grantee changed property from septic to city sewer, rewired the alarm, added fence and gravel / crushed asphalt to rear of property to stabilize the soil after purchase of property. Previous agreement with Bob Webb (original owner) is that he will rent 1 office space and 1 bay for a flat rate of $400.00 / month
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Improved Sale No. 6
Property Identification Record ID 1316 Property Type Industrial, Industrial (<20,000 SF) Address 2609 S Farmerville, Ruston, Lincoln Parish, Louisiana 71270 Sale Data Grantor Michael Freeman, et al Grantee Ronnie Walker, et ux Sale Date July 07, 2006 Deed Book/Page 1200 / 647 Property Rights Fee Financing cash Verification Ronnie Walker; 318-255-8482, June 10, 2009; Other sources:
Deed, Confirmed by Kara Platt Sale Price $110,000 Land Data Land Size 1.263 Acres or 55,000 SF Front Footage 200 ft Total Frontage: 200 ft S Farmerville Zoning D-1, Light Industrial Dimensions 200' x 275' Shape Rectangle Depth 275 General Physical Data Building Type Single Tenant Gross Area SF 4,013 Area Breakdown Office 723 Warehouse 3,290 Construction Type Steel Roof Type Metal Foundation slab HVAC Office Year Built 1982
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Indicators Sale Price/Gross Area SF $27.41 Actual or $27.41 Adjusted Floor Area Ratio 0.07 Land to Building Ratio 13.71:1 Remarks No improvements made after purchase. Grantee agreed to lease 1 office and 1 bay to original owner Bob Webb for his electrical company for a flat rate of $400.00 / month until he retires.
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REAL ESTATE APPRAISAL SERVICES
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Improved Sale No. 7
Property Identification Record ID 918 Property Type Commercial, Industrial (<20,000 SF) Address 2314 Hwy 33, Ruston, Lincoln Parish, Louisiana Sale Data Grantor Ernest James Holder, etux Grantee Jesse Earl Otwell Sale Date June 28, 2007 Deed Book/Page 1226/597 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Sale Verification Sam Riser; November 27, 2007; Marc Taylor, Appraiser, 318-
254-0302, November 27, 2007; Other sources: Deed, Confirmed by Kara Platt
Sale Price $300,000 Land Data Land Size 1.034 Acres or 45,046 SF Front Footage 154 ft Hwy 33;278 ft Hodges Rd Zoning No zoning Topography adequate Utilities available, sewer private Dimensions 154' x 278' x 156' x 341' Shape Rectangular General Physical Data Building Type Single Tenant Net Rentable SF 8,489 Area Breakdown Large Bldg 4,445 Machine Shop 2,420 Welding Shop 1,624
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Improved Sale No. 7 (Cont.) Construction Type Class "S" Roof Type Metal Foundation Concrete slab Electrical typical Stories 1 Floor Height 14 Indicators Sale Price/Net Rentable SF $35.34 Actual or $35.34 Adjusted Floor Area Ratio 0.19 Land to Building Ratio 5.31:1 Remarks Verified sale with vendor’s father and appraiser Marc Taylor. The main building is 4,445 SF with approximately 1,000 SF of office space. The office has central air and heat, suspended ceiling, vinyl tile flooring and drywall. Shop has 3 overhead doors and basic shop area. The machine shop is 2,420 SF with minimal office finish and overhead door. The welding shop is 1,624 SF with 2 overhead doors and electricity. The welding shop is a shell of a building with no a/c.
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Improved Sale No. 8
Property Identification Record ID 910 Property Type Commercial, Unknown Address 120 Railroad Avenue, Ruston, Lincoln County, Louisiana Sale Data Grantor Hedgepeth Rentals, LLC Grantee Rapid Signs, LLC Sale Date May 24, 2007 Deed Book/Page 1223/516 Property Rights Fee Simple Financing Cash Sale Verification Steven Hedgepeth; 318-222-8367, Other sources: Multi-list,
deed, Confirmed by Justin Preaus Sale Price $120,000 Land Data Land Size 0.175 Acres or 7,623 SF Front Footage 98 ft Railroad Ave Utilities Available Shape Rectangular General Physical Data Building Type Single Tenant SF 4,284 Area Breakdown Office area 1,751 Warehouse 2,533
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Improved Sale No. 8 (Cont.) Construction Type Masonry block Roof Type Metal Foundation Slab HVAC Central Income Analysis Potential Gross Income $14,400 Vacancy $600 Effective Gross Income $13,800 Expenses $3,100 Net Operating Income $10,700 Indicators Sale Price/ SF $28.01 Actual or $28.01 Adjusted Floor Area Ratio 0.56 Land to Building Ratio 1.78:1 Gross Income Multiplier 8.33 Eff. Gross Income Multiplier 8.7 Expenses/Sq. Ft. $0.72 Overall or Cap Rate 8.92% Net Operating Income/Sq. Ft. $2.50 Remarks New home of Rapid Signs. Property located in downtown Ruston area, was listed for 31 days prior to sale. Includes loading/unloading area in front with roll-up door. Previously occupied by The Cleaners of Ruston, and rented for $1,200 per month with the owner being responsible for taxes and half of the insurance costs.
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Improved Sale No. 9
Property Identification Record ID 908 Property Type Commercial, Retail Address 508 South Monroe Street, Ruston, Lincoln Parish, Louisiana User 3 LTRP Sale Data Grantor Matthew A. James Grantee Karim A Dhanani, etux Sale Date August 12, 2005 Deed Book/Page 1187/606 Property Rights Fee Simple Financing Cash Sale User 4 2182 Verification Jill James; 318-255-7970, Other sources: Multi-List, Deed,
Confirmed by Justin Preaus Sale Price $90,000 Land Data Land Size 0.189 Acres or 8,233 SF Front Footage 75 ft South Monroe Utilities Available Shape Rectangular General Physical Data Building Type Single Tenant SF 3,062
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Improved Sale No. 9 (Cont.) Area Breakdown Retail 1,100 Office 700 Warehouse & Other 1,200 Construction Type Metal Bldg Roof Type Metal Foundation Slab HVAC Central system Floor Height 12' est Year Built 1980 Condition Fair Income Analysis Potential Gross Income $13,800 Vacancy $690 Effective Gross Income $13,110 Expenses $4,200 Net Operating Income $8,910 Indicators Sale Price/ SF $29.39 Actual or $29.39 Adjusted Floor Area Ratio 0.36 Land to Building Ratio 2.74:1 Gross Income Multiplier 6.52 Eff. Gross Income Multiplier 6.86 Expenses/Sq. Ft. $1.37 Overall or Cap Rate 9.9% Net Operating Income/Sq. Ft. $2.91 Remarks Metal building on South Monroe Street, just south of West California Avenue. Property was on the market for 87 days. Brick veneer front / asphalt parking / showroom area / office area / warehouse area / storage room / roll-up doors. Purchased for use as a rental property and is currently housing a day-care facility.
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Improved Sale No. 10
Property Identification Record ID 909 Property Type Commercial, Retail Address 7087 Hwy 80 West, Ruston, Lincoln County, Louisiana Sale Data Grantor Edward A. Pardon, etux Grantee Corey Shane Martin, etux Sale Date July 25, 2005 Deed Book/Page 1179/146 Property Rights Fee Simple Financing Cash Sale Verification Other sources: Multi-List, deed Sale Price $62,000 Land Data Land Size 2.000 Acres or 87,120 SF Front Footage 209 ft Hwy 80 Utilities Available Shape Rectangular General Physical Data Building Type Single Tenant SF 3,200 Area Breakdown Office 1,700 Warehouse 1,500
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Improved Sale No. 10 (Cont.) Construction Type Metal Roof Type Metal Foundation Concrete HVAC Central Condition Fair Indicators Sale Price/ SF $19.38 Actual or $19.38 Adjusted Floor Area Ratio 0.04 Land to Building Ratio 27.23:1 Remarks Metal building just outside the city limits of Ruston. Utilized by a flooring company. Metal construction, with office, showroom, warehouse, kitchen, and storage areas. Elevated concrete loading dock in rear.
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Improved Sale No. 11
Property Identification Record ID 917 Property Type Commercial, Miscellaneous Address 2419 Hwy 33, Ruston, Lincoln Parish, Louisiana Sale Data Grantor Philip N. Taylor, etux Grantee T.A.P. of Ruston, LLC Sale Date August 20, 2004 Deed Book/Page 1164/136 Property Rights Fee Simple Conditions of Sale Arm's Length Financing Cash Sale Verification Truman Potts; 318-255-6346, November 28, 2007; Other
sources: Deed, Confirmed by Kara Platt Sale Price $100,000 Land Data Land Size 1.220 Acres or 53,143 SF Front Footage 153 ft Hwy 33;40 ft Camp Road Zoning No zoning Topography Adequate Utilities available, sewer is private Shape Irregular General Physical Data Building Type Single Tenant Gross Area SF 4,900
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Improved Sale No. 11 (Cont.) Area Breakdown Bldg A 2,400 Bldg B 1,000 Bldg C 1,500 Construction Type Class "S" and "D" Roof Type Metal Foundation concrete slab Electrical typical HVAC A/C in main building Stories 1 Indicators Sale Price/Gross Area SF $20.41 Actual or $20.41 Adjusted Floor Area Ratio 0.09 Land to Building Ratio 10.85:1 Remarks Parcel fronts Camp Road and Hwy 33. Spoke with vendee; he purchased property for private use. The main building is steel frame and heated and cooled. It has 280 SF of finished office with suspended ceiling, laminate wood flooring and drywall. He replaced original door fronts with roll up doors to store his antique cars. Building B is wood frame with metal roof and side panels. It is a shell of a building with electricity only. Building C is a steel frame building shell with electricity. Chain link fence around perimeter of property.
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UNIT OF COMPARISON / DISCUSSION OF ADJUSTMENTS
Selecting Unit of Comparison
After sales data has been gathered and verified, systematic analysis begins. Because like
units must be compared, each sale price should be stated in terms of appropriate units of
comparison. The units of comparison selected depend on the appraisal problem and nature of
the property. Units of comparison are used to facilitate comparison of the subject and
comparable properties. Examples of units of comparison include: total property price, price
per square foot of gross building area, price per apartment unit, price per cubic foot of building
area, price per guest room, price per acre, price per square foot, price per front foot, etc. After
an analysis of the comparable sales, the most reliable unit of comparison is concluded to be:
Concluded Unit of Comparison: Price per square foot
Analysis and Adjustment of Comparable Sales
Ideally, if all comparable properties are identical to the subject property, no adjustments would
be required. However, this is rarely the case, especially for non residential properties. Once
the data is collected and verified, it can be organized in a market data grid for comparison.
The grid will illustrate and recognize any important differences between the comparable
properties and the subject. These differences are often referred to as elements of
comparison. The adjustment grid contains 10 basic elements of comparison that should be
considered in sales comparison analysis.
Elements of Comparison
1.) Real Property Rights Conveyed: When real property rights are sold, they may be the sole
subject of the contract or the contract may include other rights, less than all of the real
property rights, or even another property or properties. Before the price of a comparable sale
property can be used in sales comparison analysis, the appraiser must first ensure that the
sale price of the property applies to property rights that are similar to those being appraised.
To do so may require one or more adjustments to the price before specific differences in the
physical real estate can be compared.
2.) Financing Terms: The transaction price of one property may differ from that of an identical
property due to different financing arrangements. The typical definition of market value
recognizes cash equivalent terms provided the calculation of these terms reflects the market.
In the event a property sells via atypical financing terms, the sale must be analyzed and a
conclusion made as to how the below or above market financing influences the sales price.
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3.) Conditions of Sale: Adjustments for conditions of sale usually reflect the motivations of the
buyer and the seller. In many situations the conditions of sale significantly affect transactions
prices; these are not considered arm’s length transactions. Examples warranting an
adjustment for this element of comparison include: assemblage, plottage, liquidation sale,
inter family transfer, and depressed sale. In most cases, a sale that is not considered arm’s
length is omitted from the sales comparison analysis unless market information is available to
support the atypical condition.
4.) Expenditures made immediately after purchase: A knowledgeable buyer considers
expenditures that will have to be made upon purchase of a property because these costs
affect the price the buyer agrees to pay. Such expenditures include: costs to cure deferred
maintenance, costs to demolish and remove any portion of the improvements, costs to
petitions for a zoning change, costs to remediate environmental contamination. These costs
are often quantified in price negotiations and can be discovered through verification of
transaction data. The relevant figure is not the actual cost that was incurred but the cost that
was anticipated by the buyer and seller.
5.) Market conditions (time): Comparable sales that occurred under market conditions
different from those applicable to the subject on the effective date of value require adjustment
for any differences that affect their values. An adjustment for market conditions is made if
general property values have appreciated or depreciated since the transaction dates due to
inflation or deflation or a change in investor’s perceptions of the market over time.
6.) Location: An adjustment for location within a market area may be required when the
locational characteristics of a comparable property are different from those of the subject
property. Excessive locational differences may disqualify a property from use as a
comparable. Locational differences are usually handled with quantitative adjustments.
7.) Physical characteristics: If the physical characteristics of a comparable property and the
subject property differ in many ways, each of these differences may require comparison and
adjustment. Physical differences include differences in building size, quality of construction,
architectural style, building materials, age, condition, functional utility, site size, attractiveness,
and amenities. The adjustment for physical differences may certainly be equal to the cost to
install or remove; however, this is not always the case depending on market perception.
8.) Economic characteristics: Economic characteristics include all the attributes of a property
that directly affect its income. This element of comparison is usually applied to income
producing properties. Characteristics that affect a property’s income include operating
expenses, quality of management, tenant mix, rent concessions, lease terms, lease expiration
dates, renewal options, etc.
9.) Use / Zoning: Any difference in the current use or the highest and best use of a potential
comparable sale and the subject property must be addressed. The appraiser must recognize
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the difference and determine if the sale is an appropriate comparable and, if so, whether an
adjustment is required. In most cases the buyer or buyer’s agent must confirm the ultimate
use for which the comparable was purchased.
10.) Non – realty components of value: Non-realty components of value include personal
property, business concerns, and other items that do not constitute real property but are
included in either the sale price of the comparable or the ownership interest in the subject
property. These items should be analyzed and reported separately from the realty.
See the following page for the market data adjustment grid.
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Subject Imp. Sale 1 Imp.Sale 2 Imp.Sale 3 Imp.Sale 4
Date of Sale: 5/4/2006 12/12/2007 4/13/2007 3/24/2008
Price: $160,000 $115,000 $160,000 $200,000
Rights Conveyed: $0 $0 $0 $0
Financing Adjustment: $0 $0 $0 $0
Conditions of Sale: $0 $0 $0 $0
Cash Equivalent Price: $160,000 $115,000 $160,000 $200,000
Deferred Maintenance: $0 $0 $0
Other expenditures after sale: $0 $0 $0 $0
Total Adjusted Price: $160,000 $115,000 $160,000 $200,000
Less: Land Value: -$30,000 -$30,000 -$60,000 -$30,000
Ind. Improvement Value: $130,000 $85,000 $100,000 $170,000
Market Conditions (% adj.) 5.00% 0.00% 0.00% 0.00%
Adjusted Sales Price: $136,500 $85,000 $100,000 $170,000
Unit of Comparison ($ / SF)
SF (Net Rentable) 4,013 5,000 4,000 2,800 4,500
Price per Unit: $27.30 $21.25 $35.71 $37.78
Other Adjustments: Imp. Sale 1 Imp.Sale 2 Imp.Sale 3 Imp.Sale 4
Location: 0.00% 0.00% 0.00% 0.00%
Building Size: 0.00% 0.00% 0.00% 0.00%
Construction Quality: 0.00% 0.00% -15.00% -15.00%
Architectural Style: 0.00% 0.00% 0.00% 0.00%
Finished Area: 10.00% 0.00% 5.00% 10.00%
Amenities: -2.00% 0.00% 0.00% 0.00%
Age / Condition: 0.00% 0.00% -15.00% -20.00%
Economic: 0.00% 0.00% 0.00% 0.00%
Net Adjustment: 8.00% 0.00% -25.00% -25.00%
Adj. Unit of Comparison: $29.48 $21.25 $26.78 $28.34
SUMMARY OF VALUE
Range of Unit Value: $21.25 to $29.48
Average of Unit Value: $26.46
Median Unit Value: $27.56
Concluded Unit Value: $26.00
Subject - Units / Size: 4,013
Ind. Improvement Value: $104,338
Add: Est. Land Value $48,352
Total: $152,690
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INCOME APPROACH TO VALUE
Income producing real estate is typically purchased as an investment, and from an investor’s
point of view earning power is the critical element affecting property value. One basic
investment premise holds that the higher the earnings, the higher the value, provided the
amount of risk remains constant. An investor who purchases income producing real estate is
essentially trading present dollars for the expectation of receiving future dollars. The income
capitalization approach to value consists of methods, techniques, and mathematical
procedures that I will use to analyze the property’s capacity to generate benefits and convert
these benefits into an indication of present value.
The income approach offers two acceptable methods to value future income for the subject
property. The first method is Direct Capitalization. Direct Capitalization is used in the income
capitalization approach to convert a single year’s income expectancy into a value indication.
This conversion is accomplished in one step, either by dividing the income estimate by an
appropriate income rate or by multiplying it by an appropriate income factor.
Yield capitalization is the second fundamental method used in the income capitalization
approach to value. Yield capitalization is used to convert future benefits into an indication of
present value by applying an appropriate yield rate. Yield capitalization includes:
1) Select an appropriate holding or study period
2) Forecast all future cash flows or cash flow patterns
3) Chooses an appropriate yield rate
4) Convert future benefits into present value by discounting each annual future benefit or
by developing an overall rate that reflects the income pattern, value change, and yield
rate using one of the various yield formulas.
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Contract Rent
The property owner, James D. Lord, has a verbal lease agreement with Bob Webb for the use
of 1 office of 130 SF and 1 bay in warehouse of 1,080 SF for a monthly rent of $400.00. The
lease is month to month and the tenant does not pay any taxes, insurance or util ities.
Market / Economic Rent
Market rent is the rental income a property would probably command in the open market. It is
indicated by current rents that are either paid or asked for comparable space with the same
division of expenses as of the date of the appraisal. Market rent is sometimes referred to as
economic rent.
Conclusion of Market Rent
Economic rent for the subject property is supported by competitive rentals in the market area.
The concluded rents per square foot accounts for the office and warehouse/manufacturing
areas, construction quality and other pertinent physical characteristics. Comparable rentals
are summarized on the following page. The concluded rent for the subject property is $4.50
SF in a modified gross lease situation. Hypothetically, the owner would pay for taxes,
insurance, maintenance and reserve for replacement.
RENTALS SUMMARY TABLE
No. Location Lease Type Building Size Rent/SF
1. 1711 Industrial Drive Modified 5,000 $4.56
2. 508 South Monroe Street Modified 3,062 $4.90
3. 1721 Industrial Modified 5,000 $5.28
4. 1821 Industrial Modified 5,000 $4.20
5. 1729 and 1731 Industrial Drive Modified 5,000 $4.20
6. 1720 Industrial drive Modified 5,000 $5.28
7. 1726 Trade Drive Modified 4,500 $4.00
8. 1711 Trade Drive Modified 4,500 $3.33
9. 2484 Hwy 33 Modified 4,500 $5.87
10. 2505 Hwy 33 Modified 2,430 $4.44
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Improved Lease No. 1
Property Identification Record ID 148 Property Type Industrial Address 1711 Industrial Drive, Ruston, Lincoln County, Louisiana 71270 Location Interstate Commercial Park Physical Data Net Rentable SF 5,000 Construction Type Steel Frame Roof Type Metal Foundation slab Electrical typical General Lease Data Lease Type Modified Gross Lease Tenant Size 5,000 to 5,000 General Tenant Summary Owner Thermon Holstead Verification Thermon Holstead; 318-255-4650, Confirmed by KPlatt Rent Analysis Actual Rent $4.32 - $4.80/SF; $4.56/SF Average Remarks There are 4 units in the building. Each unit has an overhead door, metal entry door and restroom. Each unit is divided by concrete block wall. Owner maintains entire building and pays taxes. Tenants are responsible for the utilities.
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Improved Lease No. 2
Property Identification Record ID 165 Property Type Commercial, Day Care Facility Address 508 South Monroe Street, Ruston, Louisiana Physical Data Net Rentable SF 3,062 Construction Type Prefab metal panel Roof Type Metal Foundation Slab Year Built 1980 Tenant Rent Roll Tenant Name Size Rent/SF Lease Type Beg. Date Term Denene Stringfellow 3,062 $4.90 Modified MTM General Tenant Summary Verification Karim Dhanani; Other sources: Lease Rent Analysis Actual Rent $4.90 - $4.90/SF; $4.90/SF Average Remarks Month-to-month lease on a metal building utilized as a day-care facility. Written lease agreement expired in February of 2008. Modified gross structure. Tenant is responsible for utilities, janitorial expenses, and the maintenance of windows, doors, sidewalks, the building front, and interior walls. Tenant is also responsible for repair items of less than $500.
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Improved Lease No. 3
Property Identification
Record ID 209
Property Type Industrial
Property Name Fastenal
Address 1721 Industrial, Ruston, Lincoln County, Louisiana 71270
Location Interstate Industrial Park
Physical Data
Net Rentable SF 5,000
Area Breakdown Warehouse 2,500
Showroom 2,500
Construction Type Class "S"
Roof Type Metal
Foundation slab
General Tenant Summary
Owner Holstead Rentals
Verification Thermon Holstead; 318-255-4650, October 01, 2009; by K Platt
Rent Analysis
Actual Rent $5.28 - $5.28/SF; $5.28/SF Average
Remarks
Lease is expiring at the end of the year and tenant moving to another location. Entire building is
heated and cooled and 50% is finished retail space. Warehouse has 1 loading dock. Lease
structure is modified
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Improved Lease No. 4
Property Identification
Record ID 210
Property Type Industrial
Property Name Tommy's Feed Store
Address 1821 Industrial, Ruston, Lincoln County, Louisiana 71270
Location Interstate Commercial Park
Physical Data
Net Rentable SF 5,000
Area Breakdown Retail 2,500
Warehouse 2,500
Construction Type Class "S"
Roof Type metal
Foundation slab
General Tenant Summary
Owner Holstead Rentals
Verification Thermon Holstead; 255-4650, October 01, 2009; Confirmed by
KPlatt
Rent Analysis
Actual Rent $4.20 - $4.20/SF; $4.20/SF Average
Remarks
50% of building is finished retail space and the other is inventory storage for feed store. Tenant
made improvements to property. Lease structure is modified gross.
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Improved Lease No. 5
Property Identification
Record ID 211
Property Type Industrial
Address 1729 and 1731 Industrial Drive, Ruston, Lincoln County,
Louisiana 71270
Location Interstate Commercial Park
Physical Data
Construction Type Class "S"
Roof Type metal
Foundation slab
Net Rentable SF 5,000
Tenant Rent Roll
Suite
No.
Tenant Name Size Rent/SF Lease Type Term
1731 AMA North 2,500 $4.80 Modified month to month
1729 Pipe Liner's Warehouse 2,500 $3.60 Modified
General Tenant Summary
Owner Thermon Holstead
Verification Thermon Holstead; 255-4650, October 01, 2009; Confirmed by
Kara Platt
Rent Analysis
Actual Rent $3.60 - $4.80/SF; $4.20/SF Average
Remarks
Pipeliners Warehouse leases a shell with a restroom and AMA North has finished office and bay.
16' eave height
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Improved Lease No. 6 (Listing)
Property Identification
Record ID 212
Property Type Industrial
Address 1720 Industrial drive, Ruston, Lincoln County, Louisiana 71270
Location Interstate Commercial Park
Physical Data
Net Rentable SF 5,000
Area Breakdown Office 1,250
Warehouse 3,750
Construction Type Class "S"
Roof Type metal
Foundation slab
General Lease Data
Typical Lease Term 1-5 years
Lease Type Modified Gross
Tenant Size 5,000 sf
General Tenant Summary
Owner Holstead Rentals
Verification Thermon Holstead; 255-4650, October 01, 2009; Confirmed by
KPlatt
Rent Analysis
Actual Rent $5.28 - $5.28/SF; $5.28/SF Average
Remarks
Space currently for lease, 1,250 SF office, 4 OH doors and canopy on rear of building. 16' eave
height. Lease structure is modified
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Improved Lease No. 7
Property Identification
Record ID 207
Property Type Industrial, Industrial (<20,000 SF)
Property Name National Healthcare Services
Address 1726 Trade Drive, Ruston, Lincoln County, Louisiana 71270
Location Interstate Commercial Park
Physical Data
Net Rentable SF 4,500
Construction Type Metal
Roof Type Metal
Foundation slab
Tenant Rent Roll
Suite
No.
Tenant Name Size Rent/SF Lease Type Term
National Healthcare
Services
2,250 $4.53 Modified 5 years
Cabinet Maker 2,250 $3.47 Modified 1 year
General Tenant Summary
Verification David Brannon; 318-255-9740, October 01, 2009; by KPlatt
Rent Analysis
Actual Rent $3.47 - $4.53/SF; $4.00/SF Average
Remarks
Mr. Brannon gave approximate rents and stated the building is split in half with the cabinet maker
utilizing just a warehouse with restroom. National Healthcare's space is 75% finished office.
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Improved Lease No. 8
Property Identification
Record ID 208
Property Type Industrial, Industrial (<20,000 SF)
Property Name Connie's Consignment
Address 1711 Trade Drive, Ruston, Lincoln County, Louisiana 71270
Location Interstate Industrial Park
Physical Data
Gross Area SF 4,500
Construction Type Class "S"
Roof Type Metal
Foundation slab
Tenant Rent Roll
Tenant Name Size Rent/SF Lease Type Beg.
Date
Term
Connie's Consignment 4,500 $3.33 Modified 2003 month to
month
General Tenant Summary
Owner Holstead Rentals
Verification Connie; September 30, 2009; Confirmed by Kara Platt
Rent Analysis
Actual Rent $3.33 - $3.33/SF; $3.33/SF Average
Remarks
Industrial building with 3 restrooms, 2 OH doors and small office. Tenant converted interior to
consignment shop. Verbal agreement month to month but has been tenant for 6 years.
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Improved Lease No. 9
Property Identification
Record ID 152
Property Type Commercial, Retail
Property Name Ruston Air Conditioning and Heating, Inc
Address 2484 Hwy 33, Ruston, Lincoln County, Louisiana 71270
Physical Data
Net Rentable SF 4,500
Area Breakdown Office 625
Warehouse 3,875
Construction Type Class "S"
Roof Type Metal
Foundation concrete slab
HVAC Central air and heat
Year Built 1978
Tenant Rent Roll
Tenant Name Size Rent/SF Lease Type Term
American Granite and Stone 4,500 $5.87 Modified 2-3 years
General Tenant Summary
Owner Ruston Air Conditioning and He
Verification Keith Moore; 318-254-8531, November 26, 2007; by Kara Platt
Rent Analysis
Actual Rent $5.87 - $5.87/SF; $5.87/SF Average
Remarks
Tenant finished out 25' x 25' of office space to display their granite and stone. Updated rent
10/1/2009 with Judy
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Improved Lease No. 10
Property Identification
Record ID 150
Property Type Commercial, Retail
Property Name Miller Swimming Pool Supply
Address 2505 Hwy 33, Ruston, Lincoln County, Louisiana 71270
Physical Data
Net Rentable SF 2,430
Area Breakdown Showroom/Office 1,215
Supply Area 1,215
Construction Type Class "S"
Roof Type Metal
Foundation concrete slab
Electrical typical
HVAC Central air and heat
Year Built 2001
Condition Good
General Tenant Summary
Owner Max Barrett Enterprises, LLC
Verification Ms. Miller; 255-7665, October 01, 2009; Inspection, by KPlatt
Rent Analysis
Actual Rent $4.44 - $4.44/SF; $4.44/SF Average
Remarks
Entire building is leased by Miller Swimming Pool Supply Company. The building is 60 x 40 and
could equally be divided into 2 suites. The supply area is not finished but has plumbing available.
Property has changed ownership but tenant is still on month to month lease.
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Direct Capitalization
Direct capitalization is a method used in the income approach to convert a single year’s
income expectancy into a value indication. This conversion is accomplished in one step,
either by dividing the income estimate by an appropriate income rate or by multiplying it by an
appropriate income factor.
Direct capitalization is widely used when properties are already operating on a stabilized basis
and there is an ample supply of comparable sales with similar risk levels, incomes, expenses,
physical and locational characteristics, and future expectations. This methodology may be
less useful for properties going through an initial lease-up or when income and / or expenses
are expected to change in an irregular pattern over time. The advantage of direct
capitalization are that it is simple to use, easy to explain, often expresses market thinking, and
provides strong market evidence of value when adequate sales are available.
Potential Gross Income: Potential gross income is usually analyzed on an annual basis.
Potential gross income comprises:
Rent for all space in the property
Rent from escalation clauses
Reimbursement income
All other forms of income to the real estate
Vacancy and collection loss: An allowance for reductions in potential gross income
attributable to vacancies, tenant turnover, and nonpayment of rent.
Effective Gross Income: Effective gross income is calculated as the potential gross income
minus the vacancy and collection loss allowance.
Operating Expenses: The periodic expenditures necessary to maintain the real property and
continue production of the effective gross income, assuming prudent and competent
management.
Fixed Expenses: Operating expenses that generally do not vary with
occupancy and that prudent management will pay for whether the property is
occupied or vacant.
Variable Expenses: Operating expense that generally vary with the level of
occupancy or the extent of services provided.
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Replacement Allowance: An allowance that provides for the periodic
replacement of building components that wear out more rapidly than the
building itself does and must be replaced during the building’s economic life.
Net Operating Income: The actual or anticipated net income that remains after all operating
expenses are deducted from effective gross income, but before mortgage debt service and
book depreciation are deducted.
Overall Capitalization Rate: An income rate for a total real property interest that reflects the
relationship between a single year’s net operating income and the total property price or value;
used to convert net operating income into an indication of overall property value (Ro – Io / Vo).
Derivation of Overall Capitalization Rates: Overall rates can be estimated with various
techniques; the techniques used depend on the quantity and quality of data available. When
supported by appropriate market data, accepted techniques include:
Derivation from comparable sales
Derivation from effective gross income multipliers and net income ratios.
Band of investment
The debt coverage formula
Yield capitalization techniques
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Direct Capitalization
Income
Net Rental Area: 4,013
Concluded Market Rent ($/SF): $4.50
Scheduled Base Rent Revenue: $18,059
Other Revenue: $0
Total Potential Gross Income: 18,059
Vacancy and Collection Loss: 5.00% $903
Effective Gross Income: 17,156
Fixed Expenses
Real Estate Taxes: $1,500
Insurance: $800
Variable Expenses
Management $515
Maintenance / Repairs $500
Reserve for replacement $500
Total Expenses $3,315
Net Operating Income $13,841
Concluded Overall Capitalization Rate 9.50%
Indicated Value from Income Approach $145,695
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RECONCILIATION OF VALUE
All three approaches to value were developed in this appraisal. The range and point value for
the subject property is offered below. All three approaches are thought to offer credible
indications of value to support the final conclusion.
Value Indications
Cost Approach = $150,379
Sales Comparison Approach = $152,690
Income Approach = $145,695
Range of Value = $145,695 to $152,690
Average Value = $149,588
Median Value = $150,379
Final Opinion of Value = $150,000 rounded
Reasonable Range of Value: $145,000 to $160,000
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ADDENDA
SUBJECT PHOTOGRAPHS (7/28/2010) ............................................................................................................ 96
LEGAL DESCRIPTION......................................................................................................................................... 100
TAX ASSESSMENTS ............................................................................................................................................. 101
FLOOD HAZARD MAP ......................................................................................................................................... 107
ZONING MAP & REGULATIONS ...................................................................................................................... 108
QUALIFICATIONS OF MICHAEL A. GRAHAM, MAI .................................................................................. 110
QUALIFICATIONS OF: KARA A. PLATT ..................................................................................................... 111
DEFINITIONS OF TERMS ................................................................................................................................... 112
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SUBJECT PHOTOGRAPHS (7/28/2010)
Front of subject property looking NE Front of subject property looking East
Front of subject property looking SE North side of property
Looking North on S Farmerville Looking South on S Farmerville
MICHAEL A. GRAHAM, MAI
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Northeast corner of building Northeast corner of building
Rear area or east side of property Rear of subject property slightly drops off
Looking West toward the subject building from
East property line Overview of rear of property
MICHAEL A. GRAHAM, MAI
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South property line Rolling gate and fencing on property
Dan Lord Office Bob Webb Office
Bathroom Overview of warehouse
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Overview of warehouse Overview of warehouse
Overview of warehouse Overview of warehouse
Overview of warehouse bay dividers Overview of warehouse
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LEGAL DESCRIPTION
For reference only. This legal should not be used without proper legal authority. Survey is recommended.
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TAX ASSESSMENTS
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FLOOD HAZARD MAP
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ZONING MAP & REGULATIONS
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QUALIFICATIONS OF MICHAEL A. GRAHAM, MAI
Michael A. Graham, MAI Real Estate Appraisals and Consultation
1300 Hudson Lane – Suite 1
Monroe, Louisiana 71201
(318) 387-9092
EDUCATION: Degree: Bachelor of Science May 1993 Institution: Louisiana State University College: College of Business Administration Major: Real Estate Finance LICENSES / DESIGNATIONS / AFFILIATIONS: Member of Appraisal Institute # 11985 (MAI) State of Louisiana Certified General Real Estate Appraiser # GO938 Louisiana Real Estate Salesperson # 64033 Louisiana Real Estate Appraisers Board Treasurer of the Louisiana Chapter of the Appraisal Institute BACKGROUND: 1984 - 1988 Ouachita Christian High School; raised in Monroe, LA 1988 - 1993 Louisiana State University; School of Business 1993 - Present Independent fee appraiser based in Monroe, LA 1994 – Present Louisiana Real Estate Salesperson 1995 – 1998 Residential construction and speculation home development 1996 – Present Manager of multi-tenant office complex, self storage facility, and multi-tenant
industrial development. 2001 – Present Adjunct instructor at LA Tech University (Finance 443 – The Appraisal of Real Estate) PROPERTY TYPES APPRAISED: Vacant commercial property / Residential subdivision developments / Farm Land / Timber land / Multifamily residential / High and low rise office developments / Big box retail / Strip center retail / Various build to suit developments / Restaurants / Limited service hotels / Convenience stores / Residential homes / lndustrial land and improved properties- light and heavy / Special purpose properties / Self storage facilities / Car dealerships / Eminent domain assignments PARTIAL LIST OF CLIENTS: Several Banks & Savings and Loans in Ouachita Parish as well as others across North Louisiana / Attorneys / CPA's / Engineering Firms / State & Local Governmental Agencies / Federal Government / Private Individuals & Investors / Utility Companies / EXPERT WITNESS TESTIMONY: Qualified as expert witness in real estate appraisal for the following Parishes: Lincoln, Union, Catahoula, Concordia, Sabine, Caldwell, Jackson, LaSalle. References available upon request.
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QUALIFICATIONS OF: KARA A. PLATT
EDUCATION: Texas A&M University B.B.A., Marketing 1998
International Certificate in Business 1998 Blinn Junior College A.S., Science 1998 LICENSES/ DESIGNATIONS/ CERTIFICATIONS: Louisiana General Real Estate Appraiser License #G2088
Completed/ passed the Louisiana Certified General Appraiser Exam, 15 hour USPAP course, Yield Capitalization of Income Property, Direct Capitalization of Income Property, Income Property Appraisal, Basic Appraisal Procedures, Basic Appraisal Principles, Real Estate Appraisal
Texas All Line Insurance License #491298 Louisiana All Line Insurance License #486435 Oklahoma All Line Insurance License #40082414 Florida All Line Insurance License #E142043 North Carolina All Line Insurance License#0002443124 Flood Certified Adjuster FCN: 50000041 BACKGROUND: 1989-1992 Buffalo High School, Buffalo, Texas 1992-1998 Blinn Junior College 1995-1998 Texas A&M University, College of Business 1998-2006 State Farm Insurance Catastrophe Claims Adjuster Present Independent Fee Associate Appraiser Present Independent Catastrophe Claims Adjuster PROPERTY TYPES APPRAISED: Vacant Commercial Property/ Farm land/ Multi Family Residential/ Residential homes/ Industrial land and improved properties/ Special purpose properties/ Convenience stores/ Restaurants/ Multi-tenant commercial/ Mobile home parks/ Warehouses CONDEMNATIONATION AND INSTITUTIONAL APPRAISALS:
#318-04-0010- LA 145 to LA 821
#023-03-0022- US HWY 425 Bastrop to Log Cabin
University of Louisiana at Monroe
Grambling State University
Louisiana Tech University
City of Monroe
City of Ruston
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DEFINITIONS OF TERMS
MARKET VALUE: "Market Value" is defined by the Department of Transportation and Development,
Appraisal Handbook, Chapter 5, 501 as:
"The most probable price, in terms of money, which a property should bring in a competiti ve and open
market under all conditions requisite to a fair 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 of a sale effective on 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 each act in what they consider their own best
interest;
(3) A reasonable time is allowed for exposure in the open markets;
(4) Payment is made in cash or its equivalent;
(5) Financing, if any, is on terms generally available in the community as of a specified date. This
financing should be typical for the property type in its locale;
(6) The price represents the normal consideration for the property sold unaffected by special financing
amounts, and/or terms, services, fees, costs, and credits incurred in the transaction."
HIGHEST AND BEST USE:
Highest and best use reflects a basic assumption about real estate market behavior - that the price a
buyer will pay for a property is based on his or her conclusions about the most profitable use of the site
or property. Therefore, sites and improved properties tend to be put to their highest and best use set
forth in a appraisal may or may not conform with the existing use. The determination of highest and
best use must be based on careful consideration of prevailing market conditions, trends affecting
market participation and change, and the existing use of the subject property.
HIGHEST AND BEST USE HAS BEEN DEFINED AS:
The reasonably probable and legal use of vacant land or an improved property, which is physically
possible, appropriately supported financially feasible, and that results in the highest value. The four
criteria the highest and best use estimate must meet are:
1. Legally permissible.
2. Physically possible.
3. Financially feasible.
4. Maximum profitability.**
*REAL ESTATE APPRAISAL TERMINOLOGY, The American Institute of Real Estate Appraisers, The
Society of Real Estate Appraisers, First Printing, 1981.
**THE DICTIONARY OF REAL ESTATE APPRAISAL, The American Institute of Real Estate
Appraisers, Second Edition, 1984, 1989.