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021400 EDAOfficial File Copy CITY OF NEW HOPE EDA MEETING City Hall, 4401 Xylon Avenue North February 14, 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 January 10, 2000 Motion Approving Proposal in the Amount of $12,300 with Northern Environmental to Prepare Revised Response Action Plan and DTED Contamination Cleanup Grant for 7500-7528 42"d Avenue North (Improvement Project No. 665) Motion Authorizing Staff to Prepare Purchase Agreement for Acquisition of commercial Property at 5550 Winnetka Avenue North in the Amount of $308,000 (Improvement Project No. 669) Motion Authorizing Staff to Obtain Appraisal of 8113 Bass Lake Road (Improvement Project No. 677) 7. Adjournment CITY OF NEW HOPE 4401 XYLON AVENUE NORTH NEW HOPE, MINNESOTA $5428 Approved EDA Minutes Regular Meeting January 10, 2000 City Hall CALL TO ORDER ROLLCALL APPROVE MINUTES IMP. PROJECT 665 Item 4 New Hope EDA Page I President Enck called the meeting of the Economic Development Authority to order at 8:48 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 Norby, seconded by Commissioner Thompson, to approve the Regular Meeting Minutes of December 13, 1999. All present voted in favor. Motion carried. President Enck introduced for discussion Item 4, 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). Mr. Phil Kern, Administrative Assistant, stated this item concerns development proposals for 42"a and Quebec Avenues. He stated the building demolition at 7500 42"a Avenue was completed in December. The City has been working with the MPCA and Electronic Industries, former tenant of 7516 42"d, to expedite the groundwater contamination clean up on the three properties. Staff is preparing a Brownfield grant application to submit to the Department of Trade and Economic Development. The grant could cover a significant portion of the excavation and remediation costs if that is how the City and MPCA decide to address the soil and ground water problems. The grant application process, however, places a heavy emphasis on projects that include a development proposal. Therefore, staff is requesting approval to seek proposals for development of this site to increase the likelihood of receiving grant funds. Mr. Kern stated the RFP identifies the City's desire for a maximum use of the property, with a high market value, pedestrian-friendly development. The RFP sets a bid deadline of FebruaD' 25. President Enck pointed out that the RFP process has been planned for the future, but the timeline is now being advanced in order to apply for the grant. Councilmember Cassen questioned how the City could receive grant funds when Electronic Industries has responsibility for the contamination clean up. Mr. Kern explained that Electronic Industries has obligations for the groundwater clean up and has a response action plan filed with the MPCA which involves a long- term remediation process lasting 20-30 years. The City is trying to secure the grant to accelerate the cleanup process so the site can be developed. The grant would January 10, 2000 MOTION Item 4 IMP. PROJECT 669 Item 5 MOTION Item 5 SECTION 8 CONTRACT Item 6 EDA RESOLUTION 00-01 item 6 ADJOURNMENT cover a maximum of 75% of the cleanup costs. He noted although Electronic Industries has not committed to funding the remaining 25%, they may find the short-term (6-9 months) clean-up method to be less costly than the present long- term commitment for the contamination clean-up. Motion was made by Commissioner Norby, seconded by Commissioner Cassen, authorizing staff to proceed with solicitation of proposals for development at 7500-7528 42~d Avenue North (Improvement Project No. 665). All present voted in favor. Motion carried. President Enck introduced for discussion Item 5, Motion Authorizing Staff to Negotiate the Purchase of 5550 Winnetka Avenue North (Improvement Project No. 669). Ms. Sue Henry, Community Development specialist, stated the property was appraised by BCL Appraisals, Inc. at $285,600. She stated the asking price is $450,000 based on a recent lease agreement; however, the appraiser cOuld not validate the price. Ms. Henry stated the tax value is $160,000. Motion was made by Commissioner Collier, seconded by Commissioner Norby, authorizing staff to negotiate the purchase of 5550 Winnetka Avenue North for a price not to exceed $285,600. All present voted in favor. Motion carried. President Enck introduced for discussion Item 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. President Enck noted the contract involves an increase to the City for administering the Section 8 Housing Assistance Program. Commissioner Collier introduced the following resolution and moved its adoption: "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". The motion for the adoption of the foregoing resolution was seconded by Commissioner Cassen, and upon vote being taken thereon, the following voted in favor thereof: Enck, Cassen, Collier, Norby, Thompson; and the following voted against '~; same: None; Abstained: None; Absent: None; whereupon the resolutim~ ..,as declared duly passed and adopted, signed by the president which was anestea to by the executive director. Motion was made by Commissioner Collier, seconded by Commissioner Thompson, to adjourn the meeting. All present voted in favor. Motion carried. The New Hope EDA adjourned at 9:00 p.m. Respectfully submitted, Valerie Leone City Clerk New Hope EDA Page 2 January l0,2000 EDA ~ RF UF. T FOR ACTION Originating Depa~t~ent Approved for Agenda Agenda Section Community Development~ EDA // / 2-14-00 Item No. Kirk McDonald By~ Phil Kern ~// 4 MOTION APPROVING PROPOSAL IN/ THE AMOUNT OF $12,300 WITH NORTHERN ENVIRONMENTAL TO PREPARE REVISED RESPONSE ACTION PLAN AND DTED CONTAMINATION CLEANUP GRANT FOR 7500-7528 42ND AVENUE NORTH (IMPROVEMENT PROJECT NO. 665) ACTION REQUESTED Staff is requesting that the EDA approve a motion authorizing Northern Environmental to prepare a revised Remedial Action Plan (RAP) and assist with the preparation of a DTED Contamination Cleanup Grant for the City-owned properties at 7500-7528 42nd Avenue. POLICY/PAST PRACTICE In the past, the Council has authorized staff to work with Northern Environmental as the environmental consultant with the contaminated properties at 7500-7528 Quebec Avenue. Northern Environmental has provided consulting assistance with the demolition of all three buildings at this site and completed soil testing for the City and Electronic Industries. BACKGROUND The City has acquired three properties at 7500, 7516, and 7528 42nd Avenue for commercial redevelopment 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. It is staff's recommendation that clean up on the site be expedited to facilitate redevelopment. Staff is working to prepare an application for the DTED Contamination Cleanup Program to cover the costs associated with site cleanup. This motion will allow staff to use the consulting services of Northern Environmental to complete a revised Remedial Action Plan with the MPCA for the site cleanup in order to submit the grant application. When the contamination on site was discovered in 1983, the MPCA entered into discussions with Electronic Industries, the property owner responsible for contamination, on a method of cleanup. (cont'd.) Request for Action Page 2 2-14-00 The process to remove contaminants from polluted sites involves a RAP to be agreed upon between the MPCA and the party responsible for the pollution. In 1984, the MPOA and Electronic Industries agreed to a RAP for remediation of the site contaminants. This plan involved removal of the soil and groundwater pollution by a soil vapor extraction (SVE) remediation system. This system extracts the pollutants from the soil and groundwater by exposing them to air, then filtering the pollutants at groundlevel. It is a long-term solution that requires the above-ground site equipment to be in place on the site for approximately 20-30 years. Doug Bergstrom from Northern Environmental described this process as "removing the water from a swimming pool with an eye dropper." In order to expedite the soil and groundwater cleanup process, staff is recommending that the City work with the MPCA and Electronic Industries to develop a new RAP. Staff recommends that the site be excavated to remove the contaminants and polluted soils and filled to allow redevelopment. Since the MPCA and Electronic Industries already have an approved plan in place, the City will need to show both parties that it is beneficial to develop a new plan for removing the site contaminants. In staff meetings, the MPCA has indicated that it would recommend a new plan and Electronic Industries also was interested in eliminating its obligation to the site by revising the RAP. Electronic Industries is currently paying the operating costs for the SVE system, which will be operating for at least another 20 years. It is expected that Electronic Industries will contribute to the costs of site cleanup not covered by grant proceeds if received. DTED funding is available for projects of this nature and the City has completed the necessary steps to date to request funding. In July 1999, the Council authorized staff to proceed with Phase I and II environmental assessments of the contamination, which were completed by Northem Environmental in September. In January 2000, the EDA authorized staff to solicit development proposals for the site. Proposals are due by February 25, and staff will present the proposals to the EDA in March. DTED has advised that all proposals with developments ready to proceed will receive first priority in the funding cycle. The last major portion of the DTED grant requirements is the development of a RAP and approval from the MPCA. Staff is recommending that the City contract with Northern Environmental for the development of the RAP and preparation of necessary materials for the grant application. FUNDING The proposal of $12,300 from Northern Environmental would be paid with 42°d Avenue TIF funds, to be reimbursed at a later date from the proceeds of the land sale and/or with grant funds. ATTACHMENTS · Northern Environmental proposal · Site maps of 7500-7528 42'~d Avenue January 28, 2000 (P2906) Mr. Kirk McDonald City of New Hope 4401 Xyion Avenue North New Hope, Minnesota 55427 RE: Proposal to Prepare DEED Brm~field Work Plan Industries Property, New Hope, Minnesota 55427 Dear Mr. McDonald: and Grant Application, Electronic ! ;. Northem Environmental Technologies, Incorporated (Northern Environmental), is pleased to submit this proposal to assist the City of New I-~ope in expediting the cleanup of lbe Electronic Industries property to allow commercial redevelopment. .; BACKGROUND INFORMATION In 1983, it was discovered that an underground wastewater settling tank at Eleclmnic Industries had leaked and released a considerable volume of trichloroethylene ('i'CE) and other contaminants to the surrounding soil and groundwater. Subsequent invesligation and monitoring revealed up to 29% TCE in select groundwater samples. In 1984. Electn3nic'lndustries s'~jned a Stipulation Agreement with the Minnesota Pollution Control Agency to provide site investigation and mmediation. In 1986, a ground water pump and treat system/air stripper system was installed. Since that time, over 5 million gallons of groundwater have been pumped and treated from the frS. In 1992, a soil vapor extraction (SVE) re~ediation system was installed and began operation, and air sparging remediation equipment was~ added in approximately 1993. TCE contaminant levels have dropped to under 50 parts per million through 1997 (the last year for which we have data). Other contaminants levels are less significant than TCE levels. PROJECT OBJECTIVE The scope of work described below is proposed to achieve expedited remediation and site closure by the Minnesota Pollution Control Agency, so that the City of New Hope may proceed with site redevelopment in a timely manner. The method of expedited rernediation will be the preparation of a grant request to the Minnesota Department of Trade and Economic Development (DTED) from their Brownfield Grant program. Receipt of award of a DTED cleanup grant is the most viable option for expedited cleanup of the site. SCOPE OF WORK The scope of work involves the followin~ tasks: .Task 1. Information Colleclion: Collec-fion of updated technical information from MPCA project files and Electronic Industries; Task 2. Data Analysis; Analysis of the technical information to develop a solid understanding of current site conditions; .T.a_sk 3. Develop Revised. RAP: Development of a modified remedial action plan (RAP) that meets the City's objectives wtu'le also meeting MPCA closure requirements; ,Task 4. Nef~ofiate with MPCA: N?gotiatJng RAP approval/closure requirements with MPCA; and Task 5. Prepp. re Portions of DTE. D Grant Applicatio..n..: Preparing technical porlJons of D'I'ED grant application. These tasks are described in more d~tail below. Task 1. Informafiq.n Collection The effort to ¢omplete this task will involve review and collection of relevant project information from both the MPCA and Electronic lndust~s. Although preliminary information was collected by Northern Environmental in 1997, updated information is. necessary to assess data trends and current subsurface contaminant conditions. The information will be reviewed and collected through on-site visits to both MPCA and Elec{mnic Industries. . Task 2. Data Anal~. is Once the information is collected, it must be compiled and analyzed, This' ta,..~k will involve evaluation of detailed geologic and hydrogeologic data at the site and in the ama, compilation of all relevant soil and groundwater chemical data at discrete sampling points, compilation of ali pumping data, and plotting the areal and historic distribution of the data in a manner appropriate for analysis. Once the information is compiled, delineation of the areal and vertical extent of soil and groundwater contamination and analysis of histodc trends will result in a detailed conceptual model of current site conditions. This conceptual model is critical to developing viable and cost-effective remedial action plans, as well as demonstrating to MPCA staff that we have a solid understanding of site condrdons. Task 3. Develop Revised RAP Development of the revised RAP is the heart of this phase of the project. MPCA approval of the revised RAP is necessary for D'rED grant submittal, and a viable, cost-effective RAP that MPCA will support will affect DTED competitive evaluation markedly. Effort for this task will pdrnadty involve conceptual engineering design based on MPCA closure requirements. Our deliverable for this .task will be a short report describing site history and geology, extent and types of contamination, his~odc trends of contamination, current site conditions, and our conceptual engineering design for the revised RAP. This task will culminate with a meeting with the City and Electronic Industries where we will present our report for review and comment. Task 4. Negotiate with MPCA Once the City and Electronic Industries have approved the revised RAP, we will present it to MPCA for their review and comment. We anticipate that after their review, we will all meet wYdl MPCA to work out any technical or regulatory process details they bring up. Our goal in this task is to receive 2 £00d ~CP'ON cj~TGT~-~ET~ + ]RU~ IS -Td~NO~IPd4B N~BHI~ON T0:60 00/60/E0 conceptual approval on the revised RAP,'so that MPCA staff may support the plan during the DTED review process. Task 5. p~r~am P .octi..'ons of DTED Gr~nt Application Once we have MPCA approval of the RAP, we will assist the City in preparing the technical porlJons of the DTED grant applicalion. This task will mainly involve submitling the RAP and supporting technical documentation in association :wrd~ the completed grant application. SCHEDULE The deadline for applications for the next DTED grant cycle4s May 1, 2000. The schedule below has bccn set to reflect completion of l ali tasks by this c~. te. We also hem assume that our authorfzation to proceed w~l be given oh February 15, 2000. Task 1. !.n,,formafion Collection This task will begin February 15, and w~ll require one weeklY0 complete. Task 2. Data Analysis This task will begin February 22, and wal require two weeks to complete. Task 3. DevelolO Revised RAP This task will begin March 1, and will refluire four weeks to complete. Task 4. Negotiate with MPCA This task will begin April I, and will require two weeks to complete. Task 5. Prepare Portions of DTED Gra~t Application This task will begin Apn'i 15, and will rec~ire one week to complete. ESTIMATED COST Task 1. Information Collection The cost to complete this task is $1,000~ Task 2. Data Analysis The cost to complete this task is $3.200.'. Task 3. De .v~. lop Revised RAP The cost to complete this task is $6,600. 3 Task 4. Neq_0tiate with MPCA The cost to complete this task is $1,00~. Task 5... Prepare Portions of D'i'~D C.~nt A_ru~___~__tion GENERAL The above scope of work assumes that MPCA and Electronic Industries have reasonal~ maintained, have access to, and will release relevant copies of project records for work previously done at the site. While we will provide our best professional services for t~is project, please understand that the DTED grant award process is competitive and therefore unpredictable. Award rankings are dependent on the number and quality of grant applications received, which wB be unknown unltl the cutoff date for receipt of applications by DTED. Theref..om, we cannot guarantee that any application, regardless of cost and merit, will be awarded in any particular grant cycle. We are grateful to be asked to continue to provide our professional services to the City of New Hope, and look forward to working with you on this exciting projecL If you have any questions or concerns regarding this proposal, please contact me at your convenience at (651) 635-9100. Sincerely, Northern Environmental Technologies Incorporated Daniel P. Barrel/, PG Senior Hydrogeologist Dou~J,,~HMM Director, Special Projects DYB/njf Attachment Cc: Mad( Hanson, Bonestroo * 2000 Nmthem ~ T~, ~ S.~PROeOS~~ 4 S00d ~'ON 9£~S~ES~9 + ~ iS -~INB~O~IANB N~F-~HI~ ~0:G0 00/G0/~0 ',, ' . ,E~ ' . ',, " F,,' , \ '. . . ' ' . · '1~, ', "-.. :;: · /' - ' ............................................ ...:..' ' .lI,~; '~" '""°" " "-~ "' , _.........-"'~ ' · '"'- -, Lr,~. f' '""',",.'.~,. ~ .... ~ · ' I, '; .................. ~,. .......... .-. ................................ .~_~r~.~._~ --- _~.~--_ "~-----~-~ ..... ;~"~ ......... ~r ~"" ..... 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MOTION AUTHORIZING STAFF TO PRE/PARE PURCHASE AGREEMENT FOR ACQUISITION OF COMMERCIAL PROPERTY AT 5550 WINNETKA AVENUE NORTH IN THE AMOUNT OF $308,000 (IMPROVEMENT PROJECT NO. 669) REQUESTED ACTION Staff recommends that the EDA approve a motion directing staff to prepare a purchase agreement for the acquisition of the commercial property located at 5550 Winnetka Avenue North in the amount of $308,000. Pursuant to the direction of the City Manager, staff and the City Attorney have reached a negotiated purchase price on the Donut Shop, contingent upon approval by the EDA. POLICY/PAST PRACTICE The City has acquired commercial properties in the past for redevelopment purposes and this property is identified in the Comprehensive Plan Update for commercial 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 for 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 completed the appraisal and established a fair market value of $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. At the January 10 EDA meeting, staff presented the appraisal to the EDA and requested authorization to negotiate for the acquisition of the property, which the EDA authorized. At that time, staff reported that the property was currently owned by Kiva New Hope Corporation and the current asking price for the property was $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 MOTION BY ~~~' SECOND BY ! ! RFA-O01 Request for Action Page 2 2-14-00 building). Staff indicated that due to the large disparity between the property owner's asking pdce and the appraised value; staff was not overly optimistic the City will be successful in negotiations. However, staff indicated we 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. Pursuant to the direction of the EDA, staff pursued negotiations and presented the owners with an offer of $280,000. The owners counter-offered with $336,000, which was substantial drop in their original asking price. The counter offer is outlined in the attached e-mail to the City. Per the attached City Attorney's correspondence, staff and the City Attorney were subsequently authorized by the City Manager to increase the City's offer to $300,000. In a phone conversation with the property owners on January 28, they offered to split the difference with the City and sell the property for $308,000. Staff indicated that we felt this was a reasonable compromise and would present the offer to the EDA with a recommendation for approval, but that a Purchase Agreement would not be prepared until after approval by the EDA. Per the City Attorney's correspondence: · A review of the BCL appraisal indicates this is a somewhat unique property. The appraisal only included one comparable sale that was similar to this property. This comparable sale was a BOSA Donut Shop in 1994. The subject property was also a BOSA Donut Shop. This comparable sale indicates the value of the subject property is approximately $282,000. It was the sale most heavily relied upon by the appraisal. Unfortunately, a 1994 sale is somewhat stale. · The owners paid $210,000 for the property in 1988. To ardve at their market value, the property owners took a simplistic approach and simply applied a 4% appreciation rate to the property over the last 12 years. By doing this, they arrived at a market value equal to their odginal counter-offer proposal of $336,000. The actual rate of market value appreciation of the last 12 years for properties similar to the subject is about 2% according, to information received from the City's appraiser. To facilitate a settlement on market value, we used a 3% appreciation rate, splitting the difference between the rate used by the property owners and the City's appraiser. A 3% rate of appreciation over the last 12 years establishes a $300,000 market valuation based on the owner's reported 1998 purchase price of $210,000. · The City must now consider whether it wishes to accept the owner's current $308,000, or continue to negotiate for a lesser price. One desirable aspect of this property is that it is currently vacant. Given this situation, a purchase at this time would permit the City to avoid all issues and costs surrounding relocation benefits to a business tenant occupying the property. Also, the property contains business fixtures valued at approximately $5,400 that would be included in the purchase transaction. So far, the value of these fixtures have been ignored in the purchase discussions. FUNDING The property is located in an area where TIF funds can be expended and the initial acquisition and demolition would be paid for with TIF. The long-term goal would be to acquire other properties in the area to assemble a larger parcel for commercial redevelopment and then request proposals. Staff has developed a spreadsheet estimating the cost of acquiring three other adjacent parcels in the area, demolishing the buildings, selling the land for redevelopment, and the projected taxes that could be generated. If the EDA proceeds with this acquisition, staff would recommend that the next Request for Action Page 3 2-14-00 property pursued be the 20/20 Eye Care located at 7809 Bass Lake Road. The acquisition/ redevelopment costs could also be supplemented by a vadety of grant applications. The concept plans prepared for the redevelopment of this area identify commercial redevelopment at this intersection. ATTACHMENTS · 1/12 City Correspondence · 1/18 Owner's E-mail · 1/27 City Attorney Correspondence · 2/4 City Attorney Correspondence · Maps/Site Data/Comprehensive Plan Information and Concepts Appraisal 4401 Xylon Avenue North New Hope, Minnesota 55428-4898 www. ci. new-hope, rnn. us City Hall: 612-531-5100 City Hall Fax: Police: 612-531-5170 Police Fax: Public Works: 612-533-4823 Public Works Fax: TDD: 612-531-5109 612-531-5136 612-531-5174 612-533-7650 January 12, 2000 Mr. Patrick Lusk 1129 North Loomis Street Naperville,' IL 60563 Subject: 5550 Winnetka Avenue North, New Hope, Minnesota Dear Mr. Lusk: Pursuant to a phone conversation with Dave Bresnehan today, I am forwarding to you a copy of the appraisal the City had completed in December 1999 for the property you own at 5550 Winnetka Avenue in New Hope, Minnesota. The market value according to the appraisal is $280,000. The appraisal was presented to the New Hope Economic Development Authority on January 10, and the EDA authorized staff to negotiate for acquisition of the property for that amount. Please review the appraisal and notify me if you are interested in meeting with representatives of ti'ie City to discuss a potential sale. If it is your intent to negotiate for a price higher than the City's appraisal, the City would expect that you would provide appropriate documentation to support your asking price. I do believe that there may be some room for negotiation, however, any agreement would be subject to final approval by the City Manager and the EDA. Please contact me at 612-531-5119 to discuss the potential purchase of the property by the City. Sincerely, r, Kirk McDonald Director of Community Development Enclosure: Appraisal cc: Dan Donahue, City Manager Steve Sondrall, City Attorney Daryl Sulander, Director of Finance Doug Sandstad, Building Official Sue Henry~.Community Development Specialist Phil Kern, Administrative Assistant Valerie Leone, City Clerk (Improvement Project #669 Family Styled City ~ For Family Uvini~ i KirkMc~.d..qnald - 5550 Winnetka New Hope, MN From: To: Date: Subject: <DBresnahan@aol.com> <kmcdonald@ci.new-hope.mn.us> 1/18/00 8:50PM 5550 Winnetka New Hope, MN 1 / 18/00 : Dear.Mr. McDonald: As you requested, I am responding to your appraisal of December 3, 1999. The appraisal on our property (5550 Winnetka) assigned a value of $280,000. We believe this amount is Iow for several reasons. Prior to becoming aware of the city's interest, our property was being actively marketed with an asking price of $450,000 or lease at $3,000 - 3,400 per month nnn (triple net). We received significant interest. Our prospects of securing a lease in 60 days or less is highly probable. However, our desire to sell is heightened by the fact this property is located in Minnesota. I live in Arizona, and my partner, Pat Lusk, lives in Chicago. The properly has no encumberances and only want what we believe is fair. In 1988, the property was in escrow with Bosa International as seller and the then current tenant, Dave Clarkson, as buyer. The contract was for $210,000. This was a fee simple real estate transaction and a good indication of value since the buyer was operating the business there for over two years. Just before closing escrow, it was discovered the property was a former gas station site and the bank withdrew it's financing committment. It was at that time, that I stepped in and purchased the property on an all cash terms. I subsequently leased the property to Dave Clarkson, the existing tenant. The property has since been reviewed by the Minnesota Pollution Control Agency and they have determined no remediation was neccessary. Since that time, we have been reluctant to extend lease terms past two or three years as we have contemplated higher and better uses for the site. We realize that shorter lease terms impacted our ability to produce higher yields on our investment and limited our ability to attract higher quality tenants. Still, having a tenant required us to continue to invest in our property. In the last three years, we have resurfaced the parking lot ($12,000), resurfaced the roof ($3,000) and replaced the HVAC system for $6,000. Based on the escrow in 1988 of $210,000 (12 years ago), and using the appreciation rate described on page 33 of the appraisal, we propose the following counter-offer to your proposal: Since 1995, the appraiser quoted the annualized appreciation rate as a minumum of 4% annualized. In 1998 and 1999 that rate was 7% annualized. We would agree to an annual compounded rate of 4% since 1988. Based on a price of $210,000 in 1988 and a 4% appreciation we would sell the property for $336,200. Respectfully, Dave Bresnahan GORDON L. JENSEN* WILLIAM G. SWANSON STEVF. N A. SONDRALL MART~ P. MALEC~A C. ALDEN I~ARSONt JUQE A. THILL OF COUNSEL LO~NS Q. BRYNESTAD *Real Properly Law Specialist Certified By The Minnesota State Bar A~oci~ion tQualified ADR Neutral JENSEN SWANSON & SONDRALL, P.A. Attorneys At Law 8525 EDINBROOK CROSSING, STE. 201 BROOKLYN PAR~ ]~alNNESOTA 55443-1999 TELEPHONE (612) 424-8811 · TELEFAX (612) 493-5193 E=MAIL jss~jsspa.com January 27, 2000 Mr. Dave Bresnahan: Kiva New Hope Corporation ! 129 Loomis Street North Naperville, IL 60053 Re: Acquisition by City of New Hope of 5550 Winnetka Avenue North Our File No: 99.10000 Dear Mr. Brestmahan: I am the New Hope City Attorney. I have been requested to contact you concerning the City's potential acquisition of the property at 5550 Winnetka Avenue North in New Hope from your corporation. I am aware of the communication and correspOndence between yourself and the City's Community Development Director Kirk McDonald. I have also reviewed the December 3, 1999 appraisal prepared by Eric Bjorldund of BCL Appraisals on this property. Based on the correspondence and information I have reviewed, it is my understanding the City has currently proposed a purchase price of $280,000 and you have countered this proposal with an offer to sell for $336,000. Simple math indicates we are $56,000 away from reaching a mutually acceptable offer. The New E,me City Manager Dan Donahue has authorized me to increase our purchase price offer z~; $300,000. However, this proposal is subject to final approval by the New Hope City Council. Basically, the New Hope City Manager is willing to submit a purchase agreement to the City Council for acquisition of this property at $300,000. Based on his recommendation the City Council will more than likely authorize the purchase of the property. Included in this proposal is the City's agreement to pay any unpaid special assessments against the property, both levied and pending, for all tax years payable 2001 and thereafter with other closing costs normally allocated between buyer and seller in a typical real estate transaction, Based on the BCL appraisal, a $300,000 purchase price for this property adequately represents the property's market value. I refer you to page ten of the appraisal wherein annualized appreciation rates for commercial real estate is discussed. Since 1990, Bjorklund indicates appreciation rates for commercial property have varied from minus five percent to plus seven percent. Bjorklund also informed me in a recent telephone conversation that commercial real estate values did not appreciate in 1988 and 89 and in fact valuations may have declined in those years. Using zero as an appreciation rate for 88 and 89 establishes an annualized rate of return for commercial real estate appreciation at 1.9 percent over your ownership period on the property according to the appraisal. Based on your purchase price of $210,000 the value of the subject property would be January 27, 2000 Page 2 $262,000 based on a simple annualized appreciation rate formula. Taking into consideration differences of opinion between various appraisals regarding appreciation/depreciation for commercial real estate valuations since 1998, I have added an additional two years of valuation adjustments at a seven percent annualized rate against the $262,000 value to reach the $300,000 counter offer for the property contained herein. I understand that property appraisal is not an objective science but a subjective art form with an understanding that appraisers can vary dramatically on their valuation opinions and have attempted to take these differences into consideration in arriving at the $300,000 number to determine value. This is similar to what you did in your January 18~h email correspondence to Kirk McDonald in establishing your $336,200 purchase price. Another way I could justify a $300,000 valuation for this property is to simply utilize the $280,000 valuation established by the December 3, 1999 BCL appraisal and then additionally reimburse you for the approximate $20,000 in maintenance expenditures you have recently made on the parking lot, roof and HVAC system. I should note however in checking with the City's Building Official I did not find the required building permit for your HVAC upgrade. Regardless of the fact the appraisal considers these upgrades in the building in arriving at the $280,000 market value, I believe the City Council would be sympathetic to an upward increase in the purchase price equivalent to your cost for the maintenance upgrades in light of the fact you will be receiving limited use from them on a sale at this time. The City is very interested in acquiring this property for future redevelopment in a vital section of the City as indicated in our comprehensive plan, however I seriously doubt the City Council will authorize an expenditure for this property in an amount greater than $300,000. Certainly, the City Council, in my opinion, would not consider a greater amount unless it was supported by reliable appraisal information indicating the December 3, 1999 BCL Appraisal is inaccurate. Frankly, after reviewing the comparable sales information used by the BCL Appraisal in relation to your property the $280,000 valuation stated in the appraisal is quite generous. The vacant land evaluation used in the appraisal's cost approach analysis establishes a vacant land valuation of $179,100 based on a very reasonable $9 per square foot. It's highly unlikely in my opinion any buyer would consider valuing the building at over $100,000. It's interesting to note the Hennepin County Assessor has placed a $34,000 market value on the building for tax purposes or one-third of the value established by the BCL Appraisal. Again, the BCL Appraisal has been generous in considering the market value for this property. It's my understanding that this letter will be faxed to vou prior to a scheduled conference call to discuss the City's purchase proposal on Friday, January 28% I look forward to discussing this matter with you at that time. Very truly yours, · . ~ New Hope City Attorney JENSEN SWANSON & SONDRALL, P.A. CC: Dan Donahue, New Hope City Manager Kirk McDonald, New Hope Community Development Director GORDON L. JENSEN* WILLIAM G. SWANSON STEVEN A. SONDRALL MART~N P. MALECHA C. ALD£N PEA~SONt JULIE A. THILL OF COUNSEL LORENS Q. BRYNE.~AD *Real Property Law Specialist Certified By The ?Qualified ADR Neutral JENSEN SWANSON & SONDRALL, P.A. Attorneys At Law 8525 EDINBROOK CROSSING, STE. 201 BROOKLYN PARK, MINNESOTA 55443-1999 TELEPHONE (612) 424-8811 · TELEFAX (612) 493-5193 E-MAIL jss~jsspa.com February 4, 2000 Kirk McDonald New Hope Community Development Coordinator City of New Hope 4401 Xylon Avenue North New Hope, MN 55428 Re.' City Acquisition of Old Donut Shop at 5550 Winnetka Avenue Our File No. 99.11246 Dear Kirk: This letter will confirm the outcome of our recent phone conference with the property owners of 5550 Winnetka Avenue North. Basically, our telephone conference was to discuss the $336,000 counter-offer proposed by the property owners in response to our initial $280,000 offer to purchase supported by the BCL appraisal. We were subsequently authorized by the City Manager to raise our offer to $300,000. In our phone conference with the property owners, they offered to now sell the property for $308,000. As a result, we are $8,000 apart at the present time. Naturally, the property owners have indicated this is their final offer. A review of the BCL appraisal indicates this is a somewhat unique property. The appraisal only included one comparable sale that was similar to this property. This comparable sale was a BOSA Donut Shop in 199,~ As you know, the subject property was also a BOSA Donut Shop. This comparable sale indicates the value of the subject property is approximately $282,000. It was the sale most heavily relied upon by the appraisal. Unfortunately, a 1994 sale is somewhat stale. The owners paid $210,000 for the property in 1988. To arrive at their market value the property owners took a simplistic approach and simply applied a 4% appreciation rate to the property over the last twelve years. By doing this, they arrived at a market value equal to their original counter-offer proposal of $336,000. The actual rate of market value appreciation over the last twelve years for properties similar to the subject is about 2% according to information I received from our appraiser. To facilitate a settlement on market value, we used a 3 % appreciation rate, splitting the difference between the rate used by the property owners and our appraiser. A 3 % rate of appreciation over the last twelve years establishes a $300,000 market valuation based on the owners' reported 1988 purchase price of $210,000. February 4, 2000 Page 2 The City must now consider whether it wishes to accept the owners' current $308,000, or whether we should continue to negotiate for a lesser price. Please keep in mind the one desirable aspect of this property is that it is currently vacant. Given this situation, a purchase at this time would permit us to avoid all issues and costs surrounding relocation benefits to a business tenant occupying the property. Also, the property contains business fixtures valued at approximately $5,400 that would be included in the purchase transaction. So far, the value of these fixtures have been ignored in purchase discussions. Please contact me if you have any questions or comments regarding our conference with the property owners or the contents of this letter. Very truly yours, Steven A. Sondrall JENSEN SWANSON & SONDRALL, P.A. cc: Daniel J. Donahue New Hope 11246-01-Client Ltr.wpd SITE DATA Site: Donut Shop Address: 5550 Winnetka Ave. No. Land Area = 20,700 sf [ .47 acres ] Building Area = 1,300 sf [ 6 % ] Year Built: 1975 Building Type: One story masonry with fiat roof Zoning District: B-2, Retail Business Street Frontages: 2 county roads; Winnetka and Bass Lake Road 18) (2) (17) (6) ~ ~8~) I¢ ~ c ~83) (26) 170 ~ (84) I~ -" (86) 4. TS....... z I I I I I I (45) -~ OF' : (85) J (99) ! (98) (97) 55'TH Memorandum Kirk McDonald, Director of Community Development Phil Kern, Administrative Assistant January 31, 2000 Donut Shop - Winnetka/Bass Lake Road Commercial Redevelopment Per your request, attached is information about the Donut Shop and its adjacent properties at the intersection of Bass Lake ROad and Winnetka Avenue. In summary, here is a brief table of the information attached 5550 Winnetka 5540 Winnetka 7809 Bass Lake Road 7801 Bass Lake Road Size of Parcel Current Zoning Market Value 20,281 sf B-2 $160,000 13,500 sf R-1 $95,000 15,400 sf B-2 $110,000 14,700 sf B-2 $199,000 The properties are all eligible for expenditure of TIF funds. The area is identified in the Comprehensive Plan as a commercial redevelopment target. In 1999, the City completed a planning study on a larger area of Winnetka and Bass Lake Road that highlighted these parcels for commercial redevelopment. If you need any further information on these properties, please let me know. Attachments: · Maps of the area · Redevelopment spreadsheet · TIF Map · Redevelopment Study as completed by NAC · Comp. Plan references R-3 " R0 TERMAN ' ' iii DOL WINNETKA : ST. RAPHAEL ELEMENTARY ...... - ...... : ....... SCHOOL ' ' " .... ' '---~ ,-.J CHURCH ! .............. 55TH .... " ........ i i >i ~ '~' 'z '" ~ UJ ,c~ Z > . LU t RA "' < .... '~> -r < '~- ......... a .......... ;__~ ~ ~ , : ~ .......... ]<~ i -° .~. 'i.-~ · ~4TH AVF N ' '. .... ......... o :: I ~ i---- I ......... ;--'~- ' ~' i l ...... '7---I t--- ................... ! F'"'-- .... "- - ..... =...~ i~'--.~ :-~"'"'-"1 =- ~ ' -.:.,: . . ....... : ....... : : ".. .-. .... ' ,' __ ~>-.. i 53RD A~EN : ;'" .. '" "-'L -' >' , ..... i "~,~ .... : ......... , ~~..-.,,,., ,., .,,--~:., ~ ~ ~- .--- Z 5550 Winnetka 20,281SF 7809 BLR ~15,~ ( 5540 Winnetka (7) 13,500 SF 7801 BLR (~) 14,700 SF (82) (22) ~ (18) (26) (2) (I?) (6) 171) (86) I Bass Lake Road -Winnetka Avenue Redevelopment Total *Added Taxes Property Size of 1998 Tax Appraised Value Acquisition Demolition Total City Land Value Generated by Parcel (SF) Valuation (Before Cost Cost Cost at B-4 Commercial Purchase) (@ $10 SF) Development (over 20 yrs) 5550 Winnetka 20,281 $160,000 $280,000 $308,000 $14,000 $322,000 $202,810 $105,857 5540 Winnetka 13,500 $95,000 $120,000 $8,000 $128,000 $135,000 $70,463 7809 Bass Lake Road 15,400 $110,000 $175,000 $8,000 $183,000 $154,000 $80,380 7801 Bass Lake Road 14,700 $199,000 $275,000 $15,000 $290,000 $147,000 $76,727 All Four Parcels 63,881 $564,000 $280,000 $878,000 $45,000 $923,000 $638,810 $333,427 Combined *Added tax rP.v~.m~..~ nr~ ~lr,~,l~t,-,rl k~,=,,-I ,,,-,,-,., ,.;~;,~ .~ .... , ........................ upon ar developments in the City. For this estimate, McDonalds at 42nd & Winnetka was used due to the value of the property and building, although the type of development for this area is not a fast-food restaurant. The properties currently pay $18,873 in taxes per year. Using the McDonald's example, it is estimated that developme~i ,.d this parcel could raise close to $40,000 in taxes. This estimate is conservative, as the McDonald's parcel is much smaller and lower in building value than the desired redevelopment for this project. Over 20 years, the increased revenues for this property, based on the conservative estimate equals $420,000. This value, adjusted for the present value of future revenue, equals $333,427 of value in 2000. Also, this cost-benefit analysis does not include the benefits to adjacent property owners of redevelopment and the potential redevelopment this may spur in the area. Projected Expenses: Projected Revenues: $923,000 $972,237 G:\CommDev\Kern\Planning Return to the City: $49,237 02/09/2000 PlanninE Districts PLANNING DISTRICT 6 . This district's borders are Winnetka Avenue to the west, the C.P. Rail System to the south, and Crystal to the east and north, with a jagged northern border. -District 6 is primarily Iow density residential with areas of multi-family residential and commercial development scattered along Bass Lake Road. The following recommendations are offered for Planning District 6. The Iow density residential neighborhoods in District 6 are generally in good condition, however, two Iow density redevelopment target areas have been identified within Planning District 6. In addressing the Iow density residential land uses in District 6, the following recommendations are made: The City will aggressively promote private reinvestment in the existing single family housing, through housing renovation seminars and programs, and the through the enforcement of the Point of Sale Housing Maintenance Code. bo Scattered site housing renovation and redevelopment will be pursued on selected lots within District 6. Co The City has targeted the Iow density residential area along Bass Lake Road and the Bass Lake Road extension. This area is characterized by small homes in marginal condition on large lots. The City will seek to acquire and redevelop these sites as new Iow to medium density residential land uses. A second Iow density residential area targeted for redevelopment consists of a number of very deep lots along Winnetka Avenue between Bass Lake Road and 53rd Avenue. The redevelopment of this area is intended to alleviate poor housing conditions, improve access onto Winnetka and more fully utilize the available land. so New Iow density residential land uses will be encouraged on the remaining vacant parcels in District 6. The medium and high density residential land uses in District 6 are located along Bass Lake Road. Inspection of these land uses find these areas in various states of disrepair. The renovation of medium and high density land use in District 6 includes: ao The City is currently participating in the redevelopment of a blighted non- conforming medium density residential site located along Bass Lake Road City of New Hope Comprehensive Plan Update 85 Development Framework Planning Districts between Neyada and Pennsylvania Avenues. This redevelopment is being undertaken with a non-profit organization along with the cooperation of lSD 281 .and the City of Crystal. This project provides a working example of projects that will provide a much needed housing resource and correct land use infrastructure concerns. The proposed land use plan has been modified to illustrate the resulting medium density land use for the site. b. A second undeveloped target area involves a high density residential site located along Winnetka Avenue north of Bass Lake Road. This site displays declining building and site conditions. The City will pursue building renovation and/or redevelopment as conditions permit. Within Planning District 6, an aggressive strategy for enhancing the commercial .~.~ character along Bass Lake Road is recommended including: _Expand the commercial land use pattems along Bass Lake Road to increase the land area for commercial redevelopment. ..._ b. ' Assemble and redevelop smaller commercial sites to 'create larger ~..~' commercial lots for contemporary retail, service and office uses. Co In cooperation with the City of Crystal, establish a commercial streetscape that enhances the overall character of the Bass Lake Road commercial corridor. City of New Hope Compi'M'~ensive F'la,-~ U~',. BROOKLYN PARK FU TURF D EVEL O PMEN T AND REDEVELOPMENT SITES © Residential Opportunity Commercial Opportunity Industrial Opportunity Commercial / Industrial Opportunity Deteriorating / Blighted Area- Underdeveloped Areas Vacant Areas =; GOLDEN VALLEY City of New Hope N~(~ October 1997 Base Map: Boneslmo Rosene 0 1000 2000 3000 Anderlik &Associates SCALE IN FEET 45 Comprehensive Plan Update Inventory R£DEVELOPMENT CONCEPT 8 5$TH AV~ DR. [] EX;STING STRUCTURES '~ N o so 'OOFEET CONCEPT 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 I.AN'E SO., MINNEAPOLIS, MINNESOTA 55418 (612)781-0605 Fax: 781-7826 RON LACI-IENMAYER, SRA I.ESLI~ L O-m~ RACINE, JR., SPA BRAD B~ORKLUND, MAI, SRA REAL ESTATE APPRA/SERS 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 reasomng leading to the conclusions. Respectfully submitted, Eric Bjorkiund,.~ Associate General Member of the Appraisal Institute & Certified General Real Property Appraiser MN License *.4003154; Expiration 08/31/00 EB/Ib MORE I'HAN ~0 YEARS FULL APPRAISAL SERVICES EEO/AA TABLE OF CONTENTS 1 APPRAISAL CERTIFICATION ................................................. 2 APPRAISAL SUMMARY ....................................................... ASSUMPTIONS AND LIMITING CONDITIONS .................................... 3 PURPOSE OF APPRAISAL AND DEFINITION OF VALUE ........................... 4 PROPERTY TO BE APPRAISED ............................................... 5 5 PROPERTY RIGHTS APPRAISED ............................................. 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 Standaras 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 ~s subject to the requirements of the Appraisal Institute relating to the necessities (from time to t~me) for peer review to occur by its duly authorized representatives, and also with iust cause, rewew by representatives of the Minnesota Department of Commerce Enforcement Diwsion relating to enforcement of the terms and conditions necessary to hold a state general appraisal license. Eric Bjorklun~/ Associate General Member of the Appraisal Institute & Certified General Real Property Appraiser Minnesota Appraisal License #-4003154; Expiration 08/31100 BCL APPRAISALS, INC. 2852 Antttony lane South. Minneapo~. Minne~:~a 55418 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 5270,000 Value Conclusion: $280,000 BCL APPRAISALS, INC. 28s2 Amhony L.~ne So~th. M~we~, ib~l~ 55418 ASSUMPTIONS AND LIMITING CONDITIONS This appraisal report has been made with the following general assumptions. 1. No responsibility is assumed for the legal description or for matters including legal or title considerations. T'ffJe 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. o 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 matedal in this report are included only to assist the reader in visualizing the property. 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 ~n this report is based. 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 Soutt~, Minn~_~_~_'__, I~ 55418 ASSUMPTIONS AND LIMITING CONDITIONS CONT. This appraisal report has been made with the following general limiting conditions: 1. 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 pdor 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 price which a property should bdng 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 pdce 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 Sou~, Minnea~nc~__~. Minne~ola 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: Officc of thc ComptroUcr of thc Currency under 12 CFR, Pan 34, Subpan C-Appraisals, 34.42 Dc£mitions [/].) 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 currently vacant. The assigned address to the real estate is 5550 Winnetka Avenue North, New Hope. PROPERTY RIGHTS APPRAISED Real property ownership consists of a group of d~stinct dghts. In this appraisal, complete real property ownership, or the fee simple ~nterest w~ll 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. ('l'he 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 w~thin the body of this report. BCL APPRAISALS, INC. 28,52 Anthony i.ane South. M#lrmapoi~. iVlblne~:~a 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 earlier. 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 variety 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 vanous counties where data was found), and several computer on-line data search networks (REDI, MLS, MOORE DATA, & PLAT SYSTEM SERVICES). BCL APPRAISALS, INC. 2852 Anmony La~e South, M~mamas, Minnes4~ 55418 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 currentiy for sale, an ownership change might occur in the near term future. The current asking price 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 period (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 prior 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, tnple 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 Anthor~/L.ane South. iVli~poli~, ~ 5S416 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 westerly 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 compnse the second largest land use. The largest industrial district 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 VVinnetka 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 District #281. MTC bus routes serve most of the City including a route on Bass Lake Road by the subject. BCL APPRAISALS, INC. CITY AND NEIGHBORHOOD DESCRIPTION CONT. Major transportation to the City is provided by Highway #169 along the westedy 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 Winnetka 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 healthy, and the overall metro iiraa 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 ara 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 buila~ng 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 Pdme 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 Anttmny Lane South. Mmneapolm, Minnesa~ 55418 CITY AND NEIGHBORHOOD DESCRIPTION CONT. moi'tgages for real estate in the subject neighborhood depend on many factors, but a reasonable estimate would be say 1-2 points higher than the pdme 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 s~te, which carnes overhead phone and electdc lines (underground from the pole to the building) would appear to exist with a utility easement. But, overhead electdc 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 Antho~ Line ,.~xlth. Minneapolis. Mirmelo~ 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. Topography 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 n~arby. 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 comer, 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 roacl median on Bass Lake Road, only right turn in/out motions to the subject are allowed on the nortt~ 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 neighbomood 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 rea(Is 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 APPI~ISALS. INC. ?~_5_~ Ar~ Lan~ Soum, M~, Mmne~,~. 55418 SITE DESCRIPTION CONT. The current zoning map of the City of New Hope shows the property is zoned B-2, Retail Business. 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. Identity 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 Anlho~y Line South, Minnel~_,~__'_, Minneloll 55418 STREETSCENE PHOTOS ]3 Street Scene West on Bass Lake Road Street Scene SoUth onWinnetka BCL APPRAISALS. INC. ]4 STREETSCENEPHO~TOS Street Scene East on Bass Lake Road Street Scene North on Winnetka BCL APPRAISALS, INC. ;-----;- ;. ...... · ~sS LAKE RD I r ~ 17 DESCRIPTION OF IMPROVEMENTS The subject land is improved with a fast food restaurant. Although currently vacant, it used to be an operating donut shop. A,qe 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 extedor 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. Extedor walls extend another two feet above the roof deck to shield roof top H.VAC equipment. Foundation Not visible. Assumed to be poured concrete footings. The extedor walls are bdck veneer over concrete block. Framinq The roof frame is comprised of webbed metal joists which are supported by the extedor load beadng concrete block walls. Intenor partition walls are framed with wood joists. .Roof Flat with a rolled asphalt membrane Walls Extedor walls are bdck over concrete block The facade however is covered with large, fixed sash, thermopane windows. In the kitcl3en and baking areas, intedor 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, Minneal3o#s, Minner~a 55418 DESCRIPTION OF IMPROVEMENTS CONT. .Ceilin,qs 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 service 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 electdc main with 240 volt and three phase service. There are two circuit breaker panels. Lighting is provided by fluorescent fixtures. 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. 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 ngid 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 Jie between the blocks and the brick exterior finish, or within the blocks themselves. BCL APPRAISALS, INC. 2852 Anthony Lane South, Mlnnelpoim, Minnel<~ 55418 DESCRIPTION OF IMPROVEMENTS CONT. Miscellaneous At the time of inspection, the building was vacant but them were several items of personal property (cash register, 3-door freezer, pop dispensing equipment, coffee machine, refrigerator, portable storage racks, warming ovens, butch"er 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 particuiady 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 heater (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 busfness saturate the floor and ceiling panels so that it is likely they would be replaced anyway if f! wasn*t another donut business that re- occupied the premises. 13,539 sf asphalt pavement 672 sf concrete pavement 382 If 6" concrete curb 4,175 sf sod grass Jawn _On-S~te Improvement~, 2 shrubs 1 tree 72 If precast concrete parking bumpers 2852 55418 ' PHOTOS OF SUBJECT PROPERTY 20 Front View Rear View BCL APPRAISALS, INC. PHOTOS OF SUBJECT PROPERTY Roof View Dining Area BCL APPRAISALS. INC. 21 PHOTOS OF SUB.JeC~,, PROPERTY Baking and Reception Area Clean Up and Storage Area BCL APPRAISALS. INC. 23 BUILDING SKETCH ;~'~' ~ Baking Storage Area Area Receptior Dining '"'i & Area 3.5'i ~ iClean_up ~ ~ Area ~.'~: 18.0' i'3.H Building Area 44 x 18 = 792 (37 + 44) x 3.5 = 142 2 10.5x37 = 389 1323 sf 2.4 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 criteria 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 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 :esidential 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 subiect 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 APPRAIEALS. INC. lane Soul~, Mmrmepo~. Ivlirmee~ ,~5418 HIGHEST AND BEST USE CONT. Hiqhest and Best Use as Vacant Cont. CurrentJy, 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. Superior 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. Hi.qhest 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 bu~lchng 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 zon;ng 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 depreciat;on. 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 covering and a parking lot that was resurfaced about two years BCL APPRAISALS. INC. HIGHEST AND BEST USE CONT. Hi,qhest 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 private 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 Anlttony ~ Seuttt, Minneapc~, ~ 55418 27 APPRAISAL METHODOLOGY General Appraisal The valuation of a typical parcel of real estate is derived 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 dsk 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. Lane South, M~pe~, Minne~m 55418 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 Heiqht 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 penmeter) 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. 2e62 ,~.'tmmy L.i~o Soum. Ivlb. vmopo~. ~ 6641e COST APPROACH CONT. Direct Construction Cost ('Replacement) The building contains 1,323 square feet of gross building area. are calculated as follows: SAY $252,800 The direct construction costs 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 Cost~ SAY $14,900 Interest and taxes on land dudng construction and clevelopment 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 8CL APPRAISALS, INC. 2852 A~ Lorw Soum. ~_,,~:_. M6~ruso~ 554~8 3O COST APPROACH 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,O0O 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 tom down or converted to another use. Marshall & Swift reports similar use (good quality fast food restaurants) buildings BCL APPRAISALS, INC. _~L_5~ Anthony Lane South, Mmn~_?~s_'_, Minn~¢~ 55418 $1 COST APPROACH 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 Antmmy Lane Soum. M,v~apo~. Minnem~ 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 comparable~i and these differences are directly attributable to the vadety in price. Preceding the description of each comparable sale is an adjustment grid. On this gdd 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 s~mply 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. 2~52 Ant~ Lane ~__~, Mm~ea~x~is, ~ 5541S COSTAPPROACH CONT. Land Valuation Cont. Financin,q 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. 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 vaded from +4%, to +7% as follows: 1995 = +4%. 1996 = +4%. 1997 = +4%. 1998 = + 7%. Thus far in 1999, +6.5% (or 7% 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 inferior to the subject. 15% upward adjustments are applied. Sale #4 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. COSTAPPROACH CONT. Land Valuation Cont. 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. Zoning/Use With the subject zoned B-2 and having only 19,900 square feet of land area, assemblage or a vadance 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 vanance. 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 pnce that comes with purchasing more, less competition for the property (who can afford the land) which does not ddve the pdce 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. 2~2 An~,c,~y Lane South, Minnearx~, Minnes~a 5541 35 COST APPROACH CONT. Land Valuation Cont. * Size Cont. with Sales #.4 & #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 price, 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 Adiustment 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 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 ($/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 pnce (for time, etc made eadier) per square foot of the comparable land sale. The adjustment gnd follows. BCL APPRAISALS. INC. 2852 All~,o,-~y Lane South. Mitmespolil. ~ 55418 COST APPROACH CONT~ Price Other Adjustment Adj Price Firmncing Adjustment Adj Price Market Co~d. Adjustment Adj Price Size (sf) Size S/sf LOcal loft Adjustment Topography Adjustment Zoning/Use Adjustment Size Adjustment LARD SALES ADJUSTMERT GRID Coq)arable Sale RD. Subject 1 2 3 N/A S285,000 S3T3,000 S170,000 S 75,000 Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple Arms Length Arms Length Arms Length Arms Length Arms Length None BIdg Demo Demo Demo -S 6,000 +~ 6,000 *S 13 500 *S 6,000 S2r9,000 S3r9,000 S183,500 S 81,000 Cash Equlv 12/03/99 Good Good Cash Cash S 0 S 0 $279,000 S379,000 Cash Cash S 0 S 0 S183,500 S 81,000 5 6 S530,000 S370,000 Fee Simple Fee Simple Arms Length Arm Length Demo None +~ 35,000 S 0 S565,000 S370,000 Cash $ 0 $565,000 Cash $ 0 S370,000 ? S 900,000 Fee SimpLe Arm Length Demo +S ~3,000 $ 913,000 Cash S o $ 913,000 B-2/Assemble 19,900 sf 06/02/99 04/13/95 05/04/95 03/17/95 03/19/98 07113195 01126198 · $.10,000 +5100,500 +S 49,000 *S 22,000 +S 68,500 *$95,000 +S 12~,000 S289,oo0 S479,500 S232,000 s103,000 S633,500 ~65,000 S1,035,000 23,250 sf 30,270 sf 21,906 sf 18,555 sf 70,650 sf 44,431 sf 125,125 af S12.43 S15.8~ S10.59 S 5.55 S 8.9? S10.47 $ 8.27 Very Good Very Good Good Average Average(+) Good Average(+) x 0.85 x 0.85 x 1.00 x 1.75 x 1.15 x 1.00 x 1.15 Good x 1.00 Good Good x 1.00 x 1.00 Good x 1.00 Good x 1.00 Good x 1.00 Good x 1.00 B- 3/None B-4/No~e B-4/Norm B-4/None B-3/Note g-4/None C- 1/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 af 125,125 af 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 lad Sub S S 8.97 Sll.44 S 9.00 S 8.25 S 9.20 $ 8.90 S 8.89 COST APPROACH CONT. _Lend 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 price 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 zc~ning 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 price 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 val~e of the subject land is estimated as follows: 19,900 sf x $9.00/sf = $179,100 BCL APPRAISALS. INC. 2852 An~-~y Lane South. Minnllpo~, Minnel4~155418 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 #1 Redeveloped Commercial Land 6113 West Broadway Avenue, New Hope Outlot 1, Mork-Campion Heights. PIN #05-118-21-22-0058. B-3, Auto Oriented 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 torn up. The end use of the site is a Citgo convenience store with gas sales. BCL APPRAISALS. INC. 2852 Ant~'x~ly Line ~:-- _,*.h, Minnle~_,~.:_, Minnelola 55418 COSTAPPROACH CONT. Type of Property: Location: Legal Description: Zoning: Date of Sale: Seller/Buyer: Sale Pdce: Land Area: Unit Pdce: Comments: COMPARABLE LAND SALE #2 Redeveloped 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 Bdcigestone 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 a new Walgreen Drug Store. Their acquisition costs, with demolition does not however, reflect what the market value of the land is. BCL APPRAISALS. INC. 2852~ lane Soum. ~_,j~_'_, Minne~ 55418 4O COSTAPPROACH CONT~ Type of Property: Location: Legal Description: Zoning: Date of Sale: Seller/Buyer. Sale Pdce: 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 bdnging 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 APPRAI~M,.~, INC. 4! 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 Redeveloped Commercial Land 5264 West Broadway Avenue, Crystal Lot 16, Block 2, Hansons Addition. PID WO9-118-21-22-0034. B-4, General Business March 17, 1995 Central Investment Corp/Gart)on 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 pnce = $4.31/sf. Buyer built an auto service'building (American Brake Service) on the site. Good traffic or~ E~roadway. Right in/out access only. BCL APPI~I. ISALS. INC. 2852 Arex~ Lane ~,~__*~. ~, Minnek~ 55418 COST APPROACH CONT, Type of Property: Location: Legal Description: Zoning: Date of Sale: Seller/Buyer. Sale Pdce: 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 building; 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. ?L_52 Anttxmy Line Soutrl, Min~e._=_~-~_.~, Minnesota 55418 43 COSTAPPROACH CONT. Type of Property: Location: Legal Description: Zoning: Date of Sale: Seller/Buyer: Sale Pdce: Land Area: Unit Price: 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. $370,0O0 44,431 square feet $8.33 per square foot Arms length, fee simple, cash saleL 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. I -- 361# CUB FOODS ADDI~ BCL APPRAISALS. INC. 2852 AMhony Line Sm.ll~. Minne~. I~ 55418 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 #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. r--'-'---ii BCL APPRAISALS, lNG. -~L-5-~ Anlttony Lane South, Minneapolis, Minnem~a 55418 45 COST APPROACH 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 Antho~ Lane South, Minnealx~, Minne~ 55418 46 S.AI FS 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 comparabie'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,cl Sales Areas of adjustment and reasons why adjustments were applied follow. Other This covers the property rights 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 rights conveyed and no other miscellaneous matters influencing value, no adjustments are applied. Financin.q This is an adjustment to reflect a cash pnce 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 fnto 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 Anlilony Line South. Mirlneal:~il, Minnelotl 55418 47 COMPARISON APPROACH CONT Discussion of Comparable Buildin,q Sales cont. Market Conditions Uke 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 varied 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 grid 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 ff~ is adjusted the most because its sale date is least current. 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 subiect. 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 Fridley, is quite a bit infenor 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 onented that impulse oriented. The subject's location is more impulse oriented. BCL APPRAISALS, INC. 2~52 Anthony Lane Sou~. Mim~eapotis, Miftnc,,m~a 5541 48 SAI ~=$ 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 brick 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 retum 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 bas~s, 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 build~ngs 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 build~ng idenhcal 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. 28S2 .~,U'x]lny Line Sol.e~. ~. IMm~ S5418 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 price to their land to building ratio, with the unit prices all made othenvise equal to the subject, except for one attribute, the vadety in price 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'C°mparables with higher land to building ratios have higher unit prices ($/sf GBA) than comparables with lower ratios. Entering the land to building ratio of the comparable into the 'X' variable in the formula, and contrasting the resulting wy. number with the 'Y' number shown at the subject's land to building area ratio (made by plugging the subject's ratio in the "X' spot in the formula) is how the adjustment is made. Sale #2 is adjusted down by 20%, and Sale ~4 is adjusted up by 5%. Sales #1 & #3, although having different ratios, do not require adjustment as the difference does not seem to be significant to cause a change in price. No adjustments to these buildings are therefore applied. Buildinq Sale Adjustment Gdd Significant areas for adjustment are ident~hed m the first column, and are labeled Other, Financin,q, Market Conditions, etc. The subject ,s identified in the second column, and the comparables in the remaining four. The adjustment methodology in this valuabon is based on widely recognized appraisal practice and adjusted as 'appropnate to fit the available market data. In short, the adjustments significant differences are sequenced into an order where Other matters are adjusted for first, thence Financing and Market Conditions. Lump sum, dollar adjustments are appropriate for BCL APPRAISALS. INC. Anthony Lane South. Minnea~_-,,~s~_. Minnesola 55418 SAi_~=S COMPARISON APPROACH CONT Discussion of Comparable Buildin,q Sales cont. Buildin,cl Sale Adiustment Grid Cont. each and adjusted prices are the result of summation. A common unit of comparison is thence created to compare the sales with the subject. This is the price per square foot of gross building area ($/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. 28,52 Anmony L~ne Soum. Minneapoas, Minnesma ,55418 51 SALES COMPARISON APPROACH CONT. Subject Price N/A Other Fee Simple Arms Length None Adjustment Adj Price Financing Adjustment Adj Price Market Cond. Adjustment Adj Price Size (GSA) Size S/sf Location Adjustment Condition Adjustment Size Adjustment Land:Btdg Ratio Adjustment Net Adj lad Subs Cash Equiv Good Good 1,323 sf 15.04:1 BUILDING SALES ADJUSTMENT GRID Comparable Building Sate No. 1 $300,000 Fee Simpte Arms Length None $ 0 $300,000 2 $209,000 Fee Simpte Arms Length None S 0 $209,000 CO,Cash Equiv $ 0 $3oo, 000 CD,Cash Equiv S 0 $209,000 04115/99 *S 12,500 3,094 sf $1Ol.00 04/30/97 9rr sf S250.26 Average xl.75 Good x 1.00 Very Good x 0.95 Average x 1.05 3,094 sf x 1.20 9rr sf x 0.95 16.55:1 x 1.00 36.2:1 x 0.80 x $201.50 x 0.~98 $199.?0 3 $545,400 Fee Simpte Arms Length None $ 0 S545,400 Cash $ 0 $545,400 11/17/97 +S 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 1.40 $1TJ.40 & S200,000 Fee Simpte Arms Length None S S200,000 Cash ,s o S200,000 10/05/94 S256,$00 1,323 sf $193.88 Gmxl (-) x 1.05 Good x 1.00 1,323 sf x 1.O0 10.06:1 x 1.05 x 1.102 $213.66 SA~ ~=S 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. VVhile 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. --~5--~ AnUx~Y Lam Sou~. ~, M~n,~ 5S418 53 SAI ~=S COMPARISON APPROACH CONT. Type of Property: Location: Legal Description: Zoning: Date of Sale: Seller/Buyer. Purchase Pdce: Land Area: Building Description: COMPARABLE BUILDING SALE #1 Dairy Queen Restaurant 225 Osborne Road, Fridley Lot 2, Block 1, East Ranch Estates 3"~ 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 stonj, on grade with no basement. 3,094 square feet gross building area. Good condition. Unit Pdce: $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 pdce allocated to just the real estate. Therefore, $75,000 is estimated to be the cash down payment which also represents that paid for the fixtures, equipment and blue sky value. Average quality Iocabon at the nortt~east comer of Osborne Road and Main Street, in Fddley. Land to building rabo is 2 69:1. However, about 20% of the land is encumbered by a water main easement, and the effective land to building ratio is best estimated at 16.55:1. Building has a canopy to serve drive-thru patrons, and buyer continued the Dairy Queen use of the real estate. The building is run as a franchise. BCL APPRAISALS. INC. 2&52 An~ L~e Soum. M,~,ama~. ~nneaem 55418 COMPARISON APPROACH CONT. 54 .S£~ U ,_ ./ ADD. ~STATES 3 BCL APPRAISALS, INC. 55 SA! ;$ COMPARISON APPROACH CONT. Type of Property: Location: Legal Description: Zoning: Date of Sale: Seller/Buyer. Purchase Price: 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 April 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 pdce 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 78r" 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 Anttm~y Lane South. Minneapoim, Minnesota 55418 SABF;_~ COMPARISON APPROACH CONT. ,:- BCL APPRAISALS, INC. 57 COMPARISON APPROACH CONT. Type of Property: Location: Legal Description: Zoning: Date of Sale: Seller/Buyer: Purchase Price: Land Area: Building Description: COMPARABLE BUILDING SALE #3 Perkins Restaurant 5420 West Broadway Avenue, Crystal Lot 2, Block 1, First Federal Ron Dopp 2n= Addition. PID #05-118-21-44-0007. B-4, Community Commercial November 17, 1997 closing. MRT Properties/U.S. Restaurant Properties $545,400 66,290 square feet Class C building, constructed in 1975. One story on grade with no basement. 5,050 square feet gross building ama. Good condition. Unit Pdce: $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 price. Good location on West Broadway Avenue, good parking area with 110 car capacity. Property was leased, and buyer continued with the Perkins use of the real estate. The buiiding ratio is 13.13:1. BCL APPRAISALS, INC. 2852 A~ Lane Soul/1. Minneal:m~, Minnesota 55418 COMPARISON APPROACH CONT. $$ BCL APPRAISALS. INC. 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 #4 BoSa Donut Shop 2325 90t' 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. gross building area. Good condition. Unit Price: $148.15 per square foot GBA. Comments: One story on grade with no basement. 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 intedor 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 the 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 pnce. The earlier 1994 sale for $200,000 is therefore believed to be most indicative of a market value pdce for this property. Whether or not the buyer would have been more informed by using a broker or appraiser, the $200,000 pdce 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, Minneapol~, Mi~ 55418 I I SAl_l=~ COMPARISON APPROACH CONT. 6O i i BCL APPRAISALS, INC. O~ 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 triple 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 Operatin.q Income $27,000 Capitalization Net Income = $27,000 : $270,000 Overall Rate 0.10 Value Indicated by Income Approach $270,000 BCL APPRAISALS, INC, Anthony Line ..~. I~_~_~n~__if,. Minneiola 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 exte~'i°r, 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 sr. 3) Rax Restaurant - 1875 Co Rd B2, Rosevllle 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. ?~5~_ Antho~/Lane Sout~, Minneatx~, ~ 55418 O~ 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/sf. 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 prior 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 A~ La~e South, Mmn~_=_~_,;-'~._'_, M~ne~. S5418 INCOME APPROACH 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 covera.qe 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. ?1__~ Anltlony Line Souttl, Minnelpo~, ~ 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 comer location at the southeast comer 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 Companson 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 th~s approach more so than any other. The Income Approach is much less reliable. Build~ngs I,ke the subject are usually owner occupied, and comparable rent and capitalization rate ~s d,ffmult to apply. The Cost Approach is about as good as the Income Approach. The lanc~ 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. 2aS2 Anmo.y L.ne Soum. MJnn.ama~, ~ SS4~8 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 An~,~y Lane Sou~. Minnee~--Y__'-_, Minnmmla 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 Depreciation As is Value 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 10) Plumbing and gas rough-ins $1,864 Total 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 Ant~ Lan~ South, Minneapolis. Minnesola 55418 PHOTOS OF IMMOVABLE TRADE FIXTURES Items #1, 2 & 3 BCL APPRAISALS. INC. I ! PHOTOS OF IMMOVABLE TRADE FIXTURES Item ~ Item #5 ~ BCL APPRAISALS. INC. PHOTOS OF IMMOVABLE TRADE FIXTURES 7O Items #6, 7 & 8 Item #9 BCL APPRAISALS, INC. 2852 Anthony Lane South. MinneaDolis, Minnesota 55418 P ,ISALS BJORKLUND, CARUFEL, LACHE~~R, INC. 2852 ANTHONY LANE SO., MINNEAPOLIS, MINNESOTA 55418 (612)781-0605 Fax: 781-7826 RON LACHENMAYER, SPA LESLIE J. (LEE) RACINE, JR., SPA BRAD B.IORKLUND, MAI, SPA ~ Qf~?.'r'~cATIE[~IS OF l~t~C ~ REAL ESTATE APPRAISERS & CONSULTANTS Bachelor of Arts; St. Olaf College 1991. De~rees in Economics & Biology, GPA 3.0 110 (Appraisal Principles) 120 (Appraisal Pro~dures) 210 (Applied Residential Property Valuation) 310 (Capitalization ~_~ & Techniques - ~ A) 410 (Star~a~ of Professional Practice - Part A) 420 (Standards of Professional Practice - Part B) 510 (Capitalization Theory & Techniques - Part B) 520 (Highest and Best Use and Market Analysis) 530 (Advanced Sales Comparison & Cost Ap~r.~ches) 540 (Report Writing and Valuation Analys~s) 550 (Case Studies zn Real Estate Valuation) -. MAI Candidate of the Appraisal Institute - MN Appraiser's License #4003154; Certified ~~ 1, 1994 1999: (c~rrent) - 1988: Staff Appraiser for BCL Appraisals 1991: Residence Hall Tr~m~Arer; St. Olaf College 1990: Teachers Assr; St. Olaf College Biology Tab Department C~t.,ercial: Retail Stores, Restaurants, Office Buildings, Shopping Centers Industrial: Manufacturing, Processing & Distribution Buildings Residential: Sir~le Family H~mms, Duplexes, Tc~mhcmes, Condcm~iniums, &Apartments Vacant Land: C~tm~-rcial, Industrial, & Residential ~ApgJ~isals have been oc~plet_~d_ upon the variety of aforementioned real estate for a range o.f functions including; sales and pur~, condemnation, tax appeals, development, znsur~, estates, divorce, & subdivision analysis. ~ INCLL~E Cities of: Blaine, Bl~n, C~m~ka, Crystal, Eden Prairie, Golden Valley, Maple Grove, Minneapolis, Minneto~ka, New Brighton, New Hope, Plymouth, Richfield, Roch~ & Savage Marquette Bank ~_at Lakes Mortgage United Mortgage ~kin Hoffman, Law Firm Prudential Life U.S. Navy Firstar Banks TCF Bank North Star Title Knutson Peat Marwi~ge Mpls Park Board Prime Mortgage ~MAC Mortgage FBS Mortgage Fleet Mortgage Kennedy & Graven CarLson Cc~panies Best & Flanagan MORE THAN 80 YEARS FULL APPRAISAL SERVICES ~CT ~,Crystal RD 515T , Park N Park z 38] CITY MAP I Land Sale No I Sale No 2 ~Ctystal ~Gareer ;UBJECT PROPERTY -- Land Sale No 2 ! EN !Building Sale No; i Land Sale No '~ ~q Sale No 4 Land Sale No 5 Land Sale No 61 Comparable Sale Map -- Building Sale No 1 , NE Land Sale No 7 i$lancl AV~ NE Comparable Sale Map Park W81ST E ,Nord MW W ~Lake, · Commul Ja m $c w 85TH Per~ La~e Building Sale No 4 W ~TH ' ' W gBTH Art W 84TH ~rk w 8TTH E911 )61 __Comparable Sale Map EXTRA COMPARABLE LAND SALE Type of Property: Location: Legal Description: Zoning: Date of Sale: Seller/Buyer: Sale Pdce: Land Area: Unit Pdce: Comments: Recleveloped 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 comer location in an area with commUnity shopping development and exposure to traffic. I BCL APPRAISALS. INC. 2852 Aflttmfly Lane South. Miflneepoi~, Miflflesol155418 EXTRA COMPARABLE LAND SALE Type of Property: Location: Legal Description: Zoning: Date of Sale: Seller/Buyer. Sale Pdce: Land Area: Unit Pdce: 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 An~,o,~y Lane South. M~naeapo#s. Minne~431a 55418 EDA FOa ACTXOS Originating Depa~tuient Approved for ~a ~da S~on EDA Communi~ Development 2-~~ It~ No. ~?rk McDonald ~ 6 MOTION AUTHORIZING STAFF TO OBTAIN APP~ISAL OF 8113 BASS ~KE ROAD (IMPROVEMENT PROJECT NO. 677) REQUESTED ACTION Staff is requesting approval of a motion authorizing staff to obtain an appraisal of the fourplex located at 8113 Bass Lake Road. Staff recently received the enclosed correspondence from the owner indicating an interest in selling the building to the City. POLICWPAST P~CTICE IN 1993, the EDA established a loan program directed at maintaining multi-family rental housing and also has considered the purchase/demolition/redevelopment of targeted multi-family propedies in the City, such as Regent Apa~ments. The new Comprehensive Plan update identifies this pmpe~y as a potential redevelopment site. BACKGROUND In May 1999, the City received correspondence from the new owner of this properly requesting consideration of financial assistance to make improvements to the prope~y, including new roof, windows, exterior doors, drain tile, parking area and landscaping. The prope~ has no garages and was previously owned by David Espeland. The EDA responded that they did not know if the financial investment in the prope~y would be worthwhile and to inquire if the owner would be interested in selling the prope~, and staff conveyed that response to the owner in correspondence. Staff has now received new correspondence from the owner stating that he is interested in selling the prope~y, with a proposed sale price of $185,000. If the City is not interested, the letter states, the owner will sell the building outright. (cont'd.) ~A~I ~ Request for Action Page 2 2-14-00 The building was constructed in 1958 and has a market value of $136,000 (land $26,000/building $110,000). There is a twin fourplex building located adjacent to this building (8109 Bass Lake Road) that is under separate ownership. Both properties are located on the south side of Bass Lake Road, just west of Lyndale Garden Center, and have a shared access off of Bass Lake Road. These properties have been designated in the Comprehensive Plan for either redevelopment or substantial rehabilitation. Estimated cost of the appraisal is $450 and once completed, staff would bring the completed appraisal back to the EDA for direction. FUNDING The property is currently not located in an area where TIF funds can be expended, therefore, EDA or CDBG funds would be used' to pay for the cost of the appraisal. ATTACHMENTS · 1/27/00 Correspondence from Owner · 5/12/99 City Correspondence · 5/10/99 EDA Minutes · 4/24/99 Correspondence from Owner · Map/Comprehensive Plan Information Steven A. Martinetti 6305 Camden Avenue North #103 Brooklyn Center, MN 55430 January 27, 2000 Mr. Kirk McDonald Director of Community Development City of New Hope 4401 Xylon Avenue North New I~ope, MN 55428 Dear Mr. McDonald, I am the owner of the fourplex located at 8113 Bass Lake Road in New Hope. Last year we discussed the possibility ofrehabbing the building with some financial help fi.om the City of New Hope. The city' s response included an offer to buy the building for demolition rather than investing a considerable amount in rehab. After giving this serious consideration, I am interested in selling the building. I propose a sale price of $185,000. If the city is not interested, I will sell the building outright. I would appreciate your consideration of this proposal and a response at your earliest convenience. Sincerely, Steve Martinetti .-4401 Xylon Avenue North New Hope, Minnesota 55428-4898 City Hall: 612-531-5100 Police: 612-531-5170 Public Works: 612-533-4823 TDD: 612.531-5109 City Hall Fax: 612.531.5136 Police Fax: 612-531.5174 Public Works Fax: 612-533-7650 Fire Dep't. Fax: 612.531.5175 May 12, 1999 Mr. Steven Martinetti 8113 Bass Lake Road, Apt. 2 New Hope, MN 55428 Subject: Request for Financial Assistance for Potential Rehabilitation Project at 8113 Bass Lake Road Dear Mr. Martinetti: · At the May 10 New Hope Economic Development Authority meeting, the EDA discussed your request for financial assistance in the form of a loan to rehabilitate the fourplex property you recently purchased at 8113 Bass Lake Road (see attached EDA request). The EDA was pleased that you want to improve the property. Due to the fact that your property is located in an area designated by the City's Comprehensive Plan for potential redevelopment, the EDA directed staff to pursue two potential options: Inquire if you might be interested in selling the property to the City for redevelopment purposes. The City would try to acquire several adjacent properties, demolish the structures, and market the property for redevelopment of townhomes. Pursue the rehabilitation option. If you do not want to sell the property, the EDA may be interested in working with you to upgrade the property. However, the EDA questioned whether a significant re- investment in the property would be worthwhile for you financially. If you are interested in potentially selling the property to the City, the first step the City would take would be to obtain an appraisal of your property to determine the fair market value. If the rehab option is pursued, we should meet to discuss the specific improvements you would like to make along with the cost estimates. Per the EDA report, we would also need to have a financial consultant review your records to determine your ability to repay the loan. Family Styled City ~ For Family Living /' EDA RESOLUTION 99-07 8113 BASS LAKE RD ~ Item 5 New Hope EDA Page 2 Now is an opportune time to recommence discussion with the property owner regarding the EDA's purchase of 7500 42'~ Avenue. The oppormmty presents itself due to the pending vacation of the property by the current tenant, Ardel Engineering, by June 1. He stated the enclosed resolution authorizes the EDA to obtain an updated appraisal of the property and commence negotiations with the property owner for acquisition of the property as of June 1, when the property officially becomes vacant and unoccupied. This will allow the City to avoid payment of tenant relocation expenses, which has been the policy for acquisition of all properties imtiated by an owner's request to sell to the City or EDA under the scattered site acquisition policy. The owner has recently obtained his own appraisal of the property indicating a market value of $545,000. Once the City has its appraisal on the property updated, the EDA will need to determine the dollar amount it is willing to authorize as a ceiling for acquisition. The owner has also indicated that he wants to be reimbursed for lost rent during the month of June in the event he agrees to keep the property vacant, so there should be some discussion concerning the amount of a non-refundable payment to the property owner in consideration for his agreement to keep the property vacant during the negotiation period. Mr. McDonald also noted that since the dealings in 1997, the attorney for the property owner has become a parmer of the City Attorney, and the City Attorney requested that the EDA be made aware of this fact. The EDA expressed support for the acquisition. In response to questions concerning possible soil contamination, City Attorney Sondrall noted there does not appear to be soil contamination on the Ardel property. Mr. Donahue, City Manager, interjected that the property will be examined prior to any purchase. Mr. Sondrall discussed the two paragraphs ia the proposed resolution which have blanks (#4 and //5). He stated the first blank will be completed to authorize the Executive Director to commence negotiations for a fair negotiated amount but at a price not to exceed the amount of the appraisal. He commented that paragraph #5 concerning a non-refundable fee would be deleted from the resolution. Commissioner Norby introduced the following resolution and moved its adoption: "RESOLUTION AUTHORIZING APPRAISALS AND COMMENCEM~ENT OF NEGOTIATIONS TO ACQUIRE 7500 42n~ AVENUE NORTH (IMPROVEMENT PROJECT NO. 474) ". The motion for the adoption of the foregoing resolution was seconded by Commissioner Collier, and upon vote being taken thereon, the following voted in favor thereof: Enck, Cassen, Collier, Norby, Thompson; and the following voted againnt 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. President Enck introduced for discussion Item 5, Discussion Regarding Request for Financial Assistance for Potential Rehabilitation Project at 8113 Bass Lake Road. Mr. McDonald, Director of Community Development, provided background of the fourplex property at 8113 Bass Lake Road. He stated the property formerly owned May 10, 1999 AD~O~ by David Espeland is now under new ownership. The building was constructed in 1958 and has a market value of $136,000 (land $26,000/building $110,000). The building has a brick exterior, but is in need of substantial repairs, including roof and window replacement, rain gutters, exterior doors, dram tile, a boiler and general interior upgrading. The parking area needs resurfacing, additional landscaping is needed and no garages are available on the site. The owner has estimated the project cost at $1:5,000, however, staff estimate it will be at least twice that amount. There is a twin fourplex building located adjacent to this building (8109 Bass Lake Road) that is under separate ownership. Both properties are located on the south side of Bass Lake Road, just west of Lyndale Garden Center, and have a shared access off of Bass Lake Road. Mr. McDonald explained that these properties have been designated in the Comprehensive Plan for either redevelopment or substantial rehabilitation. Staff is pleased that the new owner wants to cooperate with the City on potential improvements to the property. Staff is requesting direction from the EDA as to whether or not it is interested in pursuing a rehabilitation project at this site in cooperation with the new owner. If the EDA determines to proceed, staff would like authorization to meet with the property owner to determine the necessary improvements, and approach the owner of the adjacent building to inquire of their participation in the project. President Enck questioned the f~nnncial investment and whether redevelopment should be explored rather than rehabilitation of the property. Mr. McDonald reiterated that the Comprehensive Plan Update calls for rehab or redevelopment of this area. Mr. McDonald suggested obtaining a finnncial analysis similar to the one recently prepared for Regent Apartments. Councilmember Cassen pointed out that the City has received numerous complaints regarding this property in the past. The EDA was receptive to exploration of all options, and directed staff to contact the property owner to discuss redevelopment or rehabilitation options. Motion was made by Commissioner Collier, seconded by Commissioner Cassen, to adjourn the meeting. All present voted in favor. Motion carried. The New Hope EDA adjourned at 8:42 p.m. Respectfully submitted, Valerie Leone City Clerk New Hope EDA Page 3 May 10, 1999 Steven A. Martinetti 8113 Bass Lake Road, Apt. 2 New Hope, MN 55128 April 24,' 1999 Mr. Kirk McDonald Director'of Community Development City of New Hope 4401 Xylon Avenue North New Hope, MN 55428 Dear Mr. McDonald, I am the owner ofa fourplex apartmem building located at 8113 Bass Lake Road in New Hope. You may already be familiar with this property (the eyesore it is). I plan on making significant improvemems and want to make it among the best rental properties in New Hope. Among the improvements will be a new roof, rain gutters, windows, exterior doors, and paint inside and out. In addition, the lower apartments will.likely need to be drain tiled (I am currently attempting to correct the grade, but if this is not successful in stopping the water problem, drain tile is the next step). Finally, the parking area will need to be resurfaced and the area relandscaped. While I am anxious to complete these improvements, my funds are quite limited. I am very interested in any financial assistance the City of New Hope may have available. I am having the roof and windows estimated, and will forward these as you request. I (roughly) estimate the entire project at somewhere near fifteen thousand dollars. I appreciate your help and look forward to hearing from you soon. You may call me at my daytime (work) phone, (612) 348-2156, or you may leave a message at (651) 777- 7490. Steve M~'tinetti Owner / Residem Manager Mr. Steven Martinetti Page 2 May 12, 1999 Please give these options some thought and call me (531-5119) at your convenience or stop at City Hall so we can discuss further. Sincerely, Kirk McDonald Director of Community Development Enclosure: EDA Report CC; Dan Donahue, City Manager Steve Sondrall, City Attorney Doug Sandstad, Building Official Jean Coone, Acting General Inspector Sue Henry, Community Development Specialist Valerie Leone, City Clerk ~12.5 ~3 <3 910.3 <3 X(3 ~3 ~ .,,,- x 90t .8 X ~ '"% .; ~,~"', !~ i' ~ · ~"-':":.'",~:~ :~ ,~-j~ \ . . . ~ · t :, I o . · . \ ":" .'-~L' . ............ :...l ......... .~ .. ....... ~ .... __] __.. ,. .......... -~ .......... '-.-. !:"~~ ~ ~ ~m av~ ~ .. ~ ....... , .... . ...... , ~~ ~n~.- ..... ~ ~ ~ , .. - . .-' ~ ..-: ......... ~....":~,,I / % ~~ : · ,,:'. -z~¢Y' / / fVIL~GE GREEN [ ~ : ' .,. . .~xg.. ~, // / GOLF ~ "* ~w ST. THERESE '"; NURSING : :: HOME -...,.. ,; : ....... 'i ,. II " ~I~ :i .... ; : ~" :. : ..... -. '-. ~627 ~OSTERMAN JR HIGH SCHOOL ~e ~. nifes ?~ment ,-section -3ound '~ II issues * ' muFr~amil'-- 19 r olrEass Lake R°~,,~ West :.~road~ay street and street..~:ape (multi-jurisdictional, of~lf¢ourse Clu: of medium and high densi~/residential area / redevelopment sites redevelopment sires / ~ss Lake Pc: intersection realignment Vacant lots -- Medium dens~ redevelopmer~ -Vacant (Pond Place developme- oppo~nities) --Indus~al redevelopment site (demolish exi~ng building) expansion / cooperative rearrangement v~th City Sims Park parldng and turnaround ~.Single £omiiy redevelopment c?-. C, om,.mercJal redevelopment 42nd Avenue, XCon and 4Dt,h s~etscape --Medium dens~ redeveJopmen? opportunity CTwin Homes) __ In place indu~ial issues Drainage issues Irregular City boundary ,Community Perspectives The industrial park is nearly fully developed. Future industrial growth will consist of in-place expansion and site redevelopment. The appearance of outdoor storage areas within the industrial park is an issue. Intersection at 49th and Boone is in need of improvement to accommodate the turning radius of semi-trucks and trailers. DistHct 6 District 6 contains a variety of housing types from single family to very high density. For the most part, the high density housing in District 6 is very well maintained. Issues related to District 6 include: District 6 Issues c FoOur-plexes along Bass Lake Road are in bad condition. nsidered for redevelopment. These sites should be~~',, Single family homes around Begin Park are on small lots and are in poor condition. City staff has identified this area as a redevelopment area. City of New Hope Comprehensive Plan Update 30 Planning Tac~dcs · Goal 3: Policies: A. Promote multiple family housing al{ematives as an attractive life cycle housing option. Redevelop substandard multiple family properties that display deteriorated building conditions, no site amenities, poor site design, or incompatible land use patterns when it is judged not economically feasible to correct the deficiencies. Adhere to the highest community design and construction standards for new construction and redevelopment projects.  company medium and high density development with adequate accessory' .... enities such as garages, parking, open space, landscaping, and recreational  acilities to insure a safe, functional, and desirable living environment.~'" D. Consider mixed land uses as an alternative land use option in planning and redevelopment of obsolete commercial or industrial sites. Encourage neighborliness through block clubs, block parties or neighborhood associations. COMMERCIAL GOALS Goal 1: Maintain and improve New Hope's commercial areas as vital retail and service locations. Policies: Ao Work with local business people to gain an understanding of the changing needs of the business environment. Bo Promote a full and broad range of office, service, retailing, and entertainment uses within the commercial areas of New Hope. Co Attract new businesses to New Hope that are complementary to existing businesses and will contribute to the customer attraction and business interchange of the local commercial areas. Promote the redevelopment and expansion of existing businesses within the City to obtain a higher level of sales and business attraction. (" 5 B. Aggressively continue housing redevelopment programs throughout the City. Co Encourage the private redevelopment of substandard, obsolete or blighted properties. Public assistance may be applicable where the redevelopment is consistent with the goals of the New Hope Comprehensive Plan and within the financial capabilities of the:City.  stigate opportunities fOr redevelopment or renewal of deteriorating y sites. Eo Redevelop select, commercial/industrial properties which display deteriorated building conditions, obsolete site design, incompatible land use arrangements and high vacancy levels. Goal 4: Policies: A. B. Do Fo A cohesive land use pattern which ensures compatibility and strong functional relationships among activities is to be implemented. Maintain and strengthen the character of individual neighborhoods, Prevent over-intensification of land use development, that is, development which is not accompanied by a sufficient level of supportive services and facilities (utilities, parking, access, etc.). Investigate remedies to correct or eliminate existing land use compatibility problems. Examine requested land use changes in relation to adjoining land uses, site accessibility, utility availability, and consistency with the City's Comprehensive Plan and policies. Accomplish transitions between distinctly differing types of land uses in an orderly fashion which does not create a negative (economic, social or physical) impact on adjoining developments. Infill development of compatible land uses shall be strongly encouraged. Where practical, conflicting and non-complementary uses shall be eliminated through removal and relocation. 3