COMPLETE APPRAISAL OF
REAL PROPERTY
Hidden Valley Exchange Retail Center
3010 South State Route 291
Independence, Jackson County, Missouri
64058
IN A RESTRICTED
APPRAISAL REPORT
As of 4/20/04
Prepared For:
SPECS, Inc.
4200 Blue Ridge Boulevard, Suite LH-06
Kansas City, Missouri 64133
Prepared By:
Cushman & Wakefield of Illinois, Inc.
Valuation Services, Advisory Group
455 North Cityfront Plaza, Suite 2800
Chicago, IL 60611
C&W File 10: 04-248-04
Cushman & Wakefield
Cushman & Wakefield of Illinois, Inc.
455 North Cityfront Plaza, Suite 2800
Chicago, IL 60611
312.470.1817 Tel
312.470.2317 Fax
randal_dawson@cushwake.com
April 30, 2004
Jim Hoyt
General Partner
SPECS, Inc.
4200 Blue Ridge Boulevard, Suite LH-06
Kansas City, Missouri 64133
Re: Complete Appraisal of Real Property
In a Restricted Report
Hidden Valley Exchange Retail Center
3010 South State Route 291
Independence, Jackson County, Missouri 64058
C&W File ID: 04-248-04
Dear Mr. Hoyt:
In fulfillment of our agreement as outlined in the Letter of Engagement, we are
pleased to transmit our complete appraisal report on the property referenced
above.
The value opinion reported below is qualified by certain assumptions, limiting
conditions, certifications, and definitions, which are set forth in the report.
We particularly call your attention to the following extraordinary assumptions
and hypothetical conditions:
Extraordinary Assumptions: This appraisal employs no extraordinary assumptions.
Hypothetical Conditions: This appraisal employs no hypothetical conditions.
This report was prepared for SPECS, Inc. and is intended only for their
specified use. It may not be distributed to or relied upon by any other persons
or entities without the written permission of Cushman & Wakefield Illinois, Inc.
This appraisal report has been prepared in accordance with our interpretation of
your institutions guidelines, Title XI of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (FIRREA), and the Uniform Standards of
Professional Appraisal Practice (USPAP), including the Competency Provision.
The property was inspected by and the report was prepared by Randal D. Dawson,
MAI.
This appraisal employs only the Income Capitalization Approach. Based on our
analysis and knowledge of the subject property type and relevant investor
profiles, it is our opinion that this approach would be considered necessary and
applicable for market participants. The client has requested that we provide
them with a restricted use report. Therefore, we have not employed the Cost
Approach or the Sales Comparison Approach to develop an opinion of market value.
Jim Hoyt
SPECS, Inc.
April 30, 2004
Page 2
Based on our Complete Appraisal as defined by the Uniform Standards of
Professional Appraisal Practice, we have developed an opinion that the market
value of the leased fee estate of the referenced property, subject to the
assumptions and limiting conditions, certifications, extraordinary and
hypothetical conditions, if any, and definitions, "as-is" on April 20, 2004 is:
ONE MILLION FOUR HUNDRED THOUSAND DOLLARS
$1,400,000
Based on recent market transactions, as well as discussions with market
participants, a sale of the subject property at the above-stated opinion of
market value would have required an exposure time of approximately twenty-four
(24) months. Furthermore, a marketing period of approximately twenty-four (24)
months is currently warranted for the subject property.
This letter is invalid as an opinion of value if detached from the report, which
contains the text, exhibits, and Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD OF ILLINOIS, INC.
/S/ Randal D. Dawson
- ------------------------------
Randal D. Dawson, MAI
Associate Director
Missouri Certified General Appraiser
License No. RA-003304
randal- dawson@cushwake.com
312.470.1817 Office Direct 312.470.2317 Fax
Common Property Name: Hidden Valley Exchange Retail Center
Location: 3010 South State Route 291
Independence, Jackson County, Missouri 64058
The site is located east of Missouri Highway 291
approximately one mile north of US 70.
Property Description: The property consists of a 1-story multi-tenant
neighborhood shopping center containing 27,200 square
feet of gross leasable area on a 2.08-acre parcel of
land.
Assessor's Parcel Number: 25-910-09-05-01-1-00-000
Interest Appraised: Leased Fee Estate
Date of Value: April 20, 2004
Date of Inspection: April 20, 2004
Ownership: Secured Investment Resources, LP
Occupancy: The subject property is 66.8% occupied by 10 tenants.
Current Property Taxes
Total Assessment: $423,726
2003/2004 Property Taxes:$36,779
Highest and Best Use
If Vacant: A retail center developed to the highest density
possible
As Improved: As it is currently developed
Site & Improvements
Zoning: CP-2; Planned General Commercial District
Land Area: 2.08 acres
90,591 square feet
Number of Stories: 1
Year Built: 1986
Type of Construction: Steel and masonry
Gross Building Area: 27,200 square feet
Gross Leasable Area:
- ------------------------ ------------- ------------------- --------------
Component Owned Area % of
Total
- ------------------------ ------------- ------------------- --------------
- ------------------------ ------------- ------------------- --------------
In-Line 27,200 SF
Total Center GLA 27,200 SF 100%
Total Owned GLA 27,200 SF 100%
- ------------------------ ------------- ------------------- --------------
Parking Type: Surface
Number of Parking Spaces: 90
SUMMARY OF SALIENT FACTS
VALUE INDICATORS
Income Capitalization Approach
Discounted Cash Flow
Projection Period: 11 years
Holding Period: 10 years
Terminal Capitalization Rate: 10.50%
Internal Rate of Return: 12.50%
Indicated Value: $1,400,000
Reconciled Value: $1,400,000
Per Square Foot (GLA): $51.47
FINAL VALUE CONCLUSION
Market Value As-Is Leased Fee: $1,400,000
Per Square Foot (GLA): $51.47
Exposure Time: 24 months
Marketing Time: 24 months
INSURABLE VALUE
Conclusion: $1,700,000
Extraordinary Assumptions and Hypothetical Conditions
Extraordinary Assumptions
An extraordinary assumption is defined by the Uniform Standards of Professional
Appraisal Practice as "an assumption, directly related to a specific assignment,
which, if found to be false, could alter the appraiser's opinions or
conclusions. Extraordinary assumptions presume as fact otherwise uncertain
information about physical, legal or economic characteristics of the subject
property; or about conditions external to the property, such as market
conditions or trends; or about the integrity of data used in an analysis."
This appraisal employs no extraordinary assumptions.
Hypothetical Conditions
A hypothetical condition is defined by the Uniform Standards of Professional
Appraisal Practice as "that which is contrary to what exists but is supposed for
the purpose of analysis. Hypothetical conditions assume conditions contrary to
known facts about physical, legal, or economic characteristics of the subject
property; or about conditions external to the property, such as market
conditions or trends; or about the integrity of data used in an analysis."
This appraisal employs no hypothetical conditions.
[PHOTO OMITTED]
Exterior of Subject
[PHOTO OMITTED]
Exterior of Subject
[PHOTO OMITTED]
Street View Facing North
[PHOTO OMITTED]
Street View Facing South
[PHOTO OMITTED]
Rear of Subject
[PHOTO OMITTED]
Rear of Subject
TABLE OF CONTENTS
INTRODUCTION 1
REGIONAL MAP 5
REGIONAL ANALYSIS 6
LOCAL AREA MAP 13
LOCAL AREA ANALYSIS 14
RETAIL MARKET & TRADE AREA ANALYSIS 15
SITE DESCRIPTION 25
IMPROVEMENTS DESCRIPTION 26
REAL PROPERTY TAXES AND ASSESSMENTS 29
Z0NING 30
HIGHEST AND BEST USE 31
VALUATION PROCESS 33
INCOME CAPITALIZATION APPROACH 35
RECONCILIATION AND FINAL VALUE OPINION 50
INSURABLE VALUE 51
ASSUMPTIONS AND LIMITING CONDITIONS 52
CERTIFICATION 0F APPRAISAL 55
ADDENDA 56
INTRODUCTION
Identification of Property
Common Property Name: Hidden Valley Exchange Retail Center
Location: 3010 South State Route 291
Independence, Jackson County, Missouri 64058
The site is located east of Missouri Highway
291 approximately one mile north of US 70.
Property Description: The property consists of a 1-story multi-tenant
neighborhood shopping center containing 27,200
square feet of gross leasable area on a 2.08-acre
parcel of land.
Assessor's Parcel Number: 25-910-09-05-01-1-00-000
Property Ownership and Recent History
Current Ownership: Secured Investment Resources, LP
Sale History: To the best of our knowledge, the property has not
transferred within the past three years
Current Disposition: To the best of our knowledge, the property is not
under contract of sale nor is it being marketed for
sale.
Intended Use and Users of the Appraisal
This appraisal is intended to provide an opinion of the market value of the
leased fee interest in the property for the exclusive use of SPECS, Inc. in
evaluating potential financing. All other uses and users are unintended, unless
specifically stated in the letter of transmittal.
Dates of Inspection and Valuation
The value conclusion reported herein is as of April 20, 2004. The property was
inspected on April 20, 2004 by Randal D. Dawson, MAI
Property Rights Appraised
Leased Fee interest.
Scope of the Appraisal
This is a complete appraisal presented in a Restricted report, intended to
comply with the reporting requirements set forth under the Uniform Standards of
Professional Appraisal Practice (US PAP) for a Restricted Appraisal Report.
In addition, the report was also prepared to conform to the requirements of the
Code of Professional Ethics of the Appraisal Institute and the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), Title XI
Regulations.
In preparation of this appraisal, we analyzed rental data, and considered the
input of buyers, sellers, brokers, property developers and public officials.
Additionally, we investigated the general regional economy as well as the
specifics of the local area of the subject.
The scope of this appraisal required collecting primary and secondary data
relative to the subject property. The depth of the analysis is intended to be
appropriate in relation to the significance of the appraisal issues as presented
herein. The data have been analyzed and confirmed with sources believed to be
reliable, whenever possible, leading to the value conclusions set forth in this
report. In the context of completing this report, we have made a physical
inspection of the subject property. The valuation process involved utilizing
generally accepted market-derived methods and procedures considered appropriate
to the assignment.
This appraisal employs only the Income Capitalization Approach. Based on our
analysis and knowledge of the subject property type and relevant investor
profiles, it is our opinion that this approach would be considered necessary and
applicable for market participants. The client has requested that we provide
them with a restricted use report. Therefore, we have not employed the Cost
Approach or the Sales Comparison Approach to develop an opinion of market value.
Definitions of Value, Interest Appraised and Other Terms
The following definitions of pertinent terms are taken from the Dictionary of
Real Estate Appraisal, Fourth Edition (2002), published by the Appraisal
Institute, as well as other sources.
Market Value
Market value is one of the central concepts of the appraisal practice.
Market value is differentiated from other types of value in that it is
created by the collective patterns of the market. A current economic
definition agreed upon by agencies that regulate federal financial
institutions in the United States of America follows, taken from the
glossary of the Uniform Standards of Professional Appraisal Practice of The
Appraisal Foundation:
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 US 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.
Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate, subject to the
limitations imposed by the governmental powers of taxation, eminent domain,
police power, and escheat.
Leased Fee Estate
An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the leased
fee owner) and the leased fee are specified by contract terms contained
within the lease.
Leasehold Estate
The interest held by the lessee (the tenant or renter) through a lease
conveying the rights of use and occupancy for a stated term under certain
conditions.
Market Rent
The rental income that a property would most probably command on the open
market, indicated by the current rents paid and asked for comparable space
as of the date of appraisal.
Cash Equivalent
A price expressed in terms of cash, as distinguished from a price expressed
totally or partly in terms of the face amounts of notes or other securities
that cannot be sold at their face amounts.
Market Value As Is on Appraisal Date
The value of specific ownership rights of an identified parcel of real
estate as of the effective date of the appraisal; related to what
physically exists and excludes all assumptions concerning hypothetical
conditions.
Prospective Value Upon Completion of Construction
The value of a property on the date that construction is completed, based
on market conditions projected to exist as of that completion date. This
value is not the market value as of a specified future date, but rather is
a projected value based on assumptions that mayor may not occur. This value
factors in all costs associated to lease-up the property to stabilized
occupancy.
Prospective Value Upon Stabilized Occupancy
The value of a property at a point in time when all improvements have been
physically constructed and the property has been leased to its optimum
level of long term occupancy. At such point, all capital outlays for tenant
improvements, leasing commissions, marketing costs, and other carrying
charges are assumed to have been incurred.
Exposure Time and Marketing Time
Exposure Time
Under Paragraph 3 of the Definition of Market Value, the value opinion
presumes that "A reasonable time is allowed for exposure in the open
market". Exposure time is defined as the length of time the property
interest being appraised would have been offered on the market prior to the
hypothetical consummation of a sale at the market value on the effective
date of the appraisal. Exposure time is presumed to precede the effective
date of the appraisal.
The reasonable exposure period is a function of price, time and use. It is not
an isolated opinion of time alone. Exposure time is different for various types
of real estate and under various market conditions. As noted above, exposure
time is always presumed to precede the effective date of appraisal. It is the
length of time the property would have been offered prior to a hypothetical
market value sale on the effective date of appraisal. It is a retrospective
opinion based on an analysis of recent past events, assuming a competitive and
open market. It assumes not only adequate, sufficient and reasonable time but
adequate, sufficient and a reasonable marketing effort. Exposure time and
conclusion of value are therefore interrelated.
Based on our review of national investor surveys, discussions with market
participants and information gathered during the sales verification process, a
reasonable exposure time for the subject property at the value concluded within
this report would have been approximately twenty-four (24) months. This assumes
an active and professional marketing plan would have been employed by the
current owner.
Marketing Time
Marketing time is an opinion of the time that might be required to sell a
real property interest at the appraised value. Marketing time is presumed
to start on the effective date of the appraisal and take place subsequent
to the effective date of the appraisal. The opinion of marketing time uses
some of the same data analyzed in the process of estimating reasonable
exposure time and it is not intended to be a prediction of a date of sale.
We believe, based on the assumptions employed in our analysis, as well as our
selection of investment parameters for the subject, that our value conclusion
represents a price achievable within twenty-four (24) months.
Legal Description
The subject site is identified by Jackson County as 25-910-09-05-01-1-00-000.
The legal description is presented in the Addenda of the report.
[PHOTO OMITTED]
REGIONAL MAP
REGIONAL ANALYSIS
Introduction
The short- and long-term value of real estate is influenced by a variety of
factors and forces that interact within a given region. Regional analysis serves
to identify those forces that affect property value, and the role they play
within the region. The four primary forces that influence real property value
include environmental characteristics, governmental forces, social factors, and
economic trends. These forces determine the supply and demand for real property,
which, in turn, affect market value. .
The subject property is located in the City of Independence in eastern portion
of the Kansas City MSA.
Economic & Demographic Profile
The following profile of the Kansas City MSA was provided by Economy.com, a
leading provider of economic, financial, and industry information.
Economy.com's core assets of proprietary editorial and research content as well
as economic and financial databases are a source of information on national and
regional economies, industries, financial markets, and demographics. The company
is staffed with economists, data specialists, programmers, and online producers
who create a proprietary database.
Economy.com's approach to the analysis of the U.S. economy consists of building
a large-scale, simultaneous-equation econometric models, which they simulate and
adjust with local market information, creating a model of the U.S. macro economy
that is both top-down and bottom-up. As a result, those variables that are
national in nature are modeled nationally while those that are regional in
nature are modeled regionally. Thus, interest rates, prices, and business
investment are modeled as national variables; key sectors such as labor markets
(employment, labor force), demographics (population, households, and migration),
and construction activity (housing starts and sales) are modeled regionally and
then aggregated to national totals. This approach allows local information to
influence the macroeconomic outlook. Therefore, changes in fiscal policy at the
national level (changes in tax rates, for example) are translated into their
corresponding effects on state economies. At the same time, the growth patterns
of large states, such as California, New York, and Texas, playa major role in
shaping the national outlook.
In addition on a regional basis, the modeling system is explicitly linked to
other states through migration flows and unemployment rates. Economy.com's model
structure also takes into account migration between states.
[GRAPHIC OMITTED]
Kansas City
Employment Growth Rank
Best=1
Worst=325
2002-04
265
5th quintile
2002-07
222
4th quintile
MSA Life Cycle Phase
Growth/Mature
Best=1
Worst=325
Vitality
21
1st quintile
Cost of doing business U.S.=100%
95%
Cost of Living U.S.=100%
97%
- ---------------------------------------------------------------
[Graphic Omitted-Line Graph of Relative Employment Performance-
1990-2007
- ---------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002 Indicators
56.7 59.8 63.0 66.3 69.4 69.4 70.8 Gross
Metro
Product,
C$B
4.9 5.3 5.3 5.3 4.6 0.0 2.1 % Change
881.4 916.5 944.2 965.3 981.6 967.2 949.8 Total
Employment
(000)
2.4 4.0 3.0 2.2 1.7 -1.5 -1.8 % Change
4.1 3.7 3.8 3.0 3.3 4.4 5.7 Unemployment
Rate
5.2 5.9 7.9 5.3 7.7 3.4 1.8 Personal
Income
Growth
1,699.9 1,722.7 1,742.8 1,761.9 1,782.2 1,804.0 1,828.2 Population,
(000)
9,695 9,396 10,118 11,231 9,237 9,714 10,746 Single-Fam1ily
Permits
2,649 4,116 3,685 5,160 3,640 5,196 3,068 Multifamily,
Permits
98.8 106.4 113.7 120.4 125.9 134.6 137.1 Existing
Home
Price
($Ths)
5,955 6,397 11,220 9,331 8,207 19,181 23,445 Mortgage
Originations
($Mil)
12.1 12.0 8.8 7.9 8.4 9.7 11.6 Net
Migration
(000)
6,709 7,664 8,419 7,528 7,193 9,239 10,811 Personal
Bankruptcies
Indicators 2003 2004 2005 2006 2007
Gross
Metro
Product,
C$B 72.3 74.3 76.6 79.1 81.4
% Change 2.1 2.8 3.1 3.2 2.9
Total
Employment
(000) 936.6 942.6 962.0 980.4 994.4
% Change -1.4 0.6 2.1 1.9 1.4
Unemployment
Rate 5.5 5.4 5.3 5.1 4.9
Personal
Income
Growth 2.2 3.9 4.3 4.4 4.7
Population,
(000) 1,846.3 1,854.9 1,866.1 1,877.8 1,886.6
Single-
Fam1ily
Permits 11,813 10,981 9,631 9,399 9,197
Multifamily,
Permits 2,723 4,563 4,104 4,366 4,563
Existing
Home
Price
($Ths) 145.6 154.3 160.2 164.6 172.2
Mortgage
Originations
($Mil) 31,420 15,798 10,267 10,799 11,417
Net
Migration
(000) 5.3 -4.1 -1.7 -1.2 -4.2
Personal
Bankruptcies 11,953 11,417 10,394 10,270 10,380
STRENGTHS & WEAKNESSES
STRENGTHS
- - Favorable cost structure.
- - Well developed transportation and distribution network.
- - Very large presence of federal government jobs.
WEAKNESSES
- - Overwhelming dependence on Sprint and
telecom.
- - KAN suffers from suburban sprawl.
- -------------------------------------------------------------
[GRAPHIC OMITTED]
CURRENT EMPLOYMENT TRENDS
December 2003 Employment Growth
% Change Year Ago
Total -1.1
Construction -5.3
Manufacturing 4.1
Trade 0.0
Trans/Utilities 0.0
Information -4.5
Financial Activities 2.0
Prof & Business Svcs -1.9
Edu & Health Svcs -2.4
Leisure & Hospitality -4.7
Other Services -2.1
Government 0.1
- -------------------------------------------------------------
FORECAST RISKS
[Graphic Omitted-Down Arrows]
Short Term [Down Arrow]
Long Term [Down Arrow]
Risk-Adjusted Return '02-'07
0.35%
UPSIDE
- - Development of biotech takes hold beyond current expectations, yielding
significant new jobs and high incomes.
DOWNSIDE
- - Sprint is bought out and its remaining labor force is shifted to other
locations.
- - New growth industries fail to emerge in the wake of Sprint's downsizing.
- -------------------------------------------------------------
Recent Performance. Kansas City's economy continues to weaken. While the
state has enjoyed a modest turnaround over the last 12 months, KAN has skidded
further into recession due to lingering weakness in the business services,
healthcare, tourism and information industries. Manufacturing actually rose in
the latter half of 2003 thanks in part to vehicle production, but that growth is
not expected to continue. The pace of homebuilding has stabilized at a high
level and is expected to decelerate over the next few quarters. Office and
industrial markets remain bloated with excess inventory, although vacancy rates
are no longer rising.
Life sciences. Thanks to its several research institutions, KAN ranks among
the top 50 metro areas for biotech research, according to the Brookings
Institution. The Stowers Institute for Medical Research, home to around 100
scientists and a $1.6 billion endowment, is the most promising of KAN's
facilities. The institute now plans to double its research space within five
years. The Midwest Research Institute also carries out pharmaceutical and
biotech research for government and industry. The faculty at the university of
Kansas Medical Center carries out tens of millions of dollars in externally
funded research annually. And Children's Mercy Hospital performs research in
pediatric pharmacology. With the expansion of the Stowers Institute, funding
inflows will accelerate over the next several years, helping KAN to attract
skilled workers and venture capital.
Income trends. Personal income growth in KAN is projected to lead the state
and region, but lag the national average. However, on a per capita basis, income
growth should beat the U.S. average, showing that what will really constrain
income growth in KAN is a poor population trend. Kan and the U.S. had a nearly
identical pace of population growth over the last decade, but in the coming ten
years, KAN's growth is forecast to slow to just over half the U.S. rate, as
migration flows, dominated by relocating baby boomers, shift to southern and
western states favored by retirees. Boomers waiting longer to retire than had
previous cohorts could postpone the migration wave or at least spread its impact
over time. Still, the nation's demographic outlook places KAN's income growth at
risk, which in turn will handicap the metro's income-driven sectors like the
housing market, trade, and locally-oriented services.
Economic diversity. One strong advantage for KAN's economy is its diverse
industrial mix. According to Economy.com estimates, KAN ranks in the top 10% of
metro areas in terms of industrial diversity. A broad industry array affords a
measure of employment stability in downturns and also helps usher in recovery by
exposing the local economy to the industries that turn around first. The one
factor setting KAN apart is the area's large information industry. Telecom
carriers alone account for upward of 20,000 local jobs or 2% of employment. And
the information industry as a whole occupies twice the share of employment as it
does nationally. Sprint's reorganization is ongoing, with the impact of its
latest collaboration with IBM's Business Consulting Services likely to be zero
to negative net job gains in KAN in the coming year. However, the information
industry as a whole should advance by the second half, and its high wages will
assure that gains in that industry are dispersed to other sectors of the economy
like trade and housing.
Kansas City's economy is floundering and its recover will come later and
with less vigor than the nation's. Consolidation in telecom and manufacturing is
a looming short-term risk. Longer term, KAN's diversity and its promising
drivers, such as transportation, information and life sciences will keep the
metro area growing on par with the U.S. average.
David Givens
February 2004
EMPLOYMENT & INDUSTRY
TOP EMPLOYERS
Sprint Corporation 21,000
Community Health Group 7,326
DST Systems, Inc. 6,232
Ford Motor Company 5,808
Hallmark Cards, Inc. 5,000
Saint Luke's Health System 4,123
General Motors Corporation 3,200
AT&T Corporation 3,154
SBC Communications, Inc. 3,000
Children's Mercy Hospital & Clinics 2,990
Turman Medical Center 2,801
University of Missouri-Kansas City 2,790
Honeywell, Inc. 2,789
KU Med 2,784
Cerner Corporation 2,626
Black & Veatch, LLP 2,552
UMB Financial Corporation 2,507
Applebee's International, Inc. 2,478
American Airlines 2,425
University of Kansas Medical Center 2,376
Source: The Business Journal, March 2003
Public
Federal.......................................27,636
State.........................................12,011
Local.........................................97,038
2002
- -----------------------------------------------------------------
INDUSTRY DIVERSITY
Most Diverse (U.S.)
1.0
0.80
KAN 0.74
0.60
0.40
0.20
0.00
Least Diverse
EMPLOYMENT VOLATILITY
DUE TO U.S. FLUCTUATIONS
[GRAPHIC OMITTED-Bar Chart]
Not due to US = 7%
Due to US = 93%
RELATIVE TO U.S.
[Graphic Omitted-Bar Chart
US: 100
KAN: 148
- ----------------------------------------------------------------
COMPARATIVE EMPLOYMENT AND INCOME
% of Total Employment Average Annual Earnings
Sector KAN MO US KAN MO US
Construction 5.2% 5.0% 5.2% $44,724 $37,450 $39,845
Manufacturing 8.4% 12.0% 12.0% $49,004 $43,741 $48,756
Durable 57.0% 60.3% 62.0% nd $44,671 $50,404
Nondurable 43.0% 39.7% 38.0% nd $42,236 $45,969
Transport/Utilities4.9% 4.1% 3.6% $44,192 $39,474 $44,972
Wholesale Trade 5.0% 4.5% 4.4% $53,796 $47,434 $51,842
Retail Trade 11.3% 11.6% 11.7% $22,034 $20,067 $22,635
Information 5.5% 2.6% 2.6% $70,224 $74,881 $69,569
Financial
Activities 7.4% 5.9% 6.0% $35,853 $29,676 $41,740
Prof. and Bus.
Services 12.9% 11.3% 12.4% $42,515 $40,487 $43,053
Educ. and Health
Services 11.1% 13.0% 12.5% $33,988 $31,414 $34,032
Leisure and Hosp.
Services 9.3% 9.6% 9.0% $18,331 $17,014 $19,135
Other Services 4.6% 4.4% 3.9% $19,546 $17,992 $19,842
Government 14.4% 15.7% 16.2% $42,663 $37,342 $42,939
<FN>
Source: Percent of total employment - Economy.com & BLS, 2002; Average annual
earnings - BEA, 2001
</FN>
- ------------------------------------
HOUSE PRICES
[GRAPHIC OMITTED-Line Graph (1987-2003)]
- ------------------------------------
CREDIT QUALITY
Fitch: N/A
Moody's: County = Aa1
LEADING INDUSTRIES
NAICS Industry Employees (000)
GVF Federal Government 27.6
4521 Department Stores 17.2
5171 Wired Telecommunications Carriers 15.6
6216 Home Health Care Services 13.9
5241 Insurance Carriers 13.8
5413 Architectural. Engineering, & Related Services 13.6
5511 Management of Companies and Enterprises 12.9
4529 Other General Merchandise Stores 12.1
5242 Agencies, Brokerages, & Insurance Related Act. 10.6
3231 Printing and Related Support Activities 10.2
4841 General Freight Trucking 10.1
7139 Other Amusement and Recreation industries 9.9
5111 Newspaper, Periodical, Book, & Directory Pub. 9.5
5411 Legal Services 9.2
8121 Personal Care Services 8.3
High-tech employment 54.4
As % of total employment 5.7
<FN>
Source: BLS, Economy.com, 2002
</FN>
- ---------------------------------------------------------
MIGRATION FLOWS
Into Kansas City Number of Migrants Median
Income
Lawrence 1,940 24,630
St. Louis 1,492 29,015
Wichita 1,246 26,194
Chicago 1,159 45,833
St. Joseph 1,045 22,271
Topeka 982 26,131
Omaha 973 34,587
Dallas 840 57,084
Springfield 825 20,625
Denver 761 40,345
Total Inmigration 59,099 27,938
From Kansas City
Lawrence 1,506 18,287
St. Louis 1,410 33,982
Wichita 1,033 33,148
Chicago 930 31,994
St. Joseph 856 39,506
Topeka 775 27,965
Omaha 724 35,498
Dallas 689 22,391
Springfield 682 20,447
Denver 653 43,280
Total Outmigration 53,170 28,093
Net Migration 5,929 -154
- -------------------------------------
NET MIGRATION, KAN
[GRAPHIC OMITTED-Bar Chart]
Domestic Foreign Total
1998 4,531 4,235 8,766
1999 3,556 4,324 7,880
2000 2,144 6,297 8,441
2001 4,048 5,690 9,738
2002 5,950 5,664 11,614
<FN>
Source: IRS (top), 2002; Census Bureau &
Economy.com, 2002
</FN>
- ------------------------------------------------
PER CAPITA INCOME
[GRAPHIC OMITTED-Bar Chart]
32,693
KAN
28,221
MO
30,413
US
Source: Bureau of Economic Analysis, 2001
KANSAS CITY
Homebuilding Due for a Pullback
[GRAPHIC OMITTED-Line Graph (1991-2003)]
Homebuilding in KAN has surged ahead of the underlying demographic drivers of
demand. Residential permits issued over the last three years were nearly double
the number of households formed over the same period. The macroeconomic
situation has stimulated strong purchasing for several years, but those forces
will abate as interest rates rise over the next few quarters. Also contributing
to the buildup in housing inventory will be slower KAN population growth. Growth
this year will be less than half the pace of 2002, constraining new building and
price growth.
KAN Gets a Small Share of Defense Funds Reaching Missouri
[GRAPHIC OMITTED-Bar Chart]
Defense budget increases have been a boon to some areas, but KAN is a
comparatively small recipient of federal defense outlays. St. Louis receives a
far higher share of Missouri's federal defense dollars. Defense procurement
contracts measure less than 1% of gross product in KAN, compared with 3% for
Missouri and 5% for St. Louis. Defense wages and salaries in KAN as a share of
total are half the national average share. As defense budget increases
decelerate over the next few years, the lack of a deep defense agglomeration
will be less of a distinguishing characteristic between metro economies.
KAN Manufacturing Declines Often More Extreme than U.S.
[GRAPHIC OMITTED-Bar Chart]
Four of KAN's eight largest manufacturing industries suffered larger percentage
declines from 1993 to 2003 than at the U.S. level. Only transportation equipment
did not decline over the decade, owing to strong U.S. auto sales. One boon to
the industry has been the fact that Ford's Claycomo plant in KAN produces the
F-150 pickup, one of the most popular domestic vehicles. That plant recently
announced plans to layoff 200, however, after over-hiring last fall for the
launch of 2005 models.
Region's Manufacturing Outlook Sluggishly Improving
[GRAPHIC OMITTED-Bar Chart]
The Kansas City Fed's manufacturing survey of the tenth district shows a slow
but steady improvement in manufacturers' sentiment. Demand expectations for six
months hence, reflected in the new orders index, look better than at any time
during 2003. Similar movements in the employment and capital expenditures
indexes signal that KAN manufacturers themselves won't be the only ones to
benefit from higher demand. Hiring will contribute positively to the overall
labor market situation, and capital expenditures will filter through to other
manufacturers, and to local trade and services vendors.
Critical Observations
The following bullet points summarize some of our general observations relating
to the subject's region.
Social Influences
- - Approximately 1,854,900 million people live in the Kansas City metropolitan
area.
- - The population has increased approximately 1.3% annually and is forecast to
reach 1,866,600by 2007. The areas of fastest population growth are located
in the southeast, south and southwest portions of the MSA.
- - Kansas City has historically had strong migration to the area, although
with the reorganization of the telecom industry, migration may turn
negative. Forecasts for 2004 indicate the first larger out-migration in
over a decade. Most new residents are from Lawrence, St. Louis and Wichita,
while residents migrating out of Kansas are going to Lawrence, St. Louis
and Phoenix.
- - The average per capita income in the MSA is $32,693, which is above the
state ($28,221) and national ($30,413) average. The higher per capita may
be attributed to a high percentage of skilled or educated workers,
especially in the telecom and auto industry. Kansas City's percentage of
the population over 25 with a bachelor's degree is higher than Chicago and
St. Louis.
- - The MSA has a low cost of living and a low cost of doing business.
Economic Influences
- - The largest employment sectors are Government (14.4%), Professional and
Business Services (12.9%) and Retail Trade (11.3%).
- - The top employers are Sprint Corporation, Community Health Group (formerly
named Health Midwest) and DST Systems, Inc.
- - As of January 2004, the unemployment rate for Kansas City was 5.7%, which
is slightly above the state average of 5.4% and the national rate of 5.6%.
- - The only industries experiencing a growth in employment between December
2002 and December 2003 were Manufacturing (4.1 %) and Financial Activities
(2.0%). Construction had the largest decline of -5.3%.
- -. Out of a total of 325 metropolitan statistical areas in the United States,
Kansas City ranks 222 in terms of expected employment growth between 2002
and 2007.
- - Sprint, a major driver of Kansas City's economy, began a major
reorganization that included several layoffs, and continues to restructure.
The latest attempt for recovery was announced in February 2004 to partner
with IBM Business Consulting Services. This latest reorganization is
thought to have little effect on job gains in the coming year. Sprint also
vacated over 1 million square feet of office space in the downtown area and
built a campus in the suburbs, making the downtown office vacancy rate
(23%) substantially above the national average (16%).
- - The life sciences and biotechnology industries are gaining momentum in the
Kansas City area, which is valuable to help offset the area's over reliance
on Sprint and the telecom industry. Kansas City ranks among the top 50
metro areas for biotech research. The Stowers Institute for medical
Research is the leading company in this industry with over 100 scientists
and $1.6 billion endowment. The company also has plans to double its
research space within five years. Other promising companies include The
Midwest Research Institute, The University of Kansas Medical Center and the
Children's Mercy Hospital.
Government Influences
- - The Kansas City MSA includes the state capital of Kansas and benefits from
the presence of government jobs.
- - The government is supportive of business and is considered pro-growth.
- - The present economic weakness in the economy has had a negative effect on
State and local treasuries, resulting in cuts in services and an increased
risk of higher taxes. However, it is noted that this circumstance is common
among all MSA's.
Environmental Influences
- - The subject property is located in the Kansas City, Missouri Metropolitan
Statistical Area, as defined by the United States Census Bureau. The Kansas
City MSA includes 11 counties, 4 in Kansas (Johnson, Leavenworth, Miami,
and Wyandotte), and 7 in Missouri (Cass, Clay, Clinton, Jackson, Lafayette,
Platte, and Ray). The MSA includes more than 136 cities, the four largest
of which are Kansas City, Missouri; Kansas City, Kansas; Overland Park,
Kansas; and Independence, Missouri.
- - Kansas City is among the most centrally located urban markets in the
country, providing for superior marketing and distribution capabilities. It
is the only major city located within 250 miles of both the geographic and
population centers of the nation. Positioned in the heart of the farm belt
at the confluence of the Kansas and Missouri Rivers, the city and its
suburbs lie within 1 ,900:!: miles of nearly every point in the continental
U.S., or half the distance from coast to coast. The MSA is approximately
793 miles from Atlanta, GA., 501 miles from Chicago, 489 miles from Dallas,
602 miles from Denver, and 435 miles from Minneapolis.
- - Kansas City's major Interstates include 1-35 and 1-29, which run north and
south, and 1-70,which runs east and west. The MSA also has two loop
Interstates, 1-635 and 1-435. Interstate 35 connects with MSA with Wichita
and Oklahoma City to the south and Des Moines to the north. Interstate 29
connects with Omaha to the north and terminates in Kansas City. 1-70
connects with St. Louis to the east and Denver to the west.
Conclusion
In light of the social and economic attributes of the greater Kansas City area,
it is clear that the region benefits by the following:
- - Favorable cost structure
- - A transportation network that is well developed, making the metro area well
positioned to further develop as a distribution hub.
- - A large presence of government jobs, which adds stability to the local
economy.
- - Concurrently, there are inherent risks to the economic health of the
metropolitan area, including the following:
- - Overwhelming dependency on Sprint and the telecommunications industry
- - Suburban sprawl
In summary, the Precis report forecasts that the area's economic upswing will
perform on average with the national average. The downtown office occupancy rate
will continue to decrease due to the 10% vacancy left by Sprint and the ongoing
decline in professional and business services. The strength of Kansas City
before the recession was due to telecom, but because of Sprint's difficulties,
that industry is no longer attracting labor to the area. With the poor outlook
for Sprint and the lack of other growth drivers, Kansas City may experience the
beginnings of a poor population trend. Kansas City needs to replace telecom with
a new growth driver. If that is accomplished, the prospects for growth improve
dramatically. The transportation, information and the life science industries
are all positioned to step forward as major growth drivers for the area.
Overall, we are generally reserved as the future outlook of the greater Kansas
City area due to its over reliance on an unstable growth driver.
[GRAPHIC OMITTED]
LOCAL AREA MAP
LOCAL AREA ANALYSIS
Location
The property is located in Jackson County, within the greater Independence area.
Generally, the boundaries of the immediate area are Necessary Road on the east,
Interstate 78 on the north, Lees Summit Road on the west and Interstate 70 on
the south.
Access
Local area accessibility is generally good, relying on the following
transportation arteries:
Local: Access is good for north-south bound traffic via M-291 Highway and
traffic east-west via Hidden Valley Road. Major roadways in the local
area are asphalt paved, and are improved with concrete curbs and
gutters, streetlights and sidewalks. Most are two lanes. There are no
roadway improvements currently under construction or planned for the
subject's neighborhood. On an overall basis, access to the subject's
neighborhood is rated average.
Regional: Interstate access is good with Interstate 70 located
approximately 1 % mile south of the subject site.
Nearby and Adjacent Uses
The area is dominated by retail and commercial uses, with residential areas on
the periphery of the commercial development. Nearby commercial uses in the area
include community shopping centers, service stations/mini-marts, restaurants,
fast food establishments, and small, professional offices. The area is
considered to be in a stable stage of its life cycle. Supply and demand appears
well balanced with few vacancies noted.
Overall the predominant land use is retail and the local area is defined as a
destination shopping district. This location provides convenient visibility and
access to the site, and is within a casual dining destination area. The area is
a destination shopping district which also includes a number of casual dining
restaurants. Overall, the subject benefits from its good local and regional
access.
Special Hazards or Adverse Influences No hazards were noted in the immediate
local area.
Land Use Changes
None noted.
Conclusion
The subject is located along a moderately traveled commercial artery with good
exposure and accessibility. The interstate system is within close proximity and
provides good regional access to the neighboring communities. The local area has
experienced moderate growth over the last five years and the community appears
stable. For the near term (2004) the area is expected to continue to perform
moderately well.
RETAIL MARKET & TRAD AREA ANALYSIS
Definition of Market/ Trade Area Overview
The subject is located in the Independence/Raytown Submarket. A retail center's
trade area contains people who are likely to patronize that particular center.
These customers are drawn by a given class of goods and services from a
particular tenant mix. A center's fundamental drawing power comes from the
strength of the anchor tenants, as well as the regional and local tenants, which
complement and support the anchors. A successful combination of these elements
creates a destination for customers seeking a variety of goods and services
while enjoying the comfort and convenience of an integrated shopping
environment.
The subject is best described as a neighborhood center. A neighborhood center
provides for the sale of convenience goods (foods, drugs, and sundries) and
personal services (laundry and dry cleaning, barbering, shoe repairing, etc.)
for the day-to-day living needs of the immediate neighborhood. It is built
around a supermarket as the principal tenant and typically contains a gross
leasable area of about 60,000 square feet. In practice, it may range in size
from 30,000 to 100,000 square feet.
Retail space the Kansas City MSA, as in many locales nationwide, has flourished
relative to other commercial real estate sectors during the lingering period of
economic weakness. Still, the Kansas City retail market has not escaped from the
general real estate malaise. According to Reis's preliminary analysis, first
quarter 2004 vacancy in the community and neighborhood center sector was 7.0%,
up 60 basis points from a quarter earlier and among the highest averages
reported by this source for this market since the early 1990s. No improvement is
anticipated for a number of years to come. Still while vacancy remains
relatively high, demand has shown some recent improvement, keeping pace with the
recent increase in construction. Thus, in 2003 the volume of space added and the
net absorption volume were identical at 280,000 square feet.
These sums follow two years of minimal activity. Indeed, the delivery of 2.1
million square feet of new community-neighborhood center construction over the
four-year period concluding with 2000 were followed by only 44,000 square feet
of new space arriving on line over the two years following. For 2004,
construction completions and net absorption area projected at 402,000 and
224,000 square feet, respectively. Rents are flat. Reis's early first quarter
2004 data on" "this market include an average asking rent estimate of $13.14 per
square foot, down four cents from year-end. For 2003 overall asking and
effective prices rose 1.9% and 0.6%, respectively, on average. Indeed, the
market might consider itself fortunate to have avoided year-over-year rental
losses in the recent period. For 2004 Reis anticipates improvement - increases
of 2.4% and 1.5% for asking and effective rents
- - CTMTexpects retail development to be led by "specialty stores and unique
concepts such as Kansas City Life, and entertainment district proposed for
downtown Kansas City that is to open in 2006.
- - H&R Block Inc. made "the blockbuster announcement that Kansas City's
downtown boosters have awaited for more than a year," according to a recent
report in the Journal. Late in 2003 the firm announced plans to move to a
500,000-square-foot headquarters building at Main and 13th streets. "The
headquarters' first phase, valued at $120 million, will fuel plans for a
$280 million entertainment district that city officials call essential to
the Kansas City area's future."
- - Detail information on the Kansas City retail Metro area and Submarket data
is located in the Addenda section of this report.
TRAD AREA DEMOGRAPHICS
- --------------------------------------------------------------------------------
1.0-mile 3.0-mile 6.0-mile
Radius Radius Radius Independence County Kansas
Jackson City
MSA
- ---------------
POPULATION
STATISTICS
- ---------------
2000 10,400 54,494 170,218 113,288 654,880 5,595,211
2003 10,445 54,709 169,351 111,957 655,201 5,697,731
2008 10,544 55,076 168,051 109,844 656,166 5,868,211
Compound
Annual
Change
2000 -2003 0.14% 0.13% -0.17% -0.39% 0.02% 0.61%
2003 - 2008 0.19% 0.13% -0.15% -0.38% 0.03% 0.59%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOUSEHOLD
STATISTICS
- -------------
- -------------
2000 4,357 22,724 69,459 47,390 266,294 2,194,594
2003 4,451 23,084 69,748 47,234 267,986 2,252,100
2008 4,620 23,696 70,250 46,970 271,032 2,349,911
Compound
Annual
Change
2000 - 2003 0.71% 0.53% 0.14% -0.11% 0.21% 0.87%
2003 -2008 0.75% 0.52% 0.14% -0.11% 0.23% 0.85%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE
HOUSEHOLD
INCOME
- -------------
- -------------
1990 $54,500 $49,858 $51,735 $45,925 $50,583 $50,016
2003 $61,814 $56,077 $58,713 $51,678 $56,825 $55,904
2008 $69,524 $63,270 $67,790 $58,834 $65,587 $64,108
Compound
Annual
Change
1990 -2003 0.97% 0.91% 0.98% 0.91% 0.90% 0.86%
2003 -2008 2.38% 2.44% 2.92% 2.63% 2.91% 2.78%
- -------------
- -------------
RETAIL SALES
ANALYSIS
Total Retail
Sales ($Mil) $ 147 $ 751 $ 2,277 $ 1,527 $ 8,764 $ 73,550
General
Merchandise 4 $ 18 $ 56 $ 37 $ 214 $ 1,423
Apparel &
Accessory $ 6 $ 28 $ 86 $ 57 $ 333 $ 2,297
Furniture
& Home Furnish.** 6 $ 31 $ 94 $ 63 $ 362 $ 2,864$
Other Sales*** 6 $ 32 $ 96 $ 64 $ 368 $ 3,089
- --------------
Total GAFO Sales 21 $ 109 $ 332 $ 221 $ 1,277 $ 9,673
Total
Expenditure
Potential* 275 $1,294 $ 4,095 $ 2,441 $15,228 $125,901
GAFO % of
Total Retail
Sales 14.65% 14.54% 14.58% 14.47% 14.58% 13.15%
GAFO % of
Total
Expenditure
Potential 7.81% 8.43% 8.11% 9.05% 8.39% 7.68%
- --------------------------------------------------------------------------------
<FN>
- --------------------------------------------------------------------------------
SOURCE: Claritas, Inc.
* Households x Total Household Income
** Includes Home Appliance, Radio, T.V. Stores
*** "Other" Sales Estimated at 4.2% of Total Retail Sales
- --------------------------------------------------------------------------------
</FN>
[GRAPHIC OMITTED]
CURRENT POPULATION DISTRIBUTION MAP
[GRAPHIC OMITTED]
POPULATION GROWTH MAP
[GRAPHIC OMITTED]
MEDIAN HOUSEHOLD INCOME DISTRIBUTION MAP
Market Conditions and Trends
Retail activity continues to be vibrant in Kansas City. Although the pace of
retail development slowed in 2002, it accelerated again in 2003. Furthermore,
developments that are coming on line are experiencing success. Part of the
success may be attributed to a shift in focus from big boxes and strip centers
to lifestyle centers, "retailtainment" projects and New Urbanism.
By combining shopping with entertainment venues, developments are establishing
"retailtainment" centers, thereby increasing their ability to draw and hold
shoppers. The best Kansas City example of this, and the biggest story in Kansas
City retail, continues to be the development around the Kansas International
Speedway in Wyandotte County. Nebraska Furniture Mart, Great Wolf Lodge and the
T-Bones minor-league baseball franchise opened in 2003. They were preceded by
Cabela's. From its opening in August of 2002 to the end of that year Cabela's
drew 2.4 million visitors. That made it the top attraction in the State of
Kansas in 2002. In metropolitan Kansas City the only attractions to draw more
visitors than Cabela's were the area casinos. Meanwhile, plans for the adjacent
The Legends shopping center were expanded to more than one million square feet
and will include a multi-plex theater.
Bass Pro Shops, a direct competitor of Cabela's, is another potential
"retailtainment" attraction, and also a highly sought-after retailer. Bass Pro
considered several sites in the metro area for a 160,000- square-foot store. At
the end of 2003 it appeared that a site in eastern Jackson County, southwest of
Interstate 70 and Highway 291, had landed this big fish. However, it was not
certain that Bass Pro would proceed. With a store in St. Louis, and its
headquarters location in Springfield, Missouri, it may decide that another
location in Missouri is not justified.
Other developments go beyond "retailtainment" to include residential and office
elements. New Urbanism embodies the idea of mixed-use, pedestrian- friendly
urban environments similar to the appealing market centers of the past. Kansas
City's Country Club Plaza, which was established in 1923, is the epitome of what
is now thought of as New Urbanism. Zona Rosa in the Northland and Park Place in
Johnson County are two current developments that use the Country Club Plaza as a
model while seeking to create aesthetically appealing mixed-use walkable areas.
Zona Rosa is a 93-acre development northwest of Interstate 29 and Barry Road. It
will have tree-lined sidewalks and a park-like town square for community
activities. Phase I, which includes 400,000 square feet of retail space, is to
open in April of 2004. Park Place is planned for 29 acres in Leawood, in
southeastern Johnson County. It will be a 1.2-million-square-foot project on 29
acres and will include 230,000 square feet of retail space plus office space, a
hotel and residential condominiums.
In more typical big box and shopping center developments, the home improvement
category continues to be a winner. Lowe's plans two new stores in the area. A
135,000-square-foot store is planned for Wyandotte County, at a site close to
Kansas City Kansas Community College. In the City of Liberty, in the eastern
part of the Northland market, a 160,000-square-foot store has received City
approval and will start soon.
Specialty retailing has produced a significant part of recent market growth.
Ultimate Electronics, a new entrant to Kansas City, opened three stores in 2003.
They are in Lenexa (Johnson County), at Hartman Heritage Center in Independence
(Eastern Jackson County), and at 1-29 and Barry Road (Northland). Another
Johnson County store is planned for 2004. A fifth store will be placed in Lee's
Summit, in southeastern Jackson County. Each store is about 32,000 square feet.
Pier 1 is another specialty retailer expanding in the area. It added two stores
to the nine it already had in the metro area. Cold Stone Creamery, a
superpremium ice cream franchise, started with one location in Johnson County
early in 2003, but planned eight more throughout the Kansas City area. Borders
Books & Music added a sixth store in the metro area. The newest one is a
19,000-square-foot store at The Shops at Boardwalk, in the Northland.
Discount marketing seems to be on an endless development path as al-Mart and
Target continue to expand. Wal-Mart opened two Wal-Mart Neighborhood Markets in
Johnson County. At about 40,000 square feet, these stores offer most of the
popular items from standard Wal-Marts, and they include drivethrough pharmacies
and half-hour photo service. The Neighborhood Stores are designed for quick
shopping and are expected to compete with grocery and convenience stores.
Wal-Mart also opened a 200,000-square-foot store at 157th & Metcalf in southern
Johnson County. Target opened a 125,000-square-foot store on 151st Street in
southern Johnson County
The next project to make news in Kansas City will be Kansas City Live, a
Downtown project by developer The Cordish Company. The initial phase of the
project will include up to 425,000 square feet of retail space, primarily
restaurants and night clubs. The trigger for the project was the announcement by
H&R Bloc & Company that it would build a 500,000-square-foot office headquarters
in the southern part of the Downtown loop. This area has long been a target for
redevelopment. Kansas City Live will be created in an area adjacent to Block's
headquarters. The Kansas City project will be similar to projects Cordish has
done in Baltimore, Houston, Louisville and elsewhere.
Every part of the metropolitan area has projects that are under construction or
planned. The variety of locations and the range of styles, from big boxes and
neighborhood centers to "retailtainment" and New Urbanism, reflect the growth of
Kansas City. While some major retailers continue to expand in Kansas City, much
of the new development seems to favor specialty retailers and unique concepts.
This is the trend to expect over the next few years.
Submarket Activity
Johnson County
Projects Completed in 2003
Development Location Anchors
Wal-Mart 157th & Metcalf Wal-Mart Super Center.
Target 51st & Antioch Super Target (the
adjacent The
Shoppes of 151st
to be completed in
2004).
Lionsgate Market Place 128,000 sf at 143rd & Dillon's Grocery, Bank of
Metcalf Anthony.
Shawnee Crossings Kansas Hwy 7 & Mixed
Shawnee Mission retail and office.
Parkway
Projects Planned or Under
Construction
Development Location Developer Anchors/Completion
Park Place 230,000 sf at 117th Park Place Planned project, no
& Nail Partners of anchors named.
Kansas City
Ironhorse Centre 110,000 sf at 151st Merrill Mixed retail and
& Nail Development office. Planned
Of Kansas City project, no
anchors named.
Olathe Terrace 450,000 sf at 119th Maefield Planned project,
& Blackbob Development of no anchors named.
Bloomington,
Indiana
Lifestyle center 135th & Metcalf Cormac Co. Planned project, no
of Omaha anchors named.
Crystal Springs 320,000 sf at Parkway Real Planned project, no
Shopping Center 135th & Ptlumm Estate of anchors named.
Kansas City
Cornerstone of 350,000 sf at RED Development Ultimate Electronics
Leawood 135th & Nail of Kansas City Possible completion
end of 2004.
Ridgeview Falls 240,000 sf at Clements & Drugstore anchor
119th & Ridgeview Linscott of Completion late
Kansas City 2004.
and Lincoln,
Nebraska
Hy-Vee shopping 119th & Ridgeview R.H. Johnson Co. Hy-Vee grocery.
center of Kansas City
Mission Farms 42,000 sf of retail Weltner et ai, Mixed retail,
at 105th & Mission Rd Kansas City office and
residential
Planned project, no
anchors named.
Wyandotte County
Projects Completed in 2003
Development Location Anchors
Village West Kansas International Nebraska Furniture
Speedway Mart, 712,000 sf, Great
Wolf Lodge, 270 rooms plus
38,000-sf water park,
4,500-seat stadium for
T-Bones minor league
baseball.
Projects Planned or Under Construction
Development Location Developer Anchors/Completion
The Legends 800,000 sf in RED Development Possible completion
phase one at of Kansas City end of 2004.
the Kansas
Speedway
Lowe's 135,000 sf at Lowe's Home
69th & State Avenue Improvement
Warehouse.
South Kansas City
Projects Completed in 2003
Development Location Anchors
State Line Station 350,000 sf at 135th & Super Target, Pier 1
State Line Imports, Cost
Plus/World Market,
Linens n Things.
Projects Planned or Under
Construction
Development Location Developer Anchors/Completion
State Line 600,000 sf at Cormac Co. of Construction to
Station Expansion 135th & State Omaha start spring 2004,
Line no tenants
announced.
Eastern Jackson County
Projects Completed in 2003
Development Location Anchors
Hartman Heritage 1-70 & Little Blue Parkway Pier 1 Imports,
Ultimate Electronics,
Linens n Things, World
Market, Basset
Furniture Direct.
Crackerneck Plaza 40,000 sf at Hwy 40 & Boutique retail center.
Shopping Center Little Blue Parkway
Projects Planned or Under
Construction
Development Location Developer Anchors/Completion
The Shops 190,000 sf at Alsation Land No tenants
at Summit Pointe 1-470 & Hwy50 Company announced.
/ 350 Anchor spaces of
up to 60,000 sf.
Hy-Vee Grocery 73,000 sf at Redevelopment of
Noland Rd & Hwy 40 former K-Mart,
to be completed
early 2004.
Northland
Projects Completed in 2003
Development Location Anchors
The Shops at Boardwalk 136,000 sf at 1-29 & Hwy 152 Borders Books & Music,
Coldwater Creek,
Yankee Candle, Red
Star Tavern.
Northglen Village Hwy 152 & North Brighton Dickinson's Northglen
14-screen theater.
Projects Planned or Under
Construction
Development Location Developer Anchors/Completion
Zona Rosa Phase one 400,000 sf at Yaromir Steiner of Barnes & Noble
1-29 & Barry Road Columbus, Ohio & Dick's Sporting
Goods to open
Spring 2004.
Lowe's 160,000 sf at
1-35 & Hwy 152 Lowe's Home
Improvement
Warehouse.
Tuileries Plaza 225,000 sf of Prairieview Mixed-use
retail at Hwy 45 Development LLC development
& North Cosby with 40,000 sf
of office and
88 condominiums.
Grocery-anchored.
Site preparation
started.
Parkville Commons 250,000 sf of Price Chopper
retail/office at Grocery will be
Hwy 45 & Hwy 9 completed Spring
2004.
Renaissance in 180,000 sf of Stephen Block Planned project,
the Northland retail in a no anchors named.
mixed-use
development at
80th & Prospect/Hwy1
SITE DESCRIPTION
Location: 3010 South State Route 291
Independence, Jackson County, Missouri 64058
The site is located east of Missouri Highway 291
approximately one mile north of US 70. The site is located
at the intersection of Missouri Highway 291 and Hidden
Valley Road.
Shape: Irregular
Topography: Level
Land Area: 2.08 acres
90,591 square feet
Frontage, Access, The subject has adequate frontage, access and
Visibility: visibility
Soil Conditions: We did not receive nor review a soil report. However, we
assume that the soil's load-bearing capacity is sufficient
to support existing and/or proposed structure(s). We did not
observe any evidence to the contrary during our physical
inspection of the property. Drainage appears to be adequate.
Utilities All utilities are available
Site Improvements: The site improvements include asphalt paved parking areas,
curbing, signage, landscaping, yard lighting and drainage.
Land Use
Restrictions: We were not given a title report to review. We do not
know of any easements, encroachments, or restrictions that
would adversely affect the site's use. However, we recommend
a title search to determine whether any adverse conditions
exist.
Flood Map: National Flood Insurance Rate Map Community Panel Number
290178-005-B (January 3, 1979)
Flood Zone: FEMA Zone A: Special flood hazard areas subject to inundation
by the 100-year"flood. Because detailed hydraulic analyses
have not been performed, no base flood elevations or depths
are shown. Mandatory flood insurance purchase requirements
apply.
Wetlands: We were not given a Wetlands survey. If subsequent
engineering data reveal the presence of regulated wetlands,
it could materially affect property value. We recommend a
wetlands survey by a competent engineering firm.
Hazardous
Substances: We observed no evidence of toxic or hazardous substances
during our inspection of the site. However, we are not
trained to perform technical environmental inspections and
recommend the services of a professional engineer for this
purpose.
Overall
Functionality: The subject site is functional for its current use.
IMPROVEMENTS DESCRIPTION
The following description of improvements is based upon our physical inspection
of the improvements along with our discussions with the building manager.
General Description
Year Built: 1986
Number of Buildings: 1
Number of Stories: 1
Land To Building Ratio: 3.33 to 1
Building Class: B
Gross Building Area: 27,200 square feet
Gross Leasable Area:
Component Owned Area % of
Total
In-Line 27,000 SF
Total Center GLA 27,200 SF 100%
Total Center GLA 27,200 SF 100%
Construction Detail
Basic Construction: Steel and masonry
Foundation: Poured concrete slab
Framing: Structural steel with masonry and concrete encasement
Floors: Concrete poured over metal deck.
Exterior Walls: Brick.
Roof Cover: Flat roofing system consisting of built-up assemblies
with tar and gravel cover.
Windows: The windows are thermal windows in aluminum frames.
Pedestrian
Doors: Glass in aluminum frames.
Mechanical Detail
Heating: The heating system is assumed to be adequate for existing
use and in compliance with local law and building codes.
Cooling: The cooling system is assumed to be adequate for existing
use and in compliance with local law and building codes.
Plumbing: The plumbing system is assumed to be adequate for existing
use and in compliance with local law and building codes.
Electrical
Service: The electrical service system is assumed to be adequate for
existing use and in compliance with local law and building
codes.
Elevator Service: None
Fire Protection: The building is fully sprinklered.
Interior Detail
Layout: The subject property is a 1-building neighborhood shopping
center. Loading is available at the rear of each building.
Floor Covering: Ceramic tile, carpet or resilient tile.
Walls: Painted or wallpapered sheetrock.
Ceilings: The ceilings are 2' by 2' suspended acoustical tile.
Lighting: A mixture of fluorescent and incandescent light fixtures.
Restrooms: The building features adequate restrooms for men and women.
Site Improvements
Parking: 90 spaces (3.31:1,000 Sq Ft). Open surface parking.
On site Landscaping: A variety of shrubbery and grass.
Other: Concrete curbs and walkways.
Personal Property: Personal property was excluded from our valuation.
Capital
Improvements: Other than normal routine property maintenance, there are no
major capital improvement expenditures planned in the
immediate future.
Summary
Condition: Average
The building has been well maintained and provides a good
appearance relative to competing buildings within its
market.
We did not inspect the roof of the building or make a
detailed inspection of the mechanical systems. The
appraisers, however, are not qualified to render an opinion
as to the adequacy or condition of these components. The
client is urged to retain an expert in this field if
detailed information is needed about the adequacy and
condition of mechanical systems.
Quality: Average.
Design and
Functionality: The building is a Class B neighborhood shopping center
building that possesses average appeal to prospective
tenants.
Actual Age: 18 years
Effective Age: 20 years
Expected
Economic Life: 50 years
Remaining
Economic Life: 30 years
Americans With Disabilities Act
The Americans With Disabilities Act (ADA) became effective January 26, 1992. We
have not made, nor are we qualified to make a compliance survey of this property
to determine whether or not it is in conformity with the requirements of the ADA
It is possible that a compliance survey could reveal that the property is not in
compliance with one or more of the requirements of the Act. If so, this fact
could have a negative effect upon the value of the property. Since we have not
been provided with the results of a survey, we did not analyze the results of
possible non-compliance.
Hazardous Substances
We are not aware of any potentially hazardous materials (such as formaldehyde
foam insulation, asbestos insulation, radon gas emitting materials, or other
potentially hazardous materials) which may have been used in the construction of
the improvements. However, we are not qualified to detect such materials and
urge the client to employ an expert in the field to determine if such hazardous
materials exist.
REAL PROPERTY TAXES AND ASSESSMENTS
Current Property Taxes
The property is subject to the taxing jurisdiction of Jackson County. The
assessors' parcel identification number is 25-910-09-05-01-1-00-000. According
to the local assessor's office, taxes are current. The assessment and taxes for
the property are presented below:
PROPERTY TAX DATA (2003/2004)
2003/2004
Assessed Value
Total: $423,726
Effective Tax Rate 0.0868
Total Property Taxes $36,779
Building Area ( SF ) 27,200
Property Taxes per Square Foot $1.35
Total taxes for the property are $36,779, or $1.35 per square foot. It is our
opinion that the subject's real estate taxes are reasonable. Based upon
historical trends, we have assumed taxes will increase 3.00 percent per annum
over the projection period.
ZONING
The property is zoned CP-2; Planned General Commercial District by the City of
Independence. Permitted uses within this district include office, light
industrial, retail and general commercial. Residential development is prohibited
in this zoning district.
We are not experts in the interpretation of complex zoning ordinances but the
property appears to be a conforming use based on our review of public
information. The determination of compliance is beyond the scope of a real
estate appraisal.
We know of no deed restrictions, private or public, that further limit the
subject property's use. The research required to determine whether or not such
restrictions exist, however, is beyond the scope of this appraisal assignment.
Deed restrictions are a legal matter and only a title examination by an attorney
or title company can usually uncover such restrictive covenants. Thus, we
recommend a title search to determine if any such restrictions do exist.
HIGHEST AND BEST USE
Definition Of Highest And Best Use
According to The Dictionary of Real Estate Appraisal, Fourth Edition (2002), a
publication of the Appraisal Institute, the highest and best use is 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 must meet are legal permissibility,
physical possibility, financial feasibility, and maximum profitability.
Highest And Best Use Criteria
We have evaluated the site's highest and best use both as currently improved and
as if vacant. In both cases, the property's highest and best use must meet four
criteria. That use must be (1), legally permissible (2) physically possible, (3)
financially feasible, and (4) maximally productive.
Legally Permissible
The first test concerns permitted uses. According to our understanding of the
zoning ordinance, noted earlier in this report, the site may legally be improved
with structures that accommodate office, light industrial, retail and general
commercial uses. Aside from the site's zoning regulations, we are not aware of
any legal restrictions that limit the potential uses of the subject.
Physically Possible
The second test is what is physically possible. As discussed in the "Site
Description," section of the report, the site's size, soil, topography, etc. do
not physically limit its use. The subject site is of adequate shape and size to
accommodate almost all urban and suburban uses.
Financial Feasibility and Maximal Productivity
The third and fourth tests are what is financially feasible and what will
produce the highest net return. After analyzing the physically possible and
legally permissible uses of the property, the highest and best use must be
considered in light of financial feasibility and maximum productivity. For a
potential use to be seriously considered, it must have the potential to provide
a sufficient return to attract investment capital over alternative forms of
investment. A positive net income or acceptable rate of return would indicate
that a use is financially feasible.
Highest and Best Use of Site As Though Vacant
Considering the subject site's physical characteristics and location, as well as
the state of the local market, it is our opinion that the Highest and Best Use
of the subject site as though vacant is A retail center developed to the highest
density possible.
Highest and Best Use of Property As Improved
According to the Dictionary of Real Estate Appraisal, highest and best use of
the property as improved is defined as:
The use that should be made of a property as it exists. An existing
property should be renovated or retained "as is" so long as it continues to
contribute to the total market value of the property, or until the return
from a new improvement would more than offset the cost of demolishing the
existing building and constructing a new one.
It is our opinion, the existing building adds value to the site as if vacant,
therefore dictating a continuation of its current use. In conclusion, it is our
opinion that the Highest and Best Use of the subject property as improved is as
it is currently developed.
VALUATION PROCESS
Methodology
There are three generally accepted approaches available in developing. an
opinion of value: the Cost, Sales Comparison and Income Capitalization
approaches. We have considered each in this appraisal to develop an opinion of
the market value of the subject property. In appraisal practice, an approach to
value is included or eliminated based on its applicability to the property type
being valued and the quality of information available. The reliability of each
approach is dependent upon the availability and comparability of the market data
uncovered as well as the motivation and thinking of purchasers in the market for
a property such as the subject. Each approach is discussed below, and
applicability to the subject property is briefly addressed in the following
summary.
Land Value
Developing an opinion of land value is typically accomplished via the Sales
Comparison Approach by analyzing recent sales transactions of sites of
comparable zoning and utility adjusted for differences which exist between the
comparables and the subject. Valuation is typically accomplished using a unit of
comparison such as price per square foot of land. Adjustments are applied to the
unit of comparison from an analysis of comparable sales, and the adjusted unit
of comparison is then used to derive a value for the subject site.
Cost Approach
The Cost Approach is based upon the proposition that an informed purchaser would
pay no more for the subject than the cost to produce a substitute property with
equivalent utility. This approach is particularly applicable when the property
being appraised involves relatively new improvements which represent the highest
and best use of the land; or when relatively unique or specialized improvements
are located on the site, for which there exist few improved sales or leases of
comparable properties.
In the Cost Approach, the appraiser forms an opinion of the cost of all
improvements, depreciating them to reflect any value loss from physical,
functional and external causes. Land value, entrepreneurial profit and
depreciated improvement costs are then added resulting in a value estimate for
the subject property.
Sales Comparison Approach
The Sales Comparison Approach utilizes sales of comparable properties, adjusted
for differences, to indicate a value for the subject property. Valuation is
typically accomplished using a unit of comparison such as price per square foot
of building area, effective gross income multiplier or net income multiplier.
Adjustments are applied to the unit of comparison from an analysis of comparable
sales, and the adjusted unit of comparison is then used to derive a value for
the subject property.
Income Capitalization Approach
This approach first determines the income-producing capacity of a property by
utilizing contract rents on leases in place and by estimating market rent from
rental activity at competing properties for the vacant space. Deductions then
are made for vacancy and collection loss and operating expenses. The resulting
net operating income is divided by an overall capitalization rate to derive an
opinion of value for the subject property. The capitalization rate represents
the relationship between net operating income and value. This method is referred
to as Direct Capitalization.
Related to the Direct Capitalization Method is the Discounted Cash Flow Method.
In this method, periodic cash flows (which consist of net operating income less
capital costs) and a reversionary value are developed and discounted to a
present value using an internal rate of return that is determined by analyzing
current investor yield requirements for similar investments.
Summary
This appraisal employs only the Income Capitalization Approach. Based on our
analysis and knowledge of the subject property type and relevant investor
profiles, it is our opinion that this approach would be considered necessary and
applicable for market participants. The client has requested that we provide
them with a restricted use report. Therefore, we have not employed the Cost
Approach or the Sales Comparison Approach to develop an opinion of market value.
The valuation process is concluded by analyzing each approach to value used in
the appraisal. When more than one approach is used, each approach is judged
based on its applicability, reliability, and the quantity and quality of its
data. A final value opinion is chosen that either corresponds to one of the
approaches to value, or is a correlation of all the approaches used in the
appraisal.
INCOME CAPITALIZATION APPROACH
Methodology
The Income Capitalization Approach is a method of converting the anticipated
economic benefits of owning property into a value through the capitalization
process. The principle of "anticipation" underlies this approach in that
investors recognize the relationship between an asset's income and its value. In
order to value the anticipated economic benefits of a particular property,
potential income and expenses must be projected, and the most appropriate
capitalization method must be selected.
The two most common methods of converting net income into value are Direct
Capitalization and Discounted Cash Flow. In direct capitalization, net operating
income is divided by an overall capitalization rate to indicate an opinion of
market value. In the discounted cash flow method, anticipated future cash flows
and a reversionary value are discounted to an opinion of net present value at a
chosen yield rate (internal rate of return).
Based upon the above, discounted cash flow is the most appropriate in this
assignment; given the un-stabilized nature of the subject property.
Occupancy Status
The following chart summarizes the annualized attained base rent and occupancy
level of the leases in place as of the appraisal date.
OCCUPANCY PROFILE
Space Number of Occupied Total Average Vacant Total Percent
Category Tenants Area Rent Rent/SF Space Area
In line 10 18,165 SF $178,356 $9.82 9,035 SF 27,200 SF 100.0%
Total/
Weighted
Average 10 18,165 SF $178,356 $9.82 9,035 SF 27,200SF 100.0%
Percent 66.8% 33.2%
On the following page is an attained rent schedule for all tenants in place as
of the appraisal date. Please refer to the Addenda of this report for a rent
roll of the subject property.
Lease Structure
The majority of existing leases in the subject property are on a modified gross
basis, whereby the tenants are responsible for a semi- or fixed portion of their
pro-rata share of all expenses (real estate taxes and operating expenses)
excluding management and structural repairs. Lease terms are generally between 3
and 5 years in length.
ATTAINED RENT SCHEDULE As of Apr-04
Tenant Name Suite # Start End Area Base Rent/SF
Date Date (Sq Ft) Rent
Per
Year
Inline
Tan-Talizer 300 12/1/2000 11/30/2005 1,200 $11,400 $ 9.50
The Last Strand 400 9/1/2002 8/1/2005 1,200 $11,076 $ 9.23
Jacque's Bridal 600 2/1/1999 1/30/2005 1,359 $12,231 $ 9.00
Bogart's Pub 700 10/1/2003 10/30/2008 3,600 $37,800 $ 10.50
Hanger Orthopedic 1000 10/1/2002 9/30/2005 1,920 $17,280 $ 9.00
State Beauty
Supply 1200 12/1/2000 11/30/2004 1,680 $15,960 $ 9.50
MO Sewing 2400 6/1/2001 5/30/2006 2,400 $21,600 $ 9.00
Hearing Express
Lab 1600 4/1/2004 5/30/2005 1,200 $ 6,240 $ 5.20
Ortho Center 1800 7/1/1999 6/30/2006 1,800 $24,000 $ 13.33
Goodcents 2100 8/1/1999 7/1/2004 1,806 $20,769 $ 11.50
10 tenant sub-total 18,165 $178,356 $ 9.82
GRAND-TOTALS 18,165 $178,356 $ 9.82
Recent Leasing At Subject Property
The following chart summarizes recent leasing activity within the subject
property.
RECENT LEASING ACTIVITY
Tenant Name Suite # Start End Area Base Rent/SF
Date Date (Sq Ft) Rent
Per
Year
Inline
Bogart's Pub 700 10/1/2003 10/30/2008 3,600 $37,800 $ 10.50
Hearing Express
Lab 1600 4/1/2004 5/30/2005 1,200 $ 6,240 $ 5.20
Sub-Total 4,800 $44,040 $ 9.18
GRAND-TOTALS 4,800 $44,040 $ 9.18
Rent Comparables in Competing Centers
The following tables summarize rental activity in competing centers for Inline
tenant spaces.
INLINE RENT COMPARABLES
No. Property Location Area Term Rent/ Rent Vacancy Center
Tenant Name Available (years) SF Steps Rate Center
Expense Age
Recoveries -----
Center
Size
1 17331 East 40
Highway
Independence, MO 1,512 SF 5 $8.50 Flat 2.1% 1988
- ------------------- ----------- ----------
40 HI Center Modified
Gross 72,000 SF
2 18011 NE
24th Street
Independence, MO 6,580 5 $8.00 Flat 9.4% 1987
- ------------------ ----------- ----------
Arrowhead Modified 70.000 SF
Shopping Center Gross
3 3617 S Noland Road
Independence, MO 680 5 $12.00 Flat 2.1% 1972
- ------------------ ----------- ---------
Noland Road Retail Modified 32,380 SF
Gross
4 1600 South
Noland Road
Independence, MO 3,267 5 $7.59 Flat 10.0% 1973
- ------------------ ----------- ---------
Carriage Lane Modified 33,000 SF
ShoppingCenter Gross
5 1500 South
Noland Road
Independence, MO 2,175 5 $9.04 Flat 8.7% 1986
- ------------------ ----------- ---------
Noland Station Modified 25.000 SF
Gross
Survey Low: 680 5 $7.59 2.10%
Survey High: 6,580 5 $12.00 9.56%
Survey Mean: 2,843 5 $9.03 6.45%
Free Rent TI/fSF Comments
(Months)
1 17331 East 40 2 $5.00 2.11 miles from subject
Highway Major tenants- none
Independence, MO
-------------------
40 HI Center
2 18011 NE 2 $2.00 0.89 miles from subject.
24th Street Major tenants- Fantastic
------------------ Sams, Iga, little
Arrowhead Caesar's Pizza.
Shopping Center
3 3617 S Noland Road 2 $5.00 2.26 miles from subject.
Independence, MO Major tenants. Color Tile,
------------------ Dollar General
Noland Road Retail
4 1600 South 2 $5.00 2.19 miles from subject.
Noland Road Major tenants. none
------------------
Carriage Lane
ShoppingCenter
5 1500 South 2 $5.00 2.22 miles from subject.
Noland Road Major tenants none
Independence, MO
- ------------------
Noland Station
2 $2.00
2 $5.00
2 $4.40
The rent range exhibited by the com parables is from $7.59 to $12.00 per square
foot with an overall average of $9.03 per square foot. Recovery clauses for the
comparable leases typically require the tenant to pay a pro-rata share of real
estate taxes and operating expenses on a modified gross basis. Landlords are
responsible for management and capital expenditures. The comparables have flat
rental rates.
Greatest reliance has been placed on Rent Com parables 1, 3 and 5 due to their
similarity to the subject with respect to location and utility. Based upon the
recent leasing activity at the subject property, and our analysis of the com
parables, we have concluded to a market rent for the subject's inline tenants of
$9.00 per square foot. This assumes a modified gross lease with a 5-year lease
term.
[GRAPHIC OMITTED] RENTAL MAP
Market Rent Synopsis
The following chart summarizes our market rent conclusion for each tenant
category within the subject property.
MARKET RENT CONCLUSIONS
In line
Market Rent Per Square Foot $9.00
Contract Rent Increase Flat
Lease Type Modified Gross
Lease Term (years) 5
Miscellaneous Revenue
Miscellaneous revenue is from rooftop antenna income. Based upon the subject's
historical performance, we have estimated miscellaneous revenue at $4,000 in
Year 1.
Expense Reimbursements
The existing tenants are responsible for their pro-rata share of real estate
taxes and operating expenses on a modified gross basis. Future tenants are
assumed to be responsible for their pro rata share of real estate taxes and
operating expenses on a modified gross basis while the landlord is responsible
for management and capital expenditures.
Lease Expirations
A lease expiration schedule is contained in the Addenda of this report.
Assumptions Regarding Existing Leases
We have modeled all leases in accordance with the lease terms provided by
ownership. All month to month tenants were assumed to vacate after 12 months of
the cash flow start date.
Vacancy and Collection Loss
Based upon the historical occupancy of the subject, the current vacancy in the
market, and our perception of future market vacancy, we have projected a global
stabilized vacancy rate of 5.00percent. Based on the creditworthiness of the
tenants in the subject building, we have also projected a collection loss of
2.00 percent. The total vacancy and credit loss is therefore 7.00 percent.
Absorption of Vacant Space
The subject property is presently 66.78 percent occupied. We have estimated the
vacant space to be absorbed within 24 months.
Operating Expenses
We have developed an opinion of the property's annual operating expenses after
reviewing its historical performance and reviewing the operating performance of
similar buildings. We analyzed each item of expense and developed an opinion as
to what a typical informed investor would consider normal.
An historical operating history for the property, annualized year-to-date
expenses, a budget for the current year, a comparison of the budget to our
forecast, and our opinion of year one operating expenses are presented on the
following page.
REVENUE AND EXPENSE ANALYSIS
2001 2002 2003 C& W
Annualized Forecast (1)
Total Per Total Per Total Per Total Per
SF SF SF SF
POTENTIAL
GROSS REVENUE
Base Rental $245,548 $9.03 $262,915 $9.67 $270,757 $9.95 $271,159 $9.97
Revenue
Miscellaneous
Revenue 300 0.01 3,874 0.14 (2.850) (0.10) 4,000 0.15
Expense
Reimbursement
Revenue 33,740 1.24 33,592 1.24 42,014 1.54 36.549 1.34
------------- --------------- ------------- --------------
TOTAL
POTENTIAL
GROSS
REVENUE $279,588 10.28 300,381 11.04 $309,921 11.39 $311,708 $11.46
Vacancy
and
Collection
Loss (37,072) (1.36) (23,621) (0.87) (44,550) (1.64) (96,153) (3.54)
--------------- --------------- --------------- ---------------
EFFECTIVE
GROSS
REVENUE $242,516 $8.92 $276,760 $10.18 $265,371 $9.76 $215,555 $7.92
OPERATING
EXPENSES
Total Repair/
Main/Supply $1,494 $0.05 $3,782 $0.14 $4,710 $0.17 $5,000 $0.18
Total
Services 2,025 0.07 718 0.03 (700) (0.03) 1,000 0.04
Total
Administration 12,160 0.45 11,061 0.41 11,151 0.41 11,500 0.42
Total
Marketing 0 0.00 190 0.01 (190) (0.01) 500 0.02
Total Common
Area
Maintenance 45,799 1.68 35,787 1.32 49,114 1.81 50,000 1.84
Total
Utilities 1,176 0.04 1,743 0.06 1,372 0.05 1,500 0.06
Total
Insurance 8,084 0.30 10,788 0.40 6,408 0.24 6,500 0.24
Management 13,333 0.49 13,325 0.49 15,243 0.56 8.622 0.32
------------- --------------- ------------- ------------
Subtotal $84,071 $3.09 $77,394 $2.85 $87,108 $3.20 $84,622 $3.11
Real
Estate
Taxes 26,754 0.98 26,818 0.99 26,616 0.98 40,000 1.47
------------- --------------- ------------- -------------
TOTAL
EXPENSES $110,825 $4.07 $104,212 $3.83 $113,724 $4.18 $124,622 $4.58
NET
OPERATING
INCOME $131,691 $4.84 $172,54 $6.34 $151,647 $5.58 $90.933 $3.34
<FN>
(1)Fiscal Year Beginning: 4/1/2004
</FN>
Conclusion of Operating Expenses
We analyzed each item of expense and developed an opinion of a level of expense
we believe a typical investor in a property like this would consider reasonable.
We made our projections on a fiscal year basis. Year 1 begins April 1, 2004.
Please refer to the following chart for our Year 1 forecast of expenses.
Expense C&W Forecast Per SF Analysis
Total Repair/Main/Supply $5.000 $0.18 Our estimate is based
on the historical
and budgeted expenses,
plus expense levels at
competing properties.
Total Services $1,000 $0.04 Our estimate is based
on the historical and
budgeted expenses,
plus expense levels at
competing properties.
Total Administration $11,500 $0.42 Our estimate is based
on the historical
and budgeted expenses,
plus expense levels at
competing properties.
Total Marketing $500 $0.02 Our estimate is based
on the historical and
budgeted expenses,
plus expense levels at
competing properties.
Total Common Area Mainte $50,000 $1.84 Our estimate is based
on the historical
and budgeted expenses,
plus expense levels at
competing properties.
Total Utilities $1,500 $0.06 Our estimate is based
on the historical
and budgeted expenses,
plus expense levels at
competing properties.
Total lnsurance $6,500 $0.24 Our estimate is based
on the historical
and budgeted expenses,
plus expense levels at
competing properties.
Management $8,622 $0.32 Management fees for
this type of property
typically range from 3
to 4 percent of
effective gross
income. We have
utilized a management
fee of 4.0 percent
of effective gross
income, which we
consider to be market
oriented.
Real Estate Taxes $40,000 $1.47 A complete discussion
of the taxes is
included in the Real
Property Taxes and
Assessments section of
this report.
Total operating expenses excluding real estate taxes are estimated at $84,622
equating to $3.11 per square foot. The following expense comparisons support our
opinion of operating expenses for the subject.
OPERATING EXPENSE COMPARABLES
Including Real Estate Taxes
Average Operating
Publication GLA Region Expenses/SF
Dollars & Cents 54,206 Midwest $2.34
National Research Bureau 45,518 Kansas City $2.12
<FN>
Source:
Dollars & Cents of Shopping Centers - 2003, Strip Shopping Centers
National Research Bureau 2003, Strip Centers
</FN>
Income and Expense Pro Forma
The following chart is our opinion of income and expenses for Year 1.
SUMMARY OF REVENUE AND EXPENSES
2004/2005 $/SF
POTENTIAL GROSS REVENUE
Base Rental Revenue $271,159 $9.97
Miscellaneous Revenue 4,000 $0.15
Expense Reimbursement Revenue 36,549 1.34
-----------------------
TOTAL POTENTIAL GROSS REVENUE $311,708 $11.46
Vacancy and Collection Loss (96,153) (3.54)
-----------------------
EFFECTIVE GROSS REVENUE $215,555 $7.92
OPERATING EXPENSES
Total Repair/Main/Supply $5,000 $0.18
Total Services 1,000 0.04
Total Administration 11 ,500 0.42
Total Marketing 500 0.02
Total Common Area Maintenance 50,000 1.84
Total Utilities 1,500 0.06
Total Insurance 6,500 0.24
Management 8,622 0.32
-----------------------
Subtotal $84,622 $3.11
Real Estate Taxes 40,000 1.47
-----------------------
TOTAL EXPENSES $124,622 $4.58
NET OPERATING INCOME $90,933 $3.34
Capitalization Rate Selection
In addition, we have considered Investor Surveys published by Korpacz and
Cushman & Wakefield, Inc. for competitive shopping center properties.
Discounted Cash Flow Method
In the Discounted Cash Flow Method, we employed Argus for Windows software to
model the income characteristics of the property and to make a variety of cash
flow assumptions. We attempted to reflect the most likely investment assumptions
of typical buyers and sellers in this particular market segment. The following
table illustrates the assumptions used in the discounted cash flow analysis.
Discounted Cash Flow Assumptions
DISCOUNTED CASH FLOW
MODELING ASSUMPTIONS
Holding Period: 10 Years
Projection Period: 11 Years
Start Date: 4/1/2004
RESERVES FOR REPLACEMENT (PSF) $0.15
VACANCY & COLLECTION LOSS
Global Vacancy: 5.00%
Collection Loss: 2.00%
-----
Total: 7.00%
GROWTH RATES
Market Rent: 3.00%
Consumer Price Index (CPI): 3.00%
Expenses: 3.00%
Real Estate Taxes: 3.00%
RATES OF RETURN
Internal Rate of Return: 12.50%
Terminal Capitalization Rate: 10.50%
Reversionary Sales Cost: 2.00%
- -------------------------------------------------
LEASING ASSUMPTIONS Inline
- -------------------------------------------------
Market Rent Per Square Foot $9.00
Contract Rent Increase Flat
Lease Type Modified
Gross
Lease Term (years) 5
Free Rent on New Leases (months) 0
Free Rent on Renewals (months) 0
Downtime Between New Leases 6
Renewal Probability 70.00%
- ------------------------------------------------
TENANT IMPROVEMENTS (PSF) Inline
- ------------------------------------------------
New Leases $5.00
Renewals $0.00
Leasing Commissions: 6.0 percent of total rent for new leases;
0.0 percent of total rent for renewal leases.
Contract Rent Increases: Leases are assumed flat per annum.
Expense Reimbursements: Future tenants are assumed to be responsible
for their pro rata share of real estate taxes
and operating expenses on a modified gross basis
while the landlord is responsible for management
and capital expenditures.
Capital Expenditure: The building was in average condition at the
time of our inspection. We do not foresee any
major capital expenditures in the near future.
Terminal Capitalization Rate Selection
A terminal capitalization rate was used to develop an opinion of the market
value of the property at the end of the assumed investment holding period. The
rate is applied to the net operating income following year 10 before making
deductions for leasing commissions, tenant improvement allowances and reserves
for replacement. We have developed an opinion of an appropriate terminal
capitalization rate based on indicated rates in current investor surveys.
Terminal Terminal
Survey Date Cap Rate Cap Rate
Range Average
Korpacz Fourth Quarter 2004 8.0%- 11.5% 9.33%
C&W Real Estate
Outlook Spring/Summer 2003 9.0%-9.8 9.4%
<FN>
Korpacz - Refers to national strip shopping center market regardless of class or
occupancy
C&W - Refers to national Class B leased neighborhood/community center market
</FN>
As a result, we have applied a 10.50 percent terminal capitalization rate in our
analysis.
Discount Rate Selection
We have developed an opinion of future cash flows, including property value at
reversion, and discounted that income stream at an internal rate of return
(yield rate) currently required by investors for similar-:quality real property.
The yield rate (internal rate of return or IRR) is the single rate that
discounts all future equity benefits (cash flows and equity reversion) to an
opinion of net present value.
The Korpacz and Cushman & Wakefield investor surveys indicate the following
internal rates of return for competitive shopping center properties:
Survey Date IRR IRR
Range Average
Korpacz Fourth Quarter 2004 8.5%-12.0% 10.19%
C&W Real
Estate Outlook Spring/Summer 2003 10.0%-11.5% 10.8%
<FN>
Korpacz - Refers to national strip shopping center market regardless of class or
occupancy
C&W - Refers to national Class B leased neighborhood/community center market
</FN>
The above table summarizes the investment parameters of some of the most
prominent investors currently acquiring similar investment properties in the
United States. We realize that this type of survey reflects target rather than
transactional rates. Transactional rates are usually difficult to obtain in the
verification process and are actually only target rates of the buyer at the time
of sale. The property's performance will ultimately determine the actual yield
at the time of sale after a specific holding period.
We have discounted our cash flow and reversionary value projections at an
internal rate of return of 12.50 percent.
Discounted Cash Flow Method Conclusion
Based on the discount rate selected, market value is estimated at $1,400,000,
rounded. The reversion contributes 43.90 percent to this value estimate. Our
cash flow projection and valuation matrix are presented at the end of this
section.
Software : ARGUS Ver.11.0.02 Date:7/15/04
File : 04-248-04 Argus Independence Time: 3:07pm
Property Type: Neighborhood Center Ref#: ASO
Portfolio : Page: 1
Hidden Valley Exchange SC
3010 South State Route 290
Independence, MO 64058
SCHEDULE OF PROSPECTIVE CASH FLOW
In Inflated Dollars for the Fiscal Year Beginning 4/1/2004
Year 1 Year 2 Year 3 Year 4 Year 5
For the Years Mar-2005 Mar-2006 Mar-2007 Mar-2008 Mar-2009
Ending
POTENTIAL GROSS REVENUE
Base Rental Revenue $271,159 $287,071 $297,785 $299,189 $301,588
Absorption & Turnover
Vacancy (91,754) (60,686) (13,847) (7,260)
------------------------------------------------------
Scheduled Base
Rental Revenue 179,405 226,385 283,938 299,189 294,328
Expense Reimbursement
Revenue
CAM 36,549 38,138 41,300 42,601 40,951
------------------------------------------------------
Total Reimbursement
Revenue 36,549 38,138 41,300 42,601 40,951
Miscellaneous Revenue 4,000 4,120 4,244 4,371 4,502
------------------------------------------------------
TOTAL POTENTIAL
GROSS REVENUE 219,954 268,643 329,482 346,161 339,781
General Vacancy (10,385) (3,151)
Collection Loss (4,399) (5,373) (6,590) (6,923) (6,796)
------------------------------------------------------
EFFECTIVE GROSS REVENUE 215,555 263,270 322,892 328,853 329,834
OPERATING EXPENSES
CAM 50,000 51,500 53,045 54,636 56,275
Repair/ Main/ Supply 5,000 5,150 5,305 5,464 5,628
Services 1,000 1,030 1,061 1,093 1,126
Administration 11,500 11,845 12,200 12,566 12,943
Marketing 500 515 530 546 563
Utilities 1,500 1,545 1,591 1,639 1,688
Insurance 6,500 6,695 6,896 7,103 7,316
Real Estate Taxes 40,000 41,200 42,436 43,709 45,020
Management 8,622 10,531 12,916 13,154 13,193
------------------------------------------------------
TOTAL OPERATING EXPENSES 124,622 130,011 135,960 139,910 143,752
------------------------------------------------------
NET OPERATING INCOME 90,933 133,259 186,912 168,943 166,082
------------------------------------------------------
LEASING & CAPITAL COSTS
Tenant Improvements 16,434 37,408 12,911 6,078
Leasing Commissions 10,599 24,126 6,327 3,920
Reserves 4,080 4,202 4,328 4,458 4,592
------------------------------------------------------
TOTAL LEASING &
CAPITAL COSTS 31,113 65,738 25,566 4,458 14,590
------------------------------------------------------
CASH FLOW BEFORE
DEBT SERVICE & TAXES $59,820 $67,521 $161,346 $184,485 $171,492
& TAXES ------------------------------------------------------
Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
Mar-2010 Mar-2011 Mar-2012 Mar-2013 Mar-2014 Mar-2014
POTENTIAL GROSS REVENUE
Base Rental
Revenue $308,180 $324,880 $345,171 $349,195 $350,930 $358,190
Absorption &
Turnover Vacancy (10,648) (24,129) (15,851) (8,416) (6,856)
--------------------------------------------------------------
Scheduled Base
Rental Revenue 297,532 300,751 329,320 349,195 342,514 351,334
Expense Reiembursement
Revenue
CAM 39,519 37,981 39,003 40,801 39,901 40,089
--------------------------------------------------------------
Total
Reimbursement
Revenue 39,519 37,981 39,003 40,801 39,901 40,089
Miscellaneous
Revenue 4,637 4,776 4,919 5,067 5,219 5,376
--------------------------------------------------------------
TOTAL POTENTIAL
GROSS REVENUE 341,688 343,508 373,242 395,063 387,634 396,799
General Vacancy (11,852) (3,466) (5,254)
Collection Loss (6,834) (6,870) (7,465) (7,901) (7,753) (7,936)
--------------------------------------------------------------
EFFECTIVE GROSS
REVENUE 334,854 336,638 365,777 375,310 376,415 383,609
--------------------------------------------------------------
OPERAINTING
EXPENSES
CAM 57,964 59,703 61,494 63,339 65,239 67,196
Repair/Main/Supply 5,796 5,970 6,149 6,334 6,524 6,720
Services 1,159 1,194 1,230 1,267 1,305 1,344
Administration 13,332 13,732 14,144 14,568 15,005 15,455
Marketing 580 597 615 633 652 672
Utilities 1,739 1,791 1,845 1,900 1,957 2,016
Insurance 7,535 7,761 7,994 8,234 8,481 8,735
Real Estate Taxes 46,371 47,762 49,195 50,671 52,191 53,757
Management 13,394 13,466 14,631 15,012 15,057 15,344
--------------------------------------------------------------
TOTAL OPERAING
EXPENSES 147,870 151,976 157 ,297 161,958 166,411 171,239
--------------------------------------------------------------
NET OPERTING
INCOME 186,984 184,662 208,480 213,352 210,004 212,370
LEASING & CAPITAL COSTS
Tenant
Improvements 4,950 19,628 18,069 7,046 5,740
Leasing
Commissions 3,194 12,660 11,655 4,545 3,702
Reserves 4,730 4,872 5,018 5,168 5,323 5,483
--------------------------------------------------------------
TOTAL LEASING &
CAPITAL COSTS 12,674 37,160 34,742 5,168 16,914 14,925
--------------------------------------------------------------
CASH FLOW BEFORE
DEBT SERVICE &
TAXES $174,110 $147,502 $173,738 $208,184 $193,090 $197,445
--------------------------------------------------------------
--------------------------------------------------------------
Software : ARGUS Ver.11.0.02 Date:7/15/04
File : 04-248-04 Argus Independence Time: 3:07pm
Property Type: Neighborhood Center Ref#: ASO
Portfolio : Page: 3
Hidden Valley Exchange SC
3010 South State Route 290
Independence, MO 64058
RESALE - CAP RATE MATRIX
Cash Flow Before Debt Service plus Property Resale in Year 10, Mar-2014
Discounted Annually (Endpoint on Cash Flow & Resale)
Net P.V. of P.V. of P.V. of P.V. of P.V. of
For the Proceeds Property Property Property Property Property
Cap Rates From Sale @ 12.00% @ 12.25% @ 12.50% @ 12.75% @ 13.00%
10.00% $2,081,226 $1,469,078 $1,444,750 $1,420,942 $1,397,640 $1,374,832
10.25% 2,030,464 1,452,734 1,428,766 1,405,310 1,382,351 1,359,878
10.50% 1,982,120 1,437,169 1,413,544 1,390,422 1,367,790 1,345,636
10.75% 1,936,024 1,422,327 1,399,029 1,376,227 1,353,907 1,332,057
11.00% 1,892,024 1,408,160 1,385,175 1,362,677 1,340.655 1,319,095
Reconciliation Within the Income Capitalization Approach
SUMMARY OF INCOME CAPITALIZATION METHODS
Value Per Sq. Ft.
Value Indicated by the Discounted Cash Flow Method: $1,400,000 $51.47
We have placed greater reliance on the discounted cash flow method because this
mirrors the methodology used by purchasers of this property type. Therefore, our
opinion of market value via the Income Capitalization Approach is as follows:
Value Conclusion: $1,400,000 $51.47
RECONCILIATION AND FINAL VALUE OPINION
Valuation Methodology Review and Reconciliation
This appraisal employs only the Income Capitalization Approach. Based on our
analysis and knowledge of the subject property type and relevant investor
profiles, it is our opinion that this approach would be considered necessary and
applicable for market participants. The client has requested that we provide
them with a restricted use report. Therefore, we have not employed the Cost
Approach or the Sales Comparison Approach to develop an opinion of market value.
The approaches indicated the following:
Income Capitalization Approach: $1,400,000
We have given most weight to the Income Capitalization Approach because this
mirrors the methodology used by purchasers of this property type.
Based on our Complete Appraisal as defined by the Uniform Standards of
Professional Appraisal Practice, we have developed an opinion that the "as-is"
market value of the leased fee estate of the referenced property, subject to the
assumptions, limiting conditions, certifications, and definitions, on April 20,
2004 was:
ONE MILLION FOUR HUNDRED THOUSAND DOLLARS
$1,400,000
INSURABLE VALUE
Insurable Value is directly related to the portion of the real estate which is
covered under the asset's insurance policy. We have based this opinion on the
building's replacement cost new (RCN) which has no direct correlation with its
actual market value.
The replacement cost new is the total construction cost of a new building built
using modern technology, materials, standards and design, but built to the same
specifications of and with the same utility as the building being appraised. For
insurance purposes, replacement cost new includes all direct costs necessary to
construct the building improvements. Items which are not considered include land
value, site improvements, indirect costs, accrued depreciation and
entrepreneurial profit. To develop an opinion of insurable value, exclusions for
below-grade foundations and architectural fees must be deducted from replacement
cost new.
We developed an opinion of replacement cost new by using the Calculator Cost
Method developed by Marshall Valuation Service, a nationally recognized cost
estimating company which estimates construction costs for all types of
improvements. Marshall Valuation Service revises its cost factors monthly and
adjusts them to reflect regional and local cost variations.
INSURABLE VALUE
Replacement Cost New (RCN) GBA (SF)$/GBA Sub-Total
Building Improvements
Base Cost 27,200 $60.00 $1,632,000
HVAC 27,200 5.50 149,600
Sprinklers 27,200 2.50 68,000
---------------------
Subtotal 27,200 $68.00 $1,849,600
Multipliers
Current Cost 1.030
Local Area 1.150
Perimeter 0.865
Building Height 1.000
------
Product of Multipliers x 1.025
----------
Adjusted Base Building Cost $1,895,086
Less: Insurance Exclusions
Foundations Below Grade -5.00%
Piping Below Grade (Negligible) 0.00%
Architect Fees -6.00%
-------
Total Insurance Exclusion Adjustment -11.00% ($208,459)
-----------
Insurable Value $1,686,627
Rounded to nearest $100,000 $1,700,000
<FN>
Source: Marshall Valuation Service Section: 15 Quality: Average
Page: 17 Class: B
Date: 5/00 Type: Retail
</FN>
ASSUMPTIONS AND LIMITING CONDITIONS
"Report" means the appraisal or consulting report and conclusions stated
therein, or a letter opinion, to which these Assumptions and Limiting Conditions
are annexed.
"Property" means the subject of the Report .
IIC&W" means Cushman & Wakefield, Inc. or its subsidiary that issued the Report.
"Appraiser(s)" means the employee(s) of C&W who prepared and signed the Report.
The Report has been made subject to the following assumptions and limiting
conditions:
1. No opinion is intended to be expressed and no responsibility is assumed for
the legal description or for any matters that are legal in nature or require
legal expertise or specialized knowledge beyond that of a real estate appraiser.
Title to the Property is assumed to be good and marketable and the Property is
assumed to be free and clear of all liens unless otherwise stated. No survey of
the Property was undertaken.
2. The information contained in the Report or upon which the Report is based has
been gathered from sources the Appraiser assumes to be reliable and accurate.
The owner of the Property may have provided some of such information. Neither
the Appraiser nor C&W shall be responsible for the accuracy or completeness of
such information, including the correctness of estimates, opinions, dimensions,
sketches, exhibits and factual matters. Any authorized user of the Report is
obligated to bring to the attention of C&W any inaccuracies or errors that it
believes are contained in the Report.
3. The opinions are only as of the date stated in the Report. Changes since that
date in external and market factors or in the Property itself can significantly
affect the conclusions.
4. The Report is to be used in whole and not in part. No part of the Report
shall be used in conjunction with any other analyses. Publication of the Report
or any portion thereof without the prior written consent of C&W is prohibited.
Reference to the Appraisal Institute or to the MAl designation is prohibited.
Except as may be' otherwise stated in the letter of engagement, the Report may
not be used by any person other than the party to whom it is addressed or for
purposes other than that for which it was prepared. No part of the Report shall
be conveyed to the public through advertising, or used in any sales or
promotional or offering or SEC material without C&W's prior written consent.
Any authorized user of this Report who provides a copy to, or permits reliance
thereon by, any person or entity not authorized by C&W in writing to use or rely
thereon, hereby agrees to indemnify and hold C&W, its affiliates and their
respective shareholders, directors, officers and employees, harmless from and
against all damages, expenses, claims and costs, including attorneys' fees,
incurred in investigating and defending any claim arising from or in any way
connected to the use of, or reliance upon, the Report by any such unauthorized
person or entity.
5. Except as may be otherwise stated in the letter of engagement, the Appraiser
shall not be required to give testimony in any court or administrative
proceeding relating to the Property or the Appraisal.
6. The Report assumes (a) responsible ownership and competent management of the
Property; (b) there are no hidden or unapparent conditions of the Property,
subsoil or , structures that render the Property more or less valuable (no
responsibility is assumed for such conditions or for arranging for engineering
studies that may be required to discover them); (c) full compliance with all
applicable federal, state and local zoning and environmental regulations and
laws, unless noncompliance is stated, defined and considered in the Report; and
(d) all required licenses, certificates of occupancy and other governmental
consents have been or can be obtained and renewed for any use on which the value
estimate contained in the Report is based.
7. The physical condition of the improvements considered by the Report is based
on visual inspection by the Appraiser or other person identified in the Report.
C&W assumes no responsibility for the soundness of structural members nor for
the condition of mechanical equipment, plumbing or electrical components.
8. The forecasted potential gross income referred to in the Report may be based
on lease summaries provided by the owner or third parties. The Report assumes no
responsibility for the authenticity or completeness of lease information
provided by others. C&W recommends that legal advice be obtained regarding the
interpretation of lease provisions and the contractual rights of parties.
9. The forecasts of income and expenses are not predictions of the future.
Rather, they are the Appraiser's best estimates of current market thinking on
future income and expenses. The Appraiser and C&W make no warranty or
representation that these forecasts will materialize. The real estate market is
constantly fluctuating and changing. It is not the Appraiser's task to predict
or in any way warrant the conditions of a future real estate market; the
Appraiser can only reflect what the investment community, as of the date of the
Report, envisages for the future in terms of rental rates, expenses, and supply
and demand.
10. Unless otherwise stated in the Report, the existence of potentially
hazardous or toxic materials that may have been used in the construction or
maintenance of the improvements or may be located at or about the Property was
not considered in arriving at the opinion of value. These materials (such as
formaldehyde foam insulation, asbestos insulation and other potentially
hazardous materials) may adversely affect the value of the Property. The
Appraisers are not qualified to detect such substances. C&W recommends that an
environmental expert be employed to determine the impact of these matters on the
opinion of value.
11. Unless otherwise stated in the' Report, compliance with the requirements of
the Americans with Disabilities Act of 1990 (ADA) has not been considered in
arriving at the opinion of value. Failure to comply with the requirements of the
ADA may adversely affect the value of the Property. C&W recommends that an
expert in this field be employed.
12. If the Report is submitted to a lender or investor with the prior approval
of C&W, such party should consider this Report as only one factor together with
its independent investment considerations and underwriting criteria, in its
overall investment decision. Such lender or investor is specifically cautioned
to understand all Extraordinary Assumptions and Hypothetical Conditions and the
Assumptions and Limiting Conditions incorporated in this Report.
13. In the event of a claim against C&W or its affiliates or their respective
officers or employees or the Appraisers in connection with or in any way
relating to this Report or this engagement, the maximum damages recoverable
shall be the amount of the monies actually collected by C&W or its affiliates
for this Report and under no circumstances shall any claim for consequential
damages be made.
14. If the Report is referred to or included in any offering material or
prospectus, the Report shall be deemed referred to or included for informational
purposes only and C&W, its employees and the Appraiser have no liability to such
recipients. C&W disclaims any and all liability to any party other than the
party which retained C&W to prepare the Report.
15. By use of this Report each party that uses this Report agrees to be bound by
all of the Assumptions and Limiting Conditions stated herein.
Extraordinary Assumptions
An extraordinary assumption is defined as "an assumption, directly related to a
specific assignment, which, if found to be false, could alter the appraiser's
opinions or conclusions. Extraordinary assumptions presume as fact otherwise
uncertain information about physical, legal or economic characteristics of the
subject property or about conditions external to the property, such as market
conditions or trends, or the integrity of data used in an analysis" (USPAP).
This appraisal employs no extraordinary assumptions.
Hypothetical Conditions
A hypothetical condition is defined as "that which is contrary to what exists,
but is supposed for the purpose of analysis. Hypothetical conditions assume
conditions contrary to known facts about physical, legal, or economic
characteristics of the subject property or about conditions external to the
property, such as market conditions or trends, or the integrity of data used in
an analysis" (USPAP).
This appraisal employs no hypothetical conditions.
CERTIFICATON OF APPRAISAL
We certify that, to the best of our 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 our personal,
impartial, and unbiased professional analyses, opinions, and conclusions.
3. We have no present or prospective interest in the property that is the
subject of this report, and no personal interest with respect to the
parties involved.
4. We have no bias with respect to the property that is the subject of this
report or to the parties involved with this assignment.
5. Our engagement in this assignment was not contingent upon developing or
reporting predetermined results.
6. Our compensation for completing this assignment is not contingent upon the
development or reporting of a predetermined value or direction in value
that favors the cause of the client, the amount of the value opinion, the
attainment of a stipulated result, or the occurrence of a subsequent event
directly related to the intended use of this appraisal.
7. Our analyses, opinions, and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation and the Code of Professional
Ethics and the Standards of Professional Appraisal Practice of the
Appraisal Institute.
8. Randal D. Dawson, MAI made a personal inspection of the property that is
the subject of this report.
9. No one provided significant real property appraisal assistance to the
persons signing this report.
10. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
11. As of the date of this report, Appraisal Institute continuing education for
Randal D. Dawson, MAI is current.
/S/ RANDAL D. DAWSON
- -----------------------
Randal D. Dawson, MAI
Associate Director
Missouri Certified General Appraiser
License No. RA-003304