011000 EDAOfficial File Copy
CITY OF NEW HOPE
EDA MEETING
City Hall, 4401 Xylon Avenue North
January 10, 2000
President W. Peter Enck
Commissioner Sharon Cassen
Commissioner Don Collier
Commissioner Pat LaVine Norby
Commissioner Mark Thompson
2.
3.
4.
Call to Order
Roll Call
Approval of Regular Meeting Minutes of December 13, 1999
Approval of the Request for Proposal; Motion Authorizing Staff to Proceed with
Solicitation of Proposals for Development at 7500-7528 42"d Avenue North
(Improvement Project No. 665)
Motion Authorizing Staff to Negotiate the Purchase of 5550 Winnetka Avenue North
(Improvement Project No. 669)
Resolution Approving Section 8 Housing Assistance Payments Program Contract No. C-
99-66 for Administrative Services Between the Metropolitan Council and the City of New
Hope and Authorizing President and Executive Director to Execute Agreement
7. Adjournment
CITY OF NEW HOPE
4401 XYLON AVENUE NORTH
NEW HOPE, MINNESOTA 55428
Approved EDA Minutes
Regular Meeting
December 13, 1999
City Hall
CALL TO ORDER
ROLL CALL
APPROVE MINUTES
IMP. PROJECT 597
Item 4
MOTION
Item 4
CHARDON COURTS
APARTMENTS
Item 5
New Hope EDA
Page 1
President Enck called the meeting of the Economic Development Authority to order
at 8.'31 p.m.
Present:
W. Peter Enck, President
Pat LaVine Norby, Commissioner
Sharon Cassen, Commissioner
Don Collier, Commissioner
Mark Thompson, Commissioner
Motion was made by Commissioner Cassen, seconded by Commissioner Collier, to
approve the Regular Meeting Minutes of November 8, 1999. All present voted in
favor. Motion carried.
President Enck introduced for discussion Item 4, Discussion Regarding Proposed
Development for City-owned Property at 9200 49th Avenue and Authorization for
Staff to Negotiate on Potential Sale of Property (Improvement Project No. 597).
Mr. Kirk McDonald, Director 6f Community Development, provided history of the
city-owned property. He reported that staff has been approached by ID Services, a
New Hope based manufacturing company currently located at 3410 Winnetka
Avenue. ID Services is proposing to build a 31,400 square foot building on the
property. The building will be used primarily for manufacturing and warehousing its
products and as office space for its operation. They have hired Olson General
Contractors, Inc. to develop a preliminary concept plan for the site.
He indicated staff is seeking concept approval and authorization to enter into
negotiations. The EDA unanimously agreed to concept approval.
Motion was made by Commissioner Thompson, seconded by Commissioner Norby,
authorizing staff to negotiate the potential sale of city-owned property
(Improvement Project No. 597). All present voted in favor. Motion carried.
President Enck introduced for discussion Item 5, Resolution Consenting to and
Approving Sale of Parmership Interest in North Ridge Properties of New Hope
Limited Parmership.
Mr. Dan Donahue, City Manager, explained that in 1984 the City entered into a
redevelopment agreement with Northridge Properties of New Hope Limited
Partnership. The agreement required the HRA to acquire land for Northridge
Properties for the construction and development of the Chardon Court Apartments.
The HRA's financial contribution to the project consisted of $975,000 in tax
increment funds and $880,200 in interest rate reduction payments to the Partnership
payable from tax increment funds generated by the development. The agreement
provides that the HRA shall have a lien against the development in the minimum
amount of $614,200 payable upon transfer or sale of the legal or equitable interests
December 13, 1999
EDA RESOLUTION
99-13
Item 5
ADJOURNMENT
in the property.
When the agreement was originally signed in 1984, the parmership consisted of
Charles P. Thompson, Charles T. Thompson, and Donald E. Forseth. In 1987,
Donald E. Forseth and Charles P. Thompson's parmership interest were transferred
or sold to Dr. James Pattee and M. Melinda Pattee. At this time the Charles (Charlie)
Thompson wishes to transfer parmership interests to M. Melinda Pattee.
Staff has consulted the City Attorney regarding the HRA lien against the property.
The resolution approves the current ownership group and authorizes a transfer of
interest from Charles T. Thompson to M. Melinda Pattee. The transfer will not
negatively impact protection for the HRA lien against the property. The HRA lien
will be paid when Chardon Courts and/or the land is sold by the current ownership
group to a third party.
Mr. Donahue stated the resolution will approve the 1987 transfer of interests, the
present transfer of interest from Charles T. Thompson to M. Melinda Pattee, and
acknowledges that these transfers of interests do not trigger the maturity of the HRA
lien.
Mr. Steve Sondrall, City Attorney, stated he has been advised by Judith Gartner, the
attorney handling this transaction, that an amendment to the agreement may be
presented to the City in the near future. Apparently the Pattees may wish to transfer
their interests would could trigger repayment of the lien.
Commissioner Collier introduced the following resolution and moved its adoption:
"RESOLUTION CONSENTING TO AND APPROVING SALE OF
PARTNERSHIP INTEREST IN NORTH RIDGE PROPERTIES OF NEW
HOPE LIMITED PARTNERSHIP". The motion for the adoption of the foregoing
resolution was seconded by Commissioner Norby, and upon vote being taken
thereon, the following voted in favor thereof: Enck, Cassen, Collier, Norby,
Thompson; and the following voted against the same: None; Abstained: None;
Absent: None; whereupon the resolution was declared duly passed and adopted,
signed by the president which was attested to by the executive director.
Motion was made by Commissioner Collier, seconded by Commissioner Thompson,
to adjourn the meeting. Ali present voted in favor. Motion carried. The New Hope
EDA adjourned at 8:37 p.m.
Respectfully submitted,
Valerie Leone
City Clerk
New Hope EDA
Page 2
December 13, 1999
EDA
FOR ACTION
Originating Department Approved for Agenda Agenda Section
Community Development EDA
1-10-00
Kirk McDonald Item No.
By?nd Phil Kern
APPROVAL OF THE REQUEST FOR PROPOSAL; MOTION AUTHORIZING STAFF TO PROCEED
WITH SOLICITATION OF PROPOSALS FOR DEVELOPMENT AT 7500-7528 42ND AVENUE
(IMPROVEMENT PROJECT NO. 665)
ACTION REQUESTED
Staff is requesting approval of the Request For Proposal for the City-owned properties at 7500-7528
42nd Avenue. With EDA approval, staff will distribute the request for proposals to real estate developers.
POLICY/PAST PRACTICE
The request for proposal will be used to solicit development proposals for the City-owned properties. All
proposals submitted to the City will be reviewed and shared with the EDA. The EDA will then have the
ability to enter into a letter of intent if a proposal is desirable to the City.
BACKGROUND
The City has acquired three properties at 7500, 7516, and 7528 42nd Avenue due to groundwater
contamination caused by Electronic Industries, the former owner of 7516 42nd Avenue. In August 1999,
the City acquired the third parcel at 7500 42nd Avenue and demolition was completed at this property in
December. All three sites have been cleared, and staff is working with the MPCA and Electronic
Industries on possible methods to expedite the contamination clean up on the three properties.
The City is working to submit a grant application to the Department of Trade and Economic
Development in March to fund the costs of the contamination clean up. The State has over $2 million
available for Brownfield projects that result in the redevelopment of contaminated land. In order to
receive consideration for funding, several steps need to be completed. First, Phase I and Phase II
environmental examinations have to be conducted to identify the levels of contamination. The next step
i calls for a Response Action Plan (RAP) to be filed with the MPCA. Finally, a specific development must
!be identified for the contaminated land following clean up with estimates of additional economic impact
the development will have on the area. This impact includes jobs, wage rates, and added tax capacity.
The City has completed the Phase I and Phase II examinations, and staff is currently working with the
(cont'd.)
MOTION BY ~ SECOND By ~).~
Request for Action
Page 2 1-10-00
MPCA on a revised RAP. The last step the City needs to address is the identification of a potential
development for the property. The request for proposals will produce potential developments for the site,
which will be used in the DTED grant application. With a potential development for the site, the City will
be more accurately able to identify the economic impact of redevelopment.
Staff expects the RFP and grant application process to produce several options for the City in terms of
the development of this property. The EDA will be allowed to select the development it would like to see
at this property from the proposals submitted. Staff, consultants, and the MPCA have determined that the
soil and groundwater clean up process will take approximately six-to-nine months. Development would
be able to begin following the completion of this process, which could be as soon as spring 2001.
The request for proposal identifies the City's desire for a maximum use of the property with a high market
value, pedestrian-friendly development. While several potential uses were identified, the RFP
encourages all proposals to be submitted to the City, with the exception of strip malls and auto-orientated
businesses, such as gas stations and repair shops. The RFP sets a deadline of February 25, 2000, for
final submission of proposals.
ATTACHMENTS
· Request for Proposal
· Site Maps
· 42nd Avenue Redevelopment Costs & Expected Revenues
CITY Of NEW HOPE
REQUEST FOR PROPOSALS
7500-7528 42nd AVENUE NORTH (ROCKFORD ROAD)
FOR DEVELOPMENT
Section One:
Introduction
The City is requesting proposals for the development of 7500-28 42°d Avenue North
(Rockford Road). The project will involve the development of this 2.42-acre vacant lot,
located on 42nd Avenue at Quebec Avenue. The property is part of New Hope's limited
industrial (I-1) zoning district, but the City plans to rezone the property to the B-4
Community Business District.
New Hope is a fully developed suburban community located just west of Minneapolis.
With only nine undeveloped parcels of land remaining in New Hope's commercial and
industrial zones, opportunities for development are at a premium in this area.
Therefore, the City is requesting proposals that will maximize the use of this property.
Section Two:
Information about the property
The City purchased the three parcels (7528, 7516, and 7500 42"d Avenue) that make up
the 2.46 acres over the past 10 years to prepare the site for redevelopment. The
properties were used for industrial purposes, and City envisioned a different land use for
these properties along its most busy central thoroughfare, 42"d Avenue. The properties
along 42"e Avenue are located in the City's most intense commercial zoning district.
The City intends to apply the same zoning district to this property.
The City first acquired property along 42"d Avenue in 1990 after learning of groundwater
contamination in the area. After significant testing by the Minnesota Pollution Control
Agency, it was determined that the soil and ground water were contaminated by
solvents discharged from the industrial use at 7516 42"d Avenue. The City moved
quickly to acquire this property and begin the clean-up process as soon as possible. By
1996, the City was able to acquire the second of the three parcels in the project area,
7528 42"d Avenue. This site was cleared as well, leaving only one operational industrial
property in the contaminated area. This property was acquired in August 1999, and the
warehouse on the site was demolished in December 1999.
With all three properties under common ownership, the City and MPCA are prepared to
expedite the Soil and groundwater clean-up process. The City is working with the former
tenant at 7516 42na Avenue to development plans for the excavation of all the
contaminated soils and the subsequent replacement with clean soil. The City is also
working with the MPCA on this process. The excavation and soil replacement process
will incur significant costs, and the City is working on a DTED Brownfield grant to recoup
a large portion of the costs associated with making the lot developable.
The City intends to have an accelerated soil clean-up process take place in the summer
of 2000. With the involvement of the MPCA and the former tenant, the city is ensured
that the clean-up process will meet all the standards of the MPCA. The site will be free
of contaminants according to the requirements of the MPCA before it is passed over to
a future developer.
Once the soil corrections are complete, the City will conduct an appraisal on the
property to determine the market value of the entire parcel. Based on an estimate from
a professional appraiser, the City estimates that the market value will be around $8 per
square foot, or approximately $850,000. The property is located in a tax increment
financing district.
The surrounding uses are indicated on the attached zoning map. The area directly
north and to the south of the project area is a major center of employment in the City,
and a multiple family residential complex is located to the northeast. West of the project
area is New Hope's City Center area, the largest commercial district in the City.
In 1999, the City invested over $2,500,000 in a large-scale streetscape treatment of 42"d
Avenue to the west of the project area. The streetscape included the addition of planted
medians, boulevard trees, reconstructed sidewalks, and general roadway
improvements. This property has 320 feet of frontage along 42'd Avenue, and is located
one mile east of Highway 169 in the New Hope City Center area. In 1992, a traffic count
along 42nd Avenue two blocks east of this site indicated a daily traffic rate of 28,000
vehicles. The site is also visible from Winnetka Avenue, which had daily traffic flows of
14,000 vehicles.
Along with the 42nd Avenue Streetscape, the new Walgreens Development one block
east of this project area continues the revitalization of New Hope's City Center area.
Walgreens began construction in December 1999 on a new freestanding retail store at
the intersection of Winnetka and 42nd Avenues. The Walgreens development
complements the 1999 redevelopment of the freestanding Kmart store two blocks east
of the project area at 42ne and Xylon Avenues. Kmart made significant upgrades to the
interior and exterior of its store in a comprehensive remodeling project scheduled to
continue in 2000 with the addition of green spaces and overall parking lot
improvements. Other improvements in the area include the rehabilitation of Winnetka
Center in 1998, where exterior improvements were made to the entire site. Winnetka
Center is located on Winnetka Avenue just north of 42"d Avenue.
Section Three:
Proposal Criteria
The City has a keen interest in maximizing the use of this property and fulfilling a
community need. The City would like to see a high market value, pedestrian-friendly
development that blends with the existing uses and the streetscape improvements along
42nd Avenue. The City envisions a development with architectural character and modern
urban design features.
The site will be rezoned to the B-4 Community Business District. It is important to note
that the City will not pay any realtor fees or commissions in the event of the sale of the
property. Some potential developments that the City would encourage include, but are
not limited to, a restaurant, movie theater, or other similar service businesses. The City
is not interested in a retail strip-mall type development, as there is an abundant supply
existing in the City. The City is also discouraging auto-orientated businesses, such as
repair shops and gas stations.
Section Four: Timeline
The City will consider all proposals. The City will be submitting a grant application to the
Department of Trade and Economic Development in April, and select proposals will be
included with this application. The soil clean-up work is expected to start in the summer
of 2000. Negotiations as to the sale of the property and the City building plan approval
process would also begin in the summer of 2000. The City will have the property
appraised and may negotiate a Letter of Intent after the Economic Development
Authority has reviewed the proposals. The schedule for clean-up will take approximately
six-to-nine months, allowing construction to begin in the spring of 2001.
Section Five:
Proposal Content
RESPONSES MUST BE IN THE ORDER AND FORMAT PRESENTED BELOW.
ADDITIONAL INFORMATION, IF DESIRED, MAY BE INCLUDED IN ITEM 7.
1. Proposed project
Briefly explain your proposal.
Please include the following items and how they relate to your proposal. If
exact figures and explanations are not possible, please estimate using similar
developments already in operation elsewhere.
1) Type of use/product
2) Size of development (square feet)
3) Number of employees
4) Hours of operation
5) Traffic/parking needs
6) Expected noise levels
7) Preliminary site diagram
2. Firm Organization
A. How many years has your firm been established as a professional
developer?
3. Professional Organization
A. How many people are employed in your firm and summarize their areas of
expertise.
4. Experience
A. Please list some of the major development projects your firm has completed
in the Minneapolis/St. Paul area.
B. List projects similar in size and use to the project you are currently proposing.
References
A. List references for your five most recently completed projects.
6. Scope and Cost of Services
A. List the additional work tasks that you think are necessary to prepare the
property for development
B. List estimate cost of development, including land preparation costs.
7. Additional Pertinent Information
A. Provide any additional pertinent information about your firm or your proposal.
8. Certification of Information Provided
A. The information provided herein is to the best of my knowledge accurate and
can be accepted by the recipient first named above as true representation of:
Company:
Address:
Title:
Date:
Section Six: Proposal Submission
Submit four (4) copies of your proposal to:
Kirk McDonald
Director of Community Development
4401 Xylon Avenue North
New Hope, MN 55428
Proposals must be received by February 25, 2000, at 4:00 PM CST.
Proposals must be submitted in an envelope with the words "Proposal for 7500 42nd
Avenue" clearly marked on the outside of the envelope. Information must be complete.
The City of New Hope reserves the right to reject any and all proposals. Faxed
proposals are not acceptable.
Enclosures:
· Copy of 1/8th Section map for the site
· Zoning map of City Center area
Cit CenterZonin Ma
Project Site to be rezoned to B-4 Community Business
7500, 7516, & 7528 42nd Avenue
NEW HOPE
ELEMENTARY
SCHOOL
DEL DR
CENTER
PARK: :'-
,~ 42ND AVE N
"Wa~'~'e~ns'-/
Development
Underway
ROCKFORD RD
GETHSEMANE
CEMETERY
SCHOOL
BUS
HOLY
NATIVITY
I-1
1/8 Section Map
Project Site (to scale)
7500, 7516, & 7528 42nd Avenue
"1
IF PEOJ 1606 i ................ ,r ........... .7 ...........
!
I
, I
,_ ~, , ,
I~g : :Pt"RT ~ LOT 5
: (6)
(5) = (8) : (7)
: :_
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' ~ .... ~s. 4 ', gs ',
.... ~'~'~'[ ~.47 ...... ~4.~S;~.E ~ s~6"~'0'~'~ ..... ~'~ ~'~e'~'[ .......
-~" ~"" " = - ' ~ RD) '
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s46.~,~.~ ': 42ND AVENUE
I · - ~.01
42nd Avenue Redevelopment
Total ,
Taxes Generated
Property Size of 1998 Tax Appraised Acquisition Demolition Total City Land Value by Commercial
Value at B-4
Parcel (SF) Valuation (Before Cost Cost Cost (@ $8 SF) Development
Purchase) (over 20 yrs)
7528 42nd
Avenue 40,128 SF $50,000 $433,000 $450,000 $48,545 $498,545 $321,024
7516 42nd
Avenue 30,400 SF $33,300 $238,000 $40,000 $31,164 $71,164 $243,200
7500 42nd
Avenue 35,000 SF $379,000 $432,000 $482,000 $26,037 $508,037 $280,000
All Three
Parcels 105,528 SF
2,42 Acres $462,300 $1,103,000 $972,000 $105,746 $1,077,746 $844,224 $300,000
Combined
** Taxes Generated is future tax revenues based on a development equal to that in value of the Sunshine Factory. The Sunshine
Factory contributes $15,000 in taxes to the City every year. Over a 20 year period, this added value equals $300,000.
Total Revenues:
Total Cost:
$1,144,224 (Land Value + Taxes Generated)
$1 ,O77,746
Balance for the City:
$66,478
G:\Managers\Kern\Property 01/04/2000 01/04/2000
EDA
REQUEST FOR ACTION
O~~~]:~ent' Approved for Agenda Agenda Section
1/10/00 EDA
Susan Henry Item No.
By: Community Development Speciali ;t ~. 5
MOTION AUTHORIZING STAFF TO NEGOTIATE THE PURCHASE OF 5550 WINNETKA
AVENUE NORTH (IMPROVEMENT PROJECT NO. 669)
REQUESTED ACTION
Staff has received the appraisal report for the vacant commercial property currently for sale at
5550 Winnetka Avenue North. Staff requests authorization by the EDA to negotiate on the basis
of the appraisal with the property owner.
POLICY/PAST PRACTICE
In the past, the EDA has directed staff to pursue the acquisition of vacant commercial and
available residential property that is located in areas of the City that the Comprehensive Plan
has identified for potential redevelopment.
BACKGROUND
At the October 25, 1999, meeting, the EDA discussed the property located at 5550 Winnetka
Avenue North and staff was authorized to order an appraisal. The commercial property, located
at the southeast quadrant of the intersection of Winnetka Avenue and Bass Lake Road, has
been vacant fbr the past several months. Formerly known as Ed's Donut Shop, the property is
located in an area identified by the Comprehensive Plan for future redevelopment.
BCL Appraisals recently completed the appraisal. The appraisal came in at $280,000, taking
into account the various approaches to value. In addition, the value of immovable trade fixtures
in the building is estimated at $5,600, according to the report. In total, the report stated a value
of $285,600, including the immovable trade fixtures. The property is located in a B-2, Retail
Business, Zoning District. The property contains 20,700 square feet (.47 acres), and the 1,300
square foot, one story masonry structure on the site was constructed in 1975.
(cont'd.)
RFA-O01 ~
Request for Action
Page 2 1-10-00
The property is currently owned by Kiva New Hope Corporation. The current asking price for
the property is $450,000. The property owners state this value because of the previous lease
agreement held on the property (with a rental amount of $3,200/month). However, a copy of the
lease that would support this statement was requested and not provided to validate the asking
price. The 1999 value for tax purposes of the property is $160,000 ($126,000 land/S34,000
building).
The property owners have stated there has been interest in the property; however, no response
has been offered because of the City's interest in acquisition at this time. City staff have been in
recent communication with the property owner. There is quite a disparity between the property
owner's asking price and the appraised value; therefore, staff is not overly optimistic the City
will be successful in negotiations. However, staff would like the opportunity to meet with the
property owner, present the recent appraisal, and determine if negotiations can proceed.
Staff feels the subject is a key piece of property for future redevelopment of the Bass Lake
Road/Winnetka area, as identified in the City's Comprehensive Plan. The Plan outlines an
aggressive strategy for enhancing the commercial character along Bass Lake Road.
Recommendations include:
· Expand the commercial land use patterns along Bass Lake Road to increase the land area
for commercial redevelopment.
· Assemble and redevelop smaller commercial sites to create longer commercial lots for
contemporary retail, service, and office uses.
In addition to this vacant commercial property, staff has been in recent communication with a
couple of property owners along the 5400-5500 Block of Winnetka Avenue regarding a potential
voluntary sale to the City. The residential property owners were in receipt of the City's recent
letter indicating an interest in acquiring property as it becomes available.
FUNDING
If acquisition proceeds, the property is located in an area where TIF funds can also be
expended for redevelopment activities.
ATTACHMENTS
· BCL Appraisal Report
A SUMMARY REPORT
COMPLETE APPRAISAL OF
A Fast Food Restaurant Building
5550 Winnetka Avenue
New Hope, Minnesota
Ed's Donut Shop
PREPARED FOR
The City of New Hope
c/o Susan Henry
4401 Xylon Avenue North
New Hope, Minnesota 55428
EFFECTIVE DATE OF APPRAISAL
December 3, 1999
OUR FILE
99921
BCL APPRAISALS
2852 ANTHONY LANE SO., MINNEAPOLIS, MINNESOTA 55418
(612)781-0605 Fax: 781-7826
RON LACHENMAYF-.R, SRA
BRAD BJORKLUND, MAI, SRA
REAL ESTATE APPRAISERS
&
CONSULTANTS
December 3, 1999
The City of New Hope
c/o Susan Henry
4401 Xylon Avenue North
New Hope, Minnesota 55428
Re:
Market Value Appraisal on a donut shop
@ 5550 Winnetka Avenue North, New Hope
Dear Ms. Henry:
In response to your request, I have conducted the required investigation, gathered the necessary data,
and made certain analyses that have enabled me to form an opinion as to the Market Value of the real
property referenced above.
Based on an inspection of the property and the investigation and analyses undertaken, I have formed
the opinion that as of December 3, 1999, and subject to the assumptions' and limiting conditions set
forth in this report, the Market Value is $280,000 as follows:
TWO HUNDRED EIGHTY THOUSAND DOLLARS
The narrative appraisal report that follows sets forth the identification of the property, the assumptions
and limiting conditions, pertinent facts about the area and the subject property, comparable data, the
results of the investigations and analyses, and the reasoning leading to the conclusions.
Respectfully submitted,
Edc Bjorklund,.~
Associate General Member of the Appraisal Institute &
Certified General Real Property Appraiser
MN License ~003154; Expiration 08/31/00
EB/Ib
MORE THAN 80 YEARS FULL APPRAISAL SERVICES EEO/AA
TABLE OF CONTENTS
APPRAISAL CERTIFICATION ................................................. 1
APPRAISAL SUMMARY ...................................................... 2
ASSUMPTIONS AND LIMITING CONDITIONS .................................... 3
PURPOSE OF APPRAISAL AND DEFINITION OF VALUE ........................... 4
PROPERTY TO BE APPRAISED ............................................... 5
PROPERTY RIGHTS APPRAISED ............................................. 5
SCOPE OF APPRAISAL ..................................................... 6
OWNERSHIP, RECENT HISTORY & MARKETING PERIOD .......................... 7
LEGAL DESCRIPTION ....................................................... 8
REAL ESTATE TAX INFORMATION ............................................ 8
CITY AND NEIGHBORHOOD DESCRIPTION ..................................... 8
SITE DESCRIPTION ........................................................ 10
STREET SCENE PHOTOS .................................................. 13
ZONING MAP ................................. - ............................ 15
PLAT MAP ............................................................... 16
DESCRIPTION OF IMPROVEMENTS .......................................... 17
PHOTOS OF SUBJECT PROPERTY .......................................... 20
BUILDING SKETCH ........................................................ 23
HIGHEST AND BEST USE ................................................... 24
APPRAISAL METHODOLOGY ................................................ 27
COST APPROACH ..................... ' .................................... 28
SALES COMPARISON APPROACH ........................................... 46
INCOME APPROACH ....................................................... 61
SUMMARY AND CONCLUSION ............................................... 65
IMMOVABLE TRADE FIXTURE VALUE ......................................... 67
ADDENDA
APPRAISING QUALIFICATIONS OF ERIC BJORKLUND
CITY MAP
COMPARABLE SALE MAP (3)
EXTRA COMPARABLE LAND SALES
APPRAISAL CERTIFICATION
I certify that to the best of my knowledge and belief:
The statements of fact contained in this report are true and correct.
The reported analyses, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions, and are my personal, unbiased professional analyses,
opinions, and conclusions.
I have no present or prospective interest in the property that is the subject of this report, and I
have no personal interest or bias with respect to the parties involved.
My compensation for completing this assignment is not contingent upon the development or
reporting of a predetermined value or direction in value that favors the cause of the client, the
amount of the value opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of this appraisal.
My analyses, opinions, and conclusions were developed, and this report has been prepared,
in conformity with the Uniform Standards of Professional Appraisal Practice and with the
requirements of the Code of Professional Ethics and the Standards of Professional Appraisal
Practice of the Appraisal Institute.
I have made a personal inspection of the property that is the subject of this report. It was
inspected with the property owners permission on November 4, 1999. The owners, whom
were in Phoenix and Chicago at the time, were not present for the inspection.
No one provided significant professional assistance to the person Signing this report.
I certify that the use of this report is subject to the requirements of the Appraisal Institute
relating to the necessities (from time to time) for peer review to occur by its duly authorized
representatives, and also with just cause, review by representatives of the Minnesota
Department of Commerce Enforcement Division relating to enforcement of the terms and
conditions necessary to hold a state general appraisal license.
Edc Bjorklun~/
Associate General Member of the Appraisal Institute &
Certified General Real Property Appraiser
Minnesota Appraisal License #4003154; Expiration 08/31/00
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
2
APPRAISAL SUMMARY
Appraisal Scope - The property was inspected on November 4, 1999. The development of the
appraisal is considered Complete. Three approaches to value, the Cost, Sales Comparison
and Income Approach, are used to develop an estimate of Market Value. The reporting format
of the appraisal is considered to be Summary in nature.
Property Appraised - A fast food restaurant @ 5550 Winnetka Avenue North, New Hope.
Date of Valuation - December 3, 1999
Property Rights Appraised - Fee Simple
Name of Owner - Kiva New Hope Corporation (Pat Lusk & Dave Bresnahan)
Date of Inspection - November 4, 1999
Property Data - Site: 19,900 sf zoned B-2, Retail Business. Improvements: One story fast food
restaurant building with 1,323 sf GBA. Built in 1975.
Highest and Best Use - As vacant; assemblage and development with a retail commercial
building. As Improved; the present use.
Property Value Indications:
1) Cost Approach $282,500
2) Sales Comparison Approach $282,000
3) Income Approach $270,000
Value Conclusion: $280,000
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
ASSUMPTIONS AND LIMITING CONDITIONS
This appraisal report has been made with the following general assumptions.
No responsibility is assumed for the legal description or for matters including legal or title
considerations. Title to the property is assumed to be good and marketable unless
otherwise stated.
The property is appraised free and clear of any or all liens or encumbrances unless
otherwise stated.
The information furnished by others is believed to be reliable. However, no warranty is
given for its accuracy.
All engineering is assumed to be correct. The plot plans and illustrative material in this
report are included only to assist the reader in visualizing the property.
o
The appraiser assumes .that there are no hidden or unapparent conditions of the property
or subsoil which would render it more or less valuable than otherwise comparable
property. The appraiser is not an expert in determining the presence or absence of
hazardous substance, defined as all hazardous or toxic materials, waste, pollutants or
contaminants (including, but not limited to, asbestos, PCB, UFFI, or other raw materials or
chemicals) present on the property. The appraiser assumes no responsibility for the
studies or analysis which would be required to conclude the presence or absence of such
substances or for loss as a result of the presence of such substances. The client is urged
to retain an expert in this field, if desired. The value estimate is based on the assumption
that the subject property is not so affected.
It is assumed that all required licenses, certificates of occupancy, consents, or other
legislative or administrative authority from any local state, or national government or
pdvate entity or organization have been or can be obtained or renewed for any use on
which the value estimate contained in this report is based.
7. It is assumed that there is no encroachment or trespass unless noted in the report.
The Americans with Disabilities Act (ADA) became effective in January of 1992. I have
not made a specific compliance survey and analysis of this property to determine whether
or not it is in conformity with the detailed requirements of the ADA. It is possible that a
compliance survey of the property, together with a detailed analysis of the requirements of
the ADA, could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the value of the
property. Since I have no direct evidence relating to the issue, I did not consider possible
non-compliance with the requirements of the ADA in estimating the value of the property.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
ASSUMPTIONS AND LIMITING CONDITIONS CONT.
This appraisal report has been made with the following general limiting conditions:
Possession of this report, or a copy thereof, does not carry with it the dght of publication.
It may not be used for any purpose by any person other than the party to whom it is
addressed without the written consent of the appraiser, and in any event only with proper
written qualification and only in its entirety.
The appraiser herein by reason of this appraisal is not required to give further
consultation, testimony, or be in attendance in court with reference to the property in
question unless arrangements have been previously made.
Neither all nor any part of the contents of this report (especially any conclusions as to
value, the identity of the appraiser, or the firm with which the appraiser is connected)
shall be disseminated to the public through advertising, public relations, or other media
without the prior wdtten consent and approval of the appraiser.
PURPOSE OF APPRAISAL, INTENDED USERS AND DEFINITION OF VALUE
The appraisal was requested to estimate the subject's market value. The client is
proposing to purchase the property for the purposes of redeveloping it. Eminent domain is a
power possessed by the client, and condemnation remains a possibility.
The intended users of the opinions of value expressed in this document are Ms. Susan
Henry of the City of New Hope, and her assignees (those whom she would personally provide
the report to in efforts to negotiate a purchase of the subject with). These persons may be Kirk
McDonald, Director of Community Development, or the city attorney. Other users of the report
are unintended.
Market value is defined as the most probable pdce 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 (such as the threat of condemnation). 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:
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
PURPOSE OF APPRAISAL~ INTENDED USERS AND DEFINITION OF VALUE CONT.
1. buyer and seller are typically motivated
2. both parties are well informed or well advised, and acting in what they consider their best
interests;
3. a reasonable time is allowed for exposure in the open market;
4. payment is made in terms of cash in United States dollars or in terms of financial
arrangements comparable thereto; and
5. the pdce represents the normal consideration for the property sold unaffected by special
or creative financing or sales concessions granted by anyone associated with the sale.
(Source: Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, 34.42 Definitions [fi.)
PROPERTY TO BE APPRAISED
The subject property real estate is a 19,900 sf zoned B-2, Retail Business that is improved
with fast food restaurant building (a donut shop) that was constructed in 1975. The building is
The assigned address to the real estate is 5550 Winnetka Avenue North,
currently vacant.
New Hope.
PROPERTY RIGHTS APPRAISED
Real property ownership consists of a group of distinct dghts. In this appraisal, complete
real property ownership, or the fee simple interest will be valued.
Fee simple interest is the absolute ownership unencumbered by any other interest or
estate, subject only to the limitations imposed by the governmental powers of taxation, eminent
domain, police power, and escheat. (The Dictionary of Real Estate Appraisal, 3rd Edition, by
the Appraisal Institute, 1993.) Any limitations such as existing road easements on the
unencumbered fee interest are discussed within the body of this report.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
SCOPE OF APPRAISAL
The Scope is the extent of the process in which data are collected, confirmed, and
reported, and the report is completed. The formality of the appraisal process began on about
October 25, 1999 when New Hope City Council gave city staff the approval to obtain an
appraisal report of the subject property. A BCL Appraisals fee quote was submitted eadier.
With information contained in the clients engagement letter, the owner of the property was
contacted (after the date of the letter) for the purposes of setting up a time when the real
estate could be inspected. Collection of relevant data on the subject thence began, as did the
process of collecting, confirming and reporting Market Data which would enable the appraiser
to judge what approaches to value were relevant to this assignment. The subject was
inspected on November 4, 1999.
While several'techniques avail themselves to estimate the subject's market value, and
some are better than others, it is the appraiser's opinion that the three typical approaches to
value (Cost, Sales Comparison and Income Approaches) are relevant. The subject is a type of
building that is typically purchased for owner occupancy (Sales Comparison Approach is
relevant), but it may be rented to a tenant (Income Approach is relevant), and the replacement
cost to some degree is a factor (the Cost Approach is relevant) that buyers consider.
The reporting style of the data in this report is presented in summary form. Narrative
description of the market data and analyses is kept succinct.
Market data used in the appraisal was collected by Edc Bjorklund from a vadety of
sources. These sources include BCL Appraisals, Inc. office files, other appraisers (active in a
confidential data exchange), Realtors (active in the Residential and Commercial Multiple
Listing Service), buyers & sellers of similar property, nearby land owners, municipal offices (the
City of New Hope and court houses of vadous counties where data was found), and several
computer on-line data search networks (REDI, MLS, MOORE DATA, & PLAT SYSTEM
SERVICES).
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
7
OWNERSHIP, RECENT HISTORY & MARKETING PERIOD
The subject is presently owned by Kiva New Hope Corporation, and is vacant. The
ownership has remained the same over the past five years, but given that the subject is
currently for sale, an ownership change might occur in the near term future. The current
asking pdce for the subject is $450,000. The property was first offered for sale (through a sign
in the window) in about mid October, 1999. The marketing pedod (at or abOut the appraised
opinion of value) to reach a sale agreement is estimated to be about three months. The owner
agent (Dave Bresnahan of Kiva New Hope Corp) reports there has been some interest already
expressed in buying the property, but that no response has been offered because of the city's
initiatives to potentially buy it. Mr. Bresnahan reports the pdor tenant recently left the building
for health reasons after their lease expired. The old lease was for a three year term, and was
quoted at a rate of $3,200 per month, triple net. A copy of the lease that would support this
statement was requested, but it was never provided. A pdor tenant was, however, interviewed
and they said their lease was not of this nature.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
LEGAL DESCRIPTION
That part of Lot 38, lying North of the South 1,190 feet and West of the East 140 feet,
except road, Auditor's Subdivision No. 226, Hennepin County, Minnesota.
REAL ESTATE TAX INFORMATION
Taxpayer. Kiva New Hope Corporation
Fee Owner: Kiva New Hope Corporation
Address: 5550 Winnetka Avenue North, New Hope, Minnesota 55428-3719
Property I.D. Number: 05-118-21-33-0019
Assessors Market Value: $160,000 for taxes payable in 1999. Value allocation as follows:
$126,000 land & $34,000 building
Real Estate Taxes & Solid Waste Fee: $5,840.52
Special Assessments: $0.00
CITY AND NEIGHBORHOOD DESCRIPTION
The subject, is located in the City of New Hope, a second tier westedy suburb of
Minneapolis with a current population of about 21,610. New Hope is approximately seven
miles northwest of Downtown Minneapolis. The community is pdmadly residential in character.
Most of the city's homes and apartment buildings were built in the 1960's. Industrial districts
are scattered in several locations and comprise the second largest land use. The largest
industrial distdct is found on the west edge of the city's north half. Commercial development is
most concentrated at the intersection of 42nd Avenue North (C.S.A.H. #9/Rockford Road) and
Winnetka Avenue (C.S.A.H. #156).
New Hope has a council/manager plan B form of government that provides good quality
municipal utilities and services. Essentially all of the city streets are paved, have concrete curb
and gutter, street lights and service by sanitary sewer and water. The entire city is located in
School Distdct #281. MTC bus routes serve most of the City including a route on Bass Lake
Road by the subject.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
CITY AND NEIGHBORHOOD DESCRIPTION CONT.
Major transportation to the City is provided by Highway #169 along the westerly City limits.
Good secondary transportation in and through the city is also provided by Rockford Road
(C.S.A.H. #9), Bass Lake Road (C.S.A.H. #10), Medicine Lake Road (/C.S.A.H. #70), and
VVinnetka Avenue (C.S.A.H #126). The subject is located at the intersection of Bass Lake
Road and Winnetka Avenue.
No unusual municipal or economic influences are observed that would unduly affect the
value of real estate in New Hope. The subject is however located in an area of the city
(described in the Comprehensive Plan as Planning Dictrict 6) which is earmarked for potential
redevelopment, and tax increment financing funds can be expended for redevelopment
activities. While no blight in the area has been observed, it has been recommended by city
staff that within this area, smaller commercially improved sites might be assembled and
buildings razed to create larger commercial sites for re-use by contemporary retail, service and
office uses. Despite such future plans though, and disregarding the potential threat of
condemnation, the market area is perceived to be health~,, and the overall metro area
economy is good. Vacancy is Iow (c.3%) in the retail commercial market. Most small
commercial buildings like the subject are (owner) occupied.
The Zoning Map shows the nature of uses in the immediate neighborhood. The three other
comers of the Winnetka/Bass Lake Road intersection (the subject is the forth comer) are B-3
zoned (auto Oriented) and are improved with automotive service buildings. Two are service
stations (Amoco on the Northwest comer, and Sinclair on the Southwest comer) that also sell
gas (besides repairing cars), and one is a muffler shop (Midas on the Northeast comer). B-2
zoned (retail use) land is located behind each of the three comers. Developed uses on the B-
2 zoned land include a funeral home, two nursery/garden centers, and a small strip center.
On the southeast comer of the intersection where the subject is, a one story office building
abuts the subject to the east. A two story office is to the east of this. South of the subject is a
single family home. A home is also located across the street to the southwest (along with one
vacant residential lot). An elementary school and a junior high school are located behind the
house, on the west side of Winnetka.
According to a recent issue of the Wall Street Journal newspaper (11/29/99), the Federal
Reserve Bank Discount Rate is 5.68%, the Prime Rate is 8.5%, and yields on 5, 10 & 30 year
U.S. Bonds are 6.03%, 6.10% and 6.22% respectively. Interest rates on commercial
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
]0
CITY AND NEIGHBORHOOD DESCRIPTION CONT.
mortgages for real estate in the subject neighborhood depend on many factors, but a
reasonable estimate would be say 1-2 points higher than the prime rate, and 3-4 points higher
than the yield on treasury bonds. A 9.5% interest rate is estimated. Mortgage rates on 30
year conventional home mortgages are at 7.75% for 30 years with no points. In this market
area, the annualized appreciation rate for commercial real estate has varied from -5%, to +7%
as follows: 1990 =-5%. 1991 = -5%. 1992 = No change. 1993 = +3%. 1994 = +4%. 1995 =
+4%. 1996 = +4%. 1997 = +4%. 1998 = + 7%. Thus far in 1999, +6.5%.
SITE DESCRIPTION
Location
The subject property is located at 5550 Winnetka Avenue North, in the City of New Hope, in
the State of Minnesota. The zip code for this address is 55438.
Size
The subject has the shape of a rectangle, less a triangular comer cut taken from the
northeast comer. The size estimate is calculated as follows; 135' x 148' = 19,980 sf less 20' x
8' + 2 = 19,900 sf, subject to survey.
Easements
A wood pole on the east edge of the site, which carries overhead phone and electric lines
(underground from the pole to the building) would appear to exist with a utility easement. But,
overhead electric lines that parallel Winnetka Avenue appear to be in the road right-of-way.
Road easements for Winnetka Avenue and Bass Lake Road are assumed to be taken in fee.
No other easements were reported or observed to affect the subject.
Streets
The property contains about 148 feet of frontage on the right-of-way for Winnetka Avenue,
otherwise known as County Road No. 56, and about 135 feet of frontage on the right-of-way
for Bass Lake Road, otherwise known as County Road 10. Both street right-of-ways are
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
]!
SITE DESCRIPTION CONT.
Streets Cont.
improved with four lane, asphalt paved roadways. Concrete sidewalks, curbs and gutters are
present. The intersection of the streets is semaphore controlled. The right-of-way for
Winnetka is 90 feet wide, and it is over 100 feet of Bass Lake Road. The speed limit on both
streets is about 40 MPH. The average daily traffic on Bass Lake Road and Winnetka Avenue
by the subject is 21,000 and 13,500 vehicles respectively (1997 data).
Utilities
The subject is served with city sewer, water, electric, phone and natural gas.
Topo,qraph¥ and Soils
The site is generally level, but has enough slope towards the streets to allow for good
drainage. Soils appear to be firm and support the building on the site. No significant settling is
observed in the subject improvements, or on buildings nearby. Adverse contamination is
presumed to be non-existent. An old Un-o-Cai service station was however once on the
property, but the current owner reports than environmental concerns over the property were
alleviated. Other than some scrub trees or brush near the northeast corner, a few shrubs on
the west edge, and some sod, the building footprint and pavement occupy most of the site.
Accessibility
There are two curb cuts to the site from the adjacent streets; one on the north edge, and
one on the west edge. Due to a road median on Bass Lake Road, only right turn in/out
motions to the subject are allowed on the north edge. But, all turning motions to enter or leave
the site are allowed on the west edge with the Winnetka Avenue frontage. Access to the
subject from the surrounding neighborhood is good. Winnetka Avenue and Bass Lake Road
are both county roads, and collect traffic that is destined for much of northerly New Hope, and
adjacent Crystal. Moreover, these roads intersect Hwy 169, and County Roads 42, 102, 8, 9
and 81 within a mile. 1-694 is also within about one mile too.
BCL APPRAISALS, INC,
2852 Anthony Lane South, Minneapolis, Minneso~ 55418
SITE DESCRIPTION CONT.
Zoning
The current zoning map of the City of New Hope shows the property is zoned B-2, Retail
Business. The pdmary purpose of the B-2 district is to provide for Iow intensity, retail or
service outlets which deal directly with the customer for whom the goods or services are
furnished. The buildings allowed in this district are to provide goods and services on a limited
community market scale and should be located in areas which are well served by collector or
arterial street facilities at the edge of residential districts. The lot size minimum is 43,560
square feet, and the minimum lot width is 100 feet. Yard setbacks are 35 feet, 10 feet and 35
feet for front, side and rear yard respectively.
IdentiW
The identity of the subject is retail commercial. The site is located in retail zoned area, and
is on the comer of two county roads. Frequent and convenient stops by consumers of retail
goods and services may be readily made. But, given a lot size that is below standard, in order
to construct a building on the site, a buyer would recognize that there are issues with rezoning
or variances to consider. The site may also be identified as one to assemble with other similar
zoned sites to the east.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
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STREET SCENE PHOTOS
Street Scene West on Bass Lake Road
Street SCene South on Winnetka
13
BCL APPRAISALS, INC,
STREETSCENEPHOTOS
]4
Street Scene East on Bass Lake Road
Street Scene North on Winnetka
BCL APPRAISALS, INC.
· BASS
AVE
· ~SS LAKE
· ST
AVE
( CO RD NO
DESCRIPTION OF IMPROVEMENTS
The subject land is improved with a fast food restaurant. Although currently vacant, it used to
be an operating donut shop.
Age
According to county assessing and city building records, the building was constructed in
1975. As of the effective date of appraisal, the building is 24 years old.
Dimensions and Size
Please see attached sketch. The building is constructed on slab, and is one story tall. Due to
inset exterior walls on the facade of the building, the calculation of the gross building area is
less than if the dimensions of the drip line from the roof are used; 35.5' x 44'. The gross building
area is estimated at 1,323 square feet. The story height (from floor to roof deck) is 11 feet.
Exterior walls extend another two feet above the roof deck to shield roof top HVAC equipment.
Foundation
Not visible. Assumed to be poured concrete footings. The exterior walls are brick veneer
over concrete block.
Framing
The roof frame is comprised of webbed metal joists which are supported by the exterior load
bearing concrete block walls. Interior partition walls are framed with wood joists.
Roof
Flat with a rolled asphalt membrane.
Walls
Extedor walls are brick over concrete block. The facade however is covered with large, fixed
sash, thermopane windows. In the kitchen and baking areas, interior walls are finished with
marlite plastic panels. In the dining area, walls are finished with painted wood paneling.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
DESCRIPTION OF IMPROVEMENTS CONT.
18
,Ceilings
The ceilings in most of the building are suspended acoustic panels (2'x4'). Tongue and
groove wood boards are however present on the ceiling above the wait station area. Clearspan
ceiling height is eight feet.
.Floors
The building is constructed on a concrete slab. The slab is finished with clay tile floors.
Doors/Windows
There are eight large (floor to ceiling) thermopane glass windows on the facade of the
building along with two side entry glass doors, and a front entry foyer with two glass doors. A
rear sen/ica door and another side service door is metal. One glass entry door on the west
side of the building is caulked shut. Interior doors to the bathroom and storage areas are
hollow core metal.
Electrical
The building has a 200 amp electric main with 240 volt and three phase sen/ice. There are
two circuit breaker panels. Lighting is provided by fluorescent fixtures.
.plumbinp
There is one, two fixture (toilet and sink) bathroom, one 40 gallon water heater, one janitors
sink, and one hand sink in the rear storage area. Other plumbing fixtures are trade fixtures.
.Heatinct/Cooling
The building is heated by one natural gas fired furnace, and heated and cooled by two roof
top HVAC units. The insulation capacity of the building is unknown, but it is assumed to be
adequate. On the roof, there are probably rigid boards of styrofoam insulation above the metal
decking, and below rolled asphalt weather coating. Wall insulation is not visible over the
concrete blocks in the storage areas, but it may lie between the blocks and the bdck exterior
finish, or within the blocks themselves.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
DESCRIPTION OF IMPROVEMENTS CONT.
Miscellaneous
At the time of inspection, the building was vacant but there were several items of personal
property (cash register, 3-door freezer, pop dispensing equipment, coffee machine,
refrigerator, portable storage racks, warming ovens, butcher block work top) and trade fixtures
(plumbing and gas hook-ups, donut display case, a counter top & partition wall, a convection
oven hood, fire suppression system, make-up air canopy system, beverage table, 3-tub
scullery, dish tables & drying racks) that are not part of this appraisal of real estate value.
Trade fixture value is considered separately in a later section of this report.
Condition
The overall condition of the building is good. But, deterioration is present none-the-less.
The building is not new. Obsolescence is also observed. Restaurants are often constructed
for a singular user, and are not typically usable by another type of tenant unless significant
alterations are made or remodeling is done. Entrepreneurs seem to be particularly sensitive
to the floor plan and decorating.
Long lived parts of the building such as the walls, foundation and overall structure appear to
be sound and in good condition. Short lived items such as the HVAC system and roof
membrane are in good condition. The owners have apparently replaced the HVAC system two
years ago, and also resurfaced the roof and parking lot. But, other short lived items such as
the water heate~: (older) and the decorating, while not in bad physical condition, probably
needs to be redone so that the buildings ambience would fit the entrepreneurs particular type
of business. Also, odors from the old donut business saturate the floor and ceiling panels so
that it is likely they would be replaced anyway if it wasn't another donut business that re-
occupied the premises.
,On-Site Improvements
13,539 sf asphalt pavement
672 sf concrete pavement
382 If 6" concrete curb
4,175 sf sod grass lawn
2 shrubs
1 tree
72 If precast concrete parking bumpers
2852 554]8
PHOTOS OF SUBJECT PROPERTY
Front View
2.0
Rear View
BCL APPRAISALS, INC.
PHOTOS OF SUBJECT PROPERTY
Roof View
Dining Area
BCL APPRAISALS, INC.
PHOTOS OF SUBJECT PROPERTY
Baking and Reception Area
Clean Up and Storage Area
22
BCL APPRAISALS, INC.
2.3 ,
BUILDING SKETCH FileNo ,,,21
Case No
Storage
Area
&
Clean-up
Area
Baking
Area
&
Receptio~
Area
10.5'
Dinii~g
18.0' ~-3.~
Area
Building Area
44 x 18 = 792
(37 + 44) x 3.5 = 142
2
10.5x37 = 389
1323 sf
HIGHEST AND BEST USE
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 criteda the highest and best use must
meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability.
Hi,qhest and Best Use as Vacant
The subject property is zoned B-2, Retail Business under the City of New Hope's Zoning
Ordinance. The primary purpose of the B-2 district is to provide for Iow intensity, retail or
service outlets which deal directly with the customer for whom the goods or services are
fumished. The buildings allowed in this district are to provide goods and services on a limited
community market scale and should be located in areas which are well served by collector or
arterial street facilities at the edge of residential districts. The lot size minimum is 43,560
square feet, and the minimum lot width is 100 feet. Yard setbacks are 35 feet, 10 feet and 35
feet for front, side and rear yard respectively.
From a physical standpoint, the site's road access, good soils, and availability of all
municipal utilities readily give the subJect the physical capacity to be developed. But, the
subject's size of 19,900 square feet is below the minimum area required under the zoning
ordinance. Either a variance, a change in zoning or assemblage is needed so that
development 'might be permitted on the subject land.
Currently, adjacent land to the subject is improved with a house and an office type building.
Neither adjacent use as they are improved would appear to benefit much by having more land.
A need for extra parking is not perceived, and it is not likely either adjacent use would use the
subject land to add on to their building. Rather, assembling the subject with an adjacent site(s)
would create a larger parcel that would be attractive and legally permissible for redevelopment.
But since it is probable that these adjacent buildings as currently improved are worth more
than the underlying land valued as if it were a buildable site, redevelopment at this time is
unlikely. Then again, the subject is found within an area that the city would like to see
redevelopment occur in. A buyer of the subject could be eligible to receive city assistance in
offsetting contributing building value and demolition costs that with the land are higher than the
unit value of a one plus acre developable site.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
HIGHEST AND BEST USE CONT.
Hi,qhest and Best Use as Vacant Cont.
Currently, the market demand for a retail commercial building at the subject location is
perceived to be good. In other words, consumer demand from within the neighborhood trade
area should support a retail building at the subject's comer. The trade area is fully developed,
and consumers should be drawn from all directions given that the subject lies at an intersection
of two county roads that carry north, east, west and south bound traffic. Boundaries of the
trade area should extend a good half mile to the north, west and south of the subject. Supedor
competition though within the Crystal Shopping center (% mile east) and in the downtown .area
of New Hope (one mile south) would limit the drawing power of the subject to about a quarter
mile to the east, and a half mile to the south.
In conclusion, with financing readily available from most metro area lending institutions (for
new and existing construction, with terms that vary of course), a market full with capable (able
and qualified) buyers, all municipal utilities available to the site, good access, a limited supply
of land, and a city willing to help with redevelopment, investment in the site for future retail
commercial redevelopment should represent the most productive and feasible use of the site.
Values of real estate have been increasing (7% over the past few years for commercial
property), and the outlook for the real estate market as a whole is good. Appreciation is
expected to exist and or persist into the near term future.
Highest and Best Use as Improved
The subject site is improved with a fast food restaurant. This use is a permitted type of
improvement in the B-2 district. But, the building on this site alone could not be constructed
new due to the lot size being less than one acre. As such, it would seem the subject is a legal
non-conforming use of the land. The zoning ordinance does however allow for the use to
continue.
With a construction date of 1975, the subject is obviously not new. With a highest and best
use for a new building, there is physical depreciation. Long and short lived items are both
affected to significant extents. However, the building's condition is acceptable for occupancy;
everything works and major items of deferred maintenance are not observed, even though
another tenant might wish to redecorate. The building has received maintenance and repairs
since it was built. A new roof covedng and a parking lot that was resurfaced about two years
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
HIGHEST AND BEST USE CONT.
HiRhest and Best Use as Improved Cont.
ago are reported to have been the most recent repairs. Overall, the building is in pretty good
physical condition.
From a functional perspective, the buildings vacancy does and yet does not provide some
reflection as to the health of a fast food restaurant in this location. According to the owner, the
building isn't vacant because the donut business wasn't doing well. The business was "ok",
but the tenants health was apparently bad and rather than renew the lease, they just left. But
then again, the building had been used for a donut business since it was constructed in 1975,
some 24 years ago. With many restaurants having economic lives of around 30 years, a
change in the buildings use was likely soon approaching anyway. Consumer tastes change,
sales may decline as a result, and demand for a building like the subject dwindles. But, there
is demand for buildings like the subject which are in good locations and in good condition, and
most are occupied. Use of the building by a chain type operation for which the building was
first constructed for, is however doubtful. A singular owner operated business offedng a
specialty product is most probable. A coffee shop perhaps is a reasonable future use a buyer
might use the building for.
In conclusion, the highest and best use is the present use. The building is in good overall
condition, and it contributes significant value to the vacant site. Demolition is not probable for
pdvate redevelopment (unless the city makes a major financial commitment to help a buyer
acquire the subject and other adjacent buildings, and demolish them in efforts to create a one
plus acre site).
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
27
APPRAISAL METHODOLOGY
General Appraisal
The valuation of a typical parcel of real estate is dedved principally through three basic
approaches to value: The Replacement Cost Approach, The Sales Comparison Approach, &
The Income Approach.
Cost Approach
This approach requires that a current estimate of the cost of .replacing the improvements be
made, from which must be deducted accrued depreciation in terms of physical deterioration,
functional obsolescence, and economic obsolescence, if any, and to which is added the
estimated value of the land, as if vacant.
Sales Comparison Approach
The Sales Comparison Approach is based upon the principle of substitution, that is, when a
property is placed on the market, its value tends to be se{ at the cost of acquiring an equally
desirable substitute property, assuming no costly delay in making the substitution. Since no
two properties are ever truly identical, adjustments to the comparable are necessary for
differences in location, date of sale, condition, size, land to building ratio, and other matters.
These considerations are a function of the appraiser's experience and judgment.
Income Approach
The Income Approach involves an analysis of the property in terms of its ability to provide a
net annual income in dollars over a given economic life. The estimated net annual income is
then capitalized at a rate commensurate with the relative certainty of its continuance and the
risk involved in ownership of the property, by utilization of the formula; Net Income, divided by
Capitalization Rate, equals Value. In this appraisal, because owner occupancy remains a
strong probability for the subject, and buildings like the subject are predominately owner
occupied, the Income Approach is not a good approach. However, it will be applied because
some stores like it are rented.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
2.8
COST APPROACH
Marshall Valuation Service
Section 13, Page 17
Type - Restaurants, Fast Food; Class C, Very Good Quality
Basic Unit Cost
$124.68 per square foot
Square Foot Refinements
Cold Climate Heat & A/C
Total
+$ 2.15
$126.83 per square foot
Wall Hei,qht and Area Refinements
Wall Height Multiplier
(13' to roof deck)
x 0.979
Area Multiplier. x 1.261
(1,323 square foot area/153 lineal foot perimeter)
Temporal & Locational Multipliers
Current Cost Multiplier
Central USA, Class C, Section 13 x 1.08
Local Minneapolis Multiplier x 1.13
Application
$126.83 x 0.979 x 1.261 x 1.08 x 1.13 = $191.08 per square foot
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
COSTAPPROACH CONT.
Direct Construction Cost (Replacement)
SAY $252,800
The building contains 1,323 square feet of gross building area. The direct construction costs
are calculated as follows:
1,323 square feet @ $191.08 = $252,799
Site Improvements
SAY $ 45,900
18,577 sf site grading @ $0.25 = $4,644
13,539 sf asphalt pavement (~ $1.69 = $22,881
672 sf concrete pavement @ $3.35 = $2,251
382 If 6" concrete curb @ $8.01 = $3,060
4,175 sf sod grass lawn @ $0.43 = $1,795
2 shrubs @ $25 = $50
1 tree @ $180 = $180
72 If precast concrete car bumpers @ $6.16 = $444
Parking lot stdping = $300
109 If 7.5' tall'basket weave wood fence @ $18.50 = $2,017
5' x 8' & 3' x 3' double faced signs on 2 - 16' metal poles = $8,300
Total.= $45,922
Indirect Construction Costs
SAY $14,900
Interest and taxes on land dudng construction and development period, financing, appraisal
and miscellaneous expenses at approximately 5.0% of direct construction costs and site
improvements.
5.0% of ($252,800 + $45,900 or $298,700) = $14,935
BCL APPRAISALS, INC.
2852 Anthony Lane Seuth, Minneapolis, Minneso{a 55418
3O
COSTAPPROACH CONT.
Entrepreneurial Incentive
SAY $ 31,400
Entrepreneurial Profit is a market-derived figure that represents the amount an entrepreneur
expects to receive in addition to costs; the difference between total cost and market value. It is
the reward for acquiring local or national tenants, coordinating and meeting with the architect
and builder, and overseeing the management of the project to the point of occupancy in the
subject project.
Although the subject is a single tenant fast food restaurant, it usually constructed by
entrepreneurs in chains. For their efforts that begin with finding an owner/tenant whom wants
to open up a restaurant franchise in the given market area, entrepreneurs often realize some
profit. In other words, the "develop and sell for a quick profit" scenario is frequently observed
in this type of real estate. But, the small size of the subject will tend to inhibit an undue
amount of profit from being made. Also, owner occupancy tends to occur after a few years,
and the building ends up being used for a food business that reflects some individuality.
Therein, the reward to the entrepreneur in not in the real estate per say, but in the opportunity
to run a unique business (to make a living) in the building. The amount of entrepreneurial
profit is best estimated at 10% of the sum of the direct and indirect costs.
10% of ($252,800 + $45,900 + $14,900 or $313,600) = $31,360
Total Replacement Cost
$345,000
Depreciation
Depreciation is estimated by an economic age-life technique where effective age divided by
the economic life equals depreciation (percentage).
The economic life of a building like the subject is estimated using a combination of
methods; extracting the life from sales of similar buildings, the Marshall & Swift Cost Manual,
and observations in the market noting when similar buildings are torn down or converted to
another use. Marshall & Swift reports similar use (good quality fast food restaurants) buildings
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minneso~ 55418
3]
COSTAPPROACH CONT.
Depreciation Cont.
have an economic life of 35 years. Extracted economic lives from Building Sales #1, #3 & #5
indicate economic lives of 24.4, 30.6 and 30.6 years (using their actual age as estimates of
their effective age) respectively. The best overall estimate is say 30 years. The average of
the four life indications is 30.15 years. The Marshall and Swift indication provides the highest
indication at 35 years. While it perhaps is the more comprehensive indication, it is not as
reflective of the local market as are the extracted economic life from the comparable sales.
These indications are much better. Two are the same at 30.6 years.
The effective age of the subject is best estimated at 21 years. This is based upon its
actual age of 23 years, less say two years due to recent replacements made by the property
owners (HVAC, roof and parking lot). As such, with a 21 year effective age and a 30 year
economic life, (21 + 30 =) 70% depreciation is indicated.
With a total replacement cost of $345,000, the depreciation is $241,500 calculated as
follows:
$345,000 x 0.70 = $241,500
Depreciated Cost Summary
Total Direct and Indirect Construction Costs $345,000
Estimated Accrued Depreciation ($241,500)
Depreciated Cost Estimate $103,500
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
COST APPROACH CONT.
Land Valuation
A number of land sales, each having a similar highest and best use as the subject property,
have been checked and related to the subject property (vacant land only) as to location, date
of sale, size, zoning, topography, financing, and other matters influencing market value. A
sampling of the market data follows.
The analysis indicates that the subject would be marketable at about $179,000 as indicated
below:
LAND ONLY
19,900 Square Feet @ $9.00 = $179,100
Discussion of Comparable Land Sales
Seven land sales are described on the following pages. Although they are comparable,
there are many differences amongst these comparablesl and these differences are directly
attributable to the variety in price. Preceding the description of each comparable sale is an
adjustment gdd. On this grid are detailed adjustments which attempt to reconcile the
significant differences (in terms of value) that exist between the subject and the comparable
sales. From each comparable sale, an adjusted rate is produced which is an indication of the
subject's value. An explanation of the major adjustment categories and why the adjustments
are applied to the comparables follow.
Other
This is an adjustment to reflect any non-market motivations of the buyer or seller, property
dghts conveyed other than fee simple, or simply a catch all category for miscellaneous
adjustments like demolition costs to create vacant land. Sales #2-5 & #7 were adjusted
upward by the amount of demolition costs that are needed to create a vacant site. Had the
sites been vacant, buyers would have paid that much more for the property. Also included in
the adjustment to Sale #3 is the buyers additional cost ($7,500) to acquire city owned land
adjacent to the site. Sale #1 is adjusted down by the small amount of contributing value the
building shell added to the site value. Rather than being demolished, the buyer found value in
the shell because it was able to be totally remodeled into their new convenience store.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
33
COST APPROACH CONT.
Land Valuation Cont.
Financing
This is an adjustment to reflect a cash pdce if the property was purchased on a contract for
deed (or other non-cash arranged terms) that inflated the purchase pdce above that which
would have been paid in cash. Because all other sales sold for cash, no adjustments are
needed.
Market Conditions
This is essentially a time adjustment to reflect changes in market value between the date of
sale and the date of this appraisal due to pdce changes in the real estate market. In this
market area, the annualized appreciation rate has varied from +4%, to +7% as follows: 1995 =
+4%. 1996 = +4%. 1997 = +4%. 1998 = + 7%. Thus far in 1999, +6.5% (or7% annualized).
In short, the adjustment which appears in the gdd is the result of a monthly rate (i.e. 4%/year +
12mo/year = 0.333%) x the number of whole months between the closing date of the
comparable transaction to the date of this appraisal. For instance, the adjustment to Sale #2 is
0.333 x 8 months = x1.0267 for the balance of 1995 (2.67%), x 1.04 (or 4%) for 1996, x 1.04
for 1997, x 1.07 for 1998, x 1.065 for thus far in 1999 = 1.265 (or 26.5%). $379,000 cash
equivalent sale pdce x 1.265 = say $479,500 price on the effective date of this appraisal.
Adjustment amount = $479,500 - $379,000 = $100,500.
Location
This is an adjustment for location quality and property amenities including value and type of
neighborhood real estate, quality of road and utility service, access, and exposure to traffic.
The subject is rated as having a good quality location. Sales #1 & #2 have better locations
with very good ratings. 15% downward adjustments are applied. Sales #5 & #7 have above
average ratings, but are still infedor to the subject. 15% upward adjustments are applied. Sale
~ is most unlike the subject in terms of location. It is rated as average. Access to the site is
from one direction only, and the appeal of adjacent properties (older and some industrial use)
is not as good as those which surround the subject. A significant upward adjustment of 75% is
applied.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
34
COSTAPPROACH CONT.
Land Valuation Cont.
TooooraDh¥
This is an adjustment to reflect significant differences in shape, slope, subsoil conditions, or
differing amounts or wetlands or other unbuildable portions of land. The subject has a modest
incline from the street to the bulk of the site which is level, soils are good, and the shape is for
the most part blocked in an area where building setbacks may be adequately met. Its
topography rating is good. The topography of other comparables is fairly similar, and all are
rated equally as good. No topography adjustments are therefore applied.
Zonin,q/Use
With the subject zoned B-2 and having only 19,900 square feet of land area, assemblage or
a variance is needed to develop the site. Because all comparables either met the land size
minimum of their particular zoning designation or didn't require either a variance or zoning
change, all are superior. A downward zoning adjustment-is therefore needed. In other words,
a buyer of the subject should expect a discount from the buildable price of land because they
are accepting more than normal risk. A profit margin should be built into the price of the land
that will reflect and eventually reward a buyer for future efforts to assemble other sites with the
subject, change its zoning, or obtain a variance. 15% downward adjustments are applied to
each comparable.
Size
This is an adjustment to reflect the diminishing value of each additional unit of land area
(square foot) due to the higher overall price that comes with purchasing more, less competition
for the property (who can afford the land) which does not ddve the price up through multiple
bids, and also to the contrary, the reduced appeal of very small sites which are difficult to fit a
building on that would find acceptance in the market place.
With the subject being 19,900 square feet but needing assemblage for development, the
actual size is not one to which a size adjustment would be attributed to, per say. Furthermore,
a zoning adjustment, which ends up being a function of the size, has already been applied.
The developable size is what should be adjusted for. In most cases, the comparables are of
sufficient and comparable size to what the subject might be in the future. The exception lies
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
COSTAPPROACH CONT.
Land Valuation Cont.
Size Cont.
with Sales ~ & #7. These sites are much larger and are well over the lot size minimums in
their particular zoning designation (and about 2x and 3x that of the subjects). Economies of
scale are felt to have impacted the purchase pdce, and the unit price of the land as such has
been discounted. To offset this phenomena, upward size adjustments of 5% and 10% are
applied.
Land Sale Adjustment Gdd
Significant areas for adjustment are identified in the first column, and are labeled Other
Financin.q, Market Conditions, etc. The subject is identified in the second column, and the
comparables in the remaining seven.
The adjustment methodology in this valuation is based on widely recognized appraisal
practice and adjusted as appropriate to fit the available market data. In short, the adjustments
for significant differences are sequenced into an order where Other matters are adjusted for
first, thence Financing and Market Conditions. Lump sum, dollar adjustments are appropriate
for each and adjusted prices are the result of summation. A common unit of comparison is
thence created to compare the sales with the subject. This is the price per square foot ($/sf).
After converting the time adjusted purchase price to a unit pdce per square foot (a common
unit of comparison), the remaining adjustments are then applied to the subject by a
multiplication process and a single net adjustment factor. The adjustment factor is the result of
individual percentage adjustments for location, topography, zoning and size multiplied by one
another. The Indicated Subject $/sf is the result of the multiplication of each net adjustment
factor by the adjusted common unit pdce (for time, etc made earlier) per square foot of the
comparable land sale. The adjustment grid follows.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
COST APPROACH CONT.
LAND SALES ADJUSTMENT GRID
Price
Other
Adjustment
Adj Price
Financing
Adjustment
Adj Price
Market Cond.
Adjustment
Adj Price
Size (sf)
Size $/sf
Location
Adjustment
Topography
Adjustment
Zoning/Use
Adjustment
Size
Adjustment
Comparable SaLe No.
Subject 1 2 3 4
N/A $285,000 $37],000 $170,000 S 75,000
Fee Simple Fee SimpLe Fee Simple Fee Simple Fee SimpLe
Arms Length Arms Length Arms Length Arms Length Arms Length
None BLdg Demo Demo Demo
'$ 6,000 +$ 6,000 +$ 13,500 +$ 6,000
$279,000 $379,000 $183,500 $ 81,000
Cash Equiv
12/03/99
Good
Good
B-2/Assemb[e
Cash
$ 0
Cash
$ 0
Cash Cash
$ 0 $ 0
5 6
$530,000 $370,000
Fee SimpLe Fee Simpte
Arms Length Arms Length
Demo None
+$ 35,000 $ 0
$565,000 $370,000
Cash
$ 0
Cash
$ 0
$279,000 $379,000 $183,500 $ 81,000 $565,000 $370,000
7
$ 900,000
Fee SimpLe
Arms Length
Demo
+$ 13,000
$ 913,000
Cash
$ 0
19,900 sf
913,000
06/02/99 04/13/95 05/04/95 03/11/95 03/19/98 01113/95 01/26198
+$ 10,000 +$100,500 +$ 49,000 +$ 22,000 +$ 68,500 +$ 95,000 +$ 122,000
$289,000 $479,500 $232,000 $103,000 $633,500 $465,000 $1,035,000
23,250 sf 30,270 sf 21,906 sf 18,555 sf 70,650 sf 44,431 sf 125,125 sf
$12.43 $15.8~ $10.59 $ 5.55 $ 8.97 $10.47 $ 8.2? .
Very Good Good Average Average(+) Good
x 0.85 x 1.00 x 1.75 x 1.15 x 1.00
Very Good
x 0.85
Average(+)
x 1.15
Good Good Good ~ Good Good Good Good
x 1.00 x 1.00 x 1.00 x 1.00 x 1.00 x 1.00 x 1.00
B-3/None B-4/None B-4/None B-4/None B-3/None B-4/None C-l/None
x 0.85 x 0.85 x 0.85 x 0.85 x 0.85 x 0.85 x 0.85
23,250 sf 30,270 sf 21,906 sf 18,555 sf 70,650 sf 44,431 sf 125,125 sf
x 1.00 x 1.00 x 1.00 x 1.00 x 1.05 x 1.00 x 1.10
Net Adj Fact x 0.722 x 0.722 x 0.960 x 1.487 x 1.026 x 0.85 x 1.075
ind Subs S 8.97 $11.44 $ 9.00 $ 8.25 $ 9.20 $ 8.90 $ 8.89
37
COSTAPPROACH CONT.
Land Valuation Cont.
Reconciliation of Value Indications
The range of the seven indications is $8.25 to $11.44/sf, with an average of $9.24/sf, and a
standard deviation of $1.01/sf.
While all sales are meaningful, some are better than others. Because of their location and
the fact that it is the unit pdce of the sale which is being analyzed (to estimate a subject land
value), the comparables developed with automotive uses are good, but in reality, auto use of
the subject is not very probable. The subject intersection is already heavily developed with
auto uses, and zoning doesn't allow auto uses per say. Retail used sites, or those developed
with restaurants are the better comparables. These are sales #2, #3, #6 & #7. Of these, Sale
#2 is not as good as others because the restaurant soon closed; an indication perhaps that the
buyer spent too much on the project and went "belly up~" The unit pdce of it is therefore felt to
be high. The indications of value at $9.00, $8.90 and $8.89/sf are therefore best.
In summary, the best estimate of value is at say $9.00/sf. At $9.00/sf, the value of the
subject land is estimated as follows:
19,900 sf x $9.00/sf = $179,100
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
38
COST APPROACH CONT.
Type of Property:
Location:
Legal Description:
Zoning:
Date of Sale:
Seller/Buyer:
Sale Price:
Land Area:
Unit Price:
Comments:
COMPARABLE LAND SALE #1
Redeveloped Commercial Land
6113 West Broadway Avenue, New Hope
Outlot 1, Mork-Campion Heights. PIN #05-118-21-22-0058.
B-3, Auto Odented Commercial
Closed June 2, 1999
Aurora Management Inc/GWM LLC
$285,000
23,250 square feet
$12.26 per square foot as improved
Arms length, fee simple, cash transaction. No unusual conditions of sale, but an old Mobile
service station on the site, although vacant for quite some time, did have some contributing
value to the land. The buyer acquired the property and tore up most of the site in order to
replace fuel tanks and pumps. The 1,161 sf GBA building was gutted and totally
remodeled. The contributing value of the building to the land, at the time of sale is
estimated to be $5/sf GBA, or say $6,000. Value of some pavement that remained is felt to
offset demolition costs of pavement that was tom up. The end use of the site is a Citgo
convenience store with gas sales.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesola 55418
39.
COSTAPPROACH CONT.
Type of Property:
Location:
Legal Description:
Zoning:
Date of Sale:
Seller/Buyer:
Sale Pdce:
Land Area:
Unit Price:
Comments:
COMPARABLE LAND SALE #2
Redeveioped Commercial Land
6800 56th Avenue North, Crystal
Lot 4, Block 1, General Mills, Crystal Addition. PID #05-118-21-
42-0039
B-4, Community Commercial
October 14, 1994; Closed April 13, 1995
Bridgestone Firestone Inc/BC Real Estate Investment
$373,000
30,270 square feet
$12.32 per square foot
Arms length transaction, cash sale. Site was improved with an old Firestone Service
Station which the buyer had to demolish to create vacant land. Demolition costs were
$6,000. Price as vacant = $12.52/sf. Buyer built a Boston Market restaurant on the site
which became vacant just a few years later. Reliance Development Company then
purchased the restaurant for $700,000 and another older one adjacent to it (The Palace
Inn) for $1,650,000 on September 29, 1999, demolished both and constructed anew
Walgreen Drug Store. Their acquisition costs, with demolition does not however, reflect
what the market value of the land is.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minneso{a 55418
4O
COST APPROACH CONT.
Type of Property:
Location:
Legal Description:
Zoning:
Date of Sale:
Seller/Buyer:
Sale Price:
Land Area:
Unit Pdce:
Comments:
COMPARABLE LAND SALE #3
Redeveloped Commercial Land
5358 West Broadway Avenue, Crystal
Lot 1, Block 1, Clark's Submarine Sandwich 2nd Addition.
#08-118-21-11-0125.
B-4, Community Commercial
February 3, 1995; Closed May 4, 1995
Robert & Karen Miller/Nath Property II Ltd Partnership
$170,000
15,850 square feet
$10.73 per square foot
PIN
Arms length, fee simple cash sale. Site was improved with an old "A" frame restaurant
building which the buyer had to demolish to create vacant land. Demolition costs are
estimated at $6,000. Buyer also purchased some adjacent land from the city to assemble
with this for $7,500 bringing the total acquisition cost to $183,500 for 21,906 square feet of
land, or $8.37/sf. Site is now developed with a Burger King restaurant.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
41
COSTAPPROACH CONT.
Type of property:
Location:
Legal Description:
Zoning:
Date of Sale:
Seller/Buyer:
Sale Price:
Land Area:
Unit Price:
Comments:
COMPARABLE LAND SALE #4
Redeveloped Commercial Land
5264 West Broadway Avenue, Crystal
Lot 16, Block 2, Hansons Addition. PID #09-118-21-22-0034.
B-4, General Business
March 17, 1995
Central Investment Corp/Garbon Properties LLP
$75,000
18,555 square feet
$4.04 per square foot
Arms length, fee simple cash sale. Site was improved with an old wood frame office
building which the buyer had to demolish to create vacant land. Demolition costs are
estimated at $6,000. Vacant land pdce = $4.31/sf. BUyer built an auto service building
(American Brake Service) on the site. Good traffic on Broadway. Right in/out access only.
BCL APPRAISALS, INC,
2852 Anl~'~ony Lane South, Minneapolis, Minnesota 55418
42
COSTAPPROACH CONT.
Type of Property:
Location:
Legal Description:
Zoning:
Date of Sale:
Seller/Buyer:
Sale Price:
Land Area:
Unit Price:
Comments:
COMPARABLE LAND SALE #5
Redeveloped Commercial Land
5410 Lakeland Avenue North, Crystal
Lots 5 & 6, Block 5, Boulevard Acres. PIN: 04-118-21-34-0061,
0062 & 0063
B-3, Auto Oriented Commercial
January, 1998; Closed March 19, 1998
Elk's Lodge (Jerry Gustafson)/Holiday Stores
$530,000
70,650 square feet
$7.50 per square foot
Arms length, fee simple, cash transaction. No unusual conditions of sale. However, the
property was improved with a one story Elk's Lodge b-uilding; 4,578 sf GBA originally built
in 1951. The buyer had no use for the building, and it was torn down. Demolition costs are
estimated at $35,000. Vacant land price is equivalent to $530,000 + $35,000 = $565,000 +
70,650 = $8.00/sf. An outdoor advertisement sign had no contributing value; a 90 day
option was exercised that called for it to be removed at the cost of the sign owner. Buyer
redeveloPed the site with a gas station/convenience store and a car wash.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis. Minnesota 55418
43
COSTAPPROACH CONT.
Type of Property:
Location:
Legal Description:
Zoning:
Date of Sale:
Seller/Buyer.
Sale Pdce:
Land Area:
Unit Pdce:
Comments:
COMPARABLE LAND SALE #6
Vacant commercial land
5101 36th Avenue North, Crystal
Lot 2, Block 1, Cub Foods Addition. PID: 07-029-24-22-0086
B-4, Community Commercial
July 1, 1995; Closed July 13, 1995
Super Valu Inc./Anthonys Shopping Center Prtnrshp.
$370,000
44,431 square feet
$8.33 per square foot
Arms length, fee simple, cash sale. No unusual other conditions. Peripheral site adjacent
to new Cub Foods grocery store. It is now developed with a Video Update store. One
block from Highway #100. "
RL$
BCL APPRAISALS, INC.
2852 Anthony Lane Sot,'th, Minneapolis, Minnesota 55418
44
COST APPROACH CONT.
Type of Property:
Location:
Legal Description:
Zoning:
Date of Sale:
Seller/Buyer:
Sale Price:
Land Area:
Unit Price:
Comments:
COMPARABLE LAND SALE #7
Redeveloped Commercial Land
Northeast comer of Highway 47 and Mississippi Street, Fddley
Lots 10-12, Block 2, Rice Creek Terrace Plat 1, and Lots 13-16,
Block 3, Rice Creek Terrace Plat 2. PID #14-30-24-24-0009,
0010, and 0037-0040.
Cl, Local Business
January 26, 1998 Closing
Theisen "B" Partnership and Gary Swanson/EGA Trust Limited
Partnership
$900,000 combined
125,125 square feet combined
$7.19 per square foot
Fee simple, arm's length, cash sale. Level topography, however the site was improved
with an old grocery store (converted to a gym) which was demolished for a cost of $13,000.
Transaction represents an assemblage involving two sellers and one buyer whom
subsequently developed the property with a Walgreen's Drug Store.
BCL APPRAISALS, INC,
2852 Anthony Lane South, Minneapolis, Minnesota 55418
45
COSTAPPROACH CONT.
COST APPROACH RECONCILIATION
Building Depreciated Cost:
Land Value:
Total
$103,500
$179,000
$282,500
Final Value Estimate:
SAY $282,500
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
46
SALI=S COMPARISON APPROACH
Three smaller fast food building sales and one larger restaurant were chosen from a survey
of several in the subject's and competing market areas. These sales represent, overall, the
most similar properties to the subject which a buyer would consider purchasing as substitutes,
or would look to in an effort to establish the value of the subject. Based on the comparable's
price per square foot of gross building area, with necessary adjustment where needed for
significant differences, the total value indication is say $282,000 as follows:
1,323 sf GBA x $213.00/sf GBA = $281,799
Discussion of Comparable Buildin,q Sales
Areas of adjustment and reasons why adjustments were applied follow.
Other
This covers the property dghts conveyed (fee simple Usually), the motivations of the buyer &
seller (arms length or not), and miscellaneous matters such as deferred maintenance or
assumed special assessments. With all sales being arms length transactions with fee simple
property dghts conveyed and no other miscellaneous matters influencing value, no
adjustments are applied.
Financing
This is an adjustment to reflect a cash price if the property was purchased on a contract for
deed (or other non-cash arranged terms) that inflated the purchase price above that which
would have been paid in cash. Sales #1 and #2 were purchased on contract for deeds, but no
adjustment is applied. In each case, significant cash down payments were made, but given
that the total acquisition costs was broken into amounts for real estate and non real estate, it
was more advantageous for tax reasons that the buyers mark their cash down payment as
paying for fixtures and business concerns rather than the real estate (which couldn't be
depreciated as fast). Sellers probably wouldn't have gotten any less money for the real estate
if the deal was worked differently (or they were cashed out). If any adjustment is needed, the
real estate price might in fact be increased a bit because trade fixtures might have been
allocated too much value relative to the total acquisition cost.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
47
COMPARISON APPROACH CONT
Discussion of Comparable Buildin,q Sales cont.
Market Conditions
Like what was described in the valuation of comparable land sales, this is essentially a time
adjustment to reflect changes in market value between the date of sale and the date of this
appraisal due to pdce changes in the real estate market. In this market area relative to the
transaction dates of the comparables, the annualized appreciation rate has vaded from 0% to
+7% as follows: 1994 = No change. 1995 = +4%. 1996 -- +4%. 1997 = +4%. 1998 = + 7%.
Thus far in 1999, +6.5%. The adjustment which appears in the gdd is the result of a monthly
rate (i.e. 4%/year + 12mo/year = 0.333%) times the number of whole months between the
closing date of the comparable transaction to the end of that year, times the annualized rate of
each respective following year, to the date of this appraisal. Depending on how long ago the
buildings sold, total upward adjustments (which reflect a compounding effect) range from
about 4-28%. Sale #1 is adjusted the least because its sale date is most current, and Sale ~
is adjusted the most because its sale date is least currer~t.
Location
This is an adjustment for Iocational quality and property amenities including the size of the
trade area, the appeal of neighborhood real estate, quality of access, and exposure to traffic.
The subject is'rated as having a good quality location. With similar location ratings, Sales #2 &
3 are not adjusted. Traffic exposure, access and the appeal of adjacent real estate are similar
to that which is found about the subject. Sale #4, in Bloomington, is rather similar also, but
some upward consideration is applied though because the building is located on an intedor
site. Comer located buildings like the subject are better. The upward adjustment is best
estimated at 5%. Sale #1, in Fddley, is quite a bit inferior to the subject and is adjusted up
75%. Traffic flow by the building is much less, the location is in a trade area filled mostly with
industry rather than residents or other retail commercial uses, and although on a comer of a
county road, the site is one that is more destination odented that impulse oriented. The
subject's location is more impulse oriented.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
48
SA~ FS COMPARISON APPROACH CONT
Discussion of Comparable Buildin.q Sales cont.
Condition
This is an adjustment for the overall quality, condition and age of the building. The subject
is in good overall condition. Comparables #3 & ~,4 are similar and require no adjustment.
Sale #1 is a newer building constructed in 1981. It is in better condition, and also has a
canopy that permits ddve-up food service. The canopy is an amenity that isn't included in the
building area of the comparable, but is included in the value of the transaction. An overall 5%
downward adjustment is applied. Sale #2 is an older building than the subject constructed with
a wood extedor rather than bdck. Although updated since its original construction, physical
deterioration of the buildings short lived items is more evident, and the appeal of the subject's
bdck extedor is better. A 5% upward condition adjustment is applied.
,Size
In restaurant buildings, the larger they are, sit down dining becomes more of an issue. The
more sit down dining there is, the more area there is that needs to be finished with custom
decorating and trade fixtures (booths, light fixtures etc). Because restaurants are generally
decorated to serve or promote a specific type of business, the cost of the custom decorating
has a very diminishing return to another user. In other words, the owner will probably not get
too much of their money (for the decorating and fixtures) back from their investment in a later
sale. Therefore on a per square foot basis at least, buyers tend to end up spending less for
large buildings than smaller ones. Conversely, buyers usually pay more for smaller sized
restaurants because on a per square foot basis, more of the area is dedicated to what every
restaurant needs or what buyers can re-use (like clay tile floors, HVAC equipment, bathrooms).
Lastly, on a per unit basis, larger sized buildings generally tend to cost less than smaller ones
because discounts are given for purchasing and building in bulk, and labor costs are more
evenly spread out.
Because Sale ~4 appears to be a building identical in size to the subject, there is no size
difference between it and the subject. But, size differences between the subject and other
comparables do exist. Adjustment to these is needed. Sales #1 & #3 both have much more
space for indoor dining, and are well over twice the gross building area of the subject. Sale #3
is in fact about four times the size. A 20% upward adjustment is applied to Sale #1, and a
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
49
S/t/r=s COMPARISON APPROACH CONT
Discussion of Comparable Buildin,q Sales cont.
Size Cont.
40% upward adjustment is applied to Sale #3. Sale #2 has no space finished for indoor
dining, and in general is 26% smaller than the subject. A smaller, but none-the-less significant
downward adjustment of 5% is applied.
Land:Buildin,q Ratio
More land equals greater value. This is an adjustment for diffedng amounts of land relative
to the size of the building. The subject's land to building (GBA) ratio is 15.04:1. The
comparables land to building ratios vary from 10.06:1 to 36.2:1. The adjustments for different
ratios are based upon the slope of a "best fit" line on a graph of the comparables unit pdce to
their land to building ratio, with the unit prices all made otherwise equal to the subject, except
for one attribute, the variety in pdce caused by different ratios. What is readily observed is an
upward sloping line (with a regression formula of Y = 2.34X + 162.57 that shows comparables
with higher land to building ratios have higher unit pdces ($/sf GBA) than comparables with
lower ratios. Entedng the land to building ratio of the comparable into the "X" vadable in the
formula, and contrasting the resulting "Y" number with the uy,, number shown at the subject's
land to building area ratio (made by plugging the subject's ratio in the "X" spot in the formula) is
how the adjustment is made. Sale #2 is adjusted down by 20%, and Sale ~ is adjusted up
by 5%. Sales #1 & #3, although having different ratios, do not require adjustment as the
difference does not seem to be significant to cause a change in price. No adjustments to
these buildings are therefore applied.
Buildin.q Sale Adjustment Gdd
Significant areas for adjustment are identified in the first column, and are labeled Other,,
FinancinR, Market Conditions, etc. The subject is identified in the second column, and the
comparables in the remaining four.
The adjustment methodology in this valuation is based on widely recognized appraisal
practice and adjusted as 'appropriate to fit the available market data. In short, the adjustments
significant differences are sequenced into an order where Other matters are adjusted for first,
thence Financing and Market Conditions. Lump sum, dollar adjustments are appropriate for
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
5O
SALI=S COMPARISON APPROACH CONT
Discussion of Comparable Buildin,q Sales cont.
Buildin,q Sale Adiustment Gdd Cont.
each and adjusted pdces are the result of summation. A common unit of comparison is thence
created to compare the sales with the subject. This is the pdce per square foot of gross
building area ($/sf GBA). After converting the time adjusted purchase price to a unit pdce per
square foot of GBA (a common unit of comparison), the remaining adjustments are then
applied to the subject by a multiplication process and a single "Net Adjustment Factor". The
adjustment gdd follows.
BCL APPRAISALS, INC.
2852 Anthony Lane South. Minneapolis, Minnesota 55418
51
SALES COHPAR[SON APPROACH CONT.
BU[LD]NG SALES ADJUSTHENT GRID
Subject
Price N/A
Other Fee SimpLe
Arms Length
None
Adjustment
Adj Price
Financing
Adjustment
Adj Price
Market Cond.
Adjustment
Adj Price
Size (GBA)
Size $/sf
Location
Adjustment
Condition
Adjustment
Size
Adjustment
Land:BLdg Ratio
Adjustment
Net Adj
lnd SubS
Cash Equiv
12/03/99
Good
Good
1,323 sf
15.04:1
ComparabLe
1
$300,000
Fee SimpLe
Arms Length
Norm
$ 0
$300,000
CD,Cash Equiv
$ 0
$300,000
04/15/99
+$ 12,500
$312,500
3,094 sf
S101.00
Average
x 1.75
Very Good
x 0.95
3,094 sf
x 1.20
16.55:1
x 1.00
x 1.995
S201.50
BuiLding SaLe No.
2
S209,000
Fee SimpLe
Arms Length
None
$ 0
$209,000
CD,Cash Equiv
$ 0
$209,000
04/30/97
+S 35,500
S246,500
977 sf
$250.26
Good
x 1.00
Average
x 1.05
977 sf
x 0.95
36.2:1
x 0.80
x 0.798
$199.70
3
S545,400
Fee SimpLe
Arms Length
None
$ 0
$545,600
Cash
$ 0
S545,400
11/17/97
+$ 80,100
$625,500
5,050 sf
$123.86
Good
x 1.00
Good
x 1.00
5,050 sf
x 1.40
13.13:1
x 1.00
x 1.~0
$175.40
4
$200,000
Fee SimpLe
Arms Length
None
$ 0
$200,000
Cash
$ 0
$200,000
10/05/94
+$ 56,000
$256,500
1,323 sf
$193.88
Good (-)
x 1.05
Good
x 1.00
1,323 sf
x 1.00
10.06:1
x 1.05
x 1.102
$213.66
SALFS COMPARISON APPROACH CONT.
Value Reconciliation
The range of the four indications is $173.40 to $213.66/sf GBA, with an average of
$197.07/sf, and a standard deviation of $16.95/sf.
While all sales are meaningful, some are better than others. Sale #3, although close, is a
type of restaurant that usually ends up providing the customer a very different dining
experience than what might be offered in the subject building. Not only is the building
significantly larger, sit down dining with a full service menu tends to be the norm. It isn't likely
a building like this would be used as a donut shop or fast food restaurant which are probable
uses the subject building might be put to. Sales #1 & #2 are much better in this regard.
These Dairy Queens restaurants are smaller fast food restaurant buildings that usually offer
customers a limited menu, and small areas to eat. In both cases though, there are significant
differences such that neither perhaps is better than another. A composite of the two, if
possible, would end up being a good comparable. The midpoint value shown by the two
indications might perhaps be equally as good. Sale #4 by and large though is clearly the best
comparable. The building is virtually identical to the subject. It provides an indication of value
at $213.66/sf GBA. A reconciled subject value should be close to this.
In conclusion, the best estimate of the subject's value is say $213.00/sf GBA. At $213.00/sf
GBA, the value of the subject property is say $282,000 as follows:
1,323 sf GBA x $213.00/sf = $281,799
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
53
SAI_I=S COMPARISON APPROACH CONT.
Type of Property:
Location:
Legal Description:
Zoning:
Date of Sale:
Seller/Buyer:
Purchase Price:
Land Area:
Building Description:
COMPARABLE BUILDING SALE #1
Dairy Queen Restaurant
225 Osborne Road, Fridley
Lot 2, Block 1, East Ranch Estates 3rd Addition
PID #11-30-24-22-0021.
C2, General Commercial
April 15, 1999 Closing
Donald Fitch/Kraus Foods
$300,000
64,000 square feet
Class C building, constructed in 1981. One story, on grade with no basement. 3,094
square feet gross building area. Good condition.
Unit Price: $96.96 per square foot GBA'
Comments:
Arm's length, fee simple, contract for deed sale. The sale price is the allocated amount for
the real estate only. Buyer reports paying additional cash amount for the fixtures
equipment and the business value. Although the cash amount was not stated, the buyer
did say that they generally follow a rule of thumb whereas a total package price is 25%
more than the price allocated to just the real estate. Therefore, $75,000 is estimated to be
the cash down payment which also represents that paid for the fixtures, equipment and
blue sky value. Average quality location at the northeast comer of Osbome Road and
Main Street, in Fridley. Land to building ratio is 2.69:1. However, about 20% of the land is
encumbered by a water main easement, and the effective land to building ratio is best
estimated at 16.55:1. Building has a canopy to serve drive-thru patrons, and buyer
continued the Dairy Queen use of the real estate. The building is run as a franchise.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
SAI F$ COMPARISON APPROACH CONT.
.S£~. U
/
ADD.
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54
BCL APPRAISALS, INC.
.55
SALES COMPARISON APPROACH CONT.
Type of Property:
Location:
Legal Description:
Zoning:
Date of Sale:
Seller/Buyer.
Purchase Pdce:
Land Area:
Building Description:
COMPARABLE BUILDING SALE #2
Dairy Queen Restaurant
7749 Zane Avenue North, Brooklyn Park
Lengthy metes and bounds. PID #21-119-22-33-0104.
B-2, Retail Business
Apdl 30, 1997 closing.
McDonald Corporation/Michael Ziemann
$209,000
35,370 square feet
Class C building, constructed in 1962. One story on grade, no basement. 977 square feet
gross building area. Average condition.
Unit Price: $213.92 per square foot GBA
Comments:
Arm's length, fee simple, contract for deed sale. Purchase price of $209,000 reflects that
allocated for only the real estate. A cash payment for the trade fixtures equipment and
blue sky value was paid separately. The contract of $209,000 is at 9% for 180 months.
Financing terms are considered to be cash equivalent. The property has a good location at
the southWest comer of 78th Avenue and Zane, in Brooklyn Park. The land to building ratio
is 36.2:1. The buyer continued the Dairy Queen use of the real estate. The business is
run as a franchise.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
SP,! PS COMPARISON APPROACH CONT.
BCL APPRAISALS, INC.
57
COMPARISON APPROACH CONT.
Type of Property:
Location:
Legal Description:
Zoning:
Date of Sale:
Seller/Buyer.
Purchase Pdce:
Land Area:
Building Description:
COMPARABLE BUILDING SALE #3
Perkins Restaurant
5420 West Broadway Avenue, Crystal
Lot 2, Block 1, First Federal Ron Dopp 2r~ Addition.
PID #05-118-21-44-0007.
B-4, Community Commercial
November 17, 1997 closing.
MRT Properties/U.S. Restaurant Properties
$545,4OO
66,290 square feet
Class C building, constructed in 1975. One story on grade with no basement. 5,050
square feet gross building area. Good condition.
Unit Price: $108.00 per square feet GBA
Comments:
Arm's length, fee simple, cash sale. Purchase price reflects that for only the real estate.
Trade fixtures, business value and blue sky was not included in this sales pdce. Good
location on West Broadway Avenue, good parking area with 110 car capacity. Property
was lease{I, and buyer continued with the Perkins use of the real estate. The building ratio
is 13.13:1.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
SALI=S COMPARISON APPROACH CONT.
N taft
BCL APPRAISALS, INC.
SALFS COMPARISON APPROACH CONT.
Type of Property:
Location:
Legal Description:
Zoning:
Date of Sale:
Seller/Buyer:
Purchase Price:
Land Area:
Building Description:
COMPARABLE BUILDING SALE ~
BoSa Donut Shop
2325 90th Street West, Bloomington
Lot 1, Block 1, Winchell's Addition. PID #08-027-24-41-0063.
B2, Retail Business
October 5, 1994 closing
David and Deborah Clarkson/Henry and Sodara Ung
$200,000
13,304 square feet
Class C building, constructed in 1976. One story on grade with no basement.
gross building area. Good condition.
Unit Price: $148.15 per square foot GBA.
Comments:
1,350 sf
Arm's length, fee simple, cash sale. Price reflects real estate value only. The building is
virtually identical to the subject. But, it is located on an interior site in a different community,
and the land to building ratio is 9.84:1. The donut shop use of the real estate has continued
since the building was first constructed. In February of 1999, Henry and Sodara Ung sold the
property for th'e same price ($200,000) to a distant uncle of Sodara's, aka Chor Investment
Company, but remained in the building as tenants. Lease terms are unknown. The buyer
reported that the sale was not exposed to the open market, a broker was not involved, and an
appraisal was not completed to estimate the sale price. The earlier 1994 sale for $200,000 is
therefore believed to be most indicative of a market value price for this property. Whether or
not the buyer would have been more informed by using a broker or appraiser, the $200,000
price in 1999 could have been higher, with all other things being equal, due to market
appreciation since 1994.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
SAI F$ COMPARIS N APPROACH CONT.
I
I
I
I
i
i
i
~ . _~ ..~-
[."'
60
BCL APPRAISALS, INC.
{51
INCOME APPROACH
· The market value of the subject is appraised in fee simple. In the income approach to
valuation, an estimate is made of the potential, market rate tdple net rental income that might
be expected should the real estate be leased. From this number is subtracted estimated
vacancy and credit loss to yield effective net income. From the effective net income is then
subtracted any expenses that might be incurred by a typical owner or lessor. The end result is
net operating income which is then capitalized at an appropriate rate to indicate the value of
the property as an investment.
Estimated Potential Net Income
1,323 sf x $22.00/sf = $29,106
Less Vacancy & Collection Loss
0.03 x $29,100 = $873
Effective Income
$29,100
SAY ($ 900)
$28,200
Operational & Administrative Char,qes*
Structural Reserves ($0.70/sf) $ 700
Miscellaneous $ 500
Total $1,200
($1,200)
Estimated Net Operating Income
$27,000
Capitalization
Net Income
= $27,000 = $270,000
Overall Rate 0.10
Value Indicated by Income Approach
$270,000
"l'riple ne{ rent anal)lie IllUmes the tenant pay~ common area maintenance charges which cover real eatate text, hl~Zl~{I insurance, utility bills, enow removal and lite
maintenance c¢~ts, and fees charge~, by I IXO~onal management firm.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
INCOME APPROACH CONT.
Market Rent Data
1) Subway Sandwich Shop - 5557 West Broadway Avenue, Crystal. One of two tenants
(Apartment Search is the other) in a freestanding 2,400 sf retail store building located in a
satellite position (northeast comer) of the Crystal Shopping Center at the southwest comer of
Bass Lake Road and West Broadway Avenue. Subway leases % the building, or 1,200 sf.
The building is in good condition, has a bdck exterior with adequate parking, and has no
basement. Unknown construction date. Shopping center was built in 1957, but this building is
much newer;, probably in the late 1970's. Very good location. Lessee pays rent of $25.00/sf
net rent. Lease is in third year of a ten year term.
2) Boston Market Restaurant - 8061 Brooklyn Boulevard, Brooklyn Park. One of two tenants
(Hollywood Video is the other) in a brand new strip center (constructed for them in 1995) on
the south side of Brooklyn Boulevard near its intersection with Co. Rd. 81. 2,887 sf leased
area accompanied by a 25,000 sf site. Building in excellent condition, bdck exterior, no
basement. Good location. Lessee was paying rent of $29.18/sf net for the first five year term
of their 15 year lease that began in October of 1995. But, Boston Market closed this
restaurant in 1998 (along with most of their others) and the building was presumably re-let to
LeeAnn Chin's. Terms are unknown, but it seems apparent that the Boston Market probably
got out of the market because they had paid too much for their real estate and their business
couldn't support overhead costs. Boston/LeeAnn Chin's neighbor in the same building,
Hollywood Video, is paying in the neighborhood of $18/sf net for about 6,000 sf.
3) Rax Restaurant - 1875 Co Rd B2, Roseville. 3,191 sf freestanding fast food restaurant
located in the Rosedale Shopping Mall area. 67,082 sf site. Building is in average condition
with a bdck exterior. Constructed in 1979. No basement. Good location, but the building is
not on a comer. Lessee is paying $17.02/sf net for the entire premises. A percentage rent
clause of 5% of sales over $1,086,000 has never been effected. Lease was negotiated in May
of 1989 for a 10.5 year term.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
INCOME APPROACH CONT.
Market Rent Data cont.
The best estimate of the subject's rent is $22/sf. The rent on Comparable #2 is much
higher than what the subJect could achieve. The building was brand new, and leased by a
national chain. A national restaurant chain would probably not have an interest in the subject
(anymore, that is). The fact that Boston Market is no longer there also indicates that even they
perhaps were paying too much at $29.18/sr. The rent on Comparable #1 at $25/sf net is even
higher that what the subject could achieve. Subway is a national chain restaurant, and the
location is much better than the subjects. The rent of Comparable #3 at $17.02/sf is probably
a rate that the subject could realistically achieve, and perhaps more. This restaurant doesn't
have as good a curb appeal as the subject, and it is twice the size. The rent should be
adjusted upward for this, as well as perhaps the date in which the lease amount was
determined (even though the lessee paid no additional rent from generating sales over a
designated break point throughout the term of the lease). Lastly, although no written
documentation was ever provided (to me), the (out of state) property owners reported that they
had the feeling they could rent the building "every day for $3,000 a month" if they wanted.
Under the assumption that this would reflect a gross rent type of arrangement (an arrangement -_
in which a pdor tenant of the building had in fact reported paying in the past) with the lessor
paying real estate taxes, the annual amount of $36,000 less say $6,000 for taxes = $30,000 +
1,323 sf = $22.67/sf. At any concern, the best rental estimate of $22.00/sf produces the
following total rental income to the real estate.
1,323 sf GBA x $22.00/sf = $29,106
Vacancy & Collection Loss
The market for commercial buildings in locations like where the subject is found, is not
affected by much vacancy. An overall rate of 3% is estimated.
Expenses
On a triple net lease, most exPenses are paid by the lessee. The typical expenses incurred
by a lessor are annualized structural maintenance charges (to replace the roof covering and
HVAC system for instance one every 20 years or so) and miscellaneous items that would pay
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesola 55418
64
INCOME APPROACH CONT.
Expenses Cont.
every year for costs such as legal or accountant's fees and taxes on vacant space. The
structural reserves are estimated at about $0.50/sf of building area or say $700, and
miscellaneous expenses are estimated at $500. Although management charges in a net
lease arrangement are typically handled as a pass through expense to the tenant, and
comparable rentals were reflective of this trend, the subject is a single tenant building. It is
probable the owners will manage the building themselves, but not pay themselves for it by
passing on some charge to the tenant (like they would with real estate taxes). This
phenomena is therefore accounted for within the funds for miscellaneous expenses.
Capitalization
Rates from sales
1) 12.0% Denny's Restaurant - 5025 Central Ave, Columbia Heights. Sit down, family style
built in 1984, sold 10/95.
2) 8.30% Boston Market Restaurant - 8061 Brooklyn Blvd, Brooklyn Park. Hybdd fast food/sit
down style, built in 1995, sold 11/95.
3) 10.9% Rax Restaurant- 1875 Co Rd B2, Roseville. Fast food design, built in 1979, sold in
5-96. ' '
Band of Investments
30% down, 70% mortgage, 9.50% interest, 20 years, mortgage constant = 0.111, equity
constant = 0.07.
0.111 x 0.70 = 0.077
0.070 x 0.30 = 0.021
Rate = 0.098
Debt coveraqe ratio - 1.25 to 1.30 or say 1.275
Rate = 1.275 x 0.111 x 0.70 = 0.099
Conclusion: 10.0%
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
SUMMARY AND CONCLUSION
The purpose of this appraisal is to estimate the subject's market value. The City of New
Hope is interested in purchasing the subject, and this appraisal of it will provide aid in
estimating what an offer to purchase might be. The interest to purchase the subject
apparently stems from the city's identification of the subject area as one in which they would
like to see redevelopment occur in. The city's acquisition of the subject might speed a
redevelopment process along.
The subject is a single tenant, 1,323 sf GBA fast food restaurant that was constructed in
1975. Although vacant, it has been used in the past as a donut shop. The property address is
5550 Winnetka Avenue, New Hope, a corner location at the southeast corner of County Road
10 and County Road 156 in Hennepin County, Minnesota. The site area is 19,900 square feet,
and the zoning is B-2, Retail Business.
To measure the subject's market value, the Cost, Sales Comparison and Income
Approaches to Value are applied. The conclusions reached by these approaches are as
follows:
Cost Approach:
Sales Comparison Approach:
Income Approach:
$282,500
$282,000
$270,000
The best approach to value is the Sales Comparison Approach. There are a few
reasonably similar types of fast food restaurant building sales which have recently sold, and
the market is usually guided to value by this approach more so than any other. The Income
Approach is much less reliable. Buildings like the subject are usually owner occupied, and
comparable rent and capitalization rate is difficult to apply. The Cost Approach is about as
good as the Income Approach. The land sales are proximate and the cost estimate is reliable
(even though alternate local bids are lacking which would provide a good test against the
accuracy of the Marshall & Swift Cost Manual), but the subjects zoning is different from other
land sales, assemblage is needed to create a larger site which may be legally developed, and
support for the large amount of depreciation is modest. In general, the Cost Approach usually
doesn't tend to have much influence on what a buyer pays for property that isn't rather new or
of special use. In conclusion, the best estimate of value should lie between the indications of
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
SUMMARY AND CONCLUSION CONT.
value provided by the Cost and Income Approaches, and rather close to the indication of value
by the Sales Comparison Approach. This value estimate is say $280,000.
Final Value Estimate
$280,000
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
67
IMMOVABLE TRADE FIXTURE VALUE
Within the building are certain improvements that typically sell with the real estate, but are
not part of it. They are classified as immovable trade fixtures. A listing of these items with
their estimated cost new & installed, depreciation (by a factor of 70% based most simply upon
the rate applied to the real estate in the Cost Approach), and as is value for continued use
follows.
Item Cost New
1) Convection oven hood $ 815
2) Fire suppression system $2,636
3) Make-up air canopy $4,465
4) ScUllery sink w/components $2,860
5) Dish table and racking components $1,669
6) Donut display case $2,634
7) Counter top and cabinetry $ 475
8) Partition wall $ 72
9) Beverage table and cabinetry $1,306
$1,864
10) Plumbing and gas rough-ins
Total
Depreciation As is Value
less 70% $ 245
less 70% $ 791
less 70% $1,340
less 70% $ 858
less 70% $ 501
less 70% $ 791
less 70% $ 143
less 70% $ 22
less 70% $ 392
less 70% $ 559
$5,642
Immovable Trade Fixture Value Estimate
SAY $5,600
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
PHOTOS OF IMMOVABLE TRADE FIXTURES
Items #1, 2 & 3
BCE APPRAISALS, INC.
PHOTOS OF IMMOVABLE TRADE FIXTURES
Item
Item #5
BCL APPRAISALS, INC.
PHOTOS OF IMMOVABLE TRADE FIXTURES
Items #6, 7 & 8
Item #9
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
BCL APPRAISALS
BJORKLUND, CARUFEL, LACItENMAYER, INC.
(612)781-0605 Fax: 781-7826
2852 ANTHONY LANE SO., MINNEAPOLIS, MINNESOTA 55418
RON LACHENMAYER, SRA
LESLIE J. (LEE) RACINE, JR., SRA
BRAD BJORKLUND, MAI, SRA
~ QU~T.T]~ICkTI(jsTS OF
~C BJORKL~
Bachelor of Arts; St. Olaf College 1991.
Degrees in Economics & Biology, GPA 3.0
Appraisal Institute: Real Estate Appraisers Courses;
110 (Appraisal Principles)
120 (Appraisal Procedures)
210 (Applied Residential Property. Valuation) ~
310 (Capitalization 2~_eory & Teca~nl.q.u. es - ~ A)
410 (Standards of Professional Practice - F. A)
420 (Standards of Professional Practice - Part B)
510 (Capitalization Theory & Techniques - Part B)
520 (Highest and Best Use and Market Analysis.) ,
530 (Advanced Sales Comparison.& Cost_Appr.oac~es)
540 (Report Writing and Valuation _Apal.ys. ls,)
550 (Case Studies Ln B~al Estate Valuation) *~
REAL ESTATE APPRAISERS
&
CONSULTANTS
MAI Candidate of the Appraisal Institute - January 1, 1994
MN Appraiser's License #4003154; CertifiedGeneral Real Property Appraiser
1999: (current) - 1988: Staff Appraiser for BCL Appraisals Inc.
1991: Residence Hall Tr~a-~urer; St. Olaf College
1990: Teachers Asst; St. Olaf College Biology Lab Department
TYPES OF APPRAT~
c~t.tercial: Retail stores, Restaurants, office Buildings, shopping centers
Industrial: Manufacturing, Processing & Distribution Buildings
Residential: Single Family Hc~es, Duplexes, Townhomes, Condominiums,
&Apartments
Vacant Tand: C~tu,~rcial, Industrial, & Residential
Appraisals have been c~mpleted upon the variety of aforementioned real estate for a
broad range of functions including; sales and purchases, condemnation, tax appeals,
development, insurance, estates, divorce, & subdivision analysis.
c~.r~S INCLL~E
Cities of: Blaine, Bloc~h~on, Cha-~ka, Crystal, Eden Prairie, Golden Valley, Maple
Grove, Minneapolis, Minnetonka, New Brighton, New Hope, Plymouth, Richfield,
Prime Mortgage
GMAC Mortgage
FBS Mortgage
Fleet Mortx~age
Kennedy & Graven
Carlson C~t~oanies
Best & Flanagan
Marquette Bank
Great t~kes Mortgage
united Mortgage
T,,~"r'kin Hoffman, Law Firm
Prudential Life
U.S. Navy
Rochester & Savage
Firstar Banks
TCF Bank
North Star Title
Knutson Mortgage
Peat Marwick
Mpls Park Board
MORE THAN 80 YEARS FULL APPRAISAL SERVICES EEO/AA
~Crystal .>~
I SUBJECT PROPERTY
Z
2: Z
Park
T~'in Lakes
Z
m
z
AVE I
'~ ~,Jord~
CITY MAP
~Shingle
J
Building Sale No 2
Sale No I
SUBJECT PROPERTY
Land Sale No 2
~IST~ ~N
Building Sale No 3 --
Land Sale No 3
Land Sale No 4 !
~Cq/stal
Land Sale No 5
Park
Land Sale No 6
Pe/~vr
Brookli
~Gar~er
Comparable Sale Map
-- Building Sale No 1
PEARSON I
~E
69TH AVE
!Land Sale No 7
6~TH
R 130
Island
61ST AVE NE
AVE NE
Comparable Sale Map
z
uJ
W 82Nr
Park
YNESOTA
W 76TH
W
W 81ST
79~
rk
W 85TH
W 84TH
irk
Nord Myr
,ndale Commuf
z
Penn Lake
Building Sale No 4
R'
S W 94TH
W 98TH
W 87TH
Comparable Sale Map
EXTRA COMPARABLE LAND SALE
Type of Property:
Location:
Legal Description:
Zoning:
Date of Sale:
Seller/Buyer:
Sale Pdce:
Land Area:
Unit Price:
Comments:
Redeveloped Commercial Land
7900 Medicine Lake Road, New Hope
PIN #19-118-21-44-0001.
B-4, Community Business
December, 1992
Burger King Corp/Naftali Aikalai
$156,000
14,000 square feet
$11.14 per square foot as improved
Arm's length, fee simple, cash transaction. No unusual conditions of sale, but an old
Burger King restaurant on the site had to be demolished so that the buyer could redevelop
the land with his Car X Muffler shop. Demolition costs are estimated at $6,000. Vacant
land pdce = $11.57/sf. Good corner location in an area with community shopping
development and exposure to traffic.
i / I
- - 2~TH N ~
MEDZC]NE LAKE
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
EXTRA COMPARABLE LAND SALE
Type of Property:
Location:
Legal Description:
Zoning:
Date of Sale:
Seller/Buyer:
Sale Pdce:
Land Area:
Unit Price:
Comments:
Redeveloped Commercial Land
7001-7009 Bass Lake Road, New Hope
PIN #05-118-21-43-0001 & 0002.
B-4, Community Business
December, 1990
Jerome Choromanski/National Bank of St. Louis
Park
$450,000
65,878 square feet
$6.83 per square foot as improved
Arm's length, fee simple, cash transaction. No unusual conditions of sale, but there was
an old Burger King restaurant on the site that the buyer had to demolish to build a bank
(which is now present). Demolition costs are estimated at $6,000. Vacant land pdce =
$6.92/sf. Comer location but not at a major intersection.
BCL APPRAISALS, INC.
2852 Anthony Lane South, Minneapolis, Minnesota 55418
EDA
1 1/EQUEST FOR ACTION
Originating Depa~Ccaent Approved for Agenda Agenda Section
EDA
Community Development Item No.
1-10-99
B~irk McDonald By:. 6
RESOLUTION APPROVING SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM
CONTRACT NO. C-99-66 FOR ADMINISTRATIVE SERVICES BETWEEN THE METROPOLITAN
COUNCIL AND THE CITY OF NEW HOPE AND AUTHORIZING PRESIDENT AND EXECUTIVE
DIRECTOR TO EXECUTE AGREEMENT
ACTION REQUESTED
Staff recommends that the EDA approve the enclosed Resolution Approving Section 8 Housing
Assistance Payments Program Contract No. C-99-66 for Administrative Services Between the
~Metropolitan Council and the City of New Hope and Authorizing President and Executive Director to
Execute Agreement.
POLICY/PAST PRACTICE
It has been the policy of the City in the past to provide Se~:tion 8 Program administrative services to
Iow/moderate income residents in New Hope and several neighboring cities.
BACKGROUND
The City has contracted with the Metropolitan Council for the past 20 years to administer the Section 8
Housing Assistance Payments Program on a local level. The contract is revised periodically when the
reimbursement rate to the City from the Met Council (through HUD) increases. The main contract was
last amended in :~994. Subsequent to that time, several amendments were approved by the EDA
authorizing the City to provide Section 8 Program administrative services to several surrounding
communities, which results in additional reimbursements to the City for the services provided. The City
of New Hope employs a full-time Section 8 Housing Representative to administer this program and
reimbursements from the Met Council/HUD cover all costs of the program/position. The City currently
administers 233 New Hope Section 8 contracts and 92 contracts from other cities, for a total of 325
contracts.
A revised Section 8 Housing Assistance Payments Program Contract for Administrative Services was
approved by the Metropolitan Council on December 15, 1999, after input was received from the cities
with Section 8 programs and their respective housing reps. The revised contract calls for an increase in
the ongoing administrative fee that will be retroactive to June 1, 1999, as follows:
(cont'd.)
RFA-O01 ~
Request for Action
Page 2 1-10-00.
1. The administrative fee available to the City for regular vouchers will increase from $20.74 to $24.26
per unit/month for basic administrative services (an increase of $3.52).
2. The administrative fee available for the City for portability vouchers will increase from $16.59 to
$19.40 per unit/month (an increase of $2.81).
Of the 325 contracts administered by the City, 311 are regular contracts and 14 are portability contracts.
The increased reimbursement to the City in 2000 will be approximately $13,500 and the retroactive fee
paid to the City for 1999 will be approximately $7,000. The 2000 HRA budget anticipated an increase in
revenues from the Metro HRA in the amount of $12,500 to balance the budget, so the increased
reimbursement is greater than anticipated.
ATTACHMENTS
· Resolution
· Correspondence
· Contract
· Excerpts HRA Budget
CITY OF NEW HOPE
EDA RESOLUTION NO. 00-
RESOLUTION APPROVING SECTION 8 HOUSING ASSISTANCE PAYMENTS
PROGRAM CONTRACT NO. C-99-66 FOR ADMINISTRATIVE SERVICES
BETWEEN THE METROPOLITAN COUNCIL AND THE CITY OF NEW HOPE
AND AUTHORIZING PRESIDENT AND EXECUTIVE DIRECTOR TO
EXECUTE AGREEMENT
WHEREAS,
Minnesota Statutes Section 473.195, subdivision 1 (1994 and Supp. 1995) authorizes the
Metropolitan Council to plan and administer a federal Section 8 housing assistance
payments program within the seven-county metropolitan area and to exercise the
functions, rights, duties, privileges, immunities and limitations as are provided for
municipal housing and redevelopment authorities; and
WHEREAS,
the Council and the City of New Hope entered into Contract No. C-94-56 on September 1,
1994, under which the City agreed to perform specified Section 8 program administrative
services within certain jurisdictions located in the metropolitan area; and
WHEREAS,
WHEREAS,
subsequent to the approval of the initial contract, the City agreed to provide Section 8
program administrative services for the cities of Golden Valley, Edina, Maple Grove and
Osseo through contract amendments, which result in additional reimbursements to the
City for services provided; and
the Metropolitan Council recently updated and approved new contracts for all cities
administering a Section 8 Housing Assistance Program and the new contracts include an
increase in reimbursements from the Department of Housing and Urban Development;
and
WHEREAS, the updated contract for New Hope also includes the previous amendments allowing the
prov. ision of administrative services to other municipalities.
NOW, THEREFORE, BE IT RESOLVED by the Economic Development Authority of the City of New
Hope, Hennepin County, Minnesota, that the Section 8 Housing Assistance Payments
Program Contract No. C-99-66 for Administrative Services between the Metropolitan
Council and the City of New Hope EDA is hereby approved and the President and
Executive Director are authorized to execute said Amendment.
Adopted by the Economic Development Authority of the City of New Hope this 10th day of January, 2000.
President
Executive Director
Metropolitan Council
Improve regional competitiveness in a global economy
Housing & Redevelopment Authority
Metro ~
December 23, 1999
Marlene Isaacson
City of New Hope
4401 Xylon Av. N.
New Hope, MN 55428
Re:
Section 8 Housing Assistance Payments Program -
Contract for Administrative Services
Dear Ms. Isaacson:
The revised Section 8 Housing Assistance Payments Program Contract for
Administrative Services was formally approved by the Metropolitan Council at its
meeting on December 15, 1999. Thank you for your input and your patience in
getting to this point. Enclosed for your approval are two copies of the contract.
Please have both copies signed by the appropriate person(s) and return to me
for final execution by the Metropolitan Council. One executed copy will be
returned to you for your records.
This revised contract calls for an increase in the ongoing administrative fee as
well as a change in the enhanced service package and accompanying fee. Both
fees are retroactive, if applicable, to June 1, 1999. Your payments from Metro
HRA through December 31, 1999, have been based on the terms of the existing
contract. Upon final execution of this revised contract, Metro HRA will begin
making payments based on the terms of this revised contract. In addition, Metro
HRA staff is in the process of finalizing calculations of applicable retroactive
payments and any amount due you will be authorized after final execution of this
revised contract.
If you are presently performing enhanced services under the existing
administrative services contract, you may discontinue performing data entry
effective December 31, 1999. You must, however, notify us as soon as possible
if you wish to perform enhanced services as called for in this revised contract. If
you are not presently performing enhanced services under the existing
administrative services contract but wish to perform enhanced services under
this revised contract, you must notify us in writing. We will then review your
request and determine an appropriate start date.
www.metrocouncil.org
Metro Info Ltne 602-18813
230 East Fifth Street · St. Paul, Minnesota 55101-1626 * (651) 602-1428 · Fax 602-1313 · TI'Y 291-0904
An Equal Opportunity Employer
Metropolitan Council
Improve regional competitiveness in a global economy
Housing & Redevelopment Authority
Metro ~
Thank you for your ongoing dedication and hard work. If you have any questions
regarding this contract, please feel free to call me at 651-602-1600.
Sincerely,
Kathy Kline
Program Operations Supervisor
Metro HRA
Enclosure
www.metrocouncil.org
Metro Info Line 602-188~;
230 East Fifth Street * St. Paul, Minnesota 55]01-1626 * {65l) 602-1428 * Fax 602-1313 * TTY 29]-0904
An Equ~l Opportunity Employer
Contract No. C-99-66
SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM
CONTRACT FOR ADMINISTRATIVE SERVICES
CITY OF NEW HOPE
THIS ADMINISTRATIVE SERVICES CONTRACT is made and entered into by the
Metropolitan Council ("Council") and the City of New Hope ("Contractor").
WHEREAS, the Council is authorized by Minnesota Statutes section 473.195 to function as a
housing and redevelopment authority throughout the seven-county metropolitan area and exercises
its statutory authority through its Housing and Redevelopment Authority unit; and
WHEREAS, the Council has entered into one or more Annual Contributions Contracts ("ACC")
with the U.S. Department of Housing and Urban Development ("HUD") and has federal contract
authority to operate a federal Section 8 housing assistance payments program ("Section 8
program'') within the seven-county "metropolitan area" as defined by Minnesota Statutes section
473.121; and
WHEREAS, the City of New Hope is a public body, corporate and politic, duly organized under
the laws of Minnesota and is authorized perform the administrative services contemplated by this
contract; and
WHEREAS, the City of New Hope performs certain Section 8 program administrative services
within the City of New Hope and other jurisdictions on behalf of the Council under a Section 8
program administrative services contract ("Contract No. C-94-56'').
NOW THEREFORE, in consideration of the mutual promises and covenants contained in this
contract, the City of New Hope and the Council agree as follows:
I. DEFINITIONS
1.01 Definition of Terms. For the purposes of this contract, the terms defined in this section
have the meanings given them in this section, except as otherwise provided or indicated by the
context.
(a)
"Metropolitan Council" or "Council" means the Metropolitan Council established by
Minnesota Statutes section 473.123. When expressly stated or otherwise indicated by the
context of this contract, the term "Council" means the Metropolitan Council acting through
its Housing and Redevelopment Authority unit ("Metro HRA").
(b) "Contractor" means the City of New Hope acting though its goveming body and its duly
authorized or designated employees, staff or agents.
Page 1 of 16 Pages
(c)
"Preservation assistance" means a special allocation of Section 8 assistance made
available by HUD to provide rental subsidy payments on behalf of eligible residents of
properties for which federally-insured mortgages are prepaid.
(d)
"Section 8 program" means an existing housing assistance payments program under
section 8 of the United States Housing Act of 1937, title 42, United States Code, section
1437f, as amended, including the HUD Housing Choice Voucher Program.
II. SERVICES AND PROGRAM RESPONSIBILITIES
2.01 Basic Administrative Services. The Council agrees to purchase and the Contractor agrees
to perform within the jurisdiction(s) identified in Exhibit A the following "basic" Section 8
program administrative services.
(a) Initial Lease-Up. The Contractor will perform the following lease-up activities:
(1) Assist Section 8 voucher holders locate suitable dwelling units eligible for use in the
Section 8 program.
(2) Obtain applicant and participant files and review the files for accuracy and
completeness after receipt of Request for Lease Approval forms.
(3) Inspect and, as necessary, reinspect rental units identified on Request for Lease
Approval forms.
(4) Complete rent reasonableness determinations and, when appropriate, help negotiate
contract rents consistent with rent reasonableness determinations.
(5) Complete computation worksheet to determine rent portions.
(6) Verify rental property ownership.
(7)
Complete and obtain necessary lease documents for each applicant or participant
family which shall include a lease, a required lease/tenancy addendum and any other
required lease related forms, a housing assistance payments ("HAP") contract and a
W-9 form, and review the documents for conformance with Section 8 program
requirements.
(8) Certify accuracy and completeness of all application and lease-up documents and
submit completed files to the Council for final review and payment processing.
(9) Perform other tasks and lease-up activities that may be reasonably needed to facilitate
timely lease-ups.
All initial lease-up activities shall be performed using forms and documents provided by the
Council, which may be amended or modified from time to time by the Council. Upon
completion of the initial lease-up activities, the Contractor will submit all original
Page 2 of 16 Pages
Co)
documents to the Council for file management and payment processing purposes. The
Contractor will maintain at its offices a duplicate set of program files and records.
Ongoing Program Administration. The Contractor will perform all Section 8
administrative services associated with: annual and interim recertifications; rent, unit,
income and lease changes; mutual terminations; evictions; and portability lxansfers. In
addition to performing the lease-up activities listed in paragraph 2.01(a), the Contractor will
perform the following ongoing program administration activities:
(1) Initiate contacts with participant families for annual recertification.
(2) Verify family composition, income, assets, medical expenses, child care expenses and
citizenship as appropriate and determine eligibility for ongoing program participation.
(3) Issue Section 8 vouchers and provide participants with program information.
(4) Complete portability process if needed.
(5) Complete rent reasonableness determinations based upon rent reasonableness
information and forms supplied by the Council.
(6) Initiate investigation of potential fraud or program violations and make
recommendations to Metro HRA for further action.
(7)
(8)
(9)
(10)
Promptly notify appropriate Metro HRA staff of any changes in participant status or
problems including, but not limited to, participant evictions, mutual lease
terminations, abandonment of dwelling units, lack of proper eligibility documentation,
changes in household composition and income, changes in property ownership,
noncompliance with HAP contract provisions and noncompliance with federal
housing quality standards ("HQS") requirements.
Maintain at its offices a duplicate set of Section 8 program files and records for each
Section 8 family while the family is provided services under this contract. Files and
records for each family will be retained by Metro HRA for three (3) years beyond the
date when services no longer are provided to that family. The Contractor will provide
prior written notice to the Council before the Contractor disposes of any duplicate
files and records of families no longer provided services under this contract and will
dispose of any duplicate files and records in accordance with the Minnesota
Government Data Practices Act.
Conduct affirmative marketing activities such as contacting and working with rental
property owners, community groups, and rental property management groups to
encourage participation in and understanding of the Section 8 program.
Perform other work tasks that reasonably may be required to facilitate effective
ongoing program administration.
Page 3 of 16 Pages
(c)
All ongoing program administrative services shall be performed using forms and documents
provided by the Council, which may be amended or modified from time to time by the
Council. Upon completion of the ongoing program administrative services, the Contractor
will submit all original documents to the Council for file .management and payment
processing purposes. The Contractor will maintain at its offices a duplicate set of program
files and records.
Inspection and Reinspection. The Contractor will inspect and reinspect dwelling units for
use in the Section 8 program. Inspections and of dwelling units shall include a thorough
and complete on-site inspection and certification of the dwelling unit sufficient to ensure
conformance with federal HQS as set forth in title 24, Code of Federal Regulations, section
982.401, as amended, or as required by locally established requirements which have been
approved by HUD. Such inspections and reinspections shall be made at the following
times: prior to initial lease by an applicant or participant family; at least annually thereafter;
at other times during the term of the lease as needed to determine if the unit meets HQS as
required by title 24, Code of Federal Regulations, section 982.405, as amended; and as
required by locally established requirements which have been approved by HUD. For the
purposes of dwelling unit inspections, "annual" inspection means an inspection that occurs
no later than twelve (12) months after the previous inspection. The HQS inspections shall
be performed in a timely manner and inspection forms shall be completed and submitted in
a timely manner so the interests of Section 8 families, rental property owners, and the
Council are not compromised. In addition to conducting initial, annual and other HQS
inspections, the Contractor will perform the .-following additional inspection and
reinspection activities:
(1)
Conduct damage inspections as required by the Council's policies and procedures.
The Contractor will conduct all damage inspections within twenty-four (24) hours
after a request, or as soon thereafter as is reasonably possible, so the interests of
Section 8 families, rental property owners, and the Council are not compromised.
Damage inspections shall be conducted only on rental units covered by a HAP
contract containing a damage claims provision.
(2) Conduct special inspections as requested by program participants or landlords, and as
requested or required by the Council.
(3) Complete assessment of rental unit and property conditions as required for rent
reasonableness determinations.
(4) Perform other work tasks that reasonably may be required to facilitate required
inspections and reinspections.
Reports of all inspections and reinspections shall be made by the Contractor on inspection
forms provided by the Council. The Contractor will fully and accurately complete all
inspection forms and will provide timely notification of inspection results to landlords and
program participants. The Contractor will promptly notify the Council of any required
subsidy payment abatements resulting from a landlord's or a family's failure to remedy
within specified timelines any "failed" items identified during inspections or reinspections.
Page 4 of 16 Pages
2.02 Enhanced Administrative Services. At the Contractor's option but subject to Council
approval, the Contractor may perform within the jurisdiction(s) identified in Exlfibit A the
"enhanced" Section 8 program administrative services described in paragraphs 2.02(a) or 2.02Co).
(a)
Additional Administrative Services. In addition to performing the "basic" Section 8
program administrative services described in paragraph 2.01, the Contractor may elect to
perform the following "enhanced" Section 8 program administrative services:
(1)
Verify income and other eligibility information for Section 8 applicants living within
the jurisdiction(s) identified in Exhibit A who have been selected by the Council fi-om
the Council's Section 8 waiting list for participation in the Section 8 program.
(2) Determine applicant eligibility for Section 8 program assistance.
(3)
Conduct Section 8 program briefing sessions for applicant families selected and
determined eligible for participation in the Council's Section 8 program, and issue
Section 8 vouchers to eligible families.
(4)
Receive paperwork for incoming Section 8 applicants and participants who have
exercised their portability option to move into a jurisdiction for which the Contractor
provides Section 8 administrative services under this contract. The Contractor will
review the paperwork for completeness and accuracy and conduct Section 8 program
briefing sessions for families exercising their.portability option. The Contractor also
will perform and complete all required activities described in paragraph 2.01.
(b)
Preservation Assistance Administration. If HUD makes Section 8 preservation assistance
available to persons residing in rental properties located in jurisdictions for which the
Contractor provides Section 8 administrative services under this contract, the Contractor
may provide preservation assistance services. These preservation assistance services shall
include~ but are not limited to, the following:
(1) Perform initial review of resident profile information to determine preliminary
resident eligibility for preservation assistance.
(2) Prepare and distribute initial information to project residents.
(3) Conduct resident meetings at which preservation assistance information is provided
and the process for receiving preservation assistance is explained.
(4) Schedule and conduct additional group and individual resident meetings as needed.
(5) Determine resident eligibility for Section 8 preservation assistance by verifying
household income, assets and eligible expenses.
(6) Schedule and conduct client briefings and issue Section 8 vouchers to eligible families.
Page 5 of 16 Pages
(7) Complete lease-up procedures and conduct unit insPections for residents who lease
rental units using preservation assistance within the Contractor's area of service.
(c)
Eligibility to Perform Enhanced Services. The Contractor may perform the "enhanced"
Section 8 program administrative services described in paragraphs 2.02(a) or 2.02(b) by
providing the Council with written notice informing the Council about the Contractor's
intention to provide "enhanced" administrative services. Following receipt of the written
notice, the Council will determine the Contractor's capacity to perform the requested
"enhanced" administrative services and will determine with the Contractor a date upon
which the Contractor will begin providing "enhanced" Section 8 program administrative
services. The Council will provide written notice authorizing the Contractor to undertake
and perform the "enhanced" Section 8 administrative services described in paragraphs
2.02(a) and 2.02(b).
All "enhanced" administrative services shall be performed using forms and documents provided
by the Council, which may be amended or modified from time to time by the Council. Upon
completion of "enhanced" administrative services, the Contractor will submit all original
documents to the Council for file management and payment processing purposes. The
Contractor will maintain at its offices a duplicate set of program files and records.
2.03 Program Requirements and Training. The Contractor agrees to comply with the
following administrative and training requirements during the performance of this contract.
(a) Personnel. The Contractor will designate to the Council the person or persons who will
conduct or perform the Contractor activities described in this contract.
(b)
Training. The Contractor will develop and maintain a thorough understanding of the
Section 8 program regulations and the requirements and procedures set forth in manuals and
other materials provided by the Council. The Contractor agrees to send a representative to
all required Section 8 program training sessions and staff meetings conducted by the
Council. The Council will notify the Contractor of a required training session or required
meeting at least ten (10) business days prior to the training session or meeting.
(c)
Resources and Staffing. The Contractor shall provide adequate staff time and office or
program space to perform the Section 8 program administrative services contemplated by
this contract and shall make staff and office or program space available to Section 8
applicants and participants during scheduled business hours approved by Metro HRA staff.
Staff and office or program space provided by the Contractor shall comply with all
applicable state and federal accessibility standards and requirements. The Contractor shall
provide adequate signs and other directional materials to inform applicants and prospective
applicants about the place and manner of making application. The Contractor shall keep
available for distribution adequate brochures and other information or materials as may be
prepared by the Council and shall supplement the brochures with local informational
materials as appropriate or needed. The manner of furnishing these services shall be agreed
upon by the Contractor and the Council. The Contractor and the Council shall from time to
time confer about the details of the furnishing of these services. The Contractor agrees to
Page 6 of 16 Pages
comply with reasonable demands made by the Council concerning these program
requirements.
2.04 Notice of Actions and Claims. The Contractor will immediately notify Metro HRA staff by
telephone about any summons or other legal or judicial notices, including conciliation court
summons or notices, involving claims or disputes related to the administration of the Council's
Section 8 program within the jurisdiction(s) identified in Exhibit A. The Contractor will confirm
its telephone notification by written notice within three (3) business days after the telephone
notification. The Contractor also will notify the Council about and refer to Metro HRA staff within
one (1) business day any contacts related to the administration of this contract or the Section 8
families served by the Contractor under this contract that are received from legal aid
representatives, legislators or legislative staff, and television, radio or newspaper media staff.
2.05 Council Program Obligations. Unless otherwise performed by the Contractor under
paragraphs 2.01 or 2.02, the Contractor and the Council understand and agree the Contractor shall
not be required to perform the following Section 8 program services and activities which are the
primary responsibility of the Council.
(a)
Areawide Marketing. The Council will coordinate all areawide affirmative marketing
activities, such as preparing brochures and advertising, and contacting and working with
area community groups, rental property owners and rental property management groups.
(b) Waiting List Administration. The Council will develop and maintain a Section 8 applicant
waiting list and will select applicants for participation in the Section 8 program.
(c)
Records and Overall Program Management. The Council will: create, update and maintain
computer records of all active and nonactive Section 8 applicants and participants; collect
all areawide data and prepare all housing assistance program reports for HUD; provide
overall financial program management, including budgeting, requisitions and monitoring;
provide-necessary equal employment opportunity and affirmative action documents as
required by the Consolidated ACC between the Council and HUD.
(d)
HAP Contract Payments. The Council will execute housing assistance payments contracts
with rental property owners and will authorize and make housing assistance payments to
owners, both at month-end and on a weekly basis.
(e)
Informal Hearings. The Council will conduct informal hearings to review denial, reduction
or termination of Section 8 program assistance. The Council also will conduct informal
hearings to review and determine rental property owner and Section 8 participant claim
matters. The Council will keep the Contractor apprised of the status and results of all
informal heatings.
(f)
Program Training. The Council will provide necessary program training for Contractor
staff including, but not limited to, HQS inspection training. The Council will perform HQS
inspection monitoring activities.
Page 7 of 16 Pages
(g) Program Materials. The Council will prepare and Provide administrative policies,
operating brochures, forms, manuals and other Section 8 program materials.
(h)
Application and Lease-up Processes. The Council will coordinate initial application
processes and will serve as the clearinghouse for and maintain logs of all incoming and
outgoing portability lease-ups.
2.06 Area of Operation. The Council is authorized by Minnesota Statutes section 473.195 to
plan and administer a Section 8 program within the seven-county metropolitan area, including the
jurisdiction(s) identified in Exhibit A of this contract. The Section 8 program administrative
services contemplated by this contract shall be provided by the Contractor for Section 8 program
applicants and participants residing in or moving into the jurisdiction(s) identified in Exhibit A.
III. COMPENSATION AND FEE REIMBURSEMENT
3.01 Maximum Payment and Fees. The Council agrees to pay the Contractor on a monthly
basis the reimbursable costs incurred by the Contractor in furnishing the Section 8 administrative
services specified in this contract which are reimbursable to the Council by HUD.
(a)
Ongoing Administrative Fee. The Council will pay to the Contractor an ongoing
administrative fee on a per-unit-per-month basis. The per-unit-per-month fiat fee
reimbursement amount will be adjusted (increased or decreased) whenever the Section 8
program administrative fees received by the Council from HUD change. Effective upon
written notice fi.om the Council, the per-unit-per-month fiat fee reimbursement amount will
be adjusted (increased or decreased) whenever and by the same factor as the Council's
ongoing administrative fee is adjusted (increased or decreased) by HUD. The ongoing
administrative fee payable to the Contractor shall be fifty percent (50%) of the per-unit-per-
month administrative fee received by the Council fi.om HUD. For the purposes of this
paragraph, the "per-unit-per-month administrative fee received by the Council from HUD"
means the administrative fee received by the Council fi.om HUD for the units in the
Council's Section 8 programs in excess of the first 600 units (example: the "Column B"
administrative fee depicted in the matrix at page 12,713 of the March 12, 1999 Federal
Register). Notwithstanding any other provision of this contract, the Contractor and the
Council agree that this administrative fee amount is payable for Section 8 administrative
services performed by the Contractor on and after June 1, 1999. The Council will make a
one-time lump-sum payment to the Contractor to effectuate the retroactive application of
this provision. The lump sum payment will represent the difference between: the payments
already made to the Contractor for services rendered under the terms of the previous
contract fi.om June 1, 1999 to the date upon which this contract is executed; and the per-
unit-per-month fiat fee reimbursement amount stated in this paragraph 3.01(a). Payments
will be based on records described in paragraph 3.02(b). Ongoing administrative fees are'
subject to portability adjustments under paragraph 3.01(d).
Enhanced Services Administrative Fees. If the Contractor provides the additional
"enhanced" administrative services described in paragraph 2.02(a), the Council will pay the
Contractor a one-time preliminary fee of fifty dollars ($50.00) per selected applicant family
and fifty dollars ($50.00) per newly ported-in family to offset administrative expenses
Page 8 of 16 Pages
incurred by the Contractor in performing the "enhanced" services described in paragraph
2.02(a). This one-time preliminary fee for enhanced administrative services is in addition to
any ongoing administrative fees payable under paragraphs 3.01(a) and 3.01(d), any
payments or fees for the performance of preservation assistance administration described in
paragraph 2.02Co), and any hard-to-house fees under paragraph 3.01(c). If the Contractor
provides preservation assistance services described in paragraph 2.02(b), the Council will
pay the Contractor a one-time preliminary fee of $100 for each family determined eligible
for preservation assistance by HUD. The $100 one-time preliminary fee is intended to
offset administrative expenses incurred by the Contractor in providing preservation
assistance services to eligible families of eligible projects within the Contractor's area of
jurisdiction, regardless of the number of families ultimately determined eligible for such
Section 8 preservation assistance. This one-time preliminary fee for preservation assistance
services is in addition to any ongoing administrative fees payable under paragraphs 3.01(a)
and 3.01(d), any payments or fees for the performance of additional "enhanced"
administrative services described in paragraph 2.02(a), and any hard-to-house fees under
paragraph 3.01 (c).
(c)
Hard-to-House Fee. Provided hard-to-house fees are reimbursed to the Council by HUD,
the Council shall pay to the Contractor on a monthly basis forty-five dollars ($45.00), or
such other increased or decreased fee amount established by law or by HUD, for each hard-
to-house family actually housed in a different unit than the family's pre-program dwelling
unit, as well as each time a hard-to-house assisted family moves to another dwelling unit
with continued Section 8 assistance. A hard-to-house family is a family with three or more
minors. A hard-to-house family is actually housed if both a lease and a housing assistance
payments contract are executed. The hard-to-house fee is not payable to the Contractor if a
hard-to-house family does not move, or if the hard-to-house family does move but moves
without continued Section 8 assistance. This hard-to-house fee is in addition to any
ongoing administrative fees payable under paragraphs 3.01(a) and 3.01(d), any payments or
fees for the performance of additional "enhanced" administrative services described in
paragraph 2.02(a), and any payments or fees for the performance of preservation assistance
administration described in paragraph 2.02(b).
(d)
Portability Adjustment. In accordance with the portability provisions of the federal laws
governing the Section 8 program, the Council receives from each "Initial PHA" eighty (80)
percent of the Initial PHA's ongoing administrative fee for each unit month a participant
family resides in the Council's Section 8 operating jurisdiction under the federal portability
provisions. Accordingly, the Contractor and the Council agree that, for each unit month a
Section 8 family receiving Section 8 assistance under the federal portability provisions
resides in the jurisdiction(s) identified in Exhibit A, the Contractor will receive from the
Council fifty percent (50%) of the ongoing administrative fee the Council receives from the
Initial PHA.
3.02 Method of Payment. Payments to the Contractor by the Council shall be made according to
the following provisions:
(a) Quarterly Invoices and Reports. The Contractor shall prepare and submit quarterly
invoice/reports on forms or in a format approved by Metro HRA staff. The invoice/reports
Page 9 of 16 Pages
shall describe actual administrative services performed during the quarter and itemize the
Contractor's reimbursable costs of performing those services during the quarter.
(b)
Monthly Payments. Notwithstanding the quarterly invoices and reports, the Council will
pay the Contractor the applicable fees under paragraph 3.01 on a monthly basis. Ongoing
administrative fee and hard-to-house fee reimbursement payments to the Contractor will be
based on the number of units, as indicated in Metro HRA's monthly utilization and hard-to-
house reports, which are administered by the Contractor within the jurisdiction(s) identified
in Exhibit A. One-time preliminary fees described in paragraph 3.01Co) will be paid to the
Contractor based on records kept by the Council. The Contractor will notify the Council of
any fee payment or utilization issues. The Council will provide the Contractor a written
response to fee payment issues raised by the Contractor.
3.03 Administrative Fee Reserve (formerly Operating Reserve). During the term of this
contract, all funds received by the Contractor from the Council pursuant to this contract must be
expended for Section 8 program administrative costs or held for future affordable housing related
activities. The Contractor must maintain an administrative fee reserve account that must be
credited with the amount by which the total of administrative fees eamed and interest earned on the
administrative fee reserve account exceeds the Contractor's actual administrative expenses during
the calendar year. The Contractor may accUmulate in its local administrative fee reserve account up
to $10,000.00 per year for future Section 8 administrative expenses or for other affordable housing
related activities.
IV. RECORDS, FILES, AND AUDITS
4.01 Records. The Contractor agrees to maintain accurate, complete and separate accounts and
records of all expenditures of funds for which reimbursement is claimed under this contract and of
all moneys received pursuant to this contract. Such accounts and records shall be kept and
maintained during the term of this contract and for a period of three (3) years following the
termination of this contract.
4.02 Audit and Inspection. The accounts and records maintained pursuant to this contract shall
be audited in the same manner as the other accounts and records of the Contractor and may be
audited or inspected on the Contractor's premises or otherwise by individuals or organizations
designated and authorized by the Council at any time following reasonable notification during the
term of this contract and for a period of three (3) years following the termination of this contract.
The Contractor further agrees that HUD and the Comptroller General of the United States, or their
duly authorized representatives, shall have full and free access to all Contractor offices and
facilities, and to all the books, documents, papers and records of the Contractor that are pertinent to
the performance of this contract or pertinent to the operation and management of the Section 8
program, including the right to audit, and to make excerpts and transcripts from the books and
records.
4.03 Data Privacy. The Contractor agrees to abide by the Minnesota Government Data Practices
Act and other applicable state and federal law governing private or confidential data on individuals.
The use or disclosure of information concerning a Section 8 program applicant or participant in
violation of the Minnesota Government Data Practices Act or any other applicable state or federal
Page 10 of 16 Pages
law or rule of confidentiality is prohibited, except on the written informed consent of the applicant
or participant, or as otherwise allowed or provided by state or federal law. Data on a family that are
collected or created because of the family's status as a Section 8 applicant or participant is
classified as private "benefit" data under Minnesota Statutes section 13.31.
V. CONTRACT TERM
5.01 Period of Performance. This contract is effective on the date this contract is finally
executed by the Council and shall continue until the earlier of the following: termination of Section
8 program funding by HUD; termination of this contract by either party pursuant to paragraph 5.02
of this contract; or June 1, 2004. As provided in paragraph 3.01, the ongoing administrative fee
described in paragraph 3.01(a) shall be payable retroactive to June 1, 1999.
5.02 Termination of Contract. The Council and the Contractor both shall have the right to
terminate this contract at any time and for any reason by submitting written notice of termination to
the other party at least ninety (90) days prior to the specified effective date of the termination. In
addition, the Council shall have the right to terminate this contract on fourteen (14) calendar days'
written notice if the Contractor's performance is not timely or is substantially unsatisfactory, or if
the Contractor has violated any of the material terms, conditions or agreements contained in this
contract. In either event, on the termination of this contract all finished and unfinished documents,
work papers, products and records prepared by the Contractor under this contract shall become the
property of the Council. On the termination of this contract, the Contractor will be paid for
administrative services satisfactorily performed up to the date of the contract termination according
to the terms stated in article III of this contract.
VI. CONTRACT PERFORMANCE AND MODIFICATION
6.01 Assignment. The Contractor shall perform with its own organization the total work
provided for under this contract and shall not assign, subcontract or transfer any of the contract
work without the prior written consent of Metro HRA staff.
6.02 Prompt Payment of Subcontractors. If the Contractor receives prior written consent from
the Council pursuant to paragraph 6.01 of this contract and assigns, subcontracts or transfers any of
the work provided for under this contract, the Contractor agrees to pay any subcontractor within ten
(10) days of the Contractor's receipt of payment from the Council for undisputed services provided
by the subcontractor(s). The Contractor further agrees to pay interest of one and one-half (1 ½)
percent per month or any part of a month to the subcontractor(s) on any undisputed amount not paid
on time to the subcontractor(s). The Contractor agrees the minimum monthly interest penalty
payment for an unpaid balance of one hundred dollars ($100.00) or more is ten dollars ($10.00).
For an unpaid balance of less than one hundred dollars ($100.00), the Contractor agrees to pay the
actual penalty due to the subcontractor(s).
6.03 Amendments. The terms of this contract may be changed or modified by mutual agreement
of the parties. Such amendments, changes, or modifications shall be effective only on the execution
of written amendment(s) signed by the Council and the Contractor.
Page 11 of 16 Pages
VII. LIABILITY
7.01 Indemnification. To the extent permitted by law, the Contractor agrees to indemnify, defend
and save and hold the Council, its agents and employees harmless fi:om any and all claims or causes
of action arising fi:om the performance of this contract by the Contractor or the Contractor's
employees and agents. This clause shall not be construed to bar any legal remedies the Contractor
may have for the Council's failure to perform its obligations under this contract. Nothing in this
clause shall be construed as a waiver on the part of either the Contractor or the Council of any
immunities or limits on liability provided by Minnesota Statutes chapter 466, or other
applicable state or federal law.
7.02 Insurance. The Council assumes no liability with respect to bodily injury, illness, accident,
theft or any other damages or losses concerning persons or property arising out of the use or
maintenance of Contractor's premises, equipment or vehicles. The Contractor is responsible for
providing adequate insurance coverage to protect against legal liability arising out of the
Contractor's activities under this contract. Upon request fi:om Metro HRA staff, the Contractor
shall provide copies of insurance instruments or certifications from the insurance issuing agency
which show the insurance coverage, the designated beneficiary, the parties covered and the
coverage amounts.
7.03 Independent Contractor Status. The Contractor acknowledges that the Contractor and the
Contractor's agents and employees are independent contractors under the terms and conditions of
this contract. The Contractor is responsible for the employment, discharge, compensation, benefit
coverage and supervision of all Contractor personnel, employees and agents. The Contractor
expressly acknowledges that the Contractor and the Contractor's personnel, employees and agents
shall not assert any claims against the Council for reemployment, workers' compensation or other
employee benefits of any type related to the performance oft his contract.
VIII. EQUAL EMPLOYMENT; NONDISCRIMINATION
8.01 Equal Employment Opportunity. The Contractor agrees to provide equal employment
opportunities.
(a)
Nondiscrimination and Affirmative Action. The Contractor shall not discriminate against
any employee or applicant for employment because of race, color, creed, religion, national
origin, sex, marital status, status with regard to public assistance, disability, sexual
orientation or age. The Contractor shall take affirmative action to ensure that applicants are
employed, and that employees are treated during employment, without regard to race, color,
creed, religion, national origin, sex, marital status, status with regard to public assistance,
disability, sexual orientation and age. Such action includes, but is not limited to, the
following: employment, upgrading, demotion, or transfer; recruitment or recruitment
advertising; layoff or termination; rates of pay or other forms of compensation; and
selection for training, including apprenticeship.
(b)
Notice Posting. The Contractor agrees to post in conspicuous places, available to
employees and applicants for employment, notices setting forth the nondiscrimination
provisions of paragraph 8.01(a) of this contract. The Contractor will in all solicitations or
Page 12 of 16 Pages
advertisements for employees placed by or on behalf of the Contractor state that all
qualified applicants will receive consideration for employment without regard to race, color,
creed, religion, national origin, sex, marital status, status with regard to public assistance,
disability, sexual orientation and age.
(c) Subcontracts. The Contractor agrees to incorporate the provisions of paragraph 8.01 in any
subcontracts for project work.
8.02 Equal Opportunity Compliance Reviews. The Contractor shall cooperate with the
Council and HUD in conducting compliance reviews and complaint investigations pursuant to
applicable federal and state civil rights statutes, executive orders, and related roles and regulations.
8.03 Nondiscrimination in Housing. The Contractor agrees to comply with federal and state
laws prohibiting discrimination in housing.
(a)
Federal Laws. The Contractor shall comply with the nondiscrimination requirements of
Title VI of the Civil Rights Act of 1964 prohibiting discrimination based on race, color, or
national origin and Executive Order 11063 with respect to those provisions prohibiting
discrimination based on religion or sex, and with implementing HUD regulations. The
Contractor shall comply with Title VIII of the Civil Rights Act of 1968 which prohibits
discrimination in the sale, rental or financing of housing on the basis of race, color, religion,
sex, handicap, familial status, or national origin and with any implementing regulations.
The Contractor shall comply with Section 504 of the Rehabilitation Act of i973, as
amended, which prohibits discrimination against handicapped persons who would
otherwise qualify to participate in Section 8 programs and, where applicable, the Age
Discrimination Act of 1975, as amended, which prohibits discrimination on the basis of age.
Unwed parents, families with children bom out of wedlock, and recipients of public
assistance shall not be excluded from participation in or be denied the benefit of the Section
8 programs because of such status.
(b) State Laws. The Contractor shall comply with all applicable provisions of the Minnesota
Human Rights Act.
IX. GENERAL PROVISIONS
9.01 Conflict of Interest. The Contractor agrees to abide by federal and state conflict of interest
laws pertaining to the performance of this contract.
(a)
Federal Conflict Provisions. (1) In accordance with title 24, Code of Federal Regulations,
section 982.161(a), neither the Council nor any of its contractors or subcontractors may
enter into any contract, subcontract or arrangement in connection with the Section 8 tenant-
based programs in which any of the following classes of persons has any interest, direct or
indirect, during tenure or for one year thereafter:
(i)
Any present or former member or officer of the Council, except a "participant
commissioner";
Page 13 of 16 Pages
(ii)
Any employee of the Council, or any contractor, subcontractor or agent of the
Council, who formulates policy or who influences decisions with respect to the
Section 8 programs;
(iii) Any public official, member of a goveming body, or state or local legislator,
who exercises functions or responsibilities with respect to the Section 8
programs; or
(iv) Any member of the Congress of the United States.
(2) Any member of the classes described in paragraph 9.01(a)(1) must disclose their
interest or prospective interest to the Council and HUD.
(3) The conflict of interest prohibitions under paragraph 9.01(a)(1) may be waived by the
HUD field office for good cause.
(b)
State Conflict Provisions. The members, officers and employees of the Contractor will
comply with all applicable state statutory and regulatory conflict of interest laws, including
Minnesota Statutes sections 10A.07 and 469.009, as amended.
9.02 Federal Certification Regarding Lobbying. Pursuant to title 24, Code of Federal
Regulations, part 87, the Contractor certifies, to the best of its knowledge and belief, that:
(a)
Use of Federal Funds. No federal appropriated funds have been paid or will be paid, by or
on behalf of the Contractor, to any person for influencing or attempting to influence an
officer or employee of an agency, a member of Congress, an officer or employee of
Congress, or an employee of a member of Congress in connection with the awarding of any
federal contract, the making of any federal grant, the making of any federal loan, the
entering into of any cooperative agreement, and the extension, continuation, renewal,
amendment, or modification of any federal contract, grant, loan, or cooperative agreement.
(b)
Disclosure. If any funds other than federal appropriated funds have been paid or will be
paid to any person for influencing or attempting to influence an officer or employee of any
agency, a member of Congress, an officer or employee of Congress, or an employee of a
member of Congress in connection with this contract or its funding, the Contractor shall
complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying," in
accordance with its instructions.
(c)
Certification. This certification is a material representation of fact upon which reliance was
placed when this transaction was made or entered into. This certification is a prerequisite
for making or entering into this transaction imposed by title 31, United States Code, section
1352. Any person who fails to file the required certification shall be subject to a civil
penalty of not less than $10,000 and not more than $100,000 for each such failure.
9.03 Federal Regulations; HUD and Metro HRA Policies. The Contractor agrees to perform
the Section 8 program administrative services contemplated under this contract in compliance with:
parts 887 and 982 and other applicable provisions of title 24, Code of Federal Regulations, and
Page 14 of 16 Pages
other applicable provisions of the federal regulations governing the Section 8 program; applicable
provisions of the HUD Handbook; the Administrative Plan for the Metropolitan Council Housing
and Redevelopment Authority, as amended or revised; current procedures, letters and forms
provided by the Council in policy/procedural memoranda; HUD's Housing Inspection Manual for
the Section 8 Existing Housing Program; and all other applicable procedures and policies as may be
provided to the Contractor.
9.04 Prohibition of Service Charges. The Contractor shall not charge any fee to any Section 8
program applicant or participant or charge any fee to any rental property owner for any Section 8
program administrative services provided under this contract.
9.05 Prior Contracts. The Contractor and the Council agree this contract supersedes and
replaces Contract No. C-94-56, and any amendments to Contract No. C-94-56, and any other prior
Section 8 program administrative services contracts entered into between the Council and the
Contractor. Contract No. C-94-56 is terminated upon final execution of this contract.
9.06 Warranty of Legal Capacity. The individual signing this contract on behalf of the
Contractor represents and warrants on the Contractor's behalf that the individual is duly authorized
to execute this contract on the Contractor's behalf, and that this contract constitutes the Contractor's
valid, binding, and enforceable agreements.
IN WITNESS WHEREOF, the Contractor and the Council have caused this contract to be
executed by their duly authorized representatives.
Approved as to form: METROPOLITAN COUNCIL
Associate General Counsel
By:
James J. Solem, Regional Administrator
Date:
CITY OF NEW HOPE
By:
Its:
Date:
By:
Its:
Date:
C99~8
Page 15 of 16 Pages
METRO HRA (12/99)
EXHIBIT A
CITY OF NEW HOPE
The Contractor shall perform the Section 8 program contract services within the City of New Hope,
Minnesota and within the following jurisdictions located in Hennepin County, Minnesota:
Edina
Golden Valley
Maple Grove
Osseo
The Council will perform Section 8 inspection and reinspection services for dwelling units located
within the cities of Edina, Golden Valley, Maple Grove and Osseo.
Page 16ofl6Pages
BUDGET FORM II
DEPARTMENT: HRA Administration
92
ESTIMATE OF EXPECTED REVENUES AND SOURCE 2000
DESCRIPTION ', AMOUNT
221 New Hope Vouchers/Certificates x $20.74 $ 55,002
Reimbursement per unit for 12 months
12 New Hope Portability Vouchers/Certificates at $16.59 2,389
Reimbursement per unit for 12 months
*90 Outside Vouchers/Certificates x $20.74 20,533
Reimbursement (admin. only) per unit for 11 months
* 2 Outside Portability Vouchers/Certificates x $16.59 365
Reimbursement (admin. only) per unit for 11 months
Hard-to-House Reimbursement Averages 540
x 5x12months
Anticipated increase in percent reimbursement from Met Council 12,434
*Outside clients are from the following cities:
Golden Valley 12
Edina 26
Maple Grove 35
Osseo 19
TOTAL $ 91,263
2-25